UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10Q-SB
Amended
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the Period ended March 31, 2000
Commission file number: 0-30380
Diabetex International Corporation
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(Exact name of registrant as specified in charter)
Nevada 87-0652348
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
142 Ferry Road, Suites 1 & 2, Old Saybrook, Ct. 06475
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code:(860)395-1933
Indicate by check mark whether the 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practical date:
March 31, 2000 Common Shares 13,201,599 at par value $.001
PART 1 FINANCIAL INFORMATION
Diabetex International Corporation and Subsidiary
Consolidated Financial Statements
March 31, 2000
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Diabetex International Corporation
Salt Lake City, Utah
We have reviewed the accompanying consolidated balance sheet of Diabetex
International Corporation and subsidiary as of March 31, 2000 and the related
consolidated statements of income, stockholders' equity and cash flows for the
period then ended. These financial statements are the responsibility of the
company's 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 financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above 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 December 31, 1999, and the related
statements of income, stockholders' equity and cash flows for the year then
ended; and in our report dated April 12, 2000, we expressed an unqualified
opinion on those financial statements.
The accompanying statements of operations and cash flows for the period ended
March 31, 1999 were not audited or reviewed by us and, accordingly, we do not
express an opinion on them.
Crouch, Bierwolf & Chisholm
May 16, 2000
Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Balance Sheets
<TABLE>
<CAPTION> ASSETS
March 31, December 31,
2000 1999
CURRENT ASSETS
<S> <C> <C>
Cash (Note 1) $ 90,423 $ 351
Account Receivable (Net of
allowance of $0) 23,647 23,418
Total Current Assets 114,070 23,769
Property, Plant & Equipment (Note 4)(Net) 2,258 2,408
Other Assets
Intangible Assets (Note 3) (Net) 14,382,06 14,770,772
Prepaid expenses (Note 7) 783,595 249,703
$15,281,991 $15,046,652
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable & accrued expenses $ 175,250 $ 152,952
Accounts payable-related party (Note 6) 156,342 183,812
Total Current Liabilities 331,592 335,765
CONTINGENCIES AND
COMMITMENTS (Note 8) - -
STOCKHOLDERS' EQUITY
Common stock; $.002 par value;
50,000,000 shares authorized,
13,265,299 and 13,110,929 shares
issued and outstanding (Note 2) 26,531 26,222
Additional paid-in capital 17,336,805 16,509,414
Deficit accumulated during the
development stage ( 2,412,937)( 1,824,750)
Total Stockholders' Equity 14,950,399 14,710,886
$ 15,281,991 $ 15,046,652
</TABLE>
Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Operations
<TABLE>
<CAPTION> CONSOLIDATED STATEMENTS OF OPERATIONS
From
Inception on
For the September 14,
Three Months Ended 1983 to March 31, March 31,
2000 1999 2000
Statements of operations
<S> <C> <C> <C>
REVENUES $ 26,700 $ - $ 67,305
EXPENSES
Amortization and
Depreciation 388,854 150 1,166,862
Professional Services 108,932 - 1,047,791
Legal 7,400 - 88,632
Public Relations 300 1,600 14,094
Administrative 11,902 318,320 162,364
Total Expenses 517,388 320,070 2,479,743
NET LOSS BEFORE
INCOME TAXES (490,688) (320,070) ( 2,412,438)
PROVISION FOR
TAXES (Note 1) - - ( 500)
NET LOSS $ (490,688) $( 320,070) $ ( 2,412,938)
