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FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q SB/A
[X] QUARTERLY REPORT PER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE PERIOD ENDED JUNE 30, 1999.
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 0-9860
BIOSEARCH MEDICAL PRODUCTS, INC.
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(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2090421
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
35 INDUSTRIAL PARKWAY, SOMERVILLE, NEW JERSEY 08876-1276
- --------------------------------------------- -------------
(Address of principal executive offices) (Zip Code + 4)
Registrant's telephone number, including area code: (908) 722-5000
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 the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] YES [_] No
Indicate the number of shares outstanding of each of the issuers classes of
Common Stock, as of the close of the period covered by this report.
OUTSTANDING AT
CLASS JUNE 30, 1999
--------------- ---------------
Common Stock,
without par value 2,202,878
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BIOSEARCH MEDICAL PRODUCTS, INC.
INDEX TO FORM 10-Q SB
JUNE 30, 1999
PAGE NO.
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PART I - FINANCIAL INFORMATION
Condensed Balance Sheet at June 30, 1999 (unaudited)
and December 31, 1998. 3 - 4
Condensed Statements of Operations (unaudited)
for the three month periods and six month periods ended
June 30, 1999 and June 30, 1998. 5
Condensed Statements of Cash Flows (unaudited)
for the six month periods ended
June 30, 1999 and June 30, 1998. 6
Notes to (unaudited) Condensed
Financial Statements. 7
Management's Discussion and Analysis of the Financial
Condition and the Results of Operations. 8 - 9
PART II - OTHER INFORMATION
Signatures. 10
2
PART I
ITEM I - FINANCIAL STATEMENTS
BIOSEARCH MEDICAL PRODUCTS, INC.
CONDENSED BALANCE SHEETS
ASSETS
JUNE 30 DECEMBER 31
1999 1998(1)
UNAUDITED
CURRENT ASSETS:
Cash and cash equivalents $ 63,977 $ 105,768
Trade receivables 281,315 78,751
Inventories (note 2) 378,956 297,613
Other assets 210,478 256,127
---------- ----------
TOTAL CURRENT ASSETS 934,726 738,259
PROPERTY, PLANT AND EQUIPMENT, (NET) 82,978 152,887
OTHER ASSETS 4,122 5,862
---------- ----------
TOTAL ASSETS $1,021,826 $ 896,998
========== ==========
(1) - Derived from audited financial statements.
(continued)
3
BIOSEARCH MEDICAL PRODUCTS, INC.
CONDENSED BALANCE SHEETS
(CONTINUED)
LIABILITIES AND SHAREHOLDERS' EQUITY
JUNE 30 DECEMBER 31
1999 1998(1)
UNAUDITED
CURRENT LIABILITIES:
Customer deposit $ 38,087 $ 380,000
Accounts payable 320,869 253,498
Accrued liabilities 84,866 174,330
------------ ------------
TOTAL CURRENT LIABILITIES 443,822 807,828
LONG-TERM DEBT (NOTE 3) -- --
------------ ------------
TOTAL LIABILITIES 443,822 807,828
------------ ------------
SHAREHOLDERS' EQUITY:
Common stock, no par value; 5,000,000
shares authorized; issued 2,202,878
at June 30, 1999, and at December 31, 1998 11,129,954 11,129,954
Accumulated deficit (10,520,711) (11,009,545)
Treasury stock, at cost; 7,920 shares
at June 30, 1999 and at December 31, 1998 (31,239) (31,239)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 578,004 89,170
------------ ------------
$ 1,021,826 $ 896,998
============ ============
(1) - Derived from audited financial statements.
See accompanying notes to
unaudited condensed financial statements.
4
BIOSEARCH MEDICAL PRODUCTS, INC.
