<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
(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, 1999
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: $1,588,689.
The aggregate market value of the voting and non-voting equity held by
nonaffiliates of the registrant as of February 26, 2000, (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 26, 2000, there were 2,103,438 shares of the Issuer's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
Transitional Small Business Disclosure
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Format Yes No X
--- ---
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 that
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-Registered Trademark- formulations are registered with the
Environmental Protection Agency (EPA) as plant growth regulators. The active
components of TRIGGRR-Registered Trademark- are "cytokinins" that affect rates
of cell division and growth. TRIGGRR-Registered Trademark- is available in
several product formulations including:
- Soil TRIGGRR-Registered Trademark-, 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.
- Foliar TRIGGRR-Registered Trademark-, 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-Registered Trademark-. SUPPRESS-Registered Trademark- does not kill the
parasitic nematode directly; instead it interferes with the ability of the
nematode to penetrate the plant roots. SUPPRESS-Registered Trademark- is
composed of safe, nontoxic naturally occurring plant growth regulators that
activate the plants natural defenses.
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FERTILIZERS
Foliar SUNBURST-Registered Trademark- and Soil SUNBURST-Registered
Trademark- 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-Registered Trademark- label, or in cases where the use of
TRIGGRR-Registered Trademark- is not appropriate. In addition, Westbridge has
developed and markets a line of organic fertilizers under the name
BioLink-Registered Trademark-. 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.
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Research and development expenses for continuing operations for fiscal
years 1999 and 1998, respectively, were $145,520 and $144,013.
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-Registered Trademark- and Foliar TRIGGRR-Registered Trademark- 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 56% of the Company's
agricultural product sales in fiscal 1999. Sales to two major domestic customers
amounted to 51% in 1998.
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
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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. Effective
December 1, 1998 the Company and the Partnership have agreed to remove the
Company as a limited partner of the Partnership in exchange for a reduced
royalty payment of 2% and a change in the buyout provision.
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, 1999, the Company had 10 employees, 7 full-time, 3 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
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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 that expires in March 2003. Rent is being expensed on a
straight-line basis over the term of the lease.
Rent expense for the years ending November 30, 1999 and 1998, net of
sub-lease income, was $76,116 and $77,020, 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, 1996.
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, 1999, were 756.
(c) DIVIDENDS. The Company has paid no dividends. There are no contractual
restrictions that materially limit the Company's present or future
ability to pay dividends. The Company does not expect to pay dividends
in the foreseeable future.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
FISCAL YEAR 1999 COMPARED TO FISCAL YEAR 1998
Total product sales were $1,588,689 in fiscal 1999 compared with
$1,607,647 in fiscal 1998, a decrease of 1%. Prices for the Company's existing
products remained stable during fiscal 1999. Production by gallons was 110,238
in 1999 and 98,112 in 1998, an increase of 12%. The decrease was due to higher
volume sales of lower priced products during fiscal 1999.
Cost of sales as a percentage of total product sales amounted to 42% or
$662,677 in fiscal 1999, as compared with 38% or $603,459 in fiscal 1998. The
increase was primarily the result of increased raw material and labor costs.
Research and development expenses increased by $1,507, or 1% in fiscal
1999 from $144,013 in fiscal 1998.
Selling expenses increased in relation to product sales for fiscal year
1999, representing 26% of product sales in fiscal 1999 versus 25% of product
sales in fiscal 1998. This increase is a result of expanded advertising.
General and administrative expenses decreased by 11% to $216,770 in
fiscal 1999 from $244,293 in fiscal 1998. This decrease was due to reduced legal
expenses and stock transfer agent expenses associated with the reverse stock
split in the previous year.
Royalty expense decreased to $43,517 in fiscal 1999 from $51,900 in
fiscal 1998. This decrease is due to decreased sales in 1999, and the amendment
to the royalty agreement.
Interest expense increased to $29,485 for fiscal 1999, from $28,671 for
fiscal 1998. This increase is primarily due a new capital lease obligation and
new installment loan.
The net income for fiscal 1999 was $25,996 compared with net income of
$53,595 in fiscal 1998. The decrease in net income is primarily related to
higher expenses associated with additional staffing and sales of products with
lower margins.
