U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
- ------- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
--------------
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)
1700 Corporate Circle, 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 May 8, 1998, there were issued and outstanding 2,287,362 shares
of common stock of the registrant (exclusive of 26,341 shares of voting Series D
Preferred Stock convertible into 186,341 shares of common stock).
Transitional Small Business Disclosure Format Yes No X
---- -----
Page 1 of 14
<PAGE>
Prefatory Note to Amemdment No. 1 on Form 10-QSB/A.
Healthy Planet Products, Inc. (the "Company") has filed this Amendment No. 1 on
Form 10-QSB/A to revise and restate certain portions of Part I, Item 2
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Page 2 of 14
<PAGE>
HEALTHY PLANET PRODUCTS, INC.
INDEX
Page
Form 10-QSB Cover Page 1
Index 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet at March 31, 1998 4
Statements of Operations for the three-months ended
March 31, 1998 and 1997 6
Statements of Cash Flows for the three-months ended
March 31, 1998 and 1997 7
Notes to the Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signature 14
Page 3 of 14
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
HEALTHY PLANET PRODUCTS, INC.
BALANCE SHEET
ASSETS
March 31,
1998
-----------
(Unaudited)
CURRENT ASSETS
Cash and cash equivalents $2,486,021
Marketable securities 333
Accounts receivable - net of allowances for doubtful
accounts and returns of $168,662 916,679
Inventories 1,752,448
Advance on royalties 318,602
Prepaid expenses 242,708
Deferred income taxes 264,900
----------
Total current assets 5,981,691
----------
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation and amortization 810,100
----------
OTHER ASSETS
Deferred income taxes 685,800
Security deposits 34,277
Publishing rights - net of accumulated
amortization of $423,782 124,207
Other 105,855
----------
Total other assets 950,139
----------
TOTAL ASSETS $7,741,930
==========
The accompanying notes are an integral
part of these financial statements.
Page 4 of 14
<PAGE>
HEALTHY PLANET PRODUCTS, INC.
BALANCE SHEET (continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31,
1998
-----------
(Unaudited)
CURRENT LIABILITIES
Accounts payable $ 280,178
Royalties payable 20,292
Commissions payable 42,039
Series B preferred stock redemption and dividends payable 161,500
Accrued wages, bonuses and payroll taxes 57,581
Accrued liabilities 5,469
Current portion of long-term debt 104,001
----------
Total current liabilities 671,060
-----------
OTHER LIABILITIES
Long-term debt, net of current portion 114,299
Accrued rent payable 95,582
-----------
209,881
-----------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 12,000,000 shares
authorized, 2,287,362 shares issued and outstanding 22,874
Preferred stock, Series D, $.10 par value, with
aggregate liquidation preferences of $134,603,
371,009 shares authorized, 26,341 issued and
outstanding 2,634
Additional paid-in capital 13,141,087
Accumulated deficit (6,305,606)
-----------
Total shareholders' equity 6,860,989
-----------
TOTAL LIABILITIES ANT) SHAREHOLDERS' EQUITY $7,741,930
===========
The accompanying notes are an integral
part of these financial statements.
Page 5 of 14
<PAGE>
HEALTHY PLANET PRODUCTS, INC.
STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
----------------------------
1998 1997
---- ----
NET SALES $ 977,258 $ 828,281
COST OF GOODS SOLD 428,053 362,998
----------- ----------
GROSS PROFIT 549,205 465,282
OPERATING EXPENSES
Selling, shipping and marketing 302,528 227,417
General and administrative 448,441 417,128
----------- ----------
750,969 644,545
----------- ----------
OPERATING LOSS (201,764) (179,263)
----------- ----------
OTHER INCOME/EXPENSE:
Interest expense (3,705) --
Interest income 36,070 44,966
Other income 28,678 4,643
----------- ----------
61,043 49,609
----------- ----------
LOSS BEFORE TAXES (140,721) (129,654)
PROVISION FOR INCOME TAXES -- --
----------- ----------
NET LOSS $ (140,721) $ (129,654)
=========== ==========
BASIC AND DILUTED LOSS PER SHARE $ (.06) $ (.07)
=========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,237,362 1,827,362
=========== ==========
The accompanying notes are an integral part of these financial statements.
Page 6 of 14
<PAGE>
<TABLE>
HEALTHY PLANET PRODUCTS, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ($ 140,721) ($129,654)
Non-cash items included in net loss
Depreciation and amortization 73,560 50,668
Decrease in allowances for doubtful
accounts and returns (154,418) (274,426)
Changes in:
Accounts receivables (7,998) 550,030
Inventories (211,423) (383,543)
Advance on royalties (318,602) (311,444)
Prepald expenses (126,982) (51,653)
Accounts payable (95,811) 13,679
Royalties payable 15,719 1,204
Commissions payable (52,142) (78,174)
Income taxes payable (800) (16,300)
Accrued wages, bonus & payroll taxes 10,811 (27,269)
Accrued liabilities (14,834) (26,831)
Accrued rent payable 9,933 14,610
--------- ----------
Net cash used by operating activities (1,013,708) (669,103)
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales/Purchases of marketable securities 249,667 (25,614)
Purchase of equipment & color separations (13,052) (30,124)
Other assets 3,147 (42,925)
--------- ----------
Net cash provided (used) by investing activities 239,762 (98,663)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal repayments on note payable (26,095) -
--------- ----------
Net cash used by financing activities (26,095) -
--------- ----------
DECREASE IN CASH AND CASH EQUIVALENTS (800,041) (767,766)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,286,062 1,650,711
--------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD 2,486,021 $ 882,945
========= ==========
SUPPLEMENTARY CASH FLOW INFORMATION INCLUDES THE FOLLOWING.
