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
For the quarterly period ended JUNE 30, 1999
|_| Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
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 No.)
Incorporation or Organization)
5201 N.W. 77TH AVENUE, SUITE 100, 33166
MIAMI, FLORIDA -----
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(Addres of Principal Executive Offices) (Zip Code)
(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 |_| No |X|
There were 2,974,843 shares of Common Stock outstanding as of November 15,
1999.
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PART I
FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS.
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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 7
2
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GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET (UNAUDITED)
JUNE 30, 1999
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CURRENT ASSETS:
Accounts receivable 13,312
Inventory 19,043
Prepaid expenses 22,832
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TOTAL CURRENT ASSETS 55,187
Equipment and improvements, net 354,607
Patents and license agreement, net 214,165
Restricted cash equivalents 46,130
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TOTAL ASSETS 670,089
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accrued liabilities:
Accounts payable trade 303,399
Notes Payable 279,050
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582,449
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STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, 10,000,000
shares authorized, 2,574,843 shares
issued and outstanding 2,575
Additional paid-in capital 7,287,945
Deficit accumulated during the
development stage (7,202,880)
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TOTAL STOCKHOLDERS' EQUITY 87,640
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670,089
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See accompanying notes to the financial statements.
3
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<TABLE>
<CAPTION>
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS (UNAUDITED)
CUMULATIVE
FROM
JANUARY 1, FOR THE FOR THE FOR THE FOR THE
1992 THREE THREE SIX SIX
(INCEPTION) MONTHS MONTHS MONTHS MONTHS
THROUGH ENDED ENDED ENDED ENDED
JUNE 30, JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1999 1999 1998 1999 1998
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<S> <C> <C> <C> <C> <C>
REVENUE:
Sales 83,304 25,115 -- 32,769 --
Grant income 149,147 -- -- -- 35,897
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Total revenue 232,451 25,115 -- 32,769 35,897
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COST AND EXPENSES:
Cost of Sales 15,021 13,116 -- 15,021 --
General and administration 4,423,096 329,339 312,291 585,980 527,838
Research and development 2,815,767 147,486 276,243 277,669 481,016
Depreciation and amortization 242,042 44,925 14,829 54,175 29,658
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Total expenses 7,495,926 534,866 603,363 932,845 1,038,512
Amortization of deferred
debt discount 211,093 192,568 -- 192,568 --
Interest, net 271,688 1,338 7,296 3,209 46,826
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Net loss (7,202,880) (700,981) (596,067) (1,089,435) (955,789)
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Weighted average number of
common shares outstanding 2,475,942 2,340,531 2,413,241 2,340,083
Net loss per common share ($0.28) ($0.25) ($0.45) ($0.41)
SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.
</TABLE>
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<TABLE>
<CAPTION>
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (UNAUDITED)
CUMULATIVE FROM
JANUARY 1, 1992
(INCEPTION) FOR THE SIX FOR THE SIX
THROUGH JUNE 30, MONTHS ENDED MONTHS ENDED
1999 JUNE 30, 1999 JUNE 30, 1998
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<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss (7,202,880) (1,089,435) (955,789)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 242,042 54,175 29,658
Amortization of deferred debt discount 211,093 192,568 --
Write-off of acquired technology 71,250 -- --
Consulting services provided
for common stock 6,000 -- --
Stock options granted for
services 340,572 -- --
(Increase) decrease in accounts
receivable (13,312) (9,692) --
(Increase) decrease in inventory (19,043) (5,543) --
(Increase) decrease in prepaid
expenses (22,832) 20 --
(Increase) decrease in other
assets -- -- (99,375)
(Increase) decrease in
restricted cash equivalents (46,130) -- --
Increase in accounts payable
and accrued liabilities 465,332 132,359 20,588
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TOTAL ADJUSTMENTS 1,234,972 363,887 (49,129)
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NET CASH USED IN OPERATING ACTIVITIES (5,967,908) (725,548) (1,004,918)
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INVESTING ACTIVITIES:
Purchase of equipment and improvements (567,107) (1,130) (10,170)
Insurance proceeds in excess of loss on fixed
assets 3,254 3,254 --
Patent costs (261,964) -- (160,519)
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NET CASH USED IN INVESTING ACTIVITIES (825,817) 2,124 (170,689)
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FINANCING ACTIVITIES:
Increase due to parent 413,518 -- --
Proceeds from notes payable 573,500 388,500 --
Payment on notes payable (35,000) -- --
Net proceeds from issuance of
common stock and exercise of options 5,322,450 225,000 25,000
Capital contribution 500,000 -- --
Deferred offering refund 25,500 -- --
Deferred offering costs (6,243) -- --
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 6,793,725 613,500 25,000
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NET INCREASE (DECREASE) IN CASH 0 (109,924) (1,150,607)
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</TABLE>
5
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<TABLE>
<CAPTION>
GENETIC VECTORS, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS (UNAUDITED)
CUMULATIVE FROM
JANUARY 1, 1992
(INCEPTION) FOR THE SIX FOR THE SIX
THROUGH JUNE 30 MONTHS ENDED MONTHS ENDED
1999 JUNE 30, 1999 JUNE 30, 1998
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<S> <C> <C> <C>
Cash at beginning of period -- 109,924 2,102,467
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CASH AT END OF PERIOD -- -- 951,880
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SUPPLEMENTAL DISCLOSURES: -- -- --
Warrants issued in connection with
loan financing 499,650 388,500 --
Conversion of due to parent in
exchange for stock 413,518 -- --
Conversion of accrued wages for stock 132,822 -- --
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SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS
</TABLE>
6
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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, 1998. The results of operations for the six months
ended June 30, 1999 are not necessarily indicative of the results to be expected
for the full year.
2. EARNINGS PER SHARE
The following reconciles the components of the earnings per share (EPS)
computation.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, 1999 ENDED JUNE 30, 1998
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LOSS SHARES PER SHARE LOSS SHARE PER SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Loss per common
share - basic ($1,089,435) 2,413,241 ($0.45) ($955,789) 2,340,083 ($0.41)
- --------------------------------------------------------------------------------------------------------------------------
Effect of
Dilutive:
Securities -- -- -- -- -- --
Options -- -- -- -- -- --
Warrants -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Loss per common
share, assuming
dilution ($1,089,435) 2,413,241 ($0.45) ($955,789) 2,340,083 ($0.41)
</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.
