<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 March 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
------------- ----------
Commission file number 0-5576
----------------------------------
BIOSPHERICS-Registered Trademark- INCORPORATED
- --------------------------------------------------------------------------------
(Exact name of small business issuer in its charter)
Delaware 52-0849320
- -------------------------------------- --------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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
May 08, 1996, was 3,931,356.
Transitional Small Business Disclosure Format (Check One): Yes No X
-- --
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
BIOSPHERICS INCORPORATED
____________
FORM 10-QSB
INDEX
Page No.
--------
Face Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements:
Statements of Operations for the three months
ended March 31, 1996 and 1995 (unaudited) . . . . . . . . . . . 3
Balance Sheet at March 31, 1996 (unaudited) . . . . . . . . . . 4
Statements of Cash Flows for the three months
ended March 31, 1996 and 1995 (unaudited) . . . . . . . . . . . 5
Notes to the Financial Statements (unaudited) . . . . . . . . . 6
Item 2. Management's Discussion and Analysis or Plan of Operation . . . 7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . 9
Signature. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
<TABLE>
<CAPTION>
BIOSPHERICS INCORPORATED
---------------
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Statements of Operations
(unaudited)
Three Months Ended March 31,
------------------------------
1996 1995
----------- ----------
<S> <C> <C>
REVENUES
Contract revenues $ 2,937,621 $3,504,438
Other 3,808 3,250
----------- ----------
Total revenues 2,941,429 3,507,688
----------- ----------
----------- ----------
OPERATING EXPENSES
Direct contract costs and operating expenses 2,141,514 2,525,598
General and administrative 616,714 572,602
Research and development expenses 112,467 117,562
Depreciation and amortization expenses 111,159 93,714
----------- ----------
Total operating expenses 2,981,854 3,309,476
----------- ----------
(LOSS) INCOME FROM OPERATIONS (40,425) 198,212
----------- ----------
Other income (expense)
Interest expense (22,752) (22,849)
Other; net (619) 2,443
----------- ----------
(Loss) income from continuing operations (63,796) 177,806
Income tax benefit (expense) 24,243 (68,157)
----------- ----------
Net (loss) income before discontinued operations (39,553) 109,649
Loss from discontinued operations, net of
applicable income tax (benefit) of $19,294 and
$17,608 in 1996 and 1995, respectively (31,478) (28,728)
----------- ----------
Net (loss) income $ (71,031) $ 80,921
----------- ----------
----------- ----------
Net (loss) income per share data:
(Loss) income per share from continuing operations $ (0.01) $ 0.03
(Loss) income per share from discontinuing operations (0.01) 0.01
----------- ----------
Net (loss) income per share $ (0.02) $ 0.02
----------- ----------
----------- ----------
</TABLE>
See notes to financial statements.
<PAGE>
BIOSPHERICS INCORPORATED
---------------
Balance Sheet
March 31, 1996
(unaudited)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets
Cash $ 92,563
Trade accounts receivable, net 1,954,896
Costs and estimated earnings in excess
of billings on contract 184,269
Other accounts receivable 136,003
Current deferred income taxes 114,442
Prepaid expenses and other assets 697,158
Net Assets of discontinued operations 94,253
------------
Total current assets 3,273,584
Property and equipment, net 1,646,684
Patents, net 122,140
Restricted cash-security deposit 27,408
------------
Total assets $ 5,069,816
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank line of credit 310,000
Accounts payable and accrued expenses 941,327
Accrued salaries and benefits 473,258
Accrued vacation 140,343
Deferred revenue 191,461
Note payable-current 63,296
------------
Total current liabilities 2,119,685
Deferred compensation 110,626
Deferred income taxes 148,029
Deferred rent 103,656
Note payable-long term 111,502
------------
Total liabilities 2,593,498
Redeemable common stock 169,595
Stockholders' equity
Common stock 22,939
Paid in capital in excess of par value 780,224
Treasury Stock (147,437)
Retained earnings 1,650,997
------------
Total stockholders' equity 2,306,723
------------
Total liabilities and stockholders' equity $ 5,069,816
------------
------------
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
BIOSPHERICS INCORPORATED
---------------
Statements of Cash Flows
(unaudited)
Three Months Ended March 31,
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
Net income (loss) $ (71,031) $ 80,921
Adjustments:
Gain from sale of ELSD (31,482) -
Depreciation & amortization 114,250 104,732
Loss on disposal of property & equipment 576 -
Provision for uncollectible accounts 41,024 9,000
