-----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, LDsz2PkZbmP0ot8cSa1iUspSKDxznNfIijx2ZY9ysOYQDbnCAKJa6EooviSAjBoq 8kUOao2kWVXGsKyMPZrQ1g== 0000897101-97-000596.txt : 19970520 0000897101-97-000596.hdr.sgml : 19970520 ACCESSION NUMBER: 0000897101-97-000596 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH ATLANTIC TECHNOLOGIES INC CENTRAL INDEX KEY: 0000706021 STANDARD INDUSTRIAL CLASSIFICATION: FABRICATED PLATE WORK (BOILER SHOPS) [3443] IRS NUMBER: 411390785 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-12768 FILM NUMBER: 97608749 BUSINESS ADDRESS: STREET 1: 8120 PENN AVE S STE 435 CITY: BLOOMINGTON STATE: MN ZIP: 55431 BUSINESS PHONE: 6128888553 MAIL ADDRESS: STREET 1: 8120 PENN AVE SOUTH STREET 2: STE 435 CITY: BLOOMINGTON STATE: MN ZIP: 55431 10QSB 1 U.S. 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 quarterly period ended: March 31, 1997 or [ ] Transition report under Section 13 or l5(d) of the Exchange Act of 1934 For the transition period from _____ to _____ Commission File Number: 2-85984-C North Atlantic Technologies, Inc. (Exact name of small business issuer as specified in its charter) Minnesota 41-1390785 (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 8120 Penn Avenue South, Suite 435, Bloomington, Minnesota 5543l (Address of principal executive offices) (Zip Code) Issuer's telephone number 612-888-8553 ________________________________________________________________________________ Former name, former address and former fiscal year, if changed since last report 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ___ No _X_ Check whether registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by court. Yes ___ No _X_ State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date; 3,453,011 shares as of May 12, 1997. Transitional small business disclosure format? Yes ____ No _X_ PART I - FINANCIAL INFORMATION ITEM I - FINANCIAL STATEMENTS NORTH ATLANTIC TECHNOLOGIES, INC. BALANCE SHEETS (UNAUDITED)
MARCH 31, DECEMBER 31, ASSETS 1997 1996 - ----------------------------------------------------------------- ----------- ----------- CURRENT ASSETS Cash and equivalents $ 262,674 $ 199,982 Trade accounts receivable, net of allowance for doubtful accounts of $107,058 and $100,000, respectively 567,116 563,650 Inventories 186,049 170,275 Costs and estimated earnings in excess of billings on uncompleted contracts 15,478 35,765 Other current assets 6,489 11,015 ----------- ----------- Total current assets 1,037,806 980,687 PROPERTY AND EQUIPMENT Land 695,792 695,792 Buildings and leasehold improvements 504,209 504,209 Machinery and equipment 480,928 480,214 Office furniture and equipment 28,633 27,920 ----------- ----------- Totals 1,709,562 1,708,135 Less accumulated depreciation (172,439) (130,071) ----------- ----------- Net property and equipment 1,537,123 1,578,064 OTHER ASSETS Patent rights, less accumulated amortization of $10,000 and $7,500, respectively 90,000 92,500 Reorganization value in excess of amounts allocable to identifiable assets, less accumulated amortization of $41,919 and $31,439, respectively 378,966 389,447 Other 11,893 12,399 ----------- ----------- Total other assets 480,859 494,346 ----------- ----------- $ 3,055,788 $ 3,053,097 =========== =========== See notes to financial statements.
