GENETIC VECTORS INC
10QSB, 1998-11-23
PHARMACEUTICAL PREPARATIONS
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                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

      (MARK ONE)

    /X/  Quarterly Report Pursuant to Section 13 or 15(d) of Securities Exchange
         Act of 1934 (Fee Required)

                For the quarterly period ended SEPTEMBER 30, 1998

    /_/  Transition report under Section 13 or 15(d) of the Securities  Exchange
         Act of 1934 (No Fee Required)

               For the transition period from _______ to _______.

                           Commission File No. 0-21739

                              GENETIC VECTORS, INC.
                              ---------------------
                 (Name of Small Business Issuer in Its Charter)

FLORIDA                                        65-0324710                      
- -------                                        ----------                      
(State or Other Jurisdiction of                (I.R.S. Employer Identification 
Incorporation or Organization)                 No.)


5201 N.W. 77Th Avenue, Suite 100, Miami, Florida            33166      
- ------------------------------------------------            (Zip Code) 
(Address of Principal Executive Offices)

                                 (305) 716-0000
                                 --------------
                (Issuer's Telephone Number, Including Area Code)


      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,  and (2) has
been subject to such filing requirements for the past 90 days. Yes /X/ No /_/

      There were 2,345,017 shares of Common Stock outstanding as of November 20,
1998.


<PAGE>


PART I


FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS.

GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)

INDEX TO FINANCIAL STATEMENTS

                                                                 PAGE
Balance Sheet                                                    3
Statements of Operations                                         4
Statements of Cash Flows                                         5
Notes to Financial Statements                                    6









                                       2
<PAGE>


                                                          GENETIC VECTORS, INC.
                                                  (A DEVELOPMENT STAGE COMPANY)
                                                      BALANCE SHEET (UNAUDITED)


SEPTEMBER 30,                                                          1998
- --------------------------------------------------------------------------------

ASSETS
CURRENT
   Cash and cash equivalents                                         503,815
   Accounts receivable                                                 3,595
   Inventory                                                          71,785
   Prepaid expenses                                                   20,437
- --------------------------------------------------------------------------------

TOTAL CURRENT ASSETS                                                 599,632

EQUIPMENT, NET                                                       478,184

DEFERRED ACQUISITION AND PATENT COSTS, NET                           225,351
- --------------------------------------------------------------------------------
                                                                   1,303,167
================================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY                                           
CURRENT LIABILITIES
   Accounts payable and accrued liabilities                          129,374
- --------------------------------------------------------------------------------

                                                                     129,374
- --------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY                                                           
   COMMON  STOCK,   $.001  PAR  VALUE,   10,000,000                            
   SHARES  AUTHORIZED,  2,345,017 SHARES ISSUED AND                            
   OUTSTANDING                                                         2,345
   ADDITIONAL PAID-IN CAPITAL                                      6,216,953
   DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE               (5,045,505)
- --------------------------------------------------------------------------------

TOTAL STOCKHOLDERS' EQUITY                                         1,173,793
- --------------------------------------------------------------------------------

                                                                   1,303,167
================================================================================

                             SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.


                                       3
<PAGE>


<TABLE>
<CAPTION>

                                                                       GENETIC VECTORS, INC.
                                                               (A DEVELOPMENT STAGE COMPANY)
                                                         STATEMENT OF OPERATIONS (UNAUDITED)



                           CUMULATIVE
                                 FROM
                           JANUARY 1,       FOR THE        FOR THE       FOR THE   FOR THE
                                 1992         THREE          THREE          NINE   NINE
                          (INCEPTION)        MONTHS         MONTHS        MONTHS   MONTHS
                              THROUGH         ENDED          ENDED         ENDED   ENDED
                            SEPTEMBER     SEPTEMBER      SEPTEMBER     SEPTEMBER   SEPTEMBER
                             30, 1998      30, 1998       30, 1997      30, 1998     30, 1997
- -------------------------------------------------------------------------------------------------

<S>                            <C>            <C>           <C>            <C>         <C>   
REVENUE:                                                                                         

  SALES                        47,040         7,780         11,552         7,780       11,552
  GRANT INCOME                149,147             0         16,000        35,897       16,000
- -------------------------------------------------------------------------------------------------

TOTAL REVENUE                 196,187         7,780         27,552        43,677       27,552
- -------------------------------------------------------------------------------------------------

COST AND EXPENSES:
  OPERATING EXPENSES        3,164,791       355,394        439,025       883,232    1,149,401
  RESEARCH AND                                                                                   
  DEVELOPMENT               2,232,857       198,679         98,085       679,695      389,766
  DEPRECIATION AND
  AMORTIZATION                106,927        14,829         35,173        44,487       40,568
- -------------------------------------------------------------------------------------------------

TOTAL EXPENSES              5,504,575       568,902        572,283     1,607,414    1,579,735

INTEREST, NET                 262,883         9,384        104,605        56,210      159,052
- -------------------------------------------------------------------------------------------------

NET (LOSS)                (5,045,505)     (551,738)      (440,126)   (1,507,527)   (1,393,131)

WEIGHTED AVERAGE NUMBER                                                                          
  OF COMMON SHARES                      
  OUTSTANDING.                            2,345,017      2,339,634     2,341,727    2,339,634

NET (LOSS) PER COMMON                   
  SHARE                                     ($0.24)        ($0.19)       ($0.64)      ($0.60)

                                         SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.


