<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
/X/ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended October 31, 1995 or
/ / Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
COMMISSION FILE NO. 0-14836
GENERAL PARAMETRICS CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 94-2835068
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
1250 NINTH STREET, BERKELEY, CA 94710
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (510) 524-3950
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
none none
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market for the Registrant's voting stock held by non-affiliates of
the Registrant based upon the closing sale price of the Common Stock on January
2, 1996 as reported on the NASDAQ National Market System, was approximately
$12,973,000 Shares of Common Stock held by each officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded in
that such persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination for other
purposes.
As of January 2, 1996, Registrant had 5,268,204 shares of Common Stock
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the Proxy Statement for Registrant's Annual Meeting of Stockholders to
be held January 31, 1996 are incorporated by reference to Part III of this Form
10-K report.
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PART I
ITEM 1. BUSINESS
General Parametrics Corporation (herein "General Parametrics", "GPC" or the
"Company") was founded in 1981 and re-incorporated in Delaware in June 1986. GPC
designs, manufactures and markets color thermal and dye sublimation printers and
related consumables, including ribbons, transparencies and paper. The Company's
products are designed for people in business, government and education who use
color output as a normal part of their activities.
On December 4, 1995, the Company announced that it had entered into an agreement
to acquire all of the stock of EMCO Recycling Corp. ("EMCO"). The agreement
proposes that EMCO will become a wholly-owned subsidiary of GPC, and the EMCO
shareholders will collectively receive a total of 3,500,000 shares of common
stock of GPC, plus warrants to purchase 600,000 shares of GPC at $4.00 per
share, plus warrants to purchase 400,000 shares of GPC at $6.00 per share, plus
$1,150,000 in cash. The agreement is conditioned upon completion of the
Company's "due diligence" review of EMCO, including an environmental assessment
of EMCO's properties and the purchase by the Company of certain assets of Ellis
Metals, Inc. The Company hopes to close the transaction as soon after the Annual
Meeting as is practicable.
In October 1995, the Company elected to discontinue a portion of its electronic
presentation products, including VideoShow, VideoShow PRESENTER and related
products and recorded Restructuring Costs of $1,437,000. Also in October 1995,
the Company recorded a $716,000 special charge in Cost of Sales for the
repositioning of its color printer products. The charges are comprised of:
writedowns of discontinued ($530,000) and slow-moving ($395,000) inventory,
write-offs of Capitalized Software Development Costs for discontinued products
($524,000) and color printers ($321,000), write-off of fixed assets ($203,000)
associated with the manufacturing of discontinued products and a reserve of
$180,000 for lease costs related to excess facilities to be vacated and
sub-leased. All of the Restructuring Costs and Other Special Charges except for
the reserve for excess leased facilities (which the Company estimates will be
used over the next two years) are non cash charges. Also refer to "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations".
INDUSTRY OVERVIEW
The management and communication of information is integral to all
organizations. Organizations frequently use a variety of charts, graphs,
diagrams, photographs, drawings and other images to present important
information in management meetings, board meetings, sales presentations,
training seminars, etc. In recent years, computer hardware and software graphics
products have been introduced to address the presentation graphics market.
Personal computer based systems simplify and automate the creation and
modification of charts, graphs and drawings, and allow for the inclusion of
photographic images. During the past few years, an increasing market has
developed for presentation graphics software packages which produce presentation
images for personal computers. The user can then output such images to a color
printer for color overhead transparencies, color hardcopy printout or other
similar output applications. Alternatively, the user can incorporate these
images in an electronic video presentation using a personal or notebook computer
or an electronic video presentation system.
PRODUCTS
The Company offers two color thermal printers and one dye sublimation color
printer solution for creating professional quality business graphics and
presentations. The Spectra*Star 240 and Spectra*Star 280 both produce high
quality prints and overhead transparencies at low cost. Both feature 600 by 300
dots-per-inch (dpi) resolution and printing speeds up to two pages per minute.
They feature plain paper printing using a proprietary ribbon technology. They
are network compatible and offer switching among serial, parallel and AppleTalk
ports.
The Spectra*Star 280 contains a 33 MHz Intel RISC processor and provides
capabilities such as 52 professional fonts, Level 2 PostScript and HPGL
capability, 10 megabytes of RAM memory (with the ability to expand to 32
megabytes) and color matching. The Spectra*Star 240 contains a 25 MHz Intel RISC
processor, comes with 6 megabytes of RAM memory (expandable to 24 megabytes) and
provides capabilities such as 52 professional fonts, Level 2 PostScript and HPGL
capabilities and color matching. The Spectra*Star DSx is the Company's full
bleed, 600 dpi dye sublimation color printer. The Spectra*Star DSx provides
photo-realistic quality output and offers continuous tone four color prints at
600 by 300 dpi with edge-to-edge printing on both letter size and international
page formats. The DSx contains a 33 MHz Intel RISC processor and provides
capabilities such as 52 professional fonts, Level 2 Postscript capability, 16
megabytes of RAM memory (with the ability to expand to 96 megabytes) and color
matching.
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The Spectra*Star 240, 280 and DSx color printers come with two Pockettes an
innovative modular expansion system. Pockettes accepts plug-in cartridges that
expand the printer's capabilities. The Ethernet Local Area Network Cartridge
supports the eight most popular Ethernet protocols and allows the user to
operate the color printer as a Local Area Network server. The Company also
offers a 120 megabyte Hard Disk Cartridge which supports print spooling and
extended font storage.
The Company supplies color printer consumables such as ribbons, paper,
transparencies, sleeves, and fabric transfer materials for its Spectra*Star
color printers. Some of these consumables are also fully compatible with
Tektronix Phaser II color printers.
TECHNOLOGY
The Company manufactures its Spectra*Star color printers using either a thermal
wax transfer or dye sublimation printing engine, both types of engines are
acquired from a third party supplier. The Spectra*Star series of printers is
designed to cover a wide price/performance range and supports the most popular
software standard, Level 2 Postscript. Current models are equipped with serial
and parallel ports as well as an Apple Talk interface. The Company designed and
manufactures its own controller which is based on a high performance RISC
processor. The Company's controller architecture also allows it to support two
PockettesTM which can allow optional Ethernet and Hard Disk cartridges. These
features provide for expanded capabilities which help distinguish Spectra*Star
from other printers in this class.
GPC licenses a PostScript interpreter which was developed by a third party and
for which the Company pays a royalty for each unit shipped.
MARKETING AND SALES
The Company uses a variety of marketing techniques to increase the visibility of
its products, including print advertising, participation in trade shows, direct
mail, catalogues, press releases and other public relations programs. The
Company also conducts seminars in cooperation with dealers to help prospective
end users learn about its products. The Company advertises in trade
publications, catalogues, business magazines and vertical market magazines such
as those in training and government. These advertisements are oriented toward
managers and executives in the private and public sectors who use color business
graphics and make presentations as a normal part of their responsibilities,
including trainers and management consultants and staffs of audio/visual
departments in large companies.
The Company sells its products primarily through independent distributors and
dealers, both in the United States and internationally. Currently, the Company's
domestic dealer network consists of audio visual dealers, presentation products
dealers, computer dealers, LCD panel dealers and office equipment dealers. The
Company's domestic distribution channel consisted of approximately 100 dealers
as of October 31, 1995. The Company supports its dealer network with in-house
and regional sales personnel.
The Company currently sells its products internationally through approximately
40 distributors and dealers to customers in Western Europe, Canada, Australia
and the Far East. Total export sales (principally to Europe) were $2,911,000,
$2,547,000 and $2,885,000, in fiscal 1995, 1994 and 1993, respectively. Because
the majority of the Company's export sales were primarily billed and payable in
United States dollars, they were not directly subject to fluctuating currency
exchange rates. The Company currently has a European field office in England.
In fiscal 1995, 1994, and 1993, the top 10 dealers (domestic and international)
accounted for approximately 33%, 32% and 41%, respectively, of the Company's
sales. During fiscal 1995 and fiscal 1994, there were no single customers with
sales greater than 10%. During fiscal 1993, approximately 11% of the Company's
net sales were to a single customer, Lanier Worldwide, Inc. (Lanier). Lanier
purchased Spectra*Star and several of the company's discontinued products for
re-sale to its customers either under the General Parametrics label or under its
own private label. The Company currently engages in no material business with
Lanier.
The Company manufactures its products on the basis of expected near-term demand.
The Company typically ships products shortly after receipt of orders and orders
may vary widely on a daily and monthly basis. Accordingly, the Company does not
believe that backlog is a meaningful indicator of future business.
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COMPETITION
The Company faces competition in its color thermal, dye sublimation and color
printer supplies businesses. In recent years, the market for color printers has
grown substantially. The low-end of the market is dominated by low cost ink-jet
technology printers sold primarily to business users and consumers. The market
for high-end color printers has historically been business presentation users,
government presentation users, graphic arts, and engineering and scientific
applications. Many of these customers have purchased color printers which
provide high quality color images, faster printed speed and low cost per printed
page. The Company has positioned itself to compete in the color marketplace with
its Spectra*Star series of printers. The thermal series competes with several
other brands of color thermal printers, some of which are Tektronix, Seiko and
Fargo. In recent years, products based on three additional high-end color
printing technologies have been introduced: solid-ink (also called "phase
change" or "crayon"), dye sublimation and color laser. Some of the competitive
brands for the Company's Spectra*Star DSx dye sublimation printer are Tektronix,
Kodak, 3M, Seiko and Super Mac. The Company currently does not offer an ink-jet,
solid ink or color laser printer. The Company is exploring additional printer
technologies to add to its existing product offerings.
RESEARCH AND DEVELOPMENT
During fiscal 1995, 1994 and 1993 research and development expenses were
$1,044,000, $1,371,000 and $1,478,000, respectively. In fiscal 1995, 1994 and
1993 the Company capitalized $424,000, $784,000 and $787,000, respectively, of
development costs under the provisions of Statement of Financial Accounting
Standards No. 86 (see Note 2 of Notes to Consolidated Financial Statements). A
substantial portion of research and development for the Company's products had
been performed by the Company.
