Delaware
|
11-2644611
|
(State
or other jurisdiction
|
(IRS
Employer Identification No.)
|
Of
incorporation or organization)
|
|
BOVIE
MEDICAL CORPORATION
|
||
INDEX
TO FORM 10-QSB
|
||
FOR
THE QUARTER ENDED SEPTEMBER 30, 2006
|
||
Contents
|
Page
|
|
Part
I:
|
Financial
Information
|
3
|
Item
1:
|
Consolidated
Financial Statements
|
|
Consolidated
Balance Sheet - September 30, 2006
and
December 31, 2005
|
3
|
|
Consolidated
Statements of Operations for the
Three
and Nine Months Ended September 30, 2006 and 2005
|
5
|
|
Consolidated
Statement of Shareholders' Equity
for
the period January 1, 2005 to September 30, 2006
|
6
|
|
Consolidated
Statements of Cash Flows for the
Nine
Months Ended September 30, 2006 and 2005
|
7
|
|
Notes
to Financial Statements
|
9
|
|
Item
2:
|
Management's
Discussion and Analysis
|
13
|
Item
3:
|
Controls
and Procedures
|
21
|
Part
II.
|
Other
Information
|
22
|
Item
1:
|
Legal
Proceedings
|
22
|
Item
2:
|
Unregistered
Sales of Equity Securities and use of Proceeds
|
22
|
Item
3:
|
Defaults
Upon Senior Securities
|
22
|
Item
4:
|
Submission
of Matters to Vote of Security Holders
|
22
|
Item
5:
|
Other
Information
|
22
|
Item
6:
|
Exhibits
|
22
|
Signatures
|
23
|
BOVIE
MEDICAL CORPORATION
|
||
CONSOLIDATED
BALANCE SHEET
|
||
SEPTEMBER
30, 2006 AND DECEMBER 31, 2005
|
||
Assets
|
||
(Unaudited)
|
(Audited)
|
|
September
30, 2006
|
December
31, 2005
|
|
Current
assets:
|
||
Cash
|
$
2,309,492
|
$
1,295,266
|
Trade
accounts receivable (net)
|
3,016,709
|
2,316,761
|
Inventories
|
3,377,987
|
2,996,832
|
Prepaid
expenses
|
424,447
|
335,492
|
Deferred
tax asset
|
386,200
|
386,200
|
Total
current assets
|
9,514,835
|
7,330,551
|
Property
and equipment, (net)
|
3,163,142
|
2,595,641
|
Other
assets:
|
||
Brand
name/trademark (net)
|
1,509,662
|
1,509,662
|
Purchased
technology (net)
|
316,084
|
33,663
|
License
rights (net)
|
250,000
|
280,000
|
Deposits
|
21,215
|
21,215
|
2,096,961
|
1,844,540
|
|
$
14,774,938
|
$
11,770,732
|
|
The
accompanying notes are an integral part of the financial
statements.
|
BOVIE
MEDICAL CORPORATION
|
|||
CONSOLIDATED
BALANCE SHEET
|
|||
SEPTEMBER
30, 2006 AND DECEMBER 31, 2005
|
|||
(CONTINUED)
|
|||
Liabilities
and Stockholders' Equity
|
|||
(Unaudited)
|
(Audited)
|
||
September
30, 2006
|
December
31, 2005
|
||
Current
liabilities:
|
|||
Accounts
payable
|
$
921,937
|
868,212
|
|
Accrued
expenses and other liabilities
|
775,909
|
471,006
|
|
Deferred
revenue
|
109,636
|
141,586
|
|
Notes
payable
|
203,241
|
348,328
|
|
Total
current liabilities
|
2,010,723
|
1,829,132
|
|
Minority
interest
|
125,000
|
140,000
|
|
Stockholders'
equity:
|
|||
Preferred
stock, par value $.001
10,000,000
shares authorized
0
issued and outstanding on September 30, 2006 and December 31,
2005
|
--
|
--
|
|
Common
stock par value $.001; 40,000,000 shares authorized, issued and
outstanding 14,704,438 shares and 14,040,728 shares on September
30, 2006
and
|
|||
December
31, 2005 respectively
|
14,722
|
14,059
|
|
Additional
paid in capital
|
21,107,143
|
20,530,090
|
|
Accumulated
deficit
|
(8,482,650)
|
(10,742,549)
|
|
Total
stockholders' equity
|
12,639,215
|
9,801,600
|
|
Total
liabilities and stockholders' equity
|
$14,774,938
|
$11,770,732
|
|
The
accompanying notes are an integral part of the financial statements.
