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, 1997
[ ] Transition Report Under Section 12 or 15(d) of
the Exchange Act
For the transition period from _________ to __________.
Commission file number 0-20594
COMPSCRIPT, INC.
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(Exact Name or Small Business Issuer as Specified in Its Charter)
Florida 65-0506539
(State of Other Jurisdiction of I.R.S. Employer
Incorporation or Organization) Identification No.)
1225 Broken Sound Parkway, N.W., Suite A
Boca Raton, FL 33487
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(Address of Principal Executive Office)
(561) 994-8585
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(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 $.0001
per share as of October 31, 1997 was 13,957,063.
Transitional Small Business Disclosure Format:
Yes [ ] No [X]
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COMPSCRIPT, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
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PART I. FINANCIAL INFORMATION
ITEM. 1 Financial Statements
Consolidated Condensed Balance Sheets as of September 30,
1997 (Unaudited) and December 31, 1996 2
Consolidated Condensed Statements of Operations for the Nine
Months Ended September 30, 1997 and 1996 (Unaudited) 3
Consolidated Condensed Statements of Cash Flows for the Three
Months Ended September 30, 1997 and 1996 (Unaudited) 4
Notes to Consolidated Condensed Financial Statements
(Unaudited) 5
ITEM. 2 Management's Discussion and Analysis of Plan of Operations 10-13
PART II. OTHER INFORMATION
SIGNATURES
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CompScript, Inc. and Subsidiaries
Consolidated Condensed Balance Sheet
DECEMBER 31, SEPTEMBER 30,
1996 1997
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(Unaudited)
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ASSETS
Current assets:
Cash and cash equivalents $ 857,740 $ 806,141
Accounts receivable, net 6,369,720 9,881,080
Inventory 2,467,639 3,031,192
Marketable securities - 325,000
Note receivable 1,150,788 -
Income tax refund receivable 218,512 519,116
Deferred tax asset 80,201 80,201
Prepaid and other receivables 112,487 676,226
------------------------------
Total current assets 11,257,087 15,318,956
Property and equipment, net 2,231,495 3,330,022
Other assets:
Costs in excess of net assets acquired, less accumulated amortization 143,171 112,490
Other 854,222 697,898
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Total other assets 997,393 810,388
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Total assets $14,485,975 $19,459,366
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,502,436 $ 4,754,240
Accrued salaries and benefits 762,405 241,503
Accrued expenses 761,721 581,077
Accrued pharmaceuticals dispensed by third parties 164,935 100,711
Distributions payable 53,560 -
Line of credit 674,693 6,390,467
Notes payable to shareholders 843,737 371,900
Current portion of notes payable 134,581 139,992
Current portion of capital lease obligations 166,527 64,351
------------------------------
Total current liabilities 7,064,595 12,644,241
Deferred tax liabilities 35,100 35,100
Long-term debt:
Notes payable to shareholders 500,000 -
Notes payable 1,304,058 695,827
Capital lease obligations 74,530 143,603
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Total long-term debt 1,878,588 839,430
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Total liabilities 8,978,283 13,518,771
Minority interest 222,628 222,628
Shareholders' equity:
Common stock, $.0001 par value--50,000,000 shares authorized,
13,533,132 and 13,957,063 shares issued and outstanding at
December 31,1996 and September 30, 1997 1,354 1,396
Additional paid-in capital 9,328,990 11,560,536
Accumulated deficit (4,045,280) (5,843,965)
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Total shareholders' equity 5,285,064 5,620,991
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Total liabilities and shareholders' equity $14,485,975 $19,459,366
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SEE ACCOMPANYING NOTES.
