-----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, E062hvV+9by3l0OVa2DOFDgLT/xnmaV2dP0engI6/TBGektwIlC9xIEKsGOGhB4g LZ1vWmYt5j+HoJKbHu3Dyg== 0000747435-98-000006.txt : 19980805 0000747435-98-000006.hdr.sgml : 19980805 ACCESSION NUMBER: 0000747435-98-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980804 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACTION PRODUCTS INTERNATIONAL INC CENTRAL INDEX KEY: 0000747435 STANDARD INDUSTRIAL CLASSIFICATION: GAMES, TOYS & CHILDREN'S VEHICLES (NO DOLLS & BICYCLES) [3944] IRS NUMBER: 592095427 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-13118 FILM NUMBER: 98676942 BUSINESS ADDRESS: STREET 1: 344 CYPRESS RD CITY: OCALA STATE: FL ZIP: 34472-3108 BUSINESS PHONE: 3526872202 MAIL ADDRESS: STREET 1: 344 CYPRESS ROAD CITY: OCALA STATE: FL ZIP: 34472-3108 FORMER COMPANY: FORMER CONFORMED NAME: ACTION PACKETS INC DATE OF NAME CHANGE: 19880818 10QSB 1 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 June 30, 1998 Commission File Number Registration Number 2-93512-A ACTION PRODUCTS INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Florida 59-2095427 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 344 Cypress Road, Ocala, Florida 34472-3108 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (352) 687-2202 Check 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 June 30, 1998. Class Outstanding at June 30, 1998 Common Stock, $.001 par value 1,624,900 Page 2 of 9 I N D E X PART I. FINANCIAL INFORMATION Page Number Item 1. Financial Statements Condensed balance sheets - June 30, 1998 and December 31, 1997 (unaudited) 3 Condensed statements of operations and changes in Retained Earnings - Three and six months ended June 30, 1998 and 1997 (unaudited) 4 Condensed statements of cash flows - Three and six months ended June 30, 1998 and 1997 (unaudited) 5 Notes to condensed financial statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 7 SIGNATURE PAGE 9 Page 3 of 9 ACTION PRODUCTS INTERNATIONAL, INC. CONDENSED BALANCE SHEETS ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY (UNAUDITED) June 30,1998 December 31, 1997 Current assets: Cash and cash equivalents $ 163,600 $ 537,800 Accounts receivable, net of allowance of $25,500 at June 30, 1998 and December 31, 1997 1,097,900 720,000 Notes receivable, current 303,300 575,000 Inventories, net 1,585,500 1,086,000 Prepaid expenses 159,700 58,600 Total Current Assets 3,310,000 2,977,400 Property, plant and equipment, net of accumulated depreciation of $760,700 at June 30, 1998 and $718,700 at December 31, 1997 905,300 923,400 Note receivable, long term 1,163,700 1,275,000 Other assets 158,000 150,100 TOTAL ASSETS 5,537,000 5,325,900 Current liabilities: Accounts payable & accrued expenses 663,600 353,400 Deferred revenue, current 50,000 75,000 Borrowings under line of credit 336,000 591,800 Total Current Liabilities 1,049,600 1,020,200 Long term liabilities: Deferred income taxes 178,000 266,000 Deferred revenue, long term 211,500 225,000 Notes payable 600,000 600,000 Shareholders' equity: Common stock $.001 par value authorized 15,000,000; 1,624,900 issued and outstanding at June 30,1998 and December 31, 1997 1,600 1,600 Capital in excess of par value 3,008,300 3,008,300 Stock subscription receivable (113,200) (113,200) Retained earnings 601,200 318,000 Total Shareholders'Equity 3,497,900 3,214,700 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,537,000 $ 5,325,900
See Accompanying Notes Page 4 of 9 ACTION PRODUCTS INTERNATIONAL, INC. CONDENSED STATEMENTS OF OPERATIONS AND CHANGES IN RETAINED EARNINGS (UNAUDITED) Three months ended Six months ended June 30 June 30 1998 1998 1997 1998 Net Sales $1,827,800 $1,809,600 $3,081,500 $2,954,000 Cost of Sales 935,600 998,300 1,583,800 1,666,500 Gross Profit 892,200 811,300 1,497,700 1,287,500 Selling, General & Administrative Expenses 706,500 554,700 1,267,400 1,079,900 Other (expenses) income Other 70,400 1,200 81,900 4,400 Interest expense (13,000) (23,100) (29,000) (41,000) Total 57,400 (21,900) 52,900 (36,600) Income before income taxes 243,100 234,700 283,200 171,000 Provision for income taxes - - - - Net Income 243,100 234,700 283,200 171,000 Beginning retained earnings (accumulated deficit) 358,100 (381,300) 318,000 (317,600) Ending retained earnings (accumulated deficit) $ 601,200 $(146,600) $601,200 $(146,600) Net Income per share Basic $0.15 $0.15 $0.17 $0.11 Diluted $0.09 $0.09 $0.10 $0.06 Weighted average number of common shares outstanding Basic 1,624,900 1,549,900 1,624,900 1,549,900 Diluted 2,842,900 2,667,700 2,838,300 2,693,200
