FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report under Section 13 or 15(d)
Of the Securities Exchange Act of 1934
For Quarter Ended: June 30, 2001
Commission File Number: 0-15754
CREATIVE TECHNOLOGIES CORP.
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(Exact name of registrant as specified in its charter)
NEW YORK 11-2721083
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(State or other jurisdiction of (IRS Employer Identification Number)
Incorporation of organization)
170 53rd Street, Brooklyn, New York 11232
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(Address of principal executive offices) (Zip Code)
(718) 492-8400
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed since 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
Common Stock, Par Value $.09 16,698,831
- ---------------------------- ------------------------------
(Title of each class) (Outstanding at June 30, 2001)
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Condensed Consolidated Financial Statements
Balance Sheet as at June 30, 2001 and December 31, 2000 3
Statement of Operations
For the Three and Six Months ended
June 30, 2001 and June 30, 2000 4
Statement of Cash Flows
For the Six Months ended
June 30, 2001 and June 30, 2000 5
Notes to Condensed Consolidated Financial Statements 6 - 12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13 - 15
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 16
Signatures 17
2
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
June 30, December 31,
2001 2000
---- ----
Assets Unaudited Audited
Current assets:
Cash $ 100,000 $ 24,000
Accounts receivable-net 2,926,000 2,828,000
Inventories 1,831,000 1,736,000
Prepaid expenses and other current assets 378,000 219,000
------------ ------------
Total current assets 5,235,000 4,807,000
Fixed assets - less accumulated depreciation of $69,000 and $53,000 respectively 74,000 78,000
Other assets 763,000 778,000
------------ ------------
Total Assets $ 6,072,000 $ 5,663,000
============ ============
Liabilities and Stockholders' Deficiency
Current liabilities:
Loans payable - financial institution $ 2,990,000 $ 2,844,000
Notes payable-others 1,082,000 1,082,000
Notes payable - related parties 2,246,000 2,328,000
Accounts payable and accrued expenses 4,427,000 3,881,000
Due to related party 64,000 64,000
------------ ------------
Total current liabilities 10,809,000 10,199,000
Notes payable related parties 816,000 851,000
Subordinated note payable - affiliate 400,000 400,000
------------ ------------
Total liabilities 12,025,000 11,450,000
------------ ------------
Redeemable Preferred Stock - $.01 par value; authorized 5,000,000 shares; 4,000
shares of nonconvertible stock designated as 1997-A preferred stock - $1,000
stated value; issued and outstanding 3,500 shares (redemption and
liquidation value $3,500,000) 427,000 400,000
------------ ------------
Stockholders' Deficiency
Preferred stock - $.01 par value; authorized 5,000,000 shares:
10,000 shares of convertible stock designated as 1996 preferred stock - $1,000
stated value; issued and outstanding 550 shares (liquidation value $550,000) 550,000 550,000
10,000 shares of convertible stock designated as 1996-A preferred stock - $1,000
stated value; issued and outstanding 340 shares (liquidation value $340,000) 340,000 340,000
1,000 shares of convertible stock designated as 2000 preferred stock - $1,000
stated value; issued and outstanding 200 shares (liquidation value $200,000) 200,000 200,000
Common Stock - $.09 par value; authorized 45,000,000 shares, issued and
outstanding 16,699,000 shares 1,503,000 1,503,000
Additional paid-in capital 7,692,000 7,929,000
Accumulated deficit (16,665,000) (16,709,000)
------------ ------------
Stockholders' deficiency (6,380,000) (6,187,000)
------------ ------------
Total Liabilities and Stockholders' Deficiency $ 6,072,000 $ 5,663,000
============ ============
See notes to condensed consolidated financial statements
3
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2000 2001 2000 2001
---- ---- ---- ----
Net Sales $ 3,857,000 $ 4,289,000 $ 7,423,000 $ 8,228,000
Cost of sales 2,449,000 2,799,000 4,667,000 5,289,000
----------- ----------- ----------- -----------
Gross profit 1,408,000 1,490,000 2,756,000 2,939,000
----------- ----------- ----------- -----------
