<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 1996
OR
[ ] 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:
0-17458
MBf USA, Inc.
(Exact name of registrant as specified in its charter)
Maryland 73-1326131
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
500 Park Boulevard, Suite 1260
Itasca, IL 60143
---------------------------------------
(Address of principal executive office)
(708) 285-9191
---------------------------------------
(Registrant's telephone number including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of the issuer's Common Stock, par value $.01 per
share, and issuer's Series A Convertible Common Stock, par value $.01 per
share, outstanding as of May 8, 1996 was 1,600,795 and 1,252,537,
respectively.
<PAGE> 2
MBf USA, Inc.
INDEX
PART I - FINANCIAL INFORMATION
Item 1.
Consolidated Balance Sheets
March 31, 1996 (unaudited) and December 31, 1995 . . . . . . . . pg. 1
Consolidated Statements of Operations (unaudited)
for the Three Months Ended March 31, 1996 and 1995 . . . . . . . pg. 3
Consolidated Statements of Cash Flows (unaudited)
for the Three Months Ended March 31, 1996 and 1995 . . . . . . . pg. 4
Notes to the Interim Consolidated
Financial Statements (unaudited) . . . . . . . . . . . . . . . . pg. 5
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . pg. 8
PART II - OTHER INFORMATION
Item 6.
Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . pg. 11
<PAGE> 3
MBf USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,1996 December 31,1995
------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 301,879 $ 706,309
Accounts receivable - trade, net of allowance for
doubtful accounts of $65,091 in 1996 and
$56,091 in 1995 4,865,755 4,657,616
Inventories 8,670,914 10,119,642
Prepaid expenses 596,055 486,420
Other current assets 1,645 81,730
----------- -----------
Total current assets 14,436,248 16,051,717
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 706,820 698,657
Construction in progress 6,165,863 4,242,199
Vehicles 88,486 41,487
Building improvements 21,744 21,744
Equipment, furniture and fixtures 730,158 672,637
----------- -----------
Total property, plant and equipment 7,713,071 5,676,724
Less - Accumulated depreciation (257,961) (229,402)
----------- -----------
Property, plant and equipment, net 7,455,110 5,447,322
----------- -----------
INVESTMENT IN LSAI 1,059,367 1,059,367
----------- -----------
OTHER ASSETS:
Goodwill, net of accumulated amortization of $320,972
in 1996 and $306,527 in 1995 1,429,028 1,443,473
Trademarks and license rights, net of accumulated
amortization of $53,899 in 1996 and $47,688 in 1995 298,762 304,973
Due from affiliates 1,676,832 1,791,616
Other assets 589,433 274,736
----------- -----------
Total other assets 3,994,055 3,814,798
----------- -----------
$26,944,780 $26,373,204
=========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
-1-
<PAGE> 4
MBf USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31,1996 December 31,1995
------------- ----------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 1,730,429 $ 2,494,527
Notes payable and current portion of
long-term obligations 2,112,525 2,224,166
Trade notes payable to banks 5,734,134 6,243,917
Due to affiliates 1,269,795 1,215,479
Accrued expenses 1,256,827 958,130
------------ -----------
Total current liabilities 12,103,710 13,136,219
------------ -----------
LONG-TERM DEBT OBLIGATIONS 12,192,130 10,342,500
------------ -----------
OTHER LONG-TERM LIABILITIES:
Due to affiliate 1,100,000 1,100,000
Other long-term liabilities 339,309 330,266
------------ -----------
Total other long-term liabilites 1,439,309 1,430,266
------------ -----------
MINORITY INTEREST IN SUBSIDIARY 141,812 144,558
------------ -----------
SHAREHOLDERS' EQUITY:
Series A common stock, $.01 par value, 1,252,537 shares
authorized, 1,252,537 shares issued and outstanding 12,525 12,525
Common stock, $.01 par value, 4,000,000 shares
authorized, 1,730,795 and 1,224,248 shares
issued and outstanding in 1996 and 1995, respectively 17,308 17,308
Additional paid-in capital 7,487,944 7,487,944
