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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 EXCHANGE ACT
For the transition period from ____ to ____
Commission file number 0-25974
-----------------------
R-B RUBBER PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Oregon 93-0967413
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
904 E. 10th Avenue, McMinnville, Oregon 97128
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 503-472-4691
Check whether the issuer (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.
Yes _X_ No ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common stock without par value 2,172,500
(Class) (Outstanding at August 2, 1996)
Transitional Small Business Disclosure Format (check one): Yes___ No _X_
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R-B RUBBER PRODUCTS, INC.
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION Page
- ------------------------------ ----
Item 1. Financial Statements
- -----------------------------
Report of Independent Accountants 2
Balance Sheet - June 30, 1996 3
Statements of Operations - Three Month and Six Month Periods
Ended June 30, 1996 and 1995 4
Statements of Cash Flows - Six Month Periods Ended
June 30, 1996 and 1995 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 7
PART II - OTHER INFORMATION
- ---------------------------
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
1
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL INFORMATION
- -------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors
R-B Rubber Products, Inc.
We have made a review of the condensed balance sheet of R-B Rubber Products,
Inc. as of June 30, 1996, the related condensed statements of operations for the
three month and six month periods ended June 30, 1996 and 1995, and the related
condensed statements of cash flows for the six month periods ended June 30, 1996
and 1995, in accordance with standards established by the American Institute of
Certified Public Accountants.
A review of the interim financial information consists principally of obtaining
an understanding of the system for the preparation of interim financial
information, applying analytical review procedures to financial data, and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit in accordance with generally accepted
auditing standards, the objective of which is the expression of an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
Morrison & Liebswager, P.C.
King City, Oregon
August 6, 1996
2
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R-B RUBBER PRODUCTS, INC.
BALANCE SHEET
JUNE 30, 1996
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 2,164
Accounts receivable, net of allowances of $7,389 509,566
Inventories, net 517,743
Prepaid expenses and other 90,481
--------------
Total Current Assets 1,119,954
Property, Plant and Equipment, net of accumulated
depreciation and valuation allowance
of $1,483,892 4,382,479
Other Assets, net 155,652
--------------
Total Assets $ 5,658,085
--------------
--------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes payable - bank $ 430,000
Notes payable - other 112,770
Current portion of long-term debt 73,876
Accounts payable 222,487
Payroll and related benefits payable 72,525
--------------
Total Current Liabilities 911,658
Long-Term Debt, net of current portion 868,611
Deferred Income Taxes 154,494
Shareholders' Equity:
Common stock, 20,000,000 shares authorized;
2,172,500 shares issued and outstanding 3,797,442
Additional paid-in capital 282,849
Accumulated deficit (356,969)
--------------
Total Shareholders' Equity 3,723,322
--------------
Total Liabilities and Shareholders' Equity $ 5,658,085
--------------
--------------
The accompanying notes are an integral part of this balance sheet.
3
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R-B RUBBER PRODUCTS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended June 30, Six months ended June 30,
1996 1995 1996 1995
----------- --------- --------- ---------
Net sales $ 1,124,925 $ 1,127,346 $ 2,223,366 $ 1,891,079
Cost of sales 805,790 635,627 1,480,618 1,043,173
--------- --------- --------- ---------
Gross profit 319,135 491,719 742,748 847,906
Operating expenses:
Selling 130,155 81,983 274,739 178,787
General and
administrative 280,523 278,194 530,310 468,109
--------- --------- --------- ---------
410,678 360,177 805,049 646,896
Other income (expense)
Interest expense (33,679) (42,176) (58,806) (102,482)
Other income, net 3,188 - 3,188 -
--------- --------- --------- ---------
(30,491) (42,176) (55,618) (102,482)
--------- --------- --------- ---------
Income (loss) before provision
for income taxes (122,034) 89,366 (117,919) 98,528
Provision for income taxes - 26,936 - 30,051
--------- --------- --------- ---------
Net income (loss) $ (122,034) $ 62,430 $ (117,919) $ 68,477
--------- --------- --------- ---------
--------- --------- --------- ---------
Net income (loss)
per share $ (0.06) $ 0.04 $ (0.05) $ 0.05
--------- --------- --------- ---------
--------- --------- --------- ---------
Shares used in per
share calculations 2,172,500 1,586,319 2,172,500 1,334,558
--------- --------- --------- ---------
The accompanying notes are an integral part of these statements.
