<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[_] TRANSITION PERIOD PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File Number:
BORON, LEPORE & ASSOCIATES, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 22-2365997
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
17-17 Route 208 North, Fair Lawn, New Jersey 07410
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(Address of principal executive offices) (Zip Code)
(201) 791-7272
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(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, and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
As of April 28, 1998, there were outstanding 10,887,411 shares of Common Stock,
of the registrant.
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FORM 10-Q
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CONTENTS
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PAGE
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PART I - ITEM 1:
FINANCIAL STATEMENTS
Balance Sheets at March 31, 1998 (unaudited) and
December 31, 1997............................................. 1
Statements of Operations for the Three Months
Ended March 31, 1998 and 1997 (unaudited)..................... 2
Statements of Cash Flows for the Three Months ended
March 31, 1998 and 1997 (unaudited)........................... 3
Notes to Financial Statements ................................ 4
ITEM 2:
Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 5
PART II - OTHER INFORMATION
Item 1: Legal Proceedings.................................... 11
Item 2: Changes in Securities................................ 11
Item 3: Defaults in Senior Securities........................ not applicable
Item 4: Submission of Matters to a Vote of Security Holders.. not applicable
Item 5: Other Information.................................... not applicable
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedules
(b) Reports on Form 8-K
There have been no reports on Form 8-K for the quarter
for which this form on Form 10-Q is being filed.
SIGNATURES
EXHIBIT INDEX
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BORON, LEPORE & ASSOCIATES, INC.
BALANCE SHEETS
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<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
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(unaudited)
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ASSETS
Current assets:
Cash and cash equivalents $ 16,631,864 $ 24,015,554
Accounts receivable, net 35,207,755 21,764,173
Prepaid expense and other current assets 3,304,702 729,559
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Total current assets 55,144,321 46,509,286
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Furniture, fixtures and equipment, at cost, net of accumulated
depreciation of $1,069,059 at March 31, 1998 and $848,732
at December 31, 1997 6,353,859 4,454,023
Intangibles 9,086,729 20,250
Other assets 185,797 72,921
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Total assets $ 70,770,706 $ 51,056,480
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 15,692,021 $ 9,729,766
Deferred revenue 13,023,926 6,245,196
Billings in excess of costs 629,500 729,500
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Total current liabilities 29,345,447 16,704,462
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Deferred income taxes 2,559,000 1,509,000
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Commitments and contingencies
Stockholders' equity
Common stock, $.01 par value, 50,000,000 shares authorized;
15,087,410 issued and 10,887,411 outstanding at March 31,
1998; 14,947,978 issued and 10,747,979 outstanding at
December 31, 1997 150,875 149,480
Treasury stock, at cost, 4,199,999 shares at March 31,
1998, and December 31, 1997 (24,349,992) (24,349,992)
Additional paid-in capital 68,323,819 64,176,975
Accumulated deficit (5,258,443) (7,133,445)
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Total stockholders' equity 38,866,259 32,843,018
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Total liabilities and stockholders' equity $ 70,770,706 $ 51,056,480
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE BALANCE SHEETS.
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BORON, LEPORE & ASSOCIATES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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1998 1997
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Revenues $32,153,876 $13,672,863
Cost of sales 23,756,673 9,736,739
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Gross profit 8,397,203 3,936,124
Selling, general and
administrative expenses 5,780,408 2,249,522
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Operating income 2,616,795 1,686,602
Interest (income) expense, net (308,207) 409,104
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Income before income taxes 2,925,002 1,277,498
Provision for income taxes 1,050,000 400,000
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Net Income $ 1,875,002 $ 877,498
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Net income per share - basic $ 0.17 $ 0.20
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Weighted average common
shares outstanding - basic 10,769,416 2,736,384
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Net income per share - diluted $ 0.17 $ 0.12
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Weighted average common and
common equivalent shares
outstanding - diluted 11,173,588 7,403,048
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</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
<PAGE>
BORON, LEPORE & ASSOCIATES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<CAPTION>
Three Months Ended
MARCH 31,
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1998 1997
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CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income................................................... $ 1,875,002 $ 877,498
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization............................. 232,826 53,934
Deferred income taxes..................................... 1,050,000 400,000
Changes in operating assets and liabilities:
Increase in accounts receivables, net.................... (8,615,207) (1,708,942)
Increase in prepaid expenses
and other current assets................................. (2,548,830) (78,742)
Increase in other assets.................................. (105,628) (1,391)
Increase (decrease) in accounts payable
and accrued expenses..................................... 5,106,861 (6,046,034)
Increase in deferred revenue
and billings in excess of costs.......................... 2,726,569 1,128,518
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Net cash used in operating activities (278,407) (5,375,159)
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CASH FLOWS FROM INVESTING
ACTIVITIES:
Purchases of furniture, fixtures and
equipment................................................... (2,014,364) (86,664)
Acquisitions, net of acquired cash ........................... (5,091,652) -
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Net cash used in investing activities.................... (7,106,016) (86,664)
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CASH FLOWS FROM FINANCING
ACTIVITIES:
Repayments of revolving line of credit..................... - (1,000,000)
Proceeds from the issuance of
common stock............................................... 733 35,768
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Net cash provided by (used in)
financing activities..................................... 733 (964,232)
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Net decrease in cash..................................... (7,383,690) (6,426,055)
CASH AND CASH EQUIVALENTS,
beginning of period......................................... 24,015,554 7,175,648
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CASH AND CASH EQUIVALENTS, end of
period...................................................... $16,631,864 $ 749,593
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SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the period for:
Interest.................................................... $ - $ 402,000
Taxes....................................................... $ 120,000 $ -
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The accompanying notes are an integral part of these financial statements.