</TABLE>

                                       4
<PAGE>


<TABLE>
<CAPTION>

                                                                                            GENETIC VECTORS, INC.
                                                                                    (A DEVELOPMENT STAGE COMPANY)
                                                                              STATEMENT OF CASH FLOWS (UNAUDITED)




                                                          CUMULATIVE FROM                                               
                                                          JANUARY 1, 1992                          
                                                              (INCEPTION)               FOR THE               FOR THE
                                                                  THROUGH     NINE MONTHS ENDED     NINE MONTHS ENDED
                                                            SEPTEMBER 30,         SEPTEMBER 30,         SEPTEMBER 30,
                                                                     1998                  1998                  1997
========================================================================================================================
<S>                                                           <C>                   <C>                   <C>        
OPERATING ACTIVITIES:                                                                                                   
     NET LOSS                                                 (5,045,505)           (1,507,527)           (1,393,131)
       ADJUSTMENTS TO  RECONCILE  NET LOSS TO NET CASH
       USED IN OPERATING ACTIVITIES:
         DEPRECIATION AND AMORTIZATION                            106,927                44,487                40,568
         WRITE-OFF OF ACQUIRED TECHNOLOGY                          15,000                     -                     -
         STOCK OPTIONS GRANTED FOR SERVICES                        56,250                     -                     -
         (INCREASE) IN ACCOUNTS RECEIVABLE                        (3,595)               (3,595)                     -
         (INCREASE) IN INVENTORY                                 (71,785)              (71,785)                     -
         INCREASE IN PREPAID EXPENSES                            (20,437)              (20,437)                     -
         DECREASE IN OTHER ASSETS                                       -                     _              (91,159)
         INCREASE  (DECREASE) IN ACCOUNTS PAYABLE AND
         ACCRUED LIABILITIES                                      262,196              (25,168)              (57,819)
- ------------------------------------------------------------------------------------------------------------------------

TOTAL ADJUSTMENTS                                                 344,556              (76,498)             (108,410)
- ------------------------------------------------------------------------------------------------------------------------

NET CASH USED IN OPERATING ACTIVITIES                         (4,700,949)           (1,584,025)           (1,501,541)
- ------------------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES:                                                                                                   
   PURCHASE OF EQUIPMENT AND IMPROVEMENTS                       (563,498)              (60,761)             (344,048)
   ACQUISITION AND PATENT COSTS                                 (261,964)`              (1,366)             (100,002)
- ------------------------------------------------------------------------------------------------------------------------

NET CASH USED IN INVESTING ACTIVITIES                           (825,462)              (62,127)             (444,050)
- ------------------------------------------------------------------------------------------------------------------------

   FINANCING ACTIVITIES:                                                                                                
     INCREASE DUE TO PARENT                                       413,518                     -                     -
     PROCEEDS FROM NOTE PAYABLE                                    35,000                     -                     -
     PAYMENT ON  NOTE PAYABLE                                    (35,000)                     -              (35,000)
     NET PROCEEDS FROM ISSUANCE OF COMMON STOCK                 5,097,451                47,500                     -
     CAPITAL CONTRIBUTION                                         500,000                     -                     -
     DEFERRED OFFERING REFUND                                      25,500                     -                     -
     DEFERRED OFFERING COSTS                                      (6,243)                     -                     -
- ------------------------------------------------------------------------------------------------------------------------

NET CASH PROVIDED BY (USED ON) FINANCING ACTIVITIES             6,030,226                47,500              (35,000)
- ------------------------------------------------------------------------------------------------------------------------

   NET INCREASE (DECREASE) IN CASH                                503,815           (1,598,652)           (1,980,591)
   CASH AT BEGINNING OF PERIOD                                          0             2,102,467             4,745,208
- ------------------------------------------------------------------------------------------------------------------------

CASH AT END OF PERIOD                                             503,815               503,815             2,764,617
========================================================================================================================

SUPPLEMENTAL DISCLOSURES:                                                                                               
   CONVERSION OF DUE TO PARENT IN EXCHANGE FOR STOCK              413,518                     -                     -
   CONVERSION OF ACCRUED WAGES FOR STOCK                          132,822                     -                     -
- ------------------------------------------------------------------------------------------------------------------------
                                                                 SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
</TABLE>

                                       5


<PAGE>


                                                           GENETIC VECTORS, INC.
                                                   (A DEVELOPMENT STAGE COMPANY)


GENETIC VECTORS, INC.

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

1. FINANCIAL STATEMENTS

   In  the  opinion  of  the  Company,  the  accompanying   unaudited  financial
statements  include  all  adjustments   (consisting  only  of  normal  recurring
accruals)  which are  necessary for a fair  presentation  of the results for the
periods  presented.   Certain  information  and  footnote  disclosures  normally
included in the  financial  statements  prepared in  accordance  with  generally
accepted  accounting  principles  have been omitted.  It is suggested that these
financial statements be read in conjunction with the Company's Annual Report for
the year ended  December 31, 1997. The results of operations for the nine months
ended  September  30, 1998 are not  necessarily  indicative of the results to be
expected for the full year.

2. RECLASSIFICATIONS

   Certain  reclassifications of 1997 amounts have been made in order to conform
to the 1998 presentation.

3. EARNINGS PER SHARE

   The  following  reconciles  the  components  of the  earnings per share (EPS)
computation.

<TABLE>
<CAPTION>

                                   FOR THE NINE MONTHS                                  FOR THE NINE MONTHS
                                 ENDED SEPTEMBER 30, 1998                            ENDED SEPTEMBER 30, 1997
                   ---------------------------------------------------------------------------------------------------------
                         LOSS             SHARES                                               SHARE                        
                      (NUMERATOR)     (DENOMINATOR)   PER SHARE AMOUNT  LOSS (NUMERATOR)   (DENOMINATOR)   PER SHARE AMOUNT
- ----------------------------------------------------------------------------------------------------------------------------
<S>                   <C>                 <C>                  <C>        <C>                  <C>                 <C>   
Loss per common                                                                                                             
share - basic         ($1,507,527)        2,341,727            ($.64)     ($1,393,131)         2,339,634           ($.60)
- ----------------------------------------------------------------------------------------------------------------------------
Effect of                                                                                                                   
Dilutive:                                                                                                                   
   Securities                   --               --                --               --                --               --
   Options                      --               --                --               --                --               --
   Warrants                     --               --                --               --                --               --
- ----------------------------------------------------------------------------------------------------------------------------


Loss per common
share, assuming
dilution              ($1,507,527)        2,341,727            ($.64)     ($1,393,131)         2,339,634           ($.60)

</TABLE>


Net loss per share of common  stock is based on the weighted  average  number of
common shares outstanding  during each period.  Diluted loss per share of common
stock is computed on the basis of the weighted  average  number of common shares
and diluted  options and  warrants  outstanding.  Dilutive  options and warrants
having an anti-dilutive effect are excluded from the calculation.


