Glassmaster 10QSB 2004 Q1 Quarterly report (small business)

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-QSB


(X)		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
		For the quarterly period endedNovember 30, 2003

( )		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

GLASSMASTER COMPANY

(Exact name of small business issuer as specified in its charter)


South Carolina	0-2331	57-0283724

(State or other jurisdiction of Incorporation of organization	(Commission File Number)	(IRS Employer Identification No.)


PO Box 788, Lexington SC				29071

(Address of principal executive offices)				(Zip Code)

Issuer’s Telephone Number, including area code:803-359-2594

No Change

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant:

	(1)		Has 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 YES X NO

	(2)		Has been subject to such filing requirements for the past 90 days YES X NO

Common shares outstanding November 30, 2003:1,643,390 par value $0.03

GLASSMASTER COMPANY

FORM 10-QSB

FOR THE QUARTER ENDED NOVEMBER 30, 2003


		PAGE

Part I	FINANCIAL INFORMATION

Item 1.	Financial Statements

	Balance Sheets as of November 30, 2003 (Unaudited) and August 31, 2003	3

	Statements of Operations for the three months ended November 30, 2003 and December 1, 2002 (Unaudited)	4

	Statements of Cash Flows for the three months ended November 30, 2003 and December 1, 2002 (Unaudited)	5

	Notes to Consolidated Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis	9

Item 3.	Controls and Procedures	10

Part II	OTHER INFORMATION

Item 5.	Other Information	10

Item 6.	Exhibits and Reports on Form 8-K	10

SIGNATURES		11

CERTIFICATIONS		12

EXHIBITS		14

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Glassmaster Company, Inc. and Subsidiary
Consolidated Balance Sheets
(In Thousands)


			November 30, 2003			August 31, 2003

			(Unaudited)
ASSETS
Current Assets:
	Cash and Cash Equivalents		$	66		$	132
	Marketable Equity Securities – Trading			0			11
	Accounts Receivable, Trade (Net of Reserve)			2,376			2,116
	Inventories, net			2,943			2,781
	Prepaid Expenses			235			90
	Deferred Income Taxes			43			43

		Total Current Assets		5,663			5,173

Property, Plant, and Equipment, net				3,187			3,329

Deferred Tax Assets				1,394			1,394

Other Assets				29			35


		Total Assets	$	10,273		$	9,931


LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities:
	Notes, Mortgages and Debentures payable, current		$	7,493		$	7,578
	Accounts Payable			2,283			1,649
	Accrued Expenses			119			201

		Total Current Liabilities		9,895			9,428

Other Liabilities
	Notes, Mortgages, and Debentures payable, long term			410			410


		Total Liabilities		10,305			9,838

Stockholders’ Equity
	Capital Stock, 5,000,000 shares authorized $0.03 Par, 1,643,390 shares issued and outstanding		$	49		$	49
	Paid-In Capital			1,367			1,367
	Donated Capital			124			124
	Retained Deficit			(1,572	)		(1,447	)


		Total Stockholders’ Equity		(32	)		93

		Total Liabilities and Stockholders’ Equity	$	10,273		$	9,931

See notes to consolidated financial statements (unaudited) which are an integral part of this statement.

Glassmaster Company, Inc. and Subsidiary
Consolidated Statements of Operations
(In thousands except per share amounts)(Unaudited)


			Three Months Ended

			November 30, 2003			December 1, 2002

Sales			$	3,634		$	3,974
Cost of Sales				3,137			3,520

		Gross Profit		497			454

Operating Expenses
	Marketing and Selling			159			178
	General and Administrative			162			148
	Other Income and Expense — Net			159			194

		Total Operating Expenses		480			520

		Income (Loss) From Operations		17			(66	)
Other Income (Expense), net
	Interest Expense			(138	)		(144	)
	Gain on Sale of Property and Assets			0			35

		Total Other Income (Expense), net		(138	)		(109	)

Loss Before Income Taxes				(121	)		(175	)

Income Taxes				0			0


Net Loss			$	(121	)	$	(175	)


Net Loss per common share (Basic and Diluted)			$	(0.07	)	$	(0.11	)


Weighted Average Shares Outstanding				1,643,390			1,643,390

See notes to consolidated financial statements (unaudited) which are an integral part of this statement.

