UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10Q-SB Amended Quarterly Report Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the Period ended March 31, 2000 Commission file number: 0-30380 Diabetex International Corporation ------------------------------------------------- (Exact name of registrant as specified in charter Nevada 87-065234 - ---------------------- ------------------------ (State or other jurisdiction of (IRS Employe incorporation or organization) Identification No. 142 Ferry Road, Suites 1 & 2, Old Saybrook, Ct. 0647 - ----------------------------------------------- ----------------- (Address of principal executive offices) (Zip Code Registrant's telephone number including area code:(860)395-193 Indicate by check mark whether the registrant (1) has filed all report 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 last practical date March 31, 2000 Common Shares 13,201,599 at par value $.001 PART 1 FINANCIAL INFORMATION 	Diabetex International Corporation and Subsidiaries 	Consolidated Financial Statement 	March 31, 200 INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders of Diabetex International Corporation Salt Lake City, Utah We have reviewed the accompanying consolidated balance sheet of Diabetex International Corporation and subsidiary as of March 31, 2000 and the related consolidated statements of income, stockholders' equity and cash flows for the period then ended. These financial statements are the responsibility of the company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements take as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet as of December 31, 1999, and the related statements of income, stockholders' equity and cash flows for the year the ended; and in our report dated April 12, 2000, we expressed an unqualified opinion on those financial statements. The accompanying statements of operations and cash flows for the period ended March 31, 1999 were not audited or reviewed by us and, accordingly, we do no express an opinion on them. Crouch, Bierwolf & Chishol May 16, 200 	Diabetex International Corporation and Subsidiar 	(A Development Stage Company 	Consolidated Balance Sheet <TABLE [CAPTION]	 ASSET 		March 31, 	December 31 		 2000 	1999 CURRENT ASSET [S] [C] <C Cash (Note 1) $ 90,423 $ 351 Account Receivable (Net of allowance of $0)	 23,647 23,41 Total Current Assets 114,070 23,76 Property, Plant & Equipment (Note 4)(Net) 2,258 2,40 Other Asset Intangible Assets (Note 3) (Net) 14,382,068 14,770,77 Prepaid expenses (Note 7) 783,595 249,70 $ 15,281,991 $15,046,65 	LIABILITIES AND STOCKHOLDERS' EQUIT CURRENT LIABILITIES Accounts payable & accrued expenses$	 175,250 $ 152,95 Accounts payable-related party (Note 6) 156,342	 183,81 Total Current Liabilities	 331,592	 335,76 CONTINGENCIES AND COMMITMENTS (Note 8)					 - 	 - STOCKHOLDERS' EQUIT Common stock; $.002 par value 50,000,000 shares authorized, 13,265,299 and 13,110,929 shares issued and outstanding (Note 2) 26,531	 26,22 Additional paid-in capital	 17,336,805 16,509,41 Deficit accumulated during the 	 development stage ( 2,412,937) ( 1,824,750) Total Stockholders' Equity 14,950,399 14,710,886 $ 15,281,991 $ 15,046,65 	</TABLE Diabetex International Corporation and Subsidiaries 	(A Development Stage Company 	Consolidated Statements of Operation <TABLE [CAPTION] CONSOLIDATED STATEMENTS OF OPERATION From Inception on For the September 14 Three Months Ended 1983 to March 31, March 31 			 2000 1999 2000 Statements of operations [S] [C] [C] <C REVENUES $ 26,700 $ - $ 67,305 EXPENSE Amortization and Depreciation 388,854	 150 1,166,862 Professional Services		 108,932 - 2,285,291 Legal	 7,400 - 88,632 Public Relations 300 1,600 14,094 Administrative 11,902 318,320 162,364 Total Expenses 517,38 320,070 3,717, 24 NET LOSS BEFORE INCOME TAXES	 (490,688) (320,070) ( 3,649,938) PROVISION FOR TAXES (Note 1)		 - - ( 500) NET LOSS $ (490,688) $( 320,070) $ (3,650,438) LOSS PER SHARE (Note 1)	 $ (.04) $ ( .02) ( .28) AVERAGE SHARES OUTSTANDING	 13,201,599	 11,322,41 </TABLE Diabetex International Corporation and Subsidiary 	(A Development Stage Company) 	Consolidated Statements of Stockholders' Equity STOCKHOLDERS' EQUITY Accumulated Capital in Deficit Durin Common Common Excess of Retained Shares Stock Par Value Deficit