<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED APRIL 30, 2000 COMMISSION FILE NUMBER 0-5622
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PUROFLOW INCORPORATED
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(Exact name of registrant as specified in its charter)
DELAWARE 13-1947195
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(State or other jurisdiction of (I.R.S. Employer identification No.)
incorporation or organization)
16559 SATICOY STREET, VAN NUYS, CALIFORNIA 91406-1739
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(Address of executive offices) (ZIP Code)
Registrant's telephone number, including area code: (818) 756-1388
Securities registered pursuant to Section 12(g) of the Act:
Common Stock Shares outstanding
COMMON STOCK, $.01 PAR VALUE 7,399,091
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Indicate 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 [ ]
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PUROFLOW INCORPORATED
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
APRIL 30, JANUARY 31,
2000 2000
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<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 15,909 $ 56,829
Accounts receivable
Net of allowance for doubtful accounts of
$20,809 at April 30, 2000 and $25,000 at January 31, 2000 1,784,048 1,589,322
Advances to Officers & Employees 3,350 4,100
Deferred Tax benefit, current 45,347 45,347
Inventories 1,635,534 1,741,088
Prepaid expenses and other current assets 113,130 107,464
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TOTAL CURRENT ASSETS 3,597,318 3,544,150
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PROPERTY & EQUIPMENT
Leasehold improvements 61,253 59,229
Machinery and equipment 3,610,846 3,583,124
Tooling and dies 358,122 350,932
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4,030,221 3,993,285
Less accumulated depreciation
and amortization 3,191,941 3,145,251
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NET PROPERTY AND EQUIPMENT 838,280 848,034
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DEFERRED TAXES 678,980 678,980
OTHER ASSETS 395,860 392,227
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TOTAL ASSETS $ 5,510,438 $ 5,463,391
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Line of Credit 580,000 $ 500,000
Notes payable, current $ 60,000 $ 97,200
Accounts payable 482,402 428,554
Accrued expenses 145,358 325,029
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TOTAL CURRENT LIABILITIES 1,267,760 1,350,783
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Long-Term Debt 67,600 92,200
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TOTAL LIABILITIES 1,335,360 1,442,983
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, par value $.10 per share
authorized - 500,000 shares
issued none
Common stock, par value $.01 per share
authorized - 12,000,000 shares Outstanding 8,130,121 shares at January
31, 2000 and 7,399,091 at April 30, 2000 433,967 441,277
Additional paid-in capital 5,141,767 5,682,729
Accumulated deficit (1,361,737) (1,516,407)
Less:
Notes receivable from stockholders (6,000) (554,272)
Treasury stock at cost (32,919) (32,919)
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TOTAL STOCKHOLDERS' EQUITY 4,175,078 4,020,408
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 5,510,438 $ 5,463,391
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</TABLE>
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<TABLE>
<CAPTION>
PUROFLOW, INCORPORATED
CONSOLIDATED STATEMENTS OF OPERATION
(UNAUDITED)
THREE MONTHS ENDED
APRIL 30,
2000 1999
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<S> <C> <C>
Net revenue $ 2,070,232 $ 2,070,363
Cost of goods sold 1,406,703 1,498,836
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Gross profit 663,529 571,527
Selling, general
and administrative expense 479,490 534,162
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Operating income 184,039 37,365
Interest expense 13,953 4,224
Amortization Expense 13,116 11,013
Other income - 10,612
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Income before taxes 156,970 32,740
Provision for income taxes 2,300 600
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NET INCOME $ 154,670 $ 32,140
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NET INCOME PER COMMON SHARE
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Basic earnings per share $ 0.020 $ 0.004
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Diluted earnings per share $ 0.020 $ 0.004
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</TABLE>
2
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PUROFLOW, INCORPORATED
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED APRIL 30 2000 1999
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<S> <C> <C>
CASH AT BEGINNING OF PERIOD $ 56,829 $ 828,809
CASH FLOWS FROM OPERATING ACTIVITIES
Net income 154,670 32,139
Adjustments to reconcile net income to net cash
used by operating activities: -
Depreciation and amortization 46,690 68,225
Amortization of Goodwill/Non-Compete 13,117 11,013
Provision for losses on accounts receivable (4,191) (2,000)
Changes in operating assets and liabilities:
Advances to Officers & Employees 750 2,907
Accounts receivable (190,535) (184,753)
Other Receivables - 375,763
Inventories 105,554 (199,790)
Prepaid expenses and other current assets (22,416) 29,583
Other Payable - (445,650)
