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, 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 0-11472
BIOMUNE SYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 87-0380088
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
64 E. Winchester Drive, Suite 303
Murray, Utah 84107
(Address of principal executive offices) (Zip Code)
(801) 261-2727
(Issuer's telephone number)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No __ -
As of August 10, 2000, the issuer had issued and outstanding 8,599,900 shares of
common stock, par value $.0001.
Transitional Small Business Disclosure Format
(Check One):
Yes No X
-- --
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Page
No.
----
1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets as of
June 30, 2000 and September 30, 1999.........................3
Unaudited Condensed Consolidated Statements of Operations
for the three and nine months ended June 30, 2000 and 1999...4
Unaudited Condensed Consolidated Statements of Cash Flows
for the nine months ended June 30, 2000 and 1999.............5
Notes to Unaudited Condensed Consolidated Financial
Statements...................................................7
2. Management's Discussion and Analysis or Plan of Operation...11
PART II. OTHER INFORMATION...........................................13
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PART I
ITEM 1 - Financial Statements
BIOMUNE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
June 30, Sep. 30,
2000 1999
------- -------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 29,92 $ -
Receivables, net 122,025 483,995
Inventories, net 215,452 255,992
Prepaids 125,000 306,638
-------------- --------------
Total current assets 492,405 1,046,625
Long-term receivables, net 105,622 84,091
Property and equipment, net 72,282 82,805
Investment in Rockwood 450,377 450,377
Investments 864,434 1,977,026
Intangibles, net 280,182 554,081
Other assets, net 6,657 11,346
-------------- --------------
Total assets $ 2,271,959 $ 4,206,351
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 305,543 $ 628,230
Notes payable 201,275 435,000
-------------- --------------
Total current liabilities 506,818 1,063,230
Shareholders' equity:
Preferred stock, $.0001 par value; 50,000,000 shares authorized
38,523 shares and 1,428,388 shares issued and outstanding
respectively 192,642 2,174,043
Common stock, $.0001 par value; 500,000,000 shares authorized
8,599,900 shares and 2,522,413 shares outstanding respectively 860 252
Additional paid-in capital 45,303,052 41,914,343
Stock subscriptions receivable (31,982) (55,192)
Deferred compensation and consulting (177,596) (202,486)
Accumulated other comprehensive loss - (768,200)
Accumulated deficit (43,521,835) (39,919,639)
-------------- --------------
Total shareholders' equity 1,765,141 3,143,121
-------------- --------------
$ 2,271,959 $ 4,206,351
============== ==============
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated balance sheets.
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BIOMUNE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
------- -------- ------ ------
<S> <C> <C> <C> <C>
REVENUES $ 133,408 $ 612,085 $ 591,198 $ 1,387,394
OPERATING EXPENSES:
Cost of revenues 84,025 261,566 310,264 552,209
Management, consulting and research fees 847,499 98,932 2,201,403 578,682
Other general and administrative 722,464 89,855 980,561 341,008
-------------- -------------- -------------- --------------
Total operating expenses 1,653,988 450,353 3,492,228 1,471,899
-------------- -------------- -------------- --------------
INCOME (LOSS) FROM OPERATIONS (1,520,580) 161,732 (2,901,030) (84,505)
OTHER INCOME (EXPENSE):
Interest income, net (158,655) 9,883 (175,386) 93,005
Loss on investment 10,000 - (692,800) -
Minority interest - - 16,341
Other, net (33,462) - 301,775 495,000
Gain on sale of furniture 16,495 - 16,495 -
-------------- -------------- -------------- --------------
Total other income, net (165,622) (549,916) 604,346
-------------- -------------- -------------- --------------
NET INCOME (LOSS) (1,686,202) 171,616 (3,450,946) 519,841
Preferred stock dividends and accretion of
beneficial conversion feature (2,625) (46,545) (151,250) (152,297)
-------------- -------------- -------------- --------------
NET INCOME (LOSS) APPLICABLE TO COMMON SHARES (1,688,827) 125,071 (3,602,196) 367,544
============== ============== ============== ==============
NET INCOME (LOSS) PER COMMON SHARE (BASIC) $ (.20) $ 0.06 $ ( .61) $ 0.22
============== ============== ============== ==============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,590,000 2,056,000 5,920,000 1,652,000
(BASIC)
NET INCOME (LOSS) PER COMMON SHARE (DILUTED) $ (.20) $ 0.04 $ (.61) $ 0.14
============== ============== ============== ==============
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,590,000 3,102,000 5,920,000 2,698,000
(DILUTED)
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated statements.