FISCAL YEAR 1998 COMPARED TO FISCAL YEAR 1997
Total product sales were $1,607,647 in fiscal 1998 compared with
$1,333,878 in fiscal 1997, an increase of 21%. The increase is attributable to
an increase in environmental product sales and new products being manufactured
for an existing domestic customer. Prices
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for the Company's existing products remained stable during fiscal 1998.
Production by gallons were 98,112 in 1998 and 67,858 in 1997, an increase of
45%.
Cost of sales as a percentage of total product sales amounted to 38% or
$603,459 in fiscal 1998, as compared with 35% or $461,710 in fiscal 1997. The
increase was primarily the result of increased raw material and labor costs.
Research and development expenses increased by $17,988, or 14% in
fiscal 1998 from $126,025 in fiscal 1997. This increase is due to an increase in
salaries and wages attributable to the research and development function.
Selling expenses increased in relation to product sales for fiscal year
1998, representing 25% of product sales in fiscal 1998 versus 21% of product
sales in fiscal 1997. The increased expenditures are a result of new sales
personnel and expanded advertising.
General and administrative expenses increased by 17% to $244,293 in
fiscal 1998 from $208,762 in fiscal 1997. The increase was due primarily to
increased legal expenses associated with the reverse stock split and stock
transfer agent fees.
Royalty expense increased to $71,016 in fiscal 1998 from $64,369 in
fiscal 1997. This increase is due to increased sales in 1998.
Interest expense increased to $28,671 for fiscal 1998, from $26,206 for
fiscal 1997. This increase is primarily due to increases in accrued interest to
related parties and capital lease obligations.
The net income for fiscal 1998 was $53,595 compared with net income of
$94,796 in fiscal 1997. The decrease in net income is primarily related to
higher expenses associated with additional staffing and sales of products with
lower margins.
LIQUIDITY AND CAPITAL RESOURCES
Net working capital decreased to $270,565 at November 30, 1999, due
primarily to notes payable to related parties being classified as current
obligations at November 30, 1999.
Based on current cash flow projections management expects that the
Company can continue operations for the current year without infusions of
additional cash.
ITEM 7. FINANCIAL STATEMENTS
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Exhibit A, "Consolidated Financial Statements and Independent Auditor's
Report" is incorporated herein by reference.
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 Forster.
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,
1999, were as follows:
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION AND BUSINESS YEAR FIRST
---- --- EXPERIENCE DURING THE PAST FIVE YEARS BECAME DIRECTOR
------------------------------------- ---------------
<S> <C> <C> <C>
Christine Koenemann 47 Christine Koenemann was elected President 1995
and appointed as a Director of the Company on
March 2, 1995. She has worked for the Company
for the past 16 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 67 Mr. Dale, appointed a director of the Company in 1995
March 1995, is President of Silverado Capital, Inc., a
San Diego based company engaged in international
Licensing and merchant banking activities. Since
</TABLE>
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<TABLE>
<S> <C> <C> <C>
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 an U.S. Naval Aviator.
William M. Witherspoon 59 Mr. Witherspoon was appointed to the Board of 1995
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 an M.A. from MERU.
William Fruehling 60 Mr. Fruehling was appointed to the Board of Directors 1997
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.
</TABLE>
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 1999:
<TABLE>
<CAPTION>
Name of Individual Capacities in which Aggregate
<S> <C> <C>
</TABLE>
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<TABLE>
<CAPTION>
or Identity of Group Remuneration is Received Remuneration
-------------------- ------------------------ ------------
<S> <C> <C>
Christine Koenemann President $ 60,000
All Executive Officers $ 60,000
as a group (1 person)
</TABLE>
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.
During fiscal 1997, 1998, and 1999 the Company granted non-qualified
stock options to acquire 20,000, 13,750, and 15,000 shares, respectively at
$0.50, $1.00, and $1.00 per share, respectively, to members of the Board of
Directors. The options immediately vest upon grant and expire December 2001,
2002, and 2003, respectively. All of these options remain outstanding and
exercisable at November 30, 1999.
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, 1999, 175 shares have
been issued under the plan, and 4,250 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, 1999, no shares had been issued under the 1994 Plan
and 81,250 options at an exercise price between $0.50 and
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$1.00 per share were outstanding, of which 58,450 were exercisable. No options
were exercised during the fiscal year ended November 30, 1999. These options
expire through the fiscal year ended November 30, 2009.
