-----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, chcLeNVu3eMV3Ht5kFiFd66wpRtgFQxEZISzCGe7WpuGagpFuDotwM7sP/FLE94Y d8HKdWw5P0kqlu0zVk07lA== 0000067383-95-000006.txt : 19950814 0000067383-95-000006.hdr.sgml : 19950814 ACCESSION NUMBER: 0000067383-95-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICRO GENERAL CORP CENTRAL INDEX KEY: 0000067383 STANDARD INDUSTRIAL CLASSIFICATION: MISC INDUSTRIAL & COMMERCIAL MACHINERY & EQUIPMENT [3590] IRS NUMBER: 952621545 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-08358 FILM NUMBER: 95561588 BUSINESS ADDRESS: STREET 1: 1740 E WILSHIRE AVE CITY: SANTA ANA STATE: CA ZIP: 92705 BUSINESS PHONE: 7146670557 MAIL ADDRESS: STREET 1: 1740 E WILSHIRE AVE CITY: SANTA ANA STATE: CA ZIP: 92705-4615 FORMER COMPANY: FORMER CONFORMED NAME: MODULEARN INC DATE OF NAME CHANGE: 19810813 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For quarterly period ended: June 30, 1995 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: 0-8358 Micro General Corporation (Exact name of registrant as specified in its charter) Delaware 95-2621545 (State or other jurisdiction of ((I.R.S. Employer incorporation or organization) Identification Number) 1740 Wilshire Ave. Santa Ana, California 92705 (Address of principal executive offices) (Zip Code) (714) 667-0557 Registrant's telephone number, including area code 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 periods 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 [ ] The number of shares outstanding of Common Stock, $.05 Par Value - 1,948,166 shares as of August 11, 1995. MICRO GENERAL CORPORATION FORM 10-Q -- QUARTER ENDED JUNE 30, 1995 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Item 1. Financial Statements. Balance Sheets -- June 30, 1995 and December 31, 1994. Statements of Operations -- Three months ended June 30, 1995 and June 30, 1994. Statements of Operations -- Six months ended June 30, 1995 and June 30, 1994. Statements of Cash Flows -- Six months ended June 30, 1995 and June 30, 1994. Notes to Financial Statements. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. Item 6. Exhibits and Reports on Form 8-K. SIGNATURES All other schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or notes thereto. PART I. FINANCIAL INFORMATION MICRO GENERAL CORPORATION Balance Sheets June 30, 1995 and December 31, 1994 June 30, 1995 December 31, (unaudited) 1994 -------------- ------------ Assets Current assets: Cash $ 540,613 $ 152,848 Accounts and notes receivable, less allowance for doubtful receivables and sales returns of $94,566 at 6/30/95 and $81,749 at 12/31/94 384,125 618,434 Income tax refund receivable 7,000 7,000 Inventories (note 2) 1,137,121 1,140,183 Prepaid expenses and accrued interest 265,413 277,432 -------------- ----------- Total current assets 2,334,272 2,195,897 Equipment and improvements, net (note 3) 180,438 179,206 Other assets, net (note 4) 33,963 44,688 -------------- ----------- $ 2,548,673 $ 2,419,791 ============== ============ Liabilities and Stockholders' Equity Current liabilities: Note payable to bank (note 6) $ 0 $ 0 Accounts payable 72,367 296,071 Accrued expenses 231,494 228,072 Deferred rate change agreement revenue 150,881 159,853 -------------- ------------ Total current liabilities 454,742 683,996 Stockholders' equity: Preferred stock, $.05 par value; 1,000,000 shares authorized no shares issued and outstanding at 6/30/95 and 12/31/94. -- -- Common stock, $.05 par value; 4,000,000 shares authorized 1,948,166 shares issued at 6/30/95 and 1,888,166 shares at 12/31/94 (note 1) 97,408 94,408 Additional paid-in capital 4,174,508 4,111,883 Accumulated deficit (2,177,985) (2,470,496) -------------- ------------ Total stockholders' equity 2,093,931 1,735,795 -------------- ------------ $ 2,548,673 $ 2,419,791 ============== ============ See accompanying notes to financial statements.
