<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-2
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996
Commission file number: 1-9370
Biopharmaceutics, Inc.
(Exact name of Registrant as specified in its Charter)
Delaware 13-3186327
State of Corporation (I.R.S. Employer I.D. Number)
990 Station Road, Bellport, NY 11713
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (516) 286-5800
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, $0.001 Par Value NASDAQ OTC Bulletin Board
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 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.
Yes x No
----- -----
The aggregate market value of the voting stock owned by non-affiliates of
the Registrant on November 30, 1996 was $15,576,080. On such date, the mean
price at which the stock was sold was $0.50 per share.
The number of shares of Common Stock, $.001 Par Value, outstanding as of
November 30, 1996, was 40,457,350, exclusive of outstanding, unexercised
options.
DOCUMENTS INCORPORATED BY REFERENCE:
(a) Annual Report on Form 10-K for the Fiscal Year Ended September 30,1996
(b) Form 10-K/A-1 for the Fiscal Year Ended September 30, 1996
1
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) Documents filed as part of this report:
(1) and (2) - See Index to Consolidated Financial Statements and
Schedules included herein.
(3) Exhibit - Exhibit 27 -- ART.5 FDS FOR 9/30/96 10-K
(B) Reports Filed on Form 8-K during the Fourth Quarter
Incorporated By Reference
8-K dated October 9, 1996, announcing the Joint Venture Agreement with
Advanced Biological Systems, Inc.
8-K dated December 12, 1996, announcing the appointment of Johathan
Rosen to its Board of Directors.
<PAGE>
SIGNATURE
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, thereunto duly authorized.
BIOPHARMACEUTICS, INC.
By: /s/ Edward Fine
--------------------
Edward Fine
President and
Chief Executive Officer
Bellport, N.Y.
May 30, 1997
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30,
1996, 1995 AND 1994
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
INDEX
Page
Number
Auditor's Report ............................................ 1
FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of
September 30, 1996 and 1995 ................................ 2 - 3
Consolidated Statements of Operations for the
Years Ended September 30, 1996, 1995 and 1994 .............. 4
Consolidated Statements of Shareholders' Equity (Deficiency
in Assets) for the Years Ended September 30, 1996, 1995
and 1994 ................................................... 5 - 7
Consolidated Statements of Cash Flows for the
Years Ended September 30, 1996, 1995 and 1994 .............. 8 - 9
Notes to Consolidated Financial Statements .................. 10 - 28
FINANCIAL STATEMENT SCHEDULES:
Schedule VIII - Valuation Accounts .......................... 29
<PAGE>
FARBER, BLICHT & EYERMAN, LLP
Certified Public Accountants
255 Executive Drive, Suite 215 Telephone: (516) 576-7040
Plainview, NY 11803-1715 Facsimile: (516) 576-1232
Board of Directors and Shareholders
Biopharmaceutics, Inc.
Bellport, New York
We have audited the accompanying consolidated balance sheets of
Biopharmaceutics, Inc. and Subsidiaries as of September 30, 1996 and 1995, and
the related consolidated statements of operations, shareholders' equity
(deficiency in assets) and cash flows for each of the three years in the period
ended September 30, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of
Biopharmaceutics, Inc. and Subsidiaries at September 30, 1996 and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended September 30, 1996, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects,
the information set forth therein.
/s/FARBER,BLICHT & EYERMAN LLP
Plainview, New York
November 14,1996 (except for notes 5
10, 16 and 17, the latest of which
is dated March 24, 1997).
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
ASSETS
1996 1995
Current assets:
Cash $ 44,775 $ 86,664
Trade receivables, less allowance
for doubtful accounts of $25,000;
$22,000 in 1995 (Schedule VIII) 587,457 268,957
Note receivable (Note 16) 150,000 -
Inventories (Note 3) 538,359 493,671
Prepaid expenses and other
current assets 136,839 27,953
---------- --------
Total current assets 1,457,430 877,245
Property, plant and equipment, at
cost, net of accumulated depreciation
and amortization (Note 4) 333,653 443,267
Investment in restricted securities
(Note 16) 250,750 -
Intangible assets, at cost, net of
accumulated amortization (Note 5) 3,677,225 -
Licensing costs, net of accumulated
amortization (Note 6) 64,901 70,301
Sundry 32,729 30,119
---------- ----------
$5,816,688 $1,420,932
========== ==========
The accompanying notes are an integral part of these financial statements
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND 1995
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
1996 1995
---- ----
Current liabilities:
Accounts payable - trade $ 938,577 $ 1,027,865
Accrued expenses (Note 7) 727,238 1,043,676
Customer credit balances payable - 196,320
Medicare judgment payable (Note 8) - 50,000
Current maturities of long-term
debt (Note 9) 732,100 190,000
----------- -----------
Total current liabilities 2,397,915 2,507,861
----------- -----------
Long-term debt (Note 9) 1,622,792 130,982
----------- -----------
Convertible debentures payable
(Note 10) 1,402,941 1,000,000
----------- ----------
Commitments and contingencies
(Notes 14 and 15)
Shareholders' equity (deficiency in assets)
in assets) (Notes 10,11,16 and 18):
Common stock - par value $.001 per share:
Authorized - 75,000,000 shares
Issued - 40,871,078 shares;
26,535,750 shares in 1995 40,871 26,536
Additional paid-in capital 29,771,461 27,149,038
Deficit (27,915,406) (27,889,599)
----------- -----------
1,896,926 (714,025)
Less treasury stock, at cost
(413,728 shares in 1996 and 1995) (944,612) (944,612)
Notes receivable from officers
and employees (559,274) (559,274)
----------- -----------
393,040 (2,217,911)
----------- -----------
$ 5,816,688 $ 1,420,932
=========== ===========
The accompanying notes are an integral
part of these financial statements.