|
BOVIE
MEDICAL CORPORATION
|
||||
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
||||
FOR
THE THREE MONTHS ENDED SEPTEMBER 30, 2006 AND 2005 AND FOR
THE
|
||||
NINE
MONTHS ENDED SEPTEMBER 30, 2006 AND 2005
|
||||
(UNAUDITED)
|
||||
Three
Months Ended September 30,
|
Nine
Months September 30,
|
|||
2006
|
2005
|
2006
|
2005
|
|
Sales
|
$
6,999,054
|
$
5,038,908
|
$
19,751,250
|
$
14,839,711
|
Cost
of sales
|
4,118,252
|
2,924,168
|
11,743,121
|
9,489,840
|
Gross
Profit
|
2,880,802
|
2,114,740
|
8,008,129
|
5,349,871
|
Costs
and expenses:
|
||||
Research
and development
|
261,923
|
303,850
|
631,674
|
657,939
|
Professional
services
|
154,264
|
126,846
|
400,945
|
361,495
|
Salaries
and related costs
|
647,002
|
447,210
|
1,847,328
|
1,469,673
|
Selling,
general and administrative
|
952,453
|
1,038,418
|
2,789,005
|
2,653,983
|
Development
joint venture
|
34,506
|
34,890
|
112,506
|
88,772
|
2,050,148
|
1,951,214
|
5,781,458
|
5,231,862
|
|
Gain
from operations
|
830,654
|
163,526
|
2,226,671
|
118,009
|
Other
income (expense):
|
||||
Interest
(net of expense)
|
28,872
|
5,594
|
50,795
|
16,797
|
Net
income before minority interest and income tax
|
859,526
|
169,120
|
2,277,466
|
134,806
|
Minority
interest
|
5,000
|
2,500
|
15,000
|
7,500
|
Provision
for income tax
|
(
292,239)
|
(
66,300)
|
(
774,338)
|
(
54,000)
|
Realized
benefit of loss carryforward
|
284,672
|
66,300
|
741,771
|
54,000
|
Net
income
|
$
856,959
|
$
171,620
|
$
2,259,899
|
$
142,306
|
Earnings
per share
|
||||
Net
income:
|
||||
Basic
|
.06
|
.01
|
.16
|
.01
|
Diluted
|
.05
|
.01
|
.13
|
.01
|
Weighted
average number of shares outstanding
|
14,610,828
|
13,928,162
|
14,351,324
|
13,907,579
|
Weighted
average number of shares outstanding adjusted for dilutive securities
|
17,483,781
|
15,925,494
|
16,895,099
|
16,020,454
|
The
accompanying notes are an integral part of the financial
statements.
|
BOVIE
MEDICAL CORPORATION
|
|||||||
CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
|
|||||||
FOR
THE PERIOD ENDED JANUARY 1, 2005 TO SEPTEMBER 30,
2006
|
|||||||
Options
|
Common
|
Paid-in
|
|||||
Outstanding
|
Shares
|
Value
|
Capital
|
Deficit
|
Total
|
||
January
1, 2005
|
3,951,200
|
13,862,128
|
$
13,881
|
$20,391,407
|
$(11,148,757)
|
$9,256,531
|
|
Options
granted
|
475,500
|
--
|
--
|
--
|
--
|
--
|
|
Options
exercised
|
(178,600)
|
178,600
|
178
|
138,683
|
--
|
138,861
|
|
Options
forfeited
|
(
31,230)
|
--
|
--
|
--
|
--
|
--
|
|
Income
for period
|
--
|
--
|
--
|
--
|
406,208
|
406,208
|
|
December
31, 2005
|
4,168,870
|
14,040,728
|
$
14,059
|
$20,530,090
|
$
(10,742,549)
|
$9,801,600
|
|
Options
exercised
|
(
663,710)
|
663,710
|
663
|
493,362
|
--
|
494,025
|
|
Options
forfeited
|
(
22,360 )
|
||||||
Stock
based compensation
|
20,390
|
20,390
|
|||||
Stock
options issued to acquire assets
|
63,301
|
63,301
|
|||||
Income
for period
|
--
|
--
|
--
|
--
|
2,259,899
|
2,259,899
|
|
September
30, 2006
|
3,482,800
|
14,704,438
|
$
14,722
|
$
21,107,143
|
$
(8,482,650)
|
$12,639,215
|
BOVIE
MEDICAL CORPORATION
|
||
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
||
INCREASE
