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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended OCTOBER 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
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 number)
160 BROADWAY, NEW YORK, NEW YORK 10038
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 791-5362
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.10 PER SHARE
(Title of Class)
PREFERRED STOCK PURCHASE RIGHTS
(Title of Class)
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of voting (common) stock held by non-affiliates of the
Registrant as of January 23, 1998: $35,522,331.
Number of shares outstanding of each of the Registrant's classes of Common Stock
as of January 23, 1998: 2,126,265.
DOCUMENTS INCORPORATED BY REFERENCE:
None
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PART I
ITEM 1. BUSINESS
DISCONTINUED OPERATIONS
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 D of Notes to Consolidated Financial Statements). The
Company's mortgage banking operations were considered to be a discontinued
operation as of October 31, 1994. On December 19, 1995, as the result of a
merger transaction, the Company exchanged its equity interest in a development
stage company named Unistar Gaming Corp. for Common and Preferred Stock of
Executone Information Systems, Inc. (collectively, the "Executone Securities").
(See Note C of Notes to Consolidated Financial Statements.) As a result of these
transactions, the Company is not presently engaged in any business operations.
It is actively investigating new business opportunities.
COMMON STOCK OF THE COOPER COMPANIES, INC.
The Company owns shares of common stock of The Cooper Companies, Inc. (the
"TCC Common Stock"), a Delaware corporation ("TCC"), the common stock of which
is traded on the New York Stock Exchange. As of January 23, 1998, the Company
owned 4,133 shares of TCC Common Stock (see Note B of Notes to Consolidated
Financial Statements.) The Company has from time to time during the past year
sold shares of TCC Common Stock in open market transactions; and subject to
prevailing market conditions, it is the Company's intention to continue to do
so. The proceeds of sale, were and are, being used by the Company to fund its
operating expenses and to provide it with additional cash which would be
available for use in connection with the acquisition of new business
opportunities.
POSSIBLE INVESTMENT COMPANY STATUS
The Company's principal assets currently consist of cash, and cash
equivalents and shares of the TCC Common Stock and the Executone Securities. As
a result of the percentage of its assets that is currently comprised of the TCC
Common Stock and the Executone Securities, the Company could be deemed to be an
"investment company," as such term is defined in the Investment Company Act of
1940, as amended (the "Investment Company Act"). Although the Company believes
that it is not an investment company, there can be no assurance that the Company
will not be required to register as an investment company. If it is so required
to register, it would become subject to certain restrictions which could prove
to be materially burdensome to the Company. However, even if the Company were
deemed to be an investment company for purposes of the Investment Company Act,
such status would most probably be terminated upon the subsequent acquisition by
it of an operating business.
EMPLOYEES
On October 31, 1997, the Company had one full time employee.
ITEM 2. PROPERTIES.
The following is the Company's principal facility, which it currently rents on a
month to month basis from a company affiliated with a director of the Company.
Approximate Approximate
Floor Area Annual
Location Operations (Sq. Ft.) Rent
- -------- ----------------- ------------ -----------
New York, NY Executive Offices 1,500 $ 18,000
ITEM 3. LEGAL PROCEEDINGS.
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
2
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock trades on the Nasdaq Stock Market (Small Cap)
under the symbol ZAPS.
The following table sets forth, for the periods indicated, the high and
low sales prices for the Company's Common Stock as reported by the National
Association of Securities Dealers, Inc.
High Low
---- ---
Fiscal Year ended October 31, 1996
- -----------------------------------
November 1, 1995 to January 31, 1996 9 3/4 7 3/4
February 1, 1996 to April 30, 1996 10 3/4 8 3/4
May 1, 1996 to July 31, 1996 13 3/4 10 3/8
August 1, 1996 to October 31, 1996 12 10 3/4
High Low
---- ---
Fiscal Year ended October 31, 1997
- ----------------------------------
November 1, 1996 to January 31, 1997 14 1/2 11
February 1, 1997 to April 30, 1997 16 1/2 13 3/4
May 1, 1997 to July 31, 1997 23 1/4 14
August 1, 1997 to October 31, 1997 28 1/4 19 1/2
As of the close of business on January 21, 1998, there were 2,694 holders
of record of the Company's Common Stock.
DIVIDENDS
To date, the Company has not paid any dividends on its common stock. The
payment of dividends, if any, in the future is within the discretion of the
Board of Directors and will depend upon the Company's earnings, capital
requirements, financial condition and other relevant factors. The Board does not
intend to declare any dividends in the foreseeable future, but instead intends
to retain all earnings, if any, for working capital and to acquire new
businesses.
3
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ITEM 6. SELECTED FINANCIAL DATA.
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
FIVE YEAR FINANCIAL HIGHLIGHTS
YEAR-END FINANCIAL POSITION
(DOLLARS IN THOUSANDS)
The following is a summary of certain financial information with respect
to the Company's fiscal years ended October 31, 1997, 1996, 1995, 1994, and
1993. This information is derived from and should be read in conjunction with
the Company's financial statements and notes thereto included elsewhere in this
Form 10-K.
<TABLE>
<CAPTION>
October 31,
----------------------------------------------
1997 1996 1995 1994(1) 1993(2)
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
- -------------------
Total Assets $64,521 $34,138 $19,102 $42,582 $145,053
Long Term Debt -- -- -- 2,300 3,650
Total Liabilities 2,792 961 2,812 23,163 136,313
Stockholders' Equity 61,729 33,177 16,290 19,419 5,579
</TABLE>
(1) The financial information for the fiscal year ended October 31, 1994
includes the operations of the Company's majority owned subsidiary, Second
Advantage, as a discontinued operation as of October 31, 1994.
(2) The financial information for the fiscal year ended October 31, 1993
includes the operations of the Company's majority owned subsidiary, Second
Advantage Mortgage Corp. ("Second Advantage"), for the period from September 1,
1993, the effective date of the acquisition by the Company, through October 31,
1993.
4
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COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
Five Year Financial Highlights
Summary of Consolidated Operations (a)
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
For The Years Ended October 31,
1997 1996 1995 1994 (1) 1993 (2)
------- ------ ------ -------- --------
<S> <C> <C> <C> <C> <C>
Revenues
Realized and unrealized gain
(loss) on marketable securities $ 16,845 $ 772 $ (376) $ 9,320 $(3,334)
Dividend income -- -- -- 89 298
Interest and other income - net 788 22 51 176 163
-------- ------- ------- ------- -------
17,633 794 (325) 9,585 (2,873)
-------- ------- ------- ------- -------
Expenses
General and administrative 823 809 1,132 979 2,086
Interest -- 138 193 283 149
-------- ------- ------- ------- -------
Total Expenses 823 947 1,325 1,262 2,235
-------- ------- ------- ------- -------
16,810 (153) (1,650) 8,323 (5,108)
Loss and write-downs on Investments
in Preferred Stock -- (2,096) -- -- --
-------- ------- ------- ------- -------
Income (loss) from continuing
operations before income taxes 16,810 (2,249) (1,650) 8,323 (5,108)
Provision for (benefit from)
income taxes 100 -- -- -- (520)
-------- ------- ------- ------- -------
Income (loss) from continuing
operations 16,710 (2,249) (1,650) 8,323 (4,588)
Gain (loss) from discontinued
operations -- -- 2,823 (3,084) (35)
-------- ------- ------- ------- -------
Income (loss) before cumulative
effect of change in accounting
principle 16,710 (2,249) 1,173 5,239 (4,623)
Cumulative effect of change in
accounting principle -- -- -- 2,009 --
-------- ------- ------- ------- -------
Net income (loss) $ 16,710 $(2,249) $ 1,173 $ 7,248 $(4,623)
======== ======= ======= ======= =======
Net income (loss) per share
Primary:
Continuing operations $ 7.45 $ (1.05) $ (.75) $ 4.01 $ (2.17)
Discontinued operations -- -- 1.28 (1.49) (.02)
-------- ------- ------- ------- -------
7.45 (1.05) .53 2.52 (2.19)
Cumulative effect of change
in accounting principle -- -- -- .97 --
-------- ------- ------- ------- -------
Net income (loss) per share $ 7.45 $ (1.05) $ .53 $ 3.49 $ (2.19)
======== ======= ======= ======= =======
Fully Diluted:
Continuing operations $ 7.45 $ (1.05) $ (.75) $ 4.01 $ (2.17)
Discontinued operations -- -- 1.28 (1.49) (.02)
-------- ------- ------- ------- -------
7.45 (1.05) .53 2.52 (2.19)
Cumulative effect of change
in accounting principle -- -- -- .97 --
-------- ------- ------- ------- -------
Net income (loss) per share $ 7.45 $ (1.05) $ .53 $ 3.49 $ (2.19)
======== ======= ======= ======= =======
Cash dividends per common share $ -- $ -- $ -- $ -- $ --
======== ======= ======= ======= =======
Weighted average number of
shares outstanding 2,244 2,149 2,206 2,076 2,113
======== ======= ======= ======= =======
</TABLE>
(a) The prior years' amounts have been reclassified to conform to the current
years' treatment.
