<PAGE>
=========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended: JUNE 30, 1997
--------------
[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 0-19241
INVITRO INTERNATIONAL
--------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
California 33-0149560
--------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
16632 Millikan Avenue, Irvine, California 92606
--------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(714) 851-8356
(Not applicable)
--------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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 the past 90 days. YES [X] NO [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: Common Stock, without
par value, outstanding as of August 14, 1997: 14,028,300 shares.
Transitional Small Business Disclosure Format (check one):
YES [ ] NO [X]
=========================================================================
<PAGE>
INVITRO INTERNATIONAL
INDEX
<TABLE>
<CAPTION>
<S> <C> <C>
Page
Number
------
Part I FINANCIAL INFORMATION:
Item 1. Financial Statements:
Consolidated Balance Sheets at June 30, 1997
and September 30, 1996 ................................. 1
Consolidated Statements of Operations for the Nine Months
and Three Months ended June 30, 1997 and 1996 .......... 2
Consolidated Statement of Changes in Shareholders' Equity
for the Nine Months ended June 30, 1997 ................ 3
Consolidated Statements of Cash Flows for the Nine Months
ended June 30, 1997 and 1996 ........................... 4
Notes to Unaudited Consolidated Financial Statements
at June 30, 1997 ....................................... 5
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION:
Management's Discussion and Analysis of
Financial Condition and Results of Operations .......... 8
PART II OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K ................. 11
SIGNATURES .......................................................... 11
</TABLE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in this Report under the caption "Management's
Discussion and Analysis or Plan of Operation" and elsewhere constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause
the actual results or performance of the Company to be materially different
from future results or performance expressed or implied by such
forward-looking statements. Such risk factors include, among others: the
limited cash resources available to the Company, uncertainty as to the
Company's ability to implement its plan to merge with another business
entity, market acceptance of new products, and economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, services and prices, as well as other factors described in this
Report and in prior filings with the Securities and Exchange Commission.
The Company's actual results could differ materially from those suggested
or implied by any forward-looking statements as a result of such risks.
- i -
<PAGE>
PART I. FINANCIAL INFORMATION
INVITRO INTERNATIONAL
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
------------ ------------
<S> <C> <C>
ASSETS:
Current assets:
Cash and cash equivalents .................... $ 169,000 $ 1,209,000
Accounts receivable - net of allowance for
doubtful accounts of $10,000 at
June 30, 1997 and September 30, 1996 ....... 175,000 146,000
Stock subscription receivable ................ -- 250,000
Inventories .................................. 486,000 366,000
Prepaid expenses ............................. 27,000 57,000
------------ ------------
Total current assets ..................... 857,000 2,028,000
Furniture, equipment and leasehold
improvements, net ........................... 161,000 221,000
Deposits and other assets ..................... 133,000 166,000
------------ ------------
Total Assets .................................. $ 1,151,000 $ 2,415,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Accounts payable ............................ $ 67,000 $ 174,000
Accrued payroll and employee benefits ....... 66,000 82,000
Accrued restructuring costs ................. 51,000 51,000
Accrued private placement costs ............. -- 25,000
Other accrued liabilities ................... 9,000 19,000
------------ ------------
Total current liabilities ............... 193,000 351,000
------------ ------------
Commitments and Contingencies
Shareholders' Equity:
Preferred stock, no par value;
1,000,000 shares authorized;
no shares issued or outstanding ........... -- --
Common stock, no par value;
40,000,000 shares authorized;
Issued and outstanding, 14,028,300 shares
at June 30, 1997 and 13,228,365 shares
at Sept 30, 1996 ........................ 25,036,000 24,811,000
Subscribed but not paid for and not issued,
799,935 shares at Sept 30, 1996 ......... -- 225,000
Accumulated deficit ......................... (24,127,000) (23,028,000)
Currency translation adjustment ............. 49,000 56,000
------------ ------------
Total shareholders' equity .............. 958,000 2,064,000
------------ ------------
Total Liabilities and Shareholders' Equity .... $ 1,151,000 $ 2,415,000
============ ============
</TABLE>
See accompanying notes to financial statements.
