SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended JUNE 30, 1998 Commission file number 0-7099 -------------- ------ CECO ENVIRONMENTAL CORP. ------------------------------------------------ NEW YORK 13-2566064 - -------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 505 UNIVERSITY AVENUE, SUITE 1400, TORONTO, ONTARIO, CANADA M5G 1X3 - ------------------------------------------------------------- ------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 416-593-6543 ------------ - ------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. X Yes No ------ ------ Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the close of the period covered by this report. Class: COMMON, PAR VALUE $.01 PER SHARE OUTSTANDING at June 30, 1998 8,250,896
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 JUNE 30, 1998 - ------------------------------------------------------------------------------ INDEX Part I - Financial Information: Condensed consolidated balance sheet as of June 30, 1998 and December 31, 1997 2 Condensed consolidated statement of operations for the three-month and six-month periods ended June 30, 1998 and 1997 3 Condensed consolidated statement of cash flows for the six-month periods ended June 30, 1998 and 1997 4 Notes to condensed consolidated financial statements 5 & 6 Management's discussion and analysis of the financial condition and results of operations 7 to 11 Signature 12 1
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEET (unaudited) - ------------------------------------------------------------------------------- JUNE 30, DECEMBER 31, 1998 1997 ------------ ------------ ASSETS Current assets: Cash $ 269,327 $ 847,827 Marketable securities - trading 626,222 634,150 Accounts receivable 4,077,788 2,979,414 Inventories 725,379 771,068 Costs and estimated earnings in excess of billings on uncompleted contracts 622,041 235,454 Prepaid expenses and other current assets 134,807 230,458 Prepaid and refundable income taxes -- 150,200 Due from former owners of Busch Co. 207,391 -- Deferred income taxes 33,477 33,477 ------------ ------------ Total current assets 6,696,432 5,882,048 Property and equipment, net 2,093,034 1,947,482 Goodwill, net 5,062,236 5,834,858 Other intangible assets, at cost, net 1,345,119 272,696 Deferred income taxes 23,896 23,896 ------------ ------------ Total assets $ 15,220,717 $ 13,960,980 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term obligations $ 800,000 $ -- Current portion of long-term debt 301,036 333,871 Current portion of capital lease obligation 5,554 5,554 Accounts payable and accrued expenses 3,231,689 1,873,965 Billings in excess of costs and estimated earnings on uncompleted contracts 1,645,036 2,517,310 Accrued income taxes 100,800 -- Due former owners of Busch Co. -- 502,592 ------------ ------------ Total current liabilities 6,084,115 5,233,292 Long-term debt, less current portion 1,603,822 1,732,993 Capital lease obligation, less current portion 794 3,821 ------------ ------------ Total liabilities 7,688,731 6,970,106 ------------ ------------ Minority interest 165,755 248,289 ------------ ------------ Shareholders' equity: Preferred stock, $.01 par value; 10,000,000 shares authorized, none issued -- -- Common stock, $.01 par value; 100,000,000 shares authorized, 8,388,816 and 8,107,048 shares issued, respectively 83,888 81,070 Capital in excess of par value 10,139,013 9,860,063 Accumulated deficit (2,508,001) (2,849,879) ------------ ------------ 7,714,900 7,091,254 Less treasury stock, at cost (348,669) (348,669) ------------ ------------ Net shareholders' equity 7,366,231 6,742,585 ------------ ------------ Total liabilities and shareholders' equity $ 15,220,717 $ 13,960,980 ============ ============ See accompanying notes to condensed consolidated financial statements. 2
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (unaudited) - ------------------------------------------------------------------------------- THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 1998 1997 1998 1997 ------------ ------------ ------------ ------------ Revenues: Net sales - products $ 1,775,781 $ 2,927,091 $ 4,190,770 $ 5,418,967 Contract revenues 4,648,445 -- 8,888,291 48,520 ------------ ------------ ------------ ------------ Total revenues 6,424,226 2,927,091 13,079,061 5,467,487 ------------ ------------ ------------ ------------ Costs and expenses: Cost of revenues - products 818,199 1,482,156 2,103,209 2,770,027 Cost of revenues - contracts 3,514,497 -- 6,543,452 27,000 Selling and administrative 1,598,006 