<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended June 30, 1996.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________to__________
Commission file number 000-28532
ALLIED BIOTECHNOLOGY INTERNATIONAL, INC.
----------------------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 33-0256166
- ------------------------------- -------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
17942 Cowan Avenue
Irvine, California 92614-6026
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Issuer's telephone number (714) 752-6162
--------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for 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: As of June 30, 1996 there were
13,793,133 shares of common stock outstanding.
Transitional Small business Disclosure Format (check one): Yes No X .
--- ---
1
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ALLIED BIOTECHNOLOGY INTERNATIONAL INC.
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
Page No.
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<S> <C>
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Balance Sheet June 30,1996 and September 30,1995 3
Income Statements for the Quarter ended June 30, 1996 and June 30,
1995 and for the Nine Months ended June 30, 1996 and June 30, 1995. 5
Statements of Cash Flows for the Period ended June 30, 1996 and
June 30, 1995 6
Notes to the Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 12
</TABLE>
PART 2. OTHER INFORMATION
None
2
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ALLIED BIOTECHNOLOGY INTERNATIONAL INC.
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
June 30, 1996 September 30, 1995
------------- ------------------
(unaudited)
<S> <C> <C>
Current assets
- --------------
Cash 12,350 4,981
Loan receivable 0 25,244
---------- ---------
Total current assets 12,350 30,225
---------- ---------
Investment (Note 3) 2,205,000 0
---------- ---------
Furniture and Equipment
- -----------------------
Property and Equipment 77,812 27,167
Less: Accumulated depreciation (32,737) ( 9,154)
---------- ---------
Net Furniture and Equipment 45,075 18,013
---------- ---------
Stock Subscription Receivable 200,000 0
- ----------------------------- ---------- ---------
Other assets
- ------------
Real Estate (note 1 (e)) 225,000 225,000
Distribution rights, net of
amortization (note 1 (f)) 1,200,000 1,425,000
---------- ---------
Total Other Assets 1,425,000 1,650,000
---------- ---------
Total Asset 3,887,425 1,698,238
========== =========
</TABLE>
3
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ALLIED BIOTECHNOLOGY INTERNATIONAL INC.
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30,1996 September 30, 1995
------------ ------------------
(unaudited)
<S> <C> <C>
Current Liabilities
- -------------------
Accounts payable 96,248 15,264
Note payable (Note 4) 21,139 29,000
--------- ---------
Total Current Liabilities 117,387 44,264
--------- ---------
Long-Term Liabilities
- ---------------------
Note payable (Note 4) 40,000 40,000
--------- ---------
Total Liabilities 157,387 84,264
--------- ---------
Stockholders' Equity
- --------------------
Common Stock
25,000,000 shares authorized @ $.001
par value of which 13,793,133 were
issued and outstanding at June 30,1996
and 11,885,465 at September 30, 1995. 13,459 11,885
Common stock subscribed 333 0
Additional paid-in capital 4,546,317 2,078,224
Accumulated (deficit) (830,071) (476,135)
--------- ---------
Total Stockholders' Equity 3,730,038 1,613,974
--------- ---------
Total Liabilities and
Stockholders' Equity 3,887,425 1,698,238
========= =========
</TABLE>
4
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ALLIED BIOTECHNOLOGY INTERNATIONAL INC.
INCOME STATEMENTS
(unaudited)
<TABLE>
<CAPTION>
For The Quarters Ended For The Nine Months Ended
----------------------------- -----------------------------
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues 147,766 54,500 388,443 73,500
Cost of Sales 109,824 9,837 232,070 16,107
------------- ------------- ------------- -------------
Gross Profit 37,942 44,663 156,373 57,393
------------- ------------- ------------- -------------
Operating Expenses:
Amortization of
distribution right. 75,000 0 225,000 0
Depreciation 7,861 1,006 23,583 3,018
Advertising 5,207 0 8,826 201
Office staff 18,108 12,800 28,810 17,975
Stock certificate fees 1,242 1,133 1,790 1,133
Equipment rental 300 0 2,858 0
Rent 17,331 5,140 43,979 12,907
Travel and entertain. 1,238 1,027 23,984 4,064
Freight and shipping 1,376 250 2,535 250
Tax and license 1,000 0 3,914 0
Professional fees 19,850 2,600 34,069 9,958
Office expense 2,341 733 18,785 13,686
Phone and utilities 6,524 584 11,530 584
Mail and postage 1,632 0 1,632 0
Printing 5,074 2,500 16,601 3,749
Marketing meetings 11,660 3,905 31,933 7,029
Miscellaneous 2,324 1,020 5,324 9,140
Donations 0 300 700 300
Bank charges 298 45 780 45
Property taxes 0 0 5,872 0
Lab supplies 0 7,175 10,445 7,175
Interest expense 1,900 0 7,359 0
------------- ------------- ------------- -------------
Total Expenses 180,266 40,218 510,309 91,214
------------- ------------- ------------- -------------
Net (Loss) (142,324) 4,445 (353,936) (33,821)
============= ============= ============= =============
Weighted average number
of shares outstanding 12,950,501 10,160,000 12,950,901 10,160,000
============= ============= ============= =============
Net (loss) per share (.01) Nil (.03) Nil
============= ============= ============= =============
</TABLE>
5
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ALLIED BIOTECHNOLOGY INTERNATIONAL INC.
STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the Period Ended
---------------------
June 30,1996 June 30,1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) (353,936) (33,821)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization and depreciation 248,583 3,018
Increase in accounts payable 80,984 30,980
------- ------
NET CASH (USED) BY OPERATING ACTIVITIES (24,369) 177
------- ------
CASH FLOWS FROM INVESTING ACTIVITIES
(Increase) in property and equipment (50,645) 0
------- ------
NET CASH (USED) IN INVESTING ACTIVITIES (50,645) 0
------- ------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in notes payable-land 0 40,000
(Decrease) in notes payable-officer (7,861) (38,158)
Sale of common stock 65,000 0
Decrease in loans receivable 25,244 0
------- ------
NET CASH PROVIDED BY FINANCING ACTIVITIES 82,383 1,842
------- ------
NET INCREASE IN CASH 7,369 2,019
CASH, BEGINNING OF PERIOD 4,981 681
------- ------
CASH, END OF PERIOD 12,350 2,700
======= ======
</TABLE>
6
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ALLIED BIOTECHNOLOGY INTERNATIONAL INC.
NOTES TO THE FINANCIAL STATEMENT
June 30, 1996
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
------------------------------------------
This summary of significant accounting policies of ALLIED BIOTECHNOLOGY
INTERNATIONAL INC. is presented to assist in understanding the Company's
financial statements. The financial statements and notes are representations of
the Company's management, which is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted accounting
principles and have been consistently applied in the preparation of the
financial statements.
(a) Organization and Business Nature:
--------------------------------
Allied Biotechnology International Inc. was incorporated in the State of
Nevada in October, 1984. The Corporation changed its name from Primary
Metals Inc. on August 16, 1993 to Allied Biotechnology International Inc.
The company intends to develop and manufacture genetically engineered
products for the healthcare industry. The Company currently markets
immunodiagnostic kits for hospitals and physicians' offices, laboratories
and the general public. The company was a development stage company until
the September 30, 1995 fiscal year, at which time its planned principal
operations have commenced and there has been significant revenue therefrom.
(b) Depreciation and Amortization:
------------------------------
Depreciation is provided by the straight-line method at rates calculated to
amortize cost over the estimated useful lives of respective assets. Upon
sale or retirement of the respective assets, the related cost and
accumulated depreciation are eliminated from the accounts, and gains or
losses are reflected in income. Repair and maintenance expenditures, not
anticipated to extend original asset lives, are charged to income as
incurred.
(c) Equipment and Furniture:
------------------------
Laboratory and office equipment are depreciated using the straight line
method over the following estimated useful lives:
Laboratory Equipment 5 years
Office Equipment 5-7 years
7
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ALLIED BIOTECHNOLOGY INTERNATIONAL INC.
NOTES TO THE FINANCIAL STATEMENT
June 30, 1996
(continued)
(d) Intellectual Property
---------------------
The company acquired technical and marketing rights from De Ferris
Laboratories, Inc. for a line of medical diagnostic products developed in
exchange for 100,000 shares of common stock. The transaction was valued at
$100,000.
The company also purchased for the sum of $100,000 intellectual property
concerning a procedure for cancer imaging and cancer therapy. ( Note 4.)
The value of the intellectual property costs were expensed in the year of
acquisition.
(e) Real Property
-------------
The Company has acquired 180 acres of agricultural property in Bakersfield,
California valued at $225,000 in exchange for 450,000 shares of the
Company's stock. The property will be used to grow and field test a
biopesticide plant extract that has a beneficial effect in protecting
commercial crops from soil parasites. The property is expected to be
utilized by the summer of 1997.
(f) Distribution Rights
-------------------
The Company has acquired the exclusive distribution rights for healthcare
products in Korea in exchange for 500,000 shares of the Company's common
stock. The distribution network in Korea currently has average monthly
sales of $100,000, and sales of the Company's over the counter products are
expected to increase the monthly sales volume.
The distribution agreement, effective July 1, 1995, is for a period of five
years. Management values the distribution rights at $1,500,000 based on the
shares trading at $3.00 each. The cost is amortized over five years, the
life of the Agreement, on the straight line basis.
(g) Fiscal Year:
-----------
The Company operates on a September 30 fiscal year.
