<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 10-QSB
/X/ Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
/ / Transition Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
--------------------------
For the quarterly period ended March 31, 1995
--------------
Commission File No. 0-17068
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Assix International. Inc.
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 59-2855398
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 North Tampa Street, Suite 3575 Tampa, Florida 33602
-------------------------------------------------------
(Address of principal executive offices)
(813) 224-0228
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Registrant's telephone number, including area code
None
- --------------------------------------------------------------------------------
(Former Name, former address and former fiscal year, if changed since last year)
Check whether the issuer (1) filed all reports required to be filed by
Section 12, 13 or 15 (d) of the Securities Exchange Act of 1934 during the past
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
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
Common Stock $0.001 par value 4,666,866
- ----------------------------- ---------------------------
Class Outstanding at May 16, 1995
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ASSIX INTERNATIONAL, INC.
INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. Financial Information
---------------------
Item 1. Financial Statements
Consolidated Balance Sheet--March 31, 1995 3-4
Consolidated Statement of Income--Three and Nine Months
Ended March 31, 1995 and 1994 5
Consolidated Statement of Cash Flows--Nine Months Ended
March 31, 1995 and 1994 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-13
PART II. Other Information
-----------------
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
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Exhibits 15
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</TABLE>
2
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ASSIX INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 47,847
Marketable securities 3,038,622
Notes and accounts receivables
Accounts receivable - trade $ 241,022
Accounts receivable - related parties 2,517
Officer & employee advances 80,995
Less allowance for doubtful accounts (952) 323,582
----------
Income tax receivable 383,403
Prepaid expenses & deposits 195,580
Inventories - at the lower of cost (determined by the first-in,
first-out method) or market 351,053
----------
Total current assets $ 4,340,087
PROPERTY & EQUIPMENT
Land 1,740,000
Licensed Dealer Programs 2,682,005
Building & improvements 4,862,982
Other Property and equipment, net 648,832
----------
8,193,819
Less accumulated depreciation and amortization 1,572,609 6,621,210
----------
Licensed dealer demonstration programs 65,000
Construction in process of Licensed dealer programs 396,000
----------
Total property and equipment 8,822,210
OTHER ASSETS
Intangible Assets
Manufacturing technology, less accumulated amortization of
$57,599 170,358
Capitalized rental clearing costs, less accumulated
amortization of $146,545 329,727
Patents, less no accumulated amortization 67,267
Deferred charges, less accumulated amortization of $61,824 18,793
Organization costs, less accumulated amortization of $65,527 403
Other, less accumulated amortization of $166,520 224,624
----------
Total other assets 811,172
-----------
TOTAL ASSETS $13,973,469
===========
</TABLE>
See accompanying notes to the consolidated financial statements
3
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ASSIX INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEET (continued)
MARCH 31, 1995
(UNAUDITED)
<TABLE>
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable - trade $ 129,593
Sales and payroll taxes payable 6,341
Other accrued liabilities 946,302
Current maturities on long-term debt 142,141
Deferred revenue 36,725
----------
Total current liabilities $ 1,261,102
LONG-TERM DEBT 73,928
2,593,799
STOCKHOLDERS' EQUITY
Preferred stock - authorized, 7,500,000 of shares of $.01 par
value, non-cumulative; no shares issued and outstanding
Common stock - authorized, 7,500,000 shares of $.001 par
value; shares issued, 4,713,866, shares outstanding
4,666,866 4,713
Additional paid-in capital 5,820,533
Retained earnings 4,425,518
Less common stock held in treasury, 47,000 shares at cost (206,124)
----------
Total stockholders' equity 10,044,640
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $13,973,469
===========
</TABLE>
See accompanying notes to the consolidated financial statements
4
