-----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, N99CE8Lof8BCtoyL15dRneCWA5zBtobKaKS53vcf8lOsTppBdeHC70dgk+nYBED0 E1rTZ8U03UfqJkKCgF7V+Q== 0000950134-02-011245.txt : 20020913 0000950134-02-011245.hdr.sgml : 20020913 20020913140502 ACCESSION NUMBER: 0000950134-02-011245 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20020531 FILED AS OF DATE: 20020913 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMPRESO INC CENTRAL INDEX KEY: 0001108345 STANDARD INDUSTRIAL CLASSIFICATION: MANIFOLD BUSINESS FORMS [2761] IRS NUMBER: 752849585 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-29883 FILM NUMBER: 02763503 BUSINESS ADDRESS: STREET 1: 652 SOUTHWESTERN BLVD CITY: COPPELL STATE: TX ZIP: 75019 BUSINESS PHONE: 9724620100 MAIL ADDRESS: STREET 1: 652 SOUTHWESTERN BLVD CITY: COPPELL STATE: TX ZIP: 75019 FORMER COMPANY: FORMER CONFORMED NAME: IMPRESO COM INC DATE OF NAME CHANGE: 20000302 10-Q/A 1 d99761a1e10vqza.txt AMENDMENT NO. 1 TO FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A AMENDMENT NO. 1 (Mark One) X Quarterly report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 FOR THE QUARTERLY PERIOD ENDED MAY 31, 2002 OR Transition report pursuant to Section 13 or 15(d) of the Securities - --- Exchange Act of 1934 COMMISSION FILE NUMBER 000-29883 IMPRESO, INC. (Exact name of registrant as specified in its charter) DELAWARE 75-2849585 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 652 SOUTHWESTERN BOULEVARD COPPELL, TEXAS 75019 (Address of principal executive offices) (972) 462-0100 (Registrant's telephone number, including area code) 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 --- --- Indicate the number of shares outstanding of each of the issuer's classes of Common Stock as of the latest practicable date. Class of Common Stock Shares outstanding at July 12, 2002 --------------------- ----------------------------------- $0.01 Par Value 5,278,780 IMPRESO, INC. AND SUBSIDIARIES FORM 10-Q/A MAY 31, 2002 INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBER ----------- Item 1. Consolidated Financial Statements: Interim Consolidated Balance Sheets at May 31, 2002 (Unaudited) and August 31, 2001 1 Interim Consolidated Statements of Operations for the Three and Nine Months Ended May 31, 2002 and 2001 (Unaudited) 3 Interim Consolidated Statements of Cash Flows for the Nine Months Ended May 31, 2002 and 2001 (Unaudited) 4 Notes to Interim Consolidated Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial 9 Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures about Market Risk 13 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K and 8-K/A 14 SIGNATURES 15
IMPRESO, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS
May 31, August 31, 2002 2001 ---------------- ---------------- (Unaudited) Current assets: Cash and cash equivalents $ 105,087 $ 211,352 Trade accounts receivable, net of allowance for doubtful accounts of $535,322 at May 31, 2002 and $342,780 at August 31, 2001 14,017,886 11,748,088 Inventories 31,743,817 38,459,817 Prepaid expenses and other 288,431 234,411 Officers Loan 35,437 -- Deferred income tax assets 180,861 116,545 ---------------- ---------------- Total current assets 46,371,519 50,770,213 ---------------- ---------------- Property, plant and equipment, at cost 27,671,370 21,725,088 Less-Accumulated depreciation (11,410,388) (10,511,892) ---------------- ---------------- Net property, plant and equipment 16,260,982 11,213,196 ---------------- ---------------- Other assets 246,492 219,188 ---------------- ---------------- Total assets $ 62,878,993 $ 62,202,597 ================ ================
The accompanying notes are an integral part of these consolidated financial statements. 1 IMPRESO, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED) LIABILITIES AND STOCKHOLDERS' EQUITY
