UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the quarterly period ended: JULY 31, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
COMMISSION FILE NUMBER: 0-20688
GLASGAL COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2914253
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20C COMMERCE WAY, TOTOWA, NJ 07512
(Address of principal executive (Zip Code)
offices)
(201) 890-4800
Registrant's telephone number, including area code
Check whether the Registrant (1) has filed all reports required to be filed by
Section 12 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the Registrant was required to file such
reports) and (2) has been subjected to such filing requirements for the past 90
days. Yes X No .
The number of shares of Registrant's Common Stock outstanding on July 31, 1997
was 24,563,686.
<PAGE>
GLASGAL COMMUNICATIONS, INC.
FORM 10-Q
THREE MONTHS ENDED JULY 31, 1997
INDEX
PART I: FINANCIAL INFORMATION
PAGE
Item 1: Consolidated Financial Statements
Balance Sheets at April 30, 1997 and
July 31, 1997 3
Statements of Operations for the three months ended
July 31, 1996 and 1997 4
Statements of Cash Flows for the three months ended
July 31, 1996 and 1997 5
Notes to Unaudited Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II: OTHER INFORMATION 8
Item 4: Submission of Matters to a Vote of Security Holders
Item 6: Exhibits and Reports of Form 8-K 9
<PAGE>
GLASGAL COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 30, 1997 JULY 31, 1997
-------------- -------------
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 1,135,000 $ 759,000
Accounts receivable, net 11,289,000 11,545,000
Inventory 2,134,000 2,473,000
Prepaid expenses and other current assets 1,446,000 3,320,000
Net assets from discontinued operations 4,816,000 4,421,000
--------- ---------
Total current assets 20,820,000 22,518,000
PROPERTY AND EQUIPMENT, net 3,634,000 3,559,000
GOODWILL 1,680,000 1,634,000
OTHER ASSETS 1,670,000 1,822,000
----------------- -----------------
Total assets $ 27,804,000 $ 29,533,000
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Short-term borrowings $ 11,675,000 $ 9,234,000
Current portion of long-term
obligations 850,000 850,000
Accounts payable 5,415,000 7,294,000
Accrued liabilities 5,331,000 5,182,000
Other current liabilities 506,000 206,000
----------------- -----------------
Total current liabilities 23,777,000 22,766,000
----------------- -----------------
DUE TO RELATED PARTIES 1,026,000 951,000
----------------- -----------------
LONG-TERM OBLIGATIONS 5,001,000 4,695,000
----------------- -----------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.001 par value -- --
Common stock, $.001 par value 24,000 24,000
Additional paid-in capital 10,341,000 13,426,000
Accumulated deficit (12,080,000) (12,055,000)
Cumulative translation adjustment (285,000) (274,000)
------------------ ------------------
Total shareholders' equity (deficit) (2,000,000) 1,121,000
------------------ -----------------
Total liabilities and shareholders' equity (deficit) $ 27,804,000 $ 29,533,000
================= =================
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
3
<PAGE>
GLASGAL COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED,
<TABLE>
<CAPTION>
JULY 31, 1996 JULY 31, 1997
------------- -------------
<S> <C> <C>
Net Sales $ 15,830,000 $ 21,986,000
Cost of sales 9,060,000 14,019,000
--------------- ---------------
Gross Profit 6,770,000 7,967,000
Selling, general and administrative expenses 4,549,000 7,488,000
-------------- ----------------
Operating income 2,221,000 479,000
Interest Expense 280,000 454,000
--------------- ----------------
Income before taxes 1,941,000 25,000
Provision for incometaxes 44,000 --
---------------- ---------------
Income (loss) from Continuing Operations 1,897,000 25,000
Loss from Discontinued Operations (503,000) --
---------------- ---------------
NET INCOME $ 1,394,000 $ 25,000
=============== ===============
NET INCOME PER SHARE:
$
INCOME FROM CONTINUING OPERATIONS $ 0.07 --
INCOME (LOSS) FROM DISCONTINUED OPERATIONS $ (0.02) $ --
------------- ---------------
NET INCOME $ 0.05 --
============== ===============
WEIGHTED AVERAGE SHARES OUTSTANDING 26,875,387 25,834,419
============== ===============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
4
<PAGE>
GLASGAL COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED,
<TABLE>
<CAPTION>
JULY 31, 1996 JULY 31, 1997
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 1,394,000 $ 25,000
Adjustments to reconcile net income to net
cash used in operating activities--
Depreciation and amortization 377,000 489,000
Extraordinary item -- --
Changes in operating assets and liabilities:
Increase in accounts receivable, net (3,892,000) (256,000)
Increase in inventory (14,000) (339,000)
Decrease (increase) in prepaid expenses and other assets 129,000 (2,114,000)
(Increase) decrease in assets held for sale
or disposition (2,660,000) 395,000
Increase in accounts payable, accrued
liabilities and other 1,211,000 1,430,000
------------- ------------
Net cash used in operating activities (3,455,000) (370,000)
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (657,000) (280,000)
-------------- ------------
Net cash used in investing activities (657,000) (280,000)
--------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease)from short-term borrowings, net 2,094,000 (2,441,000)
Net proceeds (Payments) of indebtedness (143,000) (381,000)
Net Proceeds from Common Stock/Warrant issuances 279,000 3,085,000
Net proceeds from related parties -- --
Distributions to Stockholders -- --
----------------- -----------
Net cash provided by financing activities 2,230,000 263,000
----------------- -----------
Net effect of foreign currency translation
on cash (51,000) 11,000
-------------------- -----------
Net decrease in cash (1,933,000) (376,000)
CASH AT BEGINNING OF PERIOD 2,219,000 1,135,000
------------------- -------------
CASH AT END OF PERIOD $ 286,000 $ 759,000
=================== =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 414,000 $ 380,000
================== =============
</TABLE>
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.