Stockholders' Equit Activity from Sept. 14, 1983 thru Dec. 31, 1990	 862 $ 2 $ 94,173 	$ ( 96,973) Loss for 1990 - - - ( 130) Balance, December 31, 1990 862 2 94,173 	 ( 97,103) Issues 225 shares to a officer in cancellation of debt at $16.77 per share 225 1 3,772 - Loss for the Year - - - ( 3,333) Balance, December 31, 1991 1,087 3 97,945 ( 100,436) Expenses paid on the Company' behalf contributed to capital - - 2,666 - March 5, 1992, issued 1,25 shares for services rendered for $8 per share 1,250 2 9,998 - Loss for the Year - - - ( 10,278) Balance, December 31, 1992 2,337 5 110,609 	 ( 110,714) Loss for the Year - - - ( 136) Balance, December 31, 1993 2,337 5 110,609 ( 110,850) October 17, 1994, issue 25,000 shares for expenses paid on the Company's behalf for $.84 per share 25,000 50 20,950 - Expenses paid on the Company's behalf contributed to capital - - 612 - Loss for the Year - - - ( 22,903) Balance, December 31, 1994 27,337 55 132,171 ( 133,753) Expenses paid on the Company' behalf contributed to capital - - 1,227 - Loss for the Year - - - ( 100) Balance, December 31, 1995 27,337 5 133,398 ( 133,853) Loss for the Year	 - - - ( 100) Balance, December 31, 1996 27,337 55 133,398 ( 133,953) </TABLE 	(continued 	Diabetex International Corporation and Subsidiar 	(A Development Stage Company 	Consolidated Statements of Stockholders' Equit 	(continued <TABLE STOCKHOLDERS' EQUITY -CONTINUE Accumulated Capital in Deficit During Common Common Excess of Retained Shares Stock Par Value Deficit Stockholders' Equity Balance, December 31, 1996 27,337 $ 55 $ 133,398 $ ( 133,953) Shares issued for assets of Aladdin Transportation Landmark, Inc. and Over 100 Inc. for $0 per share 82,500 165 ( 165) - Shares issued for incentives for loans to Aladdin Transportation, Landmark, Inc. and Over 100, Inc. for $.80 per share 25,163 50 20,081 - Shares canceled by various shareholders ( 10,000) 	 ( 20) 20 		 - Shares canceled for acquisition on Aladdin Transportation, Landmark Inc. and Over 100, Inc. ( 82,500)	 ( 165) 165 		 - Shares issued for Presidential an Regal Limousine Service for $0 per share 4,000 	 8 ( 8) 	- Shares canceled for Presidentia and Regal Limousine Service( 4,000) ( 8) 8 	 - Net Loss for the Year - - - ( 23,031) Balance, December 31, 1997 42,500 	 85 153,499 ( 156,984) Rounding due to reverse stock split (Note 2)	 11 - - - Net Loss for the Year - - - ( 650) Balance, December 31, 1998 42,511 85 153,499 ( 157,634) </TABLE 	(continued 	Diabetex International Corporation and Subsidiar 	(A Development Stage Company 	Consolidated Statements of Stockholders' Equit 	(continued <TABLE STOCKHOLDERS EQUITY - CONTINUE Accumulated Capital in Deficit During 	 Common Common Excess of Retained 	 Shares Stock Par Value Deficit Shareholders' Equity Balance, December 31,1998 42,511 $ 85 $ 153,499 $ ( 157,634) Shares issued for cash at $.002 per share 8,387,800 16,775 	 530 - Shares issued for services at $.0 per share (Note 2)	 2,000,000	 4,000 96,000 - Shares issued for cash at $.05 per share 875,100 1,750 45,767 - Shares issued for services at $3 per share (Note 2)	 50,000	 100 149,900	 - Shares issued for cash at $10 per share	 1,000	 2 2,998	 - Shares issued for cash at $10 per share 21,307 43 213,027 	 - Shares issued for 100% of shares of Advanced Metabolic Technology at $10 per share (Note 3)	 1,232,261 2,465 12,320,145 	 - Shares issued for intellectual properties Hamilton-May, Inc at $10 per share (Note 3) 300,000 600 2,999,400	 - Expenses paid by shareholder in Company behalf	 - - 4,050 - Shares issued to Phoenix Energy (Note 3) 35,000 70 349,930 	 - Shares issued for services a $10. (Note 2)	 12,500	 25	 124,975 - Shares issued for cash at $10 3,450 7	 34,493 - Shares issued for services a $9.00 (Note 2) 150,000 300	 1,349,700 - Net Loss for the Year - - - ( 3,002,116) Balance, December 31,1999 13,110,929 $ 26,222 $ 17,844,414 $( 3,159,750) 	(continued 	Diabetex International Corporation and Subsidiar 	(A Development Stage Company 	Consolidated Statements of Stockholders' Equit 	(continued <TABLE [CAPTION] STOCKHOLDERS' EQUITY -CONTINUE Accumulated 		 Capital in Deficit Durin 	 Common Common Excess of Retained 	 Shares Stock Par Value Deficit Shareholders' Equity [S] [C] [C] [C] [C] Balance, December 31, 1999 13,110,929 $ 26,222 $ 17,844,414 $ (3,159,750) Shares issued for cash at $10 per share 1,770 44	 17,696	 - Shares issued for services a $5 per share	 2,000 4 9,996 - Shares issued for services a $5 per share	 100,000 200 499,800 - Shares issued for cash at $5 per share 12,100 24 54,976 - Shares issued for cash at $5 per share (net of commission of $27,500) 38,500 77 147,423 - Net Loss, March 31, 2000 - - - (490,688) Balance, March 31, 2000 13,265,299 $ 26,531$ 18,574,305 $ (3,650,438) </TABLE 	Diabetex International Corporation and Subsidiar 	(A Development Stage Company 	Consolidated Statements of Cash Flow <TABLE [CAPTION] STATEMENTS OF CASH FLOWS	 From Inception on For the Three September 14 Months Ended 1983 to March 31, March 31, 		 2000 	1999 2000 CASH FLOWS FROM OPERATING ACTIVITIES [S] [C] [C] [C] Net loss	 $ ( 490,688)$ ( 320,070) $ ( 3,650,438) Adjustments to net cash used by operating activities Depreciation & Amortization 388,854 150 	 1,166,862 Stock issued fo services/expenses 10,000	 250,000 773,631 Expenses paid by a shareholder on the Company's behalf	 - - 8,535 Increase (Decrease in accrued expenses ( 4,173) - 331,592 Increase (Decrease) in prepaids	 ( 33,892) - ( 158,594) Increase (Decrease) in accounts receivable( 229) - ( 23,647) Net Cash Used b Operating Activities ( 130,128) ( 69,920) ( 314,539) CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for acquisition of intangibles	 - - ( 225,570) Cash paid for fixed assets - 	 ( 3,008) ( 3,008) Net Cash Provided b Investing Activities - 	 ( 3,008) ( 228,578) CASH FLOWS FROM FINANCING ACTIVITIES Issuance of common stock 247,700 76,117 676,865 Stock offering costs ( 27,500) - ( 43,325) Net Cash Provided by Financing Activities 220,200	 76,117 633,540 NET INCREASE (DECREASE)IN CASH	 90,072 3,189 90,423 CASH, BEGINNING OF PERIOD	 351 - - CASH, END OF PERIOD	 $ 90,423	 $	 3,189 $ 90,423 CASH PAID FOR Interest 		 $	 - 	 $	 - $	 - Income taxes	 $	 - 	 $	 - $	 - Non Cash Transaction Stock Issuance fo Services 	 $ 10,000 $ 250,000 $ 2,011,131 Acquisition of Intangibles$	 - $ - $ 15,322,610 Prepaid expenses	 $	 500,000 $ - $ 125,000 [/TABLE] 	Diabetex International Corporation and Subsidiaries 	(A Development Stage Company 	Notes to the Consolidated Financial Statement 	March 31, 2000 and December 31, 199 NOTE 1 - ORGANIZATION AND HISTOR A. Organization The financial statements presented are those of Diabetex International Corporation (formerly Sheridan Industries, Inc.) ( a development stage company). The Company was incorporated under the laws of the State of Utah on September 14, 1983. The Company changed its name to Associated Healthcare, Inc. during 1991 but later rescinded the name change and reverted back to Sheridan Industries, Inc. The Company has never had any operations up to December 31, 1998 and in accordance with SFAS #7, is considered a development stage company. The Company is now involved in the treatment and diagnosis of diabetes. In 1998, the Company created, and later merged with, a Nevada subsidiary and changed its name to Diabetex International Corporation. In June 1999, the Company purchased all of the shares of Advanced Metabolic Technologies, a Nevada corporation (AMT) (See Note 3 for discussion of AMT and its activity). AMT was formed on May 19, 1999 as a wholly owned subsidiary of Advanced Metabolic Systems (AMS) which transferred an exclusive license to patented proprietary technology for the treatment of diabetes known as Metabolic Activation. b. Accounting Method The Company's financial statements are prepared using the accrual method of accounting. The Company has elected a December 31 year end. c. Loss Per Shar The computations of loss per share of common stock are based on the weighted average number of shares outstanding at the date of the financial statements Fully diluted loss per share and basic loss per share at December 31, 1999 is the same since any outstanding stock equivalents at December 31, 1999. (335,243 shares) would be antidilutive. There were no outstanding stock equivalents for all other periods; therefore, basic and fully diluted shares are the same 	Diabetex International Corporation 	(A Development Stage Company 	Notes to the Financial Statement 	March 31, 2000 and December 31, 1999 NOTE 1 - ORGANIZATION AND HISTORY (continued) d. Provision for Taxes The