-----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, ToZAi0e3wvtUJkbUy1XXj57Zd2mykOzMFcyxMnEk2W6c9EA1gxqOsP/HbBqKtlHp jNdx/Fdm8g7lhsFLimm9GA== 0001047469-98-021361.txt : 19980521 0001047469-98-021361.hdr.sgml : 19980521 ACCESSION NUMBER: 0001047469-98-021361 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980430 FILED AS OF DATE: 19980520 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: SEC FILE NUMBER: 000-05622 FILM NUMBER: 98628971 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 10QSB \ 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, 1998 COMMISSION FILE NUMBER 0-5622 - ------------------------------------------------------------------------------- PUROFLOW INCORPORATED - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 13-1947195 - ------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. Employer identification incorporation 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, 1998 1998 ---------- ---------- ASSETS CURRENT ASSETS Cash $ 355,472 $ 361,523 Accounts receivable Net of allowance for doubtful accounts of $26,000 at April 30, 1998 and $23,523 at January 31, 1997 1,655,001 1,602,267 Advances to Officers & Employees 4,182 - Inventories 1,715,290 1,566,865 Note receivable, current portion - Prepaid expenses and other current assets 51,894 76,331 ---------- ---------- TOTAL CURRENT ASSETS 3,781,839 3,606,986 ---------- ---------- PROPERTY & EQUIPMENT Leasehold improvements 29,218 26,980 Machinery and equipment 3,511,989 3,491,625 Automobile 1,679 1,679 Tooling and dies 306,124 303,399 Construction in progress 46,155 44,977 ---------- ---------- 3,895,165 3,868,660 Less accumulated depreciation and amortization 2,823,821 2,750,092 ---------- ---------- NET PROPERTY AND EQUIPMENT 1,071,344 1,118,568 ---------- ---------- ---------- ---------- DEFERRED TAXES 355,000 304,000 OTHER ASSETS 16,750 16,750 ---------- ---------- TOTAL ASSETS $5,224,933 $5,046,304 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current portion of long term debt $ 228,034 $ 168,034 Accounts payable 410,834 467,131 Accrued expenses 243,455 430,112 ---------- ---------- TOTAL CURRENT LIABILITIES 882,323 1,065,277 ---------- ---------- Long-Term Debt 176,000 ---------- ---------- TOTAL LIABILITIES 176,000 - ---------- ---------- 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, 1998 shares at January 31, 1997 430,579 430,579 Additional paid-in capital 4,947,727 4,947,727 Accumulated deficit (1,211,696) (1,397,279) ---------- ---------- TOTAL STOCKHOLDERS' EQUITY 4,166,610 3,981,027 ---------- ---------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,224,933 $5,046,304 ---------- ---------- ---------- ----------
See accompanying notes to the consolidated financial statements. 1 PUROFLOW INCORPORATED CONSOLIDATED STATEMENT OF OPERATION (UNAUDITED)
THREE MONTHS ENDED APRIL 30, 1998 1997 Net revenue $2,096,284 $2,349,632 Cost of goods sold 1,493,582 1,737,016 ---------- ---------- Gross profit 602,702 612,616 Selling, general and administrative expense 470,457 412,769 ---------- ---------- Operating income 132,245 199,847 Interest expense 1,074 - Non recurring expense - - Other income 3,411 2,349 ---------- ---------- Income before taxes 134,582 202,196 Provision for income taxes (51,000) (51,000) ---------- ---------- NET INCOME $ 185,582 $ 253,196 ---------- ---------- ---------- ---------- NET INCOME PER COMMON SHARE Basic earnings per share $ 0.026 $ 0.04 ---------- ---------- ---------- ---------- Diluted earnings per share $ 0.026 $ 0.03 ---------- ---------- ---------- ----------
See accompanying notes to the consolidated financial statements. 2 PUROFLOW INCORPORATED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30, 1998 1997 - ------------------------------------------------------------------------------------------ CASH AT BEGINNING OF PERIOD $ 361,523 $ 164,415 CASH FLOWS FROM OPERATING ACTIVITIES Net income 185,583 253,196 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 73,729 65,007 Provision for losses on accounts receivable 2,477 - Inventory valuation allowance - (25,300) Changes in operating assets and liabilities: Advances to Officers & Employees (3,682) Accounts receivable (55,711) (172,538) Inventories (148,425) (21,703) Prepaid expenses and other current assets 24,436 (17,479) Deferred taxes (51,000) (51,000) Accounts payable (63,411) 97,738 Accrued expenses (179,543) (30,388) --------- --------- Net cash provided by operating activities (215,547) 97,533 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (26,504) (93,905) Payments received on notes receivable - 11,965 --------- --------- Net cash provided by investing activities (26,504) (81,940) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Bank overdraft - - Net repayment under line of credit - - Principal new long-term debt 236,000 - --------- --------- Net cash used in financing activities 236,000 - --------- --------- NET INCREASE (DECREASE) IN CASH (6,051) 15,593 --------- --------- CASH AT END OF PERIOD $355,472 $180,008 --------- --------- --------- ---------
See accompanying notes to the consolidated financial statements. 3 PUROFLOW INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
COMMON ADDITIONAL FOR THE THREE MONTHS ENDED STOCK PAID-IN RETAINED APRIL 30, 1998 PAR VALUE CAPITAL EARNINGS TOTAL - ------------------------------------------------------------------------------------- Balance at January 31, 1998 $430,579 $4,947,727 $(1,397,279) $3,981,027 Net income - - 185,583 185,583 -------- ---------- ----------- ---------- Balance at April 30, 1998 $430,579 $4,947,727 $(1,211,696) $4,166,610 -------- ---------- ----------- ---------- -------- ---------- ----------- ----------
