UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE QUARTER PERIOD ENDED MARCH 31, 2002
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
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(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
947 NEWHALL STREET, COSTA MESA, CA 92627
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(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 $.001 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 May 15, 2002, there were 8,746,346 shares of the Registrant's common
stock, $.001 par value per share, issued and outstanding.
PAGE
PART I FINANCIAL INFORMATION................................. 3
Item 1. Financial Statements (Unaudited)...................... 4
Balance Sheet......................................... 4
Statement of Operations for the Three Months
Ended March 31, 2002 and 2001....................... 5
Statement of Cash Flows For the Three Months
Ended March 31, 2002 and 2001....................... 6
Notes to Financial Statements
as of March 31, 2002................................ 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 8
PART II OTHER INFORMATION..................................... 10
Item 1: Legal Proceedings..................................... 10
Item 2: Changes in Securities................................. 10
Item 3: Defaults Upon Senior Securities....................... 10
Item 4: Submission of Matters to a Vote of Security Holders... 10
Item 5: Other Information..................................... 10
Item 6(a): Exhibits.............................................. 10
Item 6(b): Reports on Form 8.K................................... 10
SIGNATURES....................................................... 11
2
PART I - FINANCIAL INFORMATION
NOTE REGARDING FORWARD-LOOKING STATEMENTS.
This Form 10-QSB 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 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.
3
ITEM 1 Financial Statements
AMERICAN INFLATABLES, INC.
BALANCE SHEET
MARCH 31, December 31,
2002 2001
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(UNAUDITED)
ASSETS
Current assets:
Inventory....................................... $ 25,575 $ 27,855
Prepaid expenses................................ 33,051 62,370
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Total current assets...................... 58,626 90,225
Property and equipment, net of accumulated
Depreciation of $85,626 and $81,044,
Respectively.................................... 77,065 81,547
Other assets...................................... 6,646 6,646
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TOTAL ASSETS $ 142,337 $ 178,418
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Cash overdraft.................................. $ 19,931 $ 4,792
Notes payable................................... 330,000 330,000
Payroll taxes payable........................... 301,007 297,446
Sales tax payable............................... 15,772 8,363
Accrued salary - stockholder.................... 187,500 150,000
Accounts payable and accrued expenses........... 274,843 233,472
Advance from stockholder........................ 222,370 250,865
Customer deposits............................... 137,688 87,255
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Total current liabilities................. 1,489,111 1,362,193
Stockholders' equity
Common stock.................................... 8,746 8,746
Additional paid in capital...................... 3,272,466 3,272,466
Note receivable................................. (250,000) (250,000)
Accumulated deficit............................. (4,377,986) (4,214,987)
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Total stockholders' equity (deficit)...... (1,346,774) (1,183,775)
----------- -----------
Total liabilities and
stockholders' (deficit) equity $ 142,337 $ 178,418
=========== ===========
See accompanying notes to financial statements
4
AMERICAN INFLATABLES, INC.
STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31,
2002 2001
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(UNAUDITED) (UNAUDITED)
Revenues......................................... $ 326,412 $ 508,500
Cost of goods sold.......................... 163,895 230,000
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Gross profit..................................... 162,517 278,500
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Selling expense.................................. 99,434 187,850
General and administrative expense............... 217,832 91,600
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Total.................................. 317,266 279,450
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Loss from operations............................ (154,749) (950)
Interest expense................................ 8,250 8,250
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Net loss .......................... $ (162,999) $ (9,200)
=========== ===========
Loss per share.............................. $ (0.02) $ (0.00)
=========== ===========
Weighted average shares..................... 8,746,346 8,621,000
=========== ===========
See accompanying notes to financial statements
5
AMERICAN INFLATABLES, INC.
STATEMENTS OF CASH FLOWS
QUARTER ENDED MARCH 31,
2002 2001
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(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net (Loss)....................................... $ (162,999) $ (9,200)
Adjustments to Reconcile
Net Income (Loss) to Net Cash Provided
By (Used In) Operating Activities
Depreciation and amortization.................... 4,482 5,600
(Increase) Decrease in:
Prepaid expense.................................. 29,319 (1,400)
Inventory........................................ 2,280 -0-
Deposits......................................... -0- (2,000)
Increase (Decrease) in:
Accounts payable and accrued expenses........... 89,841 6,300
Customer deposits............................... 50,433 -0-
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NET CASH PROVIDED BY (USED IN) OPERATING 13,356 (700)
ACTIVITIES
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CASH FLOWS FROM INVESTING ACTIVITIES
Advances to/from shareholder..................... (28,495) 5,000
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NET CASH USED IN INVESTMENT ACTIVITIES........... (28,495) 5,000
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CASH FLOW FROM FINANCING ACTIVITIES
Increase in cash overdraft....................... 15,139 -0-
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NET CASH PROVIDED BY FINANCING ACTIVITIES....... 15,139 -0-
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NET INCREASE (DECREASE) IN CASH................. -0- 4,300
CASH AT BEGINNING OF PERIOD..................... -0- 3,900
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CASH AT END OF PERIOD........................... $ -0- $ 8,200
=========== ===========
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 March
31,2002 and for the three month periods ended March 31, 2002 and 2001 have been
prepared by the Company in accordance with generally accepted accounting
principles pursuant to Regulation SB of the Securities and Exchange Commission.
