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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED MAY 31, 2001
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934
COMMISSION FILE NUMBER 000-29883
IMPRESO, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2849585
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
652 SOUTHWESTERN BOULEVARD
COPPELL, TEXAS 75019
(Address of principal executive offices)
(972) 462-0100
(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 latest practicable date.
Class of Common Stock Shares outstanding at July 13, 2001
--------------------- -----------------------------------
$0.01 Par Value 5,278,780
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IMPRESO, INC. AND SUBSIDIARIES
FORM 10-Q
MAY 31, 2001
INDEX
PART I. FINANCIAL INFORMATION PAGE NUMBER
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Item 1. Consolidated Financial Statements:
Interim Consolidated Balance Sheets at May 31, 2001
(Unaudited) and August 31, 2000 1
Interim Consolidated Statements of Operations for the
Three and Nine Months Ended May 31, 2001 and 2000
(Unaudited) 3
Interim Consolidated Statements of Cash Flows for the
Nine Months Ended May 31, 2001 and 2000
(Unaudited) 4
Notes to Interim Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 12
PART II. OTHER INFORMATION 14
Item 6. Exhibits and Reports on Form 8-K and 8-K/A 14
SIGNATURES 15
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IMPRESO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
May 31, August 31,
2001 2000
------------- -------------
(Unaudited)
Current assets:
Cash and cash equivalents $ 187,233 $ 149,527
Trade accounts receivable, net of allowance for doubtful
accounts of $281,915 at May 31, 2001 and
$168,631 at August 31, 2000 10,799,533 8,914,102
Investments in marketable securities 11,088 11,088
Inventories 36,666,721 21,232,863
Prepaid expenses and other 374,537 223,113
Deferred income tax assets 98,135 57,335
------------- -------------
Total current assets 48,137,247 30,588,028
------------- -------------
Property, plant and equipment, at cost 21,047,864 18,648,715
Less-Accumulated depreciation (10,485,810) (9,880,019)
------------- -------------
Net property, plant and equipment 10,562,054 8,768,696
------------- -------------
Other assets 240,263 26,824
------------- -------------
Total assets $ 58,939,564 $ 39,383,548
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
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IMPRESO, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
May 31, August 31,
2001 2000
------------- -------------
(Unaudited)
Current liabilities:
Accounts payable $ 16,176,095 $ 6,623,776
Accrued liabilities 3,156,864 1,984,952
Current maturities of long-term debt 617,298 247,798
Line of credit 17,424,457 12,469,390
Current maturities of prepetition debt 7,267 7,194
------------- -------------
Total current liabilities 37,381,981 21,333,110
------------- -------------
Deferred income tax liability 858,372 763,769
Long-term debt, net of current maturities 6,239,794 3,529,352
Long-term portion of prepetition debt, net of current maturities 247,254 252,727
------------- -------------
Total liabilities 44,727,401 25,878,958
------------- -------------
Commitments and contingencies
Stockholders' equity:
Preferred Stock, $.01 par value; 5,000,000 shares authorized;
0 shares issued and outstanding -- --
Common Stock, $.01 par value; 15,000,000 shares authorized;
5,292,780 shares issued; 5,278,780 shares outstanding 52,928 52,928
Warrants -- 110
Treasury Stock (14,000 shares, at cost) (38,892) --
Additional paid-in capital 6,319,682 6,319,572
Retained earnings 7,878,445 7,131,980
------------- -------------
Total stockholders' equity 14,212,163 13,504,590
------------- -------------
Total liabilities and stockholders' equity $ 58,939,564 $ 39,383,548
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
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IMPRESO, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
May 31, May 31, May 31, May 31,
2001 2000 2001 2000
------------ ------------ ------------ ------------
Net Sales $ 23,120,706 $ 18,051,583 $ 65,660,360 $ 51,958,027
Cost of sales 20,068,465 15,178,120 57,863,470 45,006,800
------------ ------------ ------------ ------------
Gross profit 3,052,241 2,873,463 7,796,890 6,951,227
Other costs and expenses:
Selling, general and administrative 1,943,928 1,878,833 5,581,522 5,023,755
Interest expense 410,107 339,392 1,139,976 896,676
Other income, net (64,307) (27,481) (158,638) (82,221)
------------ ------------ ------------ ------------
Total other costs and expenses 2,289,728 2,190,744 6,562,860 5,838,210
Income before income tax expense 762,513 682,719 1,234,030 1,113,017
Income tax expense (benefit):
Current 271,364 219,806 433,762 403,708
Deferred 34,668 (16,041) 53,803 (33,719)
------------ ------------ ------------ ------------
Total income tax expense 306,032 203,765 487,565 369,989
Net income $ 456,481 $ 478,954 $ 746,465 $ 743,028
============ ============ ============ ============
Net income per common share
(basic and diluted) $ 0.09 $ 0.09 $ 0.14 $ 0.14
============ ============ ============ ============
Weighted average shares outstanding 5,278,780 5,292,780 5,282,527 5,292,780
The accompanying notes are an integral part of these
consolidated financial statements.
