UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from to
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Commission File Number: 000-49620
Biogentech Corp.
----------------
(Exact name of small business issuer as specified in its charter)
Nevada 91-1868007
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2445 McCabe Way, Suite 150, Irvine, California 92614
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(Address of principal executive offices)
(949) 757-0001
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(Issuer's Telephone Number)
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding twelve 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 No X
------ ------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of August 25, 2003 there were
8,532,000* shares of the issuer's $.001 par value common stock issued and
outstanding.
*Represents stock issued and outstanding in Biogentech Corp., the reporting
issuer. The attached financial statements reflect a total of 20,864,708 shares
issued and outstanding as of June 30, 2003. That will be the number of shares
issued and outstanding when the Biogentech Corp. stock is issued to the
Biogentec Incorporated shareholders in exchange for their Biogentec Incorporated
stock. Also 4,500,000 shares of Biogentch Corp's common stock will be cancelled
as part of the reverse acquisition. An internal review of Biogentec
Incorporated's shareholder register and related supporting documents was
undertaken concurrently with the merger, prior to passing such records to the
transfer agent for the issuance of the exchanged shares. The review project is
complete and the stock register will be forwarded to the transfer agent for
processing.
1
PART 1 FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS -- The financial statements included in this filing
are the historical financial statements of BioGentec Incorporated, the
accounting acquirer in the reverse merger with the acquisition subsidiary of
BioGentech Corp. (formerly Togs for Tykes, Inc.). The reverse merger was not
consummated until July 2, 2003 but as Biogentec Incorporated was deemed the
accounting acquirer, and as allowed under statement of financial accounting
standards number 141("SFAS 141"), the company designated for accounting purposes
a date of convenience for the closing of June 30, 2003. (See footnote 1 for
further explanation.)
BioGentech Corp. and Subsidiary
(a Development Stage Company)
CONSOLIDATED BALANCE SHEETS
June 30, 2003 March 31, 2003
(Unaudited)
ASSETS
CURRENT ASSETS
CASH $ 10,858 $ 2,290
RESTRICTED CASH - 100,000
INVENTORY 5,903 6,000
OTHER ASSETS 545 3,486
----------- ----------
TOTAL CURRENT ASSETS 17,306 111,776
PROPERTY AND EQUIPMENT, NET 79,382 57,425
WEBSITE DEVELOPMENT COST, NET 12,650 14,900
PATENTS, NET 3,850,000 3,850,000
DEPOSIT 40,000 40,000
----------- -----------
TOTAL ASSETS $ 3,999,338 $ 4,074,101
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 452,466 $ 357,074
DUE TO RELATED PARTIES 597,133 298,162
----------- -----------
TOTAL CURRENT LIABILITIES 1,049,599 655,236
----------- -----------
COMMON STOCK - $.001 par value
50,000,000 shares authorized, 20,864,708 and 20,865 19,733
19,732,708 issued and
outstanding , respectively
ADDITIONAL PAID IN CAPITAL 7,004,913 6,906,045
DEFERRED COMPENSATION (112,000) (196,000)
DEFICIT ACCUMULATED DURING THE DEVELOPMENT STAGE (3,964,039) (3,310,913)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 2,949,739 3,418,865
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,999,338 $ 4,074,101
=========== ===========
The accompanying notes are an integral part of the
consolidated financial statements
2
BIOGENTECH CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(a Development Stage Company)
Cumulative from
inception
through June
Three months ended June 30, 30, 2003
---------------------------- -----------
2003 2002
---------- ----------
NET SALES $ 1,687 $ 117 $ 2,134
COST OF SALES 439 6,447 16,879
---------- ---------- -----------
GROSS PROFIT (LOSS) 1,248 (6,330) (14,745)
---------- ----------
OPERATING EXPENSES
DEPRECIATION & AMORTIZATION 5,249 5,117 49,445
GENERAL AND ADMINISTRATIVE EXPENSES 642,176 742,167 3,613,827
---------- ---------- -----------
TOTAL OPERATING EXPENSES 647,425 747,284 3,663,272
---------- ---------- -----------
LOSS FROM OPERATIONS (646,177) (753,614) (3,678,017)
OTHER INCOME (EXPENSE)
INTEREST EXPENSE (6,949) (31,030) (286,022)
---------- ---------- -----------
LOSS BEFORE PROVISION FOR INCOME TAXES (653,126) (784,644) (3,964,039)
PROVISION FOR INCOME TAXES - - -
---------- ---------- -----------
NET LOSS $ (653,126) $ (784,644) $(3,964,039)
========== ========== ===========
LOSS PER COMMON SHARE - BASIC AND DILUTED $ (0.03) $ (0.05) $(0.23)
========== ========== =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 19,817,875 16,978,933 17,394,862
========== ========== =============
OUTSTANDING
The accompanying notes are an integral part of the
consolidated financial statements
3
BIOGENTECH CORP. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Deficit
accumulated Total
Common stock Additional during the stockholders'
------------------------------ paid-in Deferred development equity
Shares Amount capital compensation stage (deficit)
------------- ------------- ------------- ------------- ------------- ------------
