GENETIC VECTORS INC
10QSB, 2000-08-14
PHARMACEUTICAL PREPARATIONS
Previous: VIALINK CO, 10QSB, EX-27, 2000-08-14
Next: GENETIC VECTORS INC, 10QSB, EX-21, 2000-08-14




                   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, 2000

      |_| 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,
               MIAMI, FLORIDA                               33166
       ---------------------------------------             --------
           (Address 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 3,732,843 shares of Common Stock outstanding as of August 11,
2000.


<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)




June 30,                                                        2000
-----------------------------------------------------------------------

CURRENT ASSETS:
  Cash and cash equivalents                                 $174,189
  Accounts receivable                                         29,503
  Inventory                                                   20,512
  Prepaid expenses                                            30,046
-----------------------------------------------------------------------

TOTAL CURRENT ASSETS                                         254,250

Equipment and improvements, net                              254,873
Patents and license agreement, net                           192,763
Restricted cash equivalents                                   46,130
-----------------------------------------------------------------------

                                                            $748,016
=======================================================================

LIABILITIES AND CAPITAL DEFICIT
CURRENT LIABILITIES
Accrued liabilities:
  Accounts payable and accrued liabilities                  $405,324
  Accrued interest payable                                   161,353
  Loans payable, net of unamortized discount               2,331,753
-----------------------------------------------------------------------

                                                           2,898,430
-----------------------------------------------------------------------

CAPITAL DEFICIT:
Common stock, $.001 par value, 10,000,000 shares
authorized, 3,732,843 shares issued and outstanding            3,733
Additional paid-in capital                                10,960,433
Deficit accumulated during the development stage         (13,114,580)
-----------------------------------------------------------------------

CAPITAL DEFICIT                                           (2,150,414)
-----------------------------------------------------------------------

                                                          $  748,016
=======================================================================

               See accompanying notes to the financial statements


                                       3
<PAGE>

<TABLE>

                                               GENETIC VECTORS, INC.
                                           (A DEVELOPMENT STAGE COMPANY)
                                       STATEMENTS OF OPERATIONS (UNAUDITED)
<CAPTION>
                                                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,
                                                      2000           2000             1999              2000               1999
---------------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>            <C>              <C>               <C>                <C>
REVENUE:

   Sales                                           323,525       $ 49,420         $ 49,745          $ 85,245           $ 60,934
   Grant income                                    149,147              -                -                 -                  -
---------------------------------------------------------------------------------------------------------------------------------

Total revenue                                      472,672         49,420           49,745            85,245             60,934
---------------------------------------------------------------------------------------------------------------------------------

COST AND EXPENSES:

   Cost of Sales                                    87,008         14,258           24,048            23,325             36,977

   General administration                        6,255,902        466,860          335,747         1,032,583            601,282

   Research and development                      3,465,655        184,319          147,486           361,521            277,669

   Depreciation and amortization                   375,361         23,889           44,925            47,778             54,175
---------------------------------------------------------------------------------------------------------------------------------

Total expenses                                  10,183,926        689,326          552,206         1,465,207            970,103
---------------------------------------------------------------------------------------------------------------------------------

OTHER INCOME (EXPENSE):

   Amortization of deferred loan cost           (1,542,881)      (308,351)        (192,568)         (776,319)          (192,568)

   Interest income (expense), net                  (40,445)      (100,151)           1,598          (184,471)              4,099

   Expense in connection with issuance
   of common stock for loan extension           (1,820,000)    (1,068,231)               -        (1,820,000)                  -
---------------------------------------------------------------------------------------------------------------------------------

Total other                                     (3,403,326)    (1,476,733)        (190,970)       (2,780,790)          (188,469)
---------------------------------------------------------------------------------------------------------------------------------

NET (LOSS)                                     (13,114,580)   $(2,116,639)       $(693,431)      $(4,160,752)       $(1,097,638)
=================================================================================================================================

Weighted average number of
   common shares outstanding                             -      3,732,843        2,925,942         3,584,893          2,863,241

Net loss per common share                                -         ($0.57)          ($0.24)           ($1.16)            ($0.38)

                         See accompanying notes to the financial statements.
</TABLE>




                                                 4
<PAGE>

<TABLE>
                                               GENETIC VECTORS, INC.
                                           (A DEVELOPMENT STAGE COMPANY)
                                       STATEMENTS OF CASH FLOWS (UNAUDITED)

<CAPTION>
                                                          Cumulative from            For the             For the
                                                          January 1, 1992         Six months          Six months
                                                              (inception)              ended               ended
                                                         Through June 30,           June 30,            June 30,
                                                                     2000               2000                1999
------------------------------------------------------------------------------------------------------------------
<S>                                                          <C>                 <C>                 <C>
OPERATING ACTIVITIES:
   Net loss                                                  $(13,114,580)       $(4,160,752)        $(1,097,638)
   Adjustments to reconcile net loss to net
     cash (used in) operating activities:
       Depreciation and amortization                              375,369             47,778              54,175
       Amortization of deferred loan cost                       1,542,881            776,319             192,568
       Write-off of acquired technology                            71,250                  -                   -
       Common stock issued for loan extension                   1,820,000          1,820,000                   -
       Consulting services provided for common stock                6,000                  -                   -
       Warrants issued for loan extension                         154,646             80,946                   -
       Stock options granted for services                         364,572                                      -
       (Increase) in accounts receivable                          (32,688)           (23,563)            (16,597)
       (Increase) (decrease) in inventory                         (20,512)           (13,431)             (5,543)
       (Increase) decrease in prepaid expenses                    (30,046)            20,378                  20
       (Increase) decrease in other assets                              -                  -                   -
       (Increase) decrease in restricted cash
         equivalents                                              (46,130)                 -                   -
       Increase in accounts payable
         and accrued liabilities                                  704,595            110,782             141,941
------------------------------------------------------------------------------------------------------------------

TOTAL ADJUSTMENTS                                               4,909,937          2,819,209             366,564
------------------------------------------------------------------------------------------------------------------

NET CASH USED IN OPERATING ACTIVITIES                          (8,204,643)        (1,341,543)           (731,074)
------------------------------------------------------------------------------------------------------------------

INVESTING ACTIVITIES:
   Purchase of equipment and improvements                        (577,929)            (6,070)             (1,130)
   Insurance proceeds in excess of loss on fixed                        -                  -               3,254
     assets

   Patent costs                                                  (261,964)                 -                   -
------------------------------------------------------------------------------------------------------------------

NET CASH USED IN INVESTING ACTIVITIES                            (839,893)            (6,070)              2,124
------------------------------------------------------------------------------------------------------------------

FINANCING ACTIVITIES:
   Increase due to parent                                         413,518                  -                   -
   Proceeds from notes payable                                  2,448,500          1,175,100             388,500
   Payment on notes payable                                       (35,000)                 -                   -
   Net proceeds from issuance of common stock and
     exercise of options                                        5,872,450            140,000             225,000
   Capital contribution                                           500,000                  -                   -
   Offering refund                                                 25,500                  -                   -
   Offering costs                                                  (6,243)                 -                   -
------------------------------------------------------------------------------------------------------------------

NET CASH PROVIDED BY
   FINANCING ACTIVITIES                                         9,218,725          1,315,000             613,500
------------------------------------------------------------------------------------------------------------------

NET INCREASE (DECREASE) IN CASH                                   174,189            (32,613)           (115,450)
CASH AT BEGINNING OF PERIOD                                             -            206,802             117,812
------------------------------------------------------------------------------------------------------------------

CASH AT END OF PERIOD                                             174,189          $ 174,189            $  2,362
==================================================================================================================

SUPPLEMENTAL DISCLOSURES:
   Warrants issued in connection with loan financing           $1,624,650          $ 425,000           $ 388,500
   Conversion of due to parent in exchange for stock            $ 413,518          $       -           $       -
   Conversion of accrued wages for stock                        $ 132,822          $       -           $       -
   Issuance of common stock for loan extension                 $1,820,000        $ 1,820,000           $       -

                         See accompanying notes to the financial statements.
</TABLE>

                                                 5
<PAGE>


                            GENETIC VECTORS, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                  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) that 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 on Form 10-KSB for the year ended
December 31, 1999.  The results of operations  for the six months ended June 30,
2000 are not  necessarily  indicative of the results to be expected for the full
year.

