SECURITIES AND EXCHANGE COMMISSION
UNITED STATES
Washington DC 20549
FORM 1O-QSB
(Mark One)
x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended __________September 30, 1999
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _______________ to _____________
Commission file number __________________________________
Cryogenic Solutions, Inc.
(Exact name of small business issuer as specified in its charter)
Nevada 76-0484097
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6524 San Felipe, PMB 388, Houston, Texas 77057
(Address of principal executive offices)
(713) 780 - 1399
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes No x
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
28,814,442 common shares outstanding as of September 30, 1999 at par
value $0.001
Transitional Small Business Disclosure Format (Check one):
Yes No x
SEC 2334 (2-99)Potential persons who are to respond to the collection
of information contained in this form are not required to respond
unless the form displays a currently valid OMB control number.
<PAGE> 1
PART I - FINANCIAL INFORMATION
Item 1.Financial Statements
BALANCE SHEET
AS OF September 30, 1999 AND December 31, 1998
UNAUDITED
<TABLE>
<C> <C> <C>
Sep' 30, 1999 Dec' 31, 1998
ASSETS ------------- -------------
Current Assets
Checking/Savings
Coastal $ 28,274.29 $ 173,231.84
Donaldson, Lufkin & Jenrette -MM 4.81
------------ -------------
Total Checking/Savings $ 28,279.10 $ 173,231.84
Other Current Assets
Other Current Assets
Federal Income Tax Withheld $ 18.65
Petty cash 600.00 $ 600.00
------------ -------------
Total Other Current Asset $ 618.65 $ 600.00
------------ -------------
Total Current Assets $ 28,897.75 $ 173,831.84
Fixed Assets
Research and Development Asset
Computer Equipment $ 2,079.24 $ 79.24
Cyrostorage 1,457.91 1,457.91
Freezer 600.00 3,000.00
Phoenix-Centrifuge/Microscope 2,500.00 2,500.00
Phoenix-Microscope 1,259.91 1,259.91
Phoenix -1/2 Centrifuge 1,982.34 1,982.34
Phoenix Equipment-Incubator 4,319.08 4,319.08
Refrigerator 400.00
Shaker Bath 1,800.00
Shelves for Lab 291.36 291.36
Straligene-PCR Machine 8,177.74 8,177.74
VWR-Incubator 2,208.21 2,208.21
VWR-Water Bath/Platform 3,742.23 3,742.23
Acc. Depreciation (16,785.24) -9,970.74
------------ -------------
Total Research and Development Asset $ 14,032.78 $ 19,047.28
Total Fixed Assets $ 14,032.78 $ 19,047.28
Other Assets
Development Stage Expenses
Accounting Fees $ 22,664.62 $ 8,395.00
Advertising 18,963.64 16,813.87
Auto Allowance 3,300.00 600.00
Auto Insurance 2,986.58 2,986.58
</TABLE>
<PAGE> 2
<TABLE>
<C> <C> <C>
Sep' 30, 1999 Dec' 31, 1998
------------- -------------
Auto Mileage Reimbursement 227.50 227.50
Auto Repairs 681.12 681.12
Auto-Lease 6,244.81 1,414.52
Auto-Miscellaneous Expense 192.47 120.17
Auto-Parking/Tolls 435.71 422.71
Bank Service Charges 786.23 516.23
Cellular Phone Exp 1,266.98 1,266.98
Domain Reg. 210.00
Computer-Related Expenses 3,685.85 1,120.28
Fixed Asset
Computer Equipment 14,261.75 $ 12,668.73
Office Equipment 1,491.71 $ 1,210.54
Telephones, etc. 966.39 966.39
-------------- -------------
Total Fixed Asset $ 16,719.85 $ 14,845.66
Freight/Delivery 2,775.66 2,527.21
Investigatory Expenses 624.83 60.83
Legal Fees 84,525.84 48,620.90
Meals and Entertainment 4,574.33 3,784.22
Medical Insurance 38,668.53 7,861.53
Miscellaneous Exp. 13,765.76 12,965.93
Office Supplies/Expenses 15,932.11 12,019.22
Payroll Expenses 438,805.29 191,747.34
