United States Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1998.
[ ] 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.
(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
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
________________________ _________________________________
________________________ _________________________________
Securities registered under 12(g) of the Exchange Act:
Common Stock $.001 par value
(Title of class)
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 __
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
<PAGE>
State issuer's revenues for its most recent fiscal year. -0-
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was sold, or the average bid and asked prices of such common equity, as of a
specified date within the past 60 days. As of March 1, 1999, $4,843,210.
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes[ ] No[ ].
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the Issuers's classes of
common equity, as of the latest practicable date. December 31, 1998: 85,122,884
shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe them
and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the documents is incorporated; (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant to
Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed
documents should be clearly described for identification purposes (e.g., annual
report to security holders for fiscal year ended December 24, 1990).
Transitional Small Business Disclosure Format. Yes ___, No _X_.
2
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
History and Business Development.
Biogan International, Inc. (formerly Biogan Medical International, Inc.) is
a Delaware corporation with principal and executive offices at 7213 Potomac
Drive, Boise, Idaho 83704, phone (208) 376-8500, FAX (208) 376-4663. Biogan is
currently in the business of developing a new concept design in electrical
motors called "IntorCorp Motor" which Registrant has previously referred to as
the "Smart-Power Motor", and which management presently intends to develop and
market for commercial purposes.
Biogan initiated its pursuit of a new concept in electrical motors in 1995
when it entered into a joint venture with Magnetronics, Inc. for the development
of an electrical magnetic motor referred to as the "Magna Motor" under patents
available to Magnetronics, Inc. During calendar year 1996 and after consultation
with Technical Development Consultants, Inc. an independent firm of consulting
electrical engineers and principally Mr. Scott Anderson, management of Biogan
determined that a different technology was required to accomplish the
development of the new concept in electrical motors. In the 1st quarter of 1997
management of Biogan made the decision to table further activity with
Magnetronics and to continue with its consulting agreement with Technical
Development Consultants, Inc. and Mr. Scott Anderson, to develop the "IntorCorp
Motor".
During calendar year 1997, and as part of the research and development
process, the respective consultants who had, or were expected to perform,
consulting services on the IntorCorp Motor, including Mr. Scott Anderson, was
assembled and formed a company called Collective Technologies, L.L.C. Collective
Technologies acquired from Technical Development Consultants, Inc. and Mr. Scott
Anderson as well as the other individual shareholders of Collective Technologies
any rights to the intellectual technology with respect to the "IntorCorp Motor".
During the calendar year 1997 Biogan and Collective Technologies completed and
demonstrated the development of the proof of concept and feasibility prototype
of a 5 HP "IntorCorp Motor" with a modular design, 72 volt DC motor and
controller system which meets the National Electrical Manufacturers Association
(NEMA) configuration for 5HP motors.
Joint Venture Development: IntorCorp, Inc.
By the end of 1997 Biogan and Collective Technologies negotiated a joint
venture Preincorporation Agreement which became effective February 25, 1998,
(See Exhibit "1" of Item 13 of 1997 10KSB) 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 a 50% ownership interest, and
(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
3
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"IntorCorp Motor".
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 dual 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 (See Item 6.B. pages 9&10.).
Management is currently of the opinion that the risks are lower and the market
potential higher with the 5/10 HP motors, however the final decision will be
made at such time as financing is located and committed.
Pursuant to the Preincorporation Agreement IntorCorp Inc. was incorporated
in the state of Idaho on March 11, 1998, and named as the initial directors
Scott DeHart, Wayne Stewart, George Wadsworth, CPA, and John R. Hansen, Jr.,
attorney. See Section 9.6 Management and Key Personnel of IntorCorp, Inc. page
12, for resumes of the Directors and Key Consultants of of Collective
Technologies, L.L.C. who will be responsible for the continued development of
the "IntorCorp Motor".
The capitalization of IntorCorp under the terms of the Preincorporation
Agreement is the issuance of 1,400,000 shares of common stock, par value $5.00
per share, to each of Biogan and Collective Technologies in exchange for all of
their respective rights to the intellectual technology of each in the IntorCorp
Motor at a total aggregate value, as determined by the Board of Directors, in
the amount of $14,000,000. Management anticipates issuing additional common
stock of IntorCorp Inc. to investing parties at such time as development funding
is committed.
IntorCorp Motor Characteristics.
