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 September 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 - 16,844,535 issued and outstanding as of September
30, 1999.
(This amount includes 10,044 shares paid for but unissued awaiting appropriate
issue documentation and excludes 26,235,000 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 September 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 nine month periods ended September 30, 1999 and 1998 and from
inception (September 7, 1989) through September 30, 1999, are attached hereto
and incorporated herein by this reference.
Operating results for the quarter and nine months ended September 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 September 30, 1999 and
December 31, 1998...............................................F-1
Consolidated Statements of Operations for the Nine Months
and Quarter ended September 30, 1999,1998, and from
inception (September 7, 1989) through September 30, 1999.....F-2, 3
Consolidated Statements of Changes in Common Stockholders'
(Deficit) for the Nine Months and Quarter ended September
30, 1999, 1998 and from inception (September 7, 1989)
through September 30, 1999......................................F-4
Consolidated Statements of Cash Flows for the Nine Months
and Quarter ended September 30, 1999, 1998 and from
inception (September 7, 1989) through September 30, 1999.....F-5, 6
Notes to the Consolidated Financial Statements..................F-7,8
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 a network of 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 for clinic operations, 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 open additional clinics in major
metropolitan areas, to launch its treatment process and products over the
Internet and to commence a major advertising and marketing campaign to support
each of its business units. Management feels that through advertising, working
with health insurance companies and HMOs and supplemented by a physician
referral program, revenues could be increased substantially thereby improving
the 10% to 15% of clinic capacity currently being experienced.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company had current assets of $7,796 and
current liabilities of $3,506,122; generating a working capital deficit of
$3,498,326. Which is a 25% increase from December 31, 1998. The increase in the
deficit is due primarily to the Company's (i) operating loss ($799,000) and (ii)
the unsuccessful pursuit of infusion capital ( $350,000) and (iii) the interest
to service existing debt ($264,000).
RESULTS OF OPERATIONS
During the first nine months ending September 30, 1999, the Company
revenues remained minimal as the clinics continued to emphasize skill
maintenance and training. At the current level of business, less than 10% of
capacity, it will be very difficult to maintain skill levels and retain
important staff personnel. Over the last three years, revenues have decreased
33% annually and expenses have increased 3% to 6%.
The Company's operating expenses increased by 10,7% or $20,348 in the
first nine months of 1999, as compared to the same period in 1998. This was
driven by an increase in salaries and other semi-fixed clinic costs. G & A costs
increased 46% when you compare the nine months of 1999 to the nine months of
1998. The principal increases were officers compensation ($82,000) and
professional services ($79,500). The officers salaries increase reflects the new
Company policy of accruing the full amount authorized as compensation for the
period and not just the smaller amounts actually paid. The increases in
professional services of $79,500 are attributable to outside counsel's
preparation for the pending litigation with Lindbergh-Hammar and legal costs
associated with the Berkshire-Halifax matter.
Interest expense for the first nine months increased to $264,300in 1999
versus $177,906 in 1998. This increase reflects the Company's continued
dependency on debt financing as a vehicle for funding operations. During the
comparative nine months ending in September of 1999 and 1998, the net debt
increase was $264,000 and $773,000, respectively.
3
<PAGE>
For the first three quarters of 1999 the Company had a net loss of
$799,349 compared to a net loss of $556,844 in the same period of 1998. To
summarize previously discussed factors, the lack of fundamental operational
funding prohibits the Company from building its revenue base sufficiently to
support its continuing operation. The Company anticipates that the losses will
continue until funding is obtained which will be used to launch the major
elements of the business plan.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
During the third quarter the following common share transactions
occurred:
a. Issued 127,000 restricted common shares were issued to
consultants for services rendered.
b. Issued 2,500 restricted common shares to creditors for
extensions of due dates.
c. Issued 176,900 restricted common shares for cash consideration
totaling $18,845
d. Issued 272,304 restricted common shares for debt and interest
totaling $56,627.
e. Issued 500,000 restricted common shares as interim loan
collateral to be returned at debt satisfaction.
