-----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, HTIHUNuYeF/4Q9ntCUw1rLpP+noJNgUSDt0uWMUlj7g3imvttZjQOX7B8Mw/09gZ 4RLSehCLHDiFgmFUPwn4Xw== 0000225211-00-000015.txt : 20001013 0000225211-00-000015.hdr.sgml : 20001013 ACCESSION NUMBER: 0000225211-00-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOCONTROL TECHNOLOGY INC CENTRAL INDEX KEY: 0000225211 STANDARD INDUSTRIAL CLASSIFICATION: 3845 IRS NUMBER: 251229323 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-10822 FILM NUMBER: 631823 BUSINESS ADDRESS: STREET 1: 300 INDIAN SPRINGS RD CITY: INDIANA STATE: PA ZIP: 15701 BUSINESS PHONE: 4124290673 MAIL ADDRESS: STREET 1: 300 INDIAN SPRINGS RD CITY: INDIANA STATE: PA ZIP: 15701 FORMER COMPANY: FORMER CONFORMED NAME: BIOCONTROL TECHNOLOGY INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: CORATOMIC INC DATE OF NAME CHANGE: 19861223 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 2000 Commission file number 0-10822 BIOCONTROL TECHNOLOGY, INC. (Exact name of registrant as specified in its charter) Pennsylvania 25-1229323 (State of other jurisdiction (IRS Employer of incorporation or organization) Identification no.) 2275 Swallow Hill Road, Bldg.2500, Pittsburgh, PA 15220 (Address of principal executive offices) (Zip Code) (412) 429-0673 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 X No As of March 31, 2000, 960,514,996 shares of Biocontrol Technology, Inc. common stock, par value $.10 were outstanding. 1 Biocontrol Technology, Inc. and Subsidiaries Consolidated Balance Sheets
(Unaudited) Mar. 31, 2000 Dec. 31, 1999 ------------- ------------- CURRENT ASSETS Cash and equivalents $ 17,521,694 $ 10,827,631 Accounts receivable - net of allowance for doubtful accounts of $63,679 at Mar. 31, 2000 and $63,679 at Dec. 31, 1999 42,760 27,263 Inventory - net of valuation allowance 2,801 10,308 Notes receivable 55,000 200,000 Interest receivable 0 2,701 Prepaid expenses 271,441 192,246 Advances - Officers 125,290 125,290 Other assets 500,000 0 ------------ ------------- TOTAL CURRENT ASSETS 18,518,986 11,385,439 PROPERTY, PLANT AND EQUIPMENT Building 1,207,610 1,207,610 Land 133,750 133,750 Leasehold improvements 1,496,979 1,435,319 Machinery and equipment 4,774,028 4,676,330 Furniture, fixtures & equipment 891,383 841,308 ------------- ------------- Subtotal 8,503,750 8,294,317 Less accumulated depreciation 4,844,499 4,704,539 ------------- ------------- 3,659,251 3,589,778 OTHER ASSETS Related Party Receivables Notes receivable 1,455,976 1,491,261 Interest receivable 22,773 22,023 ------------- ------------- 1,478,749 1,513,284 Allowance for related party receivables (1,329,398) (1,340,560) ------------- ------------ 149,351 172,724 Notes receivable 212,000 12,000 Interest receivable 4,496 4,235 Investment in unconsolidated subsidiaries 1,623,111 485,284 Other assets 36,626 36,376 ------------- ------------- 2,025,584 710,619 ------------- ------------- TOTAL ASSETS $ 24,203,821 $ 15,685,836 ============= ============= The accompanying notes are an integral part of these statements.
2 Biocontrol Technology, Inc. and Subsidiaries Consolidated Balance Sheets (Continued)
(Unaudited) Mar.31, 2000 Dec.31, 1999 ------------- ------------- CURRENT LIABILITIES Accounts payable $ 764,681 $ 759,733 Current portion of long-term debt 4,122,270 4,159,684 Current portion of capital lease obligations 87,337 76,017 Debentures payable 9,850,000 0 Accrued liabilities 1,309,656 1,794,370 Escrow payable 2,700 2,700 ------------- ------------- TOTAL CURRENT LIABILITIES 16,136,644 6,792,504 LONG-TERM LIABILITIES Capital lease obligations 1,304,493 1,336,147 Long - term debt 1,748 2,240 ------------- ------------- 1,306,241 1,338,387 COMMITMENTS AND CONTIGENCIES UNRELATED INVESTORS'INTEREST IN SUBSIDIARY 228,824 0 STOCKHOLDERS' EQUITY Common stock, par value $.10 per share, authorized 1,700,000,000 shares, issued and outstanding 960,514,996 at Mar. 31, 2000 and 956,100,496 at Dec. 31, 1999 96,051,500 95,610,050 Series F 4% convertible preferred stock, par value $10 per share, authorized 500,000 shares issuable in series, shares issued and outstanding 452,000 at March 31, 2000 and 72,000 at December 31, 1999. 4,520,000 720,000 Additional paid-in capital 89,592,738 85,608,192 Warrants 6,673,878 6,791,161 Accumulated deficit (190,306,004) (181,174,458) ------------- ------------- TOTAL STOCKHOLDERS' EQUITY 6,532,112 7,554,945 TOTAL LIABILITIES AND ------------- ------------- STOCKHOLDER' EQUITY $ 24,203,821 $ 15,685,836 ============= ============= The accompanying notes are an integral part of these statements.