(1) The financial information for the fiscal year ended October 31, 1994
includes the operations of the Company's majority owned subsidiary, Second
Advantage, as a discontinued operation as of October 31, 1994.
(2) The financial information for the fiscal year ended October 31, 1993
includes the operations of the Company's majority owned subsidiary, Second
Advantage, for the period from September 1, 1993, the effective date of the
acquisition by the Company, through October 31, 1993.
5
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ITEM 7. MANAGEMENTS' 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 8 herein. Reference is also
made to Part I, Item 1 "Business" herein.
CAPITAL RESOURCES AND LIQUIDITY:
The Company anticipates that during fiscal 1998, 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.
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 fiscal 1998. From November 1, 1997 to January
23, 1998, the Company sold 989,300 shares of TCC Common Stock with proceeds of
approximately $40.0 million.
The Company did not have any material capital commitments at the end of
fiscal 1997.
In 1997 and 1996, the Company used cash primarily to fund its general and
administrative expenses, acquire treasury stock and to repay bank debt. In 1995,
the Company used cash primarily to acquire its interest in Unistar Gaming Corp.
("UGC") (see Note C).
CASH FLOWS
OPERATING ACTIVITIES In fiscal 1997, the Company's operating activities
used cash primarily to fund its general and administrative expenses. Such cash
was provided by the proceeds of sale of shares of TCC Common Stock.
SALES OF TCC COMMON STOCK Net cash received in fiscal 1997 was $26.2
million as a result of the sale by the Company of shares of TCC Common Stock
owned by it.
FINANCING ACTIVITIES Net cash used in financing activities in fiscal 1997
amounted to $880,000 due to open market purchases of shares of the Company's
common stock.
RESULTS OF OPERATIONS
Comparison of each of the years in the three-year period ended October 31, 1997:
1997 VS. 1996
The net income in fiscal 1997 was $16,710,000 as compared to a net loss of
$2,249,000 in fiscal 1996.
MARKETABLE SECURITIES. The gain on marketable securities of $16,845,000
and $772,000 in fiscal 1997 and 1996, respectively, represents realized gains on
the sales of 1,134,100 shares and 195,000 shares, respectively, of TCC Common
Stock during each year. At November 1, 1995, October 31, 1996, October 31, 1997
and January 23, 1998, the quoted market price of TCC Common Stock was $5.875,
$14.375, $35.75 and $45.6875, respectively.
The loss on Executone Preferred Stock of $2,096,000 in 1996 represents a
valuation allowance in carrying value to reflect the uncertainty that UGC will
earn net income sufficient to pay dividends on the Executone Preferred Stock or
that UGC will meet the revenue and profit parameters necessary to enable the
Company to convert the Executone Preferred Stock into Executone Common Stock
(see Note C).
INTEREST INCOME. Interest income increased to $788,000 in fiscal 1997
from $22,000 in fiscal 1996 due to higher levels of cash balances.
6
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1996 VS. 1995
The net loss in fiscal 1996 was $153,000 (excluding a loss of $2,096,000
on the writedown of the Executone Preferred Stock) as compared to a net loss of
$1,650,000 (before a gain of $2,823,000 from discontinued operations) in fiscal
1995. The improvement in operating results was due primarily to a decrease in
interest expense and settlement in 1995, of several long outstanding legal
matters.
MARKETABLE SECURITIES. The gain on marketable securities of $772,000 in
1996 represents a realized gain on the sales of shares of TCC Common Stock
during the year. The loss on marketable securities of $376,000 in 1995
represents the realized loss incurred on the utilization of shares of TCC Common
Stock as part of the acquisition price of the Company's interest in UGC (see
Note C).
The loss on Executone Preferred Stock of $2,096,000 in 1996 represents a
valuation allowance in carrying value to reflect the uncertainty that UGC will
earn net income sufficient to pay dividends on the Executone Preferred Stock or
that UGC will meet the revenue and profit parameters necessary to enable the
Company to convert the Executone Preferred Stock into Executone Common Stock
(see Note C).
INTEREST EXPENSE. Interest expense decreased by $55,000 to $138,000 from
$193,000 in 1995 due to reduced borrowings.
INFLATION AND CHANGING PRICES
The Company has not been materially affected by inflation.
ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share", which is effective for financial statements
for both interim and annual periods ending after December 15, 1997. Early
adoption of the new standard is not permitted. The new standard eliminates
primary and fully dilutive earnings per share and requires presentation of basic
and dilutive earnings per share with disclosure of the methods used to compute
the per share amounts.
Basic earnings per share excludes dilution and is computed by dividing
income available to common shareholders by the weighted-average common shares
outstanding for the period. Diluted earnings per share reflects the
weighted-average common shares outstanding plus the potential effect of
securities or contracts which are convertible to common shares, such as options,
warrants, and convertible debt and preferred stock. The adoption of this
standard is not expected to have a material impact on earnings per share of the
Company.
DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE
In June 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure", which is effective for fiscal years beginning after
December 15, 1997. SFAS No. 129 was issued for two reasons; (1) to consolidate
existing guidance about disclosure of capital structure into one standard and
(2) to extend the scope of the disclosure requirements to include nonpublic
entities. SFAS No. 129 does not change the disclosure of capital structure for
the Company.
REPORTING COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which is effective for fiscal years beginning after December 15, 1997.
The statement addresses the reporting and displaying of comprehensive income and
its components. Earnings per share will only be reported for the net income and
not for comprehensive income. Adoption of SFAS No. 130 relates to disclosure
within the financial statements and may have a material effect on the Company's
financial statements, as unrealized gains, net of applicable income taxes, on
available for sale securities will be included in comprehensive income.
7
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DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which is effective for fiscal years
beginning after December 15, 1997. The statement changes the way public
companies report information about segments of their business in their annual
financial statements and requires them to report selected segment information in
their quarterly reports. Adoption of SFAS No. 131 relates to disclosure within
the financial statements and is not expected to have a material effect on the
Company's financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
8
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Report of Independent Certified Public Accountants
Board of Directors and Stockholders
Cooper Life Sciences, Inc.
