United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999.
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from ____________ to ___________
Commission file number: 33-23489
BIOGAN INTERNATIONAL, INC.
(Formerly known as Biogan Medical International, Inc.)
(Exact name of business issuer in its charter)
DELAWARE 58-1832055
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7213 Potomac Drive, Boise, Idaho 83704
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (208)-376-8500 Fax: (208) 376-4663
- --------------------------------------------------------------------------------
(Former Address)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports) Yes |_|,
No |X| , and (2) has been subject to such filing requirements for the past 90
days. Yes |X| No |_|
The number of shares of common stock outstanding as of March 31, 1999, is
85,122,884.
Transitional Small Business Disclosure Format. Yes |_|, No |X|.
1
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The following financial statements are filed as part of this report:
The Financial Statements of the Company for the three months ended of March
31, 1999, prepared by Wadsworth & Smith, Chartered, certified public
accountants, without audit.
Item 2. Management's Discussion and Plan of Operation:
Results of Operations:
Operations for the 1st quarter ended March 31, 1999, resulted in an
operating loss of $10,753 or about $0.0001 per share. During the 1st quarter
Management continued to focus its efforts on locating and developing financing
and/or joint ventures for the continued development and marketing of the
IntorCorp Motor (previously referred to as Smart-Power Motor) for its subsidiary
IntorCorp, Inc., and on developing its business plan for continued independent
business activity.
Funding and Capital Resources:
The Company's cash balances and liquidity were exhausted in 1998 and
Management reduced its leased office space and placed employees on a part-time
basis to reduce operating expenses, and arranged short term loans to continue
operations of the Company through the first part of 1999. Management presently
anticipates that additional working capital for continuing the business of the
Company will be located by a combination of one or more private placements of
common and/or preferred stock, joint venture development, debt financing, or
other means, all of which are being explored and implemented by Management.
Plan of Operation:
The Plan of Operation for Biogan is to (i) continue attempts to locate
financing and/or joint venture entities for developing and marketing of the
IntorCorp Motor through its subsidiary IntorCorp, Inc., (ii) develop a
consulting and management service for other companies, and (iii) locate and
acquire and/or joint venture with other businesses.
2
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None
Item 2. Changes in Securities.
(a) None
(b) None
(c) None
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Matters.
Biogan and Collective Technologies, L.L.C., an Idaho electrical engineering
firm, entered into a Preincorporation Agreement effective February 25, 1998, in
which Biogan and Collective Technologies each agreed
(i) to transfer to IntorCorp, Inc., an Idaho corporation formed March 11,
1998, their respective rights to all of the intellectual technology of
the "IntorCorp Motor" each in exchange for a 50% ownership interest.
(ii) that a consulting agreement will be entered into with Collective
Technologies, Inc. providing for compensation compatible with industry
standards in the locality, for the continued development and testing
of the "IntoCorp Motor".
Reference is made to the 1997 year end 10KSB for a copy of the
Preincorporation Agreement, resumes of the members of the Board of Directors of
IntorCorp, Inc., and resumes of key engineers of Collective Technologies, L.L.C.
Item 6. Exhibits.
(a) No exhibits
(b) No Form 8K filings
3
<PAGE>
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
BIOGAN INTERNATIONAL, INC.
(Registrant)
Date: August 10, 1999. By /s/
---------------------------------------
Ronald J. Tolman, Acting Vice-President
Date: August 10, 1999 By /s/
---------------------------------------
Rulon L. Tolman, Vice-President
4
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT - STAGE COMPANY)
FINANCIAL STATEMENTS
MARCH 31, 1999
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
MARCH 31, 1999
CONTENTS
Accountants' Compilation Report 1
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Equity (Deficiency) 4
Statement of Cash Flows 5
Notes to Financial Statements 6-12
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
[LETTERHEAD OF WADSWORTH & SMITH, P.C.]
To the Board of Directors
Biogan International, Inc.
