U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
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|X| ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended: DECEMBER 31, 1996
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For transition period from ______ to ______
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Commission File Number: 33-17922-C
IMMUNE RESPONSE, INC.
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(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 there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-K in this form, and no disclosure will 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 l0-KSB or any amendment to
this Form 1Q-KSB: /X/
Issuer's revenues for its most recent fiscal year: $92,851
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 2,949,709 shares of common stock outstanding as of April 7, 1997.
Documents incorporated by reference: NONE
Transitional Small Business Disclosure Format: Yes / / No /X/
<PAGE>
IMMUNE RESPONSE, INC.
FORM 10-KSB
PART I
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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 repaid the aforementioned loan with interest
during 1996. In addition, Ocurest agreed to pay the Registrant a fee of $10,000,
with interest, upon the successful completion of its planned initial public
offering which fee was paid during the fourth quarter of 1996.
On February 10, 1997 at an Annual Meeting of Stockholders, the Registrant's
shareholders approved a one for one hundred (1 for 100) reverse stock split
whereby every one hundred shares of the Registrant's $.000l par value common
stock were converted to one share of $.000l par value common stock and approved
a reduction in the number of authorized shares from 950,000,000 to 25,000,000
effective March 3, 1997. As a result, the Registrants issued shares were
decreased from 312,470,000 to 3,124,700 and outstanding shares decreased from
294,970,000 to 2,949,700.
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<PAGE>
(2)(3) During the year ended December 31, 1996, 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.
(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 was
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. During
1996, 27,500 shares were sold for net proceeds of $89,504. The Registrant has
used the proceeds from the sales of the MacGregor common stock to extinguish
debt, fund its operating needs and provide capital for future business
activities.
On July 31, 1996, MacGregor Sports and Fitness, Inc. and Technical
Publishing Solutions, Inc. completed a merger through a tax-free exchange of
common stock and the surviving entity was renamed IntraNet Solutions, Inc.
("IntraNet") . IntraNet provides integrated solutions for the management and
distribution of business critical information contained in documents using
proprietary and standard internet technologies through web based internet
software, electronic document management and on-demand printing. Following the
merger and a subsequent 4 for 1 reverse-split declared by IntraNet on October
15, 1996, the Registrant owned 1,489 shares of IntraNet common stock.
(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 two 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.
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<PAGE>
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.
(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, 1996.
PART II
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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 1995 or 1996.
(b) Holders
The number of record holders of the Registrant's Common Stock as of April
7, 1997, was 620 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
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<PAGE>
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. MANAGEMENT'S DISCUSSION AND ANALYSIS
(a) Plan of Operation
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 costs related to keeping the Registrant current with its
regulatory filings as well as certain minimal general and administrative
expenses. In previous years, the Registrant relied on loans from related
entities in order to meet 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 a majority of the Registrant's investment in MacGregor
during the fourth quarter of 1995 and the first quarter of 1996, the Registrant
has 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 1997 as compared to
1996, should the Registrant identify and pursue a business opportunity 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, 1996 was $92,851 as compared
to $157,141 for 1995. A majority of the revenue for both years was produced by
the sale of a majority of the Registrant's investment in MacGregor as described
more fully in Part 1. Item 1 Description of Business. In addition, the
Registrant recorded interest income from its loan to Ocurest as well as
miscellaneous income from a fee paid by Ocurest. Total expenses for 1996 were
$21,415 as compared to $50,864 during 1995. Expenses decreased 57% in 1996 over
1995 as a result of lower interest expense for 1996 as the Registrant
extinguished a significant portion of its notes payable. In addition, lower
legal expenses were recorded during 1996 contributing to a decrease in general
and administrative expenses of approximately 65%. Net income for the year ended
December 31, 1996 was $71,436 as compared to income of $106,277 for the year
ended December 31, 1995.
The gain on the sale of the MacGregor shares in 1995 and 1996 accounted for
the significant increase in the Registrant's profitability during the past two
years. While the Registrant has an additional 1,489 IntraNet shares remaining
for sale, once these shares are sold, the Registrant will have no significant
assets other than its cash balances and currently has no other means with which
to produce future income. As a result, the revenues and net income produced in
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<PAGE>
1995 and 1996 are not expected to continue in 1997 in the absence of a change in
the Registrant's inactive business status.
