UNITED STATES
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 October 31, 2000
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 incorporation (IRS Employer
or organization) Identification No.)
6203 Alabama Highway
P. O. Box 1067
Ringgold, Georgia
30736-1067
(Address of principal executive offices)
(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 1, 2000
- ------------------------------ --------------------------------
Common Stock $.0004 Par Value 37,551,494
1
TAPISTRON INTERNATIONAL, INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets at
July 31, 2000 and October 31, 2000 3
Condensed Consolidated Statements of Operations
for the Three Months Ended October 31, 1999 and 2000 5
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended October 31, 1999 and 2000 6
Notes to Condensed Consolidated Financial Statements 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II - OTHER INFORMATION
ITEM 5 - OTHER INFORMATION 11
SIGNATURE 12
2
TAPISTRON INTERNATIONAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
Condensed from
Audited Financial
Statements Unaudited
July 31, 2000 October 31, 2000
----------------- -----------------
CURRENT ASSETS
Cash and cash equivalents $ 65,812 $ 59,323
Receivables, net of allowance of $25,000 84,945 47,823
Receivables from employees/others 76,070 88,262
Sales contract receivables 520,000 1,214,600
Inventory, net of allowance of $30,000 3,339,603 2,739,759
Prepayments 81,107 83,543
Deferred income taxes 100,000 100,000
---------- ----------
Total current assets 4,267,537 4,333,310
---------- ----------
PROPERTY AND EQUIPMENT, NET 619,641 578,036
---------- ----------
OTHER ASSETS
Long-term receivables, net of allowance of $500,000 -- --
Patents and patent license 202,085 201,764
Deferred income taxes 1,800,000 1,800,000
Other assets 2,500 2,333
---------- ----------
Total other assets 2,004,585 2,004,097
---------- ----------
TOTAL $6,891,763 $6,915,443
========== ==========
The accompanying notes are an integral part of these financial statements.
3
TAPISTRON INTERNATIONAL, INC
CONDENSED CONSOLIDATED BALANCE SHEETS - CONTINUED
LIABILITIES AND STOCKHOLDERS' EQUITY
Condensed from
Audited Financial
Statements Unaudited
July 31, 2000 October 31, 2000
----------------- ----------------
CURRENT LIABILITIES
Short-term debt $ 1,750,125 $ 2,099,020
Short-term debt - related party 250,000 225,000
Current portion of long-term debt 200,972 119,064
Accounts payable 224,998 144,371
Accrued expenses 269,774 246,265
Customer deposits 24,095 5,775
------------ ------------
Total current liabilities 2,719,964 2,839,495
------------ ------------
CONTINGENT REORGANIZATION LIABILITY 632,145 --
------------ ------------
LONG-TERM DEBT 478 --
------------ ------------
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: 34,841,129 shares issued
at July 31, 2000 and 38,121,512 as of October 31, 2000 13,936 15,249
Additional paid in capital 26,357,489 26,988,322
Accumulated deficit (22,709,223) (22,804,597)
Treasury stock - 570,018 shares outstanding at cost (123,026) (123,026)
------------ ------------
Total stockholders' equity 3,539,176 4,075,948
------------ ------------
TOTAL $ 6,891,763 $ 6,915,443
============ ============
The accompanying notes are an integral part of these financial statements.
4
TAPISTRON INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Three Months
Ended Ended
October 31, 1999 October 31, 2000
---------------- ----------------
SALES $ 2,815,805 $ 1,719,929
COST OF SALES 1,425,420 1,090,497
------------ ------------
Gross profit 1,390,385 629,432
OPERATING EXPENSES 649,831 632,741
------------ ------------
OPERATING INCOME (LOSS) 740,554 (3,309)
------------ ------------
OTHER INCOME (EXPENSE)
Interest expense (40,966) (58,144)
Interest income 9 10
Loss on disposal of asset -- --
R&D Experimental & Modifications -- (28,870)
Gain (Loss) on foreign currency exchange rates (80,936) (5,061)
------------ ------------
Other income (expense) (121,893) (92,065)
------------ ------------
Income (Loss) before reorganization items 618,661 (95,374)
REORGANIZATION ITEMS -- --
------------ ------------
NET INCOME (LOSS) $ 618,661 $ (95,374)
============ ============
EARNINGS PER SHARE
Net income (loss) 0.020 (0.003)
Weighted average number of shares
outstanding 34,785,611 35,364,572
The accompanying notes are an integral part of the financial statements.
