<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(MARK ONE)
[XX] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the period ended December 31, 1996 or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from ______________ to ________________.
COMMISSION FILE NUMBER: 0-16128
BIODYNAMICS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-3100165
(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
10500 UNIVERSITY CENTER DRIVE, SUITE 130, TAMPA, FLORIDA 33612
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (813) 979-0016
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.01 NASDAQ
(Title of Class) (Name of Each Exchange on Which Registered)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 .
---- ----
As of February 10, 1997 there were outstanding 8,390,890 shares of Biodynamics
International, Inc. Common Stock, par value $.01.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
BIODYNAMICS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED) (AUDITED)
DECEMBER 31, SEPTEMBER 30,
1996 1996
-------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 164 $ 531
Accounts receivable 1,786 2,373
Inventories 3,286 3,341
Other current assets 276 126
----------- ----------
5,512 6,371
PROPERTY, PLANT AND EQUIPMENT, NET 3,702 3,824
INTANGIBLE AND OTHER ASSETS, NET 3,956 4,107
----------- ----------
TOTAL ASSETS $ 13,170 $ 14,302
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 579 $ 666
Accrued interest 362 442
Other accrued expenses 1,110 1,681
Credit facility 302 ---
Current portion of debt 1,556 1,578
----------- ----------
3,909 4,367
LONG-TERM DEBT 7,388 7,423
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY 1,873 2,512
----------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 13,170 $ 14,302
=========== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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BIODYNAMICS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
-----------------------------------
1996 1995
---- ----
<S> <C> <C>
OPERATING REVENUES
Revenue $ 2,486 $ 2,029
Cost of Revenue 1,438 1,381
--------- ---------
Gross Margin 1,048 648
OPERATING EXPENSES
General and administrative 544 511
Distribution and marketing 572 550
Research and development 27 48
Depreciation and amortization 363 389
--------- ---------
1,506 1,498
OPERATING LOSS (458) (850)
Other income (8) (54)
Interest expense 190 235
--------- ---------
182 181
NET LOSS BEFORE INCOME TAXES (640) (1,031)
--------- ---------
Income taxes -- --
--------- ---------
NET LOSS $ (640) $ (1,031)
========= =========
Average common shares outstanding 8,354,264 7,987,109
========== =========
Net loss per share $ (0.08) $ (0.13)
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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BIODYNAMICS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31,
--------------------------------
1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (640) $(1,031)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 455 452
Deferred interest expense -- 58
Increase (decrease) in cash resulting from changes in:
Accounts receivable 571 319
Inventories 27 (282)
Prepaid expenses and other current assets (138) (23)
Accounts payable and accrued expenses (716) (286)
-------- -------
Net cash used in operating activities (441) (793)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (23) (10)
Decreases in intangible and other assets 28 --
-------- -------
Net cash provided by (used in) investing activities 5 (10)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of stock 22 --
Proceeds from short-term borrowings 302 --
Repayment of short-term borrowings (14) (87)
Proceeds from long-term borrowings -- 766
Repayment of long-term debt (237) (16)
-------- -------
Net cash provided by financing activities 73 663
EFFECT OF EXCHANGE RATE CHANGES ON CASH (4) 2
NET DECREASE IN CASH AND CASH EQUIVALENTS (367) (138)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 531 184
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 164 $ 46
======== =======
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 267 $ 281
======== =======
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
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BIODYNAMICS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996
(IN 000S, EXCEPT SHARE DATA)
(1) ORGANIZATION
Biodynamics International, Inc. with its consolidated subsidiaries ("the
Company") processes, manufactures and distributes worldwide specialty
surgical products and tissue processing services for neuro, orthopedic,
cardiovascular, reconstructive and general surgical applications. The
Company's core business is processing human donor tissue ("allografts")
utilizing its patented Tutoplast(R) process for distribution to hospitals
and surgeons. The Company also manufactures and distributes surgical
sutures internationally.
