-----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, IynjPWhEQXCCdAM9ILaDCzNL592LcyU39EI9OvugskQ7ZW/kNPxfI7RLreBP8XPC P2PfdAW6DxXJW58ZARU79Q== 0000910680-97-000318.txt : 19971125 0000910680-97-000318.hdr.sgml : 19971125 ACCESSION NUMBER: 0000910680-97-000318 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971110 DATE AS OF CHANGE: 19971124 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROFRAME INC CENTRAL INDEX KEY: 0000754813 STANDARD INDUSTRIAL CLASSIFICATION: 3577 IRS NUMBER: 222413505 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-13117 FILM NUMBER: 97713110 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 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997 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 September 30, 1997 OR [_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File No.: 0-13117 MICROFRAME, INC. ---------------- (Exact Name of Small Business Issuer in Its Charter) New Jersey 22-2413505 ---------- ---------- (State or Other Jurisdiction of (IRS Employer Identification Number) Incorporation or Organization) 21 Meridian Road, Edison, New Jersey 08820 ------------------------------------------ (Address of Principal Executive Offices) (732) 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 4,839,303 shares of Common Stock outstanding as of November 6, 1997. Transitional Small Business Disclosure Format: Yes [_] No [X] MICROFRAME, INC. AND SUBSIDIARY FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1997 PART I. FINANCIAL INFORMATION Page Item 1. Condensed Consolidated Financial Information 2 Condensed Consolidated Balance Sheets as of September 30, 1997 and March 31, 1997 (Unaudited) 3 Condensed Consolidated Statements of Operations for the Three and Six Months Ended September 30, 1997 and 1996 (Unaudited) 4 Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 1997 and 1996 (Unaudited) 5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6-7 Item 2. Management's Discussion and Analysis or Plan of Operation 8-10 PART II. OTHER INFORMATION Item 4. Submissions of Matters to a Vote of Security Holders 11 Item 5. Other Information 11 Item 6. Exhibits and Reports on Form 8-K 12 SIGNATURES 13 PART I. Financial Information Item 1. Condensed Consolidated Financial Information. --------------------------------------------- The condensed consolidated 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 audited financial statements and the notes thereto included in the registrant's Annual Report on Form 10-KSB for the year ended March 31, 1997. 2 MicroFrame, Inc. and Subsidiary Condensed Consolidated Balance Sheets (unaudited)
September 30, March 31, 1997 1997 ----------- ----------- ASSETS Current assets Cash and cash equivalents $ 386,385 $ 539,214 Accounts receivable, less allowance for doubtful accounts of $100,000 and $100,000 1,903,131 1,898,810 Inventory, net 1,086,630 1,030,343 Deferred tax asset 321,737 314,242 Prepaid expenses and other current assets 201,693 120,990 ----------- ----------- Total current assets 3,899,576 3,903,599 Property and equipment at cost, net of Accumulated Depreciation and Amortization of $839,013 and $738,635 315,514 343,123 Capitalized software, less accumulated amortization of $910,223 and $812,257 307,509 315,568 Goodwill, less accumulated amortization of $20,355 and $16,230 81,255 85,380 Security deposits 36,740 34,703 ----------- ----------- Total assets $ 4,640,594 $ 4,682,373 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Currnt Portion of Long-trem Debt $ 32,643 $ 42,266 Accounts payable 589,950 361,537 Accrued payroll and related liabilities 202,457 280,512 Deferred income 217,276 268,518 Other current liabilities 210,676 255,346 ----------- ----------- Total current liabilities 1,253,002 1,208,179 ----------- ----------- Deferred tax liabilities 172,852 173,077 Long-term debt 19,205 30,398 Committments and contingencies Stockholders' equity Common stock - par value $.001 per share; authorized 50,000,000 shares, issued 4,839,703 shares and outstanding 4,839,303 shares at September 30, 1997; issued 4,839,203 shares and outstanding 4,838,803 shares at March 31, 1997 4,839 4,839 Preferred stock - par value $10 per share; authorized 200,000 shares, none issued Additional paid-in capital 6,213,452 6,212,828 Accumulated deficit (3,018,756) (2,942,948) ----------- ----------- 3,199,535 3,274,719 Less - Treasury stock, 400 shares, at cost (4,000) (4,000) ----------- ----------- Total stockholders' equity 3,195,535 3,270,719 ----------- ----------- Total liabilities and stockholders' equity $ 4,640,594 $ 4,682,373 =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements 3 MicroFrame, Inc. and Subsidiary Condensed Consolidated Statements of Operations (unaudited)
