UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the Quarter ended September 30, 2000
Commission file number - 000-26423
INFECTECH, INC.
Exact name of Registrant as specified in its charter)
DELAWARE 34-1760019
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification
Number)
Suite Two, 87 Stambaugh Avenue, Sharon, PA 16146
(Address of principal executive offices) (Zip Code)
(724) 346-1302
(Registrant's telephone number, including area code)
|
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding twelve months (or such shorter period that the Registrant was required to file such reports), and (2) has been subject to file such filing requirements for the past thirty days.
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report:
6,960,509 Shares of Common Stock ($.02 par value)
(Title of Class)
Infectech, Inc.
PART I: Financial Information
ITEM 1 - Financial statements
ITEM 2 - Management's' discussion and analysis of
financial condition and results of operations
PART II: Other Information
ITEM 6 - Exhibits and Reports on Form 8-K
PART I
Item 1. Financial Statements:
CONSOLIDATED BALANCE SHEETS
INFECTECH, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
Unaudited Audited
September 30, Dec 31,
ASSETS 2000 1999
CURRENT ASSETS
Cash and cash equivalents $ 2,604 $ 19,044
Prepaid rent 550 0
--------- --------
TOTAL CURRENT ASSETS 3,154 19,044
EQUIPMENT
Medical equipment 45,968 45,968
Less accumulated depreciation 27,395 22,470
-------- ------
NET EQUIPMENT 18,573 23,498
OTHER ASSETS
Deposit 2,002 2,002
Patent costs, net of accumulated amortization
of $158,991 in 2000 and $126,190 in 1999 567,387 590,409
TOTAL OTHER ASSETS 569,389 592,411
---------- --------
$591,116 $634,953
========= ========
LIABILITIES AND STOCKHOLDERS EOUITY
CURRENT LIABILITIES
Accounts payable $ 97,838 $ 76,887
Accrued payroll taxes 430 2,205
Accrued state taxes 2,468 2,468
-------- -------
TOTAL CURRENT LIABILITIES 100,736 81,560
--------- -------
LONG-TERM DEBT
Notes payable 29,593 0
STOCKHOLDERS EQUITY
Common stock -$.02 par value per share
Authorized 20,000,000 shares; issued and
outstanding 6,960,509 shares in 2000
and 6,629,064 shares in 1999 139,211 132,581
Additional paid-in capital 2,916,560 2,490,163
Deficit accumulated during the development stage (2,594,984) (2,069,351)
---------- ----------
TOTAL STOCKHOLDERS EQUITY 460,787 553,393
---------- ----------
$591,116 $634,953
========== ========
|
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS
INFECTECH, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
UNAUDITED
Period from
June 21, 1989
Three months ended September 30 Nine months ended September 30 (Inception) to
OPERATING INCOME 2000 1999 2000 1999 Sept. 30, 2000
------------------------------------------------------------------------------------
Sales and Royalties $ 2,872 $ 7,290 $21,267 $7,290 $38,226
OPERATING EXPENSES
Research and development 0 14,363 8,539 49,352 282,959
Wages 1,307 73,513 156,868 86,592 428,604
Telephone 1,122 1,656 6,157 8,106 46,496
Office Expense 1,054 919 7,246 9,674 42,903
Insurance 0 0 0 51 18,567
Legal and accounting 1,590 101,341 6,147 116,059 280,757
Travel 1,400 (77) 3,506 5,580 85,468
Payroll taxes 83 617 259 1,917 11,626
State and local taxes 190 0 724 2,621 17,003
Amortization 10,682 9,470 32,801 27,995 161,832
Depreciation 1,642 1,686 4,925 4,794 27,396
Rent 3,697 6,293 16,635 14,739 112,202
Consulting and professional
Fees 4,812 3,785 202,552 19,726 831,013
Public relations 84,625 3,378 91,596 30,188 249,883
Royalties 713 1,822 5,919 1,822 9,747
Miscellaneous operating expenses1,652 6,211 2,995 11,420 38,985
MD-diagnostics corn. Expenses 0 0 198 30,614 43,028
------- ------- ------- ------- ----------
Total operating expenses 114,569 224,977 547,067 421,250 2,688,469
------- ------- ------- ------- ---------
Loss from operations (111,697) (217,687) (525,800) (413,960) (2,650,243)
OTHER INCOME (DEDUCTIONS)
Interest expense 0 0 0 0 (661)
Interest Income 1 1,144 167 5,205 55,920
---------- --------- --------- --------- ------------
Net Loss $(111,696) (216,543) $(525,633) $(408,755) $ (2,594,984)
========== ======== ========= ========= =============
BASIC LOSS PER SHARE $ (.02) $ (.03) $ (.08) $ (.06)
====== ===== ========= ==========
