Attached files
| file | filename |
|---|---|
| 8-K/A - SEELOS THERAPEUTICS, INC. | v175706_8ka.htm |
| EX-23.1 - SEELOS THERAPEUTICS, INC. | v175706_ex23-1.htm |
| EX-99.3 - SEELOS THERAPEUTICS, INC. | v175706_ex99-3.htm |
| EX-99.2 - SEELOS THERAPEUTICS, INC. | v175706_ex99-2.htm |
Exhibit 99.1
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
THE
BOARD OF DIRECTORS BIO QUANT, Inc.
We have
audited the accompanying balance sheets of Bio-Quant, Inc. as of December 31,
2008 and 2007 and the related statements of operations, stockholders equity and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform our audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of the Company as of December 31, 2008
and 2007 and the results of its’ operations and its’ stockholders equity and
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
As
referred to in Note 10 to the financial statements, the company has restated
these financial statements since it has determined that it was not required to
record a beneficial conversion feature for common stock warrants issued treated
as equity, and to correct certain other errors.
Gruber
& Company LLC
Lake
St. Louis Missouri
May 15,
2009, except for the effects on the financial statements of the restatement
described in Note 10, as to which the date is November 30, 2009.
Bio-Quant,
Inc
Balance
Sheets
RESTATED
|
December
31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Assets
|
||||||||
|
Current
Assets
|
||||||||
|
Cash
and Cash Equivalents
|
$ | 163,897 | $ | 815,700 | ||||
|
Accounts
Receivable, net
|
378,284 | 633,153 | ||||||
|
Inventory
|
201,013 | 141,138 | ||||||
|
Prepaid
Expenses & Other Current Assets
|
22,543 | 25,423 | ||||||
|
Total
Current Assets
|
765,737 | 1,615,414 | ||||||
|
Fixed
Assets
|
737,664 | 380,056 | ||||||
|
Deposits
|
26,972 | 21,525 | ||||||
|
Total
Assets
|
$ | 1,530,373 | $ | 2,016,995 | ||||
|
Liabilities & Stockholders' Equity
(Deficit)
|
||||||||
|
Current
Liabilities
|
||||||||
|
Accounts
Payable and Accrued Expenses
|
$ | 525,684 | $ | 361,419 | ||||
|
Related
Party Payable
|
130,000 | 130,000 | ||||||
|
Total
Current Liabilities
|
655,684 | 491,419 | ||||||
|
Non-Current
Liabilities
|
||||||||
|
Long
Term Debt
|
8,900 | 8,900 | ||||||
|
Total
Non-Current Liabilities
|
8,900 | 8,900 | ||||||
|
Total
Liabilities
|
664,584 | 500,319 | ||||||
|
Commitments
& Contingencies
|
- | - | ||||||
|
Stockholders'
Equity (Deficit)
|
||||||||
|
Preferred
Stock, $0.001 par value, 10,000,000 shares
|
||||||||
|
authorized;
0 shares issued and outstanding
|
$ | - | $ | - | ||||
|
Common
Stock, $0.01 par value, 150,000,000 shares
|
||||||||
|
authorized;
3,410 and 3,277 shares issued and outstanding,
|
||||||||
|
respectively
|
34 | 33 | ||||||
|
Additional
Paid-in Capital
|
2,893,349 | 2,187,600 | ||||||
|
Retained
Deficit
|
(2,027,594 | ) | (670,957 | ) | ||||
|
Total
Stockholders' Equity (Deficit)
|
865,789 | 1,516,676 | ||||||
|
Total
Liabilities & Stockholders' Equity (Deficit)
|
$ | 1,530,373 | $ | 2,016,995 | ||||
The
accompanying notes are an integral part of these financial
statements
Bio-Quant,
Inc
Statements
of Operations
RESTATED
|
For
The Year Ended
|
||||||||
|
December
31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Revenues
|
$ | 5,040,776 | $ | 4,901,473 | ||||
|
Cost
of Sales
|
3,006,537 | 2,337,049 | ||||||
|
Gross
Profit
|
2,034,239 | 2,564,424 | ||||||
|
Operating
Expenses
|
||||||||
|
Wages
and Related Benefits
|
1,236,312 | 929,755 | ||||||
|
Rental
Expenses
|
364,155 | 321,840 | ||||||
|
Selling,
General and Administrative
|
1,790,409 | 1,270,481 | ||||||
|
Total
Operating Expenses
|
3,390,876 | 2,522,076 | ||||||
|
Net
Income (Loss)
|
$ | (1,356,637 | ) | $ | 42,348 | |||
|
Net
Income per Share
|
||||||||
|
Basic
|
$ | (405.69 | ) | $ | 13.47 | |||
|
Diluted
|
$ | (405.69 | ) | $ | 13.47 | |||
|
Number
of Shares Used in Per Share Calculations
|
||||||||
|
Basic
|
3,344 | 3,145 | ||||||
|
Diluted
|
3,344 | 3,145 | ||||||
The
accompanying notes are an integral part of these financial
statements
Bio-Quant,
Inc.
