U.S. Securities and Exchange Commission
Washington D.C. 20549
Form 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT UNDER SECTION 13
OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-12183December 28, 1995
AN-CON GENETICS, INC.
(Exact name of small business issuer as
specified in its charter)
Delaware 11-2644611
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
7100 30th Avenue North. St. Petersburg, Florida 33710-2902
(Address of principal executive offices)
(516) 694-8470
(Issuer's telephone number)
N/A
(Former name, former address and former fiscal year, if
changes since last report)
Check whether the issuer (1) filed all reports required to be
filed by Section or 15(d) of the Exchange Act during the past
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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and
reports required to be filed by Section 12,13 or 15(d)
of the Exchange Act after the distribution of securities
under a plan confirmed by court.
Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the
issuers's class of common equity, as of the latest practicable
date: 7,621,936
AN-CON GENETICS, INC.
FORM 10-QSB
QUARTERLY REPORT
SEPTEMBER 30, 1995
<PAGE>
AN-CON GENETICS, INC.
INDEX TO FORM 10-QSB
Page
Part I. Financial Information
Item 1: Financial Statements:
Consolidated Balance Sheet - September 30, 1995 F1
Consolidated Statements of Operations for the
Nine Months Ended September 30, 1995 and 1994 F3
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1995 and 1994 F4
Notes to Consolidated Financial Statements F6
Item 2: Management's Discussion and
Analysis or Plan of Operation 1
Part II. Other Information 4
Item 1: Legal Proceedings 4
Item 2: Changes in Securities 4
Item 3: Defaults Upon Senior Securities 4
Item 4: Submission of Matters of a Vote
of Security Holders 4
Item 5: Exhibits and Reports on Form 8-K 4
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
AN-CON GENETICS, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
ASSETS
Current assets:
Cash and cash equivalents $ 15,800
Accounts receivable 882,300
Inventories 505,100
Prepaid expenses 46,800
Total current assets 1,450,000
Property and equipment, net 1,152,700
Other assets:
Intangible assets, net 65,300
Unamortized debt issue costs, net 4,200
Organization cost, net 1,100
Deposits 9,500
80,100
$ 2,682,800
The accompanying notes are an integral part of the financial statements.
<PAGE>
AN-CON GENETICS, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 639,700
Accrued interest 108,400
Current maturity of long-term debt 17,300
Current portion of obligations under capital leases 16,700
Total current liabilities 782,100
Long-term debt, net 556,900
Obligations under capital leases 21,800
Total liabilities 1,360,800
Commitments and contingencies
Stockholders' equity:
Common shares, $.001 par value 15,000,000
authorized, issued and outstanding 7,621,936
on September 30, 1995 18,300
Additional paid in capital 12,210,600
Accumulated deficit (10,840,000)
1,388,900
Less: Treasury stock - at cost ( 6,000)
Subscriptions receivable ( 60,900)
Total stockholders' equity 1,322,000
$ 2,682,800
The accompanying notes are an integral part of the financial statements.
<PAGE>
AN-CON GENETICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995 1994
Sales $ 4,108,600 $ 3,186,300
Costs and expenses:
Cost of sales 2,465,200 2,014,000
Professional services 288,600 326,300
Salaries and related costs 556,600 598,000
Selling, general and administration 853,100 846,900
4,163,500 3,785,200
(Loss) from operations (54,900) (598,900)
Other income (expense):
Interest, net (10,400) (24,700)
(Loss) before extraordinary item (65,300) (623,600)
Extraordinary item:
Gain from settlement of debt 76,800 13,900
Net income (loss) $ 11,500 $ ( 609,700)
Per share:
(Loss) before extraordinary item $ (.008) $ (.20)
Extraordinary item .010 --
Net income (loss) $ .002 $ (.20)
Weighted average number of shares
outstanding 7,583,694 2,797,149 (a)
No dividends have been paid during the periods shown.
(a) Pro forma number of shares shown are as if Aaron
shareholders had received 1,370,603 or 49% of the total
outstanding An-Con shares.