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BORON, LEPORE & ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
(1) DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION:
Boron, LePore & Associates, Inc. (the ''Company'' or ''BLP'') provides
outsourced promotional, marketing, educational and field sales force logistics
services to the pharmaceutical industry.
The accompanying financial statements are unaudited and have been prepared in
accordance with generally accepted accounting principles. The foregoing
financial information reflects all adjustments which are, in the opinion of
management, necessary for a fair presentation of the results for the periods
presented. All such adjustments are of a normal, recurring nature. These
results, however, are not necessarily indicative of the results to be expected
for the full fiscal year. The financial statements should be read in
conjunction with the summary of significant accounting policies and notes to
financial statements contained in the Company's Form 10-K as filed with the
Securities and Exchange Commission.
(2) EARNINGS PER SHARE
In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings per Share", the following table reconciles income and share
amounts used to calculate basic and diluted earnings per share.
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<CAPTION>
Three Months Ended
March 31
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1998 1997
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Numerator:
Net Income - Diluted $ 1,875,002 $ 877,498
Less dividends accrued on Convertible
Participating Preferred stock - 332,000
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Net income - Basic $ 1,875,002 $ 545,498
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Denominator:
Weighted average number of common shares
Outstanding - Basic 10,769,416 2,736,384
Incremental shares from assumed conversions of options 404,172 -
Convertible Participating Preferred Stock - 4,666,664
Weighted average number of common shares
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Outstanding - Diluted 11,173,588 7,403,048
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Earnings per share - Basic $ 0.17 $ 0.20
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Earnings per share - Diluted $ 0.17 $ 0.12
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(3) ACQUISITIONS
In March 1998, the Company purchased substantially all of the assets and assumed
certain liabilities of Strategic Implications International, Inc., a Maryland
corporation. The purchase price was $4,300,000 in cash and approximately
137,000 shares of the Company's common Stock. In addition, the Company may be
required to pay certain contingent payments based on revenue goals related to
the calendar year subsequent to the date of the acquisition. The acquisition
has been accounted for using the purchase method of accounting. The excess of
purchase price over net assets acquired was estimated to be approximately
$8,300,000 and will be amortized over twenty years.
In January 1998, the Company purchased certain assets from Decision Point, Inc.,
an Illinois corporation. The purchase price was $800,000 in cash, subject to
adjustment upward or downward, based on certain revenue and pre-tax earnings
goals related to the calendar year subsequent to the date of the acquisition.
The acquisition has been accounted for using the purchase method of accounting.
The excess of purchase price over net assets acquired, estimated to be $800,000,
will be amortized over twenty years.
In May 1998, the Company entered into an agreement to purchase substantially all
of the assets and assume certain liabilities of Medical Education Systems, Inc.,
a Pennsylvania corporation ("MES"). The purchase price is $10,000,000 in cash
and 160,103 shares of common stock of the Company. In addition, the Company may
be required to pay up to $10,000,000 in contingent cash payments based on
certain operating income goals of the acquired business during the twelve-month
period subsequent to the acquisition date. The acquisition is expected to be
closed during the second quarter of 1998. The acquisition will be accounted for
using the purchase method of accounting with the resulting goodwill being
amortized over twenty years. There can be no assurance that the acquisition of
MES will be accomplished on the terms set forth above, or at all.
