SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 2003
Commission File No. 0-20101
URECOATS INDUSTRIES INC.
(Exact name of Registrant as Specified in its Charter)
Delaware (State of Incorporation) | 13-3545304 (I.R.S. Employer Identification No.) | ||||
Quorum Business Center 718 South Military Trail Deerfield Beach, Florida (Address of Principal Executive Offices) | 33442 (Zip Code) |
(Registrant's Telephone Number, Including Area Code)
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 2003
Page | |||
PART I | FINANCIAL INFORMATION | ||
3 | |||
11 | |||
14 | |||
14 | |||
PART II | OTHER INFORMATION | ||
15 | |||
15 | |||
15 | |||
15 | |||
15 | |||
16 | |||
SIGNATURES | 17 | ||
CERTIFICATIONS | 18 | ||
INDEX OF EXHIBITS | 20 | ||
2 | ||
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
CONDENSED CONSOLIDATED BALANCE SHEETS | |||
March 31, 2003 and December 31, 2002 | 4 | ||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||
Three Months Ended March 31, 2003 and 2002 | 6 | ||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||
Three Months Ended March 31, 2003 and 2002 | 8 | ||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS | 10 |
3 | ||
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, |
|
| December 31, |
| |||
|
| 2003 |
|
| 2002 |
| |
|
| (unaudited) |
|
| |||
ASSETS | |||||||
Current Assets: | |||||||
Cash | $ | 193,358 | $ | 41,520 | |||
Accounts Receivable | 492,646 | 604,945 | |||||
Inventory | 1,851,361 | 1,416,674 | |||||
Prepaid Expenses and Other Current Assets | 245,886 | 204,526 | |||||
Total Current Assets | 2,783,251 | 2,267,665 | |||||
Property, Plant and Equipment, Net | 1,438,102 | 1,514,063 | |||||
Other Assets: | |||||||
Intangibles, Net | 1,874,550 | 1,879,433 | |||||
Notes Receivable - Long Term | 256,411 | 348,412 | |||||
Deposits and Other Non-Current Assets | 158,314 | 139,211 | |||||
Total Other Assets | 2,289,275 | 2,367,056 | |||||
Total Assets | $ | 6,510,628 | $ | 6,148,784 | |||
4 | ||
CONDENSED CONSOLIDATED BALANCE SHEETS
(CONTINUED)
March 31, |
|
| December 31, |
| |||
|
| 2003 |
|
| 2002 |
| |
|
| (unaudited) |
|
| |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current Liabilities: | |||||||
Accounts Payable and Accrued Expenses | $ | 4,143,497 | $ | 3,187,449 | |||
Current Maturities of Long-Term Debt | 107,881 | 105,257 | |||||
Short-Term Notes and Loans Payable | 783,717 | 739,027 | |||||
Deferred Revenue | 77,500 | 70,000 | |||||
Total Current Liabilities | 5,112,595 | 4,101,733 | |||||
Long-Term Debt | 29,422 | 45,427 | |||||
Total Liabilities | 5,142,017 | 4,147,160 | |||||
Stockholders’ Equity: | |||||||
Preferred Stock, $1.00 Par Value; 2,000,000 Shares Authorized, of which Designations: | |||||||
Series A Convertible, 750,000 Shares Authorized; 62,500 Issued and Outstanding (Less Offering Costs of $7,465) | 55,035 | 55,035 | |||||
Series B Convertible, 500,000 Shares Authorized; 500,000 Issued and Outstanding | 500,000 | 500,000 | |||||
Series C Convertible, 750,000 Shares Authorized; 469,150 Issued and Outstanding | 469,150 | 414,781 | |||||
Common Stock, $.01 Par Value; 25,000,000 Shares Authorized; 14,243,354and 14,071,254 Issued and Outstanding at March 31, 2003 and December 31, 2002, respectively | 142,434 | 140,713 | |||||
Additional Paid-In Capital | 46,286,591 | 44,696,841 | |||||
Accumulated (Deficit) | (46,084,599 | ) | (43,805,746 | ) | |||
Total Stockholders’ Equity | 1,368,611 | 2,001,624 | |||||
Total Liabilities and Stockholders’ Equity | $ | 6,510,628 | $ | 6,148,784 | |||
5 | ||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended | |||||||
| March 31, |
| March 31, |
| |||
| 2003 |
| 2002 | ||||
Revenue: | |||||||
Application Systems | $ | 107,000 | $ | 646,538 | |||
