1
FORM 10-QSB/A
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
WEB SITE DEVELOPMENT COST AND OTHER FIXED ASSETS, 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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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 gain(loss) on Securities ... (9,618) 21,000 (42,686) (14,000)
------------ ------------ ------------ ------------
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.
2
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
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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
NO PAR VALUE NO PAR VALUE ADDITIONAL
------------ ------------ 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 ........................................... $(13,288,792) $ (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)
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 activities .............. (10,675,445) (2,005,938) (15,533,226) (3,740,231)
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 - WEB SITE DEVELOPMENT COST AND OTHER FIXED ASSETS, NET
Included in net web site development cost and other fixed assets is the
cost to develop the Company's medication management and healthcare web
site, eMD.com, totaling approximately $4.3 million. These costs are
being amortized over 60 months.
NOTE D - 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 E - 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
==========
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NOTE F - 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 an operating 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.
NOTE G - SEGMENT INFORMATION
The Company operates in two segments. The first segment consists of the
development and distribution of antimicrobial products operated in
BioShield Technologies, Inc. This business has 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.
The second segment consists of point of care medication management,
electronic medical records, pharmaceutical fulfillment and
pharmaceutical care services operated in Electronic Medical
Distribution, Inc., (eMD.com). This business segment launched its
consumer and physician web site in early January 2000. Prior to launch,
the Company had been focus on organizational activities, raising
capital, gaining regulatory approvals, research and development and
further investigation into new markets. 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 ELIMINATION CONSOLIDATED
--------- ------- ----------- ------------
Current assets ......................... $ 11,843,492 1,546,559 $ (7,495,132) $ 5,894,919
Property and equipment, net ............ 248,212 6,084,813 -- 6,333,025
Deposits and other long term assets .... 56,111 118,664 -- 174,775
------------ ------------ ------------ ------------
Total assets ........................ $ 12,147,815 $ 7,750,036 $ (7,495,132) $ 12,402,719
============ ============ ============ ============
Total liabilities ...................... 2,135,251 9,284,538 (7,495,132) 3,924,657
Total minority interest and equity ..... 10,012,564 (1,534,502) -- 8,478,062
------------ ------------ ------------ ------------
Total liabilities & equity .......... $ 12,147,815 $ 7,750,036 $ (7,495,132) $ 12,402,719
============ ============ ============ ============
The elimination above relates to inter-segment receivables and payables.
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STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
BIOSHIELD EMD.COM ELIMINATION CONSOLIDATED
--------- ------- ----------- ------------
Sales ............................. $ 319,019 $ 4,764 -- $ 323,783
Cost of goods sold ............. 161,266 1,399 -- 162,665
------------ ------------ ------------ ------------
Gross margin ................... 157,753 3,365 -- 161,118
Operating Expenses
Marketing and selling .......... 333,307 1,125,727 -- 1,459,034
General and administrative ..... 827,909 1,614,501 -- 2,442,410
Research and development ....... 643,981 311,707 -- 955,688
------------ ------------ ------------ ------------
Total expenses ................. 1,805,197 3,051,935 -- 4,857,132
Loss from operations .............. $ (1,647,444) $ (3,048,570) -- $ (4,696,014)
============ ============ ============ ============
STATEMENT OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
BIOSHIELD EMD.COM ELIMINATION CONSOLIDATED
--------- ------- ----------- ------------
Sales ............................. $ 732,418 $ 4,764 -- $ 737,182
Cost of goods sold ............. 410,258 1,399 -- 411,657
------------ ------------ ------------ ------------
Gross margin ................... 322,160 3,365 -- 325,525
Operating Expenses
Marketing and selling .......... 1,988,159 2,077,522 -- 4,065,681
General and administrative ..... 3,509,543 4,033,423 -- 7,542,966
Research and development ....... 897,188 1,459,957 -- 2,357,145
------------ ------------ ------------ ------------
Total expenses ................. 6,394,890 7,570,902 -- 13,965,792
Loss from operations .............. $ (6,072,730) $ (7,567,537) -- $(13,640,267)
============ ============ ============ ============
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NOTE H - 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. The total estimated purchase price was $480,000.
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 I - 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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15
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 believes 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.
13
16
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.
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 Heyerdahl, 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.
14
17
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.
On April 20, 2000, the Company redeemed 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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18
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: June 2, 2000 /s/ TIMOTHY C. MOSES
-------------------------------------------
TIMOTHY C. MOSES
President and Chief Executive Officer
Date: June 2, 2000 /s/ SCOTT PARLIAMENT
-------------------------------------------
SCOTT PARLIAMENT
Chief Financial Officer
16
19
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. Previously filed with 10QSB on May 15th, 2000.
10.11 -- Employment agreement between the Company and John Codilis and BioShield
Technologies, Inc. dated February 7, 2000. Previously filed with 10QSB on May 15th, 2000.
10.12 -- Employment agreement between the Company and Geoffrey Faux and Electronic
Medical Distribution, Inc. dated April 25, 2000. Previously filed with 10QSB on May 15th, 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. Previously filed with 10QSB on May 15th, 2000.
27 -- Financial Data Schedule (for SEC use only).