Operating expenses:
Selling, general and administrative expenses 787,000 981,000 1,632,000 1,930,000
Warehousing expense 213,000 258,000 433,000 501,000
Interest expense and financing costs 264,000 233,000 494,000 464,000
----------- ----------- ----------- -----------
1,264,000 1,472,000 2,559,000 2,895,000
----------- ----------- ----------- -----------
Net income 144,000 18,000 197,000 44,000
Less undeclared dividends on
preferred stock - (152,000) (137,000) (302,000)
----------- ----------- ----------- -----------
Net income (loss) applicable to common shares $ 144,000 $ (134,000) $ 60,000 $ (258,000)
=========== =========== =========== ===========
Net income (loss) per common share -
basic $.02 $.(01) $.01 $(.02)
==== ===== ==== =====
diluted $.01 $(.01) $.00 $(.02)
==== ===== ==== =====
Weighted average number of shares -
basic 7,581,000 16,699,000 5,854,000 16,699,000
=========== =========== =========== ===========
diluted 23,095,000 16,699,000 26,588,000 16,699,000
=========== =========== =========== ===========
See notes to condensed consolidated financial statements.
4
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
2000 2001
---- ----
Cash flows from operating activities:
Net income $ 197,000 $ 44,000
Adjustments to reconcile net income
to net cash provided by (used in) operating activities:
Depreciation and amortization 15,000 16,000
Amortization of goodwill 18,000 17,000
Decrease in allowance for doubtful accounts (114,000) (100,000)
Changes in operating assets and liabilities:
Decrease in accounts receivable 623,000 2,000
Decrease (Increase) in inventories 223,000 (95,000)
Increase in prepaid expenses and other current assets (80,000) (159,000)
Increase in other assets - (2,000)
(Decrease) increase in accounts payable and accrued expenses (1,067,000) 336,000
----------- ---------
Net cash provided by (used in) operating activities (185,000) 59,000
----------- ---------
Cash flows from investing activities:
Acquisition of fixed assets (6,000) (16,000)
Proceeds from sale of fixed assets - 4,000
----------- ---------
Net cash used in investing activities (6,000) (12,000)
----------- ---------
Cash flows from financing activities:
Net proceeds of loans payable - financial institution 183,000 146,000
Proceeds from notes payable - other 1,082,000 -
Repayment of notes payable - related parties (1,141,000) (117,000)
Proceeds from related parties 20,000 -
Repayment to related parties (15,000) -
----------- ---------
Net cash provided by financing activities 129,000 29,000
----------- ---------
Net (decrease) increase in cash (62,000) 76,000
Cash at beginning of period 63,000 24,000
----------- ---------
Cash at end of period $ 1,000 $ 100,000
=========== =========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 368,000 $ 349,000
=========== =========
Income Taxes $ 8,000 $ 12,000
=========== =========
Supplemental schedule of non-cash financing activities:
Issuance of 12,571,000 shares of common stock for 50 shares of 1996 preferred
stock and 830 shares of 1996-A preferred stock:
common stock 1,132,000
additional paid in capital (252,000) $ 880,000 $ -
--------- =========== =========
See notes to condensed consolidated financial statements.
5
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note - A Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and the rules and regulations of the Securities and
Exchange Commission. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three-month and six-month periods ended June 30, 2001 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2001. For further information, refer to the financial statements and footnotes
thereto included in the Company's annual report on Form 10-KSB for the year
ended December 31, 2000.
Creative Technologies Corp. ("CTC") and Subsidiary (collectively the "Company")
are engaged in importing and marketing small household products (principally to
specialty and discount stores, catalogues and other retailers) and medical,
janitorial and dietary products to hospitals and other healthcare facilities.
The consolidated financial statements include the accounts of CTC and its wholly
owned subsidiary, IHW, Inc. ("IHW") and IHW's wholly owned subsidiary, Ace
Surgical Supply Co., Inc. ("Ace"). All material intercompany balances and
transactions have been eliminated in consolidation.
