28
U.S. Securities and Exchange Commission
Washington D. C., 20549
Form 10-KSB/A
(Mark One)
( X ) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2000
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from__________ to ___________.
Commission file number 0-20924
RECONDITIONED SYSTEMS, INC.
(Name of small business issuer in its charter)
Arizona 86-0576290
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
444 West Fairmont, Tempe, Arizona 85282
(Address of principal executive offices)
480-968-1772
(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common stock, no par value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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_____.
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. (X)
The issuer's revenues for the fiscal year ended March 31, 2000 were $10,948,549.
As of June 9, 2000, the aggregate market value of the Common Stock (based on the
closing price as quoted on the Nasdaq Small Cap Market on that date) held by
non-affiliates of the Registrant was approximately $2,331,801.
As of June 9, 2000, the number of shares outstanding of the Registrant's common
stock was 1,327,684.
Portions of the Registrant's definitive Proxy Statement, dated July 13, 2000,
are incorporated herein by reference into Part III of this Report.
Transitional Small Business Disclosure Format. Yes [ ] No [X] .
Item 7. Financial Statements
INDEPENDENT AUDITORS' REPORT
----------------------------
To The Stockholders and Board of Directors of
Reconditioned Systems, Inc.
We have audited the accompanying balance sheets of Reconditioned Systems, Inc.
as of March 31, 2000 and 1999, and the related statements of operations,
stockholders' equity, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Reconditioned Systems, Inc. as
of March 31, 2000 and 1999, and the results of its operations, stockholders'
equity, and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.
Moffitt & Company, PC
Scottsdale, Arizona
August 8, 2001
RECONDITIONED SYSTEMS, INC.
BALANCE SHEETS
March 31, 2000 and 1999
2000 1999
---- ----
ASSETS
Current Assets:
Cash and cash equivalents (Notes 1, 2 and 3) $920,778 $1,103,325
Accounts receivable (Notes 1 and 6) 2,055,151 1,691,882
Inventory (Notes 1 and 6) 1,191,173 909,622
Prepaid expenses and other current assets 54,372 51,002
------ ------
Total current assets 4,221,474 3,755,831
--------- ---------
Property and Equipment, net: (Note 1 and 5) 262,543 189,173
------- -------
Other Assets:
Notes receivable - officer (Notes 3 and 4) 75,000 150,000
Refundable deposits 13,036 13,036
Other 73,745 24,703
------ ------
161,781 187,739
------- -------
Total Assets $4,645,798 $4,132,743
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 717,148 557,662
Customer deposits 26,309 22,635
Accrued expenses and other current liabilities 293,544 286,076
------- -------
Total current liabilities 1,037,001 866,373
--------- -------
Stockholders' Equity:
Common stock, no par value; 20,000,000
shares authorized 4,587,576 4,586,982
Accumulated deficit (619,566) (1,320,612)
--------- -----------
3,968,010 3,266,370
Less: treasury stock, 146,132 and 132 shares
respectively, at cost (359,213) 0
--------- -
3,608,797 3,266,370
--------- ---------
Total Liabilities and Stockholders' Equity $4,645,798 $4,132,743
========== ==========
The Accompanying Notes are an Integral Part
of the Financial Statements
RECONDITIONED SYSTEMS, INC.
