United States Securities and Exchange Commission
Washington, D.C. 20549
Form 1O-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, 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.
(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)
<PAGE>
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 [X], No
[ ], 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 1O-KSB
or any amendment to this Form 1O-KSB. [X]
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 November 16, 1999 the aggregate
market value is $12,919,100.
(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 Issuer's classes of common
equity, as of the latest practicable date March 29, 2000: 85,386,710 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 field 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].
<PAGE>
Item 1. Description of Business
(a) Business Development
Biogan International, Inc. fka Biogan Medical International, Inc., a
Delaware corporation (the "Company") was incorporated on February 5, 1988.
During the last three years the Company has not been involved in any bankruptcy,
receivership or similar proceedings.
On January 27, 2000 The Company entered into a cooperative joint venture
contract ("CJV") with Hechi Industrial Co, Ltd whereby ("Hechi") Hechi will
transfer all its assets in the CJV and the company will contribute $2 million in
cash and $ 500,000 in intellectual property and expertise. The Registered
capital (in China) of the CJV is $10M, the Company having a 25% interest of the
registered capital. The company will be entitled to 95% of the profits of the
CJV. The company will issue 31, 300 preferred shares in consideration of the
transfer by Hechi of all its assets in the CJV. Each preferred share can be
converted to 12,000 common shares, the Company has agreed to reverse split its
stock in a ratio of 12 old shares for 1 new share. It will also change its name
to HMZ Metals Inc.
The CJV is involved in refining and mining of non-ferrous metals in Guangxi
province, China. The CJV operates a copper smelter to produce cooper cathodes.
The CJV has a 100% interest in a lead-zinc mine and is the operator. Is also
holds a 9% interest in a large lead-zinc-tin-antimony mine. The trading company
buys sulphide ore and concentrates which are sold to concentrators and smelters
within China. The CSV also provides transportation and docking facilities for
various ore and concentrates, including coal.
The Company has issued a $2M secured convertible debenture to CALP II, an
investment fund, in order to fulfill its commitment to the CJV.
The Board of Directors of Biogan International has agreed to a two-fold
development program through its cooperative joint venture.
On the First part, the company would like to modernize the production equipment
of the CJV and increase their production in order to achieve this first fold.
The company will raise funds on the financial markets through debt instruments
or stock issuance. The company will also look for highly skilled individuals
with mining refining background along with individual with financial expertise.
On the second part, the company intends to take advantage of the numerous
opportunities in the non-ferrous metals industry in China. Acquisition of new
smelters and ore bodies is made possible because of the lack of capital of the
actual owners. Through its fund raising capabilities in the western financial
markets, the Company is most likely to acquired majority interest in non-ferrous
production facilities in China at a very favorable cost.
<PAGE>
The execution and success of this development program is largely contingent on
the ability of the Company to raise funds on the financial markets.
Forward-Looking Statements
This Form 10-SB includes "forward-looking statements" within the
meaning of the "safe-harbor" provisions of the Private Securities Litigation
Reform Act of 1995. Such statements are based on management's current
expectations and are subject to a number of factor and uncertainties that could
cause actual results to differ materially from those described in the
forward-looking statements. All statements, other than statements of historical
facts included in this Form, including without limitation, statements under
"Plan of Operation" and "Description of Business", regarding the Company's
financial position, business strategy, and plans objectives of management of the
Company for future operations, are forward-looking statements
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to have been correct. Important factors that could cause
actual results to differ materially from the Company's expectations include, but
are not limited to, market condition and the ability to successfully complete
financing.
(b) Reports to Security Holders
The public may read and copy any materials the Company files with the Securities
and Exchange Commission ("SEC") at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Public may obtain on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330.
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 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
<PAGE>
None.
Item 5. Market for Common Equity and Related Stockholders Matters.
(a) Market Information
The Company's common stock is traded on the National Association of Securities
Dealers Electronic Bulletin Board under the symbol BIGM.
Following are the high and low sales prices for each quarter:
Quarter Ended High Low
- ------------------ -------- --------
March 31, 1998 $ 0.1400 $ 0.0880
June 30, 1998 0.0985 0.0615
September 30, 1998 0.0625 0.0365
December 31, 1998 0.0465 0.0205
March 31, 1999 0.0450 0.0200
June 30, 1999 0.0700 0.0210
September 30, 1999 0.3300 0.1300
December 31, 1999 0.8500 0.2100
(b) As of March 27, 2000 there were approximately 762 holders of record of
the Company's common stock.
