SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended September 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 (IRS 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) 680-3516
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, 1996.
Class Outstanding at September 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 - September 30, 1996
and December 31, 1995 (unaudited) 3
Condensed statements of operations and changes
in Retained Earnings - Three and nine months ended
September 30, 1996 and 1995 (unaudited) 4
Condensed statements of cash flows - Three and nine months
ended September 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>
September 30, December 31,
1996 1995
<S> <C> <C>
Current assets:
Cash and cash equivalents $166,729 $600,085
Accounts receivable, net of
allowance of $3,500 at September
30, 1996 and $3,500 at December
31, 1995 708,609 554,926
Inventories, net 1,469,388 1,311,230
Prepaid expenses 189,637 29,980
Total Current Assets 2,534,363 2,496,221
Property, plant and equipment,
net of accumulated depreciation of
$1,122,127 at September 30, 1996 and
$1,040,404 at December 31, 1995 1,069,043 979,385
Other assets 476,475 258,578
TOTAL ASSETS 4,079,881 3,734,184
Current liabilities:
Accounts payable & accrued expenses 362,863 569,112
Deferred income taxes 0 11,075
Total Current Liabilities 362,863 580,187
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 September 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 295,276 255
Total Shareholders' Equity 3,117,018 2,553,997
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 4,079,881 $ 3,734,184
</TABLE>
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ACTION PRODUCTS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS
AND CHANGES IN RETAINED EARNINGS
(UNAUDITED)
<TABLE>
Three months ended Nine months ended
September 30 September 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net Sales $ $ $ $
1,458,827 1,454,796 4,632,673 4,400,500
Cost of Sales 955,156 974,251 3,026,755 2,907,265
Gross Profit 503,671 480,545 1,605,918 1,493,235
Selling, General &
Administrative Exp 443,544 472,187 1,294,914 1,276,927
Other (expenses) income
Other 6,902 50,324 25,841 72,427
Interest expense (13,625) (16,243) (41,824) (53,692)
Total (6,723) 34,081 (15,983) 18,735
Income before 53,404 42,439 295,021 235,043
income taxes
Provision for - - - -
income taxes
Net Income 53,404 42,439 295,021 235,043
Stock Dividend - (354,150) - (354,150)
Beginning Retained 241,872 397,134 255 204,530
Earnings
Ending Retained $ 295,276 $ 85,423 $ 295,276 $ 85,423
Earnings
Net Income per $0.04 $0.03 $0.20 $0.20
share
Weighted average
number of common
shares outstanding 1,395,605 1,499,926 1,499,926 1,161,777
</TABLE>
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ACTION PRODUCTS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
Three months Nine months ended
ended September 30 September 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $53,404 $42,439 $295,021 $235,043
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation 28,541 23,614 81,723 72,243
Provision for contribution to ESOP - 4,688 - 4,688
Change in assets and liabilities:
Decrease (increase) in current
assets other than cash and cash
equivalents 399,847 341,542 (471,498) (125,891)
Increase (decrease) in current liab (273,203) (94,487) (217,324) 209,039
Decrease (increase) in other assets (179,612) (38,250) (217,897) (83,052)
Net cash provided by (used in) oper act $28,977 $279,546 ($529,975) $312,070
Net cash used in investing activities ($59,128) ($18,434)($171,381) ($59,824)
Cash flows from financing activities:
Proceeds from (repayments of)
borrowings from related parties, net 0 (168,321) 0 (335,320)
Results of other financing activities 0 46,784 268,000 69,284
Net cash (used in) provided by fin act $0 ($121,537) $268,000($266,036)
Net increase (decrease) in cash and
cash equivalents ($30,151) $139,575 ($433,356)($13,790)
Cash and cash equivalents at start
of period $196,880 $133,685 $600,085 $287,050
Cash and cash equivalents at end
of period $166,729 $273,260 $166,729 $273,260
Supplemental disclosures - cash paid for
Interest $13,625 $16,243 $41,824 $53,692
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 September 30, 1996 and the results of its operations
and cash flows for the three and nine month periods ended September 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 September 30, 1996 are not necessarily indicative of the
operating results for the full year.
2. Shareholders' equity
During the nine months ending September 30, 1996 shareholders' equity
increased $563,021. Net income for the period was $295,021. 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. The principal maturity date has been extended five years.
5. Credit Line
The Company has established a $300,000 revolving line of credit. As of
September 30, 1996, no draws had been made on this line.
