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Delaware
(State of Incorporation) |
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13-3545304
(I.R.S. Employer Identification No.) |
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Quorum Business Center
718 South Military Trail
Deerfield Beach, Florida
(Address of Principal Executive Offices) |
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33442
(Zip Code) |
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Page | ||
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PART I |
FINANCIAL INFORMATION |
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Item 1. |
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3 | ||
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Item 2. |
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Item 3. |
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16 | ||
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Item 4. |
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16 | ||
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PART II |
OTHER INFORMATION |
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Item 1. |
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16 | ||
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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18 | |||
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19 |
2 | ||
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Table of Contents |
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Page |
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Condensed Consolidated Balance Sheets at March 31, 2004 (Unaudited) and December 31, 2003 |
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4 |
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Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2004 and March 31, 2003 (Unaudited) |
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6 |
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Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and March 31, 2003 (Unaudited) |
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7 |
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9 |
3 | ||
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Table of Contents |
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March 31, |
December 31, |
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2004 |
2003 |
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(Unaudited) |
|||||||
ASSETS |
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Current Assets: |
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|||||
Cash |
$ |
131,477 |
$ |
42,718 |
|||
Accounts Receivable (Net of Allowance For Doubtful Accounts of $579,796 and
$358,607 at March 31, 2004 and December 31, 2003, respectively) |
399,244 |
438,822 |
|||||
Inventory |
723,198 |
743,104 |
|||||
Prepaid Expenses and Other Current Assets |
340,879 |
30,499 |
|||||
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Total Current Assets |
1,594,798 |
1,255,143 |
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Property, Plant and Equipment, Net |
562,693 |
600,414 |
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Other Assets: |
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Intangibles, Net |
774,000 |
774,000 |
|||||
Notes Receivable - Long Term |
20,000 |
22,693 |
|||||
Deposits and Other Non-Current Assets |
11,096 |
46,946 |
|||||
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Total Other Assets |
805,096 |
843,639 |
|||||
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Total Assets |
$ |
2,962,587 |
$ |
2,699,196 |
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4 | ||
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Table of Contents |
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March 31, |
December 31, |
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2004 |
2003 |
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(Unaudited) |
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LIABILITIES AND STOCKHOLDERS DEFICIT |
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Current Liabilities: |
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Accounts Payable and Accrued Expenses |
$ |
4,894,555 |
$ |
4,309,888 |
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Lines of Credit |
797,421 |
797,047 |
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Note Payable |
15,500 |
- |
|||||
Loans Payable - Related Party |
1,430,000 |
60,000 |
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Current Maturities of Long-Term Debt |
42,132 |
42,080 |
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Current Maturity of Capital Lease Obligation |
2,284 |
- |
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Deferred Revenue |
7,500 |
7,500 |
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Total Current Liabilities |
7,189,392 |
5,216,515 |
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Long-Term Debt |
22,473 |
52,349 |
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Obligation Under Capital Lease |
4,559 |
- |
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Total Liabilities |
7,216,424 |
5,268,864 |
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Stockholders Deficit: |
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Preferred Stock, $1.00 Par Value; 2,000,000 Shares Authorized, of which Designations: |
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Series A Convertible, 750,000 Shares Authorized; 62,500 Issued and Outstanding at
March 31, 2004 and December 31, 2003; aggregate liquidation preference at
March 31, 2004 and December 31, 2003 of $62,500 |
55,035 |
55,035 |
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Series C Convertible, 750,000 Shares Authorized; 673,145 Issued and Outstanding at
December 31, 2003; aggregate liquidation preference of $14,026,309 at December 31,
2003 |
- |
673,145 |
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Common Stock, $.01 Par Value; 40,000,000 Shares Authorized; 28,846,399 and
16,458,375 Issued and Outstanding at March 31, 2004 and December 31, 2003,
respectively |
288,464 |
164,584 |
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Additional Paid-In Capital |
52,670,034 |
52,114,399 |
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Accumulated Deficit |
(57,267,370 |
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(55,576,831 |
