-----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, AD+8u63qpH5RneZbi2GuOZzDmRkG4vFLZFJnWzk7/uUDNGrX1p/+LFrqhnVgrwW6 7AOSk43ljWWFF9OT+Yptdw== 0000950144-01-506122.txt : 20010817 0000950144-01-506122.hdr.sgml : 20010817 ACCESSION NUMBER: 0000950144-01-506122 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010816 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: 1934 Act SEC FILE NUMBER: 000-13118 FILM NUMBER: 1716904 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 g71273e10qsb.txt ACTION PRODUCTS INTERNATIONAL, INC. 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 JUNE 30, 2001 Commission File Number 0-13118 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) 390 N. Orange Ave., Suite 2185, Orlando, Florida, 32801 (Address of principal executive offices, Zip Code) Registrant's telephone number, including area code (407) 481-8007 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 last practicable date. Class Outstanding at August 15, 2001 Common Stock, $.001 par value 2, 230,900 Transitional Small Business Disclosure Format (check one): YES [ ] NO [X] Page 1 of 12 2 I N D E X
PART I. FINANCIAL INFORMATION PAGE NUMBER Item 1. Financial Statements Condensed Consolidated Balance Sheet at June 30, 2001 3 Condensed Consolidated Statements of Operations - Three months ended and six months ended June 30, 2001 and 2000 (unaudited) 4 Condensed Consolidated Statements of Cash Flows - Six months ended June 30, 2001 and 2000 (unaudited) 5 Notes to unaudited Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 Item 3. Qualitative and Quantitative Disclosures About Market Risk 10 PART II. OTHER INFORMATION Item 4. Submission of Matters to Vote of Shareholders 10 Item 6. Exhibits and Reports on Form 8-K 10 SIGNATURE PAGE 12
Page 2 of 12 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ACTION PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
JUNE 30, 2001 ------------- ASSETS CURRENT ASSETS Cash and cash equivalents $ 740,300 Accounts receivable, net of an allowance for doubtful accounts of $141,000 1,490,500 Inventories, net 1,388,200 Prepaid expenses and other assets 501,200 ----------- TOTAL CURRENT ASSETS 4,120,200 PROPERTY, PLANT AND EQUIPMENT 2,240,900 Less accumulated depreciation and amortization (1,032,900) ----------- NET PROPERTY, PLANT AND EQUIPMENT 1,208,000 EXCESS OF FAIR VALUE OVER COST OF ASSETS ACQUIRED 563,600 OTHER ASSETS 564,300 ----------- TOTAL ASSETS $ 6,456,100 =========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current portion of installment notes payable and obligation under capital lease $ 76,100 Accounts payable 283,900 Accrued expenses 111,000 Borrowings under lines of credit 1,536,200 Other Current Liabilities 46,900 ----------- TOTAL CURRENT LIABILITIES 2,054,100 ----------- INSTALLMENT NOTES PAYABLE AND OBLIGATION UNDER CAPITAL LEASE 111,300 COMMERCIAL LOANS PAYABLE 116,500 MORTGAGE PAYABLE 684,400 DEFERRED REVENUE 137,500 ----------- TOTAL LIABILITIES 3,103,800 ----------- SHAREHOLDERS' EQUITY Common stock - $.001 par value; 15,000,000 shares authorized; 2,230,900 shares issued and outstanding 2,200 Additional paid-in capital 3,870,000 Retained Earnings 600 Stock subscriptions receivable (520,500) ----------- TOTAL SHAREHOLDERS' EQUITY 3,352,300 ----------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,456,100 ===========
See Accompanying Notes Page 3 of 12 4 ITEM 1. FINANCIAL STATEMENTS (CONT.) ACTION PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended June 30 Six Months Ended June 30 ------------------------------- ------------------------------- 2001 2000 2001 2000 ----------- ----------- ----------- ----------- NET SALES $ 1,613,300 $ 2,050,800 $ 3,271,000 $ 3,521,000 COST OF SALES 923,600 1,197,000 1,788,400 1,969,800 ----------- ----------- ----------- ----------- GROSS PROFIT 689,700 853,800 1,482,600 1,551,200 OPERATING EXPENSES Selling 337,000 321,600 675,600 613,200 General and administrative 561,500 432,500 1,160,300 835,800 ----------- ----------- ----------- ----------- TOTAL OPERATING EXPENSES 898,500 754,100 1,835,900 1,449,000 ----------- ----------- ----------- ----------- INCOME/(LOSS) FROM OPERATIONS (208,800) 99,700 (353,300) 102,200 OTHER INCOME/(EXPENSE) Interest expense (52,600) (38,300) (85,700) (72,500) Other 75,800 4,900 26,800 81,900 ----------- ----------- ----------- ----------- 23,200 (33,400) (58,900) 