Company adopted Statement of Financial Standards No. 109 "Accounting for Income taxes" in the fiscal year ended December 31, 1998 and was applied retroactively. Statement of Financial Accounting Standards No. 109 " Accounting for Income Taxes" requires an asset and liability approach for financial accounting and reporting for income tax purposes. This statement recognizes (a) the amount of taxes payable or refundable for the current year and (b) deferred tax liabilities and assets for future tax consequences of events that have been recognized in the financial statements or tax returns. Deferred income taxes result from temporary differences in the recognition of accounting transactions for tax and financial reporting purposes. There were no temporary differences at December 31, 1999 and earlier years; accordingly no deferred tax liabilities have been recognized for all years. The Company has cumulative net operating loss carryforwards of over $1,850,000 at December 31, 1999. No effect has been shown in the financial statements for the net operating loss carryforwards as the likelihood of future tax benefit from such net operating loss carryforwards is highly improbable Accordingly, the potential tax benefits of the net operating loss carryforwards, estimated based upon current tax rates at December 31, 1999 have been offset by valuation reserves of the same amount. The net operating losses begin to expire in the year 2003. e. Cash or Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less to be cash equivalents. f. Consolidated Financial Statement The consolidated financial statements include the accounts of Diabetex International Corporation and its subsidiary, Advanced Metabolic Technology. collectively, these entities are referred to as the Company. All significant intercompany transactions and accounts have been eliminated. g. Impairment of Long Lived Asset All long-lived assets (including intangible assets) are evaluated for impairment wherever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impaired asset is written down to its estimated fair market value based on the best information available. The Company determines whether an impairment has occurred by comparing the estimated undiscounted future cash flows expected to result from the use the asset and its eventual disposal to the asset's carrying amount. If the carrying amount exceeds the undiscounted future cash flows then the impairment charge is calculated as the excess of the carrying amount of the asset over its fair market value. 	Diabetex International Corporation 	(A Development Stage Company 	Notes to the Financial Statement 	March 31, 2000 and December 31, 1999 NOTE 1 - ORGANIZATION AND HISTORY (continued) h. Stock compensation awards and other non cash transactions The Company entered into several transactions that involved stock or stock options for goods or services and acquisitions of subsidiaries and medical technologies. These transactions were recorded at estimated fair market value of the stock being offered at private placement prices to the general public, publicly traded prices, or some other fair value as best determined by the board of directors with the facts and circumstances present at the time of the transaction. (See Note 2 regarding specific transactions). NOTE 2 - NON CASH TRANSACTION During 1999, the Company issued stock for services and the purchase of a subsidiary and other intellectual properties related to the medical field specifically technology that advances the treatment and diagnosis of diabetes. The transactions were recorded at estimated fair market value of the stock specifically the price of stock being offered at private placement prices to the general public, or some other negotiated arms length transaction as best determined at the time by the board of directors. The following transaction occurred in the first six months of 1999: - -In January, 1999, 2,000,000 shares were issued for services rendered for assistance in obtaining the Company's license to 44 patents 8 of which are still active covering technology related to non invasive blood glucose monitoring. These shares were valued at $.05 per share or total value of $100,000. - -In March, 1999, 50,000 shares were issued for services rendered related to the acquisition