-----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, JK1KA6bGFlC6ZTNx90WPx9qfUkLmZf7WRnFAsL1O23OTL0ceYr+qTJGioGsfp+3O 7UZrHCoqOyNdX9z483C/Ig== 0000950149-95-000776.txt : 19951119 0000950149-95-000776.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950149-95-000776 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951113 SROS: NONE 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: 1934 Act SEC FILE NUMBER: 000-17259 FILM NUMBER: 95590276 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 FORM 10-Q FOR THE PERIOD ENDED 9/30/95. 1 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 SEPTEMBER 30, 1995 ------------------------- 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 (415) 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 X NO --- --- 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 X 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 5,748.499. ---------- 2 GC INTERNATIONAL, INC. INDEX PART I. FINANCIAL INFORMATION:
FINANCIAL STATEMENTS ITEM 1. CONSOLIDATED CONDENSED BALANCE SHEETS SEPTEMBER 30, 1995 AND JUNE 30, 1995 . . . . . . . . . . . . . . . . . . . . . . . . . 1 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3 GC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)
SEPT. 30 JUNE 30 1995 1995 ---------- ---------- ASSETS Current assets: Cash $ 136,831 $ 118,385 Accounts receivable, less allowance for doubtful accounts of $3,880 and $8,129 769,956 771,089 Inventories 492,513 543,380 Prepaid expenses 10,217 9,080 ---------- ---------- Total current assets 1,409,517 1,441,904 Property and equipment, net 305,761 321,384 Deposits & Deferred Expenses 55,437 59,310 ---------- ---------- $1,770,715 $1,822,598 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) Current liabilities: Short-term bank borrowings $ 320,781 $ 374,035 Current maturities of long-term debt 76,936 59,938 Accounts payable 299,235 445,357 Accrued liabilities: Payroll 166,743 170,261 Customer Deposits 67,959 55,104 Commissions 4,216 5,858 Vacation Pay 231,875 235,177 Employee accruals 187,654 179,043 Other 861,914 861,421 ---------- ---------- Total current liabilities 2,217,313 2,386,194 Long-term debt, less current maturities 27,279 30,181 Other long-term debt 238,592 243,058 Stockholders' equity (deficit): Preferred stock, authorized 10,000,000 shares, Common stock, without par value. Authorized 30,000,000 shares; issued and outstanding 5,748,499 shares 1,791,590 1,791,590 Accumulated deficit (2,504,055) (2,628,425) ---------- ---------- Net stockholders' equity (deficit) (712,465) (836,835) $1,770,715 $1,822,598 ========== ==========
See notes to consolidated condensed financial statements. 1 4 GC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)
3 MONTHS ENDED ------------------------------ SEPT. 30 SEPT. 30 1995 1994 ----------- ----------- Net Sales $ 1,381,448 $ 909,135 Cost of Sales 955,556 651,122 ----------- ----------- Gross Profit 425,892 258,013 Operating expenses: Selling 38,028 57,065 Administrative 249,482 226,713 ----------- ----------- Operating Profit (loss) 138,382 (25,765) Extraordinary Loss on discontinued operation -0- (11,429) Other income (expense): Other income (expense), net (5,094) 10,433 Interest expense, net of interest income (8,917) (16,213) ----------- ----------- Income (loss) before income taxes 124,371 (42,974) Income tax expense (refund) -0- (233) ----------- ----------- Net Profit (loss) $ 124,371 $ (42,741) =========== =========== Common stock: Weighted average number of shares outstanding 5,748,499 7,178,355 Profit (Loss) per common share $ .02 $ (.01)
See notes to consolidated condensed financial statements. 2 5 GC INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (UNAUDITED) 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 September 30, 1995, and June 30, 1995, and the results of operations for the three months ended September 30, 1995 and 1994. 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 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-months ended September 30 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:
SEPT. 30 SEPT. 30 1995 1994 -------- -------- Raw materials $ 54,336 $ 65,561 Work in process 438,177 300,689 -------- -------- Total $492,513 $366,250 ======== ========
3 6 Management Discussion and Analysis of Financial Condition and Results of Operations Liquidity, Capital Resources, and Bank Loan Agreement BANK LOAN AGREEMENT The Company's loan agreement with its bank was renewed until April 1, 1996. The agreement requires principal payments of $16,000/month at an interest rate of 2-1/2% above the bank's prime rate. As of September 30, 1995, outstanding borrowings on the loan were $320,781 as compared to $542,000 a year earlier. LIQUIDITY As of September 30, 1995, the Company's cash position was $136,831 and working capital was a negative $779,657. The cash position and payments to trade creditors improved during the quarter as a result of the profit of the company during the first quarter. However, a settlement reached with the EPA will require the company to pay $100,000 plus interest over the next five years. (See note 5 below) OTHER IMPACTS ON LIQUIDITY The Company's liquidity is continuing to be positive and negatively impacted because of: (1) The company reported profits and positive cash flow for the 3 month period ending September 30, 1995. (2) At the present time, the Company is able to maintain production and payments to suppliers. In the second quarter ending December 31, the Company is likely to show a loss and/or negative cash flow due to the lost production over the holidays. With continued profitability and positive cash flow during the third and fourth quarter, the Company's cash situation could improve. However, there is no assurance that the Company will be able to maintain payments to suppliers on time and, if it is unable to do so, the Company could be materially adversely affected. (3) The Company must make payments