Statements
of Stockholders' Equity (Deficit)
RESTATED
|
Common
Stock
|
||||||||||||||||||||
|
Number
of
|
Par
Value ($0.01)
|
Additional
Paid-
|
Retained
|
|||||||||||||||||
|
Shares
|
Amount
|
In-Capital
|
Earnings
(Deficit)
|
Total
|
||||||||||||||||
|
Balance
at December 31, 2006
|
3,013 | $ | 30 | $ | 1,117,603 | $ | (713,305 | ) | 404,328 | |||||||||||
|
Common
Stock Issued for Cash
|
189 | 2 | 769,998 | - | 770,000 | |||||||||||||||
|
Common
Stock Issued for Conversion of Debt
|
75 | 1 | 299,999 | 300,000 | ||||||||||||||||
|
Net
Profit
|
- | - | - | 42,348 | 42,348 | |||||||||||||||
|
Balance
at December 31, 2007
|
3,277 | $ | 33 | $ | 2,187,600 | $ | (670,957 | ) | $ | 1,516,676 | ||||||||||
|
Common
Stock Issued for Cash
|
56 | - | 313,500 | - | 313,500 | |||||||||||||||
|
Common
Stock Issued for Services
|
65 | 1 | 391,789 | - | 391,790 | |||||||||||||||
|
Common
Stock Issued for Cash for the Exercise of
|
||||||||||||||||||||
|
Warrants
|
12 | - | 460 | - | 460 | |||||||||||||||
|
Net
Loss
|
- | - | - | (1,356,637 | ) | (1,356,637 | ) | |||||||||||||
|
Balance
at December 31, 2008
|
3,410 | $ | 34 | $ | 2,893,349 | $ | (2,027,594 | ) | $ | 865,789 | ||||||||||
The
accompanying notes are an integral part of these financial
statements
Statements
of Cash Flows
RESTATED
|
For
The Year Ended
|
||||||||
|
December
31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Cash
Flows from Operating Activities
|
||||||||
|
Net
Income (Loss)
|
$ | (1,356,637 | ) | $ | 42,348 | |||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||
|
Depreciation
|
192,700 | 76,497 | ||||||
|
Stock
Based Compensation
|
392,250 | - | ||||||
|
Changes
in operating assets and liabilities:
|
||||||||
|
Accounts
Receivable
|
254,869 | (173,493 | ) | |||||
|
Inventory
|
(59,875 | ) | (14,422 | ) | ||||
|
Prepaid
Expenses & Other Current Assets
|
2,880 | 13,451 | ||||||
|
Deposits
|
(5,447 | ) | 32,185 | |||||
|
Accounts
Payable and Accrued Expenses
|
164,265 | 279,473 | ||||||
|
Net
Cash Used in Operating Activities
|
(414,995 | ) | 256,039 | |||||
|
Cash Flows from Investing
Activities
|
||||||||
|
Purchase
of Fixed Assets
|
(550,308 | ) | (299,938 | ) | ||||
|
Net
Cash Used in Investing Activities
|
(550,308 | ) | (299,938 | ) | ||||
|
Cash Flows from Financing
Activities
|
||||||||
|
Proceeds
from Issuance of Common Stock
|
313,500 | 770,000 | ||||||
|
Proceeds
from Long Term Debt
|
- | 5,900 | ||||||
|
Net
Cash Provided by Financing Activities
|
313,500 | 775,900 | ||||||
|
Net
Increase (Decrease) in Cash
|
(651,803 | ) | 732,001 | |||||
|
Cash
Beginning of Period
|
815,700 | 83,699 | ||||||
|
Cash
End of Year
|
$ | 163,897 | $ | 815,700 | ||||
BIO-QUANT,
INC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
RESTATED
NOTE
1 – ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization
and Line of Business
Bio-Quant
is a contract research organization for in-vitro and in-vivo contract drug
discovery and pre-clinical development services located in San Diego,
California. Bio-Quant conducts non GLP drug discovery research services
specializing in oncology, inflammation, immunology, and diabetes. Bio-Quant's
functional proprietary high throughput screening capabilities provide customers
with a rapid and unique way to discover lead compounds directed to inhibit
direct cell function.
The
Company was founded on May 5, 1995 as Tintic Coalition Mines Corporation in Salt
Lake City, Utah. The Company was engaged in mining operations. In 2001, the
Company changed its name to Bio-Quant, Inc.
Basis
of Presentation
The
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States of
America.
Accounts
Receivable
Accounts
receivable are reported at the customers’ outstanding balances less any
allowance for doubtful accounts.
The
allowance for doubtful accounts is charged to income in amounts sufficient to
maintain the allowance for uncollectible accounts at a level management believes
is adequate to cover any probable losses. As of December 31, 2008 and 2007, the
Company had a provision for doubtful accounts totaling $25,000.
Inventories
Inventories
are stated at the lower of cost or market. Cost is computed on a
weighted-average basis, which approximates the first-in, first-out method;
market is based upon estimated replacement costs. Inventory consists of cell
vials.
Stock
Reverse
In April
of 2009 the Company effectuated a 4,000 to 1 reverse stock split. The financial
statements have been adjusted for all periods presented to reflect this
split.
Stock
Based Compensation
SFAS No.
123, “Accounting for Stock-Based Compensation,” establishes and encourages the
use of the fair value based method of accounting for stock-based compensation
arrangements under which compensation cost is determined using the fair value of
stock-based compensation determined as of the date of grant and is recognized
over the periods in which the related services are rendered. For stock based
compensation the Company recognizes an expense in accordance with SFAS No. 123
and values the equity securities based on the fair value of the security on the
date of grant. Stock option awards are valued using the Black-Scholes
option-pricing model.
As there
is no trading history and the Company securities are not offered to the public,
the Company has determined that the fair value of its stock is the price paid
when it raised funds. This price varied from $ .75 per share, pre split to $1.50
per share pre split. In 2007 there was not any stock for services. In 2008 stock
for services were recognized equaling $391,790 and is included in the statement
of operations under general and administrative expenses.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
RESTATED
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting periods.
Actual
results could differ from these estimates.
