-----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, O5ACv80kfz9gFR6WBKcMfVWbpaKswE0TzMcChj1FFha61Qyh0P4CcsDZlMLqFWOH klNqifsg+20OQxRCG+HYAw== 0000944209-99-000257.txt : 19990310 0000944209-99-000257.hdr.sgml : 19990310 ACCESSION NUMBER: 0000944209-99-000257 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990131 FILED AS OF DATE: 19990309 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATHANOR GROUP INC CENTRAL INDEX KEY: 0000278314 STANDARD INDUSTRIAL CLASSIFICATION: SCREW MACHINE PRODUCTS [3451] IRS NUMBER: 952026100 STATE OF INCORPORATION: CA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 002-63481 FILM NUMBER: 99560627 BUSINESS ADDRESS: STREET 1: 3452 E FOOTHILL BLVD STE 417 CITY: PASADENA STATE: CA ZIP: 91107 BUSINESS PHONE: 818-440-1602 MAIL ADDRESS: STREET 2: 921 E CALIFORNIA AVE CITY: ONTARIO STATE: CA ZIP: 91016 FORMER COMPANY: FORMER CONFORMED NAME: ALGERAN INC DATE OF NAME CHANGE: 19861015 10QSB 1 FORM 10-QSB FOR THE PERIOD ENDED 1/31/1999 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR QUARTER ENDED January 31, 1999 Commission File Number 2-63481 ------------------------------------------------------------ Athanor Group, Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its chapter) California 95-2026100 - ----------------------------------- ----------------------------------- (State or other jurisdiction (IRS Employer Identification No.) incorporation of organization) 921 East California Avenue, Ontario, California 91761 - -------------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code (909) 467-1205 ---------------------------- Former name, former address and former fiscal year, if changed since last report. - -------------------------------------------------------------------------------- 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 close of the period covered by this report: 1,458,854 shares as of January 31, 1999. PART I - FINANCIAL INFORMATION Item 1. Financial Statements ATHANOR GROUP, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) JANUARY 31, 1999 AND OCTOBER 31, 1998 (THOUSANDS)
ASSETS ------ 1999 1998 ------ ------ Current Assets: Cash $ 462 $ 236 Trade Receivables, Less Allowance for Doubtful Accounts of $8,000 and $13,000 1,999 2,369 Notes Receivable: Net of Allowance of $534,062 48 0 Inventories: Raw Materials 663 690 Work in Progress 568 438 Finished Goods 2,146 2,290 -------- -------- 3,377 3,418 Prepaid Expenses 143 67 Deferred Income Tax Asset 204 204 -------- -------- Total Current Assets 6,233 6,294 Property, Plant and Equipment, at Cost 5,564 5,476 Less Accumulated Depreciation and Amortization 4,003 3,932 -------- -------- Net Property, Plant and Equipment 1,561 1,544 Other Assets 296 388 -------- -------- $ 8,090 $ 8,226 ======== ========
The accompanying notes are an integral part of these statements SUBJECT TO AUDITOR'S YEAR END ADJUSTMENTS ATHANOR GROUP, INC. CONSOLIDATED BALANCE SHEETS (UNAUDITED) January 31, 1999 and October 31, 1998 (Thousands) LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------
1999 1998 ------ ------ Current Liabilities: Notes Payable $ 1,406 $ 1,273 Current Portion of Long-Term Debt 521 546 Accounts Payable 1,652 1,477 Accrued Expenses 454 716 -------- -------- Total Current Liabilities 4,033 4,012 Long-Term Debt, Less Current Portion 685 680 Noncurrent Deferred Income Tax Liability 130 130 Stockholders' Equity: Common Stock 15 15 Additional Paid-In Capital 1,447 1,447 Retained Earnings 1,780 1,942 -------- -------- Total Stockholders' Equity 3,242 3,404 -------- -------- $ 8,090 $ 8,226 ======== ========
The accompanying notes are an integral part of these statements SUBJECT TO AUDITOR'S YEAR END ADJUSTMENTS ATHANOR GROUP, INC. Consolidated Statements of Operations (Unaudited) Three Months Ended January 31, (Thousands)
1999 1998 ------ ------ Net Sales $ 4,423 $ 6,565 Cost of Sales 4,053 5,606 -------- -------- Gross Profit 370 959 Selling, General & Administrative 578 644 -------- -------- Operating Profit(Loss) (208) 315 Other Income (Expense) Interest Expense (59) (93) Miscellaneous - Net 18 15 -------- -------- Earnings (Loss) Before Income Taxes (249) 237 Income Tax Expense (Benefit) (87) 97 -------- -------- NET EARNINGS (LOSS) $ (162) $ 140 ======== ======== Net Income (Loss) Per Common Share: Basic $ (0.11) $ 0.09 ======== ======== Diluted $ (0.11) $ 0.09 ======== ========
The accompanying notes are an integral part of these statements SUBJECT TO AUDITOR'S YEAR END ADJUSTMENTS ATHANOR GROUP, INC. CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (UNAUDITED) THREE MONTHS ENDED JANUARY 31, 1999 (THOUSANDS)
Common Stock (25,000,000 Shares Additional Authorized) Paid-In Retained Shares Par Value Capital Earnings Total ------ --------- ---------- -------- ----- Balance at October 31, 1998 1,468 $ 15 $ 1,447 $ 1,942 $ 3,404 Net Loss for Three Months Ended January 31, 1999 (162) (162) --------- --------- ---------- -------- -------- 1,468 $ 15 $ 1,447 $ 1,780 $ 3,242 ========= ========= ========== ======== ========
The accompanying notes are an integral part of these statements SUBJECT TO AUDITOR'S YEAR END ADJUSTMENTS ATHANOR GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) THREE MONTHS ENDED JANUARY 31, (THOUSANDS)
