<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the quarterly period ended: June 30, 1996
------------------------------
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: 0-25148
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COIN BILL VALIDATOR, INC.
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 11-2974651
- - -------------------------------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
425B Oser Avenue Hauppauge, N.Y. 11788
- - -------------------------------- ----------
(Address of principal executive offices) Zip Code
(516) 231-1177
- - --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) 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
State the number of shares outstanding of each of the issuer's class of common
equity as of the latest practical date: 2,750,000 SHARES OF COMMON STOCK AS OF
AUGUST 12, 1996
<PAGE>
COIN BILL VALIDATOR, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Balance Sheets - June 30, 1996 and September 30, 1995 3
Statements of Operations - Nine Months ended June 30,
1996 and 1995, respectively 4
Statements of Operations - Three Months ended
June 30, 1996 and 1995, respectively 5
Statement of Shareholders' Equity - Nine Months
ended June 30, 1996 6
Statements of Cash Flows - Nine Months ended
June 30, 1996 and 1995, respectively 7
Notes to Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9 - 11
PART II. OTHER INFORMATION
Not applicable.
SIGNATURES 12
2
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COIN BILL VALIDATOR, INC.
BALANCE SHEETS
AS OF JUNE 30, 1996 (UNAUDITED) AND SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1996 SEPTEMBER 30, 1995
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $1,476,411 $1,810,882
Accounts receivable, less allowance for doubtful accounts
of $554,311 and $159,087, respectively 3,460,814 3,322,842
Inventory, less allowance for obsolescence of $1,250,000 and
$117,547, respectively 4,027,708 4,779,501
Prepaid expenses 74,155 10,954
Deferred income tax assets 134,238 118,953
----------- ------------
Total current assets 9,173,326 10,043,132
PROPERTY AND EQUIPMENT, net 728,789 460,427
OTHER ASSETS 74,588 58,625
----------- ------------
Total assets $9,976,703 $10,562,184
----------- ------------
----------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to bank $461,590 $ -
Accounts payable 517,330 1,128,776
Accrued expenses 424,246 786,631
----------- ------------
Total current liabilities 1,403,166 1,915,407
----------- ------------
SHAREHOLDERS' EQUITY:
Common stock, 20,000,000 shares authorized; $.01 par value,
2,750,000 shares issued and outstanding 27,500 27,500
Additional paid-in capital 7,978,042 7,978,042
Retained earnings 567,995 641,235
----------- ------------
Total shareholders' equity 8,573,537 8,646,777
----------- ------------
Total liabilities and shareholders' equity $9,976,703 $10,562,184
----------- ------------
----------- ------------
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE BALANCE SHEETS.
3
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COIN BILL VALIDATOR, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
NINE MONTHS ENDED JUNE 30,
1996 1995
NET SALES $11,921,330 $10,128,227
COST OF SALES 8,578,570 6,336,829
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GROSS PROFIT 3,342,760 3,791,398
OPERATING EXPENSES 3,470,403 2,441,464
------------ ------------
INCOME (LOSS) FROM OPERATIONS (127,643) 1,349,934
OTHER INCOME, NET 5,576 16,683
------------ ------------
INCOME (LOSS) BEFORE PROVISION (BENEFIT)
FOR INCOME TAXES (122,067) 1,366,617
PROVISION (BENEFIT) FOR INCOME TAXES (48,827) 178,111
------------ ------------
NET INCOME (LOSS) ($73,240) $1,188,506
------------ ------------
------------ ------------
NET LOSS PER SHARE (Note 3) ($0.03)
--------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,750,000
---------
---------
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS.