Fair
Value of Financial Instruments
On
January 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. SFAS
No. 157 defines fair value, establishes a three-level valuation hierarchy for
disclosures of fair value measurement and enhances disclosures requirements for
fair value measures. The carrying amounts reported in the balance sheets for
receivables and current liabilities each qualify as financial instruments and
are a reasonable estimate of fair value because of the short period of time
between the origination of such instruments and their expected realization and
their current market rate of interest. The three levels are defined as
follow:
o Level 1
inputs to the valuation methodology are quoted prices (unadjusted) for identical
assets or liabilities in active markets. The Company's Level 1 assets include
cash equivalents whose carrying value represents fair value because of their
short-term maturities of the investments held by these funds.
o Level 2
inputs to the valuation methodology include quoted prices for similar assets and
liabilities in active markets, and inputs that are observable for the asset or
liability, either directly or indirectly, for substantially the full term of the
financial instrument.
o Level 3
inputs to the valuation methodology are unobservable and significant to the fair
value measurement.
Cash
and Cash Equivalents
For
purposes of the statements of cash flows, the Company defines cash equivalents
as all highly liquid debt instruments purchased with a maturity of three months
or less, plus all certificates of deposit.
Concentration
of Credit Risk
Financial
instruments, which potentially subject the Company to concentrations of credit
risk, consist of cash and cash equivalents and accounts receivables. The Company
places its cash with high quality financial institutions and at times may exceed
the FDIC $250,000 insurance limit. The Company extends credit based on an
evaluation of the customer’s financial condition, generally without collateral.
Exposure to losses on receivables is principally dependent on each customer’s
financial condition. The Company monitors its exposure for credit losses and
maintains allowances for anticipated losses, as required.
Impairment
of Long-Lived Assets
SFAS No.
144 requires that long-lived assets to be disposed of by sale, including those
of discontinued operations, be measured at the lower of carrying amount or fair
value less cost to sell, whether reported in continuing operations or in
discontinued operations. SFAS No. 144 broadens the reporting of discontinued
operations to include all components of an entity with operations that can be
distinguished from the rest of the entity and that will be eliminated from the
ongoing operations of the entity in a disposal transaction. SFAS No.
144 also
establishes a “primary-asset” approach to determine the cash flow estimation
period for a group of assets and liabilities that represents the unit of
accounting for a long-lived asset to be held and used.
Revenue
recognition
The
Company recognizes revenue including multiple element arrangements, in
accordance with the provisions of the Securities and Exchange Commission’s
(“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition and the
Financial Accounting Standards Board’s (“FASB”) Emerging Issues Task Force
(“EITF”) 00-21, Revenue Agreements with Multiple Deliverable s. Revenues from
the sale of the Company’s products are recognized when persuasive evidence of an
arrangement exists, delivery has occurred (or services have been rendered), the
price is fixed or determinable, and collectability is reasonably assured. The
Company generally ships products F.O.B. shipping point. There is no conditional
evaluation on any product sold and recognized as revenue. Amounts billed in
excess of revenue recognized are recorded as deferred revenue on the balance
sheet.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
RESTATED
The
Company’s sales include Contract Services, Sales Kits and Housing Services.
Contract services include in-vitro and in-vivo testing and these services are
billed 50% upfront and 50% on completion which is determined upon delivery of
data/reports to the client. Revenue on contract services is recognized on
delivery. Sales Kits include pre packed diagnostics and research kits are billed
and revenue recognized on shipment. Housing Services include services for animal
storage and are billed and revenue recognized on a monthly basis.
Advertising
Costs
Theses
costs are expensed as incurred.
Research
and Development Costs
Expenditures
for research & development are expensed as incurred. Such costs are required
to be expensed until the point that technological feasibility is established.
The Company incurred $61,188 and $33,212 development costs for the years ended
December 31, 2008 and 2007 respectively.
Income
Taxes
The
Company accounts for income taxes using the liability method as required by
Statement of Financial Accounting Standards ("FASB") No. 109, Accounting for
Income Taxes ("SFAS 109"). Under this method, deferred tax assets and
liabilities are determined based on differences between their financial
reporting and tax basis of assets and liabilities. The Company was not required
to provide for a provision for income taxes for the periods ended December 31,
2008 and 2007, as a result of net operating losses incurred during the periods.
As of December 31, 2008, the Company has available approximately $2,028,000 of
net operating losses ("NOL") available for income tax purposes that may be
carried forward to offset future taxable income, if any. These carry forwards
expire in various years through 2026. At December 31, 2008 and 2007, the Company
has deferred tax assets of approximately $791,000 and $262,000 relating to the
Company's net operating losses, respectively. The Company's deferred tax asset
has been fully reserved by a valuation allowance since realization of its
benefit is uncertain. The Company's ability to utilize its NOL carry forwards
may be subject to an annual limitation in future periods pursuant to Section 382
of the Internal Revenue Code of 1986, as amended.
The
provision for income taxes using the federal and state tax rates as compared to
the Company's effective tax rate is summarized as follows:
|
December
31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Statutory
Federal Tax (Benefit) Rate
|
-34 | % | -34 | % | ||||
|
Statutory
State Tax (Benefit) Rate
|
-5 | % | -5 | % | ||||
|
Effective
Tax (Benefit) Rate
|
-39 | % | -39 | % | ||||
|
Valuation
Allowance
|
39 | % | 39 | % | ||||
|
Effective
Income Tax
|
0 | % | 0 | % | ||||
Significant
components of the Company's deferred tax assets at December 31, 2008 and 2007
are as follows:
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
RESTATED
|
December
31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Net
Operating Loss Carryforward
|
$ | 2,027,594 | $ | 670,957 | ||||
|
Deferred
Tax Assets
|
790,762 | 261,673 | ||||||
|
Valuation
Allowance
|
(790,762 | ) | (261,673 | ) | ||||
|
Net
Deferred Tax Asset
|
$ | - | $ | - | ||||
Concentration
During
the year ended December 31, 2008, the Company derived approximately 15.1% of its
revenue from one client. In 2007 the Company derived 33.5% of its revenue from a
total of four clients.
