-----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, HNgrvSp7LT3V49zEQ7HofwK9iZbDHAnk//XRDebsng6gDhVg/CbJQO8NqaIeomZj OTa8w9FbMQgTvQF7UhQnVQ== 0000814920-95-000013.txt : 19951202 0000814920-95-000013.hdr.sgml : 19951202 ACCESSION NUMBER: 0000814920-95-000013 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19951130 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOI INDUSTRIES INC CENTRAL INDEX KEY: 0000814920 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ALLIED TO MOTION PICTURE PRODUCTION [7819] IRS NUMBER: 592158586 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12572 FILM NUMBER: 95597913 BUSINESS ADDRESS: STREET 1: 16910 DALLAS PARKWAY STREET 2: SUITE 100 CITY: DALLAS STATE: TX ZIP: 75248 BUSINESS PHONE: 2142481922 MAIL ADDRESS: STREET 1: 16910 DALLAS PARKWAY SUITE 100 CITY: DALLAS STATE: TX ZIP: 75248 10QSB/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC. 20549 FORM 10-QSB/A (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1994 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to __________________ Commission file number: 1-12572 S.O.I. INDUSTRIES, INC. (Exact name of small business issuer as specified in its charter) Delaware 59-2158586 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 16910 Dallas Parkway, Suite 100, Dallas, Texas 75248 (Address of principal executive offices) (214) 248-1922 (Issuer's telephone number) _________________________________________________________________________ (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 Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) had been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] The number of shares outstanding of the common stock of the registrant on May 8, 1995, the latest practicable date, was 14,010,828. Transitional Small Business Disclosure Format (check one) Yes [ ] No [ X ] S.O.I. INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, June 30, 1994 1994 (Unaudited) (Audited) ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 718,914 $ 892,745 Restricted cash 500,000 500,000 Marketable securities 4,140,185 3,379,472 Accounts receivable, less allowance for doubtful accounts of $842,771 at September 30, 1994 and $775,875 at June 30, 1994 8,805,458 7,532,560 Inventories 6,236,955 6,520,034 Loans receivable, related parties 301,876 Prepaid expenses and other 806,183 146,863 ------------ ----------- Total current assets 21,207,695 19,273,550 ------------ ----------- Property, plant and equipment 7,863,960 8,166,518 Goodwill, net of accumulated amortization 2,883,754 2,934,551 Deferred tax asset 848,426 618,677 Other assets 84,887 67,498 ----------- ----------- Total assets $ 32,888,722 $ 31,060,794 =========== =========== LIABILITIES Current liabilities: Revolving lines of credit $ 7,311,465 $ 6,624,896 Current portion, long-term debt 723,348 869,058 Current portion, ESOP note payable 121,745 121,745 Current portion of capital lease obligations 77,600 45,894 Trade accounts payable 6,590,669 4,037,492 Accrued liabilities 412,459 2,291,596 Federal and state income taxes payable 226,306 621,377 Payable to officers 291,619 132,558 Other current liabilities 812,505 ----------- ----------- Total current liabilities 16,567,716 14,744,616 ----------- ----------- Long-term debt, less current maturities 3,036,405 2,717,166 ESOP note payable, less current maturities 324,653 355,089 Capital lease obligations, less current maturities 504,480 529,829 Deferred income taxes 361,652 361,652 Minority interest 3,669,541 3,542,812 Commitments and contingencies STOCKHOLDERS' EQUITY Common stock, par value $0.000025; 20,000,000 shares authorized, 10,908,950 and 10,901,470 shares outstanding at September 30, 1994 and June 30, 1994, respectively 273 273 Additional paid-in capital 6,586,236 6,524,282 Retained earnings 2,951,905 3,149,640 Due from ESOP (446,398) (476,834) Net unrealized holding loss on investment securities (667,741) (387,731) ----------- ----------- Total stockholders' equity 8,424,275 8,809,630 ----------- ----------- Total liabilities and stockholders' equity $ 32,888,722 $ 31,060,794 =========== ===========
The accompanying notes are an integral part of the financial statements 1 S.O.I. INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
For the three months ended September 30, 1994 1993 ----------- ----------- Net sales $ 10,616,640 $ 4,077,017 ----------- ----------- Costs and Expenses: Cost of goods sold (exclusive of depreciation and amortization, shown separately below) 8,525,578 2,964,084 Research and development (exclusive of depreciation and amortization, shown separately below) 412,000 Selling expenses (exclusive of depreciation and amortization, shown separately below) 838,624 340,955 General and administrative expenses (exclusive of depreciation and amortization, shown separately below) 1,349,642 267,334 Depreciation and amortization 380,478 255,453 ---------- ----------- Total costs and expenses 11,506,322 3,827,826 ---------- ----------- Operating (loss) profit (889,682) 