SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE OF 1934
For the transition period from ___________ to ___________
Commission file number: 0-24736
BioProgress Technology International, Inc.
(formerly Famous Sam's Group Inc.)
(Exact name of small business issuer as specified in its charter)
Nevada
(State or other jurisdiction of 88-0361701
incorporation or organization) (I.R.S. employer
identification number)
9055 Huntcliff Trace, Atlanta, Georgia
(Address of Principal executive offices) 30350-1735
(Zip Code)
Registrant's telephone number, including area code: (770) 641-0264
Indicate by check mark whether the issuer (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 | | No |X|
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of September 30, 1998, there
were approximately 4,999,753 shares outstanding.
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<PAGE>
I. PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, 1998
ASSETS
Current assets
Accounts Receivable 12,675
Cash 261
Payments in advance 91,888
---------
Total current assets 104,824
---------
Other Assets
Distributorship Agreement 4,000
Inter-company 0
TOTAL ASSETS ________
108,824
---------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable 40,943
Other creditors 377,706
---------
418,649
---------
Shareholders' equity (deficit)
Common stock, $0.01 par value, 10,000,000 shares
authorized, 4,999,753 outstanding in 1997/8 and 390,367
in 1996 5,000
Additional paid-in capital 4,313,065
Preferred stock, $0.01 par value, 1,000,000 shares
authorized, no shares outstanding 0
Deficit accumulated during the development stage
(4,627,890)
---------
Total Shareholders' Equity (deficit) (309,825)
Less stock subscription receivable 0
---------
Total Liabilities and Shareholders' Equity (Deficit)
108,824
---------
The accompanying notes form an integral part of these statements
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<PAGE>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months
Ended September 30,
1998 1997
Sales $ 12,675 $ 0
Cost of Goods Sold 5,106 0
Gross Profit -------- --------
7,569
Expenses
Legal 0 0
Audit and accountancy 2,352 0
Administrative expenses 154,116 0
Professional fees 49,413 0
-------- --------
Total expenses 205,881 0
-------- --------
Income (loss) before provision for income taxes (198,312) 0
Provisions for income taxes 0 0
-------- --------
Net loss (198,312) 0
-------- --------
Net loss per share (0.04) 0.00
======== ========
The accompanying notes form an integral part of these statements.
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<PAGE>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Three Months Ended
September 30,
1998 1997
Cash flows (used) by operating activities
Net loss $(198,312) $ 0
Adjustments to reconcile net gain (loss)
to net cash provided by operating activities
Increase in accounts receivables (12,675) 0
Decrease in payments in advance 5,106 0
Increase in other creditors payable 187,483 0
Increase in accounts payable 18,300 0
---------
Net cash flows generated (used) (98) 0
by operating activities
--------- --------
Proceeds from sale of stock 0 0
Stock issued in payment of liabilities 0 0
Less: stock subscription receivable 0 0
--------- --------
Net cash flows from
financing activities 0 0
Increase (decrease) in cash (98) 0
Cash at beginning of period 359 0
--------- --------
Cash at end of period 261 0
========= ========
The accompanying notes form an integral part of these statements.
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<PAGE>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARY
(a development stage company)
Notes to Financial Statements
(Unaudited)
In the opinion of management, all adjustments (consisting of normal recurring
adjustments) considered necessary for a fair presentation of the financial
condition of registrant have been included, and the disclosures are adequate to
make the information presented not misleading.
Note 1. A summary of significant accounting policies is currently on file with
the U.S. Securities and Exchange Commission in registrant's Form 10, which is
incorporated herein by reference.
Note 2. The loss per share was computed by dividing net loss by the weighted
average number of shares of common stock outstanding during the period.
Note 3. Registrant has not declared or paid dividends on its common shares since
inception.
Note 4. The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all
information and footnotes required by generally accepted accounting principles
for complete financial statements.
Note 5. Income taxes have not been provided for in that registrant has not had a
tax liability from inception to the date of these notes.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations:
The results during the period of the Registrant, BioProgress Technology
International, Inc., a Nevada corporation (together with its wholly-owned
subsidiary, BioProgress Technology, Inc., the "Company"), reflect its continuing
efforts to promote the initial line of products in the United States' natural
food and healthcare market pursuant to the Exclusive Distributorship Agreement
(the "Distributorship Agreement") between the Company's wholly-owned subsidiary
and BioProgress Technology, Limited, an entity incorporated in the United
Kingdom (the "Distributor") and an affiliate of the Company. The Distributor is
engaged in the development, manufacture, sale and distribution of materials and
processes used to replace gelatin in the manufacture of soft capsules. These
efforts by the Company are continuing as the other lines the company will be
distributing are developed and are introduced to the range of products.
The Company's expenses in the third quarter of fiscal 1998 have been largely
administrative. No meaningful comparison can be made between 1998 and 1997 as
the Company had no operations during 1997. The Company continues to investigate
other product lines and commercial opportunities presented to it.
