U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB/A
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
------------------ -------------------
Commission file number 000-27865
Disease Sciences, Inc.
(Name of small business issuer in its charter)
Delaware
------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
13-2640971
(I.R.S. Employer Identification No.)
20283 State Road 7, Suite 400, Boca Raton, FL 33498
(Address of principal executive offices)(Zip Code)
Issuer's telephone number 561-487-3655
Securities registered under Section 12(b) of the Exchange Act:
None
(Title of each class)
Name of each exchange on which registered
not applicable
Securities registered under Section 12(g) of the Exchange Act:
Common Stock
(Title of Class)
Disease Sciences, Inc., formerly known as AuctionAnything.com, Inc.
(the "Company"), hereby amends its Annual Report on Form 10-KSB for the year
ended January 31, 2001 to substitute the audited consolidated balance sheets of
the Company as of January 31, 2001 and 2000, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years then ended, included therein and which had been reported upon by KPMG,
LLC, the Company's former independent auditors, with the attached consolidated
balance sheets of as of January 31, 2001 and 2000 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years then ended which have been reported on by Feldman Sherb & Co., P.C., the
Company's current independent auditors. All references to KPMG, LLP in the
Company's Annual Report on Form 10-KSB for the year ended January 31, 2001 are
hereby deleted and the firm of Feldman Sherb & Co., P.C. is substituted
therefor. On June 7, 2001 the Company filed a Report on Form 8-K with the SEC
disclosing its change in independent auditors. There are no changes in the
financial statement included herein from the financial statements reported upon
by KPMG, LLP which were included in the Company's Annual Report on Form 10-KSB.
The Company elected to have Feldman Sherb & Co. P.C. reaudit the Company's
financial statements for the fiscal years ended January 31, 2001 and 2000, for
ease of review by its current auditors in future periods.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
DISEASE SCIENCES, INC.
(FORMERLY AUCTIONANYTHING.COM, INC.)
Independent Auditors' Report...............................................F-2
Consolidated Balance Sheets................................................F-3
Consolidated Statements of Operations......................................F-4
Consolidated Statement of Stockholders' Deficit............................F-5
Consolidated Statements of Cash Flows......................................F-6
Notes to Consolidated Financial Statements..........................F-7 - F-15
INDEPENDENT AUDITORS' REPORT
To the shareholders
Disease Sciences, Inc. and Subsidiary:
(formerly AuctionAnything.com, Inc.)
We have audited the accompanying consolidated balance sheets of Disease
Sciences, Inc. (formerly AuctionAnything.com, Inc.) and subsidiary as of January
31, 2001 and 2000 and the related consolidated statements of operations,
stockholders' deficit and cash flows for each of the years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated 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
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Disease Sciences,
Inc. (formerly AuctionAnything.com, Inc.) and subsidiary at January 31, 2001 and
2000 and the results of their operations and their cash flows for each of the
years in the period then ended in conformity with accounting principles
generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 9. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
/s/Feldman Sherb & Co., P.C.
Feldman Sherb & Co., P.C.
Certified Public Accountants
August 15, 2001
New York, NY
F-2
DISEASE SCIENCES, INC.
(FORMERLY AUCTIONANYTHING.COM, INC. AND SUBSIDIARY)
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 2001 AND 2000
2001 2000
------------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,719 $ 144,011
Accounts receivable 12,639 6,288
Inventories - 58,077
Other assets - 18,041
Due from related party - 3,487
------------- ------------
15,358 229,904
Equipment, net of accumulated depreciation of
$66,116 and $54,563, respectively 41,445 78,467
Goodwill, net - 139,931
------------- ------------
$ 56,803 $ 448,302
============= ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 118,632 $ 31,070
Unearned revenue 2,035 3,000
------------- ------------
120,667 34,070
------------- ------------
Stockholders' deficit:
Common stock, par value $.001; 50,00,000 shares
authorized, 28,790,696 and 28,321,946 issued and
outstanding, respectively 28,791 28,322
Additional paid-in capital 1,256,084 1,181,553
Accumulated deficit (1,348,739) (795,643)
------------- ------------
Total stockholders' deficit (63,864) 414,232
------------- ------------
$ 56,803 $ 448,302
============= ============
See accompanying notes to consolidated financial statements
F-3
DISEASE SCIENCES, INC.
