UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter ended March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period to
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Commission file number - 000-26423
INFECTECH, INC.
Exact name of Registrant as specified in its charter)
DELAWARE 34-1760019
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification
Number)
Suite Two, 87 Stambaugh Avenue, Sharon, PA 16146
(Address of principal executive offices) (Zip Code)
(724) 346-1302
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
and Exchange Act of 1934 during the preceding twelve months (or such
shorter period that the Registrant was required to file such reports),
and (2) has been subject to file such filing requirements for the past
thirty days.
Yes x No
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the close of the period covered by this
report:
6,703,060 Shares of Common Stock ($.02 par value)
(Title of Class)
Transitional Small Business Disclosure Format (check one):
Yes No x
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2
Infectech, Inc.
PART I: Financial Information
ITEM 1 - Financial statements
ITEM 2 - Management's' discussion and analysis of
financial condition and results of operations
PART II: Other Information
ITEM 6 - Exhibits and Reports on Form 8-K
3
PART I
Item 1. Financial Statements:
CONSOLIDATED BALANCE SHEETS
INFECTECH, INC. AND SUBSIDARY
(A DEVELOPMENT STAGE ENTERPRISE)
Unaudited Audited
March 31, Dec 31,
ASSETS 2000 1999
- ------- --------- --------
CURRENT ASSETS
Cash and cash equivalents $ 4,556 $ 19,044
EQUIPMENT
Medical equipment 45,968 45,968
Less accumulated depreciation 24,111 22,470
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NET EQUIPMENT 21,857 23,498
OTHER ASSETS
Deposit 2,002 2,002
Patent costs, net of accumulated amortization
of $137,127 in 2000 and $126,190 in 1999 582,682 590,409
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TOTAL OTHER ASSETS 584,684 592,411
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$611,097 $634,953
======== ========
LIABILITIES AND STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts payable $70,352 $76,887
Accrued payroll taxes 629 2,205
Accrued state taxes 2,468 2,468
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TOTAL CURRENT LIABILITIES 73,449 81,560
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LONG-TERM DEBT
Notes Payable 25,400 0
STOCKHOLDERS EQUITY
Common stock -$.02 par value per share
Authorized 20,000,000 shares; issued and
outstanding 6,703,060 shares in 2000
and 6,629,064 shares in 1999 134,061 132,581
Additional paid-in capital 2,741,260 2,490,163
Deficit accumulated during the development stage (2,363,073) (2,069,351)
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TOTAL STOCKHOLDERS EQUITY 512,248 553,393
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$611,097 $634,953
See accompanying notes to consolidated financial statements
4
CONSOLIDATED STATEMENTS OF OPERATIONS
INFECTECH, INC. AND SUBSIDARY
(A DEVELOPMENT STAGE ENTERPRISE)
UNAUDITED
Period from
June 21, 1989
Three months ended March 31 (Inception) to
OPERATING INCOME 2000 1999 March 31, 2000
------------------------------------------------------------
Sales and Royalties $ 7,500 $ 0 $24,459
OPERATING EXPENSES
Research and development 0 7,605 274,420
Wages 154,317 5,677 426,053
Telephone 2,650 889 42,989
Office Expense 3,160 2,990 38,817
Insurance 0 51 18,567
Legal and accounting 4,557 441 279,167
Travel 1,405 777 83,367
Payroll taxes 176 592 11,543
State and local taxes 532 2,621 16,811
Amortization 10,937 8,925 139,968
Depreciation 1,642 1,554 24,113
Rent 5,499 5,015 101,066
Consulting and professional fees 107,766 11,610 736,227
Public relations 5,971 0 164,258
Royalties 1,918 0 5,746
Miscellaneous operating expenses 734 2,758 36,724
MD-diagnostics com. Expenses 99 0 42,929
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Total operating expenses 301,363 51,505 2,442,765
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Loss from operations (293,863) (51,505) (2,418,306)
OTHER INCOME
Interest expense 0 0 (661)
Interest Income 141 2,063 55,894
Net Loss $(293,722) $(49,442) $(2,363,073)
========= ========= ============
BASIC LOSS PER SHARE (.04) $ (.01)
=========== =========
WEIGHTED AVERAGE SHARES 6,645,370 6,366,771
See accompanying notes to consolidated financial statements