We have audited the accompanying consolidated balance sheets of Cooper Life
Sciences, Inc. and its subsidiaries as of October 31, 1997 and 1996, and the
related consolidated statements of operations, stockholders' equity and cash
flows for the three years ended October 31, 1997. 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 audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Cooper Life
Sciences, Inc. and its subsidiaries as of October 31, 1997 and 1996, and the
consolidated results of their operations and their consolidated cash flows for
each of the three years in the period ended October 31, 1997 in conformity with
generally accepted accounting principles.
We have also audited the financial statement schedule listed in the accompanying
index at Item 14(a)(ii) for the years ended October 31, 1997, 1996 and 1995. In
our opinion, this financial statement schedule presents fairly, in all material
respects, the information required to be set forth therein.
GRANT THORNTON LLP
New York, New York
January 23, 1998
9
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COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OCTOBER 31,
----------------------
1997 1996
---------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 25,887 $ 471
Marketable Securities - at market value:
The Cooper Companies, Inc. Common Stock 35,515 30,583
Executone Information Systems, Inc. Common Stock 2,552 2,989
Prepaid expenses and other 567 95
-------- --------
$ 64,521 $ 34,138
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued liabilities $ 992 $ 961
Income taxes payable 100 --
Deferred income taxes 1,700 --
-------- --------
2,792 961
Commitments and Contingencies
Stockholders' equity
Preferred stock - $.10 par value: 6,000,000
shares authorized: none issued -- --
Common stock - $.10 par value:
6,000,000 shares authorized:
2,566,095 shares issued at October 31, 1997 and 1996 256 256
Additional paid-in capital 78,546 78,538
Unrealized gain on marketable securities, net
of deferred taxes 32,359 20,230
Accumulated deficit (46,659) (63,369)
Less: Common stock in treasury - at cost;
439,830 shares and 393,400 shares at
October 31, 1997 and 1996, respectively (2,773) (1,962)
Minimum pension liability -- (516)
-------- --------
Total stockholders' equity 61,729 33,177
-------- --------
$ 64,521 $ 34,138
======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
10
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COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEARS ENDED OCTOBER 31,
--------------------------------
1997 1996 1995
----- ----- ----
<S> <C> <C> <C>
Revenues
Realized gain (loss) on marketable securities $16,845 $ 772 $ (376)
Interest and other income - net 788 22 51
------- ------- -------
17,633 794 (325)
------- ------- -------
Expenses
General and administrative 823 809 1,132
Interest -- 138 193
------- ------- -------
Total expenses 823 947 1,325
------- ------- -------
16,810 (153) (1,650)
Loss and writedown on Executone Information
Systems, Inc. Preferred Stock -- (2,096) --
------- ------- -------
Income (loss) from continuing operations
before income taxes 16,810 (2,249) (1,650)
Provision for income taxes 100 -- --
------- ------- -------
Income (loss) from continuing operations 16,710 (2,249) (1,650)
Gain from discontinued operations -- -- 2,823
------- ------- -------
Net income (loss) $16,710 $(2,249) $ 1,173
======= ======= =======
Net income (loss) per share
Primary:
Continuing operations $ 7.45 $ (1.05) $ (.75)
Discontinued operations -- -- 1.28
------- ------- -------
Net income (loss) per share $ 7.45 $ (1.05) $ .53
======= ======= =======
Fully Diluted:
Continuing operations $ 7.45 $ (1.05) $ (.75)
Discontinued operations -- -- 1.28
------- ------- -------
Net income (loss) per share $ 7.45 $ (1.05) $ .53
======= ======= =======
Weighted average number of shares outstanding 2,244 2,149 2,206
======= ======= =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
11
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COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED OCTOBER 31, 1997, 1996 AND 1995
(Dollars In Thousands)
<TABLE>
<CAPTION>
Unrealized
Common Stock Additional gain on Minimum
Par paid-in marketable Accumulated Treasury pension
Shares value capital securities deficit stock liability Total
------ ----- ------- ---------- -------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at October 31, 1994 2,516 $ 251 $78,283 $5,783 $(62,293) $(2,130) $(475) $19,419
Net Income 1,173 1,173
Treasury shares issued for
pension plan contribution 26 26
Reduction in value of
marketable securities (4,394) (4,394)
Reduction in pension liability over
unrecognized prior service cost 66 66
----- ---- ------- ------- -------- ------- ---- -------
Balance at October 31, 1995 2,516 251 78,283 1,389 (61,120) (2,104) (409) 16,290
Net loss (2,249) (2,249)
Treasury shares issued for
pension plan contribution (40) 142 102
Increase in value of
marketable securities 18,841 18,841
Exercise of common
stock warrants 50 5 295 300
Increase in pension
liability over unrecognized
prior service cost (107) (107)
----- ---- ------- ------- -------- ------- ---- -------
Balance at October 31, 1996 2,566 256 78,538 20,230 (63,369) (1,962) (516) 33,177
Net Income 16,710 16,710
Treasury shares issued for
options exercised 8 72 80
Acquisition of treasury shares (883) (883)
Increase in value of marketable
securities, net of deferred taxes 12,129 12,129
Reduction of minimum
pension liability 516 516
----- ---- ------- ------- -------- ------- ---- -------
Balance at October 31, 1997 2,566 $256 $78,546 $32,359 $(46,659) $(2,773) $ -- $61,729
===== ==== ======= ======= ======== ======= ==== =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
12
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COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
</TABLE>
<TABLE>
<CAPTION>
FOR THE YEARS ENDED OCTOBER 31,
-------------------------------
1997 1996 1995
-------- -------- ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 16,710 $ (2,249) $ 1,173
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Realized (gain) loss on marketable securities (16,845) (772) 376
Loss and writedown of Executone Information
Systems, Inc. preferred stock -- 2,096 --
Gain from discontinued operations -- -- (2,823)
Provision for doubtful accounts -- 194 --
Non-cash compensation charge 112 32 --
Depreciation and other 2 26 16
Changes in assets and liabilities:
Decrease (increase) in prepaid expenses and other 9 28 (221)
Increase (decrease) in accounts payable, income
taxes payable and accrued liabilities 131 (395) 75
-------- -------- --------
Net cash provided by (used in) operating activities 119 (1,040) (1,404)
-------- -------- --------
Cash flows from investing activities:
Sale of discontinued operations -- -- 25,260
Investment in Unistar Gaming Corp. -- (200) (3,625)
Note receivable from The Cooper Companies, Inc. (5,000) -- --
Repayment of note receivable from
The Cooper Companies, Inc. 5,000 -- --
Proceeds from sales of The Cooper
Companies, Inc. common stock 26,177 2,602 --
-------- -------- --------
Net cash provided by investing activities 26,177 2,402 21,635
-------- -------- --------
Cash flows from financing activities:
Repayment of notes payable - affiliates -- -- (2,300)
Repayment of bank borrowings -- (1,500) --
Repayment of line of credit borrowings -- -- (18,034)
Proceeds from exercise of common stock
warrants and options 3 268 --
Acquisition of treasury stock (883) -- --
-------- -------- --------
Net cash used in financing activities (880) (1,232) (20,334)
-------- -------- --------
Net increase (decrease) in cash and
cash equivalents 25,416 130 (103)
Cash and cash equivalents at beginning of year 471 341 444
-------- -------- --------
Cash and cash equivalents at end of year $ 25,887 $ 471 $ 341
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ -- $ 136 $ 192
Income Taxes $ -- $ 11 $ 22
</TABLE>
Supplemental schedule of non cash investing activities (Notes C and D)
In 1995 the Company acquired 27.5% of the common stock of Unistar Gaming
Corp. for $4.8 million. The purchase price was satisfied as follows:
Cash $2,500
Forgiveness of indebtedness
for advances to UGC 475
Note payable 650
Fair value of TCC Common Stock
issued to UGC 1,188
------
$4,813
======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
13
<PAGE>
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1997, 1996 AND 1995
NOTE A - ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES
Cooper Life Sciences, Inc. (the "Company"), a Delaware corporation, owned
a majority interest in a company engaged in mortgage banking from August 1993 to
October 1994 (Note D). At the present time, the Company is not engaged in any
operating activities.
