-----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, BagXH1eVBln3ZAsL5CjVN7hqMNnjsqxkK+1wwLKQsUeorg0Ze7tqEY4u0Hk5nrX2 o8aUYf3G/e2xBCnZHDN8bA== 0000747435-97-000005.txt : 19971117 0000747435-97-000005.hdr.sgml : 19971117 ACCESSION NUMBER: 0000747435-97-000005 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 000-13118 FILM NUMBER: 97720797 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, DC 20549 Form 10-QSB QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended September 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 (IRS 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) 680-3516 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 September 30, 1997. Class Outstanding at September 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 - September 30, 1997 and December 31, 1996 (unaudited) 3 Condensed Statements of Operations and Changes in Retained Earnings - Three and nine months ended September 30, 1997 and 1996 (unaudited) 4 Condensed Statements of Cash Flows Three and nine months ended September 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) September 30, 1997 December 31, 1996 Current assets: Cash and cash equivalents $ 103,325 $ 463,137 Accounts receivable, net of allowance of $5,500 at September 30, 1997 and $25,500 at December 31, 1996 876,777 517,982 Inventories, net 1,999,516 1,204,778 Prepaid expenses 206,590 246,888 Total Current Assets 3,186,208 2,432,785 Property, plant and equipment, net of accumulated depreciation of $952,265 at September 30, 1997 and $872,692 at December 31, 1996 999,033 1,064,522 Other assets 303,810 375,009 TOTAL ASSETS 4,489,051 3,872,316 Current liabilities: Accounts payable & accrued expenses 460,169 593,174 Borrowings under line of credit 551,750 175,000 Total Current Liabilities 1,011,919 768,174 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 September 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 (14,054) (317,600) Total Shareholders' Equity 2,877,132 2,504,142 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,489,051 $ 3,872,316
Page 4 of 9 ACTION PRODUCTS INTERNATIONAL, INC. CONDENSED STATEMENTS OF OPERATIONS AND CHANGES IN RETAINED EARNINGS (UNAUDITED) Three months ended September 30 Nine months ended September 30 1997 1996 1997 1996 Net Sales $ 1,700,503 $ 1,458,827 $ 4,654,512 $ 4,632,673 Cost of Sales 918,816 955,156 2,585,283 3,026,755 Gross Profit 781,687 503,671 2,069,229 1,605,918 Selling, General & Administrative Expenses 623,606 443,544 1,703,494 1,294,914 Other (expenses) income Other 272 6,902 4,663 25,841 Interest expense (25,774) (13,625) (66,852) (41,824) Total (25,502) (6,723) (62,189) (15,983) Income before income taxes 132,579 53,404 303,546 295,021 Provision for income taxes - - - - Net Income 132,579 53,404 303,546 295,021 Beginning retained earnings (accumulated deficit) (146,633) 241,872 (317,600) 255 Ending retained earnings (accumulated deficit) $ (14,054) $ 295,276 $ (14,054) $ 295,276 Net Income per share $0.09 $0.04 $0.20 $0.20 Net income per common and common equivalent share (fully diluted) $0.05 $0.02 $0.12 $0.11 Weighted average number of common shares outstanding 1,549,926 1,499,926 1,549,926 1,499,926 Weighted average number of common and common equivalent shares outstanding 2,739,210 2,749,210 2,739,210 2,749,210
Page 5 of 9 ACTION PRODUCTS INTERNATIONAL, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months ended September 30 Nine months ended September 30 1997 1996 1997 1996 Cash flows from operating activities: Net income (loss) $132,579 $53,404 $303,546 $295,021 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation 25,607 28,541 79,573 81,723 Change in assets and liabilities: Decrease (increase) in current assets other than cash and cash equivalents 92,813 399,847 (1,113,235) (471,498) Increase (decrease) in current liabilities (313,818) (273,203) (133,005) (217,324) Decrease (increase) in other assets 29,069 (179,612) 71,199 (217,897) Net cash provided by (used in) operating activities $ (33,750) $ 28,977 ($ 791,922) ($ 529,975) Net cash used in investing activities ($ 5,810) ($ 59,128) ($ 14,084) ($ 171,381) Cash flows from financing activities: Proceeds from (repayments of) borrowings on line of credit, net 135,000 - 376,750 - Results of other financing activities - - 69,444 268,000 Net cash (used in) provided by fin. Activities $ 135,000 $ - $ 446,194 $ 268,000 Net increase (decrease) in cash and cash equiv. $95,440 ($30,151) ($359,812) ($433,356) Cash and cash equivalents at start of period $ 7,885 $ 196,880 $ 463,137 $ 600,085 Cash and cash equivalents at end of period $ 103,325 $ 166,729 $ 103,325 $ 166,729 Supplemental disclosures - cash paid for Interest $25,774 $13,625 $66,852 $41,824 Taxes $0 $0 $0 $11,075
Page 6 of 9 ACTION PRODUCTS INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Condensed consolidated financial statements In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all normal recurring adjustments necessary to present fairly the financial position of Action Products International, Inc. at September 30, 1997 and the results of its operations and cash flows for the three and nine month periods ended September 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 September 30, 1997 are not necessarily indicative of the operating results for the full year. 2. Shareholders' equity During the nine months ending September 30, 1997 shareholders' equity increased $372,990. Net income for the period was $303,546. The Company collected $69,444 of the outstanding stock subscriptions receivable; $14,556 remains receivable from a related party in the form of non-interest bearing promissory notes secured by the stock purchased. 