SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended: December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission File Number : 0-19693
BIO FLUORESCENT TECHNOLOGIES, INC.
------------------------------------------------------
(exact name of Registrant as specified in its charter)
Nevada 87-0485320
- ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7373 North Scottsdale Road, Suite C228, Scottsdale, Arizona 85253
- ----------------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip code)
Registrant's telephone number, including area code: 602-596-0269
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock
Check 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 twelve (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 ninety (90) days. [X] Yes [ ] No
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained herein, and will not 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. [X]
State Registrant's revenues for its most recent fiscal year. $0.00
As of April 24, 1997, 5,645,710.67 shares of the registrant's common stock,
$.001 par value, were outstanding. The aggregate market value of the common
stock held by non-affiliates of the registrant (i.e., excluding shares held by
executive officers, directors, and control persons as defined in Rule 405) on
that date was $1,012,640. Computed at the closing price on that date. There is
only one class of common stock outstanding.
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE (5) YEARS:
Check whether the Registrant has filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.
[ ] Yes [ ] No
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
TABLE OF CONTENTS
Page
----
ITEM 1. BUSINESS...................................................... 1
ITEM 2. PROPERTIES.................................................... 2
ITEM 3. LEGAL PROCEEDINGS............................................. 2
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS........... 2
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED
STOCKHOLDERS MATTERS.......................................... 3
ITEM 6. PLAN OF OPERATION............................................. 4
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................... 6
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE........................... 15
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............ 16
ITEM 10. EXECUTIVE COMPENSATION........................................ 17
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................... 18
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................ 18
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.............................. 18
SIGNATURES.............................................................. 19
<PAGE>
PART I
ITEM 1. BUSINESS
COMPANY BACKGROUND
Bio Fluorescent Technologies, Inc. (The "Company") is a development
stage company engaged primarily in the medical and health care industry. The
Company was incorporated on February 15, 1990 under the laws of Nevada as
Partisan Corporation. On March 10, 1995, the Company's name was changed to Bio
Fluorescent Technologies, Inc. The Company was inactive through approximately
January of 1995 and prior to such time the Company's only activities consisted
of capitalization activities.
The Company's initial business plan was based on developing, licensing
or otherwise acquiring state-of-the-art advanced diagnostic testing and
screening technology and equipment capable of early detection of human immune
system disorders such as HIV-1, HIV-2 and Hepatitis B. In February 1995 the
Company licensed a development stage diagnostic technology designed to detect
AIDS, described as the Mehica GP120 system.
In July 1996 the Company filed a complaint against the licensor of the
technology. The defendants filed a counter-claim and third party complaint
seeking declaratory relief in respect of the agreements and damages. This
litigation matter is more fully described in Item 3 "Legal Proceedings" and in
the notes to the Company's financial statements set forth herein.
Development activities were suspended and the Company has written off
the unamortized cost of the Mehica GP120 project as of December 31, 1996, and is
treating this write-off as a recision of the license agreement.
In May 1996 the Company reorganized its management team and revised its
business plan to include expansion of the Company's core market and technology
application for the screening and detection of a broader range of viral and
infectious diseases.
The Company is selecting and engaging the services of scientists and
other technical advisors to assist in its search to acquire other products or
businesses compatible with the Company's primary goal of becoming operational as
soon as possible.
Since its management reorganization in May 1996, the Company's business
development plan has been focused on a "growth by acquisition" strategy and the
Company has been actively pursuing acquisition possibilities.
The Company's agreement dated February 11, 1997, to acquire all of the
assets of Immune Network Research, Ltd. ("INR") has since been terminated. The
Company is exploring the possibility of licensing or otherwise acquiring from
INR its rights as licensee to an immune system disease treatment technology
currently in the development stage. As of the date of this filing no offer has
been presented to INR by the Company. There can be no assurance that an offer,
if presented, would be accepted by INR.
The Company plans to continue with its efforts to license or otherwise
acquire products, technology or businesses compatible with its corporate
strategies.
1
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EMPLOYEES
On March 3, 1997, the Company, through an office support service
agreement with a related party, employed a total of six persons, who provide
management, administrative and secretarial services to the Company. No employee
is subject to a collective bargaining agreement. The Company believes it has
favorable relations with its employees.
