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 quarterly period ended March 31, 2001.
/ / 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. 000-30294.
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IMX PHARMACEUTICALS, INC.
---------------------------------------------
(Name of Small Business Issuer in its Charter)
Utah 87-0394290
------------------------------------- --------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
1900 Corporate Boulevard, Suite 400 E, Boca Raton, Florida 33431
----------------------------------------------------------- ------------
(Address of Principal Executive Offices) (Zip Code)
561.998.5660
--------------------------------------------------------------------------------
(Issuer's Telephone Number)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the past 12
months (or 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 / / No /X/
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
At September 30, 2001 there were 8,132,076 shares of common stock, par
value $.001 per share outstanding.
Transitional Small Business Disclosure Format (check one): Yes / / No /X/
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
INDEX
Page
Number
------
Part I. Financial Information
Item 1. Financial Statements
1-3 Consolidated Balance Sheets as of December 31, 2000 (audited) and March
31, 2001 (unaudited)
4 Consolidated Statements of Operations for the Three Months Ended March
31, 2001 (unaudited) and March 31, 2000 (unaudited).
5 Consolidated Statements of Changes In Stockholders' Equity
6 Consolidated Statements of Cash Flows for the Three Months Ended March
31, 2001 (unaudited) and March 31, 2000 (unaudited).
7-37 Notes to Consolidated Financial Statements (unaudited)
Item 2. Management's Discussion and Analysis or Plan of Operation
38-41 Text
Part II. Other Information
41 Item 2(c). Recent Sales of Unregistered Securities
IMX PHARMACEUTICALS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited) (Audited)
March 31, December 31,
2001 2000
-------------- ---------------
CURRENT ASSETS:
Not Subject to Bankruptcy Proceedings:
Cash and cash equivalents $ 4,779 $ 10,414
Accounts receivable (net of allowance for
doubtful accounts of $50,000 and $50,000) 3,124 10,510
---------- ----------
Current Assets, Not Subject
to bankruptcy proceedings 7,903 20,924
---------- ----------
Subject to Bankruptcy Proceedings:
Cash and cash equivalents 445 9,216
Securities available for sale 2,779 1,828
Other receivables 501,288 501,703
Prepaid expenses and other 18,583 18,583
---------- ----------
Current Assets, Subject
to bankruptcy proceedings 523,095 531,330
---------- ----------
Total Current Assets 530,998 552,254
---------- ----------
PROPERTY AND EQUIPMENT:
Subject to Bankruptcy Proceedings:
Building and Land, (net of accumulated
depreciation of $15,437 and $ 9,989) 984,563 990,011
---------- ----------
Total Property and Equipment 984,563 990,011
---------- ----------
OTHER ASSETS:
Not Subject to Bankruptcy Proceedings:
Inventories in excess of amounts expected
to be sold currently 108,042 110,000
---------- ----------
Total Other Assets, Not Subject
to bankruptcy proceedings 108,042 110,000
---------- ----------
Subject to Bankruptcy Proceedings:
Deposits and other 6,144 6,144
---------- ----------
Total Other Assets, Subject
to bankruptcy proceedings 6,144 6,144
---------- ----------
Total Other Assets 114,186 116,144
---------- ----------
TOTAL ASSETS $1,629,747 $1,658,409
========== ==========
See accompanying notes to the consolidated financial statements.
1
IMX PHARMACEUTICALS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES
(Unaudited) (Audited)
March 31, December 31,
2001 2000
------------- --------------
CURRENT LIABILITIES:
Not Subject to Bankruptcy Proceedings:
Accounts payable $ 146,845 $ 136,299
Accrued expenses and other current liabilities 0 2,523
Commissions payable 1,586 1,113
Sales tax payable 1,593 1,648
---------- ----------
Current Liabilities, Not Subject to Bankruptcy Proceedings 150,024 141,583
Subject to Bankruptcy Proceedings:
Not Subject to Compromise
Current portion of fully secured long term notes 425,000 425,000
Postpetition trade accounts payable 58,912 14,183
Accrued salaries payable - Pre-petition 73,746 73,746
Accrued salaries payable - Post-petition 68,084 19,667
Accrued payroll taxes - Pre-petition 6,753 6,753
Accrued payroll taxes - Post-petition 6,809 1,967
Sales tax payable 193,792 193,792
---------- ----------
Current Liabilities, Not Subject to Compromise 833,096 735,108
---------- ----------
Subject to Compromise
Current portion of unsecured long term notes payable 1,350,172 1,350,172
Prepetition trade accounts payable 1,576,439 1,572,001
Accrued prepetion expenses 27,989 34,279
Accrued salaries payable - Post-petition 29,791 29,791
Stock recission payable 488,300 488,300
Loans payable 53,500 53,500
Commissions payable 277,425 277,425
---------- ----------
Current Liabilities, subject to compromise 3,803,616 3,805,468
---------- ----------
Total Current Liabilities 4,786,736 4,682,159
LONG-TERM LIABILITIES:
Not Subject to Bankruptcy Proceedings:
Officer's notes payable 51,000 30,000
---------- ----------
Long-Term Liabilities, not subject to bankruptcy proceedings 51,000 30,000
---------- ----------
Subject to Bankruptcy Proceedings:
Not Subject to Compromise
Fully secured long-term notes, less current portion 301,137 287,137
---------- ----------
Subject to Compromise
Unsecured long term notes payable, less current portion 553,366 553,366
---------- ----------
Total Long-Term Liabilities 905,503 870,503
---------- ----------
TOTAL LIABILITIES $5,692,239 $5,552,662
---------- ----------
See accompanying notes to the consolidated financial statements.
2
IMX PHARMACEUTICALS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
STOCKHOLDERS' EQUITY (DEFICIENCY)
(Unaudited) (Audited)
March 31, December 31,
2001 2000
-------------- ---------------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock, $.001 par value, 50,000,000 shares authorized, 12,898,522
and 12,898,522 shares issued, 8,132,076 and 8,132,076 shares
outstanding $ 12,898 $ 12,898
Additional paid-in capital 10,495,487 10,495,487
Retained earnings (deficiency) (13,984,630) (13,815,440)
Treasury stock, at cost - 4,766,446 and 4,766,446 shares (578,054) (578,054)
Accumulated other comprehensive income (loss) (8,193) (9,144)
------------ ------------
Total Stockholders' Equity (Deficiency) (4,062,492) (3,894,253)
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIENCY)) $ 1,629,747 $ 1,658,409
============ ============
See accompanying notes to the consolidated financial statements.
3
IMX PHARMACEUTICALS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
---------------------------------
2001 2000
-------------- -------------
NET SALES $ 33,848 $ 231,346
COST OF SALES 2,105 81,501
----------- -----------
GROSS PROFIT 31,743 149,845
----------- -----------
OPERATING EXPENSES:
Selling 51,672 392,304
Advertising 620 32,530
General and administrative 155,028 389,637
Depreciation and amortization 5,448 18,094
----------- -----------
Total Operating Expenses 212,768 832,565
----------- -----------
LOSS FROM OPERATIONS (181,025) (682,720)
OTHER INCOME (EXPENSES):
Other 11,835 245,493
----------- -----------
Loss Before Income Taxes (169,190) (437,227)
Provision for Income Taxes 0 0
----------- -----------
Net loss available to common stockholders $ (169,190) $ (437,227)
=========== ===========
Weighted average number of shares of
common stock outstanding:
Basic 8,132,076 4,998,508
Diluted 8,132,076 5,329,256
Net loss per common share:
Basic $ (0.02) $ (0.09)
Diluted $ (0.02) $ (0.08)
See accompanying notes to the consolidated financial statements.
