<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A-1
Quarterly Report Under Section 13 or 15(d)
of the Securities and Exchange Act of 1934
For the Quarter Ended: Commission File Number
---------------------- ----------------------
March 31, 2000 0-27727
GENE-CELL, INC.
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(Name of small business issuer in its chapter)
Nevada 91-1766174
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(State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
1010 Hercules, Houston, Texas 77058
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (281) 461-7996
---------------
Securities registered pursuant to section 12(b) of the Exchange Act: None
Check whether the Issuer (1) filed all reports required to be filed by
section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such
report(s), and (2) has been subject to such filing requirements for the
past 90 days. (1) Yes [X ] No [ ]
State the number of shares outstanding of each of the registrants classes
of common equity, as of the latest practicable date:
As of March 31, 2000, issuer had 17,778,412 shares of its $.001 par value
common stock outstanding.
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PART I FINANCIAL INFORMATION
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Item 1 Financial Statements
See pages F-1 through F-8 directly following the signature page of
this Form 10-QSB.
Condensed Balance Sheet as of March 31, 2000
and December 31, 1999 F-3
Condensed Statement of Operations for the three
months ended March 31, 2000 and 1999, and for
the period from inception, December 12, 1996,
to March 31, 2000 F-4
Condensed Statement of Stockholders' Equity for
the three months ended March 31, 2000 F-5
Condensed Statement of Cash Flows for the three
months ended March 31, 2000 and 1999, and for
the period from inception, December 12, 1996,
to March 31, 2000 F-6
Notes to Financial Statements F-7
Item 2 Plan of Operation
------ -----------------
For a complete understanding, this Plan of Operations should be read in
conjunction with Part I- Item 1. Financial Statements to this Form 10-QSB/A.
Gene-Cell, Inc. is a Nevada corporation involved in biopharmaceutical
research. The Company is considered a development stage enterprise because
it has not yet generated revenue from sale of its products. Since its
inception, the Company has devoted substantially all of its efforts to
research and development and the search for sources of capital to fund its
efforts.
During the period from inception, December 12, 1996 to December 31,
1999, the Company has not generated any revenue from sales of clinical
products and does not expect to generate any material revenue from sales of
clinical products for at least three to five years because during such time
period, management will use substantially all Company resources for further
development of its technology, including microinjection tools.
As of June 30, 1999, the Company had an accumulated deficit of
($2,034,213) funded by paid-in capital. During the years ended December
31, 1999, 1998 and 1997 the Company had losses from operations of
($594,000), ($499,260) and ($427,527), respectively. During the first
quarter of 2000, the Company recorded a loss of approximately $162,048.
The Company does not expect to make any major capital expenditures in the
foreseeable future, but expects that operating losses will continue until
such time as product sales generate sufficient revenues to fund its
continuing operations, as to which there can be no assurance.
2
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The Company has financed its operations mainly through the sale of its
common stock and had been entirely dependent on outside sources of
financing for continuation of operations. In January, 1999, the Company
received $500,000 under a promissory note collateralized by shares of its
common stock. In January, 2000, the Company received $300,000, followed
by an additional $200,000 in April, 2000, under the same promissory note.
It is the belief of the Company that these funds will be sufficient for the
Company to continue operations and its research and development efforts
through October, 2000.
The Company now seeks $2,000,000 to $10,000,000 of second round
financing to support increased R&D expenses anticipated in the next three
years. The Company will consider additional equity financing as well as
traditional bank loans and lines of credit if necessary. This investment
will be used specifically for: (1) continuing current R&D and pursuing new
lines of R&D; (2) developing a prototype of the automated microinjection
workstation; (3) licensing complementary patents and products to complete
the Company's proprietary non-viral gene therapy platform; (4) funding
sponsored research of contributory technologies; (5) establishing strong
corporate, scientific, and medical advisory boards (primarily through stock
options); (6) hiring full-time key management (especially V.P. of
Finance/Business Development) and recruiting additional
scientific/technical staff; and (7) increasing Dr. Brian Davis' involvement
as President and CEO from part-time to full-time. Obtaining such
additional funding may significantly increase yearly expenditures to
approximately $1,048,000, $2,373,000, and $3,000,000 for the years 2000,
2001, and 2002, respectively.
The Company is currently seeking relationships with larger
biopharmaceutical companies. To date, however, the Company has not entered
into any such relationships. The Company anticipates that three years from
now its research will be far enough along to enhance the Company's ability
to establish relationships with major pharmaceutical companies. These
relationships should help the Company get its technology through the
required government regulatory process and FDA approval.
The Company's capital requirements will depend on numerous factors,
including the progress of its research and development programs; the time
and cost involved in obtaining regulatory approvals; the cost of filing,
prosecuting, defending and enforcing any patent claims and other
intellectual property rights; the economic impact of competing
technologies; developments and changes arising from the Company's
continuing research; and the terms of any new collaborative, licensing and
other arrangements that the Company may establish. The Company believes
that its current assets and potential committed contributions from certain
accredited investors will be sufficient to meet the Company's short-term
operating expenses and capital expenditures. At the present time, however,
there is no way to predict when, and if, any additional contributions may
be made beyond those currently committed. Consequently, at the expiration
of current commitments, the Company will need to seek one or more
substantial new investors.
