UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE NINE MONTHS ENDED SEPTEMBER 27, 2002
[ ] 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: 001-14753
INTERNATIONAL SMART SOURCING, INC.
(Exact Name of Small Business Issuer as specified in its charter)
Delaware 11-3423157
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
320 Broad Hollow Road
Farmingdale, NY 11735
(Address of principal executive offices)
(631) 293-4650
(Issuer's telephone number)
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 _____
As of October 18, 2002, the Registrant had 3,760,934 shares of its Common Stock,
$0.001 par value, issued and outstanding.
INTERNATIONAL SMART SOURCING, INC. AND SUBSIDIARIES
FORM 10-QSB
SEPTEMBER 27, 2002
INDEX
Page
Number
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Consolidated Balance Sheet 1
Consolidated Statements of Operations 2
Consolidated Statements of Cash Flows 3
Notes to Consolidated Financial Statements 4 - 8
Item 2 - Management's Discussion and Analysis or
Plan of Operation 8 - 11
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 11
Item 2 - Changes in Securities and Use of Proceeds 11
Item 3 - Defaults Upon Senior Securities 11
Item 4 - Submission of Matters to a Vote of Security Holders 11
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 12 - 13
SIGNATURES 14
INTERNATIONAL SMART SOURCING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
SEPTEMBER 27, 2002
(unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 147,261
Accounts receivable - net of allowance for
doubtful accounts of $15,000 1,006,757
Inventories 1,560,065
Prepaid expenses and other current assets 147,239
--------------
TOTAL CURRENT ASSETS 2,861,322
Property and equipment - net 508,210
Marketable securities available for sale 84,142
Other assets 192,243
--------------
$ 3,645,917
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 1,351,995
Deferred revenue 76,528
Line of credit 832,828
Current portion of long-term debt (including $20,161 to officer/shareholders) 111,892
Current portion of obligations under capital leases 46,974
--------------
TOTAL CURRENT LIABILITIES 2,420,217
Long-term debt (including $270,835 to officer/shareholders) - less current portion 390,695
Obligations under capital leases - less current portion 63,495
--------------
TOTAL LIABILITIES 2,874,407
--------------
CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, $0.001 par value, 10,000,000 shares authorized,
issued and outstanding 3,760,934 3,761
Additional paid-in capital 7,971,928
Accumulated deficit (7,204,179)
--------------
TOTAL STOCKHOLDERS' EQUITY 771,510
--------------
$ 3,645,917
==============
See notes to consolidated financial statements.
1
INTERNATIONAL SMART SOURCING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
-------------------------------- ---------------------------------
September 27, September 28, September 27, September 28,
2002 2001 2002 2001
-------------- -------------- --------------- ---------------
NET SALES $ 2,644,996 $ 2,202,673 $ 7,587,618 $ 6,856,184
COST OF GOODS SOLD 1,749,159 1,483,901 5,167,557 4,681,227
-------------- -------------- --------------- ---------------
GROSS PROFIT 895,837 718,772 2,420,061 2,174,957
-------------- -------------- --------------- ---------------
OPERATING EXPENSES
Selling and shipping 179,111 159,746 612,821 764,948
General and administrative 673,407 768,160 2,061,431 2,080,303
-------------- -------------- --------------- ---------------
TOTAL OPERATING EXPENSES 852,518 927,906 2,674,252 2,845,251
-------------- -------------- --------------- ---------------
INCOME (LOSS) FROM OPERATIONS 43,319 (209,134) (254,191) (670,294)
Interest and other income 110,742 53,489 113,813 61,943
Interest and other expenses (45,711) (47,372) (126,945) (119,247)
-------------- -------------- --------------- ---------------
NET INCOME (LOSS) $ 108,350 $ (203,017) $ (267,323) $ (727,598)
============== ============== =============== ===============
NET INCOME (LOSS) PER SHARE
Basic $ 0.03 $ (0.05)$ (0.07)$ (0.19)
============== ============== =============== ===============
Diluted $ 0.03 $ (0.05)$ (0.07)$ (0.19)
============== ============== =============== ===============
WEIGHTED AVERAGE COMMON SHARES
Basic 3,760,934 3,735,934 3,760,934 3,731,490
============== ============== =============== ===============
Diluted 3,764,487 3,735,934 3,760,934 3,731,490
============== ============== =============== ===============
See notes to consolidated financial statements.
