U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996
[ ] Transition Report Under Section 13 or 15(d) of
the Exchange Act
For the transition period from ____________ to ____________.
Commission file number 0-20594
COMPSCRIPT, INC.
-----------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
FLORIDA 65-0506539
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1225 BROKEN SOUND PKWY. N.W., STE A
BOCA RATON, FLORIDA 33487
---------------------------------------
(Address of Principal Executive Office)
(407) 994-8585
------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 [ ]
The number of shares outstanding of the issuer's common stock, par value $.01
per share as of November 12, 1996 was 10,788,138
Traditional Small Business Disclosure Format: Yes [x] No [ ]
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
PAGE
----
PART I. FINANCIAL INFORMATION
ITEM. 1 Financial Statements (Unaudited)
Consolidated Condensed Balance Sheets as
of September 30, 1996 and December 31,
1995 2
Consolidated Condensed Statements of
Operations for the Nine Months Ended
September 30, 1996 and 1995 3
Consolidated Condensed Statement of
Shareholders Equity for the Nine Months
Ended September 30, 1996 4
Consolidated Condensed Statements of Cash
Flows for the Nine Months Ended September
30, 1996 and 1995 5
Notes to Consolidated Condensed Financial
Statements 6-10
ITEM. 2 Management's Discussion and Analysis or
Plan of Operation 11-14
PART II. OTHER INFORMATION
ITEM. 6 Exhibits & Reports on Form 8-K
SIGNATURES
<PAGE>
<TABLE>
<CAPTION>
COMPSCRIPT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
ASSETS 1996 1995
------------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 861,190 $ 315,765
Accounts receivable (net of
allowances of $194,850 and
$79,888 at September 30, 1996 and
December 31, 1995, respectively) 2,691,176 2,167,004
Inventory 887,153 772,608
Prepaid and other receivables 116,849 69,650
Receivable from sale of marketable securities 1,125,000 -
----------- -----------
Total Current Assets 5,681,368 3,325,027
----------- -----------
Property and equipment, net 1,032,030 1,138,563
Other assets 577,735 487,339
----------- -----------
Total Assets $ 7,291,133 $ 4,950,929
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 878,197 $ 1,233,029
Accrued salaries and benefits 164,993 111,897
Accrued expenses 443,835 261,469
Accrued pharmaceuticals dispensed by
third parties 137,552 63,701
Leases payable 57,143 64,400
Line of credit 231,312 204,747
Notes payable 300,997 301,539
----------- -----------
Total Current Liabilities 2,214,029 2,240,782
----------- -----------
Long-term debt:
Leases payable 21,304 59,056
Notes payable 14,461 14,873
----------- -----------
Total long-term debt 35,765 73,929
----------- -----------
Total liabilities 2,249,794 2,314,711
----------- -----------
MINORITY INTEREST IN CONSOLIDATED
SUBSIDIARY 209,106 -
----------- -----------
SHAREHOLDERS' EQUITY:
Common Stock, $.0001 par value in
1996, no par value in 1995,
50,000,000 and 10,000,000 shares
authorized; 10,718,107 and 2,258,867
shares issued and outstanding in
1996 and 1995, respectively 1,072 5,499,176
Additional Paid in Capital 7,644,189 102,414
Accumulated Deficit (2,813,028) ( 2,965,372)
---------- -----------
Total Shareholders' Equity 4,832,233 2,636,218
----------- -----------
Total Liabilities and
Shareholders' Equity $ 7,291,133 $ 4,950,929
============ ============
</TABLE>
See Accompanying Notes
2
<PAGE>
<TABLE>
<CAPTION>
COMPSCRIPT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------- --------------------------------
1996 1995 1996 1995
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
