<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 June 30, 1998.
___ 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
TUTOGEN MEDICAL, INC.
(FORMERLY 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.)
1719 ROUTE 10, SUITE 314, PARSIPPANY, NEW JERSEY 07054
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (973) 359-8444
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
(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 July 30, 1998 there were outstanding 5,363,823 shares of Tutogen Medical,
Inc. Common Stock, par value $0.01.
<PAGE> 2
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Page
PART I. Financial Information.
ITEM 1. Financial Statements.
Consolidated Balance Sheets - June 30, 1
1998 and September 30, 1997.
Consolidated Statements of Operations 2
for the three and nine months ended June 30,
1998 and 1997.
Consolidated Statements of Cash Flows 3
for the three and nine months ended June 30,
1998 and 1997.
Notes to Consolidated Financial Statements. 4
ITEM 2. Management's Discussion and Analysis of
Financial Condition 7nd Results of Operations.
PART II. Other Information.
ITEM 6. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(unaudited) (audited)
June September 30
1998 1997
----------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 250 $ 777
Accounts receivable 1,906 1,738
Inventories 3,744 2,391
Other current assets 152 94
------- -------
6,052 5,000
PROPERTY, PLANT AND EQUIPMENT, NET 2,808 2,996
INTANGIBLE AND OTHER ASSETS, NET 638 1,106
------- -------
TOTAL ASSETS $ 9,498 $ 9,102
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,266 $ 980
Accrued interest 130 267
Other accrued expenses 857 1,115
Note payable and debt, current portion 760 6,820
------- -------
3,013 9,182
OTHER LIABILITIES
Long-term debt 3,660 1,175
Other long-term obligations 10 10
SHAREHOLDERS' EQUITY (DEFICIENCY) 2,815 (1,265)
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 9,498 $ 9,102
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
1
<PAGE> 4
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
<TABLE>
<CAPTION>
Three Months Ended June 30, Nine Months Ended June 30,
-------------------------------- --------------------------------
1998 1997 1998 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Revenue $ 2,348 $ 2,082 $ 6,261 $ 6,706
Cost of revenue 1,124 1,558 3,386 4,287
----------- ----------- ----------- -----------
Gross margin 1,224 524 2,875 2,419
OPERATING EXPENSES
General and administrative 564 631 1,425 1,687
Distribution and marketing 404 636 1,071 1,748
Research and development 77 70 200 207
Depreciation and amortization 167 325 523 1,020
----------- ----------- ----------- -----------
1,212 1,662 3,219 4,662
OPERATING INCOME (LOSS) 12 (1,138) (344) (2,243)
Settlement of partnership interest (205) -- (205) --
License fee -- -- (200) --
Other income (7) (11) (71) 239
Interest expense 98 341 278 693
----------- ----------- ----------- -----------
(114) 330 (198) 932
NET INCOME (LOSS) BEFORE INCOME TAXES 126 (1,468) (146) (3,175)
Income taxes 3 -- 13 --
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ 123 $ (1,468) $ (159) $ (3,175)
=========== =========== =========== ===========
Average common shares outstanding 5,316,570 8,390,890 5,017,178 8,390,890
=========== =========== =========== ===========
Net income (loss) per share $ 0.02 $ (0.17) $ (0.03) $ (0.38)
=========== =========== =========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
2
<PAGE> 5
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended June 30,
--------------------------
1998 1997
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (159) $(3,175)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 784 1,298
Stock issued for services -- 20
Deferred interest expense -- 235
Increase (decrease) in cash resulting from changes in:
Accounts receivable (168) 696
Inventories (1,353) (812)
Prepaid expenses and other current assets (58) (291)
Accounts payable and accrued expenses (109) 733
------- -------
Net cash used in operating activities (1,063) (1,296)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (128) (68)
Decreases in intangible and other assets -- 26
------- -------
Net cash used in investing activities (128) (42)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of stock 4,295 22
Proceeds from long-term borrowings 500 --
Proceeds (repayment) of short-term borrowings (3,946) 1,566
Repayment of long-term debt (129) (261)
------- -------
Net cash provided by financing activities 720 1,327
EFFECT OF EXCHANGE RATE CHANGES ON CASH (56) (25)
NET DECREASE IN CASH AND CASH EQUIVALENTS (527) (36)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 777 531
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 250 $ 495
======= =======
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 270 $ 428
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements
3
<PAGE> 6
TUTOGEN MEDICAL, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
(1) OPERATIONS AND ORGANIZATION
Tutogen Medical, Inc. (formerly Biodynamics International, Inc.) with
its consolidated subsidiaries ("the Company") processes, manufactures
and distributes worldwide specialty surgical products and provides
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. At the Annual Meeting of shareholders of the Company held on
March 30, 1998, the Company's shareholders approved the proposal to
change the name of the Company from "Biodynamics International, Inc."
to "Tutogen Medical, Inc."
