<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-Q
--------------------------
Quarterly Report pursuant to section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended June 30, 1996 Commission File No. 0-19893
---------------------------
Alpha Pro Tech, Ltd. (formerly BFD INDUSTRIES, INC.)
----------------------------------------------------
(exact name of registrant as specified in its charter)
Delaware, U.S.A. 63-1009183
- - ---------------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation)
Suite 112, 60 Centurian Drive,
Markham, Ontario, Canada L3R 9R2
- - ------------------------ -------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (905) 479-0654
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 3 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of July 30, 1996
Common Stock, $.01 par value 20,495,463
<PAGE>
ALPHA PRO TECH, LTD.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1 Consolidated Financial Statements (Unaudited) PAGE NO.
a) Balance Sheet-
June 30, 1996 (Unaudited) and December 31, 1995 1
b) Statement of Operations
for the unaudited three months and six months
ended June 30, 1996 and June 30, 1995. 2
c) Statement of Shareholder's Equity
for the unaudited six months ended June 30, 1996 3
d) Statement of Cash Flows
for the unaudited six months ended June 30, 1996
and June 30, 1995 4
e) Notes to Consolidated Financial Statements (unaudited) 5 - 7
ITEM 2 Management's Discussion and Analysis of Financial 8 - 10
Condition and Results of Operations
Part II. OTHER INFORMATION 11
SIGNATURES 12
<PAGE>
Alpha Pro Tech, Ltd.
Consolidated Balance Sheets
(Unaudited)
- - -------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash $ 824,000 $ 344,000
Marketable Securities-restricted 38,000 36,000
Accounts receivable, net of allowance for doubtful
accounts of $62,000 and $61,000 2,252,000 2,071,000
Income taxes receivable 6,000 172,000
Inventories 2,141,000 2,098,000
Prepaid expenses and other assets 250,000 139,000
---------- ----------
5,511,000 4,860,000
Property and equipment, net of accumulated
depreciation and amortization of $715,000 and $609,000 1,504,000 1,350,000
Intangible assets, net of accumulated amortization of
$40,000 and $28,000 234,000 167,000
Other 34,000 33,000
---------- ----------
$7,283,000 $6,410,000
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,546,000 $1,351,000
Accrued liabilities 810,000 751,000
Notes payable, current portion 128,000 152,000
Loans payable, current portion 897,000 890,000
Capital leases, current portion 28,000 22,000
---------- ----------
3,409,000 3,166,000
Notes payable, less current portion - 10,000
Loans payable, less current portion 140,000 167,000
Capital leases, less current portion 77,000 49,000
Minority interest - 14,000
---------- ----------
3,626,000 3,406,000
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock
Authorized 50,000,000 with par value of $0.01;
20,495,463 and 19,911,130 issued and outstanding 205,000 199,000
Additional paid-in capital 19,250,000 18,673,000
Accumulated deficit (15,798,000) (15,868,000)
---------- ----------
3,657,000 3,004,000
---------- ----------
$7,283,000 $6,410,000
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
Alpha Pro Tech, Ltd.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales $3,873,000 $3,157,000 $7,459,000 $6,716,000
Costs of goods sold,
excluding depreciation 2,580,000 1,913,000 4,879,000 4,160,000
---------- ---------- ---------- ----------
1,293,000 1,244,000 2,580,000 2,556,000
Expenses
Selling, general and
administrative 1,154,000 963,000 2,269,000 1,924,000
Depreciation and
amortization 60,000 153,000 118,000 299,000
---------- ---------- ---------- ----------
Income from
operations 79,000 128,000 193,000 333,000
---------- ---------- ---------- ----------
Interest 59,000 116,000 140,000 316,000
Other - 2,000 (13,000) (2,000)
---------- ---------- ---------- ----------
59,000 118,000 127,000 314,000
---------- ---------- ---------- ----------
Income before provision for
income taxes and minority interest 20,000 10,000 66,000 19,000
Minority Interest (4,000) 4,000 (4,000) 4,000
Provision for income taxes (Note 7) - - - -
---------- ---------- ---------- ----------
Net Income $24,000 $6,000 $70,000 $15,000
---------- ---------- ---------- ----------
Net Income per share (Note 6) $0.00 $0.00 $0.00 $0.00
---------- ---------- ---------- ----------
Weighted average number
of shares outstanding (Note 6) 20,280,186 19,512,092 20,068,527 18,328,858
---------- ---------- ---------- ----------
</TABLE>
2
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Alpha Pro Tech, Ltd.
