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, 2000
Commission file number 0-10822
BICO, 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.)
2275 Swallow Hill Road, Bldg. 2500, Pittsburgh, PA 15220
(Address of principal executive offices) (Zip Code)
(412) 429-0673
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, 2000, 962,817,628 shares of BICO, Inc.
common stock, par value $.10 were outstanding.
<PAGE>1
<TABLE>
BICO, Inc. and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
Jun. 30, 2000 Dec. 31, 1999
------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents $ 11,827,763 $ 10,827,631
Accounts receivable - net of allowance for doubtful accounts 7,123 27,263
of $63,679 at Jun. 30, 2000 and $63,679 at Dec. 31, 1999
Inventory - net of valuation allowance 356,567 10,308
Notes receivable 20,000 200,000
Interest receivable 0 2,701
Prepaid expenses 535,186 192,246
Advances - Officers 127,290 125,290
Other assets 500,000 0
------------ -------------
TOTAL CURRENT ASSETS 13,373,929 11,385,439
PROPERTY, PLANT AND EQUIPMENT
Building 1,207,610 1,207,610
Land 133,750 133,750
Leasehold improvements 1,623,141 1,435,319
Machinery and equipment 4,911,026 4,676,330
Furniture, fixtures & equipment 1,000,477 841,308
------------- -------------
Subtotal 8,876,004 8,294,317
Less accumulated depreciation 4,997,091 4,704,539
------------- -------------
3,878,913 3,589,778
OTHER ASSETS
Related Party Receivables
Notes receivable 1,422,024 1,491,261
Interest receivable 24,555 22,023
------------- -------------
1,446,579 1,513,284
Allowance for related party receivables (1,305,258) (1,340,560)
------------- ------------
141,321 172,724
Notes receivable 212,000 12,000
Interest receivable 4,847 4,235
Investment in unconsolidated subsidiaries 1,615,581 485,284
Other assets 35,380 36,376
------------- -------------
2,009,129 710,619
------------- -------------
TOTAL ASSETS $ 19,261,971 $ 15,685,836
============= =============
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>2
<TABLE>
BICO,Inc. and Subsidiaries
Consolidated Balance Sheets
(Continued)
<CAPTION>
Jun. 30, 2000 Dec. 31, 1999
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 257,734 $ 759,733
Current portion of long-term debt 4,093,608 4,159,684
Current portion of capital lease obligations 99,606 76,017
Debentures payable 9,500,000 0
Accrued liabilities 1,394,458 1,794,370
Escrow payable 2,700 2,700
------------- -------------
TOTAL CURRENT LIABILITIES 15,348,106 6,792,504
LONG-TERM LIABILITIES
Capital lease obligations 1,273,532 1,336,147
Long-term debt 1,241 2,240
------------- -------------
1,274,773 1,338,387
COMMITMENTS AND CONTINGENCIES
UNRELATED INVESTORS'INTEREST
IN SUBSIDIARY 9,360 0
STOCKHOLDERS' EQUITY
Common stock, par value $.10 per share,
authorized 1,700,000,000 shares, issued and
outstanding 962,817,628 at Jun. 30, 2000 and
956,100,496 at Dec. 31, 1999 96,281,763 95,610,050
Series F 4% convertible preferred stock, par
value $10 per share, authorized 500,000
shares issuable in series, shares issued and
outstanding 452,000 at June 30, 2000 and 72,000
at December 31, 1999. 4,520,000 720,000
Additional paid-in capital 90,213,266 85,608,192
Warrants 6,718,837 6,791,161
Accumulated deficit (195,104,134) (181,174,458)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 2,629,732 7,554,945
------------- -------------
TOTAL LIABILITIES AND
STOCKHOLDER' EQUITY $ 19,261,971 $ 15,685,836
============= =============
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>3
<TABLE>
BICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
For the six months ended For the three months ended
Jun. 30, Jun. 30,
2000 1999 2000 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues
Net Sales $ 38,813 $ 78,428 $ 19,815 $ 51,108
Other income - 14,397 - 7,630
-------------- -------------- -------------- --------------
38,813 92,825 19,815 58,738
Costs and expenses
Cost of products sold 58,228 132,991 27,568 66,572
Research and development 3,805,960 2,154,759 1,655,637 1,410,914
General and administrative 7,621,067 8,132,276 3,432,100 5,688,833
Amortization of goodwill 136,737 - 59,530 -
-------------- -------------- -------------- --------------
11,621,992 10,420,026 5,174,835 7,166,319
