SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
10-Q/A
For Quarter Ended: March 31, 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 ____
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 18,176,858 shares as of March 31, 1995
------------------------------ --------------------------------------
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1 Condensed Consolidated Financial
Statements (Unaudited)
Balance Sheets at March 31, 1995
and June 30, 1994 3 - 4
Statements of Operations for the three
months ended March 31, 1995 and
March 31, 1994, and for the
nine months ended March 31, 1995
and March 31, 1994 5
Statement of Stockholders' Equity
for the nine months ended
March 31, 1995 6
Statements of Cash Flows for the nine
months ended March 31, 1995
and March 31, 1994 7
Notes to Financial Statements 8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 12
SIGNATURES 13
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31 June 30 March 31 June 30
1995 1994 1995 1994
(Unaudited) (Note) (Unaudited) (Note)
GBP'000 GBP'000 $'000 $'000
------- ------- ------- ------
ASSETS
Current assets:
Cash and cash equivalents 1,833 3,273 2,933 5,048
Trade accounts receivable
less allowance for
doubtful accounts of
GBP 9,000 at March and
GBP 20,000 at June 856 855 1,370 1,319
Inventories (Note D) 1,279 945 2,046 1,458
Prepayments and other current
assets 476 396 762 611
Due from affiliated companies 330 4 528 6
----- ----- ------ ------
Total current assets 4,774 5,473 7,639 8,442
Property, plant and equipment,
at cost less accumulated
depreciation of GBP 2,659,000
at March and GBP 2,432,000
at June 2,067 1,650 3,307 2,545
Patent costs and licensed
technology at cost less
accumulated amortization of
GBP 393,000 at March and GBP
313,000 at June 555 505 888 779
Other asset 38 27 60 42
----- ----- ------ ------
TOTAL ASSETS 7,434 7,655 11,894 11,808
===== ===== ====== ======
See notes to condensed consolidated financial statements
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
March 31 June 30 March 31 June 30
1995 1994 1995 1994
(Unaudited) (Note) (Unaudited) (Note)
GBP'000 GBP'000 $'000 $'000
LIABILITIES, REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable 8 8 13 12
Accounts payable and accrued expenses 393 482 625 743
Due to affiliated companies - 152 - 234
Other liabilities 53 40 85 62
Dividends payable 21 17 34 26
Income tax payable 143 7 229 11
------- ------- ------- -------
Total current liabilities 618 706 986 1,088
Notes payable 9 14 14 22
Deferred tax payable 280 280 448 432
------- ------- ------- -------
TOTAL LIABILITIES 907 1,000 1,448 1,542
------- ------- ------- -------
Preferred stock:
Redeemable preferred stock,
$0.01 par value, authorised
6,500,000 shares issued
and outstanding 1,500 shares,
aggregate liquidation
value GBP 937,500 758 758 1,500 1,500
Stockholders' Equity:
Common stock, $0.005 par value,
authorised 25,000,000 shares.
Issued and outstanding
18,176,858 shares at March
31, and 18,155,858 at June 30 47 47 91 91
Additional paid-in capital 21.040 21,011 31,398 31,351
Accumulated deficit (15,449) (15,413) (23,345) (23,276)
Currency translation adjustments 131 252 802 600
------- ------- ------- -------
TOTAL STOCKHOLDERS' EQUITY 5,769 5,897 8,946 8,766
------- ------- ------- -------
TOTAL LIABILITIES, REDEEMABLE
PREFERRED STOCK AND
STOCKHOLDERS' EQUITY 7,434 7,655 11,894 11,808
======== ======== ======== ========
See notes to condensed consolidated financial statements
Note: The Balance Sheet as of June 30, 1994 has been derived from the audited
consolidated financial statements at that date.
