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, 1996
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, 1996, 42,960,618 shares of Biocontrol
Technology, Inc. common stock, par value $.10 were outstanding.
<PAGE>
PART I FINANCIAL STATEMENTS
Item 1. Financial Statements
<TABLE>
Biocontrol Technology, Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
Jun. 30, 1996 Dec. 31, 1995
------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 3,206,582 $ 3,204,501
Accounts receivable 362,071 202,526
Subscription receivable 274,625 -
Notes receivable-related parties 250,000 250,000
Notes receivable-net of allowance for loan losses 12,000 12,000
Inventory - net of valuation allowance 2,776,732 1,660,139
Prepaid expenses 198,835 148,526
------------- -------------
TOTAL CURRENT ASSETS 7,080,845 5,477,692
PROPERTY, PLANT AND EQUIPMENT
Building 236,663 234,863
Leasehold improvements 1,128,458 1,092,311
Furniture, fixtures & equipment 675,257 633,237
Machinery and equipment 3,960,636 3,558,964
------------- -------------
Subtotal 6,001,014 5,519,375
Less accumulated depreciation 2,281,721 2,087,032
------------- -------------
3,719,293 3,432,343
OTHER ASSETS
Notes receivable-related parties 95,900 95,900
Interest receivable-related parties 47,652 42,237
Patents, net of amortization 13,263 15,429
Other assets 13,513 11,068
------------- -------------
170,328 164,634
------------- -------------
TOTAL ASSETS $ 10,970,466 $ 9,074,669
============= =============
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
Biocontrol Technology, Inc. and Subsidiaries
Consolidated Balance Sheets
(CONTINUED)
<CAPTION>
Jun. 30, 1996 Dec. 31, 1995
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 556,590 $ 1,838,408
Current portion oflong-term debt 31,833 28,404
Accrued liabilities 76,596 96,634
Deferred revenue on contract billings 326,000 326,000
------------ ------------
TOTAL CURRENT LIABILITIES 991,019 2,289,446
LONG-TERM LIABILITIES
Accrued liabilities 133,250 114,750
Long-term debt 58,550 60,580
------------ ------------
191,800 175,330
UNRELATED INVESTORS'INTEREST
IN SUBSIDIARY 2,223,466 2,562,543
STOCKHOLDERS'EQUITY
Series 1 convertible preferred stock,
par value $10 per share, authorized
500,000 shares issuable in series-
shares issued and outstanding 3,790
at Jun. 30, 1996 and 3,790 at Dec. 31, 1995 37,900 37,900
Common stock, par value $.10 per share,
authorized 60,000,000 shares, issued and
outstanding 42,960,618 at Jun. 30, 1996 and
37,021,118 at Dec. 31, 1995 4,296,062 3,702,112
Additional paid-in capital 74,417,481 59,849,875
Warrants 6,677,820 6,677,820
Accumulated deficit (77,865,082) (66,220,357)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 7,564,181 4,047,350
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 10,970,466 $ 9,074,669
============ ============
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the six months ended For the three months ended
Jun. 30, Jun. 30,
1996 1995 1996 1995
------------ ------------- ------------ ------------
<C> <C> <C> <C> <C>
Revenues
Sales $222,388 $224,351 $196,788 $114,367
Interest Income 92,257 124,512 40,015 95,548
Other income 2,657 3,750 2,657 -
------------ ------------- ------------ ------------
317,302 352,613 239,460 209,915
Costs and Expenses
Cost of products sold 93,750 129,630 80,062 78,438
Research and development 4,740,303 3,167,396 3,319,785 1,712,923
Selling, general and administrative 3,787,716 4,703,990 973,651 2,462,787
Warrant extensions - 7,595,655 - 7,595,655
Warrant extensions-Subsidiary 6,915,000 4,650,000 3,456,000 4,650,000
Interest Expense 10,824 10,138 6,134 3,736
15,547,593 20,256,809 7,835,632 16,503,539
------------ ------------- ------------ ------------
Loss before unrelated
investors' interest (15,230,291) (19,904,196) (7,596,172) (16,293,624)
------------ ------------- ------------ ------------
Unrelated investors' interest in net
loss of subsidiary 3,583,135 768,397 1,817,410 720,941
------------ ------------- ------------ ------------
Net loss ($11,647,156) ($19,135,799) ($5,778,762) ($15,572,683)
============= ============= ============ =============
Loss per common share ($0.29) ($0.58) ($0.14) ($0.47)
============= ============= ============ ============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BIOCONTROL TECHNOLOGY, INC.AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the six months ended For the three months ended
Jun. 30, Jun. 30,
1996 1995 1996 1995
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Cash flows used by operating activities:
Net loss ($11,647,156) ($19,135,799) ($5,778,762) ($15,572,682)
Adjustments to reconcile net loss to net
cash used by operating activities :
