UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
|
|
x
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010.
|
|
|
o
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________________ TO ________________.
|
Commission File No. 1-11700
HEMAGEN DIAGNOSTICS, INC.
(Exact name of registrant as specified in its charter)
|
|
|
|
|
State of Organization
|
|
IRS Employer I.D.
|
9033 Red Branch Road, Columbia, Maryland 21045-2105
|
|
(Address of principal executive offices)
|
|
|
|
(Registrant’s telephone number, including area code)
|
Indicate by checkmark 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 preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. YES
x
NO
o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES
o
NO
o
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
o
Smaller reporting company
x
Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
o
No
x
As of June 30, 2010, the registrant had 15,560,281 shares of Common Stock $.01 par value per share outstanding.
HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES
INDEX
|
|
|
|
Page
Number
|
|
PART I.
|
FINANCIAL INFORMATION
|
|
|
|
|
|
|
|
Item 1.
|
Financial Statements
|
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheets; June 30,
2010 (unaudited) and September 30, 2009
|
3
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Operations;
Three and Nine Months Ended June 30, 2010 and 2009 (unaudited)
|
5
|
|
|
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows; Nine
Months Ended June 30, 2010 and 2009 (unaudited)
|
6
|
|
|
|
|
|
|
|
|
|
Notes to Consolidated Financial Statements (unaudited)
|
7
|
|
|
|
|
|
|
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operation
|
11
|
|
|
|
|
|
|
|
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
14
|
|
|
|
|
|
|
|
|
Item 4.
|
Controls and Procedures
|
14
|
|
|
|
|
|
|
PART
II
.
|
OTHER INFORMATION
|
|
|
|
|
|
|
|
|
Item 2.
|
Unregistered Sales of Equity Securities and Use Of Proceeds
|
14
|
|
|
|
|
|
|
|
|
Item 5
|
Other Information
|
15
|
|
|
|
|
|
|
|
|
Item 6.
|
Exhibits
|
15
|
|
|
|
|
|
|
|
SIGNATURES
|
16
|
|
|
|
|
|
CERTIFICATIONS
|
|
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995
Certain statements contained in this report that are not historical facts constitute forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, and are intended to be covered by the safe harbors created by that Act. Forward looking statements may be identified by words such as “estimates”, “anticipates”, “projects”, “plans”, “expects”, “intends”, “believes”, “should” and similar expressions or the negative versions thereof and by the context in which they are used. Such statements, whether express or implied, are based on current expectations of the company and speak only as of the date made. Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to differ materially from those expressed or implied. Hemagen undertakes no obligation to update any forward-looking statements as a result of new information or to reflect events or circumstances after the date on which they are made or otherwise.
Statements concerning the establishments of reserves and adjustments for dated and obsolete products, expected financial performance, on-going business strategies and possible future action which Hemagen intends to pursue to achieve strategic objectives constitute forward-looking information. All forward looking statements, including those relating to the sufficiency of such charges, implementation of strategies and the achievement of financial performance are each subject to numerous conditions, uncertainties, risks and other factors. Factors which could cause actual performance to differ materially from these forward-looking statements, include, without limitation, management’s analysis of Hemagen’s assets, liabilities and operations, the failure to sell date–sensitive inventory prior to its expiration, competition, new product development by competitors which could render particular products obsolete, the inability to develop or acquire and successfully introduce new products or improvements of existing products, recessionary pressures on the economy and the markets in which our customers operate, costs and difficulties in complying with the laws and regulations administered by the United States Food and Drug Administration, changes in the relative strength of the U.S. Dollar and Brazilian Reals, unfavorable political or economic developments in Brazilian operations, the ability to assimilate successfully product acquisitions and other factors disclosed in our reports on Forms 10-K, 10-Q and 8-K filed with the SEC.
PART I - Financial Information
Item 1. - Financial Statements
HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
|
|
(unaudited)
|
|
|
September 30,
2009
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
|
Cash
|
|
$
|
221,640
|
|
|
$
|
156,314
|
|
Accounts receivable, less allowance for doubtful accounts of
$57,494 and $69,973 at June 30, 2010 and
September 30, 2009, respectively
|
|
|
645,070
|
|
|
|
630,020
|
|
|
Inventories, net
|
|
|
1,465,568
|
|
|
|
1,703,226
|
|
|
Current portion of note receivable
|
|
|
210,000
|
|
|
|
210,000
|
|
|
Prepaid expenses and other current assets
|
|
|
203,333
|
|
|
|
120,464
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
2,745,611
|
|
|
|
2,820,024
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT;
net of accumulated depreciation
and amortization of $6,239,083 and $6,143,356
at June 30, 2010 and September 30, 2009, respectively
|
|
|
480,092
|
|
|
|
599,008
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long term portion of note receivable
|
|
|
87,500
|
|
|
|
245,000
|
|
|
Other assets
|
|
|
41,889
|
|
|
|
54,300
|
|
|
Total other assets
|
|
|
129,389
|
|
|
|
299,300
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
3,355,092
|
|
|
$
|
3,718,332
|
|
HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
June 30,
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
707,862
|
|
|
$
|
969,135
|
|
|
Revolving line of credit
|
|
|
398,000
|
|
|
|
400,000
|
|
|
Deferred revenue
|
|
|
31,325
|
|
|
|
51,830
|
|
|
Note Payable – Itau Bank
|
|
|
--
|
|
|
|
28,859
|
|
|
Total Current Liabilities
|
|
|
1,137,187
|
|
|
|
1,449,824
|
|
|
|
|
|
|
|
|
|
|
|
|
LONG TERM LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Senior subordinated secured convertible notes
|
|
|
4,049,858
|
|
|
|
4,049,858
|
|
|
Total Long Term Liabilities
|
|
|
4,049,858
|
|
|
|
4,049,858
|
|
|
Total liabilities
|
|
|
5,187,045
|
|
|
|
5,499,682
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.01 par value - 1,000,000 shares authorized; none issued
|
|
|
--
|
|
|
|
--
|
|
|
Common stock, $.01 par value - 30,000,000 shares authorized; 15,560,281 and 15,345,281 issued and outstanding
as of June 30, 2010 and September 30, 2009, respectively
|
|
|
155,602
|
|
|
|
153,452
|
|
|
Additional paid-in capital
|
|
|
22,947,450
|
|
|
|
22,919,932
|
|
|
Accumulated deficit
|
|
|
(24,813,316
|
)
|
|
|
(24,734,125
|
)
|
|
Accumulated other comprehensive loss-
currency translation loss
|
|
|
(32,052
|
)
|
|
|
(30,972
|
)
|
|
Less treasury stock at cost; 100,000 shares at June 30, 2010
and September 30, 2009, respectively.
