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 July 31, 1995
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AND
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-15266
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BIO-REFERENCE LABORATORIES, INC.
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(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2405059
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
481 Edward H. Ross Drive, Elmwood Park, NJ 07407
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(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (201) 791-2600
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(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: 6,075,514 ($.01 par value) at
September 11, 1995.<PAGE>
BIO-REFERENCE, LABORATORIES, INC.
---------------------------------
FORM 10-QSB
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JULY 31, 1995
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I N D E X
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of July 31, 1995 (unaudited)
Statements of Operations for the
three months and nine months ended July 31, 1995
and July 31, 1994 (unaudited)
Statements of Cash Flows for the
nine months ended July 31, 1995 and July 31,
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
BIO-REFERENCE LABORATORIES, INC.
--------------------------------
BALANCE SHEET
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As of July 31, 1995
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(Unaudited)
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ASSETS
------
<TABLE>
<S> <C>
CURRENT ASSETS:
--------------
Cash $ 782,617
Cash - Restricted 6,352,000
Accounts Receivable (Net) 8,053,878
Inventory 444,351
Other Current Assets 483,519
Marketable Securities 576,950
-----------
TOTAL CURRENT ASSETS $16,692,315
--------------------
PROPERTY, PLANT AND EQUIPMENT $ 2,045,882
-----------------------------
LESS: Accumulated Depreciation 882,038
----
TOTAL PROPERTY,
PLANT AND EQUIPMENT - NET $ 1,163,844
-------------------------
OTHER ASSETS:
------------
Due from Related Party $ 250,718
Deposits 269,811
Goodwill (Net of Accumulated
Amortization of $791,174) 2,967,553
Deferred Charges (Net of Accumulated
Amortization of $1,220,751) 2,639,313
Cash - Restricted 62,168
Other Assets 195,940
-----------
TOTAL OTHER ASSETS $ 6,385,503
------------------ -----------
TOTAL ASSETS $24,242,662
------------ ===========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements
BIO-REFERENCE LABORATORIES, INC.
------------------------------
BALANCE SHEET
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As of July 31, 1995
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(Unaudited)
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LIABILITIES AND SHAREHOLDERS' EQUITY [DEFICIT]
---------------------------------------------
<TABLE>
<S> <C>
CURRENT LIABILITIES:
-------------------
Accounts Payable $ 2,303,913
Salaries and Commissions Payable 878,246
Accrued Expenses 583,039
Current Portion of Long-Term Debt 3,212,342
Current Portion of Leases Payable 307,037
Subordinated Notes 174,364
Notes Payable 4,914,766
Taxes Payable 233,007
-----------
TOTAL CURRENT LIABILITIES $12,606,714
------------------------- -----------
LONG-TERM LIABILITIES:
---------------------
Long-Term Portion of Long-Term Debt $ 197,896
Long-Term Portion of Leases Payable 236,855
Notes Payable 116,385
-----------
TOTAL LONG-TERM LIABILITIES $ 551,136
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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 6,075,514 shares 60,755
Additional Paid-In Capital 22,283,938
Accumulated [Deficit] (11,335,621)
Unrealized Gain on Marketable Securities 97,615
-----------
Totals $11,106,687
Deferred Compensation (21,875)
-----------
TOTAL SHAREHOLDERS' EQUITY $11,084,812
-------------------------- -----------
TOTAL LIABILITIES AND
---------------------
SHAREHOLDERS' EQUITY $24,242,662
-------------------- ============
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
BIO-REFERENCE LABORATORIES, INC.
