U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1
(Mark One)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: February 29, 2000
[ ] TRANSITION REPORT PURSUANT SECTION 13 OF 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________________ to __________________
Commission file number 0-28627
PRAXIS PHARMACEUTICALS, INC.
(Exact name of small business issuer as specified in its charter)
UTAH 87-0393257
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
595 HORNBY STREET, SUITE 600, VANCOUVER, BRITISH COLUMBIA, V6C 1A4 CANADA
(Address of principal executive offices)
(604) 646-5614
(Issuer's telephone number)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)
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
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the last practicable date:
11,822,209 SHARES OF COMMON STOCK, $.001 PAR VALUE, AS OF
FEBRUARY 29, 2000
Transitional Small Business Disclosure Format (check one); Yes No X
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(A DEVELOPMENT STAGE COMPANY)
INTERIM FINANCIAL STATEMENTS
FEBRUARY 29, 2000
(EXPRESSED IN U.S. DOLLARS)
UNAUDITED - SEE NOTICE TO READER
2
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
FEBRUARY 29, 2000
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT CASH $ 13,780
INVESTMENTS (NOTES 2 AND 4) 27,000
---------------
$ 40,780
===============
LIABILITIES
CURRENT
ACCOUNTS PAYABLE $ 36,010
OWING TO RELATED PARTIES 71,426
---------------
107,436
STOCK OPTION PLAN COMPENSATION (NOTE 3) 23,776
---------------
131,212
---------------
STOCKHOLDERS' EQUITY
SHARE CAPITAL
AUTHORIZED
50,000,000 COMMON SHARES WITH A PAR VALUE
OF $0.001 PER SHARE
10,000,000 PREFERRED SHARES WITHOUT PAR VALUE
ISSUED AND PAID IN CAPITAL (NOTE 3)
11,822,209 COMMON SHARES 967,473
DEFICIT ACCUMULATED DURING THE
DEVELOPMENT STAGE (1,057,905)
---------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (90,432)
---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 40,780
===============
</TABLE>
UNAUDITED
3
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(A DEVELOPMENT STAGE COMPANY)
INTERIM STATEMENT OF OPERATIONS AND DEFICIT
FOR THE NINE MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
AND CUMULATIVE TO FEBRUARY 29, 2000
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
CUMULATIVE PERIODS
TO ENDED
FEBRUARY 29, FEBRUARY 29, FEBRUARY 28,
2000 2000 1999
<S> <C> <C> <C>
OPERATING EXPENSES
RESEARCH AND DEVELOPMENT
(NOTES 2 AND 4) $ 391,181 $ 200,889 $ 102,887
RECOVERED COSTS (158,193) (158,193) -
BANK CHARGES AND EXCHANGE 3,001 551 1,518
CONSULTING 215,858 2,500 210,708
OFFICE AND SECRETARIAL 23,690 8,993 7,192
FINDERS FEES 7,500 - -
PROMOTION AND TRAVEL 153,426 73,832 36,481
PROFESSIONAL FEES 72,623 40,137 21,563
RELATED PARTY
ADMINISTRATION CHARGES 50,043 31,550 18,182
STOCK OPTION PLAN COMPENSATION 173,776 173,776 -
----------- ----------- ------------
NET LOSS FOR THE PERIOD $ 932,905 374,035 398,531
===========
DEFICIT BEGINNING OF THE PERIOD 683,870 193,296
----------- ------------
DEFICIT END OF THE PERIOD $1,057,905 $591,827
=========== ============
BASIC LOSS PER SHARE $0.03 $0.05
=========== ============
</TABLE>
UNAUDITED
4
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(A DEVELOPMENT STAGE COMPANY)
INTERIM STATEMENTS OF CASH FLOW
FOR THE NINE MONTHS ENDED FEBRUARY 29, 2000 AND FEBRUARY 28, 1999
AND CUMULATIVE TO FEBRUARY 29, 2000
(EXPRESSED IN U.S. DOLLARS)
<TABLE>
<CAPTION>
CUMULATIVE PERIODS
TO ENDED
FEBRUARY 29, FEBRUARY 29, FEBRUARY 28,
