FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q SB
[X] Quarterly Report Per Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the period ended June 30, 1998
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
__________________to_________________.
Commission File Number 0-9860
BIOSEARCH MEDICAL PRODUCTS, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2090421
- -------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
35 Industrial Parkway, Somerville, New Jersey 08876-1276
- --------------------------------------------- -----------------
(Address of principal executive offices) (Zip Code + 4)
Registrant's telephone number, including area code: (908) 722-5000
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) has been subject to such
filing requirements for the past 90 days.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuers classes of
Common Stock, as of the close of the period covered by this report.
Outstanding at
Class June 30, 1998
---------------- --------------
Common Stock,
without par value 2,202,878
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
INDEX TO FORM 10-Q SB
JUNE 30, 1998
Page No.
--------
Part I - FINANCIAL INFORMATION
- ------------------------------
Condensed Balance Sheet at June 30, 1998 (unaudited)
and December 31, 1997. 3 - 4
Condensed Statements of Operations (unaudited)
for the three month periods and six month periods ended
June 30, 1998 and June 30, 1997. 5
Condensed Statements of Cash Flows (unaudited)
for the three month periods and six month periods ended
June 30, 1998 and June 30, 1997. 6
Notes to (unaudited) Condensed
Financial Statements. 7 - 8
Management's Discussion and Analysis of the Financial
Condition and the Results of Operations. 9 - 10
Part II - OTHER INFORMATION
- ---------------------------
Signatures. 11
2
<PAGE>
Part I
------
ITEM I - FINANCIAL STATEMENTS
BIOSEARCH MEDICAL PRODUCTS, INC.
CONDENSED BALANCE SHEETS
ASSETS
------
June 30 December 31
1998 1997(1)
Unaudited
Current assets:
Cash and cash equivalents $ 13,820 $ 14,486
Trade receivables 219,835 351,964
Inventories (note 2) 348,097 372,012
Other assets 361,680 18,762
---------- ----------
Total current assets 886,954 757,224
Property, plant and equipment, (net) 172,456 1,351,882
Other assets 7,059 8,123
---------- ----------
Total assets $1,066,469 $2,117,229
========== ==========
(1) - Derived from audited financial statements.
(continued)
3
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
CONDENSED BALANCE SHEETS
(continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<TABLE>
<CAPTION>
June 30 December 31
1998 1997(1)
Unaudited
--------- ------------
<S> <C> <C>
Current liabilities:
Current maturities of L/T debt (note 3) $ -- $ 691,041
Accounts payable 241,350 353,712
Accrued liabilities 97,462 132,330
------------ ------------
Total current liabilities 338,812 1,177,083
Long-term debt (note 3) -- --
------------ ------------
Total liabilities 338,812 1,177,083
------------ ------------
Shareholders' equity:
Common stock, no par value; 5,000,000
shares authorized; issued 2,202,878
at June 30, 1998, and at December 31, 1997. 11,129,954 11,129,954
Accumulated deficit (10,371,058) (10,158,569)
Treasury stock, at cost; 7,920 shares
at June 30, 1998 and at December 31, 1997. (31,239) (31,239)
------------ ------------
Total shareholders' equity 727,657 940,146
------------ ------------
$ 1,066,469 $ 2,117,229
============ ============
</TABLE>
(1) - Derived from audited financial statements.
See accompanying notes to unaudited
condensed financial statements.
4
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
CONDENSED STATEMENTS OF OPERATIONS
Unaudited
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues, net $ 381,065 $ 402,186 $ 985,182 $ 677,148
Cost of goods sold 320,969 409,109 751,071 676,839
----------- ----------- ----------- ----------
Gross profit 60,096 (6,923) 234,111 309
Selling, general and
administrative costs 224,041 197,749 426,059 440,410
----------- ----------- ----------- ----------
Operating loss (163,945) (204,672) (191,949) (440,101)
Other income/(expense):
Interest expense (1,542) (14,955) (22,427) (34,022)
Other, net -- 9,263 1,886 9,465
----------- ----------- ----------- ----------
(1,542) (5,692) (20,541) (24,557)
----------- ----------- ----------- ----------
Pre-tax net (loss) (165,487) (210,364) (212,490) (464,658)
Federal income taxes
Net loss $ (165,487) $ (210,364) $ (212,490) $ (464,658)
=========== =========== =========== ===========
Net loss per common share $ (.08) $ (.09) $ (.10) $ (.21)
=========== =========== =========== ===========
Weighted average number
of common shares 2,202,878 2,202,878 2,202,878 2,202,878
=========== =========== =========== ===========
</TABLE>
See accompanying notes to
unaudited condensed financial statements
BIOSEARCH MEDICAL PRODUCTS, INC.
