<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[xx] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
Commission File Number: 0-19814
ABS Group Inc.
(Exact name of registrant as specified in its charter)
Delaware 87-0462198
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
818 East South Temple Street, Salt Lake City, Utah 18401
(Address of principal executive offices) (Zip Code)
(801) 521-8000
(Registrant's telephone number, including area code)
2936 Sierra Point Place, Salt Lake City, Utah 84198
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [x] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
The number of shares outstanding of each of the registrant's classes of common
stock, as of May 5, 1997 is 3,890,563 shares, all of one class of $.0001 par
value common stock.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
PART I
Item 1. Financial Statements 3-9
Item 2. Management's Discussion and Analysis 10-12
PART II
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a
Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
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ABS GROUP INC.
(A Development Stage Company)
Consolidated Balance Sheets
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1997 1996
---------- ----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 150,274 $ 65,977
Accounts receivable 109,016 30,293
Inventories 106,237 87,992
Prepaid expenses 31,799 2,060
Note receivable, related party (Note ) 19,500 --
---------- ----------
Total Current Assets 416,826 186,322
---------- ----------
FIXED ASSETS 153,024 107,593
---------- ----------
OTHER ASSETS
Investment in joint venture (Note 2) 894,343 698,953
Patents/intellectual property 716,776 724,334
Deposits 14,367 12,997
Goodwill 200,427 205,566
---------- ----------
Total Other Assets 1,825,913 1,641,850
---------- ----------
TOTAL ASSETS $2,395,763 $1,935,765
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ABS GROUP INC.
(A Development Stage Company)
Consolidated Balance Sheets (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable - trade $ 140,522 $ 335,395
Notes payable 24,395 100,564
------------ ------------
Total Current Liabilities 164,917 435,959
------------ ------------
LONG-TERM LIABILITIES
Notes payable 200,000 200,000
------------ ------------
Total Liabilities 364,917 635,959
------------ ------------
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARIES 126,449 132,141
------------ ------------
COMMITMENTS AND CONTINGENCIES -- --
------------ ------------
STOCKHOLDERS' EQUITY
Common stock, 10,000,000 shares authorized
at $0.0001 par value; 3,760,159 and 3,293,935
shares issued and outstanding, respectively 376 329
Capital in excess of par value 11,863,941 10,891,924
Foreign currency translation (83) 9
Deficit accumulated during the development stage (9,959,837) (9,724,597)
------------ ------------
Total Stockholders' Equity 1,904,397 1,167,665
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 2,395,763 $ 1,935,765
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ABS GROUP INC.
(A Development Stage Company)
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
From Inception
on October 3,
For the Three 1988 Through
Months Ended March 31, March 31,
1997 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
SALES $ 104,937 $ -- $ 122,749
COST OF SALES 61,753 -- 66,962
----------- ----------- -----------
GROSS MARGIN 43,184 -- 55,787
----------- ----------- -----------
EXPENSES
Depreciation and amortization 18,202 -- 25,047
Rent 23,835 -- 35,835
Research and development -- -- 580
General and administrative 187,446 -- 1,455,138
----------- ----------- -----------
Total Expenses 229,483 -- 1,516,600
----------- ----------- -----------
LOSS FROM OPERATIONS (186,299) -- (1,460,813)
----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income -- -- 108
Interest expense (23) -- (734)
Loss on discontinued operations (54,610) -- (80,657)
----------- ----------- -----------
Total Other Income (Expense) (54,633) -- (81,283)
----------- ----------- -----------
LOSS BEFORE DISCONTINUED
OPERATIONS AND MINORITY
INTEREST (240,932) -- (1,542,096)
LOSS ON DISCONTINUED
OPERATIONS -- (32,472) (8,425,042)
MINORITY INTEREST IN LOSS 5,692 -- 7,301
----------- ----------- -----------
NET LOSS $ (235,240) $ (32,472) $(9,959,837)
=========== =========== ===========
NET LOSS PER SHARE $ (0.07) $ (0.03)
=========== ===========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 3,527,047 1,401,599
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ABS GROUP INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