NORTH ATLANTIC TECHNOLOGIES, INC. BALANCE SHEETS (UNAUDITED)
MARCH 31, DECEMBER 31, LIABILITIES AND EQUITY 1997 1996 - ------------------------------------------------------------------ ----------- ----------- CURRENT LIABILITIES Current maturities of long-term debt $ 1,048,925 $ 741,809 Trade accounts payable 891,176 1,058,399 Other accounts payable 8,044 21,202 Billings in excess of costs and estimated earnings on uncompleted contracts 206,010 609,210 Accrued liabilities: Taxes other than income 49,892 15,884 Warranty reserve 250,000 250,000 Compensation 36,400 30,072 Interest 25,556 7,576 ----------- ----------- Total current liabilities 2,516,003 2,734,152 LONG-TERM DEBT, NET OF CURRENT MATURITIES Note payable to Bank 333,320 355,093 Mortgage note payable 461,098 465,186 Lease obligations 6,291 6,291 ----------- ----------- Total Long-Term Debt 800,709 826,570 Total Liabilities 3,316,712 3,560,722 STOCKHOLDER'S EQUITY (DEFICIT) Preferred stock, Series A Convertible, $.01 par value; authorized 22,000 shares, issued and outstanding 21,694 shares, total liquidation value, $542,350 216 216 Common stock, $.01 par value; authorized 5,000,000 shares, issued and outstanding 3,453,011 shares 34,530 22,530 Additional paid in capital 38,000 Retained earnings (deficit) (333,670) (530,371) ----------- ----------- Total stockholders' (deficit) (260,924) (507,625) ----------- ----------- $ 3,055,788 $ 3,053,097 =========== =========== See notes to financial statements.
NORTH ATLANTIC TECHNOLOGIES, INC. STATEMENTS OF OPERATIONS (UNAUDITED) SUCCESSOR PREDECESSOR COMPANY COMPANY ----------- ----------- 3 MONTHS ENDED 3 MONTHS ENDED MARCH 31, 1997 MARCH 31, 1996 ----------- ----------- REVENUES $ 1,949,967 $ 1,394,512 COST OF REVENUES 1,205,027 782,682 ----------- ----------- Gross Profit 744,940 611,830 OPERATING COSTS 502,571 411,931 ----------- ----------- OPERATING PROFIT 242,369 199,899 OTHER INCOME (EXPENSE): Royalty and services income 5,835 6,245 Interest expense (57,426) (82,372) Rental and other income 5,925 10,350 ----------- ----------- (45,666) (65,777) ----------- ----------- INCOME BEFORE REORGANIZATION ITEMS AND EXTRAORDINARY ITEM 196,703 134,122 REORGANIZATION ITEMS 1,380,468 ----------- ----------- INCOME BEFORE EXTRAORDINARY ITEM $ 196,703 $ 1,514,590 EXTRAORDINARY ITEM GAIN ON CONVERSION OF DEBT 2,154,736 ----------- ----------- NET INCOME $ 196,703 $ 3,669,326 =========== =========== NET INCOME PER COMMON SHARE Income before reorganization items and extraordinary item $ .08 $ .13 Reorganization items 1.37 Extraordinary item 2.14 ----------- ----------- Net income $ .08 $ 3.64 =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 2,506,344 1,008,552 =========== =========== See notes to financial statements NORTH ATLANTIC TECHNOLOGIES, INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
SUCCESSOR PREDECESSOR COMPANY COMPANY ----------- ----------- 3 MONTHS ENDED 3 MONTHS ENDED MARCH 31, 1997 MARCH 31, 1996 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from customers $ 1,549,136 $ 777,708 Cash paid to suppliers & employees (1,783,255) (1,021,749) Interest, rent and royalties received 5,925 17,453 Interest paid (39,446) (58,616) ----------- ----------- Net cash used in operating activities (267,640) (285,204) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (1,427) (1,213) Additions of other assets 506 (8,747) ----------- ----------- Net cash used in investing activities (921) (9,960) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Line of Credit 310,000 300,000 Payments of long-term debt (28,747) (5,351) Proceeds from issuance of common stock 50,000 ----------- ----------- Net cash provided by financing activities 331,253 294,649 ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 62,692 (515) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 199,982 44,607 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 262,674 $ 44,092 =========== =========== RECONCILIATION OF NET (LOSS) INCOME TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net (loss) Income 196,703 $ 3,669,326 Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization 55,349 39,191 Gain on extinguishment of debt and affect of fresh start reporting (3,560,770) Stock issued for compensation 2,250 Changes in assets and liabilities: Receivables (3,466) (267,343) Inventories (15,774) (4,102) Other current assets 4,526 10,355 Accounts payable and accrued liabilities (122,065) 431,433 Net increase (decrease) in billings related to costs and estimated earnings on uncompleted contacts (382,913) (605,544) ----------- ----------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES ($ 267,640) ($ 285,204) =========== ===========
