FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 33-37674-NY
EDG CAPITAL, INC.
(Exact name of small business issuer as specified in its charter)
New York 11-3023098
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
700 Stewart Avenue, Garden City, NY 11530
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(Address of principal executive offices) (Zip Code)
(516) 222-7749
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(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES |X| NO |_|
The number of shares of the issuer's common stock, par value $.001 per share,
outstanding on November 6, 2000 was 10,771,858 shares.
<PAGE>
EDG CAPITAL, INC.
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Page(s)
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PART I. Financial Information:
Item 1. Consolidated Financial Statements
Condensed Balance Sheets - September 30, 2000 (Unaudited)
and December 31, 1999 3.
Condensed Statements of Operations (Unaudited) -
Three and Nine Months Ended September 30, 2000 and 1999 4.
Condensed Statements of Cash Flows (Unaudited) -
Nine Months Ended September 30, 2000 and 1999 5.
Notes to Condensed Financial Statements (Unaudited) 6.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8.
PART II. Other Information 10.
SIGNATURES 11.
EXHIBITS: Exhibit 27 - Financial Data Schedule
<PAGE>
PART I. Financial Information
Item 1. Financial Statements
EDG CAPITAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- ASSETS -
September 30, December 31,
2000 1999
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(Unaudited) (as restated)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,534,132 $ 19,145
Management fee receivable 523,439 435,421
Prepaid expenses and other 72,386 25,575
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TOTAL CURRENT ASSETS 2,129,957 480,141
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PROPERTY AND EQUIPMENT - NET 76,905 9,697
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OTHER ASSETS:
Intangible assets - net 13,611 7,393
Security deposits and other 2,694 2,694
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16,305 10,087
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$ 2,223,167 $ 499,925
=========== ===========
- LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
Accounts payable $ 197,337 $ 70,007
Accrued expenses 17,161 4,134
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TOTAL CURRENT LIABILITIES 214,498 74,141
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COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, par value $.001; authorized 50,000,000 shares;
10,771,858 and 7,891,546 shares issued and outstanding in 2000
and 1999, respectively 10,772 7,892
Additional paid-in capital 2,403,693 389,966
Retained earnings (accumulated deficit) (405,796) 27,926
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2,008,669 425,784
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$ 2,223,167 $ 499,925
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</TABLE>
See notes to condensed consolidated financial statements.
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EDG CAPITAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
--------------------------------------------------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUE:
Management fee income $ 256,107 $ 243,937 $ 696,794 $ 1,053,830
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Medical supplies 181,567 120,679 426,317 376,921
Marketing costs 14,061 6,540 56,914 73,164
General and administrative expenses 286,058 191,695 649,366 515,189
Interest expense 2,937 -- 2,937 --
Interest and other income (2,747) (9,766) (5,018) (9,880)
----------- ----------- ----------- -----------
481,876 309,148 1,130,516 955,394
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE PROVISION
(CREDIT) FOR INCOME TAXES (225,769) (65,211) (433,722) 98,436
Provision (credit) for income taxes -- (23,541) -- 34,551
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (225,769) $ (41,670) $ (433,722) $ 63,885
=========== =========== =========== ===========
EARNINGS (LOSS) PER COMMON SHARE:
Basic and fully diluted $ (.03) $ (.01) $ (.05) $ .01
=========== =========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 8,433,062 7,891,546 8,089,956 7,849,994
=========== =========== =========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
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EDG CAPITAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (433,722) $ 63,885
Adjustments to reconcile net income (loss) to net cash flows from operating
activities:
Depreciation and amortization 6,118 16,455
Compensatory shares 83,876 --
Changes in operating assets and liabilities:
Management fee receivable (88,018) 21,786
Prepaid expenses and other (16,881) (45,827)
Accounts payable 127,330 (35,145)
Accrued expenses 13,027 549
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Net cash (used) provided by operating activities (308,200) 21,703
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (72,996) (11,715)
Patent costs (6,548) (5,878)
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Net cash (used) by investing activities (79,554) (17,593)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from sale of commons shares 1,902,731 10,000
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Net cash provided by financing activities 1,902,731 10,000
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NET INCREASE IN CASH 1,514,987 14,110
CASH, BEGINNING OF YEAR 19,145 7,647
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CASH, END OF YEAR $ 1,534,132 $ 21,757
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 2,937 $ --
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Income taxes paid $ -- $ --
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</TABLE>
See notes to condensed consolidated financial statements.
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EDG CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - DESCRIPTION OF BUSINESS:
EDG Capital, Inc., (the "Company") was incorporated in the State of New
York on August 13, 1990; and was considered a development stage company
until September 2000. On September 13, 2000, the Company acquired
Isotope Solutions, Inc. ("ISI"), a New York corporation formerly known
as Molecular Radiation Management, Inc. Subject to shareholder
approval, the Company intends to amend its certificate of incorporation
to change its name to "Isotope Solutions Group, Inc."
