<PAGE> 1
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended April 30, 1995
--------------
AND
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission File Number 0-15266
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BIO-REFERENCE LABORATORIES, INC.
- - -------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2405059
- - ------------------------------- ---------------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
481 Edward H. Ross Drive, Elmwood Park, NJ 07407
- - ------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (201) 791-2600
--------------
- - -------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities and Exchange Act of 1934 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 Securities and Exchange Act of
1934 after the distribution of securities under a plan confirmed by a
court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 6,065,514 ($.01 par
value) at June 1, 1995.
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BIO-REFERENCE LABORATORIES, INC.
--------------------------------
FORM 10-QSB
-----------
APRIL 30, 1995
--------------
I N D E X
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of April 30, 1995 (unaudited)
Statements of Operations for the
three months and six months ended April 30, 1995
and April 30, 1994 (unaudited)
Statements of Cash Flows for the
six months ended April 30, 1995 and April 30,
1994 (unaudited)
Notes to financial statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE> 3
BIO-REFERENCE LABORATORIES, INC.
--------------------------------
BALANCE SHEET
-------------
As of April 30, 1995
--------------------
(Unaudited)
-----------
ASSETS
------
<TABLE>
<S> <C>
CURRENT ASSETS:
- - --------------
Cash $ 387,344
Cash- Restricted 6,889,832
Accounts Receivable (Net) 7,889,330
Inventory 380,028
Other Current Assets 339,988
------------
TOTAL CURRENT ASSETS $ 15,886,522
-------------------- ------------
PROPERTY, PLANT AND EQUIPMENT $ 1,983,938
-----------------------------
LESS: Accumulated Depreciation 800,042
- - ---- ------------
TOTAL PROPERTY,
PLANT AND EQUIPMENT - NET $ 1,183,896
------------------------- ------------
OTHER ASSETS:
- - ------------
Due from Related Party $ 250,718
Deposits 271,924
Goodwill (Net of Accumulated
Amortization of $739,202) 3,019,525
Deferred Charges (Net of Accumulated
Amortization of $1,116,681) 2,708,383
Cash- Restricted 62,168
Other Assets 195,940
------------
TOTAL OTHER ASSETS $ 6,508,658
------------------ ------------
TOTAL ASSETS $ 23,579,076
------------ ============
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
<PAGE> 4
BIO-REFERENCE LABORATORIES, INC.
--------------------------------
BALANCE SHEET
-------------
As of April 30, 1995
--------------------
(Unaudited)
-----------
LIABILITIES AND SHAREHOLDERS' EQUITY [DEFICIT]
----------------------------------------------
<TABLE>
<S> <C>
CURRENT LIABILITIES:
- - -------------------
Accounts Payable $ 2,603,222
Salaries and Commissions Payable 759,408
Accrued Expenses 625,911
Current Portion of Long-Term Debt 3,743,528
Current Portion of Leases Payable 316,493
Subordinated Notes 186,364
Note Payable 3,707,030
Taxes Payable 339,200
-----------
TOTAL CURRENT LIABILITIES $12,281,156
------------------------- -----------
LONG-TERM LIABILITIES:
- - ---------------------
Long-Term Portion of Long-Term Debt 261,216
Long-Term Portion of Leases Payable 293,606
Notes Payable 116,385
-----------
TOTAL LONG-TERM LIABILITIES $ 671,207
--------------------------- -----------
SHAREHOLDERS' EQUITY:
- - --------------------
Preferred Stock $.10 Par Value;
Authorized 1,062,589 shares,
None Issued $ --
Senior Preferred Stock, $.10 Par Value;
Authorized 604,078 shares,
Issued and Outstanding 604,078 shares --
Common Stock, $.01 Par Value;
Authorized 18,333,333 shares,
Issued and Outstanding 6,065,514 shares 60,655
Additional Paid-In Capital 22,269,038
Accumulated [Deficit] (11,676,730)
-----------
Totals $10,652,963
Deferred Compensation (26,250)
-----------
TOTAL SHAREHOLDERS' EQUITY $10,626,713
-------------------------- -----------
TOTAL LIABILITIES AND
---------------------
SHAREHOLDERS' EQUITY $23,579,076
-------------------- ===========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
<PAGE> 5
BIO-REFERENCE LABORATORIES, INC.