-------------- -------------- -------------- --------------
Loss from operations (11,583,179) (10,327,201) (5,155,020) (7,107,581)
-------------- -------------- -------------- --------------
Other income
Interest 327,949 60,758 163,631 34,052
Other expense
Beneficial convertible debt feature 2,462,500 4,006,524 - 3,060,794
Interest expense 259,818 194,253 108,061 53,490
Loss on unconsolidated subsidiary 8,750 - - -
Loss on disposal of assets 15,874 - - -
-------------- -------------- -------------- -------------
2,746,942 4,200,777 108,061 3,114,284
-------------- -------------- -------------- -------------
Loss before unrelated investors' interest (14,002,172) (14,467,220) (5,099,450) (10,187,813)
Unrelated investors' interest in net (income)
loss of subsidiary 72,496 2,314 301,320 (21,848)
-------------- -------------- -------------- --------------
Net loss $ (13,929,676) $ (14,464,906) $ (4,798,130) $ (10,209,661)
============== ============== ============== ==============
Loss per common share - Basic:
Net Loss $ (0.01) $ (0.03) $ (0.01) $ (0.02)
Less: Preferred stock dividends (0.00) (0.00) (0.00) (0.00)
-------------- -------------- ------------- --------------
Net loss attributable to common stockholders: $ (0.01) $ (0.03) $ (0.01) $ (0.02)
============== ============== ============= ==============
Loss per common share - Diluted:
Net Loss $ (0.01) $ (0.03) $ (0.01) $ (0.02)
Less: Preferred stock dividends (0.00) (0.00) (0.00) (0.00)
-------------- -------------- ------------- --------------
Net loss attributable to common stockholders: $ (0.01) $ (0.03) $ (0.01) $ (0.02)
============== ============== ============= ==============
See notes to consolidated financial statements.
</TABLE>
<PAGE>4
<TABLE>
BICO, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
For the six months ended For the three months ended
Jun. 30, Jun. 30,
2000 1999 2000 1999
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Cash flows used by operating activities:
Net loss ($13,929,676) ($14,464,906) ($4,798,130) ($10,209,661)
Adjustments to reconcile net loss to net
cash used by operating activities :
Depreciation 309,646 880,777 152,590 439,228
Amortization 136,737 - 59,530 -
Loss on disposal of assets 15,874 - - -
Loss on unconsolidated subsidiary 8,750 - - -
Reduction in goodwill - 2,000,000 - 2,000,000
Unrelated investors' interest in subsidiary (72,496) (2,314) (301,320) 21,848
Stock issued in exchange for services - 64,463 - -
Beneficial convertible debt feature 2,462,500 4,006,524 - 3,060,794
Warrants granted 235,257 496,536 44,959 496,536
Warrants and warrant extensions by subsidiary 864,141 - 582,648 -
(Decrease)increase in allowance for related party recv. (35,302) (19,803) (24,140) (847)
Debenture interest converted to stock - 22,070 - 22,070
(Increase) decrease in accounts receivables 20,140 (20,470) 35,637 (14,886)
(Increase) decrease in inventories 542,156 (11,891) (279,724) (16,768)
Increase (decrease) in inventory valuation allowance (888,415) 85,836 (74,042) 85,836
(Increase) decrease in prepaid expenses (342,940) 21,103 (263,745) (23,950)
(Increase) decrease in other assets (499,003) (355,810) 1,247 (350,000)
(Decrease) increase in accounts payable (501,999) (1,096,090) (506,947) (290,317)
(Increase) decrease in other liabilities (399,912) (466,053) 84,802 (364,156)
Impairment loss - 283,208 - 283,208
-------------- -------------- -------------- --------------
Net cash flow used by operating activities (12,074,542) (8,576,820) (5,286,635) (4,861,065)
-------------- -------------- -------------- --------------
Cash flows from investing activities:
Purchase of property, plant and equipment (614,655) (121,038) (372,254) (112,274)
Disposal of property, plant, and equipment - 175,000 - -
(Increase) decrease in notes receivable (22,000) (49,341) 33,000 (51,975)
Payments received on notes receivable 69,237 - 33,952 -
(Increase) decrease in interest receivable (443) (22,345) (2,133) (802)
Deposit on equipment - (45,547) - (12,738)
Acquisition of unconsolidated subsidiary interests (1,275,784) - (52,000) -
-------------- -------------- -------------- --------------
Net cash provided (used) by investing activities (1,843,645) (63,271) (359,435) (177,789)
