SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended November 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 2-92261
WESTBRIDGE RESEARCH GROUP
(Name of Small Business Issuer in its Charter)
California 95-3769474
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1150 Joshua Way, Vista, California 92083
(Address of principal executive office and zip code)
(760) 599-8855
(Issuer's Telephone number)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Check whether the Issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 Issuer'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. [X]
State issuer's revenues for its most recent fiscal year: $1,339,928.
The aggregate market value of the voting and non-voting equity held by
nonaffiliates of the registrant as of February 27, 1998, (computed by reference
to the price at which the Common Stock was most recently sold) was approximately
1,914,091. This computation excludes a total of 189,347 shares held by certain
executive officers and directors of Issuer who may be deemed to be affiliates of
Issuer under applicable rules of the Securities and Exchange Commission.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date.
As of February 27, 1998, there were 2,103,438 shares of theIssuer's Common
Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Transitional Small Business Disclosure Format
Yes __ No X
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Westbridge Research Group was incorporated in California in 1982. From
inception, Westbridge Research Group and its wholly-owned subsidiary
(hereinafter referred to collectively as the "Company") have been engaged in the
development, manufacture and marketing of environmentally compatible products
for the agriculture industry. The Company also produces a line of products which
are used in the bioremediation of hazardous waste.
AGRICULTURE PRODUCTS
The Company's environmentally sensitive products include proprietary
formulations based primarily on the use of microbial fermentations and plant
extracts, micronutrient blends containing primary and complex secondary
nutrients, as well as additional natural humates and natural substances with
growth promoting activity.
Plant Growth Regulators
TRIGGRR(R) formulations are registered with the Environmental Protection Agency
(EPA) as plant growth regulators. The active components of TRIGGRR(R) are
"cytokinins" that affect rates of cell division and growth. TRIGGRR(R) is
available in several product formulations including:
o Soil TRIGGRR(R), a liquid product that is applied to the soil
at the time of planting or as a side dress to stimulate early
seedling vigor, improve root development, and improve stand.
o Foliar TRIGGRR(R), which is applied as a liquid directly to
plant foliage. The product has its primary use in stimulating
root growth, promoting earlier and fuller flowering, and
increasing seed set.
TRIGGRR products may be used with conventional farming practices and in
combination with other agricultural chemicals, rendering them easy to apply and
facilitating distribution. These products are inexpensive to use and produce
yield increases sufficient to provide substantial increases in profits to the
user.
The Company also manufactures and markets a nematode suppressant called
SUPPRESS(R). SUPPRESS(R) does not kill the parasitic nematode directly, instead
it interferes with the ability of the nematode to penetrate the plant roots.
SUPPRESS(R) is composed of safe, nontoxic naturally occurring plant growth
regulators which activate the plants natural defenses.
Fertilizers
Foliar SUNBURST(R) and Soil SUNBURST(R) are specialty micronutrient fertilizers
manufactured and marketed by Westbridge. These products contain a non-plant
growth regulator organic base and humic acids. The products are formulated for
use on crops which benefit from foliar micronutrient sprays, where a particular
crop is not included on the current TRIGGRR(R) label, or in cases where the use
of TRIGGRR(R) is not appropriate. In addition, Westbridge has developed and
markets a line of organic fertilizers under the name BioLink(R). These products
meet current guidelines for fertilizers used in organic food and fiber
production.
BIOREMEDIATION PRODUCTS
Westbridge environmental products include H4-502 and Sewage Treatment (ST-12),
which are organic products formulated to control ammonia, alcohol and hydrogen
sulfide odors safely and naturally. Bioremediation Nutrient Blends (the BNB
product line) are bionutrient products that enhance compost maturity as well as
accelerate the remediation of petroleum hydrocarbon contaminated sites.
Cellulose Digester is designed to accelerate breakdown of stubble in low- or
no-till farming operations.
FEED ADDITIVES
Animal feed additives include products derived from microbial fermentation and
proteinated and chelated trace minerals that stimulate beneficial
gastrointestinal microorganisms, thereby improving the animals digestion and
conversion of feed to weight gain.
PRODUCT DEVELOPMENT
The Company uses an intern program and contracts with universities and private
government laboratories to conduct the majority of its research and development
work in environmentally sensitive agriculture products. These programs and
contacts generate the field trials and data necessary to obtain the requisite
government approvals and establish efficacy under commercial conditions.
The Company concentrates its product development efforts on formulation
modifications designed to further increase the efficacy of the Company's
agricultural products and on studies to develop precise application rates and
timing for additional crops.
The Company has developed environmentally sensitive products for the home lawn
and garden industry. Only a small portion of Company resources are currently
being devoted to these projects, but, as funds become available, these and other
applications will be pursued.
Research and development expenses for continuing operations for fiscal years
1997 and 1996, respectively, were $126,025 and $141,585.
GOVERNMENT REGULATIONS
The Company's activities are, or may be, subject to regulation under various
laws and regulations including, among others, the Occupational Safety and Health
Act, the Toxic Substances Control Act, the National Environmental Policy Act,
other water, air and environmental quality statutes, and export control
legislation. The Company believes it has met its current obligations under the
aforementioned regulations.
In addition to the foregoing requirements, the Company's agricultural products
must be approved by state authorities before distribution in a state. In some
cases, this necessitates having to conduct field tests in the particular state
to accumulate the necessary test data for registration. Soil TRIGGRR(R) and
Foliar TRIGGRR(R) have been federally registered with the EPA. In addition, the
Company has registered its products with certain appropriate state agencies and
is pursuing registration in other states .
MARKETING
The Company uses a small number of key regional and national distributors for
its U.S. market. Internationally, the Company has executed distribution
agreements with in-place ag-chemical distributors to represent the Company's
products in specified regions or countries. The Company is dependent on three
domestic customers whose purchases amounted to 49% of the Company's agricultural
product sales in fiscal 1997. These domestic customers also represented 49% of
the Company's agricultural product sales in 1996. The Company has also increased
its foreign sales to 22% of agricultural product sales over 5% in 1996.
MANUFACTURING
All of the Company's proprietary formulations and finished products are
manufactured at its Vista, CA facility.
The Company has improved its production capabilities which has allowed it to
seek new opportunities in manufacturing liquid specialty and fertilizer products
for other companies.
LICENSES
The Company has a license agreement with Westbridge Biosystems Ltd., a
California limited partnership (the "Partnership"), for the base technology used
in many of its products. Refer to Exhibit 10(o) Biosystems License Agreement,
incorporated by reference to Exhibit 10(s) to the Company's Annual Report on
Form 10-K for the fiscal year ended November 30, 1989. On September 30, 1996,
the Company and the Partnership amended the terms of the agreement. Under the
terms of the amended agreement, the Company forgave its entire remaining note
receivable balance of $195,942 from the Partnership in exchange for a
restructuring of royalty fees and the term over which royalities are due the
Partnership. Accordingly, the forgiven note balance has been recorded as prepaid
royalties and is being amortized on a straight line basis over the term of the
amended licensing agreement, through December 31, 2006. Under the amended
licensing agreement, the Company is required to pay the Partnership royalties
equal to $1,000 per month plus 2.5% of Gross Sales. Refer to exhibit 10(u),
amended Biosystems License Agreement, of the Company's Annual Report or Form
10-KSB for the fiscal year ended November 30, 1996.