3. NOTES PAYABLE
Through June 30, 1999, the Company borrowed $388,500 (See Item 2, Changes in
Securities and Use of Proceeds; Item 3, Defaults upon Senior Securities). In
connection with these borrowings, the Company issued 313,850 warrants with
exercise prices ranging from $.01 to $5.50. The exercise prices of such
warrants were below the market price of the Company's common stock. In
connection with these transactions, the value ascribed to the warrants was
equal to the amount borrowed. Accordingly, the Company has recorded a debt
discount and has offset the amounts borrowed by the value ascribed to these
warrants. The Company will amortize the deferred discount over the term of
the related borrowings.
Notes payable as of June 30, 1999
Notes payable $567,610
Debt discount (288,560)
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net $279,050
=======
4. SUBSEQUENT EVENTS
Effective November 15, 1999, the Company was no longer in compliance with the
National Association of Securities Dealers, Inc. (NASD(R)) filing requirements.
Accordingly, the letter "E" was appended to the trading symbol. Once the NASD
receives notification that the Company complies with the filing requirement, the
fifth character "E" will be removed. The Company expects to be compliant in the
near future.
7
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ITEM 2 MANAGEMENT'S PLAN OF OPERATION AND DISCUSSION AND ANALYSIS.
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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, (c) the Company's future financing
plans and (d) the Company's ability to obtain financing and continue operations.
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 ("FORM 10-QSB") for the quarter
year ended March 31, 1999, the Company needed to raise additional capital to
continue operations beyond the end of June 1999. From April 1, 1999 through
November 19, 1999, the Company has raised an additional $1,125,000 in equity and
loans. On April 19, 1999, the Company obtained a $100,000 loan from a private
investor. On May 10, 1999, the Company obtained a $225,000 equity investment
from the sale of 225,000 shares of the Company's common stock. The equity
investor paid $1.00 per share for the 225,000 shares of the Company's common
stock, or $4.75 per share less than the closing price of $5.75 per share on May
10, 1999. On July 16, 1999, the Company obtained a $400,000 equity investment
from the sale of 400,000 shares of the Company's common stock. These two equity
investors paid $1.00 per share for the 400,000 shares of the Company's common
stock, or $4.75 per share less than the closing price of $5.75 per share on July
16, 1999. On October 6, 1999, the Company obtained a $200,000 loan from a
private investor. On November 19, 1999, the Company obtained a $200,000 loan
from a private investor. See "Changes in Securities and Use of Proceeds - Sales
of Unregistered Securities." The Company projects that all of these proceeds to
be expended by the end of December, 1999.
The Company needs to raise significant additional capital to continue
operations beyond the end of December, 1999. In the absence of additional
capital, the Company will be required to significantly curtail or cease its
business activities after December, 1999. The Company has no commitment for any
additional capital and no assurances can be given that the Company will be
successful in raising any new capital. The Company's inability to raise new
capital 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 products, 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." THE COMPANY'S ABILITY TO CONTINUE ITS BUSINESS ACTIVITIES
BEYOND DECEMBER, 1999 IS COMPLETELY DEPENDENT ON OBTAINING ADDITIONAL CAPITAL.
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During the six-month period ended June 30, 1999, the Company did not
generate significant revenues. As a result, the Company intends to continue to
report its plan of operations.
PLAN OF OPERATION
ADDITIONAL FUND RAISING ACTIVITIES. The Company is dependent on external
capital to finance its business operations. Such external capital will also be
necessary for the Company's operations to reach a level in which it may
internally generate the cash flow necessary to sustain its operations. 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. It will also jeopardize the Company's
ability to continue its business activities.
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
EpiDNA Picogram Assay Kit and manufacturing its second product the DNAMAX kit in
house. The major components of the plan of operations are as follows:
2000 o Continued research in applications of Genetic Vectors' nucleic
acid labeling technology.
o Continuation of EasyID DNA probe product development for diagnostic
uses in certain clinical diagnostic and food and beverages markets.
o Completion of first DNA labeling product for test marketing in the
molecular biology research market.
o 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 five
employees. The Company does not anticipate hiring any additional personnel
during the remainder of 1999. If the Company is successful in raising
significant new capital, then the Company anticipates hiring fifteen new
employees in 2000 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.
9
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PROPOSED PERSONNEL ADDITION PLAN 2000
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MANAGEMENT
Executive Personnel 2
Administrative Personnel 1
Director - Sales and Marketing 1
Salespersons 6
Technical Info/Inside Sales 2
Scientific Supervisors 1
Technicians
2
-----
TOTAL PROPOSED NEW EMPLOYEES 15
=====
TOTAL EMPLOYEES AT END OF YEAR 20
=====
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Company remains largely a development stage company. The Company
generated revenues of $32,769 during the six months ended June 30, 1999 and had
cost of sales of $15,021 for the same period, all of which were attributable to
sales of the Picogram Assay. The Company's expenditures far exceed its revenues.
The Company reported no revenues for the quarter ended June 30, 1998 ("SECOND
QUARTER 1998"), and accordingly no meaningful comparison to this prior period
can be made.
Research and development expenses for the six months ended June 30, 1999
decreased by $203,347 over the comparable period in the prior year. This
decrease is largely attributable to a decrease in the Company's research and
development budget, primarily due to the Company's lack of capital.
Selling, general and administrative expenses increased $58,142 in the six
months ended June 30, 1999 over the comparable period in 1998. This increase is
primarily attributable to the expenses incurred in connection with the launch of
the Company's products and the reclassifying of certain expenses.
Amortization and depreciation expense increased $217,085 in the six months
ended June 30, 1999 over the comparable period in 1998. The increase is
primarily due to the accrual of interest for borrowed money and amortization of
deferred debt discount that were incurred in connection with warrants that were
issued in 1999. The Company expects to incur substantial noncash financing
expenses during the balance of 1999 and 2000.
