1
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
COMMISSION FILE NUMBER 0-24913
BIOSHIELD TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
GEORGIA 58-2181628
(State or Other Jurisdiction (I.R.S. Employer of Identification No.)
Incorporation or Organization)
5655 PEACHTREE PARKWAY
NORCROSS, GEORGIA 30092
(Address of principal executive offices and zip code)
(770) 246-2000
(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) and has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
As of May 15, 2000, there were 7,981,714 outstanding shares of the
Registrant's Common Stock, no par value per share.
2
BIOSHIELD TECHNOLOGIES, INC.
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
1. Balance Sheets as of March 31, 2000 (unaudited) and June 30,
1999. 1
2. Statements of Operations for the three month periods ended
March 31, 2000 and 1999 (unaudited) 2
3. Statements of Operations for nine months periods ended
March 31, 2000 and 1999 (unaudited) 3
4. Statement of Changes in Stockholders' Equity (Deficit) for
the period ended March 31, 2000 (unaudited) 4
5. Statements of Cash Flows for the nine month periods ended March
31, 2000 and 1999 (unaudited) and from June 1, 1995 (inception)
thru March 31, 2000 and 1999 (unaudited) 7
6. Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-KSB 13
SIGNATURES
EXHIBIT INDEX
3
BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
March 31, June 30,
2000 1999
------------- ------------
CURRENT ASSETS
Cash and cash equivalents $ 5,015,138 $ 2,500,561
Marketable securities 62,132 103,250
Accounts receivable 364,083 102,013
Stockholders' subscription receivable -- 4,798,750
Inventories 230,571 151,403
Prepaid expenses and other current assets 222,995 171,073
------------ ------------
Total current assets 5,894,919 7,827,050
PROPERTY AND EQUIPMENT, NET 6,333,025 202,400
DEPOSITS AND OTHER LONG-TERM ASSETS 174,775 194,293
------------ ------------
$ 12,402,719 $ 8,223,743
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Notes payable $ 2,326,266 $ --
Accounts payable 653,938 597,877
Accrued liabilities 582,031 195,044
Accrued payroll 361,583 58,085
Accrued interest payable 839 839
------------ ------------
Total current liabilities 3,924,657 851,845
MINORITY INTEREST 6,191,917 4,798,750
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock - no par value; 10,000,000
shares authorized and 200 issued and
outstanding at March 31, 2000 4,000,000 --
Common stock - no par value; 40,000,000
shares authorized; 7,934,047 and 6,406,578
issued and outstanding at March 31, 2000
and December 31, 1999, respectively 14,689,137 7,336,318
Additional paid-in capital 2,560,987 870,900
Accumulated other comprehensive earnings (loss) (42,868) (1,750)
Deficit accumulated during the development stage (18,921,111) (5,632,320)
------------- ------------
2,286,145 2,573,148
$ 12,402,719 $ 8,223,743
============ ============
The accompanying notes are an integral part of these statements.
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4
BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS
(Unaudited) (Unaudited)
Three months ended June 1, 1995 (inception)
March 31, to March 31,
------------------------------- --------------------------
2000 1999 2000 1999
--------------- --------------- --------------- ----------
Net sales $ 323,783 $ 53,486 $ 2,280,304 $ 1,523,968
Cost of sales 162,665 24,654 1,071,050 591,207
----------- ----------- ----------- -----------
Gross profit 161,118 28,832 1,209,254 932,761
Operating expenses
Marketing and selling 1,459,034 196,442 5,542,955 1,302,376
General and administrative 2,442,410 348,401 11,529,370 2,967,269
Research and development 955,688 98,561 3,598,159 627,473
----------- ----------- ----------- -----------
4,857,132 643,404 20,670,484 4,897,118
----------- ----------- ----------- -----------
Loss from operations (4,696,014) (614,572) (19,461,230) (3,964,357)
Other income (expense)
Royalty fees -- -- 75,000 --
Consulting income, net of
consulting expenses of
$19,474 for the period
ended June 30, 1999 -- -- 39,908 39,908
Interest and dividend income 21,606 36,870 217,714 81,061
Interest expense -- (308) (35,336) (35,336)
----------- ----------- ----------- -----------
Net loss before income taxes
and minority interest (4,674,408) (578,010) (19,163,944) (3,878,724)
Income tax (expense) benefit -- -- -- --
Minority interest in loss of 52,107 -- 242,833 --
subsidiary ----------- ----------- ----------- -----------
NET LOSS (4,622,301) (578,010) (18,921,111) (3,878,724)
Other comprehensive earnings (loss)
Unrealized holding loss on (9,618) 21,000 (42,686) (14,000)
securities ----------- ----------- ----------- -----------
COMPREHENSIVE LOSS $(4,631,919) $ (557,010) $(18,963,797) $(3,892,724)
=========== =========== ============ ===========
Net loss per common share
Basic $ (0.66) $ (0.09) $ (3.73) $ (0.86)
=========== =========== ============ ===========
Weighted average common
shares outstanding 7,034,085 6,144,125 5,075,832 4,512,746
=========== =========== ============ ===========
The accompanying notes are an integral part of these statements.
