SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended May 31, 1999
Commission file number 000-25157
DR. ABRAVANEL'S FORMULAS, INC.
________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Nevada 95-4685068
____________________________ ________________________________
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization
124 South Hudson Avenue
Los Angeles CA 90004
________________________________________
(Address of principal executive offices)
(213) 933-0163
________________________________________________
(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 Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file
such reports) Yes [X] No [ ], and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of July 6, 1999, the issuer had outstanding 12,841,353 shares of its
Common Stock, $0.001 par value.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The unaudited financial statements of Dr. Abravanel's Formulas, Inc., a
Nevada corporation (the "Company"), as of May 31, 1999, were prepared by
Management and commence on the following page. In the opinion of Management
the financial statements fairly present the financial condition of the
Company.
<Letterhead of
BALMER AND NELSON
CERTIFIED PUBLIC ACCOUNTANTS
P.O. Box 368
Fairfield, Iowa 52556
515-472-4773>
To the Shareholders;
Dr. Abravanel's Formulas, Inc.
(A Development Stage Company)
Accountant's Compilation Report
May 31, 1999
We have compiled the accompanying balance sheet of Dr. Abravanel's Formulas,
Inc. (a development stage company) as of May 31, 1999, and the related
statements of operations, shareholders' equity and cash flows for the quarter
then ended and the period from inception (April 28, 1998) to May 31, 1999, in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not
express an opinion or any other form of assurance on them.
/s/ Balmer and Nelson
Balmer and Nelson
Certified Public Accountants
July 2, 1999
2
<PAGE>
Dr. Abravanel's Formulas, Inc.
(A Development Stage Company)
Balance Sheet
May 31, 1999
Assets
Current Assets
Cash $ 13,453
Inventory (note 1) 12,790
-----------
Total current assets 26,243
Note receivable 525
Deferred taxes, net (notes 1 and 4) 7,090
------------
Total assets $ 33,858
============
Liabilities and Shareholders' Equity
Shareholders' equity (note 3)
Common stock, $.001 par, authorized
40,000,000 shares; 12,841,353 shares
issued and outstanding $ 12,841
Additional paid-in capital - common stock 132,018
Special distribution (notes 2 and 5) (60,000)
Common stock offering costs (28,498)
Preferred stock, $.001 par, authorized
10,000,000 shares; 0 shares issued and
outstanding -
Deficit accumulated during the development stage (22,503)
------------
Total liabilities and shareholders' equity $ 33,858
============
See accompanying notes to financial statements.
See accountants' compilation report.
3
<PAGE>
Dr. Abravanel's Formulas, Inc.
(A Development Stage Company)
Statement of Operations
For the Three Month Period Ended May 31, 1999
and the Period from Inception (April 28, 1998) to May 31, 1999
Three Month Period from Inception
Period Ended (April 28, 1998) to
May 31, 1999 May 31, 1999
------------- -------------
Sales $ - $ -
Cost of sales - -
------------- -------------
Gross profit - -
------------- -------------
Costs and expenses:
General administrative 2,879 29,593
------------- --------------
Total costs and expenses 2,879 29,593
------------- --------------
Net loss before income taxes (2,879) (29,593)
Income tax benefit attributable to
continuing operations (note 4) 1,480 7,090
------------- --------------
Net income (loss) $ (1,399) $ (22,503)
------------- --------------
Net loss before income taxes per
share (note 1) $ (0.01) $ (0.01)
Net loss per share (note 1) $ (0.01) $ (0.01)
Weighted average common shares
(in thousands) (note 1) 12,841 12,063
============ ==============
See accompanying notes to financial statements.
See accountants' compilation report.
4
<PAGE>
Dr. Abravanel's Formulas, Inc.