Balance at inception
(November 21, 2000) - $ - $ - - - $ -
Issuance of founder's
shares in exchange
for property and
equipment 16,300,000 16,300 - - - 16,300
Issuance of common
stock for cash -
November 2000 @ $1.00 30,000 30 29,970 - - 30,000
Issuance of common
stock for cash -
December 2000 @ $1.00 15,000 15 14,985 - - 15,000
Issuance of common
stock for cash -
February 2001 @ $1.00 12,000 12 11,988 - - 12,000
Issuance of common
stock for cash - March
2001 @ $1.00 125,000 125 124,875 - - 125,000
Issuance of common
stock for services -
March 2001 @ $1.00 10,000 10 9,990 - - 10,000
Contributed capital
(see Notes 5 and 10) - - 62,681 - - 62,681
Net loss for the
period from inception
(November 21, 2000)
to March 31, 2001 - - - - (194,864) (194,864)
------------- ------------- ------------- ------------- ------------- ------------
Balance at March 31,
2001 16,492,000 16,492 254,489 - (194,864) 76,117
Issuance of common
stock for cash - April
2001 @ $1.00 10,000 10 9,990 - - 10,000
4
BIOGENTECH CORP. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Issuance of common
stock for telephone
equipment -
April 2001 @ $1.00
6,750 7 6,743 - - 6,750
Issuance of common
stock for cash - May
2001 @ $1.00 11,000 11 10,989 - - 11,000
Issuance of common
stock for website
development -
May 2001 @ $1.00
17,000 17 16,983 - - 17,000
Issuance of common
stock for legal
services -
May 2001 @ $1.00
1,000 1 999 - - 1,000
Issuance of common
stock for cash - June
2001 @ $1.00 23,500 24 23,476 - - 23,500
Issuance of common
stock for cash - July
2001 @ $1.00 20,000 20 19,980 - - 20,000
Issuance of common
stock for cash -
August 2001 @ $1.00 25,000 25 24,975 - - 25,000
The accompanying notes are an integral part of the
consolidated financial statements
5
BIOGENTECH CORP. AND SUBIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
Deficit
accumulated Total
Common stock Additional during the stockholders
------------------------ paid-in Deferred development equity
Shares Amount capital compensation stage (deficit)
----------- ---------- ------------ ------------ ------------ -----------
Issuance of common stock for
services, related party -
September 2001 @ $1.00 65,858 66 65,792 - - 65,858
Issuance of common stock for cash -
September 2001 @ $1.00 15,000 15 14,985 - - 15,000
Issuance of common stock for services
- September 2001 @ $1.00 11,000 11 10,989 - - 11,000
Issuance of stock options for
services - September 2001 - - 32,000 - - 32,000
Issuance of common stock for cash -
October 2001 @ $1.00 5,000 5 4,995 - - 5,000
Issuance of common stock for cash -
December 2001 @ $1.00 30,000 30 29,970 - - 30,000
Issuance of common stock for services
-
December 31, 2001 @ $1.00 33,000 33 32,967 - - 33,000
Issuance of common stock for
services, related party -
December 2001 @ $1.00 117,500 118 117,382 - - 117,500
Issuance of common stock for prepaid
advertising -
December 2001 @ $1.00 15,600 15 15,585 - - 15,600
Issuance of common stock for property
and equipment -
January 2002 @ $3.00 1,000 1 2,999 - - 3,000
Issuance of common stock for
services, related party -
January 2002 @ $1.00 33,000 33 32,967 - - 33,000
Issuance of common stock for cash -
February 2002 @ $2.00 20,000 20 39,980 - - 40,000
Issuance of common stock for cash -
March 2002 @ $2.00 12,500 12 24,988 - - 25,000
Contributed capital (see Notes 5 and
10) - - 211,269 - - 211,269
Deferred compensation - - - (60,108) - (60,108)
Net loss - - - - (1,028,397) (1,028,397)
----------- ---------- ------------ ------------ ------------ -----------
16,965,708 16,966 1,005,492 (60,108) (1,223,261) (260,911)
Balance at March 31, 2002
Issuance of common stock for services
- April 2002 @ $2.00 3,000 3 5,997 - - 6,000
Issuance of common stock for cash -
April 2002 @ $1.00 10,000 10 9,990 - - 10,000
Issuance of common stock for cash -
April 2002 @ $2.00 17,500 17 34,983 - - 35,000
Issuance of common stock for cash -
May 2002 @ $1.00 10,000 10 9,990 - - 10,000
Issuance of common stock for cash -
May 2002 @ $2.00 16,000 16 31,984 - - 32,000
The accompanying notes are an integral part of the
consolidated financial statements
6
BIOGENTECH CORP. AND SUBIDIARY
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
Deficit
accumulated Total
Common stock Additional during the stockholders'
--------------------------- paid-in Deferred development equity
Shares Amount capital compensation stage (deficit)
------------ ------------- ------------ ------------- ------------- -------------
Issuance of stock options for services
- May 2002 - - 350,000 - - 350,000
Contributed capital - bonus expense - -
(see Note 10) 50,000 - - 50,000
Issuance of common stock for cash -
June 2002 @ $1.00 5,000 5 4,995 - - 5,000
Issuance of common stock for cash -
June 2002 @ $2.00 5,000 5 9,995 - - 10,000
Issuance of common stock for cash -
July 2002 @ $1.00 5,000 5 4,995 - - 5,000
Issuance of common stock for cash -
August 2002 @ $2.00 10,000 10 19,990 - - 20,000
Issuance of common stock for cash -
September 2002 @ $2.00 10,000 10 19,990 - - 20,000
Issuance of stock options below fair
market value -
November 2002 - - 250,000 (250,000) - -
Issuance of common stock for conversion
of note -
December 2002 @ $2.00
50,000 50 99,950 - - 100,000
Issuance of common stock for cash -
December 2002 @ $2.00 20,000 20 39,980 - - 40,000
Issuance of common stock for services -
