UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark one)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the Transition period from to
Commission file number: 0-17419
__________
PC ETCETERA, INC.
______________________________________________________________________
(Exact name of small business issuer as specified in its charter)
Delaware 13-3260705
__________________________________ __________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
462 Seventh Avenue, New York, NY 10018
___________________________________________ ___________________
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (212) 736-5870
__________________
_________________________________N/A__________________________________
(Former name, former address and former fiscal year, if changed since
last report)
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
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
3,127,462 shares of common stock as of August 8, 1996
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
PART I. FINANCIAL INFORMATION
All references herein to numbers of shares of Common Stock and per
share amounts, and all references herein to dollar amounts that are
based upon the number of shares of Common Stock that are issued, give
retroactive effect to the one-for-five reverse split of the shares of
Common Stock effectuated as of April 19, 1995.
The financial information herein is unaudited. However, in the
opinion of management, such information reflects all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation of the results of operations for the periods being
reported. Additionally, it should be noted that the accompanying
condensed consolidated financial statements do not purport to contain
complete disclosures in conformity with generally accepted accounting
principles.
The results of operations for the three and six months ended June 30,
1996 are not necessarily indicative of the results of operations for
the full year.
These condensed consolidated financial statements should be read in
conjunction with the Company's audited financial statements for the
year ended December 31, 1995 and the notes thereto.
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
ASSETS:
_______
CURRENT ASSETS:
Cash and Cash Equivalents $34,442
Accounts Receivable 722,154
Inventories 54,458
Prepaid Expenses and Other Current Assets 67,968
__________
Total Current Assets 879,022
__________
PROPERTY AND EQUIPMENT (net of accumulated
depreciation of $769,400) 413,432
OTHER ASSETS (Net) 63,965
__________
TOTAL ASSETS $1,356,419
==========
LIABILITIES AND STOCKHOLDERS EQUITY:
____________________________________
CURRENT LIABILITIES:
Accounts Payable and Accrued Expenses $1,729,889
Loans Payable - Others - Current Portion 498,676
Loans Payable - Affiliate 285,706
Capital Equipment Obligations - Current Portion 65,716
Deferred Revenue 63,859
Liabilities in Connection with Assets Held for Sale
__________
Total Current Liabilities 2,643,846
__________
OTHER LIABILITIES:
Loans Payable - Bank 102,000
Capital Equipment Obligations 22,465
Other Liabilities 133,333
__________
Total Liabilities 2,901,644
__________
STOCKHOLDERS EQUITY:
Common Stock 31,275
Preferred Stock 1,000
Additional Paid in Capital 5,284,283
Accumulated Deficit (6,861,783)
__________
Total Stockholders Equity (1,545,225)
__________
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $1,356,419
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
JUNE 30,
(UNAUDITED)
SIX MONTHS ENDED THREE MONTHS ENDED
1996 1995 1996 1995
__________ __________ __________ __________
Net Sales $3,336,845 $5,800,264 $1,574,225 $2,909,005
Cost of Sales 2,312,642 3,072,720 1,013,050 1,547,963
__________ __________ __________ __________
Gross Profit 1,024,203 2,727,544 561,175 1,361,042
__________ __________ __________ __________
Selling, General and
Administrative 1,880,465 3,324,044 845,761 1,745,945
Research and Development 58,214 401,582 0 194,389
(Gain) on Sale of
Subsidiary (215,110) 0 (80,914) 0
__________ __________ __________ __________
Operating (loss) (699,366) (998,082) (203,672) (579,292)
__________ __________ __________ __________
Interest Expense (net) (75,758) (48,476) (34,059) (17,178)
__________ __________ __________ __________
Net (loss) ($775,124)($1,046,558) ($237,731) ($596,470)
======== ========== ======== ========
Net (loss) per share ($0.25) ($0.42) ($0.08) ($0.22)
======== ========== ======== ========
Weighted Average Number
of Shares 3,127,462 2,510,795 3,127,462 2,760,795
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
1996 1995
_________ ___________
Cash flows from Operating Activities:
____________________________________
Net (loss) ($775,124) ($1,046,558)
Adjustments to Reconcile Net (loss) to
Net Cash (Used In) Operating Activities:
_________________________________________
Depreciation and Amortization 81,466 406,968
Changes in Operating Assets and Liabilities:
___________________________________________
(Increase) in Accounts Receivable (118,380) (186,028)
(Increase) Decrease in Prepaid Expenses
and Other Current Assets (22,510) (75,172)
(Increase) Decrease Security Deposits (3,664) 6,640
Increase (Decrease) in Accounts Payable 341,866 227,293
(Increase) in Inventories (21,991) 0
Increase in Deferred Revenue 37,482 34,900
Increase in Other Liabilities 133,333 0
_________ ___________
Net Cash (Used in) Operating Activities (347,522) (631,957)
_________ ___________
Cash Flows From Investing Activities:
____________________________________
Purchase of Fixed Assets 0 (123,539)
Sale of Subsidiaries 610,704 0
_________ ___________
Net Cash Provided by (Used in)
Investing Activities 610,704 (123,539)
_________ ___________
Cash Flows from Financing Activities:
____________________________________
Increase in Loans Payable - Bank 0 71,329
(Repayment of) Loans Payable - Bank (39,111) 0
Increase (Decrease) in Loans Payable - Others (14,213) (82,503)
(Repayment of) Increase in Loans Payable
Related Party (250,000) 0
(Repayment of) Capital
Equipment Obligations (77,977) (179,908)
Issuance of Stock (Net of Expenses Incurred) 0 1,464,495
_________ ___________
Net Cash Provided by (Used in)
Financing Activities (381,301) 1,273,413
_________ ___________
Net Increase (Decrease) in Cash
and Cash Equivalents (118,119) 517,917
Cash and Cash Equivalents,
Beginning of Period 152,561 77,777
_________ ___________
Cash and Cash Equivalents, End of Period $34,442 $595,694
========= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
________________________________________________
Cash paid during the year for
Interest $78,328 $65,835
Income Taxes $0 $0
SUPPLEMENTAL SCHEDULE OF NON -CASH INVESTING AND FINANCING ACTIVITIES
______________________________________________________________________
None
DISCLOSURE OF ACCOUNTING POLICY
_______________________________
For purposes of the Statement of Cash Flows, the Company considers all
highly liquid instruments with a maturity of three months or less to
be cash equivalents.
<PAGE>
MANAGEMENT S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
_________________________________________________________
Results of Operations
_____________________
Revenues for the three and six months ended June 30, 1996 of
$1,574,225 and $3,336,845, respectively represented a decrease of 46%
and 42%, respectively, as compared to revenues of $2,909,005 and
5,800,264, respectively, for the three and six months ended June 30,
1995.
As discussed below, effective January 1, 1996, all of the
outstanding stock of the Company s wholly-owned Canadian subsidiary
("PC Canada") was sold. Included in the revenues for the three and
six months ended June 30, 1995 was $920,276 and $1,628,135,
respectively of revenues from PC Canada. In addition, Management has
made the decision to close the Company s wholly-owned Israeli
subsidiary ("PC Israel") as discussed below. Revenues of PC Israel
decreased by $176,488 and $355,326 during the three and six months
ended June 30, 1996 as compared to the three and six months ended June
30, 1995. Further, as discussed below, effective April 1, 1996,
the Company sold its San Francisco, California and Boise, Idaho
operations. Revenues attributable to the San Francisco operations
decreased by $228,501 and $221,886, respectively for the three and six
months ended June 30, 1996. The sale of the Company s Canadian, San
Francisco and Boise operations along with the closing of PC Israel
accounted for 90% of the decreased revenues. Total revenues for the
Company s remaining New York location showed no significant changes
for the six months ended June 30, 1996 as compared to the six months
ended June 30, 1995.
During the year ended December 31,1994 and throughout 1995 the
Company broadened and augmented its personal computer support
alternatives by introducing new service/product lines designed to
enhance its established Instructor-led training ("ILT") business.
Contract consulting is responsible for providing personal computer
personnel, on a temporary basis, to the Company s client base.
Consulting revenues for the remaining New York location grew from
$512,674 and $940,887 for the three and six months ended June 30,
1995, respectively to $754,968 and $1,504,588, respectively for the
three and six months ended June 30, 1996, respectively, an
increase of 47% and 60%, respectively. The Company has been placing
more emphasis on the growth of the Consulting Services Division. In
addition, the Company develops and offers computer-based training
("CBT") programs to augment and supplement its live training classes.
However, the CBT programs continue to result in operating losses and
the Company ceased efforts to develop new CBT products. In
September, 1995, the Company began to ship its CBT products through
the retail channel in addition to selling to corporate clients. All
products sold to retailers are returnable if not resold to end-users.