(A Development Stage Company)
Statement of Shareholders' Equity
For the Three Month Period Ended May 31, 1999
and the Period from Inception (April 28, 1998) to May 31, 1999
Three Month Period from Inception
Period Ended (April 28, 1998) to
May 31, 1999 May 31, 1999
------------- -------------
Beginning balance 42,632 -
Issuance of common stock:
10,000,000 shares on 4/28/98
(issued as partial consideration for
product formulas; valued at stock
par value) 10,000
25,000 shares on 6/15/98 250
53,500 shares on 6/15/98 8,025
100,000 shares on 7/10/98 15,000
10,000 shares on 7/16/98 100
40,000 shares on 7/16/98 6,000
135,000 shares on 7/23/98 1,350
233,461 shares on 7/23/98 35,019
27,500 shares on 7/30/98 275
33,500 shares on 7/30/98 5,025
25,000 shares on 8/18/98 250
81,667 shares on 8/18/98 12,250
750,000 shares on 8/20/98 750
60,600 shares on 8/21/98 9,090
100,000 shares on 8/21/98 1,000
137,500 shares on 8/25/98 1,375
173,000 shares on 8/25/98 25,950
750,000 shares on 8/26/98 750
40,000 shares on 8/31/98 400
10,000 shares on 9/04/98 1,500
55,625 shares on 9/18/98 10,500
Special distribution (60,000)
Common stock offering costs (7,375) (28,498)
Net loss (1,399) (22,503)
--------------- ------------
Balance at May 31, 1999 33,858 33,858
=============== ============
See accompanying notes to financial statements.
See accountants' compilation report.
5
<PAGE>
Dr. Abravanel's Formulas, Inc.
(A Development Stage Company)
Statement of Cash Flows
For the Three Month Period Ended May 31, 1999
and the Period from Inception (April 28, 1998) to May 31, 1999
Three Month Period from Inception
Period Ended (April 28, 1998) to
May 31, 1999 May 31, 1999
------------- -------------
Cash flow from operating activities
Net loss $ (1,399) $ (22,503)
Adjustments to reconcile net income to
net cash used in operating activities:
Increase in deferred taxes (1,480) (7,090)
Changes in assets and liabilities:
Inventory (12,790)
------------- -------------
Net cash used by operations (2,879) (42,383)
Cash flows from financing activities
Note Receivable (525) (525)
Issuance of common stock 134,859
Common stock offering costs (7,375) (28,498)
Payment of special distribution (19,475) (50,000)
-------------- -------------
Net increase (decrease) in cash (30,254) 13,453
Cash at beginning of period 43,707 -
-------------- -------------
Cash at end of period $ 13,453 $ 13,453
============== =============
See accompanying notes to financial statements.
See accountants' compilation report.
6
<PAGE>
Dr. Abravanel's Formulas, Inc.
(A Development Stage Company)
Statement of Cash Flows
For the Three Month Period Ended May 31, 1999
and the Period from Inception (April 28, 1998) to May 31, 1999
Three Month Period from Inception
Period Ended (April 28, 1998) to
May 31, 1999 May 31, 1999
------------- -------------
Supplemental cash flow disclosures:
Interest paid $ 0 $ 0
============= =============
Income taxes paid $ 0 $ 0
============= =============
Non cash transactions:
On April 28, 1998, 10,000,000 shares of common stock were issued
as payment for product formulas valued at $10,000.
See accompanying notes to financial statements
See accountant's compilation report.
7
<PAGE>
Dr. Abravanel's Formulas, Inc.
(A Development Stage Company)
Notes to the Financial Statements
For the Three Month Period Ended May 31, 1999
Note 1 - Nature of business and summary of significant accounting policies
Nature of business - Dr. Abravanel's Formulas, Inc. was incorporated on April
28, 1998 in the state of Nevada. The Company was formed as a nutritional
supplement development and marketing corporation.
The Company has developed products specifically for the reduction or
elimination of cravings in people.
As a development stage company, management's efforts have been in product
development and marketing strategies.
Basis of presentation - The financial statements have been prepared in
conformity with generally accepted accounting principals. In management's
opinion, these financial statements include all adjustments necessary in order
to make them not misleading.
Inventories - Inventories, which at May 31, 1999, consisted primarily of
production supplies, are stated at the lower of cost or market determined on
the first-in, first-out (FIFO)basis.