1999 1998 ------ ------ Cash Flows From Operating Activities Net Earnings (Loss) $ (162) $ 140 Adjustments to Reconcile Net Earnings (Loss) to Net Cash Provided by Operating Activities: Depreciation and Amortization 99 111 (Increase) Decrease in Operating Assets: Accounts Receivable 370 (153) Inventories 41 301 Prepaid Expenses (76) (29) Other 44 (7) Increase (Decrease) in Operating Liabilities: Accounts Payable 175 65 Accrued Liabilities (262) (35) -------- -------- Net Cash Provided by Operating Activities 229 393 -------- -------- Cash Flows from Investing Activities: Purchase of Property and Equipment (116) (29) Short Term Loan 0 (80) -------- -------- Net Cash Used in Investing Activities (116) (109) -------- -------- Cash Flows from Financing Activities: Net Borrowings (Repayment) Under Line of Credit 133 (35) Net Payments of Long Term Debt (20) (119) -------- -------- Net Cash Provided (Used) in Financing Activities 113 (154) -------- -------- Net increase in Cash 226 130 Cash at Beginning of Year 236 138 -------- -------- Cash at End of Period $ 462 $ 268 ======== ======== Supplemental Disclosures of Cash Flow Information: Interest Paid $ 59 $ 93 ======== ======== Income Taxes Paid $ 22 $ 53 ======== ========
The accompanying notes are an integral part of these statements SUBJECT TO AUDITOR'S YEAR END ADJUSTMENTS Notes to Consolidated Financial Statements (Unaudited) January 31, 1999 and 1998 Note 1 - ------ In management's opinion, all adjustments necessary to a fair settlement of the results of operations for the interim periods, have been reflected. Note 2 - ------ The consolidated financial statements include the accounts of Athanor Group, Inc., and its subsidiary, Alger Manufacturing Co., Inc. Significant inter- company accounts and transactions have been eliminated. Note 3 - ------ Basic and diluted earnings (loss) per common share are computed by using the weighted average number of common shares outstanding during each period: 1,458,854 shares in 1999 and 1,462,854 shares in 1998. Diluted earnings (loss) per common share is computed by dividing net earnings (loss) by the number of weighted average common shares outstanding during the period, including common stock equivalents. Common stock equivalents were anti-dilutive for the period ended January 31, 1999, and, accordingly, basic and diluted loss per share are equal. There were no common stock equivalents for the period ended January 31, 1998. Note 4 - ------ The Company accounts for income taxes under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, net operating loss carryforwards and credit carryforwards are included as deferred tax assets. A valuation allowance against deferred tax assets is recorded if necessary. All deferred tax amounts are measured using enacted tax rated expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Changes in tax rates are recognized in income in the period that includes the enactment date. Note 5 - ------ In 1997, the FASB issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 establishes standards for the reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general purpose financial statements. SFAS 130 is effective for fiscal years beginning after December 15, 1997. There is no difference between net income and comprehensive income for the Company. In 1997, the FASB issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SAFS 131). SFAS 131 establishes standards for public business enterprises to report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. SFAS 131 also requires that the enterprise report descriptive information about the way that the operating segments were determined and the products and services provided by the operating segments. SFAS 131 is effective for financial statements for periods beginning after December 15, 1997. In the initial year of application, comparative information for earlier years is to be restated. SFAS 131 need not be applied to interim financial statements in the initial year of its application, but comparative information for interim periods in the initial year of application is to be reported in financial statements for interim periods in the second year of application. The Company operates in one segment of the screw machine industry. Note 6 - ------ In prior years, the Company has accounted for its investment in Core Software Technology (Core) on the equity method of accounting, which requires the Company to record its shares of Core's earnings or losses. The investment in Core has been reduced to $35,000 due to Core's accumulated losses. For years beginning in fiscal 1998, the Company is carrying its investment in Core at cost, due to its percentage reduction in ownership interest and its continuation as the senior secured lender. At January 1999 and 1998 the Company owned approximately 16.9% and 18.3% respectively of the issued and outstanding common stock of Core. Note 7 - ------ In April 1995, the Company consummated a transaction, whereby it agreed to acquire 100,000 shares of its common stock at $2 per share. The agreement called for 20% down, or $40,000, at the closing and the balance of $160,000 to be paid in equal annual installments of $40,000 beginning on April 1, 1996, through April 1, 1999. Interest payments on the unpaid balance are to be paid quarterly at 8%. As of January 31, 1999, the Company's unpaid balance is $40,000. The unpaid balance is secured by an equal amount of the company's common stock as defined in the agreement. Note 8 - ------ In April 1997, the Company adopted a stock option plan (the Plan) pursuant to which the Company's Board of Directors may grant stock options to officers, directors and key employees. The Plan authorized grants of options to purchase up to 220,340 shares of authorized but unissued common stock. In December 1998, the Company granted 35,000 stock options for shares of Athanor. Stock options were granted with an exercise price equal to the stock's fair market value at the date of grant ($1.66 at December 11, 1998). All stock options vest and become fully exercisable as shown below: 6 months after granting 20% after one year 20% after two years 30% after three years 30% ============
