<PAGE>
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
For Quarter Ended: December 31, 1995
Commission File Number 0-14983
APPLIED MICROBIOLOGY, INC.
- --------------------------------------------------------------------------------
(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 18,348,227 shares as of December 31, 1995
- ----------------------------- -----------------------------------------
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1 Condensed Consolidated Financial
Statements (Unaudited)
Balance Sheets at December 31, 1995
and June 30, 1995 3 - 4
Statements of Operations for the three
months ended December 31, 1995 and December
31, 1994 and for the six months ended
December 31, 1995
and December 31, 1994 5
Statement of Stockholders' Equity
for the six months ended
December 31, 1995 6
Statements of Cash Flows for the six months
ended December 31, 1995 and
December 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
December 31 June 30
1995 1995
(Unaudited) (Note)
$'000 $'000
----- -----
ASSETS
Current assets:
Cash and cash equivalents 8,548 3,337
Trade accounts receivable less allowance for
doubtful accounts of $14,000 at December 31, 1995
and at June 30, 1995 1,745 1,836
Inventories 2,944 2,865
Prepayments and other current assets 1,045 694
Due from affiliated companies 763 627
------ ------
Total current assets 15,045 9,359
Property and equipment at cost less accumulated
depreciation of $4,214,000 at December 31, 1995
and $4,096,000 at June 30, 1995 3,843 3,446
Patent costs and licensed technology at cost less
accumulated amortization of $799,000 at December
31, 1995 and $691,000 at June 30, 1995 1,168 881
Other assets 60 102
------ ------
TOTAL ASSETS 20,116 13,788
====== ======
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
December 31 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 227 149
Accounts payable and accrued expenses 772 1,306
Due to affiliated companies 210 191
Other liabilities 89 89
Dividends payable 166 34
Taxes payable 300 257
------- -------
Total current liabilities 1,764 2,026
Note payable and lease obligation, less current portion 1,033 770
Deferred taxes payable 355 367
------- -------
TOTAL LIABILITIES 3,152 3,163
------- -------
REDEEMABLE PREFERRED STOCK
$0.01 par value. Issued and outstanding
1,500 shares at December 31, 1995 and
June 30, 1995 (aggregate involuntary
liquidation value $1,500,000) 1,500 1,500
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STOCKHOLDERS' EQUITY
Convertible preferred stock, $0.01 par
value, issued and outstanding 885
shares at December 31, 1995 and nil at
June 30, 1995 * --
Common stock, $0.005 par value,
authorized 25,000,000 shares.
Issued and outstanding 18,348,227
at December 31, 1995 and 18,176,858
at June 30, 1995 92 91
Additional paid-in capital 48,141 39,500
Accumulated deficit (32,003) (29,958)
Currency translation adjustment (766) (508)
------- -------
TOTAL STOCKHOLDERS' EQUITY 15,464 9,125
------- -------
TOTAL LIABILITIES, REDEEMABLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY 20,116 13,788
======= =======
*Value less than $500.00
Note: The Balance Sheet as of June 30, 1995 has been derived from the audited
consolidated financial statements at that date.
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Six Months Ended
December 31 December 31
1995 1994 1995 1994
---- ---- ---- ----
Net Sales 3,042 2,451 5,243 5,059
Other Operating Revenues 55 73 105 142
-------- -------- -------- --------
TOTAL REVENUES 3,097 2,524 5,348 5,201
Cost of Sales (1,341) (833) (2,490) (1,618)
-------- -------- -------- --------
GROSS PROFIT 1,756 1,691 2,858 3,583
Selling, General & Administrative
Expenses (1,733) (1,130) (3,256) (2,156)
Research Costs (626) (303) (1,098) (599)
Depreciation and Amortization (172) (158) (358) (308)
-------- -------- -------- --------
OPERATING (LOSS)/INCOME (775) 100 (1,854) 520
Interest Income 98 28 118 76
Interest Expense (23) (3) (49) (5)
-------- -------- -------- --------
(LOSS)/INCOME BEFORE TAX EXPENSE (700) 125 (1,785) 591
Tax Expense (48) (163) (59) (198)
-------- -------- -------- --------
NET (LOSS)/INCOME (748) (38) (1,844) 393
======== ======== ======== ========
(LOSS)/EARNINGS PER SHARE ($0.05) -- ($0.11) $0.02
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Convertible Common Additional Accumulated Currency Total Common
Preferred Stock Paid In Deficit Translation Shares
Stock Capital Adjustment Outstanding
$'000 $'000 $'000 $'000 $'000 $'000
----- ----- ----- ----- ----- ----- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1995 -- 91 39,500 (29,958) (508) 9,125 18,176,858
130,831 shares of common
stock issued on exercise of
options and warrants -- 1 374 -- -- 375 130,831
15,326 shares of common
