UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE QUARTER PERIOD ENDED JUNE 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-26943
AMERICAN INFLATABLES, INC.
--------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4695878
-------- ----------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
947 NEWHALL STREET, COSTA MESA, CA 92627
---------------------------------- -----
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 949-515-1776
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR
VALUE $.01 PER SHARE
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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 August 15, 2001, there were 8,621,346 shares of the Registrant's common
stock, $.01 par value per share, issued and outstanding.
PART I FINANCIAL INFORMATION................................. 2
Item 1. Financial Statements (Unaudited)...................... 3
Balance Sheet......................................... 3
Statement of Operations for the Three Months
Ended June 30, 2001 and 2000........................ 4
Statement of Operations for the Six Months
Ended June 30, 2001 and 2000 ....................... 5
Statement of Cash Flows For the Six Months
Ended June 30, 2001 and 2000........................ 6
Notes to Financial Statements
as of June 30, 2001................................. 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 8
PART II OTHER INFORMATION..................................... 11
Item 1: Legal Proceedings..................................... 11
Item 2: Changes in Securities................................. 11
Item 3: Defaults Upon Senior Securities....................... 11
Item 4: Submission of Matters to a Vote of Security Holders... 11
Item 5: Other Information..................................... 11
Item 6(a): Exhibits.............................................. 11
Item 6(b): Reports on Form 8.K................................... 11
SIGNATURES....................................................... 12
1
PART I - FINANCIAL INFORMATION
NOTE REGARDING FORWARD-LOOKING STATEMENTS.
This Form 10-QSB/A-1 contains forward-looking statements within the meaning of
the safe harbor" provisions under Section 21E of the Securities Exchange Act of
1934 and the Private Securities Litigation Reform Act of 1995. We use
forward-looking statements in our description of our plans and objectives for
future operations and assumptions underlying these plans and objectives.
Forward-looking terminology includes the words "may," "expects," "believes,"
"anticipates," "intends," "projects," or similar terms, variations of such terms
or the negative of such terms. These forward-looking statements are based on
management's current expectations and are subject to factors and uncertainties,
which could cause actual results to differ materially from those, described in
such forward-looking statements. We expressly disclaim any obligation or
undertaking to release publicly any updates or revisions to any forward-looking
statements contained in this Form 10-QSB/A-1 to reflect any change in our
expectations or any changes in events, conditions or circumstances on which any
forward-looking statement is based. Factors, which could cause such results to
differ materially from those described in the forward-looking statements, and
elsewhere in, or incorporated by reference into this Form 10-QSB/A-1.
2
ITEM 1 Financial Statements
AMERICAN INFLATABLES, INC.
BALANCE SHEET
June 30, December 31,
2001 2000
------------ ------------
(UNAUDITED)
ASSETS
Current assets:
Cash ............................................$ -0- $ 3,900
Accounts Receivable.............................. 10,200 -0-
Inventory........................................ 10,800 10,800
Prepaid expenses and other current assets........ 90,300 50,400
--------- ---------
Total current assets....................... 111,300 65,100
Fixed assets
Display and promotional blimps, net.............. 16,600 16,600
Computers, furniture and office equipment, net... 32,000 36,900
Leasehold improvements, net..........................53,900 57,000
--------- ---------
Total fixed assets.......................... 102,500 110,500
Deposits........................................... 15,400 13,400
--------- ---------
Total assets...............................$ 229,200 $ 189,000
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Overdraft $ 6,100 $ -0-
Notes payable.................................... 330,000 330,000
Accounts payable................................. 83,100 77,700
Accrued payroll liabilities...................... 171,700 162,300
Accrued liabilities.............................. 81,200 6,100
Due to related party............................. 43,600 43,600
--------- ---------
Total current liabilities.................. 715,700 619,700
Stockholders' equity
Common stock..................................... 86,000 86,000
Additional paid in capital....................... 3,154,100 3,154,100
Note receivable.................................. (250,000) (250,000)
Accumulated deficit............................. (3,476,600) (3,420,800)
--------- ----------
Total stockholders' equity (deficit)....... (486,500) (430,700)
--------- ----------
Total liabilities and
stockholders' (deficit) equity $ 229,200 $ 189,000
=========== ==========
See accompanying notes to financial statements
3
AMERICAN INFLATABLES, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED JUNE 30,
2001 2000
--------- ---------
(UNAUDITED) (UNAUDITED)
Revenues........................................... $ 389,800 $ 402,100
Cost of goods sold............................ 210,100 268,400
--------- ---------
Gross profit 179,700 133,700
--------- ---------
Administrative expenses:
Depreciation and amortization................. 3,700 8,300
Professional fees............................. 28,900 1,868,600
Office expense................................ 51,300 78,500
Salaries and payroll expenses................. 39,300 215,500
Marketing..................................... 48,900 85,400
Travel & entertainment........................ 55,300 47,700
--------- ---------
Total.................................... 227,400 2,305,600
--------- ---------
Loss from operations (47,700) (2,171,900)
Interest expense (8,300) (8,300)
--------- ---------
Net loss.............................. $ (56,000) $(2,180,200)
========= ===========
Loss per share............................... $ (0.01) $ (0.40)
========= ==========
Weighted average shares...................... 8,594,792 5,350,000
========= ==========
See accompanying notes to financial statements
4
AMERICAN INFLATABLES, INC.
STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIODS ENDED JUNE 30,
(UNAUDITED)
2001 2000
--------- ----------
(UNAUDITED) (UNAUDITED)
Revenues......................................... $ 902,400 $ 853,200
Cost of goods sold.......................... 470,700 467,000
--------- ----------
Gross profit..................................... 431,700 386,200
--------- ----------
Administrative expenses
Depreciation and amortization............... 8,000 13,600
Legal, accounting and consulting............ 61,100 1,882,500
Office expense.............................. 92,400 139,500
Salaries and payroll expenses............... 78,400 283,300
Marketing................................... 114,700 160,600
Travel & entertainment...................... 116,400 68,700
--------- ----------
Total.................................. 471,000 2,548,200
Loss from operations (39,300) (2,162,000)
Interest expense (16,500) (12,900)
--------- ----------
Net loss .......................... $ (55,800) (2,174,900)
========= ==========
Loss per share.............................. $ (0.01) $ (0.41)
========= ==========
Weighted average shares..................... 8,594,7928 5,200,000
========== ==========
See accompanying notes to financial statements
5
AMERICAN INFLATABLES, INC.
STATEMENTS of CASH FLOWS
For The Six Month Periods Ended June 30,
2001 2000
-------------- --------------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)............................... $ (55,800) $(2,174,900)
Adjustments to Reconcile
Net Income (Loss) to Net Cash Provided
By (Used In) Operating Activities
Stock issued for services....................... -0- 1,122,700
Depreciation and amortization................... 8,000 13,600
(Increase) Decrease in:
Accounts receivable............................ (10,200) -0-
Prepaid expense and other assets................ (39,900) 104,700
Inventory....................................... -0- (28,000)
Deposits........................................ (2,000) -0-
Increase (Decrease) in:
Accounts payable............................... 5,400 (20,400)
Accrued expenses............................... 84,500 922,800
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES........... (10,000) (268,900)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment/leaseholds................ -0- (4,800)
Advances to/from related party.................. -0- (4,000)
----------- -----------
NET CASH USED IN INVESTMENT ACTIVITIES.......... -0- (8,800)
----------- -----------
CASH FLOW FROM FINANCING ACTIVITIES
Issuance of common stock........................ -0- 315,000
Repayment of debt............................... -0- (13,000)
Book overdraft 6,100 -0-
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES....... 6,100 302,000
----------- -----------
NET INCREASE (DECREASE) IN CASH................. (3,900)) 24,300
CASH AT BEGINNING OF PERIOD..................... 3,900 900
----------- -----------
CASH AT END OF PERIOD........................... $ -0- $ 25,200
=========== ===========
See accompanying notes to financial statements
6
Notes to Financial Statements (Unaudited)
Note A. BASIS OF PRESENTATION
The unaudited financial statements of American Inflatables, Inc. at June 30,
2001 and for the three and six month periods ended June 30, 2001 and 2000 have
been prepared by the Company in accordance with generally accepted accounting
principles and the instructions to Form 10-QSB. Certain information and footnote
disclosures required by generally accepted accounting principles have been
condensed or ommited. However, in the opinion of management all adjustments
necessary, including normal recurring adjustments, for the financial statements
to be not misleading have been made. These interim statements should be read in
conjunction with the audited financial statements and notes thereto included in
our last audited financial statement
Note B. NOTES PAYABLE
The notes payable of $330,000 and accrued interest thereon of $16,500 was due in
May 2001. The note and accrued interest has not been paid and in in default. The
holders of these notes have demanded payment.
