<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: January 31, 1996 Commission File Number: 0-17414
---------------- -------
ADVANTAGE LIFE PRODUCTS, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-0213733
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(State of incorporation) (IRS Employer I.D. #)
285 PINEDGE DR. BERLIN, N.J. 08009
- - ----------------------------- -----
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (609) 753-0919
--------------
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common stock outstanding on March 15, 1996: 5,929,518
---------
<PAGE>
ADVANTAGE LIFE PRODUCTS, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31, April 30,
ASSETS 1996 1995
- - ------ ------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 103,624 $ 83,538
Accounts receivable, net 928,427 80,839
Income tax receivable 87,214 0
Receivable from officer 25,000 25,000
Inventory 46,603 180,849
Prepaid expenses & other 93,589 63,246
------------- --------------
TOTAL CURRENT ASSETS 1,284,457 433,472
Fixed assets, net 620,729 22,131
Intagible assets, net 2,149,704 1,163,794
Note receivable - related party 15,000 0
Net deferred tax asset 35,026 0
Deferred expenses 900,000 0
Other 3,562 0
------------- --------------
TOTAL ASSETS $ 5,008,478 $ 1,619,397
------------- --------------
------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable $ 459,074 $ 6,625
Accounts payable 1,696,209 480,111
Accrued product returns 111,543 226,564
Accrued royalties 499,153 374,255
Other accrued expenses 125,535 209,377
Notes payable - current portion 29,582 0
------------- --------------
TOTAL CURRENT LIABILITIES 2,921,096 1,296,932
------------- --------------
Notes payable - long term 21,963 0
------------- --------------
STOCKHOLDERS' EQUITY:
Common Stock 142,692 31,752
Additional Paid-in Capital 12,070,198 6,051,837
Accumulated Deficit (7,372,471) (5,761,124)
------------- --------------
Sub-total 4,840,419 322,465
Less common stock subscribed,
but not paid (Note) (2,775,000) 0
------------- --------------
TOTAL SHAREHOLDERS' EQUITY 2,065,419 322,465
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 5,008,478 $ 1,619,397
------------- --------------
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
ADVANTAGE LIFE PRODUCTS, INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months Three months
ended January 31 ended January 31
1996 1995
----------- -----------
<S> <C> <C>
REVENUES:
Gross Revenue $ 1,062,788 $10,156,379
Returns & Allowances (180,122) (2,314,510)
----------- -----------
NET REVENUES 882,666 7,841,869
COST AND EXPENSES:
Cost of sales 667,547 2,222,738
Selling, general & administrative 1,359,496 5,530,245
----------- -----------
TOTAL COSTS AND EXPENSES 2,027,043 7,752,983
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OPERATING PROFIT (LOSS) (1,144,377) 88,886
----------- -----------
Other Income (Expense) (20,833) (17,587)
Write-off of Goodwill 0
----------- -----------
(LOSS) BEFORE INCOME TAXES (1,165,210) 71,299
Income tax provision 0 0
----------- -----------
NET (LOSS) $(1,165,210) $ 71,299
----------- -----------
----------- -----------
Earnings (loss) per common shares:
Primary $ (0.20) $ 0.18
----------- -----------
----------- -----------
Fully diluted $ (0.20) $ 0.17
----------- -----------
----------- -----------
Weighted average number of common shares
used in computation:
Primary 5,929,518 396,039
----------- -----------
----------- -----------
Fully diluted 5,929,518 424,742
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----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
ADVANTAGE LIFE PRODUCTS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine months Nine months
ended January 31 ended January 31
1996 1995
---------------- -------------
<S> <C> <C>
REVENUES:
Gross Revenue $ 5,190,802 $ 11,940,918
Returns & Allowances (756,073) (2,469,012)
---------------- -------------
NET REVENUES 4,434,729 9,471,906
---------------- -------------
COST AND EXPENSES:
Cost of sales 2,660,435 2,799,506
Selling, general & administrative 5,267,125 6,932,123
---------------- -------------
TOTAL COSTS AND EXPENSES 7,927,560 9,731,629
---------------- -------------
OPERATING (LOSS) (3,492,831) (259,723)
Other Income 67,174 110,123
Write-off of Goodwill (1,000,000)
---------------- -------------
(LOSS) BEFORE INCOME TAXES (4,425,657) (149,600)
Income tax provision 0 0
---------------- -------------
NET (LOSS) $ (4,425,657) $ (149,600)
---------------- -------------
---------------- -------------
Earnings (loss) per common shares:
Primary $ (1.26) $ (0.41)
---------------- -------------
---------------- -------------
Fully diluted $ (1.26) $ (0.41)