Since the Company has no historical basis of estimating such returns,
it recognizes revenues only when such resales occur. The Company only
recognized revenues of $21,000 during the six month ended June 30, 1996
from such retail sales. Retail sales have also been lower than
expectation and the Company has also limited its efforts within the
Retail market. The Company does not have any obligations to the
end-user once the product is sold.
During the three and six months ended June 30, 1996, the Company
continued to experience declining ILT revenues. In the New York
region ILT revenues decreased by approximately 14% and 25%,
respectively, for the three and six months ended June 30, 1996, as
compared to the comparable periods in 1995. Management attributes
the declining ILT revenue to the fact that software vendors have not
released many new versions of existing software. The Company had
anticipated that the release of a new operating system entitled
Windows 95 would have a positive impact on ILT revenues. Although
released in August 1995, many clients are continuing to delay
such conversions and projects pending market place experiences with
Windows 95. In addition, the contemplated release in August 1996 of
Windows NT, a more advanced network operating system, has caused
organizations to re-evaluate desktop application strategies and back
office applications together and thus has further delayed
application or conversion projects. Increased competition was also a
factor in the decreased ILT revenues.
The Company is aggressively pursuing a move into the higher end
training market as many organizations require certification training
for Microsoft and Lotus back office applications and operating systems
which historically has had higher margins. This higher technical
training environment has a better synergy with the Company s growing
consulting business. In 1995, the Company was awarded Lotus
Authorized Education Center status and received Microsoft Authorized
Technical Education Center status during the six months ended June 30,
1996.
The Company's cost of revenues for the three and six months ended
June 30, 1996 was 64% and 69%, respectively of revenues as compared to
53% of revenues for the three and six months ended June 30, 1995. The
Company s new service/product lines do not follow the same trends in
cost of revenues as the ILT business. Cost of revenues for contract
consulting was 63% of revenues and cost of revenues (including
approximately $100,000 in design costs for the retail product) for CBT
was greater than revenues for the 1996 period.
Selling, general and administrative expenses for the three and
six months ended June 30, 1996 of $845,761 and $1,880,465,
respectively, showed a significant decrease as compared to selling,
general and administrative expenses of $1,745,945 and $3,324,044,
respectively, for the three and six months ended June 30, 1995.
Included in the net reduction was approximately $763,000 and
$1,071,441, respectively, for the three and six months ended
June 30, 1996, pertaining to the sale of PC Canada, and the San
Francisco operations as well as the shut down of PC Israel.
Management has devoted substantial efforts to an aggressive cost
containment plan. The Company reduced selling, general and
administrative expenses for its remaining United States operations by
51% and 45%, respectively, for the three and six months ended June
30, 1996 as compared to the three and six months ended June 30, 1995.
Research and development expenses were $0 and $58,214,
respectively, for the three and six months ended June 30, 1996, as
compared to $194,389 and $401,582, respectively, for the three and six
months ended June 30, 1995 due to a determination by the Company to
eliminate its CBT research and development operations.
The Company had a net loss of $237,731 and $775,124,
respectively, for the three and six months ended June 30, 1996,
respectively, as compared to a net loss of $596,470 and $1,046,558,
respectively, for the three and six months ended June 30, 1995. The
reduction of the loss is attributable primarily to managements'
aggressive cost containment plan and the elimination of the Company's
CBT research and development expenses, offset by the $215,110 gain on
the sale of PC Canada and San Francisco operations. Management
believes that the decreasing ILT revenues will continue throughout
1996. However the Company anticipates continued growth of CSD
revenues. The Company decided to cease operations of PC Israel
effective March 31, 1996 and substantially eliminate its CBT research
and development program; however, it intends to continue to market CBT
software.
As discussed below under "Liquidity and Capital Resources," (i)
effective January 1, 1996, the Company sold all of the outstanding
stock of PC Canada and (ii) effective April 1, 1996, the Company sold
its San Francisco, California and Boise, Idaho operations.
Liquidity and Capital Resources
_______________________________
The Company s working capital deficiency increased to $1,764,824
at June 30, 1996 as compared to $828,562 at December 31, 1995. The
increase was due primarily to the operating losses experienced during
the six months ended June 30, 1996, offset by the sale of PC Canada
as described above.
The Company is a party to a financing agreement by which it
finances its trade receivables. The agreement is scheduled to expire
on April 30, 1997. The balance outstanding under the agreement, which
is limited to 75% of eligible receivables, is reported as a current
liability under "Loans Payable - Others."
