<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1999
-----------------
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT
For the transition period from ____________ TO ____________
Commission file number 1-13527
-------
BIOQUAL, INC.
-------------
(Exact name of small business issuer as specified in its charter)
State of Delaware 13-3078199
----------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9600 Medical Center Drive, Rockville, Maryland 20850
- ----------------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Issuer's telephone number, including area code (301) 251-2801
Diagnon Corporation
-------------------
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the registrant filed all documents required to be filed by Section
12, 13 or 15(d) of the Exchange Act after the distribution of securities under a
plan confirmed by a court.
Yes X No
--- ---
Common Stock, $.01 par value per share; authorized 25,000,000 shares; 869,752
shares outstanding as of January 7, 2000.
Convertible Preferred Stock, $1.00 par value per share; authorized 500,000
shares; no shares outstanding as of January 7, 2000.
Transitional Small Business Disclosure Format (Check one): Yes No X
--- ---
<PAGE>
BIOQUAL, Inc.
-------------
INDEX
-----
Part I. Financial Information Page
- ------------------------------ ----
Item 1. Financial Statements.
Consolidated Balance Sheets, May 31, 1999 and
November 30, 1999 (Unaudited) . . . . . . . . . . . . . . 2
Unaudited Consolidated Statements of Operations for
the Three Months Ended November 30, 1999 and
November 30, 1998 . . . . . . . . . . . . . . . . . . . . 3
Unaudited Consolidated Statements of Operations for
the Six Months Ended November 30, 1999 and
November 30, 1998 . . . . . . . . . . . . . . . . . . . . 4
Unaudited Consolidated Statements of Cash Flows
for the Six Months Ended November 30, 1999 and
November 30, 1998 . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis . . . . . . . . 6
Part II. Other Information
- ---------------------------
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . . . . . 11
1
<PAGE>
BIOQUAL INC. AND SUBSIDIARY
- ---------------------------
CONSOLIDATED BALANCE SHEETS, MAY 31, 1999 AND NOVEMBER 30, 1999 (UNAUDITED)
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS NOVEMBER 30, 1999 MAY 31, 1999
- ------ ------------------ -------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 70,323 $ 68,768
Accounts receivable:
Trade 1,250,759 966,354
Unbilled - current 284,114 262,774
Other 29,193 26,867
Prepaid expenses 124,938 91,522
Inventories 298,095 287,596
Loans to officers 32,906
Deferred income taxes - current 72,300 77,300
----------- -----------
Total current assets 2,129,722 1,814,087
----------- -----------
FIXED ASSETS:
Leasehold improvements 887,883 832,264
Furniture, fixtures and equipment 3,399,107 3,289,879
----------- -----------
Total 4,286,990 4,122,143
Less accumulated depreciation and amortization 2,783,358 2,649,058
----------- -----------
Fixed assets, net 1,503,632 1,473,085
----------- -----------
DEFERRED INCOME TAXES - NONCURRENT 600,400 600,400
UNBILLED ACCOUNTS RECEIVABLE - NONCURRENT 435,386 493,512
OTHER NONCURRENT ASSETS 278,650 242,650
----------- -----------
TOTAL $ 4,947,790 $ 4,623,734
=========== ===========
LIABILITIES
- -----------
CURRENT LIABILITIES:
Borrowings under line of credit $ 832,024 $ 275,282
Current maturities of long-term debt 66,093 66,093
Accounts payable 157,349 215,956
Accrued compensation and related costs 336,209 474,597
Accrued income taxes 24,281
Other accrued liabilities 41,031 15,178
----------- -----------
Total current liabilities 1,432,706 1,071,387
LONG-TERM DEBT 18,997 56,211
----------- -----------
Total liabilities 1,451,703 1,127,598
----------- -----------
STOCKHOLDERS' EQUITY
- --------------------
Convertible preferred stock - par value of $1.00 per share, 500,000 shares authorized;
no shares issued and outstanding Common stock - par value of $.01 per share;
25,000,000 shares authorized; 1,600,408 shares issued; November 30, 1999, 869,752 shares,
May 31, 1999, 872,672 shares outstanding 16,004 16,004
Additional paid-in capital 7,475,035 7,475,035
Accumulated deficit (3,292,083) (3,310,022)
----------- -----------
Total 4,198,956 4,181,017
Less - treasury stock November 30, 1999, 730,656 shares, May 31, 1999, 727,736 shares,
at cost (702,869) (684,881)
----------- -----------
Total stockholders' equity 3,496,087 3,496,136
----------- -----------
TOTAL $ 4,947,790 $ 4,623,734
=========== ===========
</TABLE>
See notes to financial statements.