---------------- -------------
---------------- -------------
Weighted average number of common shares
used in computation:
Primary 3,512,120 366,410
---------------- -------------
---------------- -------------
Fully diluted 3,512,120 366,410
---------------- -------------
---------------- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
ADVANTAGE LIFE PRODUCTS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months Nine months
ended January 31 ended January 31
1996 1995
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITES
Net Profit (Loss) $(4,425,657) $ (149,600)
----------- -----------
Adjustments to reconcile net (loss) to
cash provided by operating activities:
Depreciation and amortizat 1,723,183 98,012
Allowance for doubtful accounts 694,190
Non-cash charges & other 1,594,998 44,000
Changes in assets and liabilities:
Accounts receivable & other receivable 1,324,648 (877,414)
Inventory 213,746 103,691
Prepaid expenses and other 40,714 40,183
Accounts payable (703,978) (1,199,645)
Accrued royalties 124,898
Accrued product returns (115,021) (21,984)
Accrued other expenses (137,470) 500,793
----------- -----------
Net cash (used by) operating activities (359,939) (767,774)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Receivable from officer 250,000
Cash received from acquisition 325,000
Additions to fixed assets - net (75,529) (6,707)
----------- -----------
Net cash from investing activities 249,471 243,293
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payment of note (64,561)
Advance to affiliates 128,806
Issuance of notes payable 66,309 60,000
Proceeds from issuance of common stock 477,204
----------- -----------
Net cash from (used in) financing activities 130,554 537,204
NET INCREASE(DECREASE) IN CASH 20,086 12,723
CASH, BEGINNING OF PERIOD 83,538 34,868
----------- -----------
CASH, END OF PERIOD $ 103,624 $ 47,591
----------- -----------
----------- -----------
</TABLE>
<PAGE>
ADVANTAGE LIFE PRODUCTS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------------------------ PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------------ ------------ --------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance, April 30, 1995 3,969,056 $31,752 $ 6,051,837 ($5,761,124) $322,465
Issuance of stock for acquisition 9,261,130 73,988 73,988
1 for 20 reverse stock split (12,568,677) 0
Stock dividend (100 %) 661,509 0
Acquisition of Environmental Professional 100 3,999,900 (1,468,235) 2,531,765
Advantage life Products elimination (3,438,435) 4,282,546 844,111
Net Loss (472,688) (472,688)
---------------------------------------------------------------------------------------
Balance, July 31, 1995 1,323,018 105,840 6,613,302 (3,419,501) 3,299,641
Shares issued under employment
agreements and other 525,000 4,200 2,488,750 2,492,950
Stock subscribed 4,000,000 32,000 2,968,000 3,000,000
Additional acquisition costs 81,500 652 397,458 398,110
(397,312) (397,312)
Net Loss (2,787,740) (2,787,740)
--------------------------------------------------------------------------------------
Balance, October 31, 1995 5,929,518 $ 142,692 $ 12,070,198 $ (6,207,241) $ 6,005,649
Net Loss $ (1,165,230) (1,165,230)
-------------------------------------------------------------------------------------
Balance, January 31, 1996 5,929,518 $ 142,692 $ 12,070,198 $ (7,372,471) $4,840,419
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
</TABLE>
<PAGE>
ADVANTAGE LIFE PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 1996
UNAUDITED INFORMATION
The consolidated financial statements have been prepared by Registrant, without
audit, except for the balance sheet as of April 30, 1995, which has been derived
from the audited financial statements for the year ended April 30, 1995, and
include all adjustments which are, in the opinion of management, necessary for
a fair presentation of the results of operations for the three and nine month
periods ended January 31, 1996 and 1995. Such adjustments are of a normal
recurring nature. Certain information and footnote disclosure normally included
in the financial statements have been condensed or omitted pursuant to such
rules and regulations, although Registrant believes that the disclosures in such
financial statements are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
Company's annual financial statements included in its Annual Report on Form 10-K
for the year ended April 30, 1995.
Unless otherwise indicated, all numbers relating to shares are post-split, to
reflect the one-for-twenty (1 for 20) reverse stock split that was completed on
August 1, 1995, and a 100% stock dividend that was completed on August 1, 1995.