                                       6
<PAGE>




ITEM 2.  MANAGEMENT'S PLAN OF OPERATION AND DISCUSSION AND ANALYSIS.

INTRODUCTORY STATEMENTS

      FORWARD-LOOKING  STATEMENTS AND ASSOCIATED  RISKS.  This Quarterly  Report
contains forward-looking statements, including statements regarding, among other
things, (a) the growth strategies of Genetic Vectors, Inc. (the "COMPANY"),  (b)
anticipated  trends  in the  Company's  industry  and (c) the  Company's  future
financing  plans.  In addition,  when used in this Quarterly  Report,  the words
"believes,"  "anticipates,"  "intends," "in anticipation  of," and similar words
are   intended   to   identify   certain   forward-looking   statements.   These
forward-looking  statements are based largely on the Company's  expectations and
are subject to a number of risks and uncertainties, many of which are beyond the
Company's   control.   Actual  results  could  differ   materially   from  these
forward-looking  statements  as a result of changes in trends in the economy and
the Company's  industry,  reductions in the  availability of financing and other
factors.  In light of these risks and  uncertainties,  there can be no assurance
that the forward-looking  statements  contained in this Quarterly Report will in
fact occur.  The Company does not undertake any  obligation to publicly  release
the results of any  revisions to these  forward-looking  statements  that may be
made to reflect any future events or circumstances.

      As previously reported in its Form 10-QSB for the three-month period ended
June 30,  1998,  the Company will need to raise  additional  capital to continue
operations beyond November 1998. The Company is actively  searching for capital,
but has not raised  any  substantial  capital  as of the date of this  Quarterly
Report. No assurance can be given that the Company will be successful in raising
any such capital. In the absence of such additional capital, the Company will be
required to curtail certain of its business  activities.  Any such action by the
Company will have a material adverse effect on the Company's ability to continue
to  research  and  develop  its  proposed  products  and to market  and sell its
existing product,  and will have a material adverse Effect on its operations and
financial  condition  and on its  ability to continue  as a going  concern.  See
"Management's  Plan of Operations  and  Discussion  and Analysis - Liquidity and
Capital Resources."

      After removing it from the  marketplace  during the third quarter of 1997,
the Company has completed the  refinement of the EpiDNA  Picogram Assay Kit (the
"PICOGRAM ASSAY KIT").  During the three-month  period ended September 30, 1998,
the Company has not generated  significant  revenues.  As a result,  the Company
intends to continue to report its plan of operations.  In July 1998, the Company
reintroduced the Picogram Assay Kit to the marketplace and is closely monitoring
its market  acceptance.  There can be no assurances  that the Picogram Assay Kit
will be accepted by the marketplace.

PLAN OF OPERATION

      ADDITIONAL FUND RAISING ACTIVITIES.  The Company had originally  projected
that the funds raised in its initial public offering (the "OFFERING"), which was
closed on December 26, 1996, would last for approximately  eighteen months after
the date of the  Offering.  As  previously  reported  in its Form 10-QSB for the
three-month  period  ended  June  30,  1998,  the  Company  will  need to  raise
additional capital to continue operations beyond November 1998.   In the absence


                                       7
<PAGE>


of such  additional  capital,  the Company will be  required to curtail  certain
of its business  activities.  The plan of operation  described in this Quarterly
Report assumes  that  the  Company  will  be  successful  in raising  additional
capital.  The  failure  to raise  additional  capital will,  among other things,
cause  deviations from the plan of operation described in this Quarterly Report.

      SUMMARY OF ANTICIPATED  PRODUCT RESEARCH AND  DEVELOPMENT.  Subject to the
qualifications  above,  the  Company  will  continue  its product  research  and
development and continue to implement what the Company believes to be a feasible
plan for product  development.  The  Company is  outsourcing  production  of the
Picogram  Assay  Kit.  The major  components  of the plan of  operations  are as
follows:

1998          .  Continued  research in applications of Genetic Vectors' nucleic
                 acid labeling technology.

1999          .  Initiation of EasyID DNA probe product  development for quality
                 assurance in the food and beverage industry.

              .  Completion of first DNA labeling  product for test marketing in
                 the molecular biology research market.

              .  Research in the  application  of  automated  techniques  of DNA
                 analysis for EpiDNA.


      SIGNIFICANT PLANT OR EQUIPMENT  PURCHASES.  The Company does not currently
anticipate any significant  plant or equipment  purchases during the next twelve
months.

      CHANGES  IN THE  NUMBER  OF  EMPLOYEES.  The  Company  currently  has  ten
employees.  As shown in the  following  chart,  the Company does not  anticipate
hiring   additional   personnel  during  the  remainder  of  1998.  The  Company
anticipates hiring additional  personnel in 1999 in connection with its research
and development and product  development  plan. The Company  believes that these
personnel will be adequate to accomplish the tasks set forth in its plan.