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 and 1997 the Company granted non-qualified stock
options to acquire 40,000 shares at $0.50 per share to a consultant. The options
immediately vest upon grant and expire as follows:
<TABLE>
<CAPTION>
Stock Options Exercise Price Expiration Date
------------- -------------- ---------------
<S> <C> <C>
8,000 $ .50 March 31, 2001
8,000 .50 June 30, 2001
8,000 .50 September 30, 2001
8,000 .50 December 31, 2001
8,000 .50 March 31, 2002
</TABLE>
All of these options remain outstanding and exercisable at November 30, 1999.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as of November 30,
1999, 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.
<TABLE>
<CAPTION>
W/O Exercise
Amount and Nature of Percent of Percent of
Name of Beneficial Owner Beneficial Ownership Class (5) Class (6)
------------------------ -------------------- --------- ---------
<S> <C> <C> <C>
Christine Koenemann 107,500 (1) * 4.0
1150 Joshua Way
Vista, CA 92083
</TABLE>
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<TABLE>
<S> <C> <C> <C>
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 (2) 199,297 8.5 9.4
PO Box 1735
Fairfield, IA 52556
William Fruehling (4) 8,750 * *
5416 Renaissance Avenue
San Diego, CA 92122
William J. Dale (3) 29,375 * 1.4
1150 Joshua Way
Vista, CA 92083
All Directors & Officers 344,922 9.0 15.3
as a Group (4 persons)
</TABLE>
* less than 1%
(1) Consists of exercisable options to purchase 1,250 shares at $6.00 per
share and 88,250 at $0 .50 per share.
(2) Consists of exercisable options to purchase 10,000 shares at $0.50 per
share and 10,000 shares at $1.00 per share.
(3) Consists of exercisable options to purchase 10,000 shares at $0.50 per
share and 10,000 shares at $1.00 per share.
(4) Consists of exercisable options to purchase 8,750 at $1.00 per share.
(5) Calculated as if no options were exercised and 2,103,438 shares
outstanding.
(6) 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
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None
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.
(a) 1. The following financial statements of the Company are included
in Item 7:
Consolidated Balance Sheets at November 30, 1999 and 1998
Consolidated Statements of Operations for the
two years in the period ended November 30, 1999
Consolidated Statements of Shareholders' Equity for the
two years in the period ended November 30, 1999
Consolidated Statements of Cash Flows for the
two years in the period ended November 30, 1999
Notes to Consolidated Financial Statements.
(b) No Form 8-K was filed during the last quarter of the period covered by this
report.
(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.
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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.
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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 S-18 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.
16
<PAGE>
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.
17
<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 12, 2000.
WESTBRIDGE RESEARCH GROUP
By /s/ CHRISTINE KOENEMANN
---------------------------------
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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ WILLIAM M. WITHERSPOON Director March 12, 2000
- --------------------------------
William M. Witherspoon
/s/ CHRISTINE KOENEMANN Director March 12, 2000
- --------------------------------
Christine Koenemann
/s/ WILLIAM J. DALE Director March 12, 2000
- --------------------------------
William J. Dale
/s/ WILLIAM FRUEHLING Director March 12, 2000
- --------------------------------
William Fruehling
</TABLE>
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.
18
<PAGE>
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.
19
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR'S REPORT
For The Years Ended November 30, 1999 and 1998
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
TABLE OF CONTENTS
<TABLE>
<S> <C>
INDEPENDENT AUDITOR'S REPORT..............................................F-1
FINANCIAL STATEMENTS
Consolidated Balance Sheets.....................................F-2 - 3
Consolidated Statements of Operations ..............................F-4
Consolidated Statements of Shareholders' Equity.....................F-5
Consolidated Statements of Cash Flows...........................F-6 - 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...........................F-8 - 21
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
Westbridge Research Group and Subsidiary
Vista, California
We have audited the consolidated balance sheets of Westbridge Research Group and
Subsidiary (the "Company") as of November 30, 1999 and 1998, 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, 1999 and 1998, and the
consolidated results of its operations and its cash flows for the years then
ended, in conformity with generally accepted accounting principles.
