SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
AMENDMENT NUMBER 1
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED MAY 31, 1996
[ ] TRANSITIONAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-11969
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-2408186
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
4127 Northwest 27th Lane
Gainesville, Florida 32606
(Address of principal executive offices)
Registrant's telephone number, including area code: (352) 373-2565
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
Common stock, $.01 par value
Common stock purchase warrant, entitling the holder to purchase one
share of common stock at $1.25 per share to December 7, 1996
Unit, consisting of (a) four shares of common stock and (b) four common
stock purchase warrants
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 ___
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $2,351,945
The appropriate aggregate market value of the voting stock of the Registrant
held by nonaffiliates of the Registrant as of August 21, 1996 (based upon the
closing bid and asked prices as reported by the National Association of
Securities Dealers Automatic Quotation System) was approximately $72,506,350.
The number of shares outstanding of each of the registrant's claims of stock,
as of August 21, 1996, is 41,085,513
<PAGE>2
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations
Sales for fiscal 1996 decreased $393,000 or 14% as compared to the previous
year. This was due to a decrease in sales volume resulting from lower orders
of Finally Free products, primarily in Canada, along with price reductions
necessitated by increased competition.
Gross margin for fiscal 1995 as a percentage of sales decreased by less than
.5% from 1994. Current year sales included a greater percentage to markets
where the Company has less favorable pricing arrangements. Additionally, 1996
revenues included approximately $43,000 of promotional sales of Finally Firm
products sold at little or no margin. The effect of these factors was offset
by improved vendor pricing and warehousing efficiency.
The Company continues to be dependent on the sales of one product, Finally
Free, which accounted for 97% of 1996 sales. As a result of a settlement with
the U.S. Food and Drug Administration, sales of Finally Free have been
restricted to foreign markets. Accordingly, expiration of the Company's US
Finally Free patents in 1996 is not expected to have a significant impact on
future operations. With further price decreases and reduced foreign sales
volume for Finally Free anticipated in future periods, the Company has been
active in its efforts towards diversification of both its product and markets.
Product and market diversification in the personal hair removal market was
accomplished in June 1996, when a subsidiary of the Company merged with Classy
Lady by Mehl of Puerto Rico, Inc. (Classy Lady) and the Company purchased
approximately 81% of the voting stock of SLS (Wales) Limited (SLS).
Classy Lady owns exclusive license rights to certain multiple hair removal and
laser hair removal technologies for which, U.S. and various foreign patents
have been obtained or are pending. SLS holds patents pending for laser hair
removal technologies compatible to those licensed to Classy Lady.
Additionally, SLS develops, manufactures and sells lasers primarily for use in
the field of hair removal. Intentions are to expand the operations of Classy
Lady and SLS and to further exploit their intellectual property rights through
the establishment of licensing arrangements.
During the current fiscal year, the Company began marketing efforts for
Raywatch, a wrist or clip-on watch that contains features which assist its
wearer in measuring and monitoring exposure to ultra violet light. The
Company is presently a non-exclusive, U.S. retail distributor for this
product. Negotiations will be considered for expanded distribution
arrangements and markets based on evaluation of initial results. Costs
related to the initial marketing of this product through May 31, 1996 were
approximately $75,000. Raywatch sales to date have not been significant. The
Company is currently investigating marketing strategies to expand distribution
of the Raywatch.
Initial indications are that the effort to introduce the Company's Finally
Firm product on a test market basis in Taiwan will not be successful.
Included in the 1996 charge for inventory write downs is $151,000 for write
down of inventory related to the Company's Finally Firm products.
Selling, general and administrative expenses for fiscal 1996 increased by
$500,000 as compared to the previous year. Increased depreciation and
amortization costs as a result of changes in the estimated useful lives of
certain intangible assets and equipment and the aforementioned marketing costs
related to the Raywatch product contributed to the increase. In addition,
legal, accounting and other professional fees for 1996 increased by $175,000.
These increases were primarily attributed to costs related to the Classy Lady
and SLS acquisitions. Bad debt expense for 1996, was approximately $124,000
higher than for the prior year, resulting primarily from a reassessment of the
collectability of an accounts receivable balances from the Company's
Australian and Spanish distributor.
Primarily as a result of the Company's lack of product diversification and
competition in the industry, the Company sales outlets have been restricted to
a limited number of customers. With the trend of declining sales in recent
years, the Company's policy has been to sell products on account to customers
with terms and conditions under which there is a greater degree of uncertainty
<PAGE>3
as to the collectability. Pricing is adjusted accordingly in consideration of
the increased risk. For this reason, the Company's provision for doubtful
accounts in recent years has been higher than that for previous years and for
other members of the industry. With the recent acquisitions of Classy Lady
and SLS creating increased product diversification and potential for new
markets and distribution alternatives for the Company's products, it is felt
that these risks will be significantly reduced in the future and the reserve
percentage decreased.
In January 1996, the Company received $172,000 insurance proceeds in
connection with the theft of certain inventory being carried at $99,000. The
amount by which the insurance proceeds exceed the carrying basis, has been
reflected as other income for the year ended May 31, 1996.
The increase in interest expense for the current year of $1,065,000 was
attributable to a $3,000,000 convertible debenture issued in April 1996.
Included in interest expense was a charge of $1,033,000 equal to the intrinsic
value of the beneficial common stock conversion feature provided to the
convertible debenture holders.
No provision for income tax recovery has been provided for 1996, due to the
uncertainty concerning the Company's ability to utilize the future tax
benefits of net operating losses generated during this period. For 1995, the
Company's provision for income taxes was offset by a reduction in the
Company's deferred tax asset valuation allowance of $98,000 resulting from
utilization of net operating loss carryforwards.