SEASONALITY
Agricultural product sales are typically seasonal in nature with heavier sales
in the spring months. The Company is seeking to temper the seasonality of its
agronomic sales by marketing its products in Latin American countries which
produces sales in January, February and March.
COMPETITION
The Company's agricultural products compete with chemicals of major specialty
suppliers to the agricultural industry. Some of the advantages these companies
have in supplying chemical products to the agricultural industry include
well-established distribution networks, well-known products, experience in
satisfying the needs of farmers and extensive capital resources. A number of
other existing companies are engaged in research in the area of biotechnology
relating to agriculture. The Company expects the biotechnology industry in
agriculture to be very competitive in the future. Unlike chemical products,
biotechnology products do not cause soil erosion, do not adversely affect the
environment, are not dependent on petroleum products and do not present safety
hazards to humans. Most of the Company's existing and potential competitors in
agri-chemicals and biotechnology have more experience in operations, more
extensive facilities and greater financial and other resources.
EMPLOYEES
At November 30, 1997, the Company had 10 employees, 9 full-time, 1 part time.
None of these employees are covered by a collective bargaining agreement. The
Company believes that its employee relations are satisfactory.
ITEM 2. PROPERTIES
The Company's principal executive office is located at 1150 Joshua Way, Vista,
California 92083. This facility consists of 9,515 square feet and is used for
offices, a laboratory and the production and storage of agricultural products
and materials. The Company leases these facilities under a lease which expires
in March 1999. Rent is being expensed on a straight-line basis over the term of
the lease.
Rent expense for the years ending November 30, 1997 and 1996, net of sub-lease
income, was $74,800 and $77,011, respectively.
The Company believes that its current facilities are adequate for its operations
for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
The Company is not a party to, and its property is not the subject of, any
pending legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On July 17, 1997 the shareholders of the Company voted to execute a one-for-four
reverse stock split. The reverse stock split was effective for shareholders of
record on February 6, 1998. Per share amounts in this Form 10-KSB and the
accompanying financial statements have been restated to give effect for the
reverse stock split as if it occurred on December 1, 1995.
PART II
ITEM 5. MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
(a) Principal Market. There is no established public trading market for
the single class of common equity outstanding.
(b) Approximate Number of Holders for Common Stock. The approximate number
of record holders of Common Stock as of November 30, 1997, was 852.
(c) Dividends. The Company has paid no dividends. There are no contractual
restrictions which materially limit the Company's present or future
ability to pay dividends. The Company does not expect to pay dividends
in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
Fiscal Year 1997 Compared to Fiscal Year 1996
Total product sales were $1,333,878 in fiscal 1997 compared with $866,972 in
fiscal 1996, an increase of 54%. The increase is attributable to an increase in
foreign sales and new products being manufactured for an existing domestic
customer. Prices for the Company's existing products remained stable during
fiscal 1997. Production by gallons were 67,858 in 1997 and 42,166 in 1996, an
increase of 61%.
Cost of sales as a percentage of total product sales amounted to 35% or $461,710
in fiscal 1997, as compared with 31% or $271,305 in fiscal 1996. The slight
increase was primarily the result of increased raw material and labor costs.
Research and development expenses decreased by $15,560, or 11% in fiscal 1997
from $141,585 in fiscal 1996. This reduction is due to a decrease in salaries
and wages attributable to the research and development function.
Selling expenses increased in relation to product sales for fiscal year 1997,
representing 21% of product sales in fiscal 1997 versus 18% of product sales in
fiscal 1996. The increased expenditures are a result of new sales personnel and
expanded advertising.
General and administrative expenses decreased by 25% to $208,762 in fiscal 1997
from $276,307 in fiscal 1996, and decreased as a percentage of total product
sales to 16% from 32% in fiscal 1996. The decrease was due primarily to a
reduction in consulting fees, lease expenses and a reduction in moving expenses
which were incurred in fiscal 1996.
Royalty expense decreased to $64,369 in fiscal 1997 from $574,821 in fiscal
1996. This decrease is due to the restructuring of the royalty arrangement in
the amended license agreement dated September 30, 1996.
Interest expense increased to $26,206 for fiscal 1997, from $21,834 for fiscal
1996. This increase is primarily due to increases in accrued interest to related
parties and capital lease obligations.
The net income for fiscal 1997 was $94,796 compared with a net loss of $924,133
in fiscal 1996. The increase in net income is primarily related to increased
sales, a reduction in royalty expenses and a provision for bad debt and
forgiveness of notes receivable recorded during fiscal 1996.
Fiscal Year 1996 Compared to Fiscal Year 1995
Total product sales were $866,972 in fiscal 1996 compared with $693,982 in
fiscal 1995, an increase of 25%. The increase is attributable to the Company's
focus in selecting and providing good technical support to distributors who are
innovative and well placed in the industry. In addition, the Company expanded
sales of its products on two new crops. Prices for the Company's existing
products remained stable during fiscal 1996. Production by gallons were 42,166
in 1996 and 51,802 in 1995, a decrease of 19%. The decrease in production by 19%
versus a 25% increase in sales was due to an increase in sales of the Company's
higher priced products whereas in 1995 production included a large volume of
toll manufactured products.
Cost of sales as a percentage of total product sales amounted to 31% or $271,305
in fiscal 1996, as compared with 45% or $312,809 in fiscal 1995. The decrease
was the result of an increase in the sales mix of products with higher gross
margins, and reduced overhead costs.
Research and development expenses decreased by $21,528, a decrease of 13% in
fiscal 1996 from $163,113 in fiscal 1995. The decrease is due to a decrease in
contract research and overhead costs.
Selling expenses decreased in relation to product sales for fiscal year 1996;
representing 18% of product sales in fiscal 1996 versus 36% of product sales in
fiscal 1995. The decreased expenditures are a result of reduced rent expense
attributable to the sales function, reduced sales commissions, and a decline in
consulting fees.
General and administrative expenses decreased by 36% to $276,307 in fiscal 1996
from $435,133 in fiscal 1995, and decreased as a percentage of total product
sales to 32% from 63% in fiscal 1995. The decrease was due primarily to the
reduction of legal fees from litigation settled in 1995, a reduction in rent
attributable to the general and administrative function and a decline in
consulting fees.
Royalty expenses represent royalties owed to Westbridge Biosystems, Ltd. from
which the Company has licensed certain technology. This amount remained
relatively the same in fiscal 1996 at $574,815 compared with $569,484 in fiscal
1995.
Interest expense was $21,834 in fiscal 1996, a decrease of 57% over fiscal 1995
which was $51,128. The decrease was due primarily to the reduction in
outstanding indebtedness.
The net loss for fiscal 1996 was $921,733 compared with net income of $2,228,858
in fiscal 1995. Approximately $3,424,000 is related to the Company recognizing a
gain in 1995 on notes receivable from Westbridge Biosystems Ltd. In addition, in
fiscal 1996 the Company recorded a provision for bad debt associated with a long
term receivable due from a foreign distributor. The account was collateralized
by real property in Baja, Mexico which is pending foreclosure sale by a Mexican
court.
