<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, 1997 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 November 10, 1997
-----------------
Common stock, $.01 par value.......................... 24,112,449
<PAGE>
ALPHA PRO TECH, LTD.
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1 Consolidated Financial Statements Page No.
a) Consolidated Balance Sheet -
September 30, 1997 (Unaudited) and December 31, 1996 1
b) Consolidated Statements of Operations
For the three and nine months
ended September 30, 1997 and 1996 (unaudited) 2
c) Consolidated Statement of Shareholders' Equity
For the nine months ended September 30, 1997 (unaudited) 3
d) Consolidated Statements of Cash Flows
For the nine months ended September 30, 1997
and 1996 (unaudited) 4
e) Notes to Consolidated Financial Statements 5-6
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-9
SIGNATURES 10
<PAGE>
ALPHA PRO TECH, LTD.
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 327,000 $ 275,000
Marketable Securities-restricted 22,000 39,000
Accounts receivable, net of allowance for
doubtful accounts of $98,000 and $122,000 3,375,000 2,170,000
Income taxes receivable 5,000 5,000
Inventories 3,302,000 2,942,000
Prepaid expenses and other assets 470,000 183,000
------------- -------------
7,501,000 5,614,000
Property and equipment, net of accumulated
depreciation of $1,039,000 and $836,000 1,837,000 1,615,000
Intangible assets, net of accumulated
amortization of $82,000 and $55,000 298,000 219,000
Other 31,000 33,000
------------- -------------
$ 9,667,000 $7,481,000
------------- -------------
------------- -------------
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 1,388,000 $1,600,000
Accrued liabilities 491,000 647,000
Due to related parties - 19,000
Notes payable, current portion - 31,000
Loans payable, current portion 1,227,000 1,081,000
Capital leases, current portion 55,000 36,000
------------- -------------
3,161,000 3,414,000
Loans payable, less current portion 71,000 112,000
Capital leases, less current portion 140,000 105,000
------------- -------------
3,372,000 3,631,000
------------- -------------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 50,000,000
shares authorized, 24,112,449 and
20,755,463 issued and outstanding at
September 30, 1997 and December 31, 1996 241,000 207,000
Additional paid-in capital 24,338,000 21,656,000
Accumulated deficit (18,284,000) (18,013,000)
------------- -------------
6,295,000 3,850,000
------------- -------------
$ 9,667,000 $7,481,000
------------- -------------
------------- -------------
</TABLE>
1
<PAGE>
ALPHA PRO TECH, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Sales $4,708,000 $3,772,000 $13,184,000 $11,231,000
Cost of goods sold, excluding
depreciation 3,250,000 2,449,000 8,466,000 7,328,000
---------- ---------- ----------- -----------
1,458,000 1,323,000 4,718,000 3,903,000
Expenses
Selling, general and administrative 1,657,000 1,159,000 4,540,000 3,415,000
Depreciation and amortization 82,000 66,000 230,000 184,000
---------- ---------- ----------- -----------
Income (loss) from operations (281,000) 98,000 (52,000) 304,000
---------- ---------- ----------- -----------
Interest 72,000 72,000 219,000 212,000
Other 0 0 0 0
---------- ---------- ----------- -----------
72,000 72,000 219,000 212,000
---------- ---------- ----------- -----------
Income (loss) before provision for income taxes ($353,000) 26,000 ($271,000) 92,000
Minority Interest 0 0 0 (4,000)
Provision for income taxes 0 0 0 0
---------- ---------- ----------- -----------
Net Income (loss) ($353,000) $26,000 ($271,000) $ 96,000
---------- ---------- ----------- -----------
Net Income (loss) per share ($ 0.01) $ 0.00 ($ 0.01) $ 0.00
---------- ---------- ----------- -----------
Weighted average number of shares
outstanding 24,104,116 20,512,130 23,193,445 20,163,671
---------- ---------- ----------- -----------
</TABLE>
2
<PAGE>
ALPHA PRO TECH, LTD.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES COMMON ADDITIONAL ACCUMULATED TOTAL
STOCK PAID-IN CAPITAL DEFICIT
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1996 20,755,463 $207,000 $21,656,000 ($18,013,000) $3,850,000
Stock issued for cash 3,356,986 34,000 2,438,000 2,472,000
Options/warrants
