-----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, VQfsh/4Hx4l2JxUd/LyR9hx4YeN9fF54/NrxD2pcCwCcIxdT8DQKAABNomgVFw7c BarB+iGJkBNE463P7Xh0LQ== 0000950147-99-001070.txt : 19990928 0000950147-99-001070.hdr.sgml : 19990928 ACCESSION NUMBER: 0000950147-99-001070 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19990927 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: 99717520 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 QTR ENDING 7-31-99 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 July 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 28012 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 filled 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 [X] 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 23,618,261 Shares Outstanding at August 31, 1999 COX TECHNOLOGIES, INC. AND SUBSIDIARIES INDEX FACE SHEET 1 INDEX 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS 3 Consolidated Balance Sheets July 31, 1999 and April 30, 1999 4 Consolidated Statements of Operations and Accumulated Deficit Three Months Ended July 31, 1999 and 1998 5 Statement of Cash Flows Three Months Ended July 31, 1999 and 1998 6 - 7 Notes to Consolidated Financial Statements 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9-11 PART II. OTHER INFORMATION AND SIGNATURE 12 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, USA, 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 July 31, 1999 and April 30, 1999 and to a fair statement of the results of operations for the three months ended July 31, 1999 and 1998. 3 COX TECHNOLOGIES, INC. AND SUBSIDIARIES FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS JULY 31, 1999 AND APRIL 30, 1999 - -------------------------------------------------------------------------------- July 31, 1999 April 30, 1999 ------------- -------------- ASSETS CURRENTS ASSETS: Cash and cash equivalents (Note A) $ 1,327,064 $ 1,250,810 Accounts receivable, less allowance for doubtful accounts of $28,664 at July 31,1999 and April 30, 1999 1,514,112 1,599,079 Inventory (Note B) 1,377,454 1,542,663 Investment in securities 25,997 51,211 Notes receivable-current portion 17,862 30,477 Prepaid expenses 70,531 65,860 ------------ ------------ 4,333,020 4,540,100 Property and equipment (Net) 7,094,350 7,109,762 Investment in securities 300,000 300,000 Deposits 30,677 23,692 Goodwill (Note A) 842,087 886,783 Notes receivable - non-current portion 34,074 16,855 ------------ ------------ TOTAL ASSETS $ 12,634,208 $ 12,877,192 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 557,798 $ 582,542 Income taxes payable (Note C) 2,932 34,720 Current portion of long-term debt (Note A) 1,295,034 1,651,949 ------------ ------------ TOTAL CURRENT LIABILITIES 1,855,764 2,269,211 Long-term debt 722,710 581,374 Minority interest payable 669 669 ------------ ------------ 2,579,143 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 July 31, 1999 and at April 30, 1999 (Note A) 20,306,098 20,306,098 Common stock subscribed 58,100 58,100 Contributed Capital 420,982 420,982 Treasury stock (45,920) (45,920) Accumulated deficit (10,630,161) (10,667,609) Notes receivable - common stock subscribed (54,034) (45,713) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 10,055,065 10,025,938 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 12,634,208 $ 12,877,192 ============ ============ See Notes to Financial Statement 4 COX TECHNOLOGIES, INC. AND SUBSIDIARIES (FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES) JULY 31, 1999 AND APRIL 30, 1999 - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF INCOME Three Months Ended July 31 ------------------------------ 1999 1998 ---- ---- REVENUE Sales $ 2,329,767 $ 2,372,863 ------------ ------------ COSTS AND EXPENSES Cost of sales 1,267,561 1,178,226 General and administrative expenses 633,838 611,083 Sales expense 335,020 372,747 Interest expense 43,695 31,867 Depreciation and depletion 27,438 25,092 ------------ ------------ TOTAL EXPENSE 2,307,552 2,219,015 ------------ ------------ INCOME FROM OPERATIONS 22,215 153,848 ------------ ------------ OTHER INCOME (EXPENSE) Other income (expense) 15,233 19,421 ------------ ------------ Earnings income taxes 37,448 173,269 Provisions for income taxes (Note C) -- -- NET EARNINGS 37,448 173,269 ACCUMULATED DEFICIT, beginning of period (10,667,609) (10,598,719) ------------ ------------ ACCUMULATED DEFICIT, end of period ($10,630,161) ($10,425,450) ============ ============ EARNINGS PER SHARE: Net earnings $ 0.00 $ 0.01 ------------ ------------ See Notes to Financial Statements 5 COX TECHNOLOGIES, INC. AND SUBSIDIARIES (FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES) CONSOLIDATED STATEMENTS OF CASH FLOWS JULY 31, 1999 AND APRIL 30, 1999 - -------------------------------------------------------------------------------- Three Months Ended July 31 -------------------------- 1999 1998 --------- ----------- CASH FLOW FROM OPERATING ACTIVITIES Net earnings Adjustments to reconcile net earnings $ 137,448 $ 173.269 to net cash used by operating activities: Depreciation, depletion and amortization 27,438 25,092 CHANGES IN CURRENT