4
IMX PHARMACEUTICALS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
PREFFERED STOCK COMMON STOCK
------------------------- ----------------------------- ADDITIONAL
NUMBER NUMBER PAID-IN
OF SHARES AMOUNT OF SHARES AMOUNT CAPITAL
------------ --------- ------------ ------------ ------------
Balance - December 31, 1999 0 0 9,634,707 9,635 7,943,050
Issuance of common stock for
acquisition of Select Benefits, Inc. 100,000 100 74,900
Issuance of common stock for
acquisition of Dri-Kleen, Inc. Distribution network,
inventory of finished goods and materials and
manufacturing facility in Elbow Lake, Minnesota 2,500,000 2,500 1,872,500
Issuance of common stock tyo VoyagerIT.com 500,000 500 499,500
Issuance of common stock to Shulman & Associates 100,000 100 99,900
Meyer Zall Laboratories Ltd. return of stock
in exchange of release of certain license agreements 0
Return to authorized
Prior period correction of preffered stock conversion 48,815 48 (48)
Net proceeds from sale of common stock 1,300,000 1,300 492,700
Recission of stock purchase (1,285,000) (1,285) (487,015)
Net loss
Change in other comprehensive income
------------ ---------- ------------ ------------- ------------
Balance - December 31, 2000 0 0 12,898,522 $ 12,898 $ 10,495,487
Net loss for the three months ended March 31, 2001
------------ ---------- ------------ ------------- ------------
Balance - March 31, 2001 0 $ 0 12,898,522 $ 12,898 $ 10,495,487
============ ========== ============ ============= ============
TREASURY STOCK ACCUMULATED
------------------------- OTHER TOTAL
NUMBER OF COMPREHENSIVE STOCKHOLDERS'
(DEFICIT) SHARES AMOUNT INCOME EQUITY (DEFICIENCY)
--------- ------------------------- ------------- -------------------
Balance - December 31, 1999 (4,348,955) 3,832,246 (578,054) (21,751) 3,003,925
Issuance of common stock for
acquisition of Select Benefits, Inc. 75,000
Issuance of common stock for
acquisition of Dri-Kleen, Inc. Distribution network,
inventory of finished goods and materials and
manufacturing facility in Elbow Lake, Minnesota 1,875,000
Issuance of common stock tyo VoyagerIT.com 500,000
Issuance of common stock to Shulman & Associates 100,000
Meyer Zall Laboratories Ltd. return of stock
in exchange of release of certain license agreements 734,000 0 0
Return to authorized 200,200
Prior period correction of preffered stock conversion 0
Net proceeds from sale of common stock 494,000
Recission of stock purchase (488,300)
Net loss (9,466,485) (9,466,485)
Change in other comprehensive income 12,607 12,607
------------- ------------- ----------- ------------ -------------
Balance - December 31, 2000 (13,815,440) 4,766,446 (578,054) (9,144) (3,894,253)
Net loss for the three months ended March 31, 2001 (169,190) 951 (168,239)
------------- ------------- ----------- ----------- -------------
Balance - March 31, 2001 $(13,984,630) 4,766,446 $ (578,054) $ (8,193) (4,062,492)
============= ============= =========== =========== ============
See accompanying notes to the consolidated financial statements.
5
IMX PHARMACEUTICALS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
-------------------------------
2001 2000
----------- -----------
OPERATING ACTIVITIES:
Net income (loss) $ (169,190) $ (437,227)
to net cash (used) provided by operating activities:
Depreciation and amortization 5,448 18,094
Provision for doubtful accounts 0 (25,894)
Changes in assets and liabilities:
Decrease in accounts receivable 7,386 (241,071)
Increase in other receivable 415 0
Decrease (increase) in inventories 1,958 (153,035)
(Increase) in prepaid expenses 0 (18,046)
Decrease (increase) in deposits 0 (350,000)
Decrease (increase) in other assets 0 (10,000)
(Decrease) increase in accounts payable and accrued expenses 104,577 (45,740)
----------- -----------
Net cash (used) provided by operating activities (49,406) (1,262,919)
----------- -----------
Investing Activities:
Purchase of furniture and equipment 0 (16,391)
Loan to related party 0 1,586
----------- -----------
Net cash (used) provided by investing activities 0 (14,805)
----------- -----------
Financing Activities:
Net proceeds from (repayments of) notes payable 0 (799)
Net proceeds from (repayments of) loans payable 35,000 0
----------- -----------
Net cash (used) provided by financing activities 35,000 (799)
----------- -----------
Net increase in cash and cash equivalents (14,406) (1,278,523)
Cash and cash equivalents - beginning of period 19,630 2,497,790
----------- -----------
Cash and cash equivalents - end of period $ 5,224 $ 1,219,267
=========== ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest $0 $0
Cash paid for income taxes $0 $0
See accompanying notes to the consolidated financial statements.
6
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 1 - BANKRUPTCY AND GOING CONCERN
The company has incurred operating losses for each of the last
four years ended December 31, 1997, 1998, 1999 and 2000 and
the three months ended March 31, 2001. As of March 31, 2001
the Company's current liabilities exceeded its current assets
by $4,255,738 and its total liabilities exceeded its total
assets by $4,062,492. These matters raise substantial doubt
about the ability of the Company to continue as a going
concern. The Company's continuance will be dependent on the
ability to restructure its operations to achieve profitability
in the near term and its ability to raise sufficient debt or
equity capital to fund continuing operations until such
restructuring is completed.
NOTE 2- ORGANIZATION AND CAPITALIZATION
IMX Pharmaceuticals, Inc. (the "Company"), formerly IMX
Corporation, was organized under the laws of the State of Utah
on June 2, 1982. The Company changed its name to IMX
Pharmaceuticals, Inc. on June 30, 1997. The consolidated
financial statements include the accounts of the Company and
its subsidiaries, imx-eti Life Partners, Inc. ("imx-eti"),
Sarah J. Inc. ("Sarah J."), Proctozone, Inc. (`Proctozone"),
Podiatrx, Inc. ("Podiatrx") and Select Benefits, Inc. ("Select
Benefits"). All significant intercompany balances and
transactions have been eliminated in consolidation.
In 1995, the Company entered into an acquisition agreement
(the "Agreement'), with Interderm, Ltd., ("Interderm") for the
assignment of the exclusive marketing and distribution rights
in the United States for certain pharmaceutical products
manufactured by Meyer-Zall Laboratories of South Africa
("Meyer-Zall"). The products included Exorex, an
over-the-counter psoriasis medication.
In connection with the Agreement, the Company also acquired
the right of first refusal for distribution rights in the
United States for new pharmaceutical products developed or
manufactured by Meyer-Zall.
During 1996 and 1997, the Company began to market and
distribute Exorex and other related products in the retail
market using capital raised from private placements.
Effective June 24, 1998, the Company entered into an agreement
(the "Joint Venture Agreement") with various affiliates of
Medicis Pharmaceutical Corporation ("Medicis") to form a joint
venture, Medicis Consumer Products
7
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 2 - ORGANIZATION AND CAPITALIZATION (CONT'D)
Company, LLC ("LLC"), to develop and market skin care
products. Under the terms of the Joint Venture Agreement,
Medicis contributed cash of $4,000,000 to the joint venture in
return for a 51% interest in the LLC. The Company contributed
all of the assets, property and associated rights in
connection with the Exorex product line, with an unamortized
cost of approximately $5,200, in return for a 49% interest in
the LLC.
Effective June 30, 1999, the Company entered a Sale and
Transfer Agreement ("Sale Agreement") with Medicis, whereby
the Company sold its 49% interest in the LLC to Medicis for
$3,600,000.
On June 16, 2000 the Company signed an agreement with Pure
Distributors' Inc. d/b/a Envion International to become the
exclusive worldwide distributor of all Envion's products. The
main products include meal replacement bars and nutritional
supplements marketed under the labels of BioZone and
Envitamins. Envion's products are now marketed through its
WellnessShop.com web site and companion catalogue, both of
which were to be operated by the Company as of the completion
of the agreement. The Company was to pay a fee to Envion for
the distributorship of $185,000 during 2000, $86,000 during
2001, and $66,000 during 2002 and each year thereafter.
The Company also acquired Envions entire current product
inventory for $750,000 payable monthly over two years. The
Company agreed to purchase all of its requirements for Envion
products from Envion.
The Company had an option to purchase all of Envion's rights
to its products, customer lists and various other contract
rights for $200,000. If the option were exercised, the fees
paid in connection with the Distribution Agreement would be
cancelled; the Company would no longer be required to purchase
its requirements from Envion, and would only pay Envion
royalties based on its purchase of Envion products from the
manufacturers thereof. The exercise date of the option was any
time after February 1, 2001. The Company has not exercised the
option.
On June 15, 2000 the Company purchased all the stock of Select
Benefits Corporation for a three-year note in the amount of
$189,510 and 100,000 shares of its common stock. Select
Benefits has now changed its name to IMX Select Benefits
Corporation. Select Benefits provides discount health care
memberships
8
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 2 - ORGANIZATION AND CAPITALIZATION (CONT'D)
that provide discounts of 10% to 60% for prescription drugs,
vision care, dentistry, chiropractic, hearing and other health
related benefits. Sales and expenses in connection with Select
Benefits for the initial period ended December 31, 2000 were
not material.
On July 21, 2000 the Company and Enviro-Tech signed a revised
agreement for the sale and purchase of assets. The revised
agreement provided that, in addition to purchasing the
Distribution Network, the Company would acquire all of
Enviro-Tech's inventory of Dri-Wash n' Guard, nutritional
supplement products and its 45,000 square foot factory,
warehouse, and distribution center in Elbow Lake, Minnesota.
