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 June 30, 1999
[ ] 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: 0-22899
Wasatch Pharmaceutical, Inc.
(Exact name of registrant as specified in charter)
Utah 84-0854009
---------- -----------------
State or other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization
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 [] No [X ] 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 A Common Stock, $.001- 16,265,831 Issued and outstanding as of
June 30, 1999 (This amount includes 10,044 shares paid for but unissued awaiting
appropriate issue documentation and excludes 25,735,000 shares issued to secure
the Registrant's obligations and subscription receivable for 500,000 shares)
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The Registrant's 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 foot notes 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 Registrant as of June 30, 1999, and
the related audited balance sheet of the Registrant as of December 31, 1998, the
unaudited related statements of operations and cash flows for the three month
and six month periods ended June 30, 1999 and 1998 and from inception (September
7, 1989) through June 30, 1999, are attached hereto and incorporated herein by
this reference.
Operating results for the quarter and six months ended June 30, 1999 are not
necessarily indicative of the results that can be expected for the year ending
December 31, 1999.
The following financial statements are included in this report:
Consolidated Balance Sheet as of June 30, 1999 and
December 31, 1998................................................F-1
Consolidated Statements of Operations for the Six Months
and Quarter ended June 30, 1999,1998, and from inception
(September 7, 1989) through June 30, 1999.....................F-2, 3
Consolidated Statements of Changes in Common Stockholders'
(Deficit) for the Six Months and Quarter ended June 30,
1999, 1998 and from inception (September 7, 1989) through
June 30, 1999....................................................F-4
Consolidated Statements of Cash Flows for the Six Months
and Quarter ended June 30, 1999, 1998 and from inception
(September 7, 1989) through June 30, 1999.....................F-5, 6
Notes to the Consolidated Financial Statements.....................F-7
2
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS
OF OPERATIONS
OVERVIEW
The Company has proprietary technology for the treatment of various
common skin disorders, including acne, eczema, and psoriasis. After completing
successful clinical studies, prototype clinics were established with the goal of
duplicating the success rates achieved in the clinical environment and to
establish medical, business and administrative procedures that could be
duplicated in an Internet network of patients and doctors and through Company
clinics across the country. Two prototype treatment 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 five years and has
set up the business and administrative procedures, the clinics have not reached
a profitable level due to the lack of funds for advertising and marketing.
To this date, the Company has not had the resources to fully implement
its plan for the development and expansion of its clinic operation. Due to the
lack of working capital, the Company's financial statements contain a "going
concern" disclosure, which places into question the Company's ability to
continue without substantial increases in revenues or additional long-term
financing.
The Company is seeking funding to establish an Internet presence and
open additional clinics in major metropolitan areas as well as launch a major
advertising and marketing campaign to support each of its business strategies.
Based on successful historical models, management concludes that through direct
patient treatment on the Internet, working with health insurance companies and
HMOs and supplemented by a physician referral program, revenues could be
increased substantially with the infrastructure in place that is operating at
10% to 15% of clinic capacity.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company had current assets of $10,047 and current
liabilities of $3,290,984, generating a working capital deficit of $3,280,937,
which is a 12.1% increase from December 31, 1998. The increase in the deficit is
due to the Company's operating loss of $514,797 for the six-month period ended
June 30, 1998. The deficit was financed with new borrowings of $90,659,
additional shareholder investment of $150,071 and creditor forbearance of
$115,257.
RESULTS OF OPERATIONS
During the first six months ending June 30, 1999, the Company had
revenues of $25,664 compared to $40,651 during the same six months of 1998,a
decrease of $ 14,987 or 36.9%. The Company's operating expenses increased by
7.9% or $9,825 in the first six months of 1999, as compared to the same period
in 1998.
General and administrative expenses increased $49,210 from $175,494 in
the first six months of 1998.
Interest expense the first six months of 1999 was $181,366 versus
$64,742 in 1998. The increase is attributable to increased indebtedness of
$909,000 in the last half of 1998.
