<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended: September 30, 1996
------------------
Commission File Number: 0-26756
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GEOGRAPHICS, INC.
(Exact name of registrant as specified in its charter)
Wyoming 87-0305614
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1555 Odell Road, P.O. Box 1750, Blaine, WA 98231
- ------------------------------------------------------------------------------
(Address of principal executive office and zip code)
(360) 332-6711
- ------------------------------------------------------------------------------
(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
---------- ----------
The registrant had 9,416,877 shares of common stock outstanding as of November
8, 1996.
<PAGE>
GEOGRAPHICS, INC.
INDEX
PAGE
-----
Part I. FINANCIAL INFORMATION
ITEM 1 Financial Statements
Consolidated Statements of Income
for the Three Months and Six Months Ended
September 30, 1996 and September 30, 1995 3
Consolidated Balance Sheets as of
September 30, 1996 and March 31, 1996 4
Consolidated Statements of Cash Flows
for the Six Months Ended September 30, 1996
and September 30, 1995 5
Notes to Consolidated Financial Statements 6 - 7
ITEM 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8 - 10
Part II. OTHER INFORMATION 11 - 13
SIGNATURE 15
Exhibit 11 - Computation of Earnings per Share 16
Exhibit 27 - Financial Data Schedule 17
<PAGE>
GEOGRAPHICS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
- ------------------------------------------------------------------------------------
Sept. 30 Sept. 30 Sept. 30 Sept. 30
1996 1995 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales $ 6,858,676 $ 5,158,126 $ 13,029,743 $ 10,093,834
Cost of Sales 4,083,653 3,150,693 7,809,954 6,178,249
----------- ----------- ------------ ------------
Gross Margin 2,775,023 2,007,433 5,219,789 3,915,585
S.G. & A Expense 1,975,339 1,312,954 4,009,344 2,603,692
Goodwill Amortization 0 0 0 159,768
----------- ----------- ------------ ------------
Operating Income 799,684 694,479 1,210,445 1,152,125
Other Income (Expenses)
Interest Expense (203,341) (195,231) (394,112) (358,337)
Other (10,065) 67,737 (13,841) 89,154
----------- ----------- ------------ ------------
Income Before Provision
for Income Taxes 586,278 566,985 802,492 882,942
Income Tax Provision 213,172 192,775 283,209 300,201
----------- ----------- ------------ ------------
Net Income $ 373,106 $ 374,210 $ 519,283 $ 582,741
----------- ----------- ------------ ------------
----------- ----------- ------------ ------------
Earnings Per Common and
Common Equivalent Share
Primary $0.04 $0.06 $0.06 $0.10
Assuming full dilution $0.04 $0.06 $0.06 $0.09
Share used in computing
earnings per common and
common equivalent shares:
Primary 9,427,811 6,170,171 9,198,337 5,869,219
Assuming full dilution 9,427,803 7,035,423 9,199,419 7,132,239
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
GEOGRAPHICS, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
Sept. 30, 1996 March 31, 1996
(Unaudited) (Audited)
<S> <C> <C>
Current Assets
Cash $ 188,948 $ 50,028
Accounts receivable, net 5,293,250 4,974,156
Related party receivables 0 899,422
Other receivables 180,608 62,572
Inventories 13,275,929 9,139,273
Deposits 1,394,255 597,693
Prepaid expenses 483,794 99,204
Deferred income tax 837,339 970,000
Other 145,900 96,512
------------ ------------
Total current assets 21,800,023 16,888,860
Property, plant & equipment, net 9,393,035 7,286,694
Deferred income tax 192,000 192,000
Investment in partnerships 119,596 (34,484)
Other assets 397,504 404,971
------------ ------------
Total Assets $ 31,902,158 $ 24,738,041
------------ ------------
------------ ------------
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Note payable to bank 4,398,617 5,322,939
Accounts payable 2,010,041 2,634,598
Accrued liabilities 1,946,773 1,033,905
Income tax payable 45,952 145,278
Note payable to officer & director 1,000,000 1,264,711