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
None
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 15, 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
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
----------------------------------------
ASSETS
1999 1998
----------- -----------
(Unaudited)
CURRENT ASSETS
<S> <C> <C>
Cash $ - $ 2,589
Accounts receivable - trade 2,364 7,175
Inventory 4,832 7,158
Prepaid expenses 600 600
----------- -----------
Total Current Assets 7,796 17,522
----------- -----------
PROPERTY AND EQUIPMENT
Clinic and office equipment 43,038 41,554
Less accumulated depreciation (33,539) (28,492)
----------- -----------
Net Property and Equipment 9,499 13,062
----------- -----------
OTHER ASSETS 10,200 200
----------- -----------
TOTAL ASSETS $ 27,495 $ 30,784
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 224,657 $ 237,609
Accrued interest 476,571 356,260
Accrued salaries 489,331 291,114
Payroll taxes 102,331 85,136
Other accrued expenses 34,370 60,628
Notes and advances currently due:
Short-term shareholder advances 92,840 18,157
Vendors 112,333 112,333
Stockholders and others 1,973,689 1,783,946
----------- -----------
Total Liabilities 3,506,122 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, 43,579,535 shares issued and outstanding 43,580 38,823
Additional paid-in capital 1,552,961 1,322,096
Accumulated development stage deficit (5,023,981) (4,224,632)
----------- -----------
(3,427,392) (2,863,664)
Less shares issued for collateral or notes receivable (51,235) (50,735)
----------- -----------
Total Stockholders' Deficit (3,478,627) (2,914,399)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 27,495 $ 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
September 30 From Inception
---------------------------- To September 30,
1999 1998 1999
---------- --------- ------------
REVENUES
<S> <C> <C> <C>
Professional fee income $ 4,300 $ 6,710 $ 226,329
Product sales 7,070 11,676 445,968
---------- --------- ------------
Total Revenues 11,370 18,386 672,297
---------- --------- ------------
OPERATING EXPENSES
Cost of products sold 993 930 50,611
Salaries 46,081 40,047 602,406
Employee leasing - - 218,745
Payroll taxes 3,710 3,395 56,628
Physicians fees 9,175 11,400 262,460
Rent 8,444 8,317 197,815
Advertising 250 1,056 214,587
Depreciation 1,281 1,314 33,237
Other 6,917 (132) 74,491
---------- --------- ------------
Total Operating Expenses 76,851 66,327 1,710,980
GENERAL AND ADMINISTRATIVE EXPENSE 136,136 71,588 2,760,901
INTEREST 82,936 113,164 814,679
---------- --------- ------------
Total Expenses 295,922 251,079 5,286,560
-------- -------- ---------
LOSS BEFORE DISCONTINUED OPERATIONS AND
THE PROVISION FOR INCOME TAXES (284,552) (232,693) (4,614,263)
LOSS FROM DISCONTINUED OPERATIONS - - (409,718)
---------- --------- ------------
NET LOSS BEFORE INCOME TAXES (284,552) (232,693) (5,023,981)
PROVISION FOR INCOME TAXES - - -
---------- --------- ------------
NET LOSS $ (284,552) $ (232,693) $ (5,023,981)
========== ========== ============
Loss per share before discounted operations $ (0.007) $ (0.012) $ (0.352)
Loss per share from discounted operation - - (0.031)
---------- --------- ------------
BASIC LOSS PER COMMON SHARE $ (0.007) $ (0.012) $ (0.383)
========== ========== ============
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 19,031,828 19,347,819 13,107,518
========== ========== ============
</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
For the Nine Months Ended
September 30, From Inception
---------------------------- To September 30,
1999 1998 1999
---------- --------- ------------
REVENUES
<S> <C> <C> <C>
Professional fee income $ 12,242 $ 21,047 $ 226,329
Product sales 24,792 37,990 445,968
---------- --------- ------------
Total Revenues 37,034 59,037 672,297
---------- --------- ------------
OPERATING EXPENSES
Cost of products sold 2,603 3,600 50,611
Salaries 122,836 114,755 602,406
Employee leasing - - 218,745
Payroll taxes 10,310 9,930 56,628
Physicians fees 24,592 30,600 262,460
Rent 27,882 25,482 197,815
Advertising 2,035 (120) 214,587
Depreciation 3,981 3,943 33,237
Other 17,002 2,703 74,491
---------- --------- ------------
Total Operating Expenses 211,241 190,893 1,710,980
GENERAL AND ADMINISTRATIVE EXPENSE 360,840 247,082 2,760,901
INTEREST 264,302 177,906 814,679
---------- --------- ------------
Total Expenses 836,383 615,881 5,286,560
---------- --------- ------------
LOSS BEFORE DISCONTINUED OPERATIONS AND
THE PROVISION FOR INCOME TAXES (799,349) (556,844) (4,614,263)
LOSS FROM DISCONTINUED OPERATIONS - - (409,718)
---------- --------- ------------
NET LOSS BEFORE INCOME TAXES (799,349) (556,844) (5,023,981)
PROVISION FOR INCOME TAXES - - -
---------- --------- ------------
NET LOSS $ (799,349) $ (556,844) $ (5,023,981)
========== ========== ============
Loss per share before discounted operations $ (0.019) $ (0.058) $ (0.352)
Loss per share from discounted operation - - (0.0313)
---------- --------- ------------
BASIC LOSS PER COMMON SHARE $ (0.019) $ (0.058) $ (0.383)
========== ========== ============
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 16,582,627 9,629,382 13,107,518
========== ========== ============
</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 62.31 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 in connection with:
Loan extensions 2,500 3 3
Securities sold for cash 176,900 177 18,668 18,845
