U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
================================================================================
/X/ ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended: DECEMBER 31, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For transition period from to .
================================================================================
Commission File Number: 33-17922-C
IMMUNE RESPONSE, INC.
(Name of small business issuer in its charter)
COLORADO 84-0950197
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7315 EAST PEAKVIEW AVENUE, ENGLEWOOD, COLORADO 80111
(Address of principal executive offices)(Zip Code)
Issuer's telephone number: (303) 796-8139
Securities registered under Section 12 (b) of the Exchange Act:
NONE
Securities registered under Section 12 (g) of the Exchange Act:
NONE
- --------------------------------------------------------------------------------
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange 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 / /
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is not contained in this form, and will not be contained, to the best of the
Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB: /X/
Issuer's revenues for its most recent fiscal year: $157,141
The aggregate market value of the voting stock held by non-affiliates of the
Registrant is not applicable as the Registrant's securities which were
previously listed in the National Quotation Bureau "Pink Sheets" stopped being
listed as of January 1992 and therefore the Registrant is unable to provide an
aggregate market value for its securities.
The issuer had 294,970,000 shares of common stock outstanding as of April 10,
1996.
Documents incorporated by reference: NONE
Transitional Small Business Disclosure Format: Yes / / No /X/
<PAGE>
IMMUNE RESPONSE, INC.
FORM 10-KSB
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) Business Development
(1) Immune Response, Inc. was incorporated in the State of Colorado on May
24, 1984 as Med-Mark Technologies, Inc. for the purpose of marketing medical
products. When the Registrant was unable to obtain suitable products, it ceased
operations and remained inactive from July 1985 until November 10, 1986 when it
changed its name to Immune Response, Inc. From November 1986 until May 1991, the
Registrant was a biomedical firm engaged in three levels of activity - clinical
testing, clinical research and basic research.
While the Registrant established and operated the Clinical Testing and
Research Division until May 1991, the Board of Directors, following an analysis
of the results of the Division's operations, determined that the operations were
not commercially viable and that it was highly unlikely that the Division would
ever be profitable. Accordingly, on May 10, 1991, the Registrant entered into an
Asset Purchase Agreement with Infinity Laboratories, Inc. ("Infinity") pursuant
to which it sold to Infinity all of the Registrant's assets relating to its
laboratory services and paid Infinity a total of $15,623 in cash and notes. In
return for this sale, the President of Infinity, who was the Registrant's
laboratory director at the time of the sale and had previously been the
president and a director of the Registrant, agreed to return to the Registrant
17,500,000 shares of the Registrant's common stock owned by him; agreed to the
cancellation of stock options to purchase an additional 15,000,000 shares of the
Registrant's common stock owned by him; and agreed to release the Registrant
from any further obligations under an employment agreement then in effect. This
sale was approved by the Registrant's stockholders at a Special Meeting of
Shareholders held on June 3, 1991. The Registrant suspended its biomedical
activities following this transaction and has been essentially inactive since
such time except for evaluating alternative business opportunities.
On January 8, 1996, the Registrant announced that it had executed an
agreement to merge with Ocurest Laboratories, Inc. ("Ocurest") of Palm Beach
Gardens, Florida. Concurrent with executing the merger agreement, the Registrant
made a secured loan to Ocurest in the amount of $125,000. Ocurest produces,
distributes and holds worldwide patents on a new delivery system for dispensing
ophthalmic drug solutions into the eye. On February 23, 1996, the Registrant
announced the mutual termination of its merger agreement. As part of the mutual
termination agreement, Ocurest has agreed to repay the aforementioned loan with
interest on an immediate basis as receivables allow. The Registrant anticipates
all amounts due under the loan will be repaid prior to June 30, 1996. To date,
the Registrant has received $15,000.
(a)(2)(3) During the year ended December 31, 1995, the Registrant has not
been involved in any bankruptcy, receivership or similar proceedings; has not
undergone material reclassification, merger or consolidation; has not acquired
or disposed of any material amount of assets otherwise than in the ordinary
course of business; and has not experienced any material change in its mode of
conducting business.
1
<PAGE>
(b) Business of Issuer
(1)(2)(3) The Registrant is currently an inactive company which is
evaluating alternative business opportunities. Prior to 1995, the Registrant's
only asset was 167,360 shares of the common stock of MacGregor Sports and
Fitness, Inc. ("MacGregor") a publicly-traded (NASDAQ) company which is
primarily engaged in licensing the usage of the MacGregor trade name for certain
sporting goods related products in exchange for royalties. During 1995, the
Registrant sold 133,904 of these shares for net proceeds of $208.567. An
additional 27,500 shares have been sold through March 31, 1996 for net proceeds
of $89,504, leaving 5,956 shares remaining for sale. The Registrant currently
intends to use the proceeds from the sales of the MacGregor common stock to
extinguish debt, fund its operating needs and provide capital for future
business activities.
(4) As the Registrant is currently inactive, the Registrant does not
directly compete with any company, individual or organization.
(5) The Registrant does not require raw materials.
(6) The Registrant's business is not dependent upon a single customer, or a
few customers, the loss of any one or more of which would have a material
adverse effect on the Registrant.
(7) The Registrant holds no patents or trademarks, and has no interest in
any franchises, concessions, royalty agreements or labor contracts.
(8)(9) The Registrant currently is not subject to any government
regulations which affect its business.
(10) During the last three years the Registrant spent no amounts on
Registrant-sponsored or customer-sponsored research and development activities.
(11) The Registrant is not subject to any federal, state or local
provisions which have been enacted or adopted regulating the discharge of
materials into the environment or otherwise relating to the protection of the
environment.
(12) The Registrant's executive officers are the Company's only two
employees and serve on a part-time basis. The Registrant currently has no
full-time employees.
ITEM 2. DESCRIPTION OF PROPERTY
(a) Description of Principal Plants and other Property
The Registrant's principal office is located at 7315 East Peakview Avenue,
Englewood, Colorado 80111. The Registrant is provided space on a rent free basis
by a significant shareholder.
(b) Investment Policies
The Registrant currently does not invest in real estate, real estate
mortgages, or securities of persons who primarily engage in real estate
activities.
2
<PAGE>
(c) Description of Real Estate and Operating Data
The Registrant does not own property, the book value of which amounts to
ten percent or more of the total assets of the Registrant.
ITEM 3. LEGAL PROCEEDINGS
The Registrant currently is not a party to any pending legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Registrant did not submit any matters to a vote of its security holders
during the fourth quarter ended December 31, 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) Market Information
The Registrant's Units, Common Stock and Warrants have been traded as Units
on the over-the-counter market since July, 1988. Trading in the Registrant's
securities was reported by the National Quotation Services "Pink Sheets" until
January 1992 when the Registrant's securities ceased being listed. As a result,
there has been no known trading in the Registrant's Units, Common Stock or
Warrants for the years 1994 or 1995.
