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, 2002.
/ / 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)
Suite 2902, 140 Broadway, New York, New York 10005
- ------------------------------------------------------------ -----------
(Address of Principal Executive Offices) (Zip Code)
212.509.9500
- --------------------------------------------------------------------------------
(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 /X/ No / /
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
At May 10, 2002 there were 6,181,813 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
1-2 Condensed Consolidated Balance Sheets as of June 30, 2001
(audited) and March 31, 2002 (unaudited)
3 Condensed Consolidated Statements of Operations for the Nine
Months Ended March 31, 2002 (unaudited) and March 31, 2001
(unaudited) and Three Months Ended March 31, 2002 (unaudited)
and March 31, 2001 (unaudited)
4 Condensed Consolidated Statements of Cash Flows for the Nine
Months Ended March 31, 2002 (unaudited)
5-20 Notes to Consolidated Financial Statements (unaudited)
21-26 Item 2. Management's Discussion and Analysis or Plan of
Operation
26 Item 5. Election of New Director
Part II. Other Information
27-28 Item 2(c). Recent Sales of Unregistered Securities
29 Item 6. Exhibits and Reports on Form 8-K
IMX PHARMACEUTICALS, INC.
AND SUBSIDIARY
BALANCE SHEETS
CONDENSED
CONSOLIDATED FINDSTAR PLC
MARCH 31, 2002 JUNE 30, 2001
--------------- ---------------
(UNAUDITED) (AUDITED)
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 154,803 $ 13,227
Accounts receivable 330,077 132,286
Other receivables 15,227 0
Inventories 13,153 15,926
Prepaid expenses 61,478 37,914
--------------- ---------------
Total Current Assets 574,738 199,353
--------------- ---------------
PROPERTY AND EQUIPMENT - Net
of accumulated depreciation 324,419 103,434
--------------- ---------------
OTHER ASSETS:
Note receivable, Shalom Y'all 100,000
Web design 80,457
Indemnification agreement 50,000
Security deposits 15,457
Goodwill 929,010 1,117,791
--------------- ---------------
Total Other Assets 1,174,924 1,117,791
--------------- ---------------
TOTAL ASSETS $ 2,074,081 $ 1,420,578
=============== ===============
See accompanying notes to the consolidated financial statements.
1
IMX PHARMACEUTICALS, INC.
AND SUBSIDIARY
BALANCE SHEETS
CONDENSED
CONSOLIDATED FINDSTAR PLC
MARCH 31, 2002 JUNE 30, 2001
--------------- ---------------
(UNAUDITED) (AUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Deferred revenues $ 380,536 $ 0
Note payable 514,000 0
Bankruptcy settlement and fees payable 128,333 0
Accounts payable 1,225,978 341,456
Accrued expenses 744,280 992,662
--------------- ---------------
Total Current Liabilities 2,993,127 1,334,118
--------------- ---------------
LONG TERM LIABILITIES:
Promissory notes payable 1,626,360 0
Due to affiliate 929,100 382,270
Loans payable 1,044,000 0
--------------- ---------------
Total Long Term Liabilities 3,599,460 382,270
--------------- ---------------
Total Liabilities 6,592,587 1,716,388
--------------- ---------------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $80 stated value cumulative convertible; 1,000,000 shares
authorized, 223,821 shares issued and outstanding 5,592,730 0
Common stock, $.001 par value; 50,000,000 shares authorized,
5,771,819 issued and outstanding 5,772 432,734
Additional paid-in capital 15,734,703 0
Retained earnings (deficit) (25,273,657) (728,544)
Less treasury stock, at cost (578,054) 0
--------------- ---------------
Total Stockholders' Equity (Deficit) (4,518,506) (295,810)
--------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 2,074,081 $ 1,420,578
=============== ===============
See accompanying notes to the consolidated financial statements.
2
IMX PHARMACEUTICALS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited) (Unaudited)
Nine Months Ended Three Months
March 31, March 31,
----------------------------------- -----------------------------------
2002 2001 2002 2001
--------------- --------------- --------------- ---------------
NET SALES $ 2,503,776 $ 957,796 $ 997,777 $ 360,850
COST OF SALES 1,369,115 518,889 546,672 $ 216,220
--------------- --------------- --------------- ---------------
GROSS PROFIT 1,134,661 438,907 451,105 144,630
--------------- --------------- --------------- ---------------
OPERATING EXPENSES:
Selling 937,077 1,039,739 310,480 517,842
Advertising 88,230 549,794 25,092 710
General and administrative 3,462,200 3,442,422 1,076,265 1,387,354
Depreciation and amortization 241,742 398,526 72,387 112,362
--------------- --------------- --------------- ---------------
Total Operating Expenses 4,729,249 5,430,481 1,484,224 2,018,268
--------------- --------------- --------------- ---------------
LOSS FROM OPERATIONS (3,594,588) (4,991,574) (1,033,119) (1,873,638)
--------------- --------------- --------------- ---------------
OTHER INCOME (EXPENSES):
Exercise of Medicis options 386,514 0 240,307 --
Inventory write down 0 0 0 --
Other income 365,503 158,647 356,328 --
Other expense 0 (82,107) (6,827) (846)
Interest expense (43,460) 0 (33,202) --
--------------- --------------- --------------- ---------------
708,557 76,540 556,606 (846)
--------------- --------------- --------------- ---------------
Loss before income taxes (2,886,031) (4,915,034) (476,513) (1,874,484)
Provision for Income Taxes 0 0 0 --
--------------- --------------- --------------- ---------------
Loss from operations (2,886,031) (4,915,034) (476,513) (1,874,484)
Loss on disposal of discontinued divisions (6,385,090) 0 0 0
--------------- --------------- --------------- ---------------
Net loss available to
common stockholders (9,271,121) (4,915,034) (476,513) (1,874,484)
Other Comprehensive Income (Loss) 3,283 0 206 0
--------------- --------------- --------------- ---------------
Comprehensive Loss $ (9,267,838) $ (4,915,034) $ (476,719) $ (1,874,484)
=============== =============== =============== ===============
=================================================================================================================================
Weighted average number of shares of
common stock outstanding:
Basic 4,215,554 N/A 5,088,671 N/A
Diluted 4,312,973 N/A 5,385,257 N/A
=================================================================================================================================
Net loss per common share:
Basic $ (2.20) N/A $ (0.09) N/A
Diluted $ (2.15) N/A $ (0.09) N/A
=================================================================================================================================
See accompanying notes to the consolidated financial statements.