On January 17, 2000,  the Company  acquired DNA Sciences,  Inc. in a transaction
that was accounted for as a pooling of interest.  The financial  statements  and
management's  discussion  and  analysis of  financial  condition  and results of
operations  for the six month period ended June 30, 2000 includes the results of
operations of DNA Sciences,  Inc. as if the acquisition took place on January 1,
1999. The results of operation of DNA Sciences, Inc. are combined to the results
of Genetic Vectors, Inc. for the three and the six months ended June 30, 1999.

2.   EARNINGS PER SHARE

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

<TABLE>
<CAPTION>
                                      For the six months ended June 30, 2000           For the six months ended June 30, 1999
                                   ---------------------------------------------    ---------------------------------------------
                                            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       $(4,160,752)        3,584,893       $(1.16)     $(1,097,638)        2,863,241        $(0.38)
---------------------------------- -------------- ---------------- ------------- -- ------------- ---------------- --------------

Effect of Dilutive:
   Securities                                  -                -             -                -                -              -
   Options                                     -                -             -                -                -              -
   Warrants                                    -                -             -                -                -              -
---------------------------------- -------------- ---------------- ------------- -- ------------- ---------------- --------------

Loss per common share,
   assuming dilution                $(4,160,752)        3,584,893       $(1.16)     $(1,097,638)        2,863,241        $(0.38)
</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

During the three months ended June 30, 2000, the Company borrowed  $750,000 (See
Item 2, Changes in Securities and Use of Proceeds;  Item 3, Defaults upon Senior
Securities). These loans bear interest at 12% a year and are due between October
and December  2000.  In connection  with these  borrowings,  the Company  issued
10,000 warrants at an exercise price $6.20. In connection with this transaction,
the value ascribed to the warrants was $28,600.



                                       6
<PAGE>



                            GENETIC VECTORS, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                  NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

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
debt discount over the term of the related borrowings.

3.   NOTES PAYABLE (CONTINUED)

<TABLE>
<CAPTION>
<S>                                                   <C>             <C>
Notes payable as of June 30, 2000                                     As of June 30,  2000,  the Company was past due on
                                                                      loans  with  an  original   principal  balance  of
                                                                      $1,488,500.  On July 7, 2000,  the maturity  dates
         Notes payable                                $2,413,522      were  extended from June 30, 2000 to September 30,
         Debt discount                                   (81,769)     2000 on loans with an original  principal  balance
                                                      ----------      of  $1,238,500.   As  of  the  date  hereof,   the
         Net                                          $2,331,753      Company is in  default  on loans with an  original
                                                      ==========      principal  balance of $250,000  for failing to pay
                                                                      principal and interest when due.
</TABLE>

4.   OPTIONS

On June 9, 2000,  we granted the  following  options under our 1999 Stock Option
Plan:

o  To Mead M. McCabe,  Sr., the Chairman of the Company,  options to purchase up
   to 100,000 shares of common stock at an exercise price of $6.03125 per share.
   These options vest one-third  immediately and one-third on each of the second
   and third  anniversaries  of Dr.  McCabe's 1999 employment  agreement.  These
   options may be exercised within ten years of the date of grant.

o  To Mead M. McCabe,  Jr., the Chief Executive Officer of the Company,  options
   to purchase  up to 100,000  shares of common  stock at an  exercise  price of
   $6.03125 per share. These options vest one-third immediately and one-third on
   each of the second and third  anniversaries  of Mr.  McCabe's 1999 employment
   agreement.  These  options may be  exercised  within ten years of the date of
   grant.

o  To Mark  Burroughs,  a director of the  Company,  options to purchase  17,500
   shares of common stock at an exercise price of $6.03125 per share.  12,500 of
   these options vest  immediately  and 5,000 vest in March 2001.  These options
   may be exercised within ten years of the date of grant.

o  To Jack Fell, a director of the Company, options to purchase 12,500 shares of
   common  stock at an  exercise  price of  $6.03125  per share.  7,500 of these
   options vest  immediately and 5,000 vest in March 2001.  These options may be
   exercised within ten years of the date of grant.

o  To Michael  Foley,  a director of the  Company,  options to  purchase  10,000
   shares of common stock at an exercise  price of $6.03125 per share.  5,000 of
   these options vest  immediately and 5,000 vest in January 2001. These options
   may be exercised within ten years of the date of grant.



                                       7
<PAGE>


                            GENETIC VECTORS, INC.
                        (A DEVELOPMENT STAGE COMPANY)
                  NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

5.   NEW ACCOUNTING STANDARDS

In  March  2000,   the  Financial   Accounting   Standards   Board  issued  FASB
Interpretation  No. 44,  ACCOUNTING  FOR CERTAIN  TRANSACTIONS  INVOLVING  STOCK
COMPENSATION,  AN  INTERPRETATION OF APB OPINION NO. 25. The Company adopted the
Interpretation on July 1, 2000. The Interpretation requires, among other things,
that  stock  options  that have been  modified  be  accounted  for as  variable.
Management anticipates the implementation of FASB Interpretation No. 44 will not
have a  material  effect on the  Company's  financial  position  or  results  of
operations.

6.   SUBSEQUENT EVENTS

Between  July 24 and August 1, 2000,  we borrowed  $1,200,000  from  thirty-five
private  investors from the sale of 50 Units,  consisting of a convertible  note
and warrant.  These loans have an annual interest rate of 12%, simple  interest,
payable at maturity. The loans are due in December 2000. Prior to the payment of
the principal  balance of the loan,  each private  investor may convert,  at his
option at anytime up to 30 days after the closing of an equity  financing by the
Company of $5 million or more,  all amounts due into shares of common stock at a
conversion  rate  of  $3.00  per  share.  In  addition,  and in the  event  of a
conversion,  each private investor will receive for each Unit purchased warrants
to purchase  16,665  shares of common  stock at an  exercise  price of $6.00 per
share and 16,665 shares of common stock at an exercise price of $7.10 per share.
If no conversion  occurs,  then each private investor will receive for each Unit
purchased  warrants to  purchase  10,000  shares of common  stock at an exercise
price of $6.60 per share and 10,000 shares of common stock at an exercise  price
of $8.00 per share. Additionally, in the event of a default, each investor would
be entitled to receive for each Unit purchased warrants to purchase 5,000 shares
at an  exercise  price of $5.00 per share for each  month that any  amounts  are
outstanding under the note.












                                       8
<PAGE>



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

THE FOLLOWING  INFORMATION  SHOULD BE READ IN CONJUNCTION  WITH THE CONSOLIDATED
FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO APPEARING ELSEWHERE IN
THIS QUARTERLY REPORT ON FORM 10-QSB.

PLAN OF OPERATION

We specialize  in the  development  of molecular  systems in the area of disease
management and risk assessment.  We plan to develop and manufacture  these tests
for sale to the  pharmaceutical  and  healthcare  industries.  We are  currently
selling the EpiDNA and the EasyID product lines and are developing several other
products of these lines.

