================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 27, 1998
OR
[ ] 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 1-12873
ASD Group, Inc.
(Exact name of small business issuer as specified in its charter)
DELAWARE 14-1483460
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1 Industry Street, Poughkeepsie, New York 12603
(Address of principal executive offices, including zip code)
(914) 452-3000
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
Common Stock, $.01 par value
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
Check whether the issuer (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 [ ]
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date: The number of shares of the issuer's
Common Stock, $.01 par value per share, outstanding as of May 8, 1998 was
1,577,917.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
================================================================================
1
<PAGE>
ASD GROUP, INC.
- - --------------------------------------------------------------------------------
Form 10-QSB
Quarterly Report
March 27, 1998
Index
<TABLE>
<S> <C>
Part I FINANCIAL INFORMATION Page
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheet:
March 27, 1998 (unaudited). . . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations (unaudited):
Nine and three months ended March 27, 1998 and March 28,
1997,. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows (unaudited):
Nine months ended March 27, 1998 and March 28, 1997. . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . 7
Part II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . 11
SIGNATURES 12
</TABLE>
2
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
ASD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 27,
1998
---------
ASSETS
<S> <C>
Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 162,358
Accounts receivable, less allowance for doubtful accounts of
$263,000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,571,567
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,226,420
Prepaid expenses and other current assets. . . . . . . . . . . . . . . . . 316,835
Deferred tax asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . 459,057
-----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 7,736,237
Property, plant and equipment, net . . . . . . . . . . . . . . . . . . . . 4,686,255
Deferred tax asset. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,762,398
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 688,767
Total assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $14,873,657
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . $ 8,210,725
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701,958
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 973,851
-----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . 9,886,534
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 851,933
Deferred compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . 313,460
-----------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . 11,051,927
-----------
Stockholders' equity:
Preferred stock, $.01 par value, 1,000,000 shares authorized,
none issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -
Common stock, $.01 par value, 10,000,000 shares authorized,
1,577,917 shares issued and outstanding . . . . . . . . . . . . . . . 15,779
Paid-in capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,206,892
Deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (400,941)
-----------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 3,821,730
-----------
Total liabilities and stockholders' equity. . . . . . . . . . . . . . . . . $14,873,657
===========
</TABLE>
See notes to consolidated financial statements
3
<PAGE>
ASD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
------------------------- --------------------------
MARCH 27, MARCH 28, MARCH 27, MARCH 28,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . $ 12,799,107 $ 12,083,794 $ 3,164,301 $ 3,873,949
Cost of goods sold. . . . . . . . . . . 9,999,724 8,994,085 2,618,643 2,960,819
--------------- ---------------- --------------- ---------------
Gross profit . . . . . . . . . . . . 2,799,383 3,089,709 545,658 913,130
--------------- ---------------- --------------- ---------------
Operating expenses:
Sales and marketing . . . . . . . . . . 247,595 135,689 113,135 39,473
General and administrative . . . . . 2,955,630 2,431,722 871,266 785,755
--------------- ---------------- --------------- ---------------
Total operating expenses . . . . . . . . 3,203,225 2,567,411 984,401 825,228
--------------- ---------------- --------------- ---------------
(Loss) Income from operations . . . . . (403,842) 522,298 (438,743) 87,902
Other income . . . . . . . . . . . . . 32,401 59,698 14,309 9,145
