Tuesday, December 03, 2002 8:18:24 AM
10QSB: BIOSHIELD TECHNOLOGIES INC
11/15/2002
(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
International BioChemical Industries, Inc., formerly BioShield Technologies, Inc. (the "Company") is a Georgia corporation and was organized in 1995. The Company historically has engaged in research and development, patent filings, regulatory issues and related activities geared towards the sale of its retail, industrial and institutional products. We are currently selling antimicrobial products via licensing and distribution contracts. Many of these products provide long-term killing action of microorganisms responsible for cross contamination and viral contamination, along with inhibiting and controlling the growth of over 100 viral, bacteria, fungi and yeast organisms. The Company has continued to successfully build recognition and market penetration of its recently approved E.P.A. antimicrobial product line.
We are currently engaged in sale, distribution, and development of antimicrobial, biostatic, and medical related products for the industrial and institutional, and Specialty Chemical markets.
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Three Months Ended September 30, 2002 compared to three months ended September 30, 2001
The Company's revenue decreased to $103,286 for the three months ended September 30, 2002, from $875,340 the three months ended September 30, 2001, a decrease of 88%. The decrease was attributable to a substantial decrease in sales to our customer located in the Peoples Republic of China. Gross profit of $89,585 for the three months ended September 30, 2002 represents 87% of net sales as compared to $618,307 or 71% of net sales for the three months ended September 30, 2001. The increase in gross margin is due to a restructuring of the way in which we sell our products, changing to a licensing and distribution model and selling to large multi-national corporations.
Marketing and selling expenses decreased to $34,124 for the three months ended September 30, 2002 from $117,754 for the three months ended September 30, 2001. The decrease was attributable to a change in the way in which we sell our products, changing to a licensing and distribution model. Currently, we are not selling our product directly to retail establishments and are selling the product through distributors.
Consulting fees were $303,900 for the three months ended September 30, 2002 as compared to $653,257 for the three months ended September 30, 2001, a decrease of $349,357 or 53%. Substantially all consulting expense related to consulting fees recorded from the grant and immediate exercise of stock options as well as the issuance of common shares.
Compensation expense increased to $400,169 for the three months ended September 30, 2002 from $217,745 for the three months ended September 30, 2001, an increase of $182,424 or 84%. The increase was attributable to an increase in non-cash compensation expense of $244,147 related to the issuance of stock and stock options to employees and the amortization of deferred compensation offset by a decrease in salary expense of $61,723 due to a substantial decrease in staff attributable to our cost cutting measures.
Professional fees were $42,003 for the three months ended September 30, 2002 as compared to $159,429 for the three months ended September 30, 2001, a decrease of $117,426 or (74%). The decrease was attributable to cost-cutting measures.
Other general and administrative expenses were $59,179 for the three months ended September 30, 2002 as compared to $146,775 for the three months ended September 30, 2001, a decrease of $87,596 or (60%). This decrease was related to expenses such as telephone, rent, and office expenses decreasing due to our cost-cutting measures.
Interest expense was $38,002 for the three months ended September 30, 2002 as compared to $342,598 for the three months ended September 30, 2001. Interest expense during the three months ended September 30, 2001 was primarily attributable to the amortization of beneficial interest associated with a loan as well as additional interest costs associated with our borrowings.
For the three months ended September 30, 2002 we recorded settlement expense of $92,000 in connection with certain legal obligations and settlements.
For the three months ended September 30, 2001, we recorded a loss from discontinued operations of $214,701 related to our investment in HNS.
As a result of the reasons set forth above, the Company's operations generated a net loss applicable to common shareholders of $1,030,196 or $(.01) per common share for the three months ended September 30, 2002 compared to a net loss of $(1,410,202) or $(.06) per common share for the three months ended September 30, 2001.
LIQUIDITY
At September 30, 2002, we had cash totaling $14,541 compared to $39,894 at June 30, 2002. The decrease in cash of $25,353 is primarily due to net losses of $879,792 and decreases in accrued expenses of $281,649 offset by a decrease in accounts receivable of $136,584, increases in our accounts payable balance of $447,006, non-cash compensation of $642,189 and depreciation and amortization of $20,633.