(FORMERLY AUCTIONANYTHING.COM, INC. AND SUBSIDIARY)
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended January 31,
------------------------------
2001 2000
------------- -------------
Revenues:
Auction sales $ 74,151 $ 519,033
Internet business solutions 58,820 8,685
Internet service revenue 36,260 71,754
Custom development fees 26,475 -
Commission sales - 4,015
------------- -------------
195,706 603,487
------------- -------------
Cost of sales 59,083 514,268
Cost of services 28,130 -
------------- -------------
87,213 514,268
------------- -------------
108,493 89,219
------------- -------------
Operating expenses:
Salaries and employee benefits 306,310 410,743
Professional fees 102,323 120,345
Other selling, general and administrative 218,920 185,162
Advertising 17,512 75,647
Insurance 18,383 37,566
------------- -------------
663,448 829,463
------------- -------------
Operating loss (554,955) (740,244)
Other income 2,718 12,856
Capital gains (losses) (859) -
Interest expense - (1,461)
------------- -------------
Net loss $ (553,096) $ (728,849)
============= =============
Loss per share $ (0.02) $ (0.03)
============= =============
Weighted average shares outstanding -
basic and diluted 28,588,693 27,537,863
============= =============
See accompanying notes to consolidated financial statements
F-4
DISEASE SCIENCES, INC.
(FORMERLY AUCTIONANYTHING.COM, INC. AND SUBSIDIARY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS DEFICIT
Common Stock Additional Total
---------------------------- Paid-in Accumulated Stockholders
Shares Amount Capital Deficit Deficit
------------- ------------ ------------ --------------- ---------------
Balance, January 31, 1999 500,000 $ 500 $ 72,500 $ (66,794) $ 6,206
Capital contribution acquisition 27,822,000 27,822 1,109,053 - 1,136,875
Net loss - - - (728,849) (728,849)
------------- ------------ ------------ --------------- ---------------
Balance, January 31, 2000 28,322,000 28,322 1,181,553 (795,643) 414,232
Capital contribution acquisition 469,000 469 74,531 - 75,000
Net loss - - - (553,096) (553,096)
------------- ------------ ------------ --------------- ---------------
Balance, January 31, 2001 28,791,000 $ 28,791 $ 1,256,084 $ (1,348,739) $ (63,864)
============= ============ ============ =============== ===============
See accompanying notes to consolidated financial statements
F-5
DISEASE SCIENCES, INC.
(FORMERLY AUCTIONANYTHING.COM, INC. AND SUBSIDIARY)
CONSOLDIDATED STATEMENTS OF CASH FLOWS
Year Ended January 31,
----------------------------
2001 2000
------------ ------------
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss $ (553,096) $ (728,849)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization 172,417 83,919
Loss on disposal of equipment 859 -
Changes in assets and liabilities:
Accounts receivable (6,351) (6,288)
Inventory 58,077 (14,075)
Other assets 18,041 (18,041)
Accounts payable and accrued expenses 87,562 16,923
Unearned revenue (965) 3,000
Due to/from related parties 3,487 (3,234)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (219,969) (666,645)
------------ ------------
CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES:
Proceeds from sale of equipment 4,095 -
Capital expenditures (418) (93,136)
------------ ------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 3,677 (93,136)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on notes payable to related parties - (34,304)
Proceeds from issuance of common stock 75,000 935,292
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 75,000 900,988
------------ ------------
NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS (141,292) 141,207
CASH AND CASH EQUIVALENTS - beginning of year 144,011 2,804
------------ ------------
CASH AND CASH EQUIVALENTS - end of year $ 2,719 $ 144,011
============ ============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,718 $ 1,720
============ ============
Supplemental disclosure of noncash investing and financing activities:
Goodwill generated from stock issued in TISH acquisition $ - $ 201,583
============ ============
See accompanying notes to consolidated financial statements
F-6
DISEASE SCIENCES, INC.
