10QSB 1 i10q3-01.txt 10QSB 1ST QUARTER 2002 QUARTERLY REPORT FOR INDUSTRIAL RUBBER PRODUCTS, INC. United States Securities and Exchange Commission Washington, D.C. 20549 Form 10-QSB (Mark One) [X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Period Ended March 31, 2002 or [ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Transition Period Ended From to ---------------- Commission file number 333-46643 INDUSTRIAL RUBBER PRODUCTS, INC. (Exact name of small business issuer as specified in its charter) Minnesota 41-1550505 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3516 13th Avenue East Hibbing, MN 55746 (Address of principal executive offices) (Zip Code) (218) 263-8831 (Issuer's telephone number, including area code) Not applicable (Former, name, former address and former fiscal year, if changes since last report) Applicable Only to Issuers Involved in Bankruptcy Proceedings During the Preceding Five Years Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by the court. Yes No Applicable Only to Corporate Issuers Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: Common Stock, $.001 Par Value - 4,187,205 shares as of May 14, 2002. Transitional Small Business Disclosure Format (check one) Yes No x PART I - FINANCIAL INFORMATION Item 1. Financial Statements
Industrial Rubber Products, Inc. Condensed Balance Sheets March 31, 2002 and December 31, 2001 March 31 December 31 2002 2001 Unaudited ------------- ----------- Assets Current Assets Cash and Cash Equivalents $ 134,832 $ 324,607 Trade Receivables, net of allowances 2,975,724 2,343,243 Inventories 1,027,474 1,166,081 Prepaid Expenses 281,071 287,432 Deferred Taxes 261,000 261,000 ----------- ----------- Total Current Assets $4,680,101 $4,382,363 ----------- ----------- Other Assets Cash Value of Life Insurance $ 241,977 $ 238,720 Investment in common stock of Acotec S.A. 120,000 120,000 Goodwill 1,081,951 1,081,951 Accumulated Amortization (212,691) (212,691) Prepaid Expenses 14,974 14,974 ----------- ------------ Total Other Assets $1,246,211 $1,242,954 ----------- ------------ Deferred Taxes $ 946,732 $ 980,000 Property, Plant and Equipment Land $ 511,576 $ 511,576 Buildings 1,610,551 1,610,551 Automotive Equipment 527,560 527,560 Machinery and Equipment 6,309,945 6,303,351 ---------- ----------- $8,959,632 $8,953,038 Less Accumulated Depreciation 3,616,070 3,413,095 ----------- ----------- Net Property, Plant and Equipment $5,343,562 $5,539,943 ----------- ----------- Total Assets $12,216,606 $12,145,260 =========== ============ Liabilities and Stockholder's Equity Current Liabilities Bank Note Payable $4,539,296 $4,699,996 Current Maturities of Long-term Debt 67,575 67,088 Accounts Payable 936,465 794,369 Accrued Expenses 715,816 608,663 Income Taxes Payable - 51,296 ----------- ----------- Total Current Liabilities $6,259,152 $6,221,412 ----------- ----------- Long-term Debt, less current maturities $ 748,472 $ 775,298 ----------- ----------- Stockholder's Equity Common Stock, $.001 per value; authorized 25,000,000 shares; issued 4,187,205 in 2001 and 2002. $ 4,187 $ 4,187 Additional paid-in capital 5,638,862 5,638,862 Retained Earnings (444,579) (494,481) Accumulated other comprehensive income 10,512 (18) ----------- ----------- Total Stockholder's Equity $5,208,982 $5,148,550 ----------- ----------- Total Liabilities and Stockholder's Equity $12,216,606 $12,145,260 =========== ===========
Industrial Rubber Products, Inc. Condensed Statements of Income (Unaudited) Three Months Ended March 31, -------------------------------------- 2002 2001 -------------------------------------- Net Sales $ 3,668,686 $ 3,853,636 Cost of Sales 2,898,173 3,106,621 -------------------------------------- Gross Profit $ 770,513 $ 747,015 Selling, General and Administrative Expense 590,980 648,693 -------------------------------------- Operating Income/(Loss) $ 179,533 $ 98,322 -------------------------------------- Nonoperating Income/(Expense) Interest Income $ 298 $ 4,288 Interest Expense (96,661) (164,028) Gain/(Loss) on sale of assets 0 0 -------------------------------------- $ (96,363) $ (159,740) -------------------------------------- Income/(Loss) Before Tax $ 83,170 $ (61,418) Income Tax Expense/(Credit) 33,268 (24,567) -------------------------------------- Net Income/(Loss) $ 49,902 $ (36,851) ============ ============ Net Income Per Share Basic $ 0.01 $ (0.01) ============ ============ Diluted $ 0.01 $ (0.01) ============ ============ Weighted Average Shares Outstanding Basic 4,187,205 4,187,205 ============ ============ Diluted 4,446,855 4,490,855 ============ ============
