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
--------------
[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended June 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.
(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
(Address of principal executive offices) (Zip Code)
410-381-3800
(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: 7,728,163 shares of the Company's
Common Stock (par value $0.001) were outstanding as of July 31, 1996.
<PAGE>
biosys, inc.
Condensed Consolidated Balance Sheets
(in thousands, except share data)
(unaudited)
June 30, December 31,
1996 1995
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 2,659 $ 1,755
Accounts receivable 3,875 3,009
Inventories 5,538 4,086
Prepaid expenses and other current assets 814 500
--------- --------
Total current assets 12,886 9,350
Property and equipment, net 6,579 6,421
Other assets, net 796 586
Goodwill 3,875 ---
--------- --------
$24,136 $ 16,357
======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 7,506 $ 4,767
Short-term debt 4,000 5,250
Accrued expenses 1,423 3,309
Current portion of long-term obligations 1,423 782
Deferred credits 832 931
--------- --------
Total current liabilities 15,184 15,039
--------- --------
Long-term obligations, less current portion 2,582 3,642
--------- --------
Total liabilities 17,766 18,681
--------- --------
Commitments and contingencies
Shareholders' equity (deficit):
Convertible preferred stock, $.001 par
value;5,000,000 shares authorized, 780
shares issued and outstanding 156 ---
Common stock, $.001 par value; 30,000,000
shares authorized, 7,494,200 and 5,598,828
issued and outstanding 7 6
Additional paid-in-capital 146,400 126,315
Accumulated deficit (140,136) (128,592)
Cumulative translation adjustment (57) (53)
--------- ---------
Total shareholders' equity (deficit) 6,370 (2,324)
--------- ---------
$24,136 $ 16,357
======== =========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
biosys, inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
Revenues:
Product sales ..................... $ 6,326 $ 8,402 $ 13,571 $ 14,422
Contract research and development . 306 -- 530 --
-------- -------- -------- --------
Total revenues ................. 6,632 8,402 14,101 14,422
Operating costs and expenses:
Cost of product sales ............. 6,123 7,127 11,934 12,357
Research and development .......... 1,622 1,723 3,093 3,829
Marketing and selling ............. 944 1,385 1,749 2,617
General and administrative ........ 1,013 931 1,930 1,942
Purchased research and development -- -- 6,000 --
Costs of mergers .................. -- 654 58 3,196
-------- -------- -------- --------
Total operating costs and expenses 9,702 11,820 24,764 23,941
Loss from operations ................. (3,070) (3,418) (10,663) (9,519)
Interest and other expense ........... (555) (344) (923) (439)
Interest and other income ............ 31 21 42 112
-------- -------- -------- --------
Net loss ............................. $ (3,594) $ (3,741) $(11,544) $ (9,846)
======== ======== ======== ========
Net loss per share (Note 5) .......... $ (0.48) $ (0.80) $ (1.72) $ (2.23)
======== ======== ======== ========
Weighted average common shares
outstanding ........................ 7,488 4,692 6,720 4,407
======== ======== ======== ========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
biosys, inc.
Condensed Consolidated Statements Of Cash Flows
(in thousands)
(unaudited)
Six Months Ended
June 30,
1996 1995
---- ----
Cash flows from operating activities:
Net loss ...................................... .... $(11,544) $ (9,846)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation and amortization ....................... 684 1,088
Loss on disposal of assets .......................... -- 148
Purchased research and development .................. 6,000 --
Warrants issued for loan modification ............... 56 --
Changes in assets and liabilities:
Accounts receivable ............................ (564) (1,891)
Inventories .................................... (761) (781)
Prepaid expenses and other current assets ...... 137 151
Other assets ................................... 382 3,060
Deferred credits ............................... (99) --
------- --------
Net cash used in operating activities ....... (6,062) (7,665)
-------- --------
Cash flows from investing activities:
Purchase of property and equipment .................. (638) (224)
Cash acquired in AgriDyne acquisition ............... 2,041 --
Proceeds from sales of assets and short-term
investments....................................... -- 134
Net cash provided by(used in)investing
activities................................... 1,403 (90)
------- --------
Cash flows from financing activities:
Issuance of common stock, net of issuance costs ...... 7 5
Issuance of preferred stock, net of issuance costs ... 7,254 --
Payments on debt ..................................... (1,426) (595)
Proceeds from issuance of debt ....................... -- 1,910
Principal payments on capitalized lease obligations .. (243) (276)
-------- --------
Net cash provided by financing activities .... 5,592 1,044
-------- -------
Effect of exchange rate changes on cash ................. (29) (32)
-------- -------
Net increase (decrease) in cash and cash equivalents .... 904 (6,743)
Cash and cash equivalents at beginning of period ........ 1,755 8,377
-------- -------
Cash and cash equivalents at end of period .............. $ 2,659 $ 1,634
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest ............. $ 827 $ 422
======== ========
Supplemental disclosure of non-cash financing and
investing activities:
Accretion of preferred stock dividends ............ $ 155 $ --
Common stock issued for acquisition of AgriDyne .... $ 12,925 $ --
See accompanying notes to condensed consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
biosys, inc.
