22
THIS DOCUMENT IS A COPY OF THE FORM 10-QSB FILED ON AUGUST 9,
1995 PURSUANT TO A RULE 201 TEMPORARY HARDSHIP EXEMPTION
IN ACCORDANCE WITH RULE 201 OF REGULATION S-T, THIS FORM 10-QSB
IS BEING FILED IN PAPER PURSUANT TO A TEMPORARY HARDSHIP
EXEMPTION
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
Commission file number 1-12178
InnoVet, Inc.
(Exact name of small business issuer as specified in its charter)
Florida
(State or other jurisdiction
of
incorporation or organization)
14255 US 1, Suite 206
Juno Beach, Florida
(Address of principal
executive offices)
59-2699441
(I.R.S. Employer
Identification No.)
33408
(Zip Code)
(407) 626-6025
(Issuer's telephone number, including area code)
1655 Palm Beach Lakes Blvd., Suite 910, West Palm Beach, Florida
33401
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the issuer (1) filed all reports 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 _____
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
Common Stock, $0.001 Par Value; 18,656,881 shares outstanding as
of August 7, 1995.
INDEX
INNOVET, INC.
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets
June 30, 1995 and December 31, 1994
4
Consolidated Condensed Statements of Operations
Six months ended June 30, 1995 and 1994
5
Three months ended June 30, 1995 and 1994
6
Consolidated Statement of Stockholders' Equity
Six months ended June 30, 1995
7
Consolidated Condensed Statement of Cash Flows
Six months ended June 30, 1995 and 1994
8
Notes to Consolidated Condensed Financial Statements
10
Item 2. Management's Discussion and Analysis of Financial
Condition and 12
Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
16
Item 2. Changes in Securities
16
Item 3. Defaults upon Senior Securities
16
Item 4. Submission of Matters to a Vote of Securities Holders
16
Item 5. Other Information
16
Item 6. Exhibits and Reports on Form 8-K
16
SIGNATURES 17
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
INNOVE
T,
INC.
AND
SUBSID
IARIES
CONSOL
IDATED
CONDEN
SED
BALANC
E
SHEETS
(Unaud
ited)
ASSETS June 30, December
31,
1995 1994
Curren
t
assets
Cash and cash equivalents $ $
81,677 170,472
Investments
- 839,583
Accounts receivable, net of allowance
for doubtful accounts of $0
for 1995 and 1994, respectively
- 1,029
Other receivables
70,598 209,895
Prepaid expenses and other current
assets 21,204 11,217
Total current assets 173,479 1,232,19
6
Proper 8,683
ty, 38,361
plant
and
equipm
ent at
cost
less
accumu
lated
deprec
iation
Other
assets
Notes receivable, long-term, net of
allowance for doubtful accounts of - -
$105,000 for 1995 and 1994,
respectively
Patents, net
26,246 28,006
Investments
80,000 80,000
Security deposits and other assets
26,931 52,676
Total assets $ $
315,339 1,431,23
9
LIABILITIES AND STOCKHOLDERS' EQUITY
Curren
t
liabil
ities
Accounts payable $ $
68,678 135,517
Bank loan, short-term
- 704,961
Accrued expenses
233,768 334,414
Total current liabilities 302,446 1,174,89
2
Stockh
olders
'
equity
Common stock, $.001 par value,
100,000,000 shares authorized;
18,656,881 shares issued at June 30,
1995 and
18,294,881 shares issued at December
31, 1994 18,657 18,295
Capital in excess of par value
18,856,6 18,854,1
54 56
Capital representing stock grants
5,514,99 5,514,99
0 0
Accumulated deficit
(24,377, (24,131,
408) 094)
12,893 256,347
Total liabilities and stockholders' $ $
equity 315,339 1,431,23
9
The
accomp
anying
notes
are an
integr
al
part
of
these
statem
ents.
INNO
VET,
INC.
