<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-13732
COMTREX SYSTEMS CORPORATION
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2353604
- - ------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 Executive Drive, Moorestown, NJ 08057-4224
- - ---------------------------------------- ----------------
(Address of principal executive offices) (Zip Code)
(609) 778-0090
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--------- --------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at January 31, 1998
----- -------------------------------
Common Stock, par value $.001 3,583,572
<PAGE>
COMTREX SYSTEMS CORPORATION
TABLE OF CONTENTS
FORM 10-QSB
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements, Unaudited
Unaudited Consolidated Balance Sheets
at December 31, 1997 and March 31, 1997
Unaudited Consolidated Statement of Operations for
the three and nine months ended December 31, 1997
and 1996
Unaudited Consolidated Statement of Cash Flow for
the nine months ended December 31, 1997 and 1996
Notes to Unaudited Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit Index
<PAGE>
Item 1.
Financial Statements
COMTREX SYSTEMS CORPORATION
CONSOLIDATED BALANCE SHEETS
(These statements are unaudited.)
<TABLE>
<CAPTION>
ASSETS
------
Current assets: December 31, 1997 March 31, 1997
----------------- --------------
<S> <C> <C>
Cash and cash equivalents $ 292,013 $ 142,886
Certificate of deposit 100,000 100,000
Accounts receivable, net of reserve of
$165,867 and $186,710 as of 12/31/1997
and 3/31/1997, respectively 1,373,403 1,040,374
Note receivable and accrued interest 15,990 16,640
Inventories 1,217,238 1,084,238
Due from officers 7,142 --
Prepaid expenses and other 106,472 73,752
----------- -----------
Total current assets 3,112,258 2,457,890
----------- -----------
Property and equipment:
Machinery, equipment, furniture
and leasehold improvements 1,391,014 1,052,817
Less - accum depreciation (1,108,219) (905,268)
----------- -----------
Net property and equipment 282,795 147,549
----------- -----------
Land and building:
Land and building 453,713 --
Less - accum depreciation (4,857) --
----------- -----------
Net land and building 448,856 --
----------- -----------
Other assets:
Purchased and capitalized software and design 1,031,442 1,031,442
Less - accum amortization and depreciation (737,411) (693,670)
----------- -----------
Total other assets 294,031 337,772
----------- -----------
Goodwill 434,498 --
----------- -----------
TOTAL ASSETS $ 4,572,438 $ 2,943,211
=========== ===========
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $ 797,941 $ 581,687
Accrued expenses 214,968 102,306
Note payable 48,750 --
Customer deposits 8,270 22,048
Current portion, debt and notes payable 53,307 --
Deferred revenue 135,400 --
----------- -----------
Total current liabilities 1,258,636 706,041
----------- -----------
Long term liabilities:
Long term debt, net of current 288,713 --
Convertible debentures payable 300,000 --
----------- -----------
Total long term liabilities 588,713 --
----------- -----------
Deferred income taxes 50,620 --
----------- -----------
Shareholders' equity:
Preferred stock, $1 par value, 1,000,000
shares authorized, none outstanding -- --
Common stock, $.001 par value, 5,000,000
shares authorized, 3,583,072 and 3,164,022
issued and outstanding as of
12/31/1997 and 3/31/1997, respectively 3,584 3,165
Additional paid-in capital 5,556,778 5,315,970
Accumulated deficit (2,885,893) (3,081,965)
----------- -----------
Total shareholders' equity 2,674,469 2,237,170
----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,572,438 $ 2,943,211
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 2 -
<PAGE>
COMTREX SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(These statements are unaudited.)
