<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 September 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
incorporation or organization) Identification No.)
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 September 30, 1996 was 6,432,953 shares.
<PAGE> 2
BIOFIELD CORP.
FORM 10-Q FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
INDEX
<TABLE>
<CAPTION>
Part I FINANCIAL INFORMATION PAGE NO.
--------
<S> <C>
Item 1. FINANCIAL STATEMENTS
Balance Sheets as of September 30, 1996 and December 31, 1995 . . . . . . . . 3
Statements of Operations for the three month and nine month
periods ended September 30, 1996 and 1995 and for the period
October 16, 1987 (Date of Inception) through September 30, 1996 . . . . . . . 4
Statements of Stockholders' Equity for the period October 16, 1987
(Date of Inception) through September 30, 1996 . . . . . . . . . . . . . . . 5-6
Statements of Cash Flows for the three month and nine month
periods ended September 30, 1996 and 1995 and for the period
October 16, 1987 (Date of Inception) through September 30, 1996 . . . . . . . 7-8
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 9-11
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . 12-14
Part II OTHER INFORMATION
Item 2. CHANGES IN SECURITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Item 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 3
Part I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
BIOFIELD CORP.
(A Development Stage Company)
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . $ 9,832,687 $ 3,271,341
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . 7,041,150 3,000,000
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,805 83,823
-------------- ------------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 17,274,642 6,355,164
PROPERTY AND EQUIPMENT - Net . . . . . . . . . . . . . . . . . . . . . . . . 732,740 939,370
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,591 101,292
PATENT AND PATENT APPLICATION COSTS - Net . . . . . . . . . . . . . . . . . . 477,378 379,798
-------------- ------------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,592,351 $ 7,775,624
============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 450,556 $ 390,804
Contractual settlement . . . . . . . . . . . . . . . . . . . . . . . . . 125,356 776,623
Due to affiliate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398,204 87,270
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 916,247 406,966
Capitalized lease obligations . . . . . . . . . . . . . . . . . . . . . . 29,997 26,815
-------------- ------------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 1,920,360 1,688,478
CAPITALIZED LEASE OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . 10,801 33,647
-------------- ------------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . 1,931,161 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 6,432,953 and 1,565,563 shares, respectively . . . . . . 6,433 1,565
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . 49,452,895 31,378,985
Accumulated deficit during development stage . . . . . . . . . . . . . . (32,798,138) (25,332,790)
-------------- ------------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 16,661,190 6,053,499
-------------- ------------
TOTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,592,351 $ 7,775,624
============== ============
</TABLE>
3
See notes to financial statements
<PAGE> 4
BIOFIELD CORP.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Period October 16,
Three-Month Three-Month Nine-Month Nine-Month 1987 (Date of
Period Ended Period Ended Period Ended Period Ended Inception) through
September 30, September 30, September 30, September 30, September 30,
1996 1995 1996 1995 1996
------------ ------------ ------------ ------------ -----------------
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSES:
Research and development . . . . . . . . $ 1,768,452 $ 1,586,712 $ 5,703,925 $ 4,526,995 $ 23,678,362
Selling, general and administrative . . . 921,347 696,417 2,378,024 1,518,293 9,940,986
------------ ------------ ------------ ------------ -------------
Total operating expenses . . . . . . . . 2,689,799 2,283,129 8,081,949 6,045,288 33,619,348
------------ ------------ ------------ ------------ -------------
OTHER INCOME (EXPENSES):
Interest income . . . . . . . . . . . . 248,669 137,749 623,592 275,989 1,263,516
Interest expense . . . . . . . . . . . . (2,041) (3,140) (6,991) (7,943) (442,306)