Interest income for the six months ended June 30, 1999 decreased by
$43,617 because the Company had less cash invested during the current period
than in the comparable period in the prior year. Interest income in the current
period was attributable to interest earned on certificates of deposit and money
market accounts which represented the investment of the net proceeds received by
the Company from the sale of unregistered securities and the proceeds from loan
transactions.
LIQUIDITY AND CAPITAL RESOURCES. The net cash used by the Company in
operating activities aggregated $725,548. This was largely attributable to
operating expenses and research and development activities. The Company's net
cash provided in financing activities aggregated $613,500 during the six months
ended June 30, 1999, consisting mainly of proceeds from the sale of unregistered
securities and loan transactions.
As discussed throughout the Form 10-KSB and Form 10-QSB, the Company has
experienced extreme cash shortages since the end of November 1998 through the
date of this Quarterly Report. As of June 30, 1999, the Company had no
cash-on-hand. From January 1, 1998 through June 30, 1999, the Company raised
$613,500 in equity and loans. Since June 30, 1999, the Company raised a total of
$800,000. Of that total, on July 16, 1999, the Company obtained a $400,000
equity investment from the sale of 400,000 shares of the Company's common stock.
These two equity investors paid $1.00 per share for the 400,000 shares of the
10
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Company's common stock, or $4.75 per share less than the closing price of $5.75
per share on July 16, 1999. On October 6, 1999, the Company obtained a $200,000
loan from a private investor. On November 19, 1999, the Company obtained a
$200,000 loan from a private investor. See "Changes in Securities and Use of
Proceeds - Sales of Unregistered Securities." The Company had total
stockholders' equity of $87,640 as of June 30, 1999 and its current liabilities
exceeded current assets by $527,262. The Company needs additional capital to
continue operations beyond the end of December, 1999. The Company has received
informal nonbinding assurances from a source who has previously provided the
Company with capital, that it will assist the Company in raising additional
capital for the expansion of its business. No assurances can be given that the
Company will be able to raise any such capital.
YEAR 2000 COMPUTER ISSUES. Computer programs have typically abbreviated
dates by eliminating the first two digits of the year under the assumption that
these two digits would be 19. As the year 2000 approaches, these systems may not
be able to recognize current dates which may cause computer system failure or
miscalculations by computer programs. The Company does not believe it will be
materially affected by the Year 2000 problem. The Company's conclusion is based
on a survey of the computer equipment currently in use by the Company. All such
equipment was acquired by the Company within the last three years and was
Year-2000-compliant when acquired. The Company has not expended a material
amount of costs in this assessment. Moreover, the Company remains largely a
research and development company and therefore its exposure to the Year 2000
problems of its customers and suppliers is minimal. However, the Company is
exposed to the risk that one or more of its suppliers could experience Year 2000
problems that may impact their ability to supply materials to the Company. To
date, the Company is not aware of any Year 2000 problems of its suppliers that
would have a material adverse impact on the Company's operations. Nonetheless,
the inability of suppliers to convert their computer systems to avoid any Year
2000 problems could jeopardize the supply of materials to the Company and
therefore have a material adverse effect on the Company's operations. The effect
of non-compliance by suppliers is not determinable at this time.
POTENTIAL ACQUISITION OF DNA SCIENCES. On October 4, 1999, the Company
entered into a non-binding letter of intent to acquire DNA Sciences, Inc., a
California corporation ("DNA SCIENCES"). If consummated, the transaction will be
structured as a merger of DNA Sciences with and into the Company. In the merger,
the shareholders of DNA Sciences will receive 450,000 shares of common stock of
the Company. The shareholders of DNA Sciences will also have the ability to
nominate one director to the Company's Board of Directors. The Company expects
to consummate this transaction prior to December 31, 1999.
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:
ABILITY TO REPAY INDEBTEDNESS; EXISTING DEFAULTS ON INDEBTEDNESS. As of
November 15, 1999, the Company received a total of $938,500 in loans dating back
to November 2, 1998 in seven separate loan transactions. Interest became payable
on two of these loans (a total of $150,000) on April 1, 1999, on two other loans
(a total of $288,500) on April 19, 1999 and on another loan (a total of
$100,000) on June 1, 1999. The Company is in default on these loans for failing
to pay the required interest payments. The remaining two loans (a total of
$400,000) become payable on January 19, 2000. Four of these loans (a total of
$788,500) are secured by substantially all of the Company's assets. The
Company's ability to pay any interest or to repay such loans is completely
dependent on the Company's ability to raise additional capital from external
sources. The Company's failure to raise such capital and to pay all accrued but
unpaid interest and subsequently to repay the loans upon maturity may result in
the foreclosure on the Company's assets. This would have a material adverse
effect on the Company's business, financial condition and results of operations
and would jeopardize the Company's ability to continue as a going concern.
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 products. Further, the
11
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Company has devoted most of its efforts to research and development and the
development of a business strategy. From its inception through June 30, 1999,
the Company has incurred cumulative losses of approximately $7.2 million. The
Company expects to incur substantial losses through June 2000, in part, to
research and development and manufacturing, distributing and marketing its
products. 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.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING. The Company
had no cash-on-hand as of June 30, 1999. Since June 30, 1999, the Company has
raised a total of $800,000. Of that total, $400,000 resulted from the purchase
of 400,000 shares of the Company's common stock by two private investors. These
private investors paid $1.00 per share, or $4.75 per share less than the closing
price of $5.75 per share on July 16, 1999. On October 6, 1999 and November 19,
1999, the Company obtained loans of $200,000 and $200,000, respectively, from a
private investor. The Company projects that substantially all of these proceeds
will be expended by the end of December, 1999. The Company has received informal
nonbinding assurances from a source who has previously provided the Company with
capital, that it will assist the Company in raising additional capital for the
expansion of its business. The Company's ability to continue its business
activities is completely dependent on such additional capital and its failure to
obtain such capital will have a material adverse effect on the Company's
business, financial condition and results of operation and will jeopardize the
Company's ability to continue its business activities.
