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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to _______________________
Commission file number: 0-13649
COOPER LIFE SCIENCES, INC.
_______________________________________
(Exact name of registrant as specified in its charter)
DELAWARE 94-2563513
_______________________________ _______________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
160 BROADWAY, NEW YORK, NEW YORK 10038
________________________________________ _______________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 791-5362
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
As of June 11, 1996, there were 2,172,695 outstanding shares of the issuers
Common Stock, $.10 par value.
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COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
INDEX
PAGE NO.
_______
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
April 30, 1996 and October 31, 1995 3
Consolidated Statements of Operations
For The Three and Six Months Ended
April 30, 1996 and 1995 4
Condensed Statements of Consolidated
Cash Flows For The Six Months Ended
April 30, 1996 and 1995 5
Notes to Consolidated Condensed
Financial Statements 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 8
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
Signature 10
Index of Exhibits
2
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COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
_________ ____________
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 225 $ 341
Marketable Securities:
The Cooper Companies, Inc. common stock 25,548 13,645
Executone Information Systems, Inc. common stock 3,791 --
Due from Second Advantage 194 194
Prepaid expenses and other 50 81
Investment in Unistar Gaming Corp. -- 4,812
Investment in Executone Preferred Stock 2,096 --
Furniture, fixtures and equipment, net 22 29
--------- ---------
$ 31,926 $ 19,102
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank borrowings $ 1,700 $ 1,500
Accounts payable and accrued liabilities 1,190 1,312
--------- ---------
2,890 2,812
Stockholders' Equity
Preferred stock - $.10 par value:
6,000,000 shares authorized: none issued -- --
Common stock - $.10 par value:
Authorized -- 6,000,000 shares
Issued -- 2,566,095 shares 256 251
Outstanding --
April 30, 1996, 2,172,695 shares
October 31, 1995, 2,111,695 shares
Additional paid-in capital 78,538 78,283
Unrealized gain on marketable securities 14,167 1,389
Accumulated deficit (61,554) (61,120)
Less: Common stock in treasury - at cost;
April 30, 1996, 393,400 shares
October 31, 1995, 404,400 shares (1,962) (2,104)
Minimum pension liability adjustment (409) (409)
--------- ---------
Total Stockholders' Equity 29,036 16,290
--------- ---------
$ 31,926 $ 19,102
========= =========
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
3
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COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE FIGURES)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
APRIL 30, APRIL 30,
____________________ _________________
1996 1995 1996 1995
____ ____ ____ ____
<S> <C> <C> <C> <C>
Revenues
Interest and other income $ 1 $ 3 $ 4 $ 15
Loss on sales of marketable securities -- (188) -- (188)
------- ------- ------- -------
1 (185) 4 (173)
------- ------- ------- -------
Expenses
General and administrative 222 147 358 503
Interest 40 44 80 82
------- ------- ------- -------
Total Expenses 262 191 438 585
------- ------- ------- -------
Loss from continuing operations (261) (376) (434) (758)
Provision for income taxes -- 1 -- 1
------- ------- ------- -------
Loss from continuing operations (261) (377) (434) (759)
Gain (loss) on sale of and results from
discontinued operations -- (819) -- 2,831
------- ------- ------- -------
Net income (loss) $ (261) $(1,196) $ (434) $ 2,072
======= ======= ======= =======
Net income (loss) per share
Continuing operations $ (.12) $ (.18) $ (.20) $ (.34)
Discontinued operations $ -- $ (.39) $ -- $ 1.27
------- ------- ------- -------
Net income (loss) per share $ (.12) $ (.57) $ (.20) $ .93
======= ======= ======= =======
Average number of shares outstanding 2,138 2,112 2,125 2,224
======= ======= ======= =======
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
4
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COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
April 30,
_____________________
1996 1995
____ _____
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (434) $ 2,072
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
Loss on marketable securities -- 188
Depreciation and amortization 7 7
Non cash compensation charge 32 --
Changes in assets and liabilities:
Increase in accrued income and receivables -- (382)
(Increase) decrease in prepaid expenses and other 31 (27)
(Decrease) in accounts payable and
other accrued liabilities (20) (10)
