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
|
(IRS
Employer Identification No.)
|
Of
incorporation or organization)
|
|
BOVIE
MEDICAL CORPORATION
|
||
INDEX
TO FORM 10-Q
|
||
FOR
THE QUARTER ENDED MARCH 31, 2007
|
||
Contents
|
Page
|
|
Part
I:
|
Financial
Information
|
3
|
Item
1:
|
Consolidated
Financial Statements
|
|
Consolidated
Balance Sheets - March 31, 2007 and December
31,
2006
|
3
|
|
Consolidated
Statements of Operations for the Three Months
Ended
March 31, 2007 and 2006
|
4
|
|
Consolidated
Statements of Stockholders' Equity for the Year
Ended
December 31, 2006 and the Three Months Ended
March
31, 2007
|
5
|
|
Consolidated
Statements of Cash Flows for the Three Months
Ended
March 31, 2007 and 2006
|
6
|
|
Notes
to Consolidated Financial Statements
|
7
|
|
Item
2:
|
Management's
Discussion and Analysis of Financial Condition
and
Results of Operations
|
16
|
Item
3:
|
Quantitative
and Qualitative Disclosures About Market Risk
|
24
|
Item
4:
|
Controls
and Procedures
|
24
|
Part
II.
|
Other
Information
|
25
|
Item
1:
|
Legal
Proceedings
|
25
|
Item
1A:
|
Risk
Factors
|
25
|
Item
2:
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
25
|
Item
3:
|
Defaults
Upon Senior Securities
|
25
|
Item
4:
|
Submission
of Matters to a Vote of Security Holders
|
25
|
Item
5:
|
Other
Information
|
25
|
Item
6:
|
Exhibits
|
25
|
Signatures
|
26
|
BOVIE
MEDICAL CORPORATION
|
|||||||
CONSOLIDATED
BALANCE SHEETS
|
|||||||
MARCH
31, 2007 AND DECEMBER 31, 2006
|
|||||||
Assets
|
|||||||
(Unaudited)
|
(Audited)
|
||||||
March
31, 2007
|
December
31, 2006
|
||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
3,124,810
|
$
|
2,952,892
|
|||
Trade
accounts receivable, net of allowance for doubtful accounts of $167,446
and $87,217, respectively
|
2,739,616
|
2,817,557
|
|||||
Inventories
|
4,181,586
|
3,609,301
|
|||||
Prepaid
expenses
|
403,753
|
402,423
|
|||||
Deferred
tax asset
|
546,100
|
386,200
|
|||||
Total
current assets
|
10,995,865
|
10,168,373
|
|||||
Property
and equipment, net
|
3,372,083
|
3,217,020
|
|||||
Other
assets:
|
|||||||
Brand
name/trademark, net
|
1,509,662
|
1,509,662
|
|||||
Purchased
technology, net
|
1,525,213
|
1,529,330
|
|||||
License
rights, net
|
230,000
|
240,000
|
|||||
Deposits
|
21,215
|
21,215
|
|||||
Total
other assets
|
3,286,090
|
3,300,207
|
|||||
Total
Assets
|
$
|
17,654,038
|
$
|
16,685,600
|
|||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
BOVIE
MEDICAL CORPORATION
|
|||||||
CONSOLIDATED
BALANCE SHEETS
|
|||||||
MARCH
31, 2007 AND DECEMBER 31, 2006
|
|||||||
(CONTINUED)
|
|||||||
Liabilities
and Stockholders' Equity
|
|||||||
(Unaudited)
|
(Audited)
|
||||||
March
31, 2007
|
December
31, 2006
|
||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
1,265,075
|
$
|
916,253
|
|||
Accrued
expenses and other liabilities
|
916,712
|
905,716
|
|||||
Customer
deposits
|
61,410
|
91,198
|
|||||
Deferred
revenue
|
88,335
|
173,986
|
|||||
Total
current liabilities
|
2,331,532
|
2,087,153
|
|||||
Liability
for purchased assets
|
418,150
|
418,150
|
|||||
Total
liabilities
|
2,749,682
|
2,505,303
|
|||||
Minority
interest
