UNITED STATES 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, 1996
[ ] 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: 2-35700
Wasatch Pharmaceutical, Inc.
(Exact name of registrant as specified in charter)
Utah 84-0854009
State or other jurisdiction of (I.R.S. Employer
incorporation or organization I.D. No.)
714 East 7200 South, Midvale, Utah 84047
(Address of principal executive offices) (Zip Code)
(801) 566-9688
Issuer's telephone number, including area code
Not Applicable
(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). Yes [X ]
No [ ] and (2) has been subject to such filing requirements for the past
90 days. Yes [X ] 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 last practicable date.
Class Outstanding as of May 28, 1996
Common Stock, $.001 18,239,256
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB pursuant to the rules and
regulations of the Securities and Exchange Commission and, therefore, do
not include all information and footnotes necessary for a complete
presentation of the financial position, results of operations, cash flows,
and stockholder's equity in conformity with generally accepted accounting
principles. In the opinion of management, all adjustments considered
necessary for a fair presentation of the results of operations and
financial position have been included and all such adjustments are of a
normal recurring nature.
The unaudited balance sheet of the Company as of March 31, 1996, and
the related audited balance sheet of the Company as of December 31, 1995,
the unaudited related statements of operations and cash flows for the three
month periods ended March 31, 1996 and 1995, and the unaudited statement of
stockholders' equity for the period from September 7, 1989 through March
31, 1996, are attached hereto and incorporated herein by this reference.
Operating results for the quarter ended March 31, 1996, are not
necessarily indicative of the results that can be expected for the year
ending December 31, 1996.
<PAGE>
___________________________________________________________________________
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
___________________________________________________________________________
PLAN OF OPERATION
The Company owns the proprietary technology for the treatment of
various common skin disorders, including acne, eczema, and psoriasis and
has begun to introduce this technology through company-owned clinics. As a
follow-up to previous clinical studies, prototype clinics were established
two years ago in an effort to achieve similar success rates as the clinical
studies had achieved and to establish medical and administrative procedures
that could be duplicated in clinics across the country. Two prototype
medical clinics are currently in operation in Utah. Although the Company
has confirmed the technology through the successful treatment of hundreds
of patients over the last two years and has set up the administrative
procedures, the clinics have not reached a profitable level due to the lack
of funds for advertising and marketing. The Company does not at this time
have substantial assets to support significant future development and
expansion of its clinic operation without additional working capital. Due
to lack of assets and working capital, the Company's financial statements
contain "going concern" disclosure which places into question the Company's
ability to continue without substantial increases in revenues or additional
equity financing.
The Company is seeking funding to add four more clinics in major
metropolitan areas and to launch a major advertising and marketing campaign
to support each of the clinics. Management feels that the advertising
campaign along with working with health insurance companies and HMOs to
become a Preferred Provider and a physician referral program would increase
revenues above the break-even point and make each clinic profitable.
In April, 1996, the Company entered into a contract to sell 6,000,000
shares of its restricted common stock to Lindbergh-Hammar Associates of
Dallas, Texas at a price of $1.225 per share in exchange for 7,350 shares
of preferred stock, $1,000 par value. The preferred stock bears a non-
cumulative dividend rate of 5% per annum. The voting rights to the
preferred shares will remain with the board of directors of the Company
until such time as they are redeemed. Lindbergh agrees to redeem the
preferred stock shares over a two (2) year period of time. Should
Lindbergh require additional time to redeem all of the preferred shares
issued to the Company, the Company will be entitled to an additional ten
percent (10%) over and above the face and/or par value of the then
unredeemed preferred shares. The preferred stock shares will be called and
redeemed at par value in monthly increments equal to ten percent (10%) of
the Insurance Premium income generated as a result of the Company's stock
being assigned to the Capital and Surplus Account of the Insurance Company
(i.e., should the Company's shares receive a certification value of
$21,000,000; and should Lindbergh acquire an additional $4,000,000 block of
capital for the Insurance Company Capital and Surplus Account, causing the
Insurance Company to have cummulative Capital and Surplus of $25,000,000,
the Company would be entitled to 21/25 or 84% of the 10% of premiums).
Lindbergh agrees to call and redeem a minimum of One Hundred Thousand
($100,000) Dollars face value (par value) preferred stock by the end of
ninety days after receiving the Certified Public Accountant's Cerfitication
letter confirming the bid price, or value, of the trading shares of the
Company. Lindbergh also agrees to extend an option to the Company to
repurchase up to ninety percent (90%) of the 6,000,000 shares of the
Company's common stock to be issued to Lindbergh. This option to
repurchase these shares will be at a figure equal to 200% of Lindbergh's
original acquisition price; said option will expire at the end of three
years after the closing of this agreement.
