SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report: April 13, 2000
PATHOBIOTEK DIAGNOSTICS, INC.
-----------------------------
(Exact name of registrant as specified in its charter post-merger)
Texas 76-0510754
- -------------------- -----------------
(State or other (IRS Employer
jurisdiction of incorporation Identification No.
post-merger) post-merger)
7010 NW 100 DRIVE, BLDG. A, STE. #101, HOUSTON, TX 77092
--------------------------------------------------------
(New Address)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (713) 785-4722
---------------
1
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
On March 6, 2000, Pathobiotek Diagnostics, Inc. completed a Share Purchase
Agreement with shareholders of Investra Enterprises, Inc. in which Pathobiotek
Diagnostics, Inc. acquired all of the issued and outstanding shares of the
Registrant from the five shareholders for purposes of completing a Merger of
Pathobiotek Diagnostics, Inc. and Investra Enterprises, Inc. On March 6, 2000
Pathobiotek Diagnostics, Inc. and Investra Enterprises, Inc. completed a merger
with Pathobiotek Diagnostics, Inc. being the surviving entity.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
None.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
None.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
None.
ITEM 5. OTHER EVENTS
None.
ITEM 6. RESIGNATION AND APPOINTMENT OF DIRECTORS
Scott Deitler, James Toot, and Jeff Ploen resigned as Directors of the
Company effective March 7, 2000.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIALS, & EXHIBITS
Exhibits:
Financials for Period Ending December 31, 1999
3
SIGNATURES
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: April 13, 2000 Pathobiotek Diagnostics, Inc.
/s/ Robert C. Simpson
By: -----------------------------------
Robert C. Simpson, President
4
PATHOBIOTEK DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS AND
OTHER FINANCIAL INFORMATION
Year ended December 31, 1999
with Report of Independent Auditors
TABLE OF CONTENTS
Page
Number
--------
Report of Independent Auditors 1
Audited Financial Statements:
Balance Sheets 2
Statements of Operations and Accumulated Deficit 3
Statements of Shareholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6
Report of Independent Auditors on Other Financial Information 10
Other Financial Information:
Schedules of General and Administrative Expenses 11
Wrinkel, Gardner & Company, P.C.
Certified Public Accountants
211 E. Parkwood, Suite 100
Friendswood, Texas 77546
(281) 992-2200
Report of Independent Auditors
We have audited the accompanying balance sheets of Pathobiotek Diagnostics, Inc.
(a Development Stage Company) as of December 31, 1999 and 1998, and the related
statements of operations and accumulated deficit, shareholders' equity, and cash
flows for the year ended December 31, 1999 and for the period from August 5,
1996 (Inception) through December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts an disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Pathobiotek Diagnostics, Inc.
as of December 31, 1999 and 1998, and the results of its operations and its cash
flows for the year ended December 31, 1999 and for the period from August 5,
1996 (Inception) through December 31, 1999, in conformity with generally
accepted accounting principles.
/s/ Wrinkle, Gardner & Company, P.C.
Friendswood, Texas
March 30, 2000
PATHOBIOTEK DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
December 31
1999 1998
-----------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 24,135 $ 14,131
Receivable from parent company 13,185 -
Employee receivables 2,158 2,158
Other receivables 270 -
---------------- ---------------
Total current assets 39,748 16,289
PROPERTY AND EQUIPMENT, at cost 131,361 112,585
Less: Accumulated depreciation (67,848) (43,430)
---------------- ---------------
63,513 69,155
OTHER ASSETS
Patent costs 44,699 41,563
Less: Accumulated amortization (6,039) (3,804)
Other assets 300 300
---------------- ---------------
----------------
38,960 38,059
---------------- ---------------
===============
$ 142,221 $ 123,503
================ ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payable to parent company $ - $ 13,739
Trade accounts payable and accrued expenses 1,166,412 757,829
Current portion of long-term debt (Note 3) 87,290 20,000
---------------- ---------------
Total current liabilities 1,253,702 791,568
LONG-TERM DEBT, less current portion (Note 3) - 67,290
SHAREHOLDERS' EQUITY
Common stock, $.001 par value, authorized 20,000,000 shares,
issued and outstanding 10,543,368 shares 10,543 5,967
Additional paid in capital 1,248,394 766,098
Deficit accumulated during the development stage (2,370,418) (1,507,420)
---------------- ---------------
----------------
Total shareholders' equity (1,111,481) (735,355)
---------------- ---------------
================
$ 142,221 $ 123,503
================ ===============
See notes to financial statements.
PATHOBIOTEK DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
From
Year August 5, 1996
Ended through
December 31, 1999 Dec. 31, 1999
-------------------------------------------------
Revenues $ 1,850 $ 1,850
---------------------------------------------
Gross profit 1,850 1,850
Administrative and general expenses 833,447 2,286,142
Depreciation expense 24,418 67,848
---------------------------------------------
857,865 2,353,990
---------------------------------------------
Loss from operations (856,015) (2,352,140)
Other income - 4,800
Interest expense (6,983) (23,078)
---------------------------------------------
---------------------------------------------
(6,983) (18,278)
---------------------------------------------
Net loss (862,998) (2,370,418)
Accumulated deficit at beginning of period (1,507,420) -
---------------------------------------------
Deficit accumulated during the development stage $ (2,370,418) $ (2,370,418)
=============================================
See notes to financial statements.
