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 September 30, 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 92-2601764
- -------------------------------- ---------------------------------------
(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 November 2, 1998, there were issued and outstanding 2,282,368 shares of
common stock of the registrant (exclusive of 31,335 shares of voting Series D
Preferred Stock convertible into 31,335 shares of common stock).
Transitional Small Business Disclosure Format Yes No X
----- -----
Page 1 of 16
<PAGE>
Prefatory Note to Amendment No. 1 on Form 10-QSB/A.
Healthy Planet Products, Inc. (the "Company") has filed this Amendement 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 16
<PAGE>
<TABLE>
HEALTHY PLANET PRODUCTS, INC.
-----------------------------
INDEX
-----
<CAPTION>
Page
----
<S> <C>
Form 10-QSB Cover Page 1
Index 3
PART I. FINANCIAL INFORMATION
- -----------------------------------
Item 1. Financial Statements
Balance Sheet at September 30, 1998 4
Statements of Operations for the three-months ended 6
and nine months ended September 30, 1998 and 1997
Statements of Cash Flows for the three-months ended 7
and nine months ended September 30, 1998 and 1997
Notes to the Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial 13
Condition and Results of Operations
PART II. OTHER INFORMATION
- ------------------------------
Item 6. Exhibits and Reports on Form 8-K 16
Signature 16
</TABLE>
Page 3 of 16
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
HEALTHY PLANET PRODUCTS, INC.
-----------------------------
BALANCE SHEET
-------------
ASSETS
------
September 30,
1998
(Unaudited)
------------
CURRENT ASSETS
Cash and cash equivalents $ 2,258,382
Marketable securities 333
Accounts receivable - net of allowances for doubtful
accounts and returns of $226,594 729,004
Inventories 774,185
Advance on royalties 120,523
Prepaid expenses 110,246
Deferred income taxes 264,900
------------
Total current assets 4,257,573
------------
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation and amortization 772,760
------------
OTHER ASSETS
Deferred income taxes 185,800
Security deposits 34,277
Publishing rights - net of accumulated
amortization of $463,788 100,442
Other 103,660
------------
Total other assets 424,179
------------
TOTAL ASSETS $ 5,454,512
============
The accompanying notes are an integral
part of these financial statements.
Page 4 of 16
<PAGE>
<TABLE>
HEALTHY PLANET PRODUCTS, INC.
-----------------------------
BALANCE SHEET (continued)
-------------
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<CAPTION>
September 30,
1998
------------
(Unaudited)
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 330,560
Royalties payable 22,924
Commissions payable 78,138
Series B preferred stock redemption and dividends payable 161,500
Accrued wages, bonuses and payroll taxes 65,625
Accrued liabilities 4,662
Current portion of long-term debt 108,899
------------
Total current liabilities 772,308
OTHER LIABILITIES
Long-term debt, net of current portion 17,148
Accrued rent payable 115,448
------------
904,904
------------
SHAREHOLDERS' EQUITY
Common stock, $.01 par value, 12,000,000 shares
authorized, 2,282,368 shares issued and outstanding 22,823
Preferred stock, Series D, $.10 par value, with
aggregate liquidation preferences of $160,122,
371,009 shares authorized, 31,335 issued and outstanding 3,134
Additional paid-in capital 13,320,278
Accumulated deficit (8,796,627)
------------
Total shareholders' equity 4,549,608
------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,454,512
============
<FN>
The accompanying notes are an integral
part of these financial statements.
</FN>
</TABLE>
Page 5 of 16
<PAGE>
<TABLE>
HEALTHY PLANET PRODUCTS, INC.
