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: June 30, 1999
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.
------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 88-0361701
------ ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
9055 Huntcliff Trace, Atlanta, Georgia 30350-1735
-------------------------------------- ----------
(Address of Principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 649-1133
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 X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: As of August 15, 1999, there
were approximately 30,093,199 shares outstanding. There are also 1,168,475
series A preferred stock outstanding as at that date. These are convertible at
the preference stockholders' option on or before 31 December 1999 at two and a
half shares of common stock for each series A preferred held. On the assumption
that all the preference shares are converted there will be a further 2,921,187
shares of common stock issued giving a fully diluted 33,014,386 shares
outstanding.
<PAGE>
I. PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES
-----------------------------------------------------------
(a development stage company)
CONSOLIDATED BALANCE SHEETS
(Unaudited) June 30, 1999
ASSETS
Cash and equivalents 163,489
Inventory 24,450
Trade debtors 335,682
Other debtors 9,998
Securities 1,120,000
----------
Total current assets 1,653,619
INVESTMENTS 1,350,000
FIXED ASSETS
Leasehold improvements 57,624
Plant and machinery 106,801
Office equipment 16,667
Laboratory equipment 30,358
INTANGIBLE ASSETS
Intellectual property rights 31,068
Goodwill 5,382,851
----------
TOTAL ASSETS 8,628,988
==========
LIABILITIES
Accounts payable 228,712
Related parties 734,411
Other creditors 400,714
Deferred income 1,120,000
Short-term loans 51,466
----------
Total current liabilities 2,535,303
----------
TOTAL LIABILITIES 2,535,303
==========
STOCKHOLDER'S EQUITY
Common stock, $0.008 par value:
25,000,000 shares authorized (1997: 25,000,000)
38,214,403, 38,214,403 and 10,500,000 issued in 1999,
1998 and 1997 respectively (See Note 2) 66,694
Additional paid-in capital 8,108,981
Accumulated deficit (1,622,744)
Loss for the current period (461,246)
----------
6,091,685
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 8,628,988
==========
The accompanying notes form an integral part of these statements.
<PAGE>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES
-----------------------------------------------------------
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended 30 June
--------------------------
1999 1998
---- ----
$ $
Net Revenues 52,068 0
Cost of revenues 6,716 0
----------- -----------
Gross profit 45,352 0
Less: expenses
Professional fees 191,331 46,109
Management recharge 120,000 0
General and administrative expenses 195,267 152,529
----------- -----------
Total cost and expenses 506,598 198,638
----------- -----------
Loss from operations and net loss
Applicable to common stockholders (461,246) (198,638)
=========== ===========
Diluted loss per common share (0.012) (0.015)
=========== ===========
Weighted average number of common shares 38,214,403 12,921,392
=========== ===========
The accompanying notes form an integral part of these statements.
<PAGE>
<TABLE>
<CAPTION>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
Three months ended 30 June
--------------------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net loss (461,246) (389,815)
Adjustments to reconcile net loss to net cash
Used in operating activities
Depreciation and amortization 90,644 0
Changes in operating assets and liabilities:
Decrease in accounts receivable (335,682) 0
(Increase) in inventory 0 0
(Increase) in prepaid expenses and other current assets 375,135 0
(Increase) in deferred consideration 0 0
(Increase) in payments in advance 0 (96,994)
Decrease in other assets 142,073 120,000
Increase in deferred revenue 0 0
(Decrease) increase in accounts payable (53,449) 22,643
Increase in related parties and other creditors 208,338 189,525
Decrease in short term loans (690,534) 0
-------- --------
Net cash used in operating activities (724,721) (154,641)
======== ========
Cash flows from investing activities:
Purchases of property and equipment (59,004) 0
Net of amounts acquired 0 0
-------- --------
Net cash used in investing activities (59,004) 0
======== ========
Cash flows from financing activities:
Cash from business acquisition 0 0
Proceeds from sale of stock 0 0
Proceeds from sale of preferred stock 802,475 0
Stock issued in payment of liabilities 0 0
Stock subscription receivable 0 155,000
Reduction in long-term debt 0 0
-------- --------
Net cash provided by financing activities 802,475 155,000
======== ========
Net increase in cash and cash equivalents 18,750 359
Cash and cash equivalents at beginning of period 144,739 0
-------- --------
Cash and cash equivalents at end of period 163,489 359
======== ========
Supplemental disclosure of cash flow information
Cash paid for interest 499 499
======== ========
The accompanying notes form an integral part of these statements.
</TABLE>
<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 company has prepared these accounts on the basis of a reverse
acquisition under purchase accounting by BioProgress Technology Limited, a
subsidiary of BioProgress Technology International, Inc. Accordingly, Common
Stock and additional paid-in capital have been restated to reflect the
accounting treatment required. The disclosure of stockholders' equity and in
particular the disclosure of shares in issue do not represent the shares of
common and preference stock in issue of BioProgress Technology International,
Inc. These were 30,093,199 and 1,168,475 shares respectively at 30 June 1999.
Note 3. The profit per share was computed by dividing net profit by the weighted
average number of shares of common stock outstanding during the period.
