<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 September 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 L3R 9R2
Markham, Ontario, Canada -------
(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 November 4, 1996
----------------
Common Stock, $.01 par value 20,595,463
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Alpha Pro Tech, Ltd.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1 Consolidated Financial Statements Page No.
a) Balance Sheet-
September 30, 1996 (Unaudited) and December 31, 1995 1
b) Statement of Operations
for the unaudited three months and unaudited nine months
ended September 30, 1996 and September 30, 1995. 2
c) Statement of Shareholders' Equity
for the unaudited nine months ended September 30, 1996 3
d) Statement of Cash Flows
for the unaudited nine months ended September 30, 1996
and September 30, 1995 4
e) Notes to Consolidated Financial Statements (Unaudited) 5 - 6
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7 - 8
SIGNATURES 9
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Alpha Pro Tech, Ltd.
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
(Unaudited)
SEPTEMBER 30,DECEMBER 31,
1996 1995
ASSETS
Current Assets:
Cash $ 453,000 $ 344,000
Marketable Securities-restricted 38,000 36,000
Accounts receivable, net of allowance for doubtful
accounts of $62,000 and $61,000 2,261,000 2,071,000
Income taxes receivable 6,000 172.000
Inventories 2,814,000 2,098,000
Prepaid expenses and other assets 296,000 139,000
----------- -----------
5,868,000 4,860,000
Property and equipment, net of accumulated
depreciation and amortization of $774,000 and
$609,000 1,628,000 1,350,000
Intangible assets, net of accumulated amortization
of $47,000 and $28,000 227,000 167,000
Other 34,000 33,000
----------- -----------
$ 7,757,000 $ 6,410,000
----------- -----------
----------- -----------
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,794,000 $ 1,351,000
Accrued liabilities 699,000 751,000
Notes payable, current portion 52,000 152,000
Loans payable, current portion 1,178,000 890,000
Capital leases, current portion 37,000 22,000
----------- -----------
3,760,000 3,166,000
Notes payable, less current portion - 10,000
Loans payable, less current portion 126,000 167,000
Capital leases, less current portion 113,000 49,000
Minority interest - 14,000
----------- -----------
3,999,000 3,406,000
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SHAREHOLDERS' EQUITY
Common stock
Authorized 50,000,000 with par value of $0.01;
20,595,463 and 19,911,130 issued and outstanding 206,000 199,000
Additional paid-in capital 19,324,000 18,673,000
Accumulated deficit (15,772,000) (15,868,000)
----------- -----------
3,758,000 3,004,000
----------- -----------
$ 7,757,000 $ 6,410,000
----------- -----------
----------- -----------
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Alpha Pro Tech, Ltd.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1996 1995 1996 1995
(Note 2) (Note 2)
<S> <C> <C> <C> <C>
Sales $3,772,000 3,177,000 $11,231,000 $9,893,000
Cost of goods sold,
excluding depreciation 2,449,000 2,242,000 7,328,000 6,402,000
---------- ---------- ----------- ----------
1,323,000 935,000 3,903,000 3,491,000
Expenses
Selling, general and
administrative 1,159,000 1,086,000 3,415,000 3,010,000
Depreciation and
amortization 66,000 154,000 184,000 453,000
---------- ---------- ----------- ----------
Income (loss) from operations 98,000 (305,000) 304,000 28,000
---------- ---------- ----------- ----------
Interest 72,000 95,000 212,000 411,000
Other - - 0 (2,000)
---------- ---------- ----------- ----------
72,000 95,000 212,000 409,000
---------- ---------- ----------- ----------
Income (loss) before provision for
income taxes and minority
interest 26,000 (400,000) 92,000 (381,000)
Minority interest - - (4,000) 4,000
Provision for income taxes
(Note 7) - - - -
---------- ---------- ----------- ----------
Net Income (loss) $26,000 ($400,000) $96,000 $(385,000)
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Net Income (loss) per share
(Note 6) $0.00 ($0.02) $0.00 ($0.02)
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
Weighted average number
of shares outstanding (Note 6) 20,512,130 19,840,937 20,163,671 18,832,883
---------- ---------- ----------- ----------
---------- ---------- ----------- ----------
</TABLE>
2
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Alpha Pro Tech, Ltd.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
COMMON ADDITIONAL ACCUMULATED
SHARES STOCK PAID-IN DEFICIT TOTAL
CAPITAL
<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
Stock issued for cash 684,333 7,000 588,000 595,000
Options/warrants issued
for services - 63,000 63,000
Net Income 96,000 96,000
---------- -------- ----------- ------------ ----------
Balance at
September 30, 1996 20,595,463 $206,000 $19,324,000 $(15,772,000) $3,758,000
---------- -------- ----------- ------------ ----------
---------- -------- ----------- ------------ ----------
</TABLE>
3
<PAGE>
Alpha Pro Tech, Ltd.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
- -------------------------------------------------------------------------------
