10QSB 1 a10q033101.txt 10-QSB FOR PERIOD ENDED MARCH 31, 2001 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB /_/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF 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 March 31, 2001 ------------------------------ 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.) 370 INTERLOCKEN BOULEVARD, BROOMFIELD, COLORADO 80021 (Address of principal executive offices) (805) 654-0643 (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 March 31, 2001, Common Stock, $.01 par value per share, 17,163,012 shares. ================================================================================ PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS BIOPOOL INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS MARCH 31, DECEMBER 31, 2001 2000 (UNAUDITED) -------------------------------------------------------------------------------- (in thousands except share data) ASSETS CURRENT ASSETS Cash .......................................... $ 3,047 $ 4,011 Accounts receivable, net ...................... 1,734 1,356 Inventories ................................... 2,044 2,056 Prepaid expenses and other current assets ..... 435 266 -------- -------- TOTAL CURRENT ASSETS ............................... 7,260 7,689 PROPERTY AND EQUIPMENT ............................. 3,742 3,718 Less accumulated depreciation ................. (2,771) (2,745) -------- -------- PROPERTY AND EQUIPMENT, NET ........................ 971 973 Goodwill, net of amortization of $1,027 and $761 in 2001 and 2000, respectively ........... 9,656 9,922 OTHER ASSETS ....................................... 136 146 -------- -------- TOTAL ASSETS ....................................... $ 18,023 $ 18,730 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY TOTAL CURRENT LIABILITIES .......................... $ 1,741 $ 1,306 DEFERRED TAX LIABILITY ............................. 164 164 STOCKHOLDERS' EQUITY: Common stock, $.01 par value, 50,000,000 shares authorized; 17,163,012 shares issued and outstanding in 2001 and 2000 ....... 171 171 Other stockholders' equity ......................... 18,565 18,745 Accumulated deficit ................................ (2,618) (1,656) -------- -------- TOTAL STOCKHOLDERS' EQUITY ......................... 16,118 17,260 -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ......... $ 18,023 $ 18,730 ======== ======== See accompanying notes to consolidated financial statements. 2 BIOPOOL INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) THREE MONTHS ENDING MARCH 31, 2001 2000 -------------------------------------------------------------------------------- (in thousands except per share data) SALES ............................................ $ 2,426 $ 2,409 COST OF SALES .................................... 1,234 1,162 -------- -------- GROSS PROFIT ..................................... 1,192 1,247 Operating expenses: Selling, general and administrative ......... 1,664 886 Research and development .................... 500 81 Other income, net ................................ (28) (35) -------- -------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE TAXES ................................ (944) 315 Income tax expense ............................... 18 115 -------- -------- NET INCOME (LOSS) ................................ $ (962) $ 200 ======== ======== WEIGHTED AVERAGE SHARES OUTSTANDING Basic ....................................... 17,163 8,294 Effect of dilutive shares ................... -- 42 -------- -------- Diluted ..................................... 17,163 8,336 ======== ======== BASIC AND DILUTED EARNINGS PER SHARE Net Income (loss) - Basic ................... $ (0.06) $ 0.02 Net income (loss) - Diluted ................. $ (0.06) $ 0.02 See accompanying notes to consolidated financial statements. 3 BIOPOOL INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) THREE MONTHS ENDING MARCH 31, 2001 2000 -------------------------------------------------------------------------------- (in thousands) OPERATING ACTIVITIES ................................. $ (650) $ (310) INVESTING ACTIVITIES ................................. (134) (59) FINANCING ACTIVITIES ................................. -- 28 DISCONTINUED OPERATIONS .............................. -- 192 EFFECT OF EXCHANGE RATES ............................. (180) (33) ------- ------- NET INCREASE (DECREASE) IN CASH ...................... (964) (182) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ....... 4,011 2,749 ------- ------- CASH AND CASH EQUIVALENTS, END OF PERIOD ............. $ 3,047 $ 2,567 ======= ======= See accompanying notes to consolidated financial statements. 4 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 three-month period ended March 31, 2001, is not necessarily indicative of the results that may be expected for the year ended December 31, 2001. 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, 2000. The balance sheet at December 31, 2000 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 in the notes to the consolidated financial statements excludes discontinued operations except where noted. 2. INVENTORIES March 31, December 31, 2001 2000 --------- ---------- Raw materials $ 742 $ 584 Work in process 630 685 Finished products 851 966 Reserves (179) (179) --------- ---------- $ 2,044 $ 2,056 ========= ========== 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 dilutive 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. However, the adoption of this statement had no impact on the Company's net income or stockholders' equity. Total comprehensive loss for the three months ended March 31, 2001 was $1,142,000, compared to comprehensive income of $167,000 for the same period in 2000. 5 5. 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 8, "Merger with Xtrana, Inc." The Company evaluates the segments and allocates resources based on revenue and anticipated return on investment. The accounting policies of the reportable segments are the same as those described in the 2000 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.