|
|
|
(89,637
|
)
|
|
|
(89,637
|
)
|
|
Total Stockholders’ Deficit
|
|
|
(1,831,953
|
)
|
|
|
(1,781,350
|
)
|
|
Total Liabilities and Stockholders’ Deficit
|
|
$
|
3,355,092
|
|
|
$
|
3,718,332
|
|
_______________________
The accompanying notes are an integral part of the financial statements.
HEMAGEN DIAGNOSTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
1,317,712
|
|
|
$
|
1,386,660
|
|
|
$
|
3,890,879
|
|
|
$
|
4,073,634
|
|
|
Cost of Sales
|
|
|
702,850
|
|
|
|
832,810
|
|
|
|
2,111,945
|
|
|
|
2,486,359
|
|
|
Gross Profit
|
|
|
614,862
|
|
|
|
553,850
|
|
|
|
1,778,934
|
|
|
|
1,587,275
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
506,443
|
|
|
|
565,545
|
|
|
|
1,533,364
|
|
|
|
1,759,728
|
|
|
Research and development
|
|
|
(2,157
|
)
|
|
|
35,734
|
|
|
|
19,955
|
|
|
|
75,128
|
|
|
Total operating expenses
|
|
|
504,286
|
|
|
|
601,279
|
|
|
|
1,553,319
|
|
|
|
1,834,856
|
|
|
Total operating income (loss) from continuing operations
|
|
|
110,576
|
|
|
|
(47,429
|
)
|
|
|
225,615
|
|
|
|
(247,581
|
)
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense (net), including $20,234 and $58,953 for the three
and
nine month periods ended June 30, 2009, of debt discount
amortization.
|
|
|
(83,870
|
)
|
|
|
(111,004
|
)
|
|
|
(251,694
|
)
|
|
|
(309,268
|
)
|
|
Other income
|
|
|
47
|
|
|
|
44
|
|
|
|
3,191
|
|
|
|
444
|
|
|
Gain on sale of assets
|
|
|
--
|
|
|
|
--
|
|
|
|
25,291
|
|
|
|
43,117
|
|
|
Total other expense
|
|
|
(83,823
|
)
|
|
|
(110,960
|
)
|
|
|
(223,212
|
)
|
|
|
(265,707
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss), before income taxes, from continuing operations
|
|
|
26,753
|
|
|
|
(158,389
|
)
|
|
|
2,403
|
|
|
|
(513,288
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax expense
|
|
|
34,766
|
|
|
|
2,816
|
|
|
|
81,594
|
|
|
|
19,288
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) from continuing operations
:
|
|
$
|
(8,013
|
)
|
|
$
|
(161,205
|
)
|
|
$
|
(79,191
|
)
|
|
$
|
(532,576
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Income from Discontinued Operations
|
|
|
--
|
|
|
|
(78,199
|
)
|
|
|
--
|
|
|
|
(78,199
|
)
|
|
Net Income (Loss):
|
|
|
(8,013
|
)
|
|
|
(239,404
|
)
|
|
|
(79,191
|
)
|
|
|
(610,775
|
)
|
|
Other comprehensive income (loss), net of tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(959
|
)
|
|
|
157,161
|
|
|
|
(1,080
|
)
|
|
|
(9,584
|
)
|
|
Comprehensive income (loss):
|
|
$
|
(8,972
|
)
|
|
$
|
(82,243
|
)
|
|
$
|
(80,271
|
)
|
|
$
|
(620,359
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings (loss) per share, from continuing operations - Basic
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
Earnings (loss) per share, from continuing operations - Diluted
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.03
|
)
|
|
Earnings (loss) per share, from discontinued operations - Basic
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
Earnings (loss) per share, from discontinued operations - Diluted
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
$
|
0.00
|
|
|
$
|
(0.01
|
)
|
|
Earnings (loss) per share - Basic
|
|
$
|
0.00
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.04
|
)
|
|
Earnings (loss) per share - Diluted
|
|
$
|
0.00
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.04
|
)
|
|
Weighed average common shares used in calculation of earnings (loss) per share - Basic
|
|
|
15,459,567
|
|
|
|
15,240,281
|
|
|
|
15,450,446
|
|
|
|
15,231,819
|
|
|
Weighed average common shares used in calculation of earnings (loss) per share – Diluted
|
|
|
15,459,567
|
|
|
|
15,240,281
|
|
|
|
15,450,446
|
|
|
|
15,231,819
|
|
HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
Nine Months Ended
June 30,
|
|
|
Cash flows from operating activities:
|
|
2010
|
|
|
2009
|
|
|
Net Loss
|
|
$
|
(79,191
|
)
|
|
$
|
(610,775
|
)
|
|
Adjustments to reconcile net loss to net
cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
122,259
|
|
|
|
114,182
|
|
|
Amortization of debt discount
|
|
|
--
|
|
|
|
58,953
|
|
|
Gain on sale of assets
|
|
|
(25,291
|
)
|
|
|
(43,117
|
)
|
|
(Recovery of) / Provision for Bad Debts
|
|
|
(9,720
|
)
|
|
|
27,802
|
|
|
Stock Based Compensation
|
|
|
29,669
|
|
|
|
49,285
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(5,330
|
)
|
|
|
104,332
|
|
|
Prepaid expenses and other current assets
|
|
|
(82,870
|
)
|
|
|
122,026
|
|
|
Inventories
|
|
|
237,658
|
|
|
|
237,212
|
|
|
Accounts payable and accrued expenses
|
|
|
(261,273
|
)
|
|
|
(98,697
|
)
|
|
Other assets
|
|
|
12,411
|
|
|
|
52,301
|
|
|
Deferred revenue
|
|
|
(20,505
|
)
|
|
|
(14,773
|
)
|
|
Net cash provided by (used in) operating activities
|
|
|
(82,183
|
)
|
|
|
(1,269
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(17,946
|
)
|
|
|
(114,078
|
)
|
|
Proceeds from sale of assets
|
|
|
39,912
|
|
|
|
51,805
|
|
|
Payments Received on Notes Receivable
|
|
|
157,500
|
|
|
|
157,500
|
|
|
Net cash provided by investing activities
|
|
|
179,466
|
|
|
|
95,227
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Payments on Line of Credit
|
|
|
(2,000