5
<PAGE>
GLASGAL COMMUNICATIONS, INC.
Notes to Unaudited Consolidated Financial Statements
(1) Business
Glasgal Communications, Inc. (the "Company" or "Glasgal"), and its
subsidiaries are in the business of providing software-enabled technical
configuration, integration and implementation services.
(2) Basis of Presentation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All intercompany accounts and transactions have
been eliminated.
The accompanying unaudited consolidated financial statements have been
prepared in conformity with generally accepted accounting principles consistent
with those applied in, and should be read in conjunction with, the audited
financial statements for the year ended April 30, 1997. The interim financial
information is unaudited, but reflects all normal recurring adjustments that
are, in the opinion of management, necessary for a fair statement of results for
the interim periods presented. The results for the three months ended July 31,
1997 are not necessarily indicative of results expected for the full fiscal
year.
(3) Earnings per share
Earnings per share is computed based upon the weighted average number
of common shares and common equivalent shares outstanding during each period.
Common equivalent shares have not been included, if antidilutive.
In March 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, "Earnings per Share" which
makes certain changes to the manner in which earnings per share is reported. The
Company is required to adopt this standard for the year ending April 30, 1998.
If the Company had adopted this standard for the quarter ended July 31,
1997, basic and diluted earnings per common share from continuing operations,
discontinued operations and net income would have been $.00, based on 23,709,000
weighted average shares outstanding.
(4) Equity
In July 1997 the Company, through private placement equity offerings,
issued 855,000 shares of common stock for approximately $3,120,000. Included in
other current assets is $1,517,000 of proceeds received in August 1997.
6
<PAGE>
GLASGAL COMMUNICATIONS, INC.
PART I - FINANCIAL INFORMATION
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - FOR THE THREE MONTHS ENDED JULY 31, 1997
Net sales for the three months ended July 31, 1997 were $21,986,000
compared to $15,830,000 for the three months ended July 31, 1996. This
represented an increase of approximately 39%. This increase is a result of the
Company's efforts since October 1996 to transfer the business from equipment and
service sales to service sales. As of April 30, 1997 the Company discontinued
its business of selling equipment and the focus of the Company's sales force
solely on services is being reflected
Gross profits for the three months ended July 31, 1997 were $7,967,000
compared to $6,770,000 in the three months ended July 31, 1996. Gross profits as
a percentage of net sales were 36.2% for the three months ended July 31, 1997
compared to 42.7% for the three months ended July 31, 1996. The increase is
attributable to increases of infrastructure to support the increase level of
sales of services. Included in this increase were additional sales and technical
personnel.
Selling, general and administrative expenses for the three months ended
July 31, 1997 were $7,488,000 compared to $4,549,000 for the three months ended
July 31, 1996.
Interest expense for the three months ended July 31, 1997 was $454,000
compared to $280,000 for the three months ended July 31, 1996. This increase is
attributable to an increase in average borrowings due to higher sales volume and
average receivables over the three month period, amortization of deferred
financing fees associated with the Company's March 1997 new credit facility and
an increase in long term debt.
The Company's net income for the three months ended July 31, 1997 was
approximately $25,000 compared to a net income of $1,394,000 for the three
months ended July 31, 1996.
FINANCIAL POSITION
The Company has a working capital deficiency as of July 31, 1997 of
$248,000 compared to a working capital deficiency of $2,957,000 as of April 30,
1997.
The Company has a credit facility with a bank that provides for maximum
borrowing of $17,000,000. The credit facility consists of a term loan that began
on March 19, 1997 at $2,000,000 with principal and interest due monthly. In
addition the credit facility provides for a $15,000,000 revolving credit
facility, with allowable borrowing under the facility based on a formula of
receivables and inventory. Outstanding borrowings under the term loan and
revolving loan as of July 31, 1997 were $1,908,000 and $9,234,000, respectively.
The Company strengthened its financial position during the three months
ended July 31, 1997, by raising approximately $3,120,000 through three private
placement offerings of common stock.
7
<PAGE>
GLASGAL COMMUNICATIONS, INC.
FORM 10-Q
PART II - OTHER INFORMATION
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
8
<PAGE>
GLASGAL COMMUNICATIONS, INC.
FORM 10-Q
PART II - OTHER INFORMATION - CONTINUED
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K PAGE #
(a) Exhibits
Exhibit 27
(b) Reports on Form 8-K
None
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GLASGAL COMMUNICATIONS, INC.
REGISTRANT
Dated: September 14, 1997 By: /s/ JAMES M. CACI
-------------------
James M. Caci
Chief Financial Officer
Authorized Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GLASGAL
COMMUNICATIONS INC.'S FINANCIAL STATEMENTS AS OF JULY 31, 1997 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JUL-31-1997
<CASH> 759,000
<SECURITIES> 0
<RECEIVABLES> 11,042,000
<ALLOWANCES> 503,000
<INVENTORY> 2,473,000
<CURRENT-ASSETS> 22,518,000
<PP&E> 3,323,000
<DEPRECIATION> 234,000
<TOTAL-ASSETS> 29,533,000
<CURRENT-LIABILITIES> 23,166,000
<BONDS> 0
<COMMON> 24,000
0
0
<OTHER-SE> 1,097,000
<TOTAL-LIABILITY-AND-EQUITY> 29,553,000
<SALES> 21,986,000
<TOTAL-REVENUES> 21,986,000
<CGS> 14,019,000
<TOTAL-COSTS> 14,019,000
<OTHER-EXPENSES> 7,488,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (454,000)
<INCOME-PRETAX> 25,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 25,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 25,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