3. New Accounting Standards 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. It also requires dual presentation of basic and fully diluted earnings per share for companies with complex capital structures. Adoption of the provision of SFAS No. 128 would not significantly affect reported earnings per share for any of the periods presented. 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 September 30, 1997 During the third quarter ended September 30, 1997 revenue increased to a record $1,700,503 in 1997 from $1,458,827 in 1996, up $241,676, or 17%. The third quarter 1997 net income improved 148% to a record $132,579 versus $53,404 for the 1996 comparable period, due to the increases in sales and gross margins. The increase in sales is attributable to improved packaging and presentation of the Company's core product lines; significant merchandising and marketing efforts; sustained sales from 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 $278,016 to $781,687 from $503,671. As a percent of sales, gross profit increased more than eleven points to 46.0% from 34.5% for the 1996 comparable period. Management attributes this improvement in gross profit percentage to selling price increases, new proprietary products, and more beneficial terms and pricing with overseas vendors, all of which are primarily attributable to the Company's recent transition from distributor to manufacturer. Selling, General & Administrative expenses increased $180,062. Management attributes the increase in expenses to various transitional costs including: its new catalogs by product line, 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. Nine months ended September 30, 1997 During the nine months ended September 30, 1997 revenue increased slightly to $4,654,512 in 1997 from $4,632,673 in 1996. Record sales in the second and third quarters of 1997 overcame the shortfalls experienced in the first quarter of 1997. The nine months 1997 net income was $303,546 versus $295,021 in 1996, an improvement of 3%, due to the improved margins of proprietary products and the increase in sales. The increase in sales is attributable in part to improved packaging and presentation of the Company's core product lines; significant merchandising and marketing efforts; sustained sales of 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. Page 8 of 9 Gross profit increased $463,311 to $2,069,229 from $1,605,918, up nearly 30%. As a percent of sales, gross profit was up to 44.5% from 34.7% for the 1996 comparable period. Management attributes this improvement in gross profit percentage to selling price increases, new proprietary products, and more beneficial terms and pricing with overseas vendors, all of which are primarily attributable to the Company's transition from distributor to manufacturer. Selling, General & Administrative Expenses for the six months ended increased about 30%. 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 September 30, 1997, current assets were $3,186,208 compared to current liabilities of $1,011,919 for a current ratio of 3:1. At September 30, 1997, working capital improved by $509,678 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 $876,777 and $1,999,516, respectively, at September 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 the Company's high volume period. Total current assets increased by $753,423, total assets increased by $616,735. Current liabilities increased by $245,245 due primarily to draws on the Company's line of credit, used for inventory purchases. Significant changes in balance sheet from December 31, 1996 included the following: Accounts receivable increased to $876,777 from $517,982, an increase of $358,795, due to seasonal increases during the Company's peak period and record sales in the third quarter. Inventories, consisting primarily of finished goods, increased $794,738 to $1,999,516 at September 30, 1997 from $1,204,778 at December 31, 1996 due to its seasonal nature and recent receipts of overseas products. Property, plant and equipment, net of depreciation, decreased by $65,489 from December 31, 1996 due to normal depreciation of fixed assets. Accounts payable and accrued expenses decreased $131,505 to $461,669 at September 30, 1997 from $593,174 at December 31, 1996 due to the seasonal nature of the purchases and the timing of inventory receipts. Cash and cash equivalents were down $359,812 from December 31, 1996 but up $95,440 from June 30, 1997. Cash flow used in operations was $33,750 for the three months ended September 30, 1997 as compared to cash flow provided by operations of $28,977 for the comparable period September 30, 1996. This is due primarily to the decreases in current liabilities since June 30, 1997. Cash flow used in operations was $791,922 for the nine months ended September 30, 1997 due to increases in inventories and accounts receivable associated with the Company's peak period. Shareholders' equity at September 30, 1997 increased during the nine months by $371,490 to $2,875,632 due to earnings and the receipt of payments of stock subscriptions from related parties. 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: November 7 ,1997 By: /s/ Delton G. de Armas Delton G. de Armas Controller/Corporate Secretary EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 3RD QTR 10-QSB
5 1,000 9-MOS Dec-31-1997 Jan-01-1997 Sep-30-1997 103 0 876 0 1999 3186 1951 (952) 4489 1011 600 2 0 0 2875 4489 4655 4655 2585 2585 1708 0 67 303 0 303 0 0 0 303 0.20 0.12
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