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5
BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE EARNINGS
(Unaudited)
Nine months ended
March 31,
-----------------------------
2000 1999
------------ -----------
Net sales $ 737,182 $ 286,182
Cost of sales 411,657 120,726
----------- -----------
Gross profit 325,525 165,456
Operating expenses
Marketing and selling 4,065,681 610,436
General and administrative 7,542,966 936,858
Research and development 2,357,145 211,345
----------- -----------
13,965,792 1,758,639
----------- -----------
Loss from operations (13,640,267) (1,593,183)
Other income (expense)
Interest and dividend income 108,642 74,123
Interest expense -- (16,960)
----------- -----------
Net loss before income taxes and
minority interest (13,531,625) (1,536,020)
Income tax (expense) benefit -- --
Minority interest in loss of subsidiary 242,833 --
----------- -----------
NET LOSS (13,288,792) (1,536,020)
Other comprehensive earnings (loss)
Unrealized holding loss on securities (25,368) (14,000)
----------- -----------
COMPREHENSIVE LOSS $(13,314,160) $(1,550,020)
=========== ===========
Net loss per common share
Basic $ (1.93) $ (0.27)
----------- -----------
Weighted average common shares outstanding 6,885,046 5,675,024
=========== ===========
The accompanying notes are an integral part of these statements.
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BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock Common stock
no par value no par value Additional
--------------------- --------------------------- paid-in
Shares Amount Shares Amount capital
---------- ------ ---------- ----------- ----------
Balance at June 1, 1995 $ -- -- $ -- $ -- $ --
Proceeds from original issuance of shares -- -- 3,907,086 500 --
Proceeds from issuance of shares under
private placement offering -- -- 62,612 115,000 60,000
Stock warrants issued for services rendered -- -- -- --
Net loss - June 1, 1995 (inception)
through June 30, 1996 -- -- -- -- --
---------- ------- ---------- ----------- --------
Balance at June 30, 1996 -- -- 3,969,698 115,500 60,000
Proceeds from issuance of shares
under private placement offering -- -- 149,723 275,001 --
Proceeds from issuance of shares
under private placement offering -- -- 245,000 600,000 --
Stock issuance costs related to
private placement offerings -- -- -- (25,000) --
Stock warrants issued for services rendered -- -- -- -- 62,400
Net loss for the year ended June 30, 1997 -- -- -- -- --
---------- ------- ---------- ----------- --------
Balance at June 30, 1997 -- -- 4,364,421 965,501 122,400
Proceeds from issuance of shares
under private placement offering -- -- 30,619 187,500 --
Stock options issued for services rendered -- -- -- 156,650
Contribution to capital -- -- -- -- 50,000
Net loss for the year ended June 30, 1998 -- -- -- -- --
---------- ------- ---------- ----------- --------
Balance at June 30, 1998 -- -- 4,395,040 1,153,001 329,050
Deficit
Accumulated accumulated
other during the
comprehensive development
earnings (loss) stage Total
----------------- ------------ -----------
Balance at June 1, 1995 $ -- $ -- $ --
Proceeds from original issuance of shares -- -- 500
Proceeds from issuance of shares under
private placement offering -- -- 115,000
Stock warrants issued for services rendered -- -- 60,000
Net loss - June 1, 1995 (inception)
through June 30, 1996 -- (356,316) (356,316)
---------------- ----------- -----------
Balance at June 30, 1996 -- (356,316) (180,816)
Proceeds from issuance of shares
under private placement offering -- -- 275,001
Proceeds from issuance of shares
under private placement offering -- -- 600,000
Stock issuance costs related to
private placement offerings -- -- (25,000)
Stock warrants issued for services rendered -- -- 62,400
Net loss for the year ended June 30, 1997 -- (514,459) (514,459)
---------------- ----------- -----------
