-----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, KHTqnFCtYc1LMD6l52xY5C/H1K0n1p1W40ZjtybMtJpZVqxgd9eHvRxQlwrmsgR8 h3XOJpmdqrs9Lk86UoRiEg== 0000067383-96-000005.txt : 19960814 0000067383-96-000005.hdr.sgml : 19960814 ACCESSION NUMBER: 0000067383-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 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: 96609532 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, 1996 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 June 30, 1996. MICRO GENERAL CORPORATION FORM 10-Q - QUARTER ENDED JUNE 30, 1996 TABLE OF CONTENTS PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements. Balance Sheets -- June 30, 1996 and December 31, 1995 2 Statements of Operations -- Three months ended June 30, 1996 and June 30, 1995. 3 Statements of Operations -- Six months ended June 30, 1996 and June 30, 1995. 4 Statements of Cash Flows -- Six months ended June 30, 1996 and June 30, 1995. 5 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. 11 PART II. OTHER INFORMATION Item 4. Submission of Matters to Vote of Security Holders 14 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K. 14 SIGNATURES 15 All other schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or notes thereto. MICRO GENERAL CORPORATION Balance Sheets June 30, 1996 and December 31, 1995
June 30, 1996 December 31, (unaudited) 1995 ------------ ------------- Assets Current assets: Cash $ 145,216 $ 35,222 Accounts and notes receivable, less allowance for doubtful receivables and sales returns of $38,500 at 6/30/96 and $46,594 at 12/31/95 221,841 349,991 Inventories (note 2) 1,198,843 1,324,109 Prepaid expenses and accrued interest 164,164 143,433 ----------- ----------- Total current assets 1,730,064 1,852,755 Equipment and improvements, net (note 3) 166,909 193,691 Other assets, net (note 4) 24,598 37,822 ----------- ----------- $1,921,571 $2,084,268 =========== =========== Liabilities and Stockholders' Equity: Current liabilities: Note payable to bank (note 6) $ 300,000 $ 275,000 Accounts payable 67,644 51,278 Accrued expenses 168,358 164,545 Deferred revenue 38,505 21,677 ----------- ----------- Total current liabilities 574,507 512,500 ----------- ----------- Stockholders' equity: Preferred stock, $.05 par value; 1,000,000 shares authorized no shares issued and outstanding at 6/30/96 and 12/31/95. -- -- Common stock, $.05 par value; 10,000,000 shares authorized 1,948,166 shares issued at 6/30/96 and 1,948,166 shares at 12/31/95 (note 1) 97,408 97,408 Additional paid-in capital 4,174,508 4,174,508 Accumulated deficit (2,924,852) (2,700,148) ----------- ----------- Total stockholders' equity 1,347,064 1,571,768 ----------- ----------- $1,921,571 $2,084,268 =========== =========== See accompanying notes to financial statements.
MICRO GENERAL CORPORATION Statements of Operations For the Three Months Ended June 30, 1996 and June 30, 1995 (Unaudited)
June 30, June 30, 1996 1995 ----------- ----------- Revenues: Product sales, net of returns of $42,676 in 1996 and $103,544 in 1995 $ 223,865 $ 411,713 Service and rate revenues 40,409 253,283 ----------- ----------- Total revenues 264,274 664,996 Cost of sales: Net product sales 253,557 298,015 Service and rate revenues 43,334 80,657 ----------- ----------- Total cost of sales 296,891 378,672 ----------- ----------- Gross profit (loss) (32,617) 286,324 Operating expenses: Selling, general and administrative 350,442 411,375 Engineering 19,861 91,151 Research and development 124,012 108,013 Provision for doubtful receivables 4,000 4,000 ----------- ----------- Total operating expenses 498,315 614,539 Operating (loss) (530,932) (328,215) Interest income (expense), net (4,792) 793 ----------- ----------- Loss before income taxes (535,724) (327,422) Income taxes (note 5) 0 0 ----------- ----------- Net loss $ (535,724) $ (327,422) =========== =========== Net income per common and common equivalent share (note 1) $ (0.27) $ (0.17) =========== =========== Weighted average shares outstanding (note 1) 1,948,166 1,948,166 =========== =========== See accompanying notes to financial statements.
