<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1997
------------------------------------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------- ----------------------------
Commission File Number: 0-19487
---------------------------------------------------------
NSA INTERNATIONAL, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Tennessee 62-1387102
- --------------------------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
4260 East Raines Road, Memphis, Tennessee 38118
- --------------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
(901) 541-1223
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
4,858,156 shares of $.05 par value common stock were outstanding at
January 31, 1997.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
NSA International, Inc. and Subsidiaries:
Consolidated Balance Sheets as of January 31, 1997 (unaudited) and
April 30, 1996
Consolidated Statements of Operations for the Three Month and Nine
Month Periods Ended January 31, 1997 and 1996 (unaudited)
Consolidated Statements of Shareholders' Equity for the Nine Month
Periods Ended January 31, 1997 and 1996 (unaudited)
Consolidated Statements of Cash Flows for the Nine Month Periods Ended
January 31, 1997 and 1996 (unaudited)
Notes to Consolidated Financial Statements
- 1 -
<PAGE> 3
NSA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JANUARY 31, APRIL 30,
ASSETS 1997 1996
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 5,866,179 $ 8,754,770
Short-term investments 13,507 13,047
Receivables, net 3,771,805 1,839,493
Refundable income taxes 786,750 729,545
Inventories 9,436,070 10,233,158
Deferred income taxes 322,000 322,000
Notes receivable - short-term 305,000 125,000
Other current assets 850,125 1,093,442
------------ ------------
Total current assets 21,351,436 23,110,455
PROPERTY AND EQUIPMENT, At cost:
Leasehold improvements 309,033 579,618
Manufacturing equipment 456,062 678,800
Office furniture and equipment 1,427,951 2,693,847
Transportation equipment 124,765
Data processing equipment 1,243,818 2,148,027
------------ ------------
Total 3,436,864 6,225,057
Less accumulated depreciation and amortization (1,799,694) (3,347,843)
------------ ------------
Property and equipment, net 1,637,170 2,877,214
NOTES RECEIVABLE - LONG-TERM 5,215,431 4,615,495
OTHER ASSETS 658,007 670,827
------------ ------------
TOTAL ASSETS $ 28,862,044 $ 31,273,991
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Amounts due to NSA, Inc. $ 8,422,927 $ 923,150
Accounts payable, trade 1,064,347 2,556,531
Accrued sales commissions and allowances 269,937 771,868
Accrued compensation and expenses 4,484,515 4,724,392
Accrued sales returns 946,240 1,196,142
Advance payments by dealers/distributors 16,655 105,079
Income taxes payable 799,190 1,068,596
Other current liabilities 162,502 441,300
------------ ------------
Total current liabilities 16,166,313 11,787,058
AMOUNTS DUE TO NSA, INC 7,900,000
DEFERRED INCOME TAXES 322,000 322,000
OTHER LIABILITIES 1,058,662 1,058,662
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.05 par value, 100,000,000 shares authorized, 4,858,156
outstanding at January 31, 1997 and April 30, 1996 242,908 242,908
Additional paid-in capital 29,106,950 21,196,430
Deficit (18,034,789) (11,233,067)
------------ ------------
Total shareholders' equity 11,315,069 10,206,271
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 28,862,044 $ 31,273,991
============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 4
NSA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED JANUARY 31, ENDED JANUARY 31,
---------------------------- ----------------------------
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET REVENUES $ 7,433,358 $ 18,347,914 $ 30,485,081 $ 58,401,789
COSTS AND EXPENSES:
Dealer/distributor commissions and allowances (372,169) (7,303,187) (6,506,571) (22,529,520)
Cost of products sold (4,909,891) (6,589,760) (15,915,978) (21,358,733)
Operating expenses (3,786,482) (6,962,292) (11,984,390) (21,763,874)
Interest income, net 161,859 148,026 408,688 565,545
Licensing and management fees to National Safety
Associates, Inc. (38,446) (349,021) (427,490) (1,074,891)
Restructuring costs (3,000,000)
Other income (expense), net (23,872) (32,794) 243,704 (273,999)
------------ ------------ ------------ ------------
Total (8,969,001) (21,089,028) (37,182,037) (66,435,472)
------------ ------------ ------------ ------------
LOSS BEFORE INCOME TAXES (1,535,643) (2,741,114) (6,696,956) (8,033,683)
INCOME TAX BENEFIT (EXPENSE) 95,234 6,441 (104,766) (148,829)
------------ ------------ ------------ ------------
NET LOSS $ (1,440,409) $ (2,734,673) $ (6,801,722) $ (8,182,512)
============ ============ ============ ============
