FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________________TO_____________________
AIR PACKAGING TECHNOLOGIES, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4337254
(STATE OF INCORPORATION) (IRS EMPLOYER ID NO.)
25620 RYE CANYON ROAD, VALENCIA, CALIFORNIA 91355
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(661) 294-2222
(Issuer's telephone number)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND
REPORTS REQUIRED TO BE FILED BY SECTIONS 12,13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN
CONFIRMED BY A COURT.
YES__________ NO__________
APPLICABLE ONLY TO CORPORATE ISSUERS:
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE. AS OF MARCH 31, 2000, THERE
WERE 7,520,415 SHARES OF COMMON STOCK OUTSTANDING.
<PAGE>
AIR PACKAGING TECHNOLOGIES, INC
TABLE OF CONTENTS
-----------------
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS - MARCH 31, 2000 AND DECEMBER 31, 1999 1
STATEMENTS OF OPERATIONS - THREE MONTHS ENDED
MARCH 31, 2000 AND 1999 2
STATEMENTS OF CASH FLOWS - THREE MONTHS ENDED
MARCH 31, 2000 AND 1999 3
NOTES TO FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 7
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 12
ITEM 2. CHANGES IN SECURITIES 12
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 12
ITEM 6. EXHIBITS 13
SIGNATURES 13
AIR PACKAGING TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
3/31/00 12/31/99
(Unaudited) (Audited)
---------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash. . . . . . . . . . . . . . . . . . . . . 511,128 1,150,151
Trade receivables, net of allowance of
$22,630 and $22,630. . . . . . . . . . . . . 108,658 57,603
Inventories, net of reserve of $33,000
and $33,000. . . . . . . . . . . . . . . . . 681,987 577,389
Advances and prepaids . . . . . . . . . . . . 50,339 41,895
------------ -------------
Total current assets. . . . . . . . . . . . 1,352,112 1,827,038
Property and equipment, net of depreciation
of $1,556,258 and $1,498,949 . . . . . . . . 676,655 714,186
Intangible assets, net of amortization of
of $588,656 and $575,960 . . . . . . . . . . 220,973 229,378
Deferred financing costs, net of amortization
of $19,792 and $10,417 . . . . . . . . . . . 130,208 139,583
Deposits. . . . . . . . . . . . . . . . . . . 60,100 60,100
------------ -------------
TOTAL ASSETS. . . . . . . . . . . . . . . . 2,440,048 2,970,285
============ =============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE & accrued expenses . . . . . 232,237 402,031
Deferred revenue. . . . . . . . . . . . . . . 14,992 8,795
------------ -------------
TOTAL CURRENT liabilities . . . . . . . . . 247,229 410,826
Senior convertible notes. . . . . . . . . . . 1,500,000 1,500,000
------------ -------------
Total long term liabilities . . . . . . . . 1,500,000 1 ,500,000
Common stock, $.O1 par value per share.
Authorized - 50,000,000 shares; Issued
and outstanding 7,520,415 at March 31, 2000
and 7,966,408 at
December 31, 1999. . . . . . . . . . . . . . 75,204 79,664
Additional paid in capital. . . . . . . . . . 20,794,247 20,789,787
Accumulated deficit . . . . . . . . . . . . . (20,176,632) (19,809,992)
------------ -------------
TOTAL STOCKHOLDERS' EQUITY. . . . . . . . . 692,819 1,059,459
------------ -------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY. . 2,440,048 2,970,285
============ =============
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
AIR PACKAGING TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months Three months
ended ended
3/31/00 3/31/99
(Unaudited) (Unaudited)
--------------- -----------
<S> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . 147,452 199,029
Cost of sales. . . . . . . . . . . . . . . . 129,343 184,912
--------------- -----------
Gross profit. . . . . . . . . . . . . . . . . 18,109 14,117
Operating expenses:
General, administrative and selling expenses. 366,753 378,957
Research and development. . . . . . . . . . . - 677
--------------- -----------
Total operating expenses. . . . . . . . . . . 366,753 379,634
Loss from operations. . . . . . . . . . . . . (348,644) (365,517)
Interest expense/(income) . . . . . . . . . . 17,996 (3,507)
--------------- -----------
Net loss. . . . . . . . . . . . . . . . . . . (366,640) (362,010)
=============== ===========
Loss per common share:
Basic and diluted . . . . . . . . . . . . . (0.05) (0.05)
--------------- -----------
Weighted average number of common
shares outstanding:
Basic and diluted . . . . . . . . . . . . . 7,520,415 6,789,255
------------------- -----------
</TABLE>
See notes to consolidated financial statements.