WEIGHTED AVERAGE SHARES 6,892,355 6,480,784 6,808,017 6,436,972
|
See accompanying notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF CASH FLOWS
INFECTECH, INC. AND SUBSEDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
UNAUDITED
Period from
June 21, 1989
Nine months ended September 30 (Inception) to
2000 1999 Sept. 30, 2000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (525,633) (408,755) $ (2,594,984)
Adjustments to reconcile net loss to
Net cash used in operating activities:
Amortization 32,801 27,995 161,832
Depreciation 4,925 4,794 27,396
(Increase) decrease in prepaid expenses (550) 0 (550)
Increase (decrease) in payables 20,949 (4,593) 96,042
Increase (decrease) in accrued expenses (1,774) 2,390 3,961
Expenses exchanged for capital 407,828 167,604 1,219,141
------- ------- ---------
Net cash used in operating activities (61,454) (210,565) (1,087,162)
------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment 0 (2,450) (45,969)
Patent Costs (9,778) (55,997) (727,218)
Increase in deposits 0 (51) (2,002)
------- ------- ---------
Net cash used in investing activities (9,778) (58,498) (775,189)
------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Fees in connection with issuance of stock 0 0 (87,348)
Proceeds from issuance of long-term debt 29,593 0 200,158
Proceeds from issuance of common stock 25,199 133,234 1,752,145
------- ------- ---------
Net cash provided by financing activities 54,792 133,234 1,864,955
------- ------- ---------
Net decrease in cash and cash equivalents (16,440) (135,829) 2,604
CASH AND CASH EQUIVALENTS
Beginning of period 19,044 217,295 0
End of period $ 2,604 81,466 $ 2,604
=========== ========= =========
CASH WAS PAID FOR
Interest $ 0 $ 0 $ 661
=========== ========== =========
|
See accompanying notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INFECTECH, INC. AND SUBSIDARY
(A DEVELOPMENT STAGE ENTERPRISE)
NINE MONTHS ENDED SEPTEMBER 30,2000
NOTE A - BASIS OF PRESENTATION
These unaudited financial statements are those of a development stage company, Infectech, Inc., that was incorporated in 1989 to develop diagnostic tests for infectious diseases and one 95% owned subsidiary. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with instructions to form 10-QSB. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary have been made for the fair presentation of the company's results for the nine month period ended September 30, 2000. These results are not necessarily indicative of the results that may be expected for the year ended December 31, 2000.
Infectech, Inc.
PART I (cont.)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations:
Trends and Uncertainties. Demand for Infectech's products will be dependent on, among other things, market acceptance of Infectech's concept, the quality of its products, government approval and general economic conditions, which are cyclical in nature. Inasmuch as a major portion of Infectech's activities will be the receipt of revenues from the sales of its products, Infectech's business operations may be adversely affected by Infectech's competitors and prolonged recessionary periods.
Capital and Source of Liquidity. Infectech requires substantial capital in order to meet its ongoing corporate obligations and in order to continue and expand its current and strategic business plans. Initial working capital has been obtained by the private sale of Infectech's common shares from November 1996 to present.
For the nine months ended September 30, 2000, Infectech received proceeds from the issuance of long term debt of $29,593 and proceeds from the issuance of common stock of $25,199 resulting in net cash provided by financing activities of $54,792 for the nine months ended September 30, 2000.
For the nine months ended September 30, 1999 had proceeds from the issuance of common stock of $133,234. As a result, Infectech had net cash provided by financing activities of $133,235 for the nine months ended September 30, 1999.
For the nine months ended September 30, 2000, Infectech had patent costs of $9,778 resulting in net cash used in investing activities of $9,778. Infectech anticipates that costs associated with product testing and development will continue to increase.
