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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT
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OF 1934 (Fee Required)
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FOR THE FISCAL YEAR ENDED MAY 31, 2000 COMMISSION FILE NUMBER: 0-26189
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ALLERGY IMMUNO TECHNOLOGIES, INC.
(Small Business Issuer in its Charter)
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DELAWARE 95-3937129
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(State or other jurisdiction of (I.R.S. Employer
------------------------------- Identification No.)
incorporation or organization)
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1531 MONROVIA AVENUE, NEWPORT BEACH, CA 92663
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(Address of principal executive offices) (Zip Code)
Issuer's Telephone Number: (949) 645-3703
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Securities registered under Section 12(b) of the Exchange Act:
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(Title of each class) (Name of each exchange on which registered)
NONE N/A
Securities registered under Section 12(g) of the Exchange Act:
(Title of each class)
COMMON STOCK, PAR VALUE $.001
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES(X) NO( )
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained herein, and will not be contained, to the best of issuer's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
(X)
State issuer's revenues for its most recent fiscal year: $79,976.
State the aggregate market value of the voting stock held by non-affiliates of
the issuer (based upon 3,190,932 shares held by non-affiliates and the closing
price of $.11 per share for Common Stock in the over-the-counter market as of
August 15, 2000): $351,003.
Number of shares of the issuer's common stock, par value $.001, outstanding as
of August 15, 2000: 17,170,390 shares.
DOCUMENTS INCORPORATED BY REFERENCE: The issuer's information statement for its
2000 Annual Meeting and the Annual Report on Form 10-KSB for the fiscal year
ended May 31, 2000, for Biomerica, Inc.
Transitional Small Business Disclosure Format YES ( ) NO (X)
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Allergy Immuno Technologies, Inc.
Form 10-KSB
Table of Contents
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PART I .......................................................................... 1
Item 1. DESCRIPTION OF BUSINESS.............................................. 1
Item 2. DESCRIPTION OF PROPERTY.............................................. 6
Item 3. LEGAL PROCEEDINGS ................................................... 6
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS ................... 6
PART II ......................................................................... 6
Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS ............ 7
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ........................................... 8
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ......................... 9
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE ............................................ 9
PART III ........................................................................ 9
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF
THE REGISTRANT; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT... 9
Item 10. EXECUTIVE COMPENSATION .............................................. 9
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ...... 9
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ...................... 10
Item 13. EXHIBITS LIST AND REPORTS ON FORM 8-K ............................... 11
SIGNATURES ...................................................................... 11
EXHIBIT INDEX ................................................................... 12
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PART I
Item 1. DESCRIPTION OF BUSINESS
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THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 PROVIDES A "SAFE HARBOR"
FOR FORWARD-LOOKING STATEMENTS. CERTAIN INFORMATION CONTAINED HEREIN (AS WELL AS
INFORMATION INCLUDED IN ORAL STATEMENTS OR OTHER WRITTEN STATEMENTS MADE OR TO
BE MADE BY ALLERGY IMMUNO TECHNOLOGIES, INC.) CONTAINS STATEMENTS THAT ARE
FORWARD-LOOKING, SUCH AS STATEMENTS RELATING TO CONSUMMATION OF A TRANSACTION,
ANTICIPATED FUTURE REVENUES OF THE COMPANY AND SUCCESS OF CURRENT PRODUCT
OFFERINGS. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND
UNCERTAINTIES WHICH COULD SIGNIFICANTLY AFFECT ANTICIPATED RESULTS IN THE
FUTURE, AND ACCORDINGLY, SUCH RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED
IN ANY FORWARD-LOOKING STATEMENTS MADE BY OR ON BEHALF OF ALLERGY IMMUNO
TECHNOLOGIES. THESE RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHER THINGS, THE
CONTINUED DEMAND FOR THE COMPANY'S SERVICES, COMPETITIVE AND ECONOMIC FACTORS OF
THE MARKET PLACE, AVAILABILITY OF SUPPLIES, YEAR 2000 ISSUES, ABILITY OF THE
COMPANY TO RAISE NEEDED CAPITAL FOR DEVELOPMENT OF NEW PRODUCTS AND ADDITIONAL
WORKING CAPITAL FOR CURRENT BUSINESS, HEALTH CARE REGULATIONS AND THE STATE OF
THE ECONOMY.