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BIOMUNE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
For the Nine Months
Ended June 30,
2000 1999
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ (3,450,946) $ 519,841
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 86,233 96,515
Allowance for doubtful accounts 98,653 -
Issuance of Common Stock, options and warrants for services 806,602 -
Amortization of deferred consulting expense 24,890 81,098
Loss (Gain) on sale of investments, net 391,025 (270,000)
Gain on sale of equipment (16,494) -
Income from management fee from equity investment - (450,000)
Changes in assets and liabilities:
Accounts receivable, net 133,317 698,283
Inventories 40,540 261,933
Prepaid expenses, net 181,638 (1,483,618)
Other assets 4,689 -
Accounts payable and accrued liabilities (322,686) 88,190
-------------- --------------
Net cash (used) in operating activities (2,022,476) (457,758)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments received on notes receivable 156,669 -
Purchase of assets (16,192) (5,546)
Proceeds from sale of assets, net 1,772,442 431,000
Purchase investments, net - (288,122)
-------------- --------------
Net cash generated in investing activities 1,912,919 137,232
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options 350,000 -
Proceeds from issuance of common stock, net - 848,985
Proceeds from stock subscriptions 23,210 -
Net decrease in notes payable (233,725) (515,500)
-------------- --------------
Net cash provided (used) by financing activities 139,485 333,485
-------------- --------------
</TABLE>
The accompanying notes are an integral part of these unaudited
condensed consolidated statements.
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BIOMUNE SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
For the Nine Months
Ended June 30,
-------------------
2000 1999
------ ------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS $29,928 $12,959
CASH AND CASH EQUIVALENTS AT BEGINNING
OF THE PERIOD 0 27,901
-------- --------
CASH AND CASH EQUIVALENTS AT END OF
THE PERIOD $29,928 $40,660
======== ========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During the nine months ended June 30, 2000, the Company paid preferred stock
dividends of 151,250 by issuing additional shares of preferred stock.
During the nine months ended June 30, 2000, the Company issued 200,000 shares of
common stock in exchange for a $100,000 payment on a purchase of a technology
license.
During the nine months ended June 30, 2000, the Company issued 4,443,500 shares
of common stock in exchange for $2,132,651 of its preferred series J and F
stock.
During the nine months ended June 30, 2000, the Company sold a technology
license in which a partial payment was received in the form of a note receivable
of $48,200.
During the nine months ended June 30, 2000 and 1999 the Company paid cash of
$19,000 and $33,421 for interest, respectively, and $0 for income taxes.
During the nine months ended June 30, 2000 the Company issued 200,000 shares of
the Company's common stock to pay accrued interest on debt of $174,980.
The accompanying notes are an integral part of these unaudited
condensed consolidated statements.
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BIOMUNE SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
-----------------------------------------------------------
The accompanying interim condensed consolidated financial statements are
unaudited and have been prepared consistent with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. These statements should be read in
conjunction with the audited financial statements and notes thereto included in
the Company's annual report on Form 10-KSB for the fiscal year ended September
30, 1999. Reference to the Company or Biomune includes Biomune Systems, Inc. and
its wholly owned subsidiary, Optim Nutrition, Inc.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary to fairly present the Company's financial
position as of June 30, 2000 and the results of operations for the three months
and nine months and cash flows for the nine months ended June 30, 2000 and 1999.
The interim financial statements should be read in conjunction with the
following explanatory notes. The results of operations for the three months and
nine months ended June 30, 2000 are not necessarily indicative of the results
that may be expected for the year ending September 30, 2000.
(2) NET INCOME (LOSS) PER COMMON SHARE
Basic net income (loss) per common share ("Basic EPS") excludes dilution and is
computed by dividing net income (loss) by the weighted average number of common
shares outstanding during the period. Diluted net income (loss) per common share
("Diluted EPS") reflects the potential dilution that could occur if stock
options or other contracts to issue common stock including convertible preferred
stock were exercised or converted into common stock. The computation of Diluted
EPS does not assume exercise or conversion of securities that would have an
anti-dilutive effect on net income per common share.
