I haven't followed BUGS since the price was around $1.50/share. I regret never having bought any stock back at those prices. . .it was only because I waited to long for the price to dip back down. I must have got my name on the company's mailing list because I just got an e-mail today with the following news:
(I wonder why I just got this today!)
February 16, 1999
US MICROBICS INC (BUGS)
Quarterly Report (SEC form 10QSB)
- Managements's Discussion and Analysis of Financial Condition and Results of Operations
This Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements are inherently uncertain as they are based on current expectations and assumptions concerning future events or future performance of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. Forward-looking statements usually contain the words "estimate," "anticipate," "believe," "expect," or similar expressions, and are subject to numerous known and unknown risks and uncertainties. In evaluating such statements, prospective investors should carefully review various risks and uncertainties identified below, as well as in the matters set forth under the caption "Risk Factors" in the Company's Annual Report on Form 10-KSB and its other SEC filings. These risk
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The Company
U.S. Microbics, Inc. (the "Company" or "USMX") intends to build an environmental biotech company utilizing the proprietary microbial technology, bioremediation patents, knowledge, processes and unique microbial culture collection developed over 30 years by the late George M. Robinson and his daughter Mery C. Robinson (collectively, the "Microbial Technology"). The Company creates and markets proprietary microbial technologies that provide natural solutions to many of today's environmental problems. The Company's microbes or "bugs" can be used to break down various substances, including oil, diesel, fuel, arsenic, toxic waste, water and soil contamination. The Company intends to leverage the products, applications and customer contacts developed by the Robinsons to apply, develop, license and commercialize the Microbial Technology. The Company believes that it can build the foundation for the international commercialization of proprietary products based on the Microbial Technology f
or
The Company's initial objective is to establish itself as a leading provider of environmental technology and products to companies in the United States through the licensing of technology that meets governmental standards, is environmentally friendly, easy to manufacture and apply and yields profit for its licensees. To achieve this objective, the Company intends to focus its strategy on the following three elements: (i) licensing its bioremediation technology to high-volume end-users for hydrocarbon waste cleanup; (ii) developing a manufacturing center for its proprietary microbial blends; and (iii) licensing its technology to entities for use in specific vertical markets and territories, for site clean-up and maintenance products, agricultural growth enhancement and aquaculture/mariculture applications.
The Company's achievement of its objectives is highly dependent, among other factors, on its ability to raise the necessary capital to build the production facility that will supply new customers and satisfy the potential demand from prior customers that previously utilized products based on the Microbial Technology. The Company intends to raise additional working capital through the sale of Common Stock and/or debt and through the potential licensing of its developed business arrangements. There can be no assurance that the Company will raise sufficient capital to fund its proposed operations and the Company's failure to obtain adequate financing may jeopardize its existence. See "Management's Discussion and Analysis or Plan of Operation - Liquidity and Capital Resources."
The Company's principal office is located at 5922-B Farnsworth Court, Carlsbad, California 92008, and its telephone number is (760) 918-1860. The Company's home page on the Internet can be located at www.bugsatwork.com.
Overview
During the fiscal year ended September 30, 1997, the Company engaged in the operation and shutdown of its unprofitable cellular operations. Prior to contemplating bankruptcy in July 1997, the Company hired Robert C. Brehm, who had been acting as a consultant to the Board of Directors regarding potential turnaround alternatives, as the Company's Chief Executive Officer. The Company implemented a one-for-twenty stock split, terminated its cellular operations and acquired XyclonyX, a new biotech company with proven technology. During the fiscal year ended September 30, 1998, the Company focused on capitalizing on the biotechnology assets that it had acquired, fund raising, building organizational infrastructure and establishing its manufacturing site for occupancy during September 1998.