-1-
<PAGE>
INVITRO INTERNATIONAL
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months ended Nine Months ended
June 30, June 30,
------------------------ ------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES ...................... $ 181,000 $ 327,000 $ 604,000 $ 812,000
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Costs of revenues ........... 102,000 178,000 391,000 511,000
Selling, general and
administrative expenses ... 277,000 478,000 1,296,000 1,515,000
Research and development .... 3,000 28,000 41,000 171,000
----------- ----------- ----------- -----------
Total costs and expenses .. 382,000 684,000 1,728,000 2,197,000
----------- ----------- ----------- -----------
Operating loss ................ (201,000) (357,000) (1,124,000) (1,385,000)
----------- ----------- ----------- -----------
Nonoperating income (expense):
Investment income ........... 3,000 16,000 25,000 55,000
----------- ----------- ----------- -----------
Net loss ...................... $ (198,000) $ (341,000) $(1,099,000) $(1,330,000)
=========== =========== =========== ===========
Net loss per common share ..... $(0.02) $(0.03) $(0.08) $(0.11)
=========== =========== =========== ===========
Weighted average
common shares outstanding ... 14,028,300 12,372,922 14,028,300 12,103,605
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
-2-
<PAGE>
INVITRO INTERNATIONAL
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Common Stock Common Stock Subscriptions Currency Total
------------------------ -------------------------- Accumulated translation Shareholders'
Shares Amount Shares Amount deficit adjustments Equity
---------- ------------ ----------- ------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at
September 30,
1996 ........... 13,228,365 $ 24,811,000 799,935 $ 225,000 $ (23,028,000) $ 56,000 $ 2,064,000
Payment of
common stock
subscription.... 799,935 225,000 (799,935) (225,000) -- -- --
Net loss for
the nine
months ended
June 30, 1997... -- -- -- -- (1,099,000) -- (1,099,000)
Currency
translation
adjustments .... -- -- -- -- -- (7,000) (7,000)
---------- ------------ ----------- ------------- ------------- ----------- ------------
Balances at
June 30, 1997 .. 14,028,300 $ 25,036,000 -0- $ -0- $ (24,127,000) $ 49,000 $ 958,000
========== ============ =========== ============= ============= =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
INVITRO INTERNATIONAL
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months ended
June 30,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ....................................... $ (1,099,000) $ (1,330,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization .............. 84,000 77,000
Changes in operating assets and liabilities:
Accounts receivable ...................... (29,000) 2,000
Inventories .............................. (120,000) 22,000
Prepaid expenses and other assets ........ 42,000 20,000
Accounts payable and accrued expenses .... (133,000) (46,000)
------------ ------------
Net Cash Provided By (Used In)
Operating Activities ......................... (1,255,000) (1,255,000)
------------ ------------
INVESTING ACTIVITIES:
Proceeds from sale of equipment ................ -- 40,000
Proceeds from marketable securities ............ -- 991,000
Capital expenditures ........................... (2,000) (26,000)
Additions to capitalized patent costs .......... (2,000) (13,000)
------------ ------------
Net Cash Provided By (Used In)
Investing Activities ......................... (4,000) 992,000
------------ ------------
FINANCING ACTIVITIES:
Net cash provided by sale of common stock ...... 225,000 --
------------ ------------
Effect of exchange rate changes on cash ........ (6,000) (4,000)
------------ ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS ......................... (1,040,000) (267,000
Cash and cash equivalents at beginning of year . 1,209,000 1,165,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD ..... $ 169,000 $ 898,000
============ ============
Supplemental disclosures
of cash flow information:
Cash paid during the period for:
Income taxes ............................. $ -- $ 1,000
============ ============
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE>
INVITRO INTERNATIONAL
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
NOTE 1 -- INTERIM FINANCIAL INFORMATION.
The accompanying unaudited financial statements of InVitro International, a
California corporation (the "Company") at June 30, 1997 and for the nine
months and three month periods ended June 30, 1997 and 1996 have been
prepared by the Company pursuant to the rules of the Securities and
Exchange Commission and, in the opinion of the Company's management,
include all adjustments necessary for a fair presentation of financial
position, results of operations and cash flows for the interim periods
covered by such statements. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to the Commission's rules. Reference is made to Note 1 of the
Notes to Consolidated Financial Statements contained in the Company's
Annual Report on Form 10-KSB for the fiscal year ended September 30, 1996
for a summary of significant accounting policies utilized by the Company.
