-----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, JUhdAQERHMUT4Q9U5T5xMnOmaujLdoTc2rQgXuLUb3bnzA0Flg/P7nFC4iLr8pC/ 38wPqmwEx3+e6zX+5zfFcg== 0001042910-99-001486.txt : 19991115 0001042910-99-001486.hdr.sgml : 19991115 ACCESSION NUMBER: 0001042910-99-001486 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 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: 99749006 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, 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, 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 Avenue, Suite 2185, Orlando, FL 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 September 30, 1999. Class Outstanding at September 30, 1999 Common Stock, $.001 par value 1,694,400
Page 2 of 9 I N D E X PART I. FINANCIAL INFORMATION Page Number Item 1. Financial Statements Condensed Balance Sheets - September 30, 1999 and December 31, 1998 (unaudited) 3 Condensed Statements of Operations and Changes in Retained Earnings - Three and nine months ended September 30, 1999 and 1998 (unaudited) 4 Condensed Statements of Cash Flows - Three and nine months ended September 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 (UNAUDITED) September 30, 1999 December 31, 1998 Current assets: Cash and cash equivalents $ 262,800 $ 339,900 Accounts receivable, net of allowance of $25,500 at September 30, 1999 and December 31, 1998 1,097,900 530,400 Notes Receivable 765,500 339,600 Inventories 1,276,200 1,091,000 Prepaid expenses 178,900 100,100 Income taxes refundable 37,000 37,000 ----------- ------------ Total Current Assets 3,618,300 2,438,000 Property, plant and equipment, net of Accumulated depreciation of $746,100 at September 30, 1999 and $802,500 at December 31, 1998 965,700 956,100 Notes receivable - 1,161,500 Other assets 576,600 460,700 ----------- ------------ TOTAL ASSETS $5,160,600 $5,016,300 =========== ============ Current liabilities: Accounts payable & accrued expenses $ 169,400 $ 191,100 Deferred revenue 25,000 25,000 Current portion of mortgage payable 56,300 56,300 Borrowings under line of credit 402,000 99,900 ----------- ------------ Total Current Liabilities 652,700 372,300 Long term liabilities: Deferred income taxes 278,000 338,000 Deferred revenue 193,800 200,000 Mortgage payable 679,400 691,800 Commitments and contingencies Shareholders' equity: Common stock $.001 par value authorized 15,000,000; 1,694,400 issued and outstanding at September 30,1999 and December 31, 1998 1,700 1,600 Capital in excess of par value 3,112,400 3,008,300 Stock subscriptions receivable (103,400) (43,700) Retained earnings 346,000 448,000 ----------- ------------ Total Shareholders' Equity 3,356,700 3,414,200 ----------- ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,160,600 $ 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 September 30 Nine months ended September 30 ------------------------------- ------------------------------ 1999 1998 1999 1998 --------------- --------------- ---------------- ------------- Net Sales $ 1,402,600 $ 1,764,800 $4,444,700 $ 4,846,300 Cost of Sales 846,600 940,500 2,322,400 2,524,300 ------------- ------------ ------------ ------------ Gross Profit 556,000 824,300 2,122,300 2,322,000 Selling, General & Administrative Expenses 879,500 760,500 2,331,800 2,027,900 Other (expenses) income Other 23,900 119,000 111,200 200,900 Interest expense (25,100) (26,400) (63,700) (55,400) ------------- ------------ ------------ ------------ Total (1,200) 92,600 47,500 145,500 Income (loss) before income taxes (324,700) 156,400 (162,000) 439,600 Provision (benefit) for income taxes (60,000) - (60,000) - ------------- ------------ ------------ ------------ Net Income (loss) (264,700) 156,400 (102,000) 439,600 Beginning retained earnings 610,700 601,200 448,000 318,000 ------------- ------------ ------------ ------------ Ending retained earnings $ 346,000 $ 757,600 $346,000 $ 757,600 ============= ============ ============ ============ Net Income (loss) per share Basic ($0.16) $0.10 ($0.06) $0.27 ============= ============ ============ ============ Diluted ($0.16) $0.06 ($0.06) $0.16 ============= ============ ============ ============ Weighted average number of common shares outstanding Basic 1,693,600 1,624,900 1,693,600 1,624,900 ============= ============ ============ ============ Diluted 2,584,200 2,807,200 2,584,200 2,828,700 ============= ============ ============ ============
See Accompanying Notes
