<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-QSB/A-1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended: March 31, 2000
Commission file number: 000-27847
JACOBSON RESONANCE ENTERPRISES, INC.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 65-0684400
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9960 Central Park Boulevard, #302
BOCA RATON, FLORIDA 33428
----------------------------------------
(Address of principal executive offices)
(561) 477-8020
---------------------------
(Issuer's telephone number)
Indicate by check mark whether registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of May 5, 2000: 39,650,660 shares of common stock, no par value per
share.
<PAGE> 2
JACOBSON RESONANCE ENTERPRISES, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Consolidated Balance Sheet (Unaudited)
March 31, 2000 and 1999 ............................................................................ 3
Consolidated Statements of Operations (Unaudited)
For the Three Months Ended March 31, 2000 and 1999.................................................. 4
Consolidated Statement of Changes in Shareholders' Equity (Unaudited)
For the Three Months Ended March 31, 2000........................................................... 5
Consolidated Statements of Cash Flows (Unaudited)
For the Three Months Ended March 31, 2000 and 1999.................................................. 6
Notes to Consolidated Financial Statements...................................................................... 7
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations.................. 10
PART II - OTHER INFORMATION
Item 2 -Changes in Securities................................................................................... 13
Item 5 -Other Information....................................................................................... 13
Signatures...................................................................................................... 14
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
2
<PAGE> 4
JACOBSON RESONANCE ENTERPRISES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
(Unaudited)
----------- ------------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 1,336,702 $ 579,518
Prepaid Expenses 24,213 31,317
----------- -----------
Total Current Assets 1,360,915 610,835
Property and Equipment, at Cost, (Net of Accumulated
Depreciation of $30,521 and $21,448, respectively) 155,288 116,685
Deposits 1,395 1,395
Deferred Income Tax Asset, Net of Valuation Allowance of $ 1,570,000 and
$1,332,000, respectively) -- --
----------- -----------
Total Other Assets 1,395 1,395
----------- -----------
Total Assets $ 1,517,598 $ 728,915
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 161,013 $ 148,154
Other Liabilities 34,775 --
----------- -----------
Total Current Liabilities 195,788 148,154
----------- -----------
STOCKHOLDERS' EQUITY
Preferred Stock $.001 Par Value, 5,000,000 Shares Authorized;
Issued and Outstanding, 45,000 Shares 45 45
Common Stock, $.001 Par Value, 100,000,000 Shares Authorized;
Issued and Outstanding, 38,162,077 and 37,169,127 Shares, respectively 38,162 37,169
Common Stock to be Issued 806,725 --
Additional Paid in Capital 6,440,759 5,806,107
Deficit Accumulated During the Development Stage (5,919,207) (5,217,886)
Treasury Stock Common (600,000 Shares at Cost) (600) (600)
Subscriptions Receivable (44,074) (44,074)
----------- -----------
Total Stockholders' Equity 1,321,810 580,761
----------- -----------
Total Liabilities and Stockholders' Equity $ 1,517,598 $ 728,915
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
JACOBSON RESONANCE ENTERPRISES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Period
March 31, from Inception
------------------------------- to March 31,
2000 1999 2000
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES $ 2,575 $ 6,676 $ 149,728
------------ ------------ ------------
COSTS AND EXPENSES:
General and Administrative
612,206 183,435 3,246,612
Research and Development
99,034 17,005 860,520
Financing costs
-- -- 2,094,508
------------ ------------ ------------
Total Operating Expenses 711,240 200,440 6,201,640
------------ ------------ ------------
Other Income (Expense)
Interest Income 7,344 5,901 54,124
Gain on Sales of Resonance Machines -- -- 78,581
------------ ------------ ------------
NET LOSS $ (701,321) $ (187,863) $ (5,919,207)
============ ============ ============
PER SHARE INFORMATION:
Net Loss Per Share:
Basic $ (0.02) $ (0.01)
============ ============
