-----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, TtV/m+I4ItPyPfmnCM1FR8d7IuYJGAvATblvgqTc7w8rwb4jGnZYbw9EBaxHqvvW v8UU7xXzyeJwXvYxgs+j2w== 0001042910-99-001014.txt : 19990813 0001042910-99-001014.hdr.sgml : 19990813 ACCESSION NUMBER: 0001042910-99-001014 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990812 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: 99685693 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 QUARTERLY REPORT 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, 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 (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, 1999. Class Outstanding at June 30, 1999 Common Stock, $.001 par value 1,619,400
Page 2 of 9 I N D E X PART I. FINANCIAL INFORMATION Page Number Item 1. Financial Statements Condensed balance sheets - June 30, 1999 and December 31, 1998 (unaudited) 3 Condensed statements of operations and changes in Retained Earnings - Three and six months ended June 30, 1999 and 1998 (unaudited) 4 Condensed statements of cash flows - Three and six months ended June 30, 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) June 30, 1999 December 31, 1998 Current assets: Cash and cash equivalents $ 131,100 $ 339,900 Accounts receivable, net of allowance of $25,500 at June 30, 1999 and December 31, 1998 1,231,300 530,400 Notes Receivable 309,600 339,600 Inventories, net 1,358,000 1,091,000 Prepaid expenses 209,300 100,100 Income taxes refundable 37,000 37,000 ------------------ -------------------- Total Current Assets 3,276,300 2,438,000 Property, plant and equipment, net of accumulated depreciation of $851,300 at June 30, 1999 and $802,500 at December 31, 1998 970,600 956,100 Notes Receivable 757,500 1,161,500 Other assets 503,900 460,700 ------------------ -------------------- TOTAL ASSETS 5,508,300 5,016,300 ================== ==================== Current liabilities: Accounts payable & accrued expenses 183,800 191,100 Deferred Revenue 25,000 25,000 Current portion of mortgage payable 56,300 56,300 Borrowings under line of credit 426,000 99,900 ------------------ -------------------- Total Current Liabilities 691,100 372,300 Long term liabilities: Mortgage payable 683,500 691,800 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 June 30,1999 and December 31, 1998 1,600 1,600 Additional paid-in capital 3,008,300 3,008,300 Retained Earnings 610,700 448,000 Stock Subscriptions Receivable (18,700) (43,700) ------------------ -------------------- Total Shareholders' Equity 3,601,900 3,414,200 ------------------ -------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,508,300 $ 5,016,300 ================== ====================
See Accompanying Notes
Page 4 of 9 ACTION PRODUCTS INTERNATIONAL, INC. CONDENSED STATEMENTS OF OPERATIONS AND CHANGES IN RETAINED EARNINGS (UNAUDITED) Three months ended June 30 Six months ended June 30 -------------------------------- --------------------------------- 1999 1998 1999 1998 -------------------------------- --------------------------------- Net Sales $1,855,200 $1,827,800 $3,042,100 $3,081,500 00 Cost of Sales 909,600 935,600 1,475,800 1,583,800 ------------------------------ ------------------------------- Gross Profit 945,600 892,200 1,566,300 1,497,700 Selling, General & Administrative Expenses 779,300 706,500 1,452,300 1,267,400 Other (expenses) income Other 46,900 70,400 87,300 81,900 Interest expense (23,100) (13,000) (38,600) (29,000) ------------------------------ ------------------------------- Total 23,800 57,400 48,700 52,900 Income before income taxes 190,100 243,100 162,700 283,200 Provision for income taxes - - - - ------------------------------ ------------------------------- Net Income 190,100 243,100 162,700 283,200 ------------------------------ ------------------------------- Beginning retained earnings (accumulated deficit) 420,600 358,100 448,000 318,000 ------------------------------ ------------------------------- Ending retained earnings (accumulated deficit) 610,700 $601,200 $610,700 $601,200 ============================== =============================== Net Income per share Basic $ 0.12 $ 0.15 $ 0.10 $ 0.17 ============================== =============================== Diluted $ 0.07 $ 0.09 $ 0.06 $ 0.10 ============================== =============================== Weighted average number of common shares outstanding Basic 1,619,500 1,624,900 1,622,200 1,624,900 ============================== =============================== Diluted 2,578,400 2,842,900 2,662,900 2,838,300 ============================== ===============================
See Accompanying Notes
Page 5 of 9 ACTION PRODUCTS INTERNATIONAL, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months ended June 30 Six months ended June 30 ------------------------------------ ----------------------------------- 1999 1998 1999 1998 ------------------------------------ ----------------------------------- Cash flows from operating activities: Net income $190,100 $243,100 $162,700 $283,200 Adjustments to reconcile net income to net cash used in operating activities Depreciation and amortization 30,700 48,300 96,400 69,300 Change in assets and liabilities: Increase in current assets other than cash and cash equivalents (378,300) (603,900) (643,100) (595,400) Increase (decrease) in current liabilities (27,500) 278,800 (13,500) 183,700 Decrease (increase) in other assets (36,900) (39,100) (90,800) (35,300) ---------------------------------- --------------------------------- Net cash used in operating activities (221,900) ($72,800) (488,300) ($94,500) ================================== ================================= Net cash used in investing activities (23,000) ($11,700) (63,300) ($23,900) ================================== ================================= Cash flows from financing activities: Proceeds from borrowings on line of credit 30,000 131,000 326,100 255,800 Results of other financing activities (4,000) - 16,700 - ---------------------------------- --------------------------------- Net cash provided by (used in) fin. Activities 26,000 $131,000 342,800 ($255,800) ================================== ================================= Net increase (decrease) in cash and cash equiv. (218,900) $46,500 (208,800) ($374,200) Cash and cash equivalents at start of period 350,000 $117,100 339,900 $537,800 ---------------------------------- --------------------------------- Cash and cash equivalents at end of period $131,100 $163,600 $131,100 $163,600 ================================== ================================= Supplemental disclosures - cash paid for Interest $ 23,100 $ 13,000 $ 38,600 $ 29,000 Taxes $ 4,800 $ - $ 14,800 $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, 1999 and the results of its operations and cash flows for the second quarter ending June 30, 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 June 30, 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. 