<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
--------------
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-27848
BIOFIELD CORP.
(exact name of registrant as specified in its charter)
Delaware 13-3703450
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1225 Northmeadow Pkwy.
Suite 120 Roswell, GA 30076
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (770) 740-8180
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 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
---- ----
The number of shares of Issuer's Common Stock, $.001 par value, outstanding as
of June 30, 1996 was 6,431,049 shares.
<PAGE> 2
BIOFIELD CORP.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
Part I FINANCIAL INFORMATION PAGE NO.
- ----------------------------- --------
<S> <C> <C>
Item 1. FINANCIAL STATEMENTS
Balance Sheets as of June 30, 1996 and December 31, 1995 ............... 3
Statements of Operations for the three month and six month periods
ended June 30, 1996 and 1995 and for the period
October 16, 1987 (Date of Inception) through June 30, 1996 ............. 4
Statements of Stockholders' Equity for the period October 16, 1987
(Date of Inception) through June 30, 1996 .............................. 5-6
Statements of Cash Flows for the three month and six month periods
ended June 30, 1996 and 1995 and for the period
October 16, 1987 (Date of Inception) through June 30, 1996 ............. 7-8
Notes to Financial Statements .......................................... 9-11
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS .......................... 12-13
Part II OTHER INFORMATION
- -------------------------
Item 2 CHANGES IN SECURITIES .................................................. 14
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................... 14
Item 6 EXHIBITS AND REPORTS ON FORM 8-K ....................................... 14
Signatures ........................................................................ 15
</TABLE>
<PAGE> 3
Part I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
BIOFIELD CORP.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents .................................................... $ 11,760,336 $ 3,271,341
Short-term investments ....................................................... 7,562,977 3,000,000
Other current assets ......................................................... 430,425 83,823
------------ ------------
Total current assets ...................................................... 19,753,738 6,355,164
PROPERTY AND EQUIPMENT - Net ..................................................... 807,012 939,370
OTHER ASSETS ..................................................................... 101,292 101,292
PATENT AND PATENT APPLICATION COSTS - Net ........................................ 438,739 379,798
------------ ------------
TOTAL ............................................................................ $ 21,100,781 $ 7,775,624
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable ............................................................. $ 492,345 $ 390,804
Contractual settlement ....................................................... 313,392 776,623
Due to affiliate ............................................................. 250,417 87,270
Accrued expenses ............................................................. 911,333 406,966
Capitalized lease obligations ................................................ 29,269 26,815
------------ ------------
Total current liabilities ................................................. 1,996,756 1,688,478
CAPITALIZED LEASE OBLIGATIONS .................................................... 18,372 33,647
------------ ------------
Total liabilities ......................................................... 2,015,128 1,722,125
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value; authorized 2,000,000 shares;
no shares issued .......................................................... -- --
Series A Convertible preferred stock, $.001 par value; authorized
2,350,000 shares; outstanding 0 and 2,342,118 shares, respectively ........ -- 2,342
Series B Convertible preferred stock, $.001 par value; authorized
500,000 shares; outstanding 0 and 481,644 shares respectively ............. -- 482
Series C Convertible preferred stock, $.001 par value; authorized
4,450,000 securities units; outstanding 0 and 2,914,771 units, respectively -- 2,915
Series D Convertible preferred stock, $.001 par value; authorized
3,000,000 shares; no shares issued ........................................ -- --
Common Stock, $.001 par value; authorized 25,000,000 shares;
outstanding 6,431,049 and 1,565,563 shares, respectively .................. 6,431 1,565
Additional paid-in capital ................................................... 49,434,189 31,378,985
Accumulated deficit during development stage ................................. (30,354,967) (25,332,790)
------------ ------------
Total stockholders' equity ................................................ 19,085,653 6,053,499
------------ ------------
TOTAL ............................................................................ $ 21,100,781 $ 7,775,624
============ ============