INTER- COMPANY BIOPOOL BIOPOOL ELIMIN- CONSOLI- INTERNATIONAL SWEDEN XTRANA ATIONS DATED ----------------------------------------------------------------------------------------------------------- (in thousands) THREE MONTHS ENDED MARCH 31, 2001 Sales $ 1,879 $ 781 $ 153 $ (387) $ 2,426 Less intercompany (196) (191) - 387 - -------- -------- --------- --------- -------- Sales to unafilliated customers 1,683 590 153 - 2,426 Pre-tax income (loss) (4) 45 (996) (7) (962) Total assets as of March 31, 2001 9,296 2,412 8,850 (2,535) 18,023 ----------------------------------------------------------------------------------------------------------- THREE MONTHS ENDED MARCH 31, 2000 Sales $ 1,852 $ 951 $ (394) $ 2,409 Less intercompany (158) (236) 394 -- --------- -------- --------- ------- Sales to unaffiliated customers 1,694 715 -- 2,409 Pre-tax income 91 224 315 Total assets as of March 31, 2000 8,814 2,444 (133) 11,125 -----------------------------------------------------------------------------------------------------------
6 6. INCOME TAXES For the year ended December 31, 2000, the Company recorded a full valuation allowance for its net operating loss carryforwards, which historically had been carried as a deferred tax asset, as well as providing a provision for the payment of income tax for the Company's Swedish subsidiary. The current quarter ended March 31, 2001, reflects a full valuation allowance on the net operating loss recorded for the quarter, as well as a provision for income tax for the Company's Swedish subsidiary. 7. LITIGATION On March 26, 2001, we entered into a settlement agreement with Agen Biomedical Ltd. with regard to a patent infringement filed on March 10, 2000, by Agen. As a part of the settlement, the Company and Agen have entered into a non-exclusive license agreement for the underlying patent and all claims by Agen and counter claims made by us have been dropped. We do not believe that the settlement will have a material impact on our results of operations. 8. 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 8,829,461 shares of the Company's common stock in exchange for all the outstanding capital stock of Xtrana. Of the total shares issued, 936,946 shares are held in escrow and are contingently cancelable if certain sales objectives for the Xtrana business are not met. The contingently cancelable consideration would be recorded as additional purchase price when the contingency is resolved. The contingent shares are reflected as outstanding common stock as the holders of these shares have full right to vote the shares while in escrow. Additionally, as a part of the merger, 998,366 warrants with an estimated fair value of $587,000 were issued to warrant holders of Xtrana and certain financial advisors. The former stockholders of Xtrana now hold approximately 50% of the outstanding stock of the Company, on a fully diluted basis. 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. 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. RESULTS OF OPERATIONS Sales were $2.4 million for the three-month period ended March 31, 2001, compared with $2.4 million for the corresponding period of 2000. The revenue for the Hemostasis operations was $2.3 million for the three months ended March 31, 2001, compared to $2.4 million for the same period in 2000. This slight decline was the result of reduced sales by our Swedish subsidiary and the timing of large orders from our significant OEM customers. The Xtrana operations generated revenue of $0.2 million for the three months ended March 31, 2001, which was primarily income from various research and development grants. Cost of goods sold was $1.2 million for the three-month period ended March 31, 2001, compared with $1.2 million for the corresponding period in 2000. Gross margin was 49.1% for the three-month period ended March 31, 2001, compared with 51.8% for the corresponding period in 2000. Gross margins were reduced by 2.7% for the three-month period in 2001 as a result of reduced fixed overhead absorption to inventory as a part of a program to reduce finished goods inventory on hand, which was partially offset by higher standard margins due to a more favorable product mix for the period. Finished goods inventory on hand at March 31, 2001 was $0.9 million, down 13% from the year ended December 31, 2000. 7 Operating expenses were $2.2 million for the three months ended March 31, 2001, compared with $1.0 million for the same period in 2000. Operating expenses increased by $1.1 million during the first quarter as a result of the addition of the Xtrana business. Of this $1.1 million increase from the Xtrana operations, $0.3 million related to the amortization of goodwill in connection with the merger and $0.2 million represented severance obligations relating to the departure of the former CEO in February 2001. The remaining increase in overall operating expenses of $0.1 million was due to increased spending on marketing, research and development, and quality assurance in the Hemostasis business segment. Other income is primarily interest income. FINANCIAL CONDITION As of March 31, 2001, working capital was $5.5 million, with a current ratio of 4.2 to 1.0. We have a $2.1 million revolving credit facility of which $2.0 million is unused and available. The Company is currently consuming cash to fund the research and development of the Xtrana technologies. The Company believes that some of this investment will be offset by government grants and revenue from the sale of Xtrana products over the next twelve months. This revenue combined with the Company's 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, should revenues from government grants and the Xtrana product lines not materialize, it may become necessary for the Company to raise additional capital to fund its ongoing operations. 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. PART II. OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS On April 3, 2001, the Company's Board of Directors, in accordance with its authority under the Company's Bylaws, unanimously approved the adoption of a form of Amended and Restated Bylaws of the Company, a copy of which is attached to this Form 10-QSB as Exhibit 3.1. The primary purpose of the amendments to the Bylaws was to update the Company's bylaws to more accurately reflect the current General Corporation Law of the State of Delaware. In addition, the Bylaws were amended to require that special meetings of the stockholders for any purpose or purposes may be called at any time only by the Board of Directors, the Chairman of the Board, or the Chief Executive Officer or President of the Company, and not by the stockholders. 8 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit 3.1 - Restated Bylaws of Biopool International, Inc. (b) Reports on Form 8-K. 1. Form 8-K dated December 19, 2000. Items 5 and 7 - Press Release dated January 22, 2001, announcing that the Company and Beckman Coulter entered into an agreement to offer a novel automated nucleic acid extraction system; Lease Agreement dated December 19, 2000, by and between the Company and James M. Roswell, d/b/a Burbank East Business Park. 2. Form 8-K dated February 8, 2001. Items 5 and 7 - Press Release dated February 8, 2001, announcing FDA clearance of MiniQuant(TM) D-dimER Assay System; Press Release dated February 9, 2001, announcing the resignation of John H. Wheeler. 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: MAY 14, 2000 BIOPOOL INTERNATIONAL, INC. ---------------------- ------------------------------- (Registrant) /S/ TIMOTHY J. DAHLTORP ------------------------------- Timothy J. Dahltorp Chief Operating Officer and Chief Financial Officer 9