ITEM 2. PROPERTIES
The Company maintains its principal executive office in 1,000 square
feet of a rented office facility in Scottsdale, Arizona under an office support
services agreement with a related party which expires January 1998 at a rental
rate of $1,000 per month. The Company believes that its current leased space
will be sufficient for the Company's operations in the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Company had secured worldwide rights to manufacture, market and
sell the Mehica GP120 System under an exclusive licensing agreement dated
February 1995. On July 19, 1996, the Company filed a complaint in the United
States District Court for the District of Maryland (Civil Action No. CCB
96-2266) against the licensor, The Avriel Group, and others ("TAG") seeking
declaratory relief, damages and other relief in respect to certain agreements
relating to the rights to a proprietary automated system for detection of the
HIV virus and for use in mass screening of individuals, the Packaged Antigen Kit
or "PAK" and the Mehica GP120 System. On July 30, 1996, the defendants filed an
answer, counter-claim and third party complaint, seeking declaratory relief in
respect to the agreements and damages.
The Company has made attempts to resolve this matter through a
negotiated settlement without further extensive litigation and is cautiously
optimistic that this dispute can be resolved. If a settlement cannot be reached,
the Company intends to vigorously press its claims and defend the
counter-claims.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the shareholders during the fourth
quarter of the year ended December 31, 1996.
2
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS' MATTERS
MARKET INFORMATION
Trading activity with respect to the Company's common stock has been
limited. A public trading market having the characteristics of depth, liquidity
and orderliness depends upon the existence of market makers as well as the
presence of willing buyers and sellers, which are circumstances over which the
Company has no control.
Prior to May 1, 1995, there was no public market for the Company's
common stock. Since May 1, 1995, the Company's common stock has been quoted in
the National Daily Quotation Service ("Pink Sheets") published daily by the
National Quotation Bureau, Inc. The Company's trading symbol was changed from
"BFTI" to "BFTK" in connection with Company's December 2, 1996 reverse stock
split. Quotations are also available through the Electronic Bulletin Board
operated by the National Association of Securities Dealers, Inc. Under the
symbol "BFTK".
The following table sets forth the high and low bid prices for the
Company's common stock commencing with the second fiscal quarter 1995 as
reported by the National Quotation's Bureau, Inc., which prices reflect
inter-dealer prices without retail mark-up, mark-down or commission, and may not
necessarily represent actual transactions.
Quarter Ended BFTI, Before Split BFTK, After Split
------------------ -----------------
BFTI before split and adjusted
as if reverse split had High Low High Low
occurred retroactively ---- --- ---- ---
June 30, 1995 $5,00 $1.00 $15.00 $3.00
September 30, 1995 $4.00 $2.62 $12.00 $7.86
December 31, 1995 $1.19 $1.06 $ 3.57 $3.18
March 31, 1996 $1.47 $1.00 $ 4.41 $3.00
June 30, 1996 $1.22 $0.50 $ 3.66 $1.50
September 30, 1996 $0.91 $0.22 $ 2.73 $0.66
December 2, 1996 $0.42 $0.22 $ 1.26 $0.66
BFTI after the reverse split
December 31, 1996 $ 0.72 $0.50
HOLDERS
The number of stockholders of record for the common stock of the
Company at the close of business on March 3, 1997, was 511, including brokerage
houses holding stock for an unknown number of stockholders. The
3
<PAGE>
Company estimates that there are approximately 700 beneficial owners of the
Company's common stock.
DIVIDENDS
The Company's present policy is to apply available working capital to
expansion and acquisition; consequently, the Company has not previously declared
or paid any dividends on its common stock and does not expect to pay dividends
on its common stock within the foreseeable future.
ITEM 6. PLAN OF OPERATION
The Company is presently concentrating its efforts on becoming
operational by licensing or otherwise acquiring technologically advanced
state-of-the-art immunological products which respond to the critical global
demands within the Company's selected market niche in the medical and health
care industry; the diagnosis, prevention and treatment of AIDS and other human
immune system disorders. The Company is also exploring the possibility of
acquiring other technologies, products or businesses compatible with its goal to
become operational.
The Company's management team, which was re-organized on May 1996, has
been investigating and pursuing product and technology acquisition opportunities
compatible within corporate strategies. Although the Company terminated its
agreement dated February 11, 1997, to acquire all of the assets of Immune
Network Research, Ltd. ("INR") it plans to continue to pursue the possibility of
licensing or otherwise acquiring from INR its rights as licensee to an immune
system disease treatment technology currently in the development stage. There
can be no assurance that pursuit of this technology will be successful.