LOSS PER SHARE
(Note 1) $ (.04) $ ( .02)
AVERAGE SHARES
OUTSTANDING 13,201,599 11,322,411
</TABLE>
Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION> STOCKHOLDERS' EQUITY
Accumulated
Capital in Deficit During
Common Common Excess of Retained
Shares Stock Par Value Deficit
Stockholders' Equity
<S> <C> <C> <C> <C>
Balance, December 31, 1989 862 $ 2 $ 94,173 $ (96,973)
Loss for the Year - - - ( 130)
Balance, December 31, 1990 862 2 94,173 (97,103)
Issues 225 shares to an
officer in cancellation of debt
at $16.77 per share 225 1 3,772 -
Loss for the Year - - - ( 3,333)
Balance, December 31, 1991 1,087 3 97,945 (100,436)
Expenses paid on the Company's
behalf contributed to capital - - 2,666 -
March 5, 1992, issued 1,250
shares for services rendered
for $8 per share 1,250 2 9,998 -
Loss for the Year - - - ( 10,278)
Balance, December 31, 1992 2,337 5 110,609 ( 110,714)
Loss for the Year - - - ( 136)
Balance, December 31, 1993 2,337 5 110,609 ( 110,850)
October 17, 1994, issued
25,000 shares for expenses paid
on the Company's behalf for
$.84 per share 25,000 50 20,950 -
Expenses paid on the Company's
behalf contributed to capital - - 612 -
Loss for the Year - - - ( 22,903)
Balance, December 31, 1994 27,337 55 132,171 ( 133,753)
Expenses paid on the Company's
behalf contributed to capital - - 1,227 -
Loss for the Year - - - ( 100)
Balance, December 31, 1995 27,337 5 133,398 ( 133,853)
Loss for the Year - - - ( 100)
Balance, December 31, 1996 27,337 55 133,398 ( 133,953)
</TABLE>
(continued)
Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
(continued)
<TABLE>
<CAPTION> STOCKHOLDERS' EQUITY -CONTINUED
Accumulated
Capital in Deficit During
Common Common Excess of Retained
Shares Stock Par Value Deficit
Stockholders' Equity
<S> <C> <C> <C> <C>
Balance, December 31, 1996 27,337 $ 55 $ 133,398 $ (133,953)
Shares issued for asset
of Aladdin Transportation,
Landmark, Inc. and Over 100,
Inc. for $0 per share 82,500 165 ( 165) -
Shares issued for incentives for
loans to Aladdin Transportation,
Landmark, Inc. and Over 100, Inc.
for $.80 per share 25,163 50 20,081 -
Shares canceled by various
shareholders ( 10,000) ( 20) 20 -
Shares canceled for acquisition of
Aladdin Transportation, Landmark,
Inc. and Over 100, Inc. ( 82,500) ( 165) 165 -
Shares issued for Presidential and
Regal Limousine Service for $0
per share 4,000 8 ( 8) -
Shares canceled for Presidential
and Regal Limousine Service ( 4,000) ( 8) 8 -
Net Loss for the Year - - - ( 23,031)
Balance, December 31, 1997 42,500 85 153,499 ( 156,984)
Rounding due to reverse
stock split (Note 2) 11 - - -
Net Loss for the Year - - - ( 650)
Balance, December 31, 1998 42,511 85 153,499 ( 157,634)
</TABLE>
(continued)
Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
(continued)
<TABLE>
<CAPTION> STOCKHOLDERS EQUITY - CONTINUED
Accumulated
Capital in Deficit During
Common Common Excess of Retained
Shares Stock Par Value Deficit
Shareholders' Equity
<S> <C> <C> <C> <C>
Balance, December 31, 1998 42,511 $ 85 $ 153,499 $ (157,634)
Shares issued for cash at $.002
per share 8,387,800 16,775 530 -
Shares issued for services at $.05
per share (Note 2) 2,000,000 4,000 96,000 -
Shares issued for cash at $.05
per share 875,100 1,750 45,767 -
Shares issued for services at $3
per share (Note 2) 50,000 100 149,900 -
Shares issued for cash at $3
per share 1,000 2 2,998 -
Shares issued for cash at $10
per share 21,307 43 213,027 -
Shares issued for 100% of
shares of Advanced Metabolic
Technology at $10 per
share (Note 3) 1,232,261 2,465 12,320,145 -
Shares issued for intellectual
properties Hamilton-May, Inc.
