================================================================================
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 June 30, 2000
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, (805) 654-0643
VENTURA, CALIFORNIA 93003 (Registrant's telephone number
(Address of principal executive offices) 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 June 30, 2000, Common Stock, $.01 par value per share, 8,319,951
shares.
================================================================================
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
BIOPOOL INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
DECEMBER 31,
JUNE 30, 2000 1999
--------------------------------------------------------------------------------
(in thousands except share data)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash ......................................... $ 4,140 $ 2,749
Accounts receivable, net ..................... 1,954 1,770
Inventories .................................. 2,209 1,941
Prepaid expenses and other current assets .... 267 198
Deferred tax benefits ........................ 109 109
Note receivable from Xtrana................... 1,000 --
Net assets of discontinued operations ........ -- 2,256
-------- --------
TOTAL CURRENT ASSETS ........................... 9,679 9,023
PROPERTY AND EQUIPMENT ......................... 3,603 3,553
Less accumulated depreciation ................ (2,594) (2,427)
-------- --------
PROPERTY AND EQUIPMENT, NET .................... 1,009 1,126
OTHER ASSETS ................................... 1,182 884
-------- --------
TOTAL ASSETS ................................... $ 11,870 $ 11,033
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
TOTAL CURRENT LIABILITIES ...................... $ 1,184 $ 1,077
DEFERRED TAX LIABILITY ......................... 126 122
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value, 50,000,000
shares authorized; 8,319,951 and
8,286,986 shares issued and outstanding
in 2000 and 1999, respectively ............. 83 83
Other stockholders' equity ................... 10,477 9,751
-------- --------
TOTAL STOCKHOLDERS' EQUITY ..................... 10,560 9,834
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..... $ 11,870 $ 11,033
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
BIOPOOL INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
THREE MONTHS ENDING SIX MONTHS ENDING
JUNE 30, JUNE 30,
2000 1999 2000 1999
--------------------------------------------------------------------------------
(in thousands except per share data)
<S> <C> <C> <C> <C>
SALES ............................... $ 2,834 $ 2,368 $ 5,243 $ 4,492
Cost of sales ....................... 1,276 1,244 2,438 2,292
------- ------- ------- -------
GROSS PROFIT ........................ 1,558 1,124 2,805 2,200
Operating expenses:
Selling, general, administrative .. 897 803 1,783 1,475
Research and development .......... 127 94 208 193
Other (income) expenses, net ........ (38) 17 (73) 64
------- ------- ------- -------
INCOME FROM CONTINUING OPERATIONS
BEFORE TAXES ...................... 572 210 887 468
Income tax expense .................. 183 82 298 190
------- ------- ------- -------
INCOME FROM CONTINUING OPERATIONS ... 389 128 589 278
DISCONTINUED OPERATIONS NET OF
INCOME TAX EFFECT:
Income (loss) from operations ... -- (28) -- 23
Gain on disposal of net assets .. -- 199 -- 199
------- ------- ------- -------
NET INCOME .......................... $ 389 $ 299 $ 589 $ 500
======= ======= ======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic ........................... 8,320 8,387 8,307 8,463
Effect of dilutive shares ....... 26 24 34 25
------- ------- ------- -------
Diluted ........................ 8,346 8,411 8,341 8,488
======= ======= ======= =======
BASIC AND DILUTED EARNINGS PER SHARE
Continuing operations .......... $ 0.05 $ 0.02 $ 0.07 $ 0.03
Discontinued operations ........ -- 0.02 -- 0.03
------- ------- ------- -------
Net income ..................... $ 0.05 $ 0.04 $ 0.07 $ 0.06
======= ======= ======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
3
<PAGE>
<TABLE>
BIOPOOL INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
SIX MONTHS ENDING JUNE 30,
2000 1999
--------------------------------------------------------------------------------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES ....................... $ 95 $ 934
INVESTING ACTIVITIES ....................... 2,159 869
FINANCING ACTIVITIES ....................... (800) (212)
EFFECT OF EXCHANGE RATES ................... (63) (85)
------- -------
NET INCREASE (DECREASE) IN CASH ............ $ 1,391 $ 1,506
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
4
<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 six-month period ended June 30, 2000,
are not necessarily indicative of the results that may be expected for the year
ended December 31, 2000. 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, 1999.