GENERAL
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Allergy Immuno Technologies, Inc. ("AIT" or "The Company") provides
clinical testing services to physicians, laboratories and pharmaceutical firms
in specialized areas of allergy and immunology. Test samples are sent to the
Company's laboratory for evaluation and the results of the tests are reported to
the customer (doctors, etc.). All of the Company's current revenues are derived
from providing these testing services. The Company's prior research resulted in
four patents being issued to the Company covering novel oral and injectable
allergy treatments as an alternative to allergy shots.
The Company's predecessor was originally incorporated in Utah in 1981
under the name Investor's Wealth. In 1985 that company changed its name to
Advanced Allergy Research Center, Inc. In June of 1986 NMS Pharmaceuticals, Inc.
(now Biomerica, Inc.) invested $350,000 and certain assets pursuant to an
Agreement for Purchase of Stock and Transfer of Assets dated May 15, 1986 in
exchange for 6,559,064 shares of common stock. Biomerica, Inc. ("Biomerica") now
owns approximately 74.6% of the Company's common stock. Biomerica is a global
medical company devoted to developing, manufacturing and marketing advanced
medical diagnostic products for the early detection of diseases. Biomerica's
products are sold to physicians, hospitals, laboratories and drugstores. Allergy
Immuno Technologies, Inc. was incorporated in Delaware in 1986. It was qualified
as a foreign corporation in California in January 1987. In January 1987 the
predecessor Utah corporation merged with and into the Delaware corporation
pursuant to an Agreement and Plan of Merger filed on January 20, 1987, with the
Secretary of State of Delaware and with the Secretary of State of Utah. The
Company's common stock is traded on the Pink Sheets under the stock symbol ALIM.
LABORATORY SERVICES
AIT currently operates a licensed clinical reference laboratory in
Newport Beach, California, for allergy and other esoteric diagnostic testing
services. The Company purchases diagnostic products from Biomerica and other
manufacturers of diagnostic products. Biomerica does not make competing
products, but rather makes products that the Company may purchase at a discount
for use in its clinical laboratory. Being a credited clinical laboratory, AIT
provides specialized testing services to large organizations such as Laboratory
Corporation of America and Bayer, as well as other clinics and physicians. The
laboratory accepts samples from the physicians, laboratories, clinics or
pharmaceutical companies, performs the requested test and sends a written report
of the test results to the customer. Most of the tests performed relate to
allergy or immunology. Examples of some of the commonly performed tests are
those for:
CANDIDA RELATED CONDITIONS
An elevation of certain antibodies specific to CANDIDA ALBICANS
(pathogenic fungus) antigens is an indication of either an infection (systemic
or topical) by C. ALBICANS, or the overgrowth of the fungus in the intestine.
The overgrowth in the intestine can cause C. ALBICANS antigens to enter the
circulation causing systemic Candidiasis. The use of antibiotics,
immunosuppressive agents, or birth control pills creates favorable conditions
for Candidiasis. Systemic Candidiasis is a serious condition in immunosuppressed
patients.
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FOOD ALLERGIES
AIT has various panels that can simultaneously detect if a person is
allergic to any one of 90 different foods by using only a few drops of a
patient's Blood. Incompletely digested food antigens may gain access to the
systemic circulation either through the microvilli by endocytosis or through the
intercellular spaces of the gut mucosa in conditions such as the inflammatory
bowel disease, celiac disease, gastroenteritis or the immature mucosa of the
infant. Certain antibodies may be produced against these food antigens and may
form complexes with newly absorbed antigens and can lead to tissue damage when
deposited in various organs.
