SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -------- EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 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
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(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
Route 12, Box 12876
Alabama Highway
Ringgold, GA
------------
(Address of principal executive offices)
30736
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(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 December 3, 1996
----------------------------- -------------------------------
Common Stock $.0004 Par Value 10,581,813
TAPISTRON INTERNATIONAL, INC.
TABLE OF CONTENTS
Page
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Accountant's Report 3
Consolidated Condensed Balance Sheets as of
July 31, 1996 and October 31, 1996 4
Consolidated Condensed Statements of Operations for the
Three Months Ended October 31, 1995 and 1996 6
Consolidated Condensed Statements of Cash Flows for the
Three Months Ended October 31, 1995 and 1996 7
Notes to Consolidated Condensed Financial Statements 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION
Exhibits and Reports 9
SIGNATURES 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 October 31, 1996, and the related consolidated
condensed statements of operations and cash flows for the respective three-month
periods ending October 31, 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, 1996 was audited by us and we
expressed an unqualified opinion on it in our report dated November 1, 1996, but
we have not performed any auditing procedures since that date.
DUDLEY, HOPTON-JONES, SIMS & FREEMAN PLLP
Birmingham, Alabama
December 3, 1996
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TAPISTRON INTERNATIONAL, INC.
(Debtor-in-Possession)
CONSOLIDATED CONDENSED BALANCE SHEETS
ASSETS
Condensed from
Audited Financial
Statements Unaudited
July 31,1996 October 31,1996
------------ ---------------
CURRENT ASSETS
Cash and cash equivalents $ 17,149 $ 537,589
Receivables, net of allowances of $39,905 as of July 31, 1996
and October 31, 1996 119,872 108,705
Notes receivable 600,000 1,320,000
Inventory 2,082,495 1,370,558
Prepayments 20,707 24,740
---------- ----------
Total current assets 2,840,223 3,361,592
PROPERTY AND EQUIPMENT, NET 877,269 672,521
OTHER ASSETS
Long-term receivables, net of allowance of $500,000 as of
July 31, 1996 and October 31, 1996 -- --
Patents and patent license 286,160 280,715
Other 12,886 12,138
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Total other assets 299,046 292,853
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TOTAL $4,016,538 $4,326,966
========== ==========
The accompanying notes are an integral
part of the financial statements.
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TAPISTRON INTERNATIONAL, INC.
(Debtor-in-Possession)
CONSOLIDATED CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
Condensed from
Audited Financial
Statements Unaudited
July 31,1996 October 31,1996
------------ ---------------
CURRENT LIABILITIES
Short-term debt $ 1,028,687 $ 1,128,657
Current portion of long-term debt 4,729 4,050
Accounts payable 33,970 44,994
Accrued expenses 408,350 335,319
Customer deposits 280,000 469,985
------------ ------------
Total current liabilities 1,755,736 1,983,005
LIABILITIES SUBJECT TO SETTLEMENT UNDER
REORGANIZATION PROCEEDINGS 1,599,668 1,605,083
LONG-TERM DEBT 5,060 4,752
COMMITMENTS AND CONTINGENCIES -- --
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; 10,581,813 outstanding as of July 31, 1996
and October 31, 1996 4,233 4,233
Additional paid-in capital 22,899,108 22,899,108
Accumulated deficit (22,234,475) (22,156,423)
Treasury stock - 55,518 shares outstanding, at cost (12,792) (12,792)
Total stockholders' equity 656,074 734,126
------------ ------------
TOTAL $ 4,016,538 $ 4,326,966
============ ============
The accompanying notes are an integral
part of the financial statements.
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TAPISTRON INTERNATIONAL, INC.
(Debtor-in-Possession)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended October 31,
1995 1996
------------ ------------
SALES $ 190,421 $ 1,561,874
COST OF SALES 176,004 1,107,393
------------ ------------
Gross profit 14,417 454,481
OPERATING EXPENSES
Administrative expenses 144,657 335,534
Research and development 13,169 5,379
------------ ------------
157,826 340,913
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OPERATING INCOME (LOSS) (143,409) 113,568
------------ ------------
OTHER INCOME (EXPENSE)
Interest expense (50,437) (35,518)
Interest income 0 2
------------ ------------
Other income (expense) (50,437) (35,516)
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NET INCOME (LOSS) ($ 193,846) $ 78,052
============ ============
EARNINGS PER SHARE
Net income (loss) ($ 0.03) $ 0.01
============ ============
Weighted average number of shares
outstanding 7,681,495 10,012,390
============ ============
The accompanying notes are an integral
part of the financial statements.