1,059,297 3,476,426 1,975,761 Depreciation and amortization 81,866 120,423 223,575 239,789 ------------ ------------ ------------ ------------ 6,012,568 2,661,876 12,346,662 5,012,577 ------------ ------------ ------------ ------------ Income from operations 411,658 265,215 732,399 454,910 Investment income 18,513 48,581 35,445 70,576 Interest expense, net (63,444) (20,745) (112,789) (49,378) ------------ ------------ ------------ ------------ Income before provision for income taxes 366,727 293,051 655,055 476,108 Provision for income taxes 147,000 97,400 276,000 161,000 ------------ ------------ ------------ ------------ Income before minority interest 219,727 195,651 379,055 315,108 Minority interest (13,648) (43,769) (37,177) (74,248) ------------ ------------ ------------ ------------ Net income $ 206,079 $ 151,882 $ 341,878 $ 240,860 ============ ============ ============ ============ Net income per share, basic and diluted $ .02 $ .02 $ .04 $ .03 ============ ============ ============ ============ Weighted average number of common shares outstanding: Basic 8,250,896 7,262,628 8,203,935 7,231,628 ============ ============ ============ ============ Diluted 8,680,198 7,743,544 8,633,236 7,712,544 ============ ============ ============ ============ See accompanying notes to condensed consolidated financial statements. 3
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited) - ------------------------------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 1998 1997 ------------ ------------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS Cash flows from operating activities: Net income $ 341,878 $ 240,860 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 166,841 199,260 Goodwill amortization - CECO Filters, Inc. 56,734 40,529 Minority interest 37,177 74,248 Noncash expenses, officer's compensation - 17,500 (Increase) decrease in operating assets: Accounts receivable (528,668) 1,270,200 Inventories 45,689 74,555 Costs and estimated earnings in excess of billings on uncompleted contracts (362,701) - Prepaid expenses and other current assets 113,392 (1,661) Prepaid and refundable income taxes 150,200 - Purchases of marketable securities (1,603,786) (515,054) Proceeds from sales of marketable securities 1,611,714 617,229 Increase (decrease) in operating liabilities: Accounts payable and accrued expenses 861,107 (521,331) Billings in excess of costs and estimated earnings on uncompleted contracts (1,044,098) - Income taxes payable 100,800 (244,290) ---------- ---------- Net cash provided by (used in) operating activities (53,721) 1,252,045 ----------- --------- Cash flows from investing activities: Acquisition of IFM, net of cash acquired, comprised of the following: Excess of current liabilities over current assets, net of cash acquired 169,756 - Equipment (125,132) - Goodwill (152,533) - Additions to property and equipment and intangible assets (131,273) (211,305) Acquisition of additional shares of CECO Filters, Inc. (97,932) - ----------- ------------ Net cash (used in) investing activities (337,114) (211,305) ---------- ---------- Cash flows from financing activities: Net borrowings (repayments) of short-term obligations 800,000 (400,000) Net (repayments) of long-term debt and capital lease obligation (277,682) (58,292) Due from/to former owners of Busch Co. (709,983) - ---------- ------------ Net cash (used in) financing activities (187,665) (458,294) ---------- ---------- Net increase (decrease) in cash (578,500) 582,446 Cash at beginning of period 847,827 412,174 ---------- ---------- Cash and cash equivalents at end of period $ 269,327 $ 994,620 ========== ========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the quarter for: Interest $ 137,752 $ 49,308 ---------- ----------- Income taxes $ 53,100 $ 34,800 ----------- ----------- See accompanying notes to condensed consolidated financial statements. 4