3
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The Company's ability to achieve profitability will depend, in part,
on its ability to successfully develop clinical applications and obtain
regulatory approvals for its products and to develop the capacity to
manufacture and market such products on a wide scale. There is no
assurance that the Company will be able to successfully make the transition
from research and development to manufacturing and selling commercial
microinjection therapy products on a broad basis. While attempting to make
this transition, the Company will be subject to all risks inherent in a
growing venture, including the need to produce reliable and effective
products and to develop marketing expertise and an effective sales force.
Further, the Company's success will depend, in part, on revenues
derived from the sale of the microinjection therapy products in the health
care market. In the event a market for the products the Company intends to
produce does not develop as anticipated, the Company's business, financial
condition and results of operations will be adversely effected.
Additionally, cost containment measures instituted by health care providers
as a result of regulatory reform or otherwise could result in greater
selectivity in the allocation of capital funds, and such, selectivity could
have a material adverse effect on the Company's ability to sell the
microinjection therapy and services.
The report from the Company's independent accountants includes an
explanatory paragraph which describes substantial doubt concerning the
ability of the Company to continue as a going concern, without continuing
additional contributions to capital. The Company may incur losses for the
foreseeable future due to the significant costs associated with research
and development activities which will be necessary for further development
of applications for the Company's microinjection therapy. See "Financial
Statements - Report of Independent Accountants".
PART II OTHER INFORMATION
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Item 1 Legal Proceedings
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None.
Item 2 Changes in Securities
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None.
Item 3 Defaults Upon Senior Securities
------ -------------------------------
None.
Item 4 Submission of Matters to a Vote of Security Holders
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None.
Item 5 Other Information
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None.
Item 6 Exhibits and Reports on Form 8-k
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(a) Exhibits - Exhibit 27- Financial Data Schedule
(b) Reports on Form 8-k - No reports on Form 8-k were filed
during the quarter.
4
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Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Gene-Cell, Inc.
Date: June 2, 2000 By: /s/ Brian R. Davis
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President
Date: June 2, 2000 By: /s/ Michael R. Davis
----------------------------------
Secretary
5
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Signatures
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Gene-Cell, Inc.
Date: June 2, 2000 By:
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President
Date: June 2, 2000 By:
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Secretary
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GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
------------------
FINANCIAL STATEMENTS
as of March 31, 2000 and December 31, 1999
and for the three months ended March 31, 2000 and 1999,
and for the period from inception, December 12, 1996,
to March 31, 2000
(Unaudited)
F-1
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GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
TABLE OF CONTENTS
----------------------
Page
Financial Statements:
Condensed Balance Sheet as of March 31, 2000
and December 31, 1999 F-3
Condensed Statement of Operations for the three
months ended March 31, 2000 and 1999, and for
the period from inception, December 12, 1996,
to March 31, 2000 F-4
Condensed Statement of Stockholders' Equity for
the three months ended March 31, 2000 F-5
Condensed Statement of Cash Flows for the three
months ended March 31, 2000 and 1999, and for
the period from inception, December 12, 1996,
to March 31, 2000 F-6
Notes to Financial Statements F-7
F-2
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GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED BALANCE SHEET
March 31, 2000 and December 31, 1999
-------------------
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
ASSETS (Unaudited) (Note)
------ ---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 154,178 $ 28,670
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Total current assets 154,178 28,670
Deposits 18,322 18,322
Equipment under capital leases, net 101,116 111,544
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Total assets $ 273,616 $ 158,536
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of capital lease obligations $ 38,413 $ 56,737
Accounts payable and accrued liabilities 8,052 10,618
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Total current liabilities 46,465 67,355
Capital lease obligations, net of current
portion 3,580 5,562
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Total liabilities 50,045 72,917
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Commitment and contingencies
Stockholders' equity:
Common stock, $.001 par value, 100,000,000
shares authorized, 17,778,412 shares issued
and outstanding 17,778 17,778
Additional paid-in capital 3,008,509 3,008,509
Subscription receivable (200,000) (500,000)
Losses accumulated during the development
stage (2,602,716) (2,440,668)
---------- ----------
Total stockholders' equity 223,571 85,619
---------- ----------
Total liabilities and stockholders'
equity $ 273,616 $ 158,536
========== ==========
Note: The balance sheet at December 31, 1999 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. See accompanying notes.
</TABLE>
F-3
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GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED STATEMENT OF OPERATIONS
for the three months ended March 31, 2000 and 1999 and
for the period from inception, December 12, 1996, to March 31, 2000
-----------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Inception
Ended Ended to
March 31, March 31, March 31,
2000 1999 2000
------------ ------------ -----------
<S> <C> <C> <C>
Operating, general and adminis-
trative expenses $ 44,071 $ 31,795 $ 843,475
Research and development costs 116,431 86,022 1,572,847
---------- ---------- -----------
Loss from operations (160,502) (117,817) (2,416,322)
Interest income 1,258 3,703 18,115
Interest expense (2,804) (6,429) (79,509)
---------- ---------- -----------
Net loss $ (162,048) $ (120,543) $(2,477,716)
========== ========== ===========
Weighted average shares
outstanding 17,778,412 18,778,412
========== ==========
Net loss per common share $ (0.01) $ (0.01)
========== ==========
</TABLE>
See accompanying notes.