AND
SUBS
IDIA
RIES
CONS
OLID
ATED
COND
ENSE
D
STAT
EMEN
T OF
OPER
ATIO
NS
(Una
udit
ed)
Six
Month
s
Ended
June
30,
1995 1994
Reve
nues
Sales $ $
208,803 236,846
Other income
5,556 9,819
Interest income, net 3,045 30,652
217,404 277,317
Cost
s
and
expe
nses
Cost of sales 120,966 140,635
Compensation
Officers and 103,225 138,181
employees
Grants under stock 19,403
option plans -
Consulting 19,438 110,345
Research and 44,369 56,552
development
Selling, general and 185,733 354,842
administrative expenses
Legal fees 52,319 68,039
Depreciation expense 2,895 5,336
Foreign currency (5,873)
transaction (gain)/loss -
Gain on sale of (99,979)
marketable securities -
Interest expense 40,625
5,428
463,718 898,761
Loss from continuing (246,314) (621,444)
operations before
income taxes
Prov
isio - -
n
for
inco
me
taxe
s
Loss from continuing (246,314 (621,444)
operations )
Disc
onti
nued
oper
atio
ns:
Loss from operations of
discontinued - (462,897)
subsidiaries (less
applicable income taxes
of $0)
Loss on disposal of
subsidiaries (less - (391,926)
applicable income taxes
of $0)
Net loss $ $
(246,314 (1,476,26
) 7)
Per share:
Continuing operations $ $
(0.01) (0.03)
Discontinued operations $ $
- (0.05)
Net loss $ $
(0.01) (0.08)
Weig
hted 18,455,3 17,739,11
aver 14 8
age
shar
es
Cons
olid
ated
Cond
ense
d
Stat
emen
ts
of
Oper
atio
ns
cont
inue
d on
next
page
.
The
acco
mpan
ying
note
s
are
an
inte
gral
part
of
thes
e
stat
emen
ts.
INNO
VET,
INC.
AND
SUBS
IDIA
RIES
CONS
OLID
ATED
COND
ENSE
D
STAT
EMEN
T OF
OPER
ATIO
NS
(Una
udit
ed)
Three
Months
Ended
June
30,
1995 1994
Reve
nues
Sales $ $
124,844 108,329
Other income
5,556 -
Interest income, net
11 22,673
130,411 131,002
Cost
s
and
expe
nses
Cost of sales
72,321 59,047
Compensation
Officers and
employees 51,613 72,788
Grants under stock
option plans - 14,970
Consulting
1,814 52,344
Research and
development 10,863 27,402
Selling, general and 101,288
administrative expenses 187,099
Legal fees
31,948 23,160
Depreciation expense
188 2,638
Foreign currency
transaction (gain)/loss 1,681 -
Gain on sale of
marketable securities (99,979) -
Interest expense
21,116 4,135
192,853 443,583
Loss from continuing (62,442) (312,581)
operations before
income taxes
Prov
isio - -
n
for
inco
me
taxe
s
Loss from continuing (62,442) (312,581)
operations
Disc
onti
nued
oper
atio
ns:
Loss from operations of
discontinued - -
subsidiaries (less
applicable income taxes
of $0)
Loss on disposal of
subsidiaries (less - (391,926)
applicable income taxes
of $0)
Net loss $ $
(62,442) (704,507)
Per share:
Continuing operations $ $
(0.00) (0.02)
Discontinued operations $ $
- (0.02)
Net loss $ $
(0.00) (0.04)
Weig
hted 18,455,31 17,739,11
aver 4 8
age
shar
es
The
acco
mpan
ying
note
s
are
an
inte
gral
part
of
thes
e
stat
emen
ts.
