CONFORMED
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995
Commission file number 0-10822
BIOCONTROL TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1229323
(State of other jurisdiction (IRS Employer
of incorporation or organization) Identification no.)
300 Indian Springs Road, Indiana, Pennsylvania 15701
(Address of principal executive offices) ( Zip Code)
(412) 349-1811
Registrant's telephone number, including area code
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
As of June 30, 1995, 36,809,118 shares of Biocontrol Technology, Inc.
common stock, par value $.10 were outstanding.
<PAGE>
<TABLE>
PART I FINANCIAL STATEMENTS
Item 1. Financial Statements
BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, 1995 Dec. 31, 1994
(Unaudited) (Note)
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 12,498,780 $ 3,315,846
Accounts receivable 120,211 32,721
Notes receivable 527,950 0
Interest receivable 10,282 0
Inventory 149,300 181,144
Prepaid expenses 72,910 187,460
TOTAL CURRENT ASSETS 13,379,433 3,717,171
PROPERTY, PLANT AND EQUIPMENT
Building 234,863 233,818
Leasehold improvements 853,507 597,243
Furniture, fixtures and equipment 546,418 524,598
Machinery and equipment 3,028,805 2,695,888
Subtotal 4,663,593 4,051,547
Less accumulated depreciation 1,834,486 1,631,586
2,829,107 2,419,961
OTHER ASSETS
Notes receivable - related parties 95,900 95,900
Interest receivable 37,285 32,445
Patents, net of amortization 17,595 19,761
Other assets 81,393 90,540
232,173 238,646
TOTAL ASSETS $ 16,440,713 $ 6,375,778
Note: The Balance Sheet at December 31, 1994 has been derived from
audited financial statements at that date.
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
<CAPTION>
June 30, 1993 Dec. 31, 1994
(Unaudited) (Note)
<S> <C> <C>
Current Liabilites
Accounts payable $ 257,883 $ 643,364
Current portion of long-term debt 3,222 14,412
Accrued liabilities 115,740 120,511
Deferred revenue on contract billings 326,000 326,000
TOTAL CURRENT LIABILITIES 702,845 1,104,287
LONG-TERM LIABILITIES
Accrued liabilities 112,292 109,833
Long-term debt 45,827 53,368
158,119 163,201
STOCKHOLDERS' EQUITY
Series 1 convertible preferred stock,
par value $10 per share, authorized
500,000 shares issuable in series -
shares issued and outstanding 5,490 at
Jun. 30, 1995 and at Dec. 31, 1994 54,900 54,900
Common stock, par value $.10 per share,
authorized 40,000,000 shares, issued and
outstanding 36,809,118 at Jun. 30, 1995 and
29,311,079 at Dec. 31, 1994 3,680,912 2,931,108
Additional paid-in capital 61,063,443 38,922,294
Warrants 6,716,305 0
Accumulated deficit (55,935,811) (36,800,012)
TOTAL STOCKHOLDERS' EQUITY 15,579,749 5,108,290
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 16,440,713 $ 6,375,778
Note: The Balance Sheet at December 31, 1994 has been
derived from audited financial statements at that date.
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the six months ended For the three months ended
Jun. 30, Jun. 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues
Sales $224,351 $74,093 $114,367 $20,093
Interest income 124,512 137,439 95,548 113,079
Other income 3,750 11,446 0 (600)
352,613 222,978 209,915 132,572
Costs and expenses
Cost of products sold 129,630 38,990 78,438 11,259
Research and development 3,167,396 1,955,177 1,712,923 956,292
Selling, general and administrative 4,703,990 3,462,952 2,462,787 2,268,579
Warrant extensions 7,595,655 0 7,595,655 0
Warrant extensions - Subsidiary 4,650,000 0 4,650,000 0
Interest expense 10,138 3,933 3,736 2,386
20,256,809 5,461,052 16,503,539 3,238,516
Loss before unrelated investors' interest (19,904,196) (5,238,074) (16,293,624) (3,105,944)
Unrelated investors' interest in net loss
of subsidiary 768,397 475,800 720,941 262,633
Net loss ($19,135,799) ($4,762,274) ($15,572,683) (2,843,311)
Loss per common share ($0.58) ($0.19) ($0.47) ($0.11)
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the six months For the three months
ended ended
Jun. 30, Jun. 30,
1993 1995 1994 1995
<S> <C> <C> <C> <C>
Cash flows used by operating activities:
Net loss ($19,135,799) ($4,762,274) ($15,572,682) ($2,843,311)
Adjustments to reconcile net loss to net
cash used by operating activities :
Depreciation and amortization 202,900 76,340 98,059 38,029
Unrelated investors' interest in subsidiary (768,397) (475,800) (720,941) (262,633)
Stock issued in exchange for services 73,623 367,001 41,900 131,999
Stock issued in exchange for services by subsidiary 47,250 25,200 21,000 25,200
Warrant extensions 7,595,655 0 7,595,655 0
Warrant extensions exercised (879,350) 0 (879,350) 0
Warrant extensions by subsidiary 4,650,000 0 4,650,000 0
Warrant extensions exercised 879,350 0 879,350 0
Increase (decrease) in accounts receivable (87,490) 41,600 18,919 (13,792)
(Increase) decrease in inventories 31,844 (80,489) (2,982) (50,771)