(c) Dividends
The Company has never declared any cash dividends.
(d) Recent Sales of Unregistered Securities
On February 28, 1998 the Company issued to professionals for services
rendered 120,000 shares of its common stock. The services had a fair market
value of $16,464.
On June 8, 1998 the Company issued to professionals for services rendered
105,320 shares of its common stock. The services had a fair market value of
$20,116.
On June 10, 1999 the Company issued 235,080 common shares to Wadsworth and
Smith CPAS for non-audit related accounting services. On August 21, 1999 the
Company issued 78,746 common shares to Robert Montgomery, Company
Secretary/Treasurer for legal services. On
<PAGE>
August 21, 1999 the Company issued 100,000 common shares to Wadsworth and Smith
CPAs for non-audit related accounting services. The total fair market value of
the above services, relating to the June 10, 1999 and August 21, 1999 stock for
services issuances was approximately $16,502.
All of the forgoing issuances were without an underwriter. Each of the
purchasers was in a position to insist upon the issuer providing him with
information more extensive than that contained in a registration statements.
Each of the purchasers had access to all material information regarding the
Company prior to the offer or sale. These offers and sales of common stock are
believed to have been exempt from the registration requirements of Section 5 of
the Securities Act of 1933, as amended, pursuant to section 4(2) thereof; and by
available state exemptions, from similar applicable states securities laws
exempting from registration the offer and sale of such common stock.
Item 6. Plan of Operation.
The Company had no significant revenues in the two year period ended
December 31, 1999. "The company ceased to be a development stage Company as of
September 29, 1999 when it distributed its shares of IntorCorp, Inc. stock and
intellectual property. The Company's recurring losses from prior years'
development stage activities raise substantial doubt about its ability to
continue as a going concern."
The net income for the year ended December 31, 1998 resulted from the
recovery of 3,553,000 shares of common stock. No cash inflows were involved. The
recovery of the shares was recognized as a reduction in shares for restitution,
which was reported in prior financial statements under stock restitution
expense, and was reported as stock recovery income in the December 31, 1998
statement of operations. This was a wholly non-cash accounting transaction. The
Company would have had a net loss of $305,695 for 1998 without the effect of
this transaction. For the year ended December 31, 1999 the Company had a net
loss of $130,563.
For the period April 1, 2000 to March 31, 2001 the Company can satisfy its
cash requirements as follows: approximately $1.8 million in cash was raised
through a Convertible Debentures Placement in late March, 2000; the business
combination with the Chinese mining entity Hechi; Industrial Co. LTD. Is
expected to generate positive cash, although there can be no assurance of this;
and the Company's management will seek to raise additional debt or equity
offering, although there can be no assurance management will be successful in
this endeavor.
During the period April 1, 2000 to March 31, 2001 there is expected to be a
significant increase in the number of employees, from approximately ten
presently to approximately one hundred.
Item 7. Financial Statements.
Included herewith are the audited Financial Statements of Registrant for
the year ended December 31, 1999.
Item 8. Changes in and Disagreements With Accountants On Accounting and
Financial Disclosure.
Note.
<PAGE>
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
With Section 16(A) of the Exchange Act.
Following are the Company's Directors and Executive Officers:
Name Age Titles
- ---- --- ------
Gilles LaVerdiere 47 Chairman of the Board
of Directors and President
Ronald J. Tolman 48 Director and
Vice President
Robert C. Montgomery 48 Secretary
Business experience.
Gilles LaVerdiere. Mr. LaVerdiere, a Canadian citizen, received a Bachelor
of Science Degree in Geology in 1976 from the University of Montreal and a
License in Ecology in 1996 from the University du Quebec in Abitibi-
Temiscamingup. He was a director of Ariel Mining Group from 1985 to 1999;
President and CEO of Giminex Inc.
From 1985 to 1999; President and CEO of Giminex Inc. from 1985 to 1999;
Chairman and CEO of Tiaro Bay Resources Inc. from 1996-1999; and Chairman of
Mirandar Exploration Inc. from 1998. Mr. LaVerdiere has been a geologist since
1978 and has over twenty years experience in gold and base metals exploration
and mining in North America, South America and Asia. He has been managing
exploration programs for public junior mining companies and has also been the
administrative manager of the projects.
Ronald J. Tolman. Mr. Tolman has served as Vice President of the Company
since December, 1994. Mr.Tolman was National Training and 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.
Robert C. Montgomery. Mr. Montgomery is 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 Law and
Ethics at Boise State University, and has practiced law in Idaho since 1974.