Intangibles - Start-up costs, research and development costs and formula costs
are charged to expense in the period incurred.
Income taxes - The Company accounts for income taxes under the provisions of
SFAS No. 109, Accounting for Income Taxes (SFAS No. 109). Under the asset and
liability method of SFAS No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities
and their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. Under SFAS No. 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period
that includes the enactment date.
Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual amounts could differ from those
estimates.
Per share information - Per share information has been computed using the
weighted average number of common shares outstanding during the period.
Notes Page 1
8
<PAGE>
Note 2 - Contract payable
Effective on April 28, 1998, the Company entered into an agreement to purchase
specific existing nutritional formulations as well as the non-exclusive use of
formulas to be developed in the future.
In exchange for the formulas, the Company agreed to give 10,000,000 shares of
common stock, with a par value of $10,000, and $50,000 in cash. The stock was
issued on April 28,1998, and the cash was paid in installments of $30,525 in
1998, and $19,475 in March, 1999.
Note 3 - Shareholders' equity
Voting rights and powers - Common stock shall be entitled to cash thereon one
(1) vote in person or by proxy for each share of the common stock standing in
his name.
Dividends and distributions -
a) Cash dividends - subject to the rights of holders of preferred
stock, holders of common stock shall be entitled to receive such cash
dividends as may be declared thereon by the board of directors from time to
time out of assets or funds of the Corporation legally available therefor;
b) Other dividends and distributions - The board of directors may issue
shares of the commons stock in the form of a distribution or distributions
pursuant to a stock dividend or split-up of the shares of the common stock;
c) Other rights - Except as otherwise required by the Nevada Revised
Statutes and as may otherwise be provided in these Amended Articles of
Incorporation, each share of the common stock shall have identical powers,
preferences and rights, including rights in liquidation;
Preferred stock - The powers, preferences, rights, qualifications, terms,
limitations and restrictions pertaining to the preferred stock, or any series
thereof, shall be such as may be fixed, from time to time, by the board of
directors in its sole discretion, authority to do so being hereby expressly
vested in the board.
Transfer restrictions - No sale, offer to sell, or transfer of any common
stock issued shall be made unless a registration statement under the Federal
Securities Act of 1933, as amended with respect to such shares is then in
effect or an exemption from the registration requirements of said act is then
in fact applicable to said shares. In addition, all common stock issued at
$.01 (500,000 shares)may not be sold, offered for sale, or transferred unless
approved and authorized in writing by the Company's board of directors.
Notes Page 2
9
<PAGE>
Note 4 - Income taxes
As of May 31, 1999 the Company has available net operating loss carryforwards
of approximately $34,000. These carryforwards will expire in the years 2014
and 2015. As of May 31, 1999, the Company recognized a deferred tax asset
amounting to $7,090 from its loss carryovers.
Total deferred tax assets from net operating loss carryovers $ 7,090
Less valuation allowance -
----------
Deferred tax assets, net $ 7,090
==========
Total deferred tax liabilities $ -
==========
Deferred Valuation Deferred tax
tax assets allowance assets (net)
---------- --------- ------------
Beginning balance $ 5,610 $ - $ 5,610
Current tax (expense) benefit 1,480 - 1,480
Current adjustment in valuation
allowance - - -
---------- --------- ------------
Balance at May 31, 1999 $ 7,090 $ - $ 7,090
========== ========= ============
Statutory tax on pre-tax income from continuing operations $ -
Deferred tax expense or (benefit) (7,090)
Current adjustment in valuation allowance -
------------
Income tax expense (benefit) attributable to
continuing operations $ (7,090)
============
Note 5 - Related party transactions
On April 28, 1998, the Company purchased certain nutritional formulations from
Elliot D. Abravanel, MD and Mark Delott, the only officers and directors of
the Company for $50,000 and 10,000,000 shares of common stock.
Note 6 - Contingencies
The Company is dependent on Dr. Elliot Abravanel for the development and
marketing of the Company's product line.
