SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1999
Commission file number: 0-17750
FEMINIQUE CORPORATION (Formerly Biopharmaceutics, Inc.)
-------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
DELAWARE 13-3186327
---------- --------------------
State of Corporation (I.R.S. Employer ID. Number)
990 STATION ROAD, BELLPORT, NY 11713
----------------------------------------------- ---------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code:(631) 286-5800
--------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
Common Stock, $0.001 Par Value OTC Bulletin Board
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 of the Securities Exchange Act of
1934 during the preceding 12 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 90 days.
Yes X No
---- -----
The aggregate market value of the voting stock owned by
non-affiliates of the Registrant on November 30, 1999 was $2,845,675. On such
date, the mean price at which the stock was sold was $0.125 per share.
The number of shares of Common Stock, $.001 Par Value, outstanding as
of November 30, 1999 was 22,765,399, exclusive of outstanding, unexercised
options.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE>
BIOPHARMACEUTICS, INC.
FORM 10-K
(FILED FOR FISCAL YEAR ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
PAGE NO.
PART I.
Item 1. Business . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . 7
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . .7-8
Item 4. Submission of Matters to
a Vote of Security Holders . . . . . . . . . . . . 8
PART II.
Item 5. Market for Registrant's Common
Stock and Related Shareholder
Matters . . . . . . . . . . . . . . . . . . . .. . .8-9
Item 6. Selected Financial Data . . . . . . . . . . . . 10
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations . . . . . . . . . . . . . . 10-11-12
Item 8. Financial Statements and Supplementary Data. . . . . . 12
Item 9. Disagreements on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . 12
PART III.
Item 10. Directors and Executive Officers . . . . . . . 13
Item 11. Executive Compensation . . . . . . . . . . . . 14
Item 12 Security Ownership of Certain Beneficial
Owners and Management . . . . . . . 15
Item 13. Certain Relationships and Transactions . . . . . . . 16
PART IV.
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K
Exhibit Index . . . . . . . . . . . . . . . 16
<PAGE>
PART I
ITEM 1. BUSINESS
--------
THE COMPANY
-----------
In June 1999, Biopharmaceutics, Inc. (the "Company"), pursuant to a
meeting of the Board of Directors, adopted a resolution and filed a Certificate
of Amendment to the Certificate of Incorporation and changed the name of the
Company to Feminique Corporation.
Biopharmaceutics, Inc. was originally incorporated in Nevada on
August 15, 1983, under the name of Health Care Facilities Corporation. On March
28, 1988, the Shareholders changed the Company's name to Biopharmaceutics, Inc.
and the state of incorporation from Nevada to Delaware. The Company's executive
office is located at 990 Station Road., Bellport, New York 11713. Its telephone
number is (631) 286-5900.
BUSINESS OPERATIONS
-------------------
RECENT DEVELOPMENTS
-------------------
In December 1999, the Company signed a non-binding Letter of Intent
for the sale of the Company's rights, title and interest in the cancer treatment
drug (DBD/Mitolactol) ("DBD"). (See Note 15 of the Consolidated Financial
Statements.)
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. A
fee of $50,000 was paid to a Director of the Company by Dondo for services
rendered on its behalf in said transaction. The results of operations of CMT
have been classified as discontinued operations and all prior periods have been
restated. (See Certain Relationships and Related Transactions.)
In connection with the Company's restructuring plan (see Current
Operations), the manufacturing operations of its generic pharmaceutical products
subsidiary were discontinued effective September 30, 1998. The Company
liquidated the entire Manufacturing operation in 1999. The operations of this
division for the three years ended September 30, 1999 have been reported as
discontinued operations in the accompanying consolidated statement of
operations.
2
<PAGE>
FISCAL 1999 OPERATIONS
----------------------
BACKGROUND
----------
The Company's business operations, in fiscal year 1999, were
principally conducted through one wholly owned subsidiary: Quality Health
Products, Inc. ("QHP"), a company organized to market the line of Feminine
Hygiene Products acquired in March 1996 from SSL Americas Inc., formerly known
as London International Group, Inc. ("LIG").
In addition, the Company holds the license rights to Mitolactol
("DBD"), a cytotoxic chemotherapy agent which holds "Orphan Drug Status" for
both the treatment of cervical cancer and brain cancer . On September 25, 1996,
the Company entered into a Joint Venture Agreement with Advanced Biological
Systems, Inc. (now ABS Group, Inc. "ABS") to finance the final development and
completion of the regulatory process for Mitolactol. (See Note 15 of the
Consolidated Financial Statements.)
CURRENT OPERATIONS
------------------
Since the Company's Board of Directors effectuated a restructuring of
management and adopted a plan to restructure operations in 1998, it was
determined that the feminine hygiene Branded products operation was to
constitute the Company's core business. Subsequently, the Company became a
distributor of consumer feminine hygiene and family planning products which are
sold nationwide to major chain stores, distributors and wholesalers.
FEMININE HYGIENE PRODUCTS
-------------------------
In March 1996, the Company through QHP, acquired certain feminine
hygiene Branded products from London International Group, Inc., now known as SSL
Americas Inc. The brands acquired are sold under the names Vaginex(R),
Koromex(R), Koroflex(R) and Feminique(R) and have been established on average
more than thirty years with Koromex(R) being established since 1933.
Sales of these Brands are being made to food and drug chains, drug
wholesalers, domestic and overseas distributors, clinics and domestic government
agencies. The Company's sales are conducted by one independent Sales
Representative Organization, which calls on the key accounts that carry the
lines. The Company expects its sales representative to expand sales of the lines
by expanding the customer base and by receiving greater support from the Company
in promoting the products.
No sales are currently being made to mass merchandisers such as
Wal-Mart, K-Mart, Target, Venture or Ames. The Company expects to be making a
concerted sales effort to introduce QHP's Brands to these accounts.
3
<PAGE>
BIOTECHNOLOGY
-------------
In November 1993, the Company acquired three principal assets from
Amswiss Scientific Inc. a non affiliated Canadian Corporation (Amswiss); (i) the
license rights to DBD, (ii)certain patient rights, including the U.S.A. patent
to a peptide, Nitroso N-Beta Chloroethyl Carbamoyl ("NNB"), and (iii) agreements
with the Central Research Institute for Chemistry of the Hungarian Academy of
Sciences ("CRIC") and a group of scientists associated with the Semmelweiss
Medical University, Budapest, Hungary (the "Group") for the development of two
anti-sense oligonucleotides which have displayed anti-tumor and anti-metastatic
activity.
DBD is a cytotoxic, chemotherapy agent used in the treatment of
cancer. DBD was developed and patented by Chinoin Pharmaceutical and Chemical
Works, Budapest, Hungary and eventually licensed to Amswiss from whom the
Company acquired its rights. The Company had also obtained from Amswiss, DBD's
Orphan Drug Status for the treatment of cervical cancer and brain cancer,
granted by the U.S. Food and Drug Administration ("FDA"). Orphan Drug Status
provides patent-like protection for off-patent drugs. Since DBD is no longer
covered by a patent, the Orphan Drug Status will provide important protection if
and when the Company obtains a New Drug Application ("NDA").
DBD has gone through various Phase II and Phase III clinical trials
with approximately 2400 patients in the U.S. and approximately an additional
3100 patients worldwide. One of DBD's major advantages is that it can be taken
orally, thus reducing expensive hospital stays. The majority of the development
and testing expenses for DBD have been borne by the National Cancer Institute
("NCI") in the U.S. and the European Organization for Research and Treatment of
Cancer ("EORTC") in Europe.
In July 1995, the FDA granted the Company's application for Orphan
Drug Status for DBD's use as adjuvent therapy in the treatment of primary brain
tumors.
The Company will be required to file an NDA with the FDA and receive
approval from the FDA before any U.S. commercial sales or marketing of DBD can
commence. In September 1996, the Company entered into a Joint Venture Agreement
with ABS Group, Inc. for the further development of DBD. (See Note 15 of the
Consolidated Financial Statements.)
JOINT VENTURE
-------------
On September 25, 1996, the Company entered into a Joint Venture
Agreement with Advanced Biological Systems, Inc. (a Utah Corporation) to finance
the final development of DBD (also know as Mitolactol). The Joint Venture
agreement provided, among other things, the payment of a total of a minimum of
$2,750,000 to the Company in cash and/or securities for the sub-license. Payment
terms included 425,000 shares of restricted common stock of ABS and $150,000
paid in 1996. No additional payments were made. In October 1998, the Agreement
was amended whereby ABS was granted an irrevocable 10% interest in any monies
due the Company in the event of any sale of any cancer drug of the joint
venture. The market value of the restricted shares of ABS at September 30, 1998
were negligible and the Company wrote off the value of these restricted shares,
approximately $251,000 in its Consolidated Statement of Operations.