The accompanying notes are an integral part of the financial statements.
AN-CON GENETICS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1995 1994
Net income (loss) $ 11,500 $ (609,700)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 74,600 135,100
Common stock issued for professional fees 7,900 558,900
Gain from forgiveness of debt ( 76,800) --
Changes in assets and liabilities:
(Increase) in receivables (373,800) (318,500)
(Increase) decrease in inventories 3,000 7,600
(Increase) decrease in prepaid expenses 32,000 ( 17,700)
Decrease in notes receivable -- 5,100
Increase (decrease) in accounts payable 103,000 ( 26,200)
Increase (decrease) in accrued interest ( 3,900) --
(Decrease) in customer deposits ( 106,300) ( 11,400)
Total adjustments (328,800) ( 317,700)
Net cash (used in) operating activities (292,000)
Cash flows from investing activities:
(Increase) in fixed assets (175,800) (207,200)
(Increase) in patents and
trademarks, deposits -- ( 4,300)
Net cash (used in) investing activities (175,800) (202,900)
Cash flows from financing activities:
(Decrease) in subscriptions receivable 87,900 --
(Decrease) in obligations under capital
leases ( 5,900) 12,300
(Decrease) in notes payable - officers ( 90,800) --
(Decrease) in long term debt ( 22,600) ( 74,100)
Common shares issued for cash 1,000 1,195,700
Net cash provided by (used in)
financing activities ( 30,300) 1,133,900
Net increase (decrease) in cash
and cash equivalents (534,900) ( 639,000)
Cash and cash equivalents, beginning
of period 550,700 136,100
Cash and cash equivalents, end of period $ 15,800 $ 775,100
The accompanying notes are an integral part of the financial statements.
AN-CON GENETICS, INC. AND SUBSIDIARY
STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
Cash paid during the nine months ended September 30, 1995 for:
Interest $5,500
Income Taxes -0-
Cash paid during the nine months ended September 30, 1994 for:
Interest $9,300
Income Taxes -0-
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
1. The Company issued 35,000 post split shares to
convertible note holders in redemption of $70,000 in notes
and $26,900 of accrued interest, valued at $14,000. The net
issuance cost of the redeemed bonds, in the amount of
$6,100 was written off.
2. The Company issued 27,500 post split shares for services
valued at $7,900.
3. On June 26, 1995 the company s subsidiary, Aaron Medical,
purchased a building for $625,000 by issuing 60,000 An-Con
shares valued at $78,000 and by issuing a purchase money
mortgage of $500,000. A security deposit given to the seller of
$12,200 was applied to the purchase and $34,800 was paid in cash.
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
1. On January 6, 1994, the Company reverse split its
shares 1 for 15 effective for that date.
2. On January 6, 1994, the Company issued 236,840 post split
shares of common stock payment for $332,000 of convertible notes.
On February 14, 1994, the Company issued 202,011 post split shares
of common stock upon the exercise of warrants. The Company
received $172,200 in cash and $119,000 in notes receivable.
The notes were due on May 2, 1994 with interest at 9%.
On April 7, 1995, the remaining balance of notes receivable
of $44,000 was collected.
The accompanying notes are an integral part of the financial statements.
<PAGE>
AN-CON GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30,1995
NOTE 1. INTERIM FINANCIAL STATEMENTS
In the opinion of management, the interim financial
statements reflect all adjustments, consisting of only normal
recurring items, which are necessary for a fair presentation of the
results for the interim periods presented. The results for interim
periods are not necessarily indicative of results for the full year.
These financial statements should be read in conjunction with the
significant accounting policies and the other notes to the
financial statements included in the Corporation's 1994 Annual Report
to the SEC on Form 10-KSB.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
(a) Cash and Equivalents:
Cash and equivalents include the amounts in the Company checking,
saving and money market bank accounts.
(b) Accounts Receivable:
Accounts receivable are presented net of the allowance for
doubtful accounts.
(c) Inventories:
Inventories are stated at the lower of cost, determined by the
FIFO method, or market.