3 BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the three months ended March 31, 2000 March 31, 1999 -------------- -------------- Revenues Sales $ 18,998 $ 27,320 Interest income 164,318 26,706 Other income 0 6,767 ------------- ------------- 183,316 60,793 Costs and expenses Cost of products sold 30,660 66,419 Research and development 2,150,323 743,845 Selling, general and administrative 4,282,048 2,443,443 Interest expense 151,757 140,763 Loss on unconsolidated subsidiary 8,750 0 Beneficial convertible debt feature 2,462,500 945,730 ------------- ------------- 9,086,038 4,340,200 ------------- ------------- Loss before unrelated investors' interest (8,902,722) (4,279,407) Unrelated investors' interest in net (income) loss of subsidiary (228,824) 24,162 -------------- ------------- Net loss ($9,131,546) ($4,255,245) ============= ============= Loss per common share ($0.01) ($0.03) ============= ============= The accompanying notes are an integral part of these statements. 4 BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the three months ended March 31, 2000 March 31, 1999 -------------- -------------- Cash flows used by operating activities: Net loss ($9,131,546) ($4,255,245) Adjustments to reconcile net loss to net cash used by operating activities: Depreciation 157,056 441,549 Amortization 77,207 0 Loss on disposal of assets 15,874 0 Loss on unconsolidated subsidiary 8,750 0 Unrelated investors' interest in subsidiary 228,824 (24,162) Stock issued in exchange for services 0 64,463 Beneficial convertible debt feature 2,462,500 945,730 Warrants granted 190,298 0 Warrants and warrant extensions by subsidiaries 281,493 0 Allowance for related party note receivable (11,162) (18,956) (Increase) decrease in accounts receivable (15,497) (5,584) (Increase) decrease in inventories 821,880 4,877 Increase (decrease) in inventory valuation allowance (814,373) 0 (Increase) decrease in prepaid expenses (79,195) 45,053 (Increase) decrease in other assets (500,250) (5,810) Increase (decrease) in accounts payable 4,948 (805,773) Increase (decrease) in other liabilities (484,714) (101,897) ------------ ------------ Net cash flow used by operating activities (6,787,907) (3,715,755) ------------ ------------ Cash flows from investing activities: Purchase of property, plant and equipment (242,401) (8,764) Disposal of property, plant and equipment 0 175,000 (Increase) decrease in notes receivable (55,000) 2,634 Payments received on notes receivable 35,285 0 Deposit on equipment 0 (32,809) (Increase) decrease in interest receivable 1,690 (21,543) Acquisition of unconsolidated subsidiary interests (1,223,784) 0 -------------- ------------ Net cash provided (used) by investing activities (1,484,210) 114,518 -------------- ------------ Cash flows from financing activities: Proceeds from warrants exercised 899,420 900,000 Proceeds from sale of Preferred stock-Series F 4,275,000 0 Proceeds from debentures payable 9,850,000 4,870,000 Payments on notes payable (37,906) (288,844) Payments on capital lease obligations (20,334) (34,393) -------------- ------------ Net cash provided by financing activities 14,966,180 5,446,763 -------------- ------------ Net increase (decrease) in cash 6,694,063 1,845,526 Cash and cash equivalents, beginning of year 10,827,631 125,745 ------------- ----------- Cash and cash equivalents, end of year $17,521,694 $1,971,271 ============== ============ The accompanying notes are an integral part of these statements. BIOCONTROL TECHNOLOGY, INC. NOTES TO FINANCIAL STATEMENTS NOTE A - Basis of Presentation The accompanying consolidated financial statements of Biocontrol Technology, Inc. (the "Company") and its 89.9% owned subsidiary, Coraflex, Inc., and its 52% owned subsidiary, Diasensor.com, Inc., and its 67% owned subsidiary, Petrol Rem, Inc., and its 99.1% owned subsidiary, IDT, Inc., and its 58.4% owned subsidiary, ICTI, Inc., have been prepared in accordance with generally accepted accounting principles for interim financial information, and with the instructions to Form 10-Q and Rule 10-O Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes included in the Company's annual report on Form 10-K for the year ended December 31, 1999. NOTE B - Net Loss Per Common Share Net loss per common share is based on the average number of outstanding common shares. The loss per share does not include common stock equivalents since the effect would be anti-dilutive. The weighted average shares used to calculate the loss per share for the period ending March 31, 2000, and March 31, 1999, were 957,411,668 and 156,110,750, respectively. NOTE C - Subordinated Convertible Debentures During the three months ended March 31, 2000, the Company issued subordinated 4% convertible debentures totaling $9,850,000. Such convertible debentures were issued pursuant to Regulation D, and /or Section 4(2), and have a one-year