4
<PAGE>
DISCONTINUED 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 to pay
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 have been classified as discontinued operations and
prior periods have been restated accordingly. (See Note 16(a) of the
Consolidated Financial Statements and Certain Relationships and Related
Transactions.)
In connection with the Company's restructuring plan, the
manufacturing operations of its generic pharmaceutical products subsidiary were
discontinued effective September 30, 1998. The Company has liquidated the entire
manufacturing operation. The operations of this division for the three years
ended September 30, 1999 have been reported as discontinued operations in the
accompanying consolidated statement of operations. (See Note 16(b) of the
Consolidated Financial Statements.)
EMPLOYEES
---------
As of September 30, 1999, the Company had 8 employees.
RELATED FINANCING
-----------------
In March of 1997 the Board of Directors authorized an offering of
convertible debentures with interest at 10% per annum payable in cash or common
stock at the Company's option. The debentures can be converted at the holder's
option at any time after the 181st day of the date of issuance into the
Company's common stock in its entirety or in multiples of $1,000, at a
conversion price equal to the greater of $.54 per share or 75% of the closing
price per share over the five consecutive trading days immediately prior to the
date of exercising the conversion rights. The Company received $575,000 in May
and June 1997 from the issuance of these debentures. The $575,000 of convertible
debentures outstanding at September 30, 1999 matures either in May 2002 or June
2002.
5
<PAGE>
During August and September, 1997, the Company authorized additional
shares of common stock pursuant to offerings under Regulation S for the funding
of the purchase of CMT. In connection, the Company received $1,375,000,
resulting from the sale of 3,115,385 shares of common stock.
In June 1998, the Board of Directors authorized additional offerings
pursuant to Regulation S of 1,500,000 shares of common stock for working capital
requirements. The Company received approximately $183,000, resulting from the
sale of 232,100 shares of its common stock.
In December 1998, the Board of Directors authorized the issuance of
4,444,443 restricted shares of common stock under Rule 144. As a result of this
private placement, the Company raised a total of $800,000; $100,000 in December
1998, $500,000 January 1999 and $200,000 in February 1999. This funding was used
to provide immediate and essential working capital and to further develop the
Quality Health Products, Inc. line of feminine hygiene Branded products and help
increase the value and market share of the Brand names and for the purchase of
inventory.
ITEM 2. PROPERTIES
----------
On January 15, 1999 the Company signed a lease for 15,000 square feet
of the facility in Bellport, New York, for an annual rental of $90,000 which
contains the Company's headquarters and warehousing. The lease is for one year
with an option to renew for an additional year. On November 9, 1999, the Company
notified the landlord that it was exercising its option to renew the lease for
one year expiring December 31, 2000. The current space is adequate to meet the
Company's requirements for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Company is currently negotiating with the Food and Drug
Administration ("FDA"), to prevent the FDA from debarring Biopharmaceutics, Inc.
from submitting abbreviated drug applications. This subsidiary discontinued its
operations effective September 30, 1998 (See Note 16 of the Consolidated
Financial Statements.) Management and counsel are of the opinion that this
debarment will not affect its current operations within its consumer feminine
hygiene products' subsidiary. This proceeding arose as a result of the Company
and its prior management being convicted of certain violations, for which the
resulting penalties and fines were paid in full in October 1997.
6
<PAGE>
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 other 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 have been provided for in the accompanying
financial statements.
The Company has accrued estimated settlements of pending litigation
aggregating $47,000 and recorded this amount in its consolidated statements of
operations. These claims are substantially in connection with disputes over
merchandise purchased.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
----------------------------------
SECURITY HOLDERS
----------------
NOT APPLICABLE
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON STOCK AND RELATED
---------------------------------------------
SHAREHOLDER MATTERS
-------------------
The Company's Common Stock is traded principally on the OTC Bulletin
Board under the symbol "FEMQ."
Prior to December 1, 1986, the Company's Common Stock was listed on
the National Association of Securities Dealers, Inc. automated quotation system
under the symbol "PATS." On December 19, 1986, the Company's Common Stock was
listed on The American Stock Exchange (AMEX) under the symbol ("IGN.") On May
24, 1988, trading commenced on the AMEX under the symbol BPH, reflecting the
most recent name change from Integrated Generics, Inc. to Biopharmaceutics, Inc.
On July 13, 1995 the AMEX delisted the trading of the Company's Common Stock. On
July 14, 1995, the Company was listed on the OTC Bulletin Board under the symbol
"BIOP."
On May 2, 1996, the Company's symbol was changed by to BOPH. In June
1997 the Company had a 1 for 4 reverse stock split and the symbol was changed to
BOPM.
As of November 30, 1999, there were approximately 900 holders of
record of Common Stock and approximately 4,500 holders in street name. On that
date, the Company's Common Stock closed at $0.125 per share on the OTC Bulletin
Board.
7
<PAGE>
The Company has not paid any cash dividends since its inception. For
the foreseeable future, it is anticipated that any earnings that may be
generated from operations of the Company will be retained for use in the
Company's business and that dividends will not be paid to shareholders.
The trading range for the stock for each quarterly period from
October l, 1996 to September 30, 1999 was as follows: The trading ranges for
Fiscal years 1996, and the first half of Fiscal 1997 have be restated to reflect
the 1 for 4 reverse stock split of June 1997.
HIGH LOW
Oct. 1 - Dec. 31, 1996 $2.20 $0.96
Jan. 1 - Mar. 31, 1997 $2.80 $1.84
Apr. 1 - June 30, 1997 $2.50 $1.56
July 1 - Sept. 30, 1997 $2.50 $1.68
Oct. 1 - Dec. 31, 1997 $2.50 $1.81
Jan. 1 - Mar. 31, 1998 $1.95 $1.25
Apr. 1 - June 30, 1998 $1.44 $0.55
July 1 - Sept. 30, 1998 $0.75 $0.13
Oct. 1 - Dec. 31, 1998 $0.21 $0.12
Jan. 1 - Mar. 31, 1999 $0.52 $0.125
Apr. 1 - June 30, 1999 $0.34 $0.1875
July 1 - Sept. 30, 1999 $0.25 $0.12
8
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
(Amounts in Thousands Except Per Share Data)
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Selected Operating Data (*)
Continuing Operations:
<S> <C> <C> <C> <C> <C>
Revenues $2,204 $1,999 $ 3,529 $1,705 -0-
Net Profit(Loss) ($ 893) ($1,758) $ 141 $ 244 -0-
Net Profit(Loss) Per Share ($ 0.04) ($ 0.11) $ 0.01 $ 0.03 -0-
Discontinued Operations:
Net Gain (Loss) $ 413 ($3,473) ($ 96) ($ 270) ($ 960)
Net Gain (Loss) Per Share $ 0.02 ($ 0.20) ($ 0.01) ($ 0.03) ($ 1.66)
Selected Balance Sheet Data
Total Assets $3,843 $3,930 $16,331 $5,817 $1,421
Total Liabilities $3,496 $4,088 $11,977 $5,424 $3,639
Long-Term Debt $1,221 $2,002 $ 4,581 $3,026 $1,131
Shareholders' Equity (Deficiency
in Assets) $ 347 ($ 157) $ 4,353 $ 393 ($2,218)
Dividends Declared None None None None None
<FN>
*Recasted to reflect the continuing operations of the Feminine Hygiene and
Family Planning Products division which began operations in March 1996, date of
acquisition.
</FN>
</TABLE>
ITEM 7. 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 short and long-term debt, convertible
debentures or notes, and the sale of common stock in the Company. 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 incurred was
converted to common stock, repaid or canceled. The Company also raised capital
from the sales of common shares the proceeds of which were as follows:
$1,075,000 in fiscal 1997, $182,556 in fiscal 1998 and $800,000 in fiscal 1999.
As of September 30, 1999, the Company had cash of approximately $78,000.
9
<PAGE>
With the restructuring of the Company the feminine hygiene Branded
products have become the core business with which the Company expects to grow.
The acquisition price of approximately $3,600,000 in March 1996 was financed by
a combination of Regulation S common stock sales, and notes for $2,000,000 whose
payment was restructured in December, 1998. The Brands which were acquired have
been established approximately thirty years on average and are sold under the
names Vaginex(R), Koromex(R), Koroflex(R) and Feminique(R).