-----------------------------
STATEMENTS OF OPERATIONS
------------------------
(Unaudited)
<CAPTION>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
------------------------------ ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
NET SALES $ 1,034,654 $ 1,425,463 $ 2,751,652 $ 3,138,656
COST OF GOODS SOLD 1,119,734 792,356 2,482,727 1,572,129
------------ ------------ ------------ -----------
GROSS PROFIT (LOSS) (85,080) 633,107 268,925 1,566,527
------------ ------------ ------------ -----------
OPERATING EXPENSES
Selling, shipping and marketing 366,824 344,615 949,751 802,660
General and administrative 524,098 437,361 1,451,431 1,227,645
------------ ------------ ------------ -----------
890,922 781,976 2,401,182 2,030,305
------------ ------------ ------------ -----------
OPERATING LOSS (976,002) (148,869) (2,132,257) (463,778)
OTHER INCOME/EXPENSE
Interest expense (4,306) -- (14,452) --
Interest income 31,780 43,211 95,843 116,616
Other income 32,779 467 98,764 5,138
------------ ------------ ------------ -----------
60,253 43,678 180,155 121,754
------------ ------------ ------------ -----------
LOSS BEFORE TAXES (915,749) (105,191) (1,952,102) (342,024)
PROVISION FOR INCOME TAXES 200,000 -- 500,000 222,000
------------ ------------ ------------ -----------
NET LOSS ($ 1,115,749) ($ 105,191) ($ 2,452,102) ($ 564,024)
============ ============ ============ ===========
BASIC AND DILUTED LOSS PER SHARE ($0.49) ($0.06) ($1.08) ($0.31)
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 2,282,368 1,827,362 2,265,701 1,827,362
============ ============ ============ ===========
<FN>
The accompanying notes are an integral
part of these financial statements.
</FN>
</TABLE>
Page 6 of 16
<PAGE>
<TABLE>
HEALTHY PLANET PRODUCTS, INC.
-----------------------------
STATEMENTS OF CASH FLOWS
------------------------
(Unaudited)
<CAPTION>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
----------------------------- ---------------------------
1998 1997 1998 1997
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ($1,115,749) ($ 105,191) ($2,452,102) ($ 564,024)
Non-cash items included in net loss
Depreciation and amortization 77,834 52,797 225,488 152,226
Increase/(Decrease) in allowances for
doubtful accounts and returns 86,284 62,518 (96,486) (233,869)
Change in inventory reserves 319,000 -- 665,000 81,000
Decrease in deferred income taxes 200,000 -- 500,000 217,920
Changes in:
Accounts receivables (329,108) (489,607) 121,745 53,779
Inventories 218,789 121,002 101,840 (403,764)
Advances on royalties 118,890 97,179 (120,523) (128,671)
Prepaid expenses 99,770 (7,641) 5,480 (14,195)
Accounts payable 69,316 147,262 (46,131) (2,919)
Royalties payable 8,066 5,770 18,351 8,374
Commissions payable 41,561 59,136 (16,043) (13,319)
Accrued wages, bonus and payroll taxes 22,765 44,692 18,855 435
Income taxes payable -- -- (800) (16,300)
Accrued liabilities (20,804) (4,630) (15,641) (45,788)
Accrued rent payable 9,933 9,933 29,799 35,203
------------ ----------- ------------ -----------
Net cash used by operating activities (193,453) (6,780) (1,061,168) (873,912)
------------ ----------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sales of marketable securities -- 979,919 249,667 973,103
Purchases of equipment and color separations (20,338) (29,343) (86,929) (92,225)
Security deposits -- -- -- 2,075
Other (1,701) (10,902) (10,902) (75,908)
------------ ----------- ------------ -----------
Net cash (used)/provided by investing activities (22,039) (933,104) 151,836 (807,045)
------------ ----------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments on note payable (25,694) -- (118,348) --
------------ ----------- ------------ -----------
Net cash used by financing activities (25,694) -- (118,348) --
------------ ----------- ------------ -----------
INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS (241,186) 926,324 (1,027,680) (66,867)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,499,568 657,520 3,286,062 1,650,711
------------ ----------- ------------ -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $2,258,382 $1,583,844 $2,258,382 $1,583,844
============ =========== ============ ===========
SUPPLEMENTARY CASH FLOW INFORMATION INCLUDES THE FOLLOWING:
Cash paid during the period for:
Interest $ 4,306 $ 0 $ 14,452 $ 0
Income taxes $ 0 $ 0 $ 1,600 $ 20,380
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
Page 7 of 16
<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:
September 30,
1998
-------------
Raw materials $ 62,162
Work-in-process 393,988
Finished goods 318,035
-------------
$ 774,185
=============
NOTE 3 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
September 30,
1998
-------------
Machinery, equipment and leasehold improvements $ 727,397
Molds 436,422
Color separations 302,632
Furniture and fixtures 72,664
Computer software 38,171
-------------
1,577,286
Less accumulated depreciation and amortization (804,526)
-------------
$ 772,760
=============
Page 8 of 16
<PAGE>
HEALTHY PLANET PRODUCTS, INC.
