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, 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 March 31, 1996.
Class Outstanding
----- -----------
Common Stock - $.00l Par Value 39,207,922
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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<PAGE>
BIOPHARMACEUTICS, INC.
INDEX
PART I Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheet
March 31, 1996 (Unaudited) and September 30, 1995 (Audited)
Consolidated Statement of Operations
Three and Six Months Ended March 31, 1996 and 1995(Unaudited)
Consolidated Statement of Shareholders' Equity (Deficiency in Assets)
for the Six Months Ended March 31, 1996
Consolidated Condensed Statement of Cash Flows
for the Six Months Ended March 31, 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:
Acquisition or Disposition of Assets: Letter of Intent to
purchase three branded consumer product lines from London International US.
Holdings, Inc., for the sum of $3,600,000. The purchase includes all trade
names, trademarks, patents, and all saleable finished goods inventory related to
the Feminine Hygiene Products Business. Filed January 18, 1996.
Resignation of Registrant's Director: Dr. Alfred Stracher
resigned from the Board of Director of Biopharmaceutics, Inc. as of December 4,
1995. Filed January 18, 1996.
Acquisition or Disposition of Assets: On March 15, 1996 the
Company completed its acquisition of the feminine hygiene product lines from
London International US Holdings, Inc. for the sum of $3,600,000 plus the cost
of all saleable goods inventories and raw materials related to non-manufactured
products. The purchase price includes all trade names, trademarks, patents, and
all saleable finished goods inventory related to the Feminine Hygiene Product
Business. The aggregate purchase price included a payment of $1,600,000 and
$2,000,000 in a promissory note payable $500,000 on or before April 1, 1997;
$660,000 on or before April 1, 1998 and $840,000 on April 1, 1999 with interest
at 8.5%, payable semi-annually through October 1997, then quarterly. Filed March
26, 1996.
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ITEM 1. FINANCIAL STATEMENTS
BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
(Unaudited) (Audited)
---------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 360,153 $ 86,664
Trade receivables, less allowance for
doubtful accounts 343,103 268,957
Inventories 715,508 493,671
Prepaid expenses and other assets 65,927 27,953
---------- ----------
Total current assets 1,484,691 877,245
Property, plant and equipment, at cost,
net of accumulated depreciation 349,066 443,267
Trademarks and patents 3,682,325 ---
Licensing costs, net of accumulated amortization 68,501 70,301
Sundry 30,119 30,119
---------- ----------
$5,614,702 $1,420,932
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIENCY IN ASSETS)
Current liabilities:
Account payable $1,529,616 $1,027,865
Accrued expenses 798,505 1,043,676
Customer credit balances 362,244 196,320
Medicare judgment payable 25,000 50,000
Current maturities of long-term debt 145,000 190,000
---------- ---------
Total current liabilities 2,860,365 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 (deficiency in assets):
Common Stock - par value $.00l per share
Authorized - 50,000,000 shares
Issued - 39,621,650 shares,
26,535,750 in 1995 39,622 26,536
Additional paid-in capital 29,597,638 27,149,038
Deficit (28,692,810) (27,889,599)
---------- ----------
944,450 (714,025)
Less Treasury Stock, at cost
(413,728 shares) (944,612) (944,612)
Notes receivable from officers and employees (559,274) (559,274)
---------- ----------
(599,436) (2,217,911)
$5,614,702 $1,420,932
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
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BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
--------- ---------
1996 1995 1996 1995
(Restated) (Restated)
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Sales $ 624,853 $ 524,778 $1,081,937 $1,010,937
Costs and expenses:
Cost of sales 613,109 655,885 1,248,041 1,282,136
Selling, general and
administrative 298,538 255,933 552,599 613,444
Amortization of licenses 1,800 143,046 1,800 286,092
---------- ---------- ---------- ----------
913,447 1,054,864 1,802,440 2,181,672
---------- ---------- ---------- ----------
(288,594) (530,086) (720,503) (1,170,735)
Other income (deductions):
Other Income 2,500 --- 5,000 ---
Interest expense (36,000) (36,000) (72,000) (72,000)
---------- ---------- ---------- ----------
(33,500) (36,000) (67,000) (72,000)
---------- ---------- ---------- ----------
Net (loss) from
continuing operations (322,094) (566,086) (787,503) (1,242,735)
Discontinued operations
Operating profit (loss) (15,708) 622,504 (15,708) 654,672
---------- ---------- ---------- ----------
Net loss $ 337,802) $ 56,418 $ (803,211) $ (588,063)
========== ========== ========== ==========
Primary income (loss) per share
Continuing operations $(0.01) $(0.02) $(0.03) $(0.06)
Discontinued operations 0.00 0.03 0.00 0.03
---- ---- ---- ----
$(0.01) $ 0.00 $(0.03) $(0.03)
===== ===== ===== =====
Average shares outstanding 31,138,513 23,029,706 29,105,134 22,485,448
<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 (DEFICIENCY IN ASSETS)