Depreciation and amortization 300,623 202,900 153,486 98,059
Unrelated investors' interest in subsidiary (3,583,135) (768,397) (1,817,410) (720,941)
Stock issued in exchange for services 17,200 73,623 17,200 41,900
Stock issued in exchange for services by subsidiary 7,000 47,250 - 21,000
Warrant extensions - 7,595,655 - 7,595,655
Warrant extensions by subsidiary 6,915,000 4,650,000 3,456,000 4,650,000
(Increase) decrease in receivables (434,170) (87,490) (425,700) 18,919
(Increase) decrease in inventories (1,116,593) 31,844 (207,800) (2,982)
(Increase) decrease in prepaid expenses (50,309) 114,550 (36,806) 56,864
(Increase) decrease in other assets - (10,282) 2,279 (7,619)
(Decrease) in accounts payable (1,281,818) (385,481) (39,310) (231,406)
(Decrease) in other liabilities (1,538) (2,312) (6,665) 1,837
Increase in deferred revenue on contract billing - - - 27,750
------------ ------------ ----------- ------------
Net cash flow used by operating activities (10,874,896) (7,673,939) (4,683,488) (4,023,646)
------------ ------------ ----------- ------------
Cash flows from investing activities:
Purchase of property, plant and equipment (587,573) (612,046) (488,978) (385,754)
(Increase) in notes receivable - (527,950) - (327,950)
(Increase) decrease in other assets (5,694) 6,473 (2,254) 5,528
------------ ------------ ----------- ------------
Net cash provided (used) by investing activities (593,267) (1,133,523) (491,232) (708,176)
------------ ------------ ----------- ------------
Cash flows from financing activities:
Net proceeds from sale by subsidiaries of
its common stock (97,427) 1,479,263 (257,499) 1,297,853
Proceeds from stock offering 11,533,672 16,370,789 4,401,975 12,856,619
Proceeds from warrants exercised 30,600 156,175 30,600 74,375
Proceeds from warrants exercised-subsidiary 2,000 2,900 2,000 2,500
Net (decrease) increase in notes payable 1,399 (18,731) 4,641 (34,535)
------------ ------------ ----------- ------------
Net cash provided by financing activities 11,470,244 17,990,396 4,181,717 14,196,812
Increase (decrease) in cash and equivalents 2,081 9,182,934 (993,003) 9,464,990
Cash and equivalents, beginning of period 3,204,501 3,315,846 4,199,585 3,033,790
------------ ------------ ----------- ------------
Cash and equivalents, end of period $ 3,206,582 $12,498,780 $ 3,206,582 $12,498,780
============ ============ =========== ===========
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 52% 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., 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, 1995.
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, 1996, and June 30, 1995, were 40,044,567 and 32,814,456,
respectively.
NOTE C - Stockholders Equity
- ----------------------------
During the three months ended June 30, 1996, the Company sold
3,100,000 shares of its common stock. In addition, warrants were
exercised to purchase 120,000 shares of common stock and 10,000 shares
were granted for services rendered. (See "Management's Discussion and
Analysis").
NOTE D - Stockholders Equity Subsidiary
- ---------------------------------------
During the period ending June 30, 1996, the Company's subsidiary,
Diasense Inc., extended the exercise date of warrants to purchase
1,152,000 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 $3,456,000 expense for the
difference between the fair market value and the warrant price times the
number of shares.
<PAGE>
Management's Discussion and Analysis of Financial Condition and Cash Flows
- --------------------------------------------------------------------------
Liquidity and Capital Resources
- -------------------------------
Cash increased from $3,204,501 at December 31, 1995, to $3,206,582
at June 30, 1996. This increase was attributable to the Company's
sale of registered stock to various investors. During the second
quarter the Company had $4,683,488 net cash flow used by operating
activities 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 $491,232, which included equipment
associated with development and manufacturing of the noninvasive glucose
sensor.
The Company continued to fund operations solely from sales of its
common stock. During the second quarter, the Company issued a total
of 3,100,000 shares of its common stock aggregating $4,401,975 after
commissions and fees. Proceeds from the sales were used to continue
to fund the Company's research and development projects and to
provide working capital for the Company.
During the three months ended June 30, 1996, warrants to
purchase 120,000 shares of common stock were exercised aggregating
$30,600. 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.
