2
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 September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period to
---------- ----------
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
------ ------
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:
6,480,784 Shares of Common Stock ($.02 par value)
(Title of Class)
Transitional Small Business Disclosure Format (check one):
Yes No x
------- -------
3
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
4
PART I
Item 1. Financial Statements:
Infectech, Inc.
Balance Sheet - (Unaudited)
As of September 30, 1999
ASSETS
CURRENT ASSETS
Cash and cash equivalents 81,466
Due from Employee 291
-------
TOTAL CURRENT ASSETS 81,757
EQUIPMENT
Medical equipment 45,367
Office equipment 600
Less aaccumulated depreciation (20,872)
--------
NET EQUIPMENT 25,095
OTHER ASSETS
Patent costs 652,188
Less accumulated amortization (110,438)
-------
Net Patent Costs 541,750
-------
Organization costs 2,841
Less accumulated amortization (2,841)
-------
Net Organization Costs 0
Trademarks 8,343
Security deposits 1,430
-------
TOTAL OTHER ASSETS 551,523
-------
TOTAL ASSETS 658,375
=======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable 28,413
Accrued expenses 5,380
-------
TOTAL CURRENT LIABILITIES 33,793
LONG-TERM DEBT 0
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock - $.02 par value
Authorized 20,000,000 shares issued and
outstanding 6,480,784 129,616
Additional paid-in capital 1,981,208
Deficit accumulated during the development
stage (1,486,242)
---------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 624,582
---------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) 658,375
=========
5
Infectech, Inc.
Statement of Operations
(Unaudited)
For the Nine Months Ended September 30, 1999 and
the Nine Months Ended September 30, 1998
For the For the
Three Months Ended Three Months Ended
September 30, 1999 September 30, 1998
OPERATING INCOME
Sales & Royalties $ 7,290.00 $0.00
OPERATING EXPENSES:
Research and development 14,363.00 42,504.00
Wages 7,250.00 11,027.00
Telephone 1,656.00 1,021.00
Office expense 919.00 2,070.00
Insurance 0.00 266.00
Legal & accounting 500.00 12,000.00
Travel 77.00 4,299.00
Payroll Taxes 617.00 819.00
State & local taxes 0.00 1,374.00
Amortization 9,470.00 11,933.00
Depreciation 1,686.00 1,648.00
Rent 6,293.00 8,304.00
Consulting & professional fees 0.00 12,398.00
Public relations 3,378.00 0.00
Royalties 1,822.00 0.00
Misc. operating expenses 6,211.00 1,801.00
---------- ------------
TOTAL OPERATING EXPENSES 54,242.00 111,464.00
----------- ------------
LOSS FROM OPERATIONS (46,952.00) (111,464.00)
OTHER INCOME (DEDUCTION)
Interest earned 1,144.00 3,022.00
---------- -----------
TOTAL OTHER INCOME (DEDUCTION) 1,144.00 3,022.00
---------- -----------
NET LOSS (45,808.00) (108,442.00)
========== ===========
Net Loss Per Common Share (.0071) (.0170)
6
Infectech, Inc.
Statement of Cash Flows
(Unaudited)
For the Nine Months Ended September 30, 1999 and
the Nine Months Ended September 30, 1998
For the For the
Nine Months Nine Months
Ended Ended
Sept. 30, 1999 Sept. 30, 1998
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($237,866) ($228,987)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization 27,995 23,051
Depreciation 4,794 4,319
Increase (decrease) in payables (4,593) 2,077
Increase (decrease) in accrued expenses 2,390 1,141
Expenses exchanged for capital 0 0
-------- --------
NET CASH USED IN OPERATING ACTIVITIES ($207,280) ($198,399)
CASH FLOWS FROM INVESTING ACTIVITIES
Redemption (Purchase) of certificate of deposit 0 200,000
Purchase of equipment (2,450) (4,505)
Patent costs (55,997) (179,554)
Increase (decrease) in deposits (51) (82)
Deferred merger & offering costs 0 (76,070)
------- ------
NET CASHED USED IN INVESTING ACTIVITIES ($58,498) (60,211)
CASH FLOWS FROM FINANCING ACTIVITIES
Legal fees in connection with issuance of stock (3,285) 0
Proceeds from issuance of long-term debt 0 0
Proceeds from issuance of common stock 133,234 270,074
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES $129,949 $270,074
NET INCREASE IN CASH AND CASH EQUIVALENTS ($135,829) 11,464
CASH AND CASH EQUIVALENTS
Beginning of Period $217,295 $295,489
End of Period $ 81,466 $306,953
7
NOTES TO FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations:
These financial statements are those of a development stage company,
Infectech, Inc., that was incorporated in 1989 to develop diagnostic
tests for infectious diseases. A paraffin slide technology has been
developed that greatly reduces the time required to identify bacteria
and diagnose disease. This technology has been patented in the United
States, major European countries and Australia.
The Company's operations have consisted primarily of incurring legal
costs to obtain patents in the United States and foreign countries and
conducting research and development activities.
Cash and Cash Equivalents:
The Company considers highly liquid debt instruments purchased with
maturity dates of three months or less to be cash equivalents.
The Company maintains deposits in savings, checking and transfer
accounts in one bank located in Hermitage, Pennsylvania. Deposits at
times may exceed federally insured amounts.
Equipment:
Equipment is stated at cost. Depreciation is computed on the straight-
line method.
Patent Costs:
Patent costs are stated net of amortization. Amortization is computed
on the straight-line method over a 17 year period. The company has
capitalized only legal fees related to patent rights acquired; all
other such costs have been expensed as incurred.
