SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995 Commission File Number 1-9370
BIOPHARMACEUTICS, INC
DELAWARE 13-3186327
(State of Incorporation) (I.R.S. Employer Identification No.)
990 Station Road, Bellport, New York 11713
(Address of Principal Executive Office) (Zip Code)
Registrant telephone number, including area code: (516) 286-5800
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of March 31, 1995.
Class Outstanding
----- -----------
Commonn Stock - $.00l Par Value 23,849,513
Indicate by check whether the registrant (1) has filed all reports required to
be filed by Section 13 of the Securities and Exchange Act of 1934 during the
preceding twelve 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 ninety days. Yes __X__ No _____
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BIOPHARMACEUTICS, INC.
INDEX
PART I Financial Information
Item 1. Financial Statements
March 31, 1995 (Unaudited) and September 30, 1994 (Audited)
Statements of Operations
Three and Six Months Ended March 31, 1995 and 1994(Unaudited)
Consolidated Statement of Shareholders' Equity
for the Six Months Ended March 31, 1995
Consolidated Condensed Statement of Cash Flows
for the Six Months Ended March 31, 1995 and 1994
Notes to Condensed Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II
Item 6. Reports on Form 8-K: None
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ITEM 1. FINANCIAL STATEMENTS
BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
March 31, September 30,
1995 1994
(Unaudited) (Audited)
----------- ----------
ASSETS
Current assets:
Cash $ 77,584 $ 129,004
Receivables, less allowance for
doubtful accounts 1,137,280 344,349
Inventories 1,156,734 1,301,838
Prepaid expenses and other assets 147,950 52,761
---------- ----------
Total current assets 2,519,548 1,827,952
Property, plant and equipment, at cost,
net of accumulated depreciation 572,308 672,776
Licensing costs, net of accumulated amortization 202,262 215,762
Intangible assets, Amswiss rights, net 7,181,018 7,703,610
Sundry 51,484 51,484
---------- -----------
$10,526,620 $10,471,584
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 1,242,225 1,301,882
Accrued expenses 572,896 673,374
Medicare judgment payable 279,524 279,524
Current maturities of long-term debt 75,000 125,000
---------- ----------
Total current liabilities 2,169,645 2,379,780
Long-term debt 125,000 125,000
Note payable --- 250,000
Convertible debentures payable 1,150,000 1,150,000
Shareholders' equity:
Warrants 18,000 ---
Common Stock - par value $.00l per share
Authorized - 50,000,000 shares
Issued - 23,849,513 shares, 21,189,771, 1994 23,849 21,189
Additional paid-in capital 27,413,884 26,331,310
Deficit (18,869,872) (18,281,809)
---------- ----------
8,585,861 8,070,690
Less Treasury Stock, at cost
(413,728 shares 1994) (944,612) (944,612)
Notes receivable from officers and employees (559,274) (559,274)
---------- ----------
7,081,975 6,566,804
---------- ----------
$10,526,620 $10,471,584
=========== ===========
The accompanying notes are an integral part of these financial statements.
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BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
--------- ---------
1995 1994 1995 1994
---------- ---------- ---------- ----------
Revenues:
Net sales $1,294,089 $ 527,592 $1,913,173 $1,078,123
Royalty income 210,000 --- 310,000 ---
---------- ---------- ---------- ----------
1,504,089 527,592 2,223,173 1,078,123
Costs and expenses:
Cost of sales 892,189 660,583 1,566,794 1,314,767
Selling, general and
administrative 528,436 490,394 1,038,350 938,009
Amortization of licenses 143,046 143,037 286,092 217,927
---------- ---------- ---------- ----------
1,563,671 1,294,014 2,891,236 2,470,703
---------- ---------- ---------- ----------
(59,582) (766,422) (668,063) (1,392,580)
Other income (deductions):
Other Income 152,000 --- 152,000 ---
Interest expense including
interest to officer (36,000) (47,650) (72,000) (96,532)
---------- ---------- ---------- ----------
116,000 (47,650) 80,000 (96,532)
---------- ---------- ---------- ----------
Net income (loss) $ 56,418 $ (814,072) $ (588,063)$(1,489,112)
========== ========== ========== ==========
Primary income (loss) per share $0.00 $(.04) $(.03) $(.09)
==== ==== ==== ====
Average shares outstanding 23,029,706 19,205,134 22,485,448 17,257,152
The accompanying notes are an integral part of these financial statements.