(b) Holders
The number of record holders of the Registrant's Common Stock as of April
10, 1996, was 621 according to the Registrant's transfer agent. This figure
excludes an indeterminate number of stockholders whose shares are held in
"street" or "nominee" name.
(c) Dividends
Holders of shares of Common Stock of the Registrant are entitled to
dividends when and if declared by the Registrant's Board of Directors out of
funds legally available therefor. The Registrant has not paid any dividends on
its Common Stock and currently intends to retain earnings, if any, to finance
the development and expansion of its business. Future dividend policy is subject
to the discretion of the Board of Directors and will depend upon a number of
factors, including but not limited to future earnings, capital requirements and
the financial condition of the Registrant.
ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS
(a) Plan of Operation
The Registrant's revenue significantly increased during the fiscal year
ended December 31, 1995 as more fully described in (b) below. Although the
Registrant has virtually no operating overhead costs as a result of its current
inactive status, certain funds are necessary for payment of legal and accounting
3
<PAGE>
costs related to keeping the Registrant current with its regulatory filings as
well as certain other general and administrative expenses. During 1995 as well
as in each of the last two fiscal years the Registrant has relied on loans from
related entities in order to meet some its operating expenses as well as minimal
personal loans from the Registrant's President as described more fully in Part
III. Item 12, Certain Relationships and Related Transactions.
With the sales of portions of the Registrant's investment in MacGregor in
the fourth quarter of 1995 as well as the first quarter of 1996, the Registrant
has provided the capital necessary to fund its limited business activities for
the foreseeable future as it continues the search for alternate business
opportunities. While the Registrant currently does not expect the level and
amount of its expenses will change significantly during 1996 as compared to
1995, should the Registrant identify and pursue a business opportunity such as
the merger which was contemplated with Ocurest Laboratories, Inc. as described
more fully in Part 1. Item 1 Description of Business, the Registrant can expect
increased expenses resulting from legal and other costs. Such a change in the
Registrant's business status as a result of identifying a business opportunity
which the Registrant's Board of Directors feels would be beneficial for the
Registrant and its shareholders may require securing additional financing the
amount and source of which cannot presently be determined.
The Registrant is not currently engaged in any research and development,
does not anticipate the purchase or sale of any plant or significant equipment,
nor does it anticipate any changes in the number of employees, which would have
any material effect on the financial condition of the Registrant.
(b) Management's Discussion and Analysis of Financial Condition and Results of
Operations
Total revenue for the year ended December 31, 1995 was $157,141, a majority
of which was produced by the sale of a portion of the Registrant's investment in
MacGregor as described more fully in Part 1. Item 1 Description of Business. In
addition, the Registrant recorded income from a one-time non-cash forgiveness of
debt owed by the Registrant. This compares with net revenue of $1,268 derived
solely from interest income for the year ended December 31, 1994. Total expenses
for 1995 were $50,864 as compared to $96,623 during 1994. Expenses decreased 47%
in 1995 over 1994 primarily as a result of an unrealized loss on the
Registrant's investment in MacGregor Sports and Fitness, Inc. in 1994. General
and administrative expense of $34,969 increased significantly during 1995 over
($15,240) recorded in 1994 which included a credit of $22,143 for the
forgiveness of certain debt owed by the Registrant leaving operating expenses of
$6,903. This increase in general and administrative expense is largely
attributed to increased legal costs associated with the proposed merger with
Ocurest. Net income for the year ended December 31, 1995 was $106,277 as
compared to a loss of $95,355 for the year ended December 31, 1994.
The gain on the sale of the MacGregor shares in 1995 and the unrealized
loss on the MacGregor investment in 1994 accounted for the significant swing in
the Registrant's profitability during the past two years. While the Registrant
has sold an additional 27,500 MacGregor shares in 1996 for total proceeds of
$89,504, and has an additional 5,956 shares remaining for sale, once these
shares are sold, the Registrant will have no significant assets other than its
cash balances and no other means with which to produce future income. As a
result, the revenues and net income produced in 1995 the continuation of which
is expected in 1996 is not expected continue in future years barring the a
change in the Registrant's inactive business status.
4
<PAGE>
The Company's net worth at December 31, 1995, was $171 compared to
($154,366) at the year ended December 31, 1994. The increase in the Registrant's
net worth at December 31, 1995 as compared to the previous year is a direct
result of the increase in the value of the investment in MacGregor and the
subsequent sale of a portion of that investment in addition to the Registrant
extinguishing approximately $64,000 in liabilities during 1995.
The financial results incurred during 1995 are indicative of what can be
expected for 1996 in the absence of the Registrant's identifying and
implementing alternative business opportunities. However, beyond 1996 following
the sale if its investment in MacGregor, the Registrant will continue to incur
losses barring a change in its inactive business status.
As of December 31, 1995, the Registrant had made no other material
commitments for capital expenditures.
ITEM 7. FINANCIAL STATEMENTS
The financial statements are listed under Item 13.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants during the
most recent two fiscal years.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT OF THE REGISTRANT
(a) IDENTIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
Length of
Name Age Offices held Service
- ---- --- ------------ ---------
<S> <C> <C> <C>
Joseph W. Hovorka 66 President, Treasurer, Since 1987
Principal Executive,
Financial and Accounting
Officer and Director
Thomas B. Olson 30 Secretary and Director Since 1990
</TABLE>
The directors of the Registrant are elected to hold office until the next
annual meeting of the shareholders and until their respective successors have
been elected and qualified. Officers of the Registrant are elected by the Board
of Directors and hold office until their successors are duly elected and
qualified.
No arrangement exists between any of the above officers and directors
pursuant to which any one of those persons was elected to such office or
position.
5
<PAGE>
JOSEPH W. HOVORKA. Mr. Hovorka has served as the Registrant's President
since February 1990 and has been a Vice President, Treasurer and a director
since September 1987. Mr. Hovorka has been President, Chief Executive Officer,
Treasurer and a director of ProConnextions, Inc. since August 1990 and the
Treasurer and a director of Sports Card Connection, Inc., a wholly-owned
subsidiary of ProConnextions, Inc., since November 1990. ProConnextions, Inc.
and Sports Card Connection, Inc. are privately-held companies which were formed
to buy, trade and sell sports memorabilia. From 1989 to 1993, Mr. Hovorka served
as President, Chief Operating Officer, and Treasurer and was a director of
William's Controls, Inc., a publicly-held manufacturer of pneumatic, electronic
and hydraulic controls for trucks, buses, mining, construction and refuse
collection vehicles. Mr. Hovorka also served as President and was a director of
Enercorp, Inc., a publicly-held investment company from July 1986 until June
1993. From September 1990 until June 1993 Mr. Hovorka served as President and
was a director of Ajay Sports, Inc., a publicly-traded manufacturer of golf bags
and accessories. Mr. Hovorka had been engaged in commercial and business banking
for over thirty years. Mr. Hovorka devotes only such time as is necessary to the
affairs of the Registrant.