Balance at June 30, 1997 -- (870,775) 217,126
Proceeds from issuance of shares
under private placement offering -- -- 187,500
Stock options issued for services rendered -- -- 156,650
Contribution to capital -- -- 50,000
Net loss for the year ended June 30, 1998 -- (1,471,929) (1,471,929)
---------------- ----------- -----------
Balance at June 30, 1998 -- (2,342,704) (860,653)
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BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock Common stock
no par value no par value Additional
--------------- ------------------------ paid-in
Shares Amount Shares Amount capital
------ ------ ---------- ---------- ------------
Proceeds from issuance of shares
under initial public offering -- -- 1,300,000 5,102,794 --
Proceeds from exercise of stock warrants -- -- 612,275 1,065,523 --
Proceeds from exercise of stock options -- -- 15,000 15,000 --
Stock options issued for services rendered -- -- -- -- 95,250
Compensation related to previously issued
options -- -- -- -- 121,600
Contribution to capital -- -- -- -- 325,000
Unrealized loss on securities -- -- -- -- --
Net loss for the year ended June 30, 1999 -- -- -- -- --
------ ------ --------- --------- ---------
Balance at June 30, 1999 -- -- 6,322,315 7,336,318 870,900
Proceeds from exercise of warrants
(unaudited) -- -- 3,600 21,570 --
Stock warrants issued for services
rendered (unaudited) -- -- -- -- 1,106,400
Unrealized loss on securities (unaudited) -- -- -- -- --
Net loss for the quarter ended
September 30, 1999 (unaudited) -- -- -- -- --
------ ------ --------- --------- ---------
Balance at September 30, 1999 (unaudited) -- -- 6,325,915 7,357,888 1,977,300
Deficit
Accumulated accumulated
other during the
comprehensive development
earnings (loss) stage Total
--------------- -------------- ----------
Proceeds from issuance of shares
under initial public offering -- -- 5,102,794
Proceeds from exercise of stock warrants -- -- 1,065,523
Proceeds from exercise of stock options -- -- 15,000
Stock options issued for services rendered -- -- 95,250
Compensation related to previously issued
options -- -- 121,600
Contribution to capital -- -- 325,000
Unrealized loss on securities (1,750) -- (1,750)
Net loss for the year ended June 30, 1999 -- (3,289,616) (3,289,616)
------- ---------- ----------
Balance at June 30, 1999 (1,750) (5,632,320) 2,573,148
Proceeds from exercise of warrants
(unaudited) -- -- 21,570
Stock warrants issued for services
rendered (unaudited) -- -- 1,106,400
Unrealized loss on securities (unaudited) (15,750) -- (15,750)
Net loss for the quarter ended
September 30, 1999 (unaudited) -- (4,347,177) (4,347,177)
------- ---------- ----------
Balance at September 30, 1999 (unaudited) (17,500) (9,979,497) (661,809)
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BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock Common stock Additional
no par value no par value paid-in
----------------------- -------------------------
Shares Amount Shares Amount capital
------------ ------ ----------- ------- -------------
Proceeds from exercise of
warrants (unaudited) -- -- 10,000 5,000 --
Stock warrants issued for
services rendered (unaudited) -- -- -- -- 257,000
Proceeds from exercise of stock
options (unaudited) -- -- 70,663 15,000 326,687
Unrealized loss on securities (unaudited) -- -- -- -- --
Net loss for the quarter ended
December 31, 1999 (unaudited) -- -- -- -- --
--- ---------- --------- ----------- ----------
Balance at December 31, 1999 (unaudited) -- -- 6,406,578 7,377,888 2,560,987
Proceeds from issuance of preferred
stock (unaudited) 200 4,000,000 -- -- --
Proceeds from exercise of stock
warrants (unaudited) -- -- 1,527,469 7,311,249 --
Unrealized loss on securities (unaudited) -- -- -- -- --
Net loss for the quarter ended
March 31, 2000 (unaudited) -- -- -- -- --
--- ---------- --------- ----------- ----------
