U.S. Securities and Exchange Commission
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from __________ to __________
Commission file number 0-17321
HITOX CORPORATION OF AMERICA
(Exact name of small business issuer as specified in its charter)
Delaware
(State or other jurisdiction of
incorporation or organization)
722 Burleson Street, Corpus Christi, Texas 78402
(Address of principal executive offices)
Issuer's telephone number: (361) 882-5175
None
(Former name, former address and former fiscal
year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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, $0.25 par value 4,773,187
(Class) (Outstanding as of July 26, 1999)
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
<PAGE> 1
HITOX CORPORATION OF AMERICA
INDEX
Page No.
PART I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Balance Sheets
June 30, 1999 and December 31, 1998 3-4
Condensed Statements of Income--
six months ended June 30, 1999 and 1998 5
Condensed Statements of Cash Flows--
six months ended June 30, 1999 and 1998 6
Notes to Condensed Financial Statements 7-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-14
PART II. Other Information
Item 5. Other Information 15-16
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 17
<PAGE> 2
HITOX CORPORATION OF AMERICA
CONDENSED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(in thousands, except par value)
June 30, 1999 December 31,
(Unaudited) 1998
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 1,878 $ 1,737
Trade accounts receivable, net 1,572 1,311
Other receivables 80 40
Inventories:
Raw materials 4,787 4,695
Finished goods 928 507
Supplies 87 103
----------- -----------
Total inventories 5,802 5,305
Other current assets 105 45
----------- -----------
Total current assets 9,437 8,438
Property, plant and equipment 8,675 8,197
Accumulated depreciation (5,932) (5,694)
----------- -----------
2,743 2,503
Asset held for sale -- 651
Other assets 25 25
----------- -----------
Total assets $ 12,205 $ 11,617
=========== ===========
See Notes to Condensed Financial Statements
<PAGE> 3
HITOX CORPORATION OF AMERICA
CONDENSED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(in thousands, except par value)
June 30, 1999 December 31,
(Unaudited) 1998
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,235 $ 787
Accrued expenses 263 396
Current maturities of long-term debt -- 389
----------- -----------
Total current liabilities 1,498 1,572
Other long-term debt, excluding current maturities -- --
----------- -----------
Total liabilities 1,498 1,572
Shareholders' equity:
Preferred stock $.01 par value: authorized,
5,000 shares; no shares outstanding -- --
Common stock $.25 par value: authorized,
10,000 shares; 4,673 shares outstanding
after deducting 88 shares held in treasury 1,190 1,186
Additional paid-in capital 14,361 14,341
Accumulated deficit (4,801) (5,439)
----------- -----------
10,750 10,088
Less: cost of treasury stock (43) (43)
----------- -----------
Total shareholders' equity 10,707 10,045
----------- -----------
$ 12,205 $ 11,617
=========== ===========
See Notes to Condensed Financial Statements
<PAGE> 4
HITOX CORPORATION OF AMERICA
CONDENSED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
---------------- ----------------
1999 1998 1999 1998
------- ------- ------- -------
Net Sales $ 2,959 $ 2,984 $ 6,038 $ 5,941
Costs and expenses:
Cost of products sold 2,085 2,077 4,098 4,177
Selling, administrative and general 664 606 1,332 1,205
Adjustment of asset held for sale -- -- -- 120
------- ------- ------- -------
Operating income 210 301 608 439
Other income (expenses):
Interest income 18 22 33 42
Interest expense -- (12) (4) (31)
Other, net 1 3 16 3
------- ------- ------- -------
Income before income tax 229 314 653 453
Provision for income tax 2 2 15 6
------- ------- ------- -------
NET INCOME $ 227 $ 312 $ 638 $ 447
======= ======= ======= =======
Earnings per common share:
Basic $ 0.05 $ 0.07 $ 0.14 $ 0.10
Diluted $ 0.05 $ 0.07 $ 0.14 $ 0.10
Weighted average common shares
and equivalents outstanding:
Basic 4,667 4,657 4,662 4,657
Diluted 4,749 4,715 4,720 4,704
See Notes to Condensed Financial Statements
<PAGE> 5
HITOX CORPORATION OF AMERICA
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
-----------------
1999 1998
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 638 $ 447
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 241 279