Notes Page 3
10
<PAGE>
Note 7 - Private placement memorandum and filings with the SEC
As of May 31, 1999, 831,353 shares of common stock have been issued through
the Company's private placement offering. The Company intends filing with the
NASD for listing its shares on the over the counter (OTC) Electronic Bulletin
Board. In preparation for this, the company filed with the SEC on December
10, 1998, and this filing became effective February 8, 1999. The company has
been notified by the SEC that all questions and comments have been cleared.
The only steps remaining are selecting the sponsoring market maker and
submitting Form 15-C-2-11 to the NASD OTC Bulletin Board and applying for the
CUSIP number for the company's publicly traded shares.
Note 8 - Subsequent events
The Company anticipates the need for additional capital to launch its product
line. Management may elect to sell additional equity, debt or enter into
partnerships to fund its financial needs. Currently, the Company has
developed its first product, "Replen 100 for Vibrant Health," and has a
limited inventory of this product.
Notes Page 4
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition or
Plan of Operation
The following discussion provides information which Management believes
is relevant to an assessment and understanding of the Company's plan of
operation. This discussion should be read in conjunction with the Company's
financial statements and notes.
The Company, which incorporated in the State of Nevada on April 28, 1998,
primarily as a nutritional supplement development and marketing corporation,
has not yet commenced substantive operations. Since inception, the Company
raised approximately $133,000 through an offering of its common stock made
pursuant to the exemption from the registration requirements as provided for
under Section 3(b), Regulation D, Rule 504. It also issued 10,000,000 shares
to its founders, Mark Delott and Elliot Abravanel, M.D., pursuant to a
technology transfer agreement which granted the Company 100% of the rights to
existing formulas developed by Dr. Elliot Abravanel M.D., and non-exclusive
use of formulas to be developed in the future. The Company's business purpose
is that of marketing certain products developed by Dr. Abravanel specifically
for the reduction or elimination of cravings for sugar, starch and greasy
food, as well as supplements for general well being.
The Company has expended the majority of the funds raised in its offering
on purchase of the formulas, offering costs and general administrative
expenses since inception. The Company currently has approximately $13,450 in
cash to satisfy is cash requirements over the next 12 months, and $12,800
worth of inventory of its products, which will likely be insufficient unless
Company continues to operate at its existing level, with minimal day to day
operations expenses, and little or no money dedicated to marketing.
In early 1999 the Company had narrowed its initial product focus to three
products:
1. Dr. Abravanel's Special Formula for Weight Loss
2. Dr. Abravanel's Special Formula for Vibrant Health
3. Dr. Abravanel's Special Formula for Meal Replacement
During the its first fiscal quarter, the Company completed development
and limited production of one of the above three products: Dr. Abravanel's
Special Formula for Vibrant Health". The Company has named the product
"Replen 100 for Vibrant Health" ("Replen 100"). The Company has a limited
inventory of this product. Since the beginning of this fiscal quarter, the
Company's efforts in marketing have mostly been conducted by Management and
limited to testing the market place in a limited manner as to market
acceptance of its product, Replen 100. The Company has randomly distributed
free samples to a variety of individuals and is receiving input about the
product's results from these persons. So far, the anecdotal data is relatively
favorable. However, to date, the Company has not yet determined the potential
for future sales. The Company believes more test market data through
distribution to individuals is necessary before proceeding with any
substantive marketing campaign. In addition, during the past couple of
months, Management's analysis of the industry indicates that profit margins in
the industry have radically declined. This could result in reduced profit
margins to the Company's products, if and when marketed, in order to remain
competitive. Management, therefore, is taking a cautious marketing approach
and will continue to distribute additional samples of Replen 100 over the next
fiscal quarter in order to better analyze responses to this particular
12
<PAGE>
product. If Management does not achieve at least some indication of potential
market acceptance of its products with this very conservative approach, it may
look to redefining the Company's goals. Over the next three months, the
Company has no plans for additional product development or research, nor does
it have any plans for purchase of property or equipment. The Company does not
have any lease payments or salaries to pay at this time.