As part of its restructuring as described in "BUSINESS" above, the Company has
discontinued certain products that were research and development intensive.
Historically from its inception, the Company had maintained a continuous program
of enhancing existing products and introducing new products that have extended
its various product lines. Recently, the Company has significantly reduced its
research and development expenditures to attempt to align such costs with
overall expected revenues. With the restructuring as described above, the
Company intends to identify and potentially source completed color printer
products on an OEM basis, thereby reducing the need for significant research and
development. Further, the Company intends to supplement necessary research and
development with the use of outside consultants and additional staff as
required. The Company believes that its future success will depend on its
ability to continue to enhance its existing products and to identify and
successfully develop new products which satisfactorily meet specific market
needs in a cost-effective manner. There can be no assurance, however, that the
Company's product development efforts or product identification efforts will
result in commercially successful products or that the Company's products will
not be rendered obsolete by changing technology. Additionally, the introduction
of certain enhanced or new products could adversely affect sales of existing
products. Lack of commercial acceptance of enhanced or new products introduced
by the Company could adversely affect the Company's results of operations.
MANUFACTURING
The Company has a manufacturing plant in Berkeley, California at which it
performs the assembly, testing and inspection of its products. As part of its
restructuring described in "BUSINESS" above, the Company recorded a charge of
$180,000 to reflect excess capacity at its Berkeley facility, which it intends
to vacate and sublease.
The Company principally uses standard components from multiple vendors. However,
in many of its products, certain components are purchased from sole-source
suppliers. The Company also purchases certain printer consumables from
sole-sources. There is no guarantee that the supply of sole-source components
and consumables from these suppliers, along with any new, improved and lower
cost components will continue to be made available to the Company. The Company
attempts to reduce the risk of interruption in supply of components by
maintaining adequate inventory. Loss or interruption of the supply of components
from sole-source suppliers would require additional management and engineering
efforts to develop and qualify alternate sources, and any such loss could result
in delays in product shipments, which could adversely affect the Company's
results of operations.
PATENTS AND PROPRIETARY RIGHTS
The Company relies primarily upon trade secret laws and non-disclosure
agreements to establish its proprietary interest in its products and to maintain
the confidentiality of its technology. In addition the Company has registered
trademarks on many of its product names and holds several copyrights. While the
Company believes that such protection is of value, the Company continues to rely
principally upon technological expertise and marketing skills to identify,
develop and market competitive products, rather than upon patent protection or
trade secret laws.
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Due to the extensive patent coverage in the electronics industry, it is possible
that certain elements of the Company's products may infringe existing or future
patents. The Company is not aware of any such infringement with respect to any
of the products that it currently manufactures and believes that, based on
industry practice, any necessary licenses under patents could be obtained on
conditions not materially adverse to the Company. However, should it be
necessary to license a patent in the future, no assurance can be given that
licenses would be offered by patent holders in such situations or that terms of
such licenses would be acceptable to the Company. Should it be necessary in the
future to obtain a license on a key patent and such license is not then
available, the Company could incur substantial liabilities and may need to
suspend the manufacture of those products utilizing the patented product or
process, which in turn could have a material adverse effect on the Company's
results of operations.
EMPLOYEES
As of October 31, 1995, the Company had 41 full-time employees, of whom 11 were
in administration, 4 in research and development, 13 in manufacturing and 13 in
sales, marketing and product support. As noted in "Research and Development"
above, the Company had significantly reduced its research and development
expenditures to attempt to align such costs with expected revenues. With the
restructuring as described above, the Company intends to identify and
potentially source completed color printer products on an OEM basis, thereby
reducing the need for significant research and development. Further, the Company
intends to supplement necessary research and development with the use of outside
consultants as needed. The Company's future success will depend, in part, on its
ability to continue to attract and retain highly qualified and motivated
technical, marketing and management personnel, who are in great demand. The
Company has no key life insurance policies or employment contracts with any of
such personnel. The Company has never had a work stoppage and no employees are
represented by a labor union.
ITEM 2. PROPERTIES
During the third quarter of fiscal 1994, the Company exercised its option to
terminate its lease for its plant and office space that was due to expire July
1999. Simultaneous with the termination, the Company signed a three year lease
covering approximately 28,000 square feet in the same facility, that expires
November 4, 1997. The Company has an option to extend the lease for an
additional thirty-six months. As part of its restructuring described in
"BUSINESS" above, the Company recorded a charge of $180,000 to reflect excess
capacity at the Berkeley facility, which it intends to vacate and sublease.
Management believes that the current facility has been developed to be highly
suitable to the Company's mix of manufacturing, office and storage requirements,
however that it is excessive in light of its restructuring described above.
Minimum lease payments for each of the next two fiscal years (through
termination of the lease) are $184,000 per year. There are no future minimum
lease payments for any periods thereafter. Net rental expenses under operating
leases were $193,000, $294,000 and $300,000 for fiscal 1995, 1994 and 1993,
respectively. In addition, the Company leases space for its Printer Development
Center in Incline Village, Nevada, however, subsequent to year end, the Company
exercised its option to terminate the lease.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company and their ages as of December 12, 1995 are
as follows:
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<TABLE>
<CAPTION>
Name Age Present Position Officer Since
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Gerard M. Jacobs 40 Co-President, Co-Chief Executive
Officer and Co-Chairman of the Board 1995
T. Benjamin Jennings 31 Co-President, Co-Chief Executive
Officer and Co-Chairman of the Board 1995
F. Xavier Hermosillo 45 Director and Corporate Secretary 1995
William A. Spazante 36 Vice President, Finance and 1990
Chief Financial Officer
Daniel B. Burgess 31 Executive Vice President and Division
President 1995
Michael R. Callahan 37 Vice President, Domestic Sales 1995
James C. Cogan 56 Senior Vice President, Operations 1984
</TABLE>
The Company's Chief Executive Officer, Chief Financial Officer and Secretary are
appointed by the Board of Directors and serve at the discretion of the Board.
All other officers are appointed by the Chief Executive Officer and serve at his
discretion.
Gerard M. Jacobs has served as the Company's Co-President, Co-Chief Executive
Officer and Co-Chairman of the Board of Directors since August 30, 1995. Mr.
Jacobs has been the owner and President of Environmental Waste Funding
Corporation, a company specializing in landfill development and finance, since
June 1991. From 1988 to June 1991, Mr. Jacobs was a sole proprietor engaged in
landfill development and finance. Since September 1994, Mr. Jacobs has served as
a director of Crown Casino Corporation, a publicly traded gaming company. Mr.
Jacobs is also a director and a 33% stockholder of Caspar & Associates, Inc., an
engineering firm specializing in fiber optic communications. From 1983 to 1988,
Mr. Jacobs developed resource recovery, landfill and hydroelectric projects for
the investment banking firm of Russell, Rea & Zappala, Inc., Pittsburgh,
Pennsylvania. Mr. Jacobs is a graduate of Harvard University, where he was
elected to Phi Beta Kappa. Mr. Jacobs holds a law degree from the University of
Chicago Law School, which he attended as a Weymouth Kirkland Law Scholar. Mr.
Jacobs is a member of the Pennsylvania Bar.
T. Benjamin Jennings has served as the Company's Co-President, Co- Chief
Executive Officer and Co-Chairman of the Board of Directors since August 30,
1995. Mr. Jennings has been a Director of First Southwest Company, a private
investment banking firm based in Dallas, Texas from April 1993 to November,
1995. From March 1990 until April 1993, Mr. Jennings was a Vice President of
Kidder Peabody & Co. Inc. In his past capacity, Mr. Jennings concentrated on
mergers, acquisitions, private debt and equity placements, and various types of
public security transactions. Mr. Jennings is currently Co-chairman of the
Inner-City Games, Chicago, a national charity benefiting inner-city children.
Mr. Jennings is an honors graduate of Rice University.
Xavier Hermosillo has served as a member of the Board of Directors and as
Corporate Secretary since August 30, 1995. Mr. Hermosillo has been a principal
of Xavier Hermosillo & Associates, a crisis public relations, marketing and
government affairs firm since 1984. Since October 1993, Mr. Hermosillo has also
served as a radio talk show host for Capital Cities/ABC West Coast Flagship
Radio station KABC-AM, and began hosting a nightly talk show on 50,000 watt
710-TALK-KMPC in Los Angeles when it was acquired by Capitol Cities/ABC in May
1994. Mr. Hermosillo has also been a television news commentator on KCOP-13 REAL
NEWS (United Paramount Network) since May 1993. He is the first and only Latino
radio talk show host and television commentator in Los Angeles. He is the
founding chairman of N.E.W.S. For America, a coalition of 250 Latino
organizations in Los Angeles. Mr. Hermosillo is a member of the Executive
Committee of the California Republican Party in his role as the state Chairman
of the Republican National Hispanic Assembly. He has been a delegate to the
1984, 1988 and 1992 Republican National Conventions, served as Co-chairman of
the 1992 Latino Bush Campaign and as Director of International Media at the 1992
GOP National Convention in Houston.
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William A. Spazante has served as the Company's Chief Financial Officer since
November 1992 and has also served as Vice President, Finance since March 1995.
From April 1989 through November 1992, Mr. Spazante served in a variety of
financial capacities, most recently Treasurer and Chief Accounting Officer. From
July 1986 to April 1989, Mr. Spazante served as a manager and accountant with
Ernst & Young in San Francisco. From July 1981 through July 1986, Mr. Spazante
served as an accountant with Arthur Andersen & Co.
Daniel B. Burgess has served as the Company's Executive Vice President of Sales
and Marketing since September, 1995 and was named Division President in November
1995. From January 1995 until September 1995, Mr. Burgess served as Global
Account Executive at AT&T GIS, the information technology and computer division
of AT&T. From June 1992 to December 1994, Mr. Burgess served as a Marketing
Manager for AT&T in the Worldwide Alliance Marketing organization responsible
for building the System Integration channel and indirect channel strategies.
