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
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 2003
[ ] 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 000 - 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) 243-8220
(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
-------- --------
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,
12,253,664 as of February 28, 2003.
Transitional Small Business Disclosure Format (check one):
Yes No X
-------- --------
PART 1
ITEM 1 - FINANCIAL STATEMENTS
Protalex, Inc.
(A Company in the Development Stage)
BALANCE SHEET
(Unaudited)
February 28, 2003
ASSETS
CURRENT ASSETS
Cash and cash equivalents ..................... $ 616,174
Prepaid expense ............................... 23,577
----------
Total current assets ................... $ 639,751
EQUIPMENT
Lab equipment ................................. 187,555
Office and computer equipment ................. 131,829
Furniture and fixtures ........................ 21,268
Leasehold improvements ........................ 10,685
----------
351,337
Less accumulated depreciation ................. (264,178) 87,159
----------
OTHER ASSETS
Intellectual technology license, net of
accumulated amortization of $3,386........... 16,915
----------
$ 743,825
==========
LIABILITIES
CURRENT LIABILITIES
Accounts payable .............................. $ 33,903
Current maturities of long-term liabilities . 11,776
Payroll and related liabilities ............... 8,782
Interest payable .............................. 57
----------
Total current liabilities .............. 54,518
STOCKHOLDERS' EQUITY
Common stock, no par value, authorized
40,000,000 shares, 12,570,735 shares
issued, 12,253,664 shares outstanding ....... 3,755,892
Common stock, contra .......................... (368,547)
Treasury stock, 317,071 shares ................ (30,414)
Additional paid-in-capital .................... 578,703
Deficit accumulated during the
development stage ........................... (3,246,327)
----------
Total Stockholders' equity ............. 689,307
----------
$ 743,825
==========
Protalex, Inc.
(A Company in the Development Stage)
STATEMENTS OF OPERATIONS
For the Nine Months and Three Months Ended February 28, 2003
and 2002 and Period from Inception
(September 17, 1999) through February 28, 2003
Nine Nine Three Three From Inception
Months Ended Months Ended Months Ended Months Ended Through
February 28, February 28, February 28, February 28, February 28,
2003 2002 2003 2002 2003
(Restated) (Restated)
------------ ------------ ------------ ------------ -------------
Revenues .................... $ -- $ -- $ -- $ -- $ --
Operating Expenses
Research and Development .... (583,469) (665,405) (126,220) (298,555) (2,108,017)
Administrative .............. (512,135) (196,858) (128,512) (37,465) (803,675)
Professional Fees ........... (52,953) (72,638) (11,337) (9,938) (258,622)
Depreciation and Amortization (10,085) (11,250) (2,979) (2,235) (45,281)
------------ ------------ ------------ ------------ ------------
Operating Loss ............ (1,158,642) (946,151) (269,048) (348,193) (3,215,595)
Other income (expense)
Interest Income ............. 8,459 6,430 2,574 2,451 38,738
Interest expense ............ (2,105) (7,557) (462) (1,390) (60,451)
Loss on disposal ............ (9,019) 0 0 0 (9,019)
------------ ------------ ------------ ------------ ------------
Net Loss .................... (1,161,307) (947,278) (266,936) (347,132) (3,246,327)
Weighted average number
of shares outstanding ....... 12,181,638 10,951,808 12,254,774 11,490,235 10,331,253
Loss per common share ....... ($ 0.10) ($ 0.09) ($ 0.02) ($ 0.03) ($ 0.31)
Protalex, Inc.
