-----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, IdRggWhcLHioqlXKIPsBa9pfHHvHrf/3+1dBiEm+Dr+GDUxQLgCjRaNS/hIkE2dx qKOW3/WRk5CYZCnog5nbFQ== 0001005477-98-001584.txt : 19980515 0001005477-98-001584.hdr.sgml : 19980515 ACCESSION NUMBER: 0001005477-98-001584 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALPHA PRO TECH LTD CENTRAL INDEX KEY: 0000884269 STANDARD INDUSTRIAL CLASSIFICATION: ORTHOPEDIC, PROSTHETIC & SURGICAL APPLIANCES & SUPPLIES [3842] IRS NUMBER: 631030494 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-19893 FILM NUMBER: 98620532 BUSINESS ADDRESS: STREET 1: 60 CENTURIAN DR STREET 2: SUITE 112 CITY: MARKHAM ONTARIO CANA STATE: A6 BUSINESS PHONE: 9054790654 MAIL ADDRESS: STREET 1: 60 CENTURION DR STREET 2: STE 112 CITY: MARKHAM ON STATE: A6 FORMER COMPANY: FORMER CONFORMED NAME: BFD INDUSTRIES INC DATE OF NAME CHANGE: 19930328 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------ FORM 10-Q ------------------ Quarterly Report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarter Ended March 31, 1998 Commission File No. 0-19893 --------------------------- Alpha Pro Tech, Ltd. -------------------- (exact name of registrant as specified in its charter) Delaware, U.S.A. 63-1009183 - ---------------- ---------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation) Suite 112, 60 Centurian Drive Markham, Ontario, Canada L3R 9R2 - ------------------------ ------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (905) 479-0654 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 3 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 |_| Indicate the number of shares outstanding of each of the issuer's classes of common stock , as of May 4, 1998 Common stock, $.01 par value..... 24,112,449 Alpha Pro Tech, Ltd. Table of Contents PART I. FINANCIAL INFORMATION ITEM 1 Consolidated Financial Statements (Unaudited) Page No. a) Consolidated Balance Sheet - March 31, 1998 (unaudited) and December 31, 1997 1 b) Consolidated Statement of Operations for the three months ended March 31, 1998 and March 31, 1997 (unaudited) 2 c) Consolidated Statement of Shareholder's Equity for the three months ended March 31, 1998 (unaudited) 3 d) Consolidated Statement of Cash Flows for the three months ended March 31, 1998 and March 31, 1997 (unaudited) 4 e) Notes to Consolidated Financial Statements 5-6 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 7-11 SIGNATURES 12 Alpha Pro Tech, Ltd. Consolidated Balance Sheet - -------------------------------------------------------------------------------- March 31, December 31, 1998 1997 (Unaudited) Assets Current Assets: Cash $ 302,000 $ 490,000 Marketable Securities-restricted 17,000 21,000 Accounts receivable, net of allowance for doubtful accounts of $84,000 and $91,000 2,918,000 2,805,000 Income taxes receivable 5,000 5,000 Inventories 3,668,000 3,697,000 Prepaid expenses and other assets 332,000 393,000 ------------ ------------ 7,242,000 7,411,000 Property and equipment, net of accumulated depreciation and amortization of $1,176,000 and $1,088,000 2,124,000 2,084,000 Intangible assets, net of accumulated amortization of $102,000 and $92,000 310,000 305,000 Other 187,000 185,000 ------------ ------------ $ 9,863,000 $ 9,985,000 ============ ============ Liabilities & Shareholder's Equity Current Liabilities: Accounts payable $ 1,575,000 $ 2,142,000 Accrued liabilities 589,000 494,000 Loans payable, current portion 1,311,000 1,051,000 Capital leases, current portion 120,000 112,000 ------------ ------------ 3,595,000 3,799,000 Loans payable, less current portion 307,000 320,000 Capital leases, less current portion 241,000 229,000 ------------ ------------ 4,143,000 4,348,000 ------------ ------------ Shareholders' Equity Common stock, $.01 par value, 50,000,000 shares authorized, and 24,112,449 issued and outstanding at March 31, 1998 and December 31, 1997 241,000 241,000 Additional paid-in capital 24,338,000 24,338,000 Accumulated deficit (18,859,000) (18,942,000) ------------ ------------ 5,720,000 5,637,000 ------------ ------------ $ 9,863,000 $ 9,985,000 ============ ============ 1 Alpha Pro Tech, Ltd. Consolidated Statement of Operations (Unaudited) - -------------------------------------------------------------------------------- For the three months ended March 31, 1998 1997 Sales $ 4,742,000 $ 3,985,000 Cost of goods sold, excluding depreciation 2,846,000 2,445,000 =========== =========== 1,896,000 1,540,000 Expenses Selling, general and administrative 1,661,000 1,323,000 Depreciation and amortization 98,000 70,000 =========== =========== Income from operations 137,000 147,000 Interest 54,000 81,000 Other 0 0 =========== =========== 54,000 81,000 =========== =========== Income before provision for income taxes 83,000 66,000 Provision for income taxes 0 0 =========== =========== Net Income $ 83,000 $ 66,000 =========== =========== Basic Net Income per share $ 0.00 $ 0.00 =========== =========== Diluted Net Income per share $ 0.00 $ 0.00 =========== =========== Basic weighted average number of shares outstanding 24,112,449 22,216,718 =========== =========== Diluted weighted average number of shares outstanding 