-----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, F9UGHgCTFliUI16UVrjptkJ1hLSeIOkz5cVvWO6KfnqVXqWS6EwTEGTsVVdEElNj yUdaCIqlStQ0Ls11zcaYIQ== 0000910680-96-000039.txt : 19960213 0000910680-96-000039.hdr.sgml : 19960213 ACCESSION NUMBER: 0000910680-96-000039 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960212 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROFRAME INC CENTRAL INDEX KEY: 0000754813 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER PERIPHERAL EQUIPMENT, NEC [3577] IRS NUMBER: 222413505 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-13117 FILM NUMBER: 96514653 BUSINESS ADDRESS: STREET 1: 21 MERIDIAN RD CITY: EDISON STATE: NJ ZIP: 08820 BUSINESS PHONE: 2014944440 MAIL ADDRESS: STREET 1: 21 MERIDIAN RD CITY: EDISON STATE: NJ ZIP: 08820 10QSB 1 MICROFRAME 3RD QTR. FORM 10-QSB U.S. Securities and Exchange Commission Washington, D.C. 20549 FORM 10-QSB [X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended December 31, 1995 or [ ] Transition report under Section 13 or 15(d) of the Exchange Act For the transmission period from __________ to __________ Commission file number 0-13117 MICROFRAME, INC. ---------------------------------- (Exact Name of Small Business Issuer as Specified in Its Charter) New Jersey 22-2413505 ---------- ---------- (State or Other Jurisdiction of (IRS Employer Incorporation or Organization) Identification No.) 21 Meridian Road, Edison, New Jersey 08820 ------------------------------------------------------ (Address of Principal Executive Offices) (908) 494-4440 --------------------------------- (Issuer's Telephone Number, Including Area Code) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- There were 3,717,675 shares of Common Stock outstanding at February 7, 1996. Transitional Small Business Disclosure Format: Yes No X --- --- MICROFRAME, INC. FORM 10-QSB FOR THE QUARTER ENDED DECEMBER 31, 1995 PART I. FINANCIAL INFORMATION Page Item 1. Condensed Financial Information 2 Condensed Balance Sheets as of December 31, 1995 and March 31, 1995 (Unaudited) 3 Condensed Statements of Income for the three months ended December 31, 1995 and December 31, 1994; nine months ended December 31, 1995 and December 31, 1994 (Unaudited) 4 Condensed Statements of Cash Flows for the nine months ended December 31, 1995 and December 31, 1994 (Unaudited) 5 Notes to Condensed Financial Statements 6-8 Item 2. Management's Discussion and Analysis or Plan of Operation 9-11 PART II. OTHER INFORMATION Item 6. Exhibits and reports on Form 8-K 12 SIGNATURES 13 PART I. Financial Information Item 1. CONDENSED FINANCIAL INFORMATION. The condensed financial statements included herein have been prepared by the registrant without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Although the registrant believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the registrant's latest Annual Report on Form 10-KSB. -2- MicroFrame, Inc. Condensed Balance Sheets (unaudited)
December 31, March 31, 1995 1995 ASSETS Current assets Cash and cash equivalents $ 30,584 $ 490,261 Accounts receivable, less allowance for doubtful accounts of $75,000 and $75,000, respectively 1,530,345 1,912,304 Inventory, net 1,489,412 775,540 Deferred tax asset -- 400,000 Prepaid expenses and other current assets 55,061 24,325 ------------ ------------ TOTAL CURRENT ASSETS 3,105,402 3,602,430 Property and equipment at cost, net 435,566 317,585 Capitalized software, less accumulated amortization of $504,829 and $370,879, respectively 325,463 211,602 Security deposits 44,554 31,412 Excess of cost over fair value of net assets acquired, less accumulated amortization of $3,138 and $0, respectively 98,472 0 Deferred tax asset 574,000 174,900 ------------ ------------ TOTAL ASSETS $ 4,584,357 $ 4,337,929 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short-term borrowings $ 702,965 $ 0 Accounts payable 552,044 354,427 Accrued payroll and related liabilities 126,497 240,900 Deferred income 232,292 202,478 Other current liabilities 134,254 62,730 ------------ ------------ TOTAL CURRENT LIABILITIES 1,748,052 860,535 ------------ ------------ Stockholders' equity Common stock - par value $.001 per share; authorized 50,000,000 shares, issued 3,718,075 shares and outstanding 3,717,675 shares at December 31, 1995; issued 3,687,198 shares and outstanding 3,686,798 shares at March 31, 1995 3,718 3,687 Preferred stock - par value $10 per share; authorized 200,000 shares, none issued -- -- Additional paid-in capital 4,856,924 4,769,406 Accumulated deficit (2,020,338) (1,291,699) ------------ ------------ 2,840,304 3,481,394 Less - Treasury stock, 400 shares, at cost (4,000) (4,000) ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 2,836,304 3,477,394 ------------ ------------ Commitment and contingencies -- -- ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,584,357 $ 4,337,929 ============ ============
The accompanying notes are an integral part of these condensed financial statements -3- MicroFrame, Inc. Condensed Statements of Income