FINANCIAL RESOURCES AND CASH REQUIREMENTS

We are  dependent on external  capital to finance our  operations,  and have not
generated a significant amount of cash from operations.  As of June 30, 2000, we
had cash and cash equivalents of $174,189.  Since that date, we have borrowed an
additional $1,200,000. These funds are projected to last no longer than December
1, 2000. We will need to raise additional capital to continue  operations beyond
December 1, 2000.  This plan of operation  assumes that we will be successful in
raising additional capital.  Our failure to raise additional capital will, among
other things,  cause deviations from the plan of operation  described herein and
would likely result in our need to curtail or cease operations.

Since November 1, 1998, we have borrowed $3.7 million to fund our operations. We
are in default on some of these loans for failing to pay  principal and interest
when due, a total $250,000, plus interest. See "Risk Factors - We are in default
of some of our outstanding indebtedness and may be unable to repay these loans."

CONTINGENT NON-CASH CHARGES

Our company is  obligated  to issue  additional  warrants to purchase a total of
2,008,294  shares of common  stock upon the  occurrence  of  certain  contingent
events. In particular, we are obligated to issue additional warrants to purchase
775,000  shares of our common stock upon the full  repayment of certain loans or
our successful consummation of a financing in an amount equal to or greater than
$1.5 million. In addition,  if the holders elect to convert certain indebtedness
into shares of common stock within a specified period, then the holders would be
entitled to additional  warrants to purchase (a) 616,647  shares of common stock
at an exercise  price of $6.00 per share and (b) 616,647  shares of common stock
at an  exercise  price of $7.10 per  share.  If the  holders  do not elect to so
convert,  then the holders would receive  warrants to purchase 370,000 shares of
common  stock at an exercise  price of $6.60 per share and  warrants to purchase
370,000  shares of common  stock at an  exercise  price of $8.00 per share.  The
issuance of these  contingent or any other warrants will result in a significant
non-cash charge to our company in the period in which these additional  warrants
are issued.

RESEARCH AND DEVELOPMENT

We will continue our product  research and  development  efforts and continue to
implement  what we believe to be a feasible  plan for  product  development.  We
intend to complete  the  build-out of research and  development  and  production
areas in our Florida facility. For the twelve-month period following our receipt
of significant additional capital, our activities will focus on the following:



                                       9
<PAGE>

      o  Continued  enhancement of our EasyID Juvenile  Diabetes Risk
         Assessment System.

      o  Development of new EasyID detection  systems in collaboration  with the
         Norwegian Institute of Public Health.

      o  Continuation of EasyID DNA probe product development for new diagnostic
         uses, drug discovery and certain industrial applications.

      o  Continued research and development of EasyID products for the detection
         of genes involved in cardiovascular diseases.

      o  Continued  research in applications of our EpiDNA nucleic acid labeling
         technology.

SIGNIFICANT PLANT OR EQUIPMENT PURCHASES

We  anticipate  the need to purchase  and/or lease various  equipment  valued at
approximately  $500,000.  Equipment will be used  primarily to  manufacture  the
EasyID  line  of  products  currently  being  marketed  and  develop  additional
products.

CHANGES IN THE NUMBER OF EMPLOYEES

We currently have six employees. If we are successful in raising significant new
capital,  then we anticipate hiring fourteen new employees in 2000 in connection
with our research and development and product development, administration, sales
and  marketing.  We believe that these  personnel will be adequate to accomplish
the tasks set forth in our plan.

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 $85,245  during the six months  ended June 30,  2000 as compared to
$60,934  during the six months  ended  June 30,  1999,  and had cost of sales of
$23,325  and  $36,977,   respectively,  for  the  same  periods.  The  Company's
expenditures far exceed its revenues.

Research  and  development  expenses  for the six  months  ended  June 30,  2000
increased by $83,852 over the comparable period in the prior year. This increase
is largely  attributable to the research and development  costs  associated with
our San Diego facility, which was closed on June 30, 2000.

Selling,  general  and  administrative  expenses  increased  $431,301 in the six
months ended June 30, 2000 over the comparable  period in 1999. This increase is
primarily  attributable to salaries of two executives and costs  associated with
merger, integration and operations of DNA Sciences, Inc.

Amortization of deferred loan costs increased by approximately $583,751 from the
same  period in the  prior  year.  The  increase  was  directly  related  to our
increased  borrowing  during the  latter  part of 1999 and during the six months
ended June 30, 2000 and the granting of related  warrants.  These  warrants were
valued based on the Black-Scholes  Option Pricing Model and resulted in $776,319
of amortization during the six months ended June 30, 2000.



                                       10
<PAGE>

Interest  expense,  net for the six months  ended  June 30,  2000  increased  by
$188,570,  representing  the  interest  on various  loans  obtained by us in the
latter part of 1999 and during 2000. As of June 30, 2000,  we had  approximately
$2.4 million plus accrued  interest and before  discount,  in outstanding  notes
payable.  During the comparable period in the prior year we had a minimum amount
of outstanding notes payable.

Expense in connection with issuance of common stock for loan extension increased
by $1,820,000 in the six months ended June 30, 2000 over the  comparable  period
in 1999.  This increase in primarily  attributable  to the fact that in 2000 the
Company  recorded a charge in  connection  with the issuance of common stock for
the  extension of the maturity  date of certain  loans to June 30, 2000. In this
connection  280,000 shares of the Company's common stock at $6.50 per share were
issued.

LIQUIDITY AND CAPITAL RESOURCES. The net cash used by us in operating activities
aggregated  $1.3 million in the six months ended June 30, 2000, as compared with
$0.7  million in the same period in the prior year.  This  increase  was largely
attributable to common stock issued for a loan extension previously due June 30,
2000 and increases  pertaining to the merger and  integration  and operations of
DNA Sciences, Inc. Our net cash provided by financing activities aggregated $1.3
million during the six months ended June 30, 2000, consisting mainly of proceeds
from the sale of unregistered securities and loan transactions.

We have  experienced  extreme  cash  shortages  since the end of  November  1998
through the date of this filing.  As of June 30, 2000,  we had $174,189 of cash.
Since that date, we have raised a total of $1.2 million in a private  placement.
We are and  after  the  date of  this  filing  will  be in  default  of  certain
indebtedness. Our company does not have sufficient funds to repay these loans.

These  proceeds are expected to last no longer than December 1, 2000. As of June
30,  2000,  we had a capital  deficit  of  $2,150,414.  We have  entered  into a
non-binding  letter of intent with an  underwriter to sell up to $8.4 million of
securities in a firm-commitment registered offering,  although no assurances can
be given that such an offering will take place or be  successful.  Our inability
to raise significant  capital in such a registered  offering will jeopardize our
ability to continue operations.

GOING  CONCERN  OPINION.  Our  independent  public  accountants  have  added  an
explanatory  paragraph to their audit opinion issued in connection with the 1999
and 1998  financial  statements  which states that our  company's  dependence on
outside  financing and our losses since inception raise  substantial doubt about
our ability to continue as a going concern.

IMPACT OF INFLATION.  Although inflation has slowed in recent years, it is still
a factor in the United  States  economy and we continue to seek ways to mitigate
its impact. To the extent permitted by competition,  we intend to pass increased
costs on to our customers by increasing sales prices over time. In addition,  we
place all of our major supplier purchases out to bid.

NEW FASB PRONOUNCEMENTS.  In June 1998, the Financial Accounting Standards Board
issued FASB 133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS 133 requires  companies to recognize  all  derivatives  contracts as either
assets or liabilities in the balance sheet and to measure them at fair value. If
certain  conditions  are met, a derivative may be  specifically  designated as a
hedge, the objective of which is to match the timing of gain or loss recognition
on the hedging  derivative  with the  recognition of (i) the changes in the fair
value of the hedged asset or liability that are  attributable to the hedged risk
or  (ii)  the  earnings  effect  of the  hedged  forecasted  transaction.  For a
derivative  not  designated  as a  hedging  instrument,  the  gain  or  loss  is
recognized in  operations  in the period of change.  SFAS 133, as amended by FAS
137, is effective for all fiscal  quarters of fiscal years  beginning after June
15, 2001.