249,191 ========== =========== Other income (expense): Gain on sales of marketable securities 338,009 Settlement of lawsuit 750,000 Interest and other income 7,071 35,507 Interest expense (264,569) (82,855) ----------- ----------- 830,511 (47,348) ----------- ----------- (Loss) income from continuing operations before provision for income taxes and minority interest (59,171) 201,843 Provision for income taxes 237,263 97,600 ----------- ----------- (Loss) income from continuing operations before minority interest (296,434) 104,243 Minority interest in net income of consolidated subsidiary 98,699 166,925 ----------- ----------- (Loss) income from continuing operations before discontinued operations (395,133) (62,682) Income from operations of discontinued operations, net of applicable income taxes of $117,800 224,589 ----------- ----------- Net (loss) income $ (395,133) $ 161,907 =========== =========== Weighted average shares of common stock outstanding 10,903,340 8,891,970 (Loss) earnings per share: Continuing operations $ (0.04) $ (0.01) Discontinued operations 0.00 0.03 ----------- ----------- Net (loss) income $ (0.04) $ 0.02 =========== ===========
The accompanying notes are an integral part of the financial statements 2 S.O.I. INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the three months ended September 30, 1994 1993 ----------- ----------- Cash flows from operating activities: Net (loss) income $ (395,133) $ 161,907 ----------- ----------- Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 380,478 255,453 Provision for doubtful accounts 66,896 19,920 Reserve for inventory obsolescence 36,000 Stock issued to employees as compensation 69,696 Gain on sales of marketable securities (338,009) Increase in accounts receivable (1,339,794) (240,236) Decrease (increase) in inventories 247,079 (853,505) (Increase) decrease in prepaid expenses and other (676,709) 25,518 Increase in accounts payable 2,553,177 603,179 Decrease in accrued liabilities (973,510) (53,259) Decrease in income taxes payable and deferred income taxes (624,820) (73,747) Increase in minority interest 93,050 166,925 ----------- ----------- Net cash provided by operating activities (901,599) 12,155 ----------- ----------- Cash flows from investing activities: Capital expenditures (77,920) (1,787,619) Increase in marketable securities (422,704) Repayment of loan receivable from affiliates 301,876 6,537 Change in net assets of discontinued operation (484,379) ----------- ----------- Net cash used in investing activities (198,748) (2,265,461) ----------- ----------- Cash flows from financing activities: Proceeds from long-term borrowings, net 186,245 1,324,227 Proceeds from revolving line of credit, net 686,569 550,000 Proceeds from issuance of common stock 60,060 79,450 Payments on capital lease obligations (6,358) Payments made on note due from ESOP (30,436) (32,143) Increase in note payable - ESOP 30,436 32,143 ----------- ----------- Net cash provided by financing activities 926,516 1,953,677 ----------- ----------- Decrease in cash and cash equivalents (173,831) (299,629) Cash and cash equivalents at beginning of period 892,745 755,340 ----------- ----------- Cash and cash equivalents at end of period $ 718,914 $ 455,711 =========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 263,454 $ 82,855 =========== =========== Income taxes $ 636,121 $ 195,400 =========== ===========
The accompanying notes are an integral part of the financial statements 3 S.O.I. INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) _____________ 1. Summary of Significant Accounting Policies: The accompanying consolidated financial statements include the accounts of S.O.I. Industries, Inc. (the "Company") and its wholly-owned subsidiaries, Digital Communications Technology Corporation and Subsidiary ("DCT"), American Quality Manufacturing Corporation ("AQM"), Tempo Lighting, Inc. ("Tempo") and Omni Doors, Inc. During the quarter ended December 31, 1993, Digital Communications Technology Corporation sold its subsidiary, Video Plus, Inc. Consequently, the operations and net assets of Video Plus, Inc. have been segregated from the Company's financial statements and have been presented as discontinued operations. Additionally, the financial information related to September 30, 1993 has been restated to reflect the sale of Video Plus, Inc. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted from these unaudited interim financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's annual audited financial statements. In the opinion of management, the accompanying unaudited financial statements contain all adjustments (consisting of only normal recurring accruals) necessary to conform with generally accepted accounting principles. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. 2. Inventories: The inventories are valued at the lower of cost (first-in, first-out method) or market and consisted of the following:
September 30, June 30, 1994 1994 ----------- ----------- Raw materials $ 5,343,215 $ 5,092,038 Work-in process 574,547 1,027,936 Finished goods 319,193 400,060 ----------- ----------- $ 6,236,955 $ 6,520,034 =========== ===========
4 S.O.I. INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued (Unaudited) _____________ 3. Property, Plant and Equipment: Property, plant and equipment and related accumulated depreciation are summarized as follows:
September 30, June 30, 1994 1994 ----------- ----------- Land $ 93,000 $ 93,000 Buildings and improvements 1,172,058 1,143,181 Machinery and equipment 10,019,255 10,034,870 ----------- ------------ 11,284,313 11,271,051 Less: accumulated depreciation 3,420,353 3,104,533 ----------- ------------ $ 7,863,960 $ 8,166,518 =========== ============
4. Revolving Lines of Credit: The Company's subsidiaries, DCT and Tempo, have revolving line of credit agreements which permit aggregate borrowings up to $6,100,000 based upon certain percentages applied to eligible accounts receivable and inventory. Interest is payable on all outstanding cash advances at the bank's prime rate plus 1/4%. Any unpaid principal and accrued interest is due on demand, but $700,000 is due no later than January 1, 1995 and $5,400,000 is due no later than January 1996. The lines of credit are secured by substantially all accounts receivable and inventories and all equipment not being used to collateralize other equipment and mortgage notes. The agreements further provide that the Company and its subsidiaries must comply with certain covenants, the most restrictive of which requires a minimum net leverage ratio as defined by the agreement. These lines of credit are guaranteed by the Company and its subsidiaries. As of September 30, 1994, $2,875,000 had been drawn against DCT's and Tempo's lines of credit. The Company's AQM subsidiary has a $5,000,000 revolving line of credit agreement bearing interest at the bank's prime interest rate plus 1.25%. The line of credit is limited to a borrowing base consisting of the sum of 85% of eligible accounts receivable (as defined) and 50% of AQM's eligible inventory of raw materials and finished goods. At any time during the life of the loan facility, the borrowing base attributable to inventory may not exceed the lesser of $1,500,000 or the component attributable to accounts receivable. The loan facility is collateralized by a first interest in all acquired goods, inventory, accounts receivable, property and equipment, other financial instruments (if any) and all other intangibles of AQM. This loan facility is guaranteed by the Company and its other subsidiaries. As of September 30, 1994, approximately $4,387,000 was outstanding on this loan facility. 5 S.O.I. INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, continued (Unaudited) _____________ 5. Long-Term Debt:
Long-term debt is summarized as follows: September 30, June 30, 1994 1994 ----------- ----------- Long-term debt consists of various mortgages and notes payable with interest rates ranging from 7% to 2 percent over prime. Monthly payments range from $274 to $29,000 and expiration dates range from 1995 through 2007. $ 3,759,753 $ 3,586,224 Less: current portion 723,348 869,058 ----------- ----------- $ 3,036,405 $ 2,717,166 =========== ===========
6. Stock Option Plan: On March 19, 1988, the Company's Board of Directors adopted the S.O.I. Industries, Inc. 1988 Employees' Stock Option Plan, reserving 2,000,000 shares of common stock for this purpose. The plan was subsequently approved by a vote of shareholders. At September 30, 1994, there were 1,425,000 shares reserved for future issuance. No options were granted during the three months ended September 30, 1994. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview Net sales increased approximately $6,540,000 for the three months ended September 30, 1994 as compared to the corresponding quarter of the prior year. The primary reason for this large increase was due to the acquisition of American Quality Manufacturing Corporation ("AQM") on January 1, 1994, the operations of which were not included in the corresponding quarter of the prior fiscal year. However, increased sales were also experienced at all of the Company's subsidiaries. Both operating profit and net income also increased in the current quarter as compared to the three months ended September 30, 1993. The increase in operating profit was directly attributable to the increased sales of the Company, while net income also received a boost from gains on sales of the Company's marketable securities and from the settlement of a lawsuit. Liquidity For the three months ended September 30, 1994, the Company used approximately $902,000 in cash from operating activities. This is compared with approximately $12,000 in cash provided by operating activities for the three months ended September 30, 1993. The decline in the overall operating cash flow position of the Company is primarily the result of the net loss experienced in the quarter ended September 30, 1995 along with an