Management expects that the future direction of the Company will be dependent
upon its ability to enter into licensing arrangements for the laser hair
removal technologies owned by SLS and licensed by Classy Lady and to
commercialized successfully the consumable multiple hair removal patch
licensed under the Mehl Patent.
Liquidity and Capital Resources:
Debt and Equity Offerings:
During the last quarter of the current fiscal year the Company completed
private placements of $3,000,000 convertible debentures with interest at 8%
and 10,000 shares of 5% Cumulative Convertible Series C Preferred Stock with a
stated value of $1,000 per share at an aggregate purchase price of
$10,000,000. Costs related to these placements were approximately $230,000 in
cash and 162,000 shares of the Company's common stock. As of July 31, 1996,
all of the holders of convertible debentures had exercised their right to
convert and the Company issued 615,042 shares of its common stock and retired
the debt and related accrued interest.
Management intends to apply a significant portion of the funds from these
offerings towards the acquisition of Classy Lady and SLS (Wales) and to
provide working capital for future expansion of the operations of these
entities.
Other Liquidity Matters:
For the 1996 fiscal year, the Company's cash balance increased $9.2 million,
primarily resulting from funds generated by the aforementioned private equity
and debt placements. Additionally, funds were provided by operations, the
exercise of warrants and stock options, and note payments received from CDF
Acquisition Corp. (CDF). These resources were used to advance funds to Classy
Lady and SLS in anticipation of the pending acquisitions.
In June 1995, the Company had renegotiated the repayment terms of its note
receivable from CDF. Under the terms of the original agreement, the entire
principal plus accrued interest, at the prime rate, was payable in May 1996.
Under the terms of the new agreement, in June 1995, the Company received
$112,500 in cash and 200,000 shares of its own common stock valued at $37,500
as payment towards the CDF note receivable. In December 1995, the Company
received an additional payment of $59,000 ($50,000 principal and $9,000
interest). The remaining principal and accrued interest balances are to be
paid on an installment basis through June 1998. Interest on the unpaid
principal balance is at 9% through June 1996 and 7% thereafter.
<PAGE>4
In July 1995, Roadrunner Video Enterprises, Inc. was acquired by Roadrunner
Video Group, Inc. (collectively referred to as "Roadrunner"), formerly known
as Business Data Group, a publicly traded entity. In satisfaction of
Roadrunner's $750,000 note payable to the Company, Roadrunner issued 75,000
shares of $10 par value, 12% preferred stock to the Company. Each share of
preferred stock is convertible into 10 shares of Roadrunner common stock
through June 2000.
Although the preferred stock is a restricted security (not registered for
public trading) Roadrunner is obligated to register, for public sale, a
sufficient number of common shares to satisfy conversion rights attached to
the preferred shares. Management of Roadrunner originally anticipated the
completion of such registration by the second quarter of calendar year 1996.
Such registration is now anticipated in the Fall of 1996. When and if the
registration has been completed, intentions are to evaluate the merit of
retaining all or part of the preferred stock.
In December 1995, the Company agreed to accept 24,368 shares of Roadrunner
restricted common stock in payment of $41,000 preferred stock dividends. The
Company also received registration rights with this stock and anticipates that
it too will be registered for public sale by the fall of 1996.
In December 1995, the Company filed a post-effective amendment to Form S-1
with the Securities and Exchange Commission, to register for public sale,
881,218 shares of its common stock, issuable at $1.25 per share, upon the
exercise of outstanding common stock purchase warrants.
As of May 31, 1996, the Company had issued 509,572 shares of common stock upon
the exercise of stock purchase warrants. In addition, in September 1995, the
Company issued 75,000 shares of its common stock at $.41 per share upon the
exercise of nonqualified stock options. Proceeds from the issuance of common
stock pertaining to the warrants and stock options, net of costs related to
the aforementioned registration, were $664,000. There can be no assurance
that all or any of the remaining warrant holders will exercise their rights
under the warrants.
Capital Acquisitions:
With the Company's present dependency on sales of one product in limited
markets, efforts had been taken to pursue investment opportunities to enable
the Company to expand and diversify its market. In this regard, on June 4,
1996 Classy Lady by Mehl of Puerto Rico, Inc., a privately-held Puerto Rico
Company ("Classy Lady), merged with and into a wholly-owned subsidiary of the
Company (the "Merger"). Classy Lady is a development stage company and was
formed to exploit the hair removal technologies patented by two of its
principals. In consideration for the Merger, the Company issued an aggregate
of 25,000,000 shares of Common Stock, $.01 par value per share, to the
shareholders of Classy Lady.
Concurrent with the Classy Lady merger, the Company's shareholders approved an
increase in the number of $.01 par value common shares authorized to be issued
from 20 million to 60 million.
Additionally, on June 4, 1996, the Registrant completed the purchase of
capital stock representing in the aggregate of 81% interest in SLS (Wales)
Limited, a privately held Welsh company ("SLS") engaged in developing,
manufacturing and selling lasers primarily in the field of hair removal. The
consideration for the acquisition of the SLS shares consisted of a cash
payment of 1,255,000 pounds sterling (approximately $1.9 million) and the
issuance of 25,044 shares of the Registrant's Common Stock.
Advances to Classy Lady and SLS at May 31, 1996 were $850,000 and $3,200,000,
respectively. In part, the SLS advance was applied towards the required cash
payment in the business acquisition and the balance was used to retire SLS
debt and for working capital.
The Company anticipates that it will apply a significant portion of the
proceeds from the sale of the Series C Preferred Stock, funds derived from
operations and from the exercise of warrants to develop and market products
exploiting the SLS and Classy lady technologies. The Company anticipates that
it will require additional funds to complete its business plan and is
currently investigating the feasibility of private and public offerings of
equity and debt.