INNOVET, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Capital
in
Common Excess of
Stock
Shares Amount Par Value
Balance, January 1, 1994 $ $
17,686,28 17,686 18,838,67
1 1
Capital representing exercise of stock options
568,700 569 -
Capital representing stock issued in exchange
for services 39,900 40 15,485
Capital representing stock option grants
Net loss
Balance, December 31, 1994
18,294,88 18,295 18,854,15
1 6
Capital representing exercise of stock options
360,000 360 -
Capital representing stock issued in exchange
for services 2,000 2 2,498
Net loss
Balance, June 30, 1995 $ $
18,656,88 18,657 18,856,65
1 4
Capital Total
Represent Accumulate Stockholde
ing d rs'
Stock Deficit Equity
Grants
Balance, January 1, 1994 $ $
5,485,139 $(18,906,6 5,434,823
73)
Capital representing exercise of stock options
569
Capital representing stock issued in exchange
for services 15,525
Capital representing stock option grants
29,851 29,851
Net loss
(5,224,421 (5,224,421
) )
Balance, December 31, 1994
5,514,990 (24,131,09 256,347
4)
Capital representing exercise of stock options
360
Capital representing stock issued in exchange
for services 2,500
Capital representing stock option grants
- -
Net loss (246,314)
(246,314)
Balance, June 30, 1995 $ $
5,514,990 $(24,377,4 12,893
08)
The accompanying notes are an integral part of
these statements.
IN
NO
VE
T,
IN
C.
AN
D
SU
BS
ID
IA
RI
ES
CO
NS
OL
ID
AT
ED
ST
AT
EM
EN
TS
OF
CA
SH
FL
OW
S
(U
na
ud
it
ed
)
Six
Months
Ended
June 30
1995 1994
Ca
sh
fl
ow
s
fr
om
op
er
at
in
g
ac
ti
vi
ti
es
:
Ne $
t (246,314) $(1,476,2
lo 67)
ss
Ad
ju
st
me
nt
s
to
re
co
nc
il
e
ne
t
lo
ss
to
ne
t
ca
sh
us
ed
in
op
er
at
in
g
ac
ti
vi
ti
es
:
S 2,500
t 17,700
o
c
k
i
s
s
u
e
d
f
o
r
s
e
r
v
i
c
e
s
C -
o 19,403
m
p
e
n
s
a
t
i
o
n
u
n
d
e
r
s
t
o
c
k
o
p
t
i
o
n
p
l
a
n
A 1,760
m 1,760
o
r
t
i
z
a
t
i
o
n
e
x
p
e
n
s
e
D 2,895
e 5,336
p
r
e
c
i
a
t
i
o
n
e
x
p
e
n
s
e
F (5,873)
o -
r
e
i
g
n
c
u
r
r
e
n
c
y
t
r
a
n
s
a
c
t
i
o
n
(
g
a
i
n
)
/
l
o
s
s
L 4,355
o 4,790
s
s
o
n
s
a
l
e
o
f
e
q
u
i
p
m
e
n
t
L -
o 391,926
s
s
o
n
d
i
s
p
o
s
a
l
o
f
d
i
s
c
o
n
t
i
n
u
e
d
o
p
e
r
a
t
i
o
n
s
C
h
a
n
g
e
s
i
n
o
p
e
r
a
t
i
n
g
a
s
s
e
t
s
a
n
d
l
i
a
b
i
l
i
t
i
e
s
n
e
t
o
f
e
f
f
e
c
t
s
f
r
o
m
a
c
q
u
i
s
i
t
i
o
n
s
/
d
i
s
p
o
s
i
t
i
o
n
o
f
s
u
b
s
i
d
i
a
r
i
e
s
:
( 1,029
I (32,126)
n
c
r
e
a
s
e
)
d
e
c
r
e
a
s
e
i
n
a
c
c
o
u
n
t
s
r
e
c
e
i
v
a
b
l
e
( 839,583
I -
n
c
r
e
a
s
e
)
d
e
c
r
e
a
s
e
i
n
i
n
v
e
s
t
m
e
n
t
s
( 145,170