LOSS PER COMMON SHARE $ (0.30) $ (0.56) $ (1.40) $ (1.68)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING 4,858,156 4,858,156 4,858,156 4,858,156
TRANSACTIONS WITH NATIONAL SAFETY
ASSOCIATES, INC. INCLUDED IN THE ABOVE:
Net sales to National Safety Associates, Inc. $ 2,206,000 $ 2,700,000 $ 7,231,000 $ 8,788,000
Cost of products sold (purchased from National Safety
Associates, Inc.) 83,669 492,185 348,628 960,840
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
NSA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
NINE MONTH PERIODS ENDED JANUARY 31, 1997 AND 1996 (UNAUDITED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK
---------------------------- ADDITIONAL
NUMBER PAID-IN
OF SHARES AMOUNT CAPITAL DEFICIT TOTAL
1996
<S> <C> <C> <C> <C> <C>
BALANCE AT APRIL 30, 1995 4,858,156 $ 242,908 $ 21,197,616 $ (523,582) $ 20,916,942
Repurchase of warrants (700) (700)
Net loss (8,182,512) (8,182,512)
--------- ------------ ------------ ------------ ------------
BALANCE AT JANUARY 31, 1996 4,858,156 $ 242,908 $ 21,196,916 $ (8,706,094) $ 12,733,730
========= ============ ============ ============ ============
1997
BALANCE AT APRIL 30, 1996 4,858,156 $ 242,908 $ 21,196,430 $(11,233,067) $ 10,206,271
Net loss (6,801,722) (6,801,722)
Forgiveness of debt by NSA, Inc. 7,910,520 7,910,520
--------- ------------ ------------ ------------ ------------
BALANCE AT JANUARY 31, 1997 4,858,156 $ 242,908 $ 29,106,950 $(18,034,789) $ 11,315,069
========= ============ ============ ============ ============
</TABLE>
See notes to consolidated financial statements.
<PAGE> 6
NSA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTH PERIODS ENDED JANUARY 31, 1997 AND 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (6,801,722) $ (8,182,512)
Adjustments to reconcile net loss to net cash used by operations:
Gain (loss) on sales of property and equipment 113,061 (17,134)
Depreciation and amortization 524,090 705,176
Restructuring costs 3,000,000
Changes in assets and liabilities:
Receivables, net (1,928,141) 554,426
Inventories 756,282 2,754,270
Other current and noncurrent assets 114,380 856,890
Accounts payable, trade (1,889,641) (950,974)
Accrued sales returns (249,902) (351,662)
Other accrued expenses (3,935,232) (1,482,138)
Income taxes payable/refundable 70,846 (69,441)
Other liabilities (278,798) 910,491
------------ ------------
Net cash used in operating activities (10,504,777) (5,272,608)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments (607,978)
Sales of short-term investments 515,200
Proceeds from collection of notes receivable 177,364 500,000
Purchase of property and equipment (71,475) (301,038)
Proceeds from sales of property and equipment 123,665
------------ ------------
Net cash provided by investing activities 105,889 229,849
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of common stock and warrants (700)
Advances from (repayments to) National Safety Associates, Inc. 7,510,297 (159,573)
------------ ------------
Net cash provided by (used in) financing activities 7,510,297 (160,273)
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (2,888,591) (5,203,032)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,754,770 15,603,316
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 5,866,179 $ 10,400,284
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ NIL $ 29,000
Income taxes 223,310 218,270
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
See discussion of non-cash financing activities in Note 4.
</TABLE>
See notes to consolidated financial statements.
<PAGE> 7
NSA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTH PERIODS ENDED JANUARY 31, 1997 AND 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
1. FINANCIAL STATEMENT PRESENTATION
The consolidated balance sheet as of January 31, 1997, the consolidated
statements of operations for the three month and nine month periods
ended January 31, 1997 and 1996, and the consolidated statements of
shareholders' equity and cash flows for the nine month periods ended
January 31, 1997 and 1996 have been prepared by the Company, without
audit. It is management's opinion that these statements include all
adjustments, consisting only of normal recurring adjustments, necessary
to present fairly the financial position, results of operations, and
cash flows as of January 31, 1997 and for all periods presented. The
results for the periods presented are not necessarily indicative of the
results that may be expected for the full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these consolidated financial statements be read in conjunction
with the consolidated financial statements and notes thereto included
in the Company's Annual Report on Form 10-K, previously filed with the
Securities and Exchange Commission.
