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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 June 30, 2000 Commission File No. 000-30603
HIV-VAC, INC.
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(Exact name of registrant as specified in its charter)
Nevada 86-0876846
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(State of organization) (I.R.S. Employer Identification No.)
12 Harben Court, Collingwood, Ontario Canada L9Y 4L8
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(Address of principal executive offices)
Registrant's telephone number, including area code (705) 444-6317
Check whether the issuer (1) filed all reports required to be file 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 39,529,458 shares of common stock outstanding and 10,000 shares of
preferred stock outstanding as of June 30, 2000.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HIV-VAC, INC
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30, September 30,
2000 1999
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(unaudited)
<S> <C> <C>
Current Assets
Cash $ 78,421 $ 10,898
Note receivable 5,553 -
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Total Current Assets 83,974 10,898
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Furniture and Equipment 29,918 -
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Other Assets
Patent rights 181,146 185,000
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Total Assets $ 295,038 $ 195,898
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Notes payable $ 140,000 15,000
Accrued liabilities 286,978 150,416
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Total Current Liabilities 426,978 165,416
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Shareholders' Equity
Preferred stock, $0.01 par value;
1,000,000 shares authorized;
10,000 shares issued and outstanding 100 100
Common stock, $0.001 par value;
50,000,000 shares authorized;
35,109,672 shares issued and
outstanding, respectively 39,529 35,110
Additional paid-in capital 1,171,808 326,791
Accumulated deficit 1,343,377 ) ( 191,519
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131,940 170,482
Less: subscription receivable - ( 140,000
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Total Shareholders' Equity 131,940 ) 30,482
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Total Liabilities and Shareholders' Equity $ 295,038 $ 195,898
=============== ===================
</TABLE>
See accompanying notes to unaudited condensed financial statements.
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HIV-VAC, INC.
CONDENSED STATEMENTS OF OPERATIONS
.
<TABLE>
<CAPTION>
Three months Three months Nine months Nine months
ended June 30, ended June 30, ended June ended June
2000 1999 30, 2000 30, 1999
---------------- ----------------- -------------- --------------
<S> <C> <C> <C> <C>
Cost of Sales $ - - $ - $ -
---------------- ----------------- -------------- --------------
Gross Profit - - - -
---------------- ----------------- -------------- --------------
Expenses
Selling, general and administrative 877,165 75,171 1,147,314 112,172
Amortisation & Depreciation 4,659 - 5,974 -
---------------- ----------------- -------------- --------------
Total Expenses 881,824 75,171 1,153,288 112,172
---------------- ----------------- -------------- --------------
Operating Loss ( 881,824 ) ( 75,171 ) ( 1,153,288 ) ( 112,172 )
---------------- ----------------- -------------- --------------
Other Income (Expenses)
Interest income 678 - 1,430 -
---------------- ----------------- -------------- --------------
Total Other Income (Expense) 678 - 1,430 -
Net Loss $ ( 881,146 ) ( 75,171 ) $ ( 1,151,858 ) $( 112,172 )
================ ================= ============== ==============
Basic Net Loss per Share
Net Loss Per Common Share $ ( 0.246 ) $ ( 0.004 ) $( 0.033 ) $( 0.006 )
================ ================= ============== ==============
Weighted Average common shares outstanding 35,681,716 18,079,727 35,307,687 18,079,727
</TABLE>
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HIV-VAC, INC.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months Nine months
ended ended
June 30, June 30,
2000 1999
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<S> <C> <C>
Cash flows from operating activities ;
Net loss $ ( 1,151,858 ) $ ( 112,172 )
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization and Depreciation expense 5,974 -
Issuance of stock for services 675,000
Decrease in intangible assets to net realizable value 50,000 -
Increase in notes receivable ( 5,553 ) -
Increase (Decrease) in accrued liabilites 137,353 ( 73,343 )
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Net cash used by operating
Activities ( 289,084 ) ( 38,829 )
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Cash flow from from investing activities:
Purchase of patent rights - ( 185,000 )
Purchase of furniture and equipment ( 32,038 ) ( )
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Net cash used for investing
Activities ( 32,038 ) ( 185,000 )
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Cash flows from financing activities:
Proceeds from issuance of common stock 123,645 199,999
Proceeds from notes payable 125,000 -
Proceeds from subcription receivable 140,000 -
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Net cash provided by
Financing activities 388,645 199,999
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Net increase/(decrease) in cash 67,523 ( 23,830 )
Cash at beginning of period $ 10,898 $ 23,830
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Cash at end of period $ 78,421 $ -
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Supplemental disclosure of cash flow Information:
Cash paid during the period for:
Interest $ - $ -
================== =================
Income taxes $ - $ -
================== =================
</TABLE>
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<TABLE>
<S> <C> <C>
Non Cash Transactions:
Issuance of common shares for merger with LifePlan 50,000
Issuance of common shares for legal consulting fees 675,000
$ 725,000 -
================== =================
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statement.