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BIOPHARMACEUTICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
SIX MONTHS ENDED MARCH 31, 1995
<TABLE>
<CAPTION>
Common Stock Additional Notes Receivable
Number of Par Paid-In Treasury Officers &
Shares Value Warrants Capital Deficit Stock Employees Total
---------- ------- -------- ----------- ----------- ---------- ---------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1994 21,189,771 $21,189 --- $26,331,310 $(18,281,809) $(944,612) $(559,274) $6,566,804
Shares issued in connection
with the Company's Regulation
S offering, net of related
expenses 2,659,742 2,660 --- 1,082,574 --- --- --- 1,085,234
Warrants issued in connection
with the Company's Regulation
S offering --- --- $18,000 --- --- --- --- 18,000
Net loss for six months
ended March 31, 1995 --- --- --- --- (588,063) --- --- (588,063
---------- ------- ------- ----------- ------------ ---------- --------- ----------
Balance, March 31, 1995 23,849,513 $23,849 $18,000 $27,413,884 $(18,869,872) $(944,612) $(559,274) $7,081,975
========== ======= ======= =========== ============ ========== ========= ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
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BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
(UNAUDITED)
SIX MONTHS ENDED MARCH 31,
1995 1994
---------- ----------
Cash flows from operating activities:
Loss from continuing operations $ (588,063) $(1,489,112)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 408,252 340,087
Changes in certain assets and liabilities:
Accounts receivable (792,931) 120,891
Inventories 145,104 (952,619)
Other current assets (95,189) (218,178)
Accounts payable and accrued expenses (160,135) (128,057)
Sundry non current assets --- (21,718)
Payment against settlement of litigation (50,000) (50,000)
-------- --------
Net cash provided by (used in) operating activities (1,132,962) (2,398,706)
---------- ----------
Cash flows from investing activities:
Purchase of property plant and equipment (21,692) (85,881)
Payments made for licensing agreements --- (287,000)
Legal fees for Amswiss acquisition --- (51,889)
---------- ----------
Net cash provided by (used in) investing activities (21,692) (424,770)
---------- ----------
Cash flows from financing activities:
Revolving credit and term loan activity
Borrowings --- 974,800
Repayments --- (1,128,629)
Proceed of Company's Regulation S
offering, net of related expenses 1,085,234 3,409,121
Proceeds from exercise of stock options --- 686
Proceeds from sale of warrants 18,000 ---
---------- ----------
Net cash provided by (used in) financing activities 1,103,234 3,255,978
---------- ----------
Net change in cash (51,420) 432,502
Cash at beginning of period 129,004 30,166
--------- -----------
Cash at end of period $ 77,584 $ 462,668
========= ==========
Supplemental disclosure of cash flow information:
Non cash financing activities:
Issuance of 4,000,000 shares of common stock
for Amswiss rights --- $7,750,000
Contingent notes payable issued as part
of Amswiss acquisition (250,000) 250,000
Notes receivable-officers and employees accepted
on exercise of stock options --- 559,274
Portion of settlement of litigation reclassified
to long-term debt --- 250,000
The accompanying notes are an integral part of these financial statements.
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BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1995
A. Consolidated Condensed Financial Statements
The Consolidated Condensed Balance Sheet as of March 31, 1995 and the
Consolidated Condensed Statement of Operations for the period ended March 31,
1995 and 1994 and the Consolidated Condensed Statement of Shareholders' Equity
for the six month period ended March 31, 1995, and the Consolidated Statements
of Cash Flows for the periods ended March 31, 1995 and 1994 have been prepared
by the Company without audit. In the opinion of Management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at March 31, 1995
and for all periods presented have been made.
For information concerning the Company's significant accounting
policies and Basis of Presentation, reference is made to the Company's Annual
Report on Form 10-K for the year ended September 30, 1994. Results of operations
for the period ended March 31, 1995 are not necessarily indicative of the
operating results to be expected for the full year and such results are subject
to year-end adjustment and independent audit.
The Financial Statements include the accounts of the Company and its
wholly-owned subsidiaries. All significant inter-company accounts and trans-
actions have been eliminated in consolidation. The Consolidated Statements of
Operations for all periods reflect the ongoing operations of the Company.
B. Intangible Assets
On November 18, 1993, the Company and Amswiss Scientific, Inc.,
("Amswiss"), completed a transaction whereby the Company agreed to purchase all
of Amswiss' rights to certain pharmaceuticals in the development stage,
including all agreements, licenses, applications, approvals, trademarks, trade
names, and research data, for which the Company issued to Amswiss four million
shares at $2.00 per share. Amswiss is a Canadian operation which had been
engaged in, among other things, financing the development of anti-cancer drugs
and biotechnology-based drug development programs.