San Diego, California PANNELL KERR FORSTER
February 7, 2000 Certified Public Accountants
A Professional Corporation
F-1
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
November 30, 1999 and 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 267,136 $ 249,729
Accounts receivable, less allowance of $5,000
and $206 in 1999 and 1998, respectively 270,032 296,312
Inventories 89,941 101,952
Prepaid expenses and other current assets 25,905 15,651
------------ ------------
Total current assets 653,014 663,644
------------ ------------
Property and equipment, at cost:
Machinery and equipment 196,131 163,931
Office furniture and fixtures 302,892 258,240
Vehicles 36,295 20,597
------------ ------------
535,318 442,768
Less accumulated depreciation (395,874) (370,515)
------------ ------------
Net property and equipment 139,444 72,253
------------ ------------
Long-term account receivable, net 130,000 130,000
Intangible assets, net 135,408 201,387
------------ ------------
$ 1,057,866 $ 1,067,284
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-2
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS (Continued)
November 30, 1999 and 1998
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable $ 15,790 $ 69,791
Accrued expenses 63,260 65,406
Current portion of long term debt 35,647 48,203
Current portion of capital lease obligations 14,692 5,844
Notes payable to related parties 253,060 104,834
------------ ------------
Total current liabilities 382,449 294,078
Long-term debt 19,631 8,979
Notes payable to related parties - 149,366
Capital lease obligations, net of current portion 31,615 16,686
------------ ------------
Total liabilities 433,695 469,109
------------ ------------
Commitments (Note 10)
Shareholders' equity:
Preferred stock, 5,000,000 shares authorized,
no shares outstanding in 1999 and 1998 - -
Common stock, no par value, 9,375,000 shares
authorized, 2,103,438 shares issued and
outstanding in 1999 and 1998 8,479,854 8,479,854
Paid-in capital - warrants 95,000 95,000
Accumulated deficit (7,950,683) (7,976,679)
------------ ------------
Total shareholders' equity 624,171 598,175
------------ ------------
$ 1,057,866 $ 1,067,284
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-3
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended November 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Agricultural product sales $ 1,588,689 $ 1,607,647
------------ ------------
Costs and expenses:
Cost of sales 662,677 603,459
Research and development 145,520 144,013
Selling 419,065 395,231
General and administrative 216,770 244,293
Royalties 43,517 51,900
Amortization of processes and formulas 65,979 99,454
------------ ------------
Total costs and expenses 1,553,528 1,538,350
------------ ------------
Income from operations 35,161 69,297
Other income (expense):
Interest expense (29,485) (28,671)
Interest income 13,530 8,239
Other income 8,390 6,330
------------ ------------
Income before income taxes 27,596 55,195
Provision for income taxes 1,600 1,600
------------ ------------
Net income $ 25,996 $ 53,595
============ ============
Net income per common share - basic $ .01 $ .03
------------ ------------
Weighted average shares outstanding 2,103,438 2,103,438
============ ============
Net income per common share - diluted $ .01 $ .02
------------ ------------
Weighted average shares, options and warrants outstanding 2,326,263 2,303,946
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-4
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
For The Years Ended November 30, 1999 and 1998
<TABLE>
<CAPTION>
Paid-in
Common Capital Accumulated
Stock Amount Warrants Deficit Total
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, November 30, 1997 2,103,438 $ 8,479,854 $ 95,000 $ (8,030,274) $ 544,580
Net income - - - 53,595 53,595
------------ ------------ ------------ ------------ ------------
Balance, November 30, 1998 2,103,438 8,479,854 95,000 (7,976,679) 598,175
Net income - - - 25,996 25,996
------------ ------------ ------------ ------------ ------------
Balance, November 30, 1999 2,103,438 $ 8,479,854 $ 95,000 $ (7,950,683) $ 624,171
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-5
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended November 30, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 25,996 $ 53,595
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 29,368 29,397
Amortization 65,979 99,454
Capitalized interest on notes payable to related
parties and long term debt 19,290 18,984
Gain on sale of property and equipment (1,050) -
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable 26,280 (105,276)
Decrease (increase) in inventories 12,011 (19,893)
Increase in prepaid expenses and
other current assets (10,254) (1,260)
(Decrease) increase in accounts payable (54,001) 12,395
Decrease in accrued expenses (2,146) (29,784)
Decrease in deferred rent - (1,284)
------------ ------------
Net cash flows provided by
operating activities 111,473 56,328
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (61,581) (15,636)
Proceeds from sales of equipment 1,050 -
------------ ------------
Net cash flows used in
investing activities (60,531) (15,636)
