U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: March 31, 2000
Commission File Number: 0-25388
NPS INTERNATIONAL CORPORATION
-----------------------------
(Exact name of small business issuer as specified in its charter)
Delaware
--------
(State or other jurisdiction of incorporation or organization)
86-0214815
----------
(IRS Employer Identification No.)
812 Proctor Ave.
Ogdensburg, N.Y.
----------------
(Address of principal executive offices)
13669
-----
(Zip Code)
1-800-731-8482
--------------
(Issuer's Telephone Number)
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) has been subject to such filing requirements for the past 90 days: Yes
X No .
--- ---
The number of shares of the registrant's only class of common stock issued and
outstanding, as of March 31, 2000 was 13,386,411 common shares.
<PAGE>
NPS INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONTENTS
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements Page Number
Condensed Consolidated Balance Sheet as of
March 31, 2000 (unaudited) and December 31, 1999. 3
Condensed Consolidated Statements of Operations
for the three-month periods ended March 31, 2000
and 1999 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
for the three-month periods ended March 31, 2000
and 1999 (unaudited) 5
Notes to Condensed Consolidated Financial
Statements (unaudited) 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-11
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
<PAGE>
<TABLE>
NPS INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
(Unaudited)
March 31, December 31,
2000 1999
------------ -----------
<S> <C> <C>
Current assets:
Cash $ 85,016 $ 134,330
Accounts receivable 260,445 144,180
Prepaid expenses 23,809 17,461
Inventories 322,537 200,855
Due from affiliate 6,394 6,400
------------ -----------
Total current assets 698,201 503,226
------------ -----------
Property and equipment, net 133,624 147,048
------------ -----------
Other assets:
Goodwill, net 349,054 357,129
Deferred charges and other 429,730 322,282
------------ -----------
778,784 679,411
------------ -----------
$ 1,610,609 $ 1,329,685
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt
from business combination $ 228,990 $ 228,990
Note payable 21,218 -
Accounts payable and accrued expenses 708,635 561,357
Accrued taxes 62,704 58,955
Loan payable - 152,000
Notes payable - stockholder 70,000 70,092
Convertible debt 175,000 175,000
Payable under service agreement 25,268 179,393
------------ -----------
Total current liabilities 1,291,815 1,425,787
------------ -----------
Stockholders' equity:
Common stock, $.0001 par value,
50,000,000 shares authorized;
13,386,411 shares outstanding in 2000
10,626,411 shares outstanding in 1999 1,339 1,063
Additional paid-in capital 1,232,252 680,528
Accumulated deficit (881,625) (757,530)
Accumulated other comprehensive loss (33,172) (20,163)
------------ -----------
318,794 (96,102)
------------ -----------
$ 1,610,609 $ 1,329,685
============ ===========
</TABLE>
3
<PAGE>
<TABLE>
NPS INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
(Unaudited)
Three-month periods ended
March 31,
-----------------------------
2000 1999
---------- ----------
<S> <C> <C>
Revenues $ 641,351 $ 628,188
Direct costs 555,415 516,429
---------- ----------
Gross profit 85,936 111,759
---------- ----------
Operating expenses (income):
Selling and administrative 179,458 321,274
Amortization 8,075 10,435
Interest expense 20,228 18,400
Interest income (4,256) (3,540)
Gain on sale of assets (1,127) -
Foreign taxes 7,653 10,115
---------- ----------
210,031 356,684
---------- ----------
Loss from continuing operations (124,095) (244,925)
---------- ----------
Discontinued operations:
Income from divested operations - 6,650
Gain on disposal of divested operations - 26,487
---------- ----------
- 33,137
---------- ----------
Net loss $ (124,095) $ (211,788)
========== ==========
Per share data:
Continuing operations $ (0.01) $ (0.02)
Discontinued operations 0.00 0.00
---------- ----------
$ (0.01) $ (0.02)
========== ==========
Weighted average shares outstanding 10,626,411 10,448,894
========== ==========
4
</TABLE>
<PAGE>
<TABLE>
NPS INTERNATIONAL CORPORATION
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(Unaudited)
Three-month periods ended
March 31,
-----------------------
2000 1999
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(124,095) $(211,788)
--------- ---------
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 21,499 33,224
Non-cash expenses of divested operations - 453
Obligations satisfied through issuance
of common stock 430,515 141,000
Gain on sale of divested operations - (26,487)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (116,265) (33,829)
(Increase) decrease in prepaid expenses (6,348) (12,815)
(Increase) decrease in inventory (121,682) (13,064)
Increase (decrease) in accounts payable
and accrued expenses (125,265) 91,661