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CompScript, Inc. and Subsidiaries
Consolidated Condensed Statements
of Operations (Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1996 1997 1996 1997
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Sales $11,013,682 $12,998,281 $31,968,223 $37,344,723
Cost of sales 6,387,053 7,772,981 18,717,337 22,318,315
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Gross profit 4,626,629 5,225,300 13,250,886 15,026,408
Selling, general and administrative expenses 4,606,613 5,189,820 12,252,985 15,303,080
Merger costs 668,855 - 934,223 688,706
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Total operating expenses 5,275,468 5,189,820 13,187,208 15,991,786
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Operating (loss) income (648,839) 35,480 63,678 (965,378)
Other income (expense):
Interest and other income 21,783 20,378 68,338 30,305
Interest expense (128,756) (205,438) (347,613) (453,119)
Loss on realization of note receivable - - - (800,000)
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(106,973) (185,060) (279,275) (1,222,814)
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Loss before provision for income taxes (755,812) (149,580) (215,597) (2,188,192)
Income tax provision 102,134 - 158,053 -
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Net loss $ (857,946) $ (149,580) $ (373,650) $(2,188,192)
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Net loss per share $ (.06) $ (.01) $ (.03) $ (.16)
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Weighted average shares outstanding 13,299,375 13,948,367 12,393,297 13,764,067
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SEE ACCOMPANYING NOTES.
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CompScript, Inc. and Subsidiaries
Consolidated Condensed Statements
of Cash Flows (Unaudited)
NINE MONTHS ENDED
SEPTEMBER 30
1996 1997
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OPERATING ACTIVITIES
Net loss $ (373,650) $(2,188,192)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization of leasehold improvements 466,308 580,918
Amortization of goodwill 30,681 30,681
Noncash merger costs - 420,000
Loss on realization of note receivable - 800,000
Changes in operating assets and liabilities:
Accounts receivable, net (796,175) (3,511,360)
Inventory (277,900) (563,553)
Note receivable - 25,788
Income tax refund receivable 191,571 (300,604)
Prepaid and other receivables 33,737 (301,739)
Other assets (224,655) 156,324
Accounts payable and accrued expenses (39,585) 401,981
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Net cash used in operating activities (989,668) (4,449,756)
INVESTING ACTIVITY
Purchase of property and equipment (484,599) (1,556,869)
Acquisition, net of cash acquired 403,808 -
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Net cash used in investing activity (80,791) (1,556,869)
FINANCING ACTIVITIES
Issuance of common stock and exercise of options and warrants 823,920 1,969,588
Net (repayments of) proceeds from line of credit (253,087) 5,715,774
Net proceeds from (repayments of) notes payable 1,077,236 (602,820)
Net repayments on notes payable shareholders - (971,837)
Repayments of leases payable (87,111) (155,679)
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Net cash provided by financing activities 1,560,958 5,955,026
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Net increase (decrease) in cash and cash equivalents 490,499 (51,599)
Cash and cash equivalents at beginning of period 549,548 857,740
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Cash and cash equivalents at end of period $1,040,047 $ 806,141
===========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes $ 104,900 $ 87,500
===========================
Cash paid for interest $ 244,070 $ 247,681
===========================
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SEE ACCOMPANYING NOTES.
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COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements include
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, 1997 and for the nine months ended September 30, 1997 and 1996 are
unaudited. All periods presented have been restated to reflect the January 10,
1997, February 28, 1997, and March 26, 1997 acquisitions of Medical Services
Consortium, Inc. ("MSC"), Campo Medical Pharmacy, Inc. ("Campo"), and Hytree
Pharmacy, Inc. ("Hytree"), which were accounted for as poolings of interests
(see Note 2). 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. 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. Results for the
nine-month period ended September 30, 1997 are not necessarily indicative of the
results to be achieved for the year ending December 31, 1997.
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 revenue and expenses during the reporting
period. Actual results could differ from these estimates.
Net income (loss) per share for the nine-month periods ended September
30, 1997 and 1996, have been calculated based upon the weighted average number
of common shares outstanding after giving effect to outstanding options and
warrants during the periods in which their inclusion was dilutive.
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COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION (CONT'D)
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, EARNINGS PER SHARE, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. The impact is expected to
result in an increase in primary earnings per share during profitable periods.
