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, 1997 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, 1997.
Class Outstanding
Common Stock - $.001 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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1
<PAGE>
BIOPHARMACEUTICS, INC.
INDEX
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PART I Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
March 31, 1997 (Unaudited) and September 30, 1996 (Audited)
Statements of Operations
Three Months and Six Months Ended March 31, 1997 and 1996 (Unaudited)
Consolidated Statement of Shareholders' Equity
for the Six Months Ended March 31, 1997
Consolidated Condensed Statement of Cash Flows
for the Six Months Ended March 31, 1997 and 1996
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:
Appointment of Mr. Barry Weisberg to the Board of Directors as of
February 19, 1997. Filed February 21, 1997.
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
--------------------
BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, September 30,
1997 1996
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 108,710 $ 44,775
Trade receivables, less allowance for
doubtful accounts 687,726 587,457
Note receivable 0 150,000
Inventories 533,914 538,359
Prepaid expenses and other assets 159,713 136,839
---------- ----------
Total current assets 1,490,063 1,457,430
Property, plant and equipment, at cost,
net of accumulated depreciation 269,946 333,653
Investment in restricted securities 250,750 250,750
Intangible assets, at cost, net of accumulated amortization 3,583,025 3,677,225
Licensing costs, net of accumulated amortization 63,101 64,901
Sundry 30,119 32,729
----------- -----------
$5,687,004 $5,816,688
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable-trade $ 974,235 $ 938,577
Accrued expenses 652,383 727,238
Current maturities of long-term debt 682,100 732,100
---------- ----------
Total current liabilities 2,308,718 2,397,915
Long-term debt 1,550,792 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, 1996 42,071 40,871
Additional paid-in capital 30,070,261 29,771,461
Deficit (27,883,893) (27,915,406)
---------- ----------
2,228,439 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)
---------- ----------
724,553 393,040
---------- ----------
$5,687,004 $5,816,688
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
3
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Net sales $1,500,963 $ 624,853 $2,759,481 $1,081,937
Costs and expenses:
Cost of sales 961,940 613,109 1,802,449 1,248,041
Selling, general and
administrative 382,867 298,538 678,216 552,599
Amortization of intangibles 48,000 1,800 96,000 1,800
1,392,807 913,447 2,576,665 1,802,440
108,156 (288,594) 182,816 (720,503)
Other income (deductions):
Other income 0 2,500 0 5,000
Interest expense (including
interest to officer) (91,602) (36,000) (151,303) (72,000)
---------- ---------- ---------- ----------
(91,602) (33,500) (151,303) (67,000)
Net income (loss) from
continuing operations 16,554 (322,094) 31,513 (787,503)
Discontinued operations:
Operating profit (loss) 0 (15,708) 0 (15,708)
Net income (loss) $16,554 $(337,802) $31,513 $(803,211)
========== ========== ========== ==========
Primary income (loss) per share
Continuing operation $0.00 $(0.01) $0.00 $(0.03)
Discontinued operations 0.00 (0.00) 0.00 (0.00)
Net income (loss) $0.00 $(0.01) $0.00 $(0.03)
Average shares outstanding 40,657,350 31,138,513 41,057,350 29,105,134
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
4
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
SIX MONTHS ENDED MARCH 31, 1997
<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 six months
ended March 31, 1997 --- --- --- 31,513 --- --- 31,513
---------- ------- ---------- ------------ --------- --------- --------
Balance, March 31, 1997 42,071,078 $42,071 $30,070,261 $(27,883,893) $(944,612) $(559,274) $724,553
========== ======= =========== ============ ========= ========= ========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
5
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
(UNAUDITED)
SIX MONTHS ENDED MARCH 31,
1997 1996
---------- ----------
Cash flows from operating activities:
Income (loss) from continuing operations $31,513 $(787,503)
Profit (loss) from discontinued operations --- (15,708)
Adjustments to reconcile net income (loss) to
net cash provided by (used in)
operating activities:
Depreciation and amortization 174,000 106,800
Changes in certain assets and liabilities:
Accounts receivable (100,269) (74,146)
Notes receivable 150,000
Inventories 4,445 (221,837)
Other current assets (22,874) (37,974)
Other assets 2,610 182,791
Accounts payable and accrued expenses (39,197) 256,580
Customer credit balances --- 165,924
Payment against settlement of litigation (60,000) (45,000)
Payment against Medicare settlement --- (25,000)
---------- ----------
Net cash provided by (used in)
operating activities 140,228 (495,073)
---------- ----------
Cash flows from investing activities:
Purchase of property plant and equipment (14,293) (10,799)
Trademarks and tradenames acquired (3,682,325)
---------- ----------
Net cash provided by (used in)
investing activities (14,293) (3,693,124)
---------- ----------
Cash flows from financing activities:
Proceed of Company's Regulation S
offering, net of related expenses --- 2,461,686
Long term debt incurred --- 2,000,000
Repayments of long-term debt (62,000) ---
Net cash provided by (used in)
financing activities (62,000) 4,461,686
---------- ----------
Net change in cash 63,935 273,489
Cash at beginning of period 44,775 86,664
---------- ----------
Cash at end of period $108,710 $360,153
========== ==========
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1997
A. Consolidated Condensed Financial Statements
The Consolidated Condensed Balance Sheet as of March 31, 1997 and the
Consolidated Condensed Statement of Operations for the period ended March 31,
1997 and 1996, and the Consolidated Condensed Statement of Shareholders' Equity
for the six month period ended March 31, 1997, and the Consolidated Statements
of Cash Flows for the periods ended March 31, 1997 and 1996 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, 1997
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 March 31, 1997 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.