Three Months Ended Six Months Ended September 30, September 30, 1997 1996 1997 1996 ----------- ----------- ----------- ------------ Net sales $ 2,281,727 $ 1,661,176 $ 4,018,273 $ 3,437,511 Cost of sales 1,046,052 648,831 1,787,098 1,253,890 ----------- ----------- ----------- ------------ Gross Margin 1,235,675 1,012,345 2,231,175 2,183,621 Research and development expenses 180,796 204,060 467,348 428,010 Selling, general and administrative expenses 966,731 779,724 1,853,922 1,683,019 ----------- ----------- ----------- ------------ Income (loss) from operations 88,148 28,561 (90,095) 72,592 Interest income 3,559 10,833 9,204 21,101 Interest expense (1,213) (6,669) (2,637) (20,868) ----------- ----------- ----------- ------------ Income (loss) before income tax provision(benefit) 90,494 32,725 (83,528) 72,825 Income tax provision(benefit) 12,501 0 (7,720) 0 ----------- ----------- ----------- ------------ Net income (loss) $ 77,993 $ 32,725 $ (75,808) $ 72,825 =========== =========== =========== ============ Per share data Primary Net income (loss) per share $ 0.02 $ 0.01 $ (0.01)$ 0.01 ----------- ----------- ----------- ------------ Weighted average number of common shares outstanding 4,839,703 4,823,524 N/A 4,883,704 ----------- ----------- ----------- ------------
The accompanying notes are an integral part of these condensed consolidated financial statements 4 MicroFrame, Inc. and Subsidiary Condensed Consolidated Statements of Cash Flows (unaudited)
Six Months Ended September 30, 1997 1996 ----------- ----------- Cash flows from operating activities Net income (loss) $ (75,808) $ 72,825 Adjustments to reconcile net income (loss) to net cash provided by operating activities Depreciation and amortization 202,469 177,845 Provision for bad debts 0 31,646 Provision for inventory obsolescence 0 17,500 Deferred tax provision (7,720) 0 (Increase) decrease in Accounts receivable (4,321) 272,310 Inventory (56,287) (157,249) Prepaid expenses and other current assets (80,703) (45,215) Security deposits (2,037) 90 Increase (decrease) in Accounts payable 228,413 (140,433) Accrued payroll and related liabilities (78,055) (50,027) Deferred income (51,242) (11,526) Other current liabilities (44,670) (105,080) ----------- ----------- Net cash provided by operating activities 30,039 62,686 ----------- ----------- Cash flows from investing activities Capital expenditures (72,769) (68,913) Capitalized software (89,907) (125,831) ----------- ----------- Net cash used in investing activities (162,676) (194,744) ----------- ----------- Cash flows from financing activities Repayments of debt (20,816) (519,081) Issuance of common stock 624 1,331,933 ----------- ----------- Net cash provided by (used in) financing activities (20,192) 812,852 ----------- ----------- Net increase (decrease) in cash and cash equivalents (152,829) 680,794 Cash and cash equivalents - beginning of period 539,214 48,302 ----------- ----------- Cash and cash equivalents - end of period $ 386,385 $ 729,096 =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements 5 MICROFRAME, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 (Unaudited) NOTE 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: The condensed consolidated balance sheets as of September 30, 1997 and March 31, 1997, the condensed consolidated statements of operations for the three and six month periods ended September 30, 1997 and 1996 and the condensed consolidated statements of cash flows for the six 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 for the fair presentation of the Company's financial position, results of operations and cash flows at September 30, 1997 and 1996 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 audited financial statements and notes thereto included in the annual report on Form 10-KSB for the year ended March 31, 1997. NOTE 2 - INVENTORY: Inventory consists of the following: September 30, 1997 March 31, 1997 ----------- ----------- Raw materials $ 859,198 $ 825,583 Work in process 400,731 374,802 Finished goods 26,701 29,958 ----------- ----------- 1,286,630 1,230,343 Less, allowance for obsolescence (200,000) (200,000) ----------- ----------- Total $ 1,086,630 $ 1,030,343 =========== =========== NOTE 3 - RELATED PARTY TRANSACTIONS: In August 1997, the Company and one of its officers entered into an agreement whereby a $20,000 advance received by the officer was converted into a demand note payable bearing interest at the prime rate plus 1%. The note may be repaid from time to time however the entire balance is due upon the earlier of; the officer's cessation of employment or March 31, 1999. At September 30, 1997, this amount is included in Prepaid expenses and other current assets. 