AIR PACKAGING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Three
months months
ended ended
3/31/00 3/31/99
(Unaudited) (Unaudited)
------------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . (366,640) (362,010)
Adjustments to reconcile net loss to net
cash used in operating activities: . . . . - -
Depreciation and amortization. . . . . . . 79,379 68,138
Increase (decrease) from changes in:
Trade receivables. . . . . . . . . . . . . (51,055) (29,962)
Inventories. . . . . . . . . . . . . . . . (104,598) (177,470)
Advances and prepaids. . . . . . . . . . . (8,444) 50,266
(Decrease) increase from changes in:
Accounts payable & accrued liabilities . . (169,794) (41,714)
Deferred revenue . . . . . . . . . . . . . 6,197 (88)
-------------- -----------
Net cash used in operating activities. . . (614,955) (492,840)
-------------- -----------
Cash flows from investing activities:
Purchases of property and equipment. . . . . (19,778) (12,504)
Patent expenditures. . . . . . . . . . . . . (4,290) (14,245)
-------------- -----------
Net cash used in investing activities. . . (24,068) (26,749)
-------------- -----------
Cash flows from financing activities:
Proceeds from exercise of warrants. . . . . - 615,000
-------------- -----------
Net cash provided by financing activities - 615,000
-------------- -----------
Net (decrease) increase in cash. . . . . . . (639,023) 95,411
Cash, beginning of period . . . . . . . . . . 1,150,151 125,799
-------------- -----------
Cash, end of period. . . . . . . . . . . . . 511,128 221,210
============== ===========
Supplemental disclosure of
cash flow information:
Cash paid during the three months for:
Income taxes. . . . . . . . . . . . . . . . 800
Interest - -
</TABLE>
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(UNAUDITED)
NOTE 1 - STATEMENT OF INFORMATION FURNISHED
- -------------------------------------------------
In the opinion of management the accompanying unaudited financial statements
contain all adjustments (consisting only of normal and recurring accruals)
necessary to present fairly the financial position as of March 31, 2000, and the
results of operations and cash flows for the three month periods ended March 31,
2000 and 1999. These results have been determined on the basis of generally
accepted accounting principles and practices applied consistently with those
used in the preparation of the Company's Annual Report and the Form 10-K for the
fiscal year ended December 31, 1999.
The results of operations for the three month period ended March 31, 2000 are
not necessarily indicative of the results to be expected for any other period or
for the entire year.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. The accompanying financial statements should be
read in conjunction with the Company's audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999.
NOTE 2 - EARNINGS (LOSS) PER COMMON SHARE
- ------------------------------------------------
The Company computes loss per common share under SFAS No. 128, "Earnings Per
Share," which requires presentation of basic and diluted earnings (loss) per
share. Basic earnings (loss) per common share is computed by dividing income or
loss available to common shareholders by the weighted average number of common
shares outstanding for the reporting period. Diluted earnings (loss) per common
share reflects the potential dilution that could occur if securities or other
contracts, such as stock options, to issued common stock were exercised or
converted into common stock. Common stock options were not included in the
computation of diluted loss per common share for the three months ended March
31, 2000 and 1999 because the effect would be antidilutive.
NOTE 3 - STOCK SPLIT
- ------------------------
In January 2000, the Board of Directors declared a one-to-ten reverse stock
split. All stock-related data in the consolidated financial statements reflect
the stock split for all periods presented.
NOTE 4 - EXERCISE OF WARRANTS AND OPTIONS
- ------------------------------------------------
The Company issued 410,000 shares of its common stock at $1.50 per share upon
the exercise of warrants by a shareholder during the three months ended March
31, 1999.
On March 24, 2000, the Board of Directors approved a temporary reduction in
the exercise price of all warrants and options outstanding. The exercise price
was reduced from $1.50 to the average bid price of the Company's common stock
for the twenty-five trading days immediately prior to the receipt of a notice of
conversion with a minimum conversion price of $0.50. The notice of exercises
must be received by April 30, 2000.
