-----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, GjARpk30y/Kt84t7eNh3ZLg3oJH5jjXYgQy2MjGceFomuffqXSVF9ai+TRJ6uQ1O eBnvUAJAhqmvdWTBT/ZeKA== 0000225211-99-000035.txt : 19990817 0000225211-99-000035.hdr.sgml : 19990817 ACCESSION NUMBER: 0000225211-99-000035 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BIOCONTROL TECHNOLOGY INC CENTRAL INDEX KEY: 0000225211 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [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: 99690618 BUSINESS ADDRESS: STREET 1: 300 INDIAN SPRINGS RD STREET 2: BLDG 2500 CITY: INDIANA STATE: PA ZIP: 15701 BUSINESS PHONE: 4123491811 MAIL ADDRESS: STREET 1: 300 INDIAN SPRINGS RD STREET 2: BLDG 2500 CITY: INDIANA STATE: PA ZIP: 15701 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 June 30, 1999 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.) 300 Indian Springs Road, Indiana, Pennsylvania 15701 (Address of principal executive offices) (Zip Code) (412) 349-1811 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 June 30, 1999, 648,671,008 shares of Biocontrol Technology, Inc. common stock, par value $.10 were outstanding. 1 Biocontrol Technology, Inc. and Subsidiaries Consolidated Balance Sheets
Jun. 30, 1999 Dec. 31, 1998 ------------- ------------- CURRENT ASSETS Cash and equivalents $ 10,336,030 $ 125,745 Accounts receivable - net of allowance for doubtful accounts 76,429 55,959 Inventory - net of valuation allowance 570 74,515 Prepaid expenses 149,441 170,544 ------------ ------------- TOTAL CURRENT ASSETS 10,562,470 426,763 PROPERTY, PLANT AND EQUIPMENT Building 1,207,610 1,429,906 Land 133,750 133,750 Construction in progress 0 0 Leasehold improvements 1,477,573 1,477,573 Machinery and equipment 4,809,809 5,014,103 Furniture, fixtures & equipment 831,072 794,740 ------------- ------------- Subtotal 8,459,814 8,850,072 Less accumulated depreciation 4,432,918 4,244,650 ------------- ------------- 4,026,896 4,605,422 OTHER ASSETS Related Party Receivables Notes receivable - related parties 1,567,649 1,223,900 Interest receivable - related parties 19,893 155,628 Advances-Officers 0 90,779 ------------- ------------- 1,587,542 1,470,307 Allowance for related party receivables (1,250,504) (1,270,307) ------------- ------------ 337,038 200,000 Notes receivable 12,000 142,493 Interest receivable 3,705 19,778 Goodwill, net of amortization 1,892,374 4,423,421 Deposit on equipment 45,547 0 Patents, net of amortization 267 2,433 Other assets 350,000 15,259 ------------- ------------- 2,303,893 4,603,384 ------------- ------------- TOTAL ASSETS $ 17,230,297 $ 9,835,569 ============= ============= The accompanying notes are an integral part of these statements.
2 Biocontrol Technology, Inc. and Subsidiaries Consolidated Balance Sheets (Continued)
Jun. 30, 1999 Dec. 31, 1998 ------------- ------------- CURRENT LIABILITIES Accounts payable $ 529,200 $ 1,750,188 Current portion of long-term debt 4,108,620 4,552,178 Current portion of capital lease obligations 70,925 99,061 Debentures payable 10,575,000 2,825,000 Accrued liabilities 578,134 1,096,644 Escrow payable 2,700 2,700 ------------- ------------- TOTAL CURRENT LIABILITIES 15,864,579 10,325,771 LONG-TERM LIABILITIES Capital lease obligations 1,373,532 1,412,880 ------------- ------------- 1,373,532 1,412,880 UNRELATED INVESTORS'INTEREST IN SUBSIDIARY 21,848 24,162 STOCKHOLDERS' EQUITY (DEFICIT) Common stock, par value $.10 per share, authorized 975,000,000 shares, issued and outstanding 648,671,008 at Jun. 30, 1999 and 420,773,568 at Dec. 31, 1998 64,867,101 42,077,357 Additional paid-in capital 86,273,029 92,725,285 Notes receivable issued for common stock - related party 0 (25,000) Warrants 6,396,994 6,396,994 Accumulated deficit (157,566,786) (143,101,880) ------------- ------------- TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (29,662) (1,927,244) -------------- -------------- TOTAL LIABILITIES AND STOCKHOLDER' EQUITY (DEFICIT) $ 17,230,297 $ 9,835,569 ============= ============= The accompanying notes are an integral part of these statements.
