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 June 30, 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 June
30, 2001 (unaudited)
4 Consolidated Statements of Operations for the Six Months Ended June 30,
2001 (unaudited) and June 30, 2000 (unaudited) and Three Months Ended
June 30, 2001 (unaudited) and June 30, 2000 (unaudited)
5 Consolidated Statements of Changes In Stockholders' Equity
6 Consolidated Statements of Cash Flows for the Six Months Ended June 30,
2001 (unaudited) and June 30, 2000 (unaudited) and Three Months Ended
June 30, 2001 (unaudited) and June 30, 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)
June 30, December 31,
2001 2000
----------- ------------
CURRENT ASSETS:
Not Subject to Bankruptcy Proceedings:
Cash and cash equivalents $ 4,667 $ 10,414
Accounts receivable (net of allowance for
doubtful accounts of $50,000 and $50,000) 4,269 10,510
------------ ------------
Current Assets, Not Subject
to bankruptcy proceedings 8,936 20,924
------------ ------------
Subject to Bankruptcy Proceedings:
Cash and cash equivalents 7,485 9,216
Securities available for sale 0 1,828
Other receivables 501,727 501,703
Prepaid expenses and other 18,583 18,583
------------ ------------
Current Assets, Subject
to bankruptcy proceedings 527,795 531,330
------------ ------------
Total Current Assets 536,731 552,254
------------ ------------
PROPERTY AND EQUIPMENT:
Subject to Bankruptcy Proceedings:
Building and Land, (net of accumulated
depreciation of $15,437 and $ 9,989) 979,114 990,011
------------ ------------
Total Property and Equipment 979,114 990,011
------------ ------------
OTHER ASSETS:
Not Subject to Bankruptcy Proceedings:
Inventories in excess of amounts expected
to be sold currently 106,380 110,000
------------ ------------
Total Other Assets, Not Subject
to bankruptcy proceedings 106,380 110,000
------------ ------------
Subject to Bankruptcy Proceedings:
Deposits and other 4,919 6,144
------------ ------------
Total Other Assets, Subject
to bankruptcy proceedings 4,919 6,144
------------ ------------
Total Other Assets 111,299 116,144
------------ ------------
TOTAL ASSETS $ 1,627,144 $ 1,658,409
============ ============
See accompanying notes to the consolidated financial statements.
1
IMX PHARMACEUTICALS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES
(Unaudited) (Audited)
June 30, December 31,
2001 2000
----------- ------------
CURRENT LIABILITIES:
Not Subject to Bankruptcy Proceedings:
Accounts payable $ 146,490 $ 136,299
Accrued expenses and other current
liabilities 459 2,523
Commissions payable 1,229 1,113
Sales tax payable 1,593 1,648
------------ ------------
Current Liabilities, Not Subject
to Bankruptcy Proceedings 149,771 141,583
Subject to Bankruptcy Proceedings:
Not Subject to Compromise
Current portion of fully secured long term notes 425,000 425,000
Postpetition trade accounts payable 54,008 14,183
Accrued salaries payable - Pre-petition 73,746 73,746
Accrued salaries payable - Post-petition 104,334 19,667
Accrued payroll taxes - Pre-petition 6,753 6,753
Accrued payroll taxes - Post-petition 10,433 1,967
Sales tax payable 193,792 193,792
------------ ------------
Current Liabilities, Not Subject
to Compromise 868,066 735,108
------------ ------------
Subject to Compromise
Current portion of unsecured long term notes
payable 1,350,172 1,350,172
Prepetition trade accounts payable 1,572,001 1,572,001
Accrued prepetion expenses 34,279 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 256,592 277,425
------------ ------------
Current Liabilities, subject to compromise 3,784,635 3,805,468
------------ ------------
Total Current Liabilities 4,802,472 4,682,159
LONG-TERM LIABILITIES:
Not Subject to Bankruptcy Proceedings:
Officer's notes payable 71,198 30,000
------------ ------------
Long-Term Liabilities, not subject
to bankruptcy proceedings 71,198 30,000
------------ ------------
Subject to Bankruptcy Proceedings:
Not Subject to Compromise
Fully secured long-term notes,
less current portion 287,137 287,137
------------ ------------
Subject to Compromise
Unsecured long term notes payable,
less current portion 552,988 553,366
------------ ------------
Total Long-Term Liabilities 911,323 870,503
------------ ------------
TOTAL LIABILITIES $ 5,713,795 $ 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)
June 30, 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) (14,016,982) (13,815,440)
Treasury stock, at cost - 4,766,446 and
4,766,446 shares (578,054) (578,054)
Accumulated other comprehensive income (loss) 0 (9,144)
--------------- ---------------
Total Stockholders' Equity (Deficiency) (4,086,651) (3,894,253)
--------------- ---------------
STOCKHOLDERS' EQUITY (DEFICIENCY) $ 1,627,144 $ 1,658,409
=============== ===============
See accompanying notes to the consolidated financial statements.