--------------------------------
STATEMENTS OF OPERATIONS
------------------------
[UNAUDITED]
-----------
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ ----------------
April 30, April 30,
-------- --------
1 9 9 5 1 9 9 4 1 9 9 5 1 9 9 4
------- ------- ------- -------
<S> <S> <C> <C> <C>
NET REVENUES: $7,690,359 $5,435,142 $15,332,779 $10,171,303
- - ------------ ---------- ---------- ----------- -----------
COST OF SERVICES:
- - ----------------
Depreciation $ 81,978 $ 31,971 $ 158,754 $ 58,120
Employee Related Expenses 1,767,207 1,451,333 3,516,461 2,825,236
Reagents and Lab Supplies 850,053 644,091 1,747,580 1,245,172
Other Cost of Services 967,090 649,763 1,773,849 1,282,649
---------- ---------- ----------- -----------
TOTAL COST OF SERVICES $3,666,328 $2,777,158 $ 7,196,644 $ 5,411,177
---------------------- ---------- ---------- ----------- -----------
GROSS PROFIT ON REVENUES $4,024,031 $2,657,984 $ 8,136,135 $ 4,760,126
- - ------------------------
General and Administrative Expenses:
- - -----------------------------------
Depreciation and Amortization $ 172,940 $ 109,422 $ 326,707 $ 220,975
Other General and Admin. Expenses 2,447,077 1,780,883 4,975,938 3,261,279
Bad Debt Expense 940,803 595,339 1,928,311 1,100,523
---------- ---------- ----------- -----------
TOTAL GENERAL AND ADMIN. EXPENSES $3,560,820 $2,485,644 $ 7,230,956 $ 4,582,777
--------------------------------- ---------- ---------- ----------- -----------
OPERATING INCOME $ 463,211 $ 172,340 $ 905,179 $ 177,349
----------------
OTHER (INCOME) EXPENSES:
- - -----------------------
Interest Expense $ 143,052 $ 104,934 $ 262,197 $ 236,730
Interest Income (63,189) (35,949) (105,898) (67,270)
---------- ---------- ----------- -----------
TOTAL OTHER EXPENSES - NET $ 79,863 $ 68,985 $ 156,299 $ 169,460
-------------------------- ---------- ---------- ----------- -----------
NET INCOME BEFORE EXTRAORDINARY ITEM $ 383,348 $ 103,355 $ 748,880 $ 7,889
- - ------------------------------------
Extraordinary Item - Gain on
Extinguishment of Debt -- -- -- 370,789
---------- ---------- ----------- -----------
NET INCOME $ 383,348 $ 103,355 $ 748,880 $ 378,678
- - ---------- ========== ========== =========== ===========
NET INCOME PER SHARE BEFORE EXTRAORDINARY ITEM $ .06 $ .003 $ .12 $ .02
---------------------------------------------- ========== ========== =========== ===========
NET INCOME PER SHARE $ .06 $ .003 $ .12 $ .06
-------------------- ========== ========== =========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 6,057,514 5,554,903 5,951,763 4,899,730
--------------------------------------------- ========== ========== =========== ===========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
<PAGE> 6
BIO-REFERENCE LABORATORIES, INC.
--------------------------------
STATEMENTS OF CASH FLOWS
------------------------
[UNAUDITED]
-----------
<TABLE>
<CAPTION>
Six months ended
----------------
April 30,
--------
1 9 9 5 1 9 9 4
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
- - --------------------
Net Income $ 748,880 $ 378,678
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Deferred Compensation 38,885 22,892
Depreciation and Amortization 485,461 279,095
Amortization of Deferred Interest -- 42,876
Amortization of Deferred Discount -- 15,625
Provision for Bad Debts 1,928,311 1,100,523
Forgiveness of Debt -- (370,789)
Change in Assets and Liabilities, net of
effects from purchase of GenCare
(Increase) Decrease in:
Accounts Receivable (3,629,494) (1,808,728)
Other Assets 26,279 6,115
Prepaid Expenses and Other Current Assets (223,080) (185,360)
Deferred Charges and Goodwill (506,089) 522,901
Increase (Decrease) in:
Accounts Payable and Accrued Liabilities 374,165 (722,155)
----------- -----------
NET CASH - OPERATING ACTIVITIES $ (756,682) $(1,764,129)
-------------------------------
INVESTING ACTIVITIES:
- - --------------------
Acquisition of Equipment and
Leasehold Improvements $ (264,835) $ (260,046)
----------- -----------
FINANCING ACTIVITIES:
- - --------------------
Proceeds from Stock Offering $ -- $ 8,614,425
Proceeds from Exercise of Warrants 3,150
Payments of Long-Term Debt (1,501,243) (4,645,332)
Increase in Long-Term Debt 451,513 4,529,600
Payments of Capital Lease Obligations (122,493) (51,786)
Payments of Subordinated Notes Payable (25,039) (313,000)
Increase (Decrease) in Cash Overdraft -- (93,725)
Increase in Restricted Cash (2,500,000) (4,452,000)
Increase in Revolving Line of Credit 3,707,000 --
----------- -----------
NET CASH - FINANCING ACTIVITIES $ 12,888 $ 3,588,182
------------------------------- ----------- -----------
NET INCREASE (DECREASE) IN CASH $(1,008,629) $ 1,564,007
-------------------------------
CASH AT BEGINNING OF PERIODS 1,395,973 --
---------------------------- ----------- -----------
CASH AT END OF PERIODS $ 387,344 $ 1,564,007
---------------------- =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
- - -------------------------------------------------
Cash paid during the period for:
Interest $ 181,002 $ 217,893
Income Taxes $ 901 $ 753
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
<PAGE> 7
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING
- - ---------------------------------------------------------
ACTIVITIES:
- - ----------
In January, 1994, $45,000 of debt was converted into 15,480 shares of
common stock.
