<PAGE>
===============================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1995
-------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _____________ to ________
Commission file number 0-5776
---------------------------------
BIOSPHERICS-Registered Trademark- INCORPORATED
- -------------------------------------------------------------------------------
(Exact name of small business issuer in its charter)
Delaware 52-0849320
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
12051 Indian Creek Court, Beltsville, Maryland 20705
- -------------------------------------------------------------------------------
(Address of principal executive offices)
301-419-3900
- -------------------------------------------------------------------------------
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such report(s),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
The number of outstanding shares of the registrant's Common Stock on
November 10, 1995, was 3,920,371.
Transitional Small Business Disclosure Format (Check One): Yes No X
--- ---
===============================================================================
<PAGE>
BIOSPHERICS INCORPORATED
-------------
FORM 10-QSB
Index
-----
Page No.
--------
Cover Sheet 1
Index 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statements of Operations for the
three and nine months ended September 30, 1995 and 1994
(unaudited) 3
Consolidated Balance Sheets at September 30, 1995 (unaudited)
and December 31, 1994 4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1995 and 1994 (unaudited) 5
Notes to the Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis or Plan of Operation 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURE 13
-2-
<PAGE>
PART I - FINANCIAL INFORMATION
- ------------------------------
ITEM 1. FINANCIAL STATEMENTS
- -----------------------------
BIOSPHERICS INCORPORATED
Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES
Contract revenues $ 4,070,231 $ 4,115,473 $ 12,746,995 $ 11,872,639
OPERATING EXPENSES
Direct contract costs and operating expenses 3,080,621 3,201,841 9,569,734 9,803,360
General and administrative 569,798 539,379 1,793,104 1,602,478
Research and development 114,288 82,990 411,358 499,248
Depreciation and amortization 122,835 115,536 339,534 294,081
------------ ------------ ------------ ------------
Total operating expenses 3,887,542 3,939,746 12,113,730 12,199,167
------------ ------------ ------------ ------------
Income (loss) from operations 182,689 175,727 633,265 (326,528)
Other income (expense)
Other income (expense) 4,958 5,745 (8,968) 10,632
Interest expense (88,043) (31,040) (144,690) (87,692)
------------ ------------ ------------ ------------
Income (loss) before taxes 99,604 150,432 479,607 (403,588)
Income tax benefit (expense) 30,701 (57,969) (115,790) 156,118
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 130,305 $ 92,463 $ 363,817 $ (247,470)
============ ============ ============ ============
NET INCOME (LOSS) PER SHARE $ 0.03 $ 0.02 $ 0.08 $ (0.06)
============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
-3-
<PAGE>
BIOSPHERICS INCORPORATED
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 58,006 $ 7,979
Trade accounts receivable, net 2,749,795 3,277,923
Costs and estimated earnings in excess of billings on contracts 294,068 338,810
Other receivables 126,954 202,392
Prepaid expenses and other assets 464,061 472,288
Current deferred income taxes 53,545 53,545
------------- ------------
Total current assets 3,746,429 4,352,937
Restricted cash-security deposit 27,408 27,408
Property and equipment, net 1,661,822 1,703,268
Patents, net 95,947 88,400
------------- ------------
Total assets $ 5,531,606 $ 6,172,013
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank line of credit $ 728,000 $ 1,535,000
Accounts payable and accrued expenses 1,126,181 1,331,106
Accrued salaries and benefits 519,027 469,966
Accrued vacation 181,240 173,663
Income taxes payable 896 31,772
------------- ------------
Total current liabilities 2,555,344 3,541,507
Deferred compensation 148,626 148,626
Deferred income taxes 190,425 190,425
Deferred rent 125,825 159,129
------------- ------------
Total liabilities 3,020,220 4,039,687
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 18,000,000 shares
authorized, 3,934,622 shares issued, 3,922,862 outstanding
at September 30, 1995, and 3,904,770 issued and outstanding
at December 31, 1994 39,346 39,048
Paid-in capital in excess of par 904,457 765,544
Treasury stock, 11,760 shares at cost (123,968) -
Retained earnings 1,691,551 1,327,734
------------- ------------
Stockholders' equity 2,511,386 2,132,326