PROPOSED PERSONNEL ADDITION PLAN                               1998     1999
- --------------------------------                               ----     ----
MANAGEMENT
  Chief Operating Officer                                         0        1
  Chief Financial Officer                                         0        1
SALES AND ADMINISTRATION
  Administrative Personnel                                        0        1
  Director - Sales and Marketing                                  0        1
  Salespersons                                                    0        2
  Technical Information/Inside Sales                              0        0
  Supervisors                                                     0        1
  Technicians                                                     0        3
                                                               ----     ----
TOTAL PROPOSED NEW EMPLOYEES                                      0       10
                                                               ====     ====
TOTAL EMPLOYEES AT END OF YEAR                                   10       20
                                                               ====     ====

                                       8
<PAGE>



MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

      Other than grant income, the Company did not generate significant revenues
during the nine months  ended  September  30,  1998.  The Company had no cost of
sales for that period.

      Although the Company did generate  some revenue from sales of its Picogram
Assay  Kit  during  Fiscal  1997,  it must be  stressed  that  such  sales  were
preliminary in nature,  and  represented  the purchase of product samples by the
purchasers  primarily  for  evaluation  purposes.  The Company  had  temporarily
removed the Picogram Assay Kit from the market during the third quarter of 1997,
and the Company did not generate any significant  sales revenue from the sale of
the Picogram Assay Kit in the nine months ended  September 30, 1998. The Company
reintroduced  the  Picogram  Assay  Kit in July of 1998;  however,  the  Company
remains  largely a  development  stage company with  expenditures  far exceeding
revenues.

      Research and development  expenses for the nine months ended September 30,
1998 increased by $289,929 over 1997. This increase was largely  attributable to
additional costs associated with the Picogram Assay Kit redevelopment program.

      Operating  expenses for the nine months ended September 30, 1998 decreased
by $266,169  over 1997.  This  decrease was  primarily  related to the Company's
focused efforts on development.

      LIQUIDITY  AND  CAPITAL  RESOURCES.  The net cash used by the  Company  in
operating  activities  aggregated  $1,584,025.  This was largely attributable to
operating  expenses and research and development  activities.  The Company's net
cash used in investing  activities  aggregated  $62,127 during 1998,  consisting
mainly of  purchases of  equipment  and patent  costs.  The  Company's  net cash
provided in financing  activities  aggregated  $47,500  during 1998,  consisting
mainly of proceeds from stock issuances.

      As of September 30, 1998,  the Company had total  stockholders'  equity of
$1,173,793.  The Company has no long term debt. The Company had $503,815 in cash
and cash  equivalents as of this date. These amounts  represent,  in large part,
the  remainder  of the net proceeds  generated  from the  Offering.  The Company
anticipates  that  such  proceeds  will  last  through  November  1998.   Absent
significant sales,  additional  financing will be necessary at that time for the
Company to continue  operations.  Additionally,  the Company expects to evaluate
acquisition  candidates.  The Company may have to use some of its available cash
in  connection  with  these  acquisitions   whether  or  not  any  of  them  are
consummated.

CERTAIN BUSINESS RISK FACTORS

      The Company is subject to various risks which may have a material  adverse
effect on its business,  financial condition and results of operations.  Certain
risks are discussed below:

                                       9
<PAGE>




FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING

      The  Company  has  expended,  and will  continue  to expend in the future,
substantial funds to complete the research and development of its products, some
of  which  are  in  the  early  development  stage.  The  Company  will  require
substantial funds for these purposes.  The Company will need to raise additional
capital to continue  operations  beyond  November  1998. The Company is actively
searching for capital,  but has not consummated  any additional  capital raising
transactions as of the date of this Quarterly Report. No assurances can be given
that the Company  will be  successful  in raising such  capital.  The Company is
currently  evaluating whether to curtail its business activities to preserve its
existing  capital until an alternative  source of capital can be located,  if at
all. Any such action by the Company will have a material  adverse  effect on the
Company's  ability to continue to research and develop its proposed products and
to market and sell its existing product, and will have a material adverse effect
on its  operations  and financial  condition and on its ability to continue as a
going concern.  See "Management's Plan of Operations and Discussion and Analysis
- - Liquidity and Capital Resources."

LIMITED OPERATING HISTORY AND EXPECTATION OF FUTURE LOSSES

      The Company was  organized  in 1991 and is in the  development  stage.  To
date,  the Company has  generated  very  limited  revenues  from the sale of its
product.  Further,  the Company has devoted  most of its efforts to research and
development  and the  development  of a business  strategy.  From its  inception
through  September  30,  1998,  the Company has  incurred  cumulative  losses of
approximately $5.0 million.  The Company expects to incur substantial losses for
the   foreseeable   future  due,  in  part,  to  research  and  development  and
manufacturing, distributing and marketing its product. There can be no assurance
that the Company will not encounter  substantial delays and unexpected  expenses
related to research,  development,  production and marketing or other unforeseen
difficulties, which may cause additional losses.

ABILITY TO CONTINUE TO OPERATE AS A GOING CONCERN

      The Company's  independent auditors have added an explanatory paragraph to
their  audit  opinion  issued in  connection  with the  Company's  1997 and 1996
financial  statements  which  states that the  Company's  dependence  on outside
financing and losses since inception raise  substantial  doubt about its ability
to continue as a going concern.  These  financial  statements do not include any
adjustments that might result from the outcome of this uncertainty.