SALES $ 5,304,280 $ 4,483,493 $15,616,688 $10,615,765
COST OF SALES 3,179,730 2,553,598 9,383,573 5,711,652
----------- ---------- ---------- ----------
GROSS PROFIT 2,124,550 1,929,895 6,233,115 4,904,113
----------- ---------- ---------- ----------
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,022,796 1,716,922 5,901,168 4,617,985
MERGER COSTS 301,673 - 301,673 -
----------- ---------- ---------- ----------
OPERATING (LOSS) INCOME ( 199,919) 212,973 30,274 286,128
OTHER:
Interest and other income 2,524 7,184 21,372 17,430
Interest expense ( 39,158) ( 33,748) ( 91,518) ( 67,581)
----------- ---------- ---------- ----------
(LOSS)INCOME BEFORE INCOME
TAXES AND MINORITY INTEREST ( 236,553) 186,409 ( 39,872) 235,977
BENEFIT (PROVISION) FOR
INCOME TAXES 88,708 ( 87,596) 77,007 ( 154,215)
MINORITY INTEREST IN
NET LOSS OF SUBSIDIARY 8,958 - 13,522 -
----------- ---------- ----------- ----------
NET (LOSS) INCOME $( 138,887) $ 98,813 $ 50,657 $ 81,762
=========== ========== ========== ==========
NET (LOSS) INCOME PER SHARE $( .01) $ .03 $ .01 $ .03
=========== ========== =========== ==========
WEIGHTED AVERAGE COMMON AND
COMMON EQUIVALENT SHARES
USED IN COMPUTATION OF
PER SHARE DATA 10,678,120 2,893,860 6,958,598 2,893,860
=========== ========== ========== ==========
PRO FORMA DATA:
Historical (loss) income
before income taxes $( 236,553) $ 186,409 $( 39,872) $ 235,977
Pro-forma income tax benefit
(expense) 88,708 ( 69,903) 14,952 ( 144,024)
Minority interest 8,958 - 13,522 -
----------- ---------- ---------- ----------
Pro-forma net (loss) income $( 138,887) $ 116,506 $( 11,398) $ 91,953
=========== ========== ========== ==========
Pro-forma net (loss) income
per share $( .01) $ .04 $( .00) $ .03
=========== ========== ========== ==========
Pro-forma weighted average
shares outstanding 10,678,120 2,893,620 6,958,598 2,893,620
=========== ========== ========== ==========
</TABLE>
See Accompanying Notes
3
<PAGE>
<TABLE>
<CAPTION>
COMPSCRIPT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
COMMON STOCK ADDITIONAL
------------------------------ PAID IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balances, December 31, 1995 2,258,867 $ 5,499,176 $ 102,414 $( 2,965,372) $ 2,636,218
Capital Brands Transaction:
Acquisition of existing
common shares net of
costs of $1,162,201 1,806,750 181 1,212,622 - 1,212,803
Issuance of Common stock 7,394,982 739 5,498,414 - 5,499,153
Receipt of CompScript-Boca
Common stock (2,039,840) (5,499,153) ( 222,628) - (5,721,781)
Common shares issued to
reflect 3.898373 to 1
conversion for shares issued
as a result of poolings 634,823 63 - - 63
Transfer of Delta Pharmacy
Services, Inc. deficit
to additional paid in
capital upon conversion
from an S corporation to
a C corporation - - ( 101,687) 101,687 -
Shares issued upon exercise
of warrants 37,525 4 198,866 - 198,870
Shares issued upon
exercise of stock options 625,000 62 956,188 - 956,250
Net income for the period 50,657 50,657
---------- --------- ---------- ----------- ----------
Balances, September 30, 1996 10,718,107 $ 1,072 $ 7,644,189 $ ( 2,813,028) $ 4,832,233
=========== ========== =========== ============ ===========
</TABLE>
See Accompanying Notes
4
<PAGE>
<TABLE>
<CAPTION>
COMPSCRIPT, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 50,657 $ 81,762
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 320,208 343,739
Provision for doubtful accounts 227,540 72,750
Minority Interest (13,522) -
Changes in assets and liabilities,
net of business acquisition:
Accounts receivable (751,712) (442,182)
Inventory (114,545) (293,328)
Prepaid and other receivables (47,199) (36,826)
