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 January 31, 1996
----------------
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
-------
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: 6,117,870 ($.01 par value)
at March 14, 1996.
BIO-REFERENCE, LABORATORIES, INC.
---------------------------------
FORM 10-QSB
-----------
JANUARY 31, 1996
----------------
I N D E X
---------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet as of January 31, 1996 (unaudited)
Statements of Operations for the
three months ended January 31, 1996 and January 31,
1995 (unaudited)
Statements of Cash Flows for the
three months ended January 31, 1996 and January 31,
1995 (unaudited)
Notes to financial statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
BIO-REFERENCE LABORATORIES, INC.
--------------------------------
BALANCE SHEET
-------------
As of January 31, 1996
----------------------
(Unaudited)
-----------
ASSETS
------
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS:
- --------------
Cash $ 697,049
Cash- Restricted 1,852,000
Accounts Receivable (Net) 9,278,917
Inventory 399,008
Other Current Assets 580,195
Marketable Securities 444,620
Certificates of Deposit 102,650
Certificates of Deposit- Restricted 3,563,000
---------
TOTAL CURRENT ASSETS $ 16,917,439
-------------------- ------------
PROPERTY, PLANT AND EQUIPMENT $ 2,259,067
-----------------------------
LESS: Accumulated Depreciation 1,022,854
- ---- -------------
TOTAL PROPERTY,
----------------
PLANT AND EQUIPMENT - NET $ 1,236,213
------------------------- ------------
OTHER ASSETS:
- ------------
Due from Related Party $ 250,718
Deposits 282,999
Goodwill (Net of Accumulated
Amortization of $895,267) 3,285,603
Deferred Charges (Net of Accumulated
Amortization of $1,150,933) 2,717,401
Other Assets 257,886
------------
TOTAL OTHER ASSETS $ 6,794,607
------------------ ------------
TOTAL ASSETS $ 24,948,259
------------ ============
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
BIO-REFERENCE LABORATORIES, INC.
--------------------------------
BALANCE SHEET
-------------
As of January 31, 1996
----------------------
(Unaudited)
-----------
LIABILITIES AND SHAREHOLDERS' EQUITY [DEFICIT]
----------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
CURRENT LIABILITIES:
- -------------------
Accounts Payable $ 1,934,779
Salaries and Commissions Payable 926,503
Accrued Expenses 485,793
Current Portion of Long-Term Debt 2,363,620
Current Portion of Leases Payable 264,801
Subordinated Notes 127,444
Notes Payable 6,766,331
Taxes Payable 238,458
------------
TOTAL CURRENT LIABILITIES $13,107,729
-----------
LONG-TERM LIABILITIES:
- ---------------------
Long-Term Portion of Long-Term Debt 527,859
Long-Term Portion of Leases Payable 163,936
Notes Payable 116,385
------------
TOTAL LONG-TERM LIABILITIES $ 808,180
--------------------------- -----------
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 6,300,280 shares;
and Outstanding 6,117,870 shares 61,179
Additional Paid-In Capital 22,428,757
Accumulated [Deficit] (11,396,463)
Unrealized Gain (Loss) on Marketable Securities (47,998)
--------------
Totals $ 11,045,475
Deferred Compensation (13,125)
------------
TOTAL SHAREHOLDERS' EQUITY $ 11,032,350
-------------------------- ------------
TOTAL LIABILITIES AND
---------------------
SHAREHOLDERS' EQUITY $ 24,948,259
-------------------- ===========
</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
------------------
January 31,
----------
1 9 9 6 1 9 9 5
------- -------
<S> <C> <C>
NET REVENUES: $8,122,702 $7,642,420
- ------------ ---------- ----------
COST OF SERVICES:
- ----------------
Depreciation 90,798 76,776
Employee Related Expenses 2,099,400 1,749,254