Consolidated Statement of Shareholders' Equity (Unaudited)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
SHARES STOCK CAPITAL DEFICIT TOTAL
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1995 19,911,130 $ 199,000 $ 18,673,000 $(15,868,000) $ 3,004,000
Options/warrants
exercised 584,333 6,000 514,000 520,000
Option/warrants issued
for services - - 63,000 - 63,000
Net Income - - - 70,000 70,000
----------- ----------- ----------- ------------ -----------
Balance at
June 30, 1996 20,495,463 $ 205,000 $ 19,250,000 $(15,798,000) $ 3,657,000
----------- ----------- ----------- ------------ -----------
----------- ----------- ----------- ------------ -----------
</TABLE>
3
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Alpha Pro Tech, Ltd.
Consolidated Statements of Cash Flows (Unaudited)
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $70,000 $15,000
Adjustments to reconcile net income
to net cash used for operating activities:
Depreciation and amortization 118,000 311,000
Minority interest in earnings (4,000) 4,000
Securities issued for services 15,000 49,000
Changes in assets and liabilities:
Accounts receivable (181,000) (631,000)
Income tax receivable 166,000 -
Marketable Securities (2,000) -
Inventories (43,000) (125,000)
Prepaid and other assets (63,000) 67,000
Accounts payable and accrued liabilities 186,000 (618,000)
--------- ---------
Net cash provided by/(used for) operating activities 262,000 (928,000)
--------- ---------
INVESTING ACTIVITIES:
Acquisition of businesses (Note 8) - (354,000)
Purchase of property and equipment (226,000) (53,000)
Purchase of intangible assets (21,000) (96,000)
Purchase of other assets (1,000) -
--------- --------
Net cash used for investing activities (248,000) (503,000)
--------- --------
FINANCING ACTIVITIES:
Issuance of common stock 520,000 1,663,000
Net proceeds (payments) in loans payable (20,000) 214,000
Net (payments) on notes payable (34,000) (352,000)
--------- --------
Net cash provided by financing activities 466,000 1,525,000
--------- --------
Increase in cash during the period 480,000 94,000
Cash, beginning of period 344,000 340,000
--------- --------
Cash, end of period $824,000 $434,000
--------- --------
</TABLE>
4
<PAGE>
Alpha Pro Tech, Ltd.
Notes to Consolidated Financial Statements (Unaudited)
- - --------------------------------------------------------------------------------
1. THE COMPANY
Alpha Pro Tech, Ltd. (the Company) manufactures and distributes a variety
of disposable mask, shield, and apparel products, and woundcare products.
Most of the Company's products are distributed to medical, dental,
industrial, and clean room markets, predominantly in the United States.
2. BASIS OF PRESENTATION
The unaudited interim financial statements reflect all adjustments which
are in the opinion of management necessary for a fair presentation of the
results for the interim period presented. All such adjustments made are of
a normal recurring nature.
There have been no significant changes since December 31, 1995 in
accounting principles and practices utilized in the presentation of these
financial statements.
3. INVENTORIES JUNE 30, DECEMBER 31,
1996 1995
Raw materials $1,352,000 $1,308,000
Work in process 72,000 140,000
Finished goods 717,000 650,000
---------- ----------
2,141,000 $2,098,000
---------- ----------
---------- ----------
4. ACCRUED LIABILITIES JUNE 30, DECEMBER 31,
1996 1995
Professional fees $331,000 $439,000
Payroll and payroll taxes 260,000 185,000
Other 151,000 127,000
Ludan Acquisition (Note 8) 68,000 -
---------- ----------
$810,000 $751,000
---------- ----------
---------- ----------
5
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Alpha Pro Tech, Ltd.
Notes to Consolidated Financial Statements (Unaudited)
- - --------------------------------------------------------------------------------
5. NOTES PAYABLE JUNE 30, DECEMBER 31,
1996 1995
Note payable due in monthly installments of $4,900,
interest at 7.5%, maturing July 31, 1996 $17,000 $41,000
Note payable due in monthly installments of $1,500,
interest at 8.0%, maturing July 31, 1997 16,000 26,000
Notes payable due in monthly installments of $4,000
due May 31, 1997 38,000 62,000
Notes payable to related parties, interest at 15%
payable quarterly, due on demand 24,000
Notes payable to related parties, interest at 20%
payable quarterly, due on demand 33,000 33,000
------- -------
128,000 162,000
------- -------
Less: Current portion 128,000 152,000
------- -------
Notes Payable, less current portion $ - $10,000
------- -------
------- -------
6. NET INCOME PER SHARE
Net income per share of common stock is based on the weighted average
number of shares of common stock outstanding during the quarter. Common
stock equivalents have been excluded from the earnings per share
calculation as no material dilutive effect would result.
7. PROVISION FOR INCOME TAX
No provision for income tax has been recorded in the Statement of
Operations for the six months ended June 30, 1996, as taxable income has
been eliminated as a result of the utilization of net operating loss carry
forwards.
