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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ ] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the calendar year ended December 31, 1996
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[ ] Transition report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from to
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Commission file number 0-19814
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ABS Group Inc.
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(Name of Small Business Issuer in Its Charter)
Delaware 87-0462198
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
818 East South Temple Street, Salt Lake City, Utah 84102
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(Address of Principal Executive Office) (Zip Code)
801-521-8000
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock par value $.0001 per share
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(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), and (2)
has been subject to such filing requirements for past 90 days.
Yes xx No
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Primarily during the first six months of 1996, the Company embarked
upon an effort to bring itself "current" with respect to its reporting
requirements and in that regard prepared and filed (in July
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1996) Forms 10-QSB and 10-KSB commencing with calendar year ended December 31,
1992 through and including quarter ended March 31, 1996. Thereafter it
maintained its current status with respect to its reporting requirements by
filing Forms 10-QSB for quarters ended June 30, 1996 and September 30, 1996 as
well as filing such Forms 8-K as were applicable and required.
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. [ ]
State issuer's revenues for its most recent calendar year - $17,812
The aggregate market value for the 1,246,967 shares of voting stock
(all of one class of $.0001 par value Common Stock) held by non-affiliates * of
Registrant as of March 31, 1997 is $5,767,222 based upon an average of the bid
($4.00) and asked ($5.25) prices for such stock on the date heretofore
indicated. See Item 5 (a) which indicates the limited, if any, trading activity
in the Registrant's securities for the periods indicated. By virtue hereof, it
is difficult if not impossible to accurately arrive at a completely realistic
"aggregate market value" of Registrant shares held by non-affiliates as called
for herein especially in view of the fact that the existence of limited or
sporadic quotations should not of itself be deemed to constitute an "established
public trading market". The above statements regarding "aggregate market value"
and "established public trading market" should be taken into careful
consideration when considering the information contained herein regarding the
indicated "aggregate market value" of shares of voting stock held by
non-affiliates.
* Affiliates for the purpose of this item refers to the Registrant's
officers and directors (as well as officers and/or directors of each of
its subsidiaries) and/or any persons or firms (excluding those
brokerage firms and/or clearing houses and/or depository companies
holding Registrant's securities as record holders only for their
respective clienteles' beneficial interest) owning 5% or more of the
Registrant's Common Stock, both of record and beneficially - all as of
March 31, 1997.
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
Not Applicable
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. 3,885,359 shares as of
March 31, 1997.
Transitional Small Business Disclosure Format: Yes x No
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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 document 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").
None
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TABLE OF CONTENTS
Page
Number
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PART I
Item 1. Description of Business 5
Item 2. Description of Property 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of
Security Holders 9
PART II
Item 5. Market For Common Equity and Related
Stockholder Matters 10
Item 6. Management's Discussion and Analysis 11
Item 7. Financial Statements 13
F1 - F22
Item 8. Changes in and Disagreements With
Accountants on Accounting and
Financial Disclosure 14
PART III
Item 9. Directors, Executive Officers, Promoters
and Control Persons; Compliance With
Section 16(a) of the Exchange Act 14
Item 10. Executive Compensation 17
Item 11. Security Ownership of Certain Beneficial
Owners and Management 18
Item 12. Certain Relationships and Related
Transactions 19
Item 13. Exhibits, List and Reports on Form 8-K 20
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ITEM 1. DESCRIPTION OF BUSINESS
ABS Group Inc. (hereinafter "ADBS" or the "Company"), formerly Advanced
Biological Systems, Inc., is a development stage company incorporated in the
State of Delaware in October, 1988 which discontinued operations in 1992 and was
basically inactive through March 31, 1996 (not having had any revenues from
operations from inception through such date).
In July, 1996, ADBS took the necessary steps so as to bring itself
current with the SEC with respect to its 1934 Act reporting requirements thereby
placing itself in a position so as to be able to pursue its current business
objectives, i.e. acquisition of existing business(es) and/or entry into joint
ventures in bio and medical technology opportunities where research and
development activities have been completed and products are ready for
manufacture and marketing or require final registrations and approvals for
market. Such activities resulted in the following:
A. JOINT VENTURE AND LIMITED LIABILITY COMPANY
In this respect and with the aforesaid stated business objective of
becoming a diversified bio-medical and bio-technical company seeking
opportunities in emerging medical technologies the Company, in late September
1996 entered into a Joint Venture Agreement with Biopharmaceutics, Inc. ("BIO")
for the purpose of the development and commercialization of a drug
Dibromodulcitol (also known as Mitolactol) to which BIO has the exclusive
sublicense rights. BIO and the Company thereafter formed a New York State
limited liability company known as DBD Company LLC ("DBD") and sublicensed the
aforesaid rights to DBD in order to commercialize the drug (a cytoxic
chemotherapy agent) for the treatment of cervical and brain cancer and other
forms of the disease. BIO is required to manage the venture while the Company
holds a 40% ownership interest in DBD (which interest may increase to 45% if
certain monetary goals are achieved). The Company has specifically defined
monetary commitments regarding this project (see Note 3 to consolidated
financial statements) and in this respect is obligated to provide financing
necessary in order to complete Investigational New Drug Application ("IND") and
New Drug Application ("NDA") filings with the Federal Drug Administration
("FDA"); Phase III clinical trials having been successfully completed for such
new drug. The Company's aforesaid monetary obligation to DBD amounts to
$1,000,000 of which $150,000 was contributed through December 31, 1996 and an
additional $250,000 was contributed thereafter. The balance of $600,000 is to be
paid during 1997 on an "as needed" basis. As indicated in aforesaid Note 3 to
the consolidated financial statements, a significant portion of the Company's
further consideration commitment towards the joint venture referred to is
intended to be met by the parties thereto through the issuance of shares of
restrictive common stock of the Company based upon certain valuations assigned
and certain calculations based upon trading price of the Company's common stock
on certain defined dates preceding certain FDA filings and subsequent, if
received, approvals. With respect to FDA filings, the Company's joint venture
has entered into agreement with and intends to utilize the services of a firm
founded by and presided over by a former Deputy Director of the FDA in the
Division of Cardio-Renal Drug Products (who, while at the FDA, reviewed several
INDs and NDAs. Such individual, in his consultatory capacity, has been involved
in the filing of numerous INDs and NDAs. In this manner the Company has been
able to take advantage of the fact that it is a "public" company with defined
valuations to its trading
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securities and with the ability to issue securities as partial consideration for
transaction(s) entered into.
B. ACQUISITIONS OF SUBSIDIARIES
In a further effort to broaden its above referenced business base and
objectives within the medical technology field, the Company during, October
1996, entered into two separate and distinct letters of intent each of which
subsequently resulted in acquisitions of subsidiaries as hereinafter indicated.
One of such letters of intent was with an Australian limited company and its
founder, which parties hold interests in certain products found in the waters
along the Great Barrier Reef, which products are registered with the Australian
equivalent of the FDA. The second of such letters of intent was with a private
company currently engaged in the development, manufacture and sale of
microbiological diagnostic and testing systems and equipment providing advanced
culture identification capability which is considered to be useful in the
determination of the presence of a variety of pathogenic organisms.
As a direct result of the entry into the aforesaid letters of intent
and the consummation of the intentions expressed therein, the Company concluded
such transactions, as follows:
(i) In November of 1996, Marine Research USA, Inc., ("MRUSA") an 80%
owned subsidiary of the Company formed under the laws of the State of Utah
principally for purposes of the transaction described herein acquired 100% of
the issued and outstanding securities of Marine Research Pty. Ltd. ("MRPL"), a
corporation organized under the laws of Australia and founded by Samuel J. Grant
("Grant") who owns the balance of 20% of MRUSA. MRPL is in the business of
manufacturing and marketing products produced from sea cucumbers harvested in
the territorial waters of Australia. In connection with this transaction, Grant,
the founder and a former principal shareholder of MRPL, entered into a four-year
employment agreement with the Australian corporation as its Managing Director
(and also serves as President and a Director of MRUSA). Grant has also signed a
non-disclosure agreement under which he must hold in confidence MRPL's
proprietary information.
In connection with this share acquisition, the Company has agreed to
make available to MRPL $200,000 of working capital financing. As additional
consideration regarding this transaction, the Company issued 500,000
unregistered shares of its common stock to Grant and MRUSA issued to Grant 2,000
shares of its stock which represents 20% of the issued and outstanding
securities of MRUSA. Grant has executed restrictive covenants that limit the
transferability of MRUSA shares issued to him. MRUSA retained a right of first
refusal to acquire Grant's MRUSA shares.
Through MRPL, the Company is engaged in the formulation, processing and
marketing of several nutritional products which use as a principal ingredient,
the Sea Cucumber, harvested along the Great Barrier Reef in Australia. MRPL
holds certain rights, title and interest in four existing products registered
with the Australian Therapeutic Goods Administration ("TGA") which is similar to
the U.S. FDA.