------------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,531,606 $ 6,172,013
============= ============
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
BIOSPHERICS INCORPORATED
Consolidated Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Net income (loss) $ 363,817 $ (247,470)
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:
Depreciation and amortization 339,534 294,081
Loss on disposal of property and equipment 32,415 -
Provision for uncollectible accounts 22,617 27,000
Decrease in short-term investment - 56,865
Decrease (increase) in trade accounts receivable 505,511 (500,840)
Decrease (increase) in costs and estimated earnings
in excess of billings on contracts 44,742 (248,819)
Decrease in other receivables 75,438 168,276
Decrease in income taxes receivable - 281,043
Decrease in prepaid expenses and other assets 8,227 13,084
Increase in restricted cash-security deposit - (27,408)
Increase (decrease) in accounts payable, accrued expenses, and other liabilities (204,926) 446,894
Increase in accrued salaries and benefits 49,061 133,588
Increase in accrued vacation 7,577 7,212
Decrease in income taxes payable (30,876) -
Decrease in deferred rent (33,304) (38,989)
Other - (25,974)
------------ ------------
Total adjustments 816,016 586,013
Net cash provided by operating activities 1,179,833 338,543
Cash flows from investing activities:
Purchases of property and equipment (326,450) (266,940)
Additions to patent costs (11,599) (8,176)
------------ ------------
Net cash used by investing activities (338,049) (275,116)
Cash flows from financing activities:
Net proceeds (repayments) under line of credit (807,000) 64,887
Proceeds from issuance of common stock 15,243 2,175
------------ ------------
Net cash used by financing activities (791,757) 67,062
Net increase in cash and cash equivalents 50,027 130,489
Cash and cash equivalents, beginning of period 7,979 9,045
------------ ------------
Cash and cash equivalents, end of period $ 58,006 $ 139,534
============ ============
</TABLE>
See notes to consolidated financial statements.
-5-
<PAGE>
BIOSPHERICS INCORPORATED
Notes to Consolidated Financial Statements
(Unaudited)
-------------
1. BASIS OF PRESENTATION
The accompanying interim consolidated financial statements of Biospherics
Incorporated (the "Company") do not include all of the information and
disclosures generally required for annual financial statements and are
unaudited. In the opinion of management, all material adjustments considered
necessary for a fair presentation of the results of interim periods have been
included. This report should be read in conjunction with the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1994.
2. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number
of common shares and, when appropriate, common stock equivalents outstanding
during the period. Common stock equivalents consist of shares under option.
Fully-diluted earnings per share is not materially different from primary
earnings per share. The weighted average number of common shares and common
stock equivalents outstanding during the three and nine month periods ended
September 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
1995 1994 1995 1994
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Weighted average shares outstanding 3,922,862 3,904,770 3,922,862 3,904,770
Common stock equivalents 769,636 - 527,040 -
----------- ------------ ------------ ------------
Weighted average shares and common
stock equivalents outstanding 4,692,498 3,904,770 4,449,902 3,904,770
=========== ============ ============ ============
</TABLE>
3. BANK LINE OF CREDIT
On September 28, 1994, the Company entered into an Amended and Restated
Loan Agreement (the "Previous Credit Agreement"). The Previous Credit
Agreement, which expired on May 31, 1995, provided for borrowings of up to $2
million, subject to an advance rate as defined in the agreement. Amounts
outstanding under the Previous Credit Agreement accrued interest at the
bank's prime rate plus 1% per annum. The Previous Credit Agreement contained
covenants which required the Company to meet certain tangible net worth and
cash flow coverage ratios and imposed limits on direct research and
development expenditures. On March 2, 1995, the agreement was amended to
increase research and development expenditures to certain levels, subject to
the Company obtaining certain before-tax profit margin targets.
On May 31, 1995, the Company entered into a Loan Agreement (the "New Loan
Agreement") which replaced the Company's previous bank line of credit. The
New Loan Agreement, which expires on May 31, 1996, provides for borrowings of
up to $2 million, subject to an advance rate as defined in the agreement.