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HIV-VAC, INC
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2000.
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of the management of HIV-VAC, Inc. (the Company), the
accompanying unaudited condensed financial statements include all normal
adjustments considered necessary to present fairly the financial position as of
June 30, 2000, and the results of its operations for the three months and nine
months ended June 30, 1999 and 2000, and cash flows for the nine months ended
June 30, 1999 and 2000. Interim results are not necessarily indicative of
results for a full year.
The condensed financial statements and notes are presented as permitted by Form
10-Q, and do not contain certain information included in the Company's audited
financial statements and notes for the fiscal year ended September 30, 1999.
GOING CONCERN
The Company's condensed financial statements are presented on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has experienced
recurring losses since inception and has negative net working capital and cash
flows from operations. For the years ended September 30, 1998, 1999 and the nine
months ended June 30, 2000, the Company experienced a net loss of $432,181,
$191,519 and $1,151,858 respectively.
The Company's ability to continue as a going concern is contingent upon its
ability to secure additional financing, initiating sale of its product, and
attaining profitable operations.
Management is pursuing various sources of equity financing. Although the Company
plans to pursue additional financing, there can be no assurance that the Company
will be able to secure financing or obtain on terms beneficial to the Company.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern
2. FINANCIAL STATEMENTS
The condensed financial statements include the accounts of the Company.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This discussion and analysis should be read in conjunction with our condensed
financial statements and related notes thereto appearing in Item 1 of this
report. In addition to historical information, this report contains
"forward-looking statements" that are within the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995, and that are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those projected. The words "believe", "expect", "intend",
"anticipate", and similar expressions are used to identify forward-looking
statements, but their absence does not mean that such statement is not
forward-looking. Many factors could affect the Company's actual results
including the performance of the Company's HIV vaccine which still needs to
establish safety and efficacy in human trials. The HIV vaccine is the company's
only product and the effectiveness of the vaccine is unknown. The
commercialization of the product is dependent on the safety and effectiveness of
the vaccine and will require regulatory approval before any commercialization
can occur. This process could take up to 5 years. The Company is not likely to
achieve any earnings until commercialization takes place. These risk factors,
among others, could cause results to differ materially from those presently
anticipated by the Company. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date of this
report. The Company undertakes no obligation to publicly release the results of
any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date of this report or to reflect the
occurrence of anticipated events.
OVERVIEW
The Company was formally known as Persona Records Inc, a corporation involved in
the marketing and development of music recordings. Persona Records Inc evolved
through a merger agreement in November 1998 with Nouveaux Corporation whereby
Persona Records Inc became the surviving corporation. Persona Records Inc
changed its name to HIV-VAC, Inc in March 1999.
The assets and liabilities of Persona Records Inc at March 12, 1999 were
returned to Persona's controlling shareholder by approval at a special meeting
of the Company's shareholders held on March 12, 1999.