ISI is a biopharmaceutical company engaged in the research, development
and testing of nuclear pharmaceuticals for therapeutic use in the
treatment of various cancers. ISI's research and development is
conducted by clinicians that have entered into long term contracts with
the Company.
The acquisition was effected pursuant to an Agreement and Plan of
Merger (the "Agreement"), dated September 8, 2000, by and among the
Company, MRM Merger Sub, Inc., a New York corporation and a wholly
owned subsidiary of the Company ("Merger Sub"), and ISI. On September
13, 2000, Merger Sub was merged with and into ISI, with ISI being the
surviving corporation, and ISI became a wholly-owned subsidiary of EDG.
Pursuant to the Agreement, all of ISI's outstanding common stock,
excluding its treasury stock which was cancelled, was converted into
the right to receive an aggregate of 7,440,005 shares of the Company's
common stock. Simultaneously with the closing of the acquisition, the
Company effected (a) a 2.57315 for one stock split in the form of a
stock dividend payable to shareholders of record on August 23, 2000
(with all fractional shares being rounded up), and (b) raised gross
proceeds of $2,100,000 from a private placement to accredited
investors, of 2,603,844 shares of common stock at a price of $.8065 per
share.
The merger was accounted for as a reverse acquisition in a manner
similar to a pooling of interests and as a result, the Company has
adopted the fiscal year end of December 31, which is the year end of
ISI, the accounting acquirer.
The accompanying consolidated unaudited condensed financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-QSB. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal accruals and adjustments) considered
necessary for a fair presentation have been included. Operating results
for the three and nine months ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 2000.
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<PAGE>
EDG CAPITAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 2 - PRIVATE PLACEMENT:
As mentioned above, in September 2000, the Company completed the sale
of 2,603,844 (post-split) shares of its common stock at a per share
price of $.8065, realizing net proceeds of $1,902,731. The Company also
issued 104,000 shares of its common stock to two finders of the
acquisition (see Note 1) which shares were valued in the aggregate at
$83,876.
NOTE 3 - INCOME (LOSS) PER COMMON SHARE:
Income (loss) per common share for the three and nine month periods
were calculated by dividing net income (loss) for the period by the
weighted average number of shares outstanding for each respective
period in accordance with SFAS No. 128.
All per share and weighted average share amounts have been restated to
reflect the stock split referred to in Note 1.
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
EDG Capital, Inc. (the "Company") was incorporated in the State of New
York on August 13, 1990; and was considered a development stage company
until September 2000. On September 13, 2000, the Company acquired
Isotope Solutions, Inc. ("ISI"), a New York corporation formerly known
as Molecular Radiation Management, Inc. Subject to shareholder approval,
EDG intends to amend its certificate of incorporation to change its name
to Isotope Solutions Group, Inc.
ISI is a biopharmaceutical company engaged in the research, development
and testing of nuclear pharmaceuticals for therapeutic use in the
treatment of various cancers. ISI's research and development is
conducted by clinicians that have entered into long term contracts with
the Company.
The financial information presented herein is derived from the: (i)
condensed consolidated balance sheets as of September 30, 2000 and as of
December 31, 1999, (ii) condensed consolidated statements of operations
for the three and nine month periods ended September 30, 2000 and 1999,
and (iii) condensed consolidated statements of cash flows for the nine
month periods ended September 30, 2000 and 1999.
RESULTS OF OPERATIONS
REVENUES:
Revenues for the three months ended September 30, 2000 were $256,000 as
compared to $244,000 for the corresponding period of the prior year.
However, revenues decreased to $697,000 from $1,054,000 when comparing
the nine months ended September 30, 2000 to September 30, 1999. This
nine month period decrease of $357,000 or 33.8%, was due to diminished
revenue generated by the clinician research teams during this period. To
date, patient accrual, and income derived from the treatment of those
patients, has been dependent to a great extent, on a public relations
effort, which resulted in extensive media exposure. The Company's
revenues have fluctuated depending on the timing of media exposure.
Management intends to embark on a comprehensive advertising program
commencing in 2001 to complement the Company's current public relations
effort.
COSTS AND EXPENSES:
Overall costs and expenses increased to $482,000 from $309,000 when
comparing the three months ended September 30, 2000 to the three months
ended September 30, 1999, an increase of $173,000 or 56%. For the nine
month periods in 2000 and 1999, costs and expenses increased to
$1,131,000 from $955,000, an increase of $176,000 or 18.4%. These
increases were due to the following: medical supplies costs increased by
$61,000 and $49,000, respectively, for the three and nine month periods
ended in September 2000 versus the previous year periods, primarily due
to start-up , equipment and supply costs relating to ISI's new contract
with New York Medical Oncology, PC d/b/a/ Center for Medical Oncology.