Based on the litigation relating to the Mehica GP120 System license
agreement (see Item 3, "Legal Proceedings") the Company suspended its
development efforts on the Mehica GP120 System technology and has written off
the unamortized license fee as a recision of the agreement.
The Company plans to continue to aggressively pursue the acquisition of
other products and technology through licensing and/or acquiring businesses with
market ready products and/or development stage technology with market potential
that is compatible with corporate strategies to become operational.
To date, the Company's operations have consisted primarily of pursuing
various product opportunities, assembling a management team and raising capital.
From the Company's inception to December 31, 1996, the Company's business
development costs have totaled approximately $2,729,000. These expenditures have
been funded primarily with the proceeds from the private sales of the Company's
equity securities as well as with the issuance of its common stock in exchange
for services and assets.
4
<PAGE>
During the year ended December 31, 1996, the Company's development
stage activities resulted in a deficit in cash flow of approximately $682,535.
This deficit was primarily the result of the net operating loss of approximately
$1,343,000 offset by noncash charges totaling approximately $614,000.
Additionally the deficit in cash flow from operating activities was offset by an
increase in accounts payable and accrued liabilities of approximately $45,400.
The Company's financing activities provided cash flow of approximately $670,030
during the year ended December 31, 1996, primarily as the result of the private
placement of 2,011,321 shares of the Company's common stock.
The Company has raised approximately $1,281,010 of operating capital
since inception and plans to continue its efforts to raise additional capital
needed to fund operating expenses of the business through various financing
methods including private placements of its common stock. Funding of future
operations is dependent on management's ability to raise additional capital.
Failure by the Company to obtain additional financing would have a material
adverse effect on the Company.
5
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
BIO FLUORESCENT TECHNOLOGIES, INC.
(A Development Stage Company)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
December 31, December 31,
1996 1995
---- ----
ASSETS
CURRENT ASSETS:
Cash $ 6,327 $ 18,832
Trade exchange receivable - barter (Note 2) 49,767 50,000
Media products and services receivable -
current portion (Note 3) 250,000 250,000
Prepaid expenses -- 1,875
----------- -----------
Total current assets 306,094 320,707
MEDIA PRODUCTS AND SERVICES - net of current
portion (Note 3) 250,000 250,000
LICENSE, net of accumulated amortization
of $85,000 (Note 4) -- 935,000
----------- -----------
$ 556,094 $ 1,505,707
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable -
Trade $ 158,823 $ 8,437
Related party (Note 6) 27,090 157,542
Accrued expenses 55,056 27,563
----------- -----------
Total Current liabilities 240,969 183,542
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 4 and 6)
STOCKHOLDERS' EQUITY (Note 5):
Common stock, $.001 par value, 8,333,334
shares authorized; 5,645,710 (1996) and
3,790,750 (1995) issued and outstanding 5,646 3,791
Common stock to be issued (186,333 shares) 9 186
Additional paid-in capital 3,178,370 2,703,751
Stock subscription receivable (128,000) --
Deficit accumulated during the development stage (2,740,900) (1,385,563)
----------- -----------
Total stockholders' equity 315,125 1,322,165
----------- -----------
$ 556,094 $ 1,505,707
=========== ===========
The accompanying notes are an integral part of this balance sheet.