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ASSIX INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------- ---------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Licensed dealer program revenues $ 271,686 $ 253,600 $ 828,920 $ 3,672,704
Real property revenues 416,531 635,586
Dividend & interest income 70,251 164,634
Realized gain on trading securities 249,376
Other income 3,004 12,316 4,836 25,996
------------ ------------ ------------ ------------
761,472 265,916 1,883,352 3,698,700
Costs and expenses:
Service 107,661 94,554 296,222 939,135
General and administrative 435,861 1,938,027 2,466,811 3,484,985
Depreciation and amortization 312,446 456,140 721,933 1,795,307
Interest 3,416 94,418 10,030 551,795
Loss/(gain) on asset write-down 839 8,062 816
(Gain)/Loss on sale of assets (156,847) 4,032 (316,073) 11,846
------------ ------------ ------------ ------------
Total Expenses 702,537 2,588,010 3,186,985 6,783,884
58,935 (2,322,094) (1,303,633) (3,085,184)
Gain on Sears settlement 13,136,146 13,136,146
------------ ------------ ------------ ------------
Income before income taxes & extra-
ordinary item 58,935 10,814,052 1,303,633 10,050,962
Provision for income taxes
Current (154,713) (154,713)
Deferred
------------ ------------ ------------ ------------
Income (loss) before extraordinary item 58,935 10,968,765 (1,303,633) 10,205,675
Extraordinary item, net of taxes 2,127,528 8,440,028
------------ ------------ ------------ ------------
Net income (loss) 58,935 $ 13,096,293 (1,303,633) 18,645,703
============ ============ ============ ============
Earnings (loss) per common and
common equivalent share
Income from continuing operations $ .01 $ 2.35 $ (.28) $ 2.19
(after related taxes)
Extraordinary item .46 1.81
------- ------- ------ ------
Net income (loss) $ .01 $ 2.81 $ (.28) $ 4.00
======= ======= ====== ======
Weighted average common and common 4,666,866 4,666,866 4,666,866 4,666,866
equivalent shares used in calculation: ============ ============ ============ ============
</TABLE>
See accompanying notes to the consolidated financial statements
5
<PAGE> 6
ASSIX INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
---------
1995 1994
---- ----
<S> <C> <C>
Cash flows provided by operating activities:
Net income $(1,303,633) $ 18,645,703
Adjustments to reconcile net income to net cash provided
by operations activities
Depreciation and amortization 734,029 1,795,307
Provision for uncollectable accounts receivable (23,980)
Loss on sale of property and equipment 23,287 11,846
Gain on Sears settlement 195,254
Deferred revenue 543 (380,268)
Loss on asset write-downs (4,033) 816
Proceeds from sale of trading securities 8,130,437
Purchase of trading securities (924,995)
Gain on sale of trading securities (249,376)
Gain on debt restructuring (13,824,028)
Changes in operating assets increase)/decrease and liabilities
increase/(decrease):
Accounts and notes receivable (77,287) 69,313
Prepaid expenses and advances 24,017 6,223
Income tax receivable (383,403)
Investments (9,166,595)
Other assets (680,665) (5,913)
Accounts payable, accrued interest and accrued liabilities (1,178,123) 677,590
Accrued liabilities - related parties 337,057
Income taxes payable (44,524) 1,497,000
Deferred Income taxes (33,202) 2,458,000
Accrued interest 481,184
Sales and payroll taxes payable (23,559) (59,720)
----------- ------------
Net cash provided by operating activities 3,985,533 2,738,769
Cash flows used in investing activities:
Purchase of holding securities (3,390,116)
Capital expenditures (1,284,375) (440,265)
----------- ------------
Net cash used in investing activities (4,674,491) (440,265)
Cash flows provided by (used in) financing activities:
Proceeds from debt 234,397
Principal payments on debt (74,646) (2,474,493)
Accounts receivable - related parties 152,146
----------- ------------
Net cash provided (used) by financing activities 311,897 (2,474,493)
----------- ------------
Increase in cash and cash equivalents (377,061) (175,989)
Cash and cash equivalents, beginning of period 424,908 582,010
----------- ------------
Cash and cash equivalents, end of period $ 47,847 $ 406,021
=========== ============
</TABLE>
See accompanying notes to the consolidated flnancial statements
6
<PAGE> 7
ASSIX INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1995
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The Company's interim financial statements are unaudited and should be
read in conjunction with the consolidated financial statements and notes
thereto for the year ended June 30, 1994. The results of operations for the
interim periods shown in this report are not necessarily indicative of results
to be expected for the fiscal year. The balance sheet has been reclassified
from an unclassified balance sheet to a classified balance sheet.