Glassmaster Company, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(In Thousands)(Unaudited)


				Three Months Ended

				November 30, 2003			December 1, 2002

Cash Flows From Operations
	Net Loss			$	(121	)	$	(175	)
	Adjustments to reconcile Net Loss to Net Cash Provided by Operations:
		Depreciation			142			171
		Amortization			7			6
		Gain on Sale of Assets			0			(35	)
		Changes in Operating Assets & Liabilities:
			Accounts Receivable		(260	)		605
			Inventories		(162	)		(429	)
			Prepaid Expenses & Other Current Assets		(149	)		(161	)
			Accounts Payable		634			191
			Accrued Expenses		(83	)		82

Net Cash Provided By Operating Activities					8			255


Cash Flows From Investing Activities
	Cash payments for the purchase of Fixed Assets				0			(5	)
	Cash proceeds from the sale of Assets				0			350
	Cash Proceeds from the sale of Trading Securities				11			0

Net Cash Provided By Investing Activities					11			345


Cash Flows From Financing Activities
	Proceeds from Short-Term Borrowings				0			8
	Principal payments on Short-Term Borrowings				(88	)		(1	)
	Principal payments on Long-Term Borrowings				0			(414	)
	Net Borrowings (Repayments) under Lines of Credit				3			(260	)

Net Cash Used by Financing Activities					(85	)		(667	)


Net Decrease In Cash					(66	)		(67	)

Cash and Cash Equivalents at beginning of period					132			173


Cash and Cash Equivalents at end of period				$	66		$	106


Supplemental Cash Flow Information
	Cash Paid For:
		Interest		$	135		$	144

See notes to consolidated financial statements (unaudited)which are an integral part of this statement.

Glassmaster Company, Inc. and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)

NOTE 1 – Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. However, in the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation of the Company’s financial position, results of operations, and cash flows have been included.

The consolidated financial statements for the quarters ended November 30, 2003 and December 1, 2002 and for the year ended August 31, 2003 include the accounts of Glassmaster Company, Inc. (“Glassmaster” or “the Company”) and its wholly owned subsidiary Glassmaster Controls Company, Inc. (“Controls”). All material intercompany transactions have been eliminated. Operating results for the three-month period ended November 30, 2003 are not necessarily indicative of the results that may be expected for the full fiscal year ended August 31, 2004. For further information, refer to the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-KSB for the year ended August 31, 2003.

NOTE 2 – Uncertainties

As reported in the accompanying consolidated financial statements, the Company has incurred recurring losses from operations, and as of November 30, 2003, the Company’s current liabilities exceeded its current assets by $4,232,000. Its total liabilities of $10,305,000 exceed its total assets of $8,879,000 net of deferred tax assets of $1,394,000 by $1,426,000. Management has continued cost reduction programs and is pursuing opportunities to raise additional equity capital through outside sources. Additionally, the Company’s management is pursuing possible sales of assets and product lines, and pursuing affiliations with other companies to sustain operations until current sales levels of existing products and planned sales of new products, along with expected improved profit margins through cost reductions, can move the Company toward future profitability. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary in the event that the Company is unable to generate sufficient capital to execute this plan.

NOTE 3 – Revenue Recognition

The Company recognizes revenue from product sales upon shipment to its customers.

NOTE 4 – Accounts Receivable

The Company continually reviews accounts for collectability and establishes an allowance for losses on trade receivables. Accounts receivables have been reduced by an allowance for doubtful accounts in the amount of $122,759 and $123,456 as of November 30, 2003 and August 31, 2003, respectively.

Glassmaster Company
Notes to Consolidated Financial Statements (Unaudited)

NOTE 5 – Inventories

Inventories as reported on the 2003 balance sheets are classified below:


	November 30			August 31

Materials	$	1,961,571		$	2,069,195
Work in Process		397,010			369,922
Finished Products		753,820			511,712
Reserve for Excess and Obsolete Inventories		(169,884	)		(169,884	)


	$	2,942,517		$	2,780,945

NOTE 6 – Reclassification

Certain prior year amounts may have been reclassified to conform with the current year presentation.

