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 December 31, 1996 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 December 31, 1996.
Class Outstanding
----- -----------
Common Stock - $.00l Par Value 41,657,350
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
Consolidated Condensed Balance Sheet
December 31, 1996 (Unaudited) and September 30, 1996 (Audited)
Statements of Operations
Three Months Ended December 31, 1996 and 1995(Unaudited)
Consolidated Statement of Shareholders' Equity
for the Three Months Ended December 31, 1996
Consolidated Condensed Statement of Cash Flows
for the Three Months Ended December 31, 1996 and 1995
Notes to Condensed Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
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ITEM 1. FINANCIAL STATEMENTS
BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
(Unaudited) (Audited)
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 39,574 $ 44,775
Trade receivables, less allowance for
doubtful accounts 494,612 587,457
Note receivable --- 150,000
Inventories 591,045 538,359
Prepaid expenses and other assets 125,992 136,839
---------- ----------
Total current assets 1,251,223 1,457,430
Property, plant and equipment, at cost,
net of accumulated depreciation 305,257 333,653
Investment in restricted securities 250,750 250,750
Intangible assets, at cost, net of accumulated amortization 3,630,125 3,677,225
Licensing costs, net of accumulated amortization 64,001 64,901
Sundry 32,503 32,729
---------- ----------
$5,533,859 $5,816,688
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable-trade $ 906,612 $ 938,577
Accrued expenses 542,415 727,238
Current maturities of long-term debt 687,100 732,100
---------- ----------
Total current liabilities 2,136,127 2,397,915
Long-term debt 1,586,792 1,622,792
Convertible debentures payable 1,102,941 1,402,941
Shareholders' equity:
Common Stock - par value $.00l per share
Authorized - 75,000,000 shares
Issued - 42,071,078 shares, 40,871,078, 1995 42,071 40,871
Additional paid-in capital 30,070,261 29,771,461
Deficit (27,900,447) (27,915,406)
---------- ----------
2,211,885 1,896,926
Less Treasury Stock, at cost
(413,728 shares 1994) (944,612) (944,612)
Notes receivable from officers and employees (559,274) (559,274)
---------- ----------
707,999 93,040
---------- ----------
$5,533,859 $5,816,688
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
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BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
December 31,
------------------
1996 1995
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Revenues:
Net sales $1,258,518 $ 457,084
Costs and expenses:
Cost of sales 840,509 634,932
Selling, general and administrative 295,349 251,561
Amortization of intangibles 48,000 ---
---------- ----------
1,183,858 886,493
---------- ----------
74,660 (429,409)
Other income (deductions):
Interest expense (including
interest to officer) (59,701) (36,000)
---------- ----------
Net income (loss) $ 14,959 $ (465,409)
========== ===========
Income (loss) per share
Continuing operation $0.00 ($0.02)
==== ====
Average shares outstanding 40,457,350 27,071,755
The accompanying notes are an integral part of these financial statements.
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BIOPHARMACEUTICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
Common Stock Additional
Number of Par Paid-In Treasury Notes Receivable
Shares Value Capital Deficit Stock Officers & Employees Total
------ ----- ------- ------- ----- -------------------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1996 40,871,078 $40,871 $29,771,461 $(27,915,406) $(944,612) $(559,274) $393,040
Shares issued in exchange
for convertible debentures 1,200,000 1,200 298,800 --- --- --- 300,000
Net income for the three months
ended December 31, 1996 --- --- --- 14,959 --- --- 14,959
------------ -------- ----------- ------------ --------- --------- --------
Balance, December 31, 1996 42,071,078 $42,071 $30,070,261 $(27,900,447) $(944,612) $(559,274) $707,999
=========== ======== =========== ============= ========== ========= ========
<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)
THREE MONTHS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Income (Loss) from continuing operations $ 14,959 $ (465,409)
Adjustments to reconcile net income (loss) to
net cash provided by (used in)
operating activities:
Depreciation and amortization 87,000 60,000
Changes in certain assets and liabilities:
Accounts receivable 92,845 67,741
Notes receivable 150,000 ---
Inventories (52,686) 103,772
Other current assets 10,847 (4,065)
Other assets 226 500
Accounts payable and accrued expenses (216,788) (61,213)
Customer credit balances --- 70,717
Payment against settlement of litigation (40,000) (15,000)
Payment against Medicare settlement --- (25,000)
---------- ----------
Net cash provided by (used in)
Operating activities 46,403 (267,957)
---------- ----------
Cash flows from investing activities:
Purchase of property plant and equipment (10,604) (3,662)
---------- ----------
Net cash provided by (used in)
investing activities (10,604) (3,662)
---------- ----------
Cash flows from financing activities:
Proceed of Company's Regulation S
offering, net of related expenses --- 201,239
Repayments of long-term debt (41,000) ---
---------- ----------
Net cash provided by (used in)
financing activities (41,000) 201,239
Net change in cash (5,201) (70,380)
Cash at beginning of period 44,775 86,664
---------- ----------
Cash at end of period $ 39,574 $ 16,284
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
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BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1996
A. Consolidated Condensed Financial Statements
The Consolidated Condensed Balance Sheet as of December 31, 1996 and
the Consolidated Condensed Statement of Operations for the period ended December
31, 1996 and 1995, and the Consolidated Condensed Statement of Shareholders'
Equity for the three month period ended December 31, 1996, and the Consolidated
Statements of Cash Flows for the periods ended December 31, 1996 and 1995 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
December 31, 1996 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, 1996. Results of operations
for the period ended December 31, 1996 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 Consolidated Financial Statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant inter-company
accounts and transactions have been eliminated in consolidation. The
Consolidated Statements of Operations for all periods reflect the ongoing
operations of the Company.
