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 June 30, 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 June 30, 1996.
Class Outstanding
----- -----------
Common Stock - $.00l Par Value 39,877,922
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 Balanced Sheet
June 30, 1996 (Unaudited) and September 30, 1995 (Audited)
Consolidated Statements of Operations
Three Months and Nine Months Ended June 30, 1996 and 1995 (Unaudited)
Consolidated Statements of Shareholders' Equity
(Deficiency in Assets) for the Nine Months Ended June 30, 1996
Consolidated Condensed Statement of Cash Flows for the Nine Months
Ended June 30, 1996 and 1995
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
June 30, September 30,
1996 1995
(Unaudited) (Audited)
---------- ----------
ASSETS
Current assets:
Cash $ 86,271 $ 86,664
Trade receivables, less allowance for
doubtful accounts 654,884 268,957
Inventories 766,128 493,671
Prepaid expenses and other assets 90,001 27,953
---------- ----------
Total current assets 1,597,284 877,245
Property, plant and equipment, at cost,
net of accumulated depreciation 374,715 443,267
Trademarks and patents 3,753,244 ---
Licensing costs, net of accumulated
amortization 66,701 70,301
Sundry 27,910 30,119
---------- ----------
$5,819,854 $1,420,932
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIENCY IN ASSETS)
Current liabilities:
Accounts payable $1,468,354 $l,027,865
Accrued expenses 758,484 1,043,676
Customer credit balances 337,937 196,320
Medicare judgment payable --- 50,000
Current maturities of long-term debt 410,100 190,000
---------- ----------
Total current liabilities 2,974,875 2,507,861
Long-term debt 313,773 130,982
Convertible debentures payable 1,000,000 1,000,000
Promissory note payable 2,000,000 ---
Shareholders' equity:
Common Stock - par value $.00l per share
Authorized - 50,000,000 shares
Issued - 40,291,650 shares,
26,535,750, in 1995 40,292 26,536
Additional paid-in capital 29,686,068 27,149,038
Deficit (28,691,268) (27,889,599)
========== ==========
1,035,092 (714,025)
Less Treasury Stock, at cost
(413,728 shares) (944,612) (944,612)
Notes receivable from officers
and employees (559,274) (559,274)
---------- ----------
(468,794) (2,217,911)
---------- ----------
$5,819,854 $1,420,932
=========== ==========
The accompanying notes are an integral part of these financial statements.
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BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1995 1996 1995
(Restated) (Restated)
<S> <C> <C> <C> <C>
Revenues:
Sales $1,165,917 $ 190,927 $2,247,854 $1,201,864
Costs and expenses:
Cost of sales 875,956 428,546 2,123,997 1,710,682
Selling, general and administrative 282,247 326,308 834,846 939,752
Amortization of licenses 24,900 116,046 26,700 402,138
--------- ---------- ---------- ----------
1,183,103 870,900 2,985,543 3,052,572
(17,186) (679,973) (737,689) (1,850,708)
Other income (deductions):
Other Income
Interest expense (including 62,500 --- 67,500 ---
interest to officer) (93,772) (40,205) (165,772) (112,205)
---------- ---------- ---------- ----------
(31,272) (40,205) (98,272) (112,205)
Net (loss) from continuing
operations (48,458) (720,178) (835,961) (1,962,913)
Discontinued operations:
Operating profit (loss) 50,000 220,196 34,292 874,868
---------- ---------- ---------- ----------
Net income (loss) $ 1,542 $ (499,982) $ (801,669) $(1,088,045)
=========== ========== ========== ==========
Primary income (loss) per share:
Continuing operations $(0.00) $(0.03) $(0.03) $(0.08)
Discontinued operations 0.00 0.01 0.00 0.04
---- ---- ---- ----
$ 0.00 $(.02) $(0.02) $(0.05)
==== ==== ==== ====
Average shares outstanding 39,207,922 24,431,056 32,472,730 23,133,984
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
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BIOPHARMACEUTICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
NINE MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Common Stock Additional Notes Receivable
Number of Par Paid-In Treasury Officers &
Shares Value 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 offering, net of related
expenses 13,485,900 13,486 2,448,200 --- --- --- 2,461,686
Shares issued in connection with
the Company's acquistion of
feminine hygiene product line 27,000 270 88,830 --- --- --- (89,100)
Net loss for six months
ended June 30, 1996 --- --- --- (801,669) --- --- (801,669)
---------- ------- ----------- ------------ --------- ---------- ---------
Balance, June 30, 1996 40,291,650 $40,292 $29,686,068 $(28,691,268) $(944,612) $(559,274) $(468,794)
========== ======= =========== ============ ========= ========== =========
<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)
NINE MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
---------- ----------
Cash flows from operating activities:
Loss from continuing operations $ (835,961) $(1,962,913)
Profit (loss) from discontinued operations 34,292 874,868
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 182,700 585,378
Changes in certain assets and liabilities:
Accounts receivable (385,927) (1,149,300)
Inventories (272,457) 372,220
Other current assets (62,048) (128,509)
Other assets (2,710) 14,363
Accounts payable and accrued expenses 157,827 (272,853)
Customer credit balances 141,617 ---
Accounts payable transfered to current maturities---LTD 285,100 ---
Accounts payable transferred to long term 182,791 ---
Payment against settlement of litigation (65,000) (50,000)
Payment against Medicare settlement (50,000) ---
---------- ----------
Net cash provided by (used in) operating activities (689,776) (1,716,746)
---------- ----------
Cash flows from investing activities:
Purchase of property plant and equipment (89,978) (22,773)
Trademarks and tradenames acquired (3,682,325) ---
----------- ----------
Net cash provided by (used in) investing activities (3,772,303) (22,773)
----------- ----------
Cash flows from financing activities:
Proceed of Company's Regulation S
offering, net of related expenses 2,461,686 1,777,901
Proceeds from sale of warrants --- 31,062
Promissory note issued in trademark acquisition 2,000,000 ---
---------- ----------
Net cash provided by (used in) financing activities 4,461,686 1,808,963
---------- ---------
Net change in cash (393) 69,444
Cash at beginning of period 86,664 129,004
----------- ---------
Cash at end of period $ 86,271 $ 198,448
=========== ==========
<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)
JUNE 30, 1996
A. Consolidated Condensed Financial Statements
The Consolidated Condensed Balance Sheet as of June 30, 1996 and the
Consolidated Condensed Statement of Operations for the period ended June 30,
1996 and 1995 and the Consolidated Condensed Statement of Shareholders' Equity
for the nine month period ended June 30, 1996, and the Consolidated Statements
of Cash Flows for the periods ended June 30, 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 June 30, 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, 1995. Results of operations
for the period ended June 30, 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.
B. Restatement of Prior Year's Statement of Operations
Prior year's Consolidated Statement of Operations has been restated to
confirm to write-off of Biopharm Lab, Inc. to discontinued operations in the
Company's audited financial statements at September 30, 1995.
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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 four years primarily by the issuance of common shares; $2,384,806 in fiscal
year 1993, $4,433,790 in 1994, $2,054,722 in 1995 and $2,461,686 in the first
half of 1996, convertible debentures of $800,000 in 1992 and the settlement of
claims against past management of $924,076 in 1992. As of June 30, 1996, the
Company had cash of approximately $86,000.
The Company completed its acquisition of a product line from
London International US Holdings, Inc. ("LUISH) which should generate sales in
excess of the Company's 1995 total sales and should generate substantial working
capital to the Company. The cost of $3,600,00 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 being acquired have been on the market for more than
ten years each and are being sold under the names of Vaginex(R), Koromex(R),
Koroflex(R) and Feminique(R). LIUSH is the largest condom manufacturer in the
U.S. and had decided to sell it's 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 will use the
former Treo reps to sell the newly acquired lines. All of the ten former
rep organizations have already agreed to sell the Feminine Hygiene Product
Lines. 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 that that previously made by LIUSH, expanding
the customer base and by receiving greater upport from Quality Health Products
in promoting the products.
The Company also anticipates that the approval of the additional
seven products by the Food and Drug Administration ("FDA") in 1995, which
increased the number of products manufactured by the Company for its customers,
and with the addition of three significant new customers, should enable the
Company to increase sales and provide a basis for profitability in fiscal 1996.
The Company believes that the foregoing, along with the additional
capital raised through March 1996 will be adequate to meet its current
objectives. Sinking fund requirements for the convertible debentures in 1996
should be satisfied by either refunding or conversion of the debentures into
common stock.
RESULTS OF OPERATIONS
Sales for the quarter ended June 30, 1996 totaled $1,165,917, an
increase of 510% over restated sales of $190,927 for the third quarter in 1995.
The increase was primarily attributed to the new product line acquired on March
15, 1996 from London International U.S. Holdings, Inc. Sales for nine months
increased $1,046,000 to $2,247,854 compared to $1,201,864 in the prior year.
Sales for the prior quarter totaled $625,000.
Gross profit for the quarter improved to a positive 25% compared
to a negative 124% for the comparable quarter in 1995. Margins for the prior
quarter totaled a positive 2%. On a nine month basis, gross profit totaled a
positive 5.5% versus a negative 42% for the nine months ended June 30, 1995.
Negative margins were attributed to sales levels not being high enough to absorb
fixed overheads in manufacturing.
Selling, general and administrative expenses decreased to
$282,247 versus $326,308 in the comparable quarter due primarily to legal and
accounting expenses in the quarter. For the nine month period, selling, general
and administrative expenses dropped $104,906 to $834,846 due to lower legal
expenses in the first quarter. Amortization of licenses declined from $116,046
in the 1995 quarter to $24,900 due to the write-off of the Amswiss rights in
September 1995.
Interest expense increased from $40,205 in the third quarter of
1995 to $93,722 in the current quarter due to financing $2,000,000 of the
acquisition cost of the product line purchased from London International U.S.
Holdings, Inc.
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SIGNATURES
Pursuant to the requirements of Section 13 of the Securities
and Exchange Act of1934, 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: August 14,1996
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