UNCERTAIN MARKET ACCEPTANCE AND DEPENDENCE ON A LIMITED NUMBER OF
PRODUCTS. The Company currently has two products, the Picogram Assay and the
DNAMAX Kit and another product line under development, the EasyID product line.
As such, the Company is highly dependent on a limited number of products 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. These efforts have been adversely affected by the Company's
working capital shortage. 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 Picogram Assay, the DNAMAX and EasyID are rapidly
evolving. Although the Company has conducted limited marketing of its initial
products, other proposed products are in the early development stage. These
proposed 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's experience
in manufacturing has been limited to the production of small amounts of kits of
its initial products for use in research and development and early
commercialization of its initial products. No assurance can be given that the
Company will ultimately be able to obtain or produce sufficient quantities of
such product at commercially reasonable costs.
The Company has limited experience in marketing its products and no
assurance exists that the Company can market its products in an effective
12
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manner. The Company intends to market its products in the United States, Europe
and Asia through a network of independent distributors supported by a direct
sales force, but no sales force is yet in place, and no distribution agreements
have been entered into. The Company's ability to market its product in Europe
and Asia and other areas will depend on the Company's ability to fund such
efforts as well as the Company's ability to develop 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.
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. In addition, due to the Company's working capital shortage,
there can be no assurance that the Company will be able to fund the premiums for
its existing insurance. 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.
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 ownership or license 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. In addition, due
to the Company's working capital shortage, there can be no assurance that the
Company will be able to continue its existing patent applications.
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 has to date required, and plans to continue 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. Because
of the Company's extreme cash shortage, its ability to attract or retain
qualified personnel has been hindered. Currently, none of the Company's
administrative staff has any experience in running a large company or a company
13
<PAGE>
whose securities are publicly held, apart from the Company. There can be no
assurance that the demands placed on Company personnel by the cash shortage or
the growth of the Company's business and the need for 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 has designated Mead M. McCabe, Jr. as its principal
financial officer. The Company currently has no officer with previous experience
in managing the financial and accounting functions of a publicly-held company.
14
<PAGE>
PART II
OTHER INFORMATION.
- -----------------
ITEM 1. LEGAL PROCEEDINGS.
------------------
The Company is not aware of any legal proceedings involving the Company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
------------------------------------------
(a), (b) and (d) None.
(c) SALES OF UNREGISTERED SECURITIES. On January 19, 1999, the Company
borrowed $163,500 from a private investor ("LOAN NO. 1"). The terms of Loan No.
1 provided for an annual interest rate of 12% which will increase 1% for each
month that any portion of the loan remains unpaid after January 19, 2000, up to
the maximum rate permitted by law. Accrued interest is payable monthly beginning
on April 19, 1999. The Company has not paid any interest on this loan and
therefore is in default. The outstanding principal balance must be repaid by
January 19, 2000. The loan is secured by substantially all of the Company's
assets. In addition, the Company issued the private investor warrants to
purchase 50,000 shares of Common Stock at an exercise price of $0.01 per share.
These warrants are immediately exercisable. The closing price of the Common
Stock on January 19, 1999 was $5.125. The Company is obligated to grant the
private investor warrants to purchase 150,000 shares at an exercise price of
$5.50 per share upon the repayment of the loan or the closing on the sale of
Company securities in an aggregate amount of $1,500,000. The proceeds of this
loan have already been expended by the Company to fund its working capital
needs. This offering was exempt from registration pursuant to Section 4(2) of
the Securities Act of 1933, as amended (the "ACT"), and Rule 506 promulgated
thereunder.
On March 9, 1999, the Company borrowed an additional $125,000 ("LOAN NO.
2") from the same private investor which had made Loan No. 1. The terms of Loan
No. 2 provided for an annual interest rate of 12% which will increase 1% for
each month that any portion of the loan remains unpaid after January 19, 2000,
up to the maximum rate permitted by law. Accrued interest is payable monthly
beginning on April 19, 1999. The Company has not paid any interest on this loan
and therefore is in default. The outstanding principal balance must be repaid by
January 19, 2000. The loan is secured by substantially all of the Company's
assets. In addition, the Company issued the private investor warrants to
purchase 50,000 shares of Common Stock at an exercise price of $0.01 per share.
These warrants are immediately exercisable. The closing price of the Common
Stock on March 9, 1999 was $7.875. Substantially all of the proceeds of this
loan have been expended by the Company to fund its working capital needs. This
offering was exempt from registration pursuant to Section 4(2) of the Act and
Rule 506 promulgated thereunder.
In connection with Loan No. 1 and Loan No. 2, the Company granted warrants
to purchase 16,350 shares of Common Stock on January 19, 1999 and 12,500 shares
of Common Stock on March 9, 1999 at an exercise price of $5.50 per share to a
consultant for helping the Company locate the financing. These warrants are
immediately exercisable. The closing price of the Common Stock was $5.125 and
$7.875 on January 19, 1999 and March 9, 1999, respectively. This offering was
exempt from registration pursuant to Section 4(2) of the Act.
On April 19, 1999, the Company borrowed an additional $100,000 ("LOAN NO.
3") from a private investor. This loan has an annual interest rate of 12%.
Accrued interest is payable quarterly, commencing on June 1, 1999. The Company
has not paid any interest on this loan and therefore is in default. The loan is
secured by substantially all of the Company's assets. In addition, the Company
issued the private investor warrants to purchase 25,000 shares of Common Stock
15
<PAGE>
at an exercise price of $3.50 per share. These warrants are immediately
exercisable. The closing price of the Common Stock on April 23, 1999 was $6.00.
At June 30, 1999, substantially all of the proceeds of this loan have been
expended by the Company to fund its working capital needs. This offering was
exempt from registration pursuant to Section 4(2) of the Act and Rule 506
promulgated thereunder.
On May 10, 1999, the Company issued 225,000 shares of Common Stock to a
private investor in exchange for $225,000. The proceeds from this offering were
completely expended by June 30, 1999. The private investor paid $1.00 per share
for the 225,000 shares, or $4.75 per share less than the closing price of $5.75
per share on May 10, 1999. This offering was exempt from registration pursuant
to Section 4(2) of the Act and Rule 506 promulgated thereunder.