The present prototype of the motor is a 5 horsepower motor and integrated
electronic controller. The combination of the motor and controller enables
modular configurations from fractional horsepower to high multiple-horsepower
ratings by modifying the configuration for larger size motors. Some primary
advantages of the motor and controller are:
o It has no inrush current spike at startup.
o It can not burn out under locked rotor operation (stalled
condition).
o It can (but does not have to) apply full torque to a locked rotor
indefinitely without burning out (hold power against a load).
o It is highly efficient, and maintains very high efficiency over a
broad RPM band.
o It requires less maintenance and is easily serviced when
necessary.
The basic motor architecture is that of a stacked axial-gap, permanent
magnet, brushless motor utilizing high field strength neodymium-iron boron
magnets. The high magnetic fields produced by this material allow smaller
architectures that are inherently low in hysteresis, eddy current, and winding
resistance losses. A specifically designed controller, which is incorporated
4
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in the IntorCorp Motor design, is required for operation as well as to maximize
its performance advantages. Although the proof of concept prototype runs on 72
volt DC current, the 2nd stage prototype now being developed will run
automatically on either AC or DC current and over a relatively wide range of
voltages while maintaining highly efficient use of amperage draws.
The controller is quite compact, and will be enclosed in the motor housing
in production models. The motor/controller package can be made smaller and
lighter than an equivalent rated horsepower induction motor. The IntorCorp Motor
is more flexible and efficient. The prototype's control is by an external
computer through a standard serial port for maximum operating flexibility. In
production, this will remain an option, or a control program will be loaded onto
the on-board microprocessor for simpler "plug in" operating regimes.
The control program, whether on-board or remote, can control speed,
acceleration, torque, power, direction of rotation, and index to any position
(like a stepper motor). It can provide feedback to the controller (and user) on
torque provided, horsepower delivered to the load, speed, angular position, and
rotation direction.
The controller forms the interface between the power source and the motor
windings. Its heart is the microprocessor chip that continuously monitors the
motor's speed, direction, applied voltage, back emf (voltage generated by the
motor), and user/control inputs. From all these inputs the controller calculates
and delivers to the windings a series of variable high-energy pulses. The result
is smooth, efficient, and highly responsive operation.
The controller effectively conditions its power inputs, giving unique
advantages such as:
o The power current draw from an AC source can be shaped by the
controller to be sinusoidal and precisely mapped onto the source
waveform, achieving a unity power factor. This is not true of
conventional low frequency silicon controlled rectifier starters.
o The motor can be used in relatively large horsepower applications
on single-phase lines. Inrush current spike limits conventional
motors to about 7.5 horsepower on single-phase lines.
o The motor can be operated over a wide range of torque and speed
conditions in either direction and maintains high efficiency use
of the power source.
Many new and exciting applications for the IntorCorp high-efficiency,
flexible motor are being generated by the market forces driving the rapid growth
of conventional variable speed high efficiency motor/controller combinations.
Those forces are primarily utility companies and the government's continuing
drive for electric power and environmental conservation evidenced by the EPAct
legislation, the Motor Challenge Program, and other initiatives combined with
continually increasing efforts by industry to reduce life-cycle operating costs.
Strong interests and support has been expressed by state and federal
government engineers, electric power utility engineers and officials, and other
industrial executives for various applications of the motor.
5
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Intellectual Technology.
Collective Technologies, Inc. has filed an application for Patent with
respect to the intellectual technology encompassed in the IntorCorp Motor. Under
the terms of the Preincorporation Agreement the rights to any patents on
Intellectual Technology are to be assigned to IntorCorp, Inc.
Competition.
Management of Biogan is aware that competition in the electrical motor
industry is very competitive, with several very large companies who have
extensive financial resources. Management is not, however, at this time aware of
any company that has the same or similar product as the IntorCorp Motor.
Management is of the opinion that there are several established companies that
can provide other electrical motors for the same or similar functions that the
IntorCorp Motor is expected to perform. Management is of the opinion that the
IntorCorp Motor will, however, be substantially more efficient and able to
successfully compete at such time as production of the IntorCorp Motor is
commenced.
Employees.
Effective the date of this report, Registrant has no full time employees.
ITEM 2. DESCRIPTION OF PROPERTY.
Registrant operates from approximately 250 square feet of office space at
7213 Potomac Drive, Boise, Idaho 83704, under a month-to-month tenancy.
Negotiations are now in process with representatives of the landlord to renew
the lease on the same office space or in the same office complex. Registrant
owns the office furniture and equipment which consists of 5 executive desks with
swivel chairs and side pieces, 3 secretarial desks, AT&T 25 phone system with
hardware, 4 computers with computer software, and miscellaneous other office
equipment most of which is now in storage.