The Company's net worth at December 31, 1996 was $27,578 compared to $171
at the year ended December 31, 1995. The increase in the Registrant's net worth
at December 31, 1996 as compared to the previous year is due to the Registrant
extinguishing a significant amount of its notes and accounts payable in 1996 for
which it received certain concessions from its creditors on the payment of
interest due coupled with the profits received on the Registrant's sale of
MacGregor common stock.
The financial results incurred during 1996 are not indicative of what can
be expected for 1997 as the Registrant has sold a majority of its IntraNet
common stock. While expenses are expected to continue as similar levels for
1997, revenues are expected to decrease as the Registrant has no significant
source of revenue. In the absence of the Registrant identifying and implementing
alternative business opportunities, the Registrant will most likely incur losses
without a change in its inactive business status.
As of December 31, 1996, 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
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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 67 President, Treasurer, Since
Principal Executive, 1987
Financial and Accounting
Officer and Director
Thomas B. Olson 31 Secretary and Director Since
1990
R. Andrew Girardot, Jr. 53 Director Since
1996
</TABLE>
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<PAGE>
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.
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.
R. ANDREW GIRARDOT, JR., D.D.S. Dr. Girardot has been a director of the
Registrant since November 1996. Since 1972, Dr. Girardot has been President of
his solo orthodontic practice, R. Andrew Girardot, Jr., D.D.S., P.C. in Denver,
Colorado. Dr. Girardot is also currently serving the cleft palate clinic at the
Children's Hospital in Denver, Colorado. Dr. Girardot graduated from the
University of California Orthodontic School in 1972 and is a member of the
American Association of Orthodontists, the American Dental Society, The
Foundation for Orthodontic Research, the American Equilibration Society, The
Angle Society and the Foundation for Advanced Continuing Education.
(b) Significant Employees
None
(c) Family Relationships
Not applicable
(d) Involvement in Certain Legal Proceedings
Not applicable
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<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
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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 1996, its
officers and directors have complied with all Section 16 filing requirements.
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 1996, as well as
each of the previous three 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 (See also Item 10. (f) Compensation of Directors).
(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, 1996, 1995
and 1994.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation ($$)
------------------------
(a) (b) (c)
Name & Principal Salary
Position Year ($)
- --------- ---- -------
<S> <C> <C>
Joseph W. Hovorka 1996 18,000 <F1>
President, Treasurer
Principal Executive
Officer and Accounting
Officer
Joseph W. Hovorka 1995 18,000 <F1>
Joseph W. Hovorka 1994 18,000 <F1>
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<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>
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<PAGE>
(c) Option/SAR Grants Table
The Registrant made no grants of stock options or SARs during the year
ended December 31, 1996.
(d) 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, 1996.
(e) Long Term Incentive Plans -- Awards in Last Fiscal Year
The Registrant has no long term incentive plans, and consequently had made
no such awards.
(f) Compensation of Directors
(1) Standard Arrangements
Each member of the Registrant's Board of Directors, Messrs. Hovorka, Olson
and Girardot, each receive $400 for each Board of Directors meeting attended
either in person or by telephone. For the year ended December 1996, Messrs.
Hovorka and Olson each received $1,600 for the four meetings held while Dr.
Girardot received $400 for the one meeting he attended following his appointment
to the Board of Directors. Each member of the Board of Directors also receive
reimbursement for expense incurred in attending the meetings.
(2) Other Arrangements
There are no other arrangements with respect to compensation of directors
other than those explained in Item 10. (f)(l) 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,
1996.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information at April 7, 1997 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 or executive officer of the Registrant and all persons as a group
who are executive officers and directors of the Registrant and as to the
percentage of outstanding shares so held by them at April 7, 1997. All share
amounts below reflect the one for one hundred (1 for 100) reverse stock split
approved by the Registrant's stockholders effective March 3, 1997.