Condensed Consolidated Statement Of Shareholders' Equity (Deficit)
Six Months Ended June 30 1996
(in thousands, except share data)
(unaudited)
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 3) -- -- 1,888,121 1 12,924 -- -- 12,925
Issuance of preferred stock .... 780 1 -- -- 7,253 -- -- 7,254
Accretion of preferred stock
dividend........................ -- 155 -- -- (155) -- -- --
Issuance of common stock upon
exercise of options and issuance
of common stock warrants ....... -- -- 7,251 -- 63 -- -- 63
Net Loss........................ -- -- -- -- -- (11,544) -- (11,544)
Translation adjustment ........ -- -- -- -- -- -- (4) (4)
--- ------ --------- -------- -------- ------- -------- ---------
Balance at June 30, 1996 ...... 780 $ 156 7,494,200 $ 7 $ 146,400 $(140,136) $ (57) $ 6,370
=== ======= ========== ======== ========= ========== ======== ========
See accompanying notes to condensed consolidated financial statements
</TABLE>
<PAGE>
biosys, inc.
Notes to Condensed Consolidated Financial Statements
Six Months Ended June 30, 1996
(unaudited)
Note 1. The above financial information reflects all adjustments
(consisting solely of normal recurring adjustments) which are,
in the opinion of management of biosys, inc. ("biosys" or the
"Company"), 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 condensed
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 2. 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 condensed consolidated financial statements
and related footnotes have been adjusted to reflect the
Reverse Stock Split.
Note 3. 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 six months ended June
30, 1996 and 1995, merger, severance and relocation costs of
$58,000 and $2,898,000, respectively, were incurred by biosys
related to the CGI merger. As of June 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 4. Inventories consisted of the following:
June 30, December 31,
1996 1995
Raw materials ........ $2,679,000 $2,576,000
Work-in-process ...... 536,000 225,000
Deferred growing costs 765,000 471,000
Finished goods ....... 1,558,000 814,000
---------- ----------
$5,538,000 $4,086,000
---------- ----------
Note 5. Net loss per share has been computed using the weighted
average number of common shares outstanding during each
period presented.
<PAGE>
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
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, 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 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 for the second quarter of 1996 were $6,632,000 compared
to $8,402,000 for the second quarter of 1995, a decrease of 21.1%. Product sales
were $6,326,000 in the second quarter of 1996, 24.7% less than product sales of
$8,402,000 in the same period in 1995. The decrease in revenues is attributable
to earlier delivery in 1996 of pheromone product to fulfill a recurring annual
order from Egypt and related parties, and unusually wet, cool spring weather
conditions in the U.S. in 1996. biosys, for the third consecutive year, was
granted a significant tender award related to the control of pink bollworm in
the Egyptian cotton crop. The timing of product delivery was such that most of
the Egyptian revenues in 1996 occurred in the first quarter, with only $900,000
in the second quarter, while in 1995 a majority, $3,500,000, of such revenues
were earned in the second quarter. Total revenues for the six months ended June
30, 1996 decreased 2.2% to $14,101,000 from total revenues of $14,422,000 in
1995. A major reason for this slight net decrease was the unusually wet, cool
spring weather conditions in 1996, which significantly impacted the U.S.consumer
market. This shortfall was partially offset by gains in other markets.
biosys achieved a gross margin on product sales of $203,000, or 3.2%,
for the second quarter ended June 30, 1996, versus a gross margin of $1,275,000
or 15.2% for the second quarter of 1995. For the first six months of 1996,
biosys achieved a gross margin on product sales of $1,637,000 or 12.1% versus a
gross margin of $2,065,000 or 14.3% for the first half of 1995. The decrease in
gross margin is attributable to the 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' fixed costs will be reduced 40% 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 should 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 11.4% to
$3,579,000 in the second quarter of 1996 compared to $4,039,000 for the same
quarter in 1995. Year-to-date these costs have decreased 19.3% from $8,388,000
in 1995 to $6,772,000 in 1996. These decreases in operating costs and expenses
were accomplished despite incurring costs related to running and combining the
previously separate operations of biosys and AgriDyne during the second quarter
of 1996.
