QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
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[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from ______ to ______
Commission file number 0-19819
biosys, inc.
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(Exact name of registrant as specified in its charter)
Delaware 94-2878645
--------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10150 Old Columbia Road, Columbia, Maryland 21046
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(Address of principal executive offices) (Zip Code)
410-381-3800
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(Registrant's telephone number, including area code)
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 XX No _____.
Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the last practicable date: 9,548,610 shares of the Company's
Common Stock (par value $0.001) were outstanding as of October 31, 1996.
biosys, inc.
Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
September 30, December 31,
1996 1995
---- ----
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 755 $ 1,755
Accounts receivable 3,419 3,009
Inventories (Note 6) 4,531 4,086
Prepaid expenses and other current assets 912 500
------- --------
Total current assets 9,617 9,350
Property and equipment, net 6,378 6,421
Other assets, net 824 586
Goodwill 3,875 ---
------- --------
$20,694 $ 16,357
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
Liabilities not subject to compromise
Current liabilities:
Accounts payable $ 1,947 $ 4,767
Short-term debt 3,642 5,250
Accrued expenses 401 3,309
Current portion of long-term obligations -- 782
Deferred credits 219 931
-------- ---------
Total current liabilities 6,209 15,039
-------- ---------
Long-term obligations, less current portion -- 3,642
Liabilities subject to compromise (Note 5) 10,852 ---
-------- ---------
Total liabilities 17,061 18,681
-------- ---------
Commitments and contingencies
Shareholders' equity (deficit):
Convertible preferred stock, $.001 par
value; 5,000,000 shares authorized,
535 shares issued and outstanding in 1996 312 ---
Common stock, $.001 par value; 30,000,000
shares authorized, 9,176,375 and 5,598,828
issued and outstanding 9 6
Additional paid-in-capital 146,340 126,315
Accumulated deficit (142,987) (128,592)
Cumulative translation adjustment (41) (53)
--------- ----------
Total shareholders' equity (deficit) 3,633 (2,324)
--------- ----------
$20,694 $ 16,357
========= =========
See accompanying notes to consolidated financial statements.
biosys, inc.
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
Revenues:
- ---------
Product sales $ 4,943 $ 5,246 $ 18,514 $ 19,668
Contract research and development 194 76 724 76
-------- -------- -------- ---------
Total revenues 5,137 5,322 19,238 19,744
Operating costs and expenses:
- -----------------------------
Cost of product sales 4,798 4,631 16,732 16,988
Research and development 1,246 1,829 4,339 5,658
Marketing and selling 821 912 2,570 3,529
General and administrative 809 727 2,739 2,669
Purchased research and development --- --- 6,000 ---
Costs of mergers --- 765 58 3,961
-------- -------- --------- ---------
Total operating costs and expenses 7,674 8,864 32,438 32,805
Loss from operations (2,537) (3,542) (13,200) (13,061)
Interest and other expense (329) (435) (1,252) (874)
Interest and other income 15 2 57 114
-------- -------- --------- --------
Net loss $(2,851) $(3,975) $(14,395) $(13,821)
======== ======== ========= =========
Net loss per share (Note 7) $ (0.36) $ (0.84) $ (2.03) $ (3.07)
======== ======== ========= =========
Weighted average common shares
outstanding 7,869 4,705 7,106 4,507
======== ======== ========= =========
See accompanying notes to consolidated financial statements.
biosys, inc.
Consolidated Statements Of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
September 30,
1996 1995
---- ----
Cash flows from operating activities:
Net loss $(14,395) $(13,821)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 1,037 1,179
Loss on disposal of assets --- 49
Purchased research and development 6,000 ---
Warrants issued for loan modification 153 ---
Changes in assets and liabilities:
Accounts receivable (115) (2,204)
Inventories 254 (202)
Prepaid expenses and other current assets 39 (12)
Other assets (426) 323
Accounts payable and accrued expenses 203 3,245
Deferred credits (106) ---
--------- ---------
Net cash used in operating activities (7,356) (11,443)
--------- ---------
Cash flows from investing activities:
Purchase of property and equipment (740) (396)
Cash acquired in AgriDyne acquisition 2,041 ---
Proceeds from sales of assets and
short-term investments --- 622
Net cash provided by investing activities 1,301 226
--------- ---------
Cash flows from financing activities:
Issuance of common stock, net of issuance costs 8 24
Issuance of preferred stock, net of issuance costs 7,254 ---
Payments on debt (2,042) (646)
Proceeds from issuance of debt 182 5,374
Principal payments on capitalized lease obligations (328) (349)
--------- ---------
Net cash provided by financing activities 5,074 4,403
--------- ---------
Effect of exchange rate changes on cash (19) (20)
--------- ---------
Net decrease in cash and cash equivalents (1,000) (6,834)
Cash and cash equivalents at beginning of period 1,755 8,377
--------- ---------
Cash and cash equivalents at end of period $ 755 $ 1,543
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 1,080 $ 580
========= =========
Supplemental disclosure of non-cash financing and
investing activities:
Accretion of preferred stock dividends $ 311 $ ---
Common stock issued for acquisition of AgriDyne $ 12,925 $ ---
Conversion of preferred stock to common stock $ 2 $ ---
See accompanying notes to consolidated financial statements
biosys, inc.
Consolidated Statement Of Shareholders' Equity (Deficit)
Nine Months Ended September 30 1996
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
Convertible Additional Cumulative
Preferred Stock Common Stock Paid-In Accumulated Translation
Shares Amount Shares Amount Capital Deficit Adjustment Total
------ ------ ------ ------ ------- ------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1995 --- $--- 5,598,828 $ 6 $126,315 $(128,592) $(53) $(2,324)
Issuance of common stock in
connection with acquisition
of AgriDyne (Note 4)
--- --- 1,888,121 1 12,924 --- --- 12,925
Issuance of preferred stock 780 1 --- --- 7,253 --- --- 7,254
Accretion of preferred stock
dividend
--- 311 --- --- (311) --- --- ---
Issuance of common stock upon
exercise of options and issuance
of common stock warrants --- --- 8,718 --- 161 --- --- ---
Issuance of common stock upon
conversion of preferred stock (245) --- 1,680,708 2 (2) --- --- ---
Net loss --- --- --- --- --- (14,395) --- (14,395)
Translation adjustment --- --- --- --- --- --- 12 12
----- ---- --------- ---- ------ --------- ----- --------
Balance at September 30, 1996 535 $312 9,176,375 $ 9 $146,340 $(142,987) $(41) $ 3,633
===== ==== ========= ==== ========= ========== ===== =======
</TABLE>
See accompanying notes to consolidated financial statements
biosys, inc.
Notes to Consolidated Financial Statements
Nine Months Ended September 30, 1996
(unaudited)
Note 1. biosys, inc. ("biosys" or the "Company") has been experiencing
negative cash flow from operations and it is expected that biosys will
continue to experience negative operating cash flow through the end of
1996 and potentially thereafter. Despite certain funding and
collaborative initiatives pursued by the Company during the third
quarter and prior periods, the Company has not been successful in
procuring adequate funds to satisfy creditor needs. Contributing
factors including weather related impact on revenue growth, depressed
mid-year stock market conditions and the dilutive implications arising
from the actual and potential conversions of the Company's convertible
preferred shares into common shares have hindered the Company's
initiatives. Accordingly, on September 27, 1996, the Company and one
of its subsidiaries, Crop Genetics International, (collectively the
"Debtors") filed voluntary petitions for relief under Chapter 11 of
the Bankruptcy Code (the "Filings") in order to protect themselves
from their creditors. See condensed combined financial statements of
the Debtors in Note 9.
