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<PAGE>
FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended January 6, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-16172
COMPUTONE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 23-2472952
- --------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1100 Northmeadow Parkway, Suite 150, Roswell, GA 30076
- ------------------------------------------------ -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404)475-2725
N/A
---
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 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. Yes X No .
--- ---
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X No .
--- ---
As of February 20, 1995, there were 6,240,880 shares of common stock
outstanding.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
----------------------------------
Item 1. Financial Statements:
Interim Condensed Balance Sheets as of
January 6, 1995 and April 1, 1994 3
Interim Condensed Statements of Income for
the three months ended January 6, 1995 and
January 7, 1994 4
Interim Condensed Statements of Income for
the nine months ended January 6, 1995 and
January 7, 1994 5
Interim Condensed Statements of Cash Flows
for the nine months ended January 6, 1995
and January 7, 1994 6
Notes to Interim Condensed Financial
Statements 7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 9
PART II. OTHER INFORMATION
--------------------------------------
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Computone Corporation
Interim Condensed Balance Sheets
(in thousands except par value and shares)
<TABLE>
<CAPTION>
January 6, 1995 April 1, 1994
(unaudited) (audited)
----------------- -----------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 417 $ 215
Receivables, net 2,914 2,905
Inventories, net 1,731 2,621
Prepaid expenses and other 188 48
----------------- -----------------
Total current assets 5,250 5,789
Property, equipment and improvements, net 1,034 1,168
Intangible assets, net 887 1,023
Other 164 167
----------------- -----------------
Total assets $ 7,335 $ 8,147
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade $ 1,145 $ 1,201
Accrued liabilities:
Payroll 106 101
Costs related to discontinued operations 356 473
Other 657 1,198
Current maturities of long term obligations 434 791
----------------- -----------------
Total current liabilities 2,698 3,764
Notes payable to affiliates 270 270
Other long term obligations 17 336
Commitments and contingencies --- ---
Stockholders' Equity
Convertible redeemable preferred stock, $.01
par value; 10,000,000 shares authorized;
200,000 share issued 2 2
Common stock, $.01 par value; 50,000,000
shares authorized; 6,240,078 and 6,201,883
shares outstanding at January 6, 1995 and
April 1, 1994, respectively 62 62
Additional paid in capital 41,580 41,649
Accumulated deficit (37,294) (37,936)
----------------- -----------------
Total stockholders' equity 4,350 3,777
----------------- -----------------
Total liabilities and stockholders' equity $ 7,335 $ 8,147
================= =================
</TABLE>
See accompanying notes to the consolidated financial statements.
3
<PAGE>
ITEM 1. Financial Statements (continued)
Computone Corporation
Interim Condensed Statements of Income
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
January 6, 1995 January 7, 1994
----------------- -----------------
<S> <C> <C>
Revenues:
Product sales $ 3,408 $ 3,076
Expenses:
Cost of products sold 2,134 1,813
Selling, general and administrative 1,025 894
Product development 236 301
----------------- -----------------
3,395 3,008
----------------- -----------------
Operating income from continuing operations 13 68
Non-Operating income (expense):
Other income (expense) 30 0
Interest expense (22) (6)
----------------- -----------------
Income from continuing operations before taxes 21 62
Income tax expense (benefit):
Current -- --
Deferred -- --
----------------- -----------------
-- --
----------------- -----------------
Income from continuing operations 21 62
Discontinued operations:
Income on disposal 99 --
----------------- -----------------
Income before extraordinary item 120 62
Extraordinary item:
Debt foregiveness 40 --
----------------- -----------------
Net income $ 160 $ 62
================= =================
Net income per common share and common
share equivalents:
Income from continuing operations -- 0.01
Income from discontinued operations 0.02 --
Income from extraordinary item -- --
----------------- -----------------
Net income per common share $ 0.02 $ 0.01
================= =================
Weighted average common shares and common
share equivalents outstanding 6,240 5,633
================= =================
</TABLE>
See accompanying notes to the consolidated financial statements.