In the opinion of management, the accompanying consolidated financial
statements contain all adjustments necessary to make the results of operations
for the interim periods a fair statement of such operations. All such
adjustments are of a normal, recurring nature. Due to the small dollar amount
associated with marketing expenses, these amounts have been reported in the
general and administrative category for the periods ended March 31, 1995 and
1994.
NOTE 2 - MARKETABLE SECURITIES.
During the year ended June 30, 1994, the Company adopted Statement 115 of
the Financial Accounting Standards Board "Accounting for Certain Investments in
Debt and Equity Securities." Under this new pronouncement, securities that have
readily determinable fair value should be classified into trading, held to
maturity, and available for sale. Equity securities are recorded at their fair
value, and gross unrealized holding gains and losses are disclosed. For the
purpose of determining the gain or loss on a sale, the cost of securities sold
is based on the average cost of all shares of each such security held at the
date of sale. During the three month period ended September 30,1994, the
Company sold all of its trading securities and invested the proceeds into
Treasury Bills and notes that are to be held to maturity. Those sales of
marketable securities resulted in a net realized gain of $249,376 during the
three month period ending September 30, 1994.
At March 31, 1995, the aggregate cost of the current marketable securities
and certificate of deposits held for maturity was $3,038,622, while their
market value was $3,035,133. As of March 31, 1995, the Company had $2,994,030
invested in Treasury bills and notes, money markets and $44,592 invested in
certificates of deposits. The Treasury Bills and Treasury Notes have maturity
periods ranging from 30 days to nine months with rates of return of 4.345% to
5.78%.
NOTE 3 - PROPERTY AND EQUIPMENT
Depreciation and amortization are calculated by straight-line methods over
the estimated useful lives of the assets, ranging generally from three to seven
years for tangible personal property and 40 years for real property and
improvements. For income tax purposes, the Company uses accelerated methods of
depreciation for certain assets.
Other property and equipment consist of:
<TABLE>
<S> <C>
Office furniture and equipment $ 314,588
Leasehold improvements 53,393
Automobiles 136,072
Machinery and equipment 144,779
---------
$ 648,832
=========
</TABLE>
Under Financial Accounting Standards Board 67, the Company capitalized
certain costs incurred to rent real estate. These capitalized costs equaled
$476,272 and are being amortized over 13 months.
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NOTE 4 - OTHER ASSETS
The Company capitalized $146,217 of costs associated with the improvement
of the T7000 Combi-Matcher under Financial Accounting Standards Board 2 and
86.
NOTE 5 - GAIN ON SEARS SETTLEMENT
On February 24, 1994, the Company entered into a Settlement Agreement with
Sears under which Sears and the Company mutually released each other from any
and all claims arising from the May 1989 Sears Licensed Tire Matching(R)
Agreement. As part of the Settlement Agreement, Sears paid the Company
$16,168,000 in cash (of which $2 million was paid prior to the date of the
settlement) and transferred to the Company approximately 74 acres of Duval
County, Florida real property (improved by a vacant building containing
approximately 1,715,000 square feet) and personal property formerly
constituting the Sears Jacksonville Catalogue Merchandise Distribution Center
(the "Property"), which has been appraised at $6,000,000. In turn, the Company
transferred 1,226 Tire Matching machines and patents pertaining to the
Tire-Matching technology to Sears.
NOTE 6- EXTRAORDINARY GAIN
The Company generated an $8,440,028 extraordinary gain from settling its
debt with its senior and subordinated lenders. The gain was determined by
taking the outstanding debt and accrued interest at the time of the settlements
($5,000,000 principal and $1,562,500 of accrued interest for Mass Mutual and
$7,905,600 principal and $1,155,928 of accrued interest for PNC Bank of
Kentucky) and reducing it by the payments that were made to the senior and
subordinated lenders ($250,000 from Mass Mutual and $1,550,000 for PNC).
Accordingly, the extraordinary gain is $8,440,028, which is the total gain of
$13,824,028 less deferred taxes of $2,458,000 for the Mass Mutual settlement
and $2,926,000 of income taxes for the PNC settlement. The deferred taxes for
the Mass Mutual settlement were not previously recorded and are beig recorded
in the present quarter ended March 31, 1994. See Note 6 - Debt for further
details.
