SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 30, 1995
Commission File Number Registration Number 2-93512-A
ACTION PRODUCTS INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Florida 59-2095427
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
344 Cypress Road, Ocala, Florida 34472-3108
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code
(904) 687-2202
Check 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of September 30, 1995.
Common Stock, $.001 par value - 1,499,926 shares as of
September 30, 1995
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<TABLE>
ACTION PRODUCTS INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
<CAPTION>
September 30, 1995 December 31, 1994
<S> <C> <C>
Current assets:
Cash and cash equivalents $273,260 $287,050
Tax Refund 0 10,000
Accounts receivable, net of
allowance of $3,500 at
September 30, 1995 and
$3,500 at December 31, 1994 672,761 446,812
Inventories, net 1,369,739 1,441,251
Prepaid expenses 77,408 95,954
Total Current Assets 2,393,168 2,281,067
Property, plant and equipment,
net of accumulated depreciation of
$1,019,407 at September 30, 1995
and $947,164 at December 31, 1994 972,242 984,661
Other assets 255,743 172,690
TOTAL ASSETS 3,621,153 3,438,418
Current liabilities:
Accounts payable &
accrued expenses 549,988 340,948
Current portion of notes
payable to S/H 0 0
Demand Notes payable
to shareholders 0 335,320
Deferred income taxes 3,000 3,000
Total Current Liabilities 552,988 679,268
Long term liabilities:
Notes payable 600,000 600,000
Deferred income taxes 6,000 6,000
Shareholder's equity: Common
stock $.001 par value authorized
7,500,000; 1,499,926 issued and
outstanding at September 30,1995
and 1,042,820 shares at
December 31, 1994 1,500 1,043
Capital in excess of par value 2,829,242 1,947,577
Stock Subscription Receivable (454,000) 0
Retained earnings 85,423 204,530
Total Shareholders' Equity 2,462,165 2,153,150
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 3,621,153 3,438,418
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
ACTION PRODUCTS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
AND CHANGES IN RETAINED EARNINGS
(UNAUDITED)
<CAPTION>
Three months ended September 30 Nine months ended September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net Sales $1,454,796 $1,275,148 $4,400,500 $3,698,192
Cost of Sales $974,251 $814,158 $2,907,265 $2,355,959
Gross Profit $480,545 $460,990 $1,493,235 $1,342,233
Selling, G&A
Expenses $472,187 $405,956 $1,276,927 $1,139,844
Other (expenses) income
Other $50,324 $62,556 $72,427 $79,933
Interest expense ($16,243) ($14,276) ($53,692) ($38,716)
Legal Settlement $0 ($294,500) $0 ($294,500)
Warrants' related costs $0 ($110,000) $0 ($110,000)
Total $34,081 ($356,220) $18,735 ($363,283)
Income before
income taxes $42,439 ($301,186) $235,043 ($160,894)
Provision for
income taxes $0 $0 $0 $0
Net Income $42,439 $301,186) $235,043 ($160,894)
Beginning Retained
Earnings $397,134 $585,362 $204,530 $445,070
Stock Dividend ($354,150) $0 ($354,150) $0
Ending Retained
Earnings $85,423 $284,176 $85,423 $284,176
Net Income
per share $0.03 ($0.29) $0.20 ($0.16)
Weighted average number
of common shares
outstanding 1,395,605 1,042,820 1,161,777 1,019,487
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
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<TABLE>
ACTION PRODUCTS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income (loss) $42,439 ($301,186) $235,043 ($160,896)
Adjustments to reconcile
net income to net cash
provided by (used in)
operating activities:
Depreciation $23,614 $26,269 $72,243 $81,164
Provision for contribution
to ESOP $4,688 $0 $4,688 $0
Change in assets and liabilities:
Decrease (increase) in current
assets other than cash and
cash equivalents $341,542 $111,824 ($125,891) ($150,035)
Increase (decrease) in current
liabilities other than Employee
Stock Ownership Plan liability
and related party
borrowings ($94,487) ($4,399) $209,039 $7,018
Decrease (increase)
in other assets ($38,250) $60,985 ($83,052) ($25,247)
Net cash provided by
(used in) operating
activities $279,546 ($106,507) $312,070 ($247,996)
Net cash used in
investing activities ($18,434) ($2,512) ($59,824) ($65,675)
Cash flows from financing activities:
Proceeds from (repayments of)
borrowings from
related parties,net ($168,321) ($210,345) ($335,320) $235,501
Results of other
financing activities $46,784 $0 $69,284 ($15,653)
Net cash (used in) provided
by fin. activities ($121,537) ($210,345) ($266,036) $219,848