Balance at March 31, 2000 (unaudited) 200 $4,000,000 7,934,047 $14,689,137 $2,560,987
=== ========== ========= =========== ==========
Deficit
Accumulated accumulated
other during the
comprehensive development
earnings (loss) stage Total
----------------- ------------ ------------
Proceeds from exercise of
warrants (unaudited) -- -- 5,000
Stock warrants issued for
services rendered (unaudited) -- -- 257,000
Proceeds from exercise of stock
options (unaudited) -- -- 341,687
Unrealized loss on securities (unaudited) (15,750) -- (15,750)
Net loss for the quarter ended
December 31, 1999 (unaudited) (4,319,313) (4,319,313)
----------- ------------ ----------
Balance at December 31, 1999 (unaudited) (33,250) (14,298,810) (4,393,185)
Proceeds from issuance of preferred
stock (unaudited) -- -- 4,000,000
Proceeds from exercise of stock
warrants (unaudited) -- -- 7,311,249
Unrealized loss on securities (unaudited) (9,618) -- (9,618)
Net loss for the quarter ended
March 31, 2000 (unaudited) -- (4,622,301) (4,622,301)
----------- ------------ -----------
Balance at March 31, 2000 (unaudited) $ (42,868) $(18,921,111) $ 2,286,145
=========== ============ ===========
The accompanying notes are an integral part of this statement.
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BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited) (Unaudited)
Nine months ended June 1, 1995 (inception)
March 31, to March 31,
------------------------------ ------------------------------
2000 1999 2000 1999
------------- ----------- ------------ -----------
Cash flows from operating activities:
Net loss $(13,288,791) $(1,536,020) $(18,921,111) $(3,878,724)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 458,565 16,762 519,246 49,228
Minority interest in loss (242,833) -- (242,833) --
Issuance of stock and stock
warrants for services rendered 2,029,400 61,250 2,525,300 340,300
Changes in operating assets and
liabilities:
(Increase) decrease in:
Accounts receivable (262,070) (17,173) (364,083) (127,254)
Inventory (79,168) 57,434 (230,571) (100,350)
Prepaid expenses and
other current assets (51,922) -- (237,237) --
Deposits and other assets 14,829 (105,613) (180,328) (184,129)
Increase in:
Accounts payable 56,061 (238,072) 653,938 71,466
Accrued liabilities and payroll 690,485 (244,506) 944,453 89,232
------------ ----------- ------------ -----------
Net cash used in operating (10,675,445) (2,005,938) (15,533,226) (3,740,231)
activities
Cash flows from investing activities:
Capital expenditures (4,258,234) (32,392) (4,506,210) (154,464)
Accumulated other income/loss -- -- -- --
Purchase of marketable securities -- (105,000) (105,000) (105,000)
------------ ----------- ------------ -----------
Net cash used in investing activities (4,258,234) (137,392) (4,611,210) (259,464)
Cash flows from financing activities:
Proceeds from debt -- -- 655,000 655,000
Repayment of debt -- (642,500) (655,000) (642,500)
Contribution to capital 326,687 325,000 701,687 375,000
Proceeds from stock warrants exercised 7,337,819 224,542 8,403,342 224,542
Stock issued under stock option plan 15,000 -- 30,000 --
Proceeds from common stock issuances, net 5,768,750 5,103,195 12,024,545
Proceeds from preferred stock issuances, net 4,000,000 -- 4,000,000 6,256,196
------------ ----------- ------------ -----------
Net cash provided by
financing activities 17,448,256 5,010,237 25,159,574 6,868,238
------------ ----------- ------------ -----------
Net increase in cash 2,514,577 2,866,907 5,015,138 2,868,543
Cash at beginning of period 2,500,561 1,636 -- --
------------ ----------- ------------ -----------
Cash at end of period $ 5,015,138 $ 2,868,543 $ 5,015,138 $ 2,868,543
============ =========== ============ ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest -- -- $34,498 --
The fair value of common stock, options, and
warrants issued for services rendered are
increased in the cash flows from operating
activities.
