-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JvNE40bS9TNodBexWJfg3bhnrZZMWLb5f2SYeTRSaF+Qloke753g+JVnmPjFKJN/ qTaWAPaATkoI6HmcjDJDCw== /in/edgar/work/20000907/0000950124-00-005458/0000950124-00-005458.txt : 20000922 0000950124-00-005458.hdr.sgml : 20000922 ACCESSION NUMBER: 0000950124-00-005458 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 20000907 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEOGRAPHICS INC CENTRAL INDEX KEY: 0001000621 STANDARD INDUSTRIAL CLASSIFICATION: [5110 ] IRS NUMBER: 870305614 STATE OF INCORPORATION: WI FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-26756 FILM NUMBER: 717707 BUSINESS ADDRESS: STREET 1: 1555 ODELL RD STREET 2: P O BOX 1750 CITY: BLAINE STATE: WA ZIP: 98230 BUSINESS PHONE: 3603326711 MAIL ADDRESS: STREET 1: 1555 ODELL RD CITY: BLAINE STATE: WA ZIP: 98230 10-Q/A 1 c56702a1e10-qa.txt AMENDMENT NO. 1 TO FORM 10-Q 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q/A AMENDMENT NO. 1 |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Quarter Ended September 30, 1999 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _____ to _____ Commission file number 0-26756 GEOGRAPHICS, INC. (Exact Name of Registrant as Specified in Its Charter) ---------------- WYOMING 87-0305614 (State or Other Jurisdiction (I.R.S. Employer Incorporation or Organization) Identification No.) 1555 ODELL ROAD, P. O. BOX 1750, BLAINE, WASHINGTON 98231 (Address and Zip Code of Principal Executive Offices) Registrant's Telephone Number, Including Area Code (360) 332-6711 ---------------- Securities registered pursuant to Section 12(b) of the Act: NONE Securities registered under Section 12(g) of the Exchange Act: Common stock, no par value Indicate by checkmark 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 No |X| The aggregate market value of the common stock held by nonaffiliates of the registrant as of November 1, 1999 was $13,502,032 based on a closing sales price of $0.53125 per share on the NASDAQ OTC Bulletin Board on such date. The number of shares outstanding of the registrant's common stock, no par value, as of November 1, 1999 was 25,415,589. DOCUMENTS INCORPORATED BY REFERENCE. NONE 2 EXPLANATORY NOTE Geographics, Inc. (the "Company") has determined to restate its annual consolidated financial statements and its condensed consolidated quarterly financial statements for the fiscal year ending March 31, 1999, and condensed consolidated quarterly financial statements for the interim quarters of fiscal 2000. This amendment includes in Item 1 such restated condensed consolidated financial statements for the three and six months ended September 30, 1999, and other information relating to such restated condensed consolidated financial statements. Item 2 includes the Company's amended and restated discussion and analysis of financial condition and results of operations. Except for Items 1 and 2 and Exhibits 11 and 27.1, no other information included in the original report on Form 10-Q is amended by this amendment, and such information is not included as part of this Amendment. For current information regarding risks, uncertainties and other factors that may affect the Company's future performance, please see "Outlook: Issues and Uncertainties" included in Item 7 of the Company's Annual Report on Form 10-K for the year ended March 31, 2000. 3 TABLE OF CONTENTS PAGE PART I - FINANCIAL INFORMATION..........................................................................................1 ITEM 1. FINANCIAL STATEMENTS..................................................................................1 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................1 FORWARD-LOOKING STATEMENTS............................................................................1 RESULTS OF OPERATIONS.................................................................................2 LIQUIDITY AND CAPITAL RESOURCES.......................................................................3 ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK...............................................4 PART II - OTHER INFORMATION..............................................................................................4 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.............................................................4 ITEM 5 - OTHER INFORMATION.....................................................................................5 ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K......................................................................5 SIGNATURE................................................................................................................6