In February, 1994, the Company incurred a capital lease obligation of
$33,500 in connection with the acquisition of medical equipment.
In March, 1994, $300,000 of debt was converted into 102,779 shares of
common stock.
In April, 1994, the Company issued 200,000 shares of common stock in
consideration for a covenant not-to-compete.
In June, 1994, the Company incurred capital leases for $206,142 in
connection with the acquisition of 22 automobiles and in addition,
$100,000 of cash was transferred to a restricted certificate of deposit as
collateral on the lease.
In July, 1994, the Company incurred a capital lease obligation of $267,490
in connection with the acquisition of medical equipment.
In September, 1994, $60,000 of debt was converted into 20,000 shares of
common stock.
In December, 1994, the Company incurred capital lease obligations of $13,713
in connection with the acquisition of office furniture and $12,130 in
connection with the acquisition of leasehold improvements.
In January, 1995, the Company incurred capital lease obligations of $58,668
in connection with the acquisition of computerized imaging systems.
In January, 1995, the Company issued 444,585 shares of common stock for
all of the issued and outstanding common and preferred stock of GenCare
Biomedical Research Corporation ("GenCare"). An aggregate 133,333 shares
are to be held in escrow pending certain required collections from GenCare
customers. The fair market value of the 311,252 shares to be issued
immediately was $1,634,073 on the date of the closing. In addition, the
Company incurred capital lease obligations of $32,266 in connection with the
acquisition of 4 automobiles.
In February, 1995, $37,621 of trade accounts payable was converted into
debt.
In April, 1995, the Company issued 12,000 shares of common stock in
payment of a $25,500 fee to a public relations firm pursuant to a one year
contract (renewable annually).
The Accompanying Notes are an Integral part of These Financial Statements.
<PAGE> 8
BIO-REFERENCE LABORATORIES, INC.
--------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
[1] In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments [consisting only of normal
adjustments and recurring accruals] which are necessary to present a fair
statement of the results for the interim periods presented.
[2] The results of operations for the six month period ended April 30,
1995 are not necessarily indicative of the results to be expected for the
entire year.
[3] The financial statements and notes thereto should be read in
conjunction with the financial statements and notes for the year ended
October 31, 1994 as filed with the Securities and Exchange Commission in
the Company's Annual Report on Form 10-KSB.
[4] Revenues are recognized at the time the services are performed.
Revenues on the statement of operations is net of the following amounts
for allowances and discounts.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
April 30 April 30
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C>
$6,140,452 $3,219,581 $11,530,708 $5,702,041
</TABLE>
[5] An allowance for contractual credits and uncollectible accounts is
determined based upon a review of the reimbursement policies and
subsequent collections for the different types of receivables. This
allowance, which is net against accounts receivable was $2,251,582 at
April 30, 1995.
[6] Inventory, consisting primarily of purchased clinical supplies, is
valued at the lower of cost (first-in, first-out) or market.
[7] At April 30, 1995, the Company had $6,952,000 of restricted cash which
represents collateral for two demand notes issued pursuant to bank loans and
collateral for a capital lease on automobiles.
[8] At April 30, 1995, the Company had $7,339,344 in cash in excess of the
federally insured limits, however $6,952,000 of this amount represents
collateral for demand loans with the same banks.
[9] Effective November 1, 1993, the Company adopted FAS 109 "Accounting for
Income Taxes." The effect of the adoption is not material to the
financial statements. The Company elected not to restate prior financial
statements.
