U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d)of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1997
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)
(Former name, former address and former fiscal year if changed
since last reported)
Check whether the issuer (1) 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 May 1, 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
INDEX
Page
Part I - Financial Information
Balance Sheet March 31, 1997 and December 31, 1996 3
Statement of Operations - Three Months Ended
March 31, 1997 and 1996 5
Statements of Cash Flows - Three Months Ended
March 31, 1997 and 1996 6
Notes to Financial Statements 7
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II - Other Information 12
Signature Page 13
<PAGE>
<TABLE>
ZEON Corporation
BALANCE SHEETS
<CAPTION>
March 31, 1997 December 31, 1996
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 111,692 $ 133,778
Trade Receivables, Net of Allowance
for Doubtful Accounts 284,089 234,113
Inventories 217,206 200,285
Prepaid Expenses and Other 35,530 38,505
TOTAL CURRENT ASSETS 648,517 606,681
Property and Equipment (net of
accumulated depreciation and
amortization) 73,145 75,640
Other 39,771 41,766
TOTAL NON-CURRENT ASSETS 112,916 117,406
TOTAL ASSETS $ 761,433 $ 724,087
</TABLE>
<PAGE>
<TABLE>
ZEON Corporation
BALANCE SHEETS (Continued)
<CAPTION>
March 31, 1997 December 31, 1996
(unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts Payable $ 200,395 $116,450
Accrued Expenses 20,784 71,346
TOTAL CURRENT LIABILITIES 221,179 187,796
Long-Term Debt (net of current
portion) -0- -0-
TOTAL LIABILITIES 221,179 187,796
Shareholders Equity:
Common stock, no par, $.10 stated
value; authorized 100,000,000;
issued 349,205 March 31, 1997
and 350,205 December 31, 1996 34,920 35,020
Capital in Excess of Stated Value 938,426 939,338
Deficit (433,092) (438,067)
540,254 536,291
TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY $ 761,433 $ 724,087
</TABLE>
<PAGE>
<TABLE>
ZEON Corporation
STATEMENT OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
<S> <C> <C>
Net Sales $ 572,565 $ 497,973
Cost of Sales 369,635 341,989
Gross Profit 202,930 155,984
Operating Expenses:
Selling 83,259 103,034
General 91,436 81,819
Research & Development 31,297 32,945
205,992 217,798
Income (Loss) From Operations (3,062) (61,814)
Other Income (Expenses):
Interest Expense -0- (103)
Interest Income 573 973
Other Income (Expenses) 7,465 5,899
8,038 6,769
Net Income (Loss) $ 4,976 $(55,045)
Earning per share:
Net Income (Loss) $ .014 $ (.157)
Weighted Average Common
Shares Outstanding 349,205 350,205
</TABLE>
<PAGE>
<TABLE>
ZEON Corporation
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1997 March 31, 1996
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) $ 4,975 $ (55,045)
Adjustments to Reconcile Net Income
(Loss) to Net Cash Provided By (Used
In) Operating Activities:
Depreciation & Amortization 12,114 12,452
Provisions for Losses on
Accounts Receivable 1,500 750
Gain on Sale of Fixed Assets -0- -0-
Change in Operating Assets & Liabilities:
Decrease (Increase) in Accts Receivable (51,476) (30,394)
Decrease (Increase) in Inventory (16,921) 10,819
Decrease (Increase) in Prepaid Assets 4,970 16,902
Increase (Decrease) in Accts Payable 83,945 65,761
Increase (Decrease) in Accrued Expenses (50,562) (11,319)
TOTAL ADJUSTMENTS: (16,430) 64,971
Net Cash Provided By (Used In) Operating
Activity: (11,455) 9,926
Cash Flows From Investing Activities:
Proceeds from Sale of Fixed Assets -0- -0-
Purchase of Capital Assets ( 9,619) (4,815)
Net Cash Provided by (Used In) Investing
Activities: (9,619) (4,815)
Cash Flows From Financing Activities:
Purchase of Common Stock (1,012) -0-
Net Increase (Decrease) of
Long-term Debt -0- (3,522)
Net Cash Provided By (Used In) Financing
Activities: (1,012) (3,522)
Net Increase (Decrease) In Cash: (22,086) 1,589
Cash At Beginning of Period: 133,778 126,229
Cash At End of Period: $111,692 $ 127,818
</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
approximates 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 related primarily to depreciation and other
items that result in differences between the financial reporting
and tax basis of assets and liabilities.