Reagents and Lab Supplies 1,092,998 897,527
Other Cost of Services 1,141,906 806,759
---------- ----------
TOTAL COST OF SERVICES $4,425,102 $3,530,316
---------------------- ---------- ----------
GROSS PROFIT ON REVENUES $3,697,600 $4,112,104
- ------------------------
General and Administrative Expenses:
- -----------------------------------
Depreciation and Amortization $ 154,542 $ 153,767
Other General and Admin. Expenses 2,604,430 2,528,861
Bad Debt Expense 1,144,108 987,508
---------- ----------
TOTAL GENERAL AND ADMIN. EXPENSES $3,903,080 $3,670,136
--------------------------------- ---------- ----------
OPERATING INCOME (LOSS) $ (205,480) $ 441,968
-----------------------
OTHER (INCOME) EXPENSES:
- -----------------------
Interest Expense $ 203,438 $ 119,146
Interest Income (80,166) (42,709)
---------- ----------
TOTAL OTHER EXPENSES - NET $ 123,272 $ 76,437
-------------------------- ---------- ----------
INCOME (LOSS) BEFORE TAX $ (328,752) $ 365,531
- ------------------------ ----------- -----------
Provision for Income Taxes $ 44,270 $ --
---------- -----------
NET INCOME (LOSS) $ (373,022) $ 365,531
----------------- ========== ===========
NET INCOME (LOSS) PER SHARE $ (.06) $ .06
--------------------------- ========== ==========
WEIGHTED AVERAGE NUMBER OF
--------------------------
SHARES OUTSTANDING 6,091,096 5,846,013
------------------ ========= =========
</TABLE>
BIO-REFERENCE LABORATORIES, INC.
--------------------------------
STATEMENTS OF CASH FLOWS
------------------------
[UNAUDITED]
---------
<TABLE>
<CAPTION>
Three months ended
------------------
January 31,
-----------
1 9 9 6 1 9 9 5
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income (Loss) $ (373,022) $ 365,531
Adjustments to Reconcile Net Income to
Cash Provided by Operating Activities:
Deferred Compensation 4,375 34,510
Depreciation and Amortization 245,340 230,543
Provision for Bad Debts 1,144,108 987,508
Change in Assets and Liabilities,
Net of effects from purchase of CML
(Increase) Decrease in:
Accounts Receivable (1,789,888) (1,914,879)
Other Assets 401 (1,580)
Prepaid Expenses and Other
Current Assets (67,635) (119,134)
Deferred Charges and Goodwill (164,204) (485,373)
Increase (Decrease) in:
Accounts Payable and
Accrued Liabilities (16,418) 510,952
------------ -----------
NET CASH - OPERATING ACTIVITIES $(1,164,706) $ (391,922)
-------------------------------
INVESTING ACTIVITIES:
- --------------------
Acquisition of Equipment and
Leasehold Improvements $ (102,351) $ (191,287)
Cash overdraft assumed in connection
With acquisition (3,797) --
----------- ----------
(106,148) (191,287)
FINANCING ACTIVITIES:
- --------------------
Proceeds from Exercise of Warrants $ -- $ 3,150
Payments of Long-Term Debt (631,672) (106,689)
Increase in Long-Term Debt 109,918 405,535
Payments of Capital Lease Obligations (58,350) (56,285)
Payments of Subordinated Notes Payable (7,920) (15,959)
Increase in Revolving Line of Credit 1,375,035 --
Decrease in Restricted Cash 544,646 --
----------- ---------
NET CASH - FINANCING ACTIVITIES $ 1,331,657 $ 229,752
------------------------------- ----------- ---------
NET INCREASE (DECREASE) IN CASH $ 60,803 $ (353,457)
-------------------------------
CASH AT BEGINNING OF PERIODS 636,246 1,395,973
---------------------------- ------------ ---------
CASH AT END OF PERIODS $ 697,049 $1,042,516
---------------------- ============ ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
- -------------------------------------------------
Cash paid during the period for:
Interest $ 183,740 $ 88,375
Income Taxes $ 44,270 $ 551
</TABLE>
The Accompanying Notes are an Integral Part of These Financial Statements.
