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 June 30, 1996 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 Identification No.)
incorporation or organization)
344 Cypress Road, Ocala, Florida 34472-3108
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (352) 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 June 30, 1996.
Class Outstanding at June 30, 1996
Common Stock, $.001 par value 1,499,926
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I N D E X
PART I. FINANCIAL INFORMATION Page Number
Item 1. Financial Statements
Condensed balance sheets - June 30, 1996
and December 31, 1995 (unaudited) 3
Condensed statements of operations and changes
in Retained Earnings - Three and six months ended
June 30, 1996 and 1995 (unaudited) 4
Condensed statements of cash flows - Three and six
months ended June 30, 1996 and 1995 (unaudited) 5
Notes to condensed financial statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
SIGNATURE PAGE 9
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ACTION PRODUCTS INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, 1996 December 31, 1995
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 196,880 $ 600,085
Accounts receivable, net of allowance of
$3,500 at June 30, 1996 and $3,500
at December 31, 1995 824,934 554,926
Inventories, net 1,815,160 1,311,230
Prepaid expenses 127,387 29,980
Total Current Assets 2,964,361 2,496,221
Property, plant and equipment, net of
accumulated depreciation of $1,093,586 at
June 30, 1996 and $1,040,404 at
December 31, 1995 1,038,456 979,385
Other assets 296,863 258,578
TOTAL ASSETS 4,299,680 3,734,184
Current liabilities:
Accounts payable & accrued expenses 636,066 569,112
Deferred income taxes 0 11,075
Total Current Liabilities 636,066 580,187
Long term liabilities:
Notes payable 600,000 600,000
Shareholder's equity: Common stock $.001
par value authorized 7,500,000; 1,499,926
issued and outstanding at June 30,1996
and 1,499,926 shares at December 31, 1995 1,500 1,500
Capital in excess of par value 2,829,242 2,829,242
Stock Subscription Receivable (9,000) (277,000)
Retained earnings 241,872 255
Total Shareholders' Equity 3,063,614 2,553,997
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 4,299,680 $ 3,734,184
</TABLE>
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ACTION PRODUCTS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
AND CHANGES IN RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $1,736,182 $1,659,990 $3,173,846 $2,945,705
Cost of Sales 1,155,792 1,109,075 2,071,599 1,933,014
Gross Profit 580,390 550,915 1,102,247 1,012,691
Selling, General &
Administrative Expenses 465,631 446,151 851,370 804,740
Other (expenses) income
Other 12,234 17,434 18,939 22,103
Interest expense (14,156) (20,700) (28,199) (37,449)
Total (1,922) (3,266) (9,260) (15,346)
Income before income taxes 112,837 101,498 241,617 192,605
Provision for income taxes 0 0 0 0
Net Income 112,837 101,498 241,617 192,605
Beginning Retained Earnings 129,035 295,636 255 204,529
Ending Retained Earnings $241,872 $397,134 $241,872 $397,134
Net Income per share $0.08 $0.10 0.16 $0.18
Weighted average number of
common shares outstanding 1,499,926 1,042,987 1,499,926 1,042,904
</TABLE>
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ACTION PRODUCTS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $112,837 $101,498 $241,617 $192,605
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 28,036 27,883 53,182 48,629
Change in assets and liabilities:
Decrease (increase) in current
assets other than cash and cash
equivalents (177,864) (5,047) (882,420) (467,434)
Increase (decrease) in
current liabilities (137,436) 56,232 66,954 303,526
Decrease (increase) in
other assets 5,055 (20,152) (38,285) (44,803)
Net cash provided by (used
in) operating activities ($169,372) $160,414 ($558,952) $32,523
Net cash used in investing
activities ($53,472) ($25,478) ($112,253) ($41,390)
Cash flows from financing activities:
Proceeds from (repayments
of) borrowings from related
parties, net 0 (60,000) 0 (166,999)
Results of other financing
activities 0 22,500 268,000 22,500
Net cash (used in) provided
by fin. activities $0 ($37,500) $268,000 ($144,499)
Net increase (decrease) in
cash and cash equiv. ($222,844) $97,436 ($403,205) ($153,366)
Cash and cash equivalents
at start of period $419,724 $36,248 $600,085 $287,050
Cash and cash equivalents
at end of period $196,880 $133,684 $196,880 $133,684
Supplemental disclosures - cash paid for
Interest $14,156 $20,700 $28,199 $37,449
Taxes $0 $0 $11,075 $0
</TABLE>
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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 June 30, 1996 and the results of its operations and
cash flows for the three and six month periods ended June 30, 1996.
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/A
for the year ended December 31, 1995. The results of operations for the
period ended June 30, 1996 are not necessarily indicative of the operating
results for the full year.
2. Shareholders' equity
During the six months ending June 30, 1996 shareholders' equity increased
$509,617. Net income for the period was $241,617. The Company collected
$268,000 of the outstanding stock subscriptions receivable; $9,000 remains
receivable in the form of non-interest bearing promissory notes 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. Related Party Transactions
The convertible notes payable to Warren and Judith Kaplan totaling $600,000
were transferred as follows: $480,000 to Ronald Kaplan and $120,000 to Elissa
Kaplan. There were no other changes in the terms or conditions of the notes.
