-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KjjiWrO0VkMS53cR8LTbMJXaM4fL58FL4NLHSSJ12FlmRqw5D3FXU/azzioyFE0W 4koakE3A8YKorBrz2+sRtA== 0000912057-97-019080.txt : 19970602 0000912057-97-019080.hdr.sgml : 19970602 ACCESSION NUMBER: 0000912057-97-019080 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970430 FILED AS OF DATE: 19970530 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PUROFLOW INC CENTRAL INDEX KEY: 0000100591 STANDARD INDUSTRIAL CLASSIFICATION: GENERAL INDUSTRIAL MACHINERY & EQUIPMENT, NEC [3569] IRS NUMBER: 131947195 STATE OF INCORPORATION: DE FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-05622 FILM NUMBER: 97616622 BUSINESS ADDRESS: STREET 1: 16559 SATICOY STREET CITY: VAN NUYS STATE: CA ZIP: 91406 BUSINESS PHONE: 8187561388 MAIL ADDRESS: STREET 1: 16559 SATICOY STREET CITY: VAN NUYS STATE: CA ZIP: 91406 FORMER COMPANY: FORMER CONFORMED NAME: ULTRA DYNAMICS CORP DATE OF NAME CHANGE: 19830522 10QSB 1 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED APRIL 30, 1997 COMMISSION FILE NUMBER 0-5622 - -------------------------------------------------------------------------------- PUROFLOW INCORPORATED - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter)
DELAWARE 13-1947195 - --------------------------------------------------------------------------------------- (State or other jurisdiction of incorporation (I.R.S. Employer identification No.) or organization)
16559 SATICOY STREET, VAN NUYS, CALIFORNIA 91406-1739 - -------------------------------------------------------------------------------- (Address of executive offices) (ZIP Code) Registrant's telephone number, including area code: (818) 756-1388 Securities registered pursuant to Section 12(g) of the Act: Common Stock Shares outstanding COMMON STOCK, $.01 PAR VALUE 7,108,821 - -------------------------------------------------------------------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 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 [ ] PUROFLOW INCORPORATED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
APRIL 30, JANUARY 31, 1997 1997 - ------------------------------------------------------------------------------------------ ASSETS CURRENT ASSETS Cash $ 180,008 $ 164,415 Accounts receivable Net of allowance for doubtful accounts of $49,504 at April 30, 1997 and January 31, 1997 1,634,708 1,462,170 Inventories 1,445,564 1,398,561 Note receivable, current portion 28,924 40,889 Prepaid expenses and other current assets 75,074 57,595 - ------------------------------------------------------------------------------------------ TOTAL CURRENT ASSETS 3,364,278 3,123,630 - ------------------------------------------------------------------------------------------ PROPERTY & EQUIPMENT Leasehold improvements 24,551 11,660 Machinery and equipment 3,056,181 2,988,092 Automobile 1,679 1,679 Tooling and dies 275,405 262,480 Construction in progress 143,542 143,542 - ------------------------------------------------------------------------------------------ 3,501,358 3,407,453 Less accumulated depreciation and amortization 2,517,895 2,452,888 - ------------------------------------------------------------------------------------------ NET PROPERTY AND EQUIPMENT 983,463 954,565 - ------------------------------------------------------------------------------------------ DEFERRED TAXES 51,000 OTHER ASSETS 16,750 16,750 - ------------------------------------------------------------------------------------------ TOTAL ASSETS $ 4,415,491 $ 4,094,945 - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long term debt $ 207,087 $ 207,087 Accounts payable 310,135 212,397 Accrued expenses 156,007 186,395 - ------------------------------------------------------------------------------------------ TOTAL CURRENT LIABILITIES 673,229 605,879 - ------------------------------------------------------------------------------------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Preferred stock, par value $.10 per share authorized - 500,000 shares issued none Common stock, par value $.01 per share authorized - 12,000,000 shares issued and outstanding - 7,108,821 shares at April 30, 1997 shares at January 31, 1997 430,579 430,579 Additional paid-in capital 4,947,727 4,947,727 Accumulated deficit (1,636,044) (1,889,240) - ------------------------------------------------------------------------------------------ TOTAL STOCKHOLDERS' EQUITY 3,742,262 3,489,066 - ------------------------------------------------------------------------------------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,415,491 $ 4,094,945 - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements. 1 PUROFLOW INCORPORATED CONSOLIDATED STATEMENTS OF OPERATION (UNAUDITED)