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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 three years primarily by the issuance of common shares; $2,384,806 in 1993,
$4,433,790 in 1994, $2,054,722 in 1995, and $2,547,658 in 1996; convertible
debentures of $800,000 in 1992 and the settlement of claims against past
management $924,076 in 1992. As of December 31, 1996, the Company has cash of
approximately $40,000.
As a result of the United States District Court's decision on
December 20, 1995, the Company's license for Treo had been terminated and
therefore the Company wrote-off assets associated with Treo as a discontinued
operation as of September 30, 1995. On December 13, 1996 the Company's
subsidiary, Biopharm Lab, Inc.(the distributor of Treo), filed a Chapter 7
Bankruptcy Petition in the United States District Court, Eastern District.
The Company completed its acquisition of a product line from
London International US Holdings, Inc. (LIUSH) which has previously generated
sales in excess of the Company's 1995 total sales and should generate
substantial working capital to the Company. The cost of approximately $3,600,000
was financed by a combination of Regulation S common stock sales, and notes for
$2,000,000 to be paid over a number of years. The brands acquired have been on
the market for more than ten years each and are sold under the names Vaginex(R),
Koromex(R), Koroflex(R), and Feminique(R). LIUSH is one of the largest condom
manufacturers in the U.S. and had decided to sell its Feminine Hygiene brands in
order to concentrate its efforts on its core business.
Sales of these brands are being made to food and drug chains,
drug wholesalers, distributors and the U.S. military. The Company is using nine
independent manufacturers rep organizations to sell the Feminine Hygiene
products. Each of these rep organizations already calls on the key accounts
carrying the lines. The Company expects its reps to expand sales of the lines by
making a more concerted effort than that made by LIUSH, expanding the customer
base and by receiving greater support from the Company in promoting the
products.
The Company also anticipates that the approval of additional
products by the FDA in 1996, which will increase the number of products offered
by Biopharm to its customers and with the addition of three new customers,
Biopharm is expected to increase sales and provide a basis for profitability in
fiscal 1997.
The Company believes that the foregoing, along with the
additional capital raised through September 1996 will be adequate to meet its
current objectives. Sinking fund requirements in the convertible debentures in
1996 were waived by the holder and eliminated in the conversion of the
debentures to a new series on December 15, 1996.
RESULTS OF OPERATIONS
Sales for the quarter ended December 31` 1996 of $1,258,518
represents an increase of 175% over the $457,084 shipped in the comparable
quarter in 1995. Sales for the prior quarter ended September 30, 1996 totaled
$1,477,367. Sales of Feminine Hygiene products of $783,535 represents a 100%
increase over the comparable quarter since the product line was acquired in
March 1996. Sales of generic products increased 4% to $474,983 compared to the
$457,084 shipped in 1995. By comparison to the prior quarter, sales of feminine
hygiene products totaled $868,231 and generic products totaled $609,136.
Gross margin for the quarter were a positive 33% compared to a
negative 40% in the comparable quarter in 1995. Gross margin for the prior
quarter totaled a positive 31%. Negative margins were attributable to sales
levels not being high enough to absorb fixed overheads in manufacturing.
Selling, general and administrative expenses increased to
$295,349 from $251,561 in the first quarter of 1996 due primarily to selling
expenses for the feminine hygiene product line which did not exist in the
comparable quarter. Amortization of intangibles primarily represents trademarks
and trade names for the feminine hygiene line which was acquired in March 1996.
Interest expense of $59,701 includes the financing of the
feminine hygiene acquisition, interest expense of the convertible debentures and
adjustments for prior interest accrued which was no longer payable. Interest for
the comparable quarter represented only debenture obligations
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PART II Other Information
Item 1. Legal Proceedings
Amswiss Scientific, Inc.--Amswiss Scientific, Inc. (Amswiss)
commenced an action against the Company in the U.S. District Court for the
southern district of New York on December 16, 1996. Amswiss asserted a claim for
an amount to be ascertained at trial, but believed by Amswiss to be at least two
million dollars, plus cost and attorney's fees arising from the alleged failure
of the Company to file a Registration Statement with the Securities and Exchange
Commission for certain shares and warrants of the Company owned by Amswiss.
Item 2. Changes in Securities-Not applicable
Item 3. Default upon Senior Securities-Not applicable
Item 4. Submission of materials to a vote of security holders-Not applicable
Item 5. Other information-Not applicable.
Item 6. Exhibits and Reports on Form 8-K
Exhibits 10.9:
Summons in a Civil Action-United States District Court, Southern
District. Amswiss Scientific, Inc. vs. Biopharmaceutics, Inc.
Reports on Form 8-K:
Joint Venture Agreement with Advanced Biological Systems, Inc. dated
September 25, 1996 filed on October 9, 1996.
On October 21, 1996 the Company announced the appointment of
Mr. Jonathan Rosen to its Board of Directors filed December 12, 1996.
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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: February 14, 1997
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