Interest expense. . . . . . . . . . . . 828,377 1,197,192 277,453 431,055
--------------- ---------------- --------------- ---------------
Loss before income taxes . . . . . . . . (1,199,818) (615,196) (701,887) (334,008)
Benefit for income taxes . . . . . . . (503,923) (257,983) (294,492) (139,983)
--------------- ---------------- --------------- ---------------
NET LOSS . . . . . . . . . . . . . . . $ (695,895) $ (357,213) $ (407,395) $ (194,025)
=============== =============== =============== ===============
Net Loss per common share. . . . . . . $ (.44) $ (.56) $ (.26) $ (.31)
=============== =============== =============== ===============
Weighted average common shares
outstanding . . . . . . . . . . . 1,577,917 632,917 1,577,917 632,917
=============== =============== =============== ===============
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
ASD GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------
MARCH 27, MARCH 28,
1998 1997
---- ----
<S> <C> <C>
Operating activities:
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . $ (695,895) $ (357,213)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization. . . . . . . . . . . . . . 403,405 549,267
Provision (benefit) for doubtful accounts . . . . . . . . 100,000 (90,000)
Deferred compensation . . . . . . . . . . . . . . . . . . 26,061 24,129
Interest accrued-stockholder advances . . . . . . . . . . 43,700 34,925
Deferred income taxes . . . . . . . . . . . . . . . . . . (503,923) (257,983)
Changes in assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . 503,835 715,002
Inventory . . . . . . . . . . . . . . . . . . . . . . . (168,526) 749,933
Prepaid expenses and other current assets . . . . . . . (148,046) (150,684)
Other assets. . . . . . . . . . . . . . . . . . . . . . (14,287) 22,218
Accounts payable. . . . . . . . . . . . . . . . . . . . (533,724) (901,450)
Accrued expenses. . . . . . . . . . . . . . . . . . . . 131,427 (339,823)
Deferred revenues . . . . . . . . . . . . . . . . . . . - (69,666)
----------- -----------
Net cash used in operating activities . . . . . . . . (855,973) (71,345)
Investing activities:
Capital expenditures. . . . . . . . . . . . . . . . . . . . . (349,366) (47,671)
----------- -----------
Net cash used in investing activities . . . . . . . . (349,366) (47,671)
----------- -----------
Financing activities:
Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . 7,574,969 1,100,000
Payments of long-term debt. . . . . . . . . . . . . . . . . . (7,061,513) (793,771)
Financing costs . . . . . . . . . . . . . . . . . . . . . . . (223,063) (407,314)
Payments of deferred compensation . . . . . . . . . . . . . . (21,886) (21,413)
----------- -----------
Net cash provided by (used in) financing activities 268,507 (122,498)
----------- -----------
Net decrease in cash. . . . . . . . . . . . . . . . . . . . . . (936,832) (241,514)
Cash, beginning of period . . . . . . . . . . . . . . . . . . . 1,099,190 458,911
----------- -----------
Cash, end of period . . . . . . . . . . . . . . . . . . . . . . $ 162,358 217,397
=========== ===========
Supplemental disclosure:
Cash paid during the period for:
Income taxes. . . . . . . . . . . . . . . . . . . . . . . 14,758 $ 6,484
=========== ===========
Interest . . . . . . . . . . . . . . . . . . . . . . . $ 598,511 $ 699,455
=========== ===========
</TABLE>
See notes to consolidated financial statements
5
<PAGE>
ASD GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and pursuant to the rules and regulations of
the Securities and Exchange Commission for reporting on Form 10-QSB.
Accordingly, certain information and footnote disclosures required for complete
consolidated financial statements are not included herein. It is recommended
that these consolidated financial statements be read in conjunction with the
consolidated financial statements and related notes of ASD Group, Inc. and
subsidiaries (the "Company") contained in the Company's Annual Report on Form
10-KSB for the fiscal year ended June 27, 1997. In the opinion of management,
all adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation of financial position, results of operations
and cash flows at the dates and for the periods presented have been included.
NOTE 2 - PUBLIC OFFERING OF COMMON STOCK
In May 1997, the Company completed an Initial Public Offering of
945,000 shares of common stock at $5.75 per share (the "Offering"). Prior to the
Offering, there was no public market for the Company's common stock. The net
proceeds of the Offering, after deducting applicable issuance costs and
expenses, was approximately $3,890,000. The net proceeds of the Offering were
used primarily to repay certain indebtedness, increase staffing and purchase
inventory and capital assets.