Current portion of long-term debt 782,302 656,398
------------ ------------
Total current liabilities 10,183,685 11,057,829
Long-term debt 4,665,842 3,690,360
------------ ------------
Total liabilities 14,849,527 14,748,189
------------ ------------
Stockholders' Equity
Common stock, without par value; 100,000,000 shares
authorized; 9,412,877 and 8,004,584 issued and
outstanding on Sept. 30, 1996 and March 31, 1996,
respectively 16,159,408 9,620,068
Foreign currency translation adjustment 4,156 0
Retained earnings 889,067 369,784
------------- ------------
Total Stockholders' Equity 17,052,631 9,989,852
Total Liabilities and Stockholders' Equity $ 31,902,158 $ 24,738,041
------------ ------------
------------ ------------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
GEOGRAPHICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------
Sept. 30, 1996 Sept. 30, 1995
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 519,283 $ 582,742
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH FLOWS FROM OPERATING ACTIVITIES
Depreciation and amortization 759,980 612,839
Common stock issued in lieu of other liabilities 0 130,000
Deferred income tax 132,661 0
(Gain) loss on sale of property and equipment 8,985 (119)
Equity loss from investments in partnerships 0 (3,655)
CHANGES IN OPERATING ASSETS AND LIABILITIES
Accounts receivable (138,848) (452,290)
Related party receivables 899,422 0
Other receivables (118,036) (73,677)
Inventory (3,939,208) (3,288,691)
Deposits (796,562) (181,047)
Prepaid expenses (384,590) (278,575)
Other current assets (49,388) (6,162)
Accounts payable (624,557) 509,218
Accrued liabilities 522,029 370,830
Income tax payable (99,326) 64,851
----------- -----------
Net cash flows from operating activities (3,308,155) (2,013,736)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings (repayments) on note payable to bank (924,322) 1,347,001
Proceeds from short-term borrowings 0 800,000
Proceeds from long-term debt borrowings 225,000 583,324
Repayment of long-term debt (343,378) (259,549)
Proceeds (repayment) of notes to officers & directors (264,711) 900,000
Proceeds from issuance of common stock 6,539,340 52,152
Foreign currency translation 4,156 0
----------- -----------
Net cash flows from financing activities 5,236,085 3,422,928
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment (1,607,921) (1,204,941)
Proceeds from sale of equipment 6,887 16,741
Net (increase) decrease in advances to partnerships (154,080) (182,634)
Change in other assets (33,896) (14,567)
----------- -----------
Net cash flows from investing activities (1,789,010) (1,385,401)
----------- -----------
NET CHANGE IN CASH 138,920 23,791
CASH, beginning of year 50,028 15,348
----------- -----------
CASH, end of quarter $ 188,948 $ 39,139
----------- -----------
----------- -----------
NONCASH INVESTING AND FINANCING ACTIVITIES
Financing obtained directly from sellers in acquisition
of equipment $ 1,219,764 $ 242,293
----------- -----------
----------- -----------
Assets acquired directly in acquisition of business $ 390,839 $ 0
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO THESE CONSOLIDATED FINANCIAL STATEMENTS
<PAGE>
GEOGRAPHICS, INC.
Notes to Consolidated Financial Statements
1. The accompanying interim unaudited consolidated financial statements of
Geographics, Inc. (the "Company" or "Geographics") have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, such interim
statements reflect all adjustments (consisting of normal recurring
accruals) necessary to present fairly the financial position and the
results of operations and cash flows for the interim periods presented.
The results of operations for these interim periods are not necessarily
indicative of the results to be expected for the full year. These
financial statements should be read in conjunction with the audited
consolidated financial statements and footnotes included in the Company's
consolidated financial statements and notes thereto for the fiscal year
ended March 31, 1996.