Diluted $ (0.02) $ (0.01)
============ ============
Shares Used to Compute Net Loss Per Share
Basic 37,903,137 32,439,289
============ ============
Diluted 37,903,137 32,439,289
============ ============
</TABLE>
4
<PAGE> 6
JACOBSON RESONANCE ENTERPRISES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from Inception to March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
Common Stock to be Issued Preferred Stock Additional During Stock-
----------------- --------------- --------------- Paid-In Development Subscription Treasury holder
Issued Amount Issued Amount Issued Amount Capital Stage Receivable Stock Equity
------ ------ ------ ------ ------ ------ ------- ----------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of
Founders Stock
at Par $.001 57,220,000 57,220 -- -- $ -- $-- $ (57,220) $ -- $ -- $ -- $ --
Recapitalization
June 4, 1996 4,905,000 4,905 -- -- -- -- (4,905) -- -- -- --
Issuance of Common
Stock at $.10
Per Share 10,000,000 10,000 -- -- -- -- 990,000 -- (526,550) -- 473,450
Issuance of Common
Stock at $1.75
Per Share 18,857 19 -- -- -- -- 32,981 -- -- -- 33,000
Purchase of
Treasury Stock
at Cost -- -- -- -- -- -- -- -- -- (600) (600)
Conversion of Common
Stock to
Preferred Stock (45,000,000) (45,000) -- -- 45,000 45 44,955 -- -- -- --
Net Loss -- -- -- -- -- -- -- (292,325) -- -- (292,325)
---------- ------ -- -- ------- --- ---------- ---------- --------- ----- ---------
Balance, December
31, 1996 27,143,857 27,144 -- -- 45,000 45 1,005,811 (292,325) (526,550) (600) 213,525
Issuance of Common
Stock for Services
Rendered at Prices
Between $.15 and
$1.75 Per Share 40,114 40 -- -- -- -- 12,744 -- -- -- 12,784
Issuances of Common
Stock from Private
Placement at Prices
Prices Between $.15
and $.25 Per Share 760,000 760 -- -- -- -- 139,240 -- -- -- 140,000
Issuances of Common
Stock out of Proceeds
of Subscription
Receivable -- -- -- -- -- -- -- -- 5,000 -- 5,000
Net Loss -- -- -- -- -- -- -- (315,319) -- -- (315,319)
---------- ------ -- -- ------- --- ---------- ---------- --------- ----- ---------
Balance, December
31, 1997 27,943,971 27,944 -- -- 45,000 45 1,157,795 (607,644) (521,550) (600) 55,990
Reacquisition of
Common Shares
and Collection of
Subscription
Receivable (3,000,000) (3,000) -- -- -- -- (450,000) -- 450,000 -- (3,000)
Cash Collection of
Subscription
Receivable -- -- -- -- -- -- -- -- 27,476 -- 27,476
Issuance of Common
Stock from Private
Private Placement
at a Price of $.15
per Share 4,675,850 4,676 -- -- -- -- 659,294 -- -- -- 663,970
Issuance of Common
Stock from Private
Placement at a
Price of $.35
per Share 2,017,999 2,018 -- -- -- -- 690,156 -- -- -- 692,174
Issuance of Common
Stock for Services
Rendered at Prices
between $.15
and $.35 per Share 663,223 663 -- -- -- -- 176,415 -- -- -- 177,078
Fair Value of
Options Issued to
Consultants -- -- -- -- -- -- 2,063 -- -- -- 2,063
Net Loss -- -- -- -- -- -- -- (952,276) -- -- (952,276)
---------- ------ -- -- ------- --- ---------- ---------- --------- ----- ---------
Balance December 31,
1998 32,301,043 32,301 -- -- 45,000 45 2,235,723 (1,559,920) (44,074) (600) 663,475
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 7
JACOBSON RESONANCE ENTERPRISES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (Continued)
For the Period from Inception to March 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
Common Stock to be Issued Preferred Stock Additional During Stock-
----------------- --------------- --------------- Paid-In Development Subscription Treasury holder
Issued Amount Issued Amount Issued Amount Capital Stage Receivable Stock Equity
------ ------ ------ ------ ------ ------ ------- ----------- ---------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance December
31, 1998 32,301,043 32,301 -- -- 45,000 45 2,235,723 (1,559,920) (44,074) (600) 663,475
Issuance of Common
Stock for
Services Rendered
at Prices between
$.18 and $2.69
per Share 1,313,903 1,314 -- -- -- -- 420,375 -- -- -- 421,689
Issuance of Common
Stock for
Repayment of Debt 291,305 291 -- -- -- -- 60,883 -- -- -- 61,174
Issuance of Common
Stock for Exercise
of Warrants 900,000 900 -- -- -- -- 1,754,100 -- -- -- 1,755,000
Sales of Shares
at $.20 per Share 500,000 500 -- -- -- -- 99,500 -- -- -- 100,000
Beneficial Conversion
Feature on
Convertible
Debentures -- -- -- -- -- -- 333,332 -- -- -- 333,332
Issuance of Common
Stock for
Conversion of
Debentures 1,862,876 1,863 -- -- -- -- 902,194 -- -- -- 904,057
Net Loss -- -- -- -- -- -- -- (3,657,966) -- -- (3,657,966)