BASOPHIL HISTAMINE RELEASE (BHR)
The BHR test can be used to assess the allergic response using human
blood in a test tube rather than on humans directly. Since most allergic
reactions end up with histamine release, the measurement of histamine is
essential in evaluating the effects of allergy.
OTHER ALLERGIES
AIT also performs other tests for various allergies such as inhalants,
molds, weeds, insects, and animals, among others.
TECHNOLOGY AND PATENTS
AIT has succeeded in obtaining four patents pertaining to discoveries
for allergy treatment. These are:
(1) Immunotherapy agents for treatment of IgE mediated allergies:
U.S. Patent #5,116,612 (issued May 6, 1992).
(2) Liposome containing immunotherapy agents for treatment of IgE
mediated allergies: U.S. Patent #5,049,390 (issued September
17, 1991).
(3) Immunotherapy agents for treatment of IgE mediated allergies:
U.S. Patent #4,946,945 (issued August 7, 1990).
(4) Allergen-thymic hormone conjugates for treatment of IgE
mediated allergies: U.S. Patent #5,275,814 (issued January 4,
1994).
There can be no assurance or guarantee that the Company can adequately
protect its patents or proprietary technology.
AIT would like to utilize its proprietary technologies to create unique
drugs for the treatment of allergies, especially those that can be taken orally
avoiding the present injection therapy which is tedious, expensive and
unpredictable. With financial assistance from Biomerica, AIT began preclinical
animal studies utilizing the technology covered in some of these patents. In
connection with these efforts, the Company has also received certain technical
expertise and assistance from Biomerica.
The Company would not need additional patents or licensed technology to
complete the research and development portion of the project. However, it would
need to raise additional capital in order to support the research and
development and it would require additional equipment and manpower for
manufacturing purposes. The Company is small and does not currently have the
financial and other resources to mass produce the products. Therefore, the
Company would need to find a strategic partner to finance the cost of these
efforts.
The Company has would like to use its technology to develop therapeutic
treatments based on Liposome-Encapsulated Allergens (LEA). Liposomes are small
spherical particles of lipid (fat) substance suspended in an aqueous medium
within a tissue. A small allergen can be encapsulated into a liposome via a
chemical reaction and introduced into the host tissue orally or intravenously.
Once the allergen bound liposome is introduced it starts an immune reaction in
the host body to produce antibodies to the introduced allergen. This is the same
principal as used in vaccination to prevent diseases. The host's antibodies (IgG
class) work as a defense mechanism against any exposure to the allergen after
the host has been desensitized using allergen bound liposomes. LEA therapy could
work much better than the currently used desensitization therapy. The results of
pre-clinical studies conducted on laboratory rodents administered with liposome
encapsulated dust mite by mouth and by injection, showed a dramatic increase in
the desensitization process. If successful, this new type of therapy may improve
allergy treatment for reasons indicated below:
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FEATURES BENEFIT
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Oral delivery possible Increased patient compliance, no
Injections necessary
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Complete treatment blockers Treats the disease and not the
symptoms as in histamine blockers
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Reduced patient visits Convenient to patient and less
costly.
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AIT will need to find a partner to continue this effort to develop and
test this technology.
As mentioned above, the Company has developed a Basophil Histamine
Release (BHR) test that is a surrogate to humans wherein sensitivities to
allergens may be determined in a test tube. Food sensitivity studies for large
pharmaceutical and nutritional firms such as Mead Johnson and Carnation were
conducted utilizing the BHR test. AIT would like to use the same BHR test in the
development of the new encapsulated liposome allergen therapy.
