<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
DECEMBER 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
_____________ TO _____________
Commission File Number 0-23153
VOLU-SOL, INC.
(Exact name of small business issuer as specified in its charter)
Utah 87-0543981
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5095 West 2100 South
Salt Lake City, Utah 84120
(Address of principal executive offices) (Zip Code)
(801) 974-9474
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No __
As of February 8, 2000, the issuer had issued and outstanding 2,721,042 shares
of common stock, par value $.0001.
Transitional Small Business Disclosure Format
(Check One):
Yes __ No X
--
1
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Page
No.
1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of December
31, 1999.....................................................3
Unaudited Condensed Consolidated Statements of Operations for
the three and three months ended December 31, 1999 and 1998..4
Unaudited Condensed Consolidated Statements of Cash Flows for
the three months ended December 31, 1999 and 1998............5
Notes to Unaudited Condensed Consolidated Financial
Statements...................................................6
2. Management's Discussion and Analysis or Plan of Operation....7
PART II. OTHER INFORMATION...........................................10
2
<PAGE>
PART I
ITEM 1 - Financial Statements
VOLU-SOL, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
December 31,
1999
<S> <C>
Current assets:
Cash and cash equivalents $ 37,850
----------------
Accounts receivable, less allowance for doubtful accounts of $2,188 74,461
Inventories 49,819
----------------
Total current assets 162,130
Property and equipment, net 86,937
----------------
Other assets 1,074
- ------------ ----------------
Total assets $ 250,142
================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 57,800
Accrued liabilities 24,423
Preferred stock dividends payable 40,100
----------------
Total current liabilities 122,323
----------------
Stockholders' equity:
Preferred stock, $.0001 par value; 10,000,000 shares authorized 13,153 shares
outstanding (aggregate liquidation preference $2,834,277) 3,130,416
Common Stock, par value $.0001; 50,000,000 shares authorized, 2,721,042
shares 272
issued and outstanding
Additional paid-in capital 1,911,541
Preferred stock subscriptions receivable (338,300)
Accumulated deficit (4,576,110)
----------------
Total stockholders' equity 127,819
----------------
Total liabilities and stockholders' equity $ 250,142
================
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated balance sheets.
3
<PAGE>
VOLU-SOL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended December 31,
1999 1998
Sales ----- -----
<S> <C> <C>
Cost of goods sold $ 115,350 $ 133,919
73,051 93,101
----------- ----------
Gross Margin 42,299 40,818
Selling, general and administrative expenses
180,619 277,998
Loss from operations (138,219) (237,180)
Other income (expense):
Interest Income -- 85
Interest Expense -- (7,708)
----------- -----------
Net loss before provision for income taxes (138,219) (244,803)
Provision for income taxes -- --
Net loss $ (138,219) $ (244,803)
----------- -----------
Dividends on Series A preferred stock (40,100) (29,313)
----------- -----------
Net loss applicable to common stock $ (178,319) $ (274,116)
----------- -----------
Net loss per common share - basic and diluted (0.07) (0.11)
----------- -----------
Weighted average common shares outstanding 2,721,042 2,446,288
----------- -----------
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated statements.
4
<PAGE>
VOLU-SOL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three months
Ended December 31,
1999 1998
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 138,219) $ (244,803)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation 19,875 19,975
Provision for losses
Preferred stock issued for services 90,000 -
(Increase) Decrease in:
Accounts receivable 1,236 (19,242)
Inventories 6,401 (299)
Other assets -- 12,117
Decrease in:
Accounts payable 23,434 (22,942)
Accrued liabilities (9,000) (15,526)
----------- -----------
Net cash used in operating activities: (6,273) (130,720)
----------- -----------
Cash flows from investing activities Cash flows from financial activities:
Proceeds from sale of preferred stock -- 53,500
Proceeds from notes payable -- 70,000
Principal Payment
Net cash provided by financing activities -- 123,500
----------- -----------
Net increase (decrease) in cash (6,273) (7,220)
Cash, beginning of period 44,123 16,411
----------- -----------
Cash, end of period $ 37,850 $ 9,191
=========== ===========
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated statements.
5
<PAGE>
VOLU-SOL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------------
The accompanying interim condensed consolidated financial statements of
Volu-Sol, Inc. and Volu-Sol Reagents Corporation, its wholly owned subsidiary
(collectively, the "Company"), have been prepared consistent with generally
accepted accounting principles for interim financial information in accordance
with the instructions to Form 10-QSB and Item 310 of Regulation S-B.