6 NOTE 4 - EARNINGS PER SHARE: The computation of earnings per common and common equivalent shares 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 of outstanding stock options and warrants. Fully diluted earnings per share also reflect additional dilution related to outstanding 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. Net loss per share is based on the number of common shares outstanding at the end of the period. NOTE 5 - RECENT PRONOUNCEMENTS: In fiscal 1998, the Company is required adopt the provisions of the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"), which is effective for financial statements for annual periods ending after December 15, 1997. SFAS 128 establishes standards for the computation, presentation and disclosure requirements for earnings per share. The adoption of this standard is not expected to have a material impact on the Company's earnings per share. In fiscal 1998, the Company is require to adopt the provisions of the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Segment Reporting" ("SFAS 131"), which is effective for financial statements for annual periods ending after December 15, 1997. SFAS 131 establishes standards for the disclosure requirements relative to operating segments. The Company is currently evaluating the disclosure requirements of the recently issued statement. 7 Item 2. Management's Discussion and Analysis or Plan of Operation --------------------------------------------------------- A number of statements contained in this report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involve risks and uncertainties that could cause actual results to differ materially from those expressed or implied in the applicable statements. These risks and uncertainties include, but are not limited to, the recent introduction of, and the costs associated with, a new product line; dependence on the acceptance of this new family of products; risks related to technological factors; potential manufacturing difficulties; dependence on third parties; a limited customer base; and liability risks. Results of Operations - - --------------------- Revenues for the quarter ended September 30, 1997 were $2,281,727 as compared with revenues of $1,661,176 for the same quarter of the previous fiscal year, or an increase of approximately 37%. The increase was primarily due to increased international shipments of the Company's Sentinel 2000 product. The Company continued to see interest in the other member of the family of SNS products, the Manager 2000. The Company's revenues were positively impacted as a result of shipments to the European market, including shipments under its contract with PTT Holland. Shipments to Europe were approximately $1,000,000 for the three months ended September 30, 1997 compared to $165,000 for the quarter ended September 30, 1996. The Company is aggressively pursuing customers in this market place. The Company's cost of goods sold increased from $648,831 for the quarter ended September 30, 1996 to $1,046,052 for the quarter ended September 30, 1997 as a result of increased business. Cost of goods sold as a percentage of sales increased from 39% for the previous comparable fiscal period to 45% for this fiscal period, due to the fact that the company is still experiencing a shift from its mature product lines to the newer Sentinel product line. The Company continues to focus on lowering the costs related to the newer products as they begin to mature and will eventually see the benefits from manufacturing efficiencies. Research and development expenses, net of capitalized software development, remained relatively constant with a slight decrease from $204,060 in the quarter ended September 30, 1996 to $180,796 in the current fiscal quarter. Research and development expenses as a percentage of revenues decreased from 12% to 8%., primarily due to increased revenues in the current fiscal period. Selling, general and administrative expenses increased approximately 23% from $779,724 for the prior year's comparable fiscal period to $966,731 for the fiscal period ended September 30, 1997. This increase represents lower general and administrative costs offset by increases in the Company's selling expenses including an increase in the number of direct sales people, as we embark on an aggressive growth plan. The Company anticipates seeing increased revenues as a result of these