                                       11
<PAGE>

Historically,  we have not entered into  derivatives  contracts  either to hedge
existing  risks  or for  speculative  purposes.  Accordingly,  we do not  expect
adoption  of the new  standard  on  January  1,  2001 to  affect  its  financial
statements.



























                                       12
<PAGE>



CERTAIN BUSINESS RISK FACTORS

You should  carefully  consider the risks  described  below  before  trading the
common stock. Our most significant  risks and uncertainties are described below;
however  they  are not the  only  ones we face.  If any of the  following  risks
actually occur, our business,  financial condition or result of operations would
be materially  adversely  affected,  the trading price of our common stock would
decline and you may lose all or part of your investment.

WE ARE IN DEFAULT OF SOME OF OUR  OUTSTANDING  INDEBTEDNESS  AND MAY BE UNABLE
TO REPAY THESE LOANS

Between November 1, 1998 and August 1, 2000, we borrowed a total of $3.6 million
from various private investors, consisting of:

      o     Unsecured  loans  of  $150,000,   with  interest  payable  quarterly
            beginning on April 1, 1999 and the principal  payable on November 2,
            1999.  We are in default of these loans for failing to pay principal
            and interest when due.

      o     Secured loan of $100,000,  with interest payable quarterly beginning
            on June 1, 1999 and the principal  payable on April 18, 2000. We are
            in default of this loan for failing to pay  principal  and  interest
            when due.

      o     Secured loans of $1,238,500 for which the payment dates of principal
            and interest  were  extended on March 3, 2000 by the lenders to June
            30, 2000 and again on July 7, 2000 to September 30, 2000.

      o     Loans of $175,000 convertible into shares of common stock at a price
            of $5.00 per share, which are due in September 2000.

      o     Loan of $100,000  convertible into shares of common stock at a price
            of $5.00 per share, which is due in October 2000.

      o     Loans of $600,000 convertible into shares of common stock at a price
            of $3.00 per share, which are due in November 2000.

      o     Loans of  $1,200,000  convertible  into shares of common  stock at a
            price of $3.00 per share, which are due in December 2000.

We will not be able to repay these loans  unless we raise  enough  capital  from
external sources.  Our business  operations do not generate sufficient cash flow
to repay these loans. Our inability to repay these loans may result, among other
things, in foreclosure  against our assets. This would jeopardize our ability to
continue operations, and our stock price would likely decline.

IF WE ARE UNABLE TO OBTAIN  ADDITIONAL  CAPITAL,  WE MAY BE UNABLE TO CONTINUE
OPERATIONS

We had  $174,189  of cash as of June 30,  2000.  Since  June 30,  2000,  we have
borrowed a total of $1.2 million.  We project that these  proceeds will fund our
operations no longer than  December 1, 2000.  In  connection  with our financial
statements for the year ended December 31, 1999, our  independent  auditors have
noted  there is  substantial  doubt  about our  ability to  continue  as a going
concern.  This "going  concern"  opinion is due, in part,  to our need to obtain
from external  sources  additional  financing  adequate to complete  development
activities  and to  achieve  a level  of  sales  adequate  to  support  our cost
structure.  In the  absence  of  additional  capital,  we  will be  required  to
significantly  curtail or cease our  business  activities,  and our stock  price
would decline.

OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT OR IMPOSSIBLE TO EVALUATE OUR
PERFORMANCE AND MAKE PREDICTIONS ABOUT OUR FUTURE

We were  organized in 1991 and are in the  development  stage.  To date, we have
generated  very  limited  revenues  from the sale of our  products.  Our limited
operating history makes an evaluation of our future prospects very difficult. As
a development stage company, we will encounter the types of risks, uncertainties
and difficulties frequently encountered by early-stage companies.  Many of these


                                       13
<PAGE>

risks and  uncertainties are described in more detail elsewhere in this "Certain
Business Risk Factors" section.  We may not successfully  address some or all of
these risks. If we do not successfully  address these risks, our future business
prospects will be significantly  limited and, as a result,  the trading price of
our common stock would likely decline.

WE HAVE  EXPERIENCED  SIGNIFICANT  LOSSES  AND  EXPECT TO INCUR  LOSSES IN THE
FUTURE

In the six months ended June 30, 2000,  we incurred a net loss of $4.2  million.
Our  cumulative net loss since our inception on January 1, 1992 was $13 million.
We expect to incur substantial  losses for the foreseeable  future in connection
with our research and development  efforts,  as well as the expenses  associated
with  attempting  to  commercialize   our  products,   including   expenses  for
manufacturing, marketing and distributing our products.

IF OUR ASSUMPTION ABOUT THE ROLE OF GENES IN DISEASE IS INCORRECT, WE MAY NOT BE
ABLE TO DEVELOP USEFUL PRODUCTS

Certain of our  products  and the  products  we hope to develop  involve new and
unproven  approaches.  They are based on the assumption that  information  about
genes  may  help  scientists  better  understand   complex  disease   processes.
Scientists  generally  have a  limited  understanding  of the  role of  genes in
diseases, and few products based on gene discoveries have been developed. Of the
products  that  exist,  all are  diagnostic  products.  To  date,  we know of no
therapeutic products based on disease gene discoveries.  If our assumption about
the  role of genes in the  disease  process  is  incorrect,  our gene  discovery
programs  may not result in  products,  the genetic  data  collected  may not be
useful to our  customers  and these types of products  may lose any  competitive
advantage.

ETHICAL  AND  PRIVACY  CONCERNS  MAY  LIMIT  THE USE OF  GENETIC  TESTING  AND
THEREFORE THE COMMERCIAL VIABILITY OF ANY PRODUCTS WE DEVELOP

Other  companies have developed  genetic  predisposition  tests that have raised
ethical  concerns.  It is possible that  employers or others could  discriminate
against people who have a genetic  predisposition to certain  diseases.  Concern
regarding  possible  discrimination  may  result  in  governmental   authorities
enacting  restrictions  or bans on the use of all, or certain types of,  genetic
testing. Similarly, such concerns may lead individuals to refuse to use genetics
tests even if permissible. These factors may limit the market for, and therefore
the commercial viability of, genetic testing products that our collaborators and
we develop.

OUR  PRODUCTS  MAY NOT GAIN  MARKET  ACCEPTANCE,  WHICH WOULD  JEOPARDIZE  OUR
ABILITY TO GENERATE REVENUE AND CONTINUE OPERATIONS

We are  highly  dependent  on a limited  number of  products  and our  long-term
success may depend on the market acceptance of these products. We currently have
two products lines,  the EpiDNA and EasyID product lines.  Market  acceptance of


                                       14
<PAGE>

our product lines will depend,  in part, on the our ability to  demonstrate  the
superiority of them with respect to existing techniques, including the products'
accuracy,   ease  of  use,  reliability  and   cost-effectiveness   and  on  the
effectiveness  of our  marketing  efforts.  These  efforts  have been  adversely
affected by our working capital shortage. No assurance can be given that we will
gain market acceptance for our product lines.  Failure to gain market acceptance
for these product lines will jeopardize our ability to obtain capital,  generate
revenue to continue operations, likely resulting in a lower stock price.