Retained Earnings (Deficit) (5,089,177) (4,848,224)
Foreign currency translation adjustment (37,745) (26,856)
Less - Common stock in treasury at cost
130,000 shares in 1996 and 1995 (1,323,036) (1,323,036)
------------ -----------
Total shareholders' equity 1,067,819 1,319,661
------------ -----------
------------ -----------
$ 26,944,780 26,373,204
============ ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
-2-
<PAGE> 5
MBf USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
---------------------------------------
1996 1995
------------ -------------
(Unaudited)
<S> <C> <C>
REVENUES:
Product sales, net $11,934,133 $ 9,845,508
Interest 6,399 56,438
Other 34,747 67,012
------------ -----------
Total revenues 11,975,279 9,968,958
------------ -----------
COSTS AND EXPENSES:
Cost of product sales 9,737,894 8,458,353
Selling, general and administrative 2,163,713 1,980,761
Depreciation and amortization 53,695 53,297
Interest 259,010 154,926
------------ -----------
Total costs and expenses 12,214,312 10,647,337
------------ -----------
Income (loss) from continuing operations before
income from investment, minority interest in
subsidiary, and provision for income taxes (239,033) (678,379)
INCOME (LOSS) FROM MINORITY INTEREST IN SUBSIDIARY (1,920) -
------------ -----------
Income (loss) from continuing operations before
provision for income taxes (240,953) (678,379)
PROVISION FOR INCOME TAXES - -
------------ -----------
Income (loss) from continuing operations (240,953) (678,379)
DISCONTINUED OPERATIONS OF SUBSIDIARY - (8,437)
------------ -----------
Net Income (Loss) $ (240,953) $ (686,816)
============ ===========
WEIGHTED AVERAGE NUMBER OF SHARES OF COMMON
STOCK AND COMMON STOCK EQUIVALENTS OUTSTANDING 2,853,332 2,458,973
============ ===========
NET INCOME (LOSS) PER COMMON STOCK
AND COMMON STOCK EQUIVALENT $ (0.08) $ (0.28)
============ ===========
</TABLE>
The accompanying notes to consolidated financial statements are an
integral part of these statements.
-3-
<PAGE> 6
MBf USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Three Months
Ended March 31,
----------------------------------
1996 1995
------------- -------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (240,953) $ (686,816)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 28,559 19,266
Amortization 25,137 34,031
Provision for doubtful accounts 9,000 13,000
(Income) loss from discontinued operations of subsidiary - 8,437
Changes in certain assets and liabilities:
Accounts receivable - trade (217,139) (425,369)
Inventories 1,448,728 1,087,783
Prepaid expenses (109,635) (189,312)
Other current assets 80,085 -
Accounts payable - trade (764,098) 476,015
Accrued expenses 298,697 (100,024)
----------- ----------
Net cash provided by operating activites 558,381 237,011
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,036,347) (140,215)
Expenditures for other assets (319,178) (53,227)
Advances from discontinued subsidiary - 41,738
Minority interest in subsidiary (2,746) -
----------- ----------
Net cash used in investing activities (2,358,271) (151,704)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Amounts due (from) to affiliates 169,100 (430,361)
Net borrowings (payments) on trade notes payable to banks (509,783) (3,905)
Proceeds from notes payable 2,039,656 325,000
Net proceeds from stock option exercises - 2,951
Payments on notes payable (301,667) (25,000)
Proceeds from minority interest shareholder advances 9,043 -
----------- ----------
Net cash provided by (used in) financing activities 1,406,349 (131,315)
----------- ----------
IMPACT OF EXCHANGE RATES ON CASH (10,889) -
NET DECREASE IN CASH AND CASH EQUIVALENTS (404,430) (46,008)
----------- ----------
CASH AND CASH EQUIVALENTS, beginning of period 706,309 96,096
----------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 301,879 $ 50,088
=========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
-4-
<PAGE> 7
MBf USA, Inc.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
1. Basis of Presentation:
On February 27, 1992 the shareholders of American Drug Screens, Inc.