ITEM 3. LEGAL PROCEEDINGS.
There is no pending litigation involving the Registrant, and to the best
knowledge of management there is no threatened litigation, the unfavorable
resolution of which would have a material adverse effect on the business, the
financial position or results of operations of Registrant.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
6
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
A. Market for Common Stock. Registrant's common stock is traded on the
NASDAQ over-the-counter Bulletin Board under the symbol "BIGM". The following
table shows the trading price data for the common stock as reported by NASDAQ as
the range of representative bid prices for the common stock for 1996 and 1997.
The Registrant's stock is quoted in the National Quotation Bureau's Pink Sheets
and listed on the NASD's Electronic Bulletin Board. The quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
Bid Price
---------
High Low
---- ---
1997
----
First Quarter $0.3600 $0.2400
Second Quarter $0.2500 $0.1150
Third Quarter $0.1975 $0.1600
Fourth Quarter $0.2500 $0.1200
1998
----
First Quarter $0.1400 $0.0880
Second Quarter $0.0985 $0.0615
Third Quarter $0.0625 $0.0365
Fourth Quarter $0.0465 $0.0205
B. Holders of Common Stock. The approximate number of holders of record of
the Registrant's was 788 as of December 31, 1998. A number of the Company's
record shareholders are broker/dealers who are holding record title for other
customers, and accordingly management believes the actual number of beneficial
holders of its common stock is greater than the number of shareholders of
record.
C. Dividends. There have been no cash or other distributions or dividends.
D. Unregistered Equity Securities Sold by Registrant During 1998.
During 1998 Registrant issued common stock of Registrant without
registration under the Securities Act in private transactions (Section 4(2)
exemption) to the class of persons indicated, without discounts or commissions,
for cancellation of debt and services rendered. (The list does not include
securities issued under Regulation S).
<TABLE>
<CAPTION>
Date Shares Price Value Consideration Purchasers
- ---- ------ ----- ----- ------------- -----------
<S> <C> <C> <C> <C> <C>
Feb 28 120,000 0.1372 $16.464 Services Rendered Professionals
Jun 8 105,320 0.1910 $20,116 Services Rendered Professionals
</TABLE>
7
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ITEM 6. MANAGEMENT'S DISCUSSION AND PLAN OF OPERATION.
A. IntorCorp Motor Development - IntorCorp, Inc.
To resolve issues related to rights to intellectual technology and to
assemble the desired personnel to expeditiously proceed with the further
development of the IntorCorp Motor, all material parties agreed to form
IntorCorp, Inc., a subsidiary owned 50% by Biogan and 50% by Collective
Technologies, L.L.C. (a consolidation of personnel and intellectual technology
material to the development of the IntorCorp Motor), (See "Joint Venture
Development: IntorCorp, Inc. page 3). IntorCorp Inc. intends to develop a
consulting agreement with an engineering group to continue the research and
development of the IntorCorp Motor to reach production design, and a consulting
agreement with Biogan to accomplish marketing research and other functions to
facilitate commercial marketing of the IntorCorp Motor.
The Business Plan of IntorCorp is essentially as follows (time estimates
run from the date of available funds):
1. Present Status: A 5 HP Feasibility Prototype has been developed and
tested. Presently considering the development of a
high HP motor, or a dual development of 5/10 HP
motors.
2. Support Functions: Site preparation for high voltage and high power
working and testing environment, intellectual
technology filings and procurement, and general
workplace setup. (Estimated 6 months and $1,000,000
cost)
3. Lab Prototype: Scale the design to size of motor, include AC front
end option, extensive stress testing and reliability
development, meet all design objectives including
full environmental requirements. Deliver 5 test
units and 5 demonstration units. (Estimated
71/2months and $2,300,000 cost)
4. Production Prototype: Include design improvements from reliability tests,
finalize intellectual property filings, obtain
regulatory agency approvals, and first unit
application testing, prepare 5 units for internal
destructive testing and 10 demonstration units
including units for regulatory approval. (Estimated
5 months and $1,400,000 cost)
5. Field Test: Beta test site application testing, 20 demonstration
sales units, 10 Beta field application test units.
(Estimated 5 months and $1,300,000 cost)
6. Production Start: During the field testing period the manufacturing
facilities, line and tooling can be set up such that
when the field testing is completed the
manufacturing can begin . The cost of manufacturing
is variable depending on the approach developed, the
line capacity and the degree of development of the
tooling involved.
