SEC File No. 33-85044-d
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB\A
[X] AMENDMENT NO. 1 TO QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended February 28, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File number 33-85044-d
NACO Industries, Inc.
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(Exact Name of Registrant as specified in its charter)
Utah 48-0836971
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(State of Incorporation) (Federal I.R.S. No.)
395 West 1400 North, Logan, Utah 84341
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number 801-753-8020
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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 X No
As of February 28, 1997, the Registrant had 1,500,000 shares of Common
Stock and 140,412 shares of Preferred Stock outstanding.
Transitional Small Business Disclosure Format Yes No X
<PAGE>
The Registrant's Quarterly Report on Form 10-QSB for the quarter ended February
28, 1997 is hereby amended to amend Item 1 - Financial Statements to read in
their entirety as set forth below.
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
NACO Industries, Inc.
FINANCIAL STATEMENTS
February 28, 1997
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<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NACO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
February 28 November 30
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ASSETS 1997 1996
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Current assets:
Cash $ 114,780 198,306
Accounts receivable, net of allowances
of $84,781 / $73,570 711,151 615,775
Inventory 881,259 668,501
Prepaid income taxes 48,400 48,600
Other current assets 50,861 72,202
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Total current assets 1,806,451 1,603,384
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Property and equipment:
Land 40,700 40,700
Buildings and improvements 555,822 526,329
Equipment and vehicles 2,075,193 2,033,174
Equipment construction in progress 177,807 93,130
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Total property and equipment 2,849,522 2,693,333
Accumulated depreciation (1,254,077) (1,195,036)
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Net property and equipment 1,595,445 1,498,297
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Other assets:
Intangible and other assets 115,145 105,907
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Total other assets 115,145 105,907
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Total assets $ 3,517,041 3,207,588
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<PAGE>
NACO INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
February 28 November 30
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LIABILITIES: 1997 1996
- ------------ ------------- -------------
Current liabilities:
<S> <C> <C>
Accounts payable $ 900,746 544,074
Accrued expenses 165,390 188,076
Income taxes payable 0 0
Line of credit 854,326 664,326
Current portion of long-term obligations 251,784 316,215
Payable to related party (737) 34,382
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Total current liabilities 2,171,509 1,747,073
Long-term liabilities:
Long-term obligations, less current portion 905,229 896,379
Deferred income taxes 79,100 79,100
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Total long-term liabilities 984,329 975,479
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Total liabilities 3,155,838 2,722,552
Stockholders' equity:
Common stock, $.01 par value; 10,000,000
shares authorized; 1,918,951 issued
(including 418,551 shares in treasury) 19,186 19,186
Preferred Stock, 7% Cummulative, convertible $3.00 par value
Shares authorized; 330,000. shares issued 140,412 and
132,412, respectively
(Aggregate liquidation preference $842,472 and
$794,472, respectively) 421,236 397,236
Additional paid-in capital 176,819 115,637
Retained earnings (114,469) 94,546
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502,772 626,605
Less: treasury stock - at cost (141,569) (141,569)
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Total stockholders' equity 361,203 485,036
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Total liabilities and
stockholders' equity $ 3,517,041 3,207,588
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</TABLE>
See Notes to Consolidated Financial Statements.
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<PAGE>
NACO INDUSTRIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
February 28
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1997 1996
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<S> <C> <C>
Sales, net $ 1,531,195 1,142,957
Cost of goods sold 959,306 705,158
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Gross profit 571,889 437,799
Operating expenses:
Selling expenses 346,173 276,013
General and administrative expenses 342,202 302,601
Other 0 0
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Total operating expenses 688,375 578,614
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Income (loss) from operations (116,486) (140,815)
Other income (expense):
Interest income 436 1,068
Interest expense (55,782) (56,174)
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Total other income (expense) (55,346) (55,106)
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Income (loss) before income taxes (171,832) (195,921)
Income tax expense (benefit) 0 0
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Net income (loss) $ (171,832) (195,921)
Adjustment for preferred dividends in arrears (28,183) (10,701)
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Adjusted net loss to Common Stockholders (200,015) (206,622)
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Earnings (loss) per common share:
Primary:
Earnings (loss) from net income (0.11) (0.13)
Dividends in arrears (0.02) (0.01)
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Net Earnings (loss) $ ($0.13) ($0.14)
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Fully Diluted:
Earnings (loss) from net income $ (0.13) (0.14)
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Weighted average number of common shares outstanding:
Primary 1,500,000 1,500,000
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</TABLE>
See Notes to Consolidated Financial Statements
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<PAGE>
NACO INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
February 28 February 29
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1997 1996
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Cash flows from operating activities
<S> <C> <C>
Net income (loss) $(171,832) (195,921)
Adjustments to reconcile net income (loss) to
net cash provided by (used in) operating activities:
Depreciation 59,041 42538
Amortization 1,479
Deferred income taxes
(Increase) decrease in:
Accounts receivable, net (95,376) (194,959)
Inventory (212,758) (12,199)
Prepaid income taxes 48600 120,226
Taxes Receivable (48,400) (105,226)
Other 21,341 18,218
Increase (decrease) in:
Accounts payable 356,671 396,301
Accrued expenses (22,686) (13,398)
Income taxes payable 0
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Net cash provided by (used in)
operating activities (63,920) 55,580
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Cash flows from investing activities
Net change property and equipment (156,189) (15,478)
Investment in intangible and other assets (10,717) 194,465
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Net cash provided by (used in) investing activities (166,906) 178,987
Cash flows from financing activities
Net change in line of credit 190,000 0
Payments on related party loan (35,119) (1,878)
Payments on long-term debt (74,049) (672,441)
Proceeds from short term notes payable
Proceeds from long-term loans 18,468 0
Proceeds from issuance of common stock
Proceeds from issuance of preferred stock 48,000 394,073
Purchase of treasury stock
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Net cash provided by (used in) financing activities 147,300 (280,246)
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Increase (decrease) in cash (83,526) (45,679)
Cash, beginning of period 198,306 133,481
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Cash, end of period $ 114,780 87,802
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See Notes to Consolidated Financial Statements
Supplemental disclosures:
Income taxes paid $ 0 0
Interest Paid $ 39,667 65,905
</TABLE>
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<PAGE>
NACO INDUSTRIES, INC.