The Company's principal assets currently consist of cash, and cash
equivalents and shares of The Cooper Companies, Inc. ("TCC") common stock (the
"TCC Common Stock") and Executone Information Systems, Inc. ("Executone") common
stock and preferred stock (the "Executone Securities'). As a result of the
percentage of its assets that is currently comprised of the TCC Common Stock and
the Executone Securities, the Company could be deemed to be an "investment
company," as such term is defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act"). Although the Company believes that it is
not an investment company, there can be no assurance that the Company will not
be required to register as an investment company. If it is so required to
register, it would become subject to certain restrictions which could prove to
be materially burdensome to the Company. However, even if the Company were
deemed to be an investment company for purposes of the Investment Company Act,
such status would most probably be terminated upon the subsequent acquisition by
it of an operating business.
A summary of the significant accounting policies consistently applied in the
preparation of the accompanying consolidated financial statements follows:
1. PRINCIPLES OF CONSOLIDATION
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. During fiscal year 1997, the
Company liquidated its majority owned subsidiary, Moore Sports Ltd.
2. MARKETABLE SECURITIES
In accordance with Statement No. 115, "Accounting for Certain Investments
in Debt and Equity Securities", Company management determines the appropriate
classification of securities at the time of purchase and reevaluates such
designation as of each balance sheet date. Available-for-sale securities are
carried at fair value, with the unrealized gains and losses, net of tax,
reported as a separate component of shareholders' equity. The cost of securities
sold is based on the specific identification method. At October 31, 1997, the
Company considers all of its holdings of TCC Common Stock and Executone
Information Systems, Inc. common stock to be securities available for sale.
At October 31, 1997, the Company owns approximately 6.7% of the
outstanding common stock of TCC and approximately 2% of the outstanding common
stock of Executone. (See Note B.)
3. INVESTMENT IN UNISTAR GAMING CORP.
In 1995, the Company owned approximately 31% of the outstanding common
stock of Unistar Gaming Corp. ("UGC") (see Note C). The Company sold its
investment in UGC to Executone in December 1995 for shares of Executone common
stock and preferred stock.
4. INCOME TAXES
The Company accounts for income taxes under the provisions of Financial
Accounting Standards Board Statement of Financial Accounting Standards ("SFAS")
No. 109 - "Accounting for Income Taxes."
14
<PAGE>
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997, 1996 AND 1995
NOTE A - (CONTINUED)
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments (principally consisting of
cash, cash equivalents, marketable securities and investment in Executone
Preferred Stock) approximate fair value. The Company determined the fair value
of the marketable securities based upon the quoted market values, and determined
the fair value of the investment in Executone Preferred Stock based upon
estimated recoverable amounts upon the sale of the securities.
6. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is determined using the weighted average
number of Common shares and dilutive common stock equivalents outstanding during
the respective periods. Common stock equivalents have not been included in the
determination of net loss per share as they are antidilutive or have no material
effect.
7. CASH EQUIVALENTS
The Company considers all highly liquid debt investments purchased with an
original maturity of three months or less, and amounts due from brokers to be
cash equivalents.
On October 31, 1997, the Company entered into a repurchase agreement with
Chase Securities, Inc. in the principal amount of $18,800,000, which is included
in cash and cash equivalents. Such repurchase agreement bears interest at 5.45%
on an annualized basis, matured on November 14, 1997, and is collateralized by a
United States Treasury Bond.
8. USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the period. Actual results could differ from those
estimates.
9. ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 128, "Earnings per Share", which is effective for financial statements
for both interim and annual periods ending after December 15, 1997. Early
adoption of the new standard is not permitted. The new standard eliminates
primary and fully dilutive earnings per share and requires presentation of basic
and dilutive earnings per share with disclosure of the methods used to compute
the per share amounts.
Basic earnings per share excludes dilution and is computed by dividing
income available to common shareholders by the weighted-average common shares
outstanding for the period. Diluted earnings per share reflects the
weighted-average common shares outstanding plus the potential effect of
securities or contracts which are convertible to common shares, such as options,
warrants, and convertible debt and preferred stock. The adoption of this
standard is not expected to have a material impact on earnings per share of the
Company.
15
<PAGE>
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997, 1996 AND 1995
NOTE A - (CONTINUED)
DISCLOSURE OF INFORMATION ABOUT CAPITAL STRUCTURE
In June 1997, the FASB issued SFAS No. 129, "Disclosure of Information
about Capital Structure", which is effective for fiscal years beginning after
December 15, 1997. SFAS No. 129 was issued for two reasons; (1) to consolidate
existing guidance about disclosure of capital structure into one standard and
(2) to extend the scope of the disclosure requirements to include nonpublic
entities. SFAS No. 129 does not change the disclosure of capital structure for
the Company.
REPORTING COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income", which is effective for fiscal years beginning after December 15, 1997.
The statement addresses the reporting and displaying of comprehensive income and
its components. Earnings per share will only be reported for the net income and
not for comprehensive income. Adoption of SFAS No. 130 relates to disclosure
within the financial statements and may have a material effect on the Company's
financial statements, as unrealized gains, net of applicable income taxes, on
available for sale securities will be included in comprehensive income.
DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which is effective for fiscal years
beginning after December 15, 1997. The statement changes the way public
companies report information about segments of their business in their annual
financial statements and requires them to report selected segment information in
their quarterly reports. Adoption of SFAS No. 131 relates to disclosure within
the financial statements and is not expected to have a material effect on the
Company's financial statements.
10. RECLASSIFICATIONS
Certain amounts in the 1996 and 1995 financial statements have been
reclassified to conform to the current year's presentation.
NOTE B - THE COOPER COMPANIES COMMON STOCK TRANSACTIONS
At October 31, 1997 and 1996, the Company owned 993,433 shares and
2,127,533 shares, respectively of the common stock of The Cooper Companies, Inc.
("TCC"), (the "TCC Common Stock").
The following is a summary of available-for-sale securities as of October
31, 1997 and 1996:
Gross
Unrealized Fair
(in thousands) Cost Gains (Loss) Value
------- ------------ ---------
1997
----
The Cooper Companies, Inc.
Common Stock $ 1,091 $34,424 $35,515
Executone Information
Systems, Inc. Common Stock 2,916 (364) 2,552
------- ------- -------
$ 4,007 $34,060 $38,067
======= ======= =======
1996
----
The Cooper Companies, Inc.
Common Stock $10,426 $20,157 $30,583
Executone Information
Systems, Inc. Common Stock 2,916 73 2,989
------- ------- -------
$13,342 $20,230 $33,572
======= ======= =======
16
<PAGE>
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997, 1996 AND 1995
NOTE B - (CONTINUED)
The following is a summary of gross realized gains and gross realized
losses on sales of TCC Common Stock for each of the three fiscal years ended
October 31, 1997, 1996 and 1995:
Gross Gross
Realized Realized
Gains Losses
-------- --------
(in thousands)
1997 $16,845 $ --
1996 $ 772 $ --
1995 $ -- $ (376)
From November 1, 1997 to January 23, 1998, the Company sold 989,300 shares
of TCC Common Stock with proceeds of approximately $40.0 million.