6
<PAGE>
8. ACQUISITION OF LUDAN CORPORATION
On June 30, 1996, the Company acquired the outstanding 20% interest in
Ludan Corporation from the minority shareholder for $68,000. The Company
paid $49,000 of the purchase price in July 1996 and the remaining $19,000
is due in March 1997. The Company recorded $58,000 of goodwill in
connection with this acquisition.
7
<PAGE>
ALPHA PRO TECH, LTD.
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months and six months ended June 30, 1996, compared to June 30, 1995
SALES: Consolidated net sales were $3,873,000 and $3,157,000 for
the three months ended June 30, 1996 and 1995, representing an increase of
$716,000 or 22.7%. Net sales for the Apparel Division for the three months
ended June 30, 1996 were $1,893,000 as compared to $1,097,000 for the three
months ended June 30, 1995. The Apparel Division sales increase of $796,000 or
72.6% was primarily due to increased sales to its largest customer. Mask and
eye shield sales were $1,404,000 for the second quarter ended June 30, 1996 as
compared to $1,360,000 for the same quarter for 1995. Mask and eye shield sales
are expected to continue to be relatively flat through 1996. Sales from the
Company's Unreal Lambskin-Registered Trademark- and other related products
decreased by 17.7% to $576,000 for the three months ended June 30, 1996 from
$700,000 for the three months ended June 30, 1995. The Company's Unreal
Lambskin-Registered Trademark- line of products has been updated with an
expectation of increased sales in the future. Consolidated sales were $7,459,000
and $6,716,000 for the six months ended June 30, 1996 and 1995, respectively
representing an increase of 11.1%. The increase is attributable to an increase
in apparel sales of 60.4%, offset by a decrease in mask and shield products of
4.8% and a decrease in Unreal Lambskin-Registered Trademark- of 25.7%.
COST OF GOODS SOLD: Cost of goods sold increased to $2,580,000, for
the three months ended June 30, 1996 from $1,913,000 for the three months ended
June 30, 1995. As a percentage of net sales, cost of goods sold increased to
66.6% from 60.6%. For the six months ended June 30, 1996 as compared to 1995,
cost of goods sold increased to $4,879,000 from $4,160,000. As a percentage of
net sales for the six months, cost of goods sold increased to 65.4% from 61.9%.
Gross profit margin decreased to 34.6% from 38.1% for the six months ended June
30, 1996 and 1995 respectively. The Company's gross profit margin has been
negatively impacted during the six months ended June 30, 1996 due to costs
incurred to open a new manufacturing facility in Nogales, Mexico which started
operations in January 1996. The Company expects gross profit to improve as
productivity increases in the new Nogales, Mexico facility.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses increased by $191,000 to $1,154,000 for the three months
ended June 30, 1996, from $963,000 for the three months ended June 30, 1995. As
a percentage of net sales, the ratio decreased to 29.8% in the second quarter
1996 from 30.5% in the second quarter 1995. The increase in selling, general
and administrative expenses is primarily in the areas of the Apparel Division
costs of $71,000; marketing $21,000; public company expenses $19,000 and travel
expenses $30,000. Although Apparel Division selling, general and administrative
costs increased $71,000, as a percentage of net Apparel Division sales, selling,
general and administrative expenses decreased to 17.5% for the second quarter
1996 compared to 24.4% for the second quarter 1995. Selling, general and
administrative expenses increased by $345,000 to $2,269,000 for the six months
ended June 30, 1996 from $1,924,000 for the six months ended June 30, 1995. As
a percentage of net sales, the selling, general and administrative expenses
increased to 30.4% in 1996 from 28.6% in 1995.
8
<PAGE>
DEPRECIATION & AMORTIZATION: Depreciation and amortization expense
decreased by $93,000, to $60,000 for the three months ended June 30, 1996 from
$153,000 for the same period in 1995, and decreased by $181,000 for the six
months ended June 30, 1996 compared to 1995. This decrease is primarily
attributable to the 1995 year end decision to write off of the remaining
intangible assets resulting from the acquisition of its wholly-owned subsidiary,
Alpha ProTech, Inc. during the fourth quarter 1995.
INTEREST: Interest expense decreased by $57,000, or 49.1%, to $59,000
for the second quarter 1996 from $116,000 for the second quarter 1995. Interest
expense decreased by 55.7% for the six months ended June 30, 1996 compared to
1995. These decreases are due to the Company obtaining asset based financing at
lower interest rates effective March 31, 1995, as well as due to $830,000 of
notes payable being converted to common stock during the second quarter 1995.