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IMPRESO, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
----------------------------
May 31, May 31,
2001 2000
------------ ------------
Cash Flows From Operating Activities
Net income $ 746,467 $ 743,028
Adjustments to reconcile net income to net cash
used in operating activities-
Depreciation and amortization 619,005 502,260
Increase (decrease) in deferred income taxes 53,803 (33,718)
Decrease in accounts receivable, net 2,188,485 476,342
Increase in inventories (6,935,992) (4,834,475)
Increase in prepaid expenses and other (151,424) (55,323)
(Increase) Decrease in other non current assets (213,439)
Increase (Decrease) in accounts payable 7,619,330 (798,400)
Increase (Decrease) in accrued liabilities 1,171,912 (156,310)
Decrease in income tax receivable -- 478,909
Decrease in other assets -- 1,199
------------ ------------
Net cash provided by (used in) operating activities 5,098,147 (3,676,488)
------------ ------------
Cash Flows From Investing Activities:
Additions to property, plant, and equipment (220,299) (1,035,143)
Sales of property, plant and equipment, net 9,373 28,488
Acquisition of Sky Assets (12,840,231) --
------------ ------------
Net cash used in investing activities (13,051,157) (1,006,655)
------------ ------------
Cash Flows From Financing Activities:
Net borrowings on line of credit 4,955,067 4,566,421
Payments on prepetition debt (5,400) (653,146)
Net borrowing on postpetition debt 3,079,942 927,840
Purchase of Treasury Stock (38,892) --
------------ ------------
Net cash provided by financing activities 7,990,717 4,841,115
------------ ------------
Net increase (decrease) in cash and cash equivalents 37,706 157,972
Cash and cash equivalents, beginning of period 149,527 22,629
------------ ------------
Cash and cash equivalents, end of period $ 187,233 $ 180,601
============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
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IMPRESO, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION AND NATURE OF BUSINESS:
Impreso, Inc., (formerly Impreso.com, Inc.) a Delaware corporation (referred to
collectively with its subsidiaries as the "Company"), is the parent holding
company of TST/Impreso, Inc. ("TST"), a manufacturer and distributor to dealers
and other resellers of paper and film products for commercial and home use in
domestic and international markets, and Hotsheet.com, Inc., the owner and
operator of the Hotsheet.com web portal. TST's product line consists of standard
continuous computer stock business forms; thermal facsimile paper; cut sheet
products such as copy paper, ink jet paper, digital photo paper and
transparencies; fine business stationary; point of sale and cash register
machine rolls; high speed laser roll paper; wide format engineering rolls; wide
format ink jet media; and processed laser cut sheets. TST has one wholly owned
subsidiary, TST/Impreso of California, Inc., which was formed to support the
activities of the paper converting segment of the Company's business.
2. ACQUISITION
April 26, 2001 the Company acquired substantially all of the assets of the Sky
Division of Durango-Georgia Converting, LLC for approximately $12.3 million.
This acquisition was recorded under the purchase method of accounting and,
therefore, the purchase price has been allocated to assets acquired and
liabilities assumed based on estimated fair values. The results of operations of
the acquired company were included in the consolidated results of the Company as
of the acquisition date. The estimated fair value of assets acquired and
liabilities assumed relating to the acquisition, which is subject to further
refinement, is summarized below.
The components of the purchase price and preliminary allocation are as follows:
Preliminary allocation of purchase price:
Current assets $12,571,728
Property, plant and equipment 2,201,437
Liabilities assumed and other (1,932,988)
------------
$12,840,231
As indicated earlier, some allocations are based on studies and valuations which
are currently being finalized. Management does not believe that the final
purchase price allocation will produce materially different results than those
reflected herein.