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In Australia and New Zealand these products are sold by MRPL for
therapeutic relief of arthritic and muscular pain and inflammations. In the
United States, these products are sold as food and nutritional supplements
through health food providers, and other companies which distribute such
products through catalog sales and are also offered for sale in specialty
nutrition and health food outlets. These products are packaged in the United
States in a TGA and FDA approved facility in Orem, Utah. The fourth product TBL
12 is used as a food supplement. Additional testing is now underway with
patients in Melbourne, Australia regarding use of TLB 12 in potentially treating
diseases of the immune system including HIV and Cancer - but such testing
remains in a very early stage and potential positive results, if any, can not be
predetermined.
MRPL has offices and a distribution center in Castletown, Queensland,
Australia while MRUSA maintains offices in Salt Lake City, Utah with its parent
ABS Group Inc.
(ii) Pursuant to Share Purchase and Sale Agreement dated December 31,
1996, the Company acquired (from a New Jersey corporation known as Medical
Technologies, Inc. ("MT") all of the issued and outstanding securities
(100,000,000 shares of common stock) of Future Medical Technologies, Inc.
("FMT"), which was a wholly owned subsidiary of MT. FMT is in the business of
developing, manufacturing and marketing of diagnostic products for medical and
industrial applications including a variety of plastic disposable micro
biological diagnostic and testing systems, equipment and devices which enable
microbiologists to test for bacteria in food and water and other liquids and
which provide advanced culture-identification capability useful in the
determination of presence of a variety of pathogenic organisms in a short time
frame. FMT has a patent pending for one device and owns rights to certain other
products. In connection with this transaction, Steven Gelman, consultant to FMT
since October 1996, has agreed in principle to enter into a four-year employment
agreement with FMT as its President, which employment agreement is to contain a
Non-Disclosure Agreement under which he must hold in confidence FMT's
proprietary information and a covenant not to compete for a two-year period
commencing upon the termination of his employment.
As consideration regarding this transaction, the Company issued two
ninety-day, 6% interest, promissory notes in the sums of $44,000 and $31,563.80
and also assumed the remaining payments of a four-year, 7% interest, $250,000
promissory note with a balance of $225,000 at December 31, 1996. Subsequent to
closing the Company paid in full (to MT) the above referenced $44,000 and the
$31,563.80 promissory notes.
FMT maintains offices in Boulder, Colorado, is managed by its
President, Steven I. Gelman and maintains a research laboratory in Atlanta,
Georgia, in conjunction with Georgia State University whereat FMT's full time
senior scientist works with lab assistants.
The Company together with its subsidiaries MRUSA, MRPL and FMT are
collectively referred to as the "Company" unless otherwise specifically
indicated.
The following organizational chart is intended and designed as an
overview (summary only) of the Company's structure and its division of corporate
responsibilities and operations between
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certain designated business areas and persons. This information is qualified in
its entirety by the more detailed information appearing herein and in the
consolidated notes to the Company's consolidated financial statements.
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<S> <C> <C>
ABS GROUP INC. - ORGANIZATION AND OPERATIONS - 1997
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ABS GROUP INC.
(Delaware Corporation)
Bio-Medical - Bio-Technical Company
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Board of Directors/Officers
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Emanuel A. Floor - President, CEO, Treasurer & Director
Oleg Batratchenko - Secretary & Director
Steven I. Gelman, Vice President - Marketing
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DEVELOPMENT OF THERAPEUTIC NATURAL PRODUCTS FOR INNOVATIONS IN
DRUGS AND MEDICINES WELLNESS AND FITNESS MICROBIOLOGY AND
PROGRAMS LABORATORY MONITORS
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DBD COMPANY, LLC MARINE RESEARCH USA, INC. FUTURE MEDICAL
(DBD) (MARINE USA) TECHNOLOGIES, INC. (FMT)
40.0% Interest 80.0% owned Subsidiary Wholly Owned Subsidiary
(New York Limited Company) (Utah Corporation) (New Jersey Corporation)
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Venture Manager Officers & Directors Officers & Directors
Marine Research USA, Inc. Steven I. Gelman, President,
Biopharmaceutics, Inc. Samuel J. Grant, CEO & Director
Ed Fine, President President & Director Emanuel A. Floor, Vice President,
Bellport, New York Emanuel A. Floor, Vice President, Treasurer & Director
Treasurer & Director Oleg Batratchenko, Director
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Consultants MARINE RESEARCH PTY LTD. Staff
Dr. Stewart Ehrreich MARINE Dr. Jitu Patel, Ph.D.
Dr. Kristen K. Flaharty Wholly Owned Subsidiary Senior Scientist
Ehrreich Consulting (Australia Limited Company) (Atlanta)
Coordination of all FDA Filings 100% owned by MARINE USA Renee Collier
Coordination of Samuel J. Grant, Dir. of Research & Development
Scientific Advisory Board Managing Director (Boulder)
Emanuel A. Floor, Director
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Joint Venture with Manufacture and Marketing Manufacture and Marketing of
Biopharmaceutics, Inc. (New of products using Sea monitors and related
York) for the development, Cucumber or "Beche-de-Mer" equipment and media for
manufacturing, regulatory which are marketed as membrane filtration and other
processing and rights to therapeutic drugs in Australia micro biological liquid filtration
commercially exploit and a nutritional supplements and culturing and
Dibromodulcitol (DBD) as a in the United States for relief development and sale of
drug for treatment of brain and from arthritis and muscular advanced line of disposables
cervical cancer. Phase III pain and as a gel and useful in Quantitation and
Clinical Trials complete, IND nutritional supplement useful Presumptive Identification of
and NDA applications in in boosting immune system. most bacterial pathogens.
process under direction of Research to continue on Products sold to food industry
Ehrreich Consulting and success with AIDS and and others to validate that
Scientific Advisory Board. Cancer Patients. products are bacteria free.
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Offices: Bellport, New York Offices: Castletown, Offices: Boulder, Colorado
Queensland, Australia R & D Lab: Atlanta, GA
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EMPLOYEES
At the present time ADBS' staff consists of its three officers and
directors. FMT employs three persons while MRUSA and MRPL employ an aggregate of
three persons (inclusive of their officers and directors).
ITEM 2. DESCRIPTION OF PROPERTY
Through March 31, 1997 the Company maintained its executive offices at
the home of its President (Emanuel A. Floor) at 2936 Sierra Point Place, Salt
Lake City, Utah 84109 (on a rent free basis through December 31, 1995) and its
telephone number was and remains 801-521-8000. During 1996, the Company paid
Emanuel A. Floor and Associates (an affiliate of Mr. Floor) approximately
$12,000 for use of the office space, phones, mail and postage and other office
facilities and/or expenses.
Effective April 1, 1997, the Company has established its Corporate
headquarters as well as its United States office for both MRUSA and MRPL in
space leased from unrelated third parties at 818 East South Temple Street, Salt
Lake City, Utah 84102. Its telephone number continues to be 801-521-8000. Its
fax number is 801-532-2160.
Under terms of the three year lease, the Company is obligated to pay
$21,600 for the first year, $22,800 for the second year and $23,400 for the
third year. The company has paid a security deposit of $11,000; the equivalent
of approximately six months rent. A portion of this sum - $5,500 - will be
credited against the monthly rent at the rate of $157.77 per month for the term
and the balance will be credited to the Company on return of the premises in
good condition at the end of the term.
In December of 1996, FMT, a wholly owned subsidiary of the Company,
entered into a two year lease with an unrelated third party for office space in
Boulder, Colorado. Occupancy of the space was effective February 1, 1997. Rental
charges for the space is $49,200 to be paid at the rate of $2,000 per month for
the first year and $2,100 per month for the second year. FMT deposited $12,000
with the landlord as a security deposit and to prepay three specific months of
the lease.
For further information regarding Company obligations with respect to
leasing of office space under various operating lease agreements, reference is
made to note 8 to the Company's consolidated financial statements.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently a party to any material litigation nor, to
the knowledge of management, is any material litigation threatened.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company has not held an annual meeting of stockholders throughout
calendar years 1992
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- -1996 inclusive. While the Company does currently intend to hold an annual
meeting of stockholders for its calendar year ended December 31, 1996 it has
not, as yet, formalized any specific plans as to any proposed date or site for
such meeting.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
(a) Marketing Information. The following table sets forth, for the
periods indicated, the range of high and low bid prices on the dates indicated
for the Company's securities indicated below for each full quarterly period
within the two most recent calendar years (if applicable) and any subsequent
interim period for which financial statements are included and/or required to be
included.