During the three months ended March 31, 2000, the Company cancelled 100,000
stock options outstanding to officers and issued an additional 375,000 stock
options, which expire December 31, 2004 and are subject to certain vesting
terms.
During the three months ended March 31, 2000, a warrant holder submitted 40,000
warrants to purchase common stock for cancellation by the Company.
NOTE 5 - SENIOR CONVERTIBLE NOTES
- --------------------------------------
During the year ended December 31, 1999, the Company issued $1,500,000 in Senior
Convertible Notes with interest payable annually on June 30 at 7% per annum.
The Senior Convertible Notes are unsecured and due on September 30, 2003. At
the option of the holder, the holder may convert the principal amount of such
Note at any time before September 30, 2003, into shares of common stock. The
conversion price is equal to or greater than the fair value of the stock on the
date the Senior Convertible Notes were issued.
At the holder's option, the holder may elect to receive any annual interest
payment in common stock of the Company at a 20% discount. The difference
between the fair market value of the stock on date of conversion and the
conversion price will be recorded as additional interest expense.
In conjunction with these Notes, the Company paid a finder's fee of $150,000 and
other financing costs, which is being amortized over the life of the Notes.
On March 24, 2000, the Board of Directors of the Company approved a temporary
reduction in the conversion price on the 7% Senior Convertible Debenture into
common stock. The conversion price was reduced from $1.50 to the average bid
price of the Company's common stock for the twenty-five trading days immediately
prior to the receipt of a notice of conversion, with a minimum conversion price
of $0.50. The notice of conversion for the temporary reduction must be received
by April 30, 2000 and must include all accrued interest through May 31, 2000.
As a result, the Company will record an expense related to the reduction in
conversion price. During April 2000, the Company received notices of conversion
from all of the debenture holders.
NOTE 6 - LIQUIDITY AND GOING CONCERN
- -------------------------------------------
The financial statements as of March 31, 2000 have been prepared assuming that
the Company will continue as a going concern, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business.
However, there is substantial doubt about the Company's ability to continue as a
going concern because of the magnitude of the Company's losses during the past
three years of ($1,853,012), ($1,723,647) and ($1,824,199)in 1999, 1998, and
1997, respectively and a net loss of ($366,640) for the three months ended
March 31, 2000 and an accumulated deficit of ($20,176,632) at March 31,
2000. The Company's continued existence is dependent upon its ability to raise
additional capital, to increase sales, to significantly improve operations, and
ultimately become profitable.
The Company believes that future investments and certain sales-related efforts
will provide sufficient cash flow for it to continue as a going concern in its
present form. However, there can be no assurance that the Company will achieve
such results. Accordingly, the consolidated financial statements do not include
any adjustments related to the recoverability and classification of recorded
asset amounts or the amount and classification of liabilities or any other
adjustments that might be necessary should the Company be unable to continue as
a going concern.
On March 27, 2000, the Company entered into a one-year investment banking
agreement with Givigest Fiduciaria SA "Givigest" to raise equity capital. As of
April 30, 2000, the Company has been advised that $225,000 has been raised
pursuant to the agreement and the subscription agreement is being prepared and
the funds will be forwarded to the Company during the second quarter of fiscal
2000.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS
- --------------
GENERAL
Air Packaging Technologies, Inc. (APTI) manufactures and markets a line of
industrial packaging products under the name "Air Box" . The Air Box
provides reusable protective packaging during shipping and storage for a wide
range of higher value items. It provides vastly superior protection from ESD
(electro static discharge) damage and moisture. It also provides see-through
transparency for visual inspection of the product during shipment and upon
receipt.
The Company has an aggressive on-going plan to increase its sales activity and
achieve a profitable business level of sales. In past time periods, the
Company's sales activities have been limited by a lack of funds, incomplete
designs and poor manufacturing quality. All of the known design and quality
problems of the Company were resolved successfully in the fourth quarter of
fiscal 1998. Only since January 1999 has the Company been able to
concentrate on developing future sales with major customers.
