<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
--------------
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
--------------------- -----------------------
Commission File Number: 1-10285
-------------------------------------------------------
BIOMAGNETIC TECHNOLOGIES, INC.
- - - - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
California 95-2647755
- - - - -------------------------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
<TABLE>
<S> <C>
9727 Pacific Heights Boulevard, San Diego, California 92121-3719
- - - - --------------------------------------------------------------------------------------------------------
(Address of principal executive offices) (zip code)
</TABLE>
(619) 453-6300
- - - - -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
- - - - -------------------------------------------------------------------------------
(Former name, former address and formal fiscal year,
if changed since last report)
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. /X/ Yes / / No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. / / Yes / / No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of May 12, 1995, Registrant had only one class of common stock of
which there were 39,910,174 shares outstanding.
<PAGE> 2
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BIOMAGNETIC TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31,
1995 SEPTEMBER 30,
(UNAUDITED) 1994
----------- -------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 5,662 $ 754
Short-term investments 7,856
Restricted cash 4,270 1,195
Accounts receivable 815 123
Inventories 1,904 2,023
Prepaid expenses and other current assets 110 468
-------- --------
Total current assets 20,617 4,563
Property and equipment 9,839 11,239
Less accumulated depreciation and amortization (7,741) (8,316)
-------- --------
2,098 2,923
Restricted cash 1,100 1,422
Other assets 534 511
-------- --------
Total assets $ 24,349 $ 9,419
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 1,093 $ 1,090
Accrued liabilities 1,777 1,057
Accrued salaries and employee benefits 614 529
Customer deposits 2,960 1,556
Notes payable to related parties 825 767
Short-term debt 2,137 1,678
-------- --------
Total current liabilities 9,406 6,677
Other liabilities 461 459
-------- --------
Total liabilities 9,867 7,136
SHAREHOLDERS' EQUITY
Common stock -- no par value, 60,000,000 shares
authorized; 35,027,697 and 10,027,697 shares issued and
outstanding in March and September, respectively 75,468 60,658
Accumulated deficit (60,986) (58,375)
-------- --------
Total shareholders' equity 14,482 2,283
-------- --------
Total liabilities and shareholders' equity $ 24,349 $ 9,419
======== ========
</TABLE>
See notes to consolidated financial statements.
1
<PAGE> 3
BIOMAGNETIC TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(IN THOUSANDS, EXCEPT PER-SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, MARCH 31,
1995 1994 1995 1994
-------- -------- -------- -------
REVENUES
<S> <C> <C> <C> <C>
Product sales $ 3,057 $ 477 $ 5,776 $ 545
Contract research 40 86
Interest income 44 50 75 92
-------- ------- -------- -------
Total revenues 3,141 527 5,937 637
EXPENSES
Cost of product sales 1,662 249 3,139 389
Contract research costs 43 91
Research and development 1,263 1,617 2,514 3,202
Marketing, general and administrative 1,190 904 2,283 1,867
Interest expense 285 14 521 30
-------- ------- -------- -------
Total expenses 4,443 2,784 8,548 5,488
-------- ------- -------- -------
NET LOSS $ (1,302) $(2,257) $ (2,611) $(4,851)
======== ======= ======== =======
NET LOSS PER SHARE $ (0.13) $ (0.23) $ (0.26) $ (0.49)
======== ======= ======== =======
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 10,305 9,929 10,165 9,926
======== ======= ======== =======
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 4
BIOMAGNETIC TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
1995 1994
-------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (2,611) $(4,851)
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation and amortization 671 968
Interest expense 199
Changes in operating assets & liabilities:
Restricted cash (2,753) (2,874)
Prepaid and other current assets 358 11
Accounts receivable (692) 367
Inventories 310 229
Accounts payable 3 487
Accrued liabilities 720 (98)
Customer deposits 1,404 2,484
Changes in other operating assets and liabilities 64 (69)
-------- -------
Net cash used for operating activities (2,327) (3,346)
INVESTING ACTIVITIES
Change in short-term investments (7,856) 3,728
Capital expenditures (37) (832)
-------- -------
Net cash (used for) provided by investing activities (7,893) 2,896
FINANCING ACTIVITIES
Principal repayments on short-term debt (2,000) (38)
Proceeds from short-term borrowing 2,318
Proceeds from sale of common stock 14,810 20
-------- -------
Net cash provided by (used for) financing activities 15,128 (18)
-------- -------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,908 (468)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 754 541
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,662 $ 73
======== =======
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 5
BIOMAGNETIC TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation
The unaudited condensed consolidated financial statements included herein
include the accounts of Biomagnetic Technologies, Inc. and its subsidiary (the
"Company") and have been prepared in accordance with the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Although the Company believes that the
disclosures made in this report are adequate to make the information not
misleading, it is suggested that these financial statements be read in
connection with the financial statements and notes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended September 30,
1994.