Earnings
Per share
The
Company reports earnings (loss) per share in accordance with SFAS No. 128,
“Earnings per Share.” Basic earnings (loss) per share is computed by dividing
income (loss) available to common shareholders by the weighted average number of
common shares available. Diluted earnings (loss) per share is computed similar
to basic earnings (loss) 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. Diluted earnings (loss) per share has not been presented
since the effect of the assumed conversion of options and warrants to purchase
common shares would have an anti-dilutive effect.
Recent
Accounting Pronouncements
In
December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in
Consolidated Financial Statements", which is an amendment of Accounting Research
Bulletin ("ARB") No. 51. This statement clarifies that a noncontrolling interest
in a subsidiary is an ownership interest in the consolidated entity that should
be reported as equity in the consolidated financial statements. This statement
changes the way the consolidated income statement is presented, thus requiring
consolidated net income to be reported at amounts that include the amounts
attributable to both parent and the noncontrolling interest. This statement is
effective for the fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. Based on current conditions, the
Company does not expect the adoption of SFAS 160 to have a significant impact on
its results of operations or financial position.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations." This statement replaces FASB Statement No. 141, "Business
Combinations." This statement retains the fundamental requirements in SFAS 141
that the acquisition method of accounting (which SFAS 141 called the purchase
method) be used for all business combinations and for an acquirer to be
identified for each business combination. This statement defines the acquirer as
the entity that obtains control of one or more businesses in the business
combination and establishes the acquisition date as the date that the acquirer
achieves control. This statement requires an acquirer to recognize the assets
acquired, the liabilities assumed, and any noncontrolling interest in the
acquiree at the acquisition date, measured at their fair values as of that date,
with limited exceptions specified in the statement. This statement applies
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. The Company does not expect the adoption of SFAS 160 to have
a significant impact on its results of operations or financial
position.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
RESTATED
In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
and Hedging Activities an amendment of FASB Statement No. 133." SFAS 161 changes
the disclosure requirements for derivative instruments and hedging activities.
Entities are required to provide enhanced disclosures about (a) how and why an
entity uses derivative instruments, (b) how derivative instruments and related
hedged items are accounted for under SFAS 133 and its related interpretations,
and (c) how derivative instruments and related hedged items affect an entity's
financial position, financial performance, and cash flows. Based on current
conditions, the Company does not expect the adoption of SFAS 161 to have a
significant impact on its results of operations or financial
position.
In May
2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles." SFAS 162 identifies the sources of accounting principles
and the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles (GAAP) in the United
States (the GAAP hierarchy). SFAS 162 will not have an impact on the Company's
financial statements.
In May
2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts, an interpretation of FASB Statement No. 60." The scope of
SFAS 163 is limited to financial guarantee insurance (and reinsurance)
contracts, as described in this Statement, issued by enterprises included within
the scope of Statement 60. Accordingly, SFAS 163 does not apply to financial
guarantee contracts issued by enterprises excluded from the scope of Statement
60 or to some insurance contracts that seem similar to financial guarantee
insurance contracts issued by insurance enterprises (such as mortgage guaranty
insurance or credit insurance on trade receivables). SFAS 163 also does not
apply to financial guarantee insurance contracts that are derivative instruments
included within the scope of FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 163 will not have an impact on the
Company's financial statements.
NOTE
2 – FIXED ASSETS
At
December 31, 2008 and 2007, Fixed Assets consist of the following:
|
December
31,
|
||||||||
|
2008
|
2007
|
|||||||
|
Scientific
Equipment
|
376,353 | 282,560 | ||||||
|
Animals
|
30,000 | 30,000 | ||||||
|
Computer
Equipment
|
65,631 | 55,247 | ||||||
|
Computer
Software
|
19,646 | 18,161 | ||||||
|
Furniture
and Equipment
|
82,124 | 66,649 | ||||||
|
Leasehold
Improvements
|
611,979 | 182,808 | ||||||
|
Less:
Accumulated Depreciation and Amortization
|
(448,069 | ) | (255,369 | ) | ||||
|
Net
Property & Equipment
|
$ | 737,664 | $ | 380,056 | ||||
Depreciation
and Amortization Expense for the periods ended December 31, 2008 and 2007 was
$192,700 and $76,497, respectively.
NOTE
3 – RELATED PARTY PAYABLE
The
Company is indebted to one of its officers in the amount of $130,000 for a loan
due upon demand at 10% interest. Interest accrued on this note at December 31,
2008 is $56,567 and is included in accounts payable and accrued expenses.
Interest expense per year of $13,000 has been reflected in general and
administrative expenses.
NOTE
4 – WARRANTS & OPTIONS
Warrants
In 2008
and 2007, the Company obtained equity financing thru the issuance of 245 reverse
split adjusted shares of common stock from investors totaling $1,083,500. In
conjunction with these equity raises, a total of 135 reverse split adjusted
share purchase warrants were provided at exercise prices ranging from $40 to
$4,000.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
RESTATED
At
December 31, 2008, the equity share purchase warrants outstanding and expiring
dates were as follows:
|
Weighted
|
||||||||
|
Number of
|
Average Exercise
|
|||||||
|
Warrants
|
Price
|
|||||||
|
Outstanding,
December 31, 2006
|
- | $ | - | |||||
|
Issued
|
58 | $ | 40.00 | |||||
|
Exercised
|
- | $ | - | |||||
|
Cancelled
|
- | $ | - | |||||
|
Outstanding,
December 31, 2007
|
58 | $ | 40.00 | |||||
|
Granted
|
89 | $ | 3,063.34 | |||||
|
Exercised
|
(12 | ) | $ | 40.00 | ||||
|
Cancelled
|
- | $ | - | |||||
|
Outstanding,
December 31, 2008
|
135 | $ | 2,031.02 | |||||
|
Expirys
|
||||||||
|
September-09
|
32 | $ | 40.00 | |||||
|
December-09
|
18 | $ | 40.00 | |||||
|
January-10
|
4 | $ | 40.00 | |||||
|
March-10
|
3 | $ | 40.00 | |||||
|
April-10
|
3 | $ | 40.00 | |||||
|
July-10
|
7 | $ | 40.00 | |||||
|
September-10
|
1 | $ | 80.00 | |||||
|
March-12
|
67 | $ | 4,000.00 | |||||
|
Total
|
135 | $ | 2,031.02 | |||||
Stock
Options
On
January 1, 2002, the Company granted 875, reverse split adjusted, stock options
to four Bio-Quant senior managers/owners with vesting periods of three years.
