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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
(Mark One)
[x] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended September 30, 2000
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ---- to ----
Commission file number 001-12127
EMPIRE RESOURCES, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 22-3136782
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
One Parker Plaza
Fort Lee, NJ 07024
(Address of Principal Executive Offices)
201 944-2200
(Issuer's Telephone Number, Including Area Code)
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 [X] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 15,093,762 shares of common
stock outstanding as of November 1, 2000.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
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Item 1 Financial Statements
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Introduction
The condensed consolidated interim financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission with respect to Form
10-QSB. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. In the
opinion of management, such financial statements reflect all adjustments
necessary for a fair presentation of the results for the interim periods
presented and to make such financial statements not misleading. The results of
operations of the Company for the nine months ended September 30, 2000 are not
necessarily indicative of the results to be expected for the full year. It is
suggested that these interim financial statements be read in conjunction with
the consolidated financial statements and the notes thereto included in the
Company's Form 10-KSB for the year ended December 31, 1999.
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Empire Resources, Inc.
Condensed Consolidated Balance Sheet (Unaudited)
SEPTEMBER 30,
2000
ASSETS
Current assets:
Cash $ 1,315,487
Trade accounts receivable, net 41,358,721
Inventories 23,280,508
Other current assets 867,907
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Total current assets 66,822,623
Furniture and equipment 328,076
Less: accumulated depreciation (269,380)
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Net furniture and equipment 58,696
Deferred financing costs, net 21,051
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$ 66,902,370
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable -- banks $ 40,000,000
Trade accounts payable 15,007,500
Accrued expenses 615,831
Distribution payable to former stockholders 46,482
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Total current liabilities 55,669,813
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Commitments
Stockholders' equity
Preferred stock
$.01 par value, 5,000,000 shares authorized;
none issued.
Common stock
$.01 par value; 40,000,000 shares authorized;
15,580,862 shares issued, including
3,824,511 shares held in escrow 155,809
Additional paid in capital 10,183,386
Cumulative translation adjustment 71,402
Retained earnings 1,468,021
Treasury stock (486,600 shares) (646,061)
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Total stockholders' equity 11,232,557
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$ 66,902,370
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See notes to financial statements
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Empire Resources, Inc.
Condensed Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------- -------------------------------
2000 1999 2000 1999
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
Net sales $ 52,383,189 $ 32,887,222 $ 122,094,835 $ 79,172,162
Cost of goods sold 49,415,465 30,372,855 113,882,602 73,297,199
------------ ------------- ------------- ------------
Gross profit 2,967,724 2,514,367 8,212,233 5,874,963
Selling, general and administrative expenses 1,300,825 816,163 3,827,874 2,304,283
------------ ------------- ------------ ------------
Operating income 1,666,899 1,698,204 4,384,359 3,570,680
Interest expense 878,312 701,668 2,175,016 1,678,914
------------ ------------- ------------ ------------
Income before income taxes 788,587 996,536 2,209,343 1,891,766
Income taxes 310,236 59,125 859,593 72,535
------------ ------------- ------------ ------------
Net income $ 478,351 $ 937,411 $ 1,349,750 $ 1,819,231
============ ============= ============= ============
Income before income taxes $ 996,536 $ 1,891,766
Pro forma income taxes 378,684 718,871
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Pro forma net income $ 617,852 $ 1,172,895
============= ============
Weighted average shares outstanding--basic 11,291,435 6,427,774 11,396,496 5,852,602
Weighted average shares outstanding--diluted 11,390,451 6,464,743 11,494,711 5,865,061
Earnings per share -- basic $ 0.04 $ 0.12
Earnings per share -- diluted $ 0.04 $ 0.12
Pro forma earnings per share -- basic $ 0.10 $ 0.20
Pro forma earnings per share -- diluted $ 0.10 $ 0.20
</TABLE>
See notes to financial statements
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Empire Resources, Inc.
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,349,750 $ 1,819,231
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Depreciation and amortization 50,684 37,213
Translation adjustment 35,250 12,244
Transfer of restricted shares to key employee 258,789 ----
Changes in:
Trade accounts receivable (15,402,997) (4,489,686)
Inventories (3,918,300) (4,093,092)
Other current assets (98,945) (704,703)
Deferred financing costs ---- (58,462)
Trade accounts payable 6,903,355 2,345,595
Accrued expenses (1,155,637) 932,756
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Net cash used in operating activities (11,978,051) (4,198,904)
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Cash flows from investing activities:
Additions to fixed assets (19,293) (21,886)
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Net cash used in investing activities (19,293) (21,886)
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Cash flows from financing activities:
Proceeds from notes payable--banks 13,700,000 8,000,000
Distributions to stockholders ---- (11,801,059)
Distributions payable to former stockholders ---- 46,482
Net cash acquired upon merger ---- 9,950,000
Payment of merger costs ---- (569,258)
Purchase of treasury stock (586,960) ----
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Net cash provided by financing activities 13,113,040 5,626,165
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Net increase in cash 1,115,696 1,405,375
Cash at beginning of period 199,791 147,719
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Cash at end of period $ 1,315,487 $ 1,553,094
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Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 2,219,617 $ 1,605,809
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Income taxes $ 737,745 $ 32,500
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Non-cash financing activity
Notes payable to former stockholders--distribution -- $ 152,898
============= =============
</TABLE>
See notes to financial statements
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Empire Resources, Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)
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1. The Company
The Company (as defined below) is engaged principally in the purchase, sale and
distribution of primarily semi-finished aluminum products to a diverse customer
base located throughout North America and Australia. The Company sells its
products through its own marketing and sales personnel and through its
independent sales agents located in the U.S. who receive commissions on sales.
