SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
----- EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 2000 OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
----- ------- ------
COMMISSION FILE NUMBER: 0-30619
TRINITY MEDICAL GROUP USA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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FLORIDA 68-0438943
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(STATE OR OTHER JURISDICTION OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
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3753 HOWARD HUGHES PARKWAY, 2ND FLOOR, LAS VEGAS, NV 89109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES WITH ZIP CODE)
(415) 256-1995
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
N/A (FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. YES____ NO_____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest date.
Class Outstanding at July 10, 2000
Common Stock - $0.001 par value 10,226,000 shares
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INDEX
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COVER PAGE.............................................................................................1
INDEX..................................................................................................2
PART I - FINANCIAL INFORMATION
Item 1 - Interim Financial Statements
Balance Sheets......................................................................3
Statements of Operations............................................................4
Statements of Cash Flows............................................................5
Notes to Financial Statements.......................................................6
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................................9
PART II - OTHER INFORMATION
Item 2 - Changes in Securities and Use of Proceeds...........................................11
Item 6 - Exhibits and Reports on Form 8-K....................................................12
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PART I - FINANCIAL INFORMATION
ITEM 1. INTERIM FINANCIAL STATEMENTS
TRINITY MEDICAL GROUP USA, INC.
(a company in the development stage)
BALANCE SHEETS
ASSETS
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March 31, December 31,
2000 1999
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(unaudited)
Current Assets:
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Cash $ 66,260 $ 171,485
Subscription receivable from founding shareholders 9,600 9,600
Income tax refund receivable 18,951 18,951
------------------ ------------------
Total assets $ 94,811 $ 200,036
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accounts payable $ 2,000 $ 10,343
Accrued liabilities 103,253 84,595
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Total current liabilities 105,353 94,938
Convertible Notes Payable 762,500 732,500
Stockholders' deficit
Common Stock, $0.0001 par value, 50,000,000 shares authorized,
10,226,000 shares issued and outstanding 10,226 10,226
Additional paid-in capital 228,574 228,574
Deficit accumulated during the development stage (1,011,742) (866,202)
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Total stockholders' deficit (772,942) (627,402)
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Total liabilities and stockholders' deficit $ 94,811 $ 200,036
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The accompanying notes are an integral part of these statements.
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TRINITY MEDICAL GROUP USA, INC.
(a company in the development stage)
STATEMENTS OF OPERATIONS
Period From Inception (September 28, 1998) to March 31, 2000
And three months ended March 31, 2000
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Cumulative Three Months
from inception Ended
to March 31,
March 31, 2000 2000
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(unaudited) (unaudited)
Operating expenses:
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Research and development $ (294,000) $ -
General and administrative:
Acquisition costs (404,200) -
Administrative costs (199,914) (127,924)
Marketing costs (78,250) -
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Total operating expenses (976,364) (127,924)
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Other income (expense):
Interest income 3,070 1,042
Interest expense (30,003) (18,658)
Other (8,445) -
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(35,378) (17,616)
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Net Loss $ (1,011,742) $ (145,540)
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Basic and diluted loss per common share $ (0.01)
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Basic and diluted weighted average common shares outstanding (10,226,000)
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The accompanying notes are an integral part of these statements.
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TRINITY MEDICAL GROUP USA, INC.
(a company in the development stage)
STATEMENTS OF CASH FLOWS
Period From Inception (September 28, 1998) to March 31, 2000
And Three Months ended March 31, 2000
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Cumulative
from inception Three Months
to Ended
March 31, 2000 March 31, 2000
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(unaudited) (unaudited)
Cash flows from operating activities:
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Net loss $ (1,011,742) $ (145,540)
Adjustments to reconcile net loss to net cash used in
operating activities:
Stock issued for services 229,200 -
Loss on sale of investment 8,445 -
Changes in assets and liabilities:
Income tax refund receivable (18,951) -
Accounts payable 2,000 (8,343)
Accrued liabilities 103,253 18,658
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Net cash used in operating activities (687,795) (135,225)
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Cash flows from investing activities:
Purchase of investments (69,330) -
Proceeds from sale of investments 60,885 -
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Net cash used in investing activities (8,445) -
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Cash flows provided by financing activities:
Proceeds from sale of private placement units 762,500 30,000
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Net increase (decrease) in cash 66,260 (105,225)
Cash - beginning of year - 171,485
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Cash - end of year $ 66,260 $ 66,260
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Non-cash investing and financing activities:
Issuance of common stock to founding shareholders in exchange
for subscription receivable $ 9,600 $ -
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TRINITY MEDICAL GROUP USA, INC.
