x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For the Quarterly Period Ended June 30, 2007 |
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
For the Period from to |
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 JUNE 30, 2007
|
||
Contents
|
Page
|
|
3
|
||
3
|
||
5
|
||
6
|
||
7
|
||
8
|
||
14
|
||
20
|
||
21
|
||
21
|
||
21
|
||
21
|
||
21
|
||
21
|
||
21
|
||
21
|
||
22
|
||
23
|
BOVIE
MEDICAL CORPORATION
|
||||||||
CONSOLIDATED
BALANCE SHEETS
|
||||||||
JUNE
30, 2007 AND DECEMBER 31, 2006
|
||||||||
Assets
|
||||||||
(Unaudited)
|
(Audited)
|
|||||||
June
30, 2007
|
December
31, 2006
|
|||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ |
2,501,409
|
$ |
2,952,892
|
||||
Trade
accounts receivable, net of allowance for doubtful accounts of
approximately $8,700 and $10,000, respectively
|
2,789,074
|
2,817,557
|
||||||
Inventories
|
4,470,915
|
3,609,301
|
||||||
Prepaid
expenses
|
285,317
|
402,423
|
||||||
Deferred
tax asset
|
1,015,673
|
386,200
|
||||||
Total
current assets
|
11,062,388
|
10,168,373
|
||||||
Property
and equipment, net
|
3,436,634
|
3,217,020
|
||||||
Other
assets:
|
||||||||
Brand
name/trademark, net
|
1,509,662
|
1,509,662
|
||||||
Purchased
technology, net
|
2,141,804
|
1,529,330
|
||||||
License
rights, net
|
310,359
|
240,000
|
||||||
Deposits
|
21,215
|
21,215
|
||||||
Total
other assets
|
3,983,040
|
3,300,207
|
||||||
Total
Assets
|
$ |
18,482,062
|
$ |
16,685,600
|
||||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
BOVIE
MEDICAL CORPORATION
|
||||||||
CONSOLIDATED
BALANCE SHEETS
|
||||||||
JUNE
30, 2007 AND DECEMBER 31, 2006
|
||||||||
(CONTINUED)
|
||||||||
Liabilities
and Stockholders' Equity
|
||||||||
(Unaudited)
|
(Audited)
|
|||||||
June
30, 2007
|
December
31, 2006
|
|||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ |
1,003,102
|
$ |
916,253
|
||||
Accrued
expenses and other liabilities
|
994,071
|
905,716
|
||||||
Customer
deposits
|
50,927
|
91,198
|
||||||
Deferred
revenue
|
77,686
|
173,986
|
||||||
Total
current liabilities
|
2,125,786
|
2,087,153
|
||||||
Liability
for purchased assets
|
418,150
|
418,150
|
||||||
Total
liabilities
|
2,543,936
|
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, 15,358,865 and
15,223,538 issued and outstanding on June 30, 2007 and December
31, 2006, respectively
|
15,360
|
15,224
|
||||||
Additional
paid in capital
|
22,333,932
|
22,104,416
|
||||||
Accumulated
deficit
|
(6,411,166 | ) | (8,059,343 | ) | ||||
Total
stockholders' equity
|
15,938,126
|
14,060,297
|
||||||
Total
Liabilities and Stockholders' Equity
|
$ |
18,482,062
|
$ |
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 AND SIX MONTHS ENDED JUNE 30, 2007 AND
2006
|
||||||||||||||||
(UNAUDITED)
|
||||||||||||||||
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||||||
2007
|
2006
|
2007
|
2006
|
|||||||||||||
Sales
|
$ |
7,439,380
|
$ |
6,740,745
|
$ |
14,142,243
|
$ |
12,752,196
|
||||||||
Cost
of sales
|
4,401,413
|
3,848,484
|
8,599,192
|
7,553,776
|
||||||||||||
Gross
profit
|
3,037,967
|
2,892,261
|
5,543,051
|
5,198,420
|
||||||||||||
Other
costs and expenses:
|
||||||||||||||||
Research
and development
|
435,851
|
267,075
|
816,593
|
378,055
|
||||||||||||
Professional
services
|
199,355
|
120,911
|
389,847
|
250,838
|
||||||||||||
Salaries
and related costs
|
738,571
|
758,116
|
1,468,510
|
1,282,620
|
||||||||||||
Selling,
general and administrative
|
