U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
|X| QUARTERLY REPORT PUSUANT SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2000
TRANSITION REPORT PURSUANT SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from____to ____
Commission File Number 0-26775
STEROIDOGENESIS INHIBITORS INTERNATIONAL, INC.
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(Exact name of small business issuer as specified in its charter)
NEVADA 88-0384037
- - ------------------------------- --------------
(State or other jurisdiction of (IRS. Employer
incorporation or organization) Identification No.)
101 Convention Center Dr. Suite 310 89109
- ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 702-735-7001
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 |_| No |X|
The number of shares of Common Stock outstanding as at May 12 was: 17,331,863
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
<PAGE>
TABLE OF CONTENTS
Consolidated, Interim Balance Sheets as of March 31, 2000,
& 1999 (Unaudited). 3
Consolidated Interim Statements of Operations for the period from
Inception (September 5, 1994) to March 31, 2000, and the
Three Months Ended
March 31, 2000 & 1999 (Unaudited). 4
Consolidated Interim Statements of Stockholders' Equity
(Deficit) for the period from Inception
(September 5, 1994) to March 31, 2000 (Unaudited). 5
Consolidated Interim Statements of Cash Flows for the period from
Inception (September 5, 1994) to March 31, 2000 and for the
Three Months Ended
March 31, 2000 & 1999 (Unaudited). 6
Notes to Interim Financial Statements. 7-12
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<PAGE>
PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The information required is attached.
<TABLE>
<CAPTION>
STEROIDOGENESIS INHIBITORS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED, INTERIM BALANCE SHEETS
(UNAUDITED)
March 31, 2000 & 1999
ASSETS 2000 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 189,855 $ 3,562
Note receivable-related party (note 8) 17,522 14,298
------------ ------------
207,377 17,860
------------ ------------
FIXED ASSETS:
Furniture & fixtures, at cost 47,062 29,217
Accumulated depreciation (18,897) (11,993)
------------ ------------
28,165 17,224
------------ ------------
OTHER ASSETS:
Patent registration costs 55,547 35,418
Purchased technology rights, net of accumulated
amortization of $26,334 & $ 15,437 (notes 1&2) 82,635 93,532
Deposits 15,720
Other 2,000 30,006
------------ ------------
155,902 158,956
------------ ------------
TOTAL ASSETS $ 391,444 $ 194,040
============ ============
LIABILITIES
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 404,066 $ 17,431
Short term borrowing 50,000
Due to related parties 145,000
------------ ------------
599,066 17,431
LONG-TERM LIABILITIES
Convertible debentures, net of discount 119,351
Deferred revenue (note 4) 250,000 250,000
------------ ------------
849,066 386,782
------------ ------------
COMMITMENTS (note 5)
SHAREHOLDERS' EQUITY:
Common stock, 25,000,000 share authorized at .001 par,
16,564,716 issued and outstanding (note 7) 16,565 10,686
Common stock reserved for conversion of parent's stock 107 123
Paid in capital in excess of par, net of offering costs 5,883,642 4,518,068
Accumulated deficit (6,357,936) (4,721,619)
------------ ------------
(457,622) (192,742)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 391,444 $ 194,040
============ ============
</TABLE>
See accompanying notes to the consolidated, interim financial statements
(unaudited).
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<TABLE>
<CAPTION>
STEROIDOGENESIS INHIBITORS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED, INTERIM STATEMENTS OF OPERATIONS
(UNAUDITED)
FROM INCEPTION (SEPTEMBER 5, 1994) AND FOR THE THREE MONTHS ENDED
MARCH 31, 2000 & 1999
From
09/05/94
To
03/31/00 2000 1999
-------------- --------------- -------------
<S> <C> <C> <C>
REVENUES: $ 50,000 $ 0 $ 0
-------------- --------------- -------------
EXPENSES:
Research & development 908,351 250,750 226,886
Interest 14,945 1,000 156
General & administrative 5,438,480 287,781 348,137
Depreciation and amortization 46,160 4,727 4,017
-------------- --------------- -------------
6,407,936 544,258 579,196
-------------- --------------- -------------
Net loss $ (6,357,936) $ (544,258) $ (579,196)
============== =============== =============
Earnings per share:
Basic $ (0.78) $ (0.05) $ (0.06)
============== =============== =============
Diluted $ (0.78) $ (0.05) $ (0.06)
============== =============== =============
Weighted average number of shares outstanding:
Basic 8,146,971 10,507,298 10,219,300
Diluted 8,148,464 10,540,631 10,219,300
See accompanying notes to the consolidated, interim financial statements (unaudited)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
STEROIDOGENESIS INHIBITORS INTERNATIONS, INC.