(2) SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management, the accompanying unaudited consolidated
financial statements of Biodynamics International, Inc. and the unaudited
results of operations and cash flows for these three months ended December
31, 1996 and 1995, have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis, and include all
adjustments necessary in order to make the financial statements not
misleading. The interim financial statements should be read in conjunction
with the audited consolidated financial statements of the Company for the
year ended September 30, 1996. Significant accounting policies of the
Company are presented below.
FOREIGN CURRENCY TRANSLATION. The functional currency of the Company's
German subsidiary is Deutsche Mark. This subsidiary also represents the
Company's largest operating segment and, accordingly, the translation of
financial statements is affected by significant changes in the exchange
rate. The translation of the subsidiary's operations reflect a
strengthening of the U.S. dollar against the Deutsche Mark to an average
exchange rate of DM 1.54 from DM 1.42 for the quarters ended December 31,
1996 and 1995, respectively.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries.
RECLASSIFICATIONS. Certain prior period financial statement balances
have been reclassified to conform with the current period presentation.
(4) SHAREHOLDERS' EQUITY
Shareholders' equity at December 31, 1996 and September 30, 1996 consisted
of the following:
<TABLE>
<CAPTION>
(unaudited) (audited)
December 31 September 30
1996 1996
------------ -------------
<S> <C> <C>
Capital Stock
Preferred Stock, par value $.01 per share,
Series C, 110,603 shares issued and outstanding 1 1
Common Stock, par value $.01 per share, with 8,550,890
issued and 8,390,890 outstanding at December 31, 1996
and September 30, 1996, respectively 84 83
Additional contributed capital 21,280 21,259
Foreign currency translation adjustment (74) (53)
Accumulated deficit (19,418) (18,778)
---------- ---------
$ 1,873 $ 2,512
========== =========
</TABLE>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (IN 000S)
RESULTS OF OPERATIONS
Comparisons between the 1996 and 1995 periods should recognize the approximate
8% increase in the U.S. dollar against the German Deutsche Mark. The effect of
such an increase will result in lower revenues, expenses and net loss.
REVENUE AND COST OF REVENUE
Revenue for the three months ended December 31, 1996 increased 23% to $2,486
from $2,029 for the comparable period. Revenue for the International
Operations increased 13%, despite the strengthening U.S. dollar, as a result of
increased demand caused by the departure of a major competitor. Revenue for
the U.S. Operations nearly doubled resulting from the increased supply of
recovered tissue for processing.
Gross margins increased to 42% from 32% for the comparable three month periods
attributable to improved product mix in bioimplants and a reduction in the
revenue generated from the less profitable sutures business.
GENERAL AND ADMINISTRATIVE
General and administrative expenses increased 6% to $544 from $511 for the three
month periods ending December 31, 1996 and 1995, respectively. The majority of
the increase is attributable to the employment of a new President and CEO in
1996 to replace the interim position.
DISTRIBUTION AND MARKETING
Distribution and marketing expenses increased 4% to $572 from $550 for the
three month periods ending December 31, 1996 and 1995, respectively. The
increase resulted from additional travel and marketing promotions required to
achieve the increased revenues.
RESEARCH AND DEVELOPMENT
Research and Development expenses decreased 44% to $27 from $48 for the three
month periods ending December 31, 1996 and 1995, respectively. The Company had
elected to spend minimal amounts in both periods for new R&D activities.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased 7% to $363 from $389 for the three
month periods ending December 31, 1996 and 1995, respectively. The
depreciation and amortization would have remained constant over the past year
if not for the effects of the strengthening U.S. dollar.
OTHER INCOME
Other income declined 85% to $8 from $54 for the three month periods ending
December 31, 1996 and 1995, respectively. The Company recognized some
non-operating savings in 1995 which were not expected to, and did not occur, in
1996.
INTEREST EXPENSE
Total interest expense declined 19% to $190 from $235 for the three month
periods ending December 31, 1996 and 1995, respectively, primarily from the
reduction in working capital borrowings in 1995 prior to the new Senior B
loan and an overall reduction in interest rates.