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
- --------------------------------------------------------------------
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 $32,266 in connection with the
acquisition of 4 automobiles.
In February, 1995, $37,621 of a GenCare related trade accounts payable was
settled by conversion of the entire amount into a two year debt agreement.
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 October, 1995, the Company incurred a capital lease obligation in
connection with the acquisition of medical equipment.
In December, 1995, the Company issued 4,745 shares of common stock in payment
of a $17,198.45 invoice due to a vendor.
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 three month period ended January 31, 1996
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, 1995
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
January 31
1996 1995
---- ----
<C> <C>
$6,788,521 $6,407,071
</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 $2,876,647 at January 31, 1996.
[6] Inventory, consisting primarily of purchased clinical supplies, is valued
at the lower of cost (first-in, first-out) or market.
[7] At January 31, 1996, the Company had $5,415,000 of restricted cash and
certificates of deposit which represents collateral for two demand notes
issued pursuant to bank loans and collateral for a capital lease on
automobiles.
[8] At January 31, 1996, the Company had $5,860,049 in cash in excess of the
federally insured limits, however $5,415,000 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, 1995 of
approximately $9,100,000 which begin to expire in 2002. As a result of
these carryforwards, the Company has a deferred tax asset of approximately
$3,700,000 which has been offset by a valuation account of $3,700,000,
resulting in a net deferred asset of $-0-.
[10] 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. As of January
31, 1996, $1,500,000 was paid against the principal on this note. The
Company has $1,852,000 in a savings account with this bank restricted as
collateral for the loan.
[11] 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.
[12] 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. In February, 1995, $37,621 of a GenCare trade accounts
payable was settled by conversion of the entire amount into a two year debt
agreement.
[13] 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. In January,
1996, this line of credit was increased to $7,500,000.
[14] In November, 1995, the Company acquired Oncodec Labs, Inc. All of the
issued and outstanding common stock of Oncodec Labs, Inc. was acquired for a
maximum of 40,000 shares of the Company's common stock. At the closing, the
shareholders of Oncodec Labs, Inc. received 10,000 shares and the additional
30,000 shares will be issued contingent upon receipts obtained through
December 31, 1998. This acquisition was not significant to the Company.
[15] In November, 1995, the Company acquired Community Medical Laboratories
("CML"). All of the issued and outstanding common stock of CML was acquired
for an aggregate 72,688 shares of the Company's common stock. In addition,
CML delivered CML notes totaling an aggregate $399,958 including accrued
interest through October 31, 1995 in exchange for an aggregate $200,174 in
principal amount of the Company's debentures. The 72,688 shares of the
Company's stock will be held in escrow pending certain required collections
from CML customers. In addition, the Company entered into a five year
employment agreement for an annual salary of $60,000 contingent on revenue
received from specified draw stations. This acquisition was not significant
to the Company.
[16] 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. In accordance with the terms of a
settlement which was reached in December 1995, the Company will pay $30,000
to the former shareholders of TCL.
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. While the outcome of this audit cannot be
determined at this time, the Company does not believe the outcome will have a
material adverse effect on the financial position or results of operations of
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.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
-------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
RESULTS OF OPERATIONS
---------------------
NET REVENUES:
- ------------
Net revenues for the three month period ended January 31, 1996 were $8,122,702,
as compared to $7,642,420 for the previous period ended January 31, 1995; this
represents a 6% increase in net revenues. However, due to record snowfalls in
the New York metropolitan area and based on volume on non-weather affected
days; management estimates that net revenues would have been $800,000
greater if the northeast had not experienced such severe weather.
The number of patients serviced during the period ended January 31, 1996 was
159,370, which was an increase of 16% over the prior comparable period,
despite the severe weather. Net revenue per patient decreased during the
quarter ended January 31, 1996 to $50.90 as compared to our net revenue per
patient of $55.65 for the prior comparable quarter, a decrease in net
revenue per patient of 8% due to a reduction in reimbursement levels from
third party payors. Management can not project if these decreases will
continue, or if they do, at what rate.
