SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
_____________
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission File
May 31, 1995 No. 06348
____________________________
American Plastics & Chemicals Inc.
(Exact name of registrant as specified in its charter)
Delaware 95-2461288
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization
325 N. St. Paul Street, Suite 3200, Dallas, TX 75201-3817
(Address of principal executive offices) (Zip Code)
(214) 871-9650
(Registrant'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 No X
----- -----
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date.
Classes Outstanding at August 28, 1995
-------------------------------- ------------------------------
Common Stock, $0.01 par value 28,548,416
Preferred Stock, $0.01 par value None
There are no exhibits in this document.
A M E R I C A N P L A S T I C S & C H E M I C A L S, I N C.
(A Development Stage Company)
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The consolidated financial statements of the Company included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and notes normally
included in financial statements prepared in accordance with generally accepted
accounting principles (GAAP) have been condensed or omitted pursuant to
Securities and Exchange Commission rules and regulations. It is recommended
that these financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's Annual Report on Form
10-K for the fiscal year ended August 31, 1994.
In the opinion of management, all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the results of
operations for the periods presented have been included in the accompanying
financial statements. Certain prior period amounts have been reclassified to
conform to the current period presentation format.
The results of operations for the nine months ended May 31, 1995 are believed
by Management to be generally indicative of the results to be expected for the
remaining quarter of the Company's fiscal year which ends on August 31, 1995.
1
AMERICAN PLASTICS & CHEMICALS INC.
(A Development Stage Company)
CONSOLIDATED BALANCE SHEETS
For the Quarter Ended May 31, 1995
and the Year Ended August 31, 1994
Quarter Ended Year Ended
May 31, 1995 August 31, 1994
------------- ---------------
CURRENT ASSETS
Cash $ 32,122 $ 4,930
Prepaids and Advances 3,898 2,345
Accounts Receivable 574 1,563
------------ ------------
Total Current Assets 36,594 8,838
PROPERTY AND EQUIPMENT
Furniture, Fixtures and Equipment 12,196 11,476
Less Accumulated Depreciation ( 4,494) ( 2,716)
------------ ------------
Net Property, Plant and Equipment 7,702 8,760
OTHER ASSETS
Deposits 642 630
------------ ------------
Total Other Assets 642 630
TOTAL ASSETS $ 44,938 $ 18,228
============ ============
CURRENT LIABILITIES
Notes Payable (Note 2) $ 309,537 $ 309,537
Accounts Payable (Note 3)
Trade 122,108 135,200
Affiliates 85,755 126,631
Other 90,110 51,736
Taxes Payable 1,929 14,949
Accrued Expenses (Note 4)
Payroll 756,816 633,581
Other 186,155 142,028
Loan Advances by Officer (Note 5) 2,443 20,459
------------ ------------
Total Current Liabilities $ 1,554,853 $ 1,434,121
SHAREHOLDERS' EQUITY/(DEFICIT) (Note 6)
Preferred Stock - No Par Value; $ 0 $ 0
10 Million Shares Authorized
Common Stock - Par Value $.01; 275,312 242,759
30 Million Shares Authorized
27,531,216 Issued @ May 31, 1995
24,725,816 Issued @ August 31, 1994
Treasury Stock - Par Value $.01; ( 110) ( 110)
11,000 Shares @ May 31, 1994
11,000 Shares @ August 31, 1994
Paid-In Capital 7,766,867 7,595,958
Deficit Accumulated During The Development Stage ( 9,551,984) ( 9,254,500)
------------ ------------
Total Shareholders' Equity/(Deficit) ($ 1,509,915) ($ 1,415,893)
TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY/(DEFICIT) $ 44,938 $ 18,228
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
2
A M E R I C A N P L A S T I C S & C H E M I C A L S I N C.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters Ended May 31, 1995 and May 31, 1994 and
the Period From May 13, 1985 (Date of Inception) to May 31, 1995
Period from
May 13, 1985
Three Months Ended (Inception)
--------------------------------- through
May 31, May 31, May 31,
1995 1994 1995
---------------- ------------- ---------------
REVENUES
Sales $ 0 $ 0 $ 105,000
Interest Income 0 0 346
---------------- ------------- ---------------
Total Revenues 0 0 105,346
OPERATING EXPENSES
General and Administrative 54,440 38,900 1,223,066
Outside Services 28,999 89,109 2,247,822
Insurance 1,500 1,241 36,085
Travel & Entertainment 5,467 9,312 240,663
Rent 2,532 2,491 100,561
Interest 9,114 7,849 153,839
Taxes ( 337) ( 298) 6,705
Bad Debts 0 0 15,000
Depreciation 612 1,252 80,132
Research and Development 492 0 6,590
Miscellaneous 0 0 6,841
---------------- ------------- ---------------
Total Operating Expenses 102,819 149,856 4,117,304
OTHER EXPENSES
Loss on Write-Off of Assets 0 0 295,146
Loss on Write-Off of Leasehold
Rights (Limestone Deposit) 0 0 5,000,000
Loss on Contract Settlement 0 0 280,000
Gain From Legal Settlement 0 0 ( 78,972)
Gain on Sale of Subsidiary 0 0 ( 18,848)
Other Miscellaneous Losses 0 0 62,700
---------------- ------------- ---------------
Total Other Expenses 0 0 5,540,026
NET LOSS ($ 102,819) ($ 149,856) ($ 9,551,984)
================ ============= ===============
NET LOSS PER COMMON SHARE --- ($ 0.01) ($ 0.56)
WEIGHTED NUMBER OF COMMON 26,928,952 27,676,185 16,998,439
SHARES OUTSTANDING
The accompanying notes are an integral part of these financial statements.
3
AMERICAN PLASTICS & CHEMICALS INC.
(A Development Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarters Ended May 31, 1995 and May 31, 1994 and
the Period From May 13, 1985 (Date of Inception) to May 31, 1995
Period from
May 13, 1985
Quarter Ended May 31, (Inception)
--------------------------------- Through
1995 1994 May 31, 1995
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss ($ 102,819) ($ 149,856) ($ 9,551,984)
Adjustments to Reconcile Net Loss to Net Cash (Used in)/
Provided by Operating Activities
Depreciation 612 1,252 80,132
Issuances of Common Stock as Payment for
Services, Debt, Interest and Assets 28,125 2,562 7,341,016
Loss on Write-off of Assets 0 0 248,998
Gain on Legal Settlement 0 0 ( 78,972)
Loss on Write-off of Leasehold Rights (Limestone Deposit) 0 0 5,000,000
Increase in Accounts Receivable 0 ( 1,562) ( 574)
Increase in Deposits, Prepaids, and Advances ( 910) ( 9,518) ( 4,540)
Decrease in Options on Technology 0 0 87,000
Increase in Accounts Payable ( 10,024) ( 2,912) 501,440
Increase in Taxes Payable ( 6,106) 2,067 1,929
Increase in Accrued Expenses and Other 48,100 35,010 948,907
------------- ------------- -------------
Net Cash (Used in)/ Provided by Operating Activities ( 43,022) ( 122,957) 4,573,352
CASH FLOWS USED IN INVESTING ACTIVITIES
Capital Investments ( 175) ( 5,674) ( 5,397,723)
------------- ------------- -------------
Net Cash Used in Investing Activities ( 175) ( 5,674) ( 5,397,723)
CASH FLOWS (USED IN)/ PROVIDED BY
FINANCING ACTIVITIES
Loan Advances by Officer ( 23,989) 7,569 2,443
Proceeds From Common Stock Issuances 63,313 136,822 677,106
Proceeds From/(Retirement of) Debt 0 0 176,944
------------- ------------- -------------
Net Cash (Used in)/ Provided by Financing Activities 39,324 144,391 856,493
NET CHANGE IN CASH ($ 3,873) $ 15,760 $ 32,122
============= ============= =============
CASH - BEGINNING BALANCE $ 35,995 $ 12,123 $ 0
CASH - ENDING BALANCE $ 32,122 $ 27,883 $ 32,122
The accompanying notes are an integral part of these consolidated financial
statements.
4
A M E R I C A N P L A S T I C S & C H E M I C A L S, I N C.
(A Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------
Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with GAAP guidelines for interim financial information
and the instructions for Form 10-Q, Regulation S-K, and Rule 10-01 of Regulation
S-X as set forth by the Securities and Exchange Commission. Accordingly, the
accompanying consolidated financial statements do not include all of the
information and footnotes required by GAAP guidelines for complete annual
consolidated financial statements.
In the opinion of Management, all adjustments considered necessary for a fair
presentation of the results of operations for the periods presented have been
included in the accompanying financial statements.
The accompanying financial statements do not include any financial impact of
the Company's ownership in ACME Power Company ("ACME"), a Wyoming corporation,
or Via Dana Ltd., Inc. ("Via Dana"), a Nevada corporation, as both of these
wholly-owned subsidiaries were non-operating entities during the period covered
by the financial statements. Additionally, Via Dana was formally dissolved by
action of the Company's Board of Directors on May 4, 1995, and any and all
ownership interest the Company may have had in ACME was transferred to Morgan
Laws pursuant to the settlement agreement entered into between the Company and
Mr. Laws on July 26, 1994.
Property, Plant and Equipment
The Company's property, plant and equipment is stated at cost and consists of
office furniture, fixtures, and equipment. Depreciation of these assets is
recorded using the straight line method over their estimated useful lives,
generally five years. Gains and losses on the disposal of such assets are
recognized as incurred.
Income Taxes
The Company utilizes Financial Accounting Standards Board ("FASB") Standard
109 ("SFAS 109") in accounting for income taxes. SFAS 109 requires a Company to
use the liability method in providing for income taxes on all transactions that
have been recognized in the financial statements.
The liability method requires that deferred taxes be adjusted to reflect rates
at which future tax liabilities are expected to be settled. The effects of tax
rate changes on future deferred tax liabilities and tax benefits, as well as
other changes in income tax laws, are recognized in net income in the period
such changes are enacted. Certain other provisions of SFAS 109 also affect the
measurement of future tax liabilities.
The Company had a net operating loss carryforward of approximately $9,550,000
at May 31, 1995 and does not expect to be responsible for the payment of income
taxes until such time as future profits offset this net operating loss
carryforward.
Reclassification of Prior Year Balances
Certain revenue, expense and other items have been reclassified on the prior
period consolidated balance sheet, statements of operations and cash flows for
comparative purposes.
5
Note 2. NOTES PAYABLE
-------------
At May 31, 1995 notes payable consisted of the following:
Principle Interest
Amount Maturity Date Rate
--------- ------------- ---------
$ 16,109 Upon Demand 18%
60,000 Upon Demand 11%
165,935 Upon Demand 12%
3,000 Upon Demand 10%
64,493/1/ May 31, 1995 12%
---------
$ 309,537
/1/The $64,493 note due May 31, 1995 was renewed on June 1, 1995
for a new note in the amount of $70,942 ( $64,493 principal plus $6,449
accrued interest) due December 31, 1995.
Note 3. ACCOUNTS PAYABLE
----------------
Accounts Payable totaled $297,973 at May 31, 1995. Of this amount, $175,865
was owed to insiders or affiliates of the Company.
Note 4. ACCRUED EXPENSES
----------------
The Company finances a significant portion of its operating costs via the
accrual of certain expenses, particularly payroll and payroll related items. At
May 31, 1995, accrued expenses totaled $942,971, of which $756,816 was payroll
and related items.
Note 5. LOAN ADVANCES BY OFFICER
------------------------
During the quarter ended May 31, 1995, an officer converted $28,125 of cash
advances he had made to the Company during 1994 and 1995 into 450,000 shares of
new issue Common Stock. The price paid for the stock, $0.0625 per share, is the
same price paid by outside investors participating in the Company's 1994 and
1995 Private Placements. The stock will also bear a legend restricting its sale
for a period of three years from the date of purchase. Cash advances by the
officer totaled $2,443 at May 31, 1995.
Note 6. SHAREHOLDERS' EQUITY
--------------------
The Company is authorized to issue 30 million shares of $0.01 par value Common
Stock and 10 million shares of $0.01 par value Preferred Stock. A total of
27,520,216 shares of Common Stock were issued and outstanding as of May 31,
1995. No preferred stock had been issued as of May 31, 1995. In establishing
the class of preferred stock, the stockholders provided that the dividend
policy, rights, preferences, and privileges of the preferred stock will be
determined by the Company's Board of Directors.
Note 7. LEGAL PROCEEDINGS
-----------------
The Company is not a defendant in any litigation and none is threatened.
6
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Business
The registrant was incorporated in the State of Delaware on August 8, 1966 as
Photo-Scan Corporation ("Photo-Scan"). Photo-Scan's name was changed on
January 7, 1978 to Petrofina, Inc. and, due to a conflict with a similarly named
company, to Petro Oil & Gas, Inc. ("Petro") on April 20, 1978. Petro was later
reorganized under Chapter 11 of the Bankruptcy Code and discharged on May 14,
1985. Petro's name was changed to American Plastics & Chemicals Inc. ("APAC")
on November 18, 1989.
Radiant Heat Technologies
APAC is engaged in developing, licensing and marketing certain radiant heat
technologies having application in the (i) cost-effective co-production of
calcium carbide ("CaC\\2\\") and sulfur-free fuel gases directly from raw coal
and raw limestone (the "Calcium Carbide Application"), and (ii) coal
desulfurization gasification (the "Sulfur-Free Syngas Application" or "FDG").
The radiant heat technologies marketed by APAC were invented by Edwin
Matovich, an officer and director of the Company from 1990 until his death of
cancer in December, 1993. Mr. Matovich's process consists of (i) creating
artificial high-lime coal particles, and (ii) subjecting these manufactured
particles to intense blackbody radiation such as that produced by a high-
temperature electric furnace operating at temperatures in excess of 4,000/o/F.
Operation in this mode reacts both organic and pyritic sulfur contained in the
coal to calcium sulfide and further dissolves the calcium sulfide into a
chemically stable glasslike slag, while converting the organic portion of the
coal into sulfur-free gases consisting of carbon monoxide, hydrogen and
nitrogen. Subjecting the particles to transient temperatures well above the
liquidus temperatures of all known coal ash compositions and then radiatively
quenching these entrained liquid droplets to solid vitreous shot causes the
sulfur and other reactive components of the original coal (including metals and
alkaline oxides) to become permanently incorporated into a chemically stable
alkaline, calcium-rich cementic material, thus eliminating problems associated
with an environmentally acceptable disposal of the slag from the process.
When the process is being used for gasification only (FDG), air is introduced
along with the manufactured particles to effect a high carbon conversion to
carbon monoxide and to provide sufficient energy for the reactions so that the
only electric power used in the process is that required to maintain the furnace
thermal losses, typically less than 3% of the fuel value of the produced gas.
Because of the strong radiation absorption characteristics of the opaque coal-
limestone particles and the weak radiation absorption characteristics of the
transparent process gases, the process gas stream is heated principally by
conduction from the particles and, therefore, with short residence times, the
output gases emerge from the gasification system at temperatures very much lower
than the 4,000/o/F process transient. This particular behavior of the process
allows for the use of conventional gas particulate cleanup equipment in spite of
the superior high-temperature process chemistry which has removed virtually all
of the sulfur from the produced gas.
By adjusting the ratio of limestone to coal, the process can be made to
produce calcium carbide as well as sulfur-free gases. When the calcium carbide-
rich slag is reacted with water, acetylene, a fundamental building block of the
organic chemical industry, is produced. With appropriate plant design, a
totally integrated chemical plant can be built in which only coal, limestone and
water are introduced into the plant, and only finished chemicals and slag leave
the plant. Such a plant is particularly advantageous in undeveloped or
underdeveloped areas of the world which have reserves of coal and limestone but
which do not readily possess petroleum or petrochemical intermediate materials
and delivery systems or electrical utility infrastructures. An integrated
chemical plant capable of producing acetylene, beneficial by-product process
gases, excess electric power, and self-contained waste treatment for toxic and
hazardous materials (the high-temperature alkaline environment present in the
carbide/gasification process represents an almost ideal set of conditions for
the destruction of halogenated hydrocarbons, for example) can now be located
near lower cost raw material deposits with much less concern for the
availability of industrial infrastructure.
7
Laboratory and pilot demonstrations of the Calcium Carbide Application have
revealed CaC\\2\\ yields of virtually 100% of theoretical can be achieved with a
wide variety of raw coal and lime source materials, thereby alleviating the need
for coke and dead-burned lime as raw materials in the conventional
electrothermal calcium carbide process and the economic and engineering
constraints of integrated chemical plants having to be located near low-cost
sources of carefully prepared raw materials required by conventional calcium
carbide production methods.
Generation of calcium carbide has been demonstrated at bench-scale and in a
50-ton-per-day process demonstration unit located in Spain. The Spanish unit
was designed and built as a general-purpose process facility for developing
engineering parameters of a number of radiant heat transfer processes. It was
rented for the initial calcium carbide trials which were run with reacting
particles prepared from bituminous coal and limestone. The initial trials
produced a slag containing approximately 50% CaC\\2\\, with a calculated
CaC\\2\\ reaction completion greater than 90% of theoretical. The process
conditions, as well as the compositions and physical parameters of the prepared
furnace feed material, formed the basis of the original patent application. The
demonstrated quality of CaC\\2\\ product and the demonstrated completion of
reaction were more than adequate for consideration of designs of fully-
integrated chemical plants with self-contained power generation.
An affiliate of a major multi-national chemical company built a bench-scale
test facility to validate the efficacy of the technology. APAC provided
oversight for construction of the test facility and the testing itself, while
the chemical company's Research and Development Department conducted the
required tests. The budget for the test facility and the testing, paid for by
the chemical company, was approximately 1 million USD.
Testing of the Calcium Carbide Application was conducted over a period of five
months. The tests clearly demonstrated the efficacy of the CaC\\2\\ process but
recurring problems with the thermal reactor, which had been constructed by the
chemical company to specifications other than those provided by APAC, resulted
in the chemical company concluding that additional testing of that unit was
warranted. The chemical company was willing to undertake such additional
testing at their expense but proposed that they be granted certain preferential
rights to the technology while the testing was underway. APAC, having never
experienced any reactor problems in its previous testing, refused to grant the
preferential rights the chemical company sought. Therefore, testing was
discontinued.
The Company believes that its technology represents a cost-effective method
for the co-production of commercial grade calcium carbide suitable for onsite
continuous conversion to acetylene and sulfur-free fuel gases. By converting
calcium carbide production from its present batch-type method with large capital
investments for in-process product handling to a continuous method with little
in-process product handling, the technology offers users major advantages in
capital costs, operating costs, and safety. In addition, the technology has
been shown to operate on a wide variety of carbonaceous (containing carbon) and
calcareous (containing calcium) feed materials thereby opening the potential use
of lower-cost raw materials through its ability to utilize all of the off-gases
for power generation and/or chemical synthesis.
Mr. Matovich's death has slowed APAC's ability to develop and market the
radiant heat technologies he invented, but the Company believes strongly in the
economic potential of the process, and continues in its efforts to bring it to a
state of commercial reality. APAC is currently engaged in several activities
toward this end. First, the Company is involved in discussions with Mr.
Matovich's heirs regarding replacement and renewal of the exclusive option it
once held to purchase the technologies. This option had expired immediately
prior to Mr. Matovich's death in October, 1993. Secondly, APAC is attempting to
find and employ a scientist of Mr. Matovich's qualifications and capabilities to
oversee further development of the process. Finally, the Company continues in
its efforts to market the technology, particularly the Calcium Carbide
Application.
Methylene Di-Para-Phenylene Isocyanate (MDI)
In addition to its involvement with radiant heat technologies, APAC also
provides project management and engineering services in specific areas of the
plastics and chemical industries where the Company believes it possesses unique
qualifications or expertise, or can obtain such qualifications or expertise from
its reserve of technical consultants. Two such specialty areas are the
manufacture of methylene di-para-phenylene isocyanate
8
("MDI"), a key feedstock used in the manufacture of high quality, high value-
added plastic products, particularly polyurethanes, and the development and
manufacture of proprietary polyurethane end products.
The Company has no proprietary technology for the manufacture of MDI or for
the manufacture of polyurethane end products at present, but the Company expects
to develop such technology over time. The technology to be utilized by APAC in
the near term MDI and polyurethane projects where the Company will serve as the
project manager and/or equity partner will either be licensed from others or
will be technology currently available in the public domain.
The Company first marketed its MDI capabilities in 1990, but met with limited
success due to the surplus manufacturing capacity that existed in the industry
at the time, and competition from the handful of companies who had historically
controlled the production and sale of MDI, and who wished to continue to do so
in the future.
In mid-1993 APAC initiated what eventually became two-plus years of technical
meetings and negotiations with Qing Yang Chemical Industrial Corporation ("Qing
Yang"), a People's Republic of China chemical manufacturer that had been
selected by the Chinese government to build and operate an MDI plant in China.
Qing Yang is a 50 year old company engaged in manufacturing, research and
development, engineering services and employee training. Its operations consist
of 16 factories, one design institute and three research institutes located on a
8,900 acre site near the city of Liaoyang in Liaoning Province. Qing Yang has
20,000 employees and manufactures such products as cotton fiber products, civil
explosives, polyurethane foam, automotive components, food additives,
pharmaceuticals, corrosion resistant duriron equipment and chemical equipment.
Qing Yang is a subsidiary of China North Industries Group ("NORINCO"), one of
China's largest and most successful commercial enterprises.
On July 19, 1995, APAC and Qing Yang executed a contract in Beijing, China to
jointly build and operate a 40,000 metric tons per annum MDI plant contiguous to
Qing Yang's existing facilities. Construction of the plant is expected to take
three years and cost $137 million. APAC is 60% owner of the Joint Venture and
will also serve as Project Manager during design, construction and start-up of
the plant. Annual revenues of the Joint Venture are forecast at approximately
$100 million per year.
The Joint Venture has already commenced construction on certain sections of
the MDI plant. A 25,000 metric tons per annum aniline unit is currently being
built and is scheduled to be completed in mid-1996. The aniline produced by
this unit will be sold in the international market until it is required for MDI
production in early 1999. Aniline revenue is expected to be approximately $27
million per year.
The domestic production of MDI, a specialty chemical used in the production of
a wide assortment of high-quality plastic products, including polyurethanes, is
extremely important to China. The country's production of MDI based products is
expanding rapidly and virtually all of the current supply of this critical raw
material is imported. MDI is used as the primary raw material in the production
of synthetic leathers, spandex, shoe soles, auto body and interior components,
adhesives and sealants, and all types of foams, including furniture, packaging
and rigid insulation and construction foams, in addition to other products.
While the execution of the contract is a major step forward for the
partnership between APAC and Qing Yang, there are major tasks which remain to be
completed before the project is a reality. As a matter of procedure, the
contract must receive certain central government approvals in China, including
approval by China's Ministry of Foreign Trade and Economic Cooperation.
Additionally, APAC must arrange financing of its approximately $80 million
investment in the joint venture. The Company believes these remaining tasks are
manageable, however, and looks forward to its prospects for the future.
Financial Results
The Company had no revenue during the quarter. Book operating expenses and
the Net Loss for the 3rd quarter totaled $102,819, versus $149,856 for the same
period in the prior year. Prior year expenses included, however, a one-time fee
of $70,000 for investment banking services related to APAC's China project.
Without this one-time fee, the Net Loss for the prior year 3rd quarter would
have been $79,856, or 22% less than the Net Loss for the current 3rd quarter.
Nine month year-to-date losses for the current and prior fiscal years are
9
$297,484 and $265,359, respectively. The Company's quarterly and year-to-date
losses for the current fiscal year amounted, respectively, to $0.004 and $0.0130
per average share outstanding.
While the Company's total book operating expenses for the 3rd quarter were
$102,819, the Company's use of cash during the quarter totaled only $43,022.
The remaining operating requirements were met either through the issuance of
common stock as payment for services, debt, interest, and assets ($28,125), or
by the accrual of certain expenses such as officers' compensation. Cash used
for operating expenses during the 3rd quarter of the prior year was $122,957,
versus total book operating expenses of $149,856. Use of cash for operating
expenses during the first nine months of the current fiscal year was $107,284
compared to total book operating expenses of $297,484 during the same period.
For the same nine month period for the prior fiscal year, the use of cash for
operating expenses was $161,788 compared to total book operating expenses of
$265,369 during the same period. Current fiscal year first nine months book
operating expenses not paid for with cash totaled $190,200. Of that amount,
virtually all was financed by the accrual of expenses ($167,362) such as
officers compensation.
Liquidity
As a development stage company, by definition APAC has yet to generate revenue
and income from operations and its continued existence is dependent upon its
ability to obtain the capital necessary to operate, primarily through the
issuance of additional debt or equity. During both fiscal years 1993 and 1994
the Company generated most of the capital it required to operate via two private
placements of Common Stock which raised a total of approximately $350,000. For
the current quarter and nine months year-to-date proceeds derived from the
issuance of Common Stock totaled $91,438 and $203,463, respectively. The
Company may have to raise additional capital for working capital purposes during
the upcoming year and, while the Company has been successful in raising the
necessary funding in the past, there is no assurance it will be successful in
such endeavors in the future.
The Company expects to commence generating profits from aniline sales
associated with its China Joint Venture in mid-1996. At that time, liquidity
will become less of an issue for the Company than it is at present. There is no
assurance, however, that the China project will occur as planned and, if it does
not, the Company's survival will continue to depend on its ability to raise
funding through the issuance of equity or debt as the Company does not have cash
reserves sufficient to maintain operations for any appreciable period of time.
10
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not a defendant in any litigation and none is threatened.
ITEM 2. CHANGES IN SECURITIES
There were no changes in securities during the quarter.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No response is necessary for this item.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No response is necessary for this item.
ITEM 5. OTHER INFORMATION
No response is necessary for this item.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
There are no exhibits to this report.
There was one Report on Form 8-K filed during the quarter. It is incorporated
herein by reference.
Date of Report Items Reported
-------------------- -------------------------
March 2, 1995 Item 5. Other Events
11
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 thereunto duly authorized.
AMERICAN PLASTICS & CHEMICALS, INC.
Date August 29, 1995 /s/ M. Edward Stewart
------------------------------ --------------------------------------
M. Edward Stewart
President, Chief Executive Officer
Date August 29, 1995 /s/ Daniel W. Schreimann
------------------------------ --------------------------------------
Daniel W. Schreimann
Vice President, Secretary
12