UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
Amendment No. 1 on FORM 10-K/A
FOR ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1994. Commission File Number: 1-10581
BENTLEY PHARMACEUTICALS, INC.
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(Exact name of registrant as specified in its charter)
Florida 59-1513162
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(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
One Urban Centre, Suite 550, 4830 West Kennedy Blvd., Tampa, FL 33069
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(Address of principal executive offices) Zip Code)
Registrant's telephone number, including area code: (813) 286-4401
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Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
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Common Stock, par value American Stock Exchange
$.02 per share
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant:(1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes x No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge in definitive proxy or information statements,
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of March 20, 1995, the aggregate market value of the Common Stock of the
Registrant, its only class of voting securities, held by non-affiliates of the
Registrant was approximately $8,215,190, calculated on the basis of the closing
price of such stock on the American Stock Exchange on such date.
The number of shares outstanding of the Registrant's Common Stock on March 20,
1995 was 29,773,414.
Portions of the Registrant's Proxy Statement for its 1995 Annual Meeting of
Stockholders are incorporated by reference in Part III hereof.
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Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL:
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Bentley Pharmaceuticals, Inc. (the "Registrant") is an international
pharmaceutical and health care company with its primary focus on the development
and marketing of pharmaceutical and health care products. Substantially all of
its revenues have come from its operations in France and Spain; however, the
Registrant began limited marketing of health care products in the United States
in 1994.
Effective December 31, 1992, the Registrant changes its fiscal year ended from
June 30 to December 31. The Registrant incurred a net loss of $3,578,000 for the
year ended December 31, 1994. The Registrant intends to continue to focus its
efforts on business activities which management believes should result in
operating profits in the future, of which there can be no assurance. To improve
its results, the Registrant's management will focus on increasing higher margin
pharmaceutical and health care product sales, controlling expenses through its
austerity program, careful prioritization of research and development projects
resulting in continued low overall research and development expenditures, and
potentially acquiring marketable products or profitable companies in the United
States or Europe that are compatible with the Registrant's strategy for growth.
See "--Liquidity and Capital Resources." Currently, the profit margins for the
products sold by the Registrant's subsidiary in Spain are significantly higher
than those generated by the Registrant's subsidiary in France. For business
segment information on the Registrant's operations outside the United States,
see Note 14 of Notes to Consolidated Financial Statements.
RESULTS OF OPERATIONS:
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FISCAL YEAR ENDED DECEMBER 31, 1994 VERSUS FISCAL YEAR ENDED DECEMBER 31, 1993:
The Registrant reported sales of $26,284,000 and a net loss of $3,578,000 or
$1.56 per share for the fiscal year ended December 31, 1994, compared to sales
of $19,849,000 and a net loss of $10,236,000 or $6.32 per share for the prior
year.
SALES AND COST OF SALES
The 32% increase in sales is primarily a result of increased sales by the
Registrant's subsidiary in France, Chimos/LBF. Gross margins for the year ended
December 31, 1994 averaged 18% compared with 24% in the prior year. The lower
margins are primarily a result of the lower gross margins experienced by
Chimos/LBF's distribution operations, whose sales accounted for approximately
77% of revenues, compared with 68% in the prior year. The lower gross margins
experienced by the Registrant in France were only partially offset in Spain,
where Laboratorios Belmac is experiencing margins substantially higher than
those in France.
OPERATING EXPENSES
Selling, general and administrative expenses were $7,716,000, or 29% of sales,
for the year ended December 31, 1994 compared with $9,170,000, or 46% of sales,
for the prior year. The decrease from 46% to 29% of sales is primarily
attributable to adjustments to accruals for tax contingencies, related primarily
to product registration taxes, totaling $1,645,000, which are no longer
considered probable and to cost control measures implemented by the Registrant
and reduced marketing costs
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in France due to the suspension of marketing of Biolid during the fourth quarter
of 1993. Notwithstanding these efforts, selling and marketing costs continue to
be significant and necessary expenses in connection with the Registrant's plans
to increase market share in Spain. To the extent practical, however, the
Registrant intends to continue its efforts to control general and administration
expenses as part of its austerity program.
Research and development expenses were $759,000 for the year ended December 31,
1994 compared to $1,555,000 in the prior year. The 51% decrease reflects the
results of a thorough review of all research and development activities and the
establishment of priorities based upon both technical and commercial criteria.