THOMAS B. OLSON. Mr. Olson has been a Director since 1988 and has been
Secretary of the Registrant since 1994. Since 1988, Mr. Olson has been Secretary
of Equitex, Inc., a publicly held business development company which is a
shareholder of the Registrant. Mr. Olson has attended Arizona State University
and the University of Colorado at Denver. Mr. Olson devotes only such time as is
necessary to the affairs of the Registrant.
(b) Significant Employees
None
(c) Family Relationships
Not applicable
(d) Involvement in Certain Legal Proceedings
Not applicable
Compliance with Section 16 of the Securities Act of 1934
- --------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 ("Section 16") requires the
Registrant's officers, directors and persons who own more than ten percent of
the Registrant's voting securities to file reports of their ownership and
changes in such ownership with the Securities and Exchange Commission (the
"Commission"). Commission regulations also require that such persons provide the
Registrant with copies of all Section 16 reports they file.
Based solely upon its review of such reports received by the Registrant, or
written representations from certain persons that they were not required to file
any reports under Section 16, the Registrant believes that, during 1995, its
officers and directors have complied with all Section 16 filing requirements.
6
<PAGE>
ITEM 10. EXECUTIVE COMPENSATION
(a) General
While Mr. Hovorka is to receive a salary of $18,000 per year, Mr. Hovorka
has agreed to suspend payment or accrual of such salary during 1995, as well as
each of the previous two years, until such time as the Registrant is a viable
operating company as may be determined by the Registrant's Board of Directors.
Mr. Olson currently receives no salary in his capacity as Secretary of the
Registrant. Both Mr. Hovorka and Mr. Olson receive $400 for each Board of
Directors meeting they attend, the payment of which is accrued and paid as the
Registrant's cash flow permits.
(b) Summary Compensation Table
The following table sets forth information regarding compensation
paid to the officers of the Registrant during the years ended December 31, 1995,
1994 and 1993:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation ($$)Long-Term
Compensation
Awards
(a) (b) (c) (d) (e) (g) (i)
Name & Other All
Principal Annual Options Other
Position Year Salary Bonus Compensation & SARs Compensation
($) ($) ($) (#) ($)
- --------- ---- ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph W. Hovorka 1995 18,000 <F1> 0 0 0 0
President,
Treasurer
Principal
Executive
Officer and
Accounting
Officer
Joseph W. Hovorka 1994 18,000 <F1> 0 0 0 0
Joseph W. Hovorka 1993 18,000 <F1> 0 0 0 0
- -----------
<FN>
<F1> Although Mr. Hovorka is to receive a salary of $18,000 per year, Mr.
Hovorka has agreed to suspend payment or accrual of such salary as noted in Item
10 (a) above.
</FN>
</TABLE>
(c) Option/SAR Grants Table
The Registrant made no grants of stock options or SARs during the year
ended December 31, 1995.
(d) Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Value Table
The Registrant had no stock options or SARs outstanding during the year
ended December 31, 1995.
7
<PAGE>
(e) Long Term Incentive Plans -- Awards in Last Fiscal Year
The Registrant has no long term incentive plans, and consequently has made
no such awards.
(f) Compensation of Directors
(1) Standard Arrangements
Each member of the Registrant's Board of Directors, Messrs. Joseph W.
Hovorka and Thomas B. Olson, receive $400 for each Board of Director's meeting
attended. For the year ended December 31, 1995, Messrs. Hovorka and Olson each
were eligible to receive $1,600 for the four meetings held. Payment is made to
directors as cash flow permits. Each member of the Board of Directors also
receives reimbursement for expenses incurred in attending the board meetings.
(2) Other Arrangements
There are no other arrangements which respect to compensation of directors
other than those explained in Item (f)(1) above.
(g) Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
No employment contract or change-in control arrangements are currently in
effect for either of the Registrant's two executive officers
(h) Report on Repricing of Options/SARs
No options or SARs were repriced during the fiscal year ended December 31,
1995.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a)(b) Security Ownership of Certain Beneficial Owners and Security Ownership of
Management
The following table contains information at April 10, 1996, as to the
beneficial ownership of shares of the Registrant's Common Stock by each person
who, to the knowledge of the Registrant at that date, was the beneficial owner
of five percent or more of the outstanding shares of the class, each person who
is a director of the Registrant and all persons as a group who are officers and
directors of the Registrant and as to the percentage of outstanding shares so
held by them at April 10, 1996.
8
<PAGE>
<TABLE>
<CAPTION>
Name and address Amount and Nature of Percent
of beneficial owner Beneficial Ownership <F1> of Class
- ------------------- ------------------------- --------
<S> <C> <C>
Joseph W. Hovorka -0- 0.0%
7315 East Peakview Avenue
Englewood, Colorado 80111
Thomas B. Olson 10,000,000 <F2> 3.4%
7315 East Peakview Avenue
Englewood, Colorado 80111
Henry Fong 47,750,000 <F3> 16.2%
7315 East Peakview Avenue
Englewood, Colorado 80111
All officers and directors 10,000,000 <F2> 3.4%
as a group (two persons)
- ---------------
<FN>
<F1> The beneficial owners exercise sole voting and investment power.
<F2> Includes 10,000,000 shares owned by Equitex, Inc. of which Mr. Olson is the
Secretary. Mr. Olson disclaims beneficial ownership of these securities.
<F3> Includes 10,000,000 shares owned by Equitex, Inc. of which Mr. Fong is the
President. Mr. Fong disclaims beneficial ownership of these securities.
</FN>
</TABLE>
(c) Changes in Control
The Registrant does not know of any arrangements, the operation of which
may, at a subsequent date, result in a change in control of the Registrant.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others
The Registrant currently utilizes approximately 150 square feet of office
space in Greenwood Executive Park, 6400 South Quebec, Englewood, Colorado, from
Equitex, Inc., a shareholder of the Registrant, on a rent free month-to-month
basis. The Registrant's Secretary and Director, Mr. Olson, is also Secretary of
Equitex, Inc.
During the years ended December 31, 1993, 1994 and 1995, Joseph W. Hovorka,
the President of the Registrant, made various loans to the Registrant in the
aggregate amount of $320. These loans were due on demand and due to their
negligible amount, were interest free. All of these loans were paid in full
during 1995.
During the year ended December 31, 1995 as in previous years, Equitex,
Inc., a significant shareholder of the Registrant of which the Registrant's
Secretary is also an officer, loaned $10,000 to the Registrant. When added to
the previous years' balance, the total loans outstanding at December 31, 1995
were $76,100. These loans are due on demand and carry an interest rate of 10%
per annum. Total interest due at December 31, 1995 on these loans was $35,703.
