-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KON1OKtythqIykOgPyadvMTQYV6L2yO6x+q15lS7lOSPS97FQWNnTIv11OKGzTk1 Y1iYGsIDI0MAvZXBSyQpyQ== 0001005477-97-001390.txt : 19970515 0001005477-97-001390.hdr.sgml : 19970515 ACCESSION NUMBER: 0001005477-97-001390 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOSPHERICS INC CENTRAL INDEX KEY: 0000012239 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT [8700] IRS NUMBER: 520849320 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-05576 FILM NUMBER: 97603985 BUSINESS ADDRESS: STREET 1: 12051 INDIAN CREEK CT CITY: BELTSVILLE STATE: MD ZIP: 20705 BUSINESS PHONE: 3014193900 MAIL ADDRESS: STREET 1: 12051 INDIAN CREEK COURT CITY: BELTSVILLE STATE: MD ZIP: 20705 FORMER COMPANY: FORMER CONFORMED NAME: BIOSPHERICS RESEARCH INC DATE OF NAME CHANGE: 19720404 10QSB 1 FORM 10QSB - -------------------------------------------------------------------------------- U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark one) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission file number 0-5576 BIOSPHERICS(R) INCORPORATED - -------------------------------------------------------------------------------- (Exact name of small business issuer in its charter) Delaware 52-0849320 ------------------------------- ------------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 12051 Indian Creek Court, Beltsville, Maryland 20705 - -------------------------------------------------------------------------------- (Address of principal executive offices) 301-419-3900 - -------------------------------------------------------------------------------- (Issuer's telephone number) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| The number of outstanding shares of the registrant's Common Stock on April 23, 1997, was 7,995,218. Transitional Small Business Disclosure Format (Check One): Yes |_| No |X| - -------------------------------------------------------------------------------- Biospherics Incorporated ---------- Form 10-QSB Index Page No. -------- Face Sheet............................................................... 1 Index.................................................................... 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements: Statements of Operations for the three months ended March 31, 1997 and 1996 (unaudited)..................... 3 Balance Sheet at March 31, 1997 (unaudited)................... 4 Statements of Cash Flows for the three months ended March 31, 1997 and 1996 (unaudited)..................... 5 Notes to the Financial Statements (unaudited)................. 6 Item 2. Management's Discussion and Analysis or Plan of Operation..... 7 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.............................. 9 Signature .............................................................. 10 -2- Biospherics Incorporated ---------- Part I - Financial Information Item 1. Financial Statements Statements of Operations (unaudited)
Three Months Ended March 31, ---------------------------- 1997 1996 ----------- ----------- Revenues Contract revenues $ 3,515,645 $ 2,937,621 Licensing fee revenue 750,000 -- Other 4,129 3,808 ----------- ----------- Total revenues 4,269,774 2,941,429 =========== =========== Operating expenses Direct contract costs and operating 2,679,093 2,141,514 General and administrative 677,240 616,714 Research and development 93,892 112,467 Depreciation and amortization 184,312 111,159 ----------- ----------- Total operating expenses 3,634,537 2,981,854 ----------- ----------- Income (loss) from operations 635,237 (40,425) ----------- ----------- Other income (expense) Interest, net 2,218 (22,752) Other, net 200 (619) ----------- ----------- Income (loss) from continuing operations 637,655 (63,796) Income tax (expense) benefit (223,179) 24,243 ----------- ----------- Net income (loss) before discontinued operations 414,476 (39,553) Loss from discontinued operations, net of applicable income tax benefit of $19,294 in 1996 -- (31,478) ----------- ----------- Net income (loss) $ 414,476 $ (71,031) =========== =========== Net income (loss) per share data: Income (loss) per share from continuing operations $ 0.04 $ (0.01) Income (loss) per share from discontinuing operations 0.00 0.00 ----------- ----------- Net income (loss) per share $ 0.04 $ (0.01) =========== ===========
