10QSB 1 qsbjune.htm QUARTERLY 06/30/02

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2002

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT

For the Transition Period from

Commission file number 0-12183

BOVIE MEDICAL CORPORATION

(Exact name of small business issuer as specified in its charter)

Delaware No. 11-2644611

(State or other jurisdiction of incorporation or organization) (IRS— Employer Identification No.)

734 Walt Whitman Rd., Melville, New York 11747

(Address of principal executive offices)

(631) 421-5452

(Issuer's telephone number)

Indicate by check mark 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 (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's class of common stock, as of the latest practicable date:13,204,755

BOVIE MEDICAL CORPORATION
INDEX TO FORM 10-QSB

Contents

Part I.   Financial Information................................................

        Item 1:       Consolidated Financial Statements:.......................

             Consolidated Balance Sheet - June 30, 2002
                and December 31, 2001..........................................
             Consolidated Statements of Operations for the
               six Months Ended June 30,  2002 and 2001........................
             Consolidated Statements of Operations for the
               three Months Ended June 30,  2002 and 2001......................
             Consolidated Statements of Cash Flows for the
               six Months Ended June 30, 2002 and 2001
         Consolidated statement of Operations for the six
            Months ended June 30, 2002.........................................

              Notes to Financial Statements ...................................

        Item 2: Management's Discussion and
               Analysis of Financial Conditions and Results of Operations......

Part II.   Other
Information....................................................................

 Item 1:  Legal
Proceedings....................................................................

 Item 2:  Changes in Securities................................................

 Item 3:  Defaults Upon Senior Securities......................................

 Item 4:  Submission of Matters to Vote of Security Holders....................

 Item 5:  Exhibits and Reports on Form 8-K.....................................

INDEPENDENT AUDITORS' REPORT

Board of Directors
Bovie Medical Corp.
Melville, New York

We have reviewed the accompanying balance sheet of Bovie Medical Corp., as of June 30, 2002, and the related statements of operations, and cash flows for the six months ended June 30, 2002 and 2001. These financial statements are the responsibility of the Company’s management.

We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with auditing standards generally accepted in the United States of America, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America.

Bloom & Co., LLP.
Hempstead, New York
August 5, 2002

PART I. FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS

BOVIE MEDICAL CORPORATION
CONSOLIDATED BALANCE SHEET
JUNE 30, 2002 AND DECEMBER 31, 2001


                                     Assets

                                               (Unaudited)        (Audited)
                                              June 30, 2002    December 31, 2001
                                               ---------------------------------

Current assets:

Cash                                         $    229,434         $    578,354
Trade accounts receivable                       1,454,936            1,200,933
Inventories                                     2,494,602            2,419,827
Prepaid expenses                                  219,724              128,045
Deferred tax asset                                386,200              386,200
Other receivables                                       -                  779
                                               ----------            ---------

Total current assets                            4,784,896            4,714,138

Property and equipment, net                     1,534,979            1,531,658

Other assets:

Repair parts                                      299,680              300,272
Trade name                                      1,509,662            1,509,662
Patent rights, net                                281,542              314,691
Deposits                                            8,125                8,124
Investment - Joint Venture                        200,000              200,000
                                                ---------            ---------

                                                2,299,009            2,332,749
                                                ---------            ---------

                                             $  8,618,884         $  8,578,545
                                                =========            =========

The accompanying notes are an integral part of the financial statements.

BOVIE MEDICAL CORPORATION
CONSOLIDATED BALANCE SHEET
JUNE 30, 2002 AND DECEMBER 31, 2001
(CONTINUED)

                      Liabilities and Stockholders' Equity

                                                  (Unaudited)         (Audited)
                                               June 30, 2002   December 31, 2001
                                                --------------------------------
Current liabilities:

Accounts payable                            $     455,559         $    373,375
Accrued expense                                   361,222              499,850
Notes payable - current portion                   445,036              228,977
Due to shareholders                                36,087               32,705
                                                ---------            ---------

     Total current liabilities                  1,297,904            1,134,907

Long Term Liabilities                             427,497              443,332

Stockholders' equity:

Preferred Stock, par value $.001
 10,000,000 shares authorized
 0 issued and outstanding                              --                  --
 on March 31, 2002

Common stock par value $.001;
 40,000,000 shares authorized,
 issued and outstanding 13,204,755
 shares and 13,204,755 shares
 on June 30, 2002 and December 31,
 2001 respectively                                 13,274              13,274
 Additional paid in capital                    19,817,115          19,814,334
 Accumulated deficit                          (12,936,906)        (12,827,302)
                                               ----------          ----------

    Total stockholders' equity                  6,893,483           7,000,306
                                               ----------          ----------

  Total liabilities and stockholders'
    equity                                  $   8,618,884    $      8,578,545
                                             ============         ===========

The accompanying notes are an integral part of the financial statements.

BOVIE MEDICAL CORPORATION.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)

                                                      2002              2001
                                                --------------------------------

Sales                                           $ 6,231,467       $ 5,555,178
Cost of sales                                     3,688,365         3,395,038(1)
                                                  ---------         ---------

Gross profit                                      2,543,102         2,160,140

Costs and expenses:
Research and development                            502,078           210,690
Professional services                               188,053           156,925
Salaries and related costs                          648,222           633,984
Selling, general and administrative               1,292,374           947,289
                                                 ----------         ---------

                                                  2,630,727         1,948,888(1)
                                                 ----------         ---------

Gain (Loss) from operations                     (    87,625)          211,252

Other income (expense):
Interest                                        (    21,980)       (   22,800)
Miscellaneous                                            --                --
                                                 -----------         ---------

                                                (    21,980)       (   22,800)
                                                 ----------         ----------

Income (loss)                                    (  109,605)          188,452

Provision for income tax                                 --        (   65,954)
Realized benefit of loss carryforward                    --            65,954
                                                  ---------         -----------

Net income                                     $  ( 109,605)     $    188,452
                                                  ==========        ===========

Earnings per share

Net income (loss):
      Basic                                         ( .01)              .01
      Diluted                                       ( .01)              .01

Weighted average number of shares outstanding     13,204,755         13,600,890
Weighted average number of shares adjusted for
  dilutive securities                             16,201,755         13,600,890

(1) Certain accounts have been reclassified to conform to current years
presentation.


The accompanying notes are an integral part of the financial statements.

BOVIE MEDICAL CORPORATION.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)

                                                             Quarter
                                              ----------------------------------
                                                 2002                2001


Sales                                         $ 3,202,868         $ 2,818,041
Cost of sales                                   1,983,853           1,764,957(1)
                                                ---------           ---------

Gross profit                                    1,219,015           1,053,084

Costs and expenses:
Research and development                          202,542              80,034
Professional services                              90,033              75,334
Salaries and related costs                        318,435             305,580
Selling, general and administrative               652,642             474,498
                                              -----------           ---------

                                                1,263,652             935,446(1)
                                               ----------           ---------

Gain (Loss) from operations                   (    44,637)            117,638

Other income (expense):
Interest                                      (    10,512)         (   15,037)
Miscellaneous                                          --                  --
                                               ----------          ----------

                                              (    10,512)         (   15,037)
                                               ----------          ----------

Income (loss)                                 (    55,149)            102,601

Provision for income tax                               --          (   35,906)
Realized benefit of loss carryforward                  --              35,906
                                                ---------          ----------

Net income                                  $  (   55,149)       $    102,601
                                                ==========         ==========

Earnings per share

Net income (loss):
      Basic                                         NIL               .01
      Diluted                                       NIL              .01

Weighted average number of shares outstanding   13,204,755        13,552,367
Weighted average number of shares adjusted for
  dilutive securities                           16,201,755        13,552,367

(1)Certain accounts have been reclassified to conform to current years
presentation.

The accompanying notes are an integral part of the financial statements.