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BioShield Technologies, Inc. and Subsidiary
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
NOTE A - BASIS OF PRESENTATION
The interim financial statements included herein have been prepared by the
Company without audit. These statements reflect all adjustments, which are,
in the opinion of management, necessary to present fairly the financial
position as of March 31, 2000 and the results of operations and cash flows
for the period then ended. All such adjustments are of a normal recurring
nature. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested that
these financial statements be read in conjunction with the financial
statements and notes for the fiscal year ended June 30, 1999.
NOTE B - INVENTORIES
Inventories consist primarily of raw materials, work in progress and
finished goods, which are stated at the lower of cost or market. Cost is
determined under the first-in, first-out (FIFO) valuation method.
NOTE C - LOSS PER COMMON SHARE
The Company has adopted Statement of Financial Accounting Standards No. 128
(SFAS 128), Earnings Per Share. Basic loss per common share is based upon
the weighted average number of common shares outstanding during the period.
Diluted loss per common share is not disclosed because the effect of the
exchange or exercise of common stock equivalents would be antidilutive.
NOTE D - STOCK OPTIONS AND WARRANTS
During the three months ended March 31, 2000, the following changes occurred
in outstanding stock options and warrants.
Options outstanding at December 31, 1999 768,000
Options granted 186,000
Options cancelled (60,000)
Options exercised --
---------
Options outstanding at March 31, 2000 894,000
=========
Warrants outstanding at December 31, 1999 2,189,222
Warrants granted --
Warrants cancelled --
Warrants exercised (1,318,705)
---------
Warrants outstanding at March 31, 2000 870,517
=========
NOTE E - COMMITMENTS AND CONTINGENCIES
Through March 31, 2000, the Company had paid approximately $1,000,000 and
$220,000 to iXL and Oracle, respectively, for the development of portions of the
eMD.com website. Required additional payments under each contract through fiscal
2000 are approximately $1,300,000 and 980,000, respectively. These liabilities
are classified as notes payable in the accompanying Financial Statements.
On July 6, 1999, the Company entered into a lease agreement with an
unrelated party to lease an office building for a term of ten years. Required
minimum lease payments under this lease are approximately $45,000 per month for
the year ending June 30, 2000.
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NOTE F - SEGMENT INFORMATION
Beginning in April 1999, eMD.com began research and development on a
medication management and consumer web site. The site was launched in January
2000 and subsequently updated in March 2000. There have been significant
allocations of resources to eMD.com and, accordingly, the following table shows
key financial results of the individual segments of BioShield and eMD.com.
SEGMENT INFORMATION
KEY FINANCIAL DATA
BALANCE SHEET
As of March 31, 2000
(Unaudited)
BioShield eMD.com
------------ -----------
Current assets $ 11,843,492 1,346,559
Property and equipment, net 248,212 6,084,813
Deposits and other long term assets 56,111 118,664
------------ -----------
Total assets $ 12,147,815 $ 7,550,036
============ ===========
Total liabilities 1,435,251 9,284,536
Total minority interest and equity 10,712,564 (1,734,500)
------------ -----------
Total liabilities & equity $ 12,147,815 $ 7,550,036
============ ===========
STATEMENT OF OPERATIONS
Three Months Ended March 31, 2000
BioShield eMD.com
------------ -----------
Sales $ 319,019 4,764
Cost of goods sold 161,266 1,399
------------ -----------
Gross margin 157,753 3,365
Cost of goods sold
Marketing and selling 333,307 1,125,727
General and administrative 552,909 1,889,501
Research and development 643,981 311,707
------------ -----------
Total expenses 1,530,197 3,326,935
Loss from operations $ (1,372,444) $(3,323,570)
============ ===========
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NOTE G - SUBSEQUENT EVENTS
On May 5, 2000, Electronic Medical Distribution, ("eMD.com") acquired the
assets of LabAmerica, Inc., a specialty Internet company positioned to
facilitate confidential medical lab testing at more than 1,400 locations across
the United States. The purchase price includes 60,000 shares of eMD.com, Inc.
common stock of the company, $200,000 in cash and certain Convertible Warrants
to purchase shares of eMD.