In April 1997, the Company loaned $5.0 million to TCC. In August 1997 the
loan was repaid with interest of approximately $126,600.
NOTE C - UNISTAR GAMING CORP. TRANSACTIONS
On February 28, 1995, Unistar Gaming Corp. ("UGC") acquired Unistar
Entertainment, Inc., a privately held Colorado corporation ("Unistar"). As a
result of the acquisition, approximately 27.5% of the outstanding Common Stock
of UGC was owned by the Company, and approximately 72.5% of the outstanding
Common Stock of UGC was owned by the former stockholders of 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 which are owned by the Company were
purchased for approximately $5 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 (the "Closing Date"), pursuant to an Agreement and
Plan of Merger, 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 UGC Common Stock, including
all of the shares of UGC Common Stock owned by the Company, in exchange for
3,700,000 shares of Executone Common Stock (the "Executone Common Stock"),
250,000 shares of Executone Series A Preferred Stock (the "Executone Series A
Preferred Stock") and 100,000 shares of Executone Series B Preferred Stock (the
"Executone Series B Preferred Stock"), collectively (the "Executone
Securities"). 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 is
redeemable at Executone's option for 4.925 million shares and 8.375 million
shares, respectively, of Executone common stock, and is convertible at the
holders' option, if certain revenue and profit parameters are met by UGC, for up
to 4.925 million shares and 8.375 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 holders to convert the Executone Series A and Series B Preferred
Stock into Executone Common Stock.
In exchange for its shares of UGC Common Stock, the Company received
approximately 31.5% of the Executone Securities, comprised of a) 1,166,520
shares of Executone Common Stock, b) 78,819 shares of Executone Series A
Preferred Stock, and c) 31,528 shares of Executone Series B Preferred Stock. The
Company has agreed that for a period of six months following the Closing Date
not to sell, transfer, assign, pledge or grant a security interest in its
Executone
17
<PAGE>
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997, 1996 AND 1995
NOTE C - (CONTINUED)
Securities and thereafter, through the last day of the twelfth full calendar
month following the Closing Date, not to sell in any calendar month a number of
shares of its Executone Securities equal to more than the sum of 16.66% of the
Executone Preferred Stock or the Executone Common Stock issued to the Company on
the Closing Date or thereafter and any unused amount from previous calendar
months. 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 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. Said registration statement was declared
effective on August 1, 1997. The Company has valued its shares of Executone
Series A and Series B Preferred Stock at $ 0 at October 31, 1997 and 1996 based
in part on an offer to purchase the stock, which transaction was not
consummated, and the uncertainties described in the preceding paragraph.
NOTE D - SECOND ADVANTAGE MORTGAGE CORPORATION - SALE OF DISCONTINUED OPERATION
On October 31, 1994, management of the Company formulated a plan to
discontinue its mortgage banking business. Accordingly the entire mortgage
banking operations of Second Advantage Mortgage Corp. ("Second Advantage"), a
51% owned subsidiary of the Company, and its wholly owned subsidiary, Entrust
Financial Corp. ("Entrust") was considered a discontinued operation as of
October 31, 1994.
On November 30, 1994, pursuant to an Asset Purchase Agreement dated as of
November 23, 1994 by and between The Long Island Savings Bank, FSB ("LISB") and
Entrust (the "Asset Purchase Agreement"), Entrust sold to LISB its entire
origination business, including mortgage loans held for sale and mortgage loans
in process, a substantial portion of its rights to service loans for others, and
a substantial portion of its fixed assets. Pursuant to the Asset Purchase
Agreement, LISB assumed the prospective obligations and duties of Entrust under
certain contracts and leases relating to the assets acquired by it.
The gross purchase price realized by Entrust from the transaction was
approximately $31 million in cash, which, after repayment of indebtedness
related to the business (including repayment of loans to two officers and
directors of Second Advantage of approximately $1.0 million and approximately
$17.8 million to its principal lender to retire its warehouse and credit
facility) resulted in net sale proceeds to Entrust of approximately $11.0
million. The gain on such sale amounted to approximately $2.8 million. As of
October 31, 1995, all of the purchase price proceeds had been received by
Entrust, excluding approximately $375,000 which was retained in escrow (the
"LISB Escrow") as security for the performance or payment of indemnification
obligations of Entrust to LISB, if any, which was expected to be paid to Entrust
in 1996.
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 equal to
(a) approximately $3,879,000 plus (b) certain contingent considerations
consisting primarily of 50% of the first $763,800 to be received from the LISB
Escrow. In September 1995, February 1997 and November 1997, the Company received
$187,500, $68,500 and $29,100, respectively, from the LISB Escrow. At October
31, 1996, the Company recorded a reserve for the full amount of the contingent
consideration described above.
NOTE E - BANK 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 Second Advantage
(Note D). During 1996, the $1,500,000 principal amount of the loan was repaid in
full.
18
<PAGE>
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997, 1996 AND 1995
NOTE E - (CONTINUED)
In November 1993 the Company arranged a $500,000 line of credit facility
with the bank. During 1996, the Company utilized $200,000 of the line of credit
facility which was repaid in June 1996. The loan and line of credit facility
bore interest at the bank's prime rate (8.25% at October 31, 1996) plus 1.5%.
Payment of the loan and line of credit were collateralized by 500,000 shares of
TCC Common Stock owned by the Company.
In February 1997, the Company terminated the line of credit facility and
the collateral was returned to the Company.
NOTE F - INCOME TAXES
A reconciliation of the provision for income taxes for the years ended
October 31, 1997, 1996 and 1995 and the amount computed by applying the
statutory Federal income tax rate to income (loss) from continuing operations
follows:
1997 1996 1995
------------ ----------- -----------
Computed expected provision
(benefit) for income taxes $ 5,884,000 $ (787,000) $ 578,000)
Utilization of loss
carryforwards (5,884,000) -- --
Changes in valuation
allowance -- 787,000 578,000
Alternative minimum taxes 100,000 -- --
----------- ----------- ---------
Actual provision for
income taxes $ 100,000 $ -0- $ -0-
=========== =========== =========
The tax effect of the principal temporary differences at October 31, 1997
and 1996 are as follows:
Deferred tax liabilities
Unrealized gain on marketable securities $(10,176,000) $ (2,924,000)
Deferred tax assets
Net operating loss carryforwards 6,616,000 10,006,000
Credit carryforwards 2,242,000 2,291,000
Accruals not currently deductible for
tax purposes 339,000 287,000
------------ ------------
(979,000) 9,660,000
Less valuation allowance (721,000) (9,660,000)
------------ ------------
Net deferred tax liability $ (1,700,000) $ -0-
============ ============
The valuation allowance on the deferred tax asset was substantially
reduced in 1997, reflecting the realization of the remaining net operating loss
carryforwards as a result of the sales of TCC Common Stock owned by the Company
during 1998. Prior to October 31, 1996, the net deferred tax asset was fully
reserved due to the uncertainty of realization.