BOVIE MEDICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)

                                                         2002           2001
                                                --------------------------------
Cash flows from operating activities
Net income (loss)                                  $ (  109,605)   $   188,452
Adjustments to reconcile net income
  to net cash provided by (used in)
operating activities:
Depreciation and amortization                           129,876        334,502

Changes in current assets and liabilities:
Receivables                                           ( 254,003)       113,058
Inventories and repair parts                          (  74,183)      (126,270)
Prepaid expenses                                      (  91,679)      (115,214)
Accounts payable                                         82,184       ( 42,224)
Accrued expense                                       ( 138,628)      ( 63,679)
Other assets                                                770       (  1,200)
Obligations to shareholders                               3,382             --
                                                     ----------      ---------
Net cash provided (applied) by
operating activities                                  (451,886)        287,425
                                                     ----------      ---------
Cash flows from investing activities

Increase in fixed assets                             (  95,520)      ( 81,888)
Increase in patents                                  (   4,519)      (234,998)
Increase in deposits                                        --       (  7,748)
                                                     ----------      ---------

Net cash used in investing activities                ( 100,039)      (324,634)
                                                      ---------      ---------

Cash flows from financing activities
Borrowing - line of credit/Insurance
 Premium Financing                                     260,651             --
(Decrease) in obligations to shareholders                   --      (  24,720)
(Decrease) in notes payable                          (  60,427)     ( 160,606)
Common shares purchased                                  2,381      (  73,358)
Increase in notes payable                                   --        438,783
                                                     ---------      ---------

Net cash used in financing activities                  203,005        180,099
                                                     ---------      ---------

Net increase (decrease) in cash
 and cash equivalents                                 (348,920)       142,890

Cash and cash equivalents, beginning of period         578,354        278,662
                                                      --------       --------
Cash and cash equivalents, end of period           $   229,434     $  421,552
                                                     =========       ========

The accompanying notes are an integral part of the financial statements.

BOVIE MEDICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001

Cash paid during the six months ended June 30:

                             2002             2001
                             ----             ----

Interest paid             $ 24,790          $ 27,430
Income Taxes                 - 0 -             - 0 -

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001

There were no non-cash investing and financing activities in the first six months of the year 2002 or 2001.

BOVIE MEDICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS

PART I. FINANCIAL INFORMATION (CONTINUED)

NOTE 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

The consolidated financial statements include the accounts of Bovie Medical Corporation and its wholly owned subsidiary Aaron Medical Industries, Inc. In the opinion of management, the interim financial statements reflect all adjustments, consisting of only normal recurring items, which are necessary for a fair presentation of the results for the interim periods presented.

The results for interim periods are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the significant accounting policies and the other notes to the financial statements included in the Corporation’s 1998 Annual Report to the SEC on Form 10-KSB.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates in the Preparation of Financial Statements

The preparation of consolidated financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Fair Values of Financial Instruments

Cash and cash equivalents. Holdings of highly liquid investments with maturity of three months or less, when purchased, are considered to be cash equivalents. The carrying amount reported in the balance sheet for cash and cash equivalents approximates its fair values.

Accounts receivable and accounts payable. The carrying amount of accounts receivable and accounts payable on the balance sheet approximates fair value.

Short term and long term debt. The carrying amount of the bonds and notes payable and amounts due to shareholders approximates fair value.

Inventories

Inventories are stated at the lower of cost or market. Cost is determined principally on the average cost method. Inventories at June 30, 2002 and December 31, 2001 were as follows:

                               June 30, 2002             December 31, 2001
                               -------------             -----------------

   Raw materials                 $1,245,507                $1,222,349
   Work in process                  585,330                   614,342
   Finished goods                   663,765                   583,136
                                  ---------                 ---------

          Total                  $2,494,602                $2,419,827
                                  =========                 =========

BOVIE MEDICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS

PART I. FINANCIAL INFORMATION (CONTINUED)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

Repair Parts. The Company acquired the inventory of repair parts in conjunction with the purchase of the Bovie line of generators and Bovie trade name, on May 8, 1998. The Company has maintained the inventory to service the previously sold generators. The useful life of repair parts is estimated to be five to seven years and the Company has set up an allowance for excess and obsolete parts.