2
INTERNATIONAL SMART SOURCING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
------------------------------
September 27, September 28,
2002 2001
------------- --------------
Cash flows from operating activities:
Net loss $ (267,323)$ (727,598)
------------- --------------
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash expenses related to issuance of stock and stock warrants - 156,250
Depreciation and amortization 152,250 200,481
Issuance of note payable for services - 11,535
Marketable securities received in settlement of note and interest receivable (84,142) -
Changes in assets and liabilities:
Accounts receivable (230,357) 54,410
Inventories (320,444) 104,761
Prepaid expenses and other current assets 323,770 (10,744)
Other assets (112,729) (335,840)
Accounts payable and accrued expenses 203,778 12,694
Due to related party - (61,752)
Deferred revenue (125,104) 423,508
------------- --------------
Total adjustments (192,978) 555,303
------------- --------------
Net cash used in operating activities (460,301) (172,295)
------------- --------------
Cash flows from investing activities:
Note receivable from related parties 155,693 31,246
Purchase of property and equipment (20,912) (158,801)
------------- --------------
Net cash provided by (used in) investing activities 134,781 (127,555)
------------- --------------
Cash flows from financing activities:
Capital lease repayments (52,240) (120,782)
Net proceeds from borrowings 471,020 687,350
Principal payments and repayment of loans (92,477) (370,268)
------------- --------------
Net cash provided by financing activities 326,303 196,300
------------- --------------
Increase (decrease) in cash 783 (103,550)
Cash - beginning of period 146,478 188,213
------------- --------------
Cash - end of period $ 147,261 $ 84,663
============= ==============
See notes to consolidated financial statements.
3
INTERNATIONAL SMART SOURCING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 27, 2002
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial statements and with the instructions to Form
10-QSB. Accordingly, they do not include all of the information and
disclosures required for annual financial statements. These financial
statements should be read in conjunction with the consolidated
financial statements and related footnotes included in the Company's
annual report on form 10-KSB for the year ended December 28, 2001.
In the opinion of the Company's management, all adjustments
(consisting of normal recurring accruals) necessary to present fairly
the Company's financial position as of September 27, 2002 and the
results of operations and cash flows for the nine month periods ended
September 27, 2002 and September 28, 2001 have been included.
The results of operations for the nine-month period ended September 27,
2002, are not necessarily indicative of the results to be expected for
the full year ending December 27, 2002.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. The Company
has suffered recurring losses, and did not comply with their credit
line's minimum tangible net worth covenant. In addition, the bank that
provided the Company with its credit facility was closed by the
Connecticut Banking Department on June 27, 2002, with the F.D.I.C.
assuming receivership of the failed bank. This condition raises
substantial doubt about the Company's ability to continue as a going
concern. Management's plans with respect to this matter include,
replacing their financing arrangement through an alternative lending
institution, raising additional funds through equity or debt financing
and ultimately achieving profitable operations. The Company is in
discussions with various financial institutions to replace its line of
credit. In the interim, the F.D.I.C. has continued to service the
Company's credit facility, although it is uncertain at this time what
the ultimate disposition of the facility will be. The accompanying
consolidated financial statements do not include any adjustments that
might be necessary should the Company be unable to continue as a going
concern.