Other assets (98,495) (156,904)
Accounts payable and accrued expenses (45,519) 712,788
Net cash (used in) provided by operating --------- ----------
activities (472,587) 281,799
--------- ----------
INVESTING ACTIVITIES:
Purchases of property and equipment (180,509) (325,122)
Net cash acquired in business acquisition 394,049 -
--------- ----------
Net cash provided by (used in) investing activities 213,540 (325,122)
--------- ----------
FINANCING ACTIVITIES:
Proceeds from lines of credit and notes payable 400,000 177,768
Repayment of lines of credit (373,435) (72,254)
Proceeds from exercise of stock options
and warrants 823,870 -
Repayment of notes and leases payable (45,963) (43,154)
--------- ----------
Net cash provided by financing activities 804,472 62,360
--------- ----------
Net increase in cash and cash equivalents 545,425 19,037
Cash and cash equivalents at beginning
of period 315,765 385,357
--------- ----------
Cash and cash equivalents at end of period $ 861,190 $ 404,394
========= ==========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for income taxes $ 125,623 $ 272,444
========= ==========
Cash paid for interest $ 70,695 $ 47,010
========= ==========
</TABLE>
See Accompanying Notes
5
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. THE COMPANY
As a result of the completion of the transactions described in the
following paragraphs, the Company is now principally engaged in the business of
providing comprehensive pharmacy management services.
On April 26, 1996, CompScript, Inc. (formerly Capital Brands) (the
"Company") acquired approximately 93% of the outstanding Common stock of
CompScript-Boca, Inc. (formerly CompScript, Inc.) ("CompScript-Boca"), a
privately-held provider of pharmacy management services by merger of the Company
into CompScript-Boca in exchange for issuance of 7,394,982 shares of the
Company's Common Stock. As a result of this transaction, CompScript-Boca
shareholders became the owners of approximately 80% of the Company's then
outstanding Common Stock and assumed 100% Control of the Company's Board of
Directors. Accordingly, the acquisition has been treated for financial reporting
purposes as a reverse acquisition. After completion of the transaction, the
Company became the owner of approximately 93% of the outstanding common stock of
CompScript-Boca and accordingly, recorded a minority interest in the acquired
subsidiary of $222,628, representing 7% of the net assets of the acquired
subsidiary on the date of acquisition.
The purchase price of the Company by CompScript-Boca of approximately
$3,312,201 was comprised of the 1,806,750 shares deemed to have been issued and
acquisition costs. The purchase price was allocated to the estimated fair value
of assets acquired of $2,150,000, and the acquisition costs of $1,162,201 were
charged against paid in capital since the Company had insignificant operations
at the date of the reverse acquisition.
The following unaudited pro-forma summary combines the consolidated
results of operations of the Company and CompScript-Boca as if the reverse
acquisition had occurred at January 1, 1995, after giving effect to such
transaction, the write-off of $3.6 million of CompScript-Boca's goodwill
effective as of December 31, 1995, and the acquisition of Delta Pharmacy
Services, Inc. on May 31, 1996, which was accounted for as a pooling of
interests. The unaudited pro forma summary is not necessarily indicative of
either the results of operations that would have occurred had the consolidation
been made during the periods presented, or of future results of operations of
the consolidated companies.
