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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 July 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 September 9, 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
July 31, 1996 and October 31, 1995 3
Consolidated Statements of Operations
For The Three and Nine Months Ended
July 31, 1996 and 1995 4
Condensed Statements of Consolidated
Cash Flows For The Nine Months Ended
July 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 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>
July 31, October 31,
1996 1995
------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 378 $ 341
Marketable Securities:
The Cooper Companies, Inc. common stock 24,279 13,645
Executone Information Systems, Inc. common stock 2,916 --
Due from Second Advantage 194 194
Prepaid expenses and other 27 81
Investment in Unistar Gaming Corp. -- 4,812
Investment in Executone Preferred Stock 2,096 --
Furniture, fixtures and equipment, net 18 29
--------- ---------
$ 29,908 $ 19,102
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Bank borrowings $ 1,000 $ 1,500
Accounts payable and accrued liabilities 1,037 1,312
--------- ---------
2,037 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
Outstanding --
July 31, 1996, 2,172,695 shares
October 31, 1995, 2,111,695 shares 256 251
Additional paid-in capital 78,538 78,283
Unrealized gain on marketable securities 12,866 1,389
Accumulated deficit (61,418) (61,120)
Less: Common stock in treasury - at cost;
July 31, 1996, 393,400 shares
October 31, 1995, 404,400 shares (1,962) (2,104)
Minimum pension liability adjustment (409) (409)
--------- ---------
Total Stockholders' Equity 27,871 16,290
--------- ---------
$ 29,908 $ 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 Nine Months Ended
July 31, July 31,
------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues
Interest and other income $ 4 $ 18 $ 8 $ 33
Gain (loss) on sales of marketable securities 285 -- 285 (188)
------- ------- ------- -------
289 18 293 (155)
------- ------- ------- -------
Expenses
General and administrative 120 174 478 677
Interest 33 64 113 146
------- ------- ------- -------
Total Expenses 153 238 591 823
------- ------- ------- -------
Gain (loss) from continuing operations
before income taxes 136 (220) (298) (978)
Provision for income taxes 2 -- 3
------- ------- ------- -------
Income (loss) from continuing operations 136 (222) (298) (981)
Gain (loss) on sale of and results from
discontinued operations-net of taxes -- (8) -- 2,823
------- ------- ------- -------
Net income (loss) $ 136 $ (230) $ (298) $ 1,842
======= ======= ======= =======
Net income (loss) per share
Continuing operations $ .06 $ (.11) $ (.14) $ (.44)
Discontinued operations $ -- $ -- $ -- $ 1.27
------- ------- ------- -------
Net income (loss) per share $ .06 $ (.11) $ (.14) $ .83
======= ======= ======= =======
Average number of shares outstanding 2,249 2,112 2,141 2,212
======= ======= ======= =======
</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>
Nine Months Ended
July 31,
---------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (298) $ 1,842
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities:
(Gain) loss on sale of marketable securities (285) 188
Depreciation and amortization 11 12
Non cash compensation charge 32 --
Changes in assets and liabilities:
Increase in accrued income and receivables -- (382)
Decrease in prepaid expenses and other 54 1
Decrease in accounts payable and
other accrued liabilities (173) (242)
-------- --------
Net cash (used in) provided by
operating activities (659) 1,419
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of marketable securities 1,128 --
Investment in Unistar Gaming Corp. (200) (3,624)
Sale of discontinued operations -- 22,437
-------- --------
Net cash provided by investing activities 928 18,813
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in notes payable - affiliate -- (1,650)
Payment of warehouse borrowing related to
discontinued operations -- (18,034)
Decrease in bank borrowing (500) --
Issuance of common stock from treasury -- 26
Proceeds from exercise of common stock warrants 268 --
-------- --------
Net cash used in financing activities (232) (19,658)
-------- --------
Net increase in cash and cash equivalents 37 574
Cash and cash equivalents - Beginning of period 341 444
-------- --------
Cash and cash equivalents - End of period $ 378 $ 1,018
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash used to pay interest $ 113 $ 146
Cash used to pay taxes $ -- $ 3
</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
JULY 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 (see Note 3 for more information on the disposition of the mortgage
banking business). 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.
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 July 31, 1996 and October 31, 1995 and the consolidated results
of its operations for the three and nine month periods ended July 31, 1996 and
1995, and its consolidated cash flows for the nine month periods ended July 31,
1996 and 1995.
NOTE 2. - UNISTAR GAMING CORP.
On February 28, 1995, Unistar Gaming Corp., a 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.
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
6
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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. 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.
On June 30, 1996, Executone filed 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 mortgage 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. On June 14, 1996, the Company repayed $500,000 principal amount of the
loan. This loan is currently payable on November 27, 1996. In November 1993, the
Company arranged a $500,000 revolving line of credit facility with the bank. At
July 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 July 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.
NOTE 5. - COMMON STOCK PURCHASE WARRANTS
In August 1993, in connection with guaranteeing the repayment of the bank
loan referred to in Note 4 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.
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
7
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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 NINE MONTHS ENDED JULY 31, 1996 COMPARED
TO THE THREE AND NINE MONTHS ENDED JULY 31, 1995.
COSTS AND EXPENSES. Total expense for the three months ended July 31,
1996 was $153,000 as compared to $238,000 for the three months ended July 31,
1995. General and administrative expenses in 1996 decreased by $54,000 to
$120,000 from $174,000 in the year ago period. Interest expense on the Company's
bank borrowings declined to $33,000 from $64,000 due to reduced levels of
borrowings and lower interest rates.
Total expense for the nine months ended July 31, 1996 was $591,000 as
compared to $823,000 for the nine months ended July 31, 1995. General and
administrative expenses in 1996 decreased by $199,000 to $478,000 from $677,000
in the year ago period. The decrease was due primarily to decreases in office
expenses of $77,000, compensation expense of $29,000, professional fees of
$32,000, insurance expense of $12,000 and franchise tax fees of $30,000.
Interest expense on the Company's bank borrowings declined to $113,000 from
$146,000 due to reduced levels of borrowings and lower interest rates.
DISCONTINUED OPERATIONS. The net income from discontinued operations of
approximately $2,823,000 in 1995 includes the Company's share of the gain on the
sale of the majority of the mortgage banking business in November 1994.
INCOME TAXES. Income taxes have not been provided on the gain on sales
of marketable securities because the tax basis of such securities exceeded the
book basis. Deferred tax assets have been fully reserved.
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
be sufficient to meet its corporate general and administrative, working capital
and other cash requirements during the remainder of fiscal 1996. The Company has
raised cash by sales of shares of TCC Common Stock which are owned by it, and,
depending upon prevailing market conditions, may raise additional cash through
additional sales of TCC Common Stock. The Company may also obtain 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 July 31, 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. 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.
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: September 10, 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 11
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
JULY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> JUL-31-1996
<CASH> 378
<SECURITIES> 29,291
<RECEIVABLES> 194
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 18
<DEPRECIATION> 11
<TOTAL-ASSETS> 29,908
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 256
0
0
<OTHER-SE> 27,615
<TOTAL-LIABILITY-AND-EQUITY> 29,908
<SALES> 0
<TOTAL-REVENUES> 293
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 478
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 113
<INCOME-PRETAX> (298)
<INCOME-TAX> 0
<INCOME-CONTINUING> (298)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (298)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
<FN>
See the financial statements for an unclassified balance sheet.
</FN>
</TABLE>
