SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1995 Commission File Number 1-9370
BIOPHARMACEUTICS, INC
DELAWARE 13-3186327
(State of Incorporation) (I.R.S. Employer Identification No.)
990 Station Road, Bellport, New York 11713
(Address of Principal Executive Office) (Zip Code)
Registrant telephone number, including area code: (516) 286-5800
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of December 31, 1995.
Class Outstanding
----- -----------
Common Stock - $.00l Par Value 27,455,093
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 Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
December 31, 1995 (Unaudited) and September 30, 1995 (Audited)
Consolidated Statement of Operations
Three Months Ended December 31, 1995 and 1994 (Unaudited)
Consolidated Statement of Shareholders' Equity
for the Three Months Ended December 31, 1995
Consolidated Condensed Statement of Cash Flows
for the Three Months Ended December 31, 1995 and 1994
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 8-K:
Court order dated November 1, 1995, enjoining Biopharmaceutics, Inc.
and Biopharm Lab, Inc. from exploiting licensed rights in the "Treo" skin
care product with respect to the 1996 selling season. Filed November 13, 1995.
Court order dated November 17, 1995, reducing the fine imposed against
Patient Medical Systems Corp. (now known as Biopharmaceutics, Inc.) to $50,000,
from an original amount of $175,000. Fiked December 1, 1995.
Court order dated December 20, 1995, dismissing all claims by
Biopharmaceutics, Inc. and Biopharm Lab, Inc. against Primavera Laboratories,
Inc. and Avon Products, Inc. and granted the counterclaim by Primavera
Laboratories, Inc. Filed December 28, 1995.
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ITEM 1. FINANCIAL STATEMENTS
BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
December 31, September 30,
1995 1995
(Unaudited) (Audited)
---------- ----------
ASSETS
Current assets:
Cash $ 16,284 $ 86,664
Receivables, less allowance for
doubtful accounts 201,216 268,957
Inventories 389,899 493,671
Prepaid expenses and other assets 31,998 27,953
---------- ----------
Total current assets 639,397 877,245
Property, plant and equipment, at cost,
net of accumulated depreciation 386,928 443,267
Licensing costs, net of accumulated amortization 70,301 70,301
Sundry 29,619 30,119
---------- ----------
$1,126,345 $1,420,932
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIENCY IN ASSETS)
Current liabilities:
Accounts payable $1,112,903 $1,027,865
Accrued expenses 897,425 1,043,676
Customer credit balances 267,016 196,320
Medicare judgement payable 25,000 50,000
Current maturities of long-term debt 175,000 190,000
--------- ----------
Total current liabilities 2,477,344 2,507,861
Long-term debt 130,982 130,982
Convertible debentures payable 1,000,000 1,000,000
Shareholders' equity (defiency in assets):
Common Stock - par value $.00l per share
Authorized - 50,000,000 shares
Issued - 27,868,821 shares,
26,535,750 in 1995 27,868 26,536
Additional paid-in capital 27,348,945 27,149,038
Deficit (28,355,008) (27,889,599)
---------- ----------
(978,195) (714,025)
Less Treasury Stock, at cost
(413,728 shares) (944,612) (944,612)
Notes receivable from officers and employees (559,274) (559,274)
---------- ----------
(2,482,081) (2,217,911)
---------- ----------
$1,126,245 $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)
Three Months Ended
December 31,
1995 1994
Revenues:
Net sales $ 457,084 $ 486,159
Costs and expenses:
Cost of sales 634,932 626,251
Selling, general and
administrative 254,061 500,557
---------- ----------
888,993 1,126,808
---------- ----------
(431,909) (640,649)
Other income (deductions):
Other income 2,500 ---
Interest expense (36,000) (36,000)
---------- -----------
(33,500) (36,000)
---------- -----------
Net income (loss) from
continuing operations (465,409) (676,649)
Discontinued operations
Operating profit --- 32,168
---------- ----------
Net loss $ (465,409) $ (644,481)
========== ==========
Primary income (loss) per share
Continuing operations $(0.02) $(0.03)
Discontinued operations 0.00 0.00
---- ----
$(0.02) $(0.03)
==== ====
Average shares outstanding 27,071,755 21,941,190
The accompanying notes are an integral part of these financial statements.
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BIOPHARMACEUTICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1995
<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, 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 1,333,071 1,332 199,907 --- --- --- 201,239
Net loss for the three months
ended December 31, 1995 --- --- --- (465,409) --- --- (465,409)
---------- ------- --------- ----------- ---------- ---------- ------------
Balance, December 31, 1995 27,868,821 $27,868 $27,348,945 $(28,355,008) $(944,612) $(559,274) $(2,482,081)
========== ======= =========== ============ ========= ========== ===========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
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BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31,
1995 1994
---------- ----------
Cash flows from operating activities:
Loss from continuing operations $ (465,409) $ (676,649)
Profit from discontinued operations --- 32,168
Adjustments to reconcile net income (loss) to
net cash provided by (used in)
operating activities:
Depreciation and amortization 60,000 204,124
Chanes in certain assets and liabilities:
Accounts receivable 67,741 (4,276)
Inventories 103,772 (117,608)
Other current assets (4,065) (27,139)
Accounts payable and accrued expenses (61,213) (81,392)
Customer credit balances 70,696 ---
Sundry non current asssets 500 ---
Payment against settlement of litigation (15,000) ---
Payment against Medicare settlement (25,000) ---
---------- ----------
Net cash provided by (used in)
operating activities (267,957) (670,772)
---------- ----------
Cash flows from investing activities:
Purchase of property plant and equipment (3,662) (17,116)
---------- ----------
Net cash provided by (used in)
investing activities (3,662) (17,116)
---------- ---------
Cash flows from financing activities:
Proceed of Company's Regulation S
offering, net of related expenses 201,239 743,893
Proceeds from sale of warrants --- 3,000
---------- ----------
Net cash provided by (used in)
financing activities 201,239 746,893
---------- ----------
Net change in cash (70,380) 59,005
Cash at beginning of period 86,664 129,004
---------- ----------
Cash at end of period $ 16,284 $ 188,009
========== ==========
The accompanying notes are an integral part of these financial statements.