Increase (decrease) in accrued taxes 3,749 (32,806)
Increase (decrease) in payable under
service agreement (154,125) -
--------- ---------
Total adjustments (67,922) 147,337
--------- ---------
Net cash used in operating activities (192,017) (64,451)
--------- ---------
Cash flows from investing activities:
Capital expenditures - (46,024)
Goodwill and deferred charges - (28,525)
Loans to affiliate - (5,000)
Proceeds from note receivable of divested segment - 30,000
--------- ---------
Net cash used in investing activities - (49,549)
--------- ---------
Cash flows from financing activities:
Loans from affiliate 121,485 65,500
Loans from stockholder - 10,000
Proceeds from note payable 21,218 -
--------- ---------
Net cash provided by financing activities 142,703 75,500
--------- ---------
Net decrease in cash (49,314) (38,500)
Cash balance at beginning of period 134,330 217,535
--------- ---------
Cash balance at end of period $ 85,016 $ 179,035
========= =========
</TABLE>
5
<PAGE>
NPS INTERNATIONAL CORPORATION
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(unaudited)
1. Unaudited interim financial statements
The accompanying unaudited financial statements have been prepared in
accordance with the instructions for Form 10-QSB and do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion
of management, all adjustments, consisting only of normal recurring
adjustments considered necessary for a fair presentation, have been
included. Operating results for any quarter are not necessarily
indicative of the results for any other quarter or for the full year.
These statements should be read in conjunction with the financial
statements of NPS International Corporation formerly (National Industry
Security Corporation) and notes thereto included in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1999.
2. Divested operations
Effective March 31, 1999, the Company disposed of its security division
which conducted business under the name of National Industrial Security
Corporation ("NISCO"). The results of NISCO have been reported
separately as a divestiture in the consolidated statements of
operations.
Assets and liabilities of NISCO which were divested consisted of the
following:
Accounts receivable $ 78,625
Other current assets 10,955
Intangible assets, net 7,643
Accounts payable and accrued expenses (48,710)
---------
Net assets of divested segment $ 48,513
=========
The operations of NISCO were acquired in a business combination on
November 7, 1998, and were included in the Company's 1998 consolidated
statement of operations for the period from the date of acquisition
through December 31, 1998.
6
<PAGE>
2. Divested operations (continued)
The following table summarizes selected financial data of the Company's
divested operations:
November 7, 1998
(date of acquisition)
Three-months ended through
March 31, 1999 December 31, 1998
------------------ -----------------
Revenues $166,104 $120,206
Expenses 159,455 116,932
-------- --------
Income from divested
operations $ 6,649 $ 3,274
======== ========
Such amounts have not been included in operating revenues or expenses
in the accompanying consolidated statements of operations.
Under the terms of the agreement, the Company sold the assets of NISCO
for a $75,000 note, thereby realizing a gain on divestiture of $26,487.
The note bears interest at the rate of 8% per annum. The balance of the
note was $6,394 at March 31, 2000.
7
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS.
The unaudited financial statements for the three-month period ended March 31,
2000, are attached hereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the Company's
unaudited financial statements and notes thereto included herein. In connection
with, and because it desires to take advantage of, the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995, the Company cautions
readers regarding certain forward-looking statements in the following discussion
and elsewhere in this report and in any other statement made by, or on the
behalf of the Company, whether or not in future filings with the Securities and
Exchange Commission. Forward-looking statements are statements not based on
historical information and which relate to future operations, strategies,
financial results or other developments. Forward-looking statements are
necessarily based upon estimates and assumptions that are inherently subject to
significant business, economic and competitive uncertainties and contingencies,
many of which are beyond the Company's control and many of which, with respect
to future business decisions, are subject to change. These uncertainties and
contingencies can affect actual results and could cause actual results to differ
materially from those expressed in any forward-looking statements made by, or on
behalf of, the Company. The Company disclaims any obligation to update
forward-looking statements.
