-----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, QlUblXnmqgCxyHgO/0xTPgArn+wc5skr7FO1ek0NFCQ0n3QKywIsvgxfg35Io0hq jLizCUQqzW3bWfnH7W4CMA== 0000950147-00-000021.txt : 20000107 0000950147-00-000021.hdr.sgml : 20000107 ACCESSION NUMBER: 0000950147-00-000021 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991031 FILED AS OF DATE: 20000106 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COX TECHNOLOGIES INC CENTRAL INDEX KEY: 0000065031 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 860220617 STATE OF INCORPORATION: AZ FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-08006 FILM NUMBER: 502611 BUSINESS ADDRESS: STREET 1: 69 MCADENVILLE ROAD STREET 2: SUITE 450 CITY: BELMONT STATE: NC ZIP: 28012 BUSINESS PHONE: 704-825-8146 MAIL ADDRESS: STREET 1: 69 MCADENVILLE ROAD STREET 2: SUITE 450 CITY: BELMONT STATE: NC ZIP: 28012 FORMER COMPANY: FORMER CONFORMED NAME: ENERGY RESERVE INC DATE OF NAME CHANGE: 19950907 10-Q 1 QUARTERLY REPORT FOR THE QTR ENDE 10/31/99 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(d) of the Securities Exchange Act of 1934 For Quarter ended October 31, 1999 Commission file number 0-8006 COX TECHNOLOGIES, INC. FKA: Energy Reserve, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) ARIZONA 86-0220617 - ------------------------------ ------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 69 McAdenville Road, Belmont, North Carolina 28912 -------------------------------------------------- Registrant's telephone number, including area code (704) 825-8146 Former name, former address and former fiscal year, if changed since last report Indicated by check mark 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 [ ] APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicated by check mark whether the registrant has filed all documents and reports required to by 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 a court. Yes [ ] No [ ] APPLICABLE ONLY TO CORPORATE USERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class - Common Stock, without Par Value 23,280,922 Shares Outstanding at December 7, 1999 COX TECHNOLOGIES, INC. AND SUBSIDIARIES INDEX Page ---- FACE SHEET 1 INDEX 2 PART I. - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS 3 Consolidated Balance Sheets at October 31, 1999 and July 31, 1999 4 Consolidated Statements of Operations and Accumulated Deficit Three Months Ended October 31, 1999 & 1998 5 Six Months Ended October 31, 1999 & 1998 6 Statement of Cash Flows Six Months Ended October 31, 1999 and 1998 7 Notes to Consolidated Financial Statements 8-9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10-14 PART II. OTHER INFORMATION AND SIGNATURES 15-16 2 FINANCIAL INFORMATION COX TECHNOLOGIES, INC. AND SUBSIDIARIES PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Cox Technologies, Inc. and its subsidiaries, Twin Chart, Inc., its subsidiary Transit Services, Inc., Vitsab, AB, Sweden, Vitsab, Inc., Energy Reserve Holdings, Inc., and Energy Reserve Financial Corporation (collectively the Company), engage in the business of producing and distributing transit temperature recording instruments, both domestically in United States and internationally. The Company also engages in the business of acquiring, developing and selling oil properties and of producing and selling crude oil for its own account in United States. As such the Company has not and does not engage in petroleum refining or retail marketing. The Consolidated Financial Statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the financial statements and data notes thereto included in the Company's annual report on Form 10-K, for the year ended April 30, 1999. In the opinion of the Company, all adjustments have been included which are necessary for the preparation of the balance sheets of Cox Technologies, Inc. and consolidated subsidiaries at October 31, 1999 and April 30, 1999 and to a fair statement of the results of operations for the three months ended October 31, 1999 and 1998 and for the six months ended October 31, 1999 and 1998. 