FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the period ended April 30, 1995 Commission file number 2-94692
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RADIX VENTURES, INC.
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(Exact name of registrant as specified in its charter)
New York 13-2673894
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation of organization)
230 Park Avenue, New York, New York 10169
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(Address of principal executive offices)
(212) 697-9141
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed from last
report)
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
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Indicate the number of shares outstanding of the issuer's classes of Common
Stock as of April 30, 1995.
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Class Number outstanding
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Common Stock, par value $.01 771,500
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FORM 10-Q
RADIX VENTURES, INC. AND SUBSIDIARIES
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INDEX
PAGE
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PART I. FINANCIAL INFORMATION
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Item I. Condensed Consolidated Financial Statements:
Condensed Consolidated Balance Sheets -
April 30, 1995, (unaudited) and July 31, 1994 3
Condensed Consolidated Statements of Income -
Three months and nine months ended April 30, 1995
and 1994 (unaudited) 4
Condensed Consolidated Statements of Cash Flows -
Nine months ended April 30, 1995 and 1994 (unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Item II. Management's Discussion and Analysis of Results of Operations
and Financial Condition 7
PART II. OTHER INFORMATION
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Item VI. Exhibits and Reports on Form 8-K 9
SIGNATURES 10
2
FORM 10-Q
PART I. FINANCIAL INFORMATION
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ITEM I. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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RADIX VENTURES, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED BALANCE SHEETS
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APRIL 30, JULY 31,
ASSETS 1995 1994
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(UNAUDITED)
CURRENT ASSETS:
Cash $ 1,685,704 $ 3,420,969
Accounts receivable, less allowance for
doubtful accounts of $349,524 and
$201,988 31,223,320 32,632,192
Other current assets 813,950 1,214,406
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Total Current Assets 33,722,974 37,267,567
Furniture, Equipment and Vehicles, less
allowance for depreciation of $4,389,634
and $3,928,868 2,357,797 2,227,208
OTHER ASSETS:
Intangibles 581,367 465,952
Other 1,347,258 948,493
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TOTAL ASSETS $38,009,396 $40,909,220
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LIABILITIES AND STOCKHOLDERS' EQUITY
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CURRENT LIABILITIES:
Short-term borrowings $ 1,343,293 $ -
Duty, freight and other accounts
payable 31,449,914 33,873,720
Accrued expenses and sundry
liabilities 994,130 1,206,557
Current maturities of long-term
debt - 1,974,900
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Total Current Liabilities 33,787,337 37,055,177
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Other 410,250 358,944
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410,250 358,944
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STOCKHOLDERS' EQUITY:
Common stock, authorized 1,000,000;
issued and outstanding 771,500 shares of
$.01 par value 7,715 7,715
Additional paid-in capital 941,622 941,622
Retained earnings 2,862,472 2,545,762
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3,811,809 3,495,099
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $38,009,396 $40,909,220
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See Notes to Condensed Consolidated Financial Statements.
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FORM 10-Q
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RADIX VENTURES, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
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(UNAUDITED)
Three months ended Nine months ended
April 30 April 30
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1995 1994 1995 1994
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Gross billings $111,823,522 $99,362,297 $378,491,517 $316,806,936
Less duty, freight and
other direct costs 103,548,383 92,156,918 353,604,426 295,025,705
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Net fees and commissions 8,275,139 7,205,379 24,887,091 21,781,231
Operating expenses 8,214,984 7,061,802 24,324,356 21,610,632
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Operating income 60,155 143,577 562,735 170,599
Interest expense, net (38,090) (96,032) (187,973) (270,270)
Equity in income
of unconsolidated
subsidiaries 10,156 16,238 89,155 620
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Income (loss) before
income taxes 32,221 63,783 463,917 (99,051)
Income tax charge (benefit) 8,667 18,675 147,207 (39,151)
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Net income (loss) $ 23,554 $ 45,108 $ 316,710 $ (59,900)
=========================== ============================
Net income (loss) per share
(based on 771,500 shares
outstanding) $0.03 $0.06 $0.41 $(0.08)
=========================== ============================
See Notes to Condensed Consolidated Financial Statements.