------------ ------------ ------------ ------------ ------------
Net other income . . . . . . . . . . . . 246,628 134,609 616,601 268,046 821,210
------------ ------------ ------------ ------------ ------------
NET LOSS . . . . . . . . . . . . . . . . . $ (2,443,171) $ (2,148,520) $ (7,465,348) $ (5,777,242) $ (32,798,138)
============ ============ ============ ============ =============
NET LOSS PER COMMON AND
COMMON EQUIVALENT SHARE:
Primary . . . . . . . . . . . . . . . . $ (0.38) $ (0.58) $ (1.49) $ (1.55)
============ ============ =========== ============
Fully-diluted . . . . . . . . . . . . . $ (0.38) $ (0.58) $ (1.26) $ (1.55)
============ ============ =========== ============
</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 SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Series A Series B Series C
Preferred Stock Preferred Stock Preferred Units
-------------------- -------------------- --------------------
Shares Amount Shares Amount Units Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Issuance of stock, October 16, 1987
(date of inception) ($.16 per share, net). . . . -- $ -- -- $ -- -- $ --
Issuance of stock in connection with
patent acquisition ($.001 per share) . . . . . . -- -- -- -- -- --
Net loss, October 16, 1987 to
March 31, 1988 . . . . . . . . . . . . . . . . . -- -- -- -- -- --
------ ------- ------ ------ ------ -------
BALANCE AT MARCH 31, 1988 -- -- -- -- -- --
Net loss . . . . . . . . . . . . . . . . . . . . . -- -- -- -- -- --
------ ------- ------ ------ ------ -------
BALANCE AT MARCH 31, 1989 -- -- -- -- -- --
Net loss . . . . . . . . . . . . . . . . . . . . . -- -- -- -- -- --
------ ------- ------ ------ ------ -------
BALANCE AT MARCH 31, 1990 -- -- -- -- -- --
Acquisition of 235,294 shares of
treasury stock ($.001 per share) . . . . . . . . -- -- -- -- -- --
Net loss . . . . . . . . . . . . . . . . . . . . . -- -- -- -- --
------ ------- ------ ------ ------ -------
BALANCE AT MARCH 31, 1991 -- -- -- -- -- --
Retirement of treasury stock . . . . . . . . . . . -- -- -- -- -- --
Issuance of stock in exchange for
stockholder debt ($2.90 per share) . . . . . . . -- -- -- -- -- --
Sale of stock ($.82 per share, net). . . . . . . . -- -- -- -- -- --
Amortization of deferred compensation. . . . . . . -- -- -- -- -- --
Net loss . . . . . . . . . . . . . . . . . . . . . -- -- -- -- -- --
------ ------- ------ ------ ------ -------
BALANCE AT MARCH 31, 1992 -- -- -- -- -- --
Sale of stock in connection with private
placement ($7.67 per share, net) . . . . . . . . -- -- -- -- -- --
Exercise of stock options. . . . . . . . . . . . . -- -- -- -- -- --
Amortization of deferred compensation. . . . . . . -- -- -- -- -- --
Change in par value of common stock
from $.0001 to $.001 . . . . . . . . . . . . . . -- -- -- -- -- --
Net loss . . . . . . . . . . . . . . . . . . . . . -- -- -- -- -- --
------ ------- ------ ------ ------ -------
BALANCE AT MARCH 31, 1993
(carried forward) . . . . . . . . . . . . . . . -- -- -- -- -- --
------ ------- ------ ------ ------ -------
<CAPTION>
Common Stock Additional
------------------- Paid-In Accumulated Treasury
Shares Amount Capital Deficit Stock Total
------ ------ ------- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Issuance of stock, October 16, 1987
(date of inception) ($.16 per share, net). . . . 549,020 $ 55 $ 91,898 $ -- $ -- $ 91,953
Issuance of stock in connection with
patent acquisition ($.001 per share) . . . . . . 235,294 24 276 -- -- 300
Net loss, October 16, 1987 to
March 31, 1988 . . . . . . . . . . . . . . . . . -- -- -- (159,359) -- (159,359)
-------- ------- ---------- ----------- ----- ----------
BALANCE AT MARCH 31, 1988 784,314 79 92,174 (159,359) -- (67,106)
Net loss . . . . . . . . . . . . . . . . . . . . . -- -- -- (495,520) -- (495,520)
-------- ------- ---------- ----------- ----- ----------
BALANCE AT MARCH 31, 1989 784,314 79 92,174 (654,879) -- (562,626)
Net loss . . . . . . . . . . . . . . . . . . . . . -- -- -- (233,347) -- (233,347)
-------- ------- ---------- ----------- ----- ----------
BALANCE AT MARCH 31, 1990 784,314 79 92,174 (888,226) -- (795,973)
Acquisition of 235,294 shares of
treasury stock ($.001 per share) . . . . . . . . -- -- -- -- (300) (300)
Net loss . . . . . . . . . . . . . . . . . . . . . -- -- -- (285,179) -- (285,179)
-------- ------- ---------- ----------- ----- ----------
BALANCE AT MARCH 31, 1991 784,314 79 92,174 (1,173,405) (300) (1,081,452)