(a Maryland corporation which changed its name on May 21, 1993 to MBf USA,
Inc., the "Company") approved a transaction (the "Share Exchange") whereby the
shareholder of American Health Products Corporation (a Texas corporation,
"AHPC") acquired control of the Company through a series of integrated
transactions, including (a) the increase in authorization of the Company's
Common Stock, par value $.01 per share ("Common Stock") from 2,000,000 to
4,000,000 shares, and the authorization of 1,252,537 shares of a new Series A
Convertible Common Stock, par value $0.01 per share ("Series A Common Stock"),
(b) the acquisition by a wholly owned subsidiary of the Company of all the
issued and outstanding shares of common stock of AHPC from MBf International,
Ltd., a Hong Kong corporation and the majority shareholder of the Company ("MBf
International"), in exchange for 1,252,537 shares of Series A Common Stock; and
(c) the restructuring of the Board of Directors by creating two classes of
directors. Accordingly, the transaction was accounted for as a purchase.
The unaudited consolidated financial statements have been prepared for
interim periods only and do not include all of the information and note
disclosures required by generally accepted accounting principles. These
consolidated statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 1995. The accompanying
consolidated financial statements have not been examined by independent
accountants in accordance with generally accepted accounting standards, but in
the opinion of management, such consolidated financial statements include all
adjustments necessary to fairly present the Company's financial position,
results of operations and cash flows. The results of operations for the three
month period ended March 31, 1996 may not be indicative of the results that may
be expected for the year ended December 31, 1996.
2. Description of Business:
MBf USA, Inc. and subsidiaries market medical examination gloves in
the United States and Playboy brand condoms internationally. The Company's 70%
owned Indonesian manufacturing plant is the start-up phase of operations as of
March 31, 1996, and will manufacture latex medical examination gloves. The
factory began shipping product in May, 1996.
-5-
<PAGE> 8
3. Principles of Consolidation:
The accompanying consolidated financial statements include the
accounts of the Company and its subsidiaries, American Health Products
Corporation ("AHPC"), MBf America, Inc. (an inactive holding company), Premier
Latex, Inc., which is currently inactive, and Disposable Garments, Inc.
("DGI"), a discontinued operation which is currently inactive. Effective
October 31, 1995, the Company acquired a 70% interest in an Indonesian glove
manufacturing factory, PT MBf Buana Multicorpora ("PT Buana"). Accordingly,
PT Buana's assets, liabilities, equity and minority interest is included in the
consolidated financial statements of the Company. All significant intercompany
transactions have been eliminated.
4. Other Items:
The Company's investment in Laboratory Specialist of America, Inc.
("LSAI") on the balance sheet at March 31, 1996 is comprised of a note
receivable from LSAI of $353,123 and a common stock investment in LSAI, at
cost, of $706,244. The Company has agreed not to sell its 239,405 shares of
LSAI common stock prior to July 8, 1996 without the prior consent of LSAI and
its officers and directors. Thereafter, such shares of common stock will be
eligible for sale under Rule 144.
The Company's investment in the publicly traded stock of LSAI is
accounted for as "available for sale" securities in compliance with the
provisions of the Statement of Financial Accounting Standards No. 115 (SFAS
115). On March 29, 1996, the Company's common stock investment in LSAI had a
market value of $793,029. The increase in the investment and shareholders'
equity has not been recorded as of March 31, 1996 due to the restrictions on
the sale of the stock.
5. Acquisition of PT Buana:
The Company entered into a Stock Acquisition Agreement with MBf
International dated October 31, 1995, whereby MBf International exchanged its
beneficial interest in 1,365 shares of common stock of PT Buana, representing
70% of the outstanding common stock of PT Buana, and a non-interest-bearing
demand note in the principal amount of $737,769, for 255,072 shares of the
Company's Common Stock having an aggregate value of $1,219,563. Because the
Company and PT Buana are under common control, the assets and liabilities
acquired were recorded at PT Buana's historical cost. The demand note is
guaranteed by MBf Holdings Berhad ("MBf Holdings"), the parent company of MBf
International. PT Buana is a latex examination glove factory, located in
Indonesia, which will supply production for the Company's subsidiary, AHPC.