4
INTERNATIONAL SMART SOURCING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 27, 2002
(UNAUDITED)
-continued
2. RECENT ACCOUNTING PRONOUNCEMENTS
FASB 145
On April 30, 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statement Nos. 4, 44 and 64, Amendment of FASB Statement No.13, and
Technical Corrections." The rescission of SFAS No.4, "Reporting Gains
and Losses from Extinguishments, and SFAS No.64, "Extinguishments of
Debt made to Satisfy Sinking Fund Requirements," which amended SFAS
No.4 will affect income statement classification of gains and losses
from extinguishment of debt. SFAS No.4 requires that gains and losses
from extinguishment of debt be classified as an extraordinary item, if
material. Under SFAS No. 145, extinguishment of debt is now considered
a risk management strategy by the reporting enterprise and the FASB
does not believe it should be considered extraordinary under the
criteria in APB Opinion No.30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events
and Transactions," unless the debt extinguishment meets the unusual in
nature and infrequency of occurrence criteria in APB Opinion No. 30.
SFAS No. 145 will be effective for fiscal years beginning after May
15, 2002. Upon adoption, extinguishments of debt shall be classified
under the criteria in APB Opinion No. 30.
FASB 146
In June 2002, the FASB issued SFAS No.146, "Accounting for Costs
Associated with Exit or Disposal Activities." SFAS No. 146 addresses
financial accounting and reporting for costs associated with exit or
disposal activities and nullified Emerging Issues Task Force Issue No.
94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring)." SFAS No. 146 requires that a liability for a cost
associated with an exit or disposal activity be recognized when the
liability is incurred. A fundamental conclusion reached by the FASB in
this statement is that an entity's commitment to a plan, by itself,
does not create a present obligation to others that meets the
definition of a liability. SFAS No. 146 also establishes that fair
value is the objective for initial measurement of the liability. The
provisions of this statement are effective for exit or disposal
activities that are initiated after December 31, 2002, with early
application encouraged. The Company has not yet determined the impact
of SFAS No.146 on its financial position and results of operations, if
any.
5
INTERNATIONAL SMART SOURCING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 27, 2002
(UNAUDITED)
-continued
3. INVESTMENTS
In August 2002, the Company received 1,682,844 shares of common stock
as a settlement for a note and interest receivable. The note receivable
was originally issued to another company (the "borrower") in July and
August 1999. In February 2001, the borrower declared bankruptcy under
Chapter 11 of the Federal bankruptcy code. The Company had fully
reserved the note and interest receivable of $517,616. On January 29,
2002, The Bankruptcy Court approved the borrower's Plan of
Reorganization, pursuant to which the Company received 1,682,844 shares
of the reorganized debtor common stock, which represents approximately
3 shares for each dollar owed to the Company at the time of the filing
of the bankruptcy petition, or $517,616. The Company has valued these
shares at $.05 per share, and accordingly has recorded other income of
$84,142. The Company has determined that these marketable securities
are to be held for an indefinite period and thus classified as
available for sale. Unrealized gains or losses on these securities are
added to stockholders' equity as accumulated other comprehensive gain
or loss. The Company has not recorded any unrealized gain for the nine
months ended September 27, 2002.
4. NOTES PAYABLE
In July and August 2002 the Company entered into notes payable
with three officer / shareholders of the Company, for $50,000 each, for
a total of $150,000. These notes bear interest at 10% per annum and are
payable in 12 monthly installments of $417 commencing August 1, 2002,
followed by 36 monthly installments of $1,613. Each installment applies
payment first to unpaid interest and then to principal. These notes
mature in August 2006.
5. CONTINGENCIES
The Company was brought as a defendant in six employment discrimination
complaints, and on October 17, 2002 was in the process of an
arbitration agreement to settle these complaints for an aggregate
amount of approximately $42,000. Accordingly, the Company has accrued
$42,000 as of September 27, 2002.
6
INTERNATIONAL SMART SOURCING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 27, 2002
(UNAUDITED)
-continued
6. SEGMENT AND GEOGRAPHIC INFORMATION
The Company views its operations as principally two segments, the
manufacturing and assembly of injection molded plastic components and
outsourcing of injection molded plastic components and their
assemblies. The segments share a common workforce and office
headquarters, which preclude an allocation of all overhead components.
