<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Quarter Ended June 30, 1999
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 0-26756
GEOGRAPHICS, INC.
(Exact Name of Registrant as Specified in Its Chatter)
-----------------------
WYOMING 87-0305614
(State or Other Jurisdiction (I.R.S. Employer
Incorporation or Organization) Identification No.)
1555 ODELL ROAD, P.O. BOX 1750, BLAINE, WASHINGTON 98231
(Address and Zip Code of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code (360) 332-6711
-----------------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Exchange Act: COMMON STOCK, NO
PAR VALUE
Indicate by checkmark 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 No X
--- ---
The aggregate market value of the common stock held by nonaffiliates of
the registrant as of August 6, 1999 was $4,618,813 based on a closing sales
price of $0.46875 per share on the NASDAQ OTC Bullctin Board on such date.
The number of shares outstanding of the registrant's common stock, no
par value, as of August 6, 1999 was 9,857,252.
DOCUMENTS INCORPORATED BY REFERENCE.
None.
<PAGE> 2
TABLE OF CONTENTS
Page
PART I .......................................................................1
ITEM 1. FINANCIAL STATEMENTS ...............................................1
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ........................................1
FORWARD-LOOKING STATEMENTS .......................................1
RESULTS OF OPERATIONS ............................................2
LIQUIDITY AND CAPITAL RESOURCES ..................................2
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK ............4
PART II ......................................................................4
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS ..........................4
SALES OF UNREGISTERED SECURITIES ...........................................4
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ................5
ITEM 5 -OTHER INFORMATION ..................................................5
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K ..................................7
SIGNATURE ....................................................................7
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<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Geographics, Inc. (the "Company" or "Geographics") has attached to this
Report and by this reference incorporated herein the consolidated balance sheets
as of June 30, 1999 (unaudited) and March 31, 1999, the unaudited statements of
operations for the three months ended June 30, 1999 and June 30, 1998, and the
unaudited consolidated statements of cash flows for the three months ended June
30, 1999 and June 30, 1998, together with the notes thereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements of the Company and the notes thereto appearing
elsewhere in this Report.
FORWARD-LOOKING STATEMENTS
Statements herein concerning expectations for the future constitute
forward-looking statements which are subject to a number of known and unknown
risks, uncertainties and other factors which might cause actual results to
differ materially from those expressed or implied by such forward-looking
statements. Forward-looking statements herein include, but are not limited to,
those concerning anticipated growth in the preprint paper market; anticipated
growth in the Company's sales; anticipated growth in sales of specialty paper
products as a percentage of revenue; the Company's ability to increase its
market share within the preprint industry; the ability of the Company to
successfully implement price changes for the Company's products when and as
needed; trends relating to the Company's profitability and gross profits
margins; the ability of the Company to implement, or modify its management
information system, including the electronic data interchange system, adequate
to meet operations requirements in the future and to improve its internal
controls; and the ability of the Company to refinance its existing revolving
credit facility to raise additional debt or equity financing sufficient to meet
its working capital requirements.
Relevant risks and uncertainties include, but are not limited to,
slower than anticipated growth of the preprint papers market; loss of certain
key customers; insufficient consumer acceptance of the Company's specialty paper
products; unanticipated actions, including price reductions, by the Company's
competitors; unanticipated increases in the costs of raw materials used to
produce the Company's products; loss of favorable trade credit, supply terms,
reliable and immediately available raw material supply and other favorable terms
with certain key vendors, greater than expected costs incurred in connection
with the implementation of a management information system; failure to realize
expected economic efficiencies of the Company's automated production system; the
inability to hire and retain key personnel; unexpected increases in the overall
costs of production as a result of collective bargaining arrangements;
unfavorable determinations of pending lawsuits or disputes; and inability to
secure additional working capital when and as needed. Additional risks and
uncertainties include those described under "Risk Factors" in Part I of the
Company's Annual Report on Form 10-K for the year ended March 31, 1999 and those
described from time to time in the Company's other filings with the Securities
and Exchange Commission, press releases and other communications. All forward
looking statements contained in this Report reflect the Company's expectations
at the time of this Report only, and the Company disclaims any responsibility to
revise or update any such forward-looking statement except as may be required
law.
