Form 10-QSB
[As last amended in Release No. 33-7505,
effective January 1, 1999, 63 F.R. 9632.]
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITES EXCHANGE ACT
OF 1934
For the quarterly period ended November 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from N/A to N/A
--- ---
Commission file number 0-28385
Protalex, Inc.
(Exact name of small business issuer as
specified in its charter)
New Mexico 91-2003490
---------- ----------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
P.O. Box 30952, Albuquerque, NM 87190
(Address of principal executive offices)
(505) 260-1726
(Issuer's telephone number)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: Common Stock no Par Value 10,608,635
as of December 29, 2000
Transitional Small Business Disclosure Format (check one):
Yes No X
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Protalex, Inc.
(A Company in the Development Stage)
BALANCE SHEET
(Unaudited)
November 30, 2000
ASSETS
CURRENT ASSETS
Cash ............................................ $ 169,981
Prepaid expense ................................. 39,594
---------
Total current assets ..................... $ 209,575
EQUIPMENT
Lab equipment ..................................... 105,819
Office and computer equipment ..................... 129,588
---------
235,407
Less accumulated depreciation ................... (40,130) 195,277
---------
OTHER ASSETS
Intellectual technology license, net of
accumulated amortization of $1,101 ............ 19,199
---------
$ 424,051
=========
The accompanying notes are an integral part of this financial statement.
LIABILITIES
CURRENT LIABILITIES
Payroll taxes payable ........................... $ 835
Interest payable ................................ 3,171
Current maturities of long-term
liabilities ................................... 28,384
Related party advance and license
fee payable ................................... 40,000
Note payable to individual ...................... 185,330
Accrued compensation ............................ 5,120
---------
Total current liabilities ................ $ 262,840
LONG-TERM LIABILITIES, less current maturities
Equipment note payable ............................ 52,145 52,145
--------- ---------
Total liabilities ........................ 314,985
STOCKHOLDERS' DEFICIT
Common stock, no par value, authorized
40,000,000 shares, 10,447,135 shares
issued, 10,208,635 shares outstanding .........
238,500 shares in the treasury
at -0- cost ................................... 990,891
Common stock, contra ............................ (368,547)
Deficit accumulated during the
development stage ............................. (513,278) 109,066
--------- ---------
$ 424,051
=========
The accompanying notes are an integral part of this financial statement.
Protalex, Inc.
(A Company in the Development Stage)
STATEMENT OF OPERATIONS
(Unaudited)
For the Six Months Ended November 30, 2000 and Period
Ended November 30, 1999 and from Inception
(September 17, 1999) through November 30, 2000
From Inception
Six Months Ended Period ended Through
November 30, November 30, November 30,
2000 1999 2000
------------ ------------ ------------
Interest income ............... $ 9,367 $ 2,497 $ 20,036
Expenses
Research and development .... 179,381 3,717 304,556
Administrative .............. 28,733 3,100 56,546
Professional fees ........... 26,983 42,862 104,503
Depreciation and amortization 23,959 84 28,818
Interest .................... 12,900 7,762 38,891
Salaries .................... -- 7,066 --
Payroll taxes ............... -- 787 --
------------ ------------ ------------
NET LOSS ............. $ (262,589) $ (62,881) $ (513,278)
============ ============ ============
Loss per common share - Basic . $ (.03) $ (.01) $ (.06)
============ ============ ============
Loss per common share - Diluted $ (.03) $ (.01) $ (.06)
============ ============ ============
Shares used in per share
calculation - Basic ......... 10,183,772 7,817,557 8,450,144
============ ============ ============
Shares used in per share
Calculation - Diluted ....... 10,213,202 7,846,987 8,479,574
============ ============ ============
The accompanying notes are an integral part of this financial statement.
Protalex, Inc.
