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
For the fiscal year ended: DECEMBER 31, 1998
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 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: $421
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 2,949,700 shares of common stock outstanding as of May 17, 1999.
Documents incorporated by reference: NONE
Transitional Small Business Disclosure Format: Yes / / No /X/
<PAGE>
IMMUNE RESPONSE, INC.
FORM 10-KSB
This Report may contain certain "forward-looking" statements as such term is
defined in the Private Securities Litigation Reform Act of 1995 or by the
Securities and Exchange Commission in its rules, regulations and releases, which
represent the Registrant's expectations or beliefs, including but not limited
to, statements concerning the Registrant's operations, economic performance,
financial condition, growth and acquisition strategies, investments, and future
operational plans. For this purpose, any statements contained herein that are
not statements of historical fact may be deemed to be forward-looking
statements. Without limiting the generality of the foregoing, words such as
"may", "will", "expect", "believe", "anticipate", "intent", "could", "estimate",
"might", or "continue" or the negative or other variations thereof or comparable
terminology are intended to identify forward-looking statements. These
statements by their nature involve substantial risks and uncertainties, certain
of which are beyond the Registrant's control, and actual results may differ
materially depending on a variety of important factors, including uncertainty
related to the Registrant's operations, mergers or acquisitions, governmental
regulation, the value of the Registrant's assets and any other factors discussed
in this and other Registrant filings with the Securities and Exchange
Commission.
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 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. 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. On February 23, 1996,
-1-
<PAGE>
the Registrant announced the mutual termination of its merger agreement. As part
of the mutual termination agreement, Ocurest repaid the aforementioned loan with
interest. 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 Registrant's issued shares
were decreased from 312,470,000 to 3,124,700 and outstanding shares decreased
from 294,970,000 to 2,949,700.
(2)(3) During the year ended December 31, 1998, 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. The Registrant's only non-cash
asset is certain shares of the common stock of IntraNet Solutions, Inc. 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 owns
1,489 shares of IntraNet common stock.
In each of the past several years, the Registrant has evaluated several
business opportunities which included preliminary investigation and due
diligence. Following the initial review it was determined that none of the
opportunities fit the Registrant's criteria for a viable merger or acquisition
partner. While the Registrant is not limiting its search for business
opportunities to one industry group or sector, the Registrant's management
believes that a viable merger or acquisition candidate should provide the
possibility for short and long term stockholder value by providing the
opportunity for a liquid market for the Registrant's common stock. The
Registrant is presently seeking a candidate with a product or service, which may
be in the development stage, that is proprietary and which possesses the
possibility for both a short-term liquid market for the Registrant's common
stock as well as long-term maximization of stockholder value.
(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.
-2-
<PAGE>
(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 an as needed 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 stockholder.
(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 real 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, 1998.
-3-
<PAGE>
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 1997 or 1998.
(b) Holders
The number of record holders of the Registrant's Common Stock as of May
17, 1999, was approximately 600 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. MANAGEMENT'S DISCUSSION AND ANALYSIS
This Report may contain certain "forward-looking" statements as such
term is defined in the Private Securities Litigation Reform Act of 1995 or by
the Securities and Exchange Commission in its rules, regulations and releases,
which represent the Registrant's expectations or beliefs, including but not
limited to, statements concerning the Registrant's operations, economic
performance, financial condition, growth and acquisition strategies,
investments, and future operational plans. For this purpose, any statements
contained herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the generality of the foregoing,
words such as "may", "will", "expect", "believe", "anticipate", "intent",
"could", "estimate", "might", or "continue" or the negative or other variations
thereof or comparable terminology are intended to identify forward-looking
statements. These statements by their nature involve substantial risks and
uncertainties, certain of which are beyond the Registrant's control, and actual
results may differ materially depending on a variety of important factors,
including uncertainty related to the Registrant's operations, mergers or
acquisitions, governmental regulation, the value of the Registrant's assets and
any other factors discussed in this and other Registrant filings with the
Securities and Exchange Commission.
-4-
<PAGE>
(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 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 IntraNet
in previous years, as well as the 1,489 shares still available for sale, the
Registrant has the capital necessary to fund its limited business activities for
the near 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 1999 as compared to 1998, 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 stockholders 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, 1998 was $421 as compared
to $3,181 for 1997 a decrease of 87%. All of the revenue for 1997 was produced
by interest income as was a majority during 1998. This income was earned from
short-term investments on the Registrant's cash position which income is
expected to decrease as the Registrant's cash position decreases. While the
Registrant still holds 1,489 shares of IntraNet, no sales were made during 1998.