Professional Fees 164,258.04 134,011.54
Registered Agent's Fee 570.00 570.00
Rental of Office Space 19,950.00 12,925.00
Telephone 28,315.81 13,936.19
Telephone Message Service 1,084.17 1,084.17
Travel Expenses 8,801.59 6,620.07
Utilities 1,285.42 288.23
------------- -------------
Total Development Stage Expenses $ 902,302.74 $ 498,433.00
Deposits
Office Deposit $ 250.00 $ 250.00
Telephone Service 260.00 260.00
------------- -------------
Total Deposits $ 510.00 $ 510.00
Investment Quatum Bit Induction
Technology $ 10,100.00
-------------
Total Investment $ 10,100.00
Organizational Expenses
Accounting Fees $ 2,595.00 $ 2,595.00
</TABLE>
<PAGE> 3
<TABLE>
<C> <C> <C>
Sep' 30, 1999 Dec' 31, 1998
------------- -------------
Freight/Delivery $ 249.00 249.00
Legal Fees $ 3,275.00 3,275.00
Office Supplies/Expenses $ 185.29 185.29
Professional Fees $ 1,250.00 1,250.00
State Incorporation Fees $ 340.00 340.00
------------- ------------
Total Organizational Expenses $ 7,894.29 $ 7,894.29
------------- ------------
Total Other Assets $ 920,807.03 $ 506,837.29
------------- ------------
TOTAL ASSETS $ 963,737.56 $ 699,716.41
============= ============
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable $ 59,377.69 $ 3,747.58
Payroll Expense $ 11,745.99 $ 5,867.56
------------- ------------
Total Current Liabilities $ 71,123.68 $ 9,615.14
------------- ------------
Total Liabilities $ 71,123.68 $ 9,615.14
Equity
Corp. Shareholder's Equity
Common Stock $ 28,814.44 $ 17,485.70
Paid-In Capital $1,374,015.15 915,052.44
Treasury Shares $ (60,000.00)
Corp. Shareholder's Equity - Other $ 25,000.00
Less Stock Subscriptions $ (5,825.76) -2,215.15
Deficit Accumulated During the
Development Stage $( 469,389.95) -240,221.72
------------- ------------
Total Equity $ 892,613.88 $ 690,101.27
------------- ------------
TOTAL LIABILITIES & EQUITY $ 963,737.56 $ 699,716.41
============= ============
</TABLE>
<PAGE> 4
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEP 30, 1999
AND
THE PERIOD FROM February 10,1995
(DATRE OF INCEPTION) TO SEP 30, 1999
UNAUDITED
<TABLE>
<C> <C> <C>
Feb. 10, 1995
(Inception) to
Sep 30, 1999 Sep 30, 1999
------------ --------------
Income
Dividend Income $ 1,401.26 $ 1,659.29
------------ --------------
Total Income $ 1,401.26 $ 1,659.29
Expense
Interest Paid $ 734.98
Miscellaneous
Other Spring Valley Exp. $ 10,012.83
Spring Valley Litigation Exp. $ 7,398.00
Rent $ 450.00
--------------
Total Miscellaneous $ 18,595.81
Research and Development Expense
Bio Research Fees $ 12,225.30 $ 29,497.80
Biotechnology 153,575.00 288,717.13
Consultants 2,260.75
Depreciation Expense 6,814.50 16,785.24
Freight/Delivery 83.98 98.62
Patent Attorneys' Fees/Exp 57,470.72 72,814.26
Payroll Expenses 37,615.92
Quantum Opt
</TABLE>
<PAGE> 5
<TABLE>
<C> <C> <C>
Feb. 10, 1995
(Inception) to
Sep. 30, 1999 Sep 30, 1999
------------- -------------
Supplies 300.00
Supplies
lab 400.00 4,063.71
Travel $ 300.00
-------------
Total Research and Development Expense$ 230,569.50 $ 452,453.43
------------ -------------
Total Expense $ 230,569.50 $ 471,049.24
------------ -------------
Net Deficit From Operations $(229,168.24) $ (469,389.95)
Deficit Accumulated During the Development
Stage at the Beginning of the Period $(240,221.72) 0
------------ -------------
Deficit Accumulated During the Development
Stage at the End of the Period $(469,389.96) $ (469,389.95)
------------ -------------
</TABLE>
<PAGE> 6
STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEP 30, 1999
AND
THE PERIOD FROM February 10,1995
(DATE OF INCEPTION) TO SEP 30, 1999
UNAUDITED
<TABLE>
<C> <C> <C>
Feb. 10, 1995
(Inception) to
Sep. 30, 1999 Sep. 30, 1999
------------- --------------
Stockholders' Equity: Common Stock $ 11,328.74 $ 28,814.44
Stockholders' Equity: Paid-In Capital 458,962.71 1,374,015.15
Corp. Shareholder's Equity - Other 25,000.00 25,000.00
Less Stock Subscriptions -5,825.76 -5,825.76
Stockholders' Equity: Treasury Stock -60,000.00 -60,000.00
-------------- -------------
Total $ 429,465.69 $1,362,003.83
Deficit from Operations $ (229,168.24) $ (469,389.95)
-------------- -------------
Total Stockholders' Equity $ 200,297.45 $ 892,613.88
============== =============
</TABLE>
<PAGE> 7
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEP 30, 1999
AND
THE PERIOD FROM February 10,1995
(DATE OF INCEPTION) TO SEP 30, 1999
UNAUDITED
<TABLE>
<C> <C> <C>
Feb. 10, 1995
(Inception)to
Sep 30, 1999 Sep 30, 1999
------------ -------------
OPERATING ACTIVITIES
Deficit from Operations $ (229,168.24) $ (469,389.95)
Adjustments:
Depreciation Expense 6,814.50 16,785.24
Petty Cash 0.00 -600.00
Accounts Payable 55,630.11 59,377.69
Payroll Expense 5,878.43 11,745.99
Federal Income Tax Withheld -18.65 (18.65)
Net cash provided by Operating ------------- -------------
Activities $( 160,863,85) $ (382,099.68)
INVESTING ACTIVITIES ------------- -------------
Research and Development Asset
Acquisition $ (4,800.00) $ (33,818.02)
Development Stage Expenses $ (403,880.34) $ (902,313.35)
Deposits: Office Deposit 0.00 -510.00
Investment-Quantum Bit Induction
Technology -10,100.00 (10,100.00)
Organizational Expenses 0.00 -7,894.29
Net cash provided by Investing ------------- -------------
Activities $ (418,780.34) $( 954,635.66)
FINANCING ACTIVITIES ------------- -------------
Increase due to sale of Common Stock $ 11,328.74 $ 28,814.44
Increase due to additional
Paid-in-Capital 458,962.71 1,374,015.15
Increase due to sale of Stock Warrants 25,000.00 25,000.00
Reduction due to stock subscription -2,215.15
Reduction due to repurchase of
common stock -60,000.00 -60,000.00
Net cash provided by Financin ------------- --------------
Activities $ 435,291.45 $ 1,365,614.44
------------- --------------
Net cash increase for period $ (144,352.74) $ 28,879.10
Cash at Beginning of Period 173,231.84 0
------------- --------------
Cash at End of Period $ 28,879.10 $ 28,879.10
============= ==============
</TABLE>
<PAGE> 8
To the Board of Directors and Stockholders
of Cryogenic Solutions, Inc.
6524 San Felipe, Suite 388
Houston, Texas 77057
I have audited the accompanying balance sheet of Cryogenic Solutions,
Inc. (a Nevada corporation in the development stage) as of December 31,
1998, and the related statement of operations, stockholders' equity,
and cash flows for the year then ended and for the period from February
10, 1995 (inception), to December 31, 1998. These financial statements
are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my
audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. I believe
that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Cryogenic
Solutions, Inc. as of December 31, 1998, and the results of its
operations and its cash flows for the year then ended and for the
period from February 10, 1995 (inception), to December 31, 1998, in
conformity with generally accepted accounting principles.