</TABLE>
See notes to financial statements
3
<PAGE> 4
BIOFIELD CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Period October 16,
Three-Month Three-Month Six-Month Six-Month 1987 (Date of
Period Ended Period Ended Period Ended Period Ended Inception) through
June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995 June 30, 1996
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSES:
Research and development ........... $ 2,110,538 $ 1,520,742 $ 3,935,473 $ 2,940,283 $ 21,909,910
General and administrative ......... 842,266 433,913 1,456,677 821,876 9,019,639
------------ ------------ ------------ ------------ -------------
Total operating expenses ........ 2,952,804 1,954,655 5,392,150 3,762,159 30,929,549
------------ ------------ ------------ ------------ -------------
OTHER INCOME (EXPENSES):
Interest income .................... 279,726 100,499 374,923 138,240 1,014,847
Interest expense ................... (2,335) (3,386) (4,950) (4,803) (440,265)
------------ ------------ ------------ ------------ -------------
Net other income ................ 277,391 97,113 369,973 133,437 574,582
------------ ------------ ------------ ------------ -------------
NET LOSS .............................. $ (2,675,413) $ (1,857,542) $ (5,022,177) $ (3,628,722) $ (30,354,967)
============ ============ ============ ============ =============
NET LOSS PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary ........................... $ (0.42) $ (0.50) $ (1.16) $ (0.97)
============ ============ ============ ============
Fully-diluted ..................... $ (0.42) $ (0.50) $ (0.89) $ (0.97)
============ ============ ============ ============
</TABLE>
See notes to financial statements
4
<PAGE> 5
BIOFIELD CORP.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
OCTOBER 16, 1987 (DATE OF INCEPTION) THROUGH JUNE 30, 1996
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Series A Series B Series C
Preferred Stock Preferred Stock Preferred Units Common Stock
--------------- ---------------- --------------- -------------------
Shares Amount Shares Amount Units Amount Shares Amount
------ ------ ------ ------ ----- ------ --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of stock, October 16, 1987
(date of inception) ($.16 per share, net)... -- $ -- -- $ -- -- $ -- 549,020 $ 55
Issuance of stock in connection with
patent acquisition ($.001 per share)........ -- -- -- -- -- -- 235,294 24
Net loss, October 16, 1987 to
March 31, 1988.............................. -- -- -- -- -- -- -- --
---- ----- ---- ----- ---- ----- --------- -------
BALANCE AT MARCH 31, 1988 -- -- -- -- -- -- 784,314 79
Net loss....................................... -- -- -- -- -- -- -- --
---- ----- ---- ----- ---- ----- --------- -------
BALANCE AT MARCH 31, 1989 -- -- -- -- -- -- 784,314 79
Net loss....................................... -- -- -- -- -- -- -- --
---- ----- ---- ----- ---- ----- --------- -------
BALANCE AT MARCH 31, 1990 -- -- -- -- -- -- 784,314 79
Acquisition of 235,294 shares of
treasury stock ($.001 per share)............ -- -- -- -- -- -- -- --
Net loss....................................... -- -- -- -- -- -- -- --
---- ----- ---- ----- ---- ----- --------- -------
BALANCE AT MARCH 31, 1991 -- -- -- -- -- -- 784,314 79
Retirement of treasury stock................... -- -- -- -- -- -- (235,294) (24)
Issuance of stock in exchange for
stockholder debt ($2.90 per share).......... -- -- -- -- -- -- 431,372 43
Sale of stock ($.82 per share, net)............ -- -- -- -- -- -- 24,510 2
Amortization of deferred compensation.......... -- -- -- -- -- -- -- --
Net loss....................................... -- -- -- -- -- -- -- --
---- ----- ---- ----- ---- ----- --------- -------
BALANCE AT MARCH 31, 1992 -- -- -- -- -- -- 1,004,902 100
Sale of stock in connection with private
placement ($7.67 per share, net)............ -- -- -- -- -- -- 557,475 55
Exercise of stock options...................... -- -- -- -- -- -- 2,451 1
Amortization of deferred compensation.......... -- -- -- -- -- -- -- --
Change in par value of common stock
from $.0001 to $.001........................ -- -- -- -- -- -- -- 1,408
Net loss....................................... -- -- -- -- -- -- -- --
---- ----- ---- ----- ---- ----- --------- -------
BALANCE AT MARCH 31, 1993
(carried forward)........................... -- $ -- -- $ -- -- $ -- 1,564,828 $ 1,564
---- ----- ---- ----- ---- ----- --------- -------
<CAPTION>
Additional
Paid-In Accumulated Treasury
Capital Deficit Stock Total
------------ ------------ -------- -----------
<S> <C> <C> <C> <C>
Issuance of stock, October 16, 1987
(date of inception) ($.16 per share, net)... $ 91,898 $ -- $ -- $ 91,953
Issuance of stock in connection with
patent acquisition ($.001 per share). ...... 276 -- -- 300
Net loss, October 16, 1987 to
March 31, 1988.............................. -- (159,359) -- (159,359)
----------- ------------ ----- -----------
BALANCE AT MARCH 31, 1988 92,174 (159,359) -- (67,106)
Net loss....................................... -- (495,520) -- (495,520)
----------- ------------ ----- -----------
BALANCE AT MARCH 31, 1989 92,174 (654,879) -- (562,626)
Net loss....................................... -- (233,347) -- (233,347)