(a company in the development stage)
NOTES TO FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements contain all adjustments
(consisting only of normal recurring adjustments) which in the opinion of
management are necessary to present fairly the financial position of the Company
at March 31, 2000, and the results of its operations and its cash flows for the
three month period ended March 31, 2000. The financial statements do not include
comparative first quarter information because the Company had no activity during
the quarter ended March 31, 1999. Certain information and footnote disclosures
normally included in financial statements have been condensed or omitted
pursuant to rules and regulations of the Securities and Exchange Commission,
although the Company believes that the disclosures in the financial statements
are adequate to make the information presented not misleading.
The financial statements included herein should be read in conjunction with the
financial statements for the year ended December 31, 1999, included in the
Company's Form 10-SB filed with the Securities and Exchange Commission on May
12, 2000.
NOTE B - GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, the Company is in the development stage and, at March 31, 2000, has
accumulated losses from operations amounting to $1,011,742. For the three month
period ended March 31, 2000, and for the period from inception to December 31,
1999 the Company used $135,225 and $552,570, respectively, of cash in its
operations. The drug therapy, Remune, which the Company has potential rights to
market, must undergo several phases of trial testing before approval by the
Thailand government can be obtained and significant commercialization of the
drug can occur. This additional testing will require significant additional
financing. These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern
for a reasonable period of time.
Upon becoming a reporting company under United States securities laws, the
Company intends to acquire, in the near term, the rights to Remune and assume
the related obligations specified under the Stock Purchase Agreement from TMG.
The Company intends to market Remune in the countries where it has the rights
through partner or affiliated firms, which will carry out the local regulatory
requirements, distribution, and product support. The Company intends to finance
the aforementioned activities through a secondary offering for between
$15,000,000 and $20,000,000.
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TRINITY MEDICAL GROUP USA, INC.
(a company in the development stage)
NOTES TO FINANCIAL STATEMENTS
NOTE B - GOING CONCERN - CONTINUED
The Company's initial efforts have focused on the research and development of
Remune (through TMG) and securing sales and marketing rights in Thailand.
There can be no assurance that management will be successful in raising the
necessary funds to complete the clinical trials and obtain the necessary
government approvals for the manufacturing and sale of Remune. The Company's
ability to continue as a going concern will depend upon these factors and the
success of future operations.
NOTE C - CONVERTIBLE NOTES PAYABLE
In January 2000, the Company sold 6 units of its convertible notes payable at a
price of $5,000 per unit to accredited investors in a private placement
offering. Each unit consists of a $5,000, 10% note due August 30, 2001. Each
unit is convertible into 5,000 shares of the Company's common stock at the
election of the Company after December 31, 1999. Interest accrued on each unit
is convertible to common stock at a rate of $1 per share at the date of
conversion. As of March 31, 2000, no units had been converted to common stock.
NOTE D - SUBSEQUENT EVENT
On June 21, 2000, the Company began to raise additional capital under a new
private placement offering. The private placement offers a maximum of 125 units
at $4,000 per Unit. Each Unit consists of one hundred shares of the Company's
Series A Preferred Stock (the "Preferred Shares") and a non-callable common
stock purchase warrant (the "Warrant"), designated "A Warrants". Each Preferred
Share is convertible, at the Company's option, into 10 shares of the Company's
common stock, par value $0.001 (the "Common Stock"). Each of the A Warrants
entitles the registered holder to purchase up to one thousand shares of the
Common Stock at a price of $4.00 per share for a period of 24 months from the
date of the Private Placement Prospectus. The Preferred Shares and the Warrant
included in the Units will not be separately transferable until 90 days after
the date of the Prospectus or such earlier date as the Company may determine.
The Preferred Shares can be converted at the Company's discretion into Common
Stock no later than October 1, 2000 and with approval by the Securities and
Exchange Commission (the "SEC") for the registration of the shares of Common
Stock issuable upon conversion of the Preferred Shares and upon exercise of the
A Warrants. The Company has raised approximately $40,000 under this private
placement offering and has subscribed an additional $460,000.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Plan of Operation
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Trinity Medical Group USA, Inc. (the "Company") was incorporated in the State of
Delaware on September 28, 1998 and reincorporated in Nevada in November of 1999
with its principal place of business in California. In December 1999, as the
result of a reorganization, the Company became a Florida Corporation. The
Company is an affiliate of Trinity Medical Group, Ltd., a Thailand company
(http: //www.trinitygroups/trinity medical/dsmb.htm) ("TMG"). The Company is a
late development stage company with potential rights to market a patented
treatment for HIV, "Remune(R)" , designed to induce specific T cell responses in
people infected with the Human Immunodeficiency Virus (HIV). Remune (an
immune-based therapy consisting of whole inactivated HIV-1 virus depleted of its
gp120 coat protein) is based on Dr. Jonas Salk's vaccine technology. Remune is a
registered trademark of The Immune Response Corporation.
