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
|
Delaware
|
11-2644611
|
|||
(State
or other jurisdiction Of incorporation or
organization)
|
(IRS
Employer Identification No.)
|
BOVIE
MEDICAL CORPORATION
|
||
INDEX
TO FORM 10-Q
|
||
FOR
THE QUARTER ENDED SEPTEMBER 30, 2007
|
||
Contents
|
Page
|
|
3
|
||
3
|
||
5
|
||
6
|
||
7
|
||
8
|
||
13
|
||
19
|
||
20
|
||
20
|
||
20
|
||
20
|
||
20
|
||
20
|
||
20
|
||
20
|
||
21
|
||
22
|
BOVIE
MEDICAL CORPORATION
|
||||||||
CONSOLIDATED
BALANCE SHEETS
|
||||||||
SEPTEMBER
30, 2007 AND DECEMBER 31, 2006
|
||||||||
Assets
|
||||||||
(Unaudited)
|
(Audited)
|
|||||||
September 30,
2007
|
December 31,
2006
|
|||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ |
2,637,574
|
$ |
2,952,892
|
||||
Trade
accounts receivable, net of allowance for doubtful accounts of
approximately $8,700 and $10,000, respectively
|
2,982,000
|
2,817,557
|
||||||
Inventories
|
4,680,752
|
3,609,301
|
||||||
Prepaid
expenses
|
465,988
|
402,423
|
||||||
Deferred
tax asset
|
757,392
|
386,200
|
||||||
Total
current assets
|
11,523,706
|
10,168,373
|
||||||
Property
and equipment, net
|
3,396,754
|
3,217,020
|
||||||
Other
assets:
|
||||||||
Brand
name/trademark, net
|
1,509,662
|
1,509,662
|
||||||
Purchased
technology, net
|
2,123,991
|
1,529,330
|
||||||
License
rights, net
|
294,578
|
240,000
|
||||||
Deposits
|
21,215
|
21,215
|
||||||
Total
other assets
|
3,949,446
|
3,300,207
|
||||||
Total
Assets
|
$ |
18,869,906
|
$ |
16,685,600
|
BOVIE
MEDICAL CORPORATION
|
||||||||
CONSOLIDATED
BALANCE SHEETS
|
||||||||
SEPTEMBER
30, 2007 AND DECEMBER 31, 2006
|
||||||||
(CONTINUED)
|
||||||||
Liabilities
and Stockholders' Equity
|
||||||||
(Unaudited)
|
(Audited)
|
|||||||
September
30, 2007
|
December
31, 2006
|
|||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ |
869,171
|
$ |
916,253
|
||||
Accrued
and other liabilities
|
1,063,321
|
955,716
|
||||||
Customer
deposits
|
48,260
|
91,198
|
||||||
Deferred
revenue
|
67,036
|
173,986
|
||||||
Total
current liabilities
|
2,047,788
|
2,137,153
|
||||||
Liability
for purchased assets
|
368,150
|
368,150
|
||||||
Total
liabilities
|
2,415,938
|
2,505,303
|
||||||
Minority
interest
|
--
|
120,000
|
||||||
Stockholders'
equity:
|
||||||||
Preferred
stock, par value $.001; 10,000,000 shares authorized; none issued
and
outstanding
|
--
|
--
|
||||||
Common
stock par value $.001; 40,000,000 shares authorized, 15,410,323 and
15,223,538 issued and outstanding on September 30, 2007 and December
31, 2006, respectively
|
15,410
|
15,224
|
||||||
Additional
paid in capital
|
22,378,088
|
22,104,416
|
||||||
Accumulated
deficit
|
(5,939,530 | ) | (8,059,343 | ) | ||||
Total
stockholders' equity
|
16,453,968
|
14,060,297
|
||||||
Total
Liabilities and Stockholders' Equity
|
$ |
18,869,906
|
$ |
16,685,600
|
BOVIE
MEDICAL CORPORATION
|
||||||||||||||||
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
||||||||||||||||
FOR
THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2007 AND
2006
|
||||||||||||||||
(UNAUDITED)
|
||||||||||||||||
Three
Months Ended September 30,
|
Nine
Months Ended September 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Sales