--------------------------------
STATEMENTS OF OPERATIONS
----------------------
[UNAUDITED]
---------
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------ -----------------
July 31, July,31
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1 9 9 5 1 9 9 4 1 9 9 5 1 9 9 4
------- ------- ------- -------
<S> <C> <C> <C> <C>
NET REVENUES: $8,062,709 $6,113,747 $23,395,488 $16,285,050
------------ ---------- ---------- ----------- -----------
COST OF SERVICES:
----------------
Depreciation $ 84,956 $ 52,941 $ 243,710 $ 111,061
Employee Related Expenses 1,825,548 1,510,092 5,342,009 4,335,929
Reagents and Lab Supplies 944,070 720,903 2,691,650 1,966,076
Other Cost of Services 1,043,450 734,963 2,817,299 2,017,611
---------- ---------- ----------- ----------
TOTAL COST OF SERVICES $3,898,024 $3,019,499 $11,094,668 $8,430,677
---------------------- ---------- ---------- ----------- ----------
GROSS PROFIT ON REVENUES $4,164,685 $3,094,248 $12,300,820 $7,854,373
------------------------
General and Administrative Expenses:
-----------------------------------
Depreciation and Amortization $ 174,388 $ 134,334 $ 501,095 355,309
Other General and Admin. Expenses 2,536,516 1,878,646 7,512,454 5,139,925
Bad Debt Expense 1,017,793 642,325 2,946,104 1,742,848
---------- ---------- ----------- ----------
TOTAL GENERAL AND ADMIN. EXPENSES $3,728,697 $2,655,305 $10,959,653 $7,238,082
--------------------------------- ---------- ---------- ----------- ----------
OPERATING INCOME $ 435,988 $ 438,943 $ 1,341,167 $ 616,291
----------------
OTHER (INCOME) EXPENSES:
Interest Expense $ 178,424 $ 107,473 $ 440,621 $ 344,202
Interest Income (83,545) (36,728) (189,443) (103,998)
---------- ---------- ----------- ----------
TOTAL OTHER EXPENSES - NET $ 94,879 $ 70,745 $ 251,178 $ 240,204
-------------------------- ---------- ---------- ----------- ----------
NET INCOME BEFORE EXTRAORDINARY ITEM $ 341,109 $ 368,198 $ 1,089,989 $ 376,087
------------------------------------
Extraordinary Item - Gain on
Extinguishment of Debt -- -- -- 370,789
---------- ----------- ----------- ----------
NET INCOME $ 341,109 $ 368,198 $ 1,089,989 $ 746,876
----------
NET INCOME PER SHARE
--------------------
BEFORE EXTRAORDINARY ITEM $ .05 $ .05 $ .18 $ .06
------------------------- ---------- ---------- ----------- ----------
NET INCOME PER SHARE $ .05 $ .05 $ .18 $ .13
-------------------- ---------- ---------- ----------- ----------
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 6,068,848 5,722,496 5,990,791 5,173,985
-------------------------------------------- ========== ========== ========= =========
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
BIO-REFERENCE LABORATORIES, INC.
------------------------------
STATEMENTS OF CASH FLOWS
------------------------
[UNAUDITED]
-----------
<TABLE>
<CAPTION>
Nine months ended
-----------------
July 31,
--------
1 9 9 5 1 9 9 4
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<S> <C> <C>
OPERATING ACTIVITIES:
--------------------
Net Income $ 1,089,989 $ 746,876
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Deferred Compensation 43,260 34,338
Depreciation and Amortization 744,805 466,370
Amortization of Deferred Interest -- 42,876
Amortization of Deferred Discount -- 15,625
Provision for Bad Debts 2,946,104 1,742,848
Forgiveness of Debt -- (370,789)
Change in Assets and Liabilities, net of
effects from purchase of GenCare
(Increase) Decrease in:
Accounts Receivable (4,811,833) (3,204,081)
Other Assets 28,392 2,840
Prepaid Expenses and Other Current Assets (430,934) (310,538)
Deferred Charges and Goodwill (600,616) (522,902)
Increase (Decrease) in:
Accounts Payable and Accrued Liabilities 84,629 (672,677)
----------- ------------
NET CASH - OPERATING ACTIVITIES $ (906,204) $(2,029,214)
-------------------------------
INVESTING ACTIVITIES:
--------------------
Acquisition of Equipment and
Leasehold Improvements $ (326,779) $ (211,901)
Marketable Securities (479,335) --
----------- -----------
NET CASH - INVESTING ACTIVITIES $ (806,114) $ (211,901)
-------------------------------
FINANCING ACTIVITIES:
--------------------
Proceeds from Stock Offering $ -- $ 8,614,425
Proceeds from Exercise of Warrants 18,150 --
Payments of Long-Term Debt (2,097,313) (2,608,350)
Increase in Long-Term Debt 453,077 4,529,600
Payments of Capital Lease Obligations (190,511) (87,181)
Payments of Subordinated Notes Payable (37,039) (326,000)
Decrease in Cash Overdraft -- (93,725)
Increase in Restricted Cash (1,962,168) (2,100,000)
Increase in Revolving Line of Credit 4,914,766 --
----------- -----------
NET CASH - FINANCING ACTIVITIES $ 1,098,962 $ 7,928,769
------------------------------- ----------- ------------
NET INCREASE (DECREASE) IN CASH $ (613,356) $ 5,687,654
-------------------------------
CASH AT BEGINNING OF PERIODS 1,395,973 --
---------------------------- ------------ ------------
CASH AT END OF PERIODS $ 782,617 $ 5,687,654
---------------------- ------------ ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
-------------------------------------------------
Cash paid during the period for:
Interest $ 348,517 $ 320,659
Income Taxes $ 49,882 $ 2,111
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
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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 non-escrowed shares issued at the closing was
$1,634,073 on such date. In addition, the Company incurred capital lease
obligations of for $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).