---------- ------ -- -- ------- --- ---------- ---------- --------- ----- ---------
Balance, December
31, 1999 37,169,127 37,169 -- -- 45,000 45 5,806,107 (5,217,886) (44,074) (600) 580,761
Issuance of Common
Stock for
Services Rendered
at Prices between
$1.10 and $1.52
per Share 223,200 223 -- -- -- -- 328,527 -- -- -- 328,750
Sales of Shares
a $.30 to $.75 per
Share 769,750 770 -- -- -- -- 306,125 -- -- -- 306,895
Common Stock
to be Issued -- -- 1,241,117 806,725 -- -- -- -- -- -- 806,725
Net Loss -- -- -- -- -- -- -- (701,321) -- -- (701,321)
---------- ------ -- -- ------- --- ---------- ---------- --------- ----- ---------
Balance, March
31, 2000 38,162,077 38,162 1,241,117 806,725 45,000 45 6,440,759 (5,919,207) (44,074) (600) 1,321,810
---------- ------ -- -- ------- --- ---------- ---------- --------- ----- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 8
JACOBSON RESONANCE ENTERPRISES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended For the Period
March 31, from Inception
----------------------------- to March 31,
2000 1999 2000
----------- ----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net Loss $ (701,321) $ (187,863) $(5,919,207)
Adjustments to Reconcile Net Loss to Net Cash Flows
Used in Operating Activities:
Depreciation 9,073 408 30,521
Amortization of Deferred Debt Costs -- -- 7,742
Write off of Licensing Costs 126,582
Fair Value of Common Stock Issued for Services 328,750 -- 942,619
Fair Value of Common Stock Issued for Interest -- -- 6,781
Stock Issued for Conversion of Warrants Attributed -- -- 1,754,100
Beneficial Conversion Feature of Debentures -- -- 333,332
Fair Value of Options Issued
-- -- 2,063
Changes is Operating Assets and Liabilities:
Prepaid Expenses 7,104 6,909 (24,213)
Other -- 815 --
Deposits -- -- (1,395)
Accounts Payable 12,858 (38,674) 161,012
Other Liabilities 34,775 -- 34,775
----------- ----------- -----------
Net Cash Flows Used in Operating Activities
(308,761) (218,405) (2,545,288)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets (47,675) -- (185,808)
Patent Costs -- -- (126,582)
----------- ----------- -----------
Net Cash Flows Used in Investing Activities (47,675) -- (312,390)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of Treasury Stock -- -- (600)
Proceeds from Note Payable -- -- 60,000
Proceeds From Issuance of Debentures -- -- 890,490
Proceeds From Exercise of Warrants -- -- 900
Proceeds From Common Stock to be Issued 806,725 -- 806,725
Proceeds from Issuance of Common Stock
from Subscriptions Receivable -- -- 653,976
Proceeds from Issuance of Common Stock 306,895 -- 1,782,889
----------- ----------- -----------
Net Cash Flows Provided by Financing Activities 1,113,620 -- 4,194,380
----------- ----------- -----------
Net Increase in Cash and Cash Equivalents 757,184 (218,405) 1,336,702
Cash and Cash Equivalents - Beginning of Period 579,518 642,680 --
----------- ----------- -----------
Cash and Cash Equivalents - End of Period $ 1,336,702 $ 424,275 $ 1,336,702
=========== =========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for:
Income Taxes $ -- $ -- $ --
=========== =========== ===========
Interest $ -- $ -- $ --
=========== =========== ===========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Issuance of Common Stock for Repayment of Debt $ -- $ -- $ 60,000
=========== =========== ===========
Subscriptions Receivable for Issuance of Common Stock $ -- $ -- $ 698,050
=========== =========== ===========
Conversion of debentures into common stock $ -- $ -- $ 1,000,000
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 9
JACOBSON RESONANCE ENTERPRISES, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
Note 1 - BASIS OF PRESENTATION
The accompanying financial statements for the interim period are unaudited and
reflect all adjustments (consisting only of normal recurring adjustments) which
are, in the opinion of management, necessary for a fair presentation of the
financial position and operating results for the periods presented. These
financial statements should be read in conjunction with the financial statements
and notes thereto, together with Management's Discussion and Analysis of
Financial Condition and Results of Operations, contained in the Annual Report on
Form 10-KSB for the year ended December 31, 1999, of Jacobson Resonance
Enterprises, Inc. (the "Company" ) as filed with the Securities and Exchange
Commission. The results of operations for the three months ended March 31, 2000,
are not necessarily indicative of the results for the full fiscal year ending
December 31, 2000.
