-----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, R6pd4sn3uF9maQ2kZC73AkrtxH2pcqwm2oxv83qtq5x8Q2OApPDCqFOhcPob6QGM NDKu79mcd9C31WwjYwkHow== 0000927797-99-000012.txt : 19990215 0000927797-99-000012.hdr.sgml : 19990215 ACCESSION NUMBER: 0000927797-99-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GC INTERNATIONAL INC /CA CENTRAL INDEX KEY: 0000841708 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PRIMARY METAL PRODUCTS [3390] IRS NUMBER: 942278595 STATE OF INCORPORATION: CA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-17259 FILM NUMBER: 99534326 BUSINESS ADDRESS: STREET 1: 156 BURNS AVE CITY: ATHERTON STATE: CA ZIP: 94027 BUSINESS PHONE: 4153228449 MAIL ADDRESS: STREET 1: 156 BURNS AVENUE CITY: ATHERTON STATE: CA ZIP: 94027 10-Q 1 QUARTERLY REPORT FOR DECEMBER 31, 1998 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 10-Q (Mark One) _X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1998 ----------------- OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________________ to _____________________ Commission file number 000-17259 --------- GC INTERNATIONAL , INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 94-2278595 - -------------------------------------------------------------------------------- (State or other jurisdiction of (I.R.S. employer incorporation or organization) Identification no.) 156 BURNS AVENUE, ATHERTON CALIFORNIA 94027 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code (650) 322-8449 -------------- N/A - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filled 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 ___ No _X_ APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ___ No ___ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date 5,548,401. GC INTERNATIONAL, INC. INDEX PART I. FINANCIAL INFORMATION: Item 1. Financial Statements Unaudited Condensed Balance Sheets December 31, 1998 and June 30, 1998........................1 Unaudited Condensed Statements of Operations Three and six months ended December 31, 1998 and December 31, 1997......................................2 Unaudited Statements of Cash Flows for the three months Ended December 31, 1998 and December 31, 1997..............3 Notes to Unaudited Condensed Financial Statements Ended December 31, 1998 and December 31, 1997........4 Item 2. Management's Discussion and Analysis of Financial Condition & Results of Operation..............4 PART II. OTHER INFORMATION: Item 1. Legal Proceedings............................................6 Item 2. Changes in Securities........................................6 Item 3. Defaults Upon Senior Securities..............................6 Item 4. Submission of Matters to a Vote of Security Holders....................................6 Item 5. Other Information............................................6 Item 6. Exhibits & Reports on Form 8-K...............................6 Signatures ................................................. 6 GC INTERNATIONAL, INC.
BALANCE SHEETS December 31, 1998 June 30, 1998 Unaudited --------- ------------- ASSETS Current Assets Cash ....................................... $ 329,776 $ 323,920 Accounts receivable, net of Allowance for doubtful accounts of $6,464 at December 31 and $6,464 at June 30, 1998 ................. 650,341 639,886 Inventories ................................ 531,408 479,773 Prepaid expenses ............................. 31,285 8,496 Deferred tax benefit ......................... 26,044 26,044 ----------- ----------- Total current assets ..................... 1,568,854 1,478,119 Property and equipment, net ................ 620,235 545,250 Deposits & deferred expenses ............... 42,992 35,760 Deferred tax benefit ....................... 268,128 281,164 ----------- ----------- Total assets ............................. $ 2,513,245 $ 2,340,293 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable ........................... $ 201,486 $ 130,858 Accrued expenses ........................... 668,457 696,904 Income taxes payable ....................... 7,455 -- Notes payable .............................. 268,128 266,713 ----------- ----------- Total current liabilities ................ 1,145,526 1,094,474 Other Liabilities: Notes payable, net of current portion ...... 209,612 172,726 Other long term debt ....................... 320,000 320,000 ----------- ----------- Total other liabilities .................. 529,612 492,726 ----------- ----------- Total liabilities ................... 1,657,138 1,587,200 ----------- ----------- Stockholders' equity: Common stock, without par value ............ 1,791,590 1,791,590 Accumulated deficit ........................ (953,483) (1,038,497) ----------- ----------- Net stockholders' equity ................. 838,107 753,093 Total Liabilities and Stock Holders Equity ................... $ 2,513,245 $ 2,340,293 =========== ===========