NOTE 7 - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
MARCH 31,
---------
1995
----
(Unaudited)
<S> <C>
Automobile notes $ 46,140
Insurance Financing 99,859
Equipment notes 38,228
Capitalized equipment leases 31,842
--------
216,069
Current maturities on long-term debt 142,141
--------
Total long-term debt $ 73,928
========
</TABLE>
The following are the aggregate maturities of the Company's existing
long-term debt for years subsequent to June 30, 1995:
1996 36,715
1997 12,182
1998 10,618
1999 11,014
Thereafter 3,399
-------
$73,928
=======
8
<PAGE> 9
NOTE 8 - EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share for the three months and nine months
ended March 31, 1995 and 1994 has been computed based upon the weighted average
number of common shares outstanding during the period. Common stock warrants
and options are not considered in the computation because they are anti-dilutive
in the aggregate.
NOTE 9 - INCOME TAXES
During the year ended June 30, 1994, the Company adopted Statement No.
109 of the Financial Accounting Standards Board, "Accounting for Income Taxes."
This new pronouncement requires that deferred tax assets and liabilities be
recognized for the estimated future consequences attributable to differences
between the financial statements carrying amounts of existing assets and
liabilities and their respective income tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Under Statement No. 109, the effect on deferred tax assets
and liabilities of a change in tax rates is recognized during the period that
includes the enactment date.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
A. GENERAL OVERVIEW:
The Company's operations are comprised of two independent and separate
operating groups. First, the Company owns commercial real property in
Jacksonville, Florida (known as the "Imeson Center") that includes 1,640,134
square feet of rentable warehouse/distribution (1,548,728 sq. ft.) and office
(91,846 sq. ft.) space. The Imeson Center property also includes an additional
131,000 square feet of core mezzanine space consisting of mechanical,
electrical, office and service areas that sit above and are designed to service
the main floor level. The utility of this area as rentable space is limited.
This commercial real estate asset represents the Company's largest single asset
and growth opportunity for the future. Secondly, the Company continues to
market its proprietary wheel balancing service under the trademark AccuBalance,
which represents the Company's historic business operations.
During the Company's first fiscal 1995 quarter ended September 30, 1994,
the Board of Directors elected W. Carey Webb as the Company's new President
and CEO with the directive of installing a new management team and redirecting
the Company's business operations and investments. To that end, Mr. Webb has
focused upon the following objectives: 1) to secure the company's existing
business operations and install a new management team, 2) to maximize the
operations of the Company's two primary businesses, and 3) to identify and
invest the Company's financial assets in one or more basic operating
businesses.
Over the past two fiscal quarters, Mr. Webb has concentrated on developing
tenants for the Imeson Center, restructuring management and improving
manufacturing operations, as well as securing new Licensed Servicing Agents for
the Company's proprietary Combi/Corvi improved wheel balancing program. During
the balance of calendar 1995, management expects to focus on improving it's
existing business operations while initiating the process of identifying the
Company's future long term business opportunities.
B. IMESON CENTER:
The Imeson Center property was conveyed to the Company by Sears Roebuck and
Co. in early 1994 as part of its settlement with the Company relating to
certain disputes that arose in connection with the Company's automotive
business relationship with Sears. The Imeson Center property was built by Sears
in 1974 to handle its catalog merchandising and distribution operations for the
Southeastern portion of the United States. Because the building was constructed
for the specialized purpose of serving as a Sears distribution center, the
Company is presently determining the portion, of the Imeson
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<PAGE> 10
Center property that may be rented as commercial property and what tenant
improvements may be required to maximize the rental value of such property.
The Company entered into two leases with the same tenant on December 1,
1994 to lease a portion of Imeson Center's warehouse space. The first lease is
for approximately 600,000 square feet of the first floor space and the second
lease is for approximately 200,000 square feet of the second floor. Both leases
contemplate terms of 13 months commencing December 1, 1994, with an option to
extend the lease period for 3 months. The tenant will pay its pro-rated share
of agreed upon operating expenses (which includes taxes, insurance and
maintenance) and will reimburse the Company for any utility expenses. Pursuant
to the second lease, the tenant was granted the option to lease an additional
300,000 square feet of second floor space as overflow space in consideration of
its payment of all operating expenses attributable to that space and has since
exercised that option. The tenant also increased, by approximately 50,000
square feet, the space utilized on the first floor. The tenant will not pay any
additional base rent on the second floor overflow space. The Company paid its
local leasing agent a 4% fee on base rent generated by the Property for these
leases. Base rent from these leases could generate pre-tax revenues of
approximately $1.56 million over the 13 month lease term.