Industrial Rubber Products, Inc. Statements of Cash Flows (Unaudited) Three Months Ended March 31, --------------------------------------------- 2002 2001 ------------------- ------------------- Cash Flows from Operating Activities Net Income/(Loss) $ 49,902 $ (36,851) Adjustments to reconcile net income/(loss) to net cash provided by (used in) operating activities: Depreciation 202,975 204,023 Amortization 18,032 Gain on sale of property 0 0 Deferred Taxes 33,268 (24,567) Changes in working capital components net of effect from purchase of business: (Increase) Decrease in: Receivables (632,481) (216,107) Inventories 138,607 151,830 Prepaid Expenses 6,361 (8,404) Increase (Decrease) in: Accounts payable and accrued expenses 197,953 (161,591) ------------------- ------------------- Net cash provided by (used in) operating activities $ (3,415) $ (73,635) ------------------- ------------------- Cash Flows from Investing Activities Purchase of Property and Equipment (6,594) (44,335) (Increase) decrease in cash value of life insurance (3,257) (1,000) Proceeds from the sale of property 0 0 Proceeds from the maturity of marketable debt securities 0 0 Purchase of Businesses 0 0 Other Investing Activities 0 0 ------------------- ------------------- Net cash provided by (used in) investing activities $ (9,851) $ (45,335) ------------------- ------------------- Cash Flows from Financing Activities Net proceeds (repayments) on short-term borrowings $(160,700) $(125,000) Principal payments on long-term borrowings (26,339) (16,530) Disbursements on loan origination fees 0 0 Disbursements for common stock reacquired 0 0 ------------------- ------------------- Net cash provided by (used in) financing activities $(187,039) $(141,530) ------------------- ------------------- (Increase) Decrease in Foreign Currency Adjustment (Note 6) $ 10,530 $ 10,128 ------------------- ------------------- Net increase (decrease) in cash and cash equivalents $(189,775) $(250,372) Cash and cash equivalents Beginning 324,607 388,351 ------------------- ------------------- Ending $ 134,832 $ 137,979 =========== =========== Supplemental Disclosures of Cash Flow Information Cash payments for interest $ 100,830 $ 168,756 =========== =========== Cash payments for income taxes $ 53,706 $ 3,050 =========== =========== Supplemental Schedule of Noncash Investing and Financing Activities
Industrial Rubber Products, Inc. Notes to Consolidated Financial Statements March 31, 2002 (Unaudited) Note 1. Basis of Presentation. The accompanying interim financial statements presented have been prepared by Industrial Rubber Products, Inc. (the "Company") without audit, and in the opinion of the management, reflect all adjustments of a normal recurring nature necessary for a fair statement of (a) the results of operations for the three months ended March 31, 2002 and March 31, 2001 (b) the financial position at March 31, 2002 and (c) the cash flows for the three month periods ended March 31, 2002 and March 31, 2001. Operating results for the three month period ended March 31, 2002, are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. The balance sheet presented as of December 31, 2001 has been derived from the financial statements that have been audited by the Company's independent public accountants. The financial statements and notes are condensed as permitted by Form 10-QSB and do not contain certain information included in the annual financial statements and notes of the Company. The consolidated financial statements and notes included herein should be read in conjunction with the financial statements and notes included in the Company's Form 10-KSB filed April 1, 2002. Note 2. Related Company Transactions. As of March 31, 2002 the Company had no receivables with either Nelson Roofing, Inc. or K Building Components, Inc. ("KBC"), both companies owned solely by the majority