Management estimates that an investment of $6,000,000 will take the project
through the development phases and field test. Management of both Biogan,
Collective Technologies, Inc. and IntorCorp, Inc. are presently exploring and
seeking sources of financing for the IntorCorp
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Motor project.
B. Management's Discussion of Finances and Business Activities.
The financial statements reflect that there were no revenues during the
year and a net income of $562,555. This results from the settlement of the Frank
Wright litigation previously reported with the recovery of 3,553,000 shares of
common stock valued at $0.25 per share. The recovered common stock was recorded
as a negative expense in the amount of $888,250.00 which reduced the restitution
expense from prior calendar years. Reference is made to Note 2. D of the
attached financial statements.
On December 31, 1998, Biogan issued 240,564 shares of restricted common
stock to individual lenders to retire corporate loans in the amount of $64,856
at the rate of $0.2696 per share.
Presently the primary focus of management will be the funding and marketing
of the IntorCorp Motor as a consultant to IntorCorp, Inc., described in the
preceding section. In addition, management is presently seeking other business
opportunities to acquire, develop and/or joint venture.
In order to continue with the business of IntorCorp 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 reorganizations.
Management does not now have any basis for projecting revenues from any
operations.
Management does not now have any plans for the purchase or acquisition of
any plant or significant other equipment, or to make any significant change in
the number of employees currently employed by Registrant.
ITEM 7. FINANCIAL STATEMENTS.
Included herewith are the audited Financial Statements of Registrant for
the year ended December 31, 1998, and from inception February 5, 1988 through
December 31, 1998.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
9
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The Management of Biogan is under the direct control of a board of
directors consisting of three directors who are elected at the annual meeting of
shareholders. Following the annual meeting of shareholders after the election of
the directors, the board of directors is to hold the organizational meeting at
which time the officers are appointed. In addition the Board of Directors has
established an Advisory Board, on a non-compensation basis (however, see Item
11.c. page s 14&15), to assist the Directors in directing business policy of the
Company.
9.1 Directors and Officers.
The current directors and executive officers of Biogan are as follows:
Name Age Position Date of Appointment
---- --- -------- -------------------
L. William Glazier 69 President, Director May, 1994
Ronald J. Tolman 47 Executive VP, Director May, 1994
Rulon L. Tolman 49 VP, Treasurer, Director *
Robert C. Montgomery 47 Secretary **
* Mr. Rulon L. Tolman was appointed Sec.-Treas, and Director in
September of 1994. He was appointed Vice President in February 1997,
and remained as secretary-Treasurer until September, 1997, when he was
released as Secretary.
** Mr. Montgomery was appointed corporate Secretary in September, 1997.
9.2 Business Experience.
L. William Glazier, was appointed Director and President in May of 1994, and has
since continued in the offices. Mr. Glazier retired from Chevron Oil Corporation
in 1989 as an executive having supervised five offices and a $600,000,000
operating budget. Since his appointment as Director and President, he has been
primarily responsible for assisting in the restructure of Registrant and
development of new business.
Ronald J. Tolman, was appointed Director and acting Vice President in May of
1994, and has been Executive Vice President in charge of operations since
December of 1994. Mr. Tolman was National Training & Marketing Director for
Weather Master Architectural Coatings from 1988 to 1994. Previously he served in
business related government positions including Administrator of Operations for
the State of Idaho Department of Insurance and Business Development Specialist
for the Small Business Administration.
Rulon L. Tolman, was appointed Director September 1994, and is currently a Vice
President of the Company. Mr. Tolman has been with Mutual of New York since 1978
and has been Account Executive, Field Underwriter and Sales Manager. Previously
Mr. Tolman was a Production Supervisor with Boise Cascade Container Division
managing 80 employees.
Robert C. Montgomery, 6940 Ashland Drive, Boise, Id. 83709, is presently
Secretary-Treasurer and house legal counsel for the Company. Mr. Montgomery
received his J.D. degree from the University of Idaho in 1974. Mr. Montgomery is
a member of the bar in Idaho, Oregon and Washington. He was a former adjunct
professor of Business Laws and Ethics at Boise State University, and has
practiced law in Idaho since 1974.
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9.3 Advisory Board.
The Advisory Board consists of 5 members who meet as requested by the
directors, generally twice per month. The Advisory Board Members are:
Robert C. Montgomery, see resume above.