Prior to 1992, he served in various sales management capacities for NCR
Corporation in both the direct and indirect sales channels. Mr. Burgess has a
B.S. in Mechanical Engineering from Rice University and a Masters in Business
Administration from Southern Methodist University.
Michael R. Callahan has served as the Company's Vice President, Domestic Sales
since November 1995 and as Vice President, Sales and Marketing, Multimedia prior
thereto. Mr. Callahan has served in several sales and marketing capacities with
the Company. From 1983 to 1986, Mr. Callahan was Director, Sales and Marketing
for Classic Technology Corporation in San Jose, CA, a manufacturer of multiuser
computer systems.
James C. Cogan has served as the Company's Vice President, Operations since
December, 1984, and as Senior Vice President, Operations since March 1987. From
August 1983 to December 1984, Mr. Cogan served as the Vice President,
Operations, of Wicat Systems, Inc., a manufacturer of central processing units
for microcomputers. From February 1978 to August 1983, Mr. Cogan served as the
Vice President and General Manager of the Small Systems Division at Datapoint
Corporation.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
General Parametrics Corporation Common Stock, par value $.01, has been traded on
the NASDAQ National Market System under the symbol GPAR since July 30, 1986. The
following table sets forth the high and low closing prices for the Company's
Common Stock for the periods indicated, as reported by the NASDAQ National
Market System.
<TABLE>
<CAPTION>
FISCAL 1995 LOW HIGH
----------- --- ----
<S> <C> <C>
4th Quarter $1.75 $3.63
3rd Quarter 1.44 2.13
2nd Quarter 1.50 2.00
1st Quarter 1.25 1.88
<CAPTION>
FISCAL 1994 LOW HIGH
----------- --- ----
<S> <C> <C>
4th Quarter $1.63 $2.13
3rd Quarter 1.88 2.63
2nd Quarter 2.25 2.75
1st Quarter 2.25 2.88
</TABLE>
The number of registered stockholders of record of the Company's Common Stock as
of December 15, 1995 was 313. On December 15, 1995, the closing price per share
of the Company's common stock as reported on the NASDAQ National Market System
was $3.75. During fiscal 1995, the Company declared and paid three quarterly
dividends totaling $920,000 ($.06 per share each quarter). On August 31, 1995,
the Company announced that its new Board of Directors decided to discontinue the
Company's payment of dividends. During 1994, the Company declared and paid four
quarterly dividends each fiscal year ($.06 per share each quarter) totaling
$1,220,000. The Company presently has no intention to pay dividends in the
foreseeable future and intends to utilize its cash and investments for the
intended new direction of the Company.
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ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
(in thousands, except per share and employee data)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $ 9,511 $ 12,338 $ 14,336 $16,667 $ 13,934
Gross profit 2,483 4,614 5,814 7,633 6,233
Restructuring costs 1,437 -- -- -- --
Total operating expenses 5,732 5,443 6,300 7,062 7,239
Income (loss) from operations (3,249)(2) (829) (486) 571 (1,006)
Interest income 312 229 310 968 1,370
Net income (loss) (2,437)(2) (212) 108 1,046 283
Net income (loss) per share(1) $ (.48) $ (.04) $ .02 $ .14 $ .04
Weighted average shares used in
computing earnings per share 5,125 5,098 5,095 7,336 7,944
BALANCE SHEET DATA:
Working capital(1) $ 9,140 $ 8,130 $ 7,983 $11,343 $ 24,386
Total assets(1) 10,130 13,486 15,304 16,665 28,101
Stockholders'equity(1) 9,313 12,395 13,759 14,506 25,976
Cash dividends declared per
common share $ .18 $ .24 $ .24 $ .24 .24
Number of employees 41 62 71 82 81
</TABLE>
(1) Effective August 5, 1992, the Company completed its repurchase of 3,100,000
shares of its common stock for $10,947,000.
(2) During the fourth quarter of fiscal 1995, the Company recorded a pre-tax
charge to earnings totaling $2,153,000. The charges were for restructuring costs
of $1,437,000, and other charges totaling $716,000 to cost of sales.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the percentage which
selected items in the Consolidated Statement of Operations bear to net sales and
the percentage change of such items as compared to the prior indicated period.
<TABLE>
<CAPTION>
Percentage of Net Sales Increase (Decrease)
Year Ended October 31, Over Prior Year
FY95 vs FY94 vs
1995 1994 1993 FY 94 FY 93
----------------------- --------------------
<S> <C> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% (23)% (14)%
Cost of sales 73.9 62.6 59.4 ( 9) ( 9)
Gross profit 26.1 37.4 40.6 (46) (21)
Operating expenses:
Marketing and sales 22.0 24.0 27.3 (29) (24)
Research and development 11.0 11.1 10.3 (24) ( 7)
General and administrative 12.2 9.0 6.4 5 21
Restructuring charges 15.1 - - - -
Total operating expenses 60.3 44.1 44.0 5 (14)
Loss from operations ( 34.2) (6.7) (3.4) (292) (71)
Interest income 3.3 2.2 2.2 36 (26)
Loss before income taxes ( 30.9) (4.8) (1.2) (390) (241)
Net income (loss) ( 25.6)% (1.7)% .1% (1,050)% (296)%
</TABLE>
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FISCAL 1995 TO FISCAL 1994
Special Charges
In October 1995, the Company elected to terminate a portion of its electronic
presentation products, including VideoShow, VideoShow PRESENTER and related
products and recorded Restructuring Costs of $1,437,000. Also in October 1995,
the Company recorded a $716,000 special charge in Cost of Sales for the
repositioning of its color printer products. The charges are comprised of:
writedowns of discontinued ($530,000) and slow-moving ($395,000) inventory,
write-offs of Capitalized Software Development Costs for discontinued products
($524,000) and color printers ($321,000), writedown of fixed assets ($203,000)
associated with manufacturing discontinued products and a reserve of $180,000
for lease costs related to excess facilities to be vacated and sub-leased. All
of the Restructuring Costs and Other Special Charges except for the reserve for
excess leased facilities (which the Company estimates will be used over the next
two years) are non cash charges. Revenues for terminated products were
$2,311,000, $4,222,000 and $6,645,000 for fiscal years ended 1995, 1994 and
1993, respectively. The Company's current product focus is color printers and
color printer consumables.
Operations
Fiscal 1995 net sales were $9,511,000, a $2,827,000 (22.9%) decrease from fiscal
1994 net sales of $12,338,000. The net sales decrease was primarily attributed
to lower unit shipments and price reductions in the Company's terminated
electronic presentation ($1.9 million decrease) and color printer products ($.9
million decrease). The Company's color printer consumables business remained
flat with the prior year. The decrease in the electronic presentation business
was attributed to competitive product pressures, softness in governmental
purchases and lower sales outside the United States. See "Special Charges" above
for a discussion of the electronic presentation line of products. The decrease
in the Company's color printer line of products was attributed to competitive
product pressures, such as ink-jet, color laser and phase change printer
products, as well as color thermal and dye sublimation product competition. The
color printer market is a highly competitive market and is increasingly becoming
dominated by large, well known, strongly capitalized companies with the ability
to spend significantly more resources than the Company. The Company continues
its efforts at expansion of its distribution and OEM channels for both color
printers and consumables. Through advertising and related programs,
demonstration unit programs and similar sales and marketing efforts, the Company
will attempt to increase lead count and ultimately sales. The Company is also
attempting to expand its product offerings through the identification of new
products that it can sell under its label through its distribution channels.
There can be no assurance that the Company's efforts at lead count generation,
brand name identification, and expanded product offerings will be successful or
will lead to increased sales. In addition, increased competitive pressures could
result in further price reductions for the Company's existing color thermal and
dye sublimation products and consumables, which would have a materially adverse
impact on operating results.
Gross margin was 26.1% of net sales during fiscal 1995, compared to 37.4% one
year earlier. As discussed in "Special Charges" above, the Company recorded a
charge of $716,000 to cost of sales. Exclusive of the special charge, the gross
margin would have been $3,199,000 or 33.6% of net sales. The decrease in gross
margin, exclusive of the special charge, from the prior year was due to a shift
in the Company's product mix from higher margin electronic presentation products
to lower margin color printer and consumable products and higher per unit color
printer costs associated with more expensive foreign components resulting from
the weakened United States dollar. The Company currently expects gross margins
for the printer and consumables to be in the 30% to 40% range for fiscal 1996.
Marketing and sales expenses were $2,088,000 (22.0% of the net sales) for fiscal
1995, compared to $2,959,000 (24.0% of the net sales) for fiscal 1994. The
decreased expenditures were the result of planned reductions in payroll and
related expenditures, travel and entertainment costs, and advertising and
related expenses. The Company plans to continue its efforts at cost containment.
As a result of the restructuring of the Company's operations noted in "Special
Charges" above, the Company has re-focused its marketing and sales efforts at
its color printer and consumables business.
Research and development costs (before taking into effect the net capitalization
of software development costs) were $895,000 (9.4% of the net sales) for fiscal
1995, compared to $1,355,000 (11.0% of the net sales) for fiscal 1994. The
decreased expenditures were primarily in payroll and related costs and direct
project material costs. As described in "Special Charges" above, the Company has
restructured its operations at the end of its fourth quarter. As a result of the
discontinuance of its multimedia products and the focus on its color printer
business, the Company
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<PAGE> 10
spend significantly less time and costs on research and development than it has
in the past. The Company will place more emphasis on identification of new
products that it can acquire and re-sell under its own label, while maintaining
the quality of its existing color thermal and dye sublimation product offerings.
The Company will continue to evaluate the market and apply research and
development resources as necessary to maintain a competitive line of products.
General and administrative expenditures were $1,163,000 (12.2% of the net sales)
in fiscal 1995, compared to $1,113,000 (9.0% of the net sales) for fiscal 1994.
During the fourth quarter, the Company recorded additional bad debt reserves
totaling approximately $150,000. The Company plans to continue its efforts at
cost containment of general and administrative expenses wherever possible.
As a result of the above-mentioned factors, the loss from operations for fiscal
1995 was $3,249,000, which included restructuring and other costs of $2,153,000,
compared to the loss from operations for fiscal 1994 of $829,000.
