[DESCRIPTION] LIVE FY96 Q1 10 Q/A
FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1995 Commission File Number 0-12283
ZONIC CORPORATION
(Exact name of Registrant as specified in its charter)
Ohio 31-0791199
(State of Incorporation) (I.R.S. Employer Identification Number)
50 West TechneCenter Drive, Milford, Ohio 45150
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (513) 248-1911
Not Applicable
(Former name, address or fiscal year if changed since last report)
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 total number of shares outstanding of the issuer's common shares, without
par value, as of the date of this report, follow:
3,094,136
<PAGE>
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Part I - Financial Information
Item 1- Financial Statements
<TABLE>
<CAPTION>
Statement of Operations
For the Three Period ending June 30,
(unaudited)
1995 1994
----------- ------------
<S> <C> <C>
Product and service revenues $ 1,252,462 $ 1,041,545
Cost of products and services sold 672,178 467,839
Selling and administrative expenses 438,593 566,980
Research and development expenses and software
construction and product enhancement amortization 228,059 224,844
------------ ------------
1,338,830 1,259,663
Operating loss (86,368) (218,118)
Interest expense (154,413) (162,868)
Foreign currency losses (31,365) (25,140)
Gain on sale of asset 1,417,027 -
----------- -----------
Income (loss) before taxes and extraordinary item 1,144,881 (406,126)
Provision for income taxes - -
----------- -----------
Income (loss) before extraordinary item 1,144,881 (406,126)
Extraordinary item:
Gain from debt restructuring, net of taxes 397,275 -
---------- ---------
Net income (loss) $ 1,542,156 $ (406,126)
========== =========
Income (loss) before extraordinary item $ 0.37 $ (0.13)
Extraordinary item -
Gain from debt restructuring, net of taxes 0.13 -
---------- ---------
Income (loss) per share $ 0.50 $ (0.13)
Weighted average shares outstanding 3,094,136 3,094,136
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
- 3 -
Item 1- Financial Statements
(continued)
<TABLE>
<CAPTION> Balance Sheets
As of June 30, 1995 and March 31, 1995
(unaudited)
June-30 March-31
ASSETS 1995 1995
--------- ---------
<S> <C> <C>
Current Assets
Cash $ 46,282 $ 27,222
Receivables
Trade 241,255 494,229
Related parties 322,057 412,302
Unbilled contracts 559,448 73,881
--------- ---------
Total receivables 1,122,760 980,412
Inventories
Finished products 313,311 359,844
Work in process 281,724 118,719
Raw material 242,900 316,894
--------- ---------
Total inventories 837,935 795,457
Prepaid expenses 29,959 4,004
--------- ---------
Total Current Assets 2,036,936 1,807,095
Property and Equipment-at Cost
Furniture and office equipment 484,053 484,053
Machinery and plant equipment 1,273,631 1,273,631
Software construction and product
enhancement 7,096,179 8,974,113
--------- ----------
8,853,863 10,731,797
Less accumulated accumulated depreciation
and amortization 7,032,209 8,151,171
1,821,654 2,580,626
--------- ---------
$ 3,858,590 $ 4,387,721
========= =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
- 4 -
Item 1- Financial Statements
(continued)
<CAPTION> Balance Sheets
As of June 30, 1995 and March 31, 1995
(unaudited)
June-30 March-31
LIABILITIES 1995 1995
--------- --------
<S> <C> <C>
Current Liabilities
Short term notes payable and current $ 623,468 $ 622,874
maturities of long-term debt
Accounts payable - trade 908,707 778,994
Accounts payable - related parties 918,626 806,466
Deferred income 186,824 172,969
Accrued liabilities
Salaries and wages 155,535 158,853
Property and payroll taxes 99,163 100,900
Interest, commissions and other 304,854 623,044
--------- ---------
Total Accrued Liabilities 559,552 882,797
--------- ---------
Total Current Liabilities 3,197,177 3,264,100
Long-Term obligations, less current
maturities 4,029,635 6,018,761
Deferred Rent 338,902 354,140
SHAREHOLDERS' EQUITY (DEFICIT
Common shares 62,674 62,674
Additional paid-in capital 5,726,881 5,726,881
--------- ---------
5,789,555 5,789,555
Accumulated deficit (9,496,679) (11,038,835)
--------- ----------
