UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT TO THE 1934 ACT
REPORTING REQUIREMENTS
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
2000.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________to ___________________
Commission File Number: 000-
ELAST TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Nevada 000- 88-0380544
(State of (Commission (I.R.S. Employer
organization) File Number) Identification No.)
2505 Rancho Bel Aire, Las Vegas, NV 89107
(Address of principal executive offices)
Registrant's telephone number, including area code 702.878.8310
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months and
(2) has been subject to such filing requirements for the past 90 days.
Yes X
There are 10,129,215 shares of common stock issued and outstanding as
of September 30, 2000.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited financial statements for the quarter ended
September 30, 2000.
Elast Technologies, Inc.
(A Company in the Development Stage )
Index to the Consolidated Financial Statements
(Unaudited)
As of September 30, 2000 and
For Each of the Three and Nine Month Periods Ended September 30, 2000
and 1999 and
For the Period from June 12, 1996 (Inception) to September 30, 2000
Consolidated Financial Statements (Unaudited) of Elast
Technologies, Inc.:
Consolidated Balance Sheet (Unaudited),
September 30, 2000 1
Consolidated Statements of Operations
(Unaudited) for Each of the Three and Nine
Month Periods Ended September 30, 2000 and
1999 and for the Period from June 12, 1996 2
(Inception) to September 30, 2000
Consolidated Statements of Shareholders'
Deficit (Unaudited) for the Period from June
12, 1996 (Inception) to September 30, 2000 3
Consolidated Statements of Cash Flows
(Unaudited) for Each of the Nine Month Periods
Ended September 30, 2000 and 1999 and for the
Period from June 12, 1996 (Inception) to 6
September 30, 2000
Notes to the Consolidated Financial Statements 9
(Unaudited)
Elast Technologies, Inc.
(A Company in the Development Stage )
Consolidated Balance Sheet
(Unaudited)
September 30, 2000
<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and equivalents $ 49,858
Advances to officer 40,677
Deposit 18,000
----------
Total current assets 108,535
Property and equipment, net 24,288
Deposit 2,528
License, net 120
----------
Total assets $ 135,471
==========
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Accounts payable, trade $ 22,096
Accrued payroll taxes 46,007
----------
Total liabilities 68,103
----------
Commitments and contingencies
Shareholders' deficit:
Common stock, $.001 par value; 25,000,000 shares
authorized; 10,129,215 shares issued and
outstanding at September 30, 2000 10,129
Additional paid-in capital 4,136,941
Additional paid-in capital for warrants 205,000
Common stock receivable (90,000)
Deficit accumulated during the development stage (4,194,702)
Total shareholders' deficit 67,368
----------
Total liabilities and shareholders' deficit $ 135,471
==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
Elast Technologies, Inc.
(A Company in the Development Stage )
Consolidated Statements of Operations
(Unaudited)
For Each of the Three and Nine Month Periods Ended September 30, 2000 and 1999
and
For the Period from June 12, 1996 (Inception) to September 30, 2000
<TABLE>
<S> <C> <C> <C> <C> <C>
Period from
For theThree Months For the Nine Months June 12,
Ended 1996
September 30, Ended September 30, (Inception)
to
2000 1999 2000 1999 September
30, 2000
Operating costs:
Officers $ 51,216 $ 69,696 $ 449,190 $ 106,496 $ 997,609
compensation
Research and 55,105 110,792 196,849 181,777 702,914
development
Legal and 475,959 57,340 663,801 202,874 1,302,178
professional
Investor relations 135,504 20,836 193,872 76,896 518,713
Financing consulting - - 219,675 - 279,675
fee
Other operating
costs
and expenses 58,101 80,879 277,397 135,761 411,310
--------- ---------- ---------- --------- ------------
Total operating 775,885 339,543 2,000,784 703,804 4,212,399
costs
Interest expense 10,220 - 22,515 - 22,515
Interest income (431) (3,168) (8,930) (7,143) (40,212)
--------- ---------- ---------- --------- ------------
Net loss $ 785,674 $ 336,375 $2,014,369 $ 696,661 $ 4,194,702
========= =========== ========== ========= ============
Loss per common
share -
$ 0.09 $ 0.04 $ 0.23 $ 0.09 $ 0.70
basic and diluted
========= =========== ========== ========= ============
= == == =
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
Elast Technologies, Inc.
(A Company in the Development Stage )
Consolidated Statements of Shareholders' Deficit
(Unaudited)
For the Period from June 12, 1996 (Inception) to September 30, 2000
<TABLE>
<S> <C> <C> <C> <C> <C>
Elast Technologies,
Inc.
Elast Technologies (Formerly Med Mark,
Corporation Inc.)
