-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KS9B0XIg8exyzyx6beltLR+Erzwui7R7yDCocvzCMFs6VUEoPs+vUXJmmawrDHqJ yodXJnGPIeVEOTruGvN2Nw== 0001005477-97-001562.txt : 19970526 0001005477-97-001562.hdr.sgml : 19970526 ACCESSION NUMBER: 0001005477-97-001562 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19970523 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN PHARMACEUTICAL CO /DE CENTRAL INDEX KEY: 0000864494 STANDARD INDUSTRIAL CLASSIFICATION: PHARMACEUTICAL PREPARATIONS [2834] IRS NUMBER: 841139559 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-24158 FILM NUMBER: 97613287 BUSINESS ADDRESS: STREET 1: 200 WEBRO RD CITY: PARSIPPANY STATE: NJ ZIP: 07054-2823 BUSINESS PHONE: 2017795300 FORMER COMPANY: FORMER CONFORMED NAME: BRASEL VENTURES INC DATE OF NAME CHANGE: 19930328 10QSB/A 1 FORM 10QSB/A Commission File Number 33-35153-D U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- AMENDMENT NO. 1 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 AMERICAN PHARMACEUTICAL COMPANY (Exact name of registrant as specified in its charter) DELAWARE 84-1139559 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 200 Webro Rd., Parsippany, New Jersey 07054 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (201) 515-1000 Check whether issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 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 |_| 4,681,765 Number of shares of Common Stock outstanding as of August 12, 1996 TRADITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES |_| NO |X| AMERICAN PHARMACEUTICAL COMPANY CONSOLIDATED BALANCE SHEETS (In Thousands) (Unaudited) June 30, December 31, 1996 1995 --------- ---------- ASSETS Current assets: Cash $21 $109 Accounts receivable, net of allowances of $91,000 653 301 Inventories 396 583 Prepaid expenses and other current assets 25 17 ------- ------- Total current assets 1,095 1,010 Fixed assets at cost less accumulated depreciation and amortization 507 532 Goodwill 556 574 Other assets 69 69 ------- ------- $2,227 $2,185 ====== ====== LIABILITIES AND SHAREHOLDERS' EQUITY (Capital Deficiency) Current liabilities: Current portion of long term debt 131 $131 Accounts payable 949 926 Loans payable-shareholders 1,770 1,050 Accrued expenses and other liabilities 399 471 -------- ------ Total current liabilities 3,127 2,578 Long-term debt, less current portion 648 715 Dividends in arrears 731 537 Commitments, contingencies and other matters Shareholders' equity: Preferred Stock, par value $.0001 per share; authorized 10,000,000 shares: Series A Voting Cumulative Convertible Preferred Stock, authorized 1,000,000 shares; issued and outstanding 912,000 (aggregate liquidation preference $2,777,000) 2,280 2,280 Series B Voting Cumulative Convertible Preferred Stock, authorized 1,000,000 shares; issued and outstanding 624,000 (aggregate liquidation value $1,792,000) 1,560 1,560 Common Stock, par value $.01 per share; authorized 20,000,000 shares; outstanding 4,681,765 shares 47 47 Additional capital 6,446 6,446 Deficit (12,612) (11,978) --------- -------- Total shareholders' equity (2,279) (1,645) --------- -------- $2,227 $2,185 ====== ====== The accompanying notes are an integral part of these statements. 2 AMERICAN PHARMACEUTICAL COMPANY CONSOLIDATED STATEMENTS OF OPERATIONS (In Thousands, Except Per Share Amounts) (Unaudited) Six Months Ended Three Months Ended ---------------- ------------------ June 30, June 30, June 30, June 30, 1996 1995 1996 1995 ---- ---- ---- ---- Net sales $2,047 $2,308 $933 $988 Cost of sales 1,760 2,835 819 1,289 ----- ----- --- ----- Gross profit 287 (527) 114 (301) Operating expenses: Selling and distribution 461 673 221 318 General and administrative 268 850 134 346 Amortization of intangible assets 18 24 9 12 -- -- - -- 747 1,547 344 676 --- ----- --- --- Operating (loss) (460) (2,074) (250) (977) Interest expense 92 26 49 26 ------ ------ ------- ----- Net (loss) $(552) $(2,100) $(299) $(1,003) === ===== === ===== Net (loss) per share of Common Stock $(.12) $(.52) $(.06) $(.25) === === === === Weighted average number of common shares outstanding 4,682 4,332 4,682 4,332 ===== ===== ===== ===== The accompanying notes are an integral part of these statements. 