During the quarter ended May 31, 1999 the Company paid the balance of the
$50,000 cash due to Dr. Elliot Abravanel and Mark Delott for the Company's
formulas (also as part of the technology transfer agreement discussed under
paragraph 2 of this Item), $30,525 of which was paid in 1998 with $19,475 paid
in March of 1999. There was no specific due date or terms on the payment
thereof and the individuals did not charge interest. All of Company's limited
capital of $13,453 can be dedicated to its business plan as needed. General
administrative expenses during the quarter ended May 31, 1999, were less than
$3,000, and Management does not expect such expenses to be any different for
the next quarter. The $13,000 available to the Company will be sufficient to
cover general administrative expenses for 12 months so long as the Company
does not incur any additional expenses in its day to day operations or any
expenses in connection with marketing. The Company also has sufficient
inventory to continue to provide free samples and solicit product interest as
well as anecdotal evidence to determine Replen 100's effectiveness and market
acceptance.
Although Management believes it has sufficient funds to continue
operations at its present level over the next 12 months, if the response to
the Company's products is such that Management determines a more aggressive
marketing approach is warranted, or, if the Company is forced to redefine its
business goals due to a lack of market acceptance of its products, the Company
will require additional working capital. Such capital can be raised in a
variety of manners including additional equity offerings, debt offerings or
licensing arrangements. The Company currently has no commitments for further
financing, and there is no assurance that sufficient financing will be
available.
YEAR 2000
The Company is currently addressing a universal situation know as the
Year 2000 problem or the Y2K problem. The Y2K problem relates to the
inability of certain computer software programs to properly recognize and
process date-sensitive information relative to year 2000 and beyond. The
Company's internal computer operating system is Y2K compliant as is all
software currently utilized by the Company. The Company does not intend to
add any software to its operating system without making sure that it is Y2K
compliant.
Because, as is the case with almost all companies, the Company's Y2K
compliance is in part dependent upon certain of its suppliers and vendors
being Y2K compliant, the Company intends to communicate with all of its
suppliers/vendors to determine whether not they are Y2K compliant. If they
are not, the Company will seek other suppliers/vendors which are. Because
there are a vast number of suppliers which can provide the ingredients for the
Company's products, and who can process and out-source orders, the Company
does not anticipate having a Y2K problem getting ingredients or distributing
its products. In the event the Company is forced to use alternative suppliers
for its ingredients, the Company believes it will be able to negotiate the
same or similar terms and costs. The Company also believes the same will be
true with its vendors. Because of the availability of numerous vendors/
13
<PAGE>
suppliers, the Company does not believe it will incur any additional expenses
due to Y2K problems. The Company does not, therefore, have any Y2K
contingency plans, with respect to obtaining ingredients from suppliers, or
alternative distributors.
ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB REFLECT
MANAGEMENT'S BEST JUDGMENT BASED ON FACTORS CURRENTLY KNOWN AND INVOLVE RISKS
AND UNCERTAINTIES. ACTUAL RESULTS MAY VARY MATERIALLY.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a)There are no exhibits included with this report.
(b} Reports on Form 8-K -- None
14
<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.
DR ABRAVANEL'S FORMULAS
(Registrant)
Date: July 12, 1999 By: /s/ Elliot Abravanel
------------------------
Elliot Abravanel, MD
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's unaudited financial statements as of May 31, 1999 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-28-2000
<PERIOD-START> MAR-01-1999
<PERIOD-END> MAY-31-1999
<CASH> 13,453
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 12,790
<CURRENT-ASSETS> 26,243
<PP&E> 7,615
<DEPRECIATION> 0
<TOTAL-ASSETS> 33,858
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 12,841
<OTHER-SE> 21,017
<TOTAL-LIABILITY-AND-EQUITY> 33,858
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,879
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,879)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 1,480
<CHANGES> 0
<NET-INCOME> (1,399)
<EPS-BASIC> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