19
<PAGE>
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997, 1996 AND 1995
NOTE F - (CONTINUED)
At October 31, 1997, the Company had carryforwards as follows:
(Dollars in Thousands)
Net
Operating Expiration
Loss Credits Date
--------- ------- ----------
$ 118 10/31/98
943 10/31/99
744 10/31/00
4 10/31/01
$ 5,253 10/31/02
335 10/31/03
6,328 10/31/04
1,922 10/31/05
520 10/31/06
10/31/07
2,109 10/31/08
1,001 10/31/09
1,039 10/31/10
732 10/31/11
98 later
-------- -------
$ 18,904 $ 2,242
======== =======
NOTE G - ESTIMATED TAX LIABILITIES
The Company is a party to a tax sharing agreement, as amended, with TCC
and Cooper Development Company ("CDC") related to the Cooper Labs, Inc. ("CLI")
liquidation on June 27, 1985. The above companies have agreed that: (i) in the
event that the amount of tax liability, including interest and penalties, shall
be ultimately determined to be greater or less than $10,000,000, then such
excess or deficiency shall be shared 50%, 25%, and 25% by TCC, CDC, and the
Company, respectively, and (ii) they are jointly and severally liable. TCC is
coordinating the defenses for these tax examinations. In 1997, after reviewing
certain documents related to the tax examinations which were provided by TCC,
and after consulting with its tax advisors, the Company recorded a charge of
approximately $149,000 to increase the Company's accrual for interest charges
related to potential assessments.
NOTE H - STOCK PLANS
During October 1991, the Board of Directors of the Company adopted a Stock
Option Plan for Non-Employee Directors (the "Stock Option Plan for Non-Employee
Directors") and a 1991 Stock Incentive Plan (the "1991 Stock Incentive Plan").
A brief description of each plan is as follows:
1. STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Up to 25,000 shares of common stock may be issued pursuant to the Stock
Option Plan for Non-Employee Directors (subject to appropriate adjustment in the
event of changes in the corporate structure of the Company). The Stock Option
Plan for Non-Employee Directors provides that each director of the Company who
is not an employee of the Company or any subsidiary (and who has not been an
employee for at least one year prior to the date of grant) shall be
automatically granted an option to purchase up to 500 shares of common stock of
the Company on the date of each annual meeting of stockholders at which he or
she is elected as a director of the Company. Only nonqualified options may be
granted under the Stock Option Plan for Non-Employee Directors, and the option
exercise price shall be equal to the fair market value of a share of common
stock of the Company on
20
<PAGE>
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997, 1996 AND 1995
NOTE H - (CONTINUED)
the date of the grant, and the options granted become exercisable six months
after issuance. At October 31, 1997, options to acquire 3,500 shares of common
stock have been granted under this plan and 21,000 options are available for
future grants.
2. 1991 STOCK INCENTIVE PLAN
The 1991 Stock Incentive Plan permits the granting of awards in the form
of nonqualified stock options, incentive stock options, restricted stock,
deferred stock, and other stock-based incentives. Up to 300,000 shares of common
stock of the Company may be issued pursuant to the 1991 Stock Incentive Plan
(subject to appropriate adjustment in the event of changes in the corporate
structure of the Company). Officers and other key employees of the Company or
any subsidiary are eligible to receive awards under the 1991 Stock Incentive
Plan. The option exercise price of all options which are granted under the 1991
Stock Incentive Plan must be at least equal to 100% of the fair market value of
a share of common stock of the Company on the date of grant. At October 31,
1997, options to acquire 165,000 shares of common stock have been granted under
this plan and 129,918 options are available for future grants.
Financial Accounting Standard No. 123 "Accounting for Stock Based
Compensation" ("SFAS No. 123"), issued in 1995, introduces a method of
accounting for employee stock-based compensation plans based upon the fair value
of the awards on the date they are granted. Under this fair value based method,
public companies estimate the fair value of stock options using a pricing model,
such as the Black Scholes model, which requires inputs such as the expected
volatility of the stock price and an estimate of the dividend yield over the
option's expected life. The FASB, however, does not require the use of this
method. Entities that continue to account for stock option plans under the
existing method (APB No. 25) are required to disclose proforma net income and
earnings per share, as if the fair value method had been used. Certain
additional disclosures are also required, as follows:
A summary of the activity with respect to these plans is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 182,500 $ 7.28 183,000 $7.28 182,000 $7.32
Granted 1,500 14.25 -- 6.75 1,000 15.00
Cancelled -- (500) 6.75 --
Exercised (15,500) 6.99 -- --
-----------------------------------------------------------------------------------------
Outstanding at
end of year 168,500 $ 7.37 182,500 $ 7.28 183,000 $ 7.28
=========================================================================================
Exercisable at
end of year 168,500 $ 7.37 182,500 $ 7.28 183,000 $ 7.28
=========================================================================================
Weighted average fair
value of options granted
during the year $ 4.48 -- $ 3.45
=========================================================================================
</TABLE>
The following information applies to options outstanding at October 31, 1997:
Range of exercise prices $7.00 - $15.00
Weighted average exercise price $7.37
Weighted average remaining contractual life 2.5 years
21
<PAGE>
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997, 1996 AND 1995
NOTE H - (CONTINUED)
The Company's stock option plan has been accounted for under APB Opinion
25, and related interpretations. No compensation cost has been recognized for
the plan. Had compensation cost for the plan been determined based upon fair
value of the options at the grant dates consistent with the requirements of SFAS
No. 123, the Company's net income (loss) and earnings (loss) per share would
have been the pro forma amounts indicated below.
October 31,
1997 1996
---------------------
Net income (loss) ($000) As Reported: $16,710 $(2,249)
Pro forma: 16,703 (2,249)
Primary earnings (loss) per share As Reported: 7.45 (1.05)
Pro forma 7.45 (1.05)
Fully diluted earnings
(loss) per share As Reported: 7.45 (1.05)
Pro forma: 7.45 (1.05)
The fair value of each option is estimated on the date of grant using the
Black-Scholes options-pricing model with the following weighted-average
assumptions used for grants in 1997 and 1996, expected volatility of 25%,
risk-free interest of 6.0%, and expected lives of 5 years.
3. WARRANTS
In 1993, the Company granted two stockholders a five-year warrant (the
"1993 Warrants") to purchase up to 25,000 shares of common stock of the Company
at a purchase price of $6.00 per share and registration rights, at the Company's
expense, with respect to these shares.
In February 1996, to raise cash, the Company induced the exercise of the
1993 Warrants by offering a reduction in the purchase price from $6.00 per share
to $5.375 per share. On April 2, 1996, the 1993 Warrants were exercised to
purchase 50,000 shares of the Company's Common Stock at the reduced purchase
price of $5.375 per share, or $268,750 , in cash. The Company recorded
compensation expense of $31,250 to reflect the difference between the original
and reduced per share price of the 1993 Warrants.
NOTE I - EMPLOYEE BENEFIT PLANS
In April 1985, the Company adopted its Retirement Income Plan (the
"Retirement Plan"), a noncontributory plan covering substantially all full-time,
non-union United States employees of the Company. Benefits were based upon a
combination of employee compensation and years of service. The Company paid the
entire cost of the plan for its employees and funded such costs as they accrued.
The Company's funding policy was to make annual contributions within minimum and
maximum levels required by applicable regulations. The Company's customary
contributions were designed to fund normal cost on a current basis and fund over
30 years the estimated prior service cost of benefit improvements (15 years of
annual gains and losses). The projected unit cost method was used to determine
the annual cost. Plan assets consist principally of equities and equity and
fixed income mutual funds.
Benefit accruals have been frozen as of September 15, 1988, resulting in a
plan curtailment. As a result of such curtailment, the Company will not accrue
benefits for future services; however, the Company will continue to contribute
as necessary for the unfunded liabilities.