The consideration for the purchase was changed to $1,900,000
in cash (the balance of which was paid upon execution of the
revised agreement), 2,500,000 shares of the Company's common
stock, a ninety-day interest-free note and assumption of
almost $1,000,000 in various Enviro-Tech debts. In addition
the Company and Enviro-Tech signed a long-term supply
agreement with respect to the Dri-Wash n' Guard line of
waterless car and home cleaning products. The Company took
control of the assets on July 24, 2000.
The Company assumed responsibility for (i) all payments to the
first and second mortgage holders of the Las Vegas property
owned by Enviro-Tech which was pending foreclosure and (ii)
all operating expenses of the Las Vegas property. The
Company's responsibility for items (i) and (ii), collectively,
the "Las Vegas Expenses" commenced at the closing date and
terminated after four months or until the Company had expended
$100,000, whichever occured first. The Company was to be
reimbursed for all amounts paid for the Las Vegas Expenses
from the proceeds of the Sale of the Las Vegas property after
all the obligations of the first and second trust deed notes
were satisfied.
During the first five contract years, (the Royalty period) The
Company had agreed to pay a royalty to Enviro-Tech equal to
20% of the purchase price paid for the formula (the Royalty
fee). The minimum guaranteed Royalty Fee (the Guaranteed
Royalty Fee) for the first contact year is $286,000 and
$300,000 for the succeeding four contract years. The
Guaranteed Royalty Fee is due in monthly installments of no
less than $20,000 and the minimum quarterly royalty fee is
$61,000 for the first quarter and $75,000 for each following
quarter. Interest on any monthly or quarterly royalty fee
deficiency was to accrue interest at an annualized rate of 12%
9
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 2 - ORGANIZATION AND CAPITALIZATION (CONT'D)
Upon notification of a royalty fee payment delinquency the
Company would have had forty-five days to make payment. Should
the Company fail to cure the delinquency within the forty-five
day period, Enviro-Tech may at its sole discretion terminate
the Company's right to exclusively distribute Enviro-Tech
products in North America and the Caribbean Islands.
The numerous acquisitions described above required the Company
to raise approximately $1,500,000 in asset based financing to
achieve the results forecast by its business plan. The Company
was not able to obtain the financing. The Company experienced
delays in consolidating its operations in Boca Raton, Florida
and Elbow Lake, Minnesota, resulting in expenses that exceeded
its current revenues. Consequently, the Company's cash flow
generated was insufficient to sustain operations and pay its
creditors. Accordingly, the Company decided to file a chapter
11 bankruptcy petition for the Company and imx-eti Life
Partners' Inc. on November 20, 2000 (the "Petition Date").
On December 1, 2000 the Company entered into an agreement with
Dri-Kleen Inc. (Dri-Kleen) whereby Dri-Kleen would operate the
business of marketing Dri Wash N' Guard products and other non
Dri-Wash products. Dri-Kleen will operate the voice-mail,
e-mail and toll free numbers. The operation of the business
also includes payment by Dri-Kleen, Inc. of all operational
expenses including those associated with the Elbow Lake,
Minnesota facility. As remuneration for its services Dri-Kleen
will receive ninety-seven percent of the net sales, defined as
retail sales less forty percent, during the agreement term
from all sales generated through its operation of the Dri Wash
N Guard business and the other non Dri-Wash products. The
Company will receive three percent of all net commissionable
sales. The agreement may be terminated by any party with
ninety days written notice to the other party. The Company
may, however, terminate the agreement at any time for cause,
which includes the failure of Dri-Kleen or its nominee to make
any and all payments due to the Company under the terms of the
agreement.
On December 27, 2000 the bankruptcy court entered an order
authorizing the joint administration of IMX Pharmaceuticals,
Inc. (the parent) and imx-eti's respective bankruptcy cases.
The other subsidiaries Sarah J, Proctozone, Podiatrix and
Select Benefits are not a party to the bankruptcy proceedings.
10
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 2 - ORGANIZATION AND CAPITALIZATION (CONT'D)
Post-petition, The Company has derived revenues from its
subsidiaries through the sale of their respective products.
The Company continues to operate as a debtor in possession. On
March 16, 2001 the Company and imx-eti filed a Motion to
Extend the Exclusivity Period for filing a Plan and the
periods to Solicit Exceptances of Plan ("the Exclusivity
Motion")
On July 8, 2000, 1,300,000 shares of common stock were issued
to approximately thirteen (13) individuals at $.38 per share.
Based upon the subsequent discovery of materially erroneous
information concerning the volume of sales, the issuance of
the stock was rescinded on November 5, 2000, by the Company's
board of directors for five (5) of the individuals holding
435,638 shares of common stock. The Company lacked the funds
to pay the individuals affected and therefore the liabilities
created by the rescission was recorded as stock rescission
payable. Subsequent to the Petition Date, The Company's board
of directors resolved to rescind the issuance of the balance
of 849,362 shares of common stock and the schedules will be
amended to reflect these individuals and entity as unsecured
creditors. One individual who was issued 15,000 shares elected
to not participate in the recission.
On October 2000 the Company purchased fromVoyagerIT.com (f/k/a
Enviro-Tech.com plc) debt owed to VoyagerIT.com from
Enviro-Tech International, Inc. (the "Debt"). The purchase
price for the Debt was $500,000. In satisfaction of payment
the Company issued 500,000 shares of the Company's common
stock, $0.001 par value, at an issue price of $1.00 per share
(the "Pledged shares").
Terms of the purchase agreement include that should
VoyagerIT.com realize net sales proceeds totaling $500,000 by
selling fewer than all the Pledged shares, VoyagerIT.com would
renounce its rights to the remainder of the Pledged shares and
surrender them to the Company for cancellation or otherwise
deal with them as mutually agreed to by the parties.
If by July 1, 2001, the sum of the aggregate net proceeds of
sale of the Pledged shares sold by VoyagerIT.com and the value
of the retained Pledged shares (the "Sum") is less than
$500,000 the Company agreed to pay immediately to
VoyagerIT.com an amount equal to the shortfall between the Sum
and $500,000. The value of the Pledged shares retained was to
be taken as the average closing bid on the last 20 trading
days before July 1, 2001.
11
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 3 - SUBSEQUENT EVENT
On April 4, 2001 the bankruptcy court entered an Order
granting the Exclusivity Motion and extended the time within
which the Company had exclusive rights to file a plan for an
additional thirty (30) days there from and extended the period
for solicitation of acceptances for an additional sixty (60)
days.
Subsequent to the filing of the bankruptcy case it became
evident that the Company could not sustain itself as an entity
to assist in the operation of the subsidiaries respective
businesses- the sole source of its revenues. The Company
sought offers for recapitalization of the business and each of
the subsidiaries' businesses by third parties. The Company
received two expressions of interest, only one of which, in
the opinion of the Company's management was substantial. The
appeal to the two parties who expressed an interest in
investing in the Company was based primarily on its status as
a public company. Consequently, there is no value in the
assets of the Company to provide a return to unsecured
creditors and if the Company were liquidated, after payments
are made to the secured creditors and priority and
administrative creditors, there would be no property available
for distribution to unsecured creditors. In the opinion of
management, the only substantial offer was received from Cater
Barnard, plc ("Cater Barnard"). Management determined that the
value to be invested in the Company is substantially in excess
of the Company's value as a going concern or on a liquidation
basis. The Company has filed a plan of reorganization with the
United States Bankruptcy Court, Southern District of Florida
dated May 23, 2001 pursuant to section 1125 of Title 11 of the
United States Code. (The "Bankruptcy code"). The plan is
currently pending approval of the United States Bankruptcy
Court.
On September 5, 2001 a motion was brought to the bankruptcy
court to dismiss imx-eti Life Partners, Inc.'s petition for
bankruptcy. The bankruptcy court granted the motion on
September 10, 2001.
12
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The accompanying unaudited consolidated financial statements
as of March 31, 2001 and for the three month periods ended
March 31, 2000 and 2001 have been prepared in accordance with
generally accepted accounting principles for interim financial
information. In the opinion of management, all adjustments
consisting of normal recurring accruals considered necessary
for a fair presentation have been included. Operating results
for the three-month periods ended March 31, 2001 are not
necessarily indicative of the results that may be expected for
the year ending December 31, 2001.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers
all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Securities Available for Sale
Securities available for sale are carried at estimated market
values. Unrealized
holding gains and losses on securities available for sale are
reported as a net amount in a separate component of
stockholders' equity until realized. Gains and losses realized
from the sale of investment securities are computed using the
specific-identification method.