For all stock-based compensation awards issued prior to January 1, 2003, the
Corporation applied the provisions of APB 25 in accounting for its stock option
and award plans. Stock-based compensation plans enacted after December 31, 2002,
are accounted for under the provisions of SFAS 123.
At
December 31, 2008 and 2007, the equity options outstanding were as
follows:
|
Weighted
|
||||||||
|
Number of
|
Average Exercise
|
|||||||
|
Options
|
Price
|
|||||||
|
Outstanding,
December 31, 2006
|
875 | $ | 40.00 | |||||
|
Issued
|
- | $ | - | |||||
|
Exercised
|
- | $ | - | |||||
|
Cancelled
|
- | $ | - | |||||
|
Outstanding,
December 31, 2007
|
875 | $ | 40.00 | |||||
|
Granted
|
- | $ | - | |||||
|
Exercised
|
- | $ | - | |||||
|
Cancelled
|
- | $ | - | |||||
|
Outstanding,
December 31, 2008
|
875 | $ | 40.00 | |||||
|
Exercisable
at December 31, 2008
|
875 | $ | 40.00 | |||||
NOTE
5 – STOCKHOLDERS’ EQUITY
Reverse
Split
On May 1,
2009, the Company underwent a 4,000:1 reverse stock split.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
RESTATED
Common
Stock
The
Company is authorized to issue 150,000,000 shares of $0.01 par common stock. At
December 31, 2008 and 2007, there were 3,410 and 3,277 shares issued and
outstanding, respectively.
During
the year ended December 31, 2008, the Company issued a total of 133 common
shares of which 56 shares were issued for cash totaling $313,500, 65 shares were
issued for services totaling $391,790 and 12 shares were issued for exercise of
warrants totaling $460.
NOTE
6 – COMMITMENTS AND CONTINGENCIES
The
Company has five lease agreements. The first two relate to office and testing
space whereby the former commenced January 1, 2007 and expires December 31, 2011
at a monthly base rent of $18,400 per month. The rental space is approximately
11,500 square feet. The latter lease also for testing space commenced November
2008 and ends December 2011 for a monthly base rent of $10,116. The company is
also obligated on three leases for equipment equaling $493 per month and
expiring in three to five years depending on the lease from January and November
2008. The minimum lease obligations are detailed below:
|
Minimum Lease
|
||||
|
Payments
|
||||
|
2009
|
$ | 348,108 | ||
|
2010
|
348,108 | |||
|
2011
|
346,476 | |||
|
2012
|
4,284 | |||
|
2013
|
4,284 | |||
|
Thereafter
|
- | |||
|
Total
|
$ | 1,051,260 | ||
NOTE
7 – RELATED PARTY TRANSACTION
The
Company had two related party transactions. In 2007 the Company issued 75 post
split shares to retire an officer loan of $300,000.
The
Company is indebted to one of its officers for $130,000 at December 31, 2008
plus accrued interest of $56,567.
The
Company purchased pharmaceutical grade prescription drugs from R&D
Healthcare, Inc. [R&D Healthcare]. R&D Healthcare is wholly owned by Dr.
Bassam Damaj, Bio-Quant’s Chief Executive Officer. During the years ended
December 31, 2008 and December 31, 2007, the Company paid approximately $21,000
and $5,000 respectively, to R&D Healthcare for pharmaceutical grade
prescription drugs supplied to the Company, which have been reflected in cost of
sales.
NOTE
8 – LONG TERM DEBT
The
Company is liable for lease deposits over one year on rental of housing services
for animal testing.