3
IMX PHARMACEUTICALS, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED
MARCH 31, 2002
OPERATING ACTIVITIES:
Loss from operations $ (9,267,838)
Adjustments to reconcile net loss
to net cash (used) provided by operating activities
Depreciation and amortization 392,773
Increase in accounts receivable (98,182)
Increase in other receivables (3,807)
Decrease in inventories 2,773
Decrease in prepaid expenses 7,355
Decrease in goodwill 188,781
Decrease in bank overdrafts (66,755)
Increase in bankruptcy settlement and fees payable 128,333
Increase in deferred revenues 163,475
Increase in notes payable 1,626,360
Increase in accounts payable 638,610
Increase in security deposits (1,000)
Increase in due to affiliate (382,270)
Decrease in accrued expenses (248,282)
---------------
Net cash used by operating activities (6,919,674)
---------------
INVESTING ACTIVITES:
Investment in web design (80,457)
Purchase of indemnification agreement (50,000)
---------------
Net cash used by financing activities (130,457)
---------------
NON CASH ADJUSTMENTS:
Loss on impairment of fixed assets 133,193
Note receivable received in exchange for sale of subsidiaries (100,000)
Convertible promissory note received in exchange for purchase of subsidiary (4,400,000)
Increase in other notes payable (514,000)
Promissory note payable issued in connection with purchase of subsidiary 1,044,000
Issuance of preferred stock in connection with purchase of subsidiary 5,581,679
Common stock adjustment in connection with reverse stock split (429,772)
Additional paid in capital of parent prior to consolidation 7,595,789
Retained earnings of parent prior to consolidation (1,868,707)
Treasury stock of parent prior to consolidation (578,054)
---------------
Net non cash adjustments 6,464,128
---------------
Net decrease in cash and cash equivalents (586,003)
Cash and cash equivalents - July 1, 2001 740,806
---------------
Cash and cash equivalents - March 31, 2002 $ 154,803
===============
See accompanying notes to the consolidated financial statements.
4
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTE 1- BASIS OF PRESENTATION
The condensed consolidated financial statements have been prepared by
IMX Pharmaceuticals, Inc.
The condensed consolidated balance sheet as of March 31, 2002 include
the accounts of the Company and its subsidiaries Findstar, plc,
ThinkDirectMarketing, Inc., DirectMailQuotes, LLC. The condensed
balance sheet as of June 30, 2001 includes the accounts of only the
subsidiary, Findstar plc. The condensed consolidated statement of
operations for the nine and three months ended March 31, 2002 and 2001
include the accounts of the Company and its subsidiaries. The condensed
and consolidated statement of cash flows for the nine months ended
March 31, 2002 includes the accounts of the subsidiaries at the start
of the nine months ended March 31, 2002 reconciled to the consolidated
accounts at the end of the nine month ended March 31, 2002.
All significant intercompany balances and transactions have been
eliminated in consolidation.
In the opinion of management, all adjustments (which include
reclassifications and normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash
flows at March 31, 2002 and for all periods presented, have been made.
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the
Company's financial statements and notes thereto included in the
Company's December 31, 2000 Form 10KSB and the subsidiaries Financial
Statements included in the previously filed Form 8-Ks. The results of
operations for the nine and three month periods ended March 31, 2002
are not necessarily indicative of the operating results for the full
year.
5
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTE 2 - BANKRUPTCY AND PLAN FOR REORGANIZATION
The Company's plan of reorganization became effective December 11,
2001. Since that time the Company has continued to distribute its new
common stock to its creditors.
NOTE 3 - STOCK ISSUANCES AND CONSOLIDATIONS
On December 11, 2001, pursuant to the Acquisition Agreement, the
Company issued 225,000 shares of its new Class B Preferred Stock and
1,500,000 shares of its post consolidation Common Stock. The
transaction, in which the purchasers of the shares represented that the
shares were being acquired for investment and not for distribution, is
exempt from the registration requirements of Section 5 of the
Securities Act under Section 4(2) of the Securities Act because it did
not involve a public distribution of the Company's securities.
At the closing of the Acquisition Agreement, the Company also issued an
additional 877,500 shares of the Company's post consolidation Common
Stock and a five year warrant to purchase an additional 675,000 shares
of IMX's post consolidation Common Stock at $4.00 per share to Cater
Barnard and Cater Barnard (USA) plc as designees of Griffin Securities,
Inc. ("Griffin"). The securities, which are to be issued in payment for
Griffin's services in connection with the acquisition, will be acquired
for investment and not as part of a distribution. Therefore, this
issuance is exempt from the registration requirements of Section 5 of
the Securities Act under Section 4(2) of the Securities Act as not
involving a public distribution of the Company's securities
Pursuant to the Plan, Cater Barnard will purchase of approximately
75,000 shares of common stock at four ($4) dollars per share to provide
the initial cash necessary to fund the Plan. As of March 31, 2002,
Cater Barnard had invested an additional $224,800 dollars and been
issued 2,810 shares of the Class B Preferred Stock. Both securities
will be purchased for investment and not for distribution and are
therefore exempt from the registration requirements of Section 5 of the
Securities Act under Section 4(2) of the Securities Act as sales not
involving the public distribution of securities.
Pursuant to the Forster Agreement, William A. Forster received 95,000
shares of the Company's post consolidation Common Stock in settlement
of his claim for administration expenses. This issuance is exempt from
registration because Mr. Forster has acquired these shares for
investment and not for distribution and the transaction is therefore
exempt from the registration requirements of Section 5 of the
Securities Act
6
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTE 3 - STOCK ISSUANCES AND CONSOLIDATIONS (CONT'D)
under Section 4(2) of the Securities Act as sales not involving the
public distribution of securities and may also be eligible for
exemption under Section 1145 of the Bankruptcy Act.
Subsequent to March 31, 2002, the Company issued 81,010 shares of its
Class B Preferred Stock to acquire the remainder of the equity
interests of TDMI. The transaction, in which the purchasers of the
shares represented that the shares were being acquired for investment
and not for distribution, is exempt from the registration requirements
of Section 5 of the Securities Act under Section 4(2) of the Securities
Act because it did not involve a public distribution of the Company's
securities.
