-----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, FyqJpSQzlUViViPo/9F0/7KiN+K+9/d1oCSQd0/TLEIbnizAVsxKuYPsAM7yIorM Mt+rB8v7qnpetQumbDpr7A== 0000950144-98-009742.txt : 19980817 0000950144-98-009742.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950144-98-009742 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980430 FILED AS OF DATE: 19980814 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SWISHER INTERNATIONAL INC CENTRAL INDEX KEY: 0000808356 STANDARD INDUSTRIAL CLASSIFICATION: PATENT OWNERS & LESSORS [6794] IRS NUMBER: 561541396 STATE OF INCORPORATION: NV FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-21282 FILM NUMBER: 98687199 BUSINESS ADDRESS: STREET 1: 6849 FAIRVIEW RD STREET 2: STE 200 CITY: CHARLOTTE STATE: NC ZIP: 28210 BUSINESS PHONE: 7043647707 MAIL ADDRESS: STREET 1: 6849 FAIRVIEW RD STREET 2: STE 200 CITY: CHARLOTTE STATE: NC ZIP: 28210 10QSB/A 1 SWISHER INTERNATIONAL, INC. 10QSB/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB/A-1 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 30, 1998 Commission File Number: 0-21282 SWISHER INTERNATIONAL, INC. ------------------------------- (Name of Small Business Issuer) NEVADA 56-1541396 ----------------------- ------------------------------------- (State of Incorporation) (I.R.S. Employer Identification No.) 6849 Fairview Road Charlotte, North Carolina 28210 -------------------------- ------ (Address of principal executive offices) (Zip Code) (704) 364-7707 --------------- (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by section 13 or 15 (d) of the exchange act during the past 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No Number of shares of Common Stock outstanding as of May 31, 1998: 2,222,271 Transitional Small Business Disclosure Format: [ ] Yes [X] No 2 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
ASSETS April 30, 1998 October 31, (Unaudited) 1997 -------------- -------------- CURRENT ASSETS: Cash and Cash Equivalents $ 20,896 $ 662,880 Restricted Cash 257,902 257,902 Accounts Receivable: Franchisees 3,370,135 2,994,399 Other 351,269 284,200 Related Party Receivables 394,390 370,138 Less Allowance for Doubtful Accounts (324,046) (172,000) ------------ ------------ Net Accounts Receivable 3,791,748 3,476,737 Notes Receivable, Current Portion 834,368 1,015,564 Inventory 94,940 88,786 Prepaid Expenses 568,654 184,508 Deferred Income Taxes 3,000 3,000 ------------ ------------ TOTAL CURRENT ASSETS 5,571,508 5,689,377 PROPERTY AND EQUIPMENT: Furniture & Equipment 1,833,541 1,760,087 Less Accumulated Depreciation (780,629) (652,901) ------------ ------------ NET PROPERTY AND EQUIPMENT 1,052,912 1,107,186 OTHER ASSETS: Notes Receivable: Franchisees 1,680,610 1,862,590 Related Party 1,446,638 950,388 Deferred Franchise Costs 48,530 77,957 Intangible Assets, Less Amortization 2,560,862 2,563,452 ------------ ------------ NET OTHER ASSETS 5,736,640 5,454,387 ------------ ------------ TOTAL ASSETS $ 12,361,060 $ 12,250,950 ============ ============
2 3 SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (CONTINUED)
April 30, 1998 October 31, (Unaudited) 1997 -------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Line of Credit and Long-Term Debt, Current Portion $ 2,303,963 $ 1,978,984 Accounts Payable 2,421,517 2,041,705 Accrued Expenses 361,762 222,548 Deferred Revenue 341,311 329,198 Income Taxes Payable -- 109,823 ----------- ----------- TOTAL CURRENT LIABILITIES 5,428,553 4,682,258 LONG-TERM DEBT 1,217,669 1,476,689 DEFERRED INCOME TAXES 100,000 100,000 ----------- ----------- TOTAL LIABILITIES 6,746,222 6,258,947 STOCKHOLDERS' EQUITY: Preferred Stock, $.10 par value; 1,500,000 shares authorized; none issued -- -- Series A Junior Participating Preferred Stock, par value $1.00; authorized 100,000 shares; none issued -- -- Common Stock, $.01 par value; 15,000,000 shares authorized; 2,222,271 shares issued and outstanding at April 30, 1998 and 2,122,271 outstanding at October 31, 1997 22,223 21,223 Additional Paid-In Capital 4,448,220 4,128,723 Retained Earnings 1,144,395 1,842,057 ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 5,614,838 5,992,003 ----------- ----------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $12,361,060 $12,250,950 =========== ===========
3 4 SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
