<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 March 31, 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 May 9, 1997
Common stock, $.01 par value..... 24,047,449
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ALPHA PRO TECH, LTD.
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1 Consolidated Financial Statements (Unaudited) Page No.
a) Balance Sheet -
March 31, 1997 (Unaudited) and December 31, 1996 1
b) Statement of Operations
for the unaudited three months
ended March 31, 1997 and March 31, 1996 2
c) Statement of Shareholder's Equity
for the unaudited three months ended March 31, 1997 3
d) Statement of Cash Flows
for the unaudited three months ended March 31, 1996
and March 31, 1997 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
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ALPHA PRO TECH, LTD.
CONSOLIDATED BALANCE SHEET
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<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 31, DECEMBER 31,
1997 1996
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 1,613,000 $ 275,000
Marketable Securities-restricted 22,000 39,000
Accounts receivable, net of allowance for
doubtful accounts of $122,000 2,234,000 2,170,000
Income taxes receivable 5,000 5,000
Inventories 3,136,000 2,942,000
Prepaid expenses and other assets 254,000 183,000
------------ ----------
7,264,000 5,614,000
Property and equipment, net of accumulated
depreciation and amortization of $899,000
and $836,000 1,729,000 1,615,000
Intangible assets, net of accumulated
amortization of $62,000 and $55,000 221,000 219,000
Other 33,000 33,000
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$ 9,247,000 $7,481,000
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------------ ----------
LIABILITIES & SHAREHOLDER'S EQUITY
Current Liabilities:
Accounts payable $ 1,091,000 $ 1,600,000
Accrued liabilities 509,000 647,000
Due to related parties 19,000 19,000
Notes payable, current portion 7,000 31,000
Loans payable, current portion 1,129,000 1,081,000
Capital leases, current portion 58,000 36,000
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2,813,000 3,414,000
Loans payable, less current portion 99,000 112,000
Capital leases, less current portion 171,000 105,000
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3,083,000 3,631,000
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SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 50,000,000
shares authorized, 23,730,116 and
20,755,463 issued and outstanding at
March 31, 1997 and December 31, 1996 237,000 207,000
Additional paid-in capital 23,874,000 21,656,000
Accumulated deficit (17,947,000) (18,013,000)
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6,164,000 3,850,000
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$ 9,247,000 $7,481,000
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</TABLE>
1
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ALPHA PRO TECH, LTD.
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
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FOR THE THREE MONTHS ENDED MARCH 31,
1997 1996
Sales $ 3,985,000 $ 3,586,000
Cost of goods sold, excluding
depreciation 2,445,000 2,299,000
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1,540,000 1,287,000
Expenses
Selling, general and administrative 1,323,000 1,115,000
Depreciation and amortization 70,000 58,000
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Income from operations 147,000 114,000
Interest 81,000 81,000
Other - (13,000)
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81,000 68,000
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Income before provision for income taxes 66,000 46,000
Provision for income taxes 0 0
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Net Income $ 66,000 $ 46,000
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----------- -----------
Net Income per share $ 0.00 $ 0.00
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Weighted average number of shares
outstanding 22,216,718 19,963,963
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2
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ALPHA PRO TECH, LTD.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
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<TABLE>
COMMON ADDITIONAL ACCUMULATED
SHARES STOCK PAID-IN CAPITAL DEFICIT TOTAL
---------- -------- --------------- ------------ ----------
<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 2,974,653 30,000 2,161,000 2,191,000
Options/warrants
issued for services 57,000 57,000
Net Income 66,000 66,000
---------- -------- ----------- ------------ ----------
Balance at
March 31, 1997 23,730,116 $237,000 $23,874,000 ($17,947,000) $6,164,000
---------- -------- ----------- ------------ ----------
---------- -------- ----------- ------------ ----------
</TABLE>
3
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ALPHA PRO TECH, LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
- ---------------------------------------------------------------------
FOR THE THREE MONTHS ENDED