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) - -------------------------------------------------------------------------------- 1. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position as of June 30, 1998, the results of operations for the three-month and six-month periods ended June 30, 1998 and 1997 and cash flows for the six-month periods ended June 30, 1998 and 1997. The results of operations for the six-month period ended June 30, 1998 are not necessarily indicative of the results to be expected for the full year. 2. Acquisition of Businesses During March 1998, pursuant to an Asset Purchase Agreement, the Company acquired substantially all of the assets, and the business, of Integrated Facilities Management, Inc. ("IFM") for $150,000 in cash. IFM, located in Mesa, Arizona, provides a full range of services for inter-facility general repair, preventive maintenance and inter-facility construction needs exclusively for owners and users of industrial, commercial, educational, healthcare and manufacturing facilities. The acquisition was accounted for as a purchase. The Asset Purchase Agreement provides that, notwithstanding the actual closing date, the closing was deemed to be effective as of January 1, 1998. The condensed consolidated statement of operations for the six-month period ended June 30, 1998, therefore, includes the operations of IFM since January 1, 1998. On September 25, 1997, the Company acquired substantially all of the assets, and the business, of Busch Co. During April 1998, the Company completed a valuation of certain patents acquired as part of this acquisition, utilizing the services of an independent consultant. The valuation resulted in the reclassification of $1,047,000 from goodwill to other intangible assets. On a pro forma basis, results of operations for the six-month periods ended June 30, 1998 and 1997, would have been as follows, if the acquisitions had been made as of January 1, 1997. SIX MONTHS ENDED JUNE 30, 1998 1997 ------ ------ Total revenues $13,079,061 $14,500,606 Income before provision for income taxes 655,055 733,133 Net income 341,878 341,773 Net income per share, basic and diluted .04 .05 3. Inventories consisted of the following: JUNE 30, DECEMBER 31, 1998 1997 --------- ------------ Raw materials $513,082 $409,639 Work-in-process 6,499 157,911 Finished goods 205,798 203,518 ------- ------- $725,379 $771,068 ======= ======= 5
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED (unaudited) - -------------------------------------------------------------------------------- 4. Investment in CECO Filters, Inc. In February 1998, the Company exchanged 281,768 additional shares of its common stock for 281,768 shares of CECO common stock with an unrelated third party. Also, during the six months ended June 30, 1998, the Company acquired 93,610 more shares of CECO's common stock on the open market for cash. As of June 30, 1998, the Company owned 92.92% of CECO's common stock. Summarized financial information of CECO as of and for its six months ended June 30, 1998, is as follows: Financial position: Working capital $ 1,759 =========== Total assets $10,545,158 =========== Net shareholders' equity $ 2,411,227 =========== Results of operations: Total revenues $13,079,061 =========== Income before income taxes $ 688,829 =========== Net income $ 412,829 =========== 6
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS (unaudited) - -------------------------------------------------------------------------------- Financial Condition, Liquidity and Capital Resources - The Company The Company's consolidated cash and marketable securities position decreased from $1,481,977 at December 31, 1997 to $895,549 at June 30, 1998. This decrease of $586,428 is attributable to the use of cash in operating activities of $61,649 (excluding purchases and sales of marketable securities), use of cash in investing activities of $337,114, and use of cash in financing activities of $187,665. The investments in marketable securities are primarily in high yield bonds of major U.S. corporations, as well as U.S. Treasury Bills. CECO Filters, Inc. ("CECO") maintains a $2,000,000 line of credit with a commercial bank, of which $800,000 was outstanding as of June 30, 1998. Management believes that the expected revenues from the operations of CECO, supplemented by the available line of credit, will be sufficient to provide adequate cash to fund anticipated working capital and other cash needs during the remainder of the year. The Company and CECO entered into a five-year management and consulting agreement during 1994 pursuant to which the Company provides management and financial consulting services to CECO for a monthly fee of $20,000 until the agreement expires in December 1998. The Company believes its consulting agreement with CECO and interest income from its investments in marketable securities, should provide sufficient revenue to meet its general and administrative expenses. Results of Operations - The Company The Company's consolidated statement of operations for the six-month periods ended June 30, 1998 and 1997 reflects the operations of the Company consolidated with the operations of CECO. At June 