The Company is currently negotiating to lease approximately 92,000 square
feet of first floor space to a prospective tenant in the Imeson Center property
for a period of seven years, with an option to extend for an additional three
year term. Although the terms of the proposed lease continue to be negotiated
and no assurances can be given that a definitive lease agreement will be
entered into, Company management believes that the proposed lease could
generate in the form of annual base rent a minimum of $507,000 in the first
year of the lease. Under its proposed terms, the tenant will pay its pro rata
share of agreed upon operating expenses, including taxes, insurance,
maintenance and utility expenses. In addition to base rent, the tenant will be
required to pay as additional rent an amount sufficient to amortize
approximately $1,000,000 advanced by the Company toward tenant improvement
costs over the seven year term of the lease, together with interest at the rate
of 11.5% per annum. The Company anticipates that the cost of the tenant
improvements will total approximately $2,000,000 and will be shared by the
Company and tenant on a 50/50 basis; provided, however that the tenant
reimburses the Company for its share of such improvements over the initial term
of the lease, together with interest, as additional rental payments. If the
proposed lease for the Imeson Center property is entered into, the lease term
will commence when tenant improvements are completed, which the Company expects
to be finished in July 1995 for phase I and August for Phase II. The Company
will pay its local leasing agent a 6% fee of the base rent generated by this
lease, which represents an approximate aggregate amount of $200,000 payable out
of the first five months of rental payments under the lease.
C. ASSIX AUTOMOTIVE:
Management of the Company intends to increase the automotive operation's
network of licensed agents by marketing the AccuBalance/Corvi service program,
which utilizes the Company's Corvi/Combi technology, to local and regional tire
dealer retail service outlets. This expansion effort will concentrate in the
geographic areas within which the Company currently operates (California,
Texas, Ohio, Indiana, Kentucky, Tennessee, Florida, Georgia and Alabama). If the
number of licensed agents utilizing the Corvi/Combi technology at their retail
locations does in fact increase, if expenses are controlled and Combi-Matchers
are produced continuously, management believes the automotive operation will
continue to reduce its operational loss for the year.
In the past, the Company's Automotive division had operated with its
licensed agents on a contractual basis which included a 30 day termination
provision. Currently, all new licensed agent agreements utilizing the Company's
exclusive Corvi/Combi technology require a twelve month written cancellation
notice. In many cases (especially with smaller accounts), the business
relationship with a proposed agent is initiated upon the execution of a
comprehensive letter of intent with the understanding that the final licensed
agent agreement will be executed shortly thereafter. The Company's business
relationship with Big 10 Tire Co. of Mobile, Alabama is controlled by such a
letter of intent, dated March 26, 1992, which the Company attempted to convert
into a signed 12 month agreement in 1993 and 1994. However, in December 1994,
Big 10 Tires initiated discussions
10
<PAGE> 11
regarding its desire to alter the letter of intent/Agency arrangement, which
among other issues included the purchase of the Combi-Matcher equipment from
the Company. After months of discussions, Big 10 Tires notified the Company
pursuant to a letter dated April 28, 1995 that it intended to terminate its
agreement with the Company effective as of May 28, 1995.
However, the agreement first requires the Company and Big 10 Tires to take
steps to "cure" under the Agreement (within a 60 day period) before termination
will be effective. If no agreement is reached, the loss of Big 10 Tires would
have a material negative impact upon the Company's Automotive division since
the revenues from Big 10 Tires represent approximately 25% of total Automotive
revenues for the current fiscal year. However, new agents have recently signed
agency agreements which will reduce the net reduction in revenues from a 25%
loss to a 19% loss. Company management has been in discussions with Big 10 Tire
Company since December 1994 regarding this licensing arrangement and will
continue to seek an amicable resolution to these contract negotiations. No
assurance can be given, however, that these negotiations will be successfully
consummated.