ASSETS AND CURRENT LIABILITIES (Increase) decrease in current assets: Accounts receivable 84,967 (161,850) Inventory 165,209 (52,269) Prepaid expenses (4,671) 288,570 Notes receivable and investments 37,829 12,713 (Increase) decrease in non-current assets Deposits (6,985) 1,400 Deferred taxes 30,000 Notes receivable - long term (17,219) (15,407) Goodwill 44,696 -- Increase (decrease) in current liabilities: Accounts payable and accrued expenses (24,744) (89,513) Income Taxes payable (31,788) (9,770) --------- ----------- CASH PROVIDED (USED) BY OPERATING ACTIVITIES 312,180 198,235 --------- ----------- CASH FLOW FROM INVESTING ACTIVITIES Investment in securities -- 300,000 Issuance of common stock -- 843,933 Property (12,026) (2,562,898) Acquisition of goodwill -- (814,757) --------- ----------- NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (12,026) (2,233,722) --------- ----------- CASH FLOW FROM FINANCING ACTIVITIES Repayment on notes payable - Long term debt (215,579) (30,961) Subscriptions receivable (8,321) 1,428 Minority interest -- (669) Amounts borrowed under notes payable -- 1,750,000 NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES $(223,900) $ 1,719,798 --------- ----------- See Notes to Financial Statements 6 COX TECHNOLOGIES, INC. AND SUBSIDIARIES (FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES) CONSOLIDATED STATEMENT OF CASH FLOWS - CONTINUED JULY 31, 1999 AND APRIL 30, 1999 - -------------------------------------------------------------------------------- Three Months Ended July 31 -------------------------- 1999 1998 --------- ----------- NET INCREASE (DECREASE) IN CASH 76,254 (315,689) CASH, beginning of period 1,250,810 2,575,945 ---------- ----------- CASH, end of period $1,327,064 $ 2,260,256 ========== =========== 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 issued 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 a 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 one year from June 1998. Under the 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 June17, 1999. The bank extended the monthly payments through September 1999 and in September 1999 subsequent to the date of this July 31, 1999 Report the Company refinanced its' bank 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 to the bank with a maturity date of February 10, 2000 for the consolidated indebtedness with d) the understanding that the consolidated loan would be reviewed at the maturity date for conversion to a long-term indebtedness if not paid or assumed through a pending equity financing of the Vitsab corporate structure independent of Cox Technologies, Inc. See Notes to Financial Statement 7 COX TECHNOLOGIES, INC. AND SUBSIDIARIES FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS QUARTER ENDED JULY 31, 1999 - -------------------------------------------------------------------------------- NOTE B - INVENTORY Inventory at July 31, 1999 and April 30, 1999 consists of the following: 1999 ------------------------ July 31 April 30 ---------- ---------- Raw materials $ 362,749 $ 367,752 Work-in-progress 285,680 315,690 Finished goods 726,569 859,221 Crude oil 2,456 -- ---------- ---------- $1,377,454 $1,542,663 ========== ========== NOTE C - INCOME TAXES The Company and its subsidiaries file consolidated Federal income tax returns and separate State income tax returns. 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. 8 COX TECHNOLOGIES, INC. AND SUBSIDIARIES FORMERLY ENERGY RESERVE, INC. AND SUBSIDIARIES) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS QUARTER ENDED JULY 31, 1999 - -------------------------------------------------------------------------------- FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES At July 31, 1999 the Company had a working capital of $2,477,256. This is a increase of $206,367 for the first quarter period May 1, 1999 to July 31, 1999. 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 debt incurred for the Vitsab, AB acquisition and its continued operations. (b) To repay outstanding liabilities. Vitsab, Inc., presently a: wholly owned subsidiary of the Company, has entered into a letter of intent with an investment banker to structure and negotiate a private placement financing of up to $7,500,000 of Vitsab, Inc. securities. The Company anticipates a successful conclusion of this financing by December 1999 or January 2000. COMPARISON OF OPERATIONS FOR QUARTER ENDED JULY 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 3) crude oil production (Oil). The consolidated earnings for the first fiscal quarter ended July 31, 1999 were $32,448 which is a decrease of $135,821 from the $173,269 net earnings for the same period last year. Earnings from operations for 1999 were $22,215, a decrease of $131,633 from the 1998 first fiscal quarter earnings from operations. 9 COMPARISON OF OPERATIONS FOR QUARTER ENDED - CONTINUED The following schedule reflects the operations of the two industry segments of the Company for the three months ended July 31, 1999 and 1998. As the Vitsab subsidiary was acquired on June 30, 1998, the Vitsab operations for 1998 cover only the month of July 1998.