9,400 ----------- ----------- ----------- ----------- INCOME/(LOSS) BEFORE PROVISION FOR INCOME TAXES (185,600) 66,300 (412,200) 111,600 PROVISION/(BENEFIT) FOR INCOME TAXES (117,900) 19,300 (102,000) 32,400 ----------- ----------- ----------- ----------- NET INCOME/(LOSS) $ (67,700) $ 47,000 $ (310,200) $79,200 =========== =========== =========== =========== INCOME/(LOSS) PER SHARE Basic $ (0.03) $ 0.02 $ (0.14) $ 0.04 =========== =========== =========== =========== Diluted $ (0.03) $ 0.02 $ (0.14) $ 0.03 =========== =========== =========== =========== Weighted average number of common shares outstanding: Basic 2,230,900 2,007,400 2,174,600 2,007,400 Diluted 2,230,900 2,727,200 2,174,600 2,727,200
See Accompanying Notes Page 4 of 12 5 ITEM 1. FINANCIAL STATEMENTS (CONT.) ACTION PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30 2001 2000 --------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $(310,200) $ 79,200 Adjustments to reconcile net income (loss) to net cash used in operating activities Depreciation 82,800 62,300 Amortization 201,100 105,300 Disposal of Asset 6,300 0 Provision for bad debts 44,100 7,000 Deferred income tax provision (37,500) 0 Changes in: Accounts receivable 65,600 (509,000) Inventories (300) 202,000 Prepaid expenses (235,600) (107,600) Other assets (87,600) (81,600) Accounts payable (250,200) (153,000) Accrued expenses 16,100 0 Income taxes payable (77,800) 50,200 Deferred revenue (12,500) (12,500) --------- ---------- NET CASH USED IN OPERATING ACTIVITIES (595,700) (357,700) --------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, plant and equipment (77,500) (66,900) --------- ---------- NET CASH USED IN INVESTING ACTIVITIES (77,500) (66,900) --------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES Collection of stock subscriptions receivable 203,000 9,600 Repayment of mortgage and capital lease principal (23,700) (9,400) Repayment of notes payable to related parties (18,600) 0 Proceeds from borrowings (net) 638,100 266,600 --------- ---------- NET CASH PROVIDED BY FINANCING ACTIVITIES 798,800 266,800 --------- ---------- NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 125,600 (157,800) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 614,700 1,053,600 --------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 740,300 $ 895,800 ========= ========== Supplemental disclosures - cash paid for: Interest $ 77,600 $ 72,600 Taxes $ 66,000 $ 101,000
See Accompanying Notes Page 5 of 12 6 ACTION PRODUCTS INTERNATIONAL, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. CONDENSED UNAUDITED 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. and its subsidiary, Action Products Canada Ltd. (collectively, the "Company"), at June 30, 2001 and the results of its (i) operations for the three and six month periods ended June 30, 2001 and 2000 and (ii) cash flows for the six month periods ended June 30, 2001 and 2000. The financial information included herein was taken from the books and records of the Company and is unaudited. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company's annual report on Form 10-KSB for the year ended December 31, 2000. The results of operations for the six month period ended June 30, 2001 are not necessarily indicative of the operating results for the full year. 2. LINE OF CREDIT. As of March 22, 2001, the Company entered into an agreement with Citrus Bank, pursuant to which Citrus Bank provides a revolving line of credit for up to $2 million at the "Prime" lending rate (the "Revolver"). The borrowings under the Revolver are utilized by the Company to finance accounts receivable, inventory and other operating and capital requirements. The Revolver matures June 30, 2003 and contains covenants relating to the financial condition of the Company. If the Company fails to maintain compliance with the financial covenants contained in the Revolver, the maturity date could be accelerated. The Company's previous line of credit with another financial institution expired during the first quarter of 2001. 3. EARNINGS PER SHARE. Common stock equivalents were not included in the computation of diluted earnings per share for the three and six month periods ending June 30, 2001, as their effect would have been anti-dilutive. 