General and administrative expenses increased by $94,000 and $134,000
for the three and nine month periods ended September 30, 2000 versus the
corresponding periods ended September 30, 1999, primarily due to (a)
wage increases and new hires attributable to commencement of new
clinical trials for the treatment of high-grade brain tumors under ISI's
new contract with the Mitchell E. Levine, MD, PC d/b/a Center for
Neuro-Oncology and (b) a finder's fee of $84,000 paid in
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connection with the Company's acquisition of ISI.
NET INCOME (LOSS)
For the three month period ended September 30, 2000 the Company
reflected a net loss of $226,000 ($.03 per share). For the three month
period ended September 30, 1999 the Company reflected a net loss of
$42,000 ($.01 per share). The increased loss in the year 2000 was due to
the increase in costs and expenses described above.
For the nine months ended September 30, 2000 the Company reflected a net
loss of $434,000 ($.05 per share) versus net income of $64,000 ($.01 per
share) for the nine months ended September 30, 1999. This change from a
profit to a loss was due to both the decrease in revenues and increase
in costs and expenses as described above.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2000 the Company's balance sheet reflected cash of
$1,534,000, working capital of $1,916,000 and a current ratio of
approximately 10 to 1. At the Company's year end of December 31, 1999,
the balance sheet reflected cash of only $19,000, working capital of
$406,000 and a current ratio of 6.5 to 1. The primary reason for the
positive increase in the Company's liquidity was the completion of a
private placement of common stock in September 2000, which resulted in
net cash proceeds of approximately $1,900,000.
The Company believes that its cash on hand and revenues it expects to
generate from its business will be sufficient to fund operations for at
least the next twelve months. Further, management is not aware of any
material trend, event or capital commitment which would potentially
adversely affect liquidity.
FORWARD-LOOKING STATEMENTS
The statements contained in this Quarterly Report on Form 10-QSB that
are not historical facts are forward-looking statements. Such
forward-looking statements may be identified by, among other things, the
use of forward-looking terminology such as "believes," "expects,"
"intends," "plans," "may," "will," "should," or "anticipates," or the
negative thereof or other variations thereon or comparable terminology,
or by discussions of strategy that involve risks and uncertainties.
These forward-looking statements involve predictions. The Company's
actual results, performance or achievements could differ materially from
the results expressed in, or implied by, these forward-looking
statements. Potential risks and uncertainties that could affect the
Company's future operating results include, but are not limited to, the
risks described in Exhibit 99.1 to the Company's Annual Report on Form
10-KSB for the year ended June 30, 2000, including its need to raise
additional capital, its history of losses, the high risk nature of its
business and its dependence on a few large clients, as well as economic
conditions.
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<PAGE>
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds
During the nine months ended September 30, 2000, the Company made the
sales of unregistered securities described below:
On May 17, 2000, the Company sold 154,389 shares of common stock in a
private placement to Larry Kaplan for an aggregate of $60,000. The
Company relied upon Section 4(2) of the Securities Act of 1933 as the
basis for an exemption from registration for the transaction, because
the transaction did not involve any public offering.
On September 13, 2000, the Company issued 7,440,005 shares of common
stock to 13 former shareholders of Isotope Solutions, Inc. ("ISI"), in
connection with the Company's acquisition of ISI on such date. Also on
September 13, 2000, the Company sold 1,284,500 shares of common stock at
a price of $.8065 per share to 25 accredited investors in the initial
closing of a private placement. On September 26, 2000, the Company sold
an additional 1,319,344 shares at a price of $.8065 per share to 50
accredited investors in a second closing of the private placement. The
Company relied upon Section 4(2) of the Securities Act of 1933 and Rule
506 of Regulation D as the basis for an exemption from registration for
the transactions, because the transactions did not involve any public
offering.
On September 13, 2000, the Company adopted the EDG Capital, Inc. 2000
Long-Term Incentive Plan, providing for the grant of 1,247,983 shares of
common stock to officers, directors and employees of, and consultants
to, the Company, subject to shareholder approval, and granted options to
purchase an aggregate of 673,000 shares of common stock to officers,
director and employees of, and consultants to, the Company pursuant to
the Plan, subject to shareholder approval of such awards.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
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27.1 Financial data schedule.
(b) Reports on Form 8-K
On September 19, 2000, the Company filed a Form 8-K to report under
Item 1 thereof a change in control of the Company that occurred on
September 13, 2000.
On October 5, 2000, the Company filed a Form 8-K and a Form 8-K/A to
report under Item 4 thereof a change in the Company's certifying
accountants.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: November 13, 2000 By: /s/ Jack S. Schwartzberg
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Jack S. Schwartzberg, Chief
Executive Officer and President
Date: November 13, 2000 By: /s/ Shraga D. Aranoff
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Shraga D. Aranoff, Vice President and
Treasurer (Principal Accounting Officer)
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