May 31, August 31, 2002 2001 ---------------- ---------------- (Unaudited) Current liabilities: Accounts payable $ 11,775,751 $ 18,572,200 Accrued liabilities 2,450,884 1,942,241 Current maturities of long-term debt 909,382 1,404,562 Line of credit 19,524,413 18,308,338 Current maturities of prepetition debt 7,560 7,484 ---------------- ---------------- Total current liabilities 34,667,990 40,234,825 Deferred income tax liability 932,321 926,675 Long-term debt, net of current maturities 10,856,352 6,083,279 Long-term portion of prepetition debt, net of current maturities 239,492 245,175 ---------------- ---------------- Total liabilities 46,696,155 47,489,954 Commitments and contingencies Stockholders' equity: Preferred Stock, $.01 par value; 5,000,000 shares authorized; 0 shares issued and outstanding -- -- Common Stock, $.01 par value; 15,000,000 shares authorized; 5,292,780 shares issued and 5,278,780 shares outstanding 52,928 52,928 at May 31, 2002 and August 31, 2001 Warrants 27,527 -- Treasury Stock (14,000 shares, at cost) (38,892) (38,892) Additional paid-in capital 6,319,682 6,319,682 Retained earnings 9,821,593 8,378,925 ---------------- ---------------- Total stockholders' equity 16,182,838 14,712,643 ---------------- ---------------- Total liabilities and stockholders' equity $ 62,878,993 $ 62,202,597 ================ ================
The accompanying notes are an integral part of these consolidated financial statements. 2 IMPRESO, INC. AND SUBSIDIARIES INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended May 31, May 31, May 31, May 31, 2002 2001 2002 2001 --------------- --------------- --------------- --------------- Net Sales $ 33,025,115 $ 23,120,706 $ 84,768,869 $ 65,660,360 Cost of sales 29,335,644 20,068,465 75,650,867 57,863,470 --------------- --------------- --------------- --------------- Gross profit 3,689,471 3,052,241 9,118,002 7,796,890 Other costs and expenses: Selling, general and administrative 2,474,356 1,943,928 6,695,957 5,581,522 Interest expense 431,980 410,107 1,263,052 1,139,976 Other expense (income), net (29,867) (64,307) (1,140,711) (158,638) --------------- --------------- --------------- --------------- Total other costs and expenses 2,876,469 2,289,728 6,818,298 6,562,860 Income before income tax expense 813,002 762,513 2,299,704 1,234,030 Income tax expense: Current 359,985 271,364 915,706 433,762 Deferred (60,713) 34,668 (58,670) 53,803 --------------- --------------- --------------- --------------- Total Income Tax Expense 299,272 306,032 857,036 487,565 Net income $ 513,730 $ 456,481 $ 1,442,668 $ 746,465 =============== =============== =============== =============== Net income per common share (basic and diluted) $ 0.10 $ 0.09 $ 0.27 $ 0.14 =============== =============== =============== =============== Weighted average shares outstanding 5,278,780 5,278,780 5,278,780 5,282,527
The accompanying notes are an integral part of these consolidated financial statements. 3 IMPRESO, INC. AND SUBSIDIARIES INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended ---------------------------------- May 31, May 31, 2002 2001 --------------- --------------- Cash Flows From Operating Activities Net income $ 1,442,668 $ 746,467 Adjustments to reconcile net income to net cash used in operating activities- Depreciation and amortization 898,817 619,005 (Decrease) Increase in deferred income taxes (58,670) 53,803 (Increase) Decrease in accounts receivable, net (2,269,798) 2,188,485 Decrease (Increase) in inventories 6,716,000 (6,935,992) Increase in prepaid expenses and other (89,457) (151,424) Increase in other non current assets (27,304) (213,439) (Decrease) Increase in accounts payable (6,796,449) 7,619,330 Increase in accrued liabilities 508,643 1,171,912 --------------- --------------- Net cash provided by operating activities 324,450 5,098,147 --------------- --------------- Cash Flows From Investing Activities: Additions to property, plant, and equipment (645,420) (220,299) Sales of property, plant and equipment, net 832 9,373 Acquisition of United Assets, (Sky Assets) (5,302,015) (12,840,231) Warrants Issued 27,527 -- --------------- --------------- Net Cash used in investing activities (5,919,076) (13,051,157) Cash Flows From Financing Activities: Net borrowings on line of credit 1,216,075 4,955,067 Payments on prepetition debt (5,607) (5,400) Net borrowing on postpetition debt 4,277,893 3,079,942 Purchase of Treasury Stock -- (38,892) --------------- --------------- Net cash used in financing activities 5,488,361 7,990,717 --------------- --------------- Net increase in cash and cash equivalents (106,265) 37,706 Cash and cash equivalents, beginning of period 211,352 149,527 --------------- --------------- Cash and cash equivalents, end of period $ 105,087 $ 187,233 =============== ===============