1. RESULTS OF OPERATIONS
Net sales for the three months ended March 31, 2000 were $147,452 compared to
net sales of $199,029 for the comparable period of the preceding year. This
represents a decrease of $51,577 or 26%. The net decrease is primarily due to
sales of the SDS Air Box product line which were made to one customer during the
first quarter of fiscal 1999 and were not repeated during the first quarter of
fiscal 2000. This decrease is partially offset by an increase in sales of the
Air Box product line during the three months ended March 31, 2000 from the
comparable period of the preceding year.
Cost of sales decreased $55,569 or 30% for the three months ended March 31,
2000. The decrease is due to the related decrease in sales. As sales increase,
additional working capital is required to fund inventory and work in process.
As a result of these factors, the Company has an ongoing and urgent need for
infusion of additional working capital.
General, administrative and selling expenses decreased by $12,204 or 3% during
the three months ended March 31, 2000 as compared to the three months ended
March 31, 1999. The net decrease is primarily due to a decrease in legal
professional fees during the first quarter of fiscal 2000.
Interest expense (income) was $17,996 at March 31, 2000 and $(3,507) at March
31, 1999. Interest expense increased approximately $26,000 for the three
months ended March 31, 2000 as compared to the three months ended March 31, 1999
which is related to the 7% interest-bearing Convertible Senior Notes which were
issued during the third and fourth quarters of fiscal 1999. Interest income
increased approximately $6,800 during the three months ended March 31, 2000 from
the comparable period of the prior year as the Company had an increase in cash
placed in an interest-earning account.
As a result of the above, net loss for the three month period ended March 31,
2000 decreased by $4,630 to $366,640 from $362,010.
The Company is currently in a loss carry-forward position. The net operating
loss carry-forward balance as of March 31, 2000 was approximately $18,600,000
compared to $18,200,000 as of December 31, 1999. The net operating loss
carry-forward is available to offset future taxable income through 2019. The
Company's net operating loss carry-forwards may be limited due to ownership
changes as defined under Section 382 of the Internal Revenue Code of 1986.
At March 31, 2000, the Company had a deferred tax asset, which primarily related
to the net operating losses. A 100% valuation allowance has been established as
management cannot determine whether it's more likely than not that the deferred
tax assets will be realized.
2. LIQUIDITY AND CAPITAL RESOURCES
During the Company's operating history, it has yet to show a net profit for any
given fiscal year. The Company sustained net losses of approximately
$1,853,000, $1,724,000 and $1,824,000 for the fiscal years ended December 31,
1999, 1998 and 1997, respectively that have caused the Company's Independent
Certified Public Accountants to issue an explanatory paragraph in their opinions
which expresses substantial doubt about the Company's ability to continue as a
going concern. The Company has required periodic infusions of capital to
survive and remain solvent. There can be no assurance that the Company will
continue to be able to attract additional capital and there can be no assurance
that the Company will become profitable in the foreseeable future.
The Company's primary need for capital has been to purchase raw materials,
upgrade machinery and continue to develop and enhance patents and trademarks.
On March 24, 2000, the Board of Directors of the Company approved a temporary
reduction in the conversion price on the 7% Senior Convertible Debenture into
common stock. The conversion price was reduced from $1.50 to the average bid
price of the Company's common stock for the twenty-five trading days immediately
prior to the receipt of a notice of conversion, with a minimum conversion price
of $0.50. The notice of conversion for the temporary reduction must be received
by April 30, 2000 and must include all accrued interest through May 31,
2000. As a result, the Company will record an expense related to the
reduction in conversion price. As of April 30, 2000, the Company
received notices of conversion from all of the debenture holders.
On March 24, 2000, the Board of Directors also approved a temporary reduction in
the exercise price of all warrants and options outstanding. The exercise price
was reduced from $1.50 to the average bid price of the Company's common stock
for the twenty-five trading days immediately prior to the receipt of a notice of
conversion with a minimum conversion price of $0.50. The notice of exercises
must be received by April 30, 2000.
During the three months ended March 31, 2000, the Company cancelled 100,000
stock options outstanding to officers and issued an additional 335,000 stock
options, which expire December 31, 2004 and are subject to certain vesting
terms.
During the three months ended March 31, 2000, a warrant holder submitted 40,000
warrants to purchase common stock for cancellation by the Company.