OVERVIEW
In November 1998, the Company acquired all of the issued and outstanding
securities of Naidger Power Systems, Inc., which resulted in a significant
change in the Company's principal business, from a security guard business to a
holding company whose subsidiaries are engaged in the production of metal parts
and sub-assemblies, primarily the gas meter, white goods and auto parts sector,
as well as the design and production of tools, injection molds, dies and
assembly jigs for use in the production of gas meters, white goods, auto parts
and telecommunication equipment. As a result, management is presenting the
following discussion as if the Company had acquired and operated the aforesaid
businesses for the previous two-year periods, in order to provide a better
analysis of the Company's current and prior results of operations.
The following information is intended to highlight developments in the Company's
operations to present the results of operations of the Company, to identify key
trends affecting the Company's businesses and to identify other factors
affecting the Company's results of operations for the three- month periods ended
March 31, 2000 and 1999.
8
<PAGE>
RESULTS OF OPERATIONS
Comparison of Results of Operations for the Three-Month Periods Ended March
31, 2000 and 1999
During the three-month period ended March 31, 2000, the Company's revenues
increased, as it generated revenues of $641,351, compared to revenues of
$628,188 for the similar period in 1999, an increase of $13,163 (2%). This
increase in revenues was attributable to a 5% increase in revenues as reported
in zlotys (the local currency in Poland), and a decrease of 3% resulting from a
change in the exchange rate from 4.0 zlotys per dollar at March 31, 1999 to 4.1
zlotys per dollar at March 31, 2000. In the three-month period ended March 31,
2000, costs of sales increased 8%, to $555,415, compared to $516,429 for the
similar period in 1999, an increase of $38,986. This was due primarily to an 11%
increase in costs of sales as reported in zlotys, and a decrease of 3% resulting
from the change in the exchange rate. Operating expenses were $210,031 for the
three months ended March 31, 2000, compared to $356,684 for the similar period
in 1999, a decrease of $146,653 (41%). This decrease came about due primarily to
decreases in selling and administrative expenses. Significant decreases include
public relations, which was $0 and $94,241 at March 31, 2000 and 1999,
respectively, and professional fees, which was $31,195 and $82,061 at March 31,
2000 and 1999, respectively. As a result, the Company incurred a net loss of
($124,095) during the three month period ended March 31, 2000, as compared to a
n et loss of ($244,925) for the similar period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal business, production of metal parts and tools, is a
capital intensive operation which requires periodic capital expenditures to
replace or upgrade manufacturing equipment as well as expenditures to maintain
existing equipment. To date, such expenditures have been principally financed by
cash flows from operations of the Company's operating subsidiaries. Significant
expenditures of the parent company include the servicing of debt related to the
acquisition of the Metrix Companies and ongoing general and administrative costs
incurred in connection with public reporting requirements and in investigating
new potential acquisition candidates in accordance with the Company's continuing
expansion plans. To date, such expenditures have been financed by equity capital
contributions and related party loans. These capital contributions and loans
have been adequate to permit the Company to carry on operations to date.
However, it will be necessary to finance operations over the coming year with
additional funds raised through the issuance of debt or equity securities.
On June 26, 1998, Polcorp acquired all of the issued and outstanding shares of
Metrix Tools, LLC ("MTL") and Metrix Metal, LLC ("MML") in exchange for notes
payable in the amounts of 430,000 Polish zlotys ($122,717 US dollars) and
930,000 Polish zlotys ($265,411 US dollars), respectively. These notes provide
for repayment in US Dollars based on the exchange rate at ING Bank S.A., Warsaw,
Poland. The notes are payable in four (4) equal installments commencing 90 days
after the date of the agreement. The balance of the installments were due 270,
450 and 630 days following the date of the agreement. Each installment includes
interest at the rate of 8% annually increased by the inflation ratio in Poland.
Failure to tender timely payment results in an interest charge of 20% annually.