On July 6, 1995, Advantage Life Products, Inc. ("Company") completed an
acquisition of Environmental Professionals, Inc. ("EPI") from Eagle Vision, Inc.
in exchange for 926,113 shares of the Company's common stock. The transaction
with Environmental Professionals was a purchase whereby a wholly owned
subsidiary of Advantage Life Products, Advantage Acquisition, Inc., acquired
Environmental Professionals. Included in the consolidated financial statements
of the Company are the accounts of EPI from July 1, 1995 to January 31, 1996.
EPI was founded in October 1988, engaging in contract waste removal, which
entails arranging for the transportation and disposal of waste materials for
clients. Currently, EPI provides a full range of environmental remediation
services to industrial clients, major oil companies and environmental
consultants. These services can be broken down into four categories, which are;
(1) Environmental Site Remediation, (2) Drummed Waste Management, (3)
Transportation and Disposal of Hazardous and Non-hazardous Waste Materials, and
(4) Groundwater Treatment Service and Equipment Supply. Environmental
Professionals market area includes New Jersey, New York, Delaware, Maryland, and
Eastern Pennsylvania.
<PAGE>
The exchange has been accounted as a reverse acquisition because the
shareholders of EPI obtained control of the surviving company. The unaudited
balance sheet at January 31, 1996 has been prepared assuming the Acquisition
Agreement with EPI was effective as of July 1, 1995. The unaudited statement of
operations for the three and nine month periods ended January 31, 1996 include
accounts of the Company for the three and nine month periods, and as to EPI for
three months ended January 31, 1996, and the seven months for the period ended
January 31, 1996.
ACQUISITION
On June 28, 1995, the Company entered into a definitive agreement and plan of
merger (the "Merger Agreement") under which Environmental Professionals, Inc.,
a New Jersey-based environmental services firm ("EPI") was purchased from Eagle
Vision, Inc., and merged into Advantage Acquisition, Inc., a newly formed
acquisition subsidiary of the Company. The merger became effective as of July
6, 1995.
Eagle Vision, Inc., a Florida corporation ("Eagle") and, prior to the merger,
the sole shareholder of EPI, received 926,113 shares of the Company's voting
common stock upon the consummation of the merger, representing 70% of the
1,323,018 shares of such common stock then outstanding. The exchange has been
accounted as a reverse acquisition because the shareholders of EPI obtained
control of the surviving company.
The Company's pre-merger shareholders, who owned 396,906 shares of its voting
common stock, obtained the contingent right to receive up to an additional
101,761 shares, dependent upon the Company's net recovery, if any, under pending
litigation filed against Guthy-Renker Corporation, Revlon Corporation, and
others. (See "Legal Proceedings").
EPI was founded in October 1988, and since its formation has engaged in contract
waste removal. Currently, it provides a full range of environmental remediation
services to industrial clients, major oil companies and environmental
consultants. These services consist principally of four categories:
environmental site remediation, drummed waste management, transportation and
disposal of hazardous and non-hazardous waste materials, and groundwater
treatment service and equipment supply. EPI's market area includes New Jersey,
New York, Delaware, Maryland, and Eastern Pennsylvania. The Company intends to
continue utilizing EPI's acquired assets in the same manor as they were used
prior to the merger.
GOODWILL
Goodwill, which represents the excess of purchase price over fair value of net
assets acquired, is amortized on a straight-line basis over the expected periods
to be benefited. The Company recognizes an impairment of goodwill when it is
<PAGE>
determined that the goodwill balance will not be recovered through projected
undiscounted cash flows. The amount of goodwill impairment, if any, is measured
based on the difference between the recorded goodwill balance and the amount of
undiscounted cash flows, and is recognized as a charge to operations. Goodwill
is being amortized over a three to seven year period. Included in the statement
of operations is a charge of $1,000,000 representing a reduction of Goodwill
relating to the Company's consumer product activities. These operations are
being curtailed in that the Company will allocate its future resources to
expanding its environmental business operations.
COMPONENT REPORTING
Included in net sales and cost of sales for the three and nine month periods
ended January 31, 1996 are net sales for Advantage Life Products, Inc, for the
three months ended January 31, 1996 of $317,035 cost of sales for the same
period of $61,509. Sales for Advantage Life Products, Inc, for the nine months
ended January 31, 1996 of $1,783,249 and cost of sales for the same period of
$412,424. For EPI, sales and cost of sales which are in the consolidated results
for the three month period ended January 31, 1996 were $565,631 and $606,038
respectfully. For EPI, sales included in the nine month period ended January
31, 1996 were $2,651,480 and cost of sales for the same period of $2,248,011.