There was no impact on earnings per share relating to Statement 128 for the
quarters ended September 30, 1997 and 1996.
2. ACQUISITIONS
During the first quarter of 1997, the Company completed three
acquisitions, which were accounted for as poolings of interests. A summary of
each transaction follows:
On January 10, 1997, the Company acquired MSC. In connection with the
transaction, the Company exchanged 1.4 million shares of the Company's Common
Stock for all of the outstanding common stock of MSC. MSC is in the business of
supplying prescription pharmaceuticals, consulting services and enteral and
parenteral therapies to long-term and alternate care providers in South Florida.
On February 28, 1997, the Company acquired Campo. In connection with
the transaction, the Company exchanged 375,000 shares of the Company's Common
Stock for all of the outstanding common stock of Campo. Campo is in the business
of supplying prescription pharmaceuticals and consulting services to long-term
and alternate care providers in Louisiana.
On March 26, 1997, the Company acquired Hytree. In connection with the
transaction, the Company exchanged 850,000 shares of the Company's Common Stock
for all of the outstanding common stock of Hytree. Hytree is in the business of
supplying prescription pharmaceuticals, respiratory and consulting services to
long-term and alternate care providers, along with home care and sales and
rentals of durable medical equipment and supplies within the Ohio market.
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COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
2. ACQUISITIONS (CONT'D)
The accompanying consolidated condensed financial statements for all
periods presented have been restated to reflect the acquisitions. The following
unaudited pro forma summary presents the separate results of operations for
CompScript and the pooled entities for the three and nine months ended September
30, 1997, respectively. The pro forma financial information does not purport to
be indicative of the results of operations that would have occurred had the
transactions taken place at the beginning of the periods presented or of future
results of operations.
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COMPSCRIPT MSC CAMPO HYTREE CONSOLIDATED
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THREE MONTHS ENDED
SEPTEMBER 30, 1997
Total sales $ 6,264,005 $2,559,462 $ 884,428 $3,290,386 $12,998,281
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Net (loss) income $ (658,589) $ 151,729 $ 92,103 $ 265,177 $ (149,580)
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THREE MONTHS ENDED
SEPTEMBER 30, 1996
Total sales $ 5,101,280 $2,194,878 $ 865,852 $2,851,672 $11,013,682
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Net (loss) income $ (1,098,613) $ (9,935) $ 81,756 $ 168,846 $ (857,946)
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NINE MONTHS ENDED
SEPTEMBER 30, 1997
Total sales $ 17,165,640 $8,081,389 $ 2,512,555 $9,585,139 $37,344,723
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Net (loss) income $ (3,448,114) $ 663,620 $ 330,743 $ 265,559 $(2,188,192)
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NINE MONTHS ENDED
SEPTEMBER 30, 1996
Total sales $ 15,413,688 $6,126,450 $ 2,460,591 $7,967,494 $31,968,223
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Net (loss) income $ (1,130,693) $ 398,544 $ 266,786 $ 91,713 $ (373,650)
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COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
3. MARKETABLE SECURITIES
In connection with the Company's acqisition on April 26, 1996, the
Company acquired marketable equity securities valued at $1,125,000. Subsequent
to the acquisition, on July 26, 1996, the Company sold its 1,125,000 shares of
Common Stock of QPQ Corporation ("QPQ") representing its entire marketable
equity portfolio to a major shareholder of QPQ in exchange for a $1,125,000
non-recourse promissory note payable in full, including interest, on July 4,
1997. On May 16, 1997, the Company and the note holder settled all outstanding
obligations of the note holder to the Company in exchange for the 1,125,000
shares of QPQ which were returned to the Company. As of June 30, 1997, the QPQ
shares are classified as marketable securities and are held for future sale.
During the nine months ended September 30, 1997, the Company recorded an
$800,000 charge against the note which has been classified as "loss on
realization of note receivable" in the Statement of Operations for the nine
months ended September 30, 1997. The Company deemed it appropriate to evaluate
the collateral underlying the note, as the value of the QPQ stock declined
significantly during 1997.