<TABLE>
<CAPTION>
Calendar Year Ended December 31, 1995 Quarterly Common Stock Price
By Quarter Ranges (1)
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Quarter Date High Low
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1st March 31, 1995 $ .08 $ .07
2nd June 30, 1995 $ .07 $ .04
3rd September 30, 1995 $ .04 $ .02
4th December 31, 1995 $ .02 $ .01
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<TABLE>
<CAPTION>
Calendar Year Ended December 31, 1996 Quarterly Common Stock Price
By Quarter Ranges (1)(2)
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Quarter Date High Low
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1st March 31, 1996 $ .015 $ .015
2nd June 30, 1996 $ .22 $ .015
3rd September 30, 1996 $ 3.25 $ .50
4th December 31, 1996 $ 4.50 $3.00
</TABLE>
<TABLE>
<CAPTION>
Calendar Year Ended December 31, 1997 Quarterly Common Stock Price
By Quarter Ranges (1)(2)(3)
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Quarter Date High Low
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1st March 31, 1997 $5.00 $3.00
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(1) The existence of limited or sporadic quotations should not of itself be
deemed to constitute an "established public trading market". To the
extent that limited trading in the Company's Common Stock has taken
place, such transactions have been limited to the over-the-counter
market (except as otherwise may be indicated hereinafter). All prices
indicated herein are as reported to the Company by broker-dealer(s)
making a market in its securities in the National Quotation Data
Service ("pink sheets") and/or in the Electronic Over-the-Counter
Bulletin Board (the latter under the symbol ADBS). The aforesaid
securities were not traded or quoted on any automated quotation system
(other than as may be indicated herein). The over-the-counter market
quotes indicated above reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent
actual transactions.
(2) On or about August 16, 1996 the Company effectuated a 1 for 30 reverse
split of its then outstanding shares of common stock. Prices indicated
commencing with the quarter ended September 30, 1996 reflect such
reverse split.
(3) Trading has been on a sporadic basis with limited, if any, trading
volume (on certain dates). Reported volume during the most recent
quarter ended March 31, 1997 exceeded 5,000 shares on only eight
occasions, with such volume exceeding 10,000 shares on only two
occasions.
(b) Holders. As of March 31, 1997 the approximate number of
stockholders of the
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Company's Common Stock (as indicated on its transfer agent's March 31, 1997
certified list of stockholders) amounted to 182 persons and/or firms (inclusive
of those brokerage firms and/or clearing houses and/or depository companies
holding the Company's securities for their respective clientele - each such
brokerage house, clearing house and/or depository firm being considered as one
record holder). The exact number of beneficial owners of the Company's
securities is not known but would necessarily exceed the number of record owners
indicated above in that brokerage firms and/or clearing house and/or depository
companies are normally record owners for presumably any number of unidentified
beneficial owners.
(c) Dividends. The payment by the Company of dividends, if any, in the
future rests within the discretion of its Board of Directors and will depend,
among other things, upon the Company's earnings, its capital requirements and
its financial condition, as well as other relevant factors. The Company has not
paid or declared any dividends upon its Common Stock since its inception and, by
reason of its present financial status and its contemplated financial
requirements , does not contemplate or anticipate paying any dividends upon its
Common Stock in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
The Company's intentions as expressed herein 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 ultimate objective of benefitting the Company's
stockholders. Its initial joint venture with BIO (entered into in September
1996) and its subsequent acquisitions in November and December 1996 as well as
the various monetary and other obligations assumed thereunder are summarized in
Item 1 hereto with further details appearing in the applicable notes to the
consolidated financial statements. Such 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/or liquidity/cash flows
of the Company during the calendar years ended December 31, 1995 (if applicable)
and 1996 and should be read in conjunction with the consolidated financial
statements and notes thereto included in such report.
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 (a) as indicated in Item 1 of this Form
10-KSB, the Company was basically inactive from the time that it discontinued
operations in 1992 until the time that it was reactivated during late 1996 and
(b) from inception through December 31, 1995 it had no revenues from operations.
For reasons comparable to those heretofore stated
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directly above, no comparable information is provided herein with respect to the
Company's consolidated balance sheet.
CONSOLIDATED STATEMENTS OF OPERATIONS:
For the calendar year ended December 31, 1996
Sales for the calendar year ended December 31, 1996 were $17,812 while
cost of sales amounted to $5,209 resulting in a gross margin for calendar year
1996 of $12,603. Expenses amount to $1,287,117 of which general and
administrative expenses accounted for approximately 98%. Primarily as a result
of the above, the net loss for calendar year ended December 31, 1996 was
$(1,379,751) thereby increasing the Company's deficit accumulated during
development stage to $(9,724,597) as at December 31, 1996.
CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31, 1996:
Total assets of the Company at calendar year ended December 31, 1996
were $1,935,765 of which a $698,953 investment in joint venture and $724,334
patents/intellectual property accounted for approximately 36% and 37% thereof.
Total current assets amounted to $186,322 while total current liabilities
amounted to $435,959 thereby creating a working capital deficit of $(249,637).
The aforesaid current liabilities of $435,959 consisted of accounts
payable of $335,395 and the current portion of notes payable of $100,564. 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 December 31,
1996 amounted to $635,959. See also note 5 to consolidated financial statements.
As at December 31, 1996 the Company's accumulated deficit amounted to
$(9,724,597) while total stockholders' equity amounted to $1,167,665.
CASH REQUIREMENTS AND LIQUIDITY
As indicated in the consolidated statements of stockholders' equity and
most particularly in that portion thereof which refers to transactions during
the year ended December 31, 1996, the Company has 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 461,330 shares for cash
consideration of $1,135,860. 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 1997 as
referred to directly above (and as amounting to an aggregate of 461,330 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
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rules governing transactions of this nature.
The consolidated financial statements to the Company's Form 10-KSB for
calendar year ended December 31, 1996 indicate (in Note 9 thereto) certain
factors which create an uncertainty about the Company's ability to continue as a
going concern; such factors primarily relating to the Company having sustained
significant operating losses while not having had a proven source of revenues.
Notwithstanding the concerns expressed by the Company's auditors in such Note 9
as well as in their report dated March 27, 1997 accompanying such consolidated
financial statements and the loss most recently incurred during the calendar
year ended December 31, 1996 of $(1,379,751), 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, 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 herein,
ITEM 7. FINANCIAL STATEMENTS
The following consolidated financial statements have been prepared in
accordance with the requirements of Regulation S-X and supplementary financial
information included herein, if any, has been prepared in accordance with Item
302 of Regulation S-K, such information appears on pages F-1 through F-22
inclusive of this Form 10-KSB, which pages follow this page.
ABS GROUP INC.
DECEMBER 31, 1996 AND 1995
CONTENTS
Page
----
Independent Auditor's Report F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders' Equity (Deficit) F-6
Consolidated Statements of Cash Flows F-11
Notes to the Consolidated Financial Statements F-14 - F-22
-13-
<PAGE> 14
[JONES, JENSEN & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
The Board of Directors
ABS Group Inc.
(Formerly Advanced Biological Systems, Inc.)
Salt Lake City, Utah
We have audited the accompanying consolidated balance sheets of ABS Group Inc.