<PAGE>5
INDEPENDENT AUDITOR'S REPORT
To the Stockholders and Directors
of Mehl/Biophile International Corporation:
We have audited the accompanying consolidated balance sheet of MEHL/Biophile
International Corporation (formerly Selvac Corporation) and subsidiary as of
May 31, 1996, and the related consolidated statements of operations, changes
in stockholders' equity, and cash flows, for each of the years in the two year
period ended May 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Companies as of May 31, 1996,
and results of their operations and their cash flows for each of the years in
the two year period ended May 31, 1996, in conformity with generally accepted
accounting principles.
As is discussed in Note 17 to the financial statements, the Company's 1996
financial statements as previously issued did not include the intrinsic value
of the beneficial conversion features of its convertible Series C preferred
stock and convertible debentures and the corresponding changes for implied
dividends and interest. This discovery was made subsequent to the issuance of
the financial statements. The financial statements have been restated to
reflect this correction.
Raritan, New Jersey
July 11, 1996
<PAGE>6
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MAY 31, 1996
(RESTATED)
ASSETS
CURRENT ASSETS:
Cash and equivalents $9,838,998
Accounts receivable, net of allowance for doubtful
accounts of $343,416 484,182
Inventories 387,700
Marketable securities, held to maturity 477,690
Current portion of Note receivable, CDF Acquisition Corp. 105,625
Other current assets 55,660
Total current assets 11,349,855
PROPERTY AND EQUIPMENT, net of accumulated depreciation
of $741,470 5,928
PATENTS AND PATENT RIGHTS, net of accumulated amortization
of $865,756 95,399
NOTES AND LOANS RECEIVABLE, net of current portion:
CDF Acquisition Corp. 147,948
Classy Lady by Mehl of Puerto Rico, Inc. 860,491
Loans and advances, SLS (Wales) Limited 3,200,000
OTHER ASSETS
Investment in non-marketable securities 750,000
Marketable securities, available for sale 38,975
$16,448,596
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 208,376
Accrued expenses 112,396
Other current liabilities 9,900
Total current liabilities 330,672
CONVERTIBLE DEBENTURES 750,000
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Serial preferred stock, $10 par value, 200,000 shares
authorized:
5% cumulative convertible preferred stock, Series C,
$1,000 stated value,10,000 shares issued and
outstanding 10,000,000
Common stock, $.01 par value, authorized-20,000,000 shares:
Issued shares-18,132,516 181,325
Additional paid-in capital 14,315,929
Accumulated deficit (8,170,579)
Unrealized loss - marketable securities (3,152)
16,323,523
Treasury stock, at cost, 2,474,959 common shares (955,599)
Total stockholders' equity 15,367,924
$16,448,596
See notes to consolidated financial statements.
F-2
<PAGE>7
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED MAY 31,
1996 1995
(RESTATED)
REVENUES $ 2,351,945 $ 2,744,620
COST OF SALES 1,330,726 1,562,898
GROSS MARGIN 1,021,219 1,181,722
OPERATING EXPENSES:
Selling, general and administrative 1,586,300 1,087,462
Loss on sale of property and equipment 0 20,361
Charge for inventory write down 186,675 0
Loss on sale of marketable securities 0 7,822
1,772,975 1,115,645
(751,756) 66,077
OTHER INCOME (EXPENSES):
Investment income 120,700 126,537
Other income 72,728 0
Interest expense (1,065,544) 0
INCOME (LOSS) BEFORE INCOME TAXES (1,623,872) 192,614
PROVISION FOR INCOME TAXES 0 48,386
NET INCOME (LOSS) $(1,623,872) $ 144,228
NET INCOME (LOSS) PER COMMON SHARE $ (.21) $ .01
INCOME (LOSS) APPLICABLE TO COMMON STOCK $(2,896,705) $ 86,028
See notes to consolidated financial statements.
F-3
<PAGE>8
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON ADDITIONAL
PREFERRED STOCK STOCK ISSUED PAID-IN
SERIES A 1985 SERIES SERIES C SHARES AMOUNT CAPITAL
<S> <C> <C> <C> <C> <C> <C>
Year ended May 31, 1995
Balance, May 31, 1994 $ 240,000 $ 245,000 $ 0 16,256,485 $162,565 $ 8,813,998
Cash dividends on preferred stock:
Purchase of treasury stock
Net income
Balance, end of year 240,000 245,000 0 16,256,485 162,565 8,813,998
Year ended May 31, 1996
(Restated)
Cash dividends on preferred stock
Implied dividend equal to intrinsic value of
preferred stock conversion features 1,228,000
Intrinsic value of debenture conversion features 1,033,000
Treasury stock acquisitions
Common stock issued:
Conversion of preferred stock (240,000) (245,000) 776,000 7,760 477,240
Exercise of warrants and options 584,572 5,846 657,869
Conversion of debt 353,459 3,534 2,148,442
Debt acquisition costs 90,000 900 188,100
Private placement of preferred stock 10,000,000 72,000 720 (230,720)
Unrealized loss on marketable securities
Net loss
Balance, end of year $ 0 $ 0 $10,000,000 18,132,516 $181,325 $14,315,929
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
TREASURY LOSS ON
ACCUMULATED STOCK MARKETABLE
DEFICIT AT COST SECURITIES
<S> <C> <C> <C>
Year ended May 31, 1995
Balance, May 31, 1994 $(5,380,735) $ (687,218) $ 0
Cash dividends on preferred stock: (58,200)
Purchase of treasury stock (228,580)
Net income 144,228
Balance, end of year (5,294,707) (915,798) 0
Year ended May 31, 1996
(Restated)
Cash dividends on preferred stock (24,000)
Implied dividend equal to intrinsic value of
preferred stock conversion features (1,228,000)
Intrinsic value of debenture conversion features
Treasury stock acquisitions (39,801)
Common stock issued:
Conversion of preferred stock
Exercise of warrants and options
Conversion of debt
Debt acquisition costs
Private placement of preferred stock
Unrealized loss on marketable securities (3,152)
Net loss (1,623,872)
Balance, end of year $(8,170,579) $ (955,599) $(3,152)
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>9
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MAY 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(1,623,872) $144,228
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Loss on sale of property and equipment 0 20,361