Plan of Operations for the Fiscal Year Ending September 30, 1999
The Company intends to generate revenue during the fiscal year ending September 30, 1999 by focusing on sales of Bio-Raptor tm products and related microbial blends and consulting services to support Bio-Raptor tm sales. USMX plans to sell its Bio-Raptor tm products to new and existing prospects for soil recycling center licenses, odor control and land fill operators. The Company's microbial blend production capacity will limit its sales of Bio- Raptor's tm until outsourcing and internal production can meet demand. During the first quarter of fiscal year 1999, the Company is building infrastructure (i.e., personnel, procedures and systems) and establishing initial manufacturing operations.
During the second quarter of fiscal year 1999, the Company intends to add fermentation capacity, fine tune its manufacturing operations and increase blending capacity to meet anticipated sales goals during the summer months. Principal microbial products will be Bio-Raptor tm, sewage and certain agricultural products (from internal fermentation). USMX plans to ship completed Bio-Raptors tm during the second quarter of fiscal year 1999. The Company believes that new product announcements will result from completed field test data concerning animal waste, grease trap and solvent grease absorption should. To initiate SSWM's operations for land bioremediation projects and complete organization development, the Company will need to raise approximately $5 million, $1 million of which will be used to purchase additional fermentation capacity and upgrade blending operations. The Company anticipates that revenues will be from Bio-Raptor tm licenses, equipment sales, microbial blends and rela
ted
During the third quarter of fiscal year 1999, the Company intends to increase its product delivery and sales, including Bio-Raptors tm, and to extend microbial sales for agriculture, sewage and golf course applications. During this quarter, the Company intends to continue its reliance on outsourced fermentation capacity, but also will order fermentors for on-site installation over the following six months. The Company anticipates that revenues will continue from Bio-Raptor tm related products, as well as agricultural, sewage and golf course applications.
During the fourth quarter of fiscal year 1999, the Company will test and possibly bring on line its new manufacturing capacity. USMX projects that it will increase its sales efforts and ship additional Bio-Raptors tm as well as products and services based on sewage, agricultural, and golf course applications.
Results of Operations
For the Quarter ended December 31, 1998, Compared to the Quarter Ended December 31, 1997
The Company had revenues during the quarter ended December 31, 1998 of $176,728, which consisted of Technology Licensing Agreements of $175,000 and the sale of microbic product. Cost of revenue was $17,895 leaving a gross profit of $158,833. There was no revenue for the quarter ended December 31, 1997.
Selling, general and administrative ("SG&A") expenses for first quarter of fiscal year 1999 totaled $271,951 compared to $52,760 for the corresponding quarter of fiscal year 1998. SG&A expenses for the first quarter of fiscal year 1999 consisted of accounting, legal, consulting, public relations, subsidiary startup and organization and fund raising expenses. SG&A expenses also included non-cash charges from the issuance or future issuance of stock and stock options in the approximate amount of $118,200 for the quarter ended December 31, 1998. There was no issuance of stock or options for services in the quarter ended December 31, 1997. The remaining SG&A expenses that required cash, amounted to approximately $149,700 for the quarter ended December 31, 1998. The Company used stock in lieu of cash to conserve its cash resources.
There was no interest expense for the quarter ended December 31, 1998.Interest expense totaled $33,140 for the corresponding quarter in fiscal year 1998. The decreased expense resulted from retirement of debt in the first quarter of fiscal year 1998. There was no provision for income taxes in either quarter ended December 31, 1998 or 1997, due to the losses sustained by the Company.
The Company incurred net losses of $267,900 and $85,900 for the quarters ended December 31, 1998 and 1997, respectively. Net loss per share decreased from a net loss per share of $0.13 for the quarter ended December 31, 1997, to a net loss per share of $0.11 in the corresponding quarter of 1998, due primarily to the increased weighted average number of shares of Common Stock out- standing at December 31, 1998.
