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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 quarterly period ended September 30, 2000
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COMMISSION FILE NUMBER 0-17714
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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, CALIFORNIA 93003 (805) 654-0643
(Address of principal executive offices) (Registrant's telephone 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, 2000, Common Stock, $.01 par value per share,
17,149,412 shares.
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<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
BIOPOOL INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
--------------------------------------------------------------------------------
(in thousands except share data)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash ............................................. $ 4,238 $ 2,749
Accounts receivable, net ......................... 1,803 1,770
Inventories ...................................... 2,125 1,941
Prepaid expenses and other
current assets ................................. 187 198
Deferred tax benefits ............................ 109 109
Net assets of discontinued
operations ..................................... -- 2,256
-------- --------
TOTAL CURRENT ASSETS ............................... 8,462 9,023
PROPERTY AND EQUIPMENT ............................. 3,648 3,553
Less accumulated depreciation .................... (2,617) (2,427)
-------- --------
PROPERTY AND EQUIPMENT, NET ........................ 1,031 1,126
Deferred tax benefits, non current ................. 682 --
Goodwill, net of accumulated
amortization of $420 and $310
in 2000 and 1999, respectively ................... 9,689 481
OTHER ASSETS ....................................... 287 403
-------- --------
TOTAL ASSETS ....................................... $ 20,151 $ 11,033
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
TOTAL CURRENT LIABILITIES .......................... $ 1,266 $ 1,077
DEFERRED TAX LIABILITY ............................. 126 122
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value,
50,000,000 shares authorized;
17,149,412 and 8,286,986 shares
issued and outstanding in 2000
and 1998, respectively ......................... 162 83
Other stockholders' equity ....................... 18,597 9,751
-------- --------
TOTAL STOCKHOLDERS' EQUITY ......................... 18,759 9,834
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......... $ 20,151 $ 11,033
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
BIOPOOL INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<CAPTION>
THREE MONTHS ENDING NINE MONTHS ENDING
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
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(in thousands except per share data)
<S> <C> <C> <C> <C>
SALES ............................ $ 2,446 $ 1,984 $ 7,688 $ 6,476
Cost of sales .................... 1,429 962 3,874 3,254
-------- -------- -------- --------
GROSS PROFIT ..................... 1,017 1,022 3,814 3,222
Operating expenses:
Selling, general, administrative 1,015 795 2,817 2,247
Research and development ....... 169 48 325 241
Goodwill amortization .......... 83 12 119 35
OTHER (INCOME) EXPENSES, NET ... (64) 49 (141) 113
-------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES . (186) 118 694 586
INCOME TAX EXPENSE ............... (33) 41 265 231
-------- -------- -------- --------
INCOME (LOSS) FROM CONTINUING
OPERATIONS ..................... (153) 77 429 355
DISCONTINUED OPERATIONS NET OF
INCOME TAX EFFECT:
Income (loss) from operations .. -- -- -- 23
Gain on disposal of net assets . -- -- -- 199
-------- -------- -------- --------
NET INCOME (LOSS) ................ $ (153) $ 77 $ 429 $ 577
======== ======== ======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING
Basic ............................ 12,639 8,287 9,622 8,404
Effect of dilutive shares ........ 449 21 154 23
-------- -------- -------- --------
Diluted .......................... 13,088 8,308 9,776 8,427
======== ======== ======== ========
BASIC AND DILUTED EARNINGS
PER SHARE
Continuing operations ............ $ (0.01) $ 0.01 $ 0.04 $ 0.04
Discontinued operations .......... -- -- -- 0.03
-------- -------- -------- --------
Net income ....................... $ (0.01) $ 0.01 $ 0.04 $ 0.07
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
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<PAGE>
<TABLE>
BIOPOOL INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
NINE MONTHS ENDING
SEPTEMBER 30,
2000 1999
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(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES ......................... $ 295 $ 1,271
INVESTING ACTIVITIES ......................... 1,255 837
FINANCING ACTIVITIES ......................... 200 (212)
EFFECT OF EXCHANGE RATES ..................... (261) (28)
------- -------
NET INCREASE (DECREASE) IN CASH .............. $ 1,489 $ 1,868
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
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<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,
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.
2. INVENTORIES SEPTEMBER 30, DECEMBER 31,
2000 1999
-------------------------------------
(in thousands)
Raw materials ................. $ 819 $ 710
Work in process ............... 693 646
Finished products ............. 613 585
------- -------
$ 2,125 $ 1,941
======= =======
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 $168,000 and $549,000 for the nine months ended
September 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.