(A DEVELOPMENT STATE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(UNAUDITED)
FROM INCEPTION (SEPTEMBER 5, 1994) TO MARCH 31, 2000
Shares
Number Par Value Reserved Total Total
of Common for Paid in Paid in Retained Shareholders'
Shares Stock Conversion Capital Warrants Capital Earnings Equity
---------- --------- ---------- --------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Inception at September 5, 1994 0 $ $ $ $ $ $ $ 0
Shares issued for cash, net of
offering costs 6,085,386 609 635,481 635,481 636,090
Warrants issued for cash 5,000 5,000 5,000
Shares issued as compensation for
services 714,500 71 1,428,929 1,428,929 1,429,000
Loss, from inception through
12/31/96 (2,152,843) (2,152,843)
----------- -------- ----------- --------- ------- ---------- ----------- ------------
December 31, 1996 6,799,886 680 2,064,410 5,000 2,069,410 (2,152,843) (82,753)
Issuance of stock, prior to
acquisition 206,350 21 371,134 371,134 371,155
Acquisition of subsidiary for
stock (note 2) 1,503,000 150 46,545 46,545 46,695
Recapitalization (note 2)
Shares of parent redeemed, par
value $.0001 (8,509,236) (851) 851 851 0
Shares of public subsidiary
issued, par value $.001 7,689,690 7690 820 (8,510) (8,510) 0
Loss, development stage, 1997 (979,635) (979,635)
----------- -------- ----------- --------- ------- ---------- ----------- ------------
December 31, 1997 7,689,690 7,690 820 2,474,430 5,000 2,479,430 (3,132,478) (644,538)
Conversion of parent's shares 696,022 696 (696) 0
Shares issued for cash to public,
net of offering costs 693,500 694 605,185 605,185 605,879
Shares issued in cancellation of
debt 525,000 525 524,475 524,475 525,000
Shares issued as compensation
(note 7) 400,000 400 349,600 349,600 350,000
Loss, development stage, 1998 (1,009,945) (1,009,945)
----------- -------- ----------- --------- ------- ---------- ----------- ------------
December 31, 1998 10,004,212 10,005 124 3,953,690 5,000 3,958,690 (4,142,423) (173,604)
Conversion of parent's shares 13,000 13 (13) 0 0
Shares issued in cancellation of
debt 30,000 30 29,970 29,970 30,000
Shares issued to public, net of
offering 45,000 45 41,367 41,367 41,412
Shares issued as compensation
(note 7) 3,569,250 3,569 462,113 462,113 465,682
Shares issued pursuant to
convertible debentures: 0
Detachable warrants issued (note 7) 152,125 152,125 152,125
Detachable warrants exercised
(note 7) 100,000 100 148,900 (149,000) (100) 0
Debentures converted to stock
(note 7) 1,682,447 1,682 640,438 640,438 642,120
Loss, development stage, 1999 (1,671,255) (1,671,255)
----------- -------- ----------- --------- ------- ---------- ----------- ------------
December 31, 1999 15,443,909 15,444 111 5,276,478 8,125 5,284,603 (5,813,678) (513,520)
Conversion of parent's shares 4,000 4 (4) 0 0
Shares issued for cash to public,
net of offering cost 460,000 460 113,931 113,931 114,391
Shares issued in cancellation of
debt 400,000 400 424,600 424,600 425,000
Shares issued as compensation
(note 7) 218,000 218 60,547 60,547 60,765
Warrants converted 38,807 39 3,086 (3,125) (39) 0
0 0
Loss, development stage,
March 31, 2000 (544,258) (544,258)
----------- -------- ----------- --------- ------- ---------- ----------- ------------
March 31, 2000 16,564,71 $ 16,565 $ 107 $5,878,642 $ 5,000 $ 5,883,64 $(6,357,936 $ (457,622)
=========== ======== =========== ========== ======= ========== =========== ============
See accompanying notes to the consolidated, interim financial statements (unaudited)
</TABLE>
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<TABLE>
<CAPTION>
STEROIDOGENESIS INHIBITORS INTERNATIONAL, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED, INTERIM STATEMENTS OF CASH FLOWS
(UNAUDITED)
FROM INCEPTION (SEPTEMBER 5, 1994) AND FOR THE THREE MONTHS ENDED
MARCH 31, 2000 & 1999
Inception
to 03/31/00 2000 1999
----------- ----- ----
<S> <C> <C> <C>
NET CASH USED BY OPERATING ACTIVITIES:
Net loss $ (6,357,936) $ (544,258) $ (579,196)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 46,160 4,727 4,017
Expenses paid through issuance of stock 2,365,892 60,765 212,906
(Increase) decrease in assets:
Notes receivable (17,522) (6,044) (1,208)