From Inception
on October 3,
For the Three 1988 Through
Months Ended March 31, March 31,
1997 1996 1997
--------- -------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net loss from operations $(235,241) $(32,472) $(9,959,838)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 18,189 -- 28,077
Stock issued for services rendered -- -- 955,100
Loss on investment in joint venture 54,610 -- 80,657
Stock issued in settlement of debt -- -- 1,413,320
Loss on disposition of assets -- -- 3,206,791
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (78,723) -- (95,057)
(Increase) decrease in inventory (18,245) -- (58,920)
(Increase) decrease in prepaid assets (29,739) -- (29,739)
(Increase) decrease in deposits (1,370) -- (1,370)
(Increase) decrease in related party
receivables (19,500) -- (19,500)
Increase (decrease) in accounts payable (194,873) (13,103) 59,262
--------- -------- -----------
Net Cash Provided (Used) by
Operating Activities $(504,892) $(45,574) $(4,421,217)
--------- -------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
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ABS GROUP INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
From Inception
on October 3,
For the Three 1988 Through
Months Ended March 31, March 31,
1997 1996 1997
--------- -------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING
ACTIVITIES
Investments in joint venture $(250,000) $ -- $ (550,000)
Cash acquired through investment in
subsidiary -- -- 2,022
Purchase of subsidiaries -- -- (108,731)
Purchase of product marketing rights -- -- (1,250)
Purchase of fixed assets (50,923) -- (61,707)
Purchase of promotional video -- -- (50,000)
--------- -------- -----------
Net Cash Provided (Used) by
Investing Activities (300,923) -- (769,666)
--------- -------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Capital contributed by shareholder -- -- 25,000
Proceeds from loans -- -- 398,140
Repayment of loans (76,169) -- (76,169)
Proceeds from sale of common stock 966,281 -- 4,994,186
--------- -------- -----------
Net Cash Provided (Used) by
Financing Activities 890,112 -- 5,341,157
--------- -------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 84,297 (45,574) 150,274
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 65,977 45,598 --
--------- -------- -----------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 150,274 $ 24 $ 150,274
========= ======== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
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ABS GROUP INC.
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
From Inception
For the Three on October 3,
Months Ended March 31, 1988 Through
---------------------- March 31,
1997 1996 1997
------ ------ ----------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION
Interest paid $ -- $ -- $ 711
Income taxes paid $ -- $ -- $ --
NON-CASH FINANCING ACTIVITIES
Stock issued for note $ -- $ -- $2,498,750
Purchase of Bioreactors through
assignment of note $ -- $ -- $2,150,000
Acquisition of product marketing rights
through issuance of notes and stock $ -- $ -- $2,200,000
Stock issued in settlement of debt $ -- $ -- $1,560,818
Stock and options issued for services
rendered $ -- $ -- $ 953,100
Stock issued for acquisition of
subsidiary $ -- $ -- $ 500,138
Stock issued for investment in joint venture $ -- $ -- $ 425,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
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ABS GROUP INC.
(A Development Stage Company)
Notes to the Consolidated Financial Statements
March 31, 1997 and December 31, 1996
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Certain information and footnote disclosures normally included in the
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these financial statements be read in conjunction with the
Registrant's December 31, 1996 Annual Report on Form 10-KSB. The
results of operations for the periods ended March 31, 1997 and 1996 are
not necessarily indicative of operating results for the full years.
The consolidated financial statements and other information furnished
herein reflect all adjustments which are, in the opinion of management
of the Registrant, necessary for a fair presentation of the results of
the interim periods covered by this report.
NOTE 2 - INVESTMENT IN JOINT VENTURE
During the 3 months ended March 31, 1997, the Company advanced an
additional $250,000 to DBD Company, Inc. (DBD). The Company is
committed to advancing an additional $350,000 to DBD during 1997. The
financial statements reflect the Company's share of DBD's loss which is
$54,610.