MICRO GENERAL CORPORATION Statements of Operations For the Three Months Ended June 30, 1995 and June 30, 1994 (Unaudited) June 30, June 30, 1995 1994 ------------ ------------ Revenues: Product sales, net of returns of $103,544 in 1995 and $86,012 in 1994 $ 411,713 $ 810,693 Service and rate change revenues (note 7) 253,283 191,047 ------------ ------------ Total revenues 664,996 1,001,740 Cost of sales: Net product sales 298,015 529,721 Service and rate revenues 80,657 44,432 ------------ ------------ Total cost of sales 378,672 574,153 Gross profit 286,324 427,587 Operating expenses: Selling, general and administrative 411,375 429,010 Engineering and development 199,164 96,532 Provision for doubtful receivables 4,000 (1,000) ------------ ------------ Total operating expenses 614,539 524,542 Operating loss (328,215) (96,955) Interest income, net 793 3,286 Loss on sale or disposal of assets 0 (612) ------------- ------------ Earnings before income taxes (327,422) (94,281) Income taxes (note 5) 0 0 ------------- ------------- Net loss $ (327,422) $ (94,281) ============= ============= Net loss per common and common equivalent share (note 1) $ (0.17) $ (0.05) ============= ============ Weighted average shares outstanding (note 1) 1,948,166 1,882,240 ============= ============ See accompanying notes to financial statements.
MICRO GENERAL CORPORATION Statements of Operations For the Six Months Ended June 30, 1995 and June 30, 1994 (Unaudited) June 30, June 30, 1995 1994 ------------ ------------ Revenues: Product sales, net of returns of $209,878 in 1995 and $135,940 in 1994 $ 964,886 $ 1,493,994 $135,940 in 1994 Service and rate change revenues (note 7) 1,873,798 1,352,302 ----------- ----------- Total revenues 2,838,684 2,846,296 Cost of sales: Net product sales 797,993 1,174,028 Service and rate revenues 476,983 358,879 ----------- ------------ Total cost of sales 1,274,976 1,532,907 ----------- ------------ Gross profit 1,563,708 1,313,389 Operating expenses: Selling, general and administrative 895,863 927,308 Engineering and development 367,171 206,547 Provision for doubtful receivables 13,000 8,000 ------------ ------------ Total operating expenses 1,276,034 1,141,855 ------------ ------------ Operating profit 287,674 171,534 Interest income, net 4,837 4,798 Loss on sale or disposal of assets 0 (611) ------------ ------------- Earnings before income taxes 292,511 175,721 Income taxes (note 5) 0 0 ------------ ------------- Net earnings $ 292,511 $ 175,721 ============ ============= Net earnings per common and common equivalent share (note 1) $ 0.15 $ 0.09 ============ ============= Weighted average shares outstanding (note 1) 1,935,238 1,882,240 ============ ============= See accompanying notes to financial statements
MICRO GENERAL CORPORATION Statements of Cash Flows For the Six Months Ended June 30, 1995 and June 30, 1994 (Unaudited) June 30, June 30, 1995 1994 ------------ ------------ Cash flows from operating activities: Net earnings $ 292,511 $ 175,721 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 49,003 50,286 Provision for losses on accounts receivable and sales returns, net of write-offs 12,817 (3,456) Change in assets and liabilities: Decrease in accounts receivable 221,492 216,992 (Increase) decrease in inventories 3,062 (97,428) Decrease in prepaid expenses 12,019 47,853 Increase (decrease) in accounts payable (223,704) 7,056 Increase (decrease) in deferred rate revenue (8,972) 127,827 Increase (decrease) in accrued expenses 3,422 (27,944) ------------ ------------ Total adjustments 69,139 321,186 ------------ ------------ Net cash provided by operating activities 361,650 496,907 ------------ ------------ Cash flows used in investing activities--capital expenditures (39,510) (49,911) ------------ ------------ Cash flows from financing activities: Common stock proceeds, net 65,625 0 Repayment of note payable to bank 0 (100,000) ------------ ------------ Net cash provided by (used in) financing activities 65,625 (100,000) ------------ ------------ Net increase in cash 387,765 346,996 Cash - beginning of year 152,848 85,513 ------------ ------------ Cash - end of period $ 540,613 $ 432,508 ============ ============ Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 0 $ 0 ============ ============ Income taxes $ 0 $ 0 ============ ============ See accompanying notes to financial statements