See Accompanying Notes Page 5 of 9 ACTION PRODUCTS INTERNATIONAL, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months ended Six months ended June 30 June 30 1998 1997 1998 1997 Cash flows from operating activities: Net income $243,100 $234,700 $283,200 $171,000 Adjustments to reconcile net income to net cash used in operating activities Depreciation and amortization 48,300 59,100 69,300 118,900 Change in assets and liabilities: Increase in current assets other than cash and cash equivalents (603,900) (617,900) (595,400)(1,206,000) Increase (decrease) in current liabilities 278,800 156,300 183,700 180,800 Decrease (increase) in other assets (39,100) (14,400) (35,300) (22,800) Net cash used in operating activities ($72,800) ($182,200) ($94,500) ($758,100) Net cash used in investing activities ($11,700) ($2,800) ($23,900) ($8,300) Cash flows from financing activities: Proceeds from borrowings on line of credit 131,000 65,000 (255,800) 241,800 Results of other financing activities - 69,400 - 69,400 Net cash provided by (used in) fin. activities $131,000 $134,400 ($255,800) $311,200 Net increase (decrease) in cash and cash equiv. $46,500 ($50,600) ($374,200) ($455,200) Cash and cash equivalents at start of period $117,100 $58,500 $537,800 $463,100 Cash and cash equivalents at end of period $163,600 $7,900 $163,600 $7,900 Supplemental disclosures - cash paid for Interest $13,000 $23,100 $29,000 $41,000 Taxes $ - $ - $125,000 $ -
See Accompanying Notes Page 6 of 9 ACTION PRODUCTS INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Condensed financial statements In the opinion of management, the accompanying unaudited condensed financial statements contain all normal recurring adjustments necessary to present fairly the financial position of Action Products International, Inc. at June 30, 1998 and the results of its operations and cash flows for the second quarter ending June 30, 1998. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the Company's report on Form 10-KSB for the year ended December 31, 1997. The results of operations for the period ended June 30, 1998 are not necessarily indicative of the operating results for the full year. 2. Income per common share In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, which is effective for the periods ending after December 15, 1997. SFAS No. 128 replaces the presentation of primary earnings per share with a presentation of basic earnings per share based upon the weighted average number of common shares for the period. Page 7 of 9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations: Any statements that are not historical facts contained in this discussion are forward looking statements. It is possible that the assumptions made by management for purposes of such statements may not materialize. Actual results may differ materially from those projected or implied in any forward looking statements. Such statements may involve risks and uncertainties, including but not limited to those relating to product demand, pricing, market acceptance, the effect of economic conditions, and intellectual property rights and the outcome of competitive products, risks in product development, the results of financing efforts, the ability to complete transactions, and other risks identified in this and the Company's other Securities and Exchange Commission filings. Three months ended June 30, 1998 During the second quarter ended June 30, 1998 revenue increased to a new quarterly record of $1,827,800 in 1998 from $1,809,600 in 1997. Net income for the second quarter 1998 increased to $243,100 from $234,700 for the 1997 comparable period. Management had anticipated a decline in sales from last years record quarter due to the divestiture of certain product lines, but stronger than expected sales from its new proprietary lines negated the lost sales. Gross profit increased $80,900 to $892,200 from $811,300. As a percent of sales, gross profit was up four more percentage points to 48.8% from 44.8% for the 1997 comparable period. Management attributes this continued improvement to deeper market penetration, additional proprietary products, and more beneficial terms and pricing with overseas vendors. Selling, General & Administrative expenses increased $151,800. Management attributes the increase in expenses to certain sales and marketing expenditures, including additional salaries and commissions connected with the Company's strengthening of its marketing staff, sales force, and outside sales representative organizations. Other income increased $69,200 due to gains on the disposal of assets