|
|
|
|
|
|
|
|
|
|
|
|
|
|
Previous: WATSON GENERAL CORP, 8-K, 1996-08-12 |
Next: POLARIS AIRCRAFT INCOME FUND IV, 10-Q, 1996-08-12 |
<PAGE> 1
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 June 30, 1996
-------------
Commission file number 0-16011
-------
WATSON GENERAL CORPORATION
(Exact name of registrant as specified in its charter)
California
----------
(State or other jurisdiction of
incorporation or organization)
95-2873757
----------
(I.R.S. Employer Identification No.)
32-B Mauchly
Irvine, California
------------------
(Address of principal executive offices)
92718
-----
(Zip Code)
(714) 727-4020
--------------
(Registrant's telephone number,
including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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.
X Yes No
- --- ---
The number of shares of Common Stock outstanding on June 30, 1996 was
10,626,051 Shares.
<PAGE> 2
PART I -- FINANCIAL INFORMATION
The financial information furnished herein has not been audited by independent
accountants; however, in the opinion of management, all adjustments (only
consisting of normal recurring accruals) necessary for a fair presentation of
the results of operations for the three month period ending June 30, 1996 have
been included.
ITEM 1. FINANCIAL STATEMENTS
WATSON GENERAL CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheet
<TABLE>
<CAPTION>
June September
30, 1996 30, 1995
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 635,000 $ 466,000
Accounts receivable 758,000 723,000
Prepaid expenses and other current assets 155,000 129,000
Refundable income taxes 16,000 -
Deferred income taxes 17,000 -
----------- -----------
1,581,000 1,318,000
PROPERTY AND EQUIPMENT 821,000 612,000
DEPOSITS AND OTHER ASSETS 32,000 5,000
INTANGIBLES AND GOODWILL 2,808,000 386,000
----------- -----------
5,242,000 2,321,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, accrued expenses
and other liabilities 920,000 521,000
Deferred revenue on service sales 137,000 -
Current portion of long-term debt 158,000 66,000
=========== ===========
1,215,000 587,000
LONG-TERM DEBT & OTHER LIABILITIES 919,000 359,000
DEFERRED INCOME TAXES 17,000 -
DEFERRED EMPLOYEE BENEFITS SHAREHOLDERS' EQUITY 435,000 435,000
Common stock 9,394,000 6,737,000
Additional paid-in capital 520,000 153,000
(Accumulated deficit) (7,258,000) (5,950,000)
----------- -----------
2,656,000 940,000
5,242,000 2,321,000
=========== ===========
</TABLE>
2
<PAGE> 3
WATSON GENERAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Sales $1,129,000 $1,037,000
Cost of sales (569,000) (623,000)
---------- ----------
Gross profit (loss) 560,000 414,000
Corporate, general and administrative expenses (849,000) (525,000)
Research and development (130,000) -
Interest and dividend income, net of interest expense (33,000) (12,000)
---------- ----------
Loss from operations before benefit for income taxes (452,000) (123,000)
Benefit for income taxes - -
---------- ----------
Net (loss) (452,000) (123,000)
========== ==========
Net (loss), per share (.04) (.01)
========== ==========
</TABLE>
3
<PAGE> 4
WATSON GENERAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
Nine Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Sales $ 2,541,000 $ 2,136,000
Cost of sales (1,467,000) (1,291,000)
----------- -----------
Gross profit (loss) 1,074,000 845,000
Corporate, general and administrative expenses (2,104,000) (1,715,000)
Research and development (207,000) -
Interest and dividend income, net of interest expense (66,000) (41,000)
----------- ------------
Loss from operations before benefit for income taxes (1,303,000) (911,000)
Benefit for income taxes (5,000) (10,000)
----------- ------------
Net (loss) (1,308,000) (921,000)
=========== ============
Net (loss), per share (.12) (.10)
=========== ============
</TABLE>
4
<PAGE> 5
WATSON GENERAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Nine Months Ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Cash flows (used in) operating activities:
Net (loss) $(1,308,000) $ (921,000)
Adjustments to reconcile net (loss)
to net cash used for operating activities:
Depreciation and amortization
(Increase) decrease in: 229,000 98,000
Accounts receivable 67,000 (309,000)
Other current assets 7,000 (38,000)
Increase (decrease) in:
Accounts payable and accrued expenses 132,000 170,000
Current portion of long term debt (37,000 -
Deferred revenue on service sales (7,000) -
----------- -----------
(917,000) (1,000,000)
----------- -----------
Cash flows (used in) investing activities:
Increase in deposits (24,000) -
Net purchase of subsidiary (572,000) -
Purchase of property and equipment (48,000) (322,000)
----------- -----------
(644,000) (322,000)
----------- -----------
Cash flows (used in) provided by
financing activities:
Proceeds from issuance of common stock 1,811,000 1,383,000
Borrowings, net of repayments (81,000) 283,000
----------- -----------
1,730,000 1,666,000
----------- -----------
Increase (Decrease) in cash 169,000 344,000
Cash, beginning 466,000 448,000
----------- -----------
Cash, ending 635,000 792,000
=========== ===========
</TABLE>
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations:
In the second quarter of fiscal 1996 the Company reported a net loss of
$452,000 or $0.04 per share as compared to a net loss of $123,000 or $0.01 per
share in the prior year. Results were negatively affected by the varied costs
associated with the acquisition of Watson Systems, Inc., ("WSI") (formerly
known as EnviroQuest Technologies, Ltd.) and the integration of another Company
subsidiary, EnvirAlert, into WSI. The Company also incurred additional costs
associated with the ramping up of a national sales force for the Company.
Additionally, revenues from the company's Toxguard subsidiary, which provides
environmental clean-up services for underground storage tanks, were down
significantly over the same quarter of the prior year.
The acquisition of WSI, a national provider of statistical inventory
reconciliation (SIR) services, was closed in the second fiscal quarter at the
end of January 1996. The combining of EnvirAlert and WSI will result in a
broader offering of compliance alternatives and inventory management to major
oil companies, independent marketers, and convenience store operators
nationwide.
Full integration of the two monitoring software operations under Roger Sherwood
as president has been completed and the Company is beginning an aggressive
national sales and Marketing campaign. Mr. Sherwood joined the company in late
calendar 1995 from a 30-year business career in management at Amoco.
Financial Condition and Liquidity:
The Company believe that its current cash and equivalents are adequate to
finance operations and expansion plans during fiscal 1996.
6
<PAGE> 7
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 Financial Data Schedule
8-K Settlement and Release re Acquisition of EnviroQuest Technologies, Ltd.
Filed 8/9/96
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WATSON GENERAL CORPORATION
(Registrant)
Date: August 10, 1996 By: /s/ Ronald G. Crane
-----------------------------
Ronald G. Crane
President and CEO
Date: August 10, 1996 By: /s/ Joseph L. Christoffel
-----------------------------
Joseph L. Christoffel
Chief Financial Officer
7
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 635,000
<SECURITIES> 0
<RECEIVABLES> 758,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,581,000
<PP&E> 821,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,242,000
<CURRENT-LIABILITIES> 1,215,000
<BONDS> 919,000
0
0
<COMMON> 9,394,000
<OTHER-SE> (6,738,000)
<TOTAL-LIABILITY-AND-EQUITY> 5,242,000
<SALES> 2,541,000
<TOTAL-REVENUES> 2,541,000
<CGS> 1,467,000
<TOTAL-COSTS> 1,467,000
<OTHER-EXPENSES> 2,311,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 66,000
<INCOME-PRETAX> (1,303,000)
<INCOME-TAX> 5,000
<INCOME-CONTINUING> (1,308,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,300,000)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
|
|