In the opinion of the Company, the accompanying unaudited financial statements
contain all adjustments, consisting only of normal recurring accruals,
necessary to present fairly its financial position at March 31, 1995 and the
results of operations and its cash flows for the periods presented.
2. Net Loss per Share
Shares used in computing net loss per share include the weighted average of
common stock outstanding. Common stock equivalents are antidilutive and are
excluded from the computation of net loss per share.
3. Inventories
The composition of inventories was as follows:
<TABLE>
<CAPTION>
March 31, September 30,
1995 1994
---- ----
<S> <C> <C>
Raw Materials $ 226 $ 211
Work-In-Process 1,460 1,544
Finished Goods 218 268
------ ------
$1,904 $2,023
====== ======
</TABLE>
4. Sale of Common Stock
At the Company's Annual Meeting of Shareholders held March 24, 1995, the
shareholders approved the proposed sale of common stock to a foreign investment
group, Dassesta International S.A. ("Dassesta"). On March 31, 1995, the
Company completed the private sale of 25 million shares of newly issued common
stock to Dassesta for $15 million. At the closing of the financing transaction
the Company repaid a $1.5 million short-term loan provided by Dassesta and
$500,000 of other short-term debt.
5. Subsequent Event -- Conversion of Short-term Debt to Common Stock
At March 31, 1995 the Company had $2,210,000 outstanding in 10% senior secured
promissory notes which mature May 31, 1995. The notes include $850,000
payable to certain directors and shareholders of the Company affiliated with
such directors which are classified as notes payable to related parties.
4
<PAGE> 6
In March and April 1995, the Company executed agreements with the holders of
$2,210,000 of notes providing for the conversion of the note principal plus
accrued interest to common stock in connection with the completion of the sale
of common stock to Dassesta (See Note 4.). The conversion agreements contained
similar terms to non-binding term sheets previously negotiated with certain
noteholders in November, 1994. The conversion agreements provide for i) a 10%
increase in the principal balance of the notes for purposes of conversion to
common stock, ii) issuance of common stock at a price per share utilized in the
Dassesta financing less 10% and iii) a 10% increase in the number of shares of
common stock subject to purchase under previously issued option agreements. On
April 17, 1995 the Company issued 4,882,477 shares of common stock in
accordance with the conversion agreements. The Company will record an
extraordinary charge in April, 1995 of approximately $595,000, representing the
excess of the fair value of common stock and additional options issued in
connection with the conversion over the net carrying value of the notes at
conversion.
5
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Biomagnetic Technologies, Inc. ("BTi") is the leader in magnetic source imaging
("MSI") and has developed the Magnes(R) system, an instrument designed to
assist in the noninvasive diagnosis of a broad range of medical disorders. The
Magnes system developed by the Company uses advanced superconductor technology
to measure and locate the source of magnetic fields created by the human body.
While traditional imaging methods provide anatomical detail, the measurement of
the body's magnetic fields by MSI provides information about normal and
abnormal functions of the brain, heart and other organs. The Company is
focusing the development of its technology on large commercial market
applications such as brain surgery, the diagnosis and surgical planning for
treatment of epilepsy and life-threatening cardiac arrhythmias.
Results of Operations
Total revenues for the second quarter of fiscal 1995 were $3,141,000 compared
to $527,000 for the second quarter of fiscal 1994, and the net loss was
$1,302,000 compared to a net loss of $2,257,000 for the comparable period last
fiscal year. The higher revenues for the quarter were the result of sales of
Magnes systems and Magnes components. The decrease in the net loss for the
quarter was primarily the result of higher product sales and lower research and
development expenses.
Revenues for the first six months of fiscal 1995 were $5,937,000 compared to
$637,000 for the first six months of fiscal 1994. The net loss for the same
periods was $2,611,000 and $4,851,000, respectively. The increase in revenues
resulted from Magnes system and Magnes component sales compared to a smaller
volume of Magnes component sales during the first six months of fiscal 1994.
The decline in net loss for the six month period was primarily due to higher
product sales and lower research and development expenses, offset by an
increase in interest expense from short-term debt financing and higher sales
and marketing related expenses.
The gross margin on product sales was 46% for both the second quarter and the
first six months of fiscal 1995, compared to 48% and 29%, respectively, for the
corresponding periods in fiscal 1994. The improved margins in the current
fiscal year were due primarily to sales volume related efficiencies.
Research and development expenses were $1,263,000 and $2,514,000 for the
three-month and six-month periods ended March 31, 1995. These amounts
represented a decrease of 22% and 21%, respectively, for the quarter and
six-month period compared to the same periods in fiscal 1994. The decline
was primarily due to decreased spending associated with product development
and applications development for the Magnes system.