The accompanying notes are an integral part of these consolidated financial statements. 4 IMPRESO, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. ORGANIZATION AND NATURE OF BUSINESS Impreso, Inc., (formerly Impreso.com, Inc.) a Delaware corporation (referred to collectively with its subsidiaries as the "Company"), is the parent holding company of TST/Impreso, Inc. ("TST"), a manufacturer and distributor to dealers and other resellers of paper and film products for commercial and home use in domestic and international markets, and Hotsheet.com, Inc., the owner and operator of the Hotsheet.com web portal. TST's product line consists of standard continuous computer stock business forms; thermal facsimile paper; cut sheet products such as copy paper, ink jet paper, digital photo paper and transparencies; fine business stationary; point of sale and cash register machine rolls; high speed laser roll paper; wide format engineering rolls; wide format ink jet media; and processed laser cut sheets. TST has one wholly owned subsidiary, TST/Impreso of California, Inc., which was formed to support the activities of the paper converting segment of the Company's business. 2. ACQUISITION On March 19, 2002 the Company acquired substantially all of the operating assets of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. (collectively "United") for approximately $4.5 million. On April 19, 2002, the manufacturing facility was purchased from United for $4.1 million. This acquisition was recorded under the purchase method of accounting and, therefore, the purchase price has been allocated to assets acquired based on estimated fair values. The results of operations of the acquired company were included in the consolidated results of the Company as of the acquisition date. The estimated fair value of assets acquired and liabilities assumed relating to the acquisition, which is subject to further refinement, is summarized below. The components of the purchase price and preliminary allocation are as follows: Preliminary allocation of purchase price: Current assets $ 3,261,321 Property, plant and equipment 5,302,015 ----------- 8,563,336
As indicated above, some allocations are based on studies and valuations which are currently being finalized. Management does not believe that the final purchase price allocation will produce materially different results than those reflected herein. Unaudited pro forma operating results for the Company assuming the acquisition of United occurred on September 1, 2001 are as follows: 5
For the Nine Months Ended May 31, 2002 May 31, 2001 ------------ ------------ Sales $102,854,621 $ 90,649,817 Net Income 1,062,196 (660,000) Earnings per share .20 (.12) (Basic and diluted)
3. UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS In the opinion of management, the unaudited Interim Consolidated Financial Statements of the Company include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company's financial position as of May 31, 2002, and its results of operations for the three and nine months ended May 31, 2002 and May 31, 2001. Results of the Company's operations for the interim period ended May 31, 2002, may not be indicative of results for the full fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations promulgated by the Securities and Exchange Commission (the "SEC"). The unaudited Interim Consolidated Financial Statements should be read in conjunction with the audited Consolidated Financial Statements and accompanying notes of the Company and its subsidiaries, included in the Company's Form 10-K (the "Company's Form 10-K"), for the fiscal year ended August 31, 2001 ("Fiscal 2001"). Accounting policies used in the preparation of the unaudited Interim Consolidated Financial Statements are consistent in all material respects with the accounting policies described in the Notes to Consolidated Financial Statements in the Company's Form 10-K. 4. INVENTORIES Inventories are stated at the lower of cost (principally on a first-in, first-out basis) or market and include material, labor and factory overhead. Inventories consisted of the following:
May 31, August 31, 2002 2001 -------------- --------------- Finished goods $ 17,773,794 $ 20,537,593 Raw materials 12,890,730 17,405,968 Supplies 947,414 464,679 Work-in-process 131,879 51,577 -------------- --------------- Total inventories $ 31,743,817 $ 38,459,817 ============== ===============
6 5. LONG -TERM DEBT AND LINE OF CREDIT
