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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
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FORM 10-Q SB
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[X] QUARTERLY REPORT PER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the period ended MARCH 31, 1999
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
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BIOSEARCH MEDICAL PRODUCTS, INC.
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(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
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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.
CLASS OUTSTANDING AT MARCH,31, 1999
Common Stock without par value 2,202,878
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<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
INDEX TO FORM 10-Q SB
MARCH 31, 1999
PAGE NO.
--------
PART I - FINANCIAL INFORMATION
Condensed Balance Sheet at March 31, 1999 (unaudited)
and December 31, 1998. 3 - 4
Condensed Statements of Operations (unaudited)
for the three month periods ended
March 31, 1999 and March 31, 1998. 5
Condensed Statements of Cash Flows (unaudited)
for the three month periods ended
March 31, 1999 and March 31, 1998. 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
MARCH 31, DECEMBER 31,
1999 1998(1)
--------- ------------
UNAUDITED
CURRENT ASSETS:
Cash and cash equivalents $ 49,157 $105,768
Trade receivables 111,650 78,751
Inventories (note 2) 329,827 297,613
Other assets 235,908 256,127
-------- --------
TOTAL CURRENT ASSETS 726,542 738,259
PROPERTY, PLANT AND EQUIPMENT, (NET) 88,028 152,887
OTHER ASSETS 4,991 5,862
-------- --------
TOTAL ASSETS $819,561 $896,998
======== ========
- ----------
(1) - Derived from audited financial statements.
(continued)
3
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC. CONDENSED BALANCE SHEETS
(CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
MARCH 31, DECEMBER 31,
1999 1998(1)
------------ -------------
UNAUDITED
CURRENT LIABILITIES:
Accounts payable $ 155,705 $ 253,498
Customer cash advances 123,913 380,000
Accrued liabilities 50,382 174,330
------------ ------------
TOTAL CURRENT LIABILITIES 330,000 807,828
SHAREHOLDERS' EQUITY:
Common stock, no par value; 5,000,000
shares authorized; issued 2,202,878
at March 31, 1999, and
at December 31, 1998 11,129,954 11,129,954
Accumulated deficit (10,609,154) (11,009,545)
Treasury stock, at cost;
7,920 at March 31, 1999 and
at December 31, 1998 (31,239) (31,239)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 489,561 89,170
------------ ------------
$ 819,561 $ 896,998
============ ============
- ----------
(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
THREE MONTHS ENDED MARCH 31,
-----------------------------
1999 1998
----------- -----------
Revenues, net $ 218,401 $ 604,117
Cost of goods sold 214,206 430,102
----------- -----------
Gross profit 4,195 174,015
Selling, general and
administrative costs 195,230 202,018
----------- -----------
Operating loss (191,035) (28,004)
Other income/(expense):
Interest expense -- (20,885)
Other, net 400,167 1,887
Gain on sale of fixed assets 191,259 --
591,426 (8,998)
----------- -----------
NET INCOME/(LOSS) $ 400,391 $ (47,002)
=========== ===========
INCOME/(LOSS) PER COMMON SHARE:
Net income/(loss) per common share $ .18 $ (.02)
=========== ===========
Weighted average number
of common shares 2,202,878 2,202,878
=========== ===========
See accompanying notes to unaudited
condensed financial statements.
