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: Sept 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 Sept 30, 1999, there were
approximately 30,093,199 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) September 30, 1999
ASSETS
Cash and equivalents 1,159
Inventory 24,450
Trade debtors 278,593
Other debtors 13,136
Deferred consideration 1,120,000
----------
Total current assets 1,437,338
INVESTMENTS 1,275,000
FIXED ASSETS
Leasehold improvements 120,473
Plant and machinery 125,551
Office equipment 27,131
Laboratory equipment 30,673
INTANGIBLE ASSETS
Intellectual property rights 30,647
Goodwill 5,241,197
----------
TOTAL ASSETS 8,288,010
==========
LIABILITIES
Accounts payable 422,470
Related parties 851,284
Other creditors 403,020
Deferred income 1,120,000
Short-term loans 14,776
Bank overdraft 4,945
----------
Total current liabilities 2,816,495
----------
TOTAL LIABILITIES 2,816,495
==========
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 (2,297,242)
Loss for the current period (406,918)
----------
6,091,685
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 8,288,010
==========
The accompanying notes form an integral part of these statements.
2
<PAGE>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES
-----------------------------------------------------------
(a development stage company)
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended 30 September
1999 1998
---- ----
$ $
Net Revenues 37,911 12,675
Cost of revenues 17,697 5,106
----------- -----------
Gross profit 20,214 7,569
Less: expenses
Professional fees 128,315 51,765
Management recharge 120,000 150,000
General and administrative expenses 178,817 4,116
----------- -----------
Total cost and expenses 427,132 205,881
----------- -----------
Loss from operations and net loss
Applicable to common stockholders (406,918) (198,312)
=========== ===========
Diluted loss per common share (0.011) (0.015)
=========== ===========
Weighted average number of common shares 38,214,403 12,921,392
=========== ===========
The accompanying notes form an integral part of these statements.
3
<PAGE>
BIOPROGRESS TECHNOLOGY INTERNATIONAL, INC. AND SUBSIDIARIES
(a development stage company)
CONSOLIDATED STATEMENTS OF CASH FLOW (Unaudited)
Three months ended
30 September
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (406,918) (198,312)
Adjustments to reconcile net loss to net cash
Used in operating activities
Depreciation and amortization 26,390 0
Changes in operating assets and liabilities:
Decrease (Increase) in accounts receivable 57,089 (12,675)
(Increase) in inventory 0 0
(Increase) in prepaid expenses and other current assets 0 0
(Increase) in deferred consideration 0 0
(Increase) Decrease in payments in advance 0 5,106
(Increase) Decrease in other assets (3,138) 0
Increase in deferred revenue 0 0
Increase in accounts payable 193,758 18,300
Increase in related parties and other creditors 119,179 187,483
(Decrease) in short term loans (36,690) 0
-------- --------
Net cash used in operating activities (50,330) (98)
======== ========
Cash flows from investing activities:
Purchases of property and equipment (197,945) 0
Net of amounts acquired 0 0
-------- --------
Net cash used in investing activities (197,945) 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 81,000 0
Stock issued in payment of liabilities 0 0
Stock subscription receivable 0 0
Reduction in long-term debt 0 0
-------- --------
Net cash provided by financing activities 81,000 0
======== ========
Net (decrease) in cash equivalents (167,275) (98)
Cash and cash equivalents at beginning of period 163,489 359
-------- --------
Cash and cash equivalents at end of period (3,786) 261
======== ========
Supplemental disclosure of cash flow information
Cash paid for interest 499 499
======== ========
The accompanying notes form an integral part of these statements.
4
<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 A and B series stock in issue of BioProgress Technology
International, Inc. These were 30,093,199 and 1,189,474 and 32,400 shares
respectively at 30 September 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 is continuing to
burn cash in respect of its research and development activities and that it is
still accruing revenues from its Canadian licensee.
The results 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 continues to be
ahead of schedule and the Company's first ingestible capsule machine is nearing
completion. During October, the Company shipped sample products to one of the
world's leading pharmaceutical companies. The Company anticipates 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.
5
<PAGE>
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 biodegradabe products. During September, the Company delivered to
CES samples of new and improved versions of the Trutona flushable and
biodegradable ultra thin sanitary napkin. The new versions of the sanitary
napkin include a product with wings. Each of the new versions use a new
absorbent core, which greatly improves the general level of absorbency and
facilitates a more even disperal of fluids. The new products have a natural pink
backing sheet and may be individually wrapped in water soluble and biodegradable
film. On [November 1st,] the Company received $147,000 from CES in respect of
the aforementioned agreement.
On July 31st, the Company's new facility in March, Cambridgeshire, 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. The opening ceremony was conducted in the presence of the
Company's US based executive team comprising Greg Bowers, Larry Shattles and
Anthony Soscia during a two-week fact finding visit to the UK. Also present at
the opening ceremony were Michael Daniels and Brian Besco, respectively
President and V.P. Sales and Marketing of CES.
On September 20th, construction work commenced on a 3,000 square feet extension
to the Company's March facility. This work is due for completion during January
2000. The additional space created will be used to house administrative,
accounting and sales and marketing personnel and facilities.
On October 10th, the Company was featured in the Enterprise section of the
Sunday Times, one of the UK's largest Sunday newspapers. The Company continues
to enjoy excellent press coverage in the UK and during the fourth quarter of
this year intends to commence a media campaign in North America.
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 this quarter again accrue entirely from the agreements the Company has
with Consolidated EcoProgress Technologies, Inc. Overheads are higher compared
with the same period last year as the acquisition of BioProgress Technology
Limited had not been completed at this stage last year. The company has
benefited from the sale of 32,400 series B Preferred stock during the quarter at
$2.50 per share. Capital expenditure has been significant during the quarter
with monies expended on refurbishing the March premises and the building of the
first ingestible capsule-manufacturing machine that will be ready next quarter.
The company has repaid $36,690 of short-term loans. The effect of the higher
levels of capital expenditure and lower preference share sales has resulted in
further loans from related parties and an extension in outstanding payables to
fund operating losses this quarter. Cash has consequently dropped during the
period by $167,275. Related parties continue to assist in the funding of the
company. The Company's balance sheet, however, remains sound and receivables
have been significantly reduced in the last quarter of 1999 due to funds
received from Consolidated EcoProgress Technologies, Inc. We expect to reduce
receivables even further during the next quarter.
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 license fees. The
company expects to be able to commence realizing some of its investment in
Consolidated EcoProgress Technologies, Inc over the forthcoming quarters. The
Company continues to investigate a number of other other long-term funding
scenarios and opportunities..
6
<PAGE>
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
7
<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 12th day of November,
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
8
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> OCT-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,159
<SECURITIES> 0
<RECEIVABLES> 291,729
<ALLOWANCES> 0
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<PP&E> 303,828
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<COMMON> 66,694
<OTHER-SE> 5,404,821
<TOTAL-LIABILITY-AND-EQUITY> 8,288,010
<SALES> 37,911
<TOTAL-REVENUES> 37,911
<CGS> 17,697
<TOTAL-COSTS> 427,132
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