UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d)of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1997
Commission File Number 33-6859-D
ZEON CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-0827610
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1500 Cherry Street, Louisville, CO 80027
(Address of principal executive offices) (Zip Code)
(303) 666-9400
(Registrant's telephone number including area code)
Data Display Corporation
(Former name, former address and former fiscal year if changed
since last reported)
Check whether the issuer (1) has filed all reports required to be filed by
Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
[X] Yes [ ] No
Number of shares of Common Stock Outstanding at June 30, 1997.
Common Stock, No Par Value 349,205
(Class) (Number of Shares)
Transitional Small Business Disclosure Format (check one):
[ ]Yes [X] No
<PAGE>
ZEON CORPORATION
<TABLE>
INDEX
<CAPTION>
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Page
Part I - Financial Information
Balance Sheets June 30, 1997 and December 31, 1996 3
Statements of Operations - Three Months Ended June 30,
1997 and 1996 5
Statements of Operations - Six Months Ended
June 30, 1997 and 1996 6
Statements of Cash Flows - Six Months Ended
June 30, 1997 and 1996 7
Notes to Financial Statements 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II - Other Information 14
Signature Page 15
</TABLE>
<PAGE>
ZEON CORPORATION
BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
June 30, 1997 December 31, 1996
(unaudited)
CURRENT ASSETS
Cash $ 133,239 $ 133,778
Trade Receivables, Net of Allowance
for Doubtful Accounts 386,498 234,113
Inventories 235,392 200,285
Prepaid Expenses and Other 17,096 32,505
TOTAL CURRENT ASSETS 772,225 606,681
Property and Equipment (net of
accumulated depreciation and
amortization) 67,219 75,640
Other 37,775 41,766
TOTAL NON-CURRENT ASSETS 104,994 117,406
TOTAL ASSETS $ 877,219 $ 724,087
</TABLE>
<PAGE>
ZEON CORPORATION
BALANCE SHEETS (Continued)
<TABLE>
<CAPTION>
<S> <C> <C>
June 30, 1997 December 31, 1996
(unaudited)
CURRENT LIABILITIES
Accounts Payable $ 225,638 $ 116,450
Accrued Expenses 53,296 71,346
TOTAL CURRENT LIABILITIES 278,934 187,796
Shareholders' Equity:
Common stock, no par, $.10 stated
value; authorized 1,000,000;
issued 349,205 June 30, 1997
and 350,205 December 31, 1996 34,005 35,020
Capital in Excess of Stated Value 939,340 939,338
Deficit (375,060) (438,067)
598,285 538,291
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 877,219 $ 724,087
</TABLE>
<PAGE>
ZEON CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Three Months Ended Three Months Ended
June 30, 1997 June 30, 1996
Net Sales $ 681,081 $ 577,925
Cost of Sales 438,959 348,008
Gross Profit 242,122 229,917
Operating Expenses:
Selling 66,117 79,568
General 93,991 95,939
Research & Development 30,063 29,117
190,171 204,624
Income (Loss) From Operations 51,951 25,293
Other Charges (Credits):
Interest Expense 0 2
Interest Income (775) (357)
Other (Income) Expenses (6,630) ( 5,839)
(7,405) (6,194)
Net Income (Loss) $ 59,356 $ 31,487
Earning per share:
Net Income (Loss) $ .17 $ .09
Weighted Average Common
Shares Outstanding 349,538 350,205
</TABLE>
<PAGE>
ZEON CORPORATION
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Ended Six Months Ended
June 30, 1997 June 30, 1996
Net Sales $1,253,646 $1,075,898
Cost of Sales 809,919 689,997
Gross Profit 443,727 385,901
Operating Expenses:
Selling 149,376 182,602
General 185,427 177,758
Research & Development 61,360 62,062
396,163 422,422
Income (Loss) From Operations 47,564 (36,521)
Other Charges (Credits):
Interest Expense 4 105
Interest Income (1,352) (1,330)
Other (Income) Expenses (14,095) (11,738)
(15,443) (12,963)
Net Income (Loss) $ 63,007 $ (23,558)
Earning per share:
Net Income (Loss) $ .18 $ (.07)
Weighted Average Common
Shares Outstanding 349,538 350,205
</TABLE>
<PAGE>
ZEON CORPORATION
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C>
Six Months Ended Six Months Ended
June 30, 1997 June 30, 1996
Cash Flows From Operating Activities:
Net Income (Loss) $ 63,007 $ (23,558)
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided By (Used
In) Operating Activities:
Depreciation & Amortization 25,840 24,906
Provisions for Losses on
Accounts Receivable 3,000 1,500
Change in Operating Assets & Liabilities:
Decrease (Increase) in Accts Recvble (155,385) (66,453)
Decrease (Increase) in Inventory (35,107) 3,612
Decrease (Increase) in Prepaid Assets 25,400 11,885
Increase (Decrease) in Accts Payable 109,188 80,425
Increase (Decrease) in Accrued Expenses (18,050) (22,547)
Total Adjustments: (45,114) 33,328
Net Cash Provided By (Used In) Operating
Activities: 17,893 9,770
Cash Flows From Investing Activities:
Purchase of Capital Assets (17,420) ( 6,475)
Proceeds from sale of Fixed Assets 0 0
Net Cash Provided By (Used In) Investing
Activities: (17,420) (6,475)
Cash Flows From Financing Activities:
Purchase of Common Stock (1,012) -0-
Net Cash Provided By (Used In) Financing
Activities: (1,012) -0-
Net Increase (Decrease) In Cash: (539) 3,295
Cash At Beginning Of Period: 133,778 126,229
Cash At End Of Period: $ 133,239 $ 129,524
</TABLE>
<PAGE>
ZEON CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. Summary of significant accounting policies:
Inventories:
Inventories are valued at the lower of cost or market. Cost is
determined at standard, which approximates first-in, first-out.