F-4
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GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
for the three months ended March 31, 2000
-----------------
(Unaudited)
<TABLE>
<CAPTION>
Losses
Accumulated
During the
Common Stock Additional Devel-
-------------------- Paid-In Subscription opment
Shares Amount Capital Receivable Stage Total
-------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1999 17,778,412 $ 17,778 $3,008,509 $ (500,000) $(2,440,668)$ 85,619
Receipt of
subscription
receivable 300,000 300,000
Net loss (162,048) (162,048)
-------------------------------------------------------------------
Balance at
March 31, 2000 17,778,412 $17,778 $3,008,509 $ (200,000) $(2,602,716)$223,571
===================================================================
</TABLE>
See accompanying notes.
F-5
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GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
CONDENSED STATEMENT OF CASH FLOWS
for the three months ended March 31, 2000 and 1999, and
for the period from inception, December 12, 1996, to June 30, 1999
--------------------
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Inception
Ended Ended to
March 31, March 31, December 31,
2000 1999 1999
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (162,048) $ (114,114) $(2,477,716)
Adjustments to reconcile net loss
to net cash used in operating
activities 7,862 25,503 922,175
------------ ------------ ------------
Net cash used in operating
activities (154,186) (88,611) (1,555,541)
------------ ------------ ------------
Cash flows from financing activities:
Proceeds from sale of common stock - - 562,500
Proceeds from collection of subscrip-
tion receivable 300,000 500,000 1,300,000
Payment of stock offering costs - - (64,100)
Proceeds from notes payable to
officers and stockholders - - 117,887
Payments on notes payable to officers
and stockholders - - (40,000)
Payments on capital lease obligations (20,306) (16,683) (166,568)
------------ ------------ ------------
Net cash provided by financing
activities 279,694 483,317 1,709,719
------------ ------------ ------------
Net increase (decrease) in cash and
cash equivalents 125,508 394,706 154,178
Cash and cash equivalents at beginning
of period 28,670 109,408 -
------------ ------------ ------------
Cash and cash equivalents at end of
period $ 154,178 $ 504,114 $ 154,178
============ ============ ============
</TABLE>
See accompanying notes.
F-6
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GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
SELECTED NOTES TO FINANCIAL STATEMENTS
as of March 31, 2000 and December 31, 1999
and for the three months ended March 31, 2000 and 1999,
and for the period from inception, December 12, 1996,
to March 31, 2000
------------------
(Unaudited)
1: Organization
----------------
Gene-Cell, Inc. (the "Company") is a Nevada Corporation involved in
biopharmaceutical research. The Company's research is directed at
developing gene-based therapies for treatment of a wide variety of
genetic diseases and disorders using its proprietary technology for
microinjecting DNA and proteins into living cells. The Company was
originally incorporated as Becniel and subsequently adopted name
changes to Tzaar Corporation and, finally, to Gene-Cell, Inc. The
Company is considered a development stage enterprise because it has not
yet generated revenue from sale of its products. Since its inception,
the Company has devoted substantially all of its efforts to research
and development and the search for sources of capital to fund its
efforts.
2. Interim Financial Statements
--------------------------------
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-
QSB and Article 10 of Regulation S-B. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three-month periods ended March
31, 2000 and 1999 are not necessarily indicative of the results that
may be expected for the respective full years.
A summary of the Company's significant accounting policies and other
information necessary to understand these consolidated interim
financial statements is presented in the Company's audited financial
statements for the years ended December 31, 1999 and 1998.
Accordingly, the Company's audited financial statements should be read
in connection with these financial statements.
Continued
F-7
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GENE-CELL, INC.
(A CORPORATION IN THE DEVELOPMENT STAGE)
SELECTED NOTES TO FINANCIAL STATEMENTS, Continued
as of March 31, 2000 and December 31, 1999
and for the three months ended March 31, 2000 and 1999,
and for the period from inception, December 12, 1996,
to March 31, 2000
-------------------
(Unaudited)
3. Comprehensive Income
------------------------
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income, which requires a
company to display an amount representing comprehensive income as part
of the Company's basic financial statements. Comprehensive income
includes such items as unrealized gains or losses on certain investment
securities and certain foreign currency translation adjustments. The
Company's financial statements include none of the additional elements
that affect comprehensive income. Accordingly, comprehensive income
and net income are identical.
4. Estimates
-------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets or liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
5. Income Tax
--------------
The difference between the Federal statutory income tax rate and the
Company's effective income tax rate is primarily attributable to
increases in valuation allowances for deferred tax assets relating to
net operating losses.
F-8
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