<TABLE>
<CAPTION>
Three months ended Nine months ended
December 31, December 31,
1997 1996 1997 1996
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Net sales $ 1,771,974 $ 1,154,677 $ 4,391,778 $ 4,108,929
Costs and expenses
Cost of sales 860,856 751,631 2,507,969 2,625,316
Administrative 262,528 138,903 571,113 495,172
Research and
development 59,562 43,959 169,273 106,724
Sales and marketing 190,633 160,694 449,239 597,034
Customer support 224,676 121,769 360,409 368,780
Depreciation and
amortization 46,611 35,168 107,667 92,681
----------- ----------- ----------- -----------
1,644,866 1,252,124 4,165,670 4,285,707
----------- ----------- ----------- -----------
Income (loss)
from operations 127,108 (97,447) 226,108 (176,778)
Interest income, net (25,024) (193) (27,636) 7,240
----------- ----------- ----------- -----------
Income (loss)
before income taxes
and extraordinary credit 102,084 (97,640) 198,472 (169,538)
Provision for income taxes 16,047 -- 54,602 --
----------- ----------- ----------- -----------
Income (loss) before
extraordinary credit 86,037 (97,640) 143,870 (169,538)
Extraordinary credit,
reduction of income taxes
arising from carryforward
of prior years' operating
losses 13,647 -- 52,202 --
----------- ----------- ----------- -----------
Net income (loss) $ 99,684 $ (97,640) $ 196,072 $ (169,538)
=========== =========== =========== ===========
Basic earnings per share:
Income (loss) before
extraordinary credit $ .02 $ (.03) $ .04 $ (.05)
Extraordinary credit $ .01 $ .00 $ .02 $ .00
----------- ----------- ----------- -----------
Net income (loss) $ .03 $ (.03) $ .06 $ (.05)
=========== =========== =========== ===========
Diluted earnings per share:
Income (loss) before
extraordinary credit $ .02 $ (.03) $ .04 $ (.05)
Extraordinary credit $ .01 $ .00 $ .02 $ .00
----------- ----------- ----------- -----------
Net income (loss) $ .03 $ (.03) $ .06 $ (.05)
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
- 3 -
<PAGE>
COMTREX SYSTEMS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(These statements are unaudited.)
Nine months ended
December 31,
1997 1996
--------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 196,072 $(169,538)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities -
Depreciation and amortization 107,667 92,681
Deferred income tax 2,400 --
Provisions for losses on accounts
receivable 17,413 38,448
Provisions for losses on inventories 8,500 67,432
(Increase) decrease in -
Certificate of deposit -- --
Accounts receivable (189,844) 86,576
Note receivable 650 35,296
Inventories 146,711 (321,327)
Prepaid expenses and other 345 (5,256)
Increase (decrease) in -
Accounts payable (51,085) 241,956
Accrued expenses (4,492) 23,750
Customer deposits (13,778) (2,956)
Deferred revenue 37,499 --
Notes payable, current 6,184 --
--------- ---------
Net cash provided by (used in)
operating activities 264,242 87,062
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale (purchases) of property and equipment:
Purchases of property and equipment (15,449) (93,336)
Purchases of software and capitalized
software and design -- (106,222)
Proceeds from disposals of property,
plant and equipment 7,202 --
Capitalized acquisition costs (82,605) --
--------- ---------
Net cash provided by (used in)
investing activities (90,852) (199,558)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings under line of credit 300,000 100,000
Repayments under line of credit (300,000) (100,000)
Payments on notes and other loans (16,250) --
Payments on long-term debt (15,640) --
Proceeds from issuing equity securities 7,627 --
--------- ---------
Net cash provided by (used in)
financing activities (24,263) --
--------- ---------
Net increase (decrease) in cash 149,127 (112,496)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 142,886 218,166
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 292,013 $ 105,670
========= =========
The accompanying notes are an integral part of these financial statements.
- 4 -
<PAGE>
COMTREX SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Interim financial reporting:
The accompanying financial statements should be read in conjunction
with the financial statements and notes included in the Company's latest
Annual Report on Form 10-KSB.
These interim financial statements reflect all adjustments, of a
normal and recurring nature, which are, in the opinion of management,
necessary for a fair statement of the results for the interim period(s)
presented. The results for the period(s) herein presented are not necessarily
indicative of the results for the entire fiscal year.
2. Inventories:
December 31, March 31,
1997 1997
----------- ----------
Raw materials $ 523,564 $ 1,037,167
Work-in-process 331,376 128,141
Finished goods 500,575 108,127
Reserve for excess and obsolete inventory (138,277) (189,197)
----------- -----------
$ 1,217,238 $ 1,084,238
=========== ===========
3. Income taxes:
The consolidated statements of operations reflect a provision for
income taxes at the rate of 40 percent, which represents the federal statutory
rate of 34 percent plus an effective state tax rate of 6 percent. The
provisions for income taxes are offset by tax benefits arising from an
extraordinary credit from the utilization of prior years' operating losses.