The Debtors are presently operating as debtors-in-possession subject
to the jurisdiction of the United States Bankruptcy Court for the
District of Maryland. The consolidated financial statements of the
Company have been presented in accordance with the American Institute
of Certified Public Accountants Statement of Position 90-7, "Financial
Reporting by Entities in Reorganization under the Bankruptcy Code" and
have been prepared in accordance with generally accepted accounting
principles applicable to a going concern, which principles, except as
otherwise disclosed, assume that assets will be realized and
liabilities will be discharged in the normal course of business.
In the Chapter 11 cases, substantially all the Debtors' liabilities as
of the date of the Filings are subject to resolution under a plan of
reorganization to be voted upon by the Debtors' creditors and
shareholders and confirmed by the Bankruptcy Court. Schedules have
been filed by the Debtors with the Bankruptcy Court setting forth the
assets and liabilities of the Debtors as of the date of the Filings as
shown by the Debtors' accounting records. Any differences between
amounts shown by the Debtors and claims filed by creditors will be
investigated and resolved. The amount and settlement terms for any
such disputed liabilities are subject to approval by the Bankruptcy
Court. The adjustment of the total liabilities of the Debtors remains
subject to a Bankruptcy Court approved plan of reorganization, and,
accordingly, the ultimate amount such liabilities will be settled for
is not presently determinable. Pursuant to bankruptcy law, the Debtors
presently possess the exclusive right to file a plan of reorganization
through January 25, 1997.
The Company's consolidated financial statements have been prepared on
a going concern basis, which contemplates continuity of operations,
realization of assets and liquidation of liabilities and commitments
in the normal course of business. The appropriateness of using the
going concern basis is dependent upon, among other things,
confirmation of a plan of reorganization, future operations and
financing sources to meet obligations. As a result of the Filings and
related circumstances, however, such realization of assets and
liquidation of liabilities is subject to significant uncertainty.
While under protection of Chapter 11, the Debtors may sell or
otherwise dispose of assets, and liquidate or settle liabilities, for
amounts other than those reflected in the accompanying consolidated
financial statements. Further, a plan of reorganization could
materially change the amounts reported in the accompanying
consolidated financial statements. The consolidated financial
statements do not include any adjustments relating to a recoverability
of the value of recorded asset amounts or the amounts and
classification of liabilities that might be necessary as a consequence
of a plan of reorganization. As of September 30, 1996, the Company has
not realized any gains or incurred any material charges related to the
reorganization.
Note 2. The above financial information reflects all adjustments (consisting
solely of normal recurring adjustments) which are, in the opinion of
management of biosys, necessary for the fair presentation of the
results for the interim periods presented. The interim results are not
necessarily indicative of results for a full fiscal year. The
financial statements and notes are presented on a basis, as permitted
by the Securities and Exchange Commission, and should be read in
conjunction with the Company's 1995 Annual Report on Form 10-K.
Note 3. Effective March 15, 1996, the Company effected a one for two and
one-half reverse stock split of its common stock (the "Reverse Stock
Split"). All common stock share information in the accompanying
consolidated financial statements and related footnotes have been
adjusted to reflect the Reverse Stock Split.
Note 4. On March 31, 1995, biosys, inc. acquired Crop Genetics International
Corporation ("CGI") in a transaction accounted for as a pooling of
interests. Accordingly, all consolidated financial information for
prior periods has been adjusted to include CGI financial data. During
the nine months ended September 30, 1996 and 1995, merger, severance
and relocation costs of $58,000 and $3,509,000, respectively, were
incurred by biosys related to the CGI merger. As of September 30,
1996, all significant merger, severance and relocation costs related
to the CGI merger have been incurred.
On March 15, 1996, the Company acquired AgriDyne Technologies, Inc.
("AgriDyne"), in a merger whereby AgriDyne became a wholly-owned
subsidiary of the Company. To effect the merger, the Company issued
approximately 1.9 million shares of its common stock in exchange for
all of the outstanding shares of AgriDyne common stock based on a
conversion ratio of 0.28664 of a share of biosys common stock for each
share of AgriDyne common stock. From the initial announcement of the
merger, in April 1995, through September 30, 1995, the Company
anticipated accounting for the merger as a pooling of interests.
During that period the Company charged to expense $452,000 for
printing, professional services and other costs related to the merger.
Subsequent to September 30, 1995, due to changes in facts and
circumstances, the Company determined that purchase accounting was the
appropriate method of accounting for the merger. Thus, all costs
related to the merger incurred subsequent to September 30, 1995 have
been treated as additional purchase consideration. Of the aggregate
purchase price of $13,592,000, $3,717,000 has been allocated to net
tangible assets acquired, $6,000,000 to in-process research and
development and $3,875,000 to goodwill.
Note 5. Liabilities subject to compromise under reorganization proceedings
include substantially all current and long-term unsecured or
undersecured debt as of the date of the Filings. Pursuant to the
provisions of the Bankruptcy Code, payment of those liabilities may
not be made except pursuant to a plan of reorganization or Bankruptcy
Court order while the Debtors continue to operate as a
debtor-in-possession. The Company has notified all known or potential
claimants for the purpose of identifying all pre-petition claims
against the Debtors. While the Company believes that the amounts
recorded reflect known claims at this time, the amounts actually
claimed by creditors or allowed by the Bankruptcy Court may be
different.
The following liabilities are classified as liabilities subject to
compromise at September 30, 1996:
Accounts payable $ 5,193,000
Accrued expenses 1,209,000
Deferred credits 606,000
Long-term obligations 3,844,000
-----------
$10,852,000
-----------
Note 6. Inventories consist of the following:
September 30, December 31,
1996 1995
Raw materials $2,219,000 $2,576,000
Work-in-process 375,000 225,000
Deferred growing costs 527,000 471,000
Finished goods 1,410,000 814,000
----------- ------------
$4,531,000 $4,086,000
----------- ------------
Note 7. Net loss per share has been computed using the weighted average number
of common shares outstanding during each period presented.
Note 8. In August 1996, due to biosys' failure to maintain $4 million of net
tangible assets as required by the NASD bylaws governing continued
listing on the Nasdaq National Market, biosys received notice from
Nasdaq that biosys' Common Stock was being delisted from the Nasdaq
National Market. biosys' Common Stock is now traded by use of pink
sheets in the Over-The-Counter market.
Note 9. As described in Note 2, on September 27, 1996, the Debtors filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy
Code. biosys' wholly-owned U.K. subsidiary, Agrisense-BCS, Limited,
did not file for bankruptcy protection. Condensed combined financial
statements for the Debtors as of and for the nine months ended
September 30, 1996 are presented below.