On April 17, 2000 BioShield Technologies, Inc. Board of Directors approved
the repurchase of up to 250,000 shares of the company's common stock in the
market. Of the 250,000 shares approved by the Board of Directors, the Company
repurchased 35,000 shares of its own common stock for $537,000. The Board
authorized BioShield to repurchase the shares, from time to time, at prices the
company deems appropriate.
On April 20, 2000, the Company redeemed 50% of the outstanding Series A
Convertible Preferred Stock for $2.3 million.
NOTE H - CONTINUED OPERATIONS
The Company's continued existence as a going concern is ultimately dependent
upon the success of future operations and its ability to obtain additional
financing. As shown in the financial statements, the Company has incurred
cumulative comprehensive losses of $(18,948,000) from June 1, 1995 (inception)
to March 31, 2000. The Company is a development stage company primarily engaged
in research and development, patent filings, regulatory approvals and related
activities. Through March 31, 2000, the Company had raised $25,160,000 of
capital, plus an additional $6,192,000 classified as minority interest, through
its initial public offering and other private offerings of its securities. Of
the $25 million noted above, the Company successfully raised approximately $8
million in capital during the third quarter of fiscal 2000 and will continue to
actively seek additional funds through public and private equity, debt funding,
strategic collaborative agreements, or from other sources. The failure to raise
the necessary additional capital in the future may cause substantial delays or
reduction of the scope of the Company's business plan. The Company's
continuation as a going concern is dependent upon its ability to generate or
raise sufficient cash flow to meet its obligations on a timely basis, and
ultimately to attain profitability.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BioShield Technologies, Inc. ("the Company"), a Georgia Corporation
organized in June, 1995 has, since inception, been a development stage company
engaged primarily in research and development, patent filings, regulatory
approvals and related activities geared towards the sale of its retail,
industrial and institutional products. Most of the products which have been
commercialized are in the cleaning and deodorizing segment. Some of these
products provide long-term killing action of microorganisms responsible for
cross contamination and viral contamination. Many of these products inhibit and
control the growth of over 100 viral, bacteria, fungi and yeast organisms.
Revenues generated from operations to date have primarily been limited to test
marketing and private labeling of the Company's antimicrobial products in all
division areas. The Company has continued to successfully build brand
recognition and market penetration of its new "OdorFree" product line. This
brand is competing in the multi-million dollar odor elimination packaged goods
category. The national rollout is proceeding on a strategic basis by
establishing its market presence within each individual market. Currently
OdorFree is sold through several major super market chains throughout the united
states.
On April 7, 1999, the company created eMD.com to develop electronic commerce
via the internet. eMD.com seeks to integrate four product offerings for
providers (point of care medication management, electronic medical records,
pharmaceutical fulfillment and pharmaceutical care services) with a
comprehensive healthcare website. eMD.com launched its consumer and physician
web site in early January 2000. Prior to launch, the Company had been in the
development stage, which means its primary focus has been organizational
activities, raising capital, gaining regulatory approvals, research and
development and further investigation into new markets.
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net sales for the three month period ended March 31, 2000 were $324,000, an
increase of $270,000 or 505% over the same period last year. The increase was a
result of increased distribution of the OdorFree(TM) product, primarily in the
mid and south-western United States, along with the introduction of two sizes of
Hypoallergenic OdorFree(TM). During late third quarter, the company also gained
new market penetration in the southeastern United States. As of March 31, 2000,
the company had distribution in over 6,000 retail outlets with its product.
Gross profit of $161,000 for the quarter ended March 31, 2000 represents 50% of
net sales as compared to $29,000, or 54% of net sales, for the quarter ended
March 31, 1999. The decrease in gross margin is a result of the change in
product mix and packaging year over year. The Company is gaining momentum as it
enters new retail markets. The Company settled its outstanding claim with the
EPA related to product labeling and, in fact gained EPA approval of its core
products in February 2000. BioShield has continued to make progress in product
development and testing. These events have prompted a significant increase in
sales that the Company believe will continue throughout fiscal 2001.