I -
n
c
r
e
a
s
e
)
d
e
c
r
e
a
s
e
i
n
o
t
h
e
r
r
e
c
e
i
v
a
b
l
e
s
( -
I 5,218
n
c
r
e
a
s
e
)
d
e
c
r
e
a
s
e
i
n
i
n
v
e
n
t
o
r
y
( -
I (75,000)
n
c
r
e
a
s
e
)
d
e
c
r
e
a
s
e
i
n
n
o
t
e
s
r
e
c
e
i
v
a
b
l
e
( (9,987)
I (54,564)
n
c
r
e
a
s
e
)
d
e
c
r
e
a
s
e
i
n
p
r
e
p
a
i
d
e
x
p
e
n
s
e
s
( 25,745
I (24,176)
n
c
r
e
a
s
e
)
d
e
c
r
e
a
s
e
i
n
s
e
c
u
r
i
t
y
d
e
p
o
s
i
t
s
a
n
d
o
t
h
e
r
a
s
s
e
t
s
I (66,839)
n 241,479
c
r
e
a
s
e
(
d
e
c
r
e
a
s
e
)
i
n
a
c
c
o
u
n
t
s
p
a
y
a
b
l
e
I (100,646)
n (114,240)
c
r
e
a
s
e
(
d
e
c
r
e
a
s
e
)
i
n
a
c
c
r
u
e
d
e
x
p
e
n
s
e
s
I (704,961)
n -
c
r
e
a
s
e
(
d
e
c
r
e
a
s
e
)
i
n
s
h
o
r
t-
t
e
r
m
b
o
r
r
o
w
i
n
g
s
D
i
s
c
o
n
t
i
n
u
e
d
o
p
e
r
a
t
i
o
n
s-
n
o
n
c
a
s
h
c
h
a
r
g
e
s
a
n
d
working capital changes
- 463,389
Net cash used for operating
activities (111,583) (625,372)
Ca
sh
fl
ow
s
fr
om
in
ve
st
in
g
ac
ti
vi
ti
es
:
Sa 22,428
le 1,200
of
pr
op
er
ty
,
pl
an
t
an
d
eq
ui
pm
en
t
Pu -
rc (2,391)
ha
se
of
pr
op
er
ty
,
pl
an
t
an
d
eq
ui
pm
en
t
Pr -
oc 10,000
ee
ds
fr
om
sa
le
of
di
sc
on
ti
nu
ed
op
er
at
io
ns
In -
ve (16,884)
st
in
g
ac
ti
vi
ti
es
of
di
sc
on
ti
nu
ed
op
er
at
io
ns
Net cash provided by (used) for
investing activities 22,428 (8,075)
(continue
d)
IN
NO
VE
T,
IN
C.
AN
D
SU
BS
ID
IA
RI
ES
CO
NS
OL
ID
AT
ED
ST
AT
EM
EN
TS
OF
CA
SH
FL
OW
S
(U
na
ud
it
ed
)
Six
Months
Ended
June 30
1995 1994
Ca
sh
fl
ow
s
fr
om
fi
na
nc
in
g
ac
ti
vi
ti
es
:
Pr 360
oc 179
ee
ds
fr
om
ex
er
ci
se
of
st
oc
k
op
ti
on
s
Re -
pa (50,000)
ym
en
t
of
di
re
ct
or
/o
ff
ic
er
/s
ha
re
ho
ld
er
lo
an
s
Pr -
oc 1,000,000
ee
ds
fr
om
di
re
ct
or
/o
ff
ic
er
/s
ha
re
ho
ld
er
lo
an
s
Fi -
na (84,296)
nc
in
g
ac
ti
vi
ti
es
of
di
sc
on
ti
nu
ed
op
er
at
io
ns
Net cash provided by financing
activities 360 865,883
In (88,795)
cr 232,436
ea
se
(d
ec
re
as
e)
in
ca
sh
an
d
ca
sh
eq
ui
va
le
nt
s
Ca 170,472
sh 582,622
an
d
ca
sh
eq
ui
va
le
nt
s,
be
gi
nn
in
g
of
pe
ri
od
Ca $ 81,677 $
sh 815,058
an
d
ca
sh
eq
ui
va
le
nt
s,
en
d
of
pe
ri
od
Su
pp
le
me
nt
al
di
sc
lo
su
re
s
of
ca
sh
fl
ow
in
fo
rm
at
io
n
Ca
sh
pa
id
du
ri
ng
th
e
ye
ar
:
I $ 41,577 $
n 24,428
t
e
r
e
s
t
Su
pp
le
me
nt
al
sc
he
du
le
of
no
nc
as
h
in
ve
st
in
g
an
d
fi
na
nc
in
g
ac
ti
vi
ti
es
:
(a In
) 19
95
,
th
e
Co
mp
an
y
re
tu
rn
ed
a
la
bo
ra
to
ry
ma
ch
in
e
to
th
e
ve
nd
or
va
lu
ed
at
$1
8,
80
0
wh
ic
h
wa
s
us
ed
in
th
e
re
se
ar
ch
an
d
de
ve
lo
pm
en
t
of
th
e
ge
nd
er
se
le
ct
io
n
te
ch
no
lo
gy
.