4
<PAGE>
COIN BILL VALIDATOR, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30,
1996 1995
NET SALES $4,380,997 $3,996,312
COST OF SALES 2,680,929 3,024,979
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GROSS PROFIT 1,700,068 971,333
OPERATING EXPENSES 1,275,217 986,064
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INCOME (LOSS) FROM OPERATIONS 424,851 (14,731)
OTHER INCOME (EXPENSE), NET (7,882) 16,042
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INCOME BEFORE PROVISION
FOR INCOME TAXES 416,969 1,311
PROVISION FOR INCOME TAXES 166,787 524
----------- -----------
NET INCOME $250,182 $ 787
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NET INCOME PER SHARE (Note 3) $0.09 $0.00
----------- -----------
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,750,000 2,750,000
----------- -----------
----------- -----------
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE STATEMENTS.
5
<PAGE>
COIN BILL VALIDATOR, INC.
STATEMENT OF SHARHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
<S> <C> <C> <C> <C> <C>
BALANCES AT SEPTEMBER 30, 1995 2,750,000 $27,500 $7,978,042 $641,235 $8,646,777
Net loss for the nine months
ended June 30, 1996 - - - (73,240) (73,240)
--------- ------- ---------- --------- -----------
BALANCES AT JUNE 30, 1996
(unaudited) 2,750,000 $27,500 $7,978,042 $567,995 $8,573,537
--------- ------- ---------- --------- -----------
--------- ------- ---------- --------- -----------
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THIS STATEMENT.
6
<PAGE>
COIN BILL VALIDATOR, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED JUNE 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($73,240) $1,188,506
----------- -----------
Adjustments to reconcile net income (loss) to net cash used in
operating activities:
Depreciation and amortization 208,822 41,679
Inventory obsolescence provision (note 4) 1,132,453 -
Loss on disposition of fixed assets - 31,853
Changes in operating assets and liabilities:
Accounts receivable, net (137,972) (1,316,590)
Inventory (380,660) (1,142,360)
Deferred registration costs and prepaid expenses (63,201) 30,628
Deferred income tax assets (15,285) -
Other assets (15,963) (214,040)
Accounts payable (611,446) 23,789
Accrued expenses (362,385) 198,950
----------- -----------
Total adjustments (245,637) (2,346,091)
----------- -----------
Net cash used in operating activities (318,877) (1,157,585)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net of proceeds from
disposals (477,184) (188,044)
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Net cash used in investing activities (477,184) (188,044)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable to bank 461,590 (800,000)
Issuance of stock, net of offering expenses - 6,784,762
Distribution to shareholders - (4,000,000)
----------- -----------
Net cash provided by financing activities 461,590 1,984,762
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Net increase (decrease) in cash and cash equivalents (334,471) 639,133
----------- -----------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,810,882 532,550
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $1,476,411 $1,171,683
----------- -----------
----------- -----------
CASH PAID DURING THE YEAR FOR:
Interest $8,941 $32,593
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Income taxes $499,193 $144,966
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----------- -----------
</TABLE>
THE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS ARE AN INTEGRAL
PART OF THESE STATEMENTS.
7
<PAGE>
COIN BILL VALIDATOR, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. The financial statements reflect all adjustments which, in management's
opinion, are necessary to present fairly the financial position of the
Company as of June 30, 1996 and September 30, 1995, and the results of
operations for the three and nine month periods ended June 30, 1996 and
1995 and its cash flows for the nine month periods ended June 30, 1996 and
1995. Results of operations for the three and nine month periods ended
June 30, 1996 are not necessarily indicative of the results to be expected
for the full fiscal year. For further information, refer to the financial
statements and footnotes thereto included in the Company's Annual Report on
Form 10-KSB for the fiscal year ended September 30, 1995.
2. In February 1995, the Company issued 750,000 shares of Common Stock in an
initial public offering for $11.00 per share, generating net proceeds of
approximately $6,890,000. In connection with this offering, the Company
issued warrants to the representative of the lead underwriter to purchase
75,000 shares of the Company's Common Stock at $13.20 per share.
Concurrent with this public offering, the Company no longer qualified as a
Subchapter "S" Corporation, and thereafter became subject to "C"
Corporation taxation. The Company used $4 million of the proceeds to make
a final distribution to shareholders existing prior to the offering
representing the accumulated "S" Corporation earnings which were eligible
for such a distribution pursuant to the terms of the initial public
offering. Certain shareholders have made approximately 40% of the amount
of the distribution available to the Company pursuant to three-year line of
credit agreements. No amounts are outstanding under these agreements.