MICRO GENERAL CORPORATION Statements of Operations For the Six Months Ended June 30, 1996 and June 30, 1995 (Unaudited)
June 30, June 30, 1996 1995 ----------- ---------- Revenues: Product sales, net of returns of $83,126 in 1996 and $209,878 in 1995 $ 541,975 $ 964,886 Service and rate revenues 1,192,687 1,873,798 ----------- ----------- Total revenues 1,734,662 2,838,684 Cost of sales: Net product sales 572,426 797,993 Service and rate revenues 287,326 476,983 ----------- ----------- Total cost of sales 859,752 1,274,976 ----------- ----------- Gross profit 874,910 1,563,708 Operating expenses: Selling, general and administrative 786,159 895,863 Engineering 35,624 212,478 Research and development 258,826 154,693 Provision for doubtful receivables 10,000 13,000 ----------- ----------- Total operating expenses 1,090,609 1,276,034 ----------- ----------- Operating profit (loss) (215,699) 287,674 Interest income (expense), net (8,205) 4,837 ----------- ----------- Income (loss) before income taxes (223,904) 292,511 Income taxes (note 5) 800 0 ----------- ----------- Net income (loss) $ (224,704) $ 292,511 =========== =========== Net income per common and common equivalent share (note 1) $ (0.12) $ 0.15 =========== =========== Weighted average shares outstanding (note 1) 1,948,166 1,935,238 =========== =========== See accompanying notes to financial statements.
MICRO GENERAL CORPORATION Statements of Cash Flows For the Six Months Ended June 30, 1996 and June 30, 1995 (Unaudited)
June 30, June 30, 1996 1995 ----------- ----------- Cash flows from operating activities: Net earnings (loss) $ (224,704) $ 292,511 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 41,473 49,002 Provision for losses on accounts receivable and sales returns, net of write-offs (8,094) 12,817 Change in assets and liabilities: Decrease in accounts receivable 136,243 221,492 Decrease in inventories 125,266 3,062 (Increase) decrease in prepaid expenses (19,931) 12,019 Increase (decrease) in accounts payable 16,555 (223,704) Increase (decrease) in deferred revenue 16,828 (8,973) Increase in accrued expenses 2,823 3,423 ----------- ----------- Total adjustments 311,163 69,138 Net cash provided by operating activities 86,459 361,649 Cash flows used in investing activities--capital expenditures (1,465) (39,510) Cash flows from financing activities: Common stock proceeds, net 0 65,625 Proceeds from note payable to bank 175,000 0 Repayment of note payable to bank (150,000) 0 ----------- ----------- Net cash provided by financing activities 25,000 65,625 ----------- ----------- Net increase in cash 109,994 387,764 Cash - beginning of year 35,222 152,848 ----------- ----------- Cash - end of period $ 145,216 $ 540,612 =========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 8,205 $ 0 =========== =========== Income taxes $ 800 $ 0 =========== =========== See accompanying notes to financial statements
MICRO GENRAL CORPORATION FORM 10-Q - QUARTER ENDED JUNE 30, 1996 NOTES TO FINANCIAL STATEMENTS 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 three months and six months ended June 30, 1996, are not necessarily indicative of results that may be expected for any other interim period or for the full year ending December 31, 1996. 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 life of the equipment and improvements. Net Income (Per Common Share) Net income per common share is computed based on weighted average of common shares outstanding. The potential exercise of stock options is not included in the computation of net earnings per common share since the effect would be less than 3% for the periods presented. Income Taxes The Company accounts for income taxes in accordance with Statements of Financial Accounting Standards No. 109 ("Statement 109"), "Accounting for Income Taxes." Statement 109 provides that deferred tax assets and liabilities be recognized for temporary differences between the financial reporting basis and the tax basis of the Company's assets and liabilities and expected benefits of utilizing net operation loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled. The impact on deferred taxes of changes in tax rates and laws, if any, are applied to the years during which temporary differences are expected to be settled and reflected in the financial statements in the period enacted. The cumulative effect on the adoption of Statement 109 was not material at June 30, 1996, nor to the results of operations for the year ended December 31, 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 under 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. Financial Instruments The carrying amount of cash, accounts and notes receivable, prepaid expenses, other asses, accounts payable, accrued expenses, notes payable to bank and deferred revenue are measured at cost which approximates their fair value due to the short maturity of these instruments. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Rate change revenue From time to time, the United State Postal Service ("USPS") and/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. Note 2. Inventories Inventories are comprised of the following at June 30, 1996 and December 31, 1995:
June 30, 1996 December 31, 1995 ------------- ----------------- Parts & supplies $ 798,609 $ 919,459 Purchased finished goods 366,582 372,763 Consigned inventory 33,652 31,887 ------------- ----------------- $ 1,198,843 $1,324,109 ============= =================
Note 3. Equipment and Improvements Equipment and improvements are as follows at June 30, 1996 and December 31, 1995:
June 30, 1996 December 31, 1995 ------------- ----------------- Production equipment, tooling and construction in process $ 434,848 $ 432,902 Office furniture and equipment 557,165 563,557 Leasehold improvements 36,518 30,606 ------------- ----------------- 1,028,531 1,027,065 Less accumulated depreciation and amortization 861,622 833,374 ------------- ----------------- $ 166,909 $ 193,691 ============= =================
Note 4. Other Assets Other assets are as follows at June 30, 1996 and December 31, 1995:
Estimated Useful Life 1996 1995 ----------- --------- --------- Excess cost of assets purchased over fair market value 15 years $232,531 $232,531 License rights 10 years 41,382 41,382 Other intangible assets 15 years 23,388 23,388 --------- --------- 297,301 297,301 Less accumulated amortization 272,703 259,479 --------- --------- $ 24,598 $ 37,822 ========= =========
Note 5. Income Taxes Income tax for the three months ended June 30, 1996 represents the state of California minimum tax. 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:
June 30, June 30, 1996 1995 ------------ ------------ Expected tax expense $ (76,399) $ 99,454 Utilization of net operating loss carryforward 73,399 (102,454) Nondeductible amortization of the excess cost of assets purchased over fair market value 3,000 3,000 State income taxes 800 - ------------ ------------ $ 800 $ 0 ============ ============
At both June 30, 1996 and December 31, 1995, the Company had available net operating loss carryforwards of approximately $1,839,000 and $217,000 for Federal and state income tax purposes, respectively. If not used to offset future taxable income, the net operating loss carryforwards will expire at various years through 2010. The Company also has investment tax credit and research and experimentation credit carryforwards aggregating approximately $85,000 which expire during the period 1996 to 2002. Note 6. Notes Payable The Company had a line of credit which was secured by substantially all of the Company's assets and could not exceed 70% of qualifying accounts receivable plus 40% of qualifying inventory up to a maximum credit line of $600,000. The interest rate on the line of credit was at the bank's prime rate plus 2.0%. At June 30, 1996 and December 31, 1995 the Company was either in compliance with all financial covenants or had obtained waivers of such covenants from the bank. The credit line expired July 31, 1996. On August 1, 1996, the Company paid the outstanding amount due on the line of credit in full. On August 1, 1996, the Company entered into a $3 million financing agreement to provide additional funding primarily for the retirement of bank debt, operations, and to fund the Company's ongoing development of a series of high-level security postage meters designed to comply with the new United States Postal Service proposed regulations. Two 9-1/2%, five-year convertible notes were issued, one in the amount of $1 million and one in the amount of $2 million, and are held by Fidelity National Financial, Inc., a Delaware corporation and thirty-eight (38%) percent holder of Micro General common stock and Dito Caree L.P. Holding, a Nevada corporation which owns five (5%) of the common stock of Micro General, respectively. Repayment of the notes is on an interest only basis for the first two years, with subsequent principal and interest payments for the remaining 3 years of the term. The Company can draw against the Notes in an amount up to $750,000 on a quarterly basis over the next twelve months commencing August 1, 1996, if in compliance with certain restrictive covenants. The debt, secured by the assets of the Company, can be converted into 1,344,438 shares of the Company's common stock at a range of $2.00 to $2.50 per share. Note 7. Commitments and Contingencies Noncancelable operating lease commitments consisted principally of the leases for the Company's manufacturing and administrative facility in California and it's research and development facility in Connecticut. At June 30, 1996, the Company is committed to the following noncancelable operating lease payments:
Year ending December 1996(six months) 68,000 1997 145,000 1998 124,000 1999 29,000 ---------- $ 366,000 ==========
