SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
10Q
For Quarter Ended: September 30, 1995
Commission File Number 0-14983
APPLIED MICROBIOLOGY, INC.
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(Exact name of registrant as specified in its charter)
New York 11-2653613
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(State or other jurisdiction of (IRS Employer Identification Number)
incorporation of organization)
771 Old Saw Mill River Road, Tarrytown, New York 10591
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(Address of principal executive offices) (Zip Code)
(914) 347-5767
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, Par Value $.005 18,204,682 shares as of September 30, 1995
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APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
INDEX
PART I FINANCIAL INFORMATION PAGE
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Item 1 Financial Statements (Unaudited)
Condensed consolidated balance sheets
at September 30, 1995 and
June 30, 1995 3 - 4
Condensed consolidated statements of
operations for the three months
ended September 30, 1995 and
September 30, 1994 5
Condensed consolidated statement of
changes in stockholders' equity
for the three months ended
September 30, 1995 6
Condensed consolidated statements of
cash flows for the three months
ended September 30, 1995 and
September 30, 1994 7
Notes to Condensed consolidated financial
statements 8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II OTHER INFORMATION
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Item 5 Other Matters 13
Item 6 Exhibits and Reports on Form 8K 13
SIGNATURES 14
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APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30 June 30
1995 1995
(Unaudited) (Note)
$'000 $'000
----- -----
ASSETS
Current assets:
Cash and cash equivalents 3,690 3,337
Trade accounts receivable less allowance for
doubtful accounts of $14,000 at September and
at June 1,382 1,836
Inventories 2,922 2,865
Prepayments and other current assets 736 694
Due from affiliated companies 667 627
______ _______
Total current assets
Property and equipment at cost less accumulated
depreciation of $4,173,000 at September and
$4,096,000 at June 3,586 3,446
Patent costs and licensed technology at cost
less accumulated amortization of $755,000 at
September and $691,000 at June 915 881
Other asset 60 102
______ _______
TOTAL ASSETS 13,958 13,788
______ _______
See notes to condensed consolidated financial statements
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APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
September 30 June 30
1995 1995
(Unaudited) (Note)
$'000 $'000
----- -----
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of note payable and lease obligation 149 149
Accounts payable and accrued expenses 764 1,306
Due to affiliated companies 2,086 191
Other liabilities 99 89
Dividends payable 33 34
Taxes payable 260 257
________ ________
Total current liabilities 3,391 2,026
Note payable and lease obligation 728 770
Deferred taxes payable 363 367
________ ________
TOTAL LIABILITIES 4,482 3,163
________ ________
REDEEMABLE PREFERRED STOCK
$0.01 par value. Issued and outstanding
1,500 shares at September and June,
(aggregate involuntary liquidation value
$1,500,000) 1,500 1,500
________ ________
STOCKHOLDERS' EQUITY
Common stock, $0.005 par value,
authorized 25,000,000 shares.
Issued and outstanding 18,204,682
at September and 18,176,858 at June 91 91
Additional paid-in capital 39,572 39,500
Accumulated deficit (31,087) (29,958)
Currency translation adjustment (600) (508)
________ ________
TOTAL STOCKHOLDERS' EQUITY 7,976 9,125
________ ________
TOTAL LIABILITIES, REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY 13,958 13,788
======== ========
See notes to condensed consolidated financial statements
Note: The Balance Sheet as of June 30, 1995 has been derived from the
audited consolidated financial statements at that date.
