SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark one)
[x] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the Quarter Period Ended February 28,2002
----------------
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from _______ to _______.
Commission File No. 0-26189
-------
ALLERGY IMMUNO TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 95-3937129
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1531 Monrovia Avenue, Newport Beach, California 92663
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (949) 645-3703
- --------------------------------------------------------------------------------
(Not applicable)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
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 Exchange Act of 1934
during the preceding 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
--------- --------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 17,170,390 shares of Common
Stock as of April 9, 2002.
ALLERGY IMMUNO TECHNOLOGIES, INC.
INDEX
PART I FINANCIAL INFORMATION
ITEM 1. Financial Statements:
Statements of Operations (unaudited) - Nine Months and Three Months
Ended February 28, 2002 and 2001......................................2
Balance Sheet (unaudited) - February 28, 2002.....................3 & 4
Statements of Cash Flows (unaudited)
Nine Months Ended February 28, 2002 and 2001..........................5
Statement of Changes in Shareholders' Deficit (unaudited) -
Nine Months Ended February 28, 2002...................................6
Notes to Financial Statements......................................7-10
Management's Discussion and Analysis of Financial Condition
and Selected Financial Data.......................................11-12
PART II. Other Information....................................................13
Signatures...........................................................14
1
PART I - FINANCIAL INFORMATION
SUMMARIZED FINANCIAL INFORMATION
ALLERGY IMMUNO TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS (UNAUDITED)
Nine Months Ended Three Months Ended
February 28, February 28,
2002 2001 2002 2001
------------- ------------- ------------- -------------
Net sales .................................. $ 41,453 $ 77,920 $ 12,682 $ 23,008
Cost of sales ......................... 57,638 65,258 19,144 24,180
------------- ------------- ------------- -------------
Gross profit (loss) ................... (16,185) 12,662 (6,462) (1,172)
------------- ------------- ------------- -------------
Operating Expenses:
Selling, general and administrative ... 49,923 60,261 15,696 15,049
Research and development .............. 0 0 0 0
------------- ------------- ------------- -------------
Total operating expenses ................... 49,923 60,261 15,696 15,049
------------- ------------- ------------- -------------
Operating Loss ............................. (66,108) (47,599) (22,158) (16,221)
Other income:
Other income, net ..................... 26 83 22 83
------------- ------------- ------------- -------------
Loss before taxes .......................... (66,082) (47,516) (22,136) (16,138)
Income Taxes ............................... 800 800 800 800
------------- ------------- ------------- -------------
NET LOSS ................................... $ (66,882) $ (48,316) $ (22,936) $ (16,938)
============= ============= ============= =============
Per share data:
Net loss .............................. $ (.00) $ (.00) $ (.00) $ (.00)
============= ============= ============= =============
Weighted average number of common and Common
equivalent shares outstanding .............. 17,170,390 17,170,390 17,170,390 17,170,390
============= ============= ============= =============
The accompanying notes are an integral part of these statements.
2
ALLERGY IMMUNO TECHNOLOGIES, INC.
BALANCE SHEET (UNAUDITED)
February 28,
2002
--------
Assets
Current Assets
Cash ......................................................... $ 905
Accounts receivable, less allowance for doubtful accounts .... 4,032
Inventory .................................................... 2,600
Prepaid expenses and other current assets .................... 1,301
--------
Total Current Assets ................................... 8,838
Fixed assets, net of accumulated depreciation .................... 249
Patents, net of accumulated amortization ......................... 9,887
--------
Total assets ..................................................... $18,974
========
The accompanying notes are an integral part of these statements
3
ALLERGY IMMUNO TECHNOLOGIES, INC.
BALANCE SHEET, CONTINUED (UNAUDITED)
February 28,
2002
------------
Liabilities and Shareholders' Deficit
Current Liabilities
Accounts payable and accrued expenses ..................... $ 45,957
Due to affiliate .......................................... 312,015
------------
Total Current Liabilities ............................ 357,972
Shareholders' Equity
Common stock, $.001 par value authorized 50,000,000 shares,
Issued and outstanding 17,170,390 ....................... 17,170
Additional paid-in-capital ................................ 1,777,388
Accumulated deficit ....................................... (2,133,556)
------------
Total Shareholders' Deficit .................................... (338,998)
------------
Total Liabilities and Deficit .................................. $ 18,974
============
The accompanying notes are an integral part of these statements.