approximate $1,340,000 increase in accounts receivable and an approximate $974,000 decrease in accrued liabilities. Management closely monitors accounts payable to ensure that early payment discounts are utilized, but also preserves cash by ensuring that accounts are not paid before they are due. A portion of the increased accounts receivable is due to the increase in sales at the Company's Digital Communications Technology Corporation ("DCT") subsidiary and is also due to the addition of the Company's AQM subsidiary, which was acquired on January 1, 1994. However, increased sales is only part of the explanation for the growth in accounts receivable. Throughout all the Company's subsidiaries, the demand by customers for longer payment terms resulted in an expansion of accounts receivable balances. These market pressures to extend longer payment terms are reflected in the accounts receivable conversion period (measuring how quickly the Company, on average, collects its accounts receivable). This conversion period was 81 days at June 30, 1994 and declined slightly to 75 days at September 30, 1994. Additional collections efforts at some of the Company's subsidiaries resulted in this decline, however the Company's DCT subsidiary actually experienced an increase in the average collection period. Management will continue to monitor and exercise close scrutiny on the credit and collections process in order to improve collections while preserving the Company's competitive position. Despite the demand for longer collection terms, management does not expect any significant detriment toward its short-term liquidity. During the three months ended September 30, 1994, the Company's cash needs were met primarily through utilization of its readily available credit lines to fund expansion needs and through its operations. The Company's increases in 7 long-term and short-term borrowings were used primarily to fund the conversion of AQM's facilities to implement a new product line. Long-term liquidity needs are anticipated to be met through sales growth and separate financing arrangements. Management expects that the Company will continue to meet all obligations as they come due, and no vendor/supplier problems are expected. Capital Resources During the three months ended September 30, 1994, the Company made capital expenditures through its various subsidiaries of approximately $78,000. This compares with capital expenditures of approximately $1,788,000 for the three months ended September 30, 1993. The capital expenditures were primarily concentrated at the Company's DCT subsidiary where additional expansion of the subsidiary's high-speed duplicating facility is underway. These purchases were financed through operations. Due to DCT's expanding customer base and due to production at near capacity at DCT's operating locations, future expansion is being considered by management and will be financed through operations and/or additional long-term debt. Results of Operations Net sales as compared to the corresponding quarter of the prior year increased 160% from approximately $4,077,000 for the three months ended September 30, 1993 to approximately $10,617,000 for the three months ended September 30, 1994. The primary reason for the large increase in sales is due to the acquisition of AQM on January 1, 1994. Approximately $4.3 million of the increased sales in the quarter ended September 30, 1994 related to AQM. Approximately $1.7 million of the increase is attributable to increased sales at the Company's DCT subsidiary, with the remaining sales increases resulting from the Company's other subsidiaries. Sales at DCT increased for the quarter ended September 30, 1994 as management continued to focus on the retail sell through market. This market supplies video tapes for resale to retail markets which experience their highest sales during the holiday season. Consequently, sales for DCT are expected to be at their highest during the first and second quarters. Operating profit declined for the three months ended September 30, 1994 as compared to the corresponding quarter of the prior year. Operating profit decreased from approximately $249,000 to an operating loss of $890,000 for the three month periods ended September 30, 1993 and 1994, respectively. As a percentage of net sales, the operating profit actually declined from approximately 6.1% to (8.4%) for the first quarters ended September 30, 1993 and 1994, respectively. This percentage decline is primarily attributable to costs incurred at AQM related to development of new product lines. AQM incurred significant expenses to enable its plant facilities to produce finished cabinets, while continuing to produce its traditional unfinished cabinet product lines. More expenses are expected in the next quarter, but the major expenditures related to this new product line have been incurred in the first quarter ended September 30, 1994. In addition, increases in cost of goods sold resulting from higher volume sales at lower margins experienced at DCT along with the addition of AQM, which generally operates at lower margins than the Company's other subsidiaries, contributed to this decline. 