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 September 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 September 30, 1995, 36,944,118 shares of Biocontrol Technology, Inc.
common stock, par value $.10 were outstanding.
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PART I FINANCIAL STATEMENTS
Item 1. Financial Statements
BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
Sep. 30, 1995 Dec. 31, 1994
(Unaudited) (Note)
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 7,211,764 $ 3,315,846
Accounts receivable 235,222 32,721
Notes receivable 1,105,450 0
Interest receivable 27,661 0
Inventory 667,046 181,144
Prepaid expenses 63,961 187,460
TOTAL CURRENT ASSETS 9,311,104 3,717,171
PROPERTY, PLANT AND EQUIPMENT
Building 234,863 233,818
Leasehold improvements 1,046,728 597,243
Furniture, fixtures and equipment 607,678 524,598
Machinery and equipment 3,160,316 2,695,888
Subtotal 5,049,585 4,051,547
Less accumulated depreciation 1,953,812 1,631,586
3,095,773 2,419,961
OTHER ASSETS
Notes receivable - related parties 95,900 95,900
Interest receivable 39,745 32,445
Patents, net of amortization 16,512 19,761
Other assets 11,068 90,540
163,225 238,646
TOTAL ASSETS $ 12,570,102 $ 6,375,778
Note: The Balance Sheet at December 31, 1994 has been derived
from audited financial statements at that date.
See notes to consolidated financial statements.
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BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
Sep. 30, 1995 Dec. 31, 1994
(Unaudited) (Note)
<CAPTION>
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 371,528 $ 643,364
Current portion of long-term debt 43,814 14,412
Accrued liabilities 87,156 120,511
Partial billings on contract 326,000 326,000
TOTAL CURRENT LIABILITIES 828,498 1,104,287
LONG-TERM LIABILITIES
Accrued liabilities 113,521 109,833
Long-term debt 52,940 53,368
166,461 163,201
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
Sep. 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 36,944,118 at Sep. 30, 1995 and
29,311,079 at Dec. 31, 1994 3,694,412 2,931,108
Additional paid-in capital 61,037,126 38,922,294
Warrants 6,716,305 0
Accumulated deficit (59,927,600) (36,800,012)
TOTAL STOCKHOLDERS' EQUITY 11,575,143 5,108,290
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 12,570,102 $ 6,375,778
Note: The Balance Sheet at December 31, 1994 has been derived from audited
financial statements at that date.
See notes to consolidated financial statements.
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BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the nine months ended For the three months ended
Sep. 30, Sep. 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues
Sales $ 445,043 $ 177,259 $ 220,692 $ 103,166
Interest income 255,315 229,253 130,803 91,814
Other income 8,067 15,626 4,317 4,180
708,425 422,138 355,812 199,160
Costs and expenses
Cost of products sold 190,851 98,668 61,221 59,678
Research and development 4,964,869 3,507,323 1,797,473 1,552,146
General and administrative 7,271,201 5,254,756 2,567,211 1,791,804
Warrant extensions 7,595,655 0 0 0
Warrant extensions-Subsidiary 4,650,000 0 0 0
Interest expense 13,470 5,112 3,332 1,179
24,686,046 8,865,859 4,429,237 3,404,807
Loss before unrelated investors' interest (23,977,621) (8,443,721) (4,073,425) (3,205,647)
Unrelated investors' interest in net loss of
subsidiary 850,033 616,900 81,636 141,100
Net loss ($23,127,588) ($7,826,821) ($3,991,789) ($3,064,547)
Loss per common share ($0.68) ($0.30) ($0.12) ($0.12)
See notes to consolidated financial statements.
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BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the nine months ended For the three months ended
Sep. 30, Sep. 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Cash flows used by operating activities:
Net loss ($23,127,588) ($7,826,821) ($3,991,789) ($3,064,547)
Adjustments to reconcile net loss to net
cash used by operating activities :
Depreciation and amortization 322,226 114,996 119,326 38,656
Unrelated investors' interest in subsidiary (850,033) (616,900) (81,636) (141,100)
Stock issued in exchange for services 73,623 367,001 0 0
Stock issued in exchange for services by subsidiary 61,250 25,200 14,000 0
Warrant extensions 7,595,655 0 0 0
Warrant extensions by subsidiary 4,650,000 0 0 0
(Increase) decrease in accounts receivable (202,501) 96,707 (115,011) 55,107
(Increase) decrease in inventories (485,902) (2,019) (517,746) 78,470
(Increase) decrease in prepaid expenses 123,499 (2,715) 8,949 32,572
(Increase) decrease in other assets 82,721 9,532 71,408 (19,624)
(Decrease) increase in accounts payable (271,836) (30,803) 113,645 (5,807)
(Decrease) increase in other liabilities (29,667) 34,608 (27,355) 28,367
(Decrease) increase in partial billings on contract 0 24,500 0 (102,000)
Net cash flow used by operating activities (12,058,553) (7,806,714) (4,406,209) (3,099,906)
Cash flows from investing activities:
Purchase of property, plant and equipment (998,038) (1,138,142) (385,992) (709,951)
(Increase) decrease in notes receivable (1,105,450) 45,000 (577,500) 0
(Increase) in interest receivable (34,961) (90,889) (19,839) (96,220)
Net cash used by investing activities (2,138,449) (1,184,031) (983,331) (806,171)
Cash flows from financing activities:
Proceeds from sale by subsidiaries of
its common stock 1,636,232 1,044,897 156,969 216,253
Proceeds from stock offering 16,220,789 12,550,748 (150,000) 149,998
Proceeds from warrants exercised 200,725 241,450 44,550 6,950
Proceeds from warrants exercised-subsidiary 6,200 35,000 3,300 35,000
Net increase (decrease) in term-debt 28,974 8,283 47,705 (2,122)
Net (decrease) under capital lease obligation 0 (2,661) 0 (995)
Net cash provided by financing activities 18,092,920 13,877,717 102,524 405,084
Net increase (decrease) in cash and equivalents 3,895,918 4,886,972 (5,287,016) (3,500,993)
Cash and equivalents, beginning of period 3,315,846 1,540,960 12,498,780 9,928,925
Cash and equivalents, end of period $7,211,764 $6,427,932 $7,211,764 $6,427,932
See notes to consolidated financial statements.