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<PAGE>
6. SEGMENT INFORMATION
The Company currently operates in two industries, in vitro diagnostic medical
products and nucleic acid (DNA/RNA) testing. Within the in vitro diagnostic
medical products industry, the Company has two reportable segments, Biopool
International and its wholly owned operating subsidiary, Biopool Sweden. These
two segments each manufacture and sell distinct products with different
production processes. Biopool International manufactures hemostasis products,
and Biopool Sweden primarily manufactures fibrinolytic system testing kits. The
nucleic acid (DNA/RNA) testing segment is operated under the Xtrana name and was
acquired by the Company on August 10, 2000, as described in Footnote 9, "Merger
with Xtrana, Inc."
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, Biopool Sweden, and Xtrana in
thousands of dollars.
<TABLE>
<CAPTION>
INTER-
COMPANY
BIOPOOL BIOPOOL ELIMIN- CONSOLI-
INTERNATIONAL SWEDEN XTRANA ATIONS DATED
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(in thousands)
<S> <C> <C> <C> <C> <C>
NINE MONTHS ENDED
SEPTEMBER 30, 2000
Sales ................. $ 6,100 $ 2,487 $ 45 $ (943) $ 7,688
Less intercompany ..... (399) (544) -- 943 --
------- ------- ------- ------- -------
Sales to unafilliated
customers ........... 5,701 1,943 45 -- 7,688
Pre-tax income from
continuing operations 401 581 (288) -- 694
Total assets as of
September 30, 2000 .. 8,864 2,392 10,054 (1,159) 20,151
--------------------------------------------------------------------------------
NINE MONTHS ENDED
SEPTEMBER 30, 1999
Sales ................. 5,107 2,263 -- (894) 6,467
Less intercompany ..... (333) (561) -- 894 --
------- ------- ------- ------- -------
Sales to unaffiliated
customers ........... 4,774 1,702 -- -- 6,467
Pre-tax income from
continuing operations 367 219 -- -- 586
Total assets as of
December 31, 1999 ... 8,772 2,369 -- (108) 11,033
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</TABLE>
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<PAGE>
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 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 of
2000 for $2 million, equal to the net realizable value as carried on the books.
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. 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, and
amended October 24, 2000. The Company issued 9,369,461 shares of the Company's
common stock in exchange for all the outstanding capital stock of Xtrana,
936,946 shares of which are held in escrow subject to the achievement of certain
sales objectives for the Xtrana business. 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. In the second and third quarters of 2000, we incurred costs
of $913,600 related to the Xtrana merger, consisting primarily of brokerage and
legal fees. $586,600 of these capitalized costs were incurred by the issuance of
warrants to purchase 815,000 shares of the Company's Common Stock. A warrant for
225,000 shares of Common Stock with an imputed fair value of $116,000 was issued
to Price Paschall, a Company director, for brokerage services rendered in
connection with the Xtrana merger, and a warrant for 540,000 shares of Common
Stock with an imputed fair value of $426,600 was issued to Claremont York
Capital for brokerage services rendered in connection with the Xtrana merger.
The other 50,000 warrants, fair 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.
The pro forma unaudited results of operations for the nine months ended
September 30, 2000 and 1999, assuming the consummation of the merger as of
January 1 of each period, are as follows:
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<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30 2000 1999
------------------------------ -------- --------
<S> <C> <C>
Sales ............................... $ 8,394 $ 7,030
Net income from continuing operations (799) (597)
Net income .......................... $ (799) $ (375)
Weighted average shares outstanding
Basic ............................. 17,140 17,233
Effect of dilutive shares ......... 154 23
------- --------
Diluted ........................... 17,294 17,256
Basic and diluted earnings per share
Continuing operations ............. $ (0.05) $ (0.03)
Discontinued operations ........... -- 0.01
------- --------
Net income ........................ $ (0.05) $ (0.02)
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Founded in 1987, Biopool International develops, manufactures, and markets a
full range of test kits to assess and diagnose disorders of blood coagulation,
thrombotic risk factors, fibrinolysis, platelet function, and the vascular
system, as well as specialty toxicology controls used to monitor and measure the
presence of drugs of abuse. Effective with our merger with Xtrana, the Company
also develops nucleic acid-based tests for use in drug discovery, detection of
environmental and food contaminants, forensics and identity testing, human and
animal diseases, genetic predisposition to disease, and other applications.