Accounts payable & Accrued expenses (125,823) (385,500)
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Net cash used by operating activities (22,184) (698,063)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (36,936) (51,825)
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Net cash used by investing activities (36,936) (51,825)
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CASH FLOWS FROM FINANCING ACTIVITIES
Long-term debt (61,800) (11,800)
Advance on Credit Line 80,000
Notes Recevable from Stockholders - 100
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Net cash provided / (used) by financing activities 18,200 (11,700)
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NET INCREASE / (DECREASE) IN CASH (40,920) (761,588)
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CASH AT END OF PERIOD $ 15,909 $ 67,221
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-
</TABLE>
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PUROFLOW INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
NOTES
RECEIVABLE
FROM
COMMON ADDITIONAL ACCUMULATED STOCKHOLDER
STOCK PAID-IN DEFICIT AND TREASURY
PAR VALUE CAPITAL TOTAL STOCK TOTAL
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<S> <C> <C> <C> <C> <C>
Balance at January 31, 1999 $ 440,979 $ 5,667,327 $ (668,030) $ (587,819) $ 4,852,457
Payment of note receivable $ 628 $ 628
Exercise of stock options for 9,000 shares
at $.50 per share $ 90 $ 4,410 $ 4,500
Exercise of stock options for 12,000 shares
at $.75 per share $ 120 $ 8,880 $ 9,000
Exercise of stock options for 8,800 shares
at $.25 per share $ 88 $ 2,112 $ 2,200
Net Loss $ (848,377) $ (848,377)
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Balance at January 31, 2000 $ 441,277 $ 5,682,729 $(1,516,407) $ (587,191) $ 4,020,408
Adjustment to notes receivable $ (7,310) $ (540,962) $ 548,272 $ -
Net Income $ 154,670 $ 154,670
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Balance at April 30, 2000 $ 433,967 $ 5,141,767 $(1,361,737) $ (38,919) $ 4,175,078
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</TABLE>
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PUROFLOW INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
(UNAUDITED)
APRIL 30, 2000, JANUARY 31, 2000, AND APRIL 30, 1999
NOTE 1- ORGANIZATION AND BASIS OF PRESENTATION
The consolidated balance sheet at the end of the preceding fiscal year has been
derived from the audited consolidated balance sheet contained in the Company's
annual report on Form 10-K for the fiscal year ended January 31, 2000 (The "Form
10-KSB") and is presented for comparative purposes. All other financial
statements are unaudited. In the opinion of management, all adjustments that
include only normal recurring adjustments necessary to present fairly the
financial position, results of operations and changes in financial positions for
all periods presented have been made. The results of operations for interim
periods are not necessarily indicative of the operating results for the full
year.
Footnote disclosures normally included in financial statements prepared in
accordance with the generally accepted accounting principles have been omitted
in accordance with the published rules and regulations of the Securities and
Exchange Commission.
The consolidated financials statements and notes thereto should be read in
conjunction with management's discussion and analysis of financial condition and
results of operations, contained in the Company's annual report on Form 10-KSB
for the year ended January 31, 2000
NOTE 2 - INVENTORIES
Inventories consist of the following:
APRIL 30, JANUARY 31,
1998 2000
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Raw materials and purchased parts 1,114,805 1,038,359
Work in process 243,329 267,968
Finished goods and assemblies 327,400 434,761
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Totals $1,635,534 $1,741,088
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NOTE 3 - STOCKHOLDERS EQUITY
On February 17, 2000 the Board announced a plan to retire 920,000 shares of its
common stock, from shares issued August 24, 1998 in return for cancellation of
notes received by the company from employees and board members. The company
received and retired 731,030 shares of common stock.
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NOTE 4 - NET INCOME PER SHARE
Reconciliation of basic and diluted earnings per share:
<TABLE>
<CAPTION>
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----------- ---------- PER-SHARE
INCOME SHARES AMOUNT
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<S> <C> <C> <C>
3 MONTHS ENDED APRIL 30, 2000
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Basic earnings per share $ 154,670 7,886,396 $ .02
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EFFECT OF DILUTIVE SECURITIES
Stock options 90,339
Diluted earnings per share $ 154,670 7,976,735 $ .02
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3 MONTHS ENDED APRIL 30, 1999
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Basic earnings per share $ 32,140 8,100,321 $ .004
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EFFECT OF DILUTIVE SECURITIES
Stock Options 137,007
Diluted earnings per share $ 32,140 8,237,328 $ .004
----------- ---------- ---------
</TABLE>
Basic earnings per share is based on the weighted average number of shares
outstanding. Diluted earnings per share include the effect of common stock
equivalents when dilutive.