Prepaids & other current assets (17,720) (18,477)
Increase (decrease) in liabilities:
Deferred revenue 250,000
Accounts payable 404,066 120,568 (51,474)
------------- ------------ ------------
(3,327,060) (364,242) (433,432)
------------- ------------ ------------
NET CASH USED BY INVESTING ACTIVITIES:
Purchase of technology (108,969)
Purchase of furniture and equipment (47,796)
Patent registration costs (note 1.d.1)) (55,547)
------------- ------------ ------------
(212,312) 0 0
------------- ------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES:
Proceeds from warrants 152,125 150,000
Proceeds from debentures 628,175 241,500
Proceeds from stock offering, net of costs 1,773,927 114,391 45,000
Short-term loan proceeds 1,175,000 438,000
------------- ------------ ------------
3,729,227 552,391 436,500
------------- ------------ ------------
CHANGE IN CASH 189,855 188,149 3,068
CASH AT BEGINNING OF PERIOD 0 1,706 494
------------- ------------ ------------
CASH AT END OF PERIOD $ 189,855 $ 189,855 $ 3,562
============= ============ ============
NON-CASH FINANCING & INVESTING ACTIVITIES:
Purchase of net, non-cash assets of subsidiary
for stock $ 195 $ 0 $ 0
Short-term debt retired through issuance
of stock $ 980,000 $ 425,000 $ 525,000
Income taxes and interest paid with cash 0 0 0
See accompanying notes to the consolidated, interim financial statements (unaudited)
</TABLE>
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<PAGE>
STEROIDOGENESIS INHIBITORS INTERNATIONAL, INC.
Notes to interim financial statements
1. Summary of Accounting Policies:
a. The Company:
In October, 1997, WEBX Media, Inc., a non-operating public shell, entered into
an exchange of stock with the owners of Steroidogenesis Inhibitors, Inc. (SI), a
company incorporated in Nevada in September, 1994. Subsequent to the
transaction, WEBX Media, Inc., changed its name to Steroidogenesis Inhibitors
International, Inc.(STGI). Technically, SI is a subsidiary of STGI. For
accounting purposes, however, because STGI was a non-operating shell, SI is
treated as the parent of STGI. Therefore, the financial statements include the
activity of SI from inception. See also Note 2.
The Company is engaged in securing the patent for a the licensing of a drug
called ANTICORT, a trademarked, proprietary drug. The product was developed by
Cortisol Medical Research, Inc., the majority shareholder from whom the Company
purchased the rights. Anticort was developed for the treatment of disorder and
ailments related to cortisol diseases.
The accompanying financial statements have been prepared on the basis that it is
a going concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The Company has
incurred a loss since inception of $5,813,678. As such, the financial statements
reflect recurring losses, working capital deficiencies, negative cash flows from
operating activities, and adverse key financial ratios.The Company is dependent
upon outside capital to continue in existence and to achieve profitable
operations.
Management's plans for dealing with the adverse effects of the conditions cited
above is to raise working capital through equity financing arrangements.
Subsequent to December 31, 1999, the Company entered into a commitment with an
investment banker through which up to $2,000,000 will be advanced,
collateralized by restricted registered stock. Under the agreement, the advances
are converted periodically through the issuance of stock at a discounted market
price. Through such, the Company had received advances of $425,000 through March
6, 2000. Furthermore, Management notes that many expenditures can be deferred
until funds are available to continue development. While such a strategy would
not be preferred due to a competitive market, Management is willing to pursue it
if necessary.
Adjustments and disclosures have been made so that the interim financial
statements are not misleading.
b. Basis of Consolidation:
The accompanying financial statements include the accounts of STGI and SI. All
intercompany balances and transactions have been eliminated in consolidation.
-7-
<PAGE>
STEROIDOGENESIS INHIBITORS INTERNATIONAL, INC.