(d) Property, Plant and Equipment:
Property and other equipment are recorded at cost. Depreciation
is computed using the straight-line method over the estimated useful
lives of the assets as follows: leasehold improvements-term of lease:
furniture, fixtures and equipment.
(e) Bond Issue Costs:
Costs related to a bond issue are classified as deferred charges
and amortized, using the straight line method, over the life of the
bonds.
(f) Investments:
The equity method is used to account for investments in corporate
joint ventures and other investments in common stock if the Company has
the ability to exercise significant influence over operating and
financial policies of the investee enterprise. That ability is
presumed to exist for investments of 20% or more and is presumed
not to exist for investments of less than 20%; both presumptions
may be overcome by predominant evidence to the contrary.
AN-CON GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(f) Investments (continued):
The Company initially records an investment at cost. Subsequently,
the carrying amount of the investment is increased to reflect the Company's
share of income of the investee and is reduced to reflect
the company's share of losses of the investee or dividends received
from the investee. The Company's share of the income or losses of
the investee is included in the Company's net income as the investee
reports them. Adjustments similar to those made in preparing
consolidated financial statements, such as elimination of
intercompany gains and losses and amortization of the difference
between cost and underlying equity in net assets, also are applicable
to the equity method. Under the equity method, an investment in
common stock is shown in the balance sheet of the Company as a
single amount. Likewise, an investor's share of earnings or losses
from its investment is ordinarily shown in its income statement as a
single amount.
The cost method is used when ownership of securities in an
affiliated company represents less than 20% of the total outstanding
shares of that Company. Under this method the Company records an
investment in the stock of an investee at cost, and recognizes as
income dividends received that are distributed from net accumulated
earnings of the investee since the date of acquisition by the Company.
The net accumulated earnings of an investee subsequent to the date of
investment are recognized by the Company only to the extent
distributed by the investee as dividends. Dividends received in
excess of earnings subsequent to the date of investment are
considered a return of investment and are recorded as reductions of
cost of the investment.
A loss in value of an investment that is other than a temporary
decline shall be recognized the same as a loss in value of other
long-term assets. Evidence of a loss in value might include, but
would not necessarily be limited to, absence of an ability to
recover the carrying amount of the investment or inability of
the investee to sustain an earnings capacity that would justify
the carrying amount of the investment. A current fair value of an
investment that is less than its carrying amount may indicate a
loss in value of the investment.
(g) Research and Development Costs:
Research and development costs are charged to expense when
incurred. Disclosure in the financial statements is made for
the total research and development costs charged to expense
in each period for which an income statement is presented.
Research and development costs that are purchased from another
enterprise and have future use are capitalized and are amortized
over five years.
AN-CON GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(h) Research and Development Arrangements:
The Company accounts for its obligations under an arrangement for
the funding of research and development by others by determining
whether the Company is contractually obligated to pay for research
not yet performed. If so determined, to the extent that the Company
is obligated to pay, the Company records a liability and charges
research and development costs to expense.
(i) Patents, Franchises, Licenses and Operating Rights:
The cost of franchises, license options to acquire technology and
operating rights acquired are amortized using the straight-line method
over their useful lives.
(j) Stock Issue Costs:
Stock issue costs are treated as a reduction of the amount received
from the sale of the related capital stock.
(k) Net Earning (Loss) Per Share:
Net earnings (loss) per share is computed based upon the
weighted average number of outstanding common shares during the
period considered. Taking into consideration outstanding options,
warrants and convertible debt.
(l) Accounting for Income Taxes
In February 1992, the FASB issued Statement No. 109, Accounting
for Income Taxes. FASB 109 requires an asset and liability approach
for financial accounting and reporting for income taxes. It
requires recognition of (1) current tax liabilities or assets for
the estimated taxes payable or refundable on tax returns for the
current year, and (2) deferred tax liabilities or assets for the
estimated future tax effects attributable to temporary differences
and carry forwards.