Finally, on January 31, 2002 Envesta elected, with the consent of the
Company, to convert its 85,000 shares of Class B Preferred Stock and
its note from the Company for $1,133,333 in to 1,983,333 shares of
Common Stock. Like the Class B Preferred Stock and the Note, these
securities were acquired by Envesta for investment and not with a view
towards distribution. Therefore, the transaction is exempt from the
registration requirements of Section 5 of the Securities Act under
Section 4(2) of the Securities Act as sales not involving the public
distribution of securities.
On April 30, 2002, the Board approved three consulting contracts
providing for the issuance of 5,000, 5,000, and 100,000 shares of the
Company's Common Sock as additional compensation for the consultants.
In addition, one consultant was granted the right to purchase up to
10,000 additional shares at $1.00 per share and a second was granted
the right to purchase up to 200,000 shares at $0.50 per share. None of
these rights has been exercised. At the same time, the Board approved
the issuance of 200,000 shares of its Common Stock to Hornblower and
Weeks Financial Corporation ("Hornblower") for advisory services. The
consultants and the advisor acquired all of these shares for their
investment and not for distribution. Therefore, these issuances are
exempt from the registration requirements of Section 5 of the
Securities Act under Section 4(2) of the Securities Act because they
did not involve public distribution of the Company's securities.
Also on April 30, 2002, the Board authorized Hornblower to sell, on the
Company's behalf, up to 1,000,000 shares in transactions not involving
a public distribution. During the first part of May, the Company,
through Hornblower, sold 150,000 shares of its Common Stock to a total
of six investors. Hornblower will be paid a commission of 10% of the
net proceeds of this sale. These investors stated in writing that they
were accredited investors and that they had purchased the Common Stock
for investment and not for
7
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTE 3 - STOCK ISSUANCES AND CONSOLIDATIONS (CONT'D)
distribution pursuant to an exemption from the registration
requirements of Section 5 of the Securities Act under Section 4(2) of
the Securities Act. Therefore, this transaction did not involve a
public distribution of the Company's securities.
Related Parties:
Related parties to the above transaction are:
Adrian Stecyk who is a director of Cater Barnard, TDMI, and a
principal of Griffin Securities.
Stephen Dean who is a director and chairman of Cater Barnard and a
Non-executive chairman of Envesta.
Peter Holmes who is a director of Cater Barnard and Finance Director of
Envesta.
VoyagerFinancial News. plc which has an eighty percent (80%) ownership
interest in Griffin Securities.
Cater Barnard plc., which has a forty-five percent (45%) ownership
interest in VoyagerFinancial.plc.
Note 4 - GOING CONCERN
The Company's operations are presently those of its subsidiaries
Findstar plc., ThinkDirectMarketing, Inc and DirectMAilQuotes, LLC.
("The Subsidiaries"). The Subsidiriaries have collectively incurred
operating losses since their incorporation. As of March 31, 2002 the
Company's current liabilities exceeded its current assets by $2,418,389
and its total liabilities exceeded its total assets by $4,518,506.
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.
8
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTE 5 - ACQUISITIONS AND AGREEMENTS
ACQUISITION OF FINDSTAR AND THINKDIRECT MARKETING, INC. RIGHTS
On September 30, 2001, the Company, Cater Barnard, and Envesta executed
an agreement for the transfer of the assets (the "Purchase Agreement").
On December 11, 2001, pursuant to the Purchase Agreement, in exchange
for the assets described below, the Company issued to Cater Barnard and
Envesta 225,000 shares of its newly created Class B Convertible
Preferred Stock, its promissory notes in the aggregate principal amount
of $3,000,000.00, and 1,500,000 shares of its post consolidation common
stock. The Class B Preferred Stock has an $80 stated value per share.
It is convertible into IMX Common Stock at a rate of one share of
Common Stock for each $4.00 of stated value. Until conversion, each
share of the Class B Preferred Stock will cast one vote for each share
of IMX Common Stock into which it can be converted. The notes mature in
five (5) years and bear interest at the rate of five percent (5%) per
annum. The interest or principal may be paid in cash or IMX Common
Stock, at the Company's discretion.
In addition, the Company issued 877,500 shares of the Company's post
consolidation Common Stock and a five year warrant to purchase an
additional 675,000 shares of IMX's post consolidation Common Stock at
$4.00 per share to Cater Barnard and Cater Barnard (USA) plc as
designees of Griffin Securities, Inc. ("Griffin"). The securities are
to be issued in payment for Griffin's services in connection with the
forgoing transaction.
At the conclusion of this transaction, the issuance of new common stock
to creditors, and the consolidation of the old Company common stock,
and assuming full conversion of the Class B Preferred Stock and
exercise of the warrants, Cater Barnard and Envesta held approximately
86% of the equity of the Company.
9
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTE 5 - ACQUISITIONS AND AGREEMENTS (CONT'D)
At the closing, Cater Barnard transferred all its interests in
ThinkDirectMarketing, Inc. ("TDMI") to the Company. Cater Barnard's
interests in TDMI consist of $4,000,000 of TDMI convertible promissory
notes, seventeen and one-half percent (17.5%) of the equity of TDMI,
and an option ("Option") to acquire the remaining eighty-two and
one-half percent (82.5%) of the TDMI equity. At the same time, Envesta
transferred all of its ownership of Findstar, plc ("Findstar") to the
Company. See below for a description of TDMI and Findstar.
The Purchase Agreement also obligated Cater Barnard to invest $300,000
in cash to fund the Company's Plan of Reorganization and pay the
Company's Debtor in Possession administrative expenses and the tax and
non-tax priority claims. Cater Barnard will receive one share of the
Company's post consolidation common stock for each four ($4.00) dollars
invested. If the Company requires additional funds, Cater Barnard may
fund them through the purchase of shares of the Company's new class of
Preferred Stock at $80 per share. As of March 31, 2002, Cater Barnard
had invested an additional $224,800 dollars and been issued 2,810
shares of the Class B Preferred Stock.
Immediately after the closing, all of Registrant's then current
officers and directors resigned and Stephen Dean, Adrian Stecyk, and
Mark Garratt were elected directors. The new directors then elected
Stephen Dean as Chairman, Adrian Stecyk as President and Chief
Executive Officer, Mark Garratt as Treasurer and Chief Financial
Officer, and Mark Alan Siegel as Secretary.