(A Company in the Development Stage)
STATEMENTS OF CASH FLOWS
(Unaudited) For the Nine Months Ended February
28, 2003 and 2002
and from Inception (September 17, 1999) through February 28, 2003
Nine Nine From Inception
Months Ended Months Ended Through
February 28, February 28, February 28,
2003 2002 2003
(Restated)
Cash flows from operating activities
Net Loss ............................................ (1,161,307) (947,278) (3,246,327)
Adjustments to reconcile net loss to net
Cash used in operating activities
Depreciation and amortization ....................... 83,759 83,808 280,381
Stock related compensation .......................... 273,385 133,000 406,385
Non cash expenses ................................... 0 0 16,644
Loss on disposition of equipment .................... 9,019 0 9,019
Increase in prepaid expense ......................... (21,975) (2,873) (23,577)
Increase (decrease) in payroll related liabilities .. 6,437 (1,926) 8,782
(Decrease) increase in accounts payable ............. (22,202) 1,226 33,903
(Decrease) increase in interest payable ............. (497) (3,004) 57
Decrease in professional fees payable ............... 0 (190) 0
----------- ----------- -----------
Net cash used in operating activities ............... (833,381) (737,237) (2,514,731)
Cash flows from investing activities
Acquisition of intellectual technology license
-fee portion ...................................... 0 0 (20,000)
Acquisition of equipment ............................ (12,424) (32,086) (288,069)
Excess of amounts paid for public shell over
assets acquired to be accounted for as a
recapitalization .................................. 0 0 (250,000)
Proceeds on disposal of equipment ................... 6,326 0 6,326
----------- ----------- -----------
Net cash used in investing activities ............... (6,098) (32,086) (551,743)
Cash Flows from financing activities
Additional paid-in-capital ........................ 0 143,569 183,569
Proceeds from stock issuance ...................... 1,263,001 1,102,000 3,620,401
Net (purchase) issuance of treasury stock ......... (41,667) -- (41,667)
Payment on a note payable to individual ........... -- (142,830) (225,717)
Issuance of note payable to individual ............ -- -- 368,546
Principal payment on installment purchase payable . -- -- (194,936)
Principal payment on equipment not payable ........ (27,548) (22,218) (27,548)
----------- ----------- -----------
Net cash provided by financing activities ........... 1,193,786 1,080,521 3,682,648
----------- ----------- -----------
NET INCREASE IN CASH ................................ 354,307 311,198 616,174
Cash and cash equivalents, beginning of period ...... 261,867 212,254 0
Cash and cash equivalents, end of period ............ 616,174 523,452 616,174
Interest paid ....................................... 2,482 10,633 57,631
Taxes paid .......................................... 100 0 150
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 interest payable ............. $ $ $ 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 .................... $ $ $ 91,430
=========== =========== ===========
Protalex, Inc.
(A Company in the Development Stage)
NOTES TO INTERIM FINANCIAL STATEMENTS
(Unaudited)
From Inception (September 17, 1999) through February 28, 2003
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 accounting
principles generally accepted in the United States of America 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, 2002
Form 10-KSB. This quarterly report should be read in conjunction with such
annual report.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
Company to make estimates and assumptions affecting the reported amounts of
assets, liabilities, revenues and expense, and the disclosure of contingent
assets and liabilities. Estimated amounts could differ from actual results.
2. Loss per Common Share
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards No. 128 "Earnings Per Share" (SFAS No. 128)
which is effective for periods ending after December 15, 1997. SFAS No. 128
provides for the calculation of " Basic" and "Diluted" earnings per share.
Basic earnings per share includes no dilution and is computed by dividing
loss to common shareholders by the weighted average number of common shares
outstanding for the period. All potentially dilutive securities have been
excluded from the computations since they would be antidilutive. However,
these dilutive securities could potentially dilute earnings per share in the
future. As of February 28, 2003, the Company had a total of 2,313,922
potentailly dilutive securities.
3. Stock Based Compensation
The Company accounts for the options granted to employees 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. Options to non-employees are accounted for
using the "fair value" method, which recognizes the value of the option as
an expense over the related service period with a corresponding increase to
paid-in capital.