Condensed combined balance sheet
--------------------------------
Cash and cash equivalents $ 158,000
Accounts receivable 2,241,000
Inventories 3,694,000
Intercompany receivables, net 763,000
Other current assets 864,000
-------------
Total current assets 7,720,000
Noncurrent assets 11,742,000
$ 19,462,000
Short-term debt $ 3,642,000
Accrued expenses 401,000
Deferred credits 219,000
------------
Total current liabilities 4,262,000
Liabilities subject to compromise 10,852,000
Total liabilities 15,114,000
Shareholders' equity 4,348,000
$ 19,462,000
Condensed combined statement of operations
Total revenues $ 12,280,000
Operating costs and expenses:
Cost of product sales 12,473,000
Operating costs 7,595,000
Purchased research and development 6,000,000
Costs of mergers 58,000
-------------
26,126,000
Loss from operations (13,846,000)
Interest and other expense, net (936,000)
-------------
Net loss $(14,782,000)
=============
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements
reflect the Company's current views with respect to future events and financial
performance, including statements in the following section concerning the timing
and amount of revenues derived from commercial sales, contract manufacturing and
research and development or collaborative arrangements, the level of expenses
incurred and the sufficiency of cash and other resources to fund operations and
maintain certain financial covenants contained in the Company's line of credit
and lease agreements. Actual results could differ materially from those
projected in the forward-looking statements as a result of the Company's ability
to obtain adequate additional financing as needed, the uncertainties of new
product development and introduction, sales growth, commercial acceptance of
products, actions by third party manufacturers, competitive pressures, and other
risks described from time to time in the Company's filings with the Securities
and Exchange Commission.
Overview
- --------
During 1996, unusually cool and wet weather conditions depressed
revenue in certain of the Company's key markets segments, and severely reduced
the Company's declining cash resources. biosys was unable to raise the financing
necessary to alleviate this cash shortage. Accordingly, on September 27, 1996,
the Company and one of its subsidiaries, Crop Genetics International,
(collectively the "Debtors") filed voluntary petitions for relief under Chapter
11 of the Bankruptcy Code (the "Filings") in order to protect themselves from
their creditors. The Debtors are presently operating their business as
debtors-in-possession subject to the jurisdiction of the United States
Bankruptcy Court for the District of Maryland.
The Company's consolidated financial statements have been prepared on a
going concern basis, which contemplates continuity of operations, realization of
assets and liquidation of liabilities and commitments in the normal course of
business. The appropriateness of using the going concern basis is dependent
upon, among other things, confirmation of a plan of reorganization, future
operations and financing sources to meet obligations. As a result of the Filings
and related circumstances, however, such realization of assets and liquidation
of liabilities is subject to significant uncertainty. While under protection of
Chapter 11, the Debtors may sell or otherwise dispose of assets, and liquidate
or settle liabilities, for amounts other than those reflected in the
accompanying consolidated financial statements. Further, a plan of
reorganization could materially change the amounts reported in the accompanying
consolidated financial statements. The consolidated financial statements do not
include any adjustments relating to a recoverability of the value of recorded
asset amounts or the amounts and classification of liabilities that might be
necessary as a consequence of a plan of reorganization.
biosys commenced commercialization of nematode technologies during
1989, pheromone technologies in 1993, virus-based products in 1994, and has
recognized income from the Kleentek seed cane business since the 1980's.
Revenues from commercial sales and contract manufacturing dominate total
revenues and revenues from nematode and virus research and collaborative product
development agreements are expected to form a small percentage of future total
revenues. biosys has incurred operating losses since its inception and expects
to incur an operating loss for 1996.
On March 31, 1995, biosys completed a merger with CGI whereby a
wholly-owned subsidiary of biosys was merged with CGI and CGI became a
wholly-owned subsidiary of biosys. The transaction has been accounted for as a
pooling of interests. Accordingly, the financial information for prior periods
have been restated to include CGI historical financial data. On March 15, 1996,
biosys and AgriDyne completed a merger whereby a wholly-owned subsidiary of
biosys was merged with AgriDyne, and AgriDyne became a wholly-owned subsidiary
of biosys. AgriDyne develops and commercializes plant-derived compounds for use
in environmentally compatible control of insect pests, and has three products
that have received Environmental Protection Agency registration allowing for
their sale in the U.S. The transaction was effected through the exchange of
0.28664 of a share of biosys Common Stock for each outstanding share of Common
Stock of AgriDyne, which resulted in the issuance to AgriDyne stockholders of
approximately 1.9 million shares of biosys Common Stock. The transaction was
accounted for under the purchase method of accounting.
biosys currently markets its products for use predominantly in the
northern hemisphere, where the growing season generally runs from March to
October. The seasonal nature of agriculture will cause biosys' product revenues
for certain products to be concentrated in these months and will result in
substantial variations in financial results from quarter to quarter. biosys'
product revenues could be adversely affected by unusual weather conditions, or
low insect infestation during this time period. Commercial introduction of
additional products is contingent upon, among other factors, the availability of
resources and completion of field testing prior to establishing labeling claims.
To date in 1996, biosys has sold and/or registered new product entries in the
U.S., Thailand, Mexico and Australia. In the case of baculovirus based products,
registration is required prior to product sales in the U.S. (from the
Environmental Protection Agency) as well as in certain countries abroad. In May
1996, biosys received the first U.S. registration of any baculovirus product and
obtained an order from the U.S.D.A. for biosys' Gemstar product. Unusual weather
conditions and other factors may delay field tests, label development and
commercialization. biosys' quarterly operating results may also be affected by
fluctuations in the demand for products by contract manufacturing clientele, and
the timing or amount of revenue to be recognized from major customers or
potential new contract manufacturing arrangements. In addition, biosys'
quarterly operating results may be affected by the timing of biosys' entering
into research and development or collaborative arrangements and any payments
made to or expenses incurred by biosys in connection with such arrangements.
While biosys anticipates that it may enter into such arrangements in the future,
there can be no assurance that it will do so, and, if it does, it cannot predict
the timing or amount of revenue derived from such arrangements.
For the pheromone business, the availability of the pheromone Active
Ingredient (A.I.) on a reliable, cost-effective basis has been a significant
factor affecting the viability of the business. On November 7, 1995, biosys
entered into a multiyear supply and marketing agreement with International
Specialty Products ("ISP") as part of biosys' strategy for an integrated supply
of A.I. biosys' achievement of acceptable margins for certain pheromone-based
products may be precluded if it is unable to acquire sufficient quantities of
A.I. from ISP. biosys has also established a third party manufacturing
relationship with Grant Chemical Division of Ferro Corporation for the
production of certain important intermediate products. This arrangement has more
than satisfied biosys' needs for A.I. to date. However, to the extent that these
arrangements do not result in the production of sufficient quantities of
pheromones, biosys' ability to provide pheromone-based products would be
adversely affected.