THREE MONTHS ENDED APRIL 30, 1997 1996 - ----------------------------------------------------------------------------------------------- Net revenue $2,349,632 $2,166,708 Cost of goods sold 1,737,016 1,445,221 - ----------------------------------------------------------------------------------------------- Gross profit 612,616 721,487 Selling, general and administrative expense 412,769 400,700 - ----------------------------------------------------------------------------------------------- Operating income 199,847 320,787 Interest expense - (36,102) Non recurring expense - (71,223) Other income 2,349 - - ----------------------------------------------------------------------------------------------- Income before taxes 202,196 213,462 Provision for income taxes (51,000) - - ----------------------------------------------------------------------------------------------- NET INCOME $ 253,196 $ 213,462 - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- NET INCOME PER COMMON SHARE - ----------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------- ---------- ----------- ---------- ----------- Basic earnings per share $ 0.04 $ 0.05 ---------- ----------- ---------- ----------- Diluted earnings per share $ 0.03 $ 0.04 ---------- ----------- ---------- -----------
See accompanying notes to the consolidated financial statements. 2 PUROFLOW INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30, 1997 1996 - ------------------------------------------------------------------------------------------ CASH AT BEGINNING OF PERIOD $ 164,415 $ - CASH FLOWS FROM OPERATING ACTIVITIES Net income 253,196 213,462 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 65,007 85,255 Provision for losses on accounts receivable - 10,000 Inventory valuation allowance (25,300) Changes in operating assets and liabilities: Accounts receivable (172,538) 221,552 Inventories (21,703) (143,580) Prepaid expenses and other current assets (17,479) (135,311) Deferred taxes (51,000) Accounts payable 97,738 98,233 Accrued expenses (30,388) (15,254) - ------------------------------------------------------------------------------------------ Net cash provided by operating activities 97,533 334,357 - ------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (93,905) (5,809) Payments received on notes receivable 11,965 28,806 - ------------------------------------------------------------------------------------------ Net cash provided by investing activities (81,940) 22,997 - ------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES Bank overdraft - (59,363) Net repayment under line of credit - (235,857) Principal payments on long-term debt - (49,622) - ------------------------------------------------------------------------------------------ Net cash used in financing activities - (344,842) - ------------------------------------------------------------------------------------------ NET INCREASE IN CASH 15,593 12,512 - ------------------------------------------------------------------------------------------ CASH AT END OF PERIOD $ 180,008 $ 12,512 - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements. 3 PUROFLOW INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
COMMON ADDITIONAL RETAINED STOCK PAID-IN EARNINGS FOR THE THREE MONTHS ENDED APRIL 30, 1997 PAR VALUE CAPITAL TOTAL - ------------------------------------------------------------------------------------------------------------------------ Balance at January 31, 1997 $ 430,579 $ 4,947,727 $ (1,889,240) $ 3,489,066 Net income - - 253,196 253,196 - ------------------------------------------------------------------------------------------------------------------------ Balance at April 30, 1997 $ 430,579 $ 4,947,727 $ (1,636,044) $ 3,742,262 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------
See independent auditors' report and notes to financial statements. 