<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
or
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file No. 0-12641
[LOGO]
PERSONAL COMPUTER PRODUCTS, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 33-0021693
(State or other jurisdiction of (IRS Employer ID No.)
incorporation or organization)
11031 VIA FRONTERA
SAN DIEGO, CALIFORNIA 92127
(Address of principal executive offices)
Issuer's Telephone Number, Including Area Code: (619) 485-8411
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 / /
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Class: Common Stock, $0.005 par Outstanding at May 12, 1997: 9,393,482 Shares
- -------------------------------- ---------------------------------------------
Transitional Small Business Disclosure Format (Check one):
Yes/ / No /X/
<PAGE>
PERSONAL COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
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INDEX
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PAGE
NO.
Part I. Financial Information:
Consolidated Condensed Balance Sheet, March 31, 1997 3
Consolidated Condensed Statement of Operations
Three Months ended March 31, 1997 and 1996 4
Consolidated Condensed Statement of Operations
Nine Months ended March 31, 1997 and 1996 5
Consolidated Condensed Statement of Cash Flows
Nine Months ended March 31, 1997 and 1996 6
Notes to Consolidated Condensed Financial Sta7
Management's Discussion and Analysis or Plan of Operations 9
Part II. Other Information 13
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2
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PERSONAL COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
MARCH 31, 1997
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ASSETS
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Current assets:
Cash $ 738,000
Accounts receivable, net 6,175,000
Inventories 2,887,000
Other current assets 622,000
------------
Total current assets 10,422,000
Property and equipment, net 1,632,000
Prepaid licenses, net 401,000
Capitalized software, net 324,000
Other 121,000
------------
$ 12,900,000
------------
------------
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LIABILITIES AND SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 2,496,000
Accrued expenses 1,419,000
Deferred revenues 304,000
Notes payable 1,430,000
------------
Total current liabilities 5,649,000
------------
Shareholders' equity:
5% convertible preferred stock
$1,000 PAR VALUE, 7,500 SHARES AUTHORIZED,
420.5 ISSUED AND OUTSTANDING 420,000
5% series B convertible preferred stock
$1,000 PAR VALUE, 117 SHARES AUTHORIZED,
89.4 ISSUED AND OUTSTANDING 894,000
Preferred stock
$1,000 PAR VALUE, 2,383 AUTHORIZED,
NO SHARES ISSUED AND OUTSTANDING
Common stock
$.005 PAR VALUE, 100,000,000 SHARES AUTHORIZED,
9,350,982 SHARES ISSUED AND OUTSTANDING 179,000
Paid-in capital 29698,000
Shareholder loans (112,000)
Accumulated deficit (23,828,000)
------------
Total shareholders' equity 7,251,000
------------
$ 12,900,000
------------
------------
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SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
3
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PERSONAL COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH
1997 1996
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<S> <C> <C>
Revenues:
Sales of products $ 6,373,000 $ 1,720,000
Engineering fees 1,531,000 931,000
License fees and royalties 163,000
------------ ------------
7,904,000 2,814,000
------------ ------------
Costs and expenses:
Cost of products sold 4,240,000 1,404,000
Selling, general and administrative 1,796,000 815,000
Cost of engineering fees and research and
development 999,000 531,000
Non-cash restructuring charge 2,058,000
------------ ------------
7,035,000 4,808,000
------------ ------------
Income (loss) from operations 869,000 (1,994,000)
------------ ------------
Other income (expense):
Interest, net (19,000) (23,000)
Other 1,000
------------ ------------
(18,000) (23,000)
------------ ------------
Net income (loss) before provision for income taxes 851,000 (2,017,000)
Provision for taxes 4,000
------------ ------------
Net income $ 847,000 $(2,017,000)
------------ ------------
------------ ------------
Primary income (loss) per common share $ 0.07 $ (0.55)
------------ ------------
------------ ------------
Average shares outstanding 10,713,000 3,803,000
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</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
4
<PAGE>
PERSONAL COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
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NINE MONTHS ENDED MARCH 31,
1997 1996
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<S> <C> <C>
Revenues:
Sales of products $ 18,093,000 $ 6,436,000
Engineering fees 4,245,000 1,444,000
License fees and royalties 285,000 164,000
------- -------
22,623,000 8,044,000
---------- ---------
Costs and expenses:
Cost of products sold 11,938,000 5,700,000
Selling, general and administrative 7,315,000 2,381,000
Amortization of capitalized software development costs 230,000
Cost of engineering fees and research and
development 2,452,000 1,468,000
Purchased research and development 780,000
Non-cash restructuring charge 2,058,000
---------- ---------
22,485,000 11,837,000
---------- ----------
Income (loss) from operations 138,000 (3,793,000)
------- ----------
Other income (expense):
Interest, net (35,000) (76,000)
Other 66,000
------ -------
31,000 (76,000)
------ -------
Net income (loss) before provision for income taxes 169,000 (3,869,000)
Provision for taxes 14,000 4,000
------ -----
Net income (loss) before extraordinary item 155,000 (3,873,000)
Extraordinary gain on conversion of accounts payable
into common stock 116,000
------- -------
Net income (loss) $ 155,000 $ (3,757,000)
------- ----------
------- ----------
Primary income (loss) per common share before
extraordinary item $ 0.01 $ (1.10)
------------ ------------
------------ ------------
Primary income (loss) per common share $ 0.01 $ (1.05)
------------ ------------
------------ ------------
Average shares outstanding 10,188,000 3,626,000
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</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS.
5
<PAGE>
PERSONAL COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
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NINE MONTHS ENDED MARCH 31,
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $155,000 $(3,757,000)
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO CASH USED
BY OPERATING ACTIVITIES:
Depreciation and amortization of equipment 353,000 88,000
Amortization of capitalized software development costs 230,000
Amortization of prepaid assets 389,000 56,000
Purchased in-process research and development 780,000
Non-cash restructuring charge 2,058,000
Extraordinary gain on conversion of accounts payable
into common stock (116,000)
Changes in assets and liabilities:
Accounts receivable (2,607,000) 181,000
Inventories (741,000) (14,000)
Other current assets (538,000) (122,000)
Accounts payable and accrued expenses (1,423,000) 310,000
Deferred revenues (84,000) 632,000
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NET CASH USED BY OPERATING ACTIVITIES (3,716,000) (454,000)
---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Prepaid licenses and royalties (345,000) (162,000)
Capitalized software development costs (301,000)
Proceeds for certificate of deposit 50,000
Purchase of net assets by NewGen Systems (86,000)
Capital expenditures (853,000) (162,000)
-------- --------
NET CASH USED BY INVESTING ACTIVITIES (1,535,000) (324,000)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions - NewGen Systems 1,002,000
Net proceeds from exercise of stock options 180,000
Net increase in line of credit - NewGen Systems 580,000
Net decrease in line-of-credit - Prima International (135,000) (119,000)
Repayment of notes payable (10,000) (177,000)
Principal payments under capital lease obligations (18,000) (11,000)
Net proceeds from sale of common stock 2,033,000
Proceeds from sale of common stock warrants 508,000
Proceeds from notes payable 135,000
--------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,599,000 2,369,000
--------- ---------
Net (decrease) increase in cash (3,652,000) 1,591,000
Cash at the beginning of the period 4,390,000 322,000
--------- -------
Cash at the end of the period $ 738,000 $ 1,913,000
------------ -----------
------------ -----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
6
<PAGE>
PERSONAL COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - PRINCIPLES OF CONSOLIDATION
The accompanying consolidated condensed financial statements of Personal
Computer Products, Inc. and Subsidiaries (the "Company" or "PCPI") have not been
audited. These financial statements reflect all adjustments (consisting only of
normal recurring adjustments) which are, in the opinion of management, necessary
for a fair presentation of the financial position, results of operations and
cash flows for the periods presented. These financial statements should be read
in conjunction with the Company's audited financial statements which are
included in the Company's annual report on Form 10-KSB for the year ended June
30, 1996 and the Company's Form 10-QSB for the quarters ended September 30, 1996
and December 31, 1996 filed with the Securities and Exchange Commission. Interim
operating results are not necessarily indicative of operating results for the
full year.
