FORM 10-SB/A
AMENDMENT NO. 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the
Securities Exchange Act of 1934
VIRILITEC INDUSTRIES, INC.
(Name of Small Business Issuer in its charter)
Delaware 11-3447894
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Cedarhurst ave., Suite 201, Cedarhurst, New York 11516
(Address of principal executive offices) (Zip Code)
1-800-775-0712 ext. 4144
(Issuer's Telephone Number)
718-387-5331
(Issuer's Fax Number)
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
- ---------------------------------- ------------------------------------
- ---------------------------------- ------------------------------------
Securities to be registered under Section 12(g) of the Act:
Common Stock
(Title of Class)
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<PAGE>
PART I.
Item 1. Description of Business.
(a) Business Development
Virilitec Industries, Inc. ("Virilitec", or the "Company"), a Delaware
corporation, was organized on August 11, 1998. The Company has not been involved
with any bankruptcy, receivership or similar proceedings. The Company has not
had any material reclassification, merger, consolidation, or purchase or sale of
a significant amount of assets not in the ordinary course of business.
(b) Business of Issuer
The Company was formed to license and distribute a line of
bioengineered virility nutritional supplements, designed to enhance human male
sperm count and potency (the "Product"). The [Company has not nor does it intend
to make any claims as to the effectiveness (if any) of the Product] product is a
nutritional supplement derived from natural materials and compounds. While the
Company believes it contains properties that could stimulate human male sperm
production and sexual virility, it does not make any claims whatsoever that the
product does in fact induce the desired results. The Company has not clinically
tested the product, nor has it been clinically tested in a previous formulation.
There is no statistical data to support any claims of effectiveness and the
Company makes no such clinical claims. In this manner, the product could be
compared to a vitamin or herb, in that it is a nutritional supplement taken by
individuals who believe that such supplements will have an effect upon a certain
condition whether or not such result has been determined clinically to be a
product of utilizing the supplement. There are other nutritional supplements
that claim to have similar effectiveness as the Company's Product. However, to
the Company's knowledge, none of them have demonstrated recognized clinical
effectiveness.
Management believes that the current success and widespread coverage
generated by Pfizer's Viagra(R) has positioned the market to be receptive to the
introduction of a naturally derived nutritional supplement that is cheaper and
may produce a positive effect upon male potency. As such, the Company entered
[discussions] into an agreement with Vitahealth Scientific, Inc., a New York
corporation ("Vitahealth"), regarding the distribution of its nutritional
supplement geared toward enhancing male potency and sperm count. Management
believes that it can be successful in capitalizing on the market awareness of
concerns over male potency by introducing the Product into worldwide markets.
Due to the nature of the Product, and the high cost of qualifying for
US FDA approval, management determined that the best way to market the Product
initially was to pursue sales internationally [where (management believes)
regulation regarding the distribution]. The Company has not gotten any
professional or governmental opinion that it would not be subject to
governmental regulation in those countries in which the Company intends to sell
the Product. However, in the Company's research of the market (via the internet,
contacts with other providers of nutritional supplements [is less severe than
that in the US] and informal discussions with counsel), the Company has found
overseas markets to be much more liberal in regulation than the United States.
In fact a principal of Vitahealth (the Company's supplier) has sold a similar
product to the overseas market without governmental regulatory involvement. As
such, the Company
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<PAGE>
[is actively in the process of interviewing] has identified independent sales
agents in England[,] and Israel [and any other country] where it could, in the
opinion of management, successfully introduce the Product with little or no
regulatory approval needed. Due to the delays involved with commencing Product
production, the Company was uncertain as to the start of the sales process and
could not, in good faith, make commitments to potential distributors. As such,
management has delayed interviewing potential distributors in other countries.
As soon as initial sales via the Israel and England distributors are processed,
the Company will resume its efforts to identify and engage additional
international distributors.
Vitahealth has sold a nutritional supplement designed to enhance male
potency and sperm count in the past. However, Vitahealth recently reformulated
its product to produce what it believes will be a Product with greater efficacy
in producing the desired results. Vitahealth is in the process of opening a new
manufacturing facility in Jerusalem, Israel where the Product will be
manufactured. In conjunction with the reformulation of the Product, Vitahealth
also revamped its production line, and is in the process of purchasing all new
commercial grade production and encapsulation equipment intended to allow it to
produce the Product at a high volume. The facility [will] is expected to have
full certification from the [Israeli] Israel Department of Health. The
certification from the Israel Department of Health is not a drug review or
certification of the product itself. The facility is being built with "off the
shelf" equipment, under standard health procedures. One of the principals of
Vitahealth has previously manufactured a similar product in Israel, and is well
versed in the applicable regulations. The production facility was designed and
constructed under his direct supervision. The certification from the Israeli
Department of Health is akin to certification from any local health department.
They verify that the premises are clean and sanitary for the usage intended. As
construction is supervised by an individual who is experienced with the health
requirements, the Company expects that there should be no problem in the
issuance of its certification.
The industry is extremely fragmented. There are many small operators -
companies or individuals that sell nutritional supplements, and as such it is
difficult to accurately determine what market share a specific vendor has.
Additionally, while a principal of the Company's supplier has sold an earlier
version of the Product, the Company is in the start up phase of selling its
first product, and as such has no established position in the industry.
There are currently many purveyors of nutritional supplements. The
Company intends to compete by placing a focused advertising campaign with
testimonial information (when available), and by referral. Management believes
the product will produce the desired effect upon its users, and that the success
of those users will prompt others to add the Company's nutritional supplement to
their diet.
Licensing and Distribution Agreement
[The] On August 25, 1998, the Company [has] entered into a 50 year
Licensing and Distribution Agreement with Vitahealth, whereby the Company was
granted exclusive rights to distribute the Product. Under terms of the
agreement, the Company's independent sales agents will place sales orders
directly with Vitahealth, which will fill such orders. The sales agents will pay
Vitahealth upon order placement, and Vitahealth, acting as collections agent for
the Company, will forward the Company's portion of the sales proceeds to the
Company. Vitahealth has agreed to
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<PAGE>
periodic reviews of its order receipts in order to ensure that the Company is
receiving its appropriate revenue.
The Company has paid an initial non-refundable one time $8,500
licensing fee to Vitahealth. The Company will also pay Vitahealth an annual fee
of $10,000, beginning 90 days after the Product is manufactured and ready for
delivery to the Company's agents and then annually thereafter on the anniversary
of the first payment's due date, as long as the Licensing and Distribution
Agreement has not been terminated for any reason before the date such payment is
due. The agreement also calls for Vitahealth to be paid $1.45 per capsule of the
product - to be sold in thirty day supplies (the Product's expected minimum
usage period before a user would potentially achieve positive results). The
Company expects to distribute the Product to its sales agents for $1.85 per
capsule (thereby making [$0.45] $0.40 per capsule), and the Company's
independent sales agents are projected to sell them for approximately $2.15 to
$2.25 per capsule.
