10QSB: Optional form for quarterly and transition reports of small business issuers
Published on May 23, 2002
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM 10-QSB
(X) Quarterly report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934.
For the quarterly period ended March 31, 2002.
( ) Transition report pursuant to Section 13 or 15(d) of the Exchange Act for
the transition period from _____ ____________ to ____________ .
Commission File Number: 333-72097
NeoGenomics, Inc.
(F/K/A American Communications Enterprises, Inc.)
(Exact name of registrant as specified in charter)
Nevada 74-2897368
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
355 Interstate Blvd. Sarasota, FL 34240
(Address of principal executive offices)
(941) 923-1949
(Registrant's Telephone Number, Including Area Code)
Check whether the registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
YES ( X ) NO ( )
State the number of shares outstanding of each of the issuer's classes of common
equity, as of March 31, 2002.
405,000,000
Transitional Small Business Disclosure Format:
YES ( ) NO (X)
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NeoGenomics, Inc.
(A Development Stage Enterprises)
INDEX TO FORM 10-QSB
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheet as of March 31, 2002..................... 4
Consolidated Statements of Operations for the three months
ended March 31, 2002 and the period June 1, 2001 (date of
incorporation) to March 31, 2002.................................... 5
Consolidated Statements of Cash Flows for the three months
ended March 31, 2002 and, the period June 1, 2001 (date of
incorporation) to March 31, 2002.................................... 6
Notes to Consolidated Financial Statements.......................... 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (including cautionary statement).......... .9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................... 11
Item 2. Changes in Securities............................................... 11
Item 3. Defaults Upon Senior Securities..................................... 11
Item 4. Submission of Matters to a Vote of Securities Holders............... 11
Item 5. Other Information................................................... 11
Item 6. Exhibits and Reports on Form 8-K.................................... 11
Signatures 11
2
PART I
FORWARD-LOOKING STATEMENTS
Certain statements contained in this filing are "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995, such as statements relating to financial results and plans for future
business development activities, and are thus prospective. These statements
appear in a number of places in this Form 10-QSB and include all statements that
are not statements of historical fact regarding intent, belief or our current
expectations, with respect to, among other things: (i) our financing plans; (ii)
trends affecting our financial condition or results of operations; (iii) our
growth strategy and operating strategy; and (iv) the declaration and payment of
dividends. The words "may," "would," "could," "will," "expect," "estimate,"
"anticipate," "believe," "intend," "plans," and similar expressions and
variations thereof are intended to identify forward-looking statements.
Investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, many of
which are beyond our ability to control. Actual results may differ materially
from those projected in the forward-looking statements as a result of various
factors. Among the key risks, assumptions and factors that may affect operating
results, performance and financial condition are changes in technology,
fluctuations in our quarterly results, ability to continue and manage our
growth, liquidity and other capital resources issues, competition and the other
factors discussed in detail in our filings with the Securities and Exchange
Commission.
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NeoGenomics, Inc.
(A Development Stage Enterprise)
CONSOLIDATED BALANCE SHEET AS OF
MARCH 31, 2002
(unaudited)
________________________________________________________________________________
ASSETS
CURRENT ASSETS:
Cash $ 1,028
Deposits 1,816
Total current assets 2,844
PROPERTY AND EQUIPMENT (net of accumulated
depreciation of $5,229) 200,998
TOTAL $ 203,842
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 104,472
Accrued expense 5,000
Accrued payroll 25,200
Due to affiliates 262,968
Total current liabilities 397,640
STOCKHOLDERS' DEFICIT:
Common stock, $.001 par value, 500,000,000 shares
authorized; 405,000,000 shares issued and
outstanding 405,000
Additional paid-in capital 11,358,995
Deferred stock compensation (3,298,986)
Deficit accumulated during the development stage (8,658,807)
Total stockholders' deficit (193,798)
TOTAL $ 203,842
============
________________________________________________________________________________
See notes to consolidated financial statements.
4
NeoGenomics, Inc.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
________________________________________________________________________________________
For the period June
For the three 1, 2001 (date of
months ended incorporation) to
March 31, 2002 March 31, 2002
REVENUE $ - $ 1,000
OPERATING EXPENSES:
Stock based compensation 491,916 8,452,517
General and administrative 88,925 207,290
Total operating expenses 580,841 8,659,807
NET LOSS $ (580,841) $(8,658,807)
============== ============
NET LOSS PER SHARE - Basic and
Diluted $ (0.001)
==============
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING - Basic and Diluted 405,000,000
==============
________________________________________________________________________________________
See notes to consolidated financial statements.