5
<PAGE>
CONDENSED STATEMENTS OF CASH FLOWS
Unaudited
Increase/(Decrease) in Cash and Cash Equivalents
------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $(165,487) $(210,364) $(212,490) $(464,658)
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 17,657 19,616 38,891 41,996
--------- --------- --------- ---------
Sub total 17,657 19,616 54,665 41,996
--------- --------- --------- ---------
Changes in assets and liabilities:
(Increase)/decrease in accts receivable 139,165 (97,170) 136,129 (13,698)
Decrease/(increase) in inventory (9,798) 73,525 23,915 89,174
Decr/(incr) in other current assets 5,328 3,888 3,582 (1,145)
Increase in other assets 198 865 1,064 3,719
(Decrease)/increase in accounts payable (35,651) 132,632 (3,510) 103,482
Decrease in other liabilities
and customer deposits 53,713 44,891 15,241 (44,024)
--------- --------- --------- ---------
Sub total 152,955 158,631 176,421 137,508
--------- --------- --------- ---------
Total adjustments 170,612 178,247 215,312 179,504
--------- --------- --------- ---------
Net cash used in operating activities 5,125 (32,117) 2,822 (285,154)
--------- --------- --------- ---------
Cash flows from investing activities:
Capital expenditures -- 44,692 (3,488) 31,321
Net cash provided by investing activities -- 44,692 (3,488) 31,321
--------- --------- --------- ---------
Cash flows from financing activities:
Principal payments on long-term
borrowings -- (6,370) -- (14,851)
--------- --------- --------- ---------
Net cash used in financing activities -- (6,370) -- (14,851)
--------- --------- --------- ---------
Net increase/(decrease) in cash & cash
equivalents 5,125 6,205 (666) (268,384)
Cash & cash equivalents at beginning
of period 8,695 46,487 14,486 321,376
--------- --------- --------- ---------
Cash & cash equivalents at end of period $ 13,820 $ 52,692 $ 13,820 $ 52,692
========= ========= ========= =========
</TABLE>
See accompanying notes to
unaudited condensed financial statements
BIOSEARCH MEDICAL PRODUCTS, INC.
6
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
Unaudited
1. Basis of Presentation
- --------------------------
The accounting policies followed by the Company are set forth in Note 1 of
Notes to Condensed Financial Statements in the 1997 Annual Report on Form
10-KSB.
In the opinion of the management of the Company, the accompanying condensed
financial statements contain only normal and recurring adjustments necessary for
the fair presentation of the Company's financial position as of June 30, 1998
and the results of operations for the three month periods and six month periods
ended June 30, 1998 and June 30, 1997 and the statement of cash flows for the
three month periods and six month periods ended June 30, 1998 and June 30, 1997.
The results of operations for the three month periods and six month periods
ended June 30, 1998 are not necessarily indicative of the results to be expected
for a succeeding quarter or for the full year.
2. Inventories
- ----------------
June 30, 1998 December 31, 1997
Unaudited
Finished Goods $ 83,451 $ 95,992
Work In Process 96,454 140,271
Raw Materials 168,192 135,749
-------- --------
$348,097 $372,012
======== ========
7
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Unaudited
3. Long-Term Debt
- -------------------
June 30, 1998 December 31, 1997
Unaudited
Note payable - bank (a) -- 691,041
Less current maturities -- 691,041
---------- --------
Long-term debt $ -- $ --
========== ========
(a) The company announced on June 12, 1998 that it sold its property on 35
Industrial Parkway, Branchburg to Hydromer Inc. for the sum of $850,000 and a
prepaid lease back of approximately two thirds of the building for three years
with a value of approximately $346,500 bringing the value of the total deal to
$1,196,500. The Company considers this transaction fair and reasonable and with
it, the Company paid off its debt to Summit Bank. All judgements, held by Summit
Bank, against the Company have been dismissed.
4. Sale-Leaseback Transaction
- -------------------------------
The Company has entered into an agreement with Hydromer Inc.,a related
party, through common stockholders , for the sale and leaseback of their
facility. The lease is classified as an operating lease in accordance with SFAS
No. 13 "Accounting for Leases". As of June 12,1998, the building, land and
improvements with net book values totaling $1,144,023 have been removed from the
balance sheet, and the loss realized on the sale transaction of $294,022 has
been deferred as Prepaid Rent and is being charged to rent expense over the
lease term of 36 months.