4
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R-B RUBBER PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six months ended June 30,
1996 1995
--------- ---------
Cash flows from operating activities:
Net income (loss) $ (117,919) $ 68,477
Adjustments to reconcile net income (loss) to net cash
flows used in operating activities:
Depreciation and amortization 196,010 123,275
Gain on sale of fixed assets (1,500) -
(Increase) decrease in:
Accounts receivable, net (89,791) (144,681)
Inventories, net (151,755) (51,912)
Income taxes receivable 124,565 -
Prepaid expenses and other (25,307) (54,879)
Increase (decrease) in:
Accounts payable (186,812) (131,997)
Income taxes payable, net - (68,974)
Payroll and related benefits payable 41,730 (8,731)
Interest payable (7,438) -
Deferred income taxes - 16,225
---------- ----------
Net cash used in operating activities (218,217) (253,197)
Cash flows from investing activities:
Payments for purchase of property and equipment (429,566) (1,511,153)
Proceeds from sale of fixed assets 1,500 -
Other assets, net (2,184) 3,274
---------- ----------
Net cash used in investing activities (430,250) (1,507,879)
Cash flows from financing activities:
Proceeds from short-term debt 542,770 -
Payments on short-term debt - (100,000)
Proceeds from long-term debt 18,800 800,000
Payments on long-term debt (24,232) (1,850,253)
Proceeds from the sale of Common Stock, net of
issuance costs of $869,685 - 3,819,995
---------- ----------
Net cash provided by financing activities 537,338 2,669,742
Increase (decrease) in cash and cash equivalents (111,129) 908,666
Cash and cash equivalents:
Beginning of period 113,293 54,388
---------- ----------
End of period $ 2,164 $ 963,054
---------- ----------
---------- ----------
The accompanying notes are an integral part of these statements.
5
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R-B RUBBER PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
The financial information included herein for the three month and six month
periods ended June 30, 1996 and 1995 and the financial information as of June
30, 1996 is unaudited; however, such information reflects all adjustments
consisting only of normal recurring adjustments which are, in the opinion of
management, necessary for a fair presentation of the financial position, results
of operations and cash flows for the interim periods. The interim financial
statements should be read in conjunction with the financial statements and the
notes thereto included in the Company's 1995 Annual Report to Shareholders.
The results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full year.
NOTE 2. INVENTORIES
Inventories are stated at lower of cost, using average costs, which approximates
the first-in, first-out (FIFO) method, or market, and include materials, labor
and manufacturing overhead. Unsalable or unusable items are carried at scrap
value and reprocessed.
June 30, 1996
-------------
Raw materials $ 62,477
Finished goods 438,666
Other 16,600
-----------
$ 517,743
-----------
-----------
NOTE 3. RECLASSIFICATIONS
Certain amounts in the prior year financial statements have been reclassified to
conform to the current year presentation.
NOTE 4. SUBSEQUENT EVENTS
Subsequent to June 30, 1996, the Company created Strata Surfacing, Inc.
("Strata"), a wholly owned subsidiary, for the purpose of providing flooring
systems installation. In conjunction with the creation of Strata, the Company
established a $100,000 operating line-of-credit with a commercial bank which
expires September 1, 1996, with interest at 1.25 percent over the bank's prime
rate (9.5 percent at July 31, 1996) and collateralized by the accounts
receivable and inventory of the Company.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
FORWARD LOOKING STATEMENTS
Management's Discussion and Analysis or Plan of Operation contains forward
looking statements that involve a number of risks and uncertainties. In
particular, the Company has stated its belief that demand for the Company's
products is likely to improve for the remainder of the calendar year. Future
market conditions are subject to supply and demand conditions and decisions of
other market participants over which the Company has no control and which are
inherently very difficult to predict. Accordingly, there can be no assurance
that the Company's revenues will improve. In addition, there are other factors
that could cause actual results to differ materially, including competitive
pressures, increased demand for the Company's raw materials and the risk factors
listed from time to time in the Company's Securities and Exchange Commission
reports, including, but not limited to, the report of Form 10-KSB for the year
ended December 31, 1995.
RESULTS OF OPERATIONS
Net sales remained constant at $1.1 million in the second quarter of 1996
compared to $1.1 million in the second quarter of 1995 and increased to $2.2
million for the first half of 1996 compared to $1.9 million for the first half
of 1995. The Company was unable to significantly increase sales in the first
half of 1996 due primarily to increased competition, a general slow-down within
the industry and personnel transitions within the sales and marketing
department. The Company believes that it has addressed its personnel issues in
its sales and marketing department and that demand should firm up during the
remainder of 1996, resulting in improved revenues.