Had the Company determined compensation expense based on the fair value at
the measurement date for its stock options granted to employees under
Statement of Financial Accounting Standards No. 123, the Company's net loss
and loss per share would have increased to the proforma amounts indicated as
follows:
Nine Nine From Inception
Months Ended Months Ended Through
February 28, February 28, February 28,
2003 2002 2003
---------- ---------- -----------
Net loss, as reported .......... $(1,161,307) $ (947,278) $(3,246,327)
Add: stock-based employee
compensation expense
included in reported
net loss .................. 606,617 133,000 739,617
Deduct: Stock-based employee
compensation expense
determined under fair-
value method for all
awards ................. (872,490) (231,219) (1,103,709)
----------- ----------- -----------
Pro forma net loss ............. $(1,427,180) $(1,045,497) $(3,610,419)
=========== =========== ===========
Loss per share, as reported .... $ (.10) $ (.09) $ (.31)
Proforma loss per share ........ $ (.12) $ (.10) $ (.35)
The fair value of the options are estimated on the date of the grant using
the Black-Scholes option pricing model with the following assumptions:
dividends of $0 per year; expected volatility of 90-131 percent; risk-free
interest rate of 4.16-5.11 percent; and an expected life of three-five
years.
4. Recent Accounting Pronouncements
In April 2002, the Financial Accounting Standards Board issued SFAS 145,
RESCISSION OF FASB STATEMENTS NO. 4, 44, AND 64, AMENDMENT OF FASB STATEMENT NO.
13, and Technical Corrections (SFAS 145). Among other provisions, SFAS 145
amends FASB Statement No. 13 to eliminate the inconsistency between accounting
for sale-leaseback transactions and certain lease modifications that have
economic effects that are similar to sale-leaseback transactions. It also
addresses the classification of gains or losses from early extinguishment of
debt from extraordinary items to income from continuing operations in certain
circumstances. SFAS 145 is effective for financial statements issued on or after
May 15, 2002. The Company has adopted SFAS 145 and has determined that it has no
impact on the accompanying financial statements.
In June 2002, the FASB issued Statement 146, ACCOUNTING FOR COSTS
ASSOCIATED WITH EXIT OR DISPOSAL ACTIVITIES. This statement requires
entities to recognize costs associated with exit or disposal activities when
liabilities are incurred rather than when the entity commits to an exit or
disposal plan, as currently required. Examples of costs covered by this guidance
include one-time employee termination benefits, costs to terminate contracts
other than capital leases, costs to consolidate facilities or relocate
employees, and certain other exit or disposal activities. This statement is
effective for fiscal years beginning after December 31, 2002, but early adoption
is encouraged. The Company has elected to early adopt this statement for the
year ended May 31, 2003. The Company does not anticipate that adoption of this
satement will have material effect on its financial or results of operations.
In December 2002, the FASB issued Statement 148 (SFAS 148), ACCOUNTING
FOR STOCK-BASED COMPENSATION -- TRANSITION AND DISCLOSURE: AN AMENDMENT OF FASB
STATEMENT 123 (SFAS 123), to provide alternative transition methods for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, SFAS 148 amends the disclosure requirements
of SFAS 123 to require prominent disclosures in annual financial statements
about the method of accounting for stock-based employee compensation and the pro
forma effect on reported results of applying the fair value based method for
entities that use the intrinsic value method of accounting. The pro forma effect
disclosures are also required to be prominently disclosed in interim period
financial statements. This statement is effective for financial statements for
fiscal years ending after December 15, 2002 and is effective for financial
reports containing condensed financial statements for interim periods beginning
after December 15, 2002, with earlier application permitted. The Company does
not plan a change to the fair value based method of accounting for stock-based
employee compensation and has included the disclosure requirements of SFAS 148
in the accompanying financial statements.