At June 30, 2000, there were outstanding options and warrants to purchase
262,580 shares of common stock and there were 38,523 shares of preferred stock
outstanding, convertible into a minimum of 1,169 shares of common stock.
Convertible
into # of
Preferred Number of Common
Stock Preferred Shares Shares
Series A 38,074 1,164
Series B 449 5
---------- ----------
38,523 1,169
========== ==========
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(3) COMMON STOCK TRANSACTIONS
The Company has deferred consulting expense related to shares issued under
consulting agreements entered into prior to September 30, 1999. These deferred
amounts are being recognized over the terms of the agreements as services are
provided. Total amortization of these deferred consulting expenses was $24,890
for the nine months ended June 30, 2000 and $8,297 for the three months ended
June 30, 2000.
(4) STOCK OPTIONS AND WARRANTS
During the nine months ended June 30, 2000 employees and consultants of the
Company exercised options to purchase common stock and the Company received
proceeds of $350,000 in cash.
During the nine months ended June 30, 2000 the Company issued 432,788 shares of
common stock to consultants and the Board of Directors as compensation for
services.
Also during the nine months ended June 30, 2000, the Company issued 200,000
shares to Amerifit Nutrition, Inc. in connection with the purchase of NiteBite.
(5) RELATED-PARTY TRANSACTIONS
During the nine months ended June 30, 1999, the Company recorded a management
fee of $225,000 from Twin Eagle LC (formerly Rockwood) subsidiary.
During the nine months ended June 30, 2000 the Company terminated its marketing
agreement with Harrogate Marketing LLC. Under the terms of the Settlement
Agreement terminating the marketing agreement, Harrogate waived its claim to 45%
of the future proceeds of the medical food products line and all other amounts
owed by the Company in consideration for a payment of $400,000.
From March 5, 1997 through September 30, 1997, the Company made loans to
Volu-Sol, Inc. "Volu-Sol," (then a wholly owned subsidiary of the Company)
totaling $390,500. During the year ended September 30, 1999, Volu-Sol made a
payment of $150,000 of which $114,351 went to principal and $35,649 to interest.
During the six months ended March 31, 1999 the Company made additional loans to
Volu-Sol totaling $96,000. These loans (collectively the "Volu-Sol Note") bear
interest at a rate of 10% per annum and are due on demand. Accrued but unpaid
interest owed to the Company on the Volu-Sol Note totaled $28,813 at March 31,
1999. On March 31, 1999, the Company sold and assigned the Volu-Sol Note plus
accrued interest to "Purizer," formerly Bioxide Corporation, in exchange for
178,205 shares of Purizer Corporation common stock.
During the nine months ended June 30, 2000, the Company sold a portion of its
marketable securities (including both Purizer Corporation common stock and
Volu-Sol preferred stock) for $1,187,992 and recorded a net loss of $692,800.
During the nine months ended June 30, 2000, the CEO of the Company loaned the
Company approximately $185,000.
At June 30, 2000 and 1999 the Company had advances to and investments in an
affiliate in the amount of $450,377 and $2,181,377, respectively.
At June 30, 2000 and 1999 the Company had $57,422 and $314,091 of related party
notes receivable, respectively.
During the nine months ended June 30, 2000 and 1999 the Company paid commission
and consulting expenses to Harrogate, an entity under common control, of
$985,276 and $400,341, respectively. In addition, at June 30, 1999 the
Company had a prepaid expense to the related entity of $1,502,650.
During the nine months ended June 30, 1999, the Company exchanged 322,000 shares
of its common stock for 1,900 shares of Volu-Sol Series A Preferred pursuant to
an agreement with investors entered into prior to the effective date of the
divestiture of Volu-Sol. Approximately 122,000 shares of common stock were
issued in the exchange to a shareholder of the Company and its former President,
CEO and Chairman.
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During the nine months ended June 30, 1999 the Company sold 320,000 shares of
Purizer Corporation stock and recorded a gain of $270,000.