(A Delaware (A Nevada Corporation Price
Corporation)
Common Common Common Common per
Stock Share Stock Shares Capital
Balance, June 12, 1996 (inception) - - - - -
Shares issued for the medical device 3,200,000 $ 3,200 - -
license
Shares issued for legal services 21,332 21 - - $ 0.31
Contribution of funds expended
by the major shareholder
on the Company's behalf - - - -
Shares issued in private placement 546,672 547 - - 0.38
Net loss from inception to December - - - -
31, 1996
---------- --------- --------- ---------- -----------
Balance, December 31, 1996 3,768,004 3,768 - -
Contribution of funds expended
by the major shareholder
on the Company's behalf - - - -
Net loss for the year
ended December 31, 1997 - - - -
---------- --------- --------- ---------- -----------
Balance, December 31, 1997 3,768,004 3,768 - -
========== ========= ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Deficit Less:
Detachable Accumulated Common
Additional Stock During the Stock
Paid-in Purchase Development Subscription
Capital Warrants Stage Subtotal Receivable Total
Balance, June 12, 1996 (inception) - - - - - -
Shares issued for the medical device $ (2,400) - - $ 800 - $ 800
license
Shares issued for legal services 6,698 - - 6,719 - 6,719
Contribution of funds expended by the
major
shareholder on the Company's behalf 4,167 - - 4,167 - 4,167
Shares issued in private placement 204,453 - - 205,000 $ (10,000) 195,000
Net loss from inception to December 31, - - $ (38,309) (38,309) - (38,309)
1996
---------- ---------- ----------- ---------- ----------- ----------
-
Balance, December 31, 1996 212,918 - (38,309) 178,377 (10,000) 168,377
Contribution of funds expended
by the major shareholder
on the Company's behalf 1,500 - - 1,500 - 1,500
Net loss for the year ended December - - (62,722) (62,722) - (62,722)
31, 1997
---------- ---------- ----------- ---------- ----------- ----------
-
Balance, December 31, 1997 $ 214,418 - $ (101,031) $ 117,155 $ (10,000) $ 107,155
========== ========== =========== ========== =========== ==========
</TABLE>
Elast Technologies, Inc.
(A Company in the Development Stage )
Consolidated Statements of Shareholders' Deficit
(Unaudited)
For the Period from June 12, 1996 (Inception) to September 30, 2000
<TABLE>
<S> <C> <C> <C> <C> <C>
Elast Technologies,
Inc.
Elast Technologies (Formerly Med Mark,
Corporation Inc.)
(A Delaware Corporation) (A Nevada Corporation Price
Common Common Common Common per
Stock Share Stock Shares Capital
Balance, December 31, 1997 3,768,004 $ 3,768 - -
Shares outstanding prior
to the reorganization - - 1,220,000 $ 1,220 29,506
Shares issued in private placement 394,000 394 - - $ 0.50
Payment of receivable arising from
issuance
of common stock - - - - -
Shares issued on the exercise of 506,640 507 - - 0.38
warrants
Shares issued to consultant in
connection
with the reorganization 1,007,472 1,007 - - 0.38
Shares issued and surrendered in the
acquisition of
Elast Technologies, Inc.
(a Nevada Corporation)
(reverse merger) (5,676,116) (5,676) 5,676,116 5,676
Shares issued for consulting
services,
engineering services, and
employee
compensation - - 270,000 270 1.51
Shares issued to an existing
shareholder to correct
a stock issuance error - - 13,332 13
Net loss for the year ended
December 31, 1998 - - - -
---------- ----------- --------- ---------- -----------
Balance, December 31, 1998 - - 7,179,448 $ 7,179
========== =========== ========= ========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Deficit Less:
Detachabl Accumulated Common
e
Additional Stock During the Stock
Paid-in Purchase Development Subscription
Capital Warrants Stage Subtotal Receivable Total
Balance, December 31, 1997 $ 214,418 - $ (101,031) $ 117,155 $ (10,000) $ 107,155
Shares outstanding prior to the 29,506 - - 30,726 - 30,726
reorganization
Shares issued in private placement 196,606 - - 197,000 - 197,000
Payment of receivable arising
from issuance of common stock - - - 10,000 10,000
Shares issued on the exercise of 189,483 - - 189,990 - 189,990
warrants
Shares issued to consultant in
connection
with the reorganization 376,791 - - 377,798 - 377,798
Shares issued and surrendered in the
acquisition of Elast Technologies,
Inc.
(a Nevada Corporation)
(reverse merger) - - - - - -
Shares issued for consulting
services,
engineering services, and
employee
compensation 407,095 - - 407,365 - 407,365
Shares issued to an existing
shareholder to correct
a stock issuance error (13) - - - - -
Net loss for the year ended
December 31, 1998 - - (1,102,374) (1,102,374) - (1,102,374)
---------- --------- --------- --------- ----------- ----------
Balance, December 31, 1998 $ 1,413,886 - $(1,203,405) $ 217,660 - $ 217,660
========== ========= ============ ========= =========== ==========
</TABLE>
Elast Technologies, Inc.
(A Company in the Development Stage )
Consolidated Statements of Shareholders' Deficit
(Unaudited)
For the Period from June 12, 1996 (Inception) to September 30, 2000
<TABLE>
<S> <C> <C> <C> <C> <C>
Elast Technologies,
Inc.
Elast Technologies (Formerly Med Mark,
Corporation Inc.)