-------------- -------------- -------------- --------------
Cash flows from financing activities:
Proceeds from warrants exercised 899,450 - - -
Proceeds from sale of Preferred stock-Series F 4,275,000 - - -
Proceeds from debentures payable 9,850,000 - - -
Proceeds from public offering - 19,361,418 - 13,591,418
Payments on notes payable (67,075) (443,558) (29,169) (154,714)
Payments on capital lease obligations (39,026) (67,484) (18,692) (33,091)
-------------- -------------- -------------- --------------
Net cash provided by financing activities 14,918,319 18,850,376 (47,861) 13,403,613
-------------- -------------- -------------- --------------
(Decrease) increase in cash and equivalents 1,000,132 10,210,285 (5,693,931) 8,364,759
Cash and equivalents, beginning of period 10,827,631 125,745 17,521,694 1,971,271
-------------- -------------- -------------- --------------
Cash and equivalents, end of period $ 11,827,763 $ 10,336,030 $ 11,827,763 $ 10,336,030
============== ============== ============== ==============
See notes to consolidated financial statements.
</TABLE>
BICO, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - Basis of Presentation
The accompanying consolidated financial statements of BICO,
Inc. (the "Company") and its 89.9% owned subsidiary, Coraflex,
Inc., and its 52% owned subsidiary, Diasensor.com, Inc., and
its 67% owned subsidiary, Petrol Rem, Inc., and its 99.1%
owned subsidiary, ViaCirQ, Inc., and its 58.4% owned
subsidiary, ICTI, Inc., and its 100% owned subsidiary Ceramic
Coatings Technologies, 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,
1999.
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, 2000, and
June 30, 1999, were 959,461,176 and 535,289,451,
respectively.
The net losses attributable to common stockholders for the six
month period and the three month period ended June 30, 2000
were $15,813,009 and $5,899,871 which include constructive
dividends to preferred stockholders of $1,883,333 and
$1,101,741 respectively.
NOTE C - Subordinated Convertible Debentures
During the first quarter of 2000, the Company issued
subordinated 4% convertible debentures totaling $9,850,000.
In the second quarter, $350,000 of these debentures were
converted to common stock. Such convertible debentures were
issued pursuant to Regulation D, and /or Section 4(2), and
have a one-year maturity and are not saleable or convertible
for a minimum of 90 days from issuance. A $2,462,500 expense
was recognized upon issuance for the beneficial conversion
feature of these debentures.
NOTE D - Stockholders Equity
During the six months ended June 30, 2000, the Company raised
$4,275,000 through sales of its Series F-Preferred Stock and
$899,420 from warrants exercised.
The Company's common stock is currently traded on the
electronic bulletin board under the trading symbol "BICO".
NOTE E - Legal Proceedings
During April 1998, the Company and its affiliates were served
with subpoenas by the U.S. Attorneys' office for the U.S.
District Court for the Western District of Pennsylvania. The
subpoenas requested certain corporate, financial and
scientific documents and the Company continues to provide
documents in response to such requests.
On April 30, 1996, a class action lawsuit was filed against
the Company, Diasense, Inc., and individual officers and
directors. The suit, captioned Walsingham v. Biocontrol
Technology,et al., has been certified as a class action, and is
pending in the U.S. District Court for the Western District of
Pennsylvania. The suit alleges misleading disclosures in
connection with the Noninvasive Glucose Sensor and other
related activities which the company denies. By mutual
agreement of the parties, the suit remains in the pre-trial
pleading stage, and the Company is unable to determine the
outcome or its impact upon the Company at this time.
NOTE F - Investments in Unconsolidated Subsidiaries
In January 2000, the company acquired a twenty-five
percent (25%) interest in Insight Data Link.com, Inc. for
$100,000. Insight is a Pennsylvania corporation formed to
engage in the business of acting as an internet clearinghouse
for persons seeking to acquire, and persons having available,
shopping mall space, as well as software development for
related projects.