Because the Product is in the final stages of reformulation and
Vitahealth has not yet completed construction of its manufacturing facility, the
Company has allowed Vitahealth a 95 day period from the signing of the Licensing
agreement before the Product shall be ready for production and sale. Should the
Product not be ready at such time, the Company has the right to either terminate
the agreement within the next 30 days or extend the production deadline. As of
this date, the production facility has not yet been completed. The Company and
Vitahealth have agreed to [push off the end of] extend the 95 day production
deadline until [July 31] September 30, 1999, when it believes the Product will
be available. Vitahealth had originally planned to lease and construct the
facility based on commitments made to Vitahealth by the Company regarding the
initial licensing fee and ongoing support. Because the Company's financing via
its offering did not proceed according to management's initial timetable, the
Company could not honor those commitments on a timely basis. As such, Vitahealth
had to abandon the original site selected for its production facility. As it now
had a new time window available due to the financing delays, Vitahealth decided
to reformulate the Product and to try to refine the production run. When the
Company completed its offering, the reformulation was not yet finished. Once the
reformulation was completed, Vitahealth had to reselect a site and negotiate
tenancy as well as redesign and outfit the production facility in the new plant.
Management has been assured by Vitahealth that the facility will be ready by
September 30, 1999.
Vitahealth and the Company have agreed upon certain minimal sales
quotas to be maintained for the agreement to remain in effect. Should the sales
levels fall below the sales quotas, the Company shall have the right to
terminate the Licensing and Distribution Agreement. The sales quotas follow the
following schedule; a) within the 2nd month of production and sales - a minimum
of 22,500 capsules, b) within the 3rd month of production and sales - a minimum
of 55,000 capsules, c) within the 6th month of production and sales - a minimum
of 150,000 capsules, d) a minimum of 200,000 capsules for every month following
the end of the 6th month of production and sales of the product. There is also a
10% increase in the sales quota effective annually on January 1, beginning
January 1, 2000.
Marketing and Growth
With the broad based recognition of products such as Pfizer's
Viagra(R), Management believes the market is ready for the introduction of
nutritional supplements designed to enhance human male potency and sperm count
on a long term basis. Should the Company begin distribution of this Product
domestically, it will be subject to regulation by the U.S. Food and Drug
Administration ("FDA") and most likely also by the Federal Trade Commission
("FTC") but
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<PAGE>
possibly under similar circumstances as standards applied to other mainstream
food company product lines. However, certain more stringent regulations can be
applied by the FDA and FTC to companies making health and/or nutritional claims
beyond those approved by existing regulations. While the Company does not
believe the more stringent regulations will apply, it cannot be certain.
Therefore, the Company intends to distribute the Product internationally, at
least initially.
The Product will be subject to regulation by the presiding
jurisdictional drug and/or food regulatory commissions of the countries in which
the Company intends to distribute the Product. While the Company does not
believe that any regulations will apply to the distribution of the Product
within the various countries in which it intends to initiate distribution, it
cannot be certain. At this time the Company has selected the countries of
Israel[,] and England[, Germany and France] as its initial markets. Management
believes that the regulatory requirements of those countries to be such that the
Company will be able to launch sales in those countries without concern of
violating food and/or drug regulations. The Company intends to increase its
distribution to such additional countries as allow for the sale of the Product
without expensive regulatory approval.
The Company is presently in the process of selecting qualified sales
agents to be its direct representatives in the countries the Company will market
the Product. The Company intends to support its sales agents with focused media
[(magazine, local](internet, magazine, newspaper) advertisements introducing the
Product designed to heighten awareness of the availability of alternative
products to enhance human male sperm count and potency such as the Product. The
Company will also endeavor to provide its sales agents with promotional
materials containing testimonials (when available) from users of the Company's
products.
Acquisitions
The Company has no specific acquisition plans at this time.
Compensation of Officers
The only officer to receive any cash compensation will be the President
who will receive an annual salary of $40,000, which has been waived until July
1999, at which time the Company expects full production of the Product.
Compensation of Directors
Each Director of the Company will receive 5,000 restricted Shares of
the Common Stock of the Company per year, provided they attend no less than 50%
of the Board of Directors meeting in that year.
Employees
Mrs. Bella Roth, the Company's President, is the Company's only full
time employee. The Company intends to retain marketing and public relations
consultants as necessary.
Special Note Regarding Forward-Looking Statements
Some of the statements under "Plan of Operations," "Business"
and elsewhere in this registration statement are forward-looking statements that
involve risks and uncertainties. These forward-looking statements include
statements about our plans, objectives, expectations, intentions and assumptions
and other statements contained herein that are not statements of historical
fact. You can identify these statements by words such as "may," "will,"
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<PAGE>
"should," "estimates," "plans," "expects," "believes," "intends" and similar
expressions. We cannot guarantee future results, levels of activity, performance
or achievements. Our actual results and the timing of certain events may differ
significantly from the results discussed in the forward-looking statements. You
are cautioned not to place undue reliance on any forward-looking statements.
Page 6 of 18
<PAGE>
Item 2. Plan of Operation.
The following discussion should be read in conjunction with the financial
statements and related notes which are included elsewhere in this prospectus.
Statements made below which are not historical facts are forward-looking
statements. Forward-looking statements involve a number of risks and
uncertainties including, but not limited to, general economic conditions and our
ability to market our product.
Plan of Operation
As noted in Item 1 above, the Company is currently waiting for the initial
production date ofthe Product. Until the production facilities of its supplier,
Vitahealth Scientific, Inc. are operational, the Company cannot begin to market
the Product with an expectation to be able to deliver goods within a reasonable
amount of time. [Until then, the Company does not intend to complete selection
of its international independent sales agents, nor does the Company intend to
become operational.
Once the production of the nutritional supplement has begun, and the Company can
expect in good faith to fulfill orders within a reasonable amount of time, it
expects to follow the business plan outlined in "Item 1. Description of Business
- -- Business of Issuer", and to fund its operations from revenues generated by
the sale of the nutritional supplement.] The Company has been advised by
Vitahealth that it expects to begin delivery of the Product by September 30,
1999.
Vitahealth had originally planned to lease and construct the facility based on
commitments made to Vitahealth by the Company regarding the initial licensing
fee and ongoing support. Because the Company's financing via its offering did
not proceed according to management's initial timetable, the Company could not
honor those commitments on a timely basis. As such, Vitahealth had to abandon
the original site selected for its production facility. As it now had a new time
window available due to the financing delays, Vitahealth decided to reformulate
the Product and to try to refine the production run. When the Company completed
its offering, the reformulation was not yet finished. Once the reformulation was
completed, Vitahealth had to reselect a site and negotiate tenancy as well as
redesign and outfit the production facility in the new plant. Management has
been assured by Vitahealth that the facility will be ready by September 30,
1999.