Gain on sale/disposal of asset(s) (10) --
Adjustment of asset held for sale -- 120
Other assets -- 2
Changes in working capital:
Receivables (301) (405)
Inventories (497) (383)
Other current assets (60) (86)
Accounts payable and accrued expenses 315 1,056
------- -------
Net cash provided by operating activities 326 1,030
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (486) (117)
Proceeds from sale of asset(s) 666 --
------- -------
Net cash provided by (used in) investing activities 180 (117)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (389) (501)
Proceeds from the issuance of common stock 24 --
------- -------
Net cash used in financing activities (365) (501)
------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 141 412
CASH AND CASH EQUIVALENTS:
AT BEGINNING OF PERIOD 1,737 1,720
------- -------
AT END OF PERIOD $ 1,878 $ 2,132
======= =======
Supplemental disclosure of cash flow information:
Income taxes paid $ 15 $ 6
Interest paid 4 31
See Notes to Condensed Financial Statements
<PAGE> 6
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
1. Accounting Policies
Basis of Presentation
The interim financial statements of Hitox Corporation of America (the
"Company") are unaudited, but include all adjustments which the Company deems
necessary for a fair presentation of its financial position and results of
operations. All adjustments are of a normal and recurring nature. Results
of operations for interim periods are not necessarily indicative of the
results to be expected for the full year. All significant accounting
policies conform to those previously set forth in the Company's fiscal 1998
Annual Report on Form 10-KSB.
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amount of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and revenues and expenses during the reporting period. Actual
results could differ from these estimates.
Stock Based Compensation
The Company grants stock options for a fixed number of shares to
employees with an exercise price equal to the fair value of the shares at the
date of grant. The Company has accounted for stock option grants in
accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees,
and, accordingly, recognized no compensation expense for the stock option
grants. The Company did not adopt FASB Statement No. 123, Accounting for
Stock-Based Compensation, and will continue to account for stock option
grants in accordance with APB Opinion No. 25. FASB Statement 123 requires
certain disclosures about stock-based compensation plans for all companies
regardless of the method used to account for them. Effective in 1996
calendar year-end financial statements, companies that continue to apply APB
25 are required to disclose pro forma information as if the measurement
provisions of Statement 123 had been adopted in their entirety. Such pro
forma information was included in the Company's 1998 Form 10-KSB.
2. Debt
The Company has a loan agreement with NationsBank of Texas, N.A., (the
"Bank"). The loan agreement provides the Company with a $2,000,000 line of
credit with an interest rate of the Bank's prime rate. The loan agreement
expires on April 30, 2000. The Company had no balance outstanding under the
line of credit during the second quarter of 1999. The loan agreement
includes one term loan. The Company prepaid the remaining $389,000 principal
balance of the term loan on January 15, 1999.
<PAGE> 7
3. Adjustment of Asset Held for Sale
The Company records the value of assets held for sale under Financial
Accounting Standards Board Statement No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of. The
Company adopted Statement 121 effective January 1, 1995. Statement 121
requires that assets held for disposal be valued at the lower of carrying
amount or fair value less cost to sell. Following the initial write-down of
an asset to fair value less cost to sell, the Statement requires subsequent
revisions to the carrying amount of the asset to be disposed of if the
estimate of fair value less the cost to sell changes during the holding
period. Such a revision was necessary because the Company entered into a
verbal agreement to sell its former headquarters building in April of 1998.
The resulting adjustment of $120,000 to reduce the asset to fair value was
recorded in the first quarter of 1998. The sale of the building was completed
on March 1, 1999, at a nominal gain of $10,000.