8
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ALLIED BIOTECHNOLOGY INTERNATIONAL INC.
NOTES TO THE FINANCIAL STATEMENT
June 30, 1996
(continued)
(h) Basis of Operation:
------------------
The Company prepares its financial statements and federal income taxes on
the accrual basis of accounting.
NOTE 2 STOCKHOLDERS' EQUITY:
--------------------
Upon incorporation, 2,500 shares of no par value Common Stock were
authorized and 1,750 shares were issued. Effective June 6, 1988, the
Company increased the number of shares authorized to 25,000,000,
established a par value of $.001 a share, and effected a 3,429 for 1 stock
split. All references in the Financial Statements to shares of Common Stock
and per-share data reflect the June 6, 1988 changes.
During fiscal 1993, the company acquired the intellectual property of
Recombinant Products International Inc. ("Recombinant"), a California
corporation that was developing genetically engineered products for the
healthcare industry.
The stock issuance was agreed upon by the shareholders of the Company and
Recombinant without the assignment of any valuation to the Company. All
research and development was expensed by Recombinant.
NOTE 3 INVESTMENT:
----------
On October 28, 1995 the Company purchased 49% of the stock of The
Laurinburg Group, Inc. Laurinburg owns a 100,000 square foot building on
5.31 acres of land which was previously operated as Scotland Memorial
Hospital. Laurinburg also owns a 66 2/3% interest of Laurinburg Residential
Care, LLC, a company formed to operate the new facility, but which is not
yet operational.
The investment is accounted for under the cost method and accordingly only
recognizes dividends upon their receipt.
The Company does not have managerial rights in the investment and the
Company's 49% interest does not allow any control over financial or
operating policies.
9
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ALLIED BIOTECHNOLOGY INTERNATIONAL INC.
NOTES TO THE FINANCIAL STATEMENT
June 30, 1996
(continued)
In accordance with the provisions of FASB No. 121, the Company has reviewed
the underlying asset held by the Laurinburg Group, Inc. Based on appraisals
received by the Laurinburg Group, Inc., for the land and building, the
value of the asset on the Laurinburg Group's books is already based on an
amount lower than current market. In addition, the Laurinburg Group's
option to change the use of the building to a residential retirement
facility also provides a future value greater than the carrying cost of the
investment held on the Company's books.
NOTE 4 NOTE PAYABLE:
-------------
a) A $100,000 promissory note was issued to an officer and stockholder of
the Company in exchange for intellectual property regarding the procedure
for cancer imaging and cancer therapy. Although the note does not call for
specific payments, management expects to fully pay the loan within the next
fiscal year.
b) A $40,000 loan was obtained on March 29, 1995 which was secured by the
180 acres of land. The note provides for monthly interest only payments
through to its due date of April 15, 1998 at which time a balloon payment
of the principal balance is due. The interest rate on the note is fifteen
(15%) percent per annum.
NOTE 5 INCOME TAXES:
-------------
At June 30, 1996, the Company has a federal operating loss carry forward of
$830,071 for financial accounting and federal income tax purposes.
Utilization of the net operating loss in any taxable year during the carry
forward period may be subject to an annual limitation due to the ownership
change limitations imposed by the tax law. The net operating losses will
expire at various dates commencing in the year 2000 through 2011.
The deferred tax asset consists of the future benefit of net operating loss
carry forwards. A valuation allowance limits the recognition of the benefit
of deferred tax assets until realization is reasonably assured by future
profitability.
10
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ALLIED BIOTECHNOLOGY INTERNATIONAL INC.
NOTES TO THE FINANCIAL STATEMENT
June 30, 1996
(continued)
The following is a summary of deferred taxes:
Deferred asset 282,241
Valuation allowance (282,241)
---------
0
=========
Note 6 Foreign Sales:
-------------
Sales by product type are classified under domestic and foreign sales
for the period as follows:
<TABLE>
<CAPTION>
Nine Month Period Ended June 30
----------------------------------
<S> <C> <C>
Product Type 1996 1995
- ------------------------ ---- ----
Personal Health Care
Domestic sales 71,448 0
Foreign sales 185,995 15,000
------- ------
Total 257,443 15,000
------- ------
Laboratory Supplies
Domestic sales 5,000 4,000
Foreign sales 126,000 54,500
------- ------
Total 131,000 58,500
------- ------
Domestic sales 76,448 4,000
Foreign sales 311,995 69,500
------- ------
Total sale 388,443 73,500
======= ======
</TABLE>
11
<PAGE>
ALLIED BIOTECHNOLOGY INTERNATIONAL, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL OVERVIEW
Allied Biotechnology International, Inc. is involved in the development of a
series of medical and healthcare products. These include a variety of medical
laboratory diagnostic assays designed for use by hospitals and medical clinics,
and several assays for over-the-counter sales. The Company has also acquired
the rights to develop and market a haircare and skincare product line. The
Company intends to research and develop genetically engineered
biopharmaceuticals, and will also investigate several novel immunological
procedures for cancer diagnosis and treatment.