Marketing, general and administrative expenses increased by $286,000 for the
second quarter of fiscal 1995 versus the comparable period in fiscal 1994. The
increase for the first six months of fiscal 1995 was $416,000 versus the same
period last fiscal year. The current quarter and first half increase resulted
primarily from higher sales support and marketing expenses.
Order backlog for the Company's products at March 31, 1995 was $8,803,000, of
which $2,539,000 is expected to be delivered in fiscal 1995. Order backlog was
$6,136,000 at March 31, 1994. The increase in backlog is attributable to an
increase in orders for Magnes systems.
Liquidity and Capital Resources
As of March 31, 1995, the Company had available working capital of $11,211,000,
an increase of $13,325,000 from September 30, 1994. Cash, cash equivalents and
investments totaled $13,518,000 at March 31, 1995. The increase in working
capital and cash and investments primarily reflects the completion of the
$15 million private sale of newly issued common stock to Dassesta
International S.A. and was partially offset by the use of working capital to
fund operations. Additionally, the conversion of $2.2 million of short-term
debt to common stock completed in April 1995 will result in an addition to
working capital in the third fiscal quarter (See Note 5. of the Notes to
Financial Statements).
Based on the Company's current operating plans, capital and working capital
expenditures necessary to support the further development and commercialization
of the Company's products are expected to exceed cash generated from operations
and to result in a decline in the Company's liquidity. The Company anticipates
that the net proceeds from Dassesta financing together with existing working
capital and gross profits from product sales will be adequate to finance its
operations and working capital needs through at least Fiscal 1996.
6
<PAGE> 8
PART II -- OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
On March 31, 1995 the Company completed the private sale of 15 million newly
issued shares of common stock for $25 million to Dassesta International, S.A.
Additionally, the Company issued 4,882,477 shares of newly issued shares of
common stock to certain holders of short-term debt on April 17, 1995. See Notes
4 & 5 of the Notes to Financial Statements in Part I.
The Company has a line of credit with a bank and agreements with holders of
short-term debt that contains certain covenants regarding the maintenance of
minimum net tangible assets, restrictions on further borrowing, payment of
dividends, redemption or repurchase of common stock of the Company and other
restrictions. The Company is in compliance with these requirements at
March 31, 1995.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Shareholders on March 24, 1995 and
proxies for such meeting were solicited pursuant to Regulation 14. There was
no solicitation in opposition to the Company's nominees for directors as listed
in the proxy statement and all such nominees were elected. In addition, the
following matters were adopted by the Shareholders at the Annual Meeting:
(a) Amend the Company's Articles of Incorporation to increase the authorized
number of shares of Common Stock from 23,000,000 to 60,000,000.
For - 6,002,204 Against - 17,232 Abstain - 4,081
(b) Approve the issuance and sale of 25,000,000 shares of Common Stock to a
single investor as described in the Proxy Statement.
For - 5,993,204 Against - 19,193 Abstain - 11,120
(c) Amend the 1987 Stock Option Plan to increase by the number of shares
available for issuance under the plan to 5,000,000.
For - 5,796,507 Against - 223,087 Abstain - 3,923
(d) To ratify the selection of Price Waterhouse LLP as independent accountants
for the fiscal year ending September 30, 1995.
For - 6,014,204 Against - 6,613 Abstain - 2,700
There were 3,495,800 broker nonvotes for the election of directors and
item (d) above.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: None
(b) Reports on Form 8-K: A Form 8-K report was filed on April 5, 1995
regarding the shareholder approval of the increase in the number of
authorized shares of common stock of the Company and approval of the
sale of 25,000,000 shares of common stock to a foreign investment
group.
7
<PAGE> 9
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.
BIOMAGNETIC TECHNOLOGIES, INC.
Date May 15, 1995 /S/ James V. Schumacher
----------------------------- ---------------------------------------
James V. Schumacher
President and C.E.O. (Principal
Executive Officer)
Date May 15, 1995 /S/ Peter L. Millikin
----------------------------- ---------------------------------------
Peter L. Millikin
Vice President and Controller
(Principal Accounting and Financial
Officer)
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-1-1994
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 5,662
<SECURITIES> 7,856
<RECEIVABLES> 815
<ALLOWANCES> 0
<INVENTORY> 1,904
<CURRENT-ASSETS> 20,617
<PP&E> 9,839
<DEPRECIATION> 7,741
<TOTAL-ASSETS> 24,349
<CURRENT-LIABILITIES> 9,406
<BONDS> 0
<COMMON> 75,468
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 24,349
<SALES> 5,776
<TOTAL-REVENUES> 5,937
<CGS> 3,139
<TOTAL-COSTS> 3,230
<OTHER-EXPENSES> 4,797
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 521
<INCOME-PRETAX> (2,611)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,611)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,611)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> 0
</TABLE>