Gross profit decreased to $319,000 and $743,000, respectively (28 percent and 33
percent of net sales, respectively) for the three month and six month periods
ended June 30, 1996 from $491,000 and $848,000, respectively (44 percent and 45
percent of net sales, respectively) for the comparable periods of 1995. The
decreases in gross margin dollars and gross margin as a percent of net sales is
primarily a result of increased labor and depreciation costs, combined with
little increase in sales. By the end of the second quarter of 1996, the Company
was substantially finished with its modifications of its existing processing
equipment which allows it to effectively process larger truck tire chips in
order to supplement its raw material supply with such material. The truck tire
chips are less expensive than the buffings that have been used historically.
Selling expenses increased to $130,000 and $275,000, respectively (12 percent
and 12 percent of net sales, respectively) for the three month and six month
periods ended June 30, 1996 from $82,000 and $179,000, respectively (7 percent
and 9 percent of net sales, respectively) for the comparable periods of 1995,
primarily as a result of the addition of sales and marketing personnel and
related expenses.
General and administrative expenses increased to $281,000 and $530,000,
respectively (25 percent and 24 percent of net sales, respectively) for the
three month and six month periods ended June 30, 1996 compared to $278,000 and
$468,000, respectively (25 percent and 25 percent of net sales, respectively)
for the comparable periods of 1995, primarily as a result of additional legal,
accounting and insurance costs and increased reporting and other requirements
which are associated with status as a public company,
7
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offset by cost containment efforts by the Company.
Interest expense decreased to $34,000 and $59,000, respectively for the three
month and six month periods ended June 30, 1996 from $42,000 and $102,000,
respectively for the comparable periods of 1995 as a result of decreased
outstanding debt and related interest costs for a majority of the six month
period ended June 30, 1996.
Net income (loss) was $(122,000) and $(118,000), respectively for the three
month and six month periods ended June 30, 1996 compared to $62,000 and $68,000,
respectively (6 percent and 4 percent of net sales, respectively) for the
comparable periods of 1995, as a result of the individual line items changes
discussed above.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996 working capital was $208,000, including $2,000 of cash and cash
equivalents. In the first half of 1996, working capital decreased by $365,000
and the current ratio decreased to 1.2:1 from 2.1:1.
Cash and cash equivalents decreased $111,000 primarily due to $196,000 used in
operations and $430,000 for the purchase of property and equipment, offset by
$562,000 provided from borrowings under short and long-term debt.
Accounts receivable increased $90,000 to $510,000 at June 30, 1996 compared to
$420,000 at December 31, 1995. Days sales outstanding increased to
approximately 41 days at June 30, 1996 compared to approximately 35 days at
December 31, 1995.
Inventories increased $152,000 to $518,000 at June 30, 1996 from $366,000 at
December 31, 1995 due primarily to the building of finished goods inventory in
order to help ensure adequate quantities were available during a planned shut-
down in the second quarter to work on refurbished equipment. However, expected
sales levels did not materialize, leading to higher than anticipated ending
finished goods levels. Inventory turned approximately 7 times on an annualized
basis for the first half of 1996 compared to 9 times for 1995.
Accounts payable decreased $187,000 to $222,000 at June 30, 1996 from $409,000
at December 31, 1995 primarily as a result of a $204,000 payment to one vendor
for certain production equipment in the first quarter of 1996.
Notes payable, current, increased to $543,000 at June 30, 1996 from zero at
December 31, 1995. The Company borrowed this amount for the purpose of funding
down payments on certain capital expenditures and for general operating
requirements.
Capital expenditures of $430,000 during the first half of 1996 primarily
resulted from the refurbishing of existing equipment to accommodate the
processing of truck tire chips. The Company does not expect to have significant
capital expenditures for the remainder of 1996.
8
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the shareholders of the Company was held on May 17, 1996
at which the following actions were taken:
1. The shareholders elected the five nominees for Director to the Board of
Directors of the Company. The five Directors elected, along with the voting
results are as follows:
NAME NO. OF SHARES VOTING FOR NO. OF SHARES WITHHELD VOTING
------------------------ -----------------------------
Ronald L. Bogh 2,032,343 2,350
Jerry K. Brown 2,032,343 2,350
Edward DeRaeve 2,032,343 2,350
Douglas C. Nelson 2,032,343 2,350
James V. Reimann 2,032,343 2,350
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits filed as a part of this report are listed below:
EXHIBIT NO. AND DESCRIPTION
10 Commercial loan between the Company and Key Bank, dated July 22, 1996
re: operating line of credit
11 Calculations of Net Income Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K:
The Company did not file any Reports on Form 8-K during the quarter ended
June 30, 1996.
9
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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: August 7, 1996 R-B RUBBER PRODUCTS, INC.