As of April 9, 1996, none of the total outstanding loans or interest due has
been repaid.
9
<PAGE>
During the year ended December 31, 1994 as in previous years, the Registrant
incurred legal costs from an attorney who was a former officer and director of
the Registrant in the amount of $1,823 for 1994 and $11,025 for 1993. The
aggregate amount due to the former officer and director for legal fees at
December 31, 1995 was $52,062. The entire amount was repaid during the first
quarter of 1996.
(b) Information Which May be Excluded
Not applicable
(c) Parents of Registrant
Not applicable
(d) Transactions with Promoters
Not applicable
10
<PAGE>
PART IV
ITEM 13. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(a) The Following Documents are Filed as a Part of this Report Immediately
Following the Signature Page
1. Financial Statements and Supplementary Data.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Certified Public Accountants F-1
Balance Sheet at December 31, 1995 F-3
Statements of Changes in Stockholders' Equity for the
period from inception (May 14, 1984) to December 31,
1984 and for the Years Ended December 31, 1985, 1986,
1987, 1988, 1989, 1990, 1991, 1992, 1993, 1994 and 1995 F-4
Statements of Operations for the Years ended
December 31, 1995 and 1994 and the period from inception
(May 14, 1984) to December 31, 1995 F-10
Statements of Cash Flows for the Years Ended
December 31, 1995 and 1994 and the period from inception
(May 14, 1984) to December 31, 1995 F-11
Notes to Financial Statements F-13
</TABLE>
2. Financial Statement Schedules
Not Applicable
3. Exhibits.
<TABLE>
<S> <C>
3.1 Articles of Incorporation <F1>
3.2 Bylaws <F1>
21.1 Subsidiaries <F1>
- ----------
<FN>
<F1> Incorporated by reference from the like numbered exhibits filed with the
Registrant's Registration Statement on Form S-18, No. 33-17922-C.
</FN>
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period
covered by this report.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: April 12, 1996
--------------
IMMUNE RESPONSE, INC.
(Registrant)
By /S/ JOSEPH W. HOVORKA
----------------------------------
Joseph W. Hovorka, 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
Registrant and in the capacities and on the dates indicated.
Date: April 12, 1996 /S/ JOSEPH W. HOVORKA
-------------- -------------------------------------
Joseph W. Hovorka, President,
Treasurer and Director
(Principal Executive, Financial,
and Accounting Officer)
Date: April 12, 1996 /S/ THOMAS B. OLSON
-------------- -------------------------------------
Thomas B. Olson, Secretary and
Director
12
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Immune Response, Inc.
We have audited the accompanying balance sheet of Immune Response, Inc. (a
development stage company) as of December 31, 1995 and the related statements of
operations, changes in stockholders' equity (deficit) and cash flows for the
years ended December 31, 1995 and 1994 and for the period from inception (May
14, 1984) to December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Immune Response, Inc. (a
development stage company) at December 31, 1995 and the results of its
operations and its cash flows for the years ended December 31, 1995 and 1994,
and for the period from inception (May 14, 1984) to December 31, 1995 in
conformity with generally accepted accounting principles.
It is indeterminable as to the amount to be ultimately realized from the
Company's net notes and interest receivable from and investment in MacGregor
Sports & Fitness, Inc. totaling $77,975 at December 31, 1995 in the accompanying
financial statements. The financial statements do not include any adjustments
relating to the recoverability of reported asset amounts that might result from
the outcome of this uncertainty.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 8, the Company
has minimal capital resources presently available to meet obligations which
normally can be expected to be incurred by similar companies, and has an
accumulated deficit of ($957,242) at December 31, 1995. These factors raise
substantial doubt about the Company's
F-1
<PAGE>
Report of Independent Certified Public Accountants
Page Two
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 8. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Davis & Co., CPAs, P.C.
Certified Public Accountants
Englewood, Colorado
April 5, 1996
F-2
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Balance Sheet
December 31, 1995
<TABLE>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents .................................. $ 130,362
Note receivable, net of allowance
for doubtful accounts of $6,338 ......................... 6,338
Interest receivable, net of allowance
for doubtful accounts of $1,379 ......................... 1,379
---------
138,079
Other assets
Investment in MacGregor (cost of $21,998) .................. 70,258
---------
$ 208,337
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable - related entity ............................. $ 76,100
Accrued legal expense payable to
former director ......................................... 52,062
Accounts payable - related entity .......................... 2,541
Accrued salary to officer .................................. 11,250
Accounts payable - others .................................. 22,110
Accounts payable - directors ............................... 8,400
Interest payable - related entity .......................... 35,703
---------
208,166
Contingencies (Notes 3, 5b and 8)
Stockholders' equity
Common stock, $.0001 par value; 950,000,000
shares authorized; 312,470,000 shares
issued; 294,970,000 shares outstanding .................. 31,247
Additional paid-in capital ................................. 877,906
Unrealized gain on available for sale securities ........... 48,260
Deficit accumulated during the
development stage ....................................... (957,242)
Less: treasury stock, at cost
(17,500,000 shares) ..................................... --
---------
171
---------
$ 208,337
=========
</TABLE>
The accompanying notes are a part of this statement.
F-3
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (Deficit)
For the period from inception (May 14, 1984) to December 31, 1984
and for the years ended December 31, 1985, 1986, 1987, 1988, 1989,
1990, 1991, 1992, 1993, 1994 and 1995
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In
Shares Amount Capital
------ ------ ----------
<S> <C> <C> <C>
Shares of common stock issued to
officers and directors during
the formation of the Company in
exchange for services valued
at $.000001 per share ............ 90,000,000 $ 9,000 $ (8,910)
Shares of common stock issued during
the formation of the Company in
exchange for cash of $.001 per
share to unrelated individuals ... 14,000,000 1,400 12,600
Net loss for the period from inception
(May 14, 1984) to Dec. 31, 1984
----------- ----------- -----------
Balance at December 31, 1984 ......... 104,000,000 10,400 3,690
Net loss for the year ended
December 31, 1985
----------- ----------- -----------
Balance at December 31, 1985 ......... 104,000,000 10,400 3,690
Shares of common stock issued
to unrelated individuals in
December 1986 in exchange
for cash of:
$.0005 per share ............. 14,000,000 1,400 5,600
$.00005 per share ............ 1,500,000 150 (75)
Net loss for the year ended
December 31, 1986
----------- ----------- -----------
Balance at December 31, 1986 ......... 119,500,000 11,950 9,215
Shares of common stock issued
to unrelated individuals
in exchange for cash of:
$.0005 per share in:
April 1987 ................ 2,000,000 200 800
May 1987 .................. 10,000,000 1,000 4,000
June 1987 ................. 10,000,000 1,000 4,000
$.00025 per share in:
April 1987 ................ 10,000,000 1,000 1,500
Shares of common stock issued
in August 1987 in exchange
for cash of $.0005 per
share to:
Related parties .............. 27,500,000 2,750 11,000
Others ....................... 16,000,000 1,600 6,400
</TABLE>
The accompanying notes are a part of this statement.