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
-------------------------------------- ----------------------------------------
1995 1994 1995 1994 1995 1994 1995 1994
GBP'000 GBP'000 $'000 $'000 GBP'000 GBP'000 $'000 $'000
------- ------- ----- ----- ------- ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales 2,082 1,830 3,310 2,718 5,325 4,912 8,369 7,304
Cost of Sales (718) (513) (1,141) (762) (1,755) (1,499) (2,759) (2,229)
------- ------- ------- ------- ------- ------- ------- -------
GROSS PROFIT 1,364 1,317 2,169 1,956 3,570 3,413 5,610 5,075
Other operating income 47 70 75 104 138 170 217 253
Selling, general and
administrative expenses (775) (537) (1,232) (798) (2,156) (1,792) (3,388) (2,665)
Research costs (478) (160) (760) (238) (862) (333) (1,359) (496)
Depreciation and amortization (109) (95) (173) (141) (306) (289) (481) (429)
------- ------- ------- ------- ------- ------- ------- -------
OPERATING INCOME 49 595 79 883 384 1,169 599 1,738
Interest income 27 28 43 42 76 76 119 113
Interest expense - - - - (3) (1) (5) (1)
Other expenses (Note H) (239) - (380) - (239) - (380) -
------- ------- ------- ------- ------- ------- ------- -------
(LOSS)/INCOME BEFORE TAX EXPENSE (163) 623 (258) 925 218 1,244 333 1,850
Tax expense (69) (65) (110) (96) (195) (81) (308) (120)
------- ------- ------- ------- ------- ------- ------- -------
NET (LOSS)/INCOME (232) 558 (368) 829 23 1,163 25 1,730
======= ======= ======= ======= ======= ======= ======= =======
(LOSS)/EARNINGS
PER COMMON SHARE (GBP 0.01) GBP 0.03 ($ 0.02) $ 0.04 GBP 0.00 GBP 0.06 GBP 0.00 $ 0.09
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
Preferred Common Additional Accumulated Currency
Stock Stock Paid In Deficit Translation
Capital Adjustment
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------- ------- -------- ------- -----------
Balance at June 30, 1994 - 47 21,011 (15,413) 252
Common stock issued on
exercise of options - - 29 - -
Net income for the period - - - 23 -
Preference dividend paid - - - (38) -
Preference dividend provided - - - (21) -
Arising on translation
during the period - - - - (121)
---- ---- ------ ------ ----
Balance at March 31, 1995 - 47 21,040 (15,449) 131
==== ==== ====== ======= ====
$'000 equivalent - 91 31,398 (23,345) 802
See notes to condensed consolidated financial statements
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
March 31
1995 1994 1995 1994
GBP'000 GBP'000 $'000 $'000
------- ------- ----- -----
Cash flows from operating activities
Net income 23 1,163 25 1,730
Adjustments to reconcile net income
to cash (used in)/
provided by operating activities:-
Depreciation and amortization 306 289 481 429
Changes in assets and liabilities:
(Increase)/decrease in trade
accounts receivable (1) 321 (3) 479
(Increase)/decrease in inventories (334) 104 (526) 155
Increase in other current assets (93) (34) (146) (52)
(Increase)/decrease in amounts due
from affiliated companies (349) 128 (536) 186
Increase in income tax payable 136 39 214 57
Decrease in accounts payable and
accrued expenses (86) (308) (132) (460)
(Decrease)/increase in amounts due
to affiliated companies (164) 16 (255) 24
Increase/(decrease) in other
payables 14 (70) 21 (102)
------ ----- ------ -----
Net cash (used in)/provided by
operating activities (548) 1,648 (857) 2,446
------ ----- ------ -----
Cash flows from investing activities:
Acquisition of property and equipment (636) (114) (999) (170)
Patent and licenced technology costs (162) (141) (255) (209)
------ ----- ------ -----
Net cash used in investing activities (798) (255) (1,254) (379)
------ ----- ------ -----
Cash flows from financing activities:
Dividend paid (56) (97) (87) (144)
Repayment of notes payable (5) (6) (7) (9)
Proceeds from issue of common stock 29 21 47 31
Decrease in bank overdraft - (193) - (291)
------ ----- ------ -----
Net cash used in financing activities (32) (275) (47) (413)
------ ----- ------ -----
Net (decrease)/increase in cash and
cash equivalents (1,378) 1,118 (2,158) 1,654
Cash and cash equivalents at
beginning of period 3,273 2,366 5,048 3,571
Effect of exchange rate movement (62) 36 (43) (24)
------ ----- ------ -----
Cash and cash equivalents at end of
period 1,833 3,520 2,933 5,201
====== ===== ====== =====
Supplementary disclosure of cash
flow information:
Interest paid 3 1 5 1
Tax paid 58 138 83 202
See notes to condensed consolidated financial statements
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 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) considered necessary for a
fair presentation have been included. Operating results for the nine
month period ended March 31, 1995 are not necessarily indicative of the
results that may be expected for the year ending June 30, 1995. 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, 1994.