stockholder of the Company. The Company from time to time provides management and administrative services to Nelson Roofing, Inc. and receives a management fee for such services. There were no management fees invoiced to Nelson Roofing, Inc. in the first quarter of 2002. Note 3. Earnings per share. Earnings per share have been computed on the basis of the weighted-average number of common shares outstanding during each period presented. Common shares issuable upon exercise of the employee stock options and common shares issuable upon exercise of warrants issued to the underwriters have been included in the diluted earnings per share calculations. Note 4. Total comprehensive income. For the quarter ended March 31 2002, the total comprehensive income was $56,209. The difference between total comprehensive income and net income was due to foreign currency transaction adjustments net of tax. Note 5. Goodwill. Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" (SFAS No. 142). SFAS No. 142 requires that goodwill and certain other intangible assets having indefinite lives no longer be amortized to income, but instead be replaced with periodic testing for impairment. Intangible assets determined to have definite lives will continue to be amortized over their useful lives. The Company completed its initial goodwill impairment testing during the three months ended March 31, 2002 and determined that there was no impairment as of January 1, 2002. In accordance with SFAS No. 142, prior period amounts were not restated. A reconciliation of the previously reported net income and earnings per share for the three months ended March 31, 2001 to the amounts adjusted for the reduction of amortization expense, net of the related income tax effect, is as follows:
Earnings per share --------------------------- Net Assuming Income/(Loss) Basic Dilution ------------------------------------- Net income/(loss) as reported $ (36,851) $(0.0088) $(0.0082) Add: amortization adjustment 18,032 0.0043 0.0040 ------------------------------------- Net income/(loss) as adjusted $ (18,819) $(0.0045) $(0.0042) =====================================
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Net Sales. Net sales for the period ending March 31, 2002, of $3,668,686 compares with $3,853,636 in the same quarter of 2001. Sales declined approximately 5% as many of the Company's markets continue to struggle. The Company's order backlog on March 31, 2002, was approximately $1,500,000. Cost of Sales. Cost of sales as a percentage of net sales was 79.0% in the first quarter of 2002 compared with 80.6% in the same quarter of 2001. This decrease was the result of cost reductions in the manufacturing facilities. Selling, General and Administrative Expenses. Normal selling, general and administrative expenses ("SGA") decreased from $648,693 (16.8% of net sales) in the first quarter of 2001 to $590,980 (16.1% of net sales) in the same quarter of 2002. The decrease was the result of Company's continued efforts to reduce expenses at all divisions and the corporate office. Expenses are also down as amortization expense decreased approximately $16,000 from the same quarter in 2001 as a result of the adoption of FAS 142 Non-operating Income and Expense. The major non-operating expense, interest expense, decreased from $164,028 in the first quarter of 2001 to $96,661 in the same quarter of 2002. The decrease was the result of lower interest rates and reduced debt. Net Income/(Loss) Before Tax. The net income before tax for the quarter ending March 31 2002, was $83,170 and compares with a net loss of $61,418 for the same quarter in 2001. The increase can be attributed to continued SGA cost reductions and the reduction of the Company's debt with a corresponding decrease in interest expense. Income Taxes. During the quarter ended March 31, 2002, the Company recorded an income tax expense of $33,268. This compares with an income tax credit of $36,851 in the same quarter of 2001. The Company does not anticipate the payment of income taxes for 2002 income due to operating loss carry-forwards from previous years, except for the Irathane Elliott (Canadian) subsidiary. Cash Flows. The Company's cash flows from operating activities showed