Current deferred taxes (77,721) -
Changes in assets and liabilities:
Trade accounts receivable (361,985) 106,582
Costs and estimated earnings in excess of
billings on contracts (135,239) 74,122
Other A/R 426,703 111,744
Prepaids, other (180,840) (50,852)
Payables and accrued expenses 58,334 (70,458)
Salaries and benefits 91,057 220,522
Accrued vacation 6,570 17,774
Current taxes payable (66,010) 50,549
Deferred rent (11,085) (11,085)
Net assets of discontinued operations 180,386 -
----------- -----------
Net cash (used in) provided by operating activities (16,493) 643,551
----------- -----------
Investing activities
Proceeds from sale of ELSD, net of expenses 432,295 -
Sale of property and equipment 1,000
Purchases of property and equipment (145,120) (105,185)
Additions to patent costs (27,937) (6,926)
----------- -----------
Net cash provided by (used in) investing activities 260,238 (112,111)
----------- -----------
Financing activities
Net repayments on line of credit (11,000) (310,000)
Net change in book overdraft (162,218) -
Long term loan (15,013) -
Exercise of employee stock options 7,188 -
----------- -----------
Net cash used in financing activities (181,043) (310,000)
----------- -----------
Net change in cash 62,702 221,440
Cash, beginning of period 29,861 7,979
----------- -----------
Cash, end of period $ 92,563 $ 229,419
----------- -----------
----------- -----------
</TABLE>
See notes to financial statements.
<PAGE>
BIOSPHERICS INCORPORATED
---------------
Notes to Financial Statements
(unaudited)
1. BASIS OF PRESENTATION
The accompanying interim 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 and Form 10-KSB
for the year ended December 31, 1995.
2. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number
of common shares outstanding during the period. In accordance with FASB
Standards, because of the net loss in the first quarter of 1996, outstanding
common stock equivalents were not included in the calculation of earnings per
share. In the first quarter of 1995, outstanding common stock equivalents
consisted of stock options. Primary and fully diluted earnings per share were
not materially different in the first quarter of 1995. There were 3,935,338 and
4,323,363 shares used in the net income (loss) per share computation for the
periods ended March 31, 1996 and 1995, respectively, including 411,693 common
stock equivalents in 1995.
3. SALE OF THE ENVIRONMENTAL AND LABORATORY SERVICES DIVISION (ELSD)
On January 5, 1996, the Board of Directors of the Company approved a formal
plan to sell the net assets of ELSD because of continuing lack of profitability
and diminishing opportunity for profitable new sales. On February 29, 1996, the
Company sold substantially all ELSD net assets, totaling $432,000, to ManTech
International Corporation, except for the Cleveland branch and certain
receivables retained by the Company relating to completed contracts. The
Company also received a goodwill payment of $113,000 as part of the sale.
<PAGE>
BIOSPHERICS INCORPORATED
---------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
The Company incurred net loss of $71,031 for the first quarter of 1996,
compared with net income of $80,921 during the first quarter of 1995. Revenues
decreased 16% to $2,941,000 in the first quarter of 1996, compared to $3,508,000
in the first quarter of 1995. As reflected in the chart below, the decrease in
operating profit was primarily caused by loss in revenue from the Company's core
business, Information Services Division, as a consequence of the Federal
Government budget problems and the extreme snow conditions. Details of the loss
are fully described below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
INFORMATION SERVICES 1996 1995
- ----------------------------------- ------------ ------------
<S> <C> <C>
Revenues $ 2,938,000 $ 3,505,000
Operating expenses 2,853,000 3,182,000
------------ ------------
Operating profit $ 85,000 $ 323,000
------------ ------------
------------ ------------
BIOTECH PROGRAMS
- -----------------------------------
Revenues $ 4,000 $ 3,000
Operating expenses 129,000 128,000
------------ ------------
Operating loss $ (125,000) $ (125,000)
------------ ------------
------------ ------------
</TABLE>
Information Services revenues were $2,938,000, which reflects a decrease of
16% or $567,000, compared with revenues of $3,505,000 during the first quarter
of 1995. Operating profit decreased by 74% or $238,000 from the first quarter
of 1995. The decreases in revenues and profitability were primarily a result of
government shutdown and inclement weather in January, and reallocation of
general and administrative expenses from the sale of the Environmental and
Laboratory Services Division (ELSD). The decrease was offset by additional
revenues generated from McNeil and Parke-Davis of $94,000 and $64,000,
respectively.
