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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 January 31, 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 March 7, 1996, there were 2,122,695 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
<TABLE>
<CAPTION>
Page No.
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
January 31, 1996 and October 31, 1995 3
Consolidated Statements of Operations
For The Three Months Ended
January 31, 1996 and 1995 4
Condensed Statements of Consolidated
Cash Flows For The Three Months Ended
January 31, 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 1. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 10
Signature 11
Index of Exhibits
</TABLE>
2
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COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
January 31, October 31,
1996 1995
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 10 $ 341
Marketable Securities:
The Cooper Companies, Inc. Common Stock 15,967 13,645
Executone Information Systems, Inc. Common Stock 3,062 --
Due from Second Advantage 194 194
Prepaid expenses and other 93 81
Investment in Unistar Gaming Corp. -- 4,812
Investment in Executone Preferred Stock 2,096 --
Furniture, fixtures and equipment, net 25 29
-------- --------
$ 21,447 $ 19,102
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank borrowings $ 1,500 $ 1,500
Accounts payable and accrued liabilities 1,259 1,312
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2,759 2,812
Stockholders' Equity
Preferred stock - $.10 par value:
6,000,000 shares authorized: none issued -- --
Common stock - $.10 par value: 6,000,000
Authorized -- 6,000,000 shares
Issued -- 2,516,095 shares
Outstanding--
January 31, 1996, 2,122,695 shares
October 31, 1995, 2,111,695 shares 251 251
Additional paid-in capital 78,243 78,283
Unrealized gain on marketable securities 3,858 1,389
Accumulated deficit (61,293) (61,120)
Less: Common stock in treasury - at cost;
January 31, 1996, 393,400 shares
October 31, 1995, 404,400 shares (1,962) (2,104)
Minimum pension liability adjustment (409) (409)
-------- --------
Total Stockholders' Equity 18,688 16,290
-------- --------
$ 21,447 $ 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 Three Months Ended
January 31,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Revenues
Interest and other income $ 3 $ 12
-------- --------
3 12
-------- --------
Expenses
General and administrative 136 356
Interest 40 38
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Total expenses 176 394
-------- --------
Loss from continuing operations (173) (382)
Gain on sale of and results from
discontinued operations -- 3,650
-------- --------
Net income (loss) $ (173) $ 3,268
-------- --------
-------- --------
Net income (loss) per share
Continuing operations $ (.08) $ (.17)
Discontinued operations -- 1.64
-------- --------
Net income (loss) per share $ (.08) $ 1.47
-------- --------
-------- --------
Average number of shares outstanding 2,113 2,222
-------- --------
-------- --------
</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>
Three Months Ended
January 31,
-------------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(173) $ 3,268
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Gain on sale and results of discontinued operations -- (3,650)
Depreciation and amortization 4 3
Changes in assets and liabilities:
(Increase) decrease in prepaid expenses and other 25 (53)
Increase (decrease) in accounts payable and other
accrued liabilities 13 (75)
----- -------
Net cash used in operating activities (131) (507)
----- -------
Cash flows from investing activities:
Cash from sale of discontinued operations -- 21,006
Investment in Unistar gaming Corp. (200) --
Issuance of common stock from treasury -- 26
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Net cash provided by (used in) investing activities (200) 21,032
----- -------
Cash flows from financing activities:
Decrease in notes payable - affiliate -- (2,300)
Payment of warehouse borrowing related to
discontinued operations -- (18,033)
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Net cash used in financing activities 0 (20,333)
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Net increase (decrease) in cash and cash equivalents (331) 192
Cash and cash equivalents - Beginning of period 341 444
----- -------
Cash and cash equivalents - End of period $ 10 $ 636
----- -------
----- -------
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash used to pay interest $ 40 $ 38
Cash used to pay taxes $ -- $ --
</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
January 31, 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 3 for more information on
the acquisition and disposition of Unistar Gaming Corp).
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 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 January 31, 1996 and October 31, 1995 and the consolidated
results of its operations for the three month periods ended January 31, 1996 and
1995, and its consolidated cash flows for the three month periods ended January
31, 1996 and 1995.
NOTE 2. - Significant Accounting Policies
Net income per share is determined using the weighted average number of
common and common equivalent shares outstanding during the respective periods,
including the incremental shares from the dilutive effects of warrants and stock
options. Common stock equivalents have not been included in the determination of
net loss per share as they are antidilutive.
On October 31, 1994, the Company adopted Statement of Financial Accounting
Standards No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS No. 115"). In accordance with SFAS No. 115, Company
management determines the appropriate classification of securities at the time
of purchase and reevaluates such designation as of each balance sheet date.
Marketable equity securities not held as trading assets in anticipation of
short-term market movements are classified as available-for-sale.
Available-for-sale securities are carried at fair value, with the unrealized
gains and losses, net of tax, reported in a separate component of shareholders'
equity. The cost of securities sold is based on the average cost method. At
January 31, 1996, the Company considers all of its marketable securities to be
available-for-sale securities and, as such, are carried at fair value, with the
unrealized gains and losses, net of tax, reported in a separate component of
shareholders' equity.
6
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COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements - Continued
January 31, 1996 and 1995
The Company owns approximately 20% of the outstanding TCC Common Stock and
intends to liquidate its holdings of TCC Common Stock in an orderly fashion
which should result in a holding of less than 20% of the outstanding TCC Common
Stock. Accordingly, management believes that fair value is the most meaningful
method of valuing this investment.