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
<PAGE>
of changes in ownership (Forms 3,4 and 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 two
years ended December 31, 1999, none of the Section 16(a) filing requirements
applicable of its officers, directors and greater and 10% beneficial owners was
complied with.
Item 10. Executive Compensation.
During the fiscal year ended December 31, 1998 the Company paid cash
compensation as follows: Ronald J. Tolman, Executive Vice President, Treasurer,
Director $62,100; Rulon L. Tolman, Vice President, Treasurer, Director $34,800;
Jacque L. Tolman, Executive Secretary 10,800. Rulon L. Tolman is a cousin of
Ronald J. Tolman. Jacque L. Tolman is wife of Ronald J. Tolman.
During the fiscal year ended December 31, 1999 the Company paid no
executive compensation.
During both 1998 and 1999 members of the Company's management were
reimbursed for out pocket expenses relating to Company business.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
Security Ownership of Management:
Common Stock Percentage of
Name of Owner Beneficially Owned Ownership
- --------------------------------------------------------------------------------
Gilles LaVerdiere 500,000 0.58%
813 Beriault, Ste 203
Longveuil, Quebec J4G 1X7
Ronald J. Tolman 7,558,400 8.85%
2326 Bruins Avenue
Boise, ID 83704
Robert Montgomery 2,108,000 2.47%
2160 Twin Rapid Way
Boise, ID 83709 ------------ -------------
Officers and
Directors as
a Group (3) 10,166,400 11.90%
Beneficial Owners, known to the Company, owning more than 5% of voting
securities:
<PAGE>
Common Stock Percentage of
Name of Owner Beneficially Owned Ownership
- --------------------------------------------------------------------------------
L. William Glazier 10,500,000 12.29%
121 Tyson Drive
Cottage Gonose, Or 97424
Ronald J. Tolman 7,558,400 8.85%
2326 Bruins Avenue
Boise, ID 83704
Rulon L. Tolman 9,808,333 11.49%
7272 Glenridge View
Boise, ID 83709
Item 12. Certain Relationships and Related Transactions:
None.
Item 13. Exhibits and Reports On Form 8-K
The Company filed an 8K on November 29, 1999 which outlined the
proposed plan of reorganization. 'The Company filed an 8K on October
26 1999 which describes stock distribution of R-Tec Holding, Inc.
stock'.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
(Registrant) BIOGAN INTERNATIONAL, INC.
---------------------------
By (Signature and Title) /s/ GILLES LAVERDIERE, President and CEO
and Chairman of the Board
----------------------------------------
Date March 29, 2000
--------------
<PAGE>
BIOGAN INTERNATIONAL, INC.
FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
BIOGAN INTERNATIONAL, INC.
DECEMBER 31, 1999
CONTENTS
Accountant's Report 1
Balance Sheet 2
Statement of Operations 3
Statement of Stockholders' Equity (Deficiency) 4
Statement of Cash Flows 5
Notes to Financial Statements 6-9
<PAGE>
George Brenner
Certified Public Accountant
9300 Wilshire Boulevard, Suite 480
Beverly Hills, California 90212
310-276-8845 FAX 310-276-5933
REPORT OF INDEPENDENT AUDITOR
Board of Directors
Biogan International, Inc.
Boise, Idaho
I have audited the accompanying balance sheet of Biogan International, Inc. as
of December 31, 1999 and related statements of operations, stockholders'
deficiency and cash flows for the years ended December 31, 1998 and December 31,
1999. These financial statements are the responsibility of the Company's
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 fairly, in all
material respects, the financial condition of Biogan International, Inc. as of
December 31, 1999 and the results of its operations, stockholders' deficiency
and cash flows for the years ended December 31, 1999 and 1998 in conformity with
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 Company's recurring losses from prior years'
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 form the possible inability of the Company to continue as a going
concern. Management's plans in this regard are discussed in Note 4 "Contributed
Capital" and in Note 10 "Subsequent Event" which noted is unaudited.
/s/ George Brenner
Brenner, C.P.A.
Beverly Hills, California
March 10, 2000
<PAGE>
<TABLE>
<CAPTION>
BIOGAN INTERNATIONAL, INC.
