<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995.
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
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COMMISSION FILE NUMBER: 1-8497
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KLEER-VU INDUSTRIES, INC.
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(Name of Registrant as specified in its charter)
DELAWARE 13-5671924
- -------------------------------- ----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer or
Incorporation Organization) Identification Number)
921 WEST ARTESIA BOULEVARD,
COMPTON, CALIFORNIA 90220
- -------------------------------- ---------------------------------
(Address of Principal Executive (Zip Code)
Offices)
(310) 603-9330
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(Registrant's telephone number,
including area code)
NOT APPLICABLE
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last year)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act 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
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There were 2,675,876 shares outstanding of the issuer's common stock,
$0.10 par value, as of November 17, 1995. KLEER-VU INDUSTRIES, INC.
<PAGE>
September 30, 1995
(Unaudited)
INDEX
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Page No.
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PART I - Financial Information:
Item 1. Financial Statements:
Consolidated Balance Sheets as of
September 30, 1995 (Unaudited) and December 31, 1994 . . . . 3
Consolidated Statements of Operations
for the Three Months and Nine Months Ended
September 30, 1995 and 1994 (Unaudited). . . . . . . . . . . 4
Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1995
and 1994 (Unaudited) . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial
Statements (Unaudited) . . . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . . . . 7
PART II - Other Information. . . . . . . . . . . . . . . . . . . . . . 8
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
PAGE 2
<PAGE>
KLEER-VU INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
ASSETS
<TABLE>
<CAPTION>
September 30
1995 December 31
(Unaudited) 1994
---------------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 323 $ 55
Trade receivables, less allowance of $326 and $287
4,556 7,594
Inventories 11,754 8,393
Deferred income taxes 263 263
Other 392 325
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Total current assets 17,288 16,630
Property and equipment, less accumulated depreciation and
amortization of $4,822 and $4,392 4,064 4,145
Cost in excess of net assets acquired, net of accumulated
amortization of $754 and $512 4,057 4,299
Deferred income taxes 318 318
Due from officers 196 173
Debt issue costs 495
Other 547 521
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$ 26,965 $ 26,086
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Loans from affiliates $ 700 $ 624
Current maturities of long-term debt 22 219
Trade accounts payable 4,215 4,203
Cash overdraft 524 1,153
Accounts payable to affiliated company 1,545 1,453
Accrued expenses 1,751 1,301
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Total current liabilities 8,757 8,953
Loan from affiliate 1,372
Long-term debt, less current portion 13,431 9,184
Other noncurrent liabilities 315 353
Stockholders' equity:
Preferred stock, $10 par value; 1,000,000 shares authorized;
900,000 shares issued, aggregate liquidation preference
of $900 9,000 9,000
Common stock, $0.10 par value; 10,000,000 shares authorized,
2,683,020 and 2,633,700 shares issued, respectively 268 263
Additional paid-in capital 17,063 16,160
Deficit (22,697) (17,245)
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3,634 8,178
Less: Deferred compensation and notes from officers (501) (539)
Common stock held in treasury, at cost; 7,144 shares (43) (43)
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Total stockholders' equity 3,090 7,596
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$ 26,965 $ 26,086
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</TABLE>
See accompanying notes to consolidated financial statements.