For the first half of 1999 the Company had a net loss of $514,797 compared to a
net loss of $321,151 in the same period of 1998. The Company anticipates that
the losses will continue until funding is obtained which will it to launch its
business plan and strategies.
3
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS - None.
ITEM 2. CHANGES IN SECURITIES
During the second quarter the following common share transactions
occurred:
a. Issued 365,000 restricted common shares for cash totaling
$140,000.
b. Issued 82,310 restricted common shares for loan fees.
c. Issued 2,918,700 restricted common shares for fees and
commissions in connection with fund raising efforts.
d. Issued 5,000 restricted common shares to cancel debt of
$6,342.47.
e. Issued 23,000 restricted common shares to employees as a stock
bonus.
f. Canceled 30,000 shares that had previously been issued for
collateral.
g. Issued 85,126 restricted common shares in miscellaneous
transactions.
The common shares were issued in reliance on the exemption from
registration provided by Section 4 (2) of the Securities Act of 1934
and the "Safe Harbor" of Regulation D, Rule 504.
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.
Exhibit
Number: Exhibit
27 Financial Data Schedule (included only in the
electronic filing of this document).
(b) Reports on Form 8-K
On April 5, 1999 the Company filed a report on Form 8K describing a
consulting agreement with The Vector Group for investment banking services
whereby they would receive 1.5 million shares.
4
<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.
Dated: April 18, 2000
By: /s/ David K. Giles
---------------------
David K. Giles
Principal Accounting Officer
5
<PAGE>
<TABLE>
<CAPTION>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEET
JUNE 30, 1999 AND DECEMBER 31, 1998
----------------------------------------
ASSETS
1999 1998
----------- -----------
(Unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash $ 230 $ 2,589
Accounts receivable - trade 3,492 7,175
Inventory 5,725 7,158
Prepaid expenses 600 600
----------- -----------
Total Current Assets 10,047 17,522
----------- -----------
PROPERTY AND EQUIPMENT
Clinic and office equipment 43,038 41,554
Less accumulated depreciation (31,977) (28,492)
----------- -----------
Net Property and Equipment 11,060 13,062
----------- -----------
OTHER ASSETS 200 200
----------- -----------
TOTAL ASSETS $ 21,307 $ 30,784
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 278,837 $ 237,609
Accrued interest 447,509 356,260
Accrued salaries 430,999 291,114
Payroll taxes 94,619 85,136
Other accrued expenses 33,925 60,628
Notes and advances currently due:
Short-term shareholder advances 27,166 18,157
Vendors 112,333 112,333
Stockholders and others 1,865,597 1,783,946
----------- -----------
Total Liabilities 3,290,984 2,945,183
----------- -----------
STOCKHOLDERS' DEFICIT
Preferred stock, $0.001 par value, 1,000,000
shares authorized 49,258 issued and outstanding 49 49
Common stock, $0.001 par value, 50,000,000 shares
authorized, 42,500,831 shares issued and outstanding 42,501 38,823
Additional paid-in capital 1,477,937 1,322,096
Accumulated development stage deficit (4,739,429) (4,224,632)
----------- -----------
(3,218,941) (2,863,664)
Less shares issued for future transactions (50,735) (50,735)
----------- -----------
Total Stockholders' Deficit (3,269,676) (2,914,399)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 21,307 $ 30,784
=========== ===========
</TABLE>
The accompanying footnotes are an integral part of this financial information
F-1
<PAGE>
<TABLE>
<CAPTION>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Quarter Ended From Inception
June 30, To June 30,
-------------------------- ------------
1999 1998 1999
--------- --------- ------------
REVENUES
<S> <C> <C> <C>
Professional fee income $ 3,661 $ 6,765 $ 222,029
Product sales 7,766 12,810 438,898