-i- 4 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Geographics, Inc. (the "Company" or "Geographics") has attached to this Report and by this reference incorporated herein the consolidated balance sheets as of September 30, 1999 (unaudited) and March 31, 1999 (audited), the unaudited statements of operations for the three months ended September 30, 1999 and September 30, 1998, and the unaudited consolidated statements of cash flows for the three months ended September 30, 1999 and September 30, 1998, together with the notes thereto. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements of the Company and the notes thereto appearing elsewhere in this Report. FORWARD-LOOKING STATEMENTS Statements herein concerning expectations for the future constitute forward-looking statements which are subject to a number of known and unknown risks, uncertainties and other factors which might cause actual results to differ materially from those expressed or implied by such forward-looking statements. Forward-looking statements herein include, but are not limited to, those concerning anticipated growth in the preprint paper market; anticipated growth in the Company's sales; anticipated growth in sales of specialty paper products as a percentage of revenue; the Company's ability to increase its market share within the preprint industry; the ability of the Company to successfully implement price changes for the Company's products when and as needed; trends relating to the Company's profitability and gross profits margins; the ability of the Company to implement, or modify its management information system, adequately to meet operations requirements in the future and to improve its internal controls; and the ability of the Company to refinance its existing revolving credit facility and to raise additional debt or equity financing sufficient to meet its working capital requirements. Relevant risks and uncertainties include, but are not limited to, slower than anticipated growth of the preprint paper market; loss of certain key customers; insufficient consumer acceptance of the Company's specialty paper products; unanticipated actions, including price reductions, by the Company's competitors; unanticipated increases in the costs of raw materials used to produce the Company's products; supply terms, reliable and immediately available raw material supply and other favorable terms with certain key vendors, greater than expected costs incurred in connection with the implementation of a management information system; failure to realize expected economic efficiencies of the Company's automated production system; the inability to hire and retain key personnel; unexpected increases in the overall costs of production as a result of collective bargaining arrangements; and inability to secure additional working capital when and as needed. Additional risks and uncertainties include those described under "Risk Factors" in Part I of the Company's Annual Report on Form 10-K for the year ended March 31, 1999 and those described from time to time in the Company's other filings with the Securities and Exchange Commission, press releases and other communications. All forward looking statements contained in this Report reflect the Company's expectations at the time of this Report only, and the Company disclaims any responsibility to revise or update any such forward-looking statement except as may be required law. -1- 5 RESULTS OF OPERATIONS Three Months Ended September 30, 1999 vs. Three Months Ended September 30, 1998 NET SALES. Net sales increased 41.5 % to $7,035,426 in the quarter ended September 30, 1999 from $4,971,023 in the quarter ended September 30, 1998. The increase was attributable to new business generated from Sam's Club, an increase in the Company's seasonal programs, and significantly higher sales in Europe, which increased 48.2% from fiscal 1999. In addition, the Company made higher accruals for customer program costs and credits ($1,521,694 or 13.5% of gross sales for the quarter ended September 30, 1999 compared to $707,172 or 12.5% of gross sales for the quarter ended September 30, 1998). The Company's new management has adopted a philosophy to accrue the realistic amounts due under our customer programs throughout the year to better reflect anticipated results. GROSS MARGIN. Gross margin as a percentage of gross sales decreased to 25.0% in the quarter ended September 30, 1999, from 34.5% in the same period in fiscal 1999. The lower gross margin percentage is attributable to the lower net sales as a result of the accruals of customer program costs, an increase in the cost of the Company's paper (4.43%) and supplies, and an increase in freight, primarily due to an increase in freight accruals, and shipping costs. Management is continuing to implement ways to improve manufacturing efficiency. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. While selling, general and administrative expenses increased to $1,900,885 in the quarter ended September 30, 1999 from $1,649,800 in the same period in fiscal 1999, the Company saw a decrease in these expenses on a percentage of sales basis to 27% in the quarter ended September 30, 1999 from 33.2% during the quarter ended September 30, 1998. The increase is primarily attributable to an increase in administrative salaries ($52,527) and travel expenses ($50,030). OTHER INCOME (EXPENSE). Other income for the quarter ended September 30, 1999 amounted to $137,279 compared to other expense of $24,641 for the quarter ended September 30, 1998. The change is due to the income recognized from favorable settlements of amounts owed to vendors. INTEREST EXPENSE. Interest expense decreased to $183,824 (2.3% of gross sales) during the quarter ended September 30, 1999, compared to $270,429 (5.1% of gross sales) during the same period in fiscal 1999. The lower interest costs were caused by a decrease in borrowings of the Company which were refinanced with the proceeds from the private placement of the Company's common stock. See "Liquidity and Capital Resources." Six Months Ended September 30, 1999 vs. Six Months Ended September 30, 1998 NET SALES. Net sales increased 11.9% to $12,01,90 in the six months ended September 30, 1999 from $10,764,864 in the six months ended September 30, 1998. The increase was attributable to new business generated from Sam's Club and an increase in the Company's seasonal programs. In addition, the Company made higher accruals for customer program costs and credits ($1,634,054 or 11.9% of gross sales for the six months ended September 30, 1999 compared to $1,078,808 or 9.1% of gross sales for the six months ended September 30, 1998). The Company's new management has adopted a philosophy to accrue the realistic amounts due under our customer programs throughout the year to better reflect anticipated results. GROSS MARGIN. Gross margin as a percentage of gross sales decreased to 25.9% in the six months ended September 30, 1999, from 35.1% in the same period in fiscal 1999. The lower gross margin percentage is attributable to the lower net sales as a result of the accruals of customer program -2- 6 costs, an increase in the cost of the Company's paper, wages and supplies, and an increase in freight, primarily due to an increase in freight accruals, and shipping costs. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses decreased to $3,349,808 (24.5% of gross sales) during the six months ended September 30, 1999 from $3,586,953 (30.3% of gross sales) in the same period in fiscal 1999. The decrease is primarily attributable to a decrease in consulting ($260,000) and legal expenses ($65,000). OTHER INCOME (EXPENSE). Other income for the six months ended September 30, 1999 amounted to $309,671 compared to other expense of $40,214 for the six months ended September 30, 1998. The change is due to the income recognized from favorable settlements of amounts owed to vendors. INTEREST EXPENSE. Interest expense decreased to $421,569 (3.1% of gross sales) during the six months ended September 30, 1999, compared to $607,910 (5.1% of gross sales) during the same period in fiscal 1999. The lower interest costs were caused by a decrease in borrowings of the Company which were refinanced with the proceeds from the private placement of the Company's common stock. See "Liquidity and Capital Resources." LIQUIDITY AND CAPITAL RESOURCES As a result of the rapid growth of the Company's specialty papers group, capital expenditures relating to the purchase and installation of an automated production system and a management information system, prior year operating losses, the Company has required substantial external working capital. The Company has previously experienced working capital shortfalls, which required the Company to delay payments to certain vendors, institute internal cost reduction measures and take other steps to conserve operating capital. The recapitalization currently in process has alleviated part of this problem. For the year ended March 31, 1999, operating losses totaled $3,096,106, however the Company experienced positive operating cash flows of $1,554,310. At the date of this Report, the Company's only available source of working capital consisted of borrowings available under its revolving credit facility. The revolving credit facility permits borrowings of up to $5.5 million subject to a borrowing base limitation of 70% of the value of the Company's eligible accounts and 55% of the value of its inventory, net of certain reserves. Borrowings under the facility bear interest at the prime rate and are secured by substantially all of the Company's assets. Under the terms of the facility, the Company is required to comply with a number of financial covenants relating to, among other things, the maintenance of minimum net worth, debt-to-equity ratios and cash flow coverage ratios. The Company failed to comply with the net worth, debt-to-equity ratios and cash flow coverage ratios under the revolving credit facility. The Company's lender has also provided the Company with several mortgage loans and equipment loans, and the existence of the defaults under the revolving credit facility constitutes default