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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[X ] ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
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Commission file number 1-10285
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BIOMAGNETIC TECHNOLOGIES, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
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(Full title of the plan)
Biomagnetic Technologies, Inc.
9727 Pacific Heights Blvd., San Diego, California 92121-3719
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(Name of issuer of the securities held pursuant to
the plan and the address of its principal executive office)
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BIOMAGNETIC TECHNOLOGIES, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Reports of Independent Accountants 2
Statements of Net Assets Available for Benefits 4
at September 30, 1998 and 1997
Statements of Changes in Net Assets Available for Benefits 5
for the years ended September 30, 1998, 1997 and 1996
Notes to Financial Statements 6
Signatures 9
</TABLE>
1
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee and Participants of Biomagnetic Technologies,
Inc. 1992 Employee Stock Purchase Plan:
We have audited the accompanying statements of net assets available for benefits
of Biomagnetic Technologies, Inc. 1992 Employee Stock Purchase Plan (the Plan)
as of September 30, 1998 and 1997 and the related statements of changes in net
assets available for benefits for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the 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.
As discussed in Note C to the financial statements, Biomagnetic Technologies,
Inc. (the Company) has historically reported net losses and negative cash flows
from operations. Currently, the Company anticipates that it will seek
additional financing to allow it to execute its business plan through the year
2000. For a discussion of management's plans in this regard, see Note C.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
September 30, 1998 and 1997, and the changes in net assets available for
benefits for the years then ended in conformity with generally accepted
accounting principles.
/s/ARTHUR ANDERSEN LLP
San Diego, California
November 30, 1998
2
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Administrative Committee and Participants of the Biomagnetic
Technologies, Inc. 1992 Employee Stock Purchase Plan:
In our opinion, the accompanying statement of changes in net assets available
for benefits presents fairly, in all material respects, the changes in net
assets available for benefits of Biomagnetic Technologies, Inc. 1992 Employee
Stock Purchase Plan (the Plan) for the year ended September 30, 1996, in
conformity with generally accepted accounting principles. This financial
statement is the responsibility of the Plan's management; our responsibility is
to express an opinion on this financial statement based on our audit. We
conducted our audit of this statement in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above. We have not
audited the financial statements of the Plan for any period subsequent to
September 30, 1996.
The accompanying financial statements have been prepared assuming the Plan will
continue as a going concern. As discussed in Note C to the financial
statements, Biomagnetic Technologies, Inc. (the Plan Sponsor) has suffered
recurring losses from operations and has an accumulated deficit that raise
substantial doubt about the Plan's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note C. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/PRICEWATERHOUSECOOPERS LLP
San Diego, California
January 10, 1997
3
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BIOMAGNETIC TECHNOLOGIES, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
September 30,
1998 1997
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<S> <C> <C>
Cash and cash equivalents $ 39,104 $ 36,202
U.S. Government securities, at fair value _ 103,944
Participant contributions receivable 3,086 3,584
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Net assets available for benefits $ 42,190 $ 143,730
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</TABLE>
See accompanying notes to financial statements
4
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BIOMAGNETIC TECHNOLOGIES, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
Years Ended September 30,
1998 1997 1996
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<S> <C> <C> <C>
Participant contributions $ 77,277 $ 146,175 $ 154,912
Interest income 3,229 6,087 5,984
Net depreciation in fair value
of U.S. Government securities -- -- (263)
Benefits paid to participants (182,046) (102,963) (266,449)
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Net increase (decrease) in net assets
available for benefits (101,540) 49,299 (105,816)
Net assets available for benefits:
Beginning of year 143,730 94,431 200,247
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End of year $ 42,190 $ 143,730 $ 94,431
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</TABLE>
See accompanying notes to financial statements
5
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BIOMAGNETIC TECHNOLOGIES, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE A. PLAN DESCRIPTION
In January 1992, the shareholders approved the establishment of the Biomagnetic
Technologies, Inc. 1992 Employee Stock Purchase Plan (the "Plan") under Section
423 of the Internal Revenue Code. The Plan is intended to provide eligible
employees with the opportunity to acquire an equity interest in Biomagnetic
Technologies, Inc. (the "Company") through the acquisition of purchase rights,
implemented in a series of purchase periods. The Plan is administered by a
committee of two or more members of the Company's board of directors, (the "Plan
Administrator"), as appointed by such board.
Generally, employees are eligible for participation in the Plan in the
calendar quarter following their first 90 days of continuous employment with
the Company. After enrollment, payroll deductions are made to acquire shares
under the Plan up to a maximum of the lesser of 15% of base salary or $25,000
per calendar year. Participants are fully vested at all times in the portion
of their account attributable to their contributions. A participant may
purchase a maximum of 40,000 shares during any one purchase period. In
addition, each participant is limited to purchases of $25,000 worth of the
Company's stock when combined with any other Company stock purchase plan
during any calendar year. Under no circumstances shall a purchase right be
granted under the Plan to any Eligible Employee if such individual would
immediately after the grant, own more than 5% of the total combined voting
power of the Company.