F-4
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (Deficit) (Page 2 of 6)
For the period from inception (May 14, 1984) to December 31, 1984
and for the years ended December 31, 1985, 1986, 1987, 1988, 1989,
1990, 1991, 1992, 1993, 1994 and 1995
<TABLE>
<CAPTION>
Deficit Total
Un- accumu. Stock-
realized during the holders'
gains development equity
(losses) stage (deficit)
-------- ----------- ---------
<S> <C> <C> <C>
Shares of common stock issued to
officers and directors during
the formation of the Company in
exchange for services valued
at $.000001 per share ............ $ $ $ 90
Shares of common stock issued during
the formation of the Company in
exchange for cash of $.001 per
share to unrelated individuals ... 14,000
Net loss for the period from inception
(May 14, 1984) to Dec. 31, 1984 .. (11,185) (11,185)
---------- ---------- ----------
Balance at December 31, 1984 ......... (11,185) 2,905
Net loss for the year ended
December 31, 1985 ................ (64,398) (64,398)
---------- ---------- ----------
Balance at December 31, 1985 ......... (75,583) (61,493)
Shares of common stock issued
to unrelated individuals in
December 1986 in exchange
for cash of:
$.0005 per share ............. 7,000
$.00005 per share ............ 75
Net loss for the year ended
December 31, 1986 ................ (17,557) (17,557)
---------- ---------- ----------
Balance at December 31, 1986 ......... (93,140) (71,975)
Shares of common stock issued
to unrelated individuals in
exchange for cash of:
$.0005 per share in:
April 1987 ................ 1,000
May 1987 .................. 5,000
June 1987 ................. 5,000
$.00025 per share in:
April 1987 ................ 2,500
Shares of common stock issued in
August 1987 in exchange for
cash of $.0005 per share to:
Related parties .............. 13,750
Others ....................... 8,000
</TABLE>
F-5
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (Deficit) (Page 3 of 6)
For the period from inception (May 14, 1984) to December 31, 1984
and for the years ended December 31, 1985, 1986, 1987, 1988, 1989,
1990, 1991, 1992, 1993, 1994 and 1995
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In
Shares Amount Capital
------ ------ ----------
<S> <C> <C> <C>
Shares of common stock issued in
August 1987 to an officer
and director in exchange for
services valued at $.0005
per share ........................ 15,000,000 $ 1,500 $ 6,000
Net loss for the year ended
December 31, 1987
----------- ------ ------
Balance at December 31, 1987 ......... 210,000,000 21,000 42,915
Shares of common stock issued in
July 1988, pursuant to a
public offering, for cash
of $.01 per share, net
costs of $199,761 ................ 90,000,000 9,000 691,239
Shares of common stock issued to
underwriter in July 1988,
pursuant to public offering for
cash of $.000001 per share ....... 2,880,000 288 (285)
Shares of common stock issued in
October 1988, pursuant to
exercise of Class B warrants,
for cash of $.02 per share ....... 300,000 30 5,970
Shares of common stock issued in
October and November 1988,
pursuant to exercise of
Class A warrants, for cash
of $.015 per share, net
of costs of $100 ................. 5,470,000 547 81,403
Net loss for the year ended
December 31, 1988
----------- ------ -------
Balance at December 31, 1988 ......... 308,650,000 30,865 821,242
Shares of common stock issued in
January 1989, pursuant to
the exercise of 10,300 "A"
warrants at $.015 per share,
net of costs of $184 ............. 1,030,000 103 15,163
</TABLE>
The accompanying notes are a part of this statement.
F-6
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (Deficit) (Page 4 of 6)
For the period from inception (May 14, 1984) to December 31, 1984
and for the years ended December 31, 1985, 1986, 1987, 1988, 1989,
1990, 1991, 1992, 1993, 1994 and 1995
<TABLE>
<CAPTION>
Deficit Total
Un- accumu. Stock-
realized during the holders'
gains development equity
(losses) stage (deficit)
-------- ----------- ---------
<S> <C> <C> <C>
Shares of common stock issued
in August 1987 to an officer
and director in exchange for
services valued at $.0005
per share ........................ $ $ $ 7,500
Net loss for the year ended
December 31, 1987 ................ (41,815) (41,815)
---------- ---------- ----------
Balance at December 31, 1987 ......... (134,955) (71,040)
Shares of common stock issued in
July 1988, pursuant to a
public offering, for cash
of $.01 per share, net
costs of $199,761 ................ 700,239
Shares of common stock issued to
underwriter in July 1988,
pursuant to public offering for
cash of $.000001 per share ....... 3
Shares of common stock issued in
October 1988, pursuant to
exercise of Class B warrants,
for cash of $.02 per share ....... 6,000
Shares of common stock issued in
October and November 1988,
pursuant to exercise of
Class A warrants, for cash
of $.015 per share, net
of costs of $100 ................. 81,950
Net loss for the year ended
December 31, 1988 ................ (102,626) (102,626)
---------- ---------- ----------
Balance at December 31, 1988 ......... (237,581) 614,526
Shares of common stock issued in
January 1989, pursuant to
the exercise of 10,300 "A"
warrants at $.015 per share,
net of costs of $184 ............. 15,266
</TABLE>
F-7
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (Deficit) (Page 5 of 6)
For the period from inception (May 14, 1984) to December 31, 1984
and for the years ended December 31, 1985, 1986, 1987, 1988, 1989,
1990, 1991, 1992, 1993, 1994 and 1995
<TABLE>
<CAPTION>
Additional
Common Stock Paid-In
Shares Amount Capital
------ ------ ----------
<S> <C> <C> <C>
Shares of common stock issued
January 1989, pursuant to the
exercise of 27,900 "A" warrants
at $.015 per share, net of
costs of $70 ..................... 2,790,000 279 41,501
Net loss for the year ended
December 31, 1989
----------- ------ -------
Balance at December 31, 1989 ......... 312,470,000 31,247 877,906
Net loss for the year ended
December 31, 1990
----------- ------ -------
Balance at December 31, 1990 ......... 312,470,000 31,247 877,906
Shares received from employee
as part of June 1991 sale
of laboratory assets ............. (17,500,000)
Shares placed in treasury in
June 1991 ........................ 17,500,000
Net loss for the year ended
December 31, 1991
----------- ------ -------
Balance at December 31, 1991 ......... 312,470,000 31,247 877,906
Net loss for the year ended
December 31, 1992
----------- ------ -------
Balance at December 31, 1992 ......... 312,470,000 31,247 877,906
Net loss for the year ended
December 31, 1993
----------- ------ -------
Balance at December 31, 1993 ......... 312,470,000 31,247 877,906
Net loss for the year ended
December 31, 1994
----------- ------ -------
Balance at December 31, 1994 ......... 312,470,000 31,247 877,906
Unrealized gain on available for
sale securities
Net income for the year ended
December 31, 1995
----------- ----------- -----------
Balance at December 31, 1995 ......... 312,470,000 $ 31,247 $ 877,906
=========== =========== ===========
</TABLE>
The accompanying notes are a part of this statement.