(b In
) 19
94
,
th
e
Co
mp
an
y
so
ld
it
s
wh
ol
ly
ow
ne
d
su
bs
id
ia
ry
,
DR
A
&
As
so
ci
at
es
in
ex
ch
an
ge
fo
r
$1
0,
00
0
in
ca
sh
an
d
a
fi
ve
ye
ar
no
te
re
ce
iv
ab
le
in
th
e
am
ou
nt
of
$7
5,
00
0.
Th
e
ac
co
mp
an
yi
ng
no
te
s
ar
e
an
in
te
gr
al
pa
rt
of
th
es
e
st
at
em
en
ts
.
INNOVET, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995
NOTE A - BASIS OF CONSOLIDATION
The Consolidated Condensed Balance Sheets at June 30, 1995 and
December 31, 1994 and the related Consolidated Condensed Statements of
Operations for the three months and six months ended June 30, 1995 and
1994, Consolidated Statements of Stockholders' Equity for the six months
ended June 30, 1995 and Consolidated Condensed Statements of Cash Flows for
the six months ended June 30, 1995 and 1994, have been prepared in
accordance with the instructions for Form 10-QSB and, therefore, do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and changes in financial position
in conformity with statements, including the footnotes thereto in the
Company's Annual Report on Form 10-KSB for the year ended December 31,
1994. In the opinion of management, all adjustments considered necessary
for a fair presentation of the results of operations for the six months
ended June 30, 1995 have been included.
NOTE B - REALIZATION OF ASSETS
The accompanying financial statements have been prepared assuming the
continuation of the Company as a going concern. However, the Company has
sustained substantial losses from operations in recent years and has a
significant accumulated deficit. During 1994, the Company implemented a
strategic plan in order to overcome its financial difficulties. The
Company divested all of its operating subsidiaries, thereby greatly
reducing its future losses and converting the subsidiaries' assets to cash
in order to provide working capital and reduce its obligations to
creditors.
In view of the matters described in the preceding paragraph,
recoverability of a major portion of the recorded asset amounts shown in
the accompanying consolidated balance sheet is dependent upon continued
operations of the Company, which in turn is dependent upon the Company's
ability to be successful in and to finance its future operations. The
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset and liability amounts
that might result from the above uncertainties.
At June 30, 1995, the Company had $81,677 in cash and cash equivalents
which, combined with remaining assets, are not sufficient to support its
operations for the next twelve months. Management has taken or will take
the following steps to attempt to improve its financial condition:
In April 1995, in connection with the sale of its wholly-owned
subsidiary, Cambridge Veterinary Sciences, Limited ("CVS") to Enviromed
plc, the Company sold 886,700 Enviromed plc shares for 75 pence each in two
separate transactions. Proceeds of $1,060,000 were received.
Approximately $880,000 was used to retire a secured bank debt , with the
balance of $180,000 available to the Company.
The Company's outstanding obligations at June 30, 1995 have been
reduced essentially to its current accounts payable and to its obligation
to its former President and Chief Executive Officer, Jesse Houdeshell,
pursuant to the Termination, Release and Consulting Agreement with Dr.