On January 31, 2001, the Company exercised the Option to acquire the
balance of the TDMI equity. In exchange for the equity, IMX issued to
the holders of these interests a total of 81,010 shares of its Class B
Preferred Stock. At the same time, as required by the agreement
creating the Option, IMX issued warrants to purchase 168,056 shares of
its Common Stock to the holders of TDMI warrants ("Warrants") and stock
options to the existing TDMI employees under its newly adopted 2002
Stock Option Plan (the "Plan") to purchase 189,945 shares of Common
Stock ("Stock Options"). The Warrants expire on January 31, 2007.
Warrants to purchase 66,000 shares have a purchase price of $1.89 and
the balance have a purchase price of $3.00. The Stock Options, which
are subject to the Plan's approval by the IMX Stockholders, include
60,543 that are presently vested and have an exercise price of $4.00
and 129,402 that vest over the next three years and have an exercise
price of $3.00.
10
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTE 5 - ACQUISITIONS AND AGREEMENTS (CONT'D)
Immediately after the closing, Dean Eaker and Bruce Biegel, currently
officers and directors of TDMI, were elected directors of IMX and Bruce
Biegel was elected a Senior Vice-President and designated as Chief
Financial Officer to replace Mark Garratt.
Description of TDMI and Findstar
TDMI designs, develops, and distributes products and services that
automate and streamline direct marketing and customer relationship
management.
TDMI has developed several scaleable and complementary lines of data
management products and professional direct mail services. TDMI has
marketing agreements to provide direct mail and telemarketing services
with major Corporations and business service partners that serve the
small and medium business marketplace including the United States
Postal Service ("USPS"), Avery Dennison, Interactive Intelligence Inc,
the National Restaurant Association, and the National Association of
Insurance and Financial Advisors. In April 2001, TDMI, completed the
acquisition of DirectMailQuotes, LLC ("DMQ") to further expand into
direct product sales to the mail shop channel and to provide additional
value added services to the small and medium business market. As DMQ
was also one of the five USPS partners, the acquisition consolidated
TDMI's position as the Postal Services leading affiliate.
TDMI's direct mail, mailing services and telemarketing products are
specifically tailored to provide a cost-effective and powerful direct
marketing solution for new customer acquisition and customer retention
to the more than 20 million small and medium size businesses in the
United States.
Findstar is an Information Technology Security company responsible for
the sale and distribution of Panda Software SL ("Panda Software")
anti-virus products in the United Kingdom. It operates through two
subsidiaries, Panda Software (UK) Ltd ("Panda UK") and Panda Antivirus
Software Ltd ("Panda Antivirus").
Panda UK holds the exclusive distribution license for the sale,
marketing, and distribution of Panda Software products through out
England, as well as in Scotland and Wales. The
11
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTE 5 - ACQUISITIONS AND AGREEMENTS (CONT'D)
licence has a five-year term ending in January 2006, with an option for
an additional two years. The license may be renewed for additional
periods.
Panda Antivirus distributes and supports the Panda Software products in
the entire territory under an arrangement with Panda UK. Its principal
competitors are McAfee, Norton, and Sophos.
Panda Software was established in Spain in 1990 and is currently one of
the major providers of anti-virus software to the Spanish market.
Panda UK was established in 1999 to acquire the exclusive licence for
Panda Software products. Panda Antivirus was established in 1999 as a
reseller of Panda Software products under an arrangement with Panda UK.
Findstar was incorporated in January 2001 as the holding company for
Panda UK and Panda Antivirus.
The Forster Agreement
On December 11, 2001, the Company and Shalom Y'all, Inc., a company
wholly owned by William A. Forster, the Company's former Chairman and
CEO, executed and consummated an agreement providing for the deferred
payment of Mr. Forster's secured claim (Class 4), the settlement and
payment of his administrative claim, the sale to Shalom Y'all of all of
the Company's subsidiaries, and its indemnification of the Company for
any claims against it arising from the operation of the subsidiaries'
businesses.
The agreement provided for the Company to issue a note for $82,000,
bearing interest at 15% per annum, payable on or before February 28,
2002. On March 20, 2002, the note was re-cast to provide for periodic
payments of principal and for interest to be paid at the end calculated
at a rate of 15% from December 11, 2001. At that time a partial
principal payment of $25,000 was made and the unpaid interest of $3,333
was added to the principal of the note.
In settlement of Mr. Forster's administrative claims, the Company
issued 95,000 shares of its post-consolidation Common Stock.
The purchase price for the subsidiaries is $100,000. The obligation to
make this payment is evidenced by Shalom Y'all's three-year promissory
note. This note is secured by the pledge of 25,000 of Mr. Forster's
Common Stock.
12
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTE 6 - NET INCOME (LOSS) PER COMMON SHARE
The following table sets forth the computation of basic and diluted net
loss per common share:
Nine Months Ended Three Months Ended
March 31, March 31,
----------------------------------- -----------------------------------
2002 2001 2002 2001
--------------- --------------- --------------- ---------------
Numerator:
Numerator for basic and diluted
Loss per share available
to common stockholders $ (9,267,838) $ (4,915,034) $ (476,719) $ (1,874,484)
--------------- --------------- --------------- ---------------
Denominator:
Denominator for basic loss per
share-weighted-average shares 4,215,554 N/A 5,088,671 N/A
Effect of dilutive securities:
Common stock options 0 0 0 0
--------------- --------------- --------------- ---------------
Denominator for diluted loss per
share-adjusted weighted average
shares and assumed conversions 4,312,973 -- 5,385,257 --
--------------- --------------- --------------- ---------------
Basic net loss per common share $ (2.20) N/A $ (0.09) N/A
--------------- --------------- --------------- ---------------
Diluted net loss per common share $ (2.15) N/A $ (0.09) N/A
--------------- --------------- --------------- ---------------
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. No loss per share calculation was
possible for the periods ended March 31, 2001 due to the extreme
consolidation of the Company's shares as part of the plan of
reorganization and the extent of the shares issued after December 31,
2000 in connection with the Company's acquisitions.
NOTE 7 - NOTES RECEIVABLE
The Company received in payment for its sale of the certain
pre-bankruptcy subsidiaries a non-interest bearing note in the amount
of $100,000 from Shalom Y'all, Inc. The note matures on December 31,
2004.
