Form 10-QSB/A
[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/A
(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, 2002
[ ] 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 000 - 28385
Protalex, Inc.
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(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) 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
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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 11,490,235
as of April 5, 2002.
Transitional Small Business Disclosure Format (check one):
Yes No X
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FINANCIAL STATEMENTS
PROTALEX, INC.
February 28, 2002
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Protalex, Inc.
(A Company in the Development Stage)
BALANCE SHEET
(Unaudited)
(As Restated)
February 28, 2002
ASSETS
CURRENT ASSETS
Cash and cash equivalents ....................... $ 523,452
Prepaid expense ................................. 14,196
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Total current assets ..................... $ 537,648
EQUIPMENT
Lab equipment ................................... 176,558
Office and computer equipment ................... 152,536
Furniture and fixtures .......................... 21,268
Leasehold improvements .......................... 10,685
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361,047
Less accumulated depreciation ................... (166,960) 194,087
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OTHER ASSETS
Intellectual technology license, net of
accumulated amortization of $2,369 ............ 17,931
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$ 749,666
=========
LIABILITIES
CURRENT LIABILITIES
Payroll and withholding taxes payable ........... $ 2,726
Current maturities of long-term liabilities ..... 32,749
Accounts payable ................................ 1,154
Accrued compensation ............................ 23,680
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Total current liabilities ................ $ 60,309
LONG-TERM LIABILITIES, less current maturities
Equipment note payable .......................... 11,776 11,776
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Total liabilities ........................ 72,085
STOCKHOLDERS' DEFICIT
Common stock, no par value, authorized
40,000,000 shares, 11,728,735 shares issued,
11,490,235 shares outstanding. 238,500
shares in the treasury at -0- cost .............. 2,492,891
Common stock, contra ............................ (368,546)
Additional paid-in-capital ...................... 316,569
Deficit accumulated during the development stage (1,763,333) 677,581
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$ 749,666
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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 Three and Nine Months Ended February 28, 2002 and 2001
and from Inception (September 17, 1999) through February 28, 2002
Nine Three
Months Ended Months Ended From Inception
February 28, February 28, Through
2002 2002 February 28, 2002
(As Restated) 2001 (As Restated) 2001 (As Restated)
------------- ------------- ------------- ------------ -------------
Interest income $ 6,430 $ 12,883 $ 2,451 $ 3,516 $ 29,327
Expenses
Research and development 665,405 303,137 298,555 123,756 1,240,998
Administrative 208,358 39,475 37,465 10,742 278,394
Professional fees 72,638 35,612 9,938 8,629 187,017
Depreciation and amortization 11,250 33,610 2,235 9,651 29,054
Interest 7,557 18,415 1,390 5,515 57,197
------------- ------------- -------------- ------------ -------------
NET LOSS $ (958,778) $ (417,366) $ (347,132) $ (154,777) $ (1,763,333)
============= ============= ============== ============ =============
Loss per common share - Basic $ (0.09) $ (0.04) $ (0.03) $ (0.01) $ (0.17)
============= ============= ============== ============ =============
Shares used in per share
calculation - Basic 10,951,808 10,323,325 11,490,235 10,387,537 10,208,506
============= ============= ============== ============ =============
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 Nine Months Ended February 28,
2002 and 2001 and from Inception (September 17,
1999) through February 28, 2002
Nine Nine From Inception
Months Ended Months Ended Through
February 28, 2002 February 28, February 28, 2002
(As Restated) 2001 (As Restated)
------------------ ------------------ ------------------
Cash flows from operating activities
Net loss $ (958,778) $ (417,366) $ (1,763,333)
Adjustments to reconcile net loss to net
cash provided by operating activities
Depreciation and amortization 83,804 52,629 169,329
Non cash compensation expense 133,000 - 133,000
Decrease in interest receivable - 10,669 16,644
Decrease (increase) in prepaid expense 2,873 (29,320) (14,196)
(Decrease) increase in payroll taxes payable (1,926) 2,244 2,726
Increase in accounts payable 1,226 - 1,154
(Decrease) in interest payable (3,004) (4,641) -
(Decrease) in professional fees payable (190) (5,553) -
Increase in compensation payable 5,758 - 23,680
----------------- ------------------ ------------------
Net cash used in operating activities (737,237) (391,338) (1,430,996)
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Cash flows from investing activities
Acquisition of intellectual technology license
- fee portion - - (20,000)
Acquisition of equipment (32,086) (96,716) (269,615)
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 -
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Net cash (used in) provided by
investing activities (32,086) 21,831 (539,615)
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Cash flows from financing activities
Additional paid-in-capital 143,569 - 183,569
Proceeds from stock issuance 1,102,000 425,000 2,357,400
Payment on note payable to individual (142,830) (225,716) (368,546)
Issuance of note payable to individual - - 368,546
Payment on equipment note payable (22,218) (17,695) (46,906)
----------------- ------------------ ------------------
Net cash provided by financing activities 1,080,521 181,589 2,494,063
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NET INCREASE (DECREASE) IN CASH 311,198 (187,918) 523,452
Cash and cash equivalents, beginning of period 212,254 560,487 -
----------------- ------------------ ------------------
Cash and cash equivalents, end of period $ 523,452 $ 372,569 $ 523,452
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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 Nine Months Ended February 28,
2002 and 2001 and from Inception (September 17,
1999) through February 28, 2002
Nine From Inception
Months Ended Nine Through
February 28, 2002 Months ended February 28, 2002
(As Restated) February 28, 2001 (As Restated)
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Interest paid $ 10,633 $ 19,320 $ 55,625
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Taxes paid $ - $ 50 $ 50
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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 this financial statement.