Note 2 - STOCKHOLDERS' EQUITY
In December 1999, the Company entered into an agreement to sell 5,000,000
restricted shares of its common stock to an investor at the price of $.20 per
share. Payments for such shares began in 1999 and will continue to be made to
the Company at various times in 2000. As of December 31, 1999, this investor had
purchased 500,000 shares of common stock for $100,000. In addition, the Company
granted this investor an option to purchase 2,222,222 shares of its common stock
at a price of $.45 per share. This option requires the investor to advise the
Company of his intent to exercise the option by January 31, 2001, and exercise
and execute the option on or before June 30, 2001 according to a defined
schedule. During the three months ended March 31, 2000, the investor purchased
300,000 shares for an aggregate of $60,000.
In addition to the foregoing, the Company sold 54,750 shares of common stock for
an aggregate of $16,295 on January 21, 2000; 375,000 shares of common stock for
an aggregate of $212,500 on February 16, 2000; 307,693 shares of common stock
and a warrant to purchase an additional 307,693 shares of common stock at an
exercise price of $.85 per share for an aggregate of $200,000 on April 7, 2000;
664,193 shares of common stock and a warrant to purchase an additional 664,193
shares of common stock at an exercise price of $.90 per share for an aggregate
of $431,725 on April 10, 2000, and 269,231 shares of common stock and a warrant
to purchase an additional 269,231 shares of common stock at an exercise price of
$.90 per share for an aggregate of $175,000 on April 11, 2000. These shares of
common stock and warrants were all sold for cash. The Company received payments
for the stock prior to March 31, 2000, and these payments have been classified
as common stock to be issued on the accompanying balance sheet.
8
<PAGE> 10
Note 2 -STOCKHOLDERS' EQUITY (CONTINUED)
Furthermore, on February 14, 16 and 22, 2000, respectively, the Company issued
22,500 shares, 200,000 shares and 700 shares, respectively, of common stock. The
Company issued these shares to employees and consultants for services. The
Company has recorded a charge to operations for the fair value of these shares
on the dates of their issuances, which amounted to $328,750.
The Company also issued options to purchase 599,000 shares of common stock to
employees and consultants on April 4, 2000. These options are exercisable at
$1.28 per share. Any charge related to the issuance of these options will be
charged to operations at the date of issuance.
Additionally, the Company issued 40,000 shares of common stock for an aggregate
of $16,000 on February 16, 2000, and 112,142 shares of common stock for an
aggregate of $39,250 on April 7, 2000. The Company issued these shares upon
exercise of outstanding options.
Note 3 - SUBSEQUENT EVENT
The majority stockholder of the Company is involved in litigation that may
require him to transfer shares of common stock of the Company to the plaintiffs.
In addition, the litigation may further require payments by this stockholder and
the issuance of warrants by the Company. See Item 5 of Part II in this Form
10-QSB for a more detailed discussion of this litigation. Any impact on the
accompanying financial statements as a result of the resolution of this
contingency cannot be determined at this time.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Certain statements contained in this report, including, without
limitation, statements containing the words "believes," "anticipates," "expects"
and words of similar import constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown 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 the
success and subsequent acceptance of new medical research and development; the
regulatory framework of the health care industry; the Company's ability to
create, sustain, manage or forecast its growth; its ability to attract and
retain key personnel; its ability to protect technology; changes in its business
strategy or development plans; competition; demographic changes; business
disruptions; adverse publicity; and international, national and local general
economic and market conditions.