(6) PREFERRED STOCK TRANSACTIONS
During the nine months ended June 30, 2000, the Company accrued dividends on its
outstanding Series A, series F and Series J Preferred stock of $7,825, $30,400
and $113,025, respectively. Preferred stock dividends are payable in either
additional shares of preferred stock (of the same series) or in cash, at the
option of the Company. During the period, accrued dividends on Series A, F and J
Preferred stock totaling $151,250 were paid by issuing 1,575 shares of Series A
Preferred stock 50,666 shares of Series F Preferred stock and 113 shares of
Series J Preferred stock, respectively.
During the nine months ended June 30, 1999, 307.4 shares of the Company's Series
E preferred stock were converted into approximately 287,000 shares of common
stock.
During the nine months ended June 30, 2000, all outstanding shares of the
Company's Series F and Series J preferred stock were converted into 4,443,500
shares of common stock.
(7) SALE OF NITEBITE
During the three months ended December 31, 1999, the Company entered into
letters of intent and definitive agreements with Amerifit Nutrition, Inc. and
ICN Pharmaceutical for the purchase and sale of the NiteBite product line. The
transaction involved, among other things, issuing 200,000 shares of restricted
common stock to Amerifit Nutrition, Inc. The net result of this transaction was
a gain of $301,775, which is recorded in the statement of operations under other
income.
ITEM 2 - Management's Discussion and Analysis or Plan of Operation
The following discussion should be read in conjunction with the
unaudited condensed consolidated financial statements and the notes thereto
appearing elsewhere in this Quarterly Report on Form 10-QSB.
Overview
The Company is engaged in the research, development, distribution and
sale of biologic pharmaceutical products, nutraceutical food products and
supplements, medical foods and health and beauty aids. Certain of these products
have been developed by the Company and incorporate a patented whey protein
technology, which is designed to provide or increase protective immunities from
an immune response to disease and to provide nutritional supplementation. The
energy and sports nutrition bars of the Company are marketed under an exclusive
license from the developer of the products under the label "Mountain Lift." The
Company also holds a minority interest in Rockwood LC, a California company that
distributes health and beauty aids and related products to national wholesale
and retail customers.
The Company believes its future results of operations will be affected
by factors such as:
o the availability of cash from financing activities to fund
its operations;
o the results of research and development efforts and the
clinical trials on BWPT-301, BWPT-302 and other future
pharmaceutical drug candidates based on or derived from the
Technology;
o market acceptance of Optimune, the nutrition bars, and
pharmaceutical drug candidates;
o increased competitive pressures;
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o changes in raw material sources and costs; and
o adverse changes in general economic conditions in any market
in which the Company conducts or markets its products.
The Company believes that the majority of its future revenues will come
from its nutrition and medical food products and new nutraceutical products and
pharmaceutical drugs. The Company cannot determine the ultimate effect that new
products will have on revenues, earnings, or the price of the Company's common
stock.
The Company's primary focus and efforts during the fiscal year ended
September 30, 1999, were the commercialization of its nutraceutical products,
assessing and obtaining additional nutraceutical and medical products to add to
product line, and, to a lesser extent, continuing its efforts to obtain FDA
approval of BWPT-301 for the treatment of cryptosporidiosis in people with AIDS
and BWPT-302 for the treatment of E. coli, strain 0157:H7. During the nine
months and the quarter ended June 30, 2000, the Company's revenues were
generated from the sale of Optimune and Maximune, spacial food bars and
nutrition bars.
Continuing in fiscal year 2000, the Company has directed its resources
and efforts on:
o commercialization of its nutraceutical products;
o continued marketing and selling of Mountain Lift bars;
o acquisition of new nutraceutical and or medical food products;
o development of one or more additional nutraceutical products.
Results of Operations
Comparison of the Three Months Ended June 30, 2000
with the Three Months Ended June 30, 1999
During the three months ended June 30, 2000, the Company had revenues
of $133,408 compared to $612,085 for the comparable three month period ended
June 30, 1999. The decrease in sales is due primarily to the sale of the
Company's interest in the NiteBite product line as well as a decrease in the
sales of the Company's energy bars.
Cost of sales were $84,025 for the three months ended June 30, 2000
compared to cost of sales of $261,566 for the same period in 1999. The overall
gross margin for the quarter in 2000 was 37% of revenues, compared to 57% for
the comparable quarter in 1999. The decrease in gross margin is due to the lower
margins from the sale of the Company's sports and energy bars.