The Company has interviewed sales agents only in Israel and England, and has
identified agents it intends to retain as distributors as soon as production
commences. Because of the delays involved with commencing Product production,
the Company was uncertain as to exactly when such agents could begin the sales
process and could not, in good faith, make commitments to potential
distributors. As such, management has delayed interviewing potential
distributors in other countries. As soon as initial sales via the Israel and
England distributors are processed, the Company will resume its efforts to
identify and engage additional international distributors.
The Company intends to allow each master distributor exclusive rights within
his/her own country. Any sales generated in their territory shall be for the
sole benefit of the sales agents. When a sales agent becomes a distributor for
the Company, they agree to purchase the Product from the Company for $1.85 per
capsule, and the Company's independent sales agents are projected to sell them
for approximately $2.15 to $2.25 per capsule. However, the sales agents can sell
the capsules at whatever price they determine. The sales agents compensation is
the difference between what they pay the Company for the product and the price
they sell the Product.
Page 7 of 18
<PAGE>
At the present time, management has full faith in Vitahealth's ability to
deliver the Product on schedule. However, the Company cannot guarantee that
additional production delays will not further delay the commencement of sales
and distribution. Currently, management is prepared to give Vitahealth every
opportunity to complete the production facility, even at the cost of postponing
the production deadline again. While management continually reviews the status
of the production facility to determine when the Company will begin sales there
are no plans or intentions at this time to exercise the Company's right to
terminate the Vitahealth agreement due to missing the production deadline.
As the Company has not yet begun to sell the Product, it is difficult for
management to evaluate the growth curve of Product sales. Additionally, it is
expected that the delays involved with initiating production has tarnished the
earlier market 'excitement' for human sexual virility and potency products
created by Viagra(R). When considering those factors, Management believes it is
likely that the initial sales quotas will not be met and it will have a right to
terminate the Vitahealth Agreement pursuant to the sales quota clauses present
in the agreement. Having considered the various factors involved with its right
to terminate the agreement based on sales quota requirements, management has no
plans to do so at this time. It is management's opinion, that there is a market
for a human sexual potency nutritional supplement and is fully committed to
providing Vitahealth with the opportunity to be the sole supplier of such a
product to the Company. While the Company will review the sales numbers as sales
are commenced, and retains the right to reevaluate its position on an ongoing
basis, there are no plans or intentions at this time to exercise the Company's
right to terminate the Vitahealth agreement due to sales quotas for at least
three months following initial production and sale of the Product.
The Company expects to fund $4,000 of initial advertising in health journals and
media so distributors will have such publications in hand for sales purposes.
The Company also intends to use the Internet for advertising as that currently
allows the greatest visibility for very small costs. In fact, the Company
believes that it may be able to obtain free access on certain websites looking
for products such as the Company's. Subsequently, the company intends to reserve
20% of revenues for ongoing advertising and marketing up to $10,000 (in
advertising expenditures - or $50,000 total revenues) monthly per country, and
10% of all additional revenues.
While the Company is committed to retaining Vitahealth as its supplier, there is
no guarantee that Vitahealth's production delays or lack of product salability
as evidenced by underpreforming the sales quotas will not necessitate the
eventual termination of the Vitahealth agreement. Should the agreement be
terminated for any reason, the Company at this time intends to locate another
provider of human sexual potency and virility nutritional supplements to become
its supplier. There is no guarantee that the Company will be able to locate and
retain such a provider and the Company has not even begun to attempt to locate
one. The Company continually evaluates the business market to attempt to place
itself at the most profitable position. While the Company currently intends to
continue to operate as discussed, there can be no guarantee that uncontrollable
variables will not force a substantive change in the Company's operation or
plans of operation.
At present the only cash outlay of the Company is in banking fees and in legal
and accounting fees incurred by the Company as it prepares filings associated
with being a reporting company (quarterly unaudited reports, annual reports,
etc.). Management believes there is enough cash on hand to fund such activities
for the next 12 months. When the Company becomes operational, further costs
(such as salary for Mrs. Roth) are expected to be covered by revenue generated
by the Company's sales. [As such] The agreement with Mrs. Roth calls for her to
be paid up to $40,000 from the proceeds of sales of the Product. Should sales
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levels not allow for her to receive her full compensation, she will receive
compensation from available funds after the Company satisfies all its other
obligations. The only other anticipated expense not currently provided for is
the advertising budget. Management is currently exploring various options
including the sale of additional stock and/or warrants, bank financing or
personal loans by management or family members. Other than as specifically
identified, the Company does not forsee the need to raise additional funds in
the next 12 months.
The Company does not expect to conduct any product research and development or
to purchase or sell a plant or significant equipment. The Company intends to
retain marketing and public relations consultants as necessary, and to hire
support staff for its President only if warranted by its sales volume on an as
needed basis.
Item 3. Description of Property.
The Company maintains its corporate offices rent free through April 30, 1999 at
an office of one of its shareholders at 100 Cedarhurst Ave, Suite 201,
Cedarhurst, NY 11516. The Company has agreed to either sublet the space it is
currently using at a cost of $150 monthly, or to relocate its office to another
location on [May 1, 1999.] the first day of the month commencing after the
Product is available.
Item 4. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners
None.
(b) Security Ownership of Management
<TABLE>
<S> <C> <C> <C>
Name and Address. Amount and Nature
Title of Class of Beneficial Owner of Beneficial Owner Percent of Class
Common Stock Bella Roth 3,825,000(1) 82.96%
543 Bedford Ave.
Brooklyn, NY
Common Stock Moshe Laufer 175,000(2) 3.8%
172 Rodney Street
Brooklyn, NY
Common Stock Arnold Lipton, M.D. 100,000(3) 2.17%
225 West 86 Street
New York, NY
Common Stock All Directors and 4,100,000(4) 88.93%
Executive Officers
as a Group
</TABLE>
(1)Includes underlying securities for 325,000 options to purchase
additional shares of common stock.
(2) Includes underlying securities for 75,000 options to purchase additional
shares of common.
(3) Includes underlying securities for 75,000 options to purchase
additional shares of common.
(4) Includes underlying securities for an aggregate of 475,000 options to
purchase additional shares of common stock.
Page 9 of 18
<PAGE>
(c) Changes in Control
None.
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<PAGE>
Item 5. Directors, Executive Officers, Promoters and Control Persons.
(a) Directors and Executive Officers.
Name Age Position
Bella Roth 48 President & Chairman of the Board
Arnold A. Lipton, M.D. 68 VP - Scientific Advisor & Director
Moshe Laufer 39 Secretary/Treasurer & Director
Directors serve for five year terms.
Bella Roth - President & Chairman of the Board of Directors - Mrs. Roth founded
the Company in August 1998, and has been its President and Chairman of the Board
since inception. From 1988 to 1995 Mrs. Roth was Treasurer, Secretary and a
Director of J.R. Consulting Incorporated, a publicly traded holding company.