PLAN OF OPERATION
The Company is in the development stage and has not had any significant
revenue from operations to date. It incurred a loss of $701,321 for the quarter
ended March 31, 2000, and has incurred losses of $5,919,207 since its inception
in 1996. Of that amount, $2,094,158 is attributable to the non-cash financing
cost of the Company's sale of convertible debentures and warrants to
9
<PAGE> 11
purchase common stock in early June 1999, from which the Company received net
cash proceeds of $891,390. Another $940,519 represents the non-cash expense
resulting from the issuance of common stock and options to purchase common stock
to members of the Company's management and third parties for services rendered.
Of the remaining amount, the Company has spent $860,520 on research and
development since inception.
In early May 2000, the Company launched its marketing campaign for
resonated drinking products at The Brett Favre Forward Foundation Charity
Celebrity Golf Tournament in Biloxi, Mississippi. Brett Favre is the official
spokesperson for the resonated Spring Water and Real-Pro Hi-Energy Sports Drink
produced by RealPure Beverage Group, LLC, a licensee of the Company. The Real
Pure beverages are currently being distributed for retail sale in the portion of
the United States east of the Mississippi River. Distribution west of the
Mississippi River is expected to commence in the near future. The Company
expects to begin receiving royalties from RealPure before the end of June 2000.
In addition, the Company anticipates CE Marking of its 18-inch and
seven-foot clinical Jacobson Resonators for treatment of chronic pain of the
knee sometime in the second quarter of 2000. It also expects FDA approval of its
18-inch clinical Jacobson Resonator for treatment of chronic pain from
osteoarthritis of the knee and CE Marking of those resonator models for
treatment of the entire spectrum of chronic pain sometime in the third quarter
of 2000. Receipt of those approvals will allow the Company's licensees to make,
market, distribute and sell those clinical products on a commercial basis in the
United States of America and Europe. In addition, the Company's licensees are
currently gearing up to make, market, distribute and sell the Company's portable
Jacobson resonators on a commercial basis. The foregoing combination of events
is expected to generate ongoing revenue for the Company and thereby bring it out
of the development stage into the operating stage during the calendar year 2000.
Other possible sources of revenue for the Company during the calendar
year 2000 include the following:
1. Licensing revenue from a larger medical products company for
the development, marketing and distribution rights in
connection with the use of Jacobson Resonance in the treatment
of cardiac arrhythmias. The Company thinks that interest in
such a licensing arrangement will be generated by the
publication of the results of the completed research in
cardiac pacing at the University of Oklahoma Health Sciences
Center that Jacobson Resonance is effective in the treatment
of cardiac arrhythmias in dogs.
2. Licensing revenue from O2 Marketing Group, Inc., a
manufacturer of consumer-oriented oxygen products for the
cosmetics, nutraceutical and pharmaceutical industries, for an
exclusive license to use Jacobson Resonance for not less than
ten years covering the Republic of South Africa. The Company
has a letter of intent with O2 and is currently negotiating a
definitive license arrangement.
10
<PAGE> 12
3. Licensing revenue from Comercializadora de Calidad S.A. of
Guatemala, for the distribution of resonators and the
establishment of treatment centers throughout Panama, El
Salvador, Costa Rica and Guatemala. The Company signed a
letter of intent with the Guatemalan distributor in March
2000.
4. Licensing revenue from Genesis Group International ("GGIC"),
for the use of Jacobson Resonance in the development,
distribution, marketing and sale of GGIC's all-natural and
resonated family of nasal sprays worldwide. The Company signed
a letter of intent with GGIC in February 2000.
5. Licensing revenue from Palmer Natural Products, Inc., and
Perfect Living Systems, Inc., two nutraceutical laboratories
and formulary companies located in Southern California. These
companies plan to use Jacobson Resonance technology and
equipment in the formulary of multiple nutraceuticals, as well
as client-specific products, for manufacture, marketing,
distribution and sale. The Company signed a letter of intent
with these companies in April 2000.
6. Increases in revenue from its existing licensees for the
clinical Jacobson Resonators because of additional FDA
approvals and CE Marking. After receipt of the currently
pending applications for FDA approvals and CE Marking, the
Company plans to seek additional FDA approvals for the other
three clinical models of the Jacobson Resonator and for
treatment of the entire chronic pain spectrum, not just
osteoarthritis of the knee. It also plans to seek CE Marking
of the other two clinical models of the Jacobson Resonator.