INCOME FROM OPERATIONS: Income from operations decreased by $49,000 to
$79,000 for the three months ended June 30, 1996, from $128,000 for the three
months ended June 30, 1995. Income from operations decreased by $140,000 for
the six months ended June 30, 1996 compared to the same period in 1995. These
decreases are due to an increase in selling, general, administrative expenses
offset by a decrease in depreciation and amortization and a small improvement in
gross profit.
NET INCOME: Net Income for the three months ended June 30, 1996 was
$24,000 compared to $6,000 for the three months ended June 30, 1996, an increase
of $18,000. Net income for the six months ended June 30, 1996 was $70,000
compared to $15,000 for the six months in 1995. The net income increase of
$55,000 is comprised of a decrease in interest, other expenses and minority
interest of $195,000 offset by decreased income from operations of $140,000.
Net income as a percentage of sales increased to 0.9% in the first six months of
1996 compared to 0.02% in the same period 1995.
LIQUIDITY AND CAPITAL RESOURCES:
As of June 30, 1996 the Company had cash of $824,000 and working capital of
$2,102,000. The company currently has a secured asset based lender's line of
credit of $3,000,000 based upon the level of eligible accounts receivable,
inventory, and equipment, which expires in March 1998. At June 30, 1996, the
maximum line of credit available was $1,214,000 for accounts receivable,
inventory, and equipment, of which, $1,066,000 has been used.
Net cash provided by operations was $262,000 for the six months ended June 30,
1996, compared to $928,000 used for operations for the same period in 1995. The
Company's cash provided by operations for the six months ended June 30, 1996
have been due primarily to decreases in income tax receivable and increases in
accounts payable and accrued liabilities, partially offset by increases in
accounts receivable, inventories, and other assets.
The Company's investing activities have consisted primarily of expenditures for
fixed assets for the food service business, acquisition of businesses and the
purchase of patents related to the food service business which totalled $248,000
for the six months ended June 30, 1996, and $503,000 for the same period in
1995.
The Company has no significant capital commitments, but currently anticipates
that additions to property and equipment for the balance of 1996 could be
approximately $150,000, depending on the Company's success in the food industry.
This expenditure will be dependent upon the Company's ability in raising funds
through the exercise of options and warrants.
9
<PAGE>
The Company also intends to seek out low cost acquisitions of businesses and/or
assets that are consistent with its strategic plan which will also depend on
the Company's ability to raise capital through the exercise of options and
warrants.
For the six months ended June 30, 1996 the Company's financing activities
consisted primarily of raising $520,000 through the exercise of options and
warrants. The Company expects to continue to raise funds through the exercise
of options and warrants.
The Company believes that it has adequate resources through its existing credit
facility, working capital, and expected cash provided by operations and through
the anticipated exercise of outstanding options and warrants to meet future cash
requirements for at least a twelve month period.
10
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Alpha Pro Tech, Ltd.
PART II-OTHER INFORMATION
- - ----------------------------------------------------------------------------
ITEM 4. Submission of Matters to Vote Security Holders
(a) Registrant held its Annual Meeting of Shareholders June 21, 1996.
(b) The following persons were elected Directors pursuant to the votes
indicated:
NAME FOR AGAINST
Sheldon Hoffman 14,860,800 96,807
Al Millar 14,888,000 76,807
Robert Isaly 14,882,200 76,607
John Ritota 14,882,200 76,607
Donald E. Bennett Jr. 14,881,200 83,607
(c) To amend the Company's 1993 incentive stock option plan so as to
increase the number of shares available under the plan.
FOR AGAINST ABSTAIN VOTE WITHELD
14,491,656 421,144 44,007 8,000
(d) The only other matter to be voted upon was the ratification of the
appointment of Price Waterhouse LLP as the Registrant's independent
accounts as follows:
FOR AGAINST ABSTAIN
14,905,657 33,200 25,950
11
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Alpha Pro Tech, Ltd.
DATE: BY: /s/Sheldon Hoffman
------------------------------
SHELDON HOFFMAN
Chief Executive Officer
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM THE
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996 AND STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 824,000
<SECURITIES> 38,000
<RECEIVABLES> 2,314,000
<ALLOWANCES> (62,000)
<INVENTORY> 2,141,000
<CURRENT-ASSETS> 5,511,000
<PP&E> 2,219,000
<DEPRECIATION> (715,000)
<TOTAL-ASSETS> 7,283,000
<CURRENT-LIABILITIES> 3,409,000
<BONDS> 0
0
0
<COMMON> 205,000
<OTHER-SE> 19,250,000
<TOTAL-LIABILITY-AND-EQUITY> 7,283,000
<SALES> 3,873,000
<TOTAL-REVENUES> 3,873,000
<CGS> 2,580,000
<TOTAL-COSTS> 1,214,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,000
<INCOME-PRETAX> 24,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 24,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