Property, Equipment and Depreciation:
Property and equipment are stated at cost. For financial reporting
purposes, depreciation is calculated using the straight-line method over
the related assets estimated useful lives, which approximate five years.
For income tax reporting purposes, depreciation is calculated using
accelerated methods.
Revenue Recognition:
Sales are recorded in the periods that product is shipped.
Taxes on Income:
The Company follows the provisions of Statement of Financial Accounting
Standards No. 109 - Accounting for Income Taxes (SFAS No. 109). Under
SFAS No. 109, the Company's policy is to provide deferred income taxes
on differences between the financial reporting and tax basis of assets
and liabilities.
Earnings (Loss) Per Share:
Effective June 30, 1995 the shareholders of the Company approved a
reverse split of one share for every 100 shares of common stock
outstanding. As a result, earnings (loss) per share amounts have been
restated for all periods presented to reflect the reverse stock split.
Income (loss) per common share is computed on the basis of the weighted
average number of common shares outstanding during each period. The
average number of shares outstanding was 349,538 and 350,205 during each
of the respective periods ended June 30, 1997 and December 31, 1996.
Reclassifications:
Certain reclassifications have been made to the accompanying financial
statements for comparative purposes.
2. Inventories:
Inventories consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
(Unaudited)
June 30, December 31,
1997 1996
Finished Goods $ 58,519 $ 50,723
Work-in-process 10,442 14,318
Raw Materials 166,431 135,244
$235,392 $200,285
</TABLE>
<PAGE>
ZEON CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
3. Notes payable and long-term debt:
The Company has a line-of-credit commitment from its bank for borrowings
of up to $100,000, with interest on any borrowing at 1% above the bank's
reference rate to be paid monthly. The loan commitment, if exercised,
is collateralized by trade receivables, inventories, property and
equipment and intangibles. Under the terms of the agreement, the
Company is subject to certain restrictions which include, among other
things, restrictions on borrowings and dividend payments. At June 30,
1997 and December 31, 1996, no amount was outstanding under the line of
credit agreement.
4. Commitments and related party transactions:
In December 1992, the Company entered into an operating lease to
consolidate its primary manufacturing and office facilities. The
property is leased through January 2003 from an entity in which T. Bryan
Alu, President and Chief Executive Officer of the Company, is a partner.
The lease contains an option to renew for two additional five-year
periods and requires monthly payments of approximately $8,400. The
Company is also responsible for maintenance and operating costs.
The Company has an operating lease agreement with an unrelated party
which requires monthly payments of approximately $5,700 through
December 31, 2000 including renewal options. The Company has entered
into a sublease agreement for this space with an unrelated party through
December 31, 2000 at an initial monthly rent rate of approximately
$9,200.
Effective July, 1991 the Company adopted a directors' compensation plan
whereby directors will be compensated with restricted common stock of
the Company in exchange for services provided. Shares issued will be
valued based upon the market value of the stock as determined by the
Company. As of June 30, 1997, no shares had been issued under this
plan.
<PAGE>
ZEON CORPORATION
NOTES TO FINANCIAL STATEMENTS (Continued)
Effective June 21,1995 at the annual shareholders' meeting, the
Company's shareholders approved a stock option incentive plan proposed
by the Board of Directors. Stock options may be granted to any employee
or director of the Company at the discretion of the Board of Directors.
As of June 30, 1997, no stock options had been granted.
5. Taxes on income and available carryforwards:
At December 31, 1996, the Company had net operating loss carryforwards
for income tax purposes of approximately $345,000 and investment credit
and research and development credits of approximately $45,000. The net
operating losses expire in varying amounts from 2003 through 2005, and
the investment credit and research and development credits expire in
varying amounts from 1997 through 2000.
