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 March 31, 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 March 31, 1996, 39,730,618 shares of Biocontrol
Technology, Inc. common stock, par value $.10 were outstanding.
<PAGE>
PART I FINANCIAL STATEMENTS
Item 1. Financial Statements
Biocontrol Technology, Inc. and Subsidiaries
Consolidated BalanceSheets
Mar. 31, 1996 Dec. 31, 1995
CURRENT ASSETS
Cash and equivalents $ 4,199,585 $ 3,204,501
Accounts receivable 210,996 202,526
Notes receivable - related parties 250,000 250,000
Notes receivable - net of
allowance for loan losses 12,000 12,000
Interest receivable - related parties 2,279 0
Inventory - net of valuation allowance 2,568,932 1,660,139
Prepaid expenses 162,029 148,526
TOTAL CURRENT ASSETS 7,405,821 5,477,692
PROPERTY, PLANT AND EQUIPMENT
Building 234,863 234,863
Leasehold improvements 1,118,490 1,092,311
Furniture, fixtures & equipment 655,548 633,237
Machinery and equipment 3,503,135 3,558,964
Subtotal 5,512,036 5,519,375
Less accumulated depreciation 2,128,235 2,087,032
3,383,801 3,432,343
OTHER ASSETS
Notes receivable - related parties 95,900 95,900
Interest receivable - related parties 44,641 42,237
Patents, net of amortization 14,346 15,429
Other assets 13,187 11,068
168,074 164,634
TOTAL ASSETS $ 10,957,696 $ 9,074,669
The accompanying notes are an integral part of these statements.
<PAGE>
Biocontrol Technology ,Inc. and Subsidiaries
Consolidated Balance Sheets
(CONTINUED)
Mar. 31, 1996 Dec. 31, 1995
CURRENT LIABILITIES
Accounts payable $ 595,900 $ 1,838,408
Current portion of long-term debt 29,823 28,404
Accrued liabilities 92,198 96,634
Deferred revenue on contract billings 326,000 326,000
TOTAL CURRENT LIABILITIES 1,043,921 2,289,446
LONG-TERM LIABILITIES
Accrued liabilities 124,313 114,750
Long-term debt 55,919 60,580
180,232 175,330
UNRELATED INVESTORS' INTEREST
IN SUBSIDIARY 2,513,533 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
Mar. 31, 1996 and 3,790 at Dec. 31, 1995 37,900 37,900
Common stock, par value $.10 per share
authorized 40,000,000 shares, issued and
outstanding 39,730,618 at Mar. 31, 1996 and
37,021,118 at Dec. 31, 1995 3,973,062 3,702,112
Additional paid-in capital 68,619,979 59,849,875
Warrants 6,677,820 6,677,820
Accumulated deficit (72,088,751) (66,220,357)
TOTAL STOCKHOLDERS' EQUITY 7,220,010 4,047,350
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 10,957,696 $ 9,074,669
The accompanying notes are an integral part of these statements.
<PAGE>
BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended
March 31, 1996 March 31, 1995
Revenues
Sales $ 25,600 $ 109,984
Interest income 52,242 28,964
Other income 0 3,750
Total revenues 77,842 142,698
Costs and expenses
Cost of products sold 13,688 51,192
Research and development 1,420,518 1,454,473
Selling, general and administrative 2,814,065 2,241,203
Warrant extensions - subsidiary 3,459,000 0
Interest expense 4,690 6,402
7,711,961 3,753,270
Loss before unrelated investors' interest (7,634,119) (3,610,572)
Unrelated investors' interest in net loss of
subsidiary 1,765,725 47,456
Net loss ($5,868,394) ($3,563,116)
Loss per common share ($0.15) ($0.12)
See notes to consolidated financial statements.
<PAGE>
BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the three months ended
March 31, 1996 March 31,1995
Cash flows used by operating activities:
Net loss ($5,868,394) ($3,563,116)
Adjustments to reconcile net loss to net
cash used by operating activities:
Depreciation and amortization 147,137 104,841
Unrelated investors' interest in subsidiary (1,765,725) (47,456)
Warrant extensions by subsidiary 3,459,000 -
Stock issued in exchange for services 7,000 57,973
(Increase) in accounts receivable (8,470) (106,409)
(Increase) decrease in inventories (908,793) 34,826
(Increase) decrease in prepaid expenses (13,503) 57,686
(Increase) in other assets (2,279) (2,663)
(Decrease) in accounts payable (1,242,508) (154,075)
Increase (decrease) in other liabilities 5,127 (4,149)
(Decrease) in deferred revenue on contract billing - (27,750)
Net cash flow used by operating activities (6,191,408) (3,650,292)
Cash flows from investing activities:
Purchase ofproperty, plant and equipment (98,595) (226,292)
(Increase) decrease in notes receivable - (200,000)
(Increase) decrease in other assets (3,440) 945
Net cash (used) by investing activities (102,035) (425,347)
Cash flows from financing activities:
Proceeds from sale by subsidiaries of
its common stock 160,072 181,809
Proceeds from stock offering 7,131,697 3,514,170
Proceeds from warrants exercised - 81,800
Net increase in notes payable (3,242) 15,804
Net cash provided by financing activities 7,288,527 3,793,583
(Increase) decrease in cash and equivalents 995,084 (282,056)
Cash and equivalents, beginning of period 3,204,501 3,315,846
Cash and equivalents, end of period $4,199,585 $3,033,790
See notes to consolidated financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
BIOCONTROL TECHNOLOGY, INC.