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<PAGE> 4
RESULTS OF OPERATIONS
NET SALES. Net sales decreased 18.1% to $4,499,918 in the quarter
ended June 30, 1999 from $5,497,162 in the quarter ended June 30, 1998. The
decrease was attributable to the loss of a key account in late fiscal 1998
($345,000) and significantly lower sales in Europe which decreased $130,000 or
27.3% from 1998 and was caused in part by the Company's inability to produce
product due to a lack of working capital. In addition, the Company made higher
accruals for customer program costs and credits ($1,045,498 or 18.8% of gross
sales for the quarter ended June 30, 1999 compared to $663,222 or 10.7% of gross
sales for the quarter ended June 30, 1998). The Company's new management has
adopted a philosophy to accrue the realistic amounts due under our customer
programs throughout the year to better reflect anticipated results.
GROSS MARGIN. Gross margin as a percentage of gross sales decreased to
18.1% in the quarter ended June 30, 1999, from 32.5% in the same period in
fiscal 1998. The lower gross margin is attributable to the lower net sales as a
result of the accruals of customer program costs, an increase in the cost of the
Company's materials and supplies, and an increase in freight, primarily due to
an increase in freight accruals, and shipping costs. Management is currently and
will continue to explore ways to improve manufacturing efficiency.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased to $1,118,105 (20.2% of gross sales) in the
quarter ended June 30, 1999 from $1,513,172 (24.5% of gross sales) in the same
period in fiscal 1998. This decrease is primarily attributable to a decrease in
salaries ($105,000), consulting expenses ($203,000), and legal fees ($79,000).
OTHER INCOME (EXPENSE). Other income for the quarter ended June 30,
1999 amounted to $172,392 compared to $5,642,007 for the quarter ended June 30,
1998. The difference is due to the income and gain attributed to the sale of the
Company's sign and lettering division during the quarter ended June 30, 1998.
The income and gain attributed to this segment amounted to $5,607,580, net of
tax of $50,000.
INTEREST EXPENSE. Interest expense decreased to $237,745 (4.3% of gross
sales) during the quarter ended June 30, 1999, compared to $337,480 (5.5% of
gross sales) during the same period in fiscal 1998. The lower interest costs
were caused by a decrease in borrowings by the Company to support the
operations. The decrease in borrowings was attributed to positive cash flow
generated by operations.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the rapid growth of the Company's specialty papers
group, capital expenditures relating to the purchase and installation of an
automated production system and a management information system, operating
losses and other factors, the Company has required, and continues to require,
substantial external working capital. The Company has experienced working
capital shortfalls, which have required the Company to delay payments to certain
vendors, institute internal cost reduction measures and take other steps to
conserve operating capital. During fiscal 1999, operating losses totaled
$3,096,106, and the Company experienced positive operating cash flows of
$1,554,310.
At the date of this Report, the Company's only available source of
working capital consisted of borrowings available under its revolving credit
facility. The revolving credit facility permits borrowings
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of up to $5.5 million subject to a borrowing base limitation of 70% of the value
of the Company's eligible accounts and 55% of the value of its inventory, net of
certain reserves. Borrowings under the facility bear interest at the prime rate
and are secured by substantially all of the Company's assets. Under the terms of
the facility, the Company is required to comply with a number of financial
covenants relating to, among other things, the maintenance of minimum net worth,
debt-to-equity ratios and cash flow coverage ratios.
The Company has failed to comply with the net worth, debt-to-equity
ratios and cash flow coverage ratios under the revolving credit facility. The
Company's lender has also provided the Company with several mortgage loans and
equipment loans, and the existence of the defaults under the revolving credit
facility constitutes default under these other loans. The report of the
Company's auditors included in this Report states that the Company's fiscal 1999
and 1998 losses and non-compliance with covenants under its revolving credit
facility raise substantial doubt about the Company's ability to continue as a
going concern.
