SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -------- EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1997
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 number 0-20309
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TAPISTRON INTERNATIONAL, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1684918
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(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
6203 Alabama Highway
P.O. Box 1067
Ringgold, Georgia
-----------------
(Address of principal executive offices)
30736-1067
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(Zip Code)
(706) 965-9300
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(Registrant's telephone number, including area code)
Indicate by check mark 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
----- ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the most recent practicable date.
Class Outstanding at May 28, 1997
----------------------------- -------------------------------
Common Stock $.0004 Par Value 10,526,295
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TAPISTRON INTERNATIONAL, INC.
TABLE OF CONTENTS
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PAGE
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of July 31, 1996 and April 30, 1997 1
Condensed Consolidated Statements of Operations for the Three Months Ended
April 30, 1996 and 1997 and the Nine Months Ended April 30, 1996 and 1997 3
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended
April 30, 1996 and 1997 4
Notes to Condensed Consolidated Financial Statements 5
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 6
PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION 6
SIGNATURE 7
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TAPISTRON INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
Condensed from
Audited Financial
Statements Unaudited
July 31, 1996 April 30, 1997
------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash equivalents $ 17,149 $ 375,843
Receivables, net of allowances of $39,905 as of July 31, 1996
and April 30, 1997 119,872 171,288
Notes Receivable 600,000 410,000
Inventory 2,082,495 1,331,753
Prepayments 20,707 30,103
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Total current assets 2,840,223 2,318,988
PROPERTY AND EQUIPMENT, NET 877,269 607,294
OTHER ASSETS
Long-term receivables, net of allowances of $500,000 as of
July 31, 1996 and April 30, 1997 -- --
Patents and patent license 286,160 285,715
Other 12,886 12,138
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Total other assets 299,046 297,852
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TOTAL $4,016,538 $3,224,134
========== ==========
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The accompanying notes are an integral part of the financial statements.
1
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TAPISTRON INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Condensed from
Audited Financial
Statements Unaudited
July 31, 1996 April 30, 1997
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<S> <C> <C>
CURRENT LIABILITIES
Short-term debt $ 1,028,687 $ 0
Current Portion of long-term debt 4,729 1,802
Accounts payable 33,970 175,231
Accrued expenses 408,350 288,305
Customer deposits 280,000 367,987
------------ ------------
Total current liabilities 1,755,736 833,324
LIABILITIES SUBJECT TO SETTLEMENT UNDER
REORGANIZATION PROCEEDINGS 1,599,668 2,229,808
LONG-TERM DEBT 5,060 4,752
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred stock - $.001 par value - 2,000,000 shares
authorized; no shares issued and outstanding -- --
Common stock - $.0004 par value - 100,000,000 shares
authorized; 10,581,813 outstanding as of July 31, 1996
and April 30, 1997 4,233 4,233
Additional paid-in capital 22,899,108 22,899,108
Accumulated deficit (22,234,475) (22,734,298)
Treasury stock - 55,518 shares outstanding, at cost (12,792) (12,792)
------------ ------------
Total stockholders' equity 656,074 156,250
TOTAL $ 4,016,538 $ 3,224,134
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
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TAPISTRON INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended April 30, Nine months ended April 30,
---------------------------- ---------------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $ 265,979 $ 59,745 $ 559,846 $ 2,860,687
COST OF SALES 74,133 37,256 238,176 2,032,465
------------ ------------ ------------ ------------
Gross profit 191,846 22,489 321,670 828,221
OPERATING EXPENSES
Administrative expenses 590,756 609,558 1,304,658 1,264,831
Research and development 34,574 2,563 54,951 8,377
------------ ------------ ------------ ------------
625,330 612,121 1,359,609 1,273,209
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) (433,484) (589,632) (1,037,939) (444,987)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest expense (115,790) 0 (253,626) (54,837)
Interest income 6,757 0 19,930 2
Loss of disposal of asset (56,589) 0 (48,326) 0
------------ ------------ ------------ ------------
Other income (expense) (165,622) 0 (282,022) (54,836)
------------ ------------ ------------ ------------
NET INCOME (LOSS) ($ 599,106) ($ 589,632) ($ 1,319,961) ($ 499,823)
============ ============ ============ ============
EARNINGS PER SHARE
Net income (loss) (0.06) (0.06) (0.13) (0.05)
============ ============ ============ ============
Weighted average number of
shares outstanding 9,993,091 10,526,295 9,993,091 10,526,295
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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TAPISTRON INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
ine months ended April 30,
--------------------------
1996 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($1,319,961) ($ 499,823)
Adjustments to reconcile net income (loss) to net cash used by operating
activities:
Depreciation and amortization 337,805 130,706
Loss on disposal of property, plant, and equipment 45,085 0
Changes in operating assets and liabilities:
(Increase) decrease in receivables 924,339 138,584
(Increase) decrease in prepayments 59,740 (9,766)
(Increase) decrease in inventory 533,408 914,012
Increase (Decrease) in accounts payable and accrued expenses (182,505) 114,619
----------- -----------
Net cash provided by operating activities 397,911 788,332
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CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for other assets (8,655) (5,000)
Proceeds from sale of equipment 295,925 0
Capital expenditures (923,728) (17,440)
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Net cash (used by) investing activities (636,458) (22,440)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 933,371 599,970
Proceeds from issuance of common stock 155,000 0
Principal payments of debt (891,327) (1,007,167)
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Net cash provided by financing activities 197,044 (407,197)
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NET INCREASE (DECREASE) IN CASH EQUIVALENTS: (41,503) 358,694
Cash and cash equivalents - beginning of period 99,426 17,149
----------- -----------
Cash and cash equivalents - end of period $ 57,923 $ 375,843
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 227,778 $ 19,569
=========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Inventory reclassified to equipment $ 887,613 $ 0
Transfers from Fixed Assets to Inventory $ 0 $ 163,270
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
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TAPISTRON INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1997
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
In the opinion of the management of Tapistron International, Inc. ("Tapistron")
and Fabrication Center, Inc. ("FCI"), a wholly-owned subsidiary of Tapistron,
the accompanying unaudited condensed consolidated financial statements contain
all adjustments (consisting of only normal recurring adjustments, except as
noted elsewhere in the notes to the condensed consolidated financial statements)
necessary to present fairly its financial position as of April 30, 1997 and the
results of its operations for the three and nine months ended April 30, 1997 and
1996, and cash flows for the nine months ended April 30, 1997 and 1996. These
statements are condensed and therefore do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The statements should be read in conjunction with the
consolidated financial statements and footnotes included in the Company's Annual
Report on Form 10-K for the year ended July 31, 1996. The results of operations
for the three and nine months ended April 30, 1997 are not necessarily
indicative of the results to be expected for the full year.