Cash paid during the period for:
Interest $ 3,705 $ -
Income taxes $ 1,600 $ 16,300
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
Page 7 of 14
<PAGE>
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 principles 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, which are of a normal recurring nature, 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:
March 31,
1998
-----------
Raw materials $ 38,010
Work-in-process 1,176,307
Finished goods 538,131
-----------
1,752,448
===========
NOTE 3- PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
March 31,
1998
-----------
Machinery, equipment and leasehold improvements $ 719,830
Molds 381,113
Color separations 291,630
Furniture and fixtures 72,664
Computer software 38,171
-----------
1,503,408
Less accumulated depreciation and amortization (693,308)
-----------
$ 810,100
===========
Page 8 of 14
<PAGE>
HEALTHY PLANET PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
NOTE 4 - INCOME TAXES
At March 31, 1998 the Company had available net operating loss
carryovers of approximately $6,230,500 to be applied against future federal
taxable income. Due to a change in ownership during 1988, $2,638,000 of these
amounts are subject to a Section 382 limitation of a maximum of $476,950 per
year. If the Company does not generate sufficient income to use the maximum
limitation, remaining amounts accumulate for use in future periods until the
operating loss expires. The remaining net operating loss carryovers generated
after 1988 are available to be used without yearly limitation. For federal tax
purposes, net operating losses expire as follows:
Year Ending December 31,
2002 $2,638,600
2003 1,222,000
2004 1,299,100
2005 383,300
2006 31,700
2012 655,800
----------
$6,230,500
==========
The Company has available approximately $25,500 of federal Alternative Minimum
Tax credits which can be carried forward indefinitely and offset against future
income taxes.
The Company has available approximately $326,000 of California net operating
losses which can be carried forward and offset against future taxable income.
These loss carryforwards expire in 2002.
Management of the Company believes it is more likely than not that a portion of
the federal net operating loss carryforwards will be utilized prior to
expiration. A valuation allowance has been established against remaining federal
net operating loss carryforwards.
Page 9 of 14
<PAGE>
HEALTHY PLANET PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS (continued)
(Unaudited)
<TABLE>
NOTE 5 - EARNINGS PER SHARE
<CAPTION>
Three Months Ended March 31, 1998
---------------------------------
Pre-Share
Loss Shares Amount
---- ------ ---------
<S> <C> <C> <C>
Net loss ($140,721)
----------
Basic loss per share:
Loss available to common shareholders ($140,721) 2,237,362 ($.06)
------
Effect of dilutive securities -- --
---------- ----------
Diluted loss per share:
Loss available to common shareholders
plus assumed conversions ($140,721) 2,237,362 ($.06)
========== ========== ======
</TABLE>
Warrants to purchase 368,117 shares of common stock at a weighted average price
per share of $4.45 and options to purchase 325,000 shares of common stock at a
weighted average price per share of $6.19 were outstanding at March 31, 1998,
but were not included in the computation of diluted earnings per share as the
exercise prices were greater than the average market price of the common shares.
Preferred stock convertible into 26,341 shares of common stock were outstanding
at March 31, 1998, but were not included in the computation of diluted earnings
per share as the effect would be anti-dilutive.
Page 10 of 14
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
Certain statements in this Form 10-QSB, including information set forth
under this Item 2 "Management's Discussion and Analysis of Financial Condition
and Results of Operations" constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Act").
Healthy Planet Products, Inc. (the "Company") desires to avail itself of certain
"safe harbor" provisions of the Act and is therefore including this special note
to enable the Company to do so. Forward-looking statements included in this Form
10-QSB or hereafter included in other publicly available documents filed with
the Securities and Exchange Commission, reports to the Company's stockholders
and other publicly available statements issued or released by the Company
involve known and unknown risks, uncertainties, and other factors which could
cause the Company's actual results, performance (financial or operating) or
achievements to differ from the future results, performance (financial or
operating) achievements expressed or implied by such forward looking statements.
