SECURITIES AND EXCHANGE COMMISSION
Washington, D. C., 20549
Form 10Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- - --- ACT OF 1934
For the quarterly period ended April 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 0-20309
TAPISTRON INTERNATIONAL, INC.
-----------------------------
(Exact name of registrant as specified in its charter)
GEORGIA 58-1684918
------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
Route 12, Box 12876
Alabama Highway
Ringgold, Ga
------------
(Address of principal executive offices)
30736
-----
(Zip Code)
(706) 965-9300
--------------
(Registrant's telephone number, including area code)
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 (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 most recent practicable date.
CLASS OUTSTANDING AT JUNE 6, 1996
-------------------------------- ------------------------------
Common Stock $.0004 Par Value 10,126,295
TAPISTRON INTERNATIONAL, INC.
TABLE OF CONTENTS
PAGE
----
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Accountant's Report 3
Consolidated Condensed Balance Sheets as of July 31, 1995
and April 30, 1996 4
Consolidated Condensed Statements of Operations for the Three
Months Ended April 30, 1995 and 1996 and the Nine Months
Ended April 30, 1995 and 1996 5
Consolidated Condensed Statements of Cash Flows for the Nine
Months Ended April 30, 1995 and 1996 6
Notes to Consolidated Condensed Financial Statements 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on 8-K 9
SIGNATURE 10
ACCOUNTANT'S REPORT
The Board of Directors and Stockholders
Tapistron International, Inc.
Ringgold, Georgia
The accompanying consolidated condensed balance sheet of Tapistron
International, Inc. as of April 30, 1996, and the related consolidated condensed
statements of operations and cash flows for the respective three-month and
nine-month periods ending April 30, 1996 and 1995 were not audited by us and,
accordingly, we do not express an opinion on them.
The balance sheet for the year ended July 31, 1995 was audited by us and we
expressed an unqualified opinion on it in our report dated October 18, 1995, but
we have not performed any auditing procedures since that date.
/s/Dudley, Hopton-Jones, Sims & Freeman PLLP
--------------------------------------------
Dudley, Hopton-Jones, Sims & Freeman PLLP
Birmingham, Alabama
June 6, 1996
-3-
TAPISTRON INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
Condensed from
Audited Financial
Statements Unaudited
July 31, 1995 April 30, 1996
------------------ ------------------
CURRENT ASSETS
Cash and cash equivalents $ 99,426 $ 57,923
Receivables, net of allowances of $200,000 as of July 31, 1995 447,969 173,630
Note Receivable 450,000 --
Inventory 2,801,175 2,267,767
Prepayments 97,146 37,406
----------- -----------
Total current assets 3,895,716 2,536,726
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, NET 4,771,302 5,041,077
----------- -----------
OTHER ASSETS
Long-term receivables, net of allowances of $200,000 as of
April 30, 1996 500,000 300,000
Noncompete agreements 11,545 --
Patents and patent license 293,525 291,110
Other 183,819 181,572
----------- -----------
Total other assets 988,889 772,682
----------- -----------
TOTAL $ 9,655,907 $ 8,350,485
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term debt $ 832,273 $ 891,968
Current portion of long-term debt 1,812,051 1,795,572
Accounts payable and accrued expenses 1,873,412 1,692,083
Customer deposits 285,000 285,000
----------- -----------
Total current liabilities 4,802,736 4,664,623
----------- -----------
LONG-TERM DEBT 14,001 11,654
----------- -----------
COMMITMENTS -- --
STOCKHOLDERS' EQUITY
Preferred stock - $.001 par value - 2,000,000 shares
authorized; no shares issued and outstanding -- --
Common stock - $.0004 par value - 100,000,000 shares
authorized; 9,681,813 issued as of July 31, 1995
and 10,181,813 as of April 30, 1996. 3,873 4,073
Additional paid-in capital 22,604,468 22,759,267
Accumulated deficit (17,756,379) (19,076,340)
Treasury stock - 55,518 shares for July 31, 1995
and April 30, 1996, at cost ( 12,792) ( 12,792)
----------- -----------
Total stockholders' equity 4,839,170 3,674,208
----------- -----------
TOTAL $ 9,655,907 $ 8,350,485
=========== ===========
The accompanying notes are an integral part of the financial statements.