3 AMERICAN PHARMACEUTICAL COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited) Six Months Ended ---------------- June 30, June 30, 1996 1995 ---- ---- Cash flows from operating activities: Net (loss) $(552) $(2,100) Adjustments to reconcile net loss to net cash (used) by operating activities: Depreciation and amortization 47 57 Changes in assets and liabilities: (Increase) decrease in accounts receivable (352) 453 Decrease in inventories 187 993 (Increase) decrease in prepaid expenses and other assets (8) 107 (Decrease) in accounts payable and other current liabilities (49) (1,090) -- ----- Net cash (used) by operating activities (727) (1,580) Cash flows from financing activities: Net reduction in long-term debt from re-structure - 81 Net proceeds (costs) from sales of capital stock - 985 Principle payments under long-term debt (67) (43) Loans 720 550 ---- ----- Net cash provided by financing activities 653 1,573 Cash flows from investing activities: Capital expenditures (14) (67) -- -- Net cash (used) by investing activities (14) (67) Net (decrease) increase in cash (88) (74) Cash at beginning of period 109 255 --- --- Cash at end of period $21 $181 == === The accompanying notes are an integral part of these statements. 4 AMERICAN PHARMACEUTICAL COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS June 30, 1996 The Company: The Company operates in one business segment, the repackaging and distribution (both domestically and internationally) of over-the-counter and prescription drugs and vitamin products. Basis of Preparation: The accompanying financial statements as at June 30, 1996 and for the six and three month periods ended June 30, 1996 and June 30, 1995 are unaudited; however, in the opinion of management of the Company such statements include all adjustments (consisting of normal recurring accruals) necessary to a fair statement of the information presented therein. The balance sheet as at December 31, 1995 was derived from the audited financial statements at such date. Pursuant to accounting requirements of the Securities and Exchange Commission applicable to quarterly reports on Form 10-QSB, the accompanying financial statements and these notes do not include all disclosures required by generally accepted accounting principles for complete financial statements. Accordingly, these statements should be read in conjunction with the Company's most recent annual financial statements. Results of operations for interim periods are not necessarily indicative of those to be achieved for a full year. Significant Accounting Policies: Principles of consolidation: The consolidated financial statements include the accounts of American Pharmaceutical Company, its wholly-owned subsidiary (U.S. Labs), and a majority owned subsidiary (Rx Mail). Significant intercompany accounts and transactions have been eliminated in consolidation. References herein to the "Company" refer to American Pharmaceutical Company and its subsidiaries, or American Pharmaceutical Company, as the context may require. Income Taxes: Income tax benefits associated with the Company's net operating losses have not been recognized since the likelihood of realization cannot be determined. Contingencies and Other Matters: Legal proceedings: The Company's wholly-owned subsidiary, APC, has been named as a defendant in several product liability cases involving Diethylstilbestrol, or DES, a product produced by an unrelated corporation which, in 1973, sold certain tangible and intangible assets to APC. All of the pending cases are being defended by insurance carriers and in no case has a judgement been entered against APC. While the lawsuits seek damages in excess of the Company's insurance coverage, Christian Van Pelt, P.C., General Counsel to the Company has advised the Company that the likelihood of a successful material judgement against the Company is remote, accordingly, it is the opinion of management that the outcome of this litigation will not have a material effect on the Company's financial statements. 