UNITED STATES
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 OF 1934
For the quarterly period ended April 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-17899
FRENCHTEX, INC.
(Exact name of small Business issuer as specified in this charter)
FLORIDA 65-0007008
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8940 S.W. 129th Terrace, Miami, FL 33176
(Address of principal executive offices)
Issuer's telephone number, including area code: (305) 255-4300
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 issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
YES X NO
There were 3,126,000 shares of the registrant's Common Stock, $.01 par
value, outstanding as of June 9, 1995
FRENCHTEX, INC.
CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS PAGE
BALANCE SHEET 1
STATEMENTS OF OPERATIONS 2
STATEMENTS OF CASH FLOW 3
NOTES TO FINANCIAL STATEMENTS 4
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF OPERATIONS 5 & 6
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 7
SIGNATURES 8
FRENCHTEX, INC.
BALANCE SHEET
APRIL 30, 1995
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 76,656
Accounts receivable - trade, net of allowance
for returns and doubtful accounts of $45,000 892,075
Inventories 1,274,069
Other current assets 312,483
TOTAL CURRENT ASSETS 2,555,283
PROPERTY AND EQUIPMENT, at cost,
net of accumulated depreciation of
$114,646 11,252
OTHER ASSETS 13,519
TOTAL ASSETS $ 2,580,054
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 1,041,000
Current maturities of long-term debt 17,714
Accounts payable 392,892
Accrued expenses 24,266
TOTAL CURRENT LIABILITIES 1,475,872
LONG-TERM DEBT 232,875
SHAREHOLDERS' EQUITY
Common stock, $.01 par value;
10,000,000 shares authorized,
3,186,000 issued 31,860
Additional paid-in capital 743,048
Retained earnings since August 1, 1994, net of
deficit eliminated of $7,394,411 (Note 2) 246,399
1,021,307
Less cost of 60,000 common shares in
treasury 150,000
TOTAL SHAREHOLDERS' EQUITY 871,307
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,580,054
See Accompanying Notes
PAGE 1
FRENCHTEX, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
April 30, April 30,
1995 1994 1995 1994
NET SALES $1,200,112 $1,092,030 $3,509,769 $ 2,522,719
COSTS AND OPERATING EXPENSES
Cost of sales 893,421 890,587 2,577,559 2,007,997
Selling, general and
administrative 239,789 183,119 630,818 496,571
TOTAL COSTS AND
OPERATING EXPENSES 1,133,210 1,073,706 3,208,377 2,504,568
INCOME FROM OPERATIONS 66,902 18,324 301,392 18,151
OTHER INCOME (EXPENSE)
Interest income - 480 756 1,524
Interest expense (25,943) (6,900) (55,748) (17,305)
TOTAL OTHER (EXPENSE) (25,943) (6,420) (54,993) (15,781)
NET INCOME $ 40,959 $ 11,904 $ 246,399 $ 2,370
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
NET INCOME $ .013 $ .004 $ .079 $ .001
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 3,126,000 3,057,111 3,126,000 3,057,111
SEE ACCOMPANYING NOTES
PAGE 2
FRENCHTEX, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED
April 30,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 246,399 $ 2,370
Adjustments to reconcile net income to
net cash used for operating activities:
Depreciation and amortization 13,972 22,466
Provision for doubtful accounts 15,000 (5,020)
Gain on the sale of property - (1,406)
Changes in assets and liabilities:
(Increase) decrease in assets
Accounts receivable (487,105) (351,527)
Inventories (985,145) 47,743
Vendor deposits for inventory purchases (162,138) (124,776)
Other assets (1,553) (2,636)
Increase (decrease) in liabilities
Accounts payable 368,571 111,438
Accrued expenses (33,068) 17,305
Total adjustments (1,271,466) (286,413)
NET CASH USED FOR OPERATING ACTIVITIES (1,025,067) (284,043)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (3,056) (13,498)
Proceeds from sale of property and equip. - 3,000
Proceeds from short-term borrowings 575,000 67,000
NET CASH PROVIDED BY INVESTING ACTIVITIES 571,944 56,502
CASH FLOWS FROM FINANCING ACTIVITIES
Increase (decrease) in notes payable (5,811) 256,400
Dividends paid - (34,840)
NET CASH PROVIDED BY (USED FOR)
FINANCING ACTIVITIES (5,811) 221,560
NET DECREASE IN CASH AND CASH EQUIVALENTS (458,934) (5,981)
CASH AND CASH EQUIVALENTS, Begining of period 535,590 102,322
CASH AND CASH EQUIVALENTS, End of period $ 76,656 $ 96,341
Supplemental Disclosure of Cash Flow Information:
Cash paid during the year for interest $ 52,555 $ -
See Accompanying Page
PAGE 3
FRENCHTEX, INC.