In November 2002, FASB Interpretation 45, GUARANTOR'S ACCOUNTING AND
DISCLOSURE REQUIREMENTS FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF
INDEBTEDNESS OF OTHERS (FIN 45), was issued. FIN 45 requires a guarantor entity,
at the inception of a guarantee covered by the measurement provisions of the
interpretation, to record a liability for the fair value of the obligation
undertaken in issuing the guarantee. A company previously did not record a
liability when guaranteeing obligations unless it became probable that the
Company would have to perform under the guarantee. FIN 45 applies prospectively
to guarantees the Company issues or modifies subsequent to December 31, 2002,
but has certain disclosure requirements effective for interim and annual periods
ending after December 15, 2002. The Company has historically not issued
guarantees and does not anticipate FIN 45 will have a material effect on its
financial statements.
In January 2003, the FASB issued FASB Interpretation 46 (FIN 46), CONSOLIDATION
OF VARIABLE INTEREST ENTITIES. FIN 46 clarifies the
application of Accounting Research Bulletin 51, CONSOLIDATED FINANCIAL
STATEMENTS, for certain entities that do not have sufficient equity at risk for
the entity to finance its activities without additional subordinated financial
support from other parties or in which equity investors do not have the
characteristics of a controlling financial interest ("variable interest
entities"). Variable interest entities within the scope of FIN 46 will be
required to be consolidated by their primary beneficiary. The primary
beneficiary of a variable interest entity is determined to be the party that
absorbs a majority of the entity's expected losses, receives a majority of its
expected returns, or both. FIN 46 applies immediately to variable interest
entities created after January 31, 2003, and to variable interest entities in
which an enterprise obtains an interest after that date. It applies in the first
fiscal year or interim period beginning after June 15, 2003, to variable
interest entities in which an enterprise holds a variable interest that it
acquired before February 1, 2003. The Company is in the process of determining
what impact, if any, the adoption of the provisions of FIN 46 will have upon its
financial condition or results of operations.
NOTE C - RESTATEMENT OF PRIOR FINANCIAL STATEMENTS
The accompanying financial statements include adjustments to restate amounts
previously reported in prior quarterly and annual financial statements. The
effects of the adjustments are provided below:
3 Month Period 3 Month Period 3 Month Period
Ending Year Ending Ending Ending
November 30, May 31, August 31, November 30,
2001 2002 2002 2002
----------- ----------- ----------- -----------
Effect on Net Loss
Net loss, as previously reported ............. $ (306,103) $(1,158,965) $ (322,382) $ (386,925)
Adjustments:
Compensation expense related
to grants (121,500) (121,500) (209,908) 24,842
----------- ----------- ----------- -----------
Net loss, as restated ........................ $ (427,603) $(1,280,465) $ (532,290) $ (362,083)
=========== =========== =========== ===========
Loss per share, as previously reported ....... $ (0.03) $ (0.10) $ (0.03) $ (0.03)
=========== =========== =========== ===========
Loss per share, as restated .................. $ (0.04) $ (0.12) $ (0.04) $ (0.03)
=========== =========== =========== ===========
Effect on Liabilities
Total Liabilities, as previously reported .... $ 92,707 $ 109,827 $ 164,307 $ 184,184
Adjustments:
Deferred compensation related
to option grants ..................... (11,500) (11,500) (36,342) (61,184)
----------- ----------- ----------- -----------
Total Liabilities, as restated ............... $ 81,207 $ 98,327 $ 127,965 $ 123,000
=========== =========== =========== ===========
Effect on Stockholders' Equity
Stockholders' Equity, as previously reported . $ 1,024,712 $ 344,393 $ 1,268,345 $ 856,420
Adjustments:
Compensation expense related
to option grants ..................... 11,500 11,500 36,342 61,184
----------- ----------- ----------- -----------
Stockholders' Equity, as restated ............ $ 1,036,212 $ 355,893 $ 1,304,687 $ 917,604
=========== =========== =========== ===========
The options granted by the Company vested immediately upon issuance. The Company
previously recorded the intrinsic value of options as deferred compensation and
compensation expense based on an estimated exercise life of 5 years, instead of
recognizing the options as compensation expense immediately upon vesting when
the options were issued, in accordance with Accounting Principles Board No. 25.