Harrie Marie Pollok Operhall,
A Professional Corporation
Houston, Texas
November 11, 1999
<PAGE> 9
BALANCE SHEET
AS OF DECEMBER 31, 1998
<TABLE>
<C> <C>
Dec' 31, 1998
ASSETS -------------
Current Assets
Checking/Savings
Coastal $ 173,231.84
-------------
Total Checking/Savings $ 173,231.84
Other Current Assets
Petty cash $ 600.00
-------------
Total Other Current Assets $ 600.00
-------------
Total Current Assets $ 173,831.84
Fixed Assets
Research and Development Asset
Computer Equipment $ 79.24
Cyrostorage 1,457.91
Freezer 3,000.00
Phoenix-Centrifuge/Microscope 2,500.00
Phoenix-Microscope 1,259.91
Phoenix -1/2 Centrifuge 1,982.34
Phoenix Equipment-Incubator 4,319.08
Shelves for Lab 291.36
Straligene-PCR Machine 8,177.74
VWR-Incubator 2,208.21
VWR-Water Bath/Platform 3,742.23
Acc. Depreciation -9,970.74
-------------
Total Research and Development Asset $ 19,047.28
-------------
Total Fixed Assets $ 19,047.28
Other Assets
Development Stage Expenses
Accounting Fees $ 8,395.00
Advertising 16,813.87
Auto Allowance 600.00
Auto Insurance 2,986.58
Auto Mileage Reimbursement 227.50
Auto Repairs 681.12
Auto-Lease 1,414.52
Auto-Miscellaneous Expense 120.17
Auto-Parking/Tolls 422.71
</TABLE>
<PAGE> 10
<TABLE>
<C> <C>
Dec' 31, 1998
-------------
Bank Service Charges 516.23
Cellular Phone Exp 1,266.98
Computer-Related Expenses 1,120.28
Fixed Asset
Computer Equipment $ 12,668.73
Office Equipment $ 1,210.54
Telephones, etc. 966.39
-------------
Total Fixed Asset $ 14,845.66
Freight/Delivery 2,527.21
Investigatory Expenses 60.83
Legal Fees 48,620.90
Meals and Entertainment 3,784.22
Medical Insurance 7,861.53
Miscellaneous Exp. 12,965.93
Office Supplies/Expenses 12,019.22
Payroll Expenses 191,747.34
Professional Fees 134,011.54
Registered Agent's Fee 570.00
Rental of Office Space 12,925.00
Telephone 13,936.19
Telephone Message Service 1,084.17
Travel Expenses 6,620.07
Utilities 288.23
-------------
Total Development Stage Expenses $ 498,433.00
Deposits
Office Deposit $ 250.00
Telephone Service 260.00
-------------
Total Deposits $ 510.00
Organizational Expenses
Accounting Fees $ 2,595.00
Freight/Delivery 249.00
Legal Fees 3,275.00
Office Supplies/Expenses 185.29
Professional Fees 1,250.00
State Incorporation Fees 340.00
-------------
Total Organizational Expenses $ 7,894.29
-------------
Total Other Assets $ 506,837.29
-------------
TOTAL ASSETS $ 699,716.41
=============
</TABLE>
<PAGE> 11
<TABLE>
<C> <C>
Dec' 31, 1998
LIABILITIES & EQUITY -------------
Liabilities
Current Liabilities
Accounts Payable $ 3,747.58
Payroll Expense $ 5,867.56
-------------
Total Current Liabilities $ 9,615.14
-------------
Total Liabilities $ 9,615.14
Equity
Corp. Shareholder's Equity
Common Stock $ 17,485.70
Paid-In Capital 915,052.44
Less Stock Subscriptions -2,215.15
Deficit Accumulated During the Development Stage -240,221.72
-------------
Total Equity $ 690,101.27
-------------
TOTAL LIABILITIES & EQUITY $ 699,716.41
=============
</TABLE>
<PAGE> 12
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
AND THE PERIOD FROM FEBRUARY 10,1995
(DATE OF INCEPTION) TO DECEMBER 31,1998
<TABLE>
<C> <C> <C>
Feb. 10, 1995
(Inception) to
Dec' 31, 1998 Dec. 31, 1998
------------- -------------
Income
Dividend Income $ 61.08 $ 258.03
------------- -------------
Total Income $ 61.08 $ 258.03
Expense
Interest Paid $ 0.90 $ 734.98
Miscellaneous
Other Spring Valley Exp. 2,374.32 10,013.83
Spring Valley Litigation E 9,475.00 7,398.00
Rent 0.00 450.00
------------ -------------
Total Miscellaneous $ 11,850.22 $ 18,595.81
Research and Development Expense
Bio Research Fees $ 1,500.00 $ 17,272.50
Biotechnology 78,880.79 135,142.13