NOTES TO FINANCIAL STATEMENTS
FORM 10-QSB APRIL 30, 1995
Note 1 - Basis of Presentation:
The accompanying unaudited financial statements reflect all adjustments which
are, in the opinion of management, consisting of normal recurring adjustments
necessary to present fairly the financial condition, the results of
operations and the changes in cash flows of the Company for the interim
periods.
These financial statements have been prepared in accordance with the
instructions to Form 10-Q and, therefore, do not include all of the
disclosures normally required by generally accepted accounting principles or
those normally made in the Company's annual Form 10-K filing. Users of the
financial information for interim periods are encouraged to refer to the
footnotes contained in the Annual Report to stockholders for the year ended
July 31, 1993.
Note 2 - Inventories:
Inventories are stated at the lower of cost or market, cost being determined
by the first-in, first-out basis.
Note 3 - Long-term Debt
On July 23, 1993, the Company received approval on a loan for the physical
loss of inventory and other damages sustained in Hurricane Andrew in the
amount of $256,400 from the U.S. Small Business Administration (SBA). The
loan bears interest at 4%, is payable in monthly installments of $2,477,
including principal and interest, beginning July 1994 and matures in July
2005. It is collateralized by the Company's inventory and fixed assets. The
Company received $175,600 in advances prior to the end of the second quarter
and $80,800 in February 1994.
PAGE 4
ITEM 2. Management's Discussion and Analysis of Operations.
Product sales in the third quarter ended April 30, 1995 are $1,200,112 as
compared to 1,092,030 in the same quarter of the prior year and for the nine
month period are $3,509,769 as compared to $2,522,719 in the same period last
year. This increase in sales of $108,082 (10%) and $987,050 (39%),
respectively, is primarily due to the Company's expanded product line of
terry robes and towels resulting in new programs with new and existing
customers.
Selling, general and administrative expenses for the third quarter are
$239,789 in 1995, as compared to $183,119 in the same quarter of the prior
year and for the nine month period are $630,818 in 1995 as compared to
$496,571 in the same period of the prior year. The increase in expenses of
$56,670 (31%) and $134,247 (27%), respectively, in 1995 is related to the
increase in sales volume, resulting in an increase in commissions to
independent sales representatives, warehouse supplies and temporary labor.
The third quarter increase is also due to the one time advertising allowance
to various customers of approximately $12,000 and a nonrecurring expense of
$21,000 for payment of an invoice for merchandise that was being disputed by
the Company.
Interest expense for the third quarter of 1995 is $25,943 as compared to
$6,900 in the same quarter of the prior year and for the nine months period
is $55,748 in 1995 as compared to $17,305 in the same period of the prior
year. This increase is primarily due to the increase in notes payable to
related parties which were funded during and after the second quarter of
1994.
Net income for the third quarter ended April 30, 1995 increased to $40,959 or
$.013 per share from a net income of $11,904 or $.004 per share in the same
quarter of the prior year. Net income for the nine month period increased to
$246,399 or $.079 per share from a net income of $2,370 or ($.001) per share.
Page 5
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
Net cash used in operations for the nine months period ended April 30, 1995
was $1,025,067 as compared to $284,615 in the same period in 1994. The
increase is primarily due to increase in inventory of $985,145 as compared to
a decrease of $47,743 in the same period of the prior year. The cash used in
operations was offset by an increase in short-term borrowing from related
parties of $575,000 during the first nine months of 1995.
Page 6
PART II - OTHER INFORMATION
ITEM 6 : EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None
(b) Reports on Form 8-K: None
PAGE 7
SIGNATURE
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.
FRENCHTEX, INC.
(Registrant)
JUNE 9, 1995 By: Don M. Waters
Date Don M. Waters, President
Chief Executive Officer
