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 January 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.
-----------------------------
(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
--------------
(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 March 3, 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 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of July 31, 1996 and January 31, 1997 1
Condensed Consolidated Statements of Operations for the Three Months Ended
January 31, 1996 and 1997 and the Six Months Ended January 31, 1996 and
1997 3
Condensed Consolidated Statements of Cash Flows for the Six Months Ended
January 31, 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 6 - Exhibits and Reports on 8-K 9
SIGNATURE 10
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TAPISTRON INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
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<CAPTION>
Condensed from
Audited Financial
Statements Unaudited
July 31, 1996 January 31, 1997
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CURRENT ASSETS
Cash and Cash equivalents $ 17,149 $1,164,406
Receivables, net of allowances of $39,905 as of July 31, 1996
and January 31, 1997 119,872 491,436
Notes Receivable 600,000 520,000
Inventory 2,082,495 959,175
Prepayments 20,707 25,735
---------- ----------
Total current assets 2,840,223 3,160,752
PROPERTY AND EQUIPMENT, NET 877,269 632,131
OTHER ASSETS
Long-term receivables, net of allowances of $500,000 as of
July 31, 1996 and January 31, 1997 -- --
Patents and patent license 286,160 280,715
Other 12,886 12,138
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Total other assets 299,046 292,852
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TOTAL $4,016,538 $4,085,735
========== ==========
</TABLE>
See Accompanying Notes.
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TAPISTRON INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
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<CAPTION>
Condensed from
Audited Financial
Statements Unaudited
July 31, 1996 January 31, 1997
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CURRENT LIABILITIES
Short-term debt $ 1,028,687 $ 1,278,657
Current Portion of long-term debt 4,729 2,926
Accounts payable 33,970 14,690
Accrued expenses 408,350 303,745
Customer deposits 280,000 130,000
------------ ------------
Total current liabilities 1,755,736 1,730,018
LIABILITIES SUBJECT TO SETTLEMENT UNDER
REORGANIZATION PROCEEDINGS 1,599,668 1,605,083
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 January 31, 1997 4,233 4,233
Additional paid-in capital 22,899,108 22,899,108
Accumulated deficit (22,234,475) (22,144,666)
Treasury stock - 55,518 shares outstanding, at cost (12,792) (12,792)
------------ ------------
Total stockholders' equity 656,074 745,882
TOTAL $ 4,016,538 $ 4,085,735
============ ============
</TABLE>
See Accompanying Notes.
-2-
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TAPISTRON INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended January 31, Six months ended January 31,
------------------------------ ----------------------------
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $ 252,762 $ 1,239,068 $ 443,182 $ 2,800,942
COST OF SALES 137,353 887,817 313,357 1,995,210
------------ ------------ ------------ -----------
Gross profit 115,409 351,252 129,825 805,733
OPERATING EXPENSES
Administrative expenses 569,244 319,739 713,901 655,273
Research and development 7,208 436 18,671 5,815
------------ ------------ ------------ -----------
576,452 320,175 732,572 661,088
------------ ------------ ------------ -----------
OPERATING INCOME (LOSS) (461,043) 31,077 (602,747) 144,645
------------ ------------ ------------ -----------
OTHER INCOME (EXPENSE)
Interest expense (65,964) (19,319) (116,400) (54,837)
Interest income 0 0 0 2
------------ ------------ ------------ -----------
Other income (expense) (65,964) (19,319) (116,400) (54,836)
------------ ------------ ------------ -----------
NET INCOME (LOSS) ($ 527,007) $ 11,758 ($ 720,853) $ 89,809
============ ============ ============ ============
EARNINGS PER SHARE
Net income (loss) (0.05) 0.00 (0.07) 0.01
============ ============ ============ ============
Weighted average number of
shares outstanding 9,681,813 10,526,295 9,681,813 10,526,295
============ ============ ============ ============
</TABLE>
See Accompanying Notes.
-3-
<PAGE>
TAPISTRON INTERNATIONAL, INC.
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended January 31,
----------------------------
1996 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 720,853) $ 89,809
Adjustments to reconcile net income (loss) to net cash used by
operating activities:
Depreciation and amortization 227,701 90,462
(Gain) on disposal of property, plant, and equipment (13,025) 0
Changes in operating assets and liabilities:
(Increase) decrease in receivables 661,751 (291,564)
(Increase) decrease in prepayments 8,504 (5,396)
(Increase) decrease in inventory 761,491 1,286,590
Increase (Decrease) in accounts payable and accrued
expenses (130,754) (268,470)
----------- -----------
Net cash provided by operating activities 794,815 901,431
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CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for other assets (3,200) 0
Proceeds from sale of equipment 13,425 0
Capital expenditures (919,533) (2,033)
----------- -----------
Net cash (used by) investing activities (909,308) (2,033)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt 253,332 599,970
Principal payments of debt (231,905) (352,111)
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Net cash provided by financing activities 21,427 247,859
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NET INCREASE IN CASH EQUIVALENTS: (93,066) 1,147,257
Cash and cash equivalents - beginning of period 99,426 17,149
----------- -----------
Cash and cash equivalents - end of period $ 6,360 $ 1,164,406
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 73,141 $ 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>
See Accompanying Notes.