In January 2000, Diasensor.com, acquired a ten percent
(10%) interest in MicroIslet, Inc. for an investment of
$500,000. MicroIslet is a California company, which has
licensed several diabetes research technologies from Duke
University with a specific focus on optimizing
microencapsulated islets for transplantation.
Also, during the six months ended June 30, 2000 the
Company invested an additional $175,000 in American Inter-
Metallics, Inc. ("AIM") an unconsolidated subsidiary interest
initially acquired during 1999. AIM has its operations in
Rhode Island, and is developing a product that enhances
performance in rockets and other machinery by increasing the
burn rate of propellants.
In March 2000, Diasensor.com, acquired an equity interest
in Diabecore Medical, Inc., a Toronto-based company working to
develop a new insulin for the treatment of diabetes, for $500,784.
With this initial investment, the Company owns 12% of Diabecore.
These investments are being reported on the equity basis
and differences in the investment and the underlying net
assets of the unconsolidated subsidiaries are being amortized
as goodwill over a 5 year period.
NOTE G - Beneficial Conversion Feature of Preferred Stock
As of June 30, 2000 the Company had issued 452,000 shares
of its Series F 4% convertible preferred stock, which include
a beneficial conversion feature providing the preferred
stockholder a discount of 25% upon conversion to the Company's
common stock after 120 days. The value of this beneficial
conversion feature is determined by reducing the market price
of the Company's common stock by the discounted conversion
price on the date of commitment. This discount is recognized
as a reduction in the preferred stock recorded at par and is
amortized as constructive dividends to the preferred
stockholders over the 120 day period using the effective
interest method. The total valuation discount of this
beneficial conversion feature on the 452,000 shares of
preferred stock was $1,883,333 and was recognized as
constructive dividends charged to Additional Paid in Capital
during the six months ended June 30, 2000.
NOTE H - Subsequent Events
In July 2000, the Company entered into a capital lease
for an industrial building adjacent to its existing
manufacturing facility in Indiana County, Pennsylvania. Under
the terms of the lease the Company will make total payments of
$2,066,215 through December 2010 at which time title to the
property will be transferred to the Company. Management
recognized this property and the corresponding capital lease
obligation at the present value of the lease payments which
was $1,434,066, using an imputed rate of 9% per annum.
The payment terms of the lease are as follows:
July 2000 $ 463,994
October - December 2001 37,386
January - December 2002 154,033
January - December 2003 158,652
January - December 2004 163,413
January - December 2005 168,316
Thereafter thru 2010 920,421
----------
TOTAL LEASE PAYMENTS 2,066,215
Less amount representing interest (632,149)
----------
Present value of lease payments $1,434,066
==========
Management's Discussion and Analysis of Financial Condition
and Cash Flows
Liquidity and Capital Resources
Our cash increased to $11, 827,763 as of June 30, 2000 from
$10,827,631 as of December 31, 1999. The increase was
generated from sales of our securities, including: $9,850,000
from sales of our subordinated convertible debentures;
$4,275,000 from sales of our Series F preferred stock; and
$899,420 from warrants exercised. Our Series F Convertible
Preferred Stock is not secured by any of our assets, and it is
convertible by its holders beginning 120 days from when it's
issued. Our preferred stock can be converted to our common
stock at a price that is determined by computing 75% of the
average closing bid price for the four days prior to and the
day of conversion - or a 25% discount to a five-day average
trading price. There is no minimum conversion price. Our
Subordinated convertible debentures are not secured by any
assets, and are subordinate to our corporate debt, except for
debt to any related parties. Our debentures are convertible
beginning 90 days from when we issue them. They can be
converted to common stock at a price that is determined by
computing 80% of the average closing bid price for the four
days prior to and the day of conversion - or a 20% discount
to a five-day average trading price. There is no minimum
conversion price.
During the six months ended June 30, 2000 our net cash flow
used by operating activities was ($12,074,542). During the
same period, our net cash flow used by investing activities
was ($1,843,645) due primarily to our investments in the
following unconsolidated subsidiaries: Insight Data Link.com,
Inc., American Inter-Metallics, Inc., MicroIslet, Inc., and
Diabecore Medical, Inc., which we discuss in the following
three paragraphs.