<PAGE> 8
4. Calculation of Basic and Diluted Earnings per Share
The following table sets forth the computation of basic and diluted
earnings per share:
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
---------------- ----------------
1999 1998 1999 1998
------- ------- ------- -------
Numerator:
Net Income $ 227 $ 312 $ 638 $ 447
Numerator for basic earnings
per share - income available
to common stockholders 227 312 638 447
------- ------- ------- -------
Effect of dilutive securities: -- -- -- --
------- ------- ------- -------
Numerator for diluted earnings
per share - income available
to common stockholders
After assumed conversions $ 227 $ 312 $ 638 $ 447
Denominator:
Denominator for basic earnings per
Share - weighted-average shares 4,667 4,657 4,662 4,657
Effect of dilutive securities:
Employee stock options 79 58 58 47
Warrants 3 -- -- --
------- ------- ------- -------
Dilutive potential common shares 82 58 58 47
------- ------- ------- -------
Denominator for diluted earnings
per share - weighted-average
Shares and assumed conversions 4,749 4,715 4,720 4,704
======= ======= ======= =======
Basic earnings per common share:
Net Income $ 0.05 $ 0.07 $ 0.14 $ 0.10
======= ======= ======= =======
Diluted earnings per common share:
Net Income $ 0.05 $ 0.07 $ 0.14 $ 0.10
======= ======= ======= =======
Options and warrants to purchase 1,265,486 shares of common stock were
not included in the computation of diluted earnings per share because the
exercise price was greater than the average market price of the common shares
and, therefore, the effect would be antidilutive.
<PAGE> 9
5. Commitments
The Company purchases its primary raw material, synthetic rutile, under
a supply agreement (the "Supply Agreement"). The Supply Agreement contains a
take or pay arrangement for specified quantities on a yearly basis, with a
fixed price for the first two years of its five-year term. The Company has
negotiated a price decrease for orders placed in 1999, the final year of the
supply agreement.
The initial five-year term of the Supply Agreement ends in December of
1999, and the Company has exercised the right to terminate the contract by
providing the required twelve months notice. During 1999 the Company will
pursue such a contract from a supplier who can meet the Company's
requirements for quality, consistency and price.
6. Derivatives and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, Accounting for Derivative Instruments and Hedging Activities. The
Statement requires the Company to recognize all derivatives on the balance
sheet at fair value. Derivatives that are not hedges must be adjusted to
fair value through income. If the derivative is a hedge, depending on the
nature of the hedge, changes in the fair value of derivatives are either
offset against the change in fair value of assets, liabilities, or firm
commitments through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings. The ineffective portion of
a derivative's change in fair value will be immediately recognized in
earnings. Because of the Company's minimal use of derivatives, instruments or
hedging activities, the adoption of Statement No. 133 on January 1, 1999 did
not have a significant effect on earnings or the financial position of the
Company.
7. Costs of Computer Software
In March 1998, the Accounting Standards Executive Committee of the AICPA
issued Statement of Position (SOP) 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. SOP 98-1 requires the
Company to expense training costs incurred in connection with developing or
obtaining internal use software. The adoption of this SOP on January 1, 1999
did not have an effect on net income or earnings per share for the six months
ended June 30, 1999.
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
Sales:
Net sales for the second quarter of 1999 were $2,959,000 as compared
with $2,984,000 for the same quarter of 1998, a small decrease. Higher sales
of the Company's primary product, HITOX pigments, were offset by lower BARTEX
sales. For the first six months of 1999, sales were $6,038,000 compared with
$5,941,000 in 1998, an increase of 1.6%.
Gross Profit:
Gross profit for the second quarter of 1999 was $874,000 as compared
with $907,000 for the second quarter of 1998, a decrease of $33,000, due to
lower sales and higher costs in 1999. Gross profit as a percentage of sales
was 29.5% in the second quarter this year as compared to 30.4% in the same
quarter last year. The year to date gross profit for the six months ended
June 30, 1999 was $1,940,000 or 32.1% of net sales compared with $1,764,000
or 29.7% of net sales for the same period of 1998. The improvement in the
year to date gross profit percentage compared with the same period of 1998 is
primarily the result of higher sales volumes and better production efficiency
during the first quarter of 1999 compared with the first quarter of 1998.