See notes to financial statements. -3- Biospherics Incorporated ---------- Balance Sheet March 31, 1997 (unaudited) ASSETS Current assets Cash and cash equivalents $ 2,710,634 Trade accounts receivable, net 2,606,876 Costs and estimated earnings in excess of billings on contracts 210,401 Other accounts receivable 165,696 Current deferred income taxes 83,247 Prepaid expenses and other assets 392,987 ----------- Total current assets 6,169,841 Property and equipment, net 1,564,046 Patents, net 146,999 Restricted cash-security deposit 27,408 ----------- Total assets $ 7,908,294 =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Bank line of credit $ 510,000 Accounts payable and accrued expenses 1,227,623 Accrued salaries and benefits 478,536 Accrued vacation 154,533 Income taxes payable 283,457 Deferred rent 105,943 Deferred revenue 1,290,990 Note payable, current 108,729 ----------- Total current liabilities 4,159,811 Deferred compensation 47,844 Deferred income taxes 939 Deferred rent 63,217 Note payable, long term 79,495 ----------- Total liabilities 4,351,306 Redeemable common stock 167,320 Stockholders' equity Common stock, $.005 par value, 18,000,000 shares authorized, 23,846 7,988,618 shares outstanding Paid-in capital in excess of par value 1,421,931 Treasury stock, 43,006 shares at cost (261,603) Retained earnings 2,205,494 ----------- Total stockholders' equity 3,389,668 ----------- Total liabilities and stockholders' equity $ 7,908,294 =========== See notes to financial statements. -4- Biospherics Incorporated ---------- Statements of Cash Flows (unaudited)
Three Months Ended March 31, ---------------------------- 1997 1996 ----------- --------- Operating activities Net income (loss) $ 414,476 $ (71,031) Adjustment to reconcile net income to net cash provided by operating activities: Gain from sale of discontinued operations -- (31,482) Write down of other assets 120,716 -- Depreciation and amortization 184,312 114,250 Loss on sales and retirements of property and equipment -- 576 Provision for uncollectible accounts 5,067 41,024 Deferred income taxes -- (77,721) Changes in assets and liabilities: -- Trade accounts receivable (595,818) (361,985) Costs and estimated earnings in excess of billings on contracts (91,478) (135,239) Other receivables 28,594 426,703 Prepaid expenses and other assets 12,152 (180,840) Accounts payable and accrued expenses 81,868 58,334 Accrued salaries and benefits 61,777 91,057 Accrued vacation 25,631 6,570 Income taxes payable 180,679 (66,010) Deferred rent (32,847) (11,085) Deferred revenue 1,148,102 -- Liquidation of discontinued operations assets -- 180,386 ----------- --------- Net cash provided by (used in) operating activities 1,543,231 (16,493) ----------- --------- Investing activities Proceeds from sale of ELSD, net of expenses -- 432,295 Sale of property and equipment -- 1,000 Purchases of property and equipment (54,961) (145,120) Additions to patent costs (1,446) (27,937) ----------- --------- Net cash (used in) provided by investing activities (56,407) 260,238 ----------- --------- Financing activities Net borrowings (repayments) under line of credit 275,000 (11,000) Net change in book overdraft 66,730 (162,218) Payments on long term loan (26,321) (15,013) Exercise of employee stock options 112,288 7,188 ----------- --------- Net cash provided by (used in) financing activities 427,697 (181,043) ----------- --------- Net increase in cash and cash equivalents 1,914,521 62,702 Cash and cash equivalents, beginning of period 796,113 29,861 ----------- --------- Cash and cash equivalents, end of period $2,710,631 $ 92,563 ========== =========
See notes to financial statements. -5- Biospherics Incorporated ---------- Notes to Financial Statements (unaudited) 1. Basis of Presentation The accompanying interim financial statements of Biospherics Incorporated (the "Company") do not include all of the information and disclosures generally required for annual financial statements and are unaudited. In the opinion of management, all material adjustments considered necessary for a fair presentation of the results of interim periods have been included. This report should be read in conjunction with the Company's Annual Report on Form 10-KSB for the year ended December 31, 1996. 2. Net Income (Loss) Per Share Net income (loss) per share is computed using the weighted average number of common shares outstanding during the period. In the first quarter of 1997, outstanding common stock equivalents consisted of stock options. The effect of fully dilutive earnings per share is equivalent to the primary earnings per share and therefore is not presented in the statements of operations. Because of the net loss in the first quarter of 1996, outstanding common stock equivalents were not included in the calculation of earnings per share. 