-----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, TEGYBCdCrEgs3JO2ZE5jX5kOAhBXUjtPJ3dnvAW9Y1FS6msjw5B4q9arYi3Q7+gU aAWQSWh+UhSwb8cTciV1iw== 0001047469-99-023889.txt : 19990615 0001047469-99-023889.hdr.sgml : 19990615 ACCESSION NUMBER: 0001047469-99-023889 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990430 FILED AS OF DATE: 19990611 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: 99644840 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, 1999 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 No.) 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 8,100,321 - ------------------------------------------------------------------------------- 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, 1999 1999 ------------------ ------------------- ASSETS CURRENT ASSETS Cash $ 67,221 $ 828,809 Accounts receivable Net of allowance for doubtful accounts of $20,000 at April 30, 1999 and $22,000 at January 31, 1999 1,560,007 1,373,254 Accounts Receivable, other - 375,763 Advances to Officers & Employees - 2,907 Deferred Tax benefit, current 45,347 45,347 Inventories 1,762,729 1,562,939 Note receivable, current portion - Prepaid expenses and other current assets 62,093 91,677 ------------------ ------------------- TOTAL CURRENT ASSETS 3,497,397 4,280,696 ------------------ ------------------- PROPERTY & EQUIPMENT Leasehold improvements 57,379 55,954 Machinery and equipment 3,851,868 3,808,188 Automobile 1,679 1,679 Tooling and dies 334,131 327,411 Construction in progress - - ------------------ ------------------- 4,245,057 4,193,232 Less accumulated depreciation and amortization 3,150,611 3,082,386 ------------------ ------------------- NET PROPERTY AND EQUIPMENT 1,094,446 1,110,846 ------------------ ------------------- DEFERRED TAXES 747,980 747,980 OTHER ASSETS 329,410 340,423 ------------------ ------------------- TOTAL ASSETS $ 5,669,233 $ 6,479,945 ------------------ ------------------- ------------------ ------------------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable, current $ 110,000 $ 97,200 Accounts payable 464,107 465,678 Accrued expenses 95,629 477,335 Payable for acquired company 447,875 ------------------ ------------------- TOTAL CURRENT LIABILITIES 669,736 1,488,088 ------------------ ------------------- Long-Term Debt 114,800 139,400 ------------------ ------------------- TOTAL LIABILITIES 784,536 1,627,488 ------------------ ------------------- 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 - 8,100,321 shares 440,979 440,979 Additional paid-in capital 5,667,327 5,667,327 Accumulated deficit (635,890) (668,030) Less: Notes receivable from stockholders (554,800) (554,900) Treasury stock at cost (32,919) (32,919) TOTAL STOCKHOLDERS' EQUITY 4,884,697 4,852,457 ------------------ ------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,669,233 $ 6,479,945 ------------------ ------------------- ------------------ -------------------
1 PUROFLOW INCORPORATED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED APRIL 30, 1999 1998 ------------------- ------------------ Net revenue $ 2,070,363 $ 2,096,284 Cost of goods sold 1,498,836 1,493,582 ------------------- ------------------ Gross profit 571,527 602,702 Selling, general and administrative expense 534,162 470,457 ------------------- ------------------ Operating income 37,365 132,245 Interest expense (4,224) (1,074) Amortization Expense (11,013) - Other income 10,612 3,411 ------------------- ------------------ Income before taxes 32,740 134,582 Provision (benefit) for income taxes 600 (51,000) ------------------- ------------------ NET INCOME $ 32,140 $ 185,582 ------------------- ------------------ ------------------- ------------------ NET INCOME PER COMMON SHARE Basic earnings per share $ 0.004 $ 0.030 ------------------- ------------------ ------------------- ------------------ Diluted earnings per share $ 0.004 $ 0.030 ------------------- ------------------ ------------------- ------------------
2 PUROFLOW INCORPORATED STATEMENT OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED APRIL 30 1999 1998 ------------------ ----------------- CASH AT BEGINNING OF PERIOD $ 828,809 $ 361,523 CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) 32,139 185,583 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 68,225 73,729 Provision for losses on accounts receivable (2,000) 2,477 Inventory valuation allowance - - Changes in operating assets and liabilities: Advances to Officers & Employees 2,907 (3,682) Accounts receivable (184,753) (55,711) Other Receivables 375,763 - Inventories (199,790) (148,425) Prepaid expenses and other current assets 29,583 24,436 Deferred Taxes - (51,000) Other Payable (445,650) - Accounts payable & Accrued expenses (385,500) (242,954) ------------------ ----------------- Net cash provided by operating activities (709,076) (215,547) ------------------ ----------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (51,825) (26,504) Amortization of Goodwill/Non-Compete 11,013 - ------------------ ----------------- Net cash provided by investing activities (40,812) (26,504) ------------------ ----------------- CASH FLOWS FROM FINANCING ACTIVITIES Long-term debt (11,800) 236,000 Notes Recevable from Stockholders 100 - ------------------ ----------------- Net cash used by financing activities (11,700) 236,000 ------------------ ----------------- NET INCREASE IN CASH (761,588) (6,051) ------------------ ----------------- ------------------ ----------------- CASH AT END OF PERIOD $ 67,221 $ 355,472 ------------------ ----------------- ------------------ -----------------