5
TAPISTRON INTERNATIONAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITIED)
Three Months Three Months
Ended Ended
October 31, 1999 October 31, 2000
---------------- ----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 618,661 $ (95,374)
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization 49,959 47,094
Loss on disposal of asset -- --
Loss on foreign currency exchange rates 80,936 5,061
Changes in operating assets and liabilities:
(Increase) decrease in receivables (1,895,263) (669,670)
(Increase) decrease in prepayments (69,287) (2,436)
(Increase) decrease in inventory 362,577 599,844
Increase (decrease) in accounts payable
and accrued expenses 122,284 (104,136)
Increase (decrease) in customer deposits 7,343 (18,320)
Increase (decrease) in liabilities subject to
settlement under plan of reorganization -- --
----------- -----------
(722,790) (237,937)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -- --
----------- -----------
Net cash used in investing activities -- --
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt 800,125 1,051,620
Principal repayment of debt (706,112) (807,194)
----------- -----------
Net cash provided by (used in) financing activities 94,013 244,426
NET (DECREASE) IN CASH: (628,777) (6,489)
Cash and cash equivalents - beginning of period 685,328 65,812
----------- -----------
$ 56,551 $ 59,323
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH
CASH FLOW INFORMATION:
Cash paid for interest $ 23,154 $ 58,144
SUPPLEMENTAL DISCLOSURE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Issuance of common stock to cover contingent
reorganization liability $ -- $ 632,145
The accompanying notes are an integral part of the financial statements.
6
TAPISTRON INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
In the opinion of management of Tapistron International, Inc. ("Tapistron") and
Fabrication Center, Inc. ("FCI"), a wholly-owned subsidiary of Tapistron, the
accompanying unaudited condensed consolidated financial statements contain all
adjustments (consisting of only normal recurring adjustments, except as noted
elsewhere in the notes to the condensed consolidated financial statements)
necessary to present fairly its financial position as of October 31, 2000 and
the results of its operations for the three months ended October 31, 1999 and
2000 and cash flows for the three months ended October 31, 1999 and 2000. 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, 2000. The results of operations
for the three months ended October 31, 2000 are not necessarily indicative of
the results to be expected for the full year.
NOTE 2 - EARNINGS (NET LOSS) PER SHARE
- --------------------------------------
Earnings (net loss) per share are computed using the weighted average number of
shares of common stock outstanding.
NOTE 3 - INVENTORY
- ------------------
Inventory at October 31, 2000 consists of the following:
Raw Material $ 773,025
Work in Process 1,136,769
Finished Goods 859,965
-----------
$ 2,769,759
Allowance for obsolete inventory (30,000)
-----------
Total $ 2,739,759
===========
7
TAPISTRON INTERNATIONAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - CONTINGENT REORGANIZATION LIABILITY
- --------------------------------------------
Under the Amended Plan, the Class 7 unsecured creditors received their pro rata
share of the first $500,000 cash payment and their pro rata share of a second
$500,000 cash payment, payable at $50,000 per new machine sale. With regard to
the balance of their claim, each unsecured creditor could elect either (1) 15%
of the balance of its claim or (2) the creditors pro rata share of 1,000,021
shares of common stock issued by the Company. If between August 29, 1997 and
September 30, 2000, the average of the closing prices of the Company's common
stock for any five (5) consecutive trading day period multiplied by 1,000,021
exceeds the balance of unsecured claims multiplied by factor for time value or
if any unsecured creditor shall sell, pledge, or trade the stock, directly or
indirectly, issued to it, then such creditors shall no longer be entitled to any
further distribution.
July 31, 2000 closing market price $ 0.1562
Shares issued to Class 7 (no fractional shares were issued) 1,000,021
----------
Total market value of Class 7 stock $ 156,203
----------
Balance of Class 7 unsecured claims $ 611,336
Time value factor @8.75% 1.28955083
----------
Total liability of Class 7 claims $ 788,348
----------
Total contingent liability for stock to cover Class 7 debt $ 632,145
==========
During this quarter, the Company issued common stock to cover the contingent
reorganization liability. The additional shares needed at the determined price
of $0.185 were 3,280,383 shares.
8
TAPISTRON INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of the Company's
condensed consolidated results of operations and financial condition. The
discussion should be read in conjunction with the condensed consolidated
financial statements and notes thereto.
Results of Operations
Sales
- -----
Revenues for the three months ended October 31, 2000 were $1,719,930 compared
with $2,815,805 for the three months ended October 31, 1999. The decrease in
revenues was due to a decrease in units sold.
Cost of Sales
- -------------
Cost of sales for the three months ended October 31, 2000 were $1,090,497 or 63%
of sales, compared with $1,425,420 or 51% of sales, for the three months ended
October 31, 1999. Units produced for this time period has decreased, which
directly increases total cost of sales. Excess utilization of labor for this
quarter has been used to make the machine operate in a more efficient and
flexible manner. The increased R&D expense will translate into more sales and
less cost per unit.