issued for services 244,000 244,000
Net income (loss) (271,000) (271,000)
---------- -------- ----------- ------------- -----------
Balance at
September 30, 1997 24,112,449 $241,000 $24,338,000 ($18,284,000) $6,295,000
---------- -------- ----------- ------------- -----------
---------- -------- ----------- ------------- -----------
</TABLE>
3
<PAGE>
ALPHA PRO TECH, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ($271,000) $96,000
Adjustments to reconcile net income to cash
used for operating activities:
Depreciation and amortization 230,000 184,000
Minority interest in earnings (14,000)
Securities issued for services 15,000
Changes in assets and liabilities:
Accounts receivable (1,205,000) (190,000)
Income tax receivable 167,000
Marketable securities 17,000 (2,000)
Inventories (360,000) (716,000)
Prepaid and other assets(1) (43,000) (109,000)
Accounts payable and accrued liabilities (387,000) 391,000
----------- ---------
Net cash provided by (used for) operating
activities: (2,019,000) (178,000)
----------- ---------
INVESTING ACTIVITIES:
Acquisition of business (49,000)
Purchase of property and equipment (425,000) (364,000)
Purchase of intangible assets (106,000) (30,000)
Purchase of other assets 2,000 (2,000)
----------- ---------
Net cash used for investing activities (529,000) (445,000)
----------- ---------
FINANCING ACTIVITIES:
Issuance of common stock(1) 2,472,000 595,000
Net proceeds (payments) on loans payable 105,000 247,000
Net proceeds ( payments) on capital leases 54,000
Net proceeds (payments)on notes payable (31,000) (110,000)
----------- ---------
Net Cash provided by financing activities 2,600,000 732,000
----------- ---------
Increase (decrease) in cash during the period 52,000 109,000
Cash, beginning of period $275,000 $344,000
----------- ---------
Cash, end of period $327,000 $453,000
----------- ---------
</TABLE>
- ------------------------
(1) Non - cash item: Options and warrants with fair values totalling $244,000
were issued to consultants for future services. This is reflected on the Cash
Flow Statement as a deduction in common stock and prepaid expenses.
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, shoe cover, apparel products and woundcare
products. Most of the Company's disposable apparel, mask and shield
products and woundcare 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, 1996 in
accounting principles and practices utilized in the presentation of these
financial statements.
3. INVENTORIES SEPTEMBER 30, DECEMBER 31,
1997 1996
Raw Materials $1,777,000 $1,511,000
Work in process 179,000 76,000
Finished goods 1,346,000 1,355,000
---------- ----------
$3,302,000 $2,942,000
---------- ----------
---------- ----------
4. ACCRUED LIABILITIES SEPTEMBER 30, DECEMBER 31,
1997 1996
Professional fees $123,000 $286,000
Payroll and payroll taxes 255,000 203,000
Other 113,000 158,000
-------- --------
$491,000 $647,000
-------- --------
-------- --------
5
<PAGE>
ALPHA PRO TECH, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
5. NOTES PAYABLE SEPTEMBER 30, DECEMBER 31,
1997 1996
Note payable due in monthly installments
of $1,500, interest at 8.0%, maturing
July 31, 1997 $ 9,000
Note payable due in monthly installments
of $4,000, interest at 6%, with the
remaining balance due March 31, 1997 14,000
Notes payable to related parties, interest
at 20% payable quarterly, due on demand 8,000
-------
$ - $31,000
------ -------
Less: Current portion $ - $31,000
------ -------
Notes Payable, less current portion $ - $ -
------ -------
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, 1997, as taxable income has
been eliminated as a result of the utilization of net operating loss carry
forwards.
6
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1997, COMPARED TO THE THREE
MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1996
Alpha Pro Tech, Ltd. ("Alpha" or the "Company") reported a net loss for the
three months ended September 30, 1997 of $353,000 as compared to net income of
$26,000 for the three months ended September 30, 1996, representing an decrease
of $379,000. For the nine months ended September 30, 1997 the net loss was
$271,000 compared to net income of $96,000 for the same period in 1996,
representing a decrease of $367,000 .