(FORMERLY AUCTIONANYTHING.COM, INC. AND SUBSIDIARY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2001 AND 2000
1) DESCRIPTION OF BUSINESS
AuctionAnything.com, Inc. (the "Company") operates a variety of
internet-related services. Currently, the Company has three main
revenue generating operations, which are provided by the Company
and North Orlando Sports Promotions, Inc. ("NOSP"), a wholly owned
subsidiary of the Company: 1) Internet Business Solutions ("IBS"):
a service which establishes and hosts auction and/or E-commerce
web sites for other businesses and organization primarily in both
the business-to-business and business-to-consumer markets; 2) a
company owned auction and/or E-commerce website
(WWW.SPORTSAUCTION.COM) that has been licensed to Memories and
Memorabilia, Inc., a third party fulfillment house; 3) an Internet
service provider ("ISP") service, known as Tish.net. The Company
remains committed to pursuing all commercial opportunities in the
online business-to-consumer and business-to-business and
person-to-person trading service areas.
On February 18, 1999, the Company purchased the net assets of The
Information Superhighway Corporation ("TISH") as described in Note
4. The accompanying statements of operations include the
operations of TISH from February 19, 1999 through January 31,
2001.
On May 23, 2001, the Company executed an Agreement and Plan of
Reorganization and Stock Purchase Agreement (the "Agreement") with
Disease S.I., Inc., a Florida corporation. Under the terms of the
Agreement the Company acquired 100% of the issued and outstanding
stock of Disease S.I., Inc. in exchange for 60,000,000 shares of
the Company's common stock. The transaction has been accounted for
as a reverse acquisition under the purchase method for business
combinations. Accordingly, the combination of the two companies
is recorded as a recapitalization of Disease S.I., Inc., pursuant
to which Disease S.I., Inc. is treated as the continuing entity.
On June 26, 2001, with the approval of the shareholders the
Company changed its name to Disease Sciences, Inc.
F-7
On July 24, 2001, the Company sold North Orlando Sports
Promotions, Inc., in exchange for the assumption of all
liabilities related to North Orlando and its operations estimated
at approximately $112,000, which included the forgiveness of
$91,500 in accrued compensation. Included in the sale along with
the capital stock of North Orlando were fixed assets, rights to
several domain names and various contractual rights and
obligations.
2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Principles of Consolidation - The consolidated financial
statements as of and for the years ended January 31, 2001 and
2000 include all the accounts of the Company and NOSP. The
Company acquired 100% of the stock of NOSP in the Reverse Merger
described in Note 4. All significant intercompany balances and
transactions have been eliminated in consolidation.
b) Cash and Cash Equivalents - The Company considers all highly
liquid instruments with original maturities of three months or
less at the time of purchase to be cash equivalents.
c) Inventories - Inventories were stated at the lower of cost or
market at January 31, 2000. Cost was determined principally on
the specific identification method. Provisions for potentially
obsolete or slow-moving inventory was made based on management's
analysis of inventory levels. Consignment inventory was not
recorded as inventory by the Company and was not placed in
auction until the merchandise was received. If a consignment item
did not sell in an auction, the Company requested that the
consignor lower the minimum bid or withdraw the item from the
auction.
The Company's inventories were liquidated during the year ended
January 31, 2001, and the related services were licensed to a
third party fulfillment house.
d) Equipment - Equipment is stated at cost less accumulated
depreciation. Depreciation of equipment is computed using the
straight-line method over its estimated useful life of 3 years.
For the years ended January 31, 2001 and 2000, depreciation
expense was recorded in the amount of $32,486 and $22,350,
respectively.
e) Income Taxes - The Company was considered an S-corporation for
federal income tax purposes through March 9, 1999. As such, the
Company was not subject to federal income taxes directly; income
or loss
F-8
of the Company were passed through to the individual
stockholders. As such, effective March 10, 1999, the Company
became a C-corporation for federal income tax purposes.