30, 1998, the Company owned approximately 93% of CECO. Minority interest in the consolidated statement of operations has been presented as a reduction in net income. The Company received $60,000 during each quarter for management and financial consulting services provided to CECO. This amount is not reflected in the consolidated results of operations since it is eliminated in consolidation. Except as set forth above, the Company has no other income, revenues or expenses other than as a result of its investment in CECO and its investment in marketable securities, and except for its investment activities, the Company does not engage in operations other than through its operating subsidiary, CECO. CECO is comprised of CECO Filters, Inc., Air Purator Corporation ("APC"), U.S. Facilities Management Company, Inc. ("USFM") and New Busch Co., Inc. (collectively referred to as "the CECO Group"), which provide innovative solutions to air quality problems through particle and chemical control technologies and management services. 7
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED (unaudited) - -------------------------------------------------------------------------------- Results of Operations - The Company - Continued CECO manufactures and markets filters known as fiber bed mist eliminators, designed to trap, collect and remove solid soluble and liquid particulate matter suspended in an air or other gas stream whether generated from a point source emission or otherwise. CECO offers innovative patented technologies, Catenary Grid (R) and Narrow Gap Venturi(TM), designed for use with heat and mass transfer operations and particulate control. APC designs and manufactures high performance filter media and bags for use in high temperature pulse-jet baghouses, the most effective type of baghouse for capturing submicron particulate from gas streams. USFM provides facilities management and software, as well as outsourced plant-wide maintenance management to help customers achieve their performance goals. Busch is engaged in designing, manufacturing and supplying equipment used to control the environment in and around industrial plants with a variety of proprietary and patented technologies. On March 16, 1998, CECO acquired substantially all of the assets of Integrated Facilities Management ("IFM") of Mesa, Arizona in an all cash transaction, effective January 1, 1998. IFM provides facility audits, preventative maintenance, labor force augmentation, as-built warranty reconciliation, pre-scheduled facility maintenance inspection, inter-facility construction services and other trade services. IFM has been integrated into USFM. USFM will continue to provide its unique environmental maintenance services. USFM also includes a technology arm through its strategic alliance with Western VAR Alliance. USFM can now offer complete facilities management and computerized facility and maintenance management and co-sourced resources through a single organization. Results of Operations - CECO (Company's Subsidiary) Comparison of Six Months Ended June 30, 1998 to Six Months Ended June 30, 1997 Revenues were approximately $13.1 million and $5.5 million for the six months ended June 30, 1998 and 1997, respectively, an increase of 139%. The increase in revenues from 1997 to 1998 resulted from the acquisition of Busch Co. in September, 1997 and IFM in March, 1998, increasing revenues by $7.0 million and $1.7 million, respectively. The CECO Group's backlog of orders and services at June 30, 1998 was approximately $10.0 million as compared to approximately $1.5 million at June 30, 1997, an increase of $8.5 million or 567%. The increase is principally attributable to the impact of the Busch Co. and IFM acquisitions. There can be no assurance that order and service backlog will be replicated, or increased, or translate into higher revenues in the future. The success of the CECO Group's business depends on a multitude of factors that are out of the CECO Group's control. The CECO Group's operating results can be significantly impacted by the introduction of new products and services, new manufacturing technologies, rapid change in the demand for its product and services, decrease in the average selling price over the life of a product as competition increases, and the CECO Group's dependence on the efforts of middle men to sell a significant portion of its products and services. 8
