<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 30, 1996
--------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
EXCHANGE ACT
For the transition period from to
------------------ --------------------
Commission file number 1-14244
-------
GLAS-AIRE INDUSTRIES GROUP LTD.
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
NEVADA 84-1214736
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3137 GRANDVIEW HIGHWAY, VANCOUVER, B.C. V5M 2E9
-----------------------------------------------
(Address of principal executive office)
(604) 435-8801
---------------------------
(Issuer's telephone number)
- -------------------------------------------------------------------------------
(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 No X
----- -----
Number of shares outstanding of the issuer's Common Stock:
Class Outstanding at April 30, 1996
----------------------------- -----------------------------
Common Stock, $0.01 par value 932,421
<PAGE>
Glas-Aire Industries Group Ltd.
INDEX
-----
<TABLE>
<CAPTION>
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C> <C>
Consolidated Condensed Balance Sheets -
April 30, 1996 and January 31, 1996 1
Consolidated Condensed Statement of Operations
for the three months ended April 30, 1996 and 1995 2
Consolidated Condensed Statement of Cash Flow
for the three months ended April 30, 1996 and 1995 3
Notes to Consolidated Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5-6
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 7
SIGNATURES 8
</TABLE>
ii
<PAGE>
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Item 1. Financial Statements
- -----------------------------
Glas Aire Industries Group Ltd.
Consolidated Condensed Balance Sheet
April 30, January 31,
1996 1996
(Unaudited) (Audited)
---------- -----------
<S> <C> <C>
Assets
Current
Cash and Equivalents $ 28,996 $ 330,107
Accounts receivable 457,481 672,671
Inventories 676,358 689,858
Prepaid Expenses 45,402 14,049
Deferred Offering Costs 274,672 159,817
---------- ----------
1,482,909 1,866,502
Fixed assets 780,443 758,166
---------- ----------
$2,263,352 $2,624,668
---------- ----------
Liabilities and Shareholders' Equity
Current
Bank indebtedness $ 128,940 $ 255,926
Accounts Payable and accrued liabilities 280,281 511,006
Incomes taxes payable 53,240 138,457
Current portion - long term debt 13,767 27,304
Current portion - capital lease 34,824 33,616
---------- ----------
511,052 966,309
Long Term Debt
Obligation Under Capital Lease 55,083 63,630
Deferred Income Taxes 131,664 130,571
---------- ----------
697,799 1,160,510
Shareholders' Equity
Share capital 9,366 9,238
Contributed surplus 975,020 911,148
Treasury stock (17,010) (17,010)
Retained earnings 621,800 589,834
Cumulative translation adjustment (23,623) (29,052)
---------- ----------
1,565,553 1,464,158
$2,263,352 $2,624,668
========== ==========
</TABLE>
See accompanying notes.
-1-
<PAGE>
Glas Aire Industries Group Ltd.
Consolidated Condensed Statement of Operations
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
-----------------------
April 30 April 30
1996 1995
-------- ---------
<S> <C> <C>
Sales $787,363 $1,009,024
Cost of sales 507,088 619,863
-------- ----------
Gross Profit 280,275 389,160
Expenses
Depreciation 21,517 20,380
Research and development 49,903 64,870
Selling and distribution 57,690 62,803
General and administrative 97,121 130,555
Provision for profit sharing 4,395 10,697
Interest 3,182 3,333
-------- ----------
233,808 292,638
Income from operations 46,467 96,523
Other Income 1,043 2,324
-------- ----------
Income (loss) before income taxes 47,510 98,847
Income Taxes - current 15,543 32,641
Income taxes - deferred -------- ----------
Net Income (loss) for the period $ 31,967 $ 66,206
======== ==========
Net income per share of common stock $0.03 $0.07
======== ==========
Weight average common shares outstanding 932,421 923,813
======== ==========
</TABLE>
See accompanying notes.
-2-
<PAGE>
Glas Aire Industries Group Ltd.