|
$ |
7,459,818
|
$ |
6,999,054
|
$ |
21,602,061
|
$ |
19,751,250
|
||||||||
Cost
of sales
|
4,343,709
|
4,118,252
|
12,942,901
|
11,743,121
|
||||||||||||
Gross
profit
|
3,116,109
|
2,880,802
|
8,659,160
|
8,008,129
|
||||||||||||
Other
costs and expenses:
|
||||||||||||||||
Research
and development
|
415,992
|
261,923
|
1,232,585
|
631,674
|
||||||||||||
Professional
services
|
219,354
|
154,264
|
609,201
|
400,945
|
||||||||||||
Salaries
and related costs
|
665,882
|
647,002
|
2,134,392
|
1,847,328
|
||||||||||||
Selling,
general and administrative
|
1,104,050
|
952,453
|
2,995,684
|
2,789,005
|
||||||||||||
Development
cost-joint venture
|
--
|
34,506
|
--
|
112,506
|
||||||||||||
Total
costs and expenses
|
2,405,278
|
2,050,148
|
6,971,862
|
5,781,458
|
||||||||||||
Income
from operations
|
710,831
|
830,654
|
1,687,298
|
2,226,671
|
||||||||||||
Interest
income, net
|
34,086
|
28,872
|
101,323
|
50,795
|
||||||||||||
Income
before minority interest and income taxes
|
744,917
|
859,526
|
1,788,621
|
2,277,466
|
||||||||||||
Minority
interest
|
--
|
5,000
|
5,000
|
15,000
|
||||||||||||
Provision
for income tax
|
(273,281 | ) | (292,239 | ) | (694,427 | ) | (774,338 | ) | ||||||||
Realized
benefit of tax loss carryforward
|
--
|
284,672
|
1,020,619
|
741,771
|
||||||||||||
Net
income
|
$ |
471,636
|
$ |
856,959
|
$ |
2,119,813
|
$ |
2,259,899
|
||||||||
Earnings
per share
|
||||||||||||||||
Basic
|
$ |
.03
|
$ |
.06
|
$ |
.14
|
$ |
.16
|
||||||||
Diluted
|
$ |
.03
|
$ |
.05
|
$ |
.12
|
$ |
.13
|
||||||||
Weighted
average number of shares outstanding
|
15,388,073
|
14,610,828
|
15,284,033
|
14,351,324
|
||||||||||||
Weighted
average number of shares outstanding adjusted for dilutive
securities
|
17,699,654
|
17,483,781
|
17,669,657
|
16,895,099
|
Additional
|
||||||||||||||||||||||||
Options
|
Common
|
Paid-in
|
Accumulated
|
|||||||||||||||||||||
Outstanding
|
Shares
|
Par
Value
|
Capital
|
Deficit
|
Total
|
|||||||||||||||||||
January
1, 2006
|
4,168,870
|
14,040,728
|
$ |
14,041
|
$ |
20,530,108
|
$ | (10,742,549 | ) | $ |
9,801,600
|
|||||||||||||
Options
granted
|
120,000
|
--
|
--
|
41,097
|
--
|
41,097
|
||||||||||||||||||
Options
exercised
|
(982,810 | ) |
982,810
|
983
|
794,943
|
--
|
795,926
|
|||||||||||||||||
Options
forfeited
|
(102,360 | ) |
--
|
--
|
--
|
--
|
--
|
|||||||||||||||||
Stock
options issued to acquire assets
|
--
|
--
|
--
|
63,300
|
--
|
63,300
|
||||||||||||||||||
Stock
issued to acquire assets
|
--
|
200,000
|
200
|
674,968
|
--
|
675,168
|
||||||||||||||||||
Income
for the year
|
--
|
--
|
--
|
--
|
2,683,206
|
2,683,206
|
||||||||||||||||||
December
31, 2006
|
3,203,700
|
15,223,538
|
15,224
|
22,104,416
|
(8,059,343 | ) |
14,060,297
|
|||||||||||||||||
Options
exercised
|
(174,800 | ) |
174,800
|
175
|
248,501
|
248,676
|
||||||||||||||||||
Options
granted
|
145,000
|
--
|
--
|
--
|
--
|
--
|
||||||||||||||||||
Stock
option expense
|
--
|
--
|
--
|
52,693
|
--
|
52,693
|
||||||||||||||||||
Options
forfeited
|
(42,500 | ) |
--
|
--
|
--
|
--
|
--
|
|||||||||||||||||
Stock
Swap to Acquire Options
|
--
|
