SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ending June 30, 1996
Commission File No. 0-24188
JOTAN, INC.
(Exact name of small business issuer as specified in its charter.)
Florida 59-3181162
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
118 W. Adams Street, Suite 900, Jacksonville, Florida 32202
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (904) 355-2592
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchanged act of 1934 during the
past 12 months (or for such shorter period that the issuer was required to
file such reports) and (2) has been subject to such filing requirements for the
past 90 days.
Yes [ X ] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
5,679,411 shares of common stock, $.01 par value, as of July 22, 1996.
INDEX
Jotan, Inc.
Part I--Financial Information
Item I -- Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations
for the Six Months and Quarter ended June 30, 1996 and 1995.......2
Condensed Consolidated Balance Sheets at June 30, 1996
and 1995......................................................3 & 4
Condensed Consolidated Statements of Cash Flows for the
Six Months ended June 30, 1996 and 1995...........................5
Notes to Condensed Consolidated Financial Statements..............6
Item II -- Management's Discussion and Analysis of
Financial Condition and Result of Operations................6
Part II -- Other Information
Item 6 - Exhibits and Reports on Form 8-K...............................9
Signature...................................................................10
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended June 30 Six months ended June 30
__________________________ __________________________
1996 1995 1996 1995
____________ ____________ ____________ ____________
Sales $ 2,766,368 $ 2,641,142 $ 5,484,071 $ 5,187,503
Cost of sales 2,072,562 2,061,729 4,158,714 4,050,290
____________ ____________ ____________ ____________
Gross profit 693,806 579,413 1,325,357 1,137,213
Operating expenses 609,725 715,255 1,177,034 1,346,363
____________ ____________ ____________ ____________
Operating income (loss) 84,081 ( 135,842) 148,323 ( 209,150)
Other income 22,389 85,538 39,491 156,819
Interest expense ( 81,411) ( 66,218) ( 141,736) ( 107,718)
____________ ____________ ____________ ____________
Income (loss)
before taxes 25,059 ( 116,522) 46,078 ( 160,049)
Income tax expense - - - -
------------ ------------ ------------ ------------
25,059 ( 116,522) 46,078 ( 160,049)
Net income (loss)
per share $ .00 $ (.02) $ .01 $ (.03)
Weighted average number
of common and common
equivalent shares
outstanding 6,319,278 5,499,564 5,993,537 5,327,488
See accompanying notes.
JOTAN, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
June 30
1996 1995
____________ ____________
Assets
Current assets:
Cash and cash equivalent $ 1,582,933 $ 64,427
Trade receivables (net) 1,267,097 1,284,532
Inventory 1,318,421 1,314,608
Other current assets 299,274 145,648
Total current assets 4,467,725 2,809,215
Property and equipment
Land 110,000 110,000
Buildings 465,000 465,000
Leasehold improvements 35,554 33,954
Vehicles 270,975 314,247
Furniture, fixtures and equipment 342,430 331,066
Total property and equipment 1,223,959 1,254,267
Less accumulated depreciation ( 346,400) ( 226,597)
____________ ____________
Net property and equipment 877,559 1,027,670
____________ ____________
Other assets 120,247 43,268
____________ ____________
Total assets $ 5,465,531 $ 3,880,153
Liabilities and stockholders' equity
Current liabilities:
Trade payables $ 1,426,163 $ 1,066,357
Accrued expenses 81,613 71,117
Current maturities of notes payable 234,945 670,839
____________ ____________
Total current liabilities 1,742,721 1,808,313
Long-term debt:
Convertible subordinated debenture to
related party, less current maturities - 104,615
Notes payable, less current maturities 528,881 541,328
Line of credi 1,277,102 1,031,867
____________ ____________
1,805,983 1,677,810
Stockholders' equity
Preferred stock
Authorized shares - 10,000,000
Issued and outstanding shares -
1,265,823 in 1996 and -0- in
1995 12,658 -
Voting common stock, $.01 par value:
Authorized shares - 40,000,000
Issued and outstanding shares -
5,679,411 in 1996 and 5,665,096
in 1995 56,794 56,651
Additional paid-in capital 3,980,259 2,149,068
Retained earnings (deficit) (2,132,884) (1,811,689)
____________ ____________
Total stockholders' equity 1,916,827 394,030
____________ ____________
Total liabilities and stockholders' equity $ 5,465,531 $ 3,880,153
See accompanying notes.
