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 October 31, 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.
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(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
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(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
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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 December 8, 1997
----------------------------- -------------------------------
Common Stock $.0004 Par Value 34,785,611
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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, 1997 and October 31, 1997 1
Condensed Consolidated Statements of Operations for the Three Months Ended
October 31, 1996 and 1997 2
Condensed Consolidated Statements of Cash Flows for the Three Months Ended
October 31, 1996 and 1997 3
Notes to Condensed Consolidated Financial Statements 4
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 5
PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION 5
SIGNATURE 6
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TAPISTRON INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
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Condensed from
Audited Financial
Statements Unaudited
July 31, 1997 October 31, 1997
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CURRENT ASSETS
Cash and Cash equivalents $ 27,946 $ 543,858
Receivables, net of allowances of $39,905 as of July 31, 1997
and October 31, 1997 720,740 414,810
Notes Receivable 350,000 250,000
Inventory 1,231,002 1,783,788
Prepayments 102,453 122,593
Deferred income taxes 100,000 100,000
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Total current assets 2,532,141 3,215,049
PROPERTY AND EQUIPMENT, NET 564,324 531,858
OTHER ASSETS
Long-term receivables, net of allowances of $500,000 as of
July 31, 1997 and October 31, 1997 -- --
Patents and patent license 263,068 280,446
Deferred income taxes 1,900,000 1,900,000
Other 8,247 7,722
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Total other assets 2,171,315 2,188,168
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TOTAL $ 5,267,780 $ 5,935,076
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 0 $ 0
Current Portion of long-term debt 4,315 3,192
Accounts payable 178,068 71,393
Accrued expenses 655,621 535,680
Customer deposits 936,026 137,987
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Total current liabilities 1,774,030 748,251
LIABILITIES SUBJECT TO SETTLEMENT UNDER
REORGANIZATION PROCEEDINGS 2,520,557 1,915,041
LONG-TERM DEBT 744 744
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, 1997
and 27,248,479 outstanding as of October 31, 1997 4,233 10,899
Additional paid-in capital 22,899,108 25,392,441
Accumulated deficit (21,918,100) (22,119,509)
Treasury stock - 55,518 shares outstanding, at cost (12,792) (12,792)
------------ ------------
Total stockholders' equity 972,449 3,271,039
TOTAL $ 5,267,780 $ 5,935,076
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The accompanying notes are an integral part of the financial statements.
1
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TAPISTRON INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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Three months ended Three months ended
October 31,1996 October 31, 1997
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SALES $1,561,874 $1,249,830
COST OF SALES 1,107,393 833,544
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Gross profit 454,481 416,286
OPERATING EXPENSES
Administrative expenses 340,913 647,420
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340,913 647,420
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OPERATING INCOME (LOSS) 113,568 (231,134)
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OTHER INCOME (EXPENSE)
Interest expense (35,518) 0
Interest income 2 29,725
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Other income (expense) (35,516) 29,725
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NET INCOME (LOSS) $78,052 ($201,409)
EARNINGS PER SHARE
Net income (loss) 0.01 (0.01)
Weighted average number of
shares outstanding 10,012,390 22,137,394
</TABLE>
The accompanying notes are an integral part of the financial statements.
2
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TAPISTRON INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Three months ended October 31,
1996 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 78,052 ($ 201,409)
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 50,070 36,781
Changes in operating assets and liabilities:
(Increase) decrease in receivables (708,833) 405,930
(Increase) decrease in prepayments (4,401) (20,140)
(Increase) decrease in inventory 875,207 (552,786)
Increase (Decrease) in accounts payable and accrued expenses 133,395 (227,739)
Increase (Decrease) in customer deposits 0 (798,039)
Increase (Decrease) in accounts payable and accrued expenses,
which are subject to settlement under a plan of reorganization 0 (605,516)
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Net cash provided by (used in) operating activities 423,490 (1,962,920)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for other assets 0 (18,238)
Capital expenditures (2,033) (2,930)
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Net cash (used in) investing activities (2,033) (21,168)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 99,970 0
Proceeds from issuance of common stock 0 2,500,000
Principal payments of debt (987) 0
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Net cash provided by financing activities 98,983 2,500,000
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NET INCREASE (DECREASE) IN CASH EQUIVALENTS: 520,440 515,912
Cash and cash equivalents - beginning of period 17,149 27,946
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Cash and cash equivalents - end of period $ 537,589 $ 543,858
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 137 $ 0
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SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Transfers from Fixed Assets to Inventory $ 163,270 $ 0
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</TABLE>
The accompanying notes are an integral part of the financial statements.