Liquidity and Capital Resources
Net working capital decreased to $77,341 at November 30, 1997, due primarily to
the notes payable to related parties becoming current during fiscal 1997.
Based on current cash flow projections management expects that the Company can
continue operations for the current year without infusions of additional cash.
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITORS' REPORTS
For The Years Ended November 30, 1997 and 1996
TABLE OF CONTENTS
INDEPENDENT AUDITORS' REPORTS................................................
FINANCIAL STATEMENTS
Consolidated Balance Sheets............................................
Consolidated Statements of Operations .................................
Consolidated Statements of Shareholders' Equity........................
Consolidated Statements of Cash Flows..................................
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...................................
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Westbridge Research Group and Subsidiary
Vista, California
We have audited the consolidated balance sheet of Westbridge Research Group and
Subsidiary (the "Company") as of November 30, 1997 and the related consolidated
statements of operations, shareholders' equity, and cash flows for the year 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Westbridge Research Group and Subsidiary at November 30, 1997, and the
consolidated results of its operations and its cash flows for the year then
ended, in conformity with generally accepted accounting principles.
Los Angeles, California PANNELL KERR FORSTER
January 27, 1998 (except for Note 14, as Certified Public Accountants
to which the date is February 6, 1998) A Professional Corporation
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Westbridge Research Group and Subsidiary
Carlsbad, California
We have audited the consolidated balance sheets of Westbridge Research Group and
Subsidiary as of November 30, 1996 and 1995 and the related consolidated
statements of operations, shareholders' equity, and cash flows 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.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Westbridge Research Group and Subsidiary at November 30, 1996 and 1995, and the
consolidated results of its operations and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.
PETERSON & CO.
San Diego, California
January 10, 1997
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
November 30, 1997 and 1996
<TABLE>
ASSETS
1997 1996
--------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 251,781 $ 115,719
UAccounts receivable, less allowance for doubtful
accounts of $206 and $4,473 in 1997 and 1996 191,036 128,442
Inventories 82,059 74,369
Prepaid expenses and other current assets 14,391 10,237
--------------- -------------
Total current assets 539,267 328,767
--------------- -------------
Property and equipment, at cost:
Machinery and equipment 164,890 119,135
Office furniture and fixtures 251,627 244,340
--------------- -------------
416,517 363,475
Less accumulated depreciation (341,117) (323,408)
--------------- -------------
Net property and equipment 75,400 40,067
--------------- -------------
Long-term account receivable, net 130,000 130,000
Intangible assets, net 300,840 400,294
--------------- -------------
$ 1,045,507 $ 899,128
=============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Continued)
November 30, 1997 and 1996
<TABLE>
LIABILITIES AND SHAREHOLDERS' EQUITY
1997 1996
-------------- ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 57,396 $ 17,844
Accrued expenses 95,190 78,467
Current portion of long term debt 68,581 39,239
Current portion of capital lease obligations 3,845 4,187
Notes payable to related parties 236,914 --
-------------- ------------
Total current liabilities 461,926 139,737
Long-term debt 26,067 80,619
Notes payable to related parties -- 220,423
Deferred rent 1,284 5,137
Capital lease obligations, net of current portion 11,650 3,428
-------------- -------------
Total liabilities 500,927 449,344
Commitments and contingencies (Notes 9,11 and 13)
Shareholders' equity:
Preferred stock, 5,000,000 shares authorized,
no shares outstanding in 1997 and 1996 -- --
Common stock, no par value, 9,375,000 shares
authorized, 2,103,438 shares issued and
outstanding in 1997 and 1996 8,479,854 8,479,854
Paid-in capital - warrants 95,000 95,000
Accumulated deficit (8,030,274) (8,125,070)
--------------- --------------
Total shareholders' equity 544,580 449,784
--------------- --------------
$ 1,045,507 $ 899,128
=============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS For
The Years Ended November 30, 1997 and 1996
<TABLE>
1997 1996
-------------- ------------
<S> <C> <C>
Revenues:
Agricultural product sales $ 1,333,878 $ 866,972
Other revenue 6,050 --
-------------- ------------
1,339,928 866,972
-------------- ------------
Costs and expenses:
Cost of sales 461,710 271,305
Research and development 126,025 141,585
Selling 284,003 160,573
General and administrative 208,762 276,307
Royalties 64,369 574,815
Amortization of processes and formulas 80,338 80,338
Provision for bad debt, long-term account receivable -- 196,270
Forgiveness of notes receivable -- 80,948
--------------- ------------
Total costs and expenses 1,225,207 1,782,141
--------------- ------------
Income (loss) from operations 114,721 (915,169)
Other income (expense):
Interest expense (26,206) (21,834)
Interest income 8,587 11,892
Other income 94 3,378
--------------- ------------
Income (loss) before income taxes 97,196 (921,733)
Provision for income taxes 2,400 2,400
--------------- ------------
Net income (loss) $ 94,796 $ (924,133)
=============== ============
Net income (loss) per common share $ .05 $ (.44)
--------------- ------------
Weighted average common shares outstanding 2,103,438 2,103,438
=============== ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For The Years Ended November 30, 1997 and 1996
<TABLE>
Paid-in
Common Capital Accumulated
Stock Amount Warrants Deficit Total
<S> <C> <C> <C> <C> <C>
Balance, November 30, 1995 2,103,438 $ 8,479,854 $ 95,000 $ (7,200,937) $ 1,373,917
Net loss -- -- -- (924,133) (924,133)
--------- ----------- -------- ------------- ------------
Balance, November 30, 1996 2,103,348 8,479,854 95,000 (8,125,070) 449,784
Net income -- -- -- 94,796 94,796
---------- ------------ -------- ------------- ------------
Balance, November 30, 1997 2,103,438 $ 8,479,854 $ 95,000 $ (8,030,274) $ 544,580
========== ============ ======== ============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS For
The Years Ended November 30, 1997 and 1996
<TABLE>
1997 1996
--------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 94,796 $ (924,133)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Notes receivable forgiven as payment for royalties -- 571,635
Bad debt recoveries -- (22,351)
Depreciation and amortization 117,163 100,986
Forgiveness of notes receivable -- 80,948
Provision for bad debt, long-term
account receivable -- 196,270
Changes in operating assets and liabilities:
(Increase) in accounts receivable (62,594) (34,621)
(Increase) decrease in inventories (7,690) 2,166
(Increase) decrease in prepaid expenses and
other current assets (4,154) 3,266
Increase (decrease) in accounts payable 39,552 (17,047)
Increase (decrease) in accrued expenses 16,723 (42,309)
(Decrease) increase in deferred rent (3,853) 5,137
--------------- --------------
Net cash flows provided by (used in)
operating activities 189,943 (80,053)
--------------- ---------------
Cash flows from investing activities:
Purchase of property and equipment (24,357) (4,042)
Proceeds from notes receivable -- 99,552
---------------- --------------
Net cash flows provided by (used in)
investing activities (24,357) 95,510
---------------- ---------------
Cash flows from financing activities:
Borrowings on notes payable to related parties 16,491 15,833
Borrowings on long-term debt 1,698 --
Payments on long-term debt (40,493) (32,056)
Payments on capital lease obligations (7,220) (4,187)
---------------- ----------------
Net cash flows used in financing activities (29,524) (20,410)
---------------- ----------------
Net increase (decrease) in cash and cash equivalents 136,062 (4,953)
Cash and cash equivalents at beginning of year 115,719 120,672
----------------- ----------------
Cash and cash equivalents at end of year $ 251,781 $ 115,719
================= ================
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS For
The Years Ended November 30, 1997 and 1996
<TABLE>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
1997 1996
----------------- -----------------
<S> <C> <C>
Cash paid during the year for:
Interest $ 8,017 $ 12,183
================= =================
Income taxes $ 2,400 $ 2,400
================= =================
Supplemental disclosure of noncash investing and financing activities:
Prepayment of royalties through forgiveness of notes
receivable $ -- $ 195,942
================= =================
Note payable to related party assigned to non-related
party $ -- $ 27,408
================= =================
Borrowing on long-term debt for machinery and
equipment $ 13,585 $ --
================= =================
Borrowing on capital lease obligation for
machinery and equipment $ 15,100 $ --
================= =================
</TABLE>
See accompanying notes to consolidated financial Statements.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1997 and 1996
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Westbridge Research Group (the "Company") was incorporated in California
on April 12, 1982 for the acquisition, research, development,
manufacturing and marketing of biotechnological products in the
agricultural and energy industries.