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
Sales $3,725,221 $ 1,532,649 $ 2,057,383
---------- ----------- -----------
Costs and expenses:
Cost of sales 3,141,054 2,303,224 2,542,912
Selling, general and
administrative 1,434,036 1,031,354 1,575,870
Research and development
expenses 14,426 62,311 633,154
Amortization of intangibles 99,600 576,264 483,659
---------- ----------- -----------
4,689,116 3,973,153 5,235,595
---------- ----------- -----------
(963,895) (2,440,504) (3,178,212)
---------- ----------- -----------
Other income (deductions):
Loss on write-off of
intangible assets (Note 16) - (5,526,587) -
Settlement of medicare
judgement (Note 8) - 229,524 -
Income related to contribution
of licenses and rights to
joint venture (Note 16) 400,750 - -
Gain on disposition of equipment 62,500 2,758 -
Interest expense (including
interest to officer of
$6,165 in 1995; $12,500 in
1994) (298,821) (251,438) (246,629)
---------- ----------- -----------
164,429 (5,545,743) (246,629)
---------- ----------- -----------
Loss from continuing operations (799,466) (7,986,247) (3,424,841)
---------- ----------- -----------
Discontinued operations (Note 17):
Operating loss - (429,936) (1,245,924)
Gain (loss) of disposal 773,659 (1,191,607) -
---------- ----------- -----------
773,659 (1,621,543) (1,245,924)
---------- ----------- -----------
Net loss $ (25,807) $(9,607,790) $(4,670,765)
========== =========== ===========
Primary gain (loss) per share (Note 12):
Continuing operations $ (.02) $ (.35) $ (.18)
Discontinued operations .02 (.07) (.07)
---------- ----------- -----------
Net loss $ - $ (.42) $ (.25)
========== =========== ===========
The accompanying notes are an
integral part of these financial statements.
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
Receivable
Common Shares Additional from
Number of Paid-in Treasury Officers &
Shares Amount Capital Deficit Stock Employees Total
---------- -------- ---------- ---------- ------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, October 1, 1993 11,705,250 $11,705 $13,638,265 $(13,611,044)$(1,186,196) $ - $(1,147,270)
Shares issued in
connection with the
exercise of stock options 686,100 686 559,274 - - (559,274) 686
Shares issued in connection
with the Company's
Regulation S offerings,
net of related
expenses $296,040 4,798,421 4,798 4,428,992 - - - 4,433,790
Shares issued in connection
with the purchase of
certain intangible assets
of Amswiss Scientific, Inc. 4,000,000 4,000 7,746,000 - - - 7,750,000
Shares issued (97,339)
in exchange for accounts
payable obligations - - (55,284) - 213,459 - 158,175
Shares issued (25,000)
in exchange for license - - 14,063 - 28,125 - 42,188
Net loss for year ended
September 30, 1994 - - (4,670,765) - (4,670,765)
--------- ------- ----------- ------------ ---------- ---------- ----------
Balance, September 30, 1994 21,189,771 $21,189 $26,331,310 $(18,281,809)$(944,612) $ (559,274) $6,566,804
---------- ------- ----------- ------------ ---------- ----------- ----------
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(continued)
<TABLE>
<CAPTION>
Notes
Receivable
Common Shares Additional from
Number of Paid-in Treasury Officers &
Shares Amount Capital Deficit Stock Employees Total
-------------------------------------------- ------- ---------- ---------- --------
<S> <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 offerings,
net of related expenses
of $190,891 5,545,979 5,547 2,049,175 - - 2,054,722
Shares issued in exchange
for convertible debentures 600,000 600 149,400 - - 150,000
Forfeiture of shares in
connection with the
purchase of certain
intangible assets of
Amswiss Scientific, Inc. (800,000) (800) (1,380,847) - - (1,381,647)
Net loss for year ended
September 30, 1995 - - - (9,607,790) - (9,607,790)
------------------------------------------- ------------ ----------------------- ------------
Balance, September 30, 1995 26,535,750 $26,536 $27,149,038 $(27,889,599) $(944,612) $(559,274) $(2,217,911)
========== ======= =========== ============ ========= ========= ============
<FN>
The accompanying notes are an
integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
(continued)
<TABLE>
<CAPTION>
Notes
Receivable
Common Shares Additional from
Number of Paid-in Treasury Officers &
Shares Amount Capital Deficit Stock Employees Total
----------------------------------------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1995 26,535,750 $26,536 $27,149,038 $(27,889,599) $(944,612) $(559,274) $(2,217,911)
Shares issued in connection
with the Company's
Regulation S offerings,
net of related expenses
of $31,973 11,845,328 11,845 2,535,813 - - 2,547,658
Shares issued as
commission to investment
banker in connection with
the aforementioned
Regulation S offerings 2,220,000 2,220 (2,220) - - -
Shares issued in
connection with the
Company's acquisition
of the feminine hygiene
product line (Note 5) 270,000 270 88,830 - - 89,100
Net loss for year ended
September 30, 1996 - - - (25,807) - - (25,807)
----------------------------------------------------------------- ------------------------------
Balance, September 30, 1996 40,871,078 $40,871 $29,771,461 $(27,915,406) $(944,612) $(559,274) $ 393,040
================================================================= ========= ============
<FN>
The accompanying notes are an integral
part of these financial statements.
