<PAGE>
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, 1996
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 20,711,943 shares as of September 30, 1996
- ----------------------------- ------------------------------------------
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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, 1996
and June 30, 1996 3 - 4
Condensed Consolidated Statements of
Operations for the three months
ended September 30, 1996 and
September 30, 1995 5
Condensed Consolidated Statement of
Changes in Stockholders' Equity
for the three months ended
September 30, 1996 6
Condensed Consolidated Statements of
Cash Flows for the three months
ended September 30, 1996 and
September 30, 1995 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 13
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APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30 June 30
1996 1996
(Unaudited) (Note)
$'000 $'000
------ ------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents 4,606 8,431
Trade accounts receivable less allowance for
doubtful accounts of $81,000 at September and
at June 5,098 5,356
Inventories 2,861 3,088
Prepayments and other current assets 1,033 874
------ ------
Total current assets 13,598 17,749
Property and equipment at cost less accumulated
depreciation of $4,722,000 at September and
$4,493,000 at June 4,068 3,881
Patent costs and licensed technology at cost less
accumulated amortization of $773,000 at
September and $717,000 at June 1,609 1,624
Other asset 113 113
------ ------
TOTAL ASSETS 19,388 23,367
====== ======
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
<TABLE>
<CAPTION>
September 30 June 30
1996 1996
(Unaudited) (Note)
$'000 $'000
----- -----
<S> <C> <C>
LIABILITIES, REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of note payable and lease
obligation 175 195
Accounts payable and accrued expenses 2,222 1,889
Other liabilities 83 368
Dividends payable 326 231
Taxes payable 299 254
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Total current liabilities 3,105 2,937
Note payable and lease obligation 894 935
Long term loan 2,000 2,000
Deferred taxes payable 353 349
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TOTAL LIABILITIES 6,352 6,221
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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
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STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value. Issued
and outstanding 316 at September and
370 at June (aggregate liquidation value
$3,400,000 at September and $3,906,000
at June) * *
Common stock, $0.005 par value,
authorized 40,000,000 shares.
Issued and outstanding 20,711,943
at September and 20,469,776 at June 104 102
Additional paid-in capital 51,674 51,389
Accumulated deficit (39,658) (35,179)
Currency translation adjustment (584) (666)
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TOTAL STOCKHOLDERS' EQUITY 11,536 15,646
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TOTAL LIABILITIES, REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY 19,388 23,367
======= =======
</TABLE>
*Value less than $500.00
See notes to condensed consolidated financial statements
Note: The Balance Sheet as of June 30, 1996 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
September 30
1996 1995
$'000 $'000
------ ------
<S> <C> <C>
Net Sales 4,235 2,201
Other Operating Revenues 131 50
------ ------
TOTAL REVENUES 4,366 2,251
Cost of Sales (2,489) (1,149)
------ ------
GROSS PROFIT 1,877 1,102
Selling, General & Administrative Expenses (4,605) (1,523)
Research Costs (1,400) (472)
Depreciation and Amortization (242) (186)
------ ------
OPERATING LOSS (4,370) (1,079)
Interest Income 67 20
Interest Expense (37) (26)
------ ------
LOSS BEFORE TAX EXPENSE (4,340) (1,085)
Tax Expense (45) (11)
------ ------
NET LOSS (4,385) (1,096)
------ ------
LOSS PER SHARE ($0.21) ($0.06)
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Common Additional Accumulated Currency
Stock Paid In Deficit Translation
Capital Adjustment
$'000 $'000 $'000 $'000
------- ------- ------- -------
<S> <C> <C> <C> <C>
Balance at June 30, 1996 102 51,389 (35,179) (666)
Common stock issued on
exercise of options and
warrants 1 285 -- --
Conversion of preferred
stock to common 1 -- -- --
Net loss for the period -- -- (4,385) --
Redeemable preferred stock
dividend provided -- -- (94) --
Arising on translation during
the period -- -- -- 82
------- ------- ------- -------
Balance at September 30, 1996 104 51,674 (39,658) (584)
======= ======= ======= =======
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
September 30
1996 1995
$'000 $'000
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<S> <C> <C>
Cash flows from operating activities:
Net loss (4,385) (1,096)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 242 186
Other non-cash items -- 96
Changes in assets and liabilities:
Decrease in trade accounts receivable 299 432
Decrease/(increase) in inventories 253 (88)
Increase in other assets (152) (50)
Increase in amounts due from
affiliated companies -- (47)
Increase in taxes payable 44 7
Increase/(decrease) in accounts
payable and accrued expenses 322 (530)
Decrease in amounts due to affiliated
companies -- (114)
(Decrease)/increase in other liabilities (284) 11
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Net cash used in operating activities (3,661) (1,193)
------- -------
Cash flows from investing activities:
Acquisitions of property and equipment (344) (295)
Patent costs (41) (98)
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Net cash used in investing activities (385) (393)
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Cash flows from financing activities:
Dividends paid on redeemable preferred stock -- (34)
Increase in short term borrowing from
affiliate -- 2,000
Note payable repayments -- (2)
Capital lease obligation repayments (73) (40)
Proceeds from issuance of common stock 287 18
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Net cash provided by financing activities 214 1,942
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Net (decrease)/increase in cash and cash equivalents (3,832) 356
Cash and cash equivalents at beginning of period 8,431 3,337
Effect of exchange rate movement 7 (3)
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Cash and cash equivalents at end of period 4,606 3,690
======= =======
Supplementary disclosure of cash flow information:
Interest paid 37 2
Tax paid 0 4
</TABLE>
See notes to condensed consolidated financial statements
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
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 three
month period ended September 30, 1996 are not necessarily indicative of
the results that may be expected for the year ending June 30, 1997. 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, 1996.
Note B Inventories
The components of inventory consist of the following:
September 30 June 30
1996 1996
$'000 $'000
------ ------
Raw materials 306 240
Work in progress 815 960
Finished products 1,740 1,888
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2,861 3,088
------ ------
Note C Preferred Stock Dividends
Dividends payable are aproximately $240 thousand on Redeemable Preferred
Stock and $86 thousand on Preferred Stock as of September 30, 1996.
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1996
Note D Loss per share
Loss per share for the three months ended September 30, 1996 and
September 30, 1995 is computed based on the weighted average number of
shares actually outstanding. No common stock equivalents are included
in the computation of average shares outstanding because the effect of
such inclusion would be to increase earnings per share.
3 months ended
September 30
1996 1995
No. of Shares No. of Shares
------------- -------------
Average shares outstanding 20,590,860 18,181,495
$'000 $'000
----- -----
Net loss (4,385) (1,096)
Preferred stock dividend (94) (33)
------ ------
Net income attributable to common
stockholders (4,479) (1,129)
------ ------
Loss per share of common stock ($0.21) ($0.06)
Note E Pending Sale of Food Preservative Business
On September 24, 1996, the Company signed a non-binding letter of intent
to sell its nisin-based food preservative business to Burns Philp &
Company Limited, an affiliate of the Company. The transaction is
expected to be completed in December 1996. In the first quarter, the
food preservative business accounted for approximately 59% of total
assets and 63% of total sales of the Company. The Company will retain
exclusive rights to its nisin-based pharmaceutical and animal
healthcare business.
<PAGE>
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
Financial Condition
At September 30, 1996, the Company had working capital of $10.5 million,
including a cash balance of $4.6 million, compared to June 30, 1996 working
capital of $14.8 million, including a cash balance of $8.4 million. The
decrease in working capital and cash balance is primarily due to the net loss
of $4.4 million recorded for the period (see Results of Operations below),
partly offset by reductions in accounts receivable and inventories, and an
increase in accounts payable.
In addition to the outflow from operations, cash was used for capital
expenditures, patent costs, and payments supporting lease obligations. The
largest portion of the capital expenditures was for additional nisin production
capacity at an alternative site. The nisin produced at this site will
eventually replace the higher cost nisin currently manufactured at our
Beaminster, UK site.
