<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended: March 31, 2000
Commission File Number: 0-17264
ALFA International Corp.
(Exact name of registrant as specified in its charter)
New Jersey 22-2216835
State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
107 Industrial Drive, Jersey City, New Jersey 07305
(Address of principal executive offices)
(201) 332-2200
(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. [x] Yes [ ] No
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
[x] Yes [ ] No
As of May 15, 2000, the registrant had outstanding 7,641,398
shares of Common Stock,par value $.01 per share.
<PAGE>
ALFA INTERNATIONAL CORP.
INDEX
PART I - FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
BALANCE SHEETS
DECEMBER 31, 1999
MARCH 31, 2000
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999
THREE MONTHS ENDED MARCH 31, 2000
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31,2000
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999
THREE MONTHS ENDED MARCH 31, 2000
NOTES TO FINANCIAL STATEMENTS
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
PART II - OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORT ON FORM 8-K
<PAGE>
<TABLE>
ALFA INTERNATIONAL CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, December 31,
2000 1999
----------- --------------
(Unaudited) Note 1
----------- --------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $196,598 $284,912
Accounts receivable 743 8,664
Inventory 40,755 41,297
Prepaid expenses and other
current assets 35,537 4,452
------- --------
Total Current Assets 273,633 339,325
-------- --------
PROPERTY AND EQUIPMENT:
Office & Computer Equipment 39,366 37,720
Furniture & Fixtures 28,111 27,604
------ ------
67,477 65,324
Less:
Accumulated depreciation (52,870) (49,870)
------- -------
14,607 15,454
-------- -------
Other Assets 11,123 -
-------- -------
Total Assets $299,363 $354,779
======= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
CURRENT LIABILITIES:
Accounts payable $ 20,307 $ 519
Customer deposits Payable 5,749 -
Accrued expenses and
other current liabilities - 5,301
-------- -------
Total Current Liabilities 26,056 5,820
-------- -------
STOCKHOLDERS' EQUITY:
Common Stock - $ .01 par value
Authorized - 15,000,000 shares
Issued - 7,641,398 shares at
March and December 76,414 76,414
Capital in excess of par value 5,181,703 5,181,703
Retained earnings (deficit) (4,984,810) (4,909,158)
----------- ----------
Total Stockholders' Equity 273,307 348,959
Total Liabilities & Equity $299,363 $354,779
======= =======
</TABLE>
<PAGE>
<TABLE>
ALFA INTERNATIONAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
---------------------------------------
(UNAUDITED)
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------------
2000 1999
------ ------
<S> <C> <C>
REVENUES:
Net sales $ 25,931 $ 14,771
Interest Income 2,004 24
Other income - 2,809
-------- --------
27,935 17,604
-------- --------
COSTS AND EXPENSES:
Cost of sales 13,201 4,376
Selling, general and administrative 90,386 541,187
Interest expense 0 0
------- ---------
103,587 545,563
------- ---------
NET LOSS $(75,652) $(527,959)
======= ========
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 7,641,398 6,441,398
========= =========
NET INCOME (LOSS) PER SHARE (Note 2) $ (.01) $ (.08 )
===== =====
</TABLE>
<PAGE>
<TABLE>
ALFA INTERNATIONAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
----------------------------------------------------------
(UNAUDITED)
<CAPTION>
Common Stock
---------------------- Capital in Retained
Par Excess of Earnings
Shares Value Par Value (Deficit)
-------- ------ -
- ---------- -----------
<S> <C> <C> <C> <C>
Balances at
December 31,
1999 7,641,398 $ 76,414 $ 5,181,703 $ (4,909,158)
Net loss for
the Three
Months ended
March 31, 2000 --------- ------ --------- $ (75,652)
Balances At
March 31, 2000 7,641,398 $ 76,414 $ 5,181,703 $ (4,984,810)
--------- -------- ----------- -------------
</TABLE>
<PAGE>
<TABLE>
ALFA INTERNATIONAL CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
----------------------------------------
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31
---------------------------
2000 1999
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (75,652) $ (527,959)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Depreciation and amortization 3,000 3,000
Issuance of Stock Options (Note 2) - 500,000
Changes in operating assets and liabilities:
Accounts receivable 7,921 3,780
Inventories 542 (1,075)
Other current assets (31,085) 2,624
Accounts payable 19,788 4,106
Other assets (11,123) -
Other Liabilities 5,749 -
Accrued expenses (5,301) (603)
-------- --------
Net cash flows from operating activities (86,161) (16,127)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES-
Acquisitions of property and equipment (2,153) (794)
------- -----
CASH FLOWS FROM FINANCING ACTIVITIES-
Loan from Officer - 10,000
----- ------
NET CHANGE IN CASH AND EQUIVALENTS ( 88,314) (6,921)
--------- -------
CASH AND EQUIVALENTS, BEGINNING OF PERIOD 284,912 9,897
--------- -------
CASH AND EQUIVALENTS, END OF PERIOD $ 196,598 $ 2,976
======= =====
SUPPLEMENTAL CASH FLOW INFORMATION:
Income taxes paid (refunded) - -
=== ===
Interest paid $ - $ -
=== ===
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED INTERIM FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION:
The balance sheet for Alfa International Corp. ("Alfa" or the
"Company") at the end of the preceding fiscal year has been
derived from the audited balance sheet and notes thereto
contained in the Company's annual report on Form 10-KSB for
the fiscal year ended December 31, 1999 and is presented herein
for comparative purposes. All other financial statements are
unaudited. In the opinion of management all adjustments which
include only normal recurring adjustments necessary to present
fairly the financial position, results of operations and
changes in financial position for all periods presented have
been made. The results of operations for interim periods are not
necessarily indicative of operating results for the full year.
