-----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, QKBGkOz+YW/b8TIzXgjEYId29ao+FWTmIwr+jx0UKdhMRtBLdmRE127rljdOy1nH L9t+BPCM+tIQJr0ccYTL6g== 0000910680-98-000107.txt : 19980218 0000910680-98-000107.hdr.sgml : 19980218 ACCESSION NUMBER: 0000910680-98-000107 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980217 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: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-13117 FILM NUMBER: 98541105 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 DECEMBER 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 December 31, 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 February 6, 1998. Transitional Small Business Disclosure Format: Yes [_] No [X] MICROFRAME, INC. AND SUBSIDIARY FORM 10-QSB FOR THE QUARTER ENDED DECEMBER 31, 1997 PART I. FINANCIAL INFORMATION Page - ------- --------------------- ---- Item 1. Condensed Consolidated Financial Information 2 Condensed Consolidated Balance Sheets as of December 31, 1997 and March 31, 1997 (Unaudited) 3 Condensed Consolidated Statements of Operations for the Three and Nine Months Ended December 31, 1997 and 1996 (Unaudited) 4 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended December 31, 1997 and 1996 (Unaudited) 5 Notes to Condensed Consolidated Financial Statements (Unaudited) 6-7 Item 2. Management's Discussion and Analysis 8-10 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 12 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)
- ------------------------------------------------------------------------------------------------------- December 31, March 31, 1997 1997 ----------- ----------- ASSETS Current assets Cash and cash equivalents $ 256,543 $ 539,214 Accounts receivable, less allowance for doubtful accounts of $55,626 and $100,000 2,853,633 1,898,810 Inventory, net 1,267,372 1,030,343 Deferred tax asset 499,427 314,242 Prepaid expenses and other current assets 145,492 120,990 ----------- ----------- Total current assets 5,022,467 3,903,599 Property and equipment at cost, net of Accumulated Depreciation and Amortization of $902,222 and $738,635 305,753 343,123 Capitalized software, less accumulated amortization of $955,233 and $812,257 352,509 315,568 Goodwill, less accumulated amortization of $24,293 and $16,230 77,317 85,380 Security deposits 37,139 34,703 ----------- ----------- Total assets $ 5,795,185 $ 4,682,373 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Currnt Portion of Long-trem Debt $ 21,850 $ 42,266 Accounts payable 981,954 361,537 Accrued payroll and related liabilities 114,196 280,512 Deferred income 515,482 268,518 Other current liabilities 383,092 255,346 ----------- ----------- Total current liabilities 2,016,574 1,208,179 ----------- ----------- Deferred tax liabilities 205,852 173,077 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 December 31, 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 (2,660,737) (2,942,948) ----------- ----------- 3,557,554 3,274,719 Less - Treasury stock, 400 shares, at cost (4,000) (4,000) ----------- ----------- Total stockholders' equity 3,553,554 3,270,719 ----------- ----------- Total liabilities and stockholders' equity $ 5,795,185 $ 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 Nine Months Ended December 31, December 31, 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Gross Sales 3,029,164 7,038,915 Less: Allowance for Doubtful Accounts 22,373 30,895 ----------- ----------- ----------- ----------- Net sales $ 3,051,537 $ 1,826,698 $ 7,069,810 $ 5,264,210 Cost of sales 1,366,641 762,434 3,153,739 2,016,324 ----------- ----------- ----------- ----------- Gross Margin 1,684,896 1,064,264 3,916,071 3,247,886 Research and development expenses 254,796 236,701 722,144 664,711 Selling, general and administrative expenses 1,213,739 781,852 3,075,161 2,464,871 ----------- ----------- ----------- ----------- Income from operations 216,361 45,711 118,766 118,304 Interest income 5,448 6,520 14,652 27,620 Interest expense (980) (1,881) (3,617) (22,749) ----------- ----------- ----------- ----------- Income before income tax provision(benefit) 220,829 50,350 129,801 123,175 Income tax provision (benefit) (144,690) (152,410) ----------- ----------- ----------- ----------- Net income $ 365,519 $ 50,350 $ 282,211 $ 123,175 =========== =========== =========== =========== Per share data Basic $ 0.08 $ 0.01 $ 0.06 $ 0.03 =========== =========== =========== =========== Diluted $ 0.07 $ 0.01 $ 0.06 $ 0.02 =========== =========== =========== =========== Weighted average number of common shares outstandin 4,839,303 4,820,642 4,839,110 4,697,257 ----------- ----------- ----------- ----------- Weighted average number of common shares outstandin 5,046,671 5,159,399 5,117,278 4,985,909 ----------- ----------- ----------- -----------
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)
