<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1996 Commission File Number 1-6787
HEALTH-CHEM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-2682801
(State of Incorporation) (I.R.S. Employer Identification No.)
1212 Avenue of the Americas, 24th Floor, New York, NY 10036
(Address of principal executive offices)
Registrant's Telephone Number: 212-398-0700
The registrant 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 has been subject to such filing requirements for the past 90 days.
As of October 31, 1996, 7,982,424 shares of Common Stock, $.01 Par Value were
outstanding.
Page 1<PAGE>
<PAGE>
<TABLE>
HEALTH-CHEM CORPORATION Part I
CONSOLIDATED BALANCE SHEETS Item 1
(In thousands) Page 2
<CAPTION>
September 30, December 31,
ASSETS 1996 1995
<S> (Unaudited)
CURRENT ASSETS <C> <C>
Cash and cash equivalents $ 153 $ 259
Accounts receivable, net 5,820 4,621
Inventories (Note 3) 7,959 9,070
Other current assets 3,032 1,886
Total Current Assets 16,964 15,836
PROPERTY, PLANT & EQUIPMENT
Land and buildings 5,714 5,713
Other Property, Plant & Equipment 23,632 21,645
Total Property, Plant & Equipment 29,346 27,358
Less accumulated depreciation & amortization 15,481 14,090
Net Property, Plant & Equipment 13,865 13,268
NON-CURRENT ASSETS
Notes receivable 1,275 1,500
Cash surrender value of life insurance policies 1,359 2,110
Excess of cost over fair value of assets acquired 712 731
Other non-current assets 539 208
Total Non-Current Assets 3,885 4,549
TOTAL ASSETS $34,714 $33,653
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,594 $ 3,689
Accrued expenses and other current liabilities 2,621 2,462
Income taxes payable 570 644
Total Current Liabilities 8,785 6,795
LONG-TERM LIABILITIES
10.375% Convertible Subordinated Debentures 9,500 11,000
Long-term debt 5,818 5,623
Deferred income taxes 0 8
Other long-term liabilities 2,311 1,744
Minority Interest 17 17
STOCKHOLDERS' EQUITY
Convertible special stock 7 7
Common stock 145 145
Additional paid in capital 18,286 18,286
Less stockholder notes receivable <148> <148>
Accumulated deficit <2,324> <2,141>
Subtotal 15,966 16,149
Less treasury stock, at cost <7,683> <7,683>
Total Stockholders' Equity 8,283 8,466
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $34,714 $33,653
<FN>
See Notes to Consolidated Financial Statements.<PAGE>
<PAGE>
</TABLE>
<TABLE>
HEALTH-CHEM CORPORATION Part I
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Item 1
(In thousands, except per share amounts) Page 3
<CAPTION>
For The Nine Months
Ended September 30,
1996 1995
<S> <C> <C>
REVENUE:
Net sales $37,838 $36,009
Cost of goods sold 26,356 25,986
Gross profit 11,482 10,023
OPERATING EXPENSES:
Selling, general and administrative expense 7,173 6,846
Legal expense 2,089 178
Research and development expense 2,082 2,539
Net interest expense 924 1,038
Total operating expenses 12,268 10,601
LOSS FROM OPERATIONS <786> <578>
Other income - net 387 389
LOSS FROM OPERATIONS BEFORE TAXES <399> <189>
Income tax <benefit> provision <211> 63
LOSS BEFORE EXTRAORDINARY GAIN <188> <252>
Extraordinary gain from repurchase of
debentures 5 3
NET LOSS $ <183> $ <249>
Earnings per Common Share (Primary & Fully Diluted)
(Note 4):
Loss before extraordinary gain $ <.02> $ <.03>
Extraordinary gain from repurchase of
debentures .00 .00
NET LOSS PER SHARE $ <.02> $ <.03>
Average number of common and common equivalent
shares outstanding excluding redeemable common
shares (Note 4):
Primary 7,982 7,992
Fully Diluted 7,982 7,994
<FN>
See Notes to Consolidated Financial Statements.