Research and development expenses were $1,622,000 for the second
quarter of 1996, as compared to $1,723,000 for the second quarter of 1995, a
decrease of 5.9%. Research and development expenses for the six months ended
June 30, 1996 decreased to $3,093,000 from $3,829,000 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 second quarter of 1996 decreased
31.8% to $944,000 as compared to $1,385,000 for the second quarter of 1995. For
the six months ended June 30, 1996, marketing and selling expenses were
$1,749,000 versus $2,617,000 for the corresponding period of 1995, a decrease of
32.2%. 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 $1,013,000 for the second
quarter of 1996 as compared to $931,000 for the second quarter of 1995, an
increase of 8.8%. General and administrative expenses for the six months ended
June 30, 1996 were $1,930,000 versus $1,942,000 for the six months ended June
30, 1995. Significant cost reductions have been achieved in 1996 in consolidated
efficiencies following the CGI merger, particularly the consolidation into one
headquarter's 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 June 30, 1996, such costs amounted to $4,524,000. As
of June 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 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 is 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, the net proceeds from the Preferred Share Financing
(defined below), and projected improvements in cash flow from operations, the
funding of future operations will require further infusion of capital. Based on
its current operating levels, the Company believes that it has sufficient cash
resources to maintain operations into early September 1996. biosys is actively
pursuing a variety of funding initiatives. There can be no assurances additional
financing will be obtained in the short-term or thereafter or that adequate
revenue growth and reduction of operating losses will be achieved, and even if
they are, management of biosys may choose additionally to supplement the
Company's cash position. Potential sources of additional funding include private
equity financing, mergers, collaborative research or marketing arrangements or
other strategic initiatives. Under the terms of the Loan Notes (defined below),
CGI Credit Facility (defined below), and Lease Financing (defined below),
approval is required before biosys may enter into any merger or acquisition or
enter into a major debt agreement. Under the terms of the Preferred Share
Financing, approval is required before biosys may enter into any preferred
shares financing and may be required under certain circumstances before biosys
may enter into any merger or acquisition. 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 stockholders 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 commitment or arrangement to obtain funding and there
can be no assurance that any required financing of biosys will be available on
acceptable terms, if at all. The unavailability of any required financing, the
inability to renegotiate current debt financing arrangements, required to be
renegotiated by the terms thereof (as described below), or the risks affecting
financial performance referenced above could prevent or delay the continued
development and marketing of the products of biosys, could result in
cancellation of key operating contracts, could require curtailment or sale of
operations of biosys and could result in the bankruptcy or insolvency of biosys.
On March 26, 1996, biosys completed the sale of an aggregate of 780
shares of biosys Series A 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"). The Preferred Shares were offered
and sold in reliance on the exemption from registration under the Securities Act
set forth in Regulation D under the Securities Act. In connection with the
issuance of the Preferred Shares, warrants to purchase up to 80,889 shares of
biosys Common Stock were issued to the placement agent and related parties (the
"Warrants"). The Warrants are exercisable over a five-year term and have an
exercise price of $6.75. In accordance with the registration rights agreements
between biosys and the purchasers of the Preferred Shares, biosys effected a
"shelf" registration of the Common Stock issuable upon conversion of the
Preferred Shares and, exercise of the Warrants, and will use its best efforts to
keep such registration statement effective for up to three years after the
closing.
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 shall automatically be converted into
biosys Common Stock, if not previously converted, on March 22, 1999. The
Preferred Shares principal amount accretes at an annual rate of 8%, payable in
stock upon conversion to biosys Common Stock. The Preferred Shares may be
redeemed at the option of the Company at the time of conversion at a price that
would give the investor the same return as would have been received had the
investor converted on the day the redemption occurs and sold the Common Stock
issued upon conversion. biosys also may, at its option, redeem the Preferred
Shares commencing at any time after March 26, 1997 at a price per share equal to
a specified percentage, commencing at 130% and declining to 115% in 1999, of the
original purchase price plus all accrued and unpaid accretion.