-8-
<PAGE>
<TABLE>
<CAPTION>
Name and address Amount and Nature of Percent
of beneficial owner Beneficial Ownership <F1> of Class
- ------------------- ------------------------- --------
<S> <C> <C>
Joseph N. Hovorka -0- 0.0%
7315 East Peakview Avenue
Englewood, Colorado 80111
Thomas B. Olson 100,000 <F2> 3.4%
7315 East Peakview Avenue
Englewood, Colorado 80111
R. Andrew Girardot, Jr. -0- 0.0%
4380 South Syracuse Circle
Suite 501
Denver, Colorado 80237
Henry Fong 477,500 <F3> 16.2%
7315 East Peakview Avenue
Englewood, Colorado 80111
All officers and directors 100,000 <F2> 3.4%
as a group (three persons)
- --------
<FN>
<F1> The beneficial owners exercise sole voting and investment power.
<F2> Includes 100,000 shares owned by Equitex, Inc. of which Mr. Olson is the
Secretary. Mr. Olson disclaims beneficial ownership of these securities.
<F3> Includes 100,000 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 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, 1996 on these loans was $44,274.
During the first quarter of 1997, $75,000 principal balance of these loans was
repaid by the Registrant leaving $1,100 principal and all of the interest due.
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<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
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<PAGE>
PART IV
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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>
<S> <C>
Report of Independent Certified Public Accountants......................F-1
Balance Sheet at December 31, 1996......................................F-2
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 through December 31,1996......................................F-3
Statements of Operations for the years ended December 31, 1996
and 1995 and the period from inception (May 14, 1984) to
December 31, 1996.....................................................F-11
Statements of Cash Flows for the years ended December 31, 1996
and 1995 and the period from inception (May 14, 1984)
to December 31, 1996..................................................F-12
Notes to Financial Statements..........................................F-14
</TABLE>
2. Financial Statement Schedules
Not applicable
3. Exhibits
<TABLE>
<CAPTION>
<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-l8, No. 33-17922-C
</FN>
</TABLE>
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during the period covered by this report.
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<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 14, 1997
IMMUNE RESPONSE, INC.
(Registrant)
By: /S/ JOSEPH W. HOVORKA
-----------------------------------
Joseph N. 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 14, 1997 /S/ JOSEPH W. HOVORKA
---------------------------------------
Joseph W. Hovorka, President,
Treasurer and Director
(Principal Executive, Financial,
and Accounting Officer)
Date: April 14, 1997 /S/ THOMAS B. OLSON
---------------------------------------
Thomas B. Olson, Secretary and Director
Date: April 14, 1997 /S/ R. ANDREW GIRARDOT, JR.
---------------------------------------
R. Andrew Girardot, Jr., Director
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<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, 1996 and the related statements of
operations, changes in stockholders' equity (deficit) and cash flows for the
years ended December 31, 1996 and 1995 and for the period from inception (May
14, 1984) to December 31, 1996. 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, 1996 and the results of its
operations and its cash flows for the years ended December 31, 1996 and 1995,
and for the period from inception (May 14, 1984) to December 31, 1996 in
conformity with generally accepted accounting principles.
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 ($885,807) at December 31, 1996. These factors raise
substantial doubt about the Company's 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.
/S/ DAVIS & CO., CPAs, P.C.
Davis & Co., CPAs, P.C.
Certified Public Accountants
Englewood, Colorado
March 21, 1997
F-1
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Balance Sheet
December 31, 1996
<TABLE>
<S> <C>
ASSETS
Current assets
Cash and cash equivalents .................................. $ 146,004
Note receivable, net of allowance
for doubtful accounts of $6,338 ......................... 6,338
Interest receivable, net of allowance
for doubtful accounts of $2,013 ....................... 2,013
---------
154,355
Other assets
Investment in IntraNet Solutions (cost of $3,958) .......... 8,190
---------
$ 162,545
=========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable - related entity ............................. $ 76,100
Accounts payable - related entity .......................... 2,943
Accrued salary to officer .................................. 11,250
Accounts payable - directors ............................... 400
Interest payable - related entity .......................... 44,274
---------
134,967
Contingency (Note 8)
Stockholders' equity
Common stock, $.0001 par value; 25,000,000
shares authorized; 3,124,700 shares
issued; 2,949,700 shares outstanding .................... 312
Additional paid-in capital ................................. 908,841
Unrealized gain on available for sale securities ........... 4,232
Deficit accumulated during the
development stage ....................................... (885,807)
Less: treasury stock, at cost
(175,000 shares) ........................................ --
---------
27,578
---------
$ 162,545
=========
</TABLE>
The accompanying notes are a part of this statement.