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APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
September 30
1995 1994
$'000 $'000
----- -----
Net Sales 2,201 2,608
Other Operating Revenues 50 69
_______ _______
TOTAL REVENUES 2,251 2,677
Cost of Sales (1,149) (785)
_______ _______
GROSS PROFIT 1,102 1,892
Selling, General & Administrative Expenses (1,523) (1,026)
Research Costs (472) (296)
Depreciation and Amortization (186) (150)
_______ _______
OPERATING(LOSS)/INCOME (1,079) 420
Interest Income 20 48
Interest Expense (26) (2)
_______ _______
(LOSS)/INCOME BEFORE TAX EXPENSE (1,085) 466
Tax Expense (11) (35)
_______ _______
NET(LOSS)/INCOME (1,096) 431
_______ _______
(LOSS)/EARNINGS PER SHARE ($0.06) $0.02
See notes to condensed consolidated financial statements
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APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995
(UNAUDITED)
Common Additional Accumulated Currency
Stock Paid In Deficit Translation
Capital Adjustment
$'000 $'000 $'000 $'000
----- ----- ----- -----
Balance at June 30, 1995 91 39,500 (29,958) (508)
Common stock issued on
exercise of options - 18 - -
Common stock issued to
officer - 54 - -
Net loss for the period - - (1,096) -
Redeemable preferred stock
dividend provided - - (33) -
Arising on translation
during the period - - - (92)
________ ________ ________ ________
Balance at
September 30, 1995 91 39,572 (31,087) (600)
======== ======== ======== ========
See notes to condensed consolidated financial statements
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APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
September 30
1995 1994
$'000 $'000
----- -----
Cash flows from operating activities:
Net (loss)/income (1,096) 431
Adjustments to reconcile net (loss)/income
to net cash used in operating activities:
Depreciation and amortization 186 150
Other non-cash items 96 -
Changes in assets and liabilities:
Decrease in trade accounts receivable 432 37
Increase in inventories (88) (106)
Increase in other assets (50) (60)
Increase in amounts due from
affiliated companies (47) (637)
Increase in taxes payable 7 35
Decrease in accounts payable and
accrued expenses (530) (151)
Decrease in amounts due to affiliated
companies (114) (184)
Increase in other liabilities 11 45
----- -----
Net cash used in operating activities (1,193) (440)
----- -----
Cash flows from investing activities:
Acquisitions of property and equipment (295) (329)
Patent costs (98) (79)
----- -----
Net cash used in investing activities (393) (408)
----- -----
Cash flows from financing activities:
Dividends paid on redeemable preferred stock (34) (28)
Increase in short term borrowing from
affiliate 2,000 -
Note payable repayments (2) (3)
Capital lease obligation repayments (40) -
Proceeds from issuance of common stock 18 11
----- -----
Net cash provided by/(used in) financing activities 1,942 (20)
----- -----
Net increase/(decrease) in cash and cash equivalents 356 (868)
Cash and cash equivalents at beginning of period 3,337 5,048
Effect of exchange rate movement (3) 3
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Cash and cash equivalents at end of period 3,690 4,183
===== =====
Supplementary disclosure of cash flow information:
Interest paid 2 1
Tax paid 4 2
See notes to condensed consolidated financial statements
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APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1995
Note A Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial statement reporting and with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) co nsidered necessary for
a fair presentation have been included. Operating results for the three month
period ended September 30, 1995 are not necessarily indicative of the results
that may be expected for the year ended June 30, 1996. For further information,
refer to the consolidated financial statements and notes thereto, included in
the Company's annual report on Form 10-K for the year ended June 30, 1995.
Note B Inventories
The components of inventory consist of the following:
September 30 June 30
1995 1995
$'000 $'000
----- -----
Raw materials 137 144
Work in progress 1,219 1,262
Finished products 1,566 1,459
________ _______
2,922 2,865
________ ________
Note C Redeemable Preferred Stock Dividends
Dividends payable on Redeemable Preferred Stock as of September 30, 1995
are approximately $33,000.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1995
Note D (Loss)/Earnings per share
Earnings per share for the three months ended September 30, 1994 is
computed based on the weighted average number of shares actually outstanding
plus the shares that would be outstanding assuming the exercise of dilutive
stock options, all of which are considered to be common stock equivalents. The
number of shares that would be issued from the exercise of stock options and
warrants has been reduced by the number of shares that could have been purchased
from the proceeds at the average market price of the Company's stock. No such
common stock equivalents are included in the computation of average shares
outstanding for the three months ended September 30, 1995 because the effect of
such inclusion would be to increase earnings per share.
3 months ended
September 30
1995 1994
No. of Shares No. of Shares
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Average shares outstanding 18,181,495 18,158,141
Net effect of dilutive stock options - 316,023
___________ ___________
Total average shares 18,181,495 18,474,164
___________ ___________
$'000 $'000
----- -----
Net (loss)/income (1,096) 431
Preferred stock dividend (33) (33)
___________ ___________
Net income attributable to common
stockholders (1,129) 398
___________ ___________
(Loss)/Earnings per share of common stock ($0.06) $0.02
Note E Subsequent Event
On October 20, 1995 the Company completed an $8.95 million private
placement of Convertible Preferred Stock. After expenses, the Company netted
$8.3 million. One third of the Preferred Stock is convertible into common stock
on each of the following three dates: December 4, 1995, January 3, 1996, and
January 18, 1996. The conversion rate is based on a number of factors,
including, but not limited to, the date of conversion, the liquidation
preference of the Preferred Stock, and the price of the Common St ock prior to
the date of conversion. Any outstanding shares of Convertible Preferred Stock
will automatically be converted into Common Stock on October 13, 1998. The
Company has agreed to register the Common Stock issuable upon conversion. In
connection with this private placement, the Company also issued a Warrant to
purchase 136,381 shares of Common Stock at $6.30 per share.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition
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At September 30, 1995 the Company had working capital of $6.0 million, including
a cash balance of $3.7 million, compared to June 30, 1995 working capital of
$7.3 million, including a cash balance of $3.3 million.