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. Three months ended June 30, 1999 During the second quarter ended June 30, 1999 revenue again increased to a new quarterly record of $1,855,200 in 1999 from the previous quarterly record of $1,827,800 achieved in 1998. Net income for the second quarter 1999 was $190,100 compared to $243,100 for the 1998 comparable period. Increased sales coupled with continued improvement in gross profit margins have sustained the growth of expenditures associated with the development of the Company's proprietary brands and product lines. Gross profit increased $53,400 to $945,600 from $892,200. As a percent of sales, gross profit was up more than two percentage points to 51.0% from 48.8% for the 1998 comparable period. Management attributes this continued improvement to brand development and demand for its brands and product lines within its target markets. Selling, General & Administrative expenses increased $72,800. Management attributes the increase in expenses to certain sales and marketing expenditures, product development costs, activities related to acquisitions and corporate development, and costs associated with the opening and management of the Company's new Orlando headquarters. Other income decreased $33,600 due to gains on the disposal of assets recognized in the prior year and an increase in interest expense associated with the Company's short term seasonal borrowings. Six months ended June 30, 1999 During the six months ended June 30, 1999 revenues were $3,042,100 in 1999 from $3,081,500 in 1998 due primarily to sales shortfalls in the first quarter. The downturn in sales for the six-month period is also indicative of the shift in the Company's seasonal period towards the latter part of the year. Management anticipates that its concentration and focus as a toy company will continue to align its seasonality with that traditional of the toy industry. Gross profit for the six months ended increased $68,600 to $1,566,300 from $1,497,700. As a percentage of sales, gross profit was up nearly three more points to 51.5% from 48.6% for the 1998 comparable period. Selling, General & Administrative Expenses for the six months ended increased 184,900, a substantial portion of which were incurred in the first three months. As previously discussed, management attributes the increase in expenses to certain sales and marketing expenditures, product development costs, activities related to acquisitions and corporate development, and costs associated with the opening and management of the Company's new Orlando headquarters Page 8 of 9 Financial Condition, Liquidity and Capital Resources: As of June 30, 1999, current assets were $3,276,300 compared to current liabilities of $691,100 for a current ratio of almost 5:1 compared to 3:1 at the same point in time last year. At June 30, 1999, working capital improved by $519,500 compared to December 31, 1998. The peak period of the Company's business cycle has historically been March through August, though gradually changing due to the Company's penetration into the specialty toy market. As expected, accounts receivable and inventories increased cyclically to $1,231,300 and $1,358,000, respectively, at June 30, 1999 compared to $530,400 and $1,091,000 at December 31, 1998, respectively. Total current assets increased by $838,300 and total assets increased by $492,000, while current liabilities increased by $318,800, due primarily to short term borrowings on the Company's line of credit. Other changes in balance sheet from December 31, 1997 included the following: Property, plant and equipment, net of depreciation, increased by $14,500 from December 31, 1998 as a result of furniture and fixtures additions and normal depreciation. Other assets increased from December 31, 1998, primarily due to deferrals of product development, dies, molds, designs and prepaid expenses related to new products and packaging. Accounts payable and accrued expenses decreased slightly to $183,800 at June 30, 1999 from $191,100 at December 31, 1998 due primarily to the seasonal nature of the purchases and the timing of inventory receipts. Cash and cash equivalents were down $208,800 from December 31, 1998 and $218,900 from March 31, 1999. Cash flow used in operating activities was $221,900 for the three months ended June 30, 1999 as compared to cash flow used in operating activities of $72,800 for the comparable period June 30, 1998. This is due primarily to shifts in receivables and inventory related to the beginning of the Company's seasonal push. Cash flow used in operating activities for the six months ended June 30, 1999 was $488,300 as compared to cash flow used in operating activities of $94,500 for the comparable period June 30, 1998. The decrease in cash flow is due primarily to the decrease in net income and a decrease in current liabilities compared to the comparable period in 1998. Shareholders' equity at June 30, 1998 increased during the six months then ended by $187,700 to $3,601,900 as a result of earnings and the collection 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: August 11, 1999 By:/s/ Delton G. de Armas ---------------- ------------------------ Delton G. de Armas Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE FOR 2ND QTR 10-QSB
5 1,000 6-MOS Dec-31-1999 Jan-01-1999 Jun-30-1999 131 0 1231 0 1358 3276 1822 (851) 5508 691 684 2 0 0 3600 5508 3042 3042 1476 1476 1452 0 39 163 0 163 0 0 0 163 0.10 0.06
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