Basic net loss per common share is based on the weighted-average number of
shares outstanding during the period while diluted net loss per common share
considers the dilutive effect of stock options and warrants reflected under the
treasury stock method. Both basic net loss per share and diluted net loss per
share are the same for the three-month and six-month periods ended June 30,
2001, since the Company's outstanding stock options and warrants have not been
included in the calculation because their effect would have been antidilutive.
Note - B Notes Payable and Related Party Transactions
At June 30, 2001, the Company had outstanding related party notes payable
totaling $3,062,000 as follows:
Twelve Months Ended
June 30, Amount
-------- ------
2002 $2,246,000
2003 816,000
----------
3,062,000
Current Portion 2,246,000
----------
$ 816,000
----------
Of this amount, $2,321,000 bears interest at 12% and $741,000 bears interest at
18%. These notes are payable to various individuals who are stockholders,
entities whose principals are stockholders of the Company, and the
6
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Company's retirement plan. Certain of these related party note holders have been
granted a security interest in the assets of CTC subordinated to the rights of
the financial institution described below. Notes payable aggregating $2,545,000
are personally guaranteed by certain stockholders of the Company.
At June 30, 2001 the Company had outstanding notes to others totaling $1,082,000
which bear interest at 12% and are due on demand. The Company pledged all of the
shares of Ace and IHW to the holders of these notes, subject to the prior
security interest of the financial institution and other noteholders.
At June 30, 2001, the Company owed $2,990,000 pursuant to a loan and security
agreement entered into with a financial institution whereby the Company is
required to maintain an outstanding combined loan balance of not less than
$1,500,000, but no more than $4,000,000, as defined, which expires June 2003.
The loan is collateralized by substantially all of the assets of the Company and
is partially guaranteed by an officer of the Company. Under the agreement, the
Company receives revolving credit advances based on accounts receivable and
inventory available, as defined, and is required to pay interest at a rate equal
to the greater of 7.5% or the prime rate (6.75% at June 30, 2001) plus 2% plus
other fees. The agreement, among other matters, has certain restrictions as
defined.
At June 30, 2001, the Company had an outstanding note payable (aggregating
$400,000) to an affiliate subordinated to the obligations due the financial
institution discussed above. Interest is payable on the note at the rate of 12%
per annum.
At June 30, 2001 the Company owed a related party $64,000 for the prior rental
of its office and warehousing space. Interest on these obligations are payable
at the rate of 12% per annum.
Included in prepaid expenses and other current assets at June 30, 2001 is an
amount due from a major stockholder, consisting of interest and principle,
aggregating $93,000. The note is due on demand, is collateralized, and interest
on the loan is at 12% per year.
Pursuant to the merger agreement between the Company and Ace, the Company agreed
to continue an obligation to pay $10,000 per month each in consulting fees to
two major stockholders of the Company. During the six-month periods each ended
June 30, 2001 and 2000, $60,000 was charged to operations for each of these
individuals.
Note - C Product Liability and Litigation
Various lawsuits, claims and proceedings have been or may be instituted or
asserted against the Company in the normal course of business. Based on facts
currently available, management believes that the disposition of matters that
are pending or asserted will not have a materially adverse effect on the
financial position or results of operations of the Company.
7
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note - D Stock Options
During June 2001 the company granted 1,610,000 options to purchase common shares
to various employees, officers, and directors. These options expire on June 6,
2006, and have a price of .07 cents per share, the fair market value of the
stock on the date of issuance.
Note - E Reclassification
Certain 2000 amounts have been reclassified to conform to the 2001
classification. These reclassifications had no effect on reported net income.