In July of 1999, the Company secured agreement from its principal
lender, U.S. Bank, to extend the sixth forbearance agreement until September 15,
1999. Discussions and negotiation with an alternate lender are currently under
way to refinance the Company's debt arrangements. It is management's intention
to restructure all debt to terms that are consistent with the Company's cash
flow, plus raise $3,000,000 to $5,000,000 of equity via a private placement
offering for recapitalization of the Company. As of the date of this Report,
Geographics has received over $3,000,000 in a private placement of common stock,
with proceeds to the Company at $0.30 per share, which included significant
investments from Messrs. William T. Graham, Director of the Company, and James
L. Dorman, Chairman and Chief Executive Officer of the Company, and their
respective affiliates. Further, the Company has engaged Culverwell & Company,
Inc. to use their best efforts to raise an additional $3,000,000 in a private
placement of common stock, with net proceeds to the Company of $0.30 per share.
The offering prices were determined after giving effect to liquidity and
minority discounts. In addition, Geographics has announced that it has received
two acceptable banking proposals for a new working capital facility to replace
the Company's existing facility.
The Company estimates that the effect of the Company's recapitalization
plan will result in a decrease in interest expense over $600,000 per year.
Management anticipates that the recapitalization plan will be completed during
the second fiscal quarter.
ITEM 3. QUANTATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Substantially all of the revenue and operating expenses of the
Company's foreign subsidiaries are denominated in local currencies and
translated into US dollars at rates of exchange approximating those existing at
the date of the transactions. Foreign currency translation impacts primarily
revenue and operating expenses as a result of foreign exchange rate
fluctuations. The Company's foreign currency transaction risk is primarily
limited to amounts receivable from its foreign subsidiaries, which are
denominated in local currencies. To minimize foreign currency transaction risk,
the Company ensures that its foreign subsidiaries remit amounts to the U.S.
parent in a timely manner. The Company does not currently utilize foreign
currency hedging contracts.
The Company also have foreign exchange translation exposures resulting
from the translation of foreign currency-denominated earnings into U.S. dollars
in the Company's consolidated financial statements. Foreign currency transaction
exposure arises when an operating unit transacts business denominated in a
currency that is not its own functional currency. The Company's transaction
risks are
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<PAGE> 6
attributable primarily to inventory purchases from third party vendors. The
introduction of the Euro has significantly reduced such risks, and transaction
exposures on an overall basis are not material.
If the U.S. dollar uniformly increases in strength by 10% in 1999
relative to the currencies in which the Company's sales are denominated, income
before taxes would decrease by $96,000 for the quarter ended June 30, 1999. This
calculation assumes that each exchange rate would change in the same direction
relative to the U.S. dollar. In addition to the direct effects of changes in
exchange rates, which are a changed dollar value of the resulting sales, changes
in exchange rates also affect the volume of sales or the foreign currency sales
price as competitors' products become more or less attractive. The Company's
sensitivity analysis of the effects of changes in foreign currency exchange
rates does not factor in a potential change in sales levels or local currency
prices.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
SALES OF UNREGISTERED SECURITIES
On April 29, 1999, the Company issued an aggregate of $100,000 in
convertible subordinated notes (the "Notes") pursuant to exemption under Section
4(2) of the Securities Act of 1933, as amended. One $50,000 Note was issued to
Mr. James L. Dorman, the Company's Chairman of the Board and Chief Executive
Officer, and one $50,000 Note was issued to William T. Graham, a Director of the
Company. The Notes bear interest at a rate equal to the prime rate (as
determined by U.S. Bank National Association ("U.S. Bank")) plus two percent
(2%) per annum. The Notes are subordinated to the Company's senior indebtedness
to U.S. Bank and are convertible into shares of the Company's common stock at
$0.3927 per share. Proceeds from the sale of the Notes were used to fund the
Company's operations when the Company had reached its borrowing limit under its
credit facilities with U.S. Bank and had no other sources of working capital. On
July 12, 1999 the Company repaid the Notes in full with accrued interest.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a Special Meeting of Shareholders of Geographics, Inc. held on
April 16, 1999, the Board of Directors adopted the proposal to remove all
current members of the Board of Directors of the Corporation by the votes
indicated below.