STATEMENTS OF OPERATIONS
For the Years Ended March 31, 2000 and 1999
2000 1999
---- ----
Sales $10,948,549 $11,042,451
Cost of sales 8,114,580 8,396,278
--------- ---------
Gross profit 2,833,969 2,646,173
Selling & administrative expenses 1,865,787 1,600,257
Severance charges (Note 7) 332,984 0
Terminated merger costs (Note 12) 0 50,588
- ------
Income from operations 635,198 995,328
Other income (expense):
Interest income 63,055 49.083
Interest expense 0 (1,276)
Other 2,793 7,681
----- -----
Net income before income taxes 701,046 1,050,816
Provision for income taxes 0 0
- -
Net income $701,046 $1,050,816
======== ==========
Basic earnings per share (Notes 1 and 11) $ 0.51 $ 0.71
======== =======
Basic weighted average number
of shares outstanding 1,372,935 1,473,950
========= =========
Diluted earnings per common
and common equivalent share
(Notes 1 and 11) $ 0.46 $ 0.62
======= =======
Diluted weighted average number
of shares outstanding 1,534,051 1,697,352
========== =========
The Accompanying Notes are an Integral Part
of the Financial Statements
RECONDITIONED SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended March 31, 2000 and 1999
Common Stock Common Stock Retained
Shares Amount Earnings Treasury
(Deficit) Stock Total
---------------------------------- -------------- ----------------- ---------------- -------------- --------------
Balance at March 31, 1998 1,473,950 $4,586,982 $(2,367,674) $(3,754) $2,215,554
Retirement of Treasury
Shares (134) - (3,754) 3,754 -
Net income - - 1,050,816 - 1,050,816
-------------- ----------------- ----------------- ------------ ---------------
Balance at March 31, 1999 1,473,816 $4,586,982 $(1,320,612) $ - $3,266,370
Purchase of Treasury
Shares (150,000) - - (368,413) (368,413)
Transfer of shares to
ESOP Plan 3,868 594 - 9,200 9,794
Net income - - 701,046 - 701,046
-------------- ----------------- ----------------- ------------- --------------
Balance at March 31, 2000 1,327,684 $4,587,576 $(619,566) $(359,213) $3,608,797
============== ================= ================== ============ ==============
The Accompanying Notes are an Integral Part
of the Financial Statements
RECONDITIONED SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
For the Year Ended March 31, 2000 and 1999
2000 1999
---- ----
Cash Flows from Operating Activities:
Cash received from customers $10,588,073 $10,319,727
Cash paid to suppliers and employees (10,287,962) (9,859,690)
Interest received 63,055 49,083
Interest paid 0 (1,276)
- -------
Net cash provided by operating
activities 363,166 507,844
------- -------
Cash Flows from Investing Activities:
Purchase of property and equipment (173,270) (103,590)
Other (13,825) (174)
-------- -----
Net cash used by investing
activities (187,095) (103,764)
--------- ---------
Cash Flows from Financing Activities:
Principal payments on credit line,
long-
term borrowings and obligations 0 (33,786)
under
capital leases
Purchase of Treasury Stock (368,412) 0
Transfers to ESOP Plan 9,794 0
----- -
Net cash used by financing
activities (358,618) (33,786)
--------- --------
Increase (Decrease) in cash and cash equivalents (182,547) 370,294
Cash and cash equivalents at beginning of
period 1,103,325 733,031
--------- -------
Cash and cash equivalents at end of period $920,778 $1,103,325
======== ==========
The Accompanying Notes are an Integral Part
of the Financial Statements
RECONDITIONED SYSTEMS, INC.
STATEMENTS OF CASH FLOWS (Continued)
For the Year Ended March 31, 2000 and 1999
2000 1999
---- ----
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net Income $701,046 $1,050,816
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 84,816 48,790
Provision for doubtful accounts (5,000) 1,000
Loss on disposal of fixed assets 0 355
Non-cash portion of severance charges (Note 7) 80,484 0
Changes in assets and liabilities:
Accounts receivable (358,269) (730,760)
Inventory (281,551) 15,636
Prepaid expenses and other assets (28,988) (11,548)
Accounts payable and accrued expenses 170,628 133,555
------- -------
Net cash provided by operating activities $363,166 $507,844
======== ========
Non-Cash Investing and Financing Activities:
During the years ended March 31, 2000 and 1999, the Company did not have any
non-cash investing or financing activities.
The Accompanying Notes are an Integral Part
of the Financial Statements
RECONDITIONED SYSTEMS, INC.
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 1.
Summary of Significant Accounting Policies, Nature of Operations,
and Use of Estimates
--------------------------------------------------------------------------------
Nature of Business:
Reconditioned Systems, Inc. ("RSI" or the "Company"), is a corporation
which was incorporated in the State of Arizona in March, 1987. The
principal business purpose of the Company is the remanufacturing and
sale of office workstations comprised of panel systems to customers
located throughout the country. In addition, the Company markets new
workstations, filing, seating, lighting and other office furniture
accessories.
Pervasiveness of Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results could differ
from those estimates.
Revenue Recognition:
The Company recognizes a sale when its earnings process is complete. In
connection with projects that are to be installed by a customer or an
agent of the customer, the sale is recognized when the product is
shipped to or possession is taken by the customer. In connection with
projects installed by the Company, the sale is recognized upon
completion of the installation.
Cash and Cash Equivalents:
The Company considers all highly liquid debt instruments and money
market funds purchased with an initial maturity of three (3) months or
less to be cash equivalents.