Boise, ID
Board of Directors:
We have compiled the accompanying balance sheet of Biogan International, Inc. (a
development-stage company) as of March 31, 1999, and the related statements of
operations, stockholders' equity, and cash flows for the three month period
ended March 31, 1999 and the period from February 5, 1988 (inception) through
March 31, 1999, in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management (the owners). We have not
audited or reviewed the accompanying financial statements and, accordingly, do
not express an opinion or any other form of assurance on them.
We are not independent with respect to Biogan International, Inc.
/s/ Wadsworth & Smith, P.C.
Wadsworth & Smith, P.C.
August 10, 1999
1
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
BALANCE SHEET
As of MARCH 31, 1999
ASSETS
CASH $ (181)
PAYROLL ADVANCE 400
-----------
TOTAL CURRENT ASSETS $ 219
FURNITURE/EQUIPMENT 34,716
ACCUMULATED DEPRECIATION (15,083)
-----------
TOTAL FIXED ASSETS $ 19,633
INVESTMENT IN SUBSIDIARIES --
TOTAL ASSETS $ 19,852
===========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY)
ACCOUNTS PAYABLE $ 54,589
NOTES PAYABLE - STOCKHOLDERS 80,000
NOTES PAYABLE - OTHER 35,000
ACCRUED SALARIES - OFFICERS 171,200
ACCRUED EXPENSES (ACCRUED INTEREST DUE STOCKHOLDERS $19,025) 22,634
-----------
TOTAL CURRENT LIABILITIES $ 363,423
STOCKHOLDERS' EQUITY (DEFICIENCY)
PREFERRED STOCK $.001 PAR VALUE,
10,000,000 SHARES AUTHORIZED NO SHARES ISSUED
COMMON STOCK $.001 PAR VALUE 300,000,000
SHARES AUTHORIZED, 85,122,884 ISSUED 85,123
ADDITIONAL PAID IN CAPITAL 4,367,807
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (4,796,501)
-----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) $ (343,571)
-----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY) $ 19,852
===========
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT
2
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF OPERATIONS
FROM INCEPTION
FOR THE THREE MONTH PERIOD FEBRUARY 5, 1988
ENDED THROUGH
MARCH 31, 1999 MARCH 31, 1999
SALES
REVENUE - FEES $ -- $ 7,150
RENTAL INCOME -- 1,110
----------- -----------
TOTAL SALES -- 8,260
EXPENSES
WAGES $ 792 $ 503,889
STOCK SUBSCRIPTION LOSS -- 101,006
DEPRECIATION EXPENSE 1,473 15,233
INTEREST EXPENSE 2,909 41,353
INCENTIVE BONUS -- 149,364
LEGAL & ACCOUNTING FEES 934 276,204
RENT 2,000 36,676
START UP COSTS -- 127,441
RESEARCH AND DEVELOPMENT -- 343,703
SUBSIDIARIES LOSSES -- 158,380
OTHER OPERATING EXPENSES 2,645 375,594
----------- -----------
TOTAL EXPENSES $ 10,753 $ 2,128,843
----------- -----------
NET OPERATING INCOME (LOSS) (10,753) (2,120,583)
STOCK RESTITUTION EXPENSE (NOTE 1D) -- (2,676,409)
INTEREST INCOME -- 5,448
OTHER INCOME -- 238
MISCELLANEOUS EXPENSE -- (5,195)
----------- -----------
TOTAL OTHER $ -- $(2,675,918)
----------- -----------
NET INCOME (LOSS) $ (10,753) $(4,796,501)
=========== ===========
PRIMARY INCOME (LOSS) PER SHARE $ (0.0001) $ (0.1211)
=========== ===========
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT
3
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM INCEPTION (FEBRUARY 5, 1988)
THROUGH MARCH 31, 1999
<TABLE>
<CAPTION>
DEFICIENCY
ACCUMULATED
COMMON STOCK AMOUNT ADDITIONAL DURING THE
- ------------------------------------------------------------- PER PAID-IN DEVELOPMENT STOCKHOLDERS'
ISSUED: SHARES AMOUNT SHARE CAPITAL STAGE EQUITY (DEFICIENCY)
