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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 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 0-21615
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BOSTON BIOMEDICA, INC.
----------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 04-2652826
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(State or other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
375 WEST STREET, WEST BRIDGEWATER, MASSACHUSETTS 02379
- ------------------------------------------------ -----
(Address of Principal Executive Offices) (zip code)
(508) 580-1900
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(Registrant's telephone number, including area code)
Indicate by check 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 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 number of shares outstanding of the Registrant's only class of common
stock as of September 30, 1996 was 2,690,064, and increased to 4,290,064 as of
December 13, 1996, as a result of shares issued on October 31, 1996 from
Registrant's initial public offering.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
1996 1995 1996 1995
----------------- ----------------- ----------------- -----------------
REVENUE:
<S> <C> <C> <C> <C>
Product sales $ 2,021,462 $ 1,394,551 $ 5,967,221 $ 4,419,180
Services 1,993,269 1,501,343 4,975,893 4,041,194
----------------- ----------------- ----------------- -----------------
Total revenue 4,014,731 2,895,894 10,943,114 8,460,374
COSTS AND EXPENSES:
Cost of product sales 1,044,513 737,969 3,051,346 2,384,563
Cost of services 1,218,193 1,050,705 3,467,803 3,011,020
Research and development 169,157 98,623 530,776 257,658
Selling and marketing 593,523 325,952 1,508,812 963,519
General and administrative 641,501 624,162 1,729,949 1,680,752
----------------- ----------------- ----------------- -----------------
Total operating costs and expenses 3,666,887 2,837,411 10,288,686 8,297,512
Income from operations 347,844 58,483 654,428 162,862
Interest expense, net 76,757 86,779 245,226 251,348
----------------- ----------------- ----------------- -----------------
Income (loss) before income taxes 271,087 (28,296) 409,202 (88,486)
(Provision) benefit for income taxes (108,435) 8,935 (163,681) 32,969
----------------- ----------------- ----------------- -----------------
Net income (loss) $ 162,652 $ (19,361) $ 245,521 $ (55,517)
================= ================= ================= =================
Income (loss) per share $ 0.05 $ (0.01) $ 0.08 $ (0.02)
================= ================= ================= =================
Weighted average common and common
equivalent shares outstanding 3,313,108 2,581,227 3,251,885 2,591,125
</TABLE>
See Notes to Consolidated Financial Statements.
2
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1995
PRO FORMA ACTUAL ACTUAL
----------------- ------------------ -----------------
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C>
Cash $ 75,694 $ 75,694 $ 11,463
Accounts receivable, less allowances of
$212,110 in 1996 and $142,372 in 1995 3,186,070 3,186,070 3,075,870
Inventories 3,956,974 3,956,974 3,676,851
Prepaid expense and other 800,015 800,015 254,199
Deferred income taxes 213,538 213,538 110,766
----------------- ------------------ -----------------
Total current assets 8,232,291 8,232,291 7,129,149
----------------- ------------------ -----------------
Property and equipment, net 2,690,560 2,690,560 2,614,982
OTHER ASSETS:
Notes receivable and other 75,998 75,998 83,422
Goodwill and other intangibles, net 98,547 98,547 100,820
----------------- ------------------ -----------------
174,545 174,545 184,242
----------------- ------------------ -----------------
TOTAL ASSETS $ 11,097,396 $ 11,097,396 $ 9,928,373
================= ================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long term debt $ 490,853 $ 490,853 $ 436,509
Accounts payable 805,193 805,193 745,216
Accrued expenses 874,461 874,461 595,089
Deferred revenue 757,351 757,351 523,401
----------------- ------------------ -----------------
Total current liabilities 2,927,858 2,927,858 2,300,215
----------------- ------------------ -----------------
LONG-TERM LIABILITIES:
Long-term debt, less current maturities 3,454,545 3,454,545 4,215,501
Deferred rent 80,874 80,874 141,068
Deferred income taxes 240,747 240,747 84,641
COMMITMENTS AND CONTINGENCIES
REDEEMABLE COMMON STOCK
$.01 par value; 117,647 shares authorized, issued
and outstanding - 898,503 -
STOCKHOLDERS' EQUITY
Common stock, $.01 par value; authorized 20,000,000
shares in 1996 and 15,000,000 in 1995; issued and
outstanding 2,690,064 in 1996 pro forma and
2,572,417 actual; issued 2,640,417 in 1995 26,901 25,724 26,404
Additional paid-in capital 3,615,027 2,717,701 2,798,620
Retained earnings 751,444 751,444 505,924
----------------- ------------------ -----------------
4,393,372 3,494,869 3,330,948
Less treasury stock, at cost-80,000 shares - - (144,000)
----------------- ------------------ -----------------
Total stockholders' equity 4,393,372 3,494,869 3,186,948
----------------- ------------------ -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,097,396 $ 11,097,396 $ 9,928,373
================= ================== =================
</TABLE>
See Notes to Consolidated Financial Statements.
