<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from___________to_____________________________________
Commission File Number 1-8912
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SBM INDUSTRIES, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 36-1805030
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1865 Palmer Avenue
Larchmont, NY 10538
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (914) 833-0649
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SAME
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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 Exchange Act during the past 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
-- --
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS: Check whether the registrant filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by court.
Yes __ No __
APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of
each of the issuer's classes of common equity, as of the latest practicable
date: $1.00 par value - 2,025,929 shares at April 27, 1998.
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SBM INDUSTRIES, INC.
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INDEX
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MARCH 31, 1998
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<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
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<S> <C> <C>
ITEM 1.
Consolidated Balance Sheet
March 31, 1998 1 & 2
Consolidated Statements of Income-
Three Months Ended March 31, 1998 and 1997 3
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1998 and 1997 4
Notes to Consolidated Financial Statements -
March 31, 1998 5
ITEM 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations -
March 31, 1998 6
PART II. OTHER INFORMATION 7
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PART I - FINANCIAL INFORMATION
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SBM INDUSTRIES, INC.
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CONSOLIDATED BALANCE SHEET - UNAUDITED
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MARCH 31, 1998
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A S S E T S
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CURRENT ASSETS:
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Cash $ 103,000
Accounts Receivable, Less Allowance for Doubtful
Accounts of $175,000 1,054,000
Inventories 3,157,000
Prepaid Expenses and Other Current Assets 245,000
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TOTAL CURRENT ASSETS 4,559,000
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PROPERTY, PLANT AND EQUIPMENT, AT COST:
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Land, Building and Improvements 1,235,000
Machinery and Equipment 1,037,000
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2,272,000
Less: Accumulated Depreciation 760,000
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PROPERTY, PLANT AND EQUIPMENT, NET 1,512,000
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INTANGIBLE ASSETS AND GOODWILL, NET 791,000
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TOTAL ASSETS $6,862,000
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SBM INDUSTRIES, INC.
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CONSOLIDATED BALANCE SHEET - UNAUDITED
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MARCH 31, 1998
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LIABILITIES AND SHAREHOLDERS' INVESTMENT
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<S> <C>
CURRENT LIABILITIES:
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Borrowings Under Lines of Credit $1,175,000
Accounts Payable and Accrued Expenses 1,340,000
Current Portion of Notes Payable 269,000
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TOTAL CURRENT LIABILITIES 2,784,000
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OTHER LIABILITIES:
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Notes Payable 871,000
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TOTAL LIABILITIES 3,655,000
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SHAREHOLDERS' INVESTMENT:
- ------------------------
Preferred Shares, $1 Par Value - 500,000 Shares
Authorized; Issued and Outstanding - 0 Shares -----
Common Shares, $1 Par Value - 5,000,000 Shares
Authorized; Issued and Outstanding -
2,026,000 Shares 2,026,000
Paid-in Surplus 4,344,000
Accumulated Deficit (3,163,000)
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TOTAL SHAREHOLDERS' INVESTMENT 3,207,000
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TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $6,862,000
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SBM INDUSTRIES, INC.
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CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
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FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
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<CAPTION>
1998 1997
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<S> <C> <C>
NET SALES $3,098,000 $2,861,000
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Cost of Sales 1,726,000 1,650,000
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GROSS PROFIT ON SALES 1,372,000 1,211,000
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OPERATING EXPENSES:
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Selling, General and Administrative 1,425,000 1,164,000
Depreciation and Amortization 83,000 82,000
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TOTAL OPERATING EXPENSES 1,508,000 1,246,000
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OPERATING LOSS (136,000) (35,000)
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OTHER INCOME (EXPENSES):
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Interest Expense, Net (48,000) (50,000)
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Loss Before Income Taxes (184,000) (85,000)
Provision For Income Taxes ----- -----
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NET LOSS $ (184,000) $ (85,000)
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PER SHARE (Note 1)
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Basic and Diluted:
Net Loss per Common Share $ (.09) $ (.04)
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WEIGHTED AVERAGE NUMBER OF COMMON SHARES
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Basic and Diluted 2,026,000 2,027,000
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SBM INDUSTRIES, INC.
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CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
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FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
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<CAPTION>
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(184,000) $ (85,000)
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Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 83,000 82,000
Changes in operating assets and liabilities:
Accounts receivable 401,000 998,000
Inventories (143,000) (70,000)
Prepaid expenses and other current assets (32,000) (22,000)
Accounts payable and accrued expenses (100,000) (549,000)
Deferred income ----- (18,000)
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Total Adjustments 209,000 421,000
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NET CASH PROVIDED BY OPERATING ACTIVITIES 25,000 336,000
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Fixed Assets (13,000) (18,000)
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NET CASH USED IN INVESTING ACTIVITIES (13,000) (18,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (Payment on) Revolving Line of Credit 50,000 (200,000)
Payment on Notes Payable (50,000) (56,000)
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NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES ----- (256,000)
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NET INCREASE IN CASH 12,000 62,000
CASH AT BEGINNING OF PERIOD 91,000 129,000
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CASH AT END OF PERIOD $103,000 $191,000
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</TABLE>
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SBM INDUSTRIES, INC.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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MARCH 31, 1998
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(1) Summary of Major Accounting Policies
------------------------------------
The consolidated financial statements heretofore presented have been prepared by
SBM Industries, Inc. ("the Company" or "SBM"), 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, although the Company believes
that the disclosures are adequate to make the information presented not
misleading. It is suggested that these consolidated financial statements be
read in conjunction with the financial statements and the notes thereto included
in the Company's latest annual report on Form 10-KSB. The interim figures
presented are unaudited and are subject to any adjustments which may result from
the year-end examination of the Company's financial statements. However, in the
opinion of management, the information furnished reflects all adjustments
necessary to fairly state the consolidated financial statements for the interim
periods presented.
