-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, t5He3h/Xn1ADsckBDqzmizXy7XRhBvIEaYI9Mgfq5wtQnriJ8ljcvpe/jCjAsakE GK7OdA2KiZpKzcKuRY3Xmg== 0000355876-95-000002.txt : 19950515 0000355876-95-000002.hdr.sgml : 19950515 ACCESSION NUMBER: 0000355876-95-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950210 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GANDALF TECHNOLOGIES INC CENTRAL INDEX KEY: 0000355876 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 132991700 STATE OF INCORPORATION: A6 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12643 FILM NUMBER: 95508028 BUSINESS ADDRESS: STREET 1: 130 COLONNADE RD S STREET 2: ZIP K2E 7M4 CITY: NEPEAN ONTARIO CANAD STATE: A6 BUSINESS PHONE: 6137236500 10-Q 1 Gandalf Technologies Inc. 130 Colonnade Road South Nepean, Ontario K2E 7M4 February 10, 1995 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. USA 20549 Dear Sir/Madam: Re: Gandalf Technologies Inc. - Quarterly Report of Form 10-Q Commission File No. 0-12643 Transmitted herewith in electronic format for filing with the Securities and Exchange Commission is the Quarterly Report on Form 10-Q for Gandalf Technologies Inc. for the quarter ended December 31, 1994. If you have any comments or questions with respect to the foregoing, please contact the undersigned at (613) 723-6500. Please acknowledge receipt of this letter and validation of documents by means of Compuserve to: User Id# 72741,124 CIK: 0000355876 Yours truly, s/Diana Cianciusi Corporate Secretary & Legal Counsel 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 Quarter Ended December 31, 1994 Commission file number 0-12643 GANDALF TECHNOLOGIES INC. - -------------------------------------------------------------- (Exact name of registrant as specified in its charter) ONTARIO, CANADA NOT APPLICABLE - ----------------------- ---------------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 130 COLONNADE ROAD SOUTH, NEPEAN, ONTARIO K2E 7M4 - ----------------------------------------- --------------- (Address of principal executive offices) (Postal Code) Registrant's telephone number, including area code (613) 723-6500 - -------------- NOT APPLICABLE - ----------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. *Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- The number of shares outstanding as at January 31, 1995 was 28,172,310. GANDALF TECHNOLOGIES INC. INDEX Page No. ------- PART I FINANCIAL INFORMATION Consolidated Balance Sheet - 3 Consolidated Statements of Income and Retained Earnings - 4 Consolidated Statement of Changes in Financial Position - 5 Notes to Consolidated Financial Statements - 6 Management's Discussion and Analysis of Financial Condition and Results of Operations - 9 PART II OTHER INFORMATION 14 SIGNATURE PAGE 14
GANDALF TECHNOLOGIES INC. CONSOLIDATED BALANCE SHEET (Unaudited) (Thousands of U.S. dollars) Dec 31 Mar 31 1994 1994 -------- -------- ASSETS Current assets: Cash and short-term deposits $ 10,063 $ 5,273 Accounts receivable 27,133 30,182 Inventories (note 1) 15,778 20,877 Other 1,813 4,022 -------- -------- Total current assets 54,787 60,354 Fixed assets (note 2) 18,415 20,214 Goodwill, net of amortization of $ 2,891 (March 31, 1994: $2,734) 3,523 3,680 Other assets 4,259 4,938 -------- -------- Total assets $ 80,984 $ 89,186 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Bank operating lines (note 3) $ 10,372 $ 10,512 Accounts payable and accrued liabilities (note 4) 20,052 27,854 Deferred revenue 5,770 7,424 Current portion of long-term debt 258 586 -------- -------- Total current liabilities 36,452 46,376 Long-term debt 1,785 2,020 8.5% convertible debentures, due 2002 21,387 21,681 Shareholders' equity: Capital stock: Common shares, 28,147,310 issued and outstanding (March 31, 1994: 28,072,333) 79,868 79,811 Retained earnings (deficit) (52,573) (53,770) Cumulative translation adjustment (5,935) (6,932) -------- -------- Total shareholders' equity 21,360 19,109 -------- -------- Total liabilities and shareholders' equity $ 80,984 $ 89,186 ======== ======== (See accompanying notes to consolidated financial statements)