Loss on sale of available for sale marketable
securities 0 7,822
Depreciation and amortization 308,045 172,104
Deferred taxes 0 48,386
Changes for inventory write downs 186,675 0
Provision for bad debts 258,588 163,660
Marketable securities received in payment
of preferred stock dividends and accounts
receivable (42,127) 0
Interest expense equal to intrinsic value of
debt conversion features 1,033,000
Interest paid with issuance of common stock 24,160 0
Changes in operating assets and liabilities:
Accounts receivable (111,173) 123,362
Inventories (38,420) (103,904)
Other operating assets (8,959) 50,448
Accounts payable 124,155 (365,882)
Accrued expenses 23,583 (88,430)
Other operating liabilities 350 2,400
Net cash provided by operating activities 134,005 174,555
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of held to maturity marketable securities (473,951) 0
Increase in notes and loans receivable (4,050,000) 0
Proceeds from sale of discontinued operations 0 350,000
Proceeds from sale of property and equipment 0 6,900
Proceeds from sale of available for sale
marketable securities 0 29,256
Property and equipment acquisitions (579) (11,856)
Notes receivable repayments 171,500 319,300
Net cash provided (used) by investing activities (4,353,030) 693,600
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of:
Convertible debentures 3,000,000 0
Series C Preferred stock, net of issuance costs 9,800,000 0
Common stock, net of issuance costs 663,715 0
Note repayment 0 (140,000)
Preferred stock dividends paid (36,900) (58,200)
Treasury stock acquisitions (2,301) (228,580)
Net cash (provided) by financing activities 13,424,514 (426,780)
CASH USED BY DISCONTINUED OPERATIONS 0 (145,727)
INCREASE IN CASH FOR THE YEAR 9,205,489 295,648
CASH, beginning of year 633,509 337,861
CASH, end of year $9,838,998 $633,509
See notes to consolidated financial statements.
F-5
<PAGE>10
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED MAY 31,
1996 1995
SUPPLEMENTAL SCHEDULES OF NON-CASH ACTIVITIES:
Marketable securities received in payment of:
Accounts receivable $ 702 $ 35,984
Preferred stock dividends $ 41,425
Receipt of non-marketable securities as payment
of notes receivable $ 750,000
Receipt of stock into treasury in payment of note
receivable $ 37,500
Conversion of preferred stock into common stock $485,000
Conversion of debentures into common stock $2,250,000
Common stock issued as payment of:
Debt and equity acquisition costs $491,400
Interest expense $ 24,160
Preferred stock dividend equal to intrinsic
value of beneficial conversion features $1,228,000
CASH FLOWS FROM DISCONTINUED ACTIVITIES ARE
COMPRISED OF:
Operating activities $(145,727)
See notes to consolidated financial statements.
F-6
<PAGE>11
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business of Company:
Mehl/Biophile International Corporation, formerly Selvac Corporation, (the
Company) is engaged in the sale and distribution of appliances and machines
utilizing a patented hair removal system. Until May 31, 1994 Video Knights,
Inc. (VKI), its wholly owned subsidiary, had owned and operated unique
concept-based home entertainment centers which rented and sold videotapes,
laser discs, video games and audio books. Effective at the close of business
on May 31, 1994, the company sold substantially all of the assets of VKI to
Roadrunner Video Enterprises, Inc. Accordingly, substantially all operations
of Video Knights, Inc. were discontinued effective June 1, 1994.
Additionally, VKI is authorized to sell franchises in several Mid-Atlantic
states.
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary, Video Knights, Inc. All material intercompany
balances and transactions have been eliminated.
Revenue Recognition:
Sales and related cost of goods sold are recognized upon shipment to customers
or as specified by terms of the related contracts.
Inventories:
Inventories are stated at the lower of cost (first-in, first-out) or market.
Property and Equipment:
Property and equipment are recorded at cost. The Company uses the straight-
line method of providing for depreciation and amortization for financial
reporting purposes and accelerated methods for tax purposes. Repair and
maintenance expenditures are charged to income as incurred.
Patents and Patent Rights:
The patents and patent rights are recorded at cost and are amortized on the
straight-line method over periods ranging from six to seventeen years.
Excess of Cost Over Fair Value of Assets Acquired:
The excess of the cost over the fair value of net assets at the date of
acquisition of acquired businesses is being amortized on the straight-line
method over periods ranging from ten to eleven years.
Deferred Franchise Costs:
Deferred franchise costs are recorded at cost and amortized on the straight
line method over a period of ten years.
Income Taxes:
In accordance with FASB 109, deferred income taxes are recorded to reflect the
tax consequences on future years of differences between the tax bases of
assets and liabilities and their financial reporting amounts at each year-end.
The tax benefit related to operating loss and tax credit carryforwards are
recognized if management believes, based on available evidence, that it is
more likely than not that they will be realized.
Use of Estimates:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-7
<PAGE>12
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (Continued)
Marketable Securities:
The Company classifies its marketable debt securities as "held to maturity" if
it has the positive intent and ability to hold the securities to maturity.
All other marketable securities are classified as "available for sale."
Securities classified as "available for sale" are carried in the financial
statements at fair value. Realized gains and losses, determined using the
first-in, first-out (FIFO) method, are included in earnings; unrealized
holding gains and losses are reported as a separate component of stockholders'
equity. Securities classified as held to maturity are carried at amortized
cost.