In April 1996 the Company received an oral inquiry from a Nasdaq
representative requesting that the Company provide assurance to Nasdaq that the
issuance of Common Stock upon conversion of the Preferred Shares sold in the
Preferred Share Financing would comply with the requirement in the NASD bylaws
governing continuance on the Nasdaq National Market that stockholder approval be
obtained prior to the issuance of common stock at a price less than the greater
of book or market value which equals 20% or more of a company's outstanding
common stock (the "Nasdaq 20% Rule"). The Company has submitted a written
response to Nasdaq indicating that, in the event the cumulative number of shares
of Common Stock issued or issuable pursuant to notices of conversion delivered
by holders of the Preferred Shares during the three-year period ending on May
22, 1999 (the date upon which the Preferred Shares are automatically converted)
would exceed 20% of biosys' Common Stock outstanding immediately prior to the
Preferred Share Financing, it will undertake to redeem the excess Preferred
Shares in accordance with the terms of the Preferred Share Financing. Nasdaq has
orally indicated that such course of action would be sufficient to assure
compliance with the Nasdaq 20% Rule. However, if such redemption becomes
necessary in order to comply with the Nasdaq 20% Rule, there can be no assurance
that biosys will have sufficient cash resources to redeem the excess Preferred
Shares in accordance with the terms of the Preferred Share Financing. In
addition, the provisions of the Delaware General Corporation Law prohibit
redemption of the Company's stock if the capital of biosys is impaired or if
such redemption would cause any impairment of the Company's capital. If biosys
was unable to redeem the excess Preferred Shares in order to assure compliance
with the Nasdaq 20% Rule and (a) if biosys was unable to raise additional funds
with which to effect the redemption or increase the Company's assets or (b) if
an alternative was not approved by Nasdaq, biosys' Common Stock would be
delisted from the Nasdaq National Market. A delisting of biosys from Nasdaq
could adversely affect the value and liquidity of the shares of biosys Common
Stock and restrict the Company's future ability to raise equity capital.
biosys currently has a lease financing arrangement, as amended in
writing on March 29, 1995, May 30, 1995, July 25, 1995, September 26, 1995,
November 14, 1995, January 15, 1996, February 29, 1996, May 13, 1996 and 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 $1,481,000
outstanding as of June 30, 1996 (the "Lease Financing"). Extensions of funds
under the Lease Financing are subject to certain lending limit conditions and
financial covenants identical to those agreed under the Line of Credit Facility
(defined below). The Company and the Lease Financing lender had agreed to
negotiate new financial covenants following renewal of the Line of Credit
Facility. No covenants are contained in the Loan Notes, but the Lease Financing
lender has waived any default under the Lease Financing through August 31, 1996.
Separate financial covenants will be negotiated for the Lease Financing but
there can be no assurance that such covenants will be met in the future by
biosys. If biosys is in default, and such default is not waived, then the Lease
Financing lender may accelerate biosys' payment obligations and may exercise
other rights and remedies as a secured creditor as granted under the Lease
Financing and by law, including, but not limited to, foreclosure on
substantially all of biosys' assets which were pledged as security for the Lease
Financing. The consequences of exercise by the Lease Financing lender of such
remedies could include prevention or delay of the continued development and
marketing of the products of biosys or curtailment of the operations of biosys.
In addition, the inability of biosys to comply with the requirements of the
Lease Financing could lead to the insolvency or bankruptcy of biosys.
biosys had a working capital line of credit with a bank entered into
during 1995, as amended on July 21, 1995, September 13, 1995, November 14, 1995,
December 20, 1995, February 9, 1996, March 12, 1996 and May 13, 1996 (the "Line
of Credit Facility") that allowed for borrowings of up to $5,250,000. The Line
of Credit Facility expired on June 5, 1996, but was extended on an interim basis
pending negotiations for renewal. As of June 30, 1996, $4,000,000 was
outstanding under the Line of Credit Facility. 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 do not contain financial covenants, and were originally
due and payable on August 15, 1996. On August 14, 1996, the due date of the Loan
Notes was extended to September 30, 1996. If biosys is unable to obtain further
extension of the Loan Notes, the $3,500,000 currently outstanding will become
immediately due and payable. biosys is not currently able to pay in full the
$3,500,000 obligation. Consequently if an extension is not obtained, the bank
may exercise its rights and remedies as a secured creditor, as granted under the
Loan Notes and by law, including, but not limited to, foreclosure on
substantially all of biosys' assets which were pledged as security for the Loan
Notes. The Loan Notes also require the lender's consent before biosys may enter
into future merger, acquisition or debt agreements and restrict biosys' payment
of cash dividends and repurchase of Common Stock. Borrowings under the Loan
Notes are secured by substantially all of the assets of biosys. Interest on the
borrowings is charged at the lender's prime rate plus 3% (11.25% as of June 30,
1996).