NOTE 2- INVENTORIES
Inventories at March 31, 1997 consisted of the following:
Raw materials and supplies $ 2,169,000
Work in process 27,000
Finished goods 691,000
-------
$2,887,000
----------
----------
NOTE 3- SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended March 31,
1997 1996
---- ----
<S> <C> <C>
NON-CASH FINANCING ACTIVITIES:
Conversion of preferred stock into common stock $ 2,166,000
----------
----------
Options exercised with loans $ 22,000
----------
----------
Common stock issued with notes - NewGen $ 82,000
----------
----------
Conversion of convertible notes into common stock - NewGen $ 1,000,000
----------
----------
Conversion of acquisition debt into common stock - NewGen $ 500,000
----------
----------
Conversion of accounts payable into notes payable $ 249,000
----------
----------
Conversion of accrued interest to principal on notes payable $ 21,000
----------
----------
Conversion of accrued interest into common stock $ 12,000
----------
----------
Conversion of notes payable into common stock $ 123,000
----------
----------
Conversion of accounts payable and accrued expenses into
common stock $ 272,000
----------
----------
Fixed assets acquired under capital leases $ 28,000
----------
----------
Consulting fees paid with common stock $ 5,000
----------
----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 111,000 $ 33,000
---------- ----------
---------- ----------
Cash paid during the period for income taxes $ 9,000 $ 4,000
---------- ----------
---------- ----------
</TABLE>
NOTE 4- PREFERRED DIVIDENDS
The Company's 5% convertible preferred stock ("Series A") (which ranks prior to
the Company's 5% Series B Preferred Stock and common stock) and the Company's 5%
Series B Preferred Stock ("Series B") (which ranks prior to the Company's common
stock), carry cumulative dividends, when and as declared, at an annual rate of
$50.00 and $500.00 per share, respectively. The Company extended an offer to
holders of the Company's Series A and Series B to convert the accumulated
dividends of approximately $1,789,000 and $116,000, respectively, into
unregistered shares of the Company's common stock at a conversion rate of $7.50.
During the six months ended March 31, 1997, under the terms of the offer,
preferred shareholders converted approximately $1,327,000 of the accumulated
dividend into unregistered shares of the
7
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Company's common stock. As of March 31, 1997, the accumulated dividend in
arrears was approximately $489,000 on the Series A and $89,000 on the Series B.
NOTE 5 - REVERSE STOCK SPLIT
Effective February 24, 1997, the Company effected a 1 for 5 reverse stock split.
Accordingly, all per share data for the three and nine month periods ended March
31, 1996 has been restated.
NOTE 6 - MERGER OF NEWGEN SYSTEMS ACQUISITION CORPORATION
Effective February 14, 1997, NewGen Systems Acquisition Corporation ("NewGen")
was merged into a newly created, wholly-owned subsidiary of the Company. Under
the terms of the Merger Agreement, 10,750,000 pre-reverse stock split
unregistered shares of PCPI's common stock were exchanged for all of the
outstanding shares of NewGen. On February 14, 1997, NewGen began operating as a
wholly-owned subsidiary of the Company.
As a result of the merger, which is being accounted for as a pooling of
interests, the consolidated results of operations for the nine months ended
March 31, 1997 includes pre-merger NewGen net sales of $7,190,000 and a net loss
after taxes of $1,550,000 from NewGen for the six month period ended December
31, 1996. The net loss included non-recurring charges of $1,157,000 which
included $780,000 of purchased research and development associated with the
original purchase of certain product lines from NewGen Systems Corporation by
NewGen in July 1996; a $349,000 writedown of certain prepaid licenses and
royalties; and $28,000 of other miscellaneous items.