(DECREASE) IN CASH AND CASH EQUIVALENTS
|
||
FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 2006 AND
2005
|
||
(UNAUDITED)
|
||
2006
|
2005
|
|
Cash
flows from operating activities
|
||
Net
income
|
$
2,259,899
|
$
142,306
|
Adjustments
to reconcile net income
|
||
to
net cash provided by (used in) operating activities:
|
||
Depreciation
and amortization
|
394,106
|
344,292
|
Loss
on disposals of fixed assets
|
6,727
|
|
Stock-based
compensation
|
20,390
|
--
|
Stock-based
expense for Henvil asset purchase
|
20,886
|
--
|
Changes
in current assets and liabilities:
|
||
Receivables
|
(
699,948)
|
(
331,421)
|
Inventories
and repair parts
|
(
381,155)
|
(
760,468)
|
Prepaid
expenses
|
1,045
|
110,265
|
Other
receivable
|
--
|
(
55,000)
|
Accounts
payable
|
53,725
|
98,051
|
Customer
deposits
|
--
|
78,588
|
Accrued
expense
|
304,903
|
111,115
|
Deferred
revenue
|
(
31,950)
|
(
6,610)
|
Net
cash provided (applied) by operating activities
|
1,948,628
|
(
268,882)
|
Cash
flows from investing activities
|
||
Increase
in fixed assets
|
(
929,253)
|
(
781,621)
|
Increase
in deposits
|
--
|
(
2,000)
|
Increase
in purchased technology
|
(
264,088)
|
(
2,001)
|
Net
cash used in investing activities
|
(1,193,341)
|
(
785,622)
|
Cash
flows from financing activities
|
||
Decrease
in mortgage payable
|
(348,328)
|
(
23,748)
|
Increase
in notes payable
|
132,067
|
--
|
Decrease
in notes payable
|
(18,825)
|
--
|
Common
shares purchased
|
494,025
|
50,363
|
Net
cash provided in financing activities
|
258,939
|
26,615
|
Net
increase (decrease) in cash and cash equivalents
|
1,014,226
|
(1,027,889)
|
Cash
and cash equivalents, beginning of period
|
1,295,266
|
2,294,746
|
|
|
|
Cash
and cash equivalents, end of period
|
$
2,309,492
|
$
1,266,857
|
The
accompanying notes are an integral part of the financial
statements.
|
|
2006
|
2005
|
Interest
paid
|
$
15,969
|
$
16,524
|
Income
taxes
|
25,000
|
17,692
|
September
30, 2006
|
December
31, 2005
|
|
Raw
materials
|
$1,307,296
|
$
1,139,730
|
Work
in process
|
1,406,072
|
1,267,991
|
Finished
goods
|
664,619
|
589,111
|
Total
|
$
3,377,987
|
$
2,996,832
|
September
30, 2006
|
December
31, 2005
|
|
Goodwill
acquired:
|
||
Trade
name (life indefinite)
|
$
1,509,662
|
$
1,509,662
|
Other
intangibles:
|
||
License
rights (20 yr life)
|
400,000
|
400,000
|
Less:
Accumulated amortization
|
(
150,000)
|
(
120,000)
|
Net
carrying amount
|
250,000
|
280,000
|
Purchased
technology (5 yr life)
|
$
587,267
|
$
280,764
|
Less:
Accumulated amortization
|
(271,183)
|
(247,101)
|
Net
carrying amount
|
$
316,084
|
$
33,663
|
September
30, 2006
|
|||
Cost
of Sales
|
$
1,101
|
||
Research
and Development
|
6,725
|
||
Salaries
and related costs
|
12,564
|
||
Total
|
$
20,390
|
Nine
months ended September 30
|
||
2006
|
2005
|
|
Net
income
|
$
2,260
|
$
142
|
Basic-weighted
average shares outstanding
|
14,351
|
13,908
|
Effect
of dilutive potential securities
|
2,544
|
2,112
|
Diluted
- weighted average shares outstanding
|
16,895
|
16,020
|
Basic
EPS
|
$
.16
|
$
.01
|
Diluted
EPS
|
$
.13
|
$
.01
|
Percentage
|
Percentage
|
|||||
Change
in
|