The Company has net operating loss carryforwards at October 31, 1994 of
approximately $10,700,000 which begins to expire in 2002. As a result of
these carryforwards, the Company has a deferred tax asset of approximately
$4,600,000 which has been offset by a valuation account of $4,600,000,
resulting in a net deferred asset of $-0-.
[10] In December, 1993, $1,359,375 principal [includes $271,875 in accrued
interest] was paid to subordinated promissory note holders who purchased
units in the March 31, 1993 private offering. Two note holders were repaid an
aggregare $46,875 in January 1994.
[11] In December 1993 as a result of the Company's public offering
hereinafter described, $1,000,000 was deposited in a savings account with
Manufacturers and Traders Trust Company as collateral on the note payable
to this bank. As a result of the deposit, letter of credit holders who had
posted such letters in the aggregate amount of $1,000,000 as colletral
therfore, were relieved of their obligation to secure this debt. In April,
1995, the monies in this savings account were utilized to repay the note to
this bank.
[12] In December, 1993, the Company paid $273,734 to the Internal Revenue
Service for past due payroll tax penalties and interest. As a result of
the payment, the Internal Revenue Service released all liens imposed on
the Company.
[13] On January 13, 1994, pursuant to a Registration Statement on Form
SB-2 (File No. 33-68678) declared effective by the Securities and Exchange
Commission on November 23, 1993, the Company completed the sale of an
aggregate 1,035,000 Units, each Unit consisting of three shares of Common
Stock, three Class A Redeemable Warrants and one Class B Redeemable
Warrant in an underwritten public offering on a "firm-commitment" basis
through A.S. Goldmen & Co., Inc. as Underwriter. The Units were sold at a
sales price of $10.00 per Unit of $10,350,000 in the aggregate. Each
Class A Redeemable Warrant and each Class B Redeemable Warrant entitles
the holder to purchase one share of Common Stock at an exercise price of
$4.50 and $6.75 respectively for a 60-month period commencing November 23,
1993. The Underwriter received an underwriting commission and a non-
accountable expense allowance equal to 13% of the gross offering proceeds
and also was issued Underwriters's Warrants exercisable to purchase 79,166
additional Units at $16.50 per Unit. The Company also retained the
Underwriter as a financial consultant for a two-year period at a monthly
consulting fee of $2,000.
<PAGE> 9
The Company also registered the 446,677 Class A Redeemable Warrants and the
112,500 Class B Redeemable Warrants purchased by the investors in the December
1992 Bridge Financing and the March 1993 Private Placement and the underlying
shares in the Registration Statement so as to permit the public offer and sale
of such Warrants and shares.
The Company indicated in the Registration Statement that it intended to
apply the net proceeds of the offering to repay bank and credit line
indebtedness (approximately $3,400,000); to repay the Notes purchased in
the March 1993 Private Placement (approximately $1,400,000); to repay
certain payables and tax arrearages (approximately $500,000); and to apply
the balance to working capital and as reserves for possible acquisitions.
In January 1994, the Company used a portion of the net offering proceeds
to pay its outstanding credit line indebtedness to Towers Financial
corporation by payment of approximately $2,100,000 and paid the Notes
issued in connection with the March 1993 Private Placement. In addition,
the Company applied a portion of the net offering proceeds to the payment
in full of its outstanding federal income tax liabilities and is currently
paying its tax arrearages to the States of New Jersey and New York in
accordance with installment agreements with those jurisdictions.
As a result of the November 1993 public offering, the Common Stock was
readmitted for trading on the NASDAQ System under the symbol "BRLI."
[14] In January, 1994, $3,352,000 was received for a demand note payable
to Gotham Bank of New York. Interest is due at three percent above the
bank's corporate savings account rate. The Company deposited a similar sum
in a savings account with this bank as collateral for the loan.
[15] In March, 1994, the Company purchased various furniture, fixtures,
machinery, equipment and customer lists from a non-affiliated party. As
consideration, the seller received $240,000 (including $14,400 of
interest) of which $48,000 was paid at closing and the remainder paid over
time based on the amount collected from its customer list. In addition,
the two principals signed three year employment agreements.
[16] In April, 1994, the Company issued 200,000 shares of restricted
common stock in consideration for a covenant not-to-compete.