Alfa presently has one wholly-owned subsidiary through which it
conducts all operations. All inter-company transactions have
been eliminated in its consolidation with Alfa.
Footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been omitted in accordance with the published
rules and regulations of the Securities and Exchange Commission.
These financial statements should be read in conjunction
with the financial statements and notes thereto included in the
Company's annual report on Form 10-KSB for the fiscal year ended
December 31, 1999.
NOTE 2 - STOCK BASED COMPENSATION - CONSULTING AGREEMENT:
Under a consulting agreement dated January 20, 1999, the Company
granted a total of 2,000,000 Stock options ("Options") to two
consultants "Consultants"),500,000 each at exercise prices of
$.25; $.50; $.75 and $1.00. The Options expire at the earlier of
January 20, 2002 or the date of termination of the consulting
agreement. Using the Black-Scholes option valuation model to
compute the fair value of the Options on the date of grant, the
Company booked a $500,000 non-cash charge to earnings in January
1999 to reflect this stock based compensation to the
Consultants. During August, September, October and
November 1999, a total of 1,200,000 Options were exercised,
500,000 at $.25; 500,000 at $.50 and 200,000 at $.75. The
Company received proceeds totaling $525,000.
<PAGE>
ALFA INTERNATIONAL CORP. AND SUBSIDIARY
ITEM 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations
The balance sheet for the Company at the end of fiscal year
1999 contained herein has been derived from the balance sheet
audited by the Company's independent certified public
accountants which is contained in the Company's annual report on
Form 10-KSB for the fiscal year ended December 31, 1999. All
other financial statements are unaudited.
All of the Company's operations are conducted through its wholly
owned subsidiary, Ty-Breakers Corp. ("Ty-Breakers"). Ty-Breakers
is engaged in the business of (1) manufacturing and marketing
apparel, mostly jackets, made from Tyvek and Kensel, and (2)
manufacturing , importing and marketing a line of gift items
under the brand "Extreme Tease". Ty-Breakers maintains a website
at www.ty-breakers.com for its Tyvek & Kensel apparel and has a
website under development at www.extremetease.com for its gift
items.
Tyvek, a synthetic material produced by Du Pont, is made of 100%
polyethylene and is exceptionally strong, water resistant, wind
proof and printable. From the Company's perspective, the most
important characteristic of Tyvek is its reproductive print
quality. Kensel is the trade name used to identify the patented
fabric material, which is the proprietary product of Ty-
Breakers. Kensel is made by laminating a poly-cotton material to
Tyvek. Products made from Kensel have a more substantial "feel"
than products made from Tyvek.
Du Pont presently produces all of the Tyvek material. Ty-
Breakers purchases all of its Tyvek requirements directly from
Du Pont in the United States or from DuPont's Asian agent. The
inability or failure of Du Pont to deliver this material to Ty-
Breakers would have a material adverse effect upon the
operations of Ty-Breakers. To date, Ty-Breakers has not had any
significant problems in obtaining Tyvek from Du Pont or its
agent for its manufacturing needs nor does it anticipate a
shortage in the near future. Ty-Breakers believes it maintains a
good working business relationship with Du Pont.
Ty-Breakers has its Tyvek and Kensel apparel products
manufactured and printed by unaffiliated third parties in the
United States and Asia.
Tyvek is a registered trademark of the Du Pont Company. Kensel
is a trademark of Ty-Breakers used to identify Ty-Breakers'
patented fabric material. Extreme Tease is a trademark of Ty-
Breakers used to identify its brand of gift items.