The Company has net operating loss carryforwards of approximately
$3,260,000 for financial reporting and for federal income tax purposes, which
begin to expire in 2004. The Company has tax credit carryforwards for federal
income tax purposes of approximately $148,000. Net operating loss
carryforwards are also available for state income tax purposes.
4. Earnings per share disclosure:
<TABLE>
<CAPTION>
Three months ended
December 31, 1997
------------------
Income Shares Per Share
------ ------ ---------
<S> <C> <C> <C>
Income before extraordinary item $ 86,037
Basic EPS:
Income available to common shareholders $ 86,037 3,583,072 $ 0.02
Effect of dilutive securities, options 63,907
Diluted EPS:
Income available to common shareholders $ 86,037 3,646,979 $ 0.02
</TABLE>
- 5 -
<PAGE>
COMTREX SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4. Earnings per share disclosure: (continued)
<TABLE>
<CAPTION>
Nine months ended
December 31, 1997
-----------------
Income Shares Per Share
------ ------ ---------
<S> <C> <C> <C>
Income before extraordinary item $ 143,870
Basic EPS:
Income available to common shareholders $ 143,870 3,305,650 $ 0.04
Effect of dilutive securities, options 37,614
Diluted EPS:
Income available to common shareholders $ 143,870 3,343,264 $ 0.04
Three months ended
December 31, 1996
-----------------
Income Shares Per Share
------ ------ ---------
Income (loss) before extraordinary item $ (97,640)
Basic EPS:
Income (loss)
available to common shareholders $ (97,640) 3,164,022 $ ( 0.03)
Effect of dilutive securities, options 5,001
Diluted EPS:
Income (loss)
available to common shareholders $ (97,640) 3,169,023 $ ( 0.03)
Nine months ended
December 31, 1996
-----------------
Income Shares Per Share
------ ------ ---------
Income (loss) before extraordinary item $(169,538)
Basic EPS:
Income (loss)
available to common shareholders $(169,538) 3,163,744 $ ( 0.05)
Effect of dilutive securities, options 6,700
Diluted EPS:
Income (loss)
available to common shareholders $(169,538) 3,170,444 $ ( 0.05)
</TABLE>
5. Stock purchase transaction
On October 2, 1997, the Company acquired from Norman Roberts
("Norman"), Shirley Roberts ("Shirley"), and Steven Roberts ("Steven"
together, with Norman and Shirley, the "Sellers") all the issued and
outstanding capital stock (the "Stock") of Data Systems Terminals Limited, a
corporation formed and existing under the laws of England ("DSTL"). DSTL is a
distributor of the Company's products in the United Kingdom, which business
the Company intends to continue.
The following consideration was paid by the Company for such
acquisition of the Stock:
- 6 -
<PAGE>
COMTREX SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. Stock purchase transaction: (continued)
(a) 400,000 restricted shares of the Common Stock of the Company, par
value $.001 per share, were delivered by the Company to Steven. These shares
of the Company's Common Stock are not transferable by Steven on or before
October 2, 1999.
(b) A Subordinated Convertible Debenture, in the original principal
amount of $300,000 (the "Debenture"), was delivered by the Company to Norman
and Shirley. The Debenture accrues interest at the rate of eight percent (8%)
per annum, which is payable monthly. No principal is payable pursuant to the
terms of the Debenture for the first three (3) years following its delivery.
The Debenture is convertible into shares of the Company's Common Stock (in
blocks of 20,000 shares), at any time on or before October 2, 2000, at the
rate of $1.00 per share. The Company may prepay all amounts outstanding under
the Debenture at any time on or before October 2, 2000 if (i) the shares of
the Company's Common Stock have closed at $1.50, or higher, for each trading
day for a thirty (30) day period, and (ii) the Company has provided the
holders of the Debenture with at least sixty (60) days prior written notice of
the prepayment. Any principal outstanding of the Debenture on October 2, 2000
shall be paid by the Company in twelve (12) equal quarterly installments. The
Company anticipates that internal funds will be utilized to make all interest
and principal payments due under the Debenture.
(c) A promissory note, in the original principal amount of $65,000
(the "Note"), was delivered to Norman and Shirley. The Note bears interest at
the rate of six percent (6%) per annum. The outstanding principal balance of
the Note, and all interest accrued thereon, is repayable in twelve (12) equal
monthly installments, commencing on November 1, 1997. The Company anticipates
that internal funds will be utilized to make such payments due under the Note.
