UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 28, 2009
Commission File No. 0-23204

BOSS HOLDINGS, INC.
(Exact name of registrant as specified in its charter)

Delaware   58-1972066
(State or other jurisdiction of   (IRS Employer
incorporation or organization)   Identification No.)

1221 Page Street
Kewanee, Illinois 61443
(Address of principal executive offices)

(309) 852-2131
(Issuer's telephone number)

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 (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___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  X     Yes ___ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer [    ]

 

Accelerated filer [    ]

 
   

Non-accelerated filer [    ]

Smaller Reporting Company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes___  No X   

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

Class   Outstanding at May 1, 2009  
 
Common Stock, $.25 par value             2,116,047  

Part I - Financial Information
Item 1. Financial Statements

Boss Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets
(Dollars in Thousands, Except Per Share Data)

  March 28, December 27,
  2009 2008
Assets   (Unaudited)          
Current Assets:          
      Cash and cash equivalents   $       4,388   $       803  
      Accounts receivable, net     6,023     8,256  
      Inventories     16,146     18,929  
      Deferred tax asset     1,141     1,141  
      Prepaid expenses and other     487     523  
                Total current assets     28,185     29,652  
 
Property and Equipment, net     3,298     3,340  
Other assets     129     48  
Intangibles, net of amortization     360     457  
Goodwill     2,853     2,853  
Deferred tax asset     2,100     2,078  
  $   36,925   $   38,428  
Liabilities and Stockholders' Equity          
Current Liabilities:          
      Current portion of long-term obligations   $   501   $   496  
      Accounts payable     960     1,860  
      Accrued payroll and related expenses     778     1,123  
      Accrued promotional expenses     896       991  
      Other accured liabilities     403     495  
                Total current liabilities     3,538     4,965  
 
Long-Term Obligations, net of current portion     1,442     1,607  
Deferred Compensation     150     146  
Stockholders' Equity:          
      Common stock, $.25 par value; authorized 10,000,000 shares;          
           issued and outstanding 2,116,047 and 2,036,047 shares          
           in 2009 and 2008, respectively     529     509  
      Additional paid-in capital     66,644     66,521  
      Accumulated (deficit)     (35,322 )     (35,271 )
      Accumulated other comprehensive (loss)     (56 )     (49 )
                Total stockholders' equity     31,795     31,710  
 
  $ 36,925   $ 38,428  

The accompanying notes are an integral part of these statements.

2

Boss Holdings, Inc. and Subsidiaries

Consolidated Statements of Operations
(Dollars in Thousands, Except Per Share Data)
(Unaudited)

  Quarter Ended Quarter Ended
  March 28,       March 29,
  2009 2008
Net sales   $       11,582   $       13,354  
Cost of sales     8,859     10,367  
                Gross profit     2,723     2,987  
 
Operating expenses     2,745     2,925  
                Operating income (loss)     (22 )   62  
 
Other income (expense):          
    Interest income     5     19  
    Interest expense     (67 )   (74 )
    Other     1     2  
    (61 )   (53 )
                Income (loss) before income tax     (83 )   9  
 
Income tax expense (benefit)     (32 )   19  
                Net loss   $ (51 ) $ (10 )
 
Comprehensive loss   $ (58 ) $ (82 )  
Weighted average shares outstanding     2,056,267     2,018,345  
Basic earnings (loss) per common share   $ (0.02 ) $ 0.00  
Diluted earnings (loss) per common share   $ (0.02 ) $ 0.00  

The accompanying notes are an integral part of these statements.

3

Boss Holdings, Inc. and Subsidiaries

Consolidated Statements of Cash Flows
(Dollars in Thousands)
(Unaudited)

Three Months Three Months
Ended Ended
March 28, March 29,
2009       2008
Cash Flows from Operating Activities:
      Net loss $       (51 ) $       (10 )
      Adjustments to reconcile net income (loss) to net cash
           provided by (used in) operating activities:
           Depreciation and amortization 146 139
           Stock based compensation 3 2
           Deferred tax benefit (24 ) (3 )
           Changes in assets and liabilities:
                (Increase) decrease in:  
                     Accounts receivable 2,229 890
                     Inventories 2,773 256
                     Prepaid expenses and other current assets 36 91
                     Other assets (8 ) 18
                Increase (decrease) in:  
                     Accounts payable (882 ) (839 )
                     Accrued liabilities (528 ) (379 )
                          Net cash provided by operating activities   3,694 165
 