3
IMX PHARMACEUTICALS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited) (Unaudited)
Six Months Ended Three Months
June 30, June 30,
-------------------- --------------------
2001 2000 2001 2000
------------- --------------- ------------- --------------
NET SALES $ 67,289 $ 1,525,311 $ 33,441 $ 1,293,965
COST OF SALES 5,174 520,972 3,069 439,471
------------- --------------- ------------- --------------
GROSS PROFIT 62,115 1,004,339 30,372 854,494
------------- --------------- ------------- --------------
OPERATING EXPENSES:
Selling 56,800 1,283,981 5,128 891,677
Advertising 620 48,132 - 15,602
General and administrative 206,579 1,076,299 51,691 686,662
Depreciation and amortization 10,897 31,883 5,309 13,789
------------- --------------- ------------- --------------
Total Operating Expenses 274,896 2,440,295 62,128 1,607,730
------------- --------------- ------------- --------------
LOSS FROM OPERATIONS (212,781) (1,435,956) (31,756) (753,236)
------------- --------------- ------------- --------------
OTHER INCOME (EXPENSES):
Medicis inventory recovery gain 180,162 180,162
Other 11,239 49,447 (596) (196,046)
------------- --------------- ------------- --------------
Total Other Income (Expenses) 0 49,447 (596) (15,884)
------------- --------------- ------------- --------------
Loss before income taxes (201,542) (1,206,347) (32,352) (769,120)
Provision for Income Taxes 0 0 0 0
------------- --------------- ------------- --------------
Net loss available to common stockholders $(201,542) $ (1,206,347) $ (32,352) $(769,120)
============= =============== ============= ==============
Weighted average number of shares of common
stock outstanding:
Basic 8,132,076 5,811,252 8,132,076 5,820,043
Diluted 8,132,076 6,142,000 8,132,076 6,150,791
Net loss per common share:
Basic $ (0.02) $ (0.21) $ (0.00) $ (0.13)
Diluted $ (0.02) $ (0.20) $ (0.00) $ (0.13)
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
Change in unrealized gain (loss)
on securities available-for-sale
Net loss for the six months
ended June 30, 2001
------ ----- ---------- ----------- ------------
Balance - June 30, 2001 0 $ 0 12,898,522 $ 12,898 $10,495,487
====== ===== ========== =========== ============
TREASURY STOCK ACCUMULATED TOTAL
--------------------- OTHER STOCKHOLDERS'
NUMBER OF COMPREHENSIVE EQUITY
(DEFICIT) SHARES AMOUNT INCOME (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)
Change in unrealized gain (loss)
on securities available-for-sale 9,144 9,144
Net loss for the six months
ended June 30, 2001 (201,542) (201,542)
------------- --------- --------- ------- ------------
Balance - June 30, 2001 $(14,016,982) 4,766,446 $(578,054) $ 0 $(4,086,651)
============= ========= ========== ======= ============
See accompanying notes to the consolidated financial statements.