(formerly Advanced Biological Systems, Inc.) (a development stage company) and
subsidiaries as of December 31, 1996 and 1995 and the related consolidated
statements of operations, stockholders' equity (deficit) and cash flows for the
years ended December 31, 1996, 1995 and 1994 and from the date of inception on
October 3, 1988 through December 31, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ABS
Group Inc. (formerly Advanced Biological Systems, Inc.) (a development stage
company) and subsidiaries as of December 31, 1996 and 1995 and the results of
their operations and their cash flows for the years ended December 31, 1996,
1995 and 1994, and from the date of inception on October 3, 1988 through
December 31, 1996 in conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 9 to the
consolidated financial statements, the Company is a development stage company
with no significant operating revenues to date. These conditions raise
substantial doubt about its ability to continue as a going concern. Management's
plans concerning these matters are also described in Note 9. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ Jones, Jensen & Company
Jones, Jensen & Company
March 27, 1997
F-1
<PAGE> 15
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Consolidated Balance Sheets
ASSETS
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 65,977 $45,598
Accounts receivable (Note 1) 30,293 --
Inventories (Note 1) 87,992 --
Prepaid expenses 2,060 --
---------- -------
Total Current Assets 186,322 45,598
---------- -------
FIXED ASSETS (Note 2) 107,593 --
---------- -------
OTHER ASSETS
Investment in joint venture (Note 3) 698,953 --
Patents/intellectual property (Note 4) 724,334 --
Deposits 12,997 --
Goodwill (Note 1) 205,566 --
---------- -------
Total Other Assets 1,641,850 --
---------- -------
TOTAL ASSETS $1,935,765 $45,598
========== =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-2
<PAGE> 16
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Consolidated Balance Sheets
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
December 31,
--------------------------------
1996 1995
------------ -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 335,395 $ 68,429
Notes payable (Note 5) 100,564 --
------------ -----------
Total Current Liabilities 435,959 68,429
------------ -----------
LONG-TERM LIABILITIES
Notes payable (Note 5) 200,000 --
------------ -----------
Total Liabilities 635,959 68,429
------------ -----------
MINORITY INTEREST IN CONSOLIDATED SUBSIDIARIES 132,141 --
------------ -----------
COMMITMENTS AND CONTINGENCIES (Notes 3 and 8) -- --
------------ -----------
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, 10,000,000 shares
authorized at $0.0001 par value;
3,293,935 and 890,375 shares
issued and outstanding, respectively 329 89
Capital in excess of par value 10,891,924 8,321,926
Foreign currency translation 9 --
Deficit accumulated during the development stage (9,724,597) (8,344,846)
------------ -----------
Total Stockholders' Equity (Deficit) 1,167,665 (22,831)
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 1,935,765 $ 45,598
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE> 17
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Consolidated Statements of Operations
<TABLE>
<CAPTION>
From Inception
on October 3,
For the Years Ended December 31, 1988 Through
----------------------------------------------- December 31,
1996 1995 1994 1996
----------- --------- --------- --------------
<S> <C> <C> <C> <C>
SALES $ 17,812 $ -- $ -- $ 17,812
COST OF SALES 5,209 -- -- 5,209
----------- --------- --------- -----------
GROSS MARGIN 12,603 -- -- 12,603
----------- --------- --------- -----------
EXPENSES
Depreciation and amortization 6,845 -- -- 6,845
Rent 12,000 -- -- 12,000
Research and development 580 -- -- 580
General and administrative 1,267,692 -- -- 1,267,692
----------- --------- --------- -----------
Total Expenses 1,287,117 -- -- 1,287,117
----------- --------- --------- -----------
LOSS FROM OPERATIONS (1,274,514) -- -- (1,274,514)
----------- --------- --------- -----------
OTHER INCOME (EXPENSE)
Interest income 108 -- -- 108
Interest expense (711) -- -- (711)
Loss on investment (Note 3) (26,047) -- -- (26,047)
----------- --------- --------- -----------
Total Other Income (Expense) (26,650) -- -- (26,650)
----------- --------- --------- -----------
LOSS BEFORE DISCONTINUED
OPERATIONS AND MINORITY
INTEREST (1,301,164) -- -- (1,301,164)
LOSS ON DISCONTINUED
OPERATIONS (80,196) (45,058) (107,291) (8,425,042)
MINORITY INTEREST IN LOSS 1,609 -- -- 1,609
----------- --------- --------- -----------
NET LOSS $(1,379,751) $ (45,058) $(107,291) $(9,724,597)
=========== ========= ========= ===========
NET LOSS PER SHARE $ (0.99) $ (0.11) $ (0.35)
=========== ========= =========
WEIGHTED AVERAGE SHARES
OUTSTANDING 1,401,599 428,621 310,374
=========== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE> 18
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital in During the
------------------ Excess of Development
Shares Amount Par Value Stage
------- ------- ---------- -----------
<S> <C> <C> <C> <C>
Balance, October 3, 1988 -- $ -- $ -- $ --
Shares issued to incorporators
for approximately $0.04 per share 110,222 11 3,989 --
Net loss for the year ended
December 31, 1988 -- -- -- (164)
------- ------- ---------- -----------
Balance, December 31, 1988 110,222 11 3,989 (164)
Shares issued to the public for
approximately $1.13 per share on
August 22, 1989 57,778 6 64,994 --
Costs of public offering -- -- (29,265) --
Net loss for the year ended
December 31, 1989 -- -- -- (28,341)
------- ------- ---------- -----------
Balance, December 31, 1989 168,000 17 39,718 (28,505)
Shares of restricted common
stock issued for $180.00 per
share 13,889 1 2,499,999 --
Net loss for the year ended
December 31, 1990 -- -- -- (129,598)
------- ------- ---------- -----------
Balance, December 31, 1990 181,889 $ 18 $2,539,717 $ (158,103)
------- ------- ---------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE> 19
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital in During the
------------------- Excess of Development
Shares Amount Par Value Stage
------- ------ ---------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1990 181,889 $ 18 $2,539,717 $ (158,103)
Shares issued in private
transactions at an average price
of approximately $137.94 per share 3,797 1 523,749 --
Shares issued in private
placement at $90.00 per share 22,278 2 2,004,998 --
Shares issued in exchange for
product and marketing rights
at $90.00 per share 13,333 1 1,199,999 --
Costs of private placement -- -- (218,523) --
Contribution of assets by an
officer and director -- -- 1,350 --
Net loss for the year ended
December 31, 1991 -- -- -- (2,245,287)
------- ------ ---------- -----------
Balance, December 31, 1991 221,297 22 6,051,290 (2,403,390)
Shares issued on March 31, 1992
in private placement at
$112.51 per share 2,222 -- 250,000 --
Shares issued on March 31, 1992
in settlement of debt at
approximately $30.07 per share 5,000 1 150,349 --
Shares issued on April 15, 1992 in
private placement at an average
price of approximately $134.62
per share 1,278 -- 172,050 --
------- ------ ---------- -----------
Balance forward 229,797 $ 23 $6,623,689 $(2,403,390)
------- ------ ---------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE> 20
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital in During the
------------------- Excess of Development
Shares Amount Par Value Stage
-------- ------ ---------- -----------
<S> <C> <C> <C> <C>
Balance forward 229,797 $23 $6,623,689 $(2,403,390)
Shares issued on July 23, 1992
upon exercise of options at
approximately $0.09 per share 2,777 -- 250 --
Shares issued on
October 23, 1992 in settlement
of debt at $30.00 per share 3,333 -- 100,000 --
Shares issued on
October 23, 1992 in settlement
of debt at $9.00 per share 11,667 1 104,999 --
Shares issued on
November 24, 1992 in private
placement at $60.02 per share 833 -- 50,000 --
Shares issued on November
25, 1992 in private placement
at approximately $11.32 per share 4,479 1 50,684 --
Shares issued during
December 1992 in settlement
of debt at $30.00 per share 27,903 3 837,092 --
Costs of private placements -- -- (9,250) --
Net loss for the year ended
December 31, 1992 -- -- -- (5,540,971)
-------- ------ ---------- -----------
Balance, December 31, 1992 280,789 $ 28 $7,757,464 $(7,944,361)
-------- ------ ---------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-7
<PAGE> 21
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital in During the
------------------- Excess of Development
Shares Amount Par Value Stage
-------- ------ ---------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1992 280,789 $ 28 $7,757,464 $(7,944,361)
Shares issued on
January 6, 1993 in private
placement at approximately
$11.25 per share 1,778 -- 20,000 --
Shares issued on
January 6, 1993 upon exercise
of options at approximately
$0.09 per share 2,778 -- 250 --
Shares issued on May 26, 1993
in private placement at
approximately $6.00 per share 1,667 -- 10,000 --
Shares issued on May 26, 1993
in private placement at
approximately $6.00 per share 6,667 1 39,999 --
Shares issued on July 9, 1993
in private placement at
approximately $4.50 per share 3,333 -- 15,000 --
Shares issued on August 18,
1993 in private placement at
$3.00 per share 6,000 1 17,999 --
Shares issued during December
1993 in settlement of debt at
approximately $30.00 per share 7,363 1 220,874 --
Net loss for the year ended
December 31, 1993 -- -- -- (248,136)
-------- ------ ---------- -----------
Balance, December 31, 1993 310,375 $ 31 $8,081,586 $(8,192,497)
-------- ------ ---------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-8
<PAGE> 22
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital in During the
------------------- Excess of Development
Shares Amount Par Value Stage
--------- ------ ---------- -----------
<S> <C> <C> <C> <C>
Balance, December 31, 1993 310,375 $ 31 $8,081,586 $(8,192,497)
Net loss for the year ended
December 31, 1994 -- -- -- (107,291)
--------- ------ ---------- -----------
Balance, December 31, 1994 310,375 31 8,081,586 (8,299,788)
Shares issued during December
1995 settlement of debt at
approximately $0.30 per share 466,667 47 140,351 --
Shares issued during December
1995 in private placement at
approximately $0.88 per share 113,333 11 99,989 --
Net loss for the year ended
December 31, 1995 -- -- -- (45,058)
--------- ------ ---------- -----------
Balance, December 31, 1995 890,375 89 8,321,926 (8,344,846)
Shares issued April 10, 1996
in private placement at
approximately $1.50 per share 33,333 4 34,996 --
Shares issued May 17, 1996
in private placement at
approximately $1.50 per share 3,333 -- 5,000 --
Shares issued May 17, 1996
in settlement of dispute valued
at approximately $0.90 per share 2,333 -- 2,100 --
Shares issued September 25, 1996
for investment in joint venture
valued at $1.00 per share (Note 3) 425,000 43 424,957 --
Shares issued September 27, 1996
for options exercised valued at
$0.15 per share 1,000 -- -- --
--------- ------ ---------- -----------
Balance forward 1,355,374 $ 136 $8,788,979 $(8,344,846)