Keith Cline, 1252 E. Victory Rd., Meridian, Id. 83642, investor and advisor
to the company. Mr. Cline is presently retired, but was a graduate in
engineering from U.C. Berkely in 1951, and was the owner-operator of Universal
Wood Products, Inc. and in the construction business in Meridian.
John R. Hansen, Jr., 12035 Ginger Creek Drive, Boise, Id. 83713. Mr. Hansen
received his J.D. degree from UCLA in 1956, and has practiced law from 1957 to
1968 in California and from 1968 to the present in Idaho, primarily in
securities and business practice. Mr. Hansen is presently outside counsel to the
Company.
Jacque L. Tolman, Executive Secretary for the company. Mrs. Tolman received
her accounting degree from Boise State University in 1975. She has acted as the
administrative assistant for the Company for the past three years. Her
experience includes 4 years as the Medical Staff Coordinator for St. Luke's
Regional Hospital, and one year with the St. Luke's Mountain States Tumor
Institute.
George W. Wadsworth, 214 S. Cole Road, Boise, Id. 83709, has been a partner
in the accounting firm Wadsworth & Smith, Chartered for the last 23 years. He is
also the CPA for the Company.
9.4 Family Relationships.
Mr. Ron Tolman and Mr. Rulon Tolman are cousins, and Mr. Ron Tolman and
Jacque Tolman are husband and wife.
9.5 Compliance with Section 16(a) of the Exchange Act:
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Registrant's officers and directors, and persons
who own more than 10% of a registered class of the Registrant's equity
securities, to file initial reports of ownership and reports of changes in
ownership (Forms 3,4 an 5) of common stock of the Registrant with the Securities
and Exchange Commission ("SEC"). Officers and directors and greater than 10%
beneficial holders are required by SEC regulation to furnish the Registrant with
copies of all such forms that they file.
To the Registrant's knowledge, based solely on the Registrant's failure to
receive any copies of such reports, the Registrant believes that during the
fiscal year ended December 31, 1997, none of the Section 16(a) filing
requirements applicable of its officers, directors and greater and 10%
beneficial owners was complied with.
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9.6 Resumes of Management and Key Consultants of IntorCorp Inc.
Directors of IntorCorp Inc. are Scott DeHart, Wayne Stewart, George
Wadsworth and John R. Hansen, Jr. See Advisory Board for resumes of George
Wadsworth and John R. Hansen, Jr.
Scott DeHart is 51 years of age, and received Bachelors and Masters Degrees
from Brigham Young University in Electrical Engineering. From 1975 to 1997 Mr.
DeHart was employed with Hewlett Packard and included 4 years experience as
Section Manager of the Greeley Division in Greeley, Colorado; 4 years as Section
Manager of Disk Storage Systems Division in Boise, Idaho; and 2 years as Project
Manager, Firmware Development and Firmware Development Manager. The assignments
included planning, development and managing conceptualized projects to market
production.
Wayne Stewart is 53 years of age, is a graduate of Brigham Young University
and attended graduate school at Purdue. From 1983 to 1995 he was the
Manufacturing Manager for the disk memory division of Hewlett Packard, located
in Boise, Idaho. From 1995 to 1997 he was VP over world manufacturing for
Whirlpool, and in 1997 he accepted the position of VP ov operations at Iomega.
ITEM 10. EXECUTIVE COMPENSATION.
The 1998 salary and stock remuneration accrued by Biogan to the officers
and directors and other benefits received by each of them are set forth below:
Annual Restricted Stock
Name & Position Year Compensation Shares Date
- --------------------------------------------------------------------------------
L. William Glazier, Pres. 1998 -0- -0-
Ronald J. Tolman, V-Pres 1998 $62,100 -0-
Rulon L. Tolman, 1998 $34,800 -0-
Jacque L. Tolman 1998 $10,800 -0-
Salaries were discontinued after the 3rd quarter of 1998.
Both in 1997 and in 1998 each of the management members are reimbursed for
their out of pocket expenses relating to company business.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
The following table reflects the ownership by the persons indicated as of
December 31, 1998.