2
<PAGE>
BIOQUAL, INC.AND SUBSIDIARY
- ---------------------------
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
- -------------------------------------------------------
THREE MONTHS ENDED NOVEMBER 30, 1999 AND NOVEMBER 30, 1998
- ----------------------------------------------------------
<TABLE>
<CAPTION>
NOVEMBER 30, NOVEMBER 30,
1999 1998
------------ ------------
<S> <C> <C>
REVENUES AND SALES:
Contract revenues $2,962,977 $2,666,993
Product sales 8,139 2,960
---------- ----------
Total Revenues and Sales 2,971,116 2,669,953
---------- ----------
OPERATING EXPENSES:
Contract 2,380,552 1,969,541
Cost of goods sold 8,891 4,317
Research and development 46,950 44,935
General and administrative 486,441 479,652
---------- ----------
Total 2,922,834 2,498,445
---------- ----------
OPERATING INCOME 48,282 171,508
INTEREST INCOME 807 693
INTEREST EXPENSE (14,789) (11,861)
---------- ----------
INCOME BEFORE INCOME TAX 34,300 160,340
PROVISION FOR INCOME TAX 10,000 64,100
---------- ----------
NET INCOME $ 24,300 $ 96,240
========== ==========
BASIC EARNINGS PER SHARE $0.03 $0.11
========== ==========
DILUTED EARNINGS PER SHARE $0.03 $0.11
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES 869,286 896,606
OUTSTANDING FOR BASIC EARNINGS PER SHARE
EFFECT OF DILUTIVE SECURITIES - OPTIONS 15,450 6,843
---------- ----------
WEIGHTED AVERAGE NUMBER OF SHARES 884,736 903,449
OUTSTANDING PLUS DILUTIVE OPTIONS FOR ========== ==========
DILUTIVE EARNINGS PER SHARE
</TABLE>
See notes to financial statements.
3
<PAGE>
BIOQUAL, INC.AND SUBSIDIARY
- ---------------------------
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
- -------------------------------------------------------
SIX MONTHS ENDED NOVEMBER 30, 1999 AND NOVEMBER 30, 1998
- --------------------------------------------------------
<TABLE>
<CAPTION>
NOVEMBER 30, NOVEMBER 30,
1999 1998
------------ ------------
<S> <C> <C>
REVENUES AND SALES:
Contract revenues $5,696,978 $5,378,169
Product sales 39,510 7,078
---------- ----------
Total Revenues and Sales 5,736,488 5,385,247
---------- ----------
OPERATING EXPENSES:
Contract 4,541,798 4,064,900
Cost of goods sold 36,040 9,390
Research and development 100,871 86,207
General and administrative 972,490 934,443
---------- ----------
Total 5,651,199 5,094,940
---------- ----------
OPERATING INCOME 85,289 290,307
INTEREST INCOME 1,620 1,641
INTEREST EXPENSE (27,607) (25,404)
---------- ----------
INCOME BEFORE INCOME TAX 59,302 266,544
PROVISION FOR INCOME TAX 24,000 106,600
---------- ----------
NET INCOME $ 35,302 $ 159,944
========== ==========
BASIC EARNINGS PER SHARE $0.04 $0.18
========== ==========
DILUTED EARNINGS PER SHARE $0.04 $0.18
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES 870,696 898,106
OUTSTANDING FOR BASIC EARNINGS PER SHARE
EFFECT OF DILUTIVE SECURITIES - OPTIONS 15,450 6,843
---------- ----------
WEIGHTED AVERAGE NUMBER OF SHARES 886,146 904,949
OUTSTANDING PLUS DILUTIVE OPTIONS FOR ========== ==========
DILUTIVE EARNINGS PER SHARE
</TABLE>
See notes to financial statements.