Note - F Recent Accounting Pronouncements
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No's
141 and 142, "Business Combinations" and "Goodwill and Other Intangibles". FASB
141 requires all business combinations initiated after June 30, 2001 to be
accounted for using the purchase method. Under FASB 142, goodwill is no longer
subject to amortization over its estimated useful life. Rather, goodwill is
subject to at least an annual assessment for impairment applying a fair-value
based test. Additionally, an acquired intangible asset should be separately
recognized if the benefit of the intangible asset is obtained through
contractual or other legal rights, or if the intangible asset can be sold,
transferred, licensed, rented or exchanged, regardless of the acquirer's intent
to do so. The Company is in the process of determining the impact of these
pronouncements on its financial position and results of operations.
Note - G Business Segments
In accordance with SFAS No. 131, the Company's business segments are organized
around its product lines, small household products and medical, janitorial and
dietary products. The following table is a summary of these segments for the
three-month and six-month periods ended June 30, 2000 and 2001.
8
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three-Month Period Ended June 30, 2000
Small Medical
Household Janitorial &
Products Dietary Products Corporate Elimination's Consolidated
- ---------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated
customers $2,484,000 $1,373,000 $- $- $3,857,000
- ---------------------------------------------------------------------------------------------------------------------------
Total sales $2,484,000 $1,373,000 $- $- $3,857,000
- ---------------------------------------------------------------------------------------------------------------------------
Operating income
(loss) $ 318,000 $ 121,000 $ (31,000) $- $ 408,000
Interest expense (66,000) (47,000) (151,000) - (264,000)
===========================================================================================================================
Net income (loss) $ 252,000 $ 74,000 $(182,000) $- $ 144,000
===========================================================================================================================
Depreciation
of fixed assets $ 9,000 $ 1,000 $- $- $ 10,000
- ---------------------------------------------------------------------------------------------------------------------------
Amortization
of intangibles $- $ 9,000 $- $- $ 9,000
===========================================================================================================================
Capital expenditures $ 6,000 $- $- $- $ 6,000
===========================================================================================================================
9
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Six-Month Period Ended June 30, 2000
Medical,
Janitorial
Small and
Household Dietary
Products Products Corporate Eliminations Consolidated
- -----------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated
customers $ 4,510,000 $ 2,913,000 $ - - $7,423,000
- -----------------------------------------------------------------------------------------------------------------------------
Total sales $ 4,510,000 $ 2,913,000 $ - - $7,423,000
- -----------------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ 589,000 $ 294,000 $(192,000) $ - $ 691,000
Interest expense (113,000) (99,000) (282,000) - (494,000)
- -----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 476,000 $ 195,000 $(474,000) $ - $ 197,000
- -----------------------------------------------------------------------------------------------------------------------------
Depreciation of
fixed assets $ 13,000 $ 2,000 $ - $ - $ 15,000
- -----------------------------------------------------------------------------------------------------------------------------
Amortization of
intangibles $ - $ 18,000 $ - $ - $ 18,000
- -----------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 6,000 $ - $ - $ - $ 6,000
- -----------------------------------------------------------------------------------------------------------------------------
10
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Three-Month Period Ended June 30, 2001
Medical,
Janitorial
Small and
Household Dietary
Products Products Corporate Eliminations Consolidated
- ----------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated
customers $ 2,836,000 $ 1,462,000 $ - - $4,298,000
Intersegment sales (5,000) (4,000) (9,000)
- ----------------------------------------------------------------------------------------------------------------------------
Total sales $ 2,831,000 $ 1,458,000 $ - $ - $4,289,000
- ----------------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ 119,000 $ 141,000 $ (9,000) $ - $ 251,000
Interest expense (56,000) (43,000) (134,000) - (233,000)
- ----------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 63,000 $ 98,000 $(143,000) $ - $ 18,000
