SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10QSB
Quarterly Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended Commission File Number
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March 31, 2001 000-28519
PATHOBIOTEK DIAGNOSTICS, INC.
(New Name)
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Texas 76-0510754
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(State of incorporation) (I.R.S. Employer
Identification No.)
4800 Research Forest Drive, The Woodlands, TX 77381-4142
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(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 reports), and (2) has been subject to the filing
requirements for at least the past 90 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 latest practicable date.
14,219,520 common shares as of March 31, 2001
Part I: FINANCIAL INFORMATION
PATHOBIOTEK DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET (UNAUDITED)
March 31, 2001 December 31, 2000
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ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 0 $ 5,115
Employee receivables 2,158 2,158
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Total current assets 2,158 $ 7,273
PROPERTY AND EQUIPMENT, at cost 145,366 142,533
Less: Accumulated depreciation (100,386) (93,496)
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44,980 $ 43,037
OTHER ASSETS
Deposits 10,000 10,000
Patent costs 59,459 59,459
Less: Accumulated amortization (9,539) (8,799)
Other assets 300 300
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60,220 60,960
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$ 107,358 $ 117,270
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Trade accounts payable and accrued expenses $ 375,815 $ 314,868
Due to shareholder 28,150 28,150
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Total current liabilities 403,965 $ 343,018
SHAREHOLDERS' EQUITY
Common stock, $.001 par value,
authorized 20,000,000 shares,
issued and outstanding 14,219,520 shares,
stock suscribed but not issued 1,184,283 shares
(Note 6) 15,348 $ 15,348
Additional paid in capital 1,812,231 1,766,672
Deficit accumulated during the development stage (2,124,186) (1,007,768)
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Total shareholders' equity (296,607) (225,748)
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$ 107,358 $ 117,270
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See notes to financial statements.
F-1
PATHOBIOTEK DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT (UNAUDITED)
Three Three From
months months August 5, 1996
ended ended through
March 31, 2001 March 31, 2000 March 31, 2001
-------------------- -------------------- -----------------------
Revenues $ 0 $ 0 $ 1850
Direct costs 0 0 0
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Gross profit 0 0 1,850
Administrative and general expenses 108,281 281,491 1,994,354
Depreciation expense 7,632 5,537 109,925
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115,913 287,028 2,104,279
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Loss from operations (115,913) (287,028) (2,102,429)
Other income 0 0 4,800
Interest expense (505) (1,746) (26,557)
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(505) (1,746) (21,757)
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Loss before income taxes (116,418) (288,774) (2,124,186)
Federal income taxes - current expense (benefit) 0 0 0
-------------------- -------------------- -----------------------
Net loss (116,418) (288,774) (2,124,186)
Accumulated deficit at beginning of period (2,007,768) (2,370,418) 0
-------------------- -------------------- -----------------------
Deficit accumulated during the development stage $ (2,124,186) $ (2,659,192)$ (2,124,186)
==================== ==================== =======================
Weighted Average Number of Shares Outstanding,
including subscribed but unissued 15,403,803 15,403,803
Net Profit (Loss) per share >($.01) >($.01)
See notes to financial statements.
F-2
PATHOBIOTEK DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF SHAREHOLDERS' EQUITY (UNAUDITED)
For the Period August 5, 1996 (Inception) through March 31, 2001
Deficit
Accumulated
Additional During the
Common Paid in Development
Stock Capital (3) Stage Total
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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)
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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)
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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)
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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 57,393 57,393
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Balance at December 31, 1999 10,543,368 10,543 1,248,394 (1,450,027) (191,090)
Issuance of shares previously subscribed - various dates 4,420,783 4,421 493,512 497,933
Issuance of shares for services rendered 583,652 584 24,766 25,350
Cancelation of previously issued shares (200,000) (200) (200)
Net loss for the year ended December 31, 2000 (557,741) (557,741)
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Balance at December 31, 2000 15,347,803 15,348 1,766,672 (2,007,768) (225,748)
Issuance of shares for cash 928,137 928 45,559 46,487
Cancelation of previously issued shares (928,137) (928) (928)
Net loss for quarter ended March 31, 2001 (116,418) (116,418)
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Balance at March 31, 2001 15,347,803 $ 15,348 $ 1,812,231 $ (2,124,186) $ (296,607)
====================================================================
(1) See notes 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.
