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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: September 30, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
Commission file number 1-8958
GOLD SECURITIES CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
IDAHO 91-1224178
(State of Incorporation) (I.R.S. Employer Identification No.)
65 Railroad Avenue, Ridgefield, New Jersey 07657
(Address of Principal Executive Offices)
(201) 941-6550
(Registrant's Telephone Number)
Indicate by checkmark 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 ___
As of November 15, 1995, there were 18,726,189 shares of Common Stock
outstanding.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
See pages F-1 through F-5.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
On July 24, 1995 the Company acquired Evolutions, Inc., a New Jersey
corporation ("EVI"), which is a majority owned subsidiary of PTI Plastics, Inc.,
a Delaware corporation ("PTIP"), which is, in turn, a wholly owned subsidiary of
Pure Tech International, Inc., a Delaware corporation ("PTI"). Since the
consummation of the Company's transaction with EVI, EVI is deemed to have become
the reporting company for financial reporting purposes and the Company's
financial statements now show historical information only for EVI. References
to the Company with respect to historical financial information refer to such
information for EVI. Financial information for the three and nine month periods
ended September 30, 1995 consolidates information for the Company, EVI and
subsidiaries following consummation of the EVI transaction on July 24, 1995. The
following discussion and analysis should be read in conjunction with the
Financial Statements and notes thereto appearing elsewhere herein.
Pursuant to an Agreement and Plan of Merger dated July 21, 1995 (the
"Agreement"), on July 24, 1995, the Company acquired EVI, a New Jersey
corporation. EVI is involved in the manufacture and marketing of casual apparel
made of recycled materials. The transaction was consummated by merging a wholly
owned subsidiary of the Company into EVI.
In connection with the Agreement, Messrs. Howard Michaelson and Gordon Hawk
resigned from the Company's Board. Michael Nafash, President of EVI, was
elected to the Company's Board and was appointed the Company's President and
Chief Executive Officer. Robert O'Brien will remain as a Director of the
Company, but has resigned as the Company's CEO. The parties agreed that upon
meeting the requirements of Rule 14(f) under the Securities Exchange Act of
1934, David C. Katz, President of PTI, and Paul Litwinczuk, an executive officer
of PTI, would be elected to the Company's Board.
Under the Agreement, in exchange for the merger, the holders of EVI stock
received an aggregate of 10,000,000 shares of the Company's Common Stock, as
follows: 8,800,000 shares to PTIP, 800,000 shares to Mr. Nafash and 200,000 to
each of Messrs. Katz and Litwinczuk. An additional 88,851,174 shares of Common
Stock will be issued to these parties and certain other parties upon
shareholders' approval of an amendment to the Company's certificate of
incorporation increasing the number of shares available for issuance to allow
such additional issuance. As a result of this transaction, PTIP currently holds
approximately 47% of the Company's Common Stock. Upon the issuance of the
additional Common Stock contemplated
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under the Agreement, PTIP will hold approximately 75% of the Company's
outstanding Common Stock. Mr. Nafash owns approximately 4.3% of the Company's
Common Stock (6.7% upon the issuance of the additional shares), and Messrs. Katz
and Litwinczuk each own approximately 1.0% (1.7% upon the issuance of the
additional shares).
Results of Operations
The Company had net revenues of $43,705 and $309,910 for the three and nine
month periods ended September 30, 1995 as compared to $8,987 and $106,434 for
the three and nine month periods ended September 30, 1994. Net losses for the
current three and nine month periods were $155,479 and $243,787, or $.01 and
$.02 per share as compared to losses of $22,767 and $207,767, or $15.89 and
$144.99 per share for the three and nine month periods ended September 30, 1994.
Liquidity and Capital Resources
The Company had a working capital deficit of $2,123,562 at September 30,
1995, compared to a working capital surplus of $455,507 at December 31, 1994.
The current working capital deficit is due primarily to a recorded liability of
approximately $2,700,000 due to investors that will be eliminated upon issuance
of Company common stock at such time as the number of authorized shares of the
Company is increased as per the Agreement and Plan of Merger dated July 21,
1994, see above.
The Company has borrowed $150,000 from Bear, Stearns Securities Corp.,
against marketable securities owned by the Company on deposit in a brokerage
margin account. The Company has also borrowed $796,000 from related parties and
issued demand promissory notes in return. These notes bear interest at the rate
of 12% per annum.