New Accounting Standards
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standard (SFAS) No. 128, "Earnings Per Share." This
statement specifies the computation, presentation, and disclosure
requirements for earnings per share for entities with publicly held common
stock. SFAS No. 128 supersedes the provisions of APB No. 15, and requires
the presentation of basic earnings per share and diluted earnings per
share.
The Company is required to adopt the provisions of SFAS No. 128 beginning
on December 1, 1997. Management does not believe the adoption of this
standard will have a material effect on the financial statements.
Principles of Consolidation
The accompanying financial statements consolidate the accounts of the
Company and its wholly-owned subsidiary Westbridge Agricultural Products.
All significant intercompany transactions have been eliminated in
consolidation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
The Company maintains its cash in bank deposit accounts which, at times,
may exceed the federally insured limits. The Company has not experienced
any losses in such accounts and management believes it places its cash on
deposit with financial institutions which are financially stable.
Inventories
Inventory, consisting of agricultural products, is stated at the lower of
cost (determined on a first-in, first-out basis) or market.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1997 and 1996
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Processes and Formulas
Processes and formulas are recorded at amortized cost, and amortized on a
straight-line basis over the lesser of ten years or their estimated useful
lives.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is calculated on
a straight-line basis over the estimated useful lives of the depreciable
assets, or related lease life, if shorter, which range from three to ten
years.
Revenue Recognition
Revenues are recognized when a product is shipped or a service is
performed.
Sales to Major Customers
Sales to major agricultural domestic customers were 41% and 42% of fiscal
1997 and 1996 net agricultural product sales, respectively. During fiscal
1997, 22% of total sales were derived from aggregate foreign sales
compared to 5% in 1996. A majority of the Company's domestic sales are
concentrated in Washington, California, Arizona and Texas.
Net Income (Loss) Per Share
Net income (loss) per common share is based upon the weighted average
number of common shares outstanding during the period adjusted for the
assumed conversion of dilutive stock options and warrants using the
treasury stock method. In 1997 and 1996 the effects of warrants and stock
options are not considered in the calculation as they are anti-dilutive.
Fair Value of Financial Instruments
The Company believes that the recorded values of its financial instruments
approximates their fair value at the balance sheet date.
Income Taxes
The Company accounts for income taxes using the asset and liability
method. Under the asset and liability method, deferred income taxes are
recognized for the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and the tax bases of
existing assets and liabilities.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1997 and 1996
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
Research and Development
It is the Company's policy to expense research and development costs when
incurred.
Stock Based Compensation
The Financial Accounting Standards Board (FASB) recently issued Statement
of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation." This new standard encourages, but does not
require, companies to recognize compensation expense for grants of stock,
stock options, and other equity instruments based on a fair-value method
of accounting.
Companies that do not choose to adopt new expense recognition rules of
SFAS No. 123 will continue to apply the existing accounting rules
contained in Accounting Principles Board Opinion (APBO) No. 25, but will
be required to provide proforma disclosures of the compensation expense
determined under the fair-value provisions of SFAS No. 123, if material.
APBO No. 25 requires no recognition of compensation expense for most of
the stock-based compensation arrangements provided by the Company, namely,
broad-based employee stock purchase plans and option grants where the
exercise price is equal to the market price at the date of the grant.
The Company has adopted the disclosure provisions of SFAS No. 123
effective December 1, 1996. The Company has opted to follow the accounting
provisions of APBO No. 25 for stock-based compensation and to furnish the
pro forma disclosures required under SFAS No.
123.
Management's calculation of the fair value of stock options under the
provisions of SFAS No. 123 does not have a material effect on net income
(loss) or net income (loss) per share for the years ended November 30,
1997 and 1996, respectively.
Long Lived Assets
In March 1995, the FASB issued Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which requires impairment losses to be recorded on long-lived assets
used in operations when indicators of the impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. Statement 121 also addresses the
accounting for long-lived assets that are expected to be disposed of. The
Company adopted Statement 121 in the first quarter of fiscal 1997. This
adoption did not have a material effect on the financial statements.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1997 and 1996
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
NOTE 2 - RESEARCH AND DEVELOPMENT AGREEMENTS
In December 1982, the Company entered into a research and development
agreement (the "First Agreement") with Westbridge Biosystems, Ltd. (the
"Partnership") to develop biologically compatible products to decrease the
cost of crop production, increase crop yields and improve soil quality
through the use of naturally occurring microorganisms and synthesized and
extracted organic polymers. In addition, the Company was to develop a
family of drilling and completion fluids based on synthesized and
extracted organic polymers.
Under the terms of the agreement the partnership was required to fund
research and development costs as follows:
Cash $ 2,444,625
1 year note, collected in prior years 2,423,375
12 year note, due December 31, 1994 11,826,515
------------
$16,694,515
The 12 year note is full recourse to the Partnership and the general
limited partners on a pro rata basis.
In exchange for funding the research and development, the partnership
obtained title to all technologies developed under the agreement.
Concurrent with the execution of the Development Agreement, the Company
and the Partnership entered into a technology transfer agreement (the
"Technology Agreement") under which the Company obtained the right to
acquire an option to license the developed technology, on a non-exclusive
basis for a thirteen month period, in order to review the technology and,
upon such review, to have the option to acquire a license on an exclusive,
world-wide basis to such technology.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1997 and 1996
NOTE 2 - RESEARCH AND DEVELOPMENT AGREEMENTS (Continued)
In October of 1985 the Company and the Partnership entered into a
licensing agreement (the "Licensing Agreement") under which the Company
acquired, on an exclusive world-wide basis, licensing of certain
technologies in exchange for royalties as follows:
1. An amount equal to ninety percent (90%) of applicable gross sales
generated by the Company until all principal and interest has been
paid by the Partnership on the 12-year note.