5 A shareholder of the Company filed a lawsuit in 1995 in the United States District Court for the Eastern District of Virginia contending that certain misrepresentations were made to him in the written offering materials circulated by the Company in connection with the private placement of the Company's securities. As damages, plaintiff was seeking a return of his investment (approximately $57,000, plus an unspecified amount of interest). On May 13, 1996 the Court directed a verdict in favor of the Company. In April, 1996 the former president and director of the Company filed a complaint against the Company and Christian Van Pelt in the United Stated District Court for the Southern District of New York. The Company was notified on August 12, 1996 that Mr. Brown discontinued the complaint. Debt Restructuring: In April 1995, the Company and the former shareholders of the Company entered into an agreement to amend certain agreements relating to the sale and purchase of the Company in 1992. Pursuant to the agreement, amounts payable to the former shareholders of $439,000 and $1,229,000 due them pursuant to notes payable and noncompetition obligations, respectively, were exchanged for $1,000,000 of modified promissory notes and 267,363 shares of the Company's Common Stock valued at $2.50 per share. The transaction was accounted for in accordance with SFAS 15, Accounting for Debt Restructuring. (1) $805,000 of such amount represents the discounted value of the promissory notes issued in connection with the debt restructuring and is payable in monthly installments through 2002. The discount relects an effective interest rate of 1 1/2%. The notes are subordinated to certain future financings and are collateralized by substantially all of the assets of the Company. Notes for $660,000 were exchanged for 267,363 shres of the Company's Common Stock in April 1995. Maturities of debt during the next five years, including the portion classified as current, are $144,000 in 1996, $144,000 in 1997, $144,000 in 1998, $144,000 in 1999, $144,000 in 2000 and $137,000 thereafter, less amounts representing imputed interest of $45,000. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following should be read in conjunction with the Company's financial statements and the related notes thereto included elsewhere herein. Results of Operations: Sales: Net sales for the six and three months ended June 30, 1996 were $2,047,000 and $933,000 compared to $2,308,000 and $988,000 in the corresponding period of the prior fiscal year. The Company recently appointed a new President and Chief Executive Officer, a new Vice President of Sales and Marketing to assist management in increasing sales and improving customer relations and service, and a new Vice President of Production to reduce costs and shorten inventory turnaround time. Immediate attention has been given to (I) expanding the company's customer base, (ii) evaluating the current product line to eliminate the Company's internal sales staff evaluating the productivity and geographic dispersion of its independent sales representatives. In addition, the Company intends to aggressively develop and promote its sales programs and new product introductions. While management believe these actions are important steps toward increasing sales, future increases in sales continue to be dependent on, among other things, (I) sufficient levels of capital, (ii) increases in repackaging throughput (see "Gross Margins" below), and (iii) its ability to broaden the customer base and product line. There can be no assurance that such efforts will be successful. Gross Margins: The Company's gross margin for the six and three months ended June 30, 1996 increased to $287,000 and $114,000 compared to ($527,000) and ($301,000) for the corresponding period of the prior fiscal year. The increase in gross margins were attributable to an favorable sales mix, favorable absorption and spending variances resulting from reductions in personnel. Management, including the recently appointed President and Chief Executive Officer and new Vice Presidents, are taking steps to improve efficiencies, reduce costs and enhance customer service. Such steps include new procedures to ensure that the Company is purchasing quality material at competitive prices, establishing minimum and maximum inventory levels, establishing larger and standard batch sizes, establishing "brite" (filled but unlabeled bottles) stock to expedite filling of customer orders and evaluate the current equipment with the intention of reducing labor intensive operations. Also, the company will utilize excess capacity by providing custom packaging of products provided by the customer (toll packaging). In addition, management expects to work with employees and their union to develop an incentive plan to increase output and maintain the quality of the products. There can be no assurance that such efforts will be successful. Operating Expenses: Selling and distribution: Selling and