Item 2:
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
BLP provides outsourced promotional, marketing, educational and field sales
force logistics services to the pharmaceutical industry. Substantially all of
the Company's customers are large pharmaceutical companies seeking to
communicate their messages to physicians and other healthcare professionals on a
cost-effective basis. The Company's objective is to enhance its position as a
leading provider of peer-to-peer and other meetings and to continue to expand
its array of other promotional, marketing, educational and field sales force
logistics services.
Following several years of relatively modest revenue growth, BLP's revenues grew
significantly from 1995 to 1996 and then again from 1996 to 1997. Revenues also
grew significantly in the first quarter of 1998 as compared to the first quarter
of 1997. This growth has resulted from increased business with existing
customers, the addition of
<PAGE>
new customers and the expansion of services offered. The Company believes that
the increase in business with existing customers and the addition of new
customers reflect increased recognition of peer-to-peer meeting programs as an
effective promotional technique and increased levels of promotional, marketing
and educational spending in the pharmaceutical industry. Principal elements of
the Company's growth strategy are further enhancing and expanding its service
offerings, continuing to increase business with existing customers and obtaining
new customers. As part of this strategy, over the last two years, the Company
has expanded its portfolio of services to include symposia, medical education,
product marketing, teleservices, contract sales and field sales force logistics
services. During 1997, in connection with this expansion of services, the
Company opened a new teleservice center in Norfolk, Virginia in July and
established a contract sales organization in August. In addition, in late 1997,
the Company began forming a field sales force logistics organization and, in
March 1998, the Company signed a contract with a large pharmaceutical company to
provide field sales force logistics services for up to a two-year period. Such
services will include meeting planning, event coordination and other services.
The contract provides for a management fee component and a fee-for-service
component. The management fee for the first year is fixed and will represent
substantial revenue in 1998. The management fee for the second year is subject
to future negotiation. The fee-for-service component is dependent upon the level
of services provided. The Company believes field sales force logistics is a
substantial, emerging business opportunity and that the Company's historical
expertise and ability to invest in technology provide it with a strategic
advantage. However, there can be no assurance that the Company will be able to
obtain additional field sales force logistics contracts, that the existing
contract will be extended beyond the second year or that the management fee for
such second year will be negotiated on terms acceptable to the Company (which
failure to so negotiate the management fee would result in the termination of
the contract at the end of the first year). Also in the first quarter of 1998,
the Company acquired a continuing medical education company which will be
operated as a separate division and also entered into its second contract to
provide contract sales services. In addition, in May 1998, the company entered
into an agreement to acquire a medical education and sales training company.
Such acquisition is anticipated to close during the second quarter of 1998.
Although revenues from the Company's peer-to-peer meeting business grew from
$20.6 million in 1995 to $33.4 million in 1996 to $45.1 million in 1997, the
Company does not anticipate that future growth of revenues, if any, from this
line of business will continue at such an accelerated rate. In addition, certain
of BLP's newer services, particularly symposia and field sales force logistics,
have lower gross margin percentages than the Company's historical peer-to-peer
business. Furthermore, the initial costs related to the Company's new
teleservice center and new contract sales organization, as well as the continued
development and implementation costs of the Company's technology enhancement
efforts and the establishment and build-out of its field sales force logistics
organization, will continue to negatively impact the Company's near-term
financial performance. The Company anticipates that, due to these costs and an
anticipated increase in the proportion of symposia and field sales
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force logistics revenue, its operating profit as a percentage of revenues in
1998 will be less than that achieved in 1997. The Company's objective is to
maintain and enhance its operating profit through efficiency efforts and
leveraging its operating expenses by increasing revenues. However, the Company's
operating margins could be adversely affected if its efforts to enhance the
profitability of its services are not successful, the proportion of symposia or
field sales force logistics revenue to total revenues increases more than
anticipated, total revenues do not grow sufficiently to fully leverage operating
expenses or the costs associated with the teleservice center, contract sales
organization, field sales force logistics organization or technology enhancement
efforts are greater than anticipated.
RESULTS OF OPERATIONS
The following table sets forth as a percentage of revenues certain items
reflected in the Company's Statement of Operations for the periods indicated.