The balance sheet at December 31, 1999, 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.
Financial information presented to the notes to the consolidated financial
statements excludes discontinued operations except where noted.
<TABLE>
2. INVENTORIES
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
---------------------------
(in thousands)
<S> <C> <C>
Raw materials .......................... $ 776 $ 710
Work in process ........................ 636 646
Finished products ...................... 797 585
------ ------
$2,209 $1,941
</TABLE>
3. EARNINGS PER SHARE
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.
4. COMPREHENSIVE INCOME
SFAS No. 130 requires unrealized gains and losses on the Company's foreign
currency translation adjustments to be included in other comprehensive income.
Total comprehensive income was $526,000 and $415,000 for the six months ended
June 30, 2000 and 1999, respectively.
5. RECLASSIFICATION
Certain data in the prior year consolidated financial statements have been
reclassified to conform to the 2000 presentation. The prior year consolidated
financial statements have been restated to reflect ongoing operations and,
accordingly, financial information presented in the notes to the consolidated
financial statements excludes discontinued operations, except where noted.
5
<PAGE>
6. SEGMENT INFORMATION
The Company currently operates in one industry, in vitro diagnostic medical
products. However, the Company has two reportable segments; Biopool
International and its wholly-owned operating subsidiary, Biopool Sweden. The
reportable segments are each managed separately because they manufacture and
sell distinct products with different production processes. Biopool
International manufactures hemostasis and drugs-of-abuse products, and Biopool
Sweden primarily manufactures fibrinolytic system testing kits.
The Company evaluates the segments and allocates resources based on net income
or loss. The accounting policies of the reportable segments are the same as
those described in the 1999 Form 10-KSB, "Summary of significant accounting
policies."
The consolidated financial statements include the following information for the
continuing operation of Biopool International and Biopool Sweden in thousands of
dollars.
<TABLE>
<CAPTION>
INTER-
BIOPOOL COMPANY
INTER- BIOPOOL ELIMINA- CONSOLI-
NATIONAL SWEDEN TIONS DATED
--------------------------------------------------------------------------------
(in thousands)
<S> <C> <C> <C> <C>
SIX MONTHS ENDED JUNE 30, 2000
Sales ............................... $ 4,126 $ 1,777 $ (660) $ 5,243
Less intercompany ................... (281) (379) 660 --
------- ------- ------- -------
Sales to unafilliated customers ..... 3,845 1,398 -- 5,243
Pre-tax income from continuing
operations ........................ 437 450 -- 887
Total assets as of June 30, 2000 .... 9,511 2,482 (123) 11,870
--------------------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1999
Sales ............................... 3,497 1,571 (576) 4,492
Less intercompany ................... (215) (361) 576 --
------- ------- ------- -------
Sales to unaffiliated customers ..... 3,282 1,210 -- 4,492
Pre-tax income from continuing
operations ........................ 323 145 -- 468
Total assets as of December 31, 1999 8,772 2,369 (108) 11,033
--------------------------------------------------------------------------------
</TABLE>
7. DISCONTINUED OPERATIONS
On April 30, 1999, we consummated the sale of certain business assets of our BCA
Division for $4.45 million in cash. BCA ceased operations to our benefit
effective May 1, 1999, but continued to convert certain inventory items on
behalf of the buyer through June 30, 1999. The Consolidated Statements of
Operations have been restated to reflect ongoing hemostasis operations. The sale
of BCA reduced the Company's sales by approximately 50%; however, the impact on
pretax income was negligible. The BCA facilities were sold during the second
quarter for $2 million, equal to the net realizable value as carried on the
books.
6
<PAGE>
8. LITIGATION
On March 10, 2000, the Company was served with a complaint filed in U.S.
District Court by Agen Biomedical Ltd. claiming that Biopool infringed an Agen
patent. The Company prepared and filed an answer. Management believes the
complaint to be without merit and that it will have no material impact to the
Company's financial position or results of operations.
