PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
FEDERATED PURCHASER, INC.
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1996 AND 1995
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FEDERATED PURCHASER, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
April 30, October 31,
1996 1995
(Unaudited)
CURRENT ASSETS:
Cash $ 131,801 $ 186,515
Investments - marketable securities - 99,744
Accounts receivable, less allowance
for doubtful accounts of $28,835 at
April 30, 1996 and $22,835 at
October 31, 1995, respectively 540,683 486,389
Inventories 398,565 392,282
Prepaid expenses and sundry receivables 44,932 36,868
Note receivable 20,000 -
Restrictive covenant receivable 22,500 22,500
TOTAL CURRENT ASSETS 1,158,481 1,224,298
PROPERTY AND EQUIPMENT, at cost, less accumulated
depreciation of $110,028 and $103,684 37,260 43,132
OTHER ASSETS:
Note receivable - over one year 165,000 210,000
Security deposits 10,845 10,845
Restrictive covenant - over one year 35,625 46,875
Other 80,654 70,454
TOTAL OTHER ASSETS 292,124 338,174
TOTAL ASSETS $1,487,865 $1,605,604
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $ 10,624 $ 10,624
Accounts payable 383,659 283,325
Accrued expenses 47,352 58,474
TOTAL CURRENT LIABILITIES 441,635 352,423
LONG-TERM DEBT, net of current portion 13,761 19,073
DEFERRED INCOME 58,125 69,375
TOTAL LIABILITIES 513,521 440,871
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value,
Authorized, 5,000,000 shares,
Issued and outstanding, 1,719,758 shares 171,976 171,976
Additional paid-in capital 1,692,342 1,692,342
Accumulated deficit (828,896) (638,507)
Total 1,035,422 1,225,811
Less: Treasury stock at cost 61,078 61,078
TOTAL STOCKHOLDERS' EQUITY 974,344 1,164,733
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $1,487,865 $1,605,604
(1)
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FEDERATED PURCHASER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
APRIL 30, APRIL 30,
1996 1995 1996 1995
SALES $1,058,900 $1,051,348 $1,998,139 $1,897,068
COSTS AND EXPENSES (INCOME):
Cost of sales 817,527 815,252 1,544,162 1,466,993
Selling, shipping and general
and administrative 338,782 347,349 656,748 684,346
Interest expense 707 707 1,414 2,083
Depreciation and amortization 3,172 2,553 6,344 5,106
Restrictive covenant (5,625) (5,625) (11,250) (9,375)
Interest income (2,917) (9,103) (9,390) (19,648)
Other income - (7,950) - (8,715)
Loss on sale of subsidiary - - - 182,791
TOTAL COSTS AND EXPENSES (INCOME) 1,151,646 1,143,183 2,188,028 2,303,581
LOSS BEFORE PROVISION FOR
INCOME TAXES (92,746) (91,835) (189,889)(406,513)
PROVISION FOR INCOME TAXES - 450 500 950
NET LOSS $ (92,746) $ (92,285) $(190,389) $(407,463)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,611,317 1,611,317 1,611,317 1,618,192
LOSS PER COMMON SHARE $ (.06) $ (.06) $ (.12) $ (.25)
CASH DIVIDEND PER COMMON SHARE $ .00 $ .00 $ .00 $ .00
(2)
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FEDERATED PURCHASER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED APRIL 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
Common Stock
Held in
Additional Retained Treasury
COMMON STOCK Paid-in Earnings AT COST
SHARES AMOUNT CAPITAL (DEFICIT) SHARES AMOUNT
<S> <C> <C> <C> <C> <C> <C>
BALANCES - November 1, 1994 1,719,758 $171,976 $1,692,342 $ (92,445) 19,552 $16,633
Net loss - - - (407,463) - -
Purchase of treasury stock - - - - 88,889 44,445
BALANCES - April 30, 1995 1,719,758 $171,976 $1,692,342 $(499,908) 108,441 $61,078
BALANCES - November 1, 1995 1,719,758 $171,976 $1,692,342 $(638,507) 108,441 $61,078
Net loss - - - (190,389) - -
BALANCES - April 30, 1996 1,719,758 $171,976 $1,692,342 $(828,896) 108,441 $61,078
</TABLE>
(3)
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FEDERATED PURCHASER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, 1996 AND 1995
(Unaudited)
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (190,389) $ (407,463)
Adjustments to reconcile net loss
to net cash from operating activities:
Depreciation and amortization 6,344 5,106
Allowance for doubtful accounts 6,000 6,000
Loss on divestiture of Freedom
Electronics Corp. - 182,791
Freedom Electronics Corp., net assets and
liabilities disposed of - (127,802)
Deferred income taxes - 7,867
(Increase) decrease in operating assets:
Accounts receivable (60,294) (204,291)
Inventories (6,283) (76,497)
Prepaid expenses and sundry receivables (8,064) 49,287
Increase (decrease) in operating liabilities:
Accounts payable 100,334 (17,370)
Accrued expenses (11,122) (44,302)
NET CASH USED BY OPERATING ACTIVITIES (163,474) (626,674)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds on divestiture of Freedom
Electronics Corp. - 755,845
Purchase of marketable securities - (286,224)
Sale of marketable securities 99,744 91,401
Proceeds of note receivable 25,000 -
Purchase of property and equipment (472) -
Increase in association membership costs (10,200) (10,200)
NET CASH PROVIDED BY INVESTING ACTIVITIES 114,072 550,822
CASH FLOWS USED BY FINANCING ACTIVITIES:
Payments on notes payable and long-term debt (5,312) (70,432)
NET DECREASE IN CASH (54,714) (146,284)
CASH - beginning 186,515 225,015
CASH - ending $ 131,801 $ 78,731
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 1,414 $ 2,083
Income taxes $ - $ 789
(4)
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FEDERATED PURCHASER, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED APRIL 30, 1996 AND 1995
(Unaudited)
1996 1995
NON-CASH INVESTING AND FINANCING ACTIVITY:
Divestiture of Freedom Electronics Corp.,
summarized as follows:
Selling price $ - $1,100,290
Less: Note receivable - (210,000)
Restrictive covenant - (90,000)
Treasury stock - (44,445)
Cash received $ - $ 755,845
(Concluded)
(5)
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FEDERATED PURCHASER, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
APRIL 30, 1996 AND 1995
(Unaudited)
NOTE 1
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of normal
recurring accruals) necessary to present fairly the financial position as
of April 30, 1996 and the results of operations for the six months ended
April 30, 1996 and 1995.