- ----------------------------------------------------------------------------------------------------------------------------
Depreciation of
fixed assets $ 7,000 $ 1,000 $ - $ - $ 8,000
- ----------------------------------------------------------------------------------------------------------------------------
Amortization of
intangibles $ - $ 8,000 $ - $ - $ 8,000
- ----------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 6,000 $ 1,000 $ - $ - $ 7,000
============================================================================================================================
11
CREATIVE TECHNOLOGIES CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Six-Month Period Ended June 30, 2001
Medical,
Janitorial
Small and
Household Dietary
Products Products Corporate Eliminations Consolidated
- --------------------------------------------------------------------------------------------------------------------------
Sales to unaffiliated
customers $ 5,303,000 $ 2,934,000 $ - - $8,237,000
Intersegment sales (5,000) (4,000) (9,000)
- --------------------------------------------------------------------------------------------------------------------------
Total sales $ 5,298,000 $ 2,930,000 $ - $ - $8,228,000
- --------------------------------------------------------------------------------------------------------------------------
Operating income (loss) $ 237,000 $ 307,000 $ (36,000) $ - $ 508,000
Interest expense (108,000) (86,000) (270,000) - (464,000)
- --------------------------------------------------------------------------------------------------------------------------
Net income (loss) $ 129,000 $ 221,000 $(306,000) $ - $ 44,000
- --------------------------------------------------------------------------------------------------------------------------
Depreciation of
fixed assets $ 13,000 $ 3,000 $ - $ - $ 16,000
- --------------------------------------------------------------------------------------------------------------------------
Amortization of
intangibles $ - $ 17,000 $ - $ - $ 17,000
- --------------------------------------------------------------------------------------------------------------------------
Capital expenditures $ 6,000 $ 10,000 $ - $ - $ 16,000
==========================================================================================================================
12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Creative Technologies Corp. ("CTC") is a holding company owning the stock of
IHW, Inc. ("IHW"), a distributor for various European manufacturers of moderate
to high-end housewares. IHW also owns the stock of Ace Surgical Supplies Co.,
Inc. ("Ace") an operating company, (collectively the "Company"). Ace, in
business since 1974, distributes janitorial, dietary and medical products in the
tri-state area, generally to hospitals, nursing homes and assisted living
facilities. Ace is currently expanding its customer base to include various
other facilities including educational, hospitality, institutional and
entertainment. IHW, which was incorporated in 1997, is the exclusive importer
and distributor for various European manufacturers of moderate to high-end
housewares. The companies whose products were distributed in 2001 by IHW were
Brabantia International BV, MAWA Metallwarenfabrik Wagner GmbH ("Mawa"), Foppa
Pedretti S.p.A. and Evoluzione S.R.L. IHW is continually looking to distribute
other complementary lines that meet its various criteria.
For the six-month period ended June 30, 2001, cash provided by operating
activities was $59,000, cash used in investing activities was $12,000 and cash
of $29,000 was provided by financing activities. As a result, at June 30, 2001,
cash increased by $76,000 from $24,000 at December 31, 2000 to $100,000 at June
30, 2001. The Company had a negative working capital of $5,574,000 at June 30,
2001.
Accounts payable and other liabilities increased to $4,427,000 at June 30, 2001
from $3,881,000 at December 31, 2000 primarily due to additional financing
needed to support the increase in sales and the resulting increase in inventory
and accounts receivable.
During the six-month period ended June 30, 2001, debt to a financial institution
increased by $146,000 to $2,990,000 and notes payable to related parties
decreased by $117,000 to $3,062,000.
At June 30, 2001, the Company had outstanding related party notes payable
totaling $3,062,000 as follows:
Twelve Months Ended
June 30 Amount
------- ------
2002 2,246,000
2003 816,000
----------
3,062,000
Current Portion 2,246,000
----------
$ 816,000
----------
Of this amount, $2,321,000 bears interest at 12% and $741,000 bears interest at
18%. These notes are payable to various individuals who are stockholders,
entities whose principals are stockholders of the Company, and the Company's
retirement plan. Certain of these related party note holders have been granted a
security interest in the assets of CTC subordinated to the rights of the
financial institution described below. Notes payables aggregating $2,545,000 are
personally guaranteed by certain stockholders of the Company.