Services rendered 127,000 127 127
Retirement of debt and interest 272,304 272 56,355 56,627
Shares issued to potential investor to be used
as interim loan collateral 500,000 500 500
Net loss for the quarter
ended September 30, 1999 - - - - (284,552) (284,552)
-- ---------- ------ --------- ---------- ----------
Balance September 30, 1999 of stockholders'
equity-per committed contracts 49 43,579,535 43,580 1,552,960 (5,023,981) (3,427,392)
Less: unfunded common shares issued - (26,735,000) (51) (51,184) - (51,235)
-- ---------- ------ --------- ---------- ----------
Net Equity September 30, 1999 $ 49 16,844,535 $ 43,529 $ 1,501,776 $ (5,023,981) $(3,478,627)
==== ========== ======== =========== ============ ===========
</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 Quarter Ended
September 30 From
---------------------------- Inception To
1999 1998 Sept. 30, 1999
--------- --------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss (284,552) (232,693) $ (5,023,981)
Adjustments to reconcile net (Loss) to net cash
used by operating activities:
Depreciation and depletion 1,562 1,707 33,539
Depreciation and losses on fixed asset disposals
Clinic assets - 15,234
Oil and gas assets 4,189
Loss on disposal of oil and gas properties 382,933
Expenses paid with common shares 1,054 -
Increase (decrease) in working capital
(Increase) decrease in receivables 1,128 (7,778) (2,364)
(Increase) decrease in related party receivable -
(Increase) decrease in inventory 893 (12) (4,832)
(Increase) decrease in prepaid expenses (5,269) (600)
Increase (decrease) in accounts payable (54,180) (4,087) 224,657
Increase (decrease) in accrued interest 29,062 33,254 476,571
Increase (decrease) in other accruals 66,489 10,729 626,032
--------- --------- -----------
Net cash used by operating activities (239,598) (203,095) (3,268,623)
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets - - (29,248)
Investment in Beehive Project (500,000) -
(Increase) decrease in other assets (10,000) 211 (10,200)
--------- --------- -----------
Net cash provided (used) by investing activities (10,000) (499,789) (39,448)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 173,767 843,216 2,640,633
Expenses paid by shareholder - - 38,323
Repayment of loans (200,616) (456,791)
Proceeds from sale of common shares 18,972 145,000 679,508
Capital contributed by shareholder - - 154,800
Collection of share subscriptions - - 141,726
Common shares exchanged for debt 56,630 - 78,412
Exercised stock options - - 125,250
Redemption of common shares - - (20,409)
Cost of raising capital - - (73,382)
--------- --------- -----------
Net cash provided used by financing activities 249,369 787,600 3,308,070
--------- --------- -----------
NET INCREASE (DECREASE) IN CASH (230) 84,717 0
Balance at beginning of period 230 230 -
--------- --------- -----------
Balance at end of period $ 0 $ 84,947 $ 0
========= ========= ===========
</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
For the Nine Months Ended
September 30, From
---------------------------- Inception To
1999 1998 Sept. 30, 1999
--------- --------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net loss $(799,349) $(556,844) $(5,023,981)
Adjustments to reconcile net (Loss) to net cash
used by operating activities:
Depreciation and depletion 5,047 5,122 33,539
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 - 2,204 -
Increase (decrease) in working capital
(Increase) decrease in receivables 4,811 (842) (2,364)
(Increase) decrease in related party receivable - - -
(Increase) decrease in inventory 2,326 422 (4,832)
(Increase) decrease in prepaid expenses - 9,794 (600)
Increase (decrease) in accounts payable (12,952) (3,293) 224,657
Increase (decrease) in accrued interest 120,311 97,621 476,571
Increase (decrease) in other accruals 189,154 31,994 626,032
--------- --------- -----------
Net cash used by operating activities (490,653) (419,235) (3,268,623)
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets (1,484) - (29,248)
Investment in Beehive Project (500,000) -
(Increase) decrease in other assets (10,000) 11 (10,200)
--------- --------- -----------
Net cash provided (used) by investing activities (11,484) (499,989) (39,448)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings 264,426 1,059,860 2,640,633
Expenses paid by shareholder - - 38,323
Repayment of loans - (276,402) (456,791)
Proceeds from sale of common shares 169,043 155,000 679,508
Capital contributed by shareholder - - 154,800
Collection of share subscriptions - 51,454 141,726
Common shares exchanged for debt 66,094 - 78,412
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 499,547 989,912 3,308,070
--------- --------- -----------
NET INCREASE (DECREASE) IN CASH (2,589) 70,688 0
Balance at beginning of period 2,589 14,259 -
--------- --------- -----------
Balance at end of period $ 0 $ 84,947 $ 0
========= ========= ===========
</TABLE>
The accompanying footnotes are an integral part of this financial information
F-6
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 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 Pharmaceutical, Inc. 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. On January 16, 1996, Wasatch
reorganized for the purpose of changing its domicile from Delaware to Utah and
modifying its capital structure. For the purpose of this financial presentation
"Inception" shall mean September 7, 1989, which was the commencement of Medisys
operations.