In April, 1996, the Company agreed to sell a total of 150,000 shares
of unregistered common stock to two former directors and officers of the
company in a private placement transaction at approximately $.75 per share.
The sale of these shares was completed in July, 1996.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had current assets of $18,446 and
current liabilities of $1,061,648, resulting in a working capital deficit
of $1,043,202. The increase in the working capital deficit is due
primarily to the Company's operating losses which were $128,590 for the
three month period ended March 31, 1996. The majority of expenses are
related to the operation of the two existing prototype clinics, which are
both operating at a loss. The Company is trying to obtain funding to set
up four more clinics and to launch a major advertising and public relations
campaign which would bring in additional revenue. Management feels this
additional revenue would make the clinics profitable.
In June, 1996, the Company borrowed $2,100 from four unrelated
individuals on notes to be paid from the proceeds of a proposed public
offering, accruing interest at 15%, unsecured. In July, 1996, the Company
borrowed $40,000 from a former director of the Company, payable upon
demand, accruing interest at 10% and secured by a retirement fund owned by
the spouse of Gary Heesch, President of the Company.
The Company will continue to seek both debt and equity funding to
begin a marketing program to bring in additional revenue and to meet its
current obligations, however, due to the Company's financial condition, it
would be difficult to obtain debt financing.
RESULTS OF OPERATION
In the first quarter of 1996, the Company recorded revenue of $33,674,
compared to revenues of $70,729 for the same prior year period, a decrease
of 110%. There are two reasons for this decrease in revenue. During the
first quarter of 1995, the Company had three prototype clinics operating
and bringing in revenue. The clinic in Pocatello, Idaho was closed down in
February, 1996. Also, during the first quarter of 1995, the Company was
doing some test advertising which brought in additional revenue. The
Company's operating expenses decreased by 3.1% from the first quarter of
1995 to the first quarter of 1996, due to a substantial reduction in the
amount of advertising, which was partially offset by increased legal,
accounting and administrative expenses that were associated with the
Company becoming a public entity.
The Company anticipates that the losses will continue until funding is
obtained which will be used to launch the marketing program.
___________________________________________________________________________
ITEM 1. LEGAL PROCEEDINGS
___________________________________________________________________________
None
___________________________________________________________________________
ITEM 2. CHANGES IN SECURITIES
___________________________________________________________________________
None
<PAGE>
___________________________________________________________________________
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
___________________________________________________________________________
None
___________________________________________________________________________
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
___________________________________________________________________________
None
___________________________________________________________________________
ITEM 5. OTHER INFORMATION
___________________________________________________________________________
None
___________________________________________________________________________
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
___________________________________________________________________________
(a) Exhibits. No exhibits are included as they are either not
required or not applicable.
(b) Reports on Form 8-K. None
<PAGE>
___________________________________________________________________________
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.
WASATCH PHARMACEUTICAL, INC.
[Registrant]
Dated: July 16, 1996 /s/ David K. Giles
____________________________________
David K. Giles, Principal
Accounting Officer
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS
MARCH 31,
1996 DECEMBER 31,
(Unaudited) 1995
CURRENT ASSETS
Cash $ - $ 777
Accounts receivable - trade 3,495 2,081
Accounts receivable - stockholder 500 500
Inventory (Note 1) 13,851 9,374
Prepaid Expenses 600 600
-------- --------
Total Current Assets 18,446 13,332
PROPERTY AND EQUIPMENT (Note 1)
Furniture and office equipment 45,205 45,205
Less accumulated depreciation (12,526) (10,749)
Net property and equipment 32,679 34,456
OTHER ASSETS
Deposits 266 266
TOTAL ASSETS $ 51,391 $ 48,054
</TABLE>
<PAGE>
WASATCH PHARMACEUTICAL, INC.