Unaudited pro forma operating results for the Company assuming the acquisition
of Sky occurred on September 1, 2000 are as follows:
May 31, 2001 May 31, 2000
------------ ------------
Sales $45,210,982 $35,920,417
Net Income 608,511 (316,748)
Earnings per share .12 (.06)
(Basic and diluted)
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3. INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the unaudited Interim Consolidated Financial
Statements of the Company include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the Company's
financial position as of May 31, 2001, and its results of operations for the
three and nine months ended May 31, 2001 and May 31, 2000. Results of the
Company's operations for the interim period ended May 31, 2001, may not be
indicative of results for the full fiscal year. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations promulgated by the Securities and Exchange
Commission (the "SEC").
The unaudited Interim Consolidated Financial Statements should be read in
conjunction with the audited Consolidated Financial Statements and accompanying
notes of the Company and its subsidiaries, included in the Company's Form 10-K
(the "Company's Form 10-K"), for the fiscal year ended August 31, 2000 ("Fiscal
2000"). Accounting policies used in the preparation of the unaudited Interim
Consolidated Financial Statements are consistent in all material respects with
the accounting policies described in the Notes to Consolidated Financial
Statements in the Company's Form 10-K.
4. INVENTORIES:
Inventories are stated at the lower of cost (principally on a first-in,
first-out basis) or market and include material, labor and factory overhead.
Inventories consisted of the following:
May 31, August 31,
2001 2000
------------- -------------
Finished goods $ 19,957,338 $ 7,875,235
Raw materials 15,815,749 12,624,295
Supplies 853,204 643,333
Work-in-process 40,430 90,000
------------- -------------
Total inventories $ 36,666,721 $ 21,232,863
============= =============
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5. LONG -TERM DEBT AND LINE OF CREDIT:
The following is a summary of long-term debt and line of credit: May 31, August 31,
2001 2000
------------ ------------
Line of Credit with a commercial financial corporation under revolving credit line
maturing May 2003, secured by inventories, trade accounts receivable, equipment,
goodwill associated with TST's trademark "IMPRESO" (no value on financial
statements), and a personal guarantee by the trustee of a trust which is the
largest stockholder of the Company, interest payable monthly at prime plus .25%
(7.75% at May 31, 2001) $ 17,424,457 $ 12,469,390
Note payable to a commercial financial corporation, secured by real property,
interest at 4.5% above the 11th District Cost of Funds rate (9.75% at May 31, 2001)
maturing August 2008 1,677,295 1,685,461
Note payable to a commercial financial corporation, secured by real property and
equipment, interest at 8.50%, maturing December 2009 318,373 614,097
Note payable to a commercial financial corporation, secured by real property and
equipment, interest at 8.50%, maturing August 2010. Revolving lender's blanket lien
subordinated to note's collateral 827,087 869,940
Note payable to a commercial financial corporation, secured by real property,
interest at 5.50%, maturing November 2010 249,374 --
Notes payable to various commercial financial corporations, secured by equipment,
interest rates ranging from 0.9% to 14.08%, maturing at various dates from June
2001 thru July 2005 642,906 607,652
Notes payable to a commercial financial corporation, secured by Real Property,
interest at 8%, maturing May 2011 2,233,527 --
Note payable, unsecured, interest at 8% maturing April 2006 300,000 --
Note payable, secured by equipment, no interest, maturing May 2003 608,530 --
Prepetition-
Notes payable to a commercial financial corporation, secured by real property and
equipment and a personal guarantee by the trustee of a trust which is the largest
stockholder of the Company, interest at 4%, maturing June 2023 254,521 259,921
------------ ------------
Total $ 24,536,070 $ 16,506,461
In April 2001, in conjunction with its purchase of substantially all of the
assets of the Sky Division of Durango-Georgia Converting, LLC, TST/Impreso, Inc.
amended and renewed its revolving line of credit to increase the facility from
$14.9 million to $22 million, and to extend the maturity date from May 2001
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to May 2003. The Company guaranteed the amended and renewed revolving line of
credit of TST/Impreso, Inc.
The amended revolving credit line is limited to the lesser of $22 million or a
percentage of eligible trade accounts receivable and inventories, as defined. On
May 31, 2001, the remaining availability under the amended revolving credit line
was $4.6 million. The amended revolving line of credit has restrictive covenants
requiring the maintenance of a minimum tangible net worth and working capital
requirements, as defined. As of May 31, 2001, TST/Impreso, Inc. was in
compliance with all covenants.
6. SUPPLEMENTAL CASH FLOW INFORMATION:
NINE MONTHS ENDED
May 31 May 31
2001 2000
----------- -----------
Cash paid during the period for:
Interest $ 1,139,976 $ 896,676
Income taxes $ 211,984 $ 342,590
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ENDED MAY 31, 2001 AND MAY 31,
2000.