13
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTE 8 - NOTES PAYABLE
As of March 31, 2002 notes payable consisted of the following:
Convertible bridge note payable to Acxiom
Corporation due December 31, 2001- effective Rate
approximately 4.5% $ 400,000
Individual, no stated interest rate 114,000
Individual, $25,000 monthly payments first applied
to principal interest accrued at 15% 60,333
Cater Barnard, 5%, mature 2006, interest or
principal may be paid in cash or common stock at
the Company's discretion. 1,626,360
Cater Barnard, 5%, maturing on December 31, 2006.
Convertible to common stock, valued at $0.50 per
share. Company may elect to repay interest on this
debt with common stock valued at $0.50 per share. 760,000
Cater Barnard, 5%, maturing on December 31, 2006.
Convertible to common stock, valued at $0.25 per
share. Company may elect to repay interest on this
debt with common stock valued at $0.25 per share. 284,000
Envesta, no stated repayment terms, no stated
interest, Envesta has informed management that it
will not ask for repayment in the current period. 929,100
--------------
Subtotal 4,173,793
Less: current portion 574,333
--------------
Long-term portion $ 3,599,460
--------------
14
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTE 8 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of March 31, 2002
Estimated
Property and Equipment Useful Lives 2001
- ---------------------- ----------------- ---------------
Computer equipment and software 5 years $ 493,173
Telephone equipment 5 years 18,049
Office equipment 5 years 3,212
Furniture and fixtures 7 years 137,009
---------------
Total Property and Equipment 651,443
Accumulated Depreciation (327,024)
---------------
Net Property and Equipment $ 324,419
===============
NOTES RELATED TO THE SUBSIDIARY - FINDSTAR PLC
NOTE 9 - NATURE OF BUSINESS
Findstar was incorporated on January 2, 2001 in the United Kingdom.
Findstar acquired the entire share capital of Panda Software (UK)
Limited and Panda Antivirus Software Limited on January 25, 2001.
Findstar's entire share capital was purchased by Envesta plc on June
25, 2001 and was then sold to IMX Pharmaceuticals, Inc. on September
30, 2001.
Findstar is the holding company of Panda Software (UK) Limited and
Panda Antivirus Software Limited. The financial statements incorporate
both these subsidiaries.
15
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTE 10 - GOING CONCERN
Findstar has incurred operating losses since incorporation. Findstar's
current liabilities exceed its total assets by $1,560,299 and its total
liabilities exceed its total assets by $391,410.
The accounts do not include any adjustments that would result from
Findstar being unable to trade.
NOTE 11 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents
For purposes of reporting cash flows, Findstar considers all highly
liquid investments purchases with an original maturity of three months
or less to be cash equivalent.
Accounts receivable
Management has evaluated the accounts receivable and believe that a
significant amount are uncollectable. Findstar has provided an
allowance for doubtful accounts in the amount of $50,220 at March 31,
2002.
Inventories
Inventories are stated at lower of cost or market value.
Property and equipment
Property and equipment are recorded at cost. Depreciation and
amortization are computed using methods that approximate the assets
over their useful working lives.
16
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTE 11 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue recognition
Sales are generally recorded upon the shipment of goods/ granting of
licenses to customers.
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
revenue and expenses during the reported period. Actual results could
differ from those estimates.
NOTE 12 - INVENTORIES
Inventories consist of goods for re-sale.
NOTE 13 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
DECEMBER 31, 2001 JUNE 30, 2001
--------------- ---------------
Database $ 68,867 $ 67,998
Fixtures and fittings 50,669 75,631
Motor vehicles -- 7,668
--------------- ---------------
119,536 151,297
Less: accumulated depreciation (39,197) (47,862)
--------------- ---------------
Property and equipment, net of
accumulated depreciation $ 80,339 $ 103,434
=============== ===============
17
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTE 14 - INCOME TAXES
Findstar had a net operating loss of approximately $1,838,250 at June
30, 2001 which can be used to offset future profits of Findstar.
No corporation tax charge arises on the losses made to March 31, 2002.
NOTE 15 - RELATED PARTY TRANSACTIONS
There were no related party transactions during the period covered by
the related financial statements.
NOTE 16 - COMMITMENTS AND CONTINGENCIES
Findstar did not have any capital commitments as of March 31, 2002.
Findstar leases it's premises under a non-cancelable operating lease.
The future minimum annual rental payments required under these
operating leases are approximately as follows:
Expiring within one year $ 0
Expiring between two and five years $ 75,440
A cross guarantee held by the bank in favour of Findstar and its
subsidiaries has been given by Findstar for all monies owing.
Panda Software (UK) Limited has the UK license for the import and
distribution of Panda anti-virus software.
18
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTES RELATED TO THE SUBSIDIARY - ThinkDirectMarketing, Inc.
and Subsidiary
NOTE 17 - NATURE OF BUSINESS
ThinkDirectMarketing, Inc.
ThinkDirectMarketing, Inc. ("TDMI") was originally incorporated under
the name of Digital Asset Management, Inc. in the State of Delaware on
October 14, 1998. TDMI restated its certificate of incorporation on
July 14, 2000.
TDMI designs, develops and distributes products and services that
automate and streamline direct marketing and customer relationship
management. TDMI has developed several scaleable and complimentary
lines of data management products and professional direct mail services
that were previously available only to Fortune 1000 companies. The
Company has established marketing agreements to provide direct mail and
telemarketing services with major corporations and business service
partners servicing small and medium businesses marketplace.
TDMI licenses data from two leading data providers. This data is
utilized in the Company's ThinkDirectMail line of products.
ThinkDirectMail provides online direct marketing list services sold on
a subscription basis. ThinkDirectMail TM is an online
subscription-based direct marketing list product that lets users search
through a database of over 100 million business and consumer listings
by zip code, SIC code, geographic radius, as well as names and
addresses. ThinkDirectMail enables its users to accurately target
potential customers using criteria such as age, income, housing type,
family status, etc.
The Subsidiary
Direct Mail Quotes, LLC.("DMQ") d/b/a "Mail Mogul" was originally
incorporated in the State of California on February 3, 2000.
DMQ operates a website where buyers of direct mail can receive
competitive bids from local mail shops able to handle their mailing
needs. Mail Mogul is an online market place for sellers of direct mail,
providing leads, website applications, mailing lists, mailing supplies
as well as other products and services.