It is suggested that the financial statements at June 30, 1997 be read in
conjunction with the audited consolidated financial statements and notes
thereto included in the Company's latest Annual Report on Form 10-KSB.
Results of operations for the nine months and three months ended June 30,
1997 and 1996 may not necessarily be indicative of results for the full
fiscal year.
NOTE 2 -- CASH EQUIVALENTS. For financial reporting purposes, cash
equivalents consist of money market fund accounts and all other highly
liquid investments with a maturity of three months or less when purchased.
At June 30, 1997, the Company had approximately $138,000 on deposit in a
money-market mutual fund.
NOTE 3 -- INVENTORIES. Inventories consist of the following at June 30,
1997 and September 30, 1996:
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
------------ ------------
<S> <C> <C>
Raw materials and work-in-process .. $ 60,000 $ 59,000
Finished goods ..................... 426,000 307,000
------------ ------------
$ 486,000 $ 366,000
============ ============
</TABLE>
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Management has recorded reserves that they believe are appropriate
for obsolete inventory. However, the Company has purchased inventories of
Guardian DNA in anticipation of future sales, and adjustments to the
inventory reserve would be required if such sales are not generated. As of
June 30, 1997, inventories of Guardian DNA represented $354,000 of the
Company's total inventories of $486,000.
-5-
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 4 -- FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS. Furniture,
equipment and leasehold improvements consist of the following at June 30,
1997 and September 30, 1996:
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
------------ ------------
<S> <C> <C>
Furniture and equipment ............ $ 834,000 $ 840,000
Leasehold improvements ............. 206,000 206,000
------------ ------------
1,040,000 1,046,000
Less accumulated depreciation ...... (879,000) (825,000)
------------ ------------
$ 161,000 $ 221,000
============ ============
</TABLE>
NOTE 5 -- EARNINGS PER SHARE. Earnings per share were computed by
dividing net loss for the period by the weighted average number of shares
of common stock and dilutive common stock equivalents. All common stock
equivalents (stock options and warrants) have been excluded from earnings
per share for the periods ended June 30, 1997 and 1996, as the effect of
these common stock equivalents is antidilutive.
NOTE 6 -- COMMITMENTS AND CONTINGENCIES.
The Company leases its facility in Irvine, California for $6,400 per month
under a two year lease which expires on February 28, 1998. Effective
August 31, 1997, approximately half of this facility has been subleased to
a third party for a rental of $3,200 per month.
The Company has entered into equipment leases which are accounted for as
operating leases. Future commitments under all of the Company's
noncancelable equipment lease agreements are as follows:
<TABLE>
<S> <C>
Fiscal 1997 .......................... $ 85,000
Fiscal 1998 .......................... 35,000
-----------
$ 121,000
===========
</TABLE>
The Company is a defendant in a wrongful termination lawsuit which arose
when the Company determined to liquidate its European subsidiary.
Management, based in part on consultation with legal counsel, believes this
suit is without substantial merit and should not result in a judgment which
in the aggregate would have a material adverse effect on the Company s
financial statements.
A restructuring reserve was established when the Company liquidated its
European subsidiary. Management has elected to retain this accrual until
all matters related to the liquidation have been settled.
-6-
<PAGE>
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE 7 -- PROPOSAL TO MERGE WITH ANOTHER BUSINESS.
Due to the Company's limited revenues and declining cash resources,
resulting from a reduced customer base for its proprietary in vitro safety
testing products and the lack of endorsement of the Company's products by
governmental enforcement agencies, the Company's board of directors has
authorized management to explore and negotiate a merger of the Company with
another business enterprise. This strategy is intended to provide for
survival of the Company and realization of shareholder value by a business
combination with another entity offering the potential of adding revenues.
Any such transaction will be subject to approval of the Company's board of
directors and is also anticipated to require approval by a majority of the
Company's shareholders. A transaction of this nature anticipates the
acquisition of additional assets or a merger with another business
operation in exchange for a controlling interest in the Company via the
issuance of additional equity securities. Any such transaction is expected
to involve substantial dilution to the equity interests of the Company's
shareholders.