4. INCOME TAXES
The income tax provisions for the nine-month periods ended September
30, 1997 and 1996, have been calculated by applying the Company's estimated
effective tax rate for the years 1997 and 1996.
For the nine-month period ended September 30, 1997, the relationship of
the provision for income taxes to pre-tax income reflects the exclusion of the
Subchapter S earnings of Delta and MSC from the tax provision computation.
Concurrent with the acquisitions of Delta on May 31, 1996 and MSC on January 10,
1997, Delta and MSC converted to C corporation status and their earnings from
those dates forward were included in the tax provision computation. The
consolidated condensed statement of operations for the nine months ended
September 30, 1996, do not include pro forma adjustments for income tax expense
which would have been recorded had Delta and MSC been taxable corporations as
the impact would not be significant.
5. NOTES PAYABLE
On January 3, 1997, the Company amended its financing agreement with
its primary lender to increase its revolving line-of-credit agreement to allow
for borrowings up to $5 million from the $750,000 previously in effect (the New
Credit Facility). The primary reason for the increase was to provide additional
working capital for operations and fund the Company's acquisition activity. On
August 25, 1997, the Company again amended the line-of-credit agreement to allow
for borrowings of up to $7 million. Through September 30, 1997, the Company
borrowed approximately $6.4 million under the New Credit Facility.
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COMPSCRIPT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
5. NOTES PAYABLE (CONT'D)
The New Credit Facility is collateralized by all of the Company's
accounts receivable, inventory, fixed assets and other assets, and consists of a
term loan due on April 30, 1998. Interest, which is paid monthly on the credit
facility, accrues at the lesser of the prime rate or the three-month London
Interbank Offered Rate, plus 250 basis points. The credit facility requires the
Company to maintain at all times, certain net worth, debt coverage and working
capital levels, restricts acquisitions and dispositions of property and limits
additional borrowings from other lenders.
In connection with the New Credit Facility, on January 3, 1997, the
Company also entered into a $500,000 promissory note with the same lender, the
proceeds of which were used to fund the Company's office and mail order space
expansion, which was completed in the first quarter of 1997. The principal sum
of the promissory note is payable in monthly installments of approximately
$8,333 plus interest at 9.0% for 60 months which began on February 1, 1997.
Collateral and debt covenants are the same as those of the New Credit Facility.
On March 19, 1997, the Company entered into an additional $750,000
promissory note, bearing interest at prime, with its existing lender, primarily
for working capital purposes. This loan matured on July 26, 1997, and was repaid
in August 1997. It was cross collateralized with all other borrowings previously
discussed. In addition to the collateral previously discussed, this note was
collateralized by the $325,000 of marketable securities recorded on the
Company's consolidated balance sheet at September 30, 1997.
6. SHAREHOLDERS' EQUITY
Effective January 10, 1997, MSC's Subchapter S accumulated deficit of
approximately $420,000 was reclassified to additional paid-in capital upon the
conversion of MSC to a taxable corporation concurrent with its acquisition by
the Company.
During the nine months ended September 30, 1997, the Company issued
15,000 shares of Common Stock to certain consultants as consideration for
services rendered in connection with the Company's acquisition of Campo. An
additional 30,000 shares were issued to such consultants as consideration for
services rendered in connection with the Company's acquisition of Hytree. Costs
of $420,000 associated with the issuance of those 45,000 shares have been
included in merger costs in the nine-month period ending September 30, 1997.
Additionally, during the period ended September 30, 1997, holders of options
exercised 378,898 options resulting in the issuance of 378,898 shares of Common
Stock and net proceeds to the Company of approximately $1,970,000.