</FN>
</TABLE>
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Cash flows from operating
activities: 1996 1995 1994
----------- ---- ---- ----
Loss from continuing operations $ (799,466) $(7,986,247) $(3,424,841)
Gain (loss) from discontinued
operations 773,659 (1,621,543) (1,245,924)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 303,805 835,304 761,374
Loss on write-off of
intangible assets - 5,526,587 -
Loss on write-off of licenses - 114,574 -
Gain on disposition of equipment (62,500) (2,758) -
Income related to contribution
of licenses and rights to
joint venture (400,750) - -
Changes in certain assets and liabilities:
Accounts receivable (318,500) 155,853 (19,025)
Inventories (44,688) 808,167 (747,319)
Other current assets (108,886) 24,808 73,118
Accounts payable - trade (89,288) (274,017) 732,242
Accrued expenses (44,479) 370,301 72,524
Customer credit balances (196,320) 115,859 24,961
Medicare judgment payable (50,000) (229,524) 31,000
Deferred costs - - 128,757
Sundry (2,610) 21,365 (20,380)
----------- ----------- -----------
Net cash used in
operating activities (1,040,023) (2,141,271) (3,633,513)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property, plant
and equipment (32,091) (36,773) (94,226)
Payments for licensing agreements - - (35,000)
Proceeds from sale of property,
plant and equipment - 10,000 -
Intangible assets acquired (3,682,325) - (180,646)
----------- ---------- -----------
Net cash used in
investing activities (3,714,416) (26,773) (309,872)
----------- ---------- -----------
Balance carried forward (4,754,439) (2,168,044) (3,943,385)
----------- ---------- -----------
The accompanying notes are an integral part of these
financial statements
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
1996 1995 1994
---- ---- ----
Balance brought forward $(4,754,439) $(2,168,044) $(3,943,385)
----------- ----------- -----------
Cash flows from financing activities:
Revolving credit loan activity:
Borrowings - - 1,855,000
Repayments - - (2,071,488)
Repayment of term debt - - (75,765)
Proceeds of Company's
Regulation S offerings, net
of related expenses of
$31,973; $190,891 in 1995;
$296,040 in 1994 2,547,658 2,054,722 4,433,790
Long-term debt incurred 4,269,175 130,982 -
Repayments of long-term debt (2,104,283) (60,000) (100,000)
Proceeds from the exercise
of stock options - - 686
----------- ----------- -----------
Net cash provided by
financing activities 4,712,550 2,125,704 4,042,223
----------- ---------- -----------
Net increase (decrease)
in cash (41,889) (42,340) 98,838
Cash at beginning of year 86,664 129,004 30,166
----------- ----------- -----------
Cash at end of year $ 44,775 $ 86,664 $ 129,004
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during year:
Interest $ 4,000 $ 60,000 $ 147,000
=========== =========== ===========
Non-cash financing activities:
Reference is made to Notes 9,
16 and 18 for certain non-cash
financing activities.
The accompanying notes are an integral part of these financial statements
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 1. Summary of Significant Accounting Policies
a) The Company
Biopharmaceutics, Inc. (the "Company") is a manufacturer of generic
pharmaceutical products and a distributor of consumer feminine hygiene products.
These products are sold nationwide to major chain stores, distributors,
wholesalers and clinics.
b) Principles of consolidation
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany accounts and transactions
have been eliminated in consolidation.
c) Revenue recognition
Sales are recognized as products are shipped.
d) Inventory valuation
Inventories are stated at the lower of cost
(first-in, first-out) or market.
e) Depreciation and amortization
The Company amortizes its intangible assets on the straight-line method
over their estimated useful life of twenty years. Licensing costs are being
amortized on the straight-line method over the life of the license agreements.
The Company depreciates its property and equipment on the straight-line
method for financial reporting purposes. For tax reporting purposes, the Company
uses the straight-line or accelerated methods of depreciation.
Leasehold improvements are amortized over four to ten years. Equipment,
furniture and fixtures generally have been assigned ten and seven year lives and
tools and dies, four year lives.
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 1. Summary of Significant Accounting Policies (continued)
e) Depreciation and amortization (continued)
Expenditures for maintenance, repairs, renewals and betterments are
reviewed by management and only those expenditures representing improvements to
plant and equipment are capitalized. At the time plant and equipment are retired
or otherwise disposed of, the cost and accumulated depreciation accounts and the
gain or loss on such disposition is reflected in operations.
The Company adopted Financial Accounting Standards ("FAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of" for the year ended September 30, 1996. The adoption of FAS 121
had no material effect on the financial statements.
f) Deferred income taxes
Deferred income taxes are provided based on the provisions of SFAS No. 109,
"Accounting for Income Taxes" ("SFAS 109"), to reflect the tax effect of
differences in the recognition of revenues and expenses between financial
reporting and income tax purposes based on the enacted tax laws in effect at
September 30, 1996.
g) Loss per share
Loss per share is computed based on the weighted average number of common
shares outstanding. In computing loss per share, common share equivalents are
omitted because they are antidilutive.
h) Research and development expenses
The Company expenses research and development costs as incurred. For the
years ended September 30, 1996, 1995 and 1994, research and development costs
aggregated approximately $14,000, $62,000, and $633,000, respectively.
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 1. Summary of Significant Accounting Policies (continued)
i) Fair value of financial instruments
Effective for fiscal years ending after December 15, 1995, Statement of
Financial Accounting Standards No. 107 requires entities with total assets less
than $150 million to disclose the fair value of financial instruments recognized
in the balance sheet. At September 30, 1996, the carrying amounts of the
Company's financial instruments included in its current assets and current
liabilities approximate fair value because of the short maturity of those
instruments. The carrying amounts of the Company's long-term debt also
approximates their fair value as of September 30, 1996 based upon the borrowing
rates currently available to the Company for loans with similar terms and
maturities.
j) Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. The most significant estimates made are for recoverability
of property and equipment, intangibles and accounts receivable. Actual results
could differ from those estimates.
k) Concentration of credit risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of sales, trade accounts
receivable and cash. The Company grants credit to customers located throughout
the United States. The Company performs ongoing credit evaluations of its
customers' financial condition and generally requires no collateral from its
customers. For the year ended September 30, 1996, the Company had sales to three
unrelated customers of approximately $492,000 (13.2% of sales), $461,000 (12.4%
of sales) and $446,000 (12.0% of sales). In fiscal 1995, sales to two customers
aggregated approximately $416,000 (27.1% of sales) and $351,000 (22.9% of
sales).