PATHOBIOTEK DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' EQUITY
For the Period August 5, 1996 (Inception) through December 31, 1999
Deficit
Accumulated
Additional During the
Common Paid in Development
Stock Capital (3) Stage Total
--------------------------------------------------------------------
Issuance of 4,000,000 shares - August 7, 1996 4,000,000 (1) $ 4,000 $ $ $ 4,000
Issuance of 77,320 shares - January 23, 1997 77,320 77 9,923 10,000
Issuance of 300,000 shares - January 23, 1997 300,000 (2) 300 300
Issuance of 86,800 shares - Various dates in 1997 86,800 87 35,118 35,205
Issuance of 480,000 shares - Various dates in 1997 480,000 480 254,520 255,000
Net loss for the period August 5, 1996 (Inception) through
July 31, 1997 (325,680) (325,680)
-------------------------------------------------------------------
Balance at July 31, 1997 4,944,120 4,944 299,561 (325,680) (21,175)
Issuance of 970,193 shares - Various dates in 1998 970,193 970 417,927 418,897
Repurchase of 225,000 shares - Various dates in 1998 (225,000) (225) (99,775) (100,000)
Issuance of 129,500 shares - Various dates in 1998 129,500 130 18,390 18,520
Reduction of paid in capital for management fees (8,377) (8,377)
Net loss for the year ended July 31, 1998 (778,556) (778,556)
-------------------------------------------------------------------
Balance at July 31, 1998 5,818,813 5,819 627,726 (1,104,236) (470,691)
Issuance of 178,000 shares - Various dates in 1998 178,000 178 72,372 72,550
Repurchase of 73,000 shares - Various dates in 1998 (73,000) (73) (5,227) (5,300)
Issuance of 43,000 shares - Various dates in 1998 43,000 43 87,442 87,485
Reduction of paid in capital for management fees (16,215) (16,215)
Net loss for 5 months ended December 31, 1998 (403,184) (403,184)
-------------------------------------------------------------------
Balance at December 31, 1998 5,966,813 5,967 766,098 (1,507,420) (735,355)
Issuance of 4,576,555 shares - Various dates in 1999 4,576,555 4,576 482,296 486,872
Net loss for the year ended December 31, 1999 (862,998) (862,998)
-------------------------------------------------------------------
Balance at December 31, 1999 10,543,368 $ 10,543 $ 1,248,394 $(2,370,418)$(1,111,481)
===================================================================
(1) See Note 5 to the financial statements.
(2) Stock issued in exchange for legal expenses, administrative fees and
commissions relating to the stock offering.
(3) Stock issue costs deducted from additional paid in capital related to the
offering/sale totaled $53,697.
See notes to financial statements.
PATHOBIOTEK DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
From
Year August 5, 1996
Ended through
December 31, 1999 Dec. 31, 1999
--------------------------------------------------
OPERATING ACTIVITIES
Net loss $ (862,998) $ (2,370,418)
Adjustments to reconcile net loss to net cash
(used in) operating activities:
Depreciation and amortization 24,418 73,887 *
Changes in operating assets and liabilities:
Other receivables (270) (270)*
Patent costs (901) (44,699)*
Trade accounts payable and accrued expenses 408,583 1,166,412 *
----------------------------------------------
Net cash (used in) operating activities (431,168) (1,175,088)
INVESTING ACTIVITIES
Capital expenditures (18,776) (131,361)*
Other assets - (300)*
Related parties (13,185) (15,343)*
----------------------------------------------
Net cash (used in) investing activities (31,961) (147,004)
FINANCING ACTIVITIES
Principal payments on long-term debt - (4,597)*
Related parties (13,739) 91,887 *
Proceeds from issuance of stock 486,872 1,258,937 *
----------------------------------------------
Net cash provided by financing activities 473,133 1,346,227
----------------------------------------------
INCREASE IN CASH 10,004 24,135
Cash and cash equivalents at beginning of period 14,131 -
----------------------------------------------
Cash and cash equivalents at end of period $ 24,135 $ 24,135
==============================================
See notes to financial statements.
Wrinkle, Gardner & Company, P.C.
Certified Public Accountants
211 E. Parkwood, Suite 100
Friendswood, TX 77546
(281) 992-2200
Report of Independent Auditors on Other Financial Information
Board of Directors
Pathobiotek Diagnostics, Inc.
Houston, Texas
Our report on our audits of the basic financial statements of Pathobiotek
Diagnostics, Inc. for the year ended December 31, 1999, and the period from
August 5, 1996 (Inception) to December 31, 1999 appears on page 1. Those audits
were conducted for the purpose of forming an opinion on the basic financial
statements taken as a whole. The other financial information on page 11 is
presented for purposes of additional anlysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ Wrinkle, Gardner & Company, P.C.