NOTE 3 - RELATED PARTY TRANSACTIONS
During the three months ended March 31, 1997, the Company advanced
$19,500 to a Company controlled by an officer of the Company. The
amount bears interest at 10% per annum and is due May 31, 1997.
NOTE 4 - NOTES PAYABLE
During the three months ended March 31, 1997, the Company made
principle payments of $76,168.
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company's intentions as heretofore expressed in its Form 10-KSB for
year ended December 31, 1996 is to become a diversified public company through
the acquisition or financing of opportunities with emerging bio-medical
technology firms where (a) research and development stages have been basically
completed, (b) intellectual property is protected by patents, licenses,
registration and/or proprietary formulas or processes, (c) products and/or
services are deemed unique and/or desirable and (d) Company's management and
marketing skills and financial resources are envisioned to be a valuable asset
to the overall operation(s) (present and/or proposed) of the acquired firm(s) -
all with the ultimate objective of benefitting the Company's stockholders.
Reference is herewith made to Item 1 to aforesaid Form 10-KSB as well as to the
consolidated financial statements and notes thereto as contained therein which
summarizes relevant information with respect to the Company's initial joint
venture with Biopharmaceutics, Inc. (entered into in September 1996) and its
subsequent acquisitions in November and December 1996 (of the subsidiaries
hereinafter referred to) as well as the various monetary and other obligations
assumed as a result thereof.
The consolidated financial statements include those of ABS Group Inc.
and its subsidiaries, Future Medical Technologies, Inc. ("FMT"), Marine Research
USA, Inc. ("MRUSA") and Marine Research Pty. Ltd. ("MRPL").
This discussion summarizes the significant factors affecting the
consolidated operating results, financial condition and liquidity/cash flows of
the Company as at quarter ended March 31, 1997 and year ended December 31, 1996
with respect to the Company's consolidated balance sheets and the comparative
three month periods ended March 31, 1997 and March 31, 1996 (as well as the
period from inception in October 1988 through March 31, 1997) based upon
information appearing in the Company's consolidated statements of operations and
related financial statements and should be read in conjunction with such
unaudited consolidated financial statements.
The discussion appearing hereinafter with respect to the consolidated
statements of operations does not contain comparable information and no analysis
of same is being given herein since it is not properly susceptible to narrative
comparison by virtue of the fact that as heretofore indicated in Item 1 of the
Company's aforesaid Form 10-KSB for its year ended December 31, 1996, the
Company was basically inactive from the time that it discontinued operations in
1992 until the time that it was reactivated during late 1996. For reasons
comparable to those heretofore stated directly above, no comparable information
is provided herein with respect to the Company's consolidated balance sheet.
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997
AND MARCH 31, 1996:
Quarter Ended March 31, 1997
Sales for the three month period ended March 31, 1997 were $104,937
while cost of sales amounted to $61,753 resulting in a gross margin for the
three month period ended March 31, 1997 of $43,184. Expenses amount to $229,483
of which general and administrative expenses accounted
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for approximately 82%. Primarily as a result of the above, the net loss for the
three month period ended March 31, 1997 was $(235,240) thereby increasing the
Company's deficit accumulated during development stage to $(9,959,837) as at
March 31, 1997.
Quarter Ended March 31, 1996
As heretofore indicated the Company was inactive throughout the three
month period ended March 31, 1996.
CONSOLIDATED BALANCE SHEETS AS AT MARCH 31, 1997:
Total assets of the Company at quarter ended March 31, 1997 were
$2,395,763 of which an $894,343 investment in joint venture and $716,766
patents/intellectual property accounted for approximately 37% and 30% thereof.
Total current assets amounted to $416,826 while total current liabilities
amounted to $164,917 thereby creating a working capital of $251,909.
The aforesaid current liabilities of $164,917 consisted of accounts
payable-trade of $140,522 and the current portion of notes payable of $24,395.