These approvals would broaden the product line in both the
United States of America and Europe and would broaden the
applications for the clinical Jacobson Resonators in the
United States of America.
The Company will continue both use and product research and development
for Jacobson Resonance. The Company estimates that the currently ongoing
university research will require about $120,000 of the Company's funds for the
rest of 2000. It anticipates continued prototyping of additional models of the
Jacobson Resonator for varying uses if additional funds become available for
that purpose. It estimates that the costs to the Company of such prototyping
will be approximately $100,000 for the rest of 2000.
RESULTS OF OPERATIONS FOR QUARTER ENDED MARCH 31, 2000
The Company had a net loss for the quarter ended March 31, 2000, of
$701,321, as compared to a loss for the quarter ended March 31, 1999, of
$187,863, an increase of $513,458. The increase in the loss primarily results
from (1) a $328,750 non-cash expense in the current quarter for the fair value
of common stock of the Registrant issued for services rendered and (2) an
increase in research and development costs of $82,029.
11
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES AS OF MARCH 31, 2000
The Company's cash on hand at March 31, 2000, was $1,336,702, as
compared to $579,518 at December 31, 1999. Revenues for the first quarter of
2000 were $2,575, as compared to $6,676 for the first quarter of 1999. The
Company had a net loss of $701,321 for the first quarter of 2000, as compared to
a net loss of $187,863 for 1999, an increase of $513,458. The increase is
primarily attributable to an increase in salary expense of $320,199 and an
increase in research and development expense of $82,029. The increase in salary
expense is the primarily result of the non-cash expense recorded in February
2000 for the issuance of a total of 200,000 shares of the Company's common stock
to two members of its management in lieu of cash salary, which stock was valued
at market price on the date of issuance.
Since the beginning of the year, the Company has received $1,150,770
from the sale of securities and the exercise of stock options. The Company
anticipates that its existing resources will be sufficient to fund its plan of
operation through the end of 2000. By that time, the Company expects to be
generating sufficient revenue to fund its plan of operation after then. However,
if the Company by that time is not generating any revenue or is generating
insufficient revenue for such funding, then the Company may have to seek
additional funds through either debt or equity financing.
In addition, the Company's current expectations may be materially
affected by the uncertainties created by recent developments in litigation
involving Dr. Jerry I. Jacobson, the Company's principal shareholder, Chairman
of the Board, President and Chief Executive Officer. In that regard, please see
Item 5 "Other Information."
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
In January 2000, the Company sold 400,000 shares of its common stock at
$0.50 per share for gross proceeds of $200,000 to a husband and wife and their
adult son, all accredited investors. The Company relied upon the exemption from
registration contained in Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") for these stock issuances.
Also in January 2000, the Company sold 29,750 shares of its common
stock at $0.22 per share for gross proceeds of $25,000 to the individual with
whom the Company is developing its neutraceutical licensing business. The
Company relied upon the exemption from registration contained in Section 4(2) of
the Securities Act for this stock issuance.
In February 2000, the Company issued a total of 22,500 shares to four
individuals for services rendered. The shares were valued at $1.10 per share, or
$24,750 in the aggregate. The Company relied upon the exemption from
registration contained in Section 4(2) of the Securities Act for these stock
issuances.
12
<PAGE> 14
Also in February 2000, the Company sold 300,000 shares at $0.20 per
share for gross proceeds of $60,000 to an accredited investor pursuant to a
December 1999 agreement to sell 5,000,000 shares of its common stock to the
investor at that price per share. Payments for such shares began in 1999 and
will continue at various times in 2000. In addition, the Company granted this
investor options to purchase 2,222,222 shares of its common stock at a price of
$0.45 per share. The investor must advise the Company of his intent to exercise
the options by January 31, 2001, and exercise the options on or before June 30,
2001. The Company relied upon the exemption from registration contained in
Section 4(2) of the Securities Act for this stock issuance.
Additionally, the Company received $16,000 in February 2000 from the
exercise of outstanding options to purchase 40,000 shares of common stock, half
with an exercise price of $0.45 per share and half with an exercise price of
$0.35 per share, by two members of the Company's Scientific Advisory Board. The
Company had granted the options that were exercised at $0.45 per share in June
1999 and the ones that were exercised at $0.35 per share in November 1998. The
Company relied upon the exemption from registration provided by Rule 701
promulgated pursuant to the Securities Act for these securities issuances.