The judgment regarding the need for a valuation allowance depends
on the entity's specific facts and circumstances; there are no
precise formulas for determining whether a valuation allowance is
needed or the amount of the allowance. Such a need is based on an
assessment of the likelihood of the entity's ability to generate
sufficient taxable income of the appropriate character (for example,
ordinary income or capital gain) within the carryback or
carryforward period under the applicable tax law to realize the
tax benefits recognized as a result of deductible
temporary differences, and operating loss carryforwards.
The Company has adopted the policy of preparing its financial
statements in accordance with FASB 109.
AN-CON GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (continued)
(m) Consolidation Policy
The purpose of consolidated statements is to present, primarily
for the benefit of the shareholders and creditors of the parent
company, the results of operations and the financial position of
the parent company and its subsidiaries essentially as if the group
were a single enterprise with one or more branches or divisions.
There is a presumption that consolidated statements are more
meaningful than separate statements and that they are usually
necessary for a fair presentation when one of the enterprises
in a group directly or indirectly has a controlling interest in the
other enterprises [ARB 51]. If an enterprise has one or more
subsidiaries, consolidated statements rather than parent company
financial statements are the appropriate general purpose
financial statements [FAS94].
NOTE 3. POOLING OF INTERESTS
In January 1995, An-Con Genetics, Inc. and Aaron Medical
Industries, Inc. ("The Constituents") consummated a business
combination which united the ownership interests in the two
Companies. Aaron Medical Industries, Inc. is a Florida
Corporation with offices and manufacturing facilities
in St. Petersburg, Florida. It is principally engaged in the
business of manufacturing and selling battery operated cauteries,
specialty medical lighting instruments and electrosurgical
devices to physicians and hospitals.
The combination which is accounted for as pooling of
interests was accomplished by An-Con Genetics, Inc. issuing
3,399,096 shares of common stock in exchange for all common
shares of Aaron Medical Industries, Inc.. No resources were
distributed to any shareholder.
Since the Constituents have used the same fiscal periods
and accounting policies and practices, their recorded assets
and liabilities are carried forward. The income and cash flows
of the combined Corporation includes income and cash flows
of the Constituents for the nine months ended September 30 ,1995
in which the combination occurred. The reported income and cash
flows for the nine months ended September 30, 1994 is the
combined and restated income and cash flows of the Constituents.<PAGE>
AN-CON GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3. POOLING OF INTERESTS (continued)
The following statement shows the revenues and earnings
previously reported by An-Con Genetics, Inc. with the combined
amounts of Aaron Medical Industries, Inc. presented in the
financial statements for the nine months ended September 30, 1994:
Aaron
An-Con Medical
Genetics, Inc . Industries, Inc. Total
Sales $ 43,400 $2,029,900 $2,073,300
Cost of sales 33,100 1,291,600 1,324,700
Research and development -- -- --
Professional services 128,300 29,200 157,500
Salaries and related costs 56,000 158,000 214,000
Selling, general and
administration 149,000 367,600 516,000
$ 366,400 $1,846,400 $2,212,800
(Loss) from operations (323,000) 183,500 (139,500)
Other income (expense):
Interest, net ( 18,200) 600 (17,600)
Miscellaneous -- 13,900 13,900
( 18,200) 14,500 3,700
Net income (loss) $(341,200) $ 198,000 $(143,200)
Net income (loss)
per share - pro forma (.24) .14 (.05)
Weighted average number of
shares outstanding -
pro forma 1,426,546 1,370,603 2,979,149
Percentage after
pooling 51% 49% 100%
The accompanying notes are an integral part of the financial statements.
<PAGE>
AN-CON GENETICS, INC.
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4. PURCHASE OF BUILDING
On June 26, 1995 Aaron Medical Industries, Inc., exercised
its option to purchase the building it presently occupies for
$625,000. The purchase was financed as follows:
Cash $ 47,000
Purchase Money Mortgage 500,000(a)
An-Con Shares
(60,000 x 1.30 per share) 78,000(b)
Total purchase price $625,000
(a) Payment of principal and interest at 10% payable
monthly at $5,373.06 until July 1, 1998 when a
balloon payment of $439,074.27 is due.