2. LOSS PER SHARE
Amounts shown as loss per share have been computed by dividing net loss
applicable to common shareholders by the weighted average number of
common shares outstanding.
3. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
JANUARY 31, 1997 APRIL 30, 1996
<S> <C> <C>
Raw materials $ 3,251,071 $ 5,850,158
Finished goods 7,913,834 6,733,874
Accessories 1,534,845 1,933,995
------------ ------------
Total at cost 12,699,750 14,518,027
Reserve for excess and obsolete inventory (3,263,680) (4,284,869)
------------ ------------
Total $ 9,436,070 $ 10,233,158
============ ============
</TABLE>
<PAGE> 8
4. RESTRUCTURING CHARGE AND SALE OF CERTAIN OPERATIONS
During the second quarter of 1997, the Company sold its operating
rights and certain fixed assets in Germany, Switzerland, Belgium,
Holland, and the United Kingdom. Consideration was received in the form
of notes receivable which provide for annual payments of principal and
interest over the next six to seven years. As the rates on the notes
are substantially less than current market rates, these notes were
discounted to a present value of $1,510,000 using the current U.S.
Prime rate of 8.25%. The gain on the sale of $630,000 is being
deferred, as the buyers did not make any payments to the Company as of
the closing dates; this deferred gain is offset against the related
notes receivable on the accompanying balance sheet and will be ratably
recognized by the Company as the notes are collected. Also, these
dispositions obligate the buyers to assume responsibilities for future
multi-level direct selling operations in these countries.
During the first quarter of 1997, the Company announced its decision to
close its European headquarters. Accordingly, a restructuring charge
totalling $3,000,000 was reflected during the first quarter of fiscal
1997. The charge includes estimates of $975,000 to writedown fixed
assets to net realizable value, $500,000 to recognize termination costs
of certain employees, $200,000 to accrue costs related to early
termination of leases, $825,000 to writedown certain inventories which
will be obsolete as a result of the restructuring, and $500,000 for
salary and other shutdown expenses after these operations are sold.
Costs totalling $1,115,000 principally related to inventory write-offs,
salaries and shutdown expenses, were charged against the reserve in the
second and third quarter of 1997. Additional employee termination costs
of $500,000 to $1,000,000 are expected during the implementation of the
restructuring plan, which is expected to be completed by the end of
fiscal 1997.
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Management's discussion should be read in conjunction with the
Consolidated Financial Statements and the discussion of NSA International,
Inc.'s (the "Company") business and other detailed information appearing
elsewhere herein. All information is based on the Company's fiscal quarter and
nine months ended January 31.
RESULTS OF OPERATIONS
Net Revenue
<TABLE>
<CAPTION>
Third Quarter Nine Months
--------------------------- ------------------------
1997 Change 1996 1997 Change 1996
---- ------ ---- ---- ------ ----
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Net revenues $ 7,433 (59.49)% $18,348 $30,485 (47.80)% $58,401
Cost and expenses 8,969 (57.47)% 21,089 37,182 (43.17)% 66,435
Percentage of net revenues 120.66% 114.94% 121.97% 112.47%
Net income (loss) (1,440) (2,735) (6,801) (8,183)
Earnings (loss) per share $ (.30) $ (.56) $ (1.40) $ (1.68)
</TABLE>
The decrease in the third quarter and first nine month's revenues
resulted from the sale of certain of the Company's direct selling operations in
the 1996 fourth quarter and the 1997 second quarter.
Costs and Expenses
<TABLE>
<CAPTION>
Third Quarter Nine Months
----------------------- ----------------------
1997 Change 1996 1997 Change 1996
---- ------ ---- ---- ------ ----
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Dealer/Distributor $ 372 (94.91)% $7,303 $ 6,507 (71.12)% $22,530
commissions and allowances
Percentage of net revenues 5.00% 39.80% 21.34% 38.58%
Cost of products sold 4,910 (25.49)% 6,590 15,916 (25.48)% 21,359
Percentage of net revenues 66.06% 35.92% 52.21% 36.57%
</TABLE>
The decreases in dealer/distributor commissions and allowances, as a
percentage of net revenues, for the 1997 third quarter and first nine months
reflect the change of the sales mix resulting from the sale of certain direct
selling operations which paid dealer/distributor commissions on most of their
prior sales.
The 1997 increases in the cost of products sold as a percentage of net
revenues resulted from the continued change in the Company's operations to sales
to third party licensees which have lower sales margins.