Amounts outstanding under the New Loan Agreement accrue interest at the
bank's prime rate plus .75% per annum and are collateralized by the Company's
accounts receivable. The New Loan Agreement contains covenants which require
the Company to meet certain tangible net worth and cash flow coverage ratios,
and excludes a specific limitation on research and development expenditures.
The Company was in compliance with all covenants as of September 30, 1995.
-6-
<PAGE>
BIOSPHERICS INCORPORATED
Notes to Consolidated Financial Statements
(Unaudited)
-------------
4. TERM LOAN
On October 12, 1995, the Company entered into a $200,000 Promissory Note
which matures on October 12, 1998. The Promissory Note accrues interest at
the rate of 8.55% per annum and the Company is required to make monthly
payments of interest and principal. The proceeds were used to provide
financing for a portion of the Company's property and equipment purchases
during 1995. The Promissory Note is collateralized by equipment purchased
prior to October 12, 1995.
5. COMMITMENTS AND CONTINGENCIES
As a result of routine audits of the Company's Federal income tax returns
by the Internal Revenue Service ("IRS"), the IRS had disputed the timing of
certain rent expense deductions taken during the 1986 through 1992 tax years.
The aggregate amount of the IRS' claims and penalties were $348,666 and
$79,808, respectively. The deficiencies in question constituted temporary
differences regarding the period in which certain rent expenses should have
been deducted. The Company had filed a petition in the United States Tax
Court disputing all of the claims and penalties. Additionally, the Company
had identified certain errors in the IRS audit findings. As a result, on
August 28, 1995, the Company entered into a settlement agreement under which
the IRS claims were substantially reduced and all penalties assessed were
waived. During the third quarter of 1995, the Company accrued interest
expense relating to the settlement, which was offset by reducing its current
income tax liability relating to excess income tax accruals maintained until
a settlement was reached. The overall impact on net income and cash flow was
immaterial.
On August 16, 1995, the Company entered into a Letter of Intent with MD
Foods Ingredients amba ("MD Foods") to negotiate within 1 year an agreement
to establish and operate a company ("Newco") which will produce and
distribute commercial quantities of the Company's patented, non-fattening
sugar, D-tagatose worldwide. The Letter of Intent provides for the
construction and operation of a pilot plant to obtain product development
quantities of the sugar and obtain data on which to design a full-scale
plant. The pilot plant is now under construction. Under the agreement, MD
Foods will incur costs up to $550,000 for the construction and operation of
the pilot plant, costs associated with establishing Newco, and other costs.
MD Foods will be reimbursed for 100% of such costs by Newco, if organized, or
50% by the Company if the parties do not reach an agreement. If no agreement
is reached, the product of the effort and all the technology resides with the
Company. No amounts have been accrued by the Company to reimburse MD Foods
for these costs. The Company will be reimbursed up to $170,000 by Newco for
certain costs to produce limited quantities of D-tagatose, costs associated
with establishing Newco, and certain other costs. MD Foods will reimburse
the Company for up to 50% of these costs if an agreement is not reached. The
Company has not recognized a receivable for the recovery of such costs.
-7-
<PAGE>
BIOSPHERICS INCORPORATED
----------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
The Company earned net income of $130,305 for the third quarter of 1995,
compared with $92,463 during the third quarter of 1994. Income from
operations of $182,689 in 1995 remained consistent with $175,727 during the
1994 period. Revenues decreased slightly to $4,070,231 in the third quarter
of 1995 compared to $4,115,473 for the third quarter of 1994. These
fluctuations are discussed further below.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
INFORMATION SERVICES 1995 1994
------------ ------------
<S> <C> <C>
Revenues 3,509,000 3,359,000
Operating expenses 3,179,000 3,083,000
------------ ------------
Income from operations 330,000 276,000
============ ============
ENVIRONMENTAL AND LABORATORY SERVICES
Revenues 545,000 746,000
Operating expenses 577,000 759,000
------------ ------------
Loss from operations (32,000) (13,000)
============ ============
RESEARCH AND DEVELOPMENT
Revenues 16,000 11,000
Operating expenses 131,000 98,000
------------ ------------
Loss from operations (115,000) (87,000)
============ ============
</TABLE>
Information services revenues were $3,509,000, which reflects an increase
of 4.5% or $150,000, compared with revenues of $3,359,000 during the third
quarter of 1994. Income from operations improved $54,000 from $276,000
during the third quarter of 1994. The increase in revenues was primarily the
result of increases in Federal government business offset by a decline in
commercial business. Commercial business declined due to the conclusion of a
major contract in early August 1995, offset by an increase from a customized
disease management support program. The percentage of commercial and Federal
government information services business changed from 59% and 41%,
respectively, during the 1994 period, to 53% and 47%, respectively, during
the third quarter of 1995. Cost control measures implemented on the
Company's Department of Agriculture Forest Service campsite reservation
contract was the primary cause for the increase in income from operations.