|
115,000
|
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,
15,303,538 and 15,223,538 issued and
outstanding
on March 31, 2007 and December 31, 2006, respectively
|
15,304
|
15,224
|
|||||
Additional
paid in capital
|
22,253,208
|
22,104,416
|
|||||
Accumulated
deficit
|
(7,479,156
|
)
|
(8,059,343
|
)
|
|||
Total
stockholders' equity
|
14,789,356
|
14,060,297
|
|||||
Total
Liabilities and Stockholders' Equity
|
$
|
17,654,038
|
$
|
16,685,600
|
|||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
BOVIE
MEDICAL CORPORATION
|
|||||||
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
|||||||
FOR
THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
|
|||||||
(UNAUDITED)
|
|||||||
March
31, 2007
|
March
31, 2006
|
||||||
Sales
|
$
|
6,705,175
|
$
|
6,011,451
|
|||
Cost
of sales
|
4,222,431
|
3,705,292
|
|||||
Gross
profit
|
2,482,744
|
2,306,159
|
|||||
Other
costs and expenses:
|
|||||||
Research
and development
|
350,673
|
110,980
|
|||||
Professional
services
|
190,585
|
129,927
|
|||||
Salaries
and related costs
|
700,618
|
524,504
|
|||||
Selling,
general and administrative
|
822,937
|
822,387
|
|||||
Development
cost-joint venture
|
27,316
|
33,717
|
|||||
|
|||||||
Total
costs and expenses
|
2,092,129
|
1,621,515
|
|||||
Income
from operations
|
390,615
|
684,644
|
|||||
Interest
income, net
|
39,672
|
10,486
|
|||||
Income
before minority interest and income taxes
|
430,287
|
695,130
|
|||||
Minority
interest
|
5,000
|
5,000
|
|||||
Provision
for income tax
|
(189,996
|
)
|
(257,500
|
)
|
|||
Realized
benefit of tax loss carryforward
|
334,896
|
247,500
|
|||||
Net
income
|
$
|
580,187
|
$
|
690,130
|
|||
Earnings
per share
|
|||||||
Basic
|
$
|
0.04
|
$
|
0.05
|
|||
Diluted
|
$
|
0.03
|
$
|
0.04
|
|||
Weighted
average number of shares outstanding
|
15,288,638
|
14,156,497
|
|||||
Weighted
average number of shares outstanding adjusted for
dilutive
securities
|
17,844,626
|
16,602,713
|
|||||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
BOVIE
MEDICAL CORPORATION
|
||||||||||||||||||||
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
|
||||||||||||||||||||
FOR
THE YEAR ENDED DECEMBER 31, 2006 AND THE PERIOD
|
||||||||||||||||||||
ENDED
MARCH 31, 2007
|
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
|
(80,000
|
)
|
80,000
|
80
|
144,095
|
--
|
144,175
|
||||||||||||
Options
granted
|
145,000
|
--
|
--
|
4,468
|
--
|
4,468
|
|||||||||||||
Options
forfeited
|
(35,000
|
)
|
--
|
--
|
--
|
--
|
--
|
||||||||||||
Stock
options issued to acquire assets
|
--
|
--
|
--
|
229
|
--
|
229
|
|||||||||||||
Income
for the period
|
--
|
--
|
--
|
--
|
580,187
|
580,187
|
|||||||||||||
March
31, 2007
|
3,233,700
|
15,303,538
|
$
|
15,304
|
$
|
22,253,208
|
$
|
(7,479,156
|
)
|
$
|
14,789,356
|
||||||||
The accompanying notes are an integral part of the consolidated financial statements |
BOVIE
MEDICAL CORPORATION
|
|||||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
|||||||
FOR
THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
|
|||||||
(UNAUDITED)
|
|||||||
2007
|
2006
|
||||||
Cash
flows from operating activities
|
|||||||