Sales of these Brands are being made to food and drug chains, drug
wholesalers, domestic and overseas distributors, clinics, and domestic
government agencies. The Company's sales are conducted by one independent Sales
Representative Organization, which calls on the key accounts that carry the
lines. The Company expects its sales representative to expand sales of the lines
by expanding the customer base and by receiving greater support from the Company
in promoting the products.
The Company believes that through its new repackaging of the products
and its addition of new products to the feminine hygiene line, sales of the
Company's products should be enhanced.
RESULTS OF OPERATIONS
---------------------
1999 COMPARED TO 1998
Sales and revenues for the fiscal year ended September 30, 1999 total
$2,204,038 vs. $1,998,972 for the prior fiscal year. The increase in revenues
for the feminine hygiene product line was primarily due to a price increase
which took effect on April 1, 1999.
The Company operated at a gross profit of 51.8% in 1999 as compared
with 52% in the prior year. The decline in gross profit is directly related to a
shift in product mix during the year. The selling, general and administrative
expenses were comparable to the prior year with the larger expenses being
incurred for advertising, legal and consulting fees for the feminine hygiene
line.
Amortization of intangibles of $188,400 is the amortization of
Tradenames and Trademarks, which compares with the $207,065 of amortization in
the prior fiscal year.
1998 COMPARED TO 1997
Sales and Revenues for the fiscal year ended September 30, 1998 total
$1,998,972 versus $3,529,114 for the prior fiscal year. The drop in revenues for
the feminine hygiene product line was due to supply problems resulting from cash
flow difficulties related to the discontinued divisions.
10
<PAGE>
The Company operated at a gross profit of 52% in 1998 as compared
with 59.9% in the prior year. The decline in gross profit is directly related to
a shift in product mix during the year. The increase in selling, general and
administrative expenses is due primarily to increases in advertising allowances,
legal fees and expenses for the feminine hygiene line.
Amortization of intangibles of $207,065 is the amortization of
Tradenames and Trademarks, which compares with the $192,000 of amortization in
the prior fiscal year. Other expenses for fiscal 1998 consist of accrued
expenses of approximately $219,000 for possible settlements of pending
litigation. The write-off of $297,051 relates to the Company's write-off of an
investment in ABS Group, Inc.'s restricted shares totaling $250,750 and the
write-off of $46,301 in miscellaneous licensing costs.
1997 COMPARED TO 1996
Sales and Revenues for the fiscal year ended September 30, 1997
totaled $3,529,114 compared to sales of $1,705,337 in 1996. The feminine hygiene
product line was acquired in March 1996. The Company operated at a 59.9% gross
profit in fiscal 1997 compared to a 52.6% gross profit in the prior fiscal year
due to a shift in product mix. The increase in selling, general and
administrative expenses in 1997 from 1996 is primarily due to increased freight,
commissions and other expenses associated with the increased sales volume in
1997.
Amortization of intangibles of $192,000 represents the amortization
of Tradenames and Trademarks which compares to the $99,600 of amortization of
Tradenames and Trademarks 1996 (which were acquired in March 1996). Other
expenses in fiscal 1997 include the settlement of the Amswiss lawsuit in
September 1997 in the amount of $436,300, consisting of $250,000 in cash and the
balance of $186,300 by the issuance of 115,000 shares of common stock. Interest
expense for the year ended September 30, 1997 included $114,212 of interest
incurred in the acquisition of CMT and $152,232 of interest on the note payable
for the feminine hygiene product line.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
See Financial Statements and Schedules.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
----------------------------------------------------
None.
11
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
-----------------------------------------------
The following list sets forth information as of November 30, 1999, as
to all directors and executive officers of the Company during its fiscal year
ended September 30, 1999.
RUSSELL CLEVELAND, age 61, is a Director of the Company and Chairman
of the Board of the Company. He currently serves as President of the Managing
General Partner of Renaissance Capital Partners, Ltd., President and Director of
Renaissance Capital Growth & Income Fund III, Inc. (NASDAQ) and a Director of
Renaissance US Growth and Income Trust PLC, which is traded on the London
exchange. Mr. Cleveland also currently serves as a director of Danzer
Corporation (formerly Global Environmental Corp.), Tutogen Medical, Inc.,
Bentley Pharmaceuticals, Inc. and Technology Research, Inc.
JONATHAN ROSEN, age 37, is a Director of the Company and was
appointed Acting President & Chief Executive Officer of the Company on July 29,
1998, at the time of the previous President's resignation. Since 1985 Mr. Rosen
has been a director and officer of various public corporations, many of which he
helped finance.
JOHN FIGLIOLINI, age 38, is a Director of the Company. Mr. Figliolini
is an investment banker and has worked in the securities industry since 1982,
raising over $250M in venture capital financing. He is currently the President
and owner of Phillip Louis Trading, Inc. a NASD registered broker dealer which
makes markets in many small cap stocks, in addition to providing investment
banking services.
JAMES MURPHY, age 49 is a Director of the Company. Mr. Murphy is
President, Chief Executive Officer and Chairman of the Board of Bentley
Pharmaceuticals, Inc. Previously, Mr. Murphy served as Vice President of
Business Development at MacroChem Corporation. He also spent fourteen years in
pharmaceutical research while at SmithKline Corporation and contract research
laboratories.
BARRY WEISBERG, age 54 is a Director of the Company. Mr. Weisberg is
a former Director and President of Lannett Company, Inc., a generic
pharmaceutical manufacturer, Divisional Vice President of Moore Medical
Corporation, Inc. a national drug distributor and wholesaler. Additionally Mr.
Weisberg was a Vice President of Sales for NMC Laboratories, Inc., a generic
pharmaceutical manufacturer.
JOHN J. GREIN, age 53, has been Secretary of the Corporation and Sr.
Vice President of Finance since April 1, 1999. Mr. Grein has been a V.P. and CFO
of various public and privately held companies since 1978. Mr. Grein received a
Masters in Finance from New York Institute of Technology.
12
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The following table summarizes all plan and non-plan compensation
awarded to, earned by or paid to the Company's Chief Executive Officer and its
other Executive Officers who were serving as executive officers during and at
the end of the last completed fiscal year ended September 30, 1999 for services
rendered in all capacities to the company and its subsidiaries for each of the
Company's last three fiscal years.
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
LONG TERM ALL OTHER
ANNUAL COMPENSATION COMPENSATION COMPENSATION
AWARDS
------------------- ------------ ------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS
- --------------------------- ---- ------ ----- -------
<S> <C> <C> <C> <C>
Jonathan Rosen 1999 $227,750 None None
Acting President and CEO 1998 $ 32,000 None None
John J. Grein 1999 $ 46,385 None None
Sr. V.P. of Finance
Vincent H. Pontillo 1999 $ 41,250 None None
1998 $ 75,000 None None
1997 $ 25,000 $1,200 None
Executive Officers of 1999 $315,385
Company as a Group 1998 $107,000
1997 $ 25,000
</TABLE>
AGGREGATE OPTIONS EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
---------------------------------------------------
NONE
13
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
(a) and (b) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth information at November 30, 1999
concerning ownership of the Company's Common Shares by each director and
executive officer and each person who owns of record, or is known to the Company
to own beneficially, more than five percent of the Company's Common Shares:
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
- ------------------- -------------------- ----------------
Jonathan Rosen (2)(3) 500,000 2.20%
Barry Weisberg 141,750 0.62%
John Figliolini (3) 2,131,137 9.36%
Russell Cleveland (1) 8,103 0.04%
John J. Grein 2,000 0.01%
Renaissance Capital Partners Ltd. 4,513,000 19.83%
LGT Bank in Liechtenstein AG 5,582,344 24.52%
All Directors and Officers as
a Group (5 persons) 2,782,990 12.23%
(1) Does not include 4,513,000 shares of common stock owned by Renaissance
Capital Partners Ltd. of which Russell Cleveland is a principal. (See Certain
Relationships and Related Transactions.)
(2) Does not include 47,500 shares of common stock held in the name of Anglo Co.
Ltd.
(3) Does not include 3,333,333 shares of common stock held equally with John
Figliolini held in the name of Dynamic Corporate Holdings Corporation.
14
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
Russell Cleveland, a Director of the Company, is also a major
shareholder and principal of Renaissance Capital Group, Inc.
John Figliolini, a Director of the Company, acted as a paid
consultant to Dondo Associates, Inc. in connection with the sale of CMT and
substantially assisted in obtaining the ultimate cancellation of the Company's
indebtedness to Dondo. (See Business Operations - Recent Developments and
Discontinued Operations.)