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
Revenues, net $ 498,074 $ 381,065 $ 716,475 $ 985,182
Cost of goods sold 341,707 320,969 555,914 751,071
----------- ----------- ----------- -----------
Gross profit 156,367 60,096 160,561 234,111
Selling, general and
administrative costs 218,380 224,041 413,609 426,059
----------- ----------- ----------- -----------
Operating loss (62,013) (163,945) (253,048) (191,949)
Other income/(expense):
Interest expense -- (1,542) -- (22,427)
Other, net 150,455 -- 150,622 1,886
Gain on sale of fixed assets and
technology -- -- 591,259 --
----------- ----------- ----------- -----------
150,455 (1,542) 741,881 (20,541)
----------- ----------- ----------- -----------
Pre-tax net income/(loss) 88,442 (165,487) 488,833 (212,490)
Federal income taxes
NET INCOME/(LOSS) $ 88,442 $ (165,487) $ 488,833 $ (212,490)
=========== =========== =========== ===========
NET INCOME/(LOSS) PER COMMON SHARE $ .04 $ (.08) $ .22 $ (.10)
=========== =========== =========== ===========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES 2,202,878 2,202,878 2,202,878 2,202,878
=========== =========== =========== ===========
See accompanying notes to
unaudited condensed financial statements
5
BIOSEARCH MEDICAL PRODUCTS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
UNAUDITED
SIX MONTHS ENDED
JUNE 30
-----------------
1999 1998
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 488,833 $(212,490)
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 16,284 38,891
Gain on sale of fixed assets and technology (591,259) --
--------- ---------
Sub total (574,975) 38,891
--------- ---------
CHANGES IN ASSETS AND LIABILITIES:
(Increase)/decrease in accts receivable (202,564) 136,129
(Increase/decrease in inventory (81,342) 23,915
Decr/(incr) in other current assets 45.649 3,582
Increase in other assets 1,740 1,064
Increase)/(decrease) in accts payable 67,371 (3,510)
Increase/(decrease) in other liabilities (89,464)
Increase/(decrease) in customer deposits (141,913) 15,241
--------- ---------
Sub total (400,523) 176,421
--------- ---------
Total adjustments (975,498) 215,312
--------- ---------
Net cash (used)/provided by operating activities (486,665) 2,822
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (5,126) (3,488)
Proceeds from sale of fixed assets and technology 450,000 --
Net cash(used)/provided by investing activities 444,874 (3,488)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term borrowings -- --
--------- ---------
Net cash used in financing activities -- --
--------- ---------
Net decrease in cash & cash equivalents (41,791) (666)
Cash & cash equivalents at beginning of period 105,768 14,486
--------- ---------
Cash & cash equivalents at end of period $ 63,977 $ 13,820
========= =========
See accompanying notes to
unaudited condensed financial statements
6
BIOSEARCH MEDICAL PRODUCTS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
UNAUDITED
1. BASIS OF PRESENTATION
The accounting policies followed by the Company are set forth in Note 1 of
Notes to Condensed Financial Statements in the 1998 Annual Report on Form
10-KSB.
In the opinion of the management of the Company, the accompanying condensed
financial statements contain only normal and recurring adjustments necessary for
the fair presentation of the Company's financial position as of June 30, 1999
and the results of operations for the three month periods and six month periods
ended June 30, 1999 and June 30, 1998 and the statement of cash flows for the
six month periods ended June 30, 1999 and June 30, 1998.
The results of operations for the three month periods and six month periods
ended June 30, 1999 are not necessarily indicative of the results to be expected
for a succeeding quarter or for the full year.
2. INVENTORIES
JUNE 30, 1999 DECEMBER 31, 1998
UNAUDITED
Finished Goods $121,266 $ 96,263
Work In Process 79,581 61,915
Raw Materials 178,109 139,435
-------- --------
$378,956 $297,613
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3. OTHER INCOME
In February 1999 the Company reached an agreement with C.R.Bard where
they purchased the worldwide exclusive rights to the coating technology for
intermittent urinary catheters and related coating machine for $650,000. The
machine had a net book value of $58,741 creating a gain on the sale of $591,259.
The Company received $450,000 cash and applied a $200,000 deposit.
On June 7, 1999 entered into an agreement with Applied Medical Resources
in which they were granted a perpetual, non exclusive, worldwide license for
using the Company's Licensed Technology for the sum of $150,000. The entire
amount was booked as other income.
4. COMMITMENTS AND CONTINGENCIES
There are no claims or actions against the Company which will materially
effect its financial statements.
7
BIOSEARCH MEDICAL PRODUCTS, INC.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues were $498,074 for the three months ended June 30, 1999, up
$117,009 or 30.7% compared to revenues of $381,065 for the prior year three
month period. The revenues for the six months ended June 30, 1999 were down
$268,707 or 27.3% compared to last year's $985,182.The primary reason for the
reduction in revenues versus last year is due to the loss of the SIMS business
which amounted to approximately $600,000 during 1998, offset by increases in
revenues generated from our OEM sales to Wilson-Cook during 1999 which amounted
to approximately $226,000 and the Company's new OEM arrangement with C.R.Bard in
the United Kingdom which amounted to $142,000 in 1999.