3
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
-----------------------------------------
1996 1995
------------------ -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ 245,520 $ (55,517)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 432,490 304,821
Provision for doubtful accounts 186,992 72,344
Deferred rent (60,194) (29,174)
Deferred income taxes 53,334 40,083
Changes in operating assets and liabilities:
Accounts receivable (297,192) (265,831)
Note receivable and other assets (2,575) (19,077)
Inventories (280,123) (254,472)
Prepaid expenses (43,278) (109,572)
Accounts payable 59,977 239,901
Accrued expenses 279,373 (38,337)
Deferred revenue 233,950 -
------------------ -----------------
Net cash provided by (used in) operating activities 808,274 (114,831)
------------------ -----------------
CASH FLOWS FOR INVESTING ACTIVITIES:
Additions to property and equipment (495,797) (391,223)
------------------ -----------------
Net cash used in investing activities (495,797) (391,223)
------------------ -----------------
CASH FLOWS FOR FINANCING ACTIVITIES:
Proceeds from notes payable 226,300 764,969
Proceeds from redeemable common stock, net 898,503 -
Proceeds of common stock issued, net 62,401 116,026
Initial public offering costs (502,538) -
Repayments of long-term debt (932,912) (210,500)
Purchase of treasury stock - (144,000)
------------------ -----------------
Net cash (used in) provided by financing activities (248,246) 526,495
------------------ -----------------
Increase in cash 64,231 20,441
Cash, beginning of period 11,463 89,129
------------------ -----------------
Cash, end of period $ 75,694 $ 109,570
================== =================
SUPPLEMENTAL DISCLOSURES OF NONCASH ACTIVITIES:
Conversion of note payable to common stock $ _ $ 9,600
</TABLE>
See Notes to Consolidated Financial Statements.
4
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Basis of Presentation: The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for the interim financial information and with the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of only normal recurring adjustments) considered
necessary for a fair presentation have been included. Operating results for the
three and nine months ended September 30, 1996 are not necessarily indicative of
the results that may be expected for the year ending December 31, 1996. For
further information, refer to the consolidated financial statements and
footnotes thereto included in the Final Prospectus contained in a registration
statement on Form S-1 dated October 31, 1996 for Boston Biomedica, Inc. and
Subsidiaries ("the Company" or "Boston Biomedica"). Certain prior years' amounts
in the consolidated financial statements may have been reclassified to conform
to the current year's presentation.
(2) Inventories: Inventories consisted of the following:
Sept. 30, Dec. 31,
1996 1995
--------------- --------------
Raw material $1,401,122 $1,298,131
Work in process 633,487 565,667
Finished goods 1,922,365 1,813,053
--------------- --------------
$3,956,974 $3,676,851
=============== ==============
(3) Computation of Income (Loss) Per Share
Net income (loss) per common share is computed based upon the weighted
average number of common shares and common equivalent shares (using the treasury
stock method) outstanding after certain adjustments described below. Common
equivalent shares consist of common stock options and warrants outstanding. In
accordance with Securities and Exchange Commission Staff Accounting Bulletin No.