increased selling expenses in the third and fourth quarters of this fiscal year. The Company's income from operations increased 134% to $88,148 for the three months ended September 30, 1997 compared to $28,561 for the same period a year ago. Due to increased sales, the reduction in interest costs to the Company and the provision for income tax of $12,501, the net income for the period ended September 30, 1997 increased 138% to $77,993 compared to net income of $32,725 for the quarter ended September 30, 1996. At March 31, 1997 the Company had provided a partial valuation allowance against its existing deferred tax assets. At September 30, 1997 the Company has reversed approximately $16,700 of valuation allowance relating to its net operating losses and it has recorded a benefit for other operational temporary difference items. The expiration dates for its net operating losses range from the years 2001 through 2011. 8 First Six Months of Fiscal 1998 Versus First Six Months Fiscal 1997 - - ------------------------------------------------------------------- Revenues for the six months ended September 30, 1997 were $4,018,273 as compared with revenues of $3,437,511 for the comparable period of the previous fiscal year, or an increase of approximately 16%. This improvement is due to the success of the Company's new flagship product, the Sentinel 2000, increased shipments into the European market, and the expanding domestic customer base. The Company's revenues for the six months ended September 30, 1997 were positively impacted as a result of shipments to the European market, including shipments under its contract with PTT Holland. Shipments to Europe were approximately $1,025,000 for the six months ended September 30, 1997 compared to $368,000 for the six months ended September 30, 1996. The Company is aggressively pursuing customers in this market place. The Company's cost of goods sold increased to $1,787,098 for the quarter ended September 30, 1997 compared to $1,253,890 for the quarter ended September 30, 1996 as a result of increased shipment levels. Cost of goods sold as a percentage of sales increased from 36% for the previous comparable fiscal period to 44% for this fiscal period, primarily due to the increased sales volume of the Company's newer product line. The Company expects to see increased benefits as the products mature and by continuing to improve purchasing and materials management systems. Research and development expenses, net of capitalized software development, increased from $428,010 in the six months ended September 30, 1996 to $467,348 in the current fiscal period, an increase of 9%. Research and development expenses as a percentage of revenues remained relatively constant at approximately 12%. Selling, general and administrative expenses increased 10% from $1,683,019 for the prior year's comparable fiscal period to $1,853,922 for the six months ended September 30, 1996. This increase was primarily the result of added sales personnel in the second quarter. However as a percentage of revenues, selling, general and administrative expenses decreased from 48% for the previous period to 46% for the current fiscal period. The Company's had a loss before interest and taxes of $90,095 for the six months ended September 30, 1997 compared to income of $72,825 during the six months ended September 30, 1996, primarily due to increased Selling expenses and reduced margins on its newer product lines. The Company expects that benefits will arise as a result of the increase in the sales force as well as increased volumes and manufacturing efficiencies gained thereby as the products continue to mature. The net loss for the period was $75,808 compared to net income of $72,825 for the same period in 1996. At September 30, 1997 the Company has provided a full valuation allowance against any benefits arising out of the net loss for the period, while it has recorded partial benefits for other operational temporary difference items. The current expiration dates for its net operating losses range from the years 2001 through 2011. The Company's available unused loss carryforwards and its fully provided valuation allowance against its existing deferred tax assets allows it to record no income tax provision currently. Financial Condition and Capital Resources - - ----------------------------------------- During the first six months of fiscal year 1998, the Company recorded a net loss of approximately $76,000. Included in this loss were non-cash charges of approximately $202,000 for depreciation and amortization. As a result, during the first six months of