Coatings, Sealants and Other Products | 931,602 | 673,961 | |||||
Total Revenue | 1,038,602 | 1,320,499 | |||||
Cost of Sales: | |||||||
Application Systems | 84,000 | 631,155 | |||||
Coatings, Sealants and Other Products | 688,505 | 427,969 | |||||
Warranty Costs, Freight and Other Cost of Sales | 182,287 | 87,575 | |||||
Total Cost of Sales | 954,792 | 1,146,699 | |||||
Gross Profit | 83,810 | 173,800 | |||||
Operating Expenses: | |||||||
Selling, General and Administrative | 1,787,215 | 2,119,653 | |||||
Professional Fees | 91,090 | 70,557 | |||||
Depreciation and Amortization | 114,836 | 122,273 | |||||
Research and Development | 106,079 | 89,568 | |||||
Consulting Fees | 94,838 | 157,141 | |||||
Interest Expense | 27,066 | 5,689 | |||||
Total Operating Expenses | 2,221,124 | 2,564,881 | |||||
Operating (Loss) | (2,137,314 | ) | (2,391,081 | ) | |||
Income (Loss) From Discontinued Operations | (3,413 | ) | 18,331 | ||||
Net (Loss) | $ | (2,140,727 | ) | $ | (2,372,750 | ) | |
6 | ||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended |
| ||||||
|
| March 31, |
|
| March 31, |
| |
|
| 2003 |
|
| 2002 | ||
Net (Loss) Per Common Share-Basic: | |||||||
Continuing Operations | $ | (0.151 | ) | $ | (0.018 | ) | |
Discontinued Operations | 0.000 | 0.000 | |||||
Total | $ | (0.151 | ) | $ | (0.018 | ) | |
Weighted Average Shares Outstanding | 14,157,304 | * 131,740,437 | |||||
Net (Loss) Per Common Share-Diluted: | |||||||
Continuing Operations | $ | (0.117 | ) | $ | (0.018 | ) | |
Discontinued Operations | 0.000 | 0.000 | |||||
Total | $ | (0.117 | ) | $ | (0.018 | ) | |
Weighted Average Shares Outstanding | 18,249,726 | * 136,206,937 | |||||
7 | ||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended | |||||||
March 31, |
|
| March 31, |
| |||
|
| 2003 |
|
| 2002 |
| |
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net (Loss): | |||||||
Continuing Operation | $ | (2,137,314 | ) | $ | (2,391,452 | ) | |
Discontinued Operations | (3,413 | ) | 18,702 | ||||
Adjustments to Reconcile Net (Loss) to Net Cash Provided (Used) by Operating Activities: | |||||||
Depreciation and Amortization | 114,836 | 129,401 | |||||
Non-Cash Operating Activities: | |||||||
Board of Director Fees | --- | 23,625 | |||||
Interest | 16,240 | ||||||
Consultant Fees | --- | 36,300 | |||||
Other Compensation | 10,218 | 181,577 | |||||
Changes in Assets and Liabilities: | |||||||
Prepaid Expenses | (49,063 | ) | 53,957 | ||||
Accounts and Loans Receivable | 112,300 | (439,326 | ) | ||||
Inventory | (342,688 | ) | (146,486 | ) | |||
Other Current Assets | 7,702 | (52,217 | ) | ||||
Accounts Payable and Accrued Expenses | 817,305 | (434,081 | ) | ||||
Deferred Income | 7,500 | --- | |||||
Net Cash (Used) by Operating Activities | (1,446,377 | ) | (3,020,000 | ) | |||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
(Acquisition) of Property and Equipment | (33,992 | ) | (141,591 | ) | |||
Disposition of Property and Equipment | --- | 91,338 | |||||
(Acquisition) of Intangibles | --- | (23,133 | ) | ||||
(Additions) Dispositions of Deposits and Other Non-Current Assets | (19,103 | ) | 3,000 | ||||
Net Cash (Used) by Investing Activities | (53,095 | ) | (70,386 | ) | |||
8 | ||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED - CONTINUED)
Three Months Ended | |||||||
March 31, |
|
| March 31, |
| |||
|
| 2003 |
|
| 2002 | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from the Issuance of Stock | $ | --- | $ | 3,278,000 | |||
Proceeds of Notes and Credit Lines | 448,223 | 789,180 | |||||
(Payment) of Notes and Credit Lines | (416,913 | ) | (1,085,136 | ) | |||
Proceeds of Loans from Related Parties | 1,620,000 | 200,000 | |||||
Net Cash Provided by Financing Activities | 1,651,310 | 3,182,044 | |||||
Net Increase In Cash | 151,838 | 91,658 | |||||