-4-
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TAPISTRON INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
January 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 consolidated condensed 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 January 31, 1997 and
the results of its operations for the three and six months ended January 31,
1997 and 1996, and cash flows for the six months ended January 31, 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 six months ended January 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 - 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 January 31, 1997 consists of the following:
Raw material $ 796,737
Work in process 162,438
--------
$ 959,175
=========
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<PAGE>
MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
THREE MONTHS ENDED JANUARY 31, 1997 AND 1996 SALES
- --------------------------------------------------
The Company's second quarter sales of $1,239,068 increased 390% over second
quarter sales in the prior fiscal year.
International sales accounted for approximately 98% of the Company's sales in
the second quarter of fiscal year 1997 as compared to 35% in the second quarter
of fiscal year 1996. This growth in machines sales reflects the increased demand
for Tapistron style carpet production capacity from our existing customer base.
The Company expects both domestic and foreign sales growth for the fiscal year
ending July 31, 1997 to be positively impacted due to increased marketing
efforts by the Company.
COST OF SALES
- -------------
Cost of sales as a percentage of sales increased 17.3% in the second quarter of
1997 as compared to the second quarter for the prior fiscal year. The decline in
gross margin in the current quarter is a result of the company paying a premium
for the delivery of parts as compared to prior reduced contracts favorable in
pricing and delivery.
ADMINISTRATIVE EXPENSES
- -----------------------
Administrative expenses were 26% of sales in the second quarter of fiscal year
1997, compared to 225% in the same period of fiscal year 1996. This decrease
resulted from downsizing and better utilization of our resources.
-6-
<PAGE>
SIX MONTHS ENDED JANUARY 31, 1997 AND 1996
- ------------------------------------- ----
SALES
- -----
The Company's sales for the six months ended January 31, 1997 were $2,800,942,
which represented a 532% increase from the same period of the prior fiscal year.
International sales accounted for approximately 63% of the Company's sales for
the six months ended January 31, 1997, as compared to 24% for the same period of
the prior fiscal year. The sales growth reflects multi-machine sales into the
Pacific rim, along with domestic sales.
COST OF SALES
- -------------
Cost of sales as a percentage of sales for the six months ended January 31, 1997
was 71.2% as compared to 70.7% for the same period of the prior fiscal year.
ADMINISTRATIVE EXPENSES
- -----------------------
Administrative expenses were 23% of sales for the six months ended January
31, 1997, compared to 161% for the same period of the prior fiscal year. The
decrease is a direct result of cutting S. G. & A costs.
-7-
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LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Cash and cash equivalents totaled $1,164,406 as of January 31, 1997, compared to
$6,360 as of January 31, 1996. The increase in cash and cash equivalents were
due primarily to cash generated from operations, which totaled $901,431, 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 ($352,111).
Cash requirements other than normal operating expenses are anticipated to
implement the Plan of Reorganization. The Company is in the process of doing a
public offering 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.
-8-
<PAGE>
PART II. OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule (Electronic filing only).
(b) The Company filed a current report on Form 8-K on November 25, 1996
related to the filing of a Plan of Reorganization with the United States
Bankruptcy Court. The 8-K also disclosed that the Company has entered into
an investment banking agreement designed to raise $2.5 million to
recapitalize the Company.
-9-
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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: March 13, 1997 /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 SIX MONTHS PERIOD
ENDED JANUARY 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-START> AUG-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 1,164
<SECURITIES> 0
<RECEIVABLES> 531
<ALLOWANCES> 40
<INVENTORY> 959
<CURRENT-ASSETS> 3,161
<PP&E> 1,332
<DEPRECIATION> 700
<TOTAL-ASSETS> 4,086
<CURRENT-LIABILITIES> 1,730
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 742
<TOTAL-LIABILITY-AND-EQUITY> 4,086
<SALES> 2,801
<TOTAL-REVENUES> 2,801
<CGS> 1,995
<TOTAL-COSTS> 1,995
<OTHER-EXPENSES> 661
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55
<INCOME-PRETAX> 90
<INCOME-TAX> 0
<INCOME-CONTINUING> 90
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