|
)
|
|
|
(15,000
|
)
|
|
Payments on Notes – Itau Bank
|
|
|
(28,859
|
)
|
|
|
(91,513
|
)
|
|
Net cash used in financing activities
|
|
|
(30,859
|
)
|
|
|
(106,513
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Effects of foreign exchange rate
|
|
|
(1,098
|
)
|
|
|
69,686
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in cash and cash equivalents
|
|
|
65,326
|
|
|
|
57,131
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
156,314
|
|
|
|
98,799
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
221,640
|
|
|
$
|
155,930
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
Cash paid during the period for interest
|
|
$
|
276,604
|
|
|
$
|
289,219
|
|
HEMAGEN DIAGNOSTICS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
FOR THE NINE MONTHS ENDED JUNE 30, 2010 and 2009
NOTE 1 – BASIS OF PRESENTATION
Hemagen Diagnostics, Inc. (“Hemagen” or the “Company”) has prepared the accompanying unaudited consolidated financial statements in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission instructions to Form 10-Q. These financial statements should be read together with the financial statements and notes in the Company’s 2009 Annual Report on Form 10-K filed with the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. The accompanying financial statements reflect all adjustments and disclosures, which, in the Company’s opinion, are necessary for fair presentation. All such adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results of the entire year.
NOTE 2- RECENT ACCOUNTING PRONOUNCEMENTS
Effective July 1, 2009, the Financial Accounting Standards Board’s (“FASB”) Accounting Standard Codification (“ASC”) became the single official source of authoritative, nongovernmental GAAP in the United States. The historical GAAP hierarchy was eliminated and the ASC became the only level of authoritative GAAP, other than rules and interpretative releases issued by the SEC. Our accounting policies were not affected by the conversion to ASC during the period ended September 30, 2009. However, references to specific accounting standards in the footnotes to our consolidated financial statements have been changed to refer to the appropriate section of the ASC.
The Subsequent Events Topic of the FASB ASC establishes general standards of accounting for, and disclosure of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. This accounting standard sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements. This standard also sets forth the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This accounting standard is effective for interim or annual periods ending after June 15, 2009. In February 2010, the FASB issued ASU No. 2010-09 which amended ASC 855. This amendment, which was effective upon issuance, removed the requirement for SEC registrants to disclose the date through which such registrants have evaluated subsequent events.
In October 2009, the FASB issued authoritative guidance (ASC ASU No. 2009-13) for multiple-deliverable revenue arrangements, which amends previously issued guidance to require an entity to use and estimate selling price when vendor specific objective evidence or acceptable third party evidence does not exist for any products or services included in a multiple element arrangement. The arrangement consideration should be allocated among the products and services based upon their relative selling prices, thus eliminating the use of the residual method of allocation. This standard
also requires expanded qualitative and quantitative disclosures regarding significant judgments made and changes in applying this guidance. This standard is effective on a prospective basis for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early adoption and retrospective application are also permitted. We are in the process of evaluating when we will adopt this guidance and whether the adoption will have a material impact on our financial position, results of operations, or cash flow.
ASU 2010-01, “Equity (Topic 505) — Accounting for Distributions to Shareholders with Components of Stock and Cash.” ASU 2010-01 was issued January 2010 and clarifies that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in earnings per share prospectively and is not a stock dividend. ASU 2010-01 is effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis. ASU 2010-01 had no impact on our consolidated financial statements.
ASU 2010-06, “Improving Disclosure about Fair Value Measurements,” was issued January 2010 and requires additional disclosures regarding fair value measurements, amends disclosures about post-retirement benefit plan assets and provides clarification regarding the level of disaggregation of fair value disclosures by investment class. The ASU is effective for interim and annual reporting periods
beginning after December 15, 2009, except for certain Level 3 activity disclosure requirements that will be effective for reporting periods beginning after December 15, 2010. Adoption of ASU 2010-06 had no material impact on our consolidated financial statements.