During the periods sales and cost of sales for EPI are from July 1, 1995, the
effective date of the acquisition.
EQUITY TRANSACTIONS
In order to provide working capital to enable the Company to continue its
operations as a going concern, 4,000,000 shares of common stock have been
contracted to be sold for $3,000,000. Such funds will provide working capital
needed to continue operations as a "going concern" and eliminate the significant
negative working capital position of the Company.
Supporting the sale of the 4,000,000 shares of its common stock to Roscom, Ltd,
("Roscom") and Vietri Investments, Ltd. ("Vietri") are Purcharse Agreements.
This transaction is supportrd by Capital Purchase Agreements that exist between
the Company and Roscom, effective August 15, 1995, and the Company and Vietri,
effective October 5, 1995, as well as the related promissory notes and security
agreements, each dated August 15, 1995 with respect to the Roscom transaction
and each dated October 5, 1995 with respect to the Vietri transaction, which set
forth the terms and conditions upon which 2,000,000 shares of the Company's
common stock was sold for $ .75 per share to each of Roscom and Vietri.
Pursuant to terms of the capital stock purchase agreements, the Company was to
be paid $ 200,000 cash at the closing (August 15, 1995 with respect to Roscom
and October 5, 1995, with respect to Vietri) and was to receive a promissory
note from each of
<PAGE>
Roscom and Vietri in the principal amount of $ 1,300,000 which matures August
15, 1996 with respect to Roscom and August 31, 1996 with respect to Vietri. The
respective promissory notes were secured by the shares sold to each enitiy.
There was a scrivener's error in the promissory note issued by Roscom to the
Company as the actual promissory note delivered to the Company by Roscom
indicated that the note matured December 31, 1995 whereas the capital stock
purchase agreement indicated that the note was payable August 15, 1996. The
Company has subsequently asked Roscom to execute a new note reflecting the
correct maturity date, August 15, 1996.
As Roscom and Vietri had agreed that the shares would have no voting rights
until such time as Roscom and/or Vietri had paid for the shares, it was believed
that the Company did not have an obligation to file a Form 8-K until such time
as the holders of the shares could vote such shares. A copy of Roscom's and
Vietri's respective agreements that the shares would have no voting rights until
all payments due under the notes were received by the Company.
The Capital Stock Purchase Agreement contemplated that Roscom would pay
$ 200,000 on August 15, 1995, the closing date for the Roscom transaction and
Vietri would pay $ 200,000 on October 5, 1995, the closing date of the Vietri
transaction. The Company subsequently agreed to extend the date that the cash
portion of the purchase price was payable until December 31, 1995. The amounts
paid by Roscom and Vietri to the company totaled $ 225,000 and was paid on or
about December 15, 1995. Additionally, Roscom and Vietri agreed to assume
$ 175,000 of the Company's and/or its subsidiaries indebtedness owed to two of
the Company's officers and Directors, Allan Lipstein and Gerald Norton and such
persons released the Company of $ 175,000 of such indebtedness.
While the shares issued to Roscom and Vietri contained restrictive legends, the
Company received an opinion of counsel from Joel Schneider, an attorney
practicing in New York, that the legend could be removed from the certificates
issued to Roscom and Vietri. Messrs. Lipstein and Norton further agreed to
cause the shares owned by Roscom and Vierti to be partially released from the
stock pledge agreement. It was Mr. Lipstein's and Mr. Norton's understanding
that Directors of the Company understood that certain shares would be released
from the Stock Pledge Agreements. Approximately 2,500,00 shares of the
Company's common stock was released from the terms of the stock pledge agreement
in order to enable the Company to receive the amounts payable under the
promissory notes from Vietri and Roscom.
Roscom and Vietri have approached the Company and have requested that the
Company issue shares of its preferred stock in exchange for the remaining shares
of the Company's common stock held by Roscom and Vietri. Roscom and Vietri have
represented to the Company that they would each be able to use the Company's
preferred shares as collateral for loans to be obtained by each of Roscom and
Vietri,
<PAGE>
the proceeds of which loans, $ 2,600,000, would be paid to the Company by Roscom
and Vietri, respectively. As part of this arrangement, Roscom and Vietri agreed
to accelerate the maturity date of the promissory notes to April 30, 1996;
agreed that the shares shall be nonvoting shares; and agreed that the preferred
shares of the Company's capital stock shall be escrowed with an escrow agent
acceptable to the Company.