- 8 -
<PAGE> 10
<TABLE>
<CAPTION>
Third Quarter Nine Months
----------------------- ----------------------
1997 Change 1996 1997 Change 1996
---- ------ ---- ---- ------ ----
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Operating expenses $3,786 (45.63)% $6,963 $11,984 (44.93)% $21,764
Percentage of net revenues 50.94% 37.95% 39.31% 37.27%
</TABLE>
The Company's declines in operating expenses for the 1997 third quarter
and first nine months reflect expense reductions resulting from the sale of the
Canadian direct selling operations in the 1996 fourth quarter and the sale of
several of the European direct selling operations in the 1997 second quarter.
<TABLE>
<CAPTION>
Third Quarter Nine Months
----------------------- ----------------------
1997 Change 1996 1997 Change 1996
---- ------ ---- ---- ------ ----
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest income net $163 10.13% $148 $409 (29.36)% $579
</TABLE>
The decrease in interest income for the first nine months reflects
lower average balances of cash and cash equivalents.
<TABLE>
<CAPTION>
Third Quarter Nine Months
----------------------- ----------------------
1997 Change 1996 1997 Change 1996
---- ------ ---- ---- ------ ----
(Dollars In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Management fees to NSA, Inc. $38 (89.11)% $349 $427 (60.28)% $1,075
Percentage of net revenues 0.5% 1.90% 1.4% 1.84%
</TABLE>
The decrease in management fees is due to the sale of certain of the
Company's direct selling operations.
<TABLE>
<CAPTION>
Third Quarter Nine Months
--------------- ------------
1997 1996 1997 1996
---- ---- ---- ----
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Other income (expense) $(24) $(32) $244 $(274)
Percentage of net revenues (0.3)% 0.2% 0.8% (.47)%
</TABLE>
The 1997 third quarter expense was primarily due to foreign currency
transaction and translation losses, which included a small foreign currency
hedging loss. The third quarter foreign currency translation and transaction
losses have reduced the 1997 first nine months' gain to approximately $30,000.
The 1996 nine month loss was primarily due to foreign currency hedging which was
partially offset by current translation and transaction gains.
- 9 -
<PAGE> 11
<TABLE>
<CAPTION>
Third Quarter Nine Months
--------------- ------------
1997 1996 1997 1996
---- ---- ---- ----
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Restructuring Costs 0 $0 $3,000 $0
Percentage of net revenues 0% 9.84%
</TABLE>
During the 1997 first quarter, the Company charged $3,000,000 for
expenses to be incurred with the closing of the Company's European Central
Office in Amsterdam and other charges as a result of the sale of selected
European direct selling operations.
<TABLE>
<CAPTION>
Third Quarter Nine Months
--------------- ------------
1997 1996 1997 1996
---- ---- ---- ----
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Benefit (provision) for income taxes $ 96 $ 6 $ (104) $ (149)
Effective tax rate 6.67% .22% (1.53)% (1.82)%
</TABLE>
The low effective tax rate results from certain losses incurred by the
Company's European direct selling subsidiaries, which cannot be utilized.
Net Loss
<TABLE>
<CAPTION>
Third Quarter Nine Months
--------------- ------------
1997 1996 1997 1996
---- ---- ---- ----
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Net income (loss) $(1,440) $(2,735) $(6,801) $(8,183)
Earnings (loss) per share $ (.30) $ (.56) $ (1.40) $ (1.68)
</TABLE>
Future Outlook
The Company is continuing negotiations to sell its remaining direct
selling operations located in Italy and France. Management anticipates that
the disposition of these operations will be completed during the 1997 fourth
quarter or 1998 first quarter.
In the 1997 fourth quarter the Company anticipates introducing a new
water filter, which has interchangeable replaceable filter cartridges. This
filter system has several different types of replaceable filter cartridges
available so that customers may choose a cartridge which will solve their
specific type of water problem. This product, coupled with the 1997 third
quarter new product introduction of Juice Plus Thins(TM), the Company's latest
dietary food supplement, and Pet Plus(TM), a food supplement for dogs and cats,
continues to successfully extend the Company's product lines.
In addition to these new products, the Company is aggressively
expanding into new markets. During the 1997 third quarter, the Company entered
into agreements for the distribution by third parties of its products in Russia,
Turkey, Poland and Pakistan. In the 1998 first quarter, the Company expects its
new Spanish Master Distributor to commence operations in Spain and Portugal. The
Company is currently negotiating with third parties for the introduction of its
product lines into Australia, New Zealand, Denmark, Finland, Norway and Sweden
as well as certain new Asian markets.