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<PAGE>
Pursuant to the Distributorship Agreement, the Company has now introduced X-Gel
Moisturizing Bath Aromas, the first and only gelatin-free bath beads, to the
United States. The Company has received its first shipment from the United
Kingdom manufacturing facility. The Company is currently pursuing discussions on
several fronts with potential customers, including distributors and major
retailers. XGel Moisturizing Bath Aromas are made from vegetable-based
dispersing oils and refined emollients, which the Company believes naturally
soften, repair, and protect the skin. XGel bath beads are 100% biodegradable,
non-toxic, hypo-allergenic and contain no antioxidants. Registered with the
Vegan Society, XGel bath beads contain no animal by-products and have not been
tested on animals. XGel bath beads are available in four "mood enhancing"
fragrances, which are designed to suit the demands of concerned, health
conscious individuals and the growing trends in aromatherapy.
During the third quarter of 1998, the Company agreed to acquire DHA Nutrition
Limited, a specialist sales, marketing and distribution company located in
Cambridgeshire, England. Initial consideration for the acquisition is $224,000,
to be satisfied by the issue of 400,000 ordinary shares of BioProgress
Technology's common stock restricted from sale, assignment or disposal for a
period of eighteen months from July 31, 1998. Deferred consideration of an
additional 900,000 ordinary shares of common stock is dependent upon DHA
Nutrition achieving gross sales of (pound)1,650,000 (approximately $2,700,000)
and (pound)5,500,000 (approximately $9,000,000) in the periods to September 30,
1999 and September 30, 2000, respectively.
DHA Nutrition has been working closely with Martek Biosciences Corporation
(NASDAQ: MATK) to develop the UK market for Martek's Nutritional Oils in the
Infant Formulae, vegetarian foods, dietary supplements and agro feed markets.
Following publication of the UK Government's 1995 COMA report (Committee On
Medical Aspects of Food Policy) it was recognized that increasing the average
consumption of the important fatty acids present in oily fish, particularly
Docosahexaenoic (DHA), could have a significant effect on reducing the incidence
of coronary heart disease. Further research has indicated that an adequate
intake of dietary DHA, the principal fat component of both the human brain and
eyes, may be vital in many other areas of human health. Fish do not produce DHA,
but rather acquire it through the food chain from marine micro algae (sea
plankton). Martek has identified and patented DHA producing varieties of micro
algae and early research has shown that by feeding dried Biomeal (Martek's waste
natural plant matter by-product following oil extraction) to farm animals, such
as poultry and cattle, it is possible to produce therapeutically significant
levels of DHA in their meat. This process will offer a new opportunity for
consumers of meat to increase their average intake of DHA.
Martek has granted DHA Nutrition exclusive rights to develop this new healthier
meat concept for the UK market. On July 23,1998, DHA Nutrition entered into a
development agreement with one of Europe's largest animal feed companies to
develop the opportunity with the support of major UK retailers.
The Company and DHA Nutrition are jointly in discussions regarding a technology
collaboration agreement with leading producers of prepared foods.
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<PAGE>
Liquidity and capital resources
The Company continues to fund its operations via loans and credit management.
The Company continues to investigate a number of long-term funding scenarios and
opportunities.
Year 2000 Issues
The Company has evaluated all internal software and all current
products against anticipated Year 2000 concerns, and believes that its products
and business will not be substantially affected by the advent of the year 2000,
and that it has no significant exposure to contingencies related to the Year
2000 issue for the products it has sold. The Company has initiated a project to
upgrade all internal software and to conduct testing on both its information
technology systems and its other equipment and machinery to further ensure that
all aspects of its business will be Year 2000 compliant. The Company believes
that these procedures, which are expected to be completed by December 31, 1998,
will have no material effect on the Company's customers and will not require any
material expenditures or other material diversion of resources.
During the fourth quarter of 1998 the Company will contact third
parties with which it has material relationships, including its customers and
suppliers, to attempt to determine their preparedness with respect to Year 2000
issues and to analyze the risk to the Company in the event such third parties
experience significant business interruptions as a result of Year 2000
noncompliance. The Company expects to complete this review and to determine the
need for contingency planning in this regard by March 31, 1999.
Although the Company believes its planning efforts are adequate to
address its Year 2000 concerns, there can be no assurances that the Company will
not experience unanticipated negative consequences and material costs caused by
undetected errors or defects in the technology used in its internal systems, or
that the systems of third parties on which the Company relies will be made
compliant on a timely basis and will not have any material adverse effect on the
Company. The Company is currently unable to estimate the most reasonably likely
worst-case effects of the arrival of the year 2000 and does not currently have a
contingency plan in place for any such unanticipated negative effects. The
Company intends to analyze reasonably likely worst-case scenarios and the need
for such contingency planning once the upgrade and testing of internal systems
and review of third-party preparedness described above have been completed, and
expects to complete this analysis by June 30, 1999.
It is anticipated that the total costs related to the Year 2000 issue will
approximate to no more than $5,000.
PART II - OTHER INFORMATION
Item 1. Litigation
No material legal proceedings to which the Company is a party or to which the
property of the Company is subject is pending and no such material proceeding is
known by management of the Company to be contemplated. No material legal
proceedings to which any director, officer or affiliate of the Company, any
owner of record or beneficially of more than five percent of any class of voting
securities of the Company, or security holder is a party adverse to the Company
or has a material interest adverse to the Company is pending.
Item 2. Change in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
-8-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 this 13th day of November,
1998.
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC.
(Registrant)
By: /s/ Barry J. Muncaster
----------------------
Barry J. Muncaster, President
and Chief Executive Officer
/s/ James T.C. Longley
- - ----------------------
James T. C. Longley,
Chief Financial Officer
(Principal Financial Officer)
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