Net increase (decrease) in
cash and cash equiv $139,575 ($319,364) ($13,790) ($93,823)
Cash and cash equivalents
at start of period $133,685 $444,686 $287,050 $219,145
Cash and cash equivalents
at end of period $273,260 $125,322 $273,260 $125,322
Supplemental disclosures - cash paid for
Interest $16,243 $13,418 $53,692 $37,858
Taxes $0 $0 $0 $0
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>
ACTION PRODUCTS INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
1. Condensed consolidated financial statements
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all normal recurring adjustments
necessary to present fairly the financial position of Action Products
International, Inc. at September 30, 1995 and the results of its operations and
cash flows for the three and nine month periods ending September 30, 1995.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's report on Form
10-KSB for the year ended December 31, 1994. The results of operations
for the period ended September 30, 1995 are not necessarily indicative of
the operating results for the full year.
2. Shareholders' equity
During the three months ending September 30, 1995 shareholders' equity
increased $93,910. Net income for the period was $42,439. The Company
issued 226,000 shares of its common stock at $1.50 per share on options
exercised by qualified employees. 100,000 shares were issued at $1.75
per share on other options exercised. 5000 shares were issued under the
Company's Employees' Stock Ownership Trust at $.94 per share. Finally,
the Company declared an 8% stock dividend resulting in an additional
111,106 shares issued at $3.1875 on August 18 to all shareholders of record.
An outstanding stock subscription receivable for $454,000 is held in the
form of promissory notes with no interest, due on demand; these promissory
notes are secured by the stock purchased.
3. Income per common share
Income per common share is computed based upon the weighted average
number of shares outstanding during the period.
4. Other Matters
As referred to above, on July 7,1995, the Company declared an 8% stock
dividend to shareholders of record on July 28, 1995. The stock dividend
was paid on August 18, 1995 and charged to retained earnings.
<PAGE>
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations:
Three months ended September 30, 1995
During the third quarter ended September 30, 1995 revenue increased by
14% to $1,454,796 in 1995 from $1,275,148 in 1994. The third quarter
1995 net income was $42,439 versus a net loss of $301,186 for the 1994
comparable period, an improvement of $343,625, due in part to the increase
in sales, as well as the charges in the prior period due to the legal
settlement and warrant related costs. Income per share for the third quarter
improved to $.03 in 1995 versus a loss of $.29 per share for the same quarter
in 1994. The increase in sales is attributable to the improved packaging,
merchandising and marketing efforts of the Company's core product lines.
Gross profit increased $19,555 to $480,545 from $460,990. As a percent of
sales, gross profit was 33% from 36% due to the increased costs of plastic and
paper. Selling, General & Administrative Expenses as a percentage of sales
decreased from 32% to 29% of gross sales due to results of the continued
emphasis on cost containment and other efficiencies and the increase in sales.
Nine months ended September 30, 1995
During the nine months ended September 30, 1995 revenue increased by
19% to $4,400,500 in 1995 from $3,698,192 in 1994. The nine months 1995
net income was $235,043 versus a net loss of $160,894 for the 1994
comparable period, an improvement of $395,937, again due in part to the
increase in sales, as well as the charges in the prior period due to the legal
settlement and warrant related costs. Income per share for the nine months
improved to $.20 in 1995 versus a loss of $.18 per share for the same period
in 1994. Again, the increase in sales is attributable to the improved
packaging,merchandising and marketing efforts of the Company's core product
lines.
Gross profit increased $137,083 to $1,276,927 from $1,139,844. As a percent
of sales, gross profit was 34% from 36% due to the increased costs of plastic
and paper. Selling, General & Administrative Expenses as a percentage of
sales decreased from 31% to 29% of gross sales due to results of the continued
emphasis on cost containment and other efficiencies and the increase in sales.