The consolidated financial statements include the accounts of Geographics,
Inc. and its wholly-owned subsidiaries; Geographics Marketing Canada Inc.,
Geographics (Europe) Limited, Geographics Australia, Pty. Limited, and
Geographics Foreign Sales Corporation. All intercompany balances and
transactions have been eliminated.
Certain of the Company's locations calculated cost of sales using an
estimated gross profit method for interim periods. Cost of sales at these
locations are adjusted based on physical inventories which are performed no
less than once a year.
2. The Company has a $12,000,000 revolving credit agreement with a bank.
Interest on outstanding advances is payable monthly at the bank's prime
rate. Outstanding balances as of September 30, 1996 and March 31, 1995
were $4,398,617 and $5,322,939, respectively.
The prime rate was 8.25% and 8.25% at September 30, 1996 and March 31,
1996, respectively.
3. On May 1, 1996, the Company completed a private placement of 1,268,293
units at a price of $5.125 per unit. Total proceeds from this transaction
approximated $6,500,000. Each unit included one common share of the
Company and one warrant to purchase one additional common share of the
Company at $4.25. The warrants are exercisable upon issuance and
regulatory approval, and expire June 1, 1999.
4. On January 23, 1996, the Company placed an order for a printing press. The
cost of the press is approximately $1,200,000 which is expected to be
delivered during the third quarter of fiscal year 1997. On June 27, 1996,
the Company placed an order for a packaging machine. The cost of the
packaging machine is approximately $750,000 and is expected to be delivered
during the third quarter of fiscal year 1997. The Company has commitments
from financial institutions to provide capital lease financing for these
equipment orders.
<PAGE>
5. An officer and director has received notes from the Company in exchange for
$1,000,000. The notes are payable on demand and are classified as current
liabilities. Interest on these notes is payable monthly at the rate of
prime plus 1%.
6. On July 3, 1996, the Company agreed to purchase substantially all of the
assets of Grahams Graphics Pty. Ltd., its exclusive distributor in
Australia. The total purchase price is expected to approximate $390,000 to
be paid as follows: (i) the issuance of 50,000 share of common stock
(valued at an aggregate of $200,000); (ii) the issuance of options to
purchase an additional 50,000 share of common stock for $4.00 per share;
(iii) the assumption of approximately $150,000 in unsecured trade
liabilities; and, (iv) a one time cash payment of $40,000. Upon the
completion of the purchase transaction, the assets assumed will be
contributed to the Company's wholly-owned Australian subsidiary,
Geographics Australia Pty. Ltd. The effective date of the transaction
is July 1, 1996.
The Company formed Geographics Australia PTY Limited to complete the
acquisition and become the Company's distributor of Geographics products in
Australia, replacing Grahams Graphics PTY Limited as the sole Australian
distributor.
7. There are various claims, lawsuits, and pending actions against the Company
incident to the operations of its business. It is the opinion of
management that the ultimate resolution of these matters will not have a
material effect on the Company's financial position, results of operations
or liquidity.
<PAGE>
ITEM 2
Management's Discussion and Analysis of Financial Condition
and Results of Operations
for the Three Months and Six Months Ended
September 30, 1996 and September 30, 1995
RESULTS OF OPERATIONS
SALES. Sales increased 33% to $6,858,676 in the quarter ended September 30,
1996 from $5,158,126 in the quarter ended September 30, 1995 and increased
29% to $13,029,743 for the six months ended September 30, 1996 compared to
$10,093,834 for the six months ended September 30, 1995.
Sales increased 33% for the quarter ended September 30, 1996 as compared to
the same quarter a year earlier. Sales for the quarter ended September 30,
1995 included the completion of Geopaper Gondola merchandising rack
shipments to approximately 300 office product superstores, while the
current quarter did not have a material number of initial product
shipments. After adjusting sales for initial product shipments of
approximately $750,000 in the prior year, sales increased by 56% as
compared to the same period a year ago.