------------ ------------
Cash flows from financing activities:
Borrowings on long term debt 16,496 -
Payments on notes payable to related
parties and long-term debt (38,829) (39,164)
Payments on capital lease obligations (11,202) (3,580)
------------ ------------
Net cash flows used in
financing activities (33,535) (42,744)
------------ ------------
Net increase (decrease) in cash and cash equivalents 17,407 (2,052)
Cash and cash equivalents at beginning of year 249,729 251,781
------------ ------------
Cash and cash equivalents at end of year $ 267,136 $ 249,729
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-6
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
For The Years Ended November 30, 1999 and 1998
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Cash paid during the year for:
Interest $ 31,195 $ 9,686
============ ============
Income taxes $ 1,600 $ 1,600
============ ============
Supplemental disclosure of noncash investing and financing activities:
Borrowing on capital lease obligation for
machinery and equipment $ 34,979 $ 10,615
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
F-7
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999 and 1998
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 (FASB) recently issued Statement
of Financial Accounting Standards (SFAS) No. 131, "Disclosures about
Segments of an Enterprise and Related Information." This new Statement,
effective for financial statements for periods beginning after December
15, 1997, requires that public business enterprises report certain
information about operating segments in complete sets of financial
statements of the enterprise and in condensed financial statements of
interim periods issued to shareholders. It also requires the reporting of
certain information about their products and services, the geographic
areas in which they operate, and their major customers. The Company
adopted SFAS 131 in fiscal year 1999. The Company has determined that it
operates in one segment.
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.
F-8
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999 and 1998
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
INTANGIBLE ASSETS
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 56% and 51% of fiscal
1999 and 1998 net agricultural product sales, respectively. During fiscal
1999, 13% of total sales were derived from aggregate foreign sales
compared to 11% in 1998. A majority of the Company's domestic sales are
concentrated in Washington, California, Arizona and Texas, and a majority
of the Company's foreign sales are concentrated in Peru.
NET INCOME PER SHARE
Basic earnings per common share is based upon the weighted average number
of common shares outstanding during the period. Diluted earnings per
common share is based upon the weighted average number of common shares
outstanding adjusted for the assumed conversion of diluted stock options
and warrants using the treasury stock method. The weighted average number
of common shares, options, and warrants outstanding were 2,326,263 and
2,303,946 for 1999 and 1998, respectively.
F-9
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999 and 1998
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share computations for the periods
presented below:
<TABLE>
<CAPTION>
Years Ended November 30,
1999 1998
------------ ------------
<S> <C> <C>
Numerator for earnings per common share - net income $ 25,996 $ 53,595
------------ ------------
Denominator for basic earnings per common share 2,103,438 2,103,438
------------ ------------
Effect of dilutive securities 222,825 200,508
------------ ------------
Denominator for diluted earnings per common share 2,326,263 2,303,946
------------ ------------
Net income per common share:
Basic $ .01 $ .03
============ ============
Diluted $ .01 $ .02
============ ============
</TABLE>
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.
RESEARCH AND DEVELOPMENT
It is the Company's policy to expense research and development costs when
incurred.
F-10
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999 and 1998
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
STOCK BASED COMPENSATION
During October 1995, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." This
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 pro forma 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. See Note 9.
LONG LIVED ASSETS
The Company investigates potential impairments of their long-lived assets
on an exception basis when evidence exists that events or changes in
circumstances may have made recovery of an asset's carrying value
unlikely. An impairment loss is recognized when the sum of the expected
undiscounted future net cash flows is less than the carrying amount of the
asset. No such losses have been identified.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
F-11
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999 and 1998
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:
<TABLE>
<S> <C>
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
=============
</TABLE>
The 12 year note is full recourse to the Partnership and the 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.