----------- ------------ ----- -----------
BALANCE AT MARCH 31, 1990 92,174 (888,226) -- (795,973)
Acquisition of 235,294 shares of
treasury stock ($.001 per share)............ -- -- (300) (300)
Net loss....................................... -- (285,179) -- (285,179)
----------- ------------ ----- -----------
BALANCE AT MARCH 31, 1991 92,174 (1,173,405) (300) (1,081,452)
Retirement of treasury stock................... (276) -- 300 --
Issuance of stock in exchange for
stockholder debt ($2.90 per share).......... 1,248,638 -- -- 1,248,681
Sale of stock ($.82 per share, net)............ 19,998 -- -- 20,000
Amortization of deferred compensation.......... 136,880 -- -- 136,880
Net loss....................................... -- (461,061) -- (461,061)
----------- ------------ ----- -----------
BALANCE AT MARCH 31, 1992 1,497,414 (1,634,466) -- (136,952)
Sale of stock in connection with private
placement ($7.67 per share, net)............ 4,275,223 -- -- 4,275,278
Exercise of stock options...................... 624 -- -- 625
Amortization of deferred compensation.......... 477,453 -- -- 477,453
Change in par value of common stock
from $.0001 to $.001........................ (1,408) -- -- --
Net loss....................................... -- (3,099,637) -- (3,099,637)
----------- ------------ ----- -----------
BALANCE AT MARCH 31, 1993
(carried forward)........................... $ 6,249,306 $ (4,734,103) $ -- $ 1,516,767
----------- ------------ ----- -----------
</TABLE>
(Continued)
5
<PAGE> 6
BIOFIELD CORP.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
OCTOBER 16, 1987 (DATE OF INCEPTION) THROUGH JUNE 30, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Series A Series B Series C
Preferred Stock Preferred Stock Preferred Units Common Stock
-------------------- ----------------- ------------------- -------------------
Shares Amount Shares Amount Units Amount Shares Amount
---------- ------ -------- ------ --------- ------ --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1993
(brought forward).................... -- $ -- -- $ -- -- $ -- 1,564,828 $ 1,564
Exercise of stock options............... -- -- -- -- -- -- 735 1
Sale of Series A Preferred Stock
($3.97 per share, net)............... 2,119,896 2,120 -- -- -- -- -- --
Issuance of Series A Preferred in
exchange for notes payable to related
parties ($4.50 per share)............ 222,222 222 -- -- -- -- -- --
Issuance of warrants.................... -- -- -- -- -- -- -- --
Amortization of deferred compensation... -- -- -- -- -- -- -- --
Net loss................................ -- -- -- -- -- -- -- --
---------- ------ -------- ---- --------- ------ --------- -------
BALANCE AT MARCH 31, 1994 2,342,118 2,342 -- -- -- -- 1,565,563 1,565
Sale of Series B Preferred Stock ($4.04
per share, net)...................... -- -- 481,644 482 -- -- -- --
Issuance of warrants.................... -- -- -- -- -- -- -- --
Amortization of deferred compensation... -- -- -- -- -- -- -- --
Net loss................................ -- -- -- -- -- -- -- --
---------- ------ -------- ---- --------- ------ --------- -------
BALANCE AT DECEMBER 31, 1994............ 2,342,118 2,342 481,644 482 -- -- 1,565,563 1,565
Sale of Series C Preferred Stock ($4.11
per unit, net)....................... -- -- -- -- 2,914,771 2,915 -- --
Issuance of warrants.................... -- -- -- -- -- -- -- --
Amortization of deferred compensation... -- -- -- -- -- -- -- --
Net loss................................ -- -- -- -- -- -- -- --
---------- ------ -------- ---- --------- ------ --------- -------
BALANCE AT DECEMBER 31, 1995............ 2,342,118 2,342 481,644 482 2,914,771 2,915 1,565,563 1,565
Sale of stock in connection with public
offering ($9.91 per share, net)
(unaudited).......................... -- -- -- -- -- -- 1,819,000 1,819
Conversion of Series A, Series B
and Series C Preferred Stock to
Common Stock (unaudited)............. (2,342,118) (2,342) (481,644) (482) (2,914,771) (2,915) 3,046,486 3,047
Amortization of deferred compensation
(unaudited).......................... -- -- -- -- -- -- -- --
Net loss (unaudited).................... -- -- -- -- -- -- -- --
---------- ------ -------- ---- --------- ------ --------- -------
BALANCE AT JUNE 30, 1996
(unaudited).......................... -- $ -- -- $ -- -- $ -- 6,431,049 $ 6,431
========== ====== ======== ==== ========= ====== ========= =======
<CAPTION>
Additional
Paid-In Accumulated Treasury
Capital Deficit Stock Total
-------------- -------------- --------- -----------
<S> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1993
(brought forward).................... $ 6,249,306 $ (4,734,103) $ -- $ 1,516,767
Exercise of stock options............... 187 -- -- 188
Sale of Series A Preferred Stock
($3.97 per share, net)............... 8,411,370 -- -- 8,413,490
Issuance of Series A Preferred in
exchange for notes payable to related
parties ($4.50 per share)............ 999,778 -- -- 1,000,000
Issuance of warrants.................... 2,119 -- -- 2,119
Amortization of deferred compensation... 1,580,320 -- -- 1,580,320
Net loss................................ -- (6,899,515) -- (6,899,515)