Cash and Cash Equivalents:
For purposes of reporting cash flows, cash and cash equivalents include money
market funds and other liquid investments maturing within 90 days of
acquisition.
Concentration of Credit Risk:
During the normal course of business, the Company maintains cash balances in
excess of FDIC insurance coverage limits. At May 31, 1996 cash funds in
excess of such insurance coverage limits were $9,572,400. Private insurance
in the amount of $25,000,000 is carried on a portion of these funds comprising
approximately $9,500,000 of this balance. The Company has not experienced any
losses related to these investments.
At May 31, 1996 two separate wholesale customers accounted for 47% and 34%
respectively of the Company's total accounts receivable balance. The Company
does not require collateral, and payment terms offered in certain
circumstances by the Company are for periods in excess of those general
provided typical business situations. Reserves for potential credit losses are
maintained. Management feels such reserves are adequate.
2. CONTINGENCIES:
Litigation:
Since January 1990, the Company has been engaged in an ongoing dispute with
the United States Food and Drug Administrative (FDA) regarding the marketing
status of Finally Free Hair Remover for personal (non-professional) use.
In July 1994, the FDA determined that Finally Free shall be considered a Class
III device under the Food, Drug and Cosmetic Act and accordingly, will require
premarket approval before it is sold, manufactured or distributed in the U.S.
Discussions have taken place between management and a major U.S. Corporation
in the personal care appliance industry concerning the pursuit of required FDA
approval in this regard. These discussions are in their preliminary stage and
there can be no certainty that such actions will be taken, or if they are,
that they will be successful.
At May 31, 1996, the carrying value of intangibles relating to domestic
Finally Free product is not material.
In March 1991, the Company initiated an action relating to several ongoing
royalty issues with the licenser of its radio frequency epilation technology
whereby the licenser has asserted the Company underpaid its obligations under
certain royalty agreements. Concurrent with the Classy Lady acquisition (Note
4), the parties agreed to dismiss the action which was pending in Federal
District Court, Boston, Massachusetts.
Insurance Claim:
In January 1996, the Company received insurance proceeds of $172,000 in
connection with the theft of certain inventory being carried at $99,000. The
difference between the insurance proceeds and the carrying value of the
inventory, has been recorded as other income.
F-8
<PAGE>13
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. CHANGE IN ACCOUNTING ESTIMATE:
Effective September 1, 1995, the Company reduced the estimated useful lives
used in calculating depreciation and amortization of certain intangible assets
and equipment. Estimated useful lives of certain molds used in the production
of the Company's principal product lines have been reduced in anticipation of
discontinuance of specific product designs prior to the date originally
anticipated. The estimated useful life of the excess of cost over the fair
value of assets acquired from the Company's acquisition of Mehl International
Corporation in 1985 have been reduced based on expectations that the use of
certain trademarks and trade names will be discontinued at an earlier date
than originally foreseen. The effected assets will continue to be depreciated
using the straight line method over the estimated remaining useful lives, as
adjusted.
Depreciation and amortization expense included in selling, general and
administrative expenses was approximately $103,000 higher for the year ended
May 31, 1996 than that which would have been calculated prior to the change in
accounting estimate. As a result, loss before income taxes was increased by
$103,000 and net loss per common share increased by $.01.
The following reflects those assets effected by the change in accounting
estimate:
Original Adjusted
Estimated Estimated
Useful Useful
Cost Life Life
Production molds, included in
machinery and equipment:
Finally Free $146,000 5 years 3 years
Finally Firm 63,000 5 years 2.25 years
Excess of cost over fair value
of assets acquired $73,000 40 years 11 years
4. SUBSEQUENT ACQUISITIONS:
On June 4, 1996, the Registrant completed the purchase of capital stock
representing in the aggregate of 81% interest in SLS ( Wales) Limited, a
privately held Welsh company ("SLS") engaged in developing, manufacturing and
selling lasers primarily in the field of hair removal. The consideration for
the acquisition of the SLS shares consisted of a cash payment of 1,255,000
pounds sterling (approximately $1.9 million) and the issuance of 25,044 shares
of the Company's Common Stock. SLS holds patents pending in the field of
laser depilation.
Additionally, on June 4, 1996, Classy Lady by Mehl of Puerto Rico, Inc. a
privately-held Puerto Rico company ("Classy Lady"), merged with and into a
wholly-owned subsidiary of the Company (the "Merger"). In consideration for
the Merger, the Company issued an aggregate of 25,000,000 shares of Common
Stock, $.01 par value per share, to the shareholders of Classy Lady.
In exchange for the issuance of the shares of the Company issued pursuant to
the Merger, the Company obtained all of the stock of Classy Lady, which owns
the exclusive licensing rights granted to Classy Lady by Thomas L. Mehl, Sr.
for a multiple hair removal technology and by Dr. Nardo Zaias for a laser hair
removal technology.
F-9
<PAGE>14
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. SUBSEQUENT ACQUISITIONS: (continued)
The Merger was completed in accordance with the terms of the Second amended
and Restated Agreement and Plan of Merger dated as of June 4, 1996 ( the
"Merger Agreement"). Pursuant to the Merger Agreement, the name of the
Company was changed to MEHL/Biophile International Corporation.
The following unaudited proforma information shows the results of the
Company's operations as if the SLS acquisition, accounted for as a purchase,
and the Classy Lady merger, accounted for as a non-monetary exchange, had
occurred at the beginning of each year:
Year Ended May 31,
1996 1995
Operating revenues $4,809,000 $5,040,000
Net loss $(3,497,000) $(770,000)
Loss per common share $(.12) $(.02)
The proforma results of operations are not necessarily indicative of the
actual results of operations that would have occurred had the transactions
actually occurred at the beginning of the respective periods, or of results
which may occur in the future.
5. INVENTORIES:
At May 31, 1996, inventories consist entirely of personal care appliance
finished goods.