Information services revenues continue to represent a substantial part of the
Company's revenues with 86% during the third quarter of 1995 and 82% for the
same 1994 period.
Environmental services revenues were $545,000, which reflects a decline
of 26.9% or $201,000, compared with revenues of $746,000 during the third
quarter of 1994. The operating loss was $32,000 as compared to an operating
loss of $13,000 in 1994. The decline in revenue was primarily caused by a
decrease in work in the Company's Beltsville office due to the completion of
a county government contract. Profitability continues to be strained by
competitive market pressure on pricing and a continuing high overhead rate.
The research and development loss from operations increased by $28,000 or
32.2% primarily because of higher expenses during the third quarter of 1995
in connection with human trials to determine D-tagatose usefulness with
diabetic patients underway at the University of Maryland School of Medicine.
On August 16, 1995, the Company entered into a Letter of Intent with MD
Foods Ingredients amba ("MD Foods") to negotiate within 1 year an agreement
to establish and operate a company ("Newco") which will produce and
distribute commercial quantities of the Company's patented, non-fattening
sugar, D-tagatose worldwide. The Letter of
-8-
<PAGE>
BIOSPHERICS INCORPORATED
----------
Intent provides for the construction and operation of a pilot plant to obtain
product development quantities of the sugar and obtain data on which to
design a full-scale plant. The pilot plant is now under construction. Under
the agreement, MD Foods will incur costs up to $550,000 for the construction
and operation of the pilot plant, costs associated with establishing Newco,
and other costs. MD Foods will be reimbursed for 100% of such costs by
Newco, if organized, or 50% by the Company if the parties do not reach an
agreement. If no agreement is reached, the product of the effort and all the
technology resides with the Company. No amounts have been accrued by the
Company to reimburse MD Foods for these costs. The Company will be
reimbursed up to $170,000 by Newco for certain costs to produce limited
quantities of D-tagatose, costs associated with establishing Newco, and
certain other costs. MD Foods will reimburse the Company for up to 50% of
these costs if an agreement is not reached. The Company has not recognized a
receivable for the recovery of such costs.
General and administrative expenses ("G&A") have been fully allocated to
each segment's operating results discussed above. As reflected in the
accompanying Consolidated Statements of Operations, G&A increased $30,419
from $539,379 in the third quarter of 1994 to $569,798 in the third quarter
of 1995. This increased cost is primarily a result of the transfer of
certain salary, fringe benefit, and other costs to G&A in connection with the
formation of a corporate communications group.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
The Company earned net income of $363,817 for the first nine months of
1995, compared with a net loss of $247,470 during the first nine months of
1994. Income from operations increased to $633,265 in 1995 from a loss from
operations in 1994 of $326,528. Revenues increased 7.4% to $12,746,995 in
the first nine months of 1995 compared to $11,872,639 for the first nine
months of 1994. As reflected in the chart below, the improvement in the
results of operations is primarily a result of significant improvement in
operations of the information services business. These fluctuations are
discussed further below.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
INFORMATION SERVICES 1995 1994
------------ ------------
<S> <C> <C>
Revenues 11,150,000 9,901,000
Operating expenses 9,776,000 9,674,000
------------ ------------
Income from operations 1,374,000 227,000
============ ============
ENVIRONMENTAL AND LABORATORY SERVICES
Revenues 1,578,000 1,937,000
Operating expenses 1,881,000 1,981,000
------------ ------------
Loss from operations (303,000) (44,000)
============ ============
RESEARCH AND DEVELOPMENT
Revenues 19,000 35,000
Operating expenses 457,000 545,000
------------ ------------
Loss from operations (438,000) (510,000)
============ ============
</TABLE>
Information services revenues were $11,150,000, which reflects an
increase of 12.6% or $1,249,000, compared with revenues of $9,901,000 during
the first nine months of 1994. Operating profit improved $1,147,000 from
$227,000 during the first nine months of 1994. The increases in revenues and
profitability were primarily the result of increases in commercial business
during the first six months of 1995 including a new customized disease
management support program, offset by a decline in Federal government
contract revenue. The percentage of commercial and government information
services business changed from 41% and 59%, respectively, during the 1994
period, to 55% and 45%, respectively, during the nine months ended September
30, 1995. The change in the mix of business contributed to the improved
operating profit along with cost control measures implemented on the
Company's
-9-
<PAGE>
BIOSPHERICS INCORPORATED
----------
Department of Agriculture forest service campsite reservation contract.