2000 2000 1999
<S> <C> <C> <C>
CASH PROVIDED (USED) BY
OPERATING ACTIVITIES
NET LOSS FOR THE PERIOD $ (932,905) $ (374,035) $ (398,531)
ITEMS NOT AFFECTING CASH FLOW
INVESTMENT CONSIDERATION (27,000) (27,000) -
FOR RECOVERED COSTS
STOCK OPTION PLAN
COMPENSATION 173,776 173,776
SHARE CAPITAL ISSUED FOR
CONSULTING 209,208 - 209,208
SHARE CAPITAL ISSUED FOR
RESEARCH AGREEMENT
AMENDMENTS 45,000 - 45,000
CHANGE IN NON-CASH OPERATING ITEM
ACCOUNTS PAYABLE 36,010 29,182 15,980
------------ ------------ ------------
(495,911) (198,077) (128,343)
------------ ------------ ------------
FINANCING ACTIVITIES
OWING TO RELATED PARTIES 71,426 (41,656) 10,468
SHARE CAPITAL ISSUED FOR CASH 482,725 150,000 128,725
SHARE CAPITAL ISSUED FOR
CONVERSION OF DEBENTURE 50,000 - 50,000
REORGANIZATION COSTS (94,460) - (69,460)
------------ ------------ ------------
509,691 108,344 119,733
------------ ------------ ------------
CHANGE IN CASH FOR THE PERIOD $ 13,780 (89,733) (8,610)
============
CASH BEGINNING OF THE PERIOD 103,513 23,255
----------- ------------
CASH END OF THE PERIOD $ 13,780 $ 14,645
=========== ============
</TABLE>
UNAUDITED
5
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FEBRUARY 29, 2000
1. ACCOUNTING POLICIES AND NOTES
The accounting policies followed by the Company are unchanged from
those outlined in the audited financial statements for the year ended
May 31, 1999. The notes to the financial statements at May 31, 1999
substantially apply to the interim financial statements at February 29,
2000 and are not repeated here. All adjustments have been made which,
in the opinion of management, are necessary in order to make these
financial statements not misleading.
2. INVESTMENTS
a. Praxis Pharmaceuticals Australia Pty. - $1,000
1,400,000 ordinary shares recorded at a nominal amount, currently
representing an 84.8% interest, assuming the conversion of all share
classes. The investee is in the development stage and the equity
therein is represented by unexpended funds committed for research and
development (Note 4). The net assets of the investee are unlikely to
accrue to the equity holder during the development stage and, as such,
no recognition is made in these accounts for the equity share of
earnings, losses or change in share capital until the investee advances
past the research and development stage.
b. Fairchild International Corp. - $26,000
2,600,000 common shares recorded at a nominal amount, currently
representing a 23.7% Interest. The investee is in the development stage
and the equity therein is represented by unexpended funds committed for
research and development (Note 4). The net assets of the investee are
unlikely to accrue to the equity holder during the development stage
and, as such, no recognition is made in these accounts for the equity
share of earnings, losses or change in share capital until the investee
advances past the development stage.
3. SHARE CAPITAL
a. Issued and paid in capital
<TABLE>
<CAPTION>
SHARES CONSIDERATION
<S> <C> <C>
Common Shares
Balance at May 31, 1999 10,722,209 $ 637,473
Issued during the period
For cash
@$0.05 per share 600,000 30,000
@$0.60 per share 250,000 150,000
@$0.60 per share 250,000 150,000
----------- -------------
Balance at February 29, 2000 11,822,209 $ 967,473
=========== =============
</TABLE>
A share consolidation of one new share for five old common
shares has been authorized by the shareholders and to be
declared by the directors on or before August 23, 2000.