--------- --------- ------------
Total Revenues 11,427 19,575 660,927
--------- --------- ------------
OPERATING EXPENSES
Cost of products sold 1,319 1,248 49,619
Salaries 40,490 37,899 556,325
Employee leasing - - 218,745
Payroll taxes 3,361 3,100 52,919
Physicians fees 7,800 9,000 253,284
Rent 9,379 5,447 189,371
Advertising 299 (543) 214,337
Depreciation 1,385 1,314 31,956
Other 4,727 471 67,574
--------- --------- ------------
Total Operating Expenses 68,760 57,936 1,634,130
GENERAL AND ADMINISTRATIVE EXPENSE 140,597 95,981 2,624,765
INTEREST 89,366 29,522 731,744
--------- --------- ------------
Total Expenses 298,722 183,439 4,990,639
--------- --------- ------------
LOSS BEFORE DISCONTINUED OPERATIONS AND
THE PROVISION FOR INCOME TAXES (287,296) (163,864) (4,329,712)
LOSS FROM DISCONTINUED OPERATIONS - - (409,718)
--------- --------- ------------
NET LOSS BEFORE INCOME TAXES (287,296) (163,864) (4,739,430)
PROVISION FOR INCOME TAXES - - -
--------- --------- ------------
NET LOSS $(287,296) $(163,864) $ (4,739,430)
========= ========= ============
Loss per share before discounted operations $ (0.015) $ (0.018) $ (0.334)
Loss per share from discounted operation - - (0.032)
--------- --------- ------------
BASIC LOSS PER COMMON SHARE $ (0.015) $ (0.018) $ (0.366)
========= ========= ============
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 19,484,466 8,863,734 12,955,331
========== ========= ============
</TABLE>
The accompanying footnotes are an integral part of this financial information
F-2
<PAGE>
<TABLE>
<CAPTION>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
For the Six Months Ended From Inception
June 30, To June 30,
-------------------------- ------------
1999 1998 1999
--------- --------- ------------
REVENUES
<S> <C> <C> <C>
Professional fee income $ 7,942 $ 14,337 $ 222,029
Product sales 17,722 26,314 438,898
---------- --------- ------------
Total Revenues 25,664 40,651 660,927
---------- --------- ------------
OPERATING EXPENSES
Cost of products sold 1,610 2,670 49,619
Salaries 76,755 74,708 556,325
Employee leasing - - 218,745
Payroll taxes 6,600 6,535 52,919
Physicians fees 15,416 19,200 253,284
Rent 19,438 17,165 189,371
Advertising 1,785 (1,176) 214,337
Depreciation 2,700 2,629 31,956
Other 10,085 2,835 67,574
---------- --------- ------------
Total Operating Expenses 134,391 124,566 1,634,130
GENERAL AND ADMINISTRATIVE EXPENSE 224,704 175,494 2,624,765
INTEREST 181,366 64,742 731,744
---------- --------- ------------
Total Expenses 540,461 364,802 4,990,639
---------- --------- ------------
LOSS BEFORE DISCONTINUED OPERATIONS AND
THE PROVISION FOR INCOME TAXES (514,797) (324,151) (4,329,712)
LOSS FROM DISCONTINUED OPERATIONS - - (409,718)
---------- --------- ------------
NET LOSS BEFORE INCOME TAXES (514,797) (324,151) (4,739,430)
PROVISION FOR INCOME TAXES - - -
---------- --------- ------------
NET LOSS $ (514,797) $(324,151) $ (4,739,430)
========== ========= ============
Loss per share before discounted operations $ (0.034) $ (0.034) $ (0.334)
Loss per share from discounted operation - - (0.032)
---------- --------- ------------
BASIC LOSS PER COMMON SHARE $ (0.034) $ (0.034) $ (0.366)
========== ========= ============
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 15,336,347 9,464,303 12,955,331
=========== ========= ==========
</TABLE>
The accompanying footnotes are an integral part of this financial information
F-3
<PAGE>
<TABLE>
<CAPTION>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
---------------------------------------------------------
(Unaudited)
Preferred Common Stock Additional Accumulated Total
Stock ---------------------- Paid - In Development Stockholders'
Amount Shares Amount Capital Stage Deficit Equity
--------- ---------- --------- ------------ --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance forward December 31, 1998 $ 49 38,822,821 $ 38,823 $ 1,322,096 $ (4,224,631) $(2,863,664)