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(A) Documents filed as part of this report:
(1) and (2) - See Index to Consolidated Financial Statements and
Schedules included herein.
(3) Exhibits - None
15
<PAGE>
SIGNATURE
---------
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, thereunto duly authorized.
FEMINIQUE CORPORATION
By: /S/ JONATHAN ROSEN
------------------
Jonathan Rosen
Acting President and
Chief Executive Officer
By: /S/ JOHN J. GREIN
-----------------
John J. Grein
Sr. V.P. of Finance
16
<PAGE>
Pursuant to the requirements of the Securities and Exchange
Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the date indicated.
/S/ JONATHAN ROSEN
- ------------------
JONATHAN ROSEN Acting President, Chief
Executive
Officer and Director January 31, 2000
/S/ RUSSELL CLEVELAND
- ---------------------
RUSSELL CLEVELAND Chairman of the Board January 31, 2000
/S/ JOHN FIGLIOLINI
- -------------------
JOHN FIGLIOLINI Director January 31, 2000
/S/ JAMES MURPHY
- ----------------
JAMES MURPHY Director January 31, 2000
/S/ BARRY WEISBERG
- ------------------
BARRY WEISBERG Director January 31, 2000
17
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS
BIOPHARMACEUTICS, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30,
1999, 1998 AND 1997
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
INDEX
PAGE
NUMBER
Auditor's Report 1
FINANCIAL STATEMENTS:
- ---------------------
Consolidated Balance Sheets as of
September 30, 1999 and 1998 2 - 3
Consolidated Statements of Operations for the
Years Ended September 30, 1999, 1998 and 1997 4
Consolidated Statements of Shareholders' Equity for
the Years Ended September 30, 1999, 1998 and 1997 5 - 7
Consolidated Statements of Cash Flows for the
Years Ended September 30, 1999, 1998 and 1997 8 - 9
Notes to Consolidated Financial Statements 10 - 27
FINANCIAL STATEMENT SCHEDULES:
- ------------------------------
Schedule VIII - Valuation Accounts 29
18
<PAGE>
FARBER, BLICHT & EYERMAN, LLP
- -----------------------------
Certified Public Accountants
255 Executive Drive, Suite 215 Telephone: (516) 576-7040
Plainview, NY 11803-1715 Facsimile: (516) 576-1232
Board of Directors and Shareholders
Feminique Corporation (formerly known as
Biopharmaceutics, Inc.)
Bellport, New York
We have audited the accompanying consolidated balance sheets of
Feminique Corporation (formerly known as Biopharmaceutics, Inc.) and
Subsidiaries as of September 30, 1999 and 1998, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended September 30, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Feminique Corporation (formerly known as Biopharmaceutics, Inc.) and
Subsidiaries at September 30, 1999 and 1998, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1999, in conformity with generally accepted accounting
principles. Also in our opinion, the related consolidated financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects, the
information set forth therein.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2 to the consolidated financial statements, the Company has incurred substantial
operating losses from continuing operations in each of the two years in the
period ended September 30, 1999 and had a consolidated working capital deficit
at September 30, 1999 of $1,612,877. These conditions raise substantial doubt
about the Company's ability to continue as a going concern, management's plans
in addressing these matters are more fully discussed in Note 2. The consolidated
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
Plainview, New York
January 19, 2000
19
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
ASSETS
------
1999 1998
---- ----
Current assets:
<S> <C> <C>
Cash $ 78,334 $ 34,421
Trade receivables, less allowance
for doubtful accounts of $23,000;
$15,000 in 1998 295,812 290,268
Inventories 156,716 179,401
Prepaid expenses and other
current assets 130,892 124,958
---------- ----------
Total current assets 661,754 629,048
Property, plant and equipment, at
cost, net of accumulated depreciation
and amortization 68,969 1,005
Intangible assets, at cost, net of
accumulated amortization 3,112,025 3,300,425
---------- ----------
$3,842,748 $3,930,478
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY IN ASSETS)
-----------------------------------------------------------
1999 1998
---- ----
Current liabilities:
<S> <C> <C>
Accounts payable - trade $ 537,121 $ 180,147
Accrued expenses 668,899 1,423,319
State income taxes payable
-- 29,000
Notes payable 100,000 --
Current maturities of long-term
Debt 205,685 104,341
Net liability of discontinued
operations 187,926 349,269
Convertible debentures payable 575,000 --
------------ ------------
Total current liabilities 2,274,631 2,086,076
------------ ------------
Long-term debt 1,221,003 1,426,688
------------ ------------
Convertible debentures payable
-- 575,000
------------ ------------
Commitments and contingencies -- --
Shareholders' equity:
Common stock - par value $.001
per share:
Authorized - 75,000,000 shares
Issued - 22,765,399 shares;
17,370,118 shares in 1998 22,765 17,370
Additional paid-in capital 34,850,702 33,871,890
Deficit (33,581,741) (33,101,934)
------------ ------------
1,291,726 787,326
Less treasury stock, at cost
(103,432 shares) (944,612) (944,612)
------------ ------------
347,114 (157,286)
$ 3,842,748 $ 3,930,478
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
Sales $ 2,204,038 $ 1,998,972 $ 3,529,114
----------- ----------- -----------
Costs and expenses:
<S> <C> <C> <C>
Cost of sales 1,061,839 960,185 1,414,783
Selling, general and
administrative 1,783,706 1,826,642 992,837
Amortization of intangibles 188,400 207,065 192,000
----------- ----------- -----------
3,033,945 2,993,892 2,599,620
----------- ----------- -----------
(829,907) (994,920) 929,494
----------- ----------- -----------
Other income (deductions):
Gain (Loss) on settlements of
litigation 151,500 (238,478) (436,300)
Write-off of investment in
restricted securities -- (250,750) --
Write-off of licensing costs -- (46,301) --
Interest expense (214,294) (227,754) (322,948)
----------- ----------- -----------
(62,794) (763,283) (759,248)
----------- ----------- -----------
Income (loss) from continuing
operations before provision
for state income taxes (892,701) (1,758,203) 170,246
Provision for state income
Taxes -- -- 29,000
----------- ----------- -----------
Income (loss) from continuing
Operations (892,701) (1,758,203) 141,246
----------- ----------- -----------
Discontinued operations:
Operating loss
-- (1,259,416) (96,254)
Gain (loss) on disposal 412,894 (2,213,901) --
----------- ----------- -----------
412,894 (3,473,317) (96,254)
----------- ----------- -----------
Net income (loss $ (479,807) $(5,231,520) $ 44,992
=========== =========== ===========
Earnings (loss) per common share:
Continuing operations $ (.04) $ (.11) $ .01
Discontinued operations .02 (.20) (.01)
Net loss $ (.02) $ (.31) --
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
NOTES
COMMON SHARES ADDITIONAL RECEIVABLE
---------------------------- PAID-IN FROM
NUMBER OF TREASURY OFFICERS &
SHARES AMOUNT CAPITAL DEFICIT STOCK EMPLOYEES TOTAL
---------------------------- ------- ------ --------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, October 1, 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 stock split on a
one-for-four basis (31,553,308) (31,553) 31,553 -- -- -- --
Shares issued in
connection with legal and
other services rendered 23,764 24 44,652 -- -- -- 44,676
Shares issued in connection
with the Company's
Regulation S Offerings, net
of related expenses
of $300,000 3,115,385 3,115 1,071,885 -- -- -- 1,075,000
Shares issued as commission
in connection with the
purchase of Caribbean
Medical Testing Center, Inc. 550,000 550 1,043,200 -- -- -- 1,043,750
Shares issued in connection
with settlement of
litigation 115,000 115 186,185 -- -- -- 186,300
Shares issued in exchange
for convertible debentures 2,494,813 2,495 1,244,912 -- -- -- 1,247,407
Forgiveness of interest on
indebtedness to officer -- -- 18,000 -- -- -- 18,000
Net income for the year -- -- -- 44,992 -- -- 44,992
-----------------------------------------------------------------------------------------------
Balance, September 30, 1997 16,816,732 $ 16,817 $ 33,710,648 $(27,870,414) $(944,612) $(559,274) $ 4,353,165
-----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(continued)
<TABLE>
<CAPTION>
NOTES
RECEIVABLE
COMMON SHARES ADDITIONAL FROM
-------------------------
NUMBER OF PAID-IN TREASURY OFFICERS &
SHARES AMOUNT CAPITAL DEFICIT STOCK EMPLOYEES TOTAL
------------------------------------------- ------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1997 16,816,732 $ 16,817 $ 33,710,648 $(27,870,414) $(944,612) $(559,274) $ 4,353,165
Shares issued in connection
with legal and consulting
services rendered 430,000 430 459,570 -- -- -- 460,000
Shares issued in connection
with the Company's
Regulation S offerings 232,100 232 182,324 -- -- -- 182,556
Cancellation of notes
receivable and return of
related stock issued under
granted stock options (171,525) (172) (559,102) -- -- 559,274 --
Shares issued in connection
with the exercise of
stock options 62,811 63 78,450 -- -- -- 78,513