Results of Operations
- ---------------------
Total revenues were relatively flat for the third quarter of 1996 as
compared to the comparable period in 1995 at $5,137,000 in 1996 versus
$5,322,000 in 1995. Product sales were $4,943,000 in the third quarter of 1996,
6.1% less than product sales of $5,246,000 in the same period in 1995. The
decrease in revenues is attributable to the timing of the harvest and sale of
Kleentek seed cane. In 1995 all of the Kleentek seed cane had been harvested and
sold by September 30 and $1,930,000 of revenue was recognized in the third
quarter of 1995. The 1996 harvest occurred slightly later than in 1995 due to
adverse weather conditions. Thus, for the quarter ended September 30, 1996 only
$1,366,000 of revenue has been recognized for Kleentek seed cane. The harvest
was completed in October 1996 and total revenue from the Kleentek seed cane in
1996 is expected to approximate $1,900,000. Product sales, other than Kleentek,
for the third quarter were $3,577,000 for the third quarter of 1996, an increase
of 7.9% from product sales other than Kleentek of $3,316,000 in 1995. Total
revenues for the nine months ended September 30, 1996 decreased 2.6% to
$19,238,000 from total revenues of $19,744,000 in 1995. The major reasons for
this slight net decrease are the timing of the Kleentek seed cane harvest
described above and the unusually wet, cool spring weather conditions in 1996,
which significantly impacted the U.S. consumer market. These shortfalls were
partially offset by gains in other markets. Excluding the impact of the delayed
Kleentek harvest, product sales for the nine months ended September 30, 1996
were $17,872,000 compared to $17,814,000 for the corresponding period of 1995.
biosys achieved a gross margin on product sales of $145,000, or 2.9%,
for the third quarter ended September 30, 1996, versus a gross margin of
$615,000 or 11.7% for the third quarter of 1995. The gross margin was impacted
by the timing of the recognition of the Kleentek seed cane revenue as described
above. The Kleentek seed cane has a gross margin percentage of approximately
47%. For the first nine months of 1996, biosys achieved a gross margin on
product sales of $1,782,000 or 9.6% versus a gross margin of $2,680,000 or 13.6%
for the first nine months of 1995. The decrease in gross margin is attributable
to the timing of the Kleentek sales described above and other sales volume
decreases described above and their effect on overhead recovery. In March 1996,
biosys modified its long-term manufacturing agreement for the Decatur, IL
facility. Under the terms of the revised agreement, biosys' future obligations
under this agreement were significantly reduced while maintaining adequate
availability of current and future capacity to manufacture the full range of its
nematode product line and associated contract manufacturing businesses. The
revised agreement has benefited the second and third quarters of 1996 and the
Company expects that it will positively impact biosys' future gross margins.
Because of the seasonality and perishability of biosys' nematode-based products,
weather-related demand and other sales mix variables, the required timing to
produce inventory may affect the absorption of production overhead and impact
gross margins as measured on a quarterly basis, when compared to manufacturing
operations involving different technologies, where production may occur on a
more even basis between periods.
Total operating costs and expenses (excluding cost of product sales,
purchased research and development, and costs of mergers) decreased by 17.1% to
$2,876,000 in the third quarter of 1996 compared to $3,468,000 for the same
quarter in 1995. Year-to-date these costs have decreased 18.6% from $11,856,000
in 1995 to $9,648,000 in 1996. These decreases in operating costs and expenses
arise from planned merger synergies and other economies and were accomplished
despite incurring costs related to running and combining the previously separate
operations of biosys and AgriDyne during the second and third quarters of 1996.
Research and development expenses were $1,246,000 for the third quarter
of 1996, as compared to $1,829,000 for the third quarter of 1996, a decrease of
31.9%. Research and development expenses for the nine months ended September 30,
1996 decreased to $4,339,000 from $5,658,000 incurred during the same period of
1995. The decreases were primarily due to completion or rationalization of
certain research projects and other cost control measures.
Marketing and selling expenses for the third quarter of 1996 decreased
10.0% to $821,000 as compared to $912,000 for the third quarter of 1995. For the
nine months ended September 30, 1996, marketing and selling expenses were
$2,570,000 versus $3,529,000 for the corresponding period of 1995, a decrease of
27.2%. These decreases relate to the net impact of consolidation of distribution
outlets and other efficiencies gained in the merger, and cost control measures.
General and administrative expenses were $809,000 for the third quarter
of 1996 as compared to $727,000 for the third quarter of 1995, an increase of
11.3%. General and administrative expenses for the nine months ended September
30, 1996 were $2,739,000 versus $2,669,000 for the nine months ended September
30, 1995. Significant cost reductions have been achieved in 1996 in consolidated
efficiencies following the CGI merger, particularly the consolidation into one
headquarters facility in August 1995. These cost reductions have been offset by
dual costs incurred in combining biosys' and AgriDyne's operations and increased
investment in human resources, quality assurance and investor relations.
At the time of the CGI merger announcement in December 1994, the
Company anticipated that an aggregate of approximately $4,100,000 in merger,
severance and relocation costs would be incurred by biosys and CGI related to
their combination. Through September 30, 1996, such costs amounted to
$4,524,000. As of September 30, 1996, all significant merger, severance and
relocation costs related to the CGI merger have been incurred.
At the time of the AgriDyne merger announcement on April 28, 1995, the
Company anticipated accounting for the merger as a pooling of interests. Under
this accounting method the Company was expensing costs related to the merger as
incurred. Through September 30, 1995, $452,000 of expense was recorded.
Subsequent to September 30, 1995, due to changes in facts and circumstances, the
Company determined that purchase accounting was the appropriate method of
accounting for the merger. Thus, all costs related to the merger incurred
subsequent to September 30, 1995 have been treated as additional purchase
consideration. Of the aggregate purchase price of $13,592,000, $3,717,000 has
been allocated to net tangible assets acquired, $6,000,000 to in-process
research and development and $3,875,000 to goodwill.
Liquidity and Capital Resources
- -------------------------------
biosys has been experiencing negative cash flow from operations and it
is expected that biosys will continue to experience negative operating cash flow
through the end of 1996 and potentially thereafter. Even with the cash and cash
equivalents of AgriDyne and the net proceeds from the Preferred Share Financing
(defined below) obtained during March 1996 it was projected that the funding of
future operations and payment of incurred liabilities would require further
infusion of capital. Despite certain funding and collaborative initiatives
pursued by the Company during the third quarter and prior periods, the Company
has not been successful in procuring adequate funds to satisfy creditor needs.
Contributing factors including weather related impact on revenue growth,
depressed mid-year stock market conditions and the dilutive implications arising
from the actual and potential conversions of the Preferred Shares (defined
below) into common shares have hindered the Company's initiatives.
As a consequence on September 27, 1996, the Company and one of its
subsidiaries, Crop Genetics International, (collectively the "Debtors") filed
voluntary petitions for relief under Chapter 11 of the Bankruptcy Code (the
"Filings") in order to protect themselves from their creditors. The Debtors are
presently operating as debtors-in-possession subject to the jurisdiction of the
United States Bankruptcy Court for the District of Maryland (the "Bankruptcy
Court"). Substantially all the Debtors' liabilities as of the date of the
Filings are subject to resolution under a plan of reorganization to be voted
upon by the Debtors' creditors and shareholders and confirmed by the Bankruptcy
Court. Schedules have been filed by the Debtors with the Bankruptcy Court
setting forth the assets and liabilities of the Debtors as of the date of the
Filings as shown by the Debtors' accounting records. Any differences between
amounts shown by the Debtors and claims filed by creditors will be investigated
and resolved. The amount and settlement terms for any such disputed liabilities
are subject to approval by the Bankruptcy Court. The adjustment of the total
liabilities of the Debtors remains subject to a Bankruptcy Court approved plan
of reorganization, and, accordingly, the ultimate amount such liabilities will
be settled for is not presently determinable. Pursuant to bankruptcy law, the
Debtors presently possess the exclusive right to file a plan of reorganization
through January 25, 1997.