4
<PAGE>
BIOQUAL, INC. AND SUBSIDIARY
- ----------------------------
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
- -------------------------------------------------------
SIX MONTHS ENDED NOVEMBER 30, 1999 AND NOVEMBER 30, 1998
- --------------------------------------------------------
<TABLE>
<CAPTION>
November 30, November 30,
1999 1998
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 35,302 $ 159,944
--------- ---------
Adjustments to reconcile net income to net cash used for operating
activities:
Depreciation and amortization 134,300 155,874
Deferred income taxes 5,000 79,900
Increase in accounts receivable (249,945) (357,981)
Increase in prepaid expenses (33,416) (58,067)
Increase in inventories (10,499) (167,935)
(Increase) decrease in other assets (36,000) 38,148
Decrease in accounts payable and accrued expenses (171,142) (177,788)
Common stock gifted to employees 9,392
Decrease in income taxes payable (24,281) (4,800)
--------- ---------
Total Adjustments (376,591) (492,649)
--------- ---------
NET CASH USED FOR OPERATING ACTIVITIES (341,289) (332,705)
--------- ---------
CASH FLOWS USED FOR INVESTING ACTIVITIES:
Capital expenditures (164,847) (96,915)
--------- ---------
NET CASH USED FOR INVESTING ACTIVITIES (164,847) (96,915)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds under line-of-credit agreement 556,742 509,362
Net proceeds from exercise of stock options 5,526 81
Dividends paid (17,363)
Principal payments under capital lease obligations (37,214) (78,489)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 507,691 430,954
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,555 1,334
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 68,768 65,730
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 70,323 $ 67,064
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest $ 26,036 $ 24,538
========= =========
Income taxes $ 57,600 $ 31,500
========= =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES:
Treasury stock received for payment of loans to officer $ 32,906 $ 14,344
========= =========
</TABLE>
See notes to financial statements.
5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Interim Financial Statements
- ----------------------------
In the opinion of management, all adjustments consisting only of normal
recurring accruals necessary for a fair presentation of such amounts have been
included. The results of operations for the quarter and the six month period
are not necessarily indicative of results for the year.
Inventories
- -----------
Inventories are stated at the lower of cost or market using the average cost
method.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
Summary Analysis
- ----------------
In this second quarter of fiscal year 2000, BIOQUAL (hereinafter, "the Company"
or "BIOQUAL") realized net income of $24,300. Net income for the first six
months of fiscal year 2000 totaled $35,302.
On December 31, 1999, Diagnon Corporation ("Diagnon") changed its name to
BIOQUAL, Inc. The name change was effected as a result of the merger of Diagnon
and its wholly owned subsidiary, BIOQUAL, Inc., with Diagnon being the surviving
corporation. In the merger however, Diagnon adopted the name BIOQUAL, Inc., as
the name of the surviving entity. The business and operations of BIOQUAL, Inc.
will be the same as the consolidated business and operations of Diagnon together
with its wholly owned subsidiaries prior to the merger.
On September 22, 1999, the Company paid a cash dividend of $0.02 a share for
shareholders of record as of September 7, 1999. This was the first dividend
declared by the Company.
On September 17, 1999, the Company filed a patent application entitled "High
Throughput Assay Method for Enzymes which Metabolically Hydrolyze Nucleoside
Triphosphates and an Assay System Therefor". This application specifies broad
coverage of the proprietary assay technology known as HT-SANE (High Throughput
Screening Assay for NTP hydrolyzing Enzymes). The emergence of many strains of
antibiotic resistant bacteria and fungus has intensified the search for new
antibiotics. Most antibiotics and antifungal drugs kill by inhibiting the
activity of enzymes that are essential for growth. One of the limiting steps in
drug discovery is the necessity for a high throughput enzyme assay that can be
used to quickly screen large numbers of potential drugs. HT-SANE technology
introduces the capability to develop high throughput enzyme assays for a large
number of critical enzymes, specifically those that hydrolyze nucleoside
triphosphates (NTPs) in their respective biochemical reactions.
On September 27, 1999 the National Cancer Institute (NCI) extended the contract
"Development of New Methods and Strategies for Diagnosis, Treatment and
Prevention of Invasive Fungal Infection in Patients with Cancer and HIV
Infection" for one year to September 30, 2000. The
6
<PAGE>
funding for this extension totaled $86,227.
On October 25, 1999, at the Bluegrass Equine Critical Care Symposium in
Lexington, Kentucky, the Company introduced its newest equine product Eqstend
(partially purified equine albumin). Albumin is the main protein, of three blood
plasma proteins, which is important in regulating blood volume and in
transportation of elements within the blood stream. Eqstend is a natural
product for use in horses following blood loss, dehydration, diarrhea, and
several other protein deficit disorders. The primary users of Eqstend will be
large animal surgical hospitals and critical care units.
On December 27, 1999 BIOQUAL won a renewal competition and began work on the
National Institute of Allergy and Infectious Diseases contract "Care and Housing
of Hepatitis Research Animals". This seven-year contract totals $13,634,742.