During 1994, the Registrant did not commence any new research and development
programs. It did, however, continue certain programs already in progress,
including a Biolid pharmacokinetics trial. The Registrant intends to continue to
carefully manage its research and development expenditures in the future in view
of its limited resources.
Depreciation and amortization expenses were $575,000 for the year ended December
31, 1994 compared to $756,000 for the prior year. The 24% decrease is primarily
attributable to the write-off of Drug Licenses and Product Rights as of December
31, 1993, and the 1994 sale of its Spanish ciprofloxacin antibiotic,
Belmacina(R), resulting in reduced amortization charges.
OTHER INCOME/EXPENSE
Other income/expense for the year ended December 31, 1994 included the gain
recognized upon the 1994 sale of the Registrant's Spanish rights to its
ciprofloxacin antibiotic, Belmacina(R), of approximately $884,000.
FISCAL YEAR ENDED DECEMBER 31, 1993 VERSUS TWELVE MONTHS ENDED DECEMBER 31,
1992:
The Registrant reported revenues of $19,849,000 and a net loss of $10,236,000 or
$6.32 per share for the year ended December 31, 1993, compared to revenues of
$19,217,000 and a net loss of $27,023,000 or $23.70 per share for the same
period in the prior year.
SALES AND COST OF SALES
While 1993 revenues increased slightly, their composition changed significantly.
Sharply reduced sales at Laboratoires Belmac due to its divestiture of Amodex(R)
and decreased promotion and the resulting reduction in sales of its sachet
formulation of Biolid were more than offset by increases in sales generated by
Chimos. Gross margins for the year ended December 31, 1993 averaged 24% compared
to 37% in the comparable period of the prior year. The lower margins were
primarily a result of the lower gross margins experienced by Chimos'
distribution operations, whose sales accounted for approximately 68% of
revenues, as compared to 52% in the comparable period of the prior year and to
low gross margin contributions from Laboratories Belmac's sales due to the fact
that Amodix(R) and Biolid inventories were adjusted downward to net realizable
value as of December 31, 1992. The lower gross margins experienced by the
Registrant in France were only partially offset in Spain, where Laboratorios
Belmac experienced margins substantially higher than those in France.
OPERATING EXPENSES
Selling, general and administrative expenses were $9,170,000 for the year ended
December 31, 1993 compared to $15,724,000 for the same period in the prior year.
The decrease was primarily attributable to cost control measures implemented by
the Registrant and reduced marketing costs in
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France due to the divestiture of Amodex(R) and the decreased promotion of its
sachet formulation of Biolid.
Research and development expenses were $1,555,000 for the year ended December
31, 1993 compared to $7,339,000 in the comparable period of the prior year. The
decrease reflected the results of a thorough review of all research and
development activities, and the establishment of priorities based upon both
technical and commercial criteria. Biolid (tablet formulation) was the primary
focus in research and development.
Depreciation and amortization expenses were $756,000 for the year ended December
31, 1993 compared to $1,497,000 for the same period in the prior year. The
decrease was primarily attributable to the write-down of drug licenses and
product rights and to the divestiture of Amodex(R).
As a result of the decision to withdraw the sachet formulation of Biolid from
the French market, the Registrant recorded an expense of $2,241,000 in the
fourth quarter of 1993, reflecting the write-off of the capitalized costs with
respect to the sachet formulation of Biolid, Biolid sachet inventories, and
costs associated with refunding certain costs to the potential buyer of these
rights.
The Registrant agreed in 1993 to issue to plaintiffs in class action litigation,
shares of its Common Stock with a market value of $1,000,000. The Registrant
accrued this amount as a non-current liability as of December 31, 1993.
OTHER INCOME/EXPENSE
The provision for income taxes of $343,000 for the twelve months ended December
31, 1992 was a result of foreign taxes on profits generated by Chimos in 1992.
Chimos was not eligible to file a consolidated income tax return with
Laboratoires Belmac in France until 1993; therefore, the Laboratoires Belmac
losses were not available to offset Chimos' taxable profits in 1992. No such
provision was required for the year ended December 31, 1993.
LIQUIDITY AND CAPITAL RESOURCES:
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Total assets increased from $16,160,000 at December 31, 1993 to $16,332,000 at
December 31, 1994, while Common Stockholders' Equity increased from $2,941,000
at December 31, 1993 to $4,980,000 at December 31, 1994. The increase in Common
Stockholders' Equity is primarily a result of net proceeds of approximately
$3,384,000 received from private placements of Common Stock and warrants and
approximately $693,000 received from stock subscriptions receivable, offset by
losses incurred by the Registrant for the period. Common Stockholders' Equity
also increased by $1,000,000 as a result of the issuance of Common Stock to
settle a class action litigation.