Net Sales---Net sales increased from $18.1 million in the three months ended May
31, 2000, to $23.1 million in the three months ended May 31, 2001 ("Third
Quarter"), an increase of $5.0 million or 28.1%. Net sales increased from $52
million in the nine months ended May 31, 2000, to $65.7 million in the same
period in the year ending August 31, 2001 ("Fiscal 2001"), an increase of $13.7
million, or 26.4%. Net sales increased $3.3 million in the Third Quarter and the
nine months ended May 31, 2001, as a result of the acquisition of substantially
all of the assets of the Sky Division of Durango-Georgia Converting, LLC ("Sky")
on April 26, 2001, and a 35% increase in sales of IBM branded products.
Gross Profit--- Gross profit increased from $2.9 million in the three months
ended May 31, 2000, to $3.1 million in the three months ended May 31, 2001, an
increase of 6.2%. Gross profit increased from $7.0 million in the nine months
ended May 31, 2000, to $7.8 million in the same period in 2001, an increase of
$846,000 or 12.2%. Gross profit margin for the Third Quarter and for nine months
ended May 31, 2001 decreased to approximately 13.2% from 15.9% and 11.9% from
13.4%, respectively, from the corresponding periods of the prior year. The
Company's decreased gross profit margin for the three and nine month periods
ended May 31, 2001 was due to the increased freight charges due to our
consolidation of warehouses in the Third Quarter to eliminate duplication caused
by the acquisition of Sky and the addition of new participants to our vendor
commission and rebate programs.
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Selling, General, and Administrative Expenses---SG&A expenses for the Third
Quarter, as compared to the corresponding period of the prior year, remained
consistent at $1.9 million, but as a percentage of net sales decreased to 8.4%
of net sales in 2001, from 10.4% of net sales in 2000. SG&A expenses for the
nine months ended May 31, 2001, were $5.6 million or 8.5% of net sales, as
compared to $5.0 million, or 9.7% of net sales, for the corresponding period of
the prior year. The decreases in SG&A as a percentage of net sales for the three
and nine month periods ended May 31, 2001, are due to increased net sales
without a corresponding increase in the fixed costs of operations, and the
efficiencies achieved with the consolidation of the sales forces following the
acquisition of Sky.
Interest Expense----Interest expense increased from $339,000 in the three months
ended May 31, 2000, to $410,000 in the same period of Fiscal 2001, an increase
of 20.8%. Interest expense increased from $897,000 in the nine months ended May
31, 2000, to $1.1 million in the corresponding period of Fiscal 2001, an
increase of 27.1%. The increase in interest expense for the three and nine month
periods ended May 31, 2001, was primarily attributable to increased borrowings.
The increased borrowings reflected the Company's increased inventory levels and
the financed acquisition of Sky.
Income Taxes--- Income tax expense increased from $204,000 for the three months
ended May 31, 2000, to $306,000 in the third quarter of Fiscal 2001. Income tax
expense increased from $370,000 for the nine months ended May 31, 2000, to
$487,000 in the nine months ended May 31, 2001. The increase in income tax
expense for the periods presented is a result of an increase in taxable income
and an increase in the estimated tax rate for the fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
Working capital increased to $10.8 million at May 31, 2001 from $9.3 million at
August 31, 2000. This represented an increase of 16.2%.
TST's revolving line of credit facility is currently $22 million. The loan is
secured by, among other things, inventory, trade receivables, equipment, a
personal guarantee of Marshall Sorokwasz, our Chairman of the Board and
President, and Trustee of a trust which is a principal shareholder of our
Company, and the corporate guarantee of the Company. Available borrowings under
this line of credit, which accrues interest at the prime rate of interest plus
.25% (7.75% at May 31, 2001), are based upon specified percentages of eligible
accounts receivable and inventories. As of May 31, 2001, there was a $4.6
million borrowing capacity remaining under the $22 million revolving line of
credit. The revolving credit line will mature in May 2003.
On April 26, 2001, we completed the purchase of substantially all of the assets
of the Sky Division of Durango Georgia Converting, LLC. The funding of this
purchase was accomplished by renewing, extending, and increasing our revolving
line of credit from $14.9 million to $22 million, with the increased line
collateralized by the inventory, trade receivables, and equipment acquired in
this
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acquisition, and by obtaining a $2.23 million loan from another commercial
financial institution secured by our Coppell, Texas facility and the plant
acquired in connection with the acquisition.
