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
[X] Quarterly Report Per Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the period ended March 31, 1998
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.
(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.
Class Outstanding at March 31, 1998
Common Stock without par value 2,202,878
BIOSEARCH MEDICAL PRODUCTS, INC.
INDEX TO FORM 10-Q SB
March 31, 1998
Page No.
--------
Part I - FINANCIAL INFORMATION
Condensed Balance Sheet at March 31, 1998 (unaudited)
and December 31, 1997. 3 - 4
Condensed Statements of Operations (unaudited)
for the three month periods ended
March 31, 1998 and March 31, 1997. 5
Condensed Statements of Cash Flows (unaudited)
for the three month periods ended
March 31, 1998 and March 31, 1997. 6
Notes to (unaudited) Condensed
Financial Statements. 7 - 8
Management's Discussion and Analysis of the Financial
Condition and the Results of Operations. 9 - 10
Part II - OTHER INFORMATION
Signatures. 11
2
Part I
ITEM I - FINANCIAL STATEMENTS
BIOSEARCH MEDICAL PRODUCTS, INC.
CONDENSED BALANCE SHEETS
ASSETS
March 31 December 31
1998 1997(1)
Unaudited
Current assets:
Cash and cash equivalents $ 8,695 $ 14,486
Trade receivables 355,000 351,964
Inventories (note 2) 338,300 372,012
Other assets 20,508 18,762
---------- ----------
Total current assets 722,503 757,224
Property, plant and equipment, (net) 1,334,136 1,351,882
Other assets 7,257 8,123
---------- ----------
Total assets $2,063,896 $2,117,229
========== ==========
(1) - Derived from audited financial statements.
(continued)
3
BIOSEARCH MEDICAL PRODUCTS, INC.
CONDENSED BALANCE SHEETS
(continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31 December 31
1998 1997(1)
Unaudited
Current liabilities:
Current maturities of L/T debt $ 691,041 $ 691,041
Accounts payable 347,991 353,712
Accrued liabilities 131,720 132,330
------------ ------------
Total current liabilities 1,170,752 1,177,083
Long-term debt (note 3) -- --
------------ ------------
Total liabilities 1,170,752 1,177,083
------------ ------------
Shareholders' equity:
Common stock, no par value; 5,000,000
shares authorized; issued 2,202,878
at March 31, 1998, and
at December 31, 1997 11,129,954 11,129,954
Accumulated deficit (10,205,571) (10,158,569)
Treasury stock, at cost;
7,920 at March 31, 1998 and
at December 31, 1997 (31,239) (31,239)
------------ ------------
Total shareholders' equity 893,144 940,146
------------ ------------
$ 2,063,896 $ 2,117,229
============ ============
(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 March 31,
----------------------------
1998 1997
-------- ------
Revenues, net $ 604,117 $ 274,962
Cost of goods sold 430,102 267,730
----------- -----------
Gross profit 174,015 7,232
Selling, general and
administrative costs 202,018 242,661
----------- -----------
Operating loss (28,004) (235,429)
Other income/(expense):
Interest expense (20,885) (19,067)
Other, net 1,887 202
(18,998) (18,865)
----------- -----------
Net income/(loss) $ (47,002) $ (254,294)
=========== ===========
Income/(loss) per common share:
Net income/(loss) per common share $ (.02) $ (.12)
=========== ===========
Weighted average number
of common shares 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
Increase/(Decrease) in Cash and Cash Equivalents
Three Months Ended March 31,
----------------------------
1998 1997
---- ----
Cash flows from operating activities:
Net income/(loss) $ (47,002) $(254,294)
Adjustments to reconcile net income/(loss)
to net cash provided by/(used in)
operating activities:
Depreciation and amortization 21,234 22,380
Sub total 21,234 22,380
--------- ---------
Changes in assets and liabilities:
Decrease/(increase) in accounts receivable (3,036) 83,472
Decrease/(increase) in inventory 33,712 15,649
Increase in other current assets (1,746) (5,033)
Decrease/(increase) in other assets 866 2,854
Increase in accounts payable 32,141 (29,150)
Decrease in other liabilities
and customer deposits (38,472) (88,915)
--------- ---------
Sub total 23,465 (21,123)
--------- ---------
Total adjustments 44,699 1,257
--------- ---------
Net cash provided by/(used in) operating activities (2,303) (253,037)
--------- ---------
Cash flows from investing activities:
Capital expenditures (3,488) (13,371)
Net cash used in investing activities (3,488) (13,371)
--------- ---------
Cash flows from financing activities:
Principal payments on long-term borrowing -- (8,481)
--------- ---------
Net cash used in financing activities -- (8,481)
--------- ---------
Net (decrease)/increase in cash
and cash equivalents (5,791) (274,889)
Cash & equivalents at beginning of period 14,486 321,376
--------- ---------
Cash & equivalents at end of period $ 8,695 $ 46,487
========= =========
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 Financial Statements in the 1996 Annual Report on Form 10-K.