3 PUROFLOW INCORPORATED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
NOTES RECEIVABLE FROM COMMON ADDITIONAL RETAINED STOCKHOLDER STOCK PAID-IN EARNINGS AND TREASURY FOR THE THREE MONTHS ENDED PAR VALUE CAPITAL STOCK TOTAL APRIL 30, 1999 ----------------- ----------------- ------------------ ----------------- ----------------- Balance at January 31, 1999 $ 440,979 $ 5,667,327 $ (668,030) $ (587,819) $ 4,852,457 Receivable Payment - - - 100 - Net income - - 32,140 - 32,140 ----------------- ----------------- ------------------ ----------------- ----------------- Balance at April 30, 1999 $ 440,979 $ 5,667,327 $ (635,890) $ (587,719) $ 4,884,697 ----------------- ----------------- ------------------ ----------------- ----------------- ----------------- ----------------- ------------------ ----------------- -----------------
4 PUROFLOW INCORPORATED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) APRIL 30, 1999, JANUARY 31, 1999, AND APRIL 30, 1998 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, 1999 (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, 1999 1999 ------------------ ------------------ Raw materials and purchased parts $ 1,027,465 $ 918,559 Work in process 430,191 307,444 Finished goods and assemblies 305,073 336,936 ------------------ ------------------ Totals $ 1,762,729 $ 1,562,939 ------------------ ------------------ ------------------ ------------------
NOTE 3 - STOCKHOLDERS EQUITY On August 24, 1998, the Company issued an 8-K Report stating that the Board of Directors has authorized the issuance of 1,000,000 shares of common stock for sale to directors, officers and employees. The Company sold 940,000 shares of this common stock and received proceeds of $705,000 divided between $147,000 in cash and $558,000 in notes receivables. During the 3-month period from August 1, 1998 through October 31, 1998, the Company purchased 48,500 shares of common stock for a total cost of $32,919 from the open market and is presently holding them as treasury stock. 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, 1999 Basic earnings per share $ 32,140 8,100,321 $ .004 --------------- --------------- EFFECT OF DILUTED SECURITIES Stock options 137,007 ------------------ ------------------- Diluted earnings per share $ 32,140 8,237,328 $ .004 ------------------ ------------------- --------------- ------------------ ------------------- --------------- 3 MONTHS ENDED APRIL 30, 1998 Basic earnings per share $ 185,582 7,108,821 $ .030 --------------- --------------- EFFECT OF DILUTED SECURITIES Stock Options 92,253 ------------------ ------------------- Diluted earnings per share $ 185,582 7,201,074 $ .026 ------------------ ------------------- --------------- ------------------ ------------------- ---------------
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. EARNINGS PER SHARE In the first quarter of the year ended January 31, 1999, the Company adopted Statement of Financial Accounting Standards No. 128, "Earnings per Share" (FAS 128), which supersedes Accounting Principles Board Opinion No. 15. Under FAS 128, earnings per common share is computed by dividing net income available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock. NOTE 5 - LINE OF CREDIT The Company has a $1,000,000 revolving credit line maturing on June 3, 1999. This credit line bears interest at the rate of prime plus 0.5% per annum, and is secured primarily by the Company's accounts receivable and inventories. The terms of this loan agreement contains certain restrictive covenants, including maintenance of minimum working capital, net worth, and ratios of current assets to current liabilities and debt to net worth. There is no outstanding balance under this line on January 31, 1999 and April 30,1999. NOTE 6 - INCOME TAXES Income tax benefits recognized represents the benefit of income tax loss carryforwards. 