24,112,449 25,139,796 =========== =========== 2 Alpha Pro Tech, Ltd. Consolidated Statement of Shareholders' Equity (Unaudited) - -------------------------------------------------------------------------------- Additional Common Paid-in Accumulated Shares Stock Capital Deficit Total Balance at December 31, 1997 24,112,449 $241,000 $24,338,000 ($18,942,000) $5,637,000 Net Income 83,000 83,000 ---------- -------- ----------- ------------ ---------- Balance at March 31, 1998 24,112,449 $241,000 $24,338,000 ($18,859,000) $5,720,000 ========== ======== =========== ============ ========== 3 Alpha Pro Tech, Ltd. Consolidated Statement of Cash Flows (Unaudited) - -------------------------------------------------------------------------------- For the three months ended March 31, 1998 1997 Operating Activities: Net Income/(loss) $ 83,000 $ 66,000 Adjustments to reconcile net income to cash used for operating activities: Depreciation and amortization 98,000 70,000 Changes in assets and liabilities: Accounts receivable (113,000) (64,000) Inventories 29,000 (194,000) Prepaid expenses and other assets 59,000 (14,000) Accounts payable and accrued liabilities (472,000) (647,000) ----------- ----------- Net cash provided by (used for) operating activities: (316,000) (783,000) ----------- ----------- Investing Activities: Purchase of property and equipment (128,000) (177,000) Purchase of intangible assets (15,000) (9,000) Sale of marketable securities 4,000 17,000 ----------- ----------- Net cash used for investing activities (139,000) (169,000) ----------- ----------- Financing Activities: Issuance of common stock -- 2,191,000 Net proceeds (payments) on loans payable 247,000 35,000 Net proceeds (payments)on notes payable -- (24,000) Net proceeds (payments) on capital leases 20,000 88,000 ----------- ----------- Net Cash provided by financing activities 267,000 2,290,000 ----------- ----------- Increase (decrease) in cash during the period (188,000) 1,338,000 Cash, beginning of period $ 490,000 $ 275,000 ----------- ----------- Cash, end of period $ 302,000 $ 1,613,000 ----------- ----------- 4 Alpha Pro Tech, Ltd. Notes to Consolidated Financial Statements (Unaudited) - -------------------------------------------------------------------------------- 1. The Company Alpha Pro Tech, Ltd. (the Company) manufactures and distributes a variety of disposable mask, shield, shoe cover, and apparel products, and woundcare products. Most of the Company's disposable apparel, mask and shield products, and woundcare products are distributed to medical, dental, industrial, and clean room markets, predominantly in the United States. 2. Basis of Presentation The unaudited interim financial statements reflect all adjustments which are in the opinion of management necessary for a fair presentation of the results for the interim period presented. All such adjustments made are of a normal recurring nature. There have been no significant changes since December 31, 1997 in accounting principles and practices utilized in the presentation of these financial statements. 3. Inventories March 31, December 31, 1998 1997 Raw Materials $1,635,000 $1,741,000 Work in process 486,000 370,000 Finished goods 1,547,000 1,586,000 ---------- ---------- $3,668,000 $3,697,000 ========== ========== 4. Accrued liabilities March 31, December 31, 1998 1997 Professional fees $195,000 $145,000 Payroll and payroll taxes 250,000 267,000 Other 144,000 82,000 -------- -------- $589,000 $494,000 ======== ======== 5 Alpha Pro Tech, Ltd. Notes to Consolidated Financial Statements (Unaudited) - -------------------------------------------------------------------------------- 5. Basic and Diluted Net Income/(loss) per share Basic and diluted net income/(loss) per share of common stock is based on the weighted average number of shares of common stock outstanding during the quarter. Potential common stock have been excluded from the diluted per share calculation for 1998 as exercise price of all outstanding options and warrants are greater than the weighted averae market price per share for the quarter. 6. Provision for Income Tax No provision for income tax has been recorded in the Statement of Operations for the three months ended March 31, 1998, as taxable income has been eliminated as a result of the utilization of net operating loss carry forwards. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three Months ended March 31, 1998, compared to the three months ended March 31, 1997 Alpha Pro Tech, Ltd. ("Alpha" or the "Company") reported net income for the three months ended March 31, 1998 of $83,000 as compared to net income of $66,000 for the three months ended March 31, 1997 representing an improvement of $17,000 or 25.8%. Sales Consolidated net sales for the three months ended March 31, 1998 increased to $4,742,000 from $3,985,000 in 1997, representing an increase of $757,000 or 19.0%. Net sales for the Apparel Division for the first quarter ended March 31, 1998 were $3,160,000 as compared to $2,280,000 for the same period of 1997. The Apparel Division sales increase of $880,000 or 38.6% was primarily due to increased sales to the Company's largest