NOTE 3- EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per common share are computed based upon the weighted average number of common shares outstanding during the three and nine months ended June 30, 2010 and 2009. Diluted earnings per common share is computed based on common shares outstanding plus the effect of dilutive stock options and other potentially dilutive common stock equivalents consisting of stock options and convertible debentures. The dilutive effect of stock options and other potentially dilutive common stock equivalents is determined using the treasury stock and if-converted method based on the Company’s average stock price for the period.
The following table sets forth the computation of basic and diluted earnings per share for the three and nine month periods ended June 30, 2010 and 2009.
|
|
|
Three Months Ended
June 30,
|
|
|
Nine Months Ended
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(8,013
|
)
|
|
$
|
(239,404
|
)
|
|
$
|
(79,191
|
)
|
|
$
|
(610,775
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted –average shares outstanding
|
|
|
15,459,567
|
|
|
|
15,240,281
|
|
|
|
15,450,446
|
|
|
|
15,231,819
|
|
|
Effect of dilutive shares
|
|
|
--
|
|
|
|
313
|
|
|
|
--
|
|
|
|
2,727
|
|
|
Denominator for diluted earnings per share
|
|
|
15,459,567
|
|
|
|
15,240,594
|
|
|
|
15,450,446
|
|
|
|
15,234,546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Earnings per share
|
|
$
|
0.00
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.04
|
)
|
|
Diluted Earnings per share
|
|
$
|
0.00
|
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.04
|
)
|
Diluted net income (loss) per share does not include the effect of the following common stock equivalents related to outstanding convertible debentures and stock purchase options as their effect would be antidilutive:
|
|
|
Three Months Ended
June 30,
|
|
|
Nine Months Ended
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes
|
|
|
11,571,000
|
|
|
|
5,399,800
|
|
|
|
11,571,000
|
|
|
|
5,399,800
|
|
|
Options to purchase common stock
|
|
|
2,962,208
|
|
|
|
2,889,222
|
|
|
|
2,962,208
|
|
|
|
2,889,222
|
|
|
Total antidilutive instruments
|
|
|
14,533,208
|
|
|
|
8,289,022
|
|
|
|
14,533,208
|
|
|
|
8,289,022
|
|
NOTE 4 – STOCK BASED COMPENSATION
The following table summarizes the Company’s stock option activity for the nine months ended June 30, 2010:
|
|
|
Shares
|
|
|
Weighted average
exercise price
|
|
|
Weighted average
life
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding – October 1, 2009
|
|
|
1,007,208
|
|
|
$
|
0.23
|
|
|
|
6.46
|
|
|
Granted
|
|
|
1,955,000
|
|
|
|
0.11
|
|
|
|
9.92
|
|
|
Exercised
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Forfeited, cancelled or expired
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Options outstanding – June 30, 2010
|
|
|
2,962,208
|
|
|
$
|
0.15
|
|
|
|
8.74
|
|
|
Options exercisable – June 30, 2010
|
|
|
1,046,208
|
|
|
$
|
0.22
|
|
|
|
7.04
|
|
We use the Black-Scholes option pricing model to determine the fair value of our awards on the date of grant. The fair value of each option award is estimated on the date of grant using a Black-Scholes option-pricing formula that uses the assumptions noted in the table and discussion that follows:
|
|
|
Three Months Ended
June 30,
|
|
|
Nine Months Ended
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Dividend yield
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Expected volatility
|
|
|
125.86%
|
|
|
|
120.20%
|
|
|
|
125.86%
|
|
|
|
95.1% - 120.20%
|
|
|
Risk-free interest rate
|
|
|
3.34%
|
|
|
|
3.16%
|
|
|
|
3.34%
|
|
|
|
1.67% - 3.16%
|
|
|
Expected life in years
|
|
|
10
|
|
|
|
10
|
|
|
|
10
|
|
|
|
1.5 - 10
|
|
We have elected to incur stock-based compensation expense over the requisite service period. We have estimated forfeitures and incur expense on shares we expect to vest.
As of June 30, 2010, there was $127,688 of unrecognized compensation cost related to share-based compensation arrangements that we expect to vest. This cost will be fully incurred within 3 years.
The fair value of the 1,955,000 options issued during 2010 was $130,177. The Company had 105,000 options issued and exercisable as of June 30, 2010 with an aggregate intrinsic value of $9,540.
NOTE 5 - INVENTORIES
Inventories at June 30, 2010 and September 30, 2009 consist of the following:
|
|
|
|
|
|
|
|
|
Raw Materials
|
|
$
|
1,119,809
|
|
|
$
|
1,350,828
|
|
|
Work-in-process
|
|
|
135,923
|
|
|
|
164,183
|
|
|
Finished goods
|
|
|
881,827
|
|
|
|
938,703
|
|
|
|
|
|
2,137,559
|
|
|
|
2,453,714
|
|
|
Less reserves
|
|
|
(671,991
|
)
|
|
|
(750,488
|
)
|
|
Inventories, net
|
|
$
|
1,465,568
|
|
|
$
|
1,703,226
|
|
NOTE 6 - LINE OF CREDIT
The Company entered into a revolving line of credit facility with Bay National Bank on or about September 26, 2002 for the purpose of financing working capital needs as required. Bay National Bank entered into a Consent Order with the Office of the Comptroller of Currency (the "OCC") earlier this year and on July 9, 2010, Bay National Bank was closed by the OCC, which appointed the Federal Deposit Insurance Corporation (the "FDIC") as receiver of the Bank. The FDIC has advised that subsequent to the closure, Bay Bank, FSB, Lutherville, Maryland, assumed the operations and all of the deposits of Bay National Bank, acquiring essentially all of its assets.
While the original terms of this line of credit facility contemplated its expiration on April 1, 2010, Bay National Bank granted an extension to August 1, 2010. Recently Bay Bank, FSB granted a further extension to September 1, 2010 while the bank and the company discuss the disposition of the line. The line of credit facility provides for borrowings up to $500,000 at an interest rate of Prime Rate plus .75%, with an interest rate floor of 5.5%. Maximum borrowings under the loan are based on the domestic receivables and inventory of the Company. The line of credit facility is secured by first lien on all assets of the Company. As of June 30, 2010, the outstanding balance on the line of credit facility was $398,000 with an effective interest rate of 5.50%, and the Company was in compliance with its debt covenants.
We are currently talking with several parties, including Bay Bank, FSB, and we are hopeful that we will be able to secure financing for the purpose of replacing this line of credit facility and/or further extending its expiration with Bay Bank, FSB. However, we can give no assurances that our efforts will be successful in this regard.
NOTE 7 – SENIOR SUBORDINATED SECURED CONVERTIBLE NOTES
During September 2009, the Company completed an Exchange Offer of its senior subordinated secured convertible notes due on September 30, 2009. The Company offered to exchange new, modified 8% Senior Subordinated Convertible Notes due 2014 for the outstanding 8% Senior Subordinated Secured Convertible Notes due 2009. The principal features of the Exchange Offer included $4,049,858 principal amount of Senior Subordinated Secured Convertible Notes, due September 30, 2014, which bear interest at the rate of 8% per annum, paid quarterly, convertible by holders into Common Stock at $0.35 per share. The Company can require the conversion of these Modified Notes to Common Stock at any time after the Common Stock trades at or above $0.70 for fifteen consecutive trading days.
The Company has accounted for the Exchange Offer as though the exchange of the entire amount of $4,049,858 of the Outstanding Notes was effective as of September 30, 2009, because at September 30, 2009 all of the terms and conditions for the consummation of the Exchange Offer had been satisfied.
The Modified Notes are secured by a first lien on all real, tangible and intangible property except that the terms of the Modified Notes provide that the Modified Notes are subordinate to the following: (i) a credit facility that is equal to or less than Three Million Dollars ($3,000,000), (ii) any secured financing that is greater than Two Million Dollars ($2,000,000), provided that (A) the Company provides the Holder twenty (20) business days’ written notice of such secured financing, and (B) all of the funds raised in connection with such secured financing shall be used to reduce, on a pro rata basis, the principal amount and accrued and unpaid interest owed on the Modified Notes, (iii) real estate financing that the Company may incur for the purchase of a corporate facility provided that the annual mortgage payments are less than the rent expense that the Company pays in the year of such purchase for its leased facilities, and (iv) secured financing not to exceed Four Million Dollars ($4,000,000) at any one time for the purpose of financing an acquisition by the Company of the business of another person or entity.
NOTE 8 – GEOGRAPHICAL INFORMATION
The Company considers its manufactured kits, tests and instruments as one operating segment.
The following table sets forth revenue for the periods reported and assets by geographic location for the nine months ended June 30, 2010 and 2009.
|
|
|
United*
States
|
|
|
Brazil
|
|
|
Consolidated
|
|
|
June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
1,973,358
|
|
|
$
|
1,917,521
|
|
|
$
|
3,890,879
|
|
|
Long-lived assets
|
|
$
|
263,326
|
|
|
$
|
346,155
|
|
|
$
|
609,481
|
|
|
June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
2,477,340
|
|
|
$
|
1,596,294
|
|
|
$
|
4,073,634
|
|
|
Long-lived assets
|
|
$
|
522,060
|
|
|
$
|
430,206
|
|
|
$
|
952,266
|
|
*Includes export sales to countries other than Brazil.
NOTE 9 – NOTE RECEIVABLE
The Company received an $840,000 Note during the period ended December 31, 2007 related to the sale of assets of the Company’s wholly owned subsidiary Reagents Applications, Inc. The Note is payable in forty-eight monthly installments of principal of $17,500 plus accrued interest at the rate of 8% beginning on December 31, 2007. For the nine months ended June 30, 2010 and 2009, the Company has received $157,500 in principal payments against the Note. All payments that have been received on the Note have been made in accordance with the terms of the Note.
NOTE 10 – DISCONTINUED OPERATIONS
On October 8, 2007, the Company sold the assets of its wholly-owned subsidiary Reagents Applications, Inc. The results of operations for this division have been presented as discontinued operations in the accompanying financial statements for the periods ended June 30, 2010 and 2009.
