UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C., 20549
FORM 10Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-20309
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TAPISTRON INTERNATIONAL, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-1684918
------- ----------
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
6203 Alabama Highway
P. O. Box 1067
Ringgold, Georgia
30736-1067
(Address of principal executive offices)
(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 7, 2000
- ----------------------------- ----------------------------
Common Stock $.0004 Par Value 34,785,611
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<TABLE>
<CAPTION>
TAPISTRON INTERNATIONAL, INC.
TABLE OF CONTENTS
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets as of July 31, 1999 and January 31, 2000 3
Condensed Consolidated Statements of Operations for the Three Months Ended
January 31, 1999 and 2000 and for the Six Months Ended January 31, 1999 and
2000 5
Condensed Consolidated Statements of Cash Flows for the Six Months Ended
January 31, 1999 and 2000. 6
Notes to Condensed Consolidated Financial Statements 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10
PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION 12
SIGNATURE 13
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2
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<TABLE>
<CAPTION>
TAPISTRON INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
Condensed from
Audited Financial
Statements Unaudited
July 31, 1999 January 31, 2000
--------------------- --------------------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash equivalents $ 685,328 $ 25,648
Receivables, net of allowance of $25,000 105,092 46,928
Receivables from employees 1,475 8,381
Sales contract receivables 75,000 1,325,000
Inventory 2,121,639 1,963,787
Prepayments 193,116 279,767
Deferred income taxes 100,000 100,000
--------------------- --------------------
Total current assets 3,281,650 3,749,511
--------------------- --------------------
PROPERTY AND EQUIPMENT, NET 769,935 703,362
--------------------- --------------------
OTHER ASSETS
Long-term receivables, net of allowance of $500,000 - -
Patents and patent license 234,013 218,049
Deferred income taxes 1,900,000 1,900,000
Other assets 4,050 3,000
--------------------- --------------------
Total other assets 2,138,063 2,121,049
--------------------- --------------------
TOTAL $ 6,189,648 $ 6,573,922
===================== ====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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<TABLE>
<CAPTION>
TAPISTRON INTERNATIONAL, INC
CONDENSED CONSOLIDATED BALANCE SHEETS- CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
Condensed from
Audited Financial
Statements Unaudited
July 31, 1999 January 31, 2000
-------------------- ---------------------
<S> <C> <C>
CURRENT LIABILITIES
Short-term debt $ 1,194,046 $ 1,155,145
Current portion of long-term debt 279,961 180,425
Accounts payable 99,184 124,529
Accrued expenses 211,660 244,247
Customer deposits 104,634 100,074
-------------------- ---------------------
Total current liabilities 1,889,485 1,804,420
-------------------- ---------------------
CONTINGENT REORGANIZATION LIABILITY 581,923 410,913
-------------------- ---------------------
LONG-TERM DEBT 180,932 213,949
-------------------- ---------------------
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: 34,841,129 shares issued 13,936 13,936
Additional paid in capital 26,407,711 26,578,721
Accumulated deficit (22,871,547) (22,435,225)
Treasury stock - 55,518 shares outstanding at cost (12,792) (12,792)
-------------------- ---------------------
Total stockholders' equity 3,537,308 4,144,640
-------------------- ---------------------
TOTAL $ 6,189,648 $ 6,573,922
==================== =====================
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
TAPISTRON INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Three Months Six Months
Ended Ended Ended Ended
January 31 January 31 January 31 January 31
1999 2000 1999 2000
-------------------- -------------------- ---------------- ---------------
<S> <C> <C> <C> <C>
SALES $ 1,650,145 $ 1,090,486 $2,746,377 $3,906,290
COST OF SALES 994,591 641,499 1,698,994 2,066,919
-------------------- -------------------- ---------------- ---------------
Gross profit 655,554 448,987 1,047,383 1,839,371
OPERATING EXPENSES 598,155 571,061 1,242,860 1,220,891
-------------------- -------------------- ---------------- ---------------
OPERATING INCOME (LOSS) 57,399 (122,074) (195,477) 618,480
-------------------- -------------------- ---------------- ---------------
OTHER INCOME (EXPENSE)
Interest expense (28,891) (51,774) (30,397) (92,740)
Interest income 161 10 2,630 19
Loss on disposal of asset - - (2,820) -
Loss on foreign currency exchange rates - (8,501) - (89,437)
-------------------- -------------------- ---------------- ---------------