Overhead items that are specifically identifiable to a particular
segment are applied to such segment. The Company's segment information
for the three months and nine months ended September 27, 2002 and
September 28, 2001 is as follows:
Manufacturing Corporate
and and
Assembly Outsourcing Other Consolidated
---------------- -------------- ------------- ----------------
Three Months ended
September 27, 2002
Sales to unaffiliated customers $ 2,064,319 $ 580,677 $ - $ 2,644,996
Segment assets $ 2,542,972 $ 922,936 $ 180,009 $ 3,645,917
Segment income (loss) $ 115,566 $ (65,465) $ 58,249 $ 108,350
Manufacturing Corporate
and And
Assembly Outsourcing Other Consolidated
---------------- -------------- ------------- ----------------
Three Months ended
September 28, 2001
Sales to unaffiliated customers $ 1,733,709 $ 468,964 $ - $ 2,202,673
Segment assets $ 2,316,122 $ 1,867,920 $ 383,742 $ 4,567,784
Segment income (loss) $ 45,576 $ (164,315) $ (84,278) $ (203,017)
Manufacturing Corporate
and and
Assembly Outsourcing Other Consolidated
---------------- -------------- ------------- ----------------
Nine Months ended
September 27, 2002
Sales to unaffiliated customers $ 6,029,926 $ 1,556,192 $ 1,500 $ 7,587,618
Segment assets $ 2,542,972 $ 922,936 $ 180,009 $ 3,645,917
Segment income (loss) $ 220,456 $ (472,633) $ (15,146) $ (267,323)
7
INTERNATIONAL SMART SOURCING, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 27, 2002
(UNAUDITED)
-continued
Manufacturing Corporate
and And
Assembly Outsourcing Other Consolidated
---------------- -------------- ------------- ----------------
Nine Months ended
September 28, 2001
Sales to unaffiliated customers $ 5,220,831 $ 1,635,353 $ - $ 6,856,184
Segment assets $ 2,316,122 $ 1,867,920 $ 383,742 $ 4,567,784
Segment income (loss) $ 415,415 $ (749,136) $ (393,877) $ (727,598)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
CRITICAL ACCOUNTING POLICIES
The Securities and Exchange Commission (SEC) recently issued proposed guidance
for disclosure of critical accounting policies. The SEC defines "critical
accounting policies" as those that require application of management's most
difficult, subjective or complex judgments, often as a result of the need to
make estimates about the effects of matters that are inherently uncertain and
may change in subsequent periods. The Company plans to adopt the disclosure
requirements regarding critical accounting policies once the final rules are
required to be adopted.
RESULTS OF OPERATIONS
For the three months and nine months ended September 27, 2002 compared to the
three and nine months ended September 28, 2001.
NET SALES
Net sales for the three and nine month periods ended September 27, 2002 were
$2,644,996 and $7,587,618 respectively, compared to sales of $2,202,673 and
$6,856,184 for the three and nine-month periods ended September 28, 2001. The
increase of $442,323 or 20% for the three-month period and $731,434 or 11% for
the nine-month period was attributed to the continuation of the contract with
the Defense Supply Center in Philadelphia (DSCP), and the completion of tooling
orders.
8
GROSS PROFITS
The Company realized an overall gross profit margin percentage for the three and
nine-month periods ended September 27, 2002 of 33.9% and 31.9% respectively, as
compared to 32.6% and 31.7% experienced during the three and nine-month periods
ended September 28, 2001. The increase of 2.0% for the three-month period and
..9% for the nine-month period can be attributed to the continued correction of
pricing percentages on various government orders experienced during the period.
OPERATING EXPENSES
Selling and Shipping
Selling and shipping expenses for the three and nine-month periods ended
September 27, 2002 were $179,111 and $612,821 respectively, as compared to
$159,746 and $764,948 for the three and nine-month periods ended September 28,
2001.
The increase of $19,365 or 12.1% for the three-month period and decrease of
$152,127 or 19.9% for the nine-month period is primarily attributable to an
increase in freight and shipping costs of approximately $47,000 offset by
decreases in payroll and consulting expenses of approximately $20,000 and
$213,000, respectively.