- ------------------------------------------------------------- --------- ------------- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C>
July 27, 1988 2,250,000 2,250 0.0111 22,750 -- 25,000
January 25, 1989 17,750,000 17,750 0.0060 88,750 -- 106,500
January 29, 1989 3,637,347 3,637 0.0309 108,602 -- 112,239
To management:
September 14, 1995 41,955,173 41,955 0.0010 -- -- 41,955
September 14, 1995 906,667 907 0.0030 1,813 -- 2,720
September 14, 1995 452,600 453 0.0100 4,073 -- 4,526
October 4, 1995 61,980 62 0.1000 6,136 -- 6,198
December 8, 1995 23,580 24 0.2500 5,871 -- 5,895
For professional services:
September 14, 1995 120,000 120 0.0100 1,080 -- 1,200
October 4, 1995 100,000 100 0.0100 900 -- 1,000
December 8, 1995 100,000 100 0.0100 900 -- 1,000
February 23, 1996 115,222 115 0.2149 24,643 -- 24,759
July 29, 1996 493,034 493 0.2149 105,448 -- 105,941
December 2, 1996 417,893 418 0.3691 153,835 -- 154,253
January 31, 1997 250,774 251 0.2460 61,436 -- 61,687
February 28, 1997 56,621 57 0.2600 14,665 -- 14,721
March 15, 1997 76,173 76 0.2600 19,729 -- 19,805
March 29, 1997 15,400 15 0.2600 3,989 -- 4,004
June 2, 1997 225,597 226 0.1492 33,441 -- 33,667
August 12, 1997 224,269 224 0.1465 32,626 -- 32,851
October 31, 1997 304,546 305 0.1892 57,322 -- 57,626
December 31, 1997 (352,634) (353) 0.2070 (72,650) -- (73,003)
February 28, 1998 120,000 120 0.1872 22,340 -- 22,460
June 30, 1998 342,820 343 0.0191 6,213 -- 6,556
December 31, 1998 25,545 26 0.0010 0 -- 26
For loan payments:
September 14, 1995 61,000 61 0.1000 6,039 -- 6,100
November 1, 1995 50,000 50 0.1000 4,950 -- 5,000
December 8, 1995 10,000 10 0.1000 990 -- 1,000
August 12, 1997 41,600 42 0.2000 8,278 -- 8,320
August 31, 1997 66,666 67 0.1500 9,933 -- 10,000
October 1, 1997 57,692 58 0.2600 14,942 -- 15,000
December 30, 1997 240,000 240 0.2504 59,856 -- 60,096
December 31, 1998 240,564 241 0.2696 64,625 -- 64,865
For restitution:
September 14, 1995 2,668,967 2,669 0.2500 664,573 -- 667,242
October 4, 1995 2,180,600 2,181 0.2500 542,969 -- 545,150
November 1, 1995 372,270 372 0.2500 92,695 -- 93,068
December 8, 1995 7,353,248 7,353 0.2500 1,830,959 -- 1,838,312
February 23, 1996 744,444 744 0.2500 185,367 -- 186,111
May 3, 1996 125,929 126 0.2500 31,356 -- 31,482
June 21, 1996 350,863 351 0.2500 87,365 -- 87,716
July 29, 1996 310,567 311 0.2500 77,331 -- 77,642
September 11, 1996 2,667 3 0.2500 664 -- 667
December 2, 1996 73,480 73 0.2500 18,297 -- 18,370
January 31, 1997 4,000 4 0.2500 996 -- 1,000
February 28, 1997 38,000 38 0.2500 9,462 -- 9,500
June 2, 1997 18,000 18 0.2500 4,482 -- 4,500
August 12, 1997 11,200 11 0.2500 2,789 -- 2,800
October 31, 1997 4,400 4 0.2500 1,096 -- 1,100
November 20, 1998 (3,553,000) (3,553) 0.2500 (884,697) -- (888,250)
For dispute settlement:
October 4, 1995 25,000 25 0.1000 2,475 -- 2,500
November 1, 1995 31,030 31 0.1000 3,072 -- 3,103
December 8, 1995 50,000 50 0.1000 4,950 -- 5,000
For private offering:
September 14, 1995 75,000 75 0.1000 7,425 -- 7,500
November 1, 1995 5,000 5 0.2500 1,245 -- 1,250
December 8, 1995 256,000 256 0.2500 63,744 -- 64,000
February 23, 1996 672,923 673 0.2208 147,875 -- 148,548
May 3, 1996 353,667 354 0.2208 77,718 -- 78,072
June 21, 1996 606,900 607 0.2208 133,366 -- 133,973
July 29, 1996 252,000 252 0.2201 55,206 -- 55,458
December 31, 1996 54,350 54 0.4600 24,946 -- 25,000