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------------
1996 1995
------------- -------------
(UNAUDITED) (UNAUDITED)
Pro forma net sales $ 15,616,688 $ 10,615,765
============ ============
Pro forma net income $ 50,657 $ 81,762
============ ============
Pro forma net income per share $ .01 $ .03
============ ============
6
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 (CONTINUED)
(UNAUDITED)
On May 31, 1996, the Company acquired 100% of the outstanding common
stock of Delta Pharmacy Services, Inc. ("Delta") in exchange for issuance of
666,350 shares of the Company's Common Stock. On August 19, 1996, the Company
acquired 100% of the outstanding common stock of SECURx, Inc. ("SECURx") in
exchange for 187,500 shares of the Company's Common Stock. The acquisitions have
been accounted for as poolings of interest. The accompanying financial
statements, and the pro-forma summary presented above for all periods presented
have been restated to reflect the combination. Condensed results of the
CompScript and pooled entities for all periods presented are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ---------------------------
1996 1995 1996 1995
---------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Total Revenues:
CompScript $ 3,645,895 $2,863,234 $ 9,855,890 $ 8,036,803
Pooled entities 1,658,385 1,620,259 5,760,798 2,578,962
---------- --------- ----------- -----------
Combined $ 5,304,280 $4,483,493 $ 15,616,688 $ 10,615,765
========== ========= =========== ===========
Net Income(Loss):
CompScript $( 302,477)* $ 77,135 $( 190,559)* $ 88,833
Pooled entities 163,590 21,678 241,216 ( 7,071)
---------- --------- ----------- -----------
Combined $( 138,887) 98,813 $ 50,657 $ 81,762
========== ========= =========== ===========
</TABLE>
*Includes a one time after tax charge of $188.546 relating to $301.673 of merger
costs associated with the acquisitions of Delta and SECURx.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements included
the accounts of the Company and all of its subsidiaries, which are
majority-owned. All significant intercompany transactions and balances have been
eliminated in consolidation.
The accompanying consolidated condensed financial statements as of
September 30, 1996 and 1995 are unaudited. The consolidated condensed balance
sheet as of December 31, 1995 was derived from the December 31, 1995 audited
balance sheet included in the Company's Transition Report on Form 10-KSB filed
on October 11, 1996, in connection with the reverse acquisition described in
Note 1. Such balance sheet was restated to reflect the May 31, 1996 and August
19, 1996 acquisitions of Delta and SECURx which were accounted for as a poolings
of interest. These financial statements have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the rules and regulations of the Securities and Exchange Commission (the
"SEC"). Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The Company believes it has made sufficient disclosures such that
the information presented is not misleading.
7
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 (CONTINUED)
(UNAUDITED)
In the opinion of management, the financial statements reflect all adjustments
(which include only normal recurring adjustments) necessary to state fairly the
financial position and results of operations as of and for the periods
presented.
In connection with the reverse acquisition described in Note 1, the
Company changed the year end of the accounting acquiror, CompScript-Boca to
December 31, to conform to the Company's year end. The Company filed a
Transition Report on Form 10-KSB on October 11, 1996 covering the transition
period.
Results for the nine month period ended September 30, 1996 are not
necessarily indicative of the results to be achieved for the year ending
December 31, 1996.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
NET INCOME (LOSS) PER SHARE
Net income (loss) per share for three and nine month periods ended
September 30, 1996 and 1995, have been calculated based upon the weighted
average number of common shares outstanding after giving effect to the dilutive
effect of outstanding options and warrants during the periods in which their
inclusion was dilutive.
8
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 (CONTINUED)
(UNAUDITED)
The pro forma net income (loss) per share data has been calculated
after giving effect to the income tax matters discussed more fully in Note 3.
All weighted average shares outstanding have been adjusted to reflect
the 666,350 and 187,500 shares of Common Stock issued in the acquisitions of
Delta and SECURx.
3. INCOME TAXES:
The income tax provisions for the three and nine month periods ended
September 30, 1996 and 1995, have been calculated by applying the Company's
estimated effective tax rate for the years 1996 and 1995 after giving effect to
the matters described in the following paragraphs. The effective tax rates were
calculated assuming the use of a calendar year for tax reporting purposes.
For the three and nine month periods ended September 30, 1995 the
relationship of the provision for income taxes to pre-tax income reflects the
non-deductibility of goodwill amortization of $49,362 and $148,087,
respectively, and the non-taxability of Subchapter S income of Delta of $ 17,901
and $ 46,650, respectively.
For the three and nine month periods ended September 30, 1996, the
relationship of the provision for income taxes to pre-tax income reflects the
exclusion of the Subchapter S earnings of Delta from the tax provision
computation from the beginning of the periods to the date of acquisition.
Concurrent with the acquisition of Delta on May 31, 1996, Delta converted to C
corporation status and its earnings from that date until September 30, 1996 were
included in the tax provision computation.