From 1996 to 1998, Mrs. Roth was involved in various community projects as she
searched for a business opportunity. From 1983 to 1987 she was an officer and
Director of Innovative Medical Technologies, a public company involved with the
development and marketing of electronic medical devices. [Since 1995 she has
been pursuing various personal interests.]
Arnold A. Lipton, M.D. - Vice President & Director - has been a Vice President,
the scientific advisor and a Director of the Company since August 17, 1998. Dr.
Lipton is a physician in private practice in Brooklyn, NY since 1970, with a
specialty in Obstetrics and Gynecology. Dr. Lipton holds an M.D. from Lausanne
Medical School, a Masters in Science from the Philadelphia College of Science,
and a Bachelors of Science from the Brooklyn College of Pharmacy. Dr. Lipton is
a member of the New York State Medical Society and the Kings County Medical
Society.
Moshe Laufer - Secretary/Treasurer & Director - Mr. Laufer has been the
Secretary/Treasurer and a director of the Company since its inception. From 1995
to [the present he has been ]1998 he has been primarily occupied with managing
his investment portfolio and pursuing various personal and professional
interests. From 1986 to 1995 Mr. Laufer was a licensed distributer of NY
Bottling, Inc. a company engaged in the bottling and distribution of soft drinks
in the Northeastern United States. Mr. Laufer is the brother-in-law of Mrs.
Roth.
(b) Significant Employees
None
(c) Family Relationships
Mr. Laufer is the brother in law of Mrs. Roth. There are no other family
relationships among directors or executive officers of the Company.
(d) Involvement in Certain Legal Proceedings.
None.
Item 6. Executive Compensation.
(a) General
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Commencing November 12, 1998, the Company has agreed to pay Mrs. Bella Roth, its
President & Chairman of the Board of Directors, an annual salary of $40,000.
Mrs. Roth's compensation has been waived until July 1999. Mrs. Roth provides her
services on a full-time basis. For the period ending December 31, 1998, Mrs.
Roth has earned -0-. No executive officer or employee of the Company is paid
more than $100,000 per year in salary and benefits.
(b) Summary Compensation Table
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C>
Name and Other Long-term
Principal Position Year SalaryBonus Compensation Compensation: Options (1)
- ------------------ ---- ------------- ------------ -------------------------
Bella Roth 1998 -0- 0 0 325,000 options worth $0
President &
Chairman
Arnold Lipton, M.D. 1998 0 0 0 75,000 options worth $0
V.P.-Scientific
Advisor &
Director
Moshe Laufer 1998 0 0 0 75,000 options worth $0
Secretary,
Treasurer &
Director
</TABLE>
(1) Based on the Company's Offering Memorandum dated September 25, 1998, in
which the Shares of the Company's stock was sold for an arbitrarily
determined price of $1.00 per share for unrestricted shares of the
Company's of common stock, the relatively high exercise price and the
limited time before the Options expire, the options are essentially
valueless.
(c) Options/SAR Grants Table
OPTION GRANTS IN LAST FISCAL YEAR
(Individual Grants)
<TABLE>
<S> <C> <C> <C> <C>
% of Options Exercise Price
Name Number of Options Granted (1998) (per share) Expiration
Bella Roth 175,000 36.84 $2.50 11/12/01
150,000 31.58 $4.00 11/12/01
------- -----
Total 325,000 68.42
======= =====
Arnold Lipton, M.D.
25,000 5.26 $2.00 11/12/01
50,000 10.53 $3.00 11/12/01
------ -----
Total 75,000 15.79
====== =====
Moshe Laufer
25,000 5.26 $2.50 11/12/01
50,000 10.53 $4.00 11/12/01
------ -----
Total 75,000 15.79
====== =====
(d) Aggregated Option/SAR Exercises and Fiscal Year End Option/SAR Value Table
</TABLE>
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None
(e) Long Term Incentive Plan ("LTIP") Awards Table
None
(f) Compensation of Directors
Commencing January 1, 1999 each Director shall receive 5,000 restricted shares
annually. Said compensation is contingent upon attendance at no less than 50% of
that year's Board of Director's meetings.
(g) Employment Contracts and Termination of Employment, and Change-in-Control
Arrangements
The Company has no employment contracts with any of its executive officers. Mrs.
Bella Roth serves as President of the Company for $40,000 annually, and will
continue to serve under such terms without the benefit of an employment
contract. There are no provisions for compensation to be paid to any executive
officer or director of the Company upon the termination of their services by
either party or by the actions of a third party.
(h) Report on Repricings of Options/SARs
None.
Item 7. Certain Relationships and Related Transactions.
None.
Item 8. Legal Proceedings
None
Item 9. Market Price for Common Equity and Related Stockholder Matters.
(a) Market Information
There is no public trading market for the Company's securities.
The Company currently has [40,600] 42,100 class A warrants issued and
outstanding. Each Warrant entitles the holder to purchase one Share of
restricted Common Stock at an exercise price of $10.00, subject to adjustment,
through the first anniversary of the date the Company's Shares are initially
approved for trading in any public market.
Under the terms of the Company's licensing agreement, the Company has agreed to
grant Vitahealth stock options to purchase up to 300,000 additional restricted
shares of the Common Stock of the Company for a period of 5 years beginning June
30,1999 according to the following schedule:
Date Option to be Effective Amount of Options Exercise Price (per Share)
6/30/1999 100,000 $10.00
11/30/1999 100,000 $10.00
6/30/2000 100,000 $10.00
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These options shall become effective only in the event the Licensing and
Distribution agreement between the Company and Vitahealth is still in effect on
the date the options are due to be effective. The options have no registration
rights. See "DESCRIPTION OF BUSINESS - Licensing And Distribution Agreement."
The Company has also granted stock options to the following officers to
purchase additional shares of common stock of the Company according to the
following schedule:
Name of Option Holder Amount of Options Exercise Price (per Share)
Bella Roth 175,000 $2.50
Bella Roth 150,000 $4.00
Arnold Lipton, M.D. 25,000 $2.00
Arnold Lipton, M.D. 50,000 $3.00
Moshe Laufer 25,000 $2.50
Moshe Laufer 50,000 $4.00
The shares underlying the options have no registration rights.
Of the [4,610,600] 4,667,100 shares of common stock outstanding, 3,625,000 are
currently subject to the resale restrictions and limitations of Rule 144. In
general, under Rule 144 as currently in effect, subject to the satisfaction of
certain other conditions, a person, including an affiliate, or persons whose
shares are aggregated with affiliates, who has owned restricted shares of common
stock beneficially for at least one year is entitled to sell, within any
three-month period, a number of shares that does not exceed 1% of the total
number of outstanding shares of the same class. In the event the shares are sold
on an exchange or are reported on the automated quotation system of a registered
securities association, you could sell during any three-month period the greater
of such 1% amount or the average weekly trading volume as reported for the four
calendar weeks preceding the date on which notice of your sale is filed with the
SEC. Sales under Rule 144 are also subject to certain manner of sale provisions,
notice requirements and the availability of current public information about us.