Any additional expansion of the Company's network of regional tire retail
dealers is anticipated to be financed through operating cash flows provided by
the Company's automotive services operations (which includes the money received
from the Sears settlement). Management has spent approximately $146,217 (during
the nine month period ended March 31, 1995) for the redesign of the Combi
System TM7000, which should increase the effectiveness and decrease the total
cost of the machine.
D. RESULTS OF OPERATIONS:
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1995
Revenues and other income for the three months ended March 31, 1995 ("Jan.
- - March 1995") increased $495,556 (186%) to $761,472 from $265,916 for the
three months ended March 31, 1994 "Jan. - March 1994"). This increase is
primarily due to additional real property revenues from the Imeson Center.
Revenues and other income for the nine months ended March 31, 1995 ("July -
March 1995") decreased $1,815,348 (49%) to $1,883,352 from $3,698,700 for the
nine months ended March 31, 1994 ("July - March 1994"). The primary reason for
this decrease is due to the fact that the Company and Sears (who generated
approximately $1.4 million in revenue for the Company in the Oct. - Dec. 1993
period and $4.2 million in the Jan. - March 1995 period) terminated their
relationship in February 1994. Additional revenue from the Imeson Center and
the installation of new licensed dealer programs partially offset the
decrease in Sears revenues. A licensed dealer program is an installed machine
capable of performing the Company's proprietary AccuBalance/Corvi
wheel-balancing service. As of March 31, 1995, the Company had 170 revenue
producing programs utilizing the Combi-Matcher, compared with 159 programs
utilizing the Combi-Matcher at March 31, 1994.
Service expenses for licensed dealer programs for Jan. - March 1995
increased $13,107 (14%) to $107,661 from $94,554 for Jan. - March 1994.
Service expenses for the nine month period, July - March 1995,
decreased $642,913 (69%) to $296,222 from $939,135 for July - March 1994.
Service expenses for Jan. - March 1995, as a percentage of Licensed dealer
program revenues, increased to 40% trom 37% during the Jan. - March 1994
period. Service expenses for July - March 1995, as a percentage of Licensed
dealer program revenues, increased to 36% from 26% during the July - March 1994
period. The slight increase for service expenses for the three month period
Jan. - March 1995 reflects an increase in bonuses and costs for field
personnel associated with increased Licensed dealer program revenues
and installations. The increase for service expenses as a percentage of
Licensed dealer program revenues for both the three month period and the nine
month period is due to slightly higher expenses, and for the nine month period,
substantially lower revenue than the prior year.
General and administrative expenses for Jan.- March 1995 decreased
$1,502,166 (77%) to $435,861 from $1,938,027 for Jan. - March 1994. General and
administrative expenses for the nine month period, July - March 1995, decreased
$1,018,174 (29%) to $2,466,811 from $3,494,985 for July - March 1994. General
and administrative expenses as a percentage of revenue
11
<PAGE> 12
for Jan. - March 1995 decreased to 57% from 729%. General and administrative
expenses for July - March 1995, as a percentage of revenue, increased to 131%
from 94%. The decrease in expenses from the prior year for the three month and
nine month periods are due to among other things, 1) a decrease in
professional fees that arose from various litigation matters 2) a decrease in
technology expense, and 3) the capitalization of additional costs above the
prior year associated with an increase in the production of the Combi-Matcher
from the prior year.
Depreciation and amortization expense for Jan. - March 1995 decreased
$143,694 (31%) to $312,446 from $456,140 for Jan. - March 1994. Depreciation
and amortization expense for the nine month period, July - March 1995,
decreased $1,073,374 (60%) to $721,933 from $1,795,307 for July - March 1994.
This decrease is a result of the discontinuance of depreciation for Dealer
Licensed machines previously installed at Sears (such machines were sold to
Sears on February 24, 1994) and the discontinuance of amortization of deferred
borrowing costs (which were written off in December 1993), which decrease has
been partially offset by depreciation expense for the warehouse facility
located at the Imeson Center and the amortization of clearing costs of the
warehouse facility.