Better production efficiency was achieved mainly through higher capacity
utilization as finished goods inventory was replenished from its year-end
low.
Expenses:
Total selling, administrative and general expenses increased from
$606,000 during the second quarter of 1998, to $664,000 for the second
quarter of 1999, an increase of 9.6%. Total selling, administrative and
general expenses increased from $1,205,000 during the six months ended June
30, 1998 to $1,332,000 for the same period of 1999, representing an increase
of 10.5%. The increase in expenses from 1998 to 1999 is primarily the result
of one-time costs such as attorney's fees and special Board meetings
associated with corporate ownership issues. (See Part II, Item 5, Other
Information)
In the first quarter of 1998 a non-cash charge of $120,000 was recorded
to write-down the Company's former headquarters building to fair value. The
building was sold effective March 1, 1999 at a nominal gain of $10,000, which
was recorded as Other Income in the first quarter of 1999.
<PAGE> 11
Interest Income:
During the second quarter of 1999, excess funds were deposited in short-
term interest bearing investments resulting in interest income of $18,000
compared to $22,000 for the same quarter last year. For the six months ended
June 30, 1999, interest income was $33,000 compared to $42,000 for the
corresponding period in 1998. This decrease is the result of lower cash
balances available for investment during the first six months of 1999 as
compared to the same period last year, as well as lower interest rates in
1999.
Interest Expense:
Interest expense decreased $12,000 in the second quarter of 1999 as
compared with the same quarter last year. For the six-month period ended
June 30, 1999, interest expense decreased $27,000 compared with 1998.
Interest expense is lower in 1999 than in 1998 due to the prepayment of the
Company's only term loan in January 1999.
Provision for Income Tax:
The Company has net operating loss and other carry forwards available to
offset the Company's regular taxable income. However, the Company is subject
to alternative minimum tax. The provision for income tax was $15,000 for the
six-month period ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company's balance sheet is strong at June 30, 1999. Working capital
increased from $6,866,000 at December 31, 1998 to $7,939,000 at June 30,
1999. Cash increased from $1,737,000 at December 31, 1998 to $1,878,000 at
June 30, 1999. During the six-month period, cash provided by operating
activities totaled $326,000, resulting from changes in working capital, with
the largest change being an increase in inventory. A net of $180,000 was
provided by investing activities, resulting from the sale of the Company's
former headquarters' building, offset by additions to property, plant and
equipment. Cash was used to pre-pay the Company's remaining term debt in
January totaling $389,000 and $24,000 was provided by the issuance of common
stock from employee options exercised during the second quarter of 1999.
Accounts receivable increased at June 30, 1999 compared with December
31, 1998, due to higher sales volume during the second quarter of 1999
compared to the last quarter of 1998. Inventories increased in the second
quarter of 1999 due primarily to raw material purchases. The increase in
accounts payable and accrued expenses is primarily due to the timing of raw
material purchases. The Company had no outstanding borrowings on its line of
credit at June 30, 1999, which has a limit of $2,000,000.
<PAGE> 12
The Company on an ongoing basis will finance its operations principally
through cash flows generated by operations, through bank financing and
through cash on hand. The Company has a continuing need for working capital
to finance raw material purchases, primarily synthetic rutile, which is now
purchased under a supply agreement (the "Supply Agreement") with its former
subsidiary, Malaysian Titanium Corporation ("MT"). The Supply Agreement
contains a take or pay arrangement for specified quantities on a yearly
basis, with a fixed price for the first two years of its five-year term.
The initial five-year term of the Supply Agreement ends in December of
1999, and the Company has exercised the right to terminate the contract by
providing the required twelve months notice. During 1999 the Company will
pursue such a contract from a supplier who can meet the Company's
requirements for quality, consistency and price.
The Company has a loan agreement with NationsBank of Texas, N.A., (the
"Bank"). The loan agreement provides the Company with a $2,000,000 line of
credit with an interest rate of the Bank's prime rate. The Company had no
balance outstanding under the line of credit during the first six months of
1999. The loan agreement includes one term loan, which was scheduled to
mature in January 2000. The Company prepaid the remaining $389,000 principal
balance of the term loan on January 15, 1999.