In order to continue implementing the Company's strategic plan with its subsidiaries, the Company is planning on raising an additional $2.5 to $5,000,000 from a private placement during the second and third quarters of fiscal year 1999. The funds are targeted to establish the fermentation manufacturing operation and the staffing of sales subsidiaries. Although the Company is expecting to increase revenues during the second quarter of fiscal year 1999, based on the current status of the Company, additional capital will be required in order for the Company to maintain its ongoing operations.
Liquidity and Capital Resources.
Cash and cash equivalents totaled $886,746 and $3,000 at December 31, 1998 and 1997, respectively. Net cash used by operations was $223,556 for the quarter ended December 31, 1998 compared to $232,200 for the comparable quarter of 1997. In preparing for the manufacture and sale of its products the Company purchased office furniture and equipment of approximately $27,000 including computer systems, $123,500 of manufacturing equipment and leasehold improvements of $32,600.
During the quarter ended December 31, 1998, the Company raised $730,960 from a private placement, net of placement fees, from the issuance of Series C preferred stock. As a result of these proceeds, the Company has working capital (Current Assets less Current Liabilities) of $480,533 as of December 31, 1998, compared to a negative working capital of $6,400 as of December 31, 1997. The Company raised an additional $66,000 during January of 1999, net of placement fees, from the private placement.
To date, the Company has financed its operations principally through borrowings and private placements of equity securities and debt. During fiscal year 1998, the Company raised $780,100 net of placement fees in a private placement in which shares of Series C Preferred Stock were issued. The Company believes that it has sufficient cash to continue its operations through March 31, 1999, and anticipates that cash generated from projected revenues and an anticipated private placement during the second and third quarters of fiscal year 1999 will enable it to fulfill its projected operational budget for fiscal year 1999. The Company will need additional capital to continue its operations and will endeavor to raise funds through the sale of shares, licenses and revenues. There can be no assurances, however, that the Company can obtain sufficient capital on acceptable terms, if at all. Failure to obtain such capital likely would affect adversely the Company's ability to continue as a goin
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During fiscal year 1999, the Company projects capital expenditures for plant and equipment of approximately $1 million and R&D costs of $500,000. R&D costs will be associated primarily with Bio-Raptor(tm) delivery and config- uration for specific applications. The Company also plans to increase the number of its employees to approximately 40 by the end of fiscal year 1999.
The Company's working capital and other capital requirements during the next fiscal year and thereafter will vary based on a number of factors, including: (i) the rate at which microbial products are shipped and generate profits; (ii) the necessary level of sales and marketing activities for environmental products; and (iii) the level of effort needed to develop additional distribution channels to the point of commercial viability.
There can be no assurance that additional public or private financing, including debt or equity financing, will be available as needed, or, if available, on terms favorable to the Company. Any additional equity financing may be dilutive to shareholders and such additional equity securities may have rights, preferences or privileges that are senior to those of the Company's existing Common or Preferred Stock. Furthermore, debt financing, if available, will require payment of interest and may involve restrictive covenants that could impose limitations on the operating flexibility of the Company. The failure of the Company to successfully obtain additional future funding may jeopardize the Company's ability to continue its business and operations.
Non-cash investing and financing activities.
For the quarter ended December 31, 1998: The Company issued 1,200 shares of Series D preferred stock to as compensation of officers in lieu of cash. The transaction was valued at $11.00 per share.
Human Resources As of January 15, 1999, the Company had eight (8) full-time employees and fourteen (14) full-time and part-time consultants, for a combined total of twenty-two (22) employees and consultants. The Company's personnel are employed as follows: eight (8) in administrative functions; six (6) in production support and manufacturing; six (6) in promotion; and two (2) in sales. During fiscal year 1999, the Company intends to hire additional consultants and employees in the areas of human resources, manufacturing, administration, customer support and research and development. In particular, the Company must recruit qualified personnel for key position in its microbial manufacturing and sales operations, including qualified personnel for product management, shift supervisions, laboratory and quality control functions, blending and fermentation, sales consultants, training coordinators and customer service staff. The Company's failure to effectively recruit, hire, train and ma
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