-----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, A7+pAjqOIw2x9zpdNdJbFhRYrlACu81oIURacEaxhUeNubqw0AFCK8FH8F1BmEOp XOi7hnSuBS9JCMch79xxuA== 0000950116-97-001938.txt : 19971027 0000950116-97-001938.hdr.sgml : 19971027 ACCESSION NUMBER: 0000950116-97-001938 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971024 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMTREX SYSTEMS CORP CENTRAL INDEX KEY: 0000769525 STANDARD INDUSTRIAL CLASSIFICATION: CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS) [3578] IRS NUMBER: 222353604 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13732 FILM NUMBER: 97700189 BUSINESS ADDRESS: STREET 1: 102 EXECUTIVE DR SUITE 1 CITY: MOORESTOWN STATE: NJ ZIP: 08057 BUSINESS PHONE: 6097780090 MAIL ADDRESS: STREET 1: 102 EXECUTIVE DRIVE SUITE 1 CITY: MOORESTOWN STATE: NJ ZIP: 08057 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-13732 COMTREX SYSTEMS CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 22-2353604 ------------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 102 Executive Drive, Moorestown, NJ 08057-4224 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (609) 778-0090 -------------------------------------------------- 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 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 _____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at October 24, 1997 - ----- ------------------------------- Common Stock, par value $.001 3,583,072 COMTREX SYSTEMS CORPORATION BALANCE SHEETS These statements are unaudited. ASSETS September 30, 1997 March 31, 1997 ------------------ -------------- Current assets: Cash and cash equivalents $ 320,494 $ 142,886 Certificate of deposit 100,000 100,000 Accounts receivable, net of reserve of $167,816 and $186,710 as of 9/30/1997 and 3/31/1997, respectively 1,073,866 1,040,374 Note receivable and accrued interest 16,340 16,640 Inventories 909,879 1,084,238 Prepaid expenses and other 109,831 73,752 ----------- ----------- Total current assets 2,530,410 2,457,890 ----------- ----------- Property and equipment: Machinery, equipment, furniture and leasehold improvements 1,063,663 1,052,817 Less - accumulated depreciation (935,689) (905,268) ----------- ----------- Net property and equipment 127,974 147,549 ----------- ----------- Other assets: Purchased and capitalized software and design 1,031,442 1,031,442 Less - accumulated amortization and depreciation (724,305) (693,670) ----------- ----------- Total other assets 307,137 337,772 ----------- ----------- TOTAL ASSETS $ 2,965,521 $ 2,943,211 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 520,216 $ 581,687 Accrued expenses 98,694 102,306 Customer deposits 6,403 22,048 ----------- ----------- Total current liabilities 625,313 706,041 ----------- ----------- Shareholders' equity: Preferred stock, $1 par value, 1,000,000 shares authorized, none outstanding -- -- Common stock, $.001 par value, 5,000,000 shares authorized, 3,181,522 and 3,164,022 issued and outstanding as of 9/30/1997 and 3/31/1997, respectively 3,182 3,165 Additional paid-in capital 5,322,603 5,315,970 Accumulated deficit (2,985,577) (3,081,965) ----------- ----------- Total shareholders' equity 2,340,208 2,237,170 ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,965,521 $ 2,943,211 =========== =========== The accompanying notes are an integral part of these financial statements. - 2 - COMTREX SYSTEMS CORPORATION STATEMENTS OF OPERATIONS These statements are unaudited.
Three months ended Six months ended September 30, September 30, -------------------------- -------------------------- 1997 1996 1997 1996 ----------- ----------- ----------- ----------- Net sales $ 1,365,212 $ 1,468,396 $ 2,619,804 $ 2,954,252 Costs and expenses Cost of sales 869,843 966,645 1,647,113 1,873,685 Administrative 146,543 186,207 308,585 356,269 Research and development 63,386 33,526 109,711 62,765 Sales and marketing 125,149 239,163 258,606 436,340 Customer support 77,183 138,474 135,733 247,011 Depreciation and amortization 30,706 30,529 61,056 57,513 ----------- ----------- ----------- ----------- 1,312,810 1,594,544 2,520,804 3,033,583 ----------- ----------- ----------- ----------- Income (loss) from operations 52,402 (126,148) 99,000 (79,331) Interest income, net (1,425) 3,286 (2,612) 7,433 ----------- ----------- ----------- ----------- Income (loss) before income taxes and extraordinary credit 50,977 (122,862) 96,388 (71,898) Provision for income taxes (20,390) -- (38,555) -- ----------- ----------- ----------- ----------- Income (loss) before extraordinary credit 30,587 (122,862) 57,833 (71,898) Extraordinary credit, reduction of income taxes arising from carry- forward of prior years' operating losses 20,390 -- 38,555 -- ----------- ----------- ----------- ----------- Net Income (loss) $ 50,977 $ (122,862) $ 96,388 $ (71,898) =========== =========== =========== =========== Per share data: Income (loss) before extraordinary credit $ .01 $ (.04) $ .02 $ (.02) Extraordinary credit .01 .00 .01 .00 ----------- ----------- ----------- ----------- Net Income (loss) $ .02 $ (.04) $ .03 $ (.02) =========== =========== =========== =========== Weighted average shares outstanding 3,199,502 3,174,746 3,181,762 3,170,193 =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. - 3 - COMTREX SYSTEMS CORPORATION STATEMENTS OF CASH FLOWS These statements are unaudited.