The Loan Notes and the August 14, 1996 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") pursuant to which
it received $3,400,000 in debt financing. At June 30, 1996 approximately
$2,524,000 was outstanding under this facility. Under the CGI Credit Facility,
CGI was required to maintain a tangible net worth of $3,000,000, and obtain the
prior approval of the First National Bank of Maryland (the "Bank") and the
Maryland Industrial Development Financing Authority ("MIDFA"), the guarantor of
the loan, prior to making any loans or advances to other persons, including
biosys. CGI breached these covenants concurrent with the merger of biosys and
CGI on March 31, 1995. Pursuant to an agreement dated May 26, 1995, as amended
on June 29, 1995, July 31, 1995, August 29, 1995 (the "First Modification
Agreement'), the Bank and MIDFA permanently waived such defaults in return for
(i) reduction of the loan's principal balance by $565,000 through liquidation of
a certificate of deposit required to be held as collateral by the Bank pursuant
to terms of the loan, and (ii) biosys' guarantee of the CGI Credit Facility. A
second modification agreement, dated October 2, 1995, as amended on December 5,
1995, January 31, 1996, March 15, 1996 and April 1, 1996 (the "Second
Modification Agreement") required that (i) CGI maintain a positive shareholders'
equity, (ii) by May 1, 1996, the Bank and biosys agree to the establishment of
financial covenants which would supersede the existing financial covenants,
(iii) commencing on December 1, 1995 and continuing until January 2, 1996,
biosys would prepay loan principal each month by approximately $50,500, plus all
accrued and unpaid interest, (iv) commencing on February 1, 1996 and continuing
on the first day of each month thereafter up to and including December 1, 1996,
biosys prepay loan principal each month by approximately $25,000, plus all
accrued and unpaid interest, (v) commencing on January 2, 1997 and continuing on
the first day of each month thereafter up to and including August 1, 1998,
biosys prepay loan principal each month by approximately $119,700, plus all
accrued and unpaid interest and, (vi) on or before September 1, 1998, biosys pay
all principal and interest that remains outstanding under the CGI Credit
Facility, plus all late charges, expenses and attorneys' fees owned thereunder.
On May 1, 1996, the Bank, MIDFA and biosys executed a third modification
agreement (the "Third Modification Agreement") pursuant to which, (i) biosys and
the Bank met the requirement under the Second Modification Agreement to agree on
the superseding of the existing financial covenants by outlining an acceptable
process by which biosys agrees to disclose to the Bank and MIDFA the financial
covenants or tests it agrees to regarding its Line of Credit Facility and to
automatically become bound to comply substantially with those same financial
covenants or tests for the benefit of the Bank, (ii) the Bank and MIDFA approved
the subleasing of 9,600 square feet of space in biosys' building and biosys
assigned its interest in and to the sub-lease to the Bank and MIDFA as further
collateral under the CGI Credit Facility, and (iii) the Bank and MIDFA
authorized biosys to grant a conditional right of first refusal to Zeneca
Limited plc ("Zeneca") to purchase certain specified equipment assets of the
Company related to the production of viruses pursuant to a joint development
agreement between biosys and Zeneca and biosys executed a Supplemental Security
Agreement in favor of the Bank and MIDFA regarding said assets. In connection
with the expiration of the Line of Credit Facility, biosys has confirmed with
the Bank that they are in compliance with all provisions of the CGI Credit
Facility as of August 14, 1996. There can be no assurance that all of the
foregoing events will have occurred by the dates required. If all such events do
not occur in the time required, default would occur under the CGI Credit
Facility which may entitle the Bank and MIDFA to accelerate payment of all CGI
Credit Facility indebtedness and to exercise the other rights and remedies under
the CGI Credit Facility and by law. A default and subsequent acceleration of the
agreements governing the Loan Notes, Lease Financing or CGI Credit Facility
would result in cross defaults under the agreements governing the other
arrangements. The exercise of rights and remedies under the Loan Notes, Lease
Financing or Modification Agreements could prevent or delay the continued
development and marketing of biosys' products, could require curtailment or sale
of the operations of biosys, could result in cancellation of key operating
contracts and could result in the insolvency or bankruptcy of biosys.
During 1995, the Company received notice from Nasdaq indicating that as
a result of biosys' failure to maintain $4 million of net tangible assets, as
required by the NASD bylaws governing continuance on the Nasdaq National Market,
biosys' Common Stock would be delisted if the required net tangible assets
condition were not satisfied. As a consequence of the AgriDyne merger and the
infusion of net equity of approximately $7,250,000 from the Preferred Share
Financing, both of which occurred in March 1996, the Company satisfied the
Nasdaq net tangible assets requirement as of March 22, 1996. Losses in the
quarter ended June 30, 1996 have caused biosys to fall below the Nasdaq net
tangible asset requirement. No notification arising from this condition has to
date been received from Nasdaq. If notification is given by Nasdaq and no
temporary exemption is granted by Nasdaq, or even if temporary exemption is
granted and further equity financing or other means of increasing net tangible
assets is not available, biosys' Common Stock would be delisted from the Nasdaq
National Market. biosys is actively pursuing a variety of financing and
strategic initiatives sufficient to satisfy the Nasdaq net tangible asset
requirement. However, there can be no assurance that such initiatives will be
achieved, or, if achieved, that Nasdaq will permit such financing to suffice for
maintenance on the Nasdaq National Market. A delisting of biosys from Nasdaq
could adversely affect the value and liquidity of the shares of biosys Common
Stock and restrict the Company's future ability to raise equity capital.