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 51.9% 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 - Common Stock
During the three months ended March 31, 1996, the Company
sold 2,709,500 shares of its registered 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 March 31, 1996, and March 31, 1995, were
38,828,656 and 30,411,657, respectively.
<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
$4,199,585 at March 31, 1996. This increase was primarily
attributable to the Company's sale of registered stock. During
the first quarter the Company had $6,191,408 net operating
expenditures which primarily related 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 continued to fund operations solely from sales
of its common stock. During the first quarter, the Company
entered into subscription agreements to sell the Company's common
stock. Pursuant to the agreements, a total of 2,709,500 shares
were sold during the three months ended March 31, 1996
aggregating $7,091,086 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.
Results of Operations
Sales during the first quarter decreased from $109,984 in
1995 to $25,600 in 1996. The decrease was primarily due to the
decrease in sales of the Company's Functional Electrical
Stimulators.
Interest income increased during the first quarter from
$28,964 in 1995 to $52,242 in 1996. The increase was due to the
Company's increased investments as the result of proceeds
received from selling stock.
Costs of Products Sold decreased during the first quarter
from $51,192 in 1995 to $13,688 in 1996. The decrease was
primarily due to the decrease in sales of the Company's
Functional Electrical Stimulators.
Research and Development expenses decreased during the first
quarter from $1,454,473 in 1995 to $1,420,518 in 1996. The
decrease was due to the Company's decreased level of activities
associated with research and development of the non invasive
glucose sensor and other projects.
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Cash Flows continued
Results of Operations - Continued
Selling, General and Administrative expenses increased
during the first quarter from $2,241,203 in 1995 to $2,814,065 in
1996. 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 non invasive glucose sensor.
Interest expense decreased during the first quarter from
$6,402 in 1995 to $4,690 in 1996. The decrease was due to the
Company's regular payments against outstanding principle on its
notes payable and the pay-off of long-term debt.
<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 February 1, 1996, with
respect to Item 5 other events and Item 7 (c),
Exhibit.
(2) A report on form 8-K dated February 8, 1996, with
respect to Item 5 other events and Item 7 (c),
Exhibit.
(3) A report on form 8-K dated February 20, 1996, with
respect to Item 5 other events and Item 7 (c),
Exhibit.
(4) A report on form 8-K dated February 26, 1996, with
respect to Item 5 other events and Item 7 (c),
Exhibit.
(5) A report on form 8-K dated February 27, 1996, with
respect to Item 5 other events and Item 7 (c),
Exhibit.
(6) A report on form 8-K dated March 6, 1996, with
respect to Item 5 other events and Item 7 (c),
Exhibit.
(7) A report on form 8-K dated March 7, 1996, with
respect to Item 5 other events and Item 6, and
Item 7 (c), Exhibit.
(8) A report on form 8-K dated March 22, 1996, with
respect to Item 5 other events and Item 6, and
Item 7 (c), Exhibit.
(9) A report on form 8-K dated March 25, 1996, with
respect to Item 5 other events and Item 6, and
Item 7 (c), Exhibit.
(10) A report on form 8-K dated March 27,1996, with
respect to Item 5 other events and Item 6, and
Item 7 (c), Exhibit.
(11) A report on form 8-K dated March 29, 1996, with
respect to Item 5 other events and Item 6, and
Item 7 (c), Exhibit.
(12) A report on form 8-K dated April 9, 1996, with
respect to Item 5 other events and Item 6, and
Item 7 (c), Exhibit.
(13) A report on form 8-K dated April 12, 1996, with
respect to Item 5 other events and Item 6, and
Item 7 (c), Exhibit.
(14) A report on form 8-K dated April 29, 1996, with
respect to Item 5 other events and Item 6, and
Item 7 (c), Exhibit
(15) A report on form 8-K dated May 8, 1996, with
respect to Item 5 other events and Item 6, 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 14 day of May, 1996
BIOCONTROL TECHNOLOGY, INC.
By /s/ Fred E. Cooper
Fred E. Cooper
CEO and Director (principal financial
officer and principal accounting officer)
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