During the first five months of 1997, the Company announced it had
entered into letters of intent to pursue merger negotiations with two other
business entities. Negotiations as to the first proposed merger were
terminated by mutual agreement and activities relating to a proposed merger
with Miragen Inc. have been suspended unless Miragen obtains additional
financing, as to which there can be no assurance.
The Company's management is currently negotiating a proposed merger
proposal with another business engaged primarily in the development and
sale of natural gas resources, but a definitive merger proposal has not
been executed. Although management plans to pursue merger negotiations
with any suitable prospective candidate, there can be no assurance that an
agreement with a merger prospect will be successfully concluded.
NOTE 8 -- INADEQUATE CAPITAL RESOURCES AND GOING CONCERN QUALIFICATIONS.
The Company's management anticipates that existing cash resources of
InVitro are adequate to sustain its current business operations only
through the end of September 1997, and that increases in internal sales
revenues and/or additional capital investment from a prospective merger
candidate, neither of which can be predicted at present, will be required
for InVitro to have sufficient resources to sustain its operations
thereafter. The Company's management has determined that InVitro will be
forced to cease active business operations, other than ongoing efforts to
market Guardian DNA products held in inventory, should the Company fail to
enter into a letter of intent or other agreement to merge with another
business enterprise by approximately the end of August 1997. Depending
upon the results of negotiations, the Company may be required to curtail
efforts to market and support the Company's operations even if a proposed
merger is negotiated.
The ability of the Company to continue as a going concern in the
absence of a merger with another business is dependent upon the Company
achieving positive cash flows from operations, which does not appear
probable within the near term; alternatively, the ability of the Company to
continue as a going concern is dependent upon merging with another business
enterprise with sufficient financial resources to absorb the Company's
ongoing operating expenses, as to which there can be no assurance. The
accompanying financial statements do not reflect any adjustments to the
carrying value or classifications of assets or liabilities which might
become necessary if the Company is unable to continue as a going concern.
-7-
<PAGE>
INVITRO INTERNATIONAL
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
Consolidated Financial Statements and notes thereto appearing elsewhere in
this Report.
RESULTS OF OPERATIONS:
REVENUES: For the nine months ended June 30, 1997 (the "1997
Period") revenues were $604,000, an decrease of 26% from revenues of
$812,000 in the nine months ended June 30, 1996 (the "1996 Period"). The
decrease was due to an overall decline in sales of the Company's safety
testing products during the second and third quarters of the 1997 Period.
Revenues for the quarter ended June 30, 1997 were $181,000, a 45% decline
from $327,000 in revenues for the comparable quarter in the prior year
ended June 30, 1996. To date, the marketing of Guardian DNA child safety
and identification products has not generated significant sales.
The Company's management believes that sales of its IRRITECTION Assay
System and CORROSITEX test kits to determine Packing Group classification
of corrosive substances will either remain relatively stable or may
continue to decline. Various efforts to obtain governmental enforcement
agency endorsement for use of the Company's products have proven
unsuccessful, as exemplified by the U.S. Department of Transportation
("DOT") endorsement of animal testing methods for use by its regional
operations, notwithstanding a DOT regulatory exemption permitting use of
CORROSITEX for packing group classification and the fact that CORROSITEX
offers significantly lower costs and faster results than are available by
animal testing methods. Other marketing strategies employed by the Company
have failed to increase commercial interest in the Company's safety testing
products. However, on June 13, 1997, the United States Environmental
Protection Agency issued its final approval for CORROSITEX to be listed in
the Federal Register as an approved test for characterizing dermal
corrosivity for solid waste.
To take advantage of its internal sales force and distribution
capabilities, the Company entered into an exclusive distributorship
agreement in March 1996 to market the Guardian-DNA child identification
system developed by Miragen Inc. to and through hospitals, birthing and
other institutional obstetric markets. During October 1996, the Company
entered into an agreement providing for the distribution of Guardian DNA
literature and discount coupons in hospital gift packs to approximately
300,000 new mothers per month commencing in January 1997. Due to the
nominal response to this program, the Company discontinued participation in
the gift packs program in June 1997. The Company reduced its staff during
May 1997 to lower operating costs, and sales and marketing activities since
that time have been focused almost exclusively on efforts to sell and
distribute Guardian DNA directly to one or more affiliated hospital chains.