Houdeshell dated February 23, 1994. The Company is currently negotiating a
modification of this agreement due to the Company's present financial
condition.
The Company has reduced its corporate operating and personnel expenses
in order to conserve cash. In July 1995, the Company terminated its long-
term office lease which was due to expire in October 1997 and moved to a
new location. This has resulted in a two-thirds reduction in the Company's
monthly rental expense.
The Company continues to seek methods to increase revenues from the
sale of this product. The Company has received future purchase orders for
monthly deliveries from August to December 1995 that would provide
estimated revenues of $211,250. However, the present sales volume is not
sufficient to cover all of the Company's working capital needs for the next
twelve months.
The Company has engaged in negotiations to sell or license the rights
to its consumer product and both its IVET-629 and gender selection
technologies to raise more cash.
The Company is examining opportunities to merge with and/or acquire
other companies which would provide revenues and cash flow sufficient to
sustain it.
The Company is due 98,522 shares of Enviromed plc stock from the sale
of its wholly owned subsidiary CVS. However, on June 22, 1995, the date
the shares were to be issued to the Company, the Company was notified of a
claim under the warranties provision of the sale agreement which hinders
the release of the remaining shares. As of the date of this report, the
98,522 shares have not been issued to the Company. The Company is pursuing
this matter with its legal counsel in order to arrive at a quick and
favorable resolution. Accordingly, the receivable on the balance sheet
representing these shares (under the caption other receivables) was
adjusted from its carrying price of 68 pence to the market value of 45
pence per share which resulted in a charge of $36,083 in the second
quarter.
Management believes that as a result of the actions stated above, the
Company can continue in operation; however, there is no assurance that such
actions will be consummated or will eliminate the Company's losses or the
need for additional capital.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
(a) Results of Operations.
(1) Three months ending June 30. Revenues. Total sales for the pet
stain and odor eliminator increased from $99,169 for the three months
ending June 30, 1994 to $124,844 for the same period in 1995. Even though
the number of orders and volume sold were approximately the same for each
time period under comparison, there was a credit of $26,445 issued in May
1994 for product that was reworked and subsequently invoiced in the third
quarter of 1994. Also, the 1994 sales included $9,357 of diagnostic kit
sales. The sale of diagnostic kits by InnoVet Inc. ceased in December 1994
due to the sale of the manufacturing subsidiary, CVS.
Gross margins. Gross margins decreased from 45% for the three months
ending June 30, 1994 to 42% for the same period in 1995 mainly due to the
change in product mix included in gross margin. Diagnostic kit sales
ceased in December 1994 and the pet stain and odor eliminator aerosol was
the only product sold in 1995.
Compensation of officers and employees. Compensation of officers and
employees was reduced by $21,175 or 29% due to one less officer in the
current quarter compared to the same period ended June 30, 1994.
Compensation from grants under stock option plans was reduced from $14,970
for the three months ending June 30, 1994 to $0 for the same period in 1995
since no stock options were granted to officers and employees.
Consulting fees. Consulting fees were lower in 1995 by $50,530 or 97%
due to the termination of all consulting agreements provided by Ronald S.
Brakke, Chief Executive Officer who resigned on April 5, 1995.
Research and development expenses. Research and development expenses
decreased by $16,539 or 60% in the second quarter 1995 compared to the same
quarter last year. The Company has suffered delays in the licensing of
IVET-629 and the development of the gender selection technology. To
conserve cash, the Company suspended further development of its gender
selection technology and biological testing of its IVET-629 product in
1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $85,811 or 46% in the second quarter of
1995 compared to the same quarter for 1994. The lower selling, general and
administrative expenses for the second quarter of 1995 are attributable to
the continuing cost-cutting program which began in April of 1994.