distributor which is expected to continue growing as a result of the Company's strategy toward developing innovative solutions to meet this and other customers needs. Mask and eye shield sales decreased by $83,000 or 7.7%, to $995,000 for the first quarter of 1998 from $1,078,000 in the first quarter of 1997. Sales of these products should strengthen in the second half of 1998 with the introduction of a new line of masks and shields. Sales from the Company's Extended Care Unreal Lambskin(R) and other related products which includes a line of pet beds decreased by $40,000 or 6.4%, to $587,000 in the first quarter of 1998 compared to $627,000 in the same period in 1997. The decrease in sales is primarily a result of the discontinuation of a low margin rolled good line, which was partially offset by an increase in medical fleece sale. A small decrease in Alpha's line of pet beds & related products was also responsible for the decrease. The Company's line of pet products is expected to improve in the future. Alpha has recently restructured its business around a new strategy of innovation that will enable it to develop custom products to meet its customers needs in a very timely manner. This new approach is to satisfy customer requirements in a way that the Company's larger competitors are unable to match. The Company has a profit sharing agreement with its largest distributor. Goods shipped at cost to this distributor are to fill orders already received from the distributor's end users. Revenue for goods shipped to this distributor which includes goods shipped at cost as well as the Company's share of the profits, are recognized at the time the goods are shipped. Cost of Goods Sold Cost of goods sold increased to $2,846,000 for the three months ended March 31,1997 from $2,445,000 for the same period in 1997. As a percentage of 7 net sales, cost of goods sold decreased to 60.0% in 1998 from 61.4% in 1997. Gross profit margin increased to 40.0% for the three months ended March 31, 1998 from 38.6% for the three months ended March 31, 1997. The improvement in gross profit is a result of the Company's new strategic emphasis of developing innovative high gross profit products, especially for its largest customer, and also on improved manufacturing efficiency as a result of recent capital expenditures. Management expects gross profit margin to continue to remain strong through its strategic emphasis of developing innovative products and processes but, there can be no assurance that these margin improvements will be sustained. Selling, General and Administrative Expenses Selling, general and administrative expenses increased by $338,000 to $1,661,000 for the three months ended March 31, 1998 from $1,323,000 for the three months ended March 31, 1997. As a percentage of net sales, selling, general and administrative expenses increased 35.0% in 1998 from 33.2% in 1997. The increase in selling, general and administrative expenses primarily consists of increased payroll related costs of $112,000; increased marketing, commissions and travel expenses of $104,000; increased public company expenses of $42,000 including investor relations, options/warrants issued for services; stock transfer costs, and costs associated with SEC reporting requirements; and increased general office and factory expenses of $26,000. The $112,000 increase in payroll related costs, is primarily comprised of a $9,000 decrease in administrative salaries and a $125,000 increase in factory indirect expenses of which the majority is attributable to the Apparel Division which had an increase in sales of 38.6%. As a percentage of Apparel Division sales, selling, general and administrative expenses for the Apparel Division decreased to 19.9% for the first quarter of 1998 as compared to 21.8% in the first quarter of 1997. Marketing, commissions and travel expenses, which increased $104,000 in the first quarter of 1998 as compared to the same period in 1997, increased as a percentage of net sales to 6.6% from 5.2%. These expenses are as a result of additional focus being placed on customers other than the Company's largest customer. Selling, general and administrative expenses as a percentage of net sales was 35.0% in the first quarter of 1998 as compared to 36.6% for all of fiscal 1997. Management expects selling, general and administrative expenses as a percentage of net sales to continue to decrease as sales increase. Depreciation & Amortization Depreciation and amortization expense increased by $28,000 to $98,000 for the three months March 31, 1998 from $70,000 for the same period in 1997. This increase is primarily attributable to an increase in the purchase of 8 equipment through capital leases. Net Interest Interest expense decreased by $27,000 or 33.3%, to $54,000 for the three months ended March 31, 1998 from $81,000 for the three months ended March 31, 1997. The decrease in net interest expense is due to a decrease in the cost of capital partially offset by increases in interest on additional capital leases acquired. In December 1997, the Company entered into a new three-year $2,900,000 credit facility with an asset-based lendor at prime