Dear Tomcat !
The “other income “ on the statement of operations is from cash
Investment by the company. The owner believes in building his pyramid with
A solid foundation ----- cash and no long –term debt and his payoff is starting
To show. Obviously, this is a long-term investment but one I feel will be a major
Player in the Pet industry but also in the environmental clean-up area.
Boryh,
P.S.
Cash Flows from Investing Activities
Purchase land (5,000)
Purchase of equity and bonds 702,793
Purchase of property and equipment (151,654)
Purchase Treasury stock (164,143)
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following table sets forth the percentage relationship to sales of principal items contained in the Company's Statements of Operations for the three month periods ended September 30, 1998 and 1997. It should be noted that percentages discussed throughout this analysis are stated on an approximate basis.
Three Months Ended
March 31,
1998 1997
(Unaudited)
Total revenues . . . . . . . . . . . . . . . . . . . . 100 % 100 %
Cost of sales. . . . . . . . . . . . . . . . . . . . 59 % 54 %
Gross profit . . . . . . . . . . . . . . . . . . . . . 41 % 46 %
General and Administrative expenses . . . . . . . . . 63 % 52 %
Other income . . . . . . . . . . . . . . . . . . . . . 31 % 15 %
Income (loss) before income taxes. . . . . . 9 % 9 %
Provisions income taxes. . . . . . . . . . . . . . . . - -
Net income . . . . . . . . . . . . . . . . . . . . . . 9 % 9 %
Results of Operations
Total sales, net of allowances and discounts, for the three month period ended September 30, 1998 ("first quarter of fiscal 1998") increased 102% from the first quarter of fiscal 1997 due primarily to new customer shipments. Cost of sales (as a percentage of total revenues) increased to 59% for the first quarter of fiscal 1998, from 54% for the first quarter of fiscal 1997 due to the shipment of lower margin absorbent products. Actual cost of sales increased 118% for the first quarter of fiscal 1998 compared to the corresponding 1997 period. This reflects the 102% increase in sales for the period and the shipment of lower margin absorbent products as a result of the acquisition of Super Dry Industries, Inc. ("Super Dry").
General and administrative expenses for first quarter of fiscal 1998 increased 144% compared to the corresponding 1997 period, primarily attributed to salaries and other costs associated with Super Dry. As a percentage of total revenues, general and administrative expenses increased from 52% for the first quarter of fiscal 1997 to 63% for the first quarter of fiscal 1998, due to an increase in salaried employees resulting from the Super Dry acquisition.
Other income increased to $148,559 (312%) for the first quarter of fiscal 1998 from $36,085 for the 1997 period due to interest income from cash balances and gains from investments. The net profit for the first quarter of fiscal 1998 increased to $43,706 compared with $20,660 for the corresponding 1997 period.
Liquidity and Capital Resources
Historically, the Company's working capital needs have been satisfied by operations and financing activities through the sale of securities. Working capital at September 30, 1998 was $2,995,397, a decrease from $3,275,513 at June 30, 1998. The decrease in working capital is primarily attributed to the 29% increase in accounts payable, expenditures for the purchase of new property and equipment ($151,654), and for the repurchase by the Company of its own common stock ($164,143). This decrease in working capital was partially offset with the $49,037 (16%) increase in accounts receivable due to new customer orders.
During the first three months of 1998, the Company generated cash by liquidating investments which resulted in the $913,740 (56%) decrease in investments in trading equities. These funds were used to increase cash by $345,280 (40%),inventories by $100,670 (17%), and prepaid expenses by $26,495 (88%).
Net cash used by operating activities for the first three months of fiscal 1998 was $36,716 compared $28,473 for the comparable 1997 period. This change is primarily attributed to the increases in net income and accounts payable, partially offset by increases in accounts receivable, prepaid expenses and inventories. Net cash provided by investing activities for the first three months of fiscal 1998 $381,996 compared to net cash used of $522,463 for the 1997 period. This result is due to the purchase of property and equipment during the first three months of fiscal 1997 and the sale of equity and bond investments during the first three months of fiscal 1998.
The Company anticipates meeting its working capital needs during the next twelve months primarily with revenues from operations resulting from increased marketing activities related to the Company's products. Management has not entered into any new arrangements or definitive agreements for additional private placement of securities and/or a public offering. If the Company's operations are not adequate to fund its operations and it is unable to secure financing from the sale of its securities or from private lenders, the Company could experience a cash flow shortage which could curtail the Company's operations.
As of September 30, 1998, the Company had total assets of $6,167,800 and total stockholders' equity of $5,889,085. In comparison, as of June 30, 1998, the Company had total assets of $6,242,837 and total stockholders' equity of $6,021,628. This decrease in total assets for the first three months of fiscal 1998 is primarily due to the decrease in investments in trading equities and accounts receivable.
In the opinion of management, inflation has not had a material effect on the operations of the Company.
Risk Factors and Cautionary Statements
Forward-looking statements in this report are made pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. The Company wishes to advise readers that actual results may differ substantially from such forward-looking statements. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements, including, but not limited to, the following: the ability of the Company to generate working capital, the development of the Company's existing and new products, the potential market for the Company's products, competitive factors, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission.
PART II
Item 1. Legal Proceedings
There are presently no material pending legal proceedings to which the Company or any of its subsidiaries is a party or to which any of its property is subject and, to the best of its knowledge, no such actions against the Company are contemplated or threatened.
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