3. Net income (loss) per share for the three and nine month periods ended June
30, 1996 was computed by dividing the Company's net income (loss) by the
weighted average common shares outstanding during the periods The impact
of outstanding stock options and warrants was not included in the
calculation of net income (loss) per share, as such effect, if included,
would have been anti-dilutive. Pro forma net income per share in the nine
month period ended June 30, 1995, adjusted to reflect the pro forma effect
of a "C" Corporation income tax provision for that period and the
retroactive effect of a 1.639909 stock split, in the form of a stock
dividend, which resulted in pro forma weighted average common shares
outstanding of 2,567,432, was $.32 per share.
4. During the three month period ended March 31, 1996, the Company wrote down
inventory in the approximate amount of $1.1 million associated with some
early generation products the future sales of which management believes
will be adversely impacted by sales of newly released products. This
write-down was charged to cost of sales.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NINE MONTHS ENDED JUNE 30, 1996 COMPARED WITH NINE MONTHS ENDED JUNE
30, 1995
SALES
Net sales increased by 17.7%, or $1,793,103, to $11,921,330 in the nine months
ended June 30, 1996 from $10,128,227 in the comparative prior year period. This
increase is attributable to increased sales of the Company's new product line of
paper currency validators and related paper currency stackers to domestic and
international OEM customers in the gaming industry.
GROSS PROFIT
Gross profit decreased to $3,342,760, or 28.0% of net sales, in the nine months
ended June 30, 1996, from $3,791,398, or 37.4% of net sales, in the comparative
prior year period. The decrease in gross profit as a percentage of sales was
primarily the result of the inventory write-down in the second quarter in the
approximate amount of $1.1 million associated with some early generation
products the future sales of which the Company's management believes will be
adversely impacted by sales of newly released products. Absent the inventory
write-down, the Company's gross profit was approximately 37.5% of net sales,
which the Company believes to be the gross profit typically associated with the
sales mix in the nine months ended June 30, 1996.
OPERATING EXPENSES
Operating expenses increased to $3,470,403, or 29.1% of net sales, in the nine
months ended June 30, 1996 from $2,441,464, or 24.1% of net sales, in the
comparative prior year period. This increase was due principally to increased
staffing and related payroll costs to support expansion of engineering and new
product development efforts, increased benefit costs due to the introduction of
certain employee benefits and additional bad debt expense recorded due to the
financial condition of certain customers with which the Company has since
changed selling terms to include letters of credit and other forms of security.
OTHER INCOME, NET
Other income, net, was $5,576 in the nine months ended June 30, 1996 compared to
$16,683 in the comparative prior year period due principally to interest income
earned on the Company's cash and cash equivalents in the 1996 period, partially
offset by interest expense incurred in the second and third quarters, compared
with higher levels of available cash to generate interest income, as well as
lower interest expense associated with the Company's working capital line of
credit facility, in the same period in 1995.
NET INCOME (LOSS)
Net income (loss) for the nine months ended June 30, 1996 was ($73,240) compared
with pro forma net income of $819,970 in the comparative prior year period, as
adjusted to reflect income taxes which would have been paid had the Company been
a "C" Corporation for the entire 1995 period. The net loss for the first nine
months of fiscal 1996, despite increased sales, was due principally to the one-
time inventory write-down of approximately $1.1 million as described above in
"GROSS PROFIT", as well as general increases in operating expenses as described
above in "OPERATING EXPENSES".
9
<PAGE>
THREE MONTHS ENDED JUNE 30, 1996 COMPARED WITH THREE MONTHS ENDED
JUNE 30, 1995
SALES
Net sales increased by 9.6%, or $384,685, to $4,380,997 in the three months
ended June 30, 1996 from $3,996,312 in the comparative prior year period. This
increase is attributable to increased sales of the Company's new product line of
paper currency validators and related paper currency stackers to domestic and
international OEM customers in the gaming industry.