Interest expense for Jan. - March 1995 decreased $91,002 (96%) to $3,416
from $94,418 for Jan. - March 1994. Interest expense for the nine month
period, July - March 1995, decreased $541,765 (98%) to $10,030 from $551,795
for July - March 1994. This decrease reflects the Company's payment of the
remaining amount of its debt to PNC Bank of Kentucky, Inc. ("PNC") in
February 1994 and all of its Mass Mutual Life Insurance Company ("Mass Mutual")
debt in September 1993.
Gain on the sale of assets for Jan. - March 1995 increased $160,879 to
$156,847 from a loss of $4,032 for Jan. - March 1994. Gain on the sale of
assets for the nine month period, July - March 1995, increased $327,919 to
$316,073 from a loss of $11,846 for July - March 1994. This increase primarily
reflects the sale of property from the Imeson Center.
For the three months ended March 31,1995 the Company reported income
before income taxes and extraordinary gain of $58,935 versus income of
$10,814,052 during the same period of the prior fiscal year. The Company
generated net income, after taxes, of $58,935 for the Jan. - March 1995 period
as compared to income of $13,096,293 for the comparable Jan. - March 1994
period. For the nine months ended March 31, 1995 the Company reported a loss
before income taxes and extraordinary gain of $(1,303,633) versus income of
$10,050,962 during the same period of the prior fiscal year. The Company
generated a net loss, after taxes, of $(1,303,633) for the July - March 1995
period as compared to income of $18,645,703 for the comparable July - March 1994
period. The reason for the reduction in income is due to the non-recurrence of
the extraordinary item and the reduction in revenues from the Sears settlement.
E.- LIQUIDITY AND CAPITAL RESOURCES:
The Company's consolidated balance sheet is presented on a classified
basis. As of March 31, 1995, the Company's primary sources of liquidity were
$47,847 in cash, $3,038,622 in marketable securities and certificates of
deposit, and $241,022 of trade accounts receivable. As of March 31, 1995, the
aggregate amount of the Company's short term liabilities (accounts payable,
accrued liabilities, inoome taxes payable, accrued interest and sales and
payroll taxes payable) was $1,261,102. The net liquidity of the Company as of
March 31, 1995 was $2,066,389.
Management believes these net sources of liquidity and cash flow will be
adequate to meet present obligations maturing in the fiscal year ending June
30, 1995.
Due to the classification of certain investments as trading securities,
see footnote 2, the $8,130,437 of proceeds from the sale of such securities
(which had been purchased with the proceeds from the Sears settlement) falls
into cash provided by operating activities. Because of that classification,
the Company generated cash provided by operating activities during the July -
March 1995 period of $3,985,533 compared with net cash provided by operating
activities of $2,738,769
12
<PAGE> 13
for the July - March 1994 period. Absent the sale of those securities, the
Company would not have had a positive cash flow from operating activities for
the nine month period, rather it would have used $2,970,533 of cash in
operating activities for the July - March 1995 period. For the three month
period ended Jan. - March 1995, the Company used cash from operating activities,
exclusive of the trading securities, of $489,516.
The Company purchased a 35,000 square foot office warehouse facility for
use by its automotive division for a total purchase price of $450,000 on July
8, 1994 and spent an additional $56,000 for improvements. The Company owns
this property free and clear of liens and encumbrances. The Company's principal
executive offices will remain located in downtown Tampa.
Net cash used in investing activities in the July - March 1995 period was
$4,674,491, as compared with $440,265 for the July - March 1994 period. Of the
$4,674,491 amount, $3,390,116 was used to purchase securities held to maturity.
Of the $1,284,375 used for capital expenditures, $192,034 was used by the
Imeson Center to purchase equipment and to renovate the Jacksonville property.
The remaining $1,092,341 used in investing activities represents the purchase
of the Company's 35,000 square foot office/warehouse building for $450,000,
leasehold improvements at the new building, the purchase of additional
inventory, the capitalization of costs for the improvement of the TM7000, and
the purchase of other items that are used in the business.
Net cash provided by financing activities in the July - March 1995 period
was $311,897, as compared to net cash used by financing activities of
$2,474,493 for the July - March 1994 period. This change is primarily due to
the settlement and payment of all of the Company's outstanding debt, except for
certain long-term lease obligations, and the financing of certain automobile
and equipment loans and insurance finance agreements.