Six months ended September 30, ---------------------- 1997 1996 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net income (loss) $ 96,388 $ (71,898) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities - Depreciation and amortization 61,056 57,513 Provisions for losses on accounts receivable 12,613 26,884 Provisions for losses on inventories 8,500 50,000 (Increase) decrease in - Certificate of deposit -- -- Accounts receivable (46,105) (44,081) Note receivable 300 29,300 Inventories 165,859 (116,661) Prepaid expenses and other (36,079) (1,483) Increase (decrease) in - Accounts payable (61,471) 152,034 Accrued expenses (3,612) 44,070 Customer deposits (15,645) 6,013 --------- --------- Net cash provided by (used in) operating activities 181,804 131,691 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Sale (purchases) of property and equipment: Purchases of property and equipment (10,846) (83,299) Purchases of software and capitalized software and design -- (83,976) --------- --------- Net cash provided by (used in) investing activities (10,846) (167,275) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from borrowings under line of credit 160,000 -- Repayments under line of credit (160,000) -- Proceeds from issuing equity securities 6,650 -- --------- --------- Net cash provided by (used in) financing activities 6,650 -- --------- --------- Net increase (decrease) in cash 177,608 (35,584) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 142,886 218,166 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 320,494 $ 182,582 ========= =========
The accompanying notes are an integral part of these financial statements. - 4 - COMTREX SYSTEMS CORPORATION NOTES TO FINANCIAL STATEMENTS 1. Interim financial reporting: The accompanying financial statements should be read in conjunction with the financial statements and notes included in the Company's latest Annual Report on Form 10-KSB. These interim financial statements reflect all adjustments, of a normal and recurring nature, which are, in the opinion of management, necessary for a fair statement of the results for the interim period(s) presented. The results for the period(s) herein presented are not necessarily indicative of the results for the entire fiscal year. 2. Inventories: September 30, March 31, 1997 1997 ----------- ----------- Raw materials $ 595,553 $ 1,037,167 Work-in-process 270,023 128,141 Finished goods 203,580 108,127 Reserve for excess and obsolete inventory (159,277) (189,197) ----------- ----------- $ 909,879 $ 1,084,238 =========== =========== 3. Income taxes: The consolidated statements of operations reflect a provision for income taxes at the rate of 40 percent, which represents the federal statutory rate of 34 percent plus an effective state tax rate of 6 percent. The provisions for income taxes are offset by tax benefits arising from an extraordinary credit from the utilization of prior years' operating losses. The Company has net operating loss carryforwards of approximately $3,260,000 for financial reporting and for federal income tax purposes, which begin to expire in 2004. The Company has tax credit carryforwards for federal income tax purposes of approximately $148,000. Net operating loss carryforwards are also available for state income tax purposes. - 5 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION Liquidity and Capital Resources As of September 30, 1997, the Company had total current assets of $2,530,410, including cash, cash equivalents and certificates of deposits of $420,494, as compared to $2,457,890 and $242,886, respectively, as of March 31, 1997. The Company had current liabilities of $625,313, resulting in a current ratio of 4.0 as of September 30, 1997, compared to $706,041 and 3.5, respectively, as of March 31, 1997. The Company reported net income of $50,977 and $96,388, respectively for the three month and six month periods ended September 30, 1997. The Company has net operating loss carryforwards of approximately $3,260,000 for federal income tax purposes, which do not begin to expire until 2004, and tax credit carryforwards of approximately $148,000. Operating activities generated $181,804 of cash during the first six months of fiscal 1998, as compared with cash generation of $131,691 for the corresponding prior year period. Cash and cash equivalents increased by $177,608 during the six month period of fiscal year 1998. In addition to the net income, cash provided by operating activities was positively impacted by a reduction in inventories, net of reserves, of $174,359 during the six month period ended September 30, 1997. This decrease is due primarily to the planned, gradual phase-out of the Company's SuperSprint product line, which is being replaced by the open architecture PCS/5000 product series. The PCS/5000 is configured principally with completed circuit boards and assemblies which are generally available, often with off-the-shelf delivery to the Company. The Company is able to maintain a lower level of raw material, component inventory than is required with a proprietary product