See notes to financial statements. NORTH ATLANTIC TECHNOLOGIES, INC. NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. On February 1, 1996, the Company filed a petition for reorganization under Chapter 11 of the United States Bankruptcy Code. The Plan of Reorganization was approved on April 19, 1996 and amended on May 7, 1996. The financial statements for the three months ended March 31, 1996 are presented as if the Plan was effective as of April 1, 1996. The Plan provided that: a) Holders of the Company's 12.5% Subordinated Convertible Debentures due in 1995 (the Debentures) received one share of common stock for each $1.50 of Debenture debt owed by the Company. In addition, each Debenture holder received one share of convertible preferred stock at $0.01 par value for each $100 of Debenture debt of the Company. b) Each existing stockholder was issued one share of common stock in cancellation of three shares owned by the shareholder, effective for shareholders of record on May 21, 1996. c) $500,000 of the line of credit borrowings were converted in May 1996 to a five-year note bearing interest at a rate of up to 12%, with the remainder, including an additional $200,000 in financing which became available upon approval of the Plan, being financed under a new line of credit at comparable rates with required monthly reductions of $25,000, commencing May 1, 1996. (It was subsequently agreed to defer reduction of the line of credit in $25,000 increments until August 1, 1996 and in October 1996 it was agreed that the reduction would be only $10,000 per month for the remainder of 1996. (see Note 15).) d) All other general creditors' claims were settled in full upon a schedule agreed upon between the Company and its creditors. Under the terms of the Plan, subject to the delivery of Debentures to the Company for cancellation, Debenture holders are entitled to receive up to 1,447,366 newly issued common shares, and up to 21,694 newly issued convertible preferred shares. The 3,292,689 shares of no par common stock outstanding as of May 21, 1996 have been canceled and replaced with 1,097,563 newly issued common shares. All share data within the report have been restated to reflect this 3-for-1 reverse stock split. The total outstanding common shares following the above common stock adjustments were 2,544,929. If the adjustments occurred on January 1, 1996, supplemental earnings per share for the first quarter of 1996 would have been $1.44 in total. 2. FRESH START REPORTING Under the provisions of SOP No. 90-7, the Company was required to apply "fresh start" reporting since the reorganization value, as defined, was less than the total of all postpetition liabilities and allowed claims, and holders of voting shares immediately before confirmation of the Plan received less than 50% of the voting shares of the emerging entity. Under this concept, all assets and liabilities are restated to reflect the reorganization value of the reorganized entity, which approximates its fair value at the date of reorganization. The financial statements of the reorganized entity are referred to herein as the Company or the Successor Company, and the financial statements of the entity up to the date the Plan was implemented are referred to herein as the Predecessor Company. To determine an estimate of its reorganization value, the Company utilized a combination of the estimated proceeds and recovery it would obtain from its assets and the value of its capital structure as perceived by the Company and others. Based on these factors, the Company established a reorganization value (total assets less liabilities) of the reorganized entity of $25,665. The Company allocated the reorganization value to the net book value of tangible assets as follows: Land $603,282 Machinery and equipment 268,759 Office furniture and equipment 13,107 Patent 100,000 -------- $985,148 ======== Under the provisions of SOP No. 90-7, the difference between the reorganization value of the assets and the fair value assigned to specific tangible and identified intangible assets was reported as an intangible asset identified as "reorganization value in excess of amounts allocable to identifiable assets." This amount is being amortized over ten years. In addition, the accumulated deficit of the Company was eliminated, and its capital structure was recast in conformity with the approved Plan. As such, the balance sheet of the Company as of December 31, 1996 represents that of a Successor Company which, in effect, is a new entity with assets, liabilities, and a capital structure having carrying values not comparable with prior periods. The net effect of all fresh start reporting adjustments resulted in income of $1,406,034 which is included within the Reorganization Item in the statement of operations of the Predecessor Company for the three months ended March 31, 1996, net of legal costs of $25,556 relating to the bankruptcy proceedings. The following table summarizes the adjustments required to record the reorganization of the Company and the issuance of various securities in connection with the implementation of the Plan. The presentation is presented as if the Plan was effective as of April 1, 1996.