By:/S/RONALD L. BOGH
-----------------------
Ronald L. Bogh
Chairman of the Board and President
(Principal Executive Officer)
By:/S/ DOUGLAS C. NELSON
-----------------------
Douglas C. Nelson
Director, Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
10
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LOAN AGREEMENT
(Revolving Line)
EXHIBIT 10
LOAN AGREEMENT
(Revolving Line)
THIS AGREEMENT is made this 22ND day of JULY 1996, between R-B
RUBBER PRODUCTS, INC., a CORPORATION ("Borrower"), and Key Bank of Oregon,
an Oregon banking corporation ("Bank").
RECITAL
Borrower wishes to arrange a line of credit with Bank enabling
Borrower to borrow sums from time to time up to the principal amount of ***ONE
HUNDRED THOUSAND AND NO/100*** DOLLARS ($100,000.00), and Bank and Borrower
now desire to evidence their agreement regarding such loan.
AGREEMENT
Therefore, Bank and Borrower agree as follows ("N/A" means not
applicable):
ARTICLE I - LOAN
SECTION 1.1 LOAN TERMS. Bank hereby opens a line of credit in
favor of Borrower (the "Loan") whereby Borrower may borrow funds from Bank from
time to time up to the lesser of the principal amount of $100,000.00 (the
"Credit Limit") or the amount determined in either Section 1.1(a) or Section
1.1(b) below. The Loan is a revolving credit and Borrower may obtain advances
against the loan during the Advance Period (defined below), repay any portion of
the amount borrowed and re-borrow from time to time during the Advance Period.
SECTION 1.1(A) CONFORMING LINE TERMS. If initialed here,___N/A___
, the loan is evidenced by a Security And Loan Agreement dated the same
date as this Agreement, substantially in the form of Exhibit A attached hereto,
all terms of which are incorporated herein by this reference. Borrower may
borrow up to the lesser of the Credit Limit or the maximum amount determined by
the eligible collateral pursuant to the Security And Loan Agreement. If, as and
when Borrower desires to borrow funds under the Loan, Borrower shall submit an
advance request pursuant to the Security And Loan Agreement (an "Advance
Request"). Any advance made in accordance with an Advance Request or the deposit
by Bank of funds in Borrower's account with Bank in accordance with an Advance
Request, shall be deemed conclusive evidence of the borrowing of such funds by
Borrower pursuant to this Agreement. Borrower agrees to repay the Loan in
accordance with the terms of the Security And Loan Agreement.
SECTION 1.1.(B) NON-CONFORMING LINE TERMS. If initialed here, the
Loan is evidenced by a Note dated the same date as this Agreement, substantially
in the form of Exhibit A attached hereto, all terms of which are incorporated
herein by this reference. Borrower may borrow up to the lesser of the Credit
Limit or the amount equal to the sum of (a) 80 % of the value of all eligible
Accounts, plus (b) 50 % of all eligible inventory, with a $ 250,000.00
inventory sub-limit. As used herein, the term "eligible Accounts" means all
Accounts, less (1) the amount of each account aged more than 60 days from
date of invoice, (2) Contra Accounts, (3) Concentrations at N/A %, (4)
Employee, affiliate or intercompany accounts, (5) Accounts having more than
10 % of the amount due in excess of 60 days from date of invoice, (6)
U.S. Government or Agency accounts unless specific assignment is allowed by
Bank, (7) Accounts, including consignments, on which payment is contingent upon
fulfillment of any condition whatsoever, (8) All other accounts which Bank, in
good faith, determines to be ineligible. The term "Eligible Inventory" means all
current and readily marketable inventory which is not subject to any other lien,
claim or interest other than granted to Bank, valued at the lesser of invoice
cost (less any discounts or rebates) or current wholesale market value. If, as
and when Borrower desires to borrow funds under the Loan, Borrower shall submit
an Advance Request to Bank for the amount to be funded or request funds in such
other manner as may be permitted by Bank. Any advance made in accordance with
an Advance Request or the deposit by Bank of funds in Borrower's account with
Bank in
1- LOAN AGREEMENT (Revolving Line)
<PAGE>
accordance with an Advance Request, shall be deemed conclusive evidence of the
borrowing of such funds by Borrower pursuant to this Agreement.
SECTION 1.2 PREPAYMENT. Borrower may prepay principal on the Loan
without penalty.
SECTION 1.3 PURPOSE. The proceeds of the Loan shall be used by
Borrower for the following purposes: TO FUND STRATA SURFACING, INC., A
WHOLLY OWNED COMPANY OF R-B RUBBER PRODUCTS, INC.
SECTION 1.4 SECURITY. As security for the Loan and all other
indebtedness to Bank, Borrower has granted to Bank security interests of first
priority pursuant to either the Security And Loan Agreement or other security
agreements.
SECTION 1.5 LINE FEE. Borrower shall pay to Bank a line fee
pursuant to either the Security And Loan Agreement or the Note.