Net loss for the year
ended September 30, 1998 -- -- -- (5,231,520) -- -- (5,231,520)
-------------------------------------------------------------------------------------------------
Balance, September 30, 1998 17,370,118 $ 17,370 $ 33,871,890 $(33,101,934) $(944,612) -- $ (157,286)
-------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
(continued)
<TABLE>
<CAPTION>
NOTES
RECEIVABLE
COMMON SHARES ADDITIONAL FROM
-----------------------------
NUMBER OF PAID-IN TREASURY OFFICERS &
SHARES AMOUNT CAPITAL DEFICIT STOCK EMPLOYEES TOTAL
-------------------------------------------- --------- --------- --------- ----
<S> <C> <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)
Shares issued in connection
with the Company's sale of
common stock 4,444,443 4,444 795,556 -- -- -- 800,000
Shares issued in connection
with consulting services
rendered by
Board members 639,000 639 124,784 -- -- -- 125,423
others 88,125 88 17,209 -- -- -- 17,297
Shares issued to debenture
holders for interest 121,867 122 23,033 -- -- -- 23,155
Shares issued in payment
of a note payable 101,846 102 18,230 -- -- -- 18,332
Net loss for the year
ended September 30, 1999 -- -- (479,807) -- -- -- (479,807)
-----------------------------------------------------------------------------------------------------
Balance, September 30, 1999 22,765,399 $ 22,765 $ 34,850,702 $(33,581,741) $ (944,612) -- $ 347,114
-----------------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Income (loss) from continuing operations $ (892,701) $(1,758,203) $ 141,246
Gain (loss) from discontinued operations 412,894 (3,473,317) (96,254)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization -
discontinued operations -- 828,635 385,245
Depreciation and amortization -
continuing operations 192,395 188,400 188,400
Loss on write-off of:
Property and equipment -- 1,199,422 --
Intangible assets -- 7,885,844 --
Licenses -- 46,301 15,000
Investment in restricted securities -- 250,750 --
Cancellation of indebtedness in
connection with sale of Caribbean
Medical Testing Center, Inc. -- (6,094,707) --
Issuance of common shares in
settlement of litigation -- -- 186,300
Issuance of common shares for legal
and consulting services rendered 142,720 260,000 44,676
Issuance of common shares to debenture
holders for interest 23,155 -- --
Changes in certain assets and liabilities:
Accounts receivable (5,544) 1,139,842 (462,144)
Inventories 22,685 423,733 (64,775)
Other current assets (5,934) 188,006 (117,128)
Accounts payable - trade 356,974 (901,129) (173,832)
Accrued expenses (751,188) 590,590 234,652
Obligation relating to settlement
of litigation -- (250,000) 250,000
Net liability from discontinued
operations (161,343) 349,269 --
State income taxes payable (29,000) (61,000) 90,000
Deferred revenue -- -- (172,515)
Sundry -- 68,865 (1,465)
----------- ----------- -----------
Net cash provided by (used in)
operating activities (694,887) 881,301 447,406
----------- ----------- -----------
</TABLE>
26
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
FOR THE YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
Balance carried forward $ (694,887) $ 881,301 $ 447,406
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
<S> <C> <C> <C>
Purchase of property, plant and equipment (71,959) (287,573) (162,657)
Acquisition of Caribbean Medical Testing
Center, Inc. -- -- (6,000,000)
Proceeds from sale of marketable securities -- -- 97,500
Intangible assets acquired -- -- (62,181)
Cash overdraft -- -- (59,745)
----------- ----------- -----------
Net cash used in investing activities (71,959) (287,573) (6,187,083)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common shares
of stock 800,000 -- --
Proceeds from bank loan -- 110,000 --
Proceeds from issuance of convertible
debentures -- -- 575,000
Short-term debt incurred 100,000 -- 1,250,000
Repayments of short-term debt -- -- (1,250,000)
Collection of notes receivable -- -- 150,000
Proceeds from Company's Regulation S
offerings and the exercise of
stock options -- 261,069 1,375,000
Long-term debt incurred -- -- 4,892,715
Repayments of long-term debt (89,241) (1,432,680) (795,509)
----------- ----------- -----------
Net cash provided by (used in)
financing activities 810,759 (1,061,611) 6,197,206
----------- ----------- -----------
Net increase (decrease) in cash 43,913 (467,883) 457,529
Cash at beginning of year 34,421 502,304 44,775
----------- ----------- -----------
Cash at end of year $ 78,334 $ 34,421 $ 502,304
=========== =========== ===========
Supplemental disclosure of cash flow information:
Cash paid during year:
Interest $ 127,000 $ 371,000 $ 235,000
----------- =========== ===========
Taxes $ 29,000 $ -- $ --
----------- ----------- -----------
Non-cash financing activities:
Reference is made to financial statements notes for certain non-cash financing
activities.
</TABLE>
27
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) THE COMPANY
In June, 1999, Biopharmaceutics, Inc. (the "Company"), pursuant to a
meeting of the Board of Directors, adopted a resolution and filed a Certificate
of Amendment to the Certificate of Incorporation and changed the name of the
Company to Feminique Corporation.
The Company, after its restructuring in 1998 (Note 2) became a
distributor of consumer feminine hygiene and family planning products which are
sold nationwide to major chain stores, distributors and wholesalers.
In December, 1998, the Company sold its wholly owned subsidiary,
Caribbean Medical Testing Center, Inc. ("CMT", (Note 16)). CMT was acquired by
the Company in June, 1997 and is engaged primarily in the business of
multi-phasic specialty medical testing and laboratory services throughout Puerto
Rico. The Company also discontinued its manufacturing of generic pharmaceutical
products (Note 16). The accompanying financial statements reflected the sale of
CMT and the discontinuation of its manufacturing facilities as of September 30,
1998, with both CMT and its generic pharmaceutical operations being reflected in
the consolidated statements of operations as discontinued operations.
In December, 1999, the Company signed a non-binding letter of intent
for the sale of the Company's rights, title and interest in the cancer treatment
drug (DBD/Mitolactol ("DBD"), Note 15)).
b) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
c) REVENUE RECOGNITION
Sales are recognized as products are shipped.
d) INVENTORY VALUATION
Inventories are stated at the lower of cost (first-in, first-out) or
market.
28
<PAGE>
FEMINIQUE, INC.
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
e) DEPRECIATION AND AMORTIZATION
The Company amortized its intangible asset on the straight-line
method over its estimated useful live of twenty years (Note 6). The Company
depreciated its property and equipment on the straight-line method for financial
reporting purposes. For tax reporting purposes, the Company uses the
straight-line or accelerated methods of depreciation.
Leasehold improvements were amortized over thirty-nine years.
Equipment, furniture and fixtures generally were assigned five year lives.
Expenditures for maintenance, repairs, renewals and betterments are
reviewed by management and only those expenditures representing improvements to
plant and equipment are capitalized. At the time plant and equipment are retired
or otherwise disposed of, the cost and accumulated depreciation accounts and the
gain or loss on such disposition is reflected in operations.
The Company previously adopted Financial Accounting Standards ("FAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". The adoption of FAS 121 had no material affect on the
accompanying financial statements.
f) DEFERRED INCOME TAXES
Deferred income taxes are provided based on the provisions of SFAS
No. 109, "Accounting for Income Taxes" ("SFAS 109"), to reflect the tax effect
of differences in the recognition of revenues and expenses between financial
reporting and income tax purposes based on the enacted tax laws in effect at
September 30, 1999.
g) EARNINGS PER COMMON SHARE OF COMMON STOCK
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share", became effective in the fourth quarter of 1997 and requires two
presentations of earnings per share - "basic" and "diluted". Basic earnings per
share is computed by dividing income available to common stockholders by the
weighted-average number of common shares for the period. The computation of
diluted earnings per share is similar to basic earnings per share, except that
the weighted average number of
29
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
g) EARNINGS PER COMMON SHARE OF COMMON STOCK (continued)
common shares is increased to include the number of additional common
shares that would have been outstanding if the potentially dilutive common
shares had been issued. On June 13, 1997, the Board of Directors of the Company
approved a reverse stock split of the Company's common stock on a one-for four
basis. All per share amounts in the accompanying financial statements have been
restated to reflect this reverse stock split. Only basic earnings per share is
presented as all common stock equivalents are either anti-dilutive or not
material for the periods presented.