Other income (expense) (28,730) (60,265) (30,587) (182,158)
-------------------- -------------------- ---------------- ---------------
Income (Loss) before reorganization items 28,669 (182,339) (226,064) 436,322
REORGANIZATION ITEMS (5,469) - (28,915) -
-------------------- -------------------- ---------------- ---------------
NET INCOME (LOSS) $ 23,200 $ (182,339) $(254,979) $ 436,322
==================== ==================== ================ ===============
EARNINGS PER SHARE
Net income (loss) 0.001 (0.005) (0.007) 0.013
Weighted average number of shares
outstanding 34,785,611 34,785,611 34,785,611 34,785,611
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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<TABLE>
<CAPTION>
TAPISTRON INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Six Months
Ended Ended
January 31, 1999 January 31, 2000
-------------------- --------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (254,979) $ 436,322
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 82,454 99,918
Loss on disposal of asset 2,820 -
Loss on foreign currency exchange rates - 89,437
Changes in operating assets and liabilities:
(Increase) decrease in receivables (689,788) (1,198,742)
(Increase) decrease in prepayments (48) (86,651)
(Increase) decrease in inventory 210,996 157,852
Increase (decrease) in accounts payable
and accrued expenses (231,040) 54,507
Increase (decrease) in customer deposits 65,250 (4,560)
Increase (decrease) in liabilities subject to
settlement under plan of reorganization (100,000) -
-------------------- --------------------
Net cash used in operating activities (914,335) (451,917)
-------------------- --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (40,875) (16,332)
-------------------- --------------------
Net cash used in investing activities (40,875) (16,332)
-------------------- --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 900,000 920,020
Principal repayments of debt (101,843) (1,111,451)
-------------------- --------------------
Net cash provided by (used in) financing activities 798,157 (191,431)
-------------------- --------------------
NET (DECREASE) IN CASH: (157,053) (659,680)
Cash and cash equivalents - beginning of period 247,101 685,328
-------------------- --------------------
Cash and cash equivalents - end of period $ 90,048 $ 25,648
==================== ====================
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
TAPISTRON INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
(UNAUDITIED)
Six Months Six Months
Ended Ended
January 31, 1999 January 31, 2000
--------------------- --------------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid for interest $ 27,388 $ 74,928
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Note payable for equipment 15,046 -
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
TAPISTRON INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
In the opinion of 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 January 31, 2000 and
the results of its operations for the six months ended January 31, 1999 and 2000
and cash flows for the six months ended January 31, 1999 and 2000. 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, 1999. The results of operations
for the six months ended January 31, 2000 are not necessarily indicative of the
results to be expected for the full year.
NOTE 2 - EARNINGS (NET LOSS) PER SHARE
- --------------------------------------
Earnings (net loss) per share are computed using the weighted average number of
shares of common stock outstanding.
NOTE 3 - INVENTORY
- ------------------
Inventory at January 31, 2000 consists of the following:
Raw Material $ 579,088
Work in Process 973,205
Finished Goods 411,494
----------------
Total $1,963,787
================
NOTE 4 - CONTINGENT REORGANIZATION LIABILITY
- --------------------------------------------
Under the Amended Plan, the Class 7 unsecured creditors received their pro rata
share of the first $500,000 cash payment and their pro rata share of a second
$500,000 cash payment, payable at $50,000 per new machine sale. With regard to
the balance of their claim, each unsecured creditor could elect either (1) 15%
of the balance of its claim or (2) the creditors pro rata share of 1,000,021
shares of common stock issued by the Company. If between August 29, 1997
8
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TAPISTRON INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4 - CONTINGENT REORGANIZATION LIABILITY - (CONTINUED)
- ----------------------------------------------------------
and September 30, 2000, the average of the closing prices of the Company's
common stock for any five (5) consecutive trading day period multiplied by
1,000,021 exceeds the balance of unsecured claims multiplied by factor for time
value or if any unsecured creditor shall sell, pledge, or trade the stock,
directly or indirectly, issued to it, then such creditors shall no longer be
entitled to any further distribution.