83, all common, redeemable common, and common equivalent shares issued during
the twelve month period prior to the proposed date of the initial filing of the
Registration Statement have been included in the calculation as if they were
outstanding for all periods using the treasury stock method and an initial
public offering price of $8.50 per share. Fully diluted net income (loss) per
common share is not presented as it does not materially differ from primary
earnings per share.
(4) Income Taxes
The Company's effective tax rate does not significantly differ from the
federal and state income tax statutory rates.
(5) Subsequent Events
Initial Public Offering
On October 31, 1996, the Company commenced trading as a result of its
initial public offering of its common stock ("IPO"), raising net proceeds of
$12,648,000 from sale of 1,600,000 shares at $8.50 per share. Completion of the
IPO terminates the redemption feature of the redeemable common stock and causes
its reclassification into 117,647 shares of common stock. As a result, the
unaudited pro forma balance sheet has been prepared assuming the
reclassification of the redeemable common stock into common stock as of
September 30, 1996.
5
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(5) Subsequent Events (Continued)
BioSeq, Inc.
In October 1996, the Company entered into a License Agreement, Purchase
Agreement, Stockholders' Agreement and Warrant Agreement with BioSeq, a
privately held, technology based development stage company.
The Company has agreed to purchase convertible preferred stock equivalent to
approximately 19% of the capital stock of BioSeq for an aggregate of $1,482,500
in three installments. Of the $1,482,500, $210,000 was invested at the date of
the agreements and $522,500 was invested in November, 1996. The Company must
make the remaining $750,000 installment if BioSeq attains certain technical
milestones by July 31, 1997. If such milestones are not attained by BioSeq by
July 31, 1997, the Company will still have the option to make the remaining
$750,000 investment until December 31, 1997. Under the operative documents, the
Company has price anti-dilution protection, pre-emptive rights and the right to
board representation. In addition, the Company was granted warrants to acquire
additional shares of common stock of BioSeq for additional consideration under
certain conditions, provided that this right is not exercisable to the extent it
would cause the Company's ownership to equal or exceed 20%. The Company is
accounting for its investment in BioSeq on the cost basis in accordance with the
provisions of APB 18 since its cumulative investment is and must remain less
that 20% of the equity of BioSeq and the Company does not exert significant
influence or control. Due to the uncertainty of technology based development
stage enterprises and in accordance with the provisions of SFAS 121, the Company
will perform a periodic analysis of the investment to determine whether the
carrying value of its investment in BioSeq has been impaired. If so determined,
the Company would adjust the carrying value of its investment by taking a charge
to earnings.
Upon the earlier of payment of the final installment of the Company's
aggregate $1,482,500 investment and December 31, 1997, the Company will be
granted a worldwide right to use the BioSeq technology relating to sequencing
and analysis services. The License will be exclusive until BioSeq commences
selling on a commercial basis the equipment used in the DNA sequencing and
analysis process, at which time the License will become non-exclusive. The
License provides that the Company will pay BioSeq royalties ranging from five
percent to ten percent of net revenues arising out of the services performed by
the Company with the licensed technology. The Company will account for the
royalty as a cost of revenue as the revenues are earned.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Total revenue increased 38.6%, or $1,119,000, to $4,015,000 for the quarter
ended September 30, 1996 from $2,896,000 in the prior year period. This increase
was the result of an increase in product sales of 45.0%, or $626,000, to
$2,021,000 from $1,395,000 and an increase in specialty laboratory services of
32.8%, or $492,000, to $1,993,000 from $1,501,000. Product revenue increased
primarily as a result of an overall sales increase of 75.1% in Quality Control
Products, due to strong sales of new and existing products, particularly for
Accurun TM, as well as Seroconversion and OEM panels. The increase in service
revenue was primarily attributable to a 53.7% increase in Specialty Clinical
Laboratory Testing revenue, particularly molecular and tick borne diseases
(which typically peak in the third quarter), and the addition of two new
research contracts with the National Institutes of Health in the fourth quarter
of 1995.