JOTAN, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Six months ended June 30
1996 1995
_____________ ____________
Cash flows from operating activities
Net income (loss) $ 46,078 $( 160,049)
Adjustments to reconcile net income
(loss) to net cash used in
operating activities:
Depreciation and amortization expense 77,548 58,315
Loss on disposal of property and equipment - 13,455
Stock compensation expense 7,550 -
Changes in operating assets
and liabilities:
Trade receivables ( 310,671) ( 62,837)
Inventory ( 56,484) ( 81,995)
Trade payables 217,143 ( 929,434)
Accrued expenses 22,751 ( 106,395)
Other assets ( 88,984) 1,365
____________ ____________
Net cash used in operating activities ( 85,069) ( 1,267,575)
Cash flows from investing activities
Increase in other assets ( 65,980) ( 24,514)
Purchase of property and equipment ( 17,191) ( 29,625)
____________ ____________
Net cash flows used in
investing activities ( 83,171) ( 54,139)
Cash flows from financing activities
Proceeds from line of credit borrowings 169,724 1,175,738
Repayments of amounts advanced from
Total Supply Systems, Inc. ( 249,194) ( 142,923)
Payments on long-term debt ( 35,030) ( 128,921)
Proceeds from note receivable - 64,191
Proceeds from issuance of common stock,
net of issuance costs - 402,000
Proceeds from issuance of preferred stock,
net of issuance costs 1,843,902 -
____________ ____________
Net cash provided by financing activities 1,729,402 1,370,085
____________ ____________
Net increase in cash and cash equivalents 1,561,162 48,371
Cash and cash equivalents
at beginning of period 21,771 16,056
____________ ____________
Cash and cash equivalents
at end of period $ 1,582,933 $ 64,427
See accompanying notes.
Jotan, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The Business and Basis of Presentation
Description of Business
Jotan, Inc. (the "Company") is a distributor of packaging and shipping supplies
located in the southeastern United States. The Company sells primarily to
manufacturers and provides Just On Time As Needed delivery service for its
products.
Basis of Presentation
The accompanying financial statements are unaudited and, in the opinion of
management reflect all the adjustments that are necessary for a fair
presentation of the financial position and results of operations for the periods
presented. All of such adjustments are of a normal and recurring nature. The
results of operations for the periods presented are not necessarily indicative
of the results to be expected for the entire year.
The financial statements at June 30, 1996 and June 30, 1995 reflect the
combined accounts of the Company and its subsidiaries. Certain information and
footnote disclosure normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted.
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Sales increased to $5,484,071 for the six months ended June 30, 1996 from
$5,187,503 for the six months ended June 30, 1995 or an increase of 5.7%. Sales
for the second quarter of 1996 increased 4.7% when compared to the second
quarter of 1995. The increase in sales resulted from new business at the
Company's four existing distribution centers, which more than offset the impact
of the closure of the Chattanooga distribution center during the third quarter
of 1995 and the decline in corrugated prices that occured during the first six
months of 1996.
The Company's distribution centers experienced sales increases of 21.8% in the
first six months of 1996. Unfortunately, the Company's sales were impacted
unfavorably by declining corrugated prices. While sales at existing
distribution centers increased 21.8%, manufactured square feet of product sold
increased by 43.5% compared to the same period in 1995. Overall the sales
numbers reflect strong demand for the Company's services during 1996.
Cost of sales increased to $4,158,714 or 75.8% of sales for the six months
ended June 30, 1996 from $4,050,290 or 78.1% for the six months ended
June 30, 1995. Cost of sales for the second quarter of 1996 increased to
$2,072,562 or 74.9% of sales from $2,061,729 or 78.1% of sales for the second
quarter of 1995. The improvement in profit margins reflects the Company's
ability to purchase product more efficiently as a result of the overall
improved financial condition of the Company.