-------- --------
Net cash provided by (used in) continuing
operating activities (384) 1,848
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Unistar Gaming Corp. (200) (3,624)
Sale of discontinued operations -- 22,435
-------- --------
Net cash provided by (used in) investing activities (200) 18,811
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in notes payable - affiliate -- (1,650)
Payment of warehouse borrowing related to
discontinued operations -- (18,034)
Proceeds from bank borrowing 200 --
Proceeds from exercise of common stock warrants 268 --
-------- --------
Net cash provided by (used in) financing activities 468 (19,684)
-------- --------
Net (decrease) increase in cash and cash equivalents (116) 975
Cash and cash equivalents - Beginning of period 341 444
-------- --------
Cash and cash equivalents - End of period $ 225 $ 1,419
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash used to pay interest $ 80 $ 82
Cash used to pay taxes $ -- $ 1
</TABLE>
SEE NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
5
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COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1996 AND 1995
NOTE 1. - BUSINESS OF THE COMPANY
On November 30, 1994, Cooper Life Sciences, Inc., a Delaware corporation
(the "Company"), sold substantially all of the assets of its mortgage banking
business and as of March 31, 1995 disposed of its remaining interest in the
business. The Company's mortgage banking operations were considered to be a
discontinued operation as of October 31, 1994. The Company is not presently
engaged in any business operations and is currently investigating new business
opportunities.
On December 19, 1995, Executone Information Systems, Inc., a Virginia
corporation whose common stock trades on the NASDAQ National Market System,
("Executone"), acquired all of the issued and outstanding shares of Unistar
Gaming Corp. Common Stock (the "UGC Common Stock"), including all of the shares
of UGC Common Stock owned by the Company. (See Note 2 below for more information
on the acquisition and disposition of Unistar Gaming Corp).
During interim periods, the Company follows the accounting policies set
forth in its Annual Report on Form 10-K filed with the Securities and Exchange
Commission. Readers are encouraged to refer to the Company's Form 10-K for the
fiscal year ended October 31, 1995 when reviewing this Form 10-Q. Quarterly
results reported herein are not necessarily indicative of results to be expected
for other quarters.
The consolidated financial statements include the accounts of Cooper Life
Sciences, Inc. and its majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated. Certain amounts in the 1995
financial statements have been reclassified to conform to the current year's
presentation. Interim financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1995.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of normal recurring adjustments)
considered necessary to present fairly the Company's consolidated financial
position as of April 30, 1996 and October 31, 1995 and the consolidated results
of its operations for the three and six month periods ended April 30, 1996 and
1995, and its consolidated cash flows for the six month periods ended April 30,
1996 and 1995.
NOTE 2. - UNISTAR GAMING CORP.
On February 28, 1995, Unistar Gaming Corp., a newly formed wholly owned
subsidiary of the Company, ("UGC") acquired Unistar Entertainment, Inc., a
privately held Colorado corporation ("Unistar"). Unistar holds an exclusive
contract with the Coeur d'Alene Indian Tribe in Idaho to develop and manage what
would be the first national lottery in the United States. The shares of UGC
Common Stock owned by the Company, approximately 27.5%, were purchased for
approximately $4.8 million comprised primarily of cash, portfolio securities and
a note payable. In December 1995, the Company increased its stake in UGC to
approximately 31.5% by purchasing an additional 400,000 shares of UGC Common
Stock from a UGC stockholder for a cash purchase price of $.50 per share.
On December 19, 1995, pursuant to an Agreement and Plan of Merger (the
"Merger Agreement"), Executone acquired all of the issued and outstanding shares
of UGC Common Stock, including all of the shares of UGC Common Stock owned by
the Company. In exchange for its shares of UGC Common Stock, the Company
received shares of Executone Common Stock ("Executone Common Stock"), shares of
Executone Series A Preferred Stock ("Executone Series A Preferred Stock"), and
shares of Executone Series B Preferred Stock ("Executone Series B Preferred
Stock"). The Company has agreed to certain restrictions in connection with the
sale, transfer, assignment, pledge or grant of a security interest in its
Executone Common and Preferred Stock. All such restrictions expire on December
31, 1996.