-----------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
-----------------------------
(Unaudited)
NOTE 4 - INCOME TAXES
Deferred income tax assets and liabilities are recognized using enacted tax
rates and reflect the expected future tax consequences of temporary differences
between recorded amounts of assets and liabilities for financial reporting
purposes and tax basis of such assets and liabilities. A valuation allowance is
recognized to offset a deferred tax asset if the eventual realization of all or
a portion of the asset is uncertain.
The provision for income taxes is based on pre-tax earnings as reported in the
financial statements and adjusted for requirements of current tax law, and
changes in deferred taxes.
The provision for income taxes at September 30, 1998 consists of a valuation
allowance on deferred taxes.
As of January 1, 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.
Page 9 of 16
<PAGE>
HEALTHY PLANET PRODUCTS, INC.
-----------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
-----------------------------
(Unaudited)
NOTE 4. INCOME TAXES (continued)
The Company has substantial net operating loss carryforwards and credits
available to offset future income tax liabilities. The expected tax effect of
these losses and credits are reflected as deferred tax assets on the
accompanying balance sheet. A valuation allowance has been established since the
realization of tax benefits of net operating loss carryforwards is not assured.
However, management believes, at this time, that it is more likely than not that
the Company's future taxable income will be sufficient to utilize the NOL
deferred tax asset prior to its expiration date. The amount of the valuation
allowance will be reviewed on a quarterly basis. Deferred tax assets consist of
the following:
Net operating loss carryforwards $2,147,200
AMT carryforwards 25,500
Other 278,000
----------
2,450,700
Valuation allowance on net operating
loss carryforwards (2,000,000)
Deferred income taxes expected to be
utilized currently (264,900)
-----------
Deferred income taxes $ 185,800
===========
Page 10 of 16
<PAGE>
<TABLE>
HEALTHY PLANET PRODUCTS, INC.
-----------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
-----------------------------
(Unaudited)
<CAPTION>
NOTE 5. - EARNINGS PER SHARE
Three Months Ended September 30, 1998
-------------------------------------
Per-Share
Loss Shares Amount
------------ --------- -------
<S> <C> <C> <C>
Net loss ($1,115,749)
============
Basic loss per share:
Loss available to common shareholders ($1,115,749) 2,282,368 ($.49)
Effect of dilutive securities -- -- --
------------ --------- -------
Diluted loss per share:
Loss available to common shareholders
plus assumed conversions ($1,115,749) 2,282,368 ($.49)
============ ========= =======
Nine Months Ended September 30, 1998
------------------------------------
Per-Share
Loss Shares Amount
------------ --------- -------
Net loss ($2,452,102)
============
Basic loss per share:
Loss available to common shareholders ($2,452,102) 2,265,701 ($1.08)
Effect of dilutive securities -- -- --
------------ --------- -------
Diluted loss per share:
Loss available to common shareholders
plus assumed conversions ($2,452,102) 2,265,701 ($1.08)
============ ========= =======
</TABLE>
Warrants to purchase 368,117 shares of common stock at a weighted average price
per share of $4.45 and options to purchase 350,000 shares of common stock at a
weighted average price per share of $5.88 were outstanding at September 30,
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 31,335 shares of common stock were outstanding
at September 30, 1998, but were not included in the computation of diluted
earnings per share as the effect would be anti-dilutive.