The Company has incurred and expects to incur substantial legal expenses
and settlement costs associated with the SEC investigation and other current
litigation. The Company is unable to predict the total legal and settlement
costs that will ultimately be incurred in these matters. The Company's other
litigation matters involved ASX Investment, Kerry F. Marler (a former officer
and director), and Harvey More (a consultant on the Sears settlement). The
Company is attempting to recover from Mr. Marler the costs associated with the
ASX lawsuit, but there is no assurance such costs can be recovered from him.
PART II - OTHER INFORMATION
Item 1. - LEGAL PROCEEDINGS - No material events have occurred in the Company's
ongoing litigation matters. For the prior history of such
litigation, please refer to the Company's Annual Report on
Form 10-KSB for the year ended June 30, 1994.
Item 2. - CHANGES IN SECURITIES - None.
Item 3. - DEFAULTS UPON SENIOR SECURITIES - None.
Item 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
Item 5. - OTHER INFORMATION - None.
Item 6. - EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Reg. S-B Exhibit
Item No. Description Page No.
-------- ------------ --------
11(a) Computation of Earnings per Share attached
27 Financial Data Schedule
(b) Reports on Form 8-K
During its most recent quarter ended March 31, 1995, no current Reports on
Form 8-K were filed by the Company.
13
<PAGE> 14
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.
Assix International, Inc.
-------------------------------------
Registrant
Dated 16, 1995 W. Carey Webb
-------------------------------------
W. Carey Webb
Chief Executive Officer and President
Dated 16, 1995 Richard D. Russell
-------------------------------------
Richard D. Russell
Controller/Chief Accounting Officer
14
<PAGE> 1
ASSIX INTERNATIONAL INC. EXHIBIT 11
CALCULATION OF EARNINGS PER SHARE
(UNAUDITED)
<TABLE>
<CAPTION> THREE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE:
Net income (loss) $ 58,935 $13,096,293 $(1,303,633) $18,645,703
Add interest on long-term debt net of income taxes (a)
---------- ----------- ----------- -----------
Adjusted income (loss) applicable to common and $ 58,935 $13,096,293 $(1,303,633) $18,645,703
common equivalent shares ========== =========== =========== ===========
Weighted average number of common and common
equivalent shares outstanding:
Weighted average number of shares of common stock 4,666,866 4,666,866 4,666,866 4,666,866
outstanding
Common stock equivalents representing dilutive options
---------- ----------- ----------- -----------
Weighted average number of common and 4,666,866 4,666,866 4,666,866 4,666,866
common equivalent shares outstanding ========== =========== =========== ===========
Income (loss) from continuing operations (after taxes) $ .01 $ 2.35 $ (.28) $ 2.19
Extraordinary item .46 1.81
------ ------- ------- ------
Primary earnings (loss) per common and common equivalent $ .01 $ 2.81 $ (.28) $ 4.00
share ====== ======= ======= ======
</TABLE>
(a) Adjustment to net income (loss) has been shown net of tax effects which were
calculated at 39% of the gross amount of the adjustment.
(b) Earnings (loss) per common and common equivalent share for the three months
ended March 31, 1995, and 1994 have been computed based upon the weighted
average number of common shares outstanding during the period. Common stock
warrants and options are not considered in the computations because they are
anti-dilutive in the aggregate.
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ASSIX INTERNATIONAL FOR THE NINE MONTHS ENDED MARCH 31,
1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 47,847
<SECURITIES> 3,038,622
<RECEIVABLES> 324,534
<ALLOWANCES> 952
<INVENTORY> 351,053
<CURRENT-ASSETS> 4,340,087
<PP&E> 10,394,819
<DEPRECIATION> 2,070,624
<TOTAL-ASSETS> 13,973,469
<CURRENT-LIABILITIES> 43,066
<BONDS> 0
<COMMON> 4,713
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 13,973,469
<SALES> 0
<TOTAL-REVENUES> 2,199,425
<CGS> 0
<TOTAL-COSTS> 3,484,966
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 8,062
<INTEREST-EXPENSE> 10,030
<INCOME-PRETAX> (1,303,633)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,303,633)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,303,633)
<EPS-PRIMARY> (0.28)
<EPS-DILUTED> (0.28)
</TABLE>