General and Administrative Expenses
General and administrative expenses for the three and nine-month periods ended
September 27, 2002 were $673,407 and $2,061,431 respectively, as compared to
$768,160 and $2,080,303 for the three and nine-month periods ended September 28,
2001. The decrease of $94,753 or 12.3% for the three-month period and $18,872 or
..9% for the nine-month period is primarily attributable to a decrease in payroll
and related expenses of approximately $85,000, offset by an increase in rent
expense of approximately $39,000.
Interest and other income
Income and other income for the three and nine-month periods ended September 27,
2002 were $110,742 and $113,813 respectively, as compared to $53,489 and $61,943
for the three and nine-month periods ended September 28, 2001. The increase of
$57,253 or 107% for the three-month period and $51,870 or 84% for the nine-month
period is primarily attributable to the recovery of a previously reserved note
receivable, through the receipt of 1,682,844 shares of the debtors common stock.
The Company has valued these shares at $.05 per share, or $84,142. In addition,
the Company received $20,000 from the sale of machinery and equipment.
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity needs arise from working capital requirements, capital
expenditures, and principal and interest payments. Historically, the Company's
primary source of liquidity has been cash flows generated internally from
operations. When cash flows have been insufficient to meet the Company's cash
needs, the Company has supplemented its cash needs with bank borrowings and
long-term equipment financing. The Company's cash increased to $147,261 at
September 27, 2002 from $146,478 at December 28, 2001.
9
Cash flows used in operating activities was $460,301 for the nine-months ended
September 27, 2002 on a net loss of $267,323. The increase in accounts
receivable is the result of increases in sales for the period. The increase in
inventory is the result of the Company's buildup of inventory to respond to
increased government orders and shipments. The decrease in prepaid expenses and
other current assets is a result of the expensing of deposits on materials and
molds associated with tooling and production orders that were completed during
the nine-months ended September 27, 2002. Net cash provided by investing
activities for the nine-month period ended September 27, 2002 was $134,781, such
activities consisted of cash collections of $155,593 from notes receivable from
related parties, offset by $20,912 for purchases of tooling, molds, machinery
and equipment.
Net cash provided by financing activities for the nine-month period ended
September 27, 2002 was $326,303. Cash of $471,020 was provided from borrowings
on the Company's line of credit, and $150,000 in notes payable from
officer/shareholders of the Company. Cash of $92,477 was used to make principal
payments on loans and the bank credit line and $52,240 to make capital lease
repayments.
In April 2001, the Company closed on a revolving line of credit agreement with a
bank that provided for a maximum borrowing of up to $1,500,000, subject to
certain conditions, at an interest rate of prime plus 1.75%. The loan is secured
by substantially all the assets of the Company and is unconditionally guaranteed
by three officers/shareholders, each limited to $250,000.
The bank that provided the Company with the credit facility was closed by the
Connecticut Banking Department on June 27, 2002, with the F.D.I.C. assuming
receivership of the failed bank. Management's plans with respect to this matter
include, replacing their financing arrangement through an alternative lending
institution, raising additional funds through equity or debt financing and
ultimately achieving profitable operations.
The Company is in discussions with various financial institutions to replace its
line of credit. In the interim, the F.D.I.C. has continued to service the
Company's credit facility, although it is uncertain at this time what the
ultimate disposition of the facility will be. During the quarter ended September
27, 2002, three officers/ stockholders of the Company loaned the organization a
total of an additional $150,000, with interest at ten percent per annum. The
officers/stockholders are forgoing any repayment of principal on all loans to
the Company for a period of one year.
In the event that the Company is unable to find other sources of credit or
working capital, operations of the Company would have to be limited.
The auditors' report on the Company's financial statements, in our annual Form
10-KSB, included an explanatory paragraph about the Company's ability to
continue as a going concern. The Company expects that current cash flows from
operations will be sufficient to fund its operations and meet its debt service
10
obligation for the remainder of the fiscal year ending December 27, 2002. As of
October 18, 2002, the Company had approximately $1,000,000 outstanding on its
bank line of credit, and the F.D.I.C. has capped the advances at this amount. In
addition, management is seeking to raise additional funds through additional
debt and/or equity financing, although there is no assurance it will be
successful in securing such financing. If the Company is not successful, the
Company may need to make certain reductions in its operations to maximize its
available cash resources until additional funds can be raised.