of Advanced Metabolic Technologies. The shares were valued at $ 3.00 per share or $150,000. - - In June, 1999, 1,232,261 shares were issued for acquisition of all of the stock of Advanced Metabolic Technologies (see note 3). The purchase price was 10 per share or a total value of $12,322,610. The fair market value of the stock was $10 (private placement purchase price). The Company had and appraisal completed on Advanced Metabolic Technologies intellectual properties which substantiated a value greater than the purchase price (Note 3). In June, 1999, 300,000 shares were issued for acquisition of a license for all the intellectual properties related to an insulin pump developed by Hamilton May, Inc. The purchase price was $10 per share or a total value of $3,000,000 The fair market value of the stock was $10 (private placement purchase price) In July, 1999, 35,000 shares were issued to Phoenix Energy for consulting services. The fair market value of the stock was $10 (Private Placement purchase price). 	Diabetex International Corporation 	(A Development Stage Company 	Notes to the Financial Statement 	March 31, 2000 and December 31, 1999 NOTE 2 - NON CASH TRANSACTIONS - (continued In September, 1999, 12,500 shares were issued to Anatoli Tsaliovich for service to be rendered in connection with the miniaturization and perfection of the non-invasive blood glucose monitors and hyper/hypo glycemic warning devices The fair market value of the stock was $10. (Private Placement purchase price). These expenses were expenses of Solid State Farms and credited as a prepaid royalty. (Note 8) In December, 1999, 50,000 shares of stock were issued to Nathan Drage for services performed for the Company early in the year and not previously compensated. The shares are further restricted than normal Rule 144 restrictions and have required revenue platforms before sales of the shares an occur. Due to these additional restrictions, the shares were valued a $9.00 per share In December, 1999, 100,000 shares of stock were issued to Philip Blomquist for services performed for the Company early in the year and not previously compensated. The shares are further restricted than normal Rule 144 restriction and have required revenue platforms before sales of the share can occur. Due to these additional restrictions, the shares were valued at $9.00 per share. In October, November and December, 1999, Dominion exercised 3,450 options at $10 per share it possessed from an option grant in March 1999. In January, February and March, 2000, Dominion purchased 1,770 shares of restricted stock at $10 per share from a purchase agreement obtained in March 1999 In February, 2000, 100,000 shares were issued at $5 per share to Dr. Sam Hashim for consulting work regarding the miniaturization and perfection of DBTX's noninvasive blood glucose monitors and hyper/hypo glycemic warning devices. NOTE 3 - ACQUISITION OF INTANGIBLE ASSET Advanced Metabolic Technologies (AMT AMT owns an exclusive license to market, and otherwise exploit, that certain therapy known as hepatic activation or metabolic activation (the therapy) A patent has been granted covering the therapy (May 1988) and the patent is subject of the license. The license includes any and all improvements to the therapy, the subject patent or any related subsequent patents. The therapy has been developed at the Aoki Diabetes Research Institute (ADRI) under the direction of Dr. Thomas Aoki. ADRI maintains its offices and clinic at 310 O Street, Sacramento, California This treatment is delivered by special intravenous infusion devise (pump) with the treatment programmed into the devise. The devise (Bionica Microdose) with the Company's treatment embedded in the devise has been FDA approved and in use since 1988. The treatment has been refined over the years including clinical use on human subjects, and clinical trials for over ten years with constant following of patients to demonstrate the ability of the treatment to prevent, stop and in some ways reverse the common complications of diabetes. 	