SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 16, 1995
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(May 2, 1995)
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AMERICAN CONSOLIDATED LABORATORIES, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 59-2624130
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6416 PARKLAND DRIVE, SARASOTA, FLORIDA 34243
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(Address of principal executive offices) (Zip Code)
(813) 753 - 0383
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Registrant's telephone number, including area code
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 2, 1995, American Consolidated Laboratories, Inc. ("AC Labs") or
("the Company") formerly known as Salvatori Ophthalmics, Inc. completed its
acquisition (effective May 1, 1995) of the business and assets of Philcon
Laboratories, Inc. ("Philcon") based in Philadelphia, Pennsylvania. All of the
business and assets, subject to scheduled liabilities (approximately $300,000),
were acquired by AC Labs from Philcon Laboratories, Inc. for $95,000 in cash, a
$125,000 Subordinated Promissory Note and 8,117 shares of AC Labs Common stock
(valued at $20,000 for this transaction). AC Labs will account for the
acquisition using the purchase method of accounting. The $240,000 purchase price
is subject to post-closing adjustments based upon, among other things, the net
difference between the assets acquired and liabilities assumed as of May 1,
1995.
Philcon is a manufacturer of RGP (rigid gas permeable) contact lenses and a
distributor of hydrophilic (soft) contact lenses and lens care products. The
existing manufacturing and distribution businesses of Philcon will continue in
place for the time being.
The Company obtained the funding for the acquisition from internal working
capital sources.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
Philcon Laboratories, Inc.
Report of Independent Certified Public Accountant
Balance Sheet - February 28, 1995
Statement of Operations and Changes in Retained Earnings Twelve
Months Ended February 28, 1995
Statement of Cash Flows Twelve Months Ended February 28, 1995
Notes to Financial Statements
Pro forma financial information is not available, but will be filed on
Form 8 as soon as practicable, but not later than 60 days after the due date
of this report.
Exhibits in accordance with the provisions of Item 601 of Regulation S-B
are as follows:
Exhibit
Number Description
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2.1 Asset Purchase Agreement between AC Labs and Philcon
Laboratories, Inc. dated February 1, 1995, effective
May 1, 1995
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN CONSOLIDATED LABORATORIES, INC.
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(Registrant)
Date: May 16, 1995 By:/s/ Edward J. Pocilujko
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Edward J. Pocilujko
Chief Financial Officer
Philcon Laboratories, Inc.
Financial Statements
February 28, 1995
and the Twelve Months then Ended
Philcon Laboratories, Inc.
Financial Statements
February 28, 1995
and the Twelve Months then Ended
Table of contents:
Auditor's Report 2
Balance Sheet 3
Statement of Operations and
Changes in Retained Earnings 5
Statement of Cash Flows 6
Notes to the Financial Statements 7
[LETTERHEAD OF HENRY C. STOUGHTON APPEARS HERE]
To the Stockholders of
Philcon Laboratories, Inc.
Philadelphia, PA
I have audited the accompanying balance sheet as of February 28, 1995 and
the statements of operations, retained earnings and cash flows for the twelve
months then ended. These financial statements are the responsibility of the
management of Philcon Laboratories, Inc.. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Philcon Laboratories, Inc.
as of February 28, 1995 and the results of operation and its cash flows for the
twelve months then ended in conformity with generally accepted accounting
principles.
It is my understanding that these financial statements will be used to
satisfy the requirements of American Consolidated Laboratories, Inc. in
connection with their proposal to acquire a majority of the assets and
liabilities of Philcon Laboratories, Inc. (see note 8). My audit was made for
the purpose of expressing an opinion on the basic financial statements taken as
a whole, including notes. All other information that may be associated with
these financial statements is presented for additional information purposes only
and is not part of the basic financial statements. Such information has not
been subject to the auditing procedures applied in the audit of the basic
financial statements, and, accordingly, I express no opinion on it.
/s/ Henry C. Stoughton
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Henry C. Stoughton, CPA
April 28, 1995
Philcon Laboratories, Inc. 3
Balance Sheet
February 28, 1995
Assets
Current assets:
Cash $ 6,127
Accounts receivable 161,513
Inventories 229,939
Other current assets 625
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Total current assets 398,204
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Property and Equipment:
Furniture and fixtures 26,723
Computer equipment 49,833
Lab Equipment 97,545
Vehicles 12,533
Leasehold improvements 23,705
Less accumulated depreciation (194,318)
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Property and equipment - net 16,021
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Deposits 150
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Total Assets $ 414,375
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The accompanying notes are an integral part of these
financial statements.
Philcon Laboratories, Inc. 4
Balance Sheet
February 28, 1995
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $ 15,032
Accounts payable 305,096
Accrued expenses and other current liabilities 10,725
Income taxes - net of benefit of loss
carryforwards 0
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Total current liabilities 330,853
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Long-term liabilities - net of current maturities:
Long-term debt 4,339
Loans from stockholder 1,591
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Total long-term debt 5,930
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Commitments (see note 7)
Stockholders' equity:
Common stock, $1.00 par value; 50,000
shares authorized; 25,000 shares
issued and outstanding 25,000
Retained earnings 52,592
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Total stockholders' equity 77,592
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Total liabilities and stockholder's equity $414,375
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The accompanying notes are an integral part of these
financial statements.
Philcon Laboratories, Inc. 5
Statement of Operations
and Changes in Retained Earnings
Twelve Months Ended February 28, 1995
Sales $1,546,206
Cost of sales 1,187,022
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Gross profit 359,184
Selling, general and administrative expenses 421,719
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Operating loss (62,535)
Interest expense (2,483)
Other income (expense) 2,899
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Loss before income taxes (62,119)
Provision for income taxes (see note 6) 0
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Net Loss (62,119)
Retained Earnings - February 28, 1994 114,711
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Retained Earnings - February 28, 1995 $ 52,592
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The accompanying notes are an integral part of these
financial statements.
Philcon Laboratories, Inc. 6
Statement of Cash Flows
Twelve Months Ended February 28, 1995
Net Income ($ 62,119)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 7,170
Increase in accounts receivable (14,296)
Decrease in inventories 234,532
Increase in other current assets (625)
Decrease in accounts payable (156,415)
Increase in accrued expenses
and other current liabilities 764
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Net cash provided by operating activities 9011
Cash flows used in investing activities:
Purchases of equipment (2,121)
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Cash flows provided by (used in) financing activities:
Advances from stockholder 12,000
Repayments to stockholder (14,182)
Principal payments on long-term debt (2,524)
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Net cash used in financing activities (4,706)
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Net increase in cash 2,184
Cash - February 28, 1994 3,943
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Cash - February 28, 1995 $ 6,127
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The accompanying notes are an integral part of these
financial statements.
Philcon Laboratories, Inc. 7
Notes to the Financial Statements
Twelve Months Ended February 28, 1995
1. Summary of significant accounting policies
a. Company activities
The Company is a privately held rigid (RGP) contact lens manufacturer
and a soft (gas permeable) contact lens distributor serving the
Delaware Valley locally and other national markets
b. Accounts receivable
The Company accounts for bad debts by the reserve method. Accounts
considered uncollectible have been reserved in the allowance for
doubtful accounts. At February 28, 1995, the allowance for doubtful
accounts was $4,671.
Accounts receivable are primarily due from optometrists,
ophthalmologists and opticians located in the Delaware Valley.
c. Property and equipment
Property and equipment are stated at cost and are depreciated using
both straight-line and accelerated methods over 5 to 7 years.
Leasehold improvements are amortized using the straight-line method
over the useful lives of the improvements of 7 to 30 years.
Expenditures for repairs and maintenance are charged to expense as
incurred. The cost of major renewals and betterments are capitalized
and depreciated.
d. Statement of cash flow
For purposes of reporting cash flows, the Company considers cash to be
cash on hand and cash in banks.