GANDALF TECHNOLOGIES INC. CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS (Unaudited) (Thousands of U.S. dollars except per share amounts) 13 Weeks Ended 39 Weeks Ended December 31 December 31 --------------------- -------------------- 1994 1993 1994 1993 -------- -------- -------- -------- INCOME Revenues: Product revenue $ 20,363 $ 20,301 $ 62,862 $ 68,386 Service revenue 9,388 9,965 27,267 31,071 -------- -------- -------- -------- 29,751 30,266 90,129 99,457 Operating expenses: Cost of product sales 10,661 11,295 32,651 35,754 Service expenses 5,754 6,963 17,364 20,569 Sales and marketing 7,854 11,274 24,598 33,027 Administration and general 1,957 2,825 5,793 7,938 Research and development 2,658 4,204 7,652 10,646 Restructuring costs (note 5) - - 685 - -------- -------- -------- -------- Income (loss) from operations 867 (6,295) 1,386 (8,477) Gain on sale of portfolio investment 2,024 - 2,024 - Interest expense (795) (1,010) (2,416) (3,468) Other income 58 517 203 863 -------- -------- -------- -------- Net income (loss) $ 2,154 $ (6,788) $ 1,197 $(11,082) ======== ======== ======== ======== EARNINGS PER SHARE (note 6) Net income (loss): Basic $ 0.08 $ (0.29) $ 0.04 $ (0.60) ======== ======== ======== ======== Fully diluted $ 0.06 ======== Weighted average number of shares outstanding (thousands): Basic 28,145 23,517 28,101 18,460 ======== ======== ======== ======== Fully diluted 43,320 ======== RETAINED EARNINGS Balance at beginning of period $(54,727) $(10,826) $(53,770) $ (6,532) Net income (loss) 2,154 (6,788) 1,197 (11,082) -------- -------- -------- -------- Balance at end of period $(52,573) $(17,614) $(52,573) $(17,614) ======== ======== ======== ======== (See accompanying notes to consolidated financial statements)
GANDALF TECHNOLOGIES INC. CONSOLIDATED STATEMENT OF CHANGES IN FINANCIAL POSITION (Unaudited) (Thousands of U.S. dollars) 13 Weeks Ended 39 Weeks Ended December 31 December 31 --------------------- -------------------- 1994 1993 1994 1993 -------- -------- -------- -------- Operating activities: Cash provided by (applied to) operations (note 7) $ 1,587 $ (4,157) $ 3,462 $ (3,179) Decrease (increase) in operating working capital (note 8) 2,507 (907) (685) (8,038) -------- -------- -------- -------- Cash provided by (applied to) operating activities 4,094 (5,064) 2,777 (11,217) -------- -------- -------- -------- Financing activities: Decrease in bank operating lines (2,232) (9,837) (140) (7,068) Issue of capital stock 4 34,157 57 34,157 Repayment of term debt - (19,543) - (20,382) Other (72) (385) (432) (197) -------- -------- -------- -------- Cash provided by (applied to) financing activities (2,300) 4,392 (515) 6,510 -------- -------- -------- -------- Investing activities: Proceeds on disposal of assets 2,690 - 4,062 2,246 Purchase of fixed assets (425) (1,370) (1,710) (3,110) Deferred software development costs (10) (427) (140) (1,923) Other 178 (24) 215 (159) -------- -------- -------- -------- Cash provided by (applied to) investing activities 2,433 (1,821) 2,427 (2,946) -------- -------- -------- -------- Increase (decrease) in cash in the period 4,227 (2,493) 4,689 (7,653) Effect of currency translation adjustments on cash flows (9) 20 101 (325) Cash and short-term deposits, beginning of period 5,845 4,232 5,273 9,737 -------- -------- -------- -------- Cash and short-term deposits, end of period $ 10,063 $ 1,759 $ 10,063 $ 1,759 ======== ======== ======== ======== (See accompanying notes to consolidated financial statements)
GANDALF TECHNOLOGIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (All amounts are stated in thousands of U.S. dollars.) 1. INVENTORIES Dec 31 Mar 31 1994 1994 -------- -------- Raw materials $ 3,854 $ 5,587 Work-in-process 3,817 4,007 Finished goods 8,107 11,283 -------- -------- $ 15,778 $ 20,877 ======== ======== 2. FIXED ASSETS Dec 31 Mar 31 1994 1994 -------- -------- Cost: Land $ 224 $ 213 Buildings 4,631 4,535 Equipment 54,678 53,340 Leasehold improvements 1,853 1,779 -------- -------- 61,386 59,867 Accumulated depreciation 42,971 39,653 -------- -------- Net book value $ 18,415 $ 20,214 ======== ========
3. BANK OPERATING LINES The Company's authorized bank operating lines at December 31, 1994 totalled $18.7 million. At that time, there was sufficient margin available to borrow $14.8 million and $10.4 million was being utilized. Cash and short-term deposits held as of that date represented a further $10.1 million of available cash resources, and cash and unused credit lines totalled $14.5 million. The authorized lines include two committed credit facilities with a Canadian chartered bank and a demand facility with a bank in the United Kingdom. They are secured by certain of the accounts receivable, inventories and other assets of the Company and bear interest at rates ranging from 1.0% to 2.5% above the respective banks' prime or base rates.