The Company places its cash with financial institutions insured by the
FDIC. At times, such cash balances may be in excess of the FDIC insurance limit.
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 1. Summary of Significant Accounting Policies (continued)
k) Concentration of credit risk (continued)
As of September 30, 1996, the Company had receivables from two unrelated
customers of approximately $82,000 (14.0% of accounts receivable) and $65,000
(11.1% of accounts receivable), respectively. As of September 30, 1995, the
Company had receivables from five unrelated customers averaging $46,000 per
customer (17.1% of accounts receivable).
l) Accounting for stock-based compensation
In October 1995, SFAS No. 123, "Accounting for Stock-Based Compensation",
was issued. SFAS No. 123 establishes a fair value method for accounting for
stock-based compensation plans either through recognition or disclosure. The
Company intends to adopt the employee stock-based compensation provisions of
SFAS No. 123 by disclosing the pro forma net income per share amounts assuming
the fair value method was adopted October 1, 1995. The adoption of this standard
did not impact the Company's consolidated results of operations, financial
position or cash flows.
Note 2. Basis of Preparation
For the fiscal year ended September 30, 1996, the Company's operations
included the manufacture and distribution of its generic pharmaceutical products
along with the marketing and selling of its newly acquired feminine hygiene
product lines; Vaginex, Koromex and Feminique (See Note 5).
The Company recorded net losses of $25,807, $9,607,790 and $4,670,765 for
each of the years ended September 30, 1996, 1995 and 1994, respectively. At
September 30, 1996, the Company had a working capital deficit of $940,485. As
part of management's plan to refocus the Company's efforts on its operations to
attain profitable levels, the Company acquired the Feminine Hygiene Product
Brands of London International U.S. Holdings, Inc. for a purchase price of
$3,600,000 (See Note 5).
In addition, on September 25, 1996, the Company entered into a Joint
Venture Agreement to finance the commercialization of certain cancer related
drugs (see Note 16).
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 2. Basis of Preparation (continued)
The Company anticipates that its expanding pharmaceutical customer base and
the acquisition of its new feminine hygiene product line will enable the Company
to reach profitability. The Company is of the opinion that with the funds raised
from the joint venture, possible further issuances of common stock pursuant to
Regulation S offerings, and other financing it may consider necessary to
strengthen its working capital position, it can generate adequate capital
resources to achieve its objectives.
Note 3. Inventories
The components of inventories are as follows:
September 30,
1996 1995 1994
Chemical raw materials and
packaging materials $292,278 $320,485 $ 581,992
Work in process 68,943 115,251 211,033
Finished goods 177,138 57,935 508,813
-------- -------- ----------
$538,359 $493,671 $1,301,838
======== ======== ==========
Note 4. Property, Plant and Equipment
Property, plant and equipment consists of the following:
September 30,
1996 1995
Equipment, furniture and fixtures (*) $1,710,986 $1,844,345
Leasehold improvements 572,244 570,349
Tools and dies 227,996 215,454
---------- ----------
2,511,226 2,630,148
Less accumulated depreciation and
amortization 2,177,573 2,186,881
---------- ----------
$ 333,653 $ 443,267
========== ==========
(*) Partially secured (Note 9(c)).
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 5. Acquisition of Feminine Hygiene Product Line
In March, 1996, the Company, through one of its
subsidiaries, acquired three branded consumer product lines (namely Koromex,
Vaginex and Feminique) from London International U.S. Holdings, Inc. ("London
Int'l") for a purchase price of $3,600,000. Pursuant to the acquisition
agreement, as amended, $100,000 was paid upon the signing of the agreement and
$1,500,000 paid at the closing. The balance of the purchase price of $2,000,000
is payable as follows: i) $500,000 on or before May 15, 1997, ii) $660,000 on or
before April 1, 1998 and iii) $840,000 on April 1, 1999, with interest at 8.5%,
payable semi-annually through October, 1997, then quarterly to maturity (see
Note 9). The obligation is guaranteed by the Company and is collateralized by a
security interest in all accounts receivable, inventory and the trademarks and
trade names purchased.
The assets purchased from London Int'l consisted of
trademarks, trade names and its customer base. No obligations were assumed by
the Company. The intangible assets acquired are comprised of the following:
Purchase price $3,600,000
Broker's fees (including cash
and securities) 159,100
Related legal costs incurred 12,325
__________
$3,771,425
==========
Amortization expense for the year ended September 30, 1996
aggregated $94,200.
The acquisition of the aforementioned product lines were
recorded under the purchase method of accounting, and accordingly, the results
of operations for the period from March, 1996 are included in the accompanying
consolidated financial statements.
The following unaudited pro forma financial information for
the Company gives effect to the acquisition as if it occurred on October 1,
1994, after giving effect to the interest expense associated with the
acquisition funding of the product line. These pro forma results have been
prepared for comparative purposes only and in management's opinion do not
purport to be indicative of the results of operations which actually would have
resulted had the acquisition occurred on the date indicated, or of future
results of operations of the Company. The pro forma results follow:
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 5. Acquisition of Feminine Hygiene Product Line (continued)
Pro forma
Years Ended September 30,
(unaudited)
1996 1995
Net Sales $5,660,883 $ 5,876,819
Gain (loss) from continuing
operations $ 14,006 $(6,227,332)
Gain (loss) from discontinued
operations $ 773,659 $(1,621,543)
Per share data:
Continuing operations $ - $ (.27)
Discontinued operations .02 (.07)
Note 6. Licensing Costs
The Company acquired an exclusive license to a patented
process for a non-invasive test to diagnose Alzheimer's disease during 1994. The
license agreement provides, among other things, for the payment of a royalty fee
equal to 5% of the net sales price of licensed products, with a minimum annual
royalty of $25,000 beginning in the fourth year of the agreement. The term of
the license expires in 2009, at which time the Company can continue to sell the
products without any royalty fee.