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED (unaudited) - -------------------------------------------------------------------------------- Results of Operations - CECO (Company's Subsidiary) Comparison of Six Months Ended June 30, 1998 to Six Months Ended June 30, 1997 - Continued The CECO Group's overall cost of revenues increased as a percentage of revenues for the six months ended June 30, 1998 (66%) compared to the six months ended June 30, 1997 (51%). The increase is attributed to the impact of Busch Co. where costs as a percentage of revenues amounted to 70%, and IFM, now called USFM (Service), where costs as a percentage of revenues amounted to 95% both from January 1, 1998 through March 31, 1998. Without the impact of Busch Co. and USFM (Service), the cost of revenues as a percentage of revenues would have been 48.5%. The decrease, compared to the prior year and without the impact of Busch Co. and USFM (Service), is attributed to lower material costs, as well as lower costs incurred to service the CECO Group's products. The CECO Group continues to use the latest technology available in an effort to reduce both cost of revenues (and the maintenance of optimal inventory levels) and operating expenses, and ultimately increase overall company profits. The CECO Group's selling and administrative expenses amounted to $3,318,940 for the six-month period ended June 30, 1998 compared to $1,897,766 for the six-month period ended June 30, 1997, representing an increase of $1,421,174 or 75%. This increase is the direct result of selling and administrative expenses of Busch Co. and IFM. During 1994, the CECO Group entered into a management and consulting agreement with the Company. The terms of the agreement require payment of monthly fees of $20,000 through December, 1998 in exchange for management and financial consulting services involving corporate policies; marketing; strategic and financial planning; and mergers, acquisitions and related matters. The CECO Group incurred management fees to the Company of $120,000 during each of the six-month periods ended June 30, 1998 and 1997. Interest expense increased by $88,412, or 179% during the six-month period ended June 30, 1998 as compared to the same period in 1997. The increase in interest expense can be attributed to an increased utilization of the bank line of credit during the six months ended June 30, 1998 compared to the previous year, as well as additional borrowings in the second half of 1997 incurred to fund the acquisition of Busch Co. The CECO Group earned pre-tax income of $688,829 for the six-month period ended June 30, 1998 compared to $404,056 for the six-month period ended June 30, 1997. This change is attributed principally to the increase in revenues for the six-month period ended June 30, 1998 over the comparable period in 1997. The provision for federal and state income taxes for the six-month period ended June 30, 1998 amounted to $276,000 compared to $161,000 for the six-month period ended June 30, 1997 and reflects an effective income tax rate of approximately 40% for each period. 9
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED (unaudited) - -------------------------------------------------------------------------------- Results of Operations - CECO (Company's Subsidiary) Comparison of Three Months Ended June 30, 1998 to Three Months Ended June 30, 1997 Sales were approximately $6.4 million and $2.9 million for the three-month periods ended June 30, 1998 and 1997, respectively. This represents an increase of 119.5% compared to the three months ended June 30, 1997. CECO's overall cost of revenues increased as a percentage of revenues for the three months ended June 30, 1998 (67.4%) compared to the three months ended June 30, 1997 (50.6%). The increase is attributed to the impact of Busch Co. where cost as a percentage of revenues amounted to 72%, and IFM, now called USFM (Service), where cost as a percentage of revenues amounted to 98%, both from April 1, 1998 through June 30, 1998. Without the impact of Busch Co. and USFM (Service), the cost of revenues as a percentage of revenues would have been 48.4%. The decrease, compared to the prior year and without the impact of Busch Co. and USFM (Service), is attributed to lower material costs, as well as lower costs incurred to service the CECO Group's products. The CECO Group continues to use the latest technology available in an effort to reduce both cost of revenue (and the maintenance of optimal inventory levels) and operating expenses, and ultimately increase overall company profits. The CECO Group's selling and administrative expenses amounted to $1,536,733 for the three-month period ended