On July 16, 1999, the Company issued 400,000 shares of Common Stock to two
private investors in exchange for $400,000. The proceeds from this offering were
completely expended by October, 1999. These private investors paid $1.00 per
share for the 400,000 shares, or $4.75 per share less than the closing price of
$5.75 per share on July 16, 1999. This offering was exempt from registration
pursuant to Section 4(2) of the Act and Rule 506 promulgated thereunder.
On October 6, 1999, the Company borrowed an additional $200,000 ("LOAN NO.
4") from a private investor. The loan has an annual interest rate of 12%,
accrued interest is payable quarterly, commencing January 19, 2000. The loan is
secured by substantially all of the Company's assets. In addition, the Company
issued the private investor warrants to purchase 80,000 shares of common stock
at an exercise price of $.01 per share. These warrants are immediately
exercisable. The closing price of the common stock on October 7, 1999 was $5.75.
In addition, if $1.5 million is subsequently raised or the loan is paid back,
the Company will issue warrants to purchase 150,000 shares of common stock at an
exercise price of $3.00 per share. In connection with this loan, the Company
granted warrants to purchase 20,000 shares of common stock on October 7, 1999 at
an exercise price of $3.00 per share to a consultant for helping the Company
locate the financing. These warrants are exercisable immediately. This offering
was exempt from registration pursuant to Section 4(2) of the Act and Rule 506
promulgated thereunder.
On November 19, 1999, the Company borrowed an additional $200,000 ("LOAN
NO. 5") from a private investor. The loan has an annual interest rate of 12%,
accrued interest is payable quarterly, commencing January 19, 2000. The loan is
secured by substantially all of the Company's assets. In addition, the Company
issued the private investor warrants to purchase 80,000 shares of common stock
at an exercise price of $.01 per share. These warrants are immediately
exercisable. The closing price of the common stock on November 19, 1999 was
$6.00. In addition, if $1.5 million is subsequently raised or the loan is paid
back, the Company will issue warrants to purchase 150,000 shares of common stock
at an exercise price of $3.00 per share. In connection with this loan, the
Company granted warrants to purchase 20,000 shares of common stock on November
19, 1999 at an exercise price of $3.00 per share to a consultant for helping the
Company locate the financing. These warrants are exercisable immediately. This
offering was exempt from registration pursuant to Section 4(2) of the Act and
Rule 506 promulgated thereunder. The Company expects substantially all of these
proceeds to be expended by the end of December, 1999.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
--------------------------------
As of November 15, 1999, the Company received a total of $938,500 in loans
dating back to November 2, 1998 in seven separate loan transactions. Interest
became payable on two of these loans (a total of $150,000) on April 1, 1999, on
two other loans (a total of $288,500) on April 19, 1999 and on another loan (a
total of $100,000) on June 1, 1999. The Company is in default on these loans for
failing to pay the required interest payments. The remaining two loans (a total
of $400,000) become payable on January 19, 2000. Four of these loans (a total of
$788,500) are secured by substantially all of the Company's assets. The
Company's ability to pay any interest or to repay such loans is completely
dependent on the Company's ability to raise additional capital from external
sources. The Company's failure to raise such capital and to pay all accrued but
unpaid interest and subsequently to repay the loans upon maturity may result in
the foreclosure on the Company's assets. This would have a material adverse
effect on the Company's business, financial condition and results of operations
and would jeopardize the Company's ability to continue as a going concern.
16
<PAGE>
As of September 30, 1999, the Company owed $30,533 in interest on these
loans, with interest accruing at a rate of $168.70 per day.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
---------------------------------
(A) EXHIBITS.
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION LOCATION PAGE
- ---------- ----------- -------- ----
3.1 Articles of Incorporation of Incorporated by reference
the Company, as amended to Exhibit 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 Incorporated by reference
certificate 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
September 7, 1990 between to Exhibit No. 10.1 to the
the University of Miami and Registration Statement.
its School of Medicine and
ProVec, Inc.
10.2 Assignment of License Incorporated by reference
Agreement dated January 20, to Exhibit No. 10.2 to the
1992 between ProVec, Inc. Registration Statement.
and EpiDNA, Inc.
10.3 Agreement between University Incorporated by reference
of Miami and its School of to Exhibit No. 10.3 to the
Medicine and the Company Registration Statement.
dated August 21, 1996
10.4 Employment Agreement dated Incorporated by reference
August 15, 1996 between Mead to Exhibit No. 10.4 to the
M. McCabe, Sr. and the Registration Statement.
Company
10.5 Stock Option Addendum to Incorporated by reference
Employment Agreement dated to Exhibit No. 10.5 to the
August 15, 1996 between Mead Registration Statement.
M. McCabe, Sr. And the
Company
10.6 Stock Option Addendum to Incorporated by reference
Employment Agreement dated to Exhibit No. 10.7 to the
August 15, 1996 between Mead Registration Statement.
M. McCabe, Jr. and the
Company
10.7 Consulting Agreement dated Incorporated by reference
June 19, 1996 between James to Exhibit No. 10.10 to
A. Joyce and the Company the Registration Statement.
17
<PAGE>
10.8 Letter Agreement dated Incorporated by reference
December 16, 1994 among Nyer to Exhibit No. 10.11 to
Medical Group, Inc., the the Registration Statement.
Company, Mead M. McCabe, Sr.
And Mead M. McCabe, Jr.
10.9 Investors Finders Agreement Incorporated by reference
dated June 9, 1994 among to Exhibit No. 10.12 to
Nyer Medical Group, Inc., the Registration Statement.
and the Company and Gulf
American Trading Company
10.10 Industrial Real Estate Lease Incorporated by reference
12, 1997 among to Exhibit No. dated June 10.13 to the
the Company's Quarterly Inc. Company and Jetex Group,
Report on Form 10-QSB for
the Quarter ended June 30,
1997.
10.11 Letter from University of Incorporated by reference
Miami dated April 8, 1998 to Exhibit No. 10.12 to
the Company's Annual
Report on Form 10-KSB for
the Fiscal Year ended
December 31, 1997.