Results from discontinued operations, net of income tax, for the three and nine month periods ended June 30, 2010 and 2009 are as follows:
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
--
|
|
|
$
|
91,911
|
|
|
$
|
--
|
|
|
$
|
129,695
|
|
|
Costs of sales
|
|
|
--
|
|
|
|
170,110
|
|
|
|
--
|
|
|
|
207,894
|
|
|
Gross Profit
|
|
|
--
|
|
|
|
(78,199
|
)
|
|
|
--
|
|
|
|
(78,199
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Research and development
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Total operating costs and expenses
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
--
|
|
|
|
(78,199
|
)
|
|
|
--
|
|
|
|
(78,199
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expenses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (expense)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Gain on Sale of Assets
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Total other income (expense)
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) before income taxes
|
|
|
--
|
|
|
|
(78,199
|
)
|
|
|
--
|
|
|
|
(78,199
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Tax
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
Net income (loss) from discontinued operations
|
|
|
--
|
|
|
|
(78,199
|
)
|
|
|
--
|
|
|
|
(78,199
|
)
|
The revenues generated for the three and nine month periods ended June 30, 2009 resulted from the sale of inventory from the discontinued division. Pursuant to an inventory agreement, the remaining inventory was being sold at cost to the purchaser for a period of eighteen months subsequent to the
sale. The operating loss as shown above was created by the additional inventory reserve recorded to fully reserve all remaining inventory in this division.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Refer to "Forward Looking Statements" following the Index in front of this Form 10-Q.
Following is a discussion and analysis of the financial statements and other statistical data that management believes will enhance the understanding of the Company’s financial condition and results of operations. This discussion should be read in conjunction with the financial statements and notes thereto beginning on page 1.
Overview
Hemagen Diagnostics, Inc. is a biotechnology company that develops, manufactures, and markets approximately 68 FDA-cleared proprietary medical diagnostic test kits. Hemagen has two different product lines. The Virgo® product line of diagnostic test kits is used to aid in the diagnosis of certain autoimmune and infectious diseases, using ELISA, Immunoflourescence, and hemagglutination technology. The Analyst® product line is an FDA-cleared clinical chemistry analyzer system, including consumables, that is used to measure important constituents in human and animal blood. The Company sells its products both directly and through distributors to reference labs, physicians, veterinarians, clinical laboratories and blood banks. The Company also sells its products on a private-label basis through multinational distributors. The Company was incorporated in 1985 and became a public company in 1993.
Hemagen’s principal office is located at 9033 Red Branch Road, Columbia, Maryland 21045 and the telephone number is (443) 367-5500. Hemagen maintains a website at www.hemagen.com. Investors can obtain copies of our filings with the Securities and Exchange Commission from this site free of charge as well as from the Securities and Exchange Commission website at www.sec.gov.
Critical Accounting Policies
We have identified certain accounting policies as critical to our business operations and the understanding of our results of operations. The impact and any associated risks related to the identified critical accounting policies on our business operations are discussed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2009 filed with the Securities and Exchange Commission.
Results of Operations
The Three Month Period Ended June 30, 2010
Compared to the Three Month Period Ended June 30, 2009
Revenues for the three-month period ended June 30, 2010 decreased by approximately $69,000 (5%) to approximately $1,318,000 from approximately $1,387,000 for the three-month period ended June 30, 2009. Sales in the Analyst division decreased by approximately $129,000 driven mainly by the lower revenues from equipment sales, and sales in the autoimmune line, not including Brazil, decreased by approximately $62,000. These decreases were offset by an increase in sales from Brazil of approximately $128,000, which was attributed to an overall increase in sales during the
current quarter combined with an improvement in the Brazilian currency, the Real. The Real to the dollar averaged 1.80 during the current quarter as compared to 2.09 for the same quarter a year ago.
Cost of sales decreased approximately $130,000 (16%) to approximately $703,000 from approximately $833,000 for the same period a year ago. Cost of product sales as a percentage of sales decreased to 53% from 60% from the same period last year. This decrease in cost of sales as a percentage of sales is primarily attributed to the reduction of personnel and outside consulting expenses.
Research and development expenses decreased by approximately $38,000 (106%). This decrease was the result of the reduction of certain outside consulting expenses.
The Company continues toward working to complete several research and development programs including:
|
·
|
Taking steps related to upgrading the Analyst instrument and product offerings such as evaluating and developing complimentary products for Hemagen’s Analyst product line to distribute to the veterinary market and alternative tests utilizing the Analysts’ rotor technology;
|
|
·
|
Developing new and enhancing existing ELISA kits; and
|
|
·
|
Developing and enhancing IFA kits.
|
Selling, general and administrative expenses decreased by approximately $60,000 (11%) for the quarter ended June 30, 2010 to approximately $506,000 from approximately $566,000 in the previous period. The majority of this decrease in expenses resulted from lower headcount, a reduction in travel expenses during the quarter, offset by a slight increase in facility expenses and legal fees.
Total other expenses for the quarter ended June 30, 2010 decreased by $27,000 (24%) to approximately $84,000 from approximately $111,000 from the period ending June 30, 2009. The decrease in net other expense is primarily attributed to a decrease in amortization expense related to the Senior Subordinated Convertible Notes of approximately $20,000. The Senior Subordinated Convertible Notes were refinanced during September 2009 and there is no discount being recognized in fiscal year 2010. Interest expense decreased during the current quarter as compared to the same quarter last year due to the declining balance on the Brazil equipment notes which were paid off during the quarter ended June 30, 2010.
Income tax expense for the quarter ended June 30, 2010 was approximately $35,000 as compared to approximately $3,000 of expense for the quarter ended June 30, 2009. This tax expense resulted from income realized at the Company’s Brazilian subsidiary.
Net loss for the period decreased by approximately $153,000 for the three months ended June 30, 2010 to a net loss of approximately $8,000 compared to a net loss of approximately $161,000 in the same quarter of the prior year. The decrease in net loss is attributable to a higher gross margin and a reduction of expenses.