Inflation
The Company has not been materially affected by the impact of inflation.
PART I: OTHER INFORMATION
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Item 5. Other Information.
Pursuant to an Agreement and Plan of Merger dated July 21, 1995 (the
"Agreement"), on July 24, 1995, the Company acquired EVI. EVI is involved in
the manufacture and marketing of casual apparel made of recycled materials. The
transaction was consummated by merging a wholly owned subsidiary of the Company
into EVI.
In connection with the Agreement, Messrs. Howard Michaelson and Gordon Hawk
resigned from the Company's Board. Michael Nafash, President of EVI, was
elected to the Company's Board and was appointed the Company's President and
Chief Executive Officer. Robert O'Brien will remain as a Director of the
Company, but has resigned as the Company's CEO. The parties agreed that upon
meeting the requirements of Rule 14(f) under the Securities Exchange Act of
1934, David C. Katz, President of PTI, and Paul Litwinczuk, an executive officer
of PTI, would be elected to the Company's Board.
Under the Agreement, in exchange for the merger, the holders of EVI stock
received an aggregate of 10,000,000 shares of the Company's Common Stock, as
follows: 8,800,000 shares to PTIP, 800,000 shares to Mr. Nafash and 200,000 to
each of Messrs. Katz and Litwinczuk. An additional 88,851,174 shares of Common
Stock will be issued to these parties upon shareholders' approval of an
amendment to the Company's certificate of incorporation increasing the
authorized number of shares to allow such additional issuance. As a result of
this transaction, PTIP currently holds approximately 47% of the Company's Common
Stock. Upon the issuance of the additional Common Stock contemplated under the
Agreement, PTIP will hold approximately 75% of the Company's outstanding Common
Stock. Mr. Nafash owns approximately 4.3% of the Company's Common Stock (6.7%
upon the issuance of the additional
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shares), and Messrs. Katz and Litwinczuk each own approximately 1.0% (1.7% upon
the issuance of the additional shares).
On September 27, 1995, Terrence J. Dunne resigned as the Company's principal
auditor. Mr. Dunne had been the principal auditor of the Company since March
1995. On the same date, the Company's Board of Directors accepted Mr. Dunne's
resignation and appointed Holtz Rubenstein & Co., LLP to be its principal
independent auditors.
Also on September 27, 1995, pursuant to an agreement of the same date (the
"DCI Agreement"), Kidsview, Inc., a New Jersey corporation ("KVI") acquired
certain assets (the "Assets") from Direct Connect International, Inc., a
Delaware corporation ("DCI"). KVI is a wholly owned subsidiary of EVI. The
Assets consist of DCI's business to the extent that it relates to manufacturing,
promoting and selling Zoo Borns and Tea Bunnies brand toy animals, including the
marks KIDSVIEW, ZOO BORNS, and TEA BUNNIES.
In consideration for the purchase, EVI, among other things, released DCI of
an aggregate of $750,000 in indebtedness to EVI. The DCI Agreement provides
that DCI shall again become liable for repayment of such indebtedness upon the
exercise by DCI of an option to purchase 80% of the common stock of KVI. This
option expires on December 31, 1995, and became exercisable on October 31,
1995. As of the date of this report, no action has been taken by DCI to
exercise this option. In addition, the Company agreed to issue to DCI 1,500,000
shares of its Common Stock, which issuance is contingent upon shareholders'
approval of a proposal to increase the number of shares the Company is
authorized to issue. Up to an additional 4,000,000 shares of the Company's
Common Stock will be issued to DCI if, over a period of three years, certain net
sales and earnings tests are met in connection with the business acquired from
DCI.
Under terms of the DCI Agreement, KVI and DCI also entered into a management
agreement pursuant to which DCI will make available to KVI Peter Schneider,
DCI's President, to manage the Assets. The management agreement provides for a
maximum monthly fee of up to $100,000. The first $150,000 of management fees
incurred will be offset against a $350,000 note payable to EVI by DCI. DCI was
conditionally released from the balance of the note, which has been attributed
to additional consideration for the acquired assets. The management agreement
has a term of one-year, subject to two automatic one-year extensions if certain
net sales and earnings tests are met.