2. Thereafter, an amount equal to ten percent (10%) of applicable gross
sales generated by the Company until the aggregate of such payments
is equal to the total of the limited partners' cash contributions
during the two year period ended December 31, 1984. Subsequently,
the Partnership will be entitled to a five percent (5%) royalty on
applicable gross sales generated by the Company. This royalty
obligation will remain in force as long as there remains a patent
covering the formula or, if no patent is in effect, for 17 years.
The balance of the 12 year note was entirely offset by deferred revenue
until its maturity at December 31, 1994 at which time the Company
recognized revenue of $3,424,430 representing the unpaid balance of
$4,229,676 net of forgiven receivables of $805,246. Prior to that time
revenue was recognized concurrent with cash collections or the payment of
royalties under the Licensing Agreement. At November 30, 1995 the
Partnership was in default on the note balance which totaled $948,077.
During 1996 the Company applied royalties due to the Partnership totaling
$571,635 to the note. Additionally, the Company received payments on the
note totaling $99,552 and forgave $80,948 of the remaining balance. On
September 30, 1996 the Company and the Partnership amended the terms of
the Development Agreement and the Licensing Agreement. Under the terms of
the amended agreements the Company forgave the entire remaining note
receivable balance of $195,942 in exchange for a restructuring of the
royalty fees and terms. Accordingly, the forgiven note balance has been
recorded as prepaid royalties and is being amortized straight line over
the term of the amended licensing agreement, through December 31, 2006.
Under the amended licensing agreement the Company is required to pay the
Partnership royalties equal to $1,000 per month plus 2.5% of Gross Sales
of products utilizing the licensed technologies.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1997 and 1996
NOTE 3 - INVENTORIES
Inventories consist of the following at November 30:
1997 1996
-------------- ------------
Raw materials $ 61,320 $ 42,826
Finished goods 20,739 31,543
-------------- ------------
$ 82,059 $ 74,369
============== ============
Certain of the Company's raw materials are obtained from a limited number
of suppliers.
NOTE 4 - LONG-TERM ACCOUNT RECEIVABLE
At November 30, 1989, the Company had an account receivable totaling
$451,270 due from a foreign distributor. The account was collateralized by
a perfected security interest in unimproved real property in Baja, Mexico.
The Company was unsuccessful in its efforts to collect the amounts due on
this account and, accordingly, during fiscal 1993, retained Mexican legal
counsel to initiate foreclosure proceedings. At November 30, 1997, the
land is being held by a Mexican court pending foreclosure sale.
The long term account receivable and related allowance for bad debt at
November 30 is as follows:
1997 1996
------------- -----------
Long-term account receivable $ 451,270 $ 451,270
Allowance for doubtful long-term account (321,270) (321,270)
-------------- -----------
$ 130,000 $ 130,000
============== ===========
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1997 and 1996
NOTE 5 - INTANGIBLE ASSETS
Intangible assets are as follows as of November 30:
1997 1996
------------- -----------
Purchased processes and formulas $ 3,097,369 $ 3,097,369
Prepaid royalties 195,942 195,942
-------------- ------------
3,293,311 3,293,311
Accumulated amortization (2,992,471) (2,893,017)
-------------- ------------
$ 300,840 $ 400,294
============== ============
NOTE 6 - ACCRUED EXPENSES
Accrued expenses consist of the following at November 30:
1997 1996
--------------- -------------
Royalties - related party $ 1,051 $ 1,055
Accounting fees 18,606 19,000
Accrued vacation 15,345 18,711
Accrued bonuses 21,705 --
Accrued legal settlement -- 3,176
Warranty 18,705 18,705
Sales commissions 13,365 6,289
Cooperator and scientific advisory fees 2,500 2,500
Deferred rent, current portion 3,853 3,852
Other 60 5,179
-------------- -------------
$ 95,190 $ 78,467
============== ============
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1997 and 1996
NOTE 7 - LONG-TERM DEBT
1997 1996
------------- -----------
Note payable to SBA bearing interest at 10%,
principal and interest payable monthly at
$3,400 for 60 months, maturing April 1, 1999.
This note is collateralized by all assets of
the Company. $ 52,260 $ 92,450
Note payable to a bank bearing interest at 11.85%,
principal and interest payable in monthly
installments of $303 for 60 months, maturing
December 1, 2002. This note is collateralized
by a vehicle. 13,282 --
Notes payable to an individual, with simple interest
at 8%. Principal and accrued interest due at
maturity in February 1998. Amount includes
accrued interest of $7,878 and $6,180 at
November 30, 1997 and 1996, respectively. 29,106 27,408
------------ -----------
Total long term debt 94,648 119,858
Less: Current portion 68,581 39,239
------------ -----------
Long term debt $ 26,067 $ 80,619
============ ===========
Aggregate maturities of long term debt at November 30 are as follows:
Year Ended Amount
1998 $ 68,581
1999 17,239
2000 2,693
2001 3,030
2002 3,105
-----------
$ 94,648
===========
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1997 and 1996
NOTE 8 - NOTES PAYABLE TO RELATED PARTIES
At November 30, notes payable to related parties were as follows:
1997 1996
------------ ------------
Notes payable to various related parties with
simple interest at 8% collateralized by a
subordinated security interest in substantially
all assets of the Company. Principal and accrued
interest originally due at maturity in June 1995.
Maturity extended to February 1998. Amounts
include accrued interest of $38,036 and $29,788
at November 30, 1997 and 1996, respectively. $ 141,121 $ 132,873
Notes payable to related party with simple interest
compounded annually at prime plus 1% which at November
30, 1997 was 9.5%. Collateralized by a subordinated
security interest in substantially all assets of the
Company. Principal and accrued interest due at
maturity in June 1995. Maturity extended to
February 1998. Amounts include accrued interest of
$45,793 and $37,550 at November 30, 1997 and 1996,
respectively. 95,793 87,550
------------ -----------
Total notes payable to related parties 236,914 220,423
Less: Current portion 236,914 --
------------ ------------
Notes payable to related parties, long-term $ -- $ 220,423
============ ============
Subsequent to year end, the Company began negotiating the extension of the
maturity of the above related party obligations.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1997 and 1996
NOTE 9 - CAPITAL LEASE OBLIGATIONS
At November 30, 1997, future minimum lease payments under capitalized
obligations were as follows:
Fiscal Year Amount
1998 $ 6,525
1999 5,478
2000 5,478
2001 5,022
----------
Total minimum lease payments 22,503
Less: Amount representing interest (7,008)
Present value of net minimum lease payments 15,495
Less: Current portion (3,845)
Long-term portion $ 11,650
==========
NOTE 10 - STOCK OPTIONS AND WARRANTS
During fiscal 1983 the Company established an employee incentive stock
option plan ("the 1983 Plan") under which options to purchase an aggregate
of 100,000 common shares may be granted to key employees of the Company.
Stock options granted under the plan expire at the earlier of ten years
from the date of grant or termination of employment. During 1994, the 1983
Plan was terminated and, accordingly, no further stock options can be
granted under this plan. Stock options for the purchase of 12,750 shares
at an exercise price of $6.00 per share remain outstanding and exercisable
at November 30, 1997. These stock options expire if not exercised on or
before November 5, 2000.