4
ALLERGY IMMUNO TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED FEBRUARY 28, 2002 AND 2001
2002 2001
--------- ---------
Cash flows from operating activities:
Net loss ............................................ $(66,882) $(48,316)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization .................. 955 185
Changes in current assets and liabilities:
Accounts Receivable .......................... 3,442 2,584
Inventory .................................... 1,169 26
Prepaid expenses and other current assets .... 2,352 1,269
Accounts payable and other accrued liabilities 34,224 12,105
--------- ---------
Net cash used in operating activities ............... (24,740) (32,147)
--------- ---------
Cash flows from financing activities:
Advances from affiliate ......................... 16,190 29,889
--------- ---------
Net cash used in financing activities ............... 16,190 29,889
--------- ---------
Net change in cash .................................. (8,550) (2,258)
Cash at beginning of year ........................... 9,455 2,603
--------- ---------
Cash at end of quarter .............................. $ 905 $ 345
========= =========
The accompanying notes are an integral part of these statements.
5
ALLERGY IMMUNO TECHNOLOGIES, INC.
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT (UNAUDITED)
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2002
Common Stock
----------------------------- Additional Accumu-
Number of Paid-In Lated
Shares Amount Capital Deficit Total
------------ ------------ ------------ ------------ ------------
Balances at
May 31, 2001 17,170,390 $ 17,170 $ 1,777,388 $(2,066,674) $ (272,116)
Net loss - - - (66,882) (66,882)
------------ ------------ ------------ ------------ ------------
Balances at
February 28, 2002 17,170,390 $ 17,170 $ 1,777,388 $(2,133,556) $ ( 338,998)
============ ============ ============ ============ ============
The accompanying notes are an integral part of these statements.
6
NOTES TO FINANCIAL STATEMENTS
Unaudited
February 28, 2002
(1) Reference is made to Note 1 of the Notes to Financial Statements
contained in the Company's Annual Report on Form 10-KSB for the fiscal
year ended May 31, 2001, for a summary of significant accounting policies
utilized by the Company.
(2) The information set forth in these statements is unaudited. The
information reflects all adjustments which, in the opinion of management,
are necessary to present a fair statement of results of operations of
Allergy Immuno Technologies, Inc., for the periods indicated. It does not
include all information and footnotes necessary for a fair presentation
of financial position, results of operations, and cash flow in conformity
with generally accepted accounting principles.
(3) Results of operations for the interim periods covered by this Report may
not necessarily be indicative of results of operations for the full
fiscal year.
(4) Earnings Per Share
------------------
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards (SFAS) No. 128,
EARNINGS PER SHARE ("EPS"). SFAS No. 128 requires dual presentation of
basic EPS and diluted EPS on the face of all income statements issued
after December 15, 1997 for all entities with complex capital structures.
Basic EPS is computed as net income divided by the weighted average
number of common shares outstanding for the period. Diluted EPS reflects
the potential dilution that could occur from common shares issuable
through stock options, warrants and other convertible securities.
The following table illustrates the required disclosure of the
reconciliation of the numerators and denominators of the basic and
diluted EPS computations:
7
For the Nine Months Ended February 28, 2002
---------------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------------------- ------------------- --------------------
Basic EPS -
Loss available to common
Shareholders.................................. $(66,882) 17,170,390 ($.00)
====================
Effect of dilutive securities - Options............. - -
---------------------- -------------------
Diluted EPS -
Loss available to common share-
Holders plus assumed conversions.............. $(66,882) 17,170,390 $(.00)
====================== =================== ====================
For the Nine Months Ended February 28, 2001
---------------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------------------- ------------------- --------------------
Basic EPS -
Loss available to common
Shareholders.................................. $(48,316) 17,170,390 ($.00)
====================
Effect of dilutive securities - Options............. - -
---------------------- -------------------
Diluted EPS -
Loss available to common share-
Holders plus assumed conversions.............. $(48,316) 17,170,390 ($.00)
====================== =================== ====================
For the Three Months Ended February 28, 2002
---------------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------------------- ------------------- --------------------
Basic EPS -
Loss available to common
Shareholders.................................. $(22,936) 17,170,390 ($.00)
====================
Effect of dilutive securities - Options............. - -
---------------------- -------------------
Diluted EPS -
Loss available to common share-
Holders plus assumed conversions.............. $(22,936) 17,170,390 $(.00)
====================== =================== ====================
8
For the Three Months Ended February 28, 2001
---------------------------------------------------------------------
Income Shares Per Share
(Numerator) (Denominator) Amount
---------------------- ------------------- --------------------
Basic EPS -
Loss available to common
Shareholders.................................. $(16,938) 17,170,390 ($.00)
====================
Effect of dilutive securities - Options............. - -
---------------------- -------------------
Diluted EPS -
Loss available to common share-
Holders plus assumed conversions.............. $(16,938) 17,170,390 ($.00)
====================== =================== ====================
(5) The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. During the year ended May 31,
2001 ("Fiscal 2001"), the Company experienced a net loss of $62,654 and
during the nine months, a loss of $66,882 and had negative cash flows
from operations of $42,809 and $24,740 for the fiscal year and nine
months, respectively. In addition, the Company had substantial working
capital and shareholders' deficits at February 28, 2002. These factors,
among others, raise substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
There can be no assurances that the Company will be able to successfully
implement its plans, including generating profitable operations,
generating positive cash flows from operations and obtaining additional
debt and equity capital to meet present and future working capital
demands.