3 COX TECHNOLOGIES, INC., AND SUBSIDIARIES FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS OCTOBER 31, 1999 AND APRIL 30, 1999 October 31, April 30, 1999 1999 ------------ ------------ ASSETS CURRENTS ASSETS: Cash and cash equivalents (Note A) $ 1,605,169 $ 1,250,810 Accounts receivable, less allowance for doubtful accounts of $29,527 at October 31, 1999 and April 30, 1999 1,749,890 1,599,079 Inventory (Note B) 1,348,053 1,542,663 Investment in securities 51,211 Notes receivable-current portion 17,882 30,477 Prepaid expenses 62,703 65,860 ------------ ------------ TOTAL CURRENT ASSETS 4,783,677 4,540,100 Property and equipment (net) 7,428,783 7,109,762 Investments in securities 375,671 300,000 Deposits 21,268 23,692 Goodwill (Note A) 829,526 886,783 Notes receivable - non-current portion 97.890 16,855 ------------ ------------ TOTAL ASSESTS $ 13,536,815 $ 12,877,192 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 465,833 $ 582,542 Income taxes payable (Note C) 2,932 34,720 Current portion of long-term debt (Note A) 1,809,234 1,651,949 ------------ ------------ TOTAL CURRENT LIABILITIES 2,277,999 2,269,211 Long-term debt 1,150,977 581,374 Minority Interest -0- 669 ------------ ------------ 3,428,976 2,851,254 ------------ ------------ COMMITMENTS AND CONTINGENCIES (Note D) STOCKHOLDERS' EQUITY Common stock, no par value: authorized 100,000,000 shares; issued and outstanding 23,618,261, shares at October 31, 1999 and at April 30, 1999 20,306,099 20,306,098 Common stock subscribed 58,100 58,100 Contributed Capital 420,982 420,982 Treasury stock (45,920) (45,920) Accumulated deficit (10,577,388) (10,667,609) Less - notes receivable for common stock: Subscribed (54,034) (45,713) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 10,107,839 10,025,938 ------------ ------------ TAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 13,536,815 $ 12,877,192 ============ ============ See notes to Financial Statements 4 COX TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT Three Months Ended October 31, ------------------------------ 1999 1998 ------------ ------------ REVENUE Sales $ 2,342,379 $ 2,248,525 ------------ ------------ COSTS AND EXPENSES Cost of sales 1,173,300 1,129,310 General and administrative expenses 686,247 585,226 Sales expense 372,173 337,366 Interest expense 44,855 35,796 Depreciation and depletion 28,487 50,230 ------------ ------------ TOTAL EXPENSE 2,305,062 2,137,928 ------------ ------------ INCOME FROM OPERATIONS 37,317 110,597 ------------ ------------ OTHER INCOME (expense) Other income (expense) 18,456 186,640 ------------ ------------ Earnings before income taxes 55,773 297,237 Provisions for income taxes (note c) 3,000 40,900 ------------ ------------ NET EARNINGS 52,773 256,337 ACCUMULATED DEFICIT, beginning of period (10,630,161) (10,425,450) ------------ ------------ ACCUMULATED DEFICIT, end of period ($10,577,388) $(10,169,113) ============ ============ EARNINGS PER SHARE: Net earnings (loss) $ 0.002 $ 0.01 ============ ============ See notes to Financial Statements 5 COX TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT Six Months Ended October 31, ------------------------------ 1999 1998 ------------ ------------ REVENUE 0Sales $ 4,672,146 $ 4,621,388 ------------ ------------ COSTS AND EXPENSES Cost of sales 2,440,861 2,307,536 General and administrative expenses 1,320,085 1,186,452 Sales expense 707,193 710,113 Interest expense 88,550 77,520 Depreciation and depletion 55,925 75,322 ------------ ------------ TOTAL EXPENSES 4,612,614 4,356,943 ------------ ------------ INCOME FROM OPERATIONS 59,532 264,445 ------------ ------------ OTHER INCOME (EXPENSE) Other income (expense) 33,689 206,061 ------------ ------------ Earnings before income taxes 93,221 470,506 Provisions for income taxes (note C) 3,000 40,900 ------------ ------------ NET EARNINGS 90,221 429,606 ACCUMULATED DEFICIT, beginning of period (10,667,609) (10,598,719) ------------ ------------ ACCUMULATED DEFICIT, end of period $(10,577,388) $(10,169,113) ============ ============ EARNINGS PER SHARE: Net earnings (loss) $ 0.004 $ 0.02 ============ ============ See notes to Financial Statements 6 COX TECHNOLOGIES, INC. AND SUBSIDIARIES STATEMENT OF CASH FLOWS Six Months Ended October 31, ---------------------------- 1999 1998 ----------- ----------- CASH FLOW FROM OPERATING ACTIVITIES Net earnings $ 90,221 $ 429,606 Adjustments to reconcile net earnings to net used by operating activities: Depreciation and depletion 55,925 75,322 Loss on securities -0- 180,500 Allowance for doubtful accounts 863 -0- (Acquisition) disposition of Goodwill 32,696 (803,184) CHANGES IN CURRENT ASSETS AND CURRENT LIABILITIES (Increase) decrease in current assets: Inventory 194,610 (342,459) Accounts receivable (151,674) (262,188) Prepaid expenses 3,157 264,742 Notes