MARCH 31,
------------------------
1997 1996
---------- --------
OPERATING ACTIVITIES:
Net Income (loss) $ 66,000 $ 46,000
Adjustments to reconcile net income to cash
used for operating activities:
Depreciation and amortization 70,000 58,000
Changes in assets and liabilities:
Accounts receivable (64,000) (247,000)
Marketable securities 17,000 (3,000)
Inventories (194,000) (135,000)
Prepaid and other assets(1) (14,000) 8,000
Accounts payable and accrued liabilities (647,000) 214,000
---------- --------
Net cash provided by (used for) operating
activities: (766,000) (59,000)
---------- --------
INVESTING ACTIVITIES:
Purchase of property and equipment (177,000) (96,000)
Purchase of intangible assets (9,000) (17,000)
---------- --------
Net cash used for investing activities (186,000) (113,000)
---------- --------
FINANCING ACTIVITIES:
Issuance of common stock(1) 2,191,000 153,000
Net proceeds (payments) on loans payable 35,000 (3,000)
Net proceeds (payments) on notes payable (24,000) 73,000
Net proceeds (payments) on capital leases 88,000 (6,000)
---------- --------
Net Cash provided by financing activities 2,290,000 217,000
---------- --------
Increase (decrease) in cash during the period 1,338,000 45,000
Cash, beginning of period $ 275,000 $344,000
---------- --------
Cash, end of period $1,613,000 $389,000
---------- --------
---------- --------
- --------------
(1) Non-cash item:
Options and warrants were issued to consultants for $57,000. This is
reflected on the Cash Flow Statement as a deduction in common stock and
prepaid expenses.
4
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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, 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, 1995 in
accounting principles and practices utilized in the presentation of these
financial statements.
3. INVENTORIES MARCH 31, DECEMBER 31,
1997 1996
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Raw Materials $1,666,000 $1,511,000
Work in process 109,000 76,000
Finished goods 1,361,000 1,355,000
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$3,136,000 $2,942,000
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---------- ----------
4. ACCRUED LIABILITIES MARCH 31, DECEMBER 31,
1997 1996
---------- ----------
Professional fees $ 226,000 $ 286,000
Payroll and payroll taxes 187,000 203,000
Other 96,000 158,000
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$ 509,000 $ 647,000
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5
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ALPHA PRO TECH, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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5. NOTES PAYABLE MARCH 31, DECEMBER 31,
1997 1996
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Note payable due in monthly installments
of $1,500, interest at 8.0%, maturing
July 31, 1997 $ 5,000 $ 9,000
Notes payable due in monthly installments
balance due in April, 1997 2,000
Notes payable to related parties, interest
at 15% payable quarterly, due on demand 14,000
Notes payable to related parties, interest
at 20% payable quarterly, due on demand 8,000
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$ 7,000 $31,000
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Less: Current portion $ 7,000 $31,000
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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 three months ended March 31, 1997, as taxable income has
been eliminated as a result of the utilization of net operating loss carry
forwards.
6
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS FROM OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997, COMPARED TO MARCH 31, 1996
Alpha Pro Tech, Ltd. ("Alpha" or the "Company") reported a net income for the
three months ended March 31, 1997 of $66,000 as compared to a net income of
$46,000 for the three months ended March 31, 1996, representing an improvement
of $20,000 or 43.5%.
SALES Consolidated net sales for the three months ended March 31, 1997
increased $3,985,000 from $3,586,000 in 1996, representing an increase of
$399,000 or 11.1%. Net sales for the Apparel Division for the first quarter
ended March 31, 1997 were $2,280,000 as compared to $1,566,0000 for the same
period of 1996. The Apparel Division sales increase of $714,000 or 45.6% was
primarily due to increased sales to its largest customer. Mask, and eye shield
sales decreased by 21.9%, to $1,078,000 for the first quarter 1997 from
$1,381,000 in the first quarter 1996. Mask, and eye shield sales to dentists
were virtually unchanged while the decrease can be attributed to lower medical
sales. Sales from the Company's Unreal Lambskin-Registered Trademark- and other
related products which includes a line of pet beds, remained relatively constant
at $627,000 in the first quarter 1997 compared to $639,000 in the same period
1996. The Company's Unreal Lambskin-Registered Trademark- line of products
is a mature line which is no longer an area for significant growth although
sales of pet products is expected to improve.