Management, consulting and research fees were $847,499 for the three
months ended June 30, 2000, as compared to $98,932 for the three months ended
June 30, 1999. General and administrative expenses increased from $89,855 for
the three months ended June 30, 1999 to $722,464 for the three months ended June
30, 2000. The increase in fees and expenses is due to the termination of the
marketing agreement under which the Company was outsourcing its marketing and
selling function. This function was brought in-house during the quarter.
During the three months ended June 30, 1999, the Company had a net
profit of $125,071 ($0.04 per share, fully diluted) compared to a net loss of
$1,688,827 ($0.20 per share) for the three months ended June 30, 2000. This
reversal from a net profit in 1999 to a net loss in the same quarter in 2000 is
attributable primarily to the decrease in revenue from the Company's
nutraceutical products and medical food bars and an increase in operating
expense discussed above.
Comparison of the Nine Months Ended June 30, 2000
with the Nine Months Ended June 30, 1999
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During the nine months ended June 30, 2000, the Company had revenues of
$591,198 compared to $1,387,394 for the comparable nine month period ended June
30, 1999. The decrease in revenues is due to the sale of the Company's interest
in the NiteBite product line as well as a decrease in the sales of the Company's
sports and energy bars.
Cost of sales were $310,264 for the nine months ended June 30, 2000
compared to cost of sales of $552,209 for the same period in 1999. The overall
gross margin for 2000 was 48% of revenues, compared to 60% for the comparable
quarter in 1999. The decrease in gross margin is due to the lower gross margins
from the Company's Optim product line.
Management, consulting and research fees were $2,201,403 for the nine
months ended June 30, 2000, compared to $578,682 for the nine months ended June
30, 1999. This increase is due to the Company's decision to terminate the
marketing agreement under which the Company was outsourcing its marketing and
selling function. General and administrative expenses increased from $341,008
for the nine months ended June 30, 1999 to $980,561 for the nine months ended
June 30, 2000. The increase in these expenses is due to the discontinuation of
the practice of outsourcing sales and marketing functions.
During the nine months ended June 30, 2000, the Company had a net loss
of $3,602,196 ($0.61 per share, fully diluted), compared to a net profit of
$367,544 ($.22 per share) during the nine months ended June 30, 1999. This
reversal from a net profit in 1999 to a net loss in the same quarter in 2000 is
attributable primarily to the decrease in revenue from the Company's
nutraceutical products, and an increase in operating expenses discussed above.
Liquidity and Capital Resources
Historically, the Company has been unable to finance its operations
from cash flows from operating activities. The Company expects it will require
substantial funds to continue operations. At the present time it has no plans to
continue the commercialization of its nutraceutical products, to complete
clinical trials, to obtain regulatory approval for and commercialize products
utilizing the Technology and to develop and commercialize additional
nutraceutical products based on the Technology. These activities require
significant cash and resources currently unavailable to the Company and there
can be no assurance that financing in amounts sufficient to continue these
activities will be obtained. Because revenue-generating operating activities are
not in place at significant levels and because the Company will require
significant capital to accomplish the objectives set forth above, additional
funding will be required, although such funding may not be available or may not
be available on favorable terms. Management believes that the Company-funded
research and development efforts to date have positioned the Company to pursue
future research and development efforts and clinical trials with joint venture,
strategic alliance, government or private grants or other third-party funding.
Management may seek strategic partnership, merger or other combination to obtain
financing for ongoing operations and business development activities described
above.
As of June 30, 2000, the Company had cash and cash equivalents of $29,928
and negative working capital of $(14,413) as compared to cash and cash
equivalents of $0 and negative working capital of, $(16,605), as of September
30, 1999. The increase in cash is due to the sale of Purizer shares.
The Company paid preferred stock dividends of $151,250 by issuing
additional shares of preferred stock.
During the nine months ended June 30, 2000, the Company's operating
activities used cash of $2,022,476. During the same period in the previous
fiscal year, the Company's operating activities used $457,758 of cash, which was
provided by the raising of capital from the sale of preferred stock.