Three Months Ended Six Months Ended April 30, April 30, ----------------------------- --------------------------- 1998 1997 1998 1997 ----------- ------------ ----------- ---------- REVENUES: Annuity Revenues: Product Sales to Franchisees $ 1,630,024 $ 1,352,781 $ 3,157,424 $ 2,324,857 Service Fees 531,379 450,991 1,016,682 884,732 Royalties 649,109 500,797 1,227,410 1,018,202 Marketing Fees 19,500 14,314 37,210 28,399 ----------- ----------- ----------- ------------ Total Annuity Revenues 2,830,012 2,318,883 5,438,726 4,256,190 Revenue From Company-Owned Subsidiaries 528,261 400,634 971,781 858,179 Initial Franchise Sales: Swisher Hygiene 20,558 95,525 20,558 345,525 Surface Doctor 294,600 159,605 440,245 234,605 Swisher Pest Control -- -- 18,000 -- Gain on Sale of Company-Owned Operations -- 38,804 -- 148,182 Other Income 80,234 83,201 147,250 142,191 ----------- ----------- ----------- ------------ TOTAL REVENUES 3,753,665 3,096,652 7,036,560 5,984,872 ----------- ----------- ----------- ------------ EXPENSES: Selling, G & A Expenses: Corporate & Hygiene 1,626,608 975,025 2,927,346 1,904,794 Swisher Maid 11,994 34,864 31,216 108,697 Surface Doctor 378,326 357,499 881,026 671,937 Swisher Pest Control 162,488 -- 337,003 -- Cost of Product Sales 1,404,110 1,052,487 2,607,743 1,884,636 Expenses of Company-Owned Subsidiaries 500,454 386,774 982,374 802,646 Interest Expense 69,916 45,476 156,123 94,553 ----------- ----------- ----------- ------------ TOTAL EXPENSES 4,153,896 2,852,125 7,922,831 5,467,263 ----------- ----------- ----------- ------------ INCOME BEFORE TAXES AND NON-RECURRING ITEMS (400,231) 244,527 (886,271) 517,609 PROVISION FOR INCOME TAXES (52,319) 97,710 (188,609) 208,200 ----------- ----------- ----------- ------------ NET INCOME $ (347,912) $ 146,817 $ (697,662) $ 309,409 =========== =========== =========== =========== EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENT BASIC EARNINGS $ (0.16) $ 0.07 $ (0.33) $ 0.16 =========== =========== =========== =========== COMMON SHARES 2,169,998 1,992,490 2,145,735 1,966,942 =========== =========== =========== =========== DILUTED EARNINGS $ (0.16) $ 0.06 $ (0.33) $ 0.13 =========== =========== =========== =========== COMMON SHARES AND EQUIVALENTS 2,169,998 2,398,958 2,145,735 2,386,308 =========== =========== =========== ===========
4 5 SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Six Months Ended April 30, ------------------------- 1998 1997 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $(697,662) $ 309,409 Adjustments to Reconcile Net Income to Net Cash provided (used) by operating activities - Depreciation and amortization 257,956 147,750 Change in Assets and Liabilities - (Increase) decrease in assets - Accounts receivable (315,011) (526,205) Inventory (6,154) (16,486) Prepaid expenses (384,146) (90,610) Deferred franchise costs 29,427 (29,691) Notes receivable (133,074) (364,819) Increase (decrease) in liabilities - Accounts payable 379,813 385,910 Accrued expenses 139,214 (40,891) Income taxes payable (109,823) 112,800 Deferred revenue 12,113 (14,801) --------- ---------- Total Adjustments (129,685) (437,043) --------- --------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (827,347) (127,634) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed assets (73,454) (172,271) Decrease (increase) in intangible & other assets (127,638) 4,624 --------- --------- NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (201,092) (167,647) --------- ---------
5 6 SWISHER INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (CONTINUED)
Six Months Ended April 30, ----------------------------- 1998 1997 ---------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in restricted cash $ -- $ 10,826 Net - proceeds from stock transactions 320,497 3,927 Net principal payments under long-term debt obligations 65,958 (945,387) ----------- ----------- NET CASH (USED) PROVIDED BY FINANCING ACTIVITIES 386,455 (930,634) ----------- ----------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (641,984) (1,225,915) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 662,880 1,809,590 ----------- ----------- CASH AND CASH EQUIVALENTS, END OF SECOND QUARTER $ 20,896 $ 583,675 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid year to date for - Interest $ 171,364 $ 84,502 =========== =========== Income taxes $ 330,000 $ 94,500 =========== ===========