SALES Consolidated net sales for the three months ended September 30, 1997
increased to $4,708,000 from $3,772,000 in 1996, representing an increase of
$936,000 or 24.8%. Net sales for the Apparel Division for the quarter ended
September 30, 1997 were $3,170,000 as compared to $2,121,000 for the same
period of 1996. The Apparel Division sales increase of $1,049,000 or 49.5% was
primarily due to increased sales to the company's largest customer. Mask and
eye shield sales decreased by 12.1%, to $994,000 for the third quarter of 1997
from $1,131,000 in the third quarter of 1996. This decrease is primarily the
result of a drop in shield/mask combination product sales. Sales from the
Company's Unreal Lambskin and other related products which includes a line of
pet beds increased by 4.6% to $544,000 in the third quarter of 1997 compared
to $520,000 in the same period in 1996. An increase in sales of rolled
Lambskin goods is primarily responsible for the increase. The Company's Unreal
Lambskin line of pet products is expected to improve in future quarters.
Consolidated sales were $13,184,000 and $11,231,000 for the nine months ended
September 30, 1997 and 1996, respectively, representing an increase of
$2,003,000 or 17.8%. The increase is attributable to an increase in apparel
sales of 43.9% and an increase in Unreal Lambskin of 5.4%, offset by a decrease
in mask and shield products of 14.9%.
COST OF GOODS SOLD Cost of goods sold increased to $3,250,0000 for the three
months ended September 30,1997 from $2,449,000 for the same period in 1996. As
a percentage of net sales, cost of goods sold increased to 69.0% from 64.9%.
Gross profit margin decreased to 31.0% for the three months ended September
30, 1997 from 35.1% for the three months ended September 30, 1996. For the
nine months ended September 30, 1997 as compared to 1996, cost of goods sold
increased to $8,466,000 from $7,328,000. As a percentage of net sales for the
nine months, cost of goods sold decreased to 64.2% from 65.2%. Gross profit
margin increased to 35.8% from 34.8% for the nine months ended September 30,
1997 and 1996, respectively.
7
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative expenses increased by $498,000 to $1,657,000 for the three
months ended September 30,1997 from $1,159,000 for the three months ended
September 30, 1996. As a percentage of net sales, selling, general and
administrative expenses increased to 35.2% in the third quarter of 1997 from
30.7% for the same period in 1996. The increase in selling, general and
administrative expenses primarily consists of increased payroll related costs
of $224,000; increased expense related to options/warrants issued for services
of $20,000; increased public company expenses of $62,000 including investor
relations, annual report and annual meeting costs, stock transfer costs, and
costs associated with SEC reporting requirements; increased travel expenses of
$86,000; increased professional fee expenses of $71,000; and increased
commission expense of $55,000. Of the increase in payroll related costs,
$145,000 is due to increases in factory indirect expenses of which the majority
is attributable to the Apparel Division which had an increase in sales of
49.5%. As a percentage of net Apparel Division sales, selling, general and
administrative expenses for the Apparel division decreased to 19.2% for the
third quarter of 1997 as compared to 24.9% in the third quarter of 1996.
Selling, general and administrative expenses increased by $1,125,000 to
$4,540,000 for the nine months ended September 30,1997 from $3,415,000 for the
nine months ended September 30, 1996. As a percentage of net sales, selling,
general and administrative expenses increased to 34.4% for the first three
quarters of 1997 from 30.4% in the same period in 1996. The increase in
selling, general and administrative expenses for the nine months ended
September 30, 1997 is due to payroll related costs, public company expenses,
professional fees and travel expenses as noted above.
DEPRECIATION & AMORTIZATION Depreciation and amortization expense increased by
$16,000, to $82,000 for the three months ended September 30, 1997 from
$66,000 for the same period in 1996 and increased by $46,000 for the nine
months ended September 30, 1997 compared to 1996. This increase is primarily
attributable to an increase in the purchase of equipment through capital leases
and amortization of goodwill on the acquisition of Ludan Corporation.
NET INTEREST Interest expense remained flat at $72,000 for both the third
quarter of 1997 and for the third quarter of 1996. Interest expense
increased by $7,000, or 3.3% for the nine months ended September 30, 1997
compared to 1996. The slight increase in interest expense is due to interest
on the additional capital leases acquired.
INCOME (LOSS) FROM OPERATIONS Income from operations decreased by $379,000
to a loss of $281,000 for the three months ended September 30, 1997 as compared
to income from operations of $98,000 for the three months ended September 30,
1996. Income from operations decreased by $356,000 to a loss of $52,000 for
the nine months ended September 30, 1997 compared to income from operations of
$304,000 for the same period in 1996. This change in income from operations
of $356,000 for the nine months is due to an increase in gross profit of
$815,000 offset by an increase in selling, general and administrative expenses
of $1,125,000 and an increase in depreciation and amortization of $46,000.
