<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
----- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- ----- SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission File No. 1-13048
HEALTHY PLANET PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2601764
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1129 N. McDowell Blvd., Petaluma, California 94954
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (707) 778-2280
- -------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Check whether the Issuer (1) 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
----- -----
As of July 25, 1995, there were issued and outstanding 1,682,716
shares of common stock of the registrant (exclusive of 254,675 shares of voting
Series D Preferred Stock convertible into 254,675 shares of common stock).
Page 1 of 13
<PAGE> 2
HEALTHY PLANET PRODUCTS, INC.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Form 10-QSB Cover Page 1
Index 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet at June 30, 1995 3
Statements of Income for the three-months ended 5
and six months ended June 30, 1995 and 1994
Statements of Cash Flows for the three-months ended 6
and six months ended June 30, 1995 and 1994
Notes to the Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. 0THER INFORMATION
Item 6. Exhibits and Reports on Form 8-K, Signature 12 - 13
</TABLE>
Page 2 of 13
<PAGE> 3
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
HEALTHY PLANET PRODUCTS, INC.
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
June 30,
1995
-------------
(Unaudited)
<S> <C>
CURRENT ASSETS
Cash $2,430,012
Accounts receivable - net of allowances for doubtful
accounts and returns of $150,592 810,124
Inventories 1,103,305
Advance on royalties 270,679
Prepaid expenses 108,386
Deferred income taxes 450,000
----------
Total current assets 5,172,506
----------
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation and amortization 463,821
----------
OTHER ASSETS
Deferred income taxes 699,250
Security deposits 12,300
Publishing rights - net of accumulated
amortization of $231,911 97,478
Other 3,725
----------
Total other assets 812,753
----------
Total assets $6,449,080
==========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
Page 3 of 13
<PAGE> 4
HEALTHY PLANET PRODUCTS, INC.
BALANCE SHEET (Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30,
1995
-------------
(Unaudited)
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 470,138
Royalties payable 73,467
Commissions payable 40,820
Accrued wages, bonus' and payroll taxes 91,219
Accrued liabilities 12,534
-----------
Total current liabilities 688,178
ACCRUED RENT PAYABLE 90,498
-----------
TOTAL LIABILITIES 778,676
-----------
SHAREHOLDERS EQUITY
Common stock, $.01 par value, 12,000,000 shares
authorized, 1,682,716 shares issued and outstanding 16,827
Preferred stock, Series B, $.10 par value, with
aggregate liquidation preferences of $150,120,
14,250 shares authorized, 1,251 shares issued
and outstanding 126
Preferred stock, Series D, $.10 par value, with
aggregate liquidation preferences of $1,301,389
371,009 shares authorized, 254,675 issued and
outstanding 25,467
Additional paid-in capital 11,923,593
Accumulated deficit (6,295,609)
-----------
Total Shareholders' Equity 5,670,404
-----------
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY $ 6,449,080
===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
Page 4 of 13
<PAGE> 5
HEALTHY PLANET PRODUCTS, INC.
STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $1,151,032 $650,290 $2,036,865 $1,291,193
COST OF GOODS SOLD 432,506 189,873 690,526 378,261
---------- --------- ---------- ----------
GROSS PROFIT 718,526 460,417 1,346,339 912,932
---------- --------- ---------- ----------
OPERATING EXPENSES:
Selling, shipping and marketing 219,247 157,018 395,280 289,876
General and administrative 415,304 296,098 770,758 578,872
---------- --------- ---------- ----------
634,551 453,116 1,166,038 868,748
---------- --------- ---------- ----------
OPERATING INCOME 83,975 7,301 180,301 44,184
---------- --------- ---------- ----------
OTHER INCOME:
Interest income 33,879 27,656 69,274 38,736
Other income 54 140 254 597
---------- --------- ---------- ----------
33,933 27,796 69,528 39,333
---------- --------- ---------- ----------
INCOME BEFORE TAXES 117,908 35,097 249,829 83,517
PROVISION FOR INCOME TAXES (61,250) -- (121,700) 800
---------- --------- ---------- ----------
NET INCOME 179,158 35,097 371,529 82,717
DIVIDENDS ACCUMULATED
ON PREFERRED STOCK (6,755) (6,755) (6,755) (6,755)
INCOME APPLICABLE TO COMMON STOCK $ 172,403 $ 28,342 $ 364,774 $ 75,962
========== ========= ========== ==========