Geopaper products were responsible for 69% of sales for the six month
period ended September 30, 1996, compared to 64% for the same period a year
earlier. Sales of Geopaper increased 40% to $9,021,249 from $6,455,172 for
the periods ended September 30, 1996 and 1995, respectively.
Sales of Company products other than Geopaper (stick on letters, rub on
letters, stencil and LED signs) increased by 10% for the six months ended
September 30, 1996 compared to the six months ended September 30, 1995.
The non-Geopaper products have decreased as a percentage of total sales to
31% from 36% for the six month periods ended September 30, 1996 and 1995,
respectively. These products will continue to decrease in importance to
the Company as consumers continue to utilize personal computers to perform
many of the tasks that these non-Geopaper products were designed for.
However, the increased usage of personal computers is expected to generate
new customers for Geopaper products that are specifically designed for use
with personal computing technology.
International sales of Geographics products were $1,523,100 for the quarter
ended September 30, 1996, an increase of 32% over international sales of
$1,152,233 for the quarter ended September 30, 1995. International sales
increased 68% to $2,722,621 from $1,621,522 for the six months ended
September 30, 1996 and 1995, respectively. International sales of
Geographics products represented 21% of total Geographics, Inc. sales for
the six months ended September 30, 1996, compared to 16% of total sales for
the same period a year earlier. Sales by geographic location for the six
months ended September 30, 1996 were as follows:
United States 78.8%
Canada 17.0%
Western Europe 2.3%
Australia 1.6%
<PAGE>
Others 0.3%
------
Total 100.0%
------
------
GROSS MARGIN. Gross margin as a percentage of sales was 40.5 % and 40.1% for
the three and six month periods ended September 30, 1996, compared to 38.9%
and 38.8% for the same periods last year. The Company's gross margin rate
increased primarily due to lower freight rates resulting from increased
product shipments during the past year.
Margins are also affected by changes in the mix of product sold, raw
material costs, automation, labor costs, freight costs, production levels
(overhead absorption) and the rate of product turnover. Margins are also
affected by price increases and decreases passed on to customers. While
management endeavors to improve margins, no assurance can be given that
margins will continue to improve.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, General and
Administrative expenses ("SG&A"), which consist of payroll, advertising,
and commissions, as well as administrative, accounting and legal costs
increased as a percentage of sales in the three and six months ended
September 30, 1996 to 28.8% and 30.8%, respectively, as compared to 25.5%
and 25.8% during the same periods in the prior year. SG&A costs increased
as a percentage of sales primarily due to increased overhead resulting from
the establishment of Geographics (Europe) Limited, Geographics Australia
Pty. Ltd., and the installation and training costs related to a new
computer system at the Blaine, WA facility.
GOODWILL AMORTIZATION. The Company recorded no goodwill amortization during
the three and six months ended September 30, 1996, as compared to $0 and
$159,767 for the same periods a year ago. Goodwill resulted from the
acquisition of the lettering division of E.Z. Industries in 1993. The
Goodwill was fully amortized as of June 30, 1995.
INTEREST EXPENSE. Interest expense for the three and six months ended
September 30, 1996 totaled $203,341 and $394,112, respectively, compared to
$195,231 and $358,337 for the same periods in the prior year. This
increase in interest expense was primarily due to borrowings under the
Company's revolving credit facility during the current year to fund
increases in inventories and equipment deposits, as well as additional
interest costs resulting from borrowings related to equipment purchases and
expansions to the Blaine manufacturing facility.
LIQUIDITY AND CAPITAL RESOURCES. The Company's principal capital requirements
have been to fund working capital needs, including the building of
inventories in the United States, the United Kingdom, and Australia.
Working capital has also been used to fund equipment deposits, prepaid
expenses, reduce accounts payable and to reduce income tax payable.
The Company's sales are substantially on net sixty day terms, and trade
receivables are used as collateral to provide the Company with a source of
capital prior to their collection. Working capital requirements are
reduced by vendor credit terms, which allow the Company to finance a
portion of its inventory.