During the first six months of 2000, we made investments in
unconsolidated subsidiaries. In January, BICO acquired a 25%
interest in Insight Data Link.com, Inc. for $100,000. Insight
is a start-up corporation with a software program and website
business that acts as an internet clearinghouse for the rental
of shopping mall space. Insight also plans to develop
additional software for related projects. We also invested an
additional $175,000 in American Inter-Metallics, bringing our
total investment in AIM's rocket propulsion project to
$700,000. We made these investments because our management
believes they will generate revenue.
Our subsidiary, Diasensor.com, Inc. also made investments in
unconsolidated subsidiaries. In January 2000, Diasensor.com
initiated an alliance with MicroIslet, Inc.; in return for its
initial equity investment of $500,000, Diasensor.com received
a 10% stake with an option to purchase an additional 10% in
the future. MicroIslet is developing several diabetes
research technologies with Duke University that focus on
optimizing microencapsulated islets for transplantation. The
project is in the research and development phase.
Diasensor.com also invested in Diabecore Medical, Inc.
Diabecore is a company in Toronto working with other research
institutions to develop a new insulin to treat diabetes.
Diasensor.com invested $500,784 in Diabecore and received a
12% ownership interest. This project is also in the research
and development phase. Diasensor.com made these investments
because management believes that these diabetes research
organizations and the institutions they affiliate with will
bring strength and support to our own diabetes research and
development projects.
As a result of those investments in Insight Data Link.com,
American Inter-Metallics, MicroIslet and Diabecore Medical,
our overall investment in unconsolidated subsidiaries
increased from $485,284 as of December 31, 1999 to $1,615,581
at June 30, 2000. The money we spent investing in those
four companies came from stock and debenture sales during 1999
and 2000. All the investments were our initial investments
in those companies, except American Inter-Metallics - we've
invested a total of $700,000 in AIM as of June 30, 2000.
Our net inventory increased from $10,308 as of December 31,
1999 to $356,567 as of June 30, 2000 as a result of inventory
build up for our hyperthermia products (approximately
$250,000) and our noninvasive glucose sensor product.
Current - short-term - notes receivable increased by $20,000
due to a note to one individual that is being repaid
currently, with a full payoff by August 1, 2000, and decreased
by $200,000 when a short-term note was reclassified as a long-
term note.
Interest receivable decreased from $2,701 as of December 31,
1999 to zero at June 30, 2000 due to timing of interest
payments on certain debt. Prepaid expenses increased from
$192,246 at December 31, 1999 to $535,186 as of June 30, 2000
due to prepayments required in the ordinary course of
business.
Other current assets of $500,000 resulted from a deposit we
made during the first quarter on a transaction that we later
cancelled; we expect to have the deposit returned during the
third quarter of 2000. Leasehold improvements increased by
$187,822; machinery and equipment increased by $234,696; and
furniture, fixtures and equipment increased $159,169 for the
six month period ended June 30, 2000 due to purchases we made
in connection with our noninvasive glucose sensor and
hyperthermia projects.
Related party receivables decreased by $31,403 during the six
month period ended June 30, 2000 due to scheduled repayments
on related party debt. Notes receivable increased by
$200,000 when a note previously carried as a current asset was
reclassified as a long-term asset.
Debentures payable of $9,850,000 were incurred because we
sold convertible subordinated debentures during the first
quarter to raise capital to fund operations. During the second
quarter, $350,000 of debentures were converted to common
stock. Accrued liabilities decreased from $1,794,370 to
$1,394,458 primarily due to accrued bonuses paid to employees
during the first six months.
Results of Operations
Our sales and corresponding costs of products sold during the
six months decreased to $38,813 and $58,228 respectively in
2000 from $78,428 and $132,991 in 1999. The decreases were
due to fluctuations in sales of our various products. Our
costs decreased due to our overall reduced sales. Our overall
sales decreased because we have not been able to successfully
market our products. For example, we had sales of the
Diasensor totaling $47,500 in the first six months of 1999,
and no sales of the Diasensor during the first six months of
2000, because we haven't been able to successfully sell the
device in Europe. We're not sure why we were only able to
sell a few sensors in 1999, and none in 2000. We've hired
marketing consultants to help us figure out why, and to help
us learn how to sell more. We had minor sales totaling
$3,500 of other biomedical products, primarily leftover parts
from previous models of the Diasensor, during the first six
months of 1999, but we sold all of them in 1999 and had no
similar sales in 2000. Our other product sales increased,
but not significantly. Bioremediation product sales totaled
$15,700 during the first six months of 1999, with a slight
decrease to $12,200 during the first six months of 2000.