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Item 2. Management's Discussion and Analysis or Plan of Operation
GENERAL
Except for the historical information contained herein, the matters set
forth in this Form 10-QSB are forward looking and involve a number of risks and
uncertainties that could cause actual results to differ materially from these
statements and trends. Such factors include, but are not limited to: the effect
of changes in governmental regulation, reimbursement policies and federal and
state healthcare funding; the continued availability of suitable acquisition
candidates; significant changes to general economic conditions; strengthened
competition in the Company's geographic markets; the failure of the Company to
obtain or maintain required regulatory licenses and approvals or the loss of key
personnel.
CompScript, Inc. (CompScript or the Company, f/k/a Capital Brands,
Inc.) is a comprehensive provider of pharmacy management services including
institutional pharmacy, infusion therapy, mail order and consultant pharmacist
services as well as pharmacy benefit claim administration to managed care
networks, long-term and subacute care facilities, home health patients and
recipients of managed care. The company is the successor to CompScript-Boca,
Inc. (Boca, f/k/a CompScript, Inc. which was f/k/a Aldencare, Inc.), which was
incorporated under the laws of the State of Florida on October 3, 1991.
On April 26, 1996, shareholders who previously owned approximately 93%
of Boca exchanged their shares of Boca's Common Stock for 7,394,982 common
shares (representing an 80% interest) of Capital Brands, Inc. (Capital), a
publicly-held company (the Acquisition). This exchange was structured as a
tax-free reorganization. The Acquisition was accounted for as a reverse
acquisition of Capital by Boca pursuant to which Boca was recapitalized to
include the assets and liabilities of Capital revalued to reflect the market
value of Capital's net tangible assets at the date of the Acquisition consisting
of cash and marketable equity securities. Effective July 5, 1996, Capital
changed its name to CompScript, Inc. The remaining 7% of Boca is accounted for
as a minority interest in a consolidated subsidiary on the Company's September,
1997 balance sheet.
In connection with the Company's continued expansion of its business,
the Company completed three acquisitions during the quarter ended March 31,
1997. On January 10, 1997, February 28, 1997, and March 26, 1997, the company
acquired 100% of the outstanding Common Stock of Medical Services Consortium,
Inc. ("MSC"), Campo Medical Pharmacy, Inc. ("Campo"), and Hytree Pharmacy, Inc.
("Hytree"). The acquisitions have been accounted for as poolings of interests
(see Note 2). All data included in the following discussions have been restated
to reflect the combination of MSC, Campo and Hytree for all periods presented.
10
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Results of Operations:
Sales for the three and nine-month periods ended September 30, 1997
were $12,998,281 and $37,344,723, respectively, compared to $11,013,682 and
$31,968,223, respectively, for the three and nine months ended September 30,
1996. The $1,984,599 and $5,376,500, or 18% and 17% increase, respectively, was
primarily attributed to the Company's marketing efforts directed towards new
clients.
Gross profit increased $598,671 to $5,225,300 for the three months
ended September 30, 1997 from $4,626,629 in the three months ended September 30,
1996 as a result of the increased revenue. For the nine months ended September
30, 1997, gross profit increased $ 1,775,522 to $15,026,408 from $13,250,886 in
the nine months ended September 30, 1996 also due to the increase in revenue for
those periods. Gross profit margins decreased from 42% and 41% for the three-
and nine-month periods, respectively, ended September 30, 1996, to 40% for the
three- and nine-month periods ended September 30, 1997 due to price increases of
certain pharmaceuticals.
Selling general and administrative expenses ("SG&A") were $5,189,820
and $15,303,080, respectively, for the three- and nine-month periods ended
September 30, 1997, compared to $4,606,613 and $12,252,985, respectively, for
the three- and nine-month periods ended September 30, 1996. The increases of
$583,207 and $3,050,095, respectively, were partially attributable to the
increases in revenues. During the three and nine months ended September 30,
1997, the Company also incurred additional SG&A expenses associated with payroll
costs from the addition of new executives necessary for the Company's operations
as a public company and for continued development of its acquisition strategy.