Gross profit increased 58.2%, or $645,000, to $1,752,000 for the current
quarter from $1,107,000 in the prior year period. The gross profit margin
increased to 43.6% for the current quarter versus 38.2% in the prior year
period. The gross margin improvement was primarily driven by improved margins in
services (30.0% to 38.9%) as the Company benefited from both the addition of
several new tests and higher volume in Specialty Clinical Laboratory Testing.
Research and development expenses increased 71.5%, or $70,000, to $169,000
for the current quarter from $99,000 in the prior year period. This increase was
primarily the result of additional research project expenditures for new Quality
Control Products, including panels and Accurun TM, as well as continued work on
molecular QC procucts.
Selling and marketing expenses increased 82.1%, or $268,000, to $594,000 for
the current quarter from $326,000 in the prior year period. This increase was
primarily attributable to increased personnel costs associated with the addition
of tele-sales staff for Quality Control Products, particularly Accurun TM,
increased advertising and trade show costs due to the commencement of the
Company's "Total Quality System" (TQS) marketing campaign, and costs associated
with participation by the Company's Specialty Clinical Laboratory in the Roche
Diagnostics' Amplicor(R) Access program in connection with Roche's launch of
their new FDA approved HIV PCR test kit. The Amplicor(R) kit is primarily used
to monitor the HIV viral load (level) in patients prior to and during drug
therapy.
General and administrative expenses increased 2.8%, or $17,000, to $641,000
for the current quarter from $624,000 in the prior year period. This modest
increase reflects management's continued close monitoring of expense levels.
Interest expense decreased 11.5%, or $10,000, to $77,000 for the current
quarter from $87,000 in the prior year period as the prime rate increases in
late 1995 were more than offset by reduced borrowing due to debt repayments from
additional private equity raised in the first half of 1996, as well as
prepayments from certain customers for contract research services.
For the 1996 third quarter, the Company provided taxes at the combined
federal and state statutory rate of 40%, whereas the tax benefit of the loss in
1995's third quarter was recorded at a lower rate due to a current state tax
liability.
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
Total revenue increased 29.3%, or $2,483,000, to $10,943,000 for the nine
months ended September 30, 1996 from $8,460,000 in the prior year period. This
increase was the result of an increase in product sales of 35.0%, or $1,548,000,
to $5,967,000 from $4,419,000 and an increase in specialty laboratory services
of 23.1%, or $935,000, to $4,976,000 from $4,041,000. Product revenue increased
primarily as a result of an overall increase of 47.6% in Quality Control
Products, due to strong sales of both new and existing products, particularly
for Accurun TM, as well as Seroconversion and OEM panels. The increase in
service revenue was primarily attributable to a
7
30.1% increase in Specialty Clinical Laboratory Testing revenue, particularly
molecular testing, and the addition of two new research contracts with the
National Institutes of Health in the fourth quarter of 1995.
Gross profit increased 44.3%, or $1,359,000, to $4,424,000 for the first
nine months of 1996 from $3,065,000 in the prior year period. The gross profit
margin increased to 40.4% for the first nine months of 1996 versus 36.2% in the
prior period. Gross margin improved in products (46.0% to 48.9%), as well as
services (25.5% to 30.3%) as the Company benefited from an improved revenue mix
at the higher volume level.
Research and development expenses increased 106.0%, or $273,000, to $531,000
for the 1996 period from $258,000 in the prior year period. This increase was
primarily the result of increased costs of personnel hired in the second half of
1995 to step-up the rate of new product introductions, and increased research
project expenditures.