3 BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
For the six months ended For the three months ended Jun. 30, Jun. 30, 1999 1998 1999 1998 -------------- -------------- -------------- -------------- Revenues Sales $ 78,428 $ 933,441 $ 51,108 $ 475,736 Interest income 60,758 60,594 34,052 15,116 Other income 14,397 0 7,630 0 -------------- -------------- -------------- -------------- 153,583 994,035 92,790 490,852 Costs and expenses Cost of products sold 132,991 498,860 66,572 229,880 Research and development 2,154,759 4,013,632 1,410,914 1,360,098 Selling, general and administrative 8,132,276 5,937,153 5,688,833 4,058,399 Warrant extensions - Subsidiary 0 1,870,000 0 1,870,000 Interest expense 194,253 205,658 53,490 112,851 Beneficial convertible debt feature 4,006,524 2,631,071 3,060,794 670,833 -------------- -------------- -------------- -------------- 14,620,803 15,156,374 10,280,603 8,302,061 -------------- -------------- -------------- -------------- Loss before unrelated investors' interest (14,467,220) (14,162,339) (10,187,813) (7,811,209) Unrelated investors' interest in net loss of subsidiary 2,314 1,032,005 (21,848) 967,377 -------------- -------------- -------------- -------------- Net loss ($14,464,906) ($13,130,334) ($10,209,661) ($6,843,832) ============== ============== ============== ============== Loss per common share ($0.03) ($0.06) ($0.02) ($0.03) ============== ============== ============== ============== See notes to consolidated financial statements.
4 BIOCONTROL TECHNOLOGY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
For the six months ended For the three months ended Jun. 30, Jun. 30, 1999 1998 1999 1998 -------------- -------------- -------------- -------------- Cash flows used by operating activities: Net loss ($14,464,906) ($13,130,334) ($10,209,661) ($6,843,832) Adjustments to reconcile net loss to net cash used by operating activities : Depreciation and amortization 880,777 768,884 439,228 423,567 Reduction in goodwill 2,000,000 0 2,000,000 0 Unrelated investors' interest in subsidiary (2,314) (1,032,005) 21,848 (967,377) Warrants granted by subsidiary 496,536 0 496,536 0 Warrant extensions by subsidiary 0 1,870,000 0 1,870,000 Debenture interest converted to stock 22,070 72,665 22,070 53,800 Premium for extention on debenture 0 680,500 0 680,500 Beneficial convertible debt feature 4,006,524 2,631,071 3,060,794 670,833 Acquistion of ICTI 0 621,517 0 871,517 Stock issued in exchange for services 64,463 (17,688) 0 7,499 (Increase) decrease in receivables (20,470) 314,221 (14,886) 218,869 (Increase) decrease in inventories 73,945 (30,941) 69,068 2,800 (Increase) decrease in prepaid expenses 21,103 (16,833) (23,950) 4,913 (Increase) decrease in other assets (355,810) (4,469) (350,000) 4,074 (Decrease) increase in accounts payable (1,096,090) 698,817 (290,317) 841,682 Increase in other liabilities (466,053) 422,969 (364,156) 489,141 (Decrease) increase in allowance for related party recv. (19,803) (1,743) (847) (1,743) Impairment loss 283,208 0 283,208 0 -------------- -------------- -------------- -------------- Net cash flow (used) by operating activities (8,576,820) (6,153,369) (4,861,065) (1,673,757) -------------- -------------- -------------- -------------- Cash flows from investing activities: Disposal of property, plant, and equipment 175,000 0 0 0 Purchase of property, plant and equipment (121,038) (784,082) (112,274) (48,118) (Increase) in notes receivable (49,341) (825,050) (51,975) (175,050) (Increase) in interest receivable (22,345) (33,844) (802) (19,212) Deposit on equipment (45,547) 0 (12,738) 0 Acquisition of ICTI 0 (1,030,000) 0 (1,030,000) -------------- -------------- -------------- -------------- Net cash provided (used) by investing activities (63,271) (2,672,976) (177,789) (1,272,380) -------------- -------------- -------------- -------------- Cash flows from financing activities: Proceeds from public offering 19,361,418 6,945,000 13,591,418 1,725,000 Payments on notes payable (443,558) (528,634) (154,714) (374,474) Payments on capital lease obligations (67,484) (54,553) (33,091) (28,781) -------------- -------------- -------------- -------------- Net cash provided by financing activities 18,850,376 6,361,813 13,403,613 1,321,745 -------------- -------------- -------------- -------------- (Decrease) increase in cash and equivalents 10,210,285 (2,464,532) 8,364,759 (1,624,392) -------------- -------------- -------------- -------------- Cash and equivalents, beginning of period 125,745 2,759,067 1,971,271 1,918,927 -------------- -------------- -------------- -------------- Cash and equivalents, end of period $10,336,030 $ 294,535 $10,336,030 $ 294,535 ============== ============== ============== ============== See notes to consolidated financial 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, Diasense, 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, 1998. 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 June 30, 1999, and June 30, 1998, were 535,289,451 and 202,083,594, respectively. NOTE C - Stockholders Equity During the six months ended June 30, 1999, the Company raised $19,361,418 in connection with its public offering. (See "Management's Discussion and Analysis"). The Company's common stock is currently traded on the electronic bulletin board. NOTE D - Goodwill The company recognized $5,310,501 of goodwill in connection with a Stock Purchase Agreement dated February 20, 1998 to acquire 58.4% of International Chemical Technologies, Inc. For purposes of amortizing this goodwill, Management has determined a useful life of 5 years. In the quarter ended June 30, 1999, management recorded a charge of $ 2,000,000 based upon a reevaluation of goodwill. 