Change
in
|
|||||
3rd
Quarter
|
Dollar
amounts
|
Nine
months
|
Dollar
amounts
|
|||
2006
|
2005
|
2006
|
2005
|
|||
%
|
%
|
%
|
%
|
%
|
%
|
|
Sales
|
100.0
|
100.0
|
39.0
|
100.0
|
100.0
|
33.0
|
Cost
of sales
|
59.0
|
58.0
|
41.0
|
60.0
|
64.0
|
24.0
|
Gross
profit
|
41.0
|
42.0
|
36.0
|
40.0
|
36.0
|
50.0
|
Other
costs:
|
||||||
R
& D
|
4.0
|
6.0
|
(
14.0)
|
3.0
|
4.0
|
(
4.0)
|
Professional
fees
|
2.0
|
2.0
|
22.0
|
2.0
|
2.0
|
11.0
|
Salaries
|
9.0
|
9.0
|
45.0
|
9.0
|
10.0
|
26.0
|
SGA
|
13.0
|
21.0
|
(
8.0)
|
14.0
|
18.0
|
5.0
|
Equity
in loss of Unconsolidated affiliate
|
1.0
|
1.0
|
(
1.0)
|
1.0
|
1.0
|
27.0
|
Total
other costs
|
29.0
|
39.0
|
5.0
|
29.0
|
35.0
|
11.0
|
Gain/
from operations
|
12.0
|
3.0
|
408.0
|
11.0
|
1.0
|
1,787.0
|
Other
income
|
0.0
|
0.0
|
416.0
|
0.0
|
0.0
|
202.0
|
Net
Income before Minority Interest and Income Tax
|
12.0
|
3.0
|
408.0
|
11.0
|
1.0
|
1,589.0
|
Minority
Interest
|
0.0
|
0.0
|
100.0
|
0.0
|
0.0
|
100.0
|
Income
tax expense
|
(
4.0)
|
(
1.0)
|
341.0
|
(4.0)
|
(
0.0)
|
1,334.0
|
Income
tax benefit
|
4.0
|
1.0
|
329.0
|
4.0
|
0.0
|
1,274.0
|
Net
earnings
|
12.0
|
3.0
|
399.0
|
11.0
|
1.0
|
1,488.0
|
The
table below sets forth domestic/international and product line sales
information for the third quarter of 2006 and 2005.
|
||||
Net
Sales (in thousands)
|
Percentage
change
|
Increase/
|
||
2006
|
2005
|
2006/2005
|
(Decrease)
|
|
Domestic/international
sales:
|
||||
Domestic
|
$
6,160
|
$
4,138
|
49.0
|
2,022
|
International
|
839
|
901
|
(
7.0)
|
(
-62)
|
Total
net sales
|
$
6,999
|
$
5,039
|
39.0
|
1,960
|
Product
line sales:
|
||||
Electrosurgical
|
$
5,041
|
$
3,388
|
49.0
|
1,653
|
Cauteries
|
1,465
|
1,429
|
3.0
|
36
|
Other
|
493
|
222
|
17.0
|
72
|
Total
net sales
|
$
6,999
|
$
5,039
|
39.0
|
1,960
|
The
table below sets forth domestic/international and product line sales
information for the nine months of 2006 and 2005.
|
||||
Net
Sales (in thousands)
|
Percentage
change
|
Increase/
|
||
2006
|
2005
|
2006/2005
|
(Decrease)
|
|
Domestic/international
sales:
|
||||
Domestic
|
$
17,278
|
$
12,330
|
40.0
|
4,948
|
International
|
2,473
|
2,510
|
(
1.0)
|
(
37)
|
Total
net sales
|
$
19,751
|
$
14,840
|
33.0
|
4,911
|
Product
line sales:
|
||||
Electrosurgical
|
$
13,435
|
$
8,613
|
56.0
|
4,822
|
Cauteries
|
4,343
|
4,031
|
8.0
|
312
|
Other
|
1,973
|
2,196
|
(
10.0)
|
(
223)
|
Total
net sales
|
$
19,751
|
$
14,840
|
33.0
|
4,911
|
|
As
of September 30,
|
|
Payment
Period
|
|
|
2006
|
2007
|
2008
|
2009
|
2010
|
|
Current
debt
|
137
|
66
|
-0-
|
-0-
|
-0-
|
Operating
leases
|
36
|
135
|
115
|
-0-
|
-0-
|
Unconditional
purchase obligations
|
1,009
|
3,026
|
-0-
|
-0-
|
-0-
|
|
|
Amount
of Commitment
|
|
|||||||
|
|
Total
|
Expiration
Per Period
|
|
||||||
|
|
Amount
|
Less
than
|
In
excess of
|
|
|||||
|
|
Committed
|
1
year
|
1
year
|
|
|||||
Secured
revolving credit agreement and other lines of credit
|
|
$
|
1.5
|
|
$
|
1.5
|
|
|
-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.
|
/s/Andrew
Makrides
|
Chief
Executive Officer - Andrew Makrides
|
/s/Gary
D. Pickett
|
Chief
Financial Officer- Gary D. Pickett
|