Year 2000
- ---------
The Company performed an internal assessment of the scope of the Year 2000
computer systems and software problems and its potential effect on the operation
of the Company. The Company continues to monitor its information and non-
information systems for signs of malfunction due to the Year 2000 computer
problem. The Company has not encountered any delays of service or non-service
from its major suppliers of products and services, however there can be no
assurance that the Company will not be affected by another company's Year 2000
non-compliance. The Company spent approximately $20,000 in fiscal year 1999 and
approximately $20,000 to date in fiscal year 2000 to replace non-compliant
computers and software. The Company anticipates spending an additional $5,000
in fiscal year 2000 upgrading Year 2000 non-compliant productivity software.
Any costs incurred in connection with Year 2000 compliance are expensed as
incurred. It is the opinion of management that the Year 2000 computer problem
will not have a material effect on the Company's operation. However, the
Company continues to monitor the status of its largest customer, the National
Institutes of Health (NIH), regarding Year 2000 compliance. The NIH states that
all of its mission critical systems and 98% of its non-mission critical systems
are currently compliant. However, if the NIH does experience Year 2000 related
problems, the Company's financial condition may be adversely affected until such
time that the NIH's non-compliant contingency plan is initiated.
Not all instances of date failure can be anticipated or controlled. In planning
for the most reasonably likely worst-case scenario, (e.g. NIH systems being non-
compliant after January 1, 2000), or in cases in which, despite our efforts,
failures occur, we have developed a contingency plan. The contingency plan
includes the stockpiling of critical materials necessary to maintain operations.
7
<PAGE>
Results of Operations
- ---------------------
Three Months Comparison
- -----------------------
For the three months of operations ended November 30, 1999 (the Company's second
quarter in fiscal year 2000), contract revenues increased by 11.1% or $295,984
compared to the second quarter of fiscal year 1999. This increase was due to
increased government contract activity including two one-time purchases totaling
approximately $210,000. However, the increase is not as large as anticipated
due to a decrease in the number of commercial contracts compared to the second
quarter of fiscal year 1999, the expiration of a major contract on November 8,
1998, and the recording of a reserve for a $50,000 cost overrun, due to indirect
cost variances, on a contract that ended on December 27, 1999 (this amount is
less than 1% of the total contract value). Product sales increased to $8,139
compared to $2,960 in fiscal year 1999. Contract operating expenses increased
20.9% or $411,011 compared to the second quarter of fiscal year 1999 primarily
due to increased government contract activity (including the two one-time
purchases totaling approximately $210,000 mentioned above), an increase in
overhead expenses supporting the equine production facility of approximately
$60,000 compared to the second quarter in fiscal year 1999, offset by the
decrease in commercial contracts. Cost of goods sold increased to $8,891 from
$4,317 in the second quarter of fiscal year 1999. This increase was primarily
due to the increase in units sold during this fiscal year plus the expensing of
19 free sample doses of Eqstend. Research and development (R&D) expenses
increased to $46,950 compared to $44,935 in the second quarter of fiscal year
1999. This increase is primarily due to costs associated with the development
of the high throughput assay system previously mentioned. General and
administrative expenses increased 1.4% compared to the second quarter of fiscal
year 1999 primarily due to inflationary increases in several items of expense
offset by a decrease in legal expenses during this quarter compared to fiscal
year 1999. Total operating expenses increased 17.0% due to the above.
Operating income decreased to $48,282 compared to $171,508 in the prior year.
The decrease is primarily due to several factors: 1) the increase in contract
expenses without a comparative increase in related contract revenues resulting
in a decrease in the gross margin percentage on contracts this fiscal year, 2)
the increase in overhead expenses supporting the equine production facility of
approximately $60,000, and 3) the reserve for a $50,000 cost overrun, due to
indirect cost variances, on a contract that ended on December 27, 1999.
For this quarter, the Company had interest expense of $14,789 compared to
interest expense of $11,861 in the prior year.
The Company provided for taxes, primarily state income tax, which is estimated
at $10,000. State income tax expense is reimbursable under government
contracting regulations.
8
<PAGE>
Earnings Per Share (EPS) - For the three month comparison, options to purchase
29,502 shares of common stock at prices ranging from $2.8875 per share to $3.375
per share were outstanding on November 30, 1999 but were not included in the
computation of diluted EPS because the option exercise prices were greater than
the market price of the common shares. Options to purchase 59,845 shares of
common stock at prices ranging from $1.70 per share to $3.375 per share were
outstanding at November 30, 1998 but were not included in the computation of
diluted EPS because the option exercise prices were greater than the market
price of the common shares.