The Company's products are at various stages of development and
will require additional funding for completion. The Company may chose
to discontinue any of its projects at any time if research and
development efforts indicate that continuation would be inadvisable.
The latest Diasensor 1000(TM) model, which incorporates many improvements
over the prototype used to submit data to the FDA, is currently being
tested and data is being gathered for resubmission to the FDA. Such
testing has included successful readings at both hyperglycemic and
hypoglycemic levels. In June, BICO's subsidiary IDT began its next
phase of FDA-approved whole body extracorporeal hyperthermia trials for
the treatment of HIV. In July, BICO's subsidiary Barnacle Ban signed
an exclusive distributor for its antifouling paint and other marine
products in the Chesapeake Bay area. Also in July, BICO's subsidiary
Petrol Rem was informed that two of its oil spill clean up products
will be featured by NASA under its technology transfer program.
<PAGE>
Results of Operations
- ---------------------
Sales during the second quarter increased from $114,367 in 1995 to
$196,788 in 1996 and decreased from $224,351 for the six month period
ended June 30, 1995 to $222,388 for the six month period ended June 30,
1996. The fluctuations were primarily due to the sales of the
Company's Functional Electrical Stimulators.
Interest income decreased during the second quarter from
$95,548 in 1995 to $40,015 in 1996 and from $124,512 for the six month
period ended June 30, 1995 to $92,257 for the six month period ended
June 30, 1996. The decrease was due to the Company's having less cash
to invest during 1996 than 1995.
Costs of Products Sold increased during the second quarter
from $78,438 in 1995 to $80,062 in 1996 and decreased from
$129,630 for the six month period ended June 30, 1995 to $93,750 for
the six month period ended June 30, 1996. The fluctuations were
primarily due to the Company's sales of the Functional Electrical
Stimulators.
Research and Development expenses increased during the second
quarter from $1,712,923 in 1995 to $3,319,785 in 1996 and from
$3,167,396 for the six month period ended June 30, 1995 to $4,740,303
for the six month period ended June 30, 1996. The increase was due to
the Company's increased level of activities associated with the
research and development of the non invasive glucose sensor. These
activities included manufacturing personnel assisting with the
development of the Sensor.
Selling, General and Administrative expenses decreased during the
second quarter from $2,462,787 in 1995 to $973,651 in 1996 and
from $4,703,990 for the six month period ended June 30, 1995 to
$3,787,716 for the six month period ended June 30, 1996. The decrease
was due to the Company's reorganization of some manufacturing
personnel to assist with development of the Sensor.
Interest expense increased during the second quarter from $3,736
in 1995 to $6,134 in 1996 and from $10,138 for the six month period
ended June 30, 1995 to $10,824 for the six month period ended June 30,
1996. 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 May 17, 1996,
with respect to Item 5 other events and
Item 7 (c), Exhibit.
(2) A report on form 8-K dated May 28, 1996,
with respect to Item 5 other events and
Item 7 (c), Exhibit.
(3) A report on form 8-K dated June 14,
1996, with respect to Item 5 other
events and Item 7 (c), Exhibit.
(4) A report on form 8-K dated June 20,
1996, with respect to Item 5 other
events and Item 7 (c), Exhibit.
(5) A report on form 8-K dated June 25,
1996, with respect to Item 5 other
events and Item 7 (c), Exhibit.
(6) A report on form 8-K dated July 2, 1996,
with respect to Item 5 other events and
Item 7 (c), Exhibit.
(7) A report on form 8-K dated July 16,
1996, with respect to Item 5 other
events and Item 7 (c), Exhibit.
(8) A report on form 8-K dated July 17,
1996, 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 15th day of
August, 1996.
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-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 3,206,582
<SECURITIES> 0
<RECEIVABLES> 2,092,248
<ALLOWANCES> (1,050,000)
<INVENTORY> 2,776,732
<CURRENT-ASSETS> 7,080,845
<PP&E> 6,001,014
<DEPRECIATION> (2,281,721)
<TOTAL-ASSETS> 10,970,466
<CURRENT-LIABILITIES> 991,019
<BONDS> 0
0
37,900
<COMMON> 4,296,062
<OTHER-SE> 3,230,219
<TOTAL-LIABILITY-AND-EQUITY> 10,970,466
<SALES> 222,388
<TOTAL-REVENUES> 317,302
<CGS> 93,750
<TOTAL-COSTS> 93,750
<OTHER-EXPENSES> 15,443,019
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,824
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,647,156)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> 0
</TABLE>