ARTICLE II - REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties to Bank,
which representations and warranties shall be deemed to have been reaffirmed by
Borrower as and when each Advance Request is submitted by Borrower:
SECTION 2.1 LEGAL STATUS. Borrower is a CORPORATION duly organized
and existing under the laws of the State of OREGON and is qualified to do
business in all jurisdictions in which it conducts its business.
SECTION 2.2 NO VIOLATION. The making and performance by Borrower of
this Agreement does not violate any law or regulation applicable to Borrower or
any term or provision of its articles of incorporation, or result in a breach of
or constitute a default under any agreement, indenture or other instrument to
which Borrower is a party or by which Borrower may be bound.
SECTION 2.3 AUTHORIZATION. This Agreement has been duly authorized,
executed and delivered by Borrower, and is a valid and binding agreement of
Borrower; and the Security And Loan Agreement or the Note issued hereunder by
Borrower is a valid and binding obligation of Borrower, enforceable in
accordance with its terms.
SECTION 2.4 LITIGATION. There are no pending or threatened actions
or proceedings before any court or administrative agency which may adversely
affect the financial condition or operations of Borrower other than those
heretofore disclosed by Borrower to Bank in writing.
SECTION 2.5 FINANCIAL STATEMENT. The financial statement dated
MAY 31 , 1996, heretofore delivered by Borrower to Bank presents fairly the
financial condition of Borrower, and has been prepared in accordance with
generally accepted accounting principles consistently applied. As of the date of
such financial statement, and since such date, there has been no material
adverse change in the condition or operation of the Borrower, nor has the
Borrower mortgaged, pledged or granted a security interest in or encumbered any
of Borrower's assets or properties since such date.
SECTION 2.6 INCOME TAX RETURNS. Federal tax returns of Borrower
have been filed through Borrower's tax year ending ___________, 19__, and
Borrower has no knowledge of any pending assessments or adjustments of its
income tax payable with respect to any year subsequent to that date.
2- LOAN AGREEMENT (Revolving Line)
<PAGE>
SECTION 2.7 NO SUBORDINATION. The obligations of Borrower under
this Agreement and the Security And Loan Agreement or Note are not subordinated
to any other obligation of Borrower.
SECTION 2.8 PERMITS, FRANCHISES. The Borrower possesses, and will
hereafter possess, all permits, memberships, franchises, contracts, and licenses
required, and all trademark rights, trade names, trade name rights, patents,
patent rights, and fictitious name rights necessary, to enable it to conduct the
business in which it is now engaged, without conflict with the rights of others.
ARTICLE III - CONDITIONS PRECEDENT
The obligation of Bank to make any advance hereunder is subject to the
fulfillment of the conditions of the Security And Loan Agreement or the Note
issued hereunder and to the following conditions:
SECTION 3.1 APPROVAL OF BANK COUNSEL. All legal matters incidental
to each advance hereunder shall be satisfactory to counsel of Bank.
SECTION 3.2 COMPLIANCE. The representations and warranties
contained herein and in the Security And Loan Agreement or the Note shall be
true on and as of the date of each advance made hereunder and under the Security
And Loan Agreement or the Note with the same effect as though such
representations and warranties had been made on and as of such date, and on each
such date, no event of default as defined in the Security And Loan Agreement or
the Note and Article VI herein (an "Event of Default") and no condition, event
or act which, with the giving of notice or the lapse of time or both would
constitute an Event of Default, shall have occurred and be continuing or shall
exist.
ARTICLE IV - AFFIRMATIVE COVENANTS
Borrower covenants that so long as Borrower is indebted to Bank under
this Agreement, and until the payment in full of advances made under the
Security And Loan Agreement or the Note issued hereunder, Borrower will:
SECTION 4.1 PUNCTUAL PAYMENT. Punctually pay the interest and
principal of all advances made under the Security And Loan Agreement or the Note
at the times and place and in the manner specified therein.
SECTION 4.2 ACCOUNTING RECORDS. Maintain adequate books and
accounts in accordance with generally accepted accounting principles
consistently applied, and permit any representative of Bank, at any reasonable
time, to inspect, audit and examine such books and inspect the properties of
Borrower.
SECTION 4.3 FINANCIAL STATEMENTS. Furnish Bank:
(a) Not later than ___90___days after and as of the end of each
fiscal year of Borrower, audited financial statements of Borrower, to include
Balance Sheet, Profit and Loss Statement, Reconciliation of Capital Accounts,
and ___FEDERAL TAX RETURNS; MONTHLY IN-HOUSE PREPARED FINANCIAL STATEMENTS___;
(b) Guarantor's Statements. Not later than ___N/A___ days after and
as end of ___N/A___ a financial statement prepared by Borrower and satisfactory
to Bank, to include Personal Financial Statement and a copy of the prior year's
Federal Tax Return;
(c) Accounts Receivable Aging. Not later than ___20___days after and
as of ___END OF EACH MONTH___ a list of Borrower's accounts receivable, aged
from date of invoice. Bank may contact any account debtor to verify the amount
or status of any account.