Additionally, the Company entered into another exclusive
license agreement during 1994 to market a patented antiviral composition method,
with a royalty due equal to 5% of net sales and a minimum annual royalty of
$25,000 beginning with the fourth year of the agreement. The Company will incur
a one-time payment of $40,000 upon reaching $250,000 in sales of products
resulting from this license. The license will terminate with the expiration of
the aforementioned patent.
The components of aforementioned licensing costs are as
follows:
September 30,
1996 1995
Exclusive license - Alzheimer's patent $62,188 $62,188
Exclusive license - Antiviral patent 15,000 15,000
---------- ---------
77,188 77,188
Less: accumulated amortization 12,287 6,887
---------- ---------
$64,901 $70,301
========================
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 7. Accrued Expenses
Accrued expenses consist of the following:
September 30,
1996 1995
Professional fees $ 255,000 $ 509,000
Commissions 88,000 139,000
Interest expense 274,000 255,000
Sundry 110,238 140,676
---------- ----------
$ 727,238 $1,043,676
========== ==========
Note 8. Medicare Judgment Payable
In November, 1995, the Court reduced a fine which was
originally imposed on the Company in 1989 to $50,000, which was paid on May 10,
1996. The 1995 consolidated statement of operations reflect a credit of
$229,524, representing the difference between the Court reduced settlement and
the original fine, with interest thereon totaling $279,524.
Note 9. Long-term Debt
Long-term debt consists of the following:
September 30,
1996 1995
Obligation from litigation settlement with
the United States Attorney's office (a) $ 95,000 $190,000
Note payable (b) - 130,982
Liability in connection with settlement
of legal fees (c) 224,792 -
Bridge Loan payable (d) 35,100 -
Note payable - in connection with
purchase of the feminine hygiene
product lines (Note 5) 2,000,000 -
---------- ---------
2,354,892 320,982
Less: current maturities 732,100 190,000
---------- ---------
$1,622,792 $130,982
========== =========
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 9. Long-term Debt (continued)
(a) In July, 1993, the Company's pharmaceutical subsidiary settled its
litigation with the United States Attorney's Office for $350,000 in connection
with investigations directed at the generic drug industry, involving alleged
misconduct in the filing and obtaining approval of Abbreviated New Drug
Applications ("ANDA's"). In connection with the settlement, the United States
Attorney's office has a claim against the Company for failure to pay, in its
entirety, its last installment due July 8, 1996, plus accrued interest. As a
precondition of the settlement, if the subsidiary defaulted on any of the agreed
upon payments, the unpaid balance of the settlement could become immediately due
and payable, with interest charged at the statutory rate from the closing date
for the unpaid balance. It is unknown at this time whether the U.S. Attorney's
office will seek to enforce its right to demand the full payment of the
outstanding obligation and interest thereon. The Company is currently making
monthly payments to liquidate the debt and at October 31, 1996, the remaining
outstanding balance was $85,000.
(b) On December 31, 1994, the Company issued a note payable to one of its
convertible debenture holders for $130,982, representing all accrued interest to
said date. The note matures October 1, 1998 and bears interest at 12.5% per
annum, payable in quarterly installments. The Company on September 30, 1996
issued convertible debentures in exchange for the aforementioned note payable
and issued additional debentures for accrued interest of $271,959 through
September 30, 1996 on all the outstanding debentures (Note 10).
(c) In March, 1996, the Company entered into a stipulation of settlement
agreement with its former legal counsel for unpaid legal fees. The settlement
provides for monthly payments of $7,000, increasing to $12,000, with the final
payment due on or before August 1, 1998. In the event of default, the entire
unpaid balance will become immediately due and payable, with interest due on the
unpaid principal balance from the date of default at the rate of 9% per annum.
This obligation is collateralized by certain manufacturing equipment of the
Company.
(d) On May 13, 1996, the Company entered into a bridge loan agreement with
a financial institution under which it borrowed $382,383. The loan agreement
provides, among other things, for monthly principal repayments of amounts
varying from $15,000 to $22,000. The loan matures on October 7, 1996. All
accrued interest was to be paid in October, 1996 at a rate of 1% above the
commercial prime lending rate. The loan is collateralized by all receivables and
tangible assets of the Company. The Company is not in compliance with the
payment terms of the agreement.
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 9. Long-term Debt (continued)
The following is a schedule of principal repayments of all
long-term debt at September 30, 1996:
1997 $ 732,100
1998 782,792
1999 840,000
----------
$2,354,892
==========
Note 10. Convertible Debentures Payable
The Company had outstanding at September 30, 1996 and 1995 an aggregate of
$1,402,941 and $1,000,000 of convertible debentures, respectively. In June,
1995, the Company converted $150,000 of the aforementioned debentures into
600,000 shares of common stock. The Company at September 30, 1996 issued four
additional convertible debentures aggregating $402,941 (Note 9(b)).
The convertible debentures outstanding at September 30, 1995 mature on
October 1, 1998, with optional redemptions available on October 1, 1996 at 110%
of par, and each subsequent year to maturity at 105% of par. The debentures bear
interest at the rate of 12.5% per annum which is payable in quarterly
installments. Under the original terms of the debentures, mandatory principal
redemption installments were to be made quarterly to maturity in the amount of
$30 per $1,000 of the remaining outstanding principal, commencing October 1,
1996. The Company obtained an extension until December 15, 1996 for the
aforementioned redemption installments. The debentures, as amended, do not
require mandatory principal redemption requirements and can be converted at any
time into the Company's common stock in its entirety or in multiples of $1,000,
at conversion prices equal to the lesser of $.25, $.27 or 80% of the bid price
per share, dependent upon when the debentures were issued.