Assumptions used in the accounting were:
1997 1996
---- ----
Discount rates - liability 7.50% 7.50%
Long-term rate of return - assets 8.50 8.50
22
<PAGE>
<PAGE>
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
OCTOBER 31, 1997, 1996 AND 1995
NOTE I - (CONTINUED)
A summary of the components of net periodic pension cost for 1997, 1996
and 1995 is as follows:
1997 1996 1995
-------- -------- --------
Service cost - benefits earned
during the period $ - $ - $ -
Interest cost on projected
benefit obligation 86,342 89,319 82,884
Actual return on plan assets (94,636) (88,760) (75,242)
Net amortization and deferral 24,204 21,561 24,144
-------- -------- --------
Net pension cost of defined
benefit plans $ 15,910 $ 22,120 $ 31,786
======== ========= ========
The following table sets forth the funded status and amounts recognized in
the Company's balance sheet for its defined benefit plan at October 31, 1997 and
1996:
1997 1996
---------- -------
Actuarial present value of
accumulated benefit obligations,
all of which is vested $ 1,216,635 $ 1,198,707
=========== ===========
Projected benefit obligations $(1,216,635) $(1,198,707)
Fair value of plan assets 1,519,734 1,160,844
----------- -----------
Lesser (excess) of projected
benefit obligation over fair
value of plan assets 303,099 (37,863)
Unrecognized net loss 189,718 516,326
Adjustment required to recognize
minimum liability 0 (516,326)
----------- -----------
Prepaid (accrued) pension cost $ 492,817 $ (37,863)
=========== ===========
NOTE J - PREFERRED STOCK PURCHASE RIGHTS
On January 7, 1988, the Board of Directors of the Company declared a
dividend distribution of ten rights (as adjusted for a reverse stock split) for
each outstanding share of the Company's common stock, par value $.10 per share,
to stockholders of record at the close of business on January 21, 1988. Each
right ("Right") entitles the registered holder to initially purchase from the
Company a unit consisting of one one-hundredth of a share (a "Unit") of Series A
Junior Participating Preferred Stock, par value $.10 per share, at a purchase
price of $5.50 per Unit, subject to adjustment and under certain circumstances,
as defined in the agreements.
The Rights expired on January 7, 1998.
NOTE K - COMMITMENTS AND CONTINGENCIES
1. LEASES AND OTHER COMMITMENTS
The Company has no significant annual rental obligations under
noncancellable operating leases in force at October 31, 1997. Rental expense
amounted to approximately $18,000 and $29,000 in 1997 and 1996, respectively,
and was paid to a company affiliated with a director of the Company.
23
<PAGE>
<PAGE>
SCHEDULE II
COOPER LIFE SCIENCES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- -------- -------- -------- --------
ADDITIONS
---------------------------
(1) (2)
CHARGED TO
BALANCE AT CHARGED TO OTHER DEDUC- BALANCE AT
BEGINNING COSTS AND ACCOUNTS - TIONS - END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
----------- ---------- ---------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts - Due from
Second Advantage Corp.
at October 31, 1997 $ 194 $ $ 62 (A) $ 69 (B) $ 63
-------- --------- -------- ------ --------
Allowance for doubtful
accounts - Due from
Second Advantage Corp.
at October 31, 1996 $ -0- $ 194 $ 194
-------- --------- --------
</TABLE>
(A) Write-off of account receivable
(B) Recovery of bad debt
24
<PAGE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The following are the current directors and executive officers of the Company:
Name Age Position(s)
- ----- --- ------------------------
William L. Cohen 56 Director
Moses Marx 62 Director
Steven Rosenberg 49 Vice President; Director
Harold L. Schneider 55 Secretary
Randolph B. Stockwell 51 Director
Mr. Cohen was elected a director in July 1993. Mr. Cohen is President,
Chief Executive Officer and Chairman of the Board of Andover Togs, Inc., an
apparel manufacturing company, positions he has held for more than the past five
years.
Mr. Marx was elected a director in May 1995. Mr. Marx has been a general
partner in United Equities Company (a securities brokerage firm) since 1954 and
a general partner in United Equities Commodities Company (a commodities
brokerage firm) since 1972. He is also President of Momar Corp. (an investment
company). Mr. Marx is a director of Bio Technology General Corp. (a developer
and manufacturer of biotechnology products) and The Cooper Companies, Inc. (a
developer and manufacturer of healthcare products).
Mr. Rosenberg has been Vice President and Chief Financial Officer of the
Company since 1990 and since May 1995, he has also served as acting President.
He also serves as chief administrative officer of the Company. Mr. Rosenberg was
elected a director in May 1995. From September 1987 through April 1990, he
served as President and Director of Scomel Industries, Inc., a company engaged
in international marketing and consulting. Mr. Rosenberg is a director of The
Cooper Companies, Inc.
Mr. Schneider was elected Secretary in April 1990. He has been a partner
in the law firm Tenzer Greenblatt LLP for more than the past five years.
Mr. Stockwell was elected a director in July 1988. He has been private
investor for over ten years and has served in various capacities with the
Community Bank, a commercial bank, from September 1972 to January 1987.
There are no family relationship (whether by blood, marriage or adoption)
among any of the Company's current directors or executive officers.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth information as to all cash compensation
paid by the Company to each of its executive officers whose total cash
compensation exceeded $60,000 and to all executive officers of the Company as a
group for services while an executive officer during the fiscal year ended
October 31, 1997.
Name Capacity in Which Served Cash Compensation
- ---- ------------------------ -----------------
Steven Rosenberg Acting President, Vice $90,000
President and Chief Financial
Officer
All executive officers as a group (one person) $90,000
25
<PAGE>
<PAGE>
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company receives monthly fees
of $1,000 for serving as a director of the Company and $1,000 for each day
during which he participates in a meeting of the Board and, if on a separate
day, $500 for each day during which he participates in a meeting of a committee
of the Board of which is a member. In addition, see "Stock Option Plan for
Non-Employee Directors" below.
1991 STOCK INCENTIVE PLAN
The 1991 Stock Incentive Plan permits the granting of awards in the forms
of nonqualified stock options, incentive stock options, restricted stock,
deferred stock, and other stock-based incentives. Up to 300,000 shares of common
stock of the Company may be issued pursuant to the 1991 Stock Incentive Plan
(subject to appropriate adjustment in the event of changes in the corporate
structure of the Company). Officers and other key employees of the Company or
any subsidiary are eligible to receive awards under the 1991 Stock Incentive
Plan. The option exercise price of all options which are granted under the 1991
Stock Incentive Plan must be at least equal to 100% of the fair market value of
a share of common stock of the Company on the date of grant.
Pursuant to the 1991 Stock Incentive Plan, on October 6, 1991, the
Committee administering the Plan granted nonqualified stock options to the
Company's then President to purchase up to 150,000 shares of common stock at a
purchase price of $7.00 per share and to the Company's Vice President to
purchase up to 15,000 shares of common stock at a purchase price of $7.00 per
share. The option granted to the Company's President terminates on the eighth
anniversary of its effective date and the option granted to the Company's Vice
President was exercised on April 3, 1997.
On October 13, 1994, the Committee granted additional nonqualified stock
options to the Company's Vice President to purchase up to 15,000 shares of
common stock at a purchase price of $9.75 per share which terminates on the
fifth anniversary of its effective date.
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
Up to 25,000 shares of common stock may be issued pursuant to the Stock
Option Plan for Non-Employee Directors (subject to appropriate adjustment in the
event of changes in the corporate structure of the Company). The Stock Option
Plan for Non-Employee Directors provides that each director of the Company who
is not an employee of the Company or any subsidiary (and who has not been an
employee for at least one year prior to the date of grant) shall be
automatically granted an option to purchase up to 500 shares of common stock of
the Company on the date of each annual meeting of stockholders at which he or
she is elected as a director of the Company. Only nonqualified options may be
granted under the Stock Option Plan for Non-Employee Directors, and the option
exercise price shall be equal to the fair market value of a share of common
stock of the Company on the date of the grant, and the options granted become
exercisable six months after issuance.