<PAGE>
</TABLE>
<TABLE>
HEALTH-CHEM CORPORATION Part I
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Item 1
(In thousands, except per share amounts) Page 4
<CAPTION>
For The Three Months
Ended September 30,
1996 1995
<S>
REVENUE: <C> <C>
Net sales $11,580 $13,012
Cost of goods sold 7,966 8,901
Gross profit 3,614 4,111
OPERATING EXPENSES:
Selling, general and administrative expense 2,343 2,355
Legal expense 986 61
Research and development expense 673 970
Net interest expense 257 359
Total operating expenses 4,259 3,745
<LOSS> INCOME FROM OPERATIONS <645> 366
Other income - net 183 89
<LOSS> INCOME FROM OPERATIONS BEFORE TAXES <462> 455
Income tax <benefit> provision <196> 186
<LOSS> INCOME BEFORE EXTRAORDINARY GAIN <266> 269
Extraordinary gain from repurchase of
debentures 0 2
NET <LOSS> INCOME $ <266> $ 271
Earnings per Common Share (Primary & Fully Diluted)
(Note 4):
<Loss> income before extraordinary gain $ <.03> $ .03
Extraordinary gain from repurchase of
debentures .00 .00
NET <LOSS> INCOME PER SHARE $ <.03> $ .03
Average number of common and common equivalent
shares outstanding, excluding redeemable
common shares (Note 4):
Primary 7,982 7,988
Fully diluted 7,982 7,988
<FN>
See Notes to Consolidated Financial Statements.
<PAGE>
</TABLE>
<TABLE>
HEALTH-CHEM CORPORATION Part I
CONSOLIDATED CASH FLOW STATEMENTS Item 1
(Unaudited) Page 5
(In thousands)
<CAPTION>
For The Nine Months
Ended September 30,
1996 1995
<S>
Cash was Provided by <Used for>: <C> <C>
OPERATIONS:
Loss before extraordinary gain $ <188> $ <252>
Adjustments to reconcile to net cash <used by>
provided by operations:
Depreciation and amortization 1,457 1,302
Deferred income taxes <203> <104>
Changes in:
Accounts receivable <1,200> <1,171>
Inventories 1,112 1,127
Other current assets <965> <619>
Other noncurrent assets 764 <79>
Accounts payable 1,905 <303>
Accrued expenses and other current liabilities <350> 54
Interest and income taxes payable 110 <463>
Other long term liabilities 505 266
Other, net <4> 11
Net cash provided by <used for> operations 2,943 <231>
INVESTING:
Additions to property, plant and equipment <2,010> <2,007>
Proceeds on disposals of property, plant and equipment 21 11
Payments received on notes receivable 0 71
Net cash used for investing <1,989> <1,925>
FINANCING:
Long-term debt proceeds 14,375 8,067
Long-term debt payments <14,105> <4,669>
Repurchase of convertible subordinated debentures <1,330> <1,584>
Stock options exercised 0 5
Net cash <used for> provided by financing <1,060> 1,819
Net Decrease in Cash and Cash Equivalents <106> <337>
Cash and Cash Equivalents at beginning of period 259 624
Cash and Cash Equivalents at end of period $ 153 $ 287
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 932 $ 945
Income Taxes 170 235
<FN>
See Notes to Consolidated Financial Statements.
<PAGE>
<PAGE>
HEALTH-CHEM CORPORATION Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Item 1
(Unaudited) Page 6
1. Principles of Consolidation
The consolidated financial statements include the accounts of Health-
Chem Corporation ("Health-Chem") and all of its subsidiaries
(collectively the "Company").
The Consolidated Balance Sheet as of September 30, 1996, the
Consolidated Statements of Operations and the Consolidated Cash Flow
Statements for the interim periods ended September 30, 1996 and 1995
have been prepared by the Company, without audit. In the opinion of the
Company, all necessary adjustments, consisting of normal recurring
items, have been made to present fairly the financial position, results
of operations and cash flows at September 30, 1996 and for all periods
presented. Certain amounts included in the consolidated financial
statements relating to prior periods have been reclassified to conform
to the current presentation.