8
<PAGE>
PERSONAL COMPUTER PRODUCTS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
RESULTS OF OPERATIONS
The Company has been in a transition period, from older technology and products,
to becoming a leading technology-based supplier of state-of-the-art printer
controllers to OEM customers. The implementation of the strategy of the
development of the new Adobe PostScript Interpreter (APSI) project, which
includes the Company's ColorImage-TM- Series controller implementation of Adobe-
Registered Trademark- PostScript-Registered Trademark- software for OEM
customers, and its LaserImage-TM- Series controllers including HP-based (PCL)
multi-function technology continues to show promising results.
The Company has been successful in attracting several major customers, with
substantial resources and marketing capabilities, that desire to utilize the
technologies of the Company, which the Company has developed over the past few
years. Several customers have executed contracts over the past few years to
adapt the Company's software products to controllers that will be integrated
with the hardware products of various OEM customers. These customers include,
but are not limited to, Integrated Device Technology, Inc., Matsushita Electric
Company, Ltd. (Panasonic), Minolta Company, Ltd., NEC Electronics, Inc., Canon
USA, Inc., Apple Computer, and Mita Digital Design.
The Company recognized non-recurring engineering fees ("NRE") to adapt the
Company's software products to controllers of its OEM customers of approximately
$1,531,000 for the three month period ended March 31, 1997 compared to $931,000
for the three month period ended March 31, 1996, an increase of 64%. For the
nine month period ended March 31, 1997, such revenues were $4,245,000 compared
to $1,444,000 for the nine month period ended March 31, 1996, an increase of
194%.
PCPI's strategy has required the Company to alter its focus away from some of
its traditional revenue sources and to make expenditures in support of these
efforts. As a result, the Company's business continues to be in a significant
transitional phase and there are important short-term operational and liquidity
challenges. Accordingly, year-to-year financial comparisons may be of limited
usefulness now and for the next several quarters due to these important changes
in the Company's business.
Effective February 14, 1997, the Company consummated its merger with NewGen
Systems Acquisition Corporation ("NewGen") which began its operations in July
1996. Accordingly, the consolidated results of operations for the three and nine
month periods ended March 31, 1996 do not include any comparable amounts.
Included in the consolidated results of operations for the nine months ended
March 31, 1997 are NewGen pre-merger net sales of $7,190,000 and a net loss
after taxes of $1,550,000 from NewGen for the six month period ended December
31, 1996. The net loss included non-recurring charges of $1,157,000 which
included $780,000 of purchased research and development associated with the
original purchase of certain product lines from NewGen Systems Corporation
(which was established in 1988) by NewGen in July 1996; a $349,000 writedown of
certain prepaid licenses and royalties; and $28,000 of other miscellaneous
items.
The Company had net income of $847,000 for the third quarter of fiscal 1997
compared to a net loss of $2,017,000 for the third quarter of fiscal 1996. Total
revenues were $7,904,000 for the third quarter of fiscal 1997 versus $2,814,000
for the third quarter of fiscal 1996, an increase of 181%.
For the nine month period ended March 31, 1997 net income was $155,000 compared
to a net loss of $3,757,000 for the nine month period ended March 31, 1996.
Total revenues were $22,623,000 for the nine month period ended March 31, 1997
versus $8,044,000 for the nine month period ended March 31, 1996, an increase of
181%. As noted above, included in the consolidated results of operations for the
nine months ended March 31, 1997 are NewGen pre-merger net sales of $7,190,000
and a net loss after taxes of $1,550,000 from NewGen for the six month period
ended December 31, 1996.
REVENUES
SALES OF PRODUCTS were $6,373,000 for the third quarter of fiscal 1997 versus
$1,720,000 for the third quarter of fiscal 1996. For the first nine month period
of fiscal 1997 sales of products were $18,093,000
9
<PAGE>
versus $6,436,000 for the first nine month period of fiscal 1996. The Company's
sales of products were derived from PCPI's wholly-owned subsidiaries Prima
International and NewGen.