Operating expenses declined to $1,177,034 for the first six months of 1996 from
$1,346,363 for the same period in 1995, a 12.6% decrease. Several factors
contributed to this decrease including the closure of the Chattanooga
distribution center, reduced payroll costs, and the impact of the Company's
cost cutting program.
As a result of the foregoing factors, the Company had operating income of
$148,323 for the six months ended June 30, 1996 compared to an operating loss
of $209,150 for the six months ended June 30, 1995. This represents a $357,473
improvement in results from operations for the comparable six month period. For
the three months ended June 30, 1996, the company had operating income of
$84,081 compared to an operating loss of $135,842 for the three months ended
June 30, 1995, an improvement of $219,923.
Other income declined to $39,491 for the six months ended June 30, 1996, from
$156,819 for the six months ending June 30, 1995. This decline reflects the
fact that during 1995 the Company was settling old vendor debts at a
substantial discount. Interest expense increased to $141,736 for the six months
ended June 30, 1996 from $107,718 for the six months ended June 30, 1995. This
increase reflected the impact of increased borrowings under the long term debt
agreement with the CIT Financial Group.
As a result of the foregoing factors, the Company had net income of $46,078 for
the six months ended June 30, 1996 and net income of $25,059 for the quarter
ended June 30,1996. This represents an improvement of $206,127 when compared to
the first six months of 1995 and an improvement of $141,581 when compared to
the quarter ended June 30, 1995. These results also reflect a second straight
profitable quarter, a first in the Company's short history.
3. Liquidity and Capital Resources
Jotan, Inc. held its annual meeting of stockholders on May 14, 1996, at which
shareholders authorized the change in the Company's state of incorporation
through the merger of Jotan, Inc., an Idaho corporation ("Jotan-Idaho") into
Jotan, Inc., a Florida corporation and wholly owned subsidiary of Jotan-Idaho
("Reincorporation Merger"). The Reincorporation Merger was completed on
May 16, 1996.
This change in capital structure allowed the Company to arrange for the sale of
a preferred class of stock. On May 16, 1996, Jotan, Inc. (the "Company") signed
an agreement to sell up to $6,000,000 in Series A Preferred Stock to an
affiliate of Fairview Capital L.L.C., a Raleigh, N.C. based private investment
company. The initial funding closed May 16, 1996, and provided the Company
$2,000,000 through the sale of 1,265,823 shares of Series A Convertible
Preferred Stock to F-Jotan, L.L.C., the Fairview affialte. Under the terms of
the Series A COnvertible Preferred Stock Purchase Agreement, the Company may
sell an additional $4,000,000 of Series A Convertible Preferred Stock to the
investors subject to certain conditions set forth in the Series A Convertible
Preferred Stock Purchase Agreement. The Series A Convertible Preferred Stock
carries an 8% annual dividend, which is payable in additional shares of
preferred stock, representing approximately 28% of the Company's outstanding
shares on a fully diluted basis.
The completion of this transaction coupled with the agreement already in place
with CIT Financial provides the liquidity needed to fund the future short term
expansion plans of the Company. In addition, during the third quarter of 1996
the Company will complete the repayment of the subordinated debenture to Total
Supply Systems, Inc., which will have a significant favorable impact on the
Company's future cash flows.
Part II--Other Information
Item 6--Exhibits and Reports on Form 8-K
a) Exhibit 11 Statement Re: Computation of Per Share Earnings
Three months ended Six months ended
June 30 June 30
1996 1995 1996 1995
Average shares
outstanding 5,679,411 5,499,564 5,673,603 5,327,488
Net effect of
common stock
equivalant 639,867 -0- 319,933 -0-
Totals 6,319,278 5,499,564 5,993,537 5,327,488
Net Income $ 25,059 $ (116,522) $ 46,078 $ (160,049)
Per Share amount $ .00 $ (.02) $ .01 $ (.03)
b) Form 8-K and its attachments, were filed May 31, 1996,
File No. 0-24188.
JOTAN, INC.
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.
Jotan, Inc.
By: ____________________________
Shea Ralph, President
By: _____________________________
David Freedman, Vice President
and Chief Financial Officer
July 22, 1996