Nine Months Ended December 31, 1997 1996 ----------- ----------- Cash flows from operating activities Net income (loss) $ 282,211 $ 123,175 Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 314,626 272,273 Provision for bad debts (44,374) 49,751 Provision for inventory obsolescence 0 35,000 Deferred tax provision (152,410) (Increase) decrease in Accounts receivable (910,449) (41,410) Inventory (237,029) 50,733 Prepaid expenses and other current assets (24,502) (36,826) Security deposits (2,436) 873 Increase (decrease) in Accounts payable 620,417 (203,223) Accrued payroll and related liabilities (166,316) (79,565) Deferred income 246,964 (2,976) Other current liabilities 127,746 (87,683) ----------- ----------- Net cash provided by operating activities 54,448 80,122 ----------- ----------- Cash flows from investing activities Capital expenditures (126,217) (104,560) Capitalized software (179,917) (167,558) ----------- ----------- Net cash used in investing activities (306,134) (272,118) ----------- ----------- Cash flows from financing activities Repayments of debt (31,609) (528,973) Issuance of common stock 624 1,329,923 ----------- ----------- Net cash provided by (used in) financing activities (30,985) 800,950 ----------- ----------- Net increase (decrease) in cash and cash equivalents (282,671) 608,954 Cash and cash equivalents - beginning of period 539,214 48,302 ----------- ----------- Cash and cash equivalents - end of period $ 256,543 $ 657,256 =========== ===========
The accompanying notes are an integral part of these condensed consolidated financial statements 5 MICROFRAME, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 (Unaudited) Note 1 - Condensed Consolidated Financial Statements: - ----------------------------------------------------- The condensed consolidated balance sheets as of December 31, 1997 and March 31, 1997, the condensed consolidated statements of operations for the three and nine month periods ended December 31, 1997 and 1996 and the condensed consolidated 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 for the fair presentation of the Company's financial position, results of operations and cash flows at December 31, 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: December 31, 1997 March 31, 1997 ----------- ----------- Raw materials $ 733,207 $ 825,583 Work in process 734,165 374,802 Finished goods 29,958 ----------- ----------- 1,467,372 1,230,343 Less, allowance for obsolescence (200,000) (200,000) ----------- ----------- Total $ 1,267,372 $ 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 December 31, 1997, this amount is included in Prepaid expenses and other current assets. 6 MICROFRAME, INC. AND SUBSIDIARY NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1997 (Unaudited) Note 4 - Earnings Per Share: - ---------------------------- The company has adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128") in the quarter ended December 31, 1997. All prior periods presented have been restated to account for this change. The computation of Basic Earnings Per Share is based on the weighted average number of common shares outstanding for the period. Diluted Earnings Per Share is based on the weighted average number of common shares outstanding for the period plus the dilutive effect of common stock equivalents, comprised of outstanding stock options and warrants. The following is a reconciliation of the denominator used in the calculation of basic and diluted earnings per share:
Three Months Three Months Nine Months Nine Months Ended Ended Ended Ended 12/31/97 12/31/96 12/31/97 12/31/96 ---------- ---------- ---------- ---------- Weighted Average # of Shares Outstanding 4,839,303 4,820,642 4,839,110 4,697,257 Incremental Shares for Common Equivalents 207,368 338,757 278,168 288,652 ---------- ---------- ---------- ---------- Diluted Shares Outstanding 5,046,671 5,159,399 5,117,278 4,985,909
Note 5 - Recent Pronouncements: - ------------------------------- The Company is required 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 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 and the costs associated with, a new family of products; 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 December 31, 1997 were $3,051,537 as compared with revenues of $1,826,698 for the same quarter of the previous fiscal year, or an increase of approximately 67%. 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 by increased Domestic sales and as a result of increased shipments to the European market, including shipments under its contract with PTT Holland. Shipments to Europe were approximately $800,000 for the three months ended December 31, 1997 compared to $434,000 for the quarter ended December 31, 1996. The Company is aggressively pursuing customers in this market place. The Company's cost of goods sold increased from $762,434 for the quarter ended December 31, 1996 to $1,366,641 for the quarter ended December 31, 1997 as a result of increased business. Cost of goods sold as a percentage of sales increased from 41% for the previous comparable fiscal period to 44% 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 increase from $236,701 in the quarter ended December 31, 1996 to $254,796 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 55% from $781,852 for the prior year's comparable fiscal period to $1,213,739 for the fiscal period ended December 31, 1997, however, as a percentage of sales decreased to approximately 39% compared to 42% in the previous quarter. 