Shares issued in connection with:
Note extensions - 70,000 70 - - 70
Securities sold for cash - 70,000 70 6,930 - 7,000
Services rendered - 83,000 83 - - 83
Employee benefits 30,000 30 - - 30
Shares issued to potential investor to be used
as interim loan collateral - 30,000 30 - - 30
Net loss for the quarter ended March 31, 1999 - - - - (227,502) (227,502)
---- ---------- -------- ----------- ------------ -----------
Balance March 31, 1999 of stockholders'
equity-per committed contracts 49 39,105,821 39,106 1,329,026 (4,452,133) (3,083,952)
Shares issued in connection with:
Loan extensions 62,314 62 2,990 3,052
Securities sold for cash 400,000 400 139,600 140,000
Services rendered 2,957,696 2,958 - 2,958
Retirement of debt and interest 5,000 5 6,337 6,342
Cost of Raising Funds (16) (16)
Shares return by potential investor (30,000) (30) (30)
Net loss for the quarter ended June, 1999 - - - - (287,296) (287,296)
---- ---------- -------- ----------- ------------ -----------
Balance June 30, 1999 of stockholders'
equity-per committed contracts 49 42,500,831 42,501 1,477,937 (4,739,428) (3,218,941)
Shares issued for future transactions - (26,235,000) (51) (50,684) - (50,735)
---- ---------- -------- ----------- ------------ -----------
Net equity June 30, 1999 $ 49 16,265,831 $ 42,450 $ 1,427,253 $ (4,739,428) $(3,269,676)
==== ========== ======== =========== ============ ===========
</TABLE>
The accompanying footnotes are an integral part of this financial information
F-4
<PAGE>
<TABLE>
<CAPTION>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the Six Months Ended From Inception
June 30, To June 30,
-------------------------- ------------
1999 1998 1999
--------- --------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ (514,797) $ (324,151) $ (4,739,429)
Adjustments to reconcile net (Loss) to net cash
used by operating activities:
Depreciation and depletion 3,485 3,415 31,977
Depreciation and losses on fixed asset disposals
Clinic assets - (5,413) 15,234
Oil and gas assets - - 4,189
Loss on disposal of oil and gas properties - 382,933
Expenses paid with common shares 1,150
Increase (decrease) in working capital -
(Increase) decrease in receivables 3,683 6,936 (3,492)
(Increase) decrease in related party receivable 0 - -
(Increase) decrease in inventory 1,433 434 (5,725)
(Increase) decrease in prepaid expenses - 15,063 (600)
Increase (decrease) in accounts payable 41,228 794 278,837
Increase (decrease) in accrued interest 91,249 64,367 447,509
Increase (decrease) in other accruals 122,665 21,265 559,543
-------- -------- ---------
Net cash used by operating activities (251,054) (216,140) (3,029,024)
-------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (1,484) - (29,248)
(Increase) decrease in other assets - (200) (200)
-------- -------- ---------
Net cash provided (used) by investing activities (1,484) (200) (29,448)
-------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 90,659 216,644 2,466,866
Expenses paid by shareholder - - 38,323
Repayment of loans - (75,786) (456,791)
Proceeds from sale of common shares 150,071 10,000 660,536
Capital contributed by shareholder - - 154,800
Collection of share subscriptions - 51,453 141,726
Common shares exchanged for debt 9,464 - 21,782
Exercised stock options - - 125,250
Redemption of common shares - - (20,409)
Cost of raising capital (16) - (73,382)
-------- -------- ---------
Net cash provided used by financing activities 250,178 202,311 3,058,701
-------- -------- ---------
NET INCREASE (DECREASE) IN CASH (2,359) (14,029) 230
Balance at beginning of period 2,589 14,259 -
-------- -------- ---------
Balance at end of period $ 230 $ 230 $ 230
======== ======== =========
</TABLE>
The accompanying footnotes are an integral part of this financial information
F-5
<PAGE>
<TABLE>
<CAPTION>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