<TABLE>
<CAPTION>
For Against Abstain Non-votes
<S> <C> <C> <C>
5,635,680 672,205 0 3,549,367
</TABLE>
With respect to the proposal to establish the number of members of the
Board of Directors at three, the Board of Directors adopted the proposal as
submitted by the votes indicated below:
<TABLE>
<CAPTION>
For Against Abstain Non-votes
<S> <C> <C> <C>
5,649,180 653,705 5,000 3,549,367
</TABLE>
With respect to the nominees for election as Directors of the
Corporation, the nominees were elected by the votes indicated below:
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<PAGE> 7
<TABLE>
<CAPTION>
Nominee For Withheld Abstain
<S> <C> <C> <C>
William T. Graham 5,649,180 658,705 0
James L. Dorman 5,649,180 658,705 0
C. Joseph Barnette 5,649,180 658,705 0
</TABLE>
With respect to the proposal to authorize the reimbursement of
reasonable expenses incurred by Messrs. Graham, Dorman and Barnette in
connection with the proxy solicitation for the April 16, 1999 Special Meeting of
Shareholders, the Board of Directors adopted the proposal as submitted by the
votes indicated below:
<TABLE>
<CAPTION>
For Against Abstain Non-votes
<S> <C> <C> <C>
5,507,350 790,535 10,000 3,549,367
</TABLE>
ITEM 5 - OTHER INFORMATION
The Company has announced the Board's appointment of the following
additional officers:
- - John Rossmiller, Chief Operating Officer. Mr. Rossmiller was recently the
President of Shell Patterns, LLC, a manufacturer of thermoformed and
screen-printed point of purchase displays, and Method Industries, a
manufacturer of fabricated metal products, including the Sunsor line of
vent-less fireplaces. Mr. Rossmiller was previously the President and Chief
Executive Officer of Amtel Systems Corporation, a designer and manufacturer
of digital intercom systems between 1989 and its sale in 1996, and Executive
Vice President of AC Battery Corporation, a developer and manufacturer of
energy storage systems applicable in energy intensive manufacturing
environments between 1989 and its sale to General Motors Corporation in
1994. Mr. Rossmiller currently serves on the Board of Directors of Shell
Patterns and Method Industries.
- - William J. Paquin, Jr., Controller. Mr. Paquin was previously Controller of
D-L Manufacturing and before that held the positions of accounting manager,
manager of cash and banking and internal auditor with Harnischfeger
Industries, a diversified manufacturing company. Previously, Mr. Paquin
worked in the accounting department at Johnson Controls, Inc. Mr. Paquin is
a Certified Public Accountant and has a B.B.A. and M.B.A. in Accounting and
Finance.
- - Jeffrey M. Kildow, Vice President of Sales. Mr. Kildow was the co-founder of
Innovative Storage Designs, a manufacturer of filing systems for the mass
market and office products superstores. Previously, he was Director of
Marketing for General Binding Corporation's loose-leaf products division. He
has over 14 years' experience in sales and marketing primarily in the office
products field.
- - David A. Schenker, Vice President of Sales. Mr. Schenker was the co-founder
of Innovative Storage Designs, a manufacturer of filing systems for the mass
market and office products superstores. Previously, he was Vice President
of Office Products for Steelworks, Inc., from November 1997 through July
1999, and Executive Vice President of Retail Marketing Services, Inc., from
1995 until November 1997. He has over 10 years' experience in sales and
marketing primarily in the office products field.
- - Sales Advisory Counsel. Mr. Dorman created an advisory counsel for sales and
marketing consisting of Jack Stein, William C. Stevens, Wesley C. Drumm and
Lee Palmer, owners or former owners of
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established consumer products companies and recent investors in the Company,
to assist with advice, strategy and contacts for the Company's sales and
marketing strategies. In addition, Mr. Dorman has created a
"representative's counsel" which consists of the Company's five largest
independent sales representative which will meet with management and the
advisory counsel for sales and marketing to further the Company's product
development and sales and marketing strategies.
Recapitalization and Banking Plan
Geographics also announced progress in management's plan for
recapitalizing the Company. For over two years, Geographics has been late in
making payments to vendors and in default under its working capital facilities.
As of the date of this Report, Geographics announced that it has received over
$3,000,000 in a private placement of common stock, with proceeds to the Company
at $0.30 per share, which included significant investments from Messrs. Graham
and Dorman and their respective affiliates. Further, the Company has engaged
Culverwell & Company, Inc. to use their best efforts to raise an additional
$3,000,000 in a private placement of common stock, with net proceeds to the
Company of $0.30 per share. The offering prices were determined after giving
effect to liquidity and minority discounts. In addition, Geographics has
announced that it has received two acceptable banking proposals for a new
working capital facility to replace the Company's existing facility.