6
<PAGE>
BIO FLUORESCENT TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FOR
THE PERIOD FROM INCEPTION OF DEVELOPMENT STATE (FEBRUARY 15,1990
TO DECEMBER 31, 1996)
Cumulative
from the
Inception of
Development
Stage
(February 15,
1990) to
December 31,
1996 1995 1996
---- ---- ----
NET SALES $ -- $ -- $ --
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 1,358,266 1,381,741 2,741,007
----------- ----------- -----------
Loss from operations (1,358,266) (1,381,741) (2,741,007)
INTEREST EXPENSE 2,929 (2,822) 107
----------- ----------- -----------
LOSS BEFORE PROVISION FOR INCOME
TAXES (1,355,337) (1,384,563) (2,740,900)
PROVISION FOR INCOME TAXES -- -- --
----------- ----------- -----------
NET LOSS $(1,355,337) $(1,384,563) $(2,740,900)
=========== =========== ===========
LOSS PER COMMON SHARE (Note 1) $ (0.27) $ (0.44)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,028,685 3,141,124
=========== ===========
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
BIO FLUORESCENT TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period From Inception of Development Stage
(February 15, 1990 to December 31, 1996)
<TABLE>
<CAPTION>
Deficit
Common Accumulated
Common Stock Stock Additional Common Stock During the
------------------ to Be Paid-in Subscription Development
Shares Amount Issued Capital Receivable State Total
------ ------ ------ ------- ---------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Inception 2/15/90 333,333 $ 1,000 $ $ $ $ $ 1,000
Net loss (1,000) (1,000)
--------- -------- ----- ---------- --------- ----------- -----------
Balance 12/31/94 333,333 1,000 (1,000)
Sale of common
stock, net 1,333,333 4,000 76,000 80,000
Common stock
issued 2,124,083 6,372 2,090,376 2,096,748
Common shares
subscribed 559 529,421 529,980
Net loss (1,384,563) (1,384,563)
--------- -------- ----- ---------- --------- ----------- -----------
Balance:12/31/95 3,790,749 11,372 559 2,695,797 (1,385,563) 1,322,165
Sale of common
stock, net 1,001,834 3,006 794,791 (128,000) 669,797
Common Stock
issued, net 1,186,461 3,559 (550) 559,491 562,500
Recision of
license agreement (333,333) (1,000) (883,000) (884,000)
Reverse 1 for 3
split (11,291) 11,291
Net loss (1,355,337) (1,355,337)
--------- -------- ----- ---------- --------- ----------- -----------
Balance:12/31/96 5,645,711 $ 5,646 $ 9 $3,178,370 $(128,000) $(2,740,900) $ 315,125
========= ======== ===== ========== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
BIO FLUORESCENT TECHNOLOGIES, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
For the Years Ended December 31, 1996 and 1995 and For the Period From Inception
of Development Stage (February 15, 1990 to December 31, 1996)
Cumulative
Amount From
February 15,
1990
(Inception)
to December
1996 1995 31, 1996
---- ---- -----
Net loss $(1,355,337) $(1,384,563) $(2,740,900)
Adjustments to reconcile net loss to
net cash used in operating activities:
Write down of artwork 400,000 400,000
Amortization 51,000 85,000 136,000
Common stock issued for services 562,500 126,748 689,248
Change in assets and liabilities:
(Increase)decrease in trade accounts
receivable 233 233
(Increase) decrease in prepaid expenses 1,875 (1,875)
Increase (decrease) in accounts payable 57,427 183,542 240,969
---------- ---------- ----------
Net cash used in operating activities (682,302) (591,148) (1,274,450)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from issuance of common
stock,net 669,797 609,980 1,280,777
---------- ---------- ----------
Net increase(decrease) in cash (12,505) 18,832 6,327
Cash, beginning of period 18,832
---------- ---------- ----------
Cash, end of period $ 6,327 $ 18,832 $ 6,327
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
9
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BIO FLUORESCENT TECHNOLOGIES, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
(1) THE COMPANY AND ITS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
HISTORY AND REPORTING ENTITY
Bio Fluorescent Technologies, Inc. (the Company) is a development stage
company that was incorporated under the laws of the state of Nevada in
February 1990 as Partisan Corporation. On March 10, 1995, the company's
name was changed from Partisan Corporation to Bio Fluorescent Technologies,
Inc. The Company was inactive through February 1995 and prior to such time
the Company's only activities consisted of the sale or transfer of shares
of its common stock in private placements.
DEVELOPMENT STAGE ACTIVITY AND MANAGEMENT'S PLANS
The Company's initial business plan was based on developing, licensing or
otherwise acquiring state-of-the-art advanced diagnostic testing and
screening technology and equipment capable of early detection of human
immune system disorders such as HIV- 1, HIV-2 and Hepatitis B. In February
1995 the Company licensed a development stage diagnostic technology
designed to detect AIDS, described as the Mehica GP120 system.
In July 1996 the Company filed a complaint against the licensor of the
technology. The defendants filed an answer, counter-claim and third party
complaint seeking declaratory relief in respect of the agreements and
damages. This litigation matter is more fully described in Note 4.
Development activities were suspended and the Company has written off the
unamortized cost of the Mehica GP120 project as of December 31, 1996, and
is treating this write off as a discontinued research and development
project.
In May 1996 the Company reorganized its management team and revised its
business plan to include expansion of the Company's core market and
technology application for the screening and detection of a broader range
of viral and infectious diseases.