BioTech operating expenses remained constant compared to the same period in
1995. The expenses incurred during the first quarter of 1996 were primarily
related to efforts in the start up of the pilot plant to produce D-tagatose.
The pilot plant was designed in cooperation with MD Foods to produce samples of
sugar for evaluation by food manufacturers and to obtain data that will allow
design of the first commercial plant. Management believes that significant
progress continues in improving the economies of its manufacturing process;
however, process scale-up has been slower than anticipated with market entry
production still months away. If the manufacturing process can be implemented,
the commercialization of D-tagatose could have a substantial impact on future
results of operations.
The Company continues to petition for approval of its safe-for-humans
pesticide, WingDingerTM, by the U.S. Environmental Protection Agency (EPA). The
EPA found the pesticide to be nontoxic in late 1995; however, in a subsequent
event, the EPA questioned aspects of efficacy. The Company has appealed this
finding. EPA approval must be obtained before the product can be marketed. In
another subsequent event, the EPA delisted the active ingredient of another
Company pesticide from its list of toxic compounds. State acceptances of the
EPA delisting are being sought, as are marketing partners.
SG&A has been fully allocated to each segment's operating results discussed
above. As reflected in the accompanying Statement of Operations, SG&A increased
$44,000 from $573,000 in the first quarter of 1995 to $617,000 in the first
quarter of 1996. This increased cost is primarily a result of the formation of
a Management and Information Services group along with related fringe benefits,
in addition to higher rent and other facility expenses allocated to SG&A from
the sale of ELSD.
<PAGE>
BIOSPHERICS INCORPORATED
---------------
LIQUIDITY AND CAPITAL RESOURCES
On January 5, 1996, the Board of Directors of the Company approved a formal
plan to sell the net assets of ELSD because of continuing lack of profitability
and diminishing opportunity for profitable new sales. On February 29, 1996, the
Company completed the agreement with ManTech International Corporation (ManTech)
to sell substantially all assets of ELSD, except for the Cleveland branch and
certain receivables retained by the Company relating to completed contracts.
The Company plans to sell its Cleveland branch to ManTech International
Corporation or close the office by May 31, 1996.
On April 25, 1996, the Company entered into a $150,000 Promissory Note
that will mature in three years. The Promissory Note will provide financing
for start-up equipment costs related to new contract wins. The Promissory Note
is collateralized by new equipment purchased and will accrue interest at the
rate of 8.75% per annum. The Company is required to make monthly payments of
interest and principal.
Cash flows from operating activities for the first quarter of 1996 reflect
a net use of $16,000. This results primarily from increases in accounts
receivable, offset by cash settlement received by the Company in connection with
the disputed contract with the Forest Service. The Forest Service settlement by
the U.S. Department of Agriculture was in acknowledgment of the Company's claims
of Government responsibility in the loss the Company suffered in that contract
in 1994. Net cash used in investing activities increased by $260,000, and is
due to proceeds received from the sale of ELSD of $432,000, offset by purchases
of property and equipment and additions to patent costs, all totaling $172,000.
<PAGE>
BIOSPHERICS INCORPORATED
---------------
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
REPORTS ON FORM 8-K
On March 19, 1996, the Company filed a report on Form 8-K that disclosed
certain information regarding the sale of the Environmental and Laboratory
Services Division (ELSD). As more fully described in that Form 8-K, the sale to
ManTech was completed on February 29, 1996, and all net transferred except for
the Cleveland branch and certain receivables retained by the Company relating to
completed contracts.
<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: 5/15/96 By: /s/ Richard Levin
---------------------------------- -------------------------------
Richard C. Levin
Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 92,563
<SECURITIES> 0
<RECEIVABLES> 2,036,799
<ALLOWANCES> 81,902
<INVENTORY> 0
<CURRENT-ASSETS> 3,273,584
<PP&E> 4,525,358
<DEPRECIATION> 2,878,674
<TOTAL-ASSETS> 5,069,816
<CURRENT-LIABILITIES> 2,119,685
<BONDS> 0
0
0
<COMMON> 22,939
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,069,816
<SALES> 2,937,621
<TOTAL-REVENUES> 2,941,429
<CGS> 2,141,514
<TOTAL-COSTS> 2,981,854
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,752
<INCOME-PRETAX> (63,796)
<INCOME-TAX> 24,243
<INCOME-CONTINUING> (39,553)
<DISCONTINUED> (31,478)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (71,031)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