Consultants 2,260.75
Depreciation Expense 5,535.92 9,970.74
Freight/Delivery 14.64 14.65
Patent Attorneys' Fees/Exp 12,343.54 15,343.54
Payroll Expenses 33,958.34 37,615.92
Quantum Optics
Supplies 300.00
Supplies
lab 298.00 3663.71
</TABLE>
<PAGE> 13
<TABLE>
<C> <C> <C>
Feb. 10, 1995
(Inception) to
Dec. 31, 1998 Dec. 31, 1998
------------- -------------
Travel 0.00 300.00
------------- -------------
Total Research and Development
Expense $ 132,531.23 $ 221,883.94
------------- -------------
Total Expense $ 144,381.45 $ 240,030.75
------------- -------------
Net Deficit From Operations $ (144,320.37) $ (240,221.72)
Deficit Accumulated During the Development
Stage at the Beginning of the Period -95,901.35 0
------------- -------------
Deficit Accumulated During the Development
Stage at the End of the Period $ (240,221.72) $ (240,221.72)
============= =============
</TABLE>
<PAGE> 14
STATEMENT OF STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1998
AND THE PERIOD FROM FEBRUARY 10,1995
(DATE OF INCEPTION) TO DECEMBER 31,1998
<TABLE>
<C> <C> <C>
Feb. 10, 1995
(Inception) to
Dec. 31, 1998 Dec. 31, 1998
------------- -------------
Stockholders' Equity: Common Stock $ 6,777.81 $ 17,485.70
Stockholders' Equity:
Paid-In Capital 664,040.98 943,484.77
Stockholders' Equity:
Stock Expense/Issuance/Sale -14,243.70 28,432.33
------------- --------------
Total $ 656,575.09 $ 932,538.14
Deficit from Operations $ (144,320.37) -240,221.72
------------- --------------
Total Stockholders' Equity $ (512,254.72) $ (692,316.42)
============= ==============
</TABLE>
<PAGE> 15
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
AND THE PERIOD FROM FEBRUARY 10,1995
(DATE OF INCEPTION) TO DECEMBER 31,1998
<TABLE>
<C> <C> <C>
Feb. 10, 1995
(Inception) to
Dec. 31, 1998 Dec. 31, 1998
OPERATING ACTIVITIES ------------- -------------
Deficit from Operations $ (144,320.37) $ (240,221.72)
Adjustments:
Depreciation Expense 5,535.92 9970.74
Petty Cash -600.00 -600.00
Stock Subscriptions -2,215.15 -2215.15
Accounts Payable 2,822.58 3747.58
Payroll Expense 5,867.56 5,867.56
Other Current Liability:
Loan From Share -56,040.00 -
Net cash provided by Operating ------------- --------------
Activities $ (188,949.46) (223,450.99)
INVESTING ACTIVITIES
Research and Development Asset
Acquisition $ (5,742.25) $ (29,018.02)
Development Stage Expenses -303,616.41 (498,433.00)
Deposits: Office Deposit -250.00 -510.00
Organizational Expenses -3,000.00 -7,894.29
Net cash provided by Investing ------------- -------------
Activities $ (312,608.66) $ (535,855.31)
FINANCING ACTIVITIES
Reduction of Shareholder Loans $ (15,000.00) $ -
Purchase of Common Stock 6,777.81 17,485.70
Additional Paid-In Capital upon
Purchase of Stock 664,040.98 943,484.77
Payment of Expenses Related to
Purchase of Stock -14,243.70 -28,432.33
Net cash provided by Financing ------------- -------------
Activities $ 641,575.09 $ 932,538.14
Net cash increase for period $ 140,016.97 $ 173,231.84
Cash at Beginning 33,214.87 0.00
------------- -------------
Cash at End of Period $ 173,231.84 $ 173,231.84
============= =============
</TABLE>
<PAGE> 16
Financial Statements and Exhibits.
CRYOGENIC SOLUTIONS, INC.
(A Development Stage Company)
NOTE A.-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Cryogenic Solutions, Inc. was incorporated in Nevada on February 10,
1995. It is a biotechnology company focusing on controlled cellular
dedifferentiation and transdifferentiation processes. The Company
has acquired the exclusive rights for applications to a specialized
expression vector capable of producing single stranded DNA (ssDNA)
in both eukaryotes and prokaryotes.