Accounts Receivable - Trade:
The Company provides for potentially uncollectible accounts receivable
by use of the allowance method. The allowance is provided based upon a
review of the individual accounts outstanding and the Company's prior
history of uncollectible receivable. At March 31, 2000 and 1999, the
Company has established an allowance for doubtful accounts in the
amount of $26,000 and $31,000, respectively.
Inventory:
Inventory, which is primarily composed of used office workstations and
remanufacturing supplies, is stated at the lower of cost
(weighted-average method) or market. The Company reviews its inventory
monthly and makes provisions for damaged and obsolete items. The
Company contemplates its ability to alter the size of panels and other
workstation components and designs projects so that the workstations
are comprised of products currently in inventory in establishing its
obsolescence reserve. At March 31, 2000 and 1999, the Company had
established a reserve for damaged and obsolete inventory in the amounts
of $50,000 and $100,000, respectively.
RECONDITIONED SYSTEMS, INC.
Notes to Financial Statements (Continued)
--------------------------------------------------------------------------------
Note 1.
Summary of Significant Accounting Policies, Nature of Operations,
and Use of Estimates
(Continued)
--------------------------------------------------------------------------------
Property and Equipment:
Property and equipment are recorded at cost. Depreciation is generally
provided for on the straight-line basis over the following estimated
useful lives of the assets:
Years
-----
Machinery and equipment 5 - 7
Office furniture and equipment 5 - 7
Leasehold improvements Lease term
Vehicles 4 - 5
Deferred Income Taxes:
Deferred income taxes are provided on an asset and liability method,
whereby deferred tax assets are recognized for deductible temporary
differences and operating loss and tax credit carryforwards and
deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax basis.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, there is uncertainty of the operating losses in
future periods. Deferred tax assets and liabilities are adjusted for
the effects of changes in tax laws and rates on the date of enactment.
Stock-Based Compensation:
The Company has elected to follow Accounting Principles Board Opinion
No. 25 Accounting for Stock Issued to Employees (APB 25) and the
related interpretations in accounting for its employee stock options.
Under APB 25, because the exercise price of employee stock options
equals the market price of the underlying stock on the date of grant,
no compensation expense is recorded. The Company has adopted the
disclosure-only provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (Statement
No. 123).
During 1999, the Company adopted an Employee Stock Purchase Plan (the
"Plan"). Under this plan, employees may purchase shares of the
Company's common stock, subject to certain limitations, at 85% of its
market value. Purchases are limited to 10% of an employee's eligible
compensation, up to a maximum of $25,000 per year. An aggregate of
200,000 shares of the Company's common stock are authorized and
available for sale to eligible employees. During the year ended March
31, 2000, 3,868 shares were issued to employees under the Plan.
RECONDITIONED SYSTEMS, INC.
Notes to Financial Statements (Continued)
--------------------------------------------------------------------------------
Note 1.
Summary of Significant Accounting Policies, Nature of Operations,
and Use of Estimates
(Continued)
--------------------------------------------------------------------------------
Earnings Per Common and Common Equivalent Share:
Basic earnings per share include no dilution and are computed by
dividing income available to common stockholders by the weighted
average number of shares outstanding for the period.
Diluted earnings per share amounts are computed based on the weighted
average number of shares actually outstanding plus the shares that
would be outstanding assuming the exercise of dilutive stock options,
all of which are considered to be common stock equivalents. The number
of shares that would be issued from the exercise of stock options has
been reduced by the number of shares that could have been purchased
from the proceeds at the average market price of the Company's stock.
In addition, certain outstanding options are not included in the
computation of diluted earnings per share because their effect would be
antidilutive.
-------------------------------------------------------------------------------
Note 2.
Concentrations
-------------------------------------------------------------------------------
The Company maintains cash balances at various financial institutions. Deposits
not to exceed $100,000 at the financial institutions are insured by the Federal
Deposit Insurance Corporation. As of March 31, 2000, the Company had
approximately $960,170 of uninsured cash.
In addition, the Company specializes in remanufacturing one particular original
manufacturer's (OEM) line of office workstations. The business is dependent upon
a readily available supply of new parts, as well as used product.
--------------------------------------------------------------------------------
Note 3.