<TABLE>
<CAPTION>
<S> <C>
January 31, 2000 closing market price $ 0.3438
Shares issued to Class 7 (no fractional shares were issued) 1,000,021
---------------
Total market value of Class 7 stock $ 343,807
---------------
Balance of Class 7 unsecured claims $ 611,336
Time value factor @8.75% 1.23454282
---------------
Total liability of Class 7 claims $ 754,720
---------------
Total contingent liability for stock to cover Class 7 debt $ 410,913
===============
</TABLE>
9
<PAGE>
TAPISTRON INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- --------------------------------------------------------------------------
OPERATIONS
- ----------
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
condensed consolidated results of operations and financial condition. The
discussion should be read in conjunction with the condensed consolidated
financial statements and notes thereto.
Results of Operations
Sales
- -----
Revenues for the three months ended January 31, 2000 were $1,090,486 compared
with $1,650,145 for the three months ended January 31, 1999. The decrease in
revenues was due to a decrease in units sold. Revenues for the six months ended
January 31, 2000 were $3,906,290 compared with $2,746,377 for the six months
ended January 31, 1999. The increase in revenues was due to an increase in units
sold.
Cost of Sales
- -------------
Cost of sales for the three months ended January 31, 2000 were $641,499, or 59%
of sales, compared with $994,591, or 60% of sales, for the three months ended
January 31, 1999. Cost of sales for the six months ended January 31, 2000 were
$2,066,919, or 53% of sales, compared with $1,698,994, or 62% of sales, for the
six months ended January 31, 1999. Cost of sales as a percentage of sales
decreased as a result of continued efforts of the Company to manufacture
machines more efficiently.
Operating Expenses
- ------------------
Operating expenses were $571,061 for the three months ended January 31, 2000
compared with $598,155 for the three months ended January 31, 1999. Operating
expenses were $1,220,891 for the six months ended January 31, 2000 compared with
$1,242,860 for the six months ended January 31, 1999.
Interest Expense
- ----------------
Interest expense was $92,740 for the six months ended January 31, 2000 compared
with $30,397 for the six months ended January 31, 1999. The increase was due to
an increase in debt for the six months ended January 31, 2000.
Liquidity and Capital Resources
- -------------------------------
The Company's highly liquid assets (cash and cash equivalents) at January 31,
2000 aggregated $25,648, a decrease from the $685,328 balance at July 31, 1999.
Its working capital position at January 31, 2000 of $1,945,091 increased from
the comparable amount of $1,392,165 at July 31,
10
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TAPISTRON INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- ---------------------------------------------------------------------------
OPERATIONS (continued)
- ----------------------
Liquidity and Capital Resources (continued)
- -------------------------------------------
1999. The increase in working capital was a result of increased receivables due
to the increase in revenues for the six months ended January 31, 2000.
Net cash used in operations for the six months ended January 31, 2000 was
$451,917 compared to cash used in operations of $914,335 for the six months
ended January 31, 1999. Net cash used in investing activities totaled $16,332
for the six months ended January 31, 2000 compared to $40,875 used in investing
activities during the six months ended January 31, 1999. Net cash used in
financing activities was $191,431 during the six months ended January 31, 2000
compared to cash provided by financing activities of $798,157 during the six
months ended January 31, 1999.
The Company believes its current cash needs will be adequately provided from
anticipated cash generated from operations, short-term borrowings and its lines
of credit. As of January 31, 2000, the Company had available $450,000 on its
lines of credit. Long-term cash requirements, other than normal operating
expenses, depend on the Company's profitability, its ability to manage working
capital requirements, and its rate of growth.
Market Risk
- -----------
A review of the Company's financial instruments and risk exposures at January
31, 2000, revealed that the Company had exposure to foreign currency exchange
rate risks. At January 31, 2000, the Company had an outstanding debt denominated
in the Japanese Yen, which matures in February of 2001. As exchange rates vary,
the Company's financial position, results of operations or cash flows may vary
from expectations and overall expected earnings may be adversely impacted. The
effect of foreign exchange rate fluctuations on the Company during the six
months ending January 31, 2000 was an expense of $89,437.