UNAUDITED
6
<PAGE>
PRAXIS PHARMACEUTICALS INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE INTERIM FINANCIAL STATEMENTS
FEBRUARY 29, 2000
3. SHARE CAPITAL (CONTINUED)
a. Issued and paid in capital (continued)
During the period options were exercised to acquire 500,000
common stocks at an average price of $0.30 per share. The
difference between the quoted market price of $0.60 and the
average exercise price of $0.30 per share aggregating $150,000
is recognized as stock option plan compensation cost during the
current period.
b. Stock Option Plan
Options have been granted to directors to acquire up to
1,698,330 common shares at $.41 per share to December 9, 2004.
As of February 29, 2000, the quoted market price of shares
relating to the outstanding stock options exceeded the option
exercise price by $475,532. This stock option plan
compensation cost is recognized over the sixty-month service
period. Stock option plan compensation cost for the period
aggregated $23,776.
4. RESEARCH AND DEVELOPMENT
The Company holds an ownership interest in Praxis Pharmaceuticals
Australia Pty. which is subject to a shareholders' agreement, dated as
of October 15, 1999, The agreement prescribes the terms whereby
research funding will reduce the Company's ownership interest to 35%
(currently 84.8%). As of the date of the agreement, the ownership
interest is carried at a nominal value of $1,000. All advances to
Praxis Pharmaceuticals Pty. are expensed when advanced. Funds held by
Praxis Pharmaceuticals Pty. are committed to the research and
development of phosphosugars and related licensed fields.
The Company has licensed certain rights to Fairchild International
Corp. for consideration consisting of 2,600,000 common shares and a
commitment to provide research and development funding totaling
$250,000 to October 1, 2000. The research and development funding is
recorded as a reduction of costs when received.
5. SEGMENTED INFORMATION
Geographic Segments
The Company's activities are all in the one industry segment of the
research and development of pharmaceutical products. The research and
development activities are carried out in Australia.
UNAUDITED
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion of the financial condition and results of operations
for Praxis Pharmaceuticals, Inc. ("Praxis" or the "Company")) should be read in
conjunction with the accompanying financial statements and related footnotes.
GENERAL
The Company's business is the development and commercialization of drugs and
nutraceuticals designed to prevent inflammation and their sequelae, and the
development of cosmetics for skin conditions. To date, Praxis has not generated
any revenues from product sales, royalties or license fees. Effective September
30, 1999, the Company entered into a sublicensing arrangement with Fairchild
International Corp. ("Fairchild") for the development of a nutraceutical and
cosmetic agent. In exchange for this sublicense, the Company is to receive
$250,000 as reimbursement for research and development costs it shall incur.
This amount and other costs will be deducted in arriving at "net revenues" upon
which Praxis' 35% royalty payment is based. Praxis plans to develop novel drugs
and cosmetics, and to commercialize these products through the formation of
partnerships, strategic alliances and license agreements with pharmaceutical and
cosmetic companies.
In October 1999, an agreement was entered into whereby the equity investment
made in Praxis' subsidiary, Praxis Pharmaceuticals Australia Pty. Ltd, would be
reduced to 35% through research and development funding invested by Rothschild
Bioscience Managers Limited, of Melbourne, Victoria. The Rothschild investment
is solely for the purpose of research and development into phosphosugar-based
anti-inflammatory agents for registered therapeutic use.
It is expected that the profitability and financial viability of the Company
will ultimately rest with the corporate alliances it can obtain. The Company
expects to incur significant operating losses over at least the next three
years. It is likely that these losses may increase in the future as the research
and development and clinical trials continue. The Company's profitability will
ultimately depend upon its ability to reach development and obtain regulatory
approval for its products, and to enter into alliances to develop, manufacture
and market the products. There is no guarantee that the Company will ever be
profitable.
