1
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1995
( ) 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 000-18448
AMERICAN CONSOLIDATED LABORATORIES, INC.
------------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 59-2624130
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6416 PARKLAND DRIVE, SARASOTA, FLORIDA 34243
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(941) 753 - 0383
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code
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 (X) No( )
The number of shares outstanding of the registrants Common Stock, par value
$0.05 per share, at November 10, 1995 was 4,281,927 shares.
2
PART I
ITEM 1. FINANCIAL STATEMENTS FOR THE PERIOD ENDED SEPTEMBER 30, 1995
(UNAUDITED)
(Begins on the following page)
Page 2
3
AMERICAN CONSOLIDATED LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
SEPTEMBER 30,
1995 DECEMBER 31,
(UNAUDITED) 1994
------------ ------------
Current assets:
Cash and cash equivalents...................... $ 98,026 $ 320,948
Accounts receivable, less allowance for
doubtful accounts of $78,100 ($90,000 at
1994)........................................ 1,416,956 1,073,907
Inventories, at lower of cost (first in,
first-out) or market.......................... 858,769 803,859
Other current assets........................... 69,112 92,487
------------ ------------
Total current assets 2,442,863 2,291,201
------------ ------------
Property and equipment at cost:
Land........................................... 50,000 50,000
Buildings and improvements..................... 205,000 205,000
Laboratory equipment........................... 1,110,422 998,911
Office equipment............................... 469,720 323,360
Leasehold improvements......................... 60,150 60,150
------------ ------------
1,895,292 1,637,421
Less accumulated depreciation.................. 1,175,522 1,065,236
------------ ------------
Total property and equipment 719,770 572,185
------------ ------------
Other assets:
Cost in excess of fair value of assets
acquired...................................... 828,419 813,419
Other intangible assets........................ 865,000 740,000
Deferred loan costs............................ 55,336 73,781
------------ ------------
1,748,755 1,627,200
Less accumulated amortization.................. 288,890 90,098
------------ ------------
1,459,865 1,537,102
Miscellaneous.................................... 41,869 55,828
------------ ------------
Total other assets 1,501,734 1,592,930
------------ ------------
Total assets $ 4,664,367 $ 4,456,316
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
Page 3
4
AMERICAN CONSOLIDATED LABORATORIES, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
SEPTEMBER 30,
1995 DECEMBER 31,
(UNAUDITED) 1994
------------ ------------
Current liabilities:
Accounts payable............................. $ 1,370,139 $ 903,000
Accrued expenses............................. 243,522 250,930
Notes payable to stockholders................ 230,000 1,040,000
Current maturities of long-term debt and
obligation under capital lease.............. 101,217 115,523
------------ ------------
Total current liabilities 1,944,878 2,309,453
------------ ------------
Long term debt:
Notes payable to stockholders................ 805,000 -0-
Obligation under capital lease............... -0- 34,565
Long-term debt other......................... 185,065 297,900
------------ ------------
Total long term debt 990,065 332,465
------------ ------------
Deferred rent 58,998 61,046
------------ ------------
Stockholders'equity:
Common stock, $.05 par value, 20,000,000
shares authorized: shares issued and
outstanding 4,281,927 and 3,823,048........ 214,097 191,153
Capital in excess of par value............... 5,662,459 5,282,708
Deficit...................................... (4,206,130) (3,720,509)
------------ ------------
Total stockholders' equity 1,670,426 1,753,352
------------ ------------
Total liabilities and equity $ 4,664,367 $ 4,456,316
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
Page 4
5
AMERICAN CONSOLIDATED LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- ----------------------
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
Sales............... $ 2,523,295 $ 992,080 $ 7,352,936 $ 3,004,758
Cost of Sales....... 1,545,335 459,775 4,736,773 1,432,442
------------ ------------ ------------ ------------
Gross Profit...... 977,960 532,305 2,616,163 1,572,316
------------ ------------ ------------ ------------
Selling expenses.... 333,396 99,752 748,819 322,067
Marketing expenses.. 45,494 9,363 99,003 53,871
Research and
development....... 13,720 15,383 43,423 47,218
General and
administrative.... 831,683 362,908 2,135,311 1,006,910
------------ ------------ ------------ ------------
Total Operating
Expenses......... 1,224,293 487,406 3,026,556 1,430,066
------------ ------------ ------------ ------------
Operating
income(loss)..... (246,333) 44,899 (410,393) 142,250
Interest Expense.... (36,876) (19,342) (109,831) (62,577)
Other Income........ 949 3,722 34,603 24,245
------------ ------------ ------------ ------------
Net income (loss). (282,260) 29,279 (485,621) 103,918
Deficit
at beginning of
period............. (3,923,870) (3,750,108) (3,720,509) (3,824,747)
------------ ------------ ------------ ------------
Deficit
at end of period... $(4,206,130) $(3,720,829) $(4,206,130) $(3,720,829)
============ ============ ============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
Page 5
6
AMERICAN CONSOLIDATED LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT (CONTINUED)
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- -----------------------
SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
Net income (loss)
per share - primary $ (.07) $ 0.03 $ (.11) $ 0.09
------------ ------------ ------------ ------------
The accompanying notes are an integral part of these consolidated financial
statements.
