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 March 31, 1997 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) 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 March 31, 1997.
Class Outstanding at March 31, 1997
Common Stock, $.001 par value 1,549,926
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Page 2 of 9
I N D E X
PART I. FINANCIAL INFORMATION Page Number
Item 1. Financial Statements
Condensed balance sheets - March 31, 1997
and December 31, 1996 (unaudited) 3
Condensed statements of operations and changes in
retained earnings (accumulated deficit) - Three
months ended March 31, 1997 and 1996 (unaudited) 4
Condensed statements of cash flows - Three months
ended March 31, 1997 and 1996 (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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Page 3 of 9
ACTION PRODUCTS INTERNATIONAL, INC.
CONDENSED BALANCE SHEETS
ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<S> <C> <C>
March 31, December 31,
1997 1996
Current assets:
Cash and cash equivalents $ 58,520 $ 463,137
Accounts receivable, net of
allowance of $25,500
at March 31, 1997 and
December 31, 1996 756,056 517,982
Inventories, net 1,525,563 1,204,778
Prepaid expenses 276,111 246,888
Total Current Assets 2,616,250 2,432,785
Property, plant and equipment,
net of accumulated depre-
ciation of $901,145 at
March 31, 1997 and $872,692
at December 31, 1996 1,041,520 1,064,522
Other assets 352,039 375,009
TOTAL ASSETS 4,009,809 3,872,316
Current liabilities:
Accounts payable & accrued
expenses 617,652 593,174
Borrowings under line of
credit 351,750 175,000
Total Current Liabilities 969,402 768,174
Long term liabilities:
Notes payable 600,000 600,000
Shareholder's equity:
Common stock $.001 par value
authorized 7,500,000;
1,549,926 issued and
outstanding at March 31,1996
and December 31, 1996 1,550 1,550
Additional paid-in capital 2,904,192 2,904,192
Accumulated deficit (381,335) (317,600)
Stock Subscription Receivable (84,000) (84,000)
Total Shareholders' Equity 2,440,407 2,504,142
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 4,009,809 $ 3,872,316
</TABLE>
See Accompanying Notes
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Page 4 of 9
ACTION PRODUCTS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF OPERATIONS ANDCHANGES
IN RETAINED EARNINGS (ACCUMULATED DEFICIT)
(UNAUDITED)
<TABLE>
<S> <C> <C>
Three months ended
March 31,
1997 1996
Net sales $1,144,386 $1,437,664
Cost of sales 668,153 915,807
Gross profit 476,233 521,857
Selling, general &
administrative expenses 525,226 385,739
Other (expenses) income
Other 3,194 6,705
Interest expense (17,936) (14,043)
Total (14,742) (7,338)
Income before income taxes (63,735) 128,780
Provision for income taxes - -
Net income (loss) $ (63,735) $ 128,780
Beginning retained earnings
(accumulated deficit) (317,600) 255
Ending retained earnings
(accumulated deficit) $(381,335) $ 129,035
Net income (loss) per share $ (0.04) $ 0.09
Weighted average number
of common shares outstanding 1,549,926 1,499,926
</TABLE>
See Accompanying Notes
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Page 5 of 9
ACTION PRODUCTS INTERNATIONAL, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<S> <C> <C>
Three months ended March 31,
1997 1996
Cash flows from operating activities:
Net income (loss) $ (63,735) $ 128,780
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 59,911 25,146
Change in assets and liabilities:
Increase in current assets,
other than cash and cash
equivalents (588,082) (693,481)
Increase in current liabilities
and deferred taxes 24,478 193,315
Increase in other assets (8,488) (43,340)
Net cash used in operating activities (575,916) (389,580)
Net cash used in investing activities (5,451) (58,781)
Net cash provided by financing activities 176,750 268,000
Net decrease in cash and cash equivalents (404,617) (180,361)
Cash and cash equivalents at beginning
of period 463,137 600,085
Cash and cash equivalents at end of
period $ 58,520 $ 419,724
Supplemental disclosures - cash paid for
Interest $ 17,936 $ 14,043
Taxes $ - $ 11,075
</TABLE>
See Accompanying Notes
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Page 6 of 9
ACTION PRODUCTS INTERNATIONAL, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Condensed financial statements
In the opinion of management, the accompanying unaudited
condensed financial statements contain all normal recurring
adjustments necessary to present fairly the financial position
of Action Products International, Inc. at March 31, 1997 and
the results of its operations and cash flows for the first
quarter ending March 31, 1997.