Certain information and footnote disclosures required by generally accepted
accounting principles have been condensed or omitted. However, in the opinion of
management, all adjustments necessary, including normal recurring adjustments,
for the financial statements not to be misleading have been made. These interim
statements should be read in conjunction with the financial statements and notes
thereto for the year ended December 31, 2001, and are not necessarily indicative
of results of operations to be expected for the full year.
7
Item 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company has authorized 100,000,000 shares of $.001 par value common stock.
As of March 31, 2002 there were 8,746,346 shares issued and outstanding.
THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001
RESULTS OF OPERATIONS. Net sales were $326,412 for the three months ended March
31, 2002, a decrease of $182,088 or 36% compared to net sales of $508,500
for the three months ended March 31, 2001. The Company generates substantially
all of its sales through its attendance at various industry trade shows. The
terrorist events of September 11, 2001 caused attendance at trade shows to
decline significantly than the levels in prior years. Sales of the Company's
products at each show attended in 2002 were less than those generated in 2001.
Further, at March 31, 2002 the Company had received orders and payment for
products totaling $137,688 which had not been shipped at March 31, 2002. Most of
these orders were shipped in April 2002. The delay in shipment was generally a
result of a shortage of fans which were received in April 2002. There were no
corresponding amounts in 2001.
Gross profit as a percentage of sales for the three months ended March 31, 2002
was 50%, a decrease of 5% from 55% for the three months ended March 31, 2001.
The decrease in gross profit is primarily a result of lower sales to absorb
direct labor costs and a larger proportion of sales of dancers which have a
higher material cost than other products.
Selling expense for the three month period ended March 31, 2002 was $99,434 (30%
of revenue), a decrease of $88,416 (47%) from $187,850 (37 % of revenue) for the
three month period ended March 31, 2001. This decrease in amount and as a per
cent of sales is a result of the Company attending fewer trade shows in 2002
than in 2001 and sending fewer sales representatives to each show.
General and administrative expenses for the three month period ended March 31,
2002 increased $126,232 (138%) to $217,832 compared to $91,600 for the three
month period ended March 31, 2001. This increase is a result of an increase in
legal and accounting costs of $33,993 (173%) relating to the Company's proposed
merger and an increase of $80,183 (155%) in salary costs related to increased
officers compensation.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2002, the Company had a cash overdraft of $19,931, an increase of
$15,139 from $4,792 at December 31, 2001.
Cash provided by operating activities was $13,356 during the quarter ended March
31, 2002. Use of cash in operating activities consisted mainly of the net loss
for the three month period of $162,999, offset by the effects of depreciation
and amortization of $4,482, the increase in customer deposits of $50,433 and
fluctuations in certain assets and liabilities.
8
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.
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 believes that its current cash and cash equivalent balance along
with the additional financing is insufficient to meet its working capital
expenditures through the near term and will require the Company in seeking
additional capital and/or equity. The Company is currently exploring various
financing and credit facilities and is in the process of merging with American
Sports Development Group, Inc.
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 required implementation during the second
quarter of 2001. The Company does not believe the implementation of either of
these pronouncements have had a material effect on its financial statements.
In July 2001 the FASB issued SFAS 141, "Business Combination" 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 requires 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 applied to the Company
beginning January 1, 2002. The implementation of these pronouncements has not
have a significant effect on the Company's financial statements.
9
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
None
b) Reports on Form 8-K
None.
10
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: May 15, 2002 By: /s/ Gregg Mulholland
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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: May 15, 2002 By: /s/ Gregg Mulholland
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Gregg Mulholland
Chairman of the Board
Chief Executive Officer
Date: May 15, 2002 By: /s/ Jeffrey Jacobsen
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Jeffrey Jacobsen
Chief Operating Officer
Director
Date: May 15, 2002 By: /s/ David Ariss
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David Ariss
Director
11