The Nine Month Period Ended June 30, 2010
Compared to the Nine Month Period Ended June 30, 2009
Revenues for the nine month period ended June 30, 2010 decreased by approximately $183,000 (4%) to approximately $3,891,000 from $4,074,000 for the same period ended June 30, 2009. The decrease in revenues is attributed primarily to the decline in sales in the Analyst® division during the nine month period ending June 30, 2010 of approximately $242,000 verses the prior year quarter, a decrease in the autoimmune line, excluding sales to the Company’s Brazilian subsidiary, dropped approximately $237,000 during the current period but was offset by an increase in sales from the Brazilian subsidiary by approximately $321,000. Although sales in local Brazilian currency were approximately R$133,000 lower from that of the prior year, the stabilization of the Brazilian Real resulted in increased overall US sales. The average exchange rates for the nine month periods ended June 30, 2010 and 2009 were 1.79 and 2.24, respectively.
Cost of product sales decreased by approximately $374,000 (15 %) to approximately $2,112,000 from approximately $2,486,000 for the same period last year. Cost of product sales as a percentage of sales decreased to approximately 54% compared to 61% for the same period last year. The decrease in cost of sales as a percentage of revenue was due to a reduction of operating expenses due to headcount, reduced certain outside consulting services expenses and reduced facilities maintenance expenses.
Research and development expenses decreased by approximately $55,000 (73%) during the nine months ended June 30, 2010 to approximately $20,000 from $75,000 in 2009. This decrease was the result of the reduction of certain outside consulting expenses.
Selling, general and administrative expenses decreased by approximately $227,000 (13%) for the nine months ended June 30, 2010 to approximately $1,533,000 from approximately $1,760,000 in the previous period. The decrease in expenses was primarily due to reduced headcount and reduced travel and entertainment expenses during the current year.
Total other expenses for the nine months ended June 30, 2010 decreased by approximately $43,000 to approximately $223,000 from approximately $266,000 from the nine month period ending June 30, 2009. Approximately $59,000 of this lower expense was due to the fact that during 2010 there was no amortization expense incurred related to the Senior Subordinated Convertible notes as compared to 2009. This expense savings was offset by a decrease in interest income of approximately $15,000 which occurred due to the declining principal balance on the Note receivable. There was a net decrease of approximately $18,000 in the amounts recorded as a gain on the sale of assets between the two periods and a decrease in interest expense related to the bank notes in Brazil which were fully paid off during this quarter.
Income tax expense for the nine months ended June 30, 2010 was approximately $82,000 as compared to $19,000 for the nine months ended June 30, 2009. This tax expense resulted from income realized at the Company’s Brazilian subsidiary. The income before tax for the Company’s Brazilian subsidiary for the nine month period ending June 30, 2010 was approximately $255,000 compared to net income before tax of approximately $91,000 in the prior year. The Brazilian income tax is calculated at an effective rate of approximately 29% which takes utilizes net loss carry forwards from prior periods.
Net loss decreased by approximately $532,000 for the nine months ended June 30, 2010 to a net loss of approximately $79,000 compared to a net loss of approximately $611,000 in the nine month period ended June 30, 2009. The decrease in net loss was the result of higher margins and a reduction of operating expenses during 2010. Included in the net loss for the nine month period ending June 30, 2009 was a net loss from discontinued operations of approximately $78,000, which occurred due to the additional reserves that were recorded on the remaining inventory.
Liquidity and Capital Resources
At June 30, 2010, Hemagen had $221,640 of cash, working capital of $1,608,425 and a current ratio of 2.4 to 1.0. At September 30, 2009, the Company had $156,314 of cash, working capital of $1,370,200 and a current ratio of 1.9 to 1.0.
The Company entered into a revolving line of credit facility with Bay National Bank on or about September 26, 2002 for the purpose of financing working capital needs as required. Bay National Bank entered into a Consent Order with the Office of the Comptroller of Currency (the "OCC") earlier this year and on July 9, 2010, Bay National Bank was closed by the OCC, which appointed the Federal Deposit Insurance Corporation (the "FDIC") as receiver of the Bank. The FDIC has advised that subsequent to the closure, Bay Bank, FSB, Lutherville, Maryland, assumed the operations and all of the deposits of Bay National Bank, acquiring essentially all of its assets.
While the original terms of this line of credit facility contemplated its expiration on April 1, 2010, Bay National Bank granted an extension to August 1, 2010. Recently Bay Bank, FSB granted a further extension to September 1, 2010 while the bank and the company discuss the disposition of the line. The line of credit facility provides for borrowings up to $500,000 at an interest rate of Prime Rate plus .75%, with an interest rate floor of 5.5%. Maximum borrowings under the loan are based on the domestic receivables and inventory of the Company. The line of credit facility is secured by first lien on all assets of the Company. As of June 30, 2010, the outstanding balance on the line of credit facility was $398,000 with an effective interest rate of 5.50%, and the Company was in compliance with its debt covenants.
We are currently talking with several parties, including Bay Bank, FSB, and we are hopeful that we will be able to secure financing for the purpose of replacing this line of credit facility and/or further extending its expiration with Bay Bank, FSB. However, we can give no assurances that our efforts will be successful in this regard.
The Company believes that cash flow from operations and cash on hand at June 30, 2010 will be sufficient to finance its operations for the remainder of fiscal 2010, however, the Company can give no assurances that it will have sufficient cash finance its operations. The Company has no off-balance sheet financing arrangements.
On September 30, 2009, the Company successfully completed an Exchange Offer of $4,049,858 of Old Notes, for Modified Notes due September 30, 2014. The Modified Notes bear interest at the rate of 8% per annum, paid quarterly, convertible by holders into Common Stock at $0.35 per share after September 30, 2009. The Company can require the conversion of the Modified Notes to Common
Stock at any time after the Common Stock trades at or above $0.70 for fifteen consecutive trading days.