Diabetex International Corporation 	(A Development Stage Company) 	Notes to the Financial Statement 	March 31, 2000 and December 31, 1999 NOTE 3 - ACQUISITION OF INTANGIBLE ASSETS (continued) Patients that have undergone regular treatments have reported improvements in diabetes related health complications such as restoration of kidney function or cessation of kidney degeneration, restoration of eyesight or cessation or eyesight degeneration, improved heart metabolism, cessation of diabetic hyper/hypo glycemic blackouts, and improved sense of general health and welcpme being and other benefits. Presently, ADRI and five private clinics administer the therapy to patients on a fee basis. The Company carries this asset on it's books at a cost of $12,548,180 paid in stock and cash. The Company issued 1,232,261 shares of common stock for all the outstanding shares of AMT (800,000 shares). The only asset of AMT was the license to market a therapy known as hepatic activation or metabolic activation. A part of the acquisition, the Company agreed to pay a $50,000 outstanding debt of AMT, pay all legal costs of the acquisition, and pay directly to the stockholder of AMT, cash in the amount of $150,000 over a period of 10 months. Hamilton May Hamilton May Corporation has sold the Company a license to market, and otherwise exploit, that certain mechanical device known as the Hamilton May Pump (the pump). The license includes any and all improvements to the pump and rights to patent protection if a patent, covering the pump, is even granted. The pump has been developed under the direction of Dr. Nardo Zaias f Miami, Florida. The pump has been shown to have the ability to deliver pulses of insulin and insulin related products to patients with tremendous precision and without shear. The pump has the feature of being a two-way system in that it has the capacity to both deliver and draw when attached to patient. The pump is in design stage and has not been approved by the FDA. The Company issued 300,000 shares of common stock for the Hamilton/May pump Herein is a summary of the purchase of Advanced Metobolic Technology (AMT) and Hamilton/May pump AMT Purchase of AMT intellectual properties Stock (1,232,261 shares @ $10 per share)			 $12,322,610 Cash paid for legal services on transaction	 25,57 Cash paid over time ($15,000 over 10 months)(note 6) 150,000 Assumption of debt (note 6)					 50,000 12,548,180 Hamilton/May Purchase of Hamilton/May pump Stock (300,000 shares @ $10 per share)			 3,000,000 Total 							 	 $15,548,180 	Diabetex International Corporation 	(A Development Stage Company) 	Notes to the Financial Statement 	March 31, 2000 and December 31, 199) NOTE 3 - ACQUISITION OF INTANGIBLE ASSETS (continued) The amortization of the intellectual properties of AMT and Hamilton/May began June 30, 1999. Amortization expense for 1999 is $777,408. NOTE 4 - PROPERTY, PLANT AND EQUIPMENT Property and equipment are recorded at cost. Repairs and maintenance are charged to operations, and renewals and additions are capitalized. Property and equipment consists of the following: December 31, 		 1999 	 1998 Computer Equipment	 $ 3,008 $ - Less: Accumulated Depreciation	 (600)	 - $ 2,408 $ - Depreciation is based on the estimated useful life of the asset on a straight line basis over 5 years. Depreciation expense for 1999 and 1998 was $600 and $0, respectively Depreciation expense was $150 for the quarters ending March 31, 2000 and 1999 NOTE 5 - USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumption that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. In these financial statements, assets, liabilities and earnings involve extensive reliance on management's estimates. Actual results could differ from those estimates NOTE 6 - RELATED PARTY TRANSACTION At the time of the purchase of American Metabolic Technology (Note 3) the Company agreed to pay $150,000 in closing and other costs over a period of time and another $50,000 for research performed by another research development firm for AMT before the purchase. These payments were part of the negotiated purchase price of AMT and were included in the basis of the cost of AMT. $17,187 was paid in 1999. Solid State Farms and the Company have several common shareholders with the Company and has entered into a 7% royalty agreement for any sale of its products or services. The Company has advanced $783,595 towards those. royalties as of March 31, 2000. (See Note 7 and 8). 	