[17] In April 1994, Town Clinical laboratory, Ltd. ["TCL"], a clinical
testing laboratory with principal offices in Nassau County, New York,
filed a complaint in the New York State Supreme Court, Nassau County
against the Company and its principal executive officer. The complaint
alleges unfair competition and conspiracy between the Company, its
principal executive officer and a former TCL employee to destroy TCL's
business. The complaint, which contains four causes of action, requests
that preliminary and permanent injunctions be issued and further requests
actual damages to be determined at trial plus punitive damages in the
amount of $2,000,000 in each of the four causes of action. The Company
and its principal executive officer have filed an answer denying the
material allegations of the complaint and requesting judgment dismissing
TCL's complaint. Management believes that the allegations in the
complaint against the Company and its principal executive officer are
without merit and intends to vigorously contest this action. However,
management is unable to predict the probable outcome.
In August 1994, the Company and various of its officers and directors were
named as a defendant in an action commenced by a former employee in the
Superior Court of New Jersey. The complaint alleges than an employment
agreement between the Company and the former employee was breached, and
demands an unspecified amount of compensatory and punitive damages. The
Company and the other defendants have denied the material allegations and
have filed a counterclaim against the former employee based upon his
alleged breach of the employment agreement by his lack of performance
thereunder. The Company intends to vigorously defend its position in this
action.
The Company is currently under audit by the State of New Jersey in
connection with sales and use tax matters. The liability to the State
resulting from the audit cannot be determined at this time, however, the
Company believes it will not have a material impact on the Company.
In the normal course of its business, the Company is exposed to a number
of other asserted and unasserted potential claims. In the opinion of
management, the resolution of these matters will not have a material
adverse affect on the Company's financial position or results of
operations.
[18] In November, 1994, the Company purchased a customer list and two
leased draw stations from a clinical laboratory. As consideration, the
Company assumed the seller's obligations under the leases and entered into
an agreement to pay up to $600,000 over a five and one-half year period
based on cash collected on customer list revenues. The minimum liability
for these payments is $120,000, of which $30,000 was paid at the closing.
No goodwill was recognized on this transaction. In addition, the Company
entered into a five year employment agreement with a senior marketing
representative for an annual base salary of $40,000 plus commissions based
on sales.
(19) In January, 1995, the Company acquired GenCare Biomedical Research
Corporation ["GenCare"] in a business combination accounted for under the
purchase method of accounting. GenCare provides clinical testing services
for the detection, differentiation and staging of cancer, genetic and
infectious diseases. Their customers include hospitals, medical centers,
reference laboratories and large medical practices. All of the issued and
outstanding common and preferred stock of GenCare was acquired for an
aggregate 444,585 shares of the Company's common stock [subject to
possible increase in the event of a future decrease in the market price of
the common stock]. An aggregate 133,333 shares are to be held in escrow
pending certain required collections from GenCare customers. The fair
market value of the 311,252 shares to be issued immediately was
<PAGE> 10
$1,634,073 on the date of the closing. The total cost of the acquisition was
$1,634,073 which exceeded the fair value of the net assets of GenCare by
$2,203,492. The excess is being amortized using the straight-line method over
20 years. In addition, if the specific collection levels are achieved, the
133,333 shares in escrow will be recorded as an additional cost of the
acquisition at the fair market value of the shares at the time they are issued.
In addition, the Company assumed a bank loan in the amount of $293,333. This
loan was fully paid in March, 1995.
(20) In March, 1995, the Company consummated a $6,500,000 line of credit
with Midlantic Bank, N.A.- Asset Based Lending Department. The credit
line is secured by the Company's accounts receivable, is for a two-year
term and may be extended for annual periods by mutual consents,
thereafter.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
RESULTS OF OPERATIONS
---------------------
COMPARISON OF SECOND QUARTER 1995 VS SECOND QUARTER 1994
--------------------------------------------------------
NET REVENUES:
- - ------------
Net Revenues for the three month period ended April 30, 1995 were
$7,690,359 as compared to $5,435,142 for the prior period ended April 30,
1994; this represents a 41% increase in net revenues. This increase was
related to the acquisition of GenCare Biomedical Research Laboratory
("GenCare") and to the acquisition of the customer list of a small laboratory
in New Jersey, the establishment of the Company's national dialysis
marketing effort which was initiated in March, 1994. Management believes
that the severe winter weather experienced in the northeast during the
three month period ended April 30, 1994 negatively impacted net revenues
during that period. Net revenues per patient increased 11% over the
comparable period.