Thus, after three years of service, the options become fully vested. However, options are exercisable six months after they are granted and remain exercisable for eight years after the date of issuance. There were 205,000 options to purchase common stock outstanding as of January 31, 1999, of which 34,000 were exercisable. No options were outstanding at January 31, 1998. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS - -------------------------- Except for historical facts, this Report contains forwardlooking statements concerning the Company's business outlook and plans, future cash requirements and capital expenditure requirements made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on certain assumptions and outcomes are subject to risks and uncertainties. The forward-looking statements are, therefore, subject to change at any time. Actual results could differ materially from expected results expressed in any such forward-looking statements based on numerous factors, including the level of customer demand, the cost and availability of raw materials, changes in the competitive environment, the Company's ability to achieve cost reductions and efficiencies, the Company's ability to attract and retain skilled employees and other uncertainties detailed from time to time in the Company's Securities and Exchange Commission Filings. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- The Company's working capital at January 1999 of $2,200,000 has declined slightly when compared to $2,282,000 at October 1998 and $2,343,000 at January 1998. The reduction is primarily associated with a decline in sales for the first quarter combined with the operating loss. The lack of sales in the quarter has also had a major impact on the Company's credit facility, substantially reducing cash availability for operations. The Company's credit agreement provides for a total line of credit of $3,833,333, of which $2,600,000 is for working capital, $483,333 long term machinery and equipment loan, and $750,000 line for the acquisition of additional equipment. At January 1999, the Company had approximately $709,000 available under the working capital line and $550,000 available under the equipment line as compared to $1,185,000 and $650,000, respectively, at October 1998 and $1,270,000 and $650,000, respectively, at January 1998. While the availability under the credit agreement had been substantially reduced due to the decline in sales and accounts receivable, the Company believes the lines of credit will be adequate to fund the working capital requirements and anticipated equipment purchases in fiscal 1999. The Company's credit agreement terminates in August 1999 unless extended in writing by the lender. The Company has no reason to believe that the lender will not extend the line of credit. However, there can be no assurance the Company will be able to extend the agreement. The Company expended $116,000 on new equipment during the first three months of 1999. In addition, the Company has ordered $70,000 of the new equipment for delivery in early fiscal 1999. Due to the current slowdown in business the Company does not anticipate any major equipment purchases during the balance of 1999. RESULTS OF OPERATIONS - --------------------- Sales for the first three months of fiscal 1999 have decreased 33% from 1998. The Company had seen a gradual slow-down in its business the last six months of fiscal 1998, as customers delayed shipment on existing orders and the Company's backlog had slipped. The accelerated decline in sales for the first quarter of 1999 seems to be a continuation of the slowdown the Company experienced in the last half of 1998. There are some signs that the slowdown has reached a bottom as the Company's backlog has improved to $7,710,000 at January 1999 compared to $6,986,000 at October 1998 and $9,014,000 at the end of the first quarter of 1998. In the normal course of business, some backlog orders are inevitably cancelled or the time of delivery changes. There is no assurance that the total backlog will result in completed sales. However, the Company has not experienced significant cancellations in its recent past. It is difficult at this juncture to determine the state of the economy and the Company's market. At the end of October 1998 we were wondering if the slowdown was a short-term blip or was the economy finally slowing down? We are still looking for the answer and proceeding cautiously until we see signs of a stronger economy. The Company's operating loss for the three months ended January 1999 was $(208,000) as compared to a profit of $315,000 for 1998. The difference is tied directly to the 33% decline in sales in 1999. During the last half of 1998 the Company had continually evaluated the overhead additions of previous years in an attempt to streamline operations where appropriate, especially in light of the current economic climate. This evaluation is continuing. During 1998 and early 1999 the Company devoted substantial financial and