and the recognition of deferred revenue in connection with the divestiture of certain product lines. Six months ended June 30, 1998 During the six months ended June 30, 1998 revenues were $3,081,500 in 1998, up $127,500 from $2,954,000 in 1997, thus exceeding the $3 million mark in the first half of the year for the first time in the Company's history. Management attributes the increase in net sales to improved selling systems and channels, broader distribution, stronger than expected sales from its new proprietary lines, and the earlier availability of shippable inventories. The Company continues to benefit from its transition from a toy distributor to a toy maker, as sales from proprietary toy lines have exceeded prior year results. Improvements to the sales systems have eased diversification into new markets, particularly the Company's increasing penetration into the specialty toy market. Further improvements to marketing and merchandising also contributed to the increase. Page 8 of 9 Gross profit for the six months ended increased $210,200 to $1,497,700 from $1,287,500, or about 16%. As a percentage of sales, gross profit was up five points to 48.6% from 43.6% for the 1997 comparable period, especially significant considering last year's nine-point jump. Selling, General & Administrative Expenses for the six months ended increased about 17%. As previously discussed, management attributes the increase in expenses to certain sales and marketing expenditures, including additional salaries and commissions connected with the Company's strengthening of its marketing staff, sales force, and outside sales representative organizations. Financial Condition, Liquidity and Capital Resources: As of June 30, 1998, current assets were $3,310,000 compared to current liabilities of $1,049,600 for a current ratio of better than 3:1. At June 30, 1998, working capital improved by $303,200 compared to December 31, 1997. Though gradually changing due to the Company's penetration into the specialty toy market, the peak period of the Company's business cycle has historically been March through August. As expected, accounts receivable and inventories increased cyclically to $1,097,900 and $1,585,500, respectively, at June 30, 1998 compared to $720,000 and $1,086,000 at December 31, 1997, respectively. Total current assets increased by $332,600 and total assets increased by $211,100, while current liabilities increased slightly by $29,400. Other changes in balance sheet from December 31, 1997 included the following: Property, plant and equipment, net of depreciation, decreased by $18,100 from December 31, 1997 as a result of normal depreciation. Other assets increased slightly from December 31, 1997, primarily due to amortizations and deferrals of product development, dies, molds, designs and prepaid expenses related to new products and packaging. Accounts payable and accrued expenses increased $310,200 to $663,600 at June 30, 1998 from $353,400 at December 31, 1997 due primarily to the seasonal nature of the purchases and the timing of inventory receipts. Cash and cash equivalents were down $374,200 from December 31, 1997 and up $46,500 from March 31, 1998. Cash flow used in operating activities improved to $72,800 for the three months ended June 30, 1998 as compared to cash flow used in operating activities of $182,200 for the comparable period June 30, 1997. This is due primarily to increases in sales and net income and the increases in current liabilities. Cash flow used in operating activities for the six months ended June 30, 1998 improved to $94,500 as compared to cash flow used in operating activities of $758,100 for the comparable period June 30, 1997, an improvement of $663,600. This cash flow increase is due in part to smaller inventory balances needed to sustain profitable sales in light of the divestiture of certain low-margin product lines, as well as the collection of notes receivable resulting from the divestitures. Shareholders' equity at June 30, 1998 increased during the six months then ended by $283,200 to $3,497,900 as a result of earnings. Page 9 of 9 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. Action Products International, Inc. Date: August 4, 1998 By: /s/ Delton G. de Armas Delton G. de Armas Chief Financial Officer EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 2ND QTR 10-QSB
5 1,000 6-MOS Dec-31-1998 Jan-01-1998 Jun-30-1998 164 0 1098 0 1585 3310 1666 (761) 5537 1050 600 2 0 0 3496 5537 3081 3081 1584 1584 1267 0 29 283 0 283 0 0 0 283 0.17 0.10
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