MICRO GENERAL CORPORATION NOTES TO FINANCIAL STATEMENTS FOR QUARTER ENDED JUNE 30, 1995 Note 1. Summary of Significant Accounting Policies General The operations of Micro General Corporation (the "Company") consist of the design, manufacture and sale of computerized parcel shipping systems, postal scales and piece-count scales. The financial statements presented include, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for fair presentation of the results of operations for the periods presented. The results of operations for the quarter or the six months ended June 30, 1995, are not necessarily indicative of results that may be expected for any other interim period or for the full year ending December 31, 1995. Inventories Inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value). Equipment and Improvements Equipment and improvements are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the respective equipment and improvements. Net Earnings (Per Common Share) Net earnings per common share is computed based on the weighted average of common shares outstanding. The potential exercise of stock options are included in the computation of net earnings per common share and common share equivalents. Per share computation is net income divided by the weighted average number of common shares and common share equivalents. Income Taxes In February 1992, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes". Under the asset and liability method of SFAS 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized as income in the period that includes the enactment date. Effective January 1, 1993, the Company adopted SFAS 109. The application of SFAS 109 did not have a material effect and was not recognized for the quarter or the six months ended June 30, 1995. Warranties The Company's products are sold with a ninety-day warranty on materials and workmanship. Estimated warranty costs based on historical experience are accrued as an expense at the time the products are sold. Intangible Assets Intangible assets are classified as other assets and are amortized on a straight-line basis over periods ranging from 10 to 15 years (see note 4). Deferred Revenue The Company collects fees from its customers in anticipation of future rate changes. Customers prepaying future rate changes receive memory chips with the new tariffs without paying an additional charge. Rate change fees are recorded as revenue on a pro rata basis over the prepaid period. Revenue Recognition Product sales are recorded by the Company when products are shipped to dealers and customers. Rate change revenues are recorded by the Company at the time memory chips are reprogrammed with new tariffs and shipped to the customer. Sales Returns The majority of the Company's product sales are to its authorized dealers who resell the Company's products. The Company's policy is that all sales are final, but dealers may, at the Company's sole discretion and subject to a restocking fee, return certain out-of-warranty products in exchange for products of comparable sales value. Additionally, dealers may, at the Company's sole discretion, be permitted to return their unopened inventory in the event they or the Company terminate their dealership agreement, again subject to a restocking fee. Upon acceptance of returned goods, the Company reconditions the goods, at a nominal cost, and restocks them in inventory to be sold at a later date. The Company provides an allowance for such returns equal to the estimated gross profit on the portion of sales estimated to be returned. This specific allowance is a component of the Company's allowance for doubtful receivables and sales returns. Post Retirement Benefits The Company does not have any postretirement benefits falling within the scope of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Note 2. Inventories Inventories are comprised of the following at June 30, 1995 and December 31, 1994:
June 30, 1995 December 31, 1994 ------------- ----------------- Parts & Supplies $ 779,838 $ 753,456 Purchased finished goods 253,089 292,099 Consigned inventory 104,194 94,628 ----------- ----------- $ 1,137,121 $ 1,140,183 =========== ===========
Note 3. Equipment and Improvements Equipment and improvements are as follows at June 30, 1995 and December 31, 1994:
June 30, 1995 December 31, 1994 ------------- ----------------- Production equipment, tooling and construction in process $ 428,232 $ 424,848 Office furniture and equipment 511,959 484,229 Leasehold improvements 27,776 19,381 --------- --------- 967,967 928,458 Less accumulated depreciation and amortization 787,529 749,252 --------- --------- $ 180,438 $ 179,206 ========= =========
Note 4. Other Assets Other assets are as follows at June 30, 1995 and December 31, 1994:
Estimated Useful Life 1995 1994 ----------- --------- --------- Excess cost of assets purchased over fair market, value 15 years $ 232,531 $ 232,531 License rights 10 years 26,382 26,382 Other intangible assets 15 years 23,388 23,388 --------- --------- $ 282,301 $ 282,301 Less accumulated amortization 248,338 237,613 --------- --------- $ 33,963 $ 44,688 ========= =========
Note 5. Income Taxes The expected income tax expense(benefit) computed by multiplying earnings (loss) before income tax expense by the statutory Federal income tax rate of 34% differs from the actual income tax expense as follows:
6/30/95 6/30/94 ---------- --------- Expected tax expense $ 99,454 $ 59,745 Utilization of net operating loss carryforward (102,454) (62,745) Nondeductible amortization of the excess cost of assets purchased over fair market value 3,000 3,000 State income taxes - - ---------- --------- $ 0 $ 0 ========== =========