Gain on sale of securities. The Company recorded a gain on the sale
of marketable securities of $99,979 in the second quarter 1995 due to the
sale of 886,700 capital shares of Enviromed plc that was received from the
sale of CVS. At the close of the Company's calendar year ending December
31, 1994, the shares were valued at 68 pence per share. The shares were
sold in the second quarter of 1995 to institutional investors in Britain
under two separate transactions at a price of 75 pence each, thereby
resulting in the recognized gain.
Interest income and expense. Interest income decreased by $22,662 for
the three months ending June 30, 1995 compared to the same period in 1994.
The interest bearing cash accounts that were collateral for bank loans were
used to payoff the loans in 1994, thereby reducing the cash balances
generating interest income for 1995. Interest expense increased for the
second quarter of 1995 compared to the same quarter of the prior year by
$16,981 due to a short-term bank loan which was drawn down by the Company
in December of 1994. The proceeds of the loan were used to repay secured
lenders as a condition precedent to the sale of CVS. The balance of the
loan was repaid in May of 1995.
Provision for income taxes. The Company has not recorded any income
tax expense (benefit) since the Company has never been profitable. The
Company's net loss decreased by $642,065 from a net loss of $704,507 for
the three months ended June 30, 1994 to a net loss of $62,442 for the three
months ended June 30, 1995. The net loss decreased in 1995 resulting from
the divestiture of all operating subsidiaries in 1994, a reduction in
corporate operating and personnel expenses, and a recognized gain from the
sale of the Enviromed plc shares.
Discontinued operations. In the quarter ended June 30, 1994, losses
of $391,926 were recorded as a loss on disposal of the discontinued
operations of the former subsidiaries. No losses from discontinued
operations were recorded in the same period of 1995 since the divestiture
of all subsidiaries was completed in 1994.
(2) Six months ending June 30. Revenues. Total sales decreased by
$28,043 for the six months ending June 30, 1995 compared to the same six
months for 1994. The sales decline was due to the discontinued sales of
diagnostic kits by the Company after the sale of its manufacturing
subsidiary, CVS in December 1994. The 1994 sales for the first six months
included $24,034 of diagnostic kit sales compared to $0 in 1995 for the
same six months.
Cost of revenues. Cost of revenues decreased by $19,669 for the six
months ending June 30, 1995 compared to the same period for the prior year
because of the discontinued sales of diagnostic kits.
Compensation of officers and employees. Compensation of officers and
employees was reduced by $34,956 or 25% because one less officer was
employed in the current six months compared to the same period in 1994.
Compensation from grants under stock option plans was reduced from $19,403
for the six months ending June 30, 1994 to $0 for the same period in 1995
because no stock options were granted.
Consulting fees. Consulting fees were lower in 1995 by $90,907 or 82%
due to the termination of all consulting agreements provided by Ronald S.
Brakke, Chief Executive Officer who resigned on April 5, 1995.
Research and development expenses. Research and development expenses
decreased by $12,183 or 22% in the first half of 1995 compared to the same
period last year. The Company has experienced delays in the licensing of
IVET-629 and the development of the gender selection technology. To
conserve cash, the Company suspended further development of its gender
selection technology and biological testing of its IVET-629 product in
1995.
Selling, general and administrative expenses. Selling, general and
administrative expenses decreased $169,109 or 48% in the first six months
of 1995 compared to the same period of 1994. The lower selling, general
and administrative expenses for the first half of 1995 are attributable to
the continuing cost-cutting program which began in April of 1994.
Legal expenses. Legal expenses decreased by $15,720 in the first half
of 1995 compared to the same period in 1994. Legal expenses for the first
half of 1994 included one-time expenditures relating to the agreement with
Jesse Houdeshell, the former President and Chief Executive Officer of the
Company who retired on March 1, 1994.
Gain on sale of marketable securities. The Company recorded a gain on
sale of marketable securities of $99,979 in the six months ending June 30,
1995 due to the sale of 886,700 capital shares of Enviromed plc stock that
was received from the sale of CVS in December 1994. At the close of the
Company's calendar year ending December 31, 1994, the shares were valued at
68 pence. The mentioned shares were sold in the second quarter of 1995 to
institutional investors in Britain under two separate transactions at a
price of 75 pence each, thereby resulting in the recognized gain.