The Company files consolidated income tax returns. The Company's
policy is to apply inter-corporate tax allocations using the
"separate return method." All amounts due from subsidiaries as
calculated under the "separate return method" have been
eliminated as part of the consolidation process.
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in
the period that included the enactment date.
f) Revenue Recognition - The Company earns revenues for IBS services
either through monthly licensing fees or as a percentage of the
customer's successful sales through the customer's website.
Licensing fee revenues are recognized on a pro-rata basis, and
percentage revenues are recognized upon verification of a
successful sale.
g) Earnings per Share - The Company computes earnings per share in
accordance with Statement of Financial Accounting Standards No.
128, "Earnings per Share" (SFAS No. 128"). Under the provisions
of SFAS 128, basic earnings per share is computed by dividing the
net income (loss) for the period by the weighted average number
of common shares outstanding during the period. Diluted earnings
per share is computed by dividing the net income (loss) for the
period by the weighted average number of common and potentially
dilutive common shares outstanding during the period. Potentially
dilutive common shares outstanding consist of the common shares
issuable upon the exercise of stock option and warrants (using
the treasury stock method) and upon the conversion of convertible
preferred stock (using the as-if converted method). Potentially
dilutive common shares are excluded from the calculation if their
effect is antidilutive. The Company did not have any potentially
dilutive common
F-9
shares for the year ended January 31, 2000. For the year ended
January 31, 2001, 75,000 outstanding options for common stock
were excluded from the calculation of net loss per share since
their inclusion would be antidilutive.
h) Stock Option Plan - The Company applies the intrinsic value-based
method of accounting prescribed by Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations including FASB
Interpretation No. 44, "Accounting for Certain Transactions
involving Stock Compensation an interpretation of APB Opinion No.
25" issued in March 2000, to account for its fixed plan stock
options. Under this method, compensation expense is recorded on
the date of grant only if the current market price of the
underlying sock exceeded the exercise price. SFAS No. 123,
"Accounting for Stock-Based
Compensation," established accounting and disclosure requirements
using a fair-value based method of accounting for stock-based
employee compensation plans. As allowed by SFAS No. 123, the
Company has elected to continue to apply the intrinsic
value-based method of accounting described above, and has adopted
the disclosure requirements of SFAS No. 123.
i) Use of Estimates - Management of the Company has made a number
of estimates and assumptions relating to the reporting of assets
and liabilities and the disclosure of contingent assets and
liabilities to prepare these consolidated financial statements in
conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
j) Reclassification - Certain January 31, 2000 amounts have been
reclassified to conform with the January 31, 2001 presentation.
k) Recent Accounting Pronouncements - In July 2001, the Financial
Accounting Standards Board ("FASB") issued Statement on Financial
Accounting Standards No. 141 ("SFAS 141"), "Business
Combinations." SFAS No. 141 requires the purchase method of
accounting for business combinations initiated after June 30,
2001 and eliminates the pooling-of-interests method. We believe
that the adoption of SFAS No. 141 will not have a significant
impact on our financial statements.
In July 2001, FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets", which is effective for fiscal years beginning
after December 15, 2001. SFAS 142 requires, among other things,
the discontinuance of goodwill amortization. In addition, the
standard includes provisions upon adoption for the
reclassification of certain
F-10
existing recognized intangibles as goodwill, reassessment of the
useful lives of existing recognized intangibles, reclassification
of certain intangibles out of previously reported goodwill and
the testing for the impairment of existing goodwill and other
intangibles. We are currently assessing but have not yet
determined the impact of SFAS No. 142 on our financial position
and results of operations.
3) RELATED PARTY TRANSACTIONS
During the year ended January 31, 2000, the Officers auctioned
collectible merchandise through the Company as consignors and did
not pay the Company a commission for this service. The Officers
sold merchandise for $709 for which the Company would typically
earn $109 in commission.
Notes payable bearing interest of 14% with a balance of $34,304
were paid in full to related parties on March 31, 1999.
