<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, 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 August 13, 1997
----------------
Common stock, $.01 par value..... 24,102,449
<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, 1997 (Unaudited) and December 31, 1996 1
b) Statement of Operations
for the unaudited three months and six months
ended June 30, 1997 and June 30, 1996 2
c) Statement of Shareholder's Equity
for the unaudited six months ended June 30, 1997 3
d) Statement of Cash Flows
for the unaudited six months ended June 30, 1997
and June 30, 1996 4
e) Notes to Consolidated Financial Statements 5-6
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
Part II. OTHER INFORMATION
ITEM 4 Submission of Matters to a Vote Security Holders 11
SIGNATURES 12
<PAGE>
ALPHA PRO TECH, LTD.
CONSOLIDATED BALANCE SHEET
_____________________________________________________________________________
(UNAUDITED)
JUNE 30, DECEMBER 31,
1997 1996
ASSETS
Current Assets:
Cash $ 1,344,000 $ 275,000
Marketable Securities-restricted 22,000 39,000
Accounts receivable, net of allowance for
doubtful accounts of $118,000 and $122,000 2,764,000 2,170,000
Income taxes receivable 5,000 5,000
Inventories 3,115,000 2,942,000
Prepaid expenses and other assets 378,000 183,000
------------ -----------
7,628,000 5,614,000
Property and equipment, net of accumulated
depreciation and amortization of $967,000
and $836,000 1,755,000 1,615,000
Intangible assets, net of accumulated
amortization of $72,000 and $55,000 294,000 219,000
Other 31,000 33,000
------------ -----------
$ 9,708,000 $7,481,000
------------ -----------
------------ -----------
LIABILITIES & SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts payable $ 795,000 $ 1,600,000
Accrued liabilities 475,000 647,000
Due to related parties 19,000 19,000
Notes payable, current portion - 31,000
Loans payable, current portion 1,535,000 1,081,000
Capital leases, current portion 57,000 36,000
------------ -----------
2,881,000 3,414,000
Loans payable, less current portion 85,000 112,000
Capital leases, less current portion 155,000 105,000
------------ -----------
3,121,000 3,631,000
------------ -----------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 50,000,000
shares authorized, 24,047,449 and
20,755,463 issued and outstanding at
June 30, 1997 and December 31, 1996 240,000 207,000
Additional paid-in capital 24,279,000 21,656,000
Accumulated deficit (17,932,000) (18,013,000)
------------ -----------
6,587,000 3,850,000
------------ -----------
$ 9,708,000 $7,481,000
------------ -----------
------------ -----------
1
<PAGE>
ALPHA PRO TECH, LTD.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
______________________________________________________________________________
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Sales $4,491,000 $3,873,000 $8,476,000 $7,459,000
Cost of goods sold, excluding
depreciation 2,772,000 2,580,000 5,217,000 4,879,000
------------ ------------ ---------- -----------
1,719,000 1,293,000 3,259,000 2,580,000
Expenses
Selling, general and administrative 1,561,000 1,154,000 2,883,000 2,269,000
Depreciation and amortization 78,000 60,000 148,000 118,000
------------ ------------ ---------- -----------
Income from operations 80,000 79,000 228,000 193,000
------------ ------------ ---------- -----------
Interest 66,000 59,000 147,000 140,000
Other 0 0 0 (13,000)
------------ ------------ ---------- -----------
66,000 59,000 147,000 127,000
------------ ------------ ---------- -----------
Income before provision for income taxes 14,000 20,000 81,000 66,000
Minority Interest (4,000) (4,000)
Provision for income taxes 0 0 0 0
------------ ------------ ---------- -----------
Net Income $14,000 $24,000 $81,000 $ 70,000
------------ ------------ ---------- -----------
Net Income per share $ 0.00 $ 0.00 $ 0.00 $ 0.00
------------ ------------ ---------- -----------
Weighted average number of shares
outstanding 23,968,116 20,280,186 22,862,826 20,068,527
------------ ------------ ---------- -----------
</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 3,291,986 33,000 2,379,000 2,412,000
Options/warrants
issued for services 244,000 244,000
Net Income/(Net Loss) 81,000 81,000
------------ --------- ------------ ------------- -----------
Balance at
June 30, 1997 24,047,449 $240,000 $24,279,000 ($17,932,000) $6,587,000
------------ --------- ------------ ------------- -----------
------------ --------- ------------ ------------- -----------
</TABLE>
3
<PAGE>
ALPHA PRO TECH, LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
_____________________________________________________________________
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income/(loss) $ 81,000 $70,000
Adjustments to reconcile net income to cash
used for operating activities:
Depreciation and amortization 148,000 118,000
Minority interest in earnings (4,000)
Securities issued for services 15,000
Changes in assets and liabilities:
Accounts receivable (594,000) (181,000)
Income tax receivable 166,000
Marketable securities 17,000 (2,000)
Inventories (173,000) (43,000)
Prepaid and other assets(1) 49,000 (63,000)
Accounts payable and accrued liabilities (977,000) 186,000
----------- ---------
Net cash provided by (used for) operating
activities: (1,449,000) 262,000
----------- ---------
INVESTING ACTIVITIES:
Purchase of property and equipment (271,000) (226,000)