The business combination will be accounted for using the purchase
method.
The cost of the acquired enterprise was $681,204, which represents
400,000 shares of Comtrex Common Stock with an assigned value of $233,600, the
$300,000 Debenture, the $65,000 Note and legal and accounting fees associated
with the transaction of $82,604.
Acquired goodwill will be amortized over twenty (20) years, using the
straight line method.
6. Pro forma financial data (unaudited):
As outlined in Footnote 5, the Company acquired all the issued and
outstanding capital stock of DSTL, effective October 2, 1997. The following
pro forma financial data, unaudited, reflects revenue, income from continuing
operations, net income and income per share for the nine month periods ended
December 31, 1997 and December 31, 1996, as though the transaction occurred as
of April 1, 1996.
<TABLE>
<CAPTION>
Nine months ended
December 31,
1997 1996
----------------------------
<S> <C> <C>
Revenue $ 5,606,014 $ 5,924,699
Income (loss) from continuing operations 274,101 (68,205)
Net income (loss) 191,942 (139,149)
Income (loss) per share 0.06 (0.04)
</TABLE>
- 7 -
<PAGE>
COMTREX SYSTEMS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7. Capital structure disclosure:
In connection with the acquisition of DSTL, outlined in Footnote 5, a
Subordinated Convertible Debenture, in the original principal amount of
$300,000 (the "Debenture"), was delivered by the Company to Norman and
Shirley. The Debenture accrues interest at the rate of eight percent (8%) per
annum, which is payable monthly. No principal is payable pursuant to the terms
of the Debenture for the first three (3) years following its delivery. The
Debenture is convertible into shares of the Company's Common Stock (in blocks
of 20,000 shares), at any time on or before October 2, 2000, at the rate of
$1.00 per share. The Company may prepay all amounts outstanding under the
Debenture at any time on or before October 2, 2000 if (i) the shares of the
Company's Common Stock have closed at $1.50, or higher, for each trading day
for a thirty (30) day period, and (ii) the Company has provided the holders of
the Debenture with at least sixty (60) days prior written notice of the
prepayment. Any principal outstanding of the Debenture on October 2, 2000
shall be paid by the Company in twelve (12) equal quarterly installments. The
Company anticipates that internal funds will be utilized to make all interest
and principal payments due under the Debenture.
- 8 -
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
As of December 31, 1997, the Company had total current assets of
$3,112,258, including cash, cash equivalents and certificates of deposit of
$392,013, as compared to $2,457,890 of total current assets and $242,886 of
cash, cash equivalents and certificates of deposit as of March 31, 1997. The
Company had current liabilities of $1,258,636, resulting in a current ratio of
2.5 as of December 31, 1997, compared to $706,041 and 3.5, respectively, as of
March 31, 1997.
The Company reported net income of $99,684 and $196,072, respectively
for the three month and nine month periods ended December 31, 1997. The
Company has net operating loss carryforwards of approximately $3,260,000 for
federal income tax purposes, which do not begin to expire until 2004, and tax
credit carryforwards of approximately $148,000.
As outlined in Note 5 to the Consolidated Financial Statements, the
acquisition of DSTL involved no cash outlay other than professional fees. As a
consequence, differences as of December 31, 1997 and March 31, 1997, between
accounts on the Consolidated Balance Sheets do not involve cash outlay to the
extent they are the result of merely consolidating the Balance Sheet accounts
of the parent and the subsidiary as of December 31, 1997.
The Company's Consolidated Statements of Cash Flow have been prepared
to properly reflect changes in the parent company's accounts between April 1,
1997 and December 31, 1997, and changes in the U.K. subsidiary's accounts
between October 1, 1997 and December 31, 1997. The following analysis,
therefore, relates to the changes in the Company's Balance Sheet accounts on a
cash flow basis.
Operating activities generated $264,242 of cash during the first nine
months of fiscal year 1998, as compared with cash generation of $87,062 for
the corresponding prior year period. Cash and cash equivalents increased by
$149,127 during the nine month period of fiscal year 1998.
On a cash flow basis, accounts receivable increased during the nine
month period ended December 31, 1997 by $172,431, net of reserves. The
receivables increase is largely a result of increased sales during the third
quarter as compared to the second quarter of the fiscal year. The Company
extends terms to its U.S. dealer network of up to sixty days, and terms of
thirty to sixty days to its direct customers through the Atlanta district
office and its U.K. subsidiary.