Applications by the Company to register the Kensel and Extreme
Tease trademarks are presently pending before the U.S Office of
Trademarks.
Ty-Breakers markets Tyvek apparel for use primarily as corporate
identity, advertising or promotional products (the "Custom
Business") for major national commercial enterprises, fashion
designers, sporting events and athletic associations. The custom
printed apparel (which usually bears the customer's logo or
design) are frequently used as premiums, incentives, advertising
and marketing items; or resold as retail items by these
organizations. Ty-Breakers also markets its Extreme Tease gift
products and Tyvek and Kensel apparel (bearing Ty-Breakers' own
proprietary or licensed images) to retail stores and catalog
companies. Ty-Breakers also sells Tyvek and Kensel jackets
directly to consumers through its worldwide website on the
internet.
<PAGE>
Tyvek and Kensel apparel products for Ty-Breakers' Custom
Business are manufactured and sold pursuant to specific purchase
orders and significant inventories are not maintained for
products associated with the Custom Business. Inventories are
maintained for items associated with sales to retail stores and
catalog companies and Ty-Breakers' investment in inventory is
expected to grow relative to its sales growth in this segment.
The Ty-Breakers marketing plan is particularly directed at
increasing sales to retail outlets. Ty-Breakers has developed
and introduced a new product line of gift items marketed to
retailers under the brand name Extreme Tease to complement its
marketing efforts for Tyvek and Kensel products.
Alfa continues to pursue an investment and/or acquisition in an
internet related business. As of the date hereof Alfa is
performing a due diligence investigation of one such company.
During 1999 Consultants exercised options for 1,200,000 shares
of Common Stock and the Company received proceeds of $525,000.
Based upon conversations with the Consultants, the Company
expects them to exercise the remaining 800,000 Options from
which the Company would receive proceeds of $775,000 but no
assurance can be given at this time that such remaining Options
will actually be exercised.
The Company and Ty-Breakers lease their present facility in
Jersey City, New Jersey on a month to month basis from an
unaffiliated third party. As Alfa's and Ty-Breakers' business
plans unfold, and depending upon future events, the
Company may move Alfa and/or Ty-Breakers to different locations.
During the first quarter of 2000, Ty-Breakers introduced its
"Extreme Tease" line of gift items and tee shirts bearing
proprietary art commissioned by Ty-Breakers. The new line was
shown at the Dallas Gift Show in January 2000 and at the Chicago
Gift Show in February 2000. Copyrights for all the art
commissioned for the Extreme Tease line is owned by Ty-Breakers.
Ty-Breakers is also developing and constructing a website (due
to be launched in the third quarter of 2000) for its Extreme
Tease line at www.extremetease.com for use in marketing this new
line. Ty-Breakers has recruited a sales representative in
Atlanta and intends to recruit a nationwide independent sales
representative force to sell its Extreme Tease line and later
its Tyvek and Kensel apparel to retail stores and catalog
companies. In March 2000 Ty-Breakers leased permanent
showroom space for its Extreme Tease line at the Atlanta Gift
Mart, one of the largest gift markets in the U.S. As a result,
the Extreme Tease product line will be exhibited at the four
annual gift shows held at the Atlanta Mart and will be sold by
the Ty-Breakers' sales representative in Atlanta. Ty-Breakers
is continuing its ongoing efforts to secure additional sales
representatives throughout the U.S.
Alfa intends to build its Ty-Breakers subsidiary around its core
products of Tyvek and Kensel apparel by acquiring and/or
developing new lines (such as the Extreme Tease gift line); and
Alfa will continue the due diligence examination it is presently
conducting of the business prospects of an internet related
business in which Alfa is considering making an investment.
<PAGE>
RESULTS OF OPERATIONS:
THREE MONTHS ENDED MARCH 31,2000 vs.
THREE MONTHS ENDED MARCH 31,1999
The Company experienced an increase in revenue of $10,331 for
the first quarter of 2000 as compared to the same period in the
previous year. This revenue increase resulted from an increase
in Ty-Breakers' sales of $11,160. The cost of sales percentage
for the first quarter of 1999 was 50.9% and the gross profit
percentage was 49.1%.
Selling, general and administrative expenses decreased by
$450,801 (83.3%) during the first quarter of 2000 compared to
the first quarter of 1999. This decrease is entirely
attributable to the non-recurring $500,000 non-cash
compensation expense incurred by the Company during the same
period in the previous year to account for the fair market value
of options granted to Consultants. Excluding this non-cash
charge from the previous period, SG&A actually increased by
$49,199 (119.5%) as compared to the same period in the previous
year. This increase is attributable to the Company's increased
marketing expenses, including employee salaries, during the
first quarter of 2000.