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NeoGenomics, Inc.
(A Development Stage Enterprise)
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
_______________________________________________________________________________________________________________
For the period
June 1, 2001
For the three (date of
months ended incorporation)
March 31, 2002 to March 31, 2002
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (580,841) $ (8,658,807)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation 5,156 5,229
Amortization of deferred stock compensation 491,916 737,514
Stock based compensation and consulting - 7,715,002
Non-cash expenses - 26,500
Changes in assets and liabilities, net:
Increase in deposits (516) (1,816)
Increase in accounts payable and other liabilities 25,920 40,606
NET CASH USED IN OPERATING ACTIVITIES (58,365) (135,772)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (123,476) (126,376)
Cash acquired in acquisition - 209
NET CASH USED IN INVESTING ACTIVITIES (123,476) (126,167)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from affiliates, net 105,653 262,967
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (76,188) 1,028
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 77,216 -
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,028 $ 1,028
============ ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ - $ -
============ ==============
Income taxes paid $ - $ -
============ ==============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Stock issued in acquisition of American Communications Enterprises:
Accounts Payable $ - $ 14,216
Advances from stockholder (subsequently converted to
common stock) - 156,916
Total $ - $ 171,132
============ ==============
Equipment financed through payables $ 79,850 $ 79,850
============ ==============
Deferred compensation on grants of stock options $ - $ 4,036,500
============ ==============
____________________________________________________________________________________________________________
See notes to consolidated financial statements.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
________________________________________________________________________________
NOTE A - ORGANIZATION AND DESCRIPTION OF BUSINESS
NeoGenomics, Inc. ("NEO") was incorporated under the laws of the State of
Florida on June 1, 2001 and on November 14, 2001 agreed to be acquired by
American Communications Enterprises, Inc. ("ACE"). ACE was formed in 1998 and
succeeded to NEO's name on January 14, 2002. As a result of this acquisition,
the accompanying consolidated financial statements include the accounts of NEO
and ACE (collectively referred to as "we", "us", and "our"). All significant
intercompany accounts and balances have been eliminated in consolidation.
For financial statement purposes, the acquisition has been treated as a reverse
acquisition and a recapitalization with NEO being treated as the acquirer. In
connection therewith, ACE issued 238,500,000 shares of its common stock to NEO's
founder and sole stockholder in exchange for all of NEO's issued and outstanding
common shares. The value of these shares, which was based on the number, and
fair value of shares issued ($0.03 per share based on the price at which ACE's
shares were trading at that time), has been included in stock based compensation
and in the accompanying statement of operations. Immediately before the
acquisition, ACE had 131,733,896 shares outstanding and liabilities in excess of
assets of approximately $170,000. Since the transaction was accounted for as a
purchase the deficiency of $170,000 was reflected as an adjustment to
stockholders' equity as of the acquisition date.
As a result thereof, all references to the number of shares and par value in the
accompanying financial statements and notes thereto have been adjusted to
reflect the reverse acquisition, including the authorized number of shares of
our common stock and its par value as though all such changes had been completed
as of June 1, 2001.
We are considered to be a development stage (as defined in Financial Accounting
Standards Board Statement No. 7), bio-tech company organized for the principal
purpose of developing genomic tools for women's diseases, such as ovarian
cancer, and the early diagnosis of neonatal illness. Our planned principal
operations have not commenced; therefore, most of our accounting policies and
procedures have not yet been established.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires us to make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. The reported amounts of revenues and expenses during
the reporting period may be affected by the estimates and assumptions we are
required to make. Actual results could differ from our estimates.
Basis of Presentation
Our accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
of America for interim financial information and the instructions to Form 10-QSB
and Rule 10-1 of Regulation S-X of the Securities and Exchange Commission (the
"SEC"). Accordingly, these consolidated financial statements do not include all
of the footnotes required by accounting principles generally accepted in the
United States of America. In our opinion, all adjustments (consisting of normal
and recurring adjustments) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31, 2002 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2002. The accompanying consolidated financial statements and
the notes thereto should be read in conjunction with our audited consolidated
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financial statements as of and for the year ended December 31, 2001 contained in
our Form 10-KSB.