Retirement of treasury stock . . . . . . . . . . . (235,294) (24) (276) -- 300 --
Issuance of stock in exchange for
stockholder debt ($2.90 per share) . . . . . . . 431,372 43 1,248,638 -- -- 1,248,681
Sale of stock ($.82 per share, net). . . . . . . . 24,510 2 19,998 -- -- 20,000
Amortization of deferred compensation. . . . . . . -- -- 136,880 -- -- 136,880
Net loss . . . . . . . . . . . . . . . . . . . . . -- -- -- (461,061) -- (461,061)
--------- ------- ---------- ----------- ----- ----------
BALANCE AT MARCH 31, 1992 1,004,902 100 1,497,414 (1,634,466) -- (136,952)
Sale of stock in connection with private
placement ($7.67 per share, net) . . . . . . . . 557,475 55 4,275,223 -- -- 4,275,278
Exercise of stock options. . . . . . . . . . . . . 2,451 1 624 -- -- 625
Amortization of deferred compensation. . . . . . . -- -- 477,453 -- -- 477,453
Change in par value of common stock
from $.0001 to $.001 . . . . . . . . . . . . . . -- 1,408 (1,408) -- -- --
Net loss . . . . . . . . . . . . . . . . . . . . . -- -- -- (3,099,637) -- (3,099,637)
--------- ------- ---------- ----------- ----- ----------
BALANCE AT MARCH 31, 1993
(carried forward). . . . . . . . . . . . . . . . 1,564,828 $ 1,564 $6,249,306 $(4,734,103) $ -- $1,516,767
--------- ------- ---------- ----------- ----- ----------
(Continued)
</TABLE>
5
<PAGE> 6
BIOFIELD CORP.
(A Development Stage Company)
STATEMENTS OF STOCKHOLDERS' EQUITY
OCTOBER 16, 1987 (DATE OF INCEPTION) THROUGH SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
Series A Series B Series C
Preferred Stock Preferred Stock Preferred Units
-------------------- -------------------- --------------------
Shares Amount Shares Amount Units Amount
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1993
(brought forward) . . . . . . . . . . -- $ -- -- $ -- -- $ --
Exercise of stock options . . . . . . . . -- -- -- -- -- --
Sale of Series A Preferred Stock
($3.97 per share, net) . . . . . . . . 2,119,896 2,120 -- -- -- --
Issuance of Series A Preferred Stock 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 -- -- -- --
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 -- --
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
Sale of stock in connection with public
offering ($9.91 per share, net)
(unaudited) . . . . . . . . . . . . . -- -- -- -- -- --
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)
Exercise of warrants (unaudited) . . . . -- -- -- -- -- --
Amortization of deferred compensation
(unaudited) . . . . . . . . . . . . . -- -- -- -- -- --
Net loss (unaudited) . . . . . . . . . . -- -- -- -- -- --
---------- ------ -------- ----- ---------- -------
BALANCE AT SEPTEMBER 30, 1996
(unaudited) . . . . . . . . . . . . . -- $ -- -- $ -- -- $ --
========== ====== ======== ===== ========== =======
<CAPTION>
Common Stock Additional
------------------- Paid-In Accumulated Treasury
Shares Amount Capital Deficit Stock Total
------ ------ ------- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT MARCH 31, 1993
(brought forward) . . . . . . . . . . 1,564,828 $ 1,564 $ 6,249,306 $ (4,734,103) $ -- $ 1,516,767
Exercise of stock options . . . . . . . . 735 1 187 -- -- 188
Sale of Series A Preferred Stock
($3.97 per share, net) . . . . . . . . -- -- 8,411,370 -- -- 8,413,490
Issuance of Series A Preferred Stock 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 1,565,563 1,565 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 . . . . . . 1,565,563 1,565 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 . . . . . . 1,565,563 1,565 31,378,985 (25,332,790) -- 6,053,499
Sale of stock in connection with public
offering ($9.91 per share, net)
(unaudited) . . . . . . . . . . . . . 1,819,000 1,819 18,026,419 -- -- 18,028,238
Conversion of Series A, Series B
and Series C Preferred Stock to
Common Stock (unaudited) . . . . . . . 3,046,479 3,047 2,692 -- -- --
Exercise of warrants (unaudited) . . . . 1,911 2 18,706 -- -- 18,708
Amortization of deferred compensation
(unaudited) . . . . . . . . . . . . . -- -- 26,093 -- -- 26,093
Net loss (unaudited) . . . . . . . . . . -- -- -- (7,465,348) -- (7,465,348)
--------- ------- ------------ ------------ ----- -----------
BALANCE AT SEPTEMBER 30, 1996
(unaudited) . . . . . . . . . . . . . 6,432,953 $ 6,433 $ 49,452,895 $(32,798,138) $ -- $ 16,661,190
========= ======= ============ ============ ===== ============
(Concluded)
</TABLE>
See notes to financial statements
6