4 PUROFLOW INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. (UNAUDITED) APRIL 30, 1997, JANUARY 31, 1997, AND APRIL 30, 1996 NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION The consolidated balance sheet at the end of the preceding fiscal year has been derived from the audited consolidated balance sheet contained in the Company's annual report on Form 10-K for the fiscal year ended January 31, 1997 (The "Form 10-K") and is presented for comparative purposes. All other financial statements are unaudited. In the opinion of management, all adjustments which include only normal recurring adjustments necessary to present fairly the financial position, results of operations and changes in financial positions for all periods presented have been made. The results of operations for interim periods are not necessarily indicative of the operating results for the full year. Footnote disclosures normally included in financial statements prepared in accordance with the generally accepted accounting principles have been omitted in accordance with the published rules and regulations of the Securities and Exchange Commission. NOTE 2 - INVENTORIES Inventories consist of the following: APRIL 30, JANUARY 31, 1997 1997 ----------------------------- Raw materials and purchased parts 774,176 729,740 Work in process 296,470 247,868 Finished goods and assemblies 374,918 420,953 ----------------------------- Totals $ 1,445,564 $ 1,398,561 ----------------------------- ----------------------------- NOTE 3 - STOCKHOLDERS EQUITY On March 26, 1996, the Company entered into an agreement with an investment banker to raise equity through a private placement offering. On July 24, 1996, such offering was completed. The Company sold 2,530,000 shares of common stock and received $1,742,900 of net proceeds, including $1,300 of interest. The purchase price of the common stock was $.80 per share. From the gross proceeds, the underwriter received $202,400 as a fee. The underwriter also received a 24 month option to purchase 177,100 common shares, at a price of $.80 per share. Proceeds received by the Company are used to retire bank debt and other pre-Receiver debt. The Company registered the securities on March 7, 1997. 5 NOTE 4 - NET INCOME PER SHARE Reconciliation of basic and diluted earnings per share:
----------------------------------------- INCOME SHARES PER-SHARE AMOUNT ----------------------------------------- 3 MONTHS ENDED APRIL 30, 1997 Basic earnings per share $ 253,196 7,108,821 $ .04 ------- ------- Effect of Diluted Securities - ---------------------------- Stock options 151,628 ---------- ---------- Diluted earnings per share $ 253,196 7,260,449 $ .03 ---------- ---------- ------- ---------- ---------- ------- 3 MONTHS ENDED APRIL 30, 1996 Basic earnings per share $ 213,462 4,578,521 $ .05 ------- ------- Effect of Diluted Securities - ---------------------------- Stock Options 245,878 ----------- ---------- Diluted earnings per share $ 213,462 4,824,399 $ .04 ---------- --------- ------- ---------- --------- -------
Basic earnings per share is based on the weighted average number of shares outstanding. Diluted earnings per share include the effect of common stock equivalents when dilutive. NOTE 5 - CESSATION OF RECEIVERSHIP On August 13, 1996, all bank debt owed by the Company was repaid. On August 22, 1996, the Receivership Estate was terminated by order of the Superior Court of the State of California and control of the Company was returned to the Board of Directors and Management. Additionally, the Company entered a new banking relationship. The Company obtained a $750,000 revolving credit line. This credit line bears interest at the rate of prime plus 1.5%, per annum, and is secured, primarily, by the Company's accounts receivable and inventories. The Company also obtained a $300,000, non-revolving, equipment acquisition credit line, which bears interest at the rate of prime plus 1.75%, per annum, and is secured by all of the Company's assets. Both of these loans are cross-collateralized. The terms of these loan agreements contain certain restrictive covenants, including maintenance of minimum working capital, net worth, and ratios of current assets to current liabilities and debt to net worth. NOTE 6 - NONRECURRING EXPENSES Nonrecurring expenses are the monthly administrative fees charged by the Receiver during the receivership period. The Receivership Estate began on May 1, 1995 and ended on August 22, 1996. NOTE 7 - INCOME TAXES Income tax benefits recognized represents the benefit of income tax loss carryforwards. 6 LIQUIDITY AND CAPITAL RESOURCES At April 30, 1997, the Company had cash available of $180,008, compared to $164,415 on January 31, 1997, was free of bank debt and it had a current ratio of 5.00 to 1 at April 30, 1997, compared to 5.16 to 1 on January 31, 1997. OPERATING ACTIVITIES Operations provided $97,533 of cash flow in three months ended April 30, 1997 versus $334,357 in the three months ended April 30, 1996. The lower cash flow from operations results from the increase in accounts receivable reflecting higher sales in the current quarter than the previous year's quarter. INVESTING ACTIVITIES The Company invested $93,905 in new capital equipment in the current quarter predominantly for equipment