6. PROPERTY AND EQUIPMENT:
Property and equipment is comprised as follows:
ESTIMATED USEFUL
LIFE IN YEARS
Machinery and equipment $ 677,836 2 - 7
Furniture and fixtures 69,562 7
747,398
Less: Accumulated depreciation and
amortization (741,470)
$ 5,928
Depreciation and amortization of property and equipment was $108,229 in 1996
(see Note 3) and $93,534 in 1995.
At May 31, 1996, fully depreciated machinery and equipment costing $210,000
was in use on a regular basis by the Company.
7. ACCRUED EXPENSES:
Accrued expenses consist of the following:
Professional fees $ 70,513
Interest 8,384
Royalties 20,099
State franchise taxes 9,120
Other 4,280
$112,396
F-10
<PAGE>15
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. STOCKHOLDERS' EQUITY:
Preferred Stock:
$1,000 Stated Value Series C
5% Cumulative Convertible Preferred Stock
Each share of Series C stock is convertible into common stock of the Company
at the lessor of 80% of the average market price of the common stock, for the
five trading days prior to conversion, with a minimum and maximum conversion
price of $3.00, and $7.50 respectively. The shares of common stock to be
issued upon conversion is determined by dividing the stated value of the
preferred shares by the conversion price. Dividends are payable quarterly
commencing August 31, 1996. At May 31, 1996, undeclared and unpaid dividends
were $20,800.
The intrinsic value of the Series C preferred stock conversion feature,
determined to be $1,228,000, has been charged to paid in capital and recorded
as an implied dividend for the year ended May 31, 1996.
$10 Par Value Series A and 1985 Series
12% Cumulative Convertible Preferred Stock
During the year ended May 31, 1996, all outstanding shares of the Series A and
the 1985 Series preferred stock were converted into 776,000 shares of common
stock, in aggregate.
Common Stock:
In conjunction with the Classy Lady merger on June 4, 1996, the number of $.01
par value common shares which the Company is authorized to issue was increased
from 20,000,000 to 60,000,000.
As of May 31, 1996, warrants to purchase 371,646 common shares at $1.25 per
share were outstanding. The expiration date of these common stock warrants,
as extended, is December 7, 1996.
The Company has reserved 371,646 shares of common stock for conversion of
warrants, a maximum of 3,333,333 shares for conversion of Series C preferred
stock and 261,503 for conversion of debentures (see note 15).
Stock Options:
Under the terms of the Company's stock option plan, incentive options to
purchase common shares may be granted to employees at a price to be fixed by
the Board of Directors or Stock Option Committee, but not less than the fair
value on the date of grant (110% of fair value if the optionee owns or would
own 10% of the outstanding shares if the options were exercised).
Nonqualified options may be granted at prices less than fair value. Incentive
options have a duration of seven years from the date granted.
NONQUALIFIED
Year granted 1983-1989
Option price per share $.41 - $1.44
Year Ended May 31, 1995:
Balance outstanding, beginning of year 75,000
Year Ended May 31, 1996:
Options exercised (75,000)
Balance outstanding end of year 0
F-11
<PAGE>16
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. NOTES AND LOANS RECEIVABLE:
Notes and loans receivable are comprised as follows:
Note receivable, CDF Acquisition Corp. (CDF), principal
balance of $150,000 plus accrued interest of $103,573 (1) $ 253,573
Notes receivable, Classy Lady by Mehl of Puerto Rico, Inc.
(Classy Lady), principal balance of $850,000 plus
accrued interest of $10,491 (2) 860,491
Loans and advances, SLS (Wales) Limited (3) 3,200,000
4,314,064
Less current portion 105,625
$4,208,439
(1) A current director of the Company and a former officer and director are
stockholders in CDF. The note receivable from CDF was obtained as
consideration when the Company sold the stock of its former wholly owned
subsidiary Beauty Resources, Inc. (BRI) to CDF in May 1991. In June 1995, the
note was renegotiated. Under the new agreement, the remaining outstanding
principal balance is payable in three installments of $50,000 in December
1996, 1997 and June 1998. Interest on the unamortized principal balance, at
9% through June 1996 and 7% thereafter, is payable with each principal
installment. Interest accrued prior to the refinancing, is payable at $50,000
in December 1996 and $47,948 in December 1997.
(2) During the year ended May 31,1996, in contemplation of the merger
discussed in Note 4, the Company made advances of $850,000, in aggregate,
evidenced by a promissory note, to Classy Lady. The entire principal balance
plus accrued interest, at 6%, is payable on August 20, 1996.
(3) In contemplation of the acquisition of SLS (Wales) Limited discussed in
Note 4, the Company advanced $3,200,000 to SLS (Wales) Limited. Upon closing
the acquisition of June 4, 1996, a portion of this advance equivalent to
1,255,000 pounds sterling was applied to the purchase price.
10. COMMITMENTS:
Royalties:
The Company has entered into agreements which provide for royalty payments
based on a percentage of net sales or units sold of its principal products.
Royalty expense under the agreements for fiscal years ended May 31, 1996 and
1995 was $64,000 and $101,000, respectively.
Operating Leases:
The Company leases office facilities under a non-cancelable operating lease,
which requires future minimum lease payments of $6,000 in aggregate for the
year ending May 31, 1997.
Additionally, the Company's subsidiary is contingently liable under several
lease agreements assigned to other parties during fiscal 1996 and 1995. The
Company is a guarantor to one of these agreements. No amounts have been
provided for potential loss for future rents due under these leases.
F-12
<PAGE>17
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. COMMITMENTS: (continued)
At May 31, 1996, future annual minimum lease payments under these agreements
are:
Year Ending May 31,
1997 $ 357,833
1998 248,541
1999 251,079
2000 258,060
2001 140,412
Thereafter 222,268
$1,478,193
Facilities rent expense for the years ended May 31, 1996 and 1995, was $55,922
and $76,947 respectively, including rent to Optivest (Note 14).