On a cash flow basis, inventories decreased during the nine month
period ended December 31, 1997 by $155,211, net of reserves. This decrease is
due primarily to the planned, gradual phase-out of the Company's Sprint and
SuperSprint product lines, which are being replaced by the open architecture
PCS/5000 product series. The PCS/5000 is configured principally with completed
circuit boards and assemblies which are generally available, often
off-the-shelf delivery to the Company. The Company is able to maintain a lower
level of raw material, component inventory than is required with a proprietary
product series, such as the Sprint and SuperSprint, while maintaining the same
delivery schedule, at comparable sales levels. Consolidated inventories
declined even though the Atlanta district office and the U.K. subsidiary
maintain levels of finished good products necessary to fulfill immediate
installation and service requirements.
During the current nine month period, depreciation and amortization
contributed $107,667 to cash provided by operating activities, which was
partially offset by a reduction in accounts payable, on a cash flow basis, of
$51,085. Cash provided by operating activities was positively impacted by the
increase in deferred revenue of $37,499. This increase is the result of
advanced maintenance billings generated through the U.K. subsidiary for
hardware service and technical support to its endusers.
- 9 -
<PAGE>
Liquidity and Capital Resources (continued)
Investing activities consumed $90,852 of cash during the nine month
period ended December 31, 1997, of which $82,605 was attributed to
professional fees associated with the acquisition of the U.K. subsidiary.
Financing activities consumed $24,263 of cash during the nine month
period. The Company borrowed, and repaid, $300,000 under its line of credit.
Payments in the amounts of $16,250 and $15,640 were made against the
Promissory Note issued in conjunction with the acquisition of the U.K.
subsidiary and the mortgage note against the U.K. land and building,
respectively.
In October of 1997, the Company and Fleet Bank N.A. extended an
existing line of credit agreement through July of 1998. The agreement provides
for borrowings of up to $750,000, with a limitation depending on eligible
receivables, as defined in the agreement. Borrowings bear interest at the
bank's prime rate and are collateralized by substantially all assets of the
Company.
The Company borrowed a total of $300,000 under this credit facility
at various times during the course of the nine month period, and repaid each
such borrowing. The Company expects to utilize its credit facility from time
to time for short term cash requirements. As of December 31, 1997, the Company
had no material commitments for capital expenditures.
The Company believes that its cash balance, together with its line of
credit, provides the Company with adequate liquidity to finance its projected
operations.
Results of Operation
Net sales during the third quarter of fiscal year 1998 increased by
53%, to $1,771,974, as compared with corresponding sales of $1,154,677 during
the third quarter of fiscal year 1997. Sales for the nine month period ended
December 31, 1997 were $4,391,778, a 7% increase from sales of $4,108,929 for
the corresponding period during fiscal year 1997. The significant quarterly
increase in sales is a result of the acquisition of the Company's U.K.
distributor, effective as of October 1, 1997, and the resulting consolidation
of sales.
The Company reported net income of $196,072 for the current nine
month period, or $.06 per share, as compared with a net loss of $169,538, or
$.05 per share, for the comparable prior year period. During the quarter ended
December 31, 1997, the Company reported net income of $99,684, or $.03 per
share, as compared with a net loss of $97,640, also $.03 per share, for the
third quarter of the prior fiscal year.
Selling, general and administrative, and customer support expenses
increased from $421,366, or 36% of sales, during the third quarter of fiscal
year 1997, to $677,837, or 38% of sales during the most recent quarter. For
the nine month period, such expenses declined from $1,460,986, or 36% of
sales, to $1,380,761, or 31% of sales for fiscal years 1997 and 1998,
respectively. Substantially all of the operating activities of Comtrex U.K.,
like the Company's district office in Atlanta, relate to the direct sale,
installation and service of products to end users. The selling and customer
support expenses required for such direct sales activities will represent a
higher percentage of sales than is associated with sales through a dealer or
distribution channel.
