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 September 30, 1999
Commission file number: 0-30380
Diabetex International Corporation
--------------------------------------------------
(Exact name of registrant as specified in charter)
Nevada 87-048228
---------------------- -------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
142 Ferry Road, Suites 1 & 2, Old Saybrook, Ct. 06475
----------------------------------------------- ------------------
(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:
September 30, 1999 Common Shares 12,035,552 at par value $.001
PART 1 FINANCIAL INFORMATION
Diabetex International Corporation and Subsidiary
Consolidated Financial Statements
September 30, 1999
Diabetex International Corporation and Subsidiary
(Formerly Sheridan Industries, Inc.)
Consolidated Financial Statements
September 30, 1999, December 31,1998 and 1997
INDEPENDENT AUDITOR'S REPORT
Stockholders and Directors
Diabetex International Corporation and subsidiary
Sacramento, CA
We have audited the accompanying consolidated balance sheets of Diabetex
International Corporation (a Nevada Corporation) (a development stage
enterprise) and subsidiary as of December 31, 1998 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for the years then ended. These consolidated financial statements are the
responsibility of the company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on the financial
statements of Diabetex International Corporation for the period September 14,
1983 to December 31, 1996 were audited by other accountants whose report
dated January 15, 1997 expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
situation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Diabetex
International Corporation at December 31, 1998 and 1997, and the results of
its operations and cash flows for the years 1998 and 1997, and for the
period from September 14, 1983 (inception) to December 31, 1998 in conformity
with generally accepted accounting principles.
/s/ Crouch, Bierwolf & Chisholm
Salt Lake City, UT
September 28, 1999
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Sheridan Industries, Inc.
New York, NY
We have audited the accompanying balance sheets of Sheridan Industries, Inc.
(a development stage company) as of December 31, 1996 and 1995, and the
related consolidated statements of operations, stockholders' equity
(deficit), and cash flows for the years ended December 31, 1996, 1995 and
1994 and from the date of inception on September 14, 1993 through December
31, 1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the over
ation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sheridan Industries, Inc. as
of December 31, 1996 and 1995, and the results of its operations and cash
flows for the years ended December 31, 1996, 1995 and 1994 and from the date
of inception on September 14, 1993 through December 31, 1996 in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 4 to the
financial statements, the Company is a development stage company with no
operations to date. Since the Company has had no operations to date, there
is substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 4.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
/s/ Jones, Jensen & Company
January 15, 1997
Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1999 1998 1997
(unaudited) (audited) (audited)
CURRENT ASSETS
<S> <C> <C> <C>
Cash (Note 1) $ 6,057 $ - $ -
Account Receivable (Note 1) 35,500 - -
Prepaid expenses (Note 7) 144,928 - -
Total Current Assets 186,485 - -
Property, Plant & Equipment
(Note 4)(Net) 2,558 - -
Intangible Assets (Note 3) (Net) 15,159,476 - -
$15,348,519 $ - $ -
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 81,445 $ 4,050 $ 3,400
Accounts payable-related
party (Note 6) 200,000 - -
Total Current Liabilities 281,445 4,050 3,400
CONTINGENCIES AND
COMMITMENTS (Note 8) - - -
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock; $.002 par value;
50,000,000 shares authorized,
12,909,979, 42,511 and 42,511
shares issued and outstanding
(Note 2) 25,820 85 85
Additional paid-in capital 15,985,316 153,499 153,499
Deficit accumulated during the
development stage ( 944,062)(1 57,634) (156,984)
Total Stockholders' Equity 15,067,074 ( 4,050) ( 3,400)
$ 15,348,519 $ - $ -
</TABLE>
Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Operations
<TABLE>
<CAPTION> CONSOLIDATED STATEMENTS OF OPERATIONS
From
For the Inception on
Nine Months September 14,1983
Ended For the Year Ended
September 30 December 31,September 30,
1999 1998 1998 1997 1999
OPERATIONS (unaudited)(unaudited)(audited)(audited)(unaudited)
<S> <C> <C> <C> <C> <C>
REVENUES $ 35,500 $ - $ - $ - $ 35,500
EXPENSES
Amortization and
Depreciation 389,154 - - - 389,154