3. Establish Information Services Division ("ISD") as a Wholly Owned Subsidiary On February 18, 1997, the Board of Directors approved a plan to convert the Information Services Division (ISD) into a wholly-owned subsidiary. The plan will be proposed to Shareholders at the Company's May 15, 1997, Annual Meeting. The new company will continue all of the current ISD business and will feature an expansion of its healthcare business into demand management. The subsidiary will evaluate methods of increasing its capitalization, including a possible IPO, in order to accelerate growth. Under the reorganization, ISD, which to date has funded all of the Company's nonfattening sugar (D-tagatose) development costs, will be free to concentrate on opportunities in its primary field, the healthcare market. With the recent worldwide licensing of D-tagatose to MD Foods Ingredients of Denmark, the Company has received funds that, together with anticipated continuing royalties, will allow it to continue to develop other proprietary products. 4. New accounting pronouncement In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (FAS 128), which is effective for years ending after December 15, 1997. FAS 128 simplifies the existing earnings per share (EPS) computations under Accounting Principles Board Opinion No. 15. FAS 128 revises the disclosure requirements and increases the comparability of EPS data on an international basis. In simplifying the EPS computations, the presentation of primary EPS is replaced with basic EPS, with the principal difference being that common stock equivalents are not considered in computing basic EPS. In addition, FAS 128 requires dual presentation of basic and diluted EPS. If the new pronouncement were applied, the basic earnings per share would have been $.005 and the diluted earnings per share would have been $.004 for the three months ended March 31, 1997. -6- Biospherics Incorporated ---------- ITEM 2. Management's Discussion and Analysis or Plan of Operation Results of Operations Certain oral and written statements of management of the Company included in the Form 10-QSB may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Company realized net income of $414,000 for the first quarter of 1997, compared with net loss of $71,000 during the first quarter of 1996. Revenues increased 45% to $4,270,000 in the first quarter of 1997 compared to $2,941,000 the first quarter of 1996. The increase in revenue was primarily related to a $750,000 payment received from MD Foods Ingredients amba of Denmark (MDF) upon successful completion of their due diligence and an increase in operating revenue from current contracts of $578,000. As reflected in the chart below, the increase in operating profit was a direct result of the payment from MDF, offset by one-time costs associated with establishing the Information Services Division as a wholly-owned subsidiary. Details are fully described below: Three Months Ended March 31, Information Services 1997 1996 - ------------------------------------------ ----------- ----------- Revenues $ 3,480,000 $ 2,938,000 Operating expenses 3,535,000 2,853,000 ----------- ----------- Operating (loss) profit $ (55,000) $ 85,000 ----------- ----------- BioTech Programs - ------------------------------------------ Revenues $ 790,000 $ 4,000 Operating expenses 100,000 129,000 ----------- ----------- Operating profit (loss) $ 690,000 $ (125,000) ----------- ----------- Information services revenues were $3,480,000, which reflects an increase of 18% or $542,000, compared with revenues of $2,938,000 during the first quarter of 1996. The increase in revenues is directly related to current contracts. Operating profit decreased by $140,000 from the first quarter of 1996. The decrease in profitability was primarily a result of $85,000 in one-time costs associated with establishing the Information Services Division as a wholly-owned subsidiary, and of $120,000 in software development costs associated with a major commercial contract. BioTech operating profit increased by $815,000, resulting from the licensing agreement with MD Foods Ingredients amba of Denmark. On January 6, 1997, the Company received an additional payment under the agreement of $1,750,000, of which $750,000 represented the remaining portion of the initial non-refundable payment and $1,000,000 was a non -refundable advance against future royalties, recoverable at 50% of such annual royalties. In addition, MD Foods supports Biospherics' efforts in helping to commercialize D-tagatose to the extent of approximately $250,000 per year for 1996/1997 and 