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, 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 June 30, 1997.
Class Outstanding
Common Stock - $.001 Par Value 10,540,284
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
June 30, 1997 (Unaudited) and September 30, 1996 (Audited)
Statements of Operations
Three Months and Nine Months Ended June 30, 1997 and 1996 (Unaudited)
Consolidated Statement of Shareholders' Equity
for the Nine Months Ended June 30,, 1997 (Unaudited)
Consolidated Condensed Statement of Cash Flows
for the Nine Months Ended June 30, 1997 and 1996 (Unaudited)
Notes to Condensed Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II
Item 1. Legal Proceedings
Item 6. Reports on Form 8-K:
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
--------------------
BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, September 30,
1997 1996
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 128,470 $ 44,775
Trade receivables, less allowance for
doubtful accounts 1,392,432 587,457
Note receivable 0 150,000
Inventories 624,345 538,359
Prepaid expenses and other assets 387,408 136,839
---------- ----------
Total current assets 2,532,654 1,457,430
Property, plant and equipment, at cost,
net of accumulated depreciation 1,077,775 333,653
Investment in restricted securities 250,750 250,750
Intangible assets, at cost, net of accumulated amortization 10,928,343 3,677,225
Licensing costs, net of accumulated amortization 47,201 64,901
Sundry 62,864 32,729
----------- -----------
$14,899,587 $5,816,688
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable-trade $ 2,016,404 $ 938,577
Accounts payable-other 4,900,000 0
Accrued expenses 599,174 727,238
Short term notes payable 1,500,000 0
Current maturities of long-term debt 1,286,860 732,100
---------- ----------
Total current liabilities 10,302,438 2,397,915
Long-term debt 1,897,023 1,622,792
Convertible debentures payable 1,679,941 1,402,941
Shareholders' equity:
Common Stock - par value $.00l per share
Authorized - 75,000,000 shares
Issued - 10,540,284 shares, 10,217,770, 1996 42,094 40,871
Additional paid-in capital 30,062,565 29,771,461
Deficit (27,578,587) (27,915,406)
---------- ----------
2,526,072 1,896,926
Less Treasury Stock, at cost
(413,728 shares) (944,612) (944,612)
Notes receivable from officers and employees (559,274) (559,274)
---------- ----------
1,022,186 393,040
---------- ----------
$14,899,587 $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 Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Net sales $1,884,033 $1,165,917 $4,643,514 $2,247,854
---------- ---------- ---------- ---------
Costs and expenses:
Cost of sales 1,028,776 875,956 2,644,751 2,123,997
Selling, general and
administrative 461,692 282,247 1,025,654 834,846
Amortization of intangibles 48,000 24,900 144,000 26,700
--------- --------- --------- ----------
1,538,468 1,183,103 4,114,738 2,985,543
--------- --------- --------- -----------
345,564 ( 17,186) 528,776 ( 737,689)
Other income (deductions):
Other income 0 62,500 0 67,500
Interest expense (including
interest to officer) ( 90,651) (93,772) (241,954) (165,772)
---------- ---------- ---------- ----------
(90,651) (31,272) (241,954) (98,272)
----------- ----------- ----------- -----------
Net income (loss) from
continuing operations 254,913 ( 48,458) 286,822 (835,961)
Discontinued operations:
Operating profit 0 50,000 0 34,292
---------- ---------- ---------- ----------
Net income (loss) $ 254,913 $ 1,542 $ 286,822 $(801,669)
========== ========== ========== ==========
Income (loss) per Share
Continuing operations $0.02 $ 0.00 $0.03 $(0.10)
===== ====== ===== =======
Primary income (loss) per share
Continuing operation $0.02 $ 0.00 $0.03 $(0.10)
Discontinued operations 0.00 0.00 0.00 0.00
Net income (loss) $0.02 $ 0.00 $0.03 $(0.10)
Average shares outstanding 10,540,284 9,801,998 10,540,284 8,118,183
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
4
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
NINE MONTHS ENDED JUNE 30, 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
Reverse 1 for 4 stock split
Retirement of existing shares (42,071,078)
Issuance of new shares 10,517,770