NOTE
9 – SUBSEQUENT EVENT
The
Company has completed an agreement in principle to essentially reverse merge
into a public vehicle enabling the Company to be publicly traded. The agreement
in essence is an exchange of stock.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
RESTATED
NOTE
10 - RESTATEMENT
The
previously issued financial statements have been restated and the following
financial statements line items were affected by this restatement:
Bio-Quant,
Inc
Balance
Sheets
|
December 31, 2007
|
||||||||||||
|
As Originally
|
||||||||||||
|
Stated
|
Adjustments
|
As Restated
|
||||||||||
|
Assets
|
||||||||||||
|
Current
Assets
|
||||||||||||
|
Cash
and Cash Equivalents
|
$ | 815,700 | $ | - | $ | 815,700 | ||||||
|
Accounts
Receivable, net
|
633,153 | - | 633,153 | |||||||||
|
Inventory
|
141,138 | - | 141,138 | |||||||||
|
Prepaid
Expenses & Other Current Assets
|
25,423 | - | 25,423 | |||||||||
|
Total
Current Assets
|
1,615,414 | - | 1,615,414 | |||||||||
|
Fixed
Assets
|
380,056 | - | 380,056 | |||||||||
|
Deposits
|
21,525 | - | 21,525 | |||||||||
|
Total
Assets
|
$ | 2,016,995 | $ | - | $ | 2,016,995 | ||||||
|
Liabilities & Stockholders' Equity
(Deficit)
|
||||||||||||
|
Current
Liabilities
|
||||||||||||
|
Accounts
Payable and Accrued Expenses
|
$ | 361,419 | $ | - | $ | 361,419 | ||||||
|
Related
Party Payable
|
130,000 | - | 130,000 | |||||||||
|
Derivative
Liability
|
22,514 | (22,514 | )A | - | ||||||||
|
Total
Current Liabilities
|
513,933 | (22,514 | ) | 491,419 | ||||||||
|
Non-Current
Liabilities
|
||||||||||||
|
Long
Term Debt
|
8,900 | - | 8,900 | |||||||||
|
Total
Non-Current Liabilities
|
8,900 | - | 8,900 | |||||||||
|
Total
Liabilities
|
522,833 | (22,514 | ) | 500,319 | ||||||||
|
Commitments
& Contingencies
|
- | - | - | |||||||||
|
Stockholders'
Equity (Deficit)
|
||||||||||||
|
Preferred
Stock, $0.001 par value, 10,000,000 shares authorized; 0 shares issued and
outstanding
|
$ | - | $ | - | $ | - | ||||||
|
Common
Stock, $0.01 par value, 150,000,000 shares authorized; 3,410 and 3,277
shares issued and outstanding, respectively
|
33 | - | 33 | |||||||||
|
Additional
Paid-in Capital
|
2,187,600 | - | 2,187,600 | |||||||||
|
Retained
Deficit
|
(693,471 | ) | 22,514 | A | (670,957 | ) | ||||||
|
Total
Stockholders' Equity (Deficit)
|
1,494,162 | 22,514 | 1,516,676 | |||||||||
|
Total
Liabilities & Stockholders' Equity (Deficit)
|
$ | 2,016,995 | $ | - | $ | 2,016,995 | ||||||
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
RESTATED
Bio-Quant,
Inc
Statements
of Operations
|
For The Year Ended December 31, 2007
|
||||||||||||
|
As Originally
|
||||||||||||
|
Stated
|
Adjustments
|
As Restated
|
||||||||||
|
Revenues
|
$ | 4,901,473 | $ | - | $ | 4,901,473 | ||||||
|
Cost
of Sales
|
2,337,049 | - | 2,337,049 | |||||||||
|
Gross
Profit
|
2,564,424 | - | 2,564,424 | |||||||||
|
Operating
Expenses
|
||||||||||||
|
Wages
and Related Benefits
|
929,755 | - | 929,755 | |||||||||
|
Rental
Expenses
|
321,840 | - | 321,840 | |||||||||
|
Selling,
General and Administrative
|
1,270,481 | - | 1,270,481 | |||||||||
|
Derivative
Expense
|
22,514 | (22,514 | )A | - | ||||||||
|
Total
Operating Expenses
|
2,544,590 | (22,514 | ) | 2,522,076 | ||||||||
|
Net
Income (Loss) Before Income Taxes
|
$ | 19,834 | $ | 22,514 | $ | 42,348 | ||||||
|
Provision
for Income Taxes
|
- | - | - | |||||||||
|
Net
Income (Loss)
|
$ | 19,834 | $ | 22,514 | $ | 42,348 | ||||||
|
Net
Income per Share
|
||||||||||||
|
Basic
|
$ | 6.31 | $ | 7.16 | $ | 13.47 | ||||||
|
Diluted
|
$ | 6.31 | $ | 7.16 | $ | 13.47 | ||||||
|
Number
of Shares Used in Per Share Calculations
|
||||||||||||
|
Basic
|
3,145 | - | 3,145 | |||||||||
|
Diluted
|
3,145 | - | 3,145 | |||||||||
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
RESTATED
Bio-Quant,
Inc
Statements
of Cash Flows
|
For The Year Ended December 31, 2007
|
||||||||||||
|
As Originally
|
||||||||||||
|
Stated
|
Adjustments
|
As Restated
|
||||||||||
|
Cash
Flows from Operating Activities
|
||||||||||||
|
Net
Income (Loss)
|
$ | 19,834 | $ | 22,514 | $ | 42,348 | ||||||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
|
Depreciation
|
76,497 | - | 76,497 | |||||||||
|
Stock
Based Compensation
|
- | - | - | |||||||||
|
Derivative
Expense
|
22,514 | (22,514 | )A | - | ||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||
|
Accounts
Receivable
|
(173,493 | ) | - | (173,493 | ) | |||||||
|
Inventory
|
(14,422 | ) | - | (14,422 | ) | |||||||
|
Prepaid
Expenses & Other Current Assets
|
13,451 | - | 13,451 | |||||||||
|
Deposits
|
32,185 | - | 32,185 | |||||||||
|
Accounts
Payable and Accrued Expenses
|
279,473 | - | 279,473 | |||||||||
|
Net
Cash Used in Operating Activities
|
256,039 | - | 256,039 | |||||||||
|
Cash
Flows from Investing Activities
|
||||||||||||
|
Purchase
of Fixed Assets
|
(299,938 | ) | - | (299,938 | ) | |||||||
|
Net
Cash Used in Investing Activities
|
(299,938 | ) | - | (299,938 | ) | |||||||
|
Cash
Flows from Financing Activities
|
||||||||||||
|
Proceeds
from Issuance of Common Stock
|
770,000 | - | 770,000 | |||||||||
|
Proceeds
from Long Term Debt
|
5,900 | - | 5,900 | |||||||||
|
Net
Cash Provided by Financing Activities
|
775,900 | - | 775,900 | |||||||||
|
Net
Increase (Decrease) in Cash
|
732,001 | - | 732,001 | |||||||||
|
Cash
Beginning of Period
|
83,699 | - | 83,699 | |||||||||
|
Cash