Cash Flows from Investing Activities:
      Purchases of property and equipment (80 ) (15 )
                          Net cash (used in) investing activities (80 ) (15 )
 
Cash Flows from Financing Activities:
      (Repayment) borrowing on revolving line of credit   (31 ) -
      Repayment on long-term obligation (123 )   (106 )
      Proceeds from exercise of stock options 140 -
                          Net cash (used in) financing activities (14 ) (106 )
 
      Effect of exchange rates on cash and cash equivalents (15 ) (54 )
                          Increase (decrease) in cash and cash equivalents 3,585 (10 )
 
Cash and cash equivalents:
      Beginning of period 803 2,557  
      End of period $ 4,388 $ 2,547  

The accompanying notes are an integral part of these statements.

4

Note 1. Basis of Presentation

       The consolidated financial statements included in this report have been prepared by Boss Holdings, Inc. (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission for interim reporting and include all normal and recurring adjustments which are, in the opinion of management, necessary for a fair presentation. These financial statements have not been audited by an independent accountant. The consolidated financial statements include the accounts of the Company and its subsidiaries.

       Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations for interim reporting. The Company believes that the disclosures are adequate to prevent the information from being misleading. However, these financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K and 10-K/A, for the year ended December 27, 2008. The financial data for the interim periods presented may not necessarily reflect the results to be anticipated for the complete year.

Note 2. Earnings Per Share

       The following table sets forth the computation of basic and diluted earnings (loss) per share:

Quarter Ended
($ in Thousands) March 28,       March 29,
2009 2008
Numerator for basic and diluted net earnings
      per common share, earnings (loss)
      attributable to common stockholders $         (51 ) $         (10 )
Denominator for basic net earnings
      per common share, weighted
      average shares outstanding 2,056,267 2,018,345  
Effect of dilutive securities,
      employee stock options - -
           Denominator for diluted earnings
           per common share 2,056,267 2,018,345
 
Basic earnings (loss), per common share $ (0.02 )   $ 0.00
Diluted earnings (loss), per common share $ (0.02 ) $ 0.00  

Options to purchase 205,680 shares of common stock as of the end of the first quarter of 2008 and options to purchase 129,268 shares as of the end of the first quarter in 2009 were not included in the computation of diluted earnings because the Company operated at a loss during these periods; therefore the effect of option exercise in such circumstances would be antidilutive.

5

Note 3. Comprehensive Income

       SFAS No. 130 “Reporting Comprehensive Income,” establishes standards for reporting comprehensive income and its components in financial statements. Comprehensive income, as defined, refers to revenues, expenses, gains and losses that are not included in net income but rather are recorded directly in stockholders’ equity, which for the Company is comprised of foreign currency translation adjustments and unrealized gains and losses on interest rate swap agreements. The following table summarizes the components of comprehensive income:

($ in Thousands) Three Months Ended
March 28, 2009       March 29, 2008
Net loss $        (51 ) $         (10 )
Other comprehensive income
      Foreign currency translation adjustments   (10 ) (52 )
      Unrealized gain (loss) on interest rate swap agreements    
           net of $2 and ($10), respectively, of income taxes 3 (20 )
Total comprehensive income (loss) $ (58 ) $ (82 )

Note 4. Fair Value Measurements

       Effective December 30, 2007, the Company adopted Statement of Financial Accounting Standard No. 157, “Fair Value Measurements” (SFAS 157), as it applies to our financial instruments, and Statement of Financial Accounting Standard No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115” (SFAS 159). SFAS 157 defines fair value, outlines a framework for measuring fair value, and details the required disclosures about fair value measurements. SFAS 159 permits companies to irrevocably choose to measure certain financial instruments and other items at fair value. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparison between entities that choose different measurement attributes for similar types of assets and liabilities.

       Under SFAS 157, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. SFAS 157 establishes a hierarchy in determining the fair value of an asset or liability. The fair value hierarchy has three levels of inputs, both observable and unobservable. SFAS 157 requires the utilization of the lowest possible level of input to determine fair value. Level 1 inputs include quoted market prices in an active market for identical assets or liabilities. Level 2 inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no market data.

       Except for those assets and liabilities which are required by authoritative accounting guidance to be recorded at fair value in our Consolidated Balance Sheets, the Company has elected not to record any other assets or liabilities at fair value as permitted by SFAS 159.