at $10 per share (Note 3) 300,000 600 2,999,400 -
Expenses paid by shareholder in
Company behalf - - 4,050 -
Shares issued to Phoenix Energy
(Note 3) 35,000 70 349,930 -
Shares issued for services at
$10. (Note 2) 12,500 25 124,975 -
Shares issued for cash at $10 3,450 7 34,493 -
Shares issued for services at
$.10 (Note 2) 150,000 300 112,200 -
Net Loss for the Year - - - (1,764,616)
Balance, December 31, 1999 13,110,929 $ 26,22 $ 16,606,914 $(1,922,250)
</TABLE>
(continued)
Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
(continued)
<TABLE>
<CAPTION> STOCKHOLDERS' EQUITY -CONTINUED
Accumulated
Capital in Deficit During
Common Common Excess of Retained
Shares Stock Par Value Deficit
Shareholders' Equity
<S> <C> <C> <C> <C>
Balance, December 31, 1999 13,110,929 $ 26,222 $ 16,606,914 $ (1,922,250)
Shares issued for cash at $10
per share 1,770 4 17,696 -
Shares issued for services at
$5 per share 2,000 4 9,996 -
Shares issued for services at
$5 per share 100,000 200 499,800 -
Shares issued for cash at $5
per share 12,100 24 54,976 -
Shares issued for cash at $5
per share (net of commissions
of $27,500) 38,500 77 147,423 -
Net Loss, March 31, 2000 - - - (490,688)
Balance, March 31, 2000 13,265,299 $ 26,531 $ 17,336,805 $ (2,412,938)
</TABLE>
Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION> STATEMENTS OF CASH FLOWS From
Inception on
For the Three September 14,
Months Ended 1983 to
March 31, March 31,
2000 1999 2000
CASH FLOWS FROM
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ ( 490,688) $ ( 320,070) $( 2,412,938)
Adjustments to net cash
used by operating activities:
Depreciation &
Amortization 388,854 150 1,166,862
Stock issued for
services/expenses 10,000 250,000 773,631
Expenses paid by
a shareholder on the
Company's behalf - - 8,535
Increase (Decrease)
in accrued expenses ( 4,173) - 331,592
Increase (Decrease)
in prepaids ( 33,892) - ( 158,594)
Increase (Decrease)
in accounts receivable ( 229) - ( 23,647)
Net Cash Used by
Operating Activities ( 130,128) ( 69,920) ( 314,539)
CASH FLOWS FROM
INVESTING ACTIVITIES
Cash paid for acquisition
of intangibles - - ( 225,570)
Cash paid for fixed assets - ( 3,008) ( 3,008)
Net Cash Provided by
Investing Activities - ( 3,008) ( 228,578)
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of common stock 247,700 76,117 676,865
Stock offering costs ( 27,500) - ( 43,325)
Net Cash Provided by
Financing Activities 220,200 76,117 633,540
NET INCREASE
(DECREASE)IN CASH 90,072 3,189 90,423
CASH, BEGINNING
OF PERIOD 351 - -
CASH, END OF PERIOD $ 90,423 $ 3,189 $ 90,423
CASH PAID FOR:
Interest $ - $ - $ -
Income taxes $ - $ - $ -
Non Cash Transactions
Stock Issuance for
Services $ 10,000 $ 250,000 $ 773,631
Acquisition of Intangibles$ - $ - $ 15,322,610
Prepaid expenses $ 500,000 $ - $ 125,000
</TABLE>
Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 2000 and December 31, 1999
NOTE 1 - ORGANIZATION AND HISTORY
A. Organization
The financial statements presented are those of Diabetex International
Corporation (formerly Sheridan Industries, Inc.) ( a development stage
company). The Company was incorporated under the laws of the State of Utah
on September 14, 1983. The Company changed its name to Associated Healthcare,
Inc. during 1991 but later rescinded the name change and reverted back to
Sheridan Industries, Inc. The Company has never had any operations up to
December 31, 1998 and in accordance with SFAS #7, is considered a development
stage company. The Company is now involved in the treatment and
diagnosis of diabetes.