As of June 30, 2002, the inventory of parts was as follows:

    Raw materials                                        $ 564,641
    Allowance for excess or obsolete parts                (264,961)
                                                           -------
                                                         $ 299,680
                                                          ========

Long-Lived Assets

Long-lived and assets consist of property, plant and equipment, and intangible assets.

Property, plant and equipment are recorded at cost less depreciation and amortization. Depreciation and amortization are accounted for on the straight-line method based on estimated useful lives. The amortization of leasehold improvements is based on the shorter of the lease term or the life of the improvement. Betterment and large renewals, which extend the life of the asset, are capitalized whereas maintenance and repairs and small renewals are expenses, as incurred. The estimated useful lives are: machinery and equipment, 7-15 years; buildings, 30 years; and leasehold improvements; 10-20 years.

Effective January 1, 1996, the Company adopted the Statement of Financial Accounting Standards (SFAS) No.121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. In accordance with SFAS No.121, the Company reviews long-lived assets for impairment whenever events or changes in business circumstances occur that indicate that the carrying amount of the assets may not be recovered.

The Company assesses the recoverability of long-lived assets held, and to be used, based on undiscounted cash flows and measures the impairment, if any, using discounted cash flows. Adoption of SFAS No.121 did not have a material impact on the Company’s consolidated financial position, operating results or cash flows.

Intangible assets consist of patent rights and goodwill. Goodwill represents the excess of the cost of assets of the acquired companies over the values assigned to net tangible assets.

Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 141, Business Combinations, and Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets. Statement No. 141 requires all business combinations initiated after June 30, 2001, to be accounted for using the purchase method of accounting. Under Statement No. 142, goodwill will no longer be subject to amortization over its estimated useful life. Rather, goodwill will be subject to at least an annual assessment for impairment by applying a fair-value-based test. In addition, Statement No. 142 requires separate recognition for certain acquired intangible assets that will continue to be amortized over their useful lives.

BOVIE MEDICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS

PART I. FINANCIAL INFORMATION (CONTINUED)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition and Product Warranty

Revenue from sales of products is generally recognized upon shipment to customers. The Company warrants its products for one year. The estimated future costs of warranties are not material. However, a special reserve has been set up for future delivery of certain disposables based on a promotion which ended in April of 2002.

Income is recognized in the financial statements (and the customer billed) when products are shipped from stock. Net sales are arrived at by deducting discounts from and adding freight out to gross sales.

Environmental Remediation

The Company accrues environmental remediation costs if it is probable that an asset has been impaired or a liability incurred at the financial statement date and the amount can be reasonably estimated. Environmental compliance costs are expenses, as incurred. Certain environmental costs are capitalized based on estimates and depreciated over their useful lives.

Earnings Per Common and Common Equivalent Share

In February 1997, the Financial Accounting Standards Board issued SFAS 128. “Earnings Per Share.” SFAS 128 establishes new standards for computing and presenting earnings per share (“EPS”). Specifically, SFAS 128 replaces the previously required presentation of primary EPS with a presentation of basic EPS, requires dual presentation of basic and diluted EPS on the face of the income statement for all entities with complex capital structures, and requires a reconciliation of the numerator and denominator of the basic EPS computation to the financial statements issued for periods ending after December 15, 1997. In 1997, the Company adopted SFAS 128.

Research and Development Costs

Only the development costs that are purchased from another enterprise and have alternative future use are capitalized and amortized over five years.

Income Taxes

The Company and its wholly-owned subsidiary file a consolidated federal income tax return.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

BOVIE MEDICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS

PART I. FINANCIAL INFORMATION (CONTINUED)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

Non-monetary Transactions

The accounting for non-monetary assets is based on the fair values of the assets involved. Cost of a non-monetary asset acquired in exchange for another non-monetary asset is recorded at the fair value of the asset surrendered to obtain it. The difference in the costs of the assets exchanged is recognized as a gain or loss. The fair value of the asset received is used to measure the cost, if it is more clearly evident than the fair value of asset surrendered.