End of Year
|
$ | 815,700 | $ | - | $ | 815,700 | ||||||
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
RESTATED
Bio-Quant,
Inc
Balance
Sheets
|
December 31, 2008
|
||||||||||||
|
As Originally
|
||||||||||||
|
Stated
|
Adjustments
|
As Restated
|
||||||||||
|
Assets
|
||||||||||||
|
Current
Assets
|
||||||||||||
|
Cash
and Cash Equivalents
|
$ | 163,897 | $ | - | $ | 163,897 | ||||||
|
Accounts
Receivable, net
|
378,284 | - | 378,284 | |||||||||
|
Inventory
|
201,013 | - | 201,013 | |||||||||
|
Prepaid
Expenses & Other Current Assets
|
29,768 | (7,225 | )B | 22,543 | ||||||||
|
Total
Current Assets
|
772,962 | (7,225 | ) | 765,737 | ||||||||
|
Fixed
Assets
|
737,664 | - | 737,664 | |||||||||
|
Deposits
|
51,525 | (24,553 | )D | 26,972 | ||||||||
|
Total
Assets
|
$ | 1,562,151 | $ | (31,778 | ) | $ | 1,530,373 | |||||
|
Liabilities & Stockholders' Equity
(Deficit)
|
||||||||||||
|
Current
Liabilities
|
||||||||||||
|
Accounts
Payable and Accrued Expenses
|
$ | 453,455 | $ | 72,229 | C | $ | 525,684 | |||||
|
Related
Party Payable
|
130,000 | - | 130,000 | |||||||||
|
Derivative
Liability
|
268,357 | (268,357 | )A | - | ||||||||
|
Total
Current Liabilities
|
851,812 | (196,128 | ) | 655,684 | ||||||||
|
Non-Current
Liabilities
|
||||||||||||
|
Long
Term Debt
|
8,900 | - | 8,900 | |||||||||
|
Total
Non-Current Liabilities
|
8,900 | - | 8,900 | |||||||||
|
Total
Liabilities
|
860,712 | (196,128 | ) | 664,584 | ||||||||
|
Commitments
& Contingencies
|
- | - | - | |||||||||
|
Stockholders'
Equity (Deficit)
|
||||||||||||
|
Preferred
Stock, $0.001 par value, 10,000,000 shares authorized; 0 shares issued and
outstanding
|
$ | - | $ | - | $ | - | ||||||
|
Common
Stock, $0.01 par value, 150,000,000 shares authorized; 3,410 and 3,277
shares issued and outstanding, respectively
|
34 | - | 34 | |||||||||
|
Additional
Paid-in Capital
|
2,893,349 | - | 2,893,349 | |||||||||
|
Retained
Deficit
|
(2,191,944 | ) | 164,350 | (2,027,594 | ) | |||||||
|
Total
Stockholders' Equity (Deficit)
|
701,439 | 164,350 | 865,789 | |||||||||
|
Total
Liabilities & Stockholders' Equity (Deficit)
|
$ | 1,562,151 | $ | (31,778 | ) | $ | 1,530,373 | |||||
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
RESTATED
Bio-Quant,
Inc
Statements
of Operations
|
For The Year Ended December 31, 2008
|
||||||||||||
|
As Originally
|
||||||||||||
|
Stated
|
Adjustments
|
As Restated
|
||||||||||
|
Revenues
|
$ | 5,040,776 | $ | - | $ | 5,040,776 | ||||||
|
Cost
of Sales
|
3,006,537 | - | 3,006,537 | |||||||||
|
Gross
Profit
|
2,034,239 | - | 2,034,239 | |||||||||
|
Operating
Expenses
|
||||||||||||
|
Wages
and Related Benefits
|
1,164,154 | 72,158 | C | 1,236,312 | ||||||||
|
Rental
Expenses
|
364,155 | - | 364,155 | |||||||||
|
Selling,
General and Administrative
|
1,758,560 |
31,849
|
B/C/D | 1,790,409 | ||||||||
|
Derivative
Expense
|
245,843 | (245,843 | )A | - | ||||||||
|
Total
Operating Expenses
|
3,532,712 | (141,836 | ) | 3,390,876 | ||||||||
|
Net
Income (Loss) Before Income Taxes
|
$ | (1,498,473 | ) | $ | 141,836 | $ | (1,356,637 | ) | ||||
|
Provision
for Income Taxes
|
- | - | - | |||||||||
|
Net
Income (Loss)
|
$ | (1,498,473 | ) | $ | 141,836 | $ | (1,356,637 | ) | ||||
|
Net
Income per Share
|
||||||||||||
|
Basic
|
$ | (448.11 | ) | $ | 42.42 | $ | (405.69 | ) | ||||
|
Diluted
|
$ | (448.11 | ) | $ | 42.42 | $ | (405.69 | ) | ||||
|
Number
of Shares Used in Per Share Calculations
|
||||||||||||
|
Basic
|
3,344 | - | 3,344 | |||||||||
|
Diluted
|
3,344 | - | 3,344 | |||||||||
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
RESTATED
Bio-Quant,
Inc
Statements
of Cash Flows
|
For The Year Ended December 31, 2008
|
||||||||||||
|
As Originally
|
Adjustments
|
As Restated
|
||||||||||
|
Cash Flows from Operating
Activities
|
||||||||||||
|
Net
Income (Loss)
|
$ | (1,498,473 | ) | $ | 141,836 | $ | (1,356,637 | ) | ||||
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
||||||||||||
|
Depreciation
|
192,700 | - | 192,700 | |||||||||
|
Stock
Based Compensation
|
392,250 | - | 392,250 | |||||||||
|
Derivative
Expense
|
245,843 | (245,843 | )A | - | ||||||||
|
Changes
in operating assets and liabilities:
|
||||||||||||
|
Accounts
Receivable
|
254,869 | - | 254,869 | |||||||||
|
Inventory
|
(59,875 | ) | - | (59,875 | ) | |||||||
|
Prepaid
Expenses & Other Current Assets
|
(4,345 | ) | 7,225 | B | 2,880 | |||||||
|
Deposits
|
(30,000 | ) | 24,553 | D | (5,447 | ) | ||||||
|
Accounts
Payable and Accrued Expenses
|
92,036 | 72,229 | C | 164,265 | ||||||||
|
Net
Cash Used in Operating Activities
|
(414,995 | ) | - | (414,995 | ) | |||||||
|
Cash Flows from Investing
Activities
|
||||||||||||
|
Purchase
of Fixed Assets
|
(550,308 | ) | - | (550,308 | ) | |||||||
|
Net
Cash Used in Investing Activities
|
(550,308 | ) | - | (550,308 | ) | |||||||
|
Cash Flows from Financing
Activities
|
||||||||||||
|
Proceeds
from Issuance of Common Stock
|
313,500 | - | 313,500 | |||||||||
|
Proceeds
from Long Term Debt
|
- | - | - | |||||||||
|
Net
Cash Provided by Financing Activities
|
313,500 | - | 313,500 | |||||||||
|
Net
Increase (Decrease) in Cash
|
(651,803 | ) | - | (651,803 | ) | |||||||
|
Cash
Beginning of Period
|
815,700 | - | 815,700 | |||||||||
|
Cash
End of Year
|
$ | 163,897 | $ | - | $ | 163,897 | ||||||
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
RESTATED
Bio-Quant,
Inc.
