<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-QSB
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1998
Commission file number 0-17714
BIOPOOL INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Delaware 58-1729436
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6025 Nicolle Street, Ventura, (805) 654-0643
California 93003 (Registrant's telephone
(Address of principal executive offices) number including area code)
_____________________________________________________
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 proceeding 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 / /
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Outstanding at September 30, 1998, Common Stock, $.01 par value per share,
8,617,886 shares.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
BIOPOOL INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, 1998 DECEMBER 31, 1997
(Unaudited)
- -----------------------------------------------------------------------------
(in thousands except share data)
<S> <C> <C>
ASSETS
Current assets
Cash $ 1,010 $ 1,376
Accounts receivable, net 2,735 2,677
Inventories 3,865 3,784
Prepaid expenses and other current assets 402 286
- -----------------------------------------------------------------------------
Total current assets 8,012 8,123
Property and equipment 6,669 6,583
Less accumulated depreciation (2,776) (2,398)
- -----------------------------------------------------------------------------
Property and equipment, net 3,893 4,185
Other assets 1,340 1,370
- -----------------------------------------------------------------------------
TOTAL ASSETS $13,245 $13,678
- -----------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and other payables $ 1,644 $ 1,688
Debt 918 964
- -----------------------------------------------------------------------------
Total current liabilities 2,562 2,652
Long-term debt, net 1,214 1,873
Deferred tax liability 108 108
Stockholders' equity:
Common stock, $.01 par value, 50,000,000
shares authorized; 8,617,886 and
8,648,828 shares issued and out-
standing in 1998 and 1997, respectively 86 86
Other stockholders' equity 9,275 8,959
- -----------------------------------------------------------------------------
Total stockholders' equity 9,361 9,045
- -----------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $13,245 $13,678
- -----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
BIOPOOL INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ending Nine Months Ending
September 30, September 30,
1998 1997 1998 1997
- -----------------------------------------------------------------------------
(in thousands except share data)
<S> <C> <C> <C> <C>
Sales $ 3,516 $ 4,315 $11,235 $12,661
Costs and expenses
Cost of sales 2,306 2,458 6,931 7,478
Selling, general,
administrative 997 1,078 3,173 3,215
Research and development 69 137 296 342
Restructuring costs 6 -- 144 --
Other 18 (18) 32 (51)
Interest expense 50 75 166 238
- -----------------------------------------------------------------------------
Income before taxes 70 585 493 1,439
Income tax expense 27 92 123 286
- -----------------------------------------------------------------------------
Net income $ 43 $ 493 $ 370 $ 1,153
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Earnings per share:
Basic $ -- $ 0.06 $ 0.04 $ 0.13
Diluted $ -- $ 0.06 $ 0.04 $ 0.13
</TABLE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ending September 30,
1998 1997
- -----------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
Operating activities $ 599 $ 516
Investing activities
Acquisition of BCA - (4,729)
Other (206) 4,128
Financing activities (736) (542)
Effect of exchange rates (23) (166)
- -----------------------------------------------------------------------------
Net increase (decrease) in cash $ (366) $ (793)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
BIOPOOL INTERNATIONAL, INC.
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
interim financial information and with the instructions to Form 10-QSB 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 normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the nine-month
period ended September 30, 1998, are not necessarily indicative of the results
that may be expected for the year ended December 31, 1998. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Company's annual report on Form 10-KSB for the year
ended December 31, 1997.
The balance sheet at December 31, 1997, has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
<TABLE>
2. Inventories
<CAPTION>
September 30, December 31,
1998 1997
(in thousands)
<S> <C> <C>
Raw materials $ 1,283 $ 821
Work in process 1,611 1,661
Finished products 971 1,302
------------------------------
$ 3,865 $ 3,784
</TABLE>
3. Earnings per Share
During the year ended December 31, 1997, the Company adopted SFAS No. 128,
"Earnings Per Share," which required a change in the method used to compute
earnings per share. Under this new standard, primary and fully diluted
earnings per share were replaced with "Basic" and "Diluted" earnings per
share. There were no changes to earnings per share as a result of the new
standards for the periods reported.
Basic earnings per share is based upon the weighted-average number of common
shares outstanding. Diluted earnings per share is based upon the weighted
average number of common shares and dilutive potential common shares
outstanding. Potential common shares are outstanding options under the
Company's stock option plans and outstanding warrants, which are included
under the treasury stock method.
<PAGE>
BIOPOOL INTERNATIONAL, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION &
RESULTS OF OPERATIONS
Results of Operations
Sales were $3.5 million for the three-month period and $11.2 million for the
nine-month period ended September 30, 1998, compared with $4.3 million and
$12.7 million for the corresponding periods of 1997. These amounts represent
sales declines of 19% and 11%, respectively, and are the result of numerous,
disparate factors.