Total expenses for 1998 were $9,068 as compared to $32,872 during 1997. Expenses
decreased 72% in 1998 over 1997 as a result of decreased general and
administrative expenses which are comprised almost exclusively of legal and
accounting expense. The Registrant also booked no interest expense during 1998
as a result of the Registrant extinguishing all notes payable during 1997. The
Registrant recorded a net loss for the year ended December 31, 1998 of $8,647 as
compared to $29,691 for the year ended December 31, 1997.
The gain on the sale of the IntraNet shares in previous years accounted
for significant increases in the Registrant's profitability for those 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 from which to produce
future income. As a result, the revenues and net loss produced in 1998 is
expected to continue in 1999 in the absence of sales of the Registrant's
IntraNet shares or a change in the Registrant's inactive business status.
-5-
<PAGE>
The Company's net worth at December 31, 1998 was a deficit of $11,691
compared to a deficit of $2,206 at the year ended December 31, 1997. The
Registrant's net worth will continue to decrease in the absence of a significant
level of revenues which will offset its minimal operating expenses.
The financial results incurred during 1998 are indicative of what can
be expected for 1999 should the Registrant continue as an inactive company. In
the absence of the Registrant identifying and implementing alternative business
opportunities, the Registrant will most likely incur further losses.
As of December 31, 1998, 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
Length
of
Name Age Offices held Service
- ---- --- ------------ -------
Joseph W. Hovorka 69 President, Treasurer, Since 1987
Principal Executive,
Financial and Accounting
Officer and Director
Thomas B. Olson 33 Secretary and Director Since 1990
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.
-6-
<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 holding company which is a stockholder 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
Section 16(a) Beneficial Ownership Reporting Compliance
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.
-7-
<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 1998, as
well as each of the previous five 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 are eligible to receive $400
for each Board of Directors meeting they attend, however, Messrs. Hovorka and
Olson suspended payment and accrual of such fees during 1998 until further
notice (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, 1998, 1997
and 1996.
SUMMARY COMPENSATION TABLE
Annual Compensation ($$)
------------------------
(a) (b) (c)
Name & Principal Salary
Position Year ($)
- --------- ---- -------
Joseph W. Hovorka 1998 18,000 (1)
President, Treasurer
Principal Executive
Officer and Accounting
Officer
Joseph W. Hovorka 1997 18,000 (1)
Joseph W. Hovorka 1996 18,000 (1)
- ----------
(1) 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.
(c) Option/SAR Grants Table
The Registrant made no grants of stock options or SARs during the year
ended December 31, 1998.
(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, 1998.
(e) Long Term Incentive Plans -- Awards in Last Fiscal Year
-8-
<PAGE>
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 and
Olson, are to receive $400 for each Board of Directors meeting attended either
in person or by telephone. For the year ended December 1997, Messrs. Hovorka,
Olson and a previous director each received $1,600 for the four meetings held.
During 1998, Messrs. Hovorka and Olson each received $800 for two meetings held
and agreed to suspend payment or accrual of any future fees until further
notice. Each member of the Board of Directors also receives reimbursement for
expenses 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, 1998.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table contains information at May 17, 1999 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 May 17, 1999. 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.
-9-
<PAGE>
Name and address Amount and Nature of Percent
of beneficial owner Beneficial Ownership (1) of Class
- ------------------- ------------------------ --------
Joseph W. Hovorka -0- 0.0%
7315 East Peakview Avenue
Englewood, Colorado 80111
Thomas B. Olson 100,000 (2) 3.4%
7315 East Peakview Avenue
Englewood, Colorado 80111
Henry Fong 477,500 (3) 16.2%
7315 East Peakview Avenue
Englewood, Colorado 80111
All officers and directors 100,000 (2) 3.4%
as a group (three persons)
- --------
(1) The beneficial owners exercise sole voting and investment power.
(2) Includes 100,000 shares owned by Equitex, Inc. of which Mr. Olson is the
Secretary. Mr. Olson disclaims beneficial ownership of these securities.
(3) Includes 100,000 shares owned by Equitex, Inc. of which Mr. Fong is the
President. Mr. Fong disclaims beneficial ownership of these securities.
(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 stockholder 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.
In years prior to 1996, Equitex, Inc., a significant stockholder of the
Registrant of which the Registrant's Secretary is also an officer, loaned to the
Registrant a total of $76,100. These loans were due on demand and carried an
interest rate of 10% per annum. During 1997, the entire principal balance of
these loans was repaid by the Registrant leaving $22,453 in interest due as of
December 31, 1998.