The initial focus of the company will be on the growing overseas markets which
need affordable healthcare products. The company will license the sale of its
products through distributors who are familiar with the specific regulatory
requirements and market conditions within each country.
The Company has signed distribution agreements for the medical diagnostic
products in Thailand, Korea, Indonesia, Cambodia, Laos, the Philippines and
Latin America. The products are undergoing regulatory review in these countries
before they can be approved for sale. Until regulatory approvals are received,
the Company will receive minimal sales income from these products.
The Company has also developed a line of personal healthcare products, and has
begun distribution of a series of haircare products in the United States and
overseas. The company has signed distribution contracts for Korea, Japan,
Indonesia, Australia, New Zealand and Hongkong and for various ethnic groups
within the U.S. The market for personal healthcare products is extremely
competitive and requires a significant commitment of resources for media
advertising and follow-up monitoring. Sales of the haircare products have
commenced and the Company will implement a vigorous marketing campaign of this
product in the U.S. in the near future.
12
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ALLIED BIOTECHNOLOGY INTERNATIONAL, INC.
RESULTS OF OPERATIONS.
Revenue derived from sales and license fees for the three months ended June 30,
1996 and June 30, 1995 were $147,766 and $54,500 respectively. For the nine
months ended June 30, 1996 and June 30, 1995 revenues were $388,443 and $73,500
respectively, with approximately two-thirds of the revenue from sales of the
haircare product line and one-third from sales of medical products and license
fees.
The cost of sales for the three months ended June 30, 1996 and June 30, 1995
were $109,824 and $9,837 respectively. For the nine months ended June 30, 1996
and June 30, 1995 cost of sales were $232,070 and $16,107 respectively. Total
operating expenses also increased in parallel with sales and was $180,266 for
the three months ended June 30, 1996 as compared to $40,218 for the three months
ended June 30, 1995.
This resulted in a net loss of $142,324 or $0.01 per share for the third
quarter. The total accumulated deficit since the company's inception is $830,071
and will continue to increase as the Company's expands its research and
development program and manufacturing capacity. The Company will also expend
substantial funds towards the marketing program.
To accommodate the need for additional manufacturing and office space, the
Company has recently relocated to larger facilities and will incur substantial
buildout costs, and equipment and materials costs. There will also be increased
costs associated with increased management and production personnel. Although
the Company expects that revenues derived from existing contract sales will be
sufficient to fund these expenses there is no assurance that sales will
continue to increase at the same rate as formerly, or that payments will be
received in a timely manner. The current lack of cash reserves and asset
liquidity could seriously inhibit the operations of the Company. The Company is
therefore actively seeking to increase its cash reserves through loans or equity
financing so that any shortfall in receipt of sales revenue will not have a
disruptive effect upon its operations. During the third quarter the Company
realized $ 65,000 from the sale of restricted securities with an additional
payment of $200,000 due by the end of July, 1996. Additional capital will be
required in the immediate future to fund the planned growth of the Company.
The Company expects that an additional $1,000,000 will be required to complete
Phase 1 of its business plan which is the manufacture of medical diagnostic
products. A further
13
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ALLIED BIOTECHNOLOGY INTERNATIONAL, INC.
$5,000,000 will be required to initiate Phase 2 of the business plan which is
the development and manufacture of genetically engineered products. The Company
is currently seeking capital to complete Phase 1 and to initiate Phase 2 of its
business plan. There can be no assurance that these funds will be available in
the desired time frame, or on terms favorable to the company. If adequate funds
are not available, the Company's planned growth and ongoing operations may be
seriously impaired or delayed.
SIGNATURES:
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ALLIED BIOTECHNOLOGY INTERNATIONAL, INC.
(Registrant)
Date: 23 October 1996 /s/ HENRY J.SMITH
-------------------------------------
Henry J. Smith: President and C.E.O.
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JUNE 30,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 12,350
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 12,350
<PP&E> 45,075
<DEPRECIATION> (32,737)
<TOTAL-ASSETS> 3,887,425
<CURRENT-LIABILITIES> 117,387
<BONDS> 0
0
0
<COMMON> 13,792
<OTHER-SE> 4,546,317
<TOTAL-LIABILITY-AND-EQUITY> 3,887,425
<SALES> 388,443
<TOTAL-REVENUES> 388,443
<CGS> 232,070
<TOTAL-COSTS> 232,070
<OTHER-EXPENSES> 502,950
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,359
<INCOME-PRETAX> (353,936)
<INCOME-TAX> 0
<INCOME-CONTINUING> (353,936)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (353,936)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