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. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Total net product sales decreased $187,848 or 46% for the three months ended June 30, 1996 ("Q2 1996") compared to the three months ended June 30, 1995 ("Q2 1995") while service and rate change revenues decreased $212,874 or 84% for the same period. The decrease in net product sales is due to both a decrease in the retail channel of $53,642 or 58% and a decrease in the dealer channel of $134,206 or 42% as compared to Q2 1995. For Q2 1996 and Q2 1995, service and rate change revenues represented approximately 15% and 38% of total revenue, respectively. Total net product sales decreased $422,911 or 44% for the six months ended June 30, 1996 ("YTD 1996") compared to the six months ended June 30, 1995 ("YTD 1995") while service and rate change revenues decreased $681,111 or 36%. The decrease in net product sales is due to both a decrease in the retail channel of $252,797 or 70% and a decrease in the dealer channel of $170,114 or 28% as compared to YTD 1995. For YTD 1996 and YTD 1995, service and rate change revenues represented approximately 69% and 66% of total revenue, respectively. The decrease in rate change revenues for Q2 1996 and YTD 1996 as compared to the same period in 1995, was primarily due to only a UPS rate change in 1996 as compared to both a UPS and USPS rate change in 1995. The decrease in the retail channel is a direct result of fewer orders by a major catalog wholesaler as compared to the prior period. The Company is continuing to seek other sources of retail distribution to increase sales in this channel. The dealer channel sales decrease continues to be the result of United Parcel Services activities to provide free equipment to a large portion of the Company's customer target market for shipping room manifest systems. The Company is continuing its efforts to add products through outside distribution agreements as well as through its own research and development efforts. Q2 1996 cost of sales for product sales decreased $83,805 or 39% as compared to the same period in 1995. YTD 1996 cost of sales for product sales decreased $215,265 or 41% as compared to the same period in 1995. The decrease in both periods was due to a change in product mix and a decrease in overall product sales. The Q2 1996 service and rate change revenue costs decreased $39,090 or 47% as compared to the same period in 1995, while YTD 1996 service and rate change revenue costs decreased $193,564 or 40%. The cost of goods decrease is due to a decrease in service and rate change revenues for the same period. Gross margin YTD 1996 was 50% compared to 55% for the same period the prior year. This decrease in the gross margin is due to lower total product sales. Operating expenses of the Company in Q2 1996 of $503,107 showed a 18% decrease as compared to Q2 1995, while YTD 1996 operating expenses of $1,098,814 showed a 14% decrease as compared to the same period in 1995. This decrease is a result of a decrease in both selling, general and administrative, and engineering and development expense due to cost controls and restructuring of the Company. While expenses are expected to be reduced in the selling, general and administrative departments, expenses will be increased in the research and development areas as the Company increases activity to support new products for the dealer channel and further development of the Company's high-security postage meter project. The decrease in YTD 1996 net earnings of $517,215 or 177% as compared to the same period in 1995, is primarily a result of the decreases in both product sales and in rate change revenue described above and a significant increase in research and development costs. The loss experienced in the second quarter is due to a decrease in product sales and reduced rate change revenue. Additionally, there was a significant increase in research and development expenses related to the Company's ongoing development of a series of postage meters designed to comply with the new USPS proposed regulations. A prototype of the Company's new high-level security postage meter is currently under development. 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, 1996 cash balance increased $145,216 from December 31, 1995. The increase is primarily attributable to the cash generated from amounts borrowed against the Company's line of credit. The Company's June 30, 1996 net accounts receivable balance decreased $128,150 or 37% from December 31, 1995 levels. This decrease is due to a decrease in product sales for the YTD 1996 period. Working capital was $1,155,557 at June 30, 1996 as compared to $1,340,255 at December 31, 1995. The Company's current ratio at June 30, 1996 was 3.0 as compared to 3.6 at December 31, 1995. This change is a result of lower accounts receivable balances at June 30, 1996 due to the lower YTD 1996 Company sales and slightly higher liabilities at June 30, 1996 which is due to an increase in notes payable to bank. The Company's total inventories decreased 125,266 or 9% at June 30, 1996 as compared to December 31, 1995. This decrease is due to product sales during the six months ended June 30, 1996. The Company had available liquidity through a line of credit agreement with a bank at June 30, 1996 (See note 6, of Notes to the Financial Statements). On August 1, 1996, the Company entered into a $3 million financing agreement to provide additional funding primarily for the retirement of bank debt, operations, and to fund the Company's ongoing development of a series of high-level security postage meters designed to comply with the new