We believe that the funds available under the loans for our West Virginia and
California facilities, the revolving credit facility and its extension in the
line and term to May 2003, the new loans secured by our Coppell, Texas facility
and the plant acquired in connection with the acquisition, cash and cash
equivalents, trade credit and internally generated funds will be sufficient to
satisfy our requirements for working capital and capital expenditures for at
least the next twelve months. Such belief is based on certain assumptions,
including the continuation of current operations and no extraordinary adverse
events, but there can be no assurance that such assumptions are correct. In
addition, expansion of our operations due to an increased demand for products
TST manufactures or significant growth of Hotsheet.com, Inc. may require us to
obtain additional capital to add new operations or manufacturing facilities. If
that should occur, the funds required for the new facilities would be expected
to be generated through securities offerings or additional debt. There can be no
assurance that any additional financing will be available if needed, or, if
available, will be on acceptable terms.
On September 1, 2000, we adopted Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivatives Instruments and Hedging Activities,"
as amended by SFAS No. 138, "Accounting for Derivative Instruments and Certain
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for hedging activities. SFAS No. 133, as amended, requires
the recognition of all derivative instruments as either assets or liabilities in
the statement of financial position measured at fair value. The adoption of SFAS
133 had no impact to our financial statements taken as a whole. As of May 31,
2001, we did not own derivative or other financial instruments for trading or
speculative purposes.
INVENTORY MANAGEMENT; RAW MATERIALS OF TST
We believe that it is necessary for TST to maintain a large inventory of
finished goods and raw materials to adequately service its customers. Because
TST has in the past and is currently expanding the manufacturing and
distribution of new brands and types of products, its raw material and finished
goods inventory requirements have increased over prior years. In addition,
increasing international sourcing of raw materials has impacted delivery cycles
resulting in TST's expanding inventory to accommodate less frequent, larger
shipments. TST bears the risk of increases in the prices charged by its
suppliers and decreases in the prices of raw materials held in its inventory. If
prices for products held in its finished goods inventory decline or if prices
for raw materials required by it increase, or if new technology is developed
that renders obsolete products held in inventory by TST, the Company's business
could be materially adversely affected.
During the first and second quarters of Fiscal 2001, the price of raw materials
remained relatively stable. In the Third Quarter, prices began to decrease.
Management believes that raw material paper
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costs will continue on the downward trend in the last quarter of Fiscal 2001.
Currently, raw material inventory costs still remain equal to average raw
material market costs. Management believes that despite its prior increase of
TST's inventory, it will remain competitive during this anticipated future
market trend.
TST purchases raw paper, coated thermal facsimile paper, coated technical paper,
carbon and carbonless paper, consisting of a wide variety of weights, widths,
colors, sizes and qualities, transparency film, packaging and other supplies in
the open market from a number of different companies around the world. We
believe that TST has adequate sources of raw material supplies to meet the
requirements of its business. We believe that TST has a good relationship with
all of its current suppliers.
MARKET CONDITIONS
The primary products produced by Sky are continuous feed business forms. Our
acquisition of Sky changes the percentage of business forms in our product mix
from approximately 50% to approximately 75%. Management believes that the market
for business forms, which is declining in 2001, will continue to decline in 2002
and 2003. In these market conditions, the material increase of business forms as
a percentage of products that we offer could have a material adverse effect on
the Company.
Due to decreasing costs of raw materials, TST has reduced some of the prices on
finished goods in the Third Quarter. The downward trend has continued in the
final quarter of Fiscal 2001 as prices for raw materials continue to decrease.
If prices for products manufactured by us continue to decline as a result of
market pressures, our results of operations could be materially adversely
affected.
SEASONALITY
TST may be subject to certain seasonal fluctuations in that orders for products
may decline over the summer months. However, we do not believe that such
fluctuations have a material adverse effect on our results of operations.
SKY ACQUISITION
On April 26, 2001, TST consummated its Asset Purchase Agreement with Durango
Georgia Converting, LLC, purchasing substantially all of the assets of the Sky
Division for approximately $12.3 million. Sky's manufacturing facility is
located in Green Castle, Pennsylvania and produces primarily continuous feed
business forms in addition to custom cut forms and other higher margin products.
The addition of this plant strengthens TST's East Coast production and delivery,
and increases the number of TST's manufacturing facilities to four. Recently,
Sky's annual sales have exceeded $40 million.