( A Development Stage Company)
Consolidated Balance Sheets (Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
(DEFICIT)
MARCH 31, DECEMBER 31,
1996 1995
(Unaudited)
CURRENT LIABILITIES
Cash overdraft $ 25,808 $ 26,963
Accounts payable - trade 141,984 112,628
Accounts payable related party (Note 2) 12,500 12,500
Royalties payable 9,730 7,773
Accrued interest 107,450 90,306
Accrued taxes 34,536 29,911
Current portion of notes payable (Note 4) 729,640 649,640
Total Current Liabilities 1,061,648 929,72
LONG TERM LIABILITIES
Notes payable (less current portion) (Note4)
TOTAL LIABILITIES 1,061,648 929,721
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.001 par value, 1,000,000 2,463 2,463
shares authorized, 49,258 issued and outstanding
Common stock, $0.001 par value, 50,000,000
shares authorized, 12,089,256 shares
issued and outstanding. 12,089 12,089
Additional paid-in capital 184,051 184,051
Deficit accumulated during the development
stage (1,208,860) (1,080,270)
Total Stockholder's Equity (Deficit) (1,010,257) (881,667)
TOTAL LIABILITIES AND
STOCKHOLDERS'EQUITY (DEFICIT) $ 51,391 $ 48,054
</TABLE>
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Consolidated Statement of Operations
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE
THREE MONTHS ENDED
MARCH 31,
1996 1995
(Unaudited) (Unaudited)
REVENUES
Professional fee income $ 8,208 $ 24,719
Product sales $ 25,291 $ 45,890
Miscellaneous Income 175 120
Total Revenues 33,674 70,729
COST OF GOODS SOLD 1,807 4,995
GROSS PROFIT ON SALES 31,867 65,734
OPERATING EXPENSES
Salaries 34,895 0
Payroll taxes 3,804
Advertising 2,052 33,453
Professional services 14,400 19,800
Legal & accounting 13,200 0
Rent 9,969 8,751
Depreciation 1,777 1,444
Employee leasing 0 47,932
Consulting fees 34,580 34,525
General & administrative 26,679 -
Total Operating Expenses 141,356 145,905
INCOME (LOSS) BEFORE OTHER
INCOME (EXPENSE) AND PROVISION
FOR INCOME TAXES (109,489) (80,171)
OTHER INCOME (EXPENSES)
Interest income 0 0
Royalty expense (1,957) (3,536)
Interest expense (17,144) (8,955)
Total Other Expenses $ (19,101) $ (12,491)
</TABLE>
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Consolidated Statement of Operations (Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE
THREE MONTHS ENDED
MARCH 31,
1996 1995
(Unaudited) (Unaudited)
NET INCOME (LOSS) BEFORE
PROVISION FOR INCOME TAXES $ (128,590) $ (92,662)
Provision for income taxes 0 0
NET INCOME (LOSS) $ (128,590) $ (92,662)
NET INCOME (LOSS) PER SHARE
OF COMMON STOCK $ (0.01) $ (0.01)
</TABLE>
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Statement of Stockholder's Equity (Deficit)
<TABLE>
<CAPTION>
<C> <C> <S> <C> <C> <C>
Deficit
Accumulated
Additional During the
Preferred Stock Common Stock Paid-in Development
Shares Amount Shares Amount Capital Stage
Balance
September 7, 1989 - $ - - $ - $ - $ -
Stock issued at inception at
is approximately $.0005 to the
Company's founders for
services rendered - - 10,000,000 5,334
Contribution of capital by a
shareholder 23,509
Net loss from inception
through December 31, 1992 - - - - - (170,895)
Balance, December 31, 1992 - - 10,000,000 28,843 (170,895)
Contribution of capital by
a shareholder - - - 20,000 - -
Net loss for the year ended
December 31, 1993 - - - - - (92,931)
Balance, December 31, 1993 - - 10,000,000 48,843 - (263,826)
Common stock issued in
payment of loan fees at
$.005 per share in
December, 1994 - - 75,000 375 - -
Capital contributed by a
shareholder - - - 170,434 - -
Redemption and cancellation of
common stock for cash and
note payable - - (600,000) (25,000) - -
Net loss for the year ended
December 31, 1994 - - - - - (365,189)
Balance, December 31, 1994 - $ - 9475000 $194,652 $ - $ (629,015)
</TABLE>
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Statement of Stockholder's Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Deficit
Accumulated
Additional During the
Preferred Stock Common Stock Paid-in Development
Shares Amount Shares Amount Capital Stage
Balance, December 31, 1994 - $ - 9,475,000 $194,652 - $(629,015)
Stock issued at $.005
per share for services
rendered during 1995 - - 550,000 2,767 - -
Common stock issued at
$.005 per share in payment of
loan fees in
November, 1995 - - 287,216 1,419 - -
Capital contributed by a
share holder - - - 1,000 - -
Stock issued and exchanged
per merger agreement