The Company experienced a net loss of $75,652 for the first
quarter of 2000 as compared to a net loss of $527,959 during
the same period in the previous fiscal year. This decrease of
$452,307 (85.7%) is entirely attributable to the non-recurring
$500,000 non-cash compensation expense referred to above.
Excluding this non-cash charge, the Company's loss actually
increased by $47,693 (170.6 %) as compared to the same period in
the previous year. The continued losses for the Company are
attributable to the increased SG&A expenses referred to above
and to Ty-Breakers' failure to attain a sufficient level of
sales. The Company will need to further increase sales in order
to attain profitability - a goal which is expected to be met
during the current fiscal year. Management believes that a
profitable level of sales will be Attained before the end of the
current fiscal year as a result of the Company's on-going
marketing efforts as well as its ongoing efforts to recruit
additional sales representatives. The proceeds which the Company
received from the Exercise of Options during 1999 has assisted
the Company in pursuing these efforts. No significant increases
in inventory or capital expenditures occurred during the first
quarter of 2000. Prepaid expenses increased due to show expenses
($4,700) legal retainer ($10,000) and accruals ($18,474).
LIQUIDITY AND CAPITAL RESOURCES:
The Company has experienced negative cash flows during the first
quarter of 2000 primarily due to operating losses. At March 31,
2000 the Company had working capital of $247,577 as compared to
working capital of $333,505 at December 31, 1999. This decrease
of $85,928 is primarily attributable to the Company's $75,652
loss during the period. Approximately 15% of current assets
are invested in inventory, 72% is held in cash and the balance
invested in accounts receivable and pre-paid expenses. Receipt
by the Company of $525,000 in proceeds from the exercise of
Options during August-November 1999 has positively affected the
Company's working capital position.
<PAGE>
In order to increase Ty-Breakers' level of sales, management
plans to aggressively market its products (both Tyvek & Kensel
apparel and Extreme Tease products) to retail stores while
simultaneously marketing its custom printed Tyvek products into
the (premium & incentive ) Custom Market. While no assurances
can be given at this time, management believes that such
marketing efforts will be successful in increasing Ty-Breakers'
sales and turning Ty-Breakers profitable by the end of fiscal
year 2000. Revenues (and associated sales & marketing expenses)
are projected to increase significantly in fiscal 2000. It is
essential for the Company to increase its level of sales in
order to allow continued operations.
FORWARD LOOKING STATEMENTS:
Certain statements made in this report on Form 10-QSB are
"forward looking" statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements
involve known and unknown risks, uncertainties and other factors
that may cause actual results, performance or achievements of
the Company to be materially different from any future results
implied by such forward looking statements. Although the Company
believes that the expectations reflected in such forward looking
statements are based upon reasonable assumptions, the Company's
actual results could differ materially from those set forth in
the forward looking statements. Certain factors that might cause
such a difference might include: the acceptance in the
marketplace of the Company's Extreme Tease product line, the
growth of the market for the Company's products, the renewal by
Congress of China's most-favored-nation trade status, the
ultimate decision by the Company whether or not to invest in
an internet related business or the success of the Company's
various marketing initiatives.
PART II - OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits numbered in accordance with Item 601(a) of
Regulation S-B
Exhibit Page
Numbers Description Number
- ------- ----------- ------
3.1 Articles of Incorporation, as amended *
3.2 By-laws *
27 Financial Data Schedule E-01
________________________
* Previously filed as exhibits to the Company's
Registration Statement on Form S-1 (File No.33-18591)
filed with the Securities and Exchange Commission and
incorporated herein by reference thereto.
(b) Reports on Form 8-K
None
<PAGE>
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.
DATED: May 19, 2000 ALFA INTERNATIONAL CORP.
(Registrant)
By: /s/ Frank J. Drohan
----------------------------
Frank J. Drohan
Chief Executive Officer
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 196,598
<SECURITIES> 0
<RECEIVABLES> 743
<ALLOWANCES> 0
<INVENTORY> 40,755
<CURRENT-ASSETS> 273,633
<PP&E> 67,477
<DEPRECIATION> (52,870)
<TOTAL-ASSETS> 299,363
<CURRENT-LIABILITIES> 26,056
<BONDS> 0
0
0
<COMMON> 76,414
<OTHER-SE> 5,181,703
<TOTAL-LIABILITY-AND-EQUITY> 299,363
<SALES> 25,931
<TOTAL-REVENUES> 27,935
<CGS> 13,201
<TOTAL-COSTS> 103,587
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (75,652)
<INCOME-TAX> 0
<INCOME-CONTINUING> (75,652)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (75,652)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