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 which the company denies. 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 - Year 2000 Issue The Company is currently working to resolve the potential impact of the Year 2000 on the processing of date-sensitive information. The Year 2000 Issue is the result of computer programs being written using two digits (rather than four) to define the applicable year. Programs which are susceptible to problems after December 31, 1999 are those which recognize a date using "00" as the year 1900 rather than the year 2000, which could result in miscalculations or system failures. Based upon a review of its own internal programs and software, the Company currently believes that the Year 2000 will not pose significant operational problems to its information systems, because such systems are already compliant. In addition, ChaseMellon Shareholder Services, the Company's transfer agent, has disclosed that it will be Year 2000 compliant and that no interruptions in service will occur. The Company's common stock currently trades on the electronic bulletin board; Nasdaq and its parent, the NASD, have analyzed their products and systems; are addressing their Year 2000 issues; and are implementing a plan to test their systems and to remediate any Year 2000 problems. As of this date, Nasdaq has not made a definitive statement regarding when it will be compliant, but has stated that it is making all necessary changes to its trading systems. The Company's current estimates indicate that the costs of addressing potential problems are not expected to have a material impact upon the Company's financial position, results of operations or cash flows in future periods. There can be no assurance, however, that modifications to information systems which impact the Company and which are required to remediate year 2000 issues will be made on a timely basis and that they will not adversely affect the Company's systems or operations. Management's Discussion and Analysis of Financial Condition and Cash Flows Liquidity and Capital Resources Cash increased from $ 125,745 at December 31, 1998 to $ 10,336,030 as of June 30, 1999 attributable to proceeds of $ 19,361,418 from the Company's public offering and to the Company's $ 8,576,820 net operating expenditures. During the second quarter, three of the Company's officers, Fred E. Cooper, Anthony J. Feola and Glenn Keeling, converted their outstanding amounts due to the Company to term loans. Repayments to the Company began in May 1999. Results of Operations Sales during the second quarter decreased from $475,736 in 1998 to $51,108 in 1999 and decreased for the six-month period from $933,441 in 1998 to $78,428 in 1999. The decreases were due to the discontinuation of the Companys FES project. Interest income increased during the second quarter from $15,116 in 1998 to $34,052 in 1999 and increased for the six- month period from $60,594 in 1998 to $60,758 in 1999. The fluctuations were due to the Company's varying amounts available to invest in each of those periods. Costs of Products Sold during the second quarter decreased from $229,880 in 1998 to $66,572 in 1999 and decreased for the six month period from $498,860 in 1998 to $132,991 in 1999. The decreases were primarily due to the suspension of FES activities. Research and Development expenses during the second quarter increased from $1,360,098 in 1998 to $1,410,914 in 1999 and decreased for the six month period from $4,013,632 in 1998 to $2,154,759 in 1999. The second quarter increase was due to additional activity in connection with the sensor project. Selling, General and Administrative expenses during the second quarter increased from $4,058,399 in 1998 to $5,688,833 in 1999 and increased for the six month period from $5,937,153 in 1998 to $8,132,276 in 1999. The increase from 1998 to 1999 was due to goodwill expenses related to the ICTI acquisition. During 1999, the Company revisited its ICTI operations and determined that the product may not exhibit all of the properties needed for commercial success. In connection with such analysis, the Company deiscovered a different metal- coating process which may have the potential to succeed, and is pursuing the feasibility of manufacturing and selling that product. As a result, the Company has begun to write down the goodwill associated with the ICTI purchase. Interest expense during the second quarter decreased from $112,851 in 1998 to $53,490 in 1999 and decreased for the six month period from $205,658 in 1998 to $194,253 in 1999. The decreases were due to the Company's efforts in acquiring capital through 4% convertible debentures and to Notes Payable in connection with the acquisition of ICTI. 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) A report on form 8-K dated May 24, 1999, with respect to Item 5 other events and Item 7 (c), Exhibit. (2) A report on form 8-K dated June 24, 1999, with respect to Item 5 other events. and Item 7 (c), Exhibit. (3) A report on form 8-K dated July 1, 1999, with respect to Item 5 other events and Item 7 (c), Exhibit. 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 August, 1999. BIOCONTROL TECHNOLOGY, INC. By /s/ Fred E. Cooper Fred E. Cooper CEO -----END PRIVACY-ENHANCED MESSAGE-----