Nine Months Ended Three Months Ended December 31, December 31, ------------ ------------ 1995 1994 1995 1994 Net sales $4,334,057 $5,110,962 $1,727,117 $2,030,319 ---------- ---------- ---------- ---------- Costs and expenses Cost of goods 1,796,623 2,290,145 631,049 969,352 Research and development expenses 440,082 305,411 146,032 104,209 Selling, general and administrative expenses 2,807,906 2,023,734 902,149 775,081 Amortization of excess of cost over fair value of net assets acquired 3,138 0 2,758 0 ---------- ---------- ---------- ---------- TOTAL COSTS AND EXPENSES 5,048,049 4,619,290 1,681,988 1,848,642 Interest income 3,262 6,798 200 3,122 Interest expense (17,910) (229) (16,216) (229) ---------- ---------- ---------- ---------- Income (loss) before income tax provision (728,640) 498,241 29,113 184,570 ========== ========== ========== ========== Income tax provision 0 199,300 0 73,800 ---------- ---------- ---------- ---------- NET INCOME (LOSS) $ (728,640) $ 298,941 $ 29,113 $ 110,770 ========== ========== ========== ========== Per share Primary Net income (loss) per share $ (0.20) $ 0.08 $ 0.01 $ 0.03 ---------- ---------- ---------- ---------- Shares used in computation 3,699,178 3,646,242 3,717,885 3,655,131 ---------- ---------- ---------- ---------- Fully diluted Net income (loss) per share $ (0.20) $ 0.08 $ 0.01 $ 0.03 ---------- ---------- ---------- ---------- Shares used in computation 3,699,178 3,956,420 3,717,885 3,939,265 ---------- ---------- ---------- ----------
The accompanying notes are an integral part of these condensed financial statements -4- MicroFrame, Inc. Condensed Statements of Cash Flows
(unaudited) Nine months ended December 31, ------------ 1995 1994 Cash flows from operating activities Net income (loss) $ (728,640) $ 298,941 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 243,054 151,440 Deferred tax provision -- 199,300 (Increase) decrease in Accounts receivable, net 388,862 (621,413) Inventory (712,412) 362,372 Prepaid expenses and other current assets 16,259 (17,461) Security deposits (11,492) -- Increase (decrease) in Accounts payable 167,312 (57,941) Accrued payroll and related liabilities (118,843) (16,566) Deferred income 29,814 61,718 Other current liabilities 46,486 (18,098) ------------ ------------ Net cash provided by operating activities (679,600) 342,292 ------------ ------------ Cash flows from investing activities Capital expenditures (442,220) (186,193) Acquisition of European Business Associates (50,206) -- ------------ ------------ Net cash used in investing activities (492,426) (186,193) ------------ ------------ Cash flows from financing activities Short-term borrowings 702,965 27,433 Insurance of common stock 9,384 3,000 ------------ ------------ Repayment of note payable 0 0 ------------ ------------ Net cash (used) provided by financing activities 712,349 30,433 ------------ ------------ Net (decrease) increase in cash and cash equivalents (459,677) 186,532 Cash and cash equivalents - beginning of period 490,261 505,317 ------------ ------------ Cash and cash equivalents - end of period $ 30,584 $ 691,849 ============ ============
The accompanying notes are an integral part of these condensed financial statements -5- MICROFRAME, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS DECEMBER 31, 1995 (Unaudited) NOTE 1 - CONDENSED FINANCIAL STATEMENTS: The condensed balance sheets as of December 31, 1995 and March 31, 1995, the condensed statements of operations for the nine month periods ended December 30, 1995 and 1994 and the condensed statements of cash flows for the nine month periods then ended have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at December 31, 1995 and 1994 have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto as of March 31, 1995 and for the year then ended. NOTE 2 - INVENTORY: Inventory consists of the following: December 31, 1995 March 31, 1995 ----------------- -------------- Raw materials $ 817,997 $ 347,962 Work in process 517,023 286,667 Finished goods 154,392 140,911 ----------- ----------- Total $ 1,489,412 $ 775,540 =========== =========== NOTE 3 - STOCKHOLDERS' EQUITY: During the nine months ended December 31, 1995, stockholders' equity changed for the following items: Net income/(loss) of $(728,640) Issuance of common stock of $87,549 -4- MICROFRAME, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS DECEMBER 31, 1995 (Unaudited) NOTE 4 - NET INCOME PER SHARE: The computation of earnings per common and common equivalent share is based upon the weighted average number of common shares outstanding during the period plus (in periods in which they have a dilutive effect) the effect of common stock equivalents, comprised solely of stock options. Fully diluted earnings per share also reflect additional dilution related to stock options due to the use of the market price at the end of the period, when higher than the average price for the period. NOTE 5 - ACQUISITION OF EUROPEAN BUSINESS ASSOCIATES: On September 15, 1995, MicroFrame Europe N.V., a newly formed wholly-owned subsidiary, acquired all of the issued and outstanding shares of capital