series, such as SuperSprint, while maintaining the same delivery schedule, at comparable sales levels. During the current six month period, depreciation and amortization contributed $61,056 to cash provided by operating activities, which was offset by a reduction in accounts payable of $61,471. Accounts receivable, net of reserves, rose $33,492 during the current six month period, although receivables, net of reserves declined by $109,860 during the three month period ended September 30, 1997. Investing activities consumed $10,846 of cash during the six month period ended September 30, 1997, as the company improved its Internet presence and upgraded its in-house network to a Windows NT based system. During the six month period of the prior fiscal year, both the development expense of the PCS/5000 and the purchase of the assets of AUBIS Hospitality Systems resulted in the consumption of $167,275 for investing activities through increases in property and equipment and purchased and capitalized software and design. Financing activities generated $6,650 of cash during the six month period as a result of the exercise of stock options. During the six month period, the Company borrowed, and repaid, $160,000 under its line of credit. - 6 - Liquidity (continued) In July of 1997, the Company and Fleet Bank N.A. extended an existing line of credit agreement through October 31, 1997. The agreement provides for borrowings of up to $750,000, with a limitation depending on eligible receivables, as defined in the agreement. Borrowings bear interest at the bank's prime rate and are collateralized by substantially all assets of the Company. The Company expects this line of credit to be renewed through July of 1998. The Company expects to utilize the credit facility from time to time for short term cash requirements. Effective as of October 1, 1997, the Company purchased all the outstanding capital stock of Data Systems Terminals LTD (DSL), its distributor in the United Kingdom. The Company filed a Form 8-K on October 14, 1997 relating to this transaction. The purchase price included 400,000 restricted shares of the Common Stock of the Company, a Subordinated Convertible Debenture in the original principal amount of $300,000 and a promissory note in the original principal amount of $65,000. The promissory note bears interest at the rate of six percent (6%) per annum, and is payable in twelve equal monthly installments commencing on November 1, 1997. The Debenture accrues interest at the rate of eight percent (8%) per annum, which is payable monthly. No principal payment is payable under the terms of the Debenture for the first three (3) years following its delivery. The Debenture is convertible into shares of the Company's Common Stock (in blocks of 20,000 shares), at any time on or before October 2, 2002, at the rate of $1.00 per share. Any principal outstanding on the Debenture on October 2, 2002 is to be repaid by the Company in twelve (12) equal quarterly installments. The Company anticipates that internal funds, including the cash generated by the operating activities of its new subsidiary, will be utilized to make all interest and principal payments under both the promissory note and the Debenture. Other than its acquisition of DSL, as of September 30, 1997, the Company had no material commitments for capital expenditures. The Company believes that its cash balance, together with its line of credit, provides the Company with adequate liquidity to finance its projected operations for the current fiscal year. Results of Operation Net sales during the second quarter of fiscal year 1998 decreased 7% to $1,365,212, as compared with corresponding sales of $1,468,396 during the second quarter of fiscal year 1997. Sales for the six month period ended September 30, 1997 were $2,619,804, a decrease of 11% over sales of $2,954,252 for the corresponding period during fiscal year 1997. Sales during the second quarter represented a 9% increase over sales of $1,254,592 during the first quarter of the current fiscal year. The Company reported net income of $50,977, or $.02 per share, for the quarter ended September 30, 1997, and net income for the current six month period of $96,388, or $.03 per share. For the second quarter and first six month period of the prior fiscal year, the company reported losses of $122,862, or $.04 per share, and $71,898, or $.02 per share, respectively. The turnaround in comparative net income, on the slightly reduced level of sales, for the most recent quarter is a result of broad reductions in administrative, sales, marketing and customer support expenditures. - 7 - Results of Operation (continued) Cost of sales for the second quarter of fiscal year 1998 represented 64% of net sales, compared with 66% of net sales during the second quarter of the prior fiscal year. For each of the two six month periods, cost of sales were 63%. Due to the extremely competitive nature of open architecture components, as are utilized in the Company's PCS/5000 system, the gross margin which the Company realizes on the hardware component of