TMG was formed in 1995 after the principals of the TMG and The Immune Response
Corporation (NASDAQ: IMNR) entered into a License and Collaboration Agreement
(the "License and Collaboration Agreement") dated September 15, 1995 with The
Immune Response Corporation to develop and market Remune in ten Southeast Asian
countries including Malaysia, The Philippines, Singapore, Sri Lanka, Myanmar,
Laos, Cambodia, Vietnam and Indonesia, with Thailand as the lead nation (the
"Territory"). On the same day, TMG entered into a Stock Purchase Agreement (the
"Stock Purchase Agreement") with the Immune Response Corporation. Per the Stock
Purchase Agreement, TMG purchased 333,334 shares of The Immune Response
Corporations stock at $15 per share on April 30, 1996. TMG has agreed to make
additional equity investments of up to $10 million in The Immune Response
Corporation based on the achievement of certain milestones and governmental
approvals. TMG recognized Remune's potential in 1995 and paid The Immune
Response Corporation $5 million in cash to secure the rights to develop and
market Remune in Southeast Asia.
The Company entered into a Collaboration and Supply Agreement (the "Agreement")
with TMG, dated December 1,1999. Under the terms of the Agreement, the Company
will reimburse TMG for specified research personnel, travel, laboratory,
facility and publication costs associated with clinical trials of Remune until
full regulatory approval in Thailand is granted.
The Agreement also provides that the Company make its best efforts to capitalize
itself with at least $4,000,000 through sale or subscription of common class
shares not to exceed 1 million shares. The Company agrees to prepare and
complete all necessary documentation required for registration with the U.S.
Securities and Exchange Commission as a reporting company.
In 1999, TMG completed a Phase II double blind placebo controlled clinical trial
in Thailand, the results of which have been submitted for publication in a
scientific journal. In the clinical trial above, Remune was found to increase
mean CD4+ cell counts, with increases in both cellular and humoral immune
responses and stable viral load. A follow up study through eighty-eight (88)
weeks showed a significant decrease of viral load in 30% of the subjects.
On December 24, 1999, TMG applied for expanded testing with the Ministry of
Public Health in Thailand. The extended project which has been submitted for
approval will be coordinated by Mahidol University in Bangkok, Thailand and will
study up to 10,000 individuals. This extended study of Remune is not connected
to the request for full commercial approval by the Thai Food and Drug
Administration.
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The results of the Phase II controlled trial were also presented to the World
Health Organization (WHO) and the Joint United Nations Programme on HIV/AIDS
(UNAIDS) at a vaccine advisory committee meeting in Geneva, Switzerland on
February 23, 2000.
The results of the Phase II clinical trials in Thailand and other clinical
trials using Remune as a treatment for slowing HIV-related disease progression
are encouraging. The global burden of disease and death related to HIV is
increasing at a rate unmatched by any other pathogen. At present, the most
effective treatment for slowing HIV-related disease progression, antiretoviral
medication requiring a daily multi-pill regime, is complicated to administer,
requires close medical monitoring, is extremely costly, and can cause
significant adverse effects. The study conditions of the clinical trials in
Thailand allowed Remune to be assessed as a "mono-therapy", that is, without any
other anti-viral drugs. Remune requires a minimum of a once a quarter (or more
if needed) injection. As a result, Remune is both more economical and practical
for populations such as Thailand. The number of HIV infected people in Thailand
is currently estimated at 1.0-1.4 million people. The estimate for Southeast
Asia is approximately 9 million HIV-1 infected people. A formal submission of an
application for new drug registration of Remune with the Thai Food & Drug
Administration is planned during 2000.
Remune is potentially a very cost effective therapy for the treatment of HIV
among Thailand's poorest people.
Cash requirements over the next 12 months.
------------------------------------------
Pursuant to a private offering (the "December Private Placement"), the Company
raised $732,500 at the end of 1999 and an additional $30,000 during January
2000. In the December Private Placement, the Company sold to accredited
investors 152.5 units at a price of $5,000 per unit. Each unit consists of a
$5,000, 10% per annum note of the Company, due August 31, 2001, and convertible
into 5,000 shares of the Company's Common Stock, par value $.001 per share
(collectively, the "Units").
Over the next 12 months, the Company will require additional capital through the
sale of shares of capital stock or issuance of debt in order to meet its
business needs. The Company does not anticipate any revenue from the sale of
Remune in Thailand until the first quarter of 2001. The Company is in the
process of negotiating Remune licensing agreements and, if completed,
anticipates substantial revenue from licensing Remune in other countries during
the year but cannot predict the amount of proceeds or the timing of the
completion of such transactions.