A person who has not been an affiliate for at least the three months immediately
preceding the sale and who has beneficially owned shares of common stock for at
least two years is entitled to sell such shares under Rule 144 without regard to
any of the limitations described above.
(b) Holders
There are approximately [117] 119 holders of the Company's common stock, and
approximately [8] 9 holders of the Company's Class A Warrants.
(c) Dividends
The Company has had no earnings to date, nor has the Company declared any
dividends to date. The payment by the Company of dividends, if any, in the
future, rests within the discretion of its Board of Directors and will depend,
among other things, upon the Company's earnings, its capital requirements and
its financial condition, as well as other relevant factors. The Company has not
declared any cash dividends since inception, and has no present intention of
paying any cash dividends on its Common Stock in the foreseeable future, as it
intends to use earnings, if any, to generate growth.
Item 10. Recent Sales of Unregistered Securities.
Page 14 of 18
<PAGE>
On August 16, 1998, Bella Roth purchased 3,000,000 restricted shares of the
Company at par value as a founder of the Company. On August 16, 1998, Moshe
Laufer purchased 100,000 Shares at par value as a founder of the Company. On
August 17, 1998 the Company agreed to retain Dr. Arnold Lipton wherein he would
become a Vice President of Scientific Advisory to the Company and a Director of
the Company, in exchange for 25,000 restricted shares of the common stock of the
Company. On September 18, 1998, the Company retained Mr. Ulf Jacobson as
international counsel to the Company for a period of 1 year, in exchange for
50,000 restricted shares of the common stock of the Company. These sales were
exempt from registration as not being "public" offerings pursuant to Section
4(2) of the Securities Act.
On August 18, 1998, the company sold an aggregate of 1,370,000 Shares to
investors (including 500,000 shares to Bella Roth) for $0.001 (or an aggregate
of $1,370) pursuant to an exemption from registration under Rule 504 and
pursuant to appropriate State filings or exemption from State registrations as
applicable. On August 20, 1998 the Company sold an aggregate of 10,000 Shares to
investors for $.01 per share (or an aggregate of $100) pursuant to the same
exemption from Federal registration and appropriate State filings or exemption
from State registration noted above. From August 21, 1998 through August 25,
1998 the Company sold an aggregate of 15,000 Shares to investors for $0.10 per
Share (or an aggregate of $1,500) pursuant to the same exemption from Federal
registration and appropriate State filings or exemption from State registration
noted above.
On September 25, 1998 the Company offered to the public no less than 10,000 and
up to 460,000 Units (each Unit consisting of one Share of Common Stock and one
redeemable Class A Warrant. Each Warrant entitles the holder to purchase one
Share of restricted Common Stock at an exercise price of $10.00, subject to
adjustment, through the first anniversary of the date the Company's Shares are
initially approved for trading in any public market), at a price of $1.00 per
Unit, for an aggregate of no less than $10,000 and up to a maximum of $460,000,
pursuant to the [same] exemption from Federal registration contained in Rule 504
and appropriate State filings or exemption from State [registration noted above]
filings. On November 11, 1998 the Company had an initial closing on the offering
for 38,100 units or an aggregate of $38,100. The Company held subsequent
closings 2,500 additional units or an aggregate of $2,500. The total amount of
units sold under the September 25, 1998 offering were [40,600] 42,100 units for
an aggregate total of [$40,600] $42,100.
No commissions or discounts were paid or given to any person or entity in any of
the Company's sales of securities. There were no underwriters or securities
brokers or securities dealers involved in the offering in any way; the shares
were sold by management on a best efforts basis.
Item 11. Description of Securities.
(a) Common or Preferred Stock
The Company is authorized to issue 20,000,000 shares of Common Stock,
$0.0001 par value, of which [4,610,600] 4,667,100 shares were issued and
outstanding as of the date hereof. Each outstanding share of Common Stock is
entitled to one (1) vote, either in person or by proxy, on all matters that may
be voted upon the owners thereof at meetings of the stockholders.
The holders of Common Stock (i) have equal ratable rights to dividends
from funds legally available therefor, when and if declared by the Board of
Directors of the Company; (ii) are entitled to share ratably in all of the
assets of the Company available for distribution to holders of Common Stock upon
liquidation, dissolution or winding up of the affairs of the Company; (iii) do
not have preemptive, subscription or conversion rights, or redemption or sinking
fund provisions applicable thereto; and (iv) are entitled to one non-cumulative
Page 15 of 18
<PAGE>
vote per share on all matters on which stockholders may vote at all meetings of
stockholders.
Holders of Shares of Common Stock of the Company do not have cumulative
voting rights, which means that the individuals holding Common Stock with voting
rights to more than 50% of eligible votes, voting for the election of directors,
can elect all directors of the Company if they so choose and, in such event, the
holders of the remaining shares will not be able to elect any of the Company's
directors.
(b) Debt Securities.
The Company has not issued any debt securities to date.
(c)Other securities to be Registered
Class "A" Warrants
Each Warrant entitles the holder to purchase one Share of restricted Common
Stock at an exercise price of $10.00, subject to adjustment, through the first
anniversary of the date the Company's Shares are initially approved for trading
or quotation in any public market.
Item 12. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law, as amended, authorizes the
Company to Indemnify any director or officer under certain prescribed
circumstances and subject to certain limitations against certain costs and
expenses, including attorney's fees actually and reasonably incurred in
connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative, to which a person is a party by reason of being
a director or officer of the Company if it is determined that such person acted
in accordance with the applicable standard of conduct set forth in such
statutory provisions. The Company's Certificate of Incorporation contains
provisions relating to the indemnification of director and officers and the
Company's By-Laws extends such indemnities to the full extent permitted by
Delaware law.
The Company may also purchase and maintain insurance for the benefit of any
director or officer which may cover claims for which the Company could not
indemnify such persons.
Item 13. Financial Statements.
The financial statements are included at the end of this Registration Statement,
prior to the signature page.
Item 14. Changes In and Disagreements With Accountants on Accounting
and Financial Disclosure.
None.
Item 15. Financial Statements and Exhibits.
(a) List of Financial Statements filed herewith.
Page 16 of 18
<PAGE>
(b) List of Exhibits.
Index to Exhibits
3.1 Certificate of Incorporation*
3.2 By-Laws*
4.1 Form of Warrant Certificate*
10.1 Exclusive Distribution Agreement with Vitahealth Scientific, Inc.*
27 Financial Data Schedule
- ----------------------
* Previously filed
Page 17 of 18
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
........ VIRILITEC INDUSTRIES, INC.