Fair Value of Financial Instruments
--------------------------------------------------------------------------------
Estimated fair values of the Company's financial instruments (all of which are
held for non-trading purposes), are as follows:
March 31, 2000 March 31, 1999
-------------- --------------
Carrying Carrying
Amount Fair Value Amount Fair Value
-------- ---------- --------- ----------
Cash and cash equivalents $920,778 $920,778 $1,103,235 $1,103,235
The carrying amount approximates fair value of cash and short-term instruments.
The fair values of the Note receivable - officer cannot be determined due to its
related party nature.
RECONDITIONED SYSTEMS, INC.
Notes to Financial Statements (Continued)
--------------------------------------------------------------------------------
Note 4.
Note Receivable - Officer
--------------------------------------------------------------------------------
As of March 31, 2000, the Company had a note receivable from an officer payable
in one payment on or before December 19, 2002, and collateralized by 50,000
shares of the Company's Common Stock. Interest on the note accrues at a rate
equal to that of the company's lenders' base rate plus 2.5%, payable annually
beginning December 19, 1998.
--------------------------------------------------------------------------------
Note 5.
Property and Equipment
--------------------------------------------------------------------------------
Property and equipment by major classifications are as follows:
March 31,
2000 1999
---- ----
Office furniture and equipment $271,255 $258,840
Machinery and equipment 121,327 233,996
Leasehold improvements 34,612 42,304
Vehicles 36,922 36,054
Showroom furniture 21,512 0
---------- ---------
485,628 571,194
Accumulated depreciation (223,085) (382,021)
---------- ---------
$262,543 $189,173
======== ========
Depreciation expense for the years ended March 31, 2000 and 1999 totaled $80,259
and $48,790, respectively.
--------------------------------------------------------------------------------
Note 6.
Pledged Assets and Line of Credit
--------------------------------------------------------------------------------
As of March 31, 2000, the Company had a $1,000,000 line of credit agreement with
M&I Thunderbird Bank. Under this agreement, interest is payable at the bank's
base rate. Borrowings on the line of credit may not exceed seventy-five percent
(75%) of eligible accounts receivables and thirty percent (30%) of eligible
inventory up to $300,000. The line of credit is collateralized by accounts
receivable, inventory, property and equipment, and intangibles. The agreement
contains various covenants by the Company, including covenants that the Company
will maintain certain net worth thresholds and ratios, will meet certain debt
service coverage ratios, and will not enter into or engage in various types of
agreements or business activities without approval from M&I Thunderbird Bank.
As of March 31, 2000, the Company had no outstanding borrowings on the line of
credit and was in compliance with all of the covenants of the agreement.
RECONDITIONED SYSTEMS, INC.
Notes to Financial Statements (Continued)
--------------------------------------------------------------------------------
Note 7.
Severance Charges
--------------------------------------------------------------------------------
Effective September 30, 1999, the Company entered into an agreement with and
accepted the resignation of Wayne R. Collignon, the Company's former President
and Chief Executive Officer (CEO).
On February 23, 2000, Mr. Collignon filed a lawsuit against the Company in the
Superior Court of the State of Arizona. The suit alleged breach of the above
mentioned agreement and violation of certain Arizona statutes relating to the
payment of wages. The suit sought relief in the amount of approximately $348,000
and reimbursement of attorneys' fees and court costs. Subsequently, Mr.
Collignon and the Company settled the lawsuit.
As a result of the settlement and the original agreement, the Company recorded a
total charge to operating income of $332,984, of which $292,984 was charged in
the second fiscal quarter and $40,000 was charged in the fourth fiscal quarter.
Confidentiality provisions in the settlement with Mr. Collignon prevent the
Company from disclosing any further details regarding this transaction.
--------------------------------------------------------------------------------
Note 8.
Operating Lease Commitments
--------------------------------------------------------------------------------
The Company leases remanufacturing, warehouse, showroom and office space in
Tempe, Arizona, as well as certain equipment under non-cancelable operating
lease agreements expiring at various times through April, 2006. Certain of the
lease agreements require the Company to pay property taxes, insurance and
maintenance costs. The lease on the Tempe, Arizona facility expires April, 2006.
The total minimum rental commitment due is as follows:
March 31, Amount
--------- ------
2001 $332,489
2002 356,884
2003 363,852
2004 370,995
2005 378,137
Subsequent 417,436
-------
$2,219,793
==========
Rent expense under operating lease agreements for the years ended March 31, 2000
and 1999 was approximately $336,000 and $285,500, respectively.