for a new type of airbag filter. FINANCING ACTIVITIES The Company has unused revolving credit line of $750,000 which bears interest at the rate of prime plus 1.5% per annum, secured by the Company's accounts receivable and inventory. The Company also has a non-revolving equipment acquisition loan of $300,000 which bears interest at prime rate plus 1.75% per annum. The Company is in compliance with all covenants under its loan agreement with the Bank. RESULTS OF OPERATIONS FOR QUARTER ENDED APRIL 30, 1997 REVENUES Sales were $2,349,632 in 1997, compared to $2,166,708 in 1996, representing an increase of $182,924 or 8.7%, due primarily to increased shipments of high performance filters. GROSS PROFIT Gross profit as a percentage of sales was 26% in April 1997, compared to 33% in April 1996, representing a decrease of 7% due to increased cost of materials and labor in producing airbag filters and charges of increased R & D on a new type of airbag filters. OPERATING INCOME Operating income was $199,847 in April 1997 compared to $320,787 in April 1996, a decrease of $120,727 due to the lower margins on airbag filters and the impact of the cost of new product development. INTEREST CHARGES Interest on bank loans were $36,102 in 1996 and completely eliminated in 1997. 7 INCOME TAXES A tax benefit of $51,000 was recognized as a result of income tax loss carryforwards. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 1. Reliable Metallurgical Processes Inc. commenced an action against Puroflow Corporation and Michigan Dynamics Inc. in September, 1995 in Los Angeles County Superior Court for breach of contract, open account, and anticipatory breach. This action is being vigorously opposed and the Registrant has filed a cross-complaint alleging for failure to properly perform the alleged Contract, ultra vires acts in consummation of original Agreement, and breach of fiduciary obligation by a former Director and Officer of Registrant who were also Officers and Directors of the Plaintiff. 2. Jerome Pearlman d.b.a. J&F Enterprises, a former Director of the Registrant, commenced an action in the Los Angeles County Supreme Court, for breach of an alleged promissory note. The Registrant will vigorously defend by filing a cross-complaint against Plaintiff for breach of fiduciary duty and constructive trust, seeking a return of all funds paid to Plaintiff plus interest. 3. J&F Management, Inc., controlled by Jerome Pearlman, a former Director of the Registrant, commenced an action in Municipal Court of Santa Monica Judicial District against the Registrant, and the Court appointed Receiver for possession and conversion of personal property. Defendants have vigorously defended the action by filing a motion to disqualify Plaintiff's Counsel, a demurrer to the complaint, and a cross-complaint seeking recision of the contract and restitution to Defendant of all funds paid to the Plaintiff pursuant to contract for a breach of Pearlman's fiduciary duties to the Registrant. 4. The confession of judgment obtained by Memtec America Corporation against the Registrant on December 19, 1995, previously reported on Form 10-K for the fiscal year ended January 31, 1996, was vacated by order of the Circuit Court for Baltimore County on June 24, 1996. The Registrant filed an amended counter-claim and third party complaint on August 12, 1996 against Memtec and four former employees of the Registrant now employed by Memtec. The counter-claim contains many allegations against Memtec and the four former employees and seeks substantial compensatory and punitive damages against Memtec and against Joseph B. Jasso and Michael V. Perry, former Puroflow President & CEO and Plant Manager, respectively. The Company is not a party to any other material pending suits of legal actions, and is not aware of any material claims that are threatened. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULT UPON SENIOR SECURITIES None. 8 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None. SIGNATURE Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed and on its behalf by the undersigned thereto, duly authorized. PUROFLOW INCORPORATED May 29, 1997 By: /s/ Michael H. Figoff ----------------------------------- Michael H. Figoff President/Chief Executive Officer 9 EX-27 2 EXHIBIT 27 = FDS
5 3-MOS JAN-31-1997 FEB-01-1997 APR-30-1997 180,008 0 1,713,136 49,504 1,445,564 3,364,278 3,501,358 2,517,895 4,415,491 673,229 0 0 0 5,378,306 (1,636,044) 4,415,491 2,349,632 2,349,632 1,737,016 2,149,785 (2,349) 0 0 202,196 (51,000) 253,196 0 0 0 253,196 .04 .03
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