In 1998, the Company created, and later merged with, a Nevada subsidiary and
changed its name to Diabetex International Corporation.
In June 1999, the Company purchased all of the shares of Advanced Metabolic
Technologies, a Nevada corporation (AMT) (See Note 3 for discussion of AMT and
its activity). AMT was formed on May 19, 1999 as a wholly owned subsidiary of
Advanced Metabolic Systems (AMS) which transferred an exclusive license to
patented proprietary technology for the treatment of diabetes known as
Metabolic Activation.
b. Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a December 31 year end.
c. Loss Per Share
The computations of loss per share of common stock are based on the weighted
average number of shares outstanding at the date of the financial statements.
Fully diluted loss per share and basic loss per share at December 31, 1999 is
he same since any outstanding stock equivalents at December 31, 1999
(335,243 shares) would be antidilutive. There were no outstanding stock
equivalents for all other periods; therefore, basic and fully diluted shares are
the same.
Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000 and December 31, 1999
NOTE 1 - ORGANIZATION AND HISTORY (continued)
d. Provision for Taxes
The Company adopted Statement of Financial Standards No. 109 "Accounting for
Income taxes" in the fiscal year ended December 31, 1998 and was applied
retroactively.
Statement of Financial Accounting Standards No. 109 " Accounting for Income
Taxes" requires an asset and liability approach for financial accounting and
eporting for income tax purposes. This statement recognizes (a) the amount of
taxes payable or refundable for the current year and (b) deferred tax
liabilities and assets for future tax consequences of events that have been
recognized in the financial statements or tax returns.
Deferred income taxes result from temporary differences in the recognition of
accounting transactions for tax and financial reporting purposes. There were
no temporary differences at December 31, 1999 and earlier years; accordingly,
no deferred tax liabilities have been recognized for all years.
The Company has cumulative net operating loss carryforwards of over $1,850,000
t December 31, 1999. No effect has been shown in the financial statements.
for the net operating loss carryforwards as the likelihood of future tax
benefit from such net operating loss carryforwards is highly improbable.
Accordingly, the potential tax benefits of the net operating loss
carryforwards, estimated based upon current tax rates at December 31, 1999
have been offset by valuation reserves of the same amount. The net operating
losses begin to expire in the year 2003.
e. Cash or Cash Equivalents
The Company considers all highly liquid investments with maturities of three
months or less to be cash equivalents.
f. Consolidated Financial Statements
The consolidated financial statements include the accounts of Diabetex
International Corporation and its subsidiary, Advanced Metabolic Technology.
collectively, these entities are referred to as the Company. All significant
intercompany transactions and accounts have been eliminated.
g. Impairment of Long Lived Assets
All long-lived assets (including intangible assets) are evaluated for
impairment wherever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An impaired asset
is written down to its estimated fair market value based on the best
information available. The Company determines whether an impairment has
occurred by comparing the estimated undiscounted future cash flows expected
to result from the use the asset and its eventual disposal to the
asset's carrying
amount. If the carrying amount exceeds the undiscounted future cash flows,
then the impairment
charge is calculated as the excess of the carrying amount of the asset over
its fair market value.
Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000 and December 31, 1999
NOTE 1 - ORGANIZATION AND HISTORY (continued)
h. Stock compensation awards and other non cash transactions
The Company entered into several transactions that involved stock or stock
options for goods or services and acquisitions of subsidiaries and medical
technologies. These transactions were recorded at estimated fair market value
of the stock being offered at private placement prices to the general public,
publicly traded prices, or some other fair value as best determined by the
board of directors with the facts and circumstances present at the time of the
transaction. (See Note 2 regarding specific transactions).