In July, 1995, the Company incurred an unrealized gain of $97,615 on available
for sale securities.
The Accompanying Notes are an Integral part of These Financial Statements.
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 nine month period ended July 31, 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 Nine Months Ended
July 31 July 31
1995 1994 1995 1994
---- ---- ---- ----
<C> <C> <C> <C>
$6,407,071 $3,868,052 $17,937,778 $9,570,093
</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 $2,270,949 at July 31, 1995.
[6] Inventory, consisting primarily of purchased clinical supplies, is valued
at the lower of cost (first-in, first-out) or market.
[7] At July 31, 1995, the Company had $6,414,168 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 July 31, 1995, the Company had $7,196,785 in cash in excess of the
federally insured limits, however $6,414,168 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
aggregate $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 collateral therefore, 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 or $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.
The Company also registered the 446,677 Class A Redeemable Warrants and the
112,500 Class B Redeemable Warrants purchased by the investors in its December
1992 Bridge Financing and its 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 that 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 providing 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 non-escrowed
shares issued at the closing was $1,634,073 on such date. 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 specified 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 THIRD QUARTER 1995 VS THIRD QUARTER 1994
------------------------------------------------------
NET REVENUES:
------------
Net Revenues for the three month period ended July 31, 1995 were $8,062,709 as
compared to $6,113,747 for the prior period ended July 31, 1994; this
represents an 32% increase in net revenues. This increase was related to the
acquisition of GenCare Biomedical Research Laboratory ("GenCare"), to the
acquisition of the customer list of a small laboratory in New Jersey, a price
increase of approximately 3%, the Company's national dialysis marketing effort
and its continued marketing strategy in the New York metropolitan tri-state
area. The number of patients processed during the quarter ended July 31, 1995
increased 31% over the prior comparable period.
COST OF SALES:
-------------
Gross profits on net revenues increased from $3,094,248 for the period ended
July 31, 1994 to $4,164,685 for the three month period ended July 31, 1995; an
increase of 35%. 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
July 31, 1995 compared to a gross profit margin of 51% for the three month
period ended July 31, 1994. However, the Company has shown a "Loss from
Continuing Operations" in two of the past three years.
Cost of Services increased from $3,019,499 for the three month period ended
July 31, 1994 to $3,898,024 for the Quarter ended July 31, 1995. This
represents a 29%increase in costs while net revenues increased 32%.
GENERAL AND ADMINISTRATIVE EXPENSES:
-----------------------------------
General and administrative expenses for the three month period ending July 31,
1995 were $3,728,697 as compared to $2,655,305 for the quarter ending July 31,
1994, an increase of $1,073,392 or 40%. This increase was caused in part
by a $379,560 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 commissions paid to marketing personnel.
The balance of the increase in expenses in this category were due to increases
in occupancy expenses of $96,633 and office expenses of $77,093 (such as
telephone expenses, office supplies, equipment rental and data processing
expenses). The increase in bad debt expense of $375,468 was the result of a
45% increase in gross revenues.
INTEREST EXPENSE:
----------------
Interest expense was $178,424 during the three month period ending July 31,
1995 as compared to $107,473 during the three month period ending July 31,
1994. This increase was caused by the $6,500,000 line of credit facility with
Midlantic Bank, N.A. of which approximately $4,600,000 was utilized.
INCOME (LOSS):
-------------
The Company had net income of $341,109 for the three months ended July 31,
1995 as compared to a net loss of $368,198 for the three months ended July 31,
1994, a decrease of $27,089.
NINE MONTHS 1995 COMPARED TO NINE MONTHS 1994
--------------------------------------------
NET REVENUES:
------------
Net Revenues for the nine month period ended July 31, 1994 were $16,285,050 as
compared to $23,395,488 for the current period ended July 31, 1995; this
represents a 44% increase in net revenues. The laboratory's patient count for
the nine month period ending July 31, 1995 increased by 31% over the same
period in 1994. Net revenues per patient increased from $49.08 for the period
ending July 31, 1994 to $53.70 (9%) for the period ending July 31, 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
nine months ended July 31, 1994 negatively impacted net revenues during that
period.