March 29, 1997 154,000 154 0.2500 38,346 -- 38,500
December 4, 1997 640,000 640 0.2500 159,360 -- 160,000
December 31, 1997 708,750 709 0.1422 100,041 -- 100,750
February 18, 1998 30,000 30 0.1300 3,870 -- 3,900
June 8, 1998 62,500 63 0.0800 4,938 -- 5,000
NET LOSS -- -- -- (4,796,501) (4,796,501)
----------- ----------- ----------- ----------- -----------
85,122,884 85,123 4,367,807 (4,796,501) (343,571)
=========== =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT.
4
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FROM INCEPTION
FOR THE THREE MONTH PERIOD FEBRUARY 5, 1988
ENDED THROUGH
MARCH 31, 1999 MARCH 31, 1999
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
NET INCOME (LOSS) $ (10,753) $(4,796,501)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED BY OPERATING ACTIVITIES:
ADD BACK STOCK ISSUED FOR:
MANAGEMENT -- 61,294
CONTRACT LABOR, INCENTIVE BONUSES, PROFESSIONAL
SERVICES, AND RESEARCH AND DEVELOPMENT -- 468,552
RESTITUTION -- 2,676,409
INTEREST EXPENSE -- 28,920
DISPUTE SETTLEMENTS -- 10,603
OTHER ADJUSTMENTS:
SUBSIDIARIES LOSSES -- 158,380
STOCK SUBSCRIPTION LOSS -- 101,006
FIRST DEVELOPMENT STAGE LOSS -- 142,733
DEPRECIATION AND AMORTIZATION 1,473 15,233
----------- -----------
TOTAL ADJUSTMENTS 1,473 3,663,130
ADVANCES -- (400)
ACCOUNTS RECEIVABLE 180 --
ACCOUNTS PAYABLE 4,819 54,589
ACCRUED LIABILITIES 3,062 193,834
----------- -----------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES $ (1,219) $ (885,348)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
PURCHASE FURNITURE/EQUIPMENT -- (35,113)
DISPOSAL FURNITURE/EQUIPMENT -- 475
INVESTMENT IN BIOMAGNETRONICS -- (103,937)
INVESTMENT IN BIOLINK -- (54,443)
----------- -----------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES $ -- $ (193,018)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
NOTE PAYABLE-STOCKHOLDER -- 80,000
NOTES PAYABLE - OTHER RECEIVED -- 220,141
PAYMENT OF NOTES PAYABLE - OTHER -- (43,680)
ISSUANCE OF COMMON STOCK -- 821,952
OTHER -- (228)
----------- -----------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES $ -- $ 1,078,185
----------- -----------
NET INCREASE(DECREASE) IN CASH $ (1,219) $ (181)
BEGINNING CASH BALANCE $ 1,038 $ --
----------- -----------
CASH ENDING BALANCE $ (181) $ (181)
=========== ===========
SUPPLEMENTAL INFORMATION
CASH PAYMENTS FOR INTEREST EXPENSE $ -- $ 2,711
CASH PAYMENTS FOR INCOME TAXES -- --
NONMONETARY TRANSACTIONS
STOCK ISSUED FOR:
DEBT REDUCTION -- 141,461
MANAGEMENT -- 61,294
CONTRACT LABOR, INCENTIVE BONUSES, PROFESSIONAL
SERVICES, AND RESEARCH AND DEVELOPMENT -- 468,552
RESTITUTION -- 2,676,409
INTEREST EXPENSE -- 28,920
DISPUTE SETTLEMENTS -- 10,603
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REPORT
5
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999
1. BUSINESS AND ABILITY TO CONTINUE IN EXISTENCE
Biogan International, Inc. (Biogan), is a development-stage company. See
Note 5 "Stockholders' Equity" for a history of Biogan's securities issuance
and accumulated deficit. Management presently intends to focus aggressively
on the continued further development and prototype testing of the
Motor/Controller system as well as entering into strategic alliances for
both manufacturing and marketing of the motor. Additional capital will be
required to fund the growth and expansion and provide working capital for
continued operations.