The Company's Board of Directors therefore agreed to issue 1,150,000 shares of
its Series A, non-voting shares of its preferred stock to Roscom and Vietri in
exchange for 1,500,000 shares of the Company's common stock owned by Roscom and
Vietri. The preferred Shares shall pay a cumulative preferred dividend of $ .50
per share per annum payable out of the earnings of the Company in excess of
$ 1,000,000. Roscom and Vietri shall return 1,500,000 shares of the Company's
common stock in exchange for the newly issued preferred shares. The preference
with regard to the payment of dividends shall be the only preference vis a vis
the common shares of the Company. The Company believes that the transfer of the
preferred shares for the common shares is in the best interest of the Company as
the preferred shares are non-voting, have no liquidation preferences vis a vis
the common, and the only preference is one of dividends. On the date that the
Company receives the proceeds payable in full under the promissory notes, the
Company shall release Roscom and Vietri from any claim that it may have against
them arising out of the acquisition of 4,000,000 shares of the Company's common
stock.
The Company's Board of Directors appointed Bush Ross Gardner Warren & Rudy, P.A.
("Bush Ross") to deal with all matters pertaining to the escrow of the preferred
shares and the holding of the shares as security, including but not limited to
establishing and implementing the escrow arrangements, dealing with the
Company's transfer agent and dealing with Roscom and Vietri.
The Company issued 400,000 shares of common stock to two of its senior officers
representing compensation under five year employment agreements. For accounting
purposes, those contracts are being amortized over two years.
An additional 81,500 shares of common stock were issued to advisors who
represented the Company in its acquisition of Environmental Professionals; and
issued 125,000 shares to two directors and a consultant for services rendered.
<PAGE>
STOCK OPTIONS
Stock options transactions for the period are summarized as follows:
<TABLE>
<S> <C> <C>
Balance at April 30, 1995 176,838 $13.10 - $93.75
Activity for the period
April 30, 1995 to January 31, 1996:
Granted 70,400 $5.00
Canceled 59,856 $14.10 - 14.25
------- --------------
Balance at January 31 ,1996 187,382 $5.00 - $40.20
------- --------------
------- --------------
</TABLE>
<PAGE>
Management's Discussion and Analysis or Plan of Operation.
OVERVIEW
The Company provides environmental remediation services through Environmental
Professionals, Inc., ("EPI") an entity acquired effective July 6, 1995, (see
"Stock Transactions"), and develops and markets consumer products, focusing on
cosmetic and beauty and health products.
EPI provides a full range of environmental remediation services to industrial
clients, major oil companies and environmental consultants. These services
include site remediation, waste management, transportation, the disposal of both
hazardous and non-hazardous waste materials and groundwater treatment products
and services. EPI's market area includes New Jersey, New York, Delaware,
Maryland, and Eastern Pennsylvania.
As a result of the recent acquisition of EPI and the attendant diversity of
operations, two separate divisions are being operated under the corporate
umbrella of Advantage Life Products, Inc. (the public entity).
The Company intends to focus its future operations in the environmental
industry. The Company's future plans for the environmental division include
development of EPI's groundwater treatment capability and continue to expand the
remediation business and groundwater treatment business. Additional
acquisitions in the environmental industry are also being considered and
evaluated, although there are no assurances that any will be completed.
The Company markets a line of hair products, focusing on the Secret Hair brand,
through (1) direct response television via 30 minute infomercials, (2) select
beauty salons, and (3) international sales channels. On May 9, 1994 the Company
entered into a marketing and distribution agreement with Guthy-Renker
Corporation ("GRC") of Palm Desert, California for the electronic media
distribution of Secret Hair. Pursuant to the terms of the agreement, the Company
and GRC would each receive 50% of the net profits from the sales of the Secret
Hair
<PAGE>
product. Effective January 31, 1995, due to difficulties the Company
experienced with GRC, the Company commenced airing the infomercial itself and
began selling directly to salons via direct marketing methods. See "Legal
Proceedings". GRC is a developer and distributor of infomercials. GRC has
produced and distributed infomercials and products such as Tony Robbin's
Personal Power programs, The Principal Secret skin and hair care products with
Victoria Principal, and Perfect Smile with Vanna White.