Accounts Receivable
Management has evaluated the Accounts Receivable and believes
that a significant amount are uncollectable. The Company has
provided an allowance for doubtful accounts in the amounts of
$50,000 and $50,000 for the periods ended December 31, 2000,
and March 31, 2001, respectively.
Inventories
Inventories are stated at the lower of cost or market value.
Cost is determined using the first-in, first-out method.
Property and Equipment
Property and equipment are recorded at cost. Depreciation and
amortization are computed using methods that approximate the
straight-line method over the assets' estimated useful lives.
13
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
Revenue Recognition
Sales are generally recorded upon the shipment of goods to
customers.
Production Development Costs
Costs incurred for the development of new product lines are
expensed as incurred, as specified by SOP 98-5 issued by the
American Institute of Certified Public Accountants (Note 5).
Stock-Based Compensation
The Company accounts for stock based compensation as set forth
in Accounting Principles Board ("APB") Opinion 25, "Accounting
for Stock Issued to
Employees," and discloses the proforma effect on net income
(loss) and income (loss) per share of adopting the full
provisions of Statement of Financial Accounting Standards
("SFAS") No. 123 "Accounting for Stock-Based Compensation".
Accordingly, the Company has elected to continue using APB
Opinion 25 and has disclosed in the footnotes proforma income
(loss) and income (loss) per share information as if the fair
value method had been applied.
Income Taxes
The Company files consolidated Federal and State of Florida
income tax returns. Income taxes are calculated using the
liability method specified by SFAS No. 109, "Accounting for
Income Taxes".
Net Income (Loss) Per Common Share
Net income (loss) per common share is calculated according to
SFAS No.128, "Earnings Per Share" which requires companies to
present basic and diluted earnings per share. Net income
(loss) per common share-- basic is based on the weighted
average number of common shares outstanding during the year.
Net income (loss) per common share -- diluted is based on the
weighted average number of common shares and dilutive
potential common shares outstanding during the year.
14
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONT'D)
Convertible preferred stock, certain common stock options and
common stock warrants were excluded from the computations of
net loss per share for the periods ended December 31, 2000 and
March 31, 2001 because the effect of their inclusion would be
anti-dilutive.
Fair Value of Financial Instruments
SFAS No. 107 requires the disclosure of the fair value of
financial instruments. The estimated fair value amounts have
been determined by the Company's management using available
market information and other valuation methods. However,
considerable judgment is required to interpret market data in
developing the estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of
the amounts the Company could realize in a current market
exchange.
The following methods and assumptions were used in estimating
the fair value disclosure for financial instruments:
Cash and Cash Equivalents, Accounts and Loan Receivable,
Accounts Payable, Accrued Expenses and Notes Payable - the
carrying amounts reported in the consolidated balance sheets
approximate fair value because of the short maturity of those
instruments.
Securities Available for Sale - the fair values are based on
quoted market prices at the reporting date of those or similar
investments (Note 6).
Accounting Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities, and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from
those estimates.
15
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 5 - RECENT ACCOUNTING
In June, 1997, the Financial Accounting Standards Board (the
Pronouncements "FASB") issued SFAS No. 130, "Reporting
Comprehensive Income" which became effective in 1998. SFAS No.
130 establishes standards for reporting and presentation of
comprehensive income and its components in a full set of
general-purpose financial statements. The Company adopted SFAS
No.130 on January 1, 1998.
In June, 1997 the FASB issued SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information" which
became effective in 1998. SFAS No. 131 establishes standards
for the way public enterprises are to report operating
segments in annual financial statements and requires reporting
of selected information about operating segments in interim
reports. The Company's adoption of SFAS No. 131 did not affect
the Company's consolidated financial statements.
In April,1998, the American Institute of Certified Public
Accountants issued Statement of Position No. 98-5, "Reporting
for the Costs of Start-Up Activities", ("SOP 98-5"). The
Company is required to expense all start-up costs related to
new operations as incurred. In addition, all start-up costs
that were capitalized in the past must be written off when SOP
98-5 is adopted. The Company's adoption of SOP 98-5 did not
have a material impact on its financial position or results of
operations.
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The Company is
required to adopt SFAS 133, as amended by SFAS 137, for the
year ending December 31, 2001. SFAS 133 establishes methods of
accounting for derivative financial instruments and hedging
activities related to those instruments as well as other
hedging activities. Because the Company currently holds no
derivative financial instruments and does not currently engage
in hedging activities, adoption of SFAS 133 is expected to
have no material impact on the Company's financial condition
or results of operations.
16
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 6 - SECURITIES AVAILABLE FOR SALE
Securities available for sale consist of shares of common
stock in Hydron Technologies, Inc. ("Hydron"). At December 31,
2000 and March 31, 2001, the cost basis of $10,972 and $
10,972 of the common stock in Hydron exceeded the market value
by $9,144 and $ 8,193 respectively.
NOTE 7 - INVENTORIES
Inventories consisted of the following:
March 31 December 31
2001 2000
---------------- ------------------
Other Assets Current Assets
---------------- ------------------
Finished goods $ 92,306 $ 94,264
Work-in-process 0 -
Packaging supplies 15,736 15,736
---------------- ------------------
Total $ 108,042 $ 110,000
================ ==================
NOTE 8 - INVENTORY HELD AS NONCURRENT ASSET
As of March 31, 2001 the Company held inventory of $ 108,042
shown on the balance sheet as a non-current asset. In the
opinion of management, inventory held is not expected to be
sold currently.
NOTE 9 - SUBSTANTIAL LOSSES FROM APPLICATION OF LOWER OF COST OR
MARKET RULE
During 2000, the Company significantly reduced its production
and marketing efforts in connection with several of its
products. This decision was based on the projected continued
loss of market share for these products and the inability to
deliver product on a timely basis. All of the IMX & imx-eti
Life Partners Inc. inventory was not in physical control of
The Company. Management does not have sufficient resources to
pursue control of this inventory and has abandoned it.
17
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 9 - SUBSTANTIAL LOSSES FROM APPLICATION OF LOWER OF COST OR MARKET
RULE (CONT'D)
The value of the inventories of Sarah J, Proctozone, and
Podiatrix have been significantly reduced due to The Company's
diminished capability to market and distribute its products.
Management has reduced these inventories to their estimated
liquidation value. Accordingly at December 31, 2000 the
inventories listed below were written down to their estimated
net realizable value.
Estimated Estimated
Carrying Net Realizable Net Realizable
Value Value Value
Company December 31, 2000 December 31, 2000 March 31,2001
------------------------------ ------------------------- ------------------------- -----------------------
IMX Pharmaceuticals, Inc. $ 18,295 $ -- $ --
imx-eti Life Partners, Inc. 1,528,289 -- --
------------------------- ------------------------- -----------------------
Reorganization items $ 1,546,584 $ -- $ --
========================= ========================= =======================
Sarah J. Inc. 453,992 100,000 98,042
Proctozone, Inc. 80,390 5,000 5,000
Podiatrx, Inc. 119,518 5,000 5,000
Select Benefits Inc. -
------------------------- ------------------------- -----------------------
$ 653,900 $ 110,000 108,042
========================= ========================= =======================
NOTE 10 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
March 31, December 31,
2001 2000
---------------- -----------------
Building & Land $ 1,000,000 1,000,000
Computers and office equipment 0 0
Furniture, fixtures and improvements 0 0
---------------- -----------------
1,000,000 1,000,000
Less: accumulated depreciation and
amortization (15,437) (9,989)
---------------- -----------------
Property and equipment, net of
accumulated depreciation $ 984,563 $ 990,011
================ =================
18
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 11- IMPAIRMENT OF ASSETS HELD AND USED
During 2000 the assets listed below were deemed to be impaired
and written down to their fair market value. Fair value, which
was determined by reference to the present value of the
estimated future cash inflows of such assets, exceeded their
carrying value by $ 893,733.