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BIOCONTROL TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - Basis of Presentation
The accompanying consolidated financial statements of Biocontrol
Technology, Inc. (the "Company") and its 89.9% owned subsidiary, Coraflex,
Inc., and its 53% owned subsidiary, Diasense, Inc., and its 67% owned
subsidiary, Petrol Rem, Inc., and its 99.1% owned subsidiary, IDT, Inc., and
its wholly owned subsidiaries Barnacle Ban Inc. 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 - Common Stock
During the three months ended September 30, 1995, warrants were
exercised to purchase 135,000 shares of common stock. (See "Management's
Discussion and Analysis").
NOTE C - 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 September 30, 1995, and
September 30, 1994, were 34,178,335 and 26,266,142, respectively.
<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 $7,211,764 at
September 30, 1995. This increase was primarily attributable to the Company's
sale of registered stock. During the third quarter the Company had $4,406,209
of net operating expenditures primarily relating to the research and
development of the non invasive glucose sensor (Sensor), Sensor related General
and Administrative expenses and increased inventory of materials for production
of the Sensor. The Company also had net cash used by investing activities of
$983,331 which includes equipment associated with the Company's research and
development activities and leasehold improvements in the Sensor production
facility.
During the three months ended September 30, 1995, warrants to purchase
135,000 shares of common stock were exercised aggregating $44,550. 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 third quarter increased from $103,166 in 1994 to $220,692
in 1995 and from $177,259 for the nine month period ended September 30, 1994 to
$445,043 for the nine month period ended September 30, 1995. The increase was
due to sales of its Functional Electrical Stimulators and of its bioremediation
products from the Company's subsidiary, Petrol Rem, Inc.
Interest income increased during the third quarter from $91,814 in 1994 to
$130,803 in 1995 and from $229,253 for the nine month period ended September
30, 1994 to $255,315 for the nine month period ended September 30, 1995. The
increase was due to the Company's increased investments as the result of
proceeds received from the sales of stock.
<PAGE>
Results of Operations (continued)
Costs of Products Sold increased during the third quarter from $59,678 in
1994 to $61,221 in 1995 and from $98,668 for the nine month period ended
September 30, 1994 to $190,851 for the nine month period ended September 30,
1995. The increase was due to sales of its Functional Electrical Stimulators
and of its bioremediation products from the Company's subsidiary,
Petrol Rem, Inc.
Research and Development expenses increased during the third quarter from
$1,552,146 in 1994 to $1,797,473 in 1995 and increased from $3,507,323 for the
nine month period ended September 30, 1994 to 4,964,869 for the nine month
period ended September 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.
General and Administrative expenses increased during the third quarter
from $1,791,804 in 1994 to $2,567,211 in 1995 and from $5,254,756 for the nine
month period ended September 30, 1994 to $7,271,201 for the nine month period
ended September 30, 1995. The increase is attributable to the Company's
increase in payroll expenses as a result of the recruitment and hiring of new
employees, primarily for the purpose of manufacturing and promoting the glucose
sensor.
Interest expense increased during the third quarter from $1,179 in 1994
to $3,332 in 1995 and from $5,112 for the nine month period ended September 30,
1994 to $13,470 for the nine month period ended September 30, 1995. The
increase is the result of the Company's financing various equipment for
administrative, research and development and manufacturing purposes.
Subsequent event
In October 1995, the Company announced it received a $32.5 million
contract from IMACO Gesellschaft fur Non Invasiver Systeme, Gmbh for
distribution of the Diasensor 1000 in Germany.
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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 July 27, 1995, with respect to
Item 5 other events and Item 7 (c), Exhibit.
(2) A report on form 8-K dated September 14, 1995, with respect
to Item 5 other events.
(3) A report on form 8-K dated October 10, 1995, with respect to
Item 5 other events and Item 7 (c), Exhibit.
(4) A report on form 8-K dated October 26, 1995, with respect to
Item 5 other events and Item 7 (c), Exhibit.
(5) A report on form 8-K dated November 1, 1995, with respect to
Item 5 other events and Item 7 (c), Exhibit.
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 10th day of November, 1995.
BIOCONTROL TECHNOLOGY, INC.
By /s/ Fred E. Cooper
Fred E. Cooper
CEO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 7,211,764
<SECURITIES> 0
<RECEIVABLES> 1,340,672
<ALLOWANCES> 0
<INVENTORY> 667,046
<CURRENT-ASSETS> 9,311,104
<PP&E> 5,049,585
<DEPRECIATION> 1,953,812
<TOTAL-ASSETS> 12,570,102
<CURRENT-LIABILITIES> 828,498
<BONDS> 0
<COMMON> 3,694,412
0
54,900
<OTHER-SE> 61,037,126
<TOTAL-LIABILITY-AND-EQUITY> 11,575,143
<SALES> 445,043
<TOTAL-REVENUES> 708,425
<CGS> 190,851
<TOTAL-COSTS> 190,851
<OTHER-EXPENSES> 24,495,195
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,470
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,127,588)
<EPS-PRIMARY> (.68)
<EPS-DILUTED> 0
</TABLE>