(b) The An-Con shares are restricted for 2 years and are
being held pursuant to an escrow agreement. The agreement
further restricts the release of the shares until the seller
takes such action as is necessary to further investigate,
define and remediate such contamination that exists on the
property and is referred to in environmental reports pursuant
to a Remedial Action Plan approved by the State of Florida's
appropriate agencies.
Two years from the date of Closing, if Seller and Guarantors
have not defaulted under or been in breach of any of their
obligations to Buyer, Buyer shall obtain and deliver to Escrow
Agent additional shares of Stock if the Closing Market Price of
the Stock on the thirtieth day prior to such date shall be
less than $78,000.00.
NOTE 5. ACCRUED INTEREST
Accrued interest represents interest accrued and unpaid on
Bond holders notes of $34,100 and officer/shareholder loans of
$77,600. The unpaid officer/shareholders loan interest was
$4,000 per month through July, August and September have not
been paid and is currently pending receipt of certain expense
vouchers. This agreement is part of a consulting agreement with
the former officer, now consultant, to the company.
The officer/shareholder loan has been paid in full, only
the interest remains unpaid.
AN-CON GENETICS, INC.
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Consolidated sales revenues increased by 29% from $3,186,300
to $4,108,600 for the nine months ended September 30 ,1995 as
compared to the similar period in 1994. Gross profits for the
two periods were $1,643,400 and $1,172,300 respectively, and the
gross profit percentage increased to 40% in 1995 from 37% for
the same period in 1994.
Consolidated selling, general and administrative expenses
and salaries and related expenses decreased by 2 % from
$1,444,900 to $1,409,700, for the nine months ended September
30, 1995 as compared to the same period in 1994.
Consolidated professional services decreased by 12% to
$288,600 in the nine months ended September 30, 1995 as
compared to $326,300 in the same period of the previous year.
The 1995 amount included the issuance of 27,500 post split
shares for past and present services that the Board of
Directors authorized which amounted to $7,900. Also included
in 1995 was a one time charge or $39,000 for an underwriting fee
where the underwriter went out of business. Included in the
nine months are consulting costs of $72,511 of which $46,900
was included in the six months ended June 30, 1995 as selling,
general and administrative expenses for 1995.
Research and development costs were incurred in the amount
of $114,900 for the first nine months of 1995. They are generally
attributable to the development of a new formulation of tissue fixative.
Aaron contributed $37,600 to these costs for the development of a
broad line of electrosurgical blades.
The Company had a consolidated gain of $11,500
for the nine months ended September 30, 1995 as compared
to a consolidated loss of $609,700 for the nine months
ended September 30, 1994. An operating loss of $65,400
for the nine months ended September 30, 1995 was reduced by
a gain of $76,900 from the settlement of debt. To arrive at
the consolidated gain of $11,500.
Financial Condition and Liquidity
Consolidated working capital of the Company was $667,900 on
September 30, 1995 as compared to $960,600 on September 30, 1994
and $745,900 on December 31, 1994.
On September 30,1995, consolidated total assets were $2,682,800 as
compared to $2,292,300 on September 30, 1994 and $2,205,900 on
December 31, 1994.
AN-CON GENETICS, INC.
PART I. FINANCIAL INFORMATION (continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(continued)
Financial Condition and Liquidity (continued)
The Company's consolidated cash decreased by $534,900 (97%) over
the nine months ended September 30, 1995. The net cash used in
operations was $328,800. The net cash the Company utilized to reduce
notes payable was $30,300 and $175,800 to acquire fixed assets.
The Company has not paid interest on long term bond obligations
which have been due since November, 1990. Certain bondholders
redeemed their debt and accrued interest for shares of the company
which amounted to $70,000 in principal and $26,900 in interest. The
total amount of interest payable on long term obligations
remaining was $34,900. As of September 30, 1995, the bondholders
had made no declaration that the principal was due and payable.
The Company is attempting to raise additional capital
from outside sources. The Company is in the process of
preparing a registration statement to be filed with the
Securities and Exchange Commission to register
additional shares for sale and to register the shares
exchanged for Aaron Medical Industries, Inc. shares.