COST OF GOODS SOLD Cost of goods sold increased to $2,445,000 for the three
months ended March 31, 1997 from $2,299,000 for the same period in 1996. As a
percentage of net sales, cost of goods sold decreased to 61.4% from 64.1%. Gross
profit margin increased to 38.6% for the three months ended March 31, 1997 from
35.9% for the three months ended March 31, 1996.
7
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative expenses increased by $208,000 to $1,323,000 for the three months
ended March 31, 1997 from $1,115,000 for the three months ended March 31, 1996.
As a percentage of net sales, selling, general and administrative expenses
increased to 33.2% in the first quarter of 1997 from 31.1% in the same period in
1996. The increase in selling, general and administrative expenses is primarily
in the areas of payroll related costs of $186,000; and travel expenses of
$30,000 offset by a decrease in commission expenses of $17,000. Of the $186,000
increase in payroll related costs, $166,000 is due to the Apparel Division which
had an increase in sales of 45.6%. As a percentage of net Apparel Division
sales, selling, general and administrative expenses for the Apparel division
increased to 22% for the first quarter of 1997 as compared to 20% in the
first quarter of 1996.
DEPRECIATION & AMORTIZATION Depreciation and amortization expense increased by
$12,000, to $70,000 for the three months ended March 31, 1997 from $58,000 for
the same period in 1996. This increase is primarily attributable to an increase
in the purchase of equipment through capital leases.
NET INTEREST Interest expense of $81,000 remained the same for the three months
ended March 31, 1997 and 1996. Borrowings were relatively constant for both of
these periods.
INCOME FROM OPERATIONS Income from operations increased by $33,000 to $147,000
for the three months ended March 31, 1997 from $114,000 for the three months
ended March 31, 1996. The increased income from operations is primarily due
to the increase in gross profit of $253,000 offset by an increase in selling,
general and administrative expenses of $208,000 and an increase in
depreciation and amortization of $12,000.
NET INCOME Net Income for the three months ended March 31, 1997 was $66,000
compared to a net income of $46,000 for the three months ended March 31, 1996,
an increase of $20,000. The net income increase of $20,000 is comprised of an
increase in income from operations of $33,000 offset by other income in 1996 of
$13,000.
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 1995.
8
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LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1997, the Company had cash of $1,613,000 and working capital of
$4,451,000. 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 March 31, 1997, the
maximum line of credit available was $1,455,000 for accounts receivable,
inventory and equipment.
Net cash used for operations was $766,000 for the three months ended March 31,
1997 and $59,000 for the same period of 1996. The Company's use of cash from
operations for the three months ended March 31, 1997 have been due primarily to
increases in accounts receivable, inventories, prepaid and other assets and a
decrease in accounts payable and accrued liabilities.
The Company's investing activities have consisted primarily of expenditures for
fixed assets and intangible assets which totalled $186,000 for the three months
ended March 31, 1997 and $113,000 for the same period of 1996.
The Company has no significant capital commitments but currently anticipates
that additions to property and equipment for 1997 could be approximately
$600,000 depending on the Company's success in the food industry.
During the three months ended March 31, 1997, the Company's financing
activities consisting primarily of warrants and options, and increases in the
asset based loan of $35,000 and capital leases of $88,000 offset by
repayments of borrowings totaling $24,000 which resulted in the net cash
provided by financing activities of $2,290,000.
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
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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:
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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 MARCH 31, 1997 AND DECEMBER 31, 1996 AND THE
STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31,
1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,613,000
<SECURITIES> 22,000
<RECEIVABLES> 2,356,000
<ALLOWANCES> 122,000
<INVENTORY> 3,136,000
<CURRENT-ASSETS> 7,264,000
<PP&E> 2,628,000
<DEPRECIATION> 899,000
<TOTAL-ASSETS> 9,247,000
<CURRENT-LIABILITIES> 2,813,000
<BONDS> 0
0
0
<COMMON> 237,000
<OTHER-SE> 23,874,000
<TOTAL-LIABILITY-AND-EQUITY> 9,247,000
<SALES> 3,985,000
<TOTAL-REVENUES> 3,985,000
<CGS> 2,445,000
<TOTAL-COSTS> 1,393,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81,000
<INCOME-PRETAX> 66,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 66,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 66,000
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