1,083,522
|
990,372
|
1,891,633
|
1,812,759
|
||||||||||||
Development
cost-joint venture
|
-
|
44,283
|
-
|
78,000
|
||||||||||||
Total
costs and expenses
|
2,457,299
|
2,180,757
|
4,566,583
|
3,802,272
|
||||||||||||
Income
from operations
|
580,668
|
711,504
|
976,468
|
1,396,148
|
||||||||||||
Interest
income, net
|
33,649
|
11,306
|
72,236
|
21,792
|
||||||||||||
Income
before minority interest and income taxes
|
614,317
|
722,810
|
1,048,704
|
1,417,940
|
||||||||||||
Minority
interest
|
--
|
5,000
|
--
|
10,000
|
||||||||||||
Provision
for income tax
|
(232,049 | ) | (235,700 | ) | (421,146 | ) | (493,200 | ) | ||||||||
Realized
benefit of tax loss carryforward
|
685,723
|
220,700
|
1,020,619
|
468,200
|
||||||||||||
Net
income
|
$ |
1,067,991
|
$ |
712,810
|
$ |
1,648,177
|
$ |
1,402,940
|
||||||||
Earnings
per share
|
||||||||||||||||
Basic
|
$ |
.07
|
$ |
.05
|
$ |
.11
|
$ |
.10
|
||||||||
Diluted
|
$ |
.06
|
$ |
.04
|
$ |
.09
|
$ |
.08
|
||||||||
Weighted
average number of shares outstanding
|
15,346,673
|
14,286,858
|
15,317,816
|
14,223,949
|
||||||||||||
Weighted
average number of shares outstanding adjusted for dilutive
securities
|
17,752,431
|
17,129,404
|
17,781,383
|
16,957,670
|
||||||||||||
The
accompanying notes are an integral part of the consolidated financial
statements.
|
BOVIE
MEDICAL CORPORATION
|
||||||||||||||||||||||||
CONSOLIDATED
STATEMENTS OF STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||||||
FOR
THE YEAR ENDED DECEMBER 31, 2006 AND THE PERIOD
|
||||||||||||||||||||||||
ENDED
JUNE 30, 2007 (UNAUDITED)
|
||||||||||||||||||||||||
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
|
(117,800 | ) |
117,800
|
118
|
190,957
|
--
|
191,075
|
|||||||||||||||||
Options
granted
|
145,000
|
--
|
--
|
--
|
--
|
|||||||||||||||||||
Stock
option expense
|
--
|
--
|
--
|
33,588
|
--
|
33,588
|
||||||||||||||||||
Options
forfeited
|
(42,500 | ) |
--
|
--
|
--
|
--
|
--
|
|||||||||||||||||
Reclass
adjustment
|
--
|
17,527
|
18
|
4,971
|
--
|
4,989
|
||||||||||||||||||
Income
for the period
|
--
|
--
|
--
|
--
|
1,648,177
|
1,648,177
|
||||||||||||||||||
June
30, 2007 (Unaudited)
|
3,188,400
|
15,358,865
|
$ |
15,360
|
$ |
22,333,932
|
$ | (6,411,166 | ) | $ |
15,938,126
|
The
accompanying notes are an integral part of the consolidated financial
statements.
|
BOVIE
MEDICAL CORPORATION
|
||||||||
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
||||||||
FOR
THE SIX MONTHS ENDED JUNE 30, 2007 AND 2006
|
||||||||
(UNAUDITED)
|
||||||||
2007
|
2006
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
income
|
$ |
1,648,177
|
$ |
1,402,940
|
||||
Adjustments
to reconcile net income to net cash
|
||||||||
provided
by operating activities:
|
||||||||
Depreciation
and amortization of property and equipment
|
322,303
|
211,369
|
||||||
Provision
for (recovery of ) inventory obsolescence
|
(60,784 | ) | (141,370 | ) | ||||
Benefit
for deferred income taxes
|
(629,473 | ) |
--
|
|||||
Amortization
of intangible assets
|
25,191
|
27,473
|
||||||
Stock
based compensation
|
33,588
|
--
|
||||||
Other
non-cash expense
|
4,989
|
--
|
||||||
Minority
interest in net income
|
--
|
(10,000 | ) | |||||
Changes
in current assets and liabilities:
|
||||||||
Receivables
|
28,483
|
(210,100 | ) | |||||
Inventories
|
(800,830 | ) | (122,690 | ) | ||||
Prepaid
expenses
|
117,106
|
(81,670 | ) | |||||
Accounts
payable
|
86,849
|
(50,172 | ) | |||||