to Pre-petition Creditors in accordance with the Plan of Reorganization. Due to the severe cash shortage of the company, no substantial payments have been made to creditors. Although the company is in default with substantially all of the creditors, the company is working with certain of the creditors who have requested payment. The creditor notes generally do not provide for any specific remedies or for acceleration in the event of non-payment. (4) The Company owes the Company's legal counsel(s) approximately $90,000 in connection with the bankruptcy. (5) The Company received notification by the EPA on approximately July 25, that under a partial consent decree the company is eligible to settle for an amount of $688,156 for a Superfund Site cleanup in connection with waste generated by the company's former Raytee division. The company had until September 1, 1995 to accept or decline the EPA's offer of settlement. In addition, the EPA provided the company with a means to negotiate payment terms for a potential lower amount based on the financial condition of the company. The company responded to the EPA request for financial information and evidenced its interest in settling the claim at a level at which GC could afford. In addition, GC asserted its various defenses and claimed to not be responsible for any settlement at all. The EPA reviewed the documents and financial information submitted by GCI and agreed to settle the claim for $100,000, to be paid over five years with interest. GC has until November 10, 1995 to respond. In the event that GC is not included in the partial consent decree, GC could be: (1) sued by the EPA or (2) sued by other potentially responsible parties who have agreed to the settlement or (3) recognizing the poor financial condition of the company, no one would attempt to make a claim. 4 7 If the EPA claim was to be litigated and the company is required to pay such claim in the approximate amount of $688,000 the company could:(1) be forced to file for protection under the bankruptcy laws or (2) be forced out of business or (3) be required to make significant payments to the EPA over a period of time, which would severely restrict the company's ability to recover from its bankruptcy and the recession. In addition, this settlement amount is a partial settlement and the final remediation is of an unknown amount which will not be determined until some time in 1996 or 1997. As of September 30, 1995, the company has established a reserve of $328,910. Based on the EPA's proposed settlement offer, management believes that this amount is sufficient to cover a settlement agreement that might be made for this final remediation. The company also appealed the waste content, and in addition asserts that since the EPA did not make a valid claim, even though the EPA was deemed to have been notified (as a Federal Agency) that the company was in Chapter 11, the EPA claim was discharged without liability at the time of confirmation. The company has tendered notification of the potential EPA claim to all of its insurance carriers from 1975 through 1995 and prior to the acquisition of the Raytee Company. As of October 27, 1995, substantially all of the insurance carriers have rejected the potential liability, because of language in the insurance policy. GC will continue to assert its claim. 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. The Company anticipates that additional capital equipment will be required for the Company's operating divisions during 1996. Because of the Company's negative net worth and lack of working capital, it may not be possible to lease or purchase some or all of such equipment on terms satisfactory to the Company. If sufficient capital equipment is not available, the Company could be materially adversely affected. In addition, a continued shortage of capital resources could materially adversely affect the ability of the Company to make needed improvements which could result in a longer time to return to profitability. RESULTS OF OPERATIONS Comparison of three months ended September 30, 1995, and September 30, 1994. The Company's sales for the three months ending September 30, 1995, increased $472,313 or 52% over the comparable period of the prior year, generally reflecting the increase in new orders received by the ALJ division during the past year. The backlog has remained relatively consistent throughout the Quarter and at October 31, 1995 was approximately $1,320,539. The cost of sales decreased slightly to 69.2% compared to 71.5% in the prior year period. Operating expenses increased to $287,510 compared to $283,778 in the prior period. However, expenses decreased as a percentage of sales to 20.8% compared to 31.2% due to the increased sales. Interest expense on bank debt decreased as a result of the reduction in principal. 5 8 PART II Item 1 Legal Proceedings: None. See note 5 to the MD&A on page 4 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 a) Exhibits Exhibit 27 Article Financial Schedule for Form 10-Q b) Reports on Form 8-K None 6 9 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) NOVEMBER 11, 1995 F. WILLARD GRIFFITH II - ----------------- ------------------------------------- DATE F. WILLARD GRIFFITH II CHAIRMAN, CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER 7 10 EXHIBIT EXHIBIT DESCRIPTION NO. Ex-27 Financial Data Schedule EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCEHDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED STATEMENTS OF OPERATIONS AND CONSOLIDATED BALANCE SHEET FOR PERIOD ENDING SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FIRST QUARTER 10-Q. 3-MOS JUN-30-1996 JUL-01-1995 SEP-30-1995 136,831 0 773,836 3,880 492,513 1,409,517 1,169,577 863,816 1,770,715 2,217,313 0 1,791,590 0 0 0 1,770,715 1,381,448 1,381,448 955,556 1,243,066 14,011 3,880 5,094 124,371 0 124,371 0 0 0 124,371 .02 .02
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