4
FORM 10-Q
RADIX VENTURES, INC. AND SUBSIDIARIES
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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(UNAUDITED)
Nine Months Ended April 30
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1995 1994
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OPERATING ACTIVITIES
Net income (loss) $ 316,710 $ (59,900)
Adjustments to reconcile net income to
cash used in operating activities:
Depreciation and amortization 505,062 446,572
Provision for losses in accounts
receivable 293,632 47,944
Loss (gain) on sale of furniture,
equipment and vehicles 20,430 (2,697)
Changes in operating assets and
liabilities:
Decrease in accounts receivable 1,115,240 422,247
Decrease in other current assets 400,456 306,141
Increase in other non-current assets (418,963) (16,580)
Decrease in duty, freight, and other
accounts payable, accrued expenses
and sundry liabilities (2,584,927) (4,175,075)
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NET CASH USED IN OPERATING ACTIVITIES (352,360) (3,031,348)
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INVESTING ACTIVITIES
Purchases of furniture, equipment and
vehicles (635,311) (864,703)
Proceeds from sales of furniture,
equipment and vehicles 10,102 7,825
Net purchases of marketable securities - (49,250)
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NET CASH USED IN INVESTING ACTIVITIES (625,209) (906,128)
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FINANCING ACTIVITIES
Net proceeds from revolving line of
credit 1,343,293 1,550,000
Revolving line of credit origination
expenses (126,089) -
Principal payments of debt (1,974,900) (259,100)
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (757,696) 1,290,900
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DECREASE IN CASH AND CASH EQUIVALENTS (1,735,265) (2,646,576)
Cash and cash equivalents at
beginning of year 3,420,969 4,222,105
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CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 1,685,704 $ 1,575,529
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See Notes to Condensed Consolidated Financial Statements.
5
FORM 10-Q
RADIX VENTURES, INC. AND SUBSIDIARIES
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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1. BASIS OF PRESENTATION
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The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. For further information, refer to the Company's
consolidated financial statements and footnotes thereto for the year ended July
31, 1994 included on Form 10-K filed with the Securities and Exchange Commission
on October 28, 1994.
The accompanying unaudited condensed consolidated financial statements include
all adjustments (consisting only of normal recurring accruals) which, in the
opinion of management, are necessary to present fairly the Company's financial
position at April 30, 1995, the results of operations for the three and nine
month periods ended April 30, 1995 and 1994 and statement of cash flows for the
nine months ended April 30, 1995 and 1994. The unaudited results of operations
for the nine months ended April 30, 1995 are not necessarily indicative of the
results that may be expected for the year ending July 31, 1995.
Effective November 1, 1993, the Company changed the estimated useful lives used
to compute depreciation for its computer equipment and automobiles from three
years to five years. This change conforms to the useful lives used for tax
purposes and better coincides with the estimated life expectancies of these
assets. The effect of this change favorably impacted depreciation expense by
$60,892 during the Company's nine months year-to-date of the current fiscal year
compared to the nine months year-to-date of the prior fiscal year.
2. FINANCING ARRANGEMENTS
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Effective February 1, 1995, the Company entered into a new, three year, $8
million short-term revolving line of credit agreement with its principal bank.
The new line of credit, which replaced a previous $4 million short-term
revolving line of credit, was used to redeem the outstanding balance of the
Company's subordinated debentures on February 1, 1995. Borrowings under this
new line of credit will bear interest at the annual rate of 1.25% over the
higher of the bank's prime rate or the Federal Funds Rate plus .5%, and are
secured by the assets of the Company.
3. SUBSEQUENT EVENT
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On May 3, 1995, the Company entered into an agreement with Air Express
International Corporation (AEI) whereby AEI would acquire 100% of the
outstanding stock of the Company in exchange for a maximum of one million shares
of AEI common stock. The closing of this transaction became effective June 8,
1995. Accordingly, this will be the final report which will be filed with the
Securities and Exchange Commission by the Company.
6
FORM 10-Q
ITEM II: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
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OPERATIONS AND FINANCIAL CONDITION
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RADIX VENTURES, INC. AND SUBSIDIARIES
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RESULTS OF OPERATIONS
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Net fees and commissions were $8,275,139 for the quarter and $24,887,091 for the
nine months year-to-date ended April 30, 1995, compared to $7,205,379 and
$21,781,231 for the same periods the prior fiscal year, representing increases
of 14.8% and 14.3%, respectively. Of this increase, 5.0% for both the quarter
and the nine months year-to-date resulted from two acquisitions made by the
Company in the last quarter of fiscal year 1994, with the balance of the
increase derived from additional business from new customer accounts and from an
increase in the volume of transactions processed for existing accounts.
Gross billings, which include net fees and commissions plus duty, freight and
other direct costs billed to customers and paid on their behalf, increased 12.5%
for the quarter and 19.5% for the nine months year-to-date. The increase in
gross billings resulted from the acquisitions and the increased volume of
transactions derived from new and existing customer accounts noted above and
from an increase in customs duty and freight costs billed to customers and paid
on their behalf, which does not necessarily result in a proportionate increase
in net fees and commissions.
Operating expenses were $8,214,984 for the quarter and $24,324,356 for the nine
months year-to-date, compared to $7,061,802 and $21,610,632 for the same periods
the prior fiscal year, representing increases of 16.3% and 12.6% respectively.