--------- ------ ---------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-9
<PAGE> 23
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit) (Continued)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Capital in During the
------------------- Excess of Development
Shares Amount Par Value Stage
--------- ------ ----------- -----------
<S> <C> <C> <C> <C>
Balance forward 1,355,374 $ 136 $ 8,788,979 $(8,344,846)
Shares issued September 30, 1996
for services rendered valued at
$0.79 per share 1,000,000 100 789,900 --
Capital contributed by a
stockholder -- -- 25,000 --
Shares issued October 1996 for
cash at an average price of
approximately $1.38 per share 333,333 33 459,967 --
Shares issued October 10, 1996
to settle shareholder payable
at $1.00 per share 5,000 -- 5,000 --
Shares issued to acquire
subsidiary (Note 1) 500,000 50 500,088 --
Shares issued December 30, 1996
for cash at $2.50 per share 100,000 10 249,990 --
Stock offering costs (Note 1) -- -- (90,000 --
Fractional shares resulting from
reverse stock split 228 -- -- --
Options granted with an exercise
price below current market price
of common stock (Note 6) -- -- 163,000 --
Net loss for the year ended
December 31, 1996 -- -- -- (1,379,751)
--------- ------ ----------- -----------
Balance, December 31, 1996 3,293,935 $ 329 $10,891,924 $(9,724,597)
========= ====== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-10
<PAGE> 24
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
From Inception
on October 3,
For the Years Ended December 31, 1988 Through
------------------------------------------- December 31,
1996 1995 1994 1996
----------- -------- --------- --------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net loss from operations $(1,379,751) $(45,058) $(107,291) $ (9,724,597)
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 6,845 -- -- 9,888
Stock issued for services
rendered 955,100 -- -- 955,100
Loss on investment in
joint venture 26,047 -- -- 26,047
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 (16,334) -- -- (16,334)
(Increase) decrease in
inventory (40,675) -- -- (40,675)
Increase (decrease) in
accounts payable 185,706 (40,881) 31,198 254,135
----------- -------- --------- --------------
Net Cash Provided (Used)
by Operating Activities $ (263,062) $(85,939) $ (76,093) $ (3,916,325)
----------- -------- --------- --------------
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-11
<PAGE> 25
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
From Inception
on October 3,
For the Years Ended December 31, 1988 Through
----------------------------------------- December 31,
1996 1995 1994 1996
--------- -------- -------- --------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM
INVESTING ACTIVITIES
Investment in joint venture $(300,000) $ -- $ -- $ (300,000)
Cash acquired through
investment in subsidiary 2,022 -- -- 2,022
Purchase of subsidiaries (108,731) -- -- (108,731)
Purchase of product marketing
rights -- -- -- (1,250)
Purchase of fixed assets -- -- -- (10,784)
Purchase of promotional video -- -- -- (50,000)
--------- -------- -------- --------------
Net Cash Provided (Used)
by Investing Activities (406,709) -- -- (468,743)
--------- -------- -------- --------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Capital contributed by
shareholder 25,000 -- -- 25,000
Proceeds from loans 5,000 31,500 76,100 398,140
Proceeds from sale of common
stock 660,150 100,000 -- 4,027,905
--------- -------- -------- --------------
Net Cash Provided (Used)
by Financing Activities 690,150 131,500 76,100 4,451,045
--------- -------- -------- --------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 20,379 45,561 7 65,977
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 45,598 37 30 --
--------- -------- -------- --------------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 65,977 $ 45,598 $ 37 $ 65,977
========= ======== ======== ==============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-12
<PAGE> 26
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Consolidated Statements of Cash Flows (Continued)
<TABLE>
<CAPTION>
From Inception
on October 3,
For the Years Ended December 31, 1988 Through
----------------------------------------- December 31,
1996 1995 1994 1996
--------- --------- -------- --------------
<S> <C> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION
Interest paid $ 711 $ -- $ -- $ 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 $ 7,100 $ 140,398 $ -- $ 1,560,818
Stock and options issued for
services rendered $ 953,100 $ -- $ -- $ 953,100
Stock issued for acquisition
of subsidiary $ 500,138 $ -- $ -- $ 500,138
Stock issued for investment
in joint venture $ 425,000 $ -- $ -- $ 425,000
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-13
<PAGE> 27
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The consolidated financial statements include those of ABS Group Inc.
(formerly Advanced Biological Systems, Inc.) (Formerly Advanced
Biological Systems, Inc.) and its subsidiaries Future Medical
Technologies, Inc. (FMT), Marine Research USA, Inc. (MRUSA) and Marine
Research Pty Ltd. (MRPL). Collectively, they are referred to herein as
"the Company." All intercompany accounts and transactions have been
eliminated.
ABS Group Inc. (formerly Advanced Biological Systems, Inc.) was
incorporated under the laws of the State of Delaware on October 3,
1988, discontinued operations during 1992, and was inactive until 1996.
During 1996, the Company acquired FMT, MRUSA and MRPL. The Company is
currently engaged in the production and sale of nutritional supplements
and microbiological testing kits.
On December 31, 1996, the Company purchased FMT by assuming debt in the
amount of $300,564 and by paying $73,731 in cash. The acquisition
resulted in fixed assets being revalued to their fair market value of
$55,200. The purchase of FMT resulted in the creation of goodwill of
$205,566.
Future Medical Technologies, Inc. was incorporated under the laws of
the State of New Jersey on September 28, 1989 for the purpose of
developing technology relating to microbiological testing of water,
beverages and food.
On November 7, 1996, the Company entered into an Asset Acquisition and
Financing Agreement with Marine Research USA, Inc., Marine Research
Pty. Ltd. and Samuel J. Grant, whereby the Company issued 500,000
shares of its restricted common stock to Mr. Grant as an inducement for
him to transfer certain intellectual property and operating equipment
to MRPL. As a result of the transaction, MRUSA became owner of 100% of
the issued and outstanding shares of MRPL. The Company became 80% owner
of MRUSA and Mr. Grant became 20% owner of MRUSA.
Marine Research USA (MRUSA) was incorporated in the State of Utah on
November 6, 1996 for the purpose of facilitating the purchase of Marine
Research Pty. Ltd. by ABS Group Inc. (formerly Advanced Biological
Systems, Inc.) MRUSA owns 100% of the issued and outstanding stock of
Marine Research Pty. Ltd.
Marine Research Pty Ltd. (MRPL) was incorporated under the laws of the
State of Queensland Australia on February 22, 1991 under the name of
Myalldeen Pty. Ltd. MRPL was inactive until November of 1996 when it
was purchased by MRUSA. Since that time, MRPL has been engaged in the
production and sale of registered therapeutic products in Australia and
a nutritional supplement outside of Australia, the primary ingredient
of which is Sea Cucumber.
b. Accounting Method
The Company's financial statements are prepared using the accrual
method of accounting. The Company has elected a calendar year end.
F-14
<PAGE> 28
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
c. Loss Per Share
The computation of loss per share of common stock is based on the
weighted average number of shares outstanding during the period.
d. Deferred Offering Costs
In connection with the public offering of the Company's common stock,
all costs were accumulated as deferred charges. The deferred charges
were offset against capital in excess of par value upon successful
completion of the offering.
e. Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
f. Income Taxes
No provision for income taxes has been accrued because the Company has
net operating losses from inception. Net operating loss carryforwards
of approximately $8,300,000 at December 31, 1996, expire in 2011. No
tax benefit has been reported in the financial statements because the
Company is uncertain if the carryforwards will expire unused.
Accordingly, the potential tax benefits are offset by a valuation
account of the same amount.
g. Stock Split
On November 15, 1989, the Company effected a forward split of its
common shares outstanding on a 4-for-1 basis in the form of a stock
dividend. On June 29, 1992, the Company effected a reverse stock split
of its common shares outstanding on a 1-for-3 basis. On August 14,
1996, the Company effected an additional reverse stock split of its
common shares outstanding on a 1-for-30 basis. The financial statements
have been restated retroactively to reflect the effects to these stock
splits.
I. Inventory
Inventory is stated at the lower of cost or market, with cost
determined on a first-in, first-out basis and market based on the lower
of replacement cost or realizable value.
j. Accounts Receivable
The Company provides an allowance for losses on trade receivables based
on a review of the current status of existing receivables and
management's evaluation of periodic aging of accounts. Accounts
receivable are shown net of a $9,719 allowance for doubtful accounts at
December 31, 1996.
F-15
<PAGE> 29
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
k. 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 disclosure 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.
l. Depreciation
Property and equipment are depreciated using the straight-line method
over their estimated useful lives of five to seven years. (Note 2)
m. Amortization
Goodwill and other intangibles are amortized over their estimated lives
of 10 years. Amortization expense for the years ended December 31, 1996
and 1995 was $5,038 and $0 respectively.
NOTE 2 - PROPERTY AND EQUIPMENT
Major classifications of property and equipment are as follows:
<TABLE>
<S> <C>
Production equipment $ 47,760
Office equipment 11,640
Product molds 50,000
--------
109,400
Less accumulated depreciation (1,807)
--------
$107,593
========
</TABLE>
Depreciation expense for the years ended December 31, 1996 and 1995 was
$1,807 and $0, respectively.
NOTE 3 - INVESTMENT IN JOINT VENTURE
On September 25, 1996, the Company entered into a Joint Venture
Agreement with Biopharmaceutics, Inc. (BIO) for the purpose of
commercially exploiting a drug for which BIO holds the rights to
manufacture and market. The two companies formed DBD Company LLC (DBD)
to accomplish this. BIO will sublicense its rights to the drug and will
also be responsible for the management of the day-to-day operations of
DBD. The Company is obliged to contribute cash to DBD totaling
$1,000,000. As of December 31, 1996 the Company had contributed
$150,000 to DBD. Subsequent to December 31, 1996, the Company
contributed an additional $250,000 to DBD. The balance of $600,000 is
to be paid during 1997 on an as needed basis.