OPERATING RESULTS
Net consumer product division revenues for the nine months ended January 31,
1996 were $1,783,249 as compared to $9,471,906 for the similar period ended
January 31, 1995. Net consumer product division revenues for the three months
ended January 31, 1996 were $317,035 as compared to $7,841,869 for the similar
period ending January 31, 1995.
The decrease in consumer product division revenues is attributed to the
Company's deemphasis on its consumer product activities. Going forward, the
Company is going to allocate its resources in expanding the environmental
business.
Consolidated net revenues of $4,434,729 for the nine months ended January 31,
1996 include $2,651,480 of EPI's sales from July 1, 1995, date of acquisition.
Consolidated net revenue of $882,666 for the quarter ended January 31, 1996
include $565,631 of EPI's sales for that quarter.
Cost and expenses for the consumer products division was $4,177,723 for the nine
months ended January 31, 1996, as compared to $9,731,629 for the similar 1995
period. Cost and expenses for the three month period ended January 31, 1996
were $542,706 as compared to $7,752,983 for the similar 1995 period. Cost and
expense decreases are primarily attributed to the sharp decrease in sales
volume. Consolidated costs and expenses of $7,927,560 for the nine months ended
January 31, 1996 include $3,749,837 of EPI cost and
<PAGE>
expenses from July 1, 1995, date of acquisition. Consolidate cost and expenses
of $2,027,043 for the quarter ended January 31, 1996 included $1,484,337 of
EPI's cost for that quarter.
For the nine month period ended January 31, 1996, the Company realized a net
loss of $4,425,657 ($ 1.26 per share) as compared to a net loss of $149,600
($.41 per share) for the similar period in 1995. For the three months ended
January 31, 1996, the Company realized a net loss of $1,165,210 ($.20 per share)
as compared to a net income of $71,299 ($.17 per share) for the similar period
in 1995. The increase in net loss for the nine month period is attributable to
the decline in sales relating to the consumer products division and the
additional write off of goodwill and the charge to operations for employment
contracts. As to the three month period the net loss was attributable to the
decline in sales revenue relating to the consumer product division.
STOCK TRANSACTIONS
On June 28, 1995, the Company entered into a definitive agreement and plan of
merger (the "Merger Agreement") under which Environmental Professionals,
Inc.,("EPI") a New Jersey-based environmental services firm was purchased from
Eagle Vision, Inc., and merged into Advantage Acquisition, Inc., a newly formed
acquisition subsidiary of the Company. The merger became effective as of July
6, 1995.
Eagle Vision, Inc., a Florida corporation ("Eagle") and, prior to the merger,
the sole shareholder of EPI, received 926,113 shares of the Company's voting
common stock upon the consummation of the merger, representing 70% of the
1,323,018 shares of such common stock then outstanding. The Company's pre-merger
shareholders, who owned 396,906 shares of its voting common stock, obtained the
contingent right to receive up to an additional 101,761 shares, dependent upon
the Company's net recovery, if any, under pending litigation filed against
Guthy-Renker Corporation, Revlon Corporation, and others. (See "Legal
Proceedings").
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net working capital deficiency was at $ 1,636,639 on January 31, 1996, as
compared to $863,460 at April 30,1995. The increase in the working capital
deficiency is due to the Company's loss from operations affecting working
capital. EPI's working capital deficiency included in the Company's consolidated
position at January 31, 1996 was $ 745,344. The significant increase in working
capital deficiency components at January 31, 1996 as compared to April 30, 1995
are pursuant to the inclusion of EPI's components in the consolidated balance
sheet at January 31, 1996.
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company and it subsidiaries are defendants in various legal actions which
arise in the normal conduct of business. In addition, the Company is a party in
the following legal proceedings:
Advantage Life Products, Inc. and Lasting Cosmetics, Inc., a Delaware
Corporation v. Michael Ackerman and Lasting Cosmetics, Inc., a New York
Corporation, Case No. 730085 filed in Orange County Superior Court on May 23,
1994. This is a suit by Advantage Life Products, Inc. (hereinafter "ALP") and
Lasting Cosmetics, Inc. (Delaware) (hereinafter "LCD") against Michael Ackerman
(hereinafter "ACKERMAN") and Lasting Cosmetics, Inc. (New York) (hereinafter
"LCNY") for Fraud and Deceit, Negligent Misrepresentation, Suppression of Facts,
Conspiracy, Breach of Warranty, and Declaratory Relief. Plaintiffs' complaint
seeks recovery of $17,000,000 from Defendants. In this action, Defendants
Ackerman and LCNY unsuccessfully sought to compel, inter alia, Advantage into an
arbitration. Defendants Ackerman and LCNY have appealed to the 4th District
Court of Appeal this refusal by the trial court to grant them arbitration, and
the trial judge has taken the position that the trial court proceedings have
been stayed by virtue of this appeal. This appeal is presently being briefed.