Note B Currency
As a consequence of the acquisition in August 1992 of Aplin & Barrett
Limited, which for financial reporting purposes is accounted for as a
reverse acquisition, the reporting currency for the combined entity is
the Great Britain pound (GBP). For information purposes, U.S. dollar
($) translated figures are included.
Note C Exchange Rate
Balances denominated in $ have been converted to GBP at the following
rates:-
1994/5 1993/4
Rate Rate Method
------ ------ ------
Statement of operations
and Statement of cash
flows:
- quarter to September 30 1.5432 1.4928 average rate
- quarter to December 31 1.578 1.4829 for period
- quarter to March 31 1.5897 1.4850
Balance sheet
- assets and liabilities 1.6000 1.4777 period end rate
- stockholders' equity historical rate
accounts
Note D Inventories
The components of inventory consist of the following:-
March 31 June 30
1995 1994
GBP'000 GBP'000
------- -------
Raw materials 83 62
Work in process 411 396
Finished products 785 487
------- -------
1,279 945
------- -------
Note E Preferred Stock Dividends
Dividends payable on Preferred Stock as of March 31, 1995 are
approximately GBP 21,000.
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
MARCH 31, 1995
Note F Income Taxes
Effective July 1, 1992 the Company adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. The Company
has fully reserved the tax benefit of its operating loss carry forwards
due to the fact that the likelihood of realization of the tax benefits
cannot be established.
Note G Earnings per share
Earnings per share for the quarters ending September 30, 1993, December
31, 1993, March 31, 1994 and September 30, 1994 are 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 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. Earnings per share for the quarters ending
December 31, 1994 and March 31, 1995 do not include the exercise of
stock options because the effect of such inclusion would be to increase
earnings per share.
3 months ended 9 months ended
March 31 March 31
1995 1994 1995 1994
No. of shares No. of shares
Average shares outstanding 18,174,358 18,122,247 18,165,397 17,995,557
Net effect of dilutive stock
options - 795,760 105,341 810,686
--------- ---------- ---------- ----------
Total average shares 18,174,358 18,918,007 18,270,738 18,806,243
--------- ---------- ---------- ----------
GBP'000 GBP'000 GBP'000 GBP'000
------- ------- ------- -------
Net (loss)/income (232) 558 23 1,163
Preferred stock dividend (21) (15) (59) (69)
--------- ---------- ---------- ----------
Net (loss)/income
attributable to common
stockholders (253) 543 (36) 1,094
Earnings per share of
common stock (GBP 0.01) GBP 0.03 GBP 0.00 GBP 0.06
Note H Other expenses
a) In September 1994, the Company terminated a lease. In the
quarter ended March 31, 1995, the Company settled the
dispute arising from this termination, and an amount of GBP
146,000 ($ 232,000) was included in the Income Statement.
b) In addition to the above, the Company had incurred
professional fees relating to its proposed relocation. A
portion of these are considered irrecoverable, and GBP
37,000 ($ 59,000) was included in the Income Statement in
the quarter.
c) The Company terminated the employment of a senior executive
based in the U.K. Costs of this termination, GBP 56,000
($ 89,000) was included in the Income Statement in the quarter.