On March 27, 2000, the Company entered into a one-year investment banking
agreement with Givigest Fiduciaria SA "Givigest" to raise equity capital. As of
April 30, 2000, the Company has been advised that $225,000 has been raised
pursuant to the agreement and the subscription agreement is being prepared and
the funds will be forwarded to the Company during the second quarter of fiscal
2000.
The Company's working capital as of March 31, 2000 was $1,104,883 compared to
working capital of $1,416,212 at December 31, 1999. The decrease is primarily
due to the increase in cash outflows during the first three months of fiscal
2000.
The net receivables were $108,658 at March 31, 2000 compared to $57,603 at
December 31, 1999. The net increase of $51,055 is due to additional receivables
recorded for sales during the three months ended March 31, 2000 partially offset
by payments on receivables at December 31, 1999.
Inventories at March 31, 2000 were $681,987 and $577,389 at December 31, 1999.
The increase of $104,598 or 18% is primarily due to an increase in finished
goods for upcoming shipments.
Advances and prepaids were $50,339 at March 31, 2000 compared to $41,895 at
December 31, 1999. The increase is primarily due to a loan receivable of
approximately $9,000 that was made during the first three months of fiscal 2000.
Inventory is evaluated by reviewing on hand materials and related quantities and
confirming that the market for the respective materials is continually present.
The Company analyzes all inventory items for slow movement and repair and fully
reserves items that do not move for at least three months.
The days in inventory ratio increased by 70% from 183 at December 31, 1999 to
311 at March 31, 2000. This is due to the increase in finished goods inventory
for upcoming shipments. The inventory turnover at December 31, 1999 was 2.0
compared with 1.2 at March 31, 2000.
The Company recognized a 12% gross profit during the three months ended March
31, 2000 compared to a 7% gross profit during the three months ended March 31,
1999. The Company will continue to operate at low margins until sales increase
substantially. In addition, as sales increase, additional working capital is
required to fund inventory and work in process. As a result of these factors,
the Company has an ongoing and urgent need for an infusion of additional working
capital. This need was met in fiscal 1999 by the placement of Senior
Convertible Notes of $1,500,000.
The Company will continue to require an infusion of additional working capital
in order to develop its business. The source, timing and costs of such infusion
is uncertain, and there is no certainty that the Company will be successful in
raising additional working capital, either through the sale of debt or equity
securities, or through commercial banking lines of credit. The Company
currently has no banking lines of credit.
The Company had cash outflows of $614,955 from operating activities for the
three months ended March 31, 2000 compared to cash outflows of $492,840 for the
three months ended March 31, 1999. The change in net outflows of $122,115 from
operating activities between the two comparable quarters primarily resulted from
the decrease in trade receivables of $21,093, the decrease in advances and
prepaids of $58,710 and the decrease in accounts payable and accrued expenses of
$128,080, which was partially offset by the increase in inventories of $72,872,
the increase in deferred revenue of $6,285 and the decrease in the net loss from
operations after adjustments for non-cash items of $6,611.
Net cash used in investing activities was $24,068 for the three months ended
March 31, 2000 compared to $26,749 for the three months ended March 31, 1999.
The net decrease is due to the reduction in patent expenditures during the first
quarter of fiscal 2000, offset by increases in property and equipment
expenditures.
Cash flows from financing activities were $0 during the three months ended March
31, 2000 compared to $615,000 during the three months ended March 31, 1999.
During the three months ended March 31, 1999, the Company received proceeds from
the exercise of warrants totaling $615,000. There were no warrants exercised
during the three months ended March 31, 2000.
3. SEASONALITY AND INFLATION
The Company's sales do not appear to be subject to any seasonal fluctuations.
The Company does not believe that inflation has had a material impact on its
operations.
<PAGE>
4. YEAR 2000
Many existing computer systems and applications use only two digits to identify
a year in the date field without considering the impact of the change in the
century. As a result, such systems and applications could fail or create
erroneous results unless corrected so that they can process data related to the
Year 2000. The Company relies on its systems and applications in operating and
monitoring all major aspects of its business, including financial statements,
such as general ledger, accounts receivable and accounts payable. The Company
also relies, directly and indirectly on external systems of business enterprises
such as its suppliers, creditors and financial organizations for accurate
exchange of data. Following the Year 2000 transition, the Company has not
experienced any known disruption to its business as of Year 2000. The cost of
the Company's Year 2000 programs was approximately $25,000, which was not
material to the Company's financial position or results of operations. Although
the Company's business systems were Year 2000 compliant by December 31, 1999,
the Company makes no assurances regarding Year 2000 compliance of third party
systems. The Company has not incurred any problems with third parties related
to Year 2000 but can not guarantee that it will not in the future.