Pursuant to the Stock Option Plan for Non-Employee Directors, on April 8,
1992, the Company granted nonqualified options to a nonemployee director of the
Company to purchase 500 shares of the Company's common stock at an exercise
price of $6.75 per share which options was exercised on April 3, 1997. Pursuant
to the Plan, on October 13, 1994, the Company granted nonqualified options to
its two current nonemployee directors to each purchase 500 shares of the
Company's common stock at an exercise price of $9.75 per share which options
will expire in October 1999. Pursuant to the Plan, on April 11, 1995, the
Company granted nonqualified options to its two current nonemployee directors to
each purchase 500 shares of the Company's common stock at an exercise price of
$15.00 per share which options will expire in April 2000. Pursuant to the Plan,
On April 8, 1997, the Company granted nonqualified options to three nonemployee
directors of the Company to each purchase 500 shares of the Company's common
stock at an exercise price of $14.25 per share which will expire in April 2002.
26
<PAGE>
<PAGE>
ITEM 12. SECURITIES HELD BY MANAGEMENT
The following table sets forth certain information as of January 13, 1998
with respect to the beneficial ownership of the Company's Common Stock by (i)
each person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each of the Company's directors and executive
officers, and (iii) all executive officers and directors as a group.
Number of Percent
Shares of Class
--------- --------
William Cohen 1,500(1) *
Moses Marx 1,156,120(2) 54.4%
160 Broadway, New York, NY 10038
Steven Rosenberg 20,082(3) 1.0%
Randolph B. Stockwell 7,000(4) *
All executive officers and directors
as a group (4 persons) 1,184,702(5) 55.2%
- ----------------
* Less than 1%.
(1) Issuable upon the exercise of options which have been granted to Mr. Cohen
under the Company's Stock Option Plan for Non-Employee Directors.
(2) Includes 500 shares issuable upon the exercise of options which have been
granted to Mr. Marx under the Company's Stock Option Plan for Non-Employee
Directors.
(3) Includes 15,000 shares issuable upon the exercise of outstanding options
which have been granted to Mr. Rosenberg.
(4) Includes 1,500 shares issuable upon the exercise of options which have
been granted to Mr. Stockwell under the Company's Stock Option Plan for
Non-Employee Directors.
(5) Includes 18,500 shares of Common Stock which are issuable upon the
exercise of outstanding options.
The foregoing information with respect to persons who are known by the
Company to own beneficially more than 5% of the Company's Common Stock is based
upon filings made by said persons with the Securities and Exchange Commission.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
NOT APPLICABLE
27
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) DOCUMENTS FILED AS PART OF THIS REPORT:
(i) Financial Statements
Report of Independent Certified Public Accountants
Consolidated Balance Sheets as of October 31, 1997 and 1996
Consolidated Statements of Operations for the Years Ended October 31,
1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity for the Years Ended
October 31, 1997, 1996 and 1995
Consolidated Statements of Cash Flows for the Years Ended October 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements
(ii) Financial Statement Schedules
Schedule
Number Description
-------- -----------
II. Valuation and qualifying accounts
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are not applicable and, therefore, have been omitted.
(iii) Exhibits
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Restated Certificate of Incorporation of the Company (incorporated by
reference to Exhibit 19 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended July 31, 1988).
3.2 Certificate of Amendment of Restated Certificate of Incorporation
(incorporated by reference to Exhibit 3(d) to the Company's Annual
Report on Form 10-K for the fiscal year ended October 31, 1988).
3.3 By-laws of the Company (incorporated by reference to Exhibit 3(e) to the
Company's Current Report on Form 8-K dated May 2, 1990).
10.1 Assignment, Assumption and Indemnification Agreement dated October 25,
1984 between Cooper Laboratories, Inc. and the Company (incorporated by
reference to Exhibit 10(h) to the Company's Registration Statement on
Form S-1 (Registration No. 2-97498)).
28
<PAGE>
<PAGE>
10.2 Tax Sharing Agreement between the Company and Cooper Laboratories, Inc.
dated as of October 25, 1984 (incorporated by reference to Exhibit 10(j)
to the Company's Registration Statement on Form S-1 (Registration No.
2-97498)).
10.3 Joint Amendment dated as of June 14, 1985, to the Tax Sharing Agreement
between the Company and Cooper Laboratories, Inc. dated as of October
25, 1984 (incorporated by reference to Exhibit No. 10.3 to the Company's
Quarterly Report on Form 10-Q for the Fiscal Quarter Ended April 30,
1990).
10.4 1991 Stock Incentive Plan of the Company. (incorporated by reference to
Exhibit 10.14 to the Company's Annual Report on Form 10-K for the Fiscal
Year Ended October 31, 1991).
10.5 Stock Incentive Plan for Non-Employee Directors of the Company
(incorporated by reference to Exhibit 10.15 to the Company's Annual
Report on Form 10-K for the Fiscal Year Ended October 31, 1991).
10.6 Corporate Assumption of Tax Liability dated December 10, 1985
(incorporated by reference to Exhibit 10.20 to the Company's Current
Report on Form 8-K dated April 20, 1992).
10.7 Registration Rights Agreement, dated as of August 31, 1993, by and between
the Company and Mr. Moses Marx (incorporated by reference to Exhibit
10.37 to the Company's Quarterly Report on Form 10-Q for the Fiscal
Quarter Ended July 31, 1993).
21. Subsidiaries of the Company.
27. Financial Data Schedule
(b) REPORTS ON FORM 8-K.
The Company did not file any reports on Form 8-K during the last quarter
of its fiscal year ended October 31, 1997.
29
<PAGE>
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE COMPANY HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
COOPER LIFE SCIENCES, INC.
BY: /s/ Steven Rosenberg
----------------------------------------
STEVEN ROSENBERG
Vice President (Chief Executive Officer)
DATE: January 28, 1998
---------------------------------------
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 COMPANY
AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
--------- ----- ----
Vice
President (Chief
Executive Officer,
Principal Financial
Officer and Principal
Accounting Officer);
/s/ Steven Rosenberg Director January 28, 1998
- ------------------------
STEVEN ROSENBERG
/s/ William Cohen Director January 28, 1998
- ------------------------
WILLIAM COHEN
/s/ Moses Marx Director January 28, 1998
- ------------------------
MOSES MARX
/s/ Randolph B. Stockwell Director January 28, 1998
- -------------------------
RANDOLPH B. STOCKWELL
30
<PAGE>
<PAGE>
Exhibit 21
SUBSIDIARIES OF REGISTRANT
Jurisdiction of
Name Incorporation
- ---- ----------------
Greater American Finance Group, Inc. Delaware
31
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COOPER
LIFE SCIENCES, INC. ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<CASH> 25,887
<SECURITIES> 38,067
<RECEIVABLES> 63
<ALLOWANCES> (63)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 64,521
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 256
0
0
<OTHER-SE> 61,473
<TOTAL-LIABILITY-AND-EQUITY> 64,521
<SALES> 0
<TOTAL-REVENUES> 17,633
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 823
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 16,810
<INCOME-TAX> 100
<INCOME-CONTINUING> 16,710
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,710
<EPS-PRIMARY> 7.45
<EPS-DILUTED> 7.45
<FN>
See the financial statements for an unclassified balance sheet.
</TABLE>