This debt is secured by the stock of MTL and MML. As of the date of this report,
the Company has temporarily suspended the payments which were due in 1999,
during the negotiations to acquire Metrix, S.A., as more fully described in Part
I, Item I, above. While the Company is technically in default of its obligations
under the notes because it did not make the required payment, the Company has
not received any notice of default. The balance due on these notes as of
December 31, 1999 was $228,990.
9
<PAGE>
The Company has $70,000 of notes payable to a stockholder. The notes arose from
advances made by the stockholder to the Company. The notes bear interest at
prime plus 5.25% to 6.0% and are due May 1999 through January 2000. The notes
are collateralized by the Company's accounts receivable and property and
equipment, but are subordinated to other secured debt.
Management intends to undertake a plan of expansion and in order to effectuate
the same, has recognized the Company's need for additional operating capital. In
response thereto, it is expected that the Company will continue to seek out
additional equity or debt capital from individuals, venture capitalists and
institutions during the fiscal year ending December 31, 2000. However, as of the
date of this report, no definitive agreement has been reached between the
Company and any funding source and none is expected in the foreseeable future.
Failure of the Company to obtain additional capital in the future will have a
negative impact on management's ability to continue its efforts to expand the
Company's business and generate profits from existing operations.
TRENDS
The Company is primarily focused on the development and expansion of (i)
infrastructure manufacturing and (ii) the acquisition and growth of proprietary
flow measurement and control devices in the gas and electricity meter sectors
(utility metering). With particular reference to (i), and with the understanding
that no assurances can be provided, the Company is forecasting double-digit
growth in both its tool making and metal fabrication operations as an increasing
number of domestic concerns outsource their infrastructure manufacturing
requirements to reduce internal costs. In addition, management believes that
multinationals recognize that Poland offers large pools of skilled labor and
lower production costs relative to their domestic marketplace. The outsourcing
by western firms of the Company's infrastructure manufacturing units continues
to show strength, with planned revenue growth from internal operations exceeding
10-15% commencing in fiscal 2000.
The Company's entry into the proprietary gas and electricity metering business
is scheduled for the fiscal 2000, presuming that the proposed acquisitions of
PAFAL SA and METRIX SA, both major suppliers of metering devices to the utility
sector in POLAND, are successfully consummated, of which there can be no
assurance. PAFAL is a manufacturer of electricity meters with an annual turnover
of $35,000,000 and a 83% market share, while METRIX is a producer of gas meters
with an annual turnover of $15,000,000 and a 40% share of domestic meters and a
100% share of the industrial market.
10
<PAGE>
It is anticipated that the domestic market in Poland for electricity meters will
exceed a 10% growth rate over the next 12 months as a result of both new
technological enhancements to existing products and new and/or refurbished
installations. Coupled with its strong domestic position, PAFAL anticipates that
strong potential gains in sales and profitability lie in burgeoning
international markets for its metering technologies.
While domestic gas meter sales in POLAND have remained stable over the past
year, METRIX SA has recently completed the development cycle for a new
generation of plastic injection molded meters which will eventually replace its
G4 series of domestic meters. The new meters are smaller in size and less costly
than existing metal-framed meters and are well-suited for growth in the domestic
market, not only in Poland, but in numerous international markets. Management
also sees growth in the gas meter business as a result of (1) recent substantial
price increases in Poland in alternate energy sources; (2) a reduction in the
mandatory inspection period from 30 to 15 years; (3) a trend to individual
metered premises; (4) the growth in residential construction; (5) substantial
refurbishment and/or new construction of industrial sites; and (6) export
markets encouraged by a growing requirement in international markets to monitor
costs and increase gas revenues.
INFLATION
Although the operations of the Company are influenced by general economic
conditions, the Company does not believe that inflation had a material effect on
the results of operations during the three-month period ended March 31, 2000.
11
<PAGE>
PART II. 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 - None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits
EX-27 Financial Data Schedule
(b) Reports on Form 8-K
None.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NPS INTERNATIONAL CORPORATION
(Registrant)
Dated: June 29, 2000
------------------
By: s/Stephen A. Rosenburgh
---------------------------------
Stephen A. Rosenburgh, President
13
<PAGE>
NPS INTERNATIONAL CORPORATION
EXHIBIT INDEX TO QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2000
EXHIBITS Page No.
EX-27 Financial Data Schedule............................................15
14