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
OPERATING ACTIVITIES:
Net income (loss) $96,000 ($385,000)
Adjustments to reconcile net income
to net cash used for operating activities:
Depreciation and amortization 184,000 453,000
Minority interest in earnings (14,000) 4,000
Securities issued for services 15,000 49,000
Changes in assets and liabilities:
Accounts receivable (190,000) (154,000)
Income tax receivable 167,000 -
Marketable securities (2,000) -
Inventories (716,000) 34,000
Prepaid and other assets (109,000) 63,000
Accounts payable and accrued liabilities 391,000 (548,000)
--------- ---------
Net cash provided by (used for) operating activities (178,000) (484,000)
--------- ---------
INVESTING ACTIVITIES:
Acquisition of business (Note 8) (49,000) (354,000)
Purchase of property and equipment (364,000) (170,000)
Purchase of intangible assets (30,000) (131,000)
Purchase of other assets (2,000) -
--------- ---------
Net cash used for investing activities (445,000) (655,000)
--------- ---------
FINANCING ACTIVITIES:
Issuance of common stock 595,000 1,755,000
Net proceeds (payments) on loans payable 247,000 (313,000)
Net payments on notes payable (110,000) (382,000)
--------- ---------
Net cash provided by financing activities 732,000 1,060,000
--------- ---------
Increase (decrease) in cash during the period 109,000 (79,000)
Cash, beginning of period $344,000 $340,000
--------- ---------
Cash, end of period $453,000 $261,000
--------- ---------
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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 1996 adjustments made are of a normal recurring nature. The
consolidated statement of operations for the three months ended
September 30, 1995, and the nine months ended September 30, 1995 have
been restated to reflect the adjustment described in note 16 of
the Company's 1995 annual report FORM 10-K.
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
SEPTEMBER 30, DECEMBER 31,
1996 1995
Raw materials $1,598,000 $1,308,000
Work in progress 136,000 140,000
Finished goods 1,080,000 650,000
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$2,814,000 $2,098,000
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----------- -----------
4. ACCRUED LIABILITIES SEPTEMBER 30, DECEMBER 31,
1996 1995
Professional fees $ 329,000 $ 439,000
Payroll and payroll taxes 208,000 185,000
Other 143,000 127,000
Ludan Acquisition (Note 8) 19,000 -
----------- -----------
$ 699,000 $ 751,000
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----------- -----------
5
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Alpha Pro Tech, Ltd.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
5. NOTES PAYABLE SEPTEMBER 30, DECEMBER 31,
1996 1995
Note payable due in monthly installments of
$4,900, interest at 7.5%, maturing
July 31, 1996 - $ 41,000
Note payable due in monthly installments of
$1,500, interest at 8.0%, maturing
July 31, 1997 $13,000 26,000
Note payable due in monthly installments of
$4,000 due May 31, 1997 26,000 62,000
Notes payable to related parties, interest at 20%
payable quarterly, due on demand 13,000 33,000
52,000 162,000
Less: Current portion 52,000 152,000
Notes payable, less current portion $ - $10,000
--------- ---------
--------- ---------
6. NET INCOME (LOSS) PER SHARE
Net income (loss) 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 nine months ended September 30, 1996, as taxable
income has been eliminated as a result of the utilization of net
operating loss carry forwards.
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.
6
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Alpha Pro Tech, Ltd.
ITEM II. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Three months and nine months ended September 30, 1996, compared to the three
months and nine months ended September 30, 1995
SALES: Consolidated net sales were $3,772,000 for the three months
ended September 30, 1996, as compared to $3,177,000 for the three months
ended September 30, 1995, representing an increase of $595,000 or 18.7%. Net
sales for the Apparel Division for the three months ended September 30, 1996
were $2,121,000 as compared to $1,464,000 for the three months ended
September 30, 1995. The Apparel Division sales increase of $657,000 or 44.9%
was primarily due to increased sales to its largest customer. Mask and eye
shield sales were $1,131,000 for the third quarter ended September 30, 1996
as compared to $1,129,000 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 11.0% to $520,000 for the three months ended September
30, 1996 from $584,000 for the three months ended September 30, 1995. There
have been a number of new products introduced in the Unreal Lambskin line of
products with an expectation of increased sales in the future. Consolidated
sales were $11,231,000 and $9,893,000 for the nine months ended September 30,
1996 and 1995, respectively representing an increase of 13.5%. The increase
is attributable to an increase in apparel sales of 54.1%, offset by a
decrease in mask and shield products of 3.4% and a decrease in Unreal
Lambskin-Registered Trademark- of 22.1%.