RESEARCH AND DEVELOPMENT
During fiscal 2000 the Company spent approximately $53,000 on research and
development as compared to $300 on fiscal 1999 The research that was conducted
during fiscal 2000 was not related to the liposome project. The Company does not
expect to engage in further research and development until the Company obtains
additional financing or until the Company enters into a strategic alliance with
a partner that would conduct the research needed to bring the products to
market. Biomerica has continually advanced the Company operating funds over
recent years. Biomerica determined that it could not continue to advance the
Company such large funds to cover the costs of continued research. In fiscal
1998 Biomerica invested funds to cover the cost of hiring a president who tried
to raise additional capital in order to continue the research. An alliance that
would have been beneficial to the Company was negotiated for some time, however,
it did not come to fruition. However, the Company did received a one-time
payment of $100,000for consulting services and an option to purchase 10,000
Class A Units of Hollister-Stier LLC at a purchase price of $10 per unit.
The introduction of a new product goes through phases: the formulation of
an idea; proving that idea through scientific challenge; making it into a
feasible reality; and finally distributing the product for others to benefit
from it. Thus far the Company has worked to prove the feasibility and
effectiveness of its technology of encapsulating specific allergens with
liposomes to act as antagonist to an allergic reaction to that allergen in an
individual. The technology has been shown to work in IN VITRO testing in the
Company's laboratories. The technology has also been successfully tested in
animal models. The above constitutes almost 40% of the work needed to be done in
the introduction of a product. The remaining 60% is the regulatory approval,
mass production and marketing of the technology in order to create a viable
product.
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MANUFACTURING
AIT does not currently perform any manufacturing. The Company would
need to develop procedures for manufacturing the encapsulated liposome allergens
and related technologies. At this time no work is being done on this due to
limited resources. AIT would like to collaborate with national and international
pharmaceutical companies to produce and market its products.
THE MARKET
Allergies affect 41 million people in the U.S. (20% of the population).
It is also estimated that in the U.S. alone there are 3.5 million lost workdays
every year due to allergic episodes. The incidence of allergies is at least the
same in other industrialized countries with some estimates reaching 35-50% of
the population. The total U.S. allergy market, at present, exceeds $5 billion
dollars annually.
The immunotherapeutic process typically involves weekly injections of
allergenic extract. Each dose gradually increases until the allergic response
diminishes significantly. Treatment is usually recommended to last for three to
five years.
Immunotherapy can be very effective, but the risk of inducing potentially
life-threatening response is high. For this reason, the National Institutes of
Health (NIH) recommends immunotherapy by used only when other therapies are not
successful.
Despite potential complications, immunotherapy continues to be commonly
used in the prevention of allergies. Of the more than 40 million people in the
United States who suffer from allergies, approximately 1.5 million to 2.5
million are administered immunotherapy shots by their allergists as often as
twice weekly. The allergies for some patients are nearly completely eliminated
by this therapy. However, for others the therapy is not effective enough and
must be augmented with other allergy therapeutics.
SEASONALITY OF BUSINESS
The business of the Company has not been subject to significant seasonal
fluctuations.
EMPLOYEES
The Company currently employs two employees who work in the laboratory
performing clinical testing. It contracts with Biomerica for a variety of
services.
FOREIGN BUSINESS
All of the Company's fixed assets are located within Southern California.
All of the sales are within the United States.
BACKLOG
AIT has no backlog.
COMPETITION
The independent clinical laboratory industry in the U.S. and in California
is highly competitive and fragmented. According to one industry source, there
are approximately 4,500 independent clinical laboratories in the U.S. These
independent clinical laboratories fall into two separate categories: (1)
smaller, local laboratories that generally offer fewer tests and services and
(2) larger laboratories. The Company is a small laboratory.
In the U.S. there are currently approximately thirteen competitors in the
immunotherapy market, with four holding substantial market shares. These four
are led by Bayer Allergy Products, which gained strength in the market after it
merged with Miles Laboratories. Other top competitors include Center
Laboratories, ALK and Greer Laboratories. All of these companies have
substantially greater resources and business experience than the Company. The
technology that the Company would like to develop is an unproven technology.