The Company believes its acquisition strategy will enable it to continue to
reduce SG&A expenses as a percentage of revenues in the future, as the Company
believes it has developed the executive management infrastructure necessary to
absorb additional acquisitions without corresponding percentage increases in
selling, general and administrative expenses. Ramp-up costs relating to the
opening of two new branch locations in Jackson, Mississippi and Tampa, Florida
in February and March, 1997, respectively, also contributed to increased SG&A in
the nine months ended September 30, 1997.
In connection with the Company's reverse acquisition of Capital Brands,
Inc. on April 26, 1996, the Company acquired marketable equity securities valued
at $1,125,000. Subsequent to the acquisition, on July 26, 1996, the Company sold
its 1,125,000 shares of Common Stock of QPQ Corporation ("QPQ") representing its
entire marketable equity portfolio to a major shareholder of QPQ (who formerly
served as the President of Capital Brands, Inc.) in exchange for a $1,125,000
non-recourse promissory note payable in full, including interest, on July 4,
1997. On May 16, 1997, the Company and the note holder settled all outstanding
obligations of the note holder to the Company in exchange for the 1,125,000
shares of QPQ which were returned to the Company. During the nine months ended
September 30, 1997, the Company recorded an $800,000 charge against the note,
which has been classified as "loss on realization of note receivable" in the
Statement of Operations. The Company deemed it appropriate to evaluate the
collateral underlying the note, as the value of the QPQ stock declined
significantly during the
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nine months ended September 30, 1997. As a result of reverse stock splits
effected by QPQ, the number of shares of QPQ common stock currently owned by the
Company is 18,750. According to QPQ's current filings, it is currently engaged
in the development and operation of primary-care medical service centers. The
Company currently owns approximately 7.8% of QPQ's outstanding common stock.
The nine-month period ended September 30, 1997 included $688,706 of
one-time charges related to merger and acquisition costs associated with the
three acquisitions completed during the nine-month period ended September 30,
1997. There were $668,855 and $934,223 in similar costs in the statement of
operations associated with the three- and nine-month periods ended September 30,
1996, respectively. Interest expense increased by $76,682 to $205,438, or 60%,
for the three-month period ended September 30, 1997 in comparison to $128,756
for the three month period ended September 30, 1997. For the nine-month period
ended September 30, 1997, interest expense increased by $105,506 to $453,119, or
30%, as compared to $347,613 for the nine-month period ended September 30, 1996.
These increases are attributable to the increase in the Company's debt,
primarily the line-of-credit facility.
As a result of the events previously discussed, the Company reported a
net loss of $149,580, or $.01 per share for the three months ended September 30,
1997 compared to a net loss of $857,946, or $.06 per share, during the three
months ended September 30, 1996, and a net loss of $2,188,192 or $.16 per share
for the nine months ended September 30,1997 compared to a net loss of $373,650
or $.03 during the nine months ended September 30, 1996.
Liquidity and Capital Resources:
The Company has funded its operating requirements to date primarily
through operations, the private sale of equity securities (prior to the reverse
acquisition on April 26, 1996), and borrowings under its existing line of credit
agreement. As of September 30, 1997, the Company had cash and cash equivalents
of $806,141, accounts receivable of $9,881,080, working capital of $2,674,715
and a current ratio of 1.21 to 1.00.
Net cash used in operating activities for the nine months ended
September 30, 1997 was $4,449,756 compared to $989,668 during the nine months
ended September 30, 1996. The increase in cash used in operating activities was
primarily attributable to the operating loss incurred during the nine months
ended September 30, 1997, along with increases in accounts receivable and
inventory to support the 17% increase in revenues.