(A Delaware (A Nevada Corporation Price
Corporation)
Common Common Common Common per
Stock Share Stock Shares Capital
Balance, December 31, 1998 - - 7,179,448 $ 7,179
Shares issued in private placement - - 205,900 206 $ 1.50
Shares issued in private placement - - 500,000 500 0.59
Shares issued for consulting - - 26,133 26 1.54
services
Shares issued for research
and development services - - 50,000 50 1.48
Net loss for the year ended
December 31, 1999 - - - -
---------- ---------- --------- ---------- -----------
-
Balance, December 31, 1999 - - 7,961,481 7,961
---------- ---------- --------- ---------- -----------
-
Shares issued in private placement - - 323,334 324 1.10
Shares issued, currently in - - 266,000 266 0.00
litigation
Shares issued as officer - - 144,000 144 2.01
compensation
Shares issued for consulting - - 50,000 50 1.77
services
Shares issued for consulting - - 56,400 56 2.33
services
Shares issued in a settlement of a - - 40,000 40 0.71
dispute
Shares issued in satisfaction of - - 500,000 500 0.95
debt
Shares issued in private placement - - 50,000 50 1.00
Shares issued for consulting - - 300,000 300 0.72
services
Shares issued for consulting - - 100,000 100 0.50
services
Shares issued for consulting - - 88,000 88 1.13
services
Shares issued for consulting - - 250,000 250 0.90
services
Net loss for the nine
months ended September 30, 2000 - - - -
---------- ---------- --------- ---------- -----------
-
Balance, September 30, 2000 - - 10,129,215 $ 10,129
(unaudited)
========== ========= ========== ========= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Deficit Less:
Detachable Accumulated Common
Additional Stock During the Stock
Paid-in Purchase Development Subscription
Capital Warrants Stage Subtotal Receivable Total
Balance, December 31, 1998 $ 1,413,886 - $ $ 217,660 - $ 217,660
(1,203,405)
Shares issued in private placement 308,044 - - 308,250 - 308,250
Shares issued in private placement 294,482 $ 205,000 - 499,982 - 499,982
Shares issued for consulting 40,126 - - 40,152 - 40,152
services
Shares issued for research
and development services 73,950 - - 74,000 - 74,000
Net loss for the year ended
December 31, 1999 - - (976,928) (976,928) - (976,928)
---------- ------- ----------- ------------- ------------ -----------
Balance, December 31, 1999 2,130,488 205,000 (2,180,333) 163,116 - 163,116
========== ========== =========== ============= ============ ===========
==
Shares issued in private placement 356,344 - - 356,668 - 356,668
Shares issued, currently in (266) - - - - -
litigation
Shares issued as officer 289,516 - - 289,660 - 289,660
compensation
Shares issued for consulting 88,400 - - 88,450 - 88,450
services
Shares issued for consulting 131,169 - - 131,225 - 131,225
services
Shares issued in a settlement
of a dispute 28,360 - - 28,400 - 28,400
Shares issued in satisfaction of 472,818 - - 473,318 - 473,318
debt
Shares issued in private placement 49,950 - - 50,000 - 50,000
Shares issued for consulting 216,600 - - 216,900 - 216,900
services
Shares issued for consulting 49,900 - - 50,000 - 50,000
services
Shares issued for consulting 98,912 - - 99,000 - 99,000
services
Shares issued for consulting 224,750 - - 225,000 (90,000) 135,000
services
Net loss for the nine
months ended September 30, 2000 - - (2,014,369) (2,014,369) - (2,014,369)
---------- ------- ----------- ------------- ------------ -----------
Balance, September 30, 2000 $ 4,136,941 $ 205,000 $(4,194,702) $ 157,368 (90,000) $ 67,368
(unaudited)
========== ========== =========== ============= ============ ===========
</TABLE>
Elast Technologies, Inc.
(A Company in the Development Stage )
Consolidated Statements of Cash Flows
(Unaudited)
For Each of the Nine Month Periods Ended September 30, 2000 and 1999
and
For the Period from June 12, 1996 (Inception) to September 30, 2000
<TABLE>
<S> <C> <C> <C>
For the For the June 12, 1996
Nine Months Nine Months (Inception)
Ended Ended to
September September 30, September
30, 2000 1999 30, 2000
Cash flows from operating
activities:
Net loss $(2,014,369) $ (696,661) $(4,194,702)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and 4,263 2,586 7,739
amortization
Issuance of stock for services 1,010,235 102,500 1,969,781
Loss on sale of asset - - 2,608
Issuance of stock in a 28,400 - 28,400
settlement
Increase in assets:
Advances to officer (40,677) - (40,677)
Deposit, noncurrent (2,528) - (2,528)
Increase (decrease) in
liabilities:
Accounts payable, trade 7,482 (8,511) 7,482
Accrued payroll taxes 7,109 - 7,109
Accrued interest 22,486 - 22,486
---------- ---------- -----------
Cash used in operating (977,599) (600,086) (2,192,302)
activities
========== ========== ===========
Cash flows provided by (used in)
investing activities:
Purchase of equipment (17,759) (20,092) 38,956)
Deposit on lab equipment (18,000) - (18,000)
Sale of equipment - - 5,000
---------- ---------- -----------
Cash used in investing (35,759) (20,092) (51,956)
activities
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
Elast Technologies, Inc.
(A Company in the Development Stage )
Consolidated Statements of Cash Flows
(Unaudited)
For Each of the Nine Month Periods Ended September 30, 2000 and 1999
and
For the Period from June 12, 1996 (Inception) to September 30, 2000
<TABLE>
<S> <C> <C> <C>
Period from
For the For the June 12, 1996
Nine Months Nine Months (Inception)
Ended Ended to
September 30, September 30, September 30,
2000 1999 2000
Cash flows provided by
financing activities:
Acquisition of MedMark, - - $ 30,726
Inc.
Proceeds from the exercise of
warrants - - 189,990
Payment of common stock
subscription receivable - - 10,000
Proceed from the issuance
of notes payable $ 450,832 - 450,832
Proceeds from the issuance
of common stock 406,669 $ 620,510 1,606,901
Contribution to additional
paid-in capital - - 5,667
---------- ---------- -----------
Cash provided by financing
activities 857,501 620,510 2,294,116
========== ========== ===========
Net increase(decrease) in (155,857) 332 49,858
cash
Cash at beginning of 205,715 226,818 -
period
========== ========== ===========
Cash at end of period $ 49,858 $ 227,150 $ 49,858
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
Elast Technologies, Inc.