CAUTIONARY FACTORS REGARDING FUTURE OPERATING RESULTS
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Any such forward-looking statements are based on current expectations
of future events and are subject to risks and uncertainties, which could cause
actual results to vary materially from those indicated. Actual results could
differ due to a number of factors, including negative developments relating to
unforeseen order cancellations or push outs, the Company's strategic
relationships, the impact of intense competition and changes in our industry.
The Company assumes no obligation to update any forward-looking statements as a
result of new information or future events or developments.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company was named as a defendant in six employment discrimination
complaints, and on October 17, 2002 was in the process of an arbitration
agreement to settle these complaints for an aggregate amount of approximately
$42,000. Accordingly, the Company made a $42,000 provision for such settlement,
during the three and nine months ended September 27, 2002.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
11
ITEM 5. OTHER INFORMATION
In April 2001, we closed on a revolving line of credit agreement with a bank
that provided for a maximum borrowing of up to $1,500,000, subject to certain
conditions, at an interest rate of prime plus 1.75%. The loan is secured by
substantially all the assets of the company and is unconditionally guaranteed by
three officers/shareholders, each limited to $250,000.
The bank that provided the Company with a credit facility was closed by the
Connecticut Banking Department on June 27, 2002, with the F.D.I.C. assuming
receivership of the failed bank. Management's plans with respect to this matter
include, replacing their financing arrangement through an alternative lending
institution, raising additional funds through equity or debt financing and
ultimately achieving profitable operations. The F.D.I.C. has continued to
service the Company's credit facility. The Company is in discussions with
various financial institutions to replace the line of credit.
During the quarter ended September 27, 2002, the Company entered into notes
payable with three officers / stockholders of the Company, for $50,000 each, for
a total of $150,000. These notes bear interest at 10% per annum and are payable
in 12 monthly installments of $417 commencing August 1, 2002, followed by 36
monthly installments of $1,613. Each installment applies payment first to unpaid
interest and then to principal. These notes mature in August 2006.
Additionally, in June 2002, EHC was awarded a one-year extension of its contract
with the United States Government Defense Supply Center Philadelphia (DSCP). EHC
estimates the full value of the extension to be approximately $5,000,000. The
extension commenced on June 21, 2002 and terminates on June 20, 2003.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
99.1, 99.2 and 99.3
Reports on 8-K:
The Company filed two reports on Form 8K during the quarter ended
September 27, 2002 on the following dates:
- July 1, 2002
Electronic Hardware Corp., a wholly owned subsidiary of
International Smart Sourcing, Inc. (ISSG.OB), announced that
it has been awarded a one year extension of its multi-million
dollar contract with the United States Government Defense
Supply Center Philadelphia (DSCP). Electronic Hardware
estimates the full value of the extension to be approximately
Five Million Dollars. The extension commenced on June 21, 2002
12
and terminates on June 20, 2003. The original award of the
contract by DSCP transferred to Electronic Hardware the full
responsibility to supply knobs, dials and pointers (Federal
Stock Class 5355) for the United States Government.
- July 11, 2002
Electronic Hardware Corp., a subsidiary of International Smart
Sourcing, Inc. (the "Company"), has a revolving credit line
with Connecticut Bank of Commerce. The Company has been
informed that on June 26, 2002, Connecticut Bank of Commerce
was closed by the Banking Commissioner, Connecticut Department
of Banking, and the Federal Deposit Insurance Corporation
(FDIC) was named receiver.
13
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.
INTERNATIONAL SMART SOURCING, INC.
November 12, 2002 /s/David Kassel
-------------------------------
- --------------------------- David Kassel
Date Chairman and Chief Executive Officer
November 12, 2002 /s/Arthur Myers
--------------------------------
- ---------------------------- Arthur Myers
Date Chief Financial Officer
14