5
IMX PHARMACEUTICALS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
----------------------------------- ---------------------------------
2001 2000 2001 2000
------------- ------------------ --------------- --------------
OPERATING ACTIVITIES:
Net loss $ (201,542) $ (1,206,347) $ (32,352) $ (769,120)
Adjustments to reconcile net loss to net cash (used)
provided by operating activities:
Depreciation and amortization 10,897 31,206 5,449 13,112
Loss on securities transactions 7,461 7,461 -
Provision for doubtful accounts (24,324) 1,570
Changes in assets and liabilities: -
Decrease in accounts receivable 6,241 54,767 (1,145) 295,838
Increase in other receivable (24) (439)
Decrease (increase) in inventories 3,620 (806,415) 1,662 (653,380)
(Increase) in prepaid expenses (506) 17,540
Decrease (increase) in deposits 1,225 (1,320,000) 1,225 (970,000)
Decrease (increase) in other assets (45,000) (35,000)
(Decrease) increase in accounts payable
and accrued expenses 120,313 265,438 15,736 311,178
----------- ------------- ---------- -----------
Net cash (used) provided by operating activities (51,809) (3,051,181) (2,403) (1,788,262)
----------- ------------- ---------- -----------
Investing Activities:
Purchase of furniture and equipment 0 (85,263) - (68,872)
Proceeds from sale of securities available-for-sale 3,511 2,194 3,511 2,194
Net proceeds from (repayment) of loans to related party 41,198 1,028 41,198 (558)
Goodwill purchased (264,303) - (264,303)
Decrease in investment in securities 8,730 - 8,730
----------- ------------- ---------- -----------
Net cash (used) provided by investing activities 44,709 (337,614) 44,709 (322,809)
----------- ------------- ---------- -----------
Financing Activities:
Net proceeds from (repayments of) notes payable (378) 938,504 (378) 939,303
Net proceeds from (repayments of) loans payable
Stock issuance to purchase goodwill 75,000 - 75,000
----------- ------------- ---------- -----------
Net cash (used) provided by financing activities (378) 1,013,504 (35,378) 1,014,303
----------- ------------- ---------- -----------
Net increase (decrease) in cash and cash equivalents (7,478) (2,375,291) 6,928 (1,096,768)
Cash and cash equivalents - beginning of period 19,630 2,497,791 5,224 1,219,268
----------- ------------- ---------- -----------
Cash and cash equivalents - end of period $ 12,152 $ 122,500 $ 12,152 $ 122,500
=========== ============= ========== ===========
SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION
Cash paid for interest $0 $7,843 $166
Cash paid for income taxes $0 $0 $0 $0
See accompanying notes to the consolidated financial statements.
6
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 2001 and for the six month
periods ended June 30, 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
six months ended June 30, 2001. As of June 30, 2001 the Company's
current liabilities exceeded its current assets by $4,265,741 and
its total liabilities exceeded its total assets by $4,086,651.
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
7
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 2 - ORGANIZATION AND CAPITALIZATION (CONT'D)
Corporation ("Medicis") to form a joint venture, Medicis Consumer
Products 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
8
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 2 - ORGANIZATION AND CAPITALIZATION (CONT'D)
Benefits Corporation. 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. 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
9
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 2 - ORGANIZATION AND CAPITALIZATION (CONT'D)
at an annualized rate of 12%.
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
10
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 2 - ORGANIZATION AND CAPITALIZATION (CONT'D)
Select Benefits are not a party to the bankruptcy proceedings.
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 849,342 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.
11
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 2 - ORGANIZATION AND CAPITALIZATION (CONT'D)
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.
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.
NOTE 3 - SUBSEQUENT EVENT
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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The accompanying unaudited consolidated financial statements as
of June 30, 2001 and for the six and three month periods ended
June 30, 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
six and three-month periods ended June 30, 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.
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
June 30, 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.
Revenue Recognition
Sales are generally recorded upon the shipment of goods to
customers.
13
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
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.
Convertible preferred stock, certain common stock options and
common stock
14
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
warrants were excluded from the computations of net loss per
share for the periods ended December 31, 2000 and June 30, 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 June 30, 2001 and for the six month
periods ended June 30, 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 June 30, 2001 and for the six month
periods ended June 30, 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
June 30, 2001, the cost basis of $10,972 and $ 0 of the common
stock in Hydron exceeded the market value by $9,144 and $ 0
respectively.
NOTE 7 - INVENTORIES
Inventories consisted of the following:
June 30 December 31
2001 2000
-------------- --------------
Other Assets Current Assets
-------------- --------------
Finished goods $ 90,644 $ 94,264
Packaging supplies 15,736 15,736
--------- --------
Total $ 106,380 $ 110,000
========= =========
NOTE 8 - INVENTORY HELD AS NONCURRENT ASSET
As of June 30, 2001 the Company held inventory of $ 106,380 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.