-------------- -------------- --------- -----------
BALANCE AT MARCH 31, 1994 17,243,080 (11,633,618) -- 5,613,369
Sale of Series B Preferred Stock ($4.04
per share, net)...................... 1,947,149 -- -- 1,947,631
Issuance of warrants.................... 6 -- -- 6
Amortization of deferred compensation... 14,859 -- -- 14,859
Net loss................................ -- (4,959,312) -- (4,959,312)
-------------- -------------- --------- -----------
BALANCE AT DECEMBER 31, 1994............ 19,205,094 (16,592,930) -- 2,616,553
Sale of Series C Preferred Stock ($4.11
per unit, net)....................... 11,977,856 -- -- 11,980,771
Issuance of warrants.................... 161 -- -- 161
Amortization of deferred compensation... 195,874 -- -- 195,874
Net loss................................ -- (8,739,860) -- (8,739,860)
-------------- -------------- --------- -----------
BALANCE AT DECEMBER 31, 1995............ 31,378,985 (25,332,790) -- 6,053,499
Sale of stock in connection with public
offering ($9.91 per share, net)
(unaudited).......................... 18,026,419 -- -- 18,028,238
Conversion of Series A, Series B
and Series C Preferred Stock to
Common Stock (unaudited)............. 2,692 -- -- --
Amortization of deferred compensation
(unaudited).......................... 26,093 -- -- 26,093
Net loss (unaudited).................... -- (5,022,177) (5,022,177)
-------------- -------------- --------- -----------
BALANCE AT JUNE 30, 1996
(unaudited).......................... $ 49,434,189 $ (30,354,967) $ -- $19,085,653
============== ============== ========= ===========
</TABLE>
See notes to financial statements (concluded)
6
<PAGE> 7
BIOFIELD CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Period October 16,
Six-Month Six-Month 1987 (Date of
Period Ended Period Ended Inception) through
June 30, 1996 June 30, 1995 June 20, 1996
------------- ------------- ------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss ............................................................. $ (5,022,177) $ (3,628,722) $(30,354,967)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ..................................... 291,839 251,985 1,344,177
Amortization of investment premiums ............................... 25,143 -- 25,143
Loss on disposal of property and equipment ........................ -- -- 40,536
Loss on license and settlement agreement .......................... -- -- 49,026
Noncash compensation .............................................. 26,093 109,908 2,431,479
Interest paid in common stock ..................................... -- -- 297,148
Changes in assets and liabilities:
Other current assets ............................................ (346,602) 4,728 (430,425)
Other assets .................................................... -- (1,898) (101,292)
Due to affiliate ................................................ 163,147 8,544 250,417
Contractual settlement .......................................... (463,231) -- 313,392
Accounts payable and accrued expenses ........................... 605,908 (125,446) 1,291,246
------------ ------------ ------------
Net cash used in operating activities ........................ (4,719,880) (3,380,901) (24,844,120)
------------ ------------ ------------
INVESTING ACTIVITIES:
Acquisition of property and equipment ................................ (153,549) (239,275) (2,007,409)
Costs incurred for patents and patent applications ................... (64,873) (34,598) (480,833)
Proceeds from sale of property and equipment ......................... -- -- 3,418
Purchase of short-term investments ................................... (7,588,120) -- (11,308,120)
Proceeds from sales of short-term investments ........................ 3,000,000 -- 3,720,000
------------ ------------ ------------
Net cash used in investing activities ........................ (4,806,542) (273,873) (10,072,944)
------------ ------------ ------------
FINANCING ACTIVITIES:
Repayments of capitalized lease obligations .......................... (12,821) (7,871) (34,593)
Proceeds from issuance of Series A Preferred - net ................... -- -- 8,413,490
Proceeds from issuance of Series B Preferred - net ................... -- -- 1,947,631
Proceeds from issuance of Series C Preferred - net ................... -- 11,980,771 11,980,771
Proceeds from issuance of Common Stock and warrants - net ............ 18,028,238 161 22,418,568
Proceeds from bank borrowings ........................................ -- -- 520,000
Payment on bank borrowings ........................................... -- -- (520,000)
Repayment of advances from stockholder ............................... -- -- (145,000)
Proceeds from notes payable issued to stockholder and related party .. -- -- 2,096,533
------------ ------------ ------------
Net cash provided by financing activities .................... 18,015,417 11,973,061 46,677,400
------------ ------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS .............................. 8,488,995 8,318,287 11,760,336
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .......................... 3,271,341 1,966,013 --
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................................ $ 11,760,336 $ 10,284,300 $ 11,760,336