Page 11 of 16
<PAGE>
<TABLE>
HEALTHY PLANET PRODUCTS, INC.
-----------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
-----------------------------
(Unaudited)
<CAPTION>
NOTE 5.
Three Months Ended September 30, 1997
-------------------------------------
Per-Share
Loss Shares Amount
---------- --------- -------
<S> <C> <C> <C>
Net loss ($105,191)
==========
Basic loss per share:
Loss available to common shareholders ($105,191) 1,827,362 ($.06)
Effect of dilutive securities -- -- --
---------- --------- -------
Diluted loss per share:
Loss available to common shareholders ($105,191) 1,827,362 ($.06)
========== ========= =======
Nine Months Ended September 30, 1997
------------------------------------
Per-Share
Loss Shares Amount
---------- --------- -------
Net loss ($564,024)
==========
Basic loss per share:
Loss available to common shareholders ($564,024) 1,827,362 ($.31)
Effect of dilutive securities -- -- --
---------- --------- -------
Diluted loss per share:
Loss available to common shareholders
plus assumed conversions ($564,024) 1,827,362 ($.31)
========== ========= =======
</TABLE>
Warrants to purchase 68,117 shares of common stock at a weighted average price
per share of $5.31 and options to purchase 325,000 shares of common stock at a
weighted average price per share of $6.19 were outstanding at September 30,
1997, 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 186,341 shares of common stock were outstanding
at September 30, 1997, but were not included in the computation of diluted
earnings per share as the effect would be anti-dilutive.
Page 12 of 16
<PAGE>
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 From
10-QSB or hereafter included in other publicly available documents filed with
the Securities and Exchange Commission, report 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 decrease in net sales for the nine month period ended
September 30, 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.
Sales
For the nine months ended September 30, 1998, the Company's net sales
amounted to $2,751,652 which reflected a decrease of $387,004 versus last year's
nine month results of $3,138,656 by 12.3%. An increase due to Collectibles
revenues of $343,000 was principally offset by declines in Sierra Club and
Nature Baby sales of $527,000 and $119,000, respectively. The Sierra Club
decrease was due in part by the loss of Barnes & Noble as a customer in the fall
of 1997.
For the three months ended September 30, 1998, the Company's sales
amounted to $1,034,654 representing a decrease of $390,809 compared to the prior
years three month results of $1,425,463 by 27.4%. Increased sales of
Collectibles of $162,000 were offset by declines of Sierra Club, Humane Society
and Nature Baby of $263,000, $132,000 and $172,000, respectively to result in
the quarter to quarter decline.
Gross Profit
For the nine months ended September 30, 1998, gross profit amounted to
$268,925 or 9.8% of sales. For the comparable period, gross profit amounted to
$1,566,527 or 49.9% of sales. The decline at gross margin resulted from the
revenue shortfall, the cost of a close-out of obsolete holiday product of
$230,000 and a
Page 13 of 16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
---------------------------------------------
Gross Profit (continued)
provision for obsolete and slow-moving inventory of $665,000. The Company, in
previous years during periods of revenue increases, sought to increase its
margins through quantity discounts on higher card production runs. the current
downtrend in revenues has now classified these inventories as slow-moving and
has resulted in the current quarter's increase in inventory reserves. The
inventory reserve will be evaluated quarterly based on actual and projected
sales.
For the three months ended September 30, 1998 a gross margin loss of
$85,080 was incurred compared to a gross margin profit of $633,107 for the
comparable prior year three month period. In addition to the decline
attributable to the revenue decline, an increase in inventory reserves of
$319,000 was established for slow-moving inventory.
Operating Expenses
For the nine months ended September 30, 1998, selling, shipping and
marketing expenses amounted to $949,751 reflecting an increase of $147,091
versus the prior year's level of $802,660 or 18.3%. Costs associated with the
new Collectibles line for advertising, commissions, and travel accounted for the
year to year increase.