Currently many companies make products for the treatment of allergies. The
treatments usually involve the patient undergoing a lengthy series of injections
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with allergens in order to build up a resistance to same. There are other
products in the allergy treatment market which use oral pills and inhalants such
as Claritin brand inhalants. However, these technologies afford temporary
relief, while LEA products would be designed to give patients longer term relief
from allergic reactions.
In Europe there are more companies which deal in the immunotherapy market,
but they primarily sell within the borders of their own countries.
GOVERNMENT REGULATION AND LICENSES
GENERAL
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Numerous aspects of AIT's operations, including its testing processes,
its business practices and in some instances, the amount and methods by which it
is paid, are subject to governmental regulation at the Federal, state and/or
local levels.
In order to bring oral or inhalant type products to market, the Company
would have to obtain or license other technology as well as file for other FDA
clearances. Such filing would require a substantial amount of resources.
FEDERAL AND STATE CLINICAL LABORATORY LICENSING
All clinical laboratories operating in the United States, with limited
exceptions, are required to obtain Federal certification pursuant to the
Clinical Laboratory Improvement Act (CLIA) and its implementing regulations. The
law and its implementing regulations impose, as conditions for such
certification, requirements relating to test processes, personnel
qualifications, facilities and equipment, record keeping, quality control,
quality assurance and participation in proficiency testing. The same regulatory
requirements also apply as conditions for participation in the Medicare and
Medicaid programs. CLIA regulations vary depending on the complexity of the
methodologies performed by the laboratory. Compliance is verified by periodic
on-site inspections. Sanctions for failure to meet CLIA/Medicare certification
requirements include suspension or revocation of certification, criminal
penalties, injunctive actions to close the laboratory, civil penalties or
imposition of specific plans of correction to remedy alleged deficiencies.
Licensing requirements similar to those imposed pursuant to CLIA also apply at
the state level, with similar sanctions for noncompliance. Effective January 1,
1996, California Senate Bill 113 ("SB 113") became law and amended the
California laws governing clinical laboratories to make them at least as
stringent as CLIA was as of January 1, 1994.
The Company currently holds an annually renewed clinical laboratory
license with the Department of Health Services, State of California. The current
license expires December 31, 2000. The Company also holds a clinical laboratory
license from the state of Florida. This current license expires November 11,
2000 and is renewed every two years. The Company holds a CLIA Certificate of
Compliance, which is a requirement of the Federal government for clinical
laboratories. This certificate expires in February 2001 and is renewed every two
years. Although the Company has never failed to obtain renewals, its business
operations would be materially and adversely affected if it were unable to do
so.
FEDERAL AND STATE BILLING AND FRAUD AND ABUSE LAWS
The Federal Medicare laws impose specific billing requirements on
clinical laboratories. Generally, laboratories are required to bill the Medicare
program directly rather than billing physicians or beneficiaries.
SPECIMEN TRANSPORTATION
Regulations of the Department of Transportation, the Public Health
Service, and the Postal Service apply to the transportation of clinical
laboratory specimens.
REGULATIONS FOR PRODUCTS FOR HUMAN THERAPEUTIC USE
Regulation by governmental authorities in the United States and other
countries is a significant factor for the Company's ongoing research and
development activities. In order to test clinically, to produce and to market
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products for human therapeutic use, mandatory procedures and safety standards
established by the FDA and comparable agencies in foreign countries must be
followed. The standard process required by the FDA before a pharmaceutical agent
may be marketed in the United States includes (i) preclinical tests, (ii)
submission to the FDA of an application for an Investigational New Drug ("IND"),
which must become effective before human clinical trials may commence, (iii)
adequate and well-controlled human clinical trials to establish the safety and
efficacy of the drug in its intended application, (iv) submission to and
acceptance by, the FDA of an NDA with respect to drugs or a Product License
application ("PLA") with respect to biologics, and (v) FDA approval of the NDA
or PLA prior to any commercial sale or shipment of the drug or biologic.