(6) Recent Accounting Pronouncements
--------------------------------
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141 ("SFAS 141"),
"Business Combinations", which eliminates the pooling method of
accounting for business combinations initiated after June 30, 2001. In
addition, SFAS 141 addresses the accounting for intangible assets and
goodwill acquired in a business combination. This portion of SFAS 141 is
effective for business combinations completed after June 30, 2001. The
Company does not expect SFAS 141 will have a materials impact on the
Company's financial position or results of operations.
In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 142 ("SFAS 142"), "Goodwill And Intangible Assets", which revises the
accounting for purchased goodwill and intangible assets. Under SFAS 142,
goodwill and intangible assets with indefinite lives will no longer be
amortized and will be tested for impairment annually. SFAS 142 is
effective for fiscal years beginning after December 15, 2001, with
earlier adoption permitted. The Company does not expect that SFAS 142
will have a material impact on the Company's financial position or
results of operations as a result of the future adoption of SFAS 142.
9
In August 2001, FASB issued SFAS No. 144, Impairment or Disposal of
Long-Lived Assets, which addresses accounting and financial reporting for
the impairment or disposal of long-lived assets. This standard is
effective for the Company's financial statements beginning December 1,
2002. The Company is currently evaluating the impact, if any, the
implementation of this Statement will have on the Company's financial
position and results of operations.
(7) On March 15, 2002, the Company discontinued operations of the clinical
laboratory due to continuing operating losses and lack of capital to
sustain those losses. The Company is currently exploring other business
options. The Company intends to keep current with its SEC filings as
required.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND SELECTED FINANCIAL DATA
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A "SAFE
HARBOR" FOR FORWARD-LOOKING STATEMENTS. CERTAIN INFORMATION CONTAINED HEREIN (AS
WELL AS INFORMATION INCLUDED IN ORAL STATEMENTS OR OTHER WRITTEN STATEMENTS MADE
OR TO BE MADE BY ALLERGY IMMUNO TECHNOLOGIES) CONTAINS STATEMENTS THAT ARE
FORWARD-LOOKING, SUCH AS STATEMENTS RELATING TO ANTICIPATED FUTURE REVENUES OF
THE COMPANY AND SUCCESS OR CURRENT PRODUCT OFFERINGS. SUCH FORWARD-LOOKING
INFORMATION INVOLVES IMPORTANT RISKS AND UNCERTAINTIES THAT COULD SIGNIFICANTLY
AFFECT ANTICIPATED RESULTS IN THE FUTURE, AND ACCORDINGLY, SUCH RESULTS MAY
DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING STATEMENTS MADE BY
OR ON BEHALF OF ALLERGY IMMUNO TECHNOLOGIES. THE POTENTIAL RISKS AND
UNCERTAINTIES INCLUDE, AMONG OTHERS, THE CONTINUED DEMAND FOR THE COMPANY'S
SERVICES, COMPETITIVE AND ECONOMIC FACTORS OF THE MARKETPLACE, HEALTH CARE
REGULATIONS AND THE STATE OF THE ECONOMY. READERS ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE
DATE HEREOF, AND THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE THESE
FORWARD-LOOKING STATEMENTS.