For the Quarter Ended
June 30, From
------------------------- Inception To
1999 1998 Jun. 30, 1999
-------- -------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $ (287,296) $ (163,864) $ (4,739,429)
Adjustments to reconcile net (Loss) to net cash
used by operating activities:
Depreciation and depletion 1,778 1,709 31,977
Depreciation and losses on fixed asset disposals
Clinic assets - (5,413) 15,234
Oil and gas assets - - 4,189
Loss on disposal of oil and gas properties - - 382,933
Expenses paid with common shares - 1,107
Increase (decrease) in working capital
(Increase) decrease in receivables (350) 6,631 (3,492)
(Increase) decrease in related party receivable - - -
(Increase) decrease in inventory 1,169 1,204 (5,725)
(Increase) decrease in prepaid expenses - - (600)
Increase (decrease) in accounts payable (5,024) 6,326 278,837
Increase (decrease) in accrued interest 20,976 31,720 447,509
Increase (decrease) in other accruals 76,354 12,215 559,543
-------- -------- ----------
Net cash used by operating activities (192,392) (108,365) (3,029,024)
-------- -------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (1,484) - (29,248)
(Increase) decrease in other assets 200,000 (200) (200)
-------- -------- ----------
Net cash provided (used) by investing activities 198,516 (200) (29,448)
-------- -------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings (184,526) 75,348 2,466,866
Expenses paid by shareholder - 38,323
Repayment of loans 26,065 (33,214) (456,791)
Proceeds from sale of common shares 142,958 660,536
Capital contributed by shareholder - 154,800
Collection of share subscriptions - 35,299 141,726
Common shares exchanged for debt 9,394 21,782
Exercised stock options - - 125,250
Redemption of common shares - (20,409)
Cost of raising capital (16) - (73,382)
-------- -------- ----------
Net cash provided used by financing activities (6,125) 77,433 3,058,701
-------- -------- ----------
NET INCREASE (DECREASE) IN CASH (0) (31,132) 230
Balance at beginning of period 230 31,362 -
-------- -------- ----------
Balance at end of period $ 230 $ 230 $ 230
======== ======== ==========
</TABLE>
The accompanying footnotes are an integral part of this financial information
F-6
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Registrant)
Notes to the Consolidated Financial Statements
June 30, 1999
(Unaudited)
NOTE 1 - NATURE AND HISTORY OF THE BUSINESS
The consolidated financial statements include Wasatch Pharmaceutical,
Inc. (a development stage company) (Wasatch or the Company), and its wholly
owned subsidiaries, Medisys Research Group, Inc. and American Institute of Skin
Care, Inc.
Medisys Research Group, Inc., a Utah corporation, (Medisys) was
incorporated on September 7, 1989 for the purpose of developing treatment
programs for various skin disorders. On January 21, 1994, American Institute of
Skin Care, Inc. (AISC) was incorporated as a wholly owned Utah subsidiary of
Medisys to administer the skin treatment programs developed by Medisys.
On December 29, 1995, Ceron Resources Corporation and Medisys completed
an Agreement and Plan of Reorganization whereby Ceron issued 85% of its
outstanding shares of common stock in exchange for all of the issued and
outstanding common stock of Medisys and the name was changed to Wasatch
The acquisition of Medisys by Ceron was accounted for as a purchase by
Medisys because the shareholders of Medisys control the surviving company. There
was no adjustment to the carrying value of the assets or liabilities of Ceron in
as much as its market value approximated the carrying value of net assets. In
summary, Ceron is the acquiring entity for legal purposes and Medisys is the
surviving entity for accounting purposes.
For the purpose of this financial presentation "Inception" shall mean
September 7, 1989, which was the commencement of Medisys operations.