17
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 9 - SUBSTANTIAL LOSSES FROM APPLICATION OF LOWER OF COST OR
MARKET RULE (CONT'D)
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.
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 June 30,2001
------------------------- --------------------- --------------------- ------------------
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 96,380
Proctozone, Inc. 80,390 5,000 5,000
Podiatrx, Inc. 119,518 5,000 5,000
Select Benefits Inc. -
--------------------- --------------------- ------------------
$ 653,900 $ 110,000 106,380
===================== ===================== ==================
NOTE 10 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
June 30, 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 (20,886) (9,989)
------------ -------------
Property and equipment, net of
accumulated depreciation $ 979,114 $ 990,011
============ ============
18
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 2001 and for the six month
periods ended June 30, 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 an Furniture and Leasehold Other
Company: Totals equipment fixtures Imprvements Land Buildings assets
---------------------------- ------------ -------------- ---------------- ----------- -------- --------- ----------
IMX Pharmaceuticals, inc $ 296,071 $ 219,937 $ 54,533 $ 21,601 $ 0 $ 0 $ 0
imx-eti Life Partners, Inc. 1,818,157 780,862 7,114 0 150,000 850,000 30,181
Sarah J., Inc. 125,072 106,688 0 0 0 0 18,384
Proctozone, Inc. 0 0 0 0 0 0 0
Podiatrx, Inc. 8,319 0 0 0 0 0 8,319
Select Benefits, Inc. 0 0 0 0 0 0 0
----------- ----------- ---------- --------- --------- ---------- ----------
Totals 2,247,619 1,107,487 61,647 21,601 150,000 850,000 56,884
Less: Accumulated
depreciation through
December 31, 2000 (363,875) (268,353) (35,292) (18,314) 0 (9,989) (31,927)
----------- ----------- ---------- --------- --------- ---------- ----------
Net book value 1,883,744 839,134 26,355 3,287 150,000 840,011 24,957
Less: Valuation allowance (893,733) (839,134) (26,355) (3,287) 0 0 (24,957)
----------- ----------- ---------- --------- --------- ---------- ----------
Net relizable value
at December 31, 2000 990,011 0 0 0 150,000 840,011 0
Less: Accumulated depreciation
for the six months ended
June 30, 2001 10,897 0 0 0 0 10,897 0
----------- ----------- ---------- --------- --------- ---------- ----------
Net relizable value
at June 30, 2001 $ 979,114 $ -- $ -- $ -- $ 150,000 $ 829,114 $ --
=========== =========== ========== ========= ========= ========== ==========
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:
These assets have been taken out of service and are expected to
provide no further economic benefits.
19
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 12 - IMPAIRMENT OF ASSETS HELD AND USED (CONT'D)
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 13 - 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 June 30, 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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 14 - 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 15 - 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 16 - INCOME TAXES
The provision for income taxes in the consolidated statements of
operations is as follows:
June 30, June 30,
------------ ------------
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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 16 - 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:
June 30, 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:
June 30, 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 11,295,000 11,093,000
----------------- ---------------
0
11,295,000 11,093,000
Less: valuation allowance (11,295,000) (11,093,000)
----------------- ---------------
Total net deferred tax asset $ 0 $ 0
================= ===============
22
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 16 - INCOME TAXES (CONT'D)
At June 30, 2001, the Company had net operating loss
carryforwards of approximately $ 11,295,000 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 17 - 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 June 30, 2001, the Company had reserved
874,641 and 869,641 shares of common stock respectively for
issuance relating to unexpired options and warrants.