In conjunction with the above transaction, the following noncash activity
took place:
Sale of building $(1,144,023)
Payoff of mortgage principal and Interest 722,419
Royalty payment 18,730
Additional fees to satisfy bank debt 108,851
-----------
Prepaid rent $ 294,022
===========
8
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
Item 2. Management Discussion and Analysis of the Financial Condition and
Results of Operations
Results of Operations
- ---------------------
Revenues were $381,065 for the three months ended June 30, 1998, down
$21,121 or 5.2% compared to revenues of $402,186 for the prior year three month
period. The revenues for the six months ended June 30, 1998 were up $308,034 or
45.5% compared to last year's $677,148.
Gross profit for the second quarter 1998 was $60,096 up $67,019 from a
negative gross profit of $6,923, for the same period in 1997. Six month figures
reflect the same trend, gross profit being up $233,802 from $309 in 1997 to
$234,111 in 1998. The increase in gross profit is due primarily to the sales
increase attained in 1998 versus the total sales volume for 1997 along with cost
containment prcedures implemented in 1997 and continued in 1998.
Operating loss for the second quarter 1998 was $163,945 or 43% of sales.
This represents a reduction in the loss of $40,727 or 19.9% compared to the 1997
loss of $204,672 or 50.9% of sales. Year to date 1998, the operating loss is
$191,949 or 19.5% of sales compared to a loss of $440,101 or 65% of sales for
1997. The reduction in the net operating losses between 1998 and 1997 reflect a
conscious effort of management to maintain cost controls implemented in 1997,
however certain revenue levels need to be attained to make the company
profitable.
9
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
Item 2. Management Discussion and Analysis of the Financial Condition and
Results of Operations
Liquidity and Capital Resources
- -------------------------------
The Company's operating activities generated $5,125 in cash for the second
quarter 1998 and $2,822 for the six monthe of 1998. There were no Investing
activities during the second quarter 1998 and year to date the company used
$3,488.There was no financing activities during 1998. The overall cash flow
decreased by $666 for the six months ended June 30, 1998
For the three month period ended June 30, 1998 the Company generated $5,125
from operating activities. This is due primarily to an increase in accounts
receivable of $139,165 and an increase in other laibilities of $53,713 offset by
a decrease in accounts payable of $35,651and an operating loss for the second
quarter of $165,487. All other assets and liabilities generated $13,385 in cash.
Management believes that the Company's financial condition at June 30, 1998
represents an uncertain base to conduct current operations. The Company's
Ability to continue as a going concern is dependent upon its success at
generating sufficient cash flow or obtaining additional financing as required to
meet its obligations, suppirt its working capital needs and curtailing the
ongoing losses by generating profitable revenue levels.
The Company continues to focus all its efforts on its OEM business and its
intermittent urinary catheter product line. The Company received its ISO 9000
certification and its CE mark certification. The Company feels this will open
the European market to its products and allow additional relationships with
other large medical companies' who have not received their certification and
wish to sell their products in Europe.
10
<PAGE>
Part II - Other Information
SIGNATURES
----------
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.
BIOSEARCH MEDICAL PRODUCTS, INC.
--------------------------------
Dated: August 12, 1998 /s/ Manfred F. Dyck
-------------------------------------
Manfred F. Dyck
President and Principal
Executive Officer and Director
Dated: August 12, 1998 /s/ Robert C. Keller
-------------------------------------
Robert C. Keller
Treasurer
Chief Financial and Accounting Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 13,820
<SECURITIES> 0
<RECEIVABLES> 219,835
<ALLOWANCES> 0
<INVENTORY> 348,097
<CURRENT-ASSETS> 886,954
<PP&E> 2,438,599
<DEPRECIATION> 2,266,143
<TOTAL-ASSETS> 1,066,469
<CURRENT-LIABILITIES> 338,812
<BONDS> 0
0
0
<COMMON> 11,129,954
<OTHER-SE> (10,402,297)
<TOTAL-LIABILITY-AND-EQUITY> 1,066,469
<SALES> 985,182
<TOTAL-REVENUES> 985,182
<CGS> 751,071
<TOTAL-COSTS> 751,071
<OTHER-EXPENSES> 426,059
<LOSS-PROVISION> (191,949)
<INTEREST-EXPENSE> (22,427)
<INCOME-PRETAX> (212,490)
<INCOME-TAX> 0
<INCOME-CONTINUING> (212,490)
<DISCONTINUED> 0
<EXTRAORDINARY> (212,490)
<CHANGES> 0
<NET-INCOME> (212,490)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