6
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Each share of Executone Series A and Series B Preferred Stock has voting
rights equal to a share of Executone Common Stock and will earn dividends equal
to its proportionate share (18.5% for Series A and 31.5% for Series B) of 50% of
UGC's net income. The Executone Series A and Series B Preferred Stock owned by
the Company is redeemable at Executone's option for approximately 1.55 million
shares and 2.64 million shares, respectively, of Executone Common Stock and is
convertible at the Company's option, if certain revenue and profit parameters
are met by UGC, for up to approximately 1.55 million shares and 2.64 million
shares, respectively, of Executone Common Stock. The Executone Series B
Preferred Stock is subject to the approval of Executone's shareholders for
redemption or conversion into Executone Common Stock. There can be no assurance,
however, that UGC will earn net income sufficient to pay dividends on the
Executone Series A and Series B Preferred Stock or that UGC will meet the
revenue and profit parameters necessary to enable the Company to convert the
Executone Series A and Series B Preferred Stock into Executone Common Stock.
Not later than June 30, 1996, Executone is obligated to file with the
Securities and Exchange Commission a registration statement covering the resale
of all shares of the Executone Common Stock issued pursuant to the Merger
Agreement plus all shares of Executone Common Stock issuable upon the conversion
or redemption of the Executone Series A or Series B Preferred Stock.
NOTE 3. - DISCONTINUED OPERATIONS
On October 31, 1994, management of the Company formulated a plan to
discontinue its mortgage banking business. Accordingly the entire mortgage
banking operations of the Company's majority owned subsidiary, Second Advantage
Mortgage Corp. ("Second Advantage"), and its wholly owned subsidiary, Entrust
Financial Corp. ("Entrust"), have been considered a discontinued operation as of
October 31, 1994.
On November 30, 1994, Entrust sold its entire origination business to The
Long Island Savings Bank, FSB ("LISB") for approximately $31 million in cash.
Approximately $750,000 of the purchase price will be retained in an interest
bearing escrow account (the "LISB Escrow") through 1996 as security for the
performance or payment of indemnification obligations, if any, of Entrust to
LISB.
Pursuant to a Redemption Agreement dated as of April 19, 1995 (but
effective as of March 31, 1995), by and among Second Advantage and all of its
stockholders, including the Company, Second Advantage purchased all of its
outstanding capital stock held by the Company for a cash purchase price of
approximately $3,879,000 plus certain contingent considerations consisting
primarily of 50% of the first $763,800 to be received from the LISB Escrow in
1995 and 1996. In September 1995, the Company received a contingent payment of
approximately $188,000 from the LISB Escrow.
NOTE 4. - BORROWINGS
In August 1993, the Company borrowed $1,500,000 from a bank the proceeds of
which were utilized in connection with the acquisition of the mortgage banking
business. This loan, which the Company has renewed, is currently payable on
August 27, 1996. In November 1993, the Company arranged a $500,000 revolving
line of credit facility with the bank. At April 30, 1996, borrowings against the
revolving line of credit facility amounted to $200,000. The loan and line of
credit facility bear interest at the bank's prime rate (8.25% at April 30, 1996)
plus 1.5%. Payment of the loan and revolving line of credit is secured by shares
of The Cooper Companies, Inc. Common Stock owned by the Company.
NOTE 5. - COMMON STOCK PURCHASE WARRANTS
In August 1993, in connection with guaranteeing the repayment of the bank
loan referred to in Note 5 above, the Company issued to Mel Schnell (the
Company's President, who died in May 1995) and to Moses Marx (a principal
shareholder of the Company) a Common Stock Purchase Warrant (the "Warrant") to
each purchase from the Company, for a per share price of $6.00, up to 25,000
shares of the Common Stock of the Company during the period commencing on August
31, 1993 and ending on August 31, 1998.