11. NET INCOME (LOSS) PER COMMON SHARE:
Net income (loss) per common share is computed based on net income (loss) for
the period after providing for preferred stock dividend requirements. The
number of shares used in the computation is the weighted average number of
common shares and, when their effect would be dilutive, common equivalent
shares outstanding during the period. Weighted average number of shares
during the periods are 14,075,207 in 1996 and 14,345,234 in 1995.
12. INCOME TAXES:
The components of the provision for income taxes are as follows:
YEAR ENDED MAY 31,
1996 1995
Current:
Federal $ 0 $ 0
State 0 0
$ 0 $ 0
Deferred:
Federal $ 0 $34,000
State 0 14,386
$ 0 $48,386
The following is a summary of the tax effects of the significant temporary
differences which comprise the Company's deferred tax asset at May 31, 1996:
Bad debt reserve $147,700
Depreciation 35,600
Amortization of intangibles (26,500)
Tax credit carryforwards 66,000
Loss carryforwards 1,640,000
Other 3,800
Valuation allowance (1,866,600)
Total Asset $ 0
F-13
<PAGE>18
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12.INCOME TAXES: (continued)
As of May 31, 1996, the Company had federal net operating losses (NOL) and tax
credit carryforwards, for income tax purposes, available as follows:
INVESTMENT RESEARCH AND
FISCAL YEAR OF FEDERAL TAX DEVELOPMENT
EXPIRATION NOL CREDITS TAX CREDITS
1997-2001 $ 0 $81,000 $21,000
2006 2,153,000 0 0
2007 238,000 0 0
2008 105,000 0 0
2009 1,286,000 0 0
2011 400,000 0 0
$4,182,000 $81,000 $21,000
Tax credits are subject to a statutory reduction of up to 35% in accordance
with Tax Reform Act of 1986. Application of net operating loss carryforwards
in future periods are subject to limitations as a result of the Classy Lady
merger. Management does not feel these limitations will have an adverse
effect on the Company's financial condition.
Net operating losses may generate tax benefits of $1,640,000 which has been
offset by a valuation allowance because of the uncertainty of ultimate
realization. The Company's total valuation allowance increased by $222,400
during the year ended May 31, 1996 principally due to additional net operating
losses. The valuation allowance decreased by $97,800 during the year ended
May 31, 1995 principally due to the current year use of net operating losses.
A reconciliation of the statutory U.S. Federal income tax rate and the
effective income tax rate for the years ended May 31, 1996 and 1995 is as
follows:
1996 1995
Statutory Federal income tax rate (34.0%) 34.0%
Increases (decreases) resulting from:
State income taxes, net of Federal tax benefit 4.9
Amortization of intangible assets 8.3 12.5
Non-deductible life insurance expense 3.0
Increase (decrease) in federal deferred
tax valuation allowance 25.7 (32.0)
Other 2.7
Effective tax rate 0.0% 25.1%
13. SALES TO SIGNIFICANT CUSTOMERS AND EXPORT SALES:
For the year ended May 31, 1996 and 1995, the Company had sales to two major
international customers accounting for 95% and 86% of consolidated net sales
from continuing operations, respectively. One of these customers accounted
for 89% and 76% of net sales in 1996 and 1995, respectively.
Approximately 99% of consolidated sales from continuing operations in 1996 and
1995 were to foreign customers, located principally in Asia and Europe. Sales
which are denominated in currencies other than U.S. dollars were not
significant for either period.
F-14
<PAGE>19
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
14. RELATED PARTY TRANSACTIONS:
At May 31, 1996, 850,000 shares (5.4% of the Company's outstanding common
stock) were owned by Optivest Technologies Corp. Additionally, several
officers and directors of the Company are also officers and directors of
Optivest. During the year ended May 31, 1995, the Company repaid $140,000
borrowed from Optivest in fiscal 1994 under a promissory note agreement.
Additionally, the Company leases an administrative facility from Optivest, on
a month-to-month basis. Rent to Optivest for use of administrative facilities
was $30,000 for 1996 and 1995.
Interest income on the CDF note receivable (Note 9) was $16,700 in 1996 and
$25,000 in 1995.
15. CONVERTIBLE DEBENTURES:
During the year ended May 31, 1996, the Company issued, in aggregate
$3,000,000 in convertible debentures which bear interest at 8%, are due March
31, 1997 and are convertible into common stock of the Company at a conversion
price equal to the lessor of 80% of the average market price of the common
stock, on the five trading days prior to conversion or $10.00. The debt
agreement also provides conversion privileges to the debt holder for any
unpaid interest amounts. The intrinsic value of the conversion feature,
determined at $1,033,000, has been charged to paid-in-capital and interest
expense for the year ended May 31, 1996.
As of May 31, 1996, $2,250,000 of these debentures and unpaid interest of
$24,160 were converted into an aggregate of 353,459 shares of common stock.
On July 19, 1996, the remaining $750,000 of debt and unpaid interest were
converted into 261,583 shares of the Company's common stock.
Costs associated with the issuance of each debenture are being amortized using
the straight line method over the life of the debt. Upon conversion of the
debenture any remaining unamortized costs are charged to additional paid in
capital (APIC). Amortization expense of these costs was $26,350 and amounts
charged to APIC were $122,200 for the year ended May 31, 1996.
16. INVESTMENT IN MARKETABLE AND NON-MARKETABLE SECURITIES:
In July 1995, the Company received 75,000 shares of $10 par value, 12%
cumulative preferred stock of Roadrunner Video Group, Inc. (Roadrunner), in
satisfaction of a $750,000 note payable by Roadrunner to the Company. The
Roadrunner preferred stock is a restricted security (not registered for public
sale), each preferred share is convertible into 10 shares of Roadrunner common
stock.
