SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the quarterly period ended: March 31, 2000
PATHOBIOTEK DIAGNOSTICS, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
TEXAS 0-28519 76-0510754
- -------- ------- ----------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
Incorporation
7010 N.W. 100 Drive, Bldg A. Suite 101, Houston, TX 77092
- ----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 785-4722
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 report(s), and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes X No
----- -----
Number of outstanding shares of the registrant's common stock as of March 31,
2000: 12,517,868 (not including 1,184,283 shares subscribed but not issued)
ITEM 1. FINANCIAL INFORMATION
Part I. Financial Statements
PATHOBIOTEK DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
(Unaudited)
BALANCE SHEETS
March 31, 2000 December 31, 1999
-------------- -----------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 146,440 $ 24,135
Receivable from parent company 13,185 13,185
Employee receivables 2,158 2,158
Other receivables - 270
---------------- ------------
Total current assets 161,783 39,748
PROPERTY AND EQUIPMENT, at cost 136,506 131,361
Less: Accumulated depreciation (73,385) (67,848)
---------------- ------------
63,121 63,513
OTHER ASSETS
Patent costs 46,199 44,699
Less: Accumulated amortization (6,598) (6,039)
Other assets 300 300
---------------- ------------
39,901 38,960
---------------- ------------
$ 264,805 $ 142,221
================ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payable to parent company - $ -
Trade accounts payable and accrued expenses $ 1,321,964 1,166,412
Current portion of long-term debt 71,236 87,290
---------------- ------------
Total current liabilities 1,393,200 1,253,702
SHAREHOLDERS' EQUITY
Common stock, $.001 par value,
authorized 20,000,000 shares,
issued and outstanding 12,517,868 shares 5,967
stock subscribed but not issued 1,184,283 shares 13,702
(Note 6)
Additional paid in capital 1,517,095 1,248,394
Deficit accumulated during the development stage (2,659,192) (2,370,418)
---------------- ------------
Total shareholders' equity (1,128,395) (1,111,481)
---------------- ------------
$ 264,805 $ 142,221
================ ============
See notes to financial statements.
PATHOBIOTEK DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
March 31, 2000 March 31, 1999
--------------- --------------
Revenues $ 0 $ 0
Direct costs 0 0
--------------- ----------
Gross profit 0 0
Administrative and general expenses 281,491 0
Depreciation expense 5,537 0
--------------- ----------
287,028 0
--------------- ----------
Loss from operations (287,028) 0
Other income 0 0
Interest expense (1,746) 0
--------------- ----------
(1,746) 0
--------------- ----------
Loss before income taxes (288,774) 0
Federal income taxes - current expense (benefit) 0 0
--------------- ----------
Net loss (288,774) 0
Accumulated deficit at beginning of period (2,370,418) 0
--------------- ----------
Deficit accumulated during the development stage $ (2,659,192) $ 0
=============== ==========
Weighted Average number of Shares 12,517,868
Profit (loss) per share ($.02) $ .0
See notes to financial statements.
PATHOBIOTEK DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
(Unaudited)
March 31, 2000 March 31, 1999
---------------- --------------
OPERATING ACTIVITIES
Net loss $ (288,774) $ 0
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 6,096 0
Changes in operating assets and liabilities:
Patent costs (1,500) 0
State tax refund receivable 270 0
Trade accounts payable and accrued expenses 155,552 0
---------------- ----------
Net cash provided by (used in) operating activities (128,356) 0
INVESTING ACTIVITIES
Capital expenditures (5,145) 0
Reverse merger (150,000) 0
Related parties 0 0
---------------- ----------
Net cash provided by (used in) investing activities (155,145) 0
FINANCING ACTIVITIES
Principal payments on long-term debt (16,054) 0
Proceeds from issuance of stock 421,860 0
---------------- ----------
Net cash provided by financing activities 405,806 0
---------------- ----------
(DECREASE) INCREASE IN CASH 122,305 0
Cash and cash equivalents at beginning of period 24,135 0
---------------- ----------
Cash and cash equivalents at end of priod $ 146,440 $ 0
================ ==========
See notes to financial statements.
PATHOBIOTEK DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' EQUITY
For the Period August 5, 1996 (Inception) through March 31, 2000
(Unaudited)
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)
Issuance of 1,974,500 shares - Various dates in 1Q99 3,158,783 3,159 268,701 271,860
Reverse merger - amount paid
Net loss 1Q2000 (288,774) (288,774)
--------------------------------------------------------------------
Balance at March 31, 2000 13,702,151 13,702 1,517,095 (2,659,192) (1,128,395)
====================================================================
(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 which are an integral part of this statement.
PATHOBIOTEK DIAGNOSTICS, INC
(A DEVELOPMENT STAGE COMPANY)
SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES
(Unaudited)
March 31, 2000
----------------
Amortization expense $ 559
Bank fees 3,087
Commissions 0
Donations 0
Insurance 0
Freight expense 1,216
Miscellaneous expense 2,741
Professional fees 35,480
Rent expense 8,279
Supplies 22,080
Telephone 3,810
Travel 10,159
Utilities 3,432
Outside lab expense 3,690
Payroll and benefits 179,405
Marketing 1,553
Management fees 6,000
----------------
$ 281,491
================
PATHOBIOTEK DIAGNOSTICS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
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 developmental stage company under Statement of
Financial Accounting Standard ("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 expensd as incurred; major renewals an 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 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 - Continued
March 31, 2000
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 shares
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.
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.
PATHOBIOTEK DIAGNOSTICS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - Continued
March 31, 2000
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.
The remaining balance of $71,236 and any unpaid interest is 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 $2,659,192 since inception. No
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 financial position.
Note 6 - Subscribed Stock
In additional to the 2,000,000 shares due to the parent company (Note 5) and the
2,673,125 shares due to executives of the company for compensation (Note 8), at
March 31, 2000, there were 1,184,283 shares subscribed but not yet issued.
PATHOBIOTEK DIAGNOSTICS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - Continued
March 31, 2000
Note 7 - 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 quarter ended March 31, 2000 was $8,279.
Rent expense from August 5, 1996 through March 31, 2000 was $105,752.
Note 8 - 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 $82,031 for the
quarter ended March 31, 2000 and $1,002,422 for the period from August 5, 1996
(Inception) through March 31, 2000, representing a total of 2,673, 125 shares
due for stock-based compensation.
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 2000 COMPARED TO SAME
QUARTER IN 1999
The Company had experienced expenses for the three month period of $287,028 in
2000 and $0 in 1999. The difference in expenses for the years was as a result of
the merger of Pathobiotek Diagnostics, Inc. and Investra Enterprises, Inc. The
Company had no revenues for the period in 2000 or 1999. The Company recorded a
loss for the period in 2000 of $(287,028) for general and administrative costs
compared to $0 income/loss in the same period 1999. Loss per share was ($.012)
in the quarter in 2000. The Company can expect losses until business and income
can be achieved. While the Company is seeking capital sources for investment,
there is no assurance that sources can be found.
LIQUIDITY AND CAPITAL RESOURCES
The Company had minimal cash capital at the end of the period. The Company will
be forced to either borrow or make private placements of stock in order to fund
operations. No assurance exists as to the ability to achieve loans or make
private placements of stock.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
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 3. DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) A report on Form 8-K was made on March 7, 2000 during the period for
for which this report is filed.
B) A report on Form 8-K was made on April 14, 2000 during the period
for which this report is filed.
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: June 6, 2000
PATHOBIOTEK DIAGNOSTICS, INC.
/s/ Robert Simpson
-----------------------------
President