During fiscal 1994 the Company established an employee incentive stock
option plan ("the 1994 Plan") under which options to purchase an aggregate
of 100,000 shares of the Company's common stock may be granted to key
employees and officers of the Company. Under the 1994 Plan, stock options
may be granted at an exercise price greater than or equal to the market
value at the date of the grant. Options vest 40% upon grant and 12% each
grant date anniversary until fully vested and expire at the earlier of ten
years from that date of grant or 90 days after termination of employment.
At November 30, 1997, a total of 28,750 shares remain reserved and
available for future stock option grants under the 1994 Plan.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1997 and 1996
NOTE 10 - STOCK OPTIONS AND WARRANTS (Continued)
A summary of the stock option activity under the 1983 and 1994 Plans is as
follows:
Weighted
Exercise Average
Stock Price Per Price Per
Options Share Share
Outstanding at November 30, 1995 57,500 $ .80-6.00 $ 3.40
Granted 28,750 .50 .50
Expired or canceled 34,500 .80-6.00 1.67
Exercised -- -- --
---------- ----------- ----------
Outstanding at November 30, 1996 51,750 .50-6.00 2.94
Granted 50,000 .50 .50
Expired or canceled 17,750 .50 - 6.00 3.68
Exercised -- -- --
----------- ----------- ----------
Outstanding at November 30, 1997 84,000 $ .50-6.00 $ 1.33
=========== =========== ==========
Vested stock options at
November 30, 1997 48,900
===========
During fiscal 1995 the Company granted non-qualified stock options to
acquire 50,000 shares at $.50 per share to its President. The options
immediately vest upon grant and expire in September 2000. All of these
options remain outstanding and exercisable at November 30, 1997.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1997 and 1996
NOTE 10 - STOCK OPTIONS AND WARRANTS (Continued)
During fiscal 1996 the Company granted non-qualified stock options to
acquire 24,000 shares at $.50 per share to a consultant. The options
immediately vest upon grant and are outstanding and exercisable at
November 30, 1997. A summary of these stock options is as follows:
Stock Exercise Price Expiration
Options Per Share Date
8,000 $ .50 March 31, 2001
8,000 .50 June 30, 2001
8,000 .50 September 30, 2001
At November 30, 1997 the Company has warrants outstanding to purchase
shares of its stock as follows:
Number of Exercise Price Expiration
Shares Per Share Date
60,000 $ .40 January 2001
37,500 6.00 April 1999
At November 30, 1997 all of the warrants are fully vested and exercisable.
NOTE 11 - COMMITMENTS
The Company leases its facilities under a non-cancelable operating lease
that expires March 31, 1999. The lease agreement contains provisions for
two months free rent as well as specified annual increases in the monthly
rent. Rent is being expensed on a straight line basis over the term of the
lease.
Minimum future obligations for non-cancelable operating leases as of
November 30, 1997 are as follows:
1998 $ 77,020
1999 25,800
----------
$102,820
Rent expense for the years ending November 30, 1997 and 1996, net of
sub-lease income, was $74,800 and $77,011, respectively.
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1997 and 1996
NOTE 12 - INCOME TAXES
At November 30, 1997, the Company has a federal income tax net operating
loss carryforward of approximately $4,628,000 and a California tax net
operating loss carryforward of approximately $2,256,000. The net operating
loss carryforwards expire through the year 2011.
At November 30, 1997, the Company has investment and research and
development tax credit carryforwards of approximately $72,000 for federal
income tax and financial reporting purposes. These credits expire through
the year 2000. The Company accounts for its tax credits under the flow
through method.
Pursuant to the Tax Reform Act of 1986, use of the Company's net operating
loss carryforwards may be limited if a cumulative change in ownership of
more than 50% occurs within any three year period. Management has not
completed an analysis in order to determine whether a cumulative change in
ownership of more than 50% has occurred within any three year period.
NOTE 13 - LITIGATION
During June 1994, a lawsuit was filed against the Company for a commission
due based on the anticipated merger of the Company and another company,
which never took place. During 1995, a judgement was awarded one of the
plaintiffs for $20,000 and the other plaintiff settled with the Company
for $10,000. The Company was also obligated to pay approximately $19,000
for legal fees and court fees paid by the plaintiff. At November 30, 1996,
$3,176 relating to this settlement is included in accrued expenses.
NOTE 14 - SUBSEQUENT EVENT
On July 17, 1997 the shareholders of the Company voted to execute a
one-for-four reverse stock split. The reverse stock split was effective
for shareholders of record on February 6, 1998. Per share amounts in the
accompanying financial statements have been restated to give effect for
the reverse stock split as if it occurred on December 1, 1995.
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
During January 1998, the Company filed Form 8-K notifying a change in its
independent auditors from Peterson & Company to Pannell, Kerr & Forrester.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT
The executive officers and directors of the Company, as of November 30,
1997, were as follows:
Name Principal Occupation and Year First
Business Experience During Became
Age the Past Five Years Director
Christine Koenemann 44 Christine Koenemann was elected 1995
President and appointed as a
Director of the Company on
March 2, 1995. She has worked for
the Company for the past 14 years in
varying positions including
Operations Manager, Shareholder
Relations Liaison, Director of
Administration, and Assistant
Treasurer. She attended Indiana
University School of Business and
worked in retail management for five
years.
William J. Dale 64 Mr. Dale, appointed a director of the 1995
Company in March 1995, is President
of Silverado Capital, Inc., a
San Diego based company engaged in
international Licensing and merchant
banking activities. Since 1990
Silverado has been engaged in
international marketing of products
for the Company. Prior to that, from
1980-1989, he was a partner in a San
Diego law firm where his area of practice
emphasized corporate and securities law
matters. Prior to that he had been a
sole practitioner for two years, and
for the eight years prior to that he
was general counsel for an agricultural
management company with cattle, ranches
and orchards under management. Mr. Dale
received a B.A. degree in Economics from
Allegheny College in 1955 and a LL.B.
degree from the University of Pennsylvania
in 1962. From 1955 to 1959 he was a U.S.
Naval Aviator.
William M. Witherspoon 56 Mr. Witherspoon was appointed to the Board 1995
of Directors in August 1995, and he was
elected Chairman at that time. Mr.
Witherspoon was a founder of Westbridge
Research Group. From 1982 until 1989 he
served as Chairman of the Board of Directors.
Prior to and after founding Westbridge,
he was a principal of Witherspoon and Town,
a firm that engaged in starting and providing
capital for real estate, agricultural and
marketing businesses. For the past nine years,
he worked as the owner of Firstlight
Productions, an art production and marketing
company. Mr. Witherspoon holds a B.A. degree
from Reed College and a M.A. from MERU.
William Fruehling 57 Mr.Fruehling was appointed to the Board 1997
of Directors in April 1997. Mr. Fruehling
is the founder and President of
Fruehling Communications, a San
Diego based advertising and public
relations company which focuses on
Western and Sunbelt agriculture.
Prior to starting Fruehling
Communications, Mr. Fruehling worked
extensively in the Advertising
industry with regard to
agribusiness. He managed The Elanco
Products Crop Protection Chemical
account in the Southern and Western
United States, as well as the
Monsanto Account with regard to
Hybrid Seed Corn, for Creswell,
Munsell, Fultz & Zirbel in Cedar
Rapids, Iowa.