The factory has not begun production as of March 31, 1996, and is in
the start-up phase of operation. Accordingly, the factory has capitalized
certain start-up costs incurred and will begin amortizing these costs over a
one-year period upon commencement of operations. As of March 31, 1996, the
Company has recorded a minority interest in the PT Buana subsidiary of
-6-
<PAGE> 9
$141,812 as reflected in the consolidated balance sheets, representing the
non-owned 30% equity interest in the factory. The minority interest of PT
Buana is owned by Indonesian banks financing its construction and operations.
6. Accounting for Income Taxes:
The Company records income taxes in accordance with Statement of
Financial Accounting Standards No. 109 ("SFAS 109"). SFAS 109 utilizes the
liability method and deferred taxes are determined based on the estimated
future tax effects of differences between the financial statement and tax basis
of assets and liabilities given the provisions of enacted tax laws. Deferred
income tax provisions and benefits are based on the changes in the deferred tax
asset or tax liability from period to period.
The effective income tax rates differ from the statutory federal
income tax rate of 34% at March 31, 1996 and 1995. The sources and tax effects
of the differences are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Tax expense at statutory rate of 34% $(81,924) $(233,517)
Goodwill amortization 14,445 11,570
Increase in deferred tax asset valuation allowance 67,479 221,947
-------- ---------
Provision for income taxes $ 0 $ 0
======== =========
</TABLE>
The Company had net operating loss carry forwards ("NOLs") at December
31, 1995 of approximately $4,900,000 which were available to reduce Federal
taxable income in future periods and will begin expiring in 2003. In
accordance with Federal tax regulations, usage of NOLs is subject to
limitations in future years if certain ownership changes occur. Such ownership
changes occurred with the transactions described in Note 1. Because of these
factors, the utilization of the NOLs generated prior to December 31, 1995 may
be significantly limited.
7. Contingencies:
Over the last several years, numerous product liability lawsuits have
been filed against suppliers and manufacturers of powdered latex gloves
alleging, among other things, adverse allergic reactions. AHPC is one of
numerous defendants that have been named in such lawsuits and to date is named
and served in six (6) actions. While the damages claimed are substantial, the
Company believes its exposure in these lawsuits is mitigated by (i) the fact
that it does not manufacture any of the products that are the subject of the
lawsuits; and (ii) warnings which accompany such products. In any event,
because the Company carries product liability insurance with $2,000,000 of
coverage for the payment of any indemnity or judgments, the Company believes
that its risk of exposure is limited but such litigation could have a
materially adverse effect on the Company. However, it is not possible to
predict with any degree of certainty the ultimate outcome of litigation.
-7-
<PAGE> 10
8. Reclassifications:
Certain reclassifications were made to the December 31, 1995 balance
sheet and consolidated statement of operations for the three months ended March
31, 1995. These changes had no effect on the net income (loss) for any period
and were made for consistency purposes only.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
The Company is engaged in the international marketing and distribution
of Playboy(R) brand latex condoms after acquiring the Playboy license rights on
December 30, 1993. The sales of condoms is a small portion of total product
sales due to the short period the Company has been in this business, which
commenced in 1994. The Company's subsidiary, AHPC, is engaged in the marketing
and distribution of examination gloves in the United States. AHPC's gloves
sales make up the vast majority of product sales and AHPC has been in business
since its incorporation in January 1989.
PT Buana was incorporated in Indonesia on October 17, 1994, and has
not yet begun operations at March 31, 1996. Since the Company acquired a 70%
interest in PT Buana on October 31, 1995, and due to the start-up nature of the
factory, certain start-up costs have been capitalized until operations begin
and will be amortized over a one year period. PT Buana's production of latex
examination gloves began in April 1996 and shipments of product began in May
1996.
Total revenues for the first quarter ended March 31, 1996 were
$11,975,279 compared to $9,968,958 for the same period in 1995, an increase of
20.1%. For the three months ended March 31, 1996, total revenues include
product sales of $11,175,993 from the Company's exam glove product line sold by
AHPC and $758,140 from the Playboy condom product line, increases of 17.1% and
152.5%, respectively. over the same period in 1995. Sales of exam gloves and
Playboy condoms for the comparable period in 1995 were $9,545,286 and $300,222,
respectively.