UNCERTAIN MARKET ACCEPTANCE AND DEPENDENCE ON A LIMITED NUMBER OF PRODUCTS

      The  Company's  initial  product  is the  EpiDNA(TM)  Picogram  Assay (thE
"PICOGRAM  ASsay").  The Company performed a preliminary  launch of the Picogram
Assay during the third  quarter of its 1997 fiscal year.  Thereafter,  it became
apparent that additional fine tuning of the kit was required in order to achieve
consistent results at the lower end of the sensitivity scale.  Accordingly,  the
kit was removed from the marketplace in December, 1997. The Company reintroduced
the kit in the marketplace in July of 1998,  although no assurances can be given
that the kit will be well received by the marketplace.  To date, the Company has
generated  only a limited  amount of sales from the kit.  The  Company's  second
proposed  product line is EasyID(TM)  which combines the EpiDNA  technology with
gene probes in kits for the  detection  of yeasts.  These kits are  intended for

                                       10
<PAGE>




quality  control  in the food and  beverage  industry.  The  Company  intends to
continue the  development  of the EasyID  technology.  Because the Company has a
limited number of products under  development,  the Company is highly  dependent
and the Company's long-term success may depend on the market acceptance of these
products.  Market acceptance of the Company's  products will depend, in part, on
the  Company's  ability to  demonstrate  the  superiority  of its products  with
respect to existing techniques,  including the products' accuracy,  ease of use,
reliability and  cost-effectiveness  and on the  effectiveness  of the Company's
marketing  efforts.  No assurance can be given that the Company will gain market
acceptance  for its products.  Failure to gain market  acceptance  for either of
these  product  lines  will have a  material  adverse  effect  on the  Company's
business, financial condition and results of operations.

TECHNOLOGICAL UNCERTAINTY AND EARLY STAGE OF PRODUCT DEVELOPMENT

      The science and technology of the Company's  proposed  products is rapidly
evolving.  Although the Company has conducted  limited  marketing of its initial
product,  other  proposed  products are in the early  development  stage.  These
products will require significant further research,  development and testing and
are  subject to the risks of failure  inherent  in the  development  of products
based on innovative  technologies.  These risks include the possibility that any
or all of  the  proposed  products  are  found  to be  ineffective,  unsafe,  or
otherwise  fail to receive  necessary  regulatory  clearances,  if any, that the
proposed  products,  though  effective,  are uneconomical to market,  that third
parties hold  proprietary  rights that preclude the Company from marketing them,
or that third parties market a superior or equivalent product.  Accordingly, the
Company is unable to predict  whether its  research and  development  activities
will result in any commercially viable products.

LIMITED MANUFACTURING AND MARKETING CAPABILITY

      The  Company  has  limited  experience  in  marketing  its  product and no
assurance exists that the Company can market its product in an effective manner.
The Company intends to market its product in the United States,  Europe and Asia
through a network of independent distributors supported by a direct sales force.
A limited sales force is in place. No distribution  agreements have been entered
into.  The Company's  ability to market its product in Europe and Asia and other
areas may depend on strategic alliances with marketing partners. There can be no
assurance that the Company will enter into such  alliances with other  companies
on favorable terms or at all.

GOVERNMENT REGULATION

      The Company's  operations will be subject to regulation  normally incident
to business  operations (e.g.,  occupational  safety and health acts,  workmen's
compensation  statutes,  unemployment  insurance,  and  income  tax  and  social
security related  regulations),  and to regulations present in the biotechnology
industry.  The biotechnology industry is subject to extensive Federal, state and
local government  regulation.  Although the Company believes that its operations
will comply with all applicable laws and regulations,  there can be no assurance
that the  subsequent  adoption  of laws or  regulations  or  interpretations  of
existing  laws  or  regulations,  including  changes  which  might  subject  the
Company's products to regulation by the Food and Drug  Administration,  will not


                                       11
<PAGE>




adversely  effect the  Company's  business.  Current or future  Federal or state
legislation  could  also  have  a  material  adverse  effect  on  the  Company's
operations and financial condition.

      Any  manufacturing  processes  utilized by the Company  will be subject to
stringent Federal,  state and local regulations  governing the use,  generation,
manufacture, storage, handling and disposal of certain materials and wastes, and
regarding the manufacture, testing, labeling, record keeping, and storage of its
products. Although the Company believes that it has complied and can continue to
comply in all material respects with such laws and regulations,  there can be no
assurance  that the Company will not be required to incur  significant  costs in
the future in complying with manufacturing and environmental regulations.

RISK OF PRODUCT LIABILITY CLAIMS

      The  nature of the  Company's  business  exposes  it to risk from  product
liability claims.  The Company  maintains  product  liability  insurance for its
products  with  limits  of $1  million  per  occurrence  and $2  million  in the
aggregate per year. Such insurance coverage is, however,  becoming  increasingly
expensive  and there can be no assurance  that the Company's  insurance  will be
adequate to cover future product  liability  claims, or that the Company will be
successful in maintaining  adequate  product  liability  insurance at acceptable
rates. Any losses that the Company may suffer from future liability claims,  and
any adverse  publicity from product  liability  litigation,  may have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.

COMPETITION

      The biotechnology industry is subject to intense competition.  The Company
has numerous  competitors in the United States and abroad which  include,  among
others,  diagnostics,  health care,  pharmaceutical and biotechnology companies.
Additionally,  the Company  expects other  competitors to enter its field in the
future.  Many of the Company's present and future competitors have substantially
greater financial,  business and technological  resources than the Company,  and
may have  substantially  greater  experience  in its  industry.  There can be no
assurance that the Company's resources will be sufficient to allow it to compete
effectively in the future. Such competition could have a material adverse effect
on the Company's business, financial condition and results of operations.

DEPENDENCE ON LIMITED NUMBER OF SUPPLIERS

      Certain key components of the Company's product are currently  provided to
the Company by a limited number of sources, one of which is provided by a single
source.  In connection  with the component which is provided by a single source,
the Company has not arranged  alternative supply sources.  In the event that the
Company  is  unable  to  obtain  sufficient  quantities  of such  components  on
commercially reasonable terms, or in a timely manner, the Company will be unable
to manufacture  its product on a timely and  cost-competitive  basis which would
have a material adverse effect on the Company's  business,  financial  condition
and results of  operations.  In addition,  if any of the component  parts of the
Company's product are no longer available,  the Company may be forced to further
develop its technology to incorporate alternate component parts.