Equity funding has been the only source of operational and research
support from the outset. Capital resources have been carefully
husbanded with the bulk of the funding allocated directly to research
with administrative overhead held to a minimum.
Depreciation
Currently, depreciation on the research and development equipment is
computed using the straight-line method over the assets' expected
useful life of 5 years.
Amortization
The development stage expenses and the organization expenses are being
capitalized for future amortization purposes, once the corporation
begins its business operations of marketing the results of its
research to the medical profession to cure its patients of certain
ailments.
Income Tax
The financial statements do not include a provision for income taxes
because the Corporation has incurred net operating losses for all
periods to date. The "Deficit Accumulated During the Development Stage
at December 31, 1998" for $ 240,221.72 reflects the net operating loss
to date.
<PAGE> 17
NOTE B-DEVELOPMENT STAGE OPERATIONS
The Corporation's operations, as explained in Note A, is still devoted
to raising capital, obtaining financing, and providing the funding for
the research described in Notes A and D.
NOTE C-PROPERTY AND EQUIPMENT
Property and equipment are individually identified on the Balance Sheet
and are stated at cost.
Research and Development equipment is being depreciated using the
straight-line method over the useful life of five years of the
respective assets.
The General and Administrative equipment has been set up under the
Development Stage Expenses and no depreciation has been calculated at
this time since the business operations of the business has not begun.
NOTE D-RESEARCH AND DEVELOPMENT EXPENSES
The research and the development of the technology that became known as
the ssDNA IEV was invented by an MD, Dr. Charles Conrad, founder of
InGene, Inc. and a practicing neural oncologist. The technology was
exclusively licensed and developed under a sponsored research agreement
by the Corporation. The financial arrangements of the contract are
monitored by the Corporation's management.
The research and development expense categories also reflect the
expenses of the patent attorneys hired to assist the Corporation in the
patent filings of the first ssDNA IEV patent, which is scheduled to be
issued in August of l999. Other patent filings include co-inventions by
a Corporation scientist and Dr. Conrad.
<PAGE> 18
NOTE E-LOANS FROM SHAREHOLDERS
When the Corporation was initially set up and prior to raising capital,
the original officers and shareholders loaned the Corporation funds to
pay its expenses. In addition, several of the officers were not paid
for services rendered, these expenses were accrued at that time.
During this audit period, the management decided that to meet these
obligations any and all shareholder loans were to be repaid by issuance
of common stock.
Item 2.Management's Discussion and Analysis or Plan of Operation
The first obvious market target for our delivery vector comprises those
companies who own the rights to patented oligos with therapeutic
potential. Their initial interest would be in testing the combined
technologies with a view to commercialization.
The next target would be the major pharmaceutical manufacturers who
might already have options on oligos and are looking for a way to bring
value to that property with delivery technology. These would
necessarily be firms with a long view as antisense gene therapy has the
potential to severely impact the revenues now generated by
treating symptoms for conditions that can be corrected or eliminated
with the new biotechnology.
Strategic alliances are the rule rather than the exception in the
biotech world as mentioned before. Virtually every technology invented
must be combined with another technology to comprise a useable product.
These combinations are generally effected through M&A or strategic
alliances.
Sometimes the alliances are more intended to match financing to
innovation than to match complimentary technologies. Each alliance has
a valuable role in the biotechnology arena.
Initial contact has been made by various firms that may result in a
strategic alliance. Cryogenic Solutions, Inc. ability to continue
operations in 1999 depends on its success in obtaining equity financing
in an amount sufficient to support its operations through the end of
1999, and in connection therewith, is in negotiations with several
parties to obtain such financing.
<PAGE> 19
Thus far the major role of management has been to obtain the funding
for the research, monitoring the progress, husbanding intellectual
property, and development of the technology.
1) The decision was made early on that equity funding would be the
primary source with an eye to grants whenever possible. Debt has not
been an option.
2) The management team has successfully kept the G&A extremely low and
dedicated the lions share of available funds for research and
development.
3) The Company has vigorously pursued prosecution of patents for both
its licensed technology and internally developed technology. The first
of such has been allowed and is scheduled for issue by August, 1999.