December 2002
@ $2.00
15,000 15 29,985 - - 30,000
Issuance of common stock for patents -
December 2002
@ $2.00
2,000,000 2,000 3,998,000 - - 4,000,000
Contributed capital (see Notes 5 and 10) -
- 292,718 - - 292,718
Issuance of common stock for exercise
of options -
December 2002
574,000 574 574,028 - - 574,602
Deferred compensation
- - - 60,108 - 60,108
Contributed capital (see Notes 5 and 10)
- - 5,000 5,000
Issuance of stock options for services
- January 2003 - - 25,000 - - 25,000
Issuance of common stock for cash -
February 2003 @$2.00 11,500 12 22,988 - - 23,000
Issuance of common stock for cash -
March 2003 @$2.00 5,000 5 9,995 - - 10,000
Deferred compensation
- - - 54,000 - 54,000
Net loss - - - - (2,087,652) (2,087,652)
------------- ------------- ------------ ------------- ------------- -------------
Balance at March 31, 2003 19,732,708 19,733 6,906,045 (196,000) (3,310,913) 3,418,865
The accompanying notes are an integral part of the
consolidated financial statements
7
BIOGENTECH CORP. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
Common Deficit
stock accumulated Total
Shares Additional during the stockholders
------------------------- paid-in Deferred development equity
capital compensation stage (deficit)
------------- ----------- -------------- ------------- ---------------- ----------------
Issuance of common stock for
cash - April 2003 @ $2.00 140,000
(unaudited) 70,000 70 139,930 - -
Issuance of common stock for
cash - May 2003 @ $2.00
(unaudited) 30,000 30 59,970 60,000
Deferred compensation
(unaudited) 84,000 84,000
Acquistion of Biogentech Corp. 1,032,000 1032 (101,032) - - (100,000)
of ("Togs for Tykes")
Net loss for the three
months ended June 30, 2003
(unaudited) - - - - (653,126) (653,126)
------------- ----------- -------------- ------------- ---------------- ----------------
Balance at June 30, 2003
(unaudited) 20,864,708 $ 20,865 $ 7,004,913 $ (112,000) $ (3,964,039) $ 2,949,739
============= =========== ============== ============= ================ ================
The accompanying notes are an integral part of the
consolidated financial statements
7
BIOGENTECH CORP. AND SUBIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(a Development Stage Company)
Cumulative from
inception through
Three months ended June 30, June 30, 2003
----------------------------------- ------------------
2003 2002
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $ (653,126) $ (784,644) $ (3,964,039)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN
OPERATING ACTIVITIES:
Depreciation and amortization 5,249 5,117 49,445
Common stock issued for services - 6,000 307,358
Exercise of stock options for services - - 26,960
Issuance of stock options for services - 350,000 407,000
Capital contribution - bonus (related party) - 50,000 50,000
Amortization of prepaid advertising - 3,900 15,600
Deferred compensation 84,000 31,250 138,000
Beneficial conversion feature expense - - 50,000
Amortization of discount - 31,030 273,628
Impairment expense - - 55,832
CHANGES IN ASSETS AND LIABILITIES:
( Increase) in other assets 2,941 10,519 (545)
Increase in accounts payable and accrued 95,320 15,103 452,394
expenses
(Increase) decrease in inventory 97 - 347
Increase in due to related parties 100,471 172,500 746,248
-------------- ------------- -----------------
NET CASH FLOWS USED IN OPERATING ACTIVITIES:
(365,048) (109,225) (1,391,772)
-------------- ------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (24,884) (3,489)
(84,954)
Increase in patent costs - - (24,711)
Merger fees and costs - - (100,000)
Increase in deposits - - (40,000)
Increase in website development costs - - (13,980)
- - --------
NET CASH FLOWS USED IN INVESTING ACTIVITY
(24,884) (3,489) (263,645)
-------------- ------------- -----------------
The accompanying notes are an integral part of the
consolidated financial statements
8
BIOGENTECH CORP. AND SUBIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
(a Development Stage Company)
Cumulative from
inception through
Three months ended June 30, June 30, 2003
----------------------------------- ------------------
2003 2002
---- ----
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Payment on contract - - (161,000)
Sale of common stock 200,000 102,000 806,500
Proceeds from related party advances 208,500 6,000 514,107
Payments on related party advances (10,000) - (65,000)
Contributed capital - - 571,668
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES
-------------- ------------- ------------------
398,500 108,000 1,666,275
-------------- ------------- ------------------
NET INCREASE IN CASH 8,568 (4,714) 10,858
CASH, BEGINNING OF PERIOD 2,290 7,097 -
-------------- ------------- -
CASH, END OF PERIOD $ 10,858 $ 2,383 $ 10,858
============== ============= ==================
CASH PAID DURING THE PERIOD FOR
INTEREST EXPENSE $ - $ - $ -
============== ============= ==================
INCOME TAXES $ - $ - $ -
============== ============= ==================
NON CASH INVESTING AND FINANCING ACTIVITIES:
For the three months ended June 30, 2002
-----------------------------------------
During the three months ended June 30, 2002, the Company amortized $31,250
of deferred compensation relating to the issuance of common shares for
future consulting services during the year ended March 31, 2002.