As part of an agreement with Aaron Medical Industries, Inc.
the Company had advanced a total of $304,000 to Aaron Medical
Industries, Inc. as a working capital loan. On September 30,
1995 the balance of the advance was $163,900. In January, 1995,
pursuant to an agreement (which was subsequently amended and
restated) and the approval of shareholders of Aaron Medical
Industries, Inc., the Company completed its acquisition of all
of the outstanding shares of Aaron, now a wholly owned subsidiary.
Products - Aaron
Electrosurgical blades
This is a new and expanding area for the company. Aaron
Medical manufactures a broad line of standard electrosurgical
blades, balls, needles, loops and square electrodes. The company is
in the final stages of releasing a line of conductive, reduced
stick electrodes known as Resistick . This product line offers
superior cutting and coagulation when compared to the current
reduced stick electrodes on the market. Sales are likely to begin
in the fourth quarter of 1995.
AN-CON GENETICS, INC.
PART I. FINANCIAL INFORMATION (continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION (continued)
Multifunction Electrocautery Tool
On July 20, 1994, the Company purchased all rights,
title and interest to a patent application and the invention for a
multifunction electrocautery tool having an associated suction apparatus.
The Company transferred 91,350 unregistered shares of An-Con to the
owner and will pay a 3% royalty on all sales. The product will be marketed
and manufactured by Aaron Medical Industries, Inc. estimated for sales to
begin have been changed to the first quarter of 1996. Although sales
were estimated to begin in the fourth quarter of 1995 management
now anticipates sales beginning in the first quarter of 1996.
Products - An-Con
Tissue Fixatives
Omnifix 2000
Omnifix 2000, a new tissue fixative developed by the Company
has been formulated as a safe alternative to formalin and is capable
of fixing (preserving for microscopic examination) both smaller and
larger tissue specimens. A contract manufacturer has been agreed
upon and a preliminary marketing program has been initiated.
Production of Omnifix 2000 is scheduled to begin by the end of
the fourth quarter.
Omnifix II
Omnifix II continues to be marketed and sold to hospitals and clinical
pathology laboratories for use with smaller tissue specimens.
Appointment of New Officer, Board Member and Officers Employment Agreements
On June 14, 1995 the Board of Directors appointed Mr. Delton N.
Cunningham Secretary/Treasurer of the corporation. Mr. Cunningham
is a Certified Public Accountant and is presently employed as
Vice President/Chief Financial Officer and Secretary of Aaron Medical
Industries, Inc. On October 1, 1995 the present board consisting of
Andrew Makrides and Robert Saron elected two new members. These
members are Mr. Joseph Valenti and Mr. George Kromer, Jr.
<PAGE>
AN-CON GENETICS, INC.
PART I. FINANCIAL INFORMATION (continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(continued)
Appointment of New Officer, Board Member and Officers
Employment Agreements (continued)
Joseph F. Valenti 79, former Vice President of the
International Division of Aaron Medical Industries, Inc. Retired
as of January 1, 1995. He received a Bachelor of Arts Degree in
Languages from the College of the City of New York. He was
associated with Aaron and its predecessor companies since 1980
in charge of developing the international sales department and
increasing export sales. He is the CEO and sole owner of
Valpex International Corporation, an imports product Company,
which supplies Aaron with light bulbs used in its products.
George W. Kromer, Jr. 55, from 1966 to 1986, he served as
a Senior Hospital Care Investigator for the New York City Health &
Hospital Corporation. His responsibilities included, but were not
limited to, supervising a unit that was engaged in determining
third-party reimbursements, for a health care institution
exceeding 800 and 75 outpatient clinics. In addition, since
1980 he has been writing for financial publications,
concentrating on identifying companies whose stock price was
below $10 per share. He is currently a Senior Financial
Correspondent for Today's Investor, as well as providing writing
services for companies listed on the American and Over-the-Counter
Exchanges. He received a Master's Degree in 1976 from Long
Island University, New York. majoring in Health Administration.