In addition to obtaining FDA approval for each product, each domestic drug
manufacturing establishment must be registered or licensed by the FDA. Domestic
manufacturing establishments are subject to inspections by the FDA and by other
federal, state and local agencies and must comply with Good Manufacturing
Practices as appropriate for production.
Clinical trials are typically conducted in three sequential phases, but the
phases may overlap. In Phase I, the initial introduction of the drug to humans,
the drug is tested for dosage and tolerance. Phase II involves detailed
evaluation of safety and efficacy. Phase III trials consist of larger scale
evaluation of safety and efficacy and may require larger patient numbers,
depending on the clinical indication for which marketing approval is sought. The
process of completing clinical testing and obtaining FDA approval for a new
product is likely to take a number of years and require the expenditure of
substantial resources. The FDA may also require post marketing testing and
surveillance programs to monitor the drug's efficacy and possible side effects.
Results of these post marketing programs may prevent, or limit, the further
marketing of the products.
Sales of pharmaceutical products outside of the United States are subject
to regulatory requirements that vary widely from country to country. In the
European Union ("EU"), the general trend has been toward coordination of common
standards for clinical testing of new drugs. Generally, the level of regulation
in the EU and other foreign jurisdictions is somewhat less comprehensive and
burdensome than regulation in the United States, but there are differences and,
in a few instances, foreign regulations may be more burdensome than FDA
requirements. The time required to obtain regulatory approval from the
comparable regulatory agencies in each foreign country may be longer or shorter
than that required for FDA approval.
In addition, the Company is and may be subject to regulation under state
and federal law regarding occupational safety, laboratory practices, the use and
handling of radioisotopes, environmental protection and hazardous substance
control and to other present and possible future local, state, federal and
foreign regulation.
Item 2. DESCRIPTION OF PROPERTY
-----------------------
The Company currently leases 1,600 square feet of office and laboratory
space in Newport Beach, California, on a month-to-month basis, at a rate of
$1,400 per month, plus taxes and insurance. The property is in good condition
and sufficient to meet the needs of the Company at this time. The Company does
not plan to obtain additional space in the foreseeable future. However, if the
Company obtains a research and marketing partner or raises additional funds the
need would arise for acquiring additional space. The facilities are leased from
Mrs. Ilse Sultanian and JSJ Management (one of the partners of which, Janet
Moore, is an officer, director and stockholder of the Company).
At the same facilities ancillary support services such as accounting and
office support are provided by Biomerica. AIT pays Biomerica a monthly fee of
approximately $1,450 for these services.
Item 3. LEGAL PROCEEDINGS
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Inapplicable.
Item 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
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Inapplicable.
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Item 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
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The Company's Common Stock is traded on the NASDAQ's OTC Bulletin Board
under the symbol "ALIM". The high and low closing bid information for the
Company's Common Stock during the years ended May 31, 1998 and 1999, is based on
information received from Bloomberg, L.P., the Nasdaq Trading and Market
Services and a Company market maker.
High Low
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Year Ended May 31, 1999:
Quarter ended May 31, 1999........................... .04 .03125
Quarter ended February 28, 1999...................... .13 .03125
Quarter ended November 30, 1998...................... * *
Quarter ended August 31, 1998........................ * *
Year Ended May 31, 2000:
Quarter ended May 31, 2000........................... .14 .125
Quarter ended February 29, 2000...................... .15 .10
Quarter ended November 30, 1999...................... .15 .05
Quarter ended August 31, 1999........................ .25 .02
* Indicates a period in which no trades took place and for which no bid prices
were posted.
The quotations reflect inter-dealer price, without mark-up, mark-down
or commission and may not represent actual transactions. The stock is thinly
traded and transactions in the stock are sporadic and infrequent.
As of August 16, 2000, there were 725 shareholders of record of the
Company's common stock and no holders of the Company's preferred stock.
The Company has not declared or paid any cash dividends on its common
stock and does not intend to declare or pay any cash dividends in the
foreseeable future. The payment of dividends, if any, is within the discretion
of the Board of Directors and will depend on the Company's earnings, if any, its
capital requirements, and financial condition and other such factors as the
Board of Directors may consider.