2. Taxes on Income (In thousands) For the Nine Months
Ended September 30,
1996 1995
The income tax <benefit> provision includes:
State and local income taxes $ <91> $ 102
Federal income taxes <117> <38>
Total $ <208> $ 64
Taxes on income are comprised of:
Currently payable $ <5> $ 168
Deferred benefit <203> <104>
Total $ <208> $ 64
Taxes are charged to:
Operations $ <211> $ 63
Extraordinary gain on repurchase of debentures 3 1
Total $ <208> $ 64
A reconciliation of taxes on income to the federal statutory rate is as
follows:
For the Nine Months
Ended September 30,
1996 1995
Tax benefit at statutory rate $ <133> $ <63>
Increase <decrease> resulting from:
Intangibles and officers life insurance
premiums 6 46
State and local taxes, net of federal tax
benefit <10> 66
Settlement of state tax assessments <69> 0
Reversal of valuation allowance <25> 0
Other 23 15
Tax <benefit> provision $ <208> $ 64
<PAGE>
HEALTH-CHEM CORPORATION Part I
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Item 1
(Unaudited) Page 7
3. Inventories (In thousands)
September 30, 1996 December 31, 1995
Raw materials $ 4,156 $ 4,326
Finished goods and work-in-process 3,803 4,744
Total Inventories $ 7,959 $ 9,070
4. Earnings Per Share
Primary and fully diluted earnings per share are based upon the weighted
average number of common and common equivalent shares outstanding.
Shares issuable upon exercise of dilutive stock options are included in
the number of common and common equivalent shares outstanding for 1995.
Subordinated debentures are anti-dilutive for all periods presented.
5. Legal Proceedings
Reference is made to Item 8, Financial Statements, Note 8 of the Notes
to Consolidated Financial Statements in Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995 for a description
of an action in the United States District Court for the District of
Delaware entitled Key Pharmaceuticals Inc. v. Hercon Laboratories
Corporation. A trial in this action was completed on October 10, 1996.
The Court has ordered that all post-trial briefs in this matter shall be
filed by December 6, 1996 at which time oral argument will be scheduled.
<PAGE>
<PAGE>
HEALTH-CHEM CORPORATION Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF Item 2
FINANCIAL CONDITION & RESULTS OF OPERATIONS Page 8
Results of Operations
The following discussion includes certain forward-looking statements. Such
forward-looking statements are subject to a number of factors, including
material risks and uncertainties, including those referred to herein and in
the Company's Reports on Form 10-K and Form 10-Q, which could cause actual
results to differ materially from the forward-looking statements.
Net sales increased $1.8 million, or 5%, for the nine months ended September
30, 1996 as compared to the same period in 1995. The increase is primarily
due to increases in sales of synthetic fabrics, transdermal nitroglycerin
patches and environmental products of $.8 million, $.5 million and $.5
million, respectively. The synthetic fabrics sales increase is primarily due
to higher industrial fabrics sales which includes increased governmental and
agricultural sales. Sales of transdermal nitroglycerin patches, which are
manufactured and marketed by the Company's 90% owned subsidiary Transderm
Laboratories Corporation, increased primarily due to greater demand from
domestic distributors and to higher selling prices. Environmental products
sales increased primarily due to several new insect mating disruptant products
introduced in early 1996.
Net sales decreased $1.4 million, or 11%, for the quarter ended September 30,
1996 as compared to the same period in 1995. The decrease is primarily due to
decreases in sales of synthetic fabrics and transdermal nitroglycerin patches
of $.7 million each. The synthetic fabrics sales decrease is primarily due to
the loss of an industrial fabrics customer at the Company's Pacific Combining
Corporation ("Pacific") subsidiary. Sales of transdermal nitroglycerin
patches decreased primarily due to lower sales to one of the Company's
domestic distributors, which in August 1996 obtained approval from the United
States Food and Drug Administration for the manufacture and sale of its own
nitroglycerin patches. This distributor accounted for approximately 14% of
the Company's sales for the year ended December 31, 1995. In addition to the
expected loss of sales to this distributor, it is anticipated that this
distributor's nitroglycerin patches will compete with the Company's
nitroglycerin patches. Sales to all of the Company's other distributors of
nitroglycerin patches increased during the period, as compared to both the
same period in 1995 and the second quarter of 1996.
Gross profit increased $1.5 million, or 15%, for the nine months ended
September 30, 1996 as compared to the same period in 1995. The increase is
primarily due to increased gross profits for synthetic fabrics and transdermal
nitroglycerin patches of $1.1 million and $.2 million, respectively. Gross
profit as a percentage of net sales recovered from 28% for 1995 to 30% for
1996. In 1995, gross profit as a percentage of sales for the Company's
synthetic fabric products was impaired by additional material costs. The
synthetic fabrics gross profit increase is primarily a result of greater sales
volumes, improved manufacturing variances and lower raw material costs.
