-----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, V2aYtAOM5V51xndYTaLqp6qZYKdn9WTqjxhQ18YbiL5Dxf55fLxxm194kMiFHU2y 5z1CeXRHkpHLak0GLLGW9Q== 0000747435-97-000004.txt : 19970814 0000747435-97-000004.hdr.sgml : 19970814 ACCESSION NUMBER: 0000747435-97-000004 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACTION PRODUCTS INTERNATIONAL INC CENTRAL INDEX KEY: 0000747435 STANDARD INDUSTRIAL CLASSIFICATION: ICE CREAM & FROZEN DESSERTS [2024] IRS NUMBER: 592095427 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-13118 FILM NUMBER: 97657710 BUSINESS ADDRESS: STREET 1: 344 CYPRESS RD CITY: OCALA STATE: FL ZIP: 34472-3108 BUSINESS PHONE: 9046872202 MAIL ADDRESS: STREET 1: 344 CYPRESS ROAD CITY: OCALA STATE: FL ZIP: 34472 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, 1997 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, 1997. Class Outstanding at June 30, 1997 Common Stock, $.001 par value 1,549,926 Page 2 of 9 I N D E X PART I. FINANCIAL INFORMATION Page Number Item 1. Financial Statements Condensed balance sheets - June 30, 1997 and December 31, 1996 (unaudited) 3 Condensed statements of operations and changes in Retained Earnings - Three and six months ended June 30, 1997 and 1996 (unaudited) 4 Condensed statements of cash flows - Three and six months ended June 30, 1997 and 1996 (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, December 31, 1997 1996 Current assets: Cash and cash equivalents $ 7,885 $ 463,137 Accounts receivable, net of allowance of $5,500 at June 30, 1997 and $25,500 at December 31, 1996 1,013,646 517,982 Inventories, net 1,891,533 1,204,778 Prepaid expenses 270,517 246,888 Total Current Assets 3,183,581 2,432,785 Property, plant and equipment, net of accumulated depreciation of $926,658 at June 30, 1997 and $872,692 at December 31, 1996 1,018,830 1,064,522 Other assets 332,879 375,009 TOTAL ASSETS 4,535,290 3,872,316 Current liabilities: Accounts payable & accrued expenses 773,987 593,174 Borrowings under line of credit 416,750 175,000 Total Current Liabilities 1,190,737 768,174 Long term liabilities: Notes payable 600,000 600,000 Shareholders' equity: Common stock $.001 par value authorized 7,500,000; 1,549,926 issued and outstanding at June 30,1997 and December 31, 1996 1,550 1,550 Capital in excess of par value 2,904,192 2,904,192 Stock subscription receivable (14,556) (84,000) Accumulated deficit (146,633) (317,600) Total Shareholders' Equity 2,744,553 2,504,142 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,535,290 $ 3,872,316
Page 4 of 9 ACTION PRODUCTS INTERNATIONAL, INC. CONDENSED STATEMENTS OF OPERATIONS AND CHANGES IN RETAINED EARNINGS (UNAUDITED) Three months Six months ended ended June 30 June 30 1997 1996 1997 1996 Net Sales $1,809,623 $1,736,182 $2,954,009 $3,173,846 Cost of Sales 998,314 1,155,792 1,666,467 2,071,599 Gross Profit 811,309 580,390 1,287,542 1,102,247 Selling, General & Administrative Expenses 554,662 465,631 1,079,888 851,370 Other (expenses) income Other 1,197 12,234 4,391 18,939 Interest expense (23,142) (14,156) (41,078) (28,199) Total (21,945) (1,922) (36,687) (9,260) Income before income taxes 234,702 112,837 170,967 241,617 Provision for income taxes 0 0 0 0 Net Income 234,702 112,837 170,967 241,617 Beginning retained earnings (accumulated deficit) (381,335) 129,035 (317,600) 255 Ending retained earnings (accumulated deficit) ($146,633) $241,872 ($146,633) $241,872 Net Income per share $0.15 $0.08 $0.11 $0.16 Weighted average number of common shares outstanding 1,549,926 1,499,926 1,549,926 1,499,926
Page 5 of 9 ACTION PRODUCTS INTERNATIONAL, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months Six months ended ended June 30 June 30 1997 1996 1997 1996 Cash flows from operating activities: Net income $234,702 $112,837 $170,967 $241,617 Adjustments to reconcile net income to net cash used in operating activities: Depreciation 25,513 28,036 53,966 53,182 Change in assets and liabilities: Increase in current assets other than cash and cash equivalents (617,966) (177,864)(1,206,048) (882,420) Increase (decrease) in current liabilities 156,335 (137,436) 180,813 66,954 Decrease (increase) in other assets 19,160 5,055 42,130 (38,285) Net cash used in operating activities ($182,256)($169,372) ($758,172)($558,952) Net cash used in investing activities ($2,823) ($53,472) ($8,274)($112,253) Cash flows from financing activities: Proceeds from borrowings on line of credit 65,000 0 241,750 0 Results of other financing activities 69,444 0 69,444 268,000 Net cash provided by fin. activities $134,444 $0 $311,194 $268,000 Net decrease in cash and cash equiv. ($50,635)($222,844) ($455,252)($403,205) Cash and cash equivalents at start of period $58,520 $419,724 $463,137 $600,085 Cash and cash equivalents at end of period $7,885 $196,880 $7,885 $196,880 Supplemental disclosures - cash paid for Interest $23,142 $14,156 $41,078 $28,199 Taxes $0 $0 $0 $11,075
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, 1997 and the results of its operations and cash flows for the second quarter ending June 30, 1997. 