<PAGE>
During the first six months of fiscal year 1997, the Company improved its
collection of receivables. Net accounts receivable were $5,293,250 as of
September 30, 1996, a decrease of 9.9% from the $5,873,578 receivable
balance at March 31, 1996. Inventory increased during the six months to
$13,275,929, an increase of 45.3% from the $9,139,273 inventory balance at
March 31, 1996. Increases in inventory can be attributable to management's
anticipation of inventory requirements related Geographics (Europe)
Limited's initial operations, the acquisition of Geographics Australia Pty
Limited's operations and the introduction of a new educational product
line. The investment in inventories, equipment deposits and prepaid
expenses were primarily responsible for negative cash flows from operating
activities of $3,308,155 for the six months ended September 30, 1996,
compared to negative cash flows from operating activities of $2,013,736 for
the same period a year earlier.
Despite the Company's rapid growth, Management anticipates improved
accounts receivable and inventory management due to Management's increased
focus on these critical working capital areas. Improved accounts
receivable collection procedures and increased staffing are expected to
minimize future increases in accounts receivable. New information systems,
new warehouse facilities, improved inventory organization and the
addition of key purchasing and inventory staffing should improve
efficiencies in inventory management and allow for additional sales
growth without corresponding inventory increases.
The Company's cash flow is also affected by financing activities, including
borrowings and repayments on revolving credit facilities, short and long
term notes payable to the Company's bank, proceeds from the issuance of
debentures to officers and directors, proceeds from the exercise of stock,
as well as repayment of capital leases. The majority of capital
expenditures were financed by long-term bank loans and capital leases. A
private placement of 1,268,293 units at $5.125 (see Part II, Item 5. A.),
resulted in gross proceeds of $6,500,000 to the Company which were used to
repay borrowings on short-term notes payable to the Company's bank.
Financing activity resulted in net cash flows of $5,236,085 and $3,422,928
for the six months ended September 30, 1996 and 1995, respectively.
During the six months ended September 30, 1996, the Company acquired
additional printing presses, packaging equipment and other machinery
related to the manufacture of Geopaper products. These capital
expenditures were necessary to support the continued expansion of the
Geopaper product line and the increase in Geopaper unit sales. Cash used
in investing activities (primarily capital expenditures) was $1,789,010 and
$1,385,401 for the six months ended September 30, 1996 and 1995,
respectively.
During the six months ended September 30, 1996, the Company's cash balance
increased by $138,920 to $188,948. The cash balance is not significant and
balances held by the Company are intentionally maintained at low levels as
part of the Company's strategy to minimize balances outstanding on
revolving credit facilities, thus minimizing interest expense.
Although the Company has the ability to finance its planned growth and
expansion from operating cash flow, capital lease financing and borrowings
under the Company's existing credit facilities, the Company also considers
alternative financing options, such as the issuance of common stock or
convertible debt, in the event market conditions make such alternatives
financially attractive. The Company's future financing requirements will
be affected by the number of new customers, the strength of reorders by
existing customers, the growth of existing customers, as well as the of
success of new products introduced. Additional financing might also be
necessary in the event the Company pursues further expansion or
business acquisition opportunities. There is no assurance the Company
will be able to obtain such financing or that such financing, if available,
will be on terms satisfactory to the Company.
<PAGE>
PART II. OTHER INFORMATION
ITEMS 1-3 NOT APPLICABLE
ITEM 4- SUBMISSIONS OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders of Geographics, Inc. held on August
28, 1996, the nominees for election as Directors of the Corporation were
elected in the following manner.