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 March 31, 1998
and the results of operations for the three month periods ended March 31, 1998
and March 31, 1997 and the statement of cash flows for the three month periods
ended March 31, 1998 and March 31, 1997.
The results of operations for the three month period ended March 31, 1998
are not necessarily indicative of the results to be expected for a succeeding
quarter or for the full year.
2. Inventories
March 31, 1998 December 31, 1997
Unaudited
Finished Goods $ 87,263 $ 95,992
Work In Process 127,582 140,271
Raw Materials 123,455 135,749
----------- -----------
$ 338,300 $ 372,012
=========== ===========
7
BIOSEARCH MEDICAL PRODUCTS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Unaudited
3. Long-Term Debt
March 31, 1998 December 31, 1997
Unaudited
Note payable - bank (a) 691,041 691,041
Less current maturities 691,041 691,041
-------- --------
Long-term debt $ -- $ --
======== ========
This note is secured by a first mortgage on the Company's Somerville, New
Jersey facility and miscellaneous equipment, and represents Economic Development
Authority ("EDA") funds. The note bears an interest rate of 75% of prime with a
minimum interest rate of 11.25% and a maximum interest rate of 22.5%. The
principal is payable in varying monthly installments of principal and interest,
with the final payment April 1, 2007. The Company stopped all payments as of
2/26/97.
On August 25,1997, Summit Bank notified the Company that it was in default
for failure to make payments when due. Summit Bank exercised its right under the
Loan Document to declare due and payable the entire outstanding balance. On
February 24, 1998, Summit bank entered a judgement against the Company on the
docket of the Superior Court in Bergen County, N.J. for non payment of notes and
on March 18, 1998 they entered a judgement for foreclosure against the Company
on the docket of the Superior Court of Somerset County, N.J.
4. Commitments and Contingencies
There are no claims or actions against the Company which will materially
effect its financial statements.
8
BIOSEARCH MEDICAL PRODUCTS, INC.
Item 2. Management Discussion and Analysis of the Financial Condition
and Results of Operations
Results of Operations
Revenues were $604,117 for the three months ended March 31, 1998, up
$329,155, or 120% compared to revenues of $274,962 for the prior year three
month period. OEM products sales were approximately 86% of revenues in the first
quarter 1998 compared to 67% for the same period in 1997. The increase in
revenues is due primarily to the sales volume with SIMS/Portex versus last year,
which resulted in a sales increase of approximately $339,000. All existing
purchase orders with SIMS/Portex will be completed by June 1998.
Gross profit of $174,015, or 29% was up $166,783, or 306% from the first
quarter 1997 comparable gross profit of $7,232, or 3%. The change in gross
profit is directly due to the increase in revenues as discussed above and the
cost containment procedures implemented in 1996 and continued in 1998.
Operating loss of $28,004 was $207,426, or 88% less than the operating loss
of $235,430 generated during the first quarter of 1997. These results were
mostly attributed to the cost containment procedures implemented and continued
in 1998 and the revenue increase versus 1997.
Net loss of $47,002 is $207,292 less than the loss of $254,294 from
continuing operations generated during the first quarter of 1997. The increase
of approximately $330,000 in revenues, and the cost containment procedures
implemented is the primary reason for the improvement in the bottom line,
however increased sales volumes are needed to show a profit.
9
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 $2,303 of cash during the first
quarter 1998 as compared to using $253,037 in 1997. Financing activities used no
cash for the three month period ended March 31, 1998 due to cash flow problems.
Investing activities used $3,488 for capital expenditures. The net result of
first quarter 1998 cash flow was a decrease of $5,791 in cash and cash
equivalents.
For the three month period ended March 31, 1998 all assets and liabilities
generated approximately $24,000 in cash.
Management believes that the Company's financial condition at March 31,
1998 represents an uncertain base to conduct current operations. There is no
assurance that the Company's operations will generate sufficient cash flow over
the long term to meet its long-term obligations. The Company is in the process
at this time of looking into obtaining additional financing. To date, the
Company has no available line of credit.
The Company is ISO 9000 certified and recived approval to CE mark its
bi-polar coagulation probe from British Standards Institute and can CE mark its
biofeedback device by self-certification.The Company feels this certification
will open the European market to its products and allow it to build additional
relationships with other large medical products companies' who for whatever
reason, have not received their certification and wish to sell their products in
Europe. The Company is focusing all its efforts on its OEM business and its
intermittent urinary catheter product line.
There is no assurance that the Companys' revenues will attain the volumes
needed to maintain long-term operations.
10
Part II
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: May 13, 1998 /s/ Manfred F. Dyck
-------------------------
Manfred F. Dyck
President and Principal
Executive Officer and Director
Dated: May 13, 1998 /s/ Robert C. Keller
--------------------------
Robert C. Keller
Chief Financial Officer
11