Operating Expenses
- ------------------
Operating expenses were $632,741 for the three months ended October 31, 2000
compared with $649,831 for the three months ended October 31, 1999. The decrease
in operating expenses was due to substantially less legal expenses during the
three months ended October 31, 2000.
Interest Expense
- ----------------
Interest expense was $58,144 for the three months ended October 31, 2000
compared with $40,966 for the three months ended October 31, 1999. Since
inventory did not turn as fast as the comparable quarter, the short term average
debt was higher for the three months ended October 31, 2000.
Income Tax Expense
- ------------------
The income tax provision is $0 due to utilization of the net operating loss
carry-forward to reduce current taxable income.
9
TAPISTRON INTERNATIONAL, INC.,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
- --------------------------------------------------------------------------------
Liquidity and Capital Resources
- -------------------------------
The Company's highly liquid assets (cash and cash equivalents) at October 31,
2000 aggregated $59,322, a decrease from the $65,812 balance at July 31, 2000.
Its working capital position at, October 31, 2000 of $1,494,293, decreased from
the comparable amount of $1,547,573 at July 31, 2000. The decrease in working
capital was mainly a result of increased debt due to the decrease in revenues
for the three months ended October 31, 2000.
Net cash used in operations for the three months ended October 31, 2000 were
$237,937 compared to cash used in operations of $722,790 for the three months
ended October 31, 1999. Net cash used in investing activities totaled $0 for the
three months ended October 31, 2000 compared to $0 used in investing activities
during the three months ended October 31, 1999. Net cash provided by financing
activities was $244,426 during the three months ended October 31, 2000 compared
to cash provided by financing activities of $94,013 during the three months
ended October 31, 1999.
The Company believes its current cash needs will be adequately provided from
anticipated cash generated from operations, short-term borrowings and its lines
of credit. As of October 31, 2000, the Company had available $200,980 on its
lines of credit. Long-term cash requirements, other than normal operating
expenses, depend on the Company's profitability, its ability to manage working
capital requirements, and its rate of growth.
Market Risk
- -----------
A review of the Company's financial instruments and risk exposures at October
31, 2000, revealed that the Company had exposure to foreign currency exchange
rate risks. At October 31, 2000, the Company had an outstanding debt denominated
in the Japanese Yen, which matures in February of 2001. As exchange rates vary,
the Company's financial position, results of operations or cash flows may vary
from expectations and overall expected earnings may be adversely impacted. The
effect of foreign exchange rate fluctuations on the Company during the three
months ending October 31, 2000 was an expense of $5,061.
10
TAPISTRON INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
- --------------------------------------------------------------------------------
Forward-looking Statements for Purposes of "Safe Harbor" Under the Private
Securities Reform Act of 1995
- ---------------------------------------------------------------------------
The Company has made, and may continue to make, various forward-looking
statements with respect to its financial position, projected costs, projected
savings and plans and objectives of Management.
Such forward-looking statements are identified by the use of forward-looking
words or phrases such as "anticipates," "intends," "expects," "plans,"
"believes," "estimates," or words or phrases of similar import. These
forward-looking statements are subject to numerous assumptions, risks, and
uncertainties, and the statements looking forward beyond October 31, 2000, are
subject to greater uncertainty because of the increased likelihood of changes in
underlying factors and assumptions. Actual results could differ materially from
those anticipated by the forward-looking statements.
The applicable risks and uncertainties include general economic and industry
conditions that affect all international businesses, as well as, matters that
are specific to the Company and the market it serves. Actual sales in Fiscal
2001 may be materially less than the sales projected in the forward-looking
statements if the Company's customers cancel or delay current orders or if the
Company reduces the rate at which it is building or expects to build CYP
machines for such customers. Such cancellations, delays or reductions may occur
if there is a substantial change in the general economy or if a customer were to
experience major financial difficulties. Margins may differ from those projected
in the forward-looking statements if management does not achieve success in
improving margins or other events occur that differ from the estimates used in
preparing the Company's financial statements.
In addition, all subsequent written and oral forward-looking statements
attributable to the Company or person acting on behalf of the Company are
expressly qualified in their entirety by reference to such factors.
The Company's forward-looking statements represent its judgement only on the
dates such statements are made. By making any forward-looking statements, the
Company assumes no duty to update them to reflect new, changed, or unanticipated
events or circumstances.
EXHIBITS AND REPORTS ON FORM 8-K
(a) There are no Exhibits filed with this report.
(b) No reports on Form 8-K were filed during the quarterly period ended
October 31, 2000.
11
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: December 13, 2000 /s/Rodney C. Hardeman, Jr.
--------------------- --------------------------
Rodney C. Hardeman, Jr.
(Signing on behalf of the registrant
as President and Chief
Executive Officer)
12