F-8
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (Deficit) (Page 6 of 6)
For the period from inception (May 14, 1984) to December 31, 1984
and for the years ended December 31, 1985, 1986, 1987, 1988, 1989,
1990, 1991, 1992, 1993, 1994 and 1995
<TABLE>
<CAPTION>
Deficit Total
Un- accumu. Stock-
realized during the holders'
gains development equity
(losses) stage (deficit)
-------- ----------- ---------
<S> <C> <C> <C>
Shares of common stock issued
January 1989, pursuant to the
exercise of 27,900 "A" warrants
at $.015 per share, net of
costs of $70 ..................... $ $ 41,780
Net loss for the year ended
December 31, 1989 ................ (210,550) 210,550)
---------- ---------- ----------
Balance at December 31, 1989 ......... (448,131) 461,022
Net loss for the year ended
December 31, 1990 ................ (170,446) (170,446)
---------- ---------- ----------
Balance at December 31, 1990 ......... (618,577) 290,576
Shares received from employee
as part of June 1991 sale
of laboratory assets
Shares placed in treasury in
June 1991
Net loss for the year ended
December 31, 1991 ................ (247,279) (247,279)
---------- ---------- ----------
Balance at December 31, 1991 ......... (865,856) 43,297
Net loss for the year ended
December 31, 1992 ................ (61,434) (61,434)
---------- ---------- ----------
Balance at December 31, 1992 ......... (927,290) (18,137)
Net loss for the year ended
December 31, 1993 ................ (40,873) (40,873)
---------- ---------- ----------
Balance at December 31, 1993 ......... (968,163) (59,010)
Net loss for the year ended
December 31, 1994 ................ (95,355) (95,355)
---------- ---------- ----------
Balance at December 31, 1994 ......... (1,063,518) (154,365)
Unrealized gain on available for
sales securities ................. 48,260 48,260
Net income for the year ended
December 31, 1995 ................ 106,277 106,277
----------- ----------- -----------
Balance at December 31, 1995 ......... $ 48,260 $ (957,242) $ 171
=========== =========== ===========
</TABLE>
F-9
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
For the
period
from
inception
For the years (May 14,
ended December 31, 1984) to
1995 1994 Dec. 31, 1995
---- ---- -------------
<S> <C> <C> <C>
Revenue
Interest income ................... $ 1,268 $ 1,268 $ 111,501
Laboratory test income ............ 50,187
Revenue from sale of marketing
rights to related entity ...... 7,004
Miscellaneous income .............. 1,897
Gain on sale of stock ............. 120,726 120,726
Debt forgiveness income ........... 35,147 35,147
------------- ------------- -------------
157,141 1,268 326,462
Expenses
Write-off of deferred warrant
registration costs ............ 14,422 29,422
Loss on sale of laboratory ........ 74,710
Realized loss on investment ....... 875 78,442 178,668
Laboratory supplies ............... 55,244
Consulting fees to related entities 37,500
Interest .......................... 15,261 15,785 128,567
Abandoned license agreement costs . 50,000
Research and development .......... 28,680
Rent .............................. 79,232
Services for stock ................ 7,597
Salary ............................ 275,287
Depreciation and amortization ..... 34,848
Bad debt expense .................. 634 3,214 7,718
General and administrative ........ 34,094 (15,240) 296,231
------------- ------------- -------------
50,864 96,623 1,283,704
------------- ------------- -------------
Net income (loss) ............. $ 106,277 $ (95,355) $ (957,242)
============= ============= =============
Net loss per common share ..... $ (--) $ (--) $ (.004)
============= ============= =============
Weighted average number of
common shares ..................... 294,970,000 294,970,000 241,521,059
============= ============= =============
</TABLE>
The accompanying notes are a part of this statement.
F-10
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
For the
period
from
inception
For the years (May 14,
ended December 31, 1984) to
1995 1994 Dec. 31, 1995
---- ---- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ................. $ 106,277 $ (95,355) $ (957,242)
Adjustments to reconcile net income
(loss) to net cash provided
by operating activities:
Depreciation .................... 34,848
Abandoned license agreement costs 50,000
Services for stock .............. 7,597
Bad debt expense ................ 634 634
Realized net gain on investments (119,851) 78,442 58,817
Write-off of deferred warrant
registration costs ............ 14,422 29,422
Changes in assets and liabilities:
(Increase) decrease in notes
receivable ................... -- 3,213 (287,102)
Decrease (increase) in interest
receivable ................... (1,268) (1,268) (2,758)
Increase in accounts payable
to related entity ............. 613 374 2,541
Increase in accrued legal expenses
payable to former director .... 1,780 52,062
Increase in accounts payable
to directors ................. 2,995 119 8,400
Increase-accrued salary to officer 11,250
Increase in interest payable to
related entity ............... 8,037 7,538 35,703
Increase (decrease) in interest
payable to others ............ (27,923) 8,247 --
Increase (decrease) in accounts
payable to others ............ 11,134 (22,413) 22,110
------------- ------------- -------------
Net cash provided (used) by
operating activities ......... (19,352) (4,901) (934,591)
------------- ------------- -------------
Cash flows from investing activities:
Proceeds from sale of
investment in MacGregor ......... 208,567 208,567
Purchase of certificate of deposit (75,278)
Redemption of certificates of deposit 75,278
Capital expenditures .............. (92,094)
Disposal of laboratory assets ..... 57,246
Purchase of license agreement ..... (50,000)
Acquisition of investment -
related entity ............... (7,000)
------------- ------------- -------------
Net cash used in investing
activities ................... 208,567 -- 116,719
------------- ------------- -------------
The accompanying notes are a part of this statement. (Continued)
</TABLE>
F-11
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Statements of Cash Flows (page 2)
<TABLE>
<CAPTION>
For the
period
from
inception
For the years (May 14,
ended December 31, 1984) to
1995 1994 Dec. 31, 1995
---- ---- -------------
<S> <C> <C> <C>
Cash flows from financing activities:
Proceeds from issuance of note
payable to bank ................. $ $ $ 50,000
Proceeds from issuance of notes
payable to related entities
and others ...................... 10,000 250 144,964
Payments to retire notes payable
to bank ......................... (50,000)
Payments to retire notes payable
to others ....................... (68,864) (68,864)
(Increase) in deferred warrant
registration costs .............. (29,422)
Proceeds from issuance of common
stock ........................... 901,556
------------- ------------- -------------
Net cash provided (used) by
financing activities ......... (58,864) 250 948,234
------------- ------------- -------------
Net increase (decrease) in cash
and cash equivalents .............. 130,351 (4,651) 130,362
Cash and cash equivalents at
beginning of period ............... 11 4,662
------------- ------------- -------------
Cash and cash equivalents at
end of period ..................... $ 130,362 $ 11 $ 130,362
============= ============= =============
Supplemental cash flow information:
Interest received ................. $ $ 4,502 $ 74,587
============= ============= =============
Interest paid ..................... $ $ $ 54,910
============= ============= =============
Non-cash financing activities:
Common stock issued for services .. $ $ $ 7,605
============= ============= =============
Investment in common stock of
related entity received in
exchange for marketing rights ... $ $ $ 7,000
============= ============= =============
Exchange of note receivable for
investment in SAC ............... $ $ $ 281,506
============= ============= =============
</TABLE>
The accompanying notes are a part of this statement.