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NASDAQ LISTING
On May 23, 2001, we received notice from the Nasdaq Stock Market that pursuant
to the April 12, 2001 oral hearing before a Nasdaq Listing Qualifications Panel
(the "Panel") wherein the Company requested an extension of time in order to
regain compliance, or a waiver, from the market value of public float
requirement, the Panel had determined not to grant the Company the requested
extension or waiver. However, the Panel determined that we appeared to satisfy
all requirements for continued listing on the Nasdaq SmallCap Market.
Accordingly, the Panel determined to transfer the listing of our securities to
the Nasdaq SmallCap Market effective with the open of business on May 25, 2001.
There can be no assurance, however, that we can remain in compliance with the
listing requirements of the Nasdaq SmallCap Market.
On June 6, 2001, we appealed the Panel's decision to the Nasdaq Listing and
Hearing Review Council ("Listing Council"). Any reviews by the Listing Council
will not operate as a stay of the Panel decision. As of the date of this filing,
we have not received a response from the Listing Council. The decision of the
Listing Council may be appealed to the SEC and ultimately to the courts.
FORWARD-LOOKING STATEMENTS
Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Form 10-Q contain "forward-looking
statements" about our prospects for the future, including but not limited to our
ability to generate sufficient working capital, our ability to continue to
maintain sales to justify capital expenses, and our ability to generate
additional sales to meet business expansion. Such statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially from those projected, including availability of raw materials,
availability of thermal facsimile, computer, laser and color ink jet paper, to
the cyclical nature of the industry in which we operate, the potential of
technological changes which would adversely affect the need for our products,
price fluctuations which could adversely impact the large inventory we require,
loss of any significant customer, and termination of contracts essential to our
business. Parties are cautioned not to rely on any such forward-looking
statements or judgments in making investment decisions.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are not exposed to market risks such as foreign currency exchange rates, but
are exposed to risks such as variable interest rates. Market risk is the
potential loss arising from adverse changes in market prices and rates. Our
subsidiaries do not have supply contracts with any of their foreign vendors. All
foreign vendors are paid in United States dollars. In addition, TST's
international sales of finished goods is insignificant. Accordingly, there are
not sufficient factors to create a material foreign exchange rate risk;
therefore, we do not use exchange commitments to minimize the negative
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impact of foreign currency fluctuations.
We had both fixed-rate and variable-rate debt as of May 31, 2001. The fair
market value of long-term variable interest rate debt is subject to interest
rate risk. Generally the fair market value of variable interest rate debt will
decrease as interest rates fall and increase as interest rates rise. The
estimated fair value of our total long-term fixed rate and floating rate debt
approximates fair value. Based upon our market risk sensitive debt outstanding
at May 31, 2001, there was no material exposure to our financial position or
results of operations.
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PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K AND 8K/A
(a) Exhibits
None
(b) Reports on Form 8-K and 8-K/A
On May 11, 2001, we filed a Current Report on Form 8-K, dated April 26,
2001, to report the acquisition of substantially all of the assets of
the Sky Division of Durango-Georgia Converting, LLC. We paid
approximately $12.3 million in cash. On July 9, 2001, we filed an
amendment to the Current Report on Form 8-K/A, dated April 26, 2001, to
include the financial statements of the Sky Division of Durango-Georgia
Converting, LLC, and certain pro forma financial data. On July 10,
2001, we filed an Amendment No. 2 to the Current Report on Form 8-K/A,
dated April 26, 2001, to revise the balance sheet filed as Exhibit
99.3. The following exhibits were filed with the Form 8-K, as amended:
Exhibit No. Description of Exhibits
2.1 Asset Purchase Agreement by and between TST/Impreso, Inc.
and Durango Georgia Converting LLC dated as of April 5,
2001
99.1 Impreso, Inc. Press Release issued April 30, 2001
announcing the closing of the purchase
99.2 Audited financial statements of the Sky Division of
Durango-Georgia Converting, LLC listed in Item 7 (a) of
the Company's Form 8-K/A
99.3 Unaudited Pro Forma Financial Statements of Impreso, Inc.
and Subsidiaries listed on Item 7 (b) of the 8-K/A
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17
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.
Dated: July 16, 2001
Impreso, Inc.
(Registrant)
/s/ Marshall Sorokwasz
-----------------------------------
Marshall Sorokwasz
Chairman of the Board, Chief
Executive Officer, President,
and Director
/s/ Susan Atkins
-----------------------------------
Susan Atkins
Chief Financial Officer
and Vice President
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