For the nine months ended September 30, 1999, Infectech had patent costs of $55,997 and purchased equipment of $2,450. Infectech had an increase in deposits of $51. As a result, Infectech had net cash used in investing activities of $58,498 for the nine months ended September 30, 1999.
On a long-term basis, liquidity is dependent on continuation and expansion of operation and receipt of revenues, additional infusions of capital and debt financing. Infectech believes that additional capital and debt financing in the short term will allow Infectech to increase its marketing and sales efforts and thereafter result in increased revenue and greater liquidity in the long term. However, there can be no assurance that Infectech will be able to obtain additional equity or debt financing in the future, if at all.
Results of Operations. Since inception, Infectech has not received any material revenues from operations. Sales and royalties for the nine months ended September 30, 2000 were $21,267.
Research and development expenses were $8,539 for the nine months ended September 30, 2000 compared to $49,352 for the nine months ended September 30, 1999. This decrease was due to research activities for its patents being shifted to work done internally in 1999. Wages increased to $156,868 for the nine months ended September 30, 2000 from $86,592 for the nine months ended September 30, 1999. This was the result from one employee working full time in research and development starting the later part of 1998. Legal and accounting increased to $6,147 for the nine months ended September 30, 2000 compared to $116,059 for the nine months ended September 30, 1999.
Consulting and professional fees increased to $202,552 for the nine months ended September 30, 2000 from $19,726 for the nine months ended September 30, 1999. This increase is due to increasing activity with consultants regarding marketing and commercialization of Infectech's product.
Public relation expenses were $91,596 for the nine months ended September 30, 2000 versus $30,188 for the nine months ended September 30, 1999. Infectech incurred $198 in expenses for the nine months
ended September 30, 2000 in connection with its subsidiary, MD- Diagnostics.com, Inc. to develop internet sites for medical diagnostics compared to $30,614 for the nine months ended September 30, 1999.
Plan of Operation. Infectech is in the development stage and has not conducted any significant operations to date and has received only minimal royalty revenues. Infectech may experience problems; delays, expenses and difficulties sometimes encountered by an enterprise in Infectech's stage of development, many of which are beyond Infectech's control. These include, but are not limited to, unanticipated problems relating to product development, testing, regulatory compliance, manufacturing costs, production and marketing problems, additional costs and expenses that may exceed current estimates and competition.
Infectech has funding needs of approximately $1.2 million. Infectech shall seek equity or debt financing for intellectual Property ($30,000), research and development for Tuberculosis Pseudomonas ($814,400), legal expense for patents ($263,419) and internet research and development ($50,000). This does not include Infectech's working capital need. Research and development expenses will be dependent on the availability of funds. Infectech does not expect any additional purchases of plant and equipment. There are no expected significant changes in the number of employees. If Infectech obtained funding, support type of employees such as secretarial, etc, may be required.
As of September 30, 2000, Infectech had very little working capital. Infectech expects to use this minimum capital to continue research and development of patents and for the costs associated with executing an initial public stock offering. Infectech believes that the net proceeds from equity financing together with revenues from operations, if any, will be sufficient to meet its anticipated cash needs for working capital and capital expenditures until approximately December 2001. There can be no assurance, however, that the net proceeds from equity financing will not be expended prior thereto due to unanticipated changes in economic conditions or other unforeseen circumstances. Unless growth in Infectech's revenues from operations substantially exceeds management's current expectations, by approximately December 2001, Infectech will be required to seek additional equity or debt financing to fund the costs of its operations, including continued development of its products. There can be no assurance that additional financing will be available or that, if available, such financing will be on acceptable terms to enable Infectech to complete development of or commercialize any of its proposed products or technologies.
Infectech is not delinquent in any of its obligations even though Infectech has generated limited operating revenues. Infectech intends to market its products utilizing cash made available from the private and public sale of its securities. Infectech's management is of the opinion that revenues from the sale of its products and the proceeds of the sales of its securities will be sufficient to pay its expenses until its business plan can be fully implemented.
PART II
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (numbered in accordance with Item 601 of Regulation S-K)
None
(b) Reports on Form 8-K
None
SIGNATURE
Pursuant to the requirements 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: /s/ Mitchell Felder, MD
----------------------------
Mitchell Felder, President
April 5, 2001
|