While under protection of Chapter 11, the Debtors may sell or otherwise
dispose of assets, and liquidate or settle liabilities for amounts other than
those reflected in the accompanying consolidated financial statements. biosys is
actively pursuing simultaneous initiatives to sell, merge or otherwise dispose
of all or part of its assets to third parties, raise debtor-in-possession
financing or negotiate a financing package to permit emergence of the Company
from Chapter 11 in a reorganized structure. All such activities are subject to
the agreement of a plan of reorganization with the approval and confirmation of
the Bankruptcy Court.
If additional funds are raised by biosys through the issuance of equity
securities, securities convertible into or exercisable for equity securities, or
an equity securities exchange, the percentage ownership of the then current
shareholders of biosys will be reduced. biosys may issue an additional series of
preferred stock with rights, preferences or privileges senior to those of the
biosys Common Stock. biosys does not have any current commitments or
arrangements to obtain funding and there can be no assurance that any required
financing of biosys will be available on acceptable terms, if at all. If all or
part of the business assets of biosys are sold to third parties there can be no
assurance that the proceeds will be sufficient to meet the amounts owing to
creditors or make contributions to any shareholder. Any inability of biosys to
propose an acceptable plan of reorganization to the Bankruptcy Court may result
in the imposition of an alternative plan of reorganization proposed by a group
of creditors or shareholders, or the forced liquidation of the Company's assets
by the Bankruptcy Court.
Current operations are being funded by the use of existing cash
collateral as governed by the periodic agreement of the secured creditors and
the authority of the Bankruptcy Court. On November 1, 1996, the Bankruptcy Court
granted authority to use specifically defined funds to continue operations
through November 15, 1996. Based on current operating levels, excluding any
payment of administrative expenses related to the Filings as discussed below,
the Company believes it has sufficient cash resources to maintain operations
through the end of 1996, provided Bankruptcy Court approval is granted to use
such funds through that period. While there can be no assurance as to the
availability of, or Bankruptcy Court approval to secure, debtor-in-possession
financing, receipt of such financing would extend the ability to finance
operations pending submission of a plan of reorganization. Liabilities from
debtor-in-possession financing may be accorded a priority for repayment ahead of
other creditors. The foregoing does not contemplate payment of any
administrative expenses related to the Filings, which are being incurred from
September 27, 1996 forward. It is anticipated that these costs, which will be
significant, will be paid from the proceeds of any reorganization plan.
In August 1996, due to biosys' failure to maintain $4 million of net
tangible assets as required by the NASD bylaws governing continued listing on
the Nasdaq National Market, biosys received notice from Nasdaq that biosys'
Common Stock was being delisted from the Nasdaq National Market. biosys' Common
Stock is now traded by use of pink sheets in the Over-The-Counter market.
On March 26, 1996, biosys completed the sale of an aggregate of 780
shares of biosys Series A Convertible Redeemable Preferred Stock (the "Preferred
Shares") at $10,000 per share or an aggregate purchase price of $7.8 million,
which resulted in net proceeds of $7.25 million after the payment of placement
fees of approximately $550,000, to a group of institutional accredited investors
in a private placement (the "Preferred Share Financing"). In connection with the
issuance of the Preferred Shares, warrants, exercisable over a five-year term at
an exercise price of $6.75, to purchase up to 80,889 shares of biosys Common
Stock were issued to the placement agent and related parties.
The Preferred Shares may be converted into biosys Common Stock at a
conversion price which is the lower of (i) $6.75, or (ii) 85% of the average
closing bid price for the five trading days prior to the date the investor gives
notice of conversion. The Preferred Shares principal amount accretes at an
annual rate of 8% payable in stock upon conversion to biosys Common Stock. At
the current depressed share price of biosys Common Stock, conversion of the
outstanding Preferred Shares into biosys Common Stock would result in
significant dilution to the current shareholders of biosys. As a result of the
Filings, conversions of the Preferred Shares have been halted. In addition,
biosys has violated the terms of the agreements governing the Preferred Share
Financing due to the Filings. The value to be received by the holders of the
outstanding Preferred Shares, if any, through principal repayment or conversion
to biosys Common Stock, is subject to resolution under a plan of reorganization
to be voted upon by the Debtors' creditors and shareholders and confirmed by the
Bankruptcy Court.
biosys currently has a lease financing arrangement, as amended most
recently on August 13, 1996 for existing equipment in the amount of up to
$2,500,000, subject to regular monthly repayment, under which biosys had
approximately $1,395,000 outstanding as of September 30, 1996 (the "Lease
Financing"). As a result of the Filings, biosys is in default under the Lease
Financing. However, this liability is subject to resolution under a plan of
reorganization to be voted upon by the Debtors' creditors and shareholders and
confirmed by the Bankruptcy Court. To the extent that this liability is secured,
it may be repaid prior to payment of any unsecured liabilities in a
reorganization plan.
biosys had a working capital line of credit with a bank entered into
during 1995, as amended most recently on May 13, 1996 (the "Line of Credit
Facility") that allowed for borrowings of up to $5,250,000. On July 26, 1996,
$500,000 of the Line of Credit Facility was repaid and the bank agreed to the
continuation of the remaining $3,500,000 of indebtedness pursuant to the terms
of two secured promissory notes of $3,000,000 and $500,000 respectively, and
preexisting security documentation (the "Loan Notes") as successor to the Line
of Credit Facility. The Loan Notes were originally due and payable on August 15,
1996 but were extended to September 30, 1996. As a result of the Filings, biosys
is in default under the Loan Notes. However, this liability is subject to
resolution under a plan of reorganization to be voted upon by the Debtors'
creditors and shareholders and confirmed by the Bankruptcy Court. To the extent
that this liability is secured, it may be repaid prior to payment of any
unsecured liabilities in a reorganization plan.
The Loan Notes and the extension thereof required a commitment fee of
$12,400 and issuance to the lender of warrants to purchase 173,333 shares of
biosys Common Stock at an exercise price of the lesser of $3 per share or the
lowest closing price per share of biosys Common Stock during the existence of
the Loan Notes . In addition, pre-existing warrants to purchase 124,385 shares
of biosys Common Stock held by the bank were repriced to the same exercise price
as the warrants issued in connection with the Loan Notes.
CGI has a credit facility (the "CGI Credit Facility"), as modified on
May 1, 1996, with First National Bank of Maryland pursuant to which it received
$3,400,000 in debt financing. The CGI Credit Facility is guaranteed by the
Maryland Industrial Development Financing Authority. At September 30, 1996
approximately $2,449,000 was outstanding under this facility. As a result of the
Filings, biosys is in default under the CGI Credit Facility. However, this
liability is subject to resolution under a plan of reorganization to be voted
upon by the Debtors' creditors and shareholders and confirmed by the Bankruptcy
Court. To the extent that this liability is secured, it may be repaid prior to
payment of any unsecured liabilities in a reorganization plan.