       The following table provides information on those assets and liabilities measured at fair value on a recurring basis.

6


Carrying Amount             Fair Value Measurements Using
in Consolidated                                  
Balance Sheets Fair Value
March 28, 2009 March 28, 2009 Level 1 Level 2      Level 3  
Marketable Securities (included in other assets) $         150     $       150   $       150          
Interest rate swap liability $ (41 ) $ (41 )   $       (41 )

       The valuation of the interest rate swap liability shown in the table above was provided by the Company’s primary lender and is based on mid-market levels as of the close of business on the dates indicated above.

Note 5. Operating Segments and Related Information

      The Company operates in the work gloves and protective wear segment through its Boss Manufacturing Company subsidiary, which imports, markets and distributes gloves, boots and rainwear products and hands-free lighting products. In addition, through Boss Pet the Company imports and markets a line of pet supplies including dog and cat toys, collars, leads, chains and rawhide products. Through its Galaxy Balloons subsidiary, the Company also markets custom imprinted balloons, balls and other primarily inflatable products.

The following table provides summarized information concerning the Company’s reportable segments. In this table, the Company’s corporate operations are grouped into a miscellaneous column entitled, “Corporate and Other.”

(In Thousands)       Work Gloves and Promotional and Corporate
Protective Wear Pet Supplies Specialty Products and Other Total
2009     2008     2009     2008     2009     2008     2009     2008     2009     2008
Quarter:
      Revenue $ 7,963 $ 9,381 $ 1,952   $ 1,887   $ 1,667   $ 2,086 $  -   $  - $ 11,582   $ 13,354
      Operating income (loss)   70   192   243   175   (23 )     (59 )   (312 )   (246 )   (22 ) 62
      Total assets       25,073       24,403       2,918       3,187       5,704       6,267       3,178       3,621         36,873         37,478
      Intangibles 47 925 - - 3,166 3,257 - - 3,213 4,182

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

      Certain statements, other than statements of historical fact, included in this Quarterly Report including, without limitation, the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are, or may be deemed to be, forward-looking statements that involve significant risks and uncertainties, and accordingly, there is no assurance that these expectations will be correct. These expectations are based upon many assumptions that the registrant believes to be reasonable, but such assumptions ultimately may prove to be materially inaccurate or incomplete, in whole or in part and, therefore, undue reliance should not be placed on them. Several factors which could cause actual results to differ materially from those discussed in such forward-looking statements include, but are not limited to: continuing effects of the current global financial and economic crisis on demand for both consumer and industrial products, pricing and availability of goods purchased from international suppliers, unusual weather patterns which could affect domestic demand for the registrant’s products, pricing policies of competitors, the ability to attract and retain employees in key positions, trends in the advertising and specialties industry and uncertainties and changes in general economic conditions. The words “believe,” “expect”, “anticipate”, “should”, “could” and other expressions that indicate future events and trends identify forward-looking statements. All subsequent forward-looking statements attributable to the registrant or persons acting on its behalf are expressly qualified in their entirety.

7

Sales

Sales by Segment Quarter
$(000) 2009 2008
Work gloves and protective wear 7,963 9,381
Pet supplies   1,952 1,887
Promotional & specialty products 1,667 2,086
Total sales 11,582 13,354

      Because of the continuing national and worldwide economic recession, the Company’s total revenues for the three months ended March 28, 2009 declined 13.3% from the first quarter in 2008. The Company’s pet supplies segment was the only segment to equal or surpass last year’s first quarter revenue number.

      First quarter sales in the work gloves and protective wear segment decreased $1,418,000, or 15.1%, compared to the first quarter of 2008. Industrial sales decreased $938,000 or 22.4% due to decreased industrial activity in the United States. Consumer sales in this segment were able to match last year’s sales level through aggressive work by our sales force in obtaining new accounts. CAT ® branded product sales declined $231,000 as the weak economy affected the sales of premium products. Boss Canada sales declined $279,000 and were significantly adversely affected by manufacturing cutbacks in the auto industry in Canada.

      Boss Pet’s first quarter resulted in a slight increase in sales over the first quarter of 2008. Expanded sales to existing accounts, combined with the addition of new accounts and increased pet toy sales generated by the Company’s new propriety line of plush toys, the “Fat Hedz”, allowed the pet supplies segment to meet and surpass last year’s volume.