(5,444 | ) | (5 | ) | (32,495 | ) |
--
|
(32,500 | ) | ||||||||||||||
Other
|
--
|
(98 | ) |
16
|
(16 | ) |
--
|
--
|
||||||||||||||||
Reclass
adjustment
|
--
|
17,527
|
4989
|
--
|
4,989
|
|||||||||||||||||||
Income
for the period
|
--
|
--
|
--
|
--
|
2,119,813
|
2,119,813
|
||||||||||||||||||
September
30, 2007 (Unaudited)
|
3,131,400
|
15,410,323
|
$ |
15,410
|
$ |
22,378,088
|
$ | (5,939,530 | ) | $ |
16,453,968
|
BOVIE
MEDICAL CORPORATION
|
||||||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||||||||
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006
|
||||||||
(UNAUDITED)
|
||||||||
2007
|
2006
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
income
|
$ |
2,119,813
|
$ |
2,259,899
|
||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization of property and equipment
|
492,463
|
355,024
|
||||||
Amortization
of intangible assets
|
67,739
|
54,082
|
||||||
Provision
for (recovery of) inventory obsolescence
|
(67,976 | ) | (26,502 | ) | ||||
Loss
on disposals of fixed assets
|
--
|
6,727
|
||||||
Non-cash
adjustment
|
4,989
|
--
|
||||||
Stock
based compensation
|
52,693
|
20,390
|
||||||
Stock-based
expense for Henvil asset purchase
|
--
|
20,886
|
||||||
Benefit
for deferred income taxes
|
(371,192 | ) |
--
|
|||||
Minority
interest in net loss of joint venture
|
(5,000 | ) | (15,000 | ) | ||||
Changes
in current assets and liabilities:
|
||||||||
Receivables
|
(164,443 | ) | (699,948 | ) | ||||
Inventories
|
(1,003,475 | ) | (354,653 | ) | ||||
Prepaid
expenses
|
(63,565 | ) |
1,045
|
|||||
Accounts
payable
|
(47,082 | ) |
53,725
|
|||||
Accrued
and other liabilities
|
107,605
|
304,903
|
||||||
Customer
deposits
|
(42,938 | ) |
-
|
|||||
Deferred
revenue
|
(106,950 | ) | (31,950 | ) | ||||
Net
cash provided by operating activities
|
972,681
|
1,948,628
|
||||||
Cash
flows from investing activities
|
||||||||
Purchases
of property and equipment
|
(672,200 | ) | (929,253 | ) | ||||
Purchased
technology
|
(516,356 | ) | (264,088 | ) | ||||
Purchase
of license rights
|
(315,619 | ) |
-
|
|||||
Net
cash used in investing activities
|
(1,504,175 | ) | (1,193,341 | ) | ||||
Cash
flows from financing activities
|
||||||||
Repayments
of long term debt
|
-
|
(367,153 | ) | |||||
Increase
in notes payable
|
-
|
132,067
|
||||||
Proceeds
from sales of common shares
|
216,176
|
494,025
|
||||||
Net
cash provided by financing activities
|
216,176
|
258,939
|
||||||
Net
change in cash and cash equivalents
|
(315,318 | ) |
1,014,226
|
|||||
Cash
and cash equivalents, beginning of period
|
2,952,892
|
1,295,266
|
||||||
Cash
and cash equivalents, end of period
|
$ |
2,637,574
|
$ |
2,309,492
|
Interest
|
$ |
2,439
|
$ |
15,969
|
||||
Income
taxes
|
$ |
59,916
|
$ |
25,000
|
||||
Supplemental
disclosure of non-cash investing and financing activities -
During the nine months ended September 30, 2007, the minority
interest and license rights intangible asset declined by $115,000
upon the
acquisition of the minority interest in a joint venture. In addition,
at such time, the remaining net balance of the license rights intangible
asset of $115,000 was reclassified to purchased
technology.
