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Form 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-26599
SIMEX Technologies, Inc.
(Exact name of Small Business Issuer as specified in its charter.)
State of Delaware 58-2465647
(State of Incorporation) (I.R.S. Employer
Identification No.)
Suite 995, 3475 Lenox Road, NE
Atlanta, Georgia 30326
(Address of principal executive offices.)
Issuer's telephone number,
including area code: (404) 812-3130
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [..]
The number of shares outstanding of the Registrant's common stock, par value
$0.001, at August 7, 2000, was 12,814,473 shares.
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
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SIMEX TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
June 30, 2000
-------------
(Unaudited)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 398
Trade accounts receivable, less allowance for
doubtful accounts of $60 3,737
Costs and estimated earnings in excess of billings on
uncompleted contracts 742
Inventories 1,178
Other receivables 212
Prepaid expenses and other current assets 4
--------
Total current assets 6,271
Notes receivable - officers 90
Investments 17
Investments in affiliated companies 12
Property, plant and equipment, net 3,304
Goodwill, net 2,942
Note receivable 1,104
--------
Total assets $ 13,740
========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable - bank $ 2,514
Current portion of long-term debt 348
Accounts payable 1,716
Accrued salaries and wages 391
Accrued taxes other than income 1,291
Accrued income taxes 130
Other current liabilities 133
--------
Total current liabilities 6,523
Long-term debt, less current portion 4,607
Deferred income taxes 116
Other liabilities 163
--------
Total liabilities 11,409
--------
Shareholders' equity:
Preferred stock, $.001 par value. Authorized 5,000
shares, none issued or outstanding --
Common stock, $.001 par value. Authorized 50,000
shares; 12,814 shares issued and outstanding 13
Additional paid-in capital 6,531
Accumulated deficit (2,959)
Treasury stock, 10 shares at cost (30)
Accumulated other comprehensive loss - foreign
currency translation adjustment (1,224)
--------
Total shareholders' equity 2,331
--------
Total liabilities and shareholders' equity $ 13,740
========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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SIMEX TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended June 30, Six months ended June 30,
--------------------------- -------------------------
<S> <C> <C> <C> <C>
2000 1999 2000 1999
-------- -------- -------- --------
Revenues $ 5,005 $ 7,909 $ 11,655 $ 16,174
Cost of revenues 4,741 6,360 10,031 13,107
-------- -------- -------- --------
Gross profit 264 1,549 1,624 3,067
Selling, general and administrative expenses 1,740 1,361 3,520 2,928
-------- -------- -------- --------
Operating income (loss) (1,476) 188 (1,896) 139
Other income (expense)
Interest income 53 143 77 156
Interest expense (139) (302) (296) (415)
Other (9) (130) (9) (130)
-------- -------- -------- --------
Total other expense (95) (289) (228) (389)
-------- -------- -------- --------
Loss before income taxes (1,571) (101) (2,124) (250)
Income taxes expense (benefit) (402) 102 (497) 117
-------- -------- -------- --------
Net loss $ (1,169) $ (203) $ (1,627) $ (367)
======== ======== ======== ========
Loss per share:
Basic $ (0.09) $ (0.02) $ (0.13) $ (0.03)
======== ======== ======== ========
Diluted $ (0.09) $ (0.02) $ (0.13) $ (0.03)
======== ======== ======== ========
Shares used in per share calculation:
Basic 12,814 12,824 12,814 12,824
======== ======== ======== ========
Diluted 12,814 12,824 12,814 12,824
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
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SIMEX TECHNOLOGIES INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
2000 1999
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,627) $ (367)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 407 611
Deferred income taxes (272) 82
Changes in operating assets and liabilities,
net of effects of acquisitions:
Accounts receivable 2,029 (265)
Inventories and uncompleted contracts 793 (9)
Prepaid expense and other current assets 3 (42)
Other assets 436 --
Accounts payable (1,820) 38
Accrued salaries and wages (291) (216)
Accrued taxes other than income (140) (98)
Accrued income taxes 44 11
Other current liabilities (60) (1,252)
------- -------
Net cash used in
operating activities (498) (1,507)
------- -------
Cash flows from investing activities:
Acquisitions of property, plant and equipment (964) (512)
Acquisition of investments -- (176)
Proceeds from investments 32 15
------- -------
Net cash used in investing activities (932) (673)
------- -------
Cash flows from financing activities:
Proceeds from note payable 381 1,890
Proceeds from long-term debt 4,618 --
Payments on long-term debt (2,839) (132)
------- -------
Net cash provided by financing activities 2,160 1,758
------- -------
Effect of exchange rate changes in cash (616) (178)
------- -------
Net change in cash and cash equivalents 114 (600)
Cash and cash equivalents beginning of period 284 877
------- -------
Cash and cash equivalents at end of period $ 398 $ 277
======= =======
Supplemental disclosure of cash flows information:
Cash paid during the periods for:
Interest $ 302 $ 285
======= =======
Income taxes $ -- $ --
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
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SIMEX TECHNOLOGIES INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000 and 1999
(Unaudited)
(In thousands, except per share data)
1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to 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 of normal recurring accruals)
considered necessary for a fair presentation have been included. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the SIMEX Technologies, Inc.'s Form
10-KSB for the year ended December 31, 1999.