The increased sales volume at AHPC in the three month period is
attributable to more developed customer relationships, and the ability to
fulfill customers' quantity requirements. The Company has maintained its glove
inventory levels which enabled glove sales to increase by over 17% in the first
quarter of 1996 as compared to the same period in 1995. In the first quarter of
1995, AHPC was experiencing inventory shortage problems which were not
applicable in the first three months of 1996. During the first three months
of 1996, two of AHPC's customers accounted for approximately 58% of glove
sales. The loss of either of such customers of AHPC would have a material
adverse effect on the Company.
-8-
<PAGE> 11
The increase in sales of Playboy condoms in the three month period
ended March 31, 1996 is attributable to the expansion of the Playboy condom
distribution channels and to more developed customer relationships. Currently,
the Company has signed distribution agreements in 20 countries, is working to
increase sales with its existing international distributors and is seeking to
obtain superior distributors in several new countries. The Company had 18
signed distribution agreements at March 31, 1995.
The Company has achieved a condom sales increase of 152.5% in the
first quarter of 1996 over the comparable 1995 period. However, the Playboy
License Agreement requires the Company to meet certain minimum net sales per
country, as well as aggregate sales per region, and failing to do so, Playboy
Enterprises, Inc. ("PEI") may revoke the right to sell, or grant additional
licenses to sell in each such country. As of May 13, 1996, no such revocation
has been made and the Company still has the rights to distribute the Playboy
condoms to all countries in which there are signed distribution agreements.
Cost of goods sold as a percentage of sales for the three month period
ended March 31, 1996 was 81.6%, compared to 85.9% for the comparable period in
1995. This decrease in cost of sales as a percentage of sales is attributed
to: 1) more favorable glove purchase prices obtained in 1996 due to a lower
Malaysian raw material latex price; 2) AHPC's increased glove sale prices in
the second half of 1995; and 3) more condom sales which have a higher profit
margin than glove sales.
Selling, general and administrative expenses increased from $1,980,761
for the three months ended March 31, 1995 to $2,163,713 for the same period in
1996. The increase is attributable to higher costs associated with the
introduction, launch and advertising of Playboy condoms in new and established
countries and an increase in selling expenses at AHPC commensurate with its
sales growth.
Interest expense increased from $154,926 for the quarter ended March
31, 1995 to $259,010 for the same period in 1996. The increase is attributable
to higher levels of borrowing and debt to fund the growth, expansion, and
development of the Company.
Some statements in this Form 10-Q are forward looking and actual
results may differ materially from those stated. In addition to the factors
discussed, among the other factors that may affect actual results are product
demand, the effect of economic conditions, exchange rate and interest rate
movements, the impact of competitive products and pricing, political risks in
the countries in which the Company has operations or sales and supply
constraints.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had a working capital surplus of
$2,322,538 compared to a $2,915,498 surplus at December 31, 1995. The decrease
in working capital is primarily attributable to a reduction in cash, inventory
and payables, offset by a net loss of $240,953.
-9-
<PAGE> 12
On August 16, 1995, the Company amended its credit facility loan
agreement with Bank Bumiputra Malaysia Berhad ("BBMB") which allowed for AHPC
to begin utilization of an amended BBMB credit facility. The amended credit
facility waives certain of the financial covenant requirements until December
31, 1996. The amended BBMB agreement: (i) decreased the revolving line of
credit from $6,000,000 to $1,600,000; (ii) decreased the letter of credit
commitment from $1,800,000 to $1,400,000; and (iii) decreased the standby
letter of credit commitment from $200,000 to $100,000. It transferred
$4,825,000 of the outstanding revolving line of credit balance into a new
non-revolving Converted Loan Commitment, which along with the amounts described
above, are evidenced by a single credit note in the aggregate amount of
$7,925,000. The Company is obligated to maintain AHPC's net worth to be a
minimum of $3,000,000.
