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 August 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from N/A to N/A
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Commission file number 0-28385
Protalex, Inc.
(Exact name of small business issuer as
specified in its charter)
New Mexico 91-2003490
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(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 April 5, 2001.
Transitional Small Business Disclosure Format (check one):
Yes No X
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Protalex, Inc.
(A Company in the Development Stage)
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Protalex, Inc.
(A Company in the Development Stage)
BALANCE SHEET
(Unaudited)
August 31, 2001
ASSETS
CURRENT ASSETS
Cash ............................................. $ 42,659
Prepaid expense .................................. 20,289
--------
Total current assets ...................... $ 62,948
EQUIPMENT
Lab equipment .................................... 175,401
Office and computer equipment .................... 136,032
Furniture & fixtures ............................. 20,358
Leasehold improvements ........................... 10,685
--------
342,476
Less accumulated depreciation .................... 110,743 231,733
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OTHER ASSETS
Intellectual technology license, net of
accumulated amortization of $1,862 ............. 18,438
--------
$313,119
========
The accompanying notes are an integral part of this financial statement.
LIABILITIES
CURRENT LIABILITIES
Professional fees payable ....................... $ 3,195
Payroll taxes payable ........................... 1,721
Current maturities of long-term liabilities ..... 30,929
Accrued compensation ............................ 19,840
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Total current liabilities ................ $ 55,685
LONG-TERM LIABILITIES, less current maturities
Equipment note payable .......................... 28,619
-----------
Total liabilities ........................ 84,304
STOCKHOLDERS' DEFICIT
Common stock, no par value, authorized
40,000,000 shares, 10,847,135 shares
issued, 10,608,635 shares outstanding .........
238,500 shares in the treasury at -0- cost .... 1,390,891
Common stock, contra ............................ (368,547)
Additional paid in capital ...................... 183,569
Deficit accumulated during the development stage (977,098) 228,815
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$ 313,119
===========
The accompanying notes are an integral part of this financial statement.
Protalex, Inc.
(A Company in the Development Stage)
STATEMENT OF OPERATIONS
(Unaudited)
From Inception (September 17, 1999) through August 31, 2001
Three Months Three Months From Inception
Ended Ended Through
August 31, August 31, August 31,
2001 2000 2001
------------ ------------ ------------
Interest income ............... $ -- $ 3,863 $ 22,897
Expenses
Research and development .... 134,693 71,958 710,286
Professional fees ........... 11,697 20,892 126,076
Administrative .............. 17,190 12,452 87,226
Interest .................... 4,561 6,319 54,201
Depreciation and amortization 4,402 15,164 22,206
------------ ------------ ------------
NET LOSS ............. $ (172,543) $ (122,922) $ (977,098)
============ ============ ============
Loss per common share - Basic . $ (.02) $ (.01) $ (.10)
============ ============ ============
Loss per common share - Diluted $ (.02) $ (.01) $ (.10)
============ ============ ============
Shares used in per-share
calculation - basic ......... $ 10,608,635 $ 9,489,380 $ 9,663,509
============ ============ ============
Shares used in per-share
calculation - diluted ....... $ 10,638,065 $ 9,505,751 $ 9,680,604
============ ============ ============
The accompanying notes are an integral part of these financial statements.
Protalex, Inc.
(A Company in the Development Stage)
STATEMENT OF CASH FLOWS
(Unaudited)
Periods from Inception (September 17, 1999) through August 31, 2001
Three Months Three Months From Inception
Ended Ended Through
August 31, 2001 August 31, 2000 August 31, 2001
--------------- --------------- ---------------
Cash flows from operating activities
Net loss ............................................... $ (172,543) $ (122,922) $ (977,098)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization ...................... 27,082 15,164 112,605
Non cash expenses .................................. (4) -- 16,640
(Increase) decrease in interest receivable ......... -- 10,669 --
(Increase) in prepaid expense ...................... (3,148) -- (20,289)
Increase in payroll taxes payable .................. (2,931) 1,061 1,721
Increase (decrease) in interest payable ............ (3,004) (3,705) --
Increase (decrease) in professional fees payable ... 3,004 9,709 3,194
Increase in compensation payable ................... 1,920 -- 19,844
Decrease in installment purchase payable ........... -- -- (24,687)
Increase (decrease) in related party advance
and licenses fee payable .......................... -- -- --
----------- ----------- -----------
Net cash used in operating activities .......... (149,624) (90,024) (868,070)
----------- ----------- -----------
Cash flows from investing activities
Acquisition of intellectual technology license
- fee portion ........................................ -- -- (20,000)
Acquisition of equipment ............................... (13,515) (57,910) (251,044)
Excess of amounts paid for Public Shell
over assets acquired to be accounted for
as a recapitalization ................................ -- -- (250,000)
Note receivable from individual ........................ -- 118,547 --
Payment on equipment note payable ...................... (7,195) (4,299) (7,195)
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Net cash (used) provided in investing activities (20,710) 56,338 (528,239)
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Cash flows from financing activities
Proceeds from stock issuance ........................... -- -- 1,255,400
Additional paid-in-capital ............................. 143,569 -- 183,569
Issuance of note payable to individual ................. -- -- 368,546
Principal payment on note payable individual ........... (142,830) (183,216) (368,547)
----------- ----------- -----------
Net cash provided (used) by financing activities 739 (183,216) 1,438,968
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH .......................... (169,595) (216,902) 42,659
Cash, beginning of period ................................ 212,254 560,487 --
----------- ----------- -----------
Cash, end of period ...................................... $ 42,659 $ 343,585 $ 42,659
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
Protalex, Inc.