The results of operations for the periods presented are not necessarily
indicative of the operating results for the full year.
2. LOSS PER SHARE
SIMEX Technologies, Inc. and subsidiaries (the "Company") applies the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share". Basic earnings per common share is based on the weighted average number
of common shares outstanding during the period. Diluted earnings per share
include the dilutive effect, if any, of potentially dilutive securities, if any.
For the three months ended and six months ended June 30, 2000 and 1999, the
effects on diluted loss per share from stock options have not been included
since such effects would have been anti-dilutive.
<TABLE>
Three Months Ended June 30 Six Months Ended June 30
---------------------------- --------------------------
2000 1999 2000 1999
--------- ---------- --------- --------
<S> <C> <C> <C> <C>
Numerator:
Net loss $ (1,169) $ (205) $ (1,627) (367)
-------- -------- -------- -------
Numerator for basic and diluted
loss per share $ (1,169) $ (205) $ (1,627) (367)
======== ======== ======== =======
Denominator:
Denominator for basic loss per share -
weighted average shares outstandings 12,814 12,824 12,814 12,824
Effect of dilutive securities - stock options -- -- -- --
-------- -------- -------- -------
Denominator for diluted loss per share 12,814 12,824 12,814 12,824
======== ======== ======== =======
</TABLE>
3. SEGMENT INFORMATION
The Company applies the provisions of SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information. SFAS No. 131 establishes standards
for the manner public business enterprises report information about operating
segments in their financial statements. The standard defines operating segments
as components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision makers in
deciding how to allocate resources and in assessing the performance. Based on
the quantitative thresholds specified in SFAS No. 131, the Company has
determined that it has four reportable segments. The four reportable segments
are construction, maintenance and service, production and post tensioning.
Construction consists of all of the Company's operations involved in the
design, engineering, installation and maintenance of HVAC, plumbing and
electrical products and services, both onshore and offshore.
Maintenance and service consists of operations related to service and
maintenance contracts worldwide.
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Production consists of design, engineering and production of various technical
and nontechnical products, such as SIM Ducts.
Post-Tensioning consists of construction reinforcing techniques for concrete
oil and gas production platforms, bridges, tunnels and other post and bolt
tensioning operations.
Summary information by segment for the six months and three months ended June
30, 2000 and 1999 follows (in thousands):
<TABLE>
<CAPTION>
MAINTENANCE & POST- OTHER AND
CONSTRUCTION SERVICE PRODUCTION TENSIONING ELIMINATIONS TOTAL
------------ ------------- ---------- ---------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
SIX MONTHS ENDED
JUNE 30
2000
Revenues $ 6,843 $1,991 $1,870 $ 458 $493 $11,655
Gross profit 760 402 177 126 159 1,624
1999
Revenues $ 8,629 $2,130 $3,016 $ 1,773 $626 $16,174
Gross profit 1,394 325 344 670 334 3,067
THREE MONTHS ENDED
JUNE 30
2000
Revenues $ 2,940 $ 826 $ 621 $ 209 $409 $ 5,005
Gross profit (loss) (81) 206 26 36 77 264
1999
Revenues $ 4,331 $1,422 $1,435 $ 259 $462 $ 7,909
Gross profit (loss) 1,023 241 79 (32) 238 1,549
</TABLE>
4. COMPREHENSIVE LOSS
The Company had other comprehensive loss for the three months ended June 30,
2000, of $(1,268) and $(715), respectively and for the six months ended June 30,
2000 and 1999 of $(2,064) and $(988), respectively. Adjustments to net loss to
determine other comprehensive loss are due to foreign currency translation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the consolidated
financial statements of the Company (including the notes thereto) included in
the Company's Form 10-KSB for the year ended December 31, 1999.