Friendswood, Texas
March 30, 2000
PATHOBIOTEK DIAGNOSTICS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
Note 1 - Organization and Business Activity
Pathobiotek Diagnostics, Inc., (the "Company") was formed on August 5, 1996,
under the laws of the State of Texas for the purpose of developing, producing,
distributing, selling, and/or performing diagnostics for various virus and
bacterium. The Company is a development stage company under Statement of
Financial Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by
Development Stage Enterprises." Pathobiotek Diagnostics, Inc. is a subsidiary of
Pacific Biotech International, Inc. (the "Parent"), a Texas corporation.
Note 2- Summary of Significant Accounting Policies
Cash and Cash Equivalents: The Company considers all highly liquid investments
with maturities of three months or less when purchased to be cash equivalents.
Supplemental schedule of non-cash investing and financing activities:
Equipment totaling $91,887 was acquired through a note payable financing
agreement.
Property and Equipment: Property and equipment, consisting primarily of lab and
computer equipment, is stated at cost. Depreciation is computed using the
straight-line method over estimated lives ranging from 5 to 7 years.
Maintenance and repairs are expensed as incurred; major renewals and
improvements are capitalized.
Use of Estimates: Management uses estimates and assumptions in preparing
financial statements. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses. Actual results could differ
from the estimates.
Concentration of Credit Risk: The Company's financial instruments that are
subject to concentrations of credit risk consist of cash. The company places its
cash in a high credit quality institution. At some times, such balances may be
in excess of the FDIC insurance limits.
PATHOBIOTEK DIAGNOSTICS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
Asset Valuation: The carrying amounts of long-lived assets are reviewed
periodically. If the asset carrying amount is not recoverable, the asset is
considered to be impaired and the value is adjusted.
Amortization of Patent Related Costs: In connection with the issuance of stock
to the Parent (Note 5), the Company was assigned and licensed all technological
applications of one U.S. Patent Application. Legal costs related to the
application incurred by the Company are capitalized in accordance with
management's estimation and expectation of securing a patent.
Capitalized patent related costs are amortized on a straight-line basis over the
expected life of the patent starting from the application date.
The patent process may take from several months to several years. Should the
patent be denied or its value impaired, the balance of unamortized costs will be
expensed at that date.
Income Taxes: The Company utilizes Statement of Financial Accounting Standard
No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under SFAS 109, the
liability method is used in accounting for income taxes. Under this method,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted statutory tax rates and laws that will be in effect when the
differences reverse.
Fair Value of Financial Instruments: The carrying amounts of cash, receivables,
and payables approximate their fair values due to the short-term maturities of
these instruments.
The fair value of the Company's long-term debt is estimated based on the quoted
market prices for the same or similar issues or on the current rates offered to
the Company for debt of the same remaining maturities. The recorded amounts
approximate fair value for all periods presented in the accompanying financial
statements.
PATHOBIOTEK DIAGNOSTICS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
Note 3 - Note Payable - Related Party
In connection with the purchase of lab equipment and supplies from the Parent
totaling $91,887, the Company entered into a promissory note payable agreement.
Principal paid on the note during the period ended July 31, 1997 totaled $4,597.
The remaining balance of $87,290 is payable as follows: $10,000 principal
reduction payments due annually on July 31, 1998 and 1999; interest payable
monthly at 8% of the outstanding balance; balance of principal and any unpaid
interest due on or before maturity of July 31, 2000. The note is secured by the
lab equipment.
Note 4 - Income Taxes
The Company has incurred net operating losses of $2,370,418 since inception. Not
tax benefit has been recorded relating to these losses because realization of
the carryforward benefit is uncertain. For tax purposes, the net operating loss
carryforwards will expire beginning in the year 2012.
Note 5 - Related Party Transactions
On August 7, 1996, the Company issued 4,000,000 shares of stock to the Parent,
Pacific Biotech International, Inc., in exchange for certain intangible assets
consisting primarily of license rights and technological applications. In
accordance with APB 16 and 29, the exchange was recorded at the Parent company's
historical capitalized basis, which was not considered material at August 7,
1996.
In March 1999, the Company issued an additional 2,000,000 shares of stock to the
Parent in exchange for certain intangible assets as described above. The
exchange was recorded at the Parent company's historical capitalized basis,
which was not considered material at march 1999. An additional 2,000,000 shares
is due to the Parent as of December 31, 1999. This exchange will not have a
material affect on the Company's financials position.
PATHOBIOTEK DIAGNOSTICS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
Note 6 - Leases
The Company leases office space and certain equipment under operating leases.
Future minimum lease payments are as follows:
Year
Ended
December 31,
------------
2000 $9,266
2001 725
------
$9,991
======
Rent expense for the year ended December 31, 1999, was $32,068.
Rent expense from August 5, 1996 through December 31, 1999, was $97,473.
Note 7 - Stock-Based Compensation
Stock-based compensation plans are accounted for using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees." Under this method, compensation cost is recognized
based on the fair value at the grant dates for awards under those plans. The
accompanying financial statements include compensation costs of $328,125 for the
year ended December 31, 1999, and $920,391 for the period from August 5, 1996
(Inception) through December 31, 1999.