6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. "FORWARD-LOOKING" INFORMATION This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act and are subject to the safe harbors created thereby. These forward-looking statements include the plans and objectives of management for future operations, including plans and objectives relating to (i) the continued expansion of the Company's Hygiene, Maids, Pest Control and Surface Doctor franchise programs, (ii) the introduction of new products to be sold to franchisees, (iii) the continued successful operation of franchised businesses by Hygiene, Surface Doctor, Pest Control and Maids franchisees, (iv) successful collection of the Company's notes receivable, particularly those executed by franchisees in the payment of initial franchise fees, (v) the Company's ability to re-sell certain Hygiene businesses which have been repurchased from franchisees and (vi) the Company's ability to expand into international and new domestic markets. The forward-looking statements included herein are based on current expectations that involve a number of risks and uncertainties. These forward-looking statements were based on assumptions that the Company would continue to develop and introduce new products on a timely basis, that competitive conditions within the Company's markets would not change materially or adversely, that demand for the Company's Hygiene, Maids, Pest Control and Surface Doctor franchises would remain strong, and that there would be no material adverse change in the Company's operations or business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions, and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that the assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking information will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking information included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives or plans of the Company will be achieved. THE FOLLOWING ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION AS OF APRIL 30, 1998 AND THE COMPANY'S RESULTS OF OPERATIONS FOR THE QUARTER AND SIX MONTH PERIOD ENDED APRIL 30, 1998 AND 1997 SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS REPORT. ALTHOUGH THE COMPANY BELIEVES THAT THE DISCLOSURES PRESENTED BELOW ARE ADEQUATE TO MAKE THE INTERIM FINANCIAL STATEMENTS PRESENTED NOT MISLEADING, IT IS SUGGESTED THAT THESE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO INCLUDED IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED OCTOBER 31, 1997. GENERAL: The financial information for the periods ended April 30, 1998 and 1997 included herein is unaudited but includes all adjustments which, in the opinion of management of the Company, are necessary to present fairly the financial position of the Company at April 30, 1998 and 1997, and the results of its operations and its cash flows for the six-month period then ended. The Company operates in two principal business areas: "Franchise Operations," which includes Initial Franchise Sales and Annuity Revenues (Service Fees, Product Sales to Franchisees, Royalties, and Marketing Fees), and "Company Operations through Company Owned Subsidiaries," which includes the Company's hygiene operations located in Space Coast, FL, and Tulsa, OK; the Company's residential maids operations located in the Charlotte, NC and Scottsdale, AZ areas, and the Company's pest control operation located in Monroe, NC. The Company's subsidiaries are actively engaged in providing hygiene services, pest control, and maid services directly to customers in the same manner as franchisees. The Company is currently not in compliance with the FTC Rule on franchise sales due to outstanding reports required to be filed with the SEC, which affected the Company's ability to sell certain US franchises in the second quarter. Following the filing of these outstanding documents with the SEC, the Company expects the return of eligibility to sell domestic franchises. 