F-16
<PAGE> 30
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 3 - INVESTMENT IN JOINT VENTURE (Continued)
As additional consideration, the Company has agreed to pay BIO a total
of $2.75 million in cash and securities as follows:
a) 425,000 shares of the Company's restricted common stock valued at
$2.00 per share and $150,000 in cash represented by a promissory
note payable to BIO, which was paid in full October 31, 1996.
b) $350,000 of the Company's restricted common stock, calculated at the
closing bid price per share of the stock on the day preceding the
filing of the Treatment Investigational New Drug (IND) for the drug
with the FDA and $150,000 cash on the date of filing.
c) $500,000 of the Company's restricted common stock, calculated as
described in b) above on the day preceding the approval of the
Treatment IND by the FDA or $250,000 cash on the day of approval.
d) $500,000 of the Company's restricted common stock, calculated as
described in b) above on the day preceding the filing of the New
Drug Application (NDA) if the Company elected to pay cash in c)
above or $250,000 cash on the day of filing of the NDA if stock was
issued in c) above on the day of approval.
e) $500,000 of the Company's restricted common stock, calculated as
described in b) above on the day preceding the approval of the NDA
by the FDA.
In exchange for the consideration, the Company received a 40% ownership
interest in DBD. This ownership interest will increase to 45% at such
time as BIO has received $2,000,000 in profits from DBD. The investment
is accounted for by the equity method. The investment in the joint
venture is carried at cost of $725,000 less the Company's share of the
loss for the year ended December 31, 1996 which was $26,047 for a net
amount of $698,953. This differs from the Company's underlying equity
in the net assets of DBD by $575,000, which is the amount paid to BIO
by the Company. BIO's sublicence of the product rights did not result
in the recording of an asset on the books of DBD because BIO's basis in
the product rights was $0. The amount paid to BIO represents the
estimated net present value of future income to be derived from the
sale of the drug. Financial information for DBD is as follows:
F-17
<PAGE> 31
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 3 - INVESTMENT IN JOINT VENTURE (Continued)
<TABLE>
<CAPTION>
December 31,
1996
------------------
<S> <C>
Assets:
Cash $ 25,052
Prepaid expense 75,000
------------------
Total Assets $ 100,052
==================
Liabilities and equity:
Liabilities:
Accounts payable and accrued expenses $ 15,069
------------------
Equity:
The Company 123,953
Other (38,970)
------------------
Total Equity 84,983
------------------
Total Liabilities and Equity $ 100,052
==================
</TABLE>
<TABLE>
<CAPTION>
For the
Year Ended
December 31,
1996
------------------
<S> <C>
Gross revenue $ --
Cost of sales and operational expenses 65,117
------------------
Net loss $ (65,117)
==================
Company interest in net loss $ (26,047)
==================
</TABLE>
NOTE 4 - PATENTS/INTELLECTUAL PROPERTY
During 1996, the Company acquired certain intellectual property as a
result of the purchase of its subsidiaries. Intellectual property
consisted of the following at December 31, 1996:
<TABLE>
<CAPTION>
Accumulated
Amount Amortization
-------- ------------
<S> <C> <C>
Patent Pending Qualture $ 22,243 $ --
Product Rights Qualture 102,519 --
Product Registrations Sea Care 604,610 5,038
-------- ------------
Total Intellectual Property $729,372 $ 5,038
======== ============
</TABLE>
F-18
<PAGE> 32
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 4 - PATENTS/INTELLECTUAL PROPERTY (Continued)
The Patent Pending Qualture has been capitalized and will not be
amortized until the patent is granted. The Product Rights Qualture will
be amortized over their estimated useful lives of 10 years. The Product
Registrations for SeaCare will be amortized over their estimated useful
lives of 20 years. Amortization of intellectual property was $5,038 and
$0 for the years ending December 31, 1996 and 1995, respectively.
NOTE 5 - NOTES PAYABLE
Notes payable at December 31, 1996 and 1995 consisted of the following:
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Note payable to corporation, 7% interest, maturing October 1,
2000, quarterly payments of various
amounts, unsecured $ 225,000 $ --
Note payable to corporation, 6% interest, principal
and interest, due March 31, 1997, unsecured (Note 10) 31,564 --
Note payable to corporation, 6% interest principal
and interest due March 31, 1997, unsecured (Note 10) 44,000 --
--------- --------
Total 300,564 --
Less Current Maturities (100,564) --
--------- --------
Long-Term Debt $ 200,000 $ --
========= ========
</TABLE>
Aggregate maturities required on long-term debt at December 31, 1996
are as follows:
<TABLE>
<CAPTION>
Year Amount
----- --------
<S> <C>
1997 $100,564
1998 50,000
1999 50,000
2000 100,000
--------
Total $300,564
========
</TABLE>
F-19
<PAGE> 33
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 6 - STOCK OPTIONS
The Board of Directors has adopted a 1996 Non-Statutory Stock Option
Plan and reserved 1,000,000 shares for issuance to eligible full and
part-time employees, officers, directors and consultants. Options are
non-transferrable and those issued to date are exercisable during a
term of not more than (5) years from the grant date. The options are
issuable in such amounts and at such prices as determined by the Board
of Directors, except that each option price of each grant will not be
less than twenty percent (20%) of the market value of such shares on
the date the options are granted.
The following table summarizes common stock options outstanding as of
December 31, 1996.
<TABLE>
<CAPTION>
Exercise Fair
Date Price Per Value on Options Options Options
Granted Share Grant Date Granted Exercised Outstanding
------------------ --------- ---------- ------- --------- -----------
<S> <C> <C> <C> <C> <C>
August 21, 1996 $ 0.15 $ 0.79 200,000 1,000 199,000
November 20, 1996 $ 0.90 $ 1.00 350,000 -- 350,000
------- --------- -----------
550,000 1,000 549,000
======= ========= ===========
Weighted average value of options granted $ 0.30
Total compensation cost recognized from issuance of options $ 163,000
</TABLE>
The Fair Value of the options is based on the average offering price of
the Company's common stock in the four months prior to the grant date
of the options less a discount due to the restricted nature of the
employee stock options.
Of the 550,000 options granted to date, 549,000 options remain
unexercised and expire five years from the date of the grant.
Outstanding options are not considered in the loss per share
calculation as they are antidilutive. The grant of options on August
21, 1996 and November 20, 1996 resulted in the recognition of $163,000
of compensation as a result of the difference between the exercise
price and fair market price of the Company's common stock.
NOTE 7 - RELATED PARTY TRANSACTIONS
During 1996 and 1995, the Company received advances from a shareholder
of $5,000 and $31,500 respectively. The advances were converted to
equity during the year received.
During 1996, the Company rented space for its offices from an entitiy
controlled by an officer of the Company. Rent payments totalled $12,000
for the year.
F-20
<PAGE> 34
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 8 - COMMITMENTS AND CONTINGENCIES
The Company leases office space under various operating lease
agreements which expire through 2000. Future commitments under
non-cancelable operating leases are as follows:
<TABLE>
<CAPTION>
Year Amount
----- --------
<S> <C>
1997 $ 40,650
1998 47,850
1999 23,250
2000 5,850
--------
Total $117,600
========
</TABLE>
The Company has commited to contribute $1,000,000 to a joint venture
of which it is a partner. As of December 31, 1996, the Company had
contributed $150,000. The remaining $850,000 is to be contributed
during 1997. (Note 3 and 10)
NOTE 9 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern. However,
the Company has experienced significant operating losses and does not
have a proven source of revenues. Management plans to obtain equity
financing sufficient to cover its operating costs during the
development stage until operations generate sufficient revenues to
cover operating expenses. Subsequent to December 31, 1996, the Company
has raised approximately $1,000,000 in equity financing. (Note 10)
NOTE 10 - SUBSEQUENT EVENTS
During the period subsequent to the financial statement date, the
Company has completed private placements of its common stock; 461,339
shares of common stock were issued for $1,135,861 with net proceeds of
$968,118 to the Company.
In accordance with the Joint Venture Agreement entered into by the
Company (Note 3) the Company contributed $250,000 to the Joint Venture
during January 1997.
In March 1997, the Company entered into an operating lease for office
space. The future minimum payments are reflected in the schedule at
Note 7.
In February 1997, the Company repaid notes payable totaling $75,564.
F-21
<PAGE> 35
ABS GROUP INC.
(Formerly Advanced Biological Systems, Inc.)
(A Development Stage Company)
Notes to the Consolidated Financial Statements
December 31, 1996 and 1995
NOTE 11 - PROFORMA COMBINED STATEMENTS OF OPERATIONS
The historical information contained herein has been combined on a
proforma basis. The purchase of MRUSA was effective November 7, 1996
and the purchase of FMT was effective December 31, 1996. The purchases
have been presented as though they were effective January 1, 1996 and
1995. All significant accounting policies for MRUSA and FMT are the
same as the Company's defined in Note 1.