receivable and investments (6,959) (Increase) decrease in non-current assets: Deposits 2,424 2,193 Deferred taxes 30,000 Notes receivable - long term (22,734) Increase (decrease) in current liabilities: Accounts payable and accrued expenses (117,377) 5,784 Income Taxes Payable (31,788) (25,568) ----------- ----------- NET CASH FROM OPERATING ACTIVITIES 79,057 (474,945) ----------- ----------- CASH FLOW FROM INVESTING ACTIVITIES Investment in securities (24,460) 300,000 Issuance of common stock 843,933 Purchase of property and equipment (350,385) (2,780,356) ----------- ----------- NET CASH FROM INVESTING ACTIVITIES (374,845) (1,636,423) ----------- ----------- CASH FLOW FROM FINANCING ACTIVITIES Repayment on notes payable (437,844) Amounts borrowed under notes payable 726,888 1,750,000 Repayment (additions) to subscriptions receivable (8,321) -0- ----------- ----------- NET CASH FROM INVESTING ACTIVITIES 650,147 1,312,156 ----------- ----------- NET INCREASE (DECREASE) IN CASH 354,359 (799,212) CASH, beginning of year 1,250,810 2,575,945 ----------- ----------- CASH, end of year $ 1,605,169 $ 1,776,733 =========== =========== See notes to Financial Statements 7 COX TECHNOLOGIES, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Quarter Ended October 31, 1999 SUPPLEMENTAL DISCLOSURE: Six Months Ended October 31, ---------------------------- 1999 1998 ------- ------- Interest paid $88,550 $35,796 Income taxes paid $ 8,950 $ -0- NOTE A - CASH, NOTES PAYABLE AND COMMON STOCK In June 1998, the Company acquired Vitsab, AB, a Swedish corporation in exchange for 3,375,734 shares of the Company's unregistered common stock valued at $843,933 or $0.25 per share and 950,000 shares of the common stock of VITSAB, USA, Inc., a previously wholly-owned subsidiary of the Company with 4,750,000 shares of common stock outstanding and the assumption of certain debt in the amount of $2,300,000 owed by VITSAB, AB to an unrelated company. The Company borrowed $1,750,000 from the bank under two notes and security agreements and liquidated the referenced $2,300,000 debt for the discounted sum of $1,750,000. The Company has pledged a $1,000,000 certificate of deposit with the lending bank as collateral for the $1,750,000 borrowed funds. The loans were due and payable within on year from June 1998. Under terms of the notes and security agreements the Company was obligated to make eleven (11) monthly payments of $19,258.01 and one (1) final payment of all outstanding principal and accrued interest due June 17, 1999. The bank extended the monthly payments through September 1999 and in September 1999 subsequent to the date of this October 31, 1999 Report the Company refinanced its' indebtedness as follows: a) consolidated the unpaid balance on the $1,750,000 loan with, b) an additional loan of $500,000 and, c) arranged for monthly interest only payments of $4,479.00 to the bank with a maturity date of February 10, 2000 for the consolidated indebtedness with, d) the understanding the consolidated loan would be reviewed at the maturity date for conversion to a long-term indebtedness if not paid or assumed through an equity financing of the Vitsab corporate structure independent of Cox Technologies, Inc. 8 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) NOTE B - INVENTORY Inventory at October 31, 1999 and April 30, 1999 consists of the following: 1999 ------------------------------- October 31, April 30, ---------- ---------- Raw materials $ 297,662 $ 367,752 Work-in-progress 255,743 315,690 Finished goods 792,192 859,221 Crude oil 2,456 -0- ---------- ---------- $1,348,053 $1,542,663 ========== ========== NOTE C - INCOME TAXES The Company and its subsidiaries file consolidated Federal income tax returns and separate State income tax returns. The Company's provision for income taxes is determined after application of a portion of its net operating loss carry forward. As of October 31, 1999 the Company's unused net operating loss carry forward was approximately $9,581,886. NOTE D - COMMITMENTS AND CONTINGENCIES There have been no changes in the disclosures of commitments, contingencies and litigation as contained in the Company's annual report Form 10-K for the year ended April 30, 1999. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES At October 31, 1999 the Company had a working capital of $2,505,678. This is an increase of $234,789 for the six months period May 1, 1999 to October 31, 1999. The Company did not incur any long-term debt during this period, however investment in property and equipment increased significantly by the acquisition of Vitsab, AB. At present, cash flow from operations is adequate to meet the cash requirements and commitments of the Company. However, the Company plans to enter into equity, debt or other financing arrangements to meet its future financial needs for expansion and: (a) To provide for general working capital needs including the servicing of the Vitsab, AB acquisition debt (b) To repay outstanding liabilities As previously disclosed, Vitsab, Inc. a wholly owned subsidiary of the Company entered into a letter of intent with an investment broker to structure and negotiate a private placement financing of up to $7,500,000 of Vitsab, Inc. securities. The Company has terminated this agreement and is seeking a new source of financing for Vitsab, Inc. COMPARISON OF OPERATIONS FOR SECOND FISCAL QUARTER ENDED OCTOBER 31, 1999 AND 1998 As more fully described in its annual report, Form 10K for the year ended April 30, 1999, the Company has three (3) industry operating segments; a) time temperature recorders (Recorders), b visual tag indicators (Vitsab) and c) crude oil production (Oil). Net earnings for the second fiscal quarter ended October 31, 1999 were $52,773, which is a decrease of $203,564 from $256,337 net earnings for the same period last year. This decrease was primarily due to a reduction of $168,936 in other non-operating income in 1999 as compared to 1998. Earnings from operations for 1999 were $38,069, a decrease of $72,528 from the 1998 second fiscal quarter earnings from operations. 10 COMPARISON OF OPERATIONS FOR QUARTER ENDED (Continued) The following schedule reflects the operations of the three industry segments of the Company for the three months ended October 31, 1999 and 1998.
Three Months Ended July 31 --------------------------------------------------------------------------- 1999 1998 1999 1998 1999 1998 Recorders Recorders Oil Oil Vitsab Vitsab ---------- ---------- ---------- ---------- ---------- ---------- Revenue: Sales 2,342,379 2,245,525 0 0 0 3,000 Costs and Expenses Cost of sales 993,926 935,863 2,250 2,447 177,124 191,000 General & administrative 556,191 539,233 49,324 36,136 80,732 0 Sales expense 372,173 337,366 0 0 0 0 Interest 4,855 4,921 0 0 40,000 40,732 Depreciation & depletion 15,926 29,230 0 0 12,561 21,000 ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) operations 399,308 398,912 (51,574) (38,583) (310,417) (249,732) Other income (expense) 18,023 (36,321) 433 222,961 0 0 ---------- ---------- ---------- ---------- ---------- ---------- Earnings before income taxes 417,331 362,591 (51,141) 184,378 (310,517) (249,732) Income taxes 3,000 27,134 0 13,766 0 0 ---------- ---------- ---------- ---------- ---------- ---------- Net earnings (loss) 414,331 335,457 (51,141) 170,612 (310,417) (249,732) ========== ========== ========== ========== ========== ==========
TEMPERATURE RECORDER OPERATIONS Sales increased by $96,854 or 4.3% for the second quarter 1999 fiscal year as compared to the same period of 1998 fiscal year. All categories of cost and expenses remained fairly static with only slight increases in cost of sales, general administrative and sales expenses. The Company is currently developing a new temperature logger that is expected to be more functional and complete than presently available logger technology. Management anticipates the initial marketing of this product before the end of the current fiscal year ending April 30, 2000. 11 OIL PRODUCTION OPERATIONS As discussed in the Company's annual report, Form 10-K for the year-ended April 30, 1999, the oil field operations are being operated under a farm-out arrangement with an experienced operator. The costs to the Company for direct oil field operations consisted primarily of property taxes for both 1999 and 1998. The Company expects revenue from its oil production operations in the third and fourth fiscal quarters of the current fiscal year. The increase in general and administrative expenses of $13,188 in 1999 as compared to 1998 was due to costs and expenses associated with the Company's CT Telecom division which is being operated from the Phoenix office and is included under the oil production operations. The CT Telecom division is developing a computer software operating system that is expected to be a separate revenue