NOTE 2
The results of operations for the six months ended April 30, 1996 and 1995
are not necessarily indicative of the results to be expected for the full
year.
(6)
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Item 2.
FEDERATED PURCHASER, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
RESULTS OF OPERATIONS
The Company recognized a loss of $190,389 for the six months ended April
30, 1996 on net sales of $1,998,139 compared to a loss of $407,463 on net
sales of $1,897,068 for the six months ended April 30, 1995. The loss of
$407,463 for the six months ended April 30, 1995 included a loss of
$182,791 on the divestiture of the Company's subsidiary, Freedom
Electronics Corp. ("Freedom"). The net loss for the three months ended
April 30, 1996 was $92,746 as compared to a net loss of $92,285 for the
prior period in 1995.
Net sales were $1,998,139 for the six months ended April 30, 1996 as
compared to $1,897,068 for the same period in 1995, an increase of
$101,071, or 5.3%, over the prior year. Net sales were $1,058,900 for the
three months ended April 30, 1996 as compared to $1,051,348 for the prior
period in 1995, an increase of $7,552, or 0.7%, over the prior year. The
increase in net sales for the six months ended April 30, 1996 represents a
renewed effort by management to increase sales by expanding its customer
base while preserving its present customer base. However, despite the
relative improvement of sales realized by the Company during fiscal 1995
and for the six months ended April 30, 1996, management expects that
further improvement in the Company's sales along with a reduction in
operating costs will be required to return the Company to profitability.
There can be no assurances that the Company will be successful in its
efforts to increase sales, reduce costs or improve profitability. The
likelihood of achieving sales increases is diminished by a variety of
factors, including the loss of certain customers due to the departure of
key sales personnel, intense competition and certain other industry trends.
In addition, certain gains in net sales by the Company have necessarily
been achieved at lower gross margins, which has mitigated the impact of
such sales gains on the Company's profitability. As a result, there can be
no assurances that any increase in sales activity can be maintained, or
that such sales increase will be achieved at gross profit margins
sufficient to return the Company to profitability.
Cost of sales were $1,544,162 for the six months ended April 30, 1996
compared to $1,466,993 for the six months ended April 30, 1995. Cost of
sales were $817,527 for the three months ended April 30, 1996 compared to
$815,252 the three months ended April 30, 1995. The increase in cost of
sales for both the six months and three months ended April 30, 1996 versus
the respective prior comparable periods is the result of the Company's
increased sales volume. The gross profit percentage for the six months
ended April 30, 1996 was 22.8% as compared to 22.7% for the comparable
period in 1995. The gross profit percentage for the three months ended
April 30, 1996 was 22.8% as compared to 22.5% for the comparable period in
1995.
Selling, shipping and general and administrative expenses were $656,748 for
the six months ended April 30, 1996 as compared to $684,346 for the six
months ended April 30, 1995, a decrease of $27,598, or 4.1%. For the three
months ended April 30, 1996, selling, shipping and general and
administrative expenses were $338,782 as compared to $347,349 for the prior
comparable period in 1995, a decrease of $8,567, or 2.5%. The decrease is
the result of a reduction in costs attributable to office salaries, data
processing salaries, warehouse salaries and insurance costs, partially
offset by an increase in sales salaries and non-recurring severance
payments due certain employees as a result of management's recent decision
to downsize the Company's labor force.