EARNINGS PER SHARE $ .08 $ .01 $ .18 $ .04
========== ========= ========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,031,836 1,946,575 2,022,858 1,945,041
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
Page 5 of 13
<PAGE> 6
HEALTHY PLANET PRODUCTS, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
-------------------------- -------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 179,158 $ 35,097 $ 371,529 $ 82,717
Non-cash items includd in net income
Depreciation and amortization 38,522 27,491 70,118 52,427
Increase/(Decrease) in allowances for
doubtful accounts and returns 4,453 191 (53,626) (83,772)
Change in inventory reserves (80,797) (25,000) (80,797) (25,000)
Increase in defered income taxes (65,650) -- (139,250) --
Changes in:
Accounts receivables (301,824) (82,452) 253,332 24,110
Inventories (143,250) (356,120) (327,882) (390,989)
Advances on royalties 22,851 51,383 (270,679) (94,018)
Prepaid expenses 15,757 2,189 (82,359) (37,405)
Accounts payable 155,179 279,668 243,874 140,158
Royalties payable (1,028) (102,862) (6,757) (109,829)
Commissions payable 6,319 6,678 (83,054) (86,030)
Accrued wages, bonus and payroll taxes 46,944 22,769 (35,053) (48,492)
Accrued liabilities (995) (176) (18,373) (23,415)
Accrued rent payable (34) 7,074 3,683 10,255
---------- ---------- ---------- ----------
Net cash used by operating activities (124,395) (134,070) (155,294) (589,283)
---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment and color separations (271,543) (52,096) (277,025) (106,396)
Increase in publishing rights (10,019) (3,925) (20,156) (28,168)
Other 86,200 -- 86,200 --
---------- ---------- ---------- ----------
Net cash used by investing activities (195,362) (56,021) (210,981) (134,564)
---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stock options exercised 248,750 -- 248,750 --
---------- ---------- ---------- ----------
Net cash from financing activities 248,750 -- 248,750 --
---------- ---------- ---------- ----------
(DECREASE) IN CASH (71,007) (190,091) (117,525) (723,847)
CASH, BEGINNING OF PERIOD 2,501,019 2,165,135 2,547,537 2,698,891
---------- ---------- ---------- ----------
CASH, END OF PERIOD $2,430,012 $1,975,044 $2,430,012 $1,975,044
========== ========== ========== ==========
SUPPLEMENTARY CASH FLOW INFORMATION INCLUDES THE FOLLOWING:
Cash paid during the period for:
Interest $ -- $ -- $ -- $ --
Income taxes $ 4,400 $ -- $ 17,550 $ 800
</TABLE>
The accompanying notes are an integral
part of these statements.
Page 6 of 13
<PAGE> 7
HEALTHY PLANET PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principals have been omitted pursuant to such rules and regulations.
It is believed, however, that the disclosures are adequate to make the
information presented not misleading.
The financial statements, in the opinion of management, reflect all
adjustments necessary to fairly state the financial position and the results of
operations. These results are not necessarily to be considered indicative of
the results for the entire year.
NOTE 2 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30,
1995
--------
<S> <C>
Raw materials $ 82,911
Work-in-process 654,784
Finished goods 365,610
----------
$1,103,305
==========
</TABLE>
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
June 30,
1995
--------
<S> <C>
Machinery, equipment and leasehold improvements $ 744,419
Color separations 292,457
Furniture and fixtures 72,664
Computer software 38,171
----------
1,147,711
Less accumulated depreciation and amortization (683,890)
----------
$ 463,821
==========
</TABLE>
Page 7 of 13
<PAGE> 8
HEALTHY PLANET PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
(Unaudited)
NOTE 4 - INCOME TAXES
Effective January 1992, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting For Income
Taxes", which required recognition of deferred tax liabilities and assets for
the expected future tax consequences of events that have been included in the
financial statements or tax returns. Under FAS 109, the Company is allowed to
recognize currently the future benefit of its net operating loss and
alternative minimum tax credit carryforwards. As a result of the expected
utilization of these carryforwards, a deferred tax asset was derived as
follows:
<TABLE>
<S> <C>
Deferred Tax Asset $2,641,750
Valuation Allowance (1,492,500)
----------
Net Deferred Income Taxes 1,149,250
Amount expected to be
utilized in 1995 (450,000)
----------
$ 699,250
==========
</TABLE>
Management of the Company believes it is more likely than not that the
tax benefits of the net operating loss and alternative minimum tax credit
carryforwards, net of valuation allowance, will be realized.