|
September
30, 2007
|
December
31, 2006
|
|||||||
Raw
materials
|
$ |
2,377,899
|
$ |
1,640,254
|
||||
Work
in process
|
1,455,237
|
1,351,540
|
||||||
Finished
goods
|
847,616
|
617,507
|
||||||
Total
|
$ |
4,680,752
|
$ |
3,609,301
|
September
30, 2007
|
December
31, 2006
|
|||||||
Trade
name (life indefinite)
|
$ |
1,509,662
|
$ |
1,509,662
|
||||
Purchased
technology (9-17 year lives)
|
$ |
2,437,220
|
$ |
1,805,864
|
||||
Less
accumulated amortization
|
(313,229 | ) | (276,534 | ) | ||||
Net
carrying amount
|
$ |
2,123,991
|
$ |
1,529,330
|
||||
License
rights (5 year life)
|
$ |
315,619
|
$ |
-
|
||||
License
rights (10 year life)
|
-
|
400,000
|
||||||
Less
accumulated amortization
|
(21,041 | ) | (160,000 | ) | ||||
Net
carrying amount
|
$ |
294,578
|
$ |
240,000
|
|
1.
|
Recognized
financial assets and financial liabilities
except:
|
|
a.
|
An
investment in a subsidiary that the entity is required to
consolidate
|
|
b.
|
An
interest in a variable interest entity that the entity is required
to
consolidate
|
|
c.
|
Employers’
and plans’ obligations (or assets representing net over funded positions)
for pension benefits, other postretirement benefits (including health
care
and life insurance benefits), post employment benefits, employee
stock
option and stock purchase plans, and other forms of deferred compensation
arrangements.
|
|
d.
|
Financial
assets and financial liabilities recognized under leases as defined
in
FASB Statement No. 13, Accounting for
Leases.
|
|
e.
|
Withdrawable
on demand deposit liabilities of banks, savings and loan associations,
credit unions, and other similar depository
institutions
|
|
f.
|
Financial
instruments that are, in whole or in part, classified by the issuer
as a
component of shareholder’s equity (including “temporary equity”). An
example is a convertible debt security with a non-contingent beneficial
conversion feature.
|
|
2.
|
Firm
commitments that would otherwise not be recognized at inception and
that
involve only financial instruments
|
|
3.
|
Non-financial
insurance contracts and warranties that the insurer can settle by
paying a
third party to provide those goods or
services
|
|
4.
|
Host
financial instruments resulting from separation of an embedded
non-financial derivative instrument from a non-financial hybrid
instrument.
|
|
1.
|
May
be applied instrument by instrument, with a few exceptions, such
as
investments otherwise accounted for by the equity
method
|
|
2.
|
Is
irrevocable (unless a new election date
occurs)
|
|
3.
|
Is
applied only to entire instruments and not to portions of
instruments.
|
3rd
Quarter
|
Percentage
Change
in
|
Nine
Months
|
Percentage
Change
in
|
|||||||||||||||||||||
2007
|
2006
|
Dollar
Amounts
|
2007
|
2006
|
Dollar
Amounts
|
|||||||||||||||||||
%
|
%
|
%
|
%
|
%
|
%
|
|||||||||||||||||||
Sales
|
100.0
|
100.0
|
6.6
|
100.0
|
100.0
|
9.4
|
||||||||||||||||||
Cost
of sales
|
58.2
|
59.0
|
5.5
|
59.9
|
60.0
|
10.2
|
||||||||||||||||||
Gross
profit
|
41.8
|
41.0
|
8.2
|
40.1
|
40.0
|
8.1
|
||||||||||||||||||
Other
costs:
|
||||||||||||||||||||||||
Research
& development
|
5.6
|
4.0
|
40.3
|
5.7
|
3.0
|
65.6
|
||||||||||||||||||
Professional
services
|
3.0
|
2.0
|
42.2
|
2.8
|
2.0
|
51.9
|
||||||||||||||||||
Salaries
and related costs