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Three Months Ended
March 31,
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1998 1997
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Revenues 100.0% 100.0%
Cost of sales 73.9 71.2
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Gross profit 26.1 28.8
Selling, general and administrative expenses 18.0 16.5
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Operating income 8.1 12.3
Interest (income) expense, net (1.0) 3.0
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Income before provision for income taxes 9.1 9.3
Provision for income taxes 3.3 2.9
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Net income 5.8% 6.4%
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</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Revenues increased $18.5 million, or 135%, from $13.7 million in the three month
period ended March 31, 1997 to $32.2 million in the three month period ended
March 31, 1998. This growth primarily resulted from a $7.2 million, or 56%,
increase in conferencing services revenue, the addition of $6.9 million of
revenue from field sales force logistics services and the addition of $3.4
million of revenue from contract sales services. The increase in the Company's
conferencing services revenue was comprised of a $7.9 million increase in
symposia services revenue partially offset by a $0.7 million decrease in revenue
from peer-to-peer meetings and other conferencing
<PAGE>
services. Such decrease in peer-to-peer and other conferencing services revenue
was primarily related to the Company's relocation of its main telerecruiting
function from Fair Lawn, New Jersey to Norfolk, Virginia during the first
quarter of 1998. The field sales force logistics revenue was comprised of a $3.9
million fee-for-service component, a $2.0 million management fee component and
$1.0 million development fee component. In addition, revenues from teleservices,
educational services and product marketing services increased $1.0 million, on a
combined basis, in the three month period ended March 31, 1998 as compared to
the three month period ended March 31, 1997.
Cost of sales increased $14.0 million, or 144%, from $9.7 million in the three
month period ended March 31, 1998 to $23.8 million in the three month period
ended March 31, 1997. Cost of sales as a percentage of revenues increased from
71.2% in the prior year period to 73.9% in the current year period. The
increase in cost of sales as a percentage of revenues was primarily due to the
increased proportion of symposia services revenue to total revenues and the
introduction of field sales force logistics services, both of which have a lower
average gross profit than the Company's historical peer-to-peer and other
conferencing business due to their higher proportion of production costs which
are passed through to the customer with little or no markup.
Selling, general and administrative expenses increased $3.5 million, or 157%,
from $2.3 million in the three month period ended March 31, 1997 to $5.8 million
in the three month period ended March 31, 1998. This increase was due to the
cost of personnel additions of approximately $1.8 million and an increase in
outside services, rent, depreciation and other operating costs of approximately
$1.7 million incurred to support the Company's growth. Selling, general and
administrative expenses increased as a percentage of revenues from 16.5% in the
prior year period to 18.0% in the current year period as the increase in
selling, general and administrative expenses was partially offset by the
increase of revenues.
Operating income increased $0.9 million, or 55%, from $1.7 million in the three
month period ended March 31, 1997 to $2.6 million in the three month period
ended March 31, 1998. Operating income as a percentage of revenues decreased
from 12.3% in the prior year period to 8.1% in the current year period. The
decrease in operating income as a percentage of revenues was due to the
aforementioned increases in cost of sales and selling, general and
administrative expenses as a percentage of revenues.
Interest expense, net of interest income, was $409,000 in the three month period
ended March 31, 1997 compared to $308,000 of interest income, net of interest
expense, in the three month period ended March 31, 1998. This change was due to
(i) a decrease in interest expense in the current year period as compared to the
prior year period related to the Company's full repayment of its bank debt
subsequent to the period ended March 31, 1997 and (ii) an increase in interest
income in the current year period as compared to the prior year period related
to the Company's higher average cash balance in the current year period as
compared to the prior year period.
The provision for income taxes for the three month periods ended March 31, 1998
and March 31, 1997 reflect estimated Federal and state income tax expense
partially offset by the utilization of benefits from net operating losses
previously not recognized.
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LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had $25.8 million in net working capital, a
decrease of $4.0 million from December 31, 1997. The Company's primary sources
of liquidity as of March 31, 1998 consisted of cash and cash equivalents,
accounts receivable and borrowing availability under a revolving credit
facility.
The Company's accounts receivable turnover averaged 99 and 84 days for the
periods ended March 31, 1998 and December 31, 1997. The allowance for doubtful
accounts was $0.5 million at March 31, 1998 and $0.4 million at December 31,
1997.
During the three months ended March 31, 1998, the Company used $0.3 million
in operating activities and $7.1 million in investing activities. The $7.1
million of cash used in investing activities was comprised of $5.1 used for
business acquisitions and $2.0 used to purchase computer, telephone and office
equipment.