Interest income was $312,000 during fiscal 1995, compared to $229,000 during
fiscal 1994. The increase was primarily attributed to the recording of a loss
during 1994 of $78,000 for certain of the Company's investments.
As a result of the above-mentioned factors, the loss before income taxes was
$2,937,000 for fiscal 1995 compared to the loss before income taxes of $600,000
for fiscal 1994.
The benefit from income taxes for fiscal 1995 was $500,000 compared to $388,000
for fiscal 1994. The benefit for fiscal 1995 was primarily due to the Company's
pre-tax loss and significant amounts of tax-free interest income. Due to the
Company's recent history of operating losses, a valuation allowance has been
recorded for the net deferred tax assets.
The net loss was $2,437,000 ($.48 per share) in fiscal 1995 (which includes
restructuring and other costs totaling a pre-tax charge of $2,153,000) compared
to the net loss of $212,000 ($.04 per share) in fiscal 1994.
FISCAL 1994 TO FISCAL 1993
Fiscal 1994 net sales were $12,338,000, a $1,998,000 (13.9%) decrease from
fiscal 1993 net sales of $14,336,000. The net sales decrease was primarily
attributed to lower unit shipments of the Company's electronic presentation
products, due to competitive product pressures, softness in governmental
purchases and lower sales outside the United States. During fiscal 1994,
revenues in the Company's color printer business increased modestly as the
Company continued its efforts at expansion of its distribution channels for
color printers and consumables. Gross profit was 37.4% of net sales during
fiscal 1994, compared to 40.6% one year earlier. The decrease in gross margin
was due to a shift in the Company's product mix to lower margin products and the
weaker U.S. dollar as compared to certain foreign currencies which resulted in
higher costs for some components/products sourced outside the United States.
Marketing and sales expenses were $2,959,000 (24.0% of the net sales) for fiscal
1994, compared to $3,899,000 (27.3% of the net sales) for fiscal 1993. The
decreased expenditures were the result of planned reductions in payroll and
related expenditures, travel and entertainment costs, and advertising and
related expenses.
Research and development costs (before taking into effect the net capitalization
of software development costs) were $1,355,000 (11.0% of the net sales) for
fiscal 1994, compared to $1,645,000 (11.5% of the net sales) for fiscal 1993.
The decreased expenditures were primarily in payroll and related costs and
direct project material costs. As a result of the completion of several major
development projects and the overall company-wide objective of lowering
operating costs, the Company replaced only a portion of the personnel who left
through normal attrition. Also, during the third quarter, the Company purchased
a third party multimedia presentation software product called EasyShow.
General and administrative expenditures were $1,113,000 (9.0% of the net sales)
in fiscal 1994, compared to $923,000 (6.4% of the net sales) for fiscal 1993.
During the third quarter, the Company exercised its option to terminate its
lease for its existing plant and office space that was due to expire July 1999.
The net cost of the lease termination was $81,000. Simultaneous with the
termination, the Company signed a three year lease that substantially reduces
its yearly rent cost. As a result of the above, along with increases in certain
miscellaneous expenses, general and administrative expenses increased during
fiscal 1994. In the future, the Company plans to continue its efforts at cost
containment of general and administrative expenses.
As a result of the above-mentioned factors, the loss from operations for fiscal
1994 was $829,000 compared to the loss from operations for fiscal 1993 of
$486,000.
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<PAGE> 11
Interest income was $229,000 during fiscal 1994, compared to $310,000 during
fiscal 1993. The decrease was primarily attributed to the recording of a loss of
$78,000 for certain of the Company's investments.
As a result of the above-mentioned factors, the loss before income taxes was
$600,000 for fiscal 1994 compared to the loss before income taxes of $176,000
for fiscal 1993.
The benefit from income taxes for fiscal 1994 was $388,000 compared to $284,000
for fiscal 1993. The benefit for fiscal 1994 was primarily due to the Company's
pre-tax loss, significant amounts of tax-free interest income, the availability
of research and development credits, and a refund of taxes paid in prior years.
The net loss was $212,000 ($.04 per share) in fiscal 1994 compared to net income
of $108,000 ($.02 per share) in fiscal 1993.
FISCAL 1993 TO FISCAL 1992
Fiscal 1993 net sales were $14,336,000, a $2,331,000 (13.9%) decrease from
fiscal 1992 net sales of $16,667,000. The decrease in net sales was primarily
attributed to economic weakness in the Company's commercial markets, softness in
governmental purchases, and lower product prices. In addition, the Company
experienced significant product and pricing competitive pressures in its
electronic presentation and color printer marketplaces. During fiscal 1993, the
Company expanded its distribution channel for color printer supplies. As a
result, revenues for the overall color printer business increased slightly even
though hardware unit sales decreased marginally and average hardware unit
selling prices decreased substantially. During the fourth quarter of fiscal
1993, the Company began shipping its new VideoShow PRESENTER, an advanced remote
control/teleprompter product for the personal and notebook computer marketplace.
Gross profit was 40.6% of net sales during fiscal 1993, compared to 45.8% one
year earlier. The decrease in gross margin was due to a shift in the Company's
product mix to lower margin products and lower overall product prices as a
result of market pressures.
Marketing and sales expenses were $3,899,000 (27.3% of the net sales) for fiscal
1993 compared to $4,385,000 (26.3% of the net sales) for fiscal 1992. The
decreased expenditures in absolute dollars were the result of lower earned
commissions as a result of lower sales, lower advertising and related costs and
lower overhead costs due to cost containment measures.
Research and development expenditures (before taking into effect the net
capitalization of software development costs) were $1,645,000 (11.5% of the net
sales) during fiscal 1993 compared to $1,619,000 (9.7% of the net sales) for
fiscal 1992. Research and development expenditures slightly increased even
though the net sales declined due to the Company's intent to continue investing
in research and development activities aimed at creating new products and
technologies.
General and administrative expenditures were $923,000 (6.4% of the net sales)
during fiscal 1993 compared to $1,119,000 (6.7% of the net sales) during fiscal
1992. The decrease in absolute dollars was primarily attributable to lower
personnel costs, legal fees and provisions for doubtful accounts.
As a result of the above mentioned factors, the loss from operations for fiscal
1993 was $486,000 compared to the income from operations for fiscal 1992 of
$571,000.
Interest income was $310,000 during fiscal 1993 compared to $968,000 for the
same period one year ago. This decrease was the result of: less available cash,
cash equivalents and marketable securities as a result of the completion of the
Company's repurchase of 3,100,000 shares of its common stock for $10,947,000 on
August 5, 1992; and lower prevailing market interest rates. As a result of the
above mentioned factors, the loss before income taxes was $176,000 for fiscal
1993, compared to the income before income taxes of $1,539,000 for fiscal 1992.
The benefit from income taxes for fiscal 1993 was $284,000 compared to the
provision for income taxes of $493,000 for fiscal 1992. The benefit for fiscal
1993 was primarily due to the Company's pre-tax loss, significant amounts of
tax-free interest income, the availability of research and development credits,
and a refund of taxes paid in prior years.
Net income was $108,000 ($.02 per share based on 5,095,000 shares) in fiscal
1993 compared to $1,046,000 ($.14 per share based on 7,336,000 shares) in fiscal
1992.
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<PAGE> 12
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of cash is the collection of accounts receivable
resulting from the sales of its products. At October 31, 1995, the Company had
cash, cash equivalents and marketable securities of $6,393,000 as compared to
$5,491,000 at October 31, 1994. The increase in cash is primarily the result of
the net collections in accounts receivable, less purchases of inventory,
reductions in operating expenses and the discontinuance of the Company's
dividend on August 30, 1995. The Company currently has no plans to declare and
pay a dividend.
The Company has a $2,000,000 Unsecured Documentary Letter of Credit Line
("Letter of Credit") specifically intended to facilitate the purchase of product
components through Letters of Credit. Under the terms of this arrangement, the
Company may utilize credit for up to three days for each purchase that utilizes
the Letter of Credit facility. This Letter of Credit is subject to issuance and
negotiation fees of 0.25% and expires for new letter of credit issuances on
March 30, 1996. As of October 31, 1995, the Company had $60,000 of purchase
commitments outstanding through this facility. As a result of the current year
net loss, the Company technically was in violation of the profitability covenant
to this agreement. The Company has obtained a waiver of this covenant and is
currently in the process of renewing this letter of credit facility.
The Company's new Board of Directors (elected on August 30, 1995) intends to
cause the Company to actively pursue acquisitions and mergers in unrelated
fields, including, but not limited to scrap metal recycling and/or
telecommunications. Depending on the nature and size of potential acquisitions,
mergers and other transactions, if any, the Company's cash flows from operating
and investing activities, together with its cash, cash equivalents and
marketable securities may not be sufficient in the future. The Company may have
to supplement these sources of liquidity with additional sources of funds such
as borrowings, stock offerings, etc. On December 4, 1995, the Company announced
that it has entered into an agreement to acquire all of the stock of EMCO
Recycling Corp. ("EMCO"), a metal recycling company that processes ferrous and
non-ferrous metals. The agreement is conditioned upon completion of the
Company's "due diligence" review of EMCO, including an environmental assessment
of EMCO's properties and the purchase by the Company of certain assets of Ellis
Metals, Inc. The Company hopes to close the transaction as soon after the Annual
Meeting as is practicable.
From its inception, the Company has maintained a continuous program of enhancing
existing products and introducing new products that have extended its various
product lines. As described in "Special Charges" above, the Company has
restructured its operations at the end of its fourth quarter. As a result of the
discontinuance of its multimedia and related products and the focus on its color
printer and consumables business, the Company will spend significantly less
costs on research and development than it has in the past. The Company will
place more emphasis on identification of new products that it can acquire and
re-sell under its own label, while maintaining the quality of its existing color
thermal and dye sublimation product offerings. The Company will continue to
evaluate the market and apply research and development resources as necessary to
maintain a competitive line of products.
