SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------------------------------
FORM 10Q
QUARTERLY REPORT UNDER SECTION 13 OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1998 Commission File Number 0-11750
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, 1998
Class Outstanding
----- -----------
Common Stock - $.00l Par Value 18,317,485
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 _____
<PAGE>
BIOPHARMACEUTICS, INC.
INDEX
------
Page
----
PART I Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
December 31, 1998 (Unaudited)
and September 30, 1998 (Audited) 3
Consolidated Condensed Statements of Operations
Three Months Ended December 31, 1998
and 1997(Unaudited) 4
Consolidated Condensed Statement of Shareholders' Equity
for the Three Months Ended December 31, 1998
(Unaudited) 5
Consolidated Condensed Statement of Cash Flows
for the Three Months Ended December 31, 1998
and 1997 (Unaudited) 6
Notes to Consolidated Condensed Financial Statements
(Unaudited) 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
PART II Other Information
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Default upon Senior Securities 9
Item 4. Submission of materials to a
vote of security holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED BALANCE SHEET
December 31, September 30,
1998 1998
---- ----
(Unaudited) (Audited)
----------- -------------
ASSETS
Current assets:
Cash $ 40,978 $ 34,421
Trade receivables, less allowance for
doubtful accounts 593,487 290,268
Inventories 189,679 179,401
Prepaid expenses and other assets 96,849 124,958
____________ ____________
Total current assets 920,993 629,048
Property, plant and equipment, at cost,
net of accumulated depreciation
of $485 in Dec 1998 and $410 is
Sept. 1998 930 1,005
Intangible assets, at cost, net of
accumulated amortization
of $518,100 in Dec 1998 and
$470,000 in Sept 1998 3,253,325 3,300,425
_____________ _____________
$ 4,175,248 $ 3,930,478
=============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable-trade $ 275,816 $ 180,147
Accrued expenses 1,466,509 1,423,319
Net Liability of Discontinued
Operations 282,764 349,269
State Income Taxes Payable 29,000 29,000
Current maturities of long-term debt 104,341 104,341
_____________ ___________
Total current liabilities 2,158,430 2,086,076
_____________ ___________
Long-term debt 1,411,588 1,426,688
_____________ ___________
Convertible debentures payable 575,000 575,000
_____________ ___________
Shareholders' equity:
Common Stock - par value $.00l per share 18,317 17,370
Authorized - 75,000,000 shares
Issued - 18,317,485 in Dec. 1998,
and 17,370,118 in Sept. 1998
Additional paid-in capital 34,037,450 33,871,890
Deficit (33,080,925) (33,101,934)
____________ ___________
974,842 787,326
Less Treasury Stock, at cost
(103,432 shares) (944,612) (944,612)
____________ ___________
30,230 (157,286)
_____________ ____________
$ 4,175,248 $ 3,930,478
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
December 31,
-------------------
1998 1997
---- ----
Net sales: $ 718,782 $ 622,492
Costs and expenses:
Cost of sales 246,046 217,935
Selling, general and
Administrative 357,764 320,477
Amortization of intangibles 47,100 48,000
_______ _______
650,910 586,412
_______ _______
67,872 36,080
Other deductions:
Interest expense (46,863) (46,368)
___________ ___________
Net income Continuing operations $ 21,009 $ (10,288)
Net income from Discontinued Operations -0- $ 412,003
__________ _____________
Net Income $ 21,009 $ 401,715
=========== =============
Income (Loss) per share
Continuing operations $0.00 $(0.00)
Discontinued Operations $0.00 $ 0.03
__________ _________
Income per share $0.00 $ 0.03
========== =========
Average shares outstanding 17,626,004 16,816,732
========== ==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Common Stock
_____________
Additional
Number of Par Paid-In Treasury
Shares Value Capital Deficit Stock Total
___________ ________ ____________ ____________ __________ ________
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1998 17,370,118 $17,370 $33,871,890 $(33,101,934) $(944,612) $(157,286)
(Unaudited)
Shares issued to Debenture
Holders in lieu of
interest payment 121,867 122 23,033 23,155
Shares issued in
payment Of Note Payable and
Interest due 130,945 131 18,201 18,332
Shares issued pursuant to
Sale of Common Stock 555,555 555 99,445 100,000
Shares issued in
payment of professional
services 139,000 139 24,881 25,020
Net income for the
three months
ended December 31, 1998 21,009 21,009
____________ _________ ____________ ____________ _________ _________
Balance, December 31, 1998 18,317,485 $18,317 $34,037,450 $(33,080,925) $(944,612) $ 30,230
============ ========= ============ ============= ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
BIOPHARMACEUTICS, INC.