                                       12
<PAGE>




UNCERTAINTY REGARDING PATENTS AND PROPRIETARY RIGHTS

      The  Company's  success  will  depend in part on its ability to obtain and
maintain  patent  protection for its products,  preserve its trade secrets,  and
operate without infringing the proprietary  rights of other parties.  Because of
the substantial length of time and expense associated with bringing new products
through  development  to the  marketplace,  the  biotechnology  industry  places
considerable  importance  on obtaining and  maintaining  patent and trade secret
protection  for  new  technologies,  products  and  processes.  Legal  standards
relating to the scope of claims and the validity of patents in the biotechnology
field  are  uncertain  and  evolving.  There  can be no  assurance  that  patent
applications  to which the Company  holds  rights will result in the issuance of
patents,  that  any  patents  issued  or  licensed  to the  Company  will not be
challenged  and  held to be  invalid,  or that  any such  patents  will  provide
commercially  significant  protection to the Company's technology,  products and
processes.  In  addition,  there  can  be no  assurance  that  others  will  not
independently  develop  substantially  equivalent  proprietary  information  not
covered  by  patents to which the  Company  has  rights or obtain  access to the
Company's  know-how or that others will not be issued  patents which may prevent
the sale of one or more of the Company's products,  or require licensing and the
payment of  significant  fees or  royalties  by the Company to third  parties in
order to enable the Company to conduct its business.  Defense and prosecution of
patent  claims can be expensive  and time  consuming,  regardless of whether the
outcome  is  favorable  to the  Company,  and can  result  in the  diversion  of
substantial financial,  management, and other resources from the Company's other
activities.  An  adverse  outcome  could  subject  the  Company  to  significant
liability to third  parties,  require the Company to obtain  licenses from third
parties,  or require the Company to cease any related  research and  development
activities or product sales. In addition,  the laws of certain countries may not
protect the Company's  intellectual property. No assurance can be given that any
licenses required under any such third-party patents or proprietary rights would
be made available on commercially reasonable terms, if at all.

      The Company's  success is also dependent upon the skills,  knowledge,  and
experience  of its  scientific  and  technical  personnel.  To help  protect its
rights, the Company plans to require all of its employees, consultants, advisors
and  collaborators  to enter into  confidentiality  agreements that prohibit the
disclosure of confidential information to anyone outside the Company and require
disclosure  and  in  most  cases  assignment  to the  Company  of  their  ideas,
developments,  discoveries and inventions.  There can be no assurance,  however,
that these agreements will provide  adequate  protection for the Company's trade
secrets,  know-how  or  other  proprietary  information  in  the  event  of  any
unauthorized use or disclosure.

DEPENDENCE ON KEY PERSONNEL; INEXPERIENCE OF MANAGEMENT

      The Company's ability to successfully manage its growth will substantially
depend on its  ability to attract  and retain  additional  qualified  management
personnel.  Currently,  none  of the  Company's  administrative  staff  has  any
experience in running a large company or a company whose securities are publicly
held, apart from the Company.  There can be no assurance that the demands placed
on Company  personnel by the growth of the  Company's  business and the need for


                                       13
<PAGE>




close monitoring of the Company's  operations and financial  performance through
appropriate and reliable  administrative and accounting  procedures and controls
will be met, or that the Company will otherwise manage its growth  successfully;
the  failure  to do so could  have a material  adverse  effect on the  Company's
business,  results of operations and financial  condition.  There is significant
competition  for  qualified  personnel,  and there can be no assurance  that the
Company will be successful in  recruiting,  retaining or training the management
personnel it requires.  The Company  currently has no officer with experience in
managing the financial and accounting functions of a publicly-held company.















                                       14
<PAGE>



PART II

OTHER INFORMATION.


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS.

USE OF PROCEEDS

      1.    Effective  date  of  registration  statement:   December  20,  1996;
            Commission File Number 333-5530-A.

      2.    The Offering commenced on December 20, 1996.

      3.    The Offering did not terminate before any securities were sold.

            (i)   The  Offering  did  not  terminate  before  the  sale  of  all
                  securities registered.

            (ii)  The managing underwriter was Shamrock Partners, Ltd.

            (iii) Securities registered:

                  (a)   Common Stock ($0.001 par value)

                  (b)   Underwriter  warrants to purchase an aggregate of 50,000
                        shares of  Common  Stock.  Those  warrants  will  become
                        exercisable  on December 21, 1997 and expire on December
                        19, 2001.

            (iv)  Securities sold (all sold for account of the issuer):

                                           AGGREGATE               AGGREGATE
                                            OFFERING                OFFERING
                                            PRICE OF                PRICE OF
                                  AMOUNT      AMOUNT      AMOUNT      AMOUNT
             TITLE            REGISTERED  REGISTERED        SOLD        SOLD
  ----------------------------------------------------------------------------
  1. Common Stock               575,000  $5,750,000    $575,000  $5,750,000
  2. Common Stock pursuant
     to Underwriter Warrants     50,000     750,000       - 0 -       - 0 -
  3. Underwriter Warrants        50,000         500      50,000         500




                                       15
<PAGE>




            (v)   Underwriting discounts and commissions:        $  517,500

                  Finder's fees:                                        -0-

                  Expenses paid for Underwriters:                    217,139

                  Other expenses:                                    445,610

                  Total Expenses                                  $1,180,249


            (vi)  Net Proceeds of Offering Before Referral        $4,569,751

                  Refund of Offering Costs:                       $   19,257

                  Net Proceeds of Offering:                       $4,589,008

            (vii) Uses of Net Proceeds:


<TABLE>
<CAPTION>
                                              DIRECT  OR   INDIRECT   PAYMENTS  TO      
                                              DIRECTORS,     OFFICERS,     GENERAL      
                                              PARTNERS  OF  THE  ISSUER  OR  THEIR      
                                              ASSOCIATES;  TO  PERSONS  OWNING TEN      
                                              PERCENT  OR  MORE  OF ANY  CLASS  OF      
                                              EQUITY  SECURITIES  OF  THE  ISSUER;       DIRECT OR INDIRECT PAYMENT TO
                                              AND TO AFFILIATES OF THE ISSUER            OTHERS
                                              ---------------------------------------    ----------------------------------
<S>                                           <C>                                        <C>
Construction of plant, building                                                                                            
and facilities:                                                                                                            

Purchase and installation of machinery                                                                                     
and equipment:                                                                  --                              501,802

Purchase of real estate:                                                        --                                   --

Acquisition of other                                                                                                       
business(es):                                                                   --                                   --

Repayment of indebtedness:                                                      --                                   --

Working capital:                                                           $30,000                              901,483


TEMPORARY INVESTMENTS (SPECIFY)

Merrill Lynch Money Market Account:                                                                             $97,685
Certificate of Deposit:                                                                                        $406,130


                                       16
<PAGE>





OTHER PURPOSES (SPECIFY)

Research and Development and                                                                                                 
     patent protection expenditures:                                            --                              $1,592,019

Expansion of Manufacturing facilities:                                    $109,000                                $270,299

Sales and marketing capabilities:                                               --                                $169,052

Management Salaries                                                       $429,711                                      --

Investor Relations                                                              --                                 $81,827

</TABLE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(A)   EXHIBITS.

<TABLE>
<CAPTION>

     EXHIBIT
       NO.          DESCRIPTION                                 LOCATION                                         PAGE
       ---          -----------                                 --------                                         ----
      <S>           <C>                                         <C>
      3.1           Articles of Incorporation of the            Incorporated by reference to Exhibit
                    Company, as amended                         No. 3.1 to Registrant's Registration
                                                                Statement (the "REGISTRATION Statement")
                                                                on Form SB-2 (Registration Number
                                                                333-5530-A).

      3.2           By-laws of the Company                      Incorporated by reference to Exhibit
                                                                No. 3.2 to the Registration Statement.

      4.1           Form of Common Stock certificate            Incorporated by reference to Exhibit
                                                                No. 4.1 to the Registration Statement.

      4.2           Form of Underwriters' Warrant               Incorporated by reference to Exhibit
                                                                No. 4.2 to the Registration Statement.

      4.3           Form of 1996 Incentive Plan                 Incorporated by reference to Exhibit
                                                                No. 4.3 to the Registration Statement.

      10.1          License Agreement dated                     Incorporated by reference to Exhibit
                    September 7, 1990 between the               No. 10.1 to the Registration Statement.
                    University  of Miami and its School 
                    of Medicine and ProVec, Inc.

      10.2          Assignment of License Agreement dated       Incorporated by reference to Exhibit
                    January 20, 1992 between ProVec, Inc.       No. 10.2 to the Registration Statement.
                    and EpiDNA, Inc.

      10.3          Agreement between University of Miami       Incorporated by reference to Exhibit
                    and its School of Medicine and the          No. 10.3 to the Registration Statement.
                    Company dated August 21, 1996

      10.4          Employment Agreement dated                  Incorporated by reference to Exhibit
                    August 15, 1996 between Mead M. McCabe,     No. 10.4 to the Registration Statement.
                    Sr. and the Company



                                       17
<PAGE>




      10.5          Stock Option Addendum to Employment         Incorporated by reference to Exhibit
                    Agreement dated August 15, 1996 between     No. 10.5 to the Registration Statement.
                    Mead M. McCabe, Sr. And the Company

      10.6          Employment Agreement dated                  Incorporated by reference to Exhibit
                    August 15, 1996 between Mead M. McCabe,     No. 10.6 to the Registration Statement.
                    Jr. and the Company

      10.7          Stock Option Addendum to Employment         Incorporated by reference to Exhibit
                    Agreement dated August 15, 1996 between     No. 10.7 to the Registration Statement.
                    Mead M. McCabe, Jr. and the Company

      10.8          Consulting Agreement dated June 19,         Incorporated by reference to Exhibit
                    1996 between James A. Joyce and the         No. 10.10 to the Registration Statement.
                    Company

      10.9          Letter Agreement dated December 16,         Incorporated by reference to Exhibit
                    1994 among Nyer Medical Group, Inc.,        No. 10.11 to the Registration Statement.
                    the Company, Mead M. McCabe, Sr. And
                    Mead M. McCabe, Jr.

     10.10          Investors Finders Agreement dated           Incorporated by reference to Exhibit
                    June 9, 1994 among Nyer Medical Group,      No. 10.12 to the Registration Statement.
                    Inc., and the Company and Gulf American
                    Trading Company

     10.11          Industrial Real Estate Lease dated June     Incorporated by reference to Exhibit
                    12, 1997 among the Company and Jetex        No. 10.13 to the Company's Quarterly
                    Group, Inc.                                 Report on Form 10-QSB for the Quarter
                                                                ended June 30, 1997

     10.12          Letter from University of Miami dated       Incorporated by reference to Exhibit
                    April 8, 1998                               No. 10.12 to the Company's Annual
                                                                Report on Form 10-KSB for the Fiscal
                                                                Year ended December 31, 1997

      11.           Statement re:  computation of earnings      Not applicable

      18.           Letter on change in accounting              Not applicable
                    principles

      19.           Reports furnished to Security holders       Not applicable

      22.           Published report regarding matters          Not applicable
                    submitted to vote

      23.           Consents of experts and counsel             Not applicable

      24.           Power of Attorney                           Not applicable

      27.           Financial Data Schedule                     Provided herewith

</TABLE>

(B)   REPORTS ON FORM 8-K.

      None.



                                       18
<PAGE>




                                   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.

Date:  November 23, 1998                GENETIC VECTORS, INC.