Primarily in connection with the Company's implementation of a new
management information system, the establishment of a field sales force
logistics organization and the continued development of its teleservice center
in Norfolk, Virginia, the Company anticipates capital expenditures in 1998 to
amount to approximately $5.0 million.
The Company's credit facility (the ''Credit Facility'') provides for a $5.0
million revolving line of credit, which is secured by the Company's assets. As
of December 31, 1997 and March 31, 1998, no amounts were outstanding under the
Credit Facility. The Credit Facility contains various financial and reporting
covenants. In July and November 1997 and May 1998, certain covenants in the
Credit Facility were amended to allow for the anticipated increases in capital
expenditures related to its teleservice center in Norfolk, Virginia.
In January 1998, the Company purchased certain assets from Decision Point,
Inc., an Illinois corporation. The purchase price was $800,000 in cash, subject
to adjustment upward or downward based on certain revenue and pre-tax earnings
goals in the calendar year subsequent to the date of the acquisition. The
acquisition has been accounted for using the purchase method of accounting. The
excess of purchase price over net assets acquired, estimated to be $800,000,
will be amortized over twenty years. The Company does not anticipate a material
change in cash flows from operations related to this acquired business.
In March 1998, the Company purchased substantially all of the assets and
assumed certain liabilities of Strategic Implications International, Inc., a
Maryland corporation. The purchase price was $4,330,000 in cash and
approximately 137,000 shares of the Company's common stock. In addition, the
Company may be required to pay certain contingent payments based on certain
revenue goals related to the calendar year subsequent to the date of the
acquisition. The acquisition has been accounted for using the purchase method of
accounting. The excess of purchase price over net assets
<PAGE>
acquired is estimated to be approximately $8,300,000 and will be amortized over
twenty years. The Company does not anticipate a material change in cash flows
from operations related to this acquired business.
In March 1998, the Company signed a contract with a large pharmaceutical
company to provide field sales force logistics services for up to a two-year
period. Such services will include meeting planning, event coordination and
other services. Due to the timing of cash receipts and disbursements related to
this contract, the Company anticipates that cash flows from operations will be
negatively impacted during the first half of 1998 and positively impacted during
the second half of the year.
In April 1998, the Company announced that it had filed a registration
statement with the Securities and Exchange Commission relating to a proposed
public offering of 3,900,000 shares of Common Stock, of which 2,400,000 shares
are being sold by selling stockholders and 1,500,000 shares, as well as up to
585,000 shares which may be sold pursuant to the Underwriters' over-allotment
option, are being sold by the Company (the "Secondary Offering"). The Secondary
Offering is expected to be completed during the second quarter of 1998. The net
proceeds of the Secondary Offering will be used for working capital and other
corporate purposes, including potential acquisitions. Funds from the Secondary
Offering will provide additional flexibility and reduce the potential need to
incur debt in the future as the Company pursues future acquisitions while it
also meets the anticipated cash flow requirements associated with growing its
existing lines of business. There can be no assurances that such Secondary
Offering will occur.
In May 1998, the Company entered into an agreement to purchase
substantially all of the assets and assume certain liabilities of Medical
Education Systems, Inc., a Pennsylvania corporation ("MES"). The purchase price
is $10.0 million in cash and 160,103 shares of Common Stock of the Company. In
addition, the Company may be required to pay up to $10.0 million in contingent
cash payments based on certain operating income goals of the acquired business
during the twelve-month period subsequent to the acquisition date. The
acquisition is expected to close during the second quarter of 1998. The
acquisition will be accounted for using the purchase method of accounting with
the resulting goodwill amortized over twenty years. There can be no assurance
that the acquisition of MES will be accomplished on the terms set forth above,
or at all.
YEAR 2000
In prior years, certain computer programs were written using two digits
rather than four to define the applicable year. These programs were written
without considering the impact of the upcoming change in the century and may
experience problems handling dates beyond the year 1999. The Company plans to
modify certain portions of its software so that its computer systems will
function properly with respect to dates in the year 2000 and thereafter. The
total cost of compliance and its effect on the Company's
<PAGE>
future results is currently being determined as part of the conversion planning,
although the Company does not believe such cost will be material. The Company
anticipates completion of the conversion process by December 31, 1998. There can
be no assurance that the timing and cost estimates related to the year 2000
conversion will be achieved. Actual results could differ materially from those
anticipated.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, ''Reporting Comprehensive Income''
(''SFAS 130'') and Statement of Financial Accounting Standards No. 131,
''Disclosures about Segments of an Enterprise and Related Information'' (''SFAS
131''). SFAS 130 establishes standards for reporting and display of
comprehensive income and its components in a full set of general-purpose
financial statements and requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. The adoption of this pronouncement had no impact on
the Company's financial position or results of operations as of March 31, 1998.