GROSS PROFIT
Gross profit increased to $1,700,068, or 38.8% of net sales, in the three months
ended June 30, 1996 from $971,333, or 24.3% of net sales, in the comparative
prior year period. The increase in gross profit as a percentage of sales in
this year's fiscal third quarter compared with the prior year period was
primarily the result of an unfavorable sales mix in the fiscal 1995 third
quarter in which lower margin domestic sales constituted a larger portion of
total sales versus higher margin international sales. Gross profit of 38.8% of
net sales in the fiscal 1996 third quarter more closely reflects the Company's
typical sales mix which includes a larger portion of higher margin international
sales and a smaller portion of lower margin domestic sales.
OPERATING EXPENSES
Operating expenses increased to $1,275,217, or 29.1% of net sales, in the three
months ended June 30, 1996 from $986,064, or 24.7% of net sales, in the
comparative prior year period. This increase was due principally to increased
staffing and related payroll costs to support expansion of engineering and
product development efforts, increased selling expenses related to increased
sales, and increased benefit costs due to the introduction in fiscal 1996 of
certain employee benefits.
OTHER INCOME (EXPENSE), NET
Other income (expense), net, was ($7,882) in the three months ended June 30,
1996 compared with $16,042 in the comparative prior year period due principally
to lower levels of cash and cash equivalents available to generate interest
income offset by interest expense on outstanding borrowings during the quarter
compared with interest income earned on the Company's higher levels of cash and
cash equivalents in the same period in 1995.
NET INCOME
Net income was $250,182 in the three months ended June 30, 1996 compared to net
income of $787 in the comparative prior year period, due principally to the
impact on gross profit of the more favorable sales mix in the current year
period, partially offset by increases in operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company's cash and cash equivalents were $1,476,411
compared to $1,810,882 at September 30, 1995. The Company has a $2,500,000 line
of credit from a financial institution, $461,590 of which was outstanding at
June 30, 1996. Such amount was repaid in full in July 1996.
Cash used in operations was ($318,877) in the nine months ended June 30, 1996.
This use of cash was attributable to increases in the Company's inventory and
accounts receivable related to sales and sales backlog and decreases in accrued
liabilities related primarily to income tax payments, as well as lower balances
due to trade vendors associated with improved inventory buying patterns related
to the Company's implementation of a new inventory system.
10
<PAGE>
The Company has no significant fixed commitments for capital expenditures. Its
capital requirements consist primarily of those necessary to continue to expand
its manufacturing capabilities and, to a lesser degree, interest payments on the
Company's indebtedness. Historically, the Company has met its capital
requirements through the sale of securities and through institutional financing.
The Company believes that its available resources, including its credit
facility, should be sufficient to meet its obligations as they become due and
permit continuation of its expansion efforts throughout 1996 and beyond.
11
<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.
COIN BILL VALIDATOR, INC.
By: /S/ STEPHEN KATZ
------------------
Stephen Katz
Chairman and
Chief Executive Officer
By: /S/ HENRY B. KAYSER
--------------------
Henry B. Kayser
Vice President and
Chief Financial Officer
Dated: August 12, 1996
12
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<PAGE>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,476
<SECURITIES> 0
<RECEIVABLES> 3,461
<ALLOWANCES> 554
<INVENTORY> 4,028
<CURRENT-ASSETS> 9,173
<PP&E> 729
<DEPRECIATION> 106
<TOTAL-ASSETS> 9,977
<CURRENT-LIABILITIES> 1,403
<BONDS> 0
0
0
<COMMON> 28
<OTHER-SE> 8,546
<TOTAL-LIABILITY-AND-EQUITY> 9,977
<SALES> 11,921
<TOTAL-REVENUES> 11,921
<CGS> 8,579
<TOTAL-COSTS> 12,049
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<INCOME-PRETAX> (122)
<INCOME-TAX> (49)
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</TABLE>