(A Company in the Development Stage)
STATEMENT OF CASH FLOWS
(Unaudited)
For the Six Months Ended November 30, 2000 and Period
Ended November 30, 1999 and from Inception
(September 17, 1999) through November 30, 2000
From
Six Months Inception
Ended Period Ended Through
November 30, November 30, November 30,
2000 1999 2000
--------- --------- ---------
Cash flows from operating activities
Net loss ........................................... $(262,589) $ (62,881) $(513,278)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization .................. 34,687 84 41,230
Non cash expenses .............................. -- -- 16,644
Decrease (increase) in interest receivable ..... 10,669 (2,497) --
(Increase) in prepaid expense .................. (39,094) -- (39,594)
Increase in payroll taxes payable .............. 60 351 835
(Decrease) increase in interest payable ........ (4,591) 7,762 3,171
Increase (decrease) in professional fees payable (7,782) 15,471 --
Increase in compensation payable ............... -- -- 5,120
Increase in related party advance
and licenses fee payable ...................... -- 40,000 40,000
--------- --------- ---------
Net cash used in operating activities ....... (268,640) (1,710) (445,872)
--------- --------- ---------
Cash flows from investing activities
Acquisition of intellectual technology license
- fee portion .................................... -- (20,000) (20,000)
Acquisition of equipment ........................... (71,296) (15,528) (143,976)
Excess of amounts paid for Public Shell
over assets acquired to be accounted for
as a recapitalization ............................ -- (250,000) (250,000)
Note receivable from individual .................... 118,547 (118,547) 368,546
Issuance of note payable to individual ............. -- 368,546 --
Payment on note payable to individual .............. (183,216) -- (183,216)
Payment on equipment note payable .................. (10,901) -- (10,901)
--------- --------- ---------
Net cash used in investing activities ....... (146,866) (35,529) (239,547)
--------- --------- ---------
Cash flows from financing activities
Proceeds from stock issuance ....................... 25,000 120,000 855,400
--------- --------- ---------
Net cash provided by financing activities ... 25,000 120,000 855,400
--------- --------- ---------
NET (DECREASE) INCREASE IN CASH ...................... (390,506) 82,761 169,981
Cash, beginning of period ............................ 560,487 -- --
--------- --------- ---------
Cash, end of period .................................. $ 169,981 $ 82,761 $ 169,981
========= ========= =========
The accompanying notes are an integral part of this financial statement.
Protalex, Inc.
(A Company in the Development Stage)
STATEMENT OF CASH FLOWS -CONTINUED
(Unaudited)
For the Six Months Ended November 30, 2000 Period
Ended November 30, 1999 and from Inception
(September 17, 1999) through November 30, 2000
From
Six Months Inception
Ended Period Ended Through
November 30, November 30, November 30,
2000 1999 2000
--------- --------- ---------
Interest paid ........................................ $ 16,636 $ -- $ 33,221
========= ========= =========
Taxes paid ........................................... $ -- $ -- $ --
========= ========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
10,000 shares of company stock were issued as
part of the cost of acquisition of the
intellectual technology license at
inception - value at $.03 per share ............... $ -- $ 300 $ 300
========= ========= =========
100,000 shares of company stock were issued in
exchange for legal services performed .............. $ -- $ -- $ 15,000
========= ========= =========
1,644 shares of company stock were issued in
exchange for interest payable ...................... $ -- $ -- $ 1,644
========= ========= =========
Lab equipment was acquired through issuance
of installment contract to seller .................. $ -- $ -- $ 91,430
========= ========= =========
The accompanying notes are an integral part of this financial statement.
Protalex, Inc.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
From Inception (September 17, 1999) through November 30, 2000
NOTE A - NOTES TO INTERIM FINANCIAL STATEMENTS
The interim financial data is unaudited, however in the opinion of
management, the interim data includes all adjustments, consisting of normal
recurring adjustments, necessary for a fair statement of the results for the
interim period. The financial statements included herein have been prepared
by the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been omitted pursuant to such rules and
regulations, although the Company believes that the disclosures included
herein are adequate to make the information presented not misleading.