Date: 8/3/99
/s/
........ Bella Roth, President
and Chairman
Date: 8/3/99 /s/
........ Moshe Laufer, Secretary,
Treasurer and Director
Date:
........ Arnold A. Lipton,
Vice President
Page 18 of 18
<PAGE>
Virilitec Industries Inc.
100 Cedarhurst ave. Suite 201
Cedarhurst, NY 11516
We have audited the accompanying balance sheet of Virilitec Industries Inc. (a
development stage company) as of December 31, 1998, and the related statements
of operations, stockholders' equity, and cash flows for the period August 11,
1998 (inception) to December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Virilitec Industries Inc. (a
development stage company) as of December 31, 1998, and the results of its
operations and its cash flows for the period August 11, 1998 (inception) to
December 31, 1998 in conformity with generally accepted accounting principles.
/s/
Morgenstern & Alexander
Certified Public Accountants
February 10, 1999
New York, NY
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
100 CEDARHURST AVE. SUITE 201
CEDARHURST, NEW YORK 11516
FINANCIAL STATEMENTS
FOR THE PERIOD AUGUST 11, 1998
(INCEPTION) TO DECEMBER 31, 1998
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Current Assets:
Cash $ 6,279
Equipment, at cost 3,600
License fee 8,500
Miscellaneous 400
--------
Total $ 18,779
--------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable and accrued expenses $ 881
--------
Total Liabilities $ 881
--------
Commitments and other matters
Stockholders' Equity:
Common stock, $.0001 par value;
20,000,000 shares authorized;
4,608,600 shares issued and
outstanding, of which 3,175,000
shares are restricted shares 461
Additional paid-in capital 33,624
34,085
Deficit accumulated during the development stage (16,187)
Total Stockholders' Equity 17,898
Total Liabilities &
Stockholders' Equity $ 18,779
=========
The accompanying notes are an integral part of these financial statements.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR THE PERIOD AUGUST 11, 1998
(INCEPTION) TO DECEMBER 31, 1998
Sales $ -
Costs and expenses:
Officer's salary (14,615)
General and administrative expenses ( 1,586)
Interest income 14
Net Loss and deficit accumulated
during the development stage $ (16,187)
==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD AUGUST 11, 1998
(INCEPTION) TO DECEMBER 31, 1998
Deficit
Common Stock Accumulated
$.0001 Par Value Additional During The
Paid - In Development
Shares Amount Capital Stage
Common stock issued in 3,175,000 $ 318 $( 318)
connection with the
formation of the Company
and its management team
Common stock issued 1,433,000 143 33,942
Net loss -
August 11, 1998 through
December 31, 1998 $ (16,187)
---------- ------ ------- ------------
Balance-December 31, 1998 4,608,600 $ 461 $33,624 $ (16,187)
========== ====== ======= ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE PERIOD AUGUST 11, 1998
(INCEPTION) TO DECEMBER 31, 1998
Cash Flows From Operating Activities
Net loss $ (16,187)
Adjustments to reconcile net
loss to net cash used in operating
activities:
Contributed services 15,365
Changes in operating assets
and liabilities:
Miscellaneous ( 400)
Accrued expenses 881
---------
Net cash used in operating
activities ( 341)
----------
Cash Flows From Investing Activities
Capital expenditures (3,600)
License fee (8,500)
Net cash used in investing
activities (12,100)
Cash Flows From Financing Activities
Stock offering 41,510
Cost of stock offering (22,790)
Net cash from financing activities 18,720
Net increase in cash 6,279
Cash at beginning of period -0-
Cash at end of period $ 6,279
=========
The accompanying notes are an integral part of these financial statements.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
THE COMPANY
Virilitec Industries Inc. (the Company) was incorporated on August 11, 1998 with
total authorized shares of 20,000,000, par value $.0001. The Company was formed
to license and distribute a line of bioengineered virility supplements.
Initially, the Company intends to market its product in international markets,
using independent sales agents.The Company is in the development stage and its
efforts through December 31, 1998 have been principally devoted to
organizational activities and raising capital. Management anticipates incurring
additional losses as it pursues its organizational and development efforts. The
Company is in the process of conducting an offering. The company believes it
will raise sufficient funds from the offering to finance its operations. The
Company also believes it will be able to obtain any additional funds required.
SIGNIFICANT ACCOUNTING POLICIES
Use Of 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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Depreciation
Equipment, primarily computers, is depreciated by the straight-line method over
its estimated useful life. When property is retired or otherwise disposed of,
the cost and accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in operations.
Amortization
The licensing fee will be amortized on the straight-line basis over the life of
the agreement. All mandatory additional annual payments will be charged to
operations as they become due.
Stock issuance costs
Stock issuance costs represent expenses related to the Company's offering. These
expenses include the direct costs of the offering such as legal, filing fees,
printing and related consulting fees. These costs were deducted from the
proceeds of the offering.
Stock Offering
The Company is conducting an offering of up to 460,000 units at $1.00 per unit.
Each unit entitles the holder to one (1) share of common stock, $.0001 par value
and one (1) redeemable Class A warrant entitling the holder to purchase one (1)
share of restricted common stock at an exercise price of $10.00 per share.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company has issued stock to officers and directors without receiving any
consideration, but rather in exchange for present and anticipated management
services. Under generally accepted accounting principles, it is appropriate to
record stock issued at the fair value of the stock or services rendered
whichever is more clearly evident. Since the fair value of these services can
not be estimated at this time, the stock has been recorded at par value.
CAPITALIZATION
The Company currently has 4,608,600 shares of common stock outstanding, of which
management owns 3,675,000. Included in the 3,675,000 shares owned by directors
and company management are 3,175,000 shares of restricted shares as defined in
the Securities Act of 1933 and the regulations thereunder. Management which owns
3,125,000 restricted shares has agreed not to sell any of such shares for a
period of one year following the final closing of the Stock Offering referred to
above.
OPTIONS
The Company has granted to stock options to certain officers and directors to
purchase additional shares of restricted common stock of the Company as follows:
Exercise
Option Holders Number of Options Price (Per Share)
President and Chairman 175,000 2.50
of Board of Directors
President 150,000 4.00
Vice President/Director 25,000 2.00
Vice President/Director 50,000 3.00
Secretary/Treasurer and Director 25,000 2.50
Secretary/Treasurer and Director 50,000 4.00
Under the terms of the Company's licensing agreement, the Company has also
agreed to grant stock options to its manufacturer to purchase up to 300,00
additional restricted shares of the common stock of the Company for a period of
five years beginning October 31, 1999 according to the following schedule:
Exercise
Effective Date Number of Shares Price (Per Share)
10/31/1999 100,000 10.00
03/31/2000 100,000 10.00
10/31/2000 100,000 10.00
This options shall become effective only in the event the licensing and
distribution agreement between the Company and the manufacturer is still in
effect on the date the options are due to be effective.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
LICENSING AND DISTRIBUTION AGREEMENT
The Company has entered into a fifty (50) year licensing and distribution
agreement, whereby the Company was granted exclusive rights to distribute a
certain nutritional supplement designed to enhance human male sperm count and
potency. Under the terms of the agreement, the Company's independent sales
agents will place orders directly with the manufacturer, which will fill such
orders. The sales agents will pay the manufacturer upon order placement, and the
manufacturer, acting as collections agent for the Company, will forward the
Company's portion of sales proceeds to the Company. The manufacturer has agreed
to periodic review of its order receipts in order to ensure that the Company is
receiving its appropriate revenue.