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Following the acquisition in August 1992 of Aplin & Barrett Limited (A&B),
which was accounted for as a reverse acquisition, in accordance with U.S. GAAP
the reporting currency for the financial statements is the Great Britain Pound
Sterling (GBP). Most of the figures in this discussion are therefore stated
in that currency. Certain salient figures are also shown in U.S. dollars ($),
based on the exchange rates disclosed in Note C to the condensed consolidated
financial statements.
Financial Condition
At March 31, 1995 the Company had working capital of GBP 4.156 million ($
6.653 million), including a cash balance of GBP 1.833 million ($ 2.933
million), compared to June 30, 1994 working capital of GBP 4.767 million ($
7.354 million), including a cash balance of GBP 3.273 million ($ 5.048
million). The reduction in cash balance is due in part to an increase in
amounts due from affiliates, due to timing of transactions, of approximately
GBP 0.326 million ($ 0.522 million), and the build up of finished goods
inventory to meet increased demand.
The Company had a cash outflow from operations in the nine months to March 31,
1995 of GBP 0.548 million ($ 0.857 million), compared with the cash generated
of GBP 1.648 million ($ 2.446 million) in the nine months to March 31, 1994.
In addition to the outflow from operations, cash was used for capital
expenditure (GBP 0.798 million) and preferred stock dividends (GBP 0.056
million). The largest portion of the capital expenditure was spent at the
Company's UK manufacturing facility to upgrade the operations. Further
significant expenditure is anticipated in this area, although the Company is
considering, among other things, financing through leasing of equipment and
raising capital.
Results of Operations
Sales
Sales in the quarter increased over the corresponding period in 1994 by 13.8%,
to GBP 2.082 million ($ 3.310 million), and in the nine month period by 8.4%
to GBP 5.325 million ($ 8.369 million). In $ terms, due to the fluctuation
in the exchange rate since last year, the increases were 21.8% for the
quarter, and 14.6% for the nine month period.
The percentage of sales included in the total by product is:-
% of sales in quarter % change
1995 1994 1995 vs 1994
---- ---- ------------
GBP $
Nisaplin 81.7 75.9 21.2 29.9
Ambicin 6.9 7.5 24.1 33.1
Direct-Set 7.3 4.7 31.0 40.7
Agency 2.0 1.4 100.0 116.1
Others 2.1 10.5 (75.7) (74.4)
------ ------ ------ ------
100.0 100.0 13.8 21.8
% of sales in 9 months % change
1994/5 1993/4 1995 vs 1994
------ ------ ------------
GBP $
Nisaplin 78.8 76.2 12.2 18.5
Ambicin 4.6 7.1 (29.6) (25.1)
Direct-Set 8.3 5.3 69.5 76.3
Agency 2.8 1.3 135.9 143.6
Others 5.5 10.1 (41.9) (37.4)
------ ------ ------ ------
100.0 100.0 8.4 14.6
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Nisaplin sales increased in the quarter both in terms of quantity (+ 7%) and
selling price (+ 13.3%). For the nine month period, quantity increased by
4.3%, and price by 7.5%.
Expenses
Certain items were re-classified between expense categories in this quarter
in order to better reflect the proper categorization. These re-
classifications included expenses for the first three quarters. These items
are:-
<TABLE>
<CAPTION>
Quarter 9 months
-------------------------------- -------------------------------
Cost of Cost of
GBP'million Sales Research S,G & A Sales Research S,G & A
----- -------- ------- ----- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Expenses reported on prior method 0.557 0.193 1.221 1.594 0.577 2.602
Current period adjustment 0.071 .157 (0.228) 0.161 0.285 (0.446)
Prior two periods adjustment 0.090 0.128 (0.218) N/A N/A N/A
----- ----- ------ ----- ----- ------
Expenses reported on current method 0.718 0.478 0.775 1.755 0.862 2.156
----- ----- ------ ----- ----- ------
</TABLE>
A fuller description of these items is included in the following paragraphs.
Cost of sales
Costs associated with quality management have been transferred to cost of
sales from selling, general and administrative expenses, to reflect the fact
that quality assurance and quality control are production related functions.
