<PAGE>
Page 1 of 7
FORM 10-QSB
UNITED STATES
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 March 31, 1995
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission File Number 0-3321
GRIFFIN TECHNOLOGY INCORPORATED
(Exact name of small business issuer as specified in its charter)
New York 16-0864416
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1133 Corporate Drive
Farmington, New York 14425
-------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (716) 924-7121
--------------
Check whether the issuer (1) 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
--- ---
As of April 29, 1995, the Issuer had outstanding
2,380,247 shares of Common Stock.
Transitional Small Business Disclosure Format
(check one):
Yes No X
--- ---
<PAGE>
Page 2 of 7
GRIFFIN TECHNOLOGY INCORPORATED
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, June 30,
---------------------- ----------
1995 1994 1994
------- ------- ----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 133,100 $ 238,400 $ 60,500
Accounts receivable 3,875,100 2,733,000 3,391,200
Inventory of electronic equipment for resale 425,000
Inventories of film and supplies, at LIFO cost 153,400 196,500 170,600
Prepaid expenses and other current assets 258,000 219,800 139,500
Refundable income taxes 76,600 76,600
Deferred income tax charges 388,500 137,500 388,500
Electronic control systems, at cost 17,452,800 17,927,400 17,538,700
Less - Accumulated amortization (13,944,500) (14,838,500) (13,923,100)
----------- ---------- -----------
Net electronic control systems 3,508,300 3,088,900 3,615,600
----------- ---------- -----------
Total current assets 8,818,000 6,614,100 7,842,500
----------- ---------- -----------
Long-term electronic control systems, at cost 16,489,000 15,146,100 15,626,100
Less - Accumulated amortization (10,654,900) (8,554,300) (9,089,700)
----------- ---------- -----------
Net electronic control systems 5,834,100 6,591,800 6,536,400
----------- ---------- -----------
Property, plant and equipment, at cost 5,699,800 5,481,500 5,540,700
Less - Accumulated depreciation and amortization (4,131,500) (3,817,700) (3,899,300)
----------- ---------- -----------
Net property, plant and equipment 1,568,300 1,663,800 1,641,400
----------- ---------- -----------
Deferred software costs, net 1,048,100 1,136,800 1,135,800
----------- ----------- -----------
Other assets 346,100 112,700 108,500
----------- ----------- -----------
Total assets 17,614,600 $16,119,200 $17,264,600
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 600,000 $ 629,500 $ 600,000
Accounts payable 704,200 703,800 1,038,000
Accrued payroll and related taxes 528,300 564,500 561,500
Other accrued liabilities and expenses 205,800 163,300 204,000
Income taxes payable 71,800 251,200 50,600
Unearned service fees 3,503,900 3,893,700 2,400,800
----------- ---------- ----------
Total current liabilities 5,614,000 6,206,000 4,854,900
Long-term debt 4,950,000 3,750,000 5,500,000
Employee stock purchase plan 10,900 22,800 19,800
Deferred income tax credits 532,100 532,100
----------- ---------- ----------
Total liabilities 11,107,000 9,978,800 10,906,800
----------- ---------- ----------
Shareholders' equity:
Common stock, par value $.05 per share
Authorized - 6,000,000 shares
Issued and outstanding - 2,380,247, 2,362,364,
and 2,362,364 shares, respectively 119,000 118,100 118,100
Capital in excess of par value 3,479,300 3,318,200 3,403,600
Retained earnings 2,909,300 2,704,100 2,836,100
----------- ---------- -----------
Total shareholders' equity 6,507,600 6,140,400 6,357,800
----------- ---------- -----------
Total liabilities and shareholders' equity $17,614,600 $16,119,200 $17,264,600
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
Page 3 of 7
GRIFFIN TECHNOLOGY INCORPORATED
STATEMENT OF INCOME (LOSS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the three months For the nine months
ended March 31, March 31, ended
----------------------- ------------------------
1995 1994 1995 1994
----------- --------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Service fees $3,078,200 $3,290,000 $ 9,535,100 $10,105,500
Net sales 972,800 570,800 3,445,800 2,440,200
---------- ---------- ----------- -----------
Total revenues 4,051,000 3,860,800 12,980,900 12,545,700
---------- ---------- ----------- -----------
Costs and expenses:
Cost of sales 682,100 441,800 2,171,300 1,678,000
Service of electronic control systems 1,013,300 939,600 3,239,300 2,856,900
Amortization of electronic
control systems 26,200 518,400 1,586,600 1,545,000
Amortization of software costs 85,400 77,400 240,200 231,300
Selling, general and administrative 1,123,100 1,156,500 3,320,500 3,346,400