F-3
PATHOBIOTEK DIAGNOSTICS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Three From
months months August 5, 1996
ended ended through
March 31, 2001 March 31, 2000 March 31, 2001
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OPERATING ACTIVITIES
Net loss $ (116,418) $ (288,774)$ (2,124,186)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 7,632 6,096 109,925
Changes in operating assets and liabilities:
Other receivables 0 0 (2,158)
Patent costs 0 (1,500) (59,459)
Deposits 0 0 (10,000)
Other assets 0 0 (300)
State tax refund receivable 0 270 0
Trade accounts payable and accrued expenses 44,154 155,552 375,815
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Net cash provided by (used in) operating activities (64,632) (128,356) (1,710,363)
INVESTING ACTIVITIES
Capital expenditures (2,834) (5,145) (145,366)
Reverse merger 0 (150,000) (150,000)
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Net cash provided by (used in) investing activities (2,834) (155,145) (295,366)
FINANCING ACTIVITIES
Principal payments on long-term debt 0 (16,054) (16,054)
Related parties 0 0 28,150
Proceeds from issuance of stock 54,008 421,860 1,985,290
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Net cash provided by financing activities 54,008 405,806 1,997,386
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(DECREASE) INCREASE IN CASH (13,458) 122,305 (8,343)
Cash and cash equivalents at beginning of period 5,115 24,135 0
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Cash and cash equivalents at end of priod $ (8,343) $ 146,440 $ (8,343)
================== ================== =====================
See notes to financial statements.
F-4
PATHOBIOTEK DIAGNOSTICS, INC.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2001
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 State Enterprises". Pathobiotek Diagnostics, Inc. was a subsidiary
of Pacific Biotech International, Inc. (the "Parent"), a Texas Corporation,
until May 16, 2000. Pacific Biotech International, Inc. no longer owns any
shares of the Company. On March 6, 2000, the Company completed a Share Purchase
Agreement with shareholders of Investra Enterprises, Inc. (IEI) in which the
Company acquired all 672,000 issued and outstanding shares of IEI for $150,000
for purposes of completing a merger of the Company and IEI. The Company was the
surviving entity. These financial statements assume the Company will continue as
a going concern. There is substantial doubt the Company can continue as a going
concern due to losses and a lack of financing. No adjustments have been made for
this uncertainty.
Note 2 - Summary of Significant Accounting Policies
Cash and Cash Equivalents:
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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:
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Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported revenues and expenses.
Actual results could differ from the estimates.
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:
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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.
PATHOBIOTEK DIAGNOSTICS, INC.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS - continued
March 31, 2001
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:
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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.
Net (Loss) Per Share
- ---------------------
Basic and diluted net loss per share information is presented under the
requirements of SFAS No. 128, Earnings Per Share. Basic net loss per share is
computed by dividing net loss by the weighted average number of shares of common
stock outstanding for the period, less shares subject to repurchase. Diluted net
loss per share reflects the potential dilution of securities by adding other
common stock equivalents, including stock options, shares subject to repurchase,
warrants and convertible preferred stock, in the weighted-average number of
common shares outstanding for a period, if dilutive. All potentially dilutive
securities have been excluded from the computation, as their effect is
anti-dilutive.
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 balance and any unpaid interest was due on or before maturity of July 31,
2000. The note is secured by the lab equipment. Effective May 16, 2000, the
Parent transferred the note receivable to the President of the Company. The
balance due at March 31, 2001, is $28,150.
Note 4 - Income Taxes
The Company has incurred net operating losses of $2,124,186 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 licenses 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.
PATHOBIOTEK DIAGNOSTICS, INC.
(A Development Stage Company)
NOTES TO UNAUDITED FINANCIAL STATEMENTS - continued
March 31, 2001
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
was due to the Parent as of March 31, 2000. The right to receive the 2,000,000
shares was transferred to two executives of the Company effective May 16, 2000.
This exchange will not have a material affect on the Company's financial
position.
Note 6 - Subscribed Stock
In addition to the 2,000,000 shares due to two executives related to the
transfer of stock from the former Parent (Note 5), at March 31, 2001, there were
1,128,283 shares subscribed but not yet issued.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS FOR THE QUARTER ENDED MARCH 31, 2001 COMPARED TO SAME
PERIOD IN 2000.
The Company had no revenues in the quarter in 2001 or 2000. The Company
incurred ongoing operations expenses related to research and development of its
products of $115,913 in the quarter in 2001 compared to $287,028 in the period
in 2000. The Company had a loss on operations in the quarter of ($115,913) in
2001 and ($287,028) in 2000. The net loss after interest expense in the quarter
was ($116,418) in 2001 and ($288,774) in 2000. The net loss per share was less
than ($.01) for the period.
LIQUIDITY AND CAPITAL RESOURCES
The Company had no 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
None
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
None
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: May 24, 2001
PATHOBIOTEK
/s/ Robert Simpson
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Robert Simpson, President