Information services revenues continue to represent a substantial part of the
Company's revenues with 88% during the first nine months of 1995 and 83% for
the same 1994 period.
Environmental services revenues were $1,578,000, which reflects a decline
of 18.5% or $359,000, compared with revenues of $1,937,000 during the first
nine months of 1994. The operating loss was $303,000 as compared to an
operating loss of $44,000 in 1994. The decline in results of operations was
primarily caused by a decrease in public housing work in the Company's
Cleveland office, a decrease in work in the Company's Beltsville office due
to the completion of a county government contract, competitive market
pressure on pricing, and a continuing high overhead rate. The high overhead
is partly the result of an increased emphasis on marketing and sales efforts
to increase revenues and improve profitability.
The research and development loss from operations decreased by $72,000 or
14.1% primarily because of higher expenses during the first nine months of
1994. The 1994 expenses were higher primarily as a result of toxicology
testing and initial overseas marketing costs for Sugaree-TM-, which is the
Company's patented non-fattening, bulk sugar substitute, scientifically known
as D-tagatose. Expenses incurred during 1995 primarily relate to ongoing
efforts to begin commercial production of Sugaree-TM- through a toll
producer, overseas travel to continue negotiating distribution agreements
covering the Asian and Oceania markets, and expenses associated with human
trials underway at the University of Maryland School of Medicine.
No assurance can be given that the Company will be successful in its
efforts to commercialize its products.
G&A has been fully allocated to each segment's operating results
discussed above. As reflected in the accompanying Consolidated Statements of
Operations, G&A increased $190,626 from $1,602,478 in the first nine months
of 1994 to $1,793,104 in the first nine months of 1995. This increased cost
is primarily a result of the formation of a corporate communications group
along with related fringe benefits, in addition to higher rent and other
facility expenses allocated to G&A.
LIQUIDITY AND CAPITAL RESOURCES
On September 28, 1994, the Company entered into an Amended and Restated
Loan Agreement (the "Previous Credit Agreement"). The Previous Credit
Agreement, which expired on May 31, 1995, provided for borrowings of up to $2
million, subject to an advance rate as defined in the agreement. Amounts
outstanding under the Previous Credit Agreement accrued interest at the
bank's prime rate plus 1% per annum. The Previous Credit Agreement contained
covenants which required the Company to meet certain tangible net worth and
cash flow coverage ratios and imposed limits on direct research and
development expenditures. On March 2, 1995, the agreement was amended to
increase research and development expenditures to certain levels, subject to
the Company obtaining certain before-tax profit margin targets.
On May 31, 1995, the Company entered into a Loan Agreement (the "New Loan
Agreement") which replaced the Company's previous bank line of credit. The
New Loan Agreement, which expires on May 31, 1996, provides for borrowings of
up to $2 million, subject to an advance rate as defined in the agreement.
Amounts outstanding under the New Loan Agreement accrue interest at the
bank's prime rate plus .75% per annum and are collateralized by the Company's
accounts receivable. The New Loan Agreement contains covenants which require
the Company to meet certain tangible net worth and cash flow coverage ratios,
and excludes a specific limitation on research and development expenditures.