Reducing manufacturing variances and lowering raw material costs have been the
primary focus of cost reduction efforts. Transdermal nitroglycerin patches
gross profit increased primarily due to increased domestic sales volumes.
Environmental products gross profit increased primarily due to increased sales
volumes of the new disruptant products.
Gross profit decreased $.5 million, or 12%, for the quarter ended September
30, 1996 as compared to the same period in 1995, primarily due to decreased
gross profits for transdermal nitroglycerin patches of $.6 million caused by
lower domestic sales volumes. Gross profit as a percentage of net sales were
32% and 31% for 1995 and 1996, respectively.
<PAGE> HEALTH-CHEM CORPORATION Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF Item 2
FINANCIAL CONDITION & RESULTS OF OPERATIONS Page 9
Selling, general and administrative expenses increased $.3 million for the
nine months ended September 30, 1996 as compared to the corresponding period
in 1995. The increase is primarily due to higher payroll-related expenses of
$.3 million. Selling, general and administrative expenses were approximately
the same for the quarter ended September 30, 1996 as compared to the same
period in 1995.
Legal expenses for the nine months and quarter ended September 30, 1996
increased $1.9 million and $.9 million, respectively, as compared to the same
periods in 1995. In August 1995, Key Pharmaceuticals, Inc. commenced an
action against the Company's Hercon Laboratories Corporation ("Hercon")
subsidiary relating to some of Hercon's improved transdermal nitroglycerin
products. The increased legal expenses are primarily due to the costs related
to the defense of this action, including preparation for trial, which was
commenced at the end of September 1996.
Research and development expense for the nine months and quarter ended
September 30, 1996 decreased $.5 million and $.3 million, respectively. Lower
outside testing and clinical material expenses related to pharmaceutical
products research contributed to the decrease. The Company expects such
decreases to continue through the fourth quarter of 1996.
Net interest expense for the nine months and quarter ended September 30, 1996
decreased $114,000 and $102,000, respectively, as compared to the same periods
in 1995 due primarily to capitalized interest related to new equipment under
construction.
Other income for the nine months ended September 30, 1996 was approximately
the same as compared to the same period in 1995. Other income for the quarter
ended September 30, 1996 increased $.1 million as compared to the same period
in 1995 primarily due to a settlement of a lawsuit.
Income from operations before taxes and minority interest for the nine months
and quarter ended September 30, 1996 decreased $.2 million and $.9 million,
respectively, as compared to the same periods in 1995 due primarily to the
factors discussed above. Income tax provision or benefit varies with the
amount of income or loss from operations before income taxes. At September
30, 1996, the tax benefit was increased by adjustments to reserves for a
settlement with a local taxing authority of disputed tax assessments
pertaining to prior years of $69,000 and a reversal of a portion of the
valuation allowance amounting to $25,000 (See Note 2).
The results of operations for the periods ended September 30, 1996 and 1995
are not necessarily indicative of the operating results for the full years.
Liquidity and Capital Resources
The following measures of liquidity are derived from the Company's
Consolidated Financial Statements:
September 30, December 31,
1996 1995
Working Capital (current assets less current
liabilities, in thousands) $8,179 $9,041
Current Ratio (current assets/current
liabilities) 2.0 2.3
Quick Ratio (cash & receivables/current
liabilities) .7 .7
<PAGE>
HEALTH-CHEM CORPORATION Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF Item 2
FINANCIAL CONDITION & RESULTS OF OPERATIONS Page 10
Working capital decreased $.9 million from December 31, 1995 to September 30,
1996 due to a $2.0 million increase in current liabilities, partially offset
by a $1.1 million increase in current assets. Current liabilities have
increased due to an increase in accounts payable of $2.0 million. The
accounts payable increase is primarily due to billings related to legal
expenses and raw material costs. The current asset increase of $1.1 million
consists of increases for accounts receivable and other current assets,
partially offset by a decrease in inventory. Accounts receivable increased
$1.2 million primarily due to maintaining a higher level of sales in each
quarter of 1996 as compared to the fourth quarter of 1995. Inventory
decreased $1.1 million primarily due to improvements made to the material
management system at the Company's Herculite Products, Inc. ("Herculite")
subsidiary and efforts to lower inventory levels at both Herculite and
Pacific.