He also holds a Bachelor of Science degree from Long Island
University's Brooklyn Campus and an Associate in Applied Science
degree from New York City Community College, Brooklyn, New York.
Employment Agreements
On the 8th of September, 1995, the Company and its
subsidiary entered into an employment agreement which
(a) Robert Saron providing for Mr. Saron to act as an executive
employee of the Company. The agreement was for a period of
five years and provides for compensation in the amount of
$118,335 per year plus additional amounts for automobile
allowance ($600 per month) and a bonus equal to 10% of the
Company's pre-tax profits in excess of the first $200,000
of profit in any given year. The agreement also provides
for annual cost of living percentage increases as to salary
and automobile allowance. In addition to the foregoing,
the agreement provides for a vacation of three weeks per year,
reimbursement of business expenses, group insurance and life
insurance. The agreement may be terminated (a) upon the death
of Mr. Saron, or (b) on thirty (30) days notice by Mr. Saron
to terminate, or (c) by the Company, (i) without cause, upon
the majority approval of the Board of Directors on thirty (30)
days written notice (wherein the Company shall be obligated
to pay the employee compensation under the agreement for the
AN-CON GENETICS, INC.
PART I. FINANCIAL INFORMATION (continued)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(continued)
Employment Agreements (continued)
balance term of the agreement) and (ii) the employee may elect in
lieu of (i) above, to cancel his agreement and obtain severance
payments equal to three times the annual salary and bonus in
effect during the month preceding such termination; or (d) by the
Company for cause, if during the time of employment, the employee
violates the covenant not to compete provisions of the
agreement, or is found guilty of a felony or crime of moral turpitude.
The agreement provides for a covenant not to compete directly or
indirectly against the Company for a period of one year. Such
agreement also provides for indemnification of
Mr. Saron for any liability while acting as an officer and
director of the Company except in the instances where it is
determined by a court of competent jurisdiction that (a) he has
breached his duty of loyalty to the corporation or the
shareholders, or (b) acted not in good faith or intentionally
improperly, or (c) paid unlawful dividends or made unlawful stock
purchases or redemptions, or (c) otherwise engaged in a
transaction in which he received improper personal benefit against
the interests of the corporation or its shareholders.
On September 8, 1995 the Company also entered into a
similar employment agreement with Andrew Makrides,
President for a period of five years and providing for
annual compensation in the amount of $78,500, a monthly
automobile allowance of $500 per month, and bonuses equal
to 3% of the Company's pre-tax profits in excess of the
first $300,000 of profits in An- Con Genetics, Inc. and
annual cost of living percentage increases.
In all other respects the agreement is similar
to that of Mr. Saron set forth above.
On September 8, 1995 the Company entered into a similar
three year executive employment agreement (The "Agreement")
with Delton N. Cunningham, as Vice President and Secretary
of the Company. The agreement provides for one year
extensions unless written notice of termination is
provided by the Company nine months prior to the
termination date and contains termination terms
similar to those of Mr. Saron and Makrides. The agreement
also provides for a salary of $75,000 per year, a monthly
automobile allowance of $500, a bonus equal to 3% of the
Company's pre-tax profits in excess of $300,000, three weeks
paid vacation, reimbursement of expenses, group medical
insurance and for a one year non-compete covenant upon
termination of employment.
<PAGE>
AN-CON GENETICS, INC.
PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Form 10-KSB for the years ended December 31, 1994
and 1993, Part I, Item 3. No new litigation commenced in
the nine months ended September 30, 1995.
ITEM 2. CHANGES IN SECURITIES
There have been no changes in the instruments
defining the rights or rights evidenced by any class of
registered securities.
There have been no dividends declared.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Interest on senior debt of $78,000, 8% convertible
debentures has not been paid since November of 1990 and
equals $33,900. To date, no action has been taken against
the Company by any holder of the senior debt.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
There has not been a meeting of shareholders and therefore,
no matters have been submitted to a vote of security holders since 1987.