Six Month Comparison
- --------------------
For the six months of operations ended November 30, 1999, contract revenues
increased by 5.9% or $318,809 compared to the first six months of fiscal year
1999. This increase was due to increased government contract activity including
two one-time purchases totaling approximately $210,000. However, the increase
is not as large as anticipated due to a decrease in the number of commercial
contracts compared to the first six months of fiscal year 1999, the end of a
major contract on November 8, 1998, the fiscal year 1999 funding of a $34,976
indirect rate variance cost overrun of a contract that expired in fiscal year
1995 (the contract was administratively closed out on September 30, 1998), and a
reserve for a $50,000 cost overrun, due to indirect cost variances, on a
contract that expired on December 27, 1999. Product sales increased to $39,510
compared to $7,078 in fiscal year 1999. Contract operating expenses increased
11.7% or $476,898 compared to the first six months of fiscal year 1999 primarily
due to increased government contract activity (including the two one-time
purchases totaling approximately $210,000 mentioned above), an increase in
overhead expenses supporting the equine production facility of approximately
$60,000 compared to the first six months in fiscal year 1999, offset by the
decrease in commercial contracts. Cost of goods sold increased to $36,040 from
$9,390 in the first six months of fiscal year 1999. This increase was primarily
due to the increase in units sold during this fiscal year and the expensing of
19 free doses of Eqstend. Research and development (R&D) expenses increased to
$100,871 compared to $86,207 in the first six months of fiscal year 1999. This
increase is primarily due to costs associated with the development of the high
throughput assay system previously mentioned. General and administrative
expenses increased 4.1% compared to the first six months of fiscal year 1999
primarily due to inflationary increases in several items of expense offset by a
decrease in legal expenses during this year compared to fiscal year 1999. Total
operating expenses increased 10.9% due to the above.
Operating income decreased to $85,289 compared to $290,307 in the prior year.
The decrease is primarily due to several factors: 1) the increase in contract
expenses without a comparative increase in related contract revenues resulting
in a decrease in the gross margin percentage on contracts this fiscal year, 2)
the increase in R&D expenses 3) the increase in overhead expenses supporting the
equine production facility of approximately $60,000, 4) the reserve for a
$50,000 cost overrun, due to indirect cost variances, on a contract that ended
on December 27, 1999 and 5) $34,976 increased funding to cover an indirect cost
overrun
9
<PAGE>
for an expired contract during the previous fiscal year as mentioned above.
For the six months of this fiscal year, the Company had interest expense of
$27,607 compared to interest expense of $25,404 in the prior year.
The Company provided for taxes, primarily state income tax, which is estimated
at $19,000. State income tax expense is reimbursable under government
contracting regulations.
Earnings Per Share (EPS) - For the six month comparison, options to purchase
29,502 shares of common stock at prices ranging from $2.8875 per share to $3.375
per share were outstanding on November 30, 1999 but were not included in the
computation of diluted EPS because the option exercise prices were greater than
the market price of the common shares. Options to purchase 59,845 shares of
common stock at prices ranging from $1.70 per share to $3.375 per share were
outstanding at November 30, 1998 but were not included in the computation of
diluted EPS because the option exercise prices were greater than the market
price of the common shares.
Liquidity and Capital Resources
- -------------------------------
Assets
The changes in cash and cash equivalents are detailed in the Statements of
Consolidated Cash Flows on page 5. Total assets increased $324,056. This amount
was primarily attributable to an increase in accounts receivable of $249,945
consisting mainly of 1) an increase of $284,405 in trade accounts receivable
reflecting a slower collection rate compared to the previous fiscal year end, 2)
a $36,786 decrease in unbilled accounts receivable (current plus noncurrent)
primarily resulting from a $21,158 decrease in reimbursable indirect rate
variances for the current fiscal year, a $194,290 accrual of current period
unbilled direct costs to be billed during the third quarter of fiscal year 2000
offset by a $172,949 decrease in prior year unbilled direct costs that were
billed in June 1999, the recording of $13,031 unbilled contract fee retention to
be billed at the completion of the respective contracts, and a $50,000 reserve
for a cost overrun, due to indirect rate variances from prior years, on a
contract that expired on December 27, 1999, and 3) a $2,326 increase in other
accounts receivable. Other noncurrent assets increased $36,000 representing
deposits on a nonhuman primate housing unit order. Prepaid expenses increased
$33,416 primarily due to the prepayment of business liability and life insurance
premiums. Fixed assets, net of accumulated depreciation and amortization
increased $30,547 reflecting fixed asset purchases of $164,847 (mainly lab
equipment and facility improvements) offset by depreciation and amortization of
$134,300. Inventories increased by $10,499.