F-12
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 1: SIGNIFICANT ACCOUNTING POLICIES
Significant accounting policies are as follows:
a. BUSINESS HISTORY
Immune Response, Inc. ("the Company") was incorporated under the laws of
the State of Colorado on May 14, 1984 as Med Mark Technologies, Inc. and was
inactive during the period from July 1, 1985 to November 9, 1986. On November
10, 1986 the Company changed its name to Immune Response, Inc. and resumed its
organizational activities.
The Company is in the development stage as more fully defined in Statement
No. 7 of the Financial Accounting Standards Board. Until the Company sold its
laboratory assets in May 1991, the Company performed research and provided
testing facilities for disorders of the immune system. Although the Company
received laboratory test income and revenue from the sale of marketing rights in
1990 and early 1991, the amounts received were minimal and did not represent
revenues from the Company's principal planned line of business. The Company has
been inactive since the sale of its lab assets in May 1991.
b. DEFERRED WARRANT REGISTRATION COSTS
Registration costs incurred in connection with a post-effective amendment
registration statement to register outstanding stock warrants had been deferred
and were to be charged against capital if the registration generated additional
capital, and against operations if the registration did not result in additional
capital. At December 31, 1991, management determined that $15,000 of the
original costs deferred were for work that was no longer useable. Such costs
were charged to 1991 operations. At December 31, 1994, management determined
that the $14,422 of remaining original costs were for work that was no longer
usable and such costs were charged to 1994 operations.
c. FIXED ASSETS
Expenditures for property and equipment and for renewals and betterments
which extend the originally estimated economic life of assets are capitalized at
cost. Expenditures for maintenance, repairs and other renewals of items are
charged to expense. When items are disposed of, the cost and accumulated
depreciation are eliminated from the accounts, and any gain or loss is included
in the results of operations.
The provision for depreciation was calculated using the straight-line
method over the estimated useful lives of two to seven years.
d. INVESTMENTS
Effective January 1, 1995, the Company adopted SFAS 115. Accordingly, the
Company's investment in equity securities of MacGregor Sports & Fitness is
classified as available-for-sale securities and is reported at fair value of
$70,258 compared to historical cost of $21,998. The unrealized gain of $48,260
is reported as a separate component of stockholders' equity.
F-13
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Notes to Financial Statements
e. SHARES ISSUED IN EXCHANGE FOR SERVICES
The fair value of shares issued for services rendered to the Company in
exchange for stock was determined by the officers and directors.
f. INCOME TAXES
The Company has made no provision for income taxes because of financial
statement and tax losses. At December 31, 1995 the Company has net operating
loss carryforwards for book and tax purposes available as follows:
<TABLE>
<CAPTION>
YEAR OF
EXPIRATION BOOK TAX
---------- ---- ---
<S> <C> <C>
1999 $ 61,200 $ 61,200
2000 14,400 14,400
2001 19,720 17,600
2002 41,800 41,800
2003 102,500 102,500
2004 210,300 209,100
2005 169,700 175,700
2006 247,000 174,400
2007 61,000 20,500
2008 40,900 36,900
2009 95,000 14,000
2010 (106,277) 44,000
-------- --------
$957,243 $912,100
======== ========
</TABLE>
g. NET LOSS PER COMMON SHARE
The net loss per common share is computed by dividing the net loss by the
weighted average number of shares outstanding for each period shown. All of the
common stock issued prior to the public offering is considered to be "cheap"
stock in accordance with Staff Accounting Bulletin Topic 4d, and is treated as
outstanding since inception of the Company in the weighted average number of
shares computation.
h. CASH EQUIVALENTS
For the purpose of the statements of cash flows, the Company considers all
highly liquid investments purchased with an original maturity of three months or
less to be cash equivalents provided they are not legally restricted as to
withdrawal.
i. RECLASSIFICATIONS
Certain minor reclassifications have been made to the 1994 financial
statements to conform to the 1995 presentation.
F-14
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 2: NOTE RECEIVABLE
Included in the balance sheet at December 31, 1995 is notes receivable and
interest receivable (both net of reserves) of $6,338 and $1,379, respectively,
from MacGregor Sports & Fitness, Inc. See Note 3 herein. The notes bear interest
at 12 percent per annum and are collateralized by a security interest in the
entity's assets. The collection of this receivable is indeterminable; however,
management believes this receivable (as adjusted) is fully collectible.
Note 3: INVESTMENT IN MACGREGOR SPORTS AND FITNESS, INC.
This investment originally consisted of 49,201 shares of common stock and
133,904 shares of $1 par value Class B preferred stock of Sports Acquisition
Corporation (SAC), an unrelated entity.
In January 1992, Sports Acquisition Corporation successfully merged with
Vida Ventures, Ltd. (Vida), a publicly held company. Immediately after the
merger, the new entity was renamed MacGregor Sports and Fitness, Inc. The
Company received .68 of one MacGregor common share for each of its shares of SAC
common stock, 33,456 shares in total. Each share of the Company's Class B SAC
preferred stock was exchanged for one share of MacGregor Class B convertible
preferred stock.
In January of 1994, MacGregor agreed to convert the Company's Class B
preferred stock into 133,904 shares of unrestricted common stock. This
conversion was completed in April of 1994 resulting in the Company owning
167,360 unrestricted shares of MacGregor's common stock at December 31, 1994.
During the fourth quarter of 1995, the Company sold 133,904 of the shares in the
open market for $208,567.