19
IMX PHARMACEUTICALS, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of March 31, 2002 and for the nine and three month
periods ended March 31, 2002 and 2001 are unaudited)
NOTE 17 - NATURE OF BUSINESS (Continued)
DMQ owns the web properties www.DirectMAilQuotes.com and
www.MailMogul.com. DMQ allows buyers of direct mail to receive
competitive bids from local mail shops able to handle their mailing
needs. Users of these web properties can also read from hundreds of
articles dedicated to direct mail, look up important postal rates and
regulations and search for mail shops nationwide by the services they
provide. MailMogul is an online marketplace for professional mailing
services. From the www.MailMogul.com website, members can purchase
Requests for Quotes, mailing lists, mailing supplies, data entry
services, as well as other services designed to help mail shops compete
better in the 21st century. Mail shops also have the opportunity to
rent website applications designed specifically for the direct mail
industry. These applications can be used to build a brand new site, or
added to an existing site to give mail shops the power to offer job
tracking, quote requests, postal information and job initiation right
from their website.
20
Item 2. Management's Discussion and Analysis or Plan of Operation.
General
During 2001 the Company emerged from the supervision of the Bankruptcy
Court, completed its acquisition of Findstar, plc and all of Cater Barnard plc's
("Cater Barnard") interests in ThinkDirectMarketing, Inc. ("TDMI"), sold its
subsidiaries to a corporation wholly owned by the Company's former Chairman,
William A. Forster, and began the process of distributing its new common stock
to its creditors.
During the first quarter of 2002, the Company completed the acquisition
of TDMI, continued the distribution of its new common stock to its creditors,
and began to reorganize its capital and debt structure in anticipation of
raising funds for its subsidiaries' operations.
Acquisitions
In December 2001 the Company acquired all of Cater Barnard's interests
in TDMI consisting of $4,000,000 of TDMI convertible promissory notes, seventeen
and one-half percent (17.5%) of the equity of TDMI, and an option ("Option") to
acquire the remaining eighty-two and one-half percent (82.5%) of the TDMI
equity. On January 31, 2002, the Company exercised the Option and acquired the
balance of the TDMI equity. In exchange for the equity, IMX issued to the
holders of those interests a total of 81,010 shares of its Class B Preferred
Stock. At the same time, as required by the agreement creating the Option, IMX
issued warrants to purchase 168,056 shares of Common Stock to the holders of
TDMI warrants ("Warrants"), and stock options to the existing TDMI employees
under the Company's newly adopted 2002 Stock Option Plan (the "Plan") to
purchase 189,945 shares of Common Stock ("Stock Options"). The Warrants expire
on January 31, 2007. Warrants to purchase 66,000 shares have a purchase price of
$1.89 and the balance have a purchase price of $3.00. The Stock Options, which
are subject to the Plan's approval by the IMX Stockholders, include 60,543 that
are presently vested and have an exercise price of $4.00 and 129,402 that vest
over the next three years and have an exercise price of $3.00.
Immediately after the closing, Dean Eaker and Bruce Biegel, currently
officers and directors of TDMI, were elected directors of IMX and Bruce Biegel
was elected a Senior Vice-President and designated as Chief Financial Officer to
replace Mark Garratt.
During March, the Company acquired $760,000 of additional debt of TDMI
from Cater Barnard. The Company paid for the debt, evidenced by TDMI Notes, by
issuing Company promissory notes in an equal amount. These notes mature on
December 31, 2006 and bear interest at the rate of five (5%) percent per annum.
The Company can elect to pay the interest with Common Stock valued at $0.50 per
share. The holder can convert the notes into Common Stock at a price of $0.50
per share.
Description of TDMI and Findstar
TDMI designs, develops, and distributes online products and services
that automate and streamline the direct marketing process.
TDMI has developed several scaleable and complementary lines of data
management products and professional direct mail services. TDMI has marketing
agreements to provide direct mail and telemarketing services with major
Corporations and business service partners that serve the small and medium
business marketplace including the United States Postal Service ("USPS"), Avery
Dennison, Interactive Intelligence Inc, the National Restaurant Association, and
the National Association of Insurance and Financial Advisors. In April 2001,
TDMI, completed the acquisition of DirectMailQuotes, LLC ("DMQ") to further
expand into direct product sales to the mail shop channel and to provide
additional value added services to the small and medium business market. As DMQ
was also one of the five USPS partners, the acquisition consolidated TDMI's
position as the Postal Services leading affiliate.
TDMI's direct mail, mailing services, and telemarketing products are
specifically tailored to provide a cost-effective and powerful direct marketing
solution for new customer acquisition and customer retention to the more than 20
million small and medium size businesses in the United States. Products and
services are delivered from the Company's web site and sales offices in
Stamford, CT, Longmont, CO, and Burbank, CA. In addition, the Company is the
lead speaker on lists and data at the United States Postal Services "Direct Mail
Made Easy" seminar series. The Company presented at all 19 seminars held during
the first quarter of 2002 and will participate in the 56 seminars planned by the
Postal Service for the rest of this year.
During the quarter ended March 31, 2001 TDMI began limited release of
its Online Mailing Service (OMS) Selected customers can now directly enter
orders for direct mail campaigns online. Initial customers included the United
States Postal Service and several small business mailers. OMS is scheduled for
full roll out in the second quarter of 2002 to the Company's more than 2,000
small business subscribers and the 30,000 plus members of its
ThinkDirectMarketing site.
Findstar is an Information Technology Security company responsible for
the sale and distribution of Panda Software SL ("Panda Software") anti-virus
products in the United Kingdom. It operates through two subsidiaries, Panda
Software (UK) Ltd ("Panda UK") and Panda Antivirus Software Ltd ("Panda
Antivirus").
Panda UK holds the exclusive distribution license for the sale,
marketing, and distribution of Panda Software products through out England, as
well as in Scotland and Wales. The licence has a five-year term ending in
January 2006, with an option for an additional two years. The license may be
renewed for additional periods.
Panda Antivirus distributes and supports the Panda Software products in
the entire territory under an arrangement with Panda UK. Its principal
competitors are McAfee, Norton, and Sophos.
Panda Software was established in Spain in 1990 and is currently one
of the major providers of anti-virus software to the Spanish market.
Panda UK was established in 1999 to acquire the exclusive licence for
Panda Software products. Panda Antivirus was established in 1999 as a reseller
of Panda Software products under an arrangement with Panda UK. Findstar was
incorporated in January 2001 as the holding company for Panda UK and Panda
Antivirus.