center for the Company by the fourth fiscal quarter of the fiscal year. Other income of $222,961 for 1998 was realized from the settlement of indebtedness at less than the recorded liability. VITSAB OPERATIONS This business segment was acquired in June 1998 and operations consist mainly of marketing, production and product development. The Vitsab operations are more fully disclosed in the Company's Form 10-K for the year-ended April 30, 1999. Cost of sales expenditures represent costs of operations for both Malmo, Sweden and Belmont, North Carolina operations. The net loss of the operation for the three months periods of both 1999 and 1998 were virtually the same. Cost of sales, which represents production costs, were down. General administrative expenses represent organizational expenses and salaries incurred by both Belmont and Malmo operations. Cost of sales decreased $13,876 or 0.7% in 1999 as compared to the same period for 1998. This was the result of executive and staff salaries with related expenses in establishing a new management team to develop and market the Vitsab product. Management anticipates significant Vitsab sales prior to the end of the current fiscal year ending April 30, 2000. 12 COMPARISON OF OPERATIONS FOR SIX MONTHS PERIOD The following schedule reflects the operations of the three industry segments of the Company for the six months ended October 31, 1999 and 1998.
Six Months Ended October 31 --------------------------------------------------------------------------- 1999 1998 1999 1998 1999 1998 Recorders Recorders Oil Oil Vitsab Vitsab ---------- ---------- ---------- ---------- ---------- ---------- Revenue: Sales 4,670,146 4,618,388 0 0 2,000 3,000 Costs and Expenses Cost of sales 2,158,519 2,101,250 4,500 3,286 277,842 203,000 General & administrative 1,137,934 1,119,253 101,419 67,199 80,732 0 Sales expense 707,193 710,113 0 0 0 0 Interest 12,610 13,951 0 9,857 75,940 53,712 Depreciation & depletion 31,364 50,322 0 0 24,561 25,000 ---------- ---------- ---------- ---------- ---------- ---------- Income (loss) operations 622,526 623,499 (105,919) (80,342) 457,075 (278,212) Other income (expense) 32,937 (32,643) 752 238,704 0 0 ---------- ---------- ---------- ---------- ---------- ---------- Earnings before income taxes 655,463 590,856 (105,167) 158,362 457,075 (278,712) Income taxes 3,000 27,134 0 13,766 0 0 ---------- ---------- ---------- ---------- ---------- ---------- Net earnings (loss) 652,463 563,722 (105,167) 144,596 (457,075) (278,712) ========== ========== ========== ========== ========== ==========
* Vitsab operations for 1998 cover only four months. TEMPERATURE RECORDER OPERATIONS Sales increased slightly by $51,758 for the 1999 six-month period as compared to the same 1998 period. Cost of sales was 46.0% of sales for 1999 as compared to 45% for 1998. General and administrative expense increased $18,681 as compared to 1998. As a percent of sales, such expenses were 24.4% in 1999 as compared to 24.2% in 1998. Sales expenses decreased $2,920 in 1999 as compared to 1998. As a percent of sales, such expenses were 15.1% for 1999 and 15.4% for 1998. This decrease was due primarily to fewer trade show and sales promotional expenses. Interest expense was $1,341 less for 1999 than 1998 due to increased interest bearing indebtedness of the recorder operations. Other income increased by $65,580 due to interest earnings on investments in 1999 combined with a loss on securities in 1998. 13 COMPARISON OF SIX MONTHS (CONTINUED) OIL PRODUCTION OPERATIONS As discussed in the Company's annual report, Form 10-K for the year-ended April 30, 1999, the oil field operations are being operated under a farm-out arrangement with an experienced operator. The costs to the Company for direct oil field operations consisted primarily of property taxes for both 1999 and 1998. The Company expects revenue from its oil production operations in the third and fourth fiscal quarters of the current fiscal year. The increase in general and administrative expenses of $34,220 in 1999 as compared to 1998 was due to costs and expenses associated with the Company's CT Telecom division which is being operated from the Phoenix office and is included under the oil production operations. The CT Telecom division is developing a computer software operating system that is expected to be a separate revenue center for the Company by the fourth fiscal quarter of the fiscal year. VITSAB