fiscal year 1998, the Company's financial condition remained relatively stable. The Company's operations provided approximately $17,500 of cash, which included a use of cash of approximately $55,000 to satisfy its New York State tax settlement. The Company also utilized approximately $150,000 of cash for capital and software-related expenditures and utilized approximately $20,000 of cash to pay down its long-term debt. On August 30, 1997, the Company's line of credit agreement with United National Bank of Bridgewater, New Jersey expired. The Company is currently negotiating with several institutions including United National to provide the Company with 9 a $1,000,000 line of credit, collateralized by accounts receivable of the Company, to finance future working capital requirements. The Company expects to close this line in November 1997. Based on its current cash and working capital position, as well as its available line of credit expected to be in place in November 1997, the Company believes that it will have sufficient capital to meet its operational needs over the next twelve months. In fiscal 1998, the Company is required adopt the provisions of the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"), which is effective for financial statements for annual periods ending after December 15, 1997. SFAS 128 establishes standards for the computation, presentation and disclosure requirements for earnings per share. The adoption of this standard is not expected to have a material impact on the Company's earnings per share. In fiscal 1998, the Company is require to adopt the provisions of the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131, "Segment Reporting" ("SFAS 131"), which is effective for financial statements for annual periods ending after December 15, 1997. SFAS 131 establishes standards for the disclosure requirements relative to operating segments. The Company is currently evaluating the disclosure requirements of the recently issued statement. 10 PART II. Other Information ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Shareholders of the Company was held on September 15, 1997. At such meeting the shareholders approved the following matters: PROPOSAL 1. Election of the following individuals as directors of the Company for a term of one year, which constitutes the entire Board of Directors of the Company: Stephen M. Deixler, Stephen B. Gray, David I. Gould, Michael Radomsky, William H. Whitney and Stephen P. Roma PROPOSAL 2. Ratification of the Board of Directors' selection of Coopers & Lybrand L.L.P. as the Company's independent accountants for the fiscal year ending March 31, 1998 Set forth below are the votes for, withheld, against and abstaining from each of the proposals listed above: Proposal For Withheld Against Abstain 1. Stephen M. Deixler 2,750,351 12,700 Stephen B. Gray 2,758,551 4,500 David I. Gould 2,750,351 12,700 Michael Radomsky 2,750,351 12,700 William H. Whitney 2,758,551 4,500 Stephen P. Roma 2,758,351 4,700 Alexander Stark 2,758,351 4,700 2. Coopers & Lybrand 2,758,241 4,450 360 L.L.P. ITEM 5. OTHER INFORMATION On September 15, 1997, at the Board of Directors meeting following the Annual Meeting of Shareholders, the Company's current officers were re-elected for a one year term commencing as of such date. In addition, Stephen P. Roma, David I. Gould and Stephen M. Deixler were re-elected as members of the Company's Compensation/Stock Option Committee, Audit Committee and Nominating Committee for a one-year term commencing as of such date. Stephen M. Deixler, Alan Stark and David I. Gould were re-elected to the Strategic Steering and Mergers and Acquisitions committee for a one-year term commencing as of such date. 11 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 27. Financial Data Schedule (b) Reports on Form 8-K: No Reports on Form 8-K were filed. 12 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: November 6, 1997 MICROFRAME, INC. /s/ Stephen B. Gray ----------------------------- Stephen B. Gray, President, Chief Executive Officer and Chief Operating Officer /s/ John F. McTigue ----------------------------- John F. McTigue, Chief Financial Officer and Treasurer (Principal Financial Officer) 13 EX-27 2 FDS -- QTR. ENDED SEPTEMBER 30, 1997
5 0000754813 MICROFRAME, INC. 6-MOS MAR-31-1998 APR-01-1997 SEP-30-1997 386,385 0 2,003,131 (100,000) 1,086,630 3,899,576 1,154,527 (839,013) 4,640,594 (1,253,002) 0 0 0 4,839 3,018,756 4,640,594 4,018,273 24,018,273 11,787,098 24,108,368 0 0 (6,567) (83,528) (7,720) (75,808) 0 0 0 75,808 (0.01) (0.01)
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