(Increase) decrease in prepaid expenses 114,550 (35,287) 56,864 (57,124)
(Increase) decrease in other assets (10,282) 29,156 (7,619) 1,578
(Decrease) increase in accounts payable (385,481) (26,662) (231,406) 131,121
(Decrease) increase in other liabilities (2,312) 6,241 1,837 (28,052)
Increase in deferred revenue on contract billing 0 126,500 27,750 36,000
Net cash flow used by operating activities (7,673,939) (4,708,474) (4,023,646) (2,891,756)
Cash flows from investing activities:
Purchase of property, plant and equipment (612,046) (428,191) (385,754) (348,352)
Decrease (increase) in notes receivable (527,950) 45,000 (327,950) 0
Decrease in other assets 6,473 5,331 5,528 47,173
Net cash provided (used) by investing (1,133,523) (377,860) (708,176) (301,179)
Cash flows from financing activities:
Proceeds from sale by subsidiaries of
its common stock 1,479,263 828,644 1,297,853 444,554
Proceeds from stock offering 16,370,789 12,400,750 12,856,619 1,884,927
Proceeds from warrants exercised 156,175 234,500 74,375 115,200
Proceeds from warrants exercised-subsidiary 2,900 0 2,500 0
Net (decrease) increase in notes payable (18,731) 10,405 (34,535) (23,683)
Net cash provided by financing activities 17,990,396 13,474,299 14,196,812 2,420,998
Increase (decrease) in cash and equivalents 9,182,934 8,387,965 9,464,990 (771,937)
Cash and equivalents, beginning of period 3,315,846 1,540,960 3,033,790 10,700,862
Cash and equivalents, end of period $12,498,780 $9,928,925 $12,498,780 $9,928,925
<FN>
See notes to consolidated financial statements.
</TABLE>
<PAGE>
BIOCONTROL TECHNOLOGY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - Basis of Presentation
The accompanying consolidated financial statements of
Biocontrol Technology, Inc. (the "Company") and its 88.97%
owned subsidiary, Coraflex, Inc., and its 51% owned
subsidiary, Diasense, Inc., and its 67% owned subsidiary,
Petrol Rem, Inc., and its 99.1% owned subsidiary, IDT, Inc.,
and its wholly owned subsidiary, Barnacle Ban Inc.,
(Barnacle Ban) have been prepared in accordance with
generally accepted accounting principles for interim
financial information, and with the instructions to Form 10-
Q and Rule 10-O Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been
included. For further information, refer to the
consolidated financial statements and footnotes included in
the Company's annual report on Form 10-K for the year ended
December 31, 1994.
NOTE B - Net Loss Per Common Share
Net loss per common share is based on the average
number of outstanding common shares. The loss per share
does not include common stock equivalents since the effect
would be anti-dilutive. The weighted average shares used to
calculate the loss per share for the period ending June 30,
1995, and June 30, 1994, were 32,814,456 and 25,194,270,
respectively.
NOTE C - Stockholders Equity
During the three months ended June 30, 1995, the
Company issued 4,449,854 shares of its registered common
stock pursuant to its form S-1 registration statement. In
addition, warrants were exercised to purchase 185,000 shares
of common stock. (See "Management's Discussion and
Analysis").
During the three months ended June 30, 1995, the
Company extended the exercise date of warrants to purchase
1,969,500 shares of common stock to certain officers,
directors, employees and consultants. Of the 1,969,500
warrant shares, 1,649,500 and 320,000 warrant shares were
originally granted at an exercise price of $.25 and $.33,
respectively; and extended at their original price. The
fair market value of the stock when the extensions were
granted for 549,500 warrant shares at $4.34, for 1,100,000
warrants
<PAGE>
NOTE C - Stockholders Equity -continued
shares at $4.09 and for 320,000 warrant shares at $3.84.
The Company recorded a $7,595,655 expense for the difference
between the fair market values and the warrant's exercise
prices.
On May 8, 1995, the Company's Board of Directors
unanimously consented to accept from Diasense, Inc.,
3,000,000 shares of unregistered common stock of which the
Company's and Diasense Inc.'s Boards have assigned a value
of $3.50 per share for partial payment of the debt owed by
Diasense to the Company.
NOTE D - Stockholders Equity - Subsidiary
During the period ending June 30, 1995, the Company's
subsidiary, Diasense Inc., extended the exercise date of
warrants to purchase 1,550, 000 shares of common stock to
certain officers, directors, employees and consultants. The
warrants were originally granted at an exercise price of
$.50 per share and extended at the same price. The fair
market value of the stock when the extensions were granted
was $3.50. Diasense Inc. recorded a $4,650,000 expense for
the difference between the fair market value and the warrant
price.
NOTE E - Subsequent Events
On July 12, 1995, the Company purchased 1,200,000
shares of Diasense's unregistered common stock at an
assigned price of $3.50 per share.