During the year ended January 31, 2001, the Company recorded
approximately $3,500 in bad debt expense related to an amount due
from a related party deemed uncollectible.
4) ACQUISITIONS
On March 10, 1999, the Company closed a transaction (the "Reverse
Merger") by which it acquired 100% of the outstanding capital
stock of NOSP, a privately held Florida corporation, form the
shareholders of NOSP. As consideration for this acquisition, the
Company issued 24,003,133 shares of its common stock, $.001 par
value (the "Common Stock'), which amounted to approximately 85%
of the Company's outstanding Common Stock, to the three former
shareholders of NOSP. Also, prior to the closing of the
transaction, the Company sold substantially all of its
pre-acquisition assets to its majority pre-acquisition
shareholder in exchange for his assignment to the Company of
747,116 share of Common Stock and his assumption of all of the
Company's pre-acquisition liabilities.
The Company has elected to adopt the fiscal year of its legal
acquirer, the Lawton-York Corporation. As a consequence, the
Company's fiscal year end is January 31.
Prior to the Reverse Merger, NOSP acquired the net assets of TISH
in exchange for approximately 208 shares of NOSP common stock.
These shares were exchanged for 7,059,745 shares of the Company's
common stock as part of the Reverse Merger. The acquisition was
accounted for as a
F-11
purchase. On the date of the acquisition, the net assets of TISH
were approximately $10,000 and goodwill of approximately $202,000
was recorded. The Company is amortizing this goodwill on a
straight line basis. The original useful life of the goodwill was
three years. During the year ended January 31, 2001, the Company
evaluated the estimated useful life of this intangible asset and
revised the estimated useful live to two years. The amortization
has been included in the Statement of Operations under the heading
of depreciation and amortization expense. Amortization expense for
the years ended January 31, 2001 and 2000, amounted to $139,931
and $61,569, respectively.
In anticipation of the acquisition, the Company completed a
private offering of 1,000,000 units at an offering price of $.10
per unit. Each unit consisted of one share of common stock and one
stock purchase warrant. Each stock purchase warrant entitled the
holder to purchase three shares of common stock of the Company for
$.30 per share. A total of 4,000,000 shares of common stock were
issued and sold by the Company for net proceeds of approximately
$935,000. The proceeds of the offering will be used for working
capital and to fund the Company's expansion plans.
5) STOCKHOLDERS' DEFICIT
On June 6, 2001, the Company with the approval of its shareholders
increased the number of authorized shares to 101,000,000. These
share consist of 100,000,000 shares of common stock, $.001 par
value and 1,000,000 shares of preferred stock, par value $.001.
6) LEASES
During the year ended January 31, 2000, the Company entered into
an operating lease for office space. The future minimum lease
payments under these non-cancelable operating leases are as
follows:
Year Ending January 31,
2002 $2,307
Rent expense for the years ended January 31, 2001 and 2000
amounted to $11,740 and $8,958, respectively.
F-12
7) STOCK OPTION PLAN
On August 23, 2000, the Company adopted a stock option plan (the
"Plan") pursuant to which the Company's Committee appointed by the
Board of Directors may grant options to officers and key
employees. The Plan authorizes the grant of options to purchase up
to 10,000,000 shares of the authorized but unissued common stock.
The exercise price, term and vesting schedule for options granted
under the Plan are set by the Committee, subject to certain
limitations. Under the Plan, the exercise price of the options may
not be less than the fair market value of a share of common stock
at the grant date (110% if the incentive stock option ("ISO") is
granted to a greater than 10% stockholder) and the term of an
option may not exceed 3 years (10 years if an ISO is granted to a
greater than 10% stockholder.) Options generally terminate three
months after the termination of the option holder's employment
unless terminated for cause.