Notes to Financial Statements (Unaudited)
February 28, 1997
NOTE A - BASIS OF PRESENTATION
Management has elected to omit substantially all footnotes to these unaudited
consolidated quarterly financial statements. In the opinion of management, all
adjustments (consisting only of normal recurring accruals) considered necessary
for a fair presentation have been included. Operating results for the three
month period ended February 28, 1997 are not necessarily indicative of the
results that may be expected for the fiscal year ending November 30, 1997. These
statements should be read in conjunction with the consolidated financial
statements and related notes in the Company's Annual Report on Form 10-KSB for
the year ended November 30, 1996.
NOTE B - DIVIDENDS
Dividends on the preferred stock are cumulative at 7%. At February 28, 1997 the
cumulative amount of dividends in arrears was $28,183.
NOTE C - EARNINGS PER SHARE
Primary earnings per common share is calculated by dividing adjusted net income
by the average shares of common stock of the Company and Common Stock
equivalents outstanding during the period. Net income has been adjusted for
dividends in arrears as of February 28, 1997. Common stock equivalents represent
certain outstanding stock options and warrants. During the period the market
price did not exceed the option price for the outstanding options and warrants
and therefore no dilution occurred.
The calculation of fully diluted earnings per share of Common Stock assumes the
dilutive effect of the Company's Cumulative Preferred Stock.
NOTE D - CONSULTING AGREEMENTS, WARRANTS AND OPTIONS
In September 1996 the Company entered into an agreement with Extol International
Corporation ("Extol") to provide investor relations and financial consulting
services to the Company. As part of this agreement, Extol has the right to
purchase for $100, a warrant to purchase 50,000 shares of the Company's Common
Stock at $3.50 per share. This warrant is exercisable for five (5) years from
the date of issuance, and will carry "piggyback" registration rights.
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<PAGE>
NOTE E - COMMON STOCK
Subsequent to quarter end, the Company entered into an offshore securities
subscription agreement with Britannia Holdings Ltd. of England and on March 5,
1997, the Company sold 343,750 Units for an aggregate purchase price of
$825,000. The sale was made without registration under the Securities Act of
1933 in reliance upon Regulation S. Each Unit consists of one share of Common
Stock and forty four hundredth (.44) of a warrant to purchase an additional
share of Common Stock at an exercise price of $3.50 per share. The Warrant will
expire in three years, subject to extension as described below. The Warrants are
currently callable by the Registrant anytime after its Common Stock trades for a
bid price of $7.50 or higher for 30 trading days in a row.
The Company also granted Britannia Holdings Ltd. a 12 month option to purchase
an additional 343,750 Units in connection with the sale of the above Units. If
the Purchaser purchases all of the Units subject to the Option, the Registrant
will extend the exercise period of all of the Warrants issued as part of Units
(including the Units issued on March 5, 1997) from 3 years to 7 years, and
increase the call price on such Warrants from $7.50 to $15.00.
As part of the consideration for the stock agreement, the Company has agreed to
credit additional shares of common stock to Britannia Holdings Ltd of England if
the Company does not establish a market for NACO Common Stock that trades for at
least $6.00 per share for any 10 consecutive days within twenty four months
after March 5, 1997.
A finders fee of 10% was paid to James Czirr who is an employee of Extol and is
nominated to the board of directors of the Company.
NOTE F - PREFERRED STOCK
On March 7, 1996 the Company initiated an offering of Units exempt from
registration under the Securities Act of 1933. The offering consisted of 175,000
Units at an offering price of $6.00. Each Unit consists of one share of Series 1
Class A 7% Cumulative Convertible Preferred Stock and a Warrant to purchase one
share of Common Stock at an exercise price of $3.75 per common share. The
offering is made on a "best efforts" basis and will continue until the earlier
of the sale of a maximum of 175,000 Units, or June 30, 1997. Selling commissions
equal to 10% of the offering price of the Units will be paid to placement agents
participating in the offering.
Through February 28, 1997, the Company sold 27,000 units and received net
proceeds of $145,800. Subsequent to quarter end an additional 25,000 units were
sold with net proceeds of $135,000.
Exhibits
An Amended Financial Data Schedule is filed herewith as Exhibit 27
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<PAGE>
SIGNATURES
In accordance with Section 15(d) of the Securities Exchange Act of 1934,
the Registrant has duly caused this Amendment No.1 on Form 10-KSB\A to be signed
on its behalf by the undersigned, thereunto duly authorized, on August 13, 1997.
NACO INDUSTRIES, INC.
By: /s/ Jeffrey J. Kirby
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Vice President
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