THIS DOCUMENT IS A COPY OF THE FORM 10-QSB FILED ON
MAY 16, 1996 PURSUANT TO A RULE 201 TEMPORARY HARDSHIP
EXEMPTION.
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
Commission file number 0-27230
Industrial Flexible Materials, Inc.
----------------------------------------------------------
(Exact name of small business issuer as specified in its
charter)
New York 11-3023097
-------------------------- ---------------------------
(State or other (IRS Employer
jurisdiction Identification No.)
of incorporation or
organization)
6205 Airport Freeway, Fort Worth, Texas 76117
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(Address of principal executive offices)
817-831-3294
----------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required
to be filed by Section 13 or 15(d) of the 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. Yes X No
--- ---
The number of shares of the Registrant's Common Stock
outstanding as of May 1, 1996 was 5,582,094 shares.
<PAGE>
INDUSTRIAL FLEXIBLE MATERIALS, INC.
INDEX
Part 1. Financial Information
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets
March 31, 1996 (unaudited) and December 31, 1995 . . . 3
Consolidated Statements of Income:
March 31, 1996 and 1995 (unaudited) . . . . . . . . . . 4
Consolidated Statements of Cash Flows
March 31, 1996 and 1995 (unaudited) . . . . . . . . . . 5
Notes to Consolidated Financial
Statements (unaudited) . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 8
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . 10
Item 2. Changes in Securities . . . . . . . . . . . . . . . . 10
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . 10
Item 4. Submission of Matters to a Vote of Security Holders . 10
Item 5. Other Information . . . . . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 10
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
<PAGE>
Industrial Flexible Materials, Inc. and Subsidiaries
Consolidated Balance Sheets
March 31, 1996 (unaudited) and December 31, 1995
Assets
3/31/96 12/31/95
-------------- -------------
CURRENT ASSETS:
Cash and cash equivalents $ 21,493 $ 151,777
Accounts receivable - trade 130,171 254,810
Inventories 1,697,183 1,560,135
Other 69,598 29,711
-------------- ------------
Total current assets 1,918,445 1,996,433
PROPERTY, PLANT AND EQUIPMENT:
Property plant and equipment, at cost 5,871,376 5,863,095
Accumulated depreciation 2,405,412 2,266,336
-------------- ------------
Net property, plant and equipment 3,465,964 3,596,759
OTHER ASSETS 201,072 216,892
-------------- ------------
$ 5,585,481 $ 5,810,084
============== ============
Liabilities and Stockholders' Equity
CURRENT LIABILITIES:
Current maturities of long-term debt
and capital lease obligations $ 75,534 $ 75,534
Accounts payable 514,565 294,282
Accrued expenses 467,027 408,828
-------------- ------------
Total current liabilities 1,057,126 778,644
LONG-TERM DEBT, net of current maturities 393,378 399,662
CAPITAL LEASE OBLIGATION, net of
current maturities 148,444 157,547
-------------- -------------
Total liabilities 1,598,948 1,335,853
COMMITMENTS - -
STOCKHOLDERS' EQUITY
Preferred stock - $0.01 par value; 5,000,000 shares
authorized; none issued - -
Common stock - $0.001 par value; 25,000,000 shares
authorized; 4,650,052 shares issued and
outstanding 4,650 4,650
Additional paid-in-capital 8,583,412 8,583,412
Accumulated deficit (4,601,529) (4,113,831)
-------------- -------------
Total stockholders' equity 3,986,533 4,474,231
-------------- -------------
$ 5,585,481 $ 5,810,084
============== =============
The accompanying notes are an integral part of this statement.
3
<PAGE>
Industrial Flexible Materials, Inc. and Subsidiaries
Unaudited Statements of Operations
Three Months Ended March 31, 1996 and 1995
1996 1995
------------ ----------
Sales $ 168,148 $ 429,134
Cost of goods sold 414,498 360,682
------------ ----------
Gross profit (loss) (246,350) 68,452
Administrative and selling expenses 227,384 88,674
------------ ----------
Operating loss (473,734) (20,222)
Interest expense 13,964 26,977
------------ ----------
Net loss (487,698) (47,199)
============ ==========
Weighted average shares outstanding 4,650,052 2,800,000
============ ==========
Loss per share $ (0.10) $ (0.02)
============ ==========
The accompanying notes are an integral part of these statements.