COST OF SALES:
- -------------
Cost of Services increased from $3,530,316 for the three month period ended
January 31, 1995 to $4,425,102 for the quarter ended January 31, 1996. This
represents a 25% increase in direct operating costs. Employee related expenses
increased 20% and was caused primarily by an increase to staff of twenty-six
employees. This increase to staff was caused by additional business which was
anticipated in the first quarter of 1996 and was negatively impacted by the
weather. Reagents and laboratory supplies increased by 22% over the prior
comparable period. This cost component is patient volume related and would have
been more in line with the overall increase in sales had it not been for an
inventory utilization adjustment of approximately $56,000. Other cost of
services increased 42% and was caused by two factors; one being an increase of
nine drivers and their associated vehicles and other operating expenses relating
thereto and the other one being an increase in reference laboratory billing of
73%. Management has taken steps to reduce its reference laboratory billing by
doing more tests in-house and by re-negotiating the fees it pays. However,
driver related expenses were directly impacted by the severe weather.
Gross profits on net revenues decreased from $4,112,104 for the period ended
January 31, 1995 to $3,697,600 for the three month period ended January 31,
1996; a decrease of 10%. This decrease resulted from the 25% increase in
direct expenses, while net revenues increased only 6%. The Company
believes this decrease resulted from the adverse effect on revenues due to
severe winter weather in the period ended January 31, 1996 and a decrease in
net revenue per patient.
GENERAL AND ADMINISTRATIVE EXPENSES:
- -----------------------------------
General and administrative expenses for the three month period ending January
31, 1996 were $3,903,080 as compared to $3,670,136 for the quarter ending
January 31, 1995, an increase of $232,944 or 6%, which is in line with the
6% increase in net revenues.
INTEREST EXPENSE:
- ----------------
Interest expense increased from $119,146 during the three month period ending
January 31, 1995 as compared to $203,438 during the three month period ending
January 31, 1996 and is reflexive of the Company's increase in asset based
borrowing.
INCOME (LOSS):
- -------------
The Company had a net loss of $373,022 for the three months ended January 31,
1996 as compared to net income of $365,531 for the three months ended
January 31, 1995. Management believes the net loss of $373,022 for the
period ended January 31, 1996 was attributable to the extreme winter
weather and record snow fall that the Northeast experienced during December
and January. If not for the severe winter weather, the Company believes it
would have shown a significant profit despite the average decrease in net
revenue per patient of approximately 8%.
LIQUIDITY AND CAPITAL RESOURCES:
- -------------------------------
Working capital as of January 31, 1996 was $3,809,710 as compared to
$4,551,855 at October 31, 1995 an decrease of $742,145 during the three month
period.
The Company increased its cash position by approximately $ 60,800 during the
current quarter. The Company utilized $1,164,706 in cash for operating
activities. To offset this use of cash the Company borrowed $1,375,035 in
short-term debt and $109,918 in long-term debt and repaid approximately
$697,642 in existing debt.
The capital spending requirements for the Company during 1996 is expected not
to exceed $550,000. To date, approximately $102,400 has been spent on
capital improvements.
The Company had current liabilities of $13,107,729 at January 31, 1996. The
three largest items in this category are notes payable of $6,766,331,
current portion of long-term debt of $2,363,620 and accounts payable of
$1,934,779.
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. None of the reductions enacted to date has had a material
adverse effect on the Company. For many of the tests performed for Medicare
beneficiaries or Medicaid recipients, laboratories are required to bill
Medicare or Medicaid directly, and to accept Medicare or Medicaid
reimbursement as payment in full.