stock of European Business Associates BVBA of Brussels, Belgium, a marketing organization which specializes in creating and managing distribution networks and OEM relations for suppliers to the telecommunications industry. MicroFrame Europe N.V. will serve as the Company's European sales and distribution coordinator as well as provide technical support services for the Company's authorized European distributors. The acquisition was accounted for under the purchase method of accounting. The results of the operations of MicroFrame Europe N.V. are included with the Company's results of operations from the date of acquisition. The Company issued cash and common stock valued at $128,125, assumed liabilities of $59,783, and incurred $35,075 in additional costs related to the acquisition. Total consideration as allocated to the assets acquired was as follows: Current assets $ 90,226 Property and equipment 29,497 Other assets 1,650 Goodwill 101,610 ------------- $ 222,983 -5- MICROFRAME, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS DECEMBER 31, 1995 (Unaudited) The portion of the purchase price allocated to goodwill is being amortized over a 10-year period beginning September 15, 1995. The following unaudited pro forma condensed statement of operations information has been prepared to give effect to the acquisition as if such transaction had occurred at the beginning of the periods presented. The information presented is not necessarily indicative of the results of future operations of the total Company. Nine Months Ended Dec. 31, 1995 Dec. 31, 1994 - ----------------- ------------- ------------- Net revenues $ 4,382,000 $ 5,220,000 Net income (loss) $ (759,000) $ 299,000 Pro forma earnings per share $ (.21) $ .08 -6- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION RESULTS OF OPERATIONS Revenues for the quarter ended December 31, 1995 were $1,727,117 as compared with revenues of $2,030,319 for the same quarter of the previous fiscal year, or a decrease of approximately 14.9 %. The major portion of the revenue decrease was attributable to decreased shipments to AT&T of Remote Port Security Devices (RPSDs) for their Definity PBX customers. As a result of an "overstocked" position determined by AT&T in the quarter ended September 30, 1995, a reduction in purchase order activity was effected. Revenues for the current quarter ended from AT&T were approximately 65% lower than the same quarter in the previous year. Exclusive of this component, quarterly revenue improved slightly (approximately 1%) from the quarter ended December 31, 1994. In addition, AT&T's purchase order activity resumed in December for regular monthly quantities of the RPSDs. Two additional significant reductions in the Company's revenue stream which occurred in the quarter ended September 30, 1995 experienced increases in the quarter ended December 31, 1995. First, revenues from the Company's largest customer, MCI, increased approximately threefold for the quarter ended December 31,1995 versus the quarter ended September 30, 1995. Second, the Company's revenues from international customers increased by approximately $300,000 in the quarter ended December 31, 1995 versus the quarter ended September 30,1995. During the quarter ended December 31,1995, the Company received a large purchase order commitment from Concert Management Services, a joint venture between MCI Communications and British Telecommunications, on which initial shipments were made during the quarter. The Company's cost of goods sold decreased from $969,352 from the quarter ended December 31, 1994 to $631,049 for the quarter ended December 31, 1995 as a result of decreased shipment levels. However, cost of goods as a percentage of sales decreased from 47.7% for the previous comparable fiscal period to 36.5% for this fiscal period, reflecting improved systems, purchasing procedures and more favorable pricing negotiated with vendors. Research and development expenses, net of capitalized software development, increased from $104,209 in the quarter ended December 31, 1994 to $146,032 in the current fiscal quarter, an increase of 40%. Research and development expenses as a percentage of sales increased from 5.1% to 8.5%, reflecting increased development of a next generation set of products to be introduced in the fourth fiscal quarter. Selling, general and administrative expenses increased from $775,081 for the prior year's comparable fiscal period to $902,149 for the fiscal period ending December 31, 1995. This is a result of the Company's expansion of senior management and its sales and marketing function in anticipation of future growth, which growth did not materialize in the prior comparable fiscal period. The Company's selling, general and administrative expenses decreased by approximately 5% from the quarter ended September 30, 1995 as austerity measures were implemented, including a hiring freeze and temporary furloughs of approximately 15% of the Company's full-time employees. -7- The Company's operating profit before interest and taxes decreased from $181,677 