The organization and business of the Company, accounting policies followed
by the Company and other information are contained in the notes to the
Company's financial statements filed as part of the Company's May 31, 2000
Form 10-KSB. This quarterly report should be read in conjunction with such
annual report.
NOTE B - GOING CONCERN UNCERTAINTY
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of
the Company as a going concern. The Company is a development stage
enterprise and does not have operating revenue nor anticipate generating
operating revenue for the foreseeable future. The ability of the Company to
continue as a going concern is dependent initially on its ability to raise
sufficient investment capital to fund all necessary operations and product
development activities. Secondly, the Company must develop products that are
regulatory approved and market accepted to generate operating revenue. There
is no assurance that these plans will be realized in whole or in part. The
financial statements do not include any adjustments that might result from
the outcome of these uncertainties.
NOTE C - LOSS PER COMMON SHARE
Loss per common share is computed by dividing loss available to common
shareholders by the weighted average number of common shares outstanding for
the period. Diluted earnings per share assume the exercise of outstanding
stock options.
Protalex, Inc.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
From Inception (September 17, 1999) through November 30, 2000
NOTE D - STOCK OPTIONS
The Company granted stock options to three individuals and a corporate
associate to purchase 10,000 shares each of Company common stock at $.36 per
share. The options are "stand alone" options. There is no current Company
stock option plan.
The Company accounted for the options using the "intrinsic" method which
records as compensation cost the difference between exercise price of the
options and the fair market value of Company stock on the measurement
(grant) date. $5,180 of compensation expense was recorded on the Company
books at November 30, 2000 to reflect an estimated portion of the options
awarded for past services of certain individuals and corporate associate. An
additional $20,420 of compensation expense will be recorded in future
periods ending April 28, 2002 to reflect an estimated portion of the options
awarded for future services of the individuals and associate.
An alternate method of accounting for stock options is the fair value method
based on an accepted valuation model. Compensation cost would not be
materially different if it was calculated using the fair value method.
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
The Company's unaudited financial statements for the quarter ended November 30,
2000 are included at exhibit 99 and incorporated herein by this reference.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS INCLUDING PLAN OF OPERATION.
The Company's principal activities continue to consist of laboratory work on its
bioregulator technology and ongoing animal studies. In early November the
Company completed its first animal study, involving treatment of a genetically
defective strain of mice. Data analysis continues on this study, along with the
Company's ongoing data analysis of its laboratory work. The Company believes the
results to date from this study are quite positive, and are important milestones
in moving toward the pharmaceutical regulatory progress.
The Company intends to raise additional funds for operational purposes before
the end of the year. The purpose of this funding is: to allow for the next
animal study to begin in January of 2001, to file the initial patents which will
be supported by the recently concluded animal study, and to continue the
Company's laboratory work. The size of this private placement will be
approximately $500,000. The Company's expenditures run approximately $55,000 per
month and, therefore, management believes no additional funding will be needed
until late summer of 2001. The clear majority of all funds raised by the Company
to date have gone towards developmental work on its proprietary compounds for
the treatment of arthritis.
Regarding longer term financing, the Company is continuing to explore different
possibilities. Although, management believes that funding in the range of
$15,000,000 to $20,000,000 is required for full utilization of the bioregulator
technology, the shorter term goal for funding as described in the Company's
business plan is $5,000,000. As presently contemplated, this funding would come
in three increments with the first $1,500,000 secured in the spring of 2001. The
last increment is anticipated in the fall of 2002 consisting of $2,000,000.
Please refer to the Company's 10-KSB filing for its most recent year-end, May
31, 2000 (filed August 25, 2000) for more information on the Company's business
concept, development stage status, intellectual technology and risk factors.
ITEM 6 - EXIBITS AND REPORTS ON FORM 8-K
6.1 Index of Exhibits.
Exhibit
Number Exhibit Name
27 Financial Data Schedule
6.2 Reports on Form 8-K.
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PROTALEX, INC.
DATE: BY: John E. Doherty
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John E. Doherty
President and Director,
Principal Financial Officer