The facts of which the
<PAGE>
Company has knowledge indicate that any defense by Defendants ACKERMAN and LCNY
will ultimately be found to be without merit.
Ackerman v. Advantage Life Products, Inc., Case No. 739547, filed on December 6,
1994, in the Orange County Superior Court. This action is a claim by ACKERMAN
which the Company's legal counsel believes should have been filed by ACKERMAN as
a Cross-Complaint in Case No. 730085, but which could not have been filed by
Ackerman therein without waving his theretofore unsuccessful claims that he is
entitled to go to arbitration. ACKERMAN asserts this action is on a note and
stock security agreement, and seeks a recovery in the sum of $300,000. In this
action, ALP and LCD have cross-complained against ACKERMAN and LCNY asserting
the same claims as in Case No. 730085. Given the facts of which the Company has
knowledge, it does not believe ACKERMAN and LCNY will have any more success in
this litigation than in Case No. 730085
More Direct Response, Inc., a California Corporation v. Advantage Life Products,
Inc., Case No. 739343, filed December 1, 1994. This is an action in the Orange
County Superior Court by the Plaintiff alleging Breach of Contract, Breach of
the Implied Covenant of Good Faith and Fair Dealing, Breach of Trust,
Constructive Fraud, Fraud, Imposition and Enforcement of Constructive Trust.
The action asserts that Regal Best, Inc., defaulted on a marketing agreement
with ALP, relative to the CigArrest product line which had previously been
assigned to Regal Best, Inc., and ALP had some ongoing obligation to More Direct
Response, Inc., given Regal Best's default. On February 9, 1995, the trial
judge, on the request of Defendant ALP, ordered the entire matter to binding
arbitration. More Direct Response, Inc., seeks a recovery which is vaguely
pleaded at between $75,000 and $170,000. No date for this arbitration has yet
been set but, based on the facts of which the Company is aware of, it is
anticipated that More Direct Response, Inc. will not be successful in this
arbitration.
Advantage Life Products, Inc. v. Guthy-Renker Corporation; Tri-star Products,
Inc., Revlon Consumer Products Corporation; Revlon General Wig, Inc., American
Telecast Corporation; First Class Marketing, Inc., case number BC127193 filed in
Los Angeles County Superior Court,
<PAGE>
Central District on May 4, 1995. This is a suit by the Company against the
parties listed above for Complaint for Accounting, Declaratory Relief, Breach of
Contract, Breach of Implied Good Faith and Fair Dealing, Conversion, Deceit,
Constructive Fraud, Misappropriation of Trade Secrets, Interference with
Economic Relationship, Unfair Competition, Untrue/Misleading Advertising,
Trademark Dilution, False Designation of Orgin and False Description, and for
Civil RICO for Damages and for Restitutionary, Injunctive and other Relief.
Plaintiffs' complaint seeks recovery of at least $3,000,000 from Defendants. The
facts of which the Company has knowledge indicate that any defense by the
defendants will be found to be without merit.
Guthy Renker Corporation v. Advantage Life Products, Inc., and Don Danks, Cross
complaint filed June 16, 1995 in Los Angeles Superior Court, for Breach of
Written Contract, Conversion, Negligent Misrepresentation, Bad Faith Denial of
the Existence of a Contract, Dissolution and Accounting, False Designation or
Orgin and False Description, Recission and Restitution, Defamation, Declaratory
Relief, and Injunctive Relief. Guthy-Renker is seeking approximately $4,500,000
in damage and reimbursement. The Company believes the facts of which it has
knowledge of will enable it to prevail on all claims from Guthy-Renker.
OTHER EVENTS
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None
(b) REPORTS ON FORM 8-K
None
<PAGE>
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.
ADVANTAGE LIFE PRODUCTS, INC.
March 15, 1996 by: GEORGE CARRAS
----------------------------
Chief Executive Officer & Chief Accounting Officer
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