Diabetex International Corporation 	(A Development Stage Company) 	Notes to the Financial Statement 	March 31, 2000 and December 31, 1999 NOTE 7 - PREPAID EXPENSE As part of the licensing agreement with Solid State Farms, Inc. (Note 8), the Company has agreed to pay a royalty of 7% of all sales of products or services from the Solid State technology. The contract calls for advances to be paid against the royalties to assist Solid State in the development of its current and future products and other ongoing general overhead of Solid State. In the first quarter, 2000, the Company advanced $533,892 ($33,892 in cash, $500,000 in stock) towards these expenses. Prepaid expenses consists of the following: Advances to affiliate for advance royalties (Note 8)					 $ 783,595 $ 783,595 NOTE 8 - COMMITMENTS AND CONTINGENCIE As part of the purchase of AMT, the Company agreed to pay $200,000 to Advance Metabolic Systems (AMS), former parent of AMT, in closing costs and other expenses related to the previous licensing agreement between AMS and Aoki Diabetes Research Institute (ADRI) to fund the continuing research of ADRI into advancing the metabolic activation process through a 5% royalty on all revenue of the metabolic activation technology developed by AMT. The Company also agreed to pay AMS $75,000 for services related to the insurance billing of AMT for its metabolic activation therapy. $31,250 of unpaid consulting fees was accrued at March 31, 2000 The Company signed an agreement effective June 30, 1999 to fund two consulting contracts for a total cost of $220,000 per year ($18,334 per month). Of this amount, $7,500 is accruued per month until such time as the Company can determine that it can pay the additional compensation. The consulting contract are for a period of two years and is renewable for another year upon approval of both parties. The consulting agreement for $10,000 per month is payable in cash or restricted stock which will be valued at one half of the average bid price for a period of 30 days before the payment of the services. $133,000 in compensation was accrued for the period ended March 31, 2000. In 1999, The Company entered into a licensing agreement with Solid State Farms Inc. for their 8 international patents covering proprietary technology to monitor blood glucose levels non-invasively. The agreement calls for a payment of a 7% of the adjusted gross sales price on all licensed products. The Company has made advance royalty payments of $783,595 on this royalty as of March 31, 2000. NOTE 9 - STOCK OPTIONS/PRIVATE PLACEMENT OF RESTRICTED STOCK In March, 1999, the board of directors set the price of restricted stock sales at $10 per share and offered a foreign corporation an extended agreement for a period of one year to purchase 50,000 restricted shares for the $10 price. Diabetex International Corporation (A Development Stage Company) 	Notes to the Financial Statement 	March 31, 2000 and December 31, 1999 NOTE 9 - STOCK OPTIONS/PRIVATE PLACEMENT OF RESTRICTED STOCK (continued) In August, 1999, the Company issued a one year option to Hank Bagly to purchase up to 10,000 shares at a price of $6.00 each. No options were exercised in 1999. In November, 1999, the Company issued a five year option to M. H. Meyerson and Co., Inc. to purchase up to 300,000 shares at a price of $10 each in exchange for investment banking services during the five year term. No options were exercised in 1999. NOTE 10 - REVERSE STOCK SPLIT In 1998, the Company shareholders approved a 1 for 400 reverse stock split of its common shares. The financial statements have been restated retroactively to show the effects of the split. NOTE 11 - MARKET SEGMENT INFORMATIO The company is in the business of providing equipment for the monitoring and treatment of diseases of improper metabolism including its first major market, Diabetes. The company has three independent but related lines of products and services; a) non-invasive biological monitoring; b) metabolic activation equipment and treatment, and c) new high accuracy infusion devices for the automatic delivery of its treatments. Non-invasive Biological Monitoring An exclusive worldwide license to exploit, manufacture and market patented devices to non-invasively determine blood glucose, hemoglobin A1C, and other blood levels to help treat diabetes and potentially