OPERATIONS This business segment was acquired in June 1998 and operations consist mainly of marketing, production and product development. The Vitsab operations are more fully disclosed in the Company's Form 10-K for the year-ended April 30, 1999. Cost of sales expenditures represent costs of operations for both Malmo, Sweden and Belmont, North Carolina operations. The net loss of the operation for the three months periods of both 1999 and 1998 were virtually the same. Cost of sales, which represents production costs, were down. General administrative expenses represent organizational expenses and salaries incurred by both Belmont and Malmo operations. A comparative analysis of the 1999 and 1998 operations would not be meaningful as the 1998 operations cover only four months while the 1999 operations cover six months. Management anticipates significant Vitsab sales prior to the end of the current fiscal year ending April 30, 2000. 14 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Reference is made to the annual report Form 10-K of the Company for the year ended April 30, 1999, relative to legal proceedings and litigation. No charges or determinations have occurred on such proceedings during the quarter covered by this report. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) No exhibits are filed as a part of this report. (b) There were no Form 8-K's filed by the Company during the quarter ended October 31, 1999. YEAR 2000 DISCLOSURE 1. COMPANY'S STATE OF READINESS Management began addressing the Company's Year 2000 issues over two years ago, at which time it was determined the accounting software was not Year 2000 compliant. New software was purchased and installed. The Company obtained a written statement from the software vendor who attested to the Year 2000 readiness of this software. To accommodate this new software the Company updated its network software with Novell 4.0 to interact with the accounting software in a manner that will not interfere with its Year 2000 readiness. Management has also reviewed all electronically based product software programs sourced from third party vendors and have determined they are all Year 2000 compliant. The Company has mailed questionnaire forms to all its mission critical vendor/suppliers of parts for its assembly line. There has been virtually a 100% return of these informational requests. Concurrently, the Company has been qualifying alternate vendors/suppliers for potential replacement for any non-compliant vendors. 2. COST TO ADDRESS THE COMPANY'S YEAR 2000 ISSUES The Company has expended approximately $15,000 to date in addressing its Year 2000 readiness. By management analysis, the future outlay for addressing any perceived Year 2000 issues will not exceed $25,000 including assembly line parts and supplies under its contingency plan. 15 3. RISKS OF THE COMPANY'S YEAR 2000 ISSUES Management's analysis of its Year 2000 readiness indicate there are no Year 2000 issues that will have a material effect on its business, results of operations or financial. This opinion is based upon the Company's accounting readiness is now complete and all of the vendors of parts and supplies critical to its operations have acknowledged Year 2000 readiness and compliance. 4. COMPANY'S CONTINGENCY PLANS If management's analysis of its third party vendor capability had not been achieved by June 1999, a contingency plan was developed providing for stockpiling of assembly line parts and continuing new vendor sourcing of Year 2000 compliance vendors. 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. COX TECHNOLOGIES, INC Date January 3, 2000 /s/ James L Cox ----------------------------------------------- James L Cox, President Chief Executive Officer, Director and Chairman Date January 3, 2000 /s/ Robert W. Dupree ----------------------------------------------- Robert W. Dupree, Chief Financial Officer 16 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE SECURITIES AND EXCHANGE COMMISSION FORM 10-Q OF COX TECHNOLOGIES, INC. FOR THE QUARTER ENDED OCTOBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 U.S. DOLLARS 6-MOS APR-30-2000 MAY-01-1999 OCT-31-1999 1 1,605,169 0 1,749,890 29,527 1,348,053 4,783,677 7,428,783 0 13,536,815 2,277,999 0 0 0 20,306,099 (10,198,260) 13,536,815 2,342,379 2,342,379 1,173,300 2,305,062 0 0 44,855 55,773 3,000 37,317 0 18,456 0 52,773 0.002 0.002
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