The accompanying notes are an integral part of these financial statements. 1 GC INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS 3 Months Ended 6 Months Ended -------------------------- ------------------------- 12/31/98 12/31/97 12/31/98 12/31/97 (Unaudited) (Unaudited) ----------- ----------- Net sales ......................... $ 1,340,383 $ 1,427,334 $ 2,796,596 $ 2,810,049 Cost of sales ..................... 885,789 905,915 1,812,890 1,819,789 ----------- ----------- ----------- ----------- Gross profit ...................... 454,594 521,419 983,706 990,260 Operating expenses: Selling ......................... 73,875 57,626 142,525 106,131 General & Administrative ........ 308,394 265,703 670,321 548,379 ----------- ----------- ----------- ----------- Income from operations ............ 72,324 198,090 170,860 335,750 Other income (expense) Interest, net ................... (584) 336 (4,624) (3,956) Other ........................... (49,821) (39,797) (63,002) (42,432) ----------- ----------- ----------- ----------- Income before income taxes ........ 21,919 158,629 103,234 289,362 Provision for income taxes ........ 9,210 68,497 18,220 120,539 ----------- ----------- ----------- ----------- Net income ........................ $ 12,709 $ 90,132 $ 85,014 $ 168,823 =========== =========== =========== =========== Earnings per common share Primary and Fully diluted ....... $ 0.00 $ 0.02 $ 0.01 $ 0.03 Weighted average shares outstanding Primary ......................... 5,798,721 5,798,721 5,798,721 5,798,721 Fully diluted ................... 5,798,721 5,798,721 5,798,721 5,798,721
The accompanying notes are an integral part of these financial statements. 2 GC INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS 6 Months Ended ----------------------------------- December 31, 1998 December 31,1997 (Unaudited) (Unaudited) ----------- ----------- Cash flows from operating activities: Net income ..................................... $ 85,014 $ 168,823 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .............. 55,423 54,885 Gain on sale of property, plant & equipment (1,850) (1,500) Adjustments to cash from operations: Accounts Receivables ....... (incr)decr ... (10,455) 24,998 Inventory .................. (incr)decr ... (51,635) 8,668 Accrued payable ............ incr(decr)... 70,629 10,209 Accrued liabilities ........ incr(decr)... (28,447) (25,843) Income taxes payable ....... incr(decr)... 7,455 (31,905) Reserve liability .......... incr(decr)... -- 5,817 Deferred tax ............... (incr)decr ... -- 101,443 Prepaid expenses ........... (incr)decr ... (22,789) (34,626) Other assets & deposits .... (incr)decr ... (7,232) (13,848) --------- --------- Net cash provided by operating activities 96,112 267,121 Cash flows from investing activities: Purchase of property, plant & equipment .. (130,408) (95,929) Proceeds from sale of property, plant & equipment ............................ 1,850 15,000 --------- --------- Net cash provided (used) by investing activities ................ (128,558) 94,429 Cash flows from financing activities: Payments on short term borrowings ........ 1,415 (52,493) Net cash used by financing activities .... 36,886 (26,464) New long term borrowings ................. -- -- --------- --------- Net cash provided by financing activities 38,302 (78,957) --------- --------- Increase in cash and cash equivalents .......... 5,856 93,735 Cash at beginning of period .................... 323,920 278,791 --------- --------- Cash at end of period .......................... $ 329,776 $ 372,526 ========= =========
The accompanying notes are an integral part of these financial statements. 3 GC INTERNATIONAL, INC. Notes to Condensed Financial Statements Note 1 - ------ The financial statements included herein have been prepared by GC International, Inc., ("GCI") without audit, and include all adjustments which are, in the opinion of management, necessary for a fair presentation of the Company's financial position as of December 31, 1998, and December 31, 1997, and the results of it's operation for the three and six months ended December 31, 1998 and 1997. Certain information and note disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations of the Securities and Exchange commission, although the Company believes that it's disclosure in such financial statements is adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company's financial statements and notes thereto included in the Company's Form 10-K Annual Report filed with the Securities and Exchange Commission. The results of operations for the three and six months ended December 31, 1998 are not necessarily indicative of the results of the full year. Note 2 - ------ Inventories are stated at the lower of cost (first-in, first-out method) or market and consist of the following:
December 31 December 31 1998 1997 ---- ---- Raw materials $ 58,036 $ 51,587 Work in process 473,372 419,618 ------- ------- Total $531,408 $471,205 ======= =======
Inventories increased at the end of December 1998 due to work in process that could not be shipped or was not scheduled to be shipped at the end of December. Inventories are expected to decrease during the next quarter. 4 Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources - ------------------------------- As of December 31, 1998, the Company's cash position was $329,776 and working capital was $423,327, compared to cash of $372,526 and working capital of $383,645 in the prior period. The cash position decreased during the period as a result of the purchase of new plant and equipment and an increase in inventory of the Company. Management believes that these funds and cash flow from operations are adequate to fund ongoing operations. However, there is no assurance that these funds will prove adequate if the Company is unable to maintain positive cash flow operations in the future. Capital Equipment Requirements and Equipment Leases - --------------------------------------------------- The Company, from time to time, has satisfied certain of its capital equipment requirements by