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.
biosys/CGI Merger Expenses
During 1995, biosys' management completed the process of consolidating
biosys and CGI's separate research and development, selling and marketing, and
general and administrative functions in Maryland. Research programs that were
redundant or were deemed strategically unnecessary were rationalized. To
accomplish such consolidation and rationalization, approximately 40 of the
combined companies' employees were terminated as a result of the merger and
certain California employees relocated to Maryland (including certain of biosys'
executive officers).
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. As of June 30, 1996, such costs amounted to $4,524,000. As of
June 30, 1996, management believes all significant merger, severance and
relocation costs related to the CGI merger have been incurred.
biosys' management believes that the future cost savings which are
expected to be realized from the consolidation of the two 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.
biosys/AgriDyne Merger Expenses
In April 1996, biosys' management completed the process of
consolidating biosys and AgriDyne's separate research and development, selling
and marketing, and general and administrative functions. Research programs that
were redundant or deemed strategically unnecessary were rationalized. To
accomplish such consolidation and rationalization, approximately 10 of
AgriDyne's total employees (including all of AgriDyne's executive officers in
their capacity as officers) were terminated and certain AgriDyne employees have
either relocated to Maryland, or, for those employees who were located in the
field, (in the case of marketing employees) remained in those locations.
At the time of the AgriDyne merger announcement in April 1995, the
company anticipated accounting for the merger as a pooling of interests and
estimated that an aggregate of approximately $725,000 would be incurred by
biosys related to the merger. During the first nine months of 1995, such costs
amounted to $452,000. Subsequent to September 30, 1995, due to changes in facts
and circumstances, biosys determined that purchase accounting was the
appropriate method of accounting for the merger. Thus, all costs related to the
merger 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.
biosys' management believes that the future cost savings which are
expected to be realized from the consolidation of the two separate 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 merger-related costs incurred..
Capital Equipment Expenditures
During the quarter ended June 30, 1996, the Company expended
approximately $213,000 for pilot plant, capital equipment, furniture, and
leasehold improvements.
<PAGE>
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.
10.66 First Amendment to Contract Manufacturing Agreement between
biosys, inc. and Archer-Daniels-Midland Company.
10.67 Sub-Lease Agreement between biosys, inc., Crop Genetics
International Corporation, and Gene Logic, Inc. dated May 2,
1996.
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.
10.69 Amendment #7 to the Security and Loan and Warrant Agreement dated
May 13, 1996, between biosys, inc. and Imperial Bank.
10.70 Amendment #8 to the Master Equipment Lease Agreement dated May
13, 1996, between biosys, inc. and Venture Lending and Leasing,
Inc
10.71 $3,000,00 Note dated June 5, 1996, between biosys, inc. and
Imperial Bank.
10.72 $500,000 Note dated July 26, 1996, between biosys, inc. and
Imperial Bank.
10.73 Amendment #9 to the Master Equipment Lease Agreement dated
May 13, 1996, between biosys, inc. and Venture Lending and
Leasing Inc.
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.
B. REPORTS ON FORM 8-K:
There were no reports on Form 8-K filed during the quarter ended
June 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: August 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 Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
Net loss .............. $(3,594,000) $ (3,741,000) $ (11,544,000) $(9,846,000)
=========== ============ ============= ===========
Weighted average shares
outstanding:
Common stock ....... 7,488,187 4,691,772 6,719,914 4,406,678
Net loss per share .... $ (0.48) $ (0.80) $ (1.72) $ (2.23)
=========== ============ ============= ===========
- --------------------------
(1) This Exhibit should be read in conjunction with Note 5 of Notes
to Condensed Consolidated Financial Statements.
IMPERIAL BANK
Member FDIC
NOTE
$3,000,000.00 San Jose, California June 5, 1996
On August 15, 1996, and as herein provided, for value received, the undersigned
promises to pay to IMPERIAL BANK ("Bank"), a California banking corporation, or
order, at its Santa Clara Valley Regional office, the principal sum of
$3,000,000.00 MAXIMUM or such sums up to the maximum if so stated, as the Bank
may now or hereafter advance to or for the benefit of the undersigned in
accordance with the terms hereof, together with interest from date of
disbursement at a rate of 3.000 % per year in excess of the rate of interest
which Bank has announced as its prime lending rate (the "Prime Rate"), which
shall vary concurrently with any change in such Prime Rate, or $250.00,
whichever is greater. Interest shall be computed at the above rate on the basis
of the actual number of days which the principal balance is outstanding, divided
by 360, which shall, for interest computation purposes, be considered one year.