Consolidated Condensed Statement of Cash Flows
(Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
------------------------
April 30 April 30
1996 1995
----------- -----------
<S> <C> <C>
Increase (Decrease) in Cash
Cash Flows from:
Operating Activities
Net Income for the period $ 31,967 $ 66,206
Depreciation 21,517 20,380
Deferred Income Taxes 1,093 3,675
Gain on sale of capital assets (6,627)
Net change in non-cash working capital (233,460) (179,400)
Cumulative translation adjustment 5,429 17,485
--------- ----------
Net cash (used in) operating activities (173,454) (78,281)
Financing Activities
Decrease in obligation under capital lease (7,339) (3,167)
Repayment of long-term debt (13,537) (25,515)
Purchase of treasury stock
Share offering expenses
Increase (decrease) in bank indebtedness (126,986)
Common stock 64,000
--------- ----------
Net cash (used in) financing activities (83,862) (28,682)
--------- ----------
Investing Activities
Proceeds from sale of fixed assets 15,878
Purchase of capital assets (43,794) (79,528)
--------- ----------
Net cash used in investing activities (43,794) (63,650)
--------- ----------
Decrease in cash during the period (301,110) (170,613)
Cash and equivalents, beginning of period 330,107 389,324
--------- ----------
Cash and equivalents, end of period $ 28,997 $ 218,711
========= ==========
Changes in non-cash working capital
Accounts receivable $ 215,190 ($144,092)
Inventories 13,500 (67,565)
Prepaid expense (146,208) (808)
Accounts payable and accrued liabilities (230,725) (7,507)
Income taxes payable (85,217) 40,572
--------- ----------
(233,460) (179,400)
========= ==========
</TABLE>
See accompanying notes.
-3-
<PAGE>
Glas Aire Industries Group Ltd.
Notes to Consolidated Condensed Financial Statement
April 30, 1996
1. In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting of only
those which are normal and recurring in nature) necessary to present fairly
the financial position of the Company as of April 30, 1996 and the results of
operations and cash flows for the three month periods ended April 30, 1996
and 1995.
2. These financial statements included the accounts of the Company and its
wholly-owned subsidiaries, Multicorp Holdings Inc., Glas-Aire Industries
Ltd., Glas-Aire Industries, Inc., and 326362 B.C. Ltd. All inter-company
transactions are eliminated.
These financial statements have been prepared in accordance with accounting
principles generally accepted in the United States. For further information,
refer to the Company's consolidated financial statements and footnotes
thereto included in the Company's Registration Statement filed on Form SB-2
with the Securities and Exchange Commission for the fiscal year ended January
31, 1996.
3. Certain comparative figures from the prior year have been reclassified to
conform with the current year's presentation.
4. Inventories by component are as follows:
<TABLE>
<CAPTION>
April 30 April 30
1996 1995
-------- --------
<S> <C> <C>
Raw materials $513,661 $337,540
Work-in-progress 82,392 38,902
Finished goods 66,204 52,135
Supplies 14,101 8,697
-------- --------
$676,358 $437,274
-------- --------
5. Bank Indebtedness
April 30 April 30
1996 1995
-------- --------
Revolving Bank loan $128,940 $ 0
======== ========
</TABLE>
The revolving bank loan is a Cdn. $1,000,000 overdraft facility, which is due
on demand and bears interest at Canadian bank prime rates (8% January 31,
1996, 6-1/2% April 30, 1996) plus 1/2%. This line of credit is renewable
annually.
The following have been provided as collateral for these loans:
(a) general assignments of accounts receivable and inventories.
(b) a Cdn. $2,000,000 demand debenture granting a first fixed charge on
certain equipment and a flowing charger over all other assents of the
Company.
(c) an unlimited guarantee by the Company and its subsidiary, Glas-Aire
Industries Ltd.
6. Income (loss) per share is calculated by dividing the weighted average number
of shares of common stock outstanding each period into the income (loss) for
the period. Warrants outstanding were anti-dilitive. Treasury stock held by
the Company is not included in the number of shares outstanding
7. Subsequent to the end of the first quarter on May 2, 1996, the Company issued
932,421 shares of its common stock in an underwritten public offering. As a
result, the Company has 1,612,421 shares of its common stock issued and
outstanding at this time.