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
INFECTECH, INC. AND SUBSIDARY
(A DEVELOPMENT STAGE ENTERPRISE)
UNAUDITED
Period from
June 21, 1989
Three months ended March 31 (Inception) to
2000 1999 March 31, 2000
--------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (293,722) $(49,422) $(2,363,073)
Adjustments to reconcile net loss to
Net cash used in operating activities:
Amortization 10,936 8,925 139,967
Depreciation 1,640 1,554 24,111
Increase (decrease) in payables (5,233) 551 69,860
Increase (decrease) in accrued expenses (2,878) 509 2,857
Expenses exchanged for capital 252,577 0 1,063,890
-------- ------- ----------
Net cash used in operating activities (36,680) (37,883) (1,062,388)
-------- -------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment 0 0 (45,969)
Patent Costs (3,208) (11,253) (720,648)
Increase in deposits 0 135 (2,002)
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Net cash used in investing activities (3,208) (11,118) (768,619)
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CASH FLOWS FROM FINANCING ACTIVITIES
Fees in connection with issuance of stock 0 0 (87,348)
Proceeds from issuance of long-term debt 25,400 0 195,965
Proceeds from issuance of common stock 0 4 1,726,946
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Net cash provided by financing activities 25,400 34 1,835,563
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Net decrease in cash and cash equivalents (14,488) (48,967) 4,556
CASH AND CASH EQUIVALENTS
Beginning of period 19,044 217,295 0
End of period $ 4,556 $ 168,328 $ 4,556
========== ========= ===========
CASH WAS PAID FOR
Interest $ 0 $ 0 $ (661)
See accompanying notes to consolidated financial statements
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFECTECH, INC. AND SUBSIDARY
(A DEVELOPMENT STAGE ENTERPRISE)
THREE MONTHS ENDED MARCH 30,2000
UNAUDITED
NOTE A - BASIS OF PRESENTATION
These unaudited financial statements are those of a development
stage company, Infectech, Inc., that was incorporated in 1989 to
develop diagnostic tests for infectious diseases and one 95%
owned subsidiary. The accompanying unaudited financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with instructions to form I O-QSB. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary
have been made for the fair presentation of the company's
results for the three month period ended March 30, 2000. These
results are not necessarily indicative of the results that may
be expected for the year ended December 31, 2000.
7
Infectech, Inc.
PART I (cont.)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations:
Trends and Uncertainties. Demand for Infectech's products will be
dependent on, among other things, market acceptance of Infectech's
concept, the quality of its products, government approval and general
economic conditions, which are cyclical in nature. Inasmuch as a major
portion of Infectech's activities will be the receipt of revenues from
the sales of its products, Infectech's business operations may be
adversely affected by Infectech's competitors and prolonged
recessionary periods.
Capital and Source of Liquidity. Infectech requires substantial
capital in order to meet its ongoing corporate obligations and in order
to continue and expand its current and strategic business plans.
Initial working capital has been obtained by the private sale of
Infectech's common shares from November 1996 to present.
For the three months ended March 31, 2000, Infectech received proceeds
from the issuance of long term debt of $of $25,400 resulting in net
cash provided by financing activities of $25,400 for the three months
ended March 31, 2000.
For the three months ended March 31, 1999, Infectech had proceeds from
the issuance of common stock of $34. As a result, Infectech had net
cash provided by financing activities of $34 for the three months ended
March 31, 1999.
For the three months ended March 31, 2000, Infectech had patent costs
of $3,208 resulting in net cash used in investing activities of $3,208.
Infectech anticipates that costs associated with product testing and
development will continue to increase.
For the three months ended March 31, 1999, Infectech had patent costs
of $11,253. Infectech had an increase in deposits of $135. As a
result, Infectech had net cash used in investing activities of $11,118
for the three months ended March 31, 1999.