From time to time since late 1997 on approximately a quarterly basis,
the Company has issued shares of its common stock to its executive officers
either in lieu of cash compensation or as bonuses. In February 2000, the Company
issued 100,000 shares of its Common stock to each of Debra M. Jacobson, a Senior
Vice President and Director and the Treasurer and Secretary of the Company, and
Frank A. Chaviano, a Senior Vice President of the Company. The shares were
valued at $1.52 per share, or $304,000 in the aggregate. The Company has relied
upon the exemption from registration contained in Section 4(2) of the Securities
Act for these stock issuances.
In February 2000, the Company further issued 700 shares of its common
stock to a member of its Scientific Advisory Board for services rendered. These
shares have been valued at $1.00 per share, or $700 in the aggregate. The
Company relied upon the exemption from registration contained in Section 4(2) of
the Securities Act for this stock issuance.
In March 2000, the Company sold 307,693 units, consisting of one share
of its common stock and a warrant to purchase one share of its common stock at
$0.85 per share, for $0.65 per unit, resulting in gross proceeds of $200,000, to
two accredited investors. The Company relied upon the exemption from
registration contained in Section 4(2) of the Securities Act for this stock
issuance.
Also in March 2000, the Company sold 933,424 units, consisting of one
share of its common stock and a warrant to purchase one share of its common
stock at $0.90 per share, for $0.65 per unit, resulting in gross proceeds of
$606,725, to six accredited investors. The Company relied upon the exemption
from registration contained in Section 4(2) of the Securities Act for this stock
issuance.
13
<PAGE> 15
ITEM 5. OTHER INFORMATION.
On May 11, 2000, by order dated May 4, 2000, the trial judge in
litigation styled ERIC HEWKO AND PATRICK J. CASEY V. JERRY I. JACOBSON, Case No.
CL 97-4255 AE, in the Circuit Court of the Fifteenth Judicial Circuit in and for
Palm Beach County, Florida, enforced in part an alleged settlement agreement
among Messrs. Hewko and Casey and Dr. Jacobson. Messrs. Hewko and Casey, who are
attorneys in private practice in Palm Beach County, Florida, had instituted this
litigation in May 1997 against Dr. Jacobson, who is the principal shareholder,
Chairman of the Board, President and Chief Executive Officer of the Company.
In the litigation, Messrs. Hewko and Casey had alleged that each of
them are entitled to one-sixth of Dr. Jacobson's original 57,220,000 shares of
the common stock of the Company that Dr. Jacobson received in June 1996 with
respect to the Company's acquisition of Jacobson Resonance Machines, Inc., a
Florida corporation, and an equivalent ownership interest in intellectual
property created or developed by Dr. Jacobson. They based their allegations on a
verbal arrangement that began among the three men in October 1988 and a certain
Ownership Agreement among them drafted by Mr. Casey or under his direction in
1990. Although the Ownership Agreement is dated January 1, 1990, it also
contains an acknowledgment of the signature of Dr. Jacobson dated April 14, 1990
(for which Mr. Hewko signed as the Notary Public), and acknowledgments of the
respective signatures of Messrs. Hewko and Casey dated April 26 and June 8,
1990, respectively.
In April 1998, the parties had met to discuss a possible settlement of
the litigation. As a result of the meeting, Mr. Casey prepared a proposed
settlement term sheet containing 14 points. Dr. Jacobson advised his then trial
attorneys that he did not agree, either then or previously, to the majority of
the provisions contained in the term sheet. Nevertheless, Dr. Jacobson's then
trial attorneys attended a hearing on or about April 6, 1998, which resulted in
the entry of an order on April 21, 1998, ratifying and approving the term sheet
as a settlement. On or about March 23, 2000, Messrs. Hewko and Casey filed a
motion to enforce that portion of the term sheet and the order dated April 21,
1998, that purported to require Dr. Jacobson to transfer 12,000,000 shares of
the Company's common stock to Messrs. Hewko and Casey.
The May 11 order by the trial judge granted the plaintiffs' motion to
compel Dr. Jacobson to transfer a total of 12,000,000 shares of the Company's
common stock to Messrs. Hewko and Casey, with each to receive 6,000,000 shares
of the total. In addition, the trial judge gave damage awards to each of Messrs.