9. SUBSEQUENT EVENT - MERGER WITH XTRANA, INC.
Effective August 10, 2000, Xtrana, Inc. was merged with and into the Company
pursuant to an Agreement and Plan of Reorganization dated May 3, 2000, between
Xtrana and the Company, as reported on the Company's Current Report on Form 8-K
filed with the Securities and Exchange Commission on August 11, 2000. The
Company issued 9,369,461 shares of the Company's common stock in exchange for
all the outstanding capital stock of Xtrana. The former stockholders of Xtrana
now hold approximately 50% of the outstanding stock of the Company, on a fully
diluted basis.
During the second quarter of 2000, we loaned Xtrana $1 million for general
operating purposes. We also incurred costs of $327,000 related to the Xtrana
merger, consisting primarily of brokerage and legal fees. $160,000 of these
capitalized costs were incurred by the issuance of restricted warrants to
purchase 275,000 shares of the Company's Common Stock. A warrant for 225,000
shares of Common Stock with an imputed value of $116,000 was issued to Price
Paschall, a Company director, for brokerage services rendered in connection with
the Xtrana merger. The other 50,000 warrants valued at $44,000 were issued to
the Company's legal counsel for services rendered in connection with the merger.
These fees were considered by management to be reasonable and fair.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SALE OF BLOOD GROUP SEROLOGY DIVISION
On April 30, 1999, we consummated the sale of certain business assets of our BCA
Division for $4.45 million in cash. BCA ceased operations to our benefit
effective May 1, 1999, but continued to convert certain inventory items on
behalf of the buyer through June 30, 1999. The Consolidated Statements of
Operations have been restated to reflect ongoing hemostasis operations. The sale
of BCA reduced the Company's sales by approximately 50%; however, the impact on
pretax income was negligible. The BCA facilities were sold during the second
quarter for $2 million equal to the net realizable value as carried on the
books.
MERGER WITH XTRANA, INC.
On August 10, 2000, stockholders approved the merger with Xtrana, Inc. Xtrana
was incorporated in Delaware in 1998. Xtrana, based in Denver, Colorado, has
developed new proprietary nucleic acid (DNA/RNA) testing technology, which it
plans to commercialize. Potential markets for this testing technology include
the detection of food and environmental contamination, forensics and paternity
identity testing, infectious human disease testing including bacterial warfare,
and research and other clinical applications.
In accordance with the definitive agreement dated May 4, 2000, we loaned Xtrana
$1,000,000 for general operating purposes. Certain one-time costs associated
with this merger will be reported during the first three quarters of 2000, most
of which will be capitalized. We anticipate growth in revenues, as well as a
corresponding increase in related expenses, especially research and development
costs, amortization of purchased intangible assets, and sales and marketing
expenses. We anticipate this merger will have a material negative near-term
impact on net income, but the specific magnitude is unknown at this time. We
will also experience reduced earnings per share in the near-term as a result of
the issuance of 9,369,461 shares of and 275,000 warrants to purchase Biopool
Common Stock related to the merger.
7
<PAGE>
RESULTS OF OPERATIONS
Sales were $2.8 million for the three-month period and $5.2 million for the
six-month period ended June 30, 2000, compared with $2.4 million and $4.5
million for the corresponding periods of 1999. The 2000 sales represent
increases of 20% and 17%, respectively, over the 1999 periods. These increases
were the direct result of a renewed emphasis on marketing our core hemostasis
products.
Cost of goods sold was $1.3 million for the three months and $2.5 million for
the six months ended June 30, 2000, compared with $1.2 million and $2.3 million
for the same periods in 1999. The year-to-date cost of sales as a percentage of
revenues was 47% in 2000 versus 51% in 1999. This 4% improvement is due to a
variety of factors, including a 5% price increase implemented during the first
half of 2000 on certain products and some economies of scale. We anticipate
continued improvement over 1999 margin percentages, but not necessarily at the
same level experienced year-to-date.
Selling, general and administrative ("SG&A") expenses were $897,000 and
$1,783,000 for the three months and six months ended June 30, 2000, compared
with $803,000 and $1,475,000 for the same periods of 1999. These increases were
primarily the result of increased sales and marketing efforts to improve
domestic sales and certain one-time professional fees. We anticipate continued
higher levels of SG&A spending for the foreseeable future.