Interest income and expense. Interest income decreased by $27,607 for
the six months ending June 30, 1995 compared to the same period in 1994.
The interest bearing cash accounts that were collateral for bank loans were
used to payoff their respective loans in 1994, thereby reducing the cash
balances generating interest income for 1995. Interest expense increased
for the six months ending June 30, 1995 compared to the same period of the
prior year by $35,197 due to a short-term bank loan which was drawn down by
the Company in December of 1994. The proceeds of the loan were used to
repay secured lenders as a condition precedent to the sale of CVS. The
balance of the loan was repaid in May of 1995.
Provision for income taxes. The Company has not recorded any income
tax expense (benefit) since the Company has never been profitable. The
Company's net loss decreased by $1,229,953 from a net loss of $1,476,267
for six months ended June 30, 1994 to a net loss of $246,314 for the six
months ended June 30, 1995. The net loss decreased in 1995 resulting from
the divestiture of all operating subsidiaries in 1994, a reduction in
corporate operating and personnel expenses, and a recognized gain from the
sale of the Enviromed plc shares.
Discontinued operations. For the six months ending June 30, 1994,
losses of $462,897 were recorded as losses from operations of discontinued
subsidiaries. These losses were incurred from the beginning of the year
through March 31, 1994, the date the decision was made to dispose of the
subsidiaries. Also, in the six months ending June 30, 1994, losses of
$391,926 were recorded as a loss on disposal of the discontinued operations
of the former subsidiaries. No losses from discontinued operations were
recorded in the same period during 1995 since the divestiture of all
subsidiaries was completed in 1994.
(b) Liquidity.
At June 30, 1995, the Company had $81,677 in cash and cash equivalents
which combined with the remaining assets is not sufficient to support its
operations for the next twelve months. As more fully described in Note B
to the June 30, 1995 financial statements, the Company has taken action and
has plans to revise its operations and financial requirements. See Note B
to the financial statements.
The Company's only source of revenue is from the sale of its pet stain
and odor eliminator aerosol product. The Company has received future
purchase orders for monthly deliveries from August to December 1995 that
would provide revenues of $211,250. However, the present sales volume is
not sufficient to cover all of the Company's working capital needs for the
next twelve months.
In the meantime, the Company is actively devoting its efforts to
expanding sales of its consumer aerosol product to mass markets. The
Company has been attempting to negotiate the sale or license of the rights
to its consumer product and both its IVET-629 and gender selection
technologies to raise cash. The Company is examining opportunities to
acquire or merge with other companies to obtain additional revenue and cash
flow sufficient to sustain it.
Management believes that as a result of the actions discussed above,
the Company can continue in operation; however, there is no assurance that
such actions will be consummated or will eliminate the Company's losses or
the need for additional capital.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information.
On July 11, 1995, the Company's common stock was stricken from
listing on the Emerging Company Marketplace of the American Stock Exchange
and from registration under Section 12(b) of the Securities Exchange Act of
1934 ("Exchange Act"). The Company is still required to file annual and
periodic reports under Section 15(d) of the Exchange Act. The Company
believes that its common stock will trade on the OTC Bulletin Board in the
near future.
On August 2, 1995, Dr. Richard L. Franklin, resigned as a
director of the Company. No reason was given for Dr. Franklin's
resignation. There were no disagreements between Dr. Franklin and the
Company.
Item 6. Exhibits and Reports on Form 8-K.
On April 20, 1995, the Company filed a Form 8-K to report the
resignation of its Chief Executive Officer, Ronald S. Brakke and the
resignation of a director, Howard Thomas, on April 5, 1995.
SIGNATURE
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.
InnoVet, Inc.
(Registrant)
/s/SCOTT P. CIELEWICH
Date: August 7, 1995 Scott P. Cielewich, Executive Vice
President and
Chief Financial Officer