(UNAUDITED)
SIX MONTHS ENDED MARCH 31, 1996
<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 13,085,900 13,086 2,448,600 --- --- --- 2,461,686
Net loss for six months
ended March 31, 1996 --- --- --- (803,211) --- --- (803,211)
---------- ------- ----------- ------------ --------- --------- ---------
Balance, March 31, 1996 39,621,650 $39,622 $29,597,638 $(28,692,810) $(944,612) $(559,274) $(559,436)
========== ======= =========== ============ ========= ========= =========
<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)
SIX MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Loss from continuing operations $ (787,503) $(1,242,735)
Profit (loss) from discontinued operations (15,708) 654,672
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 106,800 204,124
Changes in certain assets and liabilities:
Accounts receivable (74,146) (4,276)
Inventories (221,837) (117,608)
Other current assets (37,974) (27,139)
Accounts payable and accrued expenses 256,580 (81,392)
Customer credit balances 165,924 ---
Sundry non current assets 182,791 ---
Payment against settlement of litigation (45,000) ---
Payment against Medicare settlement (25,000) ---
---------- -----------
Net cash provided by (used in) operating activities (495,073) (614,354)
Cash flows from investing activities:
Purchase of property plant and equipment (10,799) (17,116)
Trademarks and tradenames acquired (3,682,325) ---
--------- -----------
Net cash provided by (used in) operating activities (3,682,124) (17,116)
---------- ----------
Cash flows from financing activities:
Proceed of Company's Regulation S
offering, net of related expenses 2,461,686 743,893
Proceeds from sale of warrants --- 3,000
Promissory note issued in trademark acquisition 2,000,000 ---
---------- -----------
Net cash provided by (used in) financing activities 4,461,686 746,893
---------- -----------
Net change in cash 273,489 115,423
Cash at beginning of period 86,664 129,004
---------- -----------
Cash at end of period $ 360,153 $ 244,427
========== ===========
<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)
MARCH 31, 1996
A. Consolidated Condensed Financial Statements
The Consolidated Condensed Balance Sheet as of March 31, 1996 and the
Consolidated Condensed Statement of Operations for the period ended March 31,
1996 and 1995 and the Consolidated Condensed Statement of Shareholders' Equity
for the six month period ended March 31, 1996, and the Consolidated Statements
of Cash Flows for the periods ended March 31, 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 March 31, 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 March 31, 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 years Consolidated Statement of Operations has been restated
to conform 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 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 March 31, 1996, the Company had cash
of approximately $360,000.
The Company completed its acquisition of a product line from
London International US Holdings, Inc. ("LIUSH) 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 $3,600,000 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 of Vaginex(R), Koromex(R), Koroflex(R),
and Feminique(R). LIUSH is the largest condom manufacturer in the US 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 US military. The Company will use the
former Treo reps to sell the newly acquired 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
than that previously made by LIUSH, expanding the customer base and by receiving
greater support 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 satisfy by either refunding or conversion of the debentures into
common stock.
RESULTS OF OPERATIONS
Sales for the quarter ended March 31, 1996 totaled $624,853,
an increase of 19% over restated sales of $524,778 for the second quarter in
1995. The increase was primarily attributed to the new product line acquired on
March 15, 1996 from London International US Holdings, Inc. Sales for the six
months increased $71,000 to $1,081,937 in the prior year. Sales for the prior
quarter totaled $457,000.
Gross profit for the quarter improved to a positive 2%
compared to a negative 24% for the comparable quarter in 1995. Margins for the
prior quarter totaled a negative 40%. On a six month basis, gross profit totaled
a negative 15% versus a negative 26% for the six months ended March 31, 1995.
Negative margins were attributable to sales levels not being high enough to
absorb fixed overheads in manufacturing.
Selling, general and administrative expenses increased to
$298,538 versus $255,933 in the comparable quarter due primarily to legal and
accounting expenses in the quarter. For the six month period, selling, general
and administrative expenses dropped $60,845 to $552,599 due to lower legal
expenses in the first quarter. Amortization of licenses declined from $143,046
in the 1995 quarter to $1,800 due to the write-off of the Amswiss rights in
September 1995.
Interest expense was in line with the prior quarters.
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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: May 10, 1996
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