The Company has paid an initial non-refundable one time licensing fee of $8,500.
The Company will also pay an annual licensing fee of $10,000, commencing on 90
days after the product is manufactured and delivered and each year thereafter,
on the anniversary of the first payment's due date as long as the licensing and
distribution agreement has not been terminated before the date such payment is
due. The Company's agents are required to pay the manufacturer $1.85 for each
unit of the product sold of which the manufacturer retains $1.45 and forwards
$.40 to the company. The parties have agreed to certain minimum sales and
production quotas. If either the company or the manufacturer fail to meet the
minimum sales and production quotas, either party may terminate the agreement
without penalties.
COMMITMENTS
The Company maintains its corporate offices rent free at an office of one of its
shareholders at 100 Cedarhurst Ave. Suite 201, Cedarhurst, NY 11516. Upon the
completion of the offering, the Company has agreed to either sublet the space it
is currently using at a cost of $150 monthly, or relocate its office to another
location. Management anticipates that the monthly rental cost of an office
should be no more than $500. The company included rent expense of $150 a month
in the General and Administrative expenses.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
100 CEDARHURST AVE. SUITE 201
CEDARHURST, NEW YORK 11516
FINANCIAL STATEMENTS
FOR THE PERIOD AUGUST 11, 1998
(INCEPTION) TO MAY 31, 1999
<PAGE>
Virilitec Industries Inc.
100 Cedarhurst ave. Suite 201
Cedarhurst, NY 11516
I have reviewed the accompanying balance sheet of Virilitec Industries Inc. (a
development stage company) as of May 31, 1999 and the related statements of
operations and accumulated deficit, stockholders equity and cash flows for the
five months then ended, in accordance with Statements on Standards for
Accounting an Review Services issued by the American Institute of Certified
Public Accountants. All information included in these financial statements is
the representation of the management of Virilitec Industries Inc.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole.
Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material modifications that should be
made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
/s/
Joseph Morgenstern
Certified Public Accountant
July 12, 1999
New York, NY
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
MAY 31, 1999
ASSETS
Current Assets:
Cash $ 340
Equipment, at cost 3,600
License fee 8,500
Miscellaneous 400
--------
Total Assets $ 12,840
--------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 822
Due to Officer 660
--------
Total Liabilities, all current $ 1,482
--------
Commitments and other matters
Stockholders' Equity:
Common stock, $.0001 par value; 20,000,000 shares authorized; 4,667,100 shares
issued and outstanding, of which 3,175,000
shares are restricted shares 467
Additional paid-in capital 81,285
81,752
Deficit accumulated during the development stage (70,394)
Total Stockholders' Equity 11,358
Total Liabilities &
Stockholders' Equity $ 12,840
=========
See accountant's report.
The accompanying notes are an integral part of these financial statements.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
AND ACCUMULATED DEFICIT
FOR THE FIVE MONTHS ENDED MAY 31, 1999
AND THE PERIOD AUGUST 11, 1998
(INCEPTION) TO MAY 31, 1999
Five Months August 11, 1999
Ended (Inception) To
May 31, 1999 May 31, 1999
Sales $ -0- $ -0-
Costs and expenses:
Officer's salary (16,667) (31,282)
Management fees (27,500) (27,500)
General and administrative
expenses (4,260) (5,846)
Travel (5,780) (5,780)
Interest income -0- 14
Net Loss (54,207) (70,394)
Accumulated deficit,
beginning of period (16,187) -0-
Accumulated deficit,
end of period $(70,394) $(70,394)
========= =========
See accountant's report.
The accompanying notes are an integral part of these financial statements.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD AUGUST 11, 1998
(INCEPTION) TO MAY 31, 1999
Deficit
Common Stock Accumulated
$.0001 Par Value Additional During The
Paid - In Development
Shares Amount Capital Stage
Common stock issued in 3,175,000 $ 318 $( 318)
connection with the
formation of the Company
and its management team
Common stock issued 1,492,100 149 81,603
Net loss -
August 11, 1998 through
May 31, 1999 $ (70,394)
---------- ------ ------- ------------
Balance - May 31, 1999 4,667,100 $ 467 $81,285 $ (70,394)
========== ====== ======= ============
See accountant's report.
The accompanying notes are an integral part of these financial statements.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE FIVE MONTHS ENDED MAY 31, 1999
AND THE PERIOD AUGUST 11, 1998
(INCEPTION) TO MAY 31, 1999
FIVE MONTHS AUGUST 11, 1998
ENDED (INCEPTION) TO
MAY 31, 1999 MAY 31, 1999
Cash Flows From Operating Activities
Net loss $(54,207) $ (70,394)
Adjustments to reconcile net
loss to net cash used in operating
activities:
Contributed services 44,917 60,282
Changes in operating assets
and liabilities:
Miscellaneous - ( 400)
Accrued expenses 601 1,482
--------- ---------
Net cash used in operating
activities (8,689) (9,030)
--------- ----------
Cash Flows From Investing Activities
Capital expenditures - (3,600)
License fee - (8,500)
-------- --------
Net cash used in investing
activities - (12,100)
-------- ---------
Cash Flows From Financing Activities
Stock offering 4,400 45,910
Cost of stock offering (1,650) (24,440)
-------- ---------
Net cash from financing
activities 2,750 21,470
------- ----------
Net increase (decrease) in cash (5,939) 340
Cash at beginning of period 6,279 -0-
Cash at end of period $ 340 $ 340
========= =========
See accountant's report.
The accompanying notes are an integral part of these financial statements.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999
THE COMPANY
Virilitec Industries Inc. (the Company) was incorporated on August 11, 1998 with
total authorized shares of 20,000,000, par value $.0001. The Company was formed
to license and distribute a line of bioengineered virility supplements.
Initially, the Company intends to market its product in international markets,
using independent sales agents.The Company is in the development stage and its
efforts through May 31, 1999 have been principally devoted to organizational
activities and raising capital. Management anticipates incurring additional
losses as it pursues its organizational and development efforts. The Company
believes it will be able to obtain any additional funds required.
SIGNIFICANT ACCOUNTING POLICIES
Use Of 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 and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Depreciation
Equipment, primarily computers, is depreciated by the straight-line method over
its estimated useful life. When property is retired or otherwise disposed of,
the cost and accumulated depreciation are removed from the accounts and any
resulting gain or loss is included in operations.