Total Shareholders' Deficit (3,707,124) (5,249,280)
--------- ---------
$ 3,858,590 $ 4,387,721
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
- 5 -
Item 1- Financial Statements
(continued)
<TABLE>
<CAPTION>
Statement of Shareholders' Equity (Deficit)
For the three months ended June 30, 1995
(unaudited)
Additional
Common Paid-In Accumulated
Shares Capital Deficit Total
-------- -------------- ------------ ----------
<S> <C> <C> <C> <C>
Balance,March 31, 1995 $ 62,674 $ 5,726,881 $ (11,038,835) $(5,249,280)
Net income for period 1,542,156 1,542,156
-------- ---------- ----------- -----------
Balance, June 30, 1995 $ 62,674 $ 5,726,881 $ (9,496,679) $(3,707,124)
======== ========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
- 6 -
Item 1- Financial Statements
(continued)
<TABLE>
<CAPTION>
Statement of Cash Flows
For the three months ended June 30,
(unaudited)
1995 1994
--------- ---------
<S> <C> <C>
Cash provided by operations
Net income (loss) for period $ 1,542,156 $ (406,126)
Adjustments to reconcile net income to cash from
operations:
Gain from sale of rights to software (1,417,027) -
Gain from debt restructuring (397,275) -
Depreciation and amortization 16,216 39,978
Amortization of software construction
and product enhancements 228,059 224,844
Amortization of stock options 15,785 15,785
Provision for bad debt - 3,000
Provision for obsolete inventory 9,000 15,000
Amortization of deferred income (83,914) (72,668)
Foreign currency loss and other 31,350 25,142
Increase (decrease) in cash due to changes in:
Accounts receivable (141,996) (27,829)
Inventories (51,478) 72,762
Prepaid expenses (25,955) (11,333)
Accounts payable 210,508 (43,312)
Accrued liabilities 74,043 178,151
Accrued rent (15,238) (9,945)
Deferred income 97,769 56,379
-------- --------
Net cash provided by operations 92,003 59,828
Cash used in investment activities- Increase in
software construction and product enhancements (68,626) (55,785)
Cash used in financing activities- payments on
long-term obligations (4,317) (19,885)
-------- --------
Increase (decrease) in cash 19,060 (15,842)
Cash - beginning of period 27,222 22,686
-------- --------
Cash - end of period $ 46,282 $ 6,844
======== ========
Interest paid during period, net of capitalization $ 75,242 $80,805
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
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Item 1- Financial Statements
(continued)
Notes to Financial Statements
1. Presentation of Information
In the opinion of management, the accompanying unaudited financial statements
reflect all adjustments necessary to present fairly Zonic's financial
position at June 30, 1995 and the results of operations and cash flows for
the three month periods ended June 30, 1995 and 1994. The results of
operations for the interim periods are not necessarily indicative of results
to be expected for a full year.
The financial statements are summarized and should be read in conjunction
with the annual report to shareholders and Form 10-K for the year ended March
31, 1995. Certain reclassifications have been made to amounts shown for the
prior year to conform to current year classifications.
2. Affiliated Company
The Company along with A&D Company Ltd. has formed Zonic A&D Company with
each owning 50% to market its products. Revenue from sales to Zonic A&D
Company by the Company for the three month periods ended June 30, 1995 and
1994 were $530,791 and $782,127 respectively. Zonic A&D Company experienced
a profit of $9,000 and $35,000 respectively for the three months ended June
30, 1995 and 1994.
The Company accounts for its portion of the earnings of Zonic A&D Company
using the equity method. The Company's recognition of its 50% interest in
the net profits and losses of this affiliate is limited to the investment in
this company, including the amounts the Company has committed to fund the
operations. The current and prior year period profits are not recorded as
these amounts offset unrecorded losses. Zonic A&D Company incurred
substantial losses prior to 1994 which were recorded in those years to the
extent the Company was at risk to fund these losses.