NET INCOME (LOSS) The net loss for the three months ended September 30, 1997
was $353,000 compared to net income of $26,000 for the three months ended
September 30, 1996, a decrease of $379,000 . The net income decrease is
comprised of a change in loss from operations of $379,000 . The net loss for
the nine months ended September 30, 1997 was $271,000 compared to net income of
$96,000 for the nine months in 1996. The net loss increase of $367,000 for
the nine months is comprised primarily of an increase in loss from operations
of $356,000 and a slight increase in interest expense.
8
<PAGE>
The Company does not have any pension, profit sharing or similar plans
established for its employees, however, the chief executive officer and
president are entitled to a combined bonus equal to 10% of the pre-tax profits
of the company. No bonus was earned in 1996 or 1997.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1997, the Company had cash of $327,000 and working capital
of $4,340,000. During the nine months ended September 30, 1997, cash
increased by $52,000 and accounts payable and accrued liabilities decreased by
$387,000. The improvement of the company's cash and working capital is
primarily due to the exercise of warrants and options for a total equity
infusion of $2,472,000. 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, 1997, the maximum line of credit available was $2,254,000 for
accounts receivable, inventory and equipment.
Net cash used for operations was $2,019,000 for the nine months ended September
30, 1997 and $178,000 for the same period of 1996. The Company's use of
cash from operations for the nine months ended September 30, 1997 is due
primarily to increases in accounts receivable, inventories, prepaids and other
assets and a decrease in accounts payable and accrued liabilities, offset by a
decrease in marketable securities.
The Company's investing activities have consisted primaily of expenditures for
fixed assets and intangible assets which totaled $529,000 for the nine months
ended September 30, 1997.
The Company is in the process of expanding its sewing capacity in Mexico and
anticipates that further additions to property and equipment for 1997 could be
approximately $100,000. In addition it is anticipated that its mask
manufacturing capabilities are to be improved at an estimated cost of
$100,000. Depending on the success of the automated shoe cover approximately
$350,000 of additional equipment could be required. The Company intends to
lease equipment whenever possible.
During the nine months ended September 30, 1997, the Company's financing
activities consisted primarily of the exercise of warrants and options and
increases in the asset based loan of $105,000 and capital leases of $54,000
offset by repayments of borrowings totaling $31,000 which resulted in the net
cash provided by financing activities of $2,600,000.
With the exercise of warrants and options, accounts payable and accrued
liabilities were reduced significantly to a level that is expected to remain
constant. Management believes that it has available cash and borrowings to
finance all known financial commitments for at least 24 months.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
The Private Securities Litigation Reform Act of 1995 ("Act) provides a safe
harbor for forward-looking information made on behalf of the Company. All
statements, other than statements of historical facts which address the
Company's expectations of sources of capital or which express the Company's
expectation for the future with respect to financial performance or operating
strategies can be identified as forward-looking statements. Such statements
made by the Company are based on knowledge of the environment in which it
operates, but because of the factors previously listed, as well as other
factors beyond the control of the Company, actual results may differ materially
from the expectations expressed in the forward-looking statements.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has dult caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Alpha Pro Tech, Ltd.
DATE: NOVEMBER 12, 1997 BY: /s/ SHELDON HOFFMAN
--------------------- -----------------------------------
SHELDON HOFFMAN
CHIEF EXECUTIVE OFFICER
CHIEF FINANCIAL OFFICER
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1997 AND DECEMBER 31, 1996 AND
THE STATEMENT OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
1997 AND SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 327,000
<SECURITIES> 22,000
<RECEIVABLES> 3,473,000
<ALLOWANCES> 98,000
<INVENTORY> 3,302,000
<CURRENT-ASSETS> 7,501,000
<PP&E> 2,876,000
<DEPRECIATION> 1,039,000
<TOTAL-ASSETS> 9,667,000
<CURRENT-LIABILITIES> 3,161,000
<BONDS> 0
0
0
<COMMON> 241,000
<OTHER-SE> 24,338,000
<TOTAL-LIABILITY-AND-EQUITY> 9,667,000
<SALES> 4,708,000
<TOTAL-REVENUES> 4,708,000
<CGS> 3,250,000
<TOTAL-COSTS> 1,739,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,000
<INCOME-PRETAX> (353,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (353,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (353,000)
<EPS-PRIMARY> (0.01)
<EPS-DILUTED> (0.01)
</TABLE>