The Forster Agreement
On December 11, 2001, the Company and Shalom Y'all, Inc., a company
wholly owned by William A. Forster, the Company's former Chairman and CEO,
executed and consummated an agreement providing for the deferred payment of Mr.
Forster's secured claim (Class 4), the settlement and payment of his
administrative claim in Common Stock at $4.00 per share, the sale to Shalom
Y'all of all of the Company's subsidiaries, and its indemnification of the
Company for any claims against it arising from the operation of the
subsidiaries' businesses.
Among other things, the agreement provided for the Company to issue its
$82,000 note due February 28, 2002. The note rears interest at the rate of 15%
per annum, retroactive to December 11, 2001. On March 20, 2002, the note was
re-cast to provide for periodic payments principal and for interest to be paid
at the end calculated at a rate of 15% from December 11, 2001. At that time, a
partial principal payment of $25,000 was made and the unpaid interest of $3,333
was added to the principal of the note.
The Medicis Options:
On March 20, 2001, the Company settled a portion of is debt to Cater
Barnard by assigning to it the Company's beneficial ownership of certain Options
issued to some of the Company's former officers. The Options provided for the
purchase of the common stock of Medicis Pharmaceutical Corporation of Phoenix,
Arizona ("Medicis") at a price of $24.67 per share ("Exercise Price"). 4,800
shares can be purchased in July 2002 and 4,800 shares in July 2003. On the date
of the settlement, the market price of Medicis common stock was $55.96 (Market
Price"). The amount of the settlement was a portion of the difference between
the Market Price and the Exercise Price ("Difference") multiplied by the number
of shares available for purchase. With respect to the 4,800 shares that could be
purchased within four months of the contract date, the portion shall be 90% of
the Difference. With respect to the 4,800 shares that could not be purchased for
over fifteen months, the portion shall be 70% of the Difference.
As a result of this transaction the principal of the Company's five
(5%) percent Promissory Note to Cater Barnard, dated December 11, 2001, was
reduced by $240,307.
Results of Operations
The Company's operations reflected in this quarter's financial
statements include both its Findstar and TDMI subsidiaries. The Company's
pharmaceutical and direct marketing subsidiaries were sold during the last
quarter of 2001 and are not included in the financial statements because their
operations were discontinued. The Company reflected the losses associated with
the sale by a charge of $6,092,000 in the Condensed Consolidated Statement of
Operations and Comprehensive Income (Loss) during the year December 31, 2001.
TDMI:
For the three months ended March 31, 2002, TDMI's consolidated net
sales (including DMQ) were approximately $775,000 as compared to approximately
$160,000 for the same period ended March 31, 2001, an increase of about $615,000
or more than 400%. The improved results are due to 1) significant acceleration
of the lead generation activities with our partners, 2) the addition of new data
and service product lines in the small and medium business area, and 3) growth
in customer orders and renewals across all product lines. During this period
TDMI recorded record unit sales for its data subscription products and specialty
lists services.
TDMI's gross margin on sales for the first quarter of both 2001 and
2000 was unchanged at approximately 40%.
TDMI's consolidated total operating expenses were approximately
$990,000 for the three months ended March 31, 2002. This compares with
approximately $1,345,000 for the same period ended March 31, 2001. The decrease
between periods, year to year, at a time of greatly increased overall sales was
accomplished by the reduction of advertising and marketing expenses as the
channel sales programs initiated in 2001 generated significantly more qualified
sales prospects for our sales team and web sites. At the same time, we have been
able to reduce our administrative costs through the streamlining of our
operations and the combination with DirectMailQuotes.
For the three months ended March 31, 2002, TDMI's consolidated net loss
from operations was approximately $(605,000). This represents an improvement
from net losses of about $(1,295,000) in the period ending March 31, 2001.
Increased sales during this period combined with reduced marketing and
administrative expenses combined to improve the bottom line.
This was TDMI's fourth consecutive quarter of improved performance,
including gains in sales, reduction in operating expenses, improvement in gross
profit, and at the bottom line.
Findstar:
For the three and nine months ended March 31, 2002, the Findstar's
consolidated net sales were approximately $222,000 and $684,000, as compared to
$202,000 and $566,000 for the same periods ended March 31, 2001. This increase
is due to an increase in completed sales transactions.
The Findstar's gross profit margin for the three and nine months ended
March 31, 2002 were both approximately 64%. The margins for the first three
months of 2001 were approximately 47%, and nine months to March 31, 2001
approximately 56%.
The Findstar's total operating expenses were approximately $274,700 and
$864,000 for the three and nine months ended March 31, 2002. Operating expenses
for similar periods to March 31, 2001 were approximately $518,000 and $1,299,400
respectively.
For the three months and nine months ended March 31, 2002, the
Findstar's net loss from operations was approximately $(302,000) and $(452,200).
The approximate net (loss) from operations for the three and nine months to
March 31, 2001 was approximately $(424,800) and $(994,300) respectively.
During the recent quarter, $355,000 of provisions made at June 30, 2001
for potential liabilities was determined to be unnecessary. The associated gain
is reported as other income.
All the above figures for the three months to March 31, 2001 are
approximately 50% of the 6 months figures to June 30, 2001.
IMX Administrative Costs:
IMX's central administrative costs increased slightly with the
resumption of corporate activity after the Effective Date of the Plan of
Reorganization. They were $217,000 during the first quarter of 2002 compared
with $155,000 during the same quarter of 2001.
Liquidity & Capital Resources
On March 31st, 2002, the Findstar's consolidated financial condition
included a working capital deficit of about $(630,000) as compared to a deficit
of approximately $(1,134,000) at June 30, 2001.
At the end of March, TDMI had a working capital deficit of
approximately $(1,210,000) as compared to a deficit of about $(6,000,000) on
December 31, 2001.
IMX had a consolidated working capital deficit of approximately
$(2,018,000) on March 31, 2002 as compared to a deficit of approximately
$(2,970,000) at December 1, 2001.
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.
Item 5. Election of Director
On April 30, 2002, the Board unanimously chose Lyndon Chapman, the
Chief Executive Officer of its Findstar subsidiary, to replace Mark Garratt
after his resignation. Mr. Garratt's resignation was not the result of any
dispute.