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:
F-12
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999 and 1998
NOTE 2 - RESEARCH AND DEVELOPMENT AGREEMENTS (Continued)
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
(see Note 5). 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. The
Company and the Partnership have now changed their relationship to remove
the Company as a limited partner of the Partnership, to change the amount
of the royalty payable under the licensing agreement to 2% as of December
1, 1998, and to change the buyout provision as called for in the Agreement
dated October 1, 1996.
F-13
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999 and 1998
NOTE 3 - INVENTORIES
Inventories consist of the following at November 30:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Raw materials $ 55,456 $ 44,217
Finished goods 34,485 57,735
------------ ------------
$ 89,941 $ 101,952
============ ============
</TABLE>
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
California, 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, 1999, the land is subject to a Mexican court pending
foreclosure sale.
The long term account receivable and related allowance for doubtful
accounts at November 30 is as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Long-term account receivable $ 451,270 $ 451,270
Allowance for doubtful long-term account (321,270) (321,270)
------------ ------------
$ 130,000 $ 130,000
============ ============
</TABLE>
NOTE 5 - INTANGIBLE ASSETS
Intangible assets are as follows as of November 30:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Purchased processes and formulas $ 3,097,369 $ 3,097,369
Prepaid royalties 195,942 195,942
------------ ------------
3,293,311 3,293,311
Accumulated amortization (3,157,903) (3,091,924)
------------ ------------
$ 135,408 $ 201,387
============ ============
</TABLE>
F-14
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999 and 1998
NOTE 6 - ACCRUED EXPENSES
Accrued expenses consist of the following at November 30:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Royalties - related party $ 1,297 $ 2,422
Auditing fees 17,665 17,706
Accrued vacation 16,362 15,345
Warranty 18,705 18,705
Sales commissions 9,083 9,800
Deferred rent, current portion - 1,284
Other 148 144
------------ ------------
$ 63,260 $ 65,406
============ ============
</TABLE>
NOTE 7 - LONG-TERM DEBT
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Notes payable to an individual, with simple interest
at 8%. Principal and accrued interest are due
on demand. The Company is negotiating the
extension of the maturity date. Amount includes
accrued interest of $9,006 and $9,576 at
November 30, 1999 and 1998, respectively $ 30,235 $ 30,804
Note payable to a bank bearing interest at 9.99%, principal and interest
payable in monthly installments of $350 for 60 months, maturing
October 7, 2004. This note is collateralized
by a vehicle 16,064 -
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 - 15,010
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 8,979 11,368
------------ ------------
Total long term debt 55,278 57,182
Less: Current portion 35,647 48,203
------------ ------------
Long term portion $ 19,631 $ 8,979
============ ============
</TABLE>
F-15
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999 and 1998
NOTE 7 - LONG-TERM DEBT (Continued)
Aggregate maturities of long term debt at November 30, 1999 are as
follows:
<TABLE>
<CAPTION>
Year Ended Amount
---------- ------
<S> <C>
2000 $ 35,647
2001 6,045
2002 6,569
2003 3,669
2004 3,348
----------
$ 55,278
==========
</TABLE>
NOTE 8 - NOTES PAYABLE TO RELATED PARTIES
At November 30, notes payable to related parties were as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
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 due at
maturity September 1, 2000. Amounts include accrued interest of
$43,525 and $46,281 at November 30, 1999 and 1998, respectively $ 146,610 $ 149,366
Note payable to related party with simple interest compounded annually at
prime plus 1% which at November 30, 1999 and 1998 was 8.25% and 9%
respectively. Collateralized by a subordinated security interest in
substantially all assets of the Company. Principal and accrued
interest originally due at maturity in June 1995. The note is due on
demand. The Company is negotiating the extension of the maturity
date. Amounts include accrued interest of $56,450 and $54,834 at
November 30, 1999 and1998,
respectively 106,450 104,834
------------ ------------
Total notes payable to related parties 253,060 254,200
Less: Current portion 253,060 104,834
------------ ------------
Notes payable to related parties, long-term $ - $ 149,366
============ ============
</TABLE>
F-16
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999 and 1998
NOTE 9 - 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 4,250 shares at
an exercise price of $6.00 per share remain outstanding and exercisable at
November 30, 1999. 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, 1999 and 1998, a total of 18,750 shares remain reserved
and available for future stock option grants under the 1994 Plan,
respectively.