In December 1995, the Company accepted 24,368 shares of Roadrunner restricted
common stock valued at $41,425 as payment of Roadrunner preferred stock
dividend. The securities are classified as "available for sale securities"
and reported at fair value. The terms of contractual agreements between
Roadrunner and the Company, require that Roadrunner register, for public sale,
the aforementioned 24,368 restricted common shares and a sufficient number of
common shares to satisfy the Company's preferred stock conversion rights. The
closing bid quotation for Roadrunner common stock on May 31, 1996 was $1.56.
F-15
<PAGE>20
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
16. INVESTMENT IN MARKETABLE AND NON-MARKETABLE SECURITIES: (continued)
At May 31, 1996, amortized cost, market or estimated fair value and the
cumulative unrealized holding loss on the Company's investment in marketable
securities is summarized as follows:
Market or Cumulative
Amortized Estimated Unrealized
Cost Fair Value Holding Loss
Available for Sale
Equity Securities $ 42,127 $ 38,975 $(3,152)
Held-to-Maturity
U.S. Treasury obligations, maturing
July 5, 1996 $477,690 $477,682 $ (8)
17. RESTATEMENT OF FINANCIAL STATEMENTS:
In May 1997, the Company was notified by the Securities and Exchange
Commission (SEC) that the manner with which the Company had accounted for its
issuance of convertible preferred stock and debentures was inconsistent with
the views of the SEC's accounting staff. In a letter to the Emerging Issues
Task Force of the Financial Accounting Standards Board in March of 1997, the
SEC had formalized their interpretation of the application generally accepted
accounting principals with regard to accounting for the issuance of securities
with "beneficial conversion features".
The accompanying financial statements have been restated to conform to the SEC
position in this regard. As a result of the restatement, interest expense and
preferred stock dividends increased by $1,033,000 and $1,228,000,
respectively. Additional paid-in capital has been increased by $2,261,000 to
reflect the intrinsic value of the beneficial conversion features of Series C
convertible preferred stock and convertible debentures (see Notes 8 and 15).
The Company's net loss, loss per common share and loss applicable to common
stock for the year ended May 31, 1996, as originally reported and as restated
are as follows:
Increase
Resulting
As Originally From As
Reported Restatement Restated
Net income (loss) $(590,872) $(1,033,000) $(1,623,872)
Net income (loss) per common share $ (.05) $ (.16) $ (.21)
Income (loss) applicable to
common stock $(635,705 $(2,261,000) $(2,896,705)
F16
<PAGE>21
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized on September 4, 1997
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(Registrant)
By: (s) Thomas L. Mehl, Sr.
Thomas L. Mehl, Sr.
Chairman of the Board,
President and Chief Executive Officer
<PAGE>22
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
(11) STATEMENT RE: COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
Computation of average number of shares outstanding used in determining primary
and fully diluted earnings per share:
YEAR ENDED MAY 31,
1996 1995
PRIMARY:
Weighted average number of shares
outstanding 14,075,207 14,345,234
Assumed exercise of common stock
warrants and certain stock options
based on average market value 0 0
Weighted average number of shares used
in primary per share computations 14,075,207 14,345,234
FULLY DILUTED:
Weighted average number of shares
outstanding 14,075,207 14,345,234
Assumed conversion of Series A
cumulative convertible stock 0 0
Assumed conversion of 1985 Series
cumulative convertible stock 0 0
Assumed conversion of Series C cumulative
convertible stock 0 0
Assumed conversion of convertible debentures 0 0
Assumed exercise of common stock
warrants and certain options
based on higher of average or
closing market price 0 0
Weighted average number of shares
used in fully diluted per share
computations 14,075,207 14,345,234
F-17
<PAGE>23
MEHL/BIOPHILE INTERNATIONAL CORPORATION
(FORMERLY SELVAC CORPORATION) AND SUBSIDIARY
(11) STATEMENT RE: COMPUTATION OF NET INCOME (LOSS) PER COMMON SHARE
YEAR ENDED MAY 31,
1996 1995
Weighted average number of shares outstanding:
Primary 14,075,207 14,345,234
Fully diluted 14,075,207 14,345,234
Primary:
Net income (loss) $(1,623,872) $144,228
Paid and cumulative undeclared preferred
stock dividends (44,833) (58,200)
Implied dividend equal to intrinsic value of
preferred stock conversion features (1,228,000) 0
Net income (loss) applicable to common stock $(2,896,705) $86,028
Net income (loss) per share $ (.21) $ .01
For the above years, earnings per share, assuming full dilution, has not been
presented since the effect would be antidiluting.
F-18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE BALANCE SHEET AND INCOME STATEMENT INCLUDED IN PART II, ITEM 7 OF
THE REGISTRANT'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED
MAY 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> MAY-31-1996
<CASH> 9,838,998
<SECURITIES> 477,690
<RECEIVABLES> 827,598
<ALLOWANCES> 343,416
<INVENTORY> 387,700
<CURRENT-ASSETS> 11,349,855
<PP&E> 747,398
<DEPRECIATION> 741,470
<TOTAL-ASSETS> 16,448,586
<CURRENT-LIABILITIES> 330,672
<BONDS> 750,000
<COMMON> 181,325
0
10,000,000
<OTHER-SE> 5,186,599
<TOTAL-LIABILITY-AND-EQUITY> 16,448,596
<SALES> 2,351,945
<TOTAL-REVENUES> 2,545,373
<CGS> 1,330,726
<TOTAL-COSTS> 3,136,245
<OTHER-EXPENSES> 1,772,975
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,065,544
<INCOME-PRETAX> (1,623,872)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,623,872)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,623,872)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> (.21)
</TABLE>
