UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the three months ended July 31, 1998
Commission File Number 001-12856
SALEX HOLDING CORPORATION
------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 421358036
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
50 Laser Court
PO Box 18029
Hauppauge, New York .......................................................11788
(Address of principal executive offices) ............................ (Zip Code)
(516) 436-5000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value
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|
State the number of shares outstanding of each of the issuer's classes
of common equity as of the latest practical date: April 11, 1999 -
15,964,500 shares of common stock, $.01 par value. 1,000 Shares of
Series B Convertible Preferred Stock, $.01 par value 25,000 Shares of
Series C Preferred Stock, $.01 par value
Transitional Small Business Disclosure Format (check one): Yes | |No |X|
<PAGE>
PART I FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
SALEX HOLDING CORPORATION
AND SUBSIDIARIES AND AFFILIATE
CONDENSED COMBINED CONSOLIDATED
BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, April 30,
1998 1998
ASSETS
Current Assets:
<S> <C> <C>
Cash $ 127,285 $ 55,774
Accounts Receivable, net 3,046,799 3,347,504
Prepaid expenses and other current assets 59,666 97,824
---------- ----------
Total Current Assets 3,233,750 3,501,102
---------- ----------
Property and Equipment, net 1,585,788 1,620,430
---------- ----------
Other Noncurrent Assets:
Goodwill, net 1,088,750 1,113,125
Noncompetition and consulting agreement, net 61,667 86,667
Other assets 32,321 32,321
---------- ----------
Total Other Noncurrent Assets 1,182,738 1,232,113
TOTAL ASSETS $6,002,276 $6,353,645
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Bank overdraft $ 861,163 $ 856,365
Note payable - finance company 1,106,073 1,728,294
Accounts payable 4,081,853 3,594,490
Accrued expenses and other 381,371 437,006
Current portion of long-term debt 1,053,624 1,018,589
---------- ----------
Total Current Liabilities 7,484,084 7,634,744
---------- ----------
Long-Term Debt & Capital Lease Obligations 493,395 556,280
Deferred income taxes 10,000 10,000
---------- ----------
TOTAL LIABILITIES 7,987,479 8,201,024
========== ==========
Stockholders' (Deficit) Equity:
Preferred stock-series A, $.01 par value-shares 110,608 110,608
authorized 20,000, issued and outstanding
1,625 (liquidation preference $100 per share)
Preferred stock-series C, $.01 par value-shares 250 250
authorized, issued and outstanding 25,000
Common stock, $.01 par value-shares 130,048 130,048
authorized 39,000,000, issued and
outstanding 13,004,770
Additional Paid-In Capital 4,514,527 4,514,527
Accumulated deficit & proprietor's
capital deficiency (6,240,636) (6,102,812)
Less: Note receivable (500,000) (500,000)
Total stockholders (deficit) equity (1,985,203) (1,847,379)
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT $ 6,002,276 $ 6,353,645
=========== ===========
</TABLE>
2
<PAGE>
SALEX HOLDING CORPORATION
AND SUBSIDIARIES AND AFFILIATE
CONDENSED COMBINED CONSOLIDATED
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
7/31/98 7/31/97
------- -------
<S> <C> <C>
Net Sales $ 5,503,065 $ 5,379,799
Cost of Sales 4,540,810 4,314,277
------------ ------------
Gross Profits 962,255 1,065,522
Selling, General & Administrative Expenses 1,000,032 1,137,145
------------ ------------
Loss from Operations (37,777) (71,623)
Interest Expense, Net 100,047 61,752
------------ ------------
Net Loss $ (137,824) $ (133,375)
============ ============
Basic Net Loss per Share of Common Stock 0.01 0.01
============ ============
Weighted Average Common Shares 13,004,770 11,246,366
============ ============
Outstanding
</TABLE>
3
<PAGE>
SALEX HOLDING CORPORATION
AND SUBSIDIARIES AND AFFILIATES
CONDENSED COMBINED CONSOLIDATED
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
7/31/98 7/31/97
------- -------
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C>
Net loss $(137,824) $(133,375)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 84,017 84,045
Increase (decrease) in cash flows from
changes in operating assets and
liabilities:
Accounts receivable 300,705 362,469
Prepaid expenses and other current assets 38,158 33,629
Accounts payable 487,363 (236,386)
Accrued expenses and other current liabilities (55,635) (134,962)
--------- ---------
Net cash provided by (used in) operating activities 716,784 (24,580)
--------- ---------
CASH FLOWS FROM INVESTING
ACTIVITIES:
-- (21,724)
Capital expenditures, net
--------- ---------
Net cash provided by (used in) investing activities 0 (21,724)
========= =========
CASH FLOWS FROM FINANCING
ACTIVITIES:
Change in bank overdraft 4,798 397,798
Net proceeds from (repayments of) note payable- (622,221) (221,329)
finance company
Principal payments on long-term debt (23,490) (69,809)
Payments on capital lease obligations (4,360) (15,244)
Payments on mortgage obligation -- (18,000)
Payment of promissory note-Bank -- (8,107)
Net proceeds from issuance of preferred stock 250
--------- ---------
Net cash provided by (used in) financing activities (645,273) 65,559
========= =========
Net increase (decrease) in cash 71,511 19,255
Cash, at beginning of period 55,774 125,769
--------- ---------
Cash, at end of period $ 127,285 $ 145,024
========= =========
</TABLE>
4
<PAGE>
SALEX HOLDING CORPORATION
AND SUBSIDIARIES AND AFFILIATE
NOTES TO CONDENSED COMBINED CONSOLIDATED FINANCIAL
STATEMENTS
The accompanying consolidated financial statements as of July 31, 1998
and for the three months ended July 31, 1997 have not been audited by
independent auditors, but in the opinion of management, such unaudited
statements include all adjustments consisting of normal recurring accurals
necessary for a fair presentation of the financial position, the results of
operations and cash flows for the three months ended July 31, 1998.