Financial Condition, Liquidity and Capital Resources:
As of September 30, 1995 current assets were $2,393,168 compared to
current liabilities of $552,988 for a current ratio of 4.33:1. At
September 30,1995 working capital improved by $238,382 compared to
December 31, 1994.
The peak period of the Company's business cycle is March through August.
Thus, accounts receivable and inventories were $667,708 and $1,369,739,
respectively, at September 30, 1995 compared to $446,071 and $1,441,251,
respectively, at December 31, 1994. The increase in receivables and
decrease in inventories are considered normal for the Company and reflect
the increased activity in our high volume period. Total current assets
increased by $112,101, total assets increased by $182,735 and current
liabilities decreased by $126,281.
Significant changes in balance sheet from December 31, 1994 included
the following: Accounts receivable increased to $667,708 from $446,071,
an increase of $221,637, due in part to the increase in sales. Inventories,
consisting primarily of finished goods, decreased $71,512 to $1,369,739 at
September 30, 1995 from $1,441,251 at December 31, 1994. Prepaid
expenses decreased by $18,546 to $77,408 from $95,954 at December 31, 1994.
Property, plant and equipment, net of depreciation, decreased by $12,419
from December 31, 1994. Other assets increased by $83,053 from
December 31, 1994, primarily due to product development, dies, molds,
designs and prepaid expenses related to new packaging. Accounts payable
and accrued expenses increased $209,040 to $549,988 at September 30, 1995
from $340,948 at December 31, 1994 due primarily to the seasonal nature
of the purchases and the timing of inventory receipts, i.e. large purchases
coming in earlier in the year.
Cash and cash equivalents were down $13,790 from December 31, 1994
but up $139,575 from June 30, 1995. Cash flow provided by operations
was $279,546 for the three months ended September 30, 1995 as
compared to cash flow used in operations of $106,507 for the comparable
period September 30, 1994, a favorable swing of $386,053. This is due in
part to increases sales and net income, timing of purchases, and in the
efficiency of operation.
The Company does not have a bank line of credit and had relied upon
loans from related parties for working capital secured by demand notes.
During this quarter, these notes were paid down to $0 from $335,320 at
December 31, 1994. Long term debt is unchanged consisting of a
$600,000 9% Convertible Note held by related parties.
Shareholders' equity at September 30,1995 increased during the 3rd
quarter by $93,910 to $2,462,165 in part due to earnings. In addition,
during this period the Company issued 326,000 shares of its Common
stock, from the exercise of employee and other options. The Company
has received $82,500 in cash from the exercise of the options; the balance
is held as stock subscriptions receivable in the form of promissory notes
collateralized by the stock. Related costs of $13,216 were netted for the
purpose of cash flow statement presentation.
In August of 1995, the Company paid an 8% stock dividend which
amounted to approximately 103,000 shares. As a result, the Company
charged retained earnings approximately $354,000 to reflect the
permanent capitalization of the dividend shares. For the nine months
ended September 30,1995, shareholder's equity increased by $309,015
from $2,153,149 at December 31,1994.
<PAGE>
PART II - OTHER INFORMATION
Item #6 Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit 27. Financial Data Schedule
B. Reports on Form 8-K
No reports have been filed on Form 8-K during this
quarter.
<PAGE>
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.
ACTION PRODUCTS INTERNATIONAL, INC.
November 10, 1995 Judith Kaplan
Date Judith Kaplan
(Principal Executive and Financial Officer)
<TABLE> <S> <C>
<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> 273
<SECURITIES> 0
<RECEIVABLES> 672
<ALLOWANCES> 0
<INVENTORY> 1370
<CURRENT-ASSETS> 2393
<PP&E> 1992
<DEPRECIATION> (1019)
<TOTAL-ASSETS> 3621
<CURRENT-LIABILITIES> 553
<BONDS> 600
<COMMON> 1
0
0
<OTHER-SE> 2460
<TOTAL-LIABILITY-AND-EQUITY> 3621
<SALES> 4400
<TOTAL-REVENUES> 4400
<CGS> 2907
<TOTAL-COSTS> 2907
<OTHER-EXPENSES> 1277
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 54
<INCOME-PRETAX> 235
<INCOME-TAX> 0
<INCOME-CONTINUING> 235
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 235
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