1997/1998. The decrease in operating expenses was primarily related to efforts completed in 1996 for the start up of a pilot plant to produce D-tagatose. The pilot plant was designed in cooperation with MD Foods to produce samples of the nonfattening sugar for evaluation by food manufacturers and to obtain data for the design of the first commercial plant. The Company continues to petition for approval of its safe-for-humans pesticide, WingDingerTM, by the U.S. Environmental Protection Agency (EPA). The EPA has reviewed the Company's application for approval of this novel pesticide and has found the safety data acceptable but requested a faster kill rate. The EPA feels that the kill rate for this obviously safe compound should be faster because the target insect, the common housefly, is a disease vector. Development efforts continued to design a product that will allow faster kill rates of common flies while examining non-disease vector pests for efficacy. -7- Biospherics Incorporated ---------- General and administrative costs increased by $61,000 compared to the first quarter 1996. The increase in cost is primarily a result of higher rent and other facility expenses allocated to G&A from the sale of the Environmental and Laboratory Services Division ("ELSD"). Liquidity and Capital Resources On February 18, 1997, the Board of Directors approved a plan to convert ISD into a wholly-owned subsidiary. The plan will be proposed to Shareholders at the Company's May 15, 1997, Annual Meeting. The new company will continue all of the current ISD business and will feature an expansion of its healthcare business into demand management. The subsidiary will evaluate methods of increasing its capitalization, including a possible IPO in order to accelerate growth. Under the reorganization, ISD, which to date has funded all of the Company's nonfattening sugar (D-tagatose) development costs, will be free to concentrate on opportunities in its primary field, the healthcare market. With the recent worldwide licensing of D-tagatose to MD Foods Ingredients of Denmark, the Company has received funds that, together with anticipated continuing royalties, will allow it to continue to develop other proprietary products. On March 17, 1997, the Company signed a commitment letter to borrow up to $1 million for financing start-up equipment costs related to potential new contracts. The new Promissory Note will be collateralized by new equipment purchases and will accrue interest at a rate of 2 3/4% over corresponding treasury index. The Company will be required to make monthly payments of interest and principal according to the terms of the new Promissory Note. Cash flow from operating activities for the first quarter of 1997 reflects a net cash inflow of $1,543,000. The increase primarily resulted from a $1,750,000 payment received for signing the licensing agreement with MD Foods Ingredients amba of Denmark, offset by a decrease in cash associated with an increased accounts receivable balance of $596,000 from three major contracts. -8- Biospherics Incorporated ---------- PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K No reports on Form 8-K were required to be filed for the first quarter of the year ending December 31, 1997.
Three Months Ended Exhibit 11. Computation of Earnings per Share March 31, ----------------------- 1997 1996 ---------- ----------- Net earnings $ 414,476 $ (71,031) ---------- ----------- Weighted average shares outstanding 7,930,956 7,843,374 Dilutive common stock equivalents for primary earnings per share 1,987,204 -- ---------- ----------- Weighted average shares and common stock equivalent shares outstanding or primary earnings per share 9,918,160 7,843,374 Additional equivalent shares assuming full dilution -- -- ---------- ----------- Weighted average shares and common equivalent shares for fully diluted earnings per share 9,918,160 7,843,374 ---------- ----------- Earnings per share Primary $ 0.04 $ (0.01) ---------- ----------- Fully diluted $ 0.04 $ (0.01) ---------- -----------
-9- Biospherics Incorporated ---------- Signatures In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Biospherics Incorporated Date: May 15, 1997 By: /s/ Richard C. Levin ----------------------------- Richard C. Levin Chief Operating Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 MAR-31-1997 2,710,634 0 3,042,848 (59,875) 0 6,169,841 3,159,054 (1,595,008) 7,908,294 4,159,811 0 0 0 23,846 0 7,908,294 3,515,645 4,269,774 2,677,093 3,634,537 0 0 25,172 637,655 223,179 414,476 0 0 0 414,476 .04 .04
-----END PRIVACY-ENHANCED MESSAGE-----