The Company estimates that the effect of the Company's recapitalization
plan will result in a decrease in interest expense over $600,000 per year.
Management anticipates that the recapitalization plan will be completed during
the second fiscal quarter.
New Orders and New Products
The Company introduced a full line of Christmas seasonal products and
received large orders from Office Depot, Viking, and Quill in the U.S. as well
as Business Depot, Grand & Toy, and Costco in Canada, Staples in Europe and a
Halloween program in Wal-Mart. These combined seasonal orders will add
approximately 15% to our original budgeted sales for FY 2000 ending March 31,
2000. The Company also received its first order from Sam's Club for two items,
which start shipping August 15, 1999. The Company anticipates that this will
result in an additional $1.5 million to $2 million in sales per year.
On July 1, 1999, the Company acquired the rights from Innovative
Storage Designs, Inc. for $254,000 in cash and securities to a KD (Knock Down
- -Ready to Assemble) file cabinet and storage box which can be used in
combination. The file cabinets will accommodate letter, legal, and A4 files and
can be stacked from two though four high. The Company has also acquired the
patent rights.
The Company is also in the final stages of completing an agreement to
have the exclusive distribution rights for the United States, Canada, and
Mexico for a line of five additional products complimentary to their own file
cabinet and storage drawer. The ability for a customer to buy a combination of
file drawers and storage drawers, easy to assemble without tools and yet be able
to carry this out of the store under his or her arm is a tremendous plus.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27.1 Financial Data Schedule for the quarter ended June 30, 1999.
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<PAGE> 9
(b) There were no reports on Form 8-K filed during the quarter ended
June 30, 1999.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) 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 on this 12th day of
August, 1999.
GEOGRAPHICS, INC.
By: /s/James L. Dorman
---------------------------------
James L. Dorman
Chairman, Chief Executive Officer
By: /s/William J. Paplin, Jr.
---------------------------------
William J. Paplin, Jr.
Controller
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GEOGRAPHICS, INC.
FORM 10-Q
EXHIBIT INDEX
FOR THE QUARTER ENDED JUNE 30, 1999
Exhibit
Number
27.1 Financial Data Schedule
<PAGE> 11
GEOGRAPHICS, INC
CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1999 AND MARCH 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
JUNE 30, 1999 MARCH 31, 1999
------------- --------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 159,769 $ 130,967
Accounts receivable
Trade receivables, net 2,633,710 3,187,527
Other receivables 125,263 261,091
Inventory, net of allowance for obsolete inventory of
$688,000 and $862,000 at June 30 and March 31, 1999 3,187,510 3,532,694
Prepaid expenses, deposits, and other current assets 482,214 853,357
------------ ------------
Total current assets 6,588,466 7,965,626
PROPERTY, PLANT AND EQUIPMENT, NET 9,681,652 9,945,634
OTHER ASSETS 354,256 367,501
------------ ------------
TOTAL ASSETS $ 16,624,374 $ 18,278,761
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Bank overdrafts $ 279,121 $ 253,425
Note payable to bank 4,321,189 4,896,912
Accounts payable 3,264,797 2,961,079
Accrued liabilities 1,496,409 2,496,178
Current portion of long-term debt 3,172,601 3,072,601
------------ ------------
Total current liabilities 12,534,117 13,680,195
LONG-TERM DEBT 3,448,032 3,776,432
------------ ------------
Total liabilities 15,982,149 17,456,627
------------ ------------
STOCKHOLDERS' EQUITY (DEFICIT)
No par common stock - 100,000,000 authorized, 9,857,252
issued and outstanding at June 30 and March 31, 1999 15,769,018 15,769,018
Accumulated other comprehensive income (156,622) (157,223)
Accumulated deficit (14,970,171) (14,789,661)
------------ ------------
Total stockholders' equity (deficit) 642,225 822,134