Praxis' near-term goals are to raise the funds necessary for the next five years
of company research and development activities through share offerings and cash
flow derived from sales and or licensing agreements on cosmetic products; invest
in a dedicated research facility and personnel; and generate pre-clinical and
early clinical results for the lead compounds. Over the long term, its goal is
to develop strategic alliances with established pharmaceutical companies in
order to conduct large scale, late stage clinical trials and to market approved
therapeutics.
RESULTS OF OPERATIONS
The Company continues to incur losses from operations. The net loss for the nine
months ended February 29, 2000 was $374,035 as compared to $398,531 during the
comparable nine-month period in 1999. The slight decrease in the net loss is due
in part to the receipt of $158,193 in research and development funding, which is
recorded as a reduction of research and development expenses. Were it not for
the recovered costs, research and development expenses in 2000 ($200,889)
actually increased 95% over 1999 amounts ($102,887). Stock option plan
compensation of $173,776 was incurred for the current period which was not
incurred in fiscal 1999. Promotion and travel expenses in 2000 ($73,832) also
increased by 102% over 1999 amounts ($36,481), as did professional fees ($40,137
in 2000 compared to $21,563 in 1999) and related party administration charges
($31,550 in 2000 compared to $18,182 in 1999). However, there were significantly
decreased consulting expenses in the 2000 period ($2,500), as compared to
$210,708 in 1999.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the primary source of funding for Praxis' operations has been
the private sale of its securities. For the nine months ended February 29, 2000,
the Company issued common stock for cash of $150,000.
This compares to $128,725 in the 1999 nine-month period.
At February 29, 2000, the Company's working capital deficiency was $93,656, as
compared to $16,397 at May 31, 1999. Of the liabilities at February 29, 2000,
$71,426 was owed to related parties.
Until such time as the Company obtains agreements with third-party licensees or
partners to provide funding for the Company's anticipated research and
development activities, the Company will be dependent upon proceeds from the
sale of securities. Further, substantial funds will be required before the
Company is able to generate revenues sufficient to support its operations. There
is no assurance that the Company will be able to obtain such additional funds on
favorable terms, if at all. The Company's inability to raise sufficient funds
could require it to delay, scale back or eliminate certain research and
development programs.
The report of the Company's independent auditors on the financial statements for
the year ended May 31, 1999, includes an explanatory paragraph relating to the
uncertainty of the Company's ability to continue as a going concern. Praxis has
suffered losses from operations, requires additional financing, and needs to
continue the development of its products. Ultimately the Company needs to
generate revenues and successfully attain profitable operations. These factors
raise substantial doubt about the Company's ability to continue as a going
concern. There can be no assurance that it will be able to develop a
commercially viable product. Even if the Company were able to develop a
commercially viable product, there is no assurance that it would be able to
attain profitable operations.
PLAN OF OPERATION
Assuming that Fairchild pays its remaining installments of $87,500, the Company
currently has cash and cash commitments to support the pre-clinical research
program into anti-inflammatory drugs and anti-wrinkle compounds for at least the
next 15 months. Additional funds will be needed to support any further
operations at that time. In order to increase the value of the intellectual
property to enhance the value of the Company, further funding will be required
in the next 12 months to increase the size of the research and development
operations and to conduct clinical trials. Pre-clinical research and development
can be accomplished without an injection of capital in the next 12 months
assuming receipt of the Fairchild funds. Unless extra capital is raised in the
next 12 months there will be no change in the number of employees or rate of
research and development. There are no anticipated purchases of plant or
equipment or sale of same.
The receipt of the Fairchild funds is not certain, since Fairchild's financial
condition is questionable. The independent auditors' report on Fairchild's
financial statements for the year ended December 31, 1999 included an
explanatory paragraph relating to the uncertainty of Fairchild's ability to
continue as a going concern.