The increase in operating expenses is attributable primarily to incremental
operating expenses associated with the businesses acquired in fiscal year 1994
noted above, to increases in salary and salary related expenses of $316,444
for the quarter and $892,984 for the nine months year-to-date and to an increase
in the provision for doubtful accounts of $236,452 for the quarter and $245,688
for the nine months year-to-date.
Net interest expense decreased $57,942 for the quarter and $82,297 for the nine
months year-to-date, from the corresponding prior fiscal year periods. The
decrease in net interest expense resulted primarily from the replacement on
February 1, 1995, of the Company's 13% subordinated debentures by borrowings
under a short-term bank line of credit with a lower interest rate and from an
overall reduction in average borrowings.
Equity in income of unconsolidated subsidiaries of $10,156 for the quarter and
$89,155 for the nine months year-to-date, compared to $16,238 and $620 for the
prior fiscal year periods, represents the Company's share in the income or loss
of its 50% owned Australian subsidiaries, Radix Group International Pty., Ltd.
and United Star Line Pty., Ltd., and of its 25% equity interest in James
Bourlet, Inc.
The Company reported income before income taxes of $32,221 for the quarter and
$463,917 for the nine months year-to-date, compared to income before income
taxes of $63,783 and loss before income taxes of $99,051, respectively, for the
same periods the prior fiscal year.
Income tax charges of $8,667 for the quarter and $147,207 for the nine months
year-to-date represented an effective income tax rate of 39.3% on income before
equity in income of unconsolidated subsidiaries. The effective income tax rate
for the same prior fiscal year periods was also 39.3%.
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FORM 10-Q
RADIX VENTURES, INC. AND SUBSIDIARIES
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RESULTS OF OPERATIONS (cont.)
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As a result, the Company recorded net income of $23,554 or 3 cents per share for
the quarter and $316,710 or 41 cents per share for the nine months year-to-date
ended April 30, 1995, compared to net income of $45,108 or 6 cents per share and
net loss of $59,900 or 8 cents per share, respectively, for the same prior
fiscal year periods.
LIQUIDITY AND CAPITAL RESOURCES
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The Company had a negative working capital position of $64,363 at April 30, 1995
compared to working capital of $212,390 at July 31, 1994 with the majority of
current assets comprising cash and accounts receivable.
The Company supplements its working capital by short-term borrowing to finance
any excess of its accounts receivable over its accounts payable. These
borrowings are made under a line of credit from a bank and fluctuate on a daily
basis according to the Company's requirements. On February 1, 1995, the Company
redeemed its $1,974,900 remaining outstanding subordinated debentures and
replaced its previous $4 million revolving line of credit with a new three-year
$8 million revolving line of credit. $1,343,293 was outstanding under the line
of credit at April 30, 1995 and there were no outstanding borrowings at July 31,
1994.
While working capital remains fairly constant, accounts receivable and accounts
payable fluctuate significantly on a daily basis in line with the billing and
disbursement of customs duty and freight costs. This fluctuation in accounts
receivable and accounts payable tends to offset with any differences resulting
in an increase or decrease in the Company's cash balances and/or short-term
borrowing.
The Company's capital requirements as of April 30, 1995 consist of purchases of
computer equipment and software under a continuing program to expand and upgrade
its computer systems, normal replacement of furniture, vehicles and other
equipment and lease obligations for office space and telephone equipment. The
Company's capital expenditure requirements should be met adequately by cash-on-
hand and by leasing arrangements.
IMPACT OF INFLATION
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Inflation has tended to increase the Company's operating expenses, particularly
salary and salary related expenses. However, in recent years, the Company has
been unable, in some instances, to pass such cost increases on to its customers
by means of price increases due to competitive factors. Consequently,
management has sought to mitigate the effect of inflation on the Company's
business by increasing the efficiency of its operations.
Inasmuch as the Company is not required to purchase or maintain extensive fixed
assets other than its computer systems and is not primarily reliant on
substantial interest rate sensitive indebtedness, the Company's direct exposure
to increased costs resulting from increases in interest rates is not severe.
8
FORM 10-Q
PART II. OTHER INFORMATION
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RADIX VENTURES, INC. AND SUBSIDIARIES
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ITEM VI. EXHIBITS AND REPORTS ON FORM 8-K
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No reports on form 8-K were filed for the period being reported.
9
FORM 10-Q
RADIX VENTURES, INC. AND SUBSIDIARIES
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SIGNATURES
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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.
RADIX VENTURES, INC.
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Registrant
Dated: June 15, 1995
/s/ Pierre L. Schoenheimer
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Pierre L. Schoenheimer,
Chairman
/s/ Matthew P. Sheppard
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Matthew P. Sheppard,
Vice-President and
Treasurer
10