Accrued
expenses and other liabilities
|
88,355
|
231,397
|
||||||
Customer
deposits
|
(40,271 | ) |
--
|
|||||
Deferred
revenue
|
(96,300 | ) | (21,300 | ) | ||||
Net
cash provided by operating activities
|
727,383
|
1,235,877
|
||||||
Cash
flows from investing activities
|
||||||||
Purchases
of property and equipment
|
(541,917 | ) | (510,885 | ) | ||||
Purchased
technology
|
(512,404 | ) | (224,100 | ) | ||||
Purchase
of license rights
|
(315,620 | ) |
--
|
|||||
Net
cash used in investing activities
|
(1,369,941 | ) | (734,985 | ) | ||||
Cash
flows from financing activities
|
||||||||
Repayments
of long term debt
|
--
|
(162,480 | ) | |||||
Common
shares issued
|
191,075
|
259,302
|
||||||
Net
cash provided by financing activities
|
191,075
|
96,822
|
||||||
Net
change in cash and cash equivalents
|
(451,483 | ) |
597,714
|
|||||
Cash
and cash equivalents, beginning of period
|
2,952,892
|
1,295,266
|
||||||
Cash
and cash equivalents, end of period
|
$ |
2,501,409
|
$ |
1,892,980
|
Interest
|
$ |
2,439
|
$ |
16,070
|
||||
Income
taxes
|
$ |
25,344
|
$ |
--
|
June 30, 2007
|
December 31,
2006
|
|||||||
Raw
materials
|
$ |
2,249,547
|
$ |
1,640,254
|
||||
Work
in process
|
1,477,540
|
1,351,540
|
||||||
Finished
goods
|
743,828
|
617,507
|
||||||
Total
|
$ |
4,470,915
|
$ |
3,609,301
|
|
|
June 30, 2007
|
|
|
December 31,
2006
|
|
||
|
|
|
|
|
|
|
||
Trade
name (life indefinite)
|
|
$
|
1,509,662
|
|
|
$
|
1,509,662
|
|
|
|
|
|
|
|
|
|
|
Purchased
technology (9-17 year lives)
|
|
$
|
2,432,932
|
|
|
$
|
1,805,864
|
|
Less
accumulated amortization
|
|
|
(291,128
|
)
|
|
|
(276,534
|
)
|
|
|
|
|
|
|
|
|
|
Net
carrying amount
|
|
$
|
2,141,804
|
|
|
$
|
1,529,330
|
|
|
|
|
|
|
|
|
|
|
License
rights (10 year life)
|
|
$
|
-
|
|
|
$
|
400,000
|
|
License
rights (5 yr life)
|
|
|
315,619
|
|
|
|
-
|
|
Less
accumulated amortization
|
|
|
(5,260
|
)
|
|
|
(160,000
|
)
|
Net
carrying amount
|
|
$
|
310,359
|
|
|
$
|
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.
|
|
§
|
An
entry to eliminate substantially all of its provision for income
taxes and
reduce the deferred income tax asset for approximately $391,000
representing the benefit of the utilization of a portion of its net
operating loss carryforwards during the
period.
|
|
§
|
An
entry to increase its deferred income tax asset and recognize an
additional benefit for income taxes for approximately
$1,016,000. Substantially all of this amount arose from
management’s periodic assessment of the valuation allowance related to the
deferred tax asset arising from net operating loss
carryforwards. At December 31, 2006 and March 31, 2007 a
significant portion of this asset was offset by a valuation allowance
as
the asset did not meet the required asset recognition standard required
by
FAS 109. However, at this time, management believes that its
remaining net operating loss carryforwards will be utilized by June
30,
2008 and accordingly, the remaining valuation allowance related to
such
asset has been reversed at June 30, 2007 resulting in a current deferred
income tax asset. As a result, and assuming we continue
to generate positive results of operations, our net income will be
reduced
by a provision for income taxes in the
future. However, we do not expect to pay any income taxes,
other than those arising from the alternative minimum tax, until
we fully
utilize our net operating loss
carryforwards.