net cash used of $3,415 for the first three months of 2002. Working capital component changes accounted for net cash usage of $289,560. The largest usage was accounts receivable increasing by $632,481 primarily due to one project. This project was with Acotec, of which the Company owns 10% of the common stock. Acotec has extended payment terms as do the majority of the Company's foreign accounts. Offsets to this included inventories being reduced by $138,607 and accounts payable and accrued expenses increasing by $197,953. These net unfavorable working capital changes were partially offset by the positive cash flows resulting from income before depreciation, amortization and deferred taxes, of $286,145. The Company showed net cash used in investing activities of $9,851 in the first three months of 2002. The major item was $6,594 for the purchase of property and equipment. The Company used $187,390 in financing activities for the first three months of 2002. Nearly this entire amount, $160,700, was used to reduce short-term bank borrowings. In total, the Company showed a net decrease in cash of $189,775 for the first three months of 2002. This reduced the Company's cash balance from $324,607 to $134,832. Liquidity and Sources of Capital. The Company has signed an extension of their financing agreements with US Bank to July 31, 2002. Under the terms of the extension, the Company is to make $50,000 payments monthly for May, June and July of 2002 to reduce the principal balance of the term loan. The Company's revolving credit loan balance on March 31, 2002 was $466,189. The Company is continuing to work with US Bank and other financial institutions to convert short-term borrowings into long-term debt. The Company believes that it can fund proposed capital expenditures and operating requirements from operations and bank credit lines. PART II - OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities and Use of Proceeds. None. Item 3. Defaults upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. Exhibit 10 Eight Amendment to Credit Agreement between Company and US Bank dated January 31, 2002. Exhibit 11 Statement Re: Computation of Earnings per Share. Exhibit 27 Financial Data Schedule (b) Reports on Forms 8-K. None. 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. INDUSTRIAL RUBBER PRODUCTS, INC. (Registrant) Date: May 15, 2002 /s/ James Skalski --------------------------------- James Skalski Comptroller Exhibit 10(24) EIGHTH AMENDMENT TO CREDIT AGREEMENT This Eighth Amendment to Credit Agreement dated as of January 31, 2002 is by and between INDUSTRIAL RUBBER PRODUCTS, INC., a Minnesota corporation (the "Borrower") and U.S. BANK NATIONAL ASSOCIATION, a national banking association (the "Lender"). RECITALS A. The Borrower and the Lender have entered into a Credit Agreement dated as of March 30, 1999, as amended by a First Amendment to Credit Agreement dated as of September 30, 1999, as amended by that Second Amendment to Credit Agreement dated as of March 31, 2000, as further amended by that Third Amendment to Credit Agreement dated as of June 9, 2000, as further amended by that Fourth Amendment to Credit Agreement dated as of December 31, 2000, as further amended by a Fifth Amendment to Credit Agreement dated as of March 7, 2001, as further amended by that Sixth Amendment to Credit Agreement dated as of July 12, 2001, and as further amended by that Seventh Amendment to Credit Agreement dated as of November 20, 2001 (as amended, the Credit Agreement"). B. The Borrower and the Lender wish to make certain amendments to the Credit Agreement. NOW, THEREFORE, in consideration of the mutual promises herein set forth and for other good and valuable consideration, the Borrower and the Lender agree as follows: Section 1. Capitalized Terms. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Credit Agreement, unless the context shall otherwise require. Section 2. Amendments. The Credit Agreement is hereby amended as follows: 2.1 Definition. Section 1.1 of the Credit Agreement is amended by amending the definition of "Reference Rate" to provide in its entirety as follows: "Reference Rate": The rate of interest from time to time publicly announced by the Lender as its "prime rate." The Lender may lend to its customers at rates that are at, above or below the Reference Rate. For purposes of determining any interest rate hereunder or under the Note which is based on the Reference Rate, such interest rate shall change as and when the Reference Rate changes. 