NOTE B - GOING CONCERN
Our consolidated financial statements were prepared using accounting principles
generally accepted in the United States of America applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. We have incurred significant
losses since our inception, and have experienced and continue to experience and
negative cash flows from operations. In addition, we expect to have ongoing
requirements for substantial additional capital investment to implement our
business plan. We expect to seek additional funding through the issuance of debt
or equity securities. However, there can be no assurance that we will be
successful in these efforts. These factors, among others, indicate that we may
be unable to continue as a going concern.
Our financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should we be unable to
continue as a going concern.
NOTE C - RELATED PARTY TRANSACTIONS
Advances and Loans
During the first quarter of 2002 we received net advances from Tampa Bay
Financial, Inc. ("TBF"), one of our stockholders, of approximately $87,100. The
advances are non-interest bearing, unsecured and due on demand, and the advances
will be converted to shares of our common stock at $0.0333 per share. At March
31, 2002 we owed TBF approximately $202,000.
We occasionally borrow funds from the Naples Women's Center ("NWC"), a company
owned by our president, to meet our short-term cash needs. These amounts have
been advanced to us at an interest rate of 8% and are due upon demand. During
the first quarter of 2002 we received net advances of approximately $18,600. At
March 31, 2002 we owed NWC approximately $61,000.
Consulting Agreements
During November 2001, we entered into an agreement with TBF to provide us with
consulting services and pay certain of our expenses, including the salary of our
chief financial officer and costs incurred in preparing required filings under
securities laws. The term of this agreement is one year and may be extended, at
the option of TBF, for two additional one-year terms. The fee under this
agreement is $10,000 per month. For the first quarter of 2002, we incurred
approximately $30,000 related to this agreement. Under certain circumstances,
these amounts may be repaid with issuances of our common stock. TBF also has a
right of first refusal to purchase securities we may offer at 50% of their
proposed purchase price. This right expires November 30, 2003.
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements as of and for the three months ended and the period June 1,
2001 (date of incorporation) to March 31, 2002 included with this Form 10-QSB.
Information related to our predecessor entity, American Communications
Enterprises, Inc. ("ACE"), has been omitted. ACE was formed in 1998 for the
purpose of operating radio stations and businesses within the communications
industry. ACE later changed its focus to genomics, which included acquiring a
private company desiring to become public. In November ACE and NeoGenomics,
Inc., a Florida Corporation ("NeoGenomics") entered into a Plan of Exchange
pursuant to which ACE acquired NeoGenomics. For financial statement purposes,
the merger has been treated as a reverse acquisition with NeoGenomics being
treated as the acquiror.
Readers are referred to the cautionary statement, which addresses forward-looking
statements made by us.
NeoGenomics, Inc. is considered to be in the development stage as defined in
Financial Accounting Standards Board Statement No. 7, and we are currently in
the process of developing genomic tools for women's diseases.
Critical Accounting Policies
Our critical accounting policies, including the assumptions and judgments
underlying them, are disclosed in the Notes to the Financial Statements to our
December 31, 2001 audit and Form 10-KSB. We have consistently applied these
policies in all material respects. At this stage of our development, these
policies primarily address matters of expense recognition. Although we
anticipate that revenue recognition issues will become critical in future years,
the small amount of revenue that we have earned at this stage minimizes the
impact of any judgments regarding revenue recognition. Management does not
believe that our operations to date have involved uncertainty of accounting
treatment, subjective judgment, or estimates, to any significant degree.
Results of Operations
Although we have been in existence for 10 months, management's efforts to
develop our business have not yet resulted in generation of significant
revenues. Because the Company started operations on June 1, 2001, our analysis
is not comparative. For the three months ended March 31, 2002, we had no
revenues and we incurred a net loss of approximately $580,800, which includes
non-cash stock based compensation expense of approximately $492,000. This
expense consists of the amortization of deferred stock options, which
were issued in November 2001. Our general and administrative expenses were
approximately $89,000, and are mainly comprised of administrative services
expenses, wages and depreciation.