Research and development 662,100 628,800 1,925,000 1,864,700
Interest 123,600 75,900 388,700 269,400
---------- ---------- ---------- ----------
Total costs and expenses 4,215,800 3,838,400 12,871,600 11,791,700
---------- ---------- ---------- ----------
Income (loss) before income taxes (164,800) 22,400 109,300 754,000
---------- ---------- ---------- ----------
Income tax (expense) benefit 54,800 (6,700) (36,100) (226,200)
---------- ---------- ---------- ----------
Net income (loss) $ (110,000) $ 15,700 $ 73,200 $ 527,800
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Earnings (loss) per common and
common equivalent share $(.05) $.01 $.03 $.22
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Dividends per share -0- -0- -0- -0-
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average number of common and
common equivalent shares outstanding 2,378,747 2,385,210 2,387,047 2,384,476
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
Page 4 of 7
GRIFFIN TECHNOLOGY INCORPORATED
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the nine months
ended March 31,
-------------------
1995 1994
---------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income for the period $ 73,200 $ 527,800
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation of property and equipment 232,200 223,300
Amortization of electronic control systems 1,586,600 1,545,000
Amortization of software development costs 240,200 231,300
Increase in unearned service fees 1,103,100 1,455,700
Increase (decrease) in accounts receivable (483,900) 767,000
Increase (decrease) in inventories (407,800) 93,900
(Increase) in prepaid expenses (118,500) (36,200)
(Increase) in deferred software costs (152,500) (170,900)
(Decrease) in accounts payable and
other liabilities excluding borrowings (344,000) (124,200)
Other items, net (237,600) 8,900
---------- -----------
Total adjustments 1,417,800 3,993,800
---------- -----------
Net cash provided by operating activities 1,491,000 4,521,600
---------- -----------
Cash flows from financing activities:
Provided from employee stock option
and stock purchase plans 67,700 64,000
Revolving credit and term loan agreement
Borrowings 1,800,000 900,000
Repayments (2,350,000) (3,100,000)
Principal payments under other long-term debt (35,200)
---------- -----------
Net cash used in financing activities (482,300) (2,171,200)
---------- -----------
Cash flows from investing activities:
Additions to electronic control system equipment (777,000) (2,074,000)
Additions to property, plant and equipment (159,100) (189,500)
---------- -----------
Cash used in investing activities (936,100) (2,263,500)
---------- -----------
Increase in cash 72,600 86,900
---------- -----------
Cash at beginning of period 60,500 151,500
---------- -----------
Cash at end of period $ 133,100 $ 238,400
---------- -----------
---------- -----------
Interest paid $ 382,100 $ 265,000
---------- -----------
---------- -----------
Income taxes paid $ 14,800 $ 7,300
---------- -----------
---------- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE>
Page 5 of 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
FINANCIAL CONDITION AND LIQUIDITY:
Griffin's current policy of selling its new card reading
terminals and various other equipment with an optional service
contract has had a material effect on the Statement of Cash Flows
for the nine months ended March 31, 1995. Net cash provided by
operating activities amounted to $1,491,000 in 1995 compared with
$4,521,600 one year ago as a result of a decrease in net income
and unearned service fees of $450,000 and $350,000, respectively.
During the first nine months a comparison of activity between
1994 and 1995 reflects an increase in accounts receivable,
inventory and other miscellaneous deferred costs of $1,990,000.
The change in policy has also had a significant impact on
working capital. As of March 31, 1995, working capital amounted
to $3,204,000 compared to $408,100 at March 31, 1994. The
increase in accounts receivable and inventories resulted in
$1,200,000 additional monies being borrowed in 1995 under the
Restated Revolving Credit and Term Loan Agreement. As of May 11,
1995, borrowings under the agreement amounted to $6,150,000 with
$1,000,000 of additional monies available. Management believes
these funds, and those projected from cash flow from operations,
will be adequate to support future operations.
RESULTS OF OPERATIONS:
THREE MONTHS ENDED MARCH 31, 1995, AS COMPARED TO
THE THREE MONTHS ENDED MARCH 31, 1994
Griffin's net loss for the quarter ended March 31, 1995,
amounted to $110,000, or $.05 per share compared to net income of
$15,700, or $.01 per share, for the quarter ended March 31, 1994.