OTHER MATTERS
Impact of the Year 2000
The Company's primary computer system was written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognize a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or
engage in normal business activity.
The Company assessed its year 2000 readiness in 1996 and determined that
neither its primary computer hardware nor software was year 2000 compliant.
As a result, in 1997 the Company replaced its legacy mainframe computer with
a PC based client/server computer network which is year 2000 compliant. In
July of 1998, the Company began operating with a new manufacturing/accounting
software package which is year 2000 compliant. The Company believes that
with the conversion to new hardware and software, the year 2000 issue will
not pose significant operational problems for its computer system, or its
internal operations. The software installation and conversion cost
approximately $96,000 and is virtually complete. The Company also reviewed
the software and hardware used in production and manufacturing systems and
these are not expected to be affected by the year 2000 issue.
<PAGE> 13
The Company has also taken steps to determine the Year 2000 readiness of
its mission critical business partners. That process is ongoing and based on
responses received to date, it appears that most of those companies have
addressed the Year 2000 issue and are diligently working to ensure that it
does not adversely affect their business. Should the Company determine that
a mission critical business partner will be adversely affected by a Year 2000
problem, the Company will seek alternatives to the product or services
provided by such business partner.
The Company believes it has an effective program in place to resolve the
year 2000 issue in a timely manner. As noted above, the Company has not yet
completed all necessary phases of the year 2000 program. Although no
assurances can be given as to the Company's compliance, particularly as it
relates to third parties, including governmental entities, based upon the
progress to date, the Company does not expect that the future costs of
modifications or the consequences of any unsuccessful modifications will have
a material adverse impact on the Company's financial position or results of
operations. Accordingly, the Company believes the most reasonably likely
worst case year 2000 scenario would not have a material adverse impact on the
Company's financial position or results of operations.
Forward Looking Information
Certain portions of this report contain forward-looking statements about
the business, financial condition and prospects of the Company. The actual
results of the Company could differ materially from those indicated by the
forward-looking statements because of various risks and uncertainties
including, without limitation, changes in demand for the Company's products,
changes in competition, economic conditions, fluctuations in market price for
TiO2 pigments, interest rate fluctuations, changes in the capital markets,
changes in tax and other laws and governmental rules and regulations
applicable to the Company's business, and other risks indicated in the
Company's filing with the Security and Exchange Commission. These risks and
uncertainties are beyond the ability of the Company to control, and, in many
cases, the Company cannot predict all of the risks and uncertainties that
could cause its actual results to differ materially from those indicated by
the forward-looking statements. When used in this report, the words
"believes," "estimates," "plans," "expects," "anticipates" and similar
expressions as they relate to the Company or its management are intended to
identify forward-looking statements.
<PAGE> 14
PART II
Item 5. Other Information
On March 23, 1999, Mr. Bernard Paulson, the Company's then Acting Chief
Executive Officer, made a tender offer to purchase 1,000,000 shares of the
Company's stock at $2.50 per share. Mr. Paulson volunteered to step aside
temporarily as Acting Chief Executive Officer and the Board requested that
the Company's Chairman, Mr. William Hayes, assume the CEO responsibilities in
the interim.
On April 1, 1999, the Company received a letter from Zemex Corporation
proposing to purchase all of the outstanding shares of the Company for cash
at $2.50 per share. That proposal was revised to an offer of $3.00 per share
on April 16th, following a two-day visit by Zemex personnel to the Company's
facilities in Corpus Christi. The revised proposal was subject to
negotiations with the Special Committee of the Board ("Special Committee")
formed to consider the proposal and other conditions, including a
satisfactory due diligence review by Zemex of the Company's business and
operations and approval of the Company's Board and stockholders. The Zemex
proposal also required receipt of agreements from stockholders of the Company
affiliated with existing directors to vote their shares in favor of the
transaction. The Special Committee of the Company's Board then recommended
that stockholders refuse to tender their shares in the Paulson offer in light
of the Zemex offer.