Page 6
7
AMERICAN CONSOLIDATED LABORATORIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
1995 1994
---------- ----------
Net income (loss)............................ $(485,621) $ 103,918
Adjustments to reconcile net income (loss) to
net cash provided by (used in)
operating activities:
Depreciation............................... 110,286 112,646
Provision for bad debts.................... (16,397) 16,200
Amortization............................... 231,196 29,625
(Increase) in accounts receivable.......... (162,533) (99,521)
(Increase) decrease in inventories......... 143,522 22,253
(Increase) decrease in other current assets 27,964 20,332
(Increase) in other assets................. -0- (1,138)
Increase (decrease) in accounts payable.... 195,484 (27,576)
(Decrease) increase in accrued expenses.... (10,558) 28,842
Increase (decrease) in deferred rent....... (2,048) (60)
---------- ----------
Net cash provided by
operating activities........................ 31,295 205,521
---------- ----------
Cash flows used in investing activities:
Purchase of treasury stock.................. -0- (43,617)
Purchase of Philcon Laboratories, Inc....... (246,972) -0-
Additions to property and equipment......... (243,234) -0-
Issuance of common stock.................... 402,695 5,468
---------- ----------
Net cash used in investing activities......... (87,511) (38,149)
---------- ----------
Cash flows used in financing activities:
Mortgage on Lincoln property................ 175,000 -0-
Borrowings from short-term debt............. 125,000 -0-
Principal payments on long and short-term
debts..................................... (466,706) (238,862)
---------- ----------
Net cash used in
financing activities........................ (166,706) (238,862)
---------- ----------
Net (decrease) in cash and
cash equivalents............................ (222,922) (71,490)
Cash and cash equivalents
beginning of period......................... 320,948 200,368
---------- ----------
Cash and cash equivalents
end of period............................... $ 98,026 $ 128,878
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
Page 7
8
AMERICAN CONSOLIDATED LABORATORIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
I. SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation and disclosures included
The consolidated balance sheet as of September 30, 1995
and the related consolidated statements of operations and
deficit for the three and nine-month periods ended September
30, 1995 and 1994 and the consolidated statements of cash flows
for the nine-month periods ended September 30, 1995 and 1994
are unaudited; in the opinion of management, all adjustments
necessary for a fair presentation of such consolidated
financial statements have been included. Such adjustments
consisted only of normal recurring items. Interim results are
not necessarily indicative of results for a full year.
The financial statements and notes are presented as
permitted by Form 10-QSB, and do not contain certain
information included in the Company's annual consolidated
financial statements and notes.
2. INVENTORIES
September 30
1995 December 31,
Inventories consist of the following: (Unaudited) 1994
------------- ------------
Raw materials................................ $ 156,309 $ 172,988
Work in process.............................. 21,428 36,165
Finished goods............................... 681,032 594,706
------------- ------------
$ 858,769 $ 803,859
============= ============
3. COMMITMENTS
On June 8, 1995, the Company signed a Letter of Intent to purchase
Memphis-based Mid-South Contact Lens, Inc. Mid- South is a leading
manufacturer of rigid gas permeable (RGP) contact lenses and distributor of
soft contact lenses, with operations in Memphis and Nashville, Tennessee,
Little Rock, Arkansas, and New Orleans, Louisiana.
Page 8
9
4. EARNINGS PER SHARE
The Company calculates primary earnings per share including the dilutive
effect of stock options and warrants. Fully diluted earnings per share is not
presented as it is anti-dilutive.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1994
Net sales for the three months ended September 30, 1995 ("1995") compared to
the three months ended September 30, 1994 ("1994") increased 154% to $2,523,295
due entirely to the acquisitions of Carolina Contact Lens, Inc. ("CCL") in
December, 1994 and Philcon in May, 1995 and inclusion of its results for three
months ended September, 1995.
The Company incurred a net loss of $282,260 for the 1995 period, compared to
a net profit of $29,279 for the 1994 period. Management attributes the loss
for the current period to: (i) increased general and administrative expenses
related to payroll and travel costs, (ii) new acquisitions related amortization
expenses, (iii) lower margins in the newly acquired soft lens distribution
business, and (iv) expansion of sales force.
Sales of soft contact lenses and lens care products increased 250% in the
1995 period to $1,585,992, compared to $453,000 for the 1994 period. The
increase in sales is due mainly to the acquisitions of CCL and Philcon.
Sales of rigid gas permeable ("RGP") contact lenses increased by 74% in the
1995 period to $937,303, compared to $539,000 for the 1994 period. This
increase in sales is due mainly to the acquisitions of CCL and Philcon. In
addition, the Company continues to experience a decline in one segment of its
RGP products due to the decline of contract manufacturing orders from a
contract manufacturing customer.