A summary of the stock option activity under the 1983 and 1994 Plans is as
follows:
<TABLE>
<CAPTION>
Weighted
Exercise Average
Stock Price Per Price Per
Options Share Share
------------ ------------ ------------
<S> <C> <C> <C>
Outstanding at November 30, 1997 84,000 $ .50-6.00 $ 1.33
Granted 10,000 1.00 1.00
Expired or canceled (4,250) 6.00 6.00
Exercised - - -
------------ ------------ ------------
Outstanding at November 30, 1998 89,750 .50 - 6.00 1.08
Granted - - -
Expired or canceled (4,250) 6.00 6.00
Exercised - - -
------------ ------------ ------------
Outstanding at November 30, 1999 85,500 $ .50 - 6.00 $ .83
============ ============ ============
Vested stock options at November 30, 1999 66,950
============
</TABLE>
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, 1999 and 1998.
F-17
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999 and 1998
NOTE 9 - STOCK OPTIONS AND WARRANTS (Continued)
During fiscal 1996 and 1997 the Company granted non-qualified stock
options to acquire a total of 40,000 shares at $.50 per share, the then
fair value of the shares, to a consultant. The options immediately vest
upon grant and remain outstanding and exercisable at November 30, 1999 and
1998. A summary of these stock options is as follows:
<TABLE>
<CAPTION>
Stock Exercise Price Expiration
Options Per Share Date
------------ -------------- ------------------
<S> <C> <C> <C>
8,000 $ .50 March 31, 2001
8,000 .50 June 30, 2001
8,000 .50 September 30, 2001
8,000 .50 December 31, 2001
8,000 .50 March 31, 2002
</TABLE>
During fiscal 1997 the Company granted non-qualified stock options to
acquire 20,000 shares at $.50 per share to members of the Board of
Directors. The options immediately vest upon grant and expire in December
2001. All of these options remain outstanding and exercisable at November
30, 1999 and 1998.
During fiscal 1998 the Company granted non-qualified stock options to
acquire 13,750 shares at $1.00 per share to members of the Board of
Directors. The options immediately vest upon grant and expire in December
2002. All of these options remain outstanding and exercisable at November
30, 1999.
During fiscal 1999 the Company granted non-qualified stock options to
acquire 15,000 shares at $1.00 per share to members of the Board of
Directors. The options immediately vest upon grant and expire in December
2003. All of these options remain outstanding and exercisable at November
30, 1999.
At November 30, 1999 the Company had 30,000 fully vested and exercisable
warrants outstanding to purchase shares of its stock at $.40 per share.
15,000 of the warrants expire January 10, 2000 and 15,000 expire January
10, 2001.
The Company has elected to account for nonqualified grants and grants
under its 1994 Plan following APB No. 25 and related interpretations.
Accordingly, no compensation costs have been recognized for nonqualified
options for the years ended November 30, 1999 and 1998. Under SFAS 123,
the fair value of each option granted during the years ended November 30,
1999 and 1998 was estimated on the measurement date utilizing the then
current fair value of the underlying shares less the exercise price
discounted over the average expected life of the options of five to ten
years, with an average risk free interest rate of 5.07% to 5.12%, price
volatility of .5 and no dividends. Had compensation cost for all awards
been determined based on the fair value method as prescribed by SFAS 123,
reported net income and earnings per common share would have been as
follows:
F-18
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999 and 1998
NOTE 9 - STOCK OPTIONS AND WARRANTS (Continued)
<TABLE>
<CAPTION>
November 30, November 30,
1999 1998
------------ ------------
<S> <C> <C>
Net income:
As reported $ 25,996 $ 53,595
Proforma $ 20,165 $ 35,096
Basic and diluted earnings per share:
Basic--as reported $ .01 $ .03
Basic--Proforma $ .01 $ .02
Diluted--as reported $ .01 $ .02
Diluted--Proforma $ .01 $ .02
</TABLE>
NOTE 10 - COMMITMENTS
The Company leases its facilities under a non-cancelable operating lease
that expires March 31, 2003. The lease agreement contains a two year
renewal option and it is management's intention to exercise this option.