FORWARD LOOKING STATEMENT
- ---------------------------
The above paragraphs and other parts of this Form 10-QSB Report include "Forward
Looking Statements". All statements other than statements of historical fact
included herein, including any statements with respect sales forecast, future
product acceptance or other future matters, are Forward Looking Statements.
Although the Company believes that there is a reasonable basis for the
projections reflected in such Forward Looking Statements, it can give no
assurance that such expectation will prove to be correct. Certain of the
important factors that could cause actual results to differ materially and
negatively from the Company's expectations, among others, included a slow down
in the trend in sales and orders during the remainder of the year, an inability
to obtain sufficient working capital to meet order demand, and/or a worldwide
economic slowdown.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS
A former employee of the Company was seeking a severance payment of $101,500 per
terms of his employment agreement, which was voluntarily terminated in November
1998. The Company has established a liability for the entire amount. Mediation
was held during April 2000 between the parties and the issue was tentatively
settled.
ITEM 2. - CHANGES IN SECURITIES
In January 2000, the Board of Directors declared a one-to-ten reverse stock
split. All stock-related data in the consolidated financial statements reflect
the stock split for all periods presented.
In 1991, certain stockholders of the Company entered into an escrow agreement
under which a total of approximately 450,000 shares of the Company's common
stock were placed in escrow. The shares were entitled to be released from
escrow based on the performance of the Company as measured by cash flow (as
defined by the agreement) and certain other conditions. Per the agreement, the
Company would cancel any shares remaining in escrow at December 31, 1999. The
Company's transfer agent canceled all such shares in January 2000. The shares
are included in the number of shares outstanding for prior periods presented but
have been excluded from the computation of basic and diluted loss per share for
each of the prior periods presented.
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted in the first quarter of fiscal 2000.
ITEM 6. - EXHIBITS
(3)(I) ARTICLES OF INCORPORATION. INCORPORATED BY REFERENCE TO EXHIBITS
ATTACHED TO AMENDED FORM 10 FILED JULY 23, 1999.
(3)(II) BYLAWS. INCORPORATED BY REFERENCE TO EXHIBITS ATTACHED TO AMENDED
FORM 10 FILED JULY 23, 1999.
(10) MATERIAL CONTRACTS. INCORPORATED BY REFERENCE TO EXHIBITS ATTACHED TO
FORM 10 FILED APRIL 11, 2000, FORM 10Q FILED NOVEMBER 12, 1999 AND AMENDED FORM
10 FILED JULY 23, 1999.
(27). FINANCIAL DATA SCHEDULE
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
AIR PACKAGING TECHNOLOGIES, INC.
/s/ Donald Ochacher
---------------------
DONALD OCHACHER
CHIEF EXECUTIVE OFFICER
/s/ Janet Maxey
-----------------------------------
JANET MAXEY
CHIEF FINANCIAL OFFICER
DATE: May 12, 2000_______
-----------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AS OF MARCH 31, 2000 AND STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 511128
<SECURITIES> 0
<RECEIVABLES> 131288
<ALLOWANCES> (22630)
<INVENTORY> 681987
<CURRENT-ASSETS> 1352112
<PP&E> 2232913
<DEPRECIATION> (1556258)
<TOTAL-ASSETS> 2440048
<CURRENT-LIABILITIES> 247229
<BONDS> 0
0
0
<COMMON> 75204
<OTHER-SE> 617615
<TOTAL-LIABILITY-AND-EQUITY> 2440048
<SALES> 147452
<TOTAL-REVENUES> 147452
<CGS> 129343
<TOTAL-COSTS> 129343
<OTHER-EXPENSES> 366753
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17996
<INCOME-PRETAX> (366640)
<INCOME-TAX> 0
<INCOME-CONTINUING> (366640)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (366640)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
<FN>
FOR THE PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