There has been no issuance of stock since May 31, 1999.
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Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
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OF OPERATIONS
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THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL
STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.
THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING, BUT NOT LIMITED TO, COMPETITION, WHICH HAS AND WILL CONTINUE TO PUT
PRICE PRESSURE ON THE COMPANY'S THIRD PARTY COLLECTION RECEIVABLES, AND OVERALL
MACRO-ECONOMIC CONDITIONS.
GENERAL
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The Company currently generates revenue by providing clinical testing
services to doctors, laboratories and pharmaceutical firms in specialized areas
of allergy and immunology determinations. Test samples are sent to the Company's
laboratory for evaluation and the results of the tests are reported to the
customer (doctors or other).
The Company has obtained four patents on technology relating to the
treatment of allergies. Additional financing will be required for the Company to
complete the development of its technology. The Company is not expected to
engage in further research or development unless it obtains such additional
financing. In connection with these efforts, the Company may enter into a
strategic alliance or joint venture to finance the cost of such further research
and development.
The Company's laboratory facilities are located next to its office in
Newport Beach, California. At the same facilities ancillary support services
such as accounting and office support are provided by Biomerica. AIT pays
Biomerica a monthly fee of approximately $1,450 for these services.
RESULTS OF OPERATIONS
TWELVE MONTHS ENDED MAY 31, 2000, COMPARED TO TWELVE MONTHS ENDED MAY 31, 1999
Revenues for the year ended May 31, 2000 were $79,976 as compared to
$70,351 in the prior year period. This represents an increase of $9,625 or 13.7%
from the previous period. Cost of sales as a percentage of sales decreased from
127% to 115.1% due to lower material costs.
General and administrative expenses increased from $64,679 to
$111,100 during the twelve-month period ended May 31, 2000, as compared to the
twelve month period ended May 31, 1999. The increase was $46,421 or 72%. The
increase was due to higher legal and accounting costs related to new SEC filing
requirements. For the year ended May 31, 2000 research and development expenses
were $52,600 compared to $300 for the same period in fiscal 1999. The increase
was due to the development of a new project.
The Company received during the fiscal year a one-time payment of $100,000
for consulting services and an option to purchase 10,000 Class A Units of
Hollister-Stier LLC at a purchase price of $10 per unit. The $100,000 was
recorded as income in fiscal 1999.
Other income decreased for the year ended May 31, 2000 to $1,098 from
$102,323. Income in fiscal 1999 was higher due to the $100,000 consulting fee
described above.
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LIQUIDITY AND CAPITAL RESOURCES
As of May 31, 2000, the Company had cash of $2,603 compared to $2,202
for the previous year. Its current working capital deficit was $265,893 as
compared to a deficit of $90,240 for the previous year.
The Company has been experiencing losses and has had to rely on
borrowings from Biomerica, Inc., which owns approximately 74.6% of the
outstanding stock of AIT. Management believes that losses will continue during
fiscal 2001. As of May 31, 2000 the Company owed Biomerica $282,013. Biomerica
is not charging the Company interest on the advances and has not determined any
date of repayment. In the past Biomerica has taken the Company's stock as
repayment for cash advanced.
Going Concern
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. During the year ended May 31, 2000
("Fiscal 2000"), the Company experienced a net loss of $177,786 and had negative
cash flows from operations of $70,961. In addition, the Company had substantial
working capital and shareholders' deficits at May 31, 2000. These factors, among
others, raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
There can be no assurances that the Company will be able to
successfully implement its plans, including generating profitable operations,
generating positive cash flows from operations and obtaining additional debt and
equity capital to meet present and future working capital demands.
Item 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
Exhibit 99.1, "Allergy Immuno Technologies, INc." is incorporated
herein by this reference.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
Inapplicable.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS OF THE
-------------------------------------------------------------------
REGISTRANT; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE
---------------------------------------------------------
This information is incorporated by reference to the Company's information
statement For its 2000 Annual Meeting of Stockholders which will be filed not
later than 120 days After the end of the Company's fiscal year ended May 31,
2000.