Stock-Based Compensation

The Company has adopted Accounting Principles Board Opinion 25 for its accounting for stock based compensation. Under this policy:

1. Compensation costs are recognized as an expense over the period of employment attributable to the employee stock options.

2. Shares issued in accordance with a plan for past or future services of an employee are allocated between the expired costs and future costs. Future costs are charged to the periods in which the services are performed. The pro forma amounts of the difference between compensation cost included in net income, and related cost, measured by the fair value based method including tax effects, are disclosed.

New Accounting Standards

In June 1997, the Financial Accounting Standards Board issued SFAS 130, “Reporting Comprehensive Income”. SFAS 130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general purpose financial statements. Specifically, SFAS 130 requires that all items that meet the definition of components of comprehensive income be reported in a financial statement for the period in which they are recognized. However, SFAS 130 does not specify when to recognize or how to measure the items that make up comprehensive income.

Management believes the application of SFAS 130 has not had a material effect on the Company’s financial statements.

In April 1998, the FASB issued SOP 98-5, “Reporting on the Costs of Start-up Activities,” which will became effective for the Company in fiscal 2000. It requires costs of start-up activities and organization costs to be expressed, as incurred. The Company currently follows this approach and such costs have been minimal in the past.

In June 1997, the Financial Accounting Standards Board issued SFAS 131, “Financial Reporting for Segments of Business Enterprise.” SFAS 131 supersedes the “industry segment” concept of SFAS 14 with a “management approach” concept as the basis for identifying reportable segments.

BOVIE MEDICAL CORPORATION

PART I. FINANCIAL INFORMATION (CONTINUED)

New Accounting Standards (continued)

Management believes the application of SFAS 131 has not had a material effect on the Company’s financial statements.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2002

Results of Operations

The results of operations over the six months ended June 30, 2002 show increased sales and decreased profitability, as compared to the first six months of 2001. As part of operating revenues, for the first six months of 2002, a one-time development fee of $177,500 was included which was not considered in determining the gross profit percentage for 2002. The Company’s sales revenues increased by 12%, from $5,555,178 to $6,231,467. Gross profit percentage of 39% was the same for the same period in 2001. The Company projects the gross profit percentage to decline as electrosurgical sales grow and other sales remain relatively constant. Overall margin percentages will decline since margins on electrosurgical products are less than other product margins. Gross profit increased from $2,106,140 to $2,543,102. Increased gross profit was mainly attributable to increased sales of cauteries and electrosurgical devices. For the first half of 2002 and 2001, cauteries accounted for 38% and 42% of sales, respectively. For the same periods, electrosurgical devices accounted for 28% and 25% of sales, respectively.

Operating salaries and related expenses had no significant increase and went from $633,984 to $648,222 in the six months ended June 30, 2002 as compared to the same period in 2001.

Research and development costs increased by 138% from $210,690 to $502,078 from the six months ended June 30, 2001 as compared to the six months ending June 30, 2002. The increase was mainly attributable to engineering costs on new generator models being developed and the cost of the continued development of the J Plasma device.

Expenses for professional services increased by 20% to $188,053 in the six months ended June 30, 2002, as compared to $156,925 in the same period of the previous year. The main reason for this increase was professional fees associated with standard legal matters, audit fees for the year 2001 and consulting services.

Selling, General and Administrative expenses increased by $345,085 (36%). These expenses were $947,289 in the six month period ended June 30, 2001 as compared to $1,292,374 for the six months ended June 30, 2002. The Company had significant increases in the following areas: advertising, sales commissions, show fees and costs, rent, repairs to buildings, regulatory testing and the write down of obsolete inventory. The previous items accounted for increases of $452,961 which were offset by decreases in European operations and the amortization of goodwill associated with the purchase of the Bovie name from Maxxim in 1998 of $74,355.

Interest expense decreased from $22,800 in the six months ended June 30, 2001 to $21,980 in 2002. The majority of the interest the Company pays is on its building mortgage and its line of credit.