THE  TECHNOLOGY IN OUR PRODUCTS IS RAPIDLY  EVOLVING,  AND OUR ABILITY TO EVOLVE
WITH THIS TECHNOLOGY MAY JEOPARDIZE THE COMMERCIAL VIABILITY OF OUR PRODUCTS

The science and technology of the EpiDNA Picogram  Assay,  DNAMax,  EasyID,  and
DNAtect are rapidly evolving.  The commercial viability of our product lines has
not been proven,  as we have only conducted  limited  marketing  efforts for our
existing  products  and  other  proposed  products  are in the  early  stage  of
development. All of our products 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  these  products  are  found to be
ineffective,   unsafe,  or  otherwise  fail  to  receive  necessary   regulatory
clearances,  if any, that these products,  though effective, are uneconomical to
market,  that third  parties  hold  proprietary  rights  that  preclude  us from
marketing  them, or that third parties market a superior or equivalent  product.
Accordingly,  we  are  unable  to  predict  whether  our  products  will  become
commercially viable.

WE WILL NEED TO RELY ON  COLLABORATIVE  PARTNERS TO  FACILITATE  THE SALE OF OUR
PRODUCTS  AND OUR  FAILURE TO ENTER INTO SUCH  COLLABORATIVE  ARRANGEMENTS  WILL
HINDER OUR ABILITY TO SELL OUR PRODUCTS AND SERVICES

In the future we may, in order to facilitate the sale of our systems, enter into
collaborative  selling  arrangements  with  one or  more  other  persons.  It is
uncertain  whether  we  will  be  able  to  negotiate  acceptable  collaborative
arrangements  in the  future or that  such  collaborative  arrangements  will be
successful.  If we are unable to identify collaborative partners to sell certain
of our services and/or  products,  we may be forced to develop an internal sales
force to market and sell our services  and/or  products in markets  where we are
not intending on developing a direct selling presence. Such a process would take
more time and  potentially  cost more.  As a result,  our  revenues and earnings
would be reduced. If we do enter into collaborative  selling  arrangements,  our
success  may depend  upon the  efforts of others and may be beyond our  control.
Failure  of any  collaborative  selling  arrangement  could  result  in  reduced
revenues and possible losses.

WE ARE SUBJECT TO RISKS RELATED TO PRODUCT LIABILITY CLAIMS, WHICH ARE EXPENSIVE
TO DEFEND AND MAY RESULT IN NEGATIVE PUBLICITY

The nature of our business exposes us to risk from product  liability claims. We
maintain product liability  insurance for some of our 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 our insurance will be adequate to cover future product  liability
claims, or that we will be successful in maintaining  adequate product liability
insurance at acceptable rates. In addition, due to our working capital shortage,
there  can be no  assurance  that we will be able to fund the  premiums  for our
existing insurance.  Any losses that we may suffer from future liability claims,
and any adverse  publicity  from product  liability  litigation,  may  adversely
affect our business operations and our stock price.



                                       15
<PAGE>

WE MAY NOT BE ABLE TO  SUCCESSFULLY  DEVELOP OUR  MANUFACTURING  PROCESS,  WHICH
WOULD JEOPARDIZE OUR ABILITY TO GENERATE REVENUE

We have limited  experience in manufacturing  our products,  and we have not yet
determined  whether we will be able to  produce  sufficient  quantities  of such
products at commercially  reasonable costs. Our inability to produce  sufficient
quantities at  commercially  reasonable  costs would  jeopardize  our ability to
generate revenue sufficient to support our operations.  In such event, our stock
price would likely decline.

WE MAY NOT BE ABLE TO  SUCCESSFULLY  MARKET OUR PRODUCTS IN THE UNITED STATES OR
INTERNATIONALLY

We have limited  experience in marketing  our products.  We intend to market our
products in the United  States,  Europe and Asia through  collaborative  selling
arrangements and/or through a network of independent distributors supported by a
direct  sales  force.  We do not  currently  have a sales  force in place and no
distribution  agreements  have been  entered  into.  Our  ability  to market our
products  in Europe and Asia and other  areas will depend on our ability to fund
such  efforts  as  well as our  ability  to  develop  strategic  alliances  with
marketing  partners.  Our inability to  successfully  market our products  would
jeopardize our ability to generate revenue sufficient to support our operations.

WE FACE RISKS ASSOCIATED WITH GOVERNMENTAL REGULATION

Changes in existing  regulations  could require advance  regulatory  approval of
genetic  susceptibility  tests that may result in a substantial  curtailment  or
even prohibition of our activities  without  regulatory  approval.  If our tests
ever require  regulatory  approval,  the costs of introduction will increase and
marketing and sales may be significantly delayed.

Further,  several years ago the FDA proposed to regulate as medical  devices the
"active ingredients" (known as "analyze specific reagents" or "ASRs") of certain
tests developed by, or in conjunction with, clinical laboratories.  Currently, a
final rule has not been issued.  The FDA has specifically  stated that it is not
proposing a comprehensive regulatory scheme over the final tests, but rather the
active  ingredients  ASRs  provided  to  the  laboratories  that  perform  them.
According to the FDA, any contemplated  additional controls (e.g. submission for
Pre-Market Approval applications) over the tests themselves would likely involve
those tests which identify genes  associated with cancer or diseases  associated
with  dementia.   If  the  FDA  requires  Pre-Market  Approval  of  our  genetic
susceptibility  test,  our  company  may be  required  to  conduct  pre-clinical
studies,  obtain an investigational  device exemption to conduct clinical tests,
file a Pre-Market Approval application, and obtain FDA approval. There can be no
assurance  such  approval  would be received on a timely  basis,  if at all. The
failure to receive such approval could require us to develop alternative testing
methods or utilize  approved ASRs,  which could result in the delay or cause the
termination of the use of such test. Such a delay or termination could result in
reduced revenues or losses.

WE MAY NOT BE ABLE TO  SUCCESSFULLY  MAINTAIN  OUR CURRENT  PATENTS,  OBTAIN NEW
PATENTS,  OR OPERATE WITHOUT  INFRINGING  UPON THE  PROPRIETARY  RIGHTS OF OTHER
PARTIES

Our success  will depend in part on our  ability to obtain and  maintain  patent
protection  for our products,  preserve our trade secrets,  and operate  without
infringing  upon  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.  In addition, the laws
of certain countries may not protect our intellectual property.  Legal standards


                                       16
<PAGE>

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 we hold  ownership  or license  rights will result in the
issuance  of  patents,  that any  patents  issued or  licensed to us will not be
challenged  and  held to be  invalid,  or that  any such  patents  will  provide
commercially  significant protection to our 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 we have rights or obtain access to our know-how or that others will not
be issued patents which may prevent the sale of one or more of our products,  or
require  licensing  and the payment of  significant  fees or  royalties by us to
third  parties  in order to enable  us to  conduct  our  business.  Defense  and
prosecution of patent claims can be expensive and time consuming,  regardless of
whether  the  outcome is  favorable  to us, and can result in the  diversion  of
substantial   financial,   management,   and  other  resources  from  our  other
activities.  An adverse  outcome  could subject us to  significant  liability to
third parties,  require us to obtain licenses from third parties,  or require us
to cease any related  research and  development  activities or product sales. 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 our working capital shortage, there can be
no assurance that we will be able to continue our existing patent applications.

WE MAY NOT BE ABLE TO SUCCESSFULLY PROTECT OUR PROPRIETARY INFORMATION

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

WE MAY FAIL TO HIRE, RETAIN AND INTEGRATE KEY PERSONNEL

Our ability to successfully  manage our growth will substantially  depend on our
ability to attract and retain additional qualified management personnel. Because
of our  extreme  cash  shortage,  our  ability to  attract  or retain  qualified
personnel has been  hindered.  There is  significant  competition  for qualified
personnel,  and  there  can be no  assurance  that  we  will  be  successful  in
recruiting, retaining or training the management personnel we require.

OUR CHARTER  DOCUMENTS AND FLORIDA LAW CONTAIN  ANTI-TAKEOVER  PROVISIONS THAT
MAY MAKE IT MORE DIFFICULT TO ACQUIRE US

Certain   provisions  in  our  charter   documents  and  Florida  law  may  have
anti-takeover effects, making it more difficult for a third party to acquire us,
even if a change in control would be beneficial to our shareholders.