Page 5 of 9 ACTION PRODUCTS INTERNATIONAL, INC. CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) Three months ended September 30 Nine months ended September 30 ------------------------------------ ----------------------------------- 1999 1998 1999 1998 ------------------------------------ ----------------------------------- Cash flows from operating activities: Net income (loss) ($264,700) $156,400 ($102,000) $439,600 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation & Amortization 94,100 38,300 190,500 80,300 Change in assets and liabilities: Decrease (increase) in current assets other than cash and cash equivalents 487,500 286,800 (155,600) (308,700) Decrease in current liabilities & deferred taxes (74,400) (364,500) (87,900) (180,800) (Increase) in other assets (137,700) (31,700) (228,500) (39,600) -------------- ----------- ------------- ----------- Net cash provided by (used in) operating activities 104,800 85,300 (383,500) ( 9,200) ============== =========== ============= =========== Net cash used in investing activities (24,200) ( 9,600) (87,500) ( 33,500) ============== =========== ============= =========== Cash flows from financing activities: Proceeds from (repayments of) borrowings on line of credit, net (24,000) 1,000 302,100 (254,800) Results of other financing activities 75,100 13,900 91,800 13,900 -------------- ----------- ------------- ----------- Net cash (used in) provided by fin. activities 51,100 14,900 393,900 (240,900) ============== =========== ============= =========== Net increase (decrease) in cash and cash equiv. 131,700 90,600 (77,100) (283,600) Cash and cash equivalents at start of period 131,100 163,600 339,900 537,800 -------------- ----------- ------------- ----------- Cash and cash equivalents at end of period $262,800 $ 254,200 $262,800 $ 254,200 ============== =========== ============= =========== Supplemental disclosures - cash paid for Interest $25,100 $26,400 $63,700 $55,400 Taxes ($14,800) $0 ($14,800) $0
See Accompanying Notes 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, 1999 and the results of its operations and cash flows for the three and nine month periods ended September 30, 1999 and 1998. 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, 1998. The results of operations for the period ended September 30, 1999 are not necessarily indicative of the operating results for the full year. 2. Income per common share Basic earnings per share is based on the weighted average number of common shares outstanding during each period. Diluted earnings per share is based on the sum of the weighted average number of common shares outstanding plus common stock equivalents arising out of stock options and convertible debt. To avoid an anti-dilutive calculation in periods where there is a net loss, diluted earnings (loss) per share are presented as the same amount as basic earnings (loss) per share. 3. Notes Receivable The Company had certain Notes Receivable totaling $765,500 as of September 30, 1999 which the Company anticipates collecting before fiscal year end December 31, 1999. Accordingly, the total amounts of the Notes are included in Current Assets. 4. Changes in Shareholders' Equity During the nine month period ended September 30, 1999, changes in shareholders' equity included the exercise of 75,000 stock options at approximately $1.38 each which is reflected in the September 30, 1999 balance sheet as a stock subscription receivable. Approximately $44,000 of stock subscriptions receivable were collected during the period. Page 7 of 9 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Any statements contained in this discussion that are not historical facts 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: Three months ended September 30, 1999 Sales for the three month period ended September 30, 1999 decreased to $1,402,600 compared to the third quarter record of $1,764,800 set in 1998. While sales to specialty toy stores and internet retailers continued to increase, sales to the Company's museum market customers declined sharply. Due to a shift in its core product offerings from the museum market, historically strong during the summer months, to the specialty toy market, traditionally strong during the fourth quarter, management expects a continued shift in its seasonal sales performance. Third quarter 1999 sales were also affected because of delays in the receipt of several new products. These delays resulted in certain anticipated third quarter sales being recorded in the fourth quarter. These items along with the seasonal change in sales, should strengthen fourth quarter and fiscal year results. The third quarter of 