Cash provided by operations for the nine months ended September 30, 1996 was
$2.9 million as compared to cash used for operations of $.2 million for the
same period in 1995. This increase is primarily due to higher sales volumes
and gross profits for 1996 as compared to 1995. Investing activities for the
nine months ended September 30, 1996 and 1995 used cash of $2.0 million and
$1.9 million, respectively, primarily to fund the Company's tooling and
equipment programs. Financing activities for the nine months ended September
30, 1996 used cash of $1.1 million primarily to reduce debt levels as compared
to the same period in 1995 which provided cash by financing of $1.8 million to
fund cash requirements. In the second quarter of 1996, the Company paid $.2
million to Circa Pharmaceuticals, Inc. (formerly Bolar Pharmaceutical Co.,
Inc.) representing the final portion of a 1993 settlement.
The Company expects to meet $.5 million of debenture interest payments on its
10.375% convertible subordinated debentures each April and October and other
periodic interest payments out of working capital. The required $1.5 million
sinking fund payment on the Company's subordinated debentures due on April 15,
1996 was satisfied by application of $.8 million debentures previously
repurchased, of which $.1 million were purchased in 1996, and by the Company's
redemption of an additional $.7 million of debentures. In market transactions
throughout the nine months of 1996, the Company purchased $.2 million
principal amount of its subordinated debentures for $.2 million and at June
30, 1996, the Company called for redemption $.4 million of its subordinated
debentures. Any debentures acquired in excess of the $1.5 million April 15,
1996 sinking fund requirements may be used to meet the 1997 sinking fund
requirements. Additional debentures may be repurchased and retired or if
debentures are not available for purchase, the Company has an option to call
for redemption the amount required to meet sinking fund requirements.
The Company has not paid cash dividends and does not anticipate paying such
dividends on its common stock in the foreseeable future.
<PAGE>
HEALTH-CHEM CORPORATION Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF Item 2
FINANCIAL CONDITION & RESULTS OF OPERATIONS Page 11
At September 30, 1996, the Company had borrowed $4.6 million on its $6.0
million line of credit from The First National Bank of Maryland ("First
National"). At the Company's option, borrowings under the line of credit bear
interest at the lender's prime rate or the London Inter-Bank Offer Rate. The
weighted average interest rate was 7.4% at September 30, 1996. In addition,
the Company pays a facility fee of 1/4 of 1% on the amount of the unused
credit facility. The loan agreement as amended to date, expires on October
15, 1997 and contains various covenants which, among other things, require the
Company to maintain specified ratios of debt to tangible net worth and fixed
charge coverage, and minimum levels of tangible net worth and limits capital
expenditures. At September 30, 1996 the Company was in compliance with the
covenants, as amended, except for the fixed charge coverage covenant. First
National has granted the Company a waiver for this covenant. The Company is
currently in negotiations with First National to amend and extend the loan
agreement to July 1998. The Company currently anticipates a successful
completion of these negotiations prior to the end of November 1996.
Subsequent to September 30, 1996, the Company paid $.4 million on the line of
credit decreasing the amount borrowed to $4.2 million at October 31, 1996. It
is the Company's practice to utilize the line of credit to fund current
obligations when required and to pay down the line of credit when funds become
available.
At September 30, 1996, Pacific had $1,562,500 outstanding on its term loan
from First National reflecting principal payments of $62,500 in February, May
and August. The term loan requires quarterly principal payments commencing
with the $62,500 in February 1996, increasing to $87,500 in 1997 and $95,833
from 1998 through November 2000. Unless Pacific elects otherwise in
accordance with the loan documents, borrowings under the term loan will bear
interest at the lender's prime rate plus .375%. The weighted average interest
rate was 7.3% at September 30, 1996. The term loan, which expires on November
15, 2000, is subject to various financial covenants which are similar to the
covenants of the line of credit agreement. At September 30, 1996 the Company
was in compliance with the covenants, as amended, except for the fixed charge
coverage covenant. First National has granted the Company a waiver for this
covenant. The Company is currently in negotiations with First National to
amend and extend the loan agreement to July 1998. The Company currently
anticipates a successful completion of these negotiations prior to the end of
November 1996.