For the years ended September 30, 1999, 1998 and 1997, the weighted
average number of shares outstanding used in the per share computation were
20,758,944, 17,000,237 and 15,253,588, respectively, after giving effect to the
reverse stock split.
h) RESEARCH AND DEVELOPMENT EXPENSES
The Company expenses research and development costs as incurred.
Research and development costs for the three years ended September 30, 1999 were
not significant.
i) FAIR VALUE OF FINANCIAL INSTRUMENTS
At September 30, 1999, the carrying amounts of the Company's
financial instruments included in its current assets and current liabilities
approximate fair value. Additionally, the carrying amounts of the Company's
long-term debt also approximates their fair value as of September 30, 1999.
j) ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires the Company's management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
30
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
k) CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of sales, trade accounts
receivable and cash. The Company grants credit to customers located throughout
the United States and Internationally. The Company performs ongoing credit
evaluations of its customers' financial condition and generally requires no
collateral from its customers. For the year ended September 30, 1999, the
Company had sales to one unrelated customer of approximately $271,000 (12.3% of
sales). In fiscal 1998, the Company had sales to three unrelated customers of
approximately $297,000 (14.9% of sales), $293,000 (14.7% of sales) and $254,000
(12.7% of sales). In fiscal 1997, sales to two unrelated customers aggregated
approximately $475,000 (13.5% of sales) and $351,000 (10% of sales).
The Company places its cash with financial institutions insured by
the Federal Deposit Insurance Corporation ("FDIC"). At times, such cash balances
may be in excess of the FDIC insurance limit.
As of September 30, 1999, the Company had receivables from three
unrelated customers of approximately $70,000 (23.7% of accounts receivable),
$42,000 (14.2% of accounts receivable) and $31,000 (10.5% of accounts
receivable), respectively. As of September 30, 1998, the Company had receivables
from two unrelated customers of approximately $46,000 (15.9% of accounts
receivable) and $43,000 (14.8% of accounts receivable), respectively.
l) ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No 123"), which establishes a fair value method for
accounting for stock-based compensation plans either through recognition or
disclosure. The Company has adopted the disclosure - only provisions of SFAS No.
123. (Note 12). The adoption of this standard did not impact the Company's
consolidated results of operations, financial position or cash flows.
m) YEAR 2000 COMPLIANCE
Management took steps to examine the Company's potential exposure to
business interruption due to possible year 2000 computer software failures, and
determined that no apparent conflicts would prevent the present software from
operating properly at year 2000. Management has also made similar inquiries of
their major suppliers and customers and currently, are aware of no material
conflicts that will jeopardize the operations of the Company.
31
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
------------------------------------------
n) ADVERTISING COSTS
Advertising expenditures relating to the consumer feminine hygiene
and family planning products are expensed in the period the advertising
initially takes place. Direct response advertising costs, consisting primarily
of costs associated with trade show booths are amortized over the period during
which the benefits are expected. Advertising costs aggregated approximately
$550,000, $279,000 and $177,000 for the years ended September 30, 1999, 1998 and
1997, respectively, and are included in the accompanying financial statements in
the consolidated statements of operations.
Note 2. BASIS OF PREPARATION
--------------------
In August, 1998, the Company's Board of Directors unanimously
approved a restructuring plan of the Company. As a result, the Company's
subsidiary in Puerto Rico, CMT, was sold in December, 1998 (Note 16) and the
manufacturing operations of its generic pharmaceutical products were
discontinued, effective September 30, 1998.
The Company has incurred net losses from continuing operations of
$892,701 and $1,758,203 for the years ended September 30, 1999 and 1998,
respectively, and has a working capital deficit of $1,612,877 at September 30,
1999. In conjunction with the aforementioned restructuring, and as part of
Management's plan to refocus the Company's efforts into a leading provider of
women's health care products, the Company during the year ended September 30,
1999 received $800,000 from the sale of its common stock, $100,000 from the
issuance of convertible debentures and the issued common stock in settlement of
various obligations. To overcome the Company's present working capital
deficiency and until such time that the Company attains profitable operations,
the Company intends to obtain additional funding through the further sale and
issuances of its common stock together with issuances of convertible debentures.
The Company is continuing to implement its aggressive marketing plan with its
new sales organization.
32
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 3. INVENTORIES
-----------
The components of inventories are as follows:
SEPTEMBER 30,
-------------
1999 1998 1997
-------- -------- --------
Raw materials, work-in-process
and finished goods (*) $ -- $ -- $315,675
Finished goods and raw materials-
feminine hygiene products 156,716 179,401 287,459
-------- -------- --------
$156,716 $179,401 $603,134
======== ======== ========
(*) Relating to the Company's discontinued operations (Note 16).
Note 4. PREPAID EXPENSES AND OTHER CURRENT ASSETS
-----------------------------------------
Prepaid expenses and other current assets consist of the following:
SEPTEMBER 30,
1999 1998
---- ----
Prepaid fees $ 76,000 $105,000
Prepaid insurance 17,000 15,000
Prepaid promotional fees 21,000 -
Sundry 16,892 4,958
-------- --------
$130,892 $124,958
======== ========
Note 5. PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment consists of the following:
SEPTEMBER 30,
1999 1998
---- ----
Equipment, furniture and fixtures $17,897 $ --
Building and leasehold improvements
54,062 --
Tools and dies 1,415 1,415
----- -----
73,374 1,415
Less: accumulated depreciation and
amortization 4,405 410
------- -------
$68,969 $ 1,005
======= =======
33
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)_
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 6. INTANGIBLE ASSETS
-----------------
At September 30, 1999, intangible assets represent assets acquired
from London International U.S. Holdings, Inc. ("London Int'l"), now known as SSL
Americas Inc. comprising of trademarks, trade names and a customer base. These
assets which were purchased in 1996 through one of the Company's subsidiaries
for $3,600,000 included four branded consumer product lines (namely Koromex,
Koroflex, Vaginex and Feminique). The obligation bears interest at 9.5% per
annum and in the event of default, the entire unpaid balance becomes due and
payable on demand. The obligation is guaranteed by the Company and is
collateralized by a security interest in all accounts receivable, inventory and
the trademarks and trade names purchased.
The intangible assets represent the assets acquired from London
Int'l, costing $3,600,000 and associated brokerage fees and legal costs incurred
totaling $171,425. Amortization expense aggregated $188,400 for each of the
three years ended September 30, 1999.
The components of intangible assets as of September 30, 1999 and 1998
are as follows:
1999 1998
---- ----
Trademarks, tradenames and
customer base acquired from
London Int'l $3,771,425 $3,771,425
Less: accumulated amortization 659,400 471,000
---------- ----------
$3,112,025 $3,300,425
---------- ----------
Note 7. LICENSING COSTS
---------------
During 1998, the Company wrote off $46,301, representing its
investment in an exclusive license to a patented process for a non-invasive test
to diagnose Alzheimer's disease.
34
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 8. ACCRUED EXPENSES
----------------
Accrued expenses consist of the following:
SEPTEMBER 30,
1999 1998
---- ----
Professional fees $ 332,000 $ 567,000
Commissions 76,000 124,000
Interest 110,000 586,000
Promotional costs 50,000 --
Sundry 100,899 146,319
--------- ----------
$ 668,899 $1,423,319
========= ==========
Note 9. NOTES PAYABLE
-------------
a) On September 15, 1999, the Company borrowed $100,000 from a
shareholder, evidenced by a convertible promissory note bearing interest at 8%
per annum with interest payments due on October 31, 1999, March 31, 2000 and
June 1, 2000, the maturity date of this note. The conversion price of the note
is $.15 per share, subject to certain adjustments as outlined therein.
b) On January 16, 2000, the Company borrowed an additional $37,000,
the terms and conditions of which are similar to those of the preceding $100,000
note.