(A Company in the Development Stage)
STATEMENT OF CASH FLOWS - CONTINUED
(Unaudited)
Periods from Inception (September 17, 1999) through August 31, 2001
Three Months Three Months From Inception
Ended Ended Through
August 31, 2001 August 31, 2000 August 31, 2001
--------------- --------------- ---------------
Interest paid $ 4,561 $ 10,024 $ 49,553
=========== =========== ===========
Taxes paid $ -- $ -- $ 50
=========== =========== ===========
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
=========== =========== ===========
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 these financial statements.
Protalex, Inc.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
From Inception (September 17, 1999) through August 31, 2001
NOTE A - DESCRIPTION OF OPERATIONS AND DEVELOPMENT STAGE STATUS
Protalex, Inc. (the Company or Protalex) is a development stage enterprise
incorporated on September 17, 1999 and based in Albuquerque, New Mexico. The
Company was formed to take all necessary steps to fully develop and bring to
commercial realization certain bioregular technology for the treatment of
human diseases. The Company has no operating revenue.
NOTE B - 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, 2001
Form 10-QSB. This quarterly report should be read in conjunction with such
annual report.
NOTE C - 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.
Protalex, Inc.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
From Inception (September 17, 1999) through August 31, 2001
NOTE D - 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.
NOTE E - SUBSEQUENT EVENTS
As of August 6, 2001, Protalex, Inc. has been engaged in private placement.
On September 7, 2001, the private placement was completed. 881,600
shares of common stock were issued to various investors at $1.25 per share.
$1,102,000 was received by the Company for these shares.
ITEM 2 - PROTALEX INC. - MANAGEMENT'S DISCUSSION AND ANALYSIS
INCLUDING PLAN OF OPERATION
Protalex, Inc. ended its fiscal year and started the first quarter of the
new year by continuing with its animal studies and its general laboratory
work. Results of the Company's acute arthritis model study were very
encouraging. Work in the laboratory continued on schedule, further
validating the Company's therapeutic approach. Based on laboratory results
to date, the Company will continue research and begin the process of
pursuing a physician sponsored investigational new drug application (IND).
The IND application is expected to be submitted in the fall of 2001.
Successful completion of this application would result in the Company making
the important transition to treatment of humans.
The Company continues to pursue additional financing. In the near term the
goal remains the same; to raise funds in the vicinity of $5,000,000 in order
to continue all present operations, and necessary research and development.
The Company's longer term funding goal also remains at the same level;
$15,000,000 to $20,000,000 to fully implement the Company's Bioregulator
technology.
During August 2001, Protalex, Inc. had been engaged in a private placement
to raise a maximum $1,125,000. The private placement was successful and on
September 7, 2001 the Company received funds approximating 1.1 million
dollars and issued 881,600 of common shares at $1.25 per share. Funding from
the private placement together with current resources will fund operations
and necessary research and development for the next 12 months. In connection
with this funding and future funding efforts, an affiliated company Alex,
LLC, has decided to transfer all intellectual property rights, interests and
application of bioregulator technology to the Company so that the Company
directly owns them. This transfer is in process and all necessary actions
will be completed shortly. As noted above, the Company's laboratory work
continues to support this intellectual property base. The Company has
acquired and will continue to acquire laboratory equipment. These
acquisitions will help to keep down the high cost associated with frequent
third party contracting, and speed the process of learning more about
various aspects of the Company's core technology. The Company started the
process of patent applications in early July. It expects to file its first
patent in the fall of 2001.
Please refer to the Company's 10-SB filing (December 3, 1999) and amendments
thereto for more information on the Company's technology and risk factors.
Protalex, Inc.
(A Company in the Development Stage)
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
6.1 Index of Exhibits.
None
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: October 11, 2001 BY: John E. Doherty
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John E. Doherty
President and Director,
Principal Financial Officer