maturity and are not saleable or convertible for a minimum of 90 days from issuance. A $2,462,500 expense was recognized for the beneficial conversion feature of these debentures. NOTE D - Stockholders Equity During the three months ended March 31, 2000, the Company raised $4,275,000 through sales of its Series F-Preferred Stock and $899,420 from warrants exercised. The Company's common stock is currently traded on the electronic bulletin board under the trading symbol "BICO". NOTE E - Legal Proceedings During April 1998, the Company and its affiliates were served with subpoenas by the U.S. Attorneys' office for the U.S. District Court for the Western District of Pennsylvania. The subpoenas requested certain corporate, financial and scientific documents and the Company continues to provide documents in response to such requests. On April 30, 1996, a class action lawsuit was filed against the Company, Diasense, Inc., and individual officers and directors. The suit, captioned Walsingham v. Biocontrol Technology,etal., has been certified as a class action, and is pending in the U.S. District Court for the Western District of Pennsylvania. The suit alleges misleading disclosures in connection with the Noninvasive Glucose Sensor and other related activities. By mutual agreement of the parties, the suit remains in the pre-trial pleading stage, and the Company is unable to determine the outcome or its impact upon the Company at this time. NOTE F - Investments in Unconsolidated Subsidiaries In January 2000, the company acquired a twenty-five percent (25%) interest in Insight Data Link.com, Inc. for $100,000. Insight is a Pennsylvania corporation formed to engage in the business of acting as an internet clearinghouse for persons seeking to acquire, and persons having available, shopping mall space, as well as software development for related projects. In January 2000, Diasensor.com, acquired a ten percent (10%) interest in MicroIslet, Inc. for an investment of $500,000. MicroIslet is a California company, which has licensed several diabetes research technologies from Duke University with a specific focus on optimizing microencapsulated islets for transplantation. Also, during the quarter ended March 31, 2000 the Company invested an additional $123,000 in American Inter-Metallics, Inc. ("AIM") an unconsolidated subsidiary interest initially acquired during 1999. AIM has its operations in Rhode Island, and is developing a product that enhances performance in rockets and other machinery by increasing the burn rate of propellants. In March 2000, Diasensor.com, acquired an equity interest in Diabecore Medical, Inc., a Toronto-based company working to develop a new insulin for the treatment of diabetes, for $500,784. With this initial investment, the Company owns 12% of Diabecore. These investments are being reported on the equity basis and differences in the investment and the underlying net assets of the unconsolidated subsidiaries are being amortized as goodwill over a 5 year period. Management's Discussion and Analysis of Financial Condition and Cash Flows Liquidity and Capital Resources Cash increased to $17, 521,694 as of March 31, 2000 from $10,827,631 as of December 31, 1999. The increase was generated from sales of the Company's securities, including: $9,850,000 from sales of subordinated convertible debentures; $4,275,000 from sales of Series F preferred stock; and $899,420 from warrants exercised. The Company's Series F Convertible Preferred Stock is not secured by any assets, and it is convertible by its holders beginning 120 days from issuance. The preferred stock can be converted to our common stock at a price that is determined by computing 75% of the average closing bid price for the four days prior to and the day of conversion - or a 25% discount to a five-day average trading price. There is no minimum conversion price. The subordinated convertible debentures are not secured by any assets, and are subordinate to corporate debt, except for related party debt. The debentures are convertible beginning 90 days from issuance. They can be converted to common stock at a price that is determined by computing 80% of the average closing bid price for the four days prior to and the day of conversion - or a 20% discount to a five-day average trading price. There is no minimum conversion price. During the quarter ended March 31, 2000 the Company's net cash flow used by operating activities was ($6,787,907). During the same quarter, the Company had net cash flow used by investing activities of ($1,484,210) due primarily to the investments described in Note F. Net inventory decreased from $10,308 as of December 31, 1999 to $2,801 as of March 31, 2000 as a result of certain evaluations and write-offs of existing inventory. Current (short-term) notes receivable increased by $55,000 due to a note to one individual that is being