The following is a summary of long-term debt and line of credit: May 31, August 31, 2002 2001 ----------- ------------ Line of Credit with a commercial financial corporation under revolving credit line (amended March 2002 to increase line from $22 million to $25 million and increase inventory sub-limit from $17.5 million to $21 million), maturing May 2004, secured by inventories, trade accounts receivable, equipment, goodwill associated with TST's trademark "IMPRESO" (no value on financial statements), and a personal guarantee by the trustee of a trust which is a majority stockholder of the Company, interest payable monthly at prime plus .25% (5.0% at May 31, 2002). $ 19,524,413 $ 18,308,338 Note payable to a commercial financial corporation, secured by real property, payable in monthly installments of $15,151 (including interest at 7.75%, or 4.5% above the 11th District cost of funds rate, whichever is greater; 7.75% at May 31, 2002), maturing August 2008. 1,662,354 1,672,731 Note payable to a commercial financial corporation, secured by real property and equipment, payable in monthly installments of $4,457 (including interest at 8.50%), maturing December 2009. 291,561 311,942 Note payable to a commercial financial corporation, secured by real property and equipment, payable in monthly installments of $10,843 (including interest at 8.50%), maturing August 2010. Revolving lender's blanket lien subordinated to note's collateral. 765,951 812,436 Note payable to a commercial financial corporation, secured by real property, payable in monthly installments of $2,834 (including interest at 5.5%), maturing November 2010. 227,598 243,318 Notes payable to various commercial financial corporations, secured by equipment, interest rates ranging from 1.9% to 11.17%, maturing at various dates from December 2002 through July 2005. 503,068 638,289 Notes payable to a commercial financial corporation, secured by real property and a personal guarantee by the trustee of a trust which is a majority stockholder of the Company, payable in monthly installments of $21,407 (including interest at 8%), maturing May 2011. 2,152,218 2,213,667 Acquisition note payable, unsecured, payable in quarterly installments of $15,000 (including interest at 8%), maturing April 2006. 255,000 285,000 Acquisition note payable, secured by equipment, payable in monthly installments of $16,024, no interest, maturing May 2003. 416,242 560,458
7 Note payable, unsecured, payable in three weekly installments of $200,000 beginning in November 2001 and one final payment of $150,000, no interest, matured November 2001. -- 750,000 Note payable to a commercial financial corporation, secured by real property and a personal guarantee by the trustee of a trust which is a majority stockholder of the Company, payable in monthly installments of $22,827.80 (including a fixed scheduled for interest, 7% at May 31, 2002), maturing March 2007. 3,195,839 -- Note payable to a commercial financial corporation, secured by equipment, payable in monthly installments of $17,857.14 (including interest at a variable rate equal to 30 day Commercial Paper plus 350 basis points, 5.26% at May 31, 2002), maturing February 2009. 1,444,508 -- Prepetition- Note payable to a commercial financial corporation, secured by real property and equipment and a personal guarantee by the trustee of a trust which is a majority stockholder of the Company, payable in monthly installments of $1,461 (including interest at 4%), maturing June 2023. 247,051 252,659 Non-Compete Agreements payable to two former owners of acquired business, payable in total monthly installments of $16,666.67, no interest, maturing February 2007 851,396 -- -------------- ------------- Total 31,537,199 26,048,838 Less-Current maturities (20,441,355) (19,720,384) Long-term debt $ 11,095,844 $ 6,328,454
- -------------------------------------------------------------------------------- Prepetition amount listed above represents the renegotiated amounts and terms under the 1993 plan of reorganization. As of May 31, 2002, the revolving credit line is limited to the lesser of $25 million or a percentage of eligible trade accounts receivable and inventories, as defined. On May 31, 2002, the remaining availability under the revolving credit line was $6.5 million. The line of credit has restrictive covenants requiring the maintenance of a minimum tangible net worth and working capital requirements, as defined. One of the notes payable contains restrictive covenants on current and debt to worth ratios, and the payment of cash dividends. As of May 31, 2002, the Company was in compliance with all covenants. 8 6. SUPPLEMENTAL CASH FLOW INFORMATION