                                       17
<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 April 4, 2000, we borrowed $100,000 from Donald Heap ("Loan No. 1"). The loan
has an annual interest rate of 12%, simple interest,  payable at maturity.  This
loan is due on October 3, 2000. Prior to the payment of the principal balance of
the loan, the private investor may convert,  at his option, all amounts due into
shares of our common stock at a conversion rate of $5.00 per share. In addition,
we issued the private  investor  warrants to  purchase  10,000  shares of common
stock at an exercise price of $6.20 per share.  In the event of a default,  this
note is  convertible  into shares of common stock at a conversion  rate of $3.00
per  share.  Additionally,  in the event of a  default,  the  investor  would be
entitled to warrants to purchase  1,000 shares at an exercise price of $5.00 per
share for each  month  that any  amounts  are  outstanding  under the note.  The
offering  was exempt from  registration  pursuant to Section 4(2) of the Act and
Rule 506 promulgated thereunder.

On May 8, 2000,  we  borrowed  $100,000  ("Loan  No. 2") and on May 26,  2000 we
borrowed  $500,000  from Jim Kelly  ("Loan No.  3").  These loans have an annual
interest rate of 12%, simple interest, payable at maturity. The loans are due in
November  2000.  Prior to the payment of the principal  balance of the loan, the
private  investor may convert,  at his option at anytime up to 30 days after the
closing of an equity financing by our company of $5 million or more, all amounts
due into shares of our common stock at a conversion  rate of $3.00 per share. In
addition,  and in the event of a conversion,  the private  investor will receive
warrants to purchase (a) 33,333 (Loan No. 2) and 166,665  (Loan No. 3) shares of
common stock at an exercise price of $6.00 per share and (b) 33,333 (Loan No. 2)
and 166,665  (Loan No. 3) shares of common  stock at an exercise  price of $7.10
per share.  If no  conversion  occurs,  then the private  investor  will receive
warrants to purchase (a) 20,000 (Loan No. 2) and 100,000  (Loan No. 3) shares of
common stock at an exercise price of $6.60 per share and (b) 20,000 (Loan No. 2)
and 100,000  (Loan No. 3) shares of common  stock at an exercise  price of $8.00
per  share.  Additionally,  in the event of a  default,  the  investor  would be
entitled to warrants to purchase  (a) 10,000  (Loan No. 2) and (b) 10,000  (Loan
No. 3) shares of common  stock at an exercise  price of $5.00 per share for each
month that any amounts are  outstanding  under the note. The offering was exempt
from  registration  pursuant to Section 4(2) of the Act and Rule 506 promulgated
thereunder.

On June 9, 2000,  we  borrowed  $50,000  ("Loan No.  4") from  Michael  and Lois
Halbert. This loan has an annual interest rate of 12%, simple interest,  payable
at  maturity.  The loan is due in  December  2000.  Prior to the  payment of the
principal  balance of the loan, the private investor may convert,  at his option
at anytime up to 30 days after the closing of an equity financing by our company
of $5 million or more,  all  amounts  due into  shares of our common  stock at a
conversion  rate  of  $3.00  per  share.  In  addition,  and in the  event  of a
conversion, the private investor will receive warrants to purchase 16,665 shares
of common  stock at an  exercise  price of $6.00 per share and 16,665  shares of
common stock at an exercise price of $7.10 per share.  If no conversion  occurs,
then the private  investors will receive  warrants to purchase  10,000 shares of
common stock at an exercise price of $6.60 per share and 10,000 shares of common


                                       18
<PAGE>

stock at an exercise price of $8.00 per share.  Additionally,  in the event of a
default,  the investor would be entitled to warrants to purchase 5,000 shares at
an  exercise  price of $5.00 per  share  for each  month  that any  amounts  are
outstanding under the note. The offering was exempt from  registration  pursuant
to Section 4(2) of the Act and Rule 506 promulgated thereunder.

Between July 24 and August 1, 2000, we borrowed  $1,200,000  ("Loan No. 5") from
thirty-five  private  investors  from  the  sale of 50  Units,  consisting  of a
convertible  note and warrant.  These loans have an annual interest rate of 12%,
simple interest,  payable at maturity. The loans are due in December 2000. Prior
to the payment of the principal  balance of the loan, each private  investor may
convert,  at his option at anytime up to 30 days after the  closing of an equity
financing  by our company of $5 million or more,  all amounts due into shares of
our common stock at a conversion  rate of $3.00 per share.  In addition,  and in
the event of a  conversion,  each  private  investor  will receive for each Unit
purchased  warrants to  purchase  16,665  shares of common  stock at an exercise
price of $6.00 per share and 16,665 shares of common stock at an exercise  price
of $7.10 per share.  If no conversion  occurs,  then each private  investor will
receive for each Unit  purchased  warrants to purchase  10,000  shares of common
stock at an exercise  price of $6.60 per share and 10,000 shares of common stock
at an  exercise  price of  $8.00  per  share.  Additionally,  in the  event of a
default,  each  investor  would be entitled  to receive for each Unit  purchased
warrants to purchase  5,000  shares at an exercise  price of $5.00 per share for
each month that any amounts are  outstanding  under the note.  The  offering was
exempt  from  registration  pursuant  to  Section  4(2) of the Act and  Rule 506
promulgated thereunder. The names of the thirty-five private investors are David
A. Brady, Jr., Tom Vinson, John W. McGriff, James Lasbury Mitchell III, C. Frank
Foster, Jr., Anthony Balsamo, Jim Avramovich,  Dewayne Truitt, Herman A. Vonhof,
Scott Davis, Dr. Will Brantley, Arthur Dietz, Leo Thompson, L. Scott Stankavage,
Ben Biacchino, Robert L. Stanley, Michael Chatham, Anthony Byrne, Ralph Anderson
III,  Bryan Carr,  George Levin,  Richard  Wunderlich,  J.R.  Frangipane,  James
Leiferman,  Mark  Spector,  James Owen,  Robert  Stranger,  The Estate of Milton
Smithloff,  Robert  Benninger  Jr.,  Bruce  Rothmann,  Joseph J.  Steinkirchner,
Jeffrey Rinde, Will Hendrick, Mark Jesuroga and Thomas Johnston.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES

Since November 2, 1998,  the Company  received a total of $3.6 million in loans.
Loans in the original  principal amount of $1,488,500 were due on or before June
30,  2000.  On July 7,  2000,  the  maturity  dates  of loans  with an  original
principal amount of $1,248,500 were extended from June 30, 2000 to September 30,
2000.  As such,  the Company is in default on loans with an  original  principal
amount of  $250,000  for  failing to pay the  required  principal  and  interest
payments  when due. A  significant  amount of the total loans are secured by 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.

As of August 11, 2000, the Company owed $47,800 in interest on $250,000 loans in
default with interest accruing at a rate of $82 per day.



                                       19
<PAGE>



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

(A)   EXHIBITS.