The debentures further provide that the Company maintain a minimum current
ratio and interest coverage, as defined, and must maintain a certain minimum
stockholders' equity. On December 17, 1996, the Company received waivers of the
defaults that have occurred under the agreements prior hereto and through
January 31, 1997 from the debenture holders. If an event of default exists or
occurs, as defined, subsequent to January 31, 1997 the debentures and interest
thereon may become due and payable at the discretion of the debenture holders.
The Company entered into a Debenture Conversion Agreement on December 15,
1996, whereby $300,000 of convertible debentures were converted into 1,200,000
shares of the Company's common stock.
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 11. Stock Options
In 1993, the Company adopted a stock option plan under which selected
eligible key employees of the Company are granted the opportunity to purchase
shares of the Company's common stock. The plan provides that 750,000 shares of
the Company's authorized common stock be reserved for issuance under the plan as
either incentive stock options or non-qualified options. Options are granted at
prices not less than 100 percent of the fair market value at the date of grant
and are exercisable over a period of ten years (subject to an initial one year
restrictive period) or as long as that person continues to be employed or serve
on the Board of Directors, whichever is shorter. Under the 1993 plan, no options
may be granted subsequent to January 5, 2003.
Information regarding stock options as at and for the two years ended
September 30, 1996 is summarized below:
1996 1995
------------------ -----------
Option Option
Shares Price Shares Price
Shares under option:
Outstanding -
beginning of year 653,500 $0.50 534,500 $1.25-$2.25
Granted - - 653,500 $0.50
Terminated (56,000) $0.50 (534,500) $1.25-$2.25
Outstanding - end
of year 597,500 $0.50 653,500 $0.50
Exercisable - end
of year 597,500 $0.50 - -
Note 12. Loss Per Share
For the years ended September 30, 1996, 1995 and 1994, the average number
of shares outstanding were 34,265,107, 23,150,793 and 18,549,265, respectively.
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 13. Income Taxes
The Company, as of September 30, 1996, has available approximately
$26,750,000 of net operating loss carry forwards (expiring through the year
2011) to reduce future Federal and state income taxes. Since there is no
guarantee that the related deferred tax asset will be realized by reduction of
taxes payable on taxable income during the carry forward period, a valuation
allowance has been computed to offset in its entirety the deferred tax asset
attributable to this net operating loss in the amount of $10,700,000.
Note 14. Commitments and Contingencies
(a)The operations and offices of the Company are conducted from leased
premises in Bellport, New York. The Company is negotiating for a new lease and
is currently on a month to month basis.
Total rent expense for the two years ended September 30, 1996 was
approximately $158,000 and $156,000 for the year ended September 30, 1994.
(b)The Company is involved in an administrative proceeding commenced by,
and pending before a Regents Review Committee of the New York State Education
Department. The proceeding was commenced to determine whether or not the
Company's license to operate as a manufacturer in New York should be revoked or
suspended, based upon the Company's 1993 guilty plea in Federal Court on a
variety of charges related to ANDA filings with the Food and Drug Administration
("FDA") in 1988 and 1989 (Note 9(a)). A hearing before the Regents Review
Committee is scheduled to take place in March, 1997. Company's legal counsel is
of the opinion that there is ample basis for reaching a reasonable disposition
of this matter without affecting the Company's manufacturing operations.
Amswiss Scientific, Inc. ("Amswiss") (Note 16) 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.
As of September 30, 1996, the Company is involved in various other legal
actions, none of which Management believes will have a material adverse affect
on the operations of the Company.
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 15. Employment Contract
The Company has an employment agreement with its President and Chief
Executive Officer for a period of five years, commencing October 1, 1994, for an
annual salary of $130,000 per year, plus certain fringe benefits. Pursuant to
the terms of the agreement, the Officer will receive a bonus based upon the
profitability of the Company, (5% of the annual pre-tax profit up to a maximum
bonus of $1,500,000 per year).
Note 16. Joint Venture Agreement
In November, 1993, the Company acquired from Amswiss all of Amswiss' rights
to certain pharmaceutical assets, including all agreements, licenses,
applications, approvals, trademarks and trade names, for which the Company
issued to Amswiss four million shares of its common stock and warrants to
purchase an additional two million shares valued at $2.00 per share. The
acquisition agreement provided, that of the shares and warrants issued to
Amswiss, 800,000 common shares and warrants to purchase 400,000 common shares
would be subject to forfeiture and cancellation in the event the Company is
unable to obtain final FDA approval of certain New Drug Applications ("NDA's")
on or before December 31, 1995. The Company re-evaluated its investment in the
Amswiss assets as of September 30, 1995. Due to the Company's lack of working
capital at the time, the cost of the NDA filing and new diagnostic techniques
for cervical cancer that significantly reduce potential future sales of the
Amswiss Drugs, the Company decided to write-off the adjusted unamortized
acquired Amswiss assets aggregating $5,526,587.
In addition, as a result of the Company's non-filing of the NDA's, the
Company recorded the forfeiture of the aforementioned 800,000 common shares and
warrants which resulted in a charge to common stock and additional
paid-in-capital aggregating $1,381,647. With respect to the shares and warrants
issued to Amswiss that were not subject to forfeiture, the Company 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.
As of September 30, 1995, Amswiss exercised their right to request a
registration of one half of their available shares and warrants. At September
30, 1995, the Company also canceled a contingent non-negotiable, non-interest
bearing $250,000 note, issued to Amswiss, which was due upon the FDA approval by
December 31, 1995. See Note 14 for commencement of an action by Amswiss with
regard to the aforementioned registration.
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 16. Joint Venture Agreement (continued)
On September 25, 1996, the Company entered into a joint venture agreement
with Advanced Biological Systems, Inc., who subsequently changed their name to
ABS Group, Inc. ("ABS"), for the completion of the regulatory process to
commercialize for ultimate sale certain cancer drugs purchased by the Company
from Amswiss. All funding for the joint venture will be provided for by ABS and
the Company will be responsible for handling the management of the project.