NOTE 7 – Notes and Mortgages Payable

Substantially all property, plant and equipment are pledged as collateral for borrowings. In addition, inventories and customer receivables are pledged as collateral to provide the company and it’s subsidiary with revolving lines of credit for working capital requirements. The amount available for borrowings under these lines of credit varies with fluctuations in the amount of inventories on hand and customer receivables outstanding with maximum available credit lines of $2,500,000 for the Company and $1,150,000 for the Company’s subsidiary. The line of credit for the Company requires monthly interest payments at prime (4% at November 30, 2003) plus 2.5%. The line of credit for the Company’s subsidiary requires monthly interest payments at prime 1%. The balances as of November 30, 2003 were $1,665,975 and $914,721 and the balances as of August 31, 2003 were $1,769,121 and $808,323, respectively. These credit agreements are subject to renegotiation and renewal and were set to expire January 5, 2004 and December 30, 2003, respectively. The lenders have agreed to extend the maturity dates to April 5, 2004 on the Company’s notes and June 30, 2004 on the subsidiary’s notes, respectively.

Special provisions of the loan agreements restrict payment of cash dividends without the consent of the lender as well as providing for minimum working capital requirements and maximum debt to net worth requirements in addition to providing for other minimum financial ratio requirements. The Company is in violation of certain of these covenants, and as such, all debt related to these agreements is classified as current. The Company and its subsidiary are in negotiations with the primary lenders to renew and extend the maturity of the financing agreements set to expire on the dates stated above. The Company is also actively seeking alternate sources of financing if an acceptable agreement with its current lenders cannot be reached.

NOTE 8 – Segment Reporting

The Company classifies its business into two segments based on products offered and geographic location; Industrial Products and Controls and Electronics. The Industrial Products segment produces extruded synthetic monofilament line, pultruded fiberglass products, and composites that are sold for use in a variety of industrial applications and markets. The Controls and Electronics segment produces flexible cable controls, mechanical and electronic HVAC controls, molded control panels and electronic testing equipment, that are sold for use in the heavy truck, marine, and agricultural industries and is a contract manufacturer of custom electronic products.

Glassmaster Company
Notes to Consolidated Financial Statements (Unaudited)

NOTE 8 – Segment Reporting (continued)

The Company evaluates performance based on profit or loss from operations before income taxes not including nonrecurring gains and losses. There are currently no significant intersegment sales and transfers, therefore no eliminations have been made to the information below. Included in the tables below is relevant financial data provided by each reportable segment. The amounts shown in the Other column are generally those expenses and assets which are associated with the Company’s corporate headquarters and other entity wide expenses which have not been included in segment information.


	Three Months Ended November 30, 2003

	Industrial		Controls &
	Products		Electronics		Other			Total

Segment Assets	$	4,523,235	$	3,866,444	$	1,882,679		$	10,272,358

Revenues from External Customers		2,115,793		1,518,063					3,633,856

Segment Profit (Loss) before interest		56,708		133,236		(173,168	)		16,776
Interest Expense		113,896		24,044					137,940

Income (Loss) Before Income Taxes									(121,164	)


	Three Months Ended December 1, 2002

	Industrial		Controls &
	Products		Electronics		Other			Total

Segment Assets	$	5,558,589	$	3,790,946	$	1,516,844		$	10,866,379

Revenues from External Customers		2,544,970		1,429,063					3,974,033

Segment Profit (Loss) before interest		134,734		36,229		(201,731	)		(30,768	)
Interest Expense		114,059		29,716					143,775

Income (Loss) Before Income Taxes									(174,543	)

Item 2. Management’s Discussion and Analysis

RESULTS OF OPERATIONS

Consolidated net sales for the first quarter ended November 30, 2003 were $3,633,856, a decrease of 8.6% when compared with prior year first quarter sales of $3,974,038. The decrease in comparative first quarter sales is due to lower sales at Monofilament as a result of continued weakness in that market segment. Sales in the first quarter at Glassmaster Controls increased 6.2% compared to the same period of the prior year as sales of mechanical controls and control panels began to recover after a prolonged slump in the domestic truck manufacturing industry. Sales of electronic controls and circuit boards were relatively flat when compared to last year’s first quarter.