============ ============ ============
(Continued)
</TABLE>
7
<PAGE> 8
BIOFIELD CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Period October
Six-Month Six-Month 1987 (Date of
Period Ended Period Ended Inception) through
June 30, 1996 June 30, 1995 June 30, 1996
------------- ------------ ------------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for interest................................. $ 4,950 $ 4,803 $ 52,109
============ ============== =============
SUPPLEMENTAL SCHEDULE FOR NONCASH INVESTING
AND FINANCING ACTIVITIES:
Acquisition of property and equipment under capitalized lease transactions $ - $ 55,874 $ 88,234
============ ============== =============
During the year ended March 31, 1994, the Company issued 222,222 shares of
Series A Preferred Stock in exchange for an aggregate of $1 million in
notes payable to the Company's principal stockholder and a former
Director
Notes payable................................................................ $ 1,000,000
=============
Issuance of Series A Preferred Stock......................................... $ 1,000,000
=============
At inception, the Company acquired the rights to a patent and assumption of
liabilities in exchange for 235,294 shares of Common Stock, as follows:
Fair value of patent acquired................................................ $ 112,732
Liabilities assumed.......................................................... $ 112,432
-------------
Issuance of Common Stock..................................................... $ 300
=============
Pursuant to a license and settlement agreement with respect to the patent
acquired (above), the Company received its 235,294 shares of Common Stock
during fiscal 1991, which was retired
Remaining carrying value of patent on date of license and
settlement agreement...................................................... $ 49,326
Common Stock returned to the Company......................................... $ 300
-------------
Loss on Settlement........................................................... $ 49,026
=============
During fiscal 1992, the Company exchanged 431,372 shares of Common Stock for
$96,660 in notes and $1,152,021 in debt and accrued interest, payable to
its principal stockholder
Notes payable................................................................ $ 96,660
Debt......................................................................... 854,873
Accrued interest............................................................. 297,148
-------------
Issuance of Common Stock..................................................... $ 1,248,681
=============
(Concluded)
</TABLE>
See notes to financial statements
8
<PAGE> 9
BIOFIELD CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY - The balance sheet as of June 30, 1996 and the related
statements of income, stockholders' equity and cash flows for the three
and/or six month periods ended June 30, 1996 and 1995 and for the period
October 16, 1987 (date of inception) through June 30, 1996 have been
prepared by Biofield Corp. (the "Company") without audit. In the opinion
of management, all adjustments necessary to present fairly the financial
position, results of operations and cash flows at June 30, 1996 and 1995
and for the period October 16, 1987 (date of inception) through June 30,
1996 have been made. During the interim periods reported on, the
accounting policies followed are in conformity with generally accepted
accounting principles and are consistent with those applied for annual
periods and described in the Company's registration statement filed on
Form S-1(File No. 333-00796) with the Securities and Exchange Commission
and declared effective March 19, 1996 (the "Registration Statement").
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. These financial statements
should be read in conjunction with the financial statements for the year
ended December 31, 1995 included in the Company's Registration Statement.
The results of operations for the three and six month periods ended June
30, 1996 are not necessarily indicative of the operating results for the
full year.
2. RECLASSIFICATIONS - Certain prior period amounts have been reclassified to
conform with the current period presentation.
3. CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS - The Company invests
its excess cash in investment grade, short-term interest-bearing
investments. Cash equivalents and short-term investments consist of
investment grade corporate obligations, money market funds and shares of
liquid (auction-market) preferred stock and bonds. For purposes of
financial reporting, the Company considers highly liquid investments with
an original maturity of three months or less to be cash equivalents.
Effective April 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt
and Equity Securities." The Company's short-term investments are sold if
cash is needed and, therefore, are considered "available-for-sale." At
June 30, 1996, the cost of short-term investments approximated market
value. Realized gains and losses on short-term investments were
immaterial for the three and six month periods ended June 30, 1996 and
1995.