4. SHAREHOLDERS' EQUITY:
At September 30, 1996, the Company had reserved the following shares of
Common Stock for issuance pursuant to outstanding warrants and options:
Class A Warrants, exercisable
at $4.40 per share through
December 31, 1996 29,800
Class B Warrants, exercisable
at $5.43 per share through
December 31, 1996 131,275
9
<PAGE>
COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 (CONTINUED)
(UNAUDITED)
Options, exercisable at $6.00
to $10.00 per share through
January 12, 1999 300,000
Stock option plan 900,000
---------
Total 1,361,075
=========
During the nine months September 30, 1996, the Company issued 37,525
shares of Common Stock upon the exercise of 12,000 Class A and B Warrants and
received cash of $198,870. In addition, the Company issued 625,000 shares of
Common Stock upon the exercise of 625,000 options at $1.00 per share, and
received cash of $625,000.
On August 27, 1996, the Company granted 738,100 stock options to
officers and employees at an exercise price of $5.13 per share, all of which
become exercisable on January 1, 1997.
5. SALE OF MARKETABLE SECURITIES:
On July 26, 1996, the Company sold its 1,125,000 shares of Common Stock
of QPQ Corporation("QPQ") to a major shareholder of QPQ in exchange for a
non-recourse promissory note in the original principal amount of $1,125,000,
payable in full, including accrued interest on July 26, 1997. The note may be
paid in whole or part at any time during its term without penalty. The 1,125,000
shares will serve as collateral for the note subject to release upon payment of
the principal amount or portions thereof.
6. SUBSEQUENT EVENTS:
On October 31, 1996, the Company received a commitment from a major
regional bank for a $5,000,000 secured revolving line of credit and a five year
$500,000 term loan. The new line of credit and term loan replace the Company's
existing $750,000 credit facility with the same bank.
On November 13, 1996, the Company entered into a letter of intent to
acquire 100% of the outstanding common stock of Medical Services Consortium,
Inc. ("MSC"). MSC is a privately-held provider of institutional pharmacy and
related services serving long-term care facilities primarily located in
southern Florida's Dade, Broward and Monroe Counties.
10
<PAGE>
ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION
GENERAL
As a result of the Company's (formerly Capital Brands, Inc.) recent
share exchange agreement with CompScript-Boca (formerly CompScript, Inc.) which
closed on April 26, 1996 where shareholders of CompScript-Boca exchanged
approximately 93% of the outstanding Common stock of CompScript-Boca for
approximately 80% of the outstanding Common shares of the Company, the Company
is now principally engaged in the business of providing comprehensive pharmacy
management services as more fully described below. In connection with the share
exchange agreement, the Company divested itself of its equity interests in
Family Chicken, Inc., International Fast Food Corporation and International
Hotel Corporation and retained ownership of 1,125,000 shares of Common stock of
QPQ Corporation which constituted 15.6% of QPQ's outstanding shares on such
date.
In connection with the expansion of its pharmacy management business on
May 31, 1996, the Company acquired 100% of the Common stock of Delta Pharmacy
Services, Inc. ("Delta") in exchange for issuance of 666,350 shares of the
Company's Common Stock. On August 19, 1996, the Company acquired 100% of the
outstanding common stock of SECURx, Inc. ("SECURx") in exchange for 187,500
shares of the Company's Common Stock. The acquisitions have been accounted for
as poolings of interest. All data included in the following discussions has
been restated to reflect the combination of Delta and SECURx for all periods
presented.
As a result of the completion of the transactions described above the
Company is a comprehensive provider of pharmacy management services equipped to
both lower costs and improve the quality of care. The company offers a broad
range of pharmacy, infusion therapy, consulting services, mail order, and
pharmacy benefit claim administration to managed care networks, long-term and
sub-acute care facilities, home health patients, and recipients of managed care.