During the three months ended June 30, 2002, the Company issued 6,000 shares
of its common stock valued at $6,000 for consulting services provided, which
represented the fair market value on the date of issuance.
On May 5, 2002, a related party transferred 25,000 shares of the Company's
common stock valued at $50,000 to an employee of the Company as a bonus. The
fair market value on the date of issuance was $2.00 per share. The Company
has recorded this transaction as a contribution to capital and salary
expense for the three months ended June 30, 2002.
The accompanying notes are an integral part of the
consolidated financial statements
9
BIOGENTECH CORP. AND SUBIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
(a Development Stage Company)
For the three months ended June 30, 2002 (Continued)
-----------------------------------------------------
During May 2002, the Company granted stock options to three consultants to
purchase a total of 300,000 shares at an exercise price of $1.00 per share.
The options vest immediately on the execution date of the consulting
agreement. At the date of the grant, the fair value of the common stock was
$2.00 per share. We have valued these options under the Black-Scholes model
with a total valuation of approximately $350,000, which was included in the
statements of operations for the three months ended June 30, 2002.
During the year ended March 31, 2002, the Company issued 15,600 shares of
its common stock valued at $15,600 for prepaid advertising expense. The
Company has recognized $3,900 of advertising expense relating to the
issuance during the three months ended June 30, 2002.
During the three months ended June 30, 2002, the Company recorded interest
expense totaling $31,030 relating to the discount on a note payable.
For the three months ended June 30, 2003:
-----------------------------------------
The Company has recognized deferred compensation expense totaling $84,000
relating to options, issued during the year ended March 31, 2003, during
the three months ended June 30, 2003.
10
BioGentech Corp. and Subidiary
Notes to Consolidated Financial Statements (Unaudited)
For the Three months Ended June 30, 2003 and 2002
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of presentation
---------------------
The unaudited financial statements have been prepared by BioGentech Corp. (the
"Company"), pursuant to the rules and regulations of the Securities and Exchange
Commission. (See Reverse Acquisition section below). The information furnished
herein reflects all adjustments (consisting of normal recurring accruals and
adjustments) which are, in the opinion of management, necessary to fairly
present the operating results for the respective periods. Certain information
and footnote disclosures normally present in annual financial statements
prepared in accordance with accounting principles generally accepted in the
United States of America have been omitted pursuant to such rules and
regulations. These unaudited financial statements should be read in conjunction
with the audited financial statements and footnotes for the fiscal years ended
March 31, 2003 and 2002 included on Form 8K/A as filed with the Securities and
Exchange Commission on July 18, 2003.
The results of operations for the interim periods are not necessarily indicative
of the results to be expected for the full year.
Reverse acquisition
-------------------
BioGentec Incorporated ("BG"), a private Nevada corporation, was incorporated on
November 21, 2000 according to the laws of Nevada, under the name St Petka, Inc.
On May 4, 2001, BG formally changed its name to BioGentec Incorporated. On July
2, 2003, BG was merged into Togs for Tykes Acquisition Corp.("TTAC"), a
wholly-owned subsidiary formed for the purpose of acquiring BG. TTAC is the
wholly-owned subsidiary of the registrant, BioGentech Corp. ("BGTH") (formerly
Togs for Tykes, Inc.). As allowed under SFAS 141, the Company designated a dated
of convenience of the closing for accounting purposes as June 30, 2003. Under
the terms of the merger agreement, all of BG's outstanding common stock
(19,832,708 shares of $0.0001 par value stock) will be exchanged for 19,832,708
shares newly issued shares of $0.001 par value stock of BioGentech Corp. common
stock. At the date of the transaction, BGTH had 5,532,000 shares of common stock
outstanding of which 4,500,000 will be cancelled as part of the transaction
leaving 20,864,708 shares outstanding. As of the date of this filing, BG's
shares have not been exchanged for BGTH's common stock and the 4,500,000 shares
have not been cancelled. An internal review of BG's shareholder register and
related supporting documents was undertaken concurrently with the merger and
prior to passing such records to the transfer agent for the issuance of the
exchanged shares. The review project is complete and the stock register will be
forwarded to the transfer agent for processing.
This transaction was consummated with the filing of the Articles of Merger with
the State of Nevada on July 2, 2003. BG shareholders then effectively controlled
approximately 95% of the issued and outstanding common stock of BGTH. Since the
shareholders of BG obtained control of BGTH, according to FASB
Statement No. 141 - "BUSINESS COMBINATIONS," this acquisition has been treated
as a recapitalization for accounting purposes, in a manner similar to reverse
acquisition accounting. In accounting for this transaction:
i) BG is deemed to be the purchaser and surviving company for
accounting purposes. Accordingly, its net assets are
included in the balance sheet at their historical book
values and the results of operations of BG have been
presented for the comparative prior period; and
ii) Control of the net assets and business of BGTH was
acquired for accounting purposes effective June 30, 2003.
This transaction has been accounted for as a purchase of
the assets and liabilities of BGTH by BG during the three
months ended June 30 2003. The historical cost of the net
assets acquired was $0 and $100,000 cash was paid.