4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES Dec 31 Mar 31 1994 1994 -------- -------- Trade accounts payable $ 6,398 $ 9,784 Payroll, commissions and related taxes 3,249 3,594 Other payables 8,741 13,012 Income and other taxes payable 1,664 1,464 -------- -------- $ 20,052 $ 27,854 ======== ========
5. RESTRUCTURING COSTS Restructuring costs of $0.7 million during fiscal 1995 represent severance costs associated with the elimination of approximately 70 positions at the end of the first quarter in connection with an internal functional realignment which was implemented in early July 1994. 6. EARNINGS PER SHARE Basic earnings per share is calculated using the monthly weighted average number of common shares outstanding for the period. Fully diluted earnings per share is calculated assuming convertible debentures had been converted at the beginning of the fiscal period, and all outstanding options had been exercised on the date which is the later of the beginning of the fiscal period or the dates the options were granted. For the thirty-nine weeks ended December 31, 1994 and for the comparative periods potential conversions are anti-dilutive. 7. CASH PROVIDED BY (APPLIED TO)OPERATIONS Cash provided by (applied to) operations is computed as follows:
13 Weeks Ended 39 Weeks Ended December 31 December 31 -------------------- -------------------- 1994 1993 1994 1993 -------- -------- -------- -------- Income (loss) from operations $ 867 $ (6,295) $ 1,386 $ (8,477) Depreciation and amortization 1,428 2,511 4,165 7,541 Gain on disposal of assets - - (206) (542) Income taxes (25) (125) 200 438 Interest paid (741) (765) (2,286) (3,002) Other income 58 517 203 863 -------- -------- -------- -------- $ 1,587 $ (4,157) $ 3,462 $ (3,179) ======== ======== ======== ========
8. DECREASE (INCREASE) IN OPERATING WORKING CAPITAL The decrease (increase) in operating working capital is computed as follows:
13 Weeks Ended 39 Weeks Ended December 31 December 31 --------------------- ------------------- 1994 1993 1994 1993 -------- -------- -------- -------- Accounts receivable $ 3,974 $ 2,825 $ 3,049 $ 4,339 Inventories 1,611 (783) 5,099 189 Other current assets 436 92 533 228 Accounts payable and accrued liabilities (1,784) (1,727) (8,002) (9,244) Deferred revenue (1,093) (635) (1,654) (1,383) Foreign currency equity adjustment (637) (679) 290 (2,167) -------- -------- -------- -------- $ 2,507 $ (907) $ (685) $ (8,038) ======== ======== ======== ========
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Introduction - ------------ The consolidated financial statements for the third quarter ended December 31, 1994, together with accompanying notes, should be read as an integral part of this review. These financial statements have been prepared by management in accordance with accounting principles generally accepted in Canada, the application of which, in the case of the Company, conforms in all material respects for the periods presented with accounting principles generally accepted in the United States. All amounts are stated in U.S. dollars. Results of Operations - Third Quarter Ended December 31, 1994 - ------------------------------------------------------------- The following table sets forth items derived from the quarterly consolidated statements of income as a percentage of revenues for the quarter ended December 31, 1994 and for each of the preceding four quarters. The column in the table entitled "Percentage Change Quarter 3, 1995 vs 1994" represents the percentage change, either favourable or (unfavourable), in the dollar amount of such items for the third quarter of fiscal 1995 compared with the third quarter of fiscal 1994.