6
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ITEM 2. MANAGEMENT DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS (IN 000S) CONTD.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital was reduced to $1,603 as of December 31, 1996
from $2,004 at the fiscal year end. The Company maintains current working
capital lines of credit totaling DM 1,500 (approximately $1,000) with three
German banks. As of December 31, 1996, the Company had borrowed $302 against
these lines.
The Company historically has significant cash expenditures in its first quarter
associated with the payment of its semi-annual Mezzanine debt interest and the
payment of an accrued thirteenth month salary to its German workforce. In the
second quarter, the Company will either need to repay, or have its debtholders
convert, nearly $1,000 of its Senior B loan or an additional 10% per annum
interest will occur. Net cash used in operations were $441 and $793 for the
three months ending December 31, 1996 and 1995, respectively. In the past, the
Company has relied upon its available working capital lines and institutional
investors to fund its operational cash flow, where needed. While the Company
believes that it will return to positive cash flow in future quarters, there
can be no assurances this will occur and, if not, whether existing sources will
provide the needed capital resources.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
NONE.
ITEM 2. CHANGES IN SECURITIES
NONE.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
NONE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NONE.
ITEM 5. OTHER INFORMATION.
The Company expects to relocate its corporate office in the third
quarter of 1997 from Tampa, Florida to Parsippany, New Jersey. In
anticipation of this relocation, the Company's Chief Financial Officer,
Mr. David P. Nichols, announced his resignation effective February 25,
1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
<TABLE>
<S> <C>
3.2** Articles of Incorporation of Registrant
3.3* Articles of Amendment to Articles of Incorporation establishing Series A Preferred Stock
3.4* Articles of Amendment to Articles of Incorporation establishing Series B Preferred Stock
3.5* Articles of Amendment to Articles of Incorporation establishing Series C Preferred Stock
10.18* Joint Venture Agreement between Biodynamics, Inc. And Texas Medical Products dated November 1, 1990.
10.19* Partnership Agreement between Biodynamics International, Inc. And Corin Medical Products dated
September 2, 1992
10.20*** Purchase Agreement between Biodynamics International (Deutschland) GmbH and Pfrimmer-Viggo GmbH & Co., KG.
10.21*** Convertible Debenture Loan Agreement between Biodynamics International, Inc. as Borrower and Renaissance
Capital Partners, II, Ltd. And Froley, Revy Investment Co., Inc.
10.22*** Convertible Debenture, Renaissance Capital Partners II, Ltd.
10.23*** Convertible Debenture, Froley, Revy Investment Co., Inc.
</TABLE>
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<TABLE>
<S> <C>
10.24* Senior B Loan Agreement
22* Subsidiaries of Registrant
27 Financial Data Schedule (for SEC use only)
</TABLE>
* Document incorporated by reference from previous 10-KSB or 10-QSB filing.
** Document incorporated by reference from Exhibit 2 of American
Biodynamics, Inc. Registration Statement on Form 20- F effective
October 2, 1987.
*** Document incorporated by reference from Form 8-K dated May 28, 1993.
REPORTS ON FORM 8-K
NONE.
SIGNATURES
Pursuant to the requirements 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.
Date: February 12, 1997 BIODYNAMICS INTERNATIONAL, INC.
/s/ Karl H. Meister
-------------------------------------
President and Chief Executive Officer
/s/ David P. Nichols
-------------------------------------
Chief Financial Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 164
<SECURITIES> 0
<RECEIVABLES> 1,786
<ALLOWANCES> 0
<INVENTORY> 3,286
<CURRENT-ASSETS> 5,512
<PP&E> 5,225
<DEPRECIATION> 1,523
<TOTAL-ASSETS> 13,170
<CURRENT-LIABILITIES> 3,909
<BONDS> 0
0
1
<COMMON> 84
<OTHER-SE> 1,788
<TOTAL-LIABILITY-AND-EQUITY> 13,170
<SALES> 2,486
<TOTAL-REVENUES> 2,486
<CGS> 1,438
<TOTAL-COSTS> 1,438
<OTHER-EXPENSES> 1,496
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 190
<INCOME-PRETAX> (640)
<INCOME-TAX> 0
<INCOME-CONTINUING> (640)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (640)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