<PAGE> 7
BIOFIELD CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Period October 16,
Nine-Month Nine-Month 1987 (Date of
Period Ended Period Ended Inception) through
September 30, September 30, September 30,
1996 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss .......................................................... $ (7,465,348) $ (5,777,242) $(32,798,138)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ................................... 454,225 394,346 1,506,563
Amortization of investment premiums / (discounts) ............... 45,770 -- 45,770
Loss on disposal of property and equipment ...................... -- -- 40,536
Loss on license and settlement agreement ........................ -- -- 49,026
Noncash compensation ............................................ 26,093 114,859 2,431,479
Interest paid in Common Stock ................................... -- -- 297,148
Changes in assets and liabilities:
Other current assets .......................................... (316,982) (41,014) (400,805)
Other assets .................................................. (6,299) (1,798) (107,591)
Due to affiliate .............................................. 310,934 21,919 398,204
Contractual settlement ........................................ (651,267) -- 125,356
Accounts payable and accrued expenses ......................... 569,033 97,536 1,254,371
------------ ------------ ------------
Net cash used in operating activities ...................... (7,033,841) (5,191,394) (27,158,081)
------------ ------------ ------------
INVESTING ACTIVITIES:
Acquisition of property and equipment ............................. (238,674) (321,481) (2,092,534)
Costs incurred for patents and patent applications ................ (106,501) (47,526) (522,461)
Proceeds from sale of property and equipment ...................... -- -- 3,418
Purchase of short term investments ................................ (10,086,920) (2,000,000) (13,806,920)
Proceeds from sales of short term investments ..................... 6,000,000 -- 6,720,000
------------ ------------ ------------
Net cash used in investing activities ...................... (4,432,095) (2,369,007) (9,698,497)
------------ ------------ ------------
FINANCING ACTIVITIES:
Repayments of capitalized lease obligations ....................... (19,664) (13,616) (41,436)
Proceeds from issuance of Series A Preferred Stock-net ............ -- -- 8,413,490
Proceeds from issuance of Series B Preferred Stock-net ............ -- -- 1,947,631
Proceeds from issuance of Series C Preferred Stock-net ............ -- 11,980,771 11,980,771
Proceeds from issuance of Common Stock and warrants-net ........... 18,028,238 161 22,417,755
Proceeds from exercise of stock options and warrants .............. 18,708 -- 19,521
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 .................. 18,027,282 11,967,316 46,689,265
------------ ------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS ........................... 6,561,346 4,406,915 9,832,687
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ...................... 3,271,341 1,966,013 --
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD ............................ $ 9,832,687 $ 6,372,928 $ 9,832,687
============ ============ ============
(Continued)
</TABLE>
7
<PAGE> 8
Biofield CORP.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION> Period October 16,
Nine-Month Nine-Month 1987 (Date of
Period Ended Period Ended Inception) through
September 30, September 30, September 30,
1996 1995 1996
------------- -------------- -------------
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for interest .......................... $ 6,991 $ 7,943 $ 54,150
============ ============ ============
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 September 30, 1996 and the related
statements of operations, stockholders' equity and cash flows for the three
and/or nine month periods ended September 30, 1996 and 1995 and for the
period October 16, 1987 (date of inception) through September 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 September 30,
1996 and 1995 and for the period October 16, 1987 (date of inception)
through September 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 nine month periods ended September 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
September 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 nine month periods ended September 30, 1996 and 1995.