The Company believes that its future success will depend on its ability to
continue to enhance its existing products and to identify and/or develop new
products which satisfactorily meet specific market needs in a cost-effective
manner. There can be no assurance, however, that the Company's efforts will
result in commercially successful products or that the Company's products will
not be rendered obsolete by changing technology. Additionally, the introduction
of certain enhanced or new products could adversely affect sales of existing
products. Lack of commercial acceptance of enhanced or new products introduced
by the Company could adversely affect the Company's results of operations.
The Company principally uses standard components from multiple vendors. However,
in many of its products, certain components are purchased from sole-source
suppliers. The Company also purchases some printer consumables from
sole-sources. There is no guarantee that the supply of sole-source components
and consumables from these suppliers, along with any new, improved and lower
cost components will continue to be made available to the Company. The Company
attempts to reduce the risk of interruption in supply of components by
maintaining adequate inventory. Loss or interruption of the supply of components
from sole-source suppliers would require additional management and engineering
efforts to develop and qualify alternate sources, and any such loss could result
in delays in product shipments which could adversely affect the Company's
results of operations.
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<PAGE> 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to the
Consolidated Financial Statements and Notes thereto, and selected quarterly
financial data set forth on pages 18-30 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
Certain information required by Part III is omitted from this Report in that the
Registrant will file its definitive proxy statement pursuant to Rule 14a-3 (the
"Proxy Statement") not later than 120 days after the end of the fiscal year
covered by this Report, and certain information included therein is incorporated
herein by reference.
ITEM 10. DIRECTORS
The directors of the Company, their ages as of December 15, 1995, and certain
other information about them are set forth below. All directors hold office
until the Company's next Annual Meeting of Stockholders or until their
successors are duly elected and qualified.
<TABLE>
<CAPTION>
Name Age Principal Occupation Director Since
<S> <C> <C> <C>
Gerard M. Jacobs 40 Co-President, Co-Chief Executive Officer 1995
and Co-Chairman of the Board
T. Benjamin Jennings 31 Co-President, Co-Chief Executive Officer 1995
and Co-Chairman of the Board
Xavier Hermosillo 45 Director and Corporate Secretary 1995
</TABLE>
Except as set forth below, each director has been engaged in his principal
occupation during the past five years. There are no family relationships among
directors or executive officers of the Company.
Gerard M. Jacobs has served as the Company's Co-President, Co- Chief Executive
Officer and Co-Chairman of the Board of Directors since August 30, 1995. Mr.
Jacobs has been the owner and President of Environmental Waste Funding
Corporation, a company specializing in landfill development and finance, since
June 1991. From 1988 to June 1991, Mr. Jacobs was a sole proprietor engaged in
landfill development and finance. Since September 1994, Mr. Jacobs has served as
a director of Crown Casino Corporation, a publicly traded gaming company. Mr.
Jacobs is also a director and a 33% stockholder of Caspar & Associates, Inc., an
engineering firm specializing in fiber optic communications. From 1983 to 1988,
Mr. Jacobs developed resource recovery, landfill and hydroelectric projects for
the investment banking firm of Russell, Rea & Zappala, Inc., Pittsburgh,
Pennsylvania. Mr. Jacobs is a graduate of Harvard University, where he was
elected to Phi Beta Kappa. Mr. Jacobs holds a law degree from the University of
Chicago Law School, which he attended as a Weymouth Kirkland Law Scholar. Mr.
Jacobs is a member of the Pennsylvania Bar.
T. Benjamin Jennings has served as the Company's Co-President, Co- Chief
Executive Officer and Co-Chairman of the Board of Directors since August 30,
1995. Mr. Jennings has been a Director of First Southwest Company, a private
investment banking firm based in Dallas, Texas from April 1993 to November,
1995. From March 1990 until April 1993, Mr. Jennings was a Vice President of
Kidder Peabody & Co. Inc. In his past capacity, Mr. Jennings concentrates on
mergers, acquisitions, private debt and equity placements, and various types of
public security transactions. Mr. Jennings is currently Co-chairman of the
Inner-City Games, Chicago, a national charity benefiting inner-city children.
Mr. Jennings is an honors graduate of Rice University.
Xavier Hermosillo has served as a member of the Board of Directors and as
Corporate Secretary since August 30, 1995. Mr. Hermosillo has been a principal
of Xavier Hermosillo & Associates, a crisis public relations, marketing and
government affairs firm since 1984. Since October 1993, Mr. Hermosillo has also
served as a radio talk show host for Capitol Cities/ABC West Coast Flagship
Radio station KABC-AM, and began hosting a nightly talk show on
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<PAGE> 14
50,000 watt 710-TALK-KMPC in Los Angeles when it was acquired by Capitol
Cities/ABC in May 1994. Mr. Hermosillo has also been a television news
commentator on KCOP-13 REAL NEWS (United Paramount Network) since May 1993. He
is the first and only Latino radio talk host and television commentator in Los
Angeles. He is the founding chairman of N.E.W.S. For America, a coalition of 250
Latino organizations in Los Angeles. Mr. Hermosillo is a member of the Executive
Committee of the California Republican Party in his role as the state Chairman
of the Republican National Hispanic Assembly. He has ben a delegate to the 1984,
1988 and 1992 Republican National Conventions, served as Co-chairman of the 1992
Latino Bush Campaign and as Director of International Media at the 1992 GOP
National Convention in Houston.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership of the
Company's securities on Form 3 and changes in ownership on Forms 4 or 5 with the
Securities and Exchange Commission (the "SEC"). Such officers, directors and 10%
shareholders are also required by SEC rules to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons, the Company believes
that, during the last fiscal year, all Section 16(a) filing requirements
applicable to its officers, directors and 10% shareholders were complied with,
except that Daniel B. Burgess filed a Form 3 late.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to the
information set forth under the caption "Executive Compensation" in the
Company's Proxy Statement for the 1996 Annual Meeting of Stockholders.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this item is incorporated by reference to the
information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Company's Proxy Statement for the 1996
Annual Meeting of Stockholders.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to the
information set forth under the caption "Certain Transactions" in the Company's
Proxy Statement for the 1996 Annual Meeting of Stockholders.
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<PAGE> 15
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) THE FOLLOWING DOCUMENTS ARE FILED AS PART OF THIS REPORT:
1.FINANCIAL STATEMENTS. The Consolidated Financial Statements of General
Parametrics Corporation and Report of Independent Accountants are
included at pages 18 through 30 of this Form 10-K Annual Report.
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Accountants 18
Consolidated Statement of Operations - Years Ended October 31, 1995, 1994, and 1993 19
Consolidated Balance Sheet - October 31, 1995 and 1994 20
Consolidated Statement of Cash Flows - Years Ended October 31, 1995, 1994, and 1993 21
Consolidated Statement of Stockholders' Equity - Years Ended October 31, 1995, 1994, and 1993 22
Notes to Consolidated Financial Statements 23
Selected Quarterly Financial Data (Unaudited) 28
2.FINANCIAL STATEMENT SCHEDULES. The financial statement schedules of
General Parametrics Corporation for the years ended October 31, 1995, 1994,
and 1993 are filed as part of this Report and should be read in conjunction
with the Consolidated Financial Statements of General Parametrics
Corporation.
3. EXHIBITS. See item 14(c) below.
Schedule
II Valuation and Qualifying Accounts 28
</TABLE>
Schedules not listed above have been omitted because they are not applicable or
are not required or the information required to be set forth therein is included
in the Consolidated Financial Statements or Notes thereto.
(b) REPORTS ON FORM 8-K:
The Company filed a report on Form 8-K dated July 17, 1995 reporting the sale of
shares by Herbert B. Baskin, the Company's former Chairman of the Board of
Directors, President and Chief Executive Officer to Gerard M. Jacobs, T.
Benjamin Jennings, Donald F. Moorehead and Blue Bird Partners. There were no
other reports on Form 8-K filed by the Company during the year ended October 31,
1995.
(c) EXHIBITS:
The following Exhibits are filed as part of, or incorporated by reference into,
the Report:
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
3.1(1) Certificate of Incorporation, as amended.
3.3(1) Bylaws.
10.1(2)(4) Employee Stock Purchase Plan, as amended.
10.2(2)(4) Stock Option Plan, as amended, and forms of
Incentive Stock Option Agreement
and Nonstatutory Stock Option Agreement, as
amended.
10.3(1) Form of Indemnity Agreement between Registrant and each
of its directors.
10.5(3) Lease agreement dated June 21, 1994, between
Registrant as Lessee and Smith & Walters, Inc. as
Lessor.
21.1 Subsidiaries of Registrant (included on page 30).
24.1 Consent of Independent Accountants (included on
page 31).
25.1 Power of Attorney (included on page 16).
(1) Incorporated by reference from exhibit filed with the Registrant's
Registration Statement on Form S-1 (No. 33-6591) filed June 19,
1986, and Amendment No. 1 thereto filed July 28, 1986, which
Registration Statement became effective July 30, 1986.
(2) Incorporated by reference from exhibit filed with the Registrant's
Post- Effective Amendment No. 1 to Registration Statement on Form
S-8 (No. 33-10517) filed with the Securities and Exchange
Commission on March 31, 1988.
(3) Incorporated by reference from exhibit filed with the Registrant's
October 31, 1994 Form 10-K.
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<PAGE> 16
(4) Denotes management contract or compensatory arrangements in which
executive officers participate.