The Converted Loan Commitment portion of the amended credit note
requires quarterly principal payments totaling $482,500 in 1996 and $723,750 in
1997. The Company may increase the revolving line of credit or letter of
credit facility by up to $2,000,000 as principal payments are made on the
Converted Loan Commitment. In the first quarter of 1996, AHPC paid down the
Converted Loan Commitment by $200,000 which increased the letter of credit
availability by the same amount. At March 31, 1996 and December 31, 1995,
$4,625,000 and $4,825,000, respectively, was outstanding on the Converted Loan
Commitment.
The line of credit bears interest at three percent (3%) over prime.
The entire facility, which is guaranteed by MBf Holdings, is secured by
accounts receivable and inventory and is governed by specific financial
covenants and ratios. At December 31, 1995, $1,500,000 of the credit line and
$993,500 of the letter of credit facility had been utilized. At March 31,
1996, $1,500,000 of the credit line and $1,114,208 of the letter of credit
facility had been utilized.
In June 1995, AHPC entered into a letter of credit banking facility
agreement with MBf Bank, Tonga in the amount of Tonga dollars T$1,000,000 or
approximately US$800,000 at June 30, 1995. On August 24, 1995, the MBf Bank of
Tonga approved an additional T$2 million letter of credit facility bringing the
total facility to T$3 million or approximately US$2.4 million. This unsecured
facility is guaranteed by MBf Holdings, the principal shareholder of the
Company. At March 31, 1996, $1,538,681 of this letter of credit facility was
utilized compared to $1,307,135 at December 31, 1995.
In October 1994, pursuant to two debenture and warrant purchase
agreements between the Company and two trusts established by George S. Mennen,
the Company issued, and each trust purchased, a convertible subordinated
debenture in the amount of $1,000,000 payable in seven years with interest at
one and one-half percent (1.5%) over the prime rate. Each debenture is
convertible into Common Stock of the Company at a conversion price of $25.00
per share. In addition, each trust received a warrant exercisable over five
years to purchase 7,500 shares of the Common Stock of the Company at an
exercise price of $22.50 per share. At March 31, 1996 and December 31, 1995,
long-term debt of $2 million is recorded from this transaction. For the three
months ended March 31, 1996, the Company incurred interest expense of
approximately $50,000 on this indebtedness.
-10-
<PAGE> 13
PT Buana has debt consisting of a syndicated loan facility with three
Indonesian banks, amounting to a total credit facility of $6,500,000 and bears
interest at the Prime Rate which approximates 11.5% at March 31, 1996. As of
March 31, 1996, and December 31, 1995, $6,000,000 and $4,000,000, respectively,
was outstanding on this loan facility. The loan proceeds were used for the
purchase of assets and equipment, and the construction and start-up operations
of the Indonesian factory. The loan is repayable in eight semi-annual
installments, beginning in May 1997 and ending in November 2000. The loan
facility is guaranteed by MBf Holdings and the minority shareholders of PT
Buana.
The Company is continuing to seek and identify additional sources of
funding to provide capital in the event its credit facilities do not provide
sufficient liquidity to fund the Company's ongoing operations.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
1. On February 13, 1996, the Company filed a Report on
Form 8-K wherein it reported on Item 5 that its
subsidiary, American Health Products Corporation, had
entered into an exclusive supply agreement with
American Dental Cooperative.
2. On March 16, 1996, the Company filed a Report on Form
8-K wherein it reported in Item 5 financial results
for the year ended December 31, 1995.
-11-
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MBf USA, Inc.
(Registrant)
Date: May 14, 1996 By: Stephen Tan
------------ ---------------------------------
Name: Stephen Tan
Title: Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 302
<SECURITIES> 0
<RECEIVABLES> 4,931
<ALLOWANCES> (65)
<INVENTORY> 8,671
<CURRENT-ASSETS> 14,436
<PP&E> 7,713
<DEPRECIATION> (258)
<TOTAL-ASSETS> 26,945
<CURRENT-LIABILITIES> 12,104
<BONDS> 0
<COMMON> 30
0
0
<OTHER-SE> 1,038
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<INCOME-CONTINUING> (241)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (241)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