NOTE 2 - CHANGES IN PRESENTATION
Certain financial presentations for the third quarter and the first
nine months of 1997 have been reclassified to conform to the 1998 presentation
and the discontinued oil and gas operations.
NOTE 3 - GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the comparative calendar nine
and three-month periods of 1998 and 1997 and from inception through September
30, 1998 are as follows:
<TABLE>
<CAPTION>
Nine Months Three Months Inception to
1999 1998 1999 1998 Sept., 1998
---- ---- ---- ---- -----------
<S> <C> <C> <C> <C> <C>
Officer's Compensation $193,603 $112,807 $79,085 $15,930 $1,169,128
Profession Services 109,500 29,009 12,693 3,400 353,433
Funding Fees 18,877 47,080 205 47,080 67,640
Fund Raising 40,903 16,045 40,903 - 58,657
Travel 2,815 7,666 1,563 1,394 75,935
Telephone 5,113 10,164 1,944 3.699 66,189
Insurance 773 57 15,912
Postage 1,851 39 15,822
Payroll Tax (25) (25) 16,408
Debt Extinguishment Gain (13,098) (13,098) (13,098)
Other 3,127 21,700 12,842 14 914,713
-------- --------- -------- -------- ----------
$360,840 $ 247,082 $136,136 $ 71,588 $2,760,899
======== ========= ======== ======== ==========
</TABLE>
F-7
<PAGE>
WASATCH PHARMACEUTICAL, INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
September 30, 1999
(unaudited)
NOTE 4 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern. Such principles
contemplate 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 allow it to continue as a
going concern. The Company is negotiating an agreement to raise short-term
funding and plans to seek long-term funding through a stock offering or private
placement. Management believes that sufficient funding will be raised to meet
the operating needs of the Company during the remainder of development stage.
NOTE 5 - COMMON STOCK
During the third quarter of 1998, the following common share and common
share option transactions occurred (See the 10Q's for the quarters ended March
31 and June 30, 1998 for transactions occurring during those periods):
a. Issued 127,000 restricted common shares were issued to
consultants for services rendered.
b. Issued 2,500 restricted common shares to creditors for
extensions of due dates.
c. Issued 176,900 restricted common shares for cash consideration
totaling $18,845
d. Issued 272,304 restricted common shares for the Extinguishment
of debt.
e. Issued 500,000 restricted common shares as interim loan
collateral to be returned at debt satisfaction.
F-8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2,364
<ALLOWANCES> 0
<INVENTORY> 4,832
<CURRENT-ASSETS> 7,796
<PP&E> 43,038
<DEPRECIATION> 33,539
<TOTAL-ASSETS> 27,495
<CURRENT-LIABILITIES> 3,506,122
<BONDS> 0
0
49
<COMMON> 43,580
<OTHER-SE> 1,552,961
<TOTAL-LIABILITY-AND-EQUITY> 27,495
<SALES> 24,792
<TOTAL-REVENUES> 37,034
<CGS> 2,603
<TOTAL-COSTS> 211,241
<OTHER-EXPENSES> 360,840
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 264,302
<INCOME-PRETAX> (799,349)
<INCOME-TAX> 0
<INCOME-CONTINUING> (799,349)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (799,349)
<EPS-BASIC> (.019)
<EPS-DILUTED> (.019)
</TABLE>