under these other loans. The report of the Company's auditors included in this Report states that the Company's fiscal 1999 and 1998 losses and non-compliance with covenants under its revolving credit facility raise substantial doubt about the Company's ability to continue as a going concern. In September of 1999, the Company secured agreement from its principal lender to extend the seventh forbearance agreement until November 15, 1999. As a result of new capital raised and favorable changes in management and operations, the Company has received and accepted a banking proposal with US Bank, Milwaukee, Wisconsin to refinance the Company's debt arrangements. As of the date of this Report, Geographics has received over $4,700,000 in a private placement of common stock, with proceeds to the Company at $0.30 per share, which included significant investments from Messrs. -3- 7 William T. Graham, Director and Executive Vice President of the Company, and James L. Dorman, Director, Chairman and Chief Executive Officer of the Company, and their respective affiliates. Further, the Company has engaged Culverwell & Co., Inc. of Boston, Massachusetts to use their best efforts to raise an additional $3,000,000 in a private placement of common stock, with net proceeds to the Company of $0.30 per share. The offering prices were determined after giving effect to minority discounts, and the fact that the new investors are receiving unregistered securities. Upon successful refinancing, the Company intends to eliminate all bank term loans and the defaults associated with those loans. The Company estimates that the effect of the Company's recapitalization plan will result in a decrease in interest expense over $600,000 on an annualized basis. Management anticipates that the recapitalization plan will be completed during the third fiscal quarter. ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Substantially all of the revenue and operating expenses of the Company's foreign subsidiaries are denominated in local currencies and translated into US dollars at rates of exchange approximating those existing at the date of the transactions. Foreign currency translation impacts primarily revenue and operating expenses as a result of foreign exchange rate fluctuations. The Company's foreign currency transaction risk is primarily limited to amounts receivable from its foreign subsidiaries, which are denominated in local currencies. To minimize foreign currency transaction risk, the Company ensures that its foreign subsidiaries remit amounts to the U.S. parent in a timely manner. The Company does not currently utilize foreign currency hedging contracts. The Company also has foreign exchange translation exposures resulting from the translation of foreign currency-denominated earnings into U.S. dollars in the Company's consolidated financial statements. Foreign currency transaction exposure arises when an operating unit transacts business denominated in a currency that is not its own functional currency. The Company's transaction risks are attributable primarily to inventory purchases from third party vendors. The introduction of the Euro has significantly reduced such risks, and transaction exposures on an overall basis are not material. If the U.S. dollar uniformly increases in strength by 3% in fiscal year 2000 relative to the currencies in which the Company's sales are denominated, income before taxes would decrease by $55,000 for the quarter ended September 30, 1999. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates, which are a changed dollar value of the resulting sales, changes in exchange rates also affect the volume of sales or the foreign currency sales price as competitors' products become more or less attractive. The Company's sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices. PART II - OTHER INFORMATION ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS Sales Of Unregistered Securities During the quarter ended September 30, 1999, the Company issued 15,558,337 shares of common stock in a private placement at $.30 per share, pursuant to an exemption from registration under Sections 4(2) and 4(6) of the Securities Act of 1933, as amended, and Rule 506 promulgated thereunder. The following officers and directors of the Company purchased shares pursuant to the offering: -4- 8
NAME POSITION SHARES - ---- -------- ------ William T. Graham Director and Executive Vice President 2,000,000 James L. Dorman Chairman and Chief Executive Officer 956,178 C. Joseph Barnette Director 170,000 John G. Rossmiller Chief Operating Officer 150,000 Jeffrey M. Kildow Vice President - Sales 133,333 David Schenker Vice President - Sales 133,333 ------- Total 3,542,844 =========