(A Company in the Development Stage )
Consolidated Statements of Cash Flows
(Unaudited)
For Each of the Nine Month Periods Ended September 30, 2000 and 1999
and
For the Period from June 12, 1996 (Inception) to September 30, 2000
Supplemental Disclosure of Cash Flow Information
<TABLE>
<S> <C> <C> <C>
Period from
For the For the June 12, 1996
Nine Months Nine Months (Inception)
Ended Ended to
September September 30, September 30,
30, 2000 1999 2000
Interest paid - - $ 1,375
Income taxes paid - - $ 1,973
Supplemental Schedule of
Non-Cash Investing and Financing
Activities
Assets acquired in non-cash
transactions:
Acquisition of medical device
license - - $ 800
Increase in common stock
subscription receivable - - $ 10,000
Issuance of common stock - - $ (10,800)
Payment of notes payable though
the issuance of common stock:
Notes payable $ 450,832 - $ 450,832
Increase in common stock
subscription receivable $ 22,486 - $ 22,486
Common stock $ (500) - $ (500)
Additional paid-in capital $ (472,818) - $ (472,818)
Issuance of common stock for
legal services to be provided:
Common stock receivable $ 90,000 - $ 90,000
Common stock $ (100) - $ (100)
Additional paid-in capital $ (89,900) - $ (89,900
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
Elast Technologies, Inc.
(A Company in the Development Stage )
Notes to Consolidated Financial Statements
(Unaudited)
For Each of the Nine Month Periods Ended September 30, 2000 and
1999 and
For the Period from June 12, 1996 (Inception) to September 30,
2000
1. Basis of Presentation
In the opinion the management of Elast Technologies, Inc. (a
development stage company) (the "Company"), the accompanying
unaudited condensed financial statements contain all
adjustments, consisting of only normal recurring adjustments
necessary to present fairly its financial position as of
September 30, 2000, the results of its operations for the
three and nine months ended September 30, 2000 and 1999 and
for the period from June 12, 1996 (inception) to September 30,
2000, the statements of shareholders' deficit for the period
from September 12, 1996 (inception) to September 30, 2000, and
the statement of cash flows for the three and nine months
ended September 30, 2000 and 1999 and for the period from June
12, 1996 (inception) to September 30, 2000.
Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations promulgated by the
Securities and Exchange Commission. The interim unaudited
consolidated financial statements should be read in
conjunction with the financial statements and footnotes
included in the Company's Annual Report on Form 10-KSB for the
year ended December 31, 1999.
2. Development Stage Operations
Elast Technologies, Inc. (a development stage company) has a
limited operating history with no revenues and no products or
operable technology ready for the market. The Company is
engaged in the ongoing development of its first product, a
non-invasive medical device to test for allergies with real
time, quantifiable, visually displayed results. Management's
efforts to date have focused primarily on the development of
the medical device and the raising of equity capital. As such,
the Company is subject to the risks and uncertainties
associated with a new business. The success of the Company's
future operations is dependent, in part, upon the Company's
ability to successfully market its yet to be developed
products and obtain additional capital.
Elast Technologies, Inc.
(A Company in the Development Stage )
Notes to Consolidated Financial Statements
(Unaudited)
For Each of the Nine Month Periods Ended September 30, 2000 and
1999 and
For the Period from June 12, 1996 (Inception) to September 30,
2000
3. Loss Per Common Share
In the Company's year ended December 31, 1997, the Company
adopted SFAS No. 128, Earnings per Share. Loss per common
share has been calculated in accordance with this statement.
Basic and diluted loss per common share have been computed by
dividing the loss available to common shareholders by the
weighted-average number of common shares for the period.
The computations of basic and diluted loss per common share
for the periods follow.
<TABLE>
<S> <C> <C>
For the For the
Three Months Three Months
Ended Ended
September 30, September 30,
2000 1999
Net loss available to common
stockholders $ 785,674 $ 336,375
Weighted-average shares,
basic and diluted 9,193,563 7,927,648
Loss per common share, ---------- ----------
basic and diluted $0.09 $0.04
=========== ==========
</TABLE>
<TABLE>
<S> <C> <C> <C>
Period
from
For the For the June 12,
1996
Nine Nine (Inception
Months Months ) to
Ended Ended
September September September
30, 2000 30, 1999 30, 2000
Net loss available to
common
stockholders $ $ 696,661 $
2,014,369 4,194,702
Weighted-average shares,
basic and diluted 8,737,424 7,690,164 6,020,100
Loss per common share, --------- --------- ---------
-
basic and diluted $ 0.23 $ 0.09 $ 0.70
========= ========== ==========
= =
</TABLE>
Elast Technologies, Inc.
(A Company in the Development Stage )
Notes to Consolidated Financial Statements
(Unaudited)
For Each of the Nine Month Periods Ended September 30, 2000 and
1999 and
For the Period from June 12, 1996 (Inception) to September 30,
2000
4. Notes Payable
Uncollateralized
Notes payable at September 30, 2000 follow.
2000
Notes payable to two individuals,
each with an effective interest
rates of 9% per annum, maturing on
June 30, 2002. Interest payments $ 450,832
are due quarterly.
Less: The two individuals converted
their debts and the related accrued
interest ($22,486 at September 30,
2000 into Company stock (see Note (450,832)
5).