10.12 Promissory Note dated as of Incorporated by reference
1998 in the Original Principal to Exhibit 10.13 to the
Amount of $50,000 given by the Company's Annual Report on
Company to Ms. Patricia A. Form 10-KSB for the Fiscal
Gionone Year ended December 31, 1998.
10.13 Common Stock Purchase Incorporated by reference
Warrant No. W-2 dated as of to Exhibit 10.14 to the
November 2, 1998 granted by Company's Annual Report on
the Company to Ms. Patricia Form 10-KSB for the Fiscal
A. Gionone Year ended December 31,
1998.
10.14 Promissory Note dated as of Incorporated by reference
1998 in the Original Principal to Exhibit 10.15 to the
Amount of $100,000 given by Company's Annual Report on
the Company to Jerome P. Form 10-KSB for the Fiscal
Seiden Irrevocable Trust Year ended December 31, 1998.
Dated April 22, 1998.
10.15 Common Stock Purchase Incorporated by reference
Warrant No. W-1 dated as of to Exhibit 10.16 to the
November 2, 1998 granted by Company's Annual Report on
the Company to Jerome P. Form 10-KSB for the Fiscal
Seiden Irrevocable Trust Year ended December 31,
Dated April 22, 1998 1998.
10.16 Common Stock Purchase Warrant Incorporated by reference to
No. W-5 dated as of September Exhibit 10.17 to the Company's
3, 1998 granted by the Company Annual Report on Form 10-KSB
to Sterling Technology 1999.
Partners
10.17 Common Stock Purchase Warrant Incorporated by reference to
No. W-4 dated as of January 19 Exhibit 10.18 to the Company's
1999 granted by the Company to Annual Report on Form 10-KSB
Sterling Technology Partners, for the Fiscal Year ended
Ltd. December 31, 1998.
10.18 Common Stock Purchase Warrant Incorporated by reference to
No. W-7 dated as of March 9, Exhibit 10.19 to the Company's
1999 granted by the Company Annual Report on Form 10-KSB
to Sterling Technology for the Fiscal Year ended
Partners, Ltd. December 31, 1998.
18
<PAGE>
10.19 Common Stock Purchase Incorporated by reference
Warrant No. W-3 dated as of to Exhibit 10.20 to the
January 19, 1999 granted by Company's Annual Report on
the Company to Capital Form 10-KSB for the Fiscal
Year ended December 31, 1998.
10.20 Promissory Note dated as of Incorporated by reference
January 19, 1999 in the to Exhibit 10.21 to the
Original Principal Amount of Company's Annual Report on
$163,500 given by the Form 10-KSB for the Fiscal
Company to Captial Research, Year ended December 31, 1998.
Ltd.
10.21 Pledge and Security Agreement Incorporated by reference
dated as of January 19, 1999 to Exhibit 10.22 to the
between the Company and Company's Annual Report on
Capital Resarch, Ltd. Form 10-KSB for the Fiscal
Year ended December 31, 1998.
10.22 Registration Rights Agreement Incorporated by reference Exhibit
dated as of January 19, 1999 10.23 to the Company's Annual Report
between the Company and on form 10-KSB for the Fiscal Year
Capital Research, Ltd. ended December 31 1998.
10.23 Promissory Note dated as of Incorporated by reference
March 9, 1999 in the to Exhibit 10.24 to the
Original Principal Amount of Company's Annual Report on
$125,000 given by the Form 10-KSB for the Fiscal
Company to Capital Research, Year ended December 31,
Ltd. 1998.
10.24 Common Stock Purchase Incorporated by reference
Warrant No. W-6 dated as of to Exhibit 10.25 to the
March 9, 1999 granted by the Company's Annual Report on
Company to Capital Research, Form 10-KSB for the Fiscal
Ltd. Year ended December 31,
1998.
10.25 Registration Rights Incorporated by reference
Agreement dated as of to Exhibit 10.26 to the
March 9, 1999 between the Company's Annual Report on
Company and Capital Form 10-KSB for the Fiscal
Research, Ltd. Year ended December 31,
1998.
10.26 Executive Employment Incorporated by reference
Agreement dated as of June to Exhibit 10.26 to the
1, 1999, together with Stock Company's Amendment No. 1
Option Addendum, between to the Annual Report on
Mead M. McCabe, Jr. and the Form 10-KSB for the
Company quarter ended December 31,
1999.
10.27 Executive Employment Incorporated by reference
Agreement dated as of June to Exhibit 10.27 to the
1, 1999, together with Stock Company's Amendment No. 1
Option Addendum, between to the Annual Report on
Mead M. McCabe, Sr. and the Form 10-KSB for the
Company quarter ended December 31,
1999.
11. Statement re: computation Not applicable.
of earnings
18. Letter on change in Not applicable.
accounting principles
19. Reports furnished to Not applicable.
Security holders
22. Published report regarding Not applicable.
matters submitted to Vote
23. Consents of experts and Not applicable.
counsel
24. Power of Attorney Not applicable.
27. Financial Data Schedule Provided herewith.
19
<PAGE>
99.01 Non-Binding Letter of Intent Provided herewith.
to Acquire DNA Sciences
(B) REPORTS ON FORM 8-K.
None.
20
<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: December 10, 1999 GENETIC VECTORS, INC.
By:/s/ Mead M. McCabe, Jr.
--------------------------
Mead M. McCabe, Jr.
President
21
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION LOCATION PAGE
- ----------- ----------- -------- ----
3.1 Articles of Incorporation of Incorporated by reference
the Company, as amended to Exhibit 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 Incorporated by reference
certificate 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
September 7, 1990 between to Exhibit No. 10.1 to the
the University of Miami and Registration Statement.
its School of Medicine and
ProVec, Inc.
10.2 Assignment of License Incorporated by reference
Agreement dated January 20, to Exhibit No. 10.2 to the
1992 between ProVec, Inc. Registration Statement.
and EpiDNA, Inc.