Notes to interim financial statements
The stock exchange occurred October 21, 1997. In accordance with generally
accepted accounting principles, the results of WEBX Media, Inc., through the
acquisition date are not included in the consolidated operating statements.
c. Plant, Property, and Equipment:
Fixed assets purchased are recorded at cost. Depreciation is provided using the
straight line method over the estimated useful lives of the assets. Depreciation
expense was approximately $2,003 and $1,278 for the three months ended March 31,
2000 and 1999, respectively.
d. Intangibles:
1) Legal fees associated with registering Anticort, and derivative patents are
recorded at cost. Amortization, once the patent is approved, will be calculated
using the straight-line method, over the estimated useful lives of the patents.
2) Purchased technology rights are recorded at cost and are being amortized
using the straight line method over the estimated useful life of the technology.
Amortization of purchased technology was approximately $2,724 for the three
months ended March 31, 2000 and 1999, respectively.
e. Earnings per share:
The Company calculates earnings per share in accordance with SFAS 128. At March
31, 2000, there were 100,000 warrants which were potentially dilutive. However,
because the Company has had development stage losses, the effect of including
these securities would be to reduce the loss per share. Therefore, the security
has been deemed non-dilutive.
f. Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
2. Reverse Acquisition:
On October 21, 1997, SI secured WEBX Media through a reorganization agreement.
Under the agreement, the principal shareholders of the SI exchanged their stock
on a share for share basis for the stock of WEBX. At the time of the
acquisition, WEBX was non-operating public shell with no significant assets.
-8-
<PAGE>
STEROIDOGENESIS INHIBITORS INTERNATIONAL, INC.
Notes to interim financial statements
The Company has accounted for this transaction as a capital transaction; a
retirement of SI shares and issuance of STGI shares (formerly WEBX). Because
STGI shares have stated par value of $.001 compared to SI shares at $.0001, the
exchange resulted in a reclassification from 'additional paid in capital' to
'par value'.
At the transaction date, approximately 88% of SI's shareholders exchanged SI
stock for STGI stock. The Company reserved additional STGI shares to convert the
balance of the remaining SI shareholders as they were located. During 1998, an
additional 10% of the shareholders of record at the acquisition date had
converted their shares. Such conversion have continued through March 31, 2000.
3. Convertible debentures, detachable warrants, and debt:
During the three months ended March 31, 2000, the Company borrowed $425,000
under an equity financing arrangement with an investment banker. Under the terms
of the facility, the amounts borrowed are collateralized by restricted
registered stock, and are periodically repaid through its issuance at a
discounted market price. Under such, the $425,000 was retired through the
issuance of 400,000 shares. The agreement permits up to $2,000,000 of advances
under these terms.
At March 31,2000, the Company had an amount due of $50,000. The loan is due
August, 2001, with interest at 8%. Management intends to retire this amount
through issuance of stock.
Also, at March 31, 2000, the Company had amounts due from two entities totalling
$145,000. These loans are unsecured, due upon demand, and due not accrue
interest. One of the loans is from an entity in which a director of the Company
has a majority interest. The other is from an entity owned by a family member of
the director. The entities have agreed to retire the amounts due through the
issuance of stock.
During the three months ended March 31, 1999, the Company raised capital
approximating $391,500 through convertible debentureswith detachable warrants.
The Company allocated the proceeds between the debentures and the warrants
premised upon the difference in the exercise price and the trading price of the
stock at the date the warrants were issued. The warrants were redeemed by March
31, 1999, through the issuance of 100,000 shares.
Net debentures of approximately $122,305 were converted by March 31, 1999,
through the issuance of 290,924 shares.The outstanding balance of debentures,
net of discounts, was $119,351 at March 31, 1999. This amount was converted
prior to the due date through stock issued by June 1, 1999.
-9-
<PAGE>
<TABLE>
<CAPTION>
STEROIDOGENESIS INHIBITORS INTERNATIONAL, INC.
Notes to interim financial statements
4. Deferred revenue:
SI received $250,000 from Steroidogenesis Inhibitors Canada, Inc., ( SI- Canada)
for a licensing agreement prior to the acquisition date. The licensing agreement
has a duration of ten years beginning with the date the drug is approved for use
in Canada. Pursuant to the agreement, the Company has agreed to provide
assistance in securing such approval.
5. Commitments and Contingencies:
The Company has contracted with the Aids Research Alliance to perform clinical
testing required pursuant to the Company's efforts to secure FDA approval for
Anticort. Approximately $227,000 of the $650,000 contract was paid during March
1999. By March 31, 2000, an additional $97,000 had been paid.
6. Income taxes:
Both STGI and SI have incurred substantial tax losses since inception.
Realization of the tax benefits of such are dependent upon future taxable income
within the period of time permitted by the tax code (20 years from the year of
loss). Because future earnings are uncertain, the future benefits of
carryforward losses have not been accrued.
