SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1997
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ___________________ to _____________________
Commission file number 1-10285
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BIOMAGNETIC TECHNOLOGIES, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
(Full title of the plan)
Biomagnetic Technologies, Inc.
9727 PACIFIC HEIGHTS BLVD., SAN DIEGO, CALIFORNIA 92121-3719
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(Name of issuer of the securities held pursuant to
the plan and the address of its principal executive office)
BIOMAGNETIC TECHNOLOGIES, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Public Accountants 2
Report of Independent Accountants 3
Statement of Net Assets Available for Benefits 4
at September 30, 1997 and 1996
Statement of Changes in Net Assets Available for Benefits 5
for the years ended September 30, 1997, 1996 and 1995
Notes to Financial Statements 6
Signatures 9
1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Administrative Committee and Participants of Biomagnetic Technologies,
Inc. 1992 Employee Stock Purchase Plan:
We have audited the accompanying statement of net assets available for benefits
of Biomagnetic Technologies, Inc. 1992 Employee Stock Purchase Plan ("the Plan")
as of September 30, 1997, and the related statement of changes in net assets
available for benefits for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
September 30, 1997, and the changes in net assets available for benefits for the
year then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Plan
will continue as a going concern. As discussed in Note C to the financial
statements, Biomagnetic Technologies, Inc. (the Plan Sponsor) has incurred
recurring losses from operations, has net capital and working capital
deficiencies, and short-term liquidity concerns that raise substantial doubt
about whether the Plan will continue as a going concern. Management's plans
in regard to these matters are also described in Note C. The financial
statements do not include any adjustments that might result from the outcome
of these uncertainties.
/s/ARTHUR ANDERSEN LLP
San Diego, California
March 13, 1998
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Administrative Committee and Participants of the Biomagnetic
Technologies, Inc. 1992 Employee Stock Purchase Plan
In our opinion, the accompanying statement of net assets available for
benefits and the related statements of changes in net assets available for
benefits present fairly, in all material respects, the net assets available
for benefits of the Biomagnetic Technologies, Inc. 1992 Employee Stock
Purchase Plan (the Plan) at September 30, 1996 and the changes in net assets
available for benefits for each of the two years then ended, in conformity
with generally accepted accounting principles. These financial statements
are the responsibility of the Plan's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above. We have not audited the financial statements of the Plan for any
period subsequent to September 30, 1996.
The accompanying financial statements have been prepared assuming the Plan
will continue as a going concern. As discussed in Note C to the financial
statements, Biomagnetic Technologies, Inc. (the Plan Sponsor) has suffered
recurring losses from operations and has an accumulated deficit that raise
substantial doubt about the Plan's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note C.
The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/PRICE WATERHOUSE LLP
San Diego, California
January 10, 1997
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BIOMAGNETIC TECHNOLOGIES, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
September 30,
1997 1996
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Cash and cash equivalents $ 36,202 $34,377
U.S. Government securities, at fair value 103,944 53,246
Participant contributions receivable 3,584 6,808
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Net assets available for benefits $ 143,730 $94,431
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See accompanying notes to financial statements
4
BIOMAGNETIC TECHNOLOGIES, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Years Ended September 30,
1997 1996 1995
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Participant contributions $146,175 $154,912 $144,358
Interest revenue 6,087 5,984 7,164
Net depreciation in fair value - (263) -
of U.S. Government securities
Benefits paid to participants (102,963) (266,449) (39,178)
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Net increase (decrease) in net assets
available for benefits 49,299 (105,816) 112,344
Net assets available for benefits:
Beginning of year 94,431 200,247 87,903
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End of year $143,730 $94,431 $200,247
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See accompanying notes to financial statements
5
BIOMAGNETIC TECHNOLOGIES, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
NOTE A. PLAN DESCRIPTION
In January 1992, the shareholders approved the establishment of the
Biomagnetic Technologies, Inc. 1992 Employee Stock Purchase Plan (the "Plan")
under Section 423 of the Internal Revenue Code. The Plan is intended to
provide eligible employees with the opportunity to acquire an equity interest
in Biomagnetic Technologies, Inc. (the "Company") through the acquisition of
purchase rights, implemented in a series of purchase periods. The Plan is
administered by a committee of two or more members of the Company's board of
directors, (the "Plan Administrator"), as appointed by such board.
Generally, employees are eligible for participation in the Plan in the
calendar quarter following their first 90 days of continuous employment with
the Company. After enrollment, payroll deductions are made to acquire shares
under the Plan up to a maximum of the lesser of 15% of base salary or $25,000
per calendar year. Participants are fully vested at all times in the portion
of their account attributable to their contributions. A participant may
purchase a maximum of 40,000 shares during any one purchase period. In
addition, each participant is limited to purchases of $25,000 worth of the
Company's stock when combined with any other Company stock purchase plan
during any calendar year. Under no circumstances shall a purchase right be
granted under the Plan to any Eligible Employee if such individual would
immediately after the grant, own more than 5% of the total combined voting
power of the Company.