|
8.9
|
9.0
|
2.9
|
9.9
|
9.0
|
15.5
|
||||||||||||||||||
Selling,
general and administrative
|
14.8
|
13.0
|
16.5
|
13.9
|
14.0
|
8.0
|
||||||||||||||||||
Development
cost-joint venture
|
0.0
|
1.0
|
0.0
|
0.0
|
1.0
|
0.0
|
||||||||||||||||||
Total
other costs
|
32.3
|
29.0
|
17.6
|
32.3
|
29.0
|
20.9
|
||||||||||||||||||
Income
from operations
|
9.5
|
12.0
|
-14.9
|
7.8
|
11.0
|
-24.7
|
||||||||||||||||||
Interest
income, net
|
0.5
|
0.0
|
18.1
|
0.5
|
0.0
|
109.3
|
||||||||||||||||||
Income
before minority interest and income tax
|
10.0
|
12.0
|
-13.8
|
8.3
|
11.0
|
-21.8
|
||||||||||||||||||
Minority
interest
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
0.0
|
||||||||||||||||||
Provision
for income tax
|
(3.7 | ) | (4.0 | ) |
6.5
|
(3.2 | ) | (4.0 | ) |
10.3
|
||||||||||||||
Realized
benefit of tax loss carryforward
|
0.0
|
4.0
|
-100.0
|
4.7
|
4.0
|
37.6
|
||||||||||||||||||
Net
earnings
|
6.3
|
12.0
|
-45.0
|
9.8
|
11.0
|
-6.2
|
The
table below sets forth domestic/international and product line sales
information for the first nine months of 2007 and 2006:
|
||||||||||||||||
%age
change
|
Increase/
|
|||||||||||||||
2007
|
2006
|
2007/2006
|
(Decrease)
|
|||||||||||||
Net
Sales (in thousands):
|
||||||||||||||||
Domestic
|
$ |
18,409
|
$ |
17,278
|
6.5
|
$ |
1,131
|
|||||||||
International
|
3,193
|
2,473
|
29.1
|
720
|
||||||||||||
Total
net sales
|
$ |
21,602
|
$ |
19,751
|
9.4
|
$ |
1,851
|
|||||||||
Product
line sales:
|
||||||||||||||||
Electrosurgical
|
$ |
15,182
|
$ |
13,435
|
13.0
|
$ |
1,747
|
|||||||||
Cauteries
|
4,607
|
4,343
|
6.1
|
264
|
||||||||||||
Other
|
1,813
|
1,973
|
(8.1 | ) | (160 | ) | ||||||||||
Total
net sales
|
$ |
21,602
|
$ |
19,751
|
9.4
|
$ |
1,851
|
The
table below sets forth domestic/international and product line sales
information for the third quarter of 2007 and 2006:
|
||||||||||||||||
%age
change
|
Increase/
|
|||||||||||||||
2007
|
2006
|
2007/2006
|
(Decrease)
|
|||||||||||||
Net
Sales (in thousands)
|
||||||||||||||||
Domestic
|
$ |
6,373
|
$ |
6,160
|
3.5
|
$ |
213
|
|||||||||
International
|
1,087
|
839
|
29.6
|
248
|
||||||||||||
Total
net sales
|
$ |
7,460
|
$ |
6,999
|
6.6
|
$ |
461
|
|||||||||
Product
line sales:
|
||||||||||||||||
Electrosurgical
|
$ |
5,328
|
$ |
5,041
|
5.7
|
$ |
287
|
|||||||||
Cauteries
|
1,557
|
1,465
|
6.3
|
92
|
||||||||||||
Other
|
575
|
493
|
16.6
|
82
|
||||||||||||
Total
net sales
|
$ |
7,460
|
$ |
6,999
|
6.6
|
$ |
461
|
|
As
of September 30,
|
|
Payment
Period
|
|
||||||||||||||||
2007
|
2008
|
2009
|
2010
|
2011
|
||||||||||||||||
Operating
leases
|
52,289
|
209,156
|
134,736
|
0
|
0
|
|||||||||||||||
Unconditional
purchase obligations
|
806,674
|
2,420,020
|
0
|
0
|
0
|
Certifications
of Andrew Makrides, President and Chief Executive Officer of Registrant
pursuant to Rule 13a-14 adopted under the Securities Exchange Act
of 1934,
as amended, and Section 302 of the Sarbanes-Oxley Act of
2002.
|
|
|
|
Certifications
of Gary D. Pickett, Chief Financial Officer of Registrant pursuant
to Rule
13a-14 adopted under the Securities Exchange Act of 1934, as amended,
and
Section 302 of the Sarbanes-Oxley act of 2002.
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|
|
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|