Effective for the year ended 31 December, 1998 the Company adopted SFAS No. 128
"Earnings per share." The adoption of SFAS No. 128 requires the presentation of
basic earnings per share and diluted earnings per share. Basic profit or Loss
per common share was calculated based upon the net profit or loss available to
common stockholders outstanding during the period
Note 4. Registrant has not declared or paid dividends on its common shares since
inception.
Note 5. 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 6. 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
subsidiaries, BioProgress Technology, Inc., BioProgress Technology Limited, and
DHA Nutrition Limited, the "Company"), show that the Company posted a loss of
$461,246, equivalent to $0.012 loss per common share.
The results were in line with expectations and reflect the Company's continuing
efforts to commercialize its XGel(TM) Film System, both in North America and
Europe. The Company is engaged in the development, manufacture, sale and
distribution of materials and processes used to replace gelatin in the
manufacture of soft capsules, with particular emphasis on ingestible products,
such as vitamin and herbal supplements, and pharmaceutical delivery systems. The
overheads reflect the considerable advancements that have been achieved in the
development of the Company's ingestible range of products. This development
program is ahead of schedule and it is anticipated that the ingestible range of
products should be ready for market in the fourth quarter of 1999. 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.
Revenues generated during the period were derived solely from the Research &
Development Agreement the Company has with Consolidated EcoProgress
Technologies, Inc ("CES") (VSE:CES). The Research & Development Agreement with
CES was executed contemporaneous to an agreement to sell an exclusive worldwide
license to CES to manufacture, sell and distribute the Trutona(TM)line of
flushable and biodegradable products. Royalties payable to the Company pursuant
to the exclusive license are scheduled to commence during the third quarter of
this year.
During the period the Company's subsidiary, BioProgress technology Limited
relocated both its laboratory and its manufacturing facilities to a new
facility, based in March, Cambridgeshire. The consolidation of research &
development, manufacturing and administration operations into one facility is
expected to reduce overhead and increase cash flow during the third quarter of
this year. On July 31st, the Company's new facility was officially opened by The
Right Honourable Malcolm Moss, Member of Parliament. At the opening ceremony Mr.
Moss presented the Company with the Millennium Product Award, previously
announced on April 21st, 1999, in respect of the Company's XGel(TM)Film System.
<PAGE>
On May 6th, the Company's XGel(TM) Film System was featured in the "Technology
Worth Watching" section of the Financial Times newspaper. Subsequently, further
coverage appeared in national and regional newspapers and trade magazines,
including Manufacturing Chemist. As a result of this media coverage the Company
has been contacted by interested parties and potential customers from many
countries around the globe.
The Company believes that its XGel(TM) Film System is the world's first
animal-free soft capsule process. The patented process eliminates the use of
gelatin, which is a protein derived from animal renderings. Since the
mid-1930's, gelatin has been the only material suitable for encapsulating
non-aqueous products such as vitamin oils (dietary supplements),
pharmaceuticals, cosmetic oils (bath beads) and paint, as used in the fast
growing paintball leisure pursuit. The XGel(TM) Film System employs innovative
processes that allow soft capsules to be produced with a very wide range of
characteristics from spontaneous release to delayed release, while improving the
capsules performance under extremes of temperature and humidity. The XGel(TM)
Film System technology has attracted the interest of major companies in both the
dietary supplement and pharmaceutical industries.
Liquidity and capital resources
Revenues accrue entirely from the agreements the Company has with Consolidated
EcoProgress Technologies, Inc. Overheads are higher compared with the same
period last year as DHA Nutrition Limited was not acquired at this stage,
together with higher levels of staff, the costs of the move to premises in March
and higher professional costs during the quarter. The company has benefited from
the sale of 802,475 series A Preferred stock during the quarter at $1 per share.
Together with changes in operating assets and liabilities, the company has
expended monies on refurbishing the March premises and has repaid $690,534 of
short-term loans to the company, considerably improving the balance sheet. Cash
at the end of the period was $163,489. Related parties continue to assist in the
funding of the company. The company's balance sheet is sound.
The Company continues to fund its operations via loans and credit management and
the sale of preference shares in the Company. The acquisition of the Trutona
assets and the extension of the license to CES should contribute significantly
to the Company's working capital by way of royalties and the sale of shares in
CES. The Company continues to investigate a number of other long-term funding
scenarios and opportunities.
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
<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 31st day of August,
1999.
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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 163,489
<SECURITIES> 1,120,000
<RECEIVABLES> 335,682
<ALLOWANCES> 0
<INVENTORY> 24,450
<CURRENT-ASSETS> 1,653,619
<PP&E> 211,450
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,628,988
<CURRENT-LIABILITIES> 2,535,303
<BONDS> 0
0
0
<COMMON> 66,694
<OTHER-SE> 6,024,991
<TOTAL-LIABILITY-AND-EQUITY> 8,628,988
<SALES> 52,068
<TOTAL-REVENUES> 0
<CGS> 6,716
<TOTAL-COSTS> 506,598
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (461,246)
<INCOME-TAX> 0
<INCOME-CONTINUING> (461,246)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (461,246)
<EPS-BASIC> (.012)
<EPS-DILUTED> (.012)
</TABLE>