Approximately $641,000, or 45%, of the year-to-date decline in sales was the
result of the unavailability of a finished product (BayRho ) from a single
supplier for eight of the first nine months of 1998, as previously reported.
Limited shipments of this product resumed in October, but it is too early to
estimate the significance of the near-and long-term impact on the Company's
sales as a result of the extended period of product unavailability.
International sales of immunohematology products from the BCA Division were
down approximately $340,000 for the nine-month period ended September 30,
1998, when compared with the prior year, in part as a result of the loss of
business through certain key distributors in Europe. The Company's management
continues to seek new distributors or other strategic business arrangements in
these markets, although no assurances can be made that satisfactory
arrangements will become available.
Year-to-date sales of hemostasis products experienced a decline of
approximately $474,000, largely as a result of the timing of orders placed by
the Company's customers. Hemostasis products are often sold in large
quantities at irregular intervals. Hemostasis sales for the third quarter of
1997 were particularly strong as the result of a single large order from an
Original Equipment Manufacturer (OEM) customer. Conversely, hemostasis sales
for the third quarter of 1998 were lower than usual as a result of some
inventory buildup prior to the summer holidays in Europe and some key OEM
orders delayed until the fourth quarter.
Furthermore, the Company's domestic sales in general have suffered in 1998 as
a result of a recent shift in customer buying patterns. Increasingly,
purchasing decisions are being consolidated into the hands of fewer national
purchasing groups. As a result, the Company temporarily lost access to
certain customers. The Company is currently in the process of securing supply
agreements with major vendors which have established relationships with the
purchasing groups. The Company also recently hired a new Vice President of
Marketing and Business Development with the express objective to develop and
implement new strategies to significantly improve sales. Management
anticipates measurable results from these efforts by the first quarter of next
year, although no assurances can be made that such efforts will be successful
in increasing sales materially.
Cost of sales decreased $152,000 for the three months and $547,000 for the
nine months ended September 30, 1998, compared with the respective 1997
periods as a result of lower sales. As a percentage of sales, year-to-date
cost of sales rose to 62% in 1998 compared with 59% for the same 1997 period.
These percentage increases are primarily due to the fixed nature of certain
overhead costs relative to the declining sales levels.
<PAGE>
Selling, general and administrative expenses declined $81,000 and $42,000 for
the three months and nine months ended September 30, 1998, compared with the
same periods of 1997. The first nine months of 1997 included approximately
$90,000 of incremental costs associated with the transition of the then newly
acquired BCA business. Increased expenses for a general wage increase and
allowance for BCA doubtful accounts receivable have been offset by third
quarter savings as a result of the consolidation of the Canadian operations
into the Company's Ventura facilities.
Research and development expenses were reduced by $42,000 for the nine months
ended September 30, 1998, compared to the same 1997 period, primarily as a
result of the Canadian consolidation.
On December 23, 1997, the Company announced the restructuring of its
operations by closing its facilities in Canada and consolidating the
operations of its subsidiary, Biopool Canada Inc., with operations conducted
at the Company's facilities in Ventura, California. Restructuring charges of
$342,000 were recorded in the fourth quarter of 1997 and $144,000 in 1998.
The transfer of technology, manufacturing, and administrative functions was
completed June 30, 1998, and no additional restructuring charges are
anticipated. As expected, cost savings of approximately $75,000 from the
consolidation were recognized in the third quarter of 1998.
Interest expense for the three months and nine months ended September 30,
1998, decreased $25,000 and $72,000, respectively, from the same prior year
periods as a result of lower outstanding loan balances. Total debt
outstanding at September 30, 1998, was $2.1 million versus $2.8 million a year
ago. Future interest expense will be further reduced as a result of a 1%
interest rate decrease effective August 15, 1998.
Income tax expense for the 1997 periods include benefits related to
utilization of domestic NOL carryforwards. All NOL benefits were exhausted
during 1997. Income taxes for the second quarter of 1998 included a tax
benefit associated with certain restructuring charges accrued in the fourth
quarter of 1997.
Financial Condition
The Company's liquidity and capital resources remained strong into the third
quarter of 1998. Working capital as of September 30, 1998, was $5.5 million,
with a current ratio of 3.1 to 1.0. Approximately $705,000 of cash was used
to pay down debt during the first nine months of 1998. The total debt to
equity ratio at September 30, 1998, was 23%. During the third quarter of
1998, the Company restructured its bank term loan to reduce the interest rate
by 1% and extend the term by 18 months. The Company's management believes
that the current availability of cash, lines of credit, working capital, and
cash flow from operations are adequate to meet the Company's needs for at
least the next twelve months. The Company continues to seek potential
acquisitions and sources of capital to finance such acquisitions, although it
has no commitments for either at this time.
