-----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, F56+8Wk6ECFimBUXZN21VveqQIKmkhJyNy5Is7w8D6cI90BhBsftsxSbg6JXaZQl Xa++lyq2PDCleIsEJMrx1g== 0001047469-97-004909.txt : 19971117 0001047469-97-004909.hdr.sgml : 19971117 ACCESSION NUMBER: 0001047469-97-004909 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: 97720506 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 September 30, 1997 Commission File No. 0-19893 --------------------------- Alpha Pro Tech, Ltd. (formerly BFD INDUSTRIES, INC.) ------------------------------------------------------ (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 November 10, 1997 ----------------- Common stock, $.01 par value.......................... 24,112,449 ALPHA PRO TECH, LTD. Table of Contents PART I. FINANCIAL INFORMATION ITEM 1 Consolidated Financial Statements Page No. a) Consolidated Balance Sheet - September 30, 1997 (Unaudited) and December 31, 1996 1 b) Consolidated Statements of Operations For the three and nine months ended September 30, 1997 and 1996 (unaudited) 2 c) Consolidated Statement of Shareholders' Equity For the nine months ended September 30, 1997 (unaudited) 3 d) Consolidated Statements of Cash Flows For the nine months ended September 30, 1997 and 1996 (unaudited) 4 e) Notes to Consolidated Financial Statements 5-6 ITEM 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 7-9 SIGNATURES 10 ALPHA PRO TECH, LTD. CONSOLIDATED BALANCE SHEET - --------------------------------------------------------------------------------
SEPTEMBER 30, DECEMBER 31, 1997 1996 (UNAUDITED) ASSETS Current Assets: Cash $ 327,000 $ 275,000 Marketable Securities-restricted 22,000 39,000 Accounts receivable, net of allowance for doubtful accounts of $98,000 and $122,000 3,375,000 2,170,000 Income taxes receivable 5,000 5,000 Inventories 3,302,000 2,942,000 Prepaid expenses and other assets 470,000 183,000 ------------- ------------- 7,501,000 5,614,000 Property and equipment, net of accumulated depreciation of $1,039,000 and $836,000 1,837,000 1,615,000 Intangible assets, net of accumulated amortization of $82,000 and $55,000 298,000 219,000 Other 31,000 33,000 ------------- ------------- $ 9,667,000 $7,481,000 ------------- ------------- ------------- ------------- LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable $ 1,388,000 $1,600,000 Accrued liabilities 491,000 647,000 Due to related parties - 19,000 Notes payable, current portion - 31,000 Loans payable, current portion 1,227,000 1,081,000 Capital leases, current portion 55,000 36,000 ------------- ------------- 3,161,000 3,414,000 Loans payable, less current portion 71,000 112,000 Capital leases, less current portion 140,000 105,000 ------------- ------------- 3,372,000 3,631,000 ------------- ------------- SHAREHOLDERS' EQUITY Common stock, $.01 par value, 50,000,000 shares authorized, 24,112,449 and 20,755,463 issued and outstanding at September 30, 1997 and December 31, 1996 241,000 207,000 Additional paid-in capital 24,338,000 21,656,000 Accumulated deficit (18,284,000) (18,013,000) ------------- ------------- 6,295,000 3,850,000 ------------- ------------- $ 9,667,000 $7,481,000 ------------- ------------- ------------- -------------
1 ALPHA PRO TECH, LTD. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) - --------------------------------------------------------------------------------
FOR THE THREE MONTHS FOR THE NINE MONTHS ENDED SEPTEMBER 30, ENDED SEPTEMBER 30, 1997 1996 1997 1996 Sales $4,708,000 $3,772,000 $13,184,000 $11,231,000 Cost of goods sold, excluding depreciation 3,250,000 2,449,000 8,466,000 7,328,000 ---------- ---------- ----------- ----------- 1,458,000 1,323,000 4,718,000 3,903,000 Expenses Selling, general and administrative 1,657,000 1,159,000 4,540,000 3,415,000 Depreciation and amortization 82,000 66,000 230,000 184,000 ---------- ---------- ----------- ----------- Income (loss) from operations (281,000) 98,000 (52,000) 304,000 ---------- ---------- ----------- ----------- Interest 72,000 72,000 219,000 212,000 Other 0 0 0 0 ---------- ---------- ----------- ----------- 72,000 72,000 219,000 212,000 ---------- ---------- ----------- ----------- Income (loss) before provision for income taxes ($353,000) 26,000 ($271,000) 92,000 Minority Interest 0 0 0 (4,000) Provision for income taxes 0 0 0 0 ---------- ---------- ----------- ----------- Net Income (loss) ($353,000) $26,000 ($271,000) $ 96,000 ---------- ---------- ----------- ----------- Net Income (loss) per share ($ 0.01) $ 0.00 ($ 0.01) $ 0.00 ---------- ---------- ----------- ----------- Weighted average number of shares outstanding 24,104,116 20,512,130 23,193,445 20,163,671 ---------- ---------- ----------- -----------