10.3 Agreement between University Incorporated by reference
of Miami and its School of to Exhibit No. 10.3 to the
Medicine and the Company Registration Statement.
dated August 21, 1996
10.4 Employment Agreement dated Incorporated by reference
August 15, 1996 between Mead to Exhibit No. 10.4 to the
M. McCabe, Sr. and the Registration Statement.
Company
10.5 Stock Option Addendum to Incorporated by reference
Employment Agreement dated to Exhibit No. 10.5 to the
August 15, 1996 between Mead Registration Statement.
M. McCabe, Sr. And the
Company
10.6 Stock Option Addendum to Incorporated by reference
Employment Agreement dated to Exhibit No. 10.7 to the
August 15, 1996 between Mead Registration Statement.
M. McCabe, Jr. and the
Company
10.7 Consulting Agreement dated Incorporated by reference
June 19, 1996 between James to Exhibit No. 10.10 to
A. Joyce and the Company the Registration Statement.
10.8 Letter Agreement dated Incorporated by reference
December 16, 1994 among Nyer to Exhibit No. 10.11 to
Medical Group, Inc., the the Registration Statement.
Company, Mead M. McCabe, Sr.
And Mead M. McCabe, Jr.
22
<PAGE>
10.9 Investors Finders Agreement Incorporated by reference
dated June 9, 1994 among to Exhibit No. 10.12 to
Nyer Medical Group, Inc., the Registration Statement.
and the Company and Gulf
American Trading Company
10.10 Industrial Real Estate Lease Incorporated by reference
dated June 12, 1997 among to Exhibit No. 10.13 to
the Company and Jetex Group, the Company's Quarterly
Inc. Report on Form 10-QSB for
the Quarter ended June 30,
1997.
10.11 Letter from University of Incorporated by reference
Miami dated April 8, 1998 to Exhibit No. 10.12 to
the Company's Annual
Report on Form 10-KSB for
the Fiscal Year ended
December 31, 1997.
10.12 Promissory Note dated as of Incorporated by reference
November 2, 1998 in the to Exhibit 10.13 to the
Original Principal Amount of Company's Annual Report on
$50,000 given by the Company Form 10-KSB for the Fiscal
to Ms. Patricia A. Gionone Year ended December 31,
1998.
10.13 Common Stock Purchase Incorporated by reference
Warrant No. W-2 dated as of to Exhibit 10.14 to the
November 2, 1998 granted by Company's Annual Report on
the Company to Ms. Patricia Form 10-KSB for the Fiscal
A. Gionone Year ended December 31,
1998.
10.14 Promissory Note dated as of Incorporated by reference
November 2, 1998 in the to Exhibit 10.15 to the
Original Principal Amount of Company's Annual Report on
$100,000 given by the Form 10-KSB for the Fiscal
Company to Jerome P. Seiden Year ended December 31,
Irrevocable Trust Dated 1998.
April 22, 1998
10.15 Common Stock Purchase Incorporated by reference
Warrant No. W-1 dated as of to Exhibit 10.16 to the
November 2, 1998 granted by Company's Annual Report on
the Company to Jerome P. Form 10-KSB for the Fiscal
Seiden Irrevocable Trust Year ended December 31,
Dated April 22, 1998 1998.
10.16 Common Stock Purchase Incorporated by reference
Warrant No. W-5 dated as of to Exhibit 10.17 to the
September 3, 1998 granted by Company's Annual Report on
the Company to Sterling Form 10-KSB for the Fiscal
Technology Partners, Ltd. Year ended December 31,
1998.
10.17 Common Stock Purchase Incorporated by reference
Warrant No. W-4 dated as of to Exhibit 10.18 to the
January 19, 1999 granted by Company's Annual Report on
the Company to Sterling Form 10-KSB for the Fiscal
Technology Partners, Ltd. Year ended December 31,
1998.
10.18 Common Stock Purchase Incorporated by reference
Warrant No. W-7 dated as of to Exhibit 10.19 to the
March 9, 1999 granted by the Company's Annual Report on
Company to Sterling Form 10-KSB for the Fiscal
Technology Partners, Ltd. Year ended December 31,
1998.
10.19 Common Stock Purchase Incorporated by reference
Warrant No. W-3 dated as of to Exhibit 10.20 to the
January 19, 1999 granted by Company's Annual Report on
the Company to Capital Form 10-KSB for the Fiscal
Research, Ltd. Year ended December 31,
1998.
23
<PAGE>
10.20 Promissory Note dated as of Incorporated by reference
January 19, 1999 in the to Exhibit 10.21 to the
Original Principal Amount of Company's Annual Report on
$163,500 given by the Form 10-KSB for the Fiscal
Company to Capital Research, Year ended December 31,
Ltd. 1998.
10.21 Pledge and Security Incorporated by reference
Agreement dated as of to Exhibit 10.22 to the
January 19, 1999 between the Company's Annual Report on
Company and Capital Form 10-KSB for the Fiscal
Research, Ltd. Year ended December 31,
1998.
10.22 Registration Rights Incorporated by reference
Agreement dated as of to Exhibit 10.23 to the
January 19, 1999 between the Company's Annual Report on
Company and Capital Form 10-KSB for the Fiscal
Research, Ltd. Year ended December 31,
1998.
10.23 Promissory Note dated as of Incorporated by reference
March 9, 1999 in the to Exhibit 10.24 to the
Original Principal Amount of Company's Annual Report on
$125,000 given by the Form 10-KSB for the Fiscal
Company to Capital Research, Year ended December 31,
Ltd. 1998.
10.24 Common Stock Purchase Incorporated by reference
Warrant No. W-6 dated as of to Exhibit 10.25 to the
March 9, 1999 granted by the Company's Annual Report on
Company to Capital Research, Form 10-KSB for the Fiscal
Ltd. Year ended December 31,
1998.
10.25 Registration Rights Incorporated by reference
Agreement dated as of to Exhibit 10.26 to the
March 9, 1999 between the Company's Annual Report on
Company and Capital Form 10-KSB for the Fiscal
Research, Ltd. Year ended December 31,
1998.
10.26 Executive Employment Incorporated by reference
Agreement dated as of June to Exhibit 10.26 to the
1, 1999, together with Stock Company's Amendment No. 1
Option Addendum, between to the Annual Report on
Mead M. McCabe, Jr. and the Form 10-KSB for the
Company quarter ended December 31,
1999.