NOTE 3 - REFINANCING
On December 19, 1997, the Company completed a refinancing of its
indebtedness and secured a new credit facility with an increased borrowing
limit. The Company's new revolving line of credit with PNC Business Credit
permits borrowings of up to $8,750,000 at prime plus 1/2% and expires on
December 19, 2002 (the "Line of Credit"). The Line of Credit is secured by a
first lien on the Company's assets. The amount available for borrowings under
the Line of Credit is determined pursuant to a formula based upon the Company's
eligible accounts receivable, inventory, machinery and equipment. As of March
27, 1998, $4,212,000 was outstanding under the Line of Credit and based on the
availability formula the Company had $145,000 available for additional
borrowings. Approximately $3,800,000 of the Line of Credit was used to repay the
existing revolving credit agreement, and machinery and equipment loan with
Bankers Trust Company. On that date, the Company entered into a three year term
loan with Bankers Trust Company for $2,801,000 at 10%. The term loan is secured
by a second lien on the Company's assets . The three year term loan replaces the
existing mortgage payable notes with Bankers Trust Company. On May 31, 1996, the
Company entered into an agreement with Bankers Trust Company which will permit
the Company to repay its indebtedness to Bankers Trust Company at a discount of
approximately $460,000. Under the terms of such loan agreement with Bankers
Trust Company, the discount will be earned when the unpaid principal balance of
the three year term loan reaches $460,000.
The loan agreements with both PNC Business Credit and Bankers Trust
Company contain certain restrictive financial covenants. At March 27, 1998 the
Company was not in compliance with the covenants of both PNC Business Credit and
Bankers Trust Company loan agreements. Management of the Company has had and
continues to have discussions with PNC Business Credit regarding the Company's
lack of compliance and financing needs.
Subsequent to March 27, 1998, the Company has entered into an agreement
with PNC Business Credit providing the Company with an additional $200,000
over-advance which is due May 22, 1998. As of May 15, 1998 the Company has used
$181,000 of the over-advance with $19,000 yet available. Without additional
financing it is unlikely that on May 22, 1998 the Company will be able to repay
the additional over-advance and meet all the Company's current operating
obligations. The Company is currently seeking additional financing. In addition,
the Company is exploring strategic alternatives, including a possible merger or
acquisition, with a view to enhancing shareholder value. However, there is no
guarantee that such efforts will be successful.
NOTE 4 - INVENTORY
The components of inventory at March 27, 1998 are as follows:
Raw materials . . . . . . . . . . . $ 573,006
Work-in-process . . . . . . . . . . 4,653,414
------------
$ 5,226,420
============
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
ASD Group, Inc. (the "Company") cautions readers that certain important
factors may affect the Company's actual results and could cause such results to
differ materially from any forward-looking statements which may be deemed to
have been made in this Report or which are otherwise made by or on behalf of the
Company. For this purpose, any statements contained in this Report that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the generality of the foregoing, words such as "may," "will,"
"expect," "believe," "anticipate," "intend," "could," "would," "estimate," or
"continue" or the negative other variations thereof or comparable terminology
are intended to identify forward-looking statements. Such factors include, but
are not limited to, the risks and uncertainties associated with a contract
manufacturing company which is dependent upon a small number of large companies,
a limited history of profitability, dependence upon key personnel, need for
future capital and dependence upon certain industries. Additionally, the Company
is subject to the risks and uncertainties associated with all contract
manufacturing companies including variability of customer requirements and
customer financing, limited availability of components and a market
characterized by rapidly changing technology and continuing process development.
The Company is also subject to other risks detailed herein or detailed from time
to time in the Company's filings with the Securities and Exchange Commission.