The Price Waterhouse LLP report dated March 29, 1996, on biosys' 1995
consolidated financial statements, contains an explanatory paragraph regarding
biosys' ability to continue as a going concern.
Merger Expenses
- ---------------
Total costs associated with the CGI and AgriDyne mergers amounted to
$4,976,000 as of September 30, 1996. As of that date, management believes all
significant merger, severance and relocation costs related to the mergers have
been incurred.
biosys' management believes that the future cost savings which are
expected to be realized from the consolidation of the companies, and the
attendant elimination of duplicate employee positions, functions and facilities,
and the additional product sales and contribution ultimately will be greater
than the aggregate merger-related costs.
Capital Equipment Expenditures
- ------------------------------
During the quarter ended September 30, 1996, the Company expended
approximately $102,000 for pilot plant, capital equipment, furniture, and
leasehold improvements.
PART II - OTHER INFORMATION
---------------------------
Item 1 . Legal Proceedings
None
Item 2. Changes in Securities
(a) None
(b) In the event of any liquidation, dissolution
or winding up of the Company, either
voluntarily or involuntarily, the holders of
the Company's Series A Preferred Stock are
entitled to receive, prior to and in
preference to any distribution to the
holders of the Company's Common Stock, an
amount per share equal to the sum of $10,000
for each outstanding share of Series A
Preferred Stock and an amount equal to 8% of
the original issue price per annum for the
period that has passed since the date of
issuance of any Series A Preferred Stock.
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
2.1 Asset Purchase Agreement among biosys, inc., AgriSense,
Provesta Corporation and Dow Corning Enterprises, Inc.,
dated April 30, 1993. (6)
2.2 Agreement and Plan of Merger dated as of December 8, 1994
among biosys, inc., CGI Merger Co., Inc. and Crop Genetics
International Corporation. (9), (10)
2.3 Agreement and Plan of Merger dated as of April 28, 1995
among biosys, inc., Ag Merger Company, Inc., and AgriDyne
Technologies, Inc. (13)
2.4 Amendment to Agreement and Plan of Merger, dated August 1,
1995, among biosys, inc., Ag Merger Company, Inc., and
AgriDyne Technologies, Inc. (16)
2.5 Second Amendment to Agreement and Plan of Merger, dated
October 30, 1995, among biosys, inc., Ag Merger Company,
Inc., and AgriDyne Technologies, Inc. (16)
2.6 Third Amendment to Agreement and Plan of Merger, dated
November 16, 1995, among biosys, inc., Ag Merger Company,
Inc. and AgriDyne Technologies, Inc. (16)
2.7 Fourth Amendment to Agreement and Plan of Merger, dated
December 29, 1995, among biosys, inc., Ag Merger Company,
Inc. and AgriDyne Technologies, Inc. (16)
3.1 Agreement and Plan of Merger, dated May 11, 1994, containing
the Certificate of Incorporation of biosys, inc. (8)
3.2 Bylaws of biosys, inc. (8)
3.3 Certificate of Amendment of Certificate of Incorporation of
biosys, inc., filed March 30, 1995. (16)
3.4 Certificate of Amendment of Certificate of Incorporation of
biosys, inc., filed March 15, 1996. (17)
3.5 Certificate of Designation of Preferences and Rights of
Series A Preferred Stock of biosys, inc., filed March 22,
1996. (17)
4.1 Series C Preferred Stock Purchase Agreement between biosys,
inc. and certain investors dated December 23, 1991. (1)
10.1 Master Lease Agreement dated August 14, 1991 between biosys,
inc. and Western Technology Investment and various
amendments to the Master Lease Agreement. (1)
10.2 Master Lease Agreement dated December 29, 1988 between
biosys, inc. and John Hancock Leasing and various amendments
to the Master Lease Agreement. (1)
10.3 Private Label Marketing Agreement dated August 7, 1991
between biosys, inc. and Chevron Chemical Company. (1), (2)
10.4 Private Label Marketing Agreement dated March 26, 1991
between biosys, inc. and CIBA-GEIGY Corporation. (1), (2)
10.5 Description of biosys' Sales Incentive Compensation
Arrangements. (1)
10.6 Form of Director and Officer Indemnification Agreement. (1)
10.7 Distribution Agreement dated January 14, 1991 between
biosys, inc. and Dr. R. Maag. (1), (2)
10.8 Toll Manufacturing Agreement dated December 9, 1991 between
biosys, inc. and Archer-Daniels-Midland Company. (1), (2)
10.9 Director and Consulting Agreement between biosys, inc. and
Thomas Parton dated July 9, 1991. (1)
10.10 Director and Consulting Agreement between biosys, inc. and
Dr. Alexander Cross, D.Sc. dated January 30, 1990. (1)
10.11 biosys First Amended and Restated 1987 Stock Option Plan.(3)
10.12 Exclusive Marketing Agreement dated April 6, 1992 between
biosys, inc. and CIBA-GEIGY Limited. (4), (5)
10.13 Joint Development Agreement effective October 1, 1992
between biosys, inc. and Sandoz Agro, Inc. (4), (5)
10.14 Contract Manufacturing Agreement dated December 2, 1993,
between biosys, inc. and Archer-Daniels-Midland Company.
(4), (7)
10.15 Master Equipment Lease Agreement dated as of December 21,
1994, between biosys, inc. and Venture Lending and Leasing,
Inc. (10)
10.16 Lease Schedule No. 8-001 to Master Equipment Lease Agreement
dated December 23, 1994 between biosys, inc. and Venture
Lending and Leasing, Inc. (10)
10.17 Warrant dated December 23, 1994 from biosys, inc. to Venture
Lending and Leasing, Inc.(10)
10.18 Security Agreement dated December 21, 1994, by biosys, inc.
in favor of Venture Lending and Leasing, Inc. (10)
10.19 Trademark Collateral Assignment dated December 21, 1994,
between biosys, inc. and Venture Lending and Leasing, Inc.
(10)
10.20 Patent Collateral Assignment dated December 21, 1994,
between biosys, inc. and Venture Lending and Leasing, Inc.
(10)
10.21 Letter dated December 23, 1994, between Imperial Bank and
biosys, inc. (10)
10.22 Letter dated December 20, 1994 between biosys, inc. and
Sandoz Agro, Inc. (10)
10.23 Letter to biosys, inc. from Joseph W. Kelly dated December
7, 1994. (10)
10.24 Letter to biosys, inc. from Peter S. Carlson dated December
7, 1994. (10)
10.25 Letter to biosys, inc. from James H. Davis dated December 6,
1994. (10)
10.26 Proposal Letter dated March 21, 1995, between biosys, inc.
and Imperial Bank. (11)
10.27 Security and Loan Agreement dated January 30, 1995, between
biosys, inc. and Imperial Bank. (11)
10.28 Warrant to Purchase Stock dated January 26, 1995, between
biosys, inc. and Imperial Bank. (11)
10.29 General Security Agreement dated January 30, 1995, between
biosys, inc. and Imperial Bank. (11)
10.30 biosys, inc. Second Amended and Restated 1987 Stock Option
Plan, as amended December 7, 1994. (11)
10.31 Agreement, dated March 31, 1995, between biosys, inc. and
Joseph W. Kelly. (11)
10.32 Agreement, dated March 31, 1995, between biosys, inc. and
Peter S. Carlson (11).