<TABLE>
<CAPTION>
EXHIBIT INDEX

<S>            <C>                                         <C>
     3.1       Articles of Incorporation of the Company,   Incorporated  by  reference  to Exhibit No. 3.1
               as amended                                  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

     3.3       Amendment to By-Laws of the Company         Incorporated  by  reference  to Exhibit No. 3.3
                                                           to the  Annual  Report on Form  10-KSB  for the
                                                           year ended December 31, 1999

     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

     4.4       Form of 1999 Stock Option Plan              Incorporated  by  reference  to Exhibit No. 4.4
                                                           to the  Annual  Report on Form  10-KSB  for the
                                                           year ended December 31, 1999

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

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

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

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

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



                                       20
<PAGE>

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

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

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

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

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

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

    10.12      Promissory Note dated as of November 2,     Incorporated by reference to Exhibit  No. 10.13
               1998 in the Original Principal Amount of    to the  Company's  Annual Report on Form 10-KSB
               $50,000 given by the Company to Ms.         for the year ended December 31, 1998
               Patricia A. Gionone


    10.13      Common Stock Purchase Warrant No. W-2       Incorporated  by reference to Exhibit No. 10.14
               dated  as of November 2, 1998 granted by    to the  Company's  Annual Report on Form 10-KSB
               the Company to Ms. Patricia A. Gionone      for the year ended December 31, 1998

    10.14      Promissory Note dated as of November 2,     Incorporated  by reference to Exhibit No. 10.15
               1998 in the Original Principal Amount of    to the  Company's  Annual Report on Form 10-KSB
               $100,000 given by the Company to Jerome P.  for the year ended December 31, 1998
               Seiden Irrevocable Trust Dated April 22,
               1998

    10.15      Common Stock Purchase Warrant No. W-1       Incorporated  by reference to Exhibit No. 10.16
               dated  as of November 2, 1998 granted by    to the  Company's  Annual Report on Form 10-KSB
               the Company to Jerome P. Seiden             for the year ended December 31, 1998
               Irrevocable Trust Dated April 22, 1998



                                       21
<PAGE>

    10.16      Common Stock Purchase Warrant No. W-5       Incorporated  by reference to Exhibit No. 10.17
               dated as of September 3, 1998 granted by    to the  Company's  Annual Report on Form 10-KSB
               the Company to Sterling Technology          for the year ended December 31, 1998
               Partners, Ltd.

    10.17      Common Stock Purchase Warrant No. W-4       Incorporated  by reference to Exhibit No. 10.18
               dated  as of January 19, 1999 granted by    to the  Company's  Annual Report on Form 10-KSB
               the Company to Sterling Technology          for the year ended December 31, 1998
               Partners, Ltd.

    10.18      Common Stock Purchase Warrant No. W-7       Incorporated  by reference to Exhibit No. 10.19
               dated  as of March 9, 1999 granted by the   to the  Company's  Annual Report on Form 10-KSB
               Company to Sterling Technology Partners,    for the year ended December 31, 1998
               Ltd.

    10.19      Common Stock Purchase Warrant No. W-3       Incorporated  by reference to Exhibit No. 10.20
               dated as of January 19, 1999 granted by     to the  Company's  Annual Report on Form 10-KSB
               the Company to Capital Research, Ltd.       for the year ended December 31, 1998

    10.20      Promissory Note dated as of January 19,     Incorporated by reference to Exhibit No. 10.21
               1999 in the Original Principal Amount of    to the Company's Annual Report on Form 10-KSB
               $163,500 given by the Company to Capital    for the year ended December 31, 1998
               Research, Ltd.

    10.21      Pledge and Security Agreement dated as of   Incorporated  by reference to Exhibit No. 10.22
               January 19, 1999 between the Company and    to the  Company's  Annual Report on Form 10-KSB
               Capital Research, Ltd.                      for the year ended December 31, 1998

    10.22      Registration Rights Agreement dated as of   Incorporated  by reference to Exhibit No. 10.23
               January 19, 1999 between the Company and    to the  Company's  Annual Report on Form 10-KSB
               Capital Research, Ltd.                      for the year ended December 31, 1998

    10.23      Promissory Note dated as of March 9, 1999   Incorporated by reference to Exhibit No. 10.24
               in the Original Principal Amount of         to the Company's Annual Report on Form 10-KSB
               $125,000 given by the Company to Capital    for the year ended December 31, 1998
               Research, Ltd.

    10.24      Common Stock Purchase Warrant No. W-6       Incorporated  by reference to Exhibit No. 10.25
               dated as of March 9, 1999 granted by the    to the  Company's  Annual Report on Form 10-KSB
               Company to Capital Research, Ltd.           for the year ended December 31, 1998

    10.25      Registration Rights Agreement dated as of   Incorporated  by reference to Exhibit No. 10.26
               March 9, 1999 between the Company and       to the  Company's  Annual Report on Form 10-KSB
               Capital Research, Ltd.                      for the year ended December 31, 1998


                                       22
<PAGE>

    10.26      Executive Employment Agreement, together    Incorporated  by reference to Exhibit  10.26 to
               with Stock Option Addendum, dated as of     the Company's  Annual Report on Amendment No. 1
               July 1, 1999 between Mead M. McCabe, Jr.    to the Form 10 KSB for the year ended  December
               and the Company                             31, 1998

    10.27      Executive Employment Agreement, together    Incorporated  by reference to Exhibit  10.27 to
               with Stock Option Addendum, dated as of     the Company's  Annual Report on Amendment No. 1
               July 1, 1999 between Mead M. McCabe, Sr.    to the Form 10 KSB for the year ended  December
               and the Company                             31, 1998

    10.28      Executive Employment Agreement, together    Incorporated  by reference to Exhibit No. 10.29
               with Stock Option Addendum, dated as of     to the  Annual  Report on Form  10-KSB  for the
               January 17, 2000 between Eric Wilkinson     year ended December 31, 1999
               and the Company

    10.29      Promissory Note dated as of April 19, 1999  Incorporated  by reference to Exhibit No. 10.30
               in the Original Principal Amount of         to the  Annual  Report on Form  10-KSB  for the
               $100,000 given by the Company to Jack       year ended December 31, 1999
               Surgent

    10.30      Registration Rights Agreement dated as of   Incorporated  by reference to Exhibit No. 10.31
               April 19, 1999 between the Company and      to the  Annual  Report on Form  10-KSB  for the
               Jack Surgent                                year ended December 31, 1999

    10.31      Common Stock Purchase Warrant dated as of   Incorporated  by reference to Exhibit No. 10.32
               April 19, 1999 granted by the Company to    to the  Annual  Report on Form  10-KSB  for the
               Jack Surgent                                year ended December 31, 1999

    10.32      Promissory Note dated as of October 6,      Incorporated by reference to Exhibit No. 10.33
               1999 in the Original Principal Amount of    to the Annual Report on Form 10-KSB for the
               $200,000 given by the Company to Orbiter    year ended December 31, 1999 Fund, Ltd.

    10.33      Pledge and Security Agreement dated as of   Incorporated  by reference to Exhibit No. 10.34
               October 6, 1999 between the Company and     to the  Annual  Report on Form  10-KSB  for the
               Orbiter Fund, Ltd.                          year ended December 31, 1999

    10.34      Registration Rights Agreement dated as of   Incorporated  by reference to Exhibit No. 10.35
               October 6, 1999 between the Company and     to the  Annual  Report on Form  10-KSB  for the
               Orbiter Fund, Ltd.                          year ended December 31, 1999



                                       23
<PAGE>

    10.35      Common Stock Purchase Warrant dated as of   Incorporated  by reference to Exhibit No. 10.36
               October 6, 1999 granted by the Company to   to the  Annual  Report on Form  10-KSB  for the
               Orbiter Fund, Ltd.                          year ended December 31, 1999

    10.36      Promissory Note dated as of November 19,    Incorporated by reference to Exhibit No. 10.37
               1999 in the Original Principal Amount of    to the Annual Report on Form 10-KSB
               $200,000 given by the Company to Orbiter    for the year ended December 31, 1999 Fund,
                Ltd.