Page 8 of 13
<PAGE> 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Sales
For the six months ended June 30, 1995, the Company's net sales were
$2,036,865. This reflected an increase of $745,672 or 57.7% versus the prior
year's level of $1,291,193. This improvement was a result of the combination
of a 16% price increase on counter cards phased in during the beginning of the
year and an increase in unit sales of the Company's lines of products. Sales
of the Sierra Club line increased 51% while sales of all the other lines
increased 81% to result in the overall increase of 57.7%.
For the three months ended June 30, 1995, net sales amounted to
$1,151,032 which reflected an increase of $500,742 or 77% versus the prior year
level of $650,290. Sales of the Company's Sierra Club line increased 71.5% on
a period to period basis. This improvement was the result of the price
increase and increased unit sales.
Gross Profit
For the six months ended June 30, 1995, gross profit amounted to
$1,346,339 or 66.1% of sales. For the comparable prior year quarter, gross
profit amounted to $912,932 or 70.7% of sales. Increased sales of lower
margined packaged goods and non-counter card products combined with increased
export sales to account for the decline in gross margin percentage.
For the three months ended June 30, 1995, gross profit amounted to
$718,526 or 62.4% of sales. For the comparable prior year quarter, gross
profit amounted to $460,417 or 70.8% of sales. Increased export sales and
sales of lower margined products accounted for the gross margin period to
period percentage decline.
Operating Expenses
For the six months ended June 30, 1995, selling, shipping and
marketing expenses amounted to $395,280 reflecting an increase of $105,484
versus the prior year's level of $289,876. Higher incremental commissions and
bonuses and shipping expenses associated with increased sales principally
contributed to the period to period increase.
For the three months ended June 30, 1995, selling, shipping and
marketing expenses amounted to $219,247 reflecting an increase of $62,229
versus last year's level of $157,108. Higher commissions, show expenses and
shipping expenses accounted for the increase.
General and administrative expenses amounted to $770,758 for six
months ended June 30, 1995, reflecting an increase of $191,886 versus last
year's level of $578,872. The period to period increase was a result of one
time non recurring costs associated with the Company's move to the American
Stock Exchange, timing differences on other professional fees and budgeted
increases in office and warehouse expenditures in support of increased sales.
Page 9 of 13
<PAGE> 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULT OF OPERATIONS (Continued)
Operating Expenses (Continued)
For the three months ended June 30, 1995, general and administrative
expenses amounted to $415,304 reflecting an increase of $119,206 versus the
prior year level of $296,098. Anticipated increases in staffing, warehouse
space and supplies to support a sales increase accounted for the year to year
increase.
Income
Operating income amounted to $180,301 for the six months ended June
30, 1995, reflecting an increase versus the prior year level of $44,184 or
308%. For the six months ended June 30, 1995, the Company's operating income
before taxes was $249,829 or $.12 per share. For the comparable prior year
period, the Company had net operating income before taxes of $83,517 or $.04
per share. Income before taxes improved $166,312 or 199.0% on a period to
period basis. The comparative per share data is based on weighted average
shares outstanding in each of the respective periods.
Balance Sheet
Total assets amounted to $6,449,080 as of June 30, 1995 versus the
December 31, 1994 level of $5,724,481, reflecting an increase of $724,599. The
period to period increase was caused by a reduction in cash and receivables
offset by increases in royalty advances, inventories and prepaid expenses and
capital expenditures. Total current liabilities amounted to $688,178 at June
30, 1995 versus the December 31, 1994 level of $587,541. The increase was a
result of the build-up of trade payables and bonuses offset by payment of
seasonal commissions during the beginning of the year.
Liquidity and Capital Resources
At June 30, 1995, the Company's working capital was $4,484,328
reflecting an increase over working capital at December 31, 1994 of $4,140,479.
Cash of $124,395 was used during the period to support operating activities.
Cash of $277,025 was used during the period for capital expenditures. The
major purchase was an automated boxing machine which will improve the Company's
capacity and efficiency. Cash of $248,750 was generated by the exercise of
employee stock options.
The present primary sources of the Company's liquidity have been cash
internally generated from operations, proceeds obtained by the Company through
the public sale of its securities, and the availability of a secured line of
credit. The Company has a $500,000 secured line of credit from Westamerica
Bank. The Company draws on this line from time to time on a short term basis.
As of June 30, 1995, there was no outstanding amount under this line of credit.