1995 gross profit was $977,960, or 39% of sales, compared to $532,305, or
54% of sales for the 1994 period. While gross profits will continue to
increase in absolute terms, the growing impact of distributed soft lenses and
their correspondingly lower gross margins may lead to lower gross margin
percentages in future periods. The Company's goal is to manage this business
efficiently with sophisticated order entry, order fulfillment, and shipping
procedures so as to maximize net profits.
Selling expenses increased 234% in the 1995 period to $333,396 from $99,752
in 1994, as a result of the CCL and Philcon acquisitions. General and
administrative expenses increased 129% in 1995 to $831,683 compared to $362,908
in 1994. This increase is attributable to CCL and Philcon integration related
expenses, payroll and travel expenses, and acquisitions related amortization
expense.
Interest expense increased to $36,876 in 1995 from $19,342 in 1994 due to
additional borrowings related to the CCL and Philcon acquisitions.
Page 9
10
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1995 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30,1994
Net sales for the nine months ended September 30, 1995 ("1995") compared to
the nine months ended September 30, 1994 ("1994") increased 144% to $7,352,936
due entirely to the acquisitions of Carolina Contact Lens, Inc. ("CCL") in
December, 1994 and inclusion of its results for the full 1995 period, and
Philcon in May and inclusion of its results for May thru September, 1995.
The Company incurred a net loss of $485,621 for the 1995 period, compared to
a net profit of $103,918 for the 1994 period. Management attributes the loss
for the current period to: (i) increased general administrative expenses
related to payroll and travel costs, (ii) new acquisitions related amortization
expenses, (iii) lower margins in the newly acquired soft lens distribution
business, and (iv) expansion of sales force.
Sales of soft contact lenses and lens care products increased 262% in the
1995 period to $4,907,067, compared to $1,354,000 for the 1994 period. The
increase in sales is due mainly to the acquisitions of CCL and Philcon.
Sales of rigid gas permeable ("RGP") contact lenses increased by 48% in the
1995 period to $2,445,869, compared to $1,651,000 for the 1994 period. This
increase in sales in due mainly to the acquisitions of CCL and Philcon. In
addition, the Company experienced a decline in one segment of its RGP products
due to the decline of contract manufacturing orders from a contract
manufacturing customer.
1995 gross profit was $2,616,163, or 36% of sales, compared to $1,572,316,
or 52% of sales for the 1994 period. While gross profits will continue to
increase in absolute terms, the growing impact of distributed soft lenses and
their correspondingly lower gross margins may lead to lower gross margin
percentages in future periods. The Company's goal is to manage this business
efficiently with sophisticated order entry, order fulfillment, and shipping
procedures so as to maximize net profits.
Selling expenses increased 133% in the 1995 period to $748,819 from $322,067
in 1994, as a result of the CCL and Philcon acquisitions. General and
administrative expenses increased 112% in 1995 to $2,135,311, compared to
$1,006,910 in 1994. This increase is attributable to CCL and Philcon
integration related expenses, payroll and travel expenses, and acquisitions
related amortization expense.
Interest expense increased to $109,831 in 1995 from $62,577 in 1994 due to
the additional borrowings related to the CCL and Philcon acquisitions.
Page 10
11
FINANCIAL CONDITION
Cash provided by operating activities during the 1995 period totaled
$31,295, compared to cash provided of $205,521 in 1994. For the 1995 period,
cash and cash equivalents decreased $222,922 to a period end balance of
$98,026.
Working capital at September 30, 1995 was approximately $497,985, compared
to an $18,000 deficit at December 31, 1994. Tullis-Dickerson Capital Focus,
L.P. ("TDCFLP") extended their $800,000 secured convertible term promissory
note to long-term. This was partially offset by a $125,000 note payable to
Joseph Kelly for the Philcon acquisition. A mortgage on the Lincoln property
was completed for $175,000.
The $250,000 of long-term convertible subordinated promissory notes payable
to CCL sellers were converted to common stock in June, 1995.
The Company continues to aggressively negotiate with various lenders to
provide financing to pay off maturing obligations, and put in place a credit
facility for working capital and future acquisition requirements.
On May 1, 1995, the Company completed its previously announced acquisition
of the business and assets of Philcon Laboratories, Inc. This acquisition will
bring annualized Company sales to over $10 million. The Company anticipates
making additional acquisitions of other regional contact lens labs. Consistent
with the Company's focus on the manufacturing of RGP lenses and distribution of
soft lenses manufactured by others; on January 5, 1995, the Company created a
subsidiary, Salvatori Ophthalmics Manufacturing Corporation ("SOMC"), to
encompass all of its soft contact lens manufacturing operation in Sarasota,
Florida. Management anticipates that it may divest SOMC if it finds an
interested buyer.
Management believes that achievement of new financing and additional
acquisitions will result in increased sales and improved liquidity. However,
no assurance can be given that the financing will be obtained or that
additional acquisitions will be consummated.
Page 11
12
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 Consolidated Laboratories, Inc.
Date: November 16, 1995 By: /s/Wayne Upham Smith
----------------------- --------------------------
Wayne Upham Smith
Chairman & Chief Executive
Officer
Page 12
13
EXHIBIT INDEX
27 - Financial Data Schedule (for SEC use only)