The borrowing base for the line of credit and the term loan combined is
limited to the sum of 80% of eligible accounts receivable and 35% of eligible
inventory and calculated at the end of each month. For each month of the
quarter ended September 30, 1996 the eligible amount has been less than the
aggregate maximum credit amount. The maximum credit amounts have ranged from
$7,562,500 to $7,625,000 while the eligible amounts have ranged from 93% to
97%. Since July 1994, this line has been 100% available except on December
31, 1995 and June through September 1996. Borrowings under both the line of
credit and the term loan are collateralized by a pledge of substantially all
of the assets of the Company with the exception of real estate.
The Company's debt to equity ratio was 3:1 at September 30, 1996 and at
December 31, 1995.
<PAGE>
<PAGE>
HEALTH-CHEM CORPORATION Part I
MANAGEMENT'S DISCUSSION AND ANALYSIS OF Item 2
FINANCIAL CONDITION & RESULTS OF OPERATIONS Page 12
Management believes anticipated expenditures in 1996 such as capital
expenditures, debenture repurchasing, research and development costs and other
operating expenses will be funded with cash generated from operations,
supplemented by the utilization of the line of credit. Capital expenditures
will primarily consist of manufacturing tooling and equipment and leasehold
improvements. The terms of the Company's line of credit with First National
have been amended to extend the limit on capital expenditures for 1996 from
$1.2 million to $2.2 million. At September 30, 1996, the Company had expended
$2.0 million for capital expenditures for property, plant and equipment in
1996 primarily for building a new production line for its Pacific subsidiary.
<PAGE>
<PAGE>
Part II
Item 1
Page 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Item 3, Legal Proceedings, in Registrant's Annual Report
on Form 10-K for the fiscal year ended December 31, 1995 for a description of
an action in the United States District Court for the District of Delaware
entitled Key Pharmaceuticals Inc. v. Hercon Laboratories Corporation. A trial
in this action was completed on October 10, 1996. The Court has ordered that
all post-trial briefs in this matter shall be filed by December 6, 1996 at
which time oral argument will be scheduled.
Item 5. Other Information
On August 2, 1996, the Company commenced a subscription rights offering (the
"Offering") to record holders of Common Stock other than Marvin M. Speiser,
the Company's President and Chairman of the Board, pursuant to Registration
Statement No. 333-02411. The Offering expired on September 16, 1996. A total
of 952,520 shares of Common Stock were subscribed for at a subscription price
of $1.10 per share. As a result of the Offering, the Company's public float
was increased by more than 20% from approximately 4.4 million shares to
approximately 5.4 million shares. The number of shares subscribed for
represented more than 75% of the shares in the Offering which had been subject
to repurchase by the Company from Mr. Speiser pursuant to option agreements
entered into in 1991 and 1994 (the "Options"). Mr. Speiser voluntarily waived
his right to have such Options terminate as to shares not subscribed for. As
a consequence, the balance of approximately 317,400 shares remains subject to
the Options. On November 1, 1996, the Company filed a Registration Statement
under the Securities Act of 1933 with the Securities and Exchange Commission
with respect to the sale of these 317,406 shares to a group of investment
funds, also at a subscription price of $1.10 per share.
<PAGE>
<PAGE>
Part II
Item 6
Page 14
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 First Amendment to Stock Purchase Agreement dated as of June 28,
1996 by and between Marvin M. Speiser and Health-Chem Corporation.
10.2 Second Amendment to Stock Purchase Agreement dated as of September
17, 1996 by and between Marvin M. Speiser and Health-Chem
Corporation.
(b) During the three months ended September 30, 1996, the Company did not
file any reports on Form 8-K.
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.