-----------
Total notes payable -
===========
5. Stock Transactions
Shares Issued for Officer Compensation
In 2000, the Company issued 144,000 shares as officer
compensation follow.
In 2000, the Company issued 19,000 shares to an officer as
compensation. The shares were valued at fair value, and
the Company recognized compensation expense of $24,035.
A dispute arose between the Company and a former officer
and director of the Company. In December 1999, this former
officer and director was removed from the Board of
Directors and terminated as an officer. The Company engaged
in discussions with this individual seeking a settlement of
this matter provided the terms of such settlement were
reasonable and in the best interests of the Company. In
this connection, the Company eventually entered into an
agreement in which the Company issued 125,000 shares of the
Company's common stock in settlement of the termination
dispute between the Company and a former officer and
director regarding his removal from the Board of Directors
and termination as an officer. The Company recognized
compensation expense of $265,625 in the first quarter of
2000 based on the fair value of the shares at the time of
issuance. Subsequently, the Company believes the former
officer breached the settlement agreement and, in August
2000, filed suit against him.
Elast Technologies, Inc.
(A Company in the Development Stage )
Notes to Consolidated Financial Statements
(Unaudited)
For Each of the Nine Month Periods Ended September 30, 2000 and
1999 and
For the Period from June 12, 1996 (Inception) to September 30,
2000
5. Stock Transactions, Continued
Private Placement Offering
In 2000, the Company, in a private placement offering, sold
323,334 shares of common stock at $1.10.
In 2000, the Company, in a private placement offering, sold
50,000 shares of common stock at $1.00.
Shares Issued for Services
In 2000, the Company issued 844,400 shares for finance
consulting service as follows:
Consultants were issued 50,000 shares for their finance
consulting services. The shares were valued at their fair
value at the time of issuance, $1.77 per share.
Consultants were issued 56,400 shares for their finance
consulting and public relations services. The shares were
valued at their fair value at the time of issuance, $2.33
per share.
Consultants were issued 88,000 shares for their public
relations services. The shares were valued at their fair
value at the time of issuance, $1.13 per share.
Consultants were issued 150,000 shares for their finance
consulting services. The shares were valued at their fair
value at the time of issuance, $.90 per share.
Consultants were issued 100,000 shares for future legal
services. The shares were valued at their fair value at the
time of issuance, $.90 per share.
Consultants were issued 300,000 shares for their finance
consulting services. The shares were valued at their fair
value at the time of issuance, $.72 per share.
Consultants were issued 100,000 shares for their
professional medical services. The shares were valued at
their fair value at the time of issuance, $.50 per share.
Elast Technologies, Inc.
(A Company in the Development Stage )
Notes to Consolidated Financial Statements
(Unaudited)
For Each of the Nine Month Periods Ended September 30, 2000 and
1999 and
For the Period from June 12, 1996 (Inception) to September 30,
2000
5. Stock Transactions, Continued
Shares Issued in Satisfaction of Debt
In September 2000, the Company satisfied two notes payable
held by individuals and the related accrued interest through
the issuance of 500,000 shares. The shares were valued at the
amount of debt and accrued interest owed at the time of
issuance of the shares, which totaled $473,318.
Shares Issued, Currently in Litigation
In December 1999, the Company entered into a Consulting
Agreement ("Agreement") with Crescent Partners, L.P.
("Crescent") whereby Crescent was to act as a finder of
capital and a public relations consultant. Pursuant to the
Agreement, the Company issued, in February 2000, 800,000
shares of the Company's common stock to Crescent. In turn,
Crescent was to find investors to purchase those shares at
prices to be approved by the Company. Subsequently, Crescent
sold a portion of the common stock without the Company's
approval and diverted the proceeds from the Company. The
Company filed suit against Crescent on March 30, 2000 for
breach of duty. The Company also filed an injunction to
recover the 800,000 shares and through that injunction
recovered 665,000 of the shares. The remaining shares are
recorded at par value given that the outcome of the litigation
is uncertain.
Shares Issued as Settlement of a Stock Option Dispute
A dispute between the Company and a former director arose
relating to options to purchase common stock granted by Elast
Delaware, prior to its merger with the Company. The former
director claimed the 100,000 options granted to him by Elast
Delaware were options to purchase shares of the Company. The
Company reviewed this matter and the relevant documentation
and believed the former director's claim was without merit. To
resolve this matter rather than become involved in protracted
litigation, the Company issued 40,000 shares of its common
stock in settlement of this matter. The Company recognized a
settlement expense of $28,400 based on the fair value of the
shares at the time of issuance.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF
OPERATIONS
NOTE REGARDING PROJECTIONS AND FORWARD LOOKING STATEMENTS
This statement includes projections of future results and
"forward-looking statements" as that term is defined in Section
27A of the Securities Act of 1933 as amended (the "Securities
Act"), and Section 21E of the Securities Exchange Act of 1934 as
amended (the "Exchange Act"). All statements that are included in
this Registration Statement, other than statements of historical
fact, are forward-looking statements. Although Management
believes that the expectations reflected in these forward-looking
statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors
that could cause actual results to differ materially from the
expectations are disclosed in this Statement, including, without
limitation, in conjunction with those forward-looking statements
contained in this Statement.
MANAGEMENT'S DISCUSSION AND ANALYSIS AND PLAN OF OPERATIONS
Overview. We did not have revenue from operations in the last
fiscal year and through the third quarter of 2000. Officers'
compensation, in the aggregate, decreased from $69,696 during the
third quarter of 1999 to $51,216 during the third quarter of
2000. Through the first three quarters of fiscal 2000, we issued
144,000 shares of our common stock to officers as compensation.