THREE MONTHS ENDED JULY 31 -------------------------------------------------------------- 1999 1998 1999 1998 1999 1998 Recorders Recorders Oil Oil Vitsab Vitsab --------- --------- ------- ------- -------- ------- Revenue: Sales 2,327,767 2,372,863 0 0 2,000 0 Costs and Expenses Cost of sales 1,164,593 1,165,387 2,250 839 100,718 12,000 General and administrative 581,743 580,020 52,095 31,063 0 0 Sales expense 335,020 372,747 0 0 0 0 Interest 7,755 9,030 0 9,857 35,940 12,980 Depreciation and amortization 15,438 21,092 0 0 12,000 4,000 ------- ------- ------- ------- -------- ------- Income (loss) operations 223,218 225,587 (54,345) (41,759) (146,658) (29,980) Other income(expense) 14,914 3,678 319 15,743 0 0 ------- ------- ------- ------- -------- ------- Earnings before income taxes 238,132 229,265 (54,026) (26,016) (323,740) (29,980) Income taxes 0 0 0 0 0 0 ------- ------- ------- ------- -------- ------- Net earnings (loss) 238,132 229,265 (54,026) (26,016) (146,658) (29,980) ------- ------- ------- ------- -------- -------
TEMPERATURE RECORDER OPERATIONS Sales decreased slightly by $45,000 for the 1999 first quarter period as compared to the same 1998 period. All categories of cost and expenses were virtually the same for 1999 as in 1998. Cost of sales was 50.0% of sales for 1999 as compared to 49.1% for 1998. General and administrative expense increased $1,723 as compared to 1998. As a percent of sales, such expenses were 25% in 1999 as compared to 24.4% in 1998. Sales expenses decreased $37,727 or 10.1% in 1999 as compared to 1998. As a percent of sales, such expenses were 14.4% for 1999 and 15.7% for 1998. This decrease was due primarily to fewer trade show and sales promotional expenses.+ Interest expense was $1,275 less for 1999 than 1998 due to repayment on the interest bearing indebtedness of the recorder operations. Other income increased by $11,236 due to interest earnings on investments. 10 COMPARISON OF OPERATIONS - CONTINUED OIL PRODUCTION OPERATIONS In April 1999, as fully disclosed in Notes to Financial Statements, Note E of the Company's Annual Report, Form 10K for the fiscal year ended April 30, 1999, the Company entered into a definitive oil field operating agreement (the Agreement) which provides, among other things, for revenue sharing by the parties and, at the sole funding and cost to the Operator, for the rehabilitation of the Leases and the restoration of crude oil production. The Company did not have any sales during 1999 or 1998 for the fiscal quarter ended July 31. The rehabilitation and operation of the wells is proceeding and in excess of 2,000 barrels have been produced at July 31, 1999. Capital costs by the Operator were approximately $35,000 at July 31, 1999. The increase in cost of sales represents supervision expenses of the Company in oversight activities in connection with oil field operations. The increase of $21,032 in general and administrative expenses is attributable to consulting, legal and executive expenses. VITSAB OPERATIONS The quarter ended July 31, 1999 cannot be meaningfully compared with operations ended July 31, 1998 because the 1998 operations covered only one month whereas the 1999 operations cover a full three-month period. Cost of sales is comprised of all the costs and expenses associated with the Vitsab operations at the Malmo, Sweden plant. The plant is fully staffed and equipped for production of the visual tag indicators developed by Vitsab to provide visual proof of the progress of the biological deterioration process of a perishable food package. As noted elsewhere in this Report, the Company is presently undertaking an equity financing of the Vitsab, Inc. subsidiary wherein funds for marketing, production and expansion activities of this product will be provided. 11 OTHER INFORMATION 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 July 31, 1999 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: 09-24-99 /s/ James L Cox -------------------------------------------------- James L Cox, President and Chief Executive Officer Date: 09-24-99 /s/ Robert W. Dupree -------------------------------------------------- Robert W. Dupree, Chief Financial Officer 12 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 JULY 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 U.S. DOLLARS 3-MOS APR-30-1999 MAY-01-1999 JUL-31-1999 1 1,327,064 25,997 1,514,112 28,664 1,377,454 4,333,020 7,094,350 0 12,634,208 1,855,764 2,017,744 0 0 20,306,098 (10,251,033) 12,634,208 2,329,767 2,329,767 1,267,561 2,307,552 0 0 43,695 37,448 0 22,215 0 15,233 0 37,448 0 0
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