The joint venture agreement provides, among other things, the payment of a
total of a minimum of $2,750,000 to the Company in cash and/or securities for
the sub-license, previously acquired from Amswiss. Payment terms include 425,000
shares of restricted common stock of ABS and $150,000 in cash represented by a
promissory note payable on or before October 31, 1996. Said note was paid in
full on November 1, 1996. The balance of the payments are to occur in varying
amounts of common shares and or cash coinciding with filings with the FDA and
the approval of various investigational new drug applications. Additionally, a
contribution to the joint venture of $1,000,000 is to be made by ABS as follows:
i) $400,000 by October 31, 1996, ii) $300,000 by February 28, 1997 and iii)
$300,000 by August 31, 1997. Of the first $400,000 contribution, only $150,000
has been made. The Company would share in the net profits from the sale of the
approved drug on a 60/40 basis until it had recovered at least $2,000,000 and
then share on the basis of 55/45 on subsequent profits.
The Company in 1996 recorded as income $400,750, representing the note
received of $150,000 (which was collected in November, 1996) and $250,750, the
value of 425,000 shares of ABS restricted common shares issued, pursuant to the
joint venture agreement. The value of the restricted common shares was based
upon an independent appraisal made by an investment banking firm.
Note 17. Gain (Loss) on Discontinued Operations
In August, 1992, the Company obtained an exclusive license for the mass
market manufacture and distribution of Treo. The Company had been engaged in
litigation with its Treo licensor since 1994 over, among other things, the
promotion and marketing of the product. As a result of a November 16, 1995
preliminary court order issued by the United States District Court, Eastern
District of New York, the Company was enjoined from selling Treo during the 1996
selling season. As a result of the Court's decision, the Company discontinued
the manufacturing of Treo and reclassified its results of operations as
discontinued operations in the accompanying consolidated statement of operations
for the year ended September 30, 1995.
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 17. Gain (Loss) on Discontinued Operations (continued)
In September 1996, pursuant to a Board of Directors resolution, the Company
filed a Chapter 7 Bankruptcy petition in the United States District Court for
the Eastern District of New York on December 13, 1996 for its subsidiary,
Biopharm Lab, Inc., the distributor of Treo. As a result thereof, the Company
wrote off the excess of liabilities over the subsidiaries assets, which is
reflected as a gain on disposal of discontinued operations in its consolidated
statement of operations for the year ended September 30, 1996.
A summary of the operating results of discontinued operations are as
follows:
September 30,
1996 1995 1994
Net Sales $ - $ 1,030,500 $ 608,449
Gross profit - 598,421 297,301
Net operating loss from
discontinued operations - (429,936) (1,245,924)
The components of assets and liabilities of the discontinued operations
included in the Consolidated Balance Sheets are as follows:
September 30,
1996 1995
Cash $ 107 $ 69,574
Accounts receivable (net) - 116,306
Property, plant & equipment (net) - 3,006
Intercompany payable (2,720,889) (2,622,191)
Accounts payable - (616,030)
Accrued expenses - (192,989)
Customer credit balances payable - (196,320)
----------- -----------
$(2,720,782) $(3,438,644)
=========== ===========
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 18. Common Stock
In June, 1993, the Board of Directors approved an offering pursuant to
Regulation S of 3,750,000 shares, as amended. In connection with this offering,
the Company received approximately $3,705,000 from October, 1993 to September,
1994, resulting from the sale of 3,349,851 shares of common stock. In April,
1994, the Board of Directors approved an additional offering pursuant to
Regulation S of 4,000,000 shares. In connection with this offering, the Company
received approximately $1,025,000 from May, 1994 to September, 1994, resulting
from the sale of 1,448,570 shares of common stock. In 1995, an additional
2,436,042 shares of common stock were sold for approximately $1,026,000.
During the year ended September 30, 1994, options under a former 1988 stock
option for the issuance of 686,000 common shares were exercised and paid for by
the issuance of non-interest bearing notes, payable on demand, aggregating
$559,274 and cash of $686. The notes are collateralized by the shares issued.
Additionally, 122,339 shares were issued from Treasury in exchange for trade
obligations and for the purchase of an exclusive license for a patented process
to diagnose Alzheimer's disease (Note 6).
In March, 1995, the Board of Directors approved another offering pursuant
to Regulation S of 4,500,000 shares. In connection with this offering, the
Company received approximately $1,220,000 from March, 1995 to September, 1995,
resulting from the sale of 3,109,937 shares of common stock. An additional
1,273,071 shares of common stock were sold for approximately $217,000 during the
year ended September 30, 1996.
During January, 1996, the Board of Directors authorized the issuance of
additional shares of common stock pursuant to offerings under Regulation S to
fund the working capital needs of the Company. In connection with this
resolution, the Company received approximately $2,363,000 from January, 1996 to
September, 1996, resulting from the sale of 10,572,257 shares of common stock.
Note 19. Business Segment Information
The Company's operations (Note 2) have been classified into generic
pharmaceutical products and feminine hygiene products. The generic
pharmaceuticals segment involves the manufacturing, repacking and distributing
of over-the-counter drugs. The feminine hygiene product lines, which began its
operations in April, 1996, after its acquisition from London Int'l in March,
1996 (Note 5), involves the marketing and distribution of its products. The
Company's operations for its branded consumer product line (Treo), for the years
ended September 30, 1995 and 1994 are included in the loss on discontinued
operations for those years (Note 17).