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BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Continued)
The agreement further provides that all the shares and warrants issued
be held in a Voting Trust, with the majority of the trustees consisting of
directors of the Company. The Voting Trust will expire on the earlier of the
date the FDA gives final approval of certain new drug applications or December
31, 1995. Of the shares and warrants issued to Amswiss, 800,000 common shares
and warrants to purchase 400,000 common shares will be subject to forfeiture and
cancellation in the event the Company is unable to obtain final FDA approval of
the aforementioned drug applications on or before December 31, 1995. With
respect to the shares and warrants issued to Amswiss that are not subject to
forfeiture, Amswiss was granted registration rights for one half of the shares
and warrants six months after closing and the balance of the shares and
warrants, one year after the closing. The Company has also issued to Amswiss a
contingent non-negotiable, non-interest bearing $250,00 note, payable one
hundred twenty (120) days after final FDA approval. In the event such FDA
approval is not obtained by December 31, 1995, such note will be cancelled. Upon
issuance of the new drug application, the note may be converted, at Amswiss'
election, into the Company's common shares at $3.50 per share which shares may
become subject to a public offering.
On March 31, 1995 the Company concluded that it will not be able to
obtain FDA approval for DBD by December 31, 1995 and has thereby canceled the
contingent $250,000 note payable and reduced the intangible assets by an equal
amount.
In addition, Amswiss received a three percent (3%) royalty on future
sales of a drug, and if the Company offers to sell its common shares in an
underwritten public offering, Amswiss will receive as additional compensation,
$125.000 from the net proceeds thereof.
The value of the intangible asset acquisition on the March 31, 1995
Unaudited balance sheet is comprised of the assets acquired of $7,750,000
(4,000,000 shares at 1-15/16 per share, representing the market value of the
shares issued on the date of closing) and deferred legal costs totaling
$180,646, less amortization. Management has estimated that the aforementioned
assets will be amortized over periods ranging from ten to seventeen years.
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BIOPHARMACEUTICS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operating requirements for the last four
years primarily by the issuance of common shares; $424,500 in 1992, $2,384,806
in fiscal year 1993, and $4,433,790 in fiscal year 1994, and $1,085,000 in the
first half of fiscal year 1995 and convertible debentures; $1,150,000 in 1991
and in 1992 the settlement of claims against past management $924,076. As of
March 31, 1995, the Company has cash of approximately $78,000.
The Company anticipates that the resumption of manufacturing operations
and the sales of its personal care product Treo, will contribute to increasing
sales and gross profits. The Board of Directors is currently seeking to
consummate a private offering of up to 4.5 million shares through a Regulation S
offering. The Company believes that the foregoing along with the additional
capital to be raised through the Regulation S offering, will be adequate to
meet its current objectives.
RESULTS OF OPERATIONS
Revenues for the second quarter ended March 31, 1995 increased 185% to
$1,504,089 compared to $527,592 for the second quarter of fiscal 1994. The
revenue increase includes a 145% increase in sales of $766,497 to $1,294,089,
and royalty income in the quarter of $210,000 from the Treo License Agreement.
Revenues for the first quarter of fiscal 1995 included sales of $619,084 and
royalty income of $100,000. Sales of Treo in the quarter ended March 31, 1995
increased to $769,310 compared to $43,910 for the quarter ended March 31, 1994.
Gross margin for the quarter improved to a positive 31.1% compared
to a negative 25.2% for the comparable quarter. Gross loss for the prior quarter
totaled 9%. Negative margins in prior quarters are attributable to sales levels
not being high enough to absorb fixed overheads in manufacturing. The
improvement in the quarter is attributable to the increased sale of Treo which
carries higher gross margins.
Selling, general and administrative expenses increased to $528,436 from
$490,394 in the comparable 1994 quarter due to an increase in royalty expense of
$50,000 to $125,000 for the Company's personal care product Treo. In 1994 the
comparable expense was $75,000.
Amortization of licenses totaled $143,046 for the quarter ended March
31, 1995 compared to $143,037 for the second quarter in 1994. For the six months
ended March 31, 1995 amortization totaled $286,092 vs. $217,927 in the
comparable six month period due to an increase in the amortization of the
Amswiss rights which were acquired in November 1993.
Interest expense of $36,000 for the quarter compares to $47,650 for the
comparable quarter in 1994 which included financing of accounts receivable with
CIT. The agreement with CIT. expired in September 1994.
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SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized.
/s/ Edward Fine
--------------------
BIOPHARMACEUTICS, INC.
REGISTRANT
By: EDWARD FINE, President and Chief Executive Officer
/s/ William C. Kugler
--------------------
WILLIAM C. KUGLER
Vice President and Chief Financial Officer
Dated: April 26, 1995
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