MacGregor is a publicly traded company (NASDAQ) engaged primarily in the
business of licensing the usage of the MacGregor tradename in exchange for
royalties. The MacGregor tradename is recognized as the oldest established
tradename in the United States sporting goods industry.
Note 4: NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
---- ----
<S> <C> <C>
NOTES PAYABLE - RELATED ENTITY <F1>
Uncollateralized notes payable to related entity
issued May 1990 to June 1994, bearing interest
at 12 percent per annum, payable upon demand. $76,100 $66,100
======= =======
NOTES PAYABLE - OTHER
Uncollateralized notes payable to former related
entity issued May 1990 to October 1993, bearing
interest at 12 percent per annum, payable upon
demand, demand made December 1993. Paid in
full November 15, 1995. $ -0- $68,864
======= =======
- ----------
<FN>
<F1> One of the Company's directors is also an officer of this entity.
</FN>
</TABLE>
F-15
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 5: STOCKHOLDERS' EQUITY
a. STOCK OPTIONS
In August, 1987 the Company's Board of Directors authorized an Incentive
Stock Option Plan and a Non-Qualified Stock Option Plan for which 50,000,000
shares of the Company's common stock have been reserved for each plan. Options
can be issued only to key employees under the Incentive Stock Option Plan, but
may be issued to any individual or entity selected by the committee under the
Non-Qualified Stock Option Plan. The committee of each respective plan is
authorized to determine the exercise price, the time period, the number of
shares subjected to option and the identity of those receiving the options. No
options have been granted pursuant to the Incentive Stock Option Plan.
On September 1, 1987 options under the Non-Qualified Stock Option Plan were
granted to two officers and directors to purchase 15,000,000 and 5,000,000
shares of the Company's common stock at an exercise price of $.001 per share. In
May 1991 the first option (to purchase 15,000,000 shares) was canceled as part
of the sale of laboratory assets to a former officer. The second option was
never exercised and expired on September 1, 1992.
b. SALE OF STOCK TO PUBLIC
On July 5, 1988 the Company completed a sale of 90,000,000 units (as
adjusted for the stock split described in Note 8, herein) of its $.0001 par
value common stock in a public offering. Net proceeds from the sale were
$700,239 after deducting the Underwriter's commission of $90,000 and direct
offering costs of $109,761.
Each unit consists of one share of the Company's common stock, one Class A
common stock purchase warrant and one Class B common stock purchase warrant. One
Class A unit warrant entitles the holder to purchase one share of common stock
at $.015 per share. One Class B unit warrant entitles the holder to purchase one
share of common stock at $.02 per share. The Class A and Class B warrants expire
on December 16, 1995. The Company may redeem these warrants at $.00001 per
warrant if certain conditions are met.
In October and November, 1988, Class A warrants to purchase a total of
5,470,000 shares of common stock of the Company were exercised at $.015 per
share for total proceeds of $81,950, net of costs. In October, 1988 Class B
warrants to purchase 300,000 shares of common stock were exercised at $.02 per
share for total proceeds of $6,000. In January, 1989 Class A warrants to
purchase a total of 3,820,000 shares of common stock of the Company were
exercised at $.015 per share for total proceeds of $57,046, net of costs.
F-16
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Notes to Financial Statements
In connection with this public offering, the Company also sold 2,880,000
shares of its common stock to the Underwriter for a total price of $288. No
warrants have been exercised by the Underwriter.
Note 6: RELATED PARTY TRANSACTIONS
During fiscal year 1994 the Company incurred $1,823 of legal costs from an
attorney who was also an officer, director and stockholder of the Company until
August of 1994.
During 1995, the Company accrued $5,600 payable to its two directors for
their attendance in meetings held in late 1994 and 1995.
During the year ended December 31, 1994 and to the present date, the
Company has utilized approximately 150 square feet of office space from Equitex,
Inc., a significant shareholder, on a rent free month-to-month basis.
See Notes 3 and 4, herein, regarding an investment in a related entity and
notes payable to a related entity, etc.
Note 7: SALE OF LABORATORY ASSETS
In May 1991, the Company sold certain assets with a net book value of
$59,971 to the Company's laboratory director, who was also the Company's former
President, and also agreed to pay this individual $15,623 ($10,000 cash and a
45-day bank note payable for the remaining $5,623). In return, the laboratory
director:
1) agreed to the return of 17,500,000 shares of the Company's
common stock to the Company,
2) agreed to the cancellation of his stock options to purchase
15,000,000 shares of the Company's common stock at $.001 per share as
discussed in Note 5a., herein,
3) agreed to release the Company from any and all remaining
obligations under his employment agreement with the Company.
This sale of assets was approved by the Company's stockholders on June 3,
1991.
Note 8: CONTINGENCY
The Company has minimal capital resources presently available to meet
obligations which normally can be expected to be incurred by similar companies,
and has an accumulated deficit of ($957,242) at December 31, 1995. These factors
raise substantial doubt about the Company's ability to continue as a going
concern.
F-17
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Notes to Financial Statements
There are no significant fixed commitments as of December 31, 1995 or the
present date. Management believes that the remaining minimal cash flow
requirements needed to pursue potential mergers or other business opportunities
can be met through a combination of additional stock sales and temporary loans
from a related entity until such time that the Company can obtain additional
payments on its note receivable or complete a private offering in order to
generate cash.
Note 9: SUBSEQUENT EVENTS
On January 8, 1996 the Company executed an agreement to merge with Ocurest
Laboratories, Inc. (Ocurest) of Florida, which produces and distributes a new
technology for dispensing eye drops. At the same time, the Company made a
secured 12% loan to Ocurest for $125,000. On February 23, 1996, the agreement
was terminated. As part of the mutual termination agreement, Ocurest has agreed
to repay the loan with accrued interest by June 30, 1996. To date, $15,000 has
been repaid.
During February 1996, the Company paid a former director $52,062 for
accrued legal expenses incurred from inception up until the time of his
resignation in August of 1994.
F-18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in the Registrant's Annual Report on Form 10-KSB
for the year ended December 31, 1995 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 130,362
<SECURITIES> 0
<RECEIVABLES> 15,434
<ALLOWANCES> 7,717
<INVENTORY> 0
<CURRENT-ASSETS> 138,079
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 208,337
<CURRENT-LIABILITIES> 208,166
<BONDS> 0
0
0
<COMMON> 31,247
<OTHER-SE> (31,076)
<TOTAL-LIABILITY-AND-EQUITY> 208,337
<SALES> 0
<TOTAL-REVENUES> 157,141
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 34,969
<LOSS-PROVISION> 634
<INTEREST-EXPENSE> 15,261
<INCOME-PRETAX> 106,277
<INCOME-TAX> 0
<INCOME-CONTINUING> 106,277
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 106,277
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