      Sales in the promotional and specialty products segment decreased $419,000, or 20.0%, compared to the prior year. Promotional items to schools and banks have declined with the economy along with real estate/construction and automotive promotions. Traditionally these have been significant end markets for the promotional and specialty products subsidiary.

Cost of Sales

Cost of Sales by Segment
$(000) 		Quarter
2009 2008
$ %   $ %
Work gloves and protective wear 6,148 77.2 % 7,263 77.4 %
Pet supplies 1,463 74.9 % 1,467 77.7 %
Promotional & specialty products 1,248 74.9 % 1,637 78.5 %
Total cost of sales 8,859 76.5 % 10,367 77.6 %

      Cost of sales for the three months ended March 28, 2009 totaled $8,859,000, down $1,508,000 from the corresponding period of 2008, and represents a 14.5% reduction from the prior year. Cost of sales for the period declined with the reduction in sales volume and as a result of cost-cutting initiatives put in place at all three segments. Gross margin for the first quarter of 2009 improved to 23.5% from 22.4% for the first quarter of 2008, but overall gross profit dollars have fallen $264,000 as a result of the volume loss compared to the first quarter of 2008.

8

      Gross margin dollars in the work glove and protective wear segment decreased $303,000 during the first quarter of 2009 compared to the first quarter of 2008. This decrease was related to the volume decline and was partially offset by cost reduction from reduced labor, freight and warehouse expenses.

      The pet products segment increased its gross margin to $489,000 for the first quarter of 2009. This was $69,000 above the first quarter of 2008 and was caused by improved pricing from vendors.

      Gross margin for the promotional and specialty products segment declined $30,000 to $419,000 for the first quarter of 2009 compared to the first quarter of 2008. Cost savings at the factory/warehouse offset almost all of the margin loss created by the 20% reduction in the sales volume during the first quarter of 2009.

Operating Expenses

Operating Expenses
by Segment $(000) 		Quarter
2009 2008
$ % $ %
  Work gloves and protective wear 1,745   21.9%   1,926   20.5%  
  Pet supplies 246   12.6%   245   13.0%  
  Promotional & specialty products 442   26.5%   508   24.4%  
  Corporate and other 312   -       246      -      
  Total operating expenses 2,745   23.7%   2,925   21.9%  

      Total operating expenses decreased $180,000 during the first quarter of 2009 compared to the corresponding period in 2008. Cost reductions in salaries, benefits and commissions, along with expense controls put in place in all areas account for the expense savings at work gloves and protective wear and promotional and specialty products. Additional consulting costs, including a first quarter Far East vendor trip, accounted for the increase in corporate expenses. During 2008, this buying trip occurred in the second quarter.

Earnings (Loss) From Operations

Operating Income (Loss)
by Segment $(000) 		Quarter
2009 2008
$ % $ %
  Work gloves and protective wear 70    0.9%   192    2.0%  
  Pet supplies 243   12.4%   175 9.3%  
  Promotional & specialty products (23 ) -1.4%   (59 ) -2.8%  
  Corporate and other (312 ) -       (246 ) -      
  Total operating income (loss) (22 ) -0.2%   62 0.5%  

      On a consolidated basis, the Company’s operating income for the first quarter of 2009 decreased by $84,000 compared to 2008. Cost reductions and expense savings initiatives put in place in the first quarter help to offset a 13.3% decline in revenue during the first quarter of 2009.

9

Other Income and (Expense)

     The Company incurred $67,000 in interest expense during the first quarter of 2009, a decrease of $7,000 from the first quarter of 2008. Interest income for the first quarter of 2009 was $5,000, down $14,000 from the first quarter of 2008. Because bank interest rates have fallen, interest earned on overnight investments is down substantially compared to last year.

Taxes

     In the first quarter of 2009, the Company recorded an income tax benefit of $32,000 based on current federal and estimated state income tax rates. The federal income tax portion of the tax provision is a non-cash expense, because the Company has substantial net operating loss carryforwards for federal income tax purposes resulting from losses in prior years.