5
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ 400,391 $(47,002)
Adjustments to reconcile net income/(loss)
to net cash provided by/(used in)
operating activities:
Depreciation and amortization 8,142 21,234
(Gain)/loss on sale of fixed assets (191,259) --
Sub total (183,117) 21,234
--------- --------
Changes in assets and liabilities:
Decrease/(increase) in accounts receivable (32,899) (3,036)
Decrease/(increase) in inventory (32,213) 33,712
Increase in other current assets 20,219 (1,746)
Decrease/(increase) in other assets 870 866
Increase in accounts payable (97,793) 32,141
Increase/(decrease) in other liabilities (123,948) --
Increase/(decrease) in customer deposits (256,087) (38,472)
--------- --------
Sub total (521,851) 23,465
--------- --------
Total adjustments (704,968) 44,699
--------- --------
Net cash provided by/(used in)
operating activities (304,577) (2,303)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,034) (3,488)
Preceeds from sale of fixed assets 250,000 --
Net cash used in investing activities 247,966 (3,488)
--------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowing -- --
--------- --------
Net cash used in financing activities -- --
--------- --------
Net (decrease)/increase in cash
and cash equivalents (56,611) (5,791)
Cash & equivalents at beginning of period 105,768 14,486
--------- --------
Cash & equivalents at end of period $ 49,157 $ 8,695
========= ========
See accompanying notes to unaudited
condensed financial statements
6
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
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 Financial Statements in the 1998 Annual Report on Form 10-K.
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 March 31, 1999
and the results of operations for the three month periods ended March 31, 1999
and March 31, 1998 and the statement of cash flows for the three month periods
ended March 31, 1999 and March 31, 1998.
The results of operations for the three month period ended March 31, 1999
are not necessarily indicative of the results to be expected for a succeeding
quarter or for the full year.
2. INVENTORIES
MARCH 31, 1999 DECEMBER 31, 1998
-------------- -----------------
UNAUDITED
Finished Goods $106,534 $ 96,263
Work In Process 68,604 61,915
Raw Materials 154,689 139,436
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$329,827 $297,614
======== ========
3. OTHER INCOME
In February 1999 the Company reached an agreement with C.R.Bard where they
purchased the worldwide exclusive rights to the coating technology for
intermittent urinary catheters for $400,000 and the purchase of the coating
machine for $250,000. The $400,000 was booked as other income and the $250,000
was booked as the sale of an asset and resulted in a gain on the sale of a fixed
asset of $191,259.
3. COMMITMENTS AND CONTINGENCIES
There are no claims or actions against the Company which will materially
effect its financial statements.
7
<PAGE>
BIOSEARCH MEDICAL PRODUCTS, INC.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues were $218,401 for the three months ended March 31, 1999, down
$385,716, or 63.8% compared to revenues of $604,117 for the prior year three
month period. OEM sales in first quarter 1998 amounted to $130,203 or 60% of
revenues versus $519,847 or 86% in 1997. The decrease in revenues is due
primarily to the loss of urinary catheter business with SIMS/Portex Ltd., which
ended, with the completion of their purchase orders, in June 1998. Sales to SIMS
in the first quarter 1998 were $400,779. In February 1999 we reached an
agreement with C.R.Bard, where they purchased worldwide exclusive rights to the
coating technology for $400,000 and the purchase of the coating machine for
$250,000. During 1998 C.R.Bard paid the Company $200,000 for a standstill
agreement while the Company continued to negotiate the agreement that was
eventually signed in February. The Company booked that transaction as a customer
deposit. At the signing of the agreement the $200,000 was applied to the
purchase price and paid the balance due of $450,000 at that time. For any
questions regarding the Company's relationship with C.R.Bard, see exhibit 10
(zzzz) filed with 1998 10-k SB. As our new partner, we have just begun to ship
catheters to their English subsidiary. The delay, caused by C.R.Bard's separate
deal with Hydromer Inc. being held up because of patent inquiries and C.R.Bard's
insistance on signing both deals simultaneously, has impacted our sales volume
by approximately $180,000. The $180,000 represents a prepaid purchase order for
400,000 units that could not be produced and shipped until the deal was signed.
All other product lines remained relatively the same.
Gross profit of $4,195, or 2% of revenues declined by $169,820, or 97.6%
from the first quarter 1998 comparable gross profit of $174,015, or 28.8% of
revenues. The change in gross profit is directly due to the decrease in revenues
as discussed above and the cost containment procedures implemented in 1996 and
continued in the first quarter 1999.