4
<PAGE>
Industrial Flexible Materials, Inc. and Subsidiaries
Unaudited Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995
1996 1995
---------- ----------
Operating activites
Net loss $(487,698) $ (47,199)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 154,896 108,401
Changes in operating assets and liabilities:
Accounts receivable - trade 124,639 (14,594)
Inventories (137,048) (88,503)
Other (39,887) (52,911)
Accounts payable and accrued
expenses 278,482 (84,174)
---------- ----------
Net cash used in operating activities (106,616) (178,980)
Investing activities
Purchase of property and equipment (8,281) (39,079)
---------- ----------
Net cash used in investing activities (8,281) (39,079)
Financing activities
Payments of debt (6,284) (12,500)
Payments of obligations under capital leases (9,103) -
---------- ----------
Net cash provided (used) by
financing activities (15,387) (12,500)
---------- ----------
Net increase (decrease) in cash and
cash equivalents (130,284) (230,559)
Cash and cash equivalents at beginning
of year 151,777 249,230
---------- ----------
Cash and cash equivalents at end of year $ 21,493 $ 18,671
========== ==========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 13,964 $ 19,500
========== ==========
The accompanying notes are an integral part of these statements.
5
<PAGE>
Industrial Flexible Materials, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
March 31, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying financial statements include the accounts of Industrial
Flexible Materials, Inc. ("IFM" or the "Company") and its wholly-owned
subsidiaries. All intercompany accounts and transactions have been
eliminated in consolidation.
The consolidated financial statements contained herein have been prepared by
the Company pursuant to the rules and regulations of the Securities and
Exchange Commission. In the opinion of management, all adjustments necessary
for a fair presentation of the consolidated financial position as of March
31, 1996, and the consolidated results of operations for the three months
ended March 31, 1996 and 1995 and the consolidated cash flows for the three
months ended March 31, 1996 and 1995 have been made. In addition, all such
adjustments made, in the opinion of managment, are of a normal recurring
nature. The results of operations for the periods presented are not
necessarily indicative of the results to be expected for the full fiscal
year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the interim reporting
rules of the Securities and Exchange Commission. The interim consolidated
financial statements should be read in conjunction with the audited
consolidated financial statements and related notes for the year ended
December 31, 1995, included in the Company's 1995 Annual Report on Form 10-
KSB.
NOTE B - INVENTORIES
Inventories are carried at the lower of cost (first-in, first-out) or market
and consist of the following:
3-31-96 12-31-95
----------- -----------
Raw Materials
Tires to be shredded $ 308,758 $ 308,758
Tire chips 320,474 426,021
Buff rubber 121,600 146,126
Other 89,518 70,190
Finished goods 856,833 609,040
----------- -----------
$ 1,697,183 $ 1,560,135
Tire chips are scrap tires shredded by the Company in accordance with a
recycling program controlled by the State of Texas. Shredded tires are used
by the Company as one of the raw materials from which it produces granulated
rubber products.
6
<PAGE>
Industrial Flexible Materials, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - Continued
March 31, 1996
NOTE B - INVENTORIES - Continued
The Company's products are commodities and are priced according to supply and
demand. The realization of inventories is contingent upon the expected
future production levels and the estimated average selling prices. It is
reasonably possible that the Company's estimate of future production levels
and selling prices will be reduced in the near term, which would result in a
reduction in the carrying value of inventories that could be material.
7
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Opertions
Three months ended March 31, 1996 compared with the three months ended March
31, 1995.
Results of Operations:
Net Sales for the First Quarter of 1996 declined by $260,986 when compared
with the First Quarter of 1995. This low level of sales resulted from the
overall lower level of shipments of granulated rubber to the Company's
industrial customers and the lack of shipments for construction of roadways.
Weather and the historical limited volume of road construction in the winter
months limits the Company's markets for granulated rubber during the early
part of each calendar year. The Company also was faced with strong price
competition from new granulated rubber producers in certain markets.