Total revenues for the quarter were up 5%, which is the same
percentage increase as the previous quarter. The sales pattern
reported in the first and second quarters continued to affect the
total revenue mix. Once again, the policy to sell various system
equipment resulted in a 6% decrease in service fees and a 70%
increase in net sales for the third quarter. The increase came
entirely from vending and card reader terminal sales.
Costs and expenses for the three months ended March 31,
1995, increased $377,400 over the quarter ended March 31, 1994.
Approximately $250,000 is in cost of sales and related to
equipment sales described above, and $75,000 is related to
service costs associated with the new POS systems sold.
Interest expense during the third quarter of Fiscal 1995
increased $47,700 due to a higher average balance of long-term
debt outstanding of $835,000 and an increase of 2 1/2% in the
average annual rate of interest paid as compared with the same
period one year ago.
<PAGE>
Page 6 of 7
NINE MONTHS ENDED MARCH 31, 1995, AS COMPARED TO
THE NINE MONTHS ENDED MARCH 31, 1994
Net earnings for the nine months ended March 31, 1995,
amounted to $73,200, or $.03 per share, compared to $527,800, or
$.22 per share, for the same period one year ago.
Several factors caused service fee revenues to decrease by
$570,400 during the first nine months of Fiscal 1995. These
include competitive pressures and associated pricing and
customers' taking advantage of Griffin's new policy of selling
card reader terminals and systems rather than leasing them. The
latter caused an increase in net sales for the 1995 period of
$1,005,600, or 41%.
Costs and expenses for the nine months ended March 31, 1995,
increased $1,079,900 over the first nine months of Fiscal 1994.
Approximately $500,000 is related to cost of sales associated
with the net sales increase. Costs related to realignment of
sales and marketing functions and housing information systems
division amounting to $280,000 occurred during the first two
quarters. The increase in service costs is related to
management's realignment of certain of these functions and higher
than expected costs for changing Griffin's method of selling its
system equipment.
Interest expense increased $119,300 over 1994. As a result
of the additional monies required for borrowing, as described
above, the average balance outstanding was up $700,000, and the
annual rate of interest paid increased 2%.
NOTES TO FINANCIAL STATEMENTS
Results for the period ended March 31 are not necessarily
indicative of results to be expected for the year because
Griffin's sales generally reach a seasonal peak during the months
of July through September and again during the months of April
through June.
The Company is involved in developing a plan for the
environmental clean-up of a solvent formerly used in the
manufacture of its photo identification cards. Although the
level of future expenditures for environmental matters, including
clean-up obligations, is impossible to determine with any degree
of certainty, it is management's opinion that when the costs are
finally determined, they will not have a material adverse effect
on the financial position of the Company.
Information furnished reflects all adjustments which are, in
the opinion of management, necessary to a fair statement of
results for interim periods presented. All such adjustments are
of a normal recurring nature.
Net income per share was computed on the basis of the
weighted average number of common and common equivalent shares
outstanding during each period. The common equivalent shares
represent shares contingently issuable under Griffin's stock
option plan. Common stock equivalents were not included in the
computation of the per share loss amount for the quarter ended
March 31, 1995, because the result would have been anti-
dilutive.
<PAGE>
Page 7 of 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. No reports on Form 8-K were filed for the quarter ended
March 31, 1995.
SIGNATURE
Pursuant to the requirements 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 to
sign on its behalf and as the registrant's principal financial
and accounting officer.
GRIFFIN TECHNOLOGY INCORPORATED
By: s/Joseph A. Murrer
---------------------
Joseph A. Murrer
Vice President - Finance and Administration
Treasurer and Secretary
Date: May 11, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 133100
<SECURITIES> 0
<RECEIVABLES> 3875100
<ALLOWANCES> 0
<INVENTORY> 578400
<CURRENT-ASSETS> 8818000
<PP&E> 22188800
<DEPRECIATION> 14786400
<TOTAL-ASSETS> 17614600
<CURRENT-LIABILITIES> 5614000
<BONDS> 4950000
<COMMON> 119000
0
0
<OTHER-SE> 3479300
<TOTAL-LIABILITY-AND-EQUITY> 17514600
<SALES> 972800
<TOTAL-REVENUES> 4051000
<CGS> 682100
<TOTAL-COSTS> 4215800
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 123600
<INCOME-PRETAX> (164800)
<INCOME-TAX> (54800)
<INCOME-CONTINUING> (110000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (110000)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