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 2,483
Income taxes $ 0
Philcon Laboratories, Inc. 8
Notes to the Financial Statements
Twelve Months Ended February 28, 1995
2. Inventories
Inventories are stated at the lower of cost or market on a first-in first-
out basis. At February 28, 1995 inventories consisted of the following:
Soft contact lenses $199,361
Hard contact lens materials 22,637
Supplies 7,941
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$229,939
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3. Accrued expenses
Accrued expenses and other current liabilities consisted of the following:
Employee taxes withheld and accrued $ 4,288
Payroll 5,622
Other business taxes 815
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$10,725
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4. Notes payable
Notes payable consisted of the following:
Uncollateralized notes payable to stockholder
due on demand. Interest payable at varying rates
ranging from 6% to 8%. $13,855
Note payable to bank, collateralized by a
vehicle. Payable in monthly installments of
$276 including interest computed at 9.25%. Matures
July 1997. 7,107
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Total notes payable 20,962
Less current maturities 15,032
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Long-term maturities $ 5,930
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Notes payable mature as follows:
Twelve months ending February 28,
1996 $15,032
1997 4,626
1998 1,304
Philcon Laboratories, Inc. 9
Notes to the Financial Statements
Twelve Months Ended February 28, 1995
5. Retirement plan
The company has adopted and administrates a retirement savings plan for its
employees under the Internal Revenue Code as a qualified 401(K) tax
deferred salary reduction plan amended October 1989. The purpose of the
plan is to reward eligible employees for long and loyal service by
providing them with retirement benefits. The plan year ends each September
30th.
As of September 30, 1994, the most recent plan year ending, the company
made a tax deductible contribution in the amount of $18,752 and all funding
requirements have been met. At September 30, 1994 the value of the plan
assets was $352,246.
6. Income taxes
Due to the loss from operations for the current period and tax loss
carryforwards available to the company to offset future taxable earnings
there is no provision for federal or state income taxes. At the most
recent fiscal year ending September 30, 1994 the company had $ 285,875 in
tax loss carryforwards expiring in varying amounts beginning 2001.
Statement of Financial Accounting Standards No. 109 requires that tax
benefits of loss carryforwards should be recorded and then reduced by a
valuation allowance if there is less than a 50% probability that these
benefits will be realized. As of the most recent fiscal year ending
September 30, 1994, the company had suffered continuing losses without
favorable outlook for the possibility to recover any benefits for these
losses. Under these circumstances, the valuation allowance would reduce
this deferred tax benefit to $0 as of September 30, 1994 and February 28,
1995.
If the sale of assets is consummated (see note 8), this scenario will
change significantly. If the sale were completed as described, the company
would have an ability to offset approximately $225,000 in taxable income,
providing approximately $70,000 in federal tax benefit and $14,000 in state
tax benefits. As the outcome of this event cannot be guaranteed, no
deferred tax benefit for these loss carryforwards has been recorded.
Philcon Laboratories, Inc. 10
Notes to the Financial Statements
Twelve Months Ended February 28, 1995
7. Commitments
The company leases its operating facility from its stockholders under a
non-cancelable operating lease through the year 2007. Rent expense charged
to operations under this obligation for the twelve months ending February
28, 1995 is $31,347.
The company is obligated under the terms of this lease agreement for
minimum rental payments as follows:
Twelve months ending February 28,
1996 $ 34,560
1997 34,560
1998 34,560
1999 34,560
2000 34,560
Thereafter 264,960
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$437,760
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8. Subsequent events
Inventory value reduction:
During April 1995 a principal supplier issued a memorandum indicating that
certain soft lenses would be issued at a reduced price from previous
shipments. Based on this price reduction in the marketplace, the company
has written down the value of its inventory holdings in these lens
categories as of February 28, 1995 in the amount of $6,700, which has been
included in the cost of sales for the twelve months then ended.
Asset purchase agreement:
At the balance sheet date, the stockholders of the Company were in the
process of negotiating, with an unrelated third party, for the sale of a
majority of its assets and liabilities excluding cash, loans and certain
other debt.
If this sale is consummated on its expected closing date, certain
transactions and approvals will be completed and/or obtained which are not
now reflected in the financial statements for the twelve month period ended
February 28, 1995, but will be included in the balance sheet and results
Philcon Laboratories, Inc. 11
Notes to the Financial Statements
Twelve Months Ended February 28, 1995
of operations for the year ended September 30, 1995. These transactions
and approvals among other items are:
. Payment for net assets: $115,000
. Covenant not to compete, payable in the form of a promissory
note due October 1995: $125,000
. Assignment of operating lease to purchaser
. Continuation of employee salary deferral plan (see note 5)