distribution costs for the six and three months ended June 30, 1996 decreased $212,000 and $97,000 respectively, from the corresponding period of the prior fiscal year. The decrease in such costs is primarily attributable to decreases in personnel costs. Management expects selling and distribution costs in the futures to remain, as a percentage of sales, at the level of the past six months, but there can be no assurance that such efforts to control costs will be successful. General and administrative: General and administrative costs for the six and three months ended June 30, 1996 decreased $582,000 and $212,000 respectively, from the corresponding period of the prior fiscal year. The decreases in such 7 costs are primarily attributable to decreases in personnel costs, professional fees and the provision for severance costs relating to the reorganization of personnel in 1995. Loss from operations: Management's effort to achieve profitability is largely dependent on its ability to increase sales and improve gross margins and control operating costs. Financial Condition: Liquidity and Capital Resources: The Company's working capital decreased $464,000 to ($2,032,000), at June 30, 1996 from ($1,568,000) at December 31, 1995. During the six months ended June 30, 1996 the Company received short term loans from shareholders of $720,000. Since the Company's acquisition, cash expenditures have substantially exceeded its cash generated from operations and the Company has relied on the sale of capital stock and capital contributions and loans to fund its operating activities and capital expenditures. While the Company is taking steps to generate working capital, increase sales and achieve profitability, the current level of liquidity and capital resources, is not sufficient to fund the operations and growth of the Company. Management is currently seeking alternate sources of financing to fund its operations including the sale of additional capital stock. There can be no assurance that alternative sources of financing would be available to the Company on agreeable terms. 8 PART II - OTHER INFORMATION ITEM 1. Legal Proceedings Reference is made to "Notes to Financial Statements - Contingencies and Other Matters - Legal proceedings" which are incorporated herein. ITEM 3. Defaults Upon Senior Securities Unpaid cumulative dividends on the Company's Series A and Series B Voting Cumulative Convertible Preferred Stock aggregated $731,000 through June 30, 1996. ITEM 5. Other Information ITEM 6. Exhibits and Reports on Form 8-K (a) Exhibits: None (b) Reports on Form 8-K: The Company filed a current report on Form 8-K dated May 24, 1996, reporting under Item 5. "Other Events" that Mr. Alfred C. Bagwell was appointed President and Chief Executive Officer, effective immediately. 9 SIGNATURE 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. American Pharmaceutical Company (Registrant) May 12, 1997 /s/ Alfred C. Bagwell ------------------ Alfred C. Bagwell, President (Chief Executive Officer) 10 EX-11 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 COMPUTATION OF PER SHARE DATA (UNAUDITED) Six Months Ended Three Months Ended ---------------- ------------------ June 30, June 30, June 30, June 30, 1996 1995 1996 1995 ---- ---- ---- ---- Net Loss $(552,000) $(2,100,000) $(299,000) $(1,003,000) Preferred Stock dividend (194,000) (160,000) (97,000) (88,000) -------- --------- --------- ---------- Loss applicable to Common Stock $(746,000) $(2,260,000) $(396,000) $(1,091,000) ======= ========= ========== ========= Primary: Weighted average number of common shares outstanding 4,681,765 4,332,432 4,681,765 4,332,432 ========== ========= ========= ========= Net loss per share of Common Stock (primary): $(.16) $(.52) $(.08) $(.25) === === === === Assuming Full Dilution: Weighted average number of common shares outstanding 4,681,765 4,332,432 4,681,765 4,332,432 ========= ========= ========= ========= Net loss per share of Common Stock (assuming full dilution) (a) $(.16) $(.52) $(.08) $(.25) === === === === (a) Not presented because dilution is less than 3 percent from primary amounts. 11 EX-27 3 FDS FOR; 2ND QTR. 10-QSB (AMM 1)
5 1000 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 21 0 744 (91) 396 1,095 765 (258) 2,227 3,127 649 0 3,840 47 (6,166) 2,227 2,047 2,047 1,179 1,760 747 0 92 (552) 0 (552) 0 0 0 (552) (.12) (.12)
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