The Company is selecting and engaging the services of scientists and other
technical advisors to assist in its search to acquire infectious disease
technologies and other products or businesses compatible with the Company's
primary goal of becoming operational as soon as possible.
Since its management reorganization in May 1996, the Company's business
development plan has been focused on a "growth by acquisition" strategy and
the Company has been actively pursuing acquisition possibilities.
The Company's agreement dated February 11, 1997, to acquire all of the
assets of Immune Network Research, Ltd. ("INR") has since been terminated.
The Company is exploring the possibility of licensing or otherwise
acquiring from INR its rights as licensee to an immune system disease
treatment technology currently in the development stage. As of the date of
this filing no offer has been presented to INR by the Company. There can be
no assurance that an offer, if presented, would be accepted by INR.
The Company plans to continue with its efforts to license or otherwise
acquire products, technology or businesses compatible with its corporate
strategies.
10
<PAGE>
(1) THE COMPANY AND ITS SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
From the Company's inception through December 31, 1996, the Company's
business development costs have totaled approximately $2,700,000. These
expenditures have been funded primarily with proceeds from the private
sales of its equity securities as well as with the issuance of its common
stock in exchange for services.
The Company will need to raise additional capital to satisfy its
obligations and to fund other operating expenses. The Company will continue
its efforts to raise capital, including private placements of its common
stock. However, there is no assurance that such efforts will be successful.
STOCK REVERSE SPLIT
On December 2, 1996, the Company made effective an one for three (1 for 3)
reverse stock split, whereby for three shares of the Company's common stock
was exchanged for one share of the Company's common stock. The amounts in
the respective common stock accounts were divided by three and the
difference adjusted to Additional Paid in Capital. The December 31, 1995,
year end balances were restated to reflect the effect of this reverse split
as if it was in effect at that date. The amount of this adjustment for
1995's restatement was $7,954. Without the restatement the adjustment made
on December 2, 1996, was $11,291.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
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.
LOSS PER COMMON SHARE
Loss per common share is computed by dividing the net loss by the weighted
average number of common shares outstanding during the period. Fully
diluted loss per common share is considered equal to primary loss per
common share for all periods presented.
(2) TRADE EXCHANGE RECEIVABLE - BARTER
In August 1995, the Company issued 14,814 shares (4,938 shares after
reverse split effect) of its common stock in exchange for $50,000 worth
barter credit on the ITEX Retail Trade Exchange. Management is pursuing
opportunities to utilize the barter credit for the cost of hotels and
travel over the next year.
(3) MEDIA PRODUCTS AND SERVICES RECEIVABLE
In October 1995, the Company issued 200,000 shares (66,666.67 shares after
reverse split effect) of its common stock in exchange for script writing,
music scoring, radio commercial production and radio advertising time to be
received in the future valued at approximately $500,000. Management
believes that they will be able to successfully utilize the entire balance
during 1997 and 1998.
11
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(4) LEGAL PROCEEDINGS
The Company had secured worldwide rights to manufacture, market and sell
the Mehica GP120 System in February 1995. On July 19, 1996, the Company
filed a complaint in the United States District Court for the District of
Maryland (Civil Action No. CCB 96-2266) against the licensor, The Avriel
Group and others ("TAG"), seeking declaratory relief, damages and other
relief in respect to certain agreements relating to the rights to a
proprietary automated system for detection of the HIV virus and for use in
mass screening of individuals, the Packaged Antigen Kit or "PAK" and the
Mehica GP120 System. On July 30, 1996, the defendants filed an answer,
counter-claim and third part complaint, seeking declaratory relief in
respect to the agreements and damages.
The Company has made attempts to resolve this matter through a negotiated
settlement and is cautiously optimistic that this dispute can be resolved
without further extensive litigation. If a settlement cannot be reached,
the Company intends to vigorously press its claims and defend the
counter-claims.
(5) STOCKHOLDERS' EQUITY
On December 2, 1996, the Company authorized a 3 for 1 reverse stock split
of all the common stock. The stockholders' equity and related earnings per
share amounts for all of 1996 have been stated in shares reflecting the
reverse split. The 1995 shares issued and outstanding and related earnings
per share have been restated to reflect the reverse split for comparative
purposes.
(6) RELATED PARTY TRANSACTIONS
The Company paid a related party $316,139, including $132,000 compensation
for the acting president of the Company, and $211,561 for management
services and expenses for the year ended December 31, 1996 and 1995
respectfully. At December 31, 1996 and 1995, the Company owed $27,090 and
$134,297, respectfully, to this related party which is included in accounts
payable-related party in the accompanying financial statements.