COST OF GOODS SOLD: Cost of goods sold increased to $2,449,000, for the
three months ended September 30, 1996 from $2,242,000 for the three months
ended September 30, 1995. As a percentage of net sales, cost of goods sold
decreased to 64.9% from 70.6%. For the nine months ended September 30, 1996
as compared to 1995, cost of goods sold increased to $7,328,000 from
$6,402,000. As a percentage of net sales for the nine months, cost of goods
sold increased to 65.2% from 64.7%. Gross profit margin decreased slightly
as a result of sales mix to 34.8% from 35.3% for the nine months ended
September 30, 1996 and 1995 respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses increased by $73,000 to $1,159,000 for the three
months ended September 30, 1996, from $1,086,000 for the three months ended
September 30, 1995. As a percentage of net sales, the ratio decreased to
30.7% in the third quarter 1996 from 34.2% in the third quarter 1995. The
increase in selling, general and administrative expenses is primarily due to
increases in Apparel Division costs. Selling, general and administrative
expenses increased by $405,000 to $3,415,000 for the nine months ended
September 30, 1996 from $3,010,000 for the nine months ended September 30,
1995. As a percentage of net sales, selling, general and administrative
expenses remained consistent with the previous year at 30.4%.
DEPRECIATION & AMORTIZATION: Depreciation and amortization expense
decreased by $88,000, to $66,000 for the three months ended September 30,
1996 from $154,000 for the same period in 1995, and decreased by $269,000 for
the nine months ended September 30, 1996 compared to 1995. These decreases
are attributable to the 1995 fourth quarter write off of impaired intangible
assets related to the acquisition of its wholly-owned subsidiary, Alpha Pro
Tech, Inc.
7
<PAGE>
INTEREST: Interest expense decreased by $23,000, or 24.2%, to $72,000
for the third quarter 1996 from $95,000 for the third quarter 1995. Interest
expense decreased by 48.4% for the nine months ended September 30, 1996
compared to 1995. These decreases are due to the Company obtaining asset
based financing at lower interest rates effective March 31, 1995, and to
$830,000 of notes payable being converted to common stock during the second
quarter 1995.
INCOME FROM OPERATIONS: Income from operations increased by $403,000 to
income of $98,000 for the three months ended September 30, 1996, from a loss
of $305,000 for the three months ended September 30, 1995. Income from
operations increased by $276,000 for the nine months ended September 30, 1996
compared to the same period in 1995. These increases are primarily due to a
decrease in depreciation and amortization expense in the third quarter and
year to date. In addition, the third quarter increase is also attributable
to the improved gross profit percentage.
NET INCOME: Net Income for the three months ended September 30, 1996
was $26,000 compared to a loss of $400,000 for the three months ended
September 30, 1995, an increase of $426,000. Net income for the nine months
ended September 30, 1996 was $96,000 compared to a loss of $385,000 for the
nine months in 1995. The net income increase of $481,000 is comprised of an
increase of income from operations of $276,000 and a decrease of interest of
$199,000. Net income (loss) as a percentage of sales increased to 0.9% in
the first nine months of 1996 compared to (3.9%) in the same period 1995.
LIQUIDITY AND CAPITAL RESOURCES:
As of September 30, 1996 the Company had cash of $453,000 and working capital
of $2,108,000. 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 September 30,
1996, the maximum line of credit available was $1,354,000 for accounts
receivable, inventory, and equipment, of which, $1,336,000 has been used.
Net cash used by operations was $178,000 for the nine months ended September
30, 1996, compared to $484,000 used for operations for the same period in
1995. The Company's use of cash for operations for the nine months ended
September 30, 1996 have been due primarily to increases in accounts
receivable, inventories, and other assets, partially offset by a decrease in
income tax receivable and an increase in accounts payable and accrued
liabilities.
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 intangibles which totalled $445,000 for the nine months
ended September 30, 1996, and $655,000 for the same period of 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 $50,000.
For the nine months ended September 30, 1996 the Company's financing
activities consisted primarily of raising $595,000 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.
8
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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:___________________________
SHELDON HOFFMAN
Chief Executive Officer
Chief Financial Officer
9
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of September 30, 1996 and December 31, 1995 and
the Statement of Operations for the three and nine months ended September 30,
1996 and September 30, 1995 and is qualified in its entirety by reference to
such financial statments.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 453,000
<SECURITIES> 38,000
<RECEIVABLES> 2,323,000
<ALLOWANCES> (62,000)
<INVENTORY> 2,814,000
<CURRENT-ASSETS> 5,868,000
<PP&E> 2,402,000
<DEPRECIATION> (774,000)
<TOTAL-ASSETS> 7,757,000
<CURRENT-LIABILITIES> 3,760,000
<BONDS> 0
0
0
<COMMON> 206,000
<OTHER-SE> 19,324,000
<TOTAL-LIABILITY-AND-EQUITY> 7,757,000
<SALES> 3,772,000
<TOTAL-REVENUES> 3,772,000
<CGS> 2,449,000
<TOTAL-COSTS> 1,225,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,000
<INCOME-PRETAX> 26,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 26,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,000
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