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, 1996. The results of operations
for the period ended March 31, 1997 are not necessarily
indicative of the operating results for the full year.
2. Income per common share
Income per common share is computed based upon the weighted
average number of shares outstanding during the period.
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Page 7 of 9
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Any statements that are not historical facts contained in this
discussion are forward looking statements. It is possible that
the assumptions made by management for purposes of such
statements may not materialize. Actual results may differ
materially from those projected or implied in any forward looking
statements. Such statements may that involve risks and
uncertainties, including but not limited to those relating to
product demand, pricing, market acceptance, the effect of
economic conditions, and intellectual property rights and the
outcome of competitive products, risks in product development,
the results of financing efforts, the ability to complete
transactions, and other risks identified in this and the
Company's other Securities and Exchange Commission filings.
Results of Operations:
During the first quarter ended March 31, 1997, revenues decreased
to $1,144,386 in 1997 from $1,437,664 in 1996. Management
attributes the decrease in net sales to early shortages in
shippable inventories. These shortages were primarily as a
result of the Company's transition from its role as a distributor
to becoming a manufacturer of proprietary products. Packaging
complications and delays in receipts of overseas shipments also
contributed to the inventory shortages. Furthermore, management
did not anticipate the overwhelming response at its trade shows
and from the distribution of its toy and publishing catalogs. As
a result, the Company experienced inventory shortages in product
lines where demand was underestimated.
As a percent of sales, gross profit increased substantially to
41.6% from 36.3% for the same period in 1996, though gross profit
decreased $45,624 to $476,233 from $521,857. Selling, General &
Administrative Expenses increased $139,487 resulting in a net
loss of $63,735, or $0.04 per share. Management attributes the
increase in expenses to various transitional costs including its
new divisional catalogs, extended trade show coverage, and other
marketing expenditures; additional salaries and commissions
connected with the Company's strengthening of its marketing and
sales force and outside sales representative organizations; and
increases in depreciation and amortization linked to prior year
acquisitions of equipment and other assets.
Financial Condition, Liquidity and Capital Resources:
As of March 31, 1997, current assets were $2,616,250 compared to
current liabilities of $969,402 resulting in a current ratio of
3:1. Total assets increased $137,493 to $4,009,809 from
$3,872,316 at December 31, 1996. Current liabilities increased
$201,228 due primarily to borrowings on the Company's line of
credit used to fund additional inventory purchases. Current
assets increased $183,465 due to increases in accounts receivable
and inventories.
Accounts receivable and inventories were $756,056 and $1,525,563,
respectively, at March 31, 1997, compared to $517,982 and
$1,204,778, respectively, at December 31, 1996. The increases
are as a result of the Company's normal business cycle and
preparation for its peak season, which historically stretches
from March through August.
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Page 8 of 9
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (Continued)
Cash and cash equivalents were down by $404,617, as cash was used
to position the Company for its peak period. Property, plant and
equipment, net of depreciation, decreased by $23,002. Other
assets were down $22,970 due to the amortization of prior period
acquisitions.
Accounts payable and accrued expenses increased $24,478 to
$617,652 at March 31, 1997 from $593,174 at December 31, 1996 due
to the timing of purchases and payments.
Cash used in operations was $575,916 for the three months ended
March 31, 1997, as compared to $389,580 for the comparable period
in 1996. This is due to the swing in net earnings and the extent
and timing of accruals and payments.
Shareholders' equity at March 31, 1997 decreased by $63,735 as
a result of the period's loss.
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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: May 12, 1997 By: /s/ Delton G. de Armas
Delton G. de Armas
Controller/Corporate Secretary
<PAGE>
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<PERIOD-START> Jan-01-1997
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<OTHER-SE> 2438
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