Pursuant to the Company's stock repurchase program announced June 5, 1998, the
Company had repurchased at September 30, 1998, a total of 69,100 shares of its
Common Stock on the open market at an average purchase price of $0.99 per
share.
<PAGE>
Year 2000 Readiness
The Company has formulated and is implementing a Year 2000 Readiness Plan.
Phase I of this Plan, assessment and identification of potential issues, is
currently underway. As part of Phase I, the Company has determined that it
should not experience any material Year 2000 problems with its products and
other non-information technology systems, and is assessing both its internal
information technologies and those of its third party suppliers and customers.
To date, the Company has not become aware of any material problems with either
its own or any third party systems, and expects to complete Phase I by March
31, 1999. Phase II of the Plan will consist of remediation efforts, which
the Company has targeted for completion by June 30, 1999; however, since all
of the potential risks have not yet been determined, no assurance can be made
that Phase II will be fully completed by that date.
To date, the Company has spent an immaterial amount on its compliance
program, and does not expect to spend in excess of $20,000 to complete both
Phases of its Plan. The foregoing costs do not include the Company's
internal costs (principally payroll costs for those persons working on the
compliance program), which costs the Company does not track.
The Company is unable at this time to fully assess its reasonably likely
"worst case" scenario. However, failures to correct Year 2000 systems could
result in failures or interruptions of critical business systems which could
possibly have a material impact on the Company's liquidity and financial
condition. The Company does not anticipate material problems with its power
supply or telecommunications systems.
Forward Looking Statements
Except for the historical information contained herein, this report contains
forward-looking statements (identified by the words "estimate," "anticipate,"
"expect," "believe," and similar expressions) which are based upon
management's current expectations and speak only as of the date made. These
forward-looking statements are subject to risks, uncertainties and factors
that could cause actual results to differ materially from the results
anticipated in the forward-looking statements and include, but are not
limited to, competitors' pricing strategies and technological innovations,
changes in health care and government regulations, litigation claims, foreign
currency fluctuation, product acceptance, Year 2000 issues, as well as other
factors discussed in the Company's last Report on Form 10-KSB.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statements regarding computation of earnings per share.
(b) Reports on Form 8-K - None.
<PAGE>
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.
Date: November 13, 1998 BIOPOOL INTERNATIONAL, INC.
------------------------- -----------------------------
(Registrant)
/s/ Michael D. Bick, Ph.D.
-----------------------------
Michael D. Bick, Ph.D.
Chief Executive Officer and
Chairman of the Board
/s/ Robert K. Foote
-----------------------------
Robert K. Foote
Chief Financial Officer and
Corporate Secretary
<PAGE>
EXHIBIT 11
<TABLE>
BIOPOOL INTERNATIONAL, INC.
Statement Regarding Computation of Per Share Earnings
Nine Months Ended September 30,
(in thousands except per share data)
<CAPTION>
1998 1997
<S> <C> <C>
Numerator for basic and diluted earnings
per share - net income $ 370 $1,153
------ ------
Denominator:
Denominator for basic earnings per share -
weighted-average shares 8,667 8,609
Effect of dilutive securities - employee
stock options and warrants 70 536
------ ------
Denominator for diluted earnings per share -
adjusted weighted-average shares 8,737 9,145
------ ------
BASIC EARNINGS PER SHARE $ 0.04 $ 0.13
DILUTED EARNINGS PER SHARE $ 0.04 $ 0.13
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,010,000
<SECURITIES> 0
<RECEIVABLES> 2,735,000
<ALLOWANCES> 0
<INVENTORY> 3,865,000
<CURRENT-ASSETS> 8,012,000
<PP&E> 6,669,000
<DEPRECIATION> 2,776,000
<TOTAL-ASSETS> 13,245,000
<CURRENT-LIABILITIES> 2,562,000
<BONDS> 0
0
0
<COMMON> 86,000
<OTHER-SE> 9,275,000
<TOTAL-LIABILITY-AND-EQUITY> 13,245,000
<SALES> 11,235,000
<TOTAL-REVENUES> 11,235,000
<CGS> 6,931,000
<TOTAL-COSTS> 10,576,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 166,000
<INCOME-PRETAX> 493,000
<INCOME-TAX> 123,000
<INCOME-CONTINUING> 370,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 370,000
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