Hewko and Casey in the amount of $6,446,250, or a total of $12,892,500, against
Dr. Jacobson for what the order describes as "the wrongful delay in Defendant's
performing the ministerial act of delivering to Plaintiffs their stock in JRSE."
The trial judge based these actions on what the order describes as "the terms
and conditions of a Settlement approved in open court April 6, 2000 [sic - the
actual year was 1998]."
On May 12, 2000, Dr. Jacobson's legal counsel appealed the May 11 order
to the Florida Fourth District Court of Appeals. On May 17, 2000, the trial
judge denied Dr. Jacobson's motion for stay, pending resolution of the appeal,
with regard to the transfer of the stock and required a $15,471,000 supersedeas
bond to stay, pending resolution of the appeal, enforcement of the damage
awards. Unless the trial or appellate court stays the enforcement of the order,
14
<PAGE> 16
certain of Dr. Jacobson's nonexempt property may be subject to public sale,
despite the pending appeal, to satisfy the damage awards. If a significant
portion of his stock ownership in the Company is publicly sold, there may be a
change in control of the Company.
On May 18, 2000, Dr. Jacobson's legal counsel filed an emergency motion
for stay with the appellate court. On May 19, the appellate court issued an
order giving the plaintiffs until noon on Thursday, May 25, to respond to the
motion.
At a meeting of the Company's Board of Directors on May 13, 2000, Dr.
Jacobson affirmed to the Board that he had disagreed in significant part with
material provisions of the "Settlement Agreement Terms" and that he conveyed his
objections to his 1998 trial attorney. However, the 1998 trial attorney
apparently did not convey Dr. Jacobson's objections to either the plaintiff's
counsel or the trial judge when the "settlement" based on that document was
announced in open court on April 6, 1998. The Board was also informed that Dr.
Jacobson's wife and two other persons supported Dr. Jacobson's version of his
response to the "Settlement Agreement Terms" at the evidentiary hearing held on
May 3 and 4, 2000, that led to the filing of the May 11 order.
Dr. Jacobson further informed the Board that Messrs. Hewko and Casey
were supposed to prepare or have prepared settlement documentation for review
and comment. However, Dr. Jacobson thought that such documentation would be
based on his understanding of the settlement terms as he had modified them. Dr.
Jacobson did not receive any draft settlement documentation until March 2000,
after Messrs. Hewko and Casey had demanded transfer of the 12,000,000 shares of
the Company's common stock.
Appellate counsel for Dr. Jacobson has given the Board its assessment
of Dr. Jacobson's appeal of the May 11 order. Such counsel considers Dr.
Jacobson's appeal to be meritorious and intends to raise multiple substantive
and procedural grounds for reversal in the appeal.
Based on the foregoing, the fact that Dr. Jacobson does not take a
salary from the Company, and the Board's evaluation of Dr. Jacobson's importance
to the Company at this critical juncture of its transition from the development
to the operating stage, the Board, with Dr. Jacobson abstaining, approved a
$200,000 two-year loan to Dr. Jacobson for defense costs in connection with the
pending litigation. The loan bears interest at the prime rate, adjusted
annually, and payable on May 13, 2002.
15
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
JACOBSON RESONANCE ENTERPRISES, INC.
Dated: May 25, 2000 By: /s/ Jerry I. Jacobson
-----------------------------------------
Jerry I . Jacobson, Chairman of the Board
and Chief Executive Officer
16
<PAGE> 18
EXHIBIT INDEX
Exhibit
Number Description Location
- ------- ----------- --------
27 Financial Data Schedule *1
- ---------------
*1 Filed electronically pursuant to Item 401 of Regulation S-T.
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JACOBSON
RESONANCE ENTERPRISES, INC.'S FORM 10-QSB FOR THE THREE MONTHS ENDED MARCH 31,
2000.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,336,702
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,360,915
<PP&E> 155,288
<DEPRECIATION> 30,521
<TOTAL-ASSETS> 1,517,598
<CURRENT-LIABILITIES> 195,788
<BONDS> 0
0
45
<COMMON> 38,499
<OTHER-SE> 1,283,601
<TOTAL-LIABILITY-AND-EQUITY> 1,517,598
<SALES> 2,575
<TOTAL-REVENUES> 2,575
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 711,240
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (701,321)
<INCOME-TAX> 0
<INCOME-CONTINUING> (701,321)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (701,321)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