Sales of product through Prima for the quarter ended March 31, 1997 and 1996
were $2,642,000 and $1,699,000, respectively. During the nine month period ended
March 31, 1997 such sales were $7,172,000 compared to $6,378,000 for the nine
month period ended March 31, 1996. The majority of Prima's sales during the
current fiscal year were from distribution of PCMCIA-based memory products. In
prior fiscal years, Prima's sales consisted of product distribution and
integration, including sales of its PDQ-TM- line of memory storage devices
featuring removable cartridge and magneto optical technologies. The increase in
product sales during the quarter ended March 31, 1997 was attributed to an
increase in Prima's distribution sales of PCMCIA-based memory products from
SanDisk and Integral and to the concerted effort to effect a product transition
by Prima that places less reliance on products and technologies from
SyQuest-TM-. Over the past year, the ability to obtain SyQuest products suitable
for distribution in Prima's market has diminished.
Sales of product through NewGen for the three and nine month periods ended March
31, 1997 were $3,731,000 and $10,921,000, respectively. As noted above, as
NewGen began its operations in July 1996 no prior year comparisons are
available. During the quarter ended December 31, 1996, NewGens sales were
$3,429,000. NewGen's sales of products are derived from high resolution imaging
and color digital proofing products, which have been designed by NewGen, to
customers in the printing and graphic arts industry throughout the world.
The Company has been transitioning from older technology and products, to new
technology-based printer controller products over the past few years. It is
anticipated that certain of these new technology-based products can be
distributed to Prima's and/or NewGen's customer base.
ENGINEERING FEES during fiscal 1997 and 1996 were derived from the Company
performing work on engineering projects that were funded by OEM customers under
non-recurring engineering contracts. NRE revenue for the quarters ended March
31, 1997 and 1996 was $1,531,000 and $931,000, respectively, which was
recognized during the course of development based on the percentage of
completion method. For the nine month period ended March 31, 1997 NRE revenue
was $4,245,000 versus $1,444,000 for the nine month period ended March 31, 1996.
LICENSE FEES AND ROYALTIES for the third quarter of fiscal 1996 were $163,000
while no such revenues were recognized during the third quarter of fiscal 1997.
For the nine month periods ended March 31, 1997 and 1996, such revenues were
$285,000 and $164,000, respectively. These revenues were derived from "older-
technology" based products. In the past, License fees and royalty revenue have
shown significant quarter-to-quarter fluctuations which may continue in future
quarters. PCPI has submitted several proposals to prospective customers in order
to develop Adobe PostScript-based controllers and other controllers based upon
its ImageBase-TM- technology. While the Company has entered into some contracts
with OEM customers for controller development, there can be no assurance that
additional contracts will be obtained for the development of such controllers,
or that the existing contracts will be completed, or that products will be
shipped by the customer which may result in the generation of future royalty and
license revenues or that these products, once generating royalties, will
continue to do so.
COST OF PRODUCTS SOLD
Cost of products sold for the quarters ended March 31, 1997 and 1996 were
$4,240,000 and $1,404,000, respectively, representing a gross margin of 33.5%
and 18.4%. Cost of products sold for the nine month periods ended March 31, 1997
and 1996 were $11,938,000 and $5,700,000, respectively, representing a gross
margin of 34.0% and 11.4%. The increase in the gross margin is attributed to the
addition of NewGen sales which are presently generating gross margins of
approximately 40% and a change in the product mix at Prima between the periods.
During the latter part of fiscal 1996 and through March 31, 1997, sales of
higher margin PCMCIA-based memory products and replacement lines for SyQuest
products have been increasing as a percentage of Prima's sales which has
improved the margins. During the quarter and nine month periods ended March 31,
1996, a majority of the products sales were older-technology based products and
Prima's SyQuest product lines, both of which have experienced continued decline
in the margins.
10
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses for the third quarter of fiscal
1997 were $1,796,000 versus $815,000 for the third quarter of fiscal 1996.
Selling, general and administrative expenses for first nine months of fiscal
1997 were $7,315,000 versus $2,318,000 for the first nine months of fiscal 1996.