SFAS 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to stockholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers. SFAS 131 is required to be adopted for
the Company's 1998 year-end financial statements. The Company is currently
evaluating the impact, if any, of the adoption of this pronouncement on the
Company's existing disclosures.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The statements contained in this report which are not historical facts are
forward-looking statements. Because such statements include risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could cause actual
results to differ materially from those expressed or implied by such forward-
looking statements include, but are not limited to the Company's: dependence on
the pharmaceutical industry, customer concentration, reliance on new services
for continued growth, management of growth, acquisition risks, variation in
quarterly operating results, regulation, exposure in pending and potential
litigation exposure and reliance on certain personnel, and those risks and
uncertainties contained under the heading "Risk Factors" on page 6 of the
Company's Registration Statement on Form S-1, as amended, as filed with the
Securities and Exchange Commission.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Thomas S. Boron, a former stockholder and officer of the Company, filed a
complaint on March 27, 1998 in the United States District Court for the District
of New Jersey against the Company, Patrick G. LePore and Gregory F. Boron,
senior officers and directors of the Company, and Michael W. Foti and
Christopher J. Sweeney, former officers of and current consultants to the
Company, alleging, among other matters, securities and common law fraud and
breach of contract in connection with the settlement of contractual arrangements
with Thomas S. Boron in December 1996. The damages sought by Thomas S. Boron are
not stated in the complaint. The Company's By-laws provide for mandatory
indemnification of the Company's officers and former officers to the fullest
extent authorized by the Delaware General Corporation Law against all expenses
incurred in proceedings in which an officer or former officer is involved as a
result of serving or having served as an officer, director or employee of the
Company. The Company believes the allegations of Thomas S. Boron are without
merit and intends to contest them vigorously. The Company believes that the
matter may involve significant litigation-related expenses but that it will not
have a material adverse effect on its financial condition or results of
operations; there can be no assurance, however, that this will be the case.
Item 2. Changes in Securities
(c) In March 1998, pursuant to an Asset Purchase Agreement with
Strategic Implications International, Inc. ("SII"), the Company
issued 137,052 shares of its Common Stock to SII, along with
$4,330,000, in exchange for substantially all of the assets of
SII, in reliance upon the exemption from registration under
Section 4(2) of the Securities Act.
(d) Use of Proceeds from initial public offering.
The Company's use of proceeds from its initial public offering, as reported
in its Form 10-K for the year ended December 31, 1997 as filed with the SEC, is
updated as follows:
Implementation of management information system and enhancement of overall
technological capabilities--$2,260,000, capital expenditures for teleservice
center in Norfolk, Virginia--$1,216,000.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to Vote of Security-Holders
Not applicable.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K. None.
<PAGE>
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.
BORON, LEPORE & ASSOCIATES, INC.
Date: May 5, 1998 By: /s/ Patrick G. LePore
---------------------------------
Patrick G. LePore
Chief Executive Officer, President
and Chairman of the Board
(Principal Executive Officer)
Date: May 5, 1998 By: /s/ Martin J. Veilleux
---------------------------------
Martin J. Veilleux
Chief Financial Officer, Secretary
and Treasurer (Principal Financial
and Accounting Officer)
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- ----------------------------------------------
27 Financial Data Schedules
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AT MARCH 31, 1998 AND STATEMENTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 16,631,864
<SECURITIES> 0
<RECEIVABLES> 35,657,755
<ALLOWANCES> 450,000
<INVENTORY> 0
<CURRENT-ASSETS> 55,144,321
<PP&E> 7,422,918
<DEPRECIATION> 1,069,059
<TOTAL-ASSETS> 70,770,706
<CURRENT-LIABILITIES> 29,345,447
<BONDS> 0
0
0
<COMMON> 150,875
<OTHER-SE> 38,715,384
<TOTAL-LIABILITY-AND-EQUITY> 70,770,706
<SALES> 0
<TOTAL-REVENUES> 32,153,876
<CGS> 0
<TOTAL-COSTS> 23,756,673
<OTHER-EXPENSES> 5,780,408
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (308,207)
<INCOME-PRETAX> 2,925,002
<INCOME-TAX> 1,050,000
<INCOME-CONTINUING> 1,875,002
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,875,002
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