The Company has no established credit facility with a bank or other
lending institution. The Company has in the past, from time to time, borrowed
money from certain shareholders, but there is no formal financing arrangement,
agreement or understanding in effect at this time.
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Special Statement Concerning Forward-looking Statements
This Report, in particular the "Management's Discussion and Analysis or
of Operation" section, contains forward-looking statements concerning the
expectations and anticipated operating results of the Company. All such
forward-looking statements are intended to qualify for the safe harbor
protection provided by Section 21E of the Securities Exchange Act of 1934, as
amended. The Company cautions the reader that numerous factors govern whether
events described by any forward-looking statement made by the Company will
occur. Any one of such factors could cause actual results to differ materially
from those projected by the forward-looking statements made in this Report.
These forward-looking statements include plans and objectives of management for
future operations, including plans and objectives relating to the products and
the future economic performance of the Company, including:
o market acceptance of the products;
o development of new nutraceutical products;
o the extent of additional research and development, general and
administrative and other direct costs associated with clinical
trials and FDA approval of certain products using the
Technology;
o unexpected delays in receipt of final FDA approval; and
o and the lack of sufficient cash to fund current and projected
operations and budgeted research and development for fiscal
year 2000.
The forward-looking statements are based on current expectations and
assumptions, such as:
o the Company will have adequate financing available;
o the efficacy of the Technology-based products will be
established during the ongoing clinical trials and future
clinical trials;
o the Company will successfully market the health and beauty
aids and its nutraceutical products and successfully develop
and commercialize other nutraceutical products;
o the Company will successfully develop and commercialize the
Technology; and
o the Company will timely and properly quantify and analyze the
data derived from its clinical trials.
Assumptions involve judgments with respect to, among other things,
future economic, competitive and market conditions, future business decisions,
and the results of the clinical trials and the time and money required to
successfully complete those trials, all of which are difficult or impossible to
predict accurately and many of which are beyond the control of the Company.
Although the Company believes that the assumptions underlying the
forward-looking statements in this Report are reasonable, any of these
assumptions could prove inaccurate. Therefore, there can be no assurance that
the results contemplated in any of the forward-looking statements will be
realized. Budgeting and other management decisions are subjective in many
respects and are susceptible to interpretations and periodic revision based on
actual experience and business developments, the impact of which may cause the
Company to alter its marketing capital expenditure plans or other budgets. This
will affect the Company's business, financial condition and results of
operations. In light of the significant uncertainties inherent in the
forward-looking statements, any such statement should not be regarded as a
representation by the Company or any other person that the objectives or plans
of the Company will be achieved.
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PART II. OTHER INFORMATION
ITEM 2. Changes in Securities and Use of Proceeds
Issuance of Unregistered Equity Securities During the Quarter Ended June 30,
2000.
During the quarter ended June 30, 2000, the Company did not issue
restricted securities.
ITEM 5. Other Matters
On August 7, 2000, the Company sold approximately 2,200,000 shares of
common (approximately 19.9% of the total issued and outstanding shares of the
Company) to Donlar Corporation for a note receivable. The shares are restricted
shares, sold under the terms of a Stock Purchase Agreement.
On August 8, 2000, the Company entered into an agreement (Asset
Purchase Agreement) to purchase substantially all of the assets of Donlar
Corporation, an Illinois corporation, in exchange for stock of the Company.
The transaction is subject to approval of the shareholders of the Company. As a
result, the shareholders of Donlar Corporation will own approximately 95% of the
issued and outstanding stock of the Company at the effective date of the
transaction and the current shareholders of the Company will continue to own
approximately 5% of the Company's issued and outstanding common stock. The
rights and preference as of the holders of preferred stock on the Company would
not be affected by the transaction.
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.118 Stock Purchase Agreement (Incorporated by reference to
Exhibit filed with Form 8-K on August 15, 200)
10.119 Asset Purchase Agreement (Incorporated by reference to
Exhibit filed with Form 8-K on August 15, 200)
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the
quarter ended June 30, 2000
-13-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BIOMUNE SYSTEMS, INC.
(Registrant)
Date: August 21, 2000 /s/ Michael G. Acton
--------------------
Michael G. Acton, Chief Executive Officer and
Controller (Principal Financial and Accounting
Officer)