In addition to the above adjustments, the Company also recorded corrections to
report the fair value of certain options granted for consulting services, which
also vested immediately, in connection with private placements during August
2002 and November 2002. The effect of these adjustments did not have an impact
on Stockholders' Equity or Net Loss as the value of the options were treated as
a direct cost of the stock offering, reducing the proceeds with the offsetting
impact of issuing the options increasing additional paid in capital. The Company
plans to restate previously issued Forms 10-QSB as soon as possible, as well as
the May 31, 2002 annual financial statements, to reflect the above adjustments
in the proper periods.
NOTE D - STOCK BASED COMPENSATION
The Company accounts for options granted to employees 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. Options to non-employees are accounted for using
the "fair value" method, which recognizes the value of the option as an
expense over the related service period with a corresponding increase to
paid-in capital. All options issued are "stand alone" options.
During the nine month period ended February 28,2003, the Company granted
1,371,922 options to purchase common stock with exercise prices ranging from
$1.45 to $1.70. The weighted average exercise price for options granted in the
nine month period ended February 28, 2003 was $1.50. During the nine month
period ended February 28, 2002, the Company granted options to purchase 100,000
shares of common stock at $1.25 per share. The weighted average exercise price
of options exercisable at February 28, 2003, which totaled 608,680, was $1.47.
NOTE E - BOARD ACTIONS
1. On December 16, 2002, an amendment to the Company's Bylaws was passed
to allow for a minimum of five (5) Directors and a maximum of seven (7)
Directors.
2. On December 16, 2002, the Board approved an employment offer for Steven
Kane, and it was signed the same day by Mr. Kane, appointing him President and
CEO.
3. On January 1, 2003, the Board appointed Steven Kane as a Director.
NOTE F - SUBSEQUENT EVENT
1. Protein Chemist Joseph Dervan, Ph.D began work on April 3, 2003 on a
project to characterize the active subcomponents of Protalex's target drug.
Protalex, Inc.
(A Company in the Development Stage)
PART 1
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS INCLUDING PLAN OF OPERATION
The Company's principal activities consist of preparing for a Company sponsored
investigational new drug (IND) application for treating Rheumatoid Arthritis
(RA) to be submitted to the FDA in the third quarter of calendar year 2003 and
continued laboratory research and development on its bioregulator technology.
The Company continues to pursue a balance of in-house and outsourced research
addressing FDA requirements for the Company's IND application, gathering data
for other possible diseases, and generally broadening its intellectual property
base.
The raising of an additional funds is planned during 2003 to fund FDA Phase
I/II clinical trials along with continued implementation of research plans and
execution of a broader patent strategy. A pre-clinical animal safety study for
Rheumatoid Arthritis has been completed, and the results are being compiled for
inclusion in the FDA IND application. In order to strengthen Protalex's control
of the drug formulation components, the Company has an FDA-approved lab to
manufacture a drug used in Phase I-II human clinical trials. Meanwhile in-house
laboratory work to fulfill FDA requirements continues, both in the area of drug
formulation and stability and toxicological analyses. The Company has hired a
protein Chemist to lead a drug analysis and formulation project.
Please refer to the Company's 10-KSB filing (May 31, 2002) for more information
on the Company's technology and risk factors.
LIQUIDITY AND CAPITAL RESOURCES
Cash used in operations for the nine-month periods ended February 28,
2003 and 2002 was $833,381 and $737,237, respectively. The primary reason for
the increase in cash used in operations during the nine-month period ended
February 28, 2003, as compared to the same period in the prior year, was that
the Company continues to incur net losses.
Operating loss increased to $1,158,642 for the nine month period ended February
28, 2003 from $946,151 for the nine month period ended February 28, 2002 due to
increased expenses related to pre-clinical animal studies and FDA
Investigational New Drug application preparation.