General
SIMEX Technologies, Inc. and subsidiaries (the "Company") principally operates
through its wholly owned subsidiary, Simex AS, located in Norway. The Company
is engaged in construction and services, including design, engineering,
fabrication, production, installation, and maintenance for the offshore oil and
gas industry and onshore in commercial, industrial and government projects. In
addition, the Company is engaged in concrete and post tensioning construction
for offshore oil and gas drilling platforms. The Company has derived its
revenues primarily from customers in Norway and the United Kingdom.
Results of Operations (In thousands)
The following analysis compares the results of operations for the three-month
and six-month periods ended June 30, 2000 to the comparable periods ended June
30, 1999.
Revenues during the three months ended June 30, 2000 were $5,005, compared
to $7,909 during the three months ended June 30, 1999. The decrease in
revenues in the amount of $2,904, was primarily due to the delay of the
start of several large projects until third and fourth quarter of 2000.
Revenues during the six months ended June 30, 2000 were $11,655, compared to
$16,174 during the six months ended June 30, 1999. The decrease in revenues
in the amount of $4,519, was primarily due to the delay of the start of
several large projects until third and fourth quarter of 2000.
In the three months ended June 30, 2000, cost of revenues was $4,741, which
represented 95% of revenues. During the three months ended June 30, 1999,
cost of revenues was $6,360, which represented 80% of net sales. The
increase in cost of revenues was due to pricing pressures and cost overruns,
which caused cost of revenues to exceed or equal revenues for the
Construction and Production segments.
In the six months ended June 30, 2000, cost of revenues was $10,031, which
represented 86% of revenues. During the six months ended June 30, 1999, cost
of revenues was $13,107, which represented 81% of revenues. The increase in
cost of revenues was due to pricing pressures and cost overruns, which
increased cost of revenues in the Post-Tensioning and the Construction
segments by 10% and 5%, respectively. Additionally, revenues in the
Post-Tensioning segment, which produces the lowest cost of revenues % of any
of the business segments, were approximately $1,315, or 74%, less in 2000
than the comparable period in 1999.
Selling, general and administrative expenses during the three months ended
June 30, 2000 were $1,740, which represented 35% of revenues. During the
three months ended June 30, 1999, general and administrative expenses were $
1,361 , which represented 17% of revenues. The increase in selling general
and administrative expenses, as a % of revenues, is primarily the result of a
35% reduction in revenues coupled with an increase in expenses.
Selling, general and administrative expenses during the six months ended June
30, 2000 were $3,520, which represented 30% of revenues. During the six
months ended June 30, 1999, selling general and administrative expenses were
$2,928, which represented 18% of revenues. The increase in general and
administrative expenses, as a % of revenues, is primarily the result of a 28%
reduction in revenues coupled with an increase in expenses.
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During the three months ended June 30, 2000, the Company had a net loss of
$(1,169) or $(0.09) per weighted-average share. During the three months
ended June 30, 1999, the Company reported a net loss of $(203) or $(0.02)
per weighted-average share. The loss for the three months ended June 30,
2000, was primarily due to decreased revenues and increased general and
administrative expenses in the Company's Norwegian operations.
During the six months ended June 30, 2000, the Company had net loss of
$(1,627) or $(0.13) per weighted-average share. During the six months ended
June 30, 1999, the Company reported a net loss of $(367) or $(0.03) per
weighted-average share. The net loss for the six months ended June 30, 2000,
was primarily due to decreased revenues, increased general and
administrative expenses in the Company's Norwegian operations and pricing
pressures which reduced the Company's gross profit from approximately 19% in
1999 to 14% in 2000.