stock issued to officer -- -- 54 -- -- 54 15,326
895 shares of convertible
preferred stock issued * -- 8,213 -- -- 8,213 --
10 shares of convertible
preferred stock converted
to 25,212 shares of common
stock (*) * -- -- -- * 25,212
Net loss for the period -- -- -- (1,844) -- (1,844) --
Redeemable preferred stock
dividend -- -- -- (67) -- (67) --
Convertible preferred stock
dividend -- -- -- (134) -- (134) --
Arising on translation during
the period -- -- -- -- (258) (258) --
--- --- ------ ------- ---- ------ ----------
Balance at December 31, 1995 * 92 48,141 (32,003) (766) 16,996 18,348,227
--- --- ------ ------- ---- ------ ----------
</TABLE>
* Value less than $500.00
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended
December 31
1995 1994
$'000 $'000
----- -----
Cash flows from operating activities:
Net (loss)/income (1,844) 393
Adjustments to reconcile net (loss)/income
to net cash used in operating activities:
Depreciation and amortization 358 308
Other non-cash items 96 --
Changes in assets and liabilities:
Decrease in trade accounts receivable 41 116
Increase in inventories (172) (333)
Increase in other assets (372) (153)
Increase in amounts due from
affiliated companies (155) (557)
Increase in taxes payable 54 169
Decrease in accounts payable and
accrued expenses (513) (156)
Increase/(decrease) in amounts due to
affiliated companies 13 (200)
Increase in other liabilities 3 39
------ ------
Net cash used in operating activities (2,491) (374)
------ ------
Cash flows from investing activities:
Acquisitions of property and equipment (744) (651)
Patent costs and licensed technology (395) (136)
------ ------
Net cash used in investing activities (1,139) (787)
------ ------
Cash flows from financing activities:
Dividends paid on redeemable preferred
stock (69) (60)
Note payable proceeds 35 --
Capital lease proceeds 389 --
Note payable repayments (4) (6)
Capital lease obligation repayments (79) --
Proceeds from issuance of convertible
preferred stock 8,213 --
Proceeds from issuance of common stock 375 18
------ ------
Net cash provided by/(used in) financing activities 8,860 (48)
------ ------
Effect of exchange rate movement (19) (2)
Net increase/(decrease) in cash and cash equivalents 5,219 (1,211)
Cash and cash equivalents at beginning of period 3,337 5,048
------ ------
Cash and cash equivalents at end of period 8,548 3,837
====== ======
Supplementary disclosure of cash flow information:
Interest paid 4 4
Tax paid 4 27
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 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 six
month period ended December 31, 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:
December 31 June 30
1995 1995
$'000 $'000
----- -----
Raw materials 140 144
Work in progress 1,977 1,262
Finished products 827 1,459
----- -----
2,944 2,865
----- -----
Note C Redeemable Preferred Stock Dividends payable as of December
31, 1995 are approximately $34,000 and Convertible Preferred
Stock Dividends payable as of December 31, 1995 are
approximately $132,000.
<PAGE>
APPLIED MICROBIOLOGY, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DECEMBER 31, 1995
Note D Earnings per share
Earnings per share for the quarter ending 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
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 December 31, 1995 do not include the
exercise of stock options and the conversion of the
Convertible Preferred Stock because the effect of such
inclusion would be to increase earnings per share.
<TABLE>
<CAPTION>
3 months ended 6 months ended
December 31 December 31
1995 1994 1995 1994
No. of Shares No. of Shares
------------- -------------
<S> <C> <C> <C> <C>
Average shares outstanding 18,276,455 18,163,691 18,228,975 18,160,916
Net effect of dilutive stock
options -- -- -- 158,012
----------- ----------- ----------- -----------
Total average shares 18,276,455 18,163,691 18,228,975 18,318,928
----------- ----------- ----------- -----------
$'000 $'000 $'000 $'000
----- ----- ----- -----
Net (loss)/income (748) (38) (1,844) 393
Preferred stock dividend (168) (31) (201) (64)
----------- ----------- ----------- -----------
Net (loss)/income attributable to
common stockholders (916) (69) (2,045) 329
=========== =========== =========== ===========
(Loss)/earnings per share of
common stock ($0.05) -- ($0.11) $0.02
</TABLE>
<PAGE>
Item 2 - Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations
Sales
Sales in the quarter increased from the corresponding period in 1994 by 24%, to
$3.0 million and in the six months by 4% to $5.2 million. These increases were
achieved despite the impact of a reduction in inventory by one of the Company's
major distributors that significantly affected sales in the first quarter.