June 30, 1998 compared to $1,019,619 for the three-month period ended June 30, 1997, representing an increase of $517,114 or 50.7%. This increase is the direct result of selling and administrative expenses of Busch Co. and IFM. Interest expense increased by $55,199, or 266% during the three-month period ended June 30, 1998 when compared to the same period in 1997. The increase in interest expense can be attributed to an increased utilization of the bank line of credit during the three months ended June 30, 1998 compared to the previous year, as well as additional borrowings incurred in the second half of 1997 to fund the acquisition of Busch Co. The CECO Group earned pre-tax income of $365,761 for the three-month period ended June 30, 1998 as compared to $244,941 for the three-month ended June 30, 1997. This change is attributed principally to the increase in revenues for the three-month period ended June 30, 1998 over the comparable period in 1997. The provision for federal and state income taxes for the three-month period ended June 30, 1998 amounted to $147,000 compared to $97,400 for the three-month period ended June 30, 1997 and reflects an effective income tax rate of approximately 40% for each period. 10
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CONTINUED (unaudited) - -------------------------------------------------------------------------------- Other Matters The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this document and other materials filed or to be filed with the Securities and Exchange Commission, as well as information included in oral or other written statements made or to be made by the Company, contains statements that are forward- looking. Such statements may relate to plans for future expansion, business development activities, other capital spending, financing, or other effects of regulation and competition. Such information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ from those expressed in any forward- looking statements made by or on behalf of the Company. These risks and uncertainties include, but are not limited to, those relating to product and service development activities, dependence on existing management, global economic and market conditions, and changes in federal or state laws. 11
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES SIGNATURE - -------------------------------------------------------------------------------- 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. CECO ENVIRONMENTAL CORP. ---------------------------- Phillip DeZwirek Chief Financial Officer Chief Executive Officer Date: August 3, 1998 12
CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES APPENDIX A TO ITEM 601(c) OF REGULATION S-B - -------------------------------------------------------------------------------- THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF CECO ENVIRONMENTAL CORP. AND SUBSIDIARIES AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. ITEM NUMBER AMOUNT ITEM DESCRIPTION - ----------- ------ ---------------- 5-02(1) $ 269,327 Cash and cash items 5-02(2) 626,222 Marketable securities 5-02(3)(a)(1) 4,077,788 Notes and accounts receivable, trade 5-02(4) 0 Allowances for doubtful accounts 5-02(6) 725,379 Inventories 5-02(9) 6,696,432 Total current assets 5-02(13) 3,962,994 Property, plant and equipment 5-02(14) 1,869,960 Accumulated depreciation 5-02(18) 15,220,717 Total assets 5-02(21) 6,084,115 Total current liabilities 5-02(22) 1,904,858 Bonds, mortgages and similar debt 5-02(28) 0 Preferred stock, mandatory redemption 5-02(29) 0 Preferred stock, no mandatory redemption 5-02(30) 83,888 Common stock 5-02(31) 7,282,343 Other stockholders' equity 5-02(32) 15,220,717 Total liabilities and stockholders' equity 5-03(b)1(a) 4,190,720 Net sales of tangible products 5-03(b)1 13,079,061 Total revenues 5-03(b)2(a) 2,103,209 Cost of tangible goods sold 5-03(b)2 12,346,662 Total costs and expenses applicable to sales and revenues 5-03(b)3 112,789 Other costs and expenses 5-03(b)5 0 Provision for doubtful accounts and notes 5-03(b)(8) 112,789 Interest and amortization of debt discount 5-03(b)(10) 655,055 Income (loss) before taxes and other items 5-03(b)(11) 276,000 Income tax expense (credit) 5-03(b)(14) 341,878 Income (loss) continuing operations 5-03(b)(15) 0 Discontinued operations 5-03(b)(17) 0 Extraordinary items 5-03(b)(18) 0 Cumulative effect, changes in accounting principles 5-03(b)(19) 341,878 Net income or loss 5-03(b)(20) .04 Earnings (loss) per share, basic 5-03(b)(20) .04 Earnings (loss) per share, diluted