Interest shall be payable at maturity, beginning August 15, 1996, and if not so
paid shall become a part of the principal. All payments shall be applied first
to interest, and the remainder, if any, on principal. (If checked), Principal
shall be payable in installments of $ , or more, each installment on the day of
each , beginning . Advances not to exceed any unpaid balance owing at any one
time equal to the maximum amount specified above, may be made at the option of
the Bank.
Any partial prepayment shall be applied to the installments, if any, in
inverse order of maturity. Should default be made in the payment of principal or
interest when due, or in the performance or observance, when due, of any item,
covenant or condition of any dead of trust, security agreement or other
agreement (including amendments or extensions thereof) securing or pertaining to
this note, at the option of the holder hereof and without notice or demand, the
entire balance of principal and accrued interest then remaining unpaid shall (a)
become immediately due and payable, and (b) thereafter bear interest, until paid
in full, at the increased rate of 5% per year in excess of the rate provided for
above, as it may vary from time to time.
Defaults shall include, but not be limited, to, the failure of the
maker(s) to pay principal or interest when due; the filing as to each person
obligated hereon, whether as maker, co-maker, endorser or guarantor
(individually or collectively referred to as the "Obligator") of a voluntary or
involuntary petition under the provisions of the Federal Bankruptcy Act; the
issuance of any attachment or execution against any asset of any Obligator; the
death of any Obligator, or any deterioration of the financial condition of any
Obligor which results in the holder hereof considering itself, in good faith,
Insecure.
X If any installment payment or principal balance payment due hereunder is
delinquent ten or more days, Obligor agrees to pay a late charge in the amount
of 5% of the payment so due and unpaid, in addition to the payment; but nothing
in this paragraph is to be construed as any obligation on the part of the holder
of this note to accept payment of any installment past due or less than the
total unpaid principal balance after maturity.
If this note is not paid when due, each Obligor promises to pay all
costs and expenses of collection and reasonable attorney's fees incurred by the
holder hereof on account of such collection, plus interest at the rate
applicable to principal, whether or not suit is filed hereon. Each Obligor shall
be jointly and severally liable hereon and consents to renewals, replacements
and extensions of time for payment hereof, before at, or after maturity;
consents to the acceptance, release or substitution of security for this note;
and waives demand and protest and the right to assert any statute of
limitations. Any married person who signs this note agrees to recourse may be
had against separate property for any obligations hereunder. The indebtedness
evidenced hereby shall be payable in lawful money of the United States. In any
action brought under or arising out of this note, each Obligor, including
successor(s) or assign(s) hereby consents to the application of California law,
to the jurisdiction of any competent court within the State of California, and
to service of process by any means authorized by California law.
No single or partial exercise of any power hereunder, or under any deed
of trust, security agreement or other agreement in connection herewith shall
preclude other or further exercises thereof or the exercise of any other such
power. The holder hereof shall at all times have the right to proceed against
any portion of the security for this note in such omission on the part of the
holder hereof in exercising any right hereunder, or under any deed of trust,
security agreement or other agreement, shall not operate as a waiver of such
right, or of any other right, under this note or any deed of trust, security
agreement or other agreement in connection herewith.
BIOSYS, INC.
BY: /S/ Edwin C. Quattlebaum
Pres/CEO
BY: /S/ Michael R.N. Thomas
VP/CFO/Sec'y
IMPERIAL BANK
Member FDIC
NOTE
$500,000.00 San Jose, California, July 26, 1996
On August 15, 1996, and as hereinafter provided, for value received, the
undersigned promises to pay to IMPERIAL BANK ("Bank"), a California banking
corporation, or order, at its Santa Clara Valley Regional office, the principal
sum of $500,000.00, or such sums up to the maximum if so stated, as the Bank may
now or hereafter advance to or for the benefit of the undersigned in accordance
with the terms hereof, together with interest from the date of disbursement or
N/A, whichever is later on the unpaid principal balance at the rate of 3.000%
per year in excess of the rate of Interest which Bank has announced as its prime
lending rate (the "Prime Rate"), which shall vary concurrently with any change
in such Prime Rate. or $ 250.00, whichever is greater. Interest shall be
computed at the above rate on the basis of the actual number of days during
which the principal balance is outstanding, divided by 360, which shall, for
interest computation purposes, be considered one year.
Interest shall be payable at maturity beginning August 15, 1996, and if not so
paid shall become a part of the principal, All payments shall be applied first
to Interest, and the remainder, if any, on principal. (if checked),
Principal shall be payable in installments of $ , or more, each installment on
the day or each , beginning . Advances not to exceed any unpaid balance owing at
any one time equal to the maximum amount specified above, may be made at the
option of Bank.