During the year ended September 30, 1997, the ban on the use of human
dura mater in two of the Company's important markets had a material
adverse effect on the Company's results of operations and financial
position. As a result, the Company initiated a significant
restructuring of their capitalization for both short-term and long-term
capital requirements. The recapitalization consisted of five major
segments, which were ratified by the Company's lenders and shareholders
in 1997. The recapitalization enabled the Company to obtain additional
working capital financing while reducing the Company's debt/interest
burden and preferred stock capitalization. As a result, holders of
selected debt and Series C preferred stock converted their holdings to
the Company's common stock. While additional working capital financing
in the way of bridge loans and the Series C preferred stock conversion
were completed in 1997, the remainder of the recapitalization program
was completed in the quarter ended December 31, 1997. This included the
replacement of the bridge loans with a convertible debenture loan on
November 11, 1997 (see Note 4) and the conversion in December 1997 of
certain loans by the mezzanine lenders to the Company's German
subsidiary to common stock (see Note 4). Additionally, a one-for-ten
reverse stock split on November 11, 1997 was implemented to accommodate
the various recapitalization transactions (see Note 3).
(2) SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management, the accompanying unaudited consolidated
financial statements of the Company and the unaudited results of
operations and cash flows for the three months ended June 30, 1998 and
1997 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, 1997. Significant accounting
policies of the Company are presented below.
FOREIGN CURRENCY TRANSLATION. The functional currency of the Company's
German subsidiary is the 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 1.79 and DM 1.63 for the nine months
ended March 31, 1998 and 1997, respectively.
4
<PAGE> 7
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.
(3) SHAREHOLDERS' EQUITY (DEFICIENCY)
Shareholders' equity (deficiency) at June 30, 1998 and September 30,
1997 consisted of the following:
<TABLE>
<CAPTION>
(unaudited) (audited)
June 30, September 30,
1998 1997
-------- --------
<S> <C> <C>
Shareholders' Equity (deficiency):
Common Stock, par value $.01 per share, with
5,363,823 and 26,875,090 issued and outstanding
at June 30, 1998 and September 30, 1997,
respectively $ 54 $ 84
Paid in capital 27,235 22,910
Cumulative Foreign Currency Translation Adjustment (315) (259)
Accumulated deficit (24,159) (24,000)
-------- --------
$ 2,815 $ (1,265)
======== ========
</TABLE>
On November 10, 1997, the Board of Directors approved a 1-for-10 reverse stock
split (the "Reverse Split"). The Reverse Split reduced the number of common
shares outstanding at October 10, 1997 (herein "effective date") from
approximately 26,875,000 shares to 2,687,500 shares. As of the effective date,
there were outstanding options to purchase an aggregate 2,492,000 shares of
common stock. The Reverse Split agreement provides for an automatic adjustment
of the number of shares and the price per share of common stock shares that may
be purchased under the 1996 Stock Option Plan and 1992 Stock Option Plan (herein
the "Plans"). The Company subsequently canceled all of the outstanding stock
options previously issued under its stock option plans (the "Old Options"), (to
current employees and directors) and replaced them with new options (the "New
Options"), to remedy the negative effect of the Reverse Split on the exercise
prices of Old Options which had ranged from $0.4375 per share to $1.10 per share
before the Reverse Split, and $4.375 per share to $11.00 per share after the
Reverse Split. Generally, New Options were issued for a new number of shares of
Common Stock which new number of shares is 40% of the former number of shares
into which the Old Options were exercisable before the Reverse Split. The
exercise price of the New Options is equivalent to the market price of the
Common Stock on the date of the grant of the New Options, $1.57.
On December 24, 1997, all of the mezzanine debt and related accrued interest
(approximately $4.1 million), that was carried by the Company's German
subsidiary, was exchanged for 2,626,301 shares of the Company's Common Stock.