other diseases. These device prototypes are in development, are being tested and refined, and have not been submitted for approval by the US Food and Drug Administration ("FDA") Metabolic Activation An exclusive license to exploit and market a patented metabolism treatment called Metabolic Activation (also known as hepatic activation of Continuous Intermittent Insulin Therapy, CIIIT in some medical publications). This treatment is delivered by a special infusion device with the treatment programmed into the device, and is FDA approved since 1988. The treatment has been in development for over ten years by Advanced Metabolic Systems, Inc., and has been used for the last ten years, with constant following to demonstrate the stopping of the complications of diabetes, and certain other metabolism related disease states. The Company acquired this treatment business, licenses, special infusion devices and know-how by exchange of its shares with Advanced Metabolic Systems, Inc., (AMS) Diabetex International Corporation (A Development Stage Company) 	Notes to the Financial Statement 	March 31, 2000 and December 31, 1999 NOTE 11 - MARKET SEGMENT INFORMATION (continued) Infusion Device An exclusive worldwide license to finish development, exploit, manufacture and sell an ultra accurate pumping system which will replace the current FDA approved device, and provide for automatic delivery of the treatment, and insulin or insulin related products. This technology was acquired from Hamilton/May, Inc. As of March 31, 2000, the Company has not realized significant income from any of the three distinct technologies. Other selected financial information regarding each segment as follows: <TABLE [CAPTION] MARKET SEGMENT Biological Metabolic Infusion Monitoring Activation Devices Corporate Total Income Statement Information [S] [C] [C] [C] [C] [C] Sales	 $ - $ 26,700 $ - $ - $26,700 Expenses	 - 368,905 75,000 73,483 517,388 Profit/loss from operations - $(342,205) $(75,000)$(73,483) (490,688) Balance Sheet Information Assets		 $ - $11,630,714 $2,775,000$ 6,275$ 15,281,989 Liabilities	 $ -	 $ 289,342 $ - $42,250 $31,592 </TABLE DIABETEX INTERNATIONAL CORPORATION (A DEVELOPMENT STAGE COMPANY) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION LIQUIDITY AND CAPITAL RESOURCES: The Company's working capital for the first three (3) months of 2000 decreased $ 90,072 from December 31, 1999 to $351. Since the Company was first being formed during 1999 there is no similar period with which to compare these results. The decrease in working capital is primarily due to the fact that the Company is in the development stage and its major products are still in the development stage as well resulting in poor sales and revenues results. The Company continues it efforts to raise working capital through various means of private and public financing. RESULTS OF OPERATIONS Net sales for the first three (3) months of 2000 were $ 26,700 an increase over the same period in 1999. Sales revenues are the result of the Company's Metabolic Activation therapies. The pump and glucose monitoring devices have yet to be sold on the open market, as they are still under development. The operating loss for the first three (3) months of 2000 was $491,000. This loss is due to the Company's minimal sales and the development costs for the pump and glucose monitoring devices. The Company's Metabolic Activation therapies are responsible for all of the Company's sales to date. While the benefits of these therapies have been tested and proven over the last ten (10) years they are recently becoming wide spread. Management is confident that these therapies will continue to gain wide acceptance in the medical industry and will provide significant revenues in the future. There are no financial accounting standards that have become effective during this period that will have any substantial effect on the Company's financial condition or results of its operations. PART II OTHER INFORMATION Item #6 Exhibits and Reports on Form 8K (a) Exhibit 27 Financial Data Schedule (b) No reports have been filed on Form 8K for the period ending on March 31, 2000 Signatures: DIABETEX INTERNATIONAL CORPORATION Registrant Dated: February 26, 2001 By: /s/ Benjamin Weisman ------------------------ Benjamin Weisman, CEO