10.33 Agreement, dated March 31, 1995, between biosys, inc. and
James H. Davis. (11).
10.34 Amendment #1 to Master Equipment Lease Agreement dated March
29, 1995, between biosys, inc. and Venture Lending and
Leasing, Inc. (11)
10.35 Amendment #2 to Master Equipment Lease Agreement dated May
30, 1995, between biosys, inc. and Venture Lending and
Leasing, Inc. (12)
10.36 Modification Agreement dated May 26, 1995, between biosys,
inc., Crop Genetics International Corporation, Maryland
Industrial Development Financing Authority, and the First
National Bank of Maryland. (12)
10.37 Guaranty Agreement dated May 26, 1995, between biosys, inc.,
Crop Genetics International Corporation, Maryland Industrial
Development Financing Authority, and the First National Bank
of Maryland. (12)
10.38 Pledge and Security Agreement dated May 26, 1995, between
biosys, inc., Crop Genetics International Corporation,
Maryland Industrial Development Financing Authority, and the
First National Bank of Maryland. (12)
10.39 Amendment #3 to Master Equipment Lease Agreement dated July
25, 1995, between biosys, inc., and Venture Lending and
Leasing, Inc. (15)
10.40 Amendment #1 to the Security and Loan Agreement dated July
21, 1995 between biosys, inc., and Imperial Bank. (15)
10.41 Amendment #2 to the Security and Loan Agreement dated
September 13, 1995 between biosys, inc., and Imperial Bank.
(15)
10.42 Warrant dated September 1, 1995, from biosys, inc. to
Imperial Bank. (15)
10.43 Security and Loan Agreement, dated September 15, 1995,
between biosys, inc. and Imperial Bank. (15)
10.44 Second Modification Agreement dated October 2, 1995, between
biosys, inc., Crop Genetics International Corporation,
Maryland Industrial Development Financing Authority, and the
First National Bank of Maryland. (15)
10.45 Agreement, dated September 15, 1995, between biosys, inc.
and Zeneca Limited. (4)(15)
10.46 Amendment #3 to the Security and Loan Agreement and Warrant
Agreement dated November 14, 1995 between biosys, inc. and
Imperial Bank. (16)
10.47 Form of Convertible Promissory Note dated November 10, 1995.
(16)
10.48 Placing Agreement dated November 14, 1995, between biosys,
inc. and Index Security S.A. (16)
10.49 Amendment #4 to Master Equipment Lease Agreement dated
November 14, 1995 between biosys, inc. and Venture Lending
and Leasing, Inc. (16)
10.50 Supply and Marketing Agreement dated November 7, 1995
between biosys, inc. and International Specialty Products.
(16)
10.51 Common Stock Purchase Agreement dated December 22, 1995
among biosys, inc. and certain investors. (16)
10.52 Amendment #4 to the Security and Loan and Warrant Agreement
dated December 20, 1995 between biosys, inc. and Imperial
Bank. (16)
10.53 Amendment #5 to the Master Equipment Lease Agreement dated
December 20, 1995 between biosys, inc. and Venture Lending
and Leasing, Inc. (16)
10.54 Letter Agreement dated as of November 30, 1995 among Crop
Genetics International Corporation, biosys, inc., Maryland
Industrial Development Financing Authority, and the First
National Bank of Maryland. (16)
10.55 Letter Agreement dated as of December 5, 1995 among Crop
Genetics International Corporation, biosys, inc., Maryland
Industrial Development Financing Authority and the First
National Bank of Maryland. (16)
10.56 Form of Regulation D Subscription Agreements entered into
March 22, 1996 between biosys, inc. and the investors
executing such Agreements (the "Investors). (17)
10.57 Form of Registration Rights Agreement, entered into March
22, 1996, among biosys, inc., Swartz Investments, LLC and
the Investors. (17)
10.58 Warrants, dated March 21, 1996 from biosys, inc. to certain
holders named therein. (17)
10.59 Letter Agreement dated as of January 31, 1996 among Crop
Genetics International Corporation, biosys, inc., Maryland
Industrial Development Financing Authority, and the First
National Bank of Maryland. (17)
10.60 Letter Agreement dated as of March 15, 1996, among Crop
Genetics International Corporation, biosys, inc., Maryland
Industrial Development Financing Authority, and the First
National Bank of Maryland. (17)
10.61 Amendment #5 to the Security and Loan and Warrant Agreement
dated February 9, 1996, between biosys, inc. and Imperial
Bank. (17)
10.62 Amendment #6 to the Security and Loan and Warrant Agreement
dated March 12, 1996, between biosys, inc. and Imperial
Bank. (17)
10.63 Amendment #6 to the Master Equipment Lease Agreement dated
January 15, 1996, between biosys, inc. and Venture Lending
and Leasing, Inc. (17)
10.64 Amendment #7 to the Master Equipment Lease Agreement dated
February 29, 1996, between biosys, inc. and Venture Lending
and Leasing, Inc. (17)
10.65 Letter Agreement dated as of April 1, 1996, among Crop
Genetics International Corporation, biosys, inc., Maryland
Industrial Development Financing Authority, and
the First National Bank of Maryland. (18)
10.66 First Amendment to Contract Manufacturing Agreement between
biosys, inc. and Archer-Daniels-Midland Company. (18)
10.67 Sub-Lease Agreement between biosys, inc., Crop Genetics
International Corporation, and Gene Logic, Inc. dated May 2,
1996. (18)
10.68 Third Modification Agreement dated May 1, 1996, between
biosys, inc., Crop Genetics International Corporation,
Maryland Industrial Development Financing Authority, and the
First National Bank of Maryland. (18)
10.69 Amendment #7 to the Security and Loan and Warrant Agreement
dated May 13, 1996, between biosys, inc. and Imperial Bank.
(18)
10.70 Amendment #8 to the Master Equipment Lease Agreement dated
May 13, 1996, between biosys, inc. and Venture Lending and
Leasing, Inc. (18)
10.71 $3,000,000 Note dated June 5, 1996, between biosys, inc. and
Imperial Bank.(19)
10.72 $500,000 Note dated July 26, 1996, between biosys, inc. and
Imperial Bank. (19)
10.73 Amendment #9 to the Master Equipment Lease Agreement dated
August 13, 1996, between biosys, inc. and Venture Lending
and Leasing, Inc. (19)
10.74 Letter Agreement dated as of August 13, 1996, between
biosys, inc. and Imperial Bank
11.1 Statement regarding computation of net loss per share.
21.1 Subsidiaries of biosys. (17)
- --------------------
(1) Filed as an exhibit to biosys' Registration Statement on Form S-1 (No.
33-45100 filed January 15, 1992), and incorporated herein by
reference.
(2) Portions of this exhibit have been omitted (which omissions have been
circled in the filed exhibits) and filed separately with the
Commission along with a request for confidential treatment of such
portions pursuant to Rule 406 under the Securities Act of 1933, as
amended.
(3) Compensatory Plan.