HEALTH-CHEM CORPORATION
November 1, 1996 /s/ Marvin M. Speiser
By: Marvin M. Speiser
Chairman of the Board and
President (Principal
Executive Officer)
/s/ Paul R. Moeller
By: Paul R. Moeller
Vice President - Finance
(Principal Financial Officer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 153
<SECURITIES> 0
<RECEIVABLES> 6115
<ALLOWANCES> (295)
<INVENTORY> 7959
<CURRENT-ASSETS> 3032
<PP&E> 29346
<DEPRECIATION> (15481)
<TOTAL-ASSETS> 34714
<CURRENT-LIABILITIES> 8785
<BONDS> 9500
<COMMON> 145
0
0
<OTHER-SE> 8283
<TOTAL-LIABILITY-AND-EQUITY> 34714
<SALES> 37838
<TOTAL-REVENUES> 37838
<CGS> 26356
<TOTAL-COSTS> 26356
<OTHER-EXPENSES> 11344
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 924
<INCOME-PRETAX> (399)
<INCOME-TAX> (211)
<INCOME-CONTINUING> (188)
<DISCONTINUED> 0
<EXTRAORDINARY> 5
<CHANGES> 0
<NET-INCOME> (183)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> (.02)
</TABLE>
<PAGE>
FIRST AMENDMENT
STOCK PURCHASE AGREEMENT
REFERENCE IS MADE to that certain Stock Purchase Agreement
(the "Stock Purchase Agreement") dated as of March 26, 1996 by and
between Marvin M. Speiser and Health-Chem Corporation, a Delaware
corporation.
WHEREAS, the parties hereto have entered into the Stock
Purchase Agreement; and
WHEREAS, the parties have agreed to amend the Stock Purchase
Agreement as provided herein.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency which is hereby acknowledged, the parties
hereby agree as follows:
1. The Stock Purchase Agreement is hereby amended by
deleting the original Section 6 in its entirety and inserting the
following in place thereof:
"6. Execution And Time Of Effectiveness. This Agreement may
be executed at any time prior to the filing of the
Registration Statement but shall be void and of no force and
effect in the event that the Registration Statement is not
declared effective by order of the SEC on or before September
30, 1996."
2. All other terms, conditions and provisions of the Stock
Purchase Agreement are hereby ratified and confirmed in their
entirety.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to the Stock Purchase Agreement to be executed as of June
28, 1996.
HEALTH-CHEM CORPORATION
By:/s/ Bruce M. Schloss
Its: Vice President
/s/ Marvin M. Speiser
Marvin M. Speiser
<PAGE>
SECOND AMENDMENT
TO
STOCK PURCHASE AGREEMENT
SECOND AMENDMENT to the Stock Purchase Agreement dated as of
March 26, 1996, as amended effective June 28, 1996 (the "Stock
Purchase Agreement"), by and between Marvin M. Speiser and Health-
Chem Corporation, a Delaware corporation ("Health-Chem").
WHEREAS, the parties hereto have entered into the Stock
Purchase Agreement and an amendment thereto; and
WHEREAS, the registered subscription rights offering to
stockholders (the "Offering") contemplated by the Stock Purchase
Agreement was completed on September 16, 1996, pursuant to which
subscriptions were received for 952,520 of the total of 1,269,926
shares available for subscription under the Offering which were
subject to either the 1991 Option or the 1994 Option (the "Option
Agreements") referenced in the Stock Purchase Agreement; and
WHEREAS, Marvin M. Speiser has offered to waive his rights
under Section 5 of the Stock Purchase Agreement, which provided for
the termination of the repurchase option of Health-Chem as to
unsubscribed for shares, and Mr. Speiser is willing to amend the
Stock Purchase Agreement such that the 317,406 shares unsubscribed
for in the Offering will continue to be subject to the 1991 Option
or the 1994 Option in proportion to the number of shares originally
subject to the respective options; and
WHEREAS, the parties have therefore agreed to further amend
the Stock Purchase Agreement as provided herein.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
parties hereby agree as follows:
1. The Stock Purchase Agreement is hereby amended by
deleting the original Section 5 in its entirety and inserting the
following in place thereof:
"5. Continuation of Option Agreements. Immediately
following the Expiration Date, each of the Option Agreements
shall survive, but only to the extent of unsubscribed for
shares in the following amounts:
(a) 215,028 shares shall remain subject to the 1991
Option Agreement; and
(b) 102,378 shares shall remain subject to the 1994
Option Agreement."
<PAGE>
2. All of the terms, conditions and provisions of the Stock
Purchase Agreement are hereby ratified and confirmed in their
entirety.
IN WITNESS WHEREOF, the parties hereby have caused this Second
Amendment to the Stock Purchase Agreement to be executed as of
September 17, 1996.
HEALTH-CHEM CORPORATION
By: /s/ Bruce M. Schloss
Its: Vice President
/s/ Marvin M. Speiser
Marvin M. Speiser