Accordingly, such unaudited financial statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the financial position, results of operations and cash flows of
the Company for the interim periods presented, have been included. Operating
results for the three months ended December 31, 1999 are not necessarily
indicative of the results that may be expected for the year ending September 30,
2000. The Company suggests that these condensed consolidated financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's Form 10-KSB for the year ended September 30,
1999.
(2) RELATED-PARTY TRANSACTIONS
From March 5, 1997 through December 31, 1999, the Company borrowed money from
Biomune Systems, Inc. its former parent ("Biomune") totaling $486,500. At March
31, 1999, the amount owed Biomune was $400,961, payable pursuant to a promissory
note bearing interest at an annual rate of ten percent and due on demand.
Biomune sold the note during the three months ended December 31, 1999. The note
was paid in full by the Company by issuing 2,011 shares of its Series A
Preferred Stock at the request of the new noteholder.
(3) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out method) or
market value. Inventories consist of the following as of December 31, 1999:
Raw materials, packaging and supplies $29,819
Instruments, biological stains and reagents 20,000
-------
$49,819
(4) SERIES A PREFERRED STOCK
As of December 31, 1999, the Company had $900,000 of subscriptions receivable
from the sale of 4,500 shares of Series A Preferred Stock. During the three
months ended December 31, 1999, the Company sold no shares of Series A Preferred
Stock. During the three months ended December 31, 1999, the Company issued a
total of 450 shares of Series A Preferred Stock as fees for consulting services
provided to the Company. The Company also issued 2,011 shares of Series A
Preferred Stock in satisfaction of the Note. The Series A Preferred Stock became
convertible into Common Stock beginning January 1, 1998. The "conversion price,"
which is the basis for such conversion, is the lesser of (i) 80% of the average
closing bid price of the Company's Common Stock for the three trading days
immediately preceding the date of conversion or (ii) $1.25 per share.
6
<PAGE>
(5) NET LOSS PER COMMON SHARE
Basic net loss per common share ("Basic EPS") excludes dilution and is computed
by dividing net loss by the weighted average number of common shares outstanding
during the period. Diluted net loss per common share ("Diluted EPS") reflects
the potential dilution that could occur if stock options or other contracts to
issue Common Stock including convertible Preferred Stock were exercised or
converted into Common Stock. The computation of Diluted EPS does not assume
exercise or conversion of securities that would have an anti-dilutive effect on
net loss per common share. Because the Company has incurred a loss for the
periods presented, no exercises or conversions have been considered as they
would be anti-dilutive, thereby decreasing the net loss applicable to common
shares.
During the three months ended December 31, 1999 the Company issued 8,540 shares
of Common Stock as part of the original divestiture in the nature of a dividend.
At December 31, 1999, there were outstanding options to purchase 446,100 shares
of Common Stock and there were 13,153 shares of Series A Preferred Stock
convertible into a minimum of 2,104,480 shares of Common Stock, neither of which
are included in the computation of Diluted EPS because they would be anti
dilutive. The options all relate to options to purchase Biomune common stock
outstanding at the time of the divestiture. The holders of such Biomune options
were also granted options to purchase Volu-Sol common stock.
ITEM 2 - Management's Discussion and Analysis or Plan of Operation
Until October 1, 1997, the Company was a division and then a wholly
owned subsidiary of Biomune. Effective October 1, 1997, Biomune divested itself
of the Company by distributing Volu-Sol Common Stock to holders of Biomune
Common Stock as of March 5, 1997. Since October 1, 1997, the Company has
operated as a separate entity. The following discussion and analysis should be
read in conjunction with the Company's unaudited condensed consolidated
financial statements and the notes thereto contained elsewhere in this report.
The discussion of these results should not be construed to imply that any
condition or circumstance discussed herein will necessarily continue in the
future.
Results of Operations
Comparison of the Three Months Ended December 31, 1999 to the Three Months Ended
December 31, 1998.
During the three months ended December 31, 1999, the Company's revenues
totaled $115,350 compared to $133,919 for the three months ended December 31,
1998. This decrease in revenues resulted primarily from a decrease in sales of
reagents.
Cost of revenues for the three months ended December 31, 1999 totaled
$73,051 compared to $93,101 for the three months ended December 31, 1998. The
overall gross margin for the three months ended 1999 was 36% of revenues
compared to 30% of revenues for the comparable three months ended in 1998. The
increase in the gross margin on sales of stains and reagents is attributable to
shipping charges that are now being paid by customers as well as a price
increase that was implemented in March 1998. The increased gross margin results
from a continued effort to create a leaner production team and better inventory
management.
7
<PAGE>
Selling, general and administrative expenses totaled $180,619 for the
three months ended December 31, 1999, compared to $277,998 for the three months
ended December 31, 1998, an overall decrease of $97,379. This decrease is
attributed to a continued effort to create a leaner management team. The Company
also paid consulting expenses through the issuance of 90,000 shares of the
Company's preferred stock.