3. Sale of Asset
In June, 1995, the Company sold its 40% ownership interest in the WCA Product
to A&D Company, Ltd.(A&D). The terms of the sale included total consideration
of $2,397,275 consisting of $2,000,000 which was used to repay debt owed to
A&D Company, Ltd. on loans made by A&D to the Company under a Credit Agreement
dated December 7, 1992 and interest forgiveness on those loans amounting to
$397,275. In addition, the Control Agreement which was a part of the Credit
Agreement was terminated, the borrowing limit under the Credit Agreement was
reduced from $6,000,000 to $4,000,000, and A&D appointed the Company as
exclusive distributor of the WCA Product in the Western Hemisphere.
<PAGE>
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Item 2: Management's Discussion and Analysis
Results of Operations
Product and Services Revenue increased by $210,917, or 20% for the three
months ended June 30, 1995 when compared to the same period of the prior year
due to increased sales of the Company's WCA and WS7000 products. Increased
sales of these products were partially offset by decreases in sales of the
Company's Excite products.
Order backlog amounted to $1,168,000 at June 30, 1995 compared with
$1,200,000 at June 30, 1994.
Costs of products and services sold were 54% of products and services revenues
for the three months ended June 30, 1995, versus 45% for the same periods of
the prior year. This increase in costs is due primarily to a low gross
profit margin on one large system sale. Gross profits on other sales in the
current period are consistent with levels in the prior year period.
Selling and administrative expenses decreased to 35% of total revenue for the
three months ended June 30, 1995 from 54% in the prior year period as the
result of higher revenue during the current period, lower commissions to sales
representatives due to one large system sale being sold on a net basis, and
reductions in facilities costs associated with the Company's relocation to
more cost effective facilities in October, 1994.
Research and development expenses and software construction amortization was
approximately the same during the three months ended June 30, 1995 compared
to the prior year period as product development activity remained at a level
consistent with that of the prior year. See "Software Construction and
Product Development" under Liquidity and Capital Resources.
Interest expense of $154,473 for the three months ended June 30, 1995 is
reported net of $5,000 of capitalized interest incurred on borrowings used to
fund product development expenditures. This compares to interest expense of
$162,927 for the three months ended June 30, 1994 net of capitalized interest
of $8,000. Actual interest costs incurred for the three months ended June 30,
1995 was $159,473 compared to $170,927 in the prior year period. This
decrease was a result of lower borrowing but was partially offset by an
increase in interest rates.
Foreign Currency losses amounted to $31,365 in the three month period ended
June 30, 1995 as compared to $25,140 in the prior year period. These losses
are due to the decline in the dollar against the Japanese yen.
Gain on Sale of Asset- In June 1995, the Company sold its 40% ownership
interest in the WCA Product to A&D Company, Ltd which owned the remaining 60%.
The gain on sale of this asset is net of the unamortized portion of
capitalized software construction and produuct enhancement for the WCA
product. Proceeds from the sale amounting to $2,000,000 were used to repay
loans to the Company made by A&D under a Credit Agreement dated December 7,
1992. (See Liquidity and Capital Resources and Note 3 of Notes to Financial
Statements).
Income taxes - Taxable income generated in the period ending June 30, 1995
have been offset by net loss carryforwards available to the Company. Further,
there was no provision for income taxes due to the changes in deferred tax
assets and liabilities being offset by like changes in the valuation
allowance. At March 31, 1995, the Company had $5,970,000 in loss
carryforwards which may be used to offset future income taxes. Also, the
Company had tax credits of $674,000 as of March 31, 1995 which are currently
available to offset future income taxes. No benefit from the Company's
deferred tax assets has been provided since it is not likely that such assets
would be realized at this time.
<PAGE>
- 9 -
Management's Discussion and Analysis (continued)
Extraordinary item- gain from debt restructuring, net of taxes consists of
accrued interest on loans to the Company made by A&D under the Credit
Agreement between the Company and A&D dated December 7, 1992. Forgiveness of
this interest, amounting to $397,275 at June 30, 1995, by A&D was a term
included in the Sale of the Company's 40% interest in its WCA Product to A&D.