Percentage Fiscal 1994 Fiscal 1995 Change -------------------- ------------------------------- Quarter 3 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Quarter 3 1995 vs.1994 --------- --------- --------- --------- --------- ------------ (Thousands of dollars) Revenues $30,266 $31,866 $29,718 $30,660 $29,751 (1.7)% ======= ======= ======= ======= ======= ===== (Percentage of Revenues) Revenues: Product 67.1% 70.4% 69.8% 71.0% 68.4% 0.3% Service 32.9 29.6 30.2 29.0 31.6 (5.8) ----- ----- ----- ----- ----- 100.0% 100.0% 100.0% 100.0% 100.0% (1.7) ===== ===== ===== ===== ===== Gross Margin: Product 44.4% 38.7% 47.5% 49.0% 47.7% 7.7 Service 30.1 31.6 34.6 35.6 38.7 21.1 Combined 39.7 36.6 43.6 45.1 44.8 11.1 Expenses: Sales and marketing 37.3 33.4 29.4 26.1 26.4 30.3 Administration and general 9.3 9.9 6.5 6.2 6.6 30.7 Research and development 13.9 11.5 8.1 8.4 8.9 36.8 Restructuring and other costs - 90.0 2.3 - - ------ ------ ------ ------ ------ Income (loss) from operations (20.8) (108.2) (2.7) 4.4 2.9 Gain on sale of portfolio investment - - - - 6.8 Interest expense (3.3) (2.1) (2.7) (2.7) (2.7) Other income 1.7 0.4 0.2 0.3 0.2 Income taxes - (3.6) - - - ------ ------ ------ ------ ------ Net income (loss) (22.4%) (113.5%) (5.2%) 2.0% 7.2% ====== ====== ====== ====== ======
Revenues - -------- The following table sets forth revenues by geographic segment for the quarter ended December 31, 1994 and for each of the preceding four quarters. The table also includes the change in revenues, expressed as a percentage, in the third quarter of fiscal 1995 compared to the corresponding period of fiscal 1994.
Percentage Fiscal 1994 Fiscal 1995 Change -------------------- ------------------------------- Quarter 3 Quarter 3 Quarter 4 Quarter 1 Quarter 2 Quarter 3 1995 vs.1994 --------- --------- --------- --------- --------- -------------- (Thousands of dollars) United States $ 7,480 $ 8,936 $ 8,205 $ 8,085 $ 8,309 11.1% United Kingdom 9,061 9,954 8,927 10,186 8,648 (4.6) Canada 5,078 6,348 5,736 6,184 5,434 7.0 Holland/France 4,024 3,074 4,040 3,358 4,379 8.8 Other International 4,623 3,554 2,810 2,847 2,981 (35.5) -------- -------- -------- -------- -------- $ 30,266 $ 31,866 $ 29,718 $ 30,660 $ 29,751 (1.7) ======== ======== ======== ======== ========
Revenues in the third quarter ended December 31, 1994 were $29.8 million consisting of $20.4 million of product revenue and $9.4 million of service revenue. In the second quarter of fiscal 1995 product revenue was $21.7 million and service revenue was $8.9 million for total revenues of $30.7 million. Revenues in the third quarter of fiscal 1994 were $30.3 million ($20.3 million of product revenue and $10.0 million of service revenue). Product revenue in the third quarter of fiscal 1995 was virtually unchanged from the level achieved in the third quarter of the previous fiscal year. Service revenue in the third quarter of fiscal 1995 was $9.4 million, 5.8% below the level in the third quarter of fiscal 1994. The Company has, in general, experienced a decline in service revenue during the last year as a result of declining product revenue in recent fiscal years. Revenues in the North American market (United States and Canada) were $13.7 million during the third quarter of fiscal 1995, 9.4% higher than the comparable period a year ago and 3.7% lower than the second quarter of fiscal 1995. The Company's European direct sales markets (United Kingdom, Holland and France) reported revenues of $13.0 million, unchanged from the third quarter a year ago and 3.8% lower than the second quarter of fiscal 1995. Revenues in the Company's other international markets were $3.0 million, $1.6 million lower than the revenues reported in the comparable period a year ago and 4.7% higher than the second quarter of fiscal 1995. Gross Profit - ------------ The combined gross profit (total revenues minus cost of product sales and service expenses) was $13.3 million in the third quarter of fiscal 1995, an increase of $1.3 million or 11.1% over the third quarter of fiscal 1994, on approximately the same revenue level. Restructuring actions taken in the fourth quarter of fiscal 1994 reduced manufacturing overhead costs and service costs which has resulted in a higher level of combined gross profit. The gross margin on product revenue (product revenue minus cost of product sales expressed as a percentage of product revenue) was 47.7% in the third quarter of fiscal 1995 