CAPITAL SOURCES
Protalex, Inc. successfully completed a private placement in July, 2002,
receiving funds of $1,263,000 for 842,000 shares of common stock. Issued with
these common shares were 842,000 warrants exercisable at $3.50 per share,
expiring May 31, 2005.
ADEQUACY OF CAPITAL
As of February 28, 2003, the Company's net working capital was a $506,051 and
its total cash and cash equivalents was $616,174. The Company expects to
experience operating losses and negative cash flow for the foreseeable future.
Therefore, it does not have sufficient cash to sustain those operating losses
without additional financing. The Company intends to continue to seek to raise
equity or debt financing. However, no assurance can be given that the Company
will be able to obtain additional financing on favorable terms, if at all. If
the Company cannot obtain additional financing in a timely manner, it will not
be able to continue operations. In addition, the Company has received a report,
dated August 15, 2002, from its prior independent auditors covering its
financial statements for the fiscal years ended May 31, 2002 and 2001 containing
an explanatory paragraph that states the Company's financial condition and
results of operations raises substantial doubt about its ability to continue as
a going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of that uncertainty. The
Company's current independent auditors have also advised the Company that its
financial condition and results of operations as of and for the nine-month
period ended February 28, 2003 raises substantial doubt about the Company's
ability to continue as a going concern.
RESULTS OF OPERATIONS - THREE MONTHS ENDED FEBRUARY 28, 2003 COMPARED TO THE
THREE MONTHS ENDED FEBRUARY 28, 2002
Research and development expenses decreased $172,335, or 58%, from
$298,555 for the quarter ended February 28, 2002 to $126,220 for the quarter
ended February 28, 2003. The decrease is primarily due to reduction of personnel
costs during fiscal year 2003. Administrative expenses increased $91,407, or
243%, from $37,465 for the quarter ended February 28, 2002 to $128,512 for the
quarter ended February 28, 2003. The increase was primarily due to the addition
of two administrative positions during fiscal year 2003 and the compensation
expenses associated with the issuance of stock options.
RESULTS OF OPERATIONS - NINE MONTHS ENDED FEBRUARY 28, 2003 COMPARED TO THE NINE
MONTHS ENDED FEBRUARY 28, 2002
Research and development expenses decreased $81,936, or 12% from
$665,405 for the nine-month period ended February 28, 2002 to $583,469 for the
period ended February 28, 2003. The decrease is primarily due to a reduction in
personnel expenditures in 2003 because of a change in research focus.
Administrative expenses increased $315,277 or 160% from $196,858 for the
nine-month period ended February 28, 2002 to $512,135 for the period ended
February 28, 2003. The increase is mainly due to the addition of two
administrative positions during fiscal year 2003 and the compensation expenses
associated with the issuance of stock options.
PART 1
ITEM 3 - CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures:
Disclosure controls and procedures are designed and implemented to insure that
all material information relating to a company is made known to its president,
chief financial officer, and such other persons who are responsible for
preparing and filing periodic reports with the Securities and Exchange
Commission. On April 12, 2003, Steven H. Kane and Donald K. Dean, representing
all of the officers and directors of Protalex, Inc., evaluated Protalex's
disclosure controls and procedures and concluded that such controls were
adequate as of that date.
Changes in Internal Control:
There have been no significant changes in Protalex's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
Protalex, Inc.