7 8 On March 19, 1998, options for 100,000 shares were exercised by certain officers and directors of the Company. This transaction created a note receivable to the Company of approximately $511,000. This is included in the $1,447,000 long term note receivable related party balance. For the three months ended April 30, 1998, a net loss of $348,000 was recorded, a decrease of $495,000 from the prior year period. The decrease in net income was caused by an increase in Corporate and Hygiene expenses of $651,000, an increase in Pest Control expenses of $162,000, and a decrease in product sales gross margin of $74,000. Additionally, the $38,804 gain on sale of Company-owned operations from the prior year period did not re-occur in 1998. These decreases in net income were partially offset by a reduction in the income tax provision of $150,000. REVENUE: Revenues in the second quarter ended April 30, 1998, increased 21% to $3,754,000 compared to prior year second quarter ended April 30, 1997, of $3,097,000. The major factor in the increase is the continued growth in Annuity Revenues. FRANCHISE OPERATIONS. Annuity Revenues for the three-month period ended April 30, 1998, increased 22% to $2,830,000 as compared to prior year second quarter results of $2,319,000. The majority of the increase related to $277,000 increase in product sales to franchisees. Revenue derived from Initial Franchise Sales, including sales of Master Licenses in foreign countries, increased 24% to $315,000 compared to prior year second quarter sales of $255,000. COMPANY OPERATIONS. Revenues increased 32% to $528,000 for the three-months ended April 30, 1998, compared to the prior year second quarter of $400,600. This increase is primarily attributable to the addition of the Pest Control operation located in Monroe, NC. EXPENSES: Total pre-tax expenses for the second quarter of 1998 increased 46% over second quarter 1997, which represents an increase of $1,302,000. Selling, general and administrative expenses increased by 59% to $2,179,000 compared to prior year second quarter of $1,367,000. Expenses of Company-owned subsidiaries increased $113,700 from the prior year's second quarter. FRANCHISE OPERATIONS. Expenses for the second quarter of 1998 increased $1,188,000 compared with the second quarter of 1997. Corporate and Hygiene expenses increased $651,000, approximately $200,000 of this increase is due to increases in professional fees. Expenses of $162,000 in Swisher Pest Control reflect the Company's continued investment in the start-up of this system. The $20,000 increase in Surface Doctor expenses from the prior year represent the Company's continuing efforts to integrate this system acquired in July 1996, and the on-going efforts to sell international licenses. Cost of products for resale to franchisees increased $352,000 or 33% over the prior year second quarter and corresponds to a 20% increase in product sales revenues. A change in the mix of products sold caused a decrease in the gross margin of $74,000. COMPANY OPERATIONS. Expenses for the quarter ended April 30, 1998, increased by $114,000 or 29% as compared to second quarter 1997. This increase in expenses is attributable to the addition of the Company's Monroe, NC, pest control operation. The Company hygiene, residential maids, and pest control operations are operated in the same manner as franchise operations. INCOME: Net income for the three months ended April 30, 1998, decreased $495,000 compared to the 1997 second quarter. Net loss was $348,000 for the quarter ended April 30, 1998, compared to net income of $147,000 in the second quarter of 1997. The basic loss per share for the three months ended April 30, 1998, was ($0.16) on 2,169,998 8 9 common shares, as compared to the same period last year of $.07 per share on 1,992,490 shares. Fully diluted (loss) earnings were also $ (0.16) on 2,169,998 common shares and equivalents in the three months ended April 30, 1998 and $.06 on 2,398,958 common shares and equivalents for the comparable prior year period. FRANCHISE OPERATIONS. Operating income for the three-month period ended April 30, 1998 decreased for a loss of $428,000 compared to income for the same period last year of $231,000. This decrease of $659,000 is mainly attributable to costs incurred in developing the infrastructure to support international and pest control franchise sales. COMPANY OPERATIONS. Operating income for the second quarter 1998, increased to $28,000 as compared to income in the second quarter 1997 of $14,000. This increase of $14,000 is attributable to the addition