(d) Accounts Payable Aging. Not later than ___20___ days after and
as of ___END OF EACH MONTH___ a list of Borrower's accounts payable, aged from
date of invoice.
3- LOAN AGREEMENT
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(e) Customer List. Not later than ___N/A___ days after and as of
___N/A___ a list of names and addresses of Borrower's account debtors.
(f) Other: ___NOT LATER THAN 20 DAYS AFTER AND AS OF END OF MONTH A
COMPLETE INVENTOR REPORT___;
(g) Other: _______________________________________________________
_____________________________________________________________________________;
(h) From time to time such other information as Bank may reasonably
request.
SECTION 4.4 EXISTENCE. Preserve and maintain its existence and all
of its rights, privileges and franchises; conduct its business in an orderly,
efficient, and regular manner; and comply with the requirements of all
applicable laws, rules, regulations and orders of governmental authorities.
SECTION 4.5 INSURANCE. Maintain and keep in force insurance of the
types and in amounts customarily carried in lines of business similar to
Borrower's, including (without limitation) fire, public liability, property
damage, and worker's compensation insurance, carried in companies and in amounts
satisfactory to Bank; and Borrower shall deliver to Bank from time to time at
Bank's request schedules setting forth all insurance then in effect.
SECTION 4.6 FACILITIES. Keep all of Borrower's properties useful or
necessary to Borrower's business in good repair and condition, and from time to
time make necessary repairs, renewals and replacements thereto so that
Borrower's property shall be fully and efficiently preserved and maintained.
SECTION 4.7 TAXES AND OTHER LIABILITIES. Pay and discharge when due
any and all indebtedness, obligations, assessments, real and personal property
taxes, including Federal and state income taxes, except such as Borrower may in
good faith contest or as to which a bona fide dispute may arise; provided
provision is made to the satisfaction of Bank for eventual payment thereof in
the event that it is found that the same is an obligation of Borrower.
SECTION 4.8 LITIGATION. Promptly give notice in writing to Bank of
any litigation pending or threatened against Borrower or properties of Borrower
in excess of $ ___250,000.00___.
SECTION 4.9 FINANCIAL CONDITION. Maintain Borrower's financial
condition so as to comply with the following financial parameters:
(a) Current Ratio. A ratio of total current assets to total current
liabilities of not less than
___2:1___, measured at ___FISCAL YEAR END___.
(b) Working Capital. The difference between total current assets and total
current liabilities of not less than $___N/A___, measured at___N/A___.
(c) Tangible Net Worth. A minimum tangible net worth of not less than
$___425,000.00___, measured at ___FISCAL YEAR END___.
(d) Debt-to-Tangible Net Worth. A ratio of total liabilities to tangible
net worth of not more than ___1:1___, measured at
___FISCAL YEAR END___ .
(e) Other.________________________________________________________.
(f) Other.________________________________________________________.
4- LOAN AGREEMENT (Revolving Line)
<PAGE>
SECTION 4.10 NOTICE TO BANK. Promptly give notice in writing to
Bank of (1) the occurrence of any Event of Default; (2) any change in name of
Borrower, and in the case of an organization, any change in name, identity or
corporate structure; or (3) any uninsured or partially uninsured loss through
fire, theft, liability or property damage in excess of the aggregate sum of $
250,000.00 .
ARTICLE V - NEGATIVE COVENANTS
Borrower covenants that so long as Borrower is indebted to Bank under
this Agreement, and until payment in full of the advances made pursuant to the
Security And Loan Agreement or the Note issued hereunder, Borrower will not,
without prior written consent of Bank:
SECTION 5.1 USE OF FUNDS. Use any of the proceeds of the Loan
except for the purposes stated in section 1.4.
SECTION 5.2 CAPITAL EXPENDITURE LIMITATION. Make any additional
investment in fixed assets in any one fiscal year in excess of the aggregate sum
of $ 250,000.00 .
SECTION 5.3 LEASE EXPENDITURES. Incur obligations for the lease or
hire of real or personal property in any one fiscal year in excess of the
aggregate sum of $ 250,000.00 .
SECTION 5.4 OTHER INDEBTEDNESS. Create, incur or permit to exist
any liabilities resulting from borrowings, loans or advances, whether secured or
unsecured, except short-term borrowings from Bank and liabilities of Borrower to
Bank for money borrowed hereunder in excess of the aggregate sum of $ N/A .