MERGER WITH XTRANA, INC.
On August 10, 2000, stockholders approved the merger with Xtrana, Inc. Xtrana
was incorporated in Delaware in 1997. 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 connection with the merger, we
issued 9,369,461 shares of common stock, 936,946 shares of which are held in
escrow subject to the achievement of certain sales objectives for the Xtrana
business as described in the Company's current report on Form 8-K filed with the
Securities and Exchange Commission on August 11, 2000, and amended on October
24, 2000. We recognized $913,600 in costs associated with the merger, all of
which were capitalized as of August 10, 2000.
SALE OF BLOOD GROUP SEROLOGY DIVISION
On April 30, 1999, we consummated the sale of certain business assets of BCA 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 operations. The sale of BCA will reduce the
Company's future sales by approximately 50%; however, the impact on future net
income will be negligible.
RESULTS OF OPERATIONS
Sales were $2.4 million for the three-month period and $7.7 million for the
nine-month period ended September 30, 2000, compared with $2.0 million and $6.5
million for the corresponding periods of 1999. The 2000 sales represent
increases of 20% and 18%, respectively, over the 1999 periods. These increases
primarily resulted from further development of our private label products and
increased penetration of international markets.
8
<PAGE>
Cost of goods sold was $1.4 million for the three months and $3.9 million for
the nine months ended September 30, 2000, compared with $1.0 million and $3.3
million for the same periods in 1999. Gross margin was 42% for the three-month
period and 50% for the nine-month period ended September 30, 2000, compared with
50% and 49% for the corresponding periods in 1999. Gross margins were reduced by
3% for the three-month period in 2000 as a result of the addition of the Xtrana
business. Historically, the Xtrana operations have generated gross margin levels
in excess of 50%. For the period ended September 30, 2000, Xtrana margins were
negative due to the expiration of certain grants. The Company expects these
trends to continue through the end of 2000, when it is anticipated that new
grants will begin to come on line and revenue from the sale of XtraAmp(TM),
Xtrana's first commercial product, wiLL begin to have a positive impact. Margins
were also negatively impacted as a result of reduced fixed overhead absorption
to inventory as a part of a program to reduce inventory.
Operating expenses were $1.3 million and $3.3 million for the three months and
nine months ended September 30, 2000, compared with $0.9 million and $2.5
million for the same periods of 1999. Operating expenses increased by $0.3
million during the third quarter as a result of the addition of the Xtrana
business. The remaining increase was due to certain bonus payments and severance
obligations resulting from the merger of $0.1 million and increased spending on
marketing, research and development, and quality assurance.
The 2000 Other income primarily relates to interest income. 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 September 30, 2000, working capital was $7.2 million, with a current ratio
of 6.7 to 1.0. In May 2000, we sold the BCA facilities for $2 million cash. We
have a $2 million revolving credit facility that is unused and available.
Our current availability of cash, unused line of credit, working capital, and
cash flow from operations are adequate to meet our ongoing needs for at least
the next twelve months. However, we may investigate and pursue additional
financing options in the near term to accelerate the development and
commercialization of the Xtrana technologies.
We issued 8,829,461 shares of Biopool Common Stock to the Xtrana stockholders on
August 10, 2000 and 815,000 warrants to certain financial advisors. 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'
pricing strategies and technological innovations, changes in health care and
government regulations, litigation claims, foreign currency fluctuation, product
acceptance, as well as other factors discussed in the Company's last Report on
Form 10-KSB.
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<PAGE>
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.
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<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
4.1 Rights Agreement Amendment dated March 1, 2000
(b) Reports on Form 8-K:
1. Form 8-K dated August 10, 2000 and filed August 11, 2000.
Disclosure of the completed merger of Biopool International,
Inc., and Xtrana, Inc.; Agreement and Plan of Reorganization
dated May 3, 2000; and resulting change in control.
2. Form 8-K/A dated August 10, 2000 and filed October 24, 2000.
Disclosure of financial statements and pro forma financial
information not filed with the initial report on Form 8-K.
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<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 14, 2000 BIOPOOL INTERNATIONAL, INC.
----------------- -------------------------------------
(Registrant)
/s/ JOHN H. WHEELER
-------------------------------------
John H. Wheeler
President and Chief Executive Officer
/s/ TIMOTHY J. DAHLTORP
-------------------------------------
Timothy J. Dahltorp
Chief Financial Officer and
Corporate Secretary
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