Net cash used by operating activities during the nine months ended June 30, 2010 was approximately $82,000 compared to cash used of approximately $1,000 during the nine months ended June 30, 2009. This variance from year to year was caused mainly by the increase in accounts receivable of $5,330 in the current year compared to a decrease in accounts receivable due to collections in the prior year of approximately $104,000 and the increase in prepaid expenses during the current year period of approximately $83,000 versus the reduction of prepaid expenses of approximately $122,000 during the period ending June 30, 2009 due mainly to the recognition of Brazilian taxes recoverable and the receipt of prepaid items. During the nine month period ending June 30, 2010 the Company also paid down approximately 261,000 of account payable and accrued expenses as compared to approximately $99,000 in the prior year.
Approximately $179,000 of cash was generated from investing activities during the nine months ended June 30, 2010 as compared to approximately $95,000 of cash generated by investing activities during the nine month period ended June 30, 2009. Cash was generated by the payments made on the Note receivable and the sale of lab equipment. During the nine months ended June 30, 2010 the Company purchased approximately $18,000 of capital assets compared to approximately $114,000 in the prior year, which was primarily lab equipment for use in the Brazil operations.
In accordance with the terms on the Note with the purchaser of Raichem, the Company received payments in the amount of $157,500, for each of the nine month periods ended June 30, 2010 and 2009 against the Note receivable.
Cash used in financing activities was approximately $31,000 during the nine months ended June 30, 2010, compared to cash used in financing activities of approximately $107,000 for the nine months ended June 30, 2009. The decrease in cash used in financing activities was primarily due to the reduction in the payments on the notes related to equipment to be placed in customer labs in Brazil that were financed through the Brazilian subsidiary. During the nine months ended June 30, 2010 and 2009, the Company made payments against these notes in the amount of approximately $28,000 and $92,000, respectively. This note has been paid in full as of June 30, 2010. The Company also made payments against its line of credit in each period ending June 30, 2010 and 2009, in the amounts of $2,000 and $15,000, respectively.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4. Controls and Procedures.
The Company’s Chief Executive Officer (Principal Executive Officer), William P. Hales and Principal Financial Officer, Catherine Davidson have evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as of June 30, 2010. Based upon this evaluation, Mr. Hales and Ms. Davidson believe that the Company’s disclosure controls and procedures were effective as of June 30, 2010 except for the matters described below.
Management is aware that there is a lack of segregation of duties due to the small number of employees within the financial and administrative functions of the Company. As a result of the
limitations of the resources and segregation of duties, Stegman and Company, the Company’s current auditor, has informed the Company that these limitations represent a material weakness in internal controls. Management will continue to evaluate this segregation of duties issue. Over the past several months, management has documented the Company’s critical control procedures and will continue to review and update such procedures as changes occur.
There has been no change in the Company’s internal control over financial reporting identified in connection with the evaluation of internal control that occurred during the last fiscal quarter that has materially affected, or is reasonably likely to materially affect, Hemagen’s internal control over financial reporting.
PART II. OTHER INFORMATION
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
|
Period
|
|
(
a
)
Total Number
of Shares Purchased
|
|
|
(b)
Average
Price Paid
per Share
|
|
|
(c)
Total Number of Shares
Purchased
as Part of
Publicly Announced
Plans or Programs(1)
|
|
|
(d)
Maximum Number (or
Approximate
Dollar Value)
of Shares that May
Yet Be
Purchased Under the
Plans
or Programs (2)
|
|
|
April 1-30, 2010
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
-
|
|
|
May 1-31, 2010
|
|
|
--
|
|
|
|
--
|
|
|
|
--
|
|
|
|
-
|
|
|
June 1-30, 2010
|
|
|
8,060
|
|
|
$
|
0.098
|
|
|
|
8,060
|
|
|
|
-
|
|
|
Total
|
|
|
8,060
|
|
|
$
|
0.098
|
|
|
|
8,060
|
|
|
|
-
|
|
|
|
(1)
|
Represents shares of Company’s Common Stock purchased pursuant to the Company’s Employee Stock Ownership Plan (ESOP) that was established October 1, 2003 with no expiration. The purpose of the plan is not to repurchase, but rather it is an employee benefit plan.
|
|
|
(2)
|
There is no maximum number of shares that may be purchased under the Company’s Employee Stock Ownership Plan.
|
Item 5. Other Information.
None
Item 6. Exhibits.
(a) Exhibits
|
Exhibit 31.1
|
Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a)
|
|
|
|
|
Exhibit 31.2
|
Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a)
|
|
|
|
|
Exhibit 32.1
|
Certification of Chief Executive Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
|
|
|
|
|
Exhibit 32.2
|
Certification of Principal Financial Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code
|
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 of the undersigned thereunto duly authorized.
|
|
Hemagen Diagnostics, Inc.
(Registrant)
|
|
|
|
|
|
|
|
August 16, 2010
|
By:
|
/s/ William P. Hales
|
|
|
|
|
William P. Hales
|
|
|
|
|
President and
Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
August 16, 2010
|
By:
|
/s/ Catherine M. Davidson
|
|
|
|
|
Catherine M. Davidson
|
|
|
|
|
Principal Financial Officer
|
|
16
Hemagen Diagnostics (CE) (USOTC:HMGN)
Graphique Historique de l'Action
De Nov 2024 à Déc 2024
Hemagen Diagnostics (CE) (USOTC:HMGN)
Graphique Historique de l'Action
De Déc 2023 à Déc 2024