(c) FINANCIAL STATEMENT SCHEDULES:
See Item 14(a)(2) above.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
GENERAL PARAMETRICS CORPORATION
By: /s/ Gerard M. Jacobs By: /s/ T. Benjamin Jennings
-------------------- -------------------------
Gerard M. Jacobs T. Benjamin Jennings
Co-President, Co-Chief Co-President, Co-Chief Executive
Executive Officer Officer
and Co-Chairman of the Board and Co-Chairman of the Board
Dated: January 25, 1996 Dated: January 25, 1996
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Gerard M. Jacobs and T. Benjamin Jennings, his
attorney-in-fact, with the power of substitution for him in any and all
capacities, to sign any amendments to this Report, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ---------------------------------------------------------------------------------------
<S> <C> <C>
/s/ Gerard M. Jacobs Co-President, Co-Chief Executive Officer January 25, 1996
- ------------------------ and Co-Chairman of the Board
(Gerard M. Jacobs) (Co-Principal Executive Officer)
/s/ T. Benjamin Jennings Co-President, Co-Chief Executive Officer January 25, 1996
- ------------------------ and Co-Chairman of the Board
(T. Benjamin Jennings) (Co-Principal Executive Officer)
/s/ William A. Spazante Vice President, Finance January 25, 1996
- ------------------------ and Chief Financial Officer
William A. Spazante (Principal Financial and Accounting
Officer)
/s/ Xavier Hermosillo Director and Corporate Secretary January 25, 1996
- ------------------------
(Xavier Hermosillo)
</TABLE>
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<PAGE> 17
GENERAL PARAMETRICS CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1995
-17 -
<PAGE> 18
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF GENERAL PARAMETRICS CORPORATION:
In our opinion, the Consolidated Financial Statements listed in the index
appearing under Item 14 (a)(1) and (2) on page 15 present fairly, in all
material respects, the financial position of General Parametrics Corporation and
its subsidiaries at October 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
October 31, 1995, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
PRICE WATERHOUSE LLP
San Francisco, California
December 4, 1995
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<PAGE> 19
GENERAL PARAMETRICS CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------
1995 1994 1993
----------- ------------ ------------
<S> <C> <C> <C>
Net sales $ 9,511,000 $ 12,338,000 $ 14,336,000
Cost of sales 7,028,000 7,724,000 8,522,000
----------- ------------ ------------
Gross profit 2,483,000 4,614,000 5,814,000
----------- ------------ ------------
Operating expenses:
Marketing and sales 2,088,000 2,959,000 3,899,000
Research and development 1,044,000 1,371,000 1,478,000
General and administrative 1,163,000 1,113,000 923,000
Restructuring costs 1,437,000 -- --
----------- ------------ ------------
Total operating expenses 5,732,000 5,443,000 6,300,000
----------- ------------ ------------
Loss from operations (3,249,000) (829,000) (486,000)
Interest income 312,000 229,000 310,000
----------- ------------ ------------
Loss before income taxes (2,937,000) (600,000) (176,000)
Benefit from income taxes (500,000) (388,000) (284,000)
----------- ------------ ------------
Net income (loss) $(2,437,000) $ (212,000) $ 108,000
=========== ============ ============
Net income (loss) per share $ (.48) $ (.04) $ .02
=========== ============ ============
Dividends declared per share of
Common Stock $ .18 $ .24 $ .24
=========== ============ ============
</TABLE>
See accompanying notes to Consolidated Financial Statements.
- 19 -
<PAGE> 20
GENERAL PARAMETRICS CORPORATION
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
October 31,
-----------
1995 1994
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (Notes 4 and 12) $ 3,032,000 $ 639,000
Marketable securities (Notes 5 and 12) 3,246,000 1,981,000
Accounts receivable, less allowance for doubtful accounts of
$414,000 in 1995 and $373,000 in 1994 (Note 12) 1,599,000 2,864,000
Inventories (Note 6) 1,718,000 3,398,000
Prepaid expenses 36,000 58,000
Refundable income taxes (Note 11) 326,000 281,000
----------- -----------
Total current assets 9,957,000 9,221,000
Marketable securities (Notes 5 and 12) 115,000 2,871,000
Property and equipment, net (Note 7) 58,000 400,000
Capitalized software development costs, net (Note 3) -- 994,000
----------- -----------
Total assets $10,130,000 $13,486,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 331,000 $ 540,000
Accrued compensation and benefits 169,000 243,000
Other accrued liabilities 317,000 210,000
Deferred income taxes (Note 11) -- 98,000
----------- -----------
Total current liabilities 817,000 1,091,000
----------- -----------
Commitments (Notes 8 and 9)
Stockholders' equity (Notes 2, 3, 10 and 15):
Preferred Stock, $.01 par value - 2,000,000 shares authorized;
none outstanding -- --
Common Stock, $.01 par value - 20,000,000 shares authorized;
issued and outstanding 5,214,818 in 1995
5,097,891 in 1994 51,000 51,000
Additional paid-in capital 3,038,000 2,763,000
Retained earnings 6,224,000 9,581,000
----------- -----------
Total stockholders' equity 9,313,000 12,395,000
----------- -----------
Total liabilities and stockholders' equity $10,130,000 $13,486,000
=========== ===========
</TABLE>
See accompanying notes to Consolidated Financial Statements.
-20-
<PAGE> 21
GENERAL PARAMETRICS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended October 31,
----------------------
1995 1994 1993
-----------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $(2,437,000) $ (212,000) $ 108,000
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 739,000 1,026,000 937,000
Deferred income taxes (98,000) (62,000) 238,000
Restructuring costs 1,437,000 -- --
Other special charges 716,000 -- --
Changes in assets and liabilities:
Accounts receivable 1,265,000 1,459,000 436,000
Inventories 755,000 (73,000) 664,000
Prepaid expenses 22,000 2,000 38,000
Refundable income taxes (45,000) (281,000) --
Accounts payable (209,000) (342,000) 208,000
Accrued compensation and benefits (74,000) (39,000) (7,000)
Other accrued liabilities (73,000) 23,000 (250,000)
Income taxes payable -- (34,000) (725,000)
----------- ----------- -----------
Net cash provided by operating activities 1,998,000 1,467,000 1,647,000
----------- ----------- -----------
Cash flows provided (used) by investing activities:
Changes in marketable securities, net 1,491,000 307,000 (3,506,000)
Purchases of property and equipment (27,000) (92,000) (184,000)
Capitalized software development costs (424,000) (784,000) (787,000)
----------- ----------- -----------
Net cash provided (used) by investing activities 1,040,000 (569,000) (4,477,000)
----------- ----------- -----------
Cash flows provided (used) by financing activities:
Common Stock issued under Employee Stock Purchase,
Employee Stock Option, Executive Bonus Plans,
including tax effect of stock options 275,000 68,000 358,000
Payment of cash dividends (920,000) (1,220,000) (1,213,000)
----------- ----------- -----------
Net cash provided (used) by financing activities (645,000) (1,152,000) (855,000)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 2,393,000 (254,000) (3,685,000)
Cash and cash equivalents at beginning of year 639,000 893,000 4,578,000
----------- ----------- -----------
Cash and cash equivalents at end of year $ 3,032,000 $ 639,000 $ 893,000
=========== =========== ===========
</TABLE>
See accompanying notes to Consolidated Financial Statements.
-21-
<PAGE> 22
GENERAL PARAMETRICS CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional Total
------------ Paid-in Retained Stockholders'
Shares Amount Capital Earnings Equity
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at October 31, 1992 4,962,654 $49,000 $2,339,000 $ 12,118,000 $ 14,506,000
Common Stock issued under
Employee Stock Purchase Plan 18,744 2,000 43,000 -- 45,000
Common Stock issued upon
exercise of options 70,991 -- 253,000 -- 253,000
Common Stock issued under
Executive Bonus Plan 15,000 -- 60,000 -- 60,000
Payment of cash dividends -- -- -- (1,213,000) (1,213,000)
Net income -- -- -- 108,000 108,000
-----------------------------------------------------------------
Balance at October 31, 1993 5,067,389 51,000 2,695,000 11,013,000 13,759,000
Common Stock issued under
Employee Stock Purchase Plan 21,002 -- 41,000 -- 41,000
Common Stock issued upon
exercise of options 7,200 -- 22,000 -- 22,000
Common Stock issued under
Executive Bonus Plan 2,300 -- 5,000 -- 5,000
Payment of cash dividends -- -- -- (1,220,000) (1,220,000)
Net loss -- -- -- (212,000) (212,000)
-----------------------------------------------------------------
Balance at October 31, 1994 5,097,891 51,000 2,763,000 9,581,000 12,395,000
Common Stock issued under
Employee Stock Purchase Plan 24,927 -- 31,000 -- 31,000
Common Stock issued upon
exercise of options 92,000 -- 244,000 -- 244,000
Payment of cash dividends -- -- -- (920,000) (920,000)
Net loss -- -- -- (2,437,000) (2,437,000)
-----------------------------------------------------------------
Balance at October 31, 1995 5,214,818 $51,000 $3,038,000 $ 6,224,000 $ 9,313,000
=================================================================
</TABLE>
See accompanying notes to Consolidated Financial Statements.
-22-
<PAGE> 23
GENERAL PARAMETRICS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - OPERATIONS:
General Parametrics Corporation, a Delaware corporation, and its wholly-owned
subsidiaries (the Company) are engaged in the business of designing,
manufacturing and marketing color printers and color printer consumables. See
Note 2 Restructuring and Other Special Charges and Note 15-Subsequent Events.
NOTE 2 - RESTRUCTURING COSTS AND OTHER SPECIAL CHARGES:
In October 1995, the Company elected to discontinue a portion of its electronic
presentation products, including VideoShow, VideoShow PRESENTER and related
products and recorded Restructuring Costs of $1,437,000. Also in October 1995,
the Company recorded a $716,000 special charge in Cost of Sales for the
repositioning of its color printer products. The charges are comprised of:
writedowns of discontinued ($530,000) and slow-moving ($395,000) inventory,
write-offs of Capitalized Software Development Costs for discontinued products
($524,000) and color printers ($321,000), write-off of fixed assets ($203,000)
associated with the manufacture of discontinued products and a reserve of
$180,000 for lease costs related to excess facilities to be vacated and
sub-leased. All of the Restructuring Costs and Other Special Charges except for
the reserve for excess leased facilities (which the Company estimates will be
used over the next two years) are non cash charges. Revenues for terminated
products were $2,311,000, $4,222,000 and $6,645,000 for fiscal years ended 1995,
1994 and 1993, respectively.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
CONSOLIDATION
The consolidated financial statements include the accounts of General
Parametrics Corporation and its wholly-owned subsidiaries. All material
intercompany transactions have been eliminated in consolidation.