11
BioGentech Corp. and Subidiary
Notes to Consolidated Financial Statements (Unaudited)
For the Three months Ended June 30, 2003 and 2002
Going concern
-------------
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. Through June 30, 2003, the Company
is still in the development stage and has not been able to generate any
sufficient revenue from its operations to cover its costs and operating
expenses. Although the Company has been able to issue its common stock through
private placements to raise capital in order to fund its operations, it is not
known whether the Company will be able to continue this practice, or be able to
obtain other types of financing or if its revenue will increase significantly to
be able to meet its cash operating expenses. This, in turn, raises substantial
doubt about the Company's ability to continue as a going concern. Management
anticipates revenue to grow as a result of additional products offered to its
customers and through its acquisition of InnoFood, Inc. Management believes that
the private equity financing, public equity financing and new product offerings
will enable the Company to generate positive operating cash flows and continue
its operations. However, no assurances can be given as to the success of these
plans. The financial statements do not include any adjustments that might result
from the outcome of these uncertainties.
During April 2003, a definitive agreement was signed between BioGentec
Incorporated and (BGTH) to merge BioGentec into BGTH's
wholly-owned subsidiary, Togs for Tykes Acquisition Corp. The merger was
consummated with the filing of the merger agreement with the State of Nevada in
July 2003. As a result of the merger, the Company intends to gain access to
public equity markets and additional financing.
In July 2003, the Company signed a definitive agreement to acquire InnoFood,
Inc. As of the date of this filing, the transaction has not closed. (see
Subsequent Events and management, discussion and analysis section).
Stock Options
-------------
We did not grant any new options and no options were cancelled or exercised
during the three months ended June 30, 2003. As of June 30, 2003, 1,150,000
options were outstanding., all of which are fully vested. Accordingly, no
additional disclosure is required under SFAS 148.
Earnings (loss) per share
-------------------------
We have adopted Statement of Financial Accounting Standards No. 128 ("SFAS
128"), "Earnings Per Share." Under SFAS 128, basic earnings per share is
computed by dividing income available to common stockholders by the
weighted-average number of common shares assumed to be outstanding during the
period of computation. Diluted earnings per share is computed similar to basic
earnings per share except that the denominator is increased to include the
number of additional common shares that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive. Because we have incurred net losses, basic and diluted loss per share
are the same as additional potential common shares would be anti-dilutive. As of
June 30, 2003 we have approximately 1,150,000 common stock equivalents.
Recent Accounting Pronouncements:
---------------------------------
During April 2003, the FASB issued SFAS 149 - "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities", effective for contracts entered
into or modified after June 30, 2003, except as stated below and for hedging
relationships designated after June 30, 2003. In addition, except as stated
below, all provisions of this Statement should be applied prospectively. The
provisions of this Statement that relate to Statement 133 Implementation Issues
that have been effective for fiscal quarters that began prior to June 15, 2003,
should continue to be applied in accordance with their respective effective
dates. In addition, paragraphs 7(a) and 23(a), which relate to forward purchases
or sales of when-issued securities or other securities that do not yet exist,
should be applied to both existing contracts and new contracts entered into
after June 30, 2003. The Company does not participate in such transactions,
however, is evaluating the effect of this new pronouncement, if any, and will
adopt FASB 149 within the prescribed time.
12
BioGentech Corp. and Subidiary
Notes to Consolidated Financial Statements (Unaudited)
For the Three months Ended June 30, 2003 and 2002
During May 2003, the FASB issued SFAS 150 - "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity", effective for
financial instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning after June
15, 2003. This Statement establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both liabilities
and equity. It requires that an issuer classify a freestanding financial
instrument that is within its scope as a liability (or an asset in some
circumstances). Many of those instruments were previously classified as equity.
Some of the provisions of this Statement are consistent with the current
definition of liabilities in FASB Concepts Statement No. 6, Elements of
Financial Statements. The Company is evaluating the effect of this new
pronouncement and will adopt FASB 150 within the prescribed time.
2. Related-Party Transactions
a) BioGentec has a consulting contract with R&R Development, Inc
("R&R") whereby R&R would provide managerial consulting
services to the Company at the rate of $125,000 per year and
the rate shall increase to $135,000 per year when and if
BioGentec completes a merger with a public shell company. R&R
is also a shareholder of BioGentec. For the three months ended
June 30, 2003, the Company accrued $31,250 under this
contract.
During the period from April 1, 2003 to June 30, 2003, R&R
advanced BioGentec cash totaling $208,500. These transactions
have been recorded as a demand note payable. The Company has
imputed interest on the note at a rate of 10% per annum.
Interest expense totaling $6,721 was accrued for the period
ended June 30, 2003.
b) The President (previously the Executive Vice President)
entered into an employment agreement dated November 22, 2000,
amended on December 31, 2001, which pays an annual salary of
up to $125,000 and certain bonuses. For the three months ended
June 30, 2003, the Company accrued $31,250 of salary for the
President.
c) BioGentec has entered into an employment agreement with the
Chief Operating Officer ("COO") that pays an annual salary of
$120,000 per year. As of June 30, 2003, the Company owed the
COO approximately $40,000 on the agreement, which is, included
in accounts payable and accrued expenses.
3. Sale of Common Stock
During the three months ended June 30, 2003, BioGentec Incorporated sold 100,000
restricted common shares in a private placement at $2.00 per share, which
represented the fair market value of the common stock.