<TABLE>
<CAPTION>
For the Year Ended December 31, 1996
-----------------------------------------------------------------------------------
ABS Proforma Proforma
Group Inc. FMT MRUSA Adjustments Combined
----------- ----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
NET SALES $ -- $ 229,596 $ 17,812 $ -- $ 247,408
COST OF SALES -- 240,719 5,210 -- 245,929
----------- ----------- ----------- ----------- -----------
GROSS MARGIN -- (11,123) 12,602 -- 1,479
EXPENSES 1,251,944 490,298 35,172 68,787 1,846,201
----------- ----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (1,251,944) (501,421) (22,570) (68,787) (1,844,722)
OTHER INCOME
(EXPENSE) (106,951) (180,206) 105 -- (287,052)
----------- ----------- ----------- ----------- -----------
NET LOSS $(1,358,895) $ (681,627) $ (22,465) $ (68,787) $(2,131,774)
=========== =========== =========== =========== ===========
NET LOSS PER SHARE $ (1.13)
===========
</TABLE>
<TABLE>
<CAPTION>
For the Year Ended December 31, 1995
-----------------------------------------------------------------------------------
ABS Proforma Proforma
Group Inc. FMT MRUSA Adjustments Combined
----------- ----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
NET SALES $ -- $ 467,152 $ -- $ -- $ 467,152
COST OF SALES -- 145,784 -- -- 145,784
----------- ----------- ----------- ----------- -----------
GROSS MARGIN -- 321,368 -- -- 321,368
EXPENSES -- 515,133 -- 68,787 583,920
----------- ----------- ----------- ----------- -----------
LOSS FROM OPERATIONS -- (193,765) -- (68,787) (262,552)
OTHER INCOME
(EXPENSE) (45,058) -- -- -- (45,058)
----------- ----------- ----------- ----------- -----------
NET LOSS $ (45,058) $ (193,765) $ -- $ (68,787) $ (307,610)
=========== =========== =========== =========== ===========
NET LOSS PER SHARE $ (0.38)
===========
</TABLE>
The proforma adjustments represent goodwill amortization of $20,557,
product rights amortization of $10,252, and product registrations
amortization of $37,978.
F-22
<PAGE> 36
ITEM 8. CHANGES IN THE AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
No disagreements with accountants on accounting and financial
disclosure matters existed during the Company's calendar year ended December 31,
1996.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The Directors and Executive Officers of ABS Group Inc. (and its
subsidiaries as indicated hereunder) as of March 31, 1997 are as follows:
<TABLE>
<CAPTION>
Name and Address *Position(s) Held Age
- ---------------- ----------------- ---
<S> <C> <C>
Emanuel A. Floor President, Treasurer and 61
2936 Sierra Point Place Chairman of the Board of
Salt Lake City, Utah 84109 Directors
Oleg Batratchenko Secretary and a Director 31
575 Ridgeland Terrace
Englewood, New Jersey 07631
Steven I. Gelman Vice President Marketing 38
P.O. Box 373
Nederland, Colorado 80466
Samuel J. Grant -- 44
12 Berrigan Avenue
Annadale, Townsville
Queensland, Australia
</TABLE>
* See narrative information below regarding additional positions held by
each of these persons in ABS Group Inc.'s subsidiaries.
Directors are elected to serve until the next annual meeting of
stockholders and until their successors have been elected and have qualified.
Officers are appointed to serve until the meeting of the Board of Directors
following the next annual meeting of stockholders and until their successors
have been elected and have qualified.
EMANUEL A. FLOOR has served as President and Chairman of the Board of Directors
of ABS Group Inc. since July 10, 1990, has served as Treasurer since October,
1992 and served as Secretary from March, 1993 to August 1996. Mr. Floor also
serves as Vice President, Treasurer and a Director of both Marine Research USA,
Inc. ("MRUSA") and Future Medical Technologies, Inc. ("FMT") and serves as a
director in Marine Research Pty. Ltd. ("MRPL"). Mr. Floor assumed his current
positions in MRUSA, MRPL and FMT in late 1996 upon consummation of ABS Group
Inc.'s acquisition of such firms. See Item 1 hereto. Since 1970, Mr. Floor has
also served as the President of Emanuel A. Floor and Associates, Inc., and since
1989 he has served as President of the Park Group, Inc.
-14-
<PAGE> 37
Both of these private corporations provide consulting services to business
companies in the areas of public relations, marketing, management, development
and finance. From 1975 to 1986, Mr. Floor was president, chief executive officer
and director of Triad Properties, Inc., a real estate development and marketing
company which, through various subsidiaries, owned, managed and developed (among
other properties) the Salt Lake International Center, a 900-acre business park
adjacent to the Salt Lake City International Airport in Utah; Triad Center
Houston, a 21-acre parcel of undeveloped property at the Galleria in Houston,
Texas; and the Cone Ranch, a 12,000 acre parcel of undeveloped property near
Tampa, Florida. In February 1987, several months following Mr. Floor's
resignation, Triad Properties, Inc. and several related entities filed for
protection in consolidation proceedings under the Bankruptcy Code. Between 1986
and 1987, as a result of a down-turn in the real estate market, Kimball
Associates, Inc., Bertagnole Investments Co., Bertagnole Properties and East
Canyon Resort Trust, all of which were recreational real estate development
firms for which Mr. Floor was an officer and/or director and less than a 5%
shareholder, filed for relief under the Bankruptcy Code. As a result of his
personal guarantee of substantial amounts of indebtedness of these entities, Mr.
Floor filed for personal bankruptcy in 1988 and was discharged from bankruptcy
on December 11, 1989. Additionally, Mr. Floor filed for Chapter 13 proceedings
in April 1993 and received a discharge in June 1995. Mr. Floor holds a degree in
Economics (University of Utah - 1957) and has been active in public and civic
affairs and served for eight years as a Trustee to the University of Utah (which
includes the University Hospital and Research Center). He also served on the
Board of Trustees for LDS Hospital and Holy Cross Hospital (now Salt Lake
Regional Medical Center) in Salt Lake City, Utah.
OLEG BATRATCHENKO has been Secretary and a Director of ABS Group Inc. since
August 1996 and has also served as a Director of FMT since on or about January
1997. Mr. Batratchenko has a solid international background with over eight
years of financial research and investment banking experience. Since April 1995
he has been Vice President of Research at Berkshire International Finance, Inc.
("BIF"), a New York based business and consulting firm which provides a variety
of services and advise to the business, investment and financial community. At
BIF, Mr. Batratchenko currently manages the activities of the equity research
department and provides analytical support for the process of banking clients
selection, monitoring and deals structuring. He is also a Senior Vice President
of Fifth Avenue Research and Advisory Group, Inc., managing an array of public
relations services rendered to a number of growth oriented companies listed on
NASDAQ'S SmallCap Market. From 1993 to 1995 Mr. Batratchenko was employed in the
capacity of Research Analyst by Safian Investment Research, Inc., a White
Plains, NY, financial research and money management firm. Prior thereto he
worked as a Performance Analyst with Neuberger and Berman, a New York money
management firm. Between 1987 and 1990 Mr. Batratchenko was a Research Associate
at the Moscow Institute of World Economy and International Relations, where he
completed a Master's program in Economics. Mr. Batratchenko also has a Master
Degree in International Political Economy from New York University and is an
Associate member of the Financial Analysts - Money Managers Society (New York).
STEVEN I. GELMAN has been Vice President Marketing of ABS Group Inc. since
January 1997 and has also served as President and Director of FMT since January
1997. In late 1996, Mr. Gelman served as a consultant to the then owners of FMT
assisting in a plan of restructuring with greater
-15-
<PAGE> 38
focus on marketing and existing products and thereafter became President and a
Director of FMT upon ABS Group Inc.'s acquisition thereof. From 1994 through
late 1996 Mr. Gelman served as Vice President for Sales/Marketing for LIDA
Manufacturing ("LIDA"), a private company based in Kenosha, Wisconsin and from
April 1992 until his association with LIDA served as a marketing consultant to a
variety of companies engaged in the sale of equipment to the laboratory and
medical markets. From 1983 to early 1992 Mr. Gelman served as Vice President of
Marketing for Gelman Sciences located in Ann Arbor, Michigan managing a group of
approximately 45 persons engaged in marketing and engineering research and
development. Mr. Gelman received his Bachelor of Arts degree in Biology and
Economics from Bennington College in 1983 and thereafter served on its Board of
Trustees from 1983 to 1985. Mr. Gelman subsequently received (in 1996) his
Masters in Business Administration from the University of Denver and is
currently a candidate (with anticipated date of June 1997) for a Masters degree
in Environmental Engineering from the Colorado School of Mines in Boulder,
Colorado.