7. Stock transactions:
a. Stock warrants and options:
The Company had outstanding stock options at March 31, 2000 and 1999.
A summary of the status of the Company's outstanding warrants and options at
March 31, 2000 and 1999, and changes during the three months ended on those
dates is presented below:
Weighted
Weighted Average
Average Contractual
Shares Price Life
--------- -------- -----------
<S> <C> <C> <C>
Outstanding & exercisable at
December 31, 1998 1,318,500 4.89 01/15/00
Granted during the three months
ended 3/31/99 100,000 .01 02/01/04
Exercised during the three months
ended 3/31/99 (100,000) .01 02/01/04
---------
Outstanding & exercisable at 03/31/99 1,318,500 $ 4.89 01/15/00
=========
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STEROIDOGENESIS INHIBITORS INTERNATIONAL, INC.
Notes to interim financial statements
During the three months ended March 31, 1999, 100,000 options were issued and
exercised. The options were issued with convertible debentures and allocated a
value of $149,000.The options' exercise price was $.01/share. At the date of
grant, shares were trading for approximately $1.50/share.
Weighted
Weighted Average
Average Contractual
Shares Price Life
Outstanding & exercisable at
December 31, 1999 150,000 2.65 09/30/01
Exercised during the three months
ended 3/31/00 (see below) (50,000) .94 04/01/04
--------
Outstanding & exercisable at 03/31/00 100,000 $ 3.50 06/30/00
========
</TABLE>
The 50,000 detachable warrants exercised during the three months ended March 31,
2000, were issued with convertible debentures in April, 1999. The debentures
were subsequently converted. The warrants were allocated a value of
approximately $3,125. At the date of issue, shares were trading for
approximately $1.00/share. The exercise price is $.9375/share. However, the
warrant contains a cashless exercise feature which adjusted the number of shares
to be issued dependent upon the market share of the stock. The Company issued
38,807 shares during the three months ended March 31, 2000, in full satisfaction
of the 50,000 warrants pursuant to the cashless exercise feature.
b. Stock as compensation:
The Company issues stock for services, valuing such issues premised upon the
fair market value of the stock or the services, whichever is more clearly
determinable.
During the three months ended March 31, 1999, the Company issued 215,000 shares
as compensation valuing such compensation in aggregate at $212,750. During the
three months ended March 31, 2000, the Company issued 218,000 shares as
compensation valuing such compensation in aggregate at $60,765.
c. Stock option plan
The Company has a stock option plan under which 2,500,000 shares are reserved.
At March 31, 2000, no options have been granted pursuant to the plan.
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STEROIDOGENESIS INHIBITORS INTERNATIONAL, INC.
Notes to interim financial statements
8. Related party transactions:
SI purchased the technology rights (Note 1.d.2) from an entity controlled by the
president of the Company at the time for $108,968. SI-Canada, subsequent to
securing the licensing agreement with the Company (Note 4), issued 300,000 share
to the president of the Company at that time.
Also, during the three months ended March 31, 1999 & 2000, consulting fees of
$6,000 per quarter were paid to an entity owned by a family member of a
director.
At March 31, 2000 and 1999, a director of the Company had been advanced $17,522
and $14,298, respectively. It is scheduled to be repaid during the year ending
December 31, 2000.
9. Risks and uncertainties:
Marketability of the product is dependent, among other things, upon securing
additional capital to successfully complete the clinical testing of the product,
securing FDA approval, and procurement of viable patents.
10. Litigation:
SII-Canada, to whom certain licensing rights were sold as described in Note 4,
is suing STGI claiming default under a provision of the licensing agreement
pertaining to licensing rights outside of Canada. SII-Canada contends they are
entitled to worldwide rights of the technology, or in the alternative, damages
of $100 million. A default judgement exists in Canada but the Company's attorney
is certain that the Company will be successful in setting aside that claim due
to questionable service of the initial notice.
The Company will vigorously defend against the suit and is confident regarding
the outcome. The Company has countersued seeking termination of the agreement
and damages of $15 million.
-12-
<PAGE>
PART II-OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits Index - FORM 10-QSB. None.
b. Reports on Form 8-K. No Reports were filed for the last quarter of the fiscal
year covered by this report
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.
STEROIDOGENESIS INHIBITORS INTERNATIONAL, INC.
(Registrant)
By: /s/ Alfred T. Sapse,
- - -----------------------------
President
(principal executive officer)
Date: May 15, 2000