RESULTS OF OPERATIONS
Net sales for Allergy Immuno Technologies were $41,453 for the nine
months ended February 28, 2002, as compared to $77,920 for the same period in
the previous year. This represents a decrease of $36,467 or 46.8%. For the three
months then ended sales were $12,682 as compared to $23,008 in fiscal 2001. This
represents a decrease of $10,326 or 44.9%. The decrease in sales was primarily
due to a contract research account in the prior fiscal year. Cost of sales for
the nine months decreased from $65,258 to $57,638 or $7,620 (11.7%). Cost of
sales for the quarter ended February 28, 2002 decreased to $19,144 compared to
$24,180 for the same quarter ended in the previous year. This represents a
decrease of $5,036 or 20.8%. Cost of sales as a percentage of sales increased
from 83.8% to 139.0% for the nine months and from 105.1% to 151.0% for the
quarter ended February 28, 2002, due to lower sales in relation to fixed costs.
Selling, general and administrative costs for the nine months ended
February 28, 2002, decreased from $60,261 in fiscal 2001 to $49,923 in fiscal
2002. This represents a decrease of $10,338 (17.2%) which was attributable to a
decrease in accounting fees as well as other administrative expenses. For the
quarter then ended selling, general and administrative costs increased from
$15,049 to $15,696, or $647 (4.3%).
LIQUIDITY AND CAPITAL RESOURCES
As of February 28, 2002, the Company had a cash balance of $905 as
compared to a $345 balance in the previous year. Its current working capital
deficit is $349,134 as compared to a deficit of $316,103 for the previous year.
The Company has been experiencing losses and has had to rely on
borrowings from Biomerica, Inc., which owns approximately 74.6% of the
outstanding stock of AIT. Management believes that losses will continue during
this fiscal year. As of February 28, 2002, the Company owed Biomerica $312,015.
Biomerica is not charging the Company interest on the advances and has not
determined any date of repayment. In the past Biomerica has taken the Company's
stock as repayment for cash advanced. However, there can be no assurance that
Biomerica will accept the Company's stock as payment in the future and it does
not intend to advance any further funds to AIT.
11
GOING CONCERN
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. During the year ended May 31, 2001
("Fiscal 2001"), the Company experienced a net loss of $62,654 and during the
nine months, a loss of $66,882 and had negative cash flows from operations of
$42,809 and $24,740 for the fiscal year and nine months, respectively. In
addition, the Company had substantial working capital and shareholders' deficits
at February 28, 2002. These factors, among others, raise substantial doubt about
the Company's ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
On March 15, 2002, the Company discontinued operations of the clinical
laboratory due to continuing operating losses and lack of capital to sustain
those losses. The Company is currently exploring other business options. The
Company intends to keep current with its SEC filings as required.
There can be no assurances that the Company will be able to successfully
implement its plans, including generating profitable operations, generating
positive cash flows from operations and obtaining additional debt and equity
capital to meet present and future working capital demands.
WE MAY FACE INTERRUPTION OF PRODUCTION AND SERVICES DUE TO INCREASED SECURITIES
MEASURES IN RESPONSE TO TERRORISM:
Our business depends on the free flow of products and services through
the channels of commerce. Recently, in response to terrorists' activities and
threats aimed at the United States, transportation, mail, financial and other
services have been slowed or stopped altogether. Further delays or stoppages in
transportation, mail, financial or other services could have a material adverse
effect on our business, results of operations and financial condition.
Furthermore, we may experience an increase in operating costs, such as costs for
transportation, insurance and security as a result of the activities and
potential activities. We may also experience delays in receiving payments from
payers that have been affected by the terrorist activities and potential
activities. The U.S. economy in general is being adversely affected by the
terrorist activities and potential activities and any economic downturn could
adversely impact our results of operations, impair our ability to raise capital
or otherwise adversely affect our ability to grow our business.
12
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS. Inapplicable.
Item 2. CHANGES IN SECURITIES. Inapplicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES. Inapplicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Inapplicable.
Item 5. OTHER INFORMATION. Inapplicable.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K. None.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has fully caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: April 9, 2002
ALLERGY IMMUNO TECHNOLOGIES, INC.
By: /S/ Zackary S. Irani
-----------------------------
Zackary Irani,
President, Chief Executive Officer
14