between Medisys Research
Group, Inc. and Wasatch
Pharmaceutical, Inc. 49,258 2,463 1,777,040 (187,749) 184,051 -
Net loss for the year ended
December 31, 1995 - - - - - (451,255)
Balance, December 31, 1995 49,258 2,463 12,089,25 $12,089 184,051 (1,080,270)
Net loss for the three months
ended March 31, 1996 - - - - - (128,590)
Balance, March 31, 1996 49,258 $ 2,463 12,089,256 $12,089 $184,051 (1,208,860)
</TABLE>
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE
THREE MONTHS ENDED
MARCH 31,
1996 1995
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Income (Loss) (128,590) (92,662)
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided (Used)
by Operating Activities
Depreciation 1,777 1,444
Expenses paid with common stock
Expenses paid by shareholder
(Increase) decrease inreceivables (1,414) (3,434)
(Increase) decrease in inventory (4,477) 3,831
(Increase) decrease in prepaids (1,904)
(Increase) decrease in deposits 725
Increase (decrease) in cash overdraft (1,155) (89)
Increase (decrease) in accounts 29,356 9,178
payable
Increase (decrease) in accrued payables 6,582 5,863
Increase (decrease) in accrued interest 17,144 (2,838)
Net Cash Provided (Used) by
Operating Activities (80,777) (79,886)
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchase of fixed assets 0 1,376
Net Cash Provided (Used) by
Investing Activities 0 1,376
</TABLE>
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Consolidated Statement of Cash Flows (Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
FOR THE
THREE MONTHS ENDED
MARCH 31,
1996 1995
(Unaudited) (Unaudited)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from loans 80,000 50,000
Net Cash Provided (Used) by
Investing Activities 80,000 50,000
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (777) (31,262)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 777 34,968
CASH AND CASH EQUIVALENTS AT
END OF PERIOD 0 3,706
</TABLE>
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1996 and December 31, 1995
NOTE 1 - ORGANIZATION AND HISTORY
a. Organization
The consolidated financial statements presented are those of Wasatch
Pharmaceutical, Inc. (formerly Ceron Resources Corporation) (a
development stage company) (the Company), and its wholly owned
subsidiaries, Medisys Research Group, Inc. and American Institute of Skin
Care, Inc. The Company was incorporated under the laws of the state of
Utah on March 25, 1980. The Company was initially engaged in oil and
gas exploration and development. In February 1981, the Company merged
with Folio One Productions, LTD. (a Delaware Corporation) (Folio). The
transaction was recorded as a purchase of Folio by the Company. The
Company ceased operations in 1986 and has been inactive since that time.
Medisys Research Group, Inc. (Medisys), current a wholly-owned
subsidiary of the Company was incorporated for the purpose of
developing treatment programs for various skin disorders. Medisys was
organized on September 7, 1989 as a Utah Corporation.
American Institute of Skin Care, Inc. (AISC), currently a wholly-owned
subsidiary of the Company, was incorporated to administer the skin
treatment programs developed by Medisys. AISC was organized January
21, 1994 as a Utah corporation.
On December 29, 1995 Wasatch Pharmaceutical, Inc. (Wasatch) and
Medisys Research Group, Inc. (Medisys) completed an Agreement and Plan of
Reorganization whereby Wasatch issued 10,312,216 (on a 1 share for 1 share
basis) shares of its common stock in exchange for all of the issued and
outstanding common stock of Medisys. Pursuant to the reorganization, the
name of the Company was changed to Wasatch Pharmaceutical, Inc.
The acquisition was accounted for as a purchase by Medisys of Wasatch,
because the shareholders of Medisys control the company after the
acquisition. Therefore, Medisys is treated as the acquiring entity.
There was no adjustment to the carrying value of the assets or liabilities
of Wasatch in the exchange as the market value approximated the net
carrying value. Wasatch is the acquiring entity for legal purposes and
Medisys is the surviving entity for accounting purposes.
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. Cash and Cash Equivalents
Cash equivalents include short-term, highly liquid investments with
maturities of three months or less at the time of acquisition.
