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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________ to _________
Commission File Number 0-16011
WATSON GENERAL CORPORATION
(Name of small business issuer in its charter)
CALIFORNIA 95-2873757
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization Identification No.)
32-B MAUCHLY
IRVINE, CALIFORNIA 92718
(Address of principal (Zip Code)
executive offices)
Issuer's telephone number: (714) 727-4020
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO PAR VALUE
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 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.
YES [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained herein, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of Form this 10-KSB or any amendment
thereto. [X]
State issuer's revenues for its most recent fiscal year: $4,089,000
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the price at which the stock was sold on December 17, 1996 was
$8,959,930 For purposes of the foregoing calculation only, all directors and
executive officers of the registrant have been deemed affiliates.
The number of shares outstanding of the issuer's common stock, as of December
17, 1996, was 10,487,401.
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Part II. Item 6 is hereby amended in its entirety as follows:
ITEM 6. MANAGEMENT'S DISCUSSION OF ANALYSIS OR PLAN OF OPERATION
Results of Operations
The Company reported a net loss of $2,066,000 for fiscal 1996 compared to
$1,106,000 for fiscal 1995. The increase in operating losses are due in
significant part to:
Acquisition of EnviroQuest Technologies, Ltd. and the operational merger of
this new subsidiary with the Company's Enviralert, Inc. subsidiary to form
Watson Systems, Inc. The discovery, of certain alleged inaccuracies of
certain representation, warranties, and covenants made to the Company in
connection with the acquisition caused both additional costs, as well as
delays in sales and marketing.
Ramp up of sales, marketing, and processing capacity costs for Watson
Systems, Inc.
Though losses were incurred in fiscal year 1996 the Company has continued to
improve its sales and gross margins. The Company's gross profit for fiscal 1996
was $1,591,000 or 39% of sales versus gross profit of $1,144,000 or 38% of sales
in fiscal 1995, and gross profit of $610,000 or 36% of sales in fiscal 1994. The
Company expects to maintain these higher gross margins.
Net sales for fiscal 1996 were $4,089,000, an increase of $1,099,000 from
$2,990,000 for fiscal 1995. The increase was due in large part to the
acquisition of EnviroQuest Technologies, Ltd. whose net sales for the eight
months after acquisition were $860,000. The remaining increase was due to
increased volume of services performed by the Company's other subsidiaries.
There were no material price increases during the year. With the acquisition of
EnviroQuest Technologies, Ltd. the Company now monitors over 22,000 underground
storage tanks. During the year the Company established affiliate relationships
in Australia and Korea. While no sales were derived from these relationships
during fiscal 1996, the Company sees strong international potential for its
products and services.
The Company's sales depend in part upon its customer's decision as to when to
implement measures to meet 1998 compliance requirements. The Company believes
that the market for its services may accelerate as compliance deadlines
approach.
Selling, general and administrative expenses increased to $3,368,000 in fiscal
1996 compared to $2,193,000 in fiscal 1995. This increase is in large part due
to additional costs of the new Watson Systems, Inc. operating subsidiary.
Liquidity & Capital Resources
The Company effectively financed its net cash used in operating activities for
the fiscal year by issuance of common stock.
At September 30, 1996 the Company's current liabilities exceeded current assets
by $598,000 compared to a surplus of current assets over current liabilities of
$731,000 at September 30, 1995. The Company's business does not require material
ongoing capital expenditures
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The Company has historically relied upon shareholder capital to fund operational
deficits, and expects to continue funding any operating deficits through equity
infusions in fiscal 1997. The Company is in the process of negotiating an equity
financing arrangement expected to net funds in excess of amounts required to
adequately finance operations and expansion plans. The Company also intends to
sell certain real estate assets to generate working capital.
If the Company does not obtain adequate equity financing, management plans to
recommend to the Company's Board of Directors that the Company divest certain
subsidiaries or assets, and severely curtail operating expenses in order to
finance its ongoing environmental monitoring software business.
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 hereunto duly authorized.
WATSON GENERAL CORPORATION
Date: July 10, 1997 By /s/ JOSEPH L. CHRISTOFFEL
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Joseph L. Christoffel
Chief Financial Officer
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