(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
Report of Independent Certified Public Accountants.......................F-1
Balance Sheet at December 31, 1998.......................................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, 1998......................................................F-3
Statements of Operations for the years ended December 31, 1998
and 1997 and the period from inception (May 14, 1984) to
December 31, 1998.....................................................F-11
Statements of Cash Flows for the years ended December 31, 1997
and 1997 and the period from inception (May 14, 1984)
to December 31, 1998..................................................F-12
Notes to Financial Statements...........................................F-14
2. Financial Statement Schedules
Not applicable
3. Exhibits
3.1 Articles of Incorporation (1)
3.2 Bylaws (1)
21.1 Subsidiaries (1)
- --------
(1)Incorporated by reference from the like numbered exhibits filed with the
Registrant's Registration Statement on Form S-l8, No.33-17922-C
(b) Reports on Form 8-K
No Reports on Form 8-K were filed during 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: June 3, 1999
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: June 3, 1999 /S/ JOSEPH W. HOVORKA
----------------------------------
Joseph W. Hovorka, President,
Treasurer and Director
(Principal Executive, Financial,
and Accounting Officer)
Date: June 3, 1999 /S/ THOMAS B. OLSON
----------------------------------
Thomas B. Olson, Secretary
and Director
<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, 1998 and the related statements of
operations, changes in stockholders' equity (deficit) and cash flows for the
years ended December 31, 1998 and 1997 and for the period from inception (May
14, 1984) to December 31, 1998. 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, 1998 and the results of its
operations and its cash flows for the years ended December 31, 1998 and 1997,
and for the period from inception (May 14, 1984) to December 31, 1998 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 ($924,145) at December 31, 1998. 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.
Davis & Co., CPAs, P.C.
Certified Public Accountants
Englewood, Colorado
March 23, 1999
F-1
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Balance Sheet
December 31, 1998
ASSETS
Current assets
Cash and cash equivalents .................................. $ 9,195
Investment - available for sale securities
(cost of $3,958) ...................................... 7,259
---------
$ 16,454
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable - related entity .......................... $ 3,742
Accounts payable - other ................................... 1,950
Interest payable - related entity .......................... 22,453
---------
28,145
Stockholders' equity (deficit)
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 ........... 3,301
Deficit accumulated during the
development stage ....................................... (924,145)
Less: treasury stock, at cost
(175,000 shares) ........................................ --
---------
(11,691)
$ 16,454
=========
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, 1996, 1997 and 1998
<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, 1996, 1997 and 1998
<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) 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, 1996, 1997 and 1998
<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 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, 1996, 1997 and 1998
<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) 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, 1996, 1997 and 1998
<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 10,300 "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 27,900 "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 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, 1996, 1997 and 1998
<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 10,300 "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 27,900 "A" warrants
at $1.50 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) 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, 1996, 1997 and 1998
<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
Unrealized gain (loss) on
available for sale securities
Net loss for the year ended
December 31, 1997
Balance at December 31, 1997 ............... 3,124,700 312 908,841
Unrealized gain (loss) on
available for sale securities
Net loss for the year ended
December 31, 1998
Balance at December 31, 1998 ............... 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 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, 1996, 1997 and 1998
<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
Unrealized gain (loss) on
available for sale securities .......... (93) (93)
Net loss for the year ended
December 31, 1997 ...................... (29,691) (29,691)
------------ ------------ ------------
Balance at December 31, 1997 ............... 4,139 (915,498) (2,206)
Unrealized gain (loss) on
available for sale securities .......... (838) (838)
Net loss for the year ended
December 31, 1998 ...................... (8,647) (8,647)
------------ ------------ ------------
Balance at December 31, 1998 ............... $ 3,301 $ (924,145) $ (11,691)
============ ============ ============
</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
1998 1997 DEC. 31, 1998
---- ---- -------------
<S> <C> <C> <C>
Revenue
Interest income ................... $ 408 $ 3,181 $ 125,677
Laboratory test income ............ -- -- 50,187
Revenue from sale of marketing
rights to related entity ...... -- -- 7,004
Miscellaneous income .............. 13 -- 12,710
Gain on sale of stock ............. -- -- 192,189
Debt forgiveness income ........... -- -- 35,147
----------- ----------- -----------
421 3,181 422,914
Expenses
Write-off of deferred warrant
registration costs ............ -- -- 29,422
Loss on sale of laboratory ........ -- -- 74,710
Realized loss on investment ....... -- -- 178,668
Laboratory supplies ............... -- -- 55,244
Consulting fees to related entities -- -- 37,500
Interest .......................... -- 1,079 138,306