The purchase price of the shares is the lesser of 85% of the fair market
value of the shares on the date the purchase right is granted or 85% of the
fair market value of the shares on the date the purchase period ends. The
purchase rights may be terminated by the participant at any time. The balance
in the participant's account, including accrued interest, which is credited
to the participant's account based on the participant's contributions
proportionate to the total contributions of all participants, will be
returned to the participant upon such termination. In addition, if the
participant's employment is terminated, any outstanding purchase rights are
terminated and the balance in the payroll deduction account will be returned
to the participant. If the participant dies or is permanently disabled, the
participant's estate or the participant has the option to receive the balance
in the payroll deduction account or purchase the shares at the end of the
purchase period.
The Plan provides for automatic purchase of the shares from the funds
deducted from the participant's pay and earnings thereon at the end of the
purchase period, subject to a pro-rata allocation if the Stock Purchase Plan
is oversubscribed.
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The Plan will terminate upon the earlier of (i) December 31, 2001, (ii) sale
of all shares available for issuance or, (iii) termination by the Company
immediately following the close of any purchase period. The total number of
shares authorized for future purchases under the Plan is 635,949 at September
30, 1997. The purchase period from April 1, 1994 to March 31, 1996 resulted
in an issuance of 26,283 shares of common stock of the Company. The next
purchase period is from April 1, 1996 to March 31, 1998.
Participants should refer to the Plan document for a more complete
description of the Plan provisions.
NOTE B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Plan financial statements are prepared on the accrual basis of accounting.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that effect reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
VALUATION OF INVESTMENTS
Investments consist of U.S. Government treasury securities that are stated at
fair value based on quoted market prices. The Plan's investments are held in
a Company administered bank account and all investment decisions are directed
by the Plan Administrator.
INVESTMENT INCOME
Income from investments is recorded on the accrual basis. In accordance with
the policy of stating investments at fair value, changes in net unrealized
appreciation or depreciation in the fair value of investments are reflected
in the statement of changes in net assets available for benefits in the year
in which such a change in value occurs.
ADMINISTRATIVE EXPENSES OF THE PLAN
All expenses incurred in the administration of the Plan are paid by the
Company.
CONTRIBUTIONS
Contributions to the Plan originate from after-tax payroll deductions of the
participants.
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BENEFITS PAID
Benefits paid represent the cost to the participants of the stock acquired
as well as any cash payouts due to terminations or elections by the
participants.
INCOME TAXES
The Plan Administrator believes that the Plan was established under, and is
operated in compliance with, Section 423 of the Internal Revenue Code.
Therefore, the Plan Administrator believes the Plan and earnings of the Plan
are tax exempt as of the financial statement date.
NOTE C. OPERATIONS AND CAPITAL RESOURCES OF THE PLAN SPONSOR
To date the Company has been engaged principally in research and development
activities, and has made only low volume sales to medical research
institutions. The Company incurred net losses of $5,242,000, $15,566,000, and
$6,673,000 in fiscal 1997, 1996, and 1995, respectively and has reported
losses in every year since 1982. The Company also has negative cash flows
from operations of $2,032,000, $12,808,000 and $4,402,000 in fiscal 1997,
1996, and 1995, respectively. At December 31 1997, the Company had an
accumulated deficit of $87,140,000 and a working capital deficiency of
$743,000, unaudited. Management anticipates that capital and working capital
requirements in fiscal 1998 will substantially exceed cash projected to be
generated by operations.
The Company currently anticipates that its existing capital resources will be
sufficient to provide operating capital required to meet its obligations in
the normal course of business through April 1998.
Management is currently in negotiations with several private investors to
obtain additional equity financing which would be effected through the sale
of unregistered shares of common stock of the Company under Regulation S.
There can be no assurance that the Company will be able to obtain such
financing on terms acceptable to the Company, if at all.
The Company's financial condition, the uncertainty regarding its ability to
raise additional equity financing, and the uncertainty and risks associated
with its future operations raise substantial doubt about whether the Plan
will continue as a going concern. The accompanying financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
Participants should refer to the Company's filings on Form 10-K for its year
ended September 30, 1997 and Form 10-Q for its fiscal quarter ended December
31, 1997 for a more complete discussion of the Company's financial position
and results of operations.
8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Administrative Committee of Biomagnetic Technologies, Inc. 1992 Employee
Stock Purchase Plan has duly caused this annual report to be signed by the
undersigned thereunto duly authorized.
BIOMAGNETIC TECHNOLOGIES, INC.
1992 EMPLOYEE STOCK PURCHASE PLAN
By: /s/ D. Scott Buchanan Date: March 20, 1998
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D. Scott Buchanan
Biomagnetic Technologies, Inc.
1992 Employee Stock Purchase
Plan Administrative Committee
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