Selling and marketing expenses increased 56.6%, or $545,000, to $1,509,000
for the 1996 period from $964,000 in the prior year period. This increase was
primarily attributable to increased personnel costs associated with the addition
of tele-sales staff for Quality Control Products, particularly Accurun TM,
increased advertising and trade show costs due to the commencement of the
Company's "Total Quality System" (TQS) marketing campaign, and costs associated
with participation by the Company's Specialty Clinical Laboratory in the Roche
Diagnostics' Amplicor(R) Access program in connection with Roche's launch of
their new FDA approved HIV PCR test. The Amplicor(R) kit is primarily used to
monitor the HIV viral load (level) in patients prior to and during drug therapy.
General and administrative expenses increased 2.9%, or $49,000, to
$1,730,000 for the first nine months of 1996 from $1,681,000 in the prior year
period. This modest increase reflects management's continued close monitoring of
expense levels.
Interest expense decreased 2.4%, or $6,000, to $245,000 for the 1996 period
from $251,000 in the prior year period as the prime rate increases in late 1995
were more than offset by debt reduction from additional private equity raised in
the first half of 1996, as well as prepayments from certain customers for
contract research services.
For the first nine months of 1996, the Company provided taxes at the
combined federal and state statutory rate of 40%, whereas the tax benefit of the
loss in 1995 was recorded at a lower rate due to a current state tax liability.
LIQUIDITY AND FINANCIAL CONDITION
On October 31, 1996 the Company commenced trading as a result of its initial
public offering of its common stock ("IPO"), selling 1,600,000 shares at $8.50
per share. Net proceeds raised after underwriting discounts and commissions (but
before offering costs) was $12,648,000. On November 5, 1996, the Company repaid
substantially all of its outstanding bank debt which totaled approximately $3.9
million.
The Company has financed its operations for the nine months ended September
30, 1996 through cash flow from operations, borrowings from banks and sales of
equity.
At September 30, 1996 the Company had $2,172,000 outstanding and $1,328,000
of availability under its $3.5 million Revolving Line of Credit Agreement due
June 30, 1998 (the "Revolver"). The Revolver bears interest at a rate equal to
the prime rate plus 0.5% per annum, currently 8.75%. Under the terms of the
Revolver, the Company operates under a zero balance account arrangement whereby
cash receipts are received into a lock box at the bank and reduce the Revolver,
while disbursements for payroll and accounts payable items increase the
outstanding balance of the Revolver. Borrowings under the Revolver are limited
to 80% of eligible accounts receivable plus the lesser of 40% of inventory or
$1.5 million. The Revolver contains various covenants and restrictions and the
amounts outstanding are secured by all of the Company's assets and a $2 million
life insurance
8
policy on an officer/stockholder. As noted above, the Company used a portion of
the proceeds of its initial public offering to repay the outstanding amount
under the Revolver, which was approximately $2,310,000 on the day of repayment.
Net cash provided by operations for the nine months ended September 30, 1996
was $808,000 as compared to cash used of $115,000 in the prior year period. This
increase in cash flow was primarily attributable to an increase in net income
and an increase in deferred revenue from net payments of $234,000 under a
research contract for future clinical trial services.
Cash used in investing activities for the nine months ended September 30,
1996 was $496,000 as compared to $391,000 in the prior year period. This
increase in investing activities was the result of increased capital
expenditures as the Company continues to invest in manufacturing equipment and
information systems related to operations, sales, and finance.
Cash used in financing activities for the nine months ended September 30,
1996 was $248,000 as compared to $526,000 provided by financing activities in
the prior comparable year period. Net cash was used in financing activities
primarily as a result of the repayment of $933,000 of debt and payment of
$503,000 of initial public offering costs, partially offset by $899,000 raised
through the sale of 117,647 shares of redeemable common stock to Kyowa Medex,
Co., Ltd. in April 1996.