Future Periods
Management expects that research, general and administrative, and amortization
of deferred stock compensation personnel costs (other than those for initial
development) will increase substantially in 2002 and in future years, as we
expand our research and development efforts. Most of our other operating
expenses, however, are expected to grow with time and expansion associated with
the opening of our laboratory facility which was certified in April 2002.
Liquidity and Capital Resources
During the first three months, the Company's operating activities used
approximately $58,400 in cash. This amount primarily represented cash used to
pay general and administrative expenses associated with the operation of the
Company. We spent approximately $123,500 on new equipment. The Company was able
to finance operations primarily through net advances of approximately $105,700
received from its principal shareholder and other affiliates. At March 31, 2002,
we had cash and cash equivalents of approximately $1,000.
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At the present time, the Company has very limited cash resources. The Company
does not anticipate that it will generate a significant cash flow from
operations activities until the later half of 2002. As a result, the Company
anticipates that it will require at least $1,200,000 in additional working
capital financing during the next 12 months in order to meet its requirements
during this period. The Company currently plans to finance its operations
through the sale of shares of its common stock to Tampa Bay Financial, Inc. In
this connection, Tampa Bay Financial has agreed to purchase $1,200,000 in shares
from the Company over the next 12 months. These shares will be purchased at the
price of $.0333 per share. Based upon our current plans and assumptions relating
to our business plan, we currently believe that the financing from Tampa Bay
Financial will be sufficient to meet our working capital requirements during the
next 12 months. However, in the event that Tampa Bay Financial does not provide
this funding when scheduled, or if the Company's operating expenses are greater
than anticipated, or if our plans change or our assumptions prove to be
inaccurate, we would need to obtain working capital from other sources. At the
present time, we have no commitments from any other parties to provide such
financing and there can be no assurance that such financing would be available.
If we are unable to obtain such financing, we may not be able to implement our
business plan.
Capital Expenditures
Management currently forecasts capital expenditures for the remainder of this
year to be approximately $375,000. We plan to fund these expenditures through
the sale of shares to Tampa Bay Financial.
Staffing
We plan to increase our work force. Currently, we have four full-time employees.
We plan to add additional research scientists to assist us in the development of
new products. Upon development of these products, we plan to build a sales force
to sell to end-users. We also intend to add personnel in the accounting,
administrative and investor relations areas. Management has added three
employees during 2002 and expects to add further personnel during the balance of
2002. We expect the cost of these additional employees will be in excess of
$200,000 over the next 12 months.
CAUTIONARY STATEMENT
This Form 10-QSB, press releases and certain information provided periodically
in writing or orally by our officers or our agents contain statements which
constitute forward-looking statements within the meaning of Section 27A of the
Securities Act, as amended and Section 21E of the Securities Exchange Act of
1934. The words expect, anticipate, believe, goal, plan, intend, estimate and
similar expressions and variations thereof if used are intended to specifically
identify forward-looking statements. Those statements appear in a number of
places in this Form 10-QSB and in other places, particularly, Management's
Discussion and Analysis or Results of Operations, and include statements
regarding the intent, belief or current expectations us, our directors or our
officers with respect to, among other things: (i) our liquidity and capital
resources; (ii) our financing opportunities and plans and (iii) our future
performance and operating results. Investors and prospective investors are
10
cautioned that any such forward-looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those projected in the forward-looking statements as a
result of various factors. The factors that might cause such differences
include, among others, the following: (i) any material inability of us to
successfully internally develop our products; (ii) any adverse effect or
limitations caused by governmental regulations; (iii) any adverse effect on our
positive cash flow and abilities to obtain acceptable financing in connection
with our growth plans; (iv) any increased competition in business; (v) any
inability of us to successfully conduct our business in new markets; and (vi)
other risks including those identified in our filings with the Securities and
Exchange Commission. We undertake no obligation to publicly update or revise the
forward looking statements made in this Form 10-QSB to reflect events or
circumstances after the date of this Form 10-QSB or to reflect the occurrence of
unanticipated events.
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
NONE
Item 2. Changes in Securities
NONE
Item 3. Defaults Upon Senior Securities
NONE
Item 4. Submission of Matters to a Vote of Securities Holders
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
NONE
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
NeoGenomics, Inc.
By:/s/ Dr. Michael Dent, President
Dr. Michael Dent, President
May 22, 2002
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