compared to 44.4% in the third quarter a year ago and 49.0% in the second quarter of fiscal 1995. The gross margin on service revenue (service revenue minus service expenses expressed as a percentage of service revenue) was 38.7% in the third quarter of fiscal 1995, 30.1% in the third quarter of fiscal 1994 and 35.6% in the second quarter of fiscal 1995. Operating Expenses - ------------------ Operating expenses (sales and marketing, administration and general, and research and development) were $12.5 million in the third quarter of fiscal 1995, unchanged from the second quarter and 31.9% below the $18.3 million reported in the third quarter of fiscal 1994. Reductions in operating expenses from the level a year ago are primarily related to the significant restructuring and downsizing actions undertaken in the fourth quarter of fiscal 1994. The elimination of approximately 70 positions in connection with a functional realignment which took place at the end of the first quarter of the current fiscal year has also reduced operating expenses. Since 1991, the Company has received grants of approximately $4.0 million under the Canadian Federal Government's Microelectronics and Systems Development Program ("MSDP"). This funding is required to be repaid in the form of a royalty if certain conditions are met relating to the commercialization of resulting technology. The Company believes these conditions have substantially been met and accordingly this funding will be required to be repaid in the future following completion of the approved programs, which is expected to occur during the fourth quarter of fiscal 1995 or during fiscal 1996. Commencing with the completion of the programs, annual royalties of up to 2% of product revenue will be accrued and will be paid in the following year. Operating Income - ---------------- Income from operations in the third quarter of fiscal 1995 was $0.9 million on revenues of $29.8 million. This represented an improvement of $7.2 million over the $6.3 million loss from operations reported for the third quarter of fiscal 1994 on revenues of $30.3 million. For the three quarters ended December 31, 1994, income from operations was $1.4 million compared to a loss from operations of $8.5 million during the same period a year ago. Interest Expense - ---------------- Interest expense was $0.8 million in the third quarter of fiscal 1995 compared with $1.0 million for the third quarter of fiscal 1994. The decrease in interest expense occurred as a result of the Company reducing its borrowings under bank loans during fiscal 1994. Net Income - ---------- The net income for the third quarter of fiscal 1995 was $2.2 million or $0.08 per share. This included a gain of $2.0 million from the sale of a portfolio investment. The net loss for the third quarter a year ago was $6.8 million or $0.29 per share. The net income for the thirty-nine weeks ended December 31, 1994 was $1.2 million or $0.04 per share compared to a net loss of $11.1 million or $0.60 per share for the corresponding period in fiscal 1994. Liquidity and Capital Resources - ------------------------------- The Company recorded positive cash flow of $6.4 million during the third quarter of fiscal 1995, represented by an increase in cash and short-term deposits of $4.2 million and a decrease in borrowing under bank operating lines of $2.2 million. The quarterly cash flow included proceeds of $2.6 million from the sale of a portfolio investment. For the thirty-nine weeks ended December 31, 1994, the Company recorded positive cash flow of $4.9 million (comprised of an increase in cash and short-term deposits of $4.8 million and a reduction in borrowing under bank operating lines of $0.1 million). At December 31, 1994 net bank borrowings (bank operating lines net of cash and short-term deposits) of $0.3 million, were $0.9 million lower than the $1.2 million of net bank borrowings reported at the end of the third quarter twelve months ago. During the first six months of this twelve month period (represented by the fourth quarter of fiscal 1994 and the first quarter of fiscal 1995), the Company reported negative cash flow (defined as the net change in cash and short-term deposits and borrowing under bank operating lines) of $6.3 million. During the most recent six month period (represented by the second and third quarters of fiscal 1995) the Company has reported positive cash flow of $7.2 million. Cash provided by operating