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, 1996. The results of operations for the period ended June 30, 1997 are not necessarily indicative of the operating results for the full year. 2. Income per common share Income per common share is computed based upon the weighted average number of shares outstanding during 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 that 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, 1997 During the second quarter ended June 30, 1997 revenue increased to a new quarterly record of $1,809,623 in 1997 from $1,736,182 in 1996, up 4%. The second quarter 1997 net income more than doubled to $234,702 versus $112,837 for the 1996 comparable period, due to the increase in sales and the significant eleven point improvement in the gross profit margin. The increase in sales is attributable to the improved packaging, merchandising and marketing efforts of the Company's core product lines, new products released in latter part of the second quarter, and a continued effort by sales management to expand the sales force and broaden the market base. Gross profit increased $230,919 to $811,309 from $580,390, up 40%. As a percent of sales, gross profit was up more than eleven points to 44.8% from 33.4% for the 1996 comparable period. Management attributes this improvement to selling price increases, increasing market penetration, new proprietary products, and more beneficial terms and pricing with overseas vendors, all of which are attributable to the Company's transition from distributor to manufacturer. Selling, General & Administrative expenses increased $89,031, or about 19%. Management attributes the increase in expenses to various transitional costs including its new divisional catalogs, extended trade show coverage, and other marketing expenditures; additional salaries and commissions connected with the Company's strengthening of its marketing and sales force and outside sales representative organizations; and increases in depreciation and amortization linked to prior year acquisitions of equipment and other assets. Six months ended June 30, 1997 During the six months ended June 30, 1997 revenues were $2,954,009 in 1997, down less than 7% from $3,173,846 in 1996. The decrease in sales for the six months ended is attributable to the decrease in first quarter revenues. Management attributed the decrease in first quarter net sales to early shortages in shippable inventories. These shortages were primarily as a result of the Company's transition from its role as a distributor to a manufacturer of proprietary products. Packaging complications and delays in receipts of overseas shipments also contributed to the inventory shortages. Furthermore, management did not anticipate the overwhelming response at its trade shows and from the distribution of its recently divisionalized toy and publishing catalogs. As a result, the Company experienced inventory shortages in product lines where demand was underestimated. Page 8 of 9 Gross profit for the six months ended increased $185,295 to $1,287,542 from $1,102,247, or 17%. As a percentage of sales, gross profit was up significantly to 43.6% from 34.7% for the 1996 comparable period. Selling, General & Administrative Expenses for the six months ended increased about 27%. As previously discussed, management attributes the increase in expenses to various first quarter expenditures as well as other transitional costs including its additional marketing expenditures, additional salaries and commissions, and increases in depreciation and amortization. Financial Condition, Liquidity and Capital Resources: As of June 30, 1997, current assets were $3,183,581 compared to current liabilities of $1,190,737 for a current ratio of 3:1. At June 30, 1997, working capital improved by $328,233 compared to December 31, 1996. Historically, the peak period of the Company's business cycle has been March through August. Thus, accounts receivable and inventories were $1,013,646 and $1,891,533, respectively, at June 30, 1997 compared to $517,982 and $1,204,778, respectively, at December 31, 1996. The increase in receivables and inventories are considered normal for the Company and reflect the increased activity in its high volume period. Total current assets increased by $750,796, total assets increased by $662,974. Current liabilities increased by $422,563 due primarily to draws on the Company's line of credit, used for inventory purchases, and seasonal increases in trade accounts payable. Significant changes in balance sheet from December 31, 1996 included the following: Accounts receivable increased to $1,013,646 from $517,982, due to seasonal increases during the Company's peak period and a strong increase in sales in the latter part of the second quarter. Inventories, consisting primarily of finished goods, increased $686,755 to $1,891,533 at June 30, 1997 from $1,204,778 at December 31, 1996, also reflective of the Company's peak period. Property, plant and equipment, net of depreciation, decreased by $45,692 from December 31, 1996 as a result of normal depreciation. Other assets decreased by $42,130 from December 31, 1996, primarily due to amortizations of product development, dies, molds, designs and prepaid expenses related to new products and packaging. Accounts payable and accrued expenses increased $180,813 to $773,987 at June 30, 1997 from $593,174 at December 31, 1996 due primarily to the seasonal nature of the purchases and the timing of inventory receipts. Cash and cash equivalents were down $455,252 from December 31, 1996 and $50,635 from March 31, 1997. Cash flow used in operations was $182,256 for the three months ended June 30, 1997 as compared to cash flow used in operations of $169,372 for the comparable period June 30, 1996. This is due primarily to increases in sales and net income and the increases in inventory, accounts receivable, and other current assets. Shareholders' equity at June 30, 1997 increased during the six months then ended by $240,411 to $2,744,553 due to earnings and the receipt of stock subscriptions receivable. 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: May 12, 1997 By: /s/ Delton G. de Armas Delton G. de Armas Controller/Corporate Secretary EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 2ND QTR 10-QSB
5 1,000 6-MOS Dec-31-1997 Jan-01-1997 Jun-30-1997 8 0 1013 0 1892 3184 1945 (926) 4535 1190 600 2 0 0 2743 4535 2954 2954 1666 1666 1075 0 41 171 0 171 0 0 0 171 0.11 0.11
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