4. DESCRIPTIVE ANALYSIS - The descriptive analysis contained herein compares
the financial results of the six months ended June 30 and the current
three months ended June 30, for the years 1996 and 1995. To accommodate
the comparison of pertinent financial information the following terms
will be used to denote the respective periods:
First half of 1996 - six months ended June 30, 1996
First half of 1995 - six months ended June 30, 1995
Second quarter of 1996 - three months ended June 30, 1996
Second quarter of 1995 - three months ended June 30, 1995
5. THE OFFERING - In March 1996, the Company, pursuant to an initial public
offering (the "Offering") of the Company's Common Stock, offered and
issued 1,819,000 shares at $11.00 each, for aggregate proceeds of
$18,028,238 (net of related expenses of $1,980,762). Upon the completion
of the Offering: (i) each outstanding share of Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock automatically
converted into .5729 shares of Common Stock; (ii) each outstanding share
of Series C Convertible Preferred Stock automatically converted into
.4902 shares of Common Stock, and (iii) each warrant to purchase a share
of Series C Convertible Preferred Stock and Series D Convertible
Preferred Stock automatically became exercisable for .4902 shares of
Common Stock.
9
<PAGE> 10
BIOFIELD CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
6. REVERSE STOCK-SPLIT - On February 26, 1996, the Company effected a
2.04-for-one reverse stock split of the Company's issued and outstanding
Common Stock. The accompanying financial statements and related notes to
the financial statements have been restated to reflect these changes for
all periods presented.
7. ISSUANCE OF WARRANTS - On June 30, 1996, the Company, pursuant to its
Preferred Stock and Warrant Purchase Agreement dated March 3, 1995 (the
"Series C Agreement"), and as a result of the Company's plans to submit
its Pre-Market Approval Application for the Biofield Diagnostic System to
the United States Food and Drug Administration after June 30, 1996,
issued warrants to purchase 357,192 shares of Common Stock of the Company
to shareholders who are party to the Series C Agreement. Said warrants
have an exercise price of $9.18 per share, and expire on March 3, 2000.
8. NET LOSS PER SHARE - Primary and fully-diluted net loss per common and
common equivalent share has been computed based on the weighted average
number of common stock and common stock equivalent shares outstanding
during the periods presented. Retroactive restatement has been made to
all share and per share amounts for the reverse stock split discussed
above in Note 6.
Upon the closing date of the Offering, March 22, 1996, all shares of
Series A, Series B and Series C Convertible Preferred Stock automatically
converted into shares of Common Stock (see Note 5). First half 1996
primary net loss per common and common equivalent share is computed based
upon the actual conversion date of the Company's convertible preferred
stock, March 22, 1996. First half 1996 fully-diluted net loss per common
and common equivalent share assumes conversion of the Convertible
Preferred Stock as of the beginning of the period presented. Second
quarter 1996 primary and fully-diluted net loss per common and common
equivalent share is computed based on the weighted average number of
common stock and common stock equivalent shares outstanding during the
period.
Net loss per common and common equivalent share for periods presented
prior to 1996 is computed pursuant to Securities and Exchange Commission
Staff Accounting Bulletin No. 83. Accordingly, all common stock
equivalents issued within one year of the Offering, calculated using the
treasury stock method and the public offering price of $11.00 per share,
have been included in the computation of primary and fully-diluted net
loss per common and common equivalent share as if they were outstanding
for all periods prior to the Offering. In addition, the calculation of
the weighted average number of common stock and common stock equivalent
shares outstanding also includes 2,823,762 shares of Series A and Series
B Convertible Preferred Stock, excluding shares issued subsequent to
January 31, 1995, which converted into approximately 1,617,732 shares of
Common Stock immediately upon the closing of the Offering, as if they
were converted to Common Stock as of the original dates of issuance.
Common stock equivalents, except as discussed above, are not included in
the computation of net loss per common and common equivalent share since
their effect is antidilutive.