Disposition of Oil and Gas Business - On November 20, 1996, Wasatch
exchanged 2,000,000 of its common shares for a 25% interest in fifty oil and gas
wells located in western West Virginia. Under the terms of the agreement,
Wasatch's was entitled to 25% of the revenues and incurred 25% of the operating
expenses from the wells. The property operator holds a vendor's lien that
entitles it to offset future revenues against accumulated operating deficits not
covered by revenues.
At the time they were acquired, the properties were not economically
productive. The transaction was based on the property developer raising the
funds to increase productivity in each of the wells in 1997. The Company would
not bear any of the enhanced production costs. There were no costs incurred for
reworking wells in 1997 or 1996.
In third quarter of 1997, Wasatch called upon the oil and gas property
developer to demonstrate its ability to meet commitments under the acquisition
agreement. The developer acknowledged that they were unable to meet the
contractual commitments. .In November 1997, the Wasatch Board of Directors
authorized management to exchange the Company's West Virginia oil and gas
properties for the common shares issued by Wasatch. Negotiations commenced and
an acceptable solution was reached in February 1998. Under the agreed upon
exchange arrangement, Wasatch would return title to the fifty oil and gas wells
acquired in exchange for 1,800,000 of the original shares issued and a release
from all obligations associated with the oil and gas operations. In addition,
Wasatch agreed to forgive a $520,390 debt owed it for the purchase of common
stock by an affiliate of the developer.
F-7
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Registrant)
Notes to the Consolidated Financial Statements
June 30, 1999
(Unaudited)
NOTE 2 - CHANGES IN PRESENTATION
Certain financial presentations for the second quarter and first six
months of 1997 have been reclassified to conform to the 1998 presentation.
NOTE 3 - GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the comparative calendar six
month and three month periods ended and from inception through June 30, 1998
are:
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS ENDED INCEPTION
ENDED JUNE 30, JUNE 30, TO JUNE 30,
1999 1998 1999 1998 1999
-------------- ------------ ------------ ----------- -----------------
<S> <C> <C> <C> <C> <C>
Officer's compensation $ 114,518 $ 70.777 $ 74,479 $ 36,535 $ 1,090,043
Legal and accounting 96,807 25,609 61,065 12,231 340,740
Finders fee 197 15,011 52 7,761 85,189
Travel 1,252 6.271 683 1,625 74,373
Telephone 3,169 6,465 1,928 2,826 64,245
Insurance 716 261 15,912
Postage 1.812 937 15,822
Payroll tax penalties 0 0 36,569
Other 8,761 28,834 2,389 6,465 901,872
-------------- ------------ ------------ ----------- -----------------
$ 224,704 $ 155,498 $ 140,597 $ 155,498 $ 2,624,764
============== ============ ============ =========== =================
</TABLE>
NOTE 5 - GOING CONCERN
The Registrant'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 Registrant is in the development stage and has not
established a source of revenues sufficient to allow it to continue as a going
concern. The Registrant is seeking an agreement to raise short-term funding and
plans to seek long-term funding through a stock offering. Management believes
that sufficient funding will be raised to meet the operating needs of the
Registrant during the remainder of development stage.
F-8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 230
<SECURITIES> 0
<RECEIVABLES> 3,492
<ALLOWANCES> 0
<INVENTORY> 5,725
<CURRENT-ASSETS> 10,047
<PP&E> 43,038
<DEPRECIATION> 31,977
<TOTAL-ASSETS> 21,307
<CURRENT-LIABILITIES> 3,290,984
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0
49
<COMMON> 42,501
<OTHER-SE> 1,477,937
<TOTAL-LIABILITY-AND-EQUITY> 21,307
<SALES> 17,722
<TOTAL-REVENUES> 25,664
<CGS> 1,610
<TOTAL-COSTS> 134,391
<OTHER-EXPENSES> 224,704
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 181,366
<INCOME-PRETAX> (514,797)
<INCOME-TAX> 0
<INCOME-CONTINUING> (514,797)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (514,797)
<EPS-BASIC> (.034)
<EPS-DILUTED> (.034)
</TABLE>