manpower resources toward the completion of an ISO 9002 Certification. The ISO 9000 is an international quality standard. While the ISO 9002 Certification is being required by many of the Company's current customers, it is expected to enhance the Company's appeal to potential new customers. The process started in early fiscal 1998 and was completed in February 1999 when the company passed its certifying audit. The Company should receive its ISO 9002 Certificate in the next month. YEAR 2000 COMPUTER REQUIREMENTS - ------------------------------- During fiscal 1997, the Company established an enterprise-wide program to address its Year 2000 issues. The Year 2000 effort, which includes the implementation of previously planned business critical systems and specific Year 2000 projects, is on track to be completed before the year 2000. All applications that were previously not Year 2000 compliant have been replaced by new systems. The costs of new systems have been recorded as an asset and amortized. The portion of the costs associated with making the remaining applications, not covered by new systems, Year 2000 compliant is not considered to be material. Accordingly, the Company does not expect the Year 2000 effort to have a material impact on its results of operations, liquidity or financial condition. In addition, the Company has not deferred any other projects that will have a material impact on its results of operations, liquidity or financial condition. INFORMATION TECHNOLOGY ("IT") SYSTEMS ------------------------------------- In conjunction with the establishment of its enterprise-wide Year 2000 program, the Company began converting its computer information systems to a new enterprise system, which is Year 2000 compliant. As of October 31, 1998, all implementations are complete. NON-IT SYSTEMS -------------- NonIT Systems may contain date sensitive, embedded technology requiring Year 2000 upgrades. Examples of this technology include security equipment such as access and alarm systems, as well as facilities equipment such as telephone and heating and air conditioning units. As the Company is a product manufacturer, the "embedded chip" issue relates to equipment used by the Company and hence, primarily to the Company's manufacturing facilities. Facilities and equipment inventories and assessments are in progress. However, the majority of the Company's machinery is manually operated, and therefore is less affected by Year 2000 issues. The Company is also addressing the readiness of its critical suppliers and customers. All principal material and service suppliers and critical customers have been contacted to determine their level of readiness. The Company has a planned follow up to determine their progress. In certain areas where the Company relies on products supplied by manufacturers for systems provided to its customers, the Company is seeking standard Year 2000 warranties that, to the extent assignable, may be transferred to customers. COSTS ----- The total cost associated with required modifications to become Year 2000 compliant is not expected to be material to the Company's results of operations, liquidity and financial condition. The estimated total cost of the Year 2000 effort is approximately $36,000. The total amount expended through October 1998, was approximately $13,000. The estimated future cost of completing the Year 2000 effort is estimated to be approximately $23,000. RISKS AND CONTINGENCY PLANNING ------------------------------ The Company has identified and assessed its areas of risk related to the Year 2000 problem. The failure to correct a material Year 2000 problem could result in an interruption in, or a failure of, certain normal business activities or operations. Such failures could materially and adversely affect the Company's results of operations, liquidity and financial condition. Due to the general uncertainty inherent in the Year 2000 problem, resulting in part from the uncertainty of the Year 2000 readiness of third-party suppliers, the Company is unable to determine at this time whether the consequences of the Year 2000 failures will have a material impact on the Company's results of operations, liquidity or financial condition. The Year 2000 effort is expected to significantly reduce the Company's level of uncertainty about the Year 2000 problem and, in particular, about the Year 2000 compliance and readiness of its critical suppliers and customers. The Company believes that, with the implementation of its new computer systems and upgrades and completion of the Year 2000 specific projects as scheduled, the possibility of significant interruptions of normal operations should be reduced. Item 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) None (b) No reports on Form 8-K have been filed during the quarter for which this report is filed. 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. ATHANOR GROUP, INC. Date March 8, 1999 By /s/ Duane L. Femrite ------------- -------------------- Duane L. Femrite President, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, and Director EX-27 2 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED STATEMENTS OF EARNINGS AND CONSOLIDATED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS OCT-31-1999 NOV-01-1998 JAN-31-1999 462 0 2,007 8 3,377 6,233 5,564 4,003 8,090 4,033 0 0 0 15 3,227 8,090 4,423 4,423 4,053 4,631 0 0 59 (249) (87) 0 0 0 0 (162) (.11) (.11)
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