4. SHAREHOLDERS EQUITY TRANSACTIONS. Under the employment agreement of Mr. Ronald Tuchman as President and Chief Operating Officer, effective February 2001, Mr. Tuchman agreed to invest $200,000 in the Company in exchange for 114,266 shares of the Company's common stock at a purchase price of $1.75 per share. The full amount of the subscription receivable was collected in May 2001. 5. NEW ACCOUNTING PRONOUNCEMENTS. On July 20, 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141 (SFAS 141), "Business Combinations," and No. 142 (SFAS 142), "Goodwill and Other Intangible Assets." SFAS 141 addresses financial accounting and reporting for goodwill and other intangible assets acquired in a business combination at acquisition. SFAS 141 requires the purchase method of accounting to be used for all business combinations initiated after June 30, 2001; establishes specific criteria for the recognition of intangible assets separately from goodwill; and requires unallocated negative goodwill to be written off immediately as an extraordinary gain (instead of being deferred and amortized). SFAS 142 addresses financial accounting and reporting for intangible assets acquired individually or with a group of other assets (but not those acquired in a business combination) at acquisition. SFAS 142 also addresses financial accounting and reporting for goodwill and other tangible assets subsequent to their acquisition. SFAS 142 provides that goodwill and intangible assets which have indefinite useful lives will not be amortized but rather will be tested at least annually for impairment. It also provides that intangible assets that have finite useful lives will continue to be amortized over their useful lives, but those lives will no longer be limited to forty years. SFAS 141 is effective for all business combinations initiated after June 30, 2001 and for all business combinations accounted for by the purchase method for which the date of acquisition is after June 30, 2001. The provisions of SFAS 142 are effective for fiscal years beginning after December 15, 2001. The Company will adopt SFAS 142 beginning January 1, 2002. The Company is considering the provisions of SFAS No. 141 and No. 142 and at present has not determined the impact of adopting SFAS 141 and SFAS 142. Page 6 of 12 7 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONT.) 6. RECLASSIFICATION. Certain amounts in the June 30, 2000 Financial Statements have been reclassified to conform to the June 30, 2001 presentation. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS: Forward-looking statements in this Form 10-QSB including, without limitation, statements relating to our plans, strategies, objectives, expectations, intentions and adequacy of resources, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements made in this report, other than statements of historical fact, are forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The following factors, among others, could cause actual results to differ materially from those set forth in the forward-looking statements: our ability to successfully (i) develop its brands and proprietary products through internal development, licensing and/or mergers and acquisitions, (ii) access the mass market by entering into licensing agreements with major retailers and (iii) develop its E-commerce strategy. Additional factors include, but are not limited to the following: the size and growth of the market for our products, competition, pricing pressures, market acceptance of the our products, the effect of economic conditions, intellectual property rights, the results of financing efforts, risks in product development, the ability to identify and consummate acquisition opportunities, other risks identified in this report and our other periodic filings with the Securities Exchange Commission. RESULTS OF OPERATIONS: Three Months Ended June 30, 2001 Compared With Three Months Ended June 30, 2000 NET SALES decreased by $437,500 to $1,613,300 during the second quarter ended June 30, 2001, compared with net sales of $2,050,800 during the second quarter of 2000. Management attributes the 21% decrease in net sales to the general slowdown in the economy, prompting many customers to delay orders to subsequent periods and precipitating financial difficulties among certain large retail accounts, which led to a significant reduction in their orders as compared to the second quarter of 2000. The Company's customer base began to stabilize in the