OVERVIEW
The Company provides comprehensive contract manufacturing and
engineering services to original equipment manufacturers ("OEMs.") The Company
was formed in 1965 to provide design and engineering services to IBM's main
frame computer development and manufacturing operations in New York's Hudson
Valley ("IBM-Hudson Valley"). Over a 25-year period, the Company's relationship
with IBM-Hudson Valley evolved to the point where by the mid-1980's the Company
assembled, wired and tested a significant portion of IBM-Hudson Valley's main
frame computers. IBM Hudson Valley became the Company's principal customer,
providing over 90% of its revenues. Commencing in 1990, IBM-Hudson Valley's main
frame sales began to decline due to the recession and the shift in technology to
personal computer-based systems. In December 1992, IBM-Hudson Valley eliminated
the use of substantially all main frame assembly vendors, including the Company.
As a result, the Company had significant reductions in revenues and incurred
substantial losses. Accordingly, during 1993 and 1994 the Company undertook a
restructuring of its operations wherein it implemented a significant downsizing,
re-engineered its operations and commenced intensive efforts to market its
contract manufacturing services to other OEMs. While the IBM-Hudson Valley
downsizing greatly affected the Company, management believes that its
relationship with IBM-Hudson Valley permitted the Company to evolve into a
vertically integrated contract manufacturer with a well disciplined quality
control program.
In May 1997, the Company completed an initial public offering (the
"IPO") of 945,000 shares of common stock at $5.75 per share. A portion of the
net proceeds of approximately $3,890,000 were used to repay $2,000,000 of
outstanding debt.
7
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 27, 1998 AS COMPARED TO THREE MONTHS ENDED MARCH 28,
1997
For the three months ended March 27, 1998, the Company's net sales
decreased by $710,000 or 18.3% to $3,164,000 from $3,874,000 for the three
months ended March 28, 1997. The decrease in sales was due to a recent slowdown
experienced by several large customers which resulted in the cutting back of
orders.
Cost of goods sold for the three months ended March 27, 1998 decreased
by $342,000 or 11.6% to $2,619,000 from $2,961,000 for the three months ended
March 28, 1997. The decrease in cost of goods sold is primarily the result of
the decrease in sales. Gross profit as a percentage of net sales decreased by
6.4% from 23.6% for the three months ended March 28, 1997 to 17.2% for the three
months ended March 27, 1998. The decreased gross profit percentage was primarily
due to the reduction in orders.
Selling, general and administrative expenses increased for the three
months ended March 27, 1998 by $159,000 or 19.3% to $984,000 from $825,000 for
the three months ended March 28, 1997. The increase in selling, general and
administrative expenses is primarily the result of a change in the rate of
overtime pay, additional insurance costs and legal and consulting fees related
to post initial public offering activities and retroactive pay adjustments. It
is anticipated that certain of these additional expenses will be recurring.
Interest expense decreased for the three months ended March 27, 1998 by
$154,000 or 35.6% to $277,000 from $431,000 for the three months ended March 28,
1997. The decrease in interest expense reflects a net reduction in debt as a
result of a portion of the proceeds of the initial public offering used to repay
debt.
Benefit for income taxes for the three months ended March 27, 1998 is
$294,000 as compared to a benefit of $140,000 for the three months ended March
28, 1997. The Company recorded a tax benefit from the loss during the period
ended March 27, 1998 and March 28, 1997.
The Company incurred a loss before income tax benefit and net loss of
$702,000 and $407,000, respectively, during the three months ended March 27,
1998, as compared to a loss before income taxes and a net loss of $334,000 and
$194,000, respectively, during the three months ended March 28, 1997.
8
<PAGE>
NINE MONTHS ENDED MARCH 27, 1998 AS COMPARED TO NINE MONTHS ENDED MARCH 28, 1997
For the nine months ended March 27, 1998, the Company's net sales
increased by $715,000 or 5.9% to $12,799,000 from $12,084,000 for the nine
months ended March 28, 1997. The increase in sales was a result of the Company
completing a $2,600,000 contract to manufacture equipment used in the production
of fiber optics in the first six months of the fiscal year. The increase in
sales noted was offset by a reduction in orders by several of the Company's
largest customers.