COST OF SALES:
-------------
Gross profits on net revenues increased from $7,854,373 for the period ended
July 31, 1994 to $12,300,820 for the nine month period ended July 31, 1995; an
increase of 57%. This increase was caused by an increase in net revenues. The
Company's gross profit margin improved to 53% for the period ended July 31,
1995 as compared to a gross profit margin of 48% for the period ended July 31,
1994. However, the Company has shown a "Loss from Continuing Operations" for
two of the past three years.
Cost of Services increased from $8,430,677 for the nine month period ended
July 31, 1994 to $11,094,668 for the Quarter ended July 31, 1995. This
represents a 32% increase in costs while net revenues increased 44%.
GENERAL AND ADMINISTRATIVE EXPENSES:
-----------------------------------
General and administrative expenses for the nine month period ending July 31,
1995 were $10,959,653 as compared to $7,238,082 for the period ending July 31,
1994, an increase of $3,721,571 or 51%. This increase was caused primarily
by an increase of approximately $1,203,256 in bad debt expense as a result of
a 60% increase in gross sales, $1,435,525 in employee related expenses,
$333,697 in occupancy expenses, and $251,382 in office expenses.
INTEREST EXPENSE:
----------------
Interest expense increased from $344,202 during the nine month period ending
July 31, 1994 as compared to $440,621 during the nine month period ending July
31, 1995. This increase was caused by the $6,500,000 line of credit facility
with Midlantic Bank, N.A. of which approximately $4,600,000 was utilized.
INCOME (LOSS):
-------------
The Company had net income of $1,089,989 for the nine months ended July 31,
1995 as compared to net income of $746,876 for the nine months ended July 31,
1994, an increase of $343,113. The net income of $746,876 for the period
ending July 31, 1994 is partially 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 $376,087 for the
nine month period ending July 31, 1994 as compared to $1,089,989 for the nine
month period ending July 31, 1995 an increase of $713,902.
However, Management believes the Company may have been more profitable in 1994
had it not lost net revenues due to the extreme winter weather that the
northeast experienced during January and February 1994.
LIQUIDITY AND CAPITAL RESOURCES FOR THE NINE MONTHS ENDED JULY 31, 1995
----------------------------------------------------------------------
Working capital as of July 31, 1995 was $4,085,601 as compared to $3,603,803
at October 31, 1994 an increase of $481,798 during the nine month period.
The Company decreased its cash position by approximately $613,400 during the
current period. The Company utilized $906,204 in cash for operating
activities. To offset this use of cash the Company raised $453,077 in
long-term debt and $4,914,766 in credit lines and repaid approximately
$2,324,863 in existing debt.
The capital spending requirements for the Company during 1995 is expected not
to exceed $500,000. To date, approximately $443,556 has been spent on capital
improvements, this includes approximately $116,777 in capital leases.
The Company had current liabilities of $12,606,714 at July 31, 1995. The three
largest items in this category are notes payable of $4,914,766 , current
portion of long-term debt of $3,212,342, and accounts payable of $2,303,913.
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 July 31, 1995, the Company was in arrears in the amount of $47,350 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 SB-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 July 31,
1995, the Company has utilized approximately $4,600,000 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.
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.
<PAGE>
PART II
Item 6
EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
No reports on Form 8-K have been filed during the quarter ended July 31, 1995
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: September 19, 1995
<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 reference to such (b) Report
on Form 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> JUL-31-1995
<CASH> 7,134,617
<SECURITIES> 0
<RECEIVABLES> 8,053,878
<ALLOWANCES> 0
<INVENTORY> 444,351
<CURRENT-ASSETS> 16,692,315
<PP&E> 2,045,882
<DEPRECIATION> 882,038
<TOTAL-ASSETS> 24,242,662
<CURRENT-LIABILITIES> 12,606,714
<BONDS> 9,159,645
<COMMON> 60,755
0
0
<OTHER-SE> 22,283,938
<TOTAL-LIABILITY-AND-EQUITY> 24,242,662
<SALES> 23,395,488
<TOTAL-REVENUES> 23,395,488
<CGS> 11,094,668
<TOTAL-COSTS> 22,054,321
<OTHER-EXPENSES> 251,178
<LOSS-PROVISION> 2,270,949
<INTEREST-EXPENSE> 440,621
<INCOME-PRETAX> 1,089,989
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,089,989
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,089,989
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