Machy and Furniture and Leasehold
Company: Totals equipment fixtures Imprvements
-------- ----------- ----------- ----------- -----------
IMX Pharmaceuticals, inc $ 296,071 $ 219,937 $ 54,533 $ 21,601
imx-eti Life Partners, Inc. 1,818,157 780,862 7,114 0
Sarah J., Inc. 125,072 106,688 0 0
Proctozone, Inc. 0 0 0 0
Podiatrx, Inc. 8,319 0 0 0
Select Benefits, Inc. 0 0 0 0
----------- ----------- ----------- -----------
Totals 2,247,619 1,107,487 61,647 21,601
Less: Accumulated depreciation
through December 31, 2000 (363,875) (268,353) (35,292) (18,314)
----------- ----------- ----------- -----------
Net book value 1,883,744 839,134 26,355 3,287
Less: Valuation allowance (893,733) (839,134) (26,355) (3,287)
----------- ----------- ----------- -----------
Net relizable value
at December 31, 2000 990,011 0 0 0
Less: Accumulated depreciation
for three months ended
March 31, 2001 5,448 0 0 0
----------- ----------- ----------- -----------
Net relizable value
at March 31, 2001 $ 984,563 $ -- $ -- $ --
=========== =========== =========== ===========
Other
Company: Land Buildings assets
-------- ----------- ----------- -----------
IMX Pharmaceuticals, inc $ 0 $ 0 $ 0
imx-eti Life Partners, Inc. 150,000 850,000 30,181
Sarah J., Inc. 0 0 18,384
Proctozone, Inc. 0 0 0
Podiatrx, Inc. 0 0 8,319
Select Benefits, Inc. 0 0 0
----------- ----------- -----------
Totals 150,000 850,000 56,884
Less: Accumulated depreciation
through December 31, 2000 0 (9,989) (31,927)
----------- ----------- -----------
Net book value 150,000 840,011 24,957
Less: Valuation allowance 0 0 (24,957)
----------- ----------- -----------
Net relizable value
at December 31, 2000 150,000 840,011 0
Less: Accumulated depreciation
for three months ended
March 31, 2001 0 5,448 0
----------- ----------- -----------
Net relizable value
at March 31, 2001 $ 150,000 $ 834,563 $ --
=========== =========== ===========
Management established valuation allowances for these assets
based on the following circumstances:
Machinery, Equipment, Furniture and Fixtures
IMX and IMX-ETI:
These assets were not in physical control of The Company.
Management does not have sufficient resources to pursue
control of these assets and therefore abandoned them.
Sarah J, Proctozone, Podiatrix:
19
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 11- IMPAIRMENT OF ASSETS HELD AND USED (CONT'D)
These assets have been taken out of service and are expected
to provide no further economic benefits.
Leasehold Improvements:
IMX
The Company abandoned its leasehold improvements at the
expiration of their Boca Raton, Florida corporate office lease
term.
Other Assets:
IMX and IMX-ETI
Other assets were composed of unamortized programming fees and
licensing agreements. Due to The Company's diminished
capability to market and distribute its products these assets
are expected to provide no further economic benefits.
NOTE 12 - LIABILITIES SUBJECT TO COMPROMISE
On November 20, 2000, IMX Pharmaceuticals Inc. and imx-eti
Life Partners, Inc. (The "Debtors") filed petitions for relief
under Chapter 11 of the federal bankruptcy laws in the United
States Bankruptcy Court for the Southern District of Florida.
Under Chapter 11, certain claims against the Debtor in
existence prior to the filing of the petitions for relief
under the federal bankruptcy laws are stayed while the Debtor
continues business operations as Debtor-in-possession. The
creditor's claims are reflected in the December 31, 2000 and
March 31, 2001 balance sheets as "liabilities subject to
compromise." Additional claims (liabilities subject to
compromise) may arise subsequent to the filing date resulting
from rejection of executory contracts, including leases, and
from determination by the court (or agreed to by parties in
interest) of allowed claims for contingencies and other
disputed amounts. Claims secured against the debtors assets
("secured claims") also are stayed, although the holders of
such claims have the right to move the court for relief from
the stay. Secured claims are secured primarily by liens on the
Debtors' property, plant and equipment.
20
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 13 - UNRECORDED LIABILITY
The Debtors' received approval from the Bankruptcy Court to
pay or otherwise honor certain of their prepetition
obligations, including employee wages. The Debtors have
determined that there is insufficient collateral to cover the
interest portion of scheduled payments on their prepetition
debt obligations. Contractual interest on those obligations is
estimated at $96,000, which is approximately $ 86,000 more
than reported interest expense; therefore, the Debtor has
discontinued accruing interest on these obligations.
NOTE 14 - REORGANIZATION ITEMS
Reorganization items are comprised of:
IMX imx-eti
Pharmaceuticals, Inc. Life Partners, Inc. Total
-------------------------- ---------------------- -----------------------
Professional Fees 0 0 0
-------------------------- ---------------------- -----------------------
$ 0 $ 0 $ 0
========================== ====================== =======================
NOTE 15 - INCOME TAXES
The provision for income taxes in the consolidated statements
of operations is as follows:
March 31, March 31,
------------------ -------------------
2001 2000
------------------ -------------------
Current:
Federal $ 0 $ 0
State 0 0
------------------ -------------------
$ 0 $ 0
------------------ -------------------
Deferred:
Federal $ 0 $ 0
State 0 0
------------------ -------------------
$ 0 $ 0
------------------ -------------------
21
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 15 - INCOME TAXES (CONT'D)
Applicable incomes taxes for financial reporting purposes
differ from the amounts computed by applying the statutory
federal and state income tax rates as follows:
March 31, December 31,
----------- -----------
2001 2000
----------- -----------
Tax benefit at statutory rate $ 46,000 $ 3,570,000
Increase (decrease) in tax
resulting from:
State income tax, net of federal tax benefit 8,500 610,000
Other 0 0
Increase (decrease) in valuation allowance (54,500) (4,180,000)
----------- -----------
Income taxes $ 0 $ 0
=========== ===========
The approximate tax effects of temporary differences that give
rise to the deferred tax assets and deferred tax (liabilities)
are as follows:
March 31, December 31,
------------ ------------
2001 2000
------------ ------------
Fair value of common stock options and
warrants $ 0 $ 0
Start-up costs 0 0
Depreciation and amortization 0 0
Other 0 0
Net operating loss carry forwards 11,262,000 11,093,000
------------ ------------
0
11,262,000 11,093,000
Less: valuation allowance (11,262,000) (11,093,000)
------------ ------------
Total net deferred tax asset $ 0 $ 0
============ ============
22
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 15 - INCOME TAXES (CONT'D)
At March 31, 2001, the Company had net operating loss
carryforwards of approximately $ 11,262,000 for income tax
purposes. Those losses are available for carryforward for
periods ranging from fifteen to twenty years, and will expire
beginning in 2011. Any future significant changes in ownership
of the Company may limit the annual utilization of the tax net
operating loss carryforwards.
NOTE 16 - CAPITAL STOCK
Common stock
Common stock has one vote per share for the election of
directors. All other matters are submitted to a vote of
stockholders. Shares of common stock do not have cumulative
voting, preemptive, redemption or conversion rights.
At December 31, 2000 and March 31, 2001, the Company had
reserved 874,641 and 869,641 shares of common stock
respectively for issuance relating to unexpired options and
warrants.
NOTE 17 - STOCK OPTIONS
On January 21, 1996, the Company adopted a stock option plan
with 2,000,000 shares of Common stock reserved for the grant
of options to key employees, non-employees, officers and
directors of the Company. On September 9, 1998, the Company
adopted a stock option plan with 1,200,000 shares of common
stock reserved for grant of options to key employees,
non-employees, officers and directors of the Company. Options
under these plans are exercisable over a period of ten years
with various vesting terms. All shares granted are subject to
significant restrictions as to disposition by the optionee.
23
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 17 - STOCK OPTIONS (CONT'D)
A summary of the Company's stock option activity is as
follows:
Three months ended Year ended
March 31, 2001 December 31, 2000
----------------------------------------------------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------------------------------------------------------------------------------------------------------
Options outstanding,
beginning of period 520,000 $ 1.61 1,485,000 $ 2.46
Granted - - 400,000 1.00
Exercised - - - -
Forfeited/canceled (5,000) 1.70 (1,365,000) 2.36
------------------------------------------------------------------------------------------------------
Outstanding at end of
period 515,000 $ 1.61 520,000 $ 1.61
------------------------------------------------------------------------------------------------------
A summary of the Company's fixed stock options outstanding is
as follows:
Weighted
Average
Remaining Weighted Weighted
Range of Options Contractual Average Options Average
Exercise Price Outstanding Life in Years Exercise Price Exercisable Exercise Price
----------------------------------------------------------------------------------------------------------------------
December 31, 2000
----------------------------------------------------------------------------------------------------------------------
$1.00 300,000 5.76 $ 1.00 300,000 $ 1.00
$1.75 - 2.50 220,000 5.88 2.40 210,000 2.40
----------------------------------------------------------------------------------------------------------------------
$0.75 - 6.50 520,000 5.81 1.59 510,000 1.58
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
March 31, 2001
----------------------------------------------------------------------------------------------------------------------
$1.00 300,000 4.77 $ 1.00 300,000 $ 1.00
$1.75 - 2.50 215,000 5.04 2.40 210,000 2.40
----------------------------------------------------------------------------------------------------------------------
$0.75 - 6.50 515,000 4.88 1.61 510,000 1.60
----------------------------------------------------------------------------------------------------------------------
24
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 17 - STOCK OPTIONS (CONT'D)
SFAS No. 123, "Accounting for Stock-Based Compensation",
requires the Company to provide pro forma information
regarding net income (loss) and income (loss) per share as if
compensation cost for the Company's employee stock option
plans had been determined in accordance with the fair value
based method prescribed in SFAS No. 123. The Company estimates
the fair value of each option at the grant date by using the
Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in 1999 and 2000,
expected volatility ranging from 45% to 46%; risk-free
interest rates ranging from 4.35% to 6% and expected lives
ranging from 2 to 10 years.