F-2
<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, 1995 and 1996
<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 $.0001 per share .............. 900,000 $ 90 $ --
Shares of common stock issued during
the formation of the Company in
exchange for cash of $.10 per
share to unrelated individuals ... 140,000 14 13,986
Net loss for the period from inception
(May 14, 1984) to Dec. 31, 1984 .. ------------ ------------ ------------
Balance at December 31, 1984 ......... 1,040,000 104 13,986
Net loss for the year ended
December 31, 1985 ................ ------------ ------------ ------------
Balance at December 31, 1985 ......... 1,040,000 104 13,986
Shares of common stock issued
to unrelated individuals in
December 1986 in exchange
for cash of:
$.05 per share ............... 140,000 14 6,986
$.005 per share .............. 15,000 1 74
Net loss for the year ended
December 31, 1986 ................ ------------ ------------ ------------
Balance at December 31, 1986 ......... 1,195,000 119 21,046
Shares of common stock issued
to unrelated individuals in
exchange for cash of:
$.05 per share in:
April 1987 ................ 20,000 2 998
May 1987 .................. 100,000 10 4,990
June 1987 ................. 100,000 10 4,990
$.025 per share in:
April 1987 ................ 100,000 10 2,490
</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) (Page 2 of 8)
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, 1995 and 1996
<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 $.0001 per share .............. $ $ $ 90
Shares of common stock issued during
the formation of the Company in
exchange for cash of $.10 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:
$.05 per share ............... 7,000
$.005 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:
$.05 per share in:
April 1987 ................ 1,000
May 1987 .................. 5,000
June 1987 ................. 5,000
$.025 per share in:
April 1987 ................ 2,500
</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 3 of 8)
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, 1995 and 1996
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN
SHARES AMOUNT CAPITAL
------------ ------------ ------------
<S> <C> <C> <C>
Shares of common stock issued in
August 1987 in exchange for
cash of $.05 per share to:
Related parties .............. 275,000 28 13,722
Others ....................... 160,000 16 7,984
Shares of common stock issued
in August 1987 to an officer
and director in exchange for
services valued at $.05
per share ........................ 150,000 15 $ 7,485
Net loss for the year ended
December 31, 1987 ------------ ------------ ------------
Balance at December 31, 1987 ......... 2,100,000 210 63,705
Shares of common stock issued in
July 1988, pursuant to a
public offering, for cash
of $1 per share, net of
costs of $199,761 ................ 900,000 90 700,149
Shares of common stock issued to
underwriter in July 1988,
pursuant to public offering for
cash of $.0001 per share ......... 28,800 3 --
Shares of common stock issued in
October 1988, pursuant to
exercise of Class B warrants,
for cash of $2 per share ......... 3,000 1 5,999
Shares of common stock issued in
October and November 1988,
pursuant to exercise of
Class A warrants, for cash
of $1.50 per share, net
of costs of $100 ................. 54,700 5 81,945
Net loss for the year ended
December 31, 1988 ------------ ------------ ------------
Balance at December 31, 1988 ......... 3,086,500 309 851,798
</TABLE>
The accompanying notes are a part of this statement.