Biogan and Collective Technologies, LLC (Collective) negotiated a joint
venture Preincorporation Agreement effective February 25, 1998, in which
Biogan and Collective Technologies each agreed:
(i) to transfer to "IntorCorp, Inc." (a new Idaho corporation ) their
respective rights to all of the intellectual technology of the
"IntorCorp Motor", each in exchange for 50% ownership interest,
and
(ii) that a consulting agreement will be entered into with Collective
for the continued development and testing of the "IntorCorp
Motor" compatible with industry standards in the locality.
The Business Plan incorporated in the Preincorporation Agreement
acknowledges that:
(i) the 5HP DC Feasibility Prototype has been developed and tested,
and
(ii) management is currently considering the options of developing (a)
a large power (40HP) motor or (b) a duel development of a 5/10HP
motor.
Under either of the options the cost to develop support functions, conduct
the laboratory prototype phase development and testing, complete production
prototype phase development, and field test the motors will take
approximately two years and will cost approximately $6,000,000. Management
is currently of the opinion that the risks are lower and the market
potential higher with 5/10 HP motors, however, the final decision will be
made at such time as financing is located and committed. Research and
development on the motor have ceased and will continue when funds are
available. The company is continuing to search for funding for the
development of the motor.
See Accountants' Report
-6-
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT- STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
MARCH 31, 1999
Management presently does not have any plans for the purchase or
acquisition of any significant plant or other equipment. It is anticipated
that additional employees will be required by the Registrant as the
acquired operations meet their expected growth. Since it is uncertain
whether Biogan will be successful in these ventures and whether it can
obtain sufficient capital to finance these ventures, it is uncertain
whether the Company will be capable of continuing in existence.
Management's plans to continue in existence are discussed in Note 6B.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. PRESENTATION
The accompanying financial statements have been prepared in accordance with
the Statement of Financial Accounting Standards No. 7 "Accounting and
Reporting by Development-stage Enterprises". A development stage enterprise
is one in which planned principal operations have not commenced or if its
operations have commenced there has been no significant revenue there from.
Development-stage companies report cumulative costs from the enterprise's
inception. Biogan has had two stages of development (Note 5G).
B. INVESTMENT IN SUBSIDIARIES
Biogan owns 50% of the voting stock of BioMagnetronics, Inc. and Biolink ,
Inc. Biomagnetronics, Inc. and Biolink, Inc. were both development-stage
enterprises and neither company had any operating activities during the
current period of operations. The investments were accounted for by the
equity method whereby the purchase of stock shares was recorded at cost and
increased and decreased by 50% of any profits or losses respectively.
Biogan invested $103,937 in Biomagnetronics, Inc. and $54,443 in Biolink,
Inc. The carrying amount of the investments have been reduced to $0 for
each company since both companies have had no operating activities and
there are no plans for future operations. As of March 31, 1999, neither
company has assets of any value.