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GOLD SECURITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
1995 1994
------------- -----------------
(unaudited) (Derived from
audited financial
ASSETS statements)
------------- -----------------
CURRENT ASSETS
Cash and cash equivalents $ 3,786 $ 22,713
Investments in available-for sales
securities 1,209,595 279,384
Accounts receivable 21,077 -
Due from contractor 199,195 197,864
Inventory 59,000 9,000
Notes receivable - related party 40,000 40,000
Prepaid fees and other expenses 199,000 -
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1,931,653 548,961
PROPERTY AND EQUIPMENT, net of
accumulated depreciation of $3,153 & $1,653
respectively 11,076 6,611
Security deposits - 950
Goodwill, net of amortization of $1,646 270,975 -
Licenses 1,025,000 -
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$3,038,704 $ 556,522
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 97,834 $ 78,954
Loans payable 189,500 14,500
Due to related parties 796,000 -
Due to investors 2,696,881 -
Due to DCI 75,000 -
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3,855,215 93,454
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STOCKHOLDERS' EQUITY
Common stock, $10 par value; 100,000
shares authorized; 1,000 shares issued
and outstanding - 10,000
Common stock, no par value, 50,000,000
shares authorized, 18,726,189 and
8,606,189 issued and outstanding at
September 30, 1995 and December 31,
1994 respectively. 320,154 -
Additional paid-in capital 300,000 865,000
Deficit (510,327) (341,538)
Unrealized holding (loss) on securities
available-for-sale (926,338) (70,394)
---------- ---------
(816,511) 463,068
$3,038,704 $ 556,522
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GOLD SECURITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
NINE MONTHS NINE MONTHS THREE MONTHS THREE MONTHS
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
REVENUES $ 309,910 $ 106,434 $ 43,705 $ 8,987
COSTS AND EXPENSES:
Cost of sales 229,822 165,659 46,140 2,732
Selling, general
and administrative 188,301 145,042 49,023 27,522
---------- --------- ---------- --------
418,123 310,701 95,163 30,254
---------- --------- ---------- --------
OPERATING LOSS (108,213) (204,267) (51,458) (21,267)
---------- --------- ---------- --------
OTHER:
Loss on sale of
securities 49,697 - 21,227 -
Interest expense 37,794 3,500 7,794 1,500
Interest income (26,917) - - -
---------- --------- ---------- --------
60,574 3,500 29,021 1,500
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NET LOSS $ (168,787) $(207,767) $ (80,479) $(22,767)
========== ========= ========== ========
NET LOSS PER SHARE $ (0.02) $ (144.99) $ (0.01) $ (15.89)
========== ========= ========== ========
Weighted average
number of shares
of common stock
outstanding 11,070,511 1,433 15,682,711 1,433
========== ========= ========== ========
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GOLD SECURITIES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
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<CAPTION>
NINE MONTHS NINE MONTHS THREE MONTHS THREE MONTHS
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (168,787) $(207,767) $ (80,479) $(22,767)
----------- --------- --------- --------
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation & Amortization 3,146 - 2,146 -
Non-cash compensation - 25,000 - -
Loss on sale of securities 49,697 - 21,227 -
Changes in operating assets - - - -
and liabilities: - - - -
(Increase)decrease in assets:
Accounts receivable (21,077) - (13,510) -
Due from contractor (1,331) - 4,957 -
Inventory (50,000) - - 9,000
Notes receivable - related party - - - -
Prepaid fees and other expenses (3,000) - 434 -
Security deposits 950 (950) 950 (950)
Increase(decrease) in liabilities:
Accounts payable and accrued
expenses 14,281 17,250 3,333 (13,324)
----------- --------- --------- --------
Total adjustments (7,334) 41,300 19,537 (5,274)
----------- --------- --------- --------
Net cash used in operating activities (176,121) (166,467) (60,942) (28,041)
----------- --------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to equipment and fixtures (5,965) (7,413) - (7,413)
Increase in Goodwill (75,000) (75,000)
Proceeds from sales of securities 97,148 - - -
Purchases of available-
for-sale securities (4,000) - - -
Increase in loan receivable - - - -
Repayment of loan receivable - - - -
Increase in note receivable (1,146,000) (100,805) (350,000) (50,805)
Increase in cash from acquisitions 20,011 20,011
----------- --------- --------- --------
Net cash provided by (used in)
investing activities (1,113,806) (108,218) (404,989) (58,218)
----------- --------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loan payable 175,000 - 160,000 -
Loan from related party 796,000 44,000 - (10,000)
Proceeds from issuance of stock 300,000 881,980 300,000 731,980
----------- --------- --------- --------
Net cash provided by
financing activities 1,271,000 925,980 460,000 721,980
----------- --------- --------- --------
Net increase (decrease) in cash (18,927) 651,295 (5,931) 635,721
Cash and cash equivalents
at beginning of year 22,713 0 9,717 15,574
----------- --------- --------- --------
Cash and cash equivalents
at end of period $ 3,786 $ 651,295 3,786 651,295
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GOLD SECURITIES CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(unaudited)
SEPTEMBER 30, 1995
1. The balance sheet as of September 30, 1995 and the statements of operations
and statements of cash flows for the nine months and three months ended
September 30, 1995 and 1994 have been prepared by the Company without
audit. In the opinion of management, all adjustments (which include only
normally recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at September 30, 1995 & 1994
and for all periods presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial
statements be read in conjunction with the audited financial statements of
Evolutions, Inc. for the year ended December 31, 1994 included in the form
8-K filed. The results of operations for the periods ended September 30,
1995 & 1994 are not necessarily indicative of the operating results for the
full year.