(7)
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FEDERATED PURCHASER, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity position has been and continues to be adversely
affected by a variety of factors, including the operating loss of $546,062
for the year ended October 31, 1995 and the operating loss of $190,389 for
the six months ended April 30, 1996. Moreover, the Company's liquidity
position may be negatively impacted to the extent that certain trends,
including intense competition from larger competitors in the electronics
industry and the migration of certain customers from smaller to larger
distributors, decrease the Company's sales levels, gross profit margins, or
both. While the Company enhanced its short-term liquidity position through
the one-time receipt of $755,845 in cash from the divestiture of Freedom, a
substantial portion of those proceeds have been used to sustain operations
during fiscal 1995 and for the six months ending April 30, 1996. The
Company's ability to satisfy its fixed costs of operations will depend upon
management's success in increasing sales, maintaining or improving gross
margins, reducing operating costs and securing additional lines of credit
from outside lenders. There can be no assurances that the Company's
liquidity position will not continue to be impaired both in the short-term
and in the future.
Cash and cash equivalents decreased by $54,714 for the six months ended
April 30, 1996 compared to a decrease of $146,284 for the six months ended
April 30, 1995. The decrease of $54,714 for the six months ended April 30,
1996 is attributable to the operating loss of $190,389, an increase of
$60,294 in accounts receivable, a $11,122 decrease in accrued expenses and
a $10,200 increase in association membership costs, partially offset by the
sale of $99,744 in marketable securities, the collection of $25,000 in
notes receivable and an increase of $100,334 in accounts payable. The
collection of $25,000 in notes receivable is due to Federated's
renegotiation of certain payment terms relating to debt owed by Freedom to
Federated as a result of the Divestiture.
The cash decrease of $146,284 for the six months ended April 30, 1995 was
primarily attributable to the $407,463 loss for the operating period and
the $182,791 loss resulting from the Divestiture, as well as an increase of
$204,291 in accounts receivable, an increase of $76,497 in inventories and
a decrease of $49,287 in prepaid expenses. The cash used by these
operating activities was partially offset by the Company's generation of
$550,822 in cash from investing activities, primarily from the receipt of
$755,845 in proceeds from the Divestiture. A portion of the Divestiture
proceeds were also used to retire $70,432 in long-term debt, purchase a net
amount of $194,823 in marketable securities and pay a $10,200 increase in
association membership costs.
During the six months ended April 30, 1995, the Company paid off a note
payable in the amount of $63,999 and long-term debt in the amount of
$6,433. The note was pursuant to a credit line agreement with New Jersey
National Bank which had previously been withdrawn by the bank. The note
was secured by accounts receivable and inventory of the Company. As part
of the consideration received in connection with the divestiture of
Freedom, Federated was relieved of its obligations under a note payable to
United Jersey Bank in the amount of $250,000. Federated had been a
guarantor of this obligation of Freedom.
(8)
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FEDERATED PURCHASER, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
The Company currently has no access to any outside sources of capital,
except for approximately $24,000 outstanding under an existing equipment
financing arrangement. While management continues to seek new sources of
financing from other financial institutions, no such arrangement has yet
been established. As a result, management must meet substantially all of
its short-term capital requirements from cash from operations (if any) and
existing cash reserves. There can be no assurances that the Company's cash
reserves will be sufficient to satisfy the Company's financing requirements
or that the Company's inability to obtain capital from outside sources will
not impair its ability to continue future operations.
The Company maintains its records on the accrual basis of accounting.
Income is recorded when earned and expenses are recorded when incurred.
The Company's accounting policies with respect to customer right of returns
are governed upon written authorization by Federated except for special
order items.
The Company's balance sheet at April 30, 1996 reflects working capital of
$696,846 as compared to $1,012,172 at April 30, 1995, which represents a
decrease of $315,326.
The Company's stockholders' equity is $974,344 at April 30, 1996 equivalent
to a book value per share of $.61.
(9)
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PART II - OTHER INFORMATION
FEDERATED PURCHASER, INC.
OTHER INFORMATION
APRIL 30, 1996 AND 1995
(Unaudited)
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
None
(b) REPORTS ON FORM 8-K
The Company was not required to report any material, unusual charges or
credits to income pursuant to Item 10(a) or a change in independent
accountants pursuant to Item 12 of Form 8-K for the six months ended April
30, 1996 other than which has been reported.
Form 8-K filed on November 30, 1994 in regard to the divestiture of Freedom
Electronics Corp.
Form 8-K filed on December 20, 1994 in regard to the change in registrant's
certifying accountant.
There were no securities of the Company sold by the Company during the six
months ended April 30, 1996, which were not registered under the Securities
Act of 1933, in reliance upon an exemption from registrations provided by
Section 4(2) of the Act.
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.
FEDERATED PURCHASER, INC.
(Registrant)
/s/Harry J. Fallon
------------------------------
Harry J. Fallon, President and
Principal Accounting Officer
Date
(10)
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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 30, 1996
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 1-4310
FEDERATED PURCHASER, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 22-1589344
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
268 CLIFFWOOD AVENUE, CLIFFWOOD, NEW JERSEY 07721
(Address of principle executive offices)
(Zip Code)
(908) 290-2900
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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
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 June 6, 1996,
there are 1,719,758 shares of common stock outstanding.