5
<PAGE> 8
(4) LONG-TERM DEBT
Long-term debt at June 30, 1998 and September 30, 1997 consisted of the
following:
<TABLE>
<CAPTION>
(unaudited) (audited)
June 30, September 30,
1998 1997
----------- -------------
<S> <C> <C>
Revolving credit facilities interest ranging
from 7.75% to 8.5% $ 747 $ 719
Bridge loans, 12% interest due; December 31, 1997 -- 2,036
Senior debt, 7.75% interest until March 30, 1998
when terms are renegotiable 1,086 1,215
Mezzanine debt, LIBOR plus 4%, interest
(7.3125% at September 30, 1997); due 1999 -- 3,978
Capital lease obligations, 8.5% interest; due 2000 13 47
Convertible debenture, 9% interest; due 2002 2,574 --
------ ------
4,420 7,995
Less current portion 760 6,820
------ ------
$3,660 $1,175
====== ======
</TABLE>
On December 24, 1997, all of the Mezzanine debt and related accrued interest
(approximately $4.1 million) was exchanged for 2,626,301 of the Company's common
stock.
On November 11, 1997, one of the institutional investors agreed to exchange the
bridge loans for a five-year convertible debenture convertible into 4,413,231
shares of common stock and warrants exercisable at $2,015,991 for 806,396 shares
of common stock.
On March 23, 1998, the Company received $500,000 from one of its institutional
investors and issued a 9% convertible debenture, due in November 2002.
(5) DISTRIBUTION AGREEMENT
On January 14, 1998, the Company entered into an agreement with Mentor
Corporation ("Mentor") for the purpose of granting a license to Mentor to
exclusively distribute selected products which the Company processes utilizing
the Tutoplast(R) process. This license grants Mentor the right to distribute
these selected products on an exclusive basis in their field of use which is
defined as all urological and gynecological applications and procedures in the
United States and all foreign markets. After successful completion and approval
of an appropriate Clinical Trials Protocol, the Company was paid a fee by Mentor
of $200. The term of the agreement is for seven (7) years with options to extend
on the same terms and conditions for an additional five (5) year period.
6
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(in thousands)
RESULTS OF OPERATIONS
Comparisons between the 1998 and 1997 periods should recognize the approximate
10% increase in the U.S. dollar against the German Deutsche Mark. The effect of
such increase will result in lower revenues, expenses and net loss.
NET INCOME (LOSS)
Net income for the three months ended June 30, 1998 totaled $123 or $0.02 per
share as compared to a net loss of $1,468 or $0.17 per share for the same period
a year ago. Net loss for the nine months ended June 30, 1998 was $159 or $0.03
per share as compared to a net loss of $3,175 or $0.38 per share. The decrease
in net loss is directly attributed to reductions made in depreciation, selling,
and general and administrative expenses as a result of the 1997 downsizing in
operations. This downsizing was necessitated by the ban on the use of human dura
mater tissue in the Japanese market during the quarter ending June 30, 1997. In
addition, the Company completed the restructuring of its capitalization during
the quarter ending December 31, 1997. As such, interest expense for the period
was reduced by $243 or 71% from the comparable period a year ago. This quarter
also reflects a gain from the settlement, in the amount of $205, of the
Company's interest in a joint venture in Advanced Haemotechnologics ("AHT").
REVENUE AND COST OF REVENUE
Revenue for the three months ended June 30, 1998 increased 13% to $2,348 from
$2,082 for the comparable period. The revenue for the nine months ended June 30,
1998 decreased 7% to $6,261 from $6,706 for the comparable period. The decrease
is largely attributed to the ban on the use of human dura mater tissue in the
Japanese market and the discontinuation of the Company's unprofitable sutures
business. However, it should be noted that, exclusive of the Japanese market and
the suture business, the revenue for the first nine months of the year
represents a 40% increase over the comparable period last year.
Gross margins for the three months ended June 30, 1998 increased to 52% from 25%
for the comparable period last year. The gross margins for the nine months ended
June 30, 1998 increased to 46% from 36% for the comparable period last year. The
increase is attributable to price increases, a favorable mix resulting from the
discontinuation of the unprofitable suture business and increased through-put
from the U.S. facility.
GENERAL AND ADMINISTRATIVE
General and administrative expenses decreased 11% and 16% for the three and nine
month periods ending June 30, 1998, respectively, from the comparable periods
last year. The decreases are due primarily to a reduction in headcount and legal
and consulting expenses.
DISTRIBUTION AND MARKETING
Distribution and marketing expenses decreased 36% and 39% for the three and nine
month periods ending June 30, 1998, respectively, from the comparable periods
last year. The decrease is primarily associated with the cost saving measures
instituted as a result of the discontinuation of revenue from the Japanese
market.