second quarter of 2001, with the recapitalization or acquisition of several of the Company's customers who had experienced financial difficulties in the first quarter of 2001. This stabilization of the Company's customer base, the introduction of two new products lines - Play and Store(TM) and Thomas and Friends(TM) - coupled with the fact that many of the delayed orders referred to in the previous paragraph were beginning to be made at the end of the second quarter of 2001, is expected to produce a substantial improvement in net sales in the second half of fiscal 2001. The Company initiated increased efforts to diversify its distribution channels and recruited a sales executive with contacts and experience in the development of non-traditional toy outlets which should contribute significantly to the Company's efforts in this regard. GROSS PROFIT percentage was 43% during the second quarter of 2001, compared with 42% for the same quarter of 2000. The Company's focus on cost competitive sourcing for its products led to the improved performance in spite of the decrease in net sales. The $164,100 decrease in gross profit from $853,800 to $689,700 in the quarters ended June 30, 2000 and 2001, respectively, is attributable to the previously noted decrease in net sales. Page 7 of 12 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES increased by $144,400 to $898,500 in the three month period ended June 30, 2001 from $754,100 for the comparable period in 2000. This 19% increase in SG&A expenses is due primarily to investments made in the Company's efforts to expand its product offerings, channels of distribution and business processes. These expenses include approximately $30,000 in increased expenses incurred in connection with the Integration of the operations of Action Products Canada Ltd. in association with the acquisition of assets of Earth Lore Ltd. and its "I Dig Dinosaurs" line, which occurred during the fourth-quarter 2000. Also, the Company incurred $25,000 in lease and related expenses for computer software and hardware related to the overhaul and modernization of the CRM and backoffice software systems. These investments, in addition to other benefits, will directly improve inventory management, expedite the processing of customer orders, assist in measuring the effectiveness of marketing and sales programs and improve the collection of accounts receivable. Management's decision to reduce staff levels, while at the same time recruiting staff members with the experience necessary to enhance our product development and sales efforts, resulted in a $25,000 net increase in compensation expenses not associated with the acquisition. INTEREST EXPENSE related to current and long-term debt was $52,600 and $38,300 during the second quarter of 2001 and 2000, respectively. The increase of $14,300 is due primarily to higher average balances drawn under our line of credit used to fund operations and pay down accounts payable assumed through the acquisition of Earth Lore Ltd. OTHER INCOME AND EXPENSE are netted for financial statement presentation. During the second quarter of 2001 and 2000, other income and expense were $75,800 and $4,900, respectively. The $70,900 increase was mainly attributable to an increase in service charges and an unrealized gain on investments. INCOME BEFORE PROVISION FOR INCOME TAXES AND NET INCOME. As a result of the foregoing, the Company had a net loss before taxes of $185,600 and a net loss after taxes of $67,700 during the second quarter of 2001, compared with a net income before taxes of $66,300 and net income after taxes of $47,000 during the second quarter of 2000. Six Months Ended June 30, 2001 Compared With Six Months Ended June 30, 2000 NET SALES decreased by $250,000 to $3,271,000 during the six months ended June 30, 2001, compared with net sales of $3,521,000 during the six months ended 2000. Management attributes the 7% decrease in net sales to the general slowdown in the economy, prompting many customers to delay orders to subsequent periods and precipitating financial difficulties among certain large retail accounts, which led to a significant reduction in their orders as compared to the first six month period of 2000. The Company's customer base began to stabilize in the second quarter of 2001, with the recapitalization or acquisition of several of the Company's customers