One officer was issued 19,000 shares of our common stock for
services provided and another was issued 125,000 shares of our
common stock as part of a termination settlement. The shares were
valued at the fair value at the time of issuance, which has a
weighted average fair value of $2.01 per share.
Research and development expenses decreased from $110,792 during
the three month period ended September 30, 1999 to $55,105 during
the three month period ended September 30, 2000. Legal and
professional fees increased from $57,340 during the three month
period ended September 30, 1999 to $475,959 during the three
month period ended September 30, 2000. Investor relations costs
also increased from $20,836 during the three month period ended
September 30, 1999 to $135,504 during the three month period
ended September 30, 2000. Through the first three quarters of
fiscal 2000, we issued 844,400 shares of our common stock for
finance and legal consulting services.
We suffered a net loss from operating activities of $785,674 for
the three month period ended September 30, 2000, as compared to a
net loss of $336,375 for the three month period ended September
30, 1999.
For the three months ended September 30, 2000, our net loss
available to common stockholders was $785,674, as compared to a
net loss of $336,375 for the three months ended September 30,
1999. The loss per common share, basic and diluted, for the three
months ended September 30, 2000 was $0.09 per share, as compared
to a loss per common share of $0.04 per share for the three
months ended September 30, 1999. The loss per common share for
the nine months ended September 30, 2000, was $0.23 per share, as
compared to a loss per common share of $0.09 per share for the
nine months ended September 30, 1999. The loss per common share
for the period from June 12, 1996, our date of inception, to
September 30, 2000, was $0.70 per share.
Our Plan of Operation for Next 12 Months. We are a research and
development enterprise whose primary business is the development
of the Electronic Allergo Sensitivity Test (ELAST Device(TM)).
The ELAST Device(TM) is a patented non-invasive allergy-testing
device that is expected to offer physicians accurate and
immediate diagnoses of allergies and sensitivities without the
pain, expense, or time associated with current methods. The ELAST
Device(TM) is based upon the clinical observation that the normal
electrical flow of the body is interrupted when it is exposed to
a substance to which it is sensitive or allergic. The ELAST
Device(TM) is being designed to use electronic technology to
measure the interruption of the body's electrical flow, thereby
providing an accurate assessment of sensitivity. In the last two
fiscal quarters, significant developments in the ELAST
Device(TM)'s capabilities have resulted from the Company's
research and development efforts. Specifically, the Company
believes its tests demonstrate that the ELAST Device(TM) is
capable of successfully isolating the electrical energy signal
emanating from the human body.
Our executive offices are located at 2505 Rancho Bel Air, Las
Vegas, Nevada 89107. On February 1, 2000, we relocated our
research and development facilities to San Diego's Center for
Applied Competitive Technologies. Our telephone number in Las
Vegas is 702.878.8310.
On April 14, 2000, we announced that we had entered into a
tentative merger agreement with Bioelectronics Corp., a privately
held research and development company based in Maryland which
also utilizes electronic technology to address bio-electric
medical needs. The merger agreement was subject to completion and
execution of final merger documents, and also subject to
shareholder approval. In contemplation that the merger would be
consummated, Andrew Whelan, the Chief Executive Officer of
Bioelectronics Corp., began serving as our chief operating
officer, and began using our research and development facilities
to further development of products derived from Bioelectronics
Corp.'s patented Portic Electronic Bandage. Mr. Whelan recently
informed us that Biolectronics Corp. no longer desires to
consummate the merger and terminated the . We are continuing to
negotiate with Mr. Whelan and Bioelectronics Corp. regarding the
proposed merger, because we believe our proposed merger with
Bioelectronics Corp. would result in shared technology and
marketing expertise. Both companies are involved in similar
electromedical research and both are dedicated to the provision
of convenient, reliable and cost- effective medical care. The
expanding use of Transcutaneous Nerve Stimulation (TENS) for pain
mitigation, the effective use of electricity in non-union bone
fusion, and the growing body of research establishing the body's
own use of electrical circuits have driven the advancement of
electromedicine in the fields in which both we and Bioelectronics
Corp. are concentrating our research and development activities.
Liquidity and Available Cash for Operations. We believe our
current cash resources are sufficient to fund our research and
development activities relating to the ELAST Device(TM) over the
next 3 months, but we may require additional capital as early as
the fourth quarter of fiscal 2000 if our current spending on
research and development continues at its present rate.
Specifically, in the first nine months of fiscal 2000, we spent
cash in the amount of $995,358, which is approximately $110,595
per month. However, at September 30, 2000, our cash and
equivalents totaled $49,858, with liabilities of $68,103. Those
liabilities included accounts payable of $22,096 and accrued
payroll taxes of $46,007.
Manufacturing and Marketing Our Products. We anticipate
subcontracting the manufacture and assembly of the ELAST
Device(TM) and do not expect to purchase a manufacturing facility
or equipment at this time. The principal components of the ELAST
Device(TM) consist of electronic parts that are readily
available, eliminating supply problems. Our operations are not
effected by seasonal factors.
Employees. We are currently using researchers and consultants to
staff our research facilities. We may add additional researchers
and consultants, or may hire our existing researchers and
consultants as employees if the American clinical testing of the
ELAST Device(TM) is successful. We are not able to provide a
reasonable estimate of the number of any additional researchers,
consultants or employees which may be needed at this time.