The Company anticipates capital expenditures to increase over the near term
as it expects to use approximately $1.0 million from the proceeds of its IPO to
expand its manufacturing capacity in West Bridgewater over the next 12 months,
of which approximately $500,000 will be spent on building expansion and
approximately $500,000 will be spent on equipment. In November 1996, the Company
used $522,500 of IPO proceeds to fund the second installment of the Company's
purchase of capital stock of BioSeq. The Company must make the remaining
$750,000 installment if BioSeq attains certain technical milestones by July 31,
1997. If the milestones are not achieved, the Company will have the option to
purchase the additional $750,000 of BioSeq capital stock until December 31,
1997. The Company believes that existing cash balances, the borrowing capacity
available under the Revolver, cash generated from operations, and the proceeds
of its IPO are sufficient to fund operations and anticipated capital
expenditures for the foreseeable future. There were no material financial
commitments for capital expenditures as of September 30, 1996, and currently
there are no material commitments for capital or investment expenditures other
than the BioSeq investment, and the manufacturing expansion discussed above.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("SFAS 121").
SFAS 121 requires that an impairment loss be recognized for long-lived assets
and certain identified intangibles when the carrying amount of these assets may
not be recoverable. The Company has adopted SFAS 121 effective in 1996 and the
adoption did not have a material impact on the financial statements.
In October 1995, the FASB issued Statement of Financial Accounting
Standards No. 123 ("SFAS 123") "Accounting for Stock-Based Compensation," which
becomes effective for fiscal years beginning after December 15, 1995. SFAS 123
establishes new financial accounting and reporting standards for stock-based
compensation plans. However, entities are allowed to elect whether to measure
compensation expense for stock-based compensation under SFAS 123 or APB No. 25,
"Accounting for Stock Issued to Employees." The Company has elected to continue
to account under APB No. 25 and will make the required pro forma disclosures of
net income and earnings per share as if the provisions of SFAS 123 had been
applied in its December 31, 1996 financial statements. The potential impact of
adopting this standard on the Company's pro forma disclosures of net income and
earnings per share has not been quantified at this time.
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements
concerning the Company's financial performance and business operations.
The Company wishes to caution readers of this Quarterly Report on Form 10-Q
that actual results might differ materially from those projected in any
forward-looking statements.
Factors which might cause actual results to differ materially from those
projected in the forward-looking statements contained herein include the
following: the inability of the Company to increase sales of quality control
products to end-users of infectious disease test kits; the entrance of one or
more quality control manufacturers for non-infectious disease test kits into the
quality control market for infectious disease test kits, particularly the
end-user market for quality control products for infectious disease test kits;
any material impairment of the carrying value of any investment made by the
Company, including, without limitation, the Company's investment in BioSeq,
Inc., a technology based development stage company; the inability of the Company
to maintain an adequate supply of the unique and rare specimens of plasma and
serum necessary for certain of its products; significant reductions or delays in
procurements of the Company's products by any of its major customers; imposition
by foreign governments of restrictions on the importation of blood and blood
derivatives; litigation seeking to restrict the use of intellectual property
used by the Company; potential product liability claims against the Company; and
the potential insufficiency of Company resources, including human resources,
plant and equipment and management systems, to accommodate any future growth.
Reference is made to the Company's Registration Statement on Form S-1 (Reg. No.
333-10759) for a more complete description of these and other risks.
9
BOSTON BIOMEDICA, INC.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES.
At a special meeting in lieu of annual meeting of the stockholders of the
Company held on September 5, 1996, the stockholders, among other actions,
approved Amended and Restated Articles of Organizations of the Company and
Amended and Restated By-Laws of the Company.
The Amendments made to the Company's Articles of Organization, as amended,
included the following: (1) a one-for-two reverse stock split of the common
stock, $.01 par value ("Common Stock"), pursuant to which every two shares of
Common Stock issued and outstanding were reclassified and changed into one share
of Common Stock; (2) a provision for classification of the Company's Board of
Directors into three classes, such that one class will be elected each year for
a three-year term; (3) provisions increasing from a majority to 80% the
stockholder vote required to enlarge the Board of Directors or remove a member
of the Board of Directors, whether with or without cause; (4) a so-called "fair
price provision," adopted in lieu of the statutory Fair Price Provision
contained in the Massachusetts General Laws, that is intended to protect
stockholders who do not tender their shares in a takeover bid, by guaranteeing
them a minimum price for their stock in any subsequent attempt by the bidder to
purchase their shares at a price lower than the bidder's original acquisition
price; and (5) a provision which permits the Company to repurchase shares of
stock from a stockholder of the Company upon fair and reasonable terms, without
offering any other stockholder the opportunity to sell their shares to the
Company.