NOTE 18 - 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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 18 - STOCK OPTIONS (CONT'D)
A summary of the Company's stock option activity is as follows:
Three months ended Year ended
June 30, 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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 18 - 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:
Six Months Three Months
Ended June 30, Ended June 30,
----------------------------- --------------------------
2001 2000 2001 2000
--------- --------- --------- --------
Net income (loss) applicable to
common stockholders
As reported $ (201,542) $ (1,206,347) $ (32,352) $ (769,120)
Pro forma $ (201,542) $ (1,476,347) $ (32,352) (1,068,569)
Income (loss) per share - basic
As reported $ (0.02) $ (0.21) $ (0.00) $ (0.13)
Pro forma $ (0.02) $ (0.25) $ (0.00) $ (0.18)
Income (loss) per share - diluted
As reported $ (0.02) $ (0.20) $ (0.00) $ (0.13)
Pro forma $ (0.02) $ (0.24) $ (0.00) $ (0.17)
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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 19 - 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
June 30, 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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 19 - 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 June 30, 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 20 - 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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 20 - NET INCOME (LOSS) PER COMMON SHARE (CONT'D)
Six Months Ended Three Months Ended
June 30, June 30,
------------------------------- ----------------------------
2001 2000 2001 2000
---------- ------------ ------------ ---------
Numerator:
Numerator for basic and diluted
Loss per share available
to common stockholders $ (201,542) $(1,206,347) $ (32,352) $(769,120)
Denominator:
Denominator for basic loss per
share-weighted-average shares 8,132,076 5,811,252 8,132,076 5,811,252
Effect of dilutive securities:
Common stock options 330,748 330,748
Denominator for diluted loss per
share-adjusted weighted average
shares and assumed conversions 8,132,076 6,142,000 8,132,076 6,142,000
Basic net loss per common share $ (0.02) $ (0.21) $ (0.00) $ (0.13)
Diluted net loss per common share $ (0.02) $ (0.20) $ (0.00) $ (0.13)
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 June 30,
2001, were outstanding options of 515,000 and warrants to
purchase of 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 21 - RELATED PARTY TRANSACTIONS
During 2000 and 2001, the Company received advances from related
parties. The balances due to these related parties as of June 30,
2001 and December 31, 2000 respectively were as follows:
28
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 21 - RELATED PARTY TRANSACTIONS (CONT'D)
Loans Payable Notes Payable
June 30, June 30,
---------------------- -----------------------
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 22 - 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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 22 - 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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 22 - COMMITMENTS AND CONTINGENCIES (CONT'D)
same settlement terms as the other creditors within this class.
The Over Limit Amount as of June 30, 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 23 - 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.
June 30, 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 24 - SALES TAX PAYABLE
As of June 30, 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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 24 - 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 25 - 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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 25 - 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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 25 - 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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 25 - NOTES PAYABLE (CONT'D)
Notes payable consist of the following as of June 30, 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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 25 - 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 June 30, 2001 and for the six month
periods ended June 30, 2000 and 2001 are unaudited)
NOTE 25 - 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
============= ============
Item 2. Management's Discussion and Analysis or Plan of Operation.
General
The second quarter of 2001 saw continued operations of the Company and
imx-eti LifePartners, Inc., its wholly owned subsidiary, under court
supervision. The Company's other subsidiaries, Sarah J, Inc. (d/b/a Mother 2
Be(TM)), Proctozone(TM), Inc., Podiatrx(TM), Inc., and IMX Select Benefits
Corporation, which are not parties to the bankruptcy proceedings, 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 this quarter, the Company received $ 28,028 under this contract,
for a total of $ 47,839 from its inception to June 30, 2001.
Results of Operations
For the three months and six months ended June 30, 2001, consolidated
net sales were approximately $33,000 and $67,000, as compared to about
$1,294,000 and $1,525,000, for the same periods ended June 30, 2000. This
decrease was entirely due to the almost total cessation of sales activities
after the Company's bankruptcy filing.
Gross profit margin for the three and six months ended June 30, 2001
was 91 % compared to 66 % for the same periods ended June 30, 2000. The high
margins are primarily attributable to the sales figure's inclusion of proceeds
received from Dri-Kleen without any offsetting cost.
Total operating expenses were approximately $62,000 and $275,000 for
the three and six months ended June 30, 2001. This compares with $1,608,000 and
$2,440,000 for the same periods ended June 30, 2000. The continuing decrease is
attributed to personnel and operating reductions as the Company adjusts to its
bankruptcy.
For the three months and six months ended June 30, 2000, the net loss
from operations was approximately $(32,000) and $(213,000) for the periods ended
June 30, 2001, as compared to $(753,000) and $(1,436,000) for the same periods
ended June 30, 2000. The almost complete cessation of Company activity has
substantially controlled its losses.
Liquidity and Capital Resources
At June 30, 2001, the Company's financial condition included a
working capital deficit of approximately $(4,240,000) million as compared to
approximately $(4,104,000) million at December 31, 2000.
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