during the fiscal quarter ended December 31, 1994 to $45,129 for the fiscal quarter ended December 31, 1995, as a direct result of the factors described above. FIRST NINE MONTHS OF FISCAL 1996 VERSUS FIRST NINE MONTHS OF FISCAL 1995 Revenues for the nine-month period ended December 31, 1995 were $4,334,057 as compared with revenues of $5,110,962 for the comparable period of the previous fiscal year, a decrease of approximately 15.2 %. The major portion of the revenue decrease was attributable to decreased shipments to AT&T of Remote Port Security Devices (RPSDs) for their Definity PBX customers as discussed above, as well as a significant revenue shortfall experienced in the quarter ended September 30, 1995. While the Company sells a substantial portion of its product to its top two customers, MCI and AT&T, the customer base exclusive of these two customers has increased substantially, both in terms of absolute revenues and percentage of overall revenues. Revenues excluding these top two customers for the nine months ended December 31, 1995 increased by approximately $625,000 (33%) over the nine months ended December 31,1994, while the percentage of overall revenue from all other customers increased from approximately 38% in the nine months ended December 31, 1994 to approximately 58% in the nine months ended December 31, 1995. The Company's cost of goods sold decreased from $2,290,145 from the nine months ended December 31, 1994 to $1,796,923 for the quarter ended December 31, 1995 as a result of decreased shipment levels. Despite the lower volume, cost of goods as a percentage of sales decreased from 44.8% for the previous comparable fiscal period to 41.5% for the current fiscal period , due to the favorable factors noted previously. Research and development expenses, net of capitalized software development, increased from $305,411 for the period ended December 31, 1994 to $440,082 in the current fiscal period, an increase of 44%. Research and development expenses as a percentage of sales increased from 6.0% to 10.2%, reflecting an increased commitment to the development of a next generation set of products. Selling, general and administrative expenses increased from $2,023,274 for the prior year's comparable fiscal period to $2,807,906 for the fiscal period ending December 31, 1995. This is a result of the Company's expansion of senior management and its sales and marketing function in anticipation of future growth, which growth did not materialize in the prior comparable fiscal period. The Company's operating profit before interest and taxes decreased from $491,672 during the nine months ended December 31, 1994 to an operating loss before interest and taxes of $713,992 for the nine month period ended December 31, 1995. This decrease was due to the Company's slow sales growth and the increase in operating costs which were in anticipation of more rapid growth. -8- FINANCIAL CONDITION AND CAPITAL RESOURCES During the third quarter of fiscal year 1996, the Company's financial condition remained steady with the previous quarter ended September 30, 1995. After a significant drop in working capital from $2,341,895 at March 31, 1995 to $1,351,578 at September 30, 1995, the working capital remained level at $1,357,349 at December 31, 1995. A much tighter focus on working capital management was instituted as the Company stabilized its financial condition after the decline in the quarter ended September 30, 1995. The Company has a credit agreement with CoreStates Bank ("CoreStates") for a credit line of $1,000,000 to finance future working capital requirements, collateralized by accounts receivable, inventory, equipment and all other assets of the Company, as well as a $200,000 credit facility to finance purchases of machinery and equipment, convertible into a three-year secured term loan when utilized. As of December 31, 1995, the Company has $582,000 outstanding on its credit line and there is a current term loan of $120,965 outstanding under the credit facility. As a result of its stabilized working capital position and its line of credit with CoreStates, the Company believes that it will have sufficient capital to meet its financial requirements for the remainder of the fiscal year. -9- PART II. Other Information Item 6. Exhibits and reports on Form 8-K (a) Exhibits: None. (b) Reports on Form 8-K: None. -10- SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: February 8, 1996 MICROFRAME, INC. /s/ Lonnie L. Sciambi -------------------------------- Lonnie L. Sciambi, President and Chief Executive Officer /s/ Mark A. Simmons -------------------------------- Mark A. Simmons, Chief Financial Officer (Principal Financial Officer) -11- EX-27 2 FDS -- WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
5 MICROFRAME, INC. 9-MOS MAR-31-1996 APR-01-1995 DEC-31-1995 30,584 0 1,605,345 (70,000) 1,489,412 3,105,402 943,521 (507,955) 4,584,357 1,748,052 0 0 0 3,718 2,832,586 4,584,357 1,727,117 1,727,117 631,049 1,681,988 0 0 16,216 29,113 0 29,113 0 0 0 29,113 0.01 0.01
-----END PRIVACY-ENHANCED MESSAGE-----