NOTE 2 - NON CASH TRANSACTIONS
During 1999, the Company issued stock for services and the purchase of a
subsidiary and other intellectual properties related to the medical field,
specifically technology that advances the treatment and diagnosis of diabetes.
The transactions were recorded at estimated fair market value of the stock,
specifically the price of stock being offered at private placement prices to the
general public, or some other negotiated arms length transaction as best
determined at the time by the board of directors. The following transactions
occurred in the first six months of 1999:
-In January, 1999, 2,000,000 shares were issued for services rendered for
assistance in obtaining the Company's license to 44 patents 8 of which are
still active covering technology related to non invasive blood glucose
monitoring.
These shares were valued at $.05 per share or total value of $100,000.
-In March, 1999, 50,000 shares were issued for services rendered related to the
acquisition of Advanced Metabolic Technologies. The shares were valued at $3
per share or $150,000.
- In June, 1999, 1,232,261 shares were issued for acquisition of all of
the stock of Advanced Metabolic Technologies (see note 3). The purchase
price was 10 per share or a total value of $12,322,610. The fair market value
of the stock was $10 (private placement purchase price). The Company had an
appraisal completed on Advanced Metabolic Technologies intellectual properties
which substantiated a value greater than the purchase price (Note 3).
In June, 1999, 300,000 shares were issued for acquisition of a license for all
the intellectual properties related to an insulin pump developed by Hamilton
May, Inc. The purchase price was $10 per share or a total value of $3,000,000.
The fair market value of the stock was $10 (private placement purchase price).
In July, 1999, 35,000 shares were issued to Phoenix Energy for consulting
services. The fair market value of the stock was $10 (Private Placement
purchase price).
Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000 and December 31, 1999
NOTE 2 - NON CASH TRANSACTIONS - (continued)
In September, 1999, 12,500 shares were issued to Anatoli Tsaliovich for services
to be rendered in connection with the miniaturization and perfection of the
non-invasive blood glucose monitors and hyper/hypo glycemic warning devices.
The fair market value of the stock was $10. (Private Placement purchase price).
These expenses were expenses of Solid State Farms and credited as a prepaid
royalty. (Note 8).
In December, 1999, 50,000 shares of stock were issued to Nathan Drage for
services performed for the Company early in the year and not previously
compensated. The shares are further restricted than normal Rule 144
restrictions and have required revenue platforms before sales of the shares
an occur. Due to these additional restrictions, the shares were valued at
$0.75 per share.
In December, 1999, 100,000 shares of stock were issued to Philip Blomquist
for services performed for the Company early in the year and not previously
compensated. The shares are further restricted than normal Rule
144 restrictions
and have required revenue platforms before sales of the shares
can occur. Due to these additional restrictions, the shares were valued at
$0.75 per share.
In October, November and December, 1999, Dominion exercised 3,450 options
at $10 per share it possessed from an option grant in March 1999.
In January, February and March, 2000, Dominion purchased 1,770 shares of
restricted stock at $10 per share from a purchase agreement obtained in March
1999.
In February, 2000, 100,000 shares were issued at $5 per share to Dr. Sami
Hashim for consulting work regarding the miniaturization and perfection
of DBTX's noninvasive blood glucose monitors and hyper/hypo glycemic warning
devices.
NOTE 3 - ACQUISITION OF INTANGIBLE ASSETS
Advanced Metabolic Technologies (AMT)
AMT owns an exclusive license to market, and otherwise exploit, that certain
therapy known as hepatic activation or metabolic activation (the therapy).
A patent has been granted covering the therapy (May 1988) and the patent is a
subject of the license. The license includes any and all improvements to the
therapy, the subject patent or any related subsequent patents. The therapy
has been developed at the Aoki Diabetes Research Institute (ADRI) under the
direction of Dr. Thomas Aoki. ADRI maintains its offices and clinic at 3100
O Street, Sacramento, California
This treatment is delivered by special intravenous infusion devise (pump) with
the treatment programmed into the devise. The devise (Bionica Microdose) with
the Company's treatment embedded in the devise has been FDA approved and
in use since 1988. The treatment has been refined over the years including
clinical use on human subjects, and clinical trials for over ten years with
constant following of patients to demonstrate the ability of the treatment to
prevent, stop and in some ways reverse the common complications of diabetes.
Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000 and December 31, 1999
NOTE 3 - ACQUISITION OF INTANGIBLE ASSETS (continued)
Patients that have undergone regular treatments have reported improvements in
diabetes related health complications such as restoration of kidney function or
cessation of kidney degeneration, restoration of eyesight or cessation of
eyesight degeneration, improved heart metabolism, cessation of diabetic
hyper/hypo glycemic blackouts, and improved sense of general health and well
being and other benefits. Presently, ADRI and five private clinics administer
the therapy to patients on a fee basis. The Company carries this asset on it's
books at a cost of $12,548,180 paid in stock and cash.
The Company issued 1,232,261 shares of common stock for all the outstanding
shares of AMT (800,000 shares). The only asset of AMT was the license to
market a therapy known as hepatic activation or metabolic activation. As
part of the acquisition, the Company agreed to pay a $50,000 outstanding
debt of AMT, pay all legal costs of the acquisition, and pay directly to the
stockholder of AMT, cash in the amount of $150,000 over a period of 10
months.
Hamilton May
Hamilton May Corporation has sold the Company a license to market, and
otherwise exploit, that certain mechanical device known as the Hamilton May
Pump (the pump). The license includes any and all improvements to the pump
and rights to patent protection if a patent, covering the pump, is ever
granted. The pump has been developed under the direction of Dr. Nardo Zaias
f Miami, Florida. The pump has been shown to have the ability to deliver
pulses of insulin and insulin related products to patients with tremendous
precision and without shear. The pump has the feature of being a two-way
system in that it has the capacity to both deliver and draw when attached to a
patient. The pump is in design stage and has not been approved by the FDA.
The Company issued 300,000 shares of common stock for the Hamilton/May pump.
Herein is a summary of the purchase of Advanced Metobolic Technology (AMT)
and Hamilton/May pump:
AMT
Purchase of AMT intellectual properties:
Stock (1,232,261 shares @ $10 per share) $12,322,610
Cash paid for legal services on transaction 25,570
Cash paid over time ($15,000 over 10 months)(note 6) 150,000
Assumption of debt (note 6) 50,000
12,548,180
Hamilton/May
Purchase of Hamilton/May pump
Stock (300,000 shares @ $10 per share) 3,000,000
Total $15,548,180
Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000 and December 31, 1999
NOTE 3 - ACQUISITION OF INTANGIBLE ASSETS (continued)
The amortization of the intellectual properties of AMT and Hamilton/May
began June 30, 1999. Amortization expense for 1999 is $777,408.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
Property and equipment are recorded at cost. Repairs and maintenance are
charged to operations, and renewals and additions are capitalized.
Property and equipment consists of the following:
December 31,
1999 1998
Computer Equipment $ 3,008 $ -
Less: Accumulated Depreciation (600) -
$ 2,408 $ -
Depreciation is based on the estimated useful life of the asset on a
straight line basis over 5 years.
Depreciation expense for 1999 and 1998 was $600 and $0, respectively.
Depreciation expense was $150 for the quarters ending March 31, 2000 and 1999.
NOTE 5 - USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. In these financial
statements, assets, liabilities and earnings involve extensive reliance on
management's estimates. Actual results could differ from those estimates.
NOTE 6 - RELATED PARTY TRANSACTIONS
At the time of the purchase of American Metabolic Technology (Note 3),
the Company agreed to pay $150,000 in closing and other costs over a period
of time and another $50,000 for research performed by another research
development firm for AMT before the purchase. These payments were part of the
negotiated purchase price of AMT and were included in the basis of the cost of
AMT. $17,187 was paid in 1999.