COST OF SALES:
- - -------------
Gross profits on net revenues increased from $2,657,984 for the period
ended April 30, 1994 to $4,024,031 for the three month period ended April
30, 1995; an increase of 51%. This increase was caused by an increase in
net revenues. The Company's gross profit margin improved to 52% for the
three month period ended April 30, 1995 compared to 49% for the three
month period ended April 30, 1994. However, the Company has shown a "Loss
from Continuing Operations" in two of the past three years.
Cost of Services increased from $2,777,158 for the quarter ended April 30,
1994 to $3,666,328 for the Quarter ended April 30, 1995. This represents
a 32% increase in costs while net revenues increased 41%.
GENERAL AND ADMINISTRATIVE EXPENSES:
- - -----------------------------------
General and administrative expenses for the three month period ending
April 30, 1995 were $3,560,820 as compared to $2,485,644 for the quarter
ending April 30, 1994, an increase of $1,075,176 or 43%.
This increase was caused in part by a $465,532 increase in employee
related expenses (staff additions due to the GenCare acquisition, a 5%
salary increase [as of January 1, 1995], marketing staff increases and an
increase in commission paid to marketing personnel. The balance of the
increase in expenses in this category were due to increases in occupancy
expenses of $107,339 and office expenses of $80,987 (such as telephone
expenses, office supplies, equipment rental and data processing expenses).
The increase in bad debt expense of $345,464 was the result of a 60%
increase in gross revenues.
INTEREST EXPENSE:
- - ----------------
Interest expense increased from $104,934 during the three month period
ending April 30, 1994 as compared to $143,052 during the three month
period ending April 30, 1995. This increase was caused by the $6,500,000
line of credit facility with Midlantic Bank, N.A. of which approximately
$3,700,000 was utilized.
INCOME:
- - ------
The Company had net income of $383,348 for the quarter ending April 30,
1995 as compared to $103,355 for the Quarter ending April 30, 1994 an
increase of $279,993. Management believes that the severe winter weather
experienced in the Northeast during the month of February 1994 negatively
impacted income during that period.
<PAGE> 11
SIX MONTHS 1995 COMPARED TO SIX MONTHS 1994
-------------------------------------------
NET REVENUES:
- - ------------
Net Revenues for the six month period ended April 30, 1994 were $10,171,303 as
compared to $15,332,779 for the current period ended April 30, 1995; this
represents a 51% increase in net revenues. The laboratory's patient count for
the six month period ending April 30, 1995 increased by 32% over the same period
in 1994. Net revenues per patient increased from $47.38 for the period ending
April 30, 1994 to $54.26 (15%) for the period ending April 30, 1995. This
increase was caused by both the Company's continued marketing strategy and a
price increase (instituted in November, 1994 of approximately 3%). Management
believes that the severe winter weather experienced in the Northeast during the
six months ended April 30, 1994 negatively impacted net revenues during that
period.
COST OF SALES:
- - -------------
Gross profits on net revenues increased from $4,760,126 for the period ended
April 30, 1994 to $8,136,135 for the six month period ended April 30, 1995; an
increase of 71%. The Company's gross profit margin improved to 53% for the
period ended April 30, 1995 as compared to a gross profit margin of 47% for the
period ended April 30, 1994. However, the Company has shown a "Loss from
Continuing Operations" for two of the past three years.
Cost of Services increased from $5,411,177 for the six month period ended April
30, 1994 to $7,196,644 for the Quarter ended April 30, 1995. This represents a
33% increase in costs while net revenues increased 51%.
GENERAL AND ADMINISTRATIVE EXPENSES:
- - -----------------------------------
General and administrative expenses for the six month period ending April 30,
1995 were $7,230,956 as compared to $4,582,777 for the period ending April 30,
1994, an increase of $2,648,179 or 58%. This increase was caused primarily by
an increase of approximately $828,000 in bad debt expense, $724,000 in marketing
expense, $237,000 in occupancy expenses, and $393,000 in office and other
related expenses.
INTEREST EXPENSE:
- - ----------------
Interest expense increased from $236,730 during the six month period ending
April 30, 1994 as compared to $262,197 during the six month period ending April
30, 1995. This increase was caused by the $6,500,000 line of credit facility
with Midlantic Bank, N.A. of which approximately $3,700,000 was utilized.
INCOME:
- - ------
The Company had net income of $748,880 for the six months ended April 30, 1995
as compared to net income of $378,678 for the six months ended April 30, 1994 an
increase of $370,202. The net income of $378,678 for the period ending April
30, 1994 is primarily attributable to an extraordinary gain of $370,789 on the
extinguishment of the Towers Financial Corporation Debt. The Company had a net
income before this extraordinary item of $7,889 for the six month period ending
April 30, 1994 as compared to $748,880 for the six month period ending April 30,
1994 an increase of $740,991. Management believes that the severe winter
weather experienced in the Northeast during the month of February 1994
negatively impacted income during that period.