Gross profit for the second quarter 1999 was $156,367 up $96,271 from
last years gross profit of $60,096. Six month figures show gross profit being
down $73,550 or 31.4% from $234,111 in 1998 to $160,561 in 1999. The reaseon for
the increase in gross profit in the second quarter is due primarily to the
product mix which generated higher gross margins than the mix in the prior
period. The gross margins are expected to continue for the balance of 1999.The
decrease in year to date gross profit for the year 1999 versus 1998 is due
primarily to the loss in revenues as explained previously, offset by the cost
containment procedures implemented in 1997 and continued in 1999
Operating loss for the second quarter 1999 was $62,013 or 12.5% of
sales. This represents a reduction in the loss of $101,932 or 62.2% compared to
the 1998 loss of $163,945 or 43% of sales. Year to date 1999 the operating loss
is $253,048 or 35.3% of sales against a loss of $191,949 or 19.5% of sales for
1998. The net operating losses between 1999 and 1998 reflect a concious effort
to maintain cost controls implemented in 1997, however certain revenue levels
need to be attained to make the Company profitable.
Net income for the second quarter 1999 was $88,442, which was $253,929
higher than the $165,487 loss during 1998. Year to date 1999 net income is
$488,833, over $701,323 higher than last year's loss of $212,490. The major
reason for the change in net income is because of the C.R.Bard deal signed in
February 1999 in which the Company recognized a gain on the sale of the machine
and technology of $591,259 and the agreement signed in June 1999 with Applied
Medical Resources in which the Company booked $150,000 to other income(see
Footnote No. 3).
8
BIOSEARCH MEDICAL PRODUCTS, INC.
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities used $286,665 during the first six
months of 1999 and investing activities provided $244,874 cash for the same
period. Overall cash flow decreased by $41,791 for the six months ended June 30,
1999
For the six month period ended June 30, 1999 the Company used $286,665
from operating activities. This is due primarily to increases in accounts
receivable of $202,564; inventory of $81,342; a decrease in other liabilities of
$89,464; customer deposits of $141,913 and the gain on the sale of a fixed asset
of $591,259, offset by a decrease in other current assets of $45,649; increase
in accounts payableof $67,371 and net income for the six months of $488,833.
Investing activities generated $444,874, primarily proceeds from the sale of a
fixed asset of $450,000 offset by capital expenditures of $5,126 during the
first six months. Net income was positive due to two separate agreements signed
during 1999. The C.R.Bard agreement amounted to $650,000 for the worldwide
exclusive rights to the coating technology for intermittent urinary catheters
and its related coating machine. The second agreement entered into was with
Applied Medical Resources in which the Company granted perpetual worldwide, non
exclusive license to use the Company's License Technology for the sum of
$150,000. Efforts are underway to collect receivables in a more timely fashion
and consult with its vendors to extend payables terms thereby increasing the
Company's cashflow. The Company continues to manufacture and ship intermittent
catheters to C.R.Bard, United Kingdom, against their original prepaid purchase
order of $180,000.
Management believes that the Company's financial condition at June 30,
1999 represents an uncertain base to conduct current operations. The Company's
ability to continue as a going concern is dependent upon its success at
generating cash flow or obtaining additional financing to meet its capital needs
and curtailing the ongoing losses by generating profitable revenue levels. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties.
The Company continues to focus all its efforts on building its OEM
business and its coating business through its technology. The Company received
its ISO 9000 certification and is awaiting CE mark certification. The Company
feels this will open the European market to its products and allow additional
relationships with other large medical companies' who have not received their
certification and wish to sell their products in Europe.
There is no assurance that the Company's revenue levels in 1999 will
attain the volumes needed to maintain operations.
9
PART II - OTHER INFORMATION
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.
BIOSEARCH MEDICAL PRODUCTS, INC.
Dated: October 25, 1999 /s/ Manfred F. Dyck
-----------------------------------
Manfred F. Dyck
President and Principal
Executive Officer and Director
Dated: October 25, 1999 /s/ Robert C. Keller
-----------------------------------
Robert C. Keller
Treasurer
Chief Financial and Accounting Officer
10
INDEX TO EXHIBITS
10.(aaaaa) License agreement between Applied Medical Resources and the
Company, dated June 7, 1999, in which Applied Medical was
granted perpertual, non exclusive, worldwide rights to use the
Company's Licensed Technology on specified products.
11