The balance of the shares were issued to accredited investors who had been solicited by officers and directors of the Company. Further, the Company has engaged Culverwell & Co., Inc. of Boston, Massachusetts to use their best efforts to raise an additional $3,000,000 in a private placement of common stock, with net proceeds to the Company of $0.30 per share. See "Liquidity and Capital Resources." The private placement offering remains open, and the Company expects to receive additional commitments above and beyond what has been received and issued as of the date of this report. ITEM 5 - OTHER INFORMATION Refinancing Plan The Company has accepted a proposal from US Bank Milwaukee, Wisconsin, to refinance its bank debt. US Bank has agreed to extend to the Company a $7,500,000 credit facility governed by various borrowing base restrictions and other financial covenants. Upon successful refinancing, the Company intends to eliminate all bank term loans and the defaults associated with those loans. The Company expects to complete the refinancing during the third fiscal quarter. New Products The Company has entered into an exclusive distribution arrangement in the United States, Canada and Mexico for a new line of easy to assemble plastic file cabinet and storage drawer products. The Company also intends to introduce a line of fine writing papers during the third quarter to complement our current paper products and appeal to the small business segment of our markets. Management believes that sales pending from these products will enhance the Company's financial results. Business Process and Controls Review During the second quarter, the Company engaged KPMG Vancouver British Columbia ("KPMG") to review its business processes and controls. KPMG completed the review and supplied management with recommendations to enhance the Company's internal control systems. Management is taking steps to address the control weaknesses identified by KPMG and disclosed in previous public filings. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. 10.1 Selling Agent Agreement dated as of October 5, 1999, between the Company and Culverwell & Co., Inc., filed herewith. -5- 9 10.2 Amendment to Selling Agent Agreement dated as of October 14, 1999, between the Company and Culverwell & Co., Inc. 10.3 Commitment Letter from US Bank dated October 19, 1999. 27.1 Financial Data Schedule for the quarter ended September 30, 1999. (b) There were no reports on Form 8-K filed during the quarter ended September 30, 1999. SIGNATURE Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Amendment No. 1 on form 10-Q/A to be signed on its behalf by the undersigned, thereunto duly authorized on this 7th day of August, 2000. GEOGRAPHICS, INC. By: /s/ James L. Dorman ------------------------------------- James L. Dorman President and Chief Executive Officer By: /s/ Daniel J. Regan ------------------------------------- Daniel J. Regan Vice President and Chief Financial Officer -6- 10 GEOGRAPHICS, INC. FORM 10-Q EXHIBIT INDEX FOR THE QUARTER ENDED SEPTEMBER 30, 1999 Exhibit Number 27.1 Financial Data Schedule 11 GEOGRAPHICS, INC CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1999 AND MARCH 31, 1999 (UNAUDITED) ASSETS
SEPTEMBER 30, 1999 MARCH 31, 1999 --------------------- ----------------- RESTATED RESTATED (NOTE 2) (NOTE 2) CURRENT ASSETS Cash $ 168,549 $ 130,967 Accounts receivable Trade receivables, net 4,708,327 3,048,755 Other receivables 133,700 261,091 Inventory, net of allowance for obsolete inventory of $644,000 and $862,000 at September 30 and March 31, 1999 respectively 4,023,553 3,532,684 Prepaid expenses, deposits, and other current assets 579,935 853,357 --------------------- --------------------- Total current assets 9,614,064 7,826,854 PROPERTY, PLANT AND EQUIPMENT, NET 9,598,314 9,945,634 OTHER ASSETS 763,122 367,501 --------------------- --------------------- TOTAL ASSETS $ 19,975,500 $ 18,139,989 ===================== ===================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Bank overdrafts $ 167,275 $ 253,425 Note payable to bank 3,406,993 4,896,912 Accounts payable 3,681,100 2,961,079 Accrued liabilities 1,851,181 2,896,332 Current portion of long-term debt 3,122,038 3,072,601 --------------------- --------------------- Total current liabilities 12,228,587 14,080,349 LONG-TERM DEBT 3,034,188 3,776,432 --------------------- --------------------- Total liabilities 15,262,775 17,856,781 --------------------- --------------------- STOCKHOLDERS' EQUITY No par common stock - 100,000,000 authorized, 25,415,589 and 9,857,252 issued and outstanding at September 30 and March 31, 1999 respectively 20,169,946 15,769,018 Accumulated other comprehensive income (211,326) (157,223) Accumulated deficit (15,245,895) (15,328,587) --------------------- --------------------- Total stockholders' equity 4,712,725 283,208 --------------------- --------------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 19,975,500 $ 18,139,989 ===================== =====================