RECONDITIONED SYSTEMS, INC.
Notes to Financial Statements (Continued
--------------------------------------------------------------------------------
Note 9.
Income Taxes
--------------------------------------------------------------------------------
Deferred tax assets consist of the following components:
March 31, 2000 March 31, 1999
-------------- --------------
Deferred tax assets:
State loss carryforwards $ 8,000 $72,000
Federal loss carryforwards 105,000 338,000
------- -------
113,000 410,000
Less: valuation allowance (113,000) (410,000)
--------- ---------
$ 0 $ 0
========== =========
The Company's income tax provisions differ from the amount computed by applying
the federal statutory income tax rate to income before taxes. A reconciliation
to the statutory federal income tax rate is as follows:
March 31, 2000 March 31, 1999
-------------- --------------
Income tax at statutory effective rate $238,000 $412,761
Adjustments:
NOL Carryforward (238,000) (412,761)
--------- ---------
$ 0 $ 0
========== =========
The Company's approximate net operating loss carryforwards and their respective
expiration dates, are as follows:
Amount Expiration
------ ----------
Federal $299,000 2011
State $ 99,000 2001
Based on recent taxable income levels, the Company's net operating loss
carryforwards may not be sufficient to fully offset income in future periods, in
which case the Company would begin to incur income tax expense.
--------------------------------------------------------------------------------
Note 10.
Common Stock Options
--------------------------------------------------------------------------------
During the year ended March 31, 1997, the Board of Directors issued 300,000
common stock options to certain officers and directors with an exercise price of
$1.00 per share.
During the year ended March 31, 1998, the Board of Directors approved the 1997
Employee Stock Option Plan. The Plan authorizes the Company to grant incentive
stock options to key employees of the Company. 50,000 shares of common stock are
reserved for issuance pursuant to this Plan.
RECONDITIONED SYSTEMS, INC.
Notes to Financial Statements (Continued)
--------------------------------------------------------------------------------
Note 10.
Common Stock Options
(Continued)
--------------------------------------------------------------------------------
Following is a summary of the status of the outstanding stock options for
employees, officers and directors during the year ended March 31, 1999 and 2000:
Weighted Average
Number of Options Exercise Price
----------------- ----------------
Outstanding as of April 1, 1998 300,000 $1.00
Granted 8,400 3.00
Exercised 0 0
- -
Outstanding as of March 31, 1999 308,400 1.05
Granted 8,907 2.63
Exercised 0 0
Forfeited (102,100) 1.04
--------- ----
Outstanding as of March 31, 2000 215,207 $1.13
======= =====
Information relating to the stock options at March 31, 2000, summarized by
exercise price, is as follows:
OUTSTANDING EXERCISABLE
----------- -----------
Weighted Average Weighted Average
---------------- ----------------
Remaining
Life Exercise Exercise
Shares (Years) Price Shares Price
------ ------- -------- ------ --------
6,300 4.0 $3.00 0 -
200,000 6.39 $1.00 200,000 $1.00
8,907 7.25 $2.63 4,000 $2.63
----- ---- ----- ----- -----
215,207 6.36 $1.13 204,000 $1.03
======= ==== ===== ======= =====
RECONDITIONED SYSTEMS, INC.
Notes to Financial Statements (Continued)
--------------------------------------------------------------------------------
Note 10.
Common Stock Options
(Continued)
--------------------------------------------------------------------------------
All stock options issued have an exercise price not less than the fair market
value of the Company's common stock on the date of grant. In accordance with
accounting for such options utilizing the intrinsic value method, there is no
related compensation expense recorded in the Company's financial statements for
the years ended March 31, 1999 and 2000. Had compensation cost for stock-based
compensation been determined based on the fair value of the options at the grant
dates consistent with the method of SFAS 123, the Company's net income and
earnings per share would have been reduced to the pro forma amounts presented
below:
Year Ended Year Ended
March 31, 2000 March 31, 1999
-------------- --------------
Net income:
As reported $701,046 $1,050,816
Pro forma 692,046 1,039,245
Earnings per share:
Basic:
As reported $ 0.51 $0.71
Pro forma 0.50 0.71
Diluted:
As reported $ 0.46 $0.62
Pro forma 0.45 0.62
The fair value of option grants is estimated as of the date of grant utilizing
the Black-Scholes option-pricing model with the following weighted average
assumptions for grants in 2000 and 1999: expected life of options of 7.25 years,
expected volatility of 40%, risk-free interest rates of 8%, and a 0% dividend
yield. The weighted average fair value at date of grant for options granted
during 2000 and 1999 was approximately $1.47 and $3.00, respectively.