7
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In February 1996, to raise cash, the Company induced Mr. Schnell's estate
and Mr. Marx to exercise their Warrants by offering a reduction in the purchase
price from $6.00 per share to $5.375 per share. On April 2, 1996, Mr. Marx
exercised Warrants (including the Warrant he had acquired in a private
transaction from Mr. Schnell's estate) to purchase 50,000 shares of the
Company's Common Stock at the reduced purchase price of $5.375 per share or
$268,750. The Company recorded compensation expense of $31,250 to reflect the
difference between the original and the reduced per share price of the Warrant.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
References to Notes herein are references to the "Notes to Consolidated
Financial Statements" of the Company located in Item 1 herein.
GENERAL. The Company is not presently engaged in any business operations and is
currently investigating new business opportunities. References to the "Company"
herein shall be deemed to refer to the Company and its consolidated subsidiaries
unless the context otherwise requires.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 1996 COMPARED
TO THE THREE AND SIX MONTHS ENDED APRIL 30, 1995.
COSTS AND EXPENSES. Total expense for the three months ended April 30, 1996
was $262,000 as compared to $191,000 for the three months ended April 30, 1995.
General and administrative expenses in 1996 increased by $75,000 to $222,000
from $147,000 in the year ago period. The increase was due primarily to an
increase in professional fees of $130,000 partially offset by decreases in
office expenses of $40,000, and franchise tax fees of $18,000. Interest expense
on the Company's bank borrowings declined to $40,000 from $44,000 due to lower
interest rates.
Total expense for the six months ended April 30, 1996 was $438,000 as
compared to $585,000 for the six months ended April 30, 1995. General and
administrative expenses in 1996 decreased by $145,000 to $358,000 from $503,000
in the year ago period. The decrease was due primarily to decreases in office
expenses of $58,000, compensation expense of $29,000, professional fees of
$34,000 and franchise tax fees of $21,000.
DISCONTINUED OPERATIONS. The net income from discontinued operations of
approximately $2,831,000 in 1995 includes the Company's share of the gain on the
sale of the majority of the mortgage banking business in November 1994.
CAPITAL RESOURCES AND LIQUIDITY:
The Company anticipates that during the remainder of fiscal 1996, its
principal financing needs will consist primarily of funding its general and
administrative expenses and the acquisition price of one or more new business
activities. It may be anticipated that any such acquisition will require the use
by the Company of shares of the common stock of The Cooper Companies, Inc. (the
"TCC Common Stock") which are owned by it.
Management believes that cash on hand and internally generated funds will
not be sufficient to meet its corporate general and administrative, working
capital and other cash requirements during the remainder of fiscal 1996,
however, the Company may raise cash by sales of shares of TCC Common Stock which
are owned by it, depending upon prevailing market conditions. The Company may
obtain additional cash by sales of its own debt and/or equity securities, and/or
by the utilization of the proceeds of borrowings. The Company did not have any
material capital commitments at April 30, 1996.
8
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit
Number Description
_______ ___________
27 Financial Data Schedule.
b. A Form 8-K, dated March 21, 1996 was filed by the Company during the
quarter for which this report on Form 10-Q is filed. Reported on said Form 8-K
was Changes in Control of the Company and Amendment No. 3 to the Company's
Rights Plan.
9
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COOPER LIFE SCIENCES, INC.
__________________________
(Registrant)
Date: June 11, 1996 By: /s/ Steven Rosenberg
___________________________
STEVEN ROSENBERG
VICE PRESIDENT AND CHIEF
FINANCIAL OFFICER
10
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EXHIBIT INDEX
Exhibit Sequential
Number Description Page Number
_______ ____________ ___________
27 Financial Data Schedule 12
11
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COOPER
LIFE SCIENCES, INC. QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTERLY PERIOD ENDED
APRIL 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> APR-30-1996
<CASH> 225
<SECURITIES> 31,435
<RECEIVABLES> 194
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 22
<DEPRECIATION> 7
<TOTAL-ASSETS> 31,926
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 256
0
0
<OTHER-SE> 28,780
<TOTAL-LIABILITY-AND-EQUITY> 31,926
<SALES> 0
<TOTAL-REVENUES> 4
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 358
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80
<INCOME-PRETAX> (434)
<INCOME-TAX> 0
<INCOME-CONTINUING> (434)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (434)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
<FN>
See the financial statements for an unclassified balance sheet.
</TABLE>