During the first six months of 1999 and 2000, sales of $8,350
and $5,400, respectively, were from sales of our theraPORT,
an implantable device used by patients who have to have
repeated injections of drugs. The theraPORT is implanted in
the patient's chest, and provides a fixed port for catheters
used to deliver the drugs the patient needs. Those sales
decreased because we had fewer orders in the second quarter of
2000. We also had sales of our metal-coating products totaling
$3,350 during the first six months of 1999 and $21,200 during
the first six months of 2000. The increase was due to repeat
customers who sent us more work once they were satisfied with
our earlier performance. Until we have significant sales, we
can't predict any trends for future revenues.
Interest income increased during the first six months to
$327,949 in 2000 from $163,631 in 1999. The increase occurred
because we had more funds to invest.
Other income decreased from $14,399 during the first six
months of 1999 to zero during the first six months of 2000.
The decrease was due to the loss of rental income.
Research and Development expenses during the first six months
increased to $3,805,960 in 2000 from $2,154,759 in 1999. The
increase was due to increased spending on our noninvasive
glucose sensor project, made possible due to the availability
of additional funds. We used those additional funds to
replace scientists and engineers who left during 1998 when we
had serious cash flow problems, and to work on future versions
of the noninvasive glucose sensor.
General and Administrative expenses during the first six
months decreased from $8,132,276 in 1999 to $7,621,067 in
2000. The decrease is primarily due to a $925,000 decrease
in commissions on sales of our debentures because we sold less
of those securities compared to last year. We also had a
$603,000 increase in expenses recognized for warrants granted.
We had a loss in unconsolidated subsidiary during the first
six month of $8,750. This loss resulted because we absorbed
part of a loss incurred by an unconsolidated subsidiary. Our
share of the loss is determined by applying our ownership
percentage to the total loss incurred, and we get to deduct
the portion of the loss allocated to the unrelated investors
from our total net loss.
Beneficial conversion terms included in our convertible
debentures are recognized as expense and credited to
additional paid in capital at the time the associated
debentures are issued. We recognized $2,462,500 of expense in
connection with the issuance of our subordinated convertible
debentures in the first six months of 2000 compared to
$4,006,524 for the same period in 1999. The amount decreased
primarily because we issued less debentures this year compared
to last year.
Similarly, we recognized a beneficial conversion feature for
our preferred stock during the first six months of 2000. As
of June 30, 2000, we issued 452,000 shares of our Series F
preferred stock. The preferred stock is convertible into our
common stock at a discount of 25% after 120 days. Based on
accounting rules, the value of the beneficial conversion
feature of the preferred stock is calculated as the difference
between the market price and the discounted price for the
corresponding common stock on the date the preferred stock was
purchased. The total discount of $1,883,333, or $4.17 per
preferred share, was recognized as a constructive dividend on
our preferred stock during the first six months of 2000. We
charged the $1,883,333 to additional paid-in capital. We did
not have any of these charges or constructive dividends during
the first six months of 1999 because we had not yet issued our
preferred stock.
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 11, 2000, for
the event dated May 11, 2000, with respect to
Item 5 other events. and Item 7 (c), Exhibit.
(2) A report on form 8-K dated May 22, 2000, for
the event dated May 22, 2000, with respect to
Item 5 other events and Item 7 (c), Exhibit.
(3) A report on form 8-K dated June 2, 2000, for the
events dated June 1 and June 2, 2000 with respect
to Item 5 other events, Item 6 Resignation of
Registrant's Directors and Item 7 (c), Exhibit.
(4) A report on form 8-K dated June 5, 2000, for the
event dated June 5, 2000, 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 15th day of August, 2000
.
BIOCONTROL TECHNOLOGY, INC.
By /s/ Fred E. Cooper
Fred E. Cooper
CEO