Item 10. EXECUTIVE COMPENSATION
----------------------
This information is incorporated by reference to the Company's information
statement for its 2000 Annual Meeting of Stockholders which will be filed not
later than 120 days after the end of the Company's fiscal year ended May 31,
2000.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
---------------------------------------------------------------
This information is incorporated by reference to the Company's information
statement for its 2000 Annual Meeting of Stockholders which will be filed not
later than 120 days after the end of the Company's fiscal year ended May 31,
2000.
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<PAGE>
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
This information is incorporated by reference to the Company's information
Statement for its 2000 Annual Meeting of Stockholders which will be filed not
later than 120 days after the end of the Company's fiscal year ended May 31,
2000.
Item 13. EXHIBITS LIST AND REPORTS ON FORM 8-K
-------------------------------------
EXHIBITS
--------
EXHIBIT NO. DESCRIPTION
----------- ------------
2.1 Agreement and Plan of Merger by and between Advanced Allergy
Research Center Inc., and Allergy Immuno Technologies, Inc., as
filed with the Secretaries of State of Delaware and Utah on January
20, 1987 (incorporated by reference to Exhibit 2.1 filed with
Amendment No. 1 to the Registration Statement on Form 10-SB filed
June 24, 1999).
3.1 Certificate of Incorporation (incorporated by reference to Exhibit
3.1 filed with Amendment No. 1 to the Registration Statement on
Form 10-SB filed June 24, 1999).
3.2 Bylaws of the Registrant (incorporated by reference to Exhibit 3.2
filed with Amendment No. 1 to the Registration Statement on Form
10-SB filed June 24, 1999).
16.1 Letter on Change of Certifying Accountant (incorporated by
reference to Exhibit No. 1 to the Registration Statement on Form
10-SB filed June 24, 1999).
27.1 Financial Data Schedule
99.1 Allergy Immuno Technologies, Inc. Consolidated Financial Statements
for the Year Ended May 31, 2000 and 1999 and Independent Auditors'
Report.
Reports on Form 8-K
-------------------
None.
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<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: September 13, 2000
ALLERGY IMMUNO TECHNOLOGIES, INC.
Registrant
By /s/ Zackary S. Irani
--------------------------------------
Zackary S. Irani, Chief Executive
Officer and Chairman
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature and Capacity
----------------------
/s/ Zackary S. Irani Dated September 13, 2000
-------------------------- ------------------
Zackary S. Irani
Chief Executive Officer,
Chairman of the Board and
Director
/s/ Janet Moore Dated September 13, 2000
-------------------------- ------------------
Janet Moore
Chief Financial Officer,
Chief Accounting Officer and
Director
/s/ Robert A. Orlando Dated September 13, 2000
-------------------------- ------------------
Robert A. Orlando, M.D., Ph.D.
Director
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<PAGE>
EXHIBIT INDEX
-------------
SEQUENTIALLY
EXHIBIT NUMBER DESCRIPTIONS NUMBERED
--------------- ------------ --------
2.1 Agreement and Plan of Merger by and between
Advanced Allergy Research Center Inc., and
Allergy Immuno Technologies, Inc., as filed
with the Secretaries of State of Delaware and
Utah on January 20, 1987*
3.1 Certificate of Incorporation*
3.2 Bylaws of the Registrant*
16.1 Letter on Change of Certifying Accountant*
27.1 Financial Data Schedule**
99.1 Allergy Immuno Technologies, Inc. Financial**
Statements for the Year Ended May 31, 1999
And 1998 and Independent Auditors' Report
___________________
* Previously filed and incorporated by reference to the Company's Form 10-SB
Registration Statement filed May 25, 1999 with the Securities and Exchange
Commission.
** Being filed herewith.
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