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ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations:
Three months ended September 30, 1996
During the third quarter ended September 30, 1996 revenue increased to
$1,458,827 in 1996 from $1,454,796 in 1995, up $4,031. The third quarter 1996
net income improved 26% to $53,404 versus $42,439 for the 1995 comparable
period. Income per share was $.04 in 1996 versus $.03 per share in 1995. The
increase in margins, and hence net income, is attributable to improved terms and
conditions of oversees purchases and the further development of proprietary
products versus distributed lines.
Gross profit increased $23,126 to $503,671 from $480,545. As a percent of
sales, gross profit was up to 34.5% from 33.0% for the 1995 comparable period.
Selling, General & Administrative Expenses as a percentage of sales decreased to
30% of gross sales from 32% due to the results of the continued emphasis on cost
containment and other efficiencies.
Nine months ended September 30, 1996
During the nine months ended September 30, 1996 revenue increased 5% to
$4,632,673 in 1996 from $4,400,500 in 1995. The nine months 1996 net income was
$295,021 versus $235,043 in 1995, an improvement of 26%, due to the improved
margins of proprietary products. Income per share for the nine months remained
$.20 in 1996, thus absorbing the near 30% 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. The increase in margins is attributable to
improved terms and conditions of oversees purchases and the further development
of proprietary products versus distributed lines.
Gross profit increased $112,683 to $1,605,918 from $1,493,235. As a percent of
sales, gross profit was up to 34.7% from 33.9% for the 1995 comparable period.
Selling, General & Administrative Expenses as a percentage of sales was down to
28% of gross sales from 29% for the comparable period in 1995 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, 1996, current assets were $2,534,363 compared to current
liabilities of $362,863 for a current ratio of 7:1. At September 30, 1996,
working capital improved by $255,467 compared to December 31, 1995.
The peak period of the Company's business cycle is March through August. Thus,
accounts receivable and inventories were $708,609 and $1,469,388, respectively,
at September 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 the Company's high
volume period. Total current assets increased by $38,142, total assets
increased by $345,697 and current liabilities decreased by $217,324.
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Page 8 of 9
Significant changes in balance sheet from December 31, 1995 included the
following: Accounts receivable increased to $708,609 from $554,926, an increase
of $153,683, due in part to the increase in sales, but consistent with the
comparable period in 1995. Inventories, consisting primarily of finished goods,
increased $158,158 to $1,469,388 at September 30, 1996 from $1,311,230 at
December 31, 1995 and prepaid expenses increased by $159,657 to $189,637 from
$29,980 at December 31, 1995 due to their seasonal nature. Property, plant and
equipment, net of depreciation, increased by $89,658 from December 31, 1995 due
to various equipment purchases to improve production and technological
efficiency. Other assets increased by $217,897 from December 31, 1995,
primarily due to product costs and prepaid expenses related to new products and
packaging. Accounts payable and accrued expenses decreased $206,249 to $362,863
at September 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 $433,356 from December 31, 1995 and $30,151
from June 30, 1996. Cash flow provided by operations was $28,977 for the three
months ended September 30, 1996 as compared to cash flow provided by operations
of $279,546 for the comparable period September 30, 1995. This is due to
increases in sales and net income, the timing of payments, and a concerted
effort towards earlier inventory purchases.
Shareholders' equity at September 30, 1996 increased during the nine months by
$563,021 to $3,117,018 due to earnings and the receipt of stock subscriptions
receivable.
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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: October 28,1996 By: /s/ Judith Kaplan
Judith Kaplan
Chief Financial Officer
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-START> Jan-01-1996
<PERIOD-END> Sep-30-1996
<CASH> 167
<SECURITIES> 0
<RECEIVABLES> 709
<ALLOWANCES> 0
<INVENTORY> 1469
<CURRENT-ASSETS> 2534
<PP&E> 2191
<DEPRECIATION> (1122)
<TOTAL-ASSETS> 4080
<CURRENT-LIABILITIES> 363
<BONDS> 600
<COMMON> 1
0
0
<OTHER-SE> 3116
<TOTAL-LIABILITY-AND-EQUITY> 4080
<SALES> 4633
<TOTAL-REVENUES> 4633
<CGS> 3027
<TOTAL-COSTS> 3027
<OTHER-EXPENSES> 1295
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 41824
<INCOME-PRETAX> 295021
<INCOME-TAX> 0
<INCOME-CONTINUING> 295021
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 295021
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