F-5
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (Deficit) (Page 4 of 8)
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, 1995 and 1996
<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, in exchange for
cash of $.05 per share to:
Related parties .............. 13,750
Others ....................... 8,000
Shares of common stock issued
in August 1987 to an officer
and director in exchange for
services valued at $.05
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 $1 per share, net of
costs of $199,761 ................ 700,239
Shares of common stock issued to
underwriter in July 1988,
pursuant to public offering for
cash of $.0001 per share ......... 3
Shares of common stock issued in
October 1988, pursuant to
exercise of Class B warrants,
for cash of $2 per share ......... 6,000
Shares of common stock issued in
October and November 1988,
pursuant to exercise of
Class A warrants, for cash
of $1.50 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
</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 5 of 8)
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, 1995 and 1996
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN
SHARES AMOUNT CAPITAL
------------ ------------ ------------
<S> <C> <C> <C>
Shares of common stock issued in
January 1989, pursuant to
the exercise of 103 "A"
warrants at $1.50 per share,
net of costs of $184 ............. 10,300 1 15,265
Shares of common stock issued
January 1989, pursuant to the
exercise of 279 "A" warrants
at $1.50 per share, net of
costs of $70 ..................... 27,900 3 41,777
Net loss for the year ended
December 31, 1989 ------------ ------------ ------------
Balance at December 31, 1989 ......... 3,124,700 312 908,841
Net loss for the year ended
December 31, 1990 ------------ ------------ ------------
Balance at December 31, 1990 ......... 3,124,700 312 908,841
Shares received from employee
as part of June 1991 sale
of laboratory assets ............. (175,000)
Shares placed in treasury in
June 1991 ........................ 175,000
Net loss for the year ended
December 31, 1991 ------------ ------------ ------------
Balance at December 31, 1991 ......... 3,124,700 312 908,841
Net loss for the year ended
December 31, 1992 ------------ ------------ ------------
Balance at December 31, 1992 ......... 3,124,700 312 908,841
</TABLE>
The accompanying notes are a part of this statement.
F-7
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (Deficit) (Page 6 of 8)
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, 1995 and 1996
<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
January 1989, pursuant to the
exercise of 103 "A" warrants
at $1.50 per share,
net of costs of $184 ............. 15,266
Shares of common stock issued
January 1989, pursuant to the
exercise of 279 "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)
</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 7 of 8)
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, 1995 and 1996
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN
SHARES AMOUNT CAPITAL
------------ ------------ ------------
<S> <C> <C> <C>
Net loss for the year ended
December 31, 1993 ------------ ------------ ------------
Balance at December 31, 1993 ......... 3,124,700 $ 312 $ 908,841
Net loss for the year ended
December 31, 1994 ------------ ------------ ------------
Balance at December 31, 1994 ......... 3,124,700 312 908,841
Unrealized gain on available for
sale securities
Net income for the year ended
December 31, 1995 ------------ ------------ ------------
Balance at December 31, 1995 ......... 3,124,700 312 908,841
Unrealized gain on available
for sale securities
Net income for the year ended
December 31, 1996 ------------ ------------ ------------
Balance at December 31, 1996 ......... 3,124,700 $ 312 $ 908,841
============ ============ ============
</TABLE>
The accompanying notes are a part of this statement.
F-9
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity (Deficit) (Page 8 of 8)
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, 1995 and 1996
<TABLE>
<CAPTION>
DEFICIT TOTAL
UN- ACCUMU. STOCK-
REALIZED DURING THE HOLDERS'
GAINS DEVELOPMENT EQUITY
(LOSSES) STAGE (DEFICIT)
------------ ------------ ------------
<S> <C> <C> <C>
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
sale 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
Unrealized gain on available for
sale securities .................... (44,028) (44,028)
Net income for the year ended
December 31, 1996 .................. 71,435 71,435
------------ ------------ ------------
Balance at December 31, 1996 ......... $ 4,232 $ (885,807) $ 27,578
============ ============ ============
</TABLE>
The accompanying notes are a part of this statement.