Nominee Number of Shares For
------- --------------------
Term expiring in 1997:
Ronald S. Deans 6,319,032
Scott Deans 6,314,332
Moises Cosio 6,317,632
Robert Parker 6,318,382
Mark G. Deans 6,315,132
Fidel Garcia Carrancedo 6,318,632
Alan D. Tuck Jr. 6,317,582
Luis Alberto Morato 6,314,482
With respect to the proposed increase in the number of members of the Board
of Directors from seven (7) to eight (8) members, the Board of Directors
adopted the proposal as submitted by the votes indicated below:
Number of Shares
----------------
For the proposal: 6,246,346
Against the proposal: 95,818
Votes withheld: 0
Abstentions: 6,400
Non-votes 227,378
With respect to the notification of the selection of Moss Adams LLP as the
Company's auditors for the fiscal year ending March 31, 1997, the Board of
Directors adopted the proposed amendment as submitted by the votes
indicated below:
Number of Shares
----------------
For the proposal: 5,613,256
Against the proposal: 728,490
Votes withheld: 0
Abstentions: 6,818
Non-votes 227,378
<PAGE>
With respect to the proposed issuance of 180,000 incentive stock options to
certain employees, officers and directors of the Company, the Board of
Directors adopted the proposed amendment as submitted by the votes
indicated below:
Number of Shares
----------------
For the proposal: 4,568,198
Against the proposal: 301,330
Votes withheld: 0
Abstentions: 35,420
Non-votes 1,670,994
With respect to the proposed adoption of the Geographics, Inc. 1996 Stock
Option Plan, the Board of Directors adopted the proposed amendment as
submitted by the votes indicated below:
Number of Shares
----------------
For the proposal: 4,444,762
Against the proposal: 423,225
Votes withheld: 0
Abstentions: 36,961
Non-votes 1,670,994
With respect proposed amendment to the Company's Articles of Incorporation
to effect an increase in the Company's authorized common stock from
10,000,000 shares of common stock, no par value to 100,000,000 shares of
common stock, no par value, the Board of Directors adopted the proposed
amendment as submitted by the votes indicated below:
Number of Shares
----------------
For the proposal: 5,883,723
Against the proposal: 444,717
Votes withheld: 0
Abstentions: 20,124
Non-votes 227,378
ITEM 5 - OTHER INFORMATION
A. On September 20, 1996, Mr. Fidel Carrancedo resigned as a director of the
Company. Mr. Carrancedo resigned for personal reasons and has no
disagreements with the Company. Mr. Carrancedo still remains a principal
stockholder of the Company. No additional Directors have been appointed
to replace Mr. Carrancedo.
B. The Company has adopted the following Statements of Financial Accounting
Standards ("SFAS") for the fiscal year ending March 31, 1997.
<PAGE>
SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," establishes accounting standards for
the impairment of long-lived assets, certain identifiable intangibles, and
goodwill related to those assets to be held and used and for long-lived
assets and certain identifiable intangibles to be disposed of. Long-lived
assets and certain identifiable intangibles to be held and used by a
company are required to be reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Measurement of an impairment loss for such long-lived
assets and identifiable intangibles should be based on the fair value of
the asset. Long-lived assets and certain identifiable intangibles to be
disposed of are required to be reported generally at the lower of the
carrying amount or the fair value less cost to sell. The adoption of SFAS
No. 121 had no material effect on the Company's financial position as of
September 30, 1996 or the results of its operations for the quarter ended
September 30, 1996.
SFAS No. 123, "Accounting for Stock-Based Compensation," establishes
financial accounting and reporting standards for stock-based employee
compensation plans, including stock options, stock purchase plans,
restricted stock, and stock appreciation rights. SFAS No. 123 defines and
encourages the use of the fair value method of accounting for employee
stock-based compensation. Continuing use of the intrinsic value based
method of accounting prescribed in Accounting Principles Board No. 25 ("APB
25") for measurement of employee stock-based compensation is allowed with
pro forma disclosures of net income and earnings per share as if the fair
value method of accounting had been applied. Transactions in which equity
instruments are issued in exchange for goods or services from non-employees
must be accounted for based on the fair value of the consideration received
or of the equity instrument issued, whichever is more reliably measurable.