The amendments made to the Company's By-Laws, as amended, included the
following: (1) conforming provisions to reflect the classification of the
Company's Board of Directors, as described above; (2) a provision regarding the
procedures to be followed by a stockholder in nominating one or more persons for
election as a director; including a requirement that nominations be made at
least ninety days prior to the anniversary date of the immediately preceding
annual meeting of stockholders; and (3) a provision by which the Company elected
to opt out of Chapter 110D of the Massachusetts General Laws, a law which
restricts the ability of persons holding certain percentages of voting power
from voting their stock, unless the Company's stockholders so authorize. The
effect of opting out of Chapter 110D is that a person holding the amounts of
voting power specified in Chapter 110D will be able to freely vote their shares
without the authorization of the other stockholders of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
On September 5, 1996, a special meeting in lieu of annual meeting of the
stockholders of the Company was held at the Company's offices in West
Bridgewater, Massachusetts. 4,812,307 of the Company's 5,380,130 issued and
outstanding shares of Common Stock were represented at the meeting, either in
person or by proxy. 4 proposals were submitted to the stockholders of the
Company for consideration and approval: (1) election of Directors; (2) adoption
of Amended and Restated Articles of Organization of the Company; (3) adoption of
Amended and Restated By-Laws of the Company; and (4) ratification of a proposed
form of indemnification contract to be entered into with officers and directors
of the Company, in the discretion of the Board of Directors.
The following persons were elected to serve as Directors of the Company,
with votes being cast as follows:
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
Richard T. Schumacher 4,812,307 -0- -0-
Henry A. Malkasian 4,812,307 -0- -0-
Francis E. Capitanio 4,812,307 -0- -0-
Kevin W. Quinlan 4,812,307 -0- -0-
Calvin A. Saravis 4,812,307 -0- -0-
</TABLE>
The Company's stockholders approved the proposal to adopt the Company's
Amended and Restated Articles of Organization. 4,812,307 shares were voted "For"
the proposal, and no shares were voted against or abstained from voting with
respect to the proposal.
The Company's stockholders approved the proposal to adopt the Company's
Amended and Restated By-Laws. 4,812,307 shares were voted "FOR" the proposal,
and no shares were voted against or abstained from voting with respect to the
proposal.
The Company's stockholders approved the proposed form of indemnification
contract for officers and directors of the Company. 4,812,307 shares were voted
"FOR" the proposal, and no shares were voted against or abstained from voting
with respect to the proposal.
All foregoing results are prior to the one-for-two reverse stock split.
ITEM 6. EXHIBITS AND REPORTS.
(A) EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
3.1 Amended and Restated Articles of Organization of the Registrant*
3.2 Amended and Restated By-Laws of the Registrant*
4.1 Description of Certificate for Shares of the Registrant's Common Stock*
10.18.7 Note Payable to The First National Bank of Boston, dated July 1996, in the
amount of $250,0002*
10.20 Purchase Agreement, dated October 7, 1996, between BioSeq, Inc. and the
Registrant*
10.21 Warrant Agreement, dated October 7, 1996, between BioSeq, Inc. and the
Registrant*
10.22 Stockholders' Agreement, dated October 7, 1996, between BioSeq, Inc. and the
Registrant*
10.23 License Agreement, dated October 7, 1996, between BioSeq, Inc. and the
Registrant*
11 Statement re Computation of Per Share Earnings for the three months and nine
months ended September 30, 1996 and 1995
27 Financial Data Schedule
</TABLE>
(B) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed for the quarter ended
September 30, 1996.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BOSTON BIOMEDICA, INC.