The operating loss was $87,625 for the first six months of 2002 as compared to an operating gain of $211,252 in the same period in 2001.

BOVIE MEDICAL CORPORATION

PART I. FINANCIAL INFORMATION (CONTINUED)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Results of Operations (continued)

The Company had a net loss of $109,605 for the six months ended June 30, 2002 as compared to net gain of $188,452 in 2001 for the same period. The main reason for the decrease in income of $298,057 for the first six months of 2002, from the first six months of 2001, was an increase in selling, general and administrative expenses of $291,388 and an increase in research and development costs of $210,690. These were offset by an increase in gross profit of $382,962.

The Company sells its products mostly through distributors and independent representatives who service the distributors, both in the international market and in the USA. Distributors are contacted through response to company advertising in international medical journals or at domestic or international trade shows. The main focus for export sales has been Western Europe.

The Company has distributors in all major markets in Europe. The Company intends to continue marketing its products internationally, concentrating on major markets for increased market exposure and the introduction of new products.

During the first six months of 2002, international sales increased by 23%. Sales in 2001 were $990,859, which represented 18% of total sales, while in 2002 total international sales were $1,222,048 which represented 20% of total sales. The Company expects international sales to continue to increase since it received its ISO 9000 certification in 1998.

Financial Condition

As of June 30, 2002, we had $229,434 in cash as compared to $421,522 at June 30, 2001. Cash applied to operating activities was $451,876 in the first six months of 2002 as compared to $287,325 provided by operations in 2001. Net working capital of the Company on June 30, 2002 was $3,486,992 as compared to $2,532,027 on June 30, 2001.

Investing activities utilized $100,039 in cash during the first six months of 2002, compared to $324,634 in the first six months of 2001. In 2002, the Company continued its policy of investing in property, plant and equipment needed for future business requirements, including manufacturing capacity.

The Company’s ten largest customers accounted for approximately 59% of net revenues for the first six months of 2002. At June 30, 2002, the ten largest customer receivables accounted for approximately 60% of outstanding accounts receivable.

The amount of cash provided by financing activity was $203,005 and $180,099, in the first six months of 2002 and 2001, respectively. The most significant financing activity in the six months ended June 30, 2002 was borrowing $100,000 additional funds on the Company credit line, and financing the Company’s insurance premium for $160,651.

BOVIE MEDICAL CORPORATION

PART I. FINANCIAL INFORMATION (CONTINUED)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Financial Condition (continued)

The Company believes that it has the financial resources needed to meet business requirements in the foreseeable future, including capital expenditures for the expansion of its manufacturing site, working capital requirements, and product development programs.

Outlook

The statements contained in this Outlook are based on current expectations. These statements are forward looking, and actual results may differ materially.

The Company believes that the world market for disposable medical products, such as the Company’s battery-operated cauteries, have growth potential since these products have not heretofore been affordable or effectively marketed outside the U.S., while we do not expect a dramatic growth in sales of cautery-related products domestically.

The Company continues to expand its line of electrosurgical products. Electrosurgical products sold by the Company include standard stainless steel electrodes, Bovie/Aaron 800, 900, 1200, 1250, and the 2100 high frequency generators.

From the first six months of 2001 to the first six months of 2002, the Company’s electrosurgical sales increased by 31% from $1,667,283 to $2,178,706. This increase was mainly attributable to contract purchasers and a one time promotion. With the introduction of new electrosurgical products, the Company expects electrosurgical sales to increase significantly in 2002 and 2003. The Company, through its private label capability, anticipates new opportunities in the domestic market. The electrosurgical product market is larger than the Company’s traditional market and is dominated by two main competitors, ValleyLab and Conmed. The Company believes combined markets for these products exceeds $100 million worldwide, annually.

Reliance on Collaborative, Manufacturing and Selling Arrangements

The Company is dependent on certain contractual partners for manufacturing and product development. Should a collaborative partner fail to develop and manufacture products., the Company’s future business and value of related assets could be negatively affected. No assurance can be given that a collaborative partner may give sufficient high priority to the Company’s products. In addition, disagreements or disputes may arise between the Company and its contractual partners which could adversely affect production of its products.