The Company's proprietary pharmacy management capabilities combine sophisticated
clinical tools with the latest technologies in data bases and drug profiles. The
Company's network of participating retail pharmacies, along with its electronic
on-line adjudication system and a mail service dispensing facility, allow the
Company to offer a fully integrated pharmacy benefit management program.
On July 26, 1996, the Company sold its 1,125,000 shares of Common Stock
of QPQ Corporation ("QPQ") to a major shareholder of QPQ in exchange for a
non-recourse promissory note in the original principal amount of $1,125,000,
payable in full, including interest on July 26, 1997. The note may be paid in
whole or in part at any time during its term without penalty. The 1,125,000
shares will serve as collateral for the note subject to release upon payment of
the principal amount or portions thereof.
On November 13, 1996, the Company entered into a letter of intent to
acquire 100% of the outstanding common stock of Medical Services Consortium,
Inc. ("MSC"). MSC is a privately-held provider of institutional pharmacy and
related services serving long-term care facilities primarily located in
southern Florida's Dade, Broward and Monroe Counties.
11
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 VS. SEPTEMBER 30, 1995
RESULTS OF OPERATIONS:
Revenues for the nine months ended September 30, 1996 increased 47.1%
to $15,616,688, from $10,615,765 for the nine months ended September 30, 1995.
The increase in year to date revenues over the comparable prior year period is
primarily attributed to the Company's steady internal growth resulting primarily
from marketing efforts to new and existing clients and the growth and
integration of new and existing products and services.
Cost of sales for the nine months ended September 30,1996, increased
64.3% to $9,383,573 from $5,711,652. Cost of sales as a percentage of sales for
the nine months ended September 30, 1996 and 1995 were 60.1% and 53.8%. The
substantial portion of the increase is attributable to the higher costs
associated with SECURx's operations when compared to all of the Company's other
operations. For the comparable nine months periods ended September 30, 1996 and
1995, cost of sales as a percentage of sales for all operations, excluding
SECURx were 50.5% and 50.1%, respectively. The Company is beginning to integrate
its purchasing strategy in connection with both the Delta and SECURx
acquisitions in order to reduce costs of sales.
Selling general and administrative expenses as a percentage of sales
for the nine month periods ended September 30, 1996 and 1995 were 37.8% and
43.4%. The percentage decreases in the comparative nine month periods are
primarily attributable to the increase in sales for such periods as well as the
continued efforts to leverage corporate overhead over a larger revenue base. For
the nine months ended September 30, 1995 selling, general and administrative
expenses include $148,088 of goodwill amortization. The comparable 1996 period
does not include such amortization since the unamortized balance of goodwill was
written off as of December 31, 1995, by a one time charge of $3,636,362. During
the 1996 period, the Company has incurred additional general and administrative
expenses associated with increased payroll costs from the addition of new
executives as well as increased legal and professional fees associated with
public reporting to shareholders. The Company believes that it has developed the
infrastructure necessary to absorb additional businesses without corresponding
percentage increases in selling, general and administrative expenses.
During the nine months ended September 30, 1996, the Company incurred
one time charges of $301,673 of related to merger costs associated with the
acquisitions of Delta and SECURx, which were accounted for as poolings of
interest.
Interest and other income in all periods presented consists of interest
earned on temporary cash investments and has fluctuated from period to period
depending upon the amount of excess cash available for investment.
Interest expense in the nine month period ended September 30, 1996 as
compared to the 1995 period increased by $23,937 due to higher levels of
borrowings during 1996 as compared to 1995.
As a result of events previously discussd, the Company reported net
income of $50,657 and $81,762 and net income per share of $.01 and $.03 for the
nine months ended September 30, 1996 and 1995 respectively. Exclusive of the one
time charge related to merger costs, the Company would have reported net income
of approximately $239,000 and $.03 per share on a pro forma basis for the nine
month period ended September 30, 1996.