BALANCE SHEET
As of DECEMBER 31, 1999
<S> <C>
ASSETS
CASH $ 67,193
-----------
TOTAL CURRENT ASSETS 67,193
FURNITURE/EQUIPMENT 34,716
ACCUMULATED DEPRECIATION (19,501)
-----------
TOTAL FIXED ASSETS 15,215
TOTAL ASSETS $ 82,408
===========
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY)
ACCOUNTS PAYABLE $ 67,434
NOTES PAYABLE - STOCKHOLDERS 120,000
NOTES PAYABLE - OTHER 20,000
ACCRUED SALARIES - OFFICERS 171,200
ACCRUED EXPENSES (ACCRUED INTEREST DUE STOCKHOLDERS $30,461) 31,722
-----------
TOTAL CURRENT LIABILITIES 410,356
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, 85,386,710 ISSUED 85,387
ADDITIONAL PAID IN CAPITAL 4,326,475
CONTRUBUTED CAPITAL (NET OF DEPOSIT FOR $200,000 SEE NOTE 4) 176,500
RETAINED DEFICIT (4,916,310)
-----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (327,948)
-----------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIENCY) $ 82,408
===========
</TABLE>
SEE ACCOMPANYING NOTES
2
<PAGE>
BIOGAN INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDING
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1999
<S> <C> <C>
SALES
REVENUE $ 360 $ 360
--------- ---------
TOTAL SALES 360 360
EXPENSES
WAGES 140,351 792
DEPRECIATION EXPENSE 5,923 5,890
INTEREST EXPENSE 15,286 13,400
LEGAL & ACCOUNTING FEES 56,071 90,999
RENT 11,620 2,611
START UP COSTS -- 53,500
RESEARCH AND DEVELOPMENT 602 (22)
SUBSIDIARIES LOSSES (141) --
OTHER OPERATING EXPENSES 74,472 (36,519)
--------- ---------
TOTAL EXPENSES 304,184 130,651
--------- ---------
NET OPERATING INCOME (LOSS) (303,824) (130,291)
STOCK RECOVERY INCOME (NOTE 1A) 888,250 --
INTEREST INCOME 379 15
OTHER INCOME 228 9
MISCELLANEOUS EXPENSE (2,478) (296)
--------- ---------
TOTAL OTHER 886,379 (272)
--------- ---------
NET INCOME (LOSS) $ 582,555 $(130,563)
========= =========
PRIMARY INCOME (LOSS) PER SHARE $ 0.01 $ (0.00)
========= =========
</TABLE>
SEE ACCOMPANYING NOTES
3
<PAGE>
BIOGAN INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
ADDITIONAL STOCKHOLDERS'
COMMON COMMON PAID-IN CONTRIBUTED RETAINED EQUITY
SHARES STOCK CAPITAL CAPITAL DEFICIENCY (DEFICIENCY)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1997 87,854,455 $87,855 $5,150,517 $ -- $(5,368,302) $(129,930)
NET INCOME (NOTE 1A) 582,555 582,555
SHARES ISSUED FOR SERVICES 488,365 488 28,553 29,041
SHARES ISSUED FOR DEBT REDUCTION 240,564 241 64,625 64,866
SHARES ISSUED FOR CASH 92,500 93 8,808 8,901
SHARES CANCELLED (NOTE 1A) (3,553,000) (3,553) (884,697) (888,250)
-----------------------------------------------------------------------------------
DECEMBER 31, 1998 85,122,884 85,124 4,367,806 -- (4,785,747) (332,817)
NET LOSS (130,563) (130,563)
SHARES ISSUED FOR SERVICES 413,826 413 16089 16,502
SHARES CANCELLED (150,000) (150) (57,420) (57,570)
CONTRIBUTED CAPITAL (NOTE 4) 176,500 176,500
-----------------------------------------------------------------------------------
DECEMBER 31, 1999 85,386,710 $85,387 $4,326,475 $176,500 $(4,916,310) $(327,948)
========== ======= ========== ======== ============ =========
</TABLE>
SEE ACCOMPANYING NOTES
4
<PAGE>
BIOGAN INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR FOR THE YEAR
ENDING ENDING
DECEMBER 31, 1998 DECEMBER 31, 1999
<S> <C> <C>
CASH FLOWS FROM OPERATIONS
NET INCOME (LOSS) $ 582,555 $(130,563)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED BY OPERATING ACTIVITIES:
ADD BACK STOCK ISSUED FOR:
CONTRACT LABOR, INCENTIVE BONUSES, PROFESSIONAL
SERVICES, AND RESEARCH AND DEVELOPMENT 29,041 16,502
RESTITUTION (888,250) (57,570)
INTEREST EXPENSE 4,724 --
OTHER ADJUSTMENTS:
SUBSIDIARIES LOSSES (141) --
DEPRECIATION AND AMORTIZATION 5,923 5,890
--------- ---------
TOTAL ADJUSTMENTS (848,703) (35,178)
ADVANCES (400) 400
ACCOUNTS RECEIVABLE (180) 180
ACCOUNTS PAYABLE 23,998 17,665
ACCRUED LIABILITIES 82,502 12,150
--------- ---------
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES (160,228) (135,346)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
DISPOSAL FURNITURE/EQUIPMENT 475 --
INVESTMENT IN BIOMAGNETRONICS 141 --
--------- ---------
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES 616 --