    10.37      Pledge and Security Agreement dated as of   Incorporated  by reference to Exhibit No. 10.38
               November 19, 1999 between the Company and   to the  Annual  Report on Form  10-KSB  for the
               Orbiter Fund, Ltd.                          year ended December 31, 1999

    10.38      Registration Rights Agreement dated as of   Incorporated  by reference to Exhibit No. 10.39
               November 19, 1999 between the Company and   to the  Annual  Report on Form  10-KSB  for the
               Orbiter Fund, Ltd.                          year ended December 31, 1999

    10.39      Common Stock Purchase Warrant dated as of   Incorporated  by reference to Exhibit No. 10.40
               December 22, 1999 granted by the Company    to the  Annual  Report on Form  10-KSB  for the
               to Orbiter Fund, Ltd.                       year ended December 31, 1999

    10.40      Promissory Note dated as of November 19,    Incorporated by reference to Exhibit No. 10.41
               1999 in the Original Principal Amount of    to the Annual Report on Form 10-KSB for the
               $300,000 given by the Company to Orbiter    year ended December 31, 1999 Fund,
               Ltd.

    10.41      Pledge and Security Agreement dated as of   Incorporated  by reference to Exhibit No. 10.42
               December 22, 1999 between the Company and   to the  Annual  Report on Form  10-KSB  for the
               Orbiter Fund, Ltd.                          year ended December 31, 1999

    10.42      Registration Rights Agreement dated as of   Incorporated  by reference to Exhibit No. 10.43
               December 22, 1999 between the Company and   to the  Annual  Report on Form  10-KSB  for the
               The Orbiter Fund, Ltd.                      year ended December 31, 1999

    10.43      Common Stock Purchase Warrant dated as of   Incorporated  by reference to Exhibit No. 10.44
               December 22, 1999 granted by the Company    to the  Annual  Report on Form  10-KSB  for the
               to The Orbiter Fund, Ltd.                   year ended December 31, 1999

    10.44      Promissory Note dated as of February, 2000  Incorporated  by reference to Exhibit No. 10.45
               in the Original Principal Amount of         to the  Annual  Report on Form  10-KSB  for the
               $250,000 give by the Company to The         year ended December 31, 1999
               Orbiter Fund, Ltd.



                                       24
<PAGE>

    10.45      Pledge and Security Agreement dated as of   Incorporated  by reference to Exhibit No. 10.46
               February, 2000 between the Company and The  to the  Annual  Report on Form  10-KSB  for the
               Orbiter Fund, Ltd.                          year ended December 31, 1999

    10.46      Registration Rights Agreement dated as of   Incorporated  by reference to Exhibit No. 10.47
               February, 2000 between the Company and The  to the  Annual  Report on Form  10-KSB  for the
               Orbiter Fund, Ltd.                          year ended December 31, 1999

    10.47      Stock Purchase Agreement dated as of        Incorporated  by reference to Exhibit No. 10.48
               January 17, 2000 among the Company, DNA     to the  Annual  Report on Form  10-KSB  for the
               Sciences, Inc. and the shareholders of DNA  year ended December 31, 1999
               Sciences, Inc.

    10.48      Common Stock Purchase Warrant dated as of   Incorporated  by reference to Exhibit No. 10.49
               February, 2000 given by the Company to The  to the  Annual  Report on Form  10-KSB  for the
               Orbiter Fund, Ltd.                          year ended December 31, 1999

    10.49      Convertible Promissory Note dated as of     Incorporated  by reference to Exhibit No. 10.50
               March 2, 2000 in the Original Principal     to the  Annual  Report on Form  10-KSB  for the
               Amount of $75,000 given by the Company to   year ended December 31, 1999
               Jack Higgins

    10.50      Common Stock Purchase Warrant dated as of   Incorporated   by   reference  to  Exhibit  No.
               March 2, 2000 between the Company and Jack  10.51 to the Annual  Report on Form 10-KSB for
               Higgins                                     the year ended December 31, 1999

    10.51      Convertible Promissory Note dated as of     Incorporated  by reference to Exhibit No. 10.52
               March 7, 2000 in the Original Principal     to the  Annual  Report on Form  10-KSB  for the
               Amount of $100,000 given by the Company to  year ended December 31, 1999
               Frederick & Company

    10.52      Common Stock Purchase Warrant dated as of   Incorporated  by reference to Exhibit No. 10.53
               March 7, 2000 between the Company and       to the  Annual  Report on Form  10-KSB  for the
               Frederick & Company                         year ended December 31, 1999

    10.53      Convertible Promissory Note in the          Incorporated  by reference to Exhibit No. 10.54
               Original Principal Amount of $100,000       to the  Annual  Report on Form  10-KSB  for the
               dated as of May 8, 2000 between the         year ended December 31, 1999
               Company and Jim Kelly.



                                       25
<PAGE>

    10.54      Common Stock Purchase Warrant dated as of   Incorporated  by reference to Exhibit No. 10.55
               May 8, 2000 between the Company and Jim     to the  Annual  Report on Form  10-KSB  for the
               Kelly.                                      year ended December 31, 1999

    10.55      Convertible Promissory Note in the          Incorporated  by reference to Exhibit No. 10.56
               Original Principal Amount of $500,000       to the  Annual  Report on Form  10-KSB  for the
               dated as of May 26, 2000 between the        year ended December 31, 1999
               Company and Jim Kelly.

    10.56      Common Stock Purchase Warrant dated as of   Incorporated  by reference to Exhibit No. 10.57
               May 26, 2000 between the Company and Jim    to the  Annual  Report on Form  10-KSB  for the
               Kelly.                                      year ended December 31, 1999

    10.57      Convertible Promissory Note in the          Incorporated by reference to Exhibit 10.57 to
               Original Principal Amount of $100,000       the Quarterly Report on Form 10-QSB for the
               dated as of April 4, 2000 between the       three months ended March 31, 2000 Company and
               Donald Heap.

    10.58      Common Stock Purchase Warrant No. W-18      Incorporated  by reference to Exhibit  10.58 to
               dated as of April 4, 2000 between the       the  Quarterly  Report on Form  10-QSB  for the
               Company and Donald Heap.                    three months ended March 31, 2000

    10.59      Convertible Promissory Note in the          Incorporated by reference to Exhibit 10.59 to
               Original Principal Amount of $50,000 dated  the Quarterly Report on Form 10-QSB for
               the as of June 9, 2000 between the Company  three months ended March 31, 2000
               and Michael and Lois Halbert

    10.60      Common Stock Purchase Warrant dated as of   Incorporated by reference to Exhibit 10.60
               to June 9, 2000 between the Company and     the Quarterly Report on Form 10-QSB for the
               Michael and Lois Halbert three months       ended March 31, 2000

    10.61      Common Stock Purchase Warrant No. W-12      Incorporated  by reference to Exhibit  10.61 to
               dated as of October 6, 1999 between the     the  Quarterly  Report on Form  10-QSB  for the
               Company and Sterling Technology Partners,   three months ended March 31, 2000
               Ltd.

    10.62      Common Stock Purchase Warrant No. W-13      Incorporated by reference to Exhibit 10.62 to
               dated as of December 22, 1999 between the   the Quarterly Report on Form 10-QSB for the
               Company and Sterling Technology Partners,   three months ended March 31, 2000 Ltd.

     11.       Statement re: computation of earnings       Not applicable



                                       26
<PAGE>

     18.       Letter on change in accounting principles   Not applicable

     21.       Subsidiaries of the Registrant              Provided herewith

     22.       Published report regarding matters          Not applicable
               submitted to Vote

     23.       Consent of Independent Accountant           Not applicable

     24.       Power of Attorney                           Not applicable

     27.       Financial Data Schedule                     Provided herewith
</TABLE>






























                                       27
<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:  August 14, 2000             GENETIC VECTORS, INC.


                                    By: /s/ Mead M. McCabe, Jr.
                                        ------------------------
                                          Mead M. McCabe, Jr.
                                          President







© 2022 IncJournal is not affiliated with or endorsed by the U.S. Securities and Exchange Commission