6. Supplemental:
During 1995, the Company sold certain assets (formerly referred to as
the "Display Division") of the Company having a net book value of
approximately $28,000 in exchange for cash proceeds of $37,000 and a
note receivable of $35,000.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS:
Financial Condition:
The liquidity of ZEON Corporation declined slightly with a current ratio of
2.8 to 1 at June 30, 1997 from 3.3 to 1 at December 31, 1996. With the
solid order and shipment flow, trade receivables and inventory levels have
increased. However, both receivables and inventory are current and their
turnover experience are at the same level as 1996. Current capital
equipment requirements are deemed insignificant and internal funding and
available bank resources are considered adequate to meet those needs.
Results of Operations:
Results of operations for the three months ending June 30, 1997 and 1996
<TABLE>
<CAPTION>
<S> <C> <C>
THREE MONTHS ENDED JUNE 30,
1997 1996
Sales: $681,081 $577,925
Gross Profit: 242,122 229,917
Income : 59,356 31,487
</TABLE>
Second quarter sales for 1997 was a record setting quarter for shipments.
While gross profit was higher than second quarter 1996, the percentage of
sales was 35% as compared to 1996 second quarter's 39%. The drop in gross
profit percentage is attributed product mix (1%), factory unfavorable
variances (2%) and increased shipping costs (1%). Both income dollars and
percentage increased over 1996 second quarter due to the additional sales
volume and operating expenses being $10,000 below prior years' quarter level.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED):
Quarterly selling expenses decreased $13,500 or 17% over 1996. Lower
commissions paid and salary costs contributed to the decrease.
General expenses decreased slightly by $2,000 over last year's second
quarter. Increased salaries were offset by reduction of the other general
and administrative expenses.
Research and Development costs remained relatively constant despite
increased prototypes in the franchise market segment. The increased
prototype activity was accomplished with existing staff.
Other income was approximately $1,000 higher than 1996 second quarter as
income from subleased space reflected a inflation cost index increase.
Results of operations for the six months ending June 30, 1997 and 1996
<TABLE>
<CAPTION>
<S> <C> <C>
SIX MONTHS ENDED JUNE 30,
1997 1996
Sales: $1,253,646 $1,075,898
Gross Profit: 443,727 385,901
Income (Loss): 63,007 (23,558)
</TABLE>
The Company's year-to-date Neon sales showed 16% increase over prior 1996's
first half. With sales increasein both second and first quarters, 1997 sales
was $178,000 greater than 1996's first half. Gains in new franchise accounts
and solid order performance with existing customers contributed to this
growth. Overall gross profit percentage of sales remained level with product
mix and factory variances. First half of 1997 showed an income which was a
turnaround from 1996's first half loss. (Last year's first quarter
experienced production capacity limitations with the departure of three neon
glass tubebenders which was corrected in early 1996's second quarter by
filling the vacant neon glass tubebender positions.) Higher volume and lower
operating expenses by $26,000 accounted for the 1997's income.
Selling expense decreased 19% over last year. For the 1997's first half,
overall salary and expense levels were down as market/sales effort in the
grid segment was downsized. Franchise promotional and convention expenses
and commission expenses increased from 1996's level resulting in new
franchise accounts.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED):
General and administrative expenses increased by $8,000 from 1996's first
half. Increased salaries and bad debt provision were only partially offset
by a reduction in the other general and administrative expenses.
Research and Development expenses remained constant from 1996's level.
Prototype activity supporting marketing efforts were accomplished with
existing personnel.
Other income increased by $2,000 due to cost index increase in the
sublease rent income.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of matters to a vote of Security-Holders
The Company had its annual shareholders' meeting on July 18, 1997. The
following sets forth the matters acted upon at such meeting and the
voting results with respect to each matter:
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<CAPTION>
<S> <C> <C> <C>
For Against Abstain
1.) Election of Directors
T. Bryan Alu 264,247 87
Alan M. Bloom 264,247 87
Jay R. Beyer 264,247 87
</TABLE>
Item 5. Other information
None
Item 6. Exhibits and Reports on Form 8-K
Part A. None
Part B. No reports on Form 8-K have been filed for the quarter ended
June 30, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 1, 1997 /s/ T. Bryan Alu
T. Bryan Alu
President
/s/ R. G. Routt
R. G. Routt
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 7
<LEGEND>
THIS FINANCIAL SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ZEON CORPORATION'S FINANCIAL STATEMENTS FOR THE
THREE MONTHS ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000796513
<NAME> ZEON CORPORATION
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1.0
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 0
<CASH> 133,239
<RECOVER-REINSURE> 0
<DEFERRED-ACQUISITION> 0
<TOTAL-ASSETS> 877,219
<POLICY-LOSSES> 0
<UNEARNED-PREMIUMS> 0
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<POLICY-HOLDER-FUNDS> 0
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0
0
<COMMON> 34,005
<OTHER-SE> 598,285
<TOTAL-LIABILITY-AND-EQUITY> 877,219
0
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<INCOME-PRETAX> 59,356
<INCOME-TAX> 59,356
<INCOME-CONTINUING> 59,356
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<NET-INCOME> 59,356
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
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</TABLE>