Under the accounting provisions of SFAS 123, the Company's net
income (loss) and income (loss) per share would have changed
to the pro forma amounts indicated below:
Three Months Ended March 31,
-------------------------------
2001 2000
------------- -------------
Net income (loss) applicable to
common stockholders
As reported $ (169,190) $ (437,227)
Pro forma $ (169,190) $ (707,260)
Income (loss) per share - basic
As reported $ (0.02) $ (0.08)
Pro forma $ (0.02) $ (0.12)
Income (loss) per share - diluted
As reported $ (0.02) $ (0.08)
Pro forma $ (0.02) $ (0.12)
Three executive officers of IMX Pharmaceuticals, Inc. received
a total of 24,000 options to purchase shares of common stock
of Medicis Corporation. In March of 2000 the executive
officers assigned the beneficial ownership of these options to
the Company. The options were granted in connection with the
formation of The Exorex Company LLC. The options vest over a
five-year period; twenty percent becoming vested each year.
The exercise price is $24.67. Forty percent has been
exercised. The remainder of the options are held by the
officers as nominees for the benefit of IMX Pharmaceuticals,
Inc.
25
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 18 - STOCK WARRANTS
In connection with a 1996 private placement offering of common
stock, the Company issued 580,000 warrants, each redeemable
for one share of common stock, at any time during a period of
three years, commencing on July 9, 1996 for $5.00 per share.
The warrants may be redeemed by the Company with 30 days prior
notice at a price of ten cents per warrant at any time during
the warrant exercise period, under certain conditions (as
defined). During July 1999, the Company extended the exercise
period one year to July 9, 2000.
In addition, 58,000 warrants, each to purchase one share of
common stock for $3.00 per share, and exercisable for the
three year period ending July 9, 1999, were issued to
placement agents in connection with the 1996 Private
Placement. During July 1997, in connection with a financial
advisory agreement with the placement agents, the exercise
price of the 58,000 warrants was reduced to $2.50 per share,
and the exercise period was extended to February 9, 2001. The
Company recorded approximately $71,000 as deferred consulting
expense for the estimated fair value of warrants which are
being amortized over the two year term of the agreement.
On March 31, 1999, in connection with the Company's 1997
Private Placement of convertible preferred stock (Note 13),
88,160 (76,750 original
shares, plus 11,410 shares issued in lieu of cash as preferred
stock dividends) shares outstanding at March 31, 1999 were
converted into ten shares of common stock and warrants to
purchase ten shares of common stock at any time during the
period ending July 2002 for $6.50 per share. As of March 31,
2001 no warrants to purchase common stock have been exercised.
In addition to warrants issued to investors in the February,
1997 Private Placement, warrants to purchase 7,586.25 shares
of Convertible Preferred Stock were issued to placement and
selling agents with an exercise price of $30 per share, and
are exercisable for the five year period ending July, 2002.
Each share of preferred stock is convertible into 10 shares of
common stock at $3.50 per share and 10 warrants, each warrant
to purchase one share of common stock at $6.50 per share.
Prior to the March 31, 1999 conversion, no warrants to
purchase preferred stock had been exercised.
During July, 1997, in connection with an agreement with a
financial advisor, the Company issued warrants to purchase
50,000 shares of common stock at $4.75
26
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 18 - STOCK WARRANTS (CONT'D)
per share, exercisable prior to July 2002. The Company
recorded approximately $67,000 as deferred consulting expense
for the estimated fair value of the warrants, which is being
amortized over the two year term of the agreement.
In connection with notes payable issued during 1997, as of
December 31, 1998, warrants to purchase 85,120 shares of
common stock have been issued. Also, in connection with
February, 1998 closing of the October, 1997 Private Placement,
warrants to purchase 20,180 shares of common stock were issued
to placement and selling agents. Each of the warrants
mentioned above has an exercise price of $3.50 per share, and
expires five years from the date of issuance. As of December
31, 1998 and 1999, no warrants have been exercised. The
aggregate number of common shares reserved for issuance upon
the exercise of warrants is 354,641 as of March 31, 2001. The
expiration date and exercise prices of the outstanding
warrants are as follows:
Outstanding Expiration Exercise
Warrants Date Price
--------------- ----------------- ----------------
58,000 2001 $ 2.50
132,863 2002 1.75 - 4.75
163,778 2003 1.75 - 3.50
NOTE 19 - NET INCOME (LOSS) PER COMMON SHARE
The following table sets forth the computation of basic and
diluted net loss per common share:
27
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 19 - NET INCOME (LOSS) PER COMMON SHARE (CONT'D)
Three Months Ended
March 30,
--------------------------------
2001 2000
----------- -----------
Numerator:
Numerator for basic and diluted
Loss per share available
to common stockholders $ (169,190) $ (437,227)
----------- -----------
Denominator:
Denominator for basic loss per
share-weighted-average shares 8,132,076 5,802,461
Effect of dilutive securities:
Common stock options 330,748
----------- -----------
Denominator for diluted loss per
share-adjusted weighted average
shares and assumed conversions 8,132,076 6,133,209
----------- -----------
Basic net loss per common share $ (0.02) $ (0.08)
----------- -----------
Diluted net loss per common share $ (0.02) $ (0.07)
----------- -----------
Net loss per common share is calculated by dividing the net
loss by the weighted-average shares of common stock and common
stock equivalents outstanding during the period. Excluded from
the computation of net loss per common share - diluted at
December 31, 2000 and March 31, 2001, were outstanding options
of 520,000 and 515,000 and warrants to purchase of 354,641 and
354,641 shares of common stock respectively, at exercise
prices ranging from $2.50 to $6.50, because to do so would be
anti-dilutive.
NOTE 20- RELATED PARTY TRANSACTIONS
During 2000 and 2001, the Company received advances from
related parties. The balances due to these related parties as
of March 31, 2001 and December 31, 2000 respectively were as
follows:
28
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 20- RELATED PARTY TRANSACTIONS (CONT'D)
Loans Payable Notes Payable
June 30, Payable
------------------ --------------------
Relationship 2001 2000 2001 2000
------------ -------- ------- --------- ---------
Officers $ 53,500 $ 53,500 $ 136,134 $ 101,134
Oficer's sister 0 0 12,500 12,500
-------- -------- ----------- ----------
$ 53,500 $ 53,500 $ 148,634 $ 113,634
======== ======== =========== ==========
NOTE 21 - COMMITMENTS AND CONTINGENCIES
On July 1, 1998, the Company entered into an employment
agreement for a period of three years with William Forster,
the Company's Chairman of the Board, President and Chief
Executive Officer. Mr. Forster is entitled to receive an
annual salary of $225,000 and a bonus based on a percentage of
the Company's sales (as defined).
Effective July 1, and August 1, 1998, the Company entered into
employment agreements with two officers for annual salaries
totaling approximately $205,000, plus discretionary bonuses,
and bonuses upon the sale of the Company's interest in the LLC
(as defined). The term of each agreement is three years.
The Company has entered into a series of product development
agreements with a consultant that provide for compensation to
the consultant in the form of cash, options to purchase shares
of the Company's common stock which vest as products are
developed, royalties based upon net sales of products, a
royalty based upon the sale of the rights to the products
developed, and an interest in any patents granted on products
developed by the consultant to the Company.
Bioglan Pharma PLC and Bioglan Pharma, Inc.
In November 1999, Bioglan Pharma PLC and Bioglan Pharma, Inc.
(collectively, "Bioglan") commenced an arbitration action
against the Company, Medicis and
29
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 21 - COMMITMENTS AND CONTINGENCIES (CONT'D)
the LLC, in which Bioglan claims damages for breach of various
contractual obligations arising out of the sale of the LLC and
the Exorex product line to Bioglan.