7
<PAGE> 10
RESEARCH AND DEVELOPMENT
Research and development expenses for the three and nine month periods ending
June 30, 1998 are essentially in line with the comparable periods last year.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased 49% for the three and nine month periods
ending June 30, 1998 from the comparable periods last year. The reduction in
depreciation and amortization is attributed to substantial write downs of
intangible and fixed assets taken, primarily due to the discontinued
international suture business, during the quarter ending September 30, 1997.
SETTLEMENT OF PARTNERSHIP INTEREST AND LICENSE FEE
In June 1998, the Company settled its interest in AHT by issuing 50,000 shares
of its common stock. In anticipation of the settlement, the Company had taken a
charge of $315 in the fourth quarter of 1997. The difference between the
previously recorded liability of $315 and the fair value of the shares issued
was recognized in income as a partial reversal of the charge, in the amount of
$205.
During the second quarter, the Company received and recognized as income an
up-front license fee in the amount of $200, for the rights to distribute its
Tutoplast(R) facia lata in urological and gynecological applications and
procedures.
INTEREST EXPENSE
Interest expense declined 71% and 60% for the three and nine month periods
ending June 30, 1998, respectively, from the comparable periods last year. The
reduction is directly attributed to the capital restructuring which was
completed during the quarter ending December 31, 1997. The restructuring
included the conversion of long-term debt to common stock.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998 and September 30, 1997 the Company had working capital of
$3,039 and negative working capital of $4,182 respectively. The Company
maintains current working capital lines totaling DM 1,850 (approximately $1,000)
with several German banks. At June 30, 1998 the Company had borrowed $683
against these lines.
The significant improvement in the working capital position from September 30,
1997 to June 30, 1998 was due to the recapitalization of the Company that was
completed during the three months ending December 31, 1997. In the past the
Company has relied upon its available working capital lines and institutional
investors to fund operational cash flow, when needed. The Company is actively
negotiating with its institutional investors for additional loans/investments to
bridge its working capital needs. As a result, the Company received an
additional loan, in the amount of $500, in the second quarter. In addition, the
Company is continuing to seek other investors to infuse additional capital into
the Company. While management believes that it will be successful in securing
new funding, there can be no assurances that it will be able to do so. Lack of
new funding along with the inability to increase processing revenues could
result in a curtailment of operations in the future.
The Company's ability to generate positive operational cash flow is dependent
upon increasing processing revenue through increased recoveries by tissue banks
in the U.S. and Europe, and the development of additional markets and surgical
applications worldwide. While the Company believes that it continues to make
progress in both these areas, there can be no assurances that changing
governmental regulations will not have a material adverse effect on results of
operations and cash flow.
8
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
EXHIBITS
--------
<S> <C>
No. 27 Financial Data Schedule
</TABLE>
No reports on Form 8-K were filed by the Company during the
quarter ended June 30, 1998.
9
<PAGE> 12
SIGNATURES
Registrant has duly caused this report to be signed on its behalf by the
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
undersigned, thereunto duly authorized.
TUTOGEN MEDICAL, INC.
Date: August 4, 1998 /s/ Karl H. Meister
-------------------
President and Chief Executive Officer
Date: August 4, 1998 /s/ George Lombardi
-------------------
Chief Financial Officer
(Principal Financial and Accounting Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE (IN THOUSANDS, EXCEPT PER SHARE DATA) CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE CONDENSED FINANCIAL STATEMENTS FOR THE QUARTER
ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 250
<SECURITIES> 0
<RECEIVABLES> 2,078
<ALLOWANCES> (172)
<INVENTORY> 3,744
<CURRENT-ASSETS> 6,052
<PP&E> 4,356
<DEPRECIATION> (1,548)
<TOTAL-ASSETS> 9,498
<CURRENT-LIABILITIES> 3,013
<BONDS> 0
0
0
<COMMON> 54
<OTHER-SE> 2,761
<TOTAL-LIABILITY-AND-EQUITY> 9,498
<SALES> 2,348
<TOTAL-REVENUES> 2,348
<CGS> 1,124
<TOTAL-COSTS> 1,124
<OTHER-EXPENSES> 1,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 98
<INCOME-PRETAX> 126
<INCOME-TAX> 3
<INCOME-CONTINUING> 123
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 123
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.00
</TABLE>