The increase above is partially offset by 1) a decrease in loans to officers of
$32,906 due to payments made during the first six months of this fiscal year, 2)
deferred income taxes decreased by $5,000 primarily as a result of utilizing a
portion of the federal income tax loss carryforward. The balance of the increase
was due to other miscellaneous factors.
10
<PAGE>
Liabilities
In the first six months of operations, total liabilities increased $324,105 as
compared to May 31, 1999. This increase is primarily attributable to 1) an
increase to borrowings under line-of-credit of $556,742 reflecting the slow
collection of trade accounts receivable and the payment of accrued bonuses from
the previous fiscal year, and 2) an increase in other accrued liabilities of
$25,853 primarily due to the accrual of a subcontractor invoice.
The above increase is partially offset by a decrease in accrued compensation and
related costs of $138,388 reflecting the payment of accrued bonuses from fiscal
year 1999 during the first quarter of this fiscal year, 2) payments totaling
$37,214 on capital leases reducing long-term debt, 3) a decrease in accrued
income taxes of $24,281, and 4) a decrease in accounts payable of $58,607. The
balance of the increase was due to other miscellaneous factors.
Stockholders' Equity
During the second quarter the company paid a cash dividend totaling $17,363 to
shareholders of record as of September 7, 1999.
The Company believes it has sufficient cash and financing sources to provide for
its ongoing operations and the Company continues to believe that the impact of
inflation, or the absence of it, will have no significant effect on its
operations.
Forward Looking Information
Statements herein that are not descriptions of historical facts are forward-
looking and subject to risk and uncertainties. Actual results could differ
materially from those currently anticipated due to a number of factors including
those set forth in BIOQUAL's Securities and Exchange Commission filings under
"Risk Factors", including risks relating to the early stage of products under
development; uncertainties relating to clinical trials; dependence on third
parties' future capital needs; and risks relating to the commercialization, if
any, of BIOQUAL's proposed products (such as marketing, safety, regulatory,
patent, product liability, supply, competition and other risks).
11
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Annual Meeting - October 20, 1999
Election of Directors
Four directors were elected:
For Withheld
------- --------
J. Thomas August, M.D. 747,029 782
Charles C. Francisco 747,029 782
Charles F. Gauvin 747,029 782
John C. Landon, Ph.D. 747,029 782
There were no other directors whose term of office as a director continued after
the meeting.
Other Matters Voted Upon at the Meeting
Proposal 2 To approve the appointment of Deloitte & Touche LLP as
---------- independent public accountants for the Company.
Affirmative Votes 746,914
Negative Votes 83
Abstain 814
12
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIOQUAL, Inc.
DATE January 13, 2000 /s/ John C. Landon
-------------------- --------------------------------
Chairman of the Board,
President and Chief Executive
Officer
DATE January 13, 2000 /s/ Michael P. O'Flaherty
-------------------- --------------------------------
Chief Operating Officer and
Secretary
DATE January 13, 2000 /s/ David A. Newcomer
-------------------- --------------------------------
Chief Financial Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-END> NOV-30-1999
<CASH> 70,323
<SECURITIES> 0
<RECEIVABLES> 1,999,452
<ALLOWANCES> 0
<INVENTORY> 298,095
<CURRENT-ASSETS> 2,129,722
<PP&E> 4,286,990
<DEPRECIATION> 2,783,358
<TOTAL-ASSETS> 4,947,790
<CURRENT-LIABILITIES> 1,432,706
<BONDS> 0
0
0
<COMMON> 16,004
<OTHER-SE> 3,480,083
<TOTAL-LIABILITY-AND-EQUITY> 4,947,790
<SALES> 39,510
<TOTAL-REVENUES> 5,696,978
<CGS> 36,040
<TOTAL-COSTS> 5,550,328
<OTHER-EXPENSES> 100,871
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,607
<INCOME-PRETAX> 59,302
<INCOME-TAX> 24,000
<INCOME-CONTINUING> 35,302
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,302
<EPS-BASIC> .04
<EPS-DILUTED> .04
</TABLE>