2.2 The Commitments. Section 2.1 of the Credit Agreement is amended in its entirety to provide as follows: 2.1(a) Revolving Credit. A revolving loan (the "Revolving Loan") to the Borrower available as Advances at any time and from time to time from January 31, 2002 to April 30, 2002 (the "Revolving Maturity Date"), during which period the Borrower may borrow, repay and reborrow in accordance with the provisions hereof, provided, that the unpaid principal amount of revolving Advances shall not at any time exceed $1,200,000 (the "Revolving Commitment Amount"); and provided, further, that no revolving Advance will be made if, after giving effect thereto, the unpaid principal amount of the Revolving Note would exceed the Borrowing Base. 2.1(b) A term loan (the "Term Loan") from the Lender to the Borrower in the amount of $4,173,106.77 (the "Term Loan Commitment Amount"). 2.2 The Notes. The Revolving Note attached to the Credit Agreement as Exhibit 2.3(a) is amended in its entirety to read as set forth on the Revolving Note attached hereto as Exhibit A, all references in the Credit Agreement to the Revolving Note shall mean the Revolving Note dated as of the date hereof, in the form attached hereto. The Term Note attached to the Credit Agreement as Exhibit 2.3(b) is amended in its entirety to read as set forth on the Term Note attached hereto as Exhibit B, all references in the Credit Agreement to the Term Note shall mean the Term Note dated as of the date hereof, in the form attached hereto. Section 3. Conditions and Effectiveness. This Amendment shall become effective on the date hereof, only upon satisfaction of the following conditions: (a) The Borrower shall have executed and delivered to the Lender this Eighth Amendment. (b) The Lender shall have received an amended and restated Revolving Note executed by the Borrower in form and substance satisfactory to the Lender. (c) The Lender shall have received an amended and restated Term Note executed by the Borrower in form and substance acceptable to the Lender. (d) The Lender shall have received a copy of the resolutions of the Board of Directors of the Borrower authorizing the execution, delivery and performance of this Amendment certified as true and accurate by its Secretary or Assistant Secretary, along with a certification by such Secretary or Assistant Secretary certifying as to (i) no change in the Articles of Incorporation or Bylaws of the Borrower since true and accurate copies of the same were delivered to the Lender with a certificate of the Secretary of the Borrower and (ii) identifying each officer of the Borrower authorized to executed this Amendment and any other instrument or agreement executed by the Borrower in connection with this Amendment (collectively, the "Amendment Documents"), and certifying as to specimens of such officer's signature and incumbency in such offices as such officer holds. (e) The Lender shall have received an executed consent and reaffirmation from each guarantor in form and substance acceptable to the Lender. (f) The Lender shall have received an executed reaffirmation of security agreement from each of the Borrower's subsidiaries in form and substance acceptable to the Lender. (g) The Lender shall have received such other documents as the Lender may reasonably request. (h) The Lender shall have received an extension fee in the amount of $5000.00. (i) The Borrower shall have satisfied such other conditions as specified by the Lender, including payment of all unpaid legal fees and expenses incurred by the Lender through the date of this Amendment in connection with the Credit Agreement and the Amendment Documents. Section 4. Acknowledgment. The Borrower and the Lender acknowledge and agree that as hereby amended the Credit Agreement remains in full force and effect. All references in the Credit Agreement to "this Agreement", "herein" or similar references shall mean the Credit Agreement as amended herein. The Borrower represents