Gross profit realized during the first quarter increased to $497,041, or 13.7% of sales, from $453,778, or 11.4% of sales in the year ago first quarter. The increase in gross income is due to a favorable mix of product sales and manufacturing cost reductions at Controls. The company continues in its efforts to reduce the costs of manufacturing on all of its products. Any significant future increase in gross margins will result from increasing levels of orders and throughput at Monofilament and higher rates of utilization on electronic production equipment at Controls.

Operating expenses decreased to $480,265, or 13.2% of sales, in the current year first quarter, compared to $519,751, or 13.0% of sales, in the prior year comparative period. Marketing and selling expenses in this year’s quarter declined due to lower commission generated sales at Monofilament compared to last year. Other income and expenses, net were lower in the current year quarter due to a decline in general corporate overhead this year versus the prior year period.

Interest expense totaled $137,940 during this year’s first quarter compared with $143,775 last year, a decrease of 4.1%. The decrease in interest expense is attributable to lower average borrowings outstanding compared to last year’s quarterly period.

The net loss was $121,164 during the current year first quarter compared with $174,633 in last year’s quarterly period.

LIQUIDITY AND CAPITAL RESOURCES

Cash flows from operating activities was $7,654 during the first quarter of the 2004 fiscal year compared with $254,536 during the prior year period. The decline in cash provided from operating activities is primarily due to an increase in accounts receivable outstanding at quarter end while the prior year period saw a significant decline in receivables outstanding.

Cash provided by investing activities during the first quarter was $10,764 compared to $344,559 in the year ago period. Cash received from the sale of the Newberry, SC plant in the first quarter of last fiscal year accounts for the change. There were no capital expenditures during this year’s first quarter and there currently are no material capital outlays planned.

Item 2. Management’s Discussion and Analysis (Cont’d)

Net cash used by financing activities was $84,625 in the current year period versus $666,691 last year. The decrease in cash used by investing activities is primarily due to the net proceeds from the sale of the Newberry, SC facility having been applied to debt reduction during last year’s first quarter. The current year period saw a small increase in borrowings outstanding under lines of credit while last year’s quarter saw a significant decline in these credit lines due to the large decrease in accounts receivable outstanding mentioned previously. See Note 7, Notes and Mortgages Payable, for further information and a current status of the company’s discussions with its lenders.

The company currently anticipates that its cash requirements during the remainder of the 2004 fiscal year will be provided from operations and from borrowings under existing and committed credit lines.

Item 3. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. The Company’s principal executive officer and its principal financial officer, after evaluating the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-14(c) and 15d-14(c)), have concluded that, as of such date, the Company’s disclosure controls and procedures were adequate and effective to ensure that material information relating to the Company and its consolidated subsidiaries would be made known to them by others within those entities.

(b) Changes in internal controls. There were no significant changes in the Company’s internal controls or in other factors that could significantly affect the Company’s disclosure controls and procedures subsequent to the date of their evaluation, nor were there any significant deficiencies or material weaknesses in the Company’s internal controls. As a result, no corrective actions were required or undertaken.

PART II — OTHER INFORMATION

Item 5. Other Information

Item 6. Exhibits and Reports on Form 8-K

	a)		Exhibits

			Exhibit 99.1 – Certification of Periodic Report

	b)		Reports on Form 8-K

			There were no reports on Form 8-K filed during the quarter ended November 30, 2003.

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.


		GLASSMASTER COMPANY
		LEXINGTON, SC

Date: January 15, 2004		/s/ Raymond M. Trewhella

		Raymond M. Trewhella
		(CEO and Chairman of the Board,
		Principal Executive Officer)

Date: January 15, 2004		/s/ Richard E. Trewhella

		Richard E. Trewhella
		(Corporate Controller & Treasurer,
		Principal Financial Officer)

Certifications

I, Raymond M. Trewhella , certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Glassmaster Company;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

6. The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: January 15, 2004


		/s/ Raymond m. Trewhella


		Raymond M. Trewhella
		CEO and Chairman of the Board
		Principal Executive Officer

Certifications (cont’d)

I, Richard E. Trewhella, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of Glassmaster Company;

b) evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls; and

Date: January 15, 2004


		/s/ Richard E. Trewhella


		Richard E. Trewhella
		Corporate Controller & Treasurer
		Principal Financial Officer

Glassmaster (GLMA) Inactive 10QSB2004 Q1 Quarterly report (small business)