12
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a: Beneficial Owners, known to Registrant, owning more than 5% of voting
securities:
Common Stock Percentage of
Name of Owner Beneficially Owned Ownership
- --------------------------------------------------------------------------------
L. William Glazier 10,500,000 12.3%
805 W. Cross Street
Woodland Hills, CA 95695
Ronald J. Tolman 7,558,400 8.88%
2326 Bruins Avenue
Boise, Idaho 83704
Rulon L. Tolman 9,808,333 11.22%
7272 Glenridge View
Boise, Idaho 83709
b. Security Ownership of Management:
Common Stock Percentage of
Name of Owner Beneficially Owned Ownership
- --------------------------------------------------------------------------------
L. William Glazier 10,500,000 12.3%
805 W. Cross Street
Woodland Hills, CA 95695
Ronald J. Tolman 7,558,400 8.88%
2326 Bruins Avenue
Boise, Idaho 83704
Rulon L. Tolman 9,808,333 11.5%
7272 Glenridge View
Boise, Idaho 83709
Robert C. Montgomery 2,338,000 2.75%
6940 Ashland
Boise, Idaho 83709
Jacque L. Tolman 3,664,867 4.31%
2326 Bruins Avenue
Boise, Idaho 83704
c. Security Ownership of Advisory Board Members
Keith Cline 1,130,000 1.33%
1252 E. Victory Rd.
Meridian, Idaho 83642
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John R. Hansen, Jr. 2,500.000 2.94%
1419 W. Washington
Boise, Idaho 83702
Robert C. Montgomery 2,338,000* 2.75%
6940 Ashland Drive
Boise, Idaho 83709
Jacque L. Tolman 3,664,867* 4.31%
2326 Bruins Avenue
Boise, Idaho 83704
George W. Wadsworth 2,766,676 3.25%
214 S. Cole Road
Boise, Idaho 83709
* Also listed under 11 (b) above.
Robert C. Montgomery and George W. Wadsworth are issued stock from time to
time for services rendered to the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
None.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
None
14
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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.
(formerly known as Biogan Medical International, Inc.)
(Registrant)
By /S/ RONALD J. TOLMAN V.P.
--------------------------
(Signature and Title)
/S/ RULON L. TOLMAN V.P.
--------------------------
(Printed name and Title)
Date: 8-10-99
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
By /s/ Ronald J. Tolman Executive VP & Director August 10, 1999.
------------------------
Ronald J. Tolman
By /s/ Rulon L. Tolman VP, Treasurer & Director August 10, 1999
------------------------
Rulon L. Tolman
15
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT - STAGE COMPANY)
FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
DECEMBER 31, 1998
CONTENTS
Report of Independent Auditor 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
<PAGE>
[LETTERHEAD]
GEORGE BRENNER
CERTIFIED PUBLIC ACCOUNTANT
REPORT OF INDEPENDENT AUDITOR
Board of Directors
Biogan International, Inc. formerly Biogan Medical International, Inc.
Boise, Idaho
I have audited the accompanying balance sheet of Biogan International, Inc. (a
development stage company) as of December 31, 1998 and related statements of
operations, stockholders deficiency and cash flows for the years ended December
31, 1997 and 1998 and the period from February 5, 1988 (date of inception)
through December 31, 1998. These financial statements are the responsibility of
the Companys management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, such financial statements referred to above present fairly, in
all material respects, the financial condition of Biogan International, Inc. as
of December 31, 1998 and the results of its operations, stockholders deficiency
and cash flows for the years ended December 31, 1997, 1998 and the period
February 5, 1988 through December 31, 1998 in conformity with the generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the company
will continue as a going concern. As more fully described in Note 1 to the
financial statements, the Companys recurring losses from development stage
activities raises substantial doubt about its ability to continue as a going
concern. The financial statements do not include any adjustments to reflect the
possible effects on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from the possible
inability of the Company to continue as a going concern.
/s/ George Brenner
George Brenner, C.P.A.