Effective May 1, 1996 the Company entered into an chief executive
compensation agreement wherein a company controlled by the president of the
Company would bill and be compensated for the salary of the president of
the Company. This compensation amounted to $132,000.00 for the year 1996
and common stock valued at $120,000.00 was exchanged for $120,000.00 of the
billing.
(7) INCOME TAXES
The Company provides for income taxes under Statement of Financial
Accounting Standards No. 109 (SFAS No. 109), Accounting for Income Taxes.
SFAS No. 109 requires the use of an asset and liability approach in
accounting for income taxes. Deferred tax assets and liabilities are
recorded based on the differences between the financial statement and tax
bases of assets and liabilities and the tax rates in effect when these
differences are expected to reverse.
12
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(7) INCOME TAXES - continued
The components of deferred taxes are as follows at December 31, 1996 and
1995, respectfully:
1996 1995
---- ----
Tax effect of net operating loss
carry forward $ 1,069,660 $ 554,400
Valuation allowance (1,069,660) (554.500)
$ -- $ --
SFAS No. 109 requires the reduction of deferred tax assets by a valuation
allowance if, based on the weight of available evidence, it is more likely
than not that some or all of the deferred tax assets will not be realized.
In management's opinion, there can be no assurance that the Company will
generate sufficient taxable income in the future to fully utilize the net
deferred tax asset recorded at December 31, 1996 and 1995, respectfully;
therefore, a valuation allowance has been provided for the entire balance.
Net operating loss carry forwards totaled approximately $2,729,000 and
$1,386,000 at December 31, 1996 and 1995, respectfully.
(8) STOCK COMPENSATION PLANS:
On August 29, 1996, the Company adopted fixed and performance based stock
compensation plans, which are described below. The Company accounts for the
fair value of its grants under those plans in accordance with FASB
Statement 123, Accounting for Stock Based Compensation. The compensation
cost that has been charged against income for those plans was $12,600 for
the year ended December 31, 1996.
FIXED STOCK OPTION PLAN
Under the 1996 incentive Stock Option Plan, the Company may grant options
to its employees, directors, consultants and advisors for up to 866,667
shares of its $0.001 par value common stock. The exercise price for stock
granted pursuant to a tax-qualified option plan is to be greater than or
equal to the market price of the Company's stock on the date of grant. The
exercise price of stock granted pursuant to a non-qualified stock option
plan is to be greater than or equal to 85% of the market price of the
Company's stock on the date of grant. The maximum term for an option is ten
years. Options are granted at the discretion of the board of directors.
The fair market value of the options granted during 1996 is considered to
be zero. It is the opinion of management that the options are not capable
of valuation due to the inability of the Company to establish a viable
business operation at this point during the current development stage and
the uncertainty surrounding the likelihood that the Company will generate
significant profits in the future.
13
<PAGE>
(8) STOCK COMPENSATION PLANS - continued
A summary of the status of the Company's fixed stock option plan as of
December 31, 1996 and changes during the year then ended is presented
below:
Weighted
Average
Exercise
Shares Price
------ -----
Outstanding at beginning of year -- $ --
Granted 663,334 1.65
Exercised -- --
Forfeited -- --
Outstanding at end of year 663,334 $1.65
The following table summarized information about fixed stock options
outstanding at December 31, 1996:
Weighted Average
Options Outstanding Remaining Contractual Options Exercisable
Exercise Price 12/31/96 Life 12/31/96
- -------------- ------------------- --------------------- -------------------
$1.34 388,333 3.99 years 388,333
$1.80 241,668 1.67 years 241,668
$3.75 16,666 0.25 years 16,666
$4.50 16,667 3.33 years 16,667
663,334 663,334
PERFORMANCE BASED STOCK PLAN
The Company grants selected executives and other key individuals deferred
stock awards whose vesting is contingent upon the future performance of
services under terms and conditions specified by the board of directors.
The number of shares subject to grant under this plan together with the
number of shares subject to option under the fixed stock option under the
fixed stock option plan cannot exceed 866,667 shares. The grant, which will
completely vest on August 29, 1997, is valued at the fair market value of
the stock on the date of the grant.
14
<PAGE>
ITEM 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Effective March 18, 1997, the Company engaged J. Paul Kenote, CPA, P.C.
as its independent auditors for the fiscal year ended December 31, 1996 to
replace the firm of Arthur Andersen LLP, who were dismissed at the same time.