Note 10. LONG-TERM DEBT
--------------
Long-term debt consists of the following:
SEPTEMBER 30,
1999 1998
---- ----
Note payable - in connection with
purchase of the feminine hygiene
product lines (*) $1,426,688 $1,515,929
Other -- 15,100
---------- ----------
1,426,688 1,531,029
Less: current maturities 205,685 104,341
---------- ----------
$1,221,003 $1,426,688
========== ==========
35
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 10. LONG-TERM DEBT (continued)
--------------
(*) In December, 1998, effective September 30, 1998, the Company modified
the payment terms of its outstanding debt, the related accrued
interest and accounts payable to London Int'l (Note 6). The amended
terms provide for monthly payments ranging from $21,000 per month
increasing to $43,621 per month, with the final payment due on or
before October 1, 2003. The obligation bears interest at 9.5% per
annum and in the event of default, the entire unpaid balance becomes
due and payable on demand.
The following is a schedule of principal repayments of all long-term
debt at September 30, 1999:
2000 $ 205,285
2001 301,327
2002 393,915
2003 482,883
2004 43,278
----------
$1,426,688
Note 11. CONVERTIBLE DEBENTURES PAYABLE
------------------------------
The $575,000 of convertible debentures outstanding at September 30,
1999 mature in May or June 2002, with optional redemptions available in May or
June 2000 at 105% of par. Interest on the debentures accrues at 10% per annum
and is payable in cash or stock, at the Company's option, on a quarterly basis.
The debentures can be converted at the holder's option into the Company's common
stock in its entirety, or in multiples of $1,000, at conversion prices equal to
the greater of $.54 per share or 75% of the closing price per share over the
five consecutive trading days immediately prior to the date of exercising the
conversion right. At September 30, 1999, the Company was not in compliance with
its interest payments on the debentures. As a result thereof, the accompanying
financial statements at September 30, 1999 reflect the convertible debentures
payable as a current liability.
36
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 12. STOCK OPTIONS
-------------
In 1993, the Company adopted a stock option plan under which selected
eligible key employees of the Company are granted the opportunity to purchase
shares of the Company's common stock. The plan provides that 750,000 shares of
the Company's authorized common stock be reserved for issuance under the plan as
either incentive stock options or non-qualified options. Options are granted at
prices not less than 100 percent of the fair market value at the date of grant
and are exercisable over a period of ten years or as long as that person
continues to be employed or serve on the Board of Directors, whichever is
shorter. Under the 1993 plan, no options may be granted subsequent to January 5,
2003. At September 30, 1999, the Company had 45,000 options outstanding under
this plan.
In March, 1997, the Company adopted a qualified stock option plan
entitled the 1997 Employee and Consultant Stock Option Plan and a separate 1997
Non-qualified Stock Option Plan (the "Plans"). The plans reserved for future
issuance a total of 6,500,000 shares and 720,000 shares, respectively. The
annual meeting of stockholders on July 29, 1998 voted to cancel the 1997 stock
option plans and all outstanding options related thereto.
Information regarding stock options as at and for the three years
ended September 30, 1999 is summarized below:
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ ----------------
OPTION OPTION OPTION
SHARES PRICE SHARES PRICE SHARES PRICE
------ ------ ------ ------ ------ -----
Shares under option:
Outstanding -
<S> <C> <C> <C> <C> <C> <C> <C>
beginning of year 70,000 $ 0.50 3,980,586 $0.50 - $1.88 597,500 $ 0.50
Granted - 1997
qualified plan -- -- -- -- 3,405,600 $ 1.88
Issued 1997
qualified plan -- -- -- -- 22,514 $ 1.88
Terminated (25,000) $ 0.50 (3,910,586) $0.50 - $1.88 -- --
Outstanding -
end of year 45,000 $ 0.50 70,000 $ 0.50 3,980,586 $0.50 - $1.88
</TABLE>
In 1997, the Company adopted the disclosure-only provisions of
Statement of Financial Accounting Standard No 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). Accordingly, no compensation cost has been
recognized in the accompanying statement of operations for the stock option
plans for the year ended September 30, 1997. No options were granted during the
two year period ended September 30, 1999.
37
<PAGE>
FREMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 13. INCOME TAXES
------------
The Company, as of September 30, 1999, has available approximately
$28,255,000 of net operating loss carry forwards (expiring through the year
2014) to reduce future Federal and state income taxes. Since there is no
guarantee that the related deferred tax asset will be realized by reduction of
taxes payable on taxable income during the carry forward period, a valuation
allowance has been computed to offset in its entirety the deferred tax asset
attributable to this net operating loss in the amount of approximately
$11,300,000. The amount of the valuation allowance is reviewed periodically.
The net operating loss carryforwards expire as follows:
YEAR AMOUNT
2001 $ 368,000
2002 2,675,000
2003 1,958,000
2004 1,107,000
2005 1,862,000
2006 903,000
2007 642,000
2008 3,003,000
2009 4,581,000
2010 9,491,000
2013 1,185,000
2014 480,000
-----------
$28,255,000
===========
38
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 14. COMMITMENTS AND CONTINGENCIES
-----------------------------
(a) The operations and offices of the Company and its subsidiaries
are conducted from leased premises in Bellport, New York. The Company entered
into an agreement in January, 1999 to lease 15,000 square feet of this facility
for one year, at an annual rental of $90,000, with an option to renew for an
additional year. Rent expense aggregated approximately $80,000 for the year
ended September 30, 1999 and $53,000 for each of the two years ended September
30, 1998. The Company exercised their option and renewed its lease until
December 31, 2000.
(b) The Company has operating policies in place to ensure its
operations are in conformity with regulatory agencies for environmental matters
relating to the generation or handling of hazardous substances. While the
Company does not believe that any such claims or assertions exist, there may be
potential liabilities of which the Company is not aware which would result in an
adverse effect upon the Company's financial position.
(c) The Company has accrued $47,000 for estimated settlements of
pending litigation. The claims are substantially in connection with disputes
over merchandise purchased.
(d) 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 other things, salary of $23,000 and fees
under 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 have been provided for in the accompanying consolidated
financial statements.
(e) The Company is currently negotiating with the Food and Drug
Administration ("FDA") to prevent the FDA from debarring Biopharmaceutics, Inc.
from submitting abbreviated drug applications. This subsidiary discontinued its
operations effective September 30, 1998 (Note 16). Management and counsel are of
the opinion that this debarment will not effect its current operations within
its consumer feminine hygiene products subsidiary. This proceeding arose as a
result of the Company and its prior management being convicted of certain
violations for which the resulting penalties and fines were paid in full in
October, 1997.
39
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 14. COMMITMENTS AND CONTINGENCIES (continued)
-----------------------------
(f) As of September 30, 1999, the Company is involved in various
other legal actions, none of which Management believes will have a material
adverse affect on the operations of the Company.
Note 15. JOINT VENTURE ARRANGEMENT
-------------------------
In October, 1997, the Company settled an action 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 Scientific, Inc. ("Amswiss"). Pursuant to the
Settlement Agreement, the Company paid to Amswiss $250,000 in November 1997 and
issued 115,000 shares of the Company's common stock valued at $186,300. The
accompanying statement of operations for the year ended September 30, 1997
reflects a charge aggregating $436,300 for this settlement.
During September 1996, the Company entered into a joint venture
agreement with Advanced Biological Systems, Inc., which subsequently changed its
name to ABS Group, Inc. ("ABS"), for the completion of the regulatory process to
commercialize for ultimate sale certain cancer drugs purchased by the Company
from Amswiss. All funding for the joint venture was to be provided for by ABS
and the Company was to be responsible for handling the management of the
project. For the three years ended September 30, 1999, the joint venture
incurred a combined loss of approximately $518,000.
The joint venture agreement provided, among other things, the payment
of a total of a minimum of $2,750,000 to the Company in cash and/or securities
for the sub-license. Payment terms included 425,000 shares of restricted common
stock of ABS and $150,000 paid in 1996. No additional payments were made. In
October, 1998, the Agreement was amended whereby the original profit/loss
sharing percentages were changed and ABS was granted an irrevocable 10% interest
in any monies due the Company in the event of any sale of any cancer drug of the
joint venture. The market value of the restricted shares of ABS at September 30,
1998 was negligible, and the Company wrote off the value of these restricted
shares, approximately $251,000, in its consolidated statement of operations.