NINE MONTHS ENDED May 31 May 31 2002 2001 --------------- --------------- Cash paid during the period for: Interest $ 1,263,052 $ 1,139,976 Income taxes $ 770,590 $ 211,984 Noncash Investing Activities: Issuance of Warrant to Vendor $ 27,527 $ --
7. STOCK OPTIONS AND WARRANTS On April 3, 2002, the Company filed a Registration Statement on Form S-3 with the SEC to register the sale of up to 441,000 shares of Common Stock of the Company. The shares subject to such registration are 50,000 shares issuable on exercise of a consultant's Warrant, 191,000 shares issuable on exercise of options granted to employees outside of a stock option plan, and 200,000 shares held by certain founders of the Company. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ENDED MAY 31, 2002 AND MAY 31, 2001. Net Sales---Net sales increased from $23.1 million in the three months ended May 31, 2001, to $33 million in the three months ended May 31, 2002 ("Third Quarter"), an increase of $9.9 million or 42.8%. Net sales increased from $65.7 million in the nine months ended May 31, 2001, to $84.8 million in the same period in the year ending August 31, 2002 ("Fiscal 2002"), an increase of $19.1 million, or 29.1%. Net sales increased in the Third Quarter and the nine months ended May 31, 2002, as a result of increased sales of branded products and the acquisition of substantially all of the operating assets of United on March 19, 2002. Gross Profit--- Gross profit increased from $3.1 million in the three months ended May 31, 2001, to $3.7 million in the three months ended May 31, 2002, an increase of 20.9%. Gross profit increased from $7.8 million in the nine months ended May 31, 2001, to $9.1 million in the same period in 2002, an increase of $1.3 million or 16.9%. Gross profit margin for the Third Quarter and for nine months ended May 31, 2002 decreased to approximately 11.1% from 13.2% and 10.8% from 11.9%, respectively, from the corresponding periods of the prior year. The Company's decreased gross profit margin for the three and nine month periods ended May 31, 2002 was due to increased freight charges resulting from our consolidation of warehouses in the Third Quarter to eliminate duplication caused by the acquisition of United. 9 Selling, General, and Administrative Expenses--SG&A expenses increased from $1.9 million in the three months ended May 31, 2001 to $2.5 million in the three months ended May 31, 2002, but decreased as a percentage of net sales from 8.4% in the three months ended May 31, 2001 to 7.5% in the three months ended May 31, 2002. SG&A expenses for the nine months ended May 31, 2002 increased to $6.7 million from $5.6 million in the nine months ended May 31, 2001, but decreased as a percentage of net sales from 8.5% in the nine months ended May 31, 2001 to 7.9% in the nine months ended May 31, 2002. The decreases in SG&A as a percentage of sales for the three and nine months ended May 31, 2002, are due to increased net sales without a corresponding increase in the fixed costs of operations, and the efficiencies achieved with the consolidation of the sales forces following the acquisition of substantially all of the operating assets of United. Interest Expense----Interest expense increased from $410,000 in the three months ended May 31, 2001, to $432,000 in the same period of Fiscal 2002, an increase of 5.3%. Interest expense increased from $1.1 million in the nine months ended May 31, 2001, to $1.3 million in the corresponding period of Fiscal 2002, an increase of 10.8%. The increase in interest expense for the three and nine month periods ended May 31, 2002, was primarily attributable to increased borrowings. The increased borrowings were due to the acquisition of substantially all of the operating assets of United. Other Expense (Income)--On October 16, 2001, TST received approximately $1 million in a United States class action lawsuit involving international and domestic manufacturers' alleged attempt to fix jumbo roll thermal facsimile paper prices in the United States. TST was not a named plaintiff and did not participate in the lawsuit. The plaintiff class settled the six year old suit with the defendants. The award is reported as other income in First Quarter 2002. Income Taxes--- Income tax expense decreased from $306,000 for the three months ended May 31, 2001, to $299,000 in the third quarter of Fiscal 2002 due to a deferred tax benefit. Income tax expense increased from $487,000 for the nine months ended May 31, 2001, to $857,000 in the nine months