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1996 and December 31, 1995
NOTE 1 - ORGANIZATION AND HISTORY (Continued)
d. 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.
e. Provision for Taxes
At March 31, 1996, the Company had net operating loss carry forwards
of approximately $1,209,000 that may be offset against future
taxable income through 2010. No tax benefit has been reported in the
financial statements, because the Company believes there is a 50% or
greater chance the carry forward will expire unused. Accordingly, the
potential tax benefits of the loss carry forward are offset by a
valuation allowance of the same amount.
f. Inventory
Inventory is recorded at the lower of cost or market, on a first-in,
first-out basis.
g. Property and Equipment
Property and equipment consisted of the following:
March 31, December 31,
1996 1995
Furniture and fixtures $ 45,205 $ 45,205
Less accumulated depreciation (12,256) (10,749)
Net property and equipment $ 32,679 $ 34,456
Furniture and office equipment are depreciated using the straight-line
method over their estimated useful lives of five to seven years.
Depreciation expense was $1,777 and $1,444 for the three months ended
March 31, 1996 and 1995, respectively.
h. Principles of Consolidation
The consolidated financial statements include the accounts of the
Company's wholly owned subsidiaries, Medisys Research Group, Inc. and
American Institute of Skin Care, Inc. All material intercompany
transactions and balances have been eliminated.
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1996 and December 31, 1995
NOTE 2 - RELATED PARTY TRANSACTIONS
On October 11, 1994, the Company entered into an agreement with a
shareholder to redeem 600,000 shares of its issued and outstanding
common stock for $25,000. The Company paid the shareholder $12,500 upon
execution of the agreement, and an additional $5,000 during 1994. The
remaining balance of $7,500 is non-interest bearing and is due on demand.
During 1995, a director of the Company advanced $5,000 to the Company.
The advance is non-interest bearing and is due upon demand.
During 1994, the Company loaned $500 to one of its officers who is
also a shareholder. The amount bears interest at a rate of 7% per annum
and is due upon demand.
NOTE 3 - ROYALTIES PAYABLE
A subsidiary of the Company (Medisys) acquired the marketing rights to
certain skin care products during 1991. As part of the agreement,
Medisys is required to pay royalties equal to 5% of gross product sales.
Once royalties totaling $10,000,000 have been paid, Medisys will own the
technology associated with the skin care products. Annual royalty
payments are due April 1 of the following year.
NOTE 4 - NOTES PAYABLE
<TABLE>
<S> <C> <C>
March 31, December 31,
1996 1995
The following is a description of the
notes payable
Note payable, dated October 1, 1991,
payable to an attorney, due June 30,
1994, accruing interest at 10%,
unsecured $ 42,000 $ 42,000
Note payable, dated October 1, 1991,
payable to a CPA firm, due June 30,
1994, accruing interest at 10%,
unsecured. 34,000 34,000
Note payable, dated October 1, 1991,
payable to an attorney, due June 30,
1994, accruing interest at 10%,
unsecured 3,500 3,500
Note payable, dated May 9, 1994,
payable to an individual, due November
9, 1996, accruing interest at 10%,
unsecured 100,000 100,000
Balance forward $ 179,500 $ 179,500
</TABLE>
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1996 and December 31, 1995
<TABLE>
<S> <C> <C>
March 31, December 31,
1996 1995
Balance forward $ 179,500 $ 179,500
Note payable, dated July 20, 1994, payable to an
individual, to be paid from the proceeds of a
proposed public offering, accruing interest at
10%, unsecured 50,000 50,000
Note payable, dated July 20, 1994, payable to an
individual, to be paid from the proceeds of a
proposed public offering, accruing interest at
10%, unsecured 50,000 50,000
Note payable, dated July 20, 1994, payable to a
corporation, no stated due date, accruing
interest at 6%, unsecured 32,852 32,852
Note payable, dated October 7, 1994, payable
to an individual, to be paid from the proceeds of
a proposed public offering, accruing interest at
10%, unsecured 50,000 50,000
Note payable, dated November 14, 1994, payable
to an individual, to be paid from the proceeds of
a proposed public offering, accruing interest at
10%, unsecured 50,000 50,000
Note payable, dated December 14, 1994, payable
to an individual, to be paid from the proceeds of
a proposed public offering, accruing interest at
10%, unsecured 50,000 50,000
Note payable, dated April 25, 1995, payable to an
individual, to be paid from the proceeds of a
proposed public offering, accruing interest at
10%, unsecured 115,000 115,000
Note payable, dated June 14, 1995, payable to an
individual, to be paid from the proceeds of a
proposed public offering, accruing interest at
10%, unsecured 5,000 5,000
Balance Forward $ 582,352 $ 582,352
</TABLE>
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1996 and December 31, 1995
<TABLE>
<S> <C> <C>
March 31, December 31,
1996 1995