Liquidity & Capital Resources
Software Construction and Product Development
The Company's total unamortized software construction and product enhancement
costs at June 30, 1995 and March 31, 1995 were $1,701,724 and $2,444,130,
respectively. This decrease included $582,973 related to the sale of the WCA
Product. Cash outlays for software construction and product enhancement
projects were $68,626 for the three months ended June 30, 1995 compared to
$55,785 for the prior year period. These costs will be amortized over the
estimated useful life of each product capitalized.
Working Capital and Cash Flow
The Company's working capital increased from a negative $1,457,005 at March
31, 1995 to a negative $1,160,241 at June 30, 1995 and its current ratio
increased from .55 to .64. This improvement was due to the forgiveness of
accrued interest totaling $397,275 associated with the sale of the WCA Product
during the period.
The Company's cash flows from operations amounted to $92,004 for the three
months ended June 30, 1995. Excluded from the Statement of Cash Flows are
proceeds of $2,000,000 from the sale of the WCA Product used to offset the
same amount of long-term debt payable to A&D Company, Ltd. In conjuction
with this transaction, the remaining debt payable to A&D Company, Ltd.
totaling $480,000 is due June 30, 1997. (See also Note 3 under Notes to
Financial Statements) Also, the Company used net cash of $68,626 for
software construction and product enhancements during this period.
In conjunction with the sale of the Company's 40% interest in the WCA product,
the credit limit under the Credit Agreement between the Company and A&D
Company, Ltd. was reduced from $6,000,000 to $4,000,000 and the Control
Agreement which was a part of the Credit Agreement was terminated. Borrowing
by the Company under the credit agreement consists of $3,500,000 in bank
loans guaranteed by A&D and $480,000 in loans by A&D.
The Company continues to experience serious cash flow problems and has been
unable to improve on the aging of its accounts payable and certain accrued
liabilities in the current period. The Company has no available sources for
additional borrowings at this time. The Company is actively seeking
additional working capital through additional debt or equity financing from
private sources to reduce the delinquency of its accounts payable and accrued
liabilities, make payments on its debt obligations, and to sustain its
operations. There can be no assurance that the Company will be able to
obtain additional financing on favorable terms, if at all, from any source.
Part II-Other Information
Item 6: Exhibits and Reports on Form 8-K
Exhibit 11- Computation of earnings per common share - see Statements of
Operations.
<PAGE>
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Exhibit 27- Financial Data Schedule
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed by the undersigned
thereunto duly authorized.
ZONIC CORPORATION
By: GERALD J. ZOBRIST
Gerald J. Zobrist
President and Chief Executive Officer
By: JAMES B. WEBB
James B. Webb
Senior Vice President and Treasurer
Dated: August 10, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> JUN-30-1995
<CASH> 46,282
<SECURITIES> 0
<RECEIVABLES> 1,181,652
<ALLOWANCES> 58,892
<INVENTORY> 837,935
<CURRENT-ASSETS> 2,036,936
<PP&E> 8,853,863
<DEPRECIATION> 7,032,209
<TOTAL-ASSETS> 3,858,590
<CURRENT-LIABILITIES> 3,197,177
<BONDS> 0
<COMMON> 62,674
0
0
<OTHER-SE> (3,769,798)
<TOTAL-LIABILITY-AND-EQUITY> 3,858,590
<SALES> 1,252,462
<TOTAL-REVENUES> 1,252,462
<CGS> 672,178
<TOTAL-COSTS> 1,338,830
<OTHER-EXPENSES> (1,385,662)<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 154,413
<INCOME-PRETAX> 1,144,881
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,144,881
<DISCONTINUED> 0
<EXTRAORDINARY> 397,275
<CHANGES> 0
<NET-INCOME> 1,542,156
<EPS-PRIMARY> .50
<EPS-DILUTED> .50
<FN>
<F1>INCLUDES GAIN FROM SALE OF ASSET.
</FN>
</TABLE>