NOTE 2 - EARNINGS PER SHARE
- ---------------------------
Earnings per common share is computed based on the weighted average number of
common shares and, when dilutive, common equivalent shares (stock options and
warrants) outstanding during each of the periods.
NOTE 3 - GOING CONCERN
- ----------------------
As shown in the accompanying financial statements, the Company has incurred
recurring losses from operations and, as a result, has experienced cash flow
problems. These factors raise substantial doubt about the Company's ability to
continue as a going concern. The Company's ability to continue as a going
concern is dependent first on its ability to raise additional capital to meet
its immediate working capital requirements and ultimately on its ability to
obtain profitable operating results.
NOTE 4 - INVENTORY
- ------------------
Inventory at April 30, 1997 consists of the following:
Raw Material $ 780,771
Work in Process 550,982
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$1,331,753
==========
The accompanying notes are an integral part of the financial statements.
5
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended April 30, 1996 and 1997
- ------------------------------------------
Cost of Sales as a percentage of sales increased from 27% in the three months
ended April 30, 1996 to 62% in the three months ended April 30, 1997. Certain
cost of sales were recorded in the fourth quarter for fiscal year ended July 31,
1996 that related to the third quarter ended April 30, 1996. Had these costs
been recorded in the three months ended April 30, 1996, cost of sales as a
percentage of sales would have been approximately 70% compared to 62% for the
three months ended April 30, 1997.
Nine Months Ended April 30, 1996 and 1997
- -----------------------------------------
Due to increased machine sales, revenues for the nine months ended April 30,
1997 were $2,860,687 an increase of 410% , compared to $559,846 for the nine
months ended April 30, 1996. Cost of sales as a percentage of sales increased
from 42% for the nine months ended April 30, 1996 to 71% for the nine months
ended April 30, 1997. Certain cost of sales were recorded in the fourth quarter
for fiscal year ended July 31, 1996 that related to the third quarter ended
April 30, 1996. Had these costs been recorded in the nine months ended April 30,
1996, cost of sales as a percentage of sales would have been approximately 70%
compared to 71% for the nine months ended April 30, 1997. Management projects
fiscal year end July 31, 1997 cost of sales as a percentage of sales to be
approximately 75%. Therefore, the 71% reported for nine months ended April 30,
1997 is in line with current year projections.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents totaled $375,843 as of April 30, 1997, compared to
$57,923 as of April 30, 1996. The increase in cash and cash equivalents were due
primarily to cash generated from operations, which totaled $788,332, and cash
proceeds from the issuance of debt, which was $599,970. This increase was
partially offset by cash used to make principal payments on debt ($1,007,167).
The Company is in the process of doing a private placement to provide the cash
for the Plan of Reorganization and for anticipated future operations. Management
believes that existing cash, anticipated cash generated from operations and the
issuance of additional shares of Tapistron's common stock will be sufficient to
satisfy the Company's currently anticipated cash requirements.
PART II. OTHER INFORMATION
A. Tapistron filed on March 14, 1997 the First Amended and Restated Plan of
Reorganization in the U.S. Bankruptcy Court Northern District, Atlanta
Division.
B. Tapistron filed on March 28, 1997 the Debtor's Amended and Restated
Disclosure Statement in the U.S. Bankruptcy Court Northern District,
Atlanta Division.
C. On June 3, 1997 the Court has extended the time frame to raise the
$2,500,000 for the recapitalization of the Company.
D. Deposits have been received for machines with anticipated completion prior
to year end.
6
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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,
Tapistron International, Inc.
-----------------------------
(Registrant)
Date: 6/10/97 /s/ J. Darwin Poe
--------------------- -----------------------------------------
J. Darwin Poe
(Signing on behalf of the registrant
as President and Chief Executive Officer)
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TAPISTRON INTERNATIONAL, INC., FOR THE NINE MONTHS
PERIOD ENDED APRIL 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> APR-30-1997
<CASH> 376
<SECURITIES> 0
<RECEIVABLES> 621
<ALLOWANCES> 40
<INVENTORY> 1,332
<CURRENT-ASSETS> 2,319
<PP&E> 1,347
<DEPRECIATION> 740
<TOTAL-ASSETS> 3,224
<CURRENT-LIABILITIES> 833
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 152
<TOTAL-LIABILITY-AND-EQUITY> 3,224
<SALES> 2,860
<TOTAL-REVENUES> 2,860
<CGS> 2,032
<TOTAL-COSTS> 2,032
<OTHER-EXPENSES> 1,273
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55
<INCOME-PRETAX> (500)
<INCOME-TAX> 0
<INCOME-CONTINUING> (500)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (500)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