and warrants that the Borrower has the power and legal right and authority to enter into this Amendment and has duly authorized as appropriate the execution and delivery of this Amendment and other agreements and documents executed and delivered by the Borrower in connection herewith or therewith by proper corporate action. The Borrower acknowledges and agrees that the security interests granted to the Lender pursuant to the Security Agreement secure all liabilities and obligations of the Borrower to the Lender and this Agreement, as hereby amended. Section 5. Counterparts. This Amendment may be executed in one or more counterparts and by separate parties on separate counterparts with the same effect as if the signatures thereto were on the same instrument and shall become effective when counterparts executed by all parties have been received by the Lender. IN WITNESS WHEREOF, the parties hereto have caused this Eighth Amendment to Credit Agreement to be executed by their officers thereunto duly authorized as of the date first above written. INDUSTRIAL RUBBER PRODUCTS, INC. By: ------------------------------ Title: ------------------------------ U.S. BANK NATIONAL ASSOCIATION By: ------------------------------ Title: ------------------------------ EXHIBIT A TO EIGHTH AMENDMENT TO CREDIT AGREEMENT EXHIBIT 2.3(A) TO CREDIT AGREEMENT REVOLVING NOTE $1,200,000 January 31, 2002 Minneapolis, MN FOR VALUE RECEIVED, INDUSTRIAL RUBBER PRODUCTS, INC., a corporation organized under the laws of the State of Minnesota, hereby promises to pay to the order of U.S. BANK NATIONAL ASSOCIATION (the "Lender") at its main office in Hibbing, Minnesota, in lawful money of the United States of America in immediately available funds on the Revolving Maturity Date (as such term and each other capitalized term used herein are defined in the Credit Agreement hereinafter referred to) the principal amount of ONE MILLION TWO HUNDRED THOUSAND DOLLARS AND NO CENTS ($1,200,000) or, if less, the aggregate unpaid principal amount of all Revolving Advances made by the Lender under the Credit Agreement, and to pay interest (computed on the basis of actual days elapsed and a year of 360 days) in like funds on the unpaid principal amount hereof from time to time outstanding at the rates and times set forth in the Credit Agreement. This note is the Revolving Note referred to in the Credit Agreement dated as of March 30, 1999 as amended by the First Amendment to Credit Agreement dated as of September 30, 1999, by that Second Amendment to Credit Agreement dated as of March 31, 2000, by that Third Amendment to Credit Agreement dated as of June 9, 2000, by that Fourth Amendment dated as of December 31, 2000, by that Fifth Amendment to Credit Agreement dated as of March 7, 2001, by that Sixth Amendment to Credit Agreement dated as of July 12, 2001, by that Seventh Amendment to Credit Agreement dated as of November 20, 2001, and by that Eighth Amendment to Credit Agreement dated as of even date (as the same may hereafter be from time to time amended, restated or modified, the "Credit Agreement") between the undersigned and the Lender. This note is secured, it is subject to certain permissive and mandatory prepayments and its maturity is subject to acceleration, in each case upon the terms provided in said Credit Agreement. This note is issued in substitution, extension and replacement of, but not in payment of, a Revolving Note in the original principal amount of $1,200,000 dated as of November 20, 2001 from the Borrower to the Lender. In the event of default hereunder, the undersigned agrees to pay all costs and expenses of collection, including reasonable attorney's fees. The undersigned waives demand, presentment, notice of nonpayment, protest, notice of protest and notice of dishonor. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS INDUSTRIAL RUBBER PRODUCTS, INC. By: Title: EXHIBIT B TO EIGHTH AMENDMENT TO CREDIT AGREEMENT EXHIBIT 2.3(b) TO CREDIT AGREEMENT TERM NOTE $4,173,106.77 January 31, 2002 Minneapolis, Minnesota FOR VALUE RECEIVED, INDUSTRIAL RUBBER PRODUCTS, INC., a corporation organized under the laws of the State of Minnesota, hereby promises to pay to the order of US BANK NATIONAL ASSOCIATION (the "Lender") at its main office in Hibbing, Minnesota, in lawful money of the United States of America in immediately available funds the principal amount of FOUR MILLION ONE HUNDRED SEVENTY-THREE THOUSAND ONE HUNDRED SIX AND 77/100 DOLLARS ($4,173,106.77), and to pay interest (computed on the basis of actual days elapsed and a year of 360 days) in like funds on the unpaid principal amount hereof from time to time outstanding at the rate and times set forth in the Credit Agreement. The principal amount of this note shall be due and payable by a payment in the amount of $50,000 on February 15, 2002, a payment in the amount of $50,000 on March 15, 2002, a payment in the amount of $50,000 on April 15, 2002, and one final payment on April 30, 2002 in the amount of the entire remaining principal balance. This Note is the Term Note referred to in the Credit Agreement dated as of March 30, 1999 as amended by that First Amendment to Credit Agreement dated as of September 30, 1999, by that Second Amendment to Credit Agreement dated March 31, 2000, by that Third Amendment to Credit Agreement dated as of June 9, 2000, by that Fourth Amendment to Credit Agreement dated as of December 31, 2000, by that Fifth Amendment to Credit Agreement dated as of March 7, 2001, by that Sixth Amendment to Credit Agreement dated as of July 12, 2001, by that Seventh Amendment to Credit Agreement dated as of November 20, 2001 and by that Eighth Amendment to Credit Agreement dated as of even date (as the same may hereafter be from time to time amended, restated or otherwise modified, the "Credit Agreement") between the undersigned and the Lender. This Note is secured and its maturity is subject to acceleration, in each case upon the terms provided in said Credit Agreement. This note is issued in substitution, extension and replacement of, but not in payment of, a Term Note in the original principal amount of $4,323,106.77 dated as of July 12, 2001 from the Borrower to the Lender. In the event of default hereunder, the undersigned agrees to pay all costs and expenses of collection, including reasonable attorneys' fees. The undersigned waives demand, presentment, notice of nonpayment, protest, notice of protest and notice of dishonor. THE VALIDITY, CONSTRUCTION AND ENFORCEABILITY OF THIS NOTE SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF MINNESOTA WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF, BUT GIVING EFFECT TO FEDERAL LAWS OF THE UNITED STATES APPLICABLE TO NATIONAL BANKS. INDUSTRIAL RUBBER PRODUCTS, INC. By: Title: Industrial Rubber Products, Inc. Exhibit 11 - Statement Re Computation of Earnings Per Share
Three Months Ended March 31, ---------------- 2002 ---------- Primary and full diluted: Weighted average shares outstanding during the period 4,187,205 ---------- Net Income $49,902 ---------- Net income/(loss) per share - basic $.01 ========== Net income/(loss) per share - diluted: .01
Net income per share is computed based upon the weighted average number of shares outstanding during the period. The Stock Options and Warrants discussed in the Company's Schedule 14A filed April 17, 2002 were not dilutive for the period ending March 31, 2002. EX-27 FDS This schedule contains summary financial information extracted from Industrial Rubber Products, Inc.'s Form 10-QSB for the quarterly period ended March 31, 2002 and is qualified in its entirety by reference to such consolidated statement. PERIOD-TYPE 3 MONTHS ------------------------------------------------------------------------------- FISCAL-YEAR-END DECEMBER 31,2002 PERIOD-START JANUARY 1,2002 PERIOD-END MARCH 31,2002 CASH 134,832 SECURITIES 0 RECEIVABLES 3,363,965 ALLOWANCES 388,241 INVENTORY 1,027,474 CURRENT-ASSETS 4,680,101 PP&E 8,959,632 DEPRECIATION 3,616,070 TOTAL-ASSETS 12,216,606 CURRENT-LIABILITIES 6,259,152 BONDS 748,472 PREFERRED-MANDATORY 0 PREFERRED 0 COMMON 4,187 OTHER-SE 5,205,795 TOTAL-LIABILITY-AND-EQUITY 12,216,606 SALES 3,668,686 TOTAL-REVENUES 3,668,984 CGS 2,898,173 TOTAL-COSTS 3,489,153 OTHER-EXPENSES 0 LOSS-PROVISION 7,741 INTEREST-EXPENSE 96,661 INCOME/(LOSS)-PRETAX 83,170 INCOME-TAX 33,268 INCOME/(LOSS)-CONTINUING 49,902 DISCONTINUED 0 EXTRAORDINARY 0 CHANGES 0 NET-INCOME/(LOSS) 49,902 EPS-BASIC 0.01 EPS-DILUTED 0.01