-4-
TAPISTRON INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED APRIL 30, NINE MONTHS ENDED APRIL 30,
------------------------- --------------------------
1995 1996 1995 1996
---- ---- ---- ----
SALES $ 67,201 $ 265,979 $ 1,839,694 $ 559,846
COST OF SALES 61,093 74,133 1,267,183 238,176
--------- --------- ---------- ---------
Gross profit 6,108 191,846 572,511 321,670
--------- --------- ---------- ---------
OPERATING EXPENSES
Administrative expenses 1,016,310 590,756 2,563,049 1,304,658
Research and development 489,726 34,574 2,391,648 54,951
--------- --------- ---------- ---------
1,506,036 625,330 4,954,697 1,359,609
--------- --------- ---------- ---------
OPERATING LOSS (1,499,928) ( 433,484) (4,382,186) (1,037,939)
--------- --------- ---------- ---------
OTHER INCOME (EXPENSE)
Interest expense ( 55,424) ( 115,790) ( 174,902) ( 253,626)
Interest income 1,522 6,757 16,870 19,930
Loss of disposal of asset ( 348,214) ( 56,589) ( 348,214) ( 48,326)
--------- --------- ---------- ---------
Total other income (expense) ( 402,116) ( 165,622) ( 506,246) ( 282,022)
--------- --------- ---------- ---------
NET LOSS $(1,902,044) $ (599,106) $(4,888,432) $(1,319,961)
========= ========= ========== =========
EARNINGS PER SHARE
Net loss per share $ (.21) $ (.06) $ (.57) $ (.13)
========= ========= ========== =========
Weighted average number of shares
outstanding 9,181,495 9,993,091 8,593,583 9,993,091
========= ========= ========== =========
The accompanying notes are an integral part of the financial statements.
-5-
TAPISTRON INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED APRIL 30,
---------------------------
1995 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $( 4,888,432) $(1,319,961)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization 401,509 337,805
Loss (gain) on disposal of property, plant and equipment 23,584 45,085
Loss on impairment of an asset 348,214 -
Changes in operating assets and liabilities:
(Increase) decrease in receivables 46,724 924,339
(Increase) decrease in prepayments ( 13,817) 59,740
(Increase) decrease in inventory ( 324,716) 533,408
Increase (decrease) in accounts payable and accrued expenses 1,188,931 ( 182,505)
----------- -----------
Net cash (used by) provided by operating activities ( 3,218,003) 397,911
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Payments for other assets ( 32,834) ( 8,655)
Proceeds from sale of equipment 1,250 295,925
Capital expenditures ( 584,377) ( 923,728)
----------- -----------
Net cash used by investing activities ( 615,961) ( 636,458)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt 910,000 933,371
Payment of Syndication Costs ( 17,500) -
Proceeds from issuance of common stock 3,128,675 155,000
Principal payments of debt ( 828,291) ( 891,327)
----------- -----------
Net cash provided by financing activities 3,192,884 197,044
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS ( 641,080) ( 41,503)
Cash and cash equivalents - beginning of period 712,713 99,426
----------- -----------
Cash and cash equivalents - end of period $ 71,633 $ 57,923
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 120,742 $ 227,778
=========== ===========
SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Inventory reclassified to equipment $ - $ 887,613
=========== ===========
The accompanying notes are an integral part of the financial statements.
-6-
TAPISTRON INTERNATIONAL, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 30, 1996
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
In the opinion of the Tapistron International, Inc. ("Tapistron") and
Fabrication Center, Inc. ("FCI"), a wholly-owned subsidiary of Tapistron, the
accompanying unaudited consolidated condensed financial statements contain all
adjustments (consisting of only normal recurring adjustments, except as noted
elsewhere in the notes to the consolidated condensed financial statements)
necessary to present fairly its financial position as of April 30, 1996 and the
results of its operations for the three and nine months ended April 30, 1996 and
1995, and cash flows for the nine months ended April 30, 1996 and 1995. These
statements are condensed and therefore do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The statements should be read in conjunction with the
consolidated financial statements and footnotes included in the Company's Annual
Report on Form 10-K for the year ended July 31, 1995. The results of operations
for the three and nine months ended April 30, 1996 are not necessarily
indicative of the results to be expected for the full year.