Net
income
|
$
|
580,187
|
$
|
690,130
|
|||
Adjustments
to reconcile net income to net cash
|
|||||||
provided
by operating activities:
|
|||||||
Depreciation
and amortization of property and
equipment
and intangible assets
|
127,617
|
126,774
|
|||||
Stock
based compensation
|
4,468
|
-
|
|||||
Minority
interest in net income
|
(5,000
|
)
|
(5,000
|
)
|
|||
Changes
in current assets and liabilities:
|
|||||||
Receivables
|
77,941
|
(117,171
|
)
|
||||
Inventories
|
(572,285
|
)
|
(281,761
|
)
|
|||
Prepaid
expenses
|
(1,330
|
)
|
51,935
|
||||
Deferred
tax asset
|
(159,900
|
)
|
--
|
||||
Accounts
payable
|
348,822
|
(25,086
|
)
|
||||
Accrued
expenses and other liabilities
|
10,996
|
266,115
|
|||||
Customer
deposits
|
(29,788
|
)
|
--
|
||||
Deferred
revenue
|
(85,651
|
)
|
(105,586
|
)
|
|||
Net
cash provided by operating activities
|
296,077
|
600,350
|
|||||
Cash
flows from investing activities
|
|||||||
Purchases
of property and equipment
|
(
268, 563
|
)
|
(
236,222
|
)
|
|||
Increase
in purchased technology
|
--
|
(
144,099
|
)
|
||||
Net
cash used in investing activities
|
(
268,563
|
)
|
(
380,321
|
)
|
|||
Cash
flows from financing activities
|
|||||||
Repayments
of long term debt
|
-
|
(7,909
|
)
|
||||
Common
shares issued
|
144,404
|
125,877
|
|||||
Net
cash provided by financing activities
|
144,404
|
117,968
|
|||||
Net
change in cash and cash equivalents
|
171,918
|
337,997
|
|||||
Cash
and cash equivalents, beginning of period
|
2,952,892
|
1,295,266
|
|||||
Cash
and cash equivalents, end of period
|
$
|
3,124,810
|
$
|
1,633,263
|
Interest
paid
|
$
|
-
0 -
|
$
|
6,424
|
|||
Income
taxes
|
$
|
25,344
|
$
|
-0-
|
|
March
31, 2007
|
December
31, 2006
|
|||||
Raw
materials
|
$
|
1,931,692
|
$
|
1,640,254
|
|||
Work
in process
|
1,562,740
|
1,351,540
|
|||||
Finished
goods
|
687,154
|
617,507
|
|||||
Total
|
$
|
4,181,586
|
$
|
3,609,301
|
|
March
31, 2007
|
December
31, 2006
|
|||||
Trade
name (life indefinite)
|
$
|
1,509,662
|
$
|
1,509,662
|
|||
Other
intangibles:
|
|||||||
License
rights (10 yr life)
|
$
|
400,000
|
$
|
400,000
|
|||
Less
accumulated amortization
|
(170,000
|
)
|
(160,000
|
)
|
|||
Net
carrying amount
|
$
|
230,000
|
$
|
240,000
|
|||
Purchased
technology (17 yr life)
|
$
|
1,805,977
|
$
|
1,805,864
|
|||
Less:
Accumulated amortization
|
(280,764
|
)
|
(276,534
|
)
|
|||
Net
carrying amount
|
$
|
1,525,213
|
$
|
1,529,330
|
|||
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.
|
March
31, 2007
|
March
31, 2006
|
||||||
Net
income
|
$
|
580,187
|
$
|
1,509,662
|
|||
Basic-weighted
average shares outstanding
|
15,288,638
|
14,156,497
|
|||||
Effect
of dilutive potential securities
|
2,555,988
|
2,446,216
|
|||||
Diluted
- weighted average shares outstanding
|
17,844,626
|
16,602,713
|
|||||
Basic
EPS
|
$
|
0.04
|
$
|
0.05
|
|||
Diluted
EPS
|
$
|
0.03
|
$
|
0.04
|
§ |
An
entry to eliminate substantially all of its provision for income
taxes and
reduce the deferred income tax asset for approximately $176,000
representing the benefit of the utilization of a portion of its net
operating loss carryforwards during the quarter.