The purchase price of the shares is the lesser of 85% of the fair market value
of the shares on the date the purchase right is granted or 85% of the fair
market value of the shares on the date the purchase period ends. The purchase
rights may be terminated by the participant at any time. The balance in the
participant's account, including accrued interest, which is credited to the
participant's account based on the participant's contributions proportionate to
the total contributions of all participants, will be returned to the participant
upon such termination. In addition, if the participant's employment is
terminated, any outstanding purchase rights are terminated and the balance in
the payroll deduction account will be returned to the participant. If the
participant dies or is permanently disabled, the participant's estate or the
participant has the option to receive the balance in the payroll deduction
account or purchase the shares at the end of the purchase period.
The Plan provides for automatic purchase of the shares from the funds deducted
from the participant's pay and earnings thereon at the end of the purchase
period, subject to a pro-rata allocation if the Stock Purchase Plan is
oversubscribed.
6
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The Plan will terminate upon the earlier of (i) December 31, 2001, (ii) sale of
all shares available for issuance or, (iii) termination by the Company
immediately following the close of any purchase period. The total number of
shares authorized for future purchases under the Plan is 635,949 at September
30, 1998. There were no issues of common stock for the purchase period ending
March 31, 1998. The next purchase period is from April 1, 1998 to March 31,
2000.
Participants should refer to the Plan document for a more complete description
of the Plan provisions.
NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Plan financial statements are prepared on the accrual basis of accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect 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.
VALUATION OF INVESTMENTS
Investments consist of U.S. Government treasury securities that are stated at
fair value based on quoted market prices. The Plan's investments are held in a
Company administered bank account and all investment decisions are directed by
the Plan Administrator.
INVESTMENT INCOME
Income from investments is recorded on the accrual basis. In accordance with
the policy of stating investments at fair value, changes in net unrealized
appreciation or depreciation in the fair value of investments are reflected in
the statement of changes in net assets available for benefits in the year in
which such a change in value occurs.
ADMINISTRATIVE EXPENSES OF THE PLAN
All expenses incurred in the administration of the Plan are paid by the Company.
CONTRIBUTIONS
Contributions to the Plan originate from after-tax payroll deductions of the
participants.
7
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BENEFITS PAID
Benefits paid represent the cost to the participants of the stock acquired as
well as any cash payouts due to terminations or elections by the participants.
INCOME TAXES
The Plan Administrator believes that the Plan was established under, and is
operated in compliance with, Section 423 of the Internal Revenue Code.
Therefore, the Plan Administrator believes the Plan and earnings of the Plan are
tax exempt as of the financial statement date.
NOTE C. OPERATIONS AND CAPITAL RESOURCES OF THE COMPANY
To date, the Company has been engaged principally in research and development
activities, and has made only low volume sales to medical research institutions.
The Company incurred net losses of $4,968,000, $5,242,000, and $15,566,000 in
fiscal 1998, 1997 and 1996, respectively. The Company had negative cash flows
from operations of $5,360,000, $2,032,000 and $12,808,000 in fiscal 1998, 1997
and 1996, respectively. At September 30, 1998, the Company had an accumulated
deficit of $90,823,000. Management anticipates that capital and working capital
requirements in fiscal 1999 will substantially exceed cash projected to be
generated by operations.
The Company currently anticipates that its existing capital resources, including
the net proceeds from the August 1998 sales of 30,000,000 shares of common stock
to offshore investors will be sufficient to provide operating capital required
to meet its obligations in the normal course of business through June 2000,
based upon the Company's business plan. There can be no assurance, however, that
sales of the Company's systems projected in the current business plan will be
achieved in a highly competitive and limited market for its systems. If these
sales are not achieved as planned, the Company's available funds and projected
cash flows from operations may not be sufficient to meet operating capital needs
through June 2000. Further, the Company will likely seek additional financing
in fiscal 2000 or prior thereto, to continue to fund operating capital
requirements. There can be no assurance that such financing will be available on
terms acceptable to the company, if at all.
Participants should refer to the Company's filing on Form 10-K for its year
ended September 30, 1998 for a complete presentation of the Company's financial
position and results of operations.
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Administrative Committee of Biomagnetic Technologies, Inc. 1992 Employee Stock
Purchase Plan has duly caused this annual report to be signed by the undersigned
thereunto duly authorized.
BIOMAGNETIC TECHNOLOGIES, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
By: /s/ D. Scott Buchanan Date: December 21, 1998
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D. Scott Buchanan
Biomagnetic Technologies, Inc.
1992 Employee Stock Purchase
Plan Administrative Committee
9
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CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report included in this Form 11-K, into Biomagnetic
Technologies, Inc.'s previously filed Form S-8 No. 33-60743, No. 33-61057, No.
33-32260, No. 33-33179 and No. 33-68136.
/s/ ARTHUR ANDERSEN LLP
San Diego, California
December 21, 1998
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CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-60743, No. 33-61057, No. 33-32260, No. 33-33179
and No. 33-68136) of the Biomagnetic Technologies, Inc. 1992 Employee Stock
Purchase Plan of our report dated January 10, 1997 appearing on page 3 of this
Form 11-K.
/s/ PRICEWATERHOUSECOOPERS LLP
San Diego, California
December 21, 1998