Common stock and common stock equivalent shares used in the computation
of net loss per common and common equivalent share are summarized in the
table below:
<TABLE>
<CAPTION>
Three-Month Period Six-Month Period
Ended June 30, Ended June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary.......................... 6,431,082 3,733,345 4,345,862 3,733,345
========= ========= ========= =========
Fully-diluted.................... 6,431,082 3,733,345 5,651,527 3,733,345
========= ========= ========= =========
</TABLE>
10
<PAGE> 11
BIOFIELD CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
9. SUBSEQUENT EVENT - In July 1996, the Company obtained a commitment from
an unrelated third party to enter into a $2 million sale-leaseback
agreement. The agreement will allow the Company to finance certain
equipment purchases in amounts up to $2 million for a period of two years
following June 30, 1996. The lease term will be 36 months from the date
specific equipment is leased with monthly rent expense, payable in
advance, equal to 3.07% of the equipment leased. The Company will have
the option to purchase all but not less than all of the leased equipment
at the end of the lease term for an amount equal to 15% of the equipment
cost. The Company may not enter into any such sale-leaseback
transactions unless and until definitive documentation is entered into
and certain other conditions are satisfied.
11
<PAGE> 12
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, related notes and other information included in this
Quarterly Report on Form 10-Q.
Statements in this Quarterly Report on Form 10-Q that are not historical
fact constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. All such forward-looking statements
involve risks and uncertainties, including, without limitation, to the
Company's limited operating history and anticipated future losses,
uncertainties relating to the Company's future profitability and ability to
meet its capital needs, product development, FDA approval, government
regulation, competition, market acceptance and other risks detailed in the
Company's Prospectus dated March 19, 1996 filed with the Securities and
Exchange Commission pursuant to Rule 424(b).
OVERVIEW
Since the Company's inception (October 16, 1987), the Company has been
engaged in research and development associated with its cancer detection
technology. As a development stage company, the Company has incurred net losses
since inception through June 30, 1996 of approximately $30.4 million. The
Company expects operating losses will increase for at least the next several
years as total costs and expenses increase due principally to marketing and
manufacturing expenses associated with the anticipated commercialization of the
Biofield Diagnostic System, as well as development of, and clinical trials for,
the Company's proposed breast cancer screening system and other research and
development activities.
To date, the Company has not marketed, or generated revenues from the
commercialization of, any products. The Company's results may vary
significantly from period to period depending on several factors, such as the
timing of certain expenses and the progress of the Company's research and
development and commercialization programs, all of which may be affected by the
availability of funds.
RESULTS OF OPERATIONS
Research and development expenses include the costs of engineering,
manufacturing and clinical trials and related activities conducted in
connection with required governmental and regulatory approvals for the Biofield
Diagnostic System, which consists of the Biofield Diagnostic Device and
ZEROSET(R) Sensors, as well as expenses for the development of the Company's
proposed breast cancer screening system and preclinical research related to the
enhancement of the technology and its development for use in the detection of
other cancers. Research and development expenses were $3,935,000 during the
first half of 1996, an increase of $995,000, or 34%, from the first half of
1995. This increase was primarily attributable to: a $341,000 increase in
compensation and recruiting and relocation expenses due to an increase in
existing research and development personnel from 17 in the first half of 1995
to 26 in the first half of 1996; a $149,000 increase in engineering expenses
related to the Biofield Diagnostic System; a $410,000 increase in consulting
expenses related to third-party payor reimbursement issues and preclinical
research; and a $88,000 increase due to clinical development activity.
Research and development expenses were $2,111,000 during the second
quarter of 1996, an increase of $590,000, or 39% from the second quarter of
1995. This increase was primarily attributable to: a $165,000 increase in
compensation and recruiting and relocation expenses due to an increase in
existing research and development personnel from 17 in the second quarter of
1995 to 26 in the second quarter of 1996; a $260,000 increase in consulting
expenses related to third-party payor reimbursement issues and preclinical
research; and a $108,000 increase due to clinical development activity.
General and administrative expenses were $1,457,000 during the first
half of 1996, an increase of $635,000, or 77%, from the first half of 1995.
This increase was primarily attributable to a $465,000 increase in compensation
and recruiting and relocation expenses due to the hiring of a new President and
Chief Executive Officer in December 1995 and a new Vice President of Sales and
Marketing in June 1996; and a $144,000 increase in expenses incurred in
connection with marketing activities, investor relations expenses and
additional premiums for directors' and officers' liability insurance.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
General and administrative expenses were $842,000 during the second
quarter of 1996, an increase of $408,000, or 94% from the second quarter of
1995. This increase was primarily attributable to a $329,000 increase in
compensation and recruiting and relocation expenses due to the hiring of a new
President and Chief Executive Officer in December 1995 and a new Vice President
of Sales and Marketing in June 1996; and a $85,000 increase in expenses
incurred in connection with marketing activities, investor relations expenses
and additional premiums for directors' and officers' liability insurance.