entering into equipment leases with third parties or purchase arrangements with the equipment manufacturers. During 1999, the Company has been able to arrange satisfactory equipment and automobile purchase contracts. During the six months ending December 31, 1998, the company purchased for cash a metal spectrographic analysis machine for approximately $30,000 and a new computer controlled milling machine which is leased. The Company anticipates that additional capital equipment will be required for the Company's operating divisions during 1999. The Company will use its best efforts to satisfy its capital needs by using internally generated cash in excess of debt repayments and by entering into other arrangements as available. There can be no assurances that cash resources will be adequate. Factors Affecting Future Results - -------------------------------- The Company must make payments to certain creditors in accordance with the Company's 1991 Plan of Reorganization. The total of the non-interest bearing notes, at December 31, 1998 was $186,399 compared to $412,953 at December 31, 1997. The Company settled an interim claim with the EPA for $100,000 plus interest for a Superfund Site cleanup in connection with waste generated in the 1970's by a former division. The Company made the third payment of $20,000 in August 1998, with the last payment due August 2000. Based on the settlement reached with the EPA in 1996 for the interim claim, the Company believes that its reserve for future liability in the amount of $120,000 is adequate to cover any final settlement. The Company has reviewed its internal computer systems for year 2000 compliance and is satisfied that all of its internal computer systems are either already year-2000 compliant or can be made year-2000 compliant through simple upgrades. The Company does not expect the costs of achieving full year-2000 compliance to be material for the internal systems. However, there can be no assurance that coding errors or other defects will not be discovered in the future. In addition, since the Company is very small in relation to many of its customers and suppliers, the Company has been unable to ascertain if any of its suppliers and customers are year-2000 compliant. Therefore, there can be no assurances that the Company's cash flow and materials from suppliers will not be interrupted which could result in severe disruptions in the Company's operations. 5 Results of Operations - --------------------- Comparison of three and six months ended December 31, 1998, and December 31, 1997. The Company's sales for the six months ending December 31, 1998, decreased slightly by $13,453 or 0.5% over the comparable period of the prior year. There has been a noticeable decrease in the Company's markets, the backlog which was approximately $1,852,052 at June 30, 1998, decreased at December 31, 1998 to $1,773,751. Significantly, a substantial part of the backlog is stretched out over the next year. Despite continued sales and marketing efforts and expense, tooling sales of the ALJ Division have decreased. This means that as current production orders are filled, production will decrease causing a potentially significant decrease in profits. The company is increasing the marketing efforts by adding mailings to the schedule and is changing sales representatives in under performing territories. As a result of this slowdown ALJ recently has cut back the work force by 10-15%. The Apollo Division has improved production yields and although the October through December quarter is traditionally a slow sales period, division profits exceeded the prior year. Apollo shipments are expected to increase during the next six months and are therefore expected to provide increasing profits and cash flow. However, Apollo increases are not expected to offset ALJ decreases. Therefore, it is likely that the company's profits, cash position and earnings per share will decrease as compared to 1998. The cost of sales remained constant at 64.8% for both periods. Operating expenses increased $158,336 as compared to the prior six month period of which approximately $36,000 represents additional selling expenses. The Company expects to continue heavy selling activities during the next six months to obtain new tooling and orders. Administrative expense increased due to increase in overhead and expenses associated with marketing, web site development and other expenses. As a result, the net income decreased in the quarter to $12,709 (1%) as compared to $90,132 in the prior period. 6 PART II Item 1 Legal Proceedings: None Item 2 Changes in Securities: Not Applicable Item 3 Defaults upon Senior Securities: Not Applicable Item 4 Submission of Matters to a Vote of Securities Holders: Not Applicable. Item 5 Other Information: None Item 6 Exhibits and Reports on Form 8K: None - ------------------------ GC INTERNATIONAL, INC. 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. GC International, Inc. (Registrant) February 10, 1999 F. Willard Griffith II - ------------------- ----------------------------- Date F. Willard Griffith II Chairman, Chief Executive Officer and Chief Financial Officer 7 EX-27 2 FDS --
5 1 U.S. 3-MOS JUN-30-1999 OCT-01-1999 DEC-31-1999 1 329,776 0 656,805 (6,464) 531,408 1,568,854 1,682,763 (1,062,527) 2,513,245 1,145,526 0 0 0 1,791,590 (953,483) 838,107 1,340,383 1,340,383 885,789 885,789 432,674 0 584 21,919 9,210 12,709 0 0 0 12,709 0.00 0.00
-----END PRIVACY-ENHANCED MESSAGE-----