The Registrant's working capital was $1,928,000 at December 31, 1994 compared to
$2,043,000 at December 31, 1993. Marketable securities were liquidated during
1994 to satisfy liabilities of the Registrant. Receivables increased as a result
of the growth in the Registrant's business as well as the $1,140,000 receivable
from the sale in Spain of its ciprofloxacin antibiotic, Belmacina(R), of which
$760,000 has been received subsequent to year end. Accounts payable increased in
part due to the increased level of business and in part due to the Registrant's
careful management of its limited liquid resources.
Investing activities provided net cash of $134,000 for the year ended December
31, 1994, including proceeds from the sale of the Registrant's ciprofloxacin
antibiotic, Belmacina(R) in Spain, which was sold for $1,556,000 and generated a
gain of $884,000 (See Note 8). The Registrant also sold certain
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investments during 1994 generating proceeds of $1,040,000. The Registrant
invested $648,000 in its partnership with Maximed Corporation (named Maximed
Pharmaceuticals) for development of hydrogel based feminine healthcare products.
Management believes that it is possible to introduce its first product to the
market in 1996 if a dispute with its partner can be resolved and product
development progresses as planned. Investing activities also included a
repayment to Evans Medical S.A. of $793,000 for amounts due relating to the
cancellation of the proposed sale of the marketing rights to the sachet
formulation of Biolid(R) in France in 1993.
Financing activities (primarily receipt of proceeds from private placements and
from stock subscriptions receivable) provided net proceeds of $3,439,000 for the
year ended December 31, 1994, while operating activities for the year ended
December 31, 1994 required net cash of $3,415,000.
In the past, the Registrant has experienced lower sales in the fourth calendar
quarter of each year. Should the Registrant begin large sales of a
pharmaceutical product whose sales are seasonal, seasonality of its sales may
become more significant.
A substantial amount of the Company's business is conducted in France and Spain
and is therefore influenced by the extent to which there are fluctuations in the
dollar's value against such countries' currencies. The effect of foreign
currency fluctuations on long lives assets for the year ended December 31, 1994
was an increase of $443,000 and the cumulative historical effect at September
30, 1995 was a decrease of $1,101,000 as reflected in the Company's Consolidated
Balance Sheets in the "Liabilities and Stockholders' Equity" section. Although
exchange rates fluctuated significantly in recent months, the Registrant does
not believe that the effect of foreign currency fluctuation is material to the
Registrant's results of operations as the expenses related to much of the
Registrant's foreign currency revenues are in the same currency as such
revenues. The Registrant relies primarily upon financing activities to fund the
operations of the Registrant in the United States and has not transferred
significant amounts into or out of the United States in the recent past. In the
event that the Registrant is required to fund United States operations with
funds generated in France or Spain, currency rate fluctuations in the future
could have a significant impact on the Registrant. However, at the present time,
the Registrant does not anticipate altering its business plans and practices to
compensate for future currency fluctuations.
The Registrant continues to experience negative cash flows from operating
activities, and will need to secure additional financing during 1995 in order to
fund its operations, including financing which its partnership with Maximed
Corporation may require to develop and market its hydrogel-based formulation
with extended duration. (See Item 3. Legal Proceedings.) The Registrant may seek
to enter into a partnership or other collaborative funding arrangement with
respect to future clinical trials (see "Results of Operations"). There can be no
assurance that the Registrant can secure such financing under favorable terms if
at all. The Registrant, however, continues to explore alternative sources for
financing its business. In appropriate situations, that will be strategically
determined, the Registrant may seek financial assistance from other sources,
including contribution by others to joint ventures and other collaborative or
licensing arrangements for the development, testing, manufacturing and marketing
of products and the sale of a minority interest in one or more of its
subsidiaries. Management expects that if it is successful in completing the
financing arrangements that it is actively pursuing, by carefully prioritizing
research and development activities, and continuing its austerity program
implemented in early 1993, the Registrant should have sufficient liquidity to
fund operations through 1995.
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SIGNATURES
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Pursuant to the requirements of Section 13 or 15(d) 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.
BENTLEY PHARMACEUTICALS, INC.
By: /s/ Michael D. Price
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Michael D. Price
Vice President and Chief Financial Officer
Dated: February 12, 1996
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