Cost of sales during the quarter and nine month period of fiscal year
1998 were 49% and 57% of net sales, respectively, as compared to 65% and 64%
of net sales, respectively, for the quarter and nine month period of the prior
fiscal year. The dramatic reduction in cost of sales and increase in gross
margin is a result of the consolidation of sales of Comtrex U.K. While selling
and support expenses represent a higher percentage of direct sales than sales
through a distribution network, the gross margin on such product sales is
significantly greater. In addition to product sales, approximately 30% of the
net sales of Comtrex U.K. represent maintenance, installation and
implementation services. Such service related revenue is at a greater gross
margin than product sales.
- 10 -
<PAGE>
Results of Operation (continued)
The Company's subsidiary in the U.K. will continue to operate
essentially autonomously, maintaining its current accounting system, clerical
and administrative staff. The accounting function within the subsidiary has a
reporting responsibility within the U.S., corporate, financial department. The
sales, support and service departments of Comtrex U.K., however, will continue
to operate within the reporting structure of the subsidiary. During the next
several months, the subsidiary will also begin the sales and service support
for the Company's distribution network in Europe. It is not anticipated that
this activity, which will be integrated within the business plan and operating
activities of the subsidiary, will require significant additional personnel.
The Managing Director of the U.K. subsidiary, Mr. Steven Roberts, was elected
to the Company's Board of Directors, at a regular meeting, in November of
1997. Mr. Roberts had served as Managing Director of the acquired company
since 1991, and will continue in that capacity.
As of February 3, 1998, the Company's backlog was approximately
$683,000, which includes approximately $377,700 in backlog of Comtrex U.K. for
delivery to end users, and excludes any orders for delivery to the subsidiary
from the parent. The Company's backlog as of January 31, 1997 was
approximately $229,000, which included approximately $45,000 on order from the
U.K., when the current subsidiary was operating as an independent distributor.
The Company expects that substantially all of its current backlog will be
shipped within the next 90 days.
Forward Looking Statements
This Form 10-QSB discusses primarily historical information.
Statements included in this Form 10-QSB, to the extent they are forward
looking, are based on current management expectations that involve a number of
uncertainties and risks. Potential risks and uncertainties include, without
limitation, the impact of economic conditions generally; the competitive
nature of the intelligent point-of-sale terminal industry; the Company's
ability to enhance its existing products and develop and introduce new
products which keep pace with technological developments in the marketplace;
and market demand.
- 11 -
<PAGE>
Item 6.
Exhibits and Reports on Form 8-K
List of Exhibits
Exhibit No. Description of Instrument
----------- -------------------------
2 *(2) Stock Purchase Agreement
27 *(1) Financial Data Schedule
*(1) Filed herewith.
*(2) Incorporated by reference to exhibits to the
Company's Form 8-K filed with the Securities and
Exchange Commission on October 13, 1997.
Reports on Form 8-K
Form 8-K filed on October 13, 1997,
(date of earliest event reported): October 2, 1997
Form 8-K/A filed on December 10, 1997, (date of amendment)
- 12 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COMTREX SYSTEMS CORPORATION
(Registrant)
Date: February 13, 1998 By: /s/
--------------------- --------------------------------------
Lisa J. Mudrick
Chief Financial &
Chief Accounting Officer
Date: February 13, 1998 By: /s/
--------------------- --------------------------------------
Jeffrey C. Rice
Chief Executive Officer
- 13 -
<PAGE>
Exhibit Index
Exhibit
-------
27 Financial Data Schedule
- 14 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<CASH> 292,013
<SECURITIES> 100,000
<RECEIVABLES> 1,539,270
<ALLOWANCES> 165,867
<INVENTORY> 1,217,238
<CURRENT-ASSETS> 3,112,258
<PP&E> 1,391,014
<DEPRECIATION> 1,108,219
<TOTAL-ASSETS> 4,572,438
<CURRENT-LIABILITIES> 1,258,636
<BONDS> 0
0
0
<COMMON> 3,584
<OTHER-SE> 5,556,778
<TOTAL-LIABILITY-AND-EQUITY> 4,572,438
<SALES> 4,391,778
<TOTAL-REVENUES> 4,391,778
<CGS> 2,507,969
<TOTAL-COSTS> 4,165,670
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 17,413
<INTEREST-EXPENSE> 27,636
<INCOME-PRETAX> 198,472
<INCOME-TAX> 54,602
<INCOME-CONTINUING> 143,870
<DISCONTINUED> 0
<EXTRAORDINARY> 52,202
<CHANGES> 0
<NET-INCOME> 196,072
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