4
<PAGE>
ITEM 1. Financial Statements (continued)
Computone Corporation
Interim Condensed Statements of Income
(in thousands except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
January 6, 1995 January 7, 1994
----------------- -----------------
<S> <C> <C>
Revenues:
Product sales $ 10,798 $ 10,135
Royalties -- 882
----------------- -----------------
Net revenues 10,798 11,017
Expenses:
Cost of products sold 6,677 5,989
Selling, general and administrative 3,097 2,780
Product development 811 955
----------------- -----------------
10,585 9,724
----------------- -----------------
Operating income from continuing operations 213 1,293
Non-Operating income (expense):
Other income (expense) 31 34
Interest expense (28) (118)
----------------- -----------------
Income from continuing operations before taxes 216 1,209
Income tax expense (benefit):
Current -- 436
Deferred -- (436)
----------------- -----------------
-- --
----------------- -----------------
Income from continuing operations 216 1,209
Discontinued operations:
Income on disposal 184 1,921
----------------- -----------------
Income from discontinued operations 184 1,921
----------------- -----------------
Income before extraordinary item 400 3,130
Extraordinary item:
Debt foregiveness 242 --
----------------- -----------------
Net income $ 642 $ 3,130
================= =================
Net income per common share and common
share equivalents:
Income from continuing operations 0.03 0.23
Income from discontinued operations 0.03 0.36
Income from extraordinary item 0.03 --
----------------- -----------------
Net income per common share $ 0.09 $ 0.59
================= =================
Weighted average common shares and
common share equivalents outstanding 6,205 5,273
================= =================
</TABLE>
See accompanying notes to the consolidated financial statements.
5
<PAGE>
ITEM 1. Financial Statements (continued)
Computone Corporation
Interim Condensed Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
For the Nine Months Ended
January 6, 1995 January 7, 1994
(unaudited) (unaudited)
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Income from continuing operations $ 458 $ 1,209
Adjustments to reconcile income from continuing operations
to net cash provided by (used in) continuing operations:
Depreciation and amortization 688 496
Provision for doubtful accounts (34) 29
Forgiveness of debt (242) --
Changes in assets and liabilities:
Receivables (9) 693
Inventories 890 (344)
Prepaid expenses and other (140) (23)
Deferred taxes -- --
Accounts payable and accrued liabilities (949) (261)
----------------- -----------------
Net cash provided by continuing operations 662 1,799
----------------- -----------------
Income from discontinued operations 184 1,921
Adjustments to reconcile income from discontinued operations
to net cash used in discontinued operations:
Income on disposal (184) --
Change in net assets of discontinued operations (133) (864)
Provision for loss on disposal -- (1,921)
----------------- -----------------
Net cash used in continuing operations (133) (864)
----------------- -----------------
Net cash provided by operating activities 529 935
----------------- -----------------
Cash flows from investing activities:
(Increase) decrease in other assets 3 (144)
Capitalization of software costs (224) (363)
Purchase and capitalization of property and equipment (68) (327)
----------------- -----------------
Net cash used in investing activities (289) (834)
----------------- -----------------
Cash flows from financing activities:
Borrowings under term debt agreements 300 --
Repayment of debt (350) (320)
Exercise of common stock options 12 116
Issuance of preferred stock -- 350
----------------- -----------------
Net cash (used in) provided by financing activities (38) 146
----------------- -----------------
Net increase in cash and cash equivalents 202 247
Cash and cash equivalents at beginning of period 215 104
----------------- -----------------
Cash and cash equivalents at end of period $ 417 $ 351
================= =================
Supplemental disclosures:
Interest paid $ 28 $ 8
================= =================
</TABLE>
See accompanying notes to the consolidated financial statements.
6
<PAGE>
COMPUTONE CORPORATION
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
(unaudited)
1. Basis of Presentation
--------------------
The financial statements included in this Form 10-Q have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures, normally included in financial statements prepared in accordance
with generally accepted accounting principles, have been condensed, or omitted,
pursuant to such rules and regulations. These financial statements should be
read in conjunction with the financial statements and related notes included in
the Company's Fiscal 1994 Form 10-K.
The financial statements presented herein, as of January 6, 1995 and for
the three and nine months then ended, reflect in the opinion of management, all
adjustments necessary for a fair presentation of financial position and the
results of operations for the periods presented. The results of operations for
any interim period are not necessarily indicative of the results for the full
year.
2. Inventories
-----------
Inventories, net of a reserve for obsolete, excess and non-salable
items, consisted of the following at January 6, 1995 and April 1, 1994 (in
thousands):
<TABLE>
<CAPTION>
Jan 6,1995 Apr 1,1994
---------- ----------
<S> <C> <C>
Finished goods $ 403 $ 799
Work in progress 391 542
Raw materials 937 1,280
------ ------
$1,731 $2,621
====== ======
</TABLE>
Income per share
----------------
Income per common share is computed by dividing net income applicable to
common stock by the weighted average number of shares of common stock and common
share equivalents outstanding during each period.