The Company had a cash outflow from operations in the three months to September
30, 1995 of $1.2 million, compared with an outflow of $0.4 million in the three
months to September 30, 1994. The major component of this outflow in the first
quarter was the net loss of $1.1 million recorded for the period (see Results of
Operations below). In addition, Accounts Payable decreased by $0.5 million.
These outflows were partly offset by a reduction in Accounts Receivable of $0.4
million.
In addition to the outflow from operations, cash was used for capital
expenditures, patent costs, Redeemable Preferred Stock dividends, and payments
in respect of lease obligations. The largest portion of the capital
expenditures was incurred at the Company's U.K. manufacturing plant, to further
upgrade the operations. Additional significant expenditures are expected, and
it is anticipated that these will be financed primarily through an equipment
lease.
A short-term loan received in September, 1995 from an affiliate of $2 million
was repaid in October, 1995.
In October 1995, the Company received net proceeds of $8.3 million from a
private placement of Convertible Preferred Stock. (See Note E in Notes to
Condensed Consolidated Financial Statements). The results of this transaction
are not included in the financial statements for the first quarter ended
September 30, 1995.
Results of Operations
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Sales
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Sales in the quarter decreased from the corresponding period in 1994 by 16%, to
$2.2 million.
The percentage of sales included in the total by product is:-
% of sales in quarter % change
1995 1994 95 vs 94
---- ---- --------
Nisaplin (food preservative) 64.0 78.3 (30.7)
Ambicin (animal hygiene product) 6.4 1.4 241.5
Direct-Set (dairy starter cultures) 21.3 8.4 111.3
Agency 2.9 8.8 (71.7)
Other 5.4 3.1 38.5
______ ______ _______
100.0 100.0 (15.6)
______ ______ _______
The decrease in the sales of Nisaplin is a result of a reduction in inventory by
one of the Company's distributors. However, Nisaplin sales by this distributor
to its customers increased 14% in the first quarter compared to sales during
last year's first quarter. If this distributor had placed the same order this
past quarter as it did in the first quarter of 1994, the Company's total sales
for the quarter would have increased by 6%, compared to the same period last
year.
Ambicin sales growth is a result of a change in sales policy, with the Company's
U.S. distributor now being invoiced upon shipment instead of on a consignment
basis.
The growth in Direct-Set sales is attributable to a continued increase in the
Company's existing markets in the U.K. and Ireland, and the addition of sales in
the U.S., where the Company commenced marketing on July 1, 1995.
<PAGE>
Cost of Sales
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Cost of sales as a percentage of revenues was 51%, compared with 29% in 1994.
This reduction is mainly due to the higher proportion of lower margin products
(dairy starter cultures) included in sales. Also, a planned plant shut-down led
to non-absorption of some fixed costs.
Research Costs
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Research costs increased in the quarter by $0.2 million (59%) compared to the
first quarter of 1994. The increase in cost is a function of the Company's
increased commitment to its pharmaceuticals research projects.
Selling, General, and Administrative Expenses
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Selling, general, and administrative expenses increased in the quarter by $0.5
million (48%). This was due to the increased costs of corporate infrastructure,
as well as development expenses necessary for the launch of the Company's two
new products - Cardia Salt Alternative and Wipeout Dairy Wipes, both of which
are expected to be launched in early 1996.
(Loss)/Income Before Tax Expenses
- - ---------------------------------
The Company recorded a loss before tax expense of $1.1 million in the three
months ended September 30, 1995, compared with income of $0.5 million in the
three months ended September 30, 1994.
Tax Expense
- - -----------
The Company has a tax expense, despite having a loss before tax expense. The
expense is a result of tax payable on the profits of its U.K. subsidiary.
The Company's Aplin & Barrett subsidiary continues to be in dispute with the
U.K. tax authorities about the appropriateness of certain tax deductions
claimed. If the tax authorities ultimately deny these deductions, A&B, based on
the advice of outside counsel, believe it is more likely than not that its
position will be upheld on appeal. The tax effect of these potential deductions
has not been reflected in the accompanying condensed consolidated financial
statements.
<PAGE>
PART II - OTHER INFORMATION
ITEM 5 - OTHER MATTERS
On October 1, 1995, David Guttmann resigned as the Company's Chairman of the
Board of Directors. Sheldon G. Gilgore, M.D., was elected Chairman of the Board
of Directors, effective October 1, 1995.
ITEM 6 - EXHIBITS AND REPORT ON FORM 8-K
No exhibits are filed with this report.
No reports were filed on Form 8-K during the three months ended September 30,
1995.
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APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
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.
APPLIED MICROBIOLOGY, INC.
--------------------------
Registrant
Date: November 10, 1995 By: /s/ Fredric D. Price
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Fredric D. Price
President, Chief Executive Officer,
and Director (Principal Accounting
and Financial Officer)