The increase is primarily the result of the addition of NewGen. NewGens selling,
general and administrative expenses during the three and nine months periods
ended March 31, 1997 were $1,013,000 and $5,014,000, respectively. In addition,
the Company has increased its selling expenses in an attempt to stimulate
technology and product sales. These increases are partially offset by a
concerted effort to reduce Prima's administrative overhead.
COST OF ENGINEERING FEES AND RESEARCH AND DEVELOPMENT
Cost of engineering fees and research and development for the third quarter of
fiscal 1997 were $1,149,000 (which includes $150,000 of capitalized software
development costs at NewGen and PCPI) versus $531,000 for the third quarter of
fiscal 1996, an increase of 116.4%. Cost of engineering fees and research and
development for the nine month period ended March 31, 1997 were $2,753,000
(which includes $301,000 of capitalized software development costs at PCPI and
NewGen) versus $1,468,000 for the third quarter of fiscal 1996, an increase of
87.5%. These expenditures consist of engineering expenses associated with the
development of controller technologies and designs for PCPI technology
customers. During the three and nine month periods ended March 31, 1997, the
Company capitalized certain qualified costs pursuant to Financial Accounting
Standard No. 86 ("Accounting for Costs of Computer Software to be Sold, Leased,
or Otherwise Marketed").
The consolidated statement of operations for the nine month period ended March
31, 1997, includes approximately $780,000 of purchased research and development
costs associated with the July 1996 purchase of the rights to certain products
lines under development by NewGen.
Over the past several quarters, PCPI has noticed an increase in the demand for
qualified engineers in the local market. As a result of this increased demand,
the cost of hiring and maintaining engineers could continue to increase and PCPI
could experience difficulty in obtaining these resources in the future. Should
the local market not be able to supply the required engineering talent, the
Company may be required to hire individuals from outside the market or consider
establishing an engineering division in an area of the country that could more
readily support PCPI's engineering requirements.
OTHER INCOME AND LOSS
Net interest expense was $19,000 for the quarter ended March 31, 1997 versus net
interest expense of $23,000 for the quarter ended March 31, 1996. Net interest
expense was $35,000 for the nine month period ended March 31, 1997 versus net
interest expense of $76,000 for the nine month period ended March 31, 1996. The
reduction in net interest expense is attributed to the reductions in the
outstanding debt at PCPI and Prima and increased interest income associated with
the increased cash being invested, which was partially offset by the addition of
NewGen.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1997, the Company had working capital of $4,773,000 compared to
working capital of $3,976,000 as of June 30, 1996. The shift in focus toward
Adobe co-development projects presents continuing liquidity problems because, in
the short-term, these activities are net users of working capital. Although the
Company has improved its liquidity, adequate working capital is necessary to
continue the Company's operations, develop its technology licensing business and
to deliver the resulting products to contract customers in an efficient and
timely manner. The increasing sales at Prima and the addition of NewGen place
additional pressures on PCPI's working capital. In addition, as noted above,
while the Company has entered into several contracts with OEM customers for
controller development, there can be no assurance that additional contracts will
be obtained for the development of such controllers, or that the existing
contracts will be completed, or that products will be shipped by the customer
that will generate future royalty and license revenues or that once these
products are being shipped by the Company's customers that they will continue to
generate royalties.
11
<PAGE>
The Company's 5% convertible preferred stock (which ranks prior to the Company's
5% Series B Preferred Stock and common stock) and the Company's 5% Series B
Preferred Stock (which ranks prior to the Company's common stock), carry
cumulative dividends, when and as declared, at an annual rate of $50.00 and
$500.00 per share, respectively. The aggregate amount of such dividends in
arrears at March 31, 1997 were approximately $489,000 and $89,000, respectively.
As of March 31, 1997, the Company's wholly-owned subsidiary NewGen had $621,000
of available borrowings under its special purpose line of credit.
PCPI has no material commitments for capital expenditures.