Professional Services 327,580 - 650 3,400 362,630
Legal 66,231 - - - 66,231
Public Relations 13,794 - - - 13,794
Administrative 25,170 - - 20,131 146,453
Total Expenses 821,929 - 650 23,531 978,262
NET LOSS BEFORE
INCOME TAXES (786,429) - (650) (23,531) (942,762)
PROVISION FOR
TAXES (Note 1) - - - (500 ) (1,300)
NET LOSS $ (786,429) $ - $ (650 ) $(23,031 )$(944,062)
LOSS PER SHARE
(Note 1) $ (.07) $ - $ (.02 ) $ (.54 )
AVERAGE SHARES
OUTSTANDING 12,035,552 42,511 42,511 42,511
</TABLE>
Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
(unaudited)
<TABLE>
<CAPTION>
Accumulated
Capital in Deficit During
Common Common Excess of Retained
STOCKHOLDERS' EQUITY Shares Stock Par Value Deficit
<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 (Note 10) 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 (Note 10) 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 (Note 10) 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 55 133,398 ( 133,853)
Loss for the Year - - - ( 100)
Balance, December 31, 1996 27,337 55 1 33,398 ( 133,953)
(continued)
</TABLE>
Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
(continued)
<TABLE>
<CAPTION> STOCKHOLDERS' EQUITY
Accumulated
Capital in Deficit During
Common Common Excess of Retained
STOCKHOLDERS' EQUITY Shares Stock Par Value Deficit
<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. (Note 2) for
$0 per share (Note 10) 82,500 165 (165) -
Shares issued for incentives
for loans to Aladdin
Transportation, Landmark,
Inc. and Over 100, Inc.
(Note 2) for $.80 per share
(Note 10) 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. (Note 2) ( 82,500) ( 165) 165 -
Shares issued for Presidential and
Regal Limousine Service (Note 2)
for $0 per share (Note 10) 4,000 8 ( 8) -
Shares canceled for Presidential
and Regal Limousine Service
(Note 2) ( 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)
(continued)
</TABLE>
Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity
(continued)
<TABLE>
<CAPTION> STOCKHOLDERS' EQUITY
Accumulated
Capital in Deficit During
Common Common Excess of Retained
SHAREHOLDERS' EQUITY Shares Stock Par Value Deficit
<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 1,232,261 2,465 12,320,145 -
Shares issued for intellectual
properties Hamilton-May, Inc.
at $10 per share 300,000 600 2,999,400 -
Expenses paid by shareholder in
Company behalf - - 4,050 -
Net Loss for the Period - - - (786,429)
Balance, September 30, 1999 12,909,979 $ 25,820 $ 15,985,316 $(944,062)
</TABLE>
Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION> CASH FLOWS
From
For the Inception on
Nine Months September 14,
Ended 1983 to
September 30, December 31, September 30,
1999 1998 1998 1997 1999
CASH FLOWS FROM (unaudited)(unaudited)(audited)(audited)(unaudited)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ ( 786,429)$ - $ ( 650) $ ( 23,031)$ (944,062)
Adjustments to net cash
used by operating activities:
Depreciation &
Amortization 389,154 - - - 389,154
Stock issued for services 250,000 - - - 281,000
Expenses paid by
a shareholder on the
Company's behalf 4,050 - - - 8,555
Increase (Decrease)
in accrued expenses 277,395 - 650 2,900 281,445
Increase (Decrease)
in prepaids ( 144,928) - - - ( 144,928)
Increase (Decrease)
accounts receivable ( 35,500) - - - ( 35,500)
Expenses paid by stock - - - 20,131 20,131
Net Cash Used by
Operating Activities ( 46,258) - - - ( 144,205) )
CASH FLOWS FROM
INVESTING ACTIVITIES
Cash paid for acquisition
of intangibles ( 225,570) - - - ( 225,570)
Cash paid for fixed
assets ( 3,008) - - - ( 3,008)
Net Cash Provided by
Investing Activities ( 228,578) - - - ( 228,578)
CASH FLOWS FROM
FINANCING ACTIVITIES
Issuance of common stock 280,892 - - - 394,665
Stock offering costs - - - - ( 15,825)
Net Cash Provided by
Financing Activities 280,892 - - - 378,840
NET INCREASE
(DECREASE)IN CASH 6,057 - - - 6,057
CASH, BEGINNING
OF PERIOD - - - - -
CASH, END OF PERIOD $ 6,057 $ - $ - $ - $ 6,057
CASH PAID FOR:
Interest $ - $ - $ - $ - $ -
Income taxes $ - $ - $ - $ - $ -
Non Cash Transactions
Stock Issuance for
Services $ 250,000 $ - $ - $ - $ 281,000
Acquisition of
Intangibles $15,322,610 $ - $ - $ - $15,322,610
</TABLE>
Diabetex International Corporation and Subsidiary
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1999 and 1998
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 the 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
December 31, 1999 and 1998
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
reporting 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 at 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
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 of 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 the fair market value.
Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998
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, publically traded prices, or some other fair value as best determined
by the board of directors with the facts and circumstances present at the
s to the general public, publically 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 8 patents 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
December 31, 1999 and 1998
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
ompensated. 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 December, 1999, 100,000 shares of stock were issued to Philip Blomquist
for services performed early in the year for the Company 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 purchased 3,450 shares of
restricted stock at $10 per share from a purchase agreement obtained in March
1999. (Note 9).
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
3100 O Street, in Sacramento, California.
This treatment is delivered by special intravenous infusion devise (pump)
with the treatment programed 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
December 31, 1999 and 1998
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
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 its 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 activitation 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
of 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 Company issued 300,000 shares of common stock for the Hamilton/May pump.
00 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
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
December 31, 1999 and 1998
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 (450) -
----------- ---------------
$ 2,558 $ -
============ ===============
Depreciation is based on the estimated useful life of the asset either on a
straight line basis over 5 years.
Depreciation expense for 1999 and 1998 was $600 and $0, respectively.
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 $249,703 towards those
royalties. (See Note 7 and 8).
Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998
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 of 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 1999, the Company advanced $249,703 towards these expenses.
Prepaid expenses consists of the following:
Advances to affiliate for advance royalties (Note 8) $ 119,928
Prepaid consulting fees note 8 25,000
--------------
$ 144,928
-
NOTE 8 - COMMITMENTS AND CONTINGENCIES
As part of the purchase of AMT, the Company agreed to pay $200,000 to
Advanced Metobolic 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. $12,500 of unpaid
consulting fees was accrued for the six months ended December 31, 1999.
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 services. Total compensation paid through December 31, 1999
was $7,000. Accrued compensation at December 31, 1999 was $103,000
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 $249,703 on this
royalty as of December 31, 1999.
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. 25,243 options remain unpurchased at December 31, 1999.
Diabetex International Corporation
(A Development Stage Company)
Notes to the Financial Statements
December 31, 1999 and 1998
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 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
December 31, 1999 and 1998
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 December 31, 1999, the Company has not realized significant income from
any of the three distinct technologies. Other selected financial information
regarding each segment as follows:
<TABLE>
<CAPTION> INCOME STATEMENT INFORMATION
Biological Metabolic Infusion
Monitoring Activation Devices Corp. Total
Income Statement
Information
------------------ ----------- ------------ ------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Sales $ - $ 35,500 $ - $ - $ 35,500
Expenses - 358,704 45,000 418,225 821,929
Profit/loss from
operations $ - $ ( 323,204)$ (45,00)$(418,225)$ ( 786,429)
Balance SheetInformation
Assets $ - $ 12,235,976 $2,955,000$ 157,543 $ 15,348,519
Liabilities $ - $ 215,000 $ - $ 66,445 $ 281,445
</TABLE>
NOTE 12 - GOING CONCERN
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has negative working
capital and has had recurring operating losses and is dependent upon
financing to continue operations. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Management intends to fund its subsidiaries' activities, according to the
business plan, and emerge profitable sometime in the future.
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES:
The Company's working capital at the end of nine month period ending
September 30, 1999 was $6,057. Since the
Company was first being formed during 1999 there is no similar period
with which to compare these results. The fact that the Company is in the
development stage and its major products are still in the development stage
as well results in poor sales and revenues. The Company continues its
efforts to raise working capital through various means of private and
public financing.
RESULTS OF OPERATIONS:
Net sales for the nine months ending Sept. 30, 1999 were $ 35,500.
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 this period $786,429. 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 September 30, 1999
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 Brucker Weisman
-------------------------
Benjamin Brucker Weisman, CEO