Beverly Hills, California
May 13, 1999
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
BALANCE SHEET
As of DECEMBER 31, 1998
ASSETS
CASH $ 1,039
ACCOUNTS RECEIVABLE 180
PAYROLL ADVANCE 400
-----------
TOTAL CURRENT ASSETS $ 1,619
FURNITURE/EQUIPMENT 34,716
ACCUMULATED DEPRECIATION (13,611)
-----------
TOTAL FIXED ASSETS $ 21,105
INVESTMENT IN SUBSIDIARIES --
TOTAL ASSETS $ 22,724
===========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY)
ACCOUNTS PAYABLE $ 49,770
NOTES PAYABLE - STOCKHOLDERS 80,000
NOTES PAYABLE - OTHER 35,000
ACCRUED SALARIES - OFFICERS 171,200
ACCRUED EXPENSES (ACCRUED INTEREST DUE STOCKHOLDERS $18,316) 19,572
-----------
TOTAL CURRENT LIABILITIES $ 355,542
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 (4,785,748)
-----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) $ (332,818)
-----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY) $ 22,724
===========
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
2
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FROM INCEPTION
FOR THE YEAR FOR THE YEAR FEBRUARY 5, 1988
ENDING ENDING THROUGH
DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1998
<S> <C> <C> <C>
SALES
REVENUE - FEES $ 225 -- $ 7,150
RENTAL INCOME -- 360 1,110
----------- ----------- -----------
TOTAL SALES 225 360 8,260
EXPENSES
WAGES $ 197,070 140,351 $ 503,097
STOCK SUBSCRIPTION LOSS -- -- 101,006
DEPRECIATION EXPENSE 5,570 5,923 13,761
INTEREST EXPENSE 16,798 15,286 38,444
INCENTIVE BONUS 40,803 -- 149,364
LEGAL & ACCOUNTING FEES 80,475 56,071 275,270
RENT 12,823 11,620 34,676
START UP COSTS -- -- 127,441
RESEARCH AND DEVELOPMENT 128,865 602 343,703
SUBSIDIARIES LOSSES 77,461 (141) 158,380
OTHER OPERATING EXPENSES 98,584 74,472 372,947
----------- ----------- -----------
TOTAL EXPENSES $ 658,449 304,184 $ 2,118,089
----------- ----------- -----------
NET OPERATING INCOME (LOSS) (658,224) (303,824) (2,109,829)
STOCK RESTITUTION EXPENSE (NOTE 1D) (18,900) 888,250 (2,676,409)
INTEREST INCOME 334 379 5,448
OTHER INCOME -- 228 238
MISCELLANEOUS EXPENSE (1,926) (2,478) (5,196)
----------- ----------- -----------
TOTAL OTHER $ (20,492) 886,379 $(2,675,919)
----------- ----------- -----------
NET INCOME (LOSS) $ (678,716) 582,555 $(4,785,748)
=========== =========== ===========
PRIMARY INCOME (LOSS) PER SHARE $ (0.0079) $ 0.0069 $ (0.1242)
=========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
3
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM INCEPTION (FEBRUARY 5, 1988)
THROUGH DECEMBER 31, 1998
<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 -- -- -- (4,785,748) (4,785,748)
---------- ----------- ----------- ----------- -----------
85,122,884 85,123 4,367,807 (4,785,748) (332,818)
========== =========== =========== =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT.
4
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FROM INCEPTION
FOR THE YEAR FOR THE YEAR FEBRUARY 5, 1988
ENDING ENDING THROUGH
DECEMBER 31, 1997 DECEMBER 31, 1998 DECEMBER 31, 1998
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS
NET INCOME (LOSS) $ (678,716) $ 582,555 $(4,785,748)
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 151,358 29,041 468,552
RESTITUTION 18,900 (888,250) 2,676,409
INTEREST EXPENSE 12,096 4,724 28,920
DISPUTE SETTLEMENTS -- -- 10,603
OTHER ADJUSTMENTS:
SUBSIDIARIES LOSSES 77,460 (141) 158,380
STOCK SUBSCRIPTION LOSS -- -- 101,006
FIRST DEVELOPMENT STAGE LOSS -- -- 142,733
DEPRECIATION AND AMORTIZATION 5,570 5,923 13,761
----------- ----------- -----------
TOTAL ADJUSTMENTS 265,384 (848,703) 3,661,658
ADVANCES -- (400) (400)
ACCOUNTS RECEIVABLE -- (180) (180)
ACCOUNTS PAYABLE 1,239 23,998 49,770
ACCRUED LIABILITIES 89,242 82,502 190,772
----------- ----------- -----------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES $ (322,851) $ (160,228) $ (884,128)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
PURCHASE FURNITURE/EQUIPMENT (2,396) -- (35,113)
DISPOSAL FURNITURE/EQUIPMENT -- 475 475
INVESTMENT IN BIOMAGNETRONICS (195) 141 (103,937)
INVESTMENT IN BIOLINK (2,588) -- (54,443)
----------- ----------- -----------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES $ (5,179) $ 616 $ (193,018)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
NOTE PAYABLE-STOCKHOLDER -- -- 80,000
NOTES PAYABLE - OTHER RECEIVED 75,000 95,141 220,141
PAYMENT OF NOTES PAYABLE - OTHER -- (43,680) (43,680)
ISSUANCE OF COMMON STOCK 299,250 8,901 821,952
OTHER -- (228) (228)
----------- ----------- -----------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES $ 374,250 $ 60,134 $ 1,078,185
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH $ 46,220 $ (99,478) $ 1,039
BEGINNING CASH BALANCE $ 54,297 $ 100,517 $ --
----------- ----------- -----------
CASH ENDING BALANCE $ 100,517 $ 1,039 $ 1,039
=========== =========== ===========
SUPPLEMENTAL INFORMATION
CASH PAYMENTS FOR INTEREST EXPENSE $ $ 2,711 $ 2,711
CASH PAYMENTS FOR INCOME TAXES -- --