Date: December 13, 1996 By /s/ KEVIN W. QUINLAN
---------------------- -----------------------------------------
Kevin W. Quinlan, Chief Financial Officer
(Principal Financial Officer)
11
BOSTON BIOMEDICA, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NO. DESCRIPTION NUMBERED PAGE
- ----------- ----------- -------------
<S> <C> <C>
3.1 Amended and Restated Articles of Organization of the Registrant*
3.2 Amended and Restated By-Laws of the Registrant*
4.1 Description of Certificate for Shares of the Registrant's Common Stock*
10.18.7 Note Payable to The First National Bank of Boston, dated July 1996, in the
amount of $250,0001*
10.20 Purchase Agreement, dated October 7, 1996, between BioSeq, Inc. and the
Registrant*
10.21 Warrant Agreement, dated October 7, 1996, between BioSeq, Inc. and the
Registrant*
10.22 Stockholders' Agreement, dated October 7, 1996, between BioSeq, Inc. and the
Registrant*
10.23 License Agreement, dated October 7, 1996, between BioSeq, Inc. and the
Registrant*
11 Statement re Computation of Per Share Earnings for the three months and nine
months ended September 30, 1996 and 1995
27 Financial Data Schedule
- --------
* Previously filed (with the same Exhibit number) as an Exhibit to Amendment No. 1 to the Registrant's
Registration Statement on Form S-1 (Securities and Exchange Commission File No. 333-10759).
* Previously filed (with the same Exhibit number) as an Exhibit to Amendment No. 1 to the Registrant's
Registration Statement on Form S-1 (Securities and Exchange Commission File No. 333-10759).
</TABLE>
12
EXHIBIT 11
BOSTON BIOMEDICA, INC. AND SUBSIDIARIES
STATEMENT RE COMPUTATION OF INCOME PER SHARE
WEIGHTED AVERAGE SHARES
<TABLE>
<CAPTION>
QUARTER ENDED SEPT. 30, NINE MONTHS ENDED SEPT. 30,
--------------------------------------- ----------------------------------------
1996 1995 1996 1995
----------------- ----------------- ------------------- ----------------
<S> <C> <C> <C> <C>
Average Common Stock Outstanding 2,690,064 2,547,932 2,628,841 2,557,830
Net effect of dilutive Common Stock
Equivalents-based on treasury stock
method using average market price 623,044 - 623,044 -
Issuance of "Cheap Stock" - 33,295 - 33,295
----------------- ----------------- ------------------- ----------------
3,313,108 2,581,227 3,251,885 2,591,125
================= ================= =================== ================
Net Income $ 162,652 $ (19,361) $ 245,521 $ (55,517)
Add: net reduction of interest on debt,
less 40% taxes 10,450 - 10,450 -
----------------- ----------------- ------------------- ----------------
Adjusted net income for earnings per
share calculation $ 173,102 $ (19,361) $ 255,971 $ (55,517)
================= ================= =================== ================
Income (loss) per share 0.05 (0.01) 0.08 (0.02)
================= ================= =================== ================
</TABLE>
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 75,694
<SECURITIES> 0
<RECEIVABLES> 3,398,180
<ALLOWANCES> 212,110
<INVENTORY> 3,956,974
<CURRENT-ASSETS> 8,232,291
<PP&E> 4,514,866
<DEPRECIATION> 1,824,306
<TOTAL-ASSETS> 11,097,396
<CURRENT-LIABILITIES> 2,927,858
<BONDS> 3,454,545
0
0
<COMMON> 3,641,928
<OTHER-SE> 751,444
<TOTAL-LIABILITY-AND-EQUITY> 11,097,396
<SALES> 4,014,731
<TOTAL-REVENUES> 4,014,731
<CGS> 2,262,706
<TOTAL-COSTS> 2,262,706
<OTHER-EXPENSES> 1,404,181
<LOSS-PROVISION> 83,485
<INTEREST-EXPENSE> 76,757
<INCOME-PRETAX> 271,087
<INCOME-TAX> 108,435
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 162,652
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