Part II. Other Information
Items 1, 3, 4, and 5 are omitted as they are either not applicable or
have been included in Part I.
Item 2(c) Recent Sales of Unregistered Securities
On December 11, 2001, the effective date of the Plan if Reorganization,
all 8,132,076 shares of Common Stock then outstanding and 300,000 shares of
treasury stock then held as collateral were automatically consolidated on the
basis of one share for each 20 presently held. Any fractional shares will be
rounded up to the next full share. After the rounding up, there were 421,850
shares outstanding that were derived from the previously outstanding common
stock.
In addition, all unsecured, allowed claims were settled on the basis of
one share for every $4.00 dollars of allowed claim. Here, too, any fractional
shares will be rounded up to the next full share. Approximately 770,000 shares
will be issued to Class 5, 6, 7, and 8 creditors. The consolidation and the
issuance of the common stock to creditors are exempt from the registration
requirements of Section 5 of the Securities Act pursuant to section 1145 of the
United States Bankruptcy Act.
On December 11, 2001, pursuant to the Acquisition Agreement, the
Company issued 225,000 shares of its new Class B Preferred Stock and 1,500,000
shares of its post consolidation Common Stock. The transaction, in which the
purchasers of the shares represented that the shares were being acquired for
investment and not for distribution, is exempt from the registration
requirements of Section 5 of the Securities Act under Section 4(2) of the
Securities Act because it did not involve a public distribution of the Company's
securities.
At the closing of the Acquisition Agreement, the Company also issued an
additional 877,500 shares of the Company's post consolidation Common Stock and a
five year warrant to purchase an additional 675,000 shares of IMX's post
consolidation Common Stock at $4.00 per share to Cater Barnard and Cater Barnard
(USA) plc as designees of Griffin Securities, Inc. ("Griffin"). The securities,
which are to be issued in payment for Griffin's services in connection with the
acquisition, will be acquired for investment and not as part of a distribution.
Therefore, this issuance is exempt from the registration requirements of Section
5 of the Securities Act under Section 4(2) of the Securities Act as not
involving a public distribution of the Company's securities
Pursuant to the Plan, Cater Barnard purchased of approximately 75,000
shares of common stock at four ($4) dollars per share to provide the initial
cash necessary to fund the Plan. As of December 31, 2001, Cater Barnard had
invested an additional $224,800 dollars and been issued 2,810 shares of the
Class B Preferred Stock. Both securities were purchased for investment and not
for distribution and are therefore exempt from the registration requirements of
Section 5 of the Securities Act under Section 4(2) of the Securities Act as
sales not involving the public distribution of securities.
During January 2002, Envesta elected, with the consent of the Company,
to convert its 85,000 shares of Class B Preferred Stock and its note from the
Company for $1,133,333 in to a total of 1,983,333 shares of Common Stock. Like
the Class B Preferred Stock and the Note, Envesta acquired these securities for
investment and not with a view towards distribution. The was, therefore, exempt
from the registration requirements of Section 5 of the Securities Act under
Section 4(2) of the Securities Act as sales not involving the public
distribution of securities.
On January 31, 2002 the Company issued 81,010 shares of its Class B
Preferred Stock to acquire the remainder of the equity interests of TDMI. As
part of the same transaction, the Company issued its warrants to purchase
168,056 shares of its Common Stock to the holders of TDMI warrants and stock
options to the existing TDMI employees under the Company's newly adopted 2002
Stock Option Plan to purchase 189,945 shares of Common Stock. The transaction,
in which these receiving the shares of Preferred Stock and the rights to
purchase Common Stock represented that the shares and the rights were being
acquired for investment and not for distribution, is exempt from the
registration requirements of Section 5 of the Securities Act under Section 4(2)
of the Securities Act because it did not involve a public distribution of the
Company's securities.
On April 30, 2002, the Board approved three consulting contracts
providing for the issuance of 5,000, 5,000, and 100,000 shares of the Company's
Common Sock as additional compensation for the consultants. In addition, one
consultant was granted the right to purchase up to 10,000 additional shares at
$1.00 per share and a second was granted the right to purchase up to 200,000
shares at $0.50 per share. None of these rights has been exercised. At the same
time, the Board approved the issuance of 200,000 shares of its Common Stock to
Hornblower and Weeks Financial Corporation ("Hornblower") for advisory services.
The consultants and the advisor acquired all of these shares for their
investment and not for distribution. Therefore, these issuances are exempt from
the registration requirements of Section 5 of the Securities Act under Section
4(2) of the Securities Act because they did not involve public distribution of
the Company's securities.
Also on April 30th, the Board authorized Hornblower to sell, on the
Company's behalf, up to 1,000,000 shares in transactions not involving a public
distribution. During the first part of May, the Company, through Hornblower,
sold 150,000 shares of its Common Stock to a total of six investors for $0.50
per share. Hornblower will be paid a commission of 10% of the net proceeds of
this sale. These investors stated in writing that they were accredited investors
and that they had purchased the Common Stock for investment and not for
distribution pursuant to an exemption from the registration requirements of
Section 5 of the Securities Act under Section 4(2) of the Securities Act.
Therefore, this transaction did not involve a public distribution of the
Company's securities.
Item 6. Exhibits and Reports on Form 8-K
(b) A report on Form 8-K (items 2, 3, and 7) describing the conclusion of the
Bankruptcy and the Company's acquisition of Findstar and of Cater
Barnard's rights to TDMI was filed on December 14, 2001.
A report on Form 8-K (item 8) reporting the change of the Company's
fiscal year was filed on January 15, 2002.
A report on Form 8-K (items 2 and 7) reporting on the acquisition of TDMI
was filed on February 15, 2002.
A report on Form 8-K-A (item 7) containing the financial statements
required by the acquisition of Findstar (initially reported on a Form
8-K filed on December 14, 2000) was filed on February 22, 2002.
A report on Form 8-K-A-1 (item 7) reporting the delay of the financial
information required by the acquisition of TDMI was filed on April 16,
2002.
A report on Form 8-K-A-2 (item 7) containing the delayed financial
statements for the acquisition of TDMI (as initially reported on the
Form 8-K filed on February 14, 2002) was filed on May 15, 2002.
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 15th
day of May 2002.
IMX PHARMACEUTICALS, INC
By: /s/ Adrian Stecyk
-------------------------------
Adrian Stecyk, President