The decision to change accountants was approved by the Board of Directors of the
Company.
The reports of Arthur Andersen LLP on the Company's financial
statements for the fiscal year ended December 31, 1995 did not contain an
adverse opinion or a disclaimer of opinion and were not qualified or modified as
to uncertainty, audit scope, or accounting principles.
In connection with the audit of the Company's financial statements for
the fiscal year ended December 31, 1995 and the subsequent interim periods,
there were no disagreements with Arthur Andersen LLP on any matters of
accounting principles or practices, financial statement disclosures, or auditing
scope and procedures which, if not resolved to the satisfaction of Arthur
Andersen LLP would have caused Arthur Andersen LLP to make reference of the
matter in their report.
The prior two fiscal years, years ended December 31, 1994 and 1993 were
audited and reported on by Smith & Company. The reports of Smith & Company on
the Company's financial statements for the fiscal years ended December 31, 1994
and 1993 did not contain an adverse opinion or a disclaimer of opinion and were
not qualified or modified as to uncertainty, audit scope, or accounting
principles.
In connection with the audits of the Company's financial statements for
each of the two fiscal years ended December 31, 1994 and 1993 and in the
subsequent interim periods ending March 15, 1996, there were no disagreements
with Smith & Company on any matters of accounting principles or practices,
financial statement disclosures or auditing scope and procedures which, if not
resolved to the satisfaction of Smith & Company would have caused Smith &
Company to make reference to the matter in their report.
The Company has authorized its prior auditors to respond fully to any
inquires from their successors.
15
<PAGE>
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS AND EXECUTIVE OFFICERS.
The following table sets forth the names, ages and positions of the
directors and executive officers of the Company as of March 18, 1997. A summary
of the background and experience of each of these individuals is set forth after
the table.
Name Age Position
---- --- --------
Jan J. Olivier 56 President; Chief Executive
Officer; Director
A. Richard Bullock 48 Secretary/Treasurer (Principal
Financial and Accounting
Officer); Director
Ray A. Triphahn 58 Vice President; Assistant
Secretary; Director
JAN J. OLIVIER has been a Director and the President and Chief
Executive Officer of the Company since April 1996 and has served as a business
consultant to the Company since March 1995. Since 1989 and 1993, respectively,
Mr. Olivier has owned Your Choice International, Inc. a marketing consulting
company, and Cactus Consultants International, Inc., a financial consulting
firm. From April 1983 until July 1987, Mr. Olivier was the President of Olivier
Management Corp., a Nasdaq listed company that conducted international merchant
banking activities and had offices in New York, Zurich, Miami and Seattle. Mr.
Olivier has over 30 years of national and international business experience and
has served on the boards of directors of several companies.
A. RICHARD BULLOCK has been a Director and the Secretary/Treasurer of
the Company since February 1995. In addition to his responsibilities as
Secretary/Treasurer of the Company, Mr. Bullock has been an independent
management consultant since 1979 with the Quidquida Management Corporation and
has over ten years experience providing corporate and administrative services to
a wide variety of start-up and development stage companies. He has five years
experience as an independent transportation consultant for both national and
international corporations and governments.
RAY A. TRIPHAHN has been a Director, the Vice President and Assistant
Secretary of the Company since February 1995. Mr. Triphahn is a retired
businessman. Prior to his retirement, Mr. Triphahn held various offices with
entities engaged in various aspects of the construction industry.
MANAGEMENT CONSULTANTS
The Company has retained John G. Charles to assist it with managing the
technical aspects of the Company's product acquisitions and technology
development plan. Mr. Charles is a medical technologist who was previously
employed by Providence Hospital in Seattle, Washington where he was responsible
for testing hematology, virology and microbiology. His experience includes
seventeen years at the American Optical Corporation with responsibility for
sales of technical products in the Pacific Northwest. He also served as Western
Regional Sales Manager for the Warner Lambert Division responsible for
microscopes, microtome, and clinical chemistry systems. His management
16
<PAGE>
responsibilities with Warner Lambert Division included sales and service for
eleven western states, including Washington and Alaska. For the past nine years,
Mr. Charles has participated in the development of early stage companies
specializing in marketing and exporting medical instrumentation and diagnostic
products to the laboratory field, including clinical chemistry equipment,
automated semen analyzers and products for microbiology.