Summary of Research and Development Activities. A "medical
device" is defined by Section 201(h) of the Food, Drug and
Cosmetic Act, Title 21 United States Code Section 321 as an
instrument, apparatus, or machine which is intended for use in
the diagnosis of disease or other conditions, or in the cure,
mitigation, treatment, or prevention of disease in man and other
animals. Confusion sometimes exists between unregulated consumer
products and medical devices. Products are not considered medical
devices if they have general utility and are not dedicated to
medical applications. Such products are subject to the Consumer
Product Safety Act.
Human therapeutic products are subject to rigorous pre-clinical
and clinical testing and other approval procedures. The FDA and
other similar government regulatory agencies require laboratory
and clinical testing and other costly and time-consuming
procedures before medical products such as the ELAST Device(TM)
can be marketed, including, but not limited to, premarket
notification to the FDA. Various federal, state and foreign
statutes may also govern or affect the manufacturing, safety,
labeling, storage, and marketing of such products, as well as
record-keeping incidental to such marketing. The ELAST Device(TM)
may be subject to (i) the Medical Device Amendments of 1976 to
the Federal Food, Drug and Cosmetic Act, cited above; (ii) the
Medical Device Reporting Rule implemented by the FDA in 1984;
(iii) the standards for medical device manufacturers promulgated
by the FDA; and (iv) other rules and regulations developed,
implemented and enforced by the Center for Devices and
Radiological Health, an FDA sub-agency. However, the FDA
Modernization Act of 1997 ("1997 Act") exempts from premarket
notification devices that do not present a potential unreasonable
risk of illness or injury. The 1997 Act also directs the FDA to
concentrate its postmarket surveillance on higher risk devices.
Moreover, the 1997 Act expanded the FDA's pilot program pursuant
to which the FDA accredits third party experts to conduct the
initial review of all low-to-intermediate risk devices. The
Company believes that the ELAST Device(TM) is such a low-to-
intermediate risk device and, therefore, may be subject to the
exemptions from premarket notification specified in the 1997 Act.
If such is not the case, the ELAST Device(TM) may be subject to
premarket notification and, therefore, subject to significant
delay before being offered for sale, which would have a material
adverse effect on the financial condition of the Company.
Obtaining such approvals and maintaining ongoing compliance
with these requirements can require the expenditure of
significant resources. To date, the Company has not determined
what procedures, if any, will be required in this regard and has
not begun any of these procedures. The Company is currently
investigating the possibility that the ELAST Device(TM) falls in
a category for which FDA approval has already been given. The
Company anticipates that the ELAST Device(TM) may be included in
such a category, but research is currently being conducted by the
Company to determine the appropriate regulatory requirements. In
addition, regulatory testing and approval would require
significant funding. In the event that such funding exceeded the
present financial resources of the Company, the Company would
have to receive additional capital to market the ELAST
Device(TM). An inability to obtain additional financing may have
a material adverse effect on the Company, including the
possibility that the Company would be forced to curtail its
operations significantly or to cease its operations altogether.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Except as specified below, there are no legal actions pending
against the Company nor are any such legal actions contemplated.
Pursuant to a Plan of Merger filed with the Delaware Secretary of
State ("Plan of Merger"), on or about June 30, 1998, Elast
Technologies Corporation, a Delaware corporation previously
defined herein as "Elast Delaware", merged with and into Elast
Merger, Inc., a Nevada corporation, which was a wholly-owned
subsidiary of the Company. Shareholders who formerly held stock
in Elast Delaware received 4 shares of the Company's common stock
for each share of their Elast Delaware stock, with the result
that the former shareholders of Elast Delaware now hold a
controlling interest in the Company, and Elast Delaware is now a
wholly-owed subsidiary of the Company.
There was a dispute regarding the validity of certain stock
options relating to the purchase of certain shares of Elast
Delaware's common stock. On or about May 14, 1999, Dr. Gary
Marrone, the former Secretary of Elast Delaware and a former
Director of Elast Delaware, notified the Company that he believed
that, as a result of the Plan of Merger, certain unexercised
Elast Delaware stock options held by each Director of Elast
Delaware had been converted into options to purchase up to
400,000 shares of the Company's common stock at a significantly
reduced exercise price. We settled this dispute with Dr. Marrone
during the three month period ended June 30, 2000, by issuing
40,000 shares of our common stock to Dr. Marrone. We recognized a
settlement expense of $28,400 based on the fair value of the
shares at the time of issuance.
Certain disputes have arisen between and among the present
management of the Company, on the one hand, and Edward L.
Hamilton, a former officer and director of the Company, on the
other hand. Specifically, on or about December 30, 1999, the
holders of at least two-thirds (2/3) of the Company's issued and
outstanding shares of $.001 par value common stock provided the
Company's Secretary with written consents approving the removal
of Edward L. Hamilton as a member of the Company's Board of
Directors. The Company's Board of Directors also terminated Mr.
Hamilton's employment as an officer of the Company on or about
the same date.
We attempted to settle our disputes with Mr. Hamilton by entering
into a settlement agreement which provided, among other things,
that we would issue 125,000 shares of our common stock to Mr.
Hamilton and his designee. Those shares were valued at fair value
at the time of issuance, $2.13 per share. However, we believe Mr.
Hamilton breached the settlement agreement and, on August 2,
2000, we filed a lawsuit against him in Orange County Superior
Court alleging that he breached the settlement agreement.
On or about December 7, 1999, the Company initiated an offering
of 1,000,000 shares of its $.001 par value common stock on a best
efforts basis pursuant to a Registration Statement on Form SB-2
("Registration Statement"). On or about February 25, 2000, the
Company deposited 800,000 shares in CEDE & Company through DTC.