PAGE 3
<PAGE>
KLEER-VU INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- ---------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Net sales $ 6,467 $ 7,201 $ 18,610 $ 18,816
Costs and expenses:
Cost of goods sold 5,849 5,833 16,994 15,215
Selling, general and administrative 1,997 1,731 5,806 5,084
Restructuring costs 506 506
Interest 510 286 1,262 754
--------- --------- --------- ---------
Total costs and expenses 8,356 8,356 24,062 21,559
Loss from continuing operations (1,889) (1,155) (5,452) (2,743)
Loss from discontinued operations (794) (794)
--------- --------- --------- ---------
Net loss $ (1,889) $ (1,949) $ (5,452) $ (3,537)
--------- --------- --------- ---------
Loss per share:
Continuing operations $ (.71) $ (.48) $ (2.05) $ (1.30)
Discontinued operations $ $ (.33) $ $ (.37)
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Net loss $ (.71) $ (.81) $ (2.05) $ (1.67)
--------- --------- --------- ---------
Weighted average common shares 2,675,876 2,418,875 2,662,804 2,116,122
--------- --------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
PAGE 4
<PAGE>
KLEER-VU INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30
-----------------
Increase (decrease) in cash 1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Loss from continuing operations $(5,452) $(2,743)
Adjustments to reconcile loss to cash used by
ontinuing operations:
Depreciation 430 482
Deferred compensation and amortization 619 611
Provision for bad debts 39
Gain on asset disposals (406)
Restructuring costs 506
Changes in assets and liabilities:
Trade receivables 2,999 (1,049)
Due from officers (23) (134)
Inventories (3,361) (409)
Other assets (147) 76
Accounts and acceptance payable 96 88
Accrued expenses 362 (581)
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Net cash used by continuing operations (4,438) (3,559)
Loss from discontinued operations (794)
Adjustments to reconcile loss to cash
used by discontinued operations:
Settlement costs 794
Change in accrued settlement costs (297)
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Net cash used by operating activities (3,856)
Cash flows from investing activities:
Capital expenditures (349) (293)
Proceeds from asset sales 926
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Net cash provided (used) by investing activities (349) 633
Cash flows from financing activities:
Notes payable and line of credit (251) 1,468
Loans from affiliates 700 1,627
Issuance of long-term debt and warrants to
affiliate 876
Issuance of long-term debt and warrants 5,000
Debt issue costs (408)
Payments of long-term debt (273) (339)
Cash overdraft (629) (311)
Proceeds from issuance of stock 40
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Net cash provided by financing activities 5,055 2,445
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Net increase (decrease) in cash 268 (778)
Cash, beginning of period 55 938
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Cash, end of period $ 323 $ 160
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</TABLE>
See accompanying notes to consolidated financial statements.
PAGE 5
<PAGE>
KLEER-VU INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of presentation:
The consolidated Financial statements include the accounts of Kleer Vu
Industries, Inc. (the Company) and its subsidiaries. All of the subsidiaries
are wholly-owned and all intercompany balances and transactions have been
eliminated. In the opinion of the Company, the accompanying unaudited
consolidated financial statements contain all adjustments, consisting only of
normal recurring accruals necessary to a fair presentation of the financial
position as of September 30, 1995, and the results of operations for the
three months and nine months ended September 30, 1995 and 1994, and the
statements of cash flows for the nine months ended September 30, 1995, and
1994. Although, management of the Company believes that the disclosures in
the financial statements are adequate to make the information not misleading,
certain information and footnote disclosures normally included in financial
statements that have been prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to the rules
and regulations of the Securities and Exchange Commission. For further
information, refer to the financial statements and footnotes thereto included
in the Company's Annual Report on Form 10-K for the year ended December 31,
1994.
The results of operations for the three and nine months ended September
30, 1995 are not necessarily indicative of the results of operations to be
expected for the full year ending December 31, 1995.
Certain prior period amounts have been reclassified to conform to
current period's presentation.
2. Inventories:
Inventories consisted of the following:
<TABLE>
<CAPTION>
(Dollars in Thousands)
September 30, December 31,
1995 1994
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<S> <C> <C>
Raw materials $ 5,956 $ 4,371
Work-in process 83 87
Finished products 5,715 3,935
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$ 11,754 $ 8,393
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</TABLE>
3. Supplemental cash flow disclosures:
Supplemental schedule of noncash investing and financing activities:
The Company converted loans from affiliates of $624,000 into long-term
debt and warrants to affiliates.
The Company recorded $589,000 of Original Issue Discount which has been
offset against the related loans, and recorded in Additional paid-in
capital, to reflect the value of the warrants issued in connection with
the financing of $5,000,000 from Pacific Mezzanine Fund, L.P. and its
participant, and $1,500,000 from Signal Resources, L.P. during the
second quarter of 1995.
The Company incurred $90,000 of debt issue costs, in connection with the
financing described above, through the issuance of the Company's common
stock.