The Company's revenues in the First Quarter of both 1996 and 1995 were
further limited by the lack of recycling fees paid by the State of Texas
under its Scrap Tire Recycling Program. The Company has historically
participated in this Program and anticipates doing so in the future. The
Company incurred expenses in the form of depreciation and maintenance on
equipment that is designed to collect and process scrap tire pursuant to this
Program with no related revenues generated.
The Company's cost of sales has been negatively impacted by its limited
volume of activity and the continued reduction of the Company's Tire Derived
Fuel ("TDF") inventories at depressed market values. During the first
quarter of 1996, the Company operated its granulated rubber manufacturing
facility at approximately thirty percent (30%) of its designed capacity.
However, a major portion of the Company's manufacturing costs are fixed and
could not be reduced in direct proportion to the level of manufacturing
required to meet market conditions. As the Company returns to more
acceptable levels of operation, the Company anticipates that cost of sales
will return to a more acceptable ratio to sales. During the first quarter of
1996, the Company liquidated $105,000 of TDF inventories, resulting in a
direct operating loss including delivery costs.
The Company's selling and administrative expenses increase from $88,674 in
the First Quarter of 1995 to $227,384 in the First Quarter of 1996. This
increase is attributable to an increase in sales and marketing personnel of
$26,500, an increase of $44,500 in professional fees relating to the
Company's auditors and investment bankers, and $81,500 of depreciation on
equipment that was not utilized by the Company during the First Quarter of
1996. Similar expenses were not incurred during the First Quarter of 1995.
Liquidity and Financial Condition:
While cash remains a precious commodity, the Company's overall financial
condition remains strong. The Company's ratio of current assets to current
liabilities was 1.8 to 1.0 at March 31, 1996 compared with 2.6 to 1.0 at
December 31, 1995 and .83 to 1.0 at
8
<PAGE>
March 31, 1995. The Company's current assets exceeded its total liabilities
by $319,000 at March 31, 1996. The Company anticipates that it will be
successful in meeting its cash requirements through a combined debt and
equity financing currently being negotiated with individual investors and
institutional lenders.
Inventories increased by $137,000 during the First Quarter of 1996, but of
greater positive significance is the fact that the Company's finished goods
increased by almost $250,000 during the period. As of March 31, 1996, the
Company had $850,000 of finished goods inventory ready to meet the
requirements of the asphalt paving market. This compares with a finished
goods inventory of $256,000 at March 31, 1995.
The Company's ratio of total liabilities to shareholders' equity was .4 to
1.0 at March 31, 1996 compared to .3 to 1.0 at December 31, 1995.
9
<PAGE>
Industrial Flexible Materials, Inc.
Part II. Other Information
Item 1. Legal Proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports of Form 8-K
(A) Not Applicable
(B) No reports on Form 8-K were filed during the first
quarter of 1996.
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.
Industrial Flexible Materials, Inc.
------------------------------------------------
(Registrant)
May 13, 1996 /s/ Donald K. Jury
- -------------------------- ------------------------------------------------
Date Donald K. Jury
President and Chief Financial Officer
(Duly Authorized Officer and Principal Financial
and Accounting Officer)
10
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<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 21,493
<SECURITIES> 0
<RECEIVABLES> 130,171
<ALLOWANCES> 0
<INVENTORY> 1,697,183
<CURRENT-ASSETS> 1,918,445
<PP&E> 5,871,376
<DEPRECIATION> 2,405,412
<TOTAL-ASSETS> 5,585,481
<CURRENT-LIABILITIES> 1,057,126
<BONDS> 393,378
0
0
<COMMON> 4,650
<OTHER-SE> 3,981,883
<TOTAL-LIABILITY-AND-EQUITY> 5,585,481
<SALES> 168,148
<TOTAL-REVENUES> 168,148
<CGS> 414,498
<TOTAL-COSTS> 227,384
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,964
<INCOME-PRETAX> (487,698)
<INCOME-TAX> 0
<INCOME-CONTINUING> (487,698)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (487,698)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