Such future results are based upon management's best estimates based upon
current conditions and the most recent results of operations. These include
management's forecasts for sales, the inrease in net sales for the three month
period ended March 31, 1998, purchasing plans and programs of certain large
chain buyers relating to holiday product recently experienced decline in gross
margin as well as marginal increases in general and administrative expenses, the
recent adverse trend in the general retail environment, general economic
conditions, competition generally and specifically relating to greeting cards
having environmental, nature or wildlife themes and the ability of the Company
to sustain consumer demand for the Company's principal Sierra Club card line. In
addition, the ability of the Company to enhance and expand its product mix and
to successfully introduce new products which will meet with consumer acceptance
may also affect future results. The Company to date has been materially
dependent upon the efforts of Messrs. Bruce Wilson and M. Scott Foster, who
constitute the Company's core senior management. The loss of either Mr. Wilson's
or Mr. Foster's services may have a materially adverse effect upon the business
or operations of the Company.
Sales
For the three months ended March 31, 1998, the Company's net sales
amounted to $977,258 which reflected an increase of $148,977 or 17.9% versus the
prior year level of $828,281. An increase of $85,000 or 10.3% was due to the
inclusion of the Company's new Collectible business acquired late in 1997. In
addition, an expansion of our bookmark program, reflecting an increase of 17.5%,
was offset by decreases in the base Sierra Club and Nature Baby businesses of
14.1% and 57.7% respectively, to result in the overall increase of 18.0%. The
Sierra Club decrease was due in part to the loss of Barnes and Noble as a
customer in the fall of 1997.
Gross Profit
For the three months ended March 31, 1998, gross profit amounted to
$549,205 or 56.1% of sales. This level of gross profit percentage was at parity
with the previous year's three month results of $465,282 or 56.1% of sales.
Page 11 of 14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
Operating Expenses
For the three months ended March 31, 1998, selling, shipping and
marketing expenses amounted to $302,528 reflecting an increase versus the prior
year's level of $75,111 or 33%. Costs associated with the new product launch for
advertising, promotion and travel accounted for the quarter to quarter increase.
General and administrative expenses amounted to $448,441 for the three
months ended March 31, 1998, reflecting an increase of $31,313 or 7.5% versus
the prior year quarter of $417,128. Decreases in legal fees and insurance costs
were offset by increased manpower costs associated with the acquisition of the
Collectibles line.
Income
An operating loss of $201,764 or ($.09) per share was incurred for the
three months ended March 31, 1998. Interest and other income of $61,043 reduced
the operating loss to result in a net loss of $140,721 or ($.06) per share. For
the prior year quarter, the net loss amounted to $129,654 or ($.07) per share.
Increased operating costs associated with the new Collectibles line resulted in
the current year quarter's loss.
Balance Sheet
Total assets amounted to $7,741,930 as of March 31, 1998 reflecting a
decrease versus the December 31, 1997 level of $8,036,000 or $294,070. The
period to period decrease was a result of decreased cash offset in part by
increased accounts receivables, inventories royalty advances and prepaid
expenses. Total current liabilities amounted to $671,060 as of March 31, 1998
versus the December 31, 1997 level of $806,000. The decrease was a result of the
paydown of seasonal commissions and trade payable during the quarter.
Liquidity and Capital Resources
At March 31, 1998, the Company's working capital was $5,310,631
reflecting a decrease of $95,369 versus working capital at December 31, 1997 of
$5,406,000. Cash of $792,129 was used during the period to support operating
activities primarily used for inventory of new product and royalty advances.
Cash provided by investment activities amounted to $239,762 primarily associated
with the sale of marketable securities. Cash of $26,095 was used to pay a note
related to the Corlett Collectibles acquisition. The Company remains liquid with
a current ratio of 8.9:1.
The present primary sources of the Company's liquidity has 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
with interest at the bank's Index Rate plus .75% or 8.75% as of 3/31/98. The
Company draws on this line from time to time on a short term basis; however, the
Company did not utilize the line of credit during this quarter. As of March 31,
1998, there were no borrowings under this line of credit.
Page 12 of 14
<PAGE>
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 13 of 14
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
During the quarter ended March 31, 1998, there were no reports
on Form 8-K filed by the Registrant.
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: May 15, 1998 by: /s/ Bruce A. Wilson
(February 4, 1999 --------------------------------------
as to Amendment No. 1) Bruce A. Wilson
President, Chief Executive, Chief Operating
and Chief Financial Officer
(Principal Executive, Financial
and Accounting Officer)
Page 14 of 14
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 2,486,021
<SECURITIES> 333
<RECEIVABLES> 1,085,341
<ALLOWANCES> (168,662)
<INVENTORY> 1,752,448
<CURRENT-ASSETS> 5,981,691
<PP&E> 1,503,408
<DEPRECIATION> 693,308
<TOTAL-ASSETS> 7,741,930
<CURRENT-LIABILITIES> 671,060
<BONDS> 0
0
2,634
<COMMON> 22,874
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 7,741,930
<SALES> 977,258
<TOTAL-REVENUES> 1,042,006
<CGS> 428,053
<TOTAL-COSTS> 1,179,022
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (104,721)
<INTEREST-EXPENSE> 3,705
<INCOME-PRETAX> (140,721)
<INCOME-TAX> 0
<INCOME-CONTINUING> (140,721)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (140,721)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> 0
</TABLE>