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
NOTE PAYABLE-STOCKHOLDER RECEIVED -- 25,000
NOTES PAYABLE - OTHER RECEIVED 95,141 --
PAYMENT OF NOTES PAYABLE - OTHER (43,680) --
ISSUANCE OF COMMON STOCK 8,901 --
CONTRIBUTED CAPITAL -- 176,500
OTHER (228) --
--------- ---------
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES 60,134 201,500
--------- ---------
NET INCREASE(DECREASE) IN CASH (99,478) 66,154
BEGINNING CASH BALANCE 100,517 1,039
--------- ---------
CASH ENDING BALANCE $ 1,039 $ 67,193
========= =========
SUPPLEMENTAL INFORMATION
CASH PAYMENTS FOR INTEREST EXPENSE $ 2,711 $ --
CASH PAYMENTS FOR INCOME TAXES -- --
NONMONETARY TRANSACTIONS
STOCK ISSUED FOR:
DEBT REDUCTION 60,141 --
MANAGEMENT
CONTRACT LABOR, INCENTIVE BONUSES, PROFESSIONAL
SERVICES, AND RESEARCH AND DEVELOPMENT 29,041 16,502
RESTITUTION (888,250) --
INTEREST EXPENSE 4,724 --
-- --
</TABLE>
SEE ACCOMPANYING NOTES
5
<PAGE>
BIOGAN INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. NET INCOME (LOSS) PER SHARE
Basic income (loss) per share is based on the weighted-average number
of outstanding common shares during the applicable year. The
weighted-average number of shares of common stock outstanding for the
years ended December 31, 1998 and 1999 were 85,194,622, and 85,243,038,
respectively. Of the 85,386,710 shares outstanding 48,852,065 are
restricted and 36,534,645 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, which
was reported in prior financial statements under stock restitution
expense, and is being reported as stock recovery income of $888,250 in
the December 31, 1998 statement of operations. 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 was recognized in 1998 resulting in the Company showing a net
income of $582,555. The Company would have a net loss for 1998 of
$305,695 or $.00 per share without the effect of the stock recovery
income.
B. INCOME TAXES
At December 31, 1999, Biogan had net operating losses (NOL)
carryforwards and research & development tax credit as follows:
<TABLE>
<CAPTION>
YEAR NOL YEAR EXPIRES TAX CREDITS YEAR EXPIRES
<S> <C> <C> <C> <C> <C>
1995 2,887,130 2010
1996 1,122,539 2011 12,197 2011
1997 736,051 2017 9,665 2012
1999 141,035 2019 -
---------- -------
$4,886,755 $21,862
</TABLE>
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. If
the transaction described in note 10 takes place, there will be a
significant change in ownership, and the net operating losses may be
significantly reduced.
.
C. 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.
D. CONTINUE IN EXISTENCE
The Company's recurring losses from prior years' development stage
activities raise 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 amounts and classifications of liabilities
that may result from the possible inability of the company to continue
as a going concern. Management plans to continue in existence are set
for in notes 4 and 10. There can be no assurance that these plans will
be successful.
6
<PAGE>
BIOGAN INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1999
2. PROPERTY DISTRIBUTION
Biogan International, Inc. (Biogan), ceased to be a development-stage
company as of September 29, 1999 when it distributed its shares of
InterCorp, Inc. stock and intellectual property as detailed below:
Dividend distribution: On August 19th, 1999, Biogan organized its
wholly owned subsidiary R-Tec Holding, Inc., an Idaho corporation, into
which Biogan transferred its 50% ownership interest in IntorCorp, Inc.
in exchange for 4,266,797 shares of common stock. On September 27,
1999, Biogan paid a stock distribution of all of its R-Tec Holding,
Inc. common stock to its September 15, 1999, shareholders of record, at
the rate of one share of R-Tec Holding, Inc. for each 20 shares of
Biogan, rounded up. The stock distribution was paid to American
Securities Transfer & Trust, Inc., the Transfer Agent, in escrow until
such time as an Information Statement is sent to each of the
shareholders receiving such R-Tec Holding, Inc. stock, and the Form
10SB to be filed with the SEC by R-Tec Holding, Inc. is effective.