Operating loss of $191,035 was $163,031 higher than the operating loss of
$28,004 generated during the first quarter of 1998. This was due primarily to
the decrease in revenues in 1999 versus 1998 and the cost containment procedures
implemented and continued in 1999.
Net income of $400,391 was $447,393 greater than the loss of $47,002 from
continuing operations generated during the first quarter of 1998. The increase
was due primarily to the C.R.Bard agreement which accounted for $400,000 in
other income and the $191,259 gain from the sale of a fixed asset.
8
<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 used $304,577 of cash during the first
quarter 1999 as compared to using $2,303 in 1998. Financing activities used no
cash for the three month period ended March 31, 1999 and investing activities
generated $247,966 versus cash usage of $3,488 in 1998. The net result of first
quarter 1999 cash flow was a decrease of $56,611 in cash and cash equivalents.
During the three month period ended March 31, 1999 the Company received
$450,000 from C.R.Bard as final payment as per agreement signed in February
1999. The total deal was for $650,000 and the initial deposit received in 1998
was applied to the purchase price as per the agreement. C.R.Bard purchased the
worldwide exclusive rights to the coating technology for $400,000 and $250,000
for the purchase of the coating machine. The Company used those proceeds to pay
down various liabilities incurred during the prior year as shown in the cash
flow statement for March 31, 1999. Customer deposits show a decrease of
$256,000, which was due to the $200,000 being applied to the final agreed
purchase price at the time of signing and a reduction in the prepaid purchase
order for intermittent urinary catheters as they are produced and shipped.
Management believes that the Company's financial condition at March 31,
1999 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 long term obligations, support its working capital needs and curtailing
the ongoing losses by generating profitable revenue levels. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties. In February 1999, the Company signed an agreement with
C.R.Bard to sell its worldwide exclusive rights to the Company's technology for
coating intermittent urinary catheters for $400,000 and sold its coating machine
for coating catheters for $250,000. The parties also reached an agreement,
whereby Biosearch has offered to manufacture and coat intermittent urinary
catheter components for C.R.Bard until such time as it decides to perform these
operations themselves. Proceeds from this transaction has increased the working
capital of Biosearch, however it is not significant enough to change
management's belief as to the financial condition of the Company.
9
<PAGE>
LIGUIDITY AND CAPITAL RESOURCES (cont'd)
The Company is ISO 9000 certified and received approval to CE mark its
products from British Standards Institute. The Company feels this certification
will open the European market to its products and allow it to build additional
relationships with other large medical products companies, who for whatever
reason, have not received their certification and wish to sell their products in
Europe. The Company is focusing all its efforts on its OEM business and its
intermittent urinary catheter product line.
There is no assurance that the Companys' revenues will attain the volumes
needed to maintain long-term operations.
10
<PAGE>
PART II
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: April 19, 1999 /s/ MANFRED F. DYCK
----------------------------------
Manfred F. Dyck
President and Principal
Executive Officer and Director
Dated: April 19, 1999 /s/ ROBERT C. KELLER
----------------------------------
Robert C. Keller
Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 49,157
<SECURITIES> 0
<RECEIVABLES> 111,650
<ALLOWANCES> 0
<INVENTORY> 329,827
<CURRENT-ASSETS> 726,542
<PP&E> 2,356,992
<DEPRECIATION> 2,268,964
<TOTAL-ASSETS> 819,561
<CURRENT-LIABILITIES> 330,000
<BONDS> 0
0
0
<COMMON> 11,129,954
<OTHER-SE> (10,609,154)
<TOTAL-LIABILITY-AND-EQUITY> 819,561
<SALES> 218,401
<TOTAL-REVENUES> 218,401
<CGS> 214,206
<TOTAL-COSTS> 214,206
<OTHER-EXPENSES> 195,230
<LOSS-PROVISION> (191,035)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (191,035)
<INCOME-TAX> 0
<INCOME-CONTINUING> (191,035)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 400,391
<EPS-BASIC> 0.18
<EPS-DILUTED> 0.18
</TABLE>