The consolidated financial statements should be read in conjunction
with the financial statements and related notes concerning the Company's
accounting policies and other matters contained in the Company's annual report
on Form 10-K. The results for the three months ended July 31, 1998 are not
necessarily indicative of the results for the full year ending April 30, 1998.
5
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
Three months ended July 31, 1998 compared to three months ended July
31, 1997.
For the three months ended July 31, 1998 compared to the three months
ended July 31, 1997 net sales of $5.50 million increased by $ .12 million, or
2.3% from the comparable prior year level of $5.38 million. This increase was
primarily in the areas of the Company's core operations with sales shifting
marginally between the various components of such operations
The Company's gross margin decreased to 17.5% as compared to the prior
year level of 19.8%. This 2.3% reduction of margin was attributable to an
incremental shift of business into those areas of the Company's operations which
yield lower gross margins, such as mechanical repairs as well as an industry
wide competitive decline in the margins earned for glass replacement services.
Selling, general and administrative expenses decreased by $ 137,113
from the previous year. This decrease of 12.1% was primarily attributable to
payroll decreasing by $ 85,168 as a result of voluntary reductions in executive
and management compensation of $13,255 and sales compensation of $62,781
representing 12.2% and 69.6% respectively. Additionally, the company's work
force has been reduced by 13.5%. Such a reduction had a corresponding effect on
the Company's other administrative expenses which decreased $51,945.
Interest expense of $100,047 was an increase of $38,295 from the
previous year. This increase of 62.01% was primarily due to increased charges on
the mortgage which had been in default.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Net cash flows provided in operating activities were $716,784 for the
three months ended July 31, 1998 compared with $24,580 used in operating
activities for the comparable prior year period. This increase resulted from
changes in accounts receivable, prepaid expenses and accounts payable which were
partially offset of decreases in accrued expenses.
No cash flows were used in or provided from investing activities for
the three months ended July 31, 1998.
6
<PAGE>
Net cash used in financing activities was $645,273 for the three months
ended July 31, 1998 compared with $65,559 provided in the comparable prior year
period. This was primarily due to the repayment of a note payable to a finance
company of $622,221, principal payment on long-term debt of $23,490, payments on
capital lese obligations of $4,360 and was partially offset by an increase in
our bank overdraft.
The Company has negative working capital and has limited availability
under its existing credit facility and will need additional capital to have
sufficient liquidity to meet its working capital needs for the foreseeable
future. Subsequent to this period the Company has entered into a sale and
leaseback of its building to help provide additional liquidity.
PART 2. OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
Not applicable.
ITEM 2 CHANGES IN SECURITIES AND USE OF PROCEEDS.
Not applicable
ITEM 3 DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4 SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
Not applicable
ITEM 5 OTHER INFORMATION
Not applicable
7
<PAGE>
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit 11 Not applicable.
Exhibit 27 Financial data schedule.
(b) REPORTS ON FORM 8-K
Not applicable
8
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
SALEX HOLDING CORPORATION
April 23, 1999 By: /s/ Salvatore Crimi
-------------------------------
Salvatore Crimi
Chief Executive Officer
April 23, 1999 By: /s/ Jerry M. Klienberg
-------------------------------
Jerry M. Klienberg
Principal Accounting Officer
9
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1998
<PERIOD-END> JUL-31-1998
<CASH> 127,285
<SECURITIES> 0
<RECEIVABLES> 3,046,799
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,233,750
<PP&E> 3,249,675
<DEPRECIATION> 1,663,887
<TOTAL-ASSETS> 6,002,276
<CURRENT-LIABILITIES> 7,484,094
<BONDS> 493,395
<COMMON> 130,048
0
110,858
<OTHER-SE> (2,226,109)
<TOTAL-LIABILITY-AND-EQUITY> 6,002,276
<SALES> 5,503,065
<TOTAL-REVENUES> 5,503,065
<CGS> 4,540,842
<TOTAL-COSTS> 5,540,842
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 100,047
<INCOME-PRETAX> (137,824)
<INCOME-TAX> 0
<INCOME-CONTINUING> (137,824)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (137,824)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