REVENUE RECOGNITION
The Company records revenues for sales of its hardware and software products
when the earnings process is complete and the collection of the sales price is
reasonably assured, generally at the time when the products are shipped.
WARRANTIES
The Company provides a variety of warranties covering its hardware and software
products and provides for the estimated warranty costs at the time of sale.
Warranty costs were not material to the financial statements for the years ended
October 31, 1995, 1994 and 1993.
INVENTORIES
Inventories are stated at the lower of cost or market, cost being determined
using the first-in, first-out (FIFO) method. Cost includes materials, labor and
manufacturing overhead.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are
computed using the straight-line method over the shorter of the estimated asset
life or the lease term, all of which range from one to three years. Maintenance
and repairs are charged to earnings while major improvements are capitalized.
NET INCOME PER SHARE
Net income per share is based on the weighted average number of common shares
outstanding during the period, including equivalent shares related to dilutive
stock options. The weighted average number of common shares outstanding was
5,125,000, 5,098,000 and 5,095,000 in fiscal 1995, 1994 and 1993, respectively.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
The Company capitalized software development costs in accordance with Statement
of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed". Once the point of
technological feasibility was reached, direct production costs (programming and
testing) were capitalized. Technological feasibility was established when the
Company completed all planning, designing, coding and testing activities that
were necessary to establish that the product can be produced to meet its design
specifications. Software development costs of $424,000, $784,000, and $787,000
were capitalized in fiscal 1995, 1994 and 1993, respectively. Amortization of
capitalized software development costs began when the products were available
for general release to customers and was computed on a product-by-product basis
using amortization
-23-
<PAGE> 24
periods not exceeding three years. Amortization expense was $573,000, $800,000
and $620,000 in fiscal 1995, 1994 and 1993, respectively. Refer to Note 2-
Restructuring Costs and Other Special Charges.
NOTE 4 - CASH AND CASH EQUIVALENTS:
Cash and cash equivalents include cash on hand or in demand accounts or
investments in money market accounts or funds which had an original maturity of
three months or less at the date of purchase.
NOTE 5 - MARKETABLE SECURITIES:
Marketable securities are stated at cost, which approximates market value.
Marketable securities maturing within one year are classified as current assets.
The Company's marketable securities are classified as "available for sale" in
accordance with Financial Accounting Standards Board Statement No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", which the
Company adopted in fiscal 1995. There was no material impact on its financial
position or results of operations as a result of the adoption of this standard.
Marketable securities consist of the following:
<TABLE>
<CAPTION>
October 31,
-----------
1995 1994
---- ----
<S> <C> <C>
Municipal Bonds and Obligations $2,253,000 $2,623,000
Corporate Notes, Bonds and Obligations 1,108,000 2,229,000
---------- ----------
$3,361,000 $4,852,000
========== ==========
</TABLE>
NOTE 6 - INVENTORIES:
Inventories consist of the following:
<TABLE>
<CAPTION>
October 31,
-----------
1995 1994
---- ----
<S> <C> <C>
Raw materials $ 534,000 $1,630,000
Work-in-progress 111,000 175,000
Finished goods 1,073,000 1,593,000
---------- ----------
$1,718,000 $3,398,000
========== ==========
</TABLE>
As described in Note 2-Restructuring Costs and Other Special Charges, the
Company recorded a charge totaling $925,000 to write-off discontinued inventory
and write-down slow-moving inventory.
NOTE 7 - PROPERTY AND EQUIPMENT:
The cost and accumulated depreciation of property and equipment are as follows:
<TABLE>
<CAPTION>
October 31,
-----------
1995 1994
---------- ----------
<S> <C> <C>
Equipment $2,936,000 $2,909,000
Leasehold improvements 77,000 77,000
---------- ----------
3,013,000 2,986,000
Less-Accumulated depreciation
and amortization 2,955,000 2,586,000
---------- ----------
$ 58,000 $ 400,000
========== ==========
</TABLE>
Depreciation and amortization expense for property and equipment was $166,000,
$226,000 and $317,000 for fiscal 1995, 1994 and 1993, respectively.
As described in Note 2-Restructuring Costs and Other Special Charges, the
Company recorded a writedown of $203,000 for property and equipment associated
with the manufacture of discontinued products.
NOTE 8 - LETTER OF CREDIT AGREEMENT:
The Company has a $2,000,000 Unsecured Documentary Letter of Credit Line
("Letter of Credit") specifically
-24-
<PAGE> 25
intended to facilitate the purchase of product components through Letters of
Credit. Under the terms of this arrangement, the Company may utilize credit for
up to three days for each purchase that utilizes the Letter of Credit facility.
This Letter of Credit is subject to issuance and negotiation fees of 0.25% and
expires March 30, 1996. At October 31, 1995, the Company had approximately
$60,000 of purchase commitments outstanding through the letter of credit
facility. As a result of the current year net loss, the Company was technically
in violation of the profitability covenant to this agreement. The Company has
obtained a waiver of this covenant.
NOTE 9 - LEASES:
During the third quarter of fiscal 1994, the Company exercised its option to
terminate its lease for its plant and office space that was due to expire July
1999. Simultaneous with the termination, the Company signed a three year lease
covering approximately 28,000 square feet in the same facility, that expires
November 4, 1997. The Company has an option to extend the lease for an
additional thirty-six months. As part of its restructuring described in Note 2-
Restructuring Costs and Other Special Charges above, the Company recorded a
charge of $180,000 to reflect excess capacity at the Berkeley facility, which it
intends to vacate and sublease. Management believes that the current facility
has been developed to be highly suitable to the Company's mix of manufacturing,
office and storage requirements, however that it is excessive in light of its
restructuring described above.
Minimum lease payments for each of the next two fiscal years (through
termination of the lease) are $184,000 per year. There are no future minimum
lease payments for any periods thereafter. Net rental expenses under operating
leases were $193,000, $294,000 and $300,000 for fiscal 1995, 1994 and 1993,
respectively. In addition, the Company leases space for its Printer Development
Center in Incline Village, Nevada, however, subsequent to year end, the Company
exercised its option to terminate the lease.
NOTE 10 - STOCKHOLDERS' EQUITY:
STOCK OPTION PLAN
During fiscal 1995, the stockholders approved the Company's 1995 Stock Option
Plan (the "1995 Plan") and the reservation of 500,000 shares of common stock for
issuance thereunder. The Board of Directors also terminated the Company's 1986
Stock Option Plan (the "1986 Plan") with respect to future grants. The 1986 Plan
will remain in effect as to currently outstanding options granted under such
plan. The 1995 Plan allows the Board of Directors to grant options to purchase
shares to officers and employees. The 1995 Plan allows the grant of either
incentive stock options (ISO's) or nonstatutory stock options (NSO's). The
exercise price of the option is never less than 85% or 100% of the closing bid
price of the Common Stock in the NASDAQ National Market System on the date of
grant for ISO's and NSO's, respectively.
The options granted under the 1995 Plan shall be exercisable in such a manner
and within such period or periods as shall be determined by the Board; however,
options shall expire no later than 10 years after the date of grant. Generally,
the 1995 Plan calls for options to become become exercisable in equal
installments over a four year term. However, the Board may determine at any time
to change the vesting rate or terms of exercise of options. The following
summarizes the activity of the 1995 Plan and the 1986 Plan:
1995 Plan
<TABLE>
<CAPTION>
Fiscal 1995
--------------------------
Number Option Price
of Shares Per Share
<S> <C> <C>
Beginning Balance 0 $ 0
Granted 51,000 $1.57-$4.00
Exercised 0 $ 0
Cancelled 0 $ 0
------- -----------
Ending Balance 51,000 $1.57-$4.00
Exercisable at end of period 25,000 $2.50
Options available for grant 449,000
</TABLE>
-25-
<PAGE> 26
<TABLE>
<CAPTION>
1986 Plan Fiscal 1995 Fiscal 1994 Fiscal 1993
Number Option Price Number Option Price Number Option Price
of Shares Per Share of Shares Per Share of Shares Per Share
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Beginning Balance 572,800 $1.90-$6.00 569,600 $1.90-$6.00 511,141 $1.90-$6.00
Granted 1,500 $1.57-$1.63 190,000 $1.88-$2.75 224,050 $3.00-$4.25
Exercised (92,000) $2.34-$2.98 (7,200) $1.90-$2.34 (70,991) $1.90-$3.56
Cancelled (177,500) $2.23-$3.56 (179,600) $2.23-$4.25 (94,600) $2.23-$4.25
======== ======== =======
Ending Balance 304,800 $1.57-$6.00 572,800 $1.90-$6.00 569,600 $1.90-$6.00
======== ======== =======
Exercisable at end of period 277,497 $1.88-$6.00 353,785 $1.90-$6.00 260,450 $1.90-$6.00
======== ======== =======
Options available for grant 0 462,630 473,030
======== ======== =======
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
The Company's Employee Stock Purchase Plan, initiated in fiscal 1987, allows
employees to purchase shares of the Company's Common Stock at the lower of 85%
of the fair market value of the Common Stock, as determined by the closing bid
price on the NASDAQ National Market System, on the first and last day of the
offering period. There are two six-month offering periods per calendar year.
During fiscal 1991, the stockholders approved an amendment to the Company's
Employee Stock Purchase Plan to increase the number of shares issuable under
such plan from 60,000 to 100,000 and during fiscal 1992, the stockholders
approved an amendment to increase the number of shares issuable from 100,000 to
200,000, of which 24,927 shares, 21,002 shares and 18,744 shares were issued
during fiscal 1995, 1994 and 1993, respectively.
NOTE 11 - INCOME TAXES:
In February 1992, the Financial Accounting Standards Board issued Statement No.