Statements
of Stockholders' Equity (Deficit)
As
Originally Stated
|
Common Stock
|
||||||||||||||||||||
|
Number of
|
Par Value ($0.01)
|
Additional Paid-
|
Retained
|
|||||||||||||||||
|
Shares
|
Amount
|
In-Capital
|
Earnings (Deficit)
|
Total
|
||||||||||||||||
|
Balance
at December 31, 2006
|
3,013 | $ | 30 | $ | 1,117,603 | $ | (713,305 | ) | 404,328 | |||||||||||
|
Common
Stock Issued for Cash
|
189 | 2 | 769,998 | - | 770,000 | |||||||||||||||
|
Common
Stock Issued for Conversion of Debt
|
75 | 1 | 299,999 | 300,000 | ||||||||||||||||
|
Net
Profit
|
- | - | - | 19,834 | 19,834 | |||||||||||||||
|
Balance
at December 31, 2007
|
3,277 | $ | 33 | $ | 2,187,600 | $ | (693,471 | ) | $ | 1,494,162 | ||||||||||
|
Common
Stock Issued for Cash
|
56 | - | 313,500 | - | 313,500 | |||||||||||||||
|
Common
Stock Issued for Services
|
65 | 1 | 391,789 | - | 391,790 | |||||||||||||||
|
Common
Stock Issued for Cash for the Exercise of
Warrants
|
12 | - | 460 | - | 460 | |||||||||||||||
|
Net
Loss
|
- | - | - | (1,498,473 | ) | (1,498,473 | ) | |||||||||||||
|
Balance
at December 31, 2008
|
3,410 | $ | 34 | $ | 2,893,349 | $ | (2,191,944 | ) | $ | 701,439 | ||||||||||
Adjustments
|
Adjustments
at December 31, 2006
|
- | $ | - | $ | - | $ | - | - | ||||||||||||
|
Net
Profit
|
- | - | - | 22,514 | 22,514 | |||||||||||||||
|
Adjustments
at December 31, 2007
|
- | $ | - | $ | - | $ | 22,514 | $ | 22,514 | |||||||||||
|
Net
Loss
|
- | - | - | 141,836 | 141,836 | |||||||||||||||
|
Adjustments
at December 31, 2008
|
- | $ | - | $ | - | $ | 164,350 | $ | 164,350 | |||||||||||
As
Restated
|
Balance
at December 31, 2006
|
3,013 | $ | 30 | $ | 1,117,603 | $ | (713,305 | ) | 404,328 | |||||||||||
|
Common
Stock Issued for Cash
|
189 | 2 | 769,998 | - | 770,000 | |||||||||||||||
|
Common
Stock Issued for Conversion of Debt
|
75 | 1 | 299,999 | 300,000 | ||||||||||||||||
|
Net
Profit
|
- | - | - | 42,348 | 42,348 | |||||||||||||||
|
Balance
at December 31, 2007
|
3,277 | $ | 33 | $ | 2,187,600 | $ | (670,957 | ) | $ | 1,516,676 | ||||||||||
|
Common
Stock Issued for Cash
|
56 | - | 313,500 | - | 313,500 | |||||||||||||||
|
Common
Stock Issued for Services
|
65 | 1 | 391,789 | - | 391,790 | |||||||||||||||
|
Common
Stock Issued for Cash for the Exercise of
Warrants
|
12 | - | 460 | - | 460 | |||||||||||||||
|
Net
Loss
|
- | - | - | (1,356,637 | ) | (1,356,637 | ) | |||||||||||||
|
Balance
at December 31, 2008
|
3,410 | $ | 34 | $ | 2,893,349 | $ | (2,027,594 | ) | $ | 865,789 | ||||||||||
BIO-QUANT,
INC.
NOTES
TO FINANCIAL STATEMENTS
DECEMBER
31, 2008 AND 2007
RESTATED
Restatement
Adjustments:
(A)
Reflects the restatement of the derivative liability and expense associated with
warrants issued as part of a common stock issuance. The warrants are treated as
equity.
(B)
Reflects
the write-off of prepaid expenses determined to have no benefit to future
periods.
(C)
Reflects
the write-off of a sublease deposit which has been determined to have no benefit
in future periods.
(D)
To adjust
the accrued expenses for earned but not paid compensation and other
accruals.