The Company was in compliance with all covenants as of September 30, 1995.
On October 12, 1995, the Company entered into a $200,000 Promissory Note
which matures on October 12, 1998. The Promissory Note accrues interest at
the rate of 8.55% per annum and the Company is required to make monthly
payments of interest and principal. The proceeds were used to provide
financing for a portion of the Company's property and equipment purchases
during 1995. The Promissory Note is collateralized by equipment purchased
prior to October 12, 1995.
-10-
<PAGE>
BIOSPHERICS INCORPORATED
----------
As reflected in the Consolidated Statements of Cash Flows, cash flows
provided by operating activities improved by $841,290 primarily as a result
of the improvement in earnings, accounts receivable turnover, and offset by
an increase in accounts payable cash flow. Net cash used in investing
activities increased because of equipment acquisitions required to support
the increase in the Company's volume of business. With the improvement in
cash flow, the Company was able to decrease borrowings under its credit
facility by $807,000 since December 31, 1994, as reflected by the net cash
used in financing activities.
OTHER
As a result of routine audits of the Company's Federal income tax returns
by the Internal Revenue Service ("IRS"), the IRS had disputed the timing of
certain rent expense deductions taken during the 1986 through 1992 tax years.
The aggregate amount of the IRS' claims and penalties were $348,666 and
$79,808, respectively. The deficiencies in question constituted temporary
differences regarding the period in which certain rent expenses should have
been deducted. The Company had filed a petition in the United States Tax
Court disputing all of the claims and penalties. Additionally, the Company
had identified certain errors in the IRS audit findings. As a result, on
August 28, 1995, the Company entered into a settlement agreement under which
the IRS claims were substantially reduced and all penalties assessed were
waived. During the third quarter of 1995, the Company accrued interest
expense relating to the settlement, which was offset by reducing its current
income tax liability relating to excess income tax accruals maintained until
a settlement was reached. The overall impact on net income and cash flow was
immaterial.
Consistent with the Company's policy, excess profits will be retained by
the Company to help bring D-tagatose and its other products to market, and
for investment in the expansion of the information services business. Thus,
no dividends are anticipated in 1995. While management believes that
continuing operations of the business will generate positive cash flow,
management is pursuing additional financing alternatives to accelerate
bringing its products to market and to support growth of its core businesses.
However, there can be no assurance that such alternatives will be available
on terms satisfactory to the Company.
-11-
<PAGE>
BIOSPHERICS INCORPORATED
----------
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 5, Commitments and Contingencies, in the accompanying Notes to
the Consolidated Financial Statements contained in Part I, Item I.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
EXHIBIT 27
Financial Data Schedule for the quarterly period ended September 30, 1995
(filed electronically only).
REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the quarter.
-12-
<PAGE>
BIOSPHERICS INCORPORATED
----------
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BIOSPHERICS INCORPORATED
Date: November 14, 1995 By: /s/ Arthur S. Locke, III
------------------ --------------------------
Arthur S. Locke, III
Vice President-Finance,
Chief Financial Officer
-13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENTS OF OPERATIONS AND CONSOLIDATED BALANCE SHEETS INCLUDED
IN PART 1 OF THE ACCOMPANYING FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 58,006
<SECURITIES> 0
<RECEIVABLES> 2,863,027
<ALLOWANCES> 113,232
<INVENTORY> 0
<CURRENT-ASSETS> 3,746,429
<PP&E> 4,717,608
<DEPRECIATION> 3,055,786
<TOTAL-ASSETS> 5,531,606
<CURRENT-LIABILITIES> 2,555,344
<BONDS> 0
<COMMON> 39,346
0
0
<OTHER-SE> 2,472,040
<TOTAL-LIABILITY-AND-EQUITY> 5,531,606
<SALES> 12,746,995
<TOTAL-REVENUES> 12,746,995
<CGS> 0
<TOTAL-COSTS> 9,569,734
<OTHER-EXPENSES> 750,892
<LOSS-PROVISION> 22,617
<INTEREST-EXPENSE> 144,690
<INCOME-PRETAX> 479,607
<INCOME-TAX> 115,790
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 363,817
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