12
<PAGE>
THREE MONTHS ENDED SEPTEMBER 30, 1996 VS. SEPTEMBER 30, 1995
RESULTS OF OPERATIONS:
Revenues for the three months ended September 30, 1996 increased 18.3%
to $5,304,280 from $4,483,493 for the three months ended September 30, 1995. The
increase in the three month revenues over the comparable prior year period is
primarily attributed to the Company's steady internal growth resulting primarily
from marketing efforts to new and existing clients and the growth and
integration of new and existing products and services.
Cost of sales for the three months ended September 30,1996, increased
to $3,179,730 from $2,553,598. Cost of sales as a percentage of sales for the
nine months ended September 30, 1996 and 1995 were 59.9% and 57.0%. The
substantial portion of the increase is attributable to the higher costs
associated with SECURx's operations when compared to all of the Company's other
operations. For the comparable three months periods ended September 30, 1996 and
1995, cost of sales as a percentage of sales for all operations, excluding
SECURx were 51.3% and 47.7%, respectively. The Company is beginning to integrate
its purchasing strategy in connection with both the Delta and SECURx
acquisitions in order to reduce costs of sales.
Selling general and administrative expenses as a percentage of sales
for the three month periods ended September 30, 1996 and 1995 were 38.1% and
38.3%. The percentage decrease in the comparative three month periods are
primarily attributable to the increase in sales for such periods as well as the
continued efforts to leverage corporate overhead over a larger revenue base. For
the three months ended September 30, 1995 selling, general and administrative
expenses include $49,363 of goodwill amortization. The comparable 1996 period
does not include such amortization since the unamortized balance of goodwill was
written off as of December 31, 1995, by a one time charge of $3,636,362. During
the 1996 period, the Company has incurred additional general and administrative
expenses associated with increased payroll costs from the addition of new
executives as well as increased legal and professional fees associated with
public reporting to shareholders. The Company believes that it has developed the
infrastructure necessary to absorb additional businesses without corresponding
percentage increases in selling, general and administrative expenses.
During the three months ended September 30, 1996, the Company incurred
one time charges of $301,673 related to merger costs associated with the
acquisitions of Delta and SECURx, which were accounted for as poolings of
interest.
Interest and other income in all periods presented consists of interest
earned on temporary cash investments and has fluctuated from period to period
depending upon the amount of excess cash available for investment.
Interest expense in the three month period ended September 30, 1996 as
compared to the 1995 increased by $5,410 due to higher levels of borrowings
during 1996 as compared to 1995.
As a result of events previously discussd, the Company incurred a net
loss of $138,887 and $(.01) per share compared to net income of $98,813 and $.03
per share during the three month periods ending September 30, 1996 and 1995
respectively. Exclusive of the one time charge related to merger costs, the
Company would have reported net income of approximately $49,000 and $.00 per
share on a pro forma basis for the three month period ended September 30, 1996.
13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
At September 30, 1996, the Company had working capital of $3,467,339
and cash and cash equivalents of $861,190.
Net cash used in operating activities for the nine months ended
September 30, 1996 was $472,587 compared to net cash provided by operating
activities in the nine months ended September 30, 1995 of $281,799. The increase
in cash used in operating activities in the 1996 period of $754,386 results
primarily from supporting larger levels of accounts receivable and inventory
relating to increased sales along with reductions in trade liabilities relating
to the timing of payment of vendor payables.
Net cash provided by investment activities for the period ended
September 30, 1996 consisted of $394,049 of net cash acquired in connection with
the reverse merger, net of purchases of property and equipment of $180,509,
which decreased by $144,613 when compared with the nine months ended September
30, 1995.
Net cash provided by financing activities for the nine months ended
September 30, 1996 was $804,472 as compared to net cash provided by financing
activities of $62,360 for the nine months ended September 30, 1995. During the
nine months ended September 30, 1996, the Company received proceeds from
borrowings under its line of credit of $400,000 and received cash proceeds from
the exercise of outstanding options and warrants of $823,870. Repayments of
outstanding credit obligations for the nine months ended September 30, 1996 were
$419,398 as compared to $115,408 for the nine month period ended September 30,
1995. The increase during the September 30, 1996 period is attributable to
higher repayment levels on the line of credit due to higher levels of short term
borrowings in 1996 compared to 1995. Repayments of leases and other indebtedness
decreased due to final payment in late 1995 and early 1996 of certain
obligations.