Research and Development Costs:
Research and development costs not directly reimbursable by others,
totaling $35,810 in 1992, were charged to expense when stock was issued
in exchange for patent rights. Research and development costs are
charged to expense when incurred.
Use of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
NOTE B - LINE OF CREDIT
The Company has a $10,500 line of credit, all of which was available at
September 30, 1999. The line of credit is collateralized by the
personal guarantee of a stockholder.
8
Infectech, Inc.
PART I (cont.)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations:
Trends and Uncertainties. Demand for the Company's products will be
dependent on, among other things, market acceptance of the Company's
concept, the quality of its products, government approval and general
economic conditions, which are cyclical in nature. Inasmuch as a major
portion of the Company's activities will be the receipt of revenues
from the sales of its products, the Company's business operations may
be adversely affected by the Company's competitors and prolonged
recessionary periods.
Capital and Source of Liquidity. The Company 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 the
Company's Common Shares from November 1996 to present.
For the nine months ended July 31, 1999, the Company had legal fees in
connection with the issuance of common stock of $3,285. The Company
received proceeds from the issuance of common stock of $133,234
resulting in net cash provided by financing activities of $129,949 for
the nine months ended June 30, 1999.
For the nine months ended September 30, 1998, the Company had proceeds
from the issuance of common stock of $270,074. As a result, the Company
had net cash used in investing activities of $270,074 for the nine
months ended September 30, 1999.
For the nine months ended September 30, 1999, the Company had patent
costs of $55,997, purchase of equipment of $2,450 and an increase in
deposits of $51 resulting in net cash used in investing activities of
$58,498. The Company anticipates that costs associated with product
testing and development will continue to increase.
For the nine months ended September 30, 1998, the Company received
$200,000 from the redeption of certificate of deposit. The Company
purchased equipment for $4,505 and had patent costs of $179,554 for the
nine months ended September 30, 1998. The Company had an increase in
deposits of $82 and had deferred merger and offering costs of $76,070
for that same period. As a result, the Company had net cash used in
investing activities of $60,211 for the nine months ended September 30,
1998.
The Company has a $10,500 line of credit, all of which was available at
September 30, 1998. The line of credit is collateralized by the
personal guarantee of a stockholder.
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. The Company believes that additional
capital and debt financing in the short term will allow the Company 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 the Company will be able to obtain
additional equity or debt financing in the future, if at all.
Results of Operations. Since inception, the Company has not received
any material revenues from operations.
For the nine months ended September 30, 1999, the Company had operating
expenses of $54,242. These expenses consisted primarily of research
and development of $14,363, wages of $7,250, telephone of $1,656, legal
and accounting of $500, travel of $77, payroll taxes of $617, rent of
$6,293, depreciation and amortization of $11,156, office expense of
$919, public relations of $3,378, royalties of $1,822 and miscellaneous
operating expenses of $6,211.
For the nine months ended September 30, 1998, the Company had operating
expenses of $111,464. These expenses consisted primarily of research
and development of $42,504, wages of $11,027, telephone of $1.021,
insurance of 266, legal and accounting of $12,000, travel of $4,299,
payroll taxes of $819, state and local taxes of $1,374, rent of $8,304,
depreciation and amortization of $13,581, office expense of $2,070,
consulting and professional fees of $12,398 and miscellaneous operating
expenses of $1,801.
9
Plan of Operation. The Company is in the development stage and has not
conducted any significant operations to date or received any operating
revenues. The Company may experience problems; delays, expenses and
difficulties sometimes encountered by an enterprise in the Company's
stage of development, many of which are beyond the Company'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.
As of September 30, 1999, the Company had working capital of $81,466.
The Company expects to use this capital to continue research and
development of patents and for the costs associated with executing an
initial public stock offering. The Company 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
1999. 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 the Company's revenues from operations
substantially exceeds management's current expectations, by
approximately December 1999, the Company 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 the
Company to complete development of or commercialize any of its proposed
products or technologies.
The Company is not delinquent in any of its obligations even though the
Company has generated limited operating revenues. However, the Company
is currently outside of normal vendor terms and continues to negotiate
with vendors while the management continues its efforts to raise
capital. The Company intends to market its products utilizing cash made
available from the private and public sale of its securities. The
Company'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 additional restaurants can be
added pursuant to the initial business plan.
GENERAL - YEAR 2000 ISSUES
The Company has conducted a comprehensive review of its computer
systems to identify any business functions that could be affected by
the "Year 2000" issue. As the millennium ("Year 2000") approaches,
businesses may experience problems as the result of computer programs
being written using two digits rather than four to define the
applicable year. The Company has conducted a comprehensive review of
its computer systems to identify those areas that could be affected by
the "Year 2000" issue. Any of the Company's programs that have time-
sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. If not corrected, this could result in
extensive miscalculations or a major system failure.
The Company relies on industry standard software. Certain
manufacturers have already provided the Company with upgraded software
to address the "Year 2000" issue and the Company believes that its
remaining software manufactures will modify their programs accordingly.
In the event the remaining manufacturers do not upgrade their software
packages, the Company will replace such software with programs that
address the "Year 2000" issue. The Company believes that by modifying
existing software and converting to new software, the "Year 2000" issue
will not pose significant operational problems and is not anticipated
to require additional expenditures that would materially impact its
financial position or results of operations in any given year.
Successful and timely completion of the Year 2000 project is based on
management's best estimates derived from various assumptions of future
events. These events are inherently uncertain, including the progress
and results of vendors, suppliers and customers Year 2000 readiness.
10
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
----------------------------
Mitchell Felder, President
November 20, 1999