109, "Accounting for Income Taxes", (SFAS 109). SFAS 109 is an asset and
liability approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns. In estimating
future tax consequences, SFAS 109 generally considers all expected future events
other than enactments or changes in the tax law or rates. The provision
(benefit) for (from) federal and state income taxes is as follows:
<TABLE>
<CAPTION>
Year Ended October 31,
1995 1994 1993
-----------------------------------
<S> <C> <C> <C>
Federal
Current $(404,000) $(286,000) $(466,000)
Deferred (88,000) (49,000) 199,000
--------- --------- ---------
(492,000) (335,000) (267,000)
--------- --------- ---------
State
Current 2,000 (40,000) (56,000)
Deferred (10,000) (13,000) 39,000
--------- --------- ---------
(8,000) (53,000) (17,000)
--------- --------- ---------
Total tax benefit $(500,000) $(388,000) $(284,000)
========= ========= =========
</TABLE>
In accordance with SFAS 109, the deferred tax liabilities (assets) at October
31, 1995 and 1994 are comprised of the following:
<TABLE>
<CAPTION>
Year Ended October 31,
1995 1994
--------- ---------
<S> <C> <C>
Capitalized software development costs $ -- $ 430,000
Depreciation 5,000 5,000
--------- ---------
Gross deferred income tax liabilities 5,000 435,000
--------- ---------
Accounts receivable reserves (165,000) (162,000)
Inventory reserves (103,000) (74,000)
Vacation reserves (67,000) (73,000)
Fixed asset reserves (93,000) --
Lease reserve (72,000) --
Other (10,000) (28,000)
--------- ---------
Gross deferred income tax assets (510,000) (337,000)
--------- ---------
Deferred tax asset valuation allowance 505,000 --
--------- ---------
$ -- $ 98,000
========= =========
</TABLE>
-26-
<PAGE> 27
Due to the Company's recent history of operating losses, a valuation allowance
has been recorded for the net deferred tax assets. The Company's provision
(benefit) for (from) income taxes differs from the amount that would be computed
based on the statutory federal income tax rate due to the following differences:
<TABLE>
<CAPTION>
Year Ended October 31,
1995 1994 1993
Amount % Amount % Amount %
--------------------- ------------------ -------------------
<S> <C> <C> <C> <C> <C> <C>
Normal statutory rate $(990,000) (34.0) $(204,000) (34.0) $ (60,000) (34.0)
State income taxes, net of
federal benefit -- -- (35,000) (5.8) (11,000) (6.3)
Research and development credits -- -- (44,000) (7.3) (87,000) (49.4)
Tax exempt interest (66,000) (2.2) (77,000) (12.8) (61,000) (34.7)
Adjustment of prior years taxes -- -- (50,000) (8.3) (80,000) (45.5)
Deferred tax reserve 505,000 17.2 -- -- -- --
Other 51,000 2.2 22,000 3.5 15,000 8.5
----------------------------------------------------------------------
$(500,000) (17.0) $(388,000) (64.7) $(284,000) (161.4)
======================================================================
</TABLE>
Federal and state taxes of$320,000 and $17,000 were refunded (net of federal and
state taxes paid) during fiscal 1995 and 1994, respectively. Federal and state
income taxes of $143,000 were paid (net of federal and state income tax refunds)
during fiscal 1993.
NOTE 12 - CONCENTRATIONS OF CREDIT RISK:
Financial instruments which potentially subject the Company to significant
concentrations of credit risk consist principally of cash and cash equivalents,
marketable securities and trade accounts receivable.
The Company maintains cash and cash equivalents and marketable securities and
certain other financial instruments with various financial institutions. The
Company's policy is designed to limit exposure to any one institution or
security. The Company performs periodic evaluations of the relative credit
standing of the financial institutions and issuers which are involved in the
Company's investments.
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of entities comprising the Company's customer
base, and their dispersion across many different geographical locations.
As of October 31, 1995, the Company had no significant concentrations of credit
risk.
NOTE 13 - EXPORT SALES AND SALES TO MAJOR CUSTOMERS:
Total export sales (principally to Europe) were $2,911,000, $2,547,000 and
$2,885,000 in fiscal 1995, 1994 and 1993, respectively. During fiscal 1995 and
1994, there were no single customers with sales greater than 10%. During fiscal
1993, approximately 11% of the Company's net sales were to a single customer,
Lanier Worldwide Inc. (Lanier).
NOTE 14 - EMPLOYEE BENEFIT PLAN:
Effective January 1, 1988, the Company adopted a defined contribution 401(k)
Pension Plan covering all eligible employees of the Company. Participants can
elect to contribute from 2% to 20% of their qualified pre-tax compensation. The
Company may match participant contributions as determined by the sole discretion
of the Company. Since inception of the plan, the Company has made no
contributions to the plan.
NOTE 15 - SUBSEQUENT EVENT:
On December 4, 1995, the Company announced that it has entered into an agreement
to acquire all of the stock of EMCO Recycling Corp. ("EMCO"), a metal recycling
company that processes ferrous and non-ferrous metals. The agreement proposes
that EMCO will become a wholly-owned subsidiary of GPC, and the EMCO
shareholders will collectively receive a total of 3,500,000 shares of common
stock of GPC, plus warrants to purchase 600,000 shares of GPC at $4.00 per
share, plus warrants to purchase 400,000 shares of GPC at $6.00 per share, plus
$1,150,000 in cash. The agreement is conditioned upon completion of the
Company's "due diligence" review of EMCO, including an environmental assessment
of EMCO's properties and the purchase by the Company of certain operating assets
of Ellis Metals, Inc. The Company intends to present the agreement to its
stockholders for approval and hopes to close the transaction as soon after the
Annual Meeting as is practicable.
-27-
<PAGE> 28
NOTE 16 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
The following table sets forth certain unaudited quarterly financial information
for the Company's last eight fiscal quarters:
<TABLE>
<CAPTION>
Quarter Ended
-------------
Jan. 31 April 30 July 31 Oct.31
------- -------- ------- ------
(In thousands, except per share amounts)
FISCAL 1995
<S> <C> <C> <C> <C>
Net sales $2,892 $2,402 $2,060 $ 2,157
Gross profit 1,096 874 588 (75)
Net income (loss) 90 (87) (255) (2,185)
Net income (loss) per share $ .02 $ (.02) $ (.05) $ (.43)
FISCAL 1994
Net sales $3,128 $3,009 $3,028 $ 3,173
Gross profit 1,202 1,110 1,077 1,225
Net income (loss) 49 (112) (130) (19)
Net income (loss) per share $ .01 $ (.02) $ (.03) --
</TABLE>
GENERAL PARAMETRICS CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Year Balance at Charged to Charged Balance
Ended Beginning Costs and to Other End of
Oct 31, Description of Period Expenses Accounts Deductions(1) Period
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1995 Allowance for $373,000 $231,000 $10,000 $(200,000) $414,000
doubful accounts
Reserve for lease $ 0 $180,000 -- -- $180,000
costs
1994 Allowance for $311,000 $ 35,000 $27,000 $ -- $373,000
doubtful accounts
1993 Allowance for $282,000 $ 19,000 $26,000 $ -- $311,000
doubtful accounts
</TABLE>
(1) Net of recoveries
-28-
<PAGE> 29
GENERAL PARAMETRICS CORPORATION
ANNUAL REPORT ON FORM 10-K
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
<S> <C> <C>
3.1* Certificate of Incorporation, as
amended.
3.3* Bylaws.
10.1** Employee Stock Purchase Plan,
as amended.
10.2** Stock Option Plan, as amended, and
forms of Incentive Stock Option
Agreement and Nonstatutory Stock
Option Agreement, as amended.
10.3* Form of Indemnity Agreement
between Registrant and each of its
officers and directors.
10.5*** Lease agreement dated June 21, 1994,
between Registrant as Lessee and
Smith & Walters, Inc. as Lessor.
21.1 Subsidiaries of Registrant (included on page 30).
24.1 Consent of Independent Accountants
(included on page 31).
25.1 Power of Attorney (included on page 16).
</TABLE>
* Incorporated by reference to exhibit filed with the Registrant's
Registration Statement on Form S-1 (No. 33-6591) filed June 19, 1986, and
Amendment No. 1 thereto filed July 28, 1986, which Registration Statement
became effective July 30, 1986.
** Incorporated by reference to exhibit filed with the Registrant's
Post-Effective Amendment No. 1 to Registration Statement on Form S-8 (No.
33-10517) filed with the Securities and Exchange Commission on March 31,
1988
*** Incorporated by reference from exhibit filed with the Registrant's October
31, 1994 Form 10-K.
-29-
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF GENERAL PARAMETRICS CORPORATION
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation
<S> <C>
1. Parametrics Limited Jamaica
2. General Parametrics California
International, Limited
3. General Parametrics England
U.K. Limited
4. General Parametrics of Canada
Canada, Limited
5. General Parametrics GmbH Germany
</TABLE>
-30-
<PAGE> 1
EXHIBIT 24.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of Post-Effective Amendment No. 1 to the Registration
Statement on Form S-8 (File No. 33-10517) of General Parametrics Corporation of
our report dated December 4, 1995 appearing on page 18 of this Form 10-K.
PRICE WATERHOUSE LLP
San Francisco, California
January 25, 1996
-31-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-START> NOV-01-1994
<PERIOD-END> OCT-31-1995
<CASH> 3,032,000
<SECURITIES> 3,361,000
<RECEIVABLES> 1,599,000
<ALLOWANCES> (414,000)
<INVENTORY> 1,718,000
<CURRENT-ASSETS> 9,957,000
<PP&E> 58,000
<DEPRECIATION> (2,955,000)
<TOTAL-ASSETS> 10,130,000
<CURRENT-LIABILITIES> (817,000)
<BONDS> 0
0
0
<COMMON> 51,000
<OTHER-SE> (9,262,000)
<TOTAL-LIABILITY-AND-EQUITY> (10,130,000)
<SALES> 9,511,000
<TOTAL-REVENUES> 9,511,000
<CGS> 7,028,000
<TOTAL-COSTS> 5,732,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 231,000
<INTEREST-EXPENSE> 312,000
<INCOME-PRETAX> (2,937,000)
<INCOME-TAX> (500,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,437,000
<EPS-PRIMARY> (0.48)
<EPS-DILUTED> (0.48)
</TABLE>