Mr. Paulson, through companies he controls, completed his tender offer
on April 19, 1999, having acquired 191,074 shares of the Company's stock,
bringing his total ownership of the Company to approximately 5%. Subsequent
to the termination of the tender offer, Mr. Paulson, through entities he
controls, purchased additional shares on the open market increasing his
ownership percentage to approximately 14.7% by April 23, 1999.
On April 29th, the Company announced that negotiations between Hitox and
Zemex Corporation had terminated. Mr. Paulson, together with other
shareholders holding approximately 43.9% of the Company's shares indicated to
the Special Committee their opposition to the Zemex proposal. Because the
Zemex proposal required support of the majority of the Hitox shares in order
to proceed, it appeared that insufficient votes would be available to support
the proposal.
<PAGE> 15
On May 28, 1999, Bernard A. Paulson, Paulson Ranch, Ltd. and Paulson
Acquisition LLC, Megamin Ventures Sdn. Bhd. ("Megamin"), Founders Equity
Securities, Inc., Leon S. Loeb and Richard L. Bowers , who collectively hold
in excess of 50% of the common stock of Hitox Corporation of America (the
"Company"), delivered a written demand and consent to the Company. The
written demand and consent removed Robert J. Cresci, William B. Hayes and
Michael A. Nicolais as directors of the Company and appointed Richard L.
Bowers, Thomas W. Pauken and W. Craig Epperson to serve as directors of the
Company. Messrs. Bernard A. Paulson, Christopher J. McGougan (a designee of
the Board of Megamin) and Kevin S. Moore were also directors of the Company,
and their directorships were not affected by this action.
At a meeting of the newly constituted Board of Directors held on June 1,
1999, Mr. McGougan was elected to serve as Chairman of the Company's Board of
directors and Mr. Paulson was elected to serve as President and Chief
Executive Officer. Mr. Bowers was elected Executive Vice President and
Director of Sales & Marketing. At this Board meeting, Mr. Moore tendered his
resignation as a director of the Company. Mr. Moore has voting control over
approximately 25% of the Company's issued and outstanding shares.
The parties delivering the written demand and consent removing the
existing directors and appointing their designees had the following
beneficial ownership interest in the Company's issued and outstanding shares
on May 28, 1999:
Number of Percentage of issued
shares owned and outstanding shares
------------ ----------------------
Megamin Ventures Sdn. Bhd. 1,353,000 28.95%
Bernard A. Paulson 810,574 17.35%
Leon S. Loeb 144,600 3.09%
Richard L. Bowers 67,400 1.44%
Founders Equity Securities, Inc. 21,000 0.45%
<PAGE> 16
Item 6. Exhibits and Reports on Form 8K
Page No.
--------
(a) Exhibits None
(b) Reports on Form 8-K The Company filed a Form 8-K
Current Report dated May 28, 1999
reporting a change in control
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.
Hitox Corporation of America
---------------
(Registrant)
Date: August 6, 1999 BERNARD A. PAULSON
--------------- ------------------
Bernard A. Paulson, President and CEO
Date: August 6, 1999 CRAIG SCHKADE
--------------- ------------------
Craig Schkade, Chief Financial Officer
(Principal Financial and Accounting Officer)
<PAGE> 17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> $1,878
<SECURITIES> 0
<RECEIVABLES> 1,572
<ALLOWANCES> 0
<INVENTORY> 5,802
<CURRENT-ASSETS> 9,437
<PP&E> 8,675
<DEPRECIATION> (5,932)
<TOTAL-ASSETS> $12,205
<CURRENT-LIABILITIES> 1,498
<BONDS> 0
0
0
<COMMON> 1,190
<OTHER-SE> 9,517
<TOTAL-LIABILITY-AND-EQUITY> $12,205
<SALES> $6,038
<TOTAL-REVENUES> 6,087
<CGS> 4,098
<TOTAL-COSTS> 5,430
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 653
<INCOME-TAX> 15
<INCOME-CONTINUING> 638
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 638
<EPS-BASIC> $0.14
<EPS-DILUTED> $0.14
</TABLE>