- 10 -
<PAGE> 12
Management anticipates that the operational changes, new product
introductions, and the opening of new markets will have a positive effect on its
1998 operating results. Although the ultimate effect of these changes cannot be
determined, Management anticipates that the Company's operations will improve to
the extent that the Company will be profitable on or before the fourth quarter
of 1998.
The statement above concerning the trend toward future profitability
of the Company is a forward-looking statement within the meaning of Section 23E
of the Securities Exchange Act of 1934, and is intended to qualify for safe
harbor protection as defined therein. Investors are cautioned that the
Company's ability to generate future positive operating results are subject to
risks and uncertainties including: (i) the Company's inability to retain
existing and to attract new distributors, (ii) the Company's inability to sell
its remaining European direct selling operations, and thereby realizing
significant expense reductions, and (iii) the Company's inability to
successfully introduce new products or to penetrate new markets.
Liquidity and Capital Resources
<TABLE>
<CAPTION>
Nine Months
---------------------------
1997 1996
---- ----
(Dollars in thousands)
<S> <C> <C>
Cash and cash equivalents $ 5,866 $10,400
Short-term investments 14 614
Working capital 5,185 6,513
Cash provided (used) by operating activities (10,505) (5,273)
Cash provided (used) by investing activities 105 230
Cash (used) by financing activities 7,510 (160)
</TABLE>
The Company has sufficient cash on-hand to finance current operations
and does not anticipate requiring additional funding in excess of the current
cash balances and cash flow generated from operations. If required, management
believes additional funding will be available from financial institutions or
NSA, Inc. at satisfactory terms.
- 11 -
<PAGE> 13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is party to various claims and matters of
litigation that arise in the normal course of its business. Management of the
Company believes the resolution of these matters will not have a material
adverse effect on the results of operations or the financial condition of the
Company.
On February 12, 1993, a complaint for injunctive relief and damages was
filed against the Company's affiliate, NSA, and Messrs. A. Jay Martin, L.F.
Swords and George R. Poteet, individually, in the United States District Court
for the Northern District of California. The named plaintiffs are seeking relief
on behalf of themselves and for an alleged class of persons who participated or
attempted to participate in NSA's multi-level marketing plan from February 13,
1989 to the present. The complaint alleges that the NSA multi-level marketing
plan constitutes an unlawful pyramid scheme and the sale of unregistered
securities made through the use of allegedly untrue, inaccurate and misleading
statements of material facts. It further alleges that the NSA marketing plan was
promoted utilizing fraudulent activities, unfair business practices and false
advertising. NSA and the individual defendants answered denying the allegations.
During a hearing on October 1, 1993, motions regarding the certification of the
alleged class were argued before the court. On April 5, 1994, the case was moved
to the Federal District Court for the Western District of Tennessee. The
magistrate judge assigned to the case recommended certification of the class and
NSA filed exceptions to the report. On August 20, 1996, the Court rendered an
Order Granting Plaintiff's Motion for Class Certification as Modified. On March
12, 1996, the Court denied Defendant's Motion for Reconsideration, for
Clarification of Class Certification, Stay or Alternatively for Interlocutory
Appeal.
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 (SS. 249.308 OF THIS CHAPTER).
(a) Exhibits.
27 Financial Data Schedule (for SEC purposes only)
(b) Reports on Form 8-K.
Current Report on Form 8-K filed on November 27, 1996
- 12 -
<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.
NSA INTERNATIONAL, INC.
Date: March 14, 1997 By: /s/ Stan C. Turk
-------------------------------------
Stan C. Turk, Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q OF NSA INTERNATIONAL, INC. FOR THE PERIOD ENDED JANUARY 31, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JAN-31-1997
<EXCHANGE-RATE> 1
<CASH> 5,866
<SECURITIES> 14
<RECEIVABLES> 4,143
<ALLOWANCES> (371)
<INVENTORY> 9,436
<CURRENT-ASSETS> 21,351
<PP&E> 3,437
<DEPRECIATION> (1,800)
<TOTAL-ASSETS> 1,637
<CURRENT-LIABILITIES> 16,166
<BONDS> 0
0
0
<COMMON> 243
<OTHER-SE> 11,315
<TOTAL-LIABILITY-AND-EQUITY> 28,862
<SALES> 7,433
<TOTAL-REVENUES> 7,433
<CGS> 4,910
<TOTAL-COSTS> 5,282
<OTHER-EXPENSES> 3,687
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,535)
<INCOME-TAX> (95)
<INCOME-CONTINUING> (1,440)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,440)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