Although preliminary indications for obtaining orders from a hospital chain
appear promising, there can be no assurance that these efforts will be
successful.
COSTS OF GOODS SOLD: Cost of revenues for the 1997 Period were
$391,000, or approximately 64.7% of sales, compared to $511,000 (62.9% of
sales) for the 1996 Period, resulting in a gross profit of $213,000 for the
1997 Period compared to $301,000 in the 1996 Period. Due to fixed
manufacturing costs, a portion of which are unabsorbed due to low revenues,
gross margins for the Company's proprietary in vitro products and services
are expected to remain at or near present levels until sales growth
necessary to absorb a higher percentage of fixed costs is attained, as to
which there can be no assurance. Gross margins in future periods are
expected to show improvement only if the Company's introduction of Guardian
DNA products at a favorable price per unit proves successful, since the
Company's cost of revenues for Guardian DNA is limited to the purchase of
finished kits from a supplier and a limited amount of warehouse space to
store Guardian DNA inventories.
-8-
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $1,296,000 in the 1997 Period, a decrease of
approximately $219,000 compared to $1,515,000 in selling, general and
administrative expenses for the 1996 Period. Reductions in staff and
facilities expense during the 1997 Period were offset in part by increased
marketing expenses associated with the introduction of Guardian DNA
products. Due to further reductions in staff during May 1997 and
abandonment of the hospital gift pack marketing program, management expects
that selling, general and administrative expense will be reduced in future
periods.
RESEARCH AND DEVELOPMENT. Research and development expenses for
the 1997 Period were $41,000, a $130,000 decrease from $171,000 in research
and development expenses in the 1996 Period. To conserve capital
resources, the Company previously elected to outsource as much of its
research and development requirements for the near term as is possible.
Consistent with this policy, the decline in research and development
expenses is primarily attributable to reductions in personnel and decreased
expenditures for research materials and supplies.
OTHER INCOME. Interest income was $25,000 in the 1997 Period, a
decline of $30,000 compared to the 1996 Period. The decrease in interest
income was attributable to a reduction in average cash balances compared to
the 1996 Period.
NET LOSS. The Company's net loss of $1,099,000 during the 1997
Period declined by approximately $231,000, a 17% decrease compared to the
$1,330,000 net loss for the 1996 Period. The Company's management
anticipates the Company will continue to incur losses due to the Company's
declining revenues and fixed expenses for manufacturing overhead and
selling, general and administrative expenses. Losses are expected to
continue until such time as sales increase to a level necessary to absorb
fixed costs. No assurances can be given as to whether or when sales
increases may be achieved.
The Company's operating management currently believes that a
profitable level of operations cannot be attained unless the Company
acquires or is merged with another business that can generate additional
revenues. There can be no assurance of future growth in revenues, or that
the Company will achieve revenue increases in an amount necessary to attain
profitable operations or that the Company will successfully complete a
merger with another business entity. The Company therefore may be required
to cease or curtail operations within the foreseeable future. See Notes 7
and 8 of the Notes to Consolidated Financial Statements included earlier in
this Report.
LIQUIDITY AND CAPITAL RESOURCES:
At June 30, 1997, the Company's cash resources totalled $169,000 and
its working capital was $664,000. Included in the Company's working
capital are $486,000 in inventories, of which $354,000 in inventories
represents Guardian DNA products that are dependent upon the successful
introduction of this product line for the Company to realize the value of
such inventories. During the nine months ended June 30, 1997, the
Company's cash and cash equivalents securities decreased by $1,040,000, due
primarily to cash outflows used by operating activities of $1,255,000,
partially offset by the collection of $225,000 in net proceeds from the
sale of common stock.
The Company's principal capital requirements include working capital
to finance sales and marketing activities and general and administrative
expenses. The Company has no significant pending commitments for capital
expenditures or new product development, and capital equipment additions
are not expected to be material in amount for the foreseeable future.