NOTE 2 - EARNINGS PER SHARE
Earnings per common share is computed based on the weighted average number of
common shares and, when dilutive, common equivalent shares (stock options and
warrants) outstanding during each of the periods.
NOTE 3 - GOING CONCERN
As shown in the accompanying financial statements, the Company has incurred
recurring losses from operations and, as a result, has experienced cash flow
problems. These factors raise substantial doubt about the Company's ability to
continue as a going concern. The Company's ability to continue as a going
concern is dependent first on its ability to raise additional capital to meet
its immediate working capital requirements and ultimately on its ability to
obtain profitable operating results.
-7-
Item 2. MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Three Months Ended April 30, 1995 And 1996
- - ------------------------------------------
Revenues for the three months ended April 30, 1996 ("1996 Three Months") were
$265,979 as compared to $67,201 for the three months ended April 30, 1995 ("1995
Three Months"), an increase of 95.8%.
Cost of sales as a percentage of sales decreased from 90.9% for the 1995 Three
Months to 27.9% for the 1996 Three Months.
Operating expenses consist of administrative expenses and research and
development expenses. Administrative expenses decreased to $590,756 in the 1996
Three Months from $1,016,310 in the 1995 Three Months, a 41.9% decrease. Over
the past nine months, the Company has evaluated and made reductions in all areas
of administrative expenses.
Research and development expenses decreased to $34,574 in the 1996 Three Months
from $489,726 in the 1995 Three Months, a 92.9% decrease. This decrease reflects
the Company's halting of the research and development on the new generation CYP
machine. The Company plans to market the existing CYP machine vigorously.
Interest expense increased to $115,790 for the 1996 Three Months from $55,424
for the 1995 Three Months. Interest income increased to $6,757 during the 1996
Three Months from $1,522 during the 1995 Three Months.
Nine Months Ended April 30, 1995 And 1996
- - -----------------------------------------
Revenues for the nine months ended April 30, 1996 ("1996 Nine Months") were
$559,846 as compared to $1,839,694 for the nine months ended April 30, 1995
("1995 Nine Months"), a decrease of 69.6%.
Cost of sales as a percentage of sales decreased from 68.9% for the 1995 Nine
Months to 42.5% for the 1996 Nine Months.
Operating expenses consist of administrative expenses and research and
development expenses. Administrative expenses decreased to $1,304,658 in the
1996 Nine Months from $2,563,049 in the 1995 Nine Months, a 49.1% decrease. Over
the past nine months, the Company has evaluated and made reductions in all areas
of administrative expenses. Research and development expenses decreased to
$54,951 in the 1996 Nine Months from $2,391,648 in the 1995 Nine Months, a 97.7%
decrease. These expenses decreased with the completion of the development effort
of the enhanced model of the CYP machine.
Interest expense increased to $253,626 for the 1996 Nine Months from $174,902
for the 1995 Nine Months. Interest income increased to $19,930 during the 1996
Nine Months from $16,870 during the 1995 Nine Months.
Liquidity and Capital Resources
As of April 30, 1996, the Company had a working capital deficit of approximately
$(2,128,000), a $1,220,980 decrease in working capital from July 31, 1995. The
Company anticipates that additional financing will be necessary in order to meet
projected working capital requirements over the next 12 months.
-8-
PART II. OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27- Financial Data Schedule (Electronic filing only).
(b) The Company filed a Form 8-K on February 13, 1996 related to the
restructure of the Company's debt and to provide new capital.
-9-
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.
Tapistron International, Inc.
-----------------------------
(Registrant)
Date: 6/12/96 /s/ J. Darwin Poe
-------------------------- -----------------------------------
J. Darwin Poe
(Signing on behalf of the registrant
as President and Chief Financial Officer)
-10-