Solid State Farms and the Company have several common shareholders with the
Company and has entered into a 7% royalty agreement for any sale of its
products or services. The Company has advanced $783,595 towards those.
royalties as of March 31, 2000. (See Note 7 and 8).
Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000 and December 31, 1999
NOTE 7 - PREPAID EXPENSES
As part of the licensing agreement with Solid State Farms, Inc. (Note 8), the
Company has agreed to pay a royalty of 7% of all sales of products or services
from the Solid State technology. The contract calls for advances to be paid
against the royalties to assist Solid State in the development of its current
and future products and other ongoing general overhead of Solid State. In the
first quarter, 2000, the Company advanced $533,892 ($33,892 in cash, $500,000
in stock) towards these expenses.
Prepaid expenses consists of the following:
Advances to affiliate for advance
royalties (Note 8) $ 783,595
$ 783,595
NOTE 8 - COMMITMENTS AND CONTINGENCIES
As part of the purchase of AMT, the Company agreed to pay $200,000 to Advanced
Metabolic Systems (AMS), former parent of AMT, in closing costs and other
expenses related to the previous licensing agreement between AMS and Aoki
Diabetes Research Institute (ADRI) to fund the continuing research of ADRI into
advancing the metabolic activation process through a 5% royalty on all revenues
of the metabolic activation technology developed by AMT. The Company also
agreed to pay AMS $75,000 for services related to the insurance billing of AMT
for its metabolic activation therapy. $31,250 of unpaid consulting fees was
accrued at March 31, 2000.
The Company signed an agreement effective June 30, 1999 to fund two consulting
contracts for a total cost of $220,000 per year ($18,334 per month). Of this
amount, $7,500 is accrued per month until such time as the Company can
determine that it can pay the additional compensation. The consulting contracts
are for a period of two years and is renewable for another year upon approval of
both parties. The consulting agreement for $10,000 per month is payable in cash
or restricted stock which will be valued at one half of the average bid price
for a period of 30 days before the payment of the services. $133,000 in
compensation was accrued for the period ended March 31, 2000.
In 1999, The Company entered into a licensing agreement with Solid State Farms,
Inc. for their 44 international patents covering proprietary technology to
monitor blood glucose levels non-invasively. The agreement calls for a payment
of a 7% of the adjusted gross sales price on all licensed products. The Company
has made advance royalty payments of $783,595 on this royalty as of March 31,
2000.
NOTE 9 - STOCK OPTIONS/PRIVATE PLACEMENT OF RESTRICTED STOCK
In March, 1999, the board of directors set the price of restricted stock sales
at $10 per share and offered a foreign corporation an extended agreement for
a period of one year to purchase 50,000 restricted shares for the $10 price.
Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000 and December 31, 1999
NOTE 9 - STOCK OPTIONS/PRIVATE PLACEMENT OF RESTRICTED STOCK (continued)
In August, 1999, the Company issued a one year option to Hank Bagly to purchase
up to 10,000 shares at a price of $6.00 each. No options were exercised in
1999.
In November, 1999, the Company issued a five year option to M. H. Meyerson and
Co., Inc. to purchase up to 300,000 shares at a price of $10 each in exchange
for investment banking services during the five year term. No options were
exercised in 1999.
NOTE 10 - REVERSE STOCK SPLIT
In 1998, the Company shareholders approved a 1 for 400 reverse stock split of
its common shares. The financial statements have been restated retroactively
to show the effects of the split.
NOTE 11 - MARKET SEGMENT INFORMATION
The company is in the business of providing equipment for the monitoring
and treatment of diseases of improper metabolism including its first major
market, Diabetes. The company has three independent but related lines of
products and services; a) non-invasive biological monitoring; b) metabolic
activation equipment and treatment, and c) new high accuracy infusion devices
for the automatic delivery of its treatments.