United States Postal Service proposed regulations. Two 9-1/2%, five-year convertible notes were issued, one in the amount of $1 million and one in the amount of $2 million, and are held by Fidelity National Financial, Inc., a Delaware corporation and thirty-eight (38%) percent holder of Micro General common stock and Dito Caree L.P. Holding, a Nevada corporation which owns five (5%) of the common stock of Micro General, respectively. Repayment of the notes is on an interest only basis for the first two years, with subsequent principal and interest payments for the remaining 3 years of the term. The Company can draw against the Notes in an amount up to $750,000 on a quarterly basis over the next twelve months commencing August 1, 1996, if in compliance with certain restrictive covenants. The debt, secured by the assets of the Company, can be converted into 1,344,438 shares of the Company's common stock at a range of $2.00 to $2.50 per share. It is the Company's belief that through cash flow from operations and the aforementioned convertible notes, adequate liquidity will be available through the remainder of 1996. At June 30, 1996 and December 31, 1995, the Company was in compliance with all financial covenants associated with the line of credit agreement or has obtained waivers. The Company's YTD 1996, current liabilities have increased 12% compared to the December 31, 1995 balances. This is associated with an increase in the Company's note payable to bank as compared to the December 31, 1995 balance. The Company's investment in capital expenditures during six months ended June 30, 1996 were not material. The Company does not engage in any significant off balance sheet financing. Inflation The effect of inflation on operating results has, historically, been insignificant. Impact of Recently Issued Accounting Standards In March 1995, the Financial Accounting Standards Board issued a new statement titled "Accounting for Impairment of Long-Lived Assets." In October 1995, the Financial Accounting Standards Board issued a new statement titled "Accounting for Stock-Based Compensation" (FASB 123). The new statements are effective for fiscal years beginning after December 15, 1995. The Company does not believe that adoption of the new standards will have a material effect on the financial statements. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS a. The Annual Meeting of Stockholders was held on May 21, 1996. 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 Continuing John J. Cahill 1,675,927 332 William P. Foley II 1,675,927 332 George E. Olenik 1,675,927 332 Thomas E. Pistilli 1,675,927 332 Carl A. Strunk 1,675,927 332
c. Voting on the proposal to amend the Company's Certificate of Incorporation to increase the number of shares of Common Stock which the Company is authorized to issue from 4,000,000 to 10,000,000. There were 1,639,189 votes cast for the proposal, 32,648 votes cast against the proposal, 422 abstentions, and 4,000 broker non-votes. The vote for the amendment constituted a majority of the shares outstanding and the amendment was therefore approved. ITEM 5. OTHER INFORMATION On August 1, 1996, the Company entered into a $3 million financing agreement to provide additional funding primarily for the retirement of bank debt, operations, and to fund the Company's ongoing development of a series of high-level security postage meters designed to comply with the new United States Postal Service proposed regulations. Two 9-1/2%, five-year convertible notes were issued, one in the amount of $1 million and one in the amount of $2 million, and are held by Fidelity National Financial, Inc., a Delaware corporation and thirty-eight (38%) percent holder of Micro General common stock and Dito Caree L.P. Holding, a Nevada corporation which owns five (5%) of the common stock of Micro General, respectively. Repayment of the notes is on an interest only basis for the first two years, with subsequent principal and interest payments for the remaining 3 years of the term. The Company can draw against the Notes in an amount up to $750,000 on a quarterly basis over the next twelve months commencing August 1, 1996, if in compliance with certain restrictive covenants. The debt, secured by the assets of the Company, can be converted into 1,344,438 shares of the Company's common stock at a range of $2.00 to $2.50 per share. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits (listed by numbers corresponding to the 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, 1996. MICRO GENERAL CORPORATION 10-Q -- QUARTER ENDED JUNE 30, 1996 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 13, 1996 /s/ Thomas E. Pistilli ------------------------------- Thomas E. Pistilli President Chief Executive Officer Chief Financial Officer /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-31-1996 JAN-01-1996 JUN-30-1996 145,216 0 260,341 38,500 1,198,843 1,730,064 1,028,531 861,622 1,921,571 574,507 0 97,408 0 0 4,174,508 1,921,571 1,734,662 1,734,662 859,752 859,752 1,080,609 10,000 8,205 (223,904) 800 (224,704) 0 0 0 (224,704) (.12) (.12)
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