Page 10 of 13
<PAGE> 11
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Effects of Inflation
The Company does not view the effects of inflation as having a
material effect upon its business. Increases in paper and labor costs have
been offset by increases in the price of the Company's cards and through higher
print runs, which have reduced the unit cost of the Company's card product.
While the Company has in the past increased its prices to its customers, it has
maintained its relative competitive price position within the general range of
greeting cards.
Page 11 of 13
<PAGE> 12
HEALTHY PLANET PRODUCTS, INC.
COMPUTATION OF EARNINGS PER SHARE
EXHIBIT II
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1995 June 30, 1994 June 30, 1995 June 30, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Primary earnings per share
Net income $ 179,158 $ 35,097 $ 371,529 $ 82,717
Cumulative dividends on preferred stock <6,755> <6,755> <6,755> <6,755>
---------- ---------- ---------- ----------
Income applicable to common stock $ 172,403 $ 28,342 $ 364,774 $ 75,962
========== ========== ========== ==========
Shares
Weighted average number of common
shares outstanding 1,648,716 1,522,216 1,587,550 1,521,938
Add dilutive effect of conversion of preferred
stock and outstanding options and warrants,
as determined by the application of the
treasury stock method 383,120 424,359 435,308 423,103
---------- ---------- ---------- ----------
2,031,836 1,946,575 2,022,858 1,945,041
========== ========== ========== ==========
Primary earnings per share $ .08 $ .01 $ .18 $ .04
========== ========== ========== ==========
</TABLE>
Page 12 of 13
<PAGE> 13
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
11 Computation of Earnings Per Share
27 Financial Data Schedule
</TABLE>
b. Reports on Form 8-K
During the quarter ending June 30, 1995, the following
reports on Form 8-K were filed by the Registrant:
<TABLE>
<CAPTION>
Date of Report Item Reported Description of Item
-------------- ------------- -------------------
<S> <C> <C>
April 7, 1995 Item 5. Other Events Listing of Registrant's Common
Stock on American Stock
Exchange.
May 19, 1995 Item 5. Other Events Amended and Restated
Employment Agreement between
Registrant and Bruce A. Wilson;
Amended and Restated
Employment Agreement
between Registrant and M.
Scott Foster.
</TABLE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HEALTHY PLANET PRODUCTS, INC.
(Registrant)
DATED: July 26, 1995 by: /s/ Bruce A. Wilson
----------------------------------------
Bruce A. Wilson
President, Chief Executive, Chief Operating
and Chief Financial Officer.
Page 13 of 13
<PAGE> 14
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
[S] [C]
11 Computation of Earnings Per Share
27 Financial Data Schedule
<PAGE> 1
EXHIBIT 11
HEALTHY PLANET PRODUCTS, INC.
COMPUTATION OF EARNINGS PER SHARE
EXHIBIT II
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1995 June 30, 1994 June 30, 1995 June 30, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Primary earnings per share
Net income $ 179,158 $ 35,097 $ 371,529 $ 82,717
Cumulative dividends on preferred stock <6,755> <6,755> <6,755> <6,755>
---------- ---------- ---------- ----------
Income applicable to common stock $ 172,403 $ 28,342 $ 364,774 $ 75,962
========== ========== ========== ==========
Shares
Weighted average number of common
shares outstanding 1,648,716 1,522,216 1,587,550 1,521,938
Add dilutive effect of conversion of preferred
stock and outstanding options and warrants,
as determined by the application of the
treasury stock method 383,120 424,359 435,308 423,103
---------- ---------- ---------- ----------
2,031,836 1,946,575 2,022,858 1,945,041
========== ========== ========== ==========
Primary earnings per share $ .08 $ .01 $ .18 $ .04
========== ========== ========== ==========
</TABLE>
Page 12 of 13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 2,430,012
<SECURITIES> 0
<RECEIVABLES> 960,716
<ALLOWANCES> 150,592
<INVENTORY> 1,103,305
<CURRENT-ASSETS> 5,172,506
<PP&E> 1,147,711
<DEPRECIATION> 683,890
<TOTAL-ASSETS> 6,449,080
<CURRENT-LIABILITIES> 688,178
<BONDS> 0
<COMMON> 16,827
0
25,593
<OTHER-SE> 5,627,984
<TOTAL-LIABILITY-AND-EQUITY> 6,449,080
<SALES> 2,036,865
<TOTAL-REVENUES> 2,286,694
<CGS> 690,526
<TOTAL-COSTS> 1,856,564
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 249,829
<INCOME-TAX> (121,700)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 364,774
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