EARNINGS PER SHARE
In the first quarter of the year ended January 31, 1999, the Company adopted
Statement of Financial Accounting Standards No. 128, "Earnings per Share" (FAS
128), which supersedes Accounting Principles Board Opinion No. 15. Under FAS
128, earnings, per common share, is computed by dividing net income available to
common stockholders by the weighted-average number of common shares outstanding
during the period. Diluted earnings per share reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock. Prior period amounts have been restated, where appropriate to conform to
the requirements of FAS 128.
NOTE 5 - LINE OF CREDIT
The Company has a $1,000,000 revolving credit line maturing on June 5, 2000.
This credit line bears interest at the rate of prime plus 0.25% per annum, and
is secured primarily by the Company's accounts receivable and inventories. The
terms of this loan agreement contains certain restrictive covenants, including
maintenance of minimum working capital, net worth, and ratios of current
liabilities and debt to net worth. There is an open balance of $580,000 as of
April 30, 2000.
NOTE 6 - INCOME TAXES
The company complies with Financial Accounting Standards No. 109, Accounting
for Income Taxes.
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LIQUIDITY AND CAPITAL RESOURCES
At April 30, 2000, the Company had cash available of $15,909, compared to
$56,829 on January 31, 2000. It had a current ratio of 2.84 to 1 at April 30,
2000, compared to 2.62 to 1 on January 31, 2000.
OPERATING ACTIVITIES
Cash Flow from Operations for the three months ended April 30, 2000 was reduced
by $22,184 compared to an decrease of $698,063 for the three months ended April
30,1999.
INVESTING ACTIVITIES
The Company invested $36,936 in new capital equipment in the current quarter
predominantly for tooling and machinery in support of new PMA products.
FINANCING ACTIVITIES
The Company has unused revolving credit line of $1,000,000 which bears interest
at the rate of prime plus 0.25% per annum, secured by the Company's accounts
receivable and inventory of which $580,000 is outstanding at April 30, 2000. The
Company is in compliance with all covenants under its loan agreement with the
Bank. The Company obtained a loan of $236,000 to pay non-recurring judgment
against it as well as purchase a necessary Blue print copier now reduced to
$127,600
BUSINESS ACQUISITION
On January 31, 1999 the company acquired Quality Controlled Cleaning Corporation
("QCCC") for $550,630 including all costs of the acquisition. QCCC is a
precision cleaning and repair company located in Commerce, California. The
Company's acquisition resulted in goodwill of approximately $274,000 and a
non-compete agreement of $50,000. The goodwill will amortize over 10 years and
the non-compete over its term of 3 years.
In addition to the purchase price, the agreement included a contingent payment
of 50% of net sales in the year ending January 31, 2000, in excess of $500,000
up to a maximum of $800,000. The liability totaled $125,609 and was recorded as
additional goodwill.
SEGMENT REPORTING
<TABLE>
<CAPTION>
NET SALES APRIL 30, 2000 APRIL 30, 1999
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<S> <C> <C>
Aerospace $ 1,378,171 $ 1,218,094
Puroflow International 226,989 23,714
QCCC 136,692 177,877
Airbags 328,380 650,678
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$ 2,070,232 $ 2,070,363
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</TABLE>
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<TABLE>
OPERATING INCOME
<S> <C> <C>
Aerospace $ 157,865 $ (19,338)
Puroflow International 5,218 (13,435)
QCCC 4,755 39,966
Airbags 16,201 30,172
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$ 184,039 $ 37,365
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</TABLE>
RESULTS OF OPERATIONS FOR QUARTER ENDED APRIL 30, 2000
REVENUES
Sales were $2,070,232 for the three months ended April 30, 2000 compared to
$2,070,363 in 1999.
GROSS PROFIT
Gross profit as a percentage of sales was 32% in April 2000, compared to 27.6%
in April 1999, an increase of 4.4% representing higher margins on precision
filters on the PMA Program as well as increase manufacturing efficiencies.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Operating income was $184,039 in April 2000 compared to $37,365 in April 1999, a
increase of $146,674 due to reduced legal and outside services, the settlement
of a proxy fight, and a reduction in administrative personnel.
INTEREST CHARGES Interest on the bank loan was $3,480 and $10,483 on the credit
line as of April 30, 2000.
PART II - OTHER INFORMATION
ITEM 1. PENDING LEGAL PROCEEDINGS.
The Company is not party, nor are its properties subject to, any material
pending proceedings other than ordinary routine litigation incidental to the
Company's business and the matters described above.
ITEM 2. CHANGES IN SECURITIES
None.
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<PAGE>
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None.
SIGNATURE
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed and on its behalf by the
undersigned thereto, duly authorized.
PUROFLOW INCORPORATED
June 13, 2000 By: /s/ Michael H. Figoff
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Michael H. Figoff
President/Chief Executive Officer
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