Purchase of intangible assets (92,000) (21,000)
Purchase of other assets 2,000 (1,000)
----------- ---------
Net cash used for investing activities (361,000) (248,000)
----------- ---------
FINANCING ACTIVITIES:
Issuance of common stock(1) 2,412,000 520,000
Net proceeds (payments) on loans payable 427,000 (20,000)
Net proceeds ( payments) on capital leases 71,000
Net proceeds (payments)on notes payable (31,000) (34,000)
----------- ---------
Net Cash provided by financing activities 2,879,000 466,000
----------- ---------
Increase (decrease) in cash during the period 1,069,000 480,000
Cash, beginning of period $275,000 $344,000
----------- ---------
Cash, end of period $1,344,000 $824,000
----------- ---------
</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, and 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 JUNE 30, DECEMBER 31,
1997 1996
Raw Materials $1,540,000 $1,511,000
Work in process 145,000 76,000
Finished goods 1,430,000 1,355,000
----------- -----------
$3,115,000 $2,942,000
----------- -----------
4. ACCRUED LIABILITIES JUNE 30, DECEMBER 31,
1997 1996
Professional fees $137,000 $286,000
Payroll and payroll taxes 290,000 203,000
Other 48,000 158,000
----------- -----------
$475,000 $647,000
----------- -----------
----------- -----------
5
<PAGE>
ALPHA PRO TECH, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
_____________________________________________________________________
5. NOTES PAYABLE
JUNE 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 six months ended June 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 SIX MONTHS ENDED JUNE 30, 1997, COMPARED TO THE THREE MONTHS
AND SIX MONTHS ENDED JUNE 30, 1996
Alpha Pro Tech, Ltd. ("Alpha" or the "Company") reported net income for the
three months ended June 30, 1997 of $14,000 as compared to net income of
$24,000 for the three months ended June 30, 1996, representing an decrease of
$10,000 or 41.7%. For the six months ended June 30, 1997 net income rose to
$81,000 from $70,000 for the same period in 1996, representing and increase of
15.7%.
SALES Consolidated net sales for the three months ended June 30, 1997
increased to $4,491,000 from $3,873,000 in 1996, representing an increase of
$618,000 or 16.0%. Net sales for the Apparel Division for the second quarter
ended June 30, 1997 were $2,584,000 as compared to $1,893,000 for the same
period of 1996. The Apparel Division sales increase of $691,0000 or 36.5% was
primarily due to increased sales to its largest customer. Mask and eye
shield sales decreased by 10.3%, to $1,260,000 for the second quarter of 1997
from $1,404,000 in the second 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-Registered Trademark- and other related products
which includes a line of pet beds increased by 12.3% to $647,000 in the
second quarter of 1997 compared to $576,000 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-Registered Trademark- line of pet
products is expected to improve in future quarters. Consolidated sales were
$8,476,000 and $7,459,000 for the six months ended June 30, 1997 and 1996,
respectively, representing an increase of $1,017,000 or 13.6%. The
increase is attributable to an increase in apparel sales of 43.0% and an
increase in Unreal Lambskin of 5.3%, offset by a decrease in mask and shield
products of 16.1%.
7
<PAGE>
COST OF GOODS SOLD Cost of goods sold increased to $2,772,000 for the three
months ended June 30,1997 from $2,580,000 for the same period in 1996. As a
percentage of net sales, cost of goods sold decreased to 61.7% from 66.6%.
Gross profit margin increased to 38.3% for the three months ended June 30,
1997 from 33.4% for the three months ended June 30, 1996. For the six months
ended June 30, 1997 as compared to 1996, cost of goods sold increased to
$5,217,000 from $4,879,000. As a percentage of net sales for the six months,
cost of goods sold decreased to 61.6% from 65.4%. Gross profit margin
increased to 38.4% from 34.6% for the six months ended June 30, 1997 and 1996,
respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative expenses increased by $407,000 to $1,561,000 for the three
months ended June 30,1997 from $1,154,000 for the three months ended June 30,
1996. As a percentage of net sales, selling, general and administrative
expenses increased to 34.8% in the second quarter of 1997 from 29.8% for the
same period in 1996. The increase in selling, general and administrative
expenses primarily consists of payroll related costs of $251,000;
options/warrants issued for services charge of $40,000; public company
expenses of $52,000 including investor relations, annual report and annual
meeting costs, stock transfer costs, & costs associated with SEC reporting
requirements; and travel expenses of $36,000. Of the $251,000 increase in
payroll related costs, $204,000 is due to the Apparel Division which had an
increase in sales of 36.5%. As a percentage of net Apparel Division sales,
selling, general and administrative expenses for the Apparel division
decreased to 18.4% for the second quarter of 1997 as compared to 19.9% in the
second quarter of 1996. Selling, general and administrative expenses
increased by $614,000 to $2,883,000 for the six months ended June 30,1997
from $2,269,000 for the six months ended June 30, 1996. As a percentage of
net sales, selling, general and administrative expenses increased to 34.0%
for the first two quarters of 1997 from 30.4% in the same period in 1996.