                                        By:   /s/ Mead M. Mccabe, Jr.
                                              --------------------------------
                                              Mead M. McCabe, Sr.
                                              Chairman of the Board of Directors










                                       19
<PAGE>



<TABLE>
<CAPTION>

  EXHIBIT
    NO.       DESCRIPTION                                   LOCATION                                       PAGE
    ---       -----------                                   --------                                       ----
    <S>       <C>                                           <C>                                            <C>
    3.1       Articles of Incorporation of the Company,     Incorporated by reference to Exhibit
              as amended                                    No. 3.1 to Registrant's Registration
                                                            Statement (the "REGISTRATION Statement")
                                                            on Form SB-2 (Registration Number
                                                            333-5530-A).

    3.2       By-laws of the Company                        Incorporated by reference to Exhibit
                                                            No. 3.2 to the Registration Statement.

    4.1       Form of Common Stock certificate              Incorporated by reference to Exhibit
                                                            No. 4.1 to the Registration Statement.

    4.2       Form of Underwriters' Warrant                 Incorporated by reference to Exhibit
                                                            No. 4.2 to the Registration Statement.

    4.3       Form of 1996 Incentive Plan                   Incorporated by reference to Exhibit
                                                            No. 4.3 to the Registration Statement.

    10.1      License Agreement dated September 7, 1990     Incorporated by reference to Exhibit
              between the University of Miami and its       No. 10.1 to the Registration Statement.
              School of Medicine and ProVec, Inc.

    10.2      Assignment of License Agreement dated         Incorporated by reference to Exhibit
              January 20, 1992 between ProVec, Inc. and     No. 10.2 to the Registration Statement.
              EpiDNA, Inc.

    10.3      Agreement between University of Miami and     Incorporated by reference to Exhibit
              its School of Medicine and the Company        No. 10.3 to the Registration Statement.
              dated August 21, 1996

    10.4      Employment Agreement dated August 15, 1996    Incorporated by reference to Exhibit
              between Mead M. McCabe, Sr. and the Company   No. 10.4 to the Registration Statement.

    10.5      Stock Option Addendum to Employment           Incorporated by reference to Exhibit
              Agreement dated August 15, 1996 between       No. 10.5 to the Registration Statement.
              Mead M. McCabe, Sr. And the Company

    10.6      Employment Agreement dated August 15, 1996    Incorporated by reference to Exhibit
              between Mead M. McCabe, Jr. and the Company   No. 10.6 to the Registration Statement.

    10.7      Stock Option Addendum to Employment           Incorporated by reference to Exhibit
              Agreement dated August 15, 1996 between       No. 10.7 to the Registration Statement.
              Mead M. McCabe, Jr. and the Company

    10.8      Consulting Agreement dated June 19, 1996      Incorporated by reference to Exhibit
              between James A. Joyce and the Company        No. 10.10 to the Registration Statement.

    10.9      Letter Agreement dated December 16, 1994      Incorporated by reference to Exhibit
              among Nyer Medical Group, Inc., the           No. 10.11 to the Registration Statement.
              Company, Mead M. McCabe, Sr. And Mead M.
              McCabe, Jr.



                                                 20
<PAGE>




   10.10      Investors Finders Agreement dated             Incorporated by reference to Exhibit
              June 9, 1994 among Nyer Medical Group,        No. 10.12 to the Registration Statement.
              Inc., and the Company and Gulf American
              Trading Company

   10.11      Industrial Real Estate Lease dated June 12,   Incorporated by reference to Exhibit
              1997 among the Company and Jetex Group, Inc.  No. 10.13 to the Company's Quarterly
                                                            Report on Form 10-QSB for the Quarter
                                                            ended June 30, 1997

   10.12      Letter from University of Miami dated         Incorporated by reference to Exhibit
              April 8, 1998                                 No. 10.12 to the Company's Annual
                                                            Report on Form 10-KSB for the Fiscal
                                                            Year ended December 31, 1997

    11.       Statement re:  computation of earnings        Not applicable

    18.       Letter on change in accounting principles     Not applicable

    19.       Reports furnished to Security holders         Not applicable

    22.       Published report regarding matters            Not applicable
              submitted to Vote

    23.       Consents of experts and counsel               Not applicable

    24.       Power of Attorney                             Not applicable

    27.       Financial Data Schedule                       Provided herewith


</TABLE>


                                                 21



<TABLE> <S> <C>

<ARTICLE>                     5
       
<S>                             <C>
<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                              DEC-31-1998
<PERIOD-START>                                 JUL-01-1998
<PERIOD-END>                                   SEP-30-1998
<CASH>                                             503,815
<SECURITIES>                                             0
<RECEIVABLES>                                        3,595
<ALLOWANCES>                                             0
<INVENTORY>                                         71,785
<CURRENT-ASSETS>                                   599,632
<PP&E>                                             563,498
<DEPRECIATION>                                    (85,314)
<TOTAL-ASSETS>                                   1,303,167
<CURRENT-LIABILITIES>                              129,374
<BONDS>                                                  0
                                    0
                                              0
<COMMON>                                             2,345
<OTHER-SE>                                       1,171,448
<TOTAL-LIABILITY-AND-EQUITY>                     1,303,167
<SALES>                                              7,780
<TOTAL-REVENUES>                                    43,677
<CGS>                                                    0
<TOTAL-COSTS>                                            0
<OTHER-EXPENSES>                                 1,607,414
<LOSS-PROVISION>                                         0
<INTEREST-EXPENSE>                                       0
<INCOME-PRETAX>                                (1,507,527)
<INCOME-TAX>                                             0
<INCOME-CONTINUING>                                      0
<DISCONTINUED>                                           0
<EXTRAORDINARY>                                          0
<CHANGES>                                                0
<NET-INCOME>                                   (1,507,527)
<EPS-PRIMARY>                                       (0.64)
<EPS-DILUTED>                                       (0.64)
        

</TABLE>


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