Cash at Beginning of Period | 41,520 | 519,225 | |||||
Cash at End of Period | $ | 193,358 | $ | 610,883 | |||
Supplemental Disclosure of Cash Flow Information: | |||||||
Cash Payments for Income Taxes | $ | 0 | $ | 0 | |||
Cash Payments for Interest | $ | 10,826 | $ | 5,689 | |||
Non-Cash Investing Activities: | |||||||
Acquisitions | $ | 0 | $ | 0 | |||
Total Non-Cash Investing Activities | $ | 0 | $ | 0 | |||
Non-Cash Financing Activities: | |||||||
Issuance of Stock: | |||||||
Operating Activities | $ | 26,458 | $ | 241,502 | |||
Repayment of Debts | --- | — | |||||
Acquisitions | --- | — | |||||
Total Non-Cash Financing Activities | $ | 26,458 | $ | 241,502 | |||
9 | ||
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, |
|
| December 31, |
| |||
|
| 2003 |
|
| 2002 | ||
Raw Materials | $ | 134,939 | $ | 177,695 | |||
Finished Goods | 1,716,422 | 1,238,979 | |||||
Total | $ | 1,851,361 | $ | 1,416,674 | |||
10 | ||
Three Months Ended March 31 | ||||||
Year | Basic | Diluted | ||||
2003 | 14,157,304 | 18,249,726 | ||||
2002 (*) | 131,740,437 | 136,206,937 | ||||
__________ | ||||||
(*) | Pre 1 for 10 share consolidation.See Note 3. |
11 | ||
Three Months Ended March 31, 2003 as Compared to Three Months Ended March 31, 2002
Three Months Ended | |||||||
March 31, |
|
| March 31, |
| |||
|
| 2003 |
|
| 2002 | ||
Revenue: | |||||||
Application Systems | $ | 107,000 | $ | 646,538 | |||
Coatings, Sealants and Other Products | 931,602 | 673,961 | |||||
Total Revenue | $ | 1,038,602 | $ | 1,320,499 | |||
12 | ||
13 | ||
In response to certain market and economic conditions we have refined our pricing strategy for our Flagship Products for 2003. This will impact our revenue per unit and gross profit for these products, but we anticipate that new products planned for a 2003 introduction will provide additional revenue and improved margins. During the fourth quarter we sold five (5) new Application Systems for a total of $357,500. This amount was offset by $280,000 for Application Systems returned, $70,000 for an Application System that was originally recorded as a sale, but due to additional commitments made to the customer, this sale had to be deferred, and additional selling adjustments for $33,936.
14 | ||
15 | ||
10.1 | Restricted Stock Option Agreement, effective January 1, 2003 between Timothy M. Kardok and the Company. | |
10.2 | Restricted Stock Option Agreement, effective January 1, 2003 between Michael T. Adams and the Company. | |
10.3 | Restricted Stock Option Agreement, effective January 1, 2003 between John G. Barbar and the Company. | |
10.4 | Restricted Stock Option Agreement, effective January 1, 2003 between Arthur K. Guyton and the Company. | |
10.5 | Restricted Stock Option Agreement, effective January 1, 2003 between Ronald E. Clark and the Company. | |
10.6 | Series C Preferred Stock Option Agreement dated March 21, 2003 between Richard J. Kurtz and the Company. |
16 | ||
URECOATS INDUSTRIES INC. | ||
| | |
Date: May 15, 2003 | By: | ![]() |
Timothy M. Kardok | ||
Chief Executive Officer and President |
URECOATS INDUSTRIES INC. | ||
| | |
Date: May 15, 2003 | By: | ![]() |
John G. Barbar | ||
Chief Financial Officer and Treasurer |
URECOATS INDUSTRIES INC. | ||
| | |
Date: May 15, 2003 | By: | ![]() |
Michael T. Adams | ||
Executive Vice President and Secretary |
17 | ||
URECOATS INDUSTRIES INC. | ||
| | |
Date: May 15, 2003 | By: | ![]() |
Timothy M. Kardok | ||
Chief Executive Officer and President |
18 | ||
CERTIFICATION
URECOATS INDUSTRIES INC. | ||
| | |
Date: May 15, 2003 | By: | ![]() |
John G. Barbar | ||
Chief Financial Officer and Treasurer |
19 | ||
ExhibitNumber | Description | |
10.1 | ||
10.2 | ||
10.3 | ||
10.4 | ||
10.5 | ||
10.6 |
20 | ||