-4-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Result
- -------------------------------------------------------------------------------
of Operations
- -------------
The Company's sales decreased by 22% from approximately $1,009,024 for the
three months ended April 30, 1995 to $787,363 for the three months ended April
30, 1996. This decrease resulted primarily from a general decline in the
automotive sales during the last quarter of 1995, and due to the fact that
$30,000 worth of products were returned to the Company for repackaging at the
end of the three months of 1996.
Gross profit declined by 28% from $389,160 for the three months ended April
30, 1995 to $280,275 for the three months ended April 30, 1996. The 28% decline
was primarily the result of lower sales. An increase in material costs of 3%,
unfavorable conditions for foreign currency exchange also contributed to this
decrease. As a percentage of sales, the gross profit margin declined
approximately 3%.
Depreciation expense increased by 6% from $20,380 for the three months
ended April 30, 1995 to $21,517 for the three months ended April 30, 1996. This
increase was the result of bringing new equipment into service.
Expenses for research and development decreased by 23% from $64,870 for the
three months ended April 30, 1995 to $49,903 for the three months ended April
30, 1996, primarily because the Company began to conduct more research and
development in-house after acquiring the necessary research and development
expertise, thereby decreasing consulting requirements and associated fees.
Selling and distribution expenses decreased by 8%, from $62,803 for the
three months ended April 30, 1995 to $57,690 for the three months ended April
30, 1996. This decrease was primarily due to the decline of the Company's travel
expenses.
General and administrative expenses decreased by 26% from $130,555 for the
three months ended April 30, 1995 to $97,121 for the three months ended April
30, 1996, as a result of the successful installation of customized business and
accounting computer systems for purchasing/inventory control, work order
administration, and for accounting applications, which facilitated the
mechanization of certain management activities allowing organizational down-
sizing. Management also believes that the decrease was also due to effective
training of employees for use of those systems.
Provision for profit sharing decreased from $10,697 for the three months
ended April 30, 1995 to $4,395 for the three months ended April 30, 1996, as a
result of the decline in sales.
Interest expense decreased from $3,333 for the three months ended April 30,
1995 to $3,182 for the three months ended April 30, 1996, as a result of a
decline in the effective interest rates paid by the Company, and a decline in
amounts borrowed.
Before income taxes, the Company's income decreased from $98,847 for the
three months ended April 30, 1995 to $47,510 for the three months ended April
30, 1996. This decrease in income resulted primarily from the decline in sales.
The Company accrued income taxes of $32,641 for the three months ended
April 30, 1995 and $15,543 for the three months ended April 30, 1996. The
reduction in income taxes reflected in decrease in taxable income.
Net income decreased from $66,206 for the three months ended April 30, 1995
to $31,967 for the three months ended April 30, 1996, primarily as a result of
lower sales, lower gross margin and unfavorable foreign currency exchange
conditions.
-5-
<PAGE>
Financial Condition and Liquidity
For the three months ended April 30, 1996, net cash used in operating
activities totaled $173,454, including income from operations of $31,967 and
depreciation of $21,517, and a net change in non-cash working capital of
($233,460). Net cash used in financing activities was $83,862, which
resulted from a decrease in obligation under capital lease of $7,339,
repayment of long term debt of $13,537, a decrease in bank indebtedness of
$126,986, and an increase in common stock of $64,000. Net cash used in
investing activities was $43,794, as a result of the purchase of capital
assets. Accounts receivable decreased by $359,282 primarily due to increased
collection efforts that resulted in a decrease in the collection cycle from
customers of approximately $200,000, a refund of GST and Duty Drawback were
received (approximately $170,000) in the same period. Inventories increased
by $81,065 as a result of lower sales and building inventory for later sales.
Accounts payable and accrued liabilities decreased by $223,218 because of
cash discounts taken and payment of prior year taxes and bonuses.
-6-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- -----------------------------------------
a) Exhibits: There are no exhibits for for the three months ended April 30,
1996.
b) Reports on Form 8-K: There were no reports on Form 8-K filed for the three
months ended April 30, 1996.
-7-
<PAGE>
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.
Date: June 13, 1996
-------------
GLAS-AIRE INDUSTRIES GROUP LTD.
/s/ Alex Y.W. Ding
-------------------------------------
Alex Y.W. Ding
President and Chief Operating Officer
-8-