Although the Company requested that those 800,000 shares in DTC
be returned to certificate form, Crescent Partners Fund, L.P.,
the named holder on that DTC account, initially refused to return
those shares to certificate form. The Company, therefore, applied
for, and received, injunctive relief from the Dallas County,
Texas District Court ("Court"). The Court ordered Crescent
Partners Fund, L.P. to refrain from transferring, encumbering,
hypothecating, assigning, or otherwise alienating those shares.
As a result of that lawsuit, Crescent Partners Fund, L.P.
returned to the Company a certificate evidencing approximately
534,000 shares of the Company's $.001 par value common stock. The
Company is continuing to prosecute this action against Crescent
Partners Fund, L.P. seeking the return of the remaining shares
and additional relief.
ITEM 2. CHANGES IN SECURITIES
Shares Issued as Compensation for Services. In 1998, the Company
issued 270,000 shares of its $.001 par value common stock as
compensation for consulting and engineering services, and
employee compensation, as follows: (i) Consultants were issued
115,000 shares of the Company's $.001 par value common stock as
additional compensation for their services to the Company. Those
shares were valued at what the Company believes was the fair
market value at the time of issuance, which was $1.50 per share.
(ii) Third party engineers were issued 55,000 shares of the
Company's $.001par value common stock as additional compensation
for their services to the Company. Those shares were valued at
what the Company believes was the fair market value at the time
of issuance, which was $1.54 per share. (iii) Dr. Milne, an
officer, director and major shareholder of the Company, was
issued 100,000 shares of the Company's $.001 par value common
stock as additional compensation for his services to the Company;
specifically, his continuing efforts related to the development
of certain technology which will be utilized by the Company in
its business operations. Those shares were valued at what the
Company believes was the fair market value at the time of
issuance, which was $1.50 per share. In 1999, the Company issued
shares of its $.001 par value common stock as compensation for
services provided to the Company, and employee compensation, as
follows: 13,400 shares to Gerald Klein; 4,700 shares to Ron
Almadova; 4,700shares to William Milne; 3,333 shares to Hope
Lane; 25,000 shares to Jim Woodens; and 25,000 shares to John
Martinez.
On March 13, 2000, the Company issued 6,400 shares of its common
stock to Stockgroup.com Media as a fee for Internet investment
consulting. The Company did not receive any proceeds from this
transaction. Those shares were a portion of the shares registered
by the Registration Statement. On March 15, 2000, the Company
received $140,000 for the purchase of 100,000 shares of its
common stock from HAA, Inc. Those shares were a portion of the
shares registered by the Registration Statement and such proceeds
were used for working capital. Xcell Associates received 50,000
restricted shares of the Company's $.001 par value common stock
as a pre-paid consulting fee on March 6, 2000; therefore, these
shares were not part of the shares registered by the Registration
Statement. NC Capital Markets, Inc. ("NC Capital") received
50,000 shares of the Company's $.001 par value common stock on
March 6, 2000, which shares were a portion of the shares
registered by the Registration Statement. NC Capital is an
investment banker, and these shares were a pre-paid investment
banking fee; therefore, the Company did not receive any proceeds
from this transaction. Investment banker Ronald Ardt,
individually, purchased 33,334 shares of the Company's $.001 par
value common stock and, on behalf of his company, Business
Investors Service, purchased an additional 50,000 shares of the
Company's $.001 par value common stock, which shares were a
portion of the shares registered by the Registration Statement.
The funds for both purchases were received by the Company on
March 22, 2000 and were used for working capital.
During the nine month period ended September 30, 2000, we issued
106,400 shares for finance consulting. 50,000 of those shares
were valued at $1.77, and 56,400 of those shares were valued at
$2.33, which was their fair value at the time of the respective
issuances. We also issued 144,000 shares to officers as
compensation. One officer was issued 19,000 shares for services
provided and another officer, E.L. Hamilton, was issued 125,000
shares as part of the settlement which we now claim was breached,
resulting in the lawsuit specified above. Those shares were
valued at $2.01 per share, the fair value at the time of
issuance. During the same nine months the Company issued 300,000
shares of the its common stock valued at $.72 per share for
consulting services rendered to the Company; 100,000 shares
valued at $.50 per share for consulting services; 88,000 shares
valued at $1.13 per share; and 250,000 shares of its common stock
valued at $.90 per share issued for consulting services. During
the Company issued 90,000 shares of its common stock valued at
approximately $.90 per share to one of its officers and directors
through a private placement. 50,000 shares of stock was issued to
Capital Corp. for commissions paid for the private placement made
during first quarter. During the third quarter, the Company
issued 50,000 shares of its common stock, valued at $1.00 per
share to Xcel (Oncor Partners) for cash. The Company also issued
500,000 shares of stock for the conversion of a debt valoued at
$450,000.00.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No such matters were submitted during the most recent quarter.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
3.1 The exhibit consisting of the Company's Articles of
Incorporation is attached to the Company's amended Form 10-SB,
filed on August 2, 1999. This exhibit are incorporated by
reference to that Form.
3.2 The exhibit consisting of the Company's Bylaws is attached
to the Company's amended Form 10-SB, filed on August 2, 1999.
This exhibit is incorporated by reference to that Form.
27 Financial Data Schedule
Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this
registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Elast Technologies, Inc.
By: /s/ Thomas Krucker
Thomas Krucker, President
Date: November 20, 2000
