FORM 10-QSB
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarter ended July 31, 2000
OR
() TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-17378
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VITRO DIAGNOSTICS, INC.
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(Exact name of registrant as specified in its charter)
Nevada 84-1012042
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
8100 Southpark Way, Bldg B-1 , Littleton, Colorado 80120
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(Address of principal executive offices) (Zip Code)
(303) 798-6882
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.001
par value
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 such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for at least the past 90 days.
Yes X No
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The number of shares outstanding of each of the issuer's classes of common
equity as of September 15, 2000, was 8,509,305.
<PAGE>
PART I - FINANCIAL INFORMATION
Vitro Diagnostics, Inc.
Balance Sheets
Assets
(Unaudited) (Audited)
July 31, October 31,
2000 1999
------------ -------------
Current Assets
Cash Equivalents $ 250,000 $ 44,291
Note Receivable 450,000
Accounts Receivable - 108,527
Inventories - 516,011
Prepaid Expense - 68,255
Current portion of note receivable - 1,441
------------ -------------
Total Current Assets 700,000 738,525
Property, Plant and Equipment
Leasehold Improvements - 27,645
Office Equipment & Furniture - 14,793
Lab & EDP Hardware & SW - 136,128
Total Cost - 178,566
Less Depreciation - (147,490)
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Net Property & Equipment - 31,076
Other Assets
Deposits - 6,925
Note Receivable, net of current - 5,059
Inventory - Non Current - 51,471
Patents 144,539 103,335
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Total Other Assets 144,539 166,791
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Total Assets $ 844,539 $936,393
============ =============
<PAGE>
Vitro Diagnostics, Inc.
Balance Sheets
Liabilities & Stockholders Equity
(Unaudited) (Audited)
July 31, October 31,
2000 1999
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Current Liabilities
Accounts Payable $ - $ 16,899
Salaries & Wages Payable - -
Payroll Taxes Payable - 5,925
Accrued Expenses - 1,032
Current portion of Note Payable - 36,640
------------ -------------
Total Current Liabilities - 60,496
Note Payable, net of current portion - 105,432
Shareholders' Equity
Common Stock: 500,000,000 Shares
Authorized, par $.001;
8,455,087 shares outstanding
at 10/31/99 and 07/31/00 283,036 283,036
Paid in Capital in Excess of Par 3,656,593 3,656,593
Accumulated Deficit (3,095,090) (3,169,164)
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Total Shareholders' Equity 844,539 770,465
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Total Liabilities and
Shareholders' Equity $ 844,539 $ 936,393
============ =============
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
Vitro Diagnostics, Inc.
Statement of Operations
<CAPTION>
(Unaudited)
Three Months Ended Nine Months Ended
July 31, July 31,
--------------------------- ------------------------
2000 1999 2000 1999
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue
Product Sales $ - $ - $ - $ -
----------- ----------- ---------- ----------
Gross Revenue - - - -
Cost of Sales
Product - - - -
----------- ----------- ---------- ----------
Total Cost of Sales - - - -
----------- ----------- ---------- ----------
Gross Profit - - - -
Operating Expenses
Selling, General &
Administrative 9,016 - 27,511 12,500
Research and Development 62,233 56,634 228,703 193,006
----------- ----------- ---------- ----------
Total Expenses 71,249 56,634 256,214 205,506
----------- ----------- ---------- ----------
Gain (loss) from Operations (71,249) (56,634) (256,214) (205,506)
----------- ----------- ---------- ----------
Other Income (Expense)
Other Income 1,542 1,650 5,027 4,425
Interest Expense (7,046) (29,811) (20,894) (46,287)
Accounting Change - - (305,691) -
Penalties Expense (253) - (305) -
----------- ----------- ---------- ----------
Total Other Income and (Expense) (5,757) (28,161) (321,863) (41,862)
----------- ----------- ---------- ----------
Discontinued operations
Gain on disposal of assets 467,232 - 467,232 -
Income from operations 17,722 66,368 184,917 343,251
----------- ----------- ---------- ----------
Total from discontinued Operations 484,954 66,368 652,149 343,251
Net Gain (loss) $ 407,948 $ (18,427) $ 74,072 $ 95,883
=========== =========== ========== ==========
Gain Per Share of Common Stock
(7,318,228 Shares outstanding
at 07/31/99 and 8,455,087
outstanding at 07/31/00)
From continuing operations $ (0.01) $ (0.01) $ (0.07) $ (0.03)
From discontinued operations $ 0.06 $ 0.01 $ 0.08 $ 0.04
Net Gain (loss) $ 0.05 $ 0.00 $ 0.01 $ 0.01
=========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
Vitro Diagnostics, Inc.