Shares issued in payment of fees 22,514 23 42,304 42,327
Net income for the nine months
ended June 30, 1997 --- --- --- 286,822 --- --- 286,822
---------- ------- ---------- ------------ --------- --------- --------
Balance, June 30, 1997 10,540,284 $42,094 $30,112,565 $(27,628,584) $(944,612) $(559,274) $1,022,189
========== ======= =========== ============ ========= ========= ==========
<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)
NINE MONTHS ENDED JUNE 30,
1997 1996
---------- ----------
Cash flows from operating activities:
Income (loss) from continuing operations $ 286,822 $ (835,961)
Profit (loss) from discontinued operations --- 34,292
Adjustments to reconcile net income (loss) to
net cash provided by (used in)
operating activities:
Depreciation and amortization 114,227 182,700
Changes in certain assets and liabilities:
Accounts receivable (804,975) (385,927)
Notes receivable 150,000
Inventories (150,951) (272,457)
Other current assets (250,569) (62,048)
Other assets 12,435 (2,710)
Accounts payable and accrued expenses 1,046,946) 625,718
Customer credit balances --- 141,617
Payment against settlement of litigation (65,000)
Payment against Medicare settlement --- (50,000)
---------- ----------
Net cash provided by (used in)
operating activities 403,935 ( 689,776)
---------- ----------
Cash flows from investing activities:
Purchase of property plant and equipment (744,122) (89,978)
Trademarks and tradenames acquired (7,251,118) (3,682,325)
---------- ----------
Net cash provided by (used in)
investing activities (7,995,240) (3,772,303)
---------- ----------
Cash flows from financing activities:
Proceed of Company's Regulation S
offering, net of related expenses 575,000 2,461,686
Short term debt incurred 7,550,000 2,000,000
Repayments of long-term debt ( 450,000) ---
Net cash provided by (used in)
financing activities 7,675,000 4,461,686
---------- ----------
Net change in cash 83,695 ( 393)
Cash at beginning of period 44,775 86,664
---------- ----------
Cash at end of period $128,470 $ 86,271
========== ==========
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
JUNE 30, 1997
A. Consolidated Condensed Financial Statements
The Consolidated Condensed Balance Sheet as of June 30, 1997 and the
Consolidated Condensed Statement of Operations for the period ended June 30,
1997 and 1996, and the Consolidated Condensed Statement of Shareholders' Equity
for the nine month period ended June 30,1997, and the Consolidated Statements
of Cash Flows for the periods ended June 30, 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 June 30, 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 June 30, 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.
In June of 1997 the Company had a reverse 1 for 4 stock split, the 1996
earnings per share have been restated to reflect this split.
The Consolidated Financial Statements include the results of the operations
of Caribbean Medical Testing Center, Inc. ("CMT") from June 2, 1997, the formal
acquistion date. The Company is required to make a final payment of $4.9 million
on or before September 15, 1997. The Company has received Subscription
Agreements through a private placement for an amount in excess of the $4.9
million required. If for some unforeseen reason the funds are not are not
received and/or the final payment is not made, the transaction could be canceled
by the selling party. In the unlikely event that were to occur, revenues and
income or loss for the three months and nine months ended June 30, 1997, as well
as all of the expense items entering into those calculations would be revised,
and the revised Revenue and Income or Loss would be as follow:
Three Months Nine Months
Ended June 30, Ended June 30,
1997 1996 1997 1996
---- ---- ---- ----
Revenues $ 1,251,963 $ 1,165,917 $ 4,011,444 $ 2,247,857
Net Income (Loss)
from Continuing
Operations $ 13,827 $ (48,458) $ 197,039 $ (835,961)
Profit from Discontinued
Operations $ 0 $ 50,000 $ 0 $ 34,292
Net Income
(Loss) $ (63,274) $ 1,542 $ (31,365) $ (801,669)
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; $4,433,790 in 1994, $2,054,722
in 1995, and $2,547,658 in 1996. As of June 30, 1997, the Company had cash of
approximately $128,470.