At June 30, 1995, the Company had available net operating loss carryforwards of approximately $1,649,000 and $228,000 for Federal and state income tax purposes, respectively. If not used to offset future taxable income, the net operating loss carryforwards will expire for income tax purposes at various dates through 2009. The Company also has investment tax credit and research and experimentation credit carryforwards aggregating approximately $85,000 which expire during the period 1994 to 2001. Note 6. Notes Payable The Company had a line of credit, which expired in May 1995. As of June 30, 1995 and December 31, 1994, the Company had no outstanding borrowings against the line of credit. The Company is currently negotiating other financing agreements. Note 7. Commitments and Contingencies Noncancelable operating lease commitments consist principally of the lease for the Company's manufacturing, administrative and research/development facilities. In February, 1994 the Company extended its facility lease through 1999. At December 31, 1994, the Company is committed to the following noncancelable operating lease payments: Year ending December 31, 1995 $ 120,278 1996 131,267 1997 137,945 1998 122,123 Thereafter 29,478 --------- $ 541,091 =========
At June 30, 1995 and December 31, 1994, the Company was liable for approximately $236,000 and $185,475, respectively for outstanding letters of credit to procure inventory from overseas vendors. These transactions relate solely to transactions denominated in U.S. dollars. The Company has a license agreement with Pitney Bowes which enables the Company to manufacture and sell certain products. The license agreement expires in 2004. Annual expenses for the license agreement are minor. From time to time, the United State Postal Service ("USPS") or United Parcel Service ("UPS") change their rates. For a fee, the Company provides its customers with programmable memory chips with the new tariffs which can be inserted into the Company's products. In some instances, customers prepay a fee to the Company which assures they will receive new programmable memory chips for all rate changes which occur within a predetermined period. In other instances, customers incur a fee for each time they decide to procure a new programmable memory chip. The Company experienced a UPS rate change during the periods ended June 30, 1995 and June 30, 1994, and a USPS rate change during the period ending June 30, 1995. Recorded revenues from rate changes totaled approximately $1,561,463 and $1,097,000 respectively. Gross profit totaled $1,228,122 and $1,007,000 also for the same periods. MICRO GENERAL CORPORATION FOR QUARTER ENDED JUNE 30, 1995 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Total net product sales decreased $398,980 or 49% in second quarter 1995 ("Q2 1995") over second quarter 1994 ("Q2 1994") while service and rate change revenues increased $62,236 or 33%. The decrease in net product sales was the main component in the $336,774 or 34% decrease in total revenue during for Q2 1995 over Q2 1994. The decrease in net product sales of $529,108 or 35% in year to date 1995 ("YTD 1995") as compared to year to date 1994 ("YTD 1994") was offset by the $521,496 or 39% increase in service and rate change revenue for the same period. In YTD 1995 and YTD 1994, rate change revenues represented approximately 62% and 42% of total revenue, respectively. The increase in service and rate change revenues in YTD 1995 as compared to YTD 1994, was the result of the USPS rate change in Q1 1995. While YTD sales in the retail channel increased $69,405 or 23% as compared YTD 1994, the sales in the historical dealer channel decreased $598,514 or 50%. The decrease in the historical dealer channel is a result of a decrease in net units sold and sales of lower priced models as well as the impact of free software to customers from vendors such as United States Parcel, in the manifest area of the company's business. New product introductions in future period is expected to improve volume. The decline in volume in the Q2 1995 for the retail channel of $176,056, was primarily due to significant stocking in first quarter 1995 ("Q1 1995") prior to implementation of a policy agreement in Q2 1995. Volume in this area is expected to return to more normal levels in the third quarter of 1995. The Company anticipates a further reduction in expenses and improved profit margins in the retail channel in future years. Cost of sales for YTD 1995 product sales decreased $376,035 or 32% as compared to the same period in 1994. The decrease is due to a change in product mix and a decrease in the historical dealer channel sales. The YTD 1995 service and rate change revenue costs increased $118,104 or 33% as compared to the same period in 1994. This increase is due to an increase in service and rate change revenues for the same period. Gross margin for YTD 1995 was 55% compared to 46% for the same period the prior year. The increase in the service and rate change revenue margin is due to higher rate change revenue, while the slight decrease in the product gross margin is a result of higher sales in the retail distribution channel. Operating