Total marketing and selling expenses in the quarter ending March 31, 2000
were $1,459,000. Marketing and selling expenses related to BioShield were
$333,000 for the quarter ended March 31, 2000, an increase of $137,000 from
$196,000 incurred during the quarter ended March 31, 1999. This increase relates
principally to the rollout of the OdorFree product line, repackaging efforts and
other one-time setup charges for certain retail accounts related to slotting
charges. Marketing and selling expenses related to eMD.com totaled $1,126,000
for the quarter ended March 31, 2000 as compared to zero for the same period in
prior year (eMD.com began operation in April 1999). The increase is a result of
pre-selling activities targeting physicians and physician groups in support of
the new website. Significant costs include initial development of marketing
materials and costs related to continuous technological improvement and testing
of the web site.
Total research and development expenses in the quarter ending March 31, 2000
were $956,000. Research and development expenses related to BioShield for the
quarter ended March 31, 2000 were $644,000, compared to $99,000 for the quarter
ended March 31, 1999. This represents an increase of $545,000. The increase is a
result of the continuous improvement and technological advancement in the
antimicrobial products. Research and development expenses related to eMD.com
were $312,000 primarily related to internal staff salaries and external business
partner development activities related to the web site. All third party costs
not directly related to the development of the web site were expensed as
incurred. Third party programming, software and hardware purchases have been
captured and capitalized as of March 31, 2000 with amortization of costs over a
five year period.
Total general and administrative expenses for the quarter ending March 31,
2000 were $2,442,000. General and administration expenses for BioShield were
$553,000, an increase of $205,000 over the same period ending March 31, 1999.
These higher costs related primarily to an increase in personnel cost. There
were no borrowings or interest expense incurred for the quarter ending March 31,
2000. General and administrative expenses related to eMD.com totaled $1,890,000.
These higher costs related primarily to an increase in personnel cost, legal and
regulatory fees, consulting services and facility costs. A significant portion
of the expenses incurred in the quarter will not be recurring in future periods
as staff levels have increased to eliminate expensive consultant activity.
As a result of the reasons set forth above, the Company's operations
generated a net loss of $4,622,000 or $.66 per common share for the quarter
ending March 31, 2000 compared to a net loss of $558,000 or $.09 per common
share for the quarter ended March 31, 1999. Cumulative losses from the inception
of the Company to March 31, 2000 totaled $18,921,000 or $3.73 per common share.
LIQUIDITY
The Company's cash and cash equivalents totaled $5,015,000 at March 31, 2000
and $378,655 at December 31, 1999. The higher cash position is due to a
successful warrant call of outstanding warrants issued in connection with its
initial Public Offering ("IPO"). During January 2000, the Company issued public
notice of redemption of outstanding warrants related to the IPO, which expired
February 22, 2000. Approximately 99.9% of the cash proceeds were received by
March 31, 2000 and the company raised over $7 million. The Company also
completed negotiations in early January with Jackson, LLC to increase the equity
credit facility from $6.25 to $10 million. Additionally, on January 13, 2000 the
Company completed a private placement for cash of $4 million for Series A
Convertible Preferred Stock and warrants to purchase 200,000 shares of common
stock of eMD.com.
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The impact of BioShield warrant redemption notice, the equity line of credit
and the private placement preferred stock has to date raised an additional $21
million in the calendar year 2000 to fund operations into calendar year 2001.
The Company however, expects to continue to have a substantial need to fund
operating losses and the purchases of additional capital equipment for an
indefinite period. Accordingly, the Company will be required to obtain
additional capital in the near future. The development of eMD.com, as well as
commercialization of the parent companies products will require additional
capital in order to successfully launch the site and related business. The
Company is actively seeking to obtain additional funds through public or private
equity or debt funding, strategic collaborative agreements, or from other
sources. The failure to raise the necessary additional capital in the near
future could cause substantial delay or reduction of the scope of business. No
assurance can be given that either the Company or eMD.com will be successful in
its efforts to obtain additional capital, that capital will be available on
terms acceptable to the Company or eMD.com or on terms that will not
significantly dilute the interests of existing shareholders.