The Company entered into a credit agreement to borrow up to $1,000,000 under a line of credit, which it has currently used. In addition, in 2001, the Company entered into a $2,000,000 purchase order line of credit with Aero Financial, Inc. To date, the Company has not elected to use this source of additional financing, however, in the future; the Company may elect to use this credit facility as necessary to facilitate the continued operations of the Company. We cannot assure you that we will be able to obtain additional capital from this or other investors. Our inability to successfully renegotiate these agreements could cause the company to dramatically curtail or cease operations.
The Company's ability to fund its operating requirements and maintain an adequate level of working capital until it achieves positive cash flow will depend primarily on its ability to borrow money against its accounts receivable. The Company's failure to generate substantial growth in sales and/or of its antimicrobial products; progress in research and development programs; the cost and timing of seeking regulatory approvals of the Company's products under development; the Company's ability to manufacture products at an economically feasible cost; cost in filing, prosecuting, defending and enforcing patent claims and other intellectual property rights and changes in economic, regulatory, or competitive conditions or the Company's planned business could cause the Company to require additional capital, and substantially delay or reduce the scope of business. In the event the Company must raise additional capital to fund its working capital needs, it may seek to raise such capital through loans or issuance of debt securities, issuance of equity securities, or through private placements. Moreover, there can be no assurance that the Company will be successful in its efforts to obtain additional capital, and that capital will be available on terms acceptable to the Company or on terms that will not significantly dilute the interests of existing shareholders.
We currently have no material commitments for capital expenditures.
FORWARD-LOOKING STATEMENTS
When used in this form 10-KSB, 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.
CRITICAL ACCOUNTING POLICIES
A summary of significant accounting policies is included in Note 1 to the audited financial statements included in our Annual Report on Form 10-KSB for the year ended June 30, 2002 as filed with the United States Securities and Exchange Commission. We believe that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the 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 may differ from those estimates.
We account for stock transactions in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees." In accordance with Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation," we adopted the pro forma disclosure requirements of SFAS 123.
The best weapon against "fear" is "facts"!!
11/15/2002
(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
OVERVIEW
International BioChemical Industries, Inc., formerly BioShield Technologies, Inc. (the "Company") is a Georgia corporation and was organized in 1995. The Company historically has engaged in research and development, patent filings, regulatory issues and related activities geared towards the sale of its retail, industrial and institutional products. We are currently selling antimicrobial products via licensing and distribution contracts. Many of these products provide long-term killing action of microorganisms responsible for cross contamination and viral contamination, along with inhibiting and controlling the growth of over 100 viral, bacteria, fungi and yeast organisms. The Company has continued to successfully build recognition and market penetration of its recently approved E.P.A. antimicrobial product line.
We are currently engaged in sale, distribution, and development of antimicrobial, biostatic, and medical related products for the industrial and institutional, and Specialty Chemical markets.
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
Three Months Ended September 30, 2002 compared to three months ended September 30, 2001
The Company's revenue decreased to $103,286 for the three months ended September 30, 2002, from $875,340 the three months ended September 30, 2001, a decrease of 88%. The decrease was attributable to a substantial decrease in sales to our customer located in the Peoples Republic of China. Gross profit of $89,585 for the three months ended September 30, 2002 represents 87% of net sales as compared to $618,307 or 71% of net sales for the three months ended September 30, 2001. The increase in gross margin is due to a restructuring of the way in which we sell our products, changing to a licensing and distribution model and selling to large multi-national corporations.
Marketing and selling expenses decreased to $34,124 for the three months ended September 30, 2002 from $117,754 for the three months ended September 30, 2001. The decrease was attributable to a change in the way in which we sell our products, changing to a licensing and distribution model. Currently, we are not selling our product directly to retail establishments and are selling the product through distributors.
Consulting fees were $303,900 for the three months ended September 30, 2002 as compared to $653,257 for the three months ended September 30, 2001, a decrease of $349,357 or 53%. Substantially all consulting expense related to consulting fees recorded from the grant and immediate exercise of stock options as well as the issuance of common shares.