The Company's interest income was $375,000 for the first half of 1996,
an increase of $237,000, or 171%, from the first half of 1995. Interest income
was $280,000 for the second quarter of 1996, an increase of $179,000, or 178%
from the second quarter of 1995. The increase in interest income during 1996
was primarily due to higher average invested cash, cash equivalent and
short-term investment balances compared to those of the previous period.
As a result of the foregoing, the first half of 1996 net loss increased
approximately $1,393,000, or 38% from the first half of 1995 and during the
second quarter of 1996 net loss increased approximately $818,000, or 44%, from
the second quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company had total cash, cash equivalents and
short-term investments of $19.3 million, of which $18.8 million was invested in
investment grade corporate obligations, money market funds and shares of liquid
(auction-market) preferred stock and bonds.
As of June 30, 1996, the Company had working capital of $17.8 million
compared to $4.7 million at December 31, 1995. The increase in working capital
was the result of proceeds received from the sale of 1,819,000 shares of the
Company's common stock. Proceeds, net of broker commission and offering costs,
were approximately $18.0 million. The Company does not expect to generate a
positive internal cash flow for at least several years due to the expected
increase in spending for research and development and the expected costs of
commercializing its initial product, the Biofield Diagnostic System.
Capital expenditures during the first half of 1996 were approximately
$154,000 compared to $239,000 for the first half of 1995. Capital expenditures
of $154,000 included approximately $32,000 in manufacturing equipment and
approximately $69,000 in new computer equipment to support planned computer
processing needs.
During the first half of 1996, there were no changes in the Company's
existing debt agreements, and the Company had no outstanding bank loans as of
June 30, 1996. In July 1996, the Company obtained a commitment from an
unrelated third party to enter into a $2 million sale-leaseback agreement (see
Note 9 to the Financial Statements).
The Company believes that its available cash, cash equivalents and
investment securities and investment income should be sufficient to fund the
Company's operations for approximately the next one and a half years. However,
the Company's future capital requirements will depend on many factors,
including the following: the progress of its research and development projects;
the progress of preclinical and clinical testing; the time and cost involved in
obtaining regulatory approvals; the cost of filing, prosecuting, defending or
enforcing any patent claims and other intellectual property rights; competing
technological and market developments; changes and developments in the
Company's existing collaborative, licensing and other relationships and the
terms of any new collaborative, licensing and other arrangements that the
Company may establish; and the development of commercialization activities and
arrangements. The Company will require substantial additional funds for its
research and development programs, preclinical and clinical testing, operating
expenses, regulatory processes, and manufacturing programs. There can be no
assurances that any required additional financing can be obtained, and if
obtained, at reasonable terms.
13
<PAGE> 14
PART II OTHER INFORMATION
Item 2. Changes in Securities
See Note 5 in the Notes to Financial Statements in
Part I - Financial Information of this Form 10-Q.
Item 4. Submission of Matters to a Vote of Security Holders
Pursuant to Section 228(a) of the General
Corporation Law of the State of Delaware, the
majority of the stockholders of the Company approved
by a written consent, dated as of February 16, 1996,
the Biofield Corp. 1996 Option Plan and the Biofield
Corp. 1996 Stock Option Plan for Non-Employee
Directors.
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<S> <C>
a. Exhibits Exhibit 27. Financial Data Schedule - (for SEC use only).
b. Reports on Form 8-K The Company filed a Form 8-K, dated July 3,
1996, under Item 5. Other Events.
</TABLE>
14
<PAGE> 15
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOFIELD CORP.
August 9, 1996 /s/ KENNETH W. ANSTEY
---------------------------------
By: Kenneth W. Anstey
President, Chief Executive Officer
and Director (Principal Executive
Officer)
August 9, 1996 /s/ TIMOTHY G. ROCHE
---------------------------------
By: Timothy G. Roche
Director of Finance and
Corporate Controller
(Principal Financial Officer)
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SUMMARY CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT JUNE 30, 1996 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE SIX
MONTHS ENDED JUNE 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,760,336
<SECURITIES> 7,562,977
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 19,753,738
<PP&E> 807,012<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 21,100,781
<CURRENT-LIABILITIES> 1,996,756
<BONDS> 0
0
0
<COMMON> 6,431
<OTHER-SE> 19,079,222
<TOTAL-LIABILITY-AND-EQUITY> 21,100,781
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 5,392,150
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,950
<INCOME-PRETAX> (5,022,177)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,022,177)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,022,177)
<EPS-PRIMARY> (1.16)
<EPS-DILUTED> (0.89)
<FN>
<F1>PROPERTY, PLANT, AND EQUIPMENT IS REPORTED NET OF ACCUMULATED DEPRECIATION
OF $1,208,422.
</FN>
</TABLE>