plus 2%. Alpha's previous credit facility was at prime plus 5%. Income from Operations Income from operations decreased by $10,000 to $137,000 for the three months ended March 31, 1998 from $147,000 for the three months ended March 31, 1997. The decreased income from operations is primarily due to an increase of gross profit of $356,000 offset by an increase in selling, general and administrative expenses of $338,000 and an increase in depreciation and amortization of $28,000. Net Income Net income for the three months ended March 31, 1998 was $83,000 compared to a net income of $66,000 for the three months ended March 31, 1997, an improvement of $17,000 or 25.8%. The net income increase of $17,000 is comprised primarily of a decrease in income from operations of $10,000 offset by a decrease in interest expense of $27,000. The Company does not have any pension, profit sharing or similar plans established for its employees, however, the chief executive officer and president are entitled to a combined bonus equal to 10% of the pre-tax profits of the Company. No bonus was earned in 1997. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 1998, the Company had cash of $302,000 and working capital of 9 $3,647,000. For the three months ended March 31, 1998, cash decreased by $188,000 and accounts payable and accrued liabilities decreased by $472,000. The Company currently has a secured asset based lender's line of credit of $2,900,000, based upon the level of eligible accounts receivable, inventory and equipment which expires in December 2000. At March 31, 1998, the maximum line of credit was $2,305,000 for accounts receivable, inventory and equipment of which $687,000 remained available. Net cash used for operations was $316,000 for the three months ended March 31, 1998 and $783,000 for the same period of 1997. The Company's use of cash from operations for the three months ended March 31, 1998 is due primarily to increase in accounts receivable and a decrease in accounts payable offset by decreases in inventories and prepaid expenses and other assets. The Company's investing activities have consisted primarily of expenditures for fixed assets and intangible assets of $143,000 offset by $4,000 for the sale of marketable securites for a total of $139,000 for the three months ended March 31, 1998. The Company anticipates that its mask manufacturing capabilities are to be improved based on customer demands at an estimated cost of $225,000. Depending on the success of the automated shoe cover approximately $350,000 of additional equipment could be required. The Company intends to lease equipment whenever possible. During the three months ended March 31,1998, the Company's financing activities consisted primarily of increases in the asset based loan of $247,000 and capital leases of $20,000 resulting in the net cash provided by financing activities of $267,000. Management believes that it has available cash and borrowings to finance all known financial commitments for at least 12 months. NEW ACCOUNTING STANDARDS The financial accounting standards board has issued statement of financial accounting standards (SFAS) No. 128, "Earnings Per Share," which became effective after December 15, 1997. SFAS 128 requires the computation of "basic" earnings per share, which utilizes the weighted average number of common shares outstanding without 10 regard to potential common shares, and "diluted" earnings per share, which includes all such shares if dilutive. CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION The Private Securities Litigation Reform Act of 1995 ("Act) provides a safe harbor for forward-looking information made on behalf of the Company. All statements, other than statements of historical facts which address the Company's expectations of sources of capital or which express the Company's expectation for the future with respect to financial performance or operating strategies can be identified as forward-looking statements. Such statements made by the Company are based on knowledge of the environment in which it operates, but because of the factors previously listed, as well as other factors beyond the control of the Company, actual results may differ materially from the expectations expressed in the forward-looking statements. 11 SIGNATURES Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the Registrant has dult caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Alpha Pro Tech, Ltd. DATE: May 6, 1998 BY: /s/ Sheldon Hoffman -------------------------- -------------------------------- SHELDON HOFFMAN CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER 12 EX-27 2 FDS
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheet as of March 31, 1998 and December 31, 1997 and the Statement of Operations for the three months ended March 31, 1998 and March 31, 1997. 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 302,000 17,000 3,002,000 84,000 3,668,000 7,242,000 3,300,000 1,176,000 9,863,000 3,595,000 0 0 0 241,000 24,338,000 9,863,000 4,742,000 4,742,000 2,846,000 2,846,000 1,759,000 0 54,000 83,000 0 83,000 0 0 0 83,000 0 0
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