NOTE 3. - 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 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,
Executone Information Systems, Inc. ("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 a) 1,166,520 shares of Executone Common Stock
("Executone Common Stock"), b) 78,819 shares of Executone Series A Preferred
Stock ("Executone Series A Preferred Stock"), and c) 31,528 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.
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 August 31, 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 on the Closing Date plus all
shares of Executone Common Stock issuable upon the conversion or redemption of
the Executone Series A or Series B Preferred Stock.
7
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COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
Notes to Consolidated Condensed Financial Statements - Continued
January 31, 1996 and 1995
NOTE 4. - 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 5. - 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 May
27, 1996. In November 1993, the Company arranged a $500,000 revolving line of
credit facility with the bank. At January 31, 1996, there were no borrowings
against the revolving line of credit facility. The loan and line of credit
facility bear interest at the bank's prime rate (8.25% at January 31, 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.
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 Months Ended January 31, 1996 Compared to
the Three Months Ended January 31, 1995.
Discontinued Operations. For the three months ended January 31, 1995, the
net income from discontinued operations of approximately $3,650,000 includes the
Company's share of the gain on the sale of the majority of the mortgage banking
business to LISB in November 1994.
8
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Costs and Expenses. Total expense for the three months ended January 31,
1996 was $175,000 as compared to $382,000 for the three months ended January 31,
1995. General and administrative expenses in 1996 decreased by $220,000 to
$136,000 from $356,000 in the year ago period. The decrease was due primarily to
a decrease in professional fees of approximately $164,000 and a decrease in
salaries of approximately $30,000.
Capital Resources and Liquidity:
The Company anticipates that during 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 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 January 31,
1996.
Inflation and Changing Prices:
The Company has not been materially affected by inflation.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Heraeus Lasersonics, Inc. v. Cooper Life Sciences, Inc.
On November 22, 1992, Heraeus Surgical, Inc. formerly known as Heraeus
Lasersonics, Inc. ("Heraeus") filed an action in Santa Clara County Superior
Court (the "California Action"). In this action, Heraeus, the successor to the
Company's medical laser business, claims that the Asset Purchase Agreement,
dated May 11, 1988, (the "Asset Purchase Agreement") between the parties
obligates the Company to indemnify Heraeus with respect to lawsuits in which the
plaintiff alleges injury caused by a laser sold by the Company prior to the date
of the Asset Purchase Agreement. Heraeus claims, in particular, that the Company
is required to indemnify it for monies expended by Heraeus in defending, and in
settlement of, an Ohio lawsuit, referred to as the Sutyak action. Heraeus also
raises claims based on the principles of equitable indemnity, fraud and breach
of contract and seeks a declaratory judgement as to the proper interpretation of
the parties' obligations under the Asset Purchase Agreement. In a proposed first
amended complaint, Heraeus seeks to add cases in addition to the Sutyak action,
a California lawsuit referred to as the Spalti action and a Montana lawsuit
referred to as the Stukey action.
The Company has filed a cross-claim asserting that it has no duty to
indemnify Heraeus under the terms of the Asset Purchase Agreement and that part
or all of the damages in the Sutyak action were caused by Heraeus' independent
negligence, breach of its duty to warn and/or its liability with respect to its
own product. The Company's cross-claim also seek indemnification from Heraeus
both under the Asset Purchase Agreement and under common law principles for
monies expended by the Company in defending and in settlement of the Sutyak
9
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action and seeks a declaratory judgement that Heraeus is obligated to defend the
Company in products liability cases involving lasers used after the date of the
Asset Purchase Agreement.
On February 26, 1996, the Company and Heraeus entered into a Settlement
Agreement and Mutual Release (the "Settlement Agreement"). Pursuant to the
Settlement Agreement, the parties agreed to (i) settle all of the hereinabove
mentioned claims, (ii) be subject to the rights and obligations of each other,
if any, under the Asset Purchase Agreement until February 26, 1999 and
thereafter, with respect to third party claims first made after February 26,
1996, to be subject to and governed by the principles of equity indemnity. As
part of the Settlement Agreement, the Company will pay to Heraeus the sum of
$62,500 in March 1996 and will make three additional payments to Heraeus in May,
August and November 1996, each in the amount of $62,500. These amounts were
charged against net income in fiscal 1995.
Other Actions
The Company is also a defendant in certain other litigation relating to its
former business operations. In the opinion of management, based on the advice of
legal counsel, the ultimate outcome of these matters should not have a material
impact on the financial position or results of operations of the Company.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
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<C> <S>
27 Financial Data Schedule.
</TABLE>
b. There were no reports filed by the Company on Form 8-K during the quarter for
which this report on Form 10-Q is filed.
10
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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: March 7, 1996 By: /s/ Steven Rosenberg
------------------------------
Steven Rosenberg
Vice President and Chief
Financial Officer
11
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Description Page Number
- ------- ----------- -----------
<C> <S> <C>
27 Financial Data Schedule 13
</TABLE>
12
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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
JANUARY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> JAN-31-1996
<CASH> 10
<SECURITIES> 21,125
<RECEIVABLES> 194
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 25
<DEPRECIATION> 4
<TOTAL-ASSETS> 21,447
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 251
0
0
<OTHER-SE> 18,437
<TOTAL-LIABILITY-AND-EQUITY> 21,447
<SALES> 0
<TOTAL-REVENUES> 3
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 136
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40
<INCOME-PRETAX> (173)
<INCOME-TAX> 0
<INCOME-CONTINUING> (173)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (173)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
<FN>
See the financial statements for an unclassified balance sheet.
</TABLE>