Year 2000
- ---------
The Company has conducted a review of its computer systems to identify the
systems that could be affected by the "year 2000 issue" and has substantially
developed an implementation plan to resolve such issues. The "year 2000 issue"
is the result of computer programs being written using two digits rather than
four to define the applicable year. Programs with this problem may recognize a
date using "00" as the year 1900 rather than the year 2000, resulting in system
failures or miscalculations. Although no assurance can be given, the Company
presently believes that with its modifications to existing software and
conversions to new software, the "year 2000 issue" will not pose significant
operational problems for the Company's computer systems as so modified and
converted and that the cost of such modifications and conversions will not have
a material impact on the Company's financial statements.
11
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TAPISTRON INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
- ---------------------------------------------------------------------------
OPERATIONS (continued)
- ----------------------
Forward-looking Statements for Purposes of "Safe Harbor" Under the Private
- ---------------------------------------------------------------------------
Securities Reform Act of 1995
- -----------------------------
The Company has made, and may continue to make, various forward-looking
statements with respect to its financial position, projected costs, projected
savings and plans and objectives of Management. Such forward-looking statements
are identified by the use of forward-looking words or phrases such as
"anticipates," "intends," "expects," "plans," "believes," "estimates," or words
or phrases of similar import. These forward-looking statements are subject to
numerous assumptions, risks, and uncertainties, and the statements looking
forward beyond January 31, 2000, are subject to greater uncertainty because of
the increased likelihood of changes in underlying factors and assumptions.
Actual results could differ materially from those anticipated by the
forward-looking statements.
The applicable risks and uncertainties include general economic and industry
conditions that affect all international businesses, as well as, matters that
are specific to the Company and the market it serves. Actual sales in Fiscal
2000 may be materially less than the sales projected in the forward-looking
statements if the Company's customers cancel or delay current orders or if the
Company reduces the rate at which it is building or expects to build CYP
machines for such customers. Such cancellations, delays or reductions may occur
if there is a substantial change in the general economy or if a customer were to
experience major financial difficulties. Margins may differ from those projected
in the forward-looking statements if management does not achieve success in
improving margins or other events occur that differ from the estimates used in
preparing the Company's financial statements.
In addition, all subsequent written and oral forward-looking statements
attributable to the Company or person acting on behalf of the Company are
expressly qualified in their entirety by reference to such factors.
The Company's forward-looking statements represent its judgement only on the
dates such statements are made. By making any forward-looking statements, the
Company assumes no duty to update them to reflect new, changed, or unanticipated
events or circumstances.
EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no Exhibits filed with this report.
(b) No reports on Form 8-K were filed during the quarterly period ended January
31, 2000.
12
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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 8, 2000 /s/Floyd S. Koegler, Jr..
----------------- -------------------------
Floyd S. Koegler, Jr.
(Signing on behalf of the registrant
as Vice President and Chief Financial
Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF TAPISTRON INTERNATIONAL, INC. FOR THE THREE MONTHS
PERIOD ENDED JANUARY 31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-2000
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 26
<SECURITIES> 0
<RECEIVABLES> 1,405
<ALLOWANCES> 25
<INVENTORY> 1,964
<CURRENT-ASSETS> 3,750
<PP&E> 1,803
<DEPRECIATION> 1,100
<TOTAL-ASSETS> 6,574
<CURRENT-LIABILITIES> 1,804
<BONDS> 0
0
0
<COMMON> 14
<OTHER-SE> 4,131
<TOTAL-LIABILITY-AND-EQUITY> 6,574
<SALES> 1,090
<TOTAL-REVENUES> 1,090
<CGS> 641
<TOTAL-COSTS> 641
<OTHER-EXPENSES> 571
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (182)
<INCOME-TAX> 0
<INCOME-CONTINUING> (182)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (182)
<EPS-BASIC> .005
<EPS-DILUTED> .005
</TABLE>