ended May 31, 2002. The increase in income tax expense for the periods presented is a result of an increase in taxable income and the receipt of a taxable litigation settlement as described in the preceding paragraph. LIQUIDITY AND CAPITAL RESOURCES Working capital increased to $11.7 million at May 31, 2002 from $10.5 million at August 31, 2001. This represented an increase of 11.1%. In March 2002, TST amended its agreement with a commercial financial corporation for a two-year renewal of its revolving line of credit. The amended agreement also increases the line from $22 million to $25 million and the inventory sub-limit from $17.5 to $21 million. The loan is secured by, among other things, inventory, trade receivables, equipment and a personal guarantee of Marshall Sorokwasz, our Chairman of the Board and President, and Trustee of a trust which is a principal shareholder of our Company. 10 Available borrowings under this line of credit, which accrues interest at the prime rate of interest plus .25% (5.0% at May 31, 2002), are based upon specified percentages of eligible accounts receivable and inventories. As of May 31, 2002, there was a $6.5 million borrowing capacity remaining under the $25 million revolving line of credit. The amended revolving credit line will mature in May 2004. On April 19, 2002, we completed the purchase of substantially all of the assets of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. (collectively, "United"). The Company paid approximately $4.6 million in cash for United's operating assets and approximately $4.1 million for United's real property. The funding of this purchase was accomplished by renewing, extending, and increasing our revolving line of credit from $22 million to $25 million, with the increased line collateralized by the inventory acquired in this acquisition, obtaining a $1 million loan from another commercial financial institution secured by equipment, and pledging the plant facility acquired in the real estate transaction to a commercial financial corporation, which provided $3.2 million in funding of the real property $4.1 million purchase price. We believe that the funds available under the loans encumbering our California, Illinois, Pennsylvania, Texas and West Virginia plants, the revolving credit facility, cash and cash equivalents, trade credit and internally generated funds will be sufficient to satisfy our requirements for working capital and capital expenditures for at least the next twelve months. Such belief is based on certain assumptions, including the continuation of current operations and no extraordinary adverse events, and there can be no assurance that such assumptions are correct. In addition, expansion of our operations due to an increased demand for products TST manufactures or significant growth of Hotsheet.com, Inc. may require us to obtain additional capital to add new operations or manufacturing facilities. If that should occur, we anticipate that the funds required would be generated through securities offerings or additional debt. There can be no assurance that any additional financing will be available if needed, or, if available, will be on acceptable terms. As of May 31, 2002, we did not own derivative or other financial instruments for trading or speculative purposes. The implementation of Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities" does not have a material impact on our financial position or results of operations. INVENTORY MANAGEMENT; RAW MATERIALS OF TST We believe that it is necessary for TST to maintain a large inventory of finished goods and raw materials to adequately service its customers. In recent years inventory levels had been increased to facilitate the introduction of new brands and expanded product lines. At the beginning of Fiscal 2002, management implemented a program to reduce inventory. In the first nine months of Fiscal 2002, management has reduced inventory levels of TST. From August 31, 2001 to May 31, 2002 inventory levels were reduced $5 million. Management intends to continue reducing inventory levels through the fourth quarter of Fiscal 2002. However, downward pressures on raw material prices could compress the market for our existing inventory and have a material adverse effect on the results of operations of TST, or restrain managements attempts at reducing inventory. In recent years we have depended primarily on international vendors of raw materials. U.S. currency