ITEM 5. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
27 FINANCIAL DATA SCHEDULE FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1995
28 None
SIGNATURES:
In accordance with the requirements of the Exchange Act,
the registrant caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
An-Con Genetics, Inc.
(Registrant)
Date:
Andrew Makrides
President
<PAGE>
EXHIBIT 27
AN-CON GENETICS, INC.
APPENDIX A TO ITEM 601(c) OF REGULATION S-B
COMMERCIAL AND INDUSTRIAL COMPANIES
ARTICLE 5 OF REGULATION S-X
FINANCIAL DATA SCHEDULE FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1995
September
30,
ITEM NUMBER ITEM DESCRIPTION 1995
5-02 (1) Cash and cash items 15,800
5-02 (2) Marketable securities --
5-02 (3) (a) (1) Notes and accounts receivable-trade 882,300
5-02 (4) Allowances for doubtful accounts --
5-02 (6) Inventory 505,100
5-02 (9) Total current assets 1,450,000
5-02 (13) Property, plant and equipment 1,916,800
5-02 (14) Accumulated depreciation 764,100
5-02 (18) Total assets 2,682,800
5-02 (21) Total current liabilities 782,100
5-02 (22) Bonds, mortgages and similar debt 578,700
5-02 (28) Preferred stock-mandatory redemption --
5-02 (29) Preferred stock-no mandatory redemption --
5-02 (30) Common stock 18,300
5-02 (31) Other stockholders' equity 1,303,700
5-02 (32) Total liabilities and stockholders' equity2,682,800
5-03 (b) (a) Net sales of tangible products 4,108,600
5-03 (b) 1 Total revenues 4,108,600
5-03 (b) 2 (a) Cost of tangible goods sold 2,465,200
5-03 (b) 2 Total costs and expenses
applicable to sales and revenue 2,465,200
5-03 (b) 3 Other costs and expenses 1,698,300
5-03 (b) 5 Provision for doubtful accounts and notes --
5-03 (b) (8) Interest and amortization of debt discount 10,400
5-03 (b) (10) Income before taxes and other items (65,300)
5-03 (b) (11) Income tax expense --
5-03 (b) (14) Income/loss continuing operations (65,300)
5-03 (b) (15) Discontinued operations --
5-03 (b) (17) Extraordinary items 76,800
5-03 (b) (18) Cumulative effect-changes in accounting principles --
5-03 (b) (19) Net income or loss 11,500
5-03 (b) (20) Earnings per share - primary .002
5-03 (b) (20) Earnings per share - fully diluted .002
<PAGE>
AN-CON GENETICS, INC.
APPENDIX A TO ITEM 601(c) OF REGULATION S-B
COMMERCIAL AND INDUSTRIAL COMPANIES
ARTICLE 5 OF REGULATION S-X
FINANCIAL DATA SCHEDULE FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1995
EXHIBIT 27
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<ARTICLE> 5
<CIK> 0000719135
<NAME> AN-CON GENETICS INC
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 15,800
<SECURITIES> 0
<RECEIVABLES> 882,300
<ALLOWANCES> 0
<INVENTORY> 505,100
<CURRENT-ASSETS> 1,450,000
<PP&E> 1,916,800
<DEPRECIATION> 764,100
<TOTAL-ASSETS> 2,682,800
<CURRENT-LIABILITIES> 782,100
<BONDS> 578,700
0
0
<COMMON> 18,300
<OTHER-SE> 1,303,700
<TOTAL-LIABILITY-AND-EQUITY> 2,682,800
<SALES> 4,108,600
<TOTAL-REVENUES> 4,108,600
<CGS> 2,465,200
<TOTAL-COSTS> 2,465,200
<OTHER-EXPENSES> 1,698,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,400
<INCOME-PRETAX> (65,300)
<INCOME-TAX> 0
<INCOME-CONTINUING> (65,300)
<DISCONTINUED> 0
<EXTRAORDINARY> 76,800
<CHANGES> 0
<NET-INCOME> 11,500
<EPS-PRIMARY> .002
<EPS-DILUTED> .002
</TABLE>