The 2000 Other income relates to interest income and favorable foreign exchange
transactions. The 1999 Other expenses primarily related to costs incurred to
move our Swedish operations (Biopool Sweden) into larger facilities.
The 1999 Gain on Sale of discontinued operations reflect the sale of inventory
and receivables in the second quarter of 1999 and the anticipated sale of the
facilities, which occurred in the second quarter of 2000.
FINANCIAL CONDITION
As of June 30, 2000, working capital was $8.5 million, with a current ratio of
8.2 to 1.0. In May 2000, we sold the BCA facilities for $2 million cash and
loaned Xtrana $1 million for general operating purposes. We have a $2 million
revolving credit facility that is unused and available.
During the second quarter of 2000, we incurred costs of $327,000 related to the
Xtrana merger, consisting primarily of brokerage and legal fees. $160,000 of
these capitalized costs were incurred by the issuance of restricted warrants to
purchase 275,000 shares of the Company's Common Stock. A warrant for 225,000
shares of Common Stock with an imputed value of $116,000 was issued to Price
Paschall, a Company director, for brokerage services rendered in connection with
the Xtrana merger. The other 50,000 warrants valued at $44,000 were issued to
the Company's legal counsel for services rendered in connection with the merger.
These fees were considered by management to be reasonable and fair.
Our current availability of cash, unused line of credit, working capital, and
cash flow from operations are adequate to meet our ongoing hemostasis needs for
at least the next twelve months. However, we will investigate and pursue
additional financing options in the near term to fully support the Xtrana
activities.
We issued 9,369,461 shares of Biopool Common Stock to the Xtrana stockholders on
August 10, 2000. This issuance will have a dilutive effect on earnings per share
in the near term.
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'
8
<PAGE>
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
(a) The Registrant's Annual Meeting of Stockholders was held August
10, 2000.
(b) The following directors were elected for the ensuing year at the
Annual Meeting:
Michael D. Bick, Ph.D. N. Price Paschall
Douglas L. Ayer James H. Chamberlain
No other director's term of office continued after the
Annual Meeting.
(c) The matters voted upon at the Annual Meeting, the number of votes
cast for, against, or withheld, as well as the number of
abstentions and non-votes as to each such matter were as follows:
1. The election of Michael D. Bick, Ph.D., as a director:
7,812,956 votes for; 95,600 votes against; 0 votes withheld;
0 abstentions, 411,395 non-votes.
2. The election of Douglas L. Ayer as a director:
7,738,256 votes for; 170,300 votes against; 0 votes
withheld; 0 abstentions, 411,395 non-votes.
3. The election of N. Price Paschall as a director:
7,742,256 votes for; 166,300 votes against; 0 votes
withheld; 0 abstentions, 411,395 non-votes.
4. The election of James H. Chamberlain, as a director:
7,743,756 votes for; 164,800 votes against; 0 votes
withheld; 0 abstentions, 411,395 non-votes.
5. Ratification of the appointment of Ernst & Young LLP as the
independent public accountants of the Company:
7,866,106 votes for; 14,700 votes against; 0 votes withheld;
27,750 abstentions, 411,395 non-votes.
6. Approval of the proposed merger of Xtrana, Inc. with the
Company pursuant to the terms of the Merger Agreement
between the Company and Xtrana, Inc.:
5,339,623 votes for; 140,550 votes against; 0 votes
withheld; 16,589 abstentions, 2,823,189 non-votes.
9
<PAGE>
7. Ratification of the adoption of the Biopool International,
Inc. 2000 Stock Incentive Plan:
4,957,168 votes for; 435,050 votes against; 0 votes
withheld; 104,544 abstentions, 2,823,189 non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - None
(b) Reports on Form 8-K - None
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: AUGUST 14, 2000 BIOPOOL INTERNATIONAL, INC.
-------------------- ---------------------------
(Registrant)
/S/ MICHAEL D. BICK, PH.D.
--------------------------
Michael D. Bick, Ph.D.
Chairman of the Board
/S/ ROBERT K. FOOTE
Robert K. Foote
Chief Financial Officer and
Corporate Secretary
10