4. DESCRIPTIVE ANALYSIS - The descriptive analysis contained herein compares
the financial results of the nine months ended September 30 and the current
three months ended September 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 nine months of 1996 - nine months ended September 30, 1996
First nine months of 1995 - nine months ended September 30, 1995
Third quarter of 1996 - three months ended September 30, 1996
Third quarter of 1995 - three months ended September 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 net 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 a
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 (the
"Alexa(TM) 1000 System") to the United States Food and Drug Administration
("FDA") 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 nine months of
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 nine months of 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.
Third 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 Nine-Month Period
Ended September 30, Ended September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary . . . . . . . . 6,432,292 3,733,345 5,013,059 3,733,345
========= ========= ========= =========
Fully-diluted . . . . . 6,432,292 3,733,345 5,913,682 3,733,345
========= ========= ========= =========
</TABLE>
10
<PAGE> 11
BIOFIELD CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
9. LEASE COMMITMENT - 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 an aggregate of $2 million for a period of two years ending
September 30, 1998. 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
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 specified 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" which are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that all forward looking statements involve known and
unknown risks, uncertainties, and other factors which may cause actual results,
performance or achievements of the Company to be materially different from any
future results, performance or achievements expressed or implied by such
forward looking statements. Factors that might cause such differences include
risks and uncertainties related to the Company's limited operating history,
anticipated future losses and ability to meet its capital needs; the Company's
product development efforts; FDA approvals; government regulation; competition;
market acceptance and other risks discussed 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 September 30, 1996 of approximately $32.8
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 Alexa(TM) 1000 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
Alexa(TM) 1000 System, which consists of the Alexa(TM) 1000 Diagnostic Device
and Alexa(TM) 1000 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 $5,704,000
during the first nine months of 1996, an increase of $1,177,000, or 26%, from
the first nine months of 1995. This increase was primarily attributable to: a
$506,000 increase in compensation and recruiting and relocation expenses due to
an increase in existing research and development personnel from 19 in the first
nine months of 1995 to 27 in the first nine months of 1996; a $578,000 increase
in consulting expenses related to third-party payor reimbursement issues and
preclinical research; and a $95,000 increase due to clinical development
activities.
Research and development expenses were $1,769,000 during the third
quarter of 1996, an increase of $182,000, or 11%, from the third 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 19 in the third quarter of
1995 to 27 in the third quarter of 1996; a $168,000 increase in consulting
expenses related to third-party payor reimbursement issues and preclinical
research; and a $52,000 increase due to clinical development activities. The
increases in research and development expenses during the third quarter of
1996, as discussed above, were partially offset by a $183,000 reduction in
product development expenses related to the Alexa(TM) 1000 System.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Selling, general and administrative expenses were $2,378,000 during the
first nine months of 1996, an increase of $860,000, or 57%, from the first nine
months of 1995. This increase was primarily attributable to: a $726,000
increase in compensation and recruiting and relocation expenses due to the
hiring of a new President and Chief Executive Officer in December 1995, a new
Vice President of Sales and Marketing in June 1996 and a new Director of Sales
and Marketing in August 1996; and a $299,000 increase in expenses incurred in
connection with marketing activities, investor relations and additional
premiums for directors' and officers' liability insurance. The increases in
selling, general and administrative expenses during the first nine months of
1996, as discussed above, were partially offset by a charge of approximately
$230,000 in the third quarter of 1995 for severance benefits pursuant to an
agreement entered into between the Company and its former President.