The increase in selling, general and administrative expenses for the six
months ended June 30, 1997 is due to payroll related costs, public company
expenses and travel expenses as noted above.
DEPRECIATION & AMORTIZATION Depreciation and amortization expense increased
by $18,000, to $78,000 for the three months ended June 30, 1997 from $60,000
for the same period in 1996 and increased by $30,000 for the six months ended
June 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.
8
<PAGE>
NET INTEREST Interest expense increased by $7,000, or 11.9% to $66,000 for the
second quarter of 1997 from $59,000 for the second quarter of 1996. Interest
expense increased by $7,000, or 5.0% for the six months ended June 30, 1997
compared to 1996. The slight increase in interest expense is due to interest
on the additional capital leases acquired.
INCOME FROM OPERATIONS Income from operations remained flat at $80,000 for
the three months ended June 30, 1997 as compared to $79,000 for the three
months ended June 30, 1996. Income from operations increased by $35,000 to
$228,000 for the six months ended June 30, 1997 compared to $193,000 for the
same period in 1996. The increased income from operations for the six months
is primarily due to an increase in gross profit offset by an increase in
selling, general and administrative expenses and an increase in depreciation
and amortization.
NET INCOME Net Income for the three months ended June 30, 1997 was $14,000
compared to net income of $24,000 for the three months ended June 30, 1996, a
decrease of $10,000 or 41.7%. The net income decrease is comprised primarily
of no change in income from operations and a small increase in interest
expense. Net income for the six months ended June 30, 1997 was $81,000
compared to $70,000 for the six months in 1996. The net income increase for
the six months is comprised of an increase in income from operations offset by
a slight increase in interest expense.
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 June 30, 1997, the Company had cash of $1,344,000 and working capital of
$4,747,000. During the six months ended June 30, 1997, cash increased by
$1,069,000 and accounts payable and accrued liabilities decreased by $977,000.
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 $2,412,000.
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, 1997, the maximum line of
credit available was $1,713,000 for accounts receivable, inventory and
equipment.
9
<PAGE>
Net cash used for operations was $1,449,000 for the six months ended June 30,
1997 compared to net cash provided of $262,000 for the same period of 1996.
The Company's use of cash from operations for the six months ended June 30,
1997 have been due primarily to increases in accounts receivable, inventories,
and a decrease in accounts payable and accrued liabilities offset by a decrease
in marketable securities and prepaid and other assets.
The Company is in the process of expanding its sewing operation in Mexico and
anticipates that further additions to property and equipment for 1997 could be
approximately $200,000. 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 six months ended June 30, 1997, the Company's financing activities
consisted primarily of the exercise of warrants and options, and increases in
the asset based loan of $427,000 and capital leases of $71,000 offset by
repayments of borrowings totaling $31,000 which resulted in the net cash
provided by financing activities of $2,879,000.
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.
10
<PAGE>
ALPHA PRO TECH, LTD.
PART II - OTHER INFORMATION
_____________________________________________________________________________
ITEM 4. Submission of Matters to a Vote Security Holders
(a) Registrant held its Annual Meeting of Shareholders June 20, 1997.
(b) The following persons were elected Directors pursuant to the votes
indicated:
NAME FOR AGAINST
Sheldon Hoffman 18,820,326 109,072
Al Millar 18,788,424 140,972
Robert Isaly 18,821,124 108,272
John Ritota 18,821,124 108,272
Donald E. Bennett, Jr. 18,821,124 108,272
(c) To amend the Company's 1993 incentive stock option plan.
FOR AGAINST ABSTAIN VOTE WITHHELD
17,358,575 715,986 201,219 653,616
(d) The only other matter to be voted upon was the ratification of the
appointment of Price Waterhouse LLP as the Registrant's
independent accountants as follows:
FOR AGAINST ABSTAIN
18,814,405 69,805 45,186
11
<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: AUGUST 13, 1997 BY: SHELDON HOFFMAN
------------------ ------------------------------
SHELDON HOFFMAN
CHIEF EXECUTIVE OFFICER
CHIEF FINANCIAL OFFICER
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1997 AND DECEMBER 31, 1996 AND
THE STATEMENT OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30,
1997 AND JUNE 30, 1996.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,344,000
<SECURITIES> 22,000
<RECEIVABLES> 2,882,000
<ALLOWANCES> (118,000)
<INVENTORY> 3,115,000
<CURRENT-ASSETS> 7,628,000
<PP&E> 2,722,000
<DEPRECIATION> (967,000)
<TOTAL-ASSETS> 9,708,000
<CURRENT-LIABILITIES> 2,881,000
<BONDS> 0
0
0
<COMMON> 240,000
<OTHER-SE> 24,279,000
<TOTAL-LIABILITY-AND-EQUITY> 9,708,000
<SALES> 4,491,000
<TOTAL-REVENUES> 4,491,000
<CGS> 2,772,000
<TOTAL-COSTS> 1,639,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66,000
<INCOME-PRETAX> 14,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