2. On July 24, 1995, the Company acquired Evolutions, Inc., a New Jersey
corporation, which is a majority owned subsidiary of PTI Plastics, Inc., a
wholly owned subsidiary of Pure Tech International, Inc., a Delaware
corporation. Evolutions is involved in the manufacture and marketing of
casual apparel made from recycled materials. The transaction was
consummated by merging a wholly owned subsidiary of the Company into
Evolutions, Inc.
Under the Agreement, in exchange for the merger, the holders of Evolutions,
Inc. received an aggregate of 10,000,000 shares of the Company's Common
Stock. An additional 88,851,174 shares of Common Stock will be issued to
the Evolutions Shareholders upon shareholder approval of an amendment to the
Company's certificate of incorporation increasing the authorized number of
shares to allow such an issuance. The value of the additional 88,851,174
shares to be issued, approximately $2,700,000, is included in current
liabilities in the accompanying financial statements as of September 30,
1995.
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GOLD SECURITIES CORPORATION AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(unaudited)
SEPTEMBER 30, 1995
3. On September 27, 1995, pursuant to an agreement of the same date, Kidsview
Inc., a New Jersey company and a wholly owned subsidiary of Evolutions,
Inc., acquired certain assets from Direct Connect International, Inc. (DCI),
a Delaware corporation. The assets consist of DCI's business to the extent
that it relates to manufacturing, promoting and selling Zoo Borns and Tea
Bunnies brand toy animals, including the marks KIDSVIEW, ZOO BORNS and TEA
BUNNIES.
In consideration of the purchase, Evolutions, among other things, released
DCI of an aggregate of $750,000 in indebtedness to Evolutions. The DCI
agreement provides that DCI shall again become liable for repayment of such
indebtedness upon the exercise by DCI of an option to purchase 80% of the
common stock of Kidsview. This option expires on December 31, 1995, and
became exercisable on October 31, 1995. As of the date of this report, no
action has been taken by DCI to exercise this option. In addition, the
company agreed to issue to DCI 1,500,000 shares of its Common Stock, which
issuance is contingent upon shareholders' approval of a proposal to increase
the number of shares the Company is authorized to issue. The value of the
1,500,000 shares to be issued, approximately $75,000, is included in current
liabilities in the accompanying financial statements as of September 30,
1995. Up to an additional 4,000,000 shares of the Company's Common Stock
will be issued to DCI if, over a period of three years, certain net sales
and earnings tests are met in conjunction with the business acquired from
DCI.
Under terms of the DCI agreement, Kidsview and DCI also entered into a
management agreement pursuant to which DCI will make available to Kidsview,
Peter Schneider, DCI's President to manage the Assets. The management
agreement provides for a maximum monthly fee of $100,000. The first
$150,000 of management fees incurred will be offset against a $350,000 note
payable to EVI by DCI. DCI was conditionally released from the balance of
the note, which has been attributed to additional consideration for the
acquired assets. The management agreement has a term of one-year, subject
to two automatic one-year extensions if certain net sales and earnings
tests are met.
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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.
GOLD SECURITIES CORPORATION
By: /s/ Michael Nafash
-------------------------------------
Michael Nafash
President and Chief Financial Officer
Date: December 7, 1995
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