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 .................. -- 9,619 17,971
General and administrative ........ 9,068 22,174 339,684
----------- ----------- -----------
9,068 32,872 1,347,059
----------- ----------- -----------
Net income (loss) ............. $ (8,647) $ (29,691) $ (924,145)
=========== =========== ===========
Net income (loss) per
common share $ (--) $ ( .01) $ (.38)
=========== =========== ===========
Weighted average number of
common shares 2,949,700 2,949,700 2,458,912
=========== =========== ===========
</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
1998 1997 DEC. 31, 1998
---- ---- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ................. $ (8,647) $ (29,691) $ (924,145)
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 .................. -- 9,619 10,887
Realized net gain on investments .. -- -- (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) --
Increase in accounts payable
to related entity ............. 515 284 3,742
Increase (decrease) in accounts
payable to directors ......... -- (400) --
Increase (decrease) accrued salary
to officer ................... -- (11,250) --
Increase (decrease) in interest
payable to related entity .... -- (21,821) 22,453
Increase in accounts payable
to others .................... 1,502 448 1,950
----------- ----------- -----------
Net cash (used) by
operating activities ......... (6,630) (54,079) (1,069,161)
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of
investment in MacGregor ...... -- -- 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 ......... -- -- 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
1998 1997 DEC. 31, 1998
---- ---- -------------
<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 entity
and others ...................... -- -- 144,964
Payments to retire notes payable
to bank ......................... -- (50,000)
Payments to retire notes payable
to others ....................... -- -- (68,864)
Payments to retire notes payable
to related entity ............... -- (76,100) (76,100)
(Increase) in deferred warrant
registration costs .............. -- -- (29,422)
Proceeds from issuance of common
stock ........................... -- -- 901,556
----------- ----------- -----------
Net cash provided (used) by
financing activities ......... -- (76,100) 872,134
----------- ----------- -----------
Net (decrease) increase in cash
and cash equivalents .............. (6,630) (130,179) 9,195
Cash and cash equivalents at
beginning of period ............... 15,825 146,004
----------- ----------- -----------
Cash and cash equivalents at
end of period ..................... $ 9,195 $ 15,825 $ 9,195
=========== =========== ===========
Supplemental cash flow information:
Interest received ................. $ 408 $ 1,663 $ 125,677
=========== =========== ===========
Interest paid ..................... $ -- $ 21,821 $ 138,306
=========== =========== ===========
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. 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 $7,259 compared to historical cost of $3,958. The
unrealized gain of $3,301 is reported as a separate component of stockholders'
equity.
c. 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.
d. INCOME TAXES
The Company has made no provision for income taxes because of
financial statement and tax losses. At December 31, 1998 the Company has net
operating loss carryforwards for book and tax purposes available as follows:
YEAR OF EXPIRATION BOOK TAX
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)
2012 29,691 38,517
2013 8,647 8,647
------- -------
$924,145 $888,462
======= =======
F-14
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 1: SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
e. 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.
f. 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.
g. RECLASSIFICATIONS
Certain minor reclassifications have been made to the 1997 financial
statements to conform to the 1998 presentation.
h. ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the period.
Actual results could differ from those estimates.
Note 2: 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 leaving 5,956 shares still owned by
the Company.
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 resulting in 1,489 shares still owned by
the Company at December 31, 1997 and 1998.
Note 3: SALE OF STOCK TO PUBLIC
On July 5, 1988 the Company completed a sale of 900,000 units 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.
F-15
<PAGE>
IMMUNE RESPONSE, INC.
(A Development Stage Company)
Notes to Financial Statements
Note 3: SALE OF STOCK TO PUBLIC (CONTINUED)
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 entitles 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.
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.
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 both December 31, 1997 and 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.
Note 4: RELATED PARTY TRANSACTIONS
During 1998 and 1997, the Company paid $1,600 and $2,000,
respectively, to each of its two directors (1998) and three directors (1997) for
their attendance in the meetings held in each year.
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.
Note 5: 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 ($924,145) at December 31, 1998. These factors
raise substantial doubt about the Company's ability to continue as a going
concern.
The Company has no significant fixed commitments as of December 31,
1998 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.
F-16
<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, 1998, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 9,195
<SECURITIES> 7,259
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,454
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 16,454
<CURRENT-LIABILITIES> 28,145
<BONDS> 0
0
0
<COMMON> 312
<OTHER-SE> 912,142
<TOTAL-LIABILITY-AND-EQUITY> 16,454
<SALES> 0
<TOTAL-REVENUES> 421
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 9,068
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,647)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,647)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,647)
<EPS-BASIC> (0)
<EPS-DILUTED> (0)
</TABLE>