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Total Stockholders Deficit |
(4,253,837 |
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(2,569,668 |
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Total Liabilities and Stockholders Deficit |
$ |
2,962,587 |
$ |
2,699,196 |
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5 | ||
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Table of Contents |
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For The Three Months Ended |
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March 31, |
March 31, |
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2004 |
2003 |
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Revenue: |
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Application Systems |
$ |
55,000 |
$ |
107,000 |
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Coatings, Sealants and Other Products |
592,778 |
931,602 |
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Total Revenue |
647,778 |
1,038,602 |
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Cost of Sales: |
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Application Systems |
40,000 |
84,000 |
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Coatings, Sealants and Other Products |
420,477 |
688,505 |
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Warranty Costs, Freight and Other Cost of Sales |
30,399 |
182,287 |
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Total Cost of Sales |
490,876 |
954,792 |
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Gross Profit |
156,902 |
83,810 |
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Operating Expenses: |
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Selling, General and Administrative |
1,500,155 |
1,787,215 |
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Professional Fees |
122,772 |
91,090 |
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Depreciation and Amortization |
64,230 |
114,836 |
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Research and Development |
41,668 |
106,079 |
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Consulting Fees |
67,581 |
94,838 |
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Interest Expense |
47,592 |
27,066 |
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Loss On Disposition of Machinery and Equipment |
3,443 |
- |
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Total Operating Expenses |
1,847,441 |
2,221,124 |
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Operating Loss |
(1,690,539 |
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(2,137,314 |
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Loss From Discontinued Operations |
- |
(3,413 |
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Net Loss |
$ |
(1,690,539 |
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$ |
(2,140,727 |
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Net Loss Per Common Share-Basic and Diluted: |
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Continuing Operations |
$ |
(0.059 |
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$ |
(0.161 |
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Discontinued Operations |
- |
- |
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Total |
$ |
(0.059 |
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$ |
(0.161 |
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Weighted Average Shares Outstanding |
28,833,543 |
14,157,304 |
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6 | ||
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Table of Contents |
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For The Three Months Ended |
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March 31, |
March 31, |
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2004 |
2003 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net Loss |
$ |
(1,690,539 |
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$ |
(2,140,727 |
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Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities: |
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Depreciation and Amortization |
64,230 |
114,836 |
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Loss On Disposition of Machinery and Equipment |
3,443 |
- |
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Non-Cash Operating Activities: |
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Interest |
- |
16,240 |
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Other Compensation |
- |
10,218 |
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(Increase) Decrease In Operating Assets: |
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Accounts and Loans Receivable |
44,579 |
112,300 |
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Notes Receivable |
15,936 |
- |
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Inventory |
19,907 |
(342,688 |
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Prepaid Expenses & Other Current Assets |
(326,316 |
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(41,361 |
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Increase (Decrease) In Operating Liabilities: |
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Accounts Payable and Accrued Expenses |
591,037 |
817,305 |
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Deferred Income |
- |
7,500 |
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Net Cash Used In Operating Activities |
(1,277,723 |
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(1,446,377 |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Acquisition of Machinery and Equipment |
(27,754 |
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(33,992 |
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(Increase) Decrease in Deposits and Other Non Current Assets |
38,543 |
(19,103 |
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Net Cash Provided By (Used In) Investing Activities |
$ |
10,789 |
$ |
(53,095 |
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7 | ||
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Table of Contents |
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For The Three Months Ended |
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March 31, |
March 31, |
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2004 |
2003 |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from Loans Payable - Related Party |
$ |
1,370,000 |
$ |
1,620,000 |