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.
* REGISTERED TRADEMARK
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
to its pharmaceutical customers and the addition of three new customers, should
increase sales and provide a basis for profitability in fiscal 1997.
The Company believes that the foregoing, along with the additional capital
raised through June 1997 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.
Subject to closing the Company has an agreement to acquire Caribbean
Medical Testing Center, Inc. ("CMT") in Puerto Rico wich will be effective as of
June 2, 1997. Ths Consolidated Financial Statements include the results of CMT
for the month of June 1997, althouugh the final payment required by the contract
may not be made until September 15, 1997, the last day provided for such payment
in the contract.
RESULTS OF OPERATIONS
----------------------
Revenues for the third quarter ended June 30, 1997 were $1,884,033
representing an increase of 61.8% over the $1,165,917 in the comparable 1996
quarter. Revenues for the prior quarter ended March 31, 1997 totaled $1,500,983.
For the nine months ended June 30, 1997, sales totaled $4,643,514 versus
$2,247,854 in the nine month period ended June 30, 1996. Sales of Feminine
Hygine products for the quarter increased to $760,384 from $746,648 in the
previous year, a 1.8% increase over the comparable quarter. Sales of Feminine
Hygieneducts for the first nine months totaled $2,455,936 versus $837,105 for
the comparable nine months. Sales of pharmaceutical products increased 17.2% for
the quarter to $491,577 to the $419,269 shipped in 1996. For the nine months
ended June 30, 1997 pahrmaceutical sales totaled $1,555,509 compared to
$1,410,748 shipped in 1996. Revenues from CMT, acquired in June of 1997,
contributed $632,070 to the Company's quarterly revenues.
8
<PAGE>
Gross margin for the quarter was 45% compared to 25% in the comparable 1996
quarter. Gross margin for the prior quarter totaled 33%. For the nine months
ended June 30, 1997 and 1996, gross margin was 39% and 5.5% respectively.
Selling, general and administrative expenses increased to $509,692 from
$282,247 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 nine months selling, general and administrative expenses increased to
$1,282,560 vs. $834,846 in the comparable nine months 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 $90,651 for the quarter includes the financing of the
feminine hygiene acquisition and interest expense of the convertible debentures.
Interest expense for the comparable quarter represented only debenture
obligations. For the nine months ended June 30, 1997, interest expense of
$241,954 included the financing of the acquisition, interest on the convertible
debentures and adjustment for prior interest accrued which was no longer
payable.
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:
Statement of Gross revenues and related costs related to the
acquistion of the feminine hygine line filed April 30, 1997
Letter of intent to acquire Caribbean Medical Testing Center
Inc. filed June 5, 1997
Resignation of William Kugler filed August 1, 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/ Vincent H. Pontillo
-------------------------
Vincent H. Pontillo
Controller
Dated: August 15, 1997
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> $ 128,470
<SECURITIES> 0
<RECEIVABLES> 1,392,432
<ALLOWANCES> 0
<INVENTORY> 624,345
<CURRENT-ASSETS> 2,532,654
<PP&E> 4,354,074
<DEPRECIATION> 3,276,298
<TOTAL-ASSETS> 14,899,587
<CURRENT-LIABILITIES> 10,302,438
<BONDS> 2,644,751
0
0
<COMMON> 724,553
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 14,899,587
<SALES> 4,643,514
<TOTAL-REVENUES> 4,643,514
<CGS> 2,644,751
<TOTAL-COSTS> 4,114,738
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 241,954
<INCOME-PRETAX> 286,822
<INCOME-TAX> 0
<INCOME-CONTINUING> 286,822
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 286,822
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