(4) Portions of this exhibit have been omitted (which omissions have been
circled in the filed exhibits) and filed separately with the
Commission along with a request for confidential treatment of such
portions pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.
(5) Filed as an exhibit to biosys' Annual Report on Form 10-K filed with
the Commission on March 31, 1993, and incorporated herein by
reference.
(6) Filed as an exhibit to biosys' current Report on Form 8-K filed with
the Commission on May 13, 1993, and incorporated herein by reference.
(7) Filed as an exhibit to biosys' Annual Report on Form 10-K filed with
the Commission on March 30, 1994, and incorporated herein by
reference.
(8) Filed as an exhibit to biosys' Form 10-Q filed with the Commission on
August 10, 1994, and incorporated herein by reference.
(9) Filed as an exhibit to biosys' Current Report on Form 8-K, filed with
the Commission on December 20, 1994, and incorporated herein by
reference.
(10) Filed as an exhibit to biosys' Registration Statement on Form S-4 (No.
33-89498) filed with the Commission on February 13, 1995, and
incorporated herein by reference.
(11) Filed as an exhibit to biosys' Annual Report on Form 10-K filed with
the Commission on March 31, 1995, and incorporated herein by
reference.
(12) Filed as an exhibit to biosys' Form 10-Q filed with the Commission on
May 12, 1995, and incorporated herein by reference.
(13) Filed as an exhibit to biosys' Current Report on Form 8-K, filed with
the Commission on May 5, 1995, and incorporated herein by reference.
(14) Filed as an exhibit to biosys' Form 10-Q filed with the Commission on
August 14, 1995, and incorporated herein by reference.
(15) Filed as an exhibit to biosys' Form 10-Q filed with the Commission on
November 14, 1995, and incorporated herein by reference.
(16) Filed as an exhibit to biosys' Registration Statement on Form S-4 (No.
33-00496) filed with the Commission on February 13, 1996, and
incorporated herein by reference.
(17) Filed as an exhibit to biosys' Annual Report on Form 10-K filed with
the Commission on April 1, 1996, and incorporated herein by reference.
(18) Filed as an exhibit to biosys' Form 10-Q filed with the Commission on
May 15, 1996, and incorporated herein by reference.
(19) Filed as an exhibit to biosys' Form 10-Q filed with the Commission on
August 14, 1996, and incorporated herein by reference.
B. REPORTS ON FORM 8-K:
There were no reports on Form 8-K filed during the quarter ended
September 30, 1996.
<PAGE>
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.
biosys, inc.
Date: November 14, 1996 By: /s/ Michael R.N. Thomas
---------------------------- ---------------------------
Michael R.N. Thomas
Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
EXHIBIT 11.1
biosys, inc.
COMPUTATION OF NET LOSS PER SHARE (1)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
Net loss $(2,851,000) $(3,975,000) $(14,395,000) $(13,821,000)
=========== =========== ============ ============
Weighted average shares
outstanding:
Common stock 7,868,686 4,705,306 7,105,633 4,506,980
Net loss per share $ (0.36) $ (0.84) $ (2.03) $ (3.07)
=========== =========== ============ ============
- --------------------------
(1) This Exhibit should be read in conjunction with Note 7 of Notes
to Consolidated Financial Statements.
Imperial Bank
- ----------------------------------------------------------------------
Special Markets Group - 2460 Sand Hill Road - Suite 102 - Menlo Park, CA 94025
August 13, 1996
Mr. Michael Thomas
biosys, inc.
10150 Old Columbia Road
Columbia, MD 21046
Dear Mike:
As I mentioned by phone, Imperial Bank, based on the expectation that additional
financing may be available to the Company in the near future, has approved the
following extensions of the commitments to biosys, inc., subject to the matters
below and authorization to charge the biosys account for interest due to date:
Loan 1: $3,000,000 loan
Maturity: Extended to September 30, 1996
Purpose: For general corporate purposes.
Pricing: 1. Interest Rate: Imperial Bank Prime Rate + 3% per annum.
2. Extension fee: $5,150 due and payable upon acceptance of this
letter by charge to account.
3. Warrants: a new five year warrant for 40,000 common shares,
exercisable at holders option at $2.50/share or the lowest
closing prive per share of biosys during the existence of this
loan or six months from the date hereof, whichever is longer,
on Bank's standard warrant form and all existing warrants shall
be correspondingly amended to the same pricing.
Collateral: Existing collateral and as provided below.
Loan 2: $5,000,000 loan
Maturity: Extended to September 30, 1996
Purpose: For general corporate purposes.
Pricing: 1. Interest Rate: Imperial Bank Prime Rate + 3% per annum.
2. Extension Fee: $2,250 due and payable upon acceptance of this
letter by charge to account.
3. Warrant: a new five year warrant for 20,000 common shares,
exercisable at holders option at $2.50/share or the lowest
closing price per share of biosys during the existence of this
loan or six months from the date hereof, whichever is longer,
on Bank's standard warrant form and all existing warrants shall
be correspondingly amended to the same pricing.
Collateral: Existing collateral plus, at Borrower's expense by charge to
account, a perfected security interest documented by Bank's
outside counsel in all of Borrower's intellectual property,
including all patents pending as expediously as possible.
Compliance: There are no existing financial covenants or borrowing base
requirement in connection with the loans and we are not aware
of any defaults. We continue to expect receipt of monthly
company prepared financial information within 25 days of month end.
If the above is agreeable to you, please fax back a signed copy of this letter
which will confirm your acceptance of these terms, authorize us to commence
documentation of the additional security and warrants for these extensions of
maturity and charge the biosys checking account for the loan fee and interest
due.
/s/ James B. Rutter /s/ Edgerton Scott II
- --------------------- ----------------------
James Rutter Edgerton Scott, II
Senior Vice Pres. SVP & Manager
Special Markets Special Markets
Agreed and accepted:
biosys, inc.
by: /s/ Michael Thomas
- ------------------------
Title: VP & CFO
Date: 8/14/96
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the condensed
consolidated financial condition at September 30, 1996 (unaudited) and the
condensed consolidated statement of income for the nine months ended September
30, 1996 (unaudited) and is qualified in its entirety by the reference to such
financial statements.
</LEGEND>
<CIK> 0000883076
<NAME> biosys, inc.
<MULTIPLIER> 1,000
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Sep-30-1996
<EXCHANGE-RATE> 1.000
<CASH> 755
<SECURITIES> 0
<RECEIVABLES> 3,419
<ALLOWANCES> 0
<INVENTORY> 4,531
<CURRENT-ASSETS> 9,617
<PP&E> 16,064
<DEPRECIATION> 9,679
<TOTAL-ASSETS> 20,694
<CURRENT-LIABILITIES> 17,061
<BONDS> 0
0
312
<COMMON> 9
<OTHER-SE> 3,312
<TOTAL-LIABILITY-AND-EQUITY> 20,694
<SALES> 18,514
<TOTAL-REVENUES> 19,238
<CGS> 16,732
<TOTAL-COSTS> 32,438
<OTHER-EXPENSES> 44
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,208
<INCOME-PRETAX> (14,395)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,395)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,395)
<EPS-PRIMARY> (2.03)
<EPS-DILUTED> (2.03)
</TABLE>