Protalex, Inc.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
From Inception (September 17, 1999) through February 28, 2002 (As Restated)
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, 2001
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
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.
Protalex, Inc.
(A Company in the Development Stage)
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
From Inception (September 17, 1999) through February 28, 2002 (As Restated)
NOTE D - STOCK OPTIONS (AS RESTATED)
The accompanying balance sheet, statement of operations and statement of
cash flows have been restated to recognize the cost to the Company of
issuing a stock option to one of its non-employee directors. The option
vested immediately, has a ten-year term and has an exercise price of $1.25
per share. The Company accounted for the option in accordance with APB
Opinion No. 25 and has recognized compensation expense based on the
"intrinsic value" method. This method records compensation cost as the
difference between the exercise price of the option and the fair market
value of the Company's stock on the measurement (grant) date. Because the
option vested immediately, $133,000 of compensation expense was recorded on
the Company books at November 30, 2001.
Had the Company determined compensation expense based on the fair value at
the measurement date for its stock option 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 From Inception
Months Ended Nine Through
February 28, 2002 Months Ended February 28, 2002
(As Restated) February 28, 2001 (As Restated)
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Net loss, as reported .. $ (958,778) $ (417,366) $ (1,763,333)
Proforma net loss .......... (1,056,997) (417,366) (1,861,552)
Loss per share, as reported (0.09) (0.04) (0.17)
Proforma loss per share ... (0.10) (0.04) (0.18)
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 83 percent; risk-free
interest rate of 5.05 percent; and an expected life of five years.
Protalex, Inc.
(A Company in the Development Stage)
PART I - FINANCIAL INFORMATION
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 to be submitted to the
FDA in May 2002 and continuing laboratory research and development on its
bioregulator technology. Laboratory and animal work continue on schedule
thus strengthening and extending the Company's therapeutic approach. The
Company is planning a $1,500,000 private placement in May 2002 to assist in
the completion of a Company sponsored IND and to continue to develop and
execute a broader patent strategy. Both of these developments will
strengthen the Company's position in the marketplace.
The Company continues to pursue additional financing in order to continue
future operations and necessary research and development. The near term goal
of approximately $5,000,000 remains the same. The Company's longer term
funding goal also remains the same at $15,000,000 to $20,000,000 in order to
fully implement the Company's Bioregulator technology.
Protalex, Inc. successfully completed a private placement on September 7,
2001, receiving funds of $1,102,000 for 881,600 shares of common stock.
Funding from the May 2002 private placement together with current resources
will fund operations and necessary research and development over the next 10
months. As noted above, the Company's laboratory and animal work continue to
support its intellectual property base. In the meantime, the Company has
acquired and will continue to acquire laboratory equipment. These
acquisitions will help to keep down the high cost associated with third
party contracting, and speed the process of learning more about various
aspects of the Company's core technology. The Company initiated the process
of patent applications in September 2001 and believes the planned private
placement scheduled for May 2002, will allow it to advance a broader patent
strategy.
Please refer to the Company's 10-KSB 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.
Exhibit
Number Exhibit Name
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: April 12, 2002 BY: John E. Doherty
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John E. Doherty
President and Director,