F-1 12 GEOGRAPHICS, INC Consolidated Statement of Operations (Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1999 1998 1999 1998 ------------- -------------- --------------- -------------- RESTATED RESTATED RESTATED RESTATED (NOTE 2) (NOTE 2) (NOTE 2) (NOTE 2) SALES $ 8,130,428 $5,678,204 $13,675,844 $ 11,843,672 Allowances and Credits (642,808) (351,678) (929,917) (622,908) Sales Returns (452,194) (355,494) (704,137) (455,900) ------------- -------------- --------------- -------------- Net Sales 7,035,426 4,971,032 12,041,790 10,764,864 COST OF SALES 5,002,103 3,013,726 8,498,472 6,605,521 ------------- -------------- --------------- -------------- Gross Margin 2,033,323 1,957,306 3,543,318 4,159,343 S.G.& A. EXPENSES 1,900,885 1,649,800 3,349,808 3,586,953 ------------- -------------- --------------- -------------- Operating Income (Loss) 132,438 307,506 193,510 572,390 OTHER INCOME (EXPENSE) Interest Expense (183,824) (270,430) (421,569) (607,910) Other Income (Expense) 137,279 (24,641) 309,671 (40,214) ------------- -------------- --------------- -------------- Total Other Income (Expense) (46,545) (295,071) (111,898) (648,124) NET INCOME (LOSS) FROM CONTINUING OPERATIONS 85,893 12,435 81,612 (75,734) DISCONTINUED OPERATIONS Income from and gain on disposal of Core Business - - - 5,510,762 ------------- -------------- --------------- -------------- NET INCOME (LOSS) $ 85,893 $ 12,435 $ 81,612 $ 5,435,028 ============= ============== =============== ============== EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Basic $ 0.01 $ 0.00 $ 0.01 $ 0.55 ============= ============== =============== ============== Diluted $ 0.01 $ 0.00 $ 0.01 $ 0.55 ============= ============== =============== ============== SHARES USED IN COMPUTING EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Basic 15,043,364 9,857,252 12,450,308 9,857,252 ============= ============== =============== ============== Diluted 15,422,953 9,857,252 12,829,897 9,857,252 ============= ============== =============== ==============
F-2 13 GEOGRAPHICS, INC. Consolidated Statement of Cash Flows (Unaudited)
SIX MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, 1999 1998 ---------------------- ------------------- RESTATED RESTATED (NOTE 2) (NOTE 2) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 81,612 $ 5,435,028 Adjustments to reconcile net income (loss) to net cash flows from operating activities Depreciation and amortization 652,148 888,177 (Gain) loss on sale/disposal of property and equipment 1,770 - Changes in noncash operating assets and liabilities Trade receivables (1,659,572) (89,411) Other receivables 127,391 (123,287) Inventory (490,869) 1,328,714 Prepaid expenses, deposits and current assets 273,422 10,668 Accounts payable 720,021 (178,927) Accrued liabilities (1,037,222) (109,741) ---------------------- ------------------- Net cash flows from operating activities (1,331,299) 7,161,222 ---------------------- ------------------- CASH FLOWS FROM FINANCING ACTIVITIES Decrease in bank overdrafts (93,150) (69,527) Net borrowings on note payable to bank (1,489,919) (6,423,408) Repayment of long-term debt (692,807) (668,565) Proceeds from notes payable to officers and directors 100,000 - Repayment of notes payable to officers and directors (100,000) - Proceeds from the issuance of common stock 4,200,648 - Proceeds from the issuance of common stock for assets 200,280 - Net change, foreign currency translation (54,102) (33,898) ---------------------- ------------------- Net cash flows from financing activities 2,070,950 (7,195,398) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of plant and equipment (160,738) (76,508) Purchase of Innovative Storage Design Assets (261,163) - Increase in other assets (280,168) - ---------------------- ------------------- Net cash flows from investing activities (702,069) (76,508) ---------------------- ------------------- NET CHANGE IN CASH 37,582 (110,684) CASH, BEGINNING OF PERIOD 130,967 316,078 ---------------------- ------------------- CASH, END OF PERIOD $ 168,549 $ 205,394 ====================== ===================
F-3 14 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying interim unaudited consolidated financial statements of Geographics, Inc. (the "Company" or "Geographics") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, such interim statements reflect all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position and the results of operations and cash flows for the interim periods presented. The results of operations for these interim periods are not necessarily indicative of the results to be expected for the full year. These statements should be read in conjunction with the audited consolidated financial statements and footnotes included in the Company's consolidated financial statements and notes thereto for the fiscal year ended March 31, 1999. The consolidated financial statements include the accounts of Geographics and its wholly-owned subsidiaries: Geographics Marketing Canada Inc., Geographics (Europe) Limited and Geographics Australia, Pty. Limited. All intercompany balances and transactions have been eliminated. F-4 15 NOTE 2- RESTATEMENT AND RECLASSIFICATIONS The Company has determined to restate its annual consolidated financial statements and its quarterly condensed consolidated financial statements for the years ended March 31, 1999 and 1998, and interim quarters of 2000. The following sets forth the effect and explanation of these adjustments and reclassifications:
AS PREVIOUSLY AS REPORTED ADJUSTMENTS RESTATED -------- ----------- -------- AT SEPTEMBER 30, 1999: Accounts receivable, net $ 4,847,099 $ (138,772) (a)(b) $ 4,708,327 Current assets 9,752,836 (138,772) (a)(b)(c) 9,614,064 Total Assets 20,114,272 (138,772) 19,975,500 - Accrued Liabilities 1,626,655 224,526 (d)(e) 1,851,181 Current Liabilities 12,004,061 224,526 (d)(e) 12,228,587 Total Liabilities 15,038,249 224,526 (d)(e) 15,262,775 Accumulated Deficit (14,882,597) (363,298) (a)(c)(d)(e) (15,245,895) Stockholders' Equity 5,076,023 (363,298) (a)(c)(d)(e) 4,712,725 Total Liabilities and Stockholders' Equity $ 20,114,272 $ (138,772) $ 19,975,500 AS PREVIOUSLY ADJUSTMENTS AND AS REPORTED RECLASSIFICATIONS RESTATED -------- ----------------- -------- FOR THE QUARTER ENDED SEPTEMBER 30, 1999: Net sales $ 6,592,301 $ 443,125 (b)(d)(f) $ 7,035,426 Gross Margin 1,590,198 $ 443,125 (b)(c)(d)(f)(g) 2,033,323 Selling, General and Administrative Expenses 1,457,760 $ 443,125 (b)(c)(d)(f)(g) 1,900,885 FOR THE SIX MONTHS ENDED SEPTEMBER 30, 1999: Net sales $ 11,092,219 $ 949,571 (b)(d)(f) $12,041,790 Gross Margin $ 2,593,747 $ 949,571 (b)(c)(d)(f)(g) $ 3,543,318 Selling, General and Administrative Expenses $ 2,575,865 $ 753,943 (b)(c)(d)(f)(g) $ 3,329,808 Income (loss) from Operations $ 17,882 $ 195,628 (b)(c)(d)(f)(g) $ 213,510 Net Income (loss) $ (94,016)$ 195,628 (b)(c)(d)(f)(g) $ (101,612) Net Income(Loss) Per Share $ (0.01)$ 0.02 $ 0.01
(a) In preparing its prior financial statements, Geographics relied on information of a former sales manager. Geographics later discovered that this former sales manager, who has since been terminated, failed to correctly identify the amount of sales returns that were due a particular customer. This resulted in an understatement of sales returns for the years ended March 31, 1998 and 1999 of $19,201 and 119,571, respectively. (b) Geomarketing Canada ("GMC"), a wholly-owned subsidiary of Geographics, is required to pay Canadian goods and services tax on the value of items sold in Canada. However, subsequent to June 30, 1999, Geographics discovered that GMC was declaring the goods at Canadian customs at a value that is less than the amount charged to its customers. This resulted in an understatement sales, general and administrative expenses for the years ended March 31, 1998 and 1999 by $78,828 and $166,201, respectively. F-5 16 NOTE 2- RESTATEMENT AND RECLASSIFICATIONS (CONTINUED) (c) At March 31, 1999, Geographics accrued $132,500 severance costs for certain former executives of Geographics. The restatement reflects Geographics' change in its accounting practices so as to accrue these expenses in the period in which they incurred in accordance with Staff Accounting Bulletin 100, dated November 24, 1999. (d) At March 31, 1999, Geographics accrued an estimated amount of $200,000 for incurred, but unbilled legal expenses. Subsequently, it was confirmed that the actual incurred legal expenses was approximately $100,000. (e) During the fiscal quarter ended March 31, 1999, Geographics implemented a new accounting program to calculate costs associated with customer promotions. Subsequently, Geographics discovered that the program did not accurate calculate these costs. This error resulted in an understatement of sales, general and administrative expenses for the year ended March 31, 1999 by $261,310. (f) In connection with the sale of its sign business in the year ended March 31, 1999, Geographics mistakenly received approximately $146,818 in escrowed amounts that it was not entitled to. Geographics initially kept the escrowed funds after the escrow company made an initial attempt to have the funds returned. However, Geographics never made a reserve for the potential loss of the funds. This resulted in an understatement of sales, general and administrative expenses from discontinued operations for the year ended March 31, 1999 of $146,818. (g) Reflects an accounting change to classify "back-end selling expenses," or certain advertising and promotional expenses, as sales, general and administrative expenses, rather than sales returns and allowances for the three months ended March 31, 1999 in the amount of $225,136. F-6 EX-27.1 2 c56702a1ex27-1.txt FINANCIAL DATA SCHEDULE
5 3-MOS MAR-31-2000 JUL-01-1999 SEP-30-1999 168,549 0 5,647,431 805,404 4,023,553 9,614,064 14,948,192 5,349,879 19,975,500 12,228,587 3,034,188 0 0 20,169,946 (15,457,221) 19,975,500 7,035,426 7,035,426 5,002,103 1,900,885 (137,279) 0 183,624 85,893 0 85,893 0 0 0 85,893 0.057 0.058
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