If Fairchild can obtain the capital necessary to fund the costs for
manufacturing, production, marketing, selling, and obtaining regulatory
approvals, it is possible that sales of products for arthritis and wrinkles
could commence in one to two years. This differs from prescription drugs, for
which Praxis does not expect to be able to realize revenues from the sale to
consumers within the next five years due to extended testing and regulatory
review. The regulatory requirements are much less stringent for cosmetic and
nutraceutical products than for prescription drugs. While there is nothing in
the agreement that would prevent Fairchild from unilaterally deciding to
continue to spend money on research and thereby, perhaps, use all monies that
would otherwise be paid to Praxis as royalties, doing so would not benefit
Fairchild. It would be in Fairchild's interest to commence sales of products to
generate revenues.
9
<PAGE>
YEAR 2000 READINESS DISCLOSURE
The Year 2000 issue refers to the inability of computer and other information
technology systems to properly process date and time information due to the
programming of a two digit year rather than a four digit year. The risk is that
a system will recognize the digits "00" as 1900 rather than the year 2000, or
that the system may not recognize "00" as a year at all. As a result, computers
and embedded processing systems may be at risk of malfunctioning, particularly
during the transition from 1999 to 2000.
The Company has completed its assessment of the impact of Year 2000 issues on
its business operations. The Year 2000 issue may affect the Company in four
principal areas including: (1) computer systems such as personal computers,
operating systems, business software, and application software including
accounting systems, technical support software and administration software; (2)
field assets (primarily embedded systems) such as programmable logic controllers
and equipment control panels; (3) other systems such as telephones, photocopiers
and facsimile machines; and (4) third-party suppliers and service providers such
as banks and insurance companies.
To date, the Company has implemented and tested its computer software and
hardware for Year 2000 compliance and has concluded that its hardware and
software is Year 2000 compliant.
The Company's Year 2000 program is designed to reduce the Company's risk of
material losses due to the Year 2000 issue. Management does not anticipate any
material adverse effect from the Year 2000 issue; however, the Company cannot be
certain that it will not suffer material adverse effects in the event that third
parties upon which the Company is dependent are unable to resolve their Year
2000 issues.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
<TABLE>
<CAPTION>
REGULATION CONSECUTIVE
S-B NUMBER EXHIBIT PAGE NUMBER
<S> <C> <C>
2.1 Stock Exchange Agreement with Micronetics (1)<F1> N/A
3.1 Articles of Incorporation, as amended and restated (1)<F1> N/A
3.2 Bylaws (1)<F1> N/A
10.1 Research, Development and Licence Agreement dated May 11, 1999 N/A
between Praxis Pharmaceuticals, Inc. and Fairchild International Inc. (1)<F1>
10.2 Exclusive Licence Agreement dated October 14, 1999 between Anutech Pty N/A
Ltd. and Praxis Pharmaceuticals Australia Pty Ltd. (1)<F1>
10.3 Licence Agreement dated October 14, 1999 between Anutech Pty Ltd. and N/A
Praxis Pharmaceuticals Inc. (1)<F1>
10.4 Shareholders Agreement dated as of October 15, 1999, between Praxis N/A
Pharmaceuticals Australia Pty Ltd., Praxis Pharmaceuticals Inc., Perpetual
Trustees Nominees Limited, and Rothschild Bioscience Managers Limited (1)<F1>
10.5 1999 Stock Option Plan (1)<F1> N/A
27 Financial Data Schedule<F1> N/A
----------------------------
<FN>
<F1>
(1) Incorporated by reference to the exhibits filed with the Registration Statement on Form 10-SB, File
No. 0-28627
</FN>
</TABLE>
11
<PAGE>
b) REPORTS ON FORM 8-K:
None.
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.
PRAXIS PHARMACEUTICALS, INC.
(Registrant)
Date: August 4, 2000 By: /S/ David Stadnyk
----------------------------------
David Stadnyk, Secretary
(Principal financial officer)
12
<PAGE>