12
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No reportable matter.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 31, 1996, a Proposal to effect a 1 for 5 reverse stock split
was submitted to the Company's shareholders for vote by written consent,. On
January 31, 1997, the shareholders of record on December 26, 1996 (the "record
date") holding 34,973,025 shares of Common Stock, voted 18,988,101 FOR, 160,750
AGAINST, 15,824,174 unvoted. The reverse split was effected February 24, 1997.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11.1 Computation of Earnings (loss) Per Common Share
(b) Reports on Form 8-K:
None
13
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
PERSONAL COMPUTER PRODUCTS, INC.
BY: HARRY J. SAAL
-------------------------------------------------
DATE: May 14, 1997 Harry J. Saal
CHAIRMAN OF THE BOARD
BY: EDWARD W. SAVARESE
-------------------------------------------------
DATE: May 14, 1997 Edward W. Savarese
VICE CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
BY: RALPH R. BARRY
-------------------------------------------------
DATE: May 14, 1997 Ralph R. Barry
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
14
<PAGE>
EXHIBIT 11 - COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
-----------------------
1997 1996
---- ----
<S> <C> <C>
PRIMARY INCOME (LOSS) PER COMMON SHARE:
Net income (loss) $ 847,000 $ (2,017,000)
Preferred dividend requirement (58,000) (58,000)
-------- --------
Net income (loss) applicable to common shareholders $ 789,000 $ (2,075,000)
------- -----------
------- -----------
Weighted average number of shares outstanding
Common stock 8,236,000 3,803,000
5% convertible preferred stock 25,000
5% Series B convertible preferred stock 170,000
Common stock purchase options and warrants 3,965,000
Assumed repurchase of common stock (1,683,000)
----------- ----------
Weighted average number of shares outstanding 10,713,000 3,803,000
---------- ---------
---------- ---------
Primary income (loss) per common share $ 0.07 $ (0.55)
----------- ------------
----------- ------------
<CAPTION>
NINE MONTHS ENDED MARCH 31,
---------------------------
1997 1996
---- ----
<S> <C> <C>
PRIMARY INCOME (LOSS) PER COMMON SHARE:
Net income (loss) before extraordinary item $ 858,000 $ (3,873,000)
Preferred dividend requirement (58,000) (117,000)
-------- ---------
Net income (loss) before extraordinary item applicable
to common shareholders $ 800,000 $ (3,990,000)
------- -------------
------- -------------
Net income (loss) $ 858,000 $ (3,757,000)
Preferred dividend requirement (58,000) (117,000)
-------- ---------
Net income (loss) applicable to common shareholders $ 800,000 $ (3,692,000)
------- -------------
------- -------------
Weighted average number of shares outstanding
Common stock 7,307,000 3,626,000
5% convertible preferred stock 25,000
5% Series B convertible preferred stock 170,000
Common stock purchase options and warrants 3,965,000
Assumed repurchase of common stock (1,279,000)
----------- ----------
Weighted average number of shares outstanding 10,188,000 3,626,000
---------- ---------
---------- ---------
Primary income (loss) per common share before extraordinary item $ 0.01 $ (1.10)
----------- -------------
----------- -------------
Primary income (loss) per common share $ 0.01 $ (1.05)
----------- -------------
----------- -------------
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 738
<SECURITIES> 0
<RECEIVABLES> 6,975
<ALLOWANCES> 800
<INVENTORY> 2,887
<CURRENT-ASSETS> 10,422
<PP&E> 2,738
<DEPRECIATION> 1,107
<TOTAL-ASSETS> 12,900
<CURRENT-LIABILITIES> 5,649
<BONDS> 0
0
1,314
<COMMON> 179
<OTHER-SE> 5,758
<TOTAL-LIABILITY-AND-EQUITY> 12,900
<SALES> 18,093
<TOTAL-REVENUES> 22,623
<CGS> 11,938
<TOTAL-COSTS> 14,390
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (173)
<INTEREST-EXPENSE> 133
<INCOME-PRETAX> 169
<INCOME-TAX> 14
<INCOME-CONTINUING> 155
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 155
<EPS-PRIMARY> 0.010
<EPS-DILUTED> 0.010
</TABLE>