The long term portion of such notes payable-to wit: $200,000 is the only long
term liability of the Company and, accordingly, total liabilities as at March
31, 1997 amounted to $364,917. See also note 4 to unaudited consolidated
financial statements.
As at March 31, 1997 the Company's accumulated deficit amounted to
$(9,959,837) while total stockholders' equity amounted to $1,904,397.
CASH REQUIREMENTS AND LIQUIDITY
During calendar year ended December 31, 1996, the Company had been able
to satisfy its cash requirements and raise the necessary capital in order to
finance its proposed growth and acquisition program through the sale and
issuance of approximately 470,000 shares of its common stock for a cash
consideration of $750,000. During the first quarter of 1997 the Company sold an
additional 461,224 shares for cash consideration of $1,135,595. The shares of
Company common stock referred to above were sold in accordance with certain
terms and conditions contained in Off-Shore Securities Subscription Agreements
and, accordingly, were sold outside the U.S., not as a registered public
offering but rather in reliance upon Regulation S of the General Rules and
Regulations under the Securities Act of 1933. All sales of securities pursuant
to Regulation S made during the first quarter of 1997 as referred to directly
above (and as amounting to an aggregate of 461,224 shares) have been reported in
Forms 8-K with dates of reports of January 16, February 5 and March 10, 1997 -
each of which Forms 8-K were filed in a timely manner in accordance with the new
rules governing transactions of this nature.
The consolidated financial statements to the Company's Form 10-KSB for
calendar year ended December 31, 1996 indicated certain factors which created an
uncertainty about the Company's ability to continue as a going concern.
Notwithstanding such concerns and the net loss
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most recently incurred during the quarter ended March 31, 1997 of $(235,240),
Company management nevertheless continues to believe that the Company will be
able to continue its operations through (a) the raising of additional capital
through debt and/or equity financing if necessary and/or (b) the belief that its
operations (through activities of its recently entered into joint venture and/or
recently acquired subsidiaries) will improve sufficiently so as to eventually
generate sufficient revenues so as to justify anticipated and on-going
expenditures. No assurance can, however, be given that such will be the case.
Other than as indicated herein or in its aforesaid Form 10-KSB for
calendar year ended December 31, 1996, the Company is not engaged (on its own)
in any product research and development nor does management currently
contemplate the purchase or sale of any plant or significant equipment. Any
significant change in the number of Company employees will be dependent, to a
significant degree, upon the status of its on-going joint venture and the
recently consummated acquisitions referred to herein.
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PART II
<TABLE>
<S> <C> <C>
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a
Vote of Security Holders - None
Item 5. Other Information - None
Item 6. (a) Exhibits - None
(b) Reports on Form 8-K as follows:
</TABLE>
Form 8-K with date of report January 16, 1997 - filed January
31, 1997, Form 8-K with date of report February 5, 1997 -
filed February 19, 1997, Form 8-K with date of report March
10, 1997 - filed March 25, 1997
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ABS GROUP INC.
By /s/ Emanuel A. Floor
-----------------------------------
Emanuel A. Floor, President
Dated: May 15, 1997
14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 150,274
<SECURITIES> 0
<RECEIVABLES> 118,736
<ALLOWANCES> 9,720
<INVENTORY> 106,237
<CURRENT-ASSETS> 416,826
<PP&E> 160,323
<DEPRECIATION> 7,299
<TOTAL-ASSETS> 2,395,763
<CURRENT-LIABILITIES> 164,917
<BONDS> 0
0
0
<COMMON> 376
<OTHER-SE> 1,904,021
<TOTAL-LIABILITY-AND-EQUITY> 2,395,763
<SALES> 104,937
<TOTAL-REVENUES> 104,937
<CGS> 61,753
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 229,483
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23
<INCOME-PRETAX> (235,240)
<INCOME-TAX> 0
<INCOME-CONTINUING> (235,240)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (235,240)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