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Proceeds from Notes and Lines of Credit |
3,874 |
448,223 |
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Payments on Notes and Lines of Credit |
(17,824 |
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(416,913 |
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Payments on Capital Lease Obligations |
(357 |
) |
- |
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Net Cash Provided By Financing Activities |
1,355,693 |
1,651,310 |
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Net Increase In Cash |
88,759 |
151,838 |
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Cash at Beginning of Period |
42,718 |
41,520 |
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Cash at End of Period |
$ |
131,477 |
$ |
193,358 |
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Supplemental Disclosure of Cash Flow Information: |
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Cash Payments for Income Taxes |
$ |
- |
$ |
- |
|||
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Cash Payments for Interest |
$ |
32,641 |
$ |
10,826 |
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Non-Cash Investing Activities: |
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Machinery and Equipment acquired via a Capital Lease Obligation |
$ |
7,200 |
$ |
- |
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Non-Cash Financing Activities: |
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Issuance of Common Stock Pursuant to Employment and Severance Agreements |
$ |
6,370 |
$ |
- |
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Issuance of Common Stock Pursuant to the Conversion of Series C Preferred Stock |
673,145 |
- |
|||||
Issuance of Common Stock for Operating Activities |
- |
26,458 |
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Total Non-Cash Financing Activities |
$ |
679,515 |
$ |
26,458 |
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8 | ||
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Table of Contents |
9 | ||
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Table of Contents |
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March 31, |
December31, |
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2004 |
2003 |
|||||
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Raw Materials |
$ |
- |
$ |
- |
|||
Finished Goods |
723,198 |
743,104 |
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Total |
$ |
723,198 |
$ |
743,104 |
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March 31, |
December31, |
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2004 |
2003 |
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$300,000 Line of Credit, maturing July 31, 2004, bears interest at prime plus 1% per annum, secured by all the assets of Infiniti Products, Inc. and a personal guarantee from the Chairman. |
$ |
297,503 |
$ |
297,129 |
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$500,000 Line of Credit, maturing August 1, 2004, bears interest at prime plus 2% per annum, secured by all the assets of RSM Technologies, Inc. and the Chairman is a co-borrower. |
499,918 |
499,918 |
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Total |
$ |
797,421 |
$ |
797,047 |
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10 | ||
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Table of Contents |
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For The Three Months Ended March 31, |
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2004 |
2003 |
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Per Share |
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Per Share |
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Amount |
Amount |
Amount |
Amount |
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Operating Loss |
$ |
(1,690,539 |
) |
$ |
(0.059 |
) |
$ |
(2,140,727 |
) |
$ |
(0.151 |
) | |
Dividends On Preferred Stock |
- |
- |
(138,739 |
) |
(0.010 |
) | |||||||
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Loss Available To Common Stockholders |
(1,690,539 |
) |
(0.059 |
) |
(2,279,466 |
) |
(0.161 |
) | |||||
Other Items |
- |
- |
- |
- |
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Net Loss |
$ |
(1,690,539 |
) |
$ |
(0.059 |
) |
$ |
(2,279,466 |
) |
$ |
(0.161 |
) | |
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Weighted Average Common Shares Outstanding |
28,833,543 |
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14,157,304 |
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a) |
Corporate was derived from the financial data of Urecoats Industries Inc., |
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b) |
RSM Products was derived from the financial data of RSM Technologies, Inc. and |
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c) |
Infiniti Products was derived from the financial data of Infiniti Products, Inc. |
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RSM |
Infiniti |
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Corporate |
Products |
Products |
Total |
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Revenue: |
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Application Systems |
$ |
- |
$ |
55,000 |
$ |
- |
$ |
55,000 |
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Coatings, Sealants and Other Products |
$ |
- |
$ |
131,881 |
$ |
460,897 |
$ |
592,778 |
|||||
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Gross Profit: |
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|||||||||
Application Systems |
$ |
- |
$ |
15,000 |
$ |
- |
$ |
15,000 |
|||||
Coatings, Sealants and Other Products |
$ |
- |
$ |
31,528 |
$ |
110,374 |
$ |
141,902 |
|||||
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Operating Loss |
$ |
(1,061,701 |
) |
$ |
(541,438 |
) |
$ |
(87,400 |
) |
$ |
(1,690,539 |
) | |
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Capital Expenditures (net of capital leases) |
$ |
- |
$ |
11,853 |
$ |
15,901 |
$ |
27,754 |
|||||
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Depreciation and Amortization Expense |
$ |
20,021 |
$ |
43,860 |
$ |
349 |
$ |
64,230 |
|||||
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Identifiable Assets |
$ |
1,151,064 |
$ |
1,227,636 |
$ |
583,887 |
$ |
2,962,587 |
11 | ||
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Table of Contents |
12 | ||
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For The Three Months Ended |
||||||
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March 31, |