Results of Operations
Sales
Sales in the quarter increased from the corresponding period in 1995 by 92%, to
$4.2 million.
The percentage of sales included in the total by product group is:
% of sales in quarter % change
1996 1995 96 vs. 95
---- ---- ---------
Food preservative 41.2 64.0 23.8
Animal hygiene products 12.5 6.4 278.6
Dairy ingredients 22.0 29.2 44.6
Cardia(TM) Salt Alternative 24.0 -- 100.0
Other 0.3 0.4 55.6
----- ----- -----
100.0 100.0 92.4
----- ----- -----
The increase in sales of food preservatives was largely due to abnormally low
sales in first quarter 1995, when one of the Company's largest distributors
substantially reduced purchasing levels in order to decrease inventories. First
quarter 1995 sales for food preservatives were 31% below the same period in
1994.
Sales of animal hygiene products have increased due to the inclusion of a new
product, Wipe Out, launched in February, 1996.
Sales of the lower margin dairy ingredients were up from the same period last
year. However, the Company has discontinued its distribution of these products
effective September 12, 1996.
Cardia, a special dietary food, was launched in April 1996, so there is no
previous year comparative.
Cost of Sales
Cost of sales as a percentage of sales was 59%, compared with 52% in 1995. This
increase is mainly due to a decrease in margins as the Company sold off some
inventories of dairy ingredients at cost, because the Company is exiting its
aforementioned distributorship for these products.
<PAGE>
Research Costs
Research costs increased in the quarter by $0.9 million (197%) compared to the
first quarter of 1995. The increase in cost is a function of the Company's
increased commitment to pharmaceutical drug development.
Selling, General, and Administrative Expenses
Selling, general, and administrative expenses increased in the quarter by $3.1
million (202%). This was mainly due to continued marketing investment spending
in support of the Company's two new products, Cardia and Wipe Out, both of
which were launched early in calendar 1996.
Loss Before Tax Expenses
The Company recorded a loss before tax expense of $4.3 million in the three
months ended September 30, 1996, compared with a loss of $1.1 million in the
three months ended September 30, 1995.
Tax Expense
The Company has a tax expense, despite having a loss before tax expense. The
expense is a result of taxes payable on the profits of its UK subsidiary.
Pending Sale of Food Preservative Business
On September 24, 1996 the Company signed a non-binding letter of intent to sell
its nisin-based food preservative business to Burns Philp & Company Limited, an
affiliate of the Company. The transaction is expected to be completed in
December 1996. In the first quarter, the food preservative business accounted
for approximately 59% of total assets and 63% of total sales of the Company. The
Company will retain exclusive rights to its nisin-based pharmaceutical and
animal healthcare business.
<PAGE>
PART II - OTHER INFORMATION
Item 6 - Exhibits and Report on Form 8-K
Exhibit 27 Financial Data Schedule.
No reports were filed on Form 8-K during the three months ended
September 30, 1996.
<PAGE>
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 11, 1996 By: /s/ Fredric D. Price
------------------------- -------------------------------------
Fredric D. Price
President and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 4606
<SECURITIES> 0
<RECEIVABLES> 5179
<ALLOWANCES> 81
<INVENTORY> 2861
<CURRENT-ASSETS> 13598
<PP&E> 8790
<DEPRECIATION> 4722
<TOTAL-ASSETS> 19388
<CURRENT-LIABILITIES> 3105
<BONDS> 2894
1500
0
<COMMON> 104
<OTHER-SE> 11432
<TOTAL-LIABILITY-AND-EQUITY> 19388
<SALES> 4235
<TOTAL-REVENUES> 4366
<CGS> 2489
<TOTAL-COSTS> 8736
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37
<INCOME-PRETAX> (4340)
<INCOME-TAX> 45
<INCOME-CONTINUING> (4385)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4385)
<EPS-PRIMARY> (.21)
<EPS-DILUTED> 0
</TABLE>