PAGE 6
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THIRD QUARTER 1995 VERSUS THIRD QUARTER 1994
Sales for the three month period in 1995 decreased by $734,000 or 10.2%
from those in 1994. Sales for the Company's album business declined by
$572,000 or 9.5%. Declining growth in the retail sector as well as some
price erosion for the Company's products were primarily responsible for lower
sales revenues. Sales for the Company's other product lines decreased by
$162,000 or 13.6%.
Gross profit margins declined from 19.0% in 1994 to 9.6% in 1995, due to
i) increased costs for the Company's principal raw materials, polypropylene
and paper and ii) an underutilization of the Company's manufacturing
capacity, due to reduced sales, as explained above.
Selling, general and administrative expenses increased from 24.0% of
sales in 1994 to 30.9% of sales in 1995. The increase of $266,000 is largely
due to i) the marketing and product development costs incurred to support the
introduction of the Company's Kodak photograph album line and ii) increased
legal expenses.
Interest expense in the third quarter increased by $224,000 over the
comparable period last year. The increase was a result of higher borrowing
levels to fund operating expenses and to build inventory for the new Kodak
line.
NINE MONTHS 1995 VERSUS NINE MONTHS 1994
Sales for the nine months of 1995 decreased by $206,000 or 1.1% from
those for the nine months of 1994. Sales for the Company's photo album
business achieved an increase of $509,000 or 3.5%. Sales for the Company's
other product lines decreased by $715,000 or 16.3%. Approximately $900,000
of this decline was due to the disposition during 1994 of Dixie Printing
Company, the microfilm business and the page protector business, offset by
sales increases of $185,000 for the remaining product lines.
Gross profit as a percentage of sales declined from 19.1% in 1994 to
8.7% in 1995, due to the reasons noted above for the third quarter.
Selling, general and administrative expenses increased from 27.0% in
1994 to 31.2% in 1995, due primarily to the costs related to the introduction
of the Kodak photograph album line.
Interest expense increased in 1995 by $508,000 due to the factors noted
above for the third quarter.
LIQUIDITY AND CAPITAL RESOURCES
Cash flows used by operating activities were $4,438,000 in the first
nine months of 1995 compared to $3,559,000 in the first nine months of 1994.
Operating losses and a buildup in inventories, to support anticipated sales
increases for the fourth quarter, were primarily responsible for the use of
cash in operations, and were offset somewhat by the collection of trade
receivables. Capital expenditures to increase production capacity totaled
$349,000. The Company consummated a financing on May 1, 1995 in the amount
of $6,500,000. The Company is currently in negotiations with the lenders to
modify certain of the terms of the loans, including a reduction in the
interest rates in exchange for an increased equity participation and a
conversion of a portion of the loans to equity. During the third quarter the
Company borrowed $700,000 from an affiliated company. The Company expects
that with improved cash flows from operations, it will be able to support the
cash requirements for the foreseeable future.
PAGE 7
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company settled the action brought by Westminster Capital, Inc.
("Westminster") against the Company and the Company's co-chief executive
officers individually, for breach of a purported contract by the Company.
ITEM 2 - CHANGES IN SECURITIES
Not applicable.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 - OTHER INFORMATION
Not applicable.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
Not applicable.
PAGE 8
<PAGE>
KLEER-VU INDUSTRIES, INC. AND SUBSIDIARIES
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.
KLEER-VU INDUSTRIES, INC.
Date: November 17, 1995 /s/ Brian E. Leneck
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Brian E. Leneck
Vice President
Chief Financial Officer
PAGE 9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 323
<SECURITIES> 0
<RECEIVABLES> 4,882
<ALLOWANCES> (326)
<INVENTORY> 11,754
<CURRENT-ASSETS> 17,288
<PP&E> 8,886
<DEPRECIATION> (4,822)
<TOTAL-ASSETS> 26,965
<CURRENT-LIABILITIES> 8,757
<BONDS> 0
<COMMON> 268
0
9,000
<OTHER-SE> (6,178)
<TOTAL-LIABILITY-AND-EQUITY> 26,965
<SALES> 18,610
<TOTAL-REVENUES> 18,610
<CGS> 16,994
<TOTAL-COSTS> 22,800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,262
<INCOME-PRETAX> (5,452)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,452)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,452)
<EPS-PRIMARY> (2.05)
<EPS-DILUTED> 0
</TABLE>