The Company has also retained Coast Northwest, Inc., a business
consulting firm, to assist it in managing its general business, financial and
accounting matters and to lead the professional search for qualified personnel
to direct the Company's growth. The two principals of Coast Northwest, Inc. each
have over thirty years of business management experience, including having held
senior positions with a "Big Six" international accounting firm.
The Company has contracted with Cactus Consultants International, Inc.
("CCI") for the management services of Mr. Olivier as President, Chief Executive
Officer and Manager of the Company. It has also contracted the public relation,
investor relations, activities with CCI.
ITEM 10. EXECUTIVE COMPENSATION
The following table summarizes all compensation paid to the persons who
served in the capacity of president during the three most recently completed
fiscal years. The Company did not have any executive officers whose total annual
salary and bonus exceeded $100,000 for services rendered in all capacities to
the Company during the fiscal years ended December 31, 1996, 1995, 1994 and 1993
except for its president in 1996.
Name and Fiscal Other Annual
Principal Position year Salary Bonus Compensation(1)
- ------------------ ---- ------ ----- ---------------
Jan J. Olivier, 1996 $132,000.00 $0.00 $0.00
President; Chief Executive
Officer Director (1)(2)
Clayton M. Hardman, 1995 $ 0.00 $0.00 $0.00
President; Chairman of the
Board (1)
Matthew M. Zuckermann, 1995 $ 0.00 $0.00 $0.00
President; Director (1)
Krista Castleton, 1995 $ 0.00 $0.00 $0.00
President; Director (1) 1994 $ 0.00 $0.00 $0.00
1993 $ 0.00 $0.00 $0.00
- ----------
(1) Krista Castleton served as the President (The Chief Executive Officer of
the Company) from its inception until her resignation in February 1995 in
connection with the Company's acquisition of the licensing rights to the
Mehica GP120 System. In February 1995, Matthew M. Zuckermann became the
President of the Company and he resigned in December of 1995. Clayton M.
Hardman was appointed President and Chairman of the Board in December 1995.
In April 1996, Mr. Hardman resigned as President and Chairman of the Board
and Mr. Olivier was appointed to the office of President, Chief Executive
Officer and Director.
(2) Compensation for being President and Chief Executive Officer by Mr. Olivier
was billed and paid to Cactus Consultants International, Inc.
17
<PAGE>
COMPENSATION OF DIRECTORS
Directors do not receive compensation for service on the Board of
Directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the beneficial ownership of shares of
common stock of the Company on March 3, 1997 by each director and executive
officer, by all directors and executive officers as a group and by all persons
known by the Company to be the beneficial owners of more than five percent (5%)
of the Company's common stock.
Shares of Common Stock
Beneficially owned
Common Stock
--------------------------------------
Number of Shares Percent of
Name and Address Beneficially Held Ownership
- ---------------- ----------------- ---------
A. Richard Bullock 100,000 .7%
19930 48 A Avenue
Langley, BC V3A 6Z7
Ray A. Triphahn 115,000 .8%
5200 South Lake Shore Drive #207
Tempe, Arizona 85283
Wendover Securities Corporation 3,100,000 20.8%
Charlotte house
Charlotte Street
P.O. Box N-8318
Nassau, Bahamas
All directors and executive officers 215,000 1.5%
as a group
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Cactus Consulting International, Inc. ("CCI") provided substantially
all of the Company's corporate management and administrative services during the
years ended December 31, 1996 and 1995, for which the Company paid to CCI
$404,395 and $211,561, respectfully. The Company paid CCI 200,000 shares of
Common Stock for settlement of $120,000 in accumulated payables during 1996. The
payments represent payment for services rendered and expenses advanced by CCI.
The Company owed an additional $27,090 and $134,297 on December 31, 1996 and
1995, respectfully, for services and or expenses advanced by CCI for the
Company. The Company's President, Jan J. Olivier, owns CCI.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 - Financial Data Schedule
(b) REPORTS ON FORM 8-K
There was one Current Report on Form 8-K filed December 11, 1996.
18
<PAGE>
SIGNATURES
Pursuant to the regulation 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 thereunto duly authorized.
Date: March 30, 1998 Bio Fluorescent Technologies, Inc.
(Registrant)
By: /s/ Jan J. Olivier
---------------------------------
Jan J. Olivier
President, Director
By: /s/ Wynn J. Bott
---------------------------------
Wynn J. Bott
Controller
19
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