LIQUIDITY AND CAPITAL RESOURCES:
- - -------------------------------
Working capital as of April 30, 1995 was $3,605,366 as compared to $3,603,803 at
October 31, 1994 an increase of $1,563 during the six month period.
The Company decreased its cash position by approximately $1,008,600 during the
current quarter. The Company utilized $756,682 in cash for operating
activities. To offset this use of cash the Company raised $451,513 in
long-term debt and $3,707,000 in credit lines and repaid approximately
$1,648,800 in existing debt.
The capital spending requirements for the Company during 1995 is expected not
to exceed $500,000. To date, approximately $381,612 has been spent on capital
improvements, this includes approximately $116,777 in capital leases.
The Company had current liabilities of $12,281,156 at April 30, 1995. The
three largest items in this category are current portion of long-term debt of
$3,743,528, note payable of $3,707,030 and accounts payable of $2,603,222. The
Company continues to pay its payables at 90 to 120 days. Management does not
intend to shorten this period. The Company is in arrears in certain lease
payments and other note obligations and may be deemed in "default" thereunder.
Such "defaults" in the aggregate are not material to the financial condition of
the Company. Although no equipment manufacturers or note holders have
instituted any action to repossess their equipment, management believes, but
cannot assure that this will not occur in the future. All tax liabilities
including penalties and interest have been accrued. At April 30, 1995, the
Company was in arrears
<PAGE> 12
in the amount of $78,284 in local withholding taxes, which are being paid in
accordance with installment agreements. The state authorities can impose up to
100% penalties and place a lien on the Company's assets to secure collection of
these amounts.
The Company's emphasis is to target accounts which generate larger revenues per
request for laboratory services. This results in an increase in revenue per
patient. In order to maximize collections, the Company prefers to receive
payment at time of service. If this is not available, collections are maximized
by accurate billing as close to the date of service as possible with frequent
follow-up billings.
Containment of health-care costs, including reimbursement for clinical
laboratory services, has been a focus of ongoing governmental activity. Omnibus
budget reconciliation legislation, designed to "reconcile" existing laws with
reductions and reimbursement required by enactment of a Congressional budget,
can adversely affect clinical laboratories by reducing Medicare reimbursement
for laboratory services. In each of the omnibus budget reconciliation laws
enacted in 1987, 1989 and 1990, Medicare reimbursement of clinical laboratories
was reduced from previously authorized levels. The Clinton Administration,
Congress and various Federal agencies have examined the rapid growth of Federal
expenditures for clinical laboratory services, and the use by the major clinical
laboratories (including the Company) of dual fee schedules ("client" fees
charged to physicians, hospitals, institutions and companies with whom a
laboratory deals on a bulk basis and which involve relatively low administrative
costs, and "patient" fees charged to individual patients and third party payors,
including Medicare, who generally require separate bills or claims for each
patient encountered and which involve relatively high administrative costs). A
number of proposals for legislation or regulation are under discussion which
could have the effect of substantially reducing Medicare reimbursements to
clinical laboratories. The administration's budget package for fiscal 1993
recommended adoption of a proposal of the U.S. General Accounting Office issued
in connection with a study of clinical laboratory costs made in June 1991
calling for reduction in the Medicare national limitation amounts, from the
current level of 88% of the national median to 76% of the national median. None
of the reductions enacted to date has had a material adverse effect on the
Company. In addition, a number of states, Department of Health and Human
Services and Medicare carriers (insurance companies that administer Medicare)
have imposed reductions and other limitations on Medicare and Medicaid
reimbursement for laboratory testing and one state has imposed, and other states
are considering, new taxes on health care providers, including clinical
laboratories. Depending upon the nature of regulatory action, if any, which is
taken and the content of legislation, if any, which is adopted, the Company
could experience a significant decrease in revenues from Medicare and Medicaid,
which could have a material adverse effect on the Company. The Company is
unable to predict, however, the extent to which such actions will be taken.