expenses of the Company in YTD 1995 of $1,276,034 showed an 12% increase as compared to YTD 1994. This increase in engineering and development expense is a result of preliminary research & development work on products to increase the Company's product line offering. Normal operating expenses are expected to remain the same in future periods. The increase in YTD net earnings of $116,790 or 66% as compared to the same period in 1994, is a result of the increase in rate change revenue. Net earnings for Q2 1995 decreased $233,141 or 247% as compared to Q2 1994. This decrease is primarily due to lower net product sales of $398,980 or 49% as compared to the prior period. Financial Condition, Liquidity and Capital Resources The Company's ability to generate cash depends on rate change revenue, the sale of inventory and collection of accounts receivable. The Company's June 30, 1995 cash balance increased $387,765 or 254% from December 31, 1994. The increase is primarily attributable to the cash generated from prepaid rate change revenue derived from the United States Postal Service ("USPS") rate change effective January 1995 and the United Parcel Service ("UPS") rate change effective February 1995. The Company's YTD 1995 net accounts receivable balance decreased $234,309 or 38% from December 31, 1994 levels. This decrease is due to a decrease in product sales for the YTD 1995 period. Working capital was $1,879,530 at June 30, 1995 as compared to the December 31, 1994, amount of $1,511,901. The Company's current ratio at June 30, 1995 was 5.1 as compared to 3.2 at December 31, 1994. This change is a result of higher cash balances at June 30, 1995 due to the Q1 1995 rate changes. The Company's total inventories decreased slightly $3,062 or .3% at June 30, 1995 as compared to December 31, 1994. The Company had a line of credit agreement which expired in May 1995. (See note 6, of Notes to the Financial Statements). At June 30, 1995 and December 31, 1994 the Company had outstanding borrowings against the line of credit. The Company is negotiating other financing agreements to fund research and development and current operations as may be needed. The Company's Q2 1995, current liabilities have decreased 34% over the December 31, 1994 balances. This is associated with a decrease in the Company's accounts payable balance as compared to the December 31, 1994 balance. The Company believes future liquidity requirements will be covered from operations and financing arrangements. The Company's investment in capital expenditures for YTD 1995 increased slightly over December 31, 1994 balances. There were no material commitments for capital expenditures as of June 30, 1995. The Company does not anticipate any significant domestic capital expenditures during the remainder of 1995. The Company does not engage in any off balance sheet financing. Inflation The effect of inflation on operating results has, historically, been insignificant. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS a. The Annual Meeting of Stockholders was held on June 8, 1995. b. Voting for the election of Directors at said meeting was duly and properly conducted by ballot. The following five persons were duly nominated, and each received the number of votes shown opposite his name and was elected a Director.
For Withheld --------- -------- Newly Elected John J. Cahill 1,635,759 494 Thomas E. Pistilli 1,635,759 494 Continuing William P. Foley II 1,635,759 494 George E. Olenik 1,635,759 494 Carl A. Strunk 1,635,759 494
c. Voting on the proposal to approve and adopt the 1995 Stock Option Plan ( the "1995 Plan") was duly and properly conducted by ballot. There were 1,185,673 votes cast for the proposal, 20,766 votes cast against the proposal, 5,908 abstentions and 423,906 broker non-votes. The vote for the proposal constituted a majority of the shares outstanding and the 1995 Plan was therefore approved. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits (listed by numbers corresponding to Exhibit Table of Item 601 of Regulation S-K): 11. Computation of earnings (loss) per share is not provided as the calculation can be clearly determined from the material contained in Item 1 of Part I. b. The Company did not file any reports on Form 8-K during the three months ended June 30, 1995. MICRO GENERAL CORPORATION FORM 10-Q - QUARTER ENDED JUNE 30, 1995 PART II - SIGNATURES 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. MICRO GENERAL CORPORATION Date: August 11, 1995 /s/ Thomas E. Pistilli _________________________________ Thomas E. Pistilli President Chief Executive Officer Chief Financial Officer Date: August 11,1995 /s/ Linda I. Morton _________________________________ Linda I. Morton Controller EX-27 2 ARTICLE 5 FIN. DATA SCHEDULE FOR 2ND QTR 10-Q
5 1 6-MOS Dec-31-1995 APR-01-1995 JUN-30-1995 540,613 0 478,691 94,566 1,137,121 2,334,272 967,967 787,529 2,548,673 454,742 0 97,408 0 0 4,174,508 2,093,931 2,838,684 2,838,684 1,274,976 1,274,976 1,276,034 0 0 292,511 0 292,511 0 0 0 292,511 .15 .15
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