5. Credit Line
During the quarter, the Company has established a $300,000 revolving line of
credit with a financial institution. At June 30, 1996, there were no
outstanding borrowings on the line of credit.
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ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations:
Three months ended June 30, 1996
During the second quarter ended June 30, 1996 revenue increased to $1,736,182
in 1996 from $1,659,990 in 1995, up 5%. The second quarter 1996 net income
improved 11% to $112,837 versus $101,498 for the 1995 comparable period, due
to the increase in sales. Income per share was $.08 in 1996 versus $.10 per
share in 1995 due to the 44% increase in the weighted average number of common
shares outstanding. The increase in sales is attributable to the improved
packaging, merchandising and marketing efforts of the Company's core product
lines and a newly focused effort by sales management which includes the use
of outside representatives.
Gross profit increased $29,475 to $580,390 from $550,915. As a percent of
sales, gross profit was up to 33.43% from 33.19% for the 1995 comparable
period. Selling, General & Administrative Expenses as a percentage of sales
remained constant at 27% of gross sales due to the results of the continued
emphasis on cost containment and other efficiencies, and the increase in sales.
Six months ended June 30, 1996
During the six months ended June 30, 1996 revenue increased 8% to $3,173,846
in 1996 from $2,945,705 in 1995. The six months 1996 net income was $241,617
versus $192,605 in 1995, an improvement of over 25%, due to the sales increase.
Income per share for the six months was $.16 in 1996 versus $.18 per share in
1995 reflecting the 44% increase in the weighted average number of common
shares outstanding. The increase in sales is attributable to the improved
packaging, merchandising and marketing efforts of the Company's core product
lines and a newly focused effort by sales management which includes the use
of outside representatives.
Gross profit increased $89,556 to $1,102,247 from $1,012,691. As a percent of
sales, gross profit was up to 33.73% from 33.38% for the 1995 comparable
period. Selling, General & Administrative Expenses as a percentage of sales
remained constant at 27% 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 June 30, 1996, current assets were $2,964,361 compared to current
liabilities of $636,066 for a current ratio of 5:1. At June 30, 1996, working
capital improved by $412,261 compared to December 31, 1995.
The peak period of the Company's business cycle is March through August.
Thus, accounts receivable and inventories were $824,934 and $1,815,160,
respectively, at June 30, 1996 compared to $554,926 and $1,311,230,
respectively, at December 31, 1995. The increase in receivables and
inventories are considered normal for the Company and reflect the increased
activity in our high volume period. Total current assets increased by
$468,140, total assets increased by $565,496 and current liabilities increased
by only $55,879.
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Page 8 of 9
Significant changes in balance sheet from December 31, 1995 included the
following: Accounts receivable increased to $824,934 from $554,926, an
increase of $270,008, due in part to the increase in sales. Inventories,
consisting primarily of finished goods, increased $503,930 to $1,815,160 at
June 30, 1996 from $1,311,230 at December 31, 1995. Prepaid expenses increased
by $97,407 to $127,387 from $29,980 at December 31, 1995 due to their seasonal
nature. Property, plant and equipment, net of depreciation, increased by
$59,071 from December 31, 1995 due to various equipment purchases to improve
production and technological efficiency. Other assets increased by $38,285
from December 31, 1995, primarily due to dies, molds, designs and prepaid
expenses related to new products and packaging. Accounts payable and accrued
expenses increased $66,954 to $636,066 at June 30, 1996 from $569,112 at
December 31, 1995 due primarily to the seasonal nature of the purchases and
the timing of inventory receipts.
Cash and cash equivalents were down $403,205 from December 31, 1995 and
$222,844 from March 31, 1996. Cash flow used in operations was $169,372 for
the three months ended June 30, 1996 as compared to cash flow provided by
operations of $160,414 for the comparable period June 30, 1995. This is due
to increases in sales and net income and a concerted effort towards earlier
inventory purchases.
Shareholders' equity at June 30, 1996 increased during the second quarter by
$509,617 to $3,063,614 due to earnings and the receipt of stock subscriptions
receivable.
During the quarter, the Company established a $300,000 line of credit with a
lending institution. The stated rate of interest for the line is defined as
Prime plus one half of one percent. As of June 30, 1996, the Company had no
outstanding borrowings against the line.
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Page 9 of 9
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.
Date: July 24, 1996 By: /s/ Judith Kaplan
Judith Kaplan
Chief Financial Officer
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<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Jun-30-1996
<CASH> 197
<SECURITIES> 0
<RECEIVABLES> 825
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<CURRENT-LIABILITIES> 636
<BONDS> 600
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0
0
<OTHER-SE> 3062
<TOTAL-LIABILITY-AND-EQUITY> 4300
<SALES> 3174
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<EPS-PRIMARY> .16
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