7
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company has authorized 20,000,000 shares of $0.01 par value common stock. As
of June 30, 2001 there were 8,594,792 shares issued and outstanding.
THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000
RESULTS OF OPERATIONS. Net sales wee $389,800 for the three months ended June
30, 2001, a decrease of $12,300 (5%) compared to the same period in 2000. This
decrease is due primarily to the timing of trade shows, which are the Company's
principal source of sales. Certain trade shows that were held in June 2000 were
held in July 2001.
Cost of sales as a percentage of sales decreased to 33% during the three months
ended June 30, 2001 from 46% during the three months ended June 30,2001. This
decrease resulted form the sale in 2001 of a large special order to a new
customer. The significant design costs of this sale were not billed to the
customer and are expected to be recovered through future sales.
Professional fees decreased $1,839,700 during the three month period in 2001
compared to the same period in 2000 as a result of significant fees related to
acquisition services and costs associated with a registration statement filed in
2000 did not recur in 2001. Office expenses decreased $27,200 (35%)in 2001
compared to 2000 as a result of the cost of administrative infrastructure
incurred in 2000 was not repeated in 2001. Payroll costs decreased $176,200
(82%) in 2001 compared to 2000 as bonus to officers paid in 2000 were not
repeated in 2001. Marketing, travel and entertainment costs, which relate to the
Company's participation in industry trade shows, decreased $28,900 (22%) to
$104,200 in 2001 as compared to 2000 as a result of the Company's decision to
attend fewer but larger and more geographically diverse shows in 2001 compared
to 2000.
SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000
RESULTS OF OPERATIONS. Net sales were $902,400 for the six months ended June 30
2001, an increase of $49,200 (6%) compared to net sales of $853,200 for the six
months ended June 30, 2000. The increase in sales is due to the Company
increasing its customer base. Sales for the Company continue to grow at an
increasing rate not just from repeat customers but from new customers. The
Company continues to increase its presence and exposure in the advertising
markets through increased attendance at trade shows and other advertising
mediums that provide greater exposure.
8
Gross margin as a percentage of sales for the six months ended June 30, 2001 was
48%, an increase of 3% from the six months ended June 30, 2000. The Company
through its use of higher quality materials for production, decreased
replacements and warranty coverage and provides a stronger product for sale to
the customer. During Fiscal 2000 and the first quarter of 2001 the Company
increased production and manufacturing staff. The increase in net sales enabled
the Company to fully utilize its production staff to increase gross margins in
2001.
Legal, accounting and consulting costs decreased $1,821,400 during the first six
months of 2001 compared to the same period in 2000. The decrease results from
non recurring merger and acquisition costs and professional fees associated with
a cancelled registration statement incurred during the six months ended June 30,
2000.
Office expense decreased $46,100 or 33% in the first six months of 2001 compared
to the same period in 2000 as a result of efficiencies realized with the
maturity of the Company's systems and procedures.
Payroll costs decreased $204,900 or 72% in the first six months of 2001 compared
to the first six months of 2000 due to a more stable work force in 2001, which
is more efficient and resulted in less training time for new employees. In
addition, the number of administrative employees was reduced by three.
Marketing costs decreased $45,900 or 29% during the first six months of 2001
compared to the same period in 2000 as a result of the Company's more focused
approach to its target market.
Travel and entertainment costs increased $47,700 or 69% in the first six months
of 2001 compared to the first six months of 2000 as a result of the Company
sending more representatives to trade shows and attending trade shows more
distant from its offices.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2001, the Company had a cash and cash equivalents overdraft $6,100,
a decrease of $10,000 from $3,900 at December 31, 2000.