During the nine months ended June 30, 1997, the Company's inventories
increased by $120,000 primarily as the result of increases in quantities of
Guardian DNA to support the market launch of that product line.
-9-
<PAGE>
The Company's board of directors has authorized management to explore
and negotiate a merger of the Company with another business enterprise.
This strategy is intended to provide for survival of the Company and
realization of shareholder value by a business combination with another
entity offering the potential of adding revenues. Any such transaction
will be subject to approval of the Company's board of directors and is also
anticipated to require approval by a majority of the Company's
shareholders. A transaction of this nature anticipates the acquisition of
additional assets or a merger with another business operation in exchange
for a controlling interest in the Company via the issuance of additional
equity securities. Any such transaction is expected to involve substantial
dilution to the equity interests of the Company's shareholders.
During the first five months of 1997, the Company announced it had
entered into letters of intent to pursue merger negotiations with two other
business entities. Negotiations as to the first proposed merger were
terminated by mutual agreement and activities relating to a proposed merger
with Miragen Inc. have been suspended unless Miragen obtains additional
financing, as to which there can be no assurance. The Company's management
is currently negotiating a proposed merger proposal with another business
engaged primarily in the development and sale of natural gas resources, but
a definitive merger proposal has not been executed. Although management
plans to pursue merger negotiations with any suitable prospective
candidate, there can be no assurance that an agreement with a merger
prospect will be successfully concluded.
The Company's management anticipates that existing cash resources of
InVitro are adequate to sustain its current business operations only
through the end of September 1997, and that increases in internal sales
revenues and/or additional capital investment from a prospective merger
candidate, neither of which can be predicted at present, will be required
for InVitro to have sufficient resources to sustain its operations
thereafter. The Company's management has determined that InVitro will be
forced to cease active business operations, other than ongoing efforts to
market Guardian DNA products held in inventory, should the Company fail to
enter into a letter of intent or other agreement to merge with another
business enterprise by approximately the end of August 1997. Depending
upon the results of negotiations, the Company may be required to curtail
efforts to market and support the Company's operations even if a proposed
merger is negotiated.
The ability of the Company to continue as a going concern in the
absence of a merger with another business is dependent upon the Company
achieving positive cash flows from operations, which does not appear
probable within the near term; alternatively, the ability of the Company to
continue as a going concern is dependent upon merging with another business
enterprise with sufficient financial resources to absorb the Company's
ongoing operating expenses, as to which there can be no assurance. The
accompanying financial statements do not reflect any adjustments to the
carrying value or classifications of assets or liabilities which might
become necessary if the Company is unable to continue as a going concern.
-10-
<PAGE>
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
No. Description
------ ------------
<S> <C>
27 Financial Data Schedule at June 30, 1997.
</TABLE>
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the
quarter ended June 30, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
Date: August 14, 1997
INVITRO INTERNATIONAL
(Registrant)
By: /s/ W. Richard Ulmer
-----------------------------
W. Richard Ulmer, President,
Chief Executive Officer and
Chief Financial Officer
By: /s/ Kristina A. Parker
-----------------------------
Kristina A. Parker,
Chief Accounting Officer
-11-
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information
extracted from the Statements of Operations and
Balance Sheets of InVitro International and is
qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000872610
<NAME> INVITRO INTERNATIONAL
<MULTIPLIER> 1000
<S> <C>
<FISCAL-YEAR-END> Sep-30-1997
<PERIOD-START> Oct-01-1996
<PERIOD-END> Jun-30-1997
<PERIOD-TYPE> 9-MOS
<CASH> 169
<SECURITIES> 0
<RECEIVABLES> 185
<ALLOWANCES> 10
<INVENTORY> 486
<CURRENT-ASSETS> 857
<PP&E> 1,040
<DEPRECIATION> 879
<TOTAL-ASSETS> 1,151
<CURRENT-LIABILITIES> 193
<BONDS> 0
0
0
<COMMON> 25,036
<OTHER-SE> (24,078)
<TOTAL-LIABILITY-AND-EQUITY> 1,151
<SALES> 604
<TOTAL-REVENUES> 604
<CGS> 391
<TOTAL-COSTS> 1,728
<OTHER-EXPENSES> (25)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,099)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,099)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,099)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