At June 30, 2001, the Company owed $2,990,000 pursuant to a loan and security
agreement entered into with a financial institution whereby the Company is
required to maintain an outstanding combined loan balance of not less than
$1,500,000, but no more than $4,000,000, as defined, which expires June 2003.
The loan is collateralized by substantially all of the assets of the Company and
is partially guaranteed by an officer of the Company. Under the agreement, the
Company receives revolving credit advances based on accounts receivable and
inventory available,
13
as defined, and is required to pay interest at a rate equal to the greater of
7.5% or the prime rate (6.75% at June 30, 2001) plus 2% plus other fees. The
agreement, among other matters, has certain restrictions as defined.
At June 30, 2001, the Company had an outstanding note payable (aggregating
$400,000) to an affiliate subordinated to the obligations due the financial
institution discussed above. Interest is payable on the note at the rate of 12%
per annum.
At June 30, 2001 the Company owed a related party $64,000 for the prior rental
of its office and warehousing space. Interest on these obligations are payable
at the rate of 12% per annum.
14
Results of Operations
The Company had net sales of $4,289,000 and $3,857,000, respectively, for the
three-month periods ended June 30, 2001 and June 30, 2000 and $8,228,000 and
$7,423,000, respectively, for the six-month periods ended June 30, 2001 and June
30, 2000. The increase in sales is primarily due to an increase in small
household products sales.
Gross profit margins for the second quarter ended June 30, 2001 and June 30,
2000 were 35% and 37%, respectively and for the six-month periods ended June 30,
2001 and June 30, 2000 were 36% and 37%, respectively. The decrease in gross
profit margin is primarily attributable to foreign exchange cost fluctuations.
Selling, general and administrative expenses were $981,000 and $787,000 or 23%
and 20% of net sales, respectively, in the three-month periods ended June 30,
2001 and June 30, 2000, and $1,930,000 and $1,632,000 or 23% and 22% of net
sales, respectively, in the six-month periods ended June 30, 2001 and June 30,
2000. The increase in amount of expenses is primarily due to an increase in
payroll and related expenses.
Warehousing expenses were $258,000 and $213,000 or 6% of net sales,
respectively, for the three-month periods ended June 30, 2001 and June 30, 2000,
and $501,000 and $433,000 or 6% of net sales respectively for the six-month
periods ended June 30, 2001 and June 30, 2000. Warehousing expenses increased in
absolute terms because of higher sales, but remained constant as a percentage of
overall sales.
Interest expense decreased to $233,000 from $264,000 for the three-month period
ended June 30, 2001, compared to the three-month period ended June 30, 2000, and
decreased to $464,000 from $494,000 for the six-month period ended June 30, 2001
compared to the six-month period ended June 30, 2000. The decrease of $30,000
for the six-month period ended June 30, 2001 compared to the six-month period
ended June 30, 2000 was primarily due to lower interest rates, effectively
reducing the cost of borrowings and the reduction in notes payable related
party.
Inventory was $1,831,000 at June 30, 2001 compared to $1,549,000 at June 30,
2000. The increase in inventory is primarily attributed to an expected increase
in sales. Accounts receivable net was $2,926,000 at June 30, 2001 compared to
$2,661,000 at June 30, 2000. The increase in receivables reflects the increase
in sales.
Due to the foregoing, the Company reported a net profit of $18,000 compared to a
net profit of $144,000, respectively, for the three-month periods ended June 30,
2001 and June 30, 2000, and a net profit of $44,000 compared to a net profit of
$197,000, respectively, for the six-month periods ended June 30, 2001 and June
30, 2000.
15
PART II OTHER INFORMATION
Item 6. a. Exhibits
NONE
b. Reports on form 8-K
The Registrant did not file reports on Form 8-K during the three
months ended June 30, 2001.
16
CREATIVE TECHNOLOGIES CORP.
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.
CREATIVE TECHNOLOGIES CORP.
---------------------------
Registrant
Dated: August 10, 2001 By: /s/ Richard Helfman
- ----------------------- -------------------------
Richard Helfman, President
17