Earnings (Loss) Per Share:
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 349,205 and
350,205 during each of the periods ended March 31, 1997
and December 31, 1996 respectively.
Reclassifications:
Certain reclassifications have been made to the accompanying
financial statements for comparative purposes.
2. Inventories:
Inventories consist of the following:
March 31, December 31,
1997 1996
Finished Goods $ 48,038 $ 50,723
Work-in-process 17,898 14,318
Raw Materials 151,270 135,244
$ 217,206 $200,285
<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 March 31, 1997 and December 31, 1996, no amount
was outstanding under line of credit agreements.
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 a partnership from
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 with the Company also responsible for maintenance
and operating costs.
The Company has an operating lease agreement with an unrelated party for
additional manufacturing facilities which requires monthly
payments of approximately $5,700 through December 31, 2000 including
renewal options. The Company entered into a sublease agreement for
this space with an unrelated party through December 31, 2000 for an
initial monthly rent of $9,200 and increasing at 5% per year.
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 March 31, 1997, no shares had been issued under this
plan.
<PAGE>
ZEON Corporation
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 2011, and the investment credit and research and development credits
expire in varying amounts from 1996 through 2000.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS:
Financial Condition:
The liquidity of ZEON Corporation remains adequate, with a current ratio of
2.9 to 1 as of March 31, 1997, and 3.3 to 1 as of December 31, 1996. With
the solid order and shipment flow, trade accounts receivable and inventory
levels have increased. However, both receivables and inventory are current
and their turnover experience are at same level as 1996.
Results of Operations:
Results of operations for the three months ending March 31, 1997
and 1996
THREE MONTHS ENDED MARCH 31,
1997 1996
Sales: $572,565 $497,973
Income (Loss): 4,976 (55,045)
Net income for the first quarter of 1997 was $4,976. The Company
had a solid year end backlog and franchise orders had been growing. This
resulted in a 15% increase in 1997's first quarter shipments over 1996' first
quarter.
Gross profit margin, as a percentage of sales in the first
quarter of 1997, was 35% as compared to 31% for 1996' first quarter.
This 4 point increase was due to more favorable product mix and fixed
factory costs spread over a larger volume.
Selling expenses decreased by 19% percent over first quarter 1996. The
$19,775 decrease resulted from reduced salaries and advertising.
Convention expenses did, however, increase by $10,000 as sales effort in the
franchise markets increased.
General and Administrative expenses increased by $9,600 over same
period last year. The additional expenses were salaries, rent(more space)
and property taxes.
Research and development decreased $1,600 with a reduction of
payroll. The 1996's first quarter included increased payroll expenses
related to the final design work on ZEON(RT) lightbox product line. These
1996 expenses were temporary and was reduced as ZEON(RT) lightbox product
line was introduced.
Other income increased by approximately $1,200 as the annual 5% rent
increase was given to tenants subleasing the company's previous manufacturing
facility.
<PAGE>
PART II-OTHER INFORMATION
Item 5. Other information
April 18, 1997 has been set as the record date for Company's annual
shareholders' meeting to be held on June 20, 1997.
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 March 31, 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: May 15, 1997 /s/ T. Bryan Alu
T. Bryan Alu
President
/s/ R.G. Routt
R. G. Routt
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ZEON CORPORATION'S FINANCIAL STATEMENTS FOR THE THREE
MONTHS ENDED MARCH 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000796513
<NAME> ZEON CORPORATION
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1.00
<CASH> 111,692
<SECURITIES> 0
<RECEIVABLES> 288,765
<ALLOWANCES> (4,676)
<INVENTORY> 217,206
<CURRENT-ASSETS> 648,517
<PP&E> 398,824
<DEPRECIATION> (325,679)
<TOTAL-ASSETS> 761,433
<CURRENT-LIABILITIES> 221,179
<BONDS> 0
0
0
<COMMON> 34,920
<OTHER-SE> 495,334
<TOTAL-LIABILITY-AND-EQUITY> 761,433
<SALES> 572,565
<TOTAL-REVENUES> 572,565
<CGS> 369,635
<TOTAL-COSTS> 369,635
<OTHER-EXPENSES> 204,492
<LOSS-PROVISION> 1,500
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,976
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,976
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,976
<EPS-PRIMARY> .014
<EPS-DILUTED> .014
</TABLE>