Selling, general and administrative expenses were $921,000 during the
third quarter of 1996, an increase of $225,000, or 32%, from the third quarter
of 1995. This increase was primarily attributable to: a $261,000 increase in
compensation and recruiting and relocation expenses due to the hiring of a new
President and Chief Executive Officer in December 1995, a new Vice President
of Sales and Marketing in June 1996 and a new Director of Sales and Marketing
in August 1996; and a $171,000 increase in expenses incurred in connection with
marketing activities and additional premiums for directors' and officers'
liability insurance. The increases in selling, general and administrative
expenses during the third quarter of 1996, as discussed above, were partially
offset by a charge of approximately $230,000 in the third quarter of 1995 for
severance benefits pursuant to an agreement entered into between the Company
and its former President.
The Company's interest income was $624,000 for the first nine months of
1996, an increase of $348,000, or 126%, from the first nine months of 1995.
Interest income was $249,000 for the third quarter of 1996, an increase of
$111,000, or 80%, from the third 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 nine months of 1996 net loss
increased approximately $1,688,000, or 29%, from the first nine months of 1995
and during the third quarter of 1996, net loss increased approximately
$294,000, or 14%, from the third quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1996, the Company had total cash, cash equivalents
and short-term investments of $16.9 million, of which $16.6 million was
invested in investment grade corporate obligations, money market funds and
shares of liquid (auction-market) preferred stock and bonds.
As of September 30, 1996, the Company had working capital of $15.4
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 in March 1996. Proceeds, net of underwriting
discounts and commissions 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
Alexa(TM) 1000 System.
Capital expenditures during the first nine months of 1996 were
approximately $239,000 compared to $321,000 for the first nine months of 1995.
Capital expenditures of $239,000 included approximately $85,000 in
manufacturing equipment and approximately $117,000 in new computer equipment to
support planned computer processing needs.
During the first nine months of 1996, there were no changes in the
Company's existing debt agreements, and the Company had no outstanding bank
loans as of September 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).
13
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company believes that its available cash, cash equivalents and
investment securities and investment income should be sufficient to fund the
Company's operations approximately until the end of calendar year 1997.
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.
14
<PAGE> 15
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 5. Other Information
On October 29, 1996, the Company entered into a definitive
written agreement with SeaMed Corporation ("SeaMed") of
Seattle, Washington to design and manufacture quantities
of the commercial production model of the Alexa(TM) 1000
Diagnostic Device for use in connection with clinical
studies. The agreement grants SeaMed the right to
manufacture at least 50% of the Company's worldwide
requirements for the Alexa(TM) 1000 Diagnostic Device,
other than devices to be manufactured and sold in Asia,
for a period of five years.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits Exhibit 27. Financial Data Schedule.
(for SEC use only)
15
<PAGE> 16
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.
November 13, 1996 /s/ KENNETH W. ANSTEY
------------------------------------
By: Kenneth W. Anstey
President, Chief Executive Officer
and Director (Principal Executive
Officer)
November 13, 1996 /s/ TIMOTHY G. ROCHE
------------------------------------
By: Timothy G. Roche
Director of Finance and
Corporate Controller
(Principal Financial Officer)
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AT SEPTEMBER 30, 1996 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED) AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 9,832,687
<SECURITIES> 7,041,150
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 17,274,642
<PP&E> 732,740<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 18,592,351
<CURRENT-LIABILITIES> 1,920,360
<BONDS> 0
0
0
<COMMON> 6,433
<OTHER-SE> 16,654,757
<TOTAL-LIABILITY-AND-EQUITY> 18,592,351
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 8,081,949
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,991
<INCOME-PRETAX> (7,465,348)
<INCOME-TAX> 0
<INCOME-CONTINUING> (7,465,348)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,465,348)
<EPS-PRIMARY> (1.49)
<EPS-DILUTED> (1.26)
<FN>
<F1>PROPERTY, PLANT, AND EQUIPMENT IS REPORTED NOT OF ACCUMULATED DEPRECIATION OF
$1,367,819.
</FN>
</TABLE>
