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Previous: ALLIANCE IMAGING INC /DE/, SC 13G/A, 1997-02-13 |
Next: BORG WARNER SECURITY CORP, SC 13G/A, 1997-02-13 |
<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 December 31, 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 December 31, 1996 was
10,487,401 Shares.
1
<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 December 31, 1996
have been included.
ITEM 1. FINANCIAL STATEMENTS
WATSON GENERAL CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheet
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
------------ -------------
(unaudited) (unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 391,000 $ 240,000
Accounts receivable 425,000 670,000
Prepaid expenses and other
current assets 138,000 93,000
----------- -----------
954,000 1,003,000
PROPERTY AND EQUIPMENT 429,000 806,000
DEPOSITS AND OTHER ASSETS 13,000 --
INTANGIBLES AND GOODWILL 2,378,000 2,434,000
----------- -----------
$ 3,774,000 $ 4,243,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, accrued expenses
and other liabilities $ 1,136,000 $ 1,147,000
Current portion of long-term debt 261,000 454,000
----------- -----------
1,397,000 1,601,000
LONG-TERM DEBT AND OTHER LIABILITIES 454,000 470,000
DEFERRED EMPLOYEE BENEFITS 435,000 435,000
SHAREHOLDERS' EQUITY
Common stock 9,100,000 9,100,000
Additional paid-in capital 653,000 653,000
(Accumulated deficit) (8,265,000) (8,016,000)
----------- -----------
1,488,000 1,737,000
----------- -----------
$ 3,774,000 $ 4,243,000
=========== ===========
</TABLE>
2
<PAGE> 3
WATSON GENERAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
------------ -------------
(unaudited) (unaudited)
<S> <C> <C>
Sales $1,300,000 $ 548,000
Cost of sales 512,000 426,000
---------- ---------
Gross profit (loss) 788,000 122,000
Selling, general and administrative expenses 907,000 464,000
Research and development expenses 85,000 --
Interest and expense, net of interest income 40,000 13,000
---------- ---------
Loss from operations before benefit for income taxes (244,000) (355,000)
Benefit for income taxes (5,000) (5,000)
---------- ---------
Net (loss) $ (249,000) $(360,000)
========== =========
Net (loss), per share $ (0.02) $ (0.04)
========== =========
</TABLE>
3
<PAGE> 4
WATSON GENERAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995
(unaudited) (unaudited)
----------- ------------
<S> <C> <C>
Cash flows (used in) operating activities:
Net (loss) $(249,000) $ (360,000)
Adjustments to reconcile net (loss) to net cash
used for operating activities:
Depreciation and amortization 75,000 35,000
(Increase) decrease in:
Accounts receivable 245,000 99,000
Other current assets (45,000) 52,000
Increase (decrease) in:
Accounts payable and accrued expenses (11,000) 12,000
--------- ----------
15,000 (162,000)
--------- ----------
Cash flows (used in) investing activities:
Increase in deposits (13,000) (43,000)
Purchase (sale) of property and equipment 358,000 (19,000)
--------- ----------
345,000 (62,000)
--------- ----------
Cash flows (used in) provided by financing activities
Proceeds from issuance of common stock -- 1,273,000
Borrowings, net of repayments (209,000) (5,000)
--------- ----------
(209,000) 1,268,000
--------- ----------
Increase (Decrease) in cash 151,000 1,044,000
Cash, beginning 240,000 466,000
--------- ----------
Cash, ending $ 391,000 $1,510,000
========= ==========
</TABLE>
4
<PAGE> 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations:
In the first quarter of fiscal 1996 the Company reported a net loss of
$249,000 or $0.02 per share as compared to a net loss of $360,000 or $0.04
per share in the prior year and a net loss of $758,000 for the prior
quarter. Contributing factors to reduced losses were gains in sales and the
sale of the Company's property in San Diego. Gross margins continue at
anticipated levels.
Net sales for the quarter increased $752,000 over the prior year due in part
to the Company's acquisition of it's Kansas City subsidiary, a national
provider of statistical inventory reconciliation 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.
Financial Condition and Liquidity:
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.
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.
5
<PAGE> 6
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.
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: February 5, 1996 By: /s/ Ronald G. Crane
---------------------------------
Ronald G. Crane
President and CEO
Date: February 5, 1996 By: /s/ Joseph L. Christoffel
---------------------------------
Joseph L. Christoffel
Chief Financial Officer
6
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 391,000
<SECURITIES> 0
<RECEIVABLES> 425,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 954,000
<PP&E> 429,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,774,000
<CURRENT-LIABILITIES> 1,397,000
<BONDS> 454,000
0
0
<COMMON> 9,100,000
<OTHER-SE> (7,612,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,774,000
<SALES> 1,300,000
<TOTAL-REVENUES> 1,300,000
<CGS> 512,000
<TOTAL-COSTS> 512,000
<OTHER-EXPENSES> 992,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,000
<INCOME-PRETAX> 244,000
<INCOME-TAX> 5,000
<INCOME-CONTINUING> (249,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (249,000)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
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