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BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1995
A. Consolidated Condensed Financial Statements
The Consolidated Condensed Balance Sheet as of December 31, 1995 and
the Consolidated Condensed Statement of Operations for the period ended December
31, 1995 and 1994, and the Consolidated Condensed Statement of Shareholders'
Equity for the three month period ended December 31, 1995, and the Consolidated
Statements of Cash Flows for the periods ended December 31, 1995 and 1994 have
been prepared by the Company without audit. In the opinion of Management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flows at
December 31, 1995 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 December 31, 1995 are not necessarily indicative of the
operating results to be expected for the full year and such results are subject
to year-end adjustment and independent audit.
The Consolidated Financial Statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant inter-company
accounts and transactions have been eliminated in consolidation. The
Consolidated Statements of Operations for all periods reflect the ongoing
operations of the Company.
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BIOPHARMACEUTICS, INC.
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, convertible debentures of $800,000 in
1992 and the settlement of claims against past management $924,076 in 1992.
As of September 30, 1995, the Company has cash of approximately $86,000 and
subsequently thereto through December 1995 received $217,000 from the sale of
common stock under Regulation S.
As a result of the United States District Court's decision on
December 20, 1995, the Company is enjoined from selling Treo in 1996 and
therefore the Company wrote-off assets associated with Treo as a discontinued
operation as of September 30, 1995. The Company had anticipated a negative
cash flow from the product line of $150,000 to $600,000 in fiscal 1996.
The Company signed a Letter of Intent on January 3, 1996 to
acquire a product line from London International US Holdings, Inc. (LIUSH) which
should generate sales in excess of the Company's 1995 total sales and would
generate substantial working capital to Biopharm. The cost will approximate
$3,600,000 and will be financed by a combination of Regulation S common stock
sales, registered stock sales and notes 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
the largest condom manufacturer 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 intends to use
its former Treo reps to sell the newly acquired lines.Nine of the former ten
rep organizations have already agreed to sell the new 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
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
seven products by the Food and Drug Administration ("FDA") in 1995, which
increased the number of products offered by the Company to 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.
*Registered Trademark
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BIOPHARMACEUTICS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES (Cont'd.)
The Company has re-evaluated its investment in Amswiss
Scientific, Inc. ("Amswiss") assets as of September 30, 1995. Due to the
Company's present lack of working capital, the cost of the New Drug Application
("NDA") filing, and recent developments in cancer research along with new
diagnostic techniques for cervical cancer that significantly reduce potential
future sales of the Amswiss Drugs, the Company has decided to write-off the
intangibles with a charge to its consolidated statement of operations
aggregating $5,526,587. At September 30, 1995, the Company decided not to
proceed with the filing of the NDA's and in addition, as a result of this
decision, the Company recorded the forfeiture of the aforementioned 800,000
common shares and warrants which resulted in a charge of common stock and
additional paid-in capital aggregating $1,381,647.
Company management has decided it would be more beneficial for
the Company to invest any funds raised or any funds available into the
acquisition and development of the Feminine Hygiene Products. Until the
Company's pharmaceutical sales and sales of the soon to be acquired Feminine
Hygiene Products produce positive cash flow and profitable operations, the
Company will be unable to finance the NDA for DBD. DBD is a cytotoxic,
chemotheraphy agent used in the treatment of cancer.
The Company believes that the foregoing, along with the
additional capital raised through December 1995 and the possibility of
recoveries from the appeal of the Primavera/Avon suit, will be adequate to meet
its current objectives. Sinking fund requirements in the convertible debentures
in 1996 should be satisifed by either refunding or converstion of the
debentures into common stock.
RESULTS OF OPERATIONS
Sales for the quarter ended December 31, 1995 decreased 6% to
$457,084 compared to $486,159 for the comparable quarter of fiscal 1994. Sales
for the prior quarter ended September 30, 1994 totaled $330,784.
Gross margin for the quarter of a negative 40% compared to a
negative 29% for the comparable quarter. Gross margin for the prior quarter
totaled a negative 79%. Negative margins are attributable to sales levels not
high enough to absorb fixed overheads in manufacturing.
Selling, general and administrative expenses decreased to
$254,061 from $500,557 in the first quarter of 1995 due primarily to a decrease
in legal expenses of $60,377 and a reducion of amortization of licenses of
$143,046 since the underlying intangibles were written off at September 30,
1995.
Interest expense of $36,000 compared to $36,000 in fiscal 1994.
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SIGNATURES
Pursuant to the requirements of Section 13 of the Securities and
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereto duly authorized.
/s/ Edward Fine
--------------------
BIOPHARMACEUTICS, INC.
REGISTRANT
By: EDWARD FINE, President and Chief Executive Officer
/s/ William C. Kugler
--------------------
WILLIAM C. KUGLER
Vice President and Chief Financial Officer
Dated: February 14, 1996
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