SECTION 5.5 MERGER, CONSOLIDATION, SALE OF ASSETS. Merge into or
consolidate with any corporation or other entity, or acquire all or
substantially all of the assets of any other corporation or entity; or sell,
lease, assign, transfer or otherwise dispose of all or substantially all of its
assets.
SECTION 5.6 GUARANTEES. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments in the
ordinary course of business) or accommodation endorser or otherwise for the debt
obligations of any other person or entity except as follows:___N/A___.
SECTION 5.7 LOANS, ADVANCES, INVESTMENTS. Make any loans or
advances to, or investments in, any person or entity except as follows:
___N/A___.
SECTION 5.8 DIVIDENDS, DISTRIBUTIONS. Declare or pay a dividend
either in cash, stock or other property; or redeem, retire, purchase or
otherwise acquire any shares of any class of Borrower's stock now or hereafter
outstanding.
SECTION 5.9 COMPENSATION LIMITATION. Authorize increases in annual
compensation (i.e., salaries, bonuses, dividends or other compensation) of any
owner, partner, or stockholders of Borrower in amounts in excess of $ --- .
Current aggregate compensation of principals of Borrower is:___N/A___.
ARTICLE VI - EVENTS OF DEFAULT
SECTION 6.1 In addition to Events of Default defined in the
Security And Loan Agreement or the Note issued hereunder, the following shall
constitute Events of Default:
(a) Default by Borrower in any payment of principal or interest under
the Note.
5- LOAN AGREEMENT (Revolving Line)
<PAGE>
(b) Any representation or warranty made by Borrower hereunder shall
prove to be incorrect in any material respect.
(c) Default by Borrower in the performance of any other term,
covenant or agreement contained herein or any instrument securing payment of the
Note, which default is not cured within 20 days from its occurrence.
(d) Default by Borrower under the terms of any agreement or
instrument pursuant to which Borrower has borrowed money from any person.
(e) The failure of Borrower promptly to pay and discharge any
judgment or levy or other process within 20 days after its entry into public
record, or at least 5 days prior to the time of any proposed sale under any such
judgment or levy.
(f) Borrower shall be adjudicated as bankrupt or insolvent or shall
consent to or apply for the appointment of a receiver, trustee or liquidator of
itself or any of its property, or shall admit in writing its inability to pay
its debts generally as they become due, or shall make a general assignment for
the benefit of creditors, or shall file a voluntary petition in bankruptcy or a
voluntary petition or an answer seeking reorganization or arrangement in a
proceeding under any bankruptcy law, or Borrower or its directors or a majority
of its stockholders shall take action to liquidate or dissolve Borrower or
Borrower shall be the subject of an involuntary petition in bankruptcy or a
receivership and such involuntary petition or receivership is not dismissed
within thirty (30) days of commencement.
SECTION 6.2 ACCELERATION. If an Event of Default shall occur, any
indebtedness of Borrower under this Agreement or under the Security And Loan
Agreement or the Note issued hereunder, any term of such instruments to the
contrary notwithstanding, shall, at Bank's option and without notice, become
immediately due and payable without presentment, notice or demand, all of which
are hereby expressly waived by Borrower; and the obligation, if any, of the Bank
to permit further borrowings hereunder shall immediately cease and terminate.
SECTION 6.3 SET OFF. If an Event of Default shall occur, any
indebtedness of Borrower under this Agreement or the Security And Loan Agreement
or the Note issued hereunder, any term of such instruments to the contrary
notwithstanding, shall be subject to the Bank's right of set off of any deposit
accounts of Borrower, without presentment, notice or demand, all of which are
expressly waived by Borrower.
ARTICLE VII - MISCELLANEOUS
SECTION 7.1 WAIVER. No delay or failure of Bank, or any holder of
the Security And Loan Agreement or the Note, in exercising any right, power or
privilege hereunder shall affect such right, power or privilege. The rights and
remedies of Bank hereunder are cumulative and not exclusive. Any waiver, permit,
consent or approval of any kind, including any of the foregoing granted with
respect to Borrower breaches and defaults, whether single, partial or repeated,
must be in writing and signed by holder of the Security And Loan Agreement or
the Note to be enforceable against the holder of the Security And Loan Agreement
or the Note.
SECTION 7.2 NOTICES. All notices, requests and demands given to or
made upon the respective parties shall be deemed to have been given or made when
deposited in the mail, postage prepaid, and addressed as follows:
BORROWER: R-B RUBBER PRODUCTS, INC.