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
(UNAUDITED)
THREE MONTHS ENDED DECEMBER 31,
1998 1997
---- ----
Cash flows from operating activities:
Income (Loss) from continuing operations $ 21,009 $(10,288)
Income from discontinued operations 412,003
Adjustments to reconcile net income (loss) to
net cash provided by (used in)
Operating activities:
Shares issued in lieu of payment 66,507
Depreciation and amortization
continuing operations 47,175 48,000
Depreciation and amortization
discontinued operations 206,151
Changes in certain assets and liabilities:
Accounts receivable (303,219) 131,769
Inventories (10,278) (14,674)
Other current assets 28,109 (68,840)
Other assets -0- (27,930)
Accounts payable and accrued expenses 72,354 60,748
Payment in settlement of litigation -0- (250,000)
Net cash provided by (used in) _________ _________
Operating activities ( 78,343) 486,939
Cash flows from investing activities:
Purchase of property plant and equipment (81,029)
________ _________
Net cash provided by (used in)
investing activities -0- (81,029)
_________ __________
Cash flows from financing activities:
Sale of common stock 100,000
Repayments of long-term debt (15,100) (689,063)
Net cash provided by (used in) _________ ________
financing activities 84,900 (689,063)
_________ _________
Net change in cash 6,557 (283,153)
Cash at beginning of period 34,421 502,304
__________ _________
Cash at end of period $ 40,978 $219,151
=========== =========
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
BIOPHARMACEUTICS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
DECEMBER 31, 1998
A: CONSOLIDATED STATEMENTS
The Consolidated Condensed Balance Sheet as of December 31, 1998, the
Consolidated Condensed Statement of Operations for the three months ended
December 31, 1998 and 1997, the Consolidated Condensed Statement of
Shareholders' Equity for the three months ended December 31, 1998 and 1997 and
the Consolidated Statements of Cash Flows for the three months ended December
31, 1998 and 1997 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, 1998 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, 1998. Results of operations for the
period ended December 31, 1998 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: DISCONTIUNED OPERATIONS
On December 11, 1998, the Company completed the sale of its wholly owned
subsidiary, Caribbean Medical Testing Center Inc. (''CMT''), which was in the
business of multi-phase specialty medical testing and laboratory services
throughout Puerto Rico. Under the terms of the sale, common stock of CMT was
sold for $4,700,000, payable as follows: $600,000 to be held in escrow for
specified outstanding taxes, $2,600,000 in cash and the waiver of the Company's
guaranty of a $1,500,000 note held by the purchaser. In addition and as part of
its settlement with other creditors, the Company settled an outstanding
indebtedness to Dondo Associates, Inc. ("Dondo") by assigning $2,600,000 of the
cash proceeds from the CMT sale to Dondo in exchange for the cancellation of the
Company's outstanding promissory note (incurred by the Company as a result of
the acquisition of CMT) to Dondo totaling $4,117,715 inclusive of interest. The
results of operations of CMT for the fiscal year ended September 30, 1998, have
been classified as discontinued operations.
In connection with the Company's restructuring plan, the manufacturing
operations of its generic pharmaceutical product subsidiary were discontinued
effective September 30, 1998. The Company is presently liquidating the entire
Manufacturing operations.
The Quarter end December 31, 1998 reflects only the continuing operations
of the feminine hygiene line.
The three-month numbers for CMT and the Manufacturing operations for the
quarter ended December 31, 1997 have been reclassified as discontinued
operations.