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 16,624,374 $ 18,278,761
============ ============
</TABLE>
F-1
<PAGE> 12
GEOGRAPHICS, INC
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1999 1998
------------ ------------
<S> <C> <C>
SALES $ 5,545,416 $ 6,160,384
Allowances and Credits (793,555) (562,816)
Sales Returns (251,943) (100,406)
----------- -----------
Net Sales 4,499,918 5,497,162
COST OF SALES 3,496,369 3,491,844
----------- -----------
Gross Margin 1,003,549 2,005,318
S.G.& A. EXPENSES 1,118,105 1,513,172
----------- -----------
Operating Income (Loss) (114,556) 492,146
OTHER INCOME (EXPENSE)
Interest Expense (237,745) (337,480)
Other Income (Expense) 172,392 (15,573)
----------- -----------
Total Other Income (Expense) (65,353) (353,053)
NET INCOME (LOSS) BEFORE TAX (179,909) 139,093
DISCONTINUED OPERATIONS
Income from and gain on disposal of Core Business -- 5,657,580
FEDERAL INCOME TAX BENEFIT -- --
----------- -----------
NET INCOME (LOSS) $ (179,909) $ 5,796,673
=========== ===========
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Basic $ (0.02) $ 0.59
Diluted $ (0.02) $ 0.59
SHARES USED IN COMPUTING EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE
Basic 9,857,252 9,857,252
Diluted 9,857,252 9,857,252
</TABLE>
F-2
<PAGE> 13
GEOGRAPHICS, INC
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
1999 1998
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (loss) $ (179,909) $ 5,796,673
Adjustments to reconcile net income (loss) to net
cash flows from operating activities
Depreciation and amortization 341,812 432,261
Deferred income taxes -- --
Gain on sale of Core Business -- (5,497,104)
(Gain) loss on sale/disposal of property and equipment 1,770 --
Changes in noncash operating assets and liabilities
Trade receivables 553,817 520,428
Other receivables 135,828 (123,466)
Inventory 345,174 321,376
Prepaid expenses, deposits and current assets 371,143 (248,440)
Accounts payable 303,718 (61,533)
Accured liabilities (999,769) (323,141)
----------- -----------
Net cash flows from operating activities 873,584 817,054
CASH FLOWS FROM FINANCING ACTIVITIES
Decrease in bank overdrafts 25,696 (102,772)
Net borrowings on note payable to bank (575,723) (7,025,631)
Proceeds from long-term debt borrowings -- --
Repayment of long-term debt (328,400) (335,542)
Proceeds from notes payable to officers and directors 100,000 --
Net change, foreign currency translation 601 (41,933)
----------- -----------
Net cash flows from financing activities (777,826) (7,505,878)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of plant and equipment (80,202) (31,808)
Proceeds from sales of equipment -- --
Net proceeds from sale of core business -- 6,594,891
Decrease in other assets 13,245 --
----------- -----------
Net cash flows from investing activities (66,957) 6,563,083
NET CHANGE IN CASH 28,801 (125,741)
CASH, BEGINNING OF QUARTER 130,967 316,078
----------- -----------
CASH, END OF QUARTER $ 159,768 $ 190,337
----------- -----------
</TABLE>
F-3
<PAGE> 14
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 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, 1999.
The consolidated financial statements include the accounts of
Geographics and its wholly-owned subsidiaries: Geographics Marketing Canada
Inc., Geographics (Europe) Limited and Geographics Australia, Pty. Limited. All
intercompany balances and transactions have been eliminated.
F-4
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 159,769
<SECURITIES> 0
<RECEIVABLES> 3,230,177
<ALLOWANCES> 471,204
<INVENTORY> 3,187,510
<CURRENT-ASSETS> 6,588,466
<PP&E> 14,604,910
<DEPRECIATION> 4,923,259
<TOTAL-ASSETS> 16,624,374
<CURRENT-LIABILITIES> 12,534,117
<BONDS> 3,448,032
0
0
<COMMON> 15,769,018
<OTHER-SE> (15,126,793)
<TOTAL-LIABILITY-AND-EQUITY> 16,624,374
<SALES> 4,499,918
<TOTAL-REVENUES> 4,499,918
<CGS> 3,496,369
<TOTAL-COSTS> 1,118,105
<OTHER-EXPENSES> (172,392)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 237,745
<INCOME-PRETAX> (179,909)
<INCOME-TAX> 0
<INCOME-CONTINUING> (179,909)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (179,909)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