10.27 Executive Employment Incorporated by reference
Agreement dated as of June to Exhibit 10.27 to the
1, 1999, together with Stock Company's Amendment No. 1
Option Addendum, between to the Annual Report on
Mead M. McCabe, Sr. and the Form 10-KSB for the
Company quarter ended December 31,
1999.
11. Statement re: computation Not applicable.
of earnings
18. Letter on change in Not applicable.
accounting principles
19. Reports furnished to Not applicable.
Security holders
22. Published report regarding Not applicable.
matters submitted to Vote
23. Consents of experts and Not applicable.
counsel
24. Power of Attorney Not applicable.
27. Financial Data Schedule Provided herewith.
99.01 Non-Binding Letter of Intent Provided herewith.
to Acquire DNA Sciences
24
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<NET-INCOME> (1,089,435)
<EPS-BASIC> (.45)
<EPS-DILUTED> (.45)
</TABLE>
GENETIC VECTORS, INC.
5201 N.W. 77TH AVENUE, SUITE 100
MIAMI, FLORIDA 33166
October 1, 1999
DNA Sciences, Inc.
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Gentlemen:
This letter confirms the intent of Genetic Vectors, Inc. (the
"BUYER") to acquire all of the outstanding capital stock (the "DNA SCIENCES
SHARES") of DNA Sciences, Inc., a ______________ corporation ("DNA SCIENCES"),
from the shareholders of DNA Sciences (each a "SHAREHOLDER" and collectively the
"SHAREHOLDERS").
1. THE ACQUISITION. The transaction will be structured as a merger
(the "MERGER") of DNA Sciences with and into the Buyer, so that the Shareholders
can receive tax-free treatment for the consideration received for their DNA
Sciences Shares, if permitted by the Internal Revenue Code of 1986, as amended.
The parties will use their best efforts to account for this merger using the
"pooling of interests" method of accounting.
2. PURCHASE PRICE. In exchange for the DNA Sciences Shares, the
Shareholders will receive 450,000 shares of common stock, par value $0.001 per
share (the "BUYER'S COMMON STOCK"), of the Buyer.
3. BOARD OF DIRECTORS. The Agreement (as defined herein) will
provide that the Shareholders of DNA Sciences shall have the right to nominate
one (1) member to the Buyer's Board of Directors.
4. CLOSING. The Merger will be consummated at a closing (the
"CLOSING") to be held at the offices of Buyer's attorneys, on a date which shall
be on or before November 30, 1999.
5. EMPLOYMENT AGREEMENTS. The Agreement will provide that the Buyer
will enter into an employment agreement with Richard Tullis, Eric Wilkinson and
Jerome Steifel. The terms of each of these agreements will be satisfactory to
the parties thereto.
<PAGE>
DNA Sciences, Inc.
October 1, 1999
Page 2
6. DUE DILIGENCE INSPECTION. After the signing of this letter, each party may
make examinations and inspections of each others financial condition,
properties, legal matters, business and affairs. Each party will cause their
attorneys, accountants and other advisors and agents to cooperate with the other
in its investigation and to make their files and work papers available.
Consummation of the purchase will be subject to each party obtaining
satisfactory results in its due diligence investigation; PROVIDED, HOWEVER, that
(a) each party will submit to the other party a request for documents within
five (5) days of the execution date of this letter; (b) each party will respond
to the request for documents within ten (10) days after receipt of such request;
and (c) each party will complete its review of such documents within ten (10)
days of receipt of such documents. Thereafter, each party will have five (5)
days to provide the other party with written notice of its desire not to proceed
because the results of the investigation were not satisfactory.
7. NO-SHOP. From the date of this letter until December 31, 1999,
neither DNA Sciences nor its shareholders, officers, directors, employees or
other agents will, directly or indirectly, take any action to solicit, initiate
or encourage any acquisition of substantially all of the assets or any of the
stock of DNA Sciences or any transaction similar to the transaction outlined
herein, nor will they entertain any unsolicited proposals or approaches in this
regard.
8. COSTS. Each party agrees to pay, without right of reimbursement
from the other party and regardless of whether or not the transaction is
consummated, the costs incurred by it in connection with this transaction,
including legal fees and other costs incidental to the negotiation of the terms
of the transaction and the preparation of related documentation. Each party will
indemnify and hold the other harmless from any loss, liability or expense
(including, without limitation, legal fees) resulting from the indemnifying
party's breach of this Section 8.
9. PRESS RELEASES. Prior to the Closing, neither party will make any
press release, statement to employees or other disclosure of this letter or the
transaction contemplated hereby without the prior written consent of the other
party, except as required by law.
10. NON-BINDING LETTER OF INTENT. Except for Sections 6, 7, 8 and 9
hereof, this letter is an expression of interest only and is not intended to be
a binding letter of intent, and the general principles set forth in this letter
shall not constitute an agreement to consummate the transaction described
herein. Upon the satisfactory completion of the due diligence investigation by
each of the parties hereto as described in Section 6 hereof which confirms each
party's intent to consummate the transaction for the purchase price described in
Section 2 hereof, the parties will proceed to use their best efforts to
negotiate the definitive terms of this transaction and enter into a formal and
binding agreement (the "AGREEMENT") which sets forth such representations,
warranties, covenants, indemnifications and other provisions as are acceptable
<PAGE>
DNA Sciences, Inc.
October 1, 1999
Page 3
to the parties in their sole discretion. This letter of intent is not an
agreement to enter into any definitive agreement.
11. COUNTERPARTS. This letter may be signed in counterparts, each of which will
be considered an original and all of which will constitute the same document.
If this letter accurately reflects your understanding, please indicate
your agreement by signing both enclosed copies of this letter and returning one
executed copy to me by October 5, 1999.
Sincerely yours,
GENETIC VECTORS, INC.
By:__________________________________
Name: Mead M. McCabe, Jr.
Title: President
ACCEPTED AND AGREED THIS _____
DAY OF OCTOBER, 1999:
DNA SCIENCES, INC.
By:_____________________________
Name:___________________________
Title:____________________________
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[Shareholders]
