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Previous: BWIP INC, 10-Q, 1997-05-14 |
Next: RETAIL EQUITY PARTNERS LIMITED PARTNERSHIP, 10-Q, 1997-05-14 |
<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 March 31, 1997
--------------
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 March 31, 1997 was
10,922,401 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 March 31, 1997 have
been included.
ITEM 1. FINANCIAL STATEMENTS
WATSON GENERAL CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheet
<TABLE>
<CAPTION>
March September
31, 1997 30, 1996
(unaudited) (unaudited)
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and equivalents $ 265,000 $ 240,000
Accounts receivable 449,000 670,000
Prepaid expenses and other current assets 116,000 93,000
----------- -----------
830,000 1,003,000
PROPERTY AND EQUIPMENT 388,000 806,000
DEPOSITS AND OTHER ASSETS 11,000 --
INTANGIBLES AND GOODWILL 2,322,000 2,434,000
----------- -----------
3,551,000 4,243,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable, accrued expenses
and other liabilities 1,017,000 1,147,000
Current portion of long-term debt 264,000 454,000
----------- -----------
1,281,000 1,601,000
LONG-TERM DEBT& OTHER LIABILITIES 418,000 470,000
DEFERRED EMPLOYEE BENEFITS 434,000 435,000
SHAREHOLDERS' EQUITY
Common stock 9,534,000 9,100,000
Additional paid-in capital 653,000 653,000
(Accumulated deficit) (8,769,000) (8,016,000)
----------- -----------
1,418,000 1,737,000
----------- -----------
3,551,000 4,243,000
=========== ===========
</TABLE>
2
<PAGE> 3
WATSON GENERAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
Three Months Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Sales $ 870,000 $ 864,000
Cost of sales 449,000 473,000
--------- ---------
Gross profit (loss) 421,000 391,000
Selling, general and administrative expenses 812,000 790,000
Research and development expenses 82,000 77,000
Interest and expense, net of interest income 31,000 20,000
--------- ---------
Loss from operations before benefit for income taxes (504,000) (496,000)
Benefit for income taxes -- --
--------- ---------
Net (loss) (504,000) (496,000)
========= =========
Net (loss), per share
(0.05) (0.05)
========= =========
</TABLE>
3
<PAGE> 4
WATSON GENERAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
Six Months Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Sales $ 2,170,000 $ 1,411,000
Cost of sales 961,000 898,000
----------- -----------
Gross profit (loss) 1,209,000 513,000
Selling, general and administrative expenses 1,719,000 1,254,000
Research and development expenses 167,000 77,000
Interest and expense, net of interest income 71,000 33,000
----------- -----------
Loss from operations before benefit for income taxes (748,000) (851,000)
Benefit for income taxes (5,000) (5,000)
----------- -----------
Net (loss) (753,000) (856,000)
=========== ===========
Net (loss), per share
(0.07) (0.08)
=========== ===========
</TABLE>
4
<PAGE> 5
WATSON GENERAL CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six Months Ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
(unaudited) (unaudited)
----------- -----------
<S> <C> <C>
Cash flows (used in) operating activities:
Net (loss) $ (753,000) $ (856,000)
Adjustments to reconcile net (loss) to net cash
used for operating activities
Depreciation and amortization 152,000 120,000
(Increase) decrease in:
Accounts receivable 221,000 64,000
Other current assets (23,000) 37,000
Increase (decrease) in:
Accounts payable and accrued expenses (130,000) 1,000
----------- -----------
(533,000) (634,000)
----------- -----------
Cash flows (used in) investing activities:
Increase in deposits (11,000) (10,000)
Net purchase of subsidiary -- (572,000)
Sale (purchase) of property and equipment 377,000 (28,000)
----------- -----------
366,000 (610,000)
----------- -----------
Cash flows (used in) provided by financing activities
Proceeds from issuance of common stock 434,000 1,811,000
Borrowings, net of repayments (242,000) 71,000
----------- -----------
192,000 1,882,000
----------- -----------
Increase (Decrease) in cash 25,000 638,000
Cash, beginning 240,000 466,000
----------- -----------
Cash, ending 265,000 1,104,000
=========== ===========
</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 1997 the Company reported a net loss of
$504,000 or $0.05 per share as compared to a net loss of $496,000 or $0.05
per share in the prior year. Sales for the quarter were $870,000 compared
with $864,000 in the prior year. Gross margins continue at anticipated
levels.
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 a combination equity and debt 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.
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
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: May 13, 1997 By: /s/ Ronald G. Crane
---------------------------------
Ronald G. Crane
President and CEO
Date: May 13, 1997 By: /s/ Joseph L. Christoffel
---------------------------------
Joseph L. Christoffel
Chief Financial Officer
7
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 265,000
<SECURITIES> 0
<RECEIVABLES> 449,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 830,000
<PP&E> 388,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,551,000
<CURRENT-LIABILITIES> 1,281,000
<BONDS> 0
0
0
<COMMON> 9,534,000
<OTHER-SE> (8,116,000)
<TOTAL-LIABILITY-AND-EQUITY> 3,551,000
<SALES> 870,000
<TOTAL-REVENUES> 870,000
<CGS> 449,000
<TOTAL-COSTS> 449,000
<OTHER-EXPENSES> 812,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 31,000
<INCOME-PRETAX> (504,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (504,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (504,000)
<EPS-PRIMARY> (0.05)
<EPS-DILUTED> (0.05)
</TABLE>
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