The Board of Directors of IntorCorp, Inc., a new corporation, met on April
30, 1998, and at that time approved the issuance of stock to Biogan and
Collective in exchange for the transfer of their respective rights of their
Intellectual Technology. Biogan owns 50% of the voting stock of the new
corporation. The other investor in the new corporation is Collective, an
engineering group. The two groups formed this new corporation in order to
continue further development of the motor. The new corporation is a
development stage company. There have been no financial transactions in the
new corporation.
C. STOCK VALUATION
Stock issued for non cash consideration has been valued at market value or
above from $.001 to $.25 per share (see Statement of Stockholders' Equity
"To Management" Note 5D). Stock issued for restitution (Note 5F) is valued
at $.25 per share.
See Accountants' Report
-7-
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
MARCH 31, 1999
D. NET INCOME (LOSS) PER SHARE
The net income (loss) per share has been calculated using the weighted
average number of shares of common stock outstanding during the development
stage period. The weighted average number of shares of common stock
outstanding for the period ended March 31, 1999, and the period from
February 5, 1988 (inception), through March 31, 1999, was 85,122,884; and
39,599,802 respectively. Stock options have not been considered in the
calculation of loss per share because they are antidilutive. Of the
85,122,884 shares outstanding 59,089,340 are restricted and 26,033,544
shares are unrestricted.
E. INCOME TAXES
At March 31, 1999, Biogan had net operating losses (NOL) carryforwards as
follows:
YEAR NOL YEAR EXPIRES
1995 2,819,521 2010
1996 1,122,539 2011
1997 736,051 2012
----------
$4,678,111
No deferred asset will be recognized on the tax benefit resulting from the
NOL until the Company becomes profitable. While management believes the
loss recorded due to the stock restitution loss ($2,676,409) is a tax
deductible expense, it could be subject to an IRS disallowance.
F. FURNITURE AND EQUIPMENT
Furniture and equipment are carried at cost. Depreciation of furniture and
equipment is provided using the straight-line method of depreciation and
the accelerated cost recovery method for federal income tax purposes.
Depreciation is calculated over useful life ranging from 5 to 10 years.
3. NOTES PAYABLE AT MARCH 31, 1999, CONSISTED OF THE FOLLOWING:
Notes Payable - Other:
Notes payable to an individual with interest at 10% per
annum from July 1, 1998. Note is unsecured and is payable on
demand. 5,000
Notes payable to an individual with interest at 10% per
annum from August 18, 1998. Note is unsecured and is payable
on demand. 15,000
Notes payable to an individual with interest at 12% per
annum from September 29, 1998. Note is unsecured and is
payable on demand. 15,000
--------
Total Notes Payable - Other $ 35,000
========
See Accountants' Report
-8-
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
MARCH 31, 1999
Notes Payable - Stockholder:
Notes payable to Ronald J. Tolman with interest at 10% per
annum from November 13, 1996, note is unsecured and is
payable on demand. Payments are applied first to any unpaid
interest. 40,000
Notes payable to Rulon L. Tolman with interest at 10% per
annum from November 13, 1996, note is unsecured and is
payable on demand. Payments are applied first to any unpaid
interest. 40,000
--------
Total Notes Payable - Stockholder $ 80,000
========
4. STOCK OPTIONS
On December 8, 1988, the board of directors of Biogan allocated 2,000,000
shares of the Company's authorized common stock shares for a stock
incentive plan to be issued as determined by the board at an option price
of not less than placement offering of any private placement offering of
the Company's common stock. No options have been granted or exercised under
this stock incentive plan.