Cost of goods sold for the nine months ended March 27, 1998 increased
by $1,006,000 or 11.2% to $10,000,000 from $8,994,000 for the nine months ended
March 28, 1997. The increase in cost of goods sold is primarily the result of
the increase of sales. Gross profit as a percentage of net sales decreased by
3.7% from 25.6% for the nine months ended March 28, 1997 to 21.9% for the nine
months ended March 27, 1998. The decrease in gross profit as a percentage of
sales reflects the lower gross profit percentage on the aforementioned
$2,600,000 contract and the reduction in orders.
Selling, general and administrative expenses increased for the nine
months ended March 27, 1998 by $636,000 or 24.8% to $3,203,000 from $2,567,000
for the nine months ended March 28, 1997. The increase in selling, general and
administrative expenses is primarily the result of a change in the rate of
overtime pay, additional insurance costs and legal and consulting fees related
to post initial public offering activities and retroactive pay adjustments. It
is anticipated that certain of these additional expenses will be recurring
Interest expense decreased for the nine months ended March 27, 1998 by
$369,000 or 30.8% to $828,000 from $1,197,000 for the nine months ended March
28, 1997. The decrease in interest expense reflects a net reduction in debt as a
result of a portion of the proceeds of the initial public offering used to repay
debt.
Benefit for income tax for the nine months ended March 27, 1998 is
$504,000 as compared to a benefit of $258,000 for the nine months ended March
28, 1997. The Company recorded a tax benefit from the loss during the periods
ended March 27, 1998 and March 28, 1997.
The Company incurred a loss before income tax benefit and a net loss of
$1,200,000 and $696,000, respectively, during the nine months ended March 27,
1998, as compared to a loss before income taxes and a net loss of $615,000 and
$357,000, respectively, during the nine months ended March 28, 1997.
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
STATEMENTS OF CASH FLOWS
Net cash used in operation was $856,000 for the nine months ended March
27, 1998 as compared to $71,000 used in operations for the nine months ended
March 28, 1997. The increase in cash used in operations was primarily the result
of the net loss incurred during the period. Net cash provided by financing
activities during the nine months ended March 27, 1998 was $268,000. During this
period, $7,575,000 was provided from borrowings, $7,062,000 of long-term debt
was repaid, $223,000 of financing costs were incurred and payments of deferred
compensation of $22,000 were made. Working capital decreased to $(2,150,000) at
March 27, 1998 from $3,240,000 at March 28, 1997. The decrease in working
capital is the result of the Company being in default on the loans due to PNC
Business Credit and the Banker Trust Company resulting in the total amount due
of $6,963,000 being reclassified to current liabilities.
REFINANCING
The amount available for borrowings under the Line of Credit is
determined pursuant to a formula based upon the Company's eligible accounts
receivable, inventory, machinery and equipment. As of March 27, 1998, $4,029,000
was outstanding under the Line of Credit and the Company had $4,721,000
available for additional borrowings.
On December 19, 1997, the Company completed a refinancing of its
indebtedness and secured a new credit facility with an increased borrowing
limit. The Company's new revolving line of credit with PNC Business Credit
permits borrowings of up to $8,750,000 at prime plus 1/2% and expires on
December 19, 2002 (the "Line of Credit"). The Line of Credit is secured by a
first lien on the Company's assets. The amount available for borrowings under
the Line of Credit is determined pursuant to a formula based upon the Company's
eligible accounts receivable, inventory, machinery and equipment. As of March
27, 1998, $4,212,000 was outstanding under the Line of Credit and based on the
availability formula the Company had $145,000 available for additional
borrowings. Approximately $3,800,000 of the Line of Credit was used to repay the
existing revolving credit agreement, and machinery and equipment loan with
Bankers Trust Company. On that date, the Company entered into a three year term
loan with Bankers Trust Company for $2,801,000 at 10%. The term loan is secured
by a second lien on the Company's assets . The three year term loan replaces the
existing mortgage payable notes with Bankers Trust Company. On May 31, 1996, the
Company entered into an agreement with Bankers Trust Company which will permit
the Company to repay its indebtedness to Bankers Trust Company at a discount of
approximately $460,000. Under the terms of such loan agreement with Bankers
Trust Company, the discount will be earned when the unpaid principal balance of
the three year term loan reaches $460,000.