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 has begun to see increased revenues as a result of these increased selling expenses. The Company's income from operations increased 338% to $220,829 for the three months ended December 31, 1997 compared to $50,350 for the same period a year ago. Due to increased sales, the reduction in interest costs to the Company and the benefit for income tax of $144,690, the net income for the period ended December 31, 1997 increased 626% to $365,519 compared to net income of $50,350 for the quarter ended December 31, 1996. At March 31, 1997 the Company had provided a partial valuation allowance against its existing deferred tax assets. At December 31, 1997 the Company has reversed approximately $204,000 of valuation allowance relating to its net operating losses and it has recorded a provision for other operational temporary difference items. The expiration dates for its net operating losses range from the years 2001 through 2011. 8 First Nine Months of Fiscal 1998 Versus First Nine Months Fiscal 1997 - --------------------------------------------------------------------- Revenues for the nine months ended December 31, 1997 were $7,069,810 as compared with revenues of $5,264,210 for the comparable period of the previous fiscal year, or an increase of approximately 34%. 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 nine months ended December 31, 1997 were positively impacted by increased Domestic sales and as a result of increased shipments to the European market, including shipments under its contract with PTT Holland. Shipments to Europe were approximately $1,800,000 for the nine months ended December 31, 1997 compared to $802,000 for the nine months ended December 31, 1996. The Company is aggressively pursuing customers in this market place. The Company's cost of goods sold increased to $3,153,739 for the quarter ended December 31, 1997 compared to $2,016,324 for the quarter ended December 31, 1996 as a result of increased shipment levels. Cost of goods sold as a percentage of sales increased from 38% 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 $664,711 in the nine months ended December 31, 1996 to $722,144 in the current fiscal period, an increase of 8%. Research and development expenses as a percentage of revenues decrease slightly from approximately 12% to 10%. Selling, general and administrative expenses increased 24% from $2,464,871 for the prior year's comparable fiscal period to $3,075,161 for the nine months ended December 31, 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 46% for the previous period to 43% for the current fiscal period. The Company's had income before taxes of $129,801 for the nine months ended December 31, 1997 compared to income of $123,175 during the nine months ended December 31, 1996, primarily due to increased sales. The Company expects that benefits will continue to 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 income for the period was $282,211 compared to net income of $123,175 for the same period in 1996. At March 31, 1997 the Company had provided a partial valuation allowance against its existing deferred tax assets. At December 31, 1997 the Company has reversed approximately $220,000 of valuation allowance relating to its net operating losses and it has recorded a provision for other operational temporary difference items. The expiration dates for its net operating losses range from the years 2001 through 2011. Financial Condition and Capital Resources - ----------------------------------------- During the first nine months of fiscal year 1998, the Company recorded net income of approximately $282,000. Included in this income were non-cash charges of approximately $314,000 for depreciation and amortization. As a result, during the first nine months of fiscal year 1998, the Company's financial condition remained relatively stable. The Company's operations provided approximately $54,500 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 $300,000 of cash for capital and software-related expenditures and utilized approximately $30,000 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 9 expired. In November 1997 the Company successfully negotiated with United National to provide the Company with a $1,000,000 line of credit, collateralized by accounts receivable of the Company, to finance future working capital requirements. As of February 6, 1998, the Company has not utilized this line. Based on its current cash and working capital position, as well as its available line of credit, 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 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 evaluating the disclosure requirements of the recently issued statement. 10 PART II. Other Information 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. 11 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. Dated: February 12, 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) 12 EX-27 2 FDS -- QTR ENDED 12/31/97
5 0000754813 MICROFRAME, INC. MAR-31-1998 APR-01-1997 DEC-31-1997 9-MOS 256,543 0 2,909,259 55,626 1,267,372 4,844,777 1,207,975 (902,222) 5,795,185 (2,016,574) 0 4,839 0 0 2,805,427 5,795,185 7,069,810 7,069,810 3,153,739 6,936,392 0 0 (3,617) 129,801 (7,720) 137,521 0 0 0 282,211 0.06 0.06
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