The effects of this change are shown in the above table.
Before this change, cost of sales as a percentage of revenues was 26.7% in the
quarter and 29.9% in the nine months, which is comparable to the 1994 figures
of 28.0% and 30.5% respectively.
Research costs
Research this quarter includes a re-classification of technical services and
process development expenses from selling, general and administrative
expenses. Technical services is a food research function and process
development is an applied research function. The effects of this change are
shown in the above table.
As a result, research costs have increased by GBP 0.318 million (198.8%) in
the quarter, and by GBP 0.529 million (158.9%) in the nine months. Without
the re-classifications, the increases would be GBP 0.033 million (20.6%) for
the quarter, and GBP 0.244 (73.3%) for the nine months.
The Company has continued to increase its investment in research, mostly in
the pharmaceutical area. Additional staff have been recruited both in U.S.
and U.K., and further recruitment is anticipated. The Company will shortly
be relocating its U.S. laboratories to provide better facilities.
Selling, General and Administrative Expenses
Certain costs have this quarter been re-classified out of selling, general and
administrative expenses - see preceding paragraphs.
As a result, selling, general and administrative expenses have increased by
GBP 0.238 million (44.3%) in the quarter, and by 0.364 million (20.3%) in the
nine months. Without the re-classifications the increases would have been GBP
0.684 million (127.4%) for the quarter, and GBP 0.810 million (45.2%) for the
nine months.
The main components of these increases are increased sales and marketing
costs, including sales commissions increasing due to higher sales; and other
costs as the Company consolidates
its headquarters and drug research
activities in Tarrytown, New York.
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Operating Income
In the three months to March 31, 1995, operating income was GBP 0.049 million
($ 0.079 million), compared with GBP 0.595 million ($ 0.833 million) in 1994.
Other Expenses
The Company incurred certain expenses in the quarter which are considered non-
operating and non-recurring. These are included in Other Expenses, and
comprise:-
GBP'000 $'000
------- -----
Settlement of lease dispute 146 232
Professional fees related to above 37 59
Termination payments for executive 56 89
------ ------
270 380
====== ======
A fuller explanation of these items is given in note to condensed financial
statements H.
Tax Expense
The Company's A&B subsidiary continues to be in dispute with the U.K. tax
authorities about the appropriateness of certain tax deductions claimed. The
Company continues to believe it is more likely than not that it will prevail
in respect of previous years. The Company is, however, prepared to agree with
the authorities that it will limit future deductions to a percentage of its
profits, with the balance being deferred to future periods.
Accordingly, the tax expense for the quarter and for the nine months has been
calculated on the basis that A&B will limit these deductions to 80% of its
income before such deductions.
<PAGE>
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
No exhibits are filed with this report.
No reports were filed on Form 8-K during the three months ended March 31,
1995.
<PAGE>
APPLIED MICROBIOLOGY, INC.
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 authorised.
APPLIED MICROBIOLOGY, INC.
Registrant
Date: September 11, 1995 By: /s/ Fredric D. Price
Fredric D. Price
President and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,833
<SECURITIES> 0
<RECEIVABLES> 865
<ALLOWANCES> 9
<INVENTORY> 1,279
<CURRENT-ASSETS> 4,774
<PP&E> 4,726
<DEPRECIATION> 2,659
<TOTAL-ASSETS> 7,434
<CURRENT-LIABILITIES> 618
<BONDS> 0
<COMMON> 47
758
0
<OTHER-SE> 5,722
<TOTAL-LIABILITY-AND-EQUITY> 7,434
<SALES> 5,325
<TOTAL-REVENUES> 5,539
<CGS> 1,755
<TOTAL-COSTS> 5,079
<OTHER-EXPENSES> 239
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3
<INCOME-PRETAX> 218
<INCOME-TAX> 195
<INCOME-CONTINUING> 23
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23
<EPS-PRIMARY> .00
<EPS-DILUTED> .00
</TABLE>