who had experienced financial difficulties in the first quarter of 2001. This stabilization of the Company's customer base, the introduction of two new products lines - Play and Store(TM) and Thomas and Friends(TM) - coupled with the fact that many of the delayed orders referred to in the previous paragraph were beginning to be made at the end of the second quarter of 2001, is expected to produce a substantial improvement in net sales in the second half of fiscal 2001. The Company initiated increased efforts to diversify its distribution channels and recruited a sales executive with contacts and experience in the development of non-traditional toy outlets, which should contribute significantly to the Company's efforts in this regard. GROSS PROFIT percentage was 45% during the six months ended June 30, 2001, compared with 44% for the six month period of 2000. The Company's focus on cost competitive sourcing for its products led to the improved Page 8 of 12 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) performance in spite of the decrease in net sales. The $68,600 decrease in gross profit from $1,551,200 to $1,482,600 in the six months ended June 30, 2000 and 2001, respectively, is attributable to the previously noted decrease in net sales. SELLING, GENERAL AND ADMINISTRATIVE (SG&A) EXPENSES increased by $386,900 to $1,835,900 in the six month period ended June 30, 2001 from $1,449,000 for the comparable period in 2000. This 27% increase in SG&A expenses is due primarily to investments made in the Company's efforts to expand its product offerings, channels of distribution and business processes. These expenses include approximately $100,000 in increased expenses incurred in connection with the Integration of the operations of Action Products Canada Ltd. in association with the acquisition of assets of Earth Lore Ltd. and its "I Dig Dinosaurs" line, which occurred during the fourth-quarter 2000. Also, the Company incurred $50,000 in lease and related expenses for computer software and hardware related to the overhaul and modernization of the CRM and backoffice software systems. These investments, in addition to other benefits, will directly improve inventory management, expedite the processing of customer orders, assist in measuring the effectiveness of marketing and sales programs and improve the collection of accounts receivable. Management's decision to reduce staff levels, while at the same time recruiting staff members with the experience necessary to enhance our product development and sales efforts, resulted in a $40,000 net increase in compensation expenses not associated with the acquisition. INTEREST EXPENSE related to current and long-term debt for the six months ended June 30, 2001 increased by $13,200 to $85,700, compared with $72,500 for the same period in 2000. The increase is due primarily to higher average balances drawn under our line of credit used to fund operations and pay down accounts payable assumed through the acquisition of Earth Lore Ltd. OTHER INCOME AND EXPENSE for the six months ended June 30, 2001 was $26,800, compared to $81,900 for the same period in 2000. The $55,100 decrease was mainly attributable to an unrealized loss on investments. INCOME BEFORE PROVISION FOR INCOME TAXES AND NET INCOME. As a result of the foregoing, the Company had a net loss before income taxes of $412,200 and a net loss after taxes of $310,200 for the six months ended June 30, 2001, compared with a net income before income taxes of $111,600 and net income after taxes of $79,200 during the comparable six month period in 2000. FINANCIAL CONDITION, LIQUIDITY, AND CAPITAL RESOURCES: As of June 30, 2001, the Company had cash and cash equivalents of $740,300, representing an increase of $125,600 compared to December 31, 2000. Principal sources of liquidity for the first six months of fiscal 2001 were cash flows from financing activities of $798,800, which were derived from borrowings under the Revolver and collection of stock subscriptions receivable. Principal uses of cash in the first six months of fiscal 2001 were payments reducing all current accounts payable balances by $263,800, an increase in prepaid expenses of $235,600 related to marketing activities and insurance, a reduction in income taxes payable of $77,800 and $77,500 of property plant and equipment purchases. At June 30, 2001, the