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 19. Business Segment Information (continued)
Summarized financial information by business segment is as follows:
1996
Net sales:
Pharmaceuticals $ 2,020,000
Feminine hygiene products 1,705,000
-----------
$ 3,725,000
===========
Operating gain (loss):
Pharmaceuticals $(1,452,000)
Feminine hygiene products 488,000
-----------
$ ( 964,000)
===========
Total assets:
Pharmaceuticals $ 1,200,000
Feminine hygiene products 4,216,000
-----------
$ 5,416,000(1)
===========
Depreciation and amortization:
Pharmaceuticals $ 210,000
Feminine hygiene products 94,000
-----------
$ 304,000
===========
Capital expenditures:
Pharmaceuticals $ 32,000
Feminine hygiene products -
-----------
$ 32,000
===========
(1) Total assets do not include assets relating to the Company's joint
venture agreement (Note 16).
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 20: Fourth Quarter Adjustments
Year Ended September 30, 1996
The net loss in the fourth quarter for the year ended September 30, 1996
was decreased by the following more significant adjustments:
Gain on disposal of discontinued
operations $ (724,659)
Income related to contribution of
licenses to joint venture (400,750)
------------
$(1,125,409)
============
Year Ended September 30, 1995
The net loss in the fourth quarter for the year ended September 30, 1995
was increased (decreased) by the following more significant adjustments:
Loss on write-off of intangible
assets $5,526,587
Settlement of medicare judgement (229,524)
Loss on disposal of
discontinued operations 1,191,607
----------
$6,488,670
==========
Year Ended September 30, 1994
There were no significant adjustments that either increased or decreased
the net loss in the fourth quarter of the year ended September 30, 1994.
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
Note 21. Unaudited Quarterly Financial Data
The following is a summary of unaudited quarterly operating results for the
years ended September 30, 1996, 1995 and 1994 (in thousands of dollars except
per share amounts).
Year Ended September 30, 1996
First Second Third Fourth
Quarter Quarter Quarter Quarter(1)
Continuing operations:
Revenues $ 457 $ 625 $1,166 $ 1,477
Gross profit (178) 12 290 460
Net profit (loss) (465) (322) (48) 36
Loss per share (.01) (.01) - -
Discontinued operations:
Net income (loss) $ - $(16) $ 50 $ 740
Income per share - - - .02
Year Ended September 30, 1995
First Second Third Fourth
Quarter Quarter Quarter Quarter(1)
Continuing operations:
Revenues $ 486 $ 525 $ 191 $ 331
Gross profit (140) (126) (242) (262)
Net loss (676) (307) (980) (6,023)
Loss per share (.03) (.01) (.04) (.23)
Discontinued operations:
Net income (loss) $ 32 $ 363 $ 480 $(2,497)
Income (loss) per share - .02 .02 (.09)
Year Ended September 30, 1994
First Second Third Fourth
Quarter Quarter Quarter Quarter
Continuing operations:
Revenues $ 551 $ 488 $ 519 $ 499
Gross profit (103) (139) (102) (142)
Net loss (564) (634) (1,271) (956)
Loss per share (.03) (.03) (.07) (.05)
Discontinued operations:
Net loss $(111) $(180) $ (541) $ (414)
Loss per share (.01) (.01) (.03) (.02)
(1) See Note 20.
<PAGE>
BIOPHARMACEUTICS, INC.
FORM 10-K
EXHIBIT
FOR THE YEAR ENDED SEPTEMBER 30, 1996
EXHIBIT 10.9A
<PAGE>
BIOPHARMACEUTICS, INC.
SCHEDULE VIII - VALUATION ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charged to Charged Other Balance
beginning costs and to other charges at end
Description of period expenses accounts add (deduct) period
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended September 30, 1996 $22,000 $18,697 $ - $(15,697) $25,000
======= ======= ====== ======== =======
Year ended September 30, 1995 $27,000 $ - $ - $ (5,000) $22,000
======= ======= ====== ======== =======
Year ended September 30, 1994 $26,000 $ 1,418 $ - $ (418) $27,000
======= ======= ====== ======== =======
</TABLE>
<PAGE>
FARBER, BLICHT & EYERMAN, LLP
Certified Public Accountants Telephone: (516) 576-7040
255 Executive Drive, Suite 215
Plainview, NY 11803-1715 Facsimile: (516) 576-1232
EXHIBIT 24
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the inclusion of our report on the 1996 consolidated
financial statements and schedules of Biopharmaceutics, Inc. and subsidiaries
included in the Annual Report on Form 10-K of Biopharmaceutics, Inc. for the
year ended September 30, 1996.
/s/FARBER, BLICHT & EYERMAN,LLP
Plainview, New York
May 22, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> SEP-30-1996 SEP-30-1995
<CASH> 44,775 86,664
<SECURITIES> 0 0
<RECEIVABLES> 737,457 268,957
<ALLOWANCES> 0 0
<INVENTORY> 538,359 493,671
<CURRENT-ASSETS> 1,457,430 877,245
<PP&E> 2,511,226 2,630,148
<DEPRECIATION> 2,177,573 2,186,881
<TOTAL-ASSETS> 5,816,688 1,420,932
<CURRENT-LIABILITIES> 2,397,915 2,507,861
<BONDS> 3,025,733 1,130,982
0 0
0 0
<COMMON> 393,040 (2,217,911)
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 5,816,688 1,420,932
<SALES> 3,725,221 1,532,649
<TOTAL-REVENUES> 3,725,221 1,532,649
<CGS> 3,141,054 2,303,224
<TOTAL-COSTS> 3,141,054 2,303,224
<OTHER-EXPENSES> 0 5,526,587
<LOSS-PROVISION> 18,697 (5,000)
<INTEREST-EXPENSE> 298,821 251,438
<INCOME-PRETAX> (799,466) (7,986,247)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (799,466) (7,986,247)
<DISCONTINUED> 773,659 (1,621,543)
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (25,807) (9,607,790)
<EPS-PRIMARY> 0 (.42)
<EPS-DILUTED> 0 (.42)
</TABLE>