Interest expense decreased from $7,708 for the three months ended
December 31, 1998 to $0 for the three months ended December 31, 1999.
The Company incurred a net loss applicable to common shares of $178,319
for the three months ended December 31, 1999 compared to a net loss applicable
to common shares of $274,116 for the three months ended December 31, 1998.
The Company incurred a net loss applicable to common shares of $630,766
for the three months ended December 31, 1999 compared to a net loss applicable
to common shares of $705,617 for the three months ended December 31, 1998. This
decrease in net loss is primarily due to a decrease in selling, general and
administrative expenses as well as a reduction in cost of goods sold.
Liquidity and Capital Resources
The Company currently is unable to finance its operations solely from
its cash flows from operating activities. From October 1, 1993 through March 31,
1999, Biomune financed the Company's operations through a series of loans and
other capital contributions totaling approximately $2,900,000. The Company also
sold shares of Series A Preferred Stock to provide additional working capital.
The Company believes that cash generated by operations, together with
the proceeds from additional sales of its securities will be sufficient to meet
its capital requirements for a minimum of twelve months.
As of December 31, 1999, the Company had cash of $37,850 and positive
working capital of $39,807 compared to cash of $9,191 and negative working
capital of $194,189 as of December 31, 1998.
During the three months ended December 31, 1999, the Company's
operating activities used cash of $6,273, much of which was provided by the sale
of Series A Preferred Stock. During the three months ended December 31, 1998,
the Company's operating activities used cash in the amount of $130,720, which
was provided by the sale of Series A Preferred Stock.
The Company has no credit facility with any commercial lending
institution. In the past, the Company borrowed and received capital from time to
time from Biomune, but the Company has no formal financing arrangement,
agreement or understanding for debt financing in the future.
The unaudited condensed consolidated financial statements of the
Company have been prepared on the assumption that the Company will continue as a
going concern. The Company's product line is limited and the Company has relied
upon borrowings and financing from the sale of its equity securities to sustain
operations. Additional financing will be required if the Company is to continue
as a going concern. If such additional funding cannot be obtained, the Company
may be required to scale back or discontinue its operations. Even if such
additional financing is available to the Company, there can be no assurance that
it will be on terms favorable to the Company. In any event, such financing will
result in immediate and possible substantial dilution to existing shareholders.
8
<PAGE>
Forward-looking Statements and Certain Risk Factors
Statements which are not historical facts contained in this report are
forward-looking statements. Section 21E of the Securities Exchange Act of 1934,
as amended, provides a safe harbor for forward- looking statements. In order to
comply with the terms of the safe harbor, the Company cautions that a variety of
factors could cause the Company's actual results to differ materially from
anticipated results or other expectations expressed in this report. The
forward-looking statements contained in this Management's Discussion and
Analysis or Plan or Operation also contemplate a number of risks and
uncertainties that could cause actual results to differ from projected or
anticipated results. The risk factors discussed in Part I, Item I ("Business")
and in the "Management's Discussion and Analysis or Plan or Operation" (Item 6)
of the Company's Annual Report on Form 10-KSB for the fiscal year ended
September 30, 1999 may also affect actual operating results.
PART II - OTHER INFORMATION
ITEM 4 Exhibits and Reports on Form 8-K
(a) Exhibits Required by Item 601 of Regulation S-B
Exhibit No. Description
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed no current Reports on Form 8-K in the quarter ended
December 31, 1999.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VOLU-SOL, INC.
Date: February 18, 1999 By: /s/ Wilford W. Kirton, III
---------------------------
Wilford W. Kirton, III,
Chief Executive Officer
Date: February 18, 1999 By: /s/ Michael G. Acton
---------------------
Michael G. Acton,
Acting Principal Accounting
Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001045942
<NAME> VOLU-SOL, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 37,850
<SECURITIES> 0
<RECEIVABLES> 76,649
<ALLOWANCES> (2,188)
<INVENTORY> 49,819
<CURRENT-ASSETS> 162,130
<PP&E> 428,666
<DEPRECIATION> (341,729)
<TOTAL-ASSETS> 250,142
<CURRENT-LIABILITIES> 122,323
<BONDS> 0
0
3,130,416
<COMMON> 272
<OTHER-SE> (3,002,869)
<TOTAL-LIABILITY-AND-EQUITY> 250,142
<SALES> 115,350
<TOTAL-REVENUES> 115,350
<CGS> 73,051
<TOTAL-COSTS> 73,051
<OTHER-EXPENSES> 180,619
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (178,319)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (178,319)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