<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 long and short-term debt, Convertible
Debentures or notes and the sale of Common Stock. The Company incurred
$2,000,000 of long-term debt in fiscal 1996 for the acquisition of the feminine
hygiene product line. The payment of this note was restructured in December
1998. In fiscal 1997, the Company incurred long-term debt of $575,000 with the
issuance of Convertible Debentures. As of September 30, 1998, all other
long-term debt was converted to common stock, repaid or canceled. In December
1998, the Board of Directors authorized the issuance of Rule 144 restricted
shares of common stock in a private placement to raise up to $1,000,000 in order
to provide immediate and essential working capital. As a result of this private
placement, the Company has raised $800,000: $100,000 in December 1998, $500,000
in January 1999 and $200,000 in February 1999. The Company also raised capital
from the sales of common shares, the proceeds of which are as follows:
$2,547,658 in Fiscal 1996, $1,075,000 in Fiscal 1997 and $182,556 in Fiscal
1998. As of December 31, 1998, the Company has cash of approximately $40,000.
With the restructuring of the Company, the feminine hygiene Branded
products have become the core business with which the Company expects to grow.
The Brands, which were acquired in March 1996, have been established
approximately over thirty years on average and are sold under the Brand names
Vaginex*, Koromex* and Feminique*. Sales of these Brands are being made to food
and drug chains, drug wholesalers, domestic and overseas distributors, clinics
and government agencies. The Company expects to expand sales of these Brand
names in Fiscal 1999 through increased advertising, aggressive sales marketing
through the Company's network of seven nationwide independent sales
representative organizations as well new marketing programs and new products.
(*Trademark)
The Company believes that the foregoing private placement, the
restructuring of its long-term debt and the expected increased sales volume will
be adequate to meet its current objectives.
RESULTS OF OPERATIONS
Sales for the quarter ended December 31,1998 of $718,782 represent an
increase of 15.4% from sales of $622,492 in the comparable quarter in 1997.
Sales for the prior quarter ended September 30, 1998 totaled $312,697. The
increase in sales was due directly to the infusion of working capital to
increase inventories and clear all backorders.
Gross margins for the first quarter of fiscal 1998 were 65.77% compared to
64.99% in the same quarter in fiscal 1997. Gross margin for the prior quarter
was 21.47%. Gross margins for the comparable quarters were in line with the
product mix of Koromex* and Vaginex*. (*Trademark)
Selling, general and administrative expenses increased to $357,689 in
December 1998 from $320,447 in the comparable quarter in the prior year due
primarily to increases in selling expenses for the feminine hygiene line as a
result of the increased sales. Amortization of intangibles represents trademarks
and trade names for the feminine hygiene line, which was acquired in March 1996.
Interest expense of $46,863 represents interest for feminine hygiene
acquisition and debenture obligations, which is comparable to the same quarter
in fiscal 1998.
<PAGE>
PART II--Other Information
Item 1. Legal Proceedings
On July 28, 1998, the Company's former President tendered his resignation
and then commenced an action on September 15, 1998 against the Company asserting
non-payment of, among things salary, of $23,000 and fees arising from a
consulting agreement aggregating approximately $94,000. The Company intends to
vigorously defend this lawsuit and has filed counterclaims for breach of
contract and breach of fiduciary duty. Due to uncertainties inherent in
litigation and the Company's intention to pursue its counterclaims, only $23,000
of accrued payroll has been provided for in the Consolidated Financial
Statements.
The Company has accrued estimated settlements of pending litigation
aggregating $219,000 and recorded this amount in its Consolidated Statements of
Operations for the year ended September 30, 1998. These claims are substantially
in connection with alleged legal services performed and disputes over
merchandise purchases.
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 Not applicable
<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/ Jonathan Rosen
BIOPHARMACEUTICS, INC.
REGISTRANT
By: Jonathan Rosen, Acting President
and Chief Executive Officer
/s/ Vincent H. Pontillo
VINCENT H. PONTILLO
Controller/Secretary
Dated: February 25, 1998