|
§ |
An
entry to increase its deferred income tax asset and recognize an
additional benefit for income taxes for approximately $335,000 as
a result
of management’s periodic assessment of the valuation allowance related to
a portion of its deferred income tax asset arising from net operating
loss
carryforwards. For various reasons, management believes that some
risk
exists that certain of its net operating loss carryforwards may not
be
utilized and accordingly, a portion of the related deferred income
tax
asset arising from such carryforwards has been reduced by a valuation
allowance.
|
Percentage
change in
|
||||||||||
Dollar
amounts
|
||||||||||
2007
|
2006
|
2007/2006
|
||||||||
|
%
|
%
|
%
|
|||||||
Sales
|
100.0
|
100.0
|
11.5
|
|||||||
Cost
of sales
|
63.0
|
61.6
|
14.0
|
|||||||
Gross
profit
|
37.0
|
38.4
|
7.7
|
|||||||
|
|
|
||||||||
Other
costs:
|
|
|
||||||||
Research
and development
|
5.2
|
1.8
|
216.0
|
|||||||
Professional
services
|
2.8
|
2.2
|
46.7
|
|||||||
Salaries
and related costs
|
10.4
|
8.7
|
33.6
|
|||||||
Selling,
general and administrative
|
12.3
|
13.7
|
0.1
|
|||||||
Development
cost-joint venture
|
0.4
|
0.6
|
(
19.0 )
|
|
||||||
Total
other costs
|
31.2
|
27.0
|
29.0
|
|||||||
Income
from operations
|
5.8
|
11.4
|
(
42.9 )
|
|
||||||
Interest
income, net
|
0.6
|
0.2
|
278.3
|
|||||||
Income
before minority interest and income tax
|
6.4
|
11.6
|
(
38.1 )
|
|
||||||
Minority
interest
|
0.1
|
(
0.1 )
|
|
0.0
|
||||||
Provision
for income tax
|
(
2.8 )
|
|
(
4.3 )
|
|
(
26.2 )
|
|
||||
Realized
benefit of tax loss carryforward
|
5.0
|
4.1
|
35.3
|
|||||||
Net
earnings
|
8.7
|
11.5
|
(
15.9 )
|
|
||||||
The
table below sets forth domestic/international and product line sales
information for the first quarter of 2007 and 2006.
|
|||||||||||||
Net
Sales (in thousands)
|
Percentage
change
|
Increase/
|
|||||||||||
2007
|
2006
|
2007/2006
|
(Decrease)
|
||||||||||
Domestic/international
sales:
|
|||||||||||||
Domestic
|
$
|
5,708
|
$
|
5,230
|
9.1
|
$
|
478
|
||||||
International
|
997
|
781
|
27.6
|
216
|
|||||||||
Total
net sales
|
$
|
6,705
|
$
|
6,011
|
11.5
|
$
|
694
|
||||||
Product
line sales:
|
|||||||||||||
Electrosurgical
|
$
|
4,654
|
$
|
3,824
|
21.7
|
$
|
830
|
||||||
Cauteries
|
1,461
|
1,347
|
8.4
|
114
|
|||||||||
Other
|
590
|
840
|
(
29.7
|
)
|
(250
|
)
|
|||||||
Total
net sales
|
$
|
6,705
|
$
|
6,011
|
11.5
|
$
|
694
|
|
As
of March 31,
|
|
Payment
Period
|
|
||||||||||||
2007
|
2008
|
2009
|
2010
|
2011
|
||||||||||||
Operating
leases
|
164
|
169
|
28
|
28
|
2
|
|||||||||||
Unconditional
purchase obligations
|
3,333
|
1,111
|
-0-
|
-0-
|
-0-
|
31.1
|
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.
|
31.2
|
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.
|
32.1
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002.
|