2 ALPHA PRO TECH, LTD. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED) - --------------------------------------------------------------------------------
SHARES COMMON ADDITIONAL ACCUMULATED TOTAL STOCK PAID-IN CAPITAL DEFICIT Balance at December 31, 1996 20,755,463 $207,000 $21,656,000 ($18,013,000) $3,850,000 Stock issued for cash 3,356,986 34,000 2,438,000 2,472,000 Options/warrants issued for services 244,000 244,000 Net income (loss) (271,000) (271,000) ---------- -------- ----------- ------------- ----------- Balance at September 30, 1997 24,112,449 $241,000 $24,338,000 ($18,284,000) $6,295,000 ---------- -------- ----------- ------------- ----------- ---------- -------- ----------- ------------- -----------
3 ALPHA PRO TECH, LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) - --------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 1996 OPERATING ACTIVITIES: Net income (loss) ($271,000) $96,000 Adjustments to reconcile net income to cash used for operating activities: Depreciation and amortization 230,000 184,000 Minority interest in earnings (14,000) Securities issued for services 15,000 Changes in assets and liabilities: Accounts receivable (1,205,000) (190,000) Income tax receivable 167,000 Marketable securities 17,000 (2,000) Inventories (360,000) (716,000) Prepaid and other assets(1) (43,000) (109,000) Accounts payable and accrued liabilities (387,000) 391,000 ----------- --------- Net cash provided by (used for) operating activities: (2,019,000) (178,000) ----------- --------- INVESTING ACTIVITIES: Acquisition of business (49,000) Purchase of property and equipment (425,000) (364,000) Purchase of intangible assets (106,000) (30,000) Purchase of other assets 2,000 (2,000) ----------- --------- Net cash used for investing activities (529,000) (445,000) ----------- --------- FINANCING ACTIVITIES: Issuance of common stock(1) 2,472,000 595,000 Net proceeds (payments) on loans payable 105,000 247,000 Net proceeds ( payments) on capital leases 54,000 Net proceeds (payments)on notes payable (31,000) (110,000) ----------- --------- Net Cash provided by financing activities 2,600,000 732,000 ----------- --------- Increase (decrease) in cash during the period 52,000 109,000 Cash, beginning of period $275,000 $344,000 ----------- --------- Cash, end of period $327,000 $453,000 ----------- ---------
- ------------------------ (1) Non - cash item: Options and warrants with fair values totalling $244,000 were issued to consultants for future services. This is reflected on the Cash Flow Statement as a deduction in common stock and prepaid expenses. 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, 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, 1996 in accounting principles and practices utilized in the presentation of these financial statements. 3. INVENTORIES SEPTEMBER 30, DECEMBER 31, 1997 1996 Raw Materials $1,777,000 $1,511,000 Work in process 179,000 76,000 Finished goods 1,346,000 1,355,000 ---------- ---------- $3,302,000 $2,942,000 ---------- ---------- ---------- ---------- 4. ACCRUED LIABILITIES SEPTEMBER 30, DECEMBER 31, 1997 1996 Professional fees $123,000 $286,000 Payroll and payroll taxes 255,000 203,000 Other 113,000 158,000 -------- -------- $491,000 $647,000 -------- -------- -------- -------- 5 ALPHA PRO TECH, LTD. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) - -------------------------------------------------------------------------------- 5. NOTES PAYABLE SEPTEMBER 30, DECEMBER 31, 1997 1996 Note payable due in monthly installments of $1,500, interest at 8.0%, maturing July 31, 1997 $ 9,000 Note payable due in monthly installments of $4,000, interest at 6%, with the remaining balance due March 31, 1997 14,000 Notes payable to related parties, interest at 20% payable quarterly, due on demand 8,000 ------- $ - $31,000 ------ ------- Less: Current portion $ - $31,000 ------ ------- Notes Payable, less current portion $ - $ - ------ ------- 6. NET INCOME/(LOSS) PER SHARE Net income/(loss) per share of common stock is based on the weighted average number of shares of common stock outstanding during the quarter. Common stock equivalents have been excluded from the earnings per share calculation as no material dilutive effect would result. 