BOVIE MEDICAL CORPORATION

PART I. FINANCIAL INFORMATION (CONTINUED)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Liquidity and Future Plans

The Company continues its efforts to develop and acquire new product technology and expanding manufacturing capabilities. Continued emphasis on new product development in electrosurgery, together with new technology evaluation, illustrates our shift in direction.

In order to resume strong international sales growth and maintain its ability to sell in Europe, management has implemented and been certified as ISO9001/EN46001 quality system compliant and has been granted its CE mark (International Quality control).

The Company has a line of credit with a local commercial bank for $1,500,000. Interest on the loan is paid at the bank’s base rate. As of June 30, 2002, the Company had $250,000 outstanding on its line of credit.

The Company’s future results of operations and the other forward-looking statements contained herein particularly the statements regarding growth in the medical products industry, capital spending, research and development, and marketing and general and administrative expenses, involve a number of risks and uncertainties. In addition to the factors discussed above, other factors that could cause actual results to differ materially, are the following: business conditions and the general economy; competitive factors such as rival manufacturers’ availability of products at reasonable prices; risk of nonpayment of accounts receivable; risks associated with foreign operations; and litigation involving intellectual property and consumer issues.

The management of Bovie Medical Corporation believes that it has the product mix, facilities, personnel, and competitive and financial resources for business success, but future revenues, costs, margins, product mix and profits are all subject to the influence of a number of factors, as discussed above.

FOR THE THREE MONTHS ENDED JUNE 30, 2002

Results of Operations

The results of operations over the three months ended June 30, 2002 show increased sales and decreased profitability, as compared to the same period of 2001. The Company’s sales revenues increased by 14%, from $2,818,041 to $3,202,868. Gross profit percentage for three months ended June 30, 2002 was 38% as compared to 37% for the same period in 2001. Gross profit increased from $1,053,084 to $1,219,015. Increased gross profit was mainly attributable to increased sales of cauteries and electrosurgical devices.

Operating salaries and related expenses had no significant increase and went from $305,580 to $318,435, in the three months ended June 30, 2002 as compared to the same period in 2001.

Research and development costs increased by 153% from $80,034 to $202,542 for the three months ended June 30, 2001 as compared to the three months ending June 30, 2002. The increase was mainly attributable to engineering costs on new generator models being developed and the cost of the continued development of the J Plasma device.

BOVIE MEDICAL CORPORATION

PART I. FINANCIAL INFORMATION (CONTINUED)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

Expenses for professional services increased by 20% to $90,033 in the three months ended June 30, 2002, as compared to $75,334 in the same period of the previous year. The main reason for this increase was professional fees associated with standard legal matters, audit fees for the year 2001 and consulting services.

Selling, General and Administrative expenses increased by $178,144, 38%. These expenses were $474,498 in the three month period ended June 30, 2001 as compared to $652,642 for the three months ended June 30, 2002. The Company had significant increases in the following areas: advertising, sales commissions, show fees and costs, rent, repairs to buildings, regulatory testing and the write down of obsolete inventory.

Interest expense decreased from $15,037 in the three months ended June 30, 2001 to $10,512 for the same period in 2002. The majority of the interest the Company pays is on its building mortgage and its line of credit.

The operating income was $102,601 in the first three months of 2001 as compared to an operating loss of $55,149 in the same period in 2002.

BOVIE MEDICAL CORPORATION

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Form 10-KSB for the year ended December 31, 2001, Part I, Item 3.

ITEM 2. CHANGES IN SECURITIES

There have been no changes in the instruments defining the rights or rights evidenced by any class of registered securities.

There have been no dividends declared.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

In February of 1997, the 10-year notes came due and the Company offered each bond holder 2,200 shares of common stock for their $1,000 bond and accrued interest of $550. Nineteen bondholders accepted the offer and forty-three bondholders received cash for their bonds and accrued interest. The balance of the bondholders have not redeemed their bonds or accepted the shares offered.