Management of R-Tec Holding, Inc. is presently preparing an Information
Statement to be mailed to the shareholders receiving R-Tec Holding,
Inc. stock. The audit is in process to file Form 10SB with the
Securities and Exchange Commission.
3. NOTES PAYABLE AT DECEMBER 31, 1999, CONSISTED OF THE FOLLOWING:
<TABLE>
<CAPTION>
<S> <C>
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
--------
Total Notes Payable - Other $ 20,000
========
Notes Payable - Stockholders:
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 Ronald J. Tolman with interest at 10% per annum from
September 7, 1999. Note is unsecured and is payable on demand. 5,000
Notes payable to Ronald J. Tolman with interest at 8% per annum
from July 26, 1999. Note is unsecured and is due April 28, 2000. 10,000
Notes payable to Ronald J. Tolman with interest at 12% per
annum from September 29, 1998. Note is unsecured and is payable
on demand. 15,000
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
Notes payable to Rulon L. Tolman with interest at 10% per annum
from April 29, 1999. Note is unsecured and is payable on demand.
Payments are applied first to any unpaid interest. 10,000
--------
Total Notes Payable - Stockholder $120,000
========
</TABLE>
7
<PAGE>
BIOGAN INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1999
4. CONTRIBUTED CAPITAL
In anticipation of the transaction outlined in note 10, capital was
contributed and consists of the following transactions:
<TABLE>
<CAPTION>
<S> <C>
Cash deposited into Biogan for operations $123,000
Direct payments made for auditing, legal, and consulting
expenses related to the joint venture detailed in note 10 53,500
--------
Total Contributed Capital $176,500
Nonrefundable deposit as detailed in note 10 200,000
--------
$376,500
========
</TABLE>
5. 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 to
the Glazier Family Trust (Bill Glazier) 10,500,000 shares; Ronald J.
Tolman 7,558,400 shares; Rulon L. Tolman 9,808,333. Bill Glazer and
Rulon Tolman resigned as officers of the corporation on November 29,
1999.
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, 1999, of $96,600, $63,800 and $10,800
respectively.
Gilles LaVerdiere, President and CEO of Biogan, owns 555,000 of common
stock and has contributed capital of $376,500 (see Note 4) and Robert
Montgomery, corporate secretary, owns 2,108,000 shares of common stock.
6. 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.
7. OTHER OPERATING EXPENSES
150,000 shares of common stock were canceled on July 31, 1999 that had
been issued for contract labor, which resulted in a credit to other
operating expenses of $57,570.
8. CONTINGENCY
There is a dispute with a third party against the Corporation relating
to matters of business activities that is not expected to have a
material adverse effect on the Corporation's financial position,
results of operation, or cash flows.
8
<PAGE>
BIOGAN INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS - Continued
DECEMBER 31, 1999
9. 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 under this stock incentive plan.
10. SUBSEQUENT EVENT (UNAUDITED)
The Company initially entered into an Agreement and Plan of
Reorganization with Tiaro Bay Resources and Hechi Industrial Co., LTD.,
(Hechi) a Chinese mining company on September 9, 1999. The Share
Exchange agreement was revised on November 30, 1999, to provide for a
direct venture between the Company and Hechi. Due to various
requirements of the Chinese government, the nature of the transaction
has changed from a Share Exchange Agreement to a cooperative Joint
Venture Agreement between the Company and Hechi . The company to be
formed by the joint venture will be called Guanghe Metals Co., LTD.
The joint venture contract requires the Company to raise $2,000,000
with the sum of $200,000 having already been paid to Hechi as a
nonrefundable deposit. The Company is currently in the final stages of
arranging a convertible debenture to pay the remaining $1,800.000.
Additional requirements call for the Company to effect a 12 to 1
reverse split of its common stock, effect a name change from Biogan
International, Inc., to HMZ Metals, Inc., decrease the number of shares
held by affiliates of the Company, and issue preferred shares to Hechi
shareholders upon the transfer of the Hechi assets into the joint
venture company. The preferred shares are voting shares with
preferential rights on liquidation, dissolution, or winding up of the
affairs of the corporation but are not entitled to dividends.
9