904 EAST 10TH AVENUE
MCMINNVILLE, OREGON 97128
BANK: Key Bank of Oregon, Mid-Valley CBC
6- LOAN AGREEMENT (Revolving Line)
<PAGE>
416 STATE STREET
SALEM, OREGON 97301
SECTION 7.3 ATTORNEYS' FEES. Borrower will reimburse Bank for all
costs, expenses and reasonable attorneys' fees expended or incurred by Bank in
enforcing this Agreement, in action for declaratory relief in any way related to
this Agreement, or in collecting any sums which become due the Bank under the
Security And Loan Agreement or the Note, including any actions taken in the
context of bankruptcy proceedings and any appeals of any actions described in
this section.
SECTION 7.4 GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the laws of the State of Oregon.
SECTION 7.5 WAIVER OF JURY TRIAL. IN THE EVENT ANY LITIGATION IS
COMMENCED TO ENFORCE OR CONSTRUE THIS AGREEMENT, THEN BANK AND BORROWER EACH
WAIVE THE RIGHT TO A JURY TRIAL IN SUCH PROCEEDINGS AND EACH AUTHORIZES THE
OTHER TO SUBMIT A COUNTERPART OF THIS AGREEMENT TO THE COURT HAVING JURISDICTION
OF SUCH PROCEEDINGS TO EVIDENCE THE WAIVER OF THE RIGHT TO TRIAL BY JURY.
SECTION 7.6 STATUTORY NOTICE. UNDER OREGON LAW, MOST AGREEMENTS,
PROMISES AND COMMITMENTS MADE BY A BANK AFTER OCTOBER 3, 1989, CONCERNING LOANS
AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD
PURPOSES OR SECURED SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING,
EXPRESS CONSIDERATION AND BE SIGNED BY THAT BANK TO BE ENFORCEABLE.
Executed on the day and year first hereinabove written.
BORROWER: BANK:
R-B RUBBER PRODUCTS, INC. KEY BANK OF OREGON
(Name of Firm)
By: By:
Name: RONALD L. BOGH Name: CHRIS BOHL
Title: PRESIDENT Title: VICE PRESIDENT
By:_______________________
Name:_____________________
Title:____________________
Taxpayer Identification Number: 93-0967413
7- LOAN AGREEMENT (Revolving Line)
<PAGE>
EXHIBIT 11
R-B RUBBER PRODUCTS, INC.
CALCULATIONS OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
------------------------------------------------ ----------------------- -----------------------
1996 1995 1996 1995
----------------------- ----------------------- ----------------------- -----------------------
Primary Fully Diluted Primary Fully Diluted Primary Fully Diluted Primary Fully Diluted
----------------------- ----------------------- ----------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Weighted Average Shares
Outstanding for the Period 2,172,500 2,172,500 1,586,319 1,586,319 2,172,500 2,172,500 1,334,558 1,334,558
Dilutive Common Stock
Options Using the Treasury
Stock Method - - - - - - - -
----------------------- ----------------------- ----------------------- -----------------------
Total Shares Used for Per
Share Calculations 2,172,500 2,172,500 1,586,319 1,586,319 2,172,500 2,172,500 1,334,558 1,334,558
----------------------- ----------------------- ----------------------- -----------------------
----------------------- ----------------------- ----------------------- -----------------------
Net Income (122,034) (122,034) 62,430 62,430 (117,919) (117,919) 68,477 68,477
----------------------- ----------------------- ----------------------- -----------------------
----------------------- ----------------------- ----------------------- -----------------------
Net Income Per Share $ (0.06) $ (.06) $ 0.04 $ 0.04 $ (0.05) $ (0.05) $ 0.05 $ 0.05
----------------------- ----------------------- ----------------------- -----------------------
----------------------- ----------------------- ----------------------- -----------------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,164
<SECURITIES> 0
<RECEIVABLES> 509,566
<ALLOWANCES> 7,389
<INVENTORY> 517,743
<CURRENT-ASSETS> 1,119,954
<PP&E> 4,382,479
<DEPRECIATION> 1,483,892
<TOTAL-ASSETS> 5,658,085
<CURRENT-LIABILITIES> 911,658
<BONDS> 868,811
0
0
<COMMON> 3,797,442
<OTHER-SE> (74,120)
<TOTAL-LIABILITY-AND-EQUITY> 5,858,085
<SALES> 2,223,366
<TOTAL-REVENUES> 2,223,366
<CGS> 1,480,618
<TOTAL-COSTS> 1,480,618
<OTHER-EXPENSES> 805,049
<LOSS-PROVISION> 7,428
<INTEREST-EXPENSE> (58,806)
<INCOME-PRETAX> (117,919)
<INCOME-TAX> 0
<INCOME-CONTINUING> (117,919)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (117,919)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