The Company used $347,522 in operating activities during the
three and six months ended June 30, 1996, primarily due to its net
loss of $775,124 during such period. Such loss was offset by increased
accounts payable of $341,866 during such period as well as
depreciation and amortization expenses of $81,466. During the three
and six months ended June 30, 1996, the Company s investing
activities provided cash in the amount of $610,704 as a result of the
sale of PC Canada and the San Fransico operations. The Company s
financing activities during such period used cash in the amount of
$381,310 primarily due to the repayment of loans from related parties
of $250,000.
Effective December 5, 1995, the Company borrowed $500,000 from
certain stockholders of the Company for working capital purposes. The
notes evidencing the loans provide for interest at the rate of 10% per
annum and the payment of the principal amount one year from the date
of issuance.
Effective January 1, 1996, all of the outstanding stock of PC
Canada was sold to a private company for net proceeds of $718,000,
including the license of certain computer software. Of such amount,
$250,000 was used to repay a portion of the December 1995 loans
described above. Pursuant to the terms of the notes, as a result of
the sale of PC Canada, the remaining balance of the loans is due and
payable.
Effective April 1, 1996, the Company sold the operating assets of
its San Francisco, California training office and Boise, Idaho
business location for an aggregate cash purchase price of $42,000. In
addition, the purchaser agreed to assume certain obligations and
liabilities of the Company.
As indicated above, the Company has experienced continuing net
losses and negative cash flows from operations and has a working
capital deficiency and stockholders deficit. The Company s continuing
existence is dependent upon its ability to achieve and maintain
profitable operations. The Company is currently working under a
plan to reduce overhead, and return to profitability. As indicated
above, the Company sold its Canadian subsidiary in January 1996, shut
down the Israeli- based research and development center in March 1996,
and sold the San Francisco branch in April 1996 in order to raise
needed cash and reduce expenses. In addition, the Company has
implemented a substantial cost cutting program. The Company has
currently reduced expenses by approximately $135,000 a month by
eliminating three Vice President positions, reduced the number of CBT
design staff, reduced administrative payroll obligations and sublet
office space. The Company is also experiencing growth in its
Consulting Service Division and has begun to experience reduced losses
in its ILT operations.
The Company is also presently exploring all other possible
opportunities in order to reduce the working capital deficiency,
including expanding its marketing efforts, negotiating with vendors
and debt holders and seeking additional financing. No assurances can
be given that any such efforts will be successful. Based upon the
cost reduction plans outlined above, the Company believes that it
will be able to generate sufficient cash to support its operations
through the remainder of 1996. Such belief is, however, a
forward-looking statement and, due to the stiff competition faced by
the Company from entities which provide computer training and
consulting services, and market CBT products, as well as the uncertain
operating environment currently surrounding personal computers in
general no assurances can be given that the Company will be successful
in such regard.
<PAGE>
PC ETCETERA, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
None
<PAGE>
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.
PC Etcetera, Inc.
August 9, 1996 By: /s/ /Terry I. Steinberg
_________________________________
Terry I. Steinberg
President (Principal
Executive and Financial Officer)
[ARTICLE] 5
<TABLE>
<S> <C>
[PERIOD-TYPE] 6-MOS
[FISCAL-YEAR-END] DEC-31-1996
[PERIOD-START] JAN-01-1996
[PERIOD-END] JUN-30-1996
[CASH] 34,442
[SECURITIES] 0
[RECEIVABLES] 722,154
[ALLOWANCES] 0
[INVENTORY] 54,458
[CURRENT-ASSETS] 879,022
[PP&E] 1,182,832
[DEPRECIATION] 769,400
[TOTAL-ASSETS] 1,356,419
[CURRENT-LIABILITIES] 2,643,846
[BONDS] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 1,000
[COMMON] 31,275
[OTHER-SE] 5,284,283
[TOTAL-LIABILITY-AND-EQUITY] 1,356,419
[SALES] 3,336,845
[TOTAL-REVENUES] 3,336,845
[CGS] 2,312,642
[TOTAL-COSTS] 1,938,679
[OTHER-EXPENSES] (215,110)
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 75,758
[INCOME-PRETAX] (775,124)
[INCOME-TAX] 0
[INCOME-CONTINUING] (775,124)
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] (775,124)
[EPS-PRIMARY] 0
[EPS-DILUTED] (.25)
</TABLE>