The Company believes that its cash and available sources of capital
through exercise of outstanding options and warrants as well as the availability
of borrowings under its line of credit are sufficient to meet its normal
operating requirements through September 30, 1997.
On October 31, 1996, the Company received a commitment from a major
regional bank for a $5,000,000 secured revolving line of credit and a five year
$500,000 term loan. The term loan will be used for leasehold improvements at the
Company's Boca Raton facility and for the purchase of new equipment. As of
October 31, 1996, commitments for such items were approximately $200,000. The
new line of credit and term loan replace the Company's existing $750,000 credit
faculty with the same bank.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
On July 3, 1996, the Company held its Annual Meeting of Shareholders.
The following Directors were elected at such Annual Meeting for the
term of 1 year, Brian A. Khan, Gerard N. Altieri, Martha M. Little,
Malcolm Leonard, Robert Edelheit and Paul Heimberg. There were no
directors whose term continued after the meeting.
The Shareholders elected to increase the authorized common stock of
the Company from 12,500,000 shares of Common Stock, par value $.0008 to
50,000,000 shares of Common Stock, par value $.0001 per share. The
number of affirmative votes cast with respect to this matter was
8,447,691, the number of votes cast against this matter was
2,999 and the number of votes abstained was 500.
The Shareholders elected to amend the Company's Articles of
Incorporation to change the name of the Company to CompScript, Inc.
The number of affirmative votes cast with respect to this matter was
8,446,841, the number of votes cast against this matter was 2,874 and
the number of votes abstained was 1,475.
The Shareholders elected to approve the Company's 1996 Stock Option
Plan, was adopted by the Board of Directors on May 28, 1996. The
number of affirmative votes with respect to this matter was 6,952,994,
the number of votes cast against this matter was 31,390, the number
of votes abstained was 82,511 and the number of votes not voted was
1,383,995.
ITEM 5. OTHER INFORMATION
The Company has signed a letter of intent to acquire Medical Services
Consortium, Inc. ("MSC"). Based in Miami, Florida, MSC is a
privately-held provider of institutional pharmacy and related services
serving long-term care facilities primarily located in southern
Florida's Dade, Broward and Monroe counties. The acquisition, which is
subject to, among other things, the completion of due diligence by both
parties and the signing of a definitive agreement, is expected to close
on or before Decembr 31, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(b) The following reports on Form 8-K were filed during the quarter
ended on September 30, 1996:
(i) Form 8-K/A dated August 1, 1996 concerning the change in the
Company's fiscal year.
(ii) Form 8-K dated August 30, 1996 concerning the execution of
a Stock Purchase Agreement.
15
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
COMPSCRIPT, INC.
DATE: November 19, 1996 By: /S/ BRIAN A. KAHAN
-------------------
Brian A. Kahan, Chairman of the Board,
Chief Executive Officer
(Principal Executive Officer)
DATE: November 19, 1996 By: /S/ GARY SPLAIN
----------------
Gary Splain, Chief Financial Officer
Treasurer (Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 861,190
<SECURITIES> 0
<RECEIVABLES> 2,886,026
<ALLOWANCES> (194,850)
<INVENTORY> 887,153
<CURRENT-ASSETS> 5,681,368
<PP&E> 1,849,900
<DEPRECIATION> (817,870)
<TOTAL-ASSETS> 7,291,133
<CURRENT-LIABILITIES> 2,214,029
<BONDS> 0
0
0
<COMMON> 1,072
<OTHER-SE> 4,831,161
<TOTAL-LIABILITY-AND-EQUITY> 7,291,133
<SALES> 15,616,688
<TOTAL-REVENUES> 15,616,688
<CGS> 9,383,573
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,202,841
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 70,146
<INCOME-PRETAX> (39,872)
<INCOME-TAX> 77,007
<INCOME-CONTINUING> 50,657
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,657
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