Compensation expense increased to $400,169 for the three months ended September 30, 2002 from $217,745 for the three months ended September 30, 2001, an increase of $182,424 or 84%. The increase was attributable to an increase in non-cash compensation expense of $244,147 related to the issuance of stock and stock options to employees and the amortization of deferred compensation offset by a decrease in salary expense of $61,723 due to a substantial decrease in staff attributable to our cost cutting measures.
Professional fees were $42,003 for the three months ended September 30, 2002 as compared to $159,429 for the three months ended September 30, 2001, a decrease of $117,426 or (74%). The decrease was attributable to cost-cutting measures.
Other general and administrative expenses were $59,179 for the three months ended September 30, 2002 as compared to $146,775 for the three months ended September 30, 2001, a decrease of $87,596 or (60%). This decrease was related to expenses such as telephone, rent, and office expenses decreasing due to our cost-cutting measures.
Interest expense was $38,002 for the three months ended September 30, 2002 as compared to $342,598 for the three months ended September 30, 2001. Interest expense during the three months ended September 30, 2001 was primarily attributable to the amortization of beneficial interest associated with a loan as well as additional interest costs associated with our borrowings.
For the three months ended September 30, 2002 we recorded settlement expense of $92,000 in connection with certain legal obligations and settlements.
For the three months ended September 30, 2001, we recorded a loss from discontinued operations of $214,701 related to our investment in HNS.
As a result of the reasons set forth above, the Company's operations generated a net loss applicable to common shareholders of $1,030,196 or $(.01) per common share for the three months ended September 30, 2002 compared to a net loss of $(1,410,202) or $(.06) per common share for the three months ended September 30, 2001.
LIQUIDITY
At September 30, 2002, we had cash totaling $14,541 compared to $39,894 at June 30, 2002. The decrease in cash of $25,353 is primarily due to net losses of $879,792 and decreases in accrued expenses of $281,649 offset by a decrease in accounts receivable of $136,584, increases in our accounts payable balance of $447,006, non-cash compensation of $642,189 and depreciation and amortization of $20,633.
The Company entered into a credit agreement to borrow up to $1,000,000 under a line of credit, which it has currently used. In addition, in 2001, the Company entered into a $2,000,000 purchase order line of credit with Aero Financial, Inc. To date, the Company has not elected to use this source of additional financing, however, in the future; the Company may elect to use this credit facility as necessary to facilitate the continued operations of the Company. We cannot assure you that we will be able to obtain additional capital from this or other investors. Our inability to successfully renegotiate these agreements could cause the company to dramatically curtail or cease operations.
The Company's ability to fund its operating requirements and maintain an adequate level of working capital until it achieves positive cash flow will depend primarily on its ability to borrow money against its accounts receivable. The Company's failure to generate substantial growth in sales and/or of its antimicrobial products; progress in research and development programs; the cost and timing of seeking regulatory approvals of the Company's products under development; the Company's ability to manufacture products at an economically feasible cost; cost in filing, prosecuting, defending and enforcing patent claims and other intellectual property rights and changes in economic, regulatory, or competitive conditions or the Company's planned business could cause the Company to require additional capital, and substantially delay or reduce the scope of business. In the event the Company must raise additional capital to fund its working capital needs, it may seek to raise such capital through loans or issuance of debt securities, issuance of equity securities, or through private placements. Moreover, there can be no assurance that the Company will be successful in its efforts to obtain additional capital, and that capital will be available on terms acceptable to the Company or on terms that will not significantly dilute the interests of existing shareholders.
We currently have no material commitments for capital expenditures.
FORWARD-LOOKING STATEMENTS
When used in this form 10-KSB, 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.
CRITICAL ACCOUNTING POLICIES
A summary of significant accounting policies is included in Note 1 to the audited financial statements included in our Annual Report on Form 10-KSB for the year ended June 30, 2002 as filed with the United States Securities and Exchange Commission. We believe that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the 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 may differ from those estimates.
We account for stock transactions in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees." In accordance with Statement of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-Based Compensation," we adopted the pro forma disclosure requirements of SFAS 123.
The best weapon against "fear" is "facts"!!
The best weapon against "fear" is "facts"!!
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