(A Company in the Development Stage)
PART 2
ITEM 6- EXHIBITS AND REPORTS ON FORM 8-K
6.A Index of Exhibits - From 10-K
- -------------------------------------------------------------------------
2.1 Stock Purchase Agreement Incorporated by reference,
among Protalex, Inc., to the Company's 10-SB
Don Hanosh and Enerdyne filing December 3, 1999
Corporation
- -------------------------------------------------------------------------
Merger Agreement and Plan Incorporated by reference
of Re-organization to the Company's 10-SB
between Protalex, Inc. filing December 3, 1999
and Enerdyne Corporation
- -------------------------------------------------------------------------
3.1 Articles of Incorporation, Incorporated by reference
as amended to the Company's 10-SB
filing December 3, 1999
- -------------------------------------------------------------------------
10.1 Promissory Note in favor Incorporated by reference
of Don Hanosh to the Company's 10-SB
filing December 3, 1999
- -------------------------------------------------------------------------
10.2 Continuing and Unconditional Incorporated by reference,
Guaranty executed by John to the Company's 10-SB
E. Doherty filing December 3, 1999
- -------------------------------------------------------------------------
10.3 Continuing and Unconditional Incorporated by reference,
Guaranty executed by James to the Company's 10-SB
K. Strattman filing December 3, 1999
- -------------------------------------------------------------------------
10.5 Form of Confidential Disclosure Incorporated by reference,
Agreement to the Company's 10-SB
filing December 3, 1999
- -------------------------------------------------------------------------
Exhibit
Number Exhibit Name
6.B A report on Form 8-K was filed on February 28,
2003, which detailed the resignation of Atkinson & Co. as
Protalex's certifying accountant, and the engagement of
Grant Thornton, LLP.
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: April 12, 2003 BY: Steven H. Kane
---------------- ----------------------
Steven H. Kane
President and Director
CERTIFICATION OF THE 10-QSB BY THE PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL
FINANCIAL OFFICER -NEW EXCHANGE ACT RULES 13A-
14, 15D-14
I, Steven H. Kane, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Protalex, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant, is made
known to us by others, particularly during the period in which
this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
CERTIFICATION OF THE 10-QSB BY THE PRINCIPAL EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL OFFICER -NEW EXCHANGE ACT RULES 13A-
14, 15D-14 - CONTINUED
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 12, 2003
Steven H. Kane
------------------------------
Steven H. Kane
President and Director
CERTIFICATION OF THE 10-QSB BY THE PRINCIPAL EXECUTIVE OFFICER AND
PRINCIPAL FINANCIAL OFFICER - CONTINUED
I, Donald K. Dean, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of
Protalex, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the registrant, is made
known to us by others, particularly during the period in which
this quarterly report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
CERTIFICATION OF THE 10-QSB BY THE PRINCIPAL EXECUTIVE OFFICER
AND PRINCIPAL FINANCIAL OFFICER - CONTINUED
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: April 12, 2003
Donald K. Dean
------------------------------
Donald K. Dean
Treasurer and Chief Financial Officer
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
I, Steven H. Kane, President of Protalex, Inc. certify in my capacity as an
officer of Protalex that I have reviewed the quarterly report of Protalex on
Form 10-QSB for the nine month period ended February 28, 2003 and that to the
best of my knowledge:
1. the report fully complies with the requirements of the Securities
Exchange Act of 1934; and
2. the information contained in the report fairly presents, in all
material respects, the financial condition and results of operations of
Protalex.
The purpose of this statement is solely to comply with Title 18, Chapter 63,
Section 1350 of the United States Code, as amended by Section 906 of the
Sarbanes-Oxley Act of 2002.
Date: April 12, 2003 BY: Steven H. Kane
---------------- ----------------------
Steven H. Kane
President and Director
CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
I, Donald K. Dean, Treasurer and Chief Financial Officer of Protalex, Inc.
certify in my capacity as an officer of Protalex that I have reviewed the
quarterly report of Protalex on Form 10-QSB for the nine month period ended
February 28, 2003 and that to the best of my knowledge:
1. the report fully complies with the requirements of the Securities
Exchange Act of 1934; and
2. the information contained in the report fairly presents, in all material
respects, the financial condition and results of operations of Protalex.
The purpose of this statement is solely to comply with Title 18, Chapter 63,
Section 1350 of the United States Code, as amended by Section 906 of the
Sarbanes-Oxley Act of 2002.
Date: April 12, 2003 BY: Donald K. Dean
---------------- ---------------------------
Donald K. Dean
Treasurer and Chief Financial Officer