Directors are elected to serve until the next annual meeting of shareholders and
until their successors have been elected and have qualified. Officers are
appointed to serve until the meeting of the Board of Directors following the
next annual meeting of shareholders and until their successors have been elected
and qualified.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the aggregate remuneration paid in fiscal 1997:
Name of Individual Capacities in which Aggregate
or Identity of Group Remuneration is Received Remuneration
Christine Koenemann President $ 57,500
All Executive Officers $ 57,500
as a group (1 person)
For each year of service, each independent director receives stock options, with
exercise prices equal to the fair market value on the date of grant, in an
amount such that the aggregate exercise price of the options equals $5,000.00
for their services as directors.
Employee Incentive Stock Option Plan
On April 25, 1983, the Company adopted an employee incentive stock option plan
(the "Option Plan") to provide to participating employees added incentive to
achieve high levels of performance for the Company. The Option Plan was approved
by the Company's stockholders on May 31, 1984. The Option Plan terminated May
31, 1994 and options granted under this plan will expire if not exercised on or
before November 5, 2000.
The Option Plan provided for the granting of options to full-time salaried
officers and employees to purchase shares of Common Stock at prices per share
which must not be less than 100% of the fair market value of the Common Stock
subject thereto at the time each option is granted. Options granted under the
Option Plan expire not later than five (5) years from the date of grant. The
selection of individuals and the setting of the terms and provisions of the
options received by them are determined by the Board of Directors (the "Board")
or the Executive Committee. No option can be granted to an individual who will,
immediately prior or immediately after the option is granted, own directly or
indirectly more than 10% of the Company's outstanding Common Stock. Options are
non-transferable by the optionee. Under this plan, an aggregate of 100,000
shares of Common Stock may be issued. As of November 30, 1997, 175 shares have
been issued under the plan, and 21,250 options are outstanding at $6.00 per
share.
During 1994, the Company established an employee incentive stock option plan
("the 1994 Plan") under which options to purchase an aggregate of 100,000 common
shares may be granted at fair market value. During fiscal 1997 the Company
granted options to acquire 50,000 shares at $0.50 per share to its President. At
November 30, 1997, no shares had been issued under the 1994 Plan and 71,250
options at an exercise price of $0.50 per share were outstanding, of which
36,150 were exercisable. No options were exercised during the fiscal year ended
November 30, 1997. These options expire through the fiscal year ended November
30, 2007.
During 1995, the Company granted nonqualified stock options to acquire 50,000
shares at $0.50 per share to its current President. The options expire September
2000. These options are currently exercisable.
During fiscal 1996 the Company granted non-qualified stock options to acquire
24,000 shares at $0.50 per share to a consultant. The options immediately vest
upon grant and expire as follows:
Stock Exercise Expiration
Options Price Date
8,000 $ .50 March 31, 2001
8,000 .50 June 30, 2001
8,000 .50 September 30, 2001
All of these options remain outstanding and exercisable at November 30, 1997.
Unrestricted Non-qualified Stock Options and Warrants
During the fiscal year ended November 30, 1991, the Company granted warrants to
purchase 75,000 shares of Common Stock to Jack E. Dahl at an exercise price of
$0.40 per share. Such warrants are vested 15,000 shares per year commencing
January 10, 1992 through January 10, 1996 and expire five years after date of
vesting. Subsequently, Mr. Dahl entered into an agreement with Warren Currier,
who was then President of the Company, which was approved by the Board of
Directors of the Company, whereby 60,000 of the warrants issued to Mr. Dahl,
were transferred to Mr. Currier. The 15,000 warrants retained by Mr. Dahl
expired during fiscal 1997.
In May, 1991, the Company initiated a private placement memorandum offering
("Offering") to Westbridge Biosystems Ltd.'s limited partners. Participating
limited partners, representing 47.5 limited partnership units, purchased units
at $15,000 each. The units included a note payable described in long term debt
above. Each unit also included 2,000 warrants valued at $95,000, or $1.00 each.
Aggregate warrants issued with the Offering were 380,000. During the year ended
November 30, 1997, all of these warrants expired unexercised.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as of November 30, 1997, with
respect to the beneficial ownership of the Company's Common Stock (a) by each
person who is known to the Company to own beneficially or of record more than 5%
of the outstanding shares of Common Stock, (b) each present director and nominee
for election as a director of the Company, and (c) all officers and directors of
the Company as a group.
Amount and Nature W/O Exercise
of Beneficial Percent of Percent of
Name of Beneficial Owner Ownership Class (2) Class (3)
- ------------------------ ---------- --------- ---------
Christine Koenemann 110,675 (1) * 3.6
1150 Joshua Way
Vista, CA 92083
Albert L. Good 182,300 8.7 8.7
14550 Castle Rock Road
Salinas, CA 93908
Kenneth P. Miles 117,867 5.6 5.6
8 Avenida Andra
Palm Desert, CA 92260
William M. Witherspoon 179,297 8.5 8.5
PO Box 1735
Fairfield, IA 52556
Peter L. Salk 79,167 3.8 3.8
7459 High Avenue
La Jolla, CA 92037
William J. Dale 9,375 * *
1150 Joshua Way
Vista, CA 92083
All Directors & Officers 299,347 9.0 13.7
as a Group (3 persons)
* less than 1%
(1) Consists of exercisable options to purchase 3,750 shares at $6.00 per
share and 74,750 at $0 .50 per share.
(2) Calculated as if no options were exercised and 2,103,438 shares
outstanding.
(3) Calculated as if only that (those) shareholder's(s') options/warrants
exercisable within 60 days were exercised and no other
options/warrants were exercised.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.
(a) The following financial statements of the Company are included in Item
7:
Consolidated Balance Sheets at November 30, 1997 and 1996
Consolidated Statements of Operations for the
two years in the period ended November 30, 1997
Consolidated Statements of Shareholders' Equity for the
two years in the period ended November 30, 1997
Consolidated Statements of Cash Flows for the
two years in the period ended November 30, 1997
Notes to Consolidated Financial Statements.
(b) No Form 8-K was filed during the last quarter of the period covered by
this report. The Company filed 8-K during January, 1998.
(c) Exhibit filed herewith:
3(a) Articles of Incorporation and amendments thereto, incorporated by
reference to Exhibit 3(a) to Registration Statement number 2-92261 on
Form S-18 filed July 18, 1984.
3(b) Amendment to Articles of Incorporation as filed with the California
Secretary of State on September 24, 1997.
3(c) Bylaws, incorporated by reference to Exhibit 3(b) to Registration
Statement number 2-92261 on Form S-18 filed July 18, 1984
10(a) Biosystems R & D Agreement, incorporated by reference to Exhibit 10(a)
to Registration Statement number 2-92261 on Form S-18 filed July 18,
1984.
10(b) Biosystems Technology Transfer Agreement, incorporated by reference to
Exhibit 10(b) to Registration Statement number 2-92261 on Form S-18
filed July 18, 1984.
10(c) Biolink Acquisition Agreement, incorporated by reference to Exhibit
10(c) to Registration Statement number 2-92261 on Form S-18 filed July
18, 1984.