4. Subsequent Events
InnoFood, Inc. Agreement
-------------------------
On July 31, 2003, the Company entered into a definitive agreement to acquire
InnoFood, Inc. ("InnoFood"), owner of certain rights to a proprietary food
processing technology developed by Modofood S.P.A. of Brescia, Italy. The
agreement provides BioGentech exclusive manufacturing and distribution rights of
Modofood's proprietary food sterilization and preservation technology for North
America, Central America, South America and Japan, as well as the exclusive
rights to negotiate on behalf of Modofood for Southeast Asia, including Taiwan,
China and Indonesia.
Under terms of the agreement, InnoFood shareholders will receive one BioGentech
common share and one BioGentech warrant share for every twelve shares of
InnoFood common stock. InnoFood shareholders will also receive one InnoFood
preferred share for every 1,200 InnoFood common shares. The agreement calls for
BioGentech to infuse $5 million of working capital prior to December 31, 2003.
As of August 20, 2003, the transaction has not closed, but the Company has
issued 3.5 million common shares of stock which are being held in escrow
relating to this agreement.
13
ITEM 2. PLAN OF OPERATION
--------------------------
THIS FOLLOWING INFORMATION SPECIFIES CERTAIN FORWARD-LOOKING STATEMENTS OF
MANAGEMENT OF THE COMPANY. FORWARD-LOOKING STATEMENTS ARE STATEMENTS THAT
ESTIMATE THE HAPPENING OF FUTURE EVENTS AND ARE NOT BASED ON HISTORICAL FACT.
FORWARD-LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF FORWARD-LOOKING
TERMINOLOGY, SUCH AS "MAY", "SHALL", "COULD", "EXPECT", "ESTIMATE",
"ANTICIPATE", "PREDICT", "PROBABLE", "POSSIBLE", "SHOULD", "CONTINUE", OR
SIMILAR TERMS, VARIATIONS OF THOSE TERMS OR THE NEGATIVE OF THOSE TERMS. THE
FORWARD-LOOKING STATEMENTS SPECIFIED IN THE FOLLOWING INFORMATION HAVE BEEN
COMPILED BY OUR MANAGEMENT ON THE BASIS OF ASSUMPTIONS MADE BY MANAGEMENT AND
CONSIDERED BY MANAGEMENT TO BE REASONABLE. OUR FUTURE OPERATING RESULTS,
HOWEVER, ARE IMPOSSIBLE TO PREDICT AND NO REPRESENTATION, GUARANTY, OR WARRANTY
IS TO BE INFERRED FROM THOSE FORWARD-LOOKING STATEMENTS.
THE ASSUMPTIONS USED FOR PURPOSES OF THE FORWARD-LOOKING STATEMENTS SPECIFIED IN
THE FOLLOWING INFORMATION REPRESENT ESTIMATES OF FUTURE EVENTS AND ARE SUBJECT
TO UNCERTAINTY AS TO POSSIBLE CHANGES IN ECONOMIC, LEGISLATIVE, INDUSTRY, AND
OTHER CIRCUMSTANCES. AS A RESULT, THE IDENTIFICATION AND INTERPRETATION OF DATA
AND OTHER INFORMATION AND THEIR USE IN DEVELOPING AND SELECTING ASSUMPTIONS FROM
AND AMONG REASONABLE ALTERNATIVES REQUIRE THE EXERCISE OF JUDGMENT. TO THE
EXTENT THAT THE ASSUMED EVENTS DO NOT OCCUR, THE OUTCOME MAY VARY SUBSTANTIALLY
FROM ANTICIPATED OR PROJECTED RESULTS, AND, ACCORDINGLY, NO OPINION IS EXPRESSED
ON THE ACHIEVABILITY OF THOSE FORWARD-LOOKING STATEMENTS. WE CANNOT GUARANTY
THAT ANY OF THE ASSUMPTIONS RELATING TO THE FORWARD-LOOKING STATEMENTS SPECIFIED
IN THE FOLLOWING INFORMATION ARE ACCURATE, AND WE ASSUME NO OBLIGATION TO UPDATE
ANY SUCH FORWARD-LOOKING STATEMENTS.
CRITICAL ACCOUNTING POLICY AND ESTIMATES. Our Management's Discussion and
Analysis of Financial Condition and Results of Operations section discusses our
financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States of America. The preparation
of these financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. On an on-going basis, management evaluates
its estimates and judgments, including those related to revenue recognition,
accrued expenses, financing operations, and contingencies and litigation.
Management bases its estimates and judgments on historical experience and on
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions. The most significant accounting estimates inherent in
the preparation of our financial statements include estimates as to the
appropriate carrying value of certain assets and liabilities which are not
readily apparent from other sources, including patents. These accounting
policies are described at relevant sections in this discussion and analysis and
in the notes to the financial statements included in our Quarterly Report on
Form 10-QSB for the period ended June 30, 2003.
OUR BACKGROUND. We were incorporated in Nevada on September 26, 1997, as Aztec
Ventures, Inc. Our original business was the sale of pay phone services. In June
2001, our management and business changed. On September 5, 2001, we amended our
Articles of Incorporation to change our name to Togs for Tykes, Inc. due to the
shift of our business to designing and marketing children's apparel. Since we
were not successful in implementing that business plan due to lack of funds, in
March 2003, we entered into negotiations regarding an acquisition of BioGentec
Incorporated, a Nevada corporation ("BG"), in order to merge it with and into
our wholly-owned subsidiary, Togs for Tykes Acquisition Corporation, a Nevada
corporation. By means of a shareholder vote in March 2003, we changed our name
to Biogentech Corp.