CONVERTIBLE SUBORDINATED REVERSE SUCCESSOR PREDESSOR DEBT DISCHARGE STOCK SPLIT COMPANY'S COMPANY AND RELATED FOR EXISTING REORGANIZED PRE- ISSUANCE OF COMMON "FRESH START" BALANCE CONFIRMATION CAPITAL STOCK SHAREHOLDERS REPORTING SHEET CURRENT ASSETS $ 1,733,549 $ 1,733,549 PROPERTY AND EQUIPMENT, NET 819,147 885,148 1,704,295 OTHER ASSETS: Patent 100,000 100,000 Reorganization value in excess of amounts allocable to identifiable assets 420,886 420,886 Other 12,399 12,399 ----------- ----------- $ 2,565,095 $-- $-- $ 1,406,034 $ 3,971,129 =========== =========== =========== =========== =========== LIABILITIES NOT SUBJECT TO COMPROMISE: Current liabilities $ 3,930,507 $ 3,930,507 Lease obligations (long-term) 14,957 14,957 ----------- ----------- 3,945,464 3,945,464 LIABILITIES SUBJECT TO COMPROMISE - Convertible subordinated debentures and related interest payable 2,169,426 $(2,169,426) ----------- ----------- Total liabilities 6,114,890 (2,169,426) 3,945,464 STOCKHOLDERS' EQUITY (DEFICIT): Preferred stock 216 216 Common stock (no par) 3,056,804 $(3,056,804) Common stock ($.01 par) 14,474 10,975 25,449 Accumulated deficit (6,606,599) 2,154,736 3,045,829 $ 1,406,034 ----------- ----------- ----------- ----------- (3,549,795) 2,169,426 -- 1,406,034 25,665 ----------- ----------- ----------- ----------- ----------- $ 2,565,095 $ -- $ -- $ 1,406,034 $ 3,971,129 =========== =========== =========== =========== ===========
3. The accompanying financial statements are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of the results of operations for the periods presented have been made. The Company's financial statements have been prepared on a going-concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Predecessor Company (see Note 2) incurred net losses for the year ended December 31, 1995 of $2,201,742, and the Successor Company incurred a loss for the nine months ended December 31, 1996 of $530,371. As a result, financial resources have been strained. As of March 31, 1997, the Successor Company's current liabilities exceed current assets by $1,528,197. While the Company, through its Plan, which was confirmed by the United States Bankruptcy Court, has significantly reduced its debt commitments, the Successor Company's continuation as a going concern is dependent on its ability to generate sufficient cash flow from operations, and obtain additional financing to meet its obligations on a timely basis. The Successor Company's business is currently dependent on large projects in the industrial sector. These projects involve long order cycles, and exact order placement dates are beyond the control of the Successor Company. While the Successor Company utilizes a progress billing procedure, there are periods of net cash outflows when cash flow is of concern. Both the Predecessor Company and the Successor Company have been able to manage normal operating cash flow through the use of internally generated funds and an established line of credit. Management is attempting to obtain bridge financing from a major investor. Management has also recently implemented a significant cost reduction and cost containment program, and has revised the Company's pricing strategy for its products. The accompanying financial statements include adjustments related to the implementation of the Plan of Reorganization and the adoption of fresh start reporting. However, the financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence. 4. ACCOUNTING PRONOUNCEMENT In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". This statement specifies the computation, presentation, and disclosure requirements for earnings per share (EPS). This Statement is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. This statement replaces the presentation of primary EPS with a presentation of basic EPS. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. The Company does not believe the adoption of SFAS No. 128 will have a material impact on the financial statements. PART 1 - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Revenues of $1,949,967 for the three months ended March 31, 1997 of the Successor Company reflect an increase of 40% from the $1,394,512 in revenues reported for the comparable 3 month period of the Predecessor Company in 1996. The Company believes that the increase in revenues was due in part to the increased confidence of the customers about the continued existence of the company. Gross profit margins for the three months ended March 31, 1997 of the Successor Company were 38% as compared to 44% for the same period last year of the Predecessor Company. The first quarter of 1996 included a reduction of reserve estimates resulting in a 7% favorable gross profit impact for that quarter. Operating costs of the Successor Company for the three months ended March 31, 1997 increased $90,640 over the same period in 1996 of the Predecessor Company. The increase was due partly to increased commissions on an increased revenue base. Also contributing to the increase were additional expenses related to the reorganization. Interest expense of the Successor Company for the three months ended March 31, 1997 was $57,426 as compared to $82,373 for the same period in 1996 of the Predecessor Company. The first three months of 1996 included $20,761 of interest related to the Subordinated Convertible Debentures which were canceled in exchange for common and preferred stock as part of the reorganization. LIQUIDITY AND CAPITAL RESOURCES The working capital deficit position of the Successor Company was ($1,478,197) at March 31, 1997 which was an improvement of $275,268 over the year ended December 31, 1996. In March 1997, the Company issued a major shareholder 1,200,000 shares of common stock in exchange for which the shareholder (i)paid to the Company $50,000; (ii)waived his rights to receive the interest rate differential payments with respect to payments made to the Bank in February through May 1997 (which interest rate differential payments were estimated to equal a total of approximately $14,000); and (iii)agreed to consent to an increase in the line of credit to $1,250,000 and an abatement of the $25,000 monthly reduction in the line of credit until after June 1, 1997. The Company believes that the conversion of the Debentures into equity and the cancellation of the Debenture interest, and the improvement of demand in the global marketplace for its products will strengthen its position as a going concern. However, the Company's ability to continue as a going concern is subject to a number of risks and uncertainties including, among others, the Company's ability to generate sufficient funds from operations and the overall demand for the Company's product, which is subject to general economic, competitive and industry - specific conditions. IMPACT OF NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share". This statement specifies the computation, presentation, and disclosure requirements for earnings per share (EPS). This Statement is effective for financial statements issued for periods ending after December 15, 1997, including interim periods. This statement replaces the presentation of primary EPS with a presentation of basic EPS. Basic EPS excludes dilution and is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding for the period. The Company does not believe the adoption of SFAS No. 128 will have a material impact on the financial statements. PART 2 - OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. Item 6. Exhibits and Reports on form 8-K. (a) Exhibits. 27 Financial Data Schedule (b) Reports on Form 8-K None SIGNATURE Dated: May 14, 1997 In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. North Atlantic Technologies, Inc. /s/ Allen R. Karson May 14, 1997 - ------------------- Allen R. Karson Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer and principal accounting officer). EX-27 2 FINANCIAL DATA SCHEDULE
5 3-MOS DEC-31-1997 MAR-31-1997 262,674 0 674,174 107,058 186,049 1,037,806 1,709,562 172,439 3,055,788 2,516,003 0 0 216 34,530 (333,670) 3,055,788 1,949,967 1,949,967 1,234,052 1,234,052 (11,260) 0 57,426 196,703 0 196,703 0 0 0 196,703 .08 .08
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