of the Pest Control operations in Monroe, NC. An income tax benefit of $52,000 was an improvement of $149,000 from the second quarter of 1997. LIQUIDITY AND CAPITAL RESOURCES: The Company has historically financed its growth through cash from operations. In addition, the Company used the proceeds of a public offering completed in April 1993 to finance the expansion of its franchise system. For the first six months in fiscal year 1998, net cash used by operations and investing activities were approximately $827,000 and $201,000 respectively. The increase of $386,000 in net cash provided from financing activities resulted primarily from stock options being exercised by certain officers and directors. Working capital decreased $882,000 during the first six months of fiscal year 1998 due principally to the use of $642,000 in cash and cash equivalents as detailed in the Consolidated Statement of Cash Flows and an increase of $379,800 in accounts payable due primarily to a 33% increase in the cost of product sales. Total assets increased $227,000 due mainly to an increase in accounts receivable and prepaids. Total liabilities increased by $487,000, which is reflected in the increase in accounts payable and accrued expenses. The Company has reviewed the Year 2000 problem as it relates to the Company's internal systems as well as those of its vendors and determined that it will not have a material impact on its business, operations nor its financial condition. Nevertheless, the Company's rapid expansion has resulted in an increasing number of entities with which the Company does business. While the Company believes that the Year 2000 issue will not have a material impact on the Company's internal operations or those of its current vendors, there can be no guarantee that the systems of other unrelated entities on which its systems and operations rely, or on which its systems and operations may rely in the future, will be corrected on a timely basis and will not have a material adverse impact on the Company. 9 10 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. In August 1997, the previous owners of the Surface Doctor Division iled suit against certain officers of the Company and the Company. Civil Action File No. 97-CV-2581 (CC) and Civil Action File No. 1 97-CV-2303-CC were both filed in the United States District Court for the Northern District of Georgia, Atlanta Division. These suits were settled during the quarter, without any adverse effect to the Company. As part of the settlement, the former director and previous owner of Surface Doctor relinquished back to the Company options for 75,000 shares of common stock. ITEM 2. CHANGES IN SECURITIES. Options for 100,000 shares were exercised by certain officers and directors on March 19, 1998. The exercising of these options created a note receivable to the company in the amount of $511,250 and is included in the long term note receivable related parties balance. A schedule of the options exercised are as follows: Pat Swisher - 57,600 shares @ $5.50 per share Tom Reeder - 19,000 shares @ $5.00 per share George Moore - 23,400 shares @ $4.25 per share ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (1) Exhibits 27 Financial Data Schedule (for SEC use only).* (2) Reports on Form 8-K A report on Form 8-K was filed on February 27, 1998, relating to the withdrawal of the Company's Certifying Accountants. A report on Form 8-K was filed on March 13, 1998, relating to the Company's former Certifying Accountants response to the Company's report filed on February 27, 1998. Amendment No. 1 to the report on Form 8-K originally filed on March 13, 1998, was filed on March 24, 1998, relating to the withdrawal of the Company's Certifying Accountants. Amendment No. 2 to the report on Form 8-K originally filed on March 13, 1998, was filed on April 24, 1998, relating to retention of new Certifying Accountants for the Company. * Previously filed. 10 11 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. SWISHER INTERNATIONAL, INC. Registrant Date - August 12, 1998 by: /s/ Patrick L. Swisher ----------------------- Patrick L. Swisher Chief Executive Officer Date - August 12, 1998 by: /s/ Thomas W. Busch ---------------------------- Thomas W. Busch Principal Accounting Officer 11 -----END PRIVACY-ENHANCED MESSAGE-----