5. STOCKHOLDERS' EQUITY (Deficit)
Following is a table of Biogan International Inc.'s stock and equity
transactions:
<TABLE>
<CAPTION>
In (000)
Common .001/share Paid-In Accumulated Total
Shares Amount Capital Deficit Equity
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
A) Ronney shares 2,250 $ 2,250 $ 22,750 $ $ 25,000
B) Biogan merger 17,750 17,750 88,750 106,500
C) Stock Subscriptions 3,637 3,637 108,602 112,239
D) Expenses/Service Mgmt Grp 43,400 43,400 17,894 61,294
E) Shares for Cash 7,380 7,380 1,464,107 1,471,487
F) Shares for Restitution 10,706 10,706 2,665,704 2,676,410
G) Deficit:
2/5/88 - 6/26/94 (142,733) (142,733)
6/27/94 - 06/30/99 (4,653,768) (4,653,768)
-------------------------------------------------------------------------------------
Totals 85,123 $ 85,123 $ 4,367,807 $(4,796,501) $ (343,571)
====== =========== =========== =========== ===========
</TABLE>
A. Issuance of 2,250,000 shares of Ronney, a Delaware Corporation.
B. Exchange of Biogan (an Oregon Corporation), 5,000,000 shares for 17,750,000
shares of Ronney. Ronney and Biogan merged and changed its name to Biogan
International, Inc.
See Accountants' Report
-9-
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
MARCH 31, 1999
C. Issuance of a stock subscription to Tower Enterprises International, Inc.
(a European Corporation), a former 84% shareholder in Biogan International,
Inc. 11,512,653 of the 15,150,000 original stock subscription has been
canceled as of December 31, 1998.
D. Shares issued to new management for expenses/services incurred in
re-starting Biogan International, Inc. were valued at or above the market
value of the common stock listed on NASDAQ BB at $.001 to $.25 per share at
the time the expenses were incurred; the services were rendered; and the
Board of Directors' resolution approving the issuance was made. See
"Statement of Stockholders' Equity" and Note 7.
E. Cash shares and shares issued for services rendered and for loan payments
by parties other than management.
F. From 1990 through May 1994 Biogan International, Inc. was under the control
of prior management and affiliates. Effective December 31, 1996, the
Company completed its review stock transactions and has issued 14,258,635
shares of common stock as restitution to investors who substantiated their
claims of purchasing stock from the Company but had not received stock
certificates. In addition, the Company has obtained a court judgment
canceling 15,150,000 shares of common stock issued in "C" above, and
4,117,653 shares issued to Tower Enterprises International, Inc. in "B"
above. The company recovered 3,553,000 shares relating to the above court
order on November 20, 1998. This transaction results in a net total of
10,705,635 shares for restitution being issued.
G. Biogan International has effectively had two development stages:
(1) From February 5, 1988, through June 27, 1994. During this period the
company was dormant for approximately four years.
(2) The second development stage (June 27, 1994, through March 31, 1999)
is and continues under the new management group set forth in D above.
6. COMMITMENTS AND CONTINGENCIES
A. SHARES FOR RESTITUTION
As set forth in Note 5F "Shareholders' Equity" Biogan was committed
through December 31, 1997, to issue shares to replace shares sold by
Tower International's US agent, Tower Holdings, Ltd.
B. OTHER
In connection with the Company's plans to become operational,
management will focus on the funding and marketing of the InterCorp
Motor as a consultant to InterCorp, Inc. In addition, management is
presently seeking other business opportunities to acquire, develop
and/or joint venture. In order to continue with the business of
InterCorp and/or Biogan, it will be necessary to raise additional
capital which management intends to obtain through private placements
of common stock or other securities, with qualified investors or other
business organizations. It is uncertain whether the Company will be
successful in raising the needed capital. However, as discussed in
Note 1 the Company remains a development-stage company.