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TAPISTRON INTERNATIONAL, INC.
(Debtor-in-Possession)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended October 31,
------------------------------
1995 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) ($193,847) 78,052
Adjustments to reconcile net income (loss) to net cash provided by
Operating Activities:
Depreciation and amortization 108,791 50,070
Loss on disposal of property, plant and equipment (13,025) 0
Changes in operating assets and liabilities
Decrease (increase) in receivables 639,204 (708,833)
Decrease (increase) in prepayments (24,163) (4,401)
Decrease(increase) in inventory 642,078 875,207
Increase (decrease) in accounts payable and accrued expenses (288,574) 133,395
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Net cash provided by operating activities 870,464 423,490
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CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for other assets (3,200) --
Capital Expenditures (705,994) (2,033)
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Net cash used in investing activities (709,194) (2,033)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of debt 50,000 99,970
Principal payments of debt (216,829) (987)
--------- ---------
Net cash provided by (used in) financing activities (166,829) 98,983
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS: 7,866 520,440
Cash and cash equivalents - beginning of period 99,426 17,149
--------- ---------
Cash and cash equivalents - end of period $ 107,292 $ 537,589
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest $ 69,921 $ 137
========= =========
Transfers from Fixed Assets to Inventory $ -- $ 163,270
========= =========
The accompanying notes are an integral
part of the financial statements.
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TAPISTRON INTERNATIONAL, INC.
(Debtor-in-Possession)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
October 31, 1996
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
In the opinion of the Management of 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 only of 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 October 31, 1996 and
the results of its operations for the three months ended October 31, 1996 and
1995, and cash flows for the three months ended October 31, 1996 and 1995. These
statement 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, 1996. The results of operations
for the three months ended October 31, 1996 are not necessarily indicative of
the results to be expected for the full year.
NOTE 2 - NET INCOME (LOSS) PER SHARE
- ------------------------------------
Net income (loss) per common share is computed based on the weighted average
number of common shares outstanding.
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. Management intends to raise additional
capital through the placement of an equity offering.
NOTE 4 - PLAN OF REORGANIZATION
- -------------------------------
On November 20, 1996 the Company filed a plan of reorganization with the United
States Bankruptcy Court. As part of the plan of reorganization the Company has
entered into an investment banking agreement to raise a total of $2.5 million to
recapitalize the Company.
-8-
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Three Months Ended October 31, 1995 and 1996
- --------------------------------------------
Revenues for the three months ended October 31, 1996 ("1996 Three Months") were
$1,561,874 as compared to $190,421 for the three months ended October 31, 1995
("1995 Three Months"), an increase of 99.9%.
Cost of sales as a percentage of sales decreased from 92.4% for the 1995 Three
Months to 70.9% for the 1996 Three Months.
Operating expenses consist of administrative expenses and research and
development expenses. Administrative expenses increased to $335,534 in the 1996
Three Months from $144,657 in the 1995 Three Months, a 132% increase. This
increase is proportionately related to the increase in sales activity in the
1996 Three Months as compared to the 1995 Three Months.
Research and development expenses decreased to $5,379 in the 1996 Three Months
from $13,169 in the 1995 Three Months, a 59.2% decrease.
Interest expense decreased to $35,518 for the 1996 Three Months form $50,437 for
the 1995 Three Months.
LIQUIDITY AND CAPITAL RESOURCES
As of October 31, 1996, the Company had working capital of approximately
$1,378,587, a $294,100 increase from July 31, 1996. The Company anticipates that
additional financing will be necessary in order to meet projected working
capital requirements over the next 12 months.
The Company has entered into an investment banking agreement under which the
investment banker has agreed to raise a total of $2.5 million to recapitalize
the Company. The investment banker will also assist the Company in obtaining a
$500,000 credit facility to provide working capital pending confirmation of the
Company's plan of reorganization.
PART II. OTHER INFORMATION
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule (Electronic filing only).
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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 there unto duly authorized.
Tapistron International, Inc.
-----------------------------
(Registrant)
Date: December 11, 1996 /s/ J. Darwin Poe
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J. Darwin Poe
(Signing on behalf of the registrant
and as Chief Executive Officer)
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