3
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TAPISTRON INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
October 31, 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 October 31, 1997 and
the results of its operations for the three months ended October 31, 1996 and
1997, and cash flows for the three months ended October 31, 1996 and 1997. 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, 1997. The results of operations
for the three months ended October 31, 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 - INVENTORY
- ------------------
Inventory at October 31, 1997 consists of the following:
Raw Material $651,494
Work in Process 1,132,293
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$1,783,788
4
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended October 31, 1996 and 1997
- --------------------------------------------
Revenues for the three months ended October 31, 1997 ("1997 Three Months") were
$1,249,830 as compared to $1,561,874 for the three months ended October 31, 1996
("1996 Three Months"), a decrease of 20.0%. This decrease in sales is due to the
cyclical nature of the business and the Company expects overall sales for the
fiscal year to exceed the previous years sales.
Cost of sales as a percentage of sales decreased to 66.7% for the 1997 Three
Months from 70.9% for the 1996 Three Months. This decrease is result of
continuing efforts to reduce and contain costs in the manufacturing of CYP
machines.
Operating expenses consist of administrative expenses. Administrative expenses
increased to $647,420 in the 1997 Three Months from $340,913 in the 1996 Three
Months, a 89.9% increase. This increase is a result of the Company expanding its
manufacturing, and sales and marketing efforts, and to further develop the
technologies of the CYP machine.
Interest expense decreased to $0 for the 1997 Three Months from $35,518 for the
1996 Three Months. Interest income increased to $29,725 for the 1997 Three
Months from $2 for the 1996 Three Months as the Company invested the proceeds
from its private placement.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 1997, the Company had working capital of $2,466,798, an
increase of $1,708,687. This increase is primarily a result of the $2,500,000
proceeds that the Company received from a private placement. As of October 31,
1997, the Company had total cash of $543,858, up from $27,946 at July 31, 1997.
Cash used in operations was $1,962,920. The Company reduced its liabilities
which are subject to the Plan of Reorganization by $605,516, in addition to
administrative claims of $279,299.Cash used in investing activities was $21,168.
Cash provided by financing activities was $2,500,000. Financing activities
included proceeds of $2,500,000 from the issuance of the Company's common stock.
Management believes the existing cash and anticipated cash generated from
operations will be sufficient to satisfy the Company's future cash requirements.
PART II. OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule (Electronic filing only).
(b) No reports on Form 8-K were filed by Registrant during the quarterly period
ended October 31, 1997.
5
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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.
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(Registrant)
Date: 12-8-97 /s/ J. Darwin Poe
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J. Darwin Poe
(Signing on behalf of the registrant
as President and Chief Executive Officer)
6
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TAPISTRON INTERNATIONAL, INC., FOR THE THREE MONTHS
PERIOD ENDED OCTOBER 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> JUL-31-1998
<PERIOD-START> AUG-01-1997
<PERIOD-END> OCT-31-1997
<CASH> 544
<SECURITIES> 0
<RECEIVABLES> 455
<ALLOWANCES> 40
<INVENTORY> 1,784
<CURRENT-ASSETS> 3,215
<PP&E> 1,350
<DEPRECIATION> 818
<TOTAL-ASSETS> 5,935
<CURRENT-LIABILITIES> 748
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0
0
<COMMON> 10
<OTHER-SE> 3,261
<TOTAL-LIABILITY-AND-EQUITY> 5,935
<SALES> 1,250
<TOTAL-REVENUES> 1,250
<CGS> 834
<TOTAL-COSTS> 834
<OTHER-EXPENSES> 647
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (30)
<INCOME-PRETAX> (201)
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<NET-INCOME> (201)
<EPS-PRIMARY> (.01)
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</TABLE>