its sales is decreasing. The Company began the separate sale of the software component of the PCS/5000 system in April of 1997, the beginning of its current fiscal year. To the extent that its dealers and distributors procure the hardware component of the system from third party sources, there is a negative impact on the Company's sales figure. However, the Company realizes a significantly higher gross margin on software products, which favorably impacts overall cost of sales. In addition, direct sales through the Company's Atlanta district office are at greater gross margins than sales through the Company's dealer and distributor network. Sales, marketing and customer support expenses during the second quarter and first six month period of fiscal year 1998 were $202,332, or 15% of net sales, and $394,339, also 15% of sales, respectively. The comparable numbers for the prior fiscal year were $377,637, or 26% of sales, and $683,351, or 23% of sales. Effective as of October 1, 1997, the Company purchased all the outstanding capital stock of Data Systems Terminals LTD (DSL), its distributor in the United Kingdom. Information on the transaction is included in the Liquidity section of this Form 10-Q, and in the Form 8-K filed by the Company on October 14, 1997. DSL will operate as a wholly owned subsidiary of the Company, under the name Comtrex Systems LTD, at the existing headquarters facility of DSL outside London. Revenues for DSL during its fiscal year ended June 30, 1997 were approximately $3,000,000, of which approximately one half related to the sale, installation and maintenance of Comtrex products. During the Company's fiscal year ended March 31, 1997, sales to DSL by the Company were approximately $635,000. During the six month period ended September 30, 1997, sales to DSL by the Company were approximately $560,000. The Company will begin filing consolidated financial statements which include the results of operation of the new subsidiary with its third quarter Form 10-Q, for the period beginning October 1, 1997. Such consolidated statements will eliminate the intercompany sales to its subsidiary, while including the sales of the subsidiary to end users in the United Kingdom. In addition to continuing the direct sale of Comtrex products in the U.K., personnel from the new subsidiary will act in a training and support capacity for the sales and installation activities of the Company's existing distributors in France, Belgium, Holland, Germany, Portugal and Spain. The Company anticipates that the proximate availability of such support services will have a positive impact on the sales levels of its international distributors. For comparative purposes, as of October 21, 1997, the Company's backlog including an intercompany backlog to DSL valued at the pricing available to international distributors, was approximately $407,200. The - 8 - Results of Operation (continued) consolidated backlog of the Company, eliminating the intercompany orders from DSL and including the orders on-hand from end-users of DSL, was approximately $845,500. These figures compare with the Company's backlog of approximately $292,000 as of October 31, 1996. The Company's dealers typically place orders with the Company based on their sales activities with end user customers, and do not maintain significant inventory levels of the Company's products. Sales by the Company's District Office are generally placed one or more months before actual delivery and installation. The Company expects that sales through its new subsidiary will also be placed one or more months before actual delivery. The Company expects that substantially all of its current backlog will be shipped within the next 90 days. Forward Looking Statements This Form 10-Q discusses primarily historical information. Statements included in this Form 10-Q, to the extent they are forward looking, are based on current management expectations that involve a number of uncertainties and risks. Potential risks and uncertainties include, without limitation, the impact of economic conditions generally; the competitive nature of the intelligent point-of-sale terminal industry; the Company's ability to enhance its existing products and develop and introduce new products which keep pace with technological developments in the marketplace; and market demand. - 9 - 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. COMTREX SYSTEMS CORPORATION (Registrant) Date: October 24, 1997 By: /s/ LISA J. MUDRICK --------------------- --------------------------------- Lisa J. Mudrick Chief Financial & Chief Accounting Officer Date: October 24, 1997 By: /s/ JEFFREY C. RICE --------------------- --------------------------------- Jeffrey C. Rice Chief Executive Officer - 10 - EX-27 2 FINANCIAL DATA SCHEDULE
5 1 6-MOS MAR-31-1997 SEP-30-1997 320,494 100,000 1,241,682 167,816 909,879 2,530,410 1,063,663 935,689 2,965,521 625,313 0 0 0 3,182 5,322,603 2,965,521 2,619,804 2,623,848 1,647,113 2,520,804 0 12,613 6,656 96,388 38,555 57,833 0 38,555 0 96,388 .03 .03
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