F-10
<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
1996 1995 DEC. 31, 1996
------------ ------------ -------------
<S> <C> <C> <C>
Revenue
Interest income .................. $ 10,587 $ 1,268 $ 122,088
Laboratory test income ........... -- -- 50,187
Revenue from sale of marketing
rights to related entity ..... -- -- 7,004
Miscellaneous income ............. 10,800 -- 12,697
Gain on sale of stock ............ 71,464 120,726 192,189
Debt forgiveness income .......... -- 35,147 35,147
------------ ------------ ------------
92,851 157,141 419,312
Expenses
Write-off of deferred warrant
registration costs ........... -- -- 29,422
Loss on sale of laboratory ....... -- -- 74,710
Realized loss on investment ...... -- 875 178,668
Laboratory supplies .............. -- -- 55,244
Consulting fees to related entities -- -- 37,500
Interest ......................... 8,570 15,261 137,227
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 ................. 634 634 8,352
General and administrative ....... 12,211 34,094 308,442
------------ ------------ ------------
21,415 50,864 1,305,119
------------ ------------ ------------
Net income (loss) ............ $ 71,436 $ 106,277 $ (885,807)
============ ============ ============
Net income (loss) per
common share ............... $ .024 $ .04 $ (.37)
============ ============ ============
Weighted average number of
common shares .................... 2,949,700 2,949,700 2,415,211
============ ============ ============
</TABLE>
The accompanying notes are a part of this statement.
F-11
<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
1996 1995 DEC. 31, 1996
------------ ------------ -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) .................... $ 71,436 $ 106,277 $ (885,807)
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 1,268
Realized net gain on investments ... (71,464) (119,851) (13,519)
Write-off of deferred warrant
registration costs ............... -- -- 29,422
Changes in assets and liabilities:
(Increase) in notes
receivable ...................... -- -- (287,102)
(Increase) in interest
receivable ...................... (1,268) (1,268) (4,026)
Increase in accounts payable
to related entity ................ 402 613 2,943
(Decrease) in accrued legal expenses
payable to former director ....... (52,062) -- --
Increase (decrease) in accounts
payable to directors ............ (8,000) 2,995 400
Increase-accrued salary to officer . -- -- 11,250
Increase in interest payable to
related entity .................. 8,571 8,037 44,274
(Decrease) in interest payable
to others ....................... -- (27,923) --
Increase (decrease) in accounts
payable to others ............... (22,110) 11,134 --
------------ ------------ ------------
Net cash (used) by
operating activities ............ (73,861) (19,352) (1,008,452)
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from sale of
investment in MacGregor ............ 89,503 208,567 298,070
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 provided by
------------ ------------ ------------
investing activities ............ 89,503 208,567 206,222
------------ ------------ ------------
</TABLE>
The accompanying notes are a part of this statement. (Continued)
F-12
<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
1996 1995 DEC. 31, 1996
------------ ------------ -------------
<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 ......................... -- 10,000 144,964
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) 948,234
------------ ------------ ------------
Net increase in cash and
cash equivalents ..................... 15,642 130,351 146,004
Cash and cash equivalents at
beginning of period .................. 130,362 11 --
------------ ------------ ------------
Cash and cash equivalents at
end of period ........................ $ 146,004 $ 130,362 $ 146,004
============ ============ ============
Supplemental cash flow information:
Interest received .................... $ 4,298 $ -- $ 78,885
============ ============ ============
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-13
<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 IntraNet Solutions (formerly
MacGregor Sports & Fitness) is classified as available- for-sale securities and
is reported at fair value of $8,190 compared to historical cost of $3,958. The
unrealized gain of $4,232 is reported as a separate component of stockholders'
equity.
F-14
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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, 1996 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
2011 (71,436) (70,802)
-------- --------
$885,807 $841,298
======== ========
</TABLE>
g. NET INCOME (LOSS) PER COMMON SHARE
The net loss per common share is computed by dividing the net income (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 1995 financial
statements to conform to the 1996 presentation.
F-15
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 2: NOTE RECEIVABLE
Included in the balance sheet at December 31, 1996 is a note receivable and
interest receivable (both net of reserves) of $6,338 and $2,013, respectively,
from MacGregor Sports & Fitness, Inc. See Note 3 herein. The note bears interest
at 12 percent per annum. The collection of this receivable is indeterminable;
however, management believes this receivable (as adjusted) is fully collectible.
Note 3: INVESTMENT IN INTRANET SOLUTIONS (FORMERLY MACGREGOR SPORTS AND FITNESS,
INC.)
In January of 1994, the Company converted its Class B preferred stock of
MacGregor Sports & Fitness 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. During January of 1996, the Company sold an additional
27,500 shares in the open market for $89,503.