The percentage of sales included in the total by product is:
% of sales in quarter % change
1995 1994 95 vs. 94
---- ---- ---------
Nisaplin (food preservative) 70.2 75.7 15.0
Ambicin (animal hygiene product) 4.6 5.0 13.0
Direct-Set (dairy starter cultures) 15.2 9.5 97.9
Other 10.0 9.8 26.7
----- ----- ----
Total 100.0 100.0 24.1
----- ----- ----
% of sales in six months % change
1995 1994 95 vs. 94
---- ---- ---------
Nisaplin 67.7 76.9 (8.8)
Ambicin 5.3 3.1 77.6
Direct-Set 17.8 9.0 104.3
Other 9.2 11.0 (13.3)
----- ----- -----
Total 100.0 100.0 3.6
----- ----- -----
The decrease in Nisaplin sales in the six months is due to the inventory
adjustment by the distributor mentioned above. If this distributor had placed
the same orders this year as last, Nisaplin sales would have increased in the
six months by approximately 7%. The growth in sales of Ambicin is a result of
added resources to develop sales in the North American market. Increases in
Direct-Set sales are due to a continued expansion in the Company's existing U.K.
and Ireland markets, in addition to new sales opportunities in the U.S., where
the Company commenced marketing efforts on July 1, 1995.
Cost of Sales
Cost of sales as a percentage of sales for the quarter was 44.1%, compared with
34.0% in 1994 and in the six months 47.5%, compared with 32.0% in 1994. These
increases are largely due to the higher proportion of sales in lower margin
dairy (Direct-Set) products.
Research Costs
Research costs increased in the quarter by $0.3 million (107%), and in the six
month period by $0.5 million (83%) compared to the same periods last year. These
increases are a result of the Company's expansion in spending in support of
pharmaceutical research projects.
<PAGE>
Selling, General, and Administrative Expenses ("S,G&A")
S,G&A expenses increased by $0.6 million (53%) for the three month period and
$1.1 million (54%) for the first six months, ended December 31, 1995. These
increases largely represented pre-launch investment spending necessary for the
introduction of the Company's two new products: Wipe Out(TM) Dairy Wipes and
Cardia(TM) Salt Alternative, which are expected to be launched in February and
March, respectively.
(Loss)/Income Before Tax Expenses
The Company recorded a loss before tax expense of $0.7 million in the quarter
ended December 31, 1995, compared with income of $0.1 million in the quarter
ended December 31, 1994. In the six months ended December 31, 1995, the Company
recorded a loss before tax expense of $1.8 million, compared with income of $0.6
million in the six months ended December 31, 1994. These losses are due to the
aforementioned declines in Gross Profits, combined with planned increases in
spending in Research and S,G&A.
Tax Expense
The Company had a tax expense in the quarter and in the six months despite
having a loss before tax. This is a result of tax payable on the profits of its
U.K. subsidiary.
The Company's subsidiary, Aplin & Barrett Ltd. ("A&B") continues to be in
dispute with the U.K. tax authorities about the appropriateness of certain tax
deductions claimed. A&B has obtained advice of outside counsel that the Company
will most likely win the dispute. The tax effect of these potential deductions
has not been reflected in the accompanying condensed consolidated financial
statements.
Financial Condition
As of December 31, 1995 the Company had working capital of $13.3 million,
including a cash balance of $8.5 million, compared to June 30, 1995 working
capital of $7.3 million, including a cash balance of $3.3 million. The increase
in working capital and cash balance is primarily the result of the private
placement in October 1995 of $8.95 million of Convertible Preferred Stock, which
netted the Company $8.2 million in cash. Augmenting this increase were warrant
and option conversions of $0.4 million and lease financing of $0.4 million.
Major components of cash outflows were the net loss of $1.8 million, added
working capital requirements of $1.1 million and equipment costs and license
fees of $1.1 million.
The Company plans to continue investment spending that is necessary for the
launch of Wipe Out Dairy Wipes and Cardia Salt Alternative. As a result, the
Company anticipates that it may report a loss for the current fiscal year.
<PAGE>
PART II - OTHER INFORMATION
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 December 31,
1995.
<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: February 1, 1996 By: /s/ Fredric D. Price
---------------- ----------------------
Fredric D. Price
President and Chief Executive Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 8,548
<SECURITIES> 0
<RECEIVABLES> 1,759
<ALLOWANCES> 14
<INVENTORY> 2,944
<CURRENT-ASSETS> 15,045
<PP&E> 8,057
<DEPRECIATION> 4,214
<TOTAL-ASSETS> 20,116
<CURRENT-LIABILITIES> 1,764
<BONDS> 1,033
1,500
0
<COMMON> 92
<OTHER-SE> 15,372
<TOTAL-LIABILITY-AND-EQUITY> 20,116
<SALES> 3,042
<TOTAL-REVENUES> 3,097
<CGS> 1,341
<TOTAL-COSTS> 3,872
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 23
<INCOME-PRETAX> (700)
<INCOME-TAX> 48
<INCOME-CONTINUING> (748)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (748)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