8 As a percentage of net sales, selling expenses were consistent for the three month periods ended September 30, 1994 and 1993, however general and administrative expenses increased from 7% of net sales to 13% of net sales. Approximately $490,000 was added to general and administrative expenses at AQM relating to the reconfiguration of the Kansas facility to meet operational requirements compatible with AQM's other facility. This, along with expenditures of $412,000 for development and set-up of AQM's new product lines caused the operating losses experienced in the quarter. Management is continuing to focus on holding operating costs to a minimum and is implementing strategies at both of the above-mentioned segments to improve the operating margins. Approximately $338,000 was added to other income during the three months ended September 30, 1994 related to realized gains earned from the Company's marketable securities portfolio. The Company invests funds in quality equity securities through high quality brokers and, by policy, limits the amount of exposure in any one equity investment. Such investments are continually monitored to reduce the risk of adverse stock market volatility. Cash not invested in securities is placed on account with high quality brokerage firms, which is swept daily into a federally insured money market account, or placed on account with federally insured national banks. In September 1994, the Company settled a lawsuit against its former President and Chairman that alleged he caused the Company to sell him its wholly-owned subsidiary, CeraTech Corporation, for less than fair value in June 1992. The former President paid the Company $750,000 on September 16, 1994, in full settlement of the lawsuit. The Company experienced a large increase in interest expense during the quarter ended September 30, 1994 as compared to the quarter ended September 30, 1993, increasing from approximately $83,000 to $265,000, respectively. The primary reasons for this increase were due to (1) the addition of the Company's Cabinet and Furniture segment with its line of credit and other short-term borrowing needs and (2) an increase in the overall prime lending rate on which several of the Company's borrowing rates are based. In the quarter ended December 31, 1993, after evaluating the historical contribution of DCT's Video Plus, Inc. subsidiary and considering the expected future contribution of this subsidiary, management decided to sell Video Plus, Inc. The operations of Video Plus, Inc. have therefore been removed from the operating section of the consolidated statements of income for all periods presented, and the income or loss from operations of Video Plus, Inc. have been segregated under discontinued operations. The net effect of the operation of Video Plus, Inc. for the quarter ended September 30, 1994 was income of approximately $225,000. For the entire fiscal year ended June 30, 1994, the net effect of this discontinued operation was a reduction to net income of approximately $95,000. Other Comments DCT's sales levels generally follow the retail sell through markets, which typically peak in the fall and early winter months as retail demand and holiday 9 orders are met. The subsidiary has mitigated this seasonality by increasing sales efforts to lower volume, higher margin customers such as corporate training video duplication and the video rental market. Even by utilizing these techniques, sales levels are still lower in the summer months. AQM's sales levels generally follow remodeling and other "do it yourself" retail markets, which traditionally peak in the winter and spring. Therefore, this segment is subjected to seasonal influences, with the highest level of sales typically realized in the period from January through April. The costs of AQM's products are subject to inflationary pressures and commodity price fluctuations. Inflationary pressure has been relatively modest over the past five years, except for lumber prices, which rose approximately 14% during the fiscal year 1994. However, the segment has generally been able to mitigate the effects of inflation and commodity price fluctuations through sales price increases and cost savings in other areas. 10 SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. S.O.I. INDUSTRIES, INC. By: /s/ Sanford M. Whitman Date: November 28, 1995 Sanford M. Whitman, Vice President and Chief Financial Officer EX-27 2 ART. 5 FDS FOR 1ST QTR 10-QSB/A
5 3-MOS JUN-30-1995 JUL-01-1994 SEP-30-1994 1,218,914 4,140,185 9,648,229 (842,771) 6,236,955 21,207,695 11,284,313 (3,420,353) 32,888,722 16,567,716 3,865,538 273 0 0 8,424,002 32,888,722 10,616,640 10,616,640 8,525,578 8,525,578 2,980,744 66,896 264,569 (59,171) 237,263 (395,133) 0 0 0 (395,133) (0.04) (0.04)
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