The Company purchases from suppliers located throughout the world.
2. Organization and Basis of Presentation
Empire Resources, Inc., formerly known as Integrated Technology USA, Inc.,
("Integrated" or the "Company") was incorporated in 1990. On February 22, 1999,
the Company signed a merger agreement with Empire Resources, Inc. ("Empire"), a
distributor of value added, semi-finished aluminum products. Under the terms of
the Agreement and Plan of Merger, effective September 17, 1999, Empire was
merged with and into the Company.
Upon completion of the merger, the Company changed its name to Empire Resources,
Inc. The merged company is continuing the business of Empire.
In conjunction with the merger, Empire Resources Pacific Ltd.
("Empire-Pacific"), an affiliate of Empire Resources, Inc. operating in
Australia, became a wholly owned subsidiary of Empire in a combination of
companies under common control, which was accounted for at historical cost in a
manner similar to that in a pooling of interests.
In addition, the Company has two other wholly owned subsidiaries, I.T.I.
Innovative Technology, Ltd. ("Innovative") and CompuPrint Ltd. ("CompuPrint"),
both of which are incorporated in Israel and are presently inactive.
For accounting and financial reporting purposes, the merger has been treated as
a "reverse acquisition." Under this treatment, the surviving corporation has
been treated as a continuation of Empire, and the merger has been treated as an
issuance of shares by Empire to the stockholders of Integrated in exchange for
Integrated's cash. Accordingly, the accompanying condensed financial statements
are the historical financial statements of Empire and Empire Resources Pacific
Ltd., and include the results of operations, which have been minimal, of
Integrated and its subsidiaries only from the September 17, 1999 merger date.
All significant intercompany transactions and accounts have been eliminated.
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3. Use of estimates
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of the
financial statements and the reported amount of income and expenses during the
reported period. Actual results could differ from these estimates.
4. Income Taxes and Pro Forma Income Taxes
Empire had elected S corporation status for federal income tax purposes, and
accordingly was not subject to federal tax on its income for periods prior to
the merger with Integrated on September 17, 1999. Income tax expense for periods
prior to the merger date represents state and local taxes.
Pro forma income tax expense represents the provision for income taxes as if
Empire had been a C corporation for the three months and nine months ended
September 30, 1999.
5. Inventories
Inventories consist of semi-finished aluminum products stored in warehouses or
in transit.
6. Notes Payable--Banks
The Company operates under a line of credit with two commercial banks. During
2000 the Company amended its revolving credit agreement under which its line of
credit was increased from $45 million to $50 million until November 30, 2000.
This temporary increase will revert after that date to the original agreement
amount of $45 million. In connection with this modification, certain of the
Company's covenants and ratio requirements were also modified. Borrowings under
this line of credit are collateralized by security interests in substantially
all assets of the Company.
7. Earnings Per Share
Three months ended Nine months ended
September 30, September 30,
2000 1999 2000 1999
---- ---- ---- ----
Weighted average shares
outstanding - basic 11,291,435 6,427,774 11,396,496 5,852,602
Dilutive effect of stock
options and warrants 99,016 36,969 98,215 12,459
Weighted average shares
outstanding - diluted 11,390,451 6,464,743 11,494,711 5,865,061
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Basic earnings per share for the 2000 periods are based upon the Company's
number of common shares outstanding during such periods. For 1999 periods prior
to the merger, earnings per share are based on the number of shares of the
Company's common stock issued to the former Empire stockholders in the merger,
excluding the 3,824,511 shares which were placed in escrow. The 1999 periods
subsequent to the merger include the shares of the former Integrated Technology
stockholders in the calculation of earnings per share.
Diluted earnings per share and pro forma diluted earnings per share are based
upon the weighted average number of common shares outstanding during each
period, assuming the issuance of common shares for all dilutive potential common
shares outstanding during the period.
8. New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities ("SFAS 133"). SFAS 133 will require the Company to record
all derivatives as assets or liabilities at fair value. The statement requires
that changes in the derivatives' fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. SFAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 2000. The impact of
SFAS 133 on the Company's financial statements will depend on a variety of
factors, including the extent of the Company's hedging activities, the types of
hedging instruments used and the effectiveness of such instruments. The effect
of adopting the statement is currently being evaluated.
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