activities in the third quarter of fiscal 1995 was $4.1 million compared with negative cash flow from operating activities of $5.1 million in the third quarter a year ago. During the first three quarters of fiscal 1995 the Company has recorded positive cash flow from operating activities of $ 2.8 million versus negative cash flow from operating activities of $11.2 million during the same period a year ago. At December 31, 1994 the Company's authorized bank operating lines totalled $18.7 million. This included $15.2 million relating to two committed credit facilities with a Canadian chartered bank bearing interest at the bank's prime rate plus 1.0%. During November 1994 these committed facilities were renewed until the next annual review date of July 31, 1995. Upon maturity of these facilities on July 31, 1995, the outstanding borrowings convert to demand facilities unless a renewal of the committed operating facilities is agreed between the Company and the bank. The additional authorized amount of $3.5 million related to a demand facility with a bank in the United Kingdom. During the third quarter of fiscal 1995, this facility was renewed until September 1995. Under the new agreement the authorized amount of the facility was increased by $0.8 million to $3.5 million and the interest rate was reduced by up to 0.5%. The interest rate varies depending on borrowing levels and ranges from 2.0% to 2.5% above the bank's base rate. The operating lines are secured by certain of the accounts receivable, inventories and other assets of the Company. The amount available for borrowing at any time under the facilities is determined based on margin formulas relating to levels of accounts receivable, inventories and other bank covenants. Under such formulas, $14.8 million was available to the Company at December 31, 1994 and $10.4 million was being utilized. Cash and short-term deposits held as of that date represented a further $10.1 million of cash resources available to the Company. Cash and unused credit facilities totalled $14.5 million at December 31, 1994, compared to $10.5 million at October 1, 1994 and $10.2 million at March 31, 1994. Financial covenants contained in the bank loan agreements measure among other items, the tangible net worth of the Company, the current ratio and the debt to tangible net worth ratio. The Company is currently in full compliance under all of its bank loan agreements. At March 31, 1994 and July 2, 1994, the Company had been in default of certain financial covenants contained in its previous loan agreements but obtained waivers at the time in respect of such defaults. The Company believes that its current financial base, together with available credit facilities, provides sufficient financial resources to meet its short-term operating requirements. The Company anticipates that its long-term cash requirements will be satisfied through future operating cash flows and the refinancing or conversion of term debt, the majority of which relates to convertible subordinated debentures due in 2002. The Company's current ratio was 1.5:1 at December 31, 1994 compared to 1.3:1 at March 31, 1994. Accounts receivable and inventories at December 31, 1994 were $42.9 million (accounts receivable - $27.1 million; inventories - $15.8 million) versus $51.1 million at March 31, 1994 (accounts receivable - $30.2 million; inventories - $20.9 million). Lower manufacturing costs as a result of the restructuring actions taken in the fourth quarter of fiscal 1994, contributed to the decrease in inventory levels. Accounts payable and accrued liabilities have decreased $7.8 million since March 31, 1994 as a result of the payment of restructuring costs accrued in the fourth quarter of fiscal 1994 and lower levels of trade accounts payable. II - OTHER INFORMATION - ---------------------- Item 6(b) - Reports on Form 8-K - ------------------------------ There were no reports on Form 8-K filed for the quarter ended December 31, 1994. SIGNATURES - ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GANDALF TECHNOLOGIES INC. February 8, 1995 BY: s/THOMAS A. VASSILIADES - ------------------------- ---------------------------- Date Thomas A. Vassiliades President (Chief Executive Officer) February 8, 1995 BY: s/WALTER R. MACDONALD - -------------------------- --------------------------- Date Walter R. MacDonald Vice President, Finance (Chief Financial Officer) -----END PRIVACY-ENHANCED MESSAGE-----