40
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 15. JOINT VENTURE ARRANGEMENT (continued)
-------------------------
In December 1999, the Company signed a non-binding letter of intent
for the sale of the Company's rights, title and interest in the cancer treatment
drug DBD. The agreement, among other things, requires the purchaser to assume
all costs relative to the development and subsequent marketing and sale of DBD
provided such development costs do not exceed $2,000,000. In the event that the
costs of any additional studies exceed this amount, the Company will share in
the expenses on a 50/50 basis of such additional studies. Upon the execution of
a definitive Agreement, a non-refundable amount of $25,000 shall be paid to the
Company, with, among other things, an additional $100,000 paid to the Company
within five days of the date the FDA approves DBD for sale to the public. The
Company will receive certain royalty payments on a quarterly basis, based upon
varying percentages of net sales. This non-binding letter of intent is
terminated if an Agreement is not reached by April 15, 2000.
Note 16. GAIN (LOSS) ON DISCONTINUED OPERATIONS
--------------------------------------
(a) In June, 1997, the Company acquired all of the outstanding shares
of CMT (Note 1) for $7,500,000. Under the terms of the Stock Purchase Agreement,
the Company paid $6,000,000 through September 1997. The Company signed a
promissory note, as amended, for the balance of the purchase price of
$1,500,000, which was to mature in November, 1999 and bore interest at 10.5% per
annum. The acquisition of CMT was recorded under the purchase method of
accounting.
In December 1998, the Company completed the sale of CMT. Under the
terms of the sale, the common stock of CMT was sold for $4,700,000, payable as
follows: $600,000 to be held in escrow for outstanding taxes, $2,600,000 in full
settlement of promissory notes payable of $4,117,715 and the return of the note
payable to the purchaser of $1,500,000. The forgiveness of debt of $1,517,715,
on the settlement of the aforementioned note payable was credited to
discontinued operations in 1998. The results of operations of CMT were
classified as discontinued operations and prior periods were restated,
accordingly. In addition, the Company wrote-off the excess of CMT's assets over
liabilities as a loss on disposal of discontinued operations in its consolidated
statement of operations for the year ended September 30, 1998.
41
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 16. GAIN (LOSS) ON DISCONTINUED OPERATIONS (continued)
--------------------------------------
(b) In connection with the Company's restructuring plan, the
manufacturing operations of its generic pharmaceutical products were
discontinued, effective September 30, 1998. The operations of this division for
the three years ended September 30, 1999 have been reported as discontinued
operations in the accompanying consolidated statement of operations.
The components of assets and liabilities of the discontinued
manufacturing operations are as follows:
September 30,
1999 1998
---- ----
Cash overdraft $ -- $ (23,019)
Accounts receivable (net) -- 265,815
Prepaid expenses -- 89,965
Inventory -- 245,299
Property and equipment (net) -- 115,714
Security deposit -- 25,200
Accounts payable (157,330) (755,217)
Accrued expenses (30,596) (313,026)
--------- ---------
Net current liability of
discontinued operations $(187,926) $(349,269)
========= =========
42
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 17. COMMON STOCK
------------
During August and September, 1997, the Board of Directors approved an
offering pursuant to Regulation S for the issuance of shares of common stock for
the funding of the purchase of CMT. In this connection, the Company received
$1,375,000, resulting from the sale of 3,115,385 shares of common stock.
In June, 1998, the Board of Directors authorized
additional offerings pursuant to Regulation S of 1,500,000 shares
of common stock for working capital requirements. The Company received
approximately $183,000, resulting from the sale of 232,100 shares of its common
stock.
During the year ended September 30, 1998, the Company reacquired
certain shares issued and held in escrow in connection with the exercise of
options (issued to various officers and employees under a former 1988 stock
option plan), and canceled the related notes receivable, aggregating $559,274.
In December, 1998, the Board of Directors authorized the sale of
4,444,443 shares of common stock for $800,000 to its members. The cash was
received by the Company in December, 1998, and in January and February of 1999.
Note 18. BUSINESS SEGMENT INFORMATION
----------------------------
The Company's operations prior to its restructuring (Note 2) were
classified into generic pharmaceutical products, feminine hygiene products and
medical testing and laboratory services. Subsequent to the restructuring and
sale of CMT, the Company's statement of operations for the three years ended
September 30, 1999 only includes the operations of its feminine hygiene
products. The operations of the generic pharmaceutical division and CMT are
included in the loss on discontinued operations for the three years then ended.
43
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 19. FOURTH QUARTER ADJUSTMENTS
--------------------------
YEAR ENDED SEPTEMBER 30, 1999
The net loss in the fourth quarter for the year ended September 30,
1999 was (increased) decreased by the following more significant adjustments:
Gain on disposal of discontinued
operations $ 413,000
Accrual and reclassification of
advertising and promotional expenses (239,000)
----------
$ 174,000
==========
YEAR ENDED SEPTEMBER 30, 1998
The net loss in the fourth quarter for the year ended September 30,
1998 was increased by the following more significant adjustments:
Loss and estimated costs on disposal
of discontinued operations $(2,214,000)
Increase in allowance for
doubtful accounts for CMT and
estimated sales discounts for
Feminine Hygiene Products division (578,000)
Inventory obsolescence (100,000)
Estimated costs of litigation and
legal fees (420,000)
-----------
$(3,312,000)
===========
YEAR ENDED SEPTEMBER 30, 1997
The net income in the fourth quarter for the year ended September 30,
1997 was decreased by the following more significant adjustments:
Amortization of goodwill recognized
in the acquisition of CMT $ (192,000)
Settlement of litigation (436,000)
-----------
$ (628,000)
===========
44
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997
Note 20. UNAUDITED QUARTERLY FINANCIAL DATA
----------------------------------
The following is a summary of unaudited quarterly
operating results for the years ended September 30, 1999, 1998
and 1997 (in thousands of dollars except per share amounts).
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, 1999
-----------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- -------- ------- -------
Continuing operations:
<S> <C> <C> <C> <C>
Revenues $ 719 $ 620 $ 333 $ 532
Gross profit 473 364 132
173
Net income (loss) 21 (88) (123) (703)
Loss per share -- -- (.01) (.03)
Discontinued operations:
Net $ -- $ -- -- $ 413
-- --
-- .02
YEAR ENDED SEPTEMBER 30, 1998
-----------------------------
FIRST SECOND THIRD FOURTH
Quarter(1) QUARTER QUARTER QUARTER QUARTER(1)
Continuing operations: ------- -------- ------- -------
Revenues $ 622 $ 620 $ 445 $ 312
Gross profit 404 379 189 67
Net loss (10) (53) (308) (1,387)
Loss per share -- -- (.02) (.09)
Discontinued operations:
Net income (loss) $ 412 $ 1,363 $ (989) $(4,259)
Income (loss) per share .03 .08 (.06) (.25)
YEAR ENDED SEPTEMBER 30, 1998
-----------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER(1)
------- -------- ------- -------
Continuing operations:
Revenues $ 783 $ 912 $ 772 $ 1,062
Gross profit 453 489 515 657
Net income (loss) 19 (70) 250 (58)
Income (loss) per share -- (.01) .02 --
Discontinued operations:
Net income (loss) $ (4) $ 86 $ 5 $ (183)
Income (loss) per share -- .01 -- (.01)
<FN>
(1) See Note 19.
</FN>
</TABLE>
<PAGE>
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
FORM 10-K
EXHIBIT
FOR THE YEAR ENDED SEPTEMBER 30, 1999
EXHIBIT 10.9A
FEMINIQUE CORPORATION
(FORMERLY KNOWN AS BIOPHARMACEUTICS, INC.)
SCHEDULE VIII - VALUATION ACCOUNTS
DESCRIPTION
Allowance for doubtful accounts:
<TABLE>
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1999 $15,000 $ 19,000 $ - $ 11,000 $23,000
======= ======== ====== ========= =======
Year ended September 30, 1998 $92,000 $481,000 $ - $(558,000)(1) $15,000
======= ======== ====== ========= =======
Year ended September 30, 1997 $25,000 $ 99,000 $ - $ (32,000) $92,000
======= ======== ====== ========= =======
<FN>
(1) Included in net current liability of discontinued operations and loss on
disposal of discontinued operations.
</FN>
</TABLE>
45
<PAGE>
FARBER, BLICHT & EYERMAN, LLP
- -----------------------------
Certified Public Accountants
255 Executive Drive, Suite 215
Plainview, NY 11803-1715
Telephone: (516) 576-7040
Facsimile: (516) 576-1232
EXHIBIT 24
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the inclusion of our report on the 1999
consolidated financial statements and schedules of Feminique Corporation
(formerly known as Biopharmaceutics, Inc.) and subsidiaries included in the
Annual Report on Form 10-K of Feminique Corporation for the year ended September
30, 1999.
Plainview, New York
January , 2000