Rent is being expensed on a straight line basis over the term of the
lease. The Company also leases certain of its property and equipment from
BSB Leasing, through capital leases that expire in October 2001, August
2002 and March 2003, respectively. Capitalized leases included in property
and equipment amounted to approximately $61,900 and $26,900, before
accumulated depreciation of approximately $12,800 and $9,300 as of
November 30, 1999 and 1998, respectively. Minimum future obligations under
these leases as of November 30 are as follows:
<TABLE>
<CAPTION>
Year Ending
November 30, Capital Operating
------------ ------- ---------
<S> <C> <C> <C>
2000 $ 21,098 $ 78,952
2001 20,185 79,728
2002 14,640 81,320
2003 3,433 27,372
------------ ------------
Total minimum lease payments 59,356 $ 267,372
============
Amount representing interest (13,049)
------------
Present value of minimum lease payments $ 46,307
============
</TABLE>
Rent expense under the non-cancelable operating lease, net of sub-lease
income, was $76,116 and $77,020 for the years ended November 30, 1999 and
1998, respectively.
F-19
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999 and 1998
NOTE 11 - INCOME TAXES
Deferred income taxes reflect the net tax effects of the temporary
differences between the carrying amounts of assets and liabilities for
financial reporting and the amounts used for income tax purposes. The tax
effect of temporary differences consisted of the following as of November
30:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax assets
Net operating loss carryforwards $ 1,532,000 $ 1,695,000
Tax credit carryforwards 72,000 72,000
Other 66,000 10,000
------------ ------------
Gross deferred tax assets 1,670,000 1,777,000
Less valuation allowance (1,670,000) (1,777,000)
------------ ------------
Net deferred tax assets $ - $ -
============ ============
</TABLE>
Realization of deferred tax assets is dependant upon sufficient future
taxable income during the period that deductible temporary differences and
carryforwards are expected to be available to reduce taxable income. A
valuation allowance is recorded when, in the opinion of management, it is
more likely than not that some portion or all of the deferred tax assets
will not be realized. As the achievement of required future taxable income
is uncertain, the Company recorded a valuation allowance. The valuation
allowance decreased by $107,000 from 1998.
At November 30, 1999, the Company has a federal income tax net operating
loss carryforward of approximately $4,390,000 and a California tax net
operating loss carryforward of approximately $670,000. The federal and
California net operating loss carryforwards expire through the year 2011
and 2001, respectively.
At November 30, 1999, the Company has federal income tax credit
carryforwards of approximately $72,000. These credits expire through the
year 2000. The Company accounts for its tax credits under the flow through
method.
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.
F-20
<PAGE>
WESTBRIDGE RESEARCH GROUP
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
November 30, 1999 and 1998
NOTE 11 - INCOME TAXES (Continued)
A reconciliation of the effective tax rates with the federal statutory
rate is as follows as of November 30:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Income tax benefit at 35% statutory rate $ 9,000 $ 19,000
Change in valuation allowance (107,000) (65,000)
Nondeductible expenses 16,000 30,000
Adjustment to carryforwards 84,000 -
Other (2,000) 25,600
State income taxes, net 1,600 (8,000)
------------ ------------
$ 1,600 $ 1,600
============ ============
</TABLE>
NOTE 12 - RECLASSIFICATION
Certain amounts in the 1998 consolidated balance sheet and consolidated
statement of operations have been reclassified in order to conform to the
current year presentation.
F-21
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-END> NOV-30-1999
<CASH> 267,136
<SECURITIES> 0
<RECEIVABLES> 27,032
<ALLOWANCES> 5,000
<INVENTORY> 89,941
<CURRENT-ASSETS> 653,014
<PP&E> 535,318
<DEPRECIATION> 395,874
<TOTAL-ASSETS> 1,057,866
<CURRENT-LIABILITIES> 129,389
<BONDS> 304,306
0
0
<COMMON> 8,479,854
<OTHER-SE> 95,000
<TOTAL-LIABILITY-AND-EQUITY> 1,057,866
<SALES> 1,588,689
<TOTAL-REVENUES> 1,588,689
<CGS> 662,677
<TOTAL-COSTS> 1,553,528
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,485
<INCOME-PRETAX> 27,596
<INCOME-TAX> 1,600
<INCOME-CONTINUING> 25,996
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,996
<EPS-BASIC> .01
<EPS-DILUTED> .01
</TABLE>