10(d) Employee Incentive Stock Option Plan, incorporated by reference to
Exhibit 10(d) to Registration Statement number 2-92261 on Form S-18
filed July 18, 1984.
10(e) Employee Stock Purchase Plan, incorporated by reference to Exhibit
10(e) to Registration Statement number 2-92261 on Form S-18 filed July
18, 1984.
10(f) Nonqualified Stock Option of Dr. Jonas Salk, incorporated by reference
to Exhibit 10(f) filed with Form 8-K dated November 10, 1987.
10(g) Nonqualified Stock Option of Stephen C. Hall, incorporated by
reference to Exhibit 10(g) filed with Form 8-K dated November 10,
1987.
10(h) Nonqualified Stock Option of Michael A. Spivak, incorporated by
reference to Exhibit 10(h) filed with Form 8-K dated November 10,
1987.
10(i) Nonqualified Stock Option of Dr. Peter L. Salk, incorporated by
reference to Exhibit 10(i) filed with Form 8-K dated November 10,
1987.
10(j) Nonqualified Stock Option of Gerald R. Haddock, incorporated by
reference to Exhibit 10(j) filed with Form 8-K dated November 10,
1987.
10(k) Nonqualified Stock Option of Peter Dine, incorporated by reference to
Exhibit 10(m) filed with the Annual Report on Form 10-K for the fiscal
year ended November 30, 1988.
10(l) Nonqualified Stock Option of Stanley L. Woodward, incorporated by
reference to Exhibit 10(n) filed with the Annual Report on Form 10-K
for the fiscal year ended November 30, 1988.
10(m) Westbridge Agrosystems Limited Exchange Agreement, incorporated by
reference to Exhibit 10(o) filed with Post Effective Amendment Number
1 to the Registration Statement number 2-92261 on Form S18 filed
December 26, 1989.
10(n) Nonqualified Stock Option of Noel R. Schaefer incorporated by
reference to Exhibit 10(q) to the Company's Annual Report on Form 10-K
for the fiscal year ended November 30, 1989.
10(o) Biosystems License Agreement incorporated by reference to Exhibit
10(s) to the Company's Annual Report on Form 10-K for the fiscal year
ended November 30, 1989.
10(p) Warrant Agency Agreement, incorporated by reference to Exhibit 4(b) to
Registration Statement number 2-92261 on Form S-18 filed July 18,
1984.
10(q) Agriculture Products Marketing, Sales, License and Distribution
Agreement by and between Haddock & Schaefer and the Company, dated
November 15, 1991, incorporated by reference to Exhibit 10(q) filed
with The Annual Report on Form 10-KSB for the fiscal year ended
November 30, 1992.
10(r) Oil Products Marketing, Sales, License and Distribution Agreement by
and between Haddock & Schaefer and the Company, dated November 15,
1991, incorporated by reference to Exhibit 10(r) filed with The Annual
Report on Form 10-KSB for the fiscal year ended November 30, 1992.
10(s) Employment Agreement by and between Company and Warren Currier III,
dated December 1, 1991, by reference to Exhibit 10(s) filed with
10-KSB for the fiscal year ended November 30, 1992.
10(t) Property lease by and between Mitsui Fudosan (USA), Inc. and the
Company, dated December 1, 1995, filed with the Annual Report on Form
10-KSB for the fiscal year ended November 30, 1995.
10(u) Agreement dated as of October 1, 1996, by and between Westbridge
Research Group and Westbridge Biosystems Limited filed with the Annual
Report on Form 10-KSB for the fiscal year ended November 30, 1996.
10(v) Westbridge Research Group 1994 Incentive Stock Option Plan filed with
the Annual Report on Form 10-KSB for the fiscal year ended November
30, 1996.
10(w) Nonqualified Stock Option of Christine Koenemann, incorporated by
reference to Exhibit 10(w) filed with the Annual Report on Form 10-KSB
for the fiscal year ended November 30, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 of 15(d) of the Securities Exchange
Act of 1934, the Issuer has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on March 13,1998.
Westbridge Research Group
By: /s/
--------------------------------
Christine Koenemann, President
Principal Executive Officer
Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Issuer and in
the capacities and on the dates indicated:
Signature Title Date
/s/ William M. Witherspoon
________________________________ Director March 13, 1998
William M. Witherspoon
/s/ Christine Koenemann
________________________________ President March 13, 1998
Christine Koenemann
/s/ William J. Dale
________________________________ Director March 13, 1998
William J. Dale
/s/ William Fruehling
________________________________ Director March 13, 1998
William Fruehling
Supplemental information to be furnished with reports filed pursuant to Section
15(d) of the Act by Issuers which have not registered Securities pursuant to
Section 12 of the Act.
No annual report covering the Issuer's last fiscal year or proxy material has
been sent to security holders. An annual report is to be furnished to security
holders subsequent to the filing of the annual report of this form.
<PAGE>
CERTIFICATE OF AMENDMENT
OF
ARTICLES OF INCORPORATION
Christine Koenemann and William Witherspoon certify that:
1. They are the president and the secretary, respectively, of
Westbridge Research Group, a California corporation.
2. Article Three of the Articles of Incorporation of this corporation
is amended to read as follows:
"THREE: (a) This corporation is authorized to issue two classes
of shares, designated respectively "Common Stock" and "Preferred
Stock". This Corporation may issue 37,500,000 shares of Common
Stock and 5,000,000 shares of Preferred Stock. On the amendment
of this article, each outstanding share of Common Stock is
converted into 0.25 shares of Common Stock.
(b) The Board of Directors may divide the Preferred Stock into
any number of series. The Board of Directors shall fix the
designation and number of shares of each such series. The Board
of Directors may determine and alter the rights, preferences and
privileges and restrictions granted to and imposed upon any
wholly unissued series of Preferred Stock. The Board of
Directors, within the limits and restrictions of any resolution
adopted by it originally fixing the number of shares of any
series, may increase or decrease the number of shares of any such
series after the issuance of shares of that series, but not below
the number of outstanding shares of such series."
3. The foregoing amendment of Articles of Incorporation has been duly
approved by the Board of Directors.
4. The foregoing amendment of Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with Section 902 of
the California Corporations Code. The total number of outstanding shares of the
corporation is 8,413,753. The number of shares voting in favor of the amendment
equaled or exceeded the vote required. The percentage vote required was more
than 50%.
<PAGE>
We further declare under penalty of perjury under the laws of the State
of California that the matter set forth in this certificate are true and correct
of our own knowledge.
Dated: July 18, 1997 ------------------------------------
Christine Koenemann
President
------------------------------------
William Witherspoon
Secretary
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference into the Westbridge Research
Group and Subsidiary (the "Company") registration statement on Form 10-KSB of
our report dated January 27, 1997 on the financial statements of the Company for
the year ended November 30, 1997.
Pannell Kerr Forster
Los Angeles, California
March 16, 1998
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference into the Westbridge Research
Group and Subsidiary (the "Company") registration statement on Form 10-KSB of
our report dated January 10, 1997 on the financial statements of the Company for
the years ended November 30, 1996 and 1995.
Peterson & Co.
San Diego, California
March 16, 1998
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<FISCAL-YEAR-END> NOV-30-1997
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