Amortization
The licensing fee will be amortized on the straight-line basis over the life of
the agreement. All mandatory additional annual payments will be charged to
operations as they become due.
Stock issuance costs
Stock issuance costs represent expenses related to the Company's offering. These
expenses include the direct costs of the offering such as legal, filing fees,
printing and related consulting fees. These costs were deducted from the
proceeds of the offering.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company has issued stock to officers and directors without receiving any
consideration, but rather in exchange for present and anticipated management
services. Under generally accepted accounting principles, it is appropriate to
record stock issued at the fair value of the stock or services rendered
whichever is more clearly evident. Since the fair value of these services can
not be estimated at this time, the stock has been recorded at par value.
CAPITALIZATION
The Company currently has 4,667,100 shares of common stock outstanding, of which
management owns 3,675,000. Included in the 3,675,000 shares owned by directors
and company management are 3,175,000 shares of restricted shares as defined in
the Securities Act of 1933 and the regulations thereunder. Management which owns
3,125,000 restricted shares has agreed not to sell any of such shares for a
period of one year following the final closing of the Stock Offering referred to
above.
OPTIONS
The Company has granted stock options to certain officers and directors to
purchase additional shares of restricted common stock of the Company as follows:
Exercise
Option Holders Number of Options Price (Per Share)
President and Chairman 175,000 2.50
of Board of Directors
President 150,000 4.00
Vice President/Director 25,000 2.00
Vice President/Director 50,000 3.00
Secretary/Treasurer and Director 25,000 2.50
Secretary/Treasurer and Director 50,000 4.00
Under the terms of the Company's licensing agreement, the Company has also
agreed to grant stock options to its manufacturer to purchase up to 300,00
additional restricted shares of the common stock of the Company for a period of
five years beginning October 31, 1999 according to the following schedule:
Exercise
Effective Date Number of Shares Price (Per Share)
10/31/1999 100,000 10.00
03/31/2000 100,000 10.00
10/31/2000 100,000 10.00
This options shall become effective only in the event the licensing and
distribution agreement between the Company and the manufacturer is still in
effect on the date the options are due to be effective.
<PAGE>
VIRILITEC INDUSTRIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999
LICENSING AND DISTRIBUTION AGREEMENT
The Company has entered into a fifty (50) year licensing and distribution
agreement, whereby the Company was granted exclusive rights to distribute a
certain nutritional supplement designed to enhance human male sperm count and
potency. Under the terms of the agreement, the Company's independent sales
agents will place orders directly with the manufacturer, which will fill such
orders. The sales agents will pay the manufacturer upon order placement, and the
manufacturer, acting as collections agent for the Company, will forward the
Company's portion of sales proceeds to the Company. The manufacturer has agreed
to periodic review of its order receipts in order to ensure that the Company is
receiving its appropriate revenue.
The Company has paid an initial non-refundable one time licensing fee of $8,500.
The Company will also pay an annual licensing fee of $10,000, commencing on 90
days after the product is manufactured and delivered and each year thereafter,
on the anniversary of the first payment's due date as long as the licensing and
distribution agreement has not been terminated before the date such payment is
due. The Company's agents are required to pay the manufacturer $1.85 for each
unit of the product sold of which the manufacturer retains $1.45 and forwards
$.40 to the company. The parties have agreed to certain minimum sales and
production quotas. If either the company or the manufacturer fail to meet the
minimum sales and production quotas, either party may terminate the agreement
without penalties.
COMMITMENTS
The Company maintains its corporate offices rent free at an office of one of its
shareholders at 100 Cedarhurst Ave. Suite 201, Cedarhurst, NY 11516. Upon the
completion of the offering, the Company has agreed to either sublet the space it
is currently using at a cost of $150 monthly, or relocate its office to another
location. Management anticipates that the monthly rental cost of an office
should be no more than $500. The company included rent expense of $150 a month
in the General and Administrative expenses.
<PAGE>
August 12, 1999
Securities and Exchange Commission
450 5th Street, N.W.
Washington, D.C. 20549
Re: Virilitec Industries, Inc. -- Form 10-SB filed
March 29, 1999; File number 0-25659
Gentlemen:
Following are responses to the comment letter dated June 3, 1999 (the
"Letter") prepared by the staff of the Securities and Exchange Commission (the
"Staff") relating to the above referenced registration statement. Capitalized
terms used herein that are not defined have the meanings given them in the
registration statement. Each number paragraph below corresponds to the numbered
paragraph in the Letter. The page references below correspond to page numbering
of the registration statement filed herewith. Enclosed supplementally for your
convenience is a marked copy of the registration statement marked to show
changes from the previous filing.
1. The registration statement has been revised on the cover page to
indicate the change.
2-9. The Business Section has been revised to include a discussion of
all of these items.
10. The Plan of Operation has been revised to discuss these elements.
11. The Plan of Operation has been revised to clarify that Mrs. Roth
will only receive salary out of profits. Accordingly, projections and their
basis are not necessary as Mrs. Roth will not get paid if there are no profits.
12. The indicated change has been made on page 9.
13. The indicated change has been made on page 11.
14. Mr. Jacobson has not been listed because he is not an employee. Mr.
Jacobson is an attorney who has been retained to provide international legal
advice to the company.
15. The requested material has been provided on page 14.
16. The indicated changes have been made on page 15.
17. The signature page is dated and signed.
18. The requested discussion appears in the revised Plan of Operation
section.
19. The indicated change has been made.
20. The indicated change has been made.
21. The indicated change has been made.
22. Please note that in the literature discussing offerings made
pursuant to Rule 504 as promulgated under the Securities Act of 1933, as
amended, are generally referred to as "public" offerings since the shares are
freely transferrable. As disclosed on page 15 the offerings complied with Rule
504 which is why the word "public" was used. As apparently this can cause some
confusion we have deleted the word "public."
23. The officers of the company received the number of shares listed by
their name as stated in Item 4. As stated on page 15 the shares were issued on
August 16 and 17, 1998. As the company at this time had no assets or business
and was literally a "start up" company the fair value of the services provided
by its officers could not be estimated.
24. As indicated above, at the time of the issuance of the founders
stock to the company's initial officers the company had no business operations.
However, beginning with the execution of the License and Distribution Agreement,
the company now had a business plan and a potential value. Accordingly, the
company valued the shares sold in September at a higher price.
25. Updated financial statements are included.
If the Staff has any questions regarding the contents of this letter or
the accompanying filing that may not rise to the level of necessarily requiring
another comment letter, I respectfully request the opportunity to discuss such
matters with the Staff so as to perhaps obviate the need for additional
correspondence thereby expediting the review process. I can be reached at (212)
685-7600 ext. 3006.
Very truly yours,
/s/
IR/rs Irving Rothstein
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