Liquidity and Capital Resources
During the six months ended June 30, 2000, the Company experienced negative
operating cash flows of $(498). Negative operating cash flows in the six months
ended June 30, 2000 resulted principally from a reduction in accounts payable
of $(1,820) and a net loss of $(1,627). These negative effects on operating
cash flows were partially offset by decreases in accounts receivable and
inventories and uncompleted projects of $2,029 and $793, respectively. During
the six months ended June 30, 1999, the Company experienced negative operating
cash flows of $(1,507). Negative operating cash flows in the six months ended
June 30, 1999` resulted principally from a reduction in other current
liabilities of $(1,252) and a net loss of $(367). These negative effects on
operating cash flows were partially offset by depreciation and amortization of
$611.
Net cash used by investing activities of $(932) during the six months ended
June 30, 2000, was primarily the result of acquisitions of property, plant and
equipment. Net cash used of $(673) during the six months ended June 30, 1999
consisted primarily of $(512) used for the acquisitions of property, plant and
equipment and $(176) used to increase investments.
Net cash provided by financing activities of $2,160 during the six months ended
June 30, 2000 was primarily due to increased borrowings under the Company's
long-term debt facilities of $4,618 less payments on long-term debt of
$(2,839). Net cash provided by financing activities of $1,758 during six months
ended June 30, 1999 was primarily due to proceeds from short term bank
borrowings partially offset by payments of $(132) on long-term debt.
The Company believes that its available cash resources and credit facilities,
combined with its cash flows from operations will be sufficient to meet its
anticipated working capital and capital expenditure requirements for at least
the next twelve months.
Inflation
Inflation has not had a material impact on the Company's operations.
New Accounting Pronouncements
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities,"
is effective for all fiscal quarters of fiscal years beginning after June 15,
2000. SFAS No. 133 requires companies to recognize all derivative contracts as
either assets or liabilities in the balance sheet and to measure them at fair
value. If certain conditions are met, a derivative may be specifically
designated as a hedge, the objective of which is to match the timing of gain or
loss recognition on the hedging derivative with the recognition of (i) the
changes
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in the fair value of the hedged asset or liability that are attributable to the
hedged risk or (ii) the earnings effect of the hedged forecasted transaction.
For a derivative not designed as a hedging instrument, the gain or loss is
recognized in income in the period of change. This pronouncement is not expected
to have an effect on the Company as the Company does not enter into in any
derivative instruments or engage in any hedging activities.
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Certain statements in this quarterly report on Form 10-QSB contain
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, which statements can generally be identified by
use of forward-looking terminology, such as "may," "will," "expect,"
"estimate," "anticipate," "believe," "target," "plan," "project," or "continue"
or the negatives thereof or other variations thereon or similar terminology,
and are made on the basis of management's plans and current analyses of the
Company, its business and the industry as a whole. These forward-looking
statements are subject to risks and uncertainties, including, but not limited
to, economic conditions, competition, interest rate sensitivity and exposure to
regulatory and legislative changes. The above factors, in some cases, have
affected, and in the future could affect, the Company's financial performance
and could cause actual results for 2000 and beyond to differ materially from
those expressed or implied in such forward-looking statements, even if
experience or future changes make it clear that any projected results expressed
or implied therein will not be realized.
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PART II. OTHER INFORMATION
ITEM 1. THROUGH ITEM 5. Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
A list of exhibits included as part of this report is set
forth in the Exhibit Index appearing elsewhere in this
report, and is incorporated by reference.
(b) Reports on form 8-K
Registrant did not file any reports on Form 8-K during the
quarter for which this report is filed.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27.1 Financial Data Schedule, submitted to the Commission in
electronic format. (for SEC use only)
</TABLE>
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Signatures
In accordance with the requirements of the Exchange Act, the Registrant caused
this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
SIMEX TECHNOLOGIES, INC.
DATE: August 14, 2000 BY: /s/ Elmer Lunde
---------------
Elmer Lunde
Chairman
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Exhibit Index
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27.1 Financial Data Schedule, submitted to the Commission in
electronic format. (for SEC use only)
</TABLE>
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