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Cash Flows
Liquidity and Capital Resources
Cash increased from $3,315,846 at December 31, 1994, to
$12,498,780 at June 30, 1995. This increase was attributable
to the Company's sale of registered stock to various
investors. During the second quarter the Company had
$2,264,946 net operating expenditures which primarily
related to the research and development of the non invasive
glucose sensor, and sensor related general and
administrative expenses. The Company also had net cash used
by investing activities of $708,176, which included
equipment associated with developmental activities and
leasehold improvements on the manufacturing plant.
The Company continued to fund operations solely from
sales of its common stock. During the second quarter, the
Company issued a total of 4,449,854 shares of its registered
common stock during the three months ended June 30, 1995,
aggregating $12,856,619 after commissions and fees.
Proceeds from the sales were used to continue to fund the
Company's research and development projects, to fund
leasehold improvements on the manufacturing plant and to
provide working capital for the Company.
During the three months ended June 30, 1995, warrants
to purchase 185,000 shares of common stock were exercised
aggregating $74,375. Proceeds from the exercised warrants
were used to continue to fund the Company's research and
development projects and to provide working capital for the
Company.
Results of Operations
Sales during the second quarter increased from $20,093
in 1994 to $114,367 in 1995 and from $74,093 for the six
month period ended June 30, 1994 to $224,351 for the six
month period ended June 30, 1995. The increase was primary
due to the sales of its Functional Electrical Stimulators
and foreign paint sales from the Company's subsidiary,
Barnacle Ban.
Interest income decreased during the second quarter
from $113,079 in 1994 to $95,548 in 1995 and from $137,439
for the six month period ended June 30, 1994 to $124,512 for
the six month period ended June 30, 1995. The decrease was
due to the Company's average amounts invested being lower
when compared to the 1994 periods.
Costs of Products Sold increased during the second
quarter from $11,259 in 1994 to $78,438 in 1995 and from
$38,990 for the six month period ended June 30, 1994 to
$129,630 for the six month period ended June 30, 1995. The
increase was primarily due to the Company's sales of the
<PAGE>
Results of Operations - continued
Functional Electrical Stimulators and paint from the
Company's subsidiary, Barnacle Ban.
Research and Development expenses increased during the
second quarter from $956,292 in 1994 to $1,712,923 in 1995
and from $1,955,177 for the six month period ended June 30,
1994 to $3,167,396 for the six month period ended June 30,
1995. The increase was due to the Company's increased level
of activities associated with the research and development
of the non invasive glucose sensor and other projects.
Selling, General and Administrative expenses increased
during the second quarter from $2,268,579 in 1994 to
$2,462,787 in 1995 and from $3,462,952 for the six month
period ended June 30, 1994 to $4,703,990 for the six month
period ended June 30, 1995. The increase was due to the
Company's increase in payroll expenses as a result of the
recruitment and hiring of new employees, primarily for the
purpose of developing and promoting the glucose sensor.
Interest expense increased during the second quarter
from $2,386 in 1994 to $3,736 in 1995 and from $3,933 for
the six month period ended June 30, 1994 to $10,138 for the
six month period ended June 30, 1995. The increase is the
result of the Company's financing of various equipment for
administrative and research and development purposes.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits
(B) Reports on Form 8-K
(1) A report on form 8-K dated April 7, 1995,
with respect to Item 5 other events and Item
7 (c), Exhibit.
(2) A report on form 8-K dated April 25, 1995,
with respect to Item 5 other events and Item
7 (c), Exhibit.
(3) A report on form 8-K dated May 4, 1995, with
respect to Item 5 other events and Item 7
(c), Exhibit.
(4) A report on form 8-K dated June 22, 1995,
with respect to Item 5 other events and Item
7 (c), Exhibit.
(5) A report on form 8-K dated June 30, 1995,
with respect to Item 5 other events and Item
7 (c), Exhibit.
(6) A report on form 8-K dated July 27, 1995,
with respect to Item 5 other events and Item
7 (c), Exhibit.
<PAGE>
SIGNATURES
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 on this 14th day of August, 1995.
BIOCONTROL TECHNOLOGY, INC.
By /s/ Fred E. Cooper
Fred E. Cooper
CEO and Director
(principal financial officer and principal
accounting officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 12,498,780
<SECURITIES> 0
<RECEIVABLES> 120,211
<ALLOWANCES> 0
<INVENTORY> 149,00
<CURRENT-ASSETS> 13,379,433
<PP&E> 4,663,593
<DEPRECIATION> 1,834,486
<TOTAL-ASSETS> 16,440,713
<CURRENT-LIABILITIES> 702,845
<BONDS> 0
<COMMON> 3,680,912
0
54,900
<OTHER-SE> 67,779,748
<TOTAL-LIABILITY-AND-EQUITY> 16,440,713
<SALES> 224,351
<TOTAL-REVENUES> 352,613
<CGS> 129,630
<TOTAL-COSTS> 129,630
<OTHER-EXPENSES> 20,127,179
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,138
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (19,135,799)
<EPS-PRIMARY> (.58)
<EPS-DILUTED> 0
</TABLE>