     The current ongoing downturn in the national and world economies has caused the Company to consider cost reductions in all aspects of its operations in order to offset lost revenue. Total sales in the first quarter of 2009 were down by 13% compared with the prior year (15% in the work gloves, boots and rainwear segment) and the Company expects further erosion of sales during the remainder of 2009. Industrial sales of work gloves, boots and rainwear are being especially adversely affected by the ongoing recession, down over 22% in the first quarter. Based on disruption in the U.S. automobile manufacturing sector and related industrial businesses including the Chrysler Corporation bankruptcy, anticipated bankruptcy or restructuring of General Motors and production slow-downs at Caterpillar, it appears that a portion of the Company’s industrial sales base is not likely to regenerate even if the economy rebounds. The Company already has reduced its work force, both in warehousing and office staff, and all hourly workers are reduced to a 32 hour workweek. Inventory has been reduced and capital expenditures are being closely evaluated. Management will continue to consider further areas in which to reduce its operating costs.

Liquidity and Capital Resources

     Operating activities provided $3,694,000 in cash during the first quarter of 2009, compared to $165,000 in 2008. This favorable cash performance in 2009 was attributable to reduced inventory and accounts receivable partially offset by decreases in payables and accruals. Inventory levels are being reduced to be in line with current sales projections. The reduction in accounts receivable is a result of the 13.3% decline in sales during the first quarter.

     Investing activities used $80,000 in the first quarter of 2009, compared to $15,000 during the comparable period in 2008. The $80,000 spent during the first quarter was for facility improvements and the initial payments on a new shipping system at the work gloves and protective wear segment. The only capital investment the Company is planning for the second quarter and the rest of the year is $100,000 for the completion of the new shipping system at the work gloves and protective wear segment.

      Financing activities used $14,000 during the first quarter of 2009. Pay down of long-term debt used $123,000 and Boss Canada used $31,000 for repayment on their revolving line of credit. These amounts were partially offset by proceeds from exercised stock options of $140,000. Stock options outstanding as of March 28, 2009 are 231,000. There are currently no borrowings against the Company’s primary line of credit.

      At March 28, 2009 the Company had $4,388,000 in cash with zero borrowings against its $7,000,000 revolving line of credit. The Company was in compliance with its credit facility loan covenants as of March 28, 2009. Management believes the Company’s cash on hand and availability under the credit facility should provide ample liquidity for the Company’s expected working capital and operating needs.

10

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

      The Company has minimal exposure to market risks such as changes in foreign currency exchange rates and interest rates. The value of the Company’s financial instruments is generally not materially impacted by changes in interest rates. The Company has entered into two interest rate swap agreements. The first effectively fixes at 5.83% the interest rate on its mortgage note with a current value of approximately $732,000 related to Kewanee warehouse facilities. The second swap fixes at 6.32% the rate on approximately $583,000 of the Company’s term loan related to the Galaxy acquisition. Fluctuations in interest rates are not expected to have a material impact on the interest expense incurred under the Company’s revolving credit facility.

Item 4T. CONTROLS AND PROCEDURES

      As of the end of the period covered by this report, the Company conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. There was no change in the Company’s internal control over financial reporting during the Company’s most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting .

11

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

      The Company is a party to various legal actions incident to the normal operation of its business. These lawsuits primarily involve claims for damages arising out of commercial disputes. The Company has been named as a defendant in several lawsuits alleging past exposure to asbestos contained in gloves sold by one of the Company’s predecessors-in-interest, all of which actions are being defended by one or more of the Company’s products liability insurers. Management believes the ultimate disposition of these matters should not materially impact the Company’s consolidated financial position or liquidity.

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds

      Not applicable.

Item 3. Defaults Upon Senior Securities

      Not applicable.

Item 4. Submission of Matters to a Vote of Security Holders

      Not applicable.

Item 5. Other Information

      Not applicable.

Item 6. Exhibits

      (a) Exhibits

          31.1 Certification of Principal Executive Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
       
31.2 Certification of Principal Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002.
 
32       Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

12

SIGNATURES

     Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

  BOSS HOLDINGS, INC.  
 
 
 
Dated:   May 12, 2009   By:   /s/ Steven G. Pont  
               Steven G. Pont  
               Vice President of Finance  
              (Principal financial officer)  

13

Boss (PK) (USOTC:BSHI)
Gráfica de Acción Histórica
De Nov 2024 a Dic 2024 Haga Click aquí para más Gráficas Boss (PK).
Boss (PK) (USOTC:BSHI)
Gráfica de Acción Histórica
De Dic 2023 a Dic 2024 Haga Click aquí para más Gráficas Boss (PK).