Balance Forward $ 582,352 $ 582,352
Note payable, dated August 23, 1995, payable to
an individual, to be paid from the proceeds of a
proposed public offering, accruing interest at
10%, unsecured 10,000 10,000
Note payable, dated September 2, 1995, payable to
an individual, to be paid from the proceeds of a
proposed public offering, accruing interest at
10%, unsecured 15,000 15,000
Note payable, dated November 28, 1995, payable to
an individual, to be paid from the proceeds of a
proposed public offering, accruing interest at
10%, unsecured 20,000 20,000
Various notes payable, dated October through
December, 1995 payable to individuals, to be
paid from the proceeds of a proposed public
offering, accruing interest at 10%,
unsecured 22,288 22,288
Note payable, dated January 10, 1996, payable to
an individual, to be paid from the proceeds of a
proposed public offering, accruing interest at
10%, unsecured 50,000
Note payable, dated January 29, 1995, payable to
an individual, to be paid from the proceeds of a
proposed public offering, accruing interest at
10%, unsecured 10,000
Note payable, dated February 28, 1995, payable to
an individual, to be paid from the proceeds of a
proposed public offering, accruing interest at
10%, unsecured 20,000
Total $ 729,640 $ 649,640
</TABLE>
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1996 and December 31, 1995
NOTE 5 - SUBSEQUENT EVENTS
On April 15, 1996, the Company entered into an agreement with
Lindbergh-Hammar Associates, Inc. (Lindbergh), to exchange 6,000,000
shares of its common stock for 7,350 shares of Preferred Stock of
Lindbergh. The voting rights of the 6,000,000 shares of the Company's
common stock will remain with the Company's board of directors and
Lindbergh will be granted one seat on the Company's board of directors.
Lindbergh will redeem the preferred stock shares at their par value of
$1,000 per share in monthly increments equal to ten percent (10%) of
the Insurance Premium income generated as a result of the Company's
stock being assigned to the capital and surplus account of Lindbergh.
Lindbergh will redeem a minimum of $100,000 face value of the
preferred stock within 90 days after receiving a Certified Public
Accountants Certification letter confirming the bid price or value of
the trading shares of the Company. Lindbergh will also extend an
option to the Company to repurchase up to 90% of the 6,000,000
shares of its common stock issued to Lindbergh at a price equal to 200% of
Lindbergh's original acquisition price. This option will expire three
years from the date of the agreement. All shares issued in accordance
with this agreement will be held in escrow until Lindbergh has redeemed all
of its preferred stock issued to the Company.
On April 1, 1996, the Company agreed to sell a total of 150,000 shares
of unregistered common stock to two former directors and officers of the
Company in a private placement transaction at approximately $.75 per
share. The sale of these shares was completed on July 2, 1996.
NOTE 6 - PREFERRED STOCK
The Company's preferred stock (Series A) entitles the holder to per-
share annual dividends equal to 20% of the Company's net income divided
by 300,000, times the number of shares of preferred stock outstanding
(3.28% of net income based on preferred stock outstanding at December
31, 1995 and 1994). Dividends are required to the extent that there is
net income and that the are funds legally available. To the extent
funds are not legally available in net income years, the payment of the
dividends calculated shall be deferred until such time as there shall be
funds legally available. The shares are redeemable at the option
of the Company at $2.00 per share plus accrued and unpaid dividends.
The shares have a liquidating value of $1.00 per share plus accrued and
unpaid dividends. There were no accrued and unpaid dividends at March
31, 1996 and December 31, 1995.
NOTE 7 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in
the normal course of business. However, the Company is in the development
stage and has not established a source of revenues sufficient to cover
its operating costs which would allow it to continue as a going concern.
The Company has reached an agreement with another corporation to raise
short- term funding. (Note 5). The Company plans to eventually seek
long-term funding through a stock offering. Management believes that
sufficient funding will be raised to meet the operating needs of the
Company during the development stage.
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1996 and December 31, 1995
NOTE 8 - BANK OVERDRAFT
$20,605 of the bank overdraft for March 31, 1996 and December 31, 1995
resulted from an overdraft with First Security Bank of Utah, N.A. which
was the subject of a lawsuit and resulted in a judgment against the
Company. In July, 1996, this debt including court costs and attorney's
fees was paid off and a Satisfaction of Judgment was registered with the
courts.
<PAGE>
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<PERIOD-END> MAR-31-1996
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