6 LIQUIDITY AND CAPITAL RESOURCES At April 30, 1999, the Company had cash available of $67,221, compared to $828,809 on January 31, 1999. It had a current ratio of 5.22 to 1 at April 30, 1999, compared to 2.87 to 1 on January 31, 1999. OPERATING ACTIVITIES Cash flow from Operations for the three months ended April 30,1999 was reduced by $761,588 compared to a decrease of $6,051 for the three months ended April 30,1998. The reduction in cash available resulted from the acquisition of QCCC and a reduction in accrued expenses associated with payment of bills from completed litigation. INVESTING ACTIVITIES The Company invested $51,825 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 $1,000,000 which bears interest at the rate of prime plus 0.5% per annum, secured by the Company's accounts receivable and inventory. 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 non-recurring judgment against it as well as purchase a necessary blueprint copier. The outstanding balance as of April 30, 1999 is $170,867. BUSINESS ACQUISITION On January 31, 1999, the Company acquired Quality Controlled Cleaning Corporation ("QCCC") for $550,630 including all costs of the acquisition. QCCC is a precision cleaning and repair company located in Commerce, California. The Company's acquisition resulted in goodwill of approximately $274,000 and a non-compete agreement of $50,000. The goodwill will amortize over 10 years and the non-compete agreement over its term of 3 years. In addition to the purchase price, the agreement includes a contingent payment of 50% of net sales in the year ending January 31, 2000, in excess of $500,000 up to a maximum of $800,000. If the full amount of the contingency is realized, the liability would total $150,000 and would be recorded as additional goodwill. RESULTS OF OPERATIONS FOR QUARTER ENDED APRIL 30, 1999 REVENUES Sales were $2,070,363 for the three months ended April 30,1999 compared to $2,096,284 in 1998, a modest decrease of $25,921. Sales of airbag filters were relatively flat for the comparable period due to the slow ramp-up of the new model non-azide airbag, a decrease in shipments for technical aftermarket filters of $234,100 offset by our new QCCC operation revenue of $177,900 and shipments of $23,700 for International Sales. 7 GROSS PROFIT Gross profit as a percentage of sales was 27.6% in April 1999, compared to 28.7% in April 1998, representing a decrease of 1.1% representing lower margins on airbag filters. Increased marketing costs are a result of development of the International Sales Division. OPERATING INCOME Operating income was $37,365 in April 1999 compared to $132,245 in April 1998, a decrease of $63,705 due to the lower margins on airbag filters as a result of the slow ramp-up of the new model non-azide airbag filter for the driver and passenger-side impact filter and substantial increase in marketing costs due to the development of the International Sales Division. INTEREST CHARGES Interest on the bank loan was $4,724 as of April 30, 1999 and $1,074 at April 30, 1998. INCOME TAXES A tax benefit of $51,000 was recognized as a result of income tax loss carryforwards in 1998. PART II - OTHER INFORMATION ITEM 1. PENDING LEGAL PROCEEDINGS 1. The Company reported the conclusion of litigation with Memtec America Corporation in February 1999 and the award of damages reported in its Form 10 KSB filing for the fiscal year ended January 31, 1999. 2. The Company reports the commencing of a lawsuit by Steel Partners II L.L.P. against the Company and its four directors on May 3, 1999 in the U.S. District Court for the District of Delaware seeking to rescind or enjoin the Private Placement of 940,000 shares of common stock purchased by the directors, officers and employees of the Company. The purpose of the lawsuit is calculated to obtain control of the Board of Directors and to sell the assets of Puroflow. Steel Partners II L.L.P. owns 16.6% of the issued and outstanding shares of the Registrant. The Company has retained counsel in Delaware to vigorously contest the action, for the lawsuit is without merit and seeks to intimidate the Board of Directors. The Company has retained counsel in the State of California to commence an action in the Supreme Court of the State of California, County of Los Angeles, to seek compensatory and punitive damages and injunctive relief for interference with prospective economic advantage of the Company's business. 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. 8 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 On January 31, 1999, the Registrant acquired Quality Controlled Cleaning Corporation representing 100% of the issued and outstanding shares (see Business Acquisition above). 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 June 11, 1999 By: /s/ Michael H. Figoff -------------------------------------------- Michael H. Figoff President/Chief Executive Officer 9 EX-27 2 EXHIBIT 27
5 3-MOS JAN-31-1999 FEB-01-1999 APR-30-1999 67,221 0 1,580,007 20,000 1,762,729 3,497,397 4,245,057 3,150,611 5,669,233 669,736 0 0 0 5,520,587 (635,890) 5,669,233 2,070,363 2,070,363 1,498,836 2,032,998 401 (2,000) 4,224 32,740 600 32,140 0 0 0 32,140 .004 .004
-----END PRIVACY-ENHANCED MESSAGE-----