The loan agreements with both PNC Business Credit and Bankers Trust
Company contain certain restrictive financial covenants. At March 27, 1998 the
Company was not in compliance with the covenants of both PNC Business Credit and
Bankers Trust Company loan agreements.
Subsequent to March 27, 1998, the Company has entered into an agreement
with PNC Business Credit providing the Company with an additional $200,000
over-advance which is due May 22, 1998. As of May 15, 1998 the Company has used
$181,000 of the over-advance with $19,000 yet available. Without additional
financing it is unlikely that on May 22, 1998 the Company will be able to repay
the additional over-advance and meet all the Company's current operating
obligations. The Company is currently seeking additional financing. However,
there is no guarantee that such efforts will be successful.
10
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On May 12, 1997, the U.S. Securities and Exchange Commission declared
effective the Company's Registration Statement on Form SB-2 (SEC File Number
333-7731). The offering of the securities registered pursuant to the
Registration Statement commenced on May 13, 1997. The IPO terminated after the
sale of 945,000 shares of the Company's common stock, $.01 par value per share
(the "Common Stock"), for $5.75 per share. The managing underwriter for the IPO
was H. J. Meyers & Co., Inc.
In connection with the IPO, the Company incurred expenses of
approximately $1,544,000. These expenses were in the form of direct or indirect
payments to others and not direct or indirect payments to directors or officers
of the Company or to persons owning more than 10% of any class of securities of
the Company. From the net proceeds of approximately $3,890,000, the Company has
used approximately $2,800,000 for repayment of indebtedness, $1,000,000 for the
purchase of materials and to increase staffing for the production of new
projects, and approximately $90,000 for working capital. With the exception of
payments to William Becker and Sanford Feld, persons owning more than 10% of the
Company's securities, none of the payments from the use of proceeds were made to
officers, directors or persons owning more than 10% of any class of securities
of the Company.
Item 6. Exhibits and Reports of Form 8-K
(a) Exhibits:
(27) Financial Data Schedule (Edgar version only)
(b) Reports on Form 8-K: none
11
<PAGE>
ASD GROUP, INC.
SIGNATURES
In accordance with the requirement of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the undersigned,
therunto duly authorized.
By /s/ GARY HORNE
---------------------------------
Gary Horne
Chief Executive Officer
Date: May 18, 1998
12
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- - ------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> JUN-26-1998 JUN-26-1998
<PERIOD-START> JUN-28-1997 JUN-28-1997
<PERIOD-END> MAR-27-1998 MAR-28-1997
<CASH> 0 162,358
<SECURITIES> 0 0
<RECEIVABLES> 0 1,850,827
<ALLOWANCES> 0 263,000
<INVENTORY> 0 5,226,420
<CURRENT-ASSETS> 0 775,892
<PP&E> 0 4,686,255
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 0 14,873,657
<CURRENT-LIABILITIES> 0 3,398,048
<BONDS> 0 0
0 0
0 0
<COMMON> 0 15,799
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 0 14,873,657
<SALES> 3,164,301 12,799,107
<TOTAL-REVENUES> 3,164,301 12,799,107
<CGS> 2,618,642 9,999,724
<TOTAL-COSTS> 984,401 3,203,225
<OTHER-EXPENSES> (14,309) (32,401)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 277,453 828,377
<INCOME-PRETAX> (701,886) (1,199,818)
<INCOME-TAX> (294,492) (503,923)
<INCOME-CONTINUING> (407,394) (695,895)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (407,394) (695,895)
<EPS-PRIMARY> (.26) (.44)
<EPS-DILUTED> 0 0
</TABLE>