FORWARD LOOKING STATEMENTS
When used in this form 10-QSB, the words or phrases "will likely result",
"are expected to," "will continue," "is anticipated," "estimate," "project," or
similar expressions are intended to identify "forward looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are subject to certain risks and uncertainties including changes in
economic conditions in the Company's market area, changes in policies by
regulatory agencies, fluctuations in interest rates, demand for loans in the
Company's market area and competition, that could cause actual results to differ
materially from historical earnings and those presently anticipated or
projected. The Company wishes to caution readers not to place undue reliance on
any such forward-looking statements, which speak only as to the date made. The
Company wishes to advise readers that the factors listed above could affect the
Company's financial performance and could cause the Company's actual results for
future periods to differ materially from any opinions or statements expressed
with respect to future periods in any current statements. The Company does not
undertake, and specifically disclaims any obligation, to publicly release the
result of any revisions which may be made to any forward-looking statements to
reflect events or circumstances after the date of such statements or to reflect
the occurrence of anticipated or unanticipated events.
YEAR 2000 ISSUES
The Company experienced no adverse effect from the Year 2000 millennium bug.
All operations have proceeded without incident.
MANAGEMENT CHANGES
During the quarter ended March, 31, 2000 the company completed termination
negotiations with Timothy Hyerdal, former Chief Financial Officer for BioShield
Technologies. Also, subsequent to March 31, 2000, the company accepted the
resignation of Wayne Roberts, former V.P. of Corporate Communications for
BioShield.
SUBSEQUENT EVENTS
On May 5, 2000 eMD.com, acquired the assets of LabAmerica, Inc., a specialty
Internet company positioned to facilitate confidential medical lab testing at
more than 1,400 locations across the United States. The purchase price includes
60,000 shares of eMD.com, Inc., common stock and $200,000 in cash.
On April 17, 2000 BioShield Technologies, Inc. Board of Directors approved
the repurchase of up to 250,000 shares of the company's common stock in the
market. Of the 250,000 shares approved by the Board of Directors, the Company
repurchased 35,000 shares of its own common stock for $537,000. The Board
authorized BioShield to repurchase the shares, from time to time, at prices the
company deems appropriate.
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On April 20, 2000, the Company redeems 50% of the outstanding Series A
Convertible Preferred Stock for $2.3 million. The Series A Convertible Preferred
Stock were registered by the Company on Form SB-2 with the SEC for the
registration of common stock issuable pursuant to the conversion of the Series A
Preferred Stock during the third quarter of fiscal 2000.
PART II. OTHER INFORMATION
Items 1, 2, 3, 4, and 5. Not Applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit
Number Description
------- -----------
10.10 -- Employment agreement between the Company and Scott Parliament
and Electronic Medical Distribution, Inc. dated February 14, 2000.
10.11 -- Employment agreement between the Company and John Codilis and
Bioshield Technologies, Inc. dated February 7, 2000.
10.12 -- Employment agreement between the Company and Geoffrey Faux and
Electronic Medical Distribution, Inc. dated April 25, 2000.
10.13 -- Asset Purchase agreement by and among LabAmerica, Inc., Gregory
Smith, David Nelson, Gordon Schuchardt, Bryon M.G. Sanford,
Richard Fisher and eMD Acquisition Corp., dated as of April 17, 2000.
27 -- Financial Data Schedule (for SEC use only).
(b) Reports on Form 8-K
None.
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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.
BIOSHIELD TECHNOLOGIES, INC.
Date: May 12, 2000 /s/ TIMOTHY C. MOSES
-------------------------------------------------
TIMOTHY C. MOSES
President and Chief Executive Officer
Date: May 12, 2000 /s/ SCOTT PARLIAMENT
-------------------------------------------------
SCOTT PARLIAMENT
Chief Financial Officer
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BIOSHIELD TECHNOLOGIES, INC
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
10.10 -- Employment agreement between the Company and Scott Parliament
and Electronic Medical Distribution, Inc. dated February 14, 2000.
10.11 -- Employment agreement between the Company and John Codilis and Bioshield
Technologies, Inc. dated February 7,
2000.
10.12 -- Employment agreement between the Company and Geoffrey Faux and
Electronic Medical Distribution, Inc. dated April 25, 2000.
10.13 -- Asset Purchase agreement by and among LabAmerica, Inc., Gregory
Smith, David Nelson, Gordon Schuchardt, Bryon M.G. Sanford,
Richard Fisher and eMD Acquisition Corp., dated as of April 17, 2000.
27 -- Financial Data Schedule (for SEC use only).