Company had $1,536,200 of borrowings under the line of credit, an increase of $754,200 from $782,000 as of June 30, 2000. This was due primarily to payments for inventory purchases and liabilities assumed in association with the acquisition of Earth Lore Ltd. The line of credit which provides for borrowings up to $2,000,000 matures June 30, 2003. Under the credit agreement for the Revolver, the Company is subject to financial covenants relating to certain asset balances and financial ratios. As of June 30, 2001 the Company was eligible to borrow $1,694,000 under the Revolver. The Company believes that currently available cash and cash equivalents, liquid investments, cash flows from operations and current credit facilities will be sufficient to fund its operations for at least the next twelve months. Page 9 of 12 10 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK No information has been presented pursuant to Item 3 as the Company does not have any financial instruments outstanding as of June 30, 2001 requiring market risk disclosure or material foreign currency exposure requiring market risk disclosure. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SHAREHOLDERS The annual meeting was held in the Company's offices at 390 North Orange Ave. Suite 2185, Orlando, Florida 32801 on Friday, May 25, 2001. The sole proposal brought before the shareholders was the nomination, by the Board of Directors, of Judith Kaplan, Lawrence Bernstein and Marvin Smollar for reelection as Class I Directors. The total number of shares entitled to vote at the meeting was 1,387,157. As a result of the votes cast, as described below, all three nominees were elected for two year terms to expire at the Annual Shareholders' Meeting in 2003:
Name For Against Abstained - ------------------------------------------------------------------------- Judith Kaplan 1,374,676 7,608 4,873 Lawrence Bernstein 1,382,284 - 0 - 4,873 Marvin Smollar 1,382,284 - 0 - 4,873
Ronald S. Kaplan and Ronald Tuchman were the two remaining Directors whose terms will continue to the Annual Meeting of Shareholders in 2002. No other business was brought before the Annual Meeting. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K A. EXHIBITS
Exhibit No. 3.1 Amended Articles of Incorporation, incorporated by reference to an Exhibit to Definitive Proxy Statement filed May 22, 1998. 3.2 Amended By-laws, incorporated by reference to an Exhibit to the Definitive Proxy Statement filed May 22, 1998. 10.1 Employee Stock Ownership Plan, incorporated by reference to an Exhibit to the Company's Registration Statement on Form S-18, dated April 23, 1984, at pages 154-208. 10.2 Incentive Stock Option Plan, incorporated by reference to an Exhibit to the Company's Registration Statement on Form S-18 dated September 25, 1984, at pages 210-220. 10.3 401(k) Plan dated October 3, 1986, incorporated by reference to an Exhibit to Form 10-K filed August 15, 1987. 10.4 Amendment to Employee Stock Ownership Plan dated February 8, 1988, incorporated by reference to an Exhibit to Form 10-K filed March 31, 1989. 10.5.1 Amendment to Employee Stock Ownership Plan dated March 10, 1989, incorporated by reference to an Exhibit to Form 10-K filed March 31, 1989.
Page 10 of 12 11 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (CONT.) 10.6 Company's 1996 Stock Option Plan incorporated by reference to an Exhibit to the Company's Registration Statement on Form S-8 filed on April 20, 1999. 10.7 Asset Purchase Agreement between the Company and American Outdoor Products, Inc. dated December 31, 1997, incorporated by reference to Exhibit in the Company's Current Report on Form 8-K filed February 26, 1998. 10.8 Asset Purchase Agreement between the Company and Earth Lore Ltd., dated October 15, 2000, incorporated by reference to Exhibit in the Company's Current Report on Form 8-K filed November 6, 2000.
B. REPORTS ON FORM 8-K None Items 1, 2, 3 and 5 are inapplicable and have been omitted. Page 11 of 12 12 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 15, 2001 By: /s/ Ronald Kaplan --------------- ---------------------------------- Ronald Kaplan, Chief Executive Officer Date: August 15, 2001 By: /s/ Robert L. Burrows --------------- --------------------------------- Robert L. Burrows, Chief Financial Officer (Principal Accounting Officer) Page 12 of 12 -----END PRIVACY-ENHANCED MESSAGE-----