-----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, R+HZ81fXsrsyOVh/z3X1O+EIUpcA+kN77a/gc2KnMkll7JAoJ+OxhLUSkRltj1UI qO5bhQG/Xnjyf5J+1QDtkw== 0001042910-99-000617.txt : 19990518 0001042910-99-000617.hdr.sgml : 19990518 ACCESSION NUMBER: 0001042910-99-000617 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 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: 99625358 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, DC 20549 Form 10-QSB QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended March 31, 1999 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) 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 March 31, 1999. Class Outstanding at March 31, 1999 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 - March 31, 1999 and December 31, 1998 (unaudited) 3 Condensed statements of income and changes in retained earnings - Three months ended March 31, 1999 and 1998 (unaudited) 4 Condensed statements of cash flows - Three months ended March 31, 1999 and 1998 (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) March 31, 1999 December 31, 1998 Current assets: Cash and cash equivalents $ 350,000 $ 339,900 Accounts receivable, net of allowance of $25,500 at March 31, 1999 and December 31, 1998 752,900 530,400 Notes Receivable 339,600 339,600 Inventories, net 1,231,800 1,091,000 Prepaid expenses 169,200 100,100 Income taxes refundable 37,000 37,000 ------------------- ----------------------- Total Current Assets 2,880,500 2,438,000 Property, plant and equipment, net of accumulated depreciation of $826,300 at March 31, 1999 and $802,500 at December 31, 1998 972,600 956,100 Notes Receivable 993,900 1,161,500 Other assets 472,700 460,700 ------------------- ----------------------- TOTAL ASSETS 5,319,700 5,016,300 =================== ======================= Current liabilities: Accounts payable & accrued expenses 211,300 191,100 Deferred Revenue 25,000 25,000 Current portion of mortgage payable 56,300 56,300 Borrowings under line of credit 395,900 99,900 ------------------- ----------------------- Total Current Liabilities 688,500 372,300 Long term liabilities: Mortgage payable 687,600 691,800 Deferred Revenue 193,800 200,000 Deferred Income Taxes 338,000 338,000 Shareholder's equity: Common stock $.001 par value authorized 15,000,000; 1,624,900 issued and outstanding at March 31,1999 and December 31, 1998 1,600 1,600 Additional paid-in capital 3,008,300 3,008,300 Retained Earnings 420,600 448,000 Stock Subscriptions Receivable (18,700) (43,700) ------------------- ----------------------- Total Shareholders' Equity 3,411,800 3,414,200 ------------------- ----------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,319,700 $ 5,016,300 =================== =======================
See Accompanying Notes Page 4 of 9 ACTION PRODUCTS INTERNATIONAL, INC. CONDENSED STATEMENTS OF INCOME AND CHANGES IN RETAINED EARNINGS (UNAUDITED)
Three months ended March 31, ------------------------------------------------ 1999 1998 ----------------------- ----------------- Net sales $ 1,186,900 $ 1,253,700 Cost of sales 566,200 648,200 ----------------------- ----------------- Gross profit 620,700 605,500 Selling, general & administrative expenses 673,000 560,900 Other (expenses) income Other 40,400 11,500 Interest expense (15,500) (16,000) ----------------------- ----------------- Total 24,900 (4,500) Income (loss) before income taxes (27,400) 40,100 Provision for income taxes - - ----------------------- ----------------- Net income (loss) $ (27,400) $ 40,100 ----------------------- ----------------- Beginning retained earnings 448,000 318,000 ----------------------- ----------------- Ending retained earnings $ 420,600 $ 358,100 ======================= ================= Net income (loss) per share Basic $ (0.02) $ 0.02 Diluted $ (0.02) $ 0.02 ======================= ================= Weighted average number of common shares outstanding Basic 1,624,900 1,624,900 ======================= ================= Diluted 1,624,900 2,833,400 ======================= =================
See Accompanying Notes
Page 5 of 9 ACTION PRODUCTS INTERNATIONAL, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months ended March 31, ----------------------------------- 1999 1998 --------------- ----------------- Cash flows from operating activities: Net income (loss) $ (27,400) $ 40,100 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 65,700 35,400 Changes in assets and liabilities: Current assets, other than cash and cash equivalents (264,800) 8,400 Other assets (53,900) (10,600) Current liabilities and deferred taxes 14,000 (95,100) --------------- ----------------- Net cash used in operating activities (266,400) (21,800) =============== ================= Net cash used in investing activities (40,300) (12,200) =============== ================= Net cash provided by financing activities 316,800 (386,700) =============== ================= Net decrease in cash and cash equivalents 10,100 (420,700) Cash and cash equivalents at beginning of period 339,900 537,800 --------------- ----------------- Cash and cash equivalents at end of period $ 350,000 $ 117,100 =============== ================= Supplemental disclosures - cash paid for Interest $ 15,500 $ 16,000 Taxes $ 10,000 $ 125,000