See accompanying notes to the consolidated financial statements. 4 PUROFLOW INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. (UNAUDITED) APRIL 30, 1998, JANUARY 31, 1998, AND APRIL 30, 1997 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-KSB for the fiscal year ended January 31, 1998 (The "Form 10-KSB") 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, 1998 1998 ---------- ----------- Raw materials and purchased parts $ 845,147 $ 766,222 Work in process 536,749 472,656 Finished goods and assemblies 333,394 327,987 ---------- ----------- Totals $1,715,290 $1,566,865 ---------- ----------- ---------- -----------
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 were 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, 1998 Basic earnings per share $185,582 7,108,821 $.03 ----- ----- EFFECT OF DILUTED SECURITIES Stock options 92,253 -------- --------- Diluted earnings per share $185,582 7,200,874 $.026 -------- --------- ----- -------- --------- ----- 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 $.026 -------- --------- ----- -------- --------- -----
Basic earnings per share are 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 - INCOME TAXES Income tax benefits recognized represents the benefit of income tax loss carryforwards. LIQUIDITY AND CAPITAL RESOURCES At April 30, 1998, the Company had cash available of $355,472, compared to $361,523 on January 31, 1998. It had a current ratio of 5.29 to 1 at April 30, 1998, compared to 4.2 to 1 on January 31, 1998. 6 OPERATING ACTIVITIES Cash Flow from Operations for the three months ended April 30,1998 was reduced by $215,547 compared to an increase of $97,533 for the three months ended April 30,1997. INVESTING ACTIVITIES The Company invested $26,504 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. The Company obtained a loan of $236,000 to pay the non-recurring judgment against it as well as purchase a necessary blueprint copier. RESULTS OF OPERATIONS FOR QUARTER ENDED APRIL 30, 1998 REVENUES Sales were $2,096,254 for the three months ended April 30,1998 compared to $2,349,632 in 1997. This represents a decrease of $253,334 or 10.78% due primarily to a reduction of 23.4% in the sale of airbags, a result of the slow ramp-up in the new model non-azide airbag for the driver and passenger side impact filters. GROSS PROFIT Gross profit as a percentage of sales was 29% in April 1998, compared to 26% in April 1997, representing an increase of 3% representing higher margins on precision filters on the PMA Program as well as increased manufacturing efficiencies. OPERATING INCOME Operating income was $132,245 in April 1998 compared to $199,847 in April 1997, a decrease of $67,602 due to the lower margins on airbag filters, the impact of the cost of new product development as well as increased marketing costs. INTEREST CHARGES Interest on the bank loan was $1,074 as of April 30, 1998. INCOME TAXES A tax benefit of $51,000 was recognized as a result of income tax loss carryforwards. 7 PART II - OTHER INFORMATION ITEM 1. PENDING LEGAL PROCEEDINGS 1) Memtec America Corporation obtained a confession of judgment from the Circuit Court of Baltimore County, Maryland, on December 19,1995 against the Company for approximately $220,000, based upon the execution of a promissory note by a former chief executive of the Company, which note was executed in exchange for goods and services delivered by the Plaintiff. The Company disputes that any amounts are due under the note as a result of Company's right of set-off. The judgment was obtained without due notice to the Company. The Receiver retained counsel in Baltimore, Maryland, for the purpose of setting aside the confession of judgment and to assert a number of counter-claims against Memtec America Corporation. The confession of judgment was vacated by order of the Circuit Court of Baltimore County on June 24,1996. The Company filed an amended counter-claim and third party complaint on August 12, 1996 against Memtec America Corporation and four employees of the Company now employed by Memtec America Corporation. The counter-claim against the four former employees was dismissed for jurisdictional purposes. The Company now is in the process of securing positive depositions from key witnesses to support the amended counter-claim, and management believes the Company will recover a reasonable award and legal fees. Although the Company cannot determine the potential liability which may result from the foregoing, it believes it will prevail in its defenses, and does not expect that such litigation will have a material adverse effect on its financial position or results of operation. At January 31,1998, an accrual in the amount of approximately $256,000 had been recorded for judgments against the Company for lawsuits that have concluded. The Company is not party, nor are its properties subject to, any material pending proceedings other than ordinary routine litigation incidental to the Company's business and the matters described above. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULT UPON SENIOR SECURITIES None. 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. 8 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 20, 1998 By: /s/ Michael H. Figoff --------------------------------------- Michael H. Figoff President/Chief Executive Officer 9 EX-27 2 EXHIBIT 27
5 3-MOS JAN-31-1998 FEB-01-1998 APR-30-1998 355,472 0 1,681,001 26,000 1,715,290 3,781,839 3,895,165 2,823,821 5,224,933 882,323 0 0 0 5,378,306 (1,211,696) 5,224,933 2,096,284 2,096,284 1,493,582 1,964,039 (3,411) 2,477 1,074 134,582 (51,000) 185,582 0 0 0 185,582 .026 .026
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