Specifically, Bioglan claims that Medicis, the LLC and the
Company breached an Asset Purchase Agreement by transferring
inventories to Bioglan that had a remaining shelf life less
than 12 months and was otherwise unmarketable. The Asset
Purchase Agreement specified that Bioglan was to take title to
all inventories having a shelf life greater than 12 months,
and the Company was to take title to inventories having a
shelf life of 12 months or less. The products were warehoused
together. Management believes that Medicis, under an interim
management agreement with Bioglan, filled Bioglan orders with
the Company's inventories. In addition, the Company has filed
a counterclaim in the arbitration against Bioglan for damages
relating to the conversion of this property.
In the second claim, Bioglan seeks unspecified damages from
the Company, Medicis and the LLC because it claims that the
inventories that it received had not been properly stored and
therefore were unmarketable. Management believes that this
claim does not have any merit. since it was never advised by
the manufacturer, Meyer-Zall, of any requirement for cold
storage for the product. The Company intends to vigorously
defend this matter. However, management cannot assess the
likelihood of an unfavorable outcome, or the range of
potential loss, if any, which might result from this claim.
Dri-Kleen, Inc.
A disputed payable in the approximate amount of $ 1,475,000
has been asserted by Dri-Kleen, Inc. related to the
acquisition of imx-eti. Management believes that this matter
will be resolved as part of the bankruptcy proceedings and the
exact amount of the liability, if any, is indeterminate
therefore no accrual has been made.
Accrued Salaries Payable, Pre-petition
The Bankruptcy Court limits the amount of pre-petition accrued
salaries that may be classified as "not subject to compromise"
to $4,340 per employee (the "Limit"). Any amount due an
employee above this Limit (the "Over Limit Amount") is deemed
a "liability subject to compromise" and will be subject to the
30
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 21 - COMMITMENTS AND CONTINGENCIES (CONT'D)
same settlement terms as the other creditors within this
class. The Over Limit Amount as of March 31, 2001 was $29,791.
The payroll taxes related to the Over Limit Amount are deemed
"liabilities not subject to compromise". The Over Limit Amount
payroll taxes are estimated at $2,979 and are included in the
Accrued payroll taxes, pre-petition of $6,753.
NOTE 22- OTHER RECEIVABLES
Other receivables are as follows:
The $500,000 due from Dri-Kleen Inc. is composed of
approximately $400,000 in loan debt, $30,000 of accrued
interest on the debt and $160,000 of expenses paid by the
Company on behalf of Dri-Kleen, Inc.
March 31, December 31,
2001 2000
--------- ------------
Subject to bankruptcy proceedings:
----------------------------------
Due from Dri-Kleen, Inc. $ 500,000 $ 500,000
Other 1,288 1,703
--------- ---------
Total $ 501,288 $ 501,703
========= =========
NOTE 23- SALES TAX PAYABLE
As of March 31, 2001 Imx-eti Life Partners, Inc. estimated an
unpaid sales tax liability in excess of $195,000. At the Board
of Directors meeting of November 5, 2000 the Board approved a
resolution to indemnify the Company's Officers against any
claim made or successfully asserted against any Company
Officer for any unpaid sales or other tax liability and the
costs of defending against the claim.
31
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 23- SALES TAX PAYABLE (CONT'D)
Additionally the Company resolved that if a claim of personal
tax liability for which indemnification may be sought against
the Company is asserted, the Company Officer shall advise IMX
to that effect and shall thereafter permit IMX to participate
at its sole expense in the negotiation and settlement of that
claim and to join in or assume the defense of any legal action
arising there from with counsel selected by IMX and reasonably
satisfactory to the Company Officer. The Company Officer may
implead IMX in any action that is subject to indemnity.
NOTE 24 - NOTES PAYABLE
Notes payable consist of the following as of December 31,
2000:
PARTIALLY
FULLY SECURED OR
SECURED UNSECURED
------- -----------
Non-interest bearing promissory note payable,
Pure Distributors, Inc. d/b/a Envion
International, payable in 24 monthly installments
of $31,250 principal only $ 0 $ 718,750
Promissory note payable, Wachovia Bank, N.A.,
bearing Interest at 9.5% per annum, payable in 24 monthly
installments of $8,851 principal and interest. 0 175,038
32
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 24 - NOTES PAYABLE (CONT'D)
PARTIALLY
FULLY SECURED OR
SECURED UNSECURED
------- -----------
Non-interest bearing promissory note payable, Dri-Kleen, Inc.
d/b/a Enviro-Tech International, related to the purchase of
inventory. The note is payable as the related inventory is
sold by The Company with the balance due and payable 90 days
from the inception of the note. 0 600,000
Non-interest bearing promissory note payable, Vitaquest
International, Inc. payable in 12 monthly installments of
$6,000 in the first year commencing August 1, 2000, followed
by 12 monthly installments of $7,000 commencing August 1,
2001, then increasing to monthly installments of $8,000.
commencing August 1, 2002 and continuing until the note is
paid in full. All overdue amounts are subject to a 5% penalty. 0 192,000
Promissory note payable, Community First National Bank,
bearing interest at 5% per annum, payable in 24 monthly
installments of $6,250 principal and interest with balloon
payments as follows:
November 2001 $ 75,000
August 2002 $ 250,000
August 2003 $ 132,637
632,637 0
33
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 24 - NOTES PAYABLE (CONT'D)
PARTIALLY
FULLY SECURED OR
SECURED UNSECURED
------- -----------
Non-recourse note payable, Select Benefits, Inc. monthly
installments equal to 15% of sales from a select group of
clients that pre-existed the acquisition date (Note 1) The
note paydown is estimated at $60,000 per year. 0 188,909
Non-interest bearing note payable, Marc Balmuth, with no
stated repayment terms. 0 20,000
Non-interest bearing notes payable, William
Forster, with no stated repayment terms. 97,000 4,134
Non-interest bearing note payable, Jo Ann Forster,
with no stated repayment terms 12,500 0
Non-interest bearing loan payable, Distributors,
with no stated repayment terms 0 4,707
----------------- ----------------
Total Notes and Loans Payable 742,137 1,903,538
Less Current Portion (425,000) (1,350,172)
----------------- -----------------
Non Current Portion $ 317,137 $ 553,366
================= =================
34
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 24 - NOTES PAYABLE (CONT'D)
Notes payable consist of the following as of March 31, 2001:
PARTIALLY
FULLY SECURED OR
SECURED UNSECURED
------- -----------
Non-interest bearing promissory note payable,
Pure Distributors, Inc. d/b/a Envion International,
payable in 24 monthly installments of $31,250
principal only $ 0 $ 718,750
Promissory note payable, Wachovia Bank, N.A.,
bearing Interest at 9.5% per annum, payable in
24 monthly installments of $8,851 principal and interest. 0 175,038
Non-interest bearing promissory note payable,
Dri-Kleen, Inc. d/b/a Enviro-Tech International,
related to the purchase of inventory. The note is
payable as the related inventory is sold by The Company
with the balance due and payable 90 days from the
inception of the note. 0 600,000
35
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 24 - NOTES PAYABLE (CONT'D)
PARTIALLY
FULLY SECURED OR
SECURED UNSECURED
------- -----------
Non-interest bearing promissory note payable, Vitaquest
International, Inc. payable in 12 monthly installments of
$6,000 in the first year commencing August 1, 2000, followed
by 12 monthly installments of $7,000 commencing August 1,
2001, then increasing to monthly installments of $8,000.
commencing August 1, 2002 and continuing until the note is
paid in full. All overdue amounts are subject to a 5% penalty. 0 192,000
Promissory note payable, Community First National Bank,
bearing interest at 5% per annum, payable in 24 monthly
installments of $6,250 principal and interest with balloon
payments as follows:
November 2001 $ 75,000
August 2002 $ 250,000
August 2003 $ 132,637
632,637 0
Non-recourse note payable, Select Benefits, Inc. monthly
installments equal to 15% of sales from a select group of
clients that pre-existed the acquisition date (Note 1) The
note paydown is estimated at $60,000 per year. 0 188,909
36
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2001 and for the three month
periods ended March 31, 2000 and 2001 are unaudited)
NOTE 24 - NOTES PAYABLE (CONT'D)
PARTIALLY
FULLY SECURED OR
SECURED UNSECURED
------- -----------
Non-interest bearing note payable, Marc Balmuth, with no
stated repayment terms. 0 20,000
Non-interest bearing notes payable, William Forster, with
no stated repayment terms. 132,000 4,134
Non-interest bearing note payable, Jo Ann
Forster, with no stated repayment terms 12,500 0
Non-interest bearing loan payable,
Distributors, with no stated repayment terms 0 4,707
--------------- ------------
Total Notes and Loans Payable 777,137 1,903,538
Less Current Portion (425,000) (1,350,172)
--------------- ------------
Non Current Portion $ 352,137 $ 553,366
=============== ============
37
Item 2. Management's Discussion and Analysis or Plan of Operation.