Net income per share is computed based on the weighted average number of shares
outstanding during each period. The average number of shares used in the
computation of earnings per share was 2,026,000 for 1998 and 2,027,000 for 1997.
The profit and loss information for the interim periods presented are not
necessarily indicative of results to be expected for the year.
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SBM INDUSTRIES, INC.
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ITEM 2, MANAGEMENT'S DISCUSSION AND ANALYSIS
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OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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FOR THE THREE MONTHS ENDED MARCH 31, 1998
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THREE MONTHS ENDED MARCH 31, 1998
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COMPARED TO
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THREE MONTHS ENDED MARCH 31, 1997
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SALES. Sales from continuing operations increased $237,000, or 8.3%, to
$3,098,000 in the first three months of 1998. Star Struck's sales for the
period were $2,972,000, up $437,000, or 17%, from $2,535,000 for the first three
months of 1997. RC Manufacturing, Inc.'s sales of $126,000 showed a decrease of
$200,000, or 61%, from sales for the first three months of 1997 of $326,000.
GROSS PROFIT. Gross profit increased by $161,000 to $1,372,000 in the first
three months of 1998. Gross margin increased to 44.3% in the first three months
of 1998 compared to 42.3% for the same period in 1997. For the first three
months of 1998, Star Struck had a gross margin of 46%, while RC Manufacturing
showed a gross margin of 3%. These figures represent an increase in gross
margin for Star Struck and a substantial decrease in gross margin for RC
Manufacturing, Inc., compared to the same period in 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased $261,000 to $1,425,000 in the first three
months of 1998. As a percentage of sales, selling, general and administrative
expenses increased to 46% in the first three months of 1998 compared to 40.7%
for the same period in 1997. For the first three months of 1997, Star Struck's
selling, general and administrative expenses represented 43.1% of total sales,
while RC Manufacturing, Inc.'s and SBM's expenses were 2.6% and .3% of total
sales, respectively, for the first three months of 1998.
OPERATING PROFIT. Operating profit decreased $101,000 to show a loss of
$136,000 for the first three months of 1998.
NET INCOME. Net income for the first three months of 1998 decreased $99,000 to
show a loss of $184,000.
LIQUIDITY AND CAPITAL RESOURCES. The Company has $1,225,000 available in line
of credit agreements with two of its banks. These agreements for $1,000,000 and
$225,000 extend through May 1998 and January 1999, respectively. At March 31,
1998, the Company had $1,175,000 outstanding under these lines of credit.
The Company believes that it has adequate funds available to conduct and
continue its business and to repay the approximate $269,000 in long-term debt
which will mature in the next twelve months.
At March 31, 1998 net working capital was $1,775,000.
YEAR 2000 COMPLIANCE. The Company has addressed and evaluated the overall year
2000 issue. Necessary changes to the Company's computer systems have been
identified and are being implemented. Date sensitive computer programs that do
not properly recognize the year 2000 could generate incorrect data or cause a
system to fail, resulting in business interruption. Costs incurred, which were
immaterial relative to the year 2000 issue, have been expensed.
The year 2000 issue is expected to affect the systems of suppliers and vendors
with which the Company interacts. There can be no assurance that any potential
year 2000 noncompliance within the systems of these other companies will not
have a material adverse effect on the Company.
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PART II - OTHER INFORMATION
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SBM INDUSTRIES, INC.
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MARCH 31, 1998
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Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults upon Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27-Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter
ended March 31, 1998
SIGNATURES
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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.
SBM INDUSTRIES, INC.
Date: May 5, 1998 By: /s/ Peter Nisselson
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Peter Nisselson, President
Date: May 5, 1998 By: /s/ Kenneth Karlan
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Kenneth Karlan, Vice-President
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SBM
INDUSTRIES, INC.'S QUARTERLY REPORT TO STOCKHOLDERS FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997
<CASH> 103,000 0
<SECURITIES> 0 0
<RECEIVABLES> 1,229,000 0
<ALLOWANCES> 175,000 0
<INVENTORY> 3,157,000 0
<CURRENT-ASSETS> 4,559,000 0
<PP&E> 2,272,000 0
<DEPRECIATION> 760,000 0
<TOTAL-ASSETS> 6,862,000 0
<CURRENT-LIABILITIES> 2,784,000 0
<BONDS> 0 0
0 0
0 0
<COMMON> 2,026,000 0
<OTHER-SE> 1,181,000 0
<TOTAL-LIABILITY-AND-EQUITY> 6,862,000 0
<SALES> 3,098,000 2,861,000
<TOTAL-REVENUES> 3,098,000 2,861,000
<CGS> 1,726,000 1,650,000
<TOTAL-COSTS> 1,508,000 1,246,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 48,000 50,000
<INCOME-PRETAX> (184,000) (85,000)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (184,000) (85,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (184,000) (85,000)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> (.09) (.04)
</TABLE>