For the three months ended September 30, 1998, selling, shipping and
marketing expenses amounted to $366,824 reflecting an increase of $22,209 over
the previous year's level of $344,615 or 6.4%. Decreased commissions were offset
by increases in advertising and travel costs associated with the new product
launch.
General and administrative expenses amounted to $1,451,431 for the nine
months ended September 30, 1998, reflecting an increase of $223,786 or 18.2%
versus the prior year period $1,227,645. Increased professional fees accounted
for 35% of the increase with the addition of personnel for the new Collectibles
line accounting for 40% of the year to year increase.
General and administrative expenses amounted to $524,098 for the three
months ended September 30, 1998, reflecting an increase of $86,737 or 19.8%
versus the prior year quarter of $437,361. Increased professional fees and the
addition of people for the new Collectibles line accounted for the year to year
increase.
Income
An operating loss of $2,132,257 or $.94 per share was incurred for the
nine months ended September 30, 1998. Interest and other income of $180,155
reduced the operating loss to result in a net loss before income taxes of
$1,952,107 or $.86 per share. For the prior year period, the net loss before
income taxes amounted to $342,024 or $.19 per share. Lower sales, increased
operating costs associated with the new Collectibles line, the close-out of
slow-moving inventory and the write-down of obsolete inventory resulted in the
Page 14 of 16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
---------------------------------------
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
---------------------------------------------
Income (continued)
nine month loss. Net loss for the nine months ended September 30, 1998 amounted
to $2,452,102 or $1.08 per share, compared to the prior year's net loss of
$564,024 or $.31 per share. During the nine month period a $500,000 valuation
allowance was placed on deferred tax assets. Under Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes", a valuation
allowance is recognized to offset a deferred tax asset if the eventual
realization of all or a portion of the asset is uncertain. Due to the loss for
the nine months ended September 30, 1998, the realization of tax benefits from
net operating loss carryforwards is not assured. The amount of the valuation
allowance will be reviewed and may be adjusted on a quarterly basis.
Balance Sheet
Total assets at September 30, 1998 amounted to $5,454,512 which reflected a
decrease versus the December 31, 1997 level of $8,036,000 by $2,581,488 or
32.1%. A decline in cash, inventories, prepaid assets, and receivables were
offset in part by increases in fixed assets, prepaid assets and royalties to
result in the period to period decline.
As of September 30, 1998 the Company had deferred tax assets amounting to
$450,000. Of this amount, $147,200 represented NOL carryforwards (which expire
in 2013) with the balance relating principally to reserves for inventory and
receivables. Management believes, at this time, that it is more likely than not
that the Company's future taxable income will be sufficient to utilize the NOL
deferred tax asset prior to its expiration date.
Total current liabilities amounted to $772,308 as of September 30, 1998 versus
the December 31, 1997 level of $806,000. The decrease was a result of the
paydown of commissions and trade payables offset by increases in royalties due.
Liquidity and Capital Resources
At September 30, 1998, the Company's working capital was $3,485,265 reflecting a
decrease of $1,920,735 versus working capital at December 31, 1997 of
$5,406,000. Cash of $96,932 was generated during the period from operating
activities primarily due to a reduction of accounts receivable. Cash of $151,836
was generated by investment activities during the period due primarily to the
sale of marketable securities. Cash of $118,348 was used to pay a note related
to the Corlett Collectibles acquisition. The Company remains liquid with a
current ratio of 5.5:1.
The present primary sources of the Company's liquidity has been cash internally
generated from operations, proceeds obtained by the Company through the private
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 8.5% as of September 30, 1998.
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
September 30, 1998, there were no borrowings under this line of credit.
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 15 of 16
<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 September 30, 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: November __, 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 16 of 16
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 2,258,382
<SECURITIES> 333
<RECEIVABLES> 955,598
<ALLOWANCES> (226,594)
<INVENTORY> 774,185
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0
3,134
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</TABLE>