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

An annual meeting of shareholders was held on April 24, 2002, at which time the Company’s board of directors were re-elected, the Company’s auditors were appointed and the Company’s 2002 employee stock option plan was approved.

ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K

A) Exhibits
28 None

BOVIE MEDICAL CORPORATION

SIGNATURES:

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Bovie Medical Corporation.
(Registrant)

Date: August 14, 2002,

/s/Andrew Makrides

Chief Executive Officer - Andrew Makrides,

CONSENT OF CERTIFIED PUBLIC ACCOUNTANT

We consent to the incorporation in this Quarterly Report on Form 10-QSB of Bovie Medical Corporation of our report dated August 5, 2002.

Bloom & Co., LLP
s/Bloom & Company
Hempstead, New York
August 5, 2002

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THEEXCHANGE ACT

BOVIE MEDICAL CORPORATION

(Exact name of small business issuer as specified in its charter)

BOVIE MEDICAL CORPORATION INDEX TO FORM 10-QSB

INDEPENDENT AUDITORS' REPORT

PART I. FINANCIAL INFORMATION ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS

BOVIE MEDICAL CORPORATION CONSOLIDATED BALANCE SHEET JUNE 30, 2002 AND DECEMBER 31, 2001

BOVIE MEDICAL CORPORATION CONSOLIDATED BALANCE SHEET JUNE 30, 2002 AND DECEMBER 31, 2001 (CONTINUED)

BOVIE MEDICAL CORPORATION. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (UNAUDITED)

BOVIE MEDICAL CORPORATION. CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001 (UNAUDITED)

BOVIE MEDICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001 (UNAUDITED)

BOVIE MEDICAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001

BOVIE MEDICAL CORPORATION NOTES TO FINANCIAL STATEMENTS

PART I. FINANCIAL INFORMATION (CONTINUED)

NOTE 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

BOVIE MEDICAL CORPORATION NOTES TO FINANCIAL STATEMENTS

PART I. FINANCIAL INFORMATION (CONTINUED)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

BOVIE MEDICAL CORPORATION NOTES TO FINANCIAL STATEMENTS

PART I. FINANCIAL INFORMATION (CONTINUED)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

BOVIE MEDICAL CORPORATION NOTES TO FINANCIAL STATEMENTS

PART I. FINANCIAL INFORMATION (CONTINUED)

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)

BOVIE MEDICAL CORPORATION

PART I. FINANCIAL INFORMATION (CONTINUED)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FOR THE SIX MONTHS ENDED JUNE 30, 2002

BOVIE MEDICAL CORPORATION

PART I. FINANCIAL INFORMATION (CONTINUED)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

BOVIE MEDICAL CORPORATION

PART I. FINANCIAL INFORMATION (CONTINUED)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

BOVIE MEDICAL CORPORATION

PART I. FINANCIAL INFORMATION (CONTINUED)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

FOR THE THREE MONTHS ENDED JUNE 30, 2002

BOVIE MEDICAL CORPORATION

PART I. FINANCIAL INFORMATION (CONTINUED)

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)

BOVIE MEDICAL CORPORATION

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 2. CHANGES IN SECURITIES

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K

BOVIE MEDICAL CORPORATION

CONSENT OF CERTIFIED PUBLIC ACCOUNTANT

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT

BOVIE MEDICAL CORPORATION
INDEX TO FORM 10-QSB

PART I. FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS

BOVIE MEDICAL CORPORATION
CONSOLIDATED BALANCE SHEET
JUNE 30, 2002 AND DECEMBER 31, 2001

BOVIE MEDICAL CORPORATION
CONSOLIDATED BALANCE SHEET
JUNE 30, 2002 AND DECEMBER 31, 2001
(CONTINUED)

BOVIE MEDICAL CORPORATION.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)

BOVIE MEDICAL CORPORATION.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)

BOVIE MEDICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(UNAUDITED)

BOVIE MEDICAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001

BOVIE MEDICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS

BOVIE MEDICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS

BOVIE MEDICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS

BOVIE MEDICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS