1
UNITED STATES
-------------
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q/A
-----------
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996 .
-----------------------------------------------
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
-------------------- ---------------------------
Commission File Number: 0-18938 .
--------------------------------------------------------
U.S. ALCOHOL TESTING OF AMERICA, INC. .
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE #22-2806310 .
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10410 TRADEMARK STREET, RANCHO CUCAMONGA, CALIFORNIA 91730
- ----------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(909) 466-8378 .
- -------------------------------------------------------------------------------
Registrant's Telephone Number, Including Area Code
.
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
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. /X/ Yes / / No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 OR 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. / / Yes / / No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date.
As of August 1, 1996 - Common Stock, $.01 Par Value 35,353,092
1
2
U.S. ALCOHOL TESTING OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, March 31,
1996 1996.
---- ----
(Unaudited)
ASSETS
------
Current Assets:
Cash and Cash Equivalents $ 1,330,139 $ 1,204,646
Accounts Receivable (Net of Allowances
For Bad Debts of $113,903 at June 30, 1996
and $112,490 at March 31, 1996 480,717 278,874
Other Receivables 301,850 1,850
Inventories 823,663 681,839
Prepaid Expenses 210,385 253,787
Current Assets of Discontinued
Operations, net 113,227 256,654
Total Current Assets 3,259,981 2,677,650
Property and Equipment (Net of Accumulated
Depreciation of $2,046,802 at June 30, 1996
and $1,845,015 at March 31, 1996) 2,561,836 2,691,979
Non Current Assets of Discontinued
Operations, net 24,524 307,868
Intangible Assets 4,986,501 858,343
--------- -------
Total Assets $10,832,842 $ 6,535,840
=========== ===========
The accompanying notes are an integral part of the financial statements.
2
3
U.S. ALCOHOL TESTING OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(CONTINUED)
June 30, March 31,
1996 1996
--------- --------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Notes Payable $ 400,000 $
Accounts Payable 432,147 487,320
Accrued Expenses and Taxes 442,061 468,150
Current Portion of Long-Term Debt 48,792 29,395
Preferred Stock Dividend Payable 14,405 7,202
----------- -----------
Total Current Liabilities 1,337,405 992,067
Long-Term Debt - Net of Current Portion 17,367 32,935
Commitments and Contingencies ----------- ----------
Total Liabilities 1,354,772 1,025,002
Minority Interest 1,361,038 1,478,508
----------- -----------
Stockholders' Equity:
Preferred Stock Class "A", $.01 Par Value,
500,000 Shares Authorized, Issued and
Outstanding 41,157 Shares at June 30,
1996 and March 31, 1996. (Liquidation
Preference of $205,785 at June 30, 1996
and March 31, 1995) 412 412
Preferred Stock Class "B", $.01 Par Value,
1,500,000 Shares Authorized, Issued and
Outstanding -0- Shares at June 30,
1995 and March 31, 1995.
Common Stock, $.01 Par Value, 50,000,000
Shares Authorized, Issued and Outstanding
35,353,092 Shares at June 30, 1996 and
32,480,000 March 31, 1996 355,831 324,800
Additional Paid-In Capital 50,619,295 45,176,619
Accumulated Deficit (42,858,507) (41,469,501)
----------- -----------
Total Stockholders' Equity 8,117,032 4,032,330
----------- -----------
Total Liabilities and Stockholders' Equity $10,832,842 $ 6,535,840
=========== ===========
The accompanying notes are an integral part of the financial statements.
3
4
U.S. ALCOHOL TESTING OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
For the Three Months Ended
June 30,
1996 1995 .
---------- --------
Continuing Operations
Sales - Net 603,716 $ 406,595
Costs and Expenses:
Cost of Sales 219,650 272,449
Selling and Marketing Expenses 228,509 188,993
General and Administrative Expense 1,257,641 743,135
Research and Development 208,714 244,083
Interest 45,425
Depreciation and Amortization 195,677 238,085
------- -------
Loss From Operations (1,506,475) (1,325,575)
Other Income (Expense) - 340,831
-------
Loss Before Minority Interest --------- --------
In Net Loss of Subsidiary (1,506,475) (984,744)
Minority Interest In Net Loss of Subsidiary 117,470 34,957
------- -------
Loss From Continuing Operations (1,389,005) (949,787)
Discontinued Operations
Loss From Operations before Minority Interest
In Net Loss (408,129)
Minority Interest 133,018
-------
Loss From Discontinued Operations (275,111)
. .
------------ -----------
Net Loss $ (1,389,005) $(1,224,898)
============ ============
Loss Applicable to Common Stock
Net Loss (1,389,005) $(1,224,898)
Preferred Stock Dividend (7,202) (7,203)
------ -----
Loss Applicable to Common Stock $ (1,396,207) $(1,232,101)
============= ===========
Loss Per Common Share:
Loss From Continuing Operations $ ( .04) $ ( .03)
Loss From Discontinued Operations $ ( .01)
Net Loss $ ( .04) $ ( .04)
Weighted Average Common Shares Outstanding 33,991,269 28,141,041
The accompanying notes are an integral part of the financial statements.
4
5
U.S. ALCOHOL TESTING OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
For the Three Months
Ended
June 30,
1996 1995 .
--------- --------
Cash Flow From Operating Activities:
Net Loss $ (1,389,005) $(1,224,898)
Adjustments to Reconcile Net Loss
to Net Cash Used by Operating Activities:
Provision For Bad Debts 3,511 ( 27,046)
Loss on Disposition of Fixed Assets 6,110 -
Depreciation and Amortization 195,677 308,566
Minority Interest in Net Loss of Subsidiary,
Net of Preferred Stock Dividends Paid (117,470) ( 167,975)
Unrealized Loss(Gain) on Marketable Securities - ( 276,072
Amortization of Bond Discount - ( 779)
Change in Operating Assets and Liabilities:
Decrease (Increase) in
Accounts Receivable (205,354) 27,682
(Increase) Decrease in Inventories (141,824) ( 39,456)
Decrease in Prepaid Expenses 43,402 42,971
(Increase) Decrease in Other Receivables (300,000) ( 14,681)
Increase (Decrease) in Accounts Payable (55,173) ( 360,671)
Decrease in Accrued Expenses
and Taxes 18,886 ( 39,460)
Increase in Other Current and Noncurrent Assets (65,658)
------- ---------.
Net Cash (Used) by Operating Activities (2,006,898) (1,771,819)
Cash Flow From Investing Activities:
Purchases of Property and Equipment (71,644) ( 146,799)
Purchase of Robert Stutman & Associates, Inc. (2,100,000) -
Proceeds from Sale of Assets of Discontinued
Operations 426,771 -
Other-Net (5,111) (14,530)
------ ------
Net Cash Provided (Used) by Investing Activities (1,749,984) (161,329)
--------- -------
Cash Flow From Financing Activities:
Sale and Issuance of Common Stock 4,286,204 -
Expenses of Common Stock Issuance (400,000) -
Payments of Long-Term Debt (3,829) ( 17,357)
Payment of Dividend on Class "A"
Preferred Stock -
Proceeds of Brokerage Loans Payable - 1,000,000
Payments of Brokerage Loans Payable - (24,595)
--------- ------
Net Cash Provided by Financing Activities 3,882,375 958,048
5
6
U.S. ALCOHOL TESTING OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED
(UNAUDITED)
For the Three Months Ended
June 30,
1996 1995 .
------- -------
Increase (Decrease) in Cash and Cash Equivalents $ 125,493 $( 975,100)
Cash and Cash Equivalents - Beginning 1,204,646 1,633,098
--------- ---------
Cash and Cash Equivalents - Ending $ 1,330,139 $ 657,998
=========== ============
Supplemental Disclosure of Cash Information:
Cash Paid for Interest $ 46,115
============
Income Taxes Paid $ -
============
Non-Cash Financing Activities:
Preferred Stock Dividends Accrued $ 7,203
============
Issuance of Common Stock for Business Acquired $ 1,562,500 $ -
=========== ============
Issuance of Note Payable for Business Acquired $ 400,000 $ -
=========== ============
The accompanying notes are an integral part of the financial statements.
6
7
U.S. ALCOHOL TESTING OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
NOTE 1 - Basis of Presentation .
The consolidated financial statements include the accounts of
U.S. Alcohol Testing of America, Inc. (the "Company") and its
wholly and majority owned subsidiaries. All significant
intercompany accounts and transactions are eliminated in
consolidation.
In the opinion of the Company, the accompanying unaudited
consolidated financial statements reflect all adjustments
(which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations
and cash flows for the periods presented.
Results of operations for interim periods are not necessarily
indicative of the results of operations for a full year due to
external factors which are beyond the control of the Company.
NOTE 2 - Cash and Cash Equivalents
Cash and cash equivalents are summarized as follows:
June 30, March 31,
1996 1996
------- ---------
Cash in Banks $ 1,071,661 $ 450,845
Money Market Funds 3,478 933
Commercial Paper 255,000 752,868
------- -------
$ 1,330,139 $1,204,646
============ ==========
NOTE 3 - Inventories
Inventories are summarized as follows:
June 30, March 31,
1996 1996
-------- --------
Finished Goods $ 63,360 $ 64,437
Work in Process 462,349 334,699
Raw Materials 297,954 282,703
--------- -------
$ 823,663 $ 681,839
========== ==========
7
8
U.S. ALCOHOL TESTING OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
NOTE 4 - Property and Equipment
Property and equipment is summarized as follows:
June 30, March 31,
1996 1996
-------- ---------
Furniture and Equipment $ 552,835 $ 453,609
Equipment 837,658 811,333
Equipment - Network/Per Test 2,312,752 2,327,553
Test Equipment 498,629 476,765
Leasehold Improvements 343,691 343,692
Vehicles 63,073 124,042
------- -------
4,608,638 4,536,994
Less: Accumulated Depreciation 2,046,802 1,845,015
--------- ---------
$2,561,836 $2,691,979
========== ==========
8
9
U.S. ALCOHOL TESTING OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
NOTE 5 - Long-Term Debt
Long-Term Debt is summarized as follows:
June 30, March 31,
1996 1996
---- --------
Capitalized lease obligations secured
by certain equipment payable in
various monthly installments, and
due through January, 1999. $ 66,159 $ 62,330
Less: Current Portion 48,792 29,395
------- ------
$ 17,367 $ 32,935
========== =========
NOTE 6 - Minority Interest
The Company's consolidated financial statements at June 30, 1996 include 100%
of the assets, liabilities and losses of U.S. Drug Testing, Inc., a 67% owned
publicly traded subsidiary, and 100% of the assets, liabilities and losses of
Good Ideas Enterprises, Inc., a 61% owned publicly traded subsidiary. The
$1,361,038 minority interest reported on the balance sheet represents the
minority shareholders' interest in the equity of these subsidiaries.
NOTE 7 - Acquisition of Robert Stutman & Associates, Inc.
On May 21, 1996 the Company completed the acquisition of Robert Stutman &
Associates, Inc. ("RSA"), a provider of corporate "Drug Free Workplace"
programs. The purchase price was comprised of $2,100,000 in cash, $400,000
in notes, bearing interest at 6% and due May 21, 1997, 500,000 shares of the
Company's Common Stock and Common Stock purchase warrants to acquire 900,000
shares of the Company's Common Stock at $3.125 per share, which was the closing
sales price of the Common Stock on April 17, 1996.
9
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Effect of Merger - U.S. Drug Testing, Inc.
During May 1996, USAT filed a Registration Statement to register
shares of the USAT Common Stock to be issued to the minority stockholders of
U.S. Drug Testing, Inc., ("U.S. Drug") upon consummation of a proposed merger
of U.S. Drug into and with a wholly-owned subsidiary of the Company. If the
proposed merger is successful, USAT will record a non-recurring charge to
income of approximately $8,500,000 as Incomplete Research and Development cost
representing the excess of the market value of USAT Common Stock over the
recorded value of the minority interest in U.S. Drug. The effects of the
merger are discussed in the USAT's Annual Report for the fiscal year ended
March 31, 1996. There can be no assurance that the merger will be consummated.
Effects of Merger - Good Ideas
During April 1996, USAT filed the Registration Statement to register
shares of USAT Common Stock to be issued to the minority shareholders of Good
Ideas Enterprises, Inc., ("Good Ideas") upon consummation of a proposed merger
of a wholly-owned subsidiary of USAT with and into Good Ideas. If the proposed
merger is successful, USAT will record a charge to Loss On Disposal of
Discontinued Operations of approximately $635,000 representing the excess of
the market value of USAT Common Stock over the recorded value of the minority
interest in Good Ideas. The effects of the merger are discussed in the USAT's
Annual Report for the fiscal year ended March 31, 1996. There can be no
assurance that the merger will be consummated.
Liquidity and Capital Resources
Although the Company has a history of operating losses through June
30, 1996, management believes that the Company will have the cash resources
available to it to meet all of its operating requirements for the ensuing
twelve months.
Management bases its belief on the following:
1) Operations discontinued in for the fiscal year ended March 31,
1996 ("fiscal 1996") had been producing significant operating losses which have
been eliminated .
2) There is no indication that the Company will be effected by
any losses from litigation or claims such as it experienced in fiscal 1996,
although there can be no assurance that such claims will not arise.
3) Cash flow from operations will be increased through
* The addition of RSA revenues
* Developing the human resource provider
business
* Emphasis on sales of Mobile Alcohol
Collection Systems and Alcohol Breath Tubes
* Implying the sales force to represent with
RSA/ProActive "products" and alcohol testing
products.