Statements of Cash Flows
<CAPTION>
Nine Months Ending Twelve Months Ending
07/31/00 10/31/99
(Unaudited) (Audited)
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Cash Flows from Operating Activities
<S> <C> <C>
Net Income (Loss) $ 74,074 $ (140,803)
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
Depreciation & Amortization 6,520 13,763
Gain on sale of assets (467,232)
Expenses Incurred for Stock - 27,300
Changes in Assets & Liabilities:
Decrease (increase) in-
Accounts Receivable (99,615) 9,839
Inventories 397,016 (98,668)
Prepaid Expenses 11,880 (4,712)
Deposits 15,411
(Decrease) increase in-
Accounts Payable 48,591 (68,140)
Salaries & Wages Payable 300 -
Payroll Taxes Payable (5,428) (2,365)
Accrued Expenses - (2,365)
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Net Cash Provided (Used) by
Operating Activities (33,893) (241,760)
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Cash Flows From Investing Activities
Proceeds from sale of assets 243,483
Capital Expenditures (29,683 (17,953)
Patents (41,204) (48,612)
Increase in note receivable (6,825)
Payments on note receivable 6,500 325
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Net Cash Provided (Used) by
Financing Activities 179,096 (73,065)
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Cash Flows from Financing Activities
Proceeds from Note Payable, Bank 60,506 150,000
Payments on Notes Payable, Bank (7,928)
Payments on Short Term Notes Payable (154,708)
Sales of common stock 376,000
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Net Cash from Investing Activities 60,506 363,364
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Net Increase (Decrease) in Cash 205,709 48,539
Cash (Bank Overdraft) Beginning 44,291 (4,248)
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Cash Ending $ 250,000 $ 44,291
================== ====================
Supplemental disclosures of cash flow information
Cash paid during the year for:
Interest $ 20,894 $ 51,854
================== ====================
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
Vitro Diagnostics, Inc.
Notes to the Financial Statements
July 31, 2000 (Unaudited)
Note 1- Unaudited Financial Information
The information furnished herein was taken from the books and records of
the Company without audit. The Company believes, however, that it has made all
adjustments necessary to reflect properly the results of operations for the nine
month interim periods ended July 31, 2000 and 1999. The adjustments consists
only of normal reoccurring accruals. The results of operations for the nine
month interim period ended July 31, 2000 are not necessarily indicative of the
results to be expected for the year ended October 31, 2000.
Note 2 - Financial Statements
Management has elected to omit substantially all footnotes relating to the
condensed financial statements of the Company included in the report. For a
complete set of footnotes, reference is made to the Company's Annual Report on
Form 10-KSB for the year ended October 31, 1999 as filed with the Securities and
Exchange Commission and the audited financial statements included therein.
Note 3 - Change in Accounting Policy
As of November 1, 1999, the Company changed its method of determining cost
of its finished goods inventory from a method based on costs as a percentage of
gross selling price to cost determined by a study of the manufacturing
processes. Management believes that the new method results in a closer matching
of costs associated with the products, thereby reflecting a more realistic
picture of the Company's financial progress. The effect of the change was to
increase income for the quarter ended July 31, 2000 by $14,749 ($0.00 per share)
and to increase income for the three quarters ended July 31, 2000 by $155,039
($0.02 per share). The cumulative effect of the change on prior years of
$(305,691) ($.04 per share) is a one time charge to income. Proforma amounts
showing the effect of applying the new method retroactively are as follows:
Quarter Year to Date
Net income (loss) $422,697 $229,111
Income(loss) per common share $ 0.05 $ 0.03
Management is unable to determine the effect of the change had it occurred on
November 1, 1998 on the quarter ended July 31, 1999.
<PAGE>
Note 4 - Sales of business segment
In a transaction which closed August 7, 2000, the Company sold all of the
assets of its antigen division to a private company controlled by the former
president and a director. The transaction was effective for accounting purposes
on July 31, 2000. In exchange for the assets, the purchaser agreed to pay the
Company $700,000 and assume substantially all of its liabilities. At closing,
the Company received $250,000 cash and a promissory note in the principal amount
of $450,000 payable September 7, 2000. In addition, the purchaser assumed all of
the Company's liabilities except for certain excluded liabilities associated
with the business and assets retained. The recorded liabilities assumed totaled
approximately $270,000. The Company is contingently liable for those liabilities
until they are satisfied by the purchaser. The total sales price was
approximately $970,000. The gain recorded on the sales was approximately
$467,232.
The operations of the antigen division have been presented in the statement
of operations as discontinued operations. The presentation of the discontinued
operations includes only the net results of its operations and the gain on its
disposal.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
------------
This section discusses the financial condition and results of operation of
Vitro Diagnostics, Inc. (the "Company") at July 31, 2000 and for the three and
nine month periods ending that date. This information should be read in
conjunction with the information contained in the Company's Annual Report on
Form 10-KSB for the fiscal year ended October 31, 1999, including the audited
financial statements contained therein.