7
<PAGE>
COMPUTONE CORPORATION
NOTES TO INTERIM CONDENSED FINANCIAL STATEMENTS
(unaudited)
4. Income taxes
------------
On April 3, 1993, the Company adopted the Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". Such adoption had no
cumulative effect on the Company's consolidated financial statements. Prior
years' financial statements have not been restated.
The Company has available net operating and capital loss carryforwards,
including preacquisition operating loss carryforwards which relate to a
predecessor company, which expire during the period 2003-2008. The Company's
possible use of the loss carryforwards will be limited as a result of several
different changes in ownership which have occurred since the carryforwards
started to accumulate. The use of the net operating loss carryforwards are
limited due to statutory provisions which apply after certain changes in control
occur.
For financial reporting purposes, a valuation allowance has been
established to reflect a net deferred tax balance of $0 as of the date of
adoption of FAS 109 as well as at January 6, 1995.
The Company estimates that no current provision for income taxes is
required for the nine months ended January 6, 1995.
5. Debt
----
On August 12, 1994, the Company secured financing from a bank in the form
of a $300,000 note payable and a $500,000 line of credit. The note bears
interest at a rate of floating prime plus 2% and is due in monthly installments
of $16,666.67 plus accrued interest. The line of credit also bears interest at
a rate of floating prime plus 2% on any proceeds and .25% on any unused portion
of the line.
6. Extraordinary item
------------------
During the three months ended January 6, 1995, the Company identified
opportunities to reduce its working capital requirements by negotiating lump-sum
payment settlements with various vendors with which the Company had previously
restructured outstanding debt. As a result of these negotiations, the Company
was able to reduce the amounts payable to these vendors by approximately $40,000
which was accounted for as extraordinary income.
8
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition for the Three and
Nine Months Ended January 6, 1995.
INTRODUCTION
- ------------
The comparative information contained herein includes results of
operations for the Company's continuing businesses. Certain previous components
of the Company are presented as discontinued operations in the accompanying
Consolidated Financial Statements.
Liquidity
- ---------
Cash provided by income from continuing operations amounted to $662,000 for
the nine months ended January 6, 1995 compared to cash provided by continuing
operations of $1,799,000 for the comparable nine months ended January 7, 1994.
The reduction in cash provided by continuing operations as compared to the prior
year fiscal period primarily reflects the termination of a royalty agreement
during the nine months ended January 7, 1994 and a reduction in accounts payable
and accrued liabilities.
Cash used in financing activities amounted to $38,000 for the nine months
ended January 6, 1995 compared with $146,000 provided by financing activities
for the comparable nine months of the prior fiscal year. This change from the
same period of the prior fiscal year results from the issuance of preferred
stock during the nine months ended January 7, 1994.
Working capital amounted to $2,552,000 at January 6, 1995, an increase of
$527,000, since April 1, 1994. The ratio of current assets to current
liabilities at January 6, 1995 was 1.95 to 1.00 compared to 1.54 to 1.00 at
April 1, 1994. The increase in working capital is primarily attributable to the
payment of a portion of the Company's accrued liabilities.
On August 12, 1994, the Company secured financing from a bank in the form
of a $300,000 note payable and a $500,000 line of credit. The note bears
interest at a rate of floating prime plus 2% and is due in monthly installments
of $16,666.67 plus accrued interest. The line of credit also bears interest at a
rate of floating prime plus 2% on any proceeds and .25% on any unused portion of
the line.
9
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition for the Three and
Nine Months Ended January 6, 1995 (continued).
Results of operations
- ---------------------
Product sales revenue from continuing operations for the quarter ended
January 6, 1995 totaled approximately $3,408,000 compared to $3,076,000 for the
comparable quarter of the prior fiscal year, an 11% increase. Product sales
revenues for the nine months ended January 6, 1995 were $10,798,000 versus
$10,135,000 during the same period of the prior fiscal year, a 7% increase. Net
revenues for the nine months ended January 7, 1994 included $882,000 related to
royalties received. The increases in product sales revenues can be attributed
to the Company's continuing efforts to open new distribution channels throughout
the world.
Cost of products sold for the quarter amounted to $2,134,000 or 63% of
product sales revenues versus $1,813,000 or 59% for the comparable quarter of
the prior year. For the nine months ended January 6, 1995, cost of products sold
amounted to $6,677,000 or 62% of product sales revenue, versus $5,989,000 or 59%
for the comparable nine months of the prior fiscal year. The Company continues
to focus on reducing the cost of products sold in order to increase
profitability of continuing operations. However, some initial start-up costs
associated with the outsourcing of production has caused a temporary increase in
cost of products sold.