1999 produced a net loss of $264,700. Net income for the same period last year was $156,400. Gross profit for the third quarter of 1999 was $556,000 compared to $824,300 for the third quarter of 1998. This decline of $268,300 in gross profit was primarily due to the $362,200 decline in sales. As a percentage of sales, the gross margin declined to 40%. Management attributes that decline, in part, to discounting programs aimed at improving third-quarter sales. Management expects the margins to improve in the future as the discounting programs are discontinued. Selling, general & administrative expenses increased to $879,500 for the third quarter of 1999, an increase of $119,000 from the same period in 1998. Management attributes the increase in selling, general and administrative expenses to the addition of office space and product licensing, development and design costs incurred in 1999. Other income (expense) was ($1,200) in the third quarter of 1999 compared to $92,600 in the third quarter of 1998. The 1998 amount included a one time gain from the sale of certain assets and equipment that had been used in the Company's screen printing operation. Page 8 of 9 Nine months ended September 30, 1999 Revenue for the nine month period ended September 30, 1999 was $4,444,700. This represents a decrease of $401,600 from the record set in the prior year of $4,846,300. Management attributes the decrease in year-to-date net sales primarily to lagging sales in the third quarter. As described above, management expects a continued shift in its seasonal business towards the fourth quarter. The nine months 1999 net loss was $102,000 compared to net income of $439,600 in 1998, due to the third quarter results and increases in Selling, General & Administrative Expenses. Gross profit margin for the nine months was nearly identical to the same period last year at 48%. Selling, general & administrative expenses increased to $2,331,800 for the first three quarters of 1999, an increase of $303,900 from the same period in 1998. Management attributes the increase in selling, general and administrative expenses to the addition of office space and product licensing, development and design costs incurred in 1999. Other income (expense) was $47,500 for the first three quarters of 1999 compared to $145,500 for the first three quarters of 1998. The 1998 amount included a one time gain from the sale of certain assets and equipment that had been used in the Company's screen printing operation. Financial Condition, Liquidity and Capital Resources As of September 30, 1999, current assets were $3,618,300 compared to current liabilities of $652,700 for a current ratio of 5.5:1, down from 6.5:1 at December 31, 1998. At September 30, 1999, working capital increased by approximately $900,000 compared to December 31, 1998. Historically, the peak period of the Company's business cycle has been March through August. Due to a shift in the Company's focus towards the specialty toy market, management expects increased sales in the fourth quarter. Accounts receivable and inventories were $1,097,900 and $1,276,200 respectively, at September 30, 1999 compared to $530,400 and $1,091,000 at December 31, 1998. The increase in receivables and inventories are considered normal for the Company and reflect the anticipated activity in the Company's high volume period. Current liabilities increased by $280,400 due primarily to draws on the Company's line of credit. Cash and cash equivalents were down $77,100 from December 31, 1998 but up $131,700 from June 30, 1999. Operations provided cash flow of $104,800 for the three months ended September 30, 1999 compared to cash flow provided by operations of $85,300 for the comparable period ended September 30, 1998. Cash flow used in operations was $383,500 for the nine months ended September 30, 1999 compared to $9,200 used in the comparable nine-month period ended September 30, 1998. Shareholders' equity at September 30, 1999 decreased during the nine months by $57,500 to $3,356,700 due primarily to the net loss in the current period. 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 10, 1999 By: /s/ Ronald S. Kaplan ---------------------- --------------------------- Ronald S. Kaplan Chief Executive Officer EX-27 2 FIN. DATA SCHEDULE FOR 3RD QTR 10-QSB
5 1,000 9-MOS Dec-31-1998 Jan-01-1999 Sep-30-1999 263 0 1098 0 1276 3618 1712 (746) 5161 653 679 2 0 0 3357 5161 4445 4445 2322 2322 2332 (60) 64 (102) 0 (102) 0 0 0 (102) (0.06) (0.06)
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