On a long-term basis, liquidity is dependent on continuation and
expansion of operation and receipt of revenues, additional infusions of
capital and debt financing. Infectech believes that additional
capital and debt financing in the short term will allow Infectech to
increase its marketing and sales efforts and thereafter result in
increased revenue and greater liquidity in the long term. However,
there can be no assurance that Infectech will be able to obtain
additional equity or debt financing in the future, if at all.
Results of Operations. Since inception, Infectech has not received
any material revenues from operations. Sales and royalties for the
three months ended March 31, 2000 were $7,500.
Research and development expenses were $0 for the three months ended
March 31, 2000 compared to $7,605 for the three months ended March 31,
1999. This decrease was due to research activities for its patents
being shifted to work done internally in 1999. Wages increased to
$154,317 for the three months ended March 31, 2000 from $5,677 for the
three months ended March 31, 1999. This was the result from one
employee working full time in research and development starting the
later part of 1998. Legal and accounting increased to $4,557 for the
three months ended March 31, 2000 compared to $441 for the three months
ended March 31, 1999.
Consulting and professional fees increased to $107,766 for the three
months ended March 31, 2000 from $11,610 for the three months ended
March 31, 1999. This increase is due to increasing activity with
consultants regarding marketing and commercialization of Infectech's
product.
Insurance expense decreased from $51 for the three months ended March
31, 1999 to $0 for the three months ended March 31, 2000 since
Infectech discontinued life insurance coverage on its officers.
8
Public relation expenses were $5,499 for the three months ended March
31, 2000 versus -0- for the three months ended March 31, 1999. This
is due again to Infectech starting to market its product. Infectech
incurred $99 in expenses for the three months ended March 31, 2000 in
connection with its subsidiary, MD-Diagnostics.com, Inc. to develop
internet sites for medical diagnostics compared to $-0- for the three
months ended March 31, 1999.
Plan of Operation. Infectech is in the development stage and has not
conducted any significant operations to date and has received only
minimal royalty revenues. Infectech may experience problems; delays,
expenses and difficulties sometimes encountered by an enterprise in
Infectech's stage of development, many of which are beyond Infectech's
control. These include, but are not limited to, unanticipated problems
relating to product development, testing, regulatory compliance,
manufacturing costs, production and marketing problems, additional
costs and expenses that may exceed current estimates and competition.
Infectech has funding needs of approximately $1.2 million. Infectech
shall seek equity or debt financing for intellectual Property
($30,000), research and development for Tuberculosis Pseudomonas
($814,400), legal expense for patents ($263,419) and internet research
and development ($50,000). This does not include Infectech's working
capital need. Research and development expenses will be dependent on
the availability of funds. Infectech does not expect any additional
purchases of plant and equipment. There are no expected significant
changes in the number of employees. If Infectech obtained funding,
support type of employees such as secretarial, etc, may be required.
As of March 31, 2000, Infectech had very little working capital.
Infectech expects to use this minimum capital to continue research and
development of patents and for the costs associated with executing an
initial public stock offering. Infectech believes that the net
proceeds from equity financing together with revenues from operations,
if any, will be sufficient to meet its anticipated cash needs for
working capital and capital expenditures until approximately December
2001. There can be no assurance, however, that the net proceeds from
equity financing will not be expended prior thereto due to
unanticipated changes in economic conditions or other unforeseen
circumstances. Unless growth in Infectech's revenues from operations
substantially exceeds management's current expectations, by
approximately December 2001, Infectech will be required to seek
additional equity or debt financing to fund the costs of its
operations, including continued development of its products. There can
be no assurance that additional financing will be available or that, if
available, such financing will be on acceptable terms to enable
Infectech to complete development of or commercialize any of its
proposed products or technologies.
Infectech is not delinquent in any of its obligations even though
Infectech has generated limited operating revenues. Infectech
intends to market its products utilizing cash made available from the
private and public sale of its securities. Infectech's management is of
the opinion that revenues from the sale of its products and the
proceeds of the sales of its securities will be sufficient to pay its
expenses until its business plan can be fully implemented.
9
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
None
(b) Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
Date: /s/ Mitchell Felder, MD
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Mitchell Felder, President
April 5, 2001