Non-invasive Biological Monitoring
An exclusive worldwide license to exploit, manufacture and market patented
devices to non-invasively determine blood glucose, hemoglobin A1C, and other
blood levels to help treat diabetes and potentially other diseases. These
device prototypes are in development, are being tested and refined, and have
not been submitted for approval by the US Food and Drug Administration ("FDA").
Metabolic Activation
An exclusive license to exploit and market a patented metabolism treatment
called Metabolic Activation (also known as hepatic activation of Continuous
Intermittent Insulin Therapy, CIIIT in some medical publications).
This treatment is delivered by a special infusion device with the treatment
programmed into the device, and is FDA approved since 1988. The treatment
has been in development for over ten years by Advanced Metabolic Systems, Inc.,
and has been used for the last ten years, with constant following to
demonstrate the stopping of the complications of diabetes, and certain other
metabolism related disease states. The Company acquired this treatment,
business, licenses, special infusion devices and know-how by exchange of its
shares with Advanced Metabolic Systems, Inc., (AMS).
Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
March 31, 2000 and December 31, 1999
NOTE 11 - MARKET SEGMENT INFORMATION (continued)
Infusion Devices
An exclusive worldwide license to finish development, exploit, manufacture and
sell an ultra accurate pumping system which will replace the current FDA
approved device, and provide for automatic delivery of the treatment, and any
insulin or insulin related products. This technology was acquired from
Hamilton/May, Inc.
As of March 31, 2000, the Company has not realized significant income from any
f the three distinct technologies. Other selected financial information
regarding each segment as follows:
<TABLE>
<CAPTION> MARKET SEGMENT
Biological Metabolic Infusion
Monitoring Activation Devices Corporate Total
Income Statement Information
<S> <C> <C> <C> <C> <C>
Sales $ - $ 26,700 $ - $ - $26,700
Expenses - 368,905 75,000 73,483 517,388
Profit/loss from operations - $(342,205 ) $ 75,000)$(73,483) (490,688)
Balance Sheet Information
Assets $ - $11,630,714 $2,775,000 $ 6,275 15,281,989
Liabilities $ - $ 289,342 $ - $ 42,250 $31,592
</TABLE>
DIABETEX INTERNATIONAL CORPORATION
(A DEVELOPMENT STAGE COMPANY)
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES:
The Company's working capital for the first three (3) months of
2000 decreased $ 90,072 from December 31, 1999 to $351. Since the
Company was first being formed during 1999 there is no similar period
with which to compare these results. The decrease in working capital
is primarily due to the fact that the Company is in the development
stage and its major products are still in the development stage as well
resulting in poor sales and revenues results. The Company continues its
efforts to raise working capital through various means of private and
public financing.
RESULTS OF OPERATIONS:
Net sales for the first three (3) months of 2000 were $ 26,700 an
increase over the same period in 1999. Sales revenues are the
result of the Company's Metabolic Activation therapies. The pump
and glucose monitoring devices have yet to be sold on the open
market, as they are still under development.
The operating loss for the first three (3) months of 2000 was
$491,000. This loss is due to the Company's minimal sales and the
development costs for the pump and glucose monitoring devices.
The Company's Metabolic Activation therapies are responsible for
all of the Company's sales to date. While the benefits of these
therapies have been tested and proven over the last ten (10) years,
they are recently becoming wide spread. Management is confident
that these therapies will continue to gain wide acceptance in the
medical industry and will provide significant revenues in the future.
There are no financial accounting standards that have become effective
during this period that will have any substantial effect on the Company's
financial condition or results of its operations.
PART II OTHER INFORMATION
Item #6 Exhibits and Reports on Form 8K
(a) Exhibit 27 Financial Data Schedule
(b) No reports have been filed on Form 8K during the quarter
ended March 31, 2000
PART III Signatures
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly cause this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Diabetex International Corp.
-----------------------------
Registrant
Dated: December 5, 2000 By: /s/ Benjamin Weisman
-------------------------
Benjamin Weisman, CEO