10
11
Additionally, USAT has demonstrated its past ability to successfully generate
funds from the exercise of Common Stock purchase warrants and to privately
place USAT's equity securities.
For a more complete discussion of Liquidity and Capital Resources, see the
Company's :Management Discussion and Analysis of Financial Condition" in its
Annual Report on Form 10-K for fiscal 1996.
Changes in Financial Condition
Cash used for operations was $2,007,000 for the quarter ended June 30,
1996. The net loss for the quarter was $1,389,000. The adjustment necessary
to reconcile the net loss to the net cash used by operating activities was
$618,000. Significant components of this adjustment included an increase in
other receivables of $300,000 from the sale of the assets of U.S. Rubber
Recycling, Inc., the minority interest in the loss of U.S. Drug of $117,000, an
increase in accounts receivable of $205,000, an increase in inventory of
$142,000 and a decrease in accrued expenses of $164,000 reduced by depreciation
of $196,000.
Cash used in investing activities was $1,750,000 consisting of the
purchase of Robert Stutman & Associates, Inc. of $2,100,000 and purchase of
property and equipment of $72,000. The sale of assets of discontinued
operations provided $427,000.
Cash flow from financing activities provided $3,882,000, primarily
from the exercise of common stock purchase warrants in the amount of $4,286,000
less related expenses of $400,000.
Costs associated with the issuance of common stock were $400,000.
Results of Operations
Three months ended June 30, 1996 compared with three months ended June 30,
1995.
Revenues from continuing operations increased by $197,000 or 48% from
$407,000 in fiscal 1995 to $604,000 in fiscal 1996. The increase was the
result of higher cost per test revenue increasing U.S. Alcohol sales from
$329,000 in 1995 to $394,000 in 1996, together with sales from RSA/ProActive of
$184,000. As RSA/ProActive are new operations to the Company, no revenues from
these operations in included in the prior period. Alconet sales declined from
$78,000 in fiscal 1995 to $26,000 in fiscal 1996.
Operating losses from Continuing Operations increased to $1,389,000 in
the quarter ending June 30, 1996 compared with $985,000 in the same period of
fiscal 1995. USAT operating, loss increased from $656,000 in fiscal 1995 to
$787,000 as the result of increased general and administrative cost consisting
of duplicate salaries during the period of management transition, legal costs
associates with the filing of two registrations statements in connection with
the proposed purchase of the minority share of Good Ideas Enterprises, Inc.,
and U.S. Drug Testing, Inc., and the cost associated with the acquisition of
RSA. The loss from U.S. Drug increased from $106,000 during the quarter
ended June 30, 1995 to $365,000 in the same quarter of the current year. The
prior year results of U.S. Drug included other income of approximately
$336,000, primarily from unrealized gain in the value of marketable securities.
U.S. Drug is currently conducting a feasibility study as to the drug
testing product which will require increased development costs until completed.
If, as hoped, the results are satisfactory, USAT anticipates that such expense
will continue to be high. If the results of the feasibility study are
unsuccessful U.S. Drug will be able to reduce such development expenses, but
its opportunity to produce revenues in two years will be eliminated. Except
for these expenses and those related to the "taking private transactions,"
USAT's management anticipates that other costs will be controlled during the
balance of the fiscal year ended March 31, 1997 ("fiscal 1997") and that
revenues will grow during the balance of fiscal 1997 from RSA/ProActive
operations and the alcohol testing operations. There can be no assurance that
management's expectations will be realized and, if realized, when.
11
12
PART II
ITEM 1 - Legal Proceedings
The Company is subject to legal proceedings and claims which
have arisen in the ordinary course of its business and have not been finally
adjudicated. These actions, when finally concluded and determined, will not,
in the opinion of management, have a material adverse effect upon the financial
position of the Company.
ITEM 2 - Changes in Securities
There have been no changes in securities of the Registrant.
ITEM 3 - Defaults Upon Senior Securities
There have been no defaults on senior securities.
ITEM 4 - Increase in Amount of Outstanding Securities
There have been no changes in amount of outstanding
securities.
ITEM 5 - Submission of Matters for a Vote of Shareholders
There was no matter submitted to shareholders vote.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) None.
(b) Current Report on Form 8-K dated May 21, 1996 and filed on
June 5, 1996.
12
13
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 thereto duly authorized.
U.S. ALCOHOL TESTING OF AMERICA, INC.
Registrant
Date: September 18, 1996 BY: /s/ Linda H. Masterson
-------------------------------
Linda H. Masterson
President
13