The Company has determined that it will continue to use the method of
accounting prescribed in APB 25 for measurement of employee stock-based
compensation, and will begin providing the required pro forma disclosures
in its financial statements for the year ending March 31, 1997 as allowed
by SFAS No. 123.
<PAGE>
EXHIBIT INDEX
Page
----
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
A. Exhibits.
11. Statement regarding computation of Earnings Per Share 16
27. Financial Data Schedule 17
B. Reports on Form 8-K.
No reports were filed by the Company on Form 8-K during the fiscal quarter
ended September 30, 1996.
<PAGE>
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.
GEOGRAPHICS, INC.
-----------------
(Registrant)
Date: November 15, 1996 By: /s/ RONALD S. DEANS
---------------------------------
Ronald S. Deans
President, Chief Executive Officer
Chief Financial Officer and Secretary
<PAGE>
EXHIBIT 11
GEOGRAPHICS, INC.
COMPUTATION OF EARNINGS PER SHARE
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
Sept. 30, 1996 Sept. 30, 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE:
Net income used to compute primary earnings per share $ 373,106 $ 374,210
---------- ----------
---------- ----------
Weighted average number of shares outstanding 9,393,547 5,789,818
Add: Weighted average number of shares which could
have been issued upon exercise of outstanding
options 22,940 286,915
Add: Weighted average number of shares which could
have been issued upon exercise of outstanding
warrants 11,323 93,438
---------- ----------
Weighted average number of shares used to
compute primary earnings per share 9,427,810 6,170,171
---------- ----------
---------- ----------
Primary earnings per share $ 0.04 $ 0.06
---------- ----------
---------- ----------
FULLY DILUTED EARNINGS PER COMMON SHARE:
Net income $ 373,106 $ 374,210
Add: Interest which would not have been incurred,
net of tax, upon conversion of 8% debentures 0 7,208
Add: Interest which would not have been incurred,
net of tax, upon conversion of 11% debentures 0 3,063
Add: Interest which would not have been incurred,
net of tax, upon conversion of 10.25% debenture 0 2,502
---------- ----------
Net income used to calculate fully diluted earnings
per share $ 373,106 $ 386,983
---------- ----------
---------- ----------
Weighted average number of shares outstanding 9,393,547 5,789,818
Add: Weighted average number of shares which could
have been issued upon exercise of outstanding
options 22,933 431,156
Add: Weighted average number of shares which could
have been issued upon exercise of outstanding
warrants 11,323 117,663
Add: Weighted average number of shares which could
have been issued upon conversion of 8% debentures 0 468,634
Add: Weighted average number of shares which could
have been issued upon conversion of 11% debentures 0 183,442
Add: Weighted average number of shares which could
have been issued upon conversion of 10.25%
debentures 0 44,710
---------- ----------
Weighted average number of shares used to compute
fully diluted earnings per share 9,427,803 7,035,423
---------- ----------
---------- ----------
Fully diluted earnings per share $ 0.04 $ 0.06
---------- ----------
---------- ----------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM (A) FROM
10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 188,948
<SECURITIES> 0
<RECEIVABLES> 5,623,796
<ALLOWANCES> (149,938)
<INVENTORY> 13,275,929
<CURRENT-ASSETS> 21,800,023
<PP&E> 13,287,609
<DEPRECIATION> (3,894,574)
<TOTAL-ASSETS> 31,902,158
<CURRENT-LIABILITIES> 10,183,685
<BONDS> 0
0
0
<COMMON> 16,159,408
<OTHER-SE> 893,223
<TOTAL-LIABILITY-AND-EQUITY> 31,902,158
<SALES> 6,858,676
<TOTAL-REVENUES> 6,858,676
<CGS> 4,083,653
<TOTAL-COSTS> 1,975,339
<OTHER-EXPENSES> 10,065
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 203,341
<INCOME-PRETAX> 586,278
<INCOME-TAX> 213,172
<INCOME-CONTINUING> 373,106
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 373,106
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