Any partial prepayment shall be applied to the installments, it any, in
inverse order of maturity. Should default be made in the payment of principal or
interest when due, or in the performance or observance, where due, of any item,
covenant or condition of any deed of trust, security agreement or other
agreement (including amendments or extensions thereof), securing or pertaining
to this note, at the option of the holder hereof find without notice or demand,
the entire balance of principal and accrued interest then remaining unpaid shall
(a) become immediately due and payable, and (b) thereafter bear interest, until
paid in full, at the increased rate of 5% per year in excess of the rate
provided for above, as it may vary from time to time.
Defaults shall include, but not be limited to, the failure of the
maker(s) to pay principal or interest when due; the filing as to each person
obligated hereon, whether co maker, endorser or guarantor (individually or
collectively referred to as the "Obligor") of a voluntary or involuntary
petition under the provisions of the Federal Bankruptcy Act; the issuance of any
attachment or execution against any asset of any Obligor; the death of any
Obligor; or any deterioration of the financial condition of any Obligor which
results in the holder hereof considering itself, in good faith, insecure.
X If any installment payment or principal balance payment due hereunder is
delinquent ten or more days, Obligor agrees to pay a late charge in the amount
of 5% of the payment so due and unpaid, in addition to the payment; but nothing
in this paragraph is to be construed as any obligation on the part of the holder
of this note to accept payment of any installment past due or less than the
total unpaid principal balance after maturity.
If this note is not paid when due, each Obligor promises to pay all
costs and expenses of collection and reasonable attorneys' fees incurred by the
holder hereof on account of such collection, plus interest at the rate
applicable to principal, whether or not suit is filed hereon. Each Obligor shall
be jointly and severally liable hereon and consents to renewals, replacements
and extensions of time for payment hereof, before, at, or after maturity
consents to the acceptance, release or substitution of security for this note;
and waives demand and protest and the right to assert any statute of
limitations. Any married person who signs this note agrees that recourse may be
had against separate property for any obligations hereunder. The indebtedness
evidenced hereby shall be payable in lawful money of the United States. In any
action brought under or arising out of this note, each Obligor, including
successor(s) or assign(s) hereby consents to the, application of California law,
to the jurisdiction of any competent court within the State of California, and
to service of process by any means authorized by California law
No single or partial exercise of any power hereunder, or under any deed
of trust. security agreement or other agreement in connection herewith shall
preclude other or further exercises thereof or the exercise of any other such
power. The holder hereof shall at all times have the right to proceed against
any portion of the security for this note in such order and in such manner as
such holder may consider appropriate, without waiving any rights with respect to
any of the security. Any delay or omission on the part of the holder hereof in
exercising any right hereunder, or under any deed of trust, security agreement
or other agreement, shall not operate as a waiver of such right, or of any other
right, under this note or any deed of trust, security agreement or other
agreement in connection herewith.
BIOSYS, INC.
BY: /S/ Edwin C. Quattlebaum
Pres/CEO
BY: /S/ Michael R. N. Thomas
VP/CFO/Sec'y
Western Technology Investment
August 13, 1996
Mr. Michael Thomas
Vice President and Chief Financial Officer
Biosys
10150 Old Columbia Road
Columbia, MD 21046-1704
Re- Lease Agreement Between Biosys and Venture Lending & Leasing, Inc.,
dated December 21, 1994
Dear Mike:
VLLI will waive the financial covenants in Paragraphs 24 (d), (e) and (f) of the
above referenced agreement and any existing amendments to them through August
31, 1996. This waiver is specifically conditioned upon no event of default
existing or occurring with Imperial Bank or the continued waiver through the
same period by Imperial Bank of its financial covenants, if any, with Biosys.
Sincerely
/S/ Ronald W. Swenson
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the condensed
consolidated financial condition at June 30, 1996 (unaudited) and the condensed
consolidated statement of income for the three months ended June 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> 6-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Jun-30-1996
<EXCHANGE-RATE> 1.000
<CASH> 2,659
<SECURITIES> 0
<RECEIVABLES> 3,875
<ALLOWANCES> 0
<INVENTORY> 5,538
<CURRENT-ASSETS> 12,886
<PP&E> 15,951
<DEPRECIATION> 9,372
<TOTAL-ASSETS> 24,136
<CURRENT-LIABILITIES> 15,184
<BONDS> 2,582
0
156
<COMMON> 7
<OTHER-SE> 6,207
<TOTAL-LIABILITY-AND-EQUITY> 24,136
<SALES> 13,571
<TOTAL-REVENUES> 14,101
<CGS> 11,934
<TOTAL-COSTS> 24,764
<OTHER-EXPENSES> 53
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 870
<INCOME-PRETAX> (11,544)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,544)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,544)
<EPS-PRIMARY> (1.72)
<EPS-DILUTED> (1.72)
</TABLE>