7. USE OF 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
disclosures of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
See accountants' Report
-10-
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
MARCH 31, 1999
8. RELATED PARTY TRANSACTIONS
Pursuant to a board of directors meeting held in July 1995, the Company
issued common stock to the following related parties in exchange for
expenses incurred on behalf of the Company and for services rendered: (The
schedule below has been adjusted to reflect shares issued to the Advisory
Board from each of the related parties listed below - see Note 12)
<TABLE>
<CAPTION>
Name Date Numbered of Market Issue Expense/
Expense/Service shares issued Price Price Service
Rendered per share per share Amount
Glazier Family Trust
<S> <C> <C> <C> <C>
during 1994 10,079,178 $ .001 $ .001 $ 10,079
during first quarter of 1995 245,000 .001 .003 735
during second quarter of 1995 148,300 .010 .010 1,483
during third quarter of 1995 20,830 .100 .100 2,083
during fourth quarter of 1995 6,692 .125 .250 1,673
-------------------------------------------------------------------------------------------------
10,500,000 $ 16,053
Ronald J. Tolman Family Trust
during 1994 8,982,729 $ .001 $ .001 $ 8,983
during first quarter of 1995 328,333 .001 .003 985
during second quarter of 1995 154,300 .010 .010 1,543
during third quarter of 1995 21,150 .100 .100 2,115
during fourth quarter of 1995 6,888 .125 .250 1,722
-------------------------------------------------------------------------------------------------
9,493,400 $ 15,348
Rulon L. Tolman
during 1994 9,386,667 $ .001 $ .001 $ 9,387
during first quarter of 1995 333,333 .001 .003 1,000
during second quarter of 1995 150,000 .010 .010 1,500
during third quarter of 1995 20,000 .100 .100 2,000
during fourth quarter of 1995 10,000 .125 .250 2,500
-------------------------------------------------------------------------------------------------
9,900,000 $ 16,387
</TABLE>
Biogan sub-leased office space (month to month) from a company owned by
Ronald J. Tolman until December 31, 1996. Total rental expense for the
period from inception February 5, 1988, until March 31, 1999, amounted to
$10,233. See Note 3 for details on notes payable due stockholders. Ron
Tolman, Rulon Tolman and Jacque Tolman have accrued wages for the two year
period ending December 31, 1998, of $96,600, $63,800 and $10,800
respectively.
9. LEASES
The Company conducts its operations from facilities that are leased under a
noncancelable operating lease that expired on May 31, 1999. The Company is
presently on a month to month lease.
Rental expense for the three months ended March 31, 1999, amounted to
$2,000. Rental expense for the period from inception February 5, 1988,
through March 31, 1999, amounted to $37,287. See Note 7 for related party
rental transactions.
See Accountants' Report
-11-
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
MARCH 31, 1999
10. CORPORATE NAME CHANGE
The Board of Directors consented to change the name of the corporation from
Biogan Medical International, Inc. to Biogan International , Inc. This
action was deemed necessary to avoid the confusion that has developed from
the word "medical" in the name when the main emphasis of the company is to
promote the development of the electro-magnetic motor. The name change was
recorded by the state of Delaware on September 5, 1997.
11. YEAR 2000 COMPLIANCE
The Company will begin a Year 2000 compliance project in June 1999. The
project will encompass upgrading the server and all proprietary software
and non-proprietary software. The project will be completed by September
1999.
The Company is in the process of assessing Year 2000 issues not related to
its internal systems, including issues with suppliers and consultants. Due
to the general uncertainty of the Year 2000 readiness of suppliers and
consultants, the Company is unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on the
Company's results of operations, liquidity or financial condition. The
Company believes that interruptions of normal operations will not be
affected.
Total expenditures for the Year 2000 project are estimated to be $5,000 in
fiscal year 1999. There were no Year 2000 related costs in the current
fiscal year.
The Company is currently formulating contingency plans in the event of a
Year 2000 failure. The Company expects that a contingency plan will be in
place by September 30, 1999.
See Accountants' Report
-12-
WADSWORTH & SMITH, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MARCH 31,
1999 THREE-MONTHS STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> (181)
<SECURITIES> 0
<RECEIVABLES> 400
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 219
<PP&E> 34,716
<DEPRECIATION> (15,083)
<TOTAL-ASSETS> 19,633
<CURRENT-LIABILITIES> 363,423
<BONDS> 0
0
0
<COMMON> 4,452,930
<OTHER-SE> (4,796,501)
<TOTAL-LIABILITY-AND-EQUITY> 19,852
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 7,844
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,909
<INCOME-PRETAX> (10,753)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,753)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,753)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