In April 1999, the Company acquired from Intracell Vaccines Ltd, the exclusive
worldwide rights to a vaccine developed to combat AIDS. Terms of the acquisition
included the issue of 5,750,000 common shares and 10,000 preferred shares to
Intracell Vaccines Ltd, an anti-dilution provision in favor of Intracell
Vaccines Ltd, and the issue of options totaling 30,000,000 to the shareholders
of Intracell Vaccines Ltd. In addition, HIV-VAC, Inc also agreed to provide
funding of $5 Million towards the research and commercialization of the vaccine.
The vaccine was developed by Dr Gordon Skinner through The University of
Birmingham, UK. The vaccine is currently completing laboratory trials in
conjunction with The Russia AIDS Centre. Human testing is expected to start in
Russia within the next 12 months.
The Company is also exploring the feasibility of commencing human trials in an
African country where the AIDS virus has reached epidemic proportions. Trials in
Africa would complement the work currently under way in Russia and will also be
done in conjunction with an American University.
The Company has failed to honor the financial funding commitments of $5 million
made to Intracell Vaccines Limited. Prior funding commitments made by investors
have not yet materialized and the lack
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of funding has had a material effect on the company's ability to proceed with
research. The Company is currently relying on Intracell Vaccines Ltd for
continuing support.
To date, we have generated no operating revenues. We anticipate only modest
revenues from government or other grants or from collaborations with other
entities over the next three to five years. We have incurred losses since
inception as a result of research and development and general and administrative
expenses in support of our operations. As of June 30, 2000, we had a deficit
accumulated during the development stage of $1,343,377.
We anticipate incurring substantial losses over at least the next three years as
we complete our clinical trials, apply for regulatory approvals, continue
development of our technology and expand our operations.
The Company does not have the capital it requires to proceed to human trials and
is exploring numerous alternatives to finance operations. These include the
funding of the Company through private placement agreements, possible joint
venture proposals where the partner provides substantial funding to the project
or the granting of sub-licences on payment of upfront fees as well as the
payment of on-going royalties on sales.
The Company estimates that it requires $5 Million over the next 12 months in
order to commence human trials. Our future capital requirements depend on
several factors, including the progress of our laboratory and I/II clinical
trials, the progress of internal research and development projects, the need for
manufacture facilities, the purchase of additional capital equipment; and the
availability of government research grants.
RESULTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE NINE MONTHS ENDED JUNE 30, 1999
EXPENDITURE
Research and administrative expenses for the nine months ended June 30, 2000
increased by $ 1,041,116 from $112,172 for the nine months ended June 1999 to
$1,153,288 for the nine months ended June 30, 2000. The increase in expenditure
was due to the change in operations of the company from a music production
company to a vaccine development company. Expenses for the nine months ended
June 30, 2000 consisted principally of administrative and research consulting
costs, costs of establishing a laboratory, general administrative costs and a
non-cash compensation expense related to the cost of merger with Lifeplan and
legal consulting costs.
OTHER INCOME
Other income consisted of interest income derived from cash on deposit.. The
Company received no income for the comparable period ended March 31, 1999.
NET LOSS
Net loss for the nine months ended June 30, 2000 was $1,151,858 compared to a
loss of $112,172 for the nine months ended June 30, 1999. The increase in net
loss was due to the change in operations from a producer of music productions to
vaccine development
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RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2000 COMPARED TO THE THREE MONTHS ENDED
JUNE 30, 1999
EXPENDITURE
Research and administrative expenses for the three months ended June 30, 2000
increased by $806,653 from $75,171 for the three months ended June 1999 to
$881,824 for the three months ended March 31, 2000. The increase in expenditure
was due to the change in operations of the company from a music production
company to a vaccine development company. Expenses for the three months ended
March 31, 2000 consisted principally of administrative and research consulting
costs, costs of establishing a laboratory, general administrative costs and a
non-cash compensation expense related to the legal consulting costs.
OTHER INCOME
Other income consisting of interest income derived from cash on deposit. The
Company received no income for the comparable period ended June 30, 1999.
NET LOSS
Net loss for the three months ended June 30, 2000 was $881,146 compared to a
loss of $75,212 for the three months ended June 30, 1999. The increase in net
loss was due to he commencement of vaccine research and development and legal
consulting costs.