Selling, general and administrative expenses amounted to $1,025,000
and $3,097,000 or 30% and 29% of product sales revenue for the three and nine
ended January 6, 1995 versus $894,000 and $2,780,000 or 29% and 27% of product
sales revenue for the comparable three and nine months of the prior fiscal year,
respectively. The increases in expenses when compared to the same periods of
the prior fiscal year can be attributed to advertising and marketing
expenditures.
Product development expenses amounted to $236,000 and $811,000 or 7% and
8% of product sales revenue for the three and nine month periods ended January
6, 1995 This compares to $301,000 and $955,000 or 10% and 9% of product sales
revenue for the comparable three and nine periods of the prior fiscal year.
This reduction can be attributed to the capitalization of product development
expenses related to new products.
10
<PAGE>
ITEM 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition for the Three and
Nine Months Ended January 6, 1995 (continued).
Income from continuing operations for the quarter ended January 6, 1995
amounted to $21,000 compared to $62,000 for the comparable quarter of the prior
fiscal year, a 66% decrease. Income from continuing operations for the nine
months ended January 6, 1995 was $216,000 versus $327,000 for the same nine
month period of the prior fiscal year excluding the non-product royalty income
received during the prior fiscal year. This results in a 34% decrease from the
prior fiscal year. These decreases in income can be attributed to the Company's
temporary increase in costs of products sold associated with some start-up costs
pertaining to the outsourcing of production.
Income from discontinued operations totaled $184,000 for the nine months
ended January 6, 1995 compared to $1,921,000 for the nine months ended January
7, 1994. The $184,000 related to the sale of certain assets. The $1,921,000
related to the fact that the loss on disposal of Princeton and Denison was less
than originally provided for and, therefore, the estimated disposal costs were
reduced.
During the three months ended January 6, 1995, the Company identified
opportunities to reduce its working capital requirements by negotiating lump-sum
payment settlements with various vendors with which the Company had previously
restructured outstanding debt. As a result of these negotiations, the Company
was able to reduce the amounts payable to these vendors by approximately
$40,000 which was accounted for as extraordinary income.
11
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None, other than those matters described in Item 3 to the Company's
Annual Report on Form 10-K for the year ended April 1, 1994.
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
a) No exhibits are furnished with this report.
b) The Company filed a report dated December 15, 1994 on Form 8-K
reporting under Item 4. The report disclosed details of the Company's
terminated relationship with its independent accountant, Ernst & Young
LLP.
The Company is continuing to interview independent accounting firms
with the intention of making a decision on a firm in the near future.
12
<PAGE>
SIGNATURES
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, thereunto duly authorized.
COMPUTONE CORPORATION
Date: February 16, 1996 By: /s/ Thomas J. Anderson
----------------------
Thomas J. Anderson
President & Chief Operating Officer
(duly authorized officer and
Principal Executive Officer)
By: /s/ Gregory A. Alba
-------------------
Gregory A. Alba
Controller
Principal Accounting Officer
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> APR-07-1995 APR-07-1995
<PERIOD-START> OCT-08-1994 OCT-08-1994
<PERIOD-END> JAN-06-1995 JAN-06-1995
<CASH> 417 417
<SECURITIES> 0 0
<RECEIVABLES> 3,833 3,833
<ALLOWANCES> 919 919
<INVENTORY> 1,731 1,731
<CURRENT-ASSETS> 5,250 5,250
<PP&E> 3,618 3,618
<DEPRECIATION> 2,584 2,584
<TOTAL-ASSETS> 7,335 7,335
<CURRENT-LIABILITIES> 2,698 2,698
<BONDS> 0 0
62 62
0 0
<COMMON> 2 2
<OTHER-SE> 4,286 4,286
<TOTAL-LIABILITY-AND-EQUITY> 7,335 7,335
<SALES> 3,408 10,798
<TOTAL-REVENUES> 3,408 10,798
<CGS> 2,134 6,677
<TOTAL-COSTS> 3,395 10,585
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 22 28
<INCOME-PRETAX> 21 216
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 21 216
<DISCONTINUED> 99 184
<EXTRAORDINARY> 40 242
<CHANGES> 0 0
<NET-INCOME> 160 642
<EPS-PRIMARY> .02 .09
<EPS-DILUTED> .02 .09
</TABLE>
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