4) The combination of Beta Tests and RFP's assures a flow of
corroborative data while new approaches and technologies are tested.
The strategy from this point forward is simple:
1) Provide the ssDNA IEV BetaTest Kits (product samples that may not be
reverse engineered) to as many respected investigators as possible at
cost so that they can demonstrate the efficacy of our proprietary
vector by delivering their own patented oligos.
2)Complete primate studies being conducted at The Southwest Foundation
for Biomedical Research, San Antonio, Texas to prove in vivo expression
in pharmacologically significant quantities. The research is intended
to turn off or antisense the SIV virus. Results of such studies are
expected by the spring of 2000.
3)Identify promising "compassionate use" therapies that qualify for
fast-track FDA approval to demonstrate safety and efficacy in human
trials.
This strategy has been initiated and is progressing with deliberate
speed. In addition, the company is posting Requests for Proposals
RFP) from interested and competent research facilities to conduct in
vivo studies from a list suggested by the Cryogenic Solutions, Inc.
Scientific Advisory Board.
<PAGE> 20
In Kind Stock Swap
In January 1999 rules governing Regulation D, 504 Private Placements
were amended whereby issuers were compelled to offer one year
restricted stock to suitable investors. Prior to this amendment,
issuers were permitted to offer freely transferable shares to
investors, typically at a slight discount to market in order to secure
equity financing. This new rule governing equity financing would place
shareholders at a large disadvantage due to the fact that in order to
secure funds for continued operations management would be forced to
offer unusually large discounts to market in consideration for the one
year restriction for sale of securities.
Rather than continue to fund future operations of the company at such a
disadvantage to the shareholders, the management of Cryogenic
Solutions, Inc. decided to offer all current shareholders the
opportunity to exchange their freely transferable shares for one
year restricted shares at a 2 for 1 ratio. The reasons for the offer of
the In Kind Stock Swap was to have all benefits of the exchange accrue
to current shareholders through the accumulation of freely transferable
shares in the company's treasury. Shareholders were benefited by the
ability to double their holdings in the company in a non-taxable
exchange according to IRS section code 1036 titled "Stock For Stock Of
Same Corporation". It was deemed necessary for the continued funding of
operations by the company's management to hold treasury shares for
purposes such as; use for sale to employees, satisfying any future
stock options and bonus plans; to establish a market in the stock; use
the stock to purchase other assets; use for a stock dividend; buyout a
particular stockholder or avoid takeovers.
Shareholders were notified of the In Kind Stock Swap via public press
releases, information contained on the Internet and through bulletins
issued by the Depository Trust Company (DTC).
The company's transfer agency, Nevada Agency and Trust Company (NATCO)
of Reno, Nevada acted as trustee for the exchange and was issued
20,000,000 shares to implement the transaction.
The company extended an offer to all shareholders to exchange shares of
Cryogenic Solutions, Inc. freely tradable common stock. The Company
issued two shares of one year restricted common stock in consideration
for each share of freely tradable common stock transferred to the
Company between May 16 and August 21, 1999 up to a total of ten million
shares.
The results of the completion of the In Kind Stock Swap are;
Number of one year restricted shares issued:11,651,522 shares
Number of freely transferable shares transferred to treasury:
5,825,761 shares
The remaining 8,348,478 shares of the 20,000,000 issued to the trustee
NATCO were retired back to authorized and un-issued upon completion of
the exchange.
The total number of shares outstanding as of September 27, 1999 is
28,814,442 common.
<PAGE> 21
Change in Management
In May of 1999 Laurence Mealey, CEO of the company died, subsequently
Mike Skillern assumed the position of temporary CEO and President. On
September 1, 1999 Malcolm Skolnick was appointed as CEO and President
of the Company. He was also appointed as a director of the company
beginning September 1, 1999 for a term of three years.
Lawrence Wunderlich, Vice President of Finance and Corporate Secretary
was also appointed to the Board of Directors on September 1, 1999 for a
term of three years.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ending
September30,1999
<PAGE> 22
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dell Gibson, Executive Vice President
(Registrant)
Date: November 15, 1999 By------------------------------------
(Signature)*
Print the name and title of each signing officer under his or her
signature.
<PAGE> 23