LIQUIDITY AND CAPITAL RESOURCES
Cash, cash equivalents and investment securities were $78,421 at June 30, 2000.
During the nine months ended June 30, 2000, the Company has financed operations
through capital provided through a note of $125,000, a loan from Intracell
Vaccines Ltd. and through the private sale of 527,893 common shares for cash of
$123,645. The Company has also issued 3,000,000 common shares in connection with
legal consulting services and issued 100,000 common shares under an agreement of
merger with the shareholder of Lifeplan. In addition, the Company issued 791,893
common shares at par to Intracell Vaccines Limited under terms of the
anti-dilution clause of the assignment of license agreement dated April 6, 1999.
The Company does not have the liquidity or capital required to commence human
trial testing of its vaccine and is exploring numerous alternatives to finance
operations. These include the funding of the Company through private placement
agreements, possible joint venture proposals where the partner provides
substantial funding to the project, or the granting of sub-licences upon payment
of upfront fees as well as the payment of on-going royalties on sales.
Our exposure to foreign exchange rate risk is primarily related to our
conducting research at our facility in the United Kingdom. A sudden decrease in
The UK's currency exchange rate versus the U.S. Dollar could have an adverse
impact on our expenses.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not currently subject to any legal proceedings or claims.
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ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The Company issued 10,000 preferred class A shares to Intracell Vaccines Ltd
under a stock purchase agreement approved on March 31, 1999. Each preferred
share is entitled to 3000 votes per share at any meeting of shareholders where
votes are submitted.
On March 8, 2000, the Company issued 100,000 common shares with par value of
$.001 per share under an agreement of merger with the shareholder of Lifeplan.
The shares were issued at $0.50 each.
On May 26, 2000 the Company issued 454,545 common shares with par value of $.001
per share for cash of $99,990. and also issued 681,817 common shares at par to
Intracell Vaccines Ltd under the terms of the anti-dilution provision of the
Assignment of Licence agreement dated April 6, 1999.
On June 29, 2000 the company issued 73,348 common shares with par value of $.001
per share for cash of $23,655. and also issued 110,076 common shares at par to
Intracell Vaccines Ltd under the terms of the anti-dilution provision of the
Assignment of Licence agreement dated 6 April 1999.
On June 29, 2000, the company issued 3,000,000 million common shares with a par
value of $.001 for legal consulting services. The shares were issued at $0.225
each.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
FINANCIAL STATEMENTS
Unaudited financial statements as of June 30, 2000, and for the three-month
period then ended.
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DIROCCO & DOMBROW, P.A.
3601 WEST COMMERCIAL BLVD. SUITE 39
FT. LAUDERDALE, FL 33309
(954) 731-8181
FAX (954) 739-1054
REPORT ON REVIEW BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
HIV-VAC, Inc.
Ontario, Canada
We have reviewed the accompanying condensed balance sheet of HIV-VAC, Inc. as of
June 30, 2000 and the related condensed statements of operations for the three
months and the nine months ended June 30, 2000 and 1999, and cash flows for the
nine months ended June 30, 2000 and 1999. These condensed financial statements
are the responsibility of the Companys management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the condensed financial statements taken as a
whole. Accordingly, we do not express such an opinion.
The condensed financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial statements as
modified by the instructions to Form 10-QSB by Regulation K. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
Based on our review, with the exception described in the preceding paragraph, we
are not aware of any material modifications that should be made to the
accompanying condensed financial statements for them to be in conformity with
generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the balance sheet as of September 30, 1999 and the related
statements of operations, stockholders equity and cash flows for the year then
ended (not presented herein). In our report dated April 28, 2000, we expressed
an unqualified opinion on those financial statements. In our opinion, the
information set forth in the accompanying balance sheet as of June 30, 2000, is
fairly stated in all material respects in relation to the balance sheet from
which it has been derived.
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The accompanying condensed financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 1 to the
condensed financial statements, the Company's significant operating losses raise
substantial doubt about its ability to continue as a going concern. Management's
plans regarding those matter also are described in Note 1. The condensed
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
August 9, 2000