NONMONETARY TRANSACTIONS
STOCK ISSUED FOR:
DEBT REDUCTION 81,320 60,141 141,461
MANAGEMENT -- 61,294
CONTRACT LABOR, INCENTIVE BONUSES, PROFESSIONAL
SERVICES, AND RESEARCH AND DEVELOPMENT 151,358 29,041 468,552
RESTITUTION 18,900 (888,250) 2,676,409
INTEREST EXPENSE 12,096 4,724 28,920
DISPUTE SETTLEMENTS -- -- 10,603
</TABLE>
SEE ACCOMPANYING NOTES AND ACCOUNTANT'S REPORT
5
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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 Accountant's Report
-6-
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT- STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1998
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 year 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 December 31, 1998, 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 has been no financial transactions in the
new Corporation.
See Accountant's Report
-7-
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1998
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.
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 year ended December 31, 1997, December 31, 1998, and
the period from February 5, 1988 (inception), through December 31, 1998,
was 85,957,910; 84,638,704; and 38,524,172 respectively. Of the 85,122,884
shares outstanding 59,089,340 are restricted and 26,033,544 shares are
unrestricted.
The net income for the year ended December 31, 1998 was generated from the
recovery of 3,553,000 shares of common stock. The recovery of the shares
was recognized as a reduction in shares for restitution and reduced the
stock restitution expense in the current year statement of operations by
$888,250. The Company is reporting this transaction as a change in an
accounting estimate under Accounting Principles Board Opinion number 20
"Accounting Changes" and the entire recovery has been recognized in the
current year resulting the Company to showing a net income of $582,555. The
Company would have a net loss for the current year of $305,695 or $.0036
per share without the effect of the recovery of the stock restitution
expense.
E. INCOME TAXES At December 31, 1998, 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.
See Accountant's Report
-8-
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1998
3. NOTES PAYABLE AT DECEMBER 31, 1998, CONSISTED OF THE FOLLOWING:
<TABLE>
<CAPTION>
Notes Payable - Other:
<S> <C>
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
=======
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
=======
</TABLE>
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.
See Accountant's Report
-9-
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1998
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 - 6/30/98 (4,643,015) (4,643,015)
-------------------------------------------------------------------------
Totals 85,123 $ 85,123 $ 4,367,807 $(4,785,748) $ (332,818)
====== =========== =========== =========== ===========
</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.
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 December 31,
1998) is and continues under the new management group set forth
in D above.
See accountant's Report
-10-
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1998
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. 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
<S> <C> <C> <C> <C>
Glazier Family Trust
- --------------------
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>
See Accountant's Report
-11-
<PAGE>
BIOGAN INTERNATIONAL, INC.
(A DEVELOPMENT-STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1998
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 December 31, 1998, 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.
8. 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.
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 year ending December 31, 1998, amounted to $11,620.
Rental expense for the period from inception February 5, 1988, through
December 31, 1998, amounted to $34,676. See Note 7 for related party rental
transactions.
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 Accountant's Report
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM DECEMBER 31,
1998 ANNUAL STATEMENT 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-END> DEC-31-1998
<CASH> 1,039
<SECURITIES> 0
<RECEIVABLES> 580
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,619
<PP&E> 34,716
<DEPRECIATION> (13,611)
<TOTAL-ASSETS> 22,724
<CURRENT-LIABILITIES> 355,542
<BONDS> 0
0
0
<COMMON> 4,452,930
<OTHER-SE> (4,785,748)
<TOTAL-LIABILITY-AND-EQUITY> 22,724
<SALES> 0
<TOTAL-REVENUES> 739
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 288,898
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,286
<INCOME-PRETAX> (303,824)
<INCOME-TAX> 0
<INCOME-CONTINUING> (303,824)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 888,250
<NET-INCOME> 582,555
<EPS-BASIC> .007
<EPS-DILUTED> .007
</TABLE>