repaid currently, with a full payoff by August 1, 2000, and decreased by $200,000 when a short-term note was reclassified as a long-term note. Interest receivable decreased from $2,701 as of December 31, 1999 to zero at March 31,2000 due to timing of interest payments on certain debt. Prepaid expenses increased from $192,246 at December 31, 1999 to $271,441 as of March 31, 2000 due to expenses incurred in the ordinary course of business. Other current assets of $500,000 resulted from a deposit made during the first quarter on a transaction that was later cancelled; the Company expects to have the deposit returned during the second quarter of 2000. Leasehold improvements increased by $61,660; machinery and equipment increased by $97,688; and furniture, fixtures and equipment increased $50,075 during the first quarter due to purchases made in connection with the noninvasive glucose sensor project. Related party receivables decreased by $35,285 during the first quarter due to scheduled repayments on related party debt. Notes receivable increased by $200,000 when a note previously carried as a current asset was reclassified as a long-tem asset. Investment in unconsolidated subsidiaries increased from $485,284 as of December 31, 1999 to $1,623,111 at March 31,2000 primarily as a result of the following investments: $100,000 in Insight Data Link.com, Inc; $500,000 in MicroIslet, Inc.; $500,784 in Diabecore Medical, Inc.; and $123,000 in American Inter-Metallics, Inc. All the investments were initial investments by the Company, with the exception of American-Inter-Metallics, in which the Company has invested an aggregate of $648,000 as of March 31, 2000 (See Note F). Debenture payable of $9,850,000 were incurred because the Company sold its convertible subordinated debentures during the first quarter to raise capital to fund operations. Accrued liabilities decreased from $1,794,370 to $1,309,656 when accrued bonuses were paid to employees during the first quarter. Results of Operations Sales and corresponding costs of products sold during the first quarter decreased to $18,998 and $30,660 respectively in 2000 from $27,230 and $66,419 in 1999. The decreases were due to fluctuations in sales of the Company's various products. Interest income increased during the first quarter to $164,318 in 2000 from $26,706 in 1999. The increase occurred because the Company's had more funds to invest. Other Income decreased from $6,767 during the first quarter of 1999 to zero during the first quarter of 2000. The decrease was due to the loss of certain rental income. Research and Development expenses during the first quarter increased to $2,150,323 in 2000 from $743,845 in 1999. The increase was due to an additional activity in connection with the Noninvasive Glucose Sensor project, made possible due to the availability of additional funds. Selling, General and Administrative expenses during the first quarter increased to $4,282,048 in 2000 from $2,443,443 in 1999. The increase was due to the Company's expenses in connection with its sales of securities, increases in salaries, and expenses recognized for warrants granted. The Company incurred a loss on unconsolidated subsidiary during the first quarter of $8,750. This loss resulted form the Company absorbing a part of a loss incurred by an unconsolidated subsidiary; the Company's share of the loss is determined by applying the Company's ownership percentage to the total loss incurred. Beneficial conversion terms included in the Company's convertible debentures are recognized as expense and credited to additional paid in capital at the time the associated debentures are issued. The Company recognized $2,462,500 of expense in connection with its issuance of Subordinated Convertible Debentures in the first quarter of 2000 compared to $945,730 for the same period in 1999. This increase in 2000 was primarily the result of a greater amount of debentures being issued. PART II - OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (A) Exhibits (B) Reports on Form 8-K (1) The Company filed a Form 8-K report on March 17, 2000, for the event dated March 14, 2000. The item listed was Item 5, Other Events; and Item 7(c), Exhibits. (2) The Company filed a Form 8-K report on April 4, 2000, for the event dated March 28, 2000. The item listed was Item 5, Other Events; and Item 7(c), Exhibits. (3) The Company filed a Form 8-K report on April 5, 2000, for the event dated March 30, 2000. The item listed was Item 5, Other Events; and Item 7(c), Exhibits. (4) The Company filed a Form 8-K report on April 18, 2000, for the event dated April 11, 2000. The item listed was Item 5, Other Events; and Item 7(c), Exhibits. 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 on this 15th day of May, 2000. . BIOCONTROL TECHNOLOGY, INC. By /s/ Fred E. Cooper Fred E. Cooper CEO -----END PRIVACY-ENHANCED MESSAGE-----