7
<PAGE>
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 March 31, 1997, the Company had cash of approximately $109,000.
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 U.S. 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*, Koromex*,
Koroflex*, and Feminique*. 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 fiscal year 1997, 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 second quarter ended March 31, 1997 were $1,500,963
representing an increase of 140% over the $624,853 shipped in the comparable
quarter in 1996. Sales for the prior quarter ended December 31, 1996 totaled
$1,258,518. For the half year ended March 31, 1997, sales totaled $2,759,481
versus $1,081,937 shipped in the first half of fiscal year 1996. Sales of
Feminine Hygiene products of $912,016 represents a 1,000% increase over the
comparable quarter since the product line was acquired in March 1996. Sales of
Feminine Hygiene products for the first half totaled $1,695,551 versus $90,458
for the comparable half year. Sales of generic products increased 10% for the
quarter to $588,947 compared to the $534,395 shipped in 1996. For the six months
ended March 31, 1997 generic sales totaled $1,063,930 compared to $991,479
shipped in 1996. By comparison to the prior quarter, sales of feminine hygiene
products totaled $783,535 and generic products totaled $474,983.
*Registered Trademark
8
<PAGE>
Gross margin for the quarter was 36% compared to 1.9% in the comparable
1996 quarter. Gross margin for the prior quarter totaled 33%. For the six months
ended March 31, 1997, gross margin was 35% and a negative 15% respectively.
Negative margins in 1996 were attributable to sales levels not being high enough
to absorb fixed overheads in manufacturing.
Selling, general and administrative expenses increased to $382,867 from
$298,538 in the fiscal 1996 quarter due primarily to selling expenses for the
feminine hygiene product line which was only acquired in the comparable quarter.
For the first half selling, general and administrative expenses increased to
$678,216 vs. $552,599 in the comparable half for similar reasons. Amortization
of intangibles primarily represents trademarks and tradenames for the feminine
hygiene line which was acquired in March 1996.
Interest expense of $91,602 for the quarter includes the financing of the
feminine hygiene acquisition, interest expense of the convertible debentures.
Interest expense for the comparable quarter represented only debenture
obligations. For the six months ended March 31, 1997, interest expense of
$151,303 included the financing of the acquisition, interest on the convertible
debentures and adjustment for prior interest accrued which was no longer
payable. The comparable half year included only debenture obligations.
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 - None
Reports on Form 8-K:
Appointment of Mr. Barry Weisberg to the Board of Directors on
February 19, 1997. Filed February 21, 1997.
9
<PAGE>
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: May 7, 1997
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> $108,710
<SECURITIES> 0
<RECEIVABLES> 687,726
<ALLOWANCES> 0
<INVENTORY> 533,914
<CURRENT-ASSETS> 1,490,063
<PP&E> 2,525,519
<DEPRECIATION> 2,255,573
<TOTAL-ASSETS> 5,687,004
<CURRENT-LIABILITIES> 2,308,718
<BONDS> 2,653,733
0
0
<COMMON> 724,553
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5,687,004
<SALES> 2,759,481
<TOTAL-REVENUES> 2,759,481
<CGS> 1,802,449
<TOTAL-COSTS> 2,576,665
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151,303
<INCOME-PRETAX> 31,513
<INCOME-TAX> 0
<INCOME-CONTINUING> 31,513
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,513
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