General
The first quarter of 2001 is the first full quarter of operations since
the Company and imx-eti LifePartners, Inc., its wholly owned subsidiary, filed
for protection from their creditors and an opportunity to reorganize under
Chapter 11 of the United States Bankruptcy Act. The Company's other active
subsidiaries, Sarah J, Inc. (d/b/a Mother 2 Be(TM)), Proctozone(TM), Inc.,
Podiatrx(TM), Inc., and IMX Select Benefits Corporation, are not parties to the
bankruptcy proceedings, and maintained minor activity during the period
Prior to the second quarter of last year, IMX was a development company
primarily engaged in the development of lines of health and beauty products that
the company believes will offer superior benefits to consumers. The Mother 2
Be(R), Proctozone(TM), and Podiatrx(TM) lines were launched in 1999 and 2000.
During the second and third quarters of last year, the Company,
embarked upon a series acquisitions designed make it a Multi Level Marketing
company with a large North American Independent Distributor network and a modern
manufacturing, warehousing, and distribution facility for its growing array of
proprietary products.
Unfortunately, delays in the consolidation of the Company's operations
in Boca Raton, Florida and Elbow Lake, Minnesota and failure to secure the
needed $1,500,000 in asset based financing depleted the Company's cash. This,
together with operational difficulties caused by contractual differences with
Envion International at their facility in Nashua, New Hampshire resulted, on
November 20, 2000, in the Company's bankruptcy.
Acquisitions
During the prior year, the Company purchased the Enviro-Tech
Distribution Network, all of Enviro-Tech's inventory of Dri Wash n' Guard(TM)
and nutritional supplement products, and its 45,000 square foot factory,
warehouse, and distribution center in Elbow Lake, Minnesota, all of the stock of
Select Benefits Corporation, and became the exclusive worldwide distributor of
all of Envion International's products.
Enviro-Tech distributed the Dri Wash n' Guard(TM) line of waterless car
and home cleaning products, as well as its proprietary nutritional, vitamin, and
skin care products. Select Benefits provides discount health care memberships
that provide discounts of 10% to 60% for prescription drugs, vision care,
dentistry, chiropractic, hearing, and other health related benefits. Envion's
main products included meal replacement bars and nutritional supplements
marketed under the BioZone(R) and Envitamins(R) names.
Bankruptcy
On November 20, 2000 the Company and its wholly-owned subsidiary,
imx-eti LifePartners, Inc. filed voluntary petitions for relief under Chapter 11
of the United States Bankruptcy Code in the United States Bankruptcy Court for
the Southern District of Florida, West Palm Beach Division. On December 27,
2000, the Bankruptcy Court ordered the joint administration of the two cases.
On August 10, 2001, the Company filed its Third Amended Plan of
Reorganization. The Plan provides, in part, for a one for twenty consolidation
of the Company's existing Common Stock, the payment of cash to the Company's
priority and secured creditors, and the issuance to its unsecured creditors of
one share of common stock for each four ($4) dollars of debt. Under the Plan,
Cater Barnard and Envesta, plc, a related company, will transfer assets valued
at $27,000,000 to the Company in exchange for a package of Company notes,
Company Common Stock valued at four ($4) dollars per share, and shares of a new
class of Preferred Stock convertible into shares of Common Stock at four ($4)
dollars per share. The cash needs of the plan are being funded by the purchase
of approximately 75,000 shares of common stock at four ($4) dollars per share by
Cater Barnard, plc. If additional funds are required for the Plan, Cater Barnard
will purchase shares of the Company's new class of Preferred Stock.
On September 10, 2001, the Bankruptcy Court dismissed imx-eti
LifePartners, Inc.'s Bankruptcy Case.
On September 26, 2001, after a hearing, the Court confirmed the Plan.
The order was entered on October 11, 2001. It is expected that the Plan will be
declared effective during October 2001.
On September 30, 2001, the Company, Cater Barnard, and Envesta executed
an agreement for the transfer of the assets. The closing is anticipated during
October 2001.
Post Bankruptcy Activities
On December 1, 2000 the Company entered into an agreement with
Dri-Kleen Inc. (Dri-Kleen) whereby Dri-Kleen would operate the business of
marketing Dri Wash N' Guard products and other non Dri-Wash products (the
"Operating Agreement"). Dri-Kleen will operate the voice-mail, e-mail and toll
free numbers. The operation of the business also includes payment by Dri-Kleen,
Inc. of all operational expenses including those associated with the Elbow Lake,
Minnesota facility. As remuneration for its services Dri-Kleen will receive
ninety-seven percent of the net sales, defined as retail sales less forty
percent, during the agreement term from all sales generated through its
operation of the Dri Wash N Guard business and the other non Dri-Wash products.
The Company will receive three percent of all net commissionable sales.
During the first quarter, the Company received $17,381 under this
contract.
Results of Operations
For the three months March 31, 2001, consolidated net sales were
approximately $34,000, as compared to $231,000 for the same period ended March
31, 2000. This decrease was primarily due to the reduction of Company activity
after the bankruptcy filing.
Gross profit margin for the three months ended March 31, 2001 was 94%
compared to 65% for the same period ended March 31, 2000. The increased profit
margins appeared because the sales figure includes proceeds received from
Dri-Kleen without any offsetting cost.
Total operating expenses for the three months ended March 31, 2001 were
approximately $213,000. This compares with approximately $833,000 for the same
period last year. The decrease is attributed to personnel and operating
reductions as the Company adjusted to its bankruptcy.
The net loss from operations was approximately $(181,000) for the three
months ended March 31, 2001, compared with $(683,000) for the same period ended
March 31, 2000. Reduction of the overall level of Company activity has reduced
its losses.
Liquidity and Capital Resources
At March 31, 2001, the Company's financial condition included working
capital of approximately $(4,230,000) million as compared to approximately $
(4,100,000) million at December 31, 2000. Net cash used by operating activities
for this quarter was approximately $(49,000), compared with approximately $(1,
260,000) during the three months ended March 31, 2000. The overall lack of
activity in 2001 is due to the operation of the Company primarily as a
debtor-in-possession.
Inflation
Inflation rates in the United States have not had a significant impact
on operating results for the periods presented.
Cautionary Statement Regarding Forward-Looking Statements
Certain statements contained in this item and elsewhere in this report
regarding matters that are not historical facts are forward-looking statements
(as such term is defined in the Private Securities Litigation Reform Act of
1995). Because such forward-looking statements include risks and uncertainties,
actual results may differ materially from those expressed or implied by such
forward-looking statements. All statements that address operating performance,
events or developments that management expects or anticipates to incur in the
future, including statements relating to sales and earnings growth or statements
expressing general optimism about future operating results, are
forward-looking statements. The forward-looking statements are based on
management's current views and assumptions regarding future events and operating
performance. Many factors could cause actual results to differ materially from
estimates contained in management's forward-looking statements. The differences
may be caused by a variety of factors, including but not limited to adverse
economic conditions, competitive pressures, inadequate capital, unexpected
costs, lower revenues and net incomes and forecasts, the possibility of
fluctuation and volatility of the Company's operating results and condition,
inability to carry out marketing and sales plans, and loss of key executives,
among other things.
Part II. Other Information
Items 1, 3,4, 5, and 6 are omitted as they are either not applicable or
have been included in Part I.
Item 2 (c) Recent Sales of Unregistered Securities
On July 19, 2000, fourteen (14) sophisticated investors, including five
(5) members of management purchased an aggregate of 1,300,000 shares of Common
Stock at the purchase price of $.38 per share, and the Company received $494,000
in proceeds. In the transaction, shares of common stock were sold to accredited
investors, affiliates, consultants and employees, which were exempt from the
registration requirements of Section 5 of the Securities Act under Section 4(2)
of the Securities Act. Unfortunately, at the time of this sale, the Company was
circulating materially inaccurate information concerning its sales during the
second quarter. As described in the Company's Amended Report on Form 10-QSB for
the quarter ended June 30, 2000, sales were overstated by approximately $400,000
or almost one-quarter. This material misstatement created a rescission right on
behalf of the purchasing parties. On November 8, 2000 and April 17, 2001, the
Board of Directors voted to rescind the sale and treat the purchasers as
unsecured creditors. All but one has accepted. The declining person holds 15,000
shares for which he paid $5,700.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant has caused this quarterly report on Form 10-QSB to be
signed in its behalf by the undersigned thereunto duly authorized on the 30th
day of September 2001.
IMX PHARMACEUTICALS, INC
By: /s/ Leonard F. Kaplan
---------------------------------------------
Leonard F. Kaplan, Chief Financial Officer