devaluation in Asia, South America and Europe, as well as increased demand for paper in Asia has created supply disruption and a tighter raw material market for the Company. The 11 Company intends to shift its supply chain from international to domestic sources, which historically charge higher prices for raw materials. This shift could have a material adverse effect on the results of operation by making our finished goods pricing uncompetitive. TST bears the risk of increases in the prices charged by its suppliers and decreases in the prices of raw materials held in its inventory. If prices for products held in its finished goods inventory decline, if prices for raw materials required by it increase, or if new technology is developed that renders obsolete products distributed and held in inventory by TST, the Company's business could be materially adversely affected. TST purchases raw paper, coated thermal facsimile paper, coated technical paper, carbon and carbonless paper (consisting of a wide variety of weights, widths, colors, sizes and qualities), transparency film, packaging and other supplies in the open market from a number of different companies around the world. We believe that TST has adequate sources of raw material supplies to meet the requirements of its business. We believe that TST has a good relationship with all of its current suppliers. MARKET CONDITIONS The primary products produced by United are continuous feed business forms and small rolls. Our acquisition of United did not change the percentage of business forms in our product mix from 69%, which is a reduction from the 75% mix after the acquisition of the Sky Division of Durango-Georgia Converting, LLC ("Sky") in April 2001. Management believes that the market for business forms, which is declining in 2002, will continue to decline in 2003. Management has targeted these acquisitions to assume customer base that will eventually transition into our other product lines as the business forms format becomes obsolete. September 11, 2001's impact on the economy has also impacted the net sales of TST; however, the exact impact on the results of operations is not ascertainable. Although net sales in the nine months ended May 31, 2002, as compared to the nine months ended May 31, 2001, increased 29.1%, the Company expected net sales to have been significantly higher due to the acquisition of United in March 2002 and reduction in the market place of competitors of the Company's products. Management believes that the slowed economy will continue to effect the fourth quarter 2002 results of operations. If selling prices for products manufactured by us cannot increase in relation to raw material cost increases, or if prices for products manufactured by us decline as a result of market pressures, our results of operations could be materially adversely affected. SEASONALITY TST may be subject to certain seasonal fluctuations in that orders for products may decline over the summer months. If the market for finished goods decreases, then the adverse impact of the seasonal fluctuations on the Company will be greater. Hotsheet.com revenues are partially generated by retail sales which are typically stronger during the Christmas holiday season. 12 SUBSEQUENT EVENTS On July 12, 2002, the Board of Directors unanimously voted to approve the engagement of Blackman Kallick Bartelstein, LLP as the independent public accountants for Impreso, Inc. for the August 31, 2002 audit. FORWARD-LOOKING STATEMENTS Management's Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Form 10-Q/A contain "forward-looking statements" about our prospects for the future, including but not limited to our ability to generate sufficient working capital, our ability to continue to maintain sales to justify capital expenses, and our ability to generate additional sales to meet business expansion. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those projected, including availability of raw materials, availability of thermal facsimile, computer, laser and color ink jet paper, to the cyclical nature of the industry in which we operate, the potential of technological changes which would adversely affect the need for our products, price fluctuations which could adversely impact the large inventory we require, loss of any significant customer, and termination of contracts essential to our business. Parties are cautioned not to rely on any such forward-looking statements or judgments in making investment decisions. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are not exposed to market risks such as foreign currency exchange rates, but are exposed to risks such as variable interest rates. Market risk is the potential loss arising from adverse changes in market prices and rates. Our subsidiaries do not have supply contracts with any of their foreign vendors. All foreign vendors are paid in United States currency. In addition, TST's international sales of finished goods is insignificant. Accordingly, there are not sufficient factors to create a material foreign exchange rate risk; therefore, we do not use exchange commitments to minimize the negative impact of foreign currency fluctuations. We had both fixed-rate and variable-rate debts as of May 31, 2002. The fair market value of long-term variable interest rate debt is subject to interest rate risk. Generally the fair market value of variable interest rate debt will decrease as interest rates fall and increase as interest rates rise. The estimated fair value of our total long-term fixed rate and floating rate debt approximates carrying value. Based upon our market risk sensitive debt outstanding at May 31, 2002, there was no material exposure to our financial position or results of operations. 13 PART II: OTHER INFORMATION ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K AND 8K/A (a) Exhibits None (b) Reports on Form 8-K and 8-K/A On April 3, 2002, we filed a Current Report on Form 8-K, dated March 19, 2002, to report the acquisition of substantially all of the operating assets of United Computer Supplies, Inc. and United Computer Supplies-East, Inc. (collectively "United"). After completion of the entire transaction, including the purchase of the plant facility on April 19, 2002, we paid approximately $8.7 million in cash. On June 3, 2002, we filed an amendment to the Current Report on Form 8-K/A, dated March 19, 2002, to include the financial statements of United, and certain pro forma financial data. The following exhibits were filed with the Form 8-K, as amended: Exhibit No. Description of Exhibits ----------- ----------------------- 2.1 Asset Purchase Agreement by and between TST/Impreso, Inc. and Bank of America, N.A. and consented to by United Computer Supplies, Inc., United Computer Supplies-East, Inc. and John R. Zimmerman (dated as of March 19, 2002) 2.2 Real Estate Purchase and Sale Agreement by and between United Computer Supplies, Inc. and TST/Impreso, Inc. dated as of March 15, 2002 99.1 Impreso, Inc. Press Release issued March 20, 2002 announcing the closing of the purchase 99.2 Audited financial statements of United Computer Supplies, Inc. and its subsidiaries listed in Item 7(a) of the Company's Form 8-K/A 99.3 Unaudited Pro Forma Financial Statements of Impreso, Inc. and Subsidiaries listed on Item 7 (b) of the 8-K/A 14 SIGNATURES Pursuant to the requirements 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. Dated: September 13, 2002 Impreso, Inc. (Registrant) /s/ Marshall Sorokwasz ------------------------------ Marshall Sorokwasz Chairman of the Board, Chief Executive Officer, President, and Director /s/ Susan Atkins ------------------------------ Chief Financial Officer and Vice President 15 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBITS - ----------- ----------------------- 99 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EX-99 3 d99761a1exv99.txt CERTIFICATIONS OF CEO AND CFO TO 18 USC SEC. 1350 EXHIBIT 99 CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 I, Marshall D. Sorokwasz, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Impreso, Inc. as amended on Form 10-Q/A for the quarterly period ended May 31, 2002 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q/A fairly presents in all material respects the financial condition and results of operations of Impreso, Inc. By: /s/ Marshall D. Sorokwasz ---------------------------------- Name: Marshall D. Sorokwasz Title: Chief Executive Officer I, Susan Atkins, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Impreso, Inc. as amended on Form 10-Q/A for the quarterly period ended May 31, 2002 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q/A fairly presents in all material respects the financial condition and results of operations of Impreso, Inc. By: /s/ Susan Atkins ----------------------------------- Name: Susan Atkins Title: Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----