|
2nd
Quarter
|
Percentage
Change
in Dollar
|
Six
Months
|
Percentage
Change
in Dollar
|
|||||||||||||||||||||
2007
|
2006
|
Amounts
|
2007
|
2006
|
Amounts
|
|||||||||||||||||||
%
|
%
|
%
|
%
|
%
|
%
|
|||||||||||||||||||
Sales
|
100.0
|
100.0
|
10.4
|
100.0
|
100.0
|
10.9
|
||||||||||||||||||
Cost
of sales
|
59.2
|
57.0
|
14.4
|
60.8
|
59.0
|
13.8
|
||||||||||||||||||
Gross
profit
|
40.8
|
43.0
|
5.0
|
39.2
|
41.0
|
6.63
|
||||||||||||||||||
Other
costs:
|
||||||||||||||||||||||||
Research
& development
|
5.9
|
4.0
|
63.2
|
5.8
|
3.0
|
116.0
|
||||||||||||||||||
Professional
services
|
2.7
|
2.0
|
64.9
|
2.8
|
2.0
|
55.4
|
||||||||||||||||||
Salaries
and related costs
|
9.9
|
11.0
|
(2.6 | ) |
10.4
|
10.0
|
14.5
|
|||||||||||||||||
Selling,
general and administrative
|
14.5
|
15.0
|
9.4
|
13.3
|
14.0
|
4.4
|
||||||||||||||||||
Development
cost-joint venture
|
0.0
|
0.0
|
(100.0 | ) |
0.0
|
1.0
|
(100.0 | ) | ||||||||||||||||
Total
other costs
|
33.0
|
32.0
|
12.7
|
32.3
|
30.0
|
20.1
|
||||||||||||||||||
Income
from operations
|
7.8
|
11.0
|
(18.4 | ) |
6.9
|
11.0
|
(30.0 | ) | ||||||||||||||||
Interest
income, net
|
.5
|
0.0
|
197.6
|
.5
|
0.0
|
231.5
|
||||||||||||||||||
Income
before minority interest and income tax
|
8.3
|
11.0
|
(15.0 | ) |
7.4
|
11.0
|
(26.0 | ) | ||||||||||||||||
Minority
interest
|
0.0
|
0.0
|
(100.0 | ) |
0.0
|
0.0
|
(100.0 | ) | ||||||||||||||||
Provision
for income tax
|
(3.1 | ) | (3.0 | ) | (1.6 | ) | (2.9 | ) | (4.0 | ) | (14.6 | ) | ||||||||||||
Realized
benefit of tax loss carryforward
|
9.2
|
3.0
|
210.7
|
7.2
|
4.0
|
118.0
|
||||||||||||||||||
Net
earnings
|
14.4
|
11.0
|
49.8
|
11.7
|
11.0
|
17.5
|
||||||||||||||||||
The
table below sets forth domestic/international and product line sales
information for the first six months of 2007 and 2006:
|
||||||||||||||||
%age
change
|
Increase/
|
|||||||||||||||
2007
|
2006
|
2007/2006
|
(Decrease)
|
|||||||||||||
Net
Sales (in thousands):
|
||||||||||||||||
Domestic
|
$ |
12,036
|
$ |
11,117
|
8.3
|
|
919
|
|||||||||
International
|
2,106
|
1,635
|
28.8
|
471
|
||||||||||||
|
||||||||||||||||
Total
net sales
|
$ |
14,142
|
$ |
12,752
|
10.9
|
1,390
|
||||||||||
|
||||||||||||||||
Product
line sales:
|
|
|||||||||||||||
Electrosurgical
|
$ |
9,869
|
$ |
8,380
|
17.8
|
|
1,489
|
|||||||||
Cauteries
|
3,050
|
2,877
|
6.0
|
|
173
|
|||||||||||
Other
|
1,223
|
1,495
|
(18.2
|
) | (272 | ) | ||||||||||
Total
net sales
|
$ |
14,142
|
$ |
12,752
|
10.9
|
1,390
|
|
The
table below sets forth domestic/international and product line sales
information for the second quarter of 2007 and 2006:
|
||||||||||||||||
%age
change
|
Increase/
|
|||||||||||||||
2007
|
2006
|
2007/2006
|
(Decrease)
|
|||||||||||||
Net
Sales (in thousands)
|
||||||||||||||||
Domestic
|
$ |
6,330
|
$ |
5,888
|
7.5
|
442
|
||||||||||
International
|
1,109
|
853
|
30.0
|
256
|
||||||||||||
Total
net sales
|
$ |
7,439
|
$ |
6,741
|
10.4
|
698
|
||||||||||
Product
line sales:
|
||||||||||||||||
Electrosurgical
|
$ |
5,216
|
$ |
4,569
|
14.1
|
647
|
||||||||||
Cauteries
|
1,588
|
1,530
|
3.7
|
58
|
||||||||||||
Other
|
635
|
642
|
(1.0 | ) | (7 | ) | ||||||||||
Total
net sales
|
$ |
7,439
|
$ |
6,741
|
10.4
|
698
|
|
As
of June 30,
|
Payment
Period
|
|||||||
2007
|
2008
|
2009
|
2010
|
2011
|
|||||
Operating
leases
|
110
|
169
|
28
|
28
|
2
|
||||
Unconditional
purchase obligations
|
2,222
|
1,111
|
-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.
|
/s/Andrew
Makrides
|
Chief
Executive Officer - Andrew Makrides
|
/s/Gary
D. Pickett
|
Chief
Financial Officer- Gary D. Pickett
|