RECONDITIONED SYSTEMS, INC.
Notes to Financial Statements (Continued)
--------------------------------------------------------------------------------
Note 11.
Earnings Per Share
--------------------------------------------------------------------------------
For the years ended March 31, 2000 and 1999, the following data shows amounts
used in computing earnings per share and the effect on income and the weighted
average number of shares of dilutive potential common stock.
March 31,
2000 1999
---- ----
Basic EPS
Net Income $701,046 $1,050,816
======== ==========
Weighted average number of shares outstanding 1,372,935 1,473,880
Basic earnings per share $0.51 $0.71
===== =====
Diluted EPS
Net Income $701,046 $1,050,816
======== ==========
Weighted average number of shares outstanding 1,372,935 1,473,880
Effect of dilutive securities:
Stock options 161,116 223,472
------- -------
Total common shares + assumed conversions 1,534,051 1,697,352
Diluted earnings per share $0.46 $0.62
===== =====
--------------------------------------------------------------------------------
Note 12.
Terminated Merger Costs
--------------------------------------------------------------------------------
During the fiscal year ended March 31, 1999, the Company entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Cort Investment
Group, Inc., a Texas corporation d/b/a Contract Network ("CNI"). CNI terminated
the Merger Agreement in February 1999. As of March 31, 1999, the Company had
incurred $50,588 in expenses related to the terminated merger.
--------------------------------------------------------------------------------
Note 13.
Subsequent Event
--------------------------------------------------------------------------------
On June 8, 2001, the Company's former principal independent accountant, Semple &
Cooper, LLP resigned. Semple & Cooper's reports on the Company's financial
statements for the years ended March 31, 1999 and 2000 contained an unqualified
opinion, and were not modified as to uncertainty, audit scope or accounting
principles. There were no disagreements with Semple & Cooper on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure. On June 29, Semple & Cooper, notified the Company ther were
withdrawing their opinions for the audits for the fiscal years ended March 31,
1999 and 2000. (See the Company's reports filed on Form 8-K dated June 15, 2001
and June 29, 2001.)
On July 5, 2001, Nasdaq notified the Company that as a result of Semple & Cooper
withdrawing their audit opinions, the Company was no longer in compliance with
Nasdaq Marketplace Rule 4815(b) and that the Company's securities were in
jeopardy of being delisted from the Nasdaq Stock Market. The Company engaged
Moffitt & Company to conduct an audit of the Company's financial statements for
the years ended March 31, 1999 and 2000 in order to correct the deficiency. As
of the date of this report, the Company believes it has satisfied this
deficiency.
On July 24, 2001, Nasdaq informed the Company that the Company's public float
was not in compliance with the Marketplace Rules. The Company issued a 5% stock
dividend to shareholders of record on August 13, 2001 in order to satisfy the
public float requirement.
Item 8. Changes in and Disagreements with Accountants on Accounting and
------------------------------------------------------------------------
Financial Disclosure
---------------------
On June 8, 2001, the Registrant's former principal independent accountant,
Semple & Cooper, LLP resigned. On June 29, 2001, Semple & Cooper notified the
Company they were withdrawing their opinions for the audits for the fiscal years
ended March 31, 1999 and 2000. (See the Company's reports filed on Form 8-K
dated June 15, 2001 and June 29, 2001.) Semple & Cooper's reports on the
Company's financial statements for the years ended March 31, 1999 and 2000 did
not contain an adverse opinion or disclaimer of opinion, and were not modified
as to uncertainty, audit scope or accounting principles. There were no
disagreements with Semple & Cooper on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure. On
June 22, 2001, the Registrant appointed Moffitt & Company, PC as the principal
independent accountant. Moffitt & Company has re-audited the Company's
financial statements for the years ended March 31, 1999 and 2000.
SIGNATURES
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and the
dates indicated.
Reconditioned Systems, Inc.
Date: August 24, 2001 /s/ Scott W. Ryan
--------------------------
Scott W. Ryan, Chairman of the Board
Date: August 24, 2001 /s/ Dirk D. Anderson
-----------------------------
Dirk D. Anderson, Chief Executive Officer
and President
(Principal Accounting Officer)