Stock option activity during the period is indicated as follows:
Weighted Average
Shares Exercise Price
------------------ -------------------
Balance, January 31, 2000 - $ -
Granted 1,000,000 0.20
Exercised - -
Forfeited 750,000 0.20
Expired - -
------------------
Balance, January 31, 2001 250,000 0.20
==================
Weighted average fair value of option granted and $ 65,256
not forfeited during the year ===================
The Company applies APB Opinion No. 25 in accounting for its Plan
and, accordingly, no compensation cost has been recognized for its
stock options in the financial statements. Had the Company
determined compensation cost based on the fair value at the grant
date for its options under SFAS No. 123, the Company's net loss
would have been increased to the pro forma amounts indicated
below:
Year ended January
31, 2001
---------------------
Net loss available to common shareholders - as reported $ (553,096)
Net loss available to common shareholders - pro forma $ (618,352)
Net loss per share - as reported $ (0.019)
Net loss per share - pro forma $ (0.021)
F-13
The effects of applying SFAS No. 123 for the presentation of pro
forma disclosures are not necessarily indicative of the effects on
reported net income for future years.
The fair value of the options granted were estimated using the
Black-Scholes option pricing model as of the date of grant with
the following assumptions:
Expected dividend yield 0.0%
Risk-free interest rate 4.5%
Expected volatility 80.0%
Term (vesting period in years) 1
8) INCOME TAXES
The following is a reconciliation between expected income tax
benefit and actual using the applicable statutory federal income
tax rate for the period ended January 31, 2001.
Expected tax benefit $ (188,050)
Change in valuation allowance 154,200
Goodwill amortization 47,580
State benefit (14,840)
Other 1,110
----------------------
$ -
======================
The tax effect of temporary differences that give rise to the
deferred tax assets as of January 31, 2001 are as follows:
Deferred tax asset:
Net operating loss carryforward $ 404,100
Less valuation allowance 404,100
----------------------
Net deferred tax asset $ -
======================
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or
all of the deferred tax asset will not be realized. The ultimate
realization of the deferred tax asset is dependent upon the
generation of future taxable income during the periods in which
those temporary differences become deductible. Management
considers the projected future taxable income and tax planning
strategies, as well as carryback opportunities, in making these
assessments. Based upon the level of historical taxable income and
projections for future taxable income over the periods in which
deferred tax assets are deductible, management believes it is more
likely than not that the Company will not realize the
F-14
benefits of theses deductible differences. The benefit of the net
operating loss carryforward might be limited due to changes in
ownership as defined in the Internal Revenue Code and Regulation
thereunder.
9) LIQUIDITY
The accompanying consolidated financial statements have been
prepared on the basis that the Company will continue as a going
concern, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course business.
However, since inception, the Company's operating and investing
activities have used more cash than they have generated. Because
of the continued need for substantial amounts of working capital
to fund the growth of the business, the Company expects to
continue to experience significant negative operating and
investing cash flows for the foreseeable future. The Company may
need to raise additional capital in the future to meet the
operating and investing cash requirements. The Company may not be
able to find additional financing, if required, on favorable
terms or at all. If additional funds are raised through the
issuance of equity, equity-related or debt securities, these
securities may have rights, preferences or privileges senior to
those of the rights of the common stock, and the stockholders may
experience additional dilution to their equity ownership. Since
there are no assurances that such financing will be available
when and as needed to satisfy current obligations, substantial
doubt exists as to whether the Company will continue as a going
concern.
F-15
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Disease Sciences, Inc. has duly caused this Report on Form
10-KSB/A to be signed on its behalf by the undersigned, thereunto duly
authorized.
DISEASE SCIENCES, INC.
By: /s/ Dr. Wayne Goldstein
-------------------------------------
Dr. Wayne Goldstein
Chief Executive Officer and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
Signature Title Date
/s/ Dr. Wayne Goldstein President, Chief Executive
------------------------ Officer and Director
Dr. Wayne Goldstein August 15, 2001
/s/ Brian S. John Chief Financial Officer,
------------------------ Principal Accounting Officer
Brian S. John and Director August 15, 2001
/s/ Bryant Villeponteau Chief Scientific Officer
------------------------ and Director
Bryant Villeponteau, Ph.D. August 15, 2001