MacGregor successfully merged with Technical Publishing Solutions, Inc. on
July 31, 1996 and the combined entity was renamed IntraNet Solutions. IntraNet
provides integrated solutions to large corporations for the management and
distribution of business critical information contained in documents using
proprietary and standard internet technologies. In October 1996 IntraNet
declared a 1-for-4 reverse stock split.
Note 4: NOTES PAYABLE
Notes payable consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995
------- -------
<S> <C> <C>
NOTES PAYABLE - RELATED ENTITY (a)<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 $76,100
======= =======
- --------
<FN>
<F1>(a) One of the Company's directors is also an officer of this entity.
</FN>
</TABLE>
Note 5: SALE OF STOCK TO PUBLIC
On July 5, 1988 the Company completed a sale of 900,000 units (as adjusted
for the stock split described in Note 9, 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 consisted 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 entitled the holder to purchase one share of common stock
at $1.50 per share. One Class B unit warrant entitles the holder to purchase one
share of common stock at $2.00 per share. The Class A and Class B warrants
expired on December 16, 1995.
F-16
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 5: SALE OF STOCK TO PUBLIC (CONTINUED)
In October and November, 1988, Class A warrants to purchase a total of
54,700 shares of common stock of the Company were exercised at $1.50 per share
for total proceeds of $81,950, net of costs. In October, 1988 Class B warrants
to purchase 3,000 shares of common stock were exercised at $2 per share for
total proceeds of $6,000. In January, 1989 Class A warrants to purchase a total
of 38,200 shares of common stock of the Company were exercised at $1.50 per
share for total proceeds of $57,046, net of costs.
In connection with this public offering, the Company also sold 28,800
shares of its common stock to the Underwriter for a total price of $288. No
warrants were exercised by the Underwriter.
Note 6: RELATED PARTY TRANSACTIONS
During 1995 and 1996, the Company paid $2,800 and $1,400, respectively to
each of its two directors for their attendance in meetings held from late 1994
through 1996.
During the year ended December 31, 1995 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 Note 4, herein, regarding notes payable to a related entity. Since
December 31, 1996, the Company has repaid $75,000 of the principal balance due
on these notes.
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 175,000 shares of the Company's common stock to
the Company,
2) agreed to the cancellation of his stock options to purchase 150,000
shares of the Company's common stock at $.10 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 ($885,807) at December 31, 1996. 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
Note 8: CONTINGENCY (CONTINUED)
The Company has no significant fixed commitments as of December 31, 1996 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 use of the Company's current cash balance and additional
sales of IntraNet stock.
Note 9: SUBSEQUENT EVENT - REVERSE STOCK SPLIT
On February 10, 1997 the Company's shareholders approved a 1-for- 100
reverse split whereby every one hundred shares of the Company's $.0001 par value
common stock were converted to one share of $.0001 par value common stock. The
shareholders also approved a reduction in the number of authorized shares from
950,000,000 to 25,000,000 effective March 3, 1997. As a result, the Company's
issued and outstanding shares at December 31, 1996, as restated, were 3,124,700
and 2,949,700, respectively. The financial statements herein have been adjusted
to reflect the 1-for-100 reverse stock split back to the date of inception.
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, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 146,004
<SECURITIES> 8,190
<RECEIVABLES> 16,702
<ALLOWANCES> 8,351
<INVENTORY> 0
<CURRENT-ASSETS> 154,355
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 162,545
<CURRENT-LIABILITIES> 134,967
<BONDS> 0
0
0
<COMMON> 312
<OTHER-SE> 27,266
<TOTAL-LIABILITY-AND-EQUITY> 162,545
<SALES> 0
<TOTAL-REVENUES> 92,851
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 12,211
<LOSS-PROVISION> 634
<INTEREST-EXPENSE> 8,570
<INCOME-PRETAX> 71,436
<INCOME-TAX> 0
<INCOME-CONTINUING> 71,436
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 71,436
<EPS-PRIMARY> .024
<EPS-DILUTED> .024
</TABLE>