The current cash on hand will be sufficient to fund operations through the
second quarter of 2000. During the second quarter we received subscriptions for
$500,000 in a private offering (the "June Private Placement") through issuance
of a new class of Preferred Shares and Warrant. We anticipate that the June
Private Placement wil be completed in the third quarter.
The proceeds from the June Private Placement are expected to be sufficient to
fund operations through the end of the calendar year 2000. In the third quarter
we plan to file a registration statement to register the shares of capital stock
issuable under the December Private Placement and the June Private Placement.
Product Research and Development Plans
--------------------------------------
The Company intends to secure regulatory approval for sale of Remune in Thailand
during the calendar year 2000. Our researchers have concluded a Phase II
clinical study in Thailand of about 300 individuals infected with HIV and
continue to analyze the study group. The results were presented in two major
scientific conferences in March 2000: at the UN/WHO AIDS conference in Geneva,
Switzerland and that UCLA
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AIDS Conference held in Palm Springs, California. A manuscript detailing the
study has been submitted to a major journal for publication.
Upon acceptance of the manuscript by a major scientific journal, the Company
believes it will have the necessary support to request regulatory approval of
Remune by the Thai Food and Drug Administration. The Company intends to have
Remune be considered for full approval by the Thai Food and Drug Administration
during 2000.
The Company is also trying to gain approval and support by the Thai Ministry of
Public Health for an extended study of Remune in up to 10,000 HIV infected
individuals. The application with the Thai FDA for full approval is not linked
in any way with the program proposed with the Thai Ministry of Public Health.
Upon approval of either the Thai FDA or the Thai Ministry of Public Health, the
Company intends to purchase plant, equipment and land leases in 2000 for a
handling and storage facility in Thailand. The facility will be located close to
the Bangkok International Airport and will receive Remune shipment in bulk. The
facility will be built to U.S. FDA Good Manufacturing Practice standards and
provide for climate controlled and secure warehousing. The estimated cost for
the facility is $5 million and will require six months to one year to construct.
The capital for this project would be provided by the sale of shares of capital
stock, issuance of debt or financing by a banking institution.
The Company intends to increase its employment base in the third quarter of
2000. Upon approval from either the Thai FDA or the Thai Ministry of Public
Health, the Company will add financial managers, engineering consultants and
additional directors. From our present level of two employees we estimate having
about 15 employees by year end.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Pursuant to an Agreement for the Exchange of Common Stock, dated December 31,
1999, between the shareholders of the Company and August Project III Corp., a
Florida corporation ("August Project"), August Project issued to the Company's
shareholders 5,226,000 shares of Common Stock in exchange for 100% of the
outstanding shares of the Company. In addition, certain shareholders of August
Project sold 4,867,000 shares to the shareholders of the Company in exchange for
$175,000. Following the merger, the shareholders of the predecessor Company
owned a total of 10,093,000 out of a total of 10,226,000 outstanding shares of
August Project. August Project was the surviving corporation after the merger.
Prior to the merger, August Project had been approved for listing on the
National Quotation Service Pink Sheets with the following trading symbol: AUUK.
On January 5, 2000, August Project changed its name to Trinity Medical Group
USA, Inc.
In connection with the December Private Placement the Company sold 152.5 units
to "accredited investors", as that term is defined in Regulation D promulgated
under the Securities Act of 1933 (the "Securities Act"), as amended. Each Unit
cost $5,000 and consisted of a $5,000, 10% per annum note of the Company due
August 31, 2001 convertible into 5,000 shares of the Company's common stock,
$0.001 par value, per share (the "Notes"). The aggregate offering price was
$762,500 and the Company received net proceeds in the amount of $757,500. The
Company believes that the exemption afforded by Section 4(2) of the Securities
Act and Regulation D promulgated thereunder, is applicable to the above
issuances as a transaction by an issuer not involving a public offering.
The notes issued in the December Private Placement will be converted to common
stock by the end of the third quarter of 2000.
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The Company has paid no dividends on its common stock and cannot assure that it
will achieve sufficient earnings to pay cash dividends on its common stock in
the near future. Further, the Company intends to retain earnings to fund its
operations. Therefore, the Company does not anticipate paying any cash dividends
on its common stock in the foreseeable future.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS:
27 Financial Data Schedule
B) REPORTS ON FORM 8-K
The Company did not file any reports on Form 8-K during the three
months ended March 31, 2000.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRINITY MEDICAL GROUP USA, INC.
/s/ James Namnath
-----------------
By: James Namnath
President
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