Pursuant to a Post-Effective Amendment on Form S-2 to its Registration Statement
(File No. 33-68628), declared effective by the Securities and Exchange
Commission on December 14, 1994, the Company is offering for sale up to
3,551,677 shares of its Common Stock to the holders of its outstanding Class A
Redeemable Warrants upon exercise thereof and up to 1,147,500 shares of its
Common Stock to the holders of its outstanding Class B Redeemable Warrants upon
exercise thereof. Each Class A Redeemable Warrant and each Class B Redeemable
Warrant entitles the holder to purchase one share of Common Stock at an exercise
price of $4.50 and $6.75, respectively, through November 23, 1998. Each Class A
Redeemable Warrant and each Class B Redeemable Warrant is redeemable by the
Company at a redemption price of $.10 per Redeemable Warrant upon not less than
30 days' prior written notice, provided that the average closing bid price for
the Common Stock equals or exceeds $7.20 and $10.80, respectively, for any 20
trading days within a period of 30 consecutive trading days ending on the fifth
trading day immediately prior to the notice of redemption. The exercise price
and the number of shares purchasable upon exercise of the Redeemable Warrants
are subject to adjustment upon the occurrence of certain events including stock
dividends and stock splits. The Redeemable Warrants do not contain provisions
protecting against dilution resulting from the sale of additional shares of
Common Stock at an exercise price less than the respective Redeemable Warrant
exercise prices. The Company anticipates gross proceeds of approximately
$15,983,000, if all of the Class A Redeemable Warrants are exercised.
On March 28, 1995, the Company consummated a $6,500,000 line of credit with
Midlantic Bank, N.A.- Asset Based Lending Department. The credit line is
secured by the Company's accounts receivable, is for a two-year term and may be
extended for annual periods by mutual consents, thereafter. As of April 30,
1995, the Company has utilized approximately $3,700,000 of this credit facility.
The Company intends to capitalize on the current trend of consolidation in the
clinical laboratory industry through acquisitions of other laboratories in its
geographical region with significant customer lists. Purchase prices to acquire
other laboratories may involve cash, notes, Common Stock, and/or combinations
thereof.
Cash on hand, cash flows from operations, equity financing and additional
borrowing capabilities are expected to be sufficient to meet anticipated
operating requirements, debt repayments and provide funds for capital
expenditures, excluding acquisitions for the foreseeable future.
<PAGE> 13
Impact of Inflation
- - -------------------
To date, inflation has not had a material effect on the Company's operations.
New Authoritative Pronouncements
- - --------------------------------
The Financial Accounting Standards Board has issued FAS 107, "Disclosure about
Fair Value of Financial Instruments." Adoption of the new statement is not
expected to have a material impact on the Company's financial position or
results of operations. FAS 107 is effective for fiscal years beginning after
December 15, 1992, except for entities with less than $150 million in total
assets for which the effective date is fiscal years beginning after December 15,
1995. The Company will adopt FAS 107 on November 1, 1996.
PART II
Item 6
EXHIBITS AND REPORTS ON FORM 8-K
- - --------------------------------
During the quarter ended April 30, 1995, the Company filed one report on Form-
8K/A amending Form 8-K dated January 4, 1995, filed January 16, 1995, reporting
in Item 7, the Financial Statements and Pro-Forma Financial Statements of
GenCare Biomedical Research Corporation.
<PAGE> 14
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.
BIO-REFERENCE LABORATORIES, INC.
(Registrant)
/S/ Marc D. Grodman
-----------------------------------
Marc D. Grodman, M.D.
President
/S/ Sam Singer
------------------------------------
Sam Singer
Chief Financial and Accounting
Officer
Date: June 8, 1995
<PAGE> 15
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from (a) the
Balance Sheet and Statement of Operations filed as part of the Quarterly Report
on Form 10-QSB and is qualified in its entirety by refence to such (b) Report on
Form 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> APR-30-1995
<CASH> 7,277,176
<SECURITIES> 0
<RECEIVABLES> 7,889,330
<ALLOWANCES> 0
<INVENTORY> 380,028
<CURRENT-ASSETS> 15,886,522
<PP&E> 1,983,938
<DEPRECIATION> 800,042
<TOTAL-ASSETS> 23,579,076
<CURRENT-LIABILITIES> 12,281,156
<BONDS> 8,624,622
<COMMON> 60,655
0
0
<OTHER-SE> 22,269,038
<TOTAL-LIABILITY-AND-EQUITY> 23,579,076
<SALES> 15,332,779
<TOTAL-REVENUES> 15,332,779
<CGS> 7,196,644
<TOTAL-COSTS> 14,427,600
<OTHER-EXPENSES> 156,299
<LOSS-PROVISION> 2,251,582
<INTEREST-EXPENSE> 262,197
<INCOME-PRETAX> 748,880
<INCOME-TAX> 0
<INCOME-CONTINUING> 748,880
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 748,880
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