March 31, |
||||||
2004 |
2003 |
||||||
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|
||||||
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|
|||||
Revenue: |
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|
|||||
Application Systems |
$ |
55,000 |
$ |
107,000 |
|||
Coatings, Sealants and Other Products |
592,778 |
931,602 |
|||||
|
|
||||||
Total Revenue |
$ |
647,778 |
$ |
1,038,602 |
|||
|
|
13 | ||
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Table of Contents |
14 | ||
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Table of Contents |
(a) |
Financial position and results of operations, including general and administrative expense targets and effects on income from continuing operations; |
(b) |
Cash position and cash requirements, including the sufficiency of the Companys cash requirements for the next twelve months; |
(c) |
Sales and margins; |
(d) |
Sources, amounts, and concentration of revenue; |
(e) |
Costs and expenses; |
(f) |
Accounting estimates, including treatment of goodwill and intangible assets, doubtful accounts, inventory, restructuring, warranty, and product returns; |
(g) |
Operations, including international, supply chain, quality control, and manufacturing supply, capacity, and facilities, including the anticipated opening of the Companys manufacturing operations; |
(h) |
Products and services, price of products, product lines, and product and sales channel mix; |
(i) |
Relationship with customers, suppliers and strategic partners, including increased reliance on strategic partners; |
(j) |
Raw material variations, substrate preparation, application specifications, operator techniques, and ambient weather fluctuations; |
(k) |
Acquisition and disposition activity; |
(l) |
Credit facility and ability to raise capital; |
(m) |
Real estate lease arrangements; |
(n) |
Global economic, social, and geopolitical conditions; |
(o) |
Industry trends and the Companys response to these trends; |
(p) |
Tax position and audits; |
(q) |
Strategic organizational initiatives, cost-reduction efforts, including workforce reductions, and the effect on employees; |
(r) |
Sources of competition; |
(s) |
Protection of intellectual property; |
(t) |
Outcome and effect of current and potential future litigation; |
(u) |
Research and development efforts, including the Companys investment in new technologies; |
(v) |
Future lease obligations and other commitments and liabilities; |
(w) |
Common stock, including trading price; |
15 | ||
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Table of Contents |
(x) |
Security of computer systems; and |
(y) |
Changes in accounting policies and practices, as may be adopted by regulatory agencies, and the Financial Accounting Standards Board. |
16 | ||
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Table of Contents |
(a) |
Pursuant to the Certificate of Designation of Preferences of Series C Convertible Preferred Stock, all 673,145 shares of the Series C Convertible Preferred Stock outstanding on January 1, 2004 (the Mandatory Conversion Date) were deemed converted as of such date as if the Holders had given the Conversion Notice on the Mandatory Conversion Date, into 12,375,024 shares of restricted common stock. No person, after the Mandatory Conversion Date, has any rights in respect of Series C Convertible Preferred Stock, except the right to receive shares of restricted common stock on conversion thereof, as adjusted for the reverse split and share consolidation approved by the common stockholders on May 28, 2002 and effectuated at the close of business on May 30, 2002; of which: |
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(i) an aggregate of 10,684,800 shares of restricted Common Stock were issued to the Chairman, pursuant to the mandatory conversion of an aggregate of 460,245 shares of Series C Convertible Preferred Stock, which Series C Convertible Preferred Stock was purchased in 2002 and 2003 and previously valued and recorded in the aggregate at $9,204,900; and |
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(ii) an aggregate of 830,000 shares of restricted Common Stock were issued to a corporation in which a director owns a material interest, pursuant to the mandatory conversion of an aggregate of 100,000 shares of Series C Convertible Preferred Stock, which Series C Convertible Preferred Stock was purchased in 2002 and previously valued and recorded in the aggregate at $2,000,000. |
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(b) |
On March 31, 2004, the Company issued an aggregate of 7,000 shares of restricted common stock to current and former officers, as other compensation, pursuant to their employment agreements, which were valued and recorded in the aggregate at $3,430. |
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(c) |
On March 31, 2004, the Company issued an aggregate of 6,000 shares of restricted common stock to a former officer as severance compensation in connection with the termination of his employment contract, which transaction was valued and recorded at $2,940. |
17 | ||
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Table of Contents |
Date: |
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May 21, 2004 |
|
URECOATS INDUSTRIES INC. | ||
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By: |
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Michael T. Adams |
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President |
Date: |
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May 21, 2004 |
|
URECOATS INDUSTRIES INC. | ||
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By: |
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Dennis A. Dolnick |
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Chief Financial Officer and Corporate Treasurer |
18 | ||
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Table of Contents |
Exhibit |
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Number |
Description |
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10.1 |
Employment Agreement, effective March 16, 2004, between Dennis A. Dolnick and the Company. |
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31.1 |
Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32 |
Certification of Principal Executive Officer and Chief Financial Officer pursuant to §906 of Sarbanes-Oxley Act of 2002. |
19 | ||
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