We entered into an Agreement and Plan of Merger with BG which provided that BG
would become our subsidiary by merging with our acquisition subsidiary. That
agreement is attached as an exhibit to our report on Form 8-K filed on July 3,
2003. On July 2, 2003, our subsidiary filed Articles of Merger with the
Secretary of State of Nevada to complete that acquisition for accounting
purposes, the company has deemed the transaction closed as of June 30, 2003.We
anticipate that the acquisition will increase the total value of the corporation
to our investors. Also in July 2003, we changed our fiscal year end from
December 31 to March 31.
BIOGENTEC INCORPORATED. BioGentec Incorporated ("BG") was incorporated in Nevada
on November 21, 2000. BG is dedicated to the development and commercialization
of consumer medical products and life style - health improvement products. BG's
first product focus is in the fields of immunomodulation, menopause, pinpoint
detoxification and cholesterol reduction. BG anticipates that its initial
patented product, Prehistin,(formerly Allertin, will create a unique niche
within the allergy relief category. In November 2000, BG acquired Allergy
Limited, LLC ("Allergy Limited"). Allergy Limited sponsored the clinical
research for Prehistin's formula from 1989 through 2000 and secured the first
patent, in 1992 and BG secured the second in 2001. Please refer to our Form 8-K
filed on July 16, 2003 and the first amendment filed on July 18, 2003, for a
more detailed discussion on the Biogentec Incorporated's business and
management.
14
For the three month period ended June 30, 2003.
-----------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES. We had cash of $10,858 at June 30, 2003. We
also had $545 in other assets and $5,903 in inventory, making our total current
assets as at June 30, 2003 equal to $17,306. We also had the following fixed
assets: $79,382 in net fixed assets, $12,650 represented by our website, $40,000
in deposits and $3,850,000 represented by net value of our patents. Therefore,
our total assets as of June 30, 2003 totaled $3,999,338. Our total current
liabilities were $1,049,599 at June 30, 2003, which was represented by accounts
payable and accrued expenses of $452,446 and $597,133 due to related parties or
shareholders.
We have financed our operations primarily through cash generated from related
party debt financing and from the private placement sale of equity securities.
During the three month ended June 30, 2003, BG sold 100,000 common shares of its
common stock for $2.00 per share and received $200,000. Additionally related
parties loaned $208,500 to BG. In the three month period ended June 30, 2002, BG
sold $102,000 in common stock and received $6000 in related party loans.
As of June 30, 2003, we had negative working capital of $1,032,293 an increase
of $488,833 (76%) as compared to June 30, 2002, due primarily to an increase in
related party obligations and compensation.
Our net cash used by operating activities was $365,048 for the three months
ended June 30, 2003 as compared to net cash used of $109,225 for the three
months ended June 30, 2002, an increase of $225,833 or 207%, primarily due to a
reduction of non-cash equity and expense transactions.
Our cash used in investing activities was $24,884 for the three month period
ended June 30, 2003, an increase of $21,395 or 613%, due to the purchase of
computer equipment.
Our net cash provided by financing activities was $398,500 for the three months
ended June 30, 2003 compared to $108,000 for the same period a year earlier, an
increase of 269%. The increase is primarily due to increases in the sale of
common stock and loan proceeds from related parties.
See Subsequent Events section for a discussion of capital requirements related
to acquisition of InnoFood and financing obtained subsequent to June 30, 2003.
RESULTS OF OPERATIONS.
Revenues and Cost of Sales: Revenues for the quarters ended June 30, 2003 and
2002 are insignificant as we are undertaking a Phase III clinical trial in order
to obtain FDA approval as an over the counter drug.
Operating Expenses: Operating expenses for the quarter
ended June 30, 2003 were $647,425 as compared to $747,284 for the quarter ended
June 30, 2002. For both periods expenses incurred were for two major purposes:
ongoing development of our Prehistin product and related product management and
ii) general management and fund raising efforts. Expenses decreased $99,859 due
primarily to reduced compensation and consulting expenses.
15
Our net loss for three months ended June 30, 2003, was $653,126 ($0.03 per share
loss) compared to a net loss of $784,644 ($0.05 per share loss) for the
corresponding period in 2002. Our net loss for the period from our inception to
June 30, 2003, was $3,964,039 (a loss of $0.23 per share).
Our Plan of Operation for the Next Twelve Months. Over the next 12 months, we
plan on pursuing the product development begun by Biogentec Incorporated.
Specifically, we plan on moving forward with the development, marketing and sale
of our Prehistin product and related products. We also hope that the transaction
with InnoFood will close. Should it close, we will pursue the manufacturing and
distribution of Modofood's proprietary food sterilization and preservation
technology in North America, Central America, South America and Japan, as well
as the exclusive rights to negotiate on behalf of Modofood for Southeast Asia,
including Taiwan, China and Indonesia.
At June 30, 2003, we had cash of $10,858. Subsequent to June 30, 2003, we expect
to receive a loan in the amount of $2,088,000 from International Business
Consultants, GmbH. The total amount of the loan is $2.4 Million and is
collateralized with 3.5 million in our common stock with a loan to value of our
common stock of twenty-five (25) percent. The loan has a two year term at 6%
interest, paid quarterly. We will be required to raise additional funds in order
to pursue the further development and marketing of the Prehistin product. We
will also be required to raise additional funds to manufacture and market
Modofood's product. In that regard, we plan on raising additional financing
through private placements or other offerings of our stock. We may attempt to
secure other loans from lending institutions or otherwise. There is no guarantee
that we will be able to raise additional funds through offerings or otherwise.