SAMUEL J. GRANT has served as President, CEO and a Director of MRUSA, a Utah
corporation and 80% owned subsidiary of ABS Group Inc. since November 1996 and
owns the balance of 20% of MRUSA's outstanding securities. He also serves as
Managing Director (since November 1996) of MRUSA's wholly owned subsidiary -
MRPL, an Australian limited company. Since 1982 Mr. Grant has been engaged in
the development of the special processes required to harvest the sea cucumber
and convert it and other sea based products into therapeutic products and became
Managing Director of Pacific Grant Corporation which initially manufactured,
marketed and distributed such products. For further information regarding MRPL
(and its products) reference is herewith made to Item 1, Description of
Business. Mr. Grant (a) previously served as Managing Director for a number of
Australian based companies and (b) has extensive experience in export marketing
having provided marketing related consulting services to various firms engaged
in such diverse areas as leather, textiles, minerals and industrial and
pharmaceutical chemicals. Mr. Grant received his education in Australia having
attended St. Benedict's College and Geralton Business College, both located in
Western Australia. Mr. Grant has been a member of the New York Academy of
Science since January of 1991.
Security ownership of management - See Item 11 hereof with respect to
security ownership, if any, of management and Item 10 footnote (c) with respect
to options granted to certain members of management in accordance with 1996
Non-Statutory Stock Option Plan.
-16-
<PAGE> 39
ITEM 10. EXECUTIVE COMPENSATION
Remuneration paid (and/or accrued, if applicable and so specifically
indicated) to officers and/or directors of the Company during calendar year
ended December 31, 1996 is indicated in the chart appearing directly
hereinafter.
<TABLE>
<CAPTION>
Securities
Principal Salaries, Fees, or Property, Aggregate of
Capacities Directors' Fees, Insurance Benefits Contingent
Name of In Which Commissions or Reimbursement, Forms of
Individual Served and Bonuses Personal Benefits Remuneration
- ---------- -------------------------- ---------------- ------------------ ------------
<S> <C> <C> <C> <C>
Emanuel A. Floor President, Treasurer, $86,500 (a) $38,198 (b)(c) $
and Chairman of the
Board of Directors (i)
Oleg Batratchenko Secretary and a Director (ii) $ -0- $ (c) $
Samuel J. Grant Managing Director of $16,000 $ $
Marine Research Pty. Ltd.,
President and Director of
Marine Research USA, Inc.
Steven I. Gelman President and Director of $ $ 2,076 $
Future Medical Technologies,
Inc. (iii)
</TABLE>
There are no current written employment agreements between ABS Group
Inc. and any of its officers and directors.
No compensation of any nature was paid to any director for services
rendered to the Company in such capacity excepting for repayment made, if any,
for accountable expenses incurred on the Company's behalf.
(i) Mr. Floor also serves as a Director in MRUSA, MRPL and FMT and is Vice
President and Treasurer of both MRUSA and FMT.
(ii) Mr. Batratchenko also serves as a Director of FMT.
(iii) Mr. Gelman also serves as Vice President Marketing of ABS Group Inc.
(a) Includes $14,500 accrued in calendar year 1995 and paid in 1996.
(b) Consists of (i) office rent and expenses - $12,590, (ii) medical
insurance premiums - $11,629, (iii) auto allowance - $6,000 and (iv)
reimbursement for business expenses - $7,979.
(c) In accordance with the terms and conditions of a 1996 Non-Statutory
Stock Option Plan, Messrs. Floor and Batratchenko were each granted in
August 1996 options to purchase up to 50,000 shares of Company common
stock exercisable at $.15 per share while Mr. Floor was granted in
November 1996, additional options to purchase up to 350,000 shares of
Company common stock exercisable at $.90 per share. Through calendar
year 1996 none of such options were exercised. See also Note 6 to
consolidated financial statements. In March of 1997 Mr. Floor exercised
5,000 of his options to purchase shares at $.15 per share.
-17-
<PAGE> 40
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners - The following
persons and/or firms are known to the Company to be the beneficial owners of
more than 5% of the 3,885,359 shares of the Company's outstanding $.001 par
value Common Stock as of March 31, 1997. To the best of the Company's knowledge
each individual and/or firm has beneficial ownership of the shares and each
individual and/or firm has sole voting power and sole investment power with
respect to the number of shares beneficially owned.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- ------------------- -------------------- --------
<S> <C> <C>
Brookfield Associates, Ltd. 300,000 7.72%
c/o Akar Verwaltung AG
Seestrasse 17
P.O. Box 53
CH-8702 Zollikon 2
Switzerland
Targas Foundation 400,000 10.32%
c/o Akar Verwaltungs AG
Seestrasse 17
P.O. Box 53
CH-8702 Zollikon 2
Switzerland
Biopharmaceutics, Inc. 425,000 10.94%
900 Station Road
Bellport, New York 11713
Sierra Growth & Opportunity Inc. 1,000,000 25.24%
551 Fifth Avenue
New York, New York 10017
Samuel J. Grant 500,000 12.87%
12 Berrigan Avenue
Annadale, Townsville
Australia
</TABLE>
(b) Security Ownership of Management - The number and percentage of
shares of $.0001 par value Common Stock of the Company owned of record and
beneficially, by each current officer and director of the Company (or officer
and/or director in any of the Company affiliates if so specifically indicated)
and by all current officers and directors of the Company as a group, is as
follows - as of March 31, 1997. To the best of the Company's knowledge each
individual has beneficial ownership of the shares and each individual has sole
voting power and sole investment
-18-
<PAGE> 41
power with respect to the number of shares beneficially owned.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Beneficial Owner Beneficial Ownership of Class
- ------------------- -------------------- --------
<S> <C> <C>
Emanuel A. Floor 13,392 (1)(2) .34%
2936 Sierra Point Place
Salt Lake City, Utah 84109
Oleg Batratchenko -0- (2) -0-%
575 Ridgeland Terrace
Englewood, New Jersey 07631
Steven I. Gelman (3) -0- -0-%
P.O. Box 373
Nederland, Colorado 80466
Samuel J. Grant (4) 500,000 12.87%
12 Berrigan Avenue
Annadale, Townsville
Australia
All offices and directors
as a group (4 person(s)(5) 513,392 13.21%
</TABLE>
(1) Mr. Floor owns 5,000 shares of record and beneficially. Additionally,
Mr. Floor may be deemed to be the beneficial owner of 8,392 shares held
of record by The Five Floors, Inc., a Utah corporation, as a result of
his status as an officer and principal shareholder of such corporation
and the fact that such corporation's shares are owned, in their
entirety, by Mr. Floor and his family.
(2) Does not include options granted to Messrs. Floor and Batratchenko in
accordance with ADBS' 1996 Non-Statutory Stock Option Plan. See
footnote (c) to Item 10 hereof.
(3) Mr. Gelman in addition to serving as Vice President of ADBS is also
President and a Director of FMT.
(4) Mr. Grant serves as President and a Director of MRUSA and Managing
Director of MRPL.
(5) Includes Mr. Grant who is not an officer or director of ADBS but serves
as President of certain subsidiaries as indicated in footnote 4 hereto.
The Company does not know of any arrangement or pledge of its
securities by persons now considered in control of the Company that might result
in a change of control.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For the calendar year ended December 31, 1996 there have not been any
material transactions between the Company and any director, executive officer,
security holder or any member of the immediate family of any of the
aforementioned which exceeded $60,000 other than as may be indicated in this
Form 10-KSB and the consolidated financial statements and footnotes thereto
which are a part hereof.
-19-
<PAGE> 42
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
Reference is herewith made to page F-1 through F-22 inclusive of this
10-KSB with respect to the consolidated financial statements and notes thereto
included therein.
No exhibits are being filed with this Form 10-KSB.
During the last quarter of the Company's calendar year ended December
31, 1996 a Form 8-K was filed on December 16, 1996 with date of report of
December 2, 1996.
-20-
<PAGE> 43
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.
ABS GROUP INC.
By /s/ Emanuel A. Floor
-------------------
Emanuel A. Floor, President
Date: April 14, 1997
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.
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Emanuel A. Floor President, Treasurer, Dated: Apr. 14, 1997
- --------------------------- and Chairman of the
Emanuel A. Floor Board of Directors
/s/ Oleg Batratchenko Secretary and a Director Dated: Apr. 14, 1997
- --------------------------
Oleg Batratchenko
</TABLE>
-21-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 65,977
<SECURITIES> 0
<RECEIVABLES> 40,012
<ALLOWANCES> 9,719
<INVENTORY> 87,992
<CURRENT-ASSETS> 196,322
<PP&E> 109,400
<DEPRECIATION> 1,807
<TOTAL-ASSETS> 1,935,765
<CURRENT-LIABILITIES> 435,959
<BONDS> 0
0
0
<COMMON> 329
<OTHER-SE> 1,167,336
<TOTAL-LIABILITY-AND-EQUITY> 1,935,765
<SALES> 17,812
<TOTAL-REVENUES> 17,812
<CGS> 5,209
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,313,767
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 711
<INCOME-PRETAX> (1,299,555)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,299,555)
<DISCONTINUED> (80,196)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,379,751)
<EPS-PRIMARY> (0.99)
<EPS-DILUTED> (0.99)
</TABLE>