In a transaction which closed August 7, 2000, the Company sold all of the
assets of its antigen division to AspenBio, Inc., a private Colorado corporation
("Purchaser"). This transaction was effective for accounting purposes on July
31, 2000. In exchange for the assets, the Purchaser agreed to pay $700,000 and
assume substantially all of the liabilities then outstanding. At closing, the
Company received $250,000 cash and a promissory note in the principal amount of
$450,000 payable September 7, 2000, which was subsequently paid. In addition,
the Purchaser assumed all outstanding liabilities except for certain excluded
liabilities associated with the business and assets retained. As of the date of
closing, the total assumed liabilities, including $283,726 of facilities and
equipment leases, totaled approximately $553,726 on an unaudited basis. The
Purchaser agreed to pay all of these liabilities as they become due. If not
sooner paid, the Purchaser agreed to pay the liabilities within ninety days of
closing, or to obtain a release of the Company.
<PAGE>
The assets included in this sale were all of the assets formerly used in
the antigen division. These assets include equipment, furniture, fixtures,
inventory, accounts receivable and intangible assets associated with the antigen
division. These assets were formerly used to produce and distribute antigens
primarily for diagnostic purposes. Following the sale, we retained patents and
other intellectual property used or proposed to be used in connection with a
therapeutic business. The Company intends to continue that business in the
future.
Certain statements contained herein constitute "forward looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward looking statements include, without limitation, statements regarding the
Company's plan of business operations, potential contractual arrangements,
anticipated revenues and related expenditures. Factors that could cause actual
results to differ materially include, among others, the following: acceptability
of the Company's products in the market place, general economic conditions, and
the overall state of the biotechnology industry. Most of these factors are
outside the control of the Company. Investors are cautioned not to put undue
reliance on forward looking statements. Except as otherwise required by
applicable securities statutes or regulations, the Company disclaims any intent
or obligation to update publicly these forward looking statements, whether as a
result of new information, future events or otherwise.
Liquidity and Capital Resources
-------------------------------
At July 31, 2000, the Company had working capital of $700,000, consisting
of $700,000 of current assets and no current liabilities. The current assets
which existed at that time represent the proceeds from sale of the antigen
division which was sold effective July 31, 2000, as more specifically described
above. This sale produced an increase in working capital of $21,971 from fiscal
year end October 31, 1999. Current assets decreased by $38,525 while current
liabilities decreased by $60,496. In addition, the agreement of purchase
requires the Purchaser to assume all of the liabilities, including certain
off-balance sheet items such as equipment and facilities leases, except certain
excluded liabilities. Management believes that this transaction will provide the
Company with needed cash and relieve it of liabilities in order to devote
resources to further develop its therapeutic business. Assumption of the
liabilities is contingent on the Purchaser paying them or removing the Company
as a responsible party on or before November 7, 2000. Assuming that is the case,
management is of the opinion that the Company will not require additional
capital from outside sources to finance its capital requirements for the balance
of fiscal 2000 and 2001. However, management believes that the Company will
require additional funds in the future to continue efforts at developing its
therapeutic business and gaining FDA approval of its proposed therapeutic
products.
Historically, the Company has relied on borrowing to maintain its R&D
department and finance necessary research and development, since its operations
used, rather than provided cash. During the six month period ended April 30,
2000, the most recent accounting period prior to sale of the antigen division,
operations used $162,000 of cash. This cash out-flow was addressed through
borrowing, as the Company borrowed $172,000 during that six month period. As a
result, a primary motivation for the sale of the antigen division was the cash
it would produce and the anticipated elimination of liabilities.
<PAGE>
Results of Operations
---------------------
For the nine months ended July 31, 2000, the Company realized net income of
$74,072, or $0.01 per share, including a gain on the disposition of its antigen
business. Results for the three months then ended, including that gain, were net
income of $407,948, or $0.05 per share. The operation of the antigen business
has been presented as discontinued operations. Overall results for the three and
nine month periods ended July 31, 2000 therefore include income or loss from
operations, other income or expense and gain or loss on discontinued operations.
The Company realized a gain of $467,232 on the disposal of its antigen
business. Coupled with the net loss from operations of $71,249 and other
expenses, including a charge for a change in accounting for costs of goods sold
of $5,757, the Company realized net income of $407,948 for the three months
ended July 31, 2000. The loss from operations of $256,214 and other expenses of
$321,863, produced net income of $74,072 for the nine month period.
Profit margin from sales of the Company's product decreased from the first
nine months of 1999, from 72% for the nine months ended July 31, 1999 to 68% for
the nine months ended July 31, 2000. Management believes that this is
attributable to increased sales at discounted prices. Also, selling, general and
administrative expenses increased from 1999 to 2000 by approximately $15,000.
Research and development increased approximately $36,000 as result of increased
expenditures related to the Company's cell immortalization research.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized, on September 20, 2000.
Vitro Diagnostics, Inc.
By: /s/ James R. Musick
------------------------------
James R. Musick, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the Company
in the capacities indicated on September 20, 2000.
Principal Executive and Financial Officer:
/s/ James R. Musick
------------------------------
James R. Musick, President and
Chief Executive Officer