If we are unable to raise funds, our ability to continue with product
development and to complete the final closing with InnoFood will be hindered.
During the next twelve months, we plan on moving forward with the FDA approval
process related to our Prehistin product. We are also in the process of
developing additional related products. Such development is in its infancy.
Other than the research and development related to our Prehistin product, we do
not plan to engage in any other research and development unless we are able to
raise additional funds.
We do anticipate the purchase of significant equipment within the next 12 months
for InnoFood.
We do not anticipate any significant hiring up to fifty (50) people over the
next 12 months for InnoFood and other product lines, assuming we are able to
close the Innofood transaction described above.
ITEM 3. CONTROLS AND PROCEDURES
-------------------------------
(a) Evaluation of disclosure controls and procedures. We maintain controls and
procedures designed to ensure that information required to be disclosed in the
reports that we file or submit under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission. Based upon
their evaluation of those controls and procedures performed as of June 30, 2003,
our chief executive officer and the principal financial officer concluded that
our disclosure controls and procedures were adequate.
(b) Changes in internal controls. There were no significant changes in our
internal controls or in other factors that could significantly affect these
controls subsequent to the date of the evaluation of those controls by the chief
executive officer and principal financial officer.
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
--------------------------
As of March 31, 2003, BioGentec Incorporated, which is as of the date of this
report our wholly owned subsidiary, vacated previously occupied office space and
is in a dispute with the prior landlord. The landlord has filed suit against us
in the County of Orange, Superior Court of California, Case #03CC02904. We
believe that the landlord breached the agreement and that we will successfully
defend ourselves.
ITEM 2. CHANGES IN SECURITIES.
------------------------------
16
On June 19, 2003, we filed a certificate of amendment to our Articles of
Incorporation to effect an increase in our authorized common stock from
20,000,000 to 50,000,000 shares.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
----------------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
----------------------------------------------------------
On March 24, 2003 shareholders representing a majority of our issued and
outstanding common stock voted to increase our authorized shares of common stock
from 20,000,000 to 50,000,000, and to change our name to Biogentech Corp. Both
of these actions were effected by filing a certificate of amendment to our
Articles of Incorporation on with the State of Nevada on June 19, 2003.
ITEM 5. OTHER INFORMATION
--------------------------
None during the reporting period. However, subsequent to the reporting period,
on July 15, 2003, the Registrant's Board of Directors approved a change in the
Registrant's fiscal year end from December 31st to March 31st. The Registrant's
next fiscal year will begin on April 1st and end on March 31st of each year,
effective with the year beginning April 1, 2004.
Reference is also made to the audited financial reports for the years ending
March 31, 2003 and March 31, 2002 for BioGentec Incorporated which were filed
with our report on Form 8-K on July 3, 2003 as amended, regarding our
subsidiary's acquisition of BioGentec Incorporated and other events. We expect
to file subsequent Quarterly Reports on Form 10-QSB on or before the due dates
of November 15, 2003 and February 14, 2004, and to file our next Annual Report
on Form 10-KSB on or before June 30, 2004.
On July 31, 2003 we entered into a definitive agreement to acquire InnoFood,
Inc. ("InnoFood"), owner of certain rights to a proprietary food processing
technology developed by Modofood S.P.A. of Brescia, Italy. The agreement
provides exclusive manufacturing and distribution rights of Modofood's
proprietary food sterilization and preservation technology for North America,
Central America, South America and Japan, as well as the exclusive rights to
negotiate on behalf of Modofood for Southeast Asia, including Taiwan, China and
Indonesia.
Under terms of the agreement, InnoFood shareholders will receive one share of
our common stock and a warrant to purchase one share of our common stock for
every twelve shares of InnoFood common stock. InnoFood shareholders will also
receive one share of our preferred stock for every 1,200 InnoFood common shares.
The agreement calls for us to infuse $5 million of working capital prior to
December 31, 2003. As of August 20, 2003, this transaction has not closed.
See Subsequent Events in the notes to our finance statements for a discussion of
capital requirements related to the acquisition of InnoFood and financing
obtained subsequent to June 30, 2003.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
On June 25, 2003, we filed a report on Form 8-K to disclose the filing of the
certificate of amendment to our Articles of Incorporation on with the State of
Nevada on June 19, 2003, effecting the increase in our authorized shares of
common stock from 20,000,000 to 50,000,000, and our name change to Biogentech
Corp. Both of these actions were approved in March 2003 by vote of shareholders
holding a majority of our issued and outstanding common stock.
17
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Biogentech Corp.,
a Nevada corporation
August 27, 2003 By: /s/ Chaslav Radovich
----------------------------------------
Chaslav Radovich
Its: Chief Executive Officer, President,
Director
18
CERTIFICATIONS
--------------
I, Chaslav Radovich, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Biogentech
Corp.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this
report;
4. The registrant's other certifying officer(s) and I are responsible
for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
registrant and have:
(a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation and
(c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting; and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting , to the registrant's auditors and the audit committee of
the registrant's board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
(b) Any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant`s internal control over financial reporting.
Date: August 27, 2003
/s/ Chaslav Radovich
----------------------
Chaslav Radovich
Chief Executive Officer and Chief Financial Officer
19