See Accompanying Notes Page 6 of 9 ACTION PRODUCTS INTERNATIONAL, INC. NOTES TO CONDENSED 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 March 31, 1999 and the results of its operations and cash flows for the first quarter ending March 31, 1999. 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 report on Form 10-KSB for the year ended December 31, 1998. The results of operations for the period ended March 31, 1999 are not necessarily indicative of the operating results for the full year. 2. Year 2000 The Year 2000 issue is the result of shortcomings in electronic data processing systems and other electronic equipment that may adversely affect business operations. The Company's management is making efforts to determine the possible effects of Year 2000 issues on its operations. Management will also attempt to determine if its significant customers, vendors and other third parties upon which it relies have addressed or will be able to address any affected systems on a timely basis. Management does not expect the potential disruption from Year 2000 issues to have a material effect on the Company's business operations, but the outcome remains uncertain. The accompanying financial statements contain no provision or adjustments related to the ultimate outcome of this uncertainty. 3. Earnings per share Common stock equivalents were not included in the presentation of diluted earnings per share for the period ending March 31, 1999, as their effect would have been anti-dilutive. Page 7 of 9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Forward-looking Statements: 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. Results of Operations: Revenues decreased to $1,186,900 during the first quarter ended March 31, 1999 from $1,253,700 in 1998. Management attributes the slight downturn in net sales primarily to declines in museum market as a whole. The Company continues to diversify its distribution channels and reduce its dependence on any one market. This strategy allowed the Company to avoid a greater detriment as a result of reduced museum industry traffic. The dip in the Company's museum business was nearly twice the overall downturn, implying strong sales gains within the prioritized distribution channels. Improvements to the sales systems have eased diversification into new markets, particularly the Company's increasing penetration into the specialty toy market. In addition to sales growth generated within certain target markets, Management credits its proprietary brands with generating improved margins. Gross margins continued an upward trend with a substantial increase to 52.3% from 48.3% for the same period in 1998, surging the Company's gross margins to over 50% for the first time in its history. Selling, General & Administrative Expenses increased to $673,000 primarily as a result of ramped up promotional efforts furthering the Company's brand development, including advertising and public relations, certain marketing and product development expenses, and advance licensing fees related to its Discovery Channel(R) product line. The Company also incurred certain expenses related to the opening of its new Orlando headquarters. Management's efforts offset many of these increases by reducing costs in some general areas such as staff costs, outside labor, bank charges, subscriptions and dues, and other general and administrative expenses. Financial Condition, Liquidity and Capital Resources: As of March 31, 1999, current assets were $2,880,500 compared to current liabilities of $688,500 resulting in a current ratio of better than 4:1. Total assets increased to $5,319,700 from $5,016,300 at December 31, 1998. Current liabilities increased $316,200 due primarily to seasonal borrowings on the Company's line of credit. Current assets increased $442,500 due to primarily to increases in accounts receivable and inventories. Page 8 of 9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Accounts receivable and inventories were $752,900 and $1,231,800, respectively, at March 31, 1999, compared to $530,400 and $1,091,000, respectively, at December 31, 1998. The increases are as a result of the Company's normal business cycle. Cash and cash equivalents were up by $10,100, as a net result of borrowings on the Company's line of credit to position the Company for its peak period. Property, plant and equipment, net of depreciation, increased by $16,500, primarily related to leasehold improvements associated with the new Orlando headquarters. Other assets were up $12,000. Accounts payable and accrued expenses increased $20,200 to $211,300 at March 31, 1999 from $191,100 at December 31, 1998 due primarily to the timing of purchases and payments. Net borrowings under the line of credit increased to $395,900 at March 31, 1999 from $99,900 at December 31, 1998 as a result of routine seasonal inventory purchases. Cash used in operations was $266,400 for the three months ended March 31, 1999, as compared to $21,800 for the comparable period in 1998, due primarily to sales on credit and fortification of inventory levels in anticipation of the upcoming seasonal spike in business. Shareholders' equity at March 31, 1999 decreased by $2,400 as a combined result of the net loss and collections 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 14,1999 By: /s/ Delton G. de Armas ----------- ------------------------ Delton G. de Armas Chief Financial Officer EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 1ST QTR 10-QSB
5 1,000 3-MOS Dec-31-1999 Jan-01-1999 Mar-31-1999 350 0 753 0 1232 2880 1799 (826) 5320 689 688 2 0 0 3410 5320 1187 1187 566 566 673 0 16 (27) 0 (27) 0 0 0 (27) (0.02) (0.02)
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