Net cash used in investing activities was $1,556,869 for the nine
months ended September 30, 1997, which was a direct result of net purchases of
property and equipment related to the Company's expansion of its Boca Raton
office and new mail order facility which was completed in February 1997. The
Company also made expenditures for computer and processing equipment, and
leasehold improvements pertaining to the new office and institutional pharmacy
location that MSC moved into during September of 1997. This new facility was
necessary to accommodate the increased revenues at MSC, along with its
continuing emphasis on infusion
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therapy services. During the nine months ended September 30, 1997, the Company
opened two new branch locations in Jackson, Mississippi and Tampa, Florida,
which began operations in February and March 1997, respectively. Net cash used
in investing activities was $80,791 for the nine months ended September 30,1996,
consisted of $484,599 used in purchases equipment net of $403,808 of cash
received in excess of costs incurred from the reverse acquisition of Capital
Brands, Inc.
Financing activities provided $5,955,026 in cash in the nine months
ended September 30, 1997, compared to $1,560,958 in the nine months ended
September 30, 1996, comprised of the following:
Nine months ended
September 30,
1996 1997
--------------------------
Issuance of shares of common stock $ - $ 950,000
Exercise of options and warrants 823,920 1,019,588
Net proceeds from (repayment of) line of credit (253,087) 5,715,774
Net proceeds from (repayment of) other debt 990,125 (1,730,336)
--------------------------
$ 1,560,958 $ 5,955,026
==========================
The Company's future capital requirements for operations include
financing the growth of working capital items such as accounts receivable and
inventory, purchasing equipment and upgrading management information and
inventory control systems. Additionally, the Company has terminated its
agreement with an outside consultant who had been engaged to develop new mail
order business. As a result, the Company will reduce costs by approximately
$245,000 for the remainder of fiscal 1997, with no corresponding decrease in
revenue. Management has also decided to terminate its pharmacy benefits
management contracts, effective December 31, 1997, which is expected to result
in a material reduction in selling, general and administrative expenses.
Based upon the continuation of the Company's business development, the
Company believes the cash flow from operations and borrowings under an expanded
credit facility will provide sufficient cash to fund its operations and meet
current obligations for the foreseeable future. The Company is attempting to
improve cash flows from operations and maintain flexibility in financing both
interim and long-term working capital requirements by reducing inventory levels,
as a result of the utilization of its inventory control system which will
improve the scheduling and timing of purchases.
In the event the Company dramatically expands its operations or makes
acquisitions that would require funds in addition to its existing liquid assets
and cash flows, it would have to seek additional debt or equity financing. There
can be no assurance that the Company could obtain such financing or that such
financing would be available on terms acceptable to the Company.
13
<PAGE>
PART II. OTHER INFORMATION
(a) Not applicable
(b) Reports on Form 8-K - None
<PAGE>
SIGNATURE
In accordance with requirements of the Exchange Act, the Issuer caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CompScript, Inc.
Date: November 12, 1997 By: /S/ BRIAN A. KAHAN
----------------------------------------
Brian A. Kahan, Chief Executive
Officer (Principal Executive Officer)
Date: November 12, 1997 By: /S/ JUAN C. COCUY
-----------------------------------------
Juan C. Cocuy, Chief Financial Officer
(Principal Financing and Accounting
Officer)
15
<PAGE>
EXHIBIT INDEX
EXHIBIT
- -------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 806,141
<SECURITIES> 325,000
<RECEIVABLES> 10,959,166
<ALLOWANCES> (1,078,086)
<INVENTORY> 3,031,192
<CURRENT-ASSETS> 15,318,956
<PP&E> 5,627,397
<DEPRECIATION> 3,297,375
<TOTAL-ASSETS> 19,459,366
<CURRENT-LIABILITIES> 12,644,241
<BONDS> 0
0
0
<COMMON> 1,396
<OTHER-SE> 5,716,571
<TOTAL-LIABILITY-AND-EQUITY> 19,459,366
<SALES> 37,344,423
<TOTAL-REVENUES> 37,344,423
<CGS> 22,318,315
<TOTAL-COSTS> 22,318,315
<OTHER-EXPENSES> 14,278,493
<LOSS-PROVISION> 1,024,587
<INTEREST-EXPENSE> 453,119
<INCOME-PRETAX> (2,188,192)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,188,192)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,188,192)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