A number of proposals for legislation or regulation are under discussion which
could have the effect of substantially reducing Medicare reimbursements to
clinical laboratories. For example, the House Energy and Commerce
Subcommittee on Oversight and Investigation introduced legislation in 1987
and 1989 that would require clinical laboratories to charge Medicare the
lowest prices charged to any client. In October 1990, the Office of the
Inspector General ("OIG") of the Department of Health and Human Services
("HHS") proposed a so-called "laboratory roll-in" reimbursement methodology,
whereby physicians would be reimbursed a flat fee per office visit for
clinical laboratory testing, thereby forcing clinical laboratories to bid to
provide those services to physicians. 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 a reduction in the Medicare national
limitation amounts, from the current level of 88% of the national median to
76% of the national median. The Health Care Financing Administration
("HCFA") has announced that it is developing a proposal to provide for
reimbursement of clinical laboratories on a competitive bid basis. In
addition, a number of states, HHS 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 material adverse
effect on the Company. The Company is unable to predict, however, the
extent to which such actions will be taken.
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, 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 ["FASB"] issued Statement of Financial
Accounting Standards ["SFAS"] No. 121, "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of," in March 1995 and
SFAS No. 114, "Accounting by Creditors for Impairment of a Loan," in May
1993. SFAS No. 121 establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles, and goodwill related to
those assets to be held and used, and for long-lived assets and certain
identifiable intangibles to be disposed of. SFAS No. 121 is effective for
financial statements issued for fiscal years beginning after December 15,
1995. SFAS No. 114 establishes accounting standards for the impairment of
certain loans. SFAS No. 114 applies to financial statements for fiscal years
beginning after December 15, 1994. Adoption of SFAS No. 121 and SFAS No. 114
is not expected to have a material impact on the Company's financial
statements.
The FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation," in
October 1995. SFAS No. 123 uses a fair value based method of accounting for
stock options and similar equity instruments as contrasted to the intrinsic
value based method of accounting prescribed by Accounting Principles Board
[APB] Opinion No. 25, "Accounting for Stock Issued to Employees." The
Company has not decided if it will adopt SFAS No. 123 or continue to apply
APB Opinion No. 25 for financing reporting purposes. SFAS No. 123 will have
to be adopted for financial note disclosure purposes in any event. The
accounting requirements of SFAS No. 123 are effective for transactions
entered into in fiscal years that begin after December 15, 1995; the
disclosure requirements of SFAS No. 123 are effective for financial statements
for fiscal years beginning after December 15, 1995.
In December 1994, the American Institute of Certified Public Accountants issued
Statement of Position [SOP] 94-6, "Disclosure of Certain Significant Risks and
Uncertainties," the provisions of which are effective for financial statements
issued for fiscal years ending after December 15, 1995. In general, SOP 94-6
requires disclosures about the nature of a company's operations and the use of
estimates in the preparation of financial statements. The Company does not
anticipate a significant expansion of its financial statement note disclosure
as a result of SOP 94-6.
PART II
Item 6
EXHIBITS AND REPORTS ON FORM 8-K
- --------------------------------
No reports on Form 8-K have been filed during the quarter ended January 31,
1996.
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, M.D.
- --------------------------------------------------
Marc D. Grodman, M.D.
President
/S/ Sam Singer
- -------------------------------------------------------
Sam Singer
Chief Financial and Accounting Officer
Date: March 14, 1996
<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> 3-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 2,549,049
<SECURITIES> 444,620
<RECEIVABLES> 12,215,564
<ALLOWANCES> 2,876,647
<INVENTORY> 399,008
<CURRENT-ASSETS> 16,917,439
<PP&E> 2,259,067
<DEPRECIATION> 1,022,854
<TOTAL-ASSETS> 24,948,259
<CURRENT-LIABILITIES> 13,107,729
<BONDS> 10,330,376
0
0
<COMMON> 61,179
<OTHER-SE> 22,428,757
<TOTAL-LIABILITY-AND-EQUITY> 24,948,259
<SALES> 8,122,702
<TOTAL-REVENUES> 8,122,702
<CGS> 4,425,102
<TOTAL-COSTS> 8,328,182
<OTHER-EXPENSES> 123,272
<LOSS-PROVISION> 1,144,108
<INTEREST-EXPENSE> 203,438
<INCOME-PRETAX> (328,752)
<INCOME-TAX> 44,270
<INCOME-CONTINUING> (373,022)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (373,022)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