7. PROVISION FOR INCOME TAX No provision for income tax has been recorded in the Statement of Operations for the nine months ended September 30, 1997, 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 AND NINE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996 Alpha Pro Tech, Ltd. ("Alpha" or the "Company") reported a net loss for the three months ended September 30, 1997 of $353,000 as compared to net income of $26,000 for the three months ended September 30, 1996, representing an decrease of $379,000. For the nine months ended September 30, 1997 the net loss was $271,000 compared to net income of $96,000 for the same period in 1996, representing a decrease of $367,000 . SALES Consolidated net sales for the three months ended September 30, 1997 increased to $4,708,000 from $3,772,000 in 1996, representing an increase of $936,000 or 24.8%. Net sales for the Apparel Division for the quarter ended September 30, 1997 were $3,170,000 as compared to $2,121,000 for the same period of 1996. The Apparel Division sales increase of $1,049,000 or 49.5% was primarily due to increased sales to the company's largest customer. Mask and eye shield sales decreased by 12.1%, to $994,000 for the third quarter of 1997 from $1,131,000 in the third quarter of 1996. This decrease is primarily the result of a drop in shield/mask combination product sales. Sales from the Company's Unreal Lambskin and other related products which includes a line of pet beds increased by 4.6% to $544,000 in the third quarter of 1997 compared to $520,000 in the same period in 1996. An increase in sales of rolled Lambskin goods is primarily responsible for the increase. The Company's Unreal Lambskin line of pet products is expected to improve in future quarters. Consolidated sales were $13,184,000 and $11,231,000 for the nine months ended September 30, 1997 and 1996, respectively, representing an increase of $2,003,000 or 17.8%. The increase is attributable to an increase in apparel sales of 43.9% and an increase in Unreal Lambskin of 5.4%, offset by a decrease in mask and shield products of 14.9%. COST OF GOODS SOLD Cost of goods sold increased to $3,250,0000 for the three months ended September 30,1997 from $2,449,000 for the same period in 1996. As a percentage of net sales, cost of goods sold increased to 69.0% from 64.9%. Gross profit margin decreased to 31.0% for the three months ended September 30, 1997 from 35.1% for the three months ended September 30, 1996. For the nine months ended September 30, 1997 as compared to 1996, cost of goods sold increased to $8,466,000 from $7,328,000. As a percentage of net sales for the nine months, cost of goods sold decreased to 64.2% from 65.2%. Gross profit margin increased to 35.8% from 34.8% for the nine months ended September 30, 1997 and 1996, respectively. 7 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses increased by $498,000 to $1,657,000 for the three months ended September 30,1997 from $1,159,000 for the three months ended September 30, 1996. As a percentage of net sales, selling, general and administrative expenses increased to 35.2% in the third quarter of 1997 from 30.7% for the same period in 1996. The increase in selling, general and administrative expenses primarily consists of increased payroll related costs of $224,000; increased expense related to options/warrants issued for services of $20,000; increased public company expenses of $62,000 including investor relations, annual report and annual meeting costs, stock transfer costs, and costs associated with SEC reporting requirements; increased travel expenses of $86,000; increased professional fee expenses of $71,000; and increased commission expense of $55,000. Of the increase in payroll related costs, $145,000 is due to increases in factory indirect expenses of which the majority is attributable to the Apparel Division which had an increase in sales of 49.5%. As a percentage of net Apparel Division sales, selling, general and administrative expenses for the Apparel division decreased to 19.2% for the third quarter of 1997 as compared to 24.9% in the third quarter of 1996. Selling, general and administrative expenses increased by $1,125,000 to $4,540,000 for the nine months ended September 30,1997 from $3,415,000 for the nine months ended September 30, 1996. As a percentage of net sales, selling, general and administrative expenses increased to 34.4% for the first three quarters of 1997 from 30.4% in the same period in 1996. The increase in selling, general and administrative expenses for the nine months ended September 30, 1997 is due to payroll related costs, public company expenses, professional fees and travel expenses as noted above. DEPRECIATION & AMORTIZATION Depreciation and amortization expense increased by $16,000, to $82,000 for the three months ended September 30, 1997 from $66,000 for the same period in 1996 and increased by $46,000 for the nine months ended September 30, 1997 compared to 1996. This increase is primarily attributable to an increase in the purchase of equipment through capital leases and amortization of goodwill on the acquisition of Ludan Corporation. NET INTEREST Interest expense remained flat at $72,000 for both the third quarter of 1997 and for the third quarter of 1996. Interest expense increased by $7,000, or 3.3% for the nine months ended September 30, 1997 compared to 1996. The slight increase in interest expense is due to interest on the additional capital leases acquired. INCOME (LOSS) FROM OPERATIONS Income from operations decreased by $379,000 to a loss of $281,000 for the three months ended September 30, 1997 as compared to income from operations of $98,000 for the three months ended September 30, 1996. Income from operations decreased by $356,000 to a loss of $52,000 for the nine months ended September 30, 1997 compared to income from operations of $304,000 for the same period in 1996. This change in income from operations of $356,000 for the nine months is due to an increase in gross profit of $815,000 offset by an increase in selling, general and administrative expenses of $1,125,000 and an increase in depreciation and amortization of $46,000. NET INCOME (LOSS) The net loss for the three months ended September 30, 1997 was $353,000 compared to net income of $26,000 for the three months ended September 30, 1996, a decrease of $379,000 . The net income decrease is comprised of a change in loss from operations of $379,000 . The net loss for the nine months ended September 30, 1997 was $271,000 compared to net income of $96,000 for the nine months in 1996. The net loss increase of $367,000 for the nine months is comprised primarily of an increase in loss from operations of $356,000 and a slight increase in interest expense. 8 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 1996 or 1997. LIQUIDITY AND CAPITAL RESOURCES As of September 30, 1997, the Company had cash of $327,000 and working capital of $4,340,000. During the nine months ended September 30, 1997, cash increased by $52,000 and accounts payable and accrued liabilities decreased by $387,000. The improvement of the company's cash and working capital is primarily due to the exercise of warrants and options for a total equity infusion of $2,472,000. The Company currently has a secured asset based lender's line of credit of $3,000,000, based upon the level of eligible accounts receivable, inventory and equipment which expires in March 1998. At September 30, 1997, the maximum line of credit available was $2,254,000 for accounts receivable, inventory and equipment. Net cash used for operations was $2,019,000 for the nine months ended September 30, 1997 and $178,000 for the same period of 1996. The Company's use of cash from operations for the nine months ended September 30, 1997 is due primarily to increases in accounts receivable, inventories, prepaids and other assets and a decrease in accounts payable and accrued liabilities, offset by a decrease in marketable securities. The Company's investing activities have consisted primaily of expenditures for fixed assets and intangible assets which totaled $529,000 for the nine months ended September 30, 1997. The Company is in the process of expanding its sewing capacity in Mexico and anticipates that further additions to property and equipment for 1997 could be approximately $100,000. In addition it is anticipated that its mask manufacturing capabilities are to be improved at an estimated cost of $100,000. 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 nine months ended September 30, 1997, the Company's financing activities consisted primarily of the exercise of warrants and options and increases in the asset based loan of $105,000 and capital leases of $54,000 offset by repayments of borrowings totaling $31,000 which resulted in the net cash provided by financing activities of $2,600,000. With the exercise of warrants and options, accounts payable and accrued liabilities were reduced significantly to a level that is expected to remain constant. Management believes that it has available cash and borrowings to finance all known financial commitments for at least 24 months. 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. 9 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: NOVEMBER 12, 1997 BY: /s/ SHELDON HOFFMAN --------------------- ----------------------------------- SHELDON HOFFMAN CHIEF EXECUTIVE OFFICER CHIEF FINANCIAL OFFICER 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996 AND THE STATEMENT OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1997 SEP-30-1997 327,000 22,000 3,473,000 98,000 3,302,000 7,501,000 2,876,000 1,039,000 9,667,000 3,161,000 0 0 0 241,000 24,338,000 9,667,000 4,708,000 4,708,000 3,250,000 1,739,000 0 0 72,000 (353,000) 0 (353,000) 0 0 0 (353,000) (0.01) (0.01)
-----END PRIVACY-ENHANCED MESSAGE-----