Cash used in operating activities was $10,000 during the six month period ended
June 30, 2001. Use of cash in operating activities consisted mainly of the net
loss for the six month period of $55,800, the offsetting effects of depreciation
and amortization of $8,000, and fluctuations in certain assets and liabilities.
To date, the Company has not invested in derivative securities or any other
financial instruments that involve a high level of complexity or risk. Cash has
been, and the Company contemplates that it will continue to be, used for general
operating purposes.
9
From time to time, the Company may evaluate potential acquisitions of products,
businesses, and technologies that may complement or expand the Company's
business. Any such transactions consummated may use a portion of the Company's
working capital and/or require the issuance of equity or debt.
The Company's success will be dependent upon its ability to generate sufficient
cash flow to meet its obligations on a timely basis, to obtain financing or
refinancing as may be required, and ultimately to achieve profitability. The
Company believes that its current cash resources to fund its operations through
fiscal 2001 without additional financing. The Company may not be able to obtain
sufficient financing to satisfy its cash requirements. The Company may be
required to obtain financing on terms that are not favorable to the Company or
its shareholders. If the Company is unable to obtain additional financing when
needed, it may be required to delay or scale back its operations, which could
have a material adverse effect on its business, financial condition and results
of operations.
The Company anticipates that it will need to raise additional capital on a
private placement basis through the sale of the Company's common stock,
preferred stock, debt or convertible debt, or some combination thereof. The
Company believes that if it is unable to raise additional equity or debt capital
sufficient to meet its current needs, the Company may need additional capital
soon thereafter. This additional capital, if needed, will be on such terms as
may then be available.
While the Company is currently exploring opportunities available to raise
additional capital, it has not received any commitment from any investor,
underwriter, lender or broker dealer to provide any funds. There is no assurance
that the Company will be successful in raising additional funds, or, if is
successful, that, in view of the Company's current circumstances, and funds can
be raised on terms that are reasonable.
The Company is in the process of being acquired by National Paintball Supply
Co., Inc. The Company believes that National Paintball Supply Co., Inc. has the
ability to, and will provide the necessary liquidity to the Company after the
acquisition is completed.
RECENT ACCOUNTING PRONOUNCEMENTS
During 2000, the Emerging Issues Task Force issued EITF 00-10 "Accounting for
Shipping and Handling Fees and Costs" and EITF 00-14 "Accounting for Certain
Sales Incentives". Both of these require implementation during the second
quarter of 2001. Inflatables does not believe the implementation of either of
these pronouncements will have a material effect on its financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for Derivative
Instruments and Hedging Activities." This statement establishes accounting and
reporting standards for derivative instruments, including some derivative
instruments embedded in other contracts (collectively referred to as
derivatives), and for other hedging activities. The Company will adopt SFAS 133
in Fiscal 2001, in accordance with SFAS 137, which deferred the effective date
of SFAS 133. The adoption of this standard in Fiscal 2001 is not expected not
have a material impact on the Company's consolidated financial statements.
10
In July 2001 the FASB issued SFAS 141 " Business Combinations" and SFAS 142
"Goodwill and Other Intangible Assets." SFAS 141 requires that the purchase
method of accounting be used to account for all business combinations entered
into after June 30,2001. SFAS 142 required that goodwill and other intangible
assets with indefinite lives be tested for impairment annually and not be
subjected to amortization. The provisions of SFAS 142 will apply to Inflatabiles
beginning January 1,2002. Inflatables does not believe the implementation of
either of these pronouncements will have a material effect on its financial
statements.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
There are no material legal proceedings to which the Company is currently a
party or to which the property of the Company is subject.
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBIT AND REPORTS ON FORM 8-K
a) Exhibits
b) Reports on Form 8-K
None.
11
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Date: October 31, 2001 By: /s/ Gregg Mulholland
Amendment No. 1 ---------------------------
Gregg Mulholland
Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Date: October 31, 2001 By: /s/ Gregg Mulholland
---------------------------
Gregg Mulholland
Chairman of the Board
Chief Executive Officer
Date: October 31, 2001 By: /s/ Jeffrey Jacobsen
---------------------------
Jeffrey Jacobsen
Chief Operating Officer
Director
Date: October 31, 2001 By: /s/ David Ariss
---------------------------
David Ariss
Director
12