FORM 10-Q
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 June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-09964
Corcap, Inc.
(Exact name of registrant as specified in its charter)
Nevada 06-1237135
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
90 State House Square, Hartford, Connecticut 06103-3720
(Address of principal executive offices) Zip Code)
Registrant's telephone number, including area code (203)247-7611
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
As of August 10, 1995, a total of 2,925,726 shares of Common Stock,
$.01 par value, were outstanding.<PAGE>
CORCAP, INC.
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994 3
Consolidated Statements of Operations -
Three Months and Six Months Ended June 30, 1995 and 1994 4
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-14
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 14
Signature 15
CORCAP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
June 30, December 31,
1995 1994
(Unaudited)
ASSETS
Current Assets:
Cash $ - $
202
Accounts receivable, net
2,244 1,827
Inventories:
Work in process
377 260
Raw Materials and supplies
270 254
Total inventories
647 514
Other
96 37
Total Current Assets
2,987 2,580
Property, plant and equipment, at cost
706 699
Less: Accumulated depreciation
(677) (672)
Net property, plant and equipment
29 27
Other Assets:
Other assets, net
102 102
Total Assets $3,118 $ 2,709
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities:
Accounts payable $
1,831 $ 1,137
Bank Line Payable
48 -
Customer deposits
21 92
Accrued pension costs
25 25
Accrued liabilities
801 865
Net current liabilities of discontinued operations
918 881
Current portion of deferred compensation
96 71
Total Current Liabilities
3,740 3,071
Deferred compensation and other long term liabilities
359 432
Total Liabilities
4,099 3,503
STOCKHOLDERS DEFICIT
Common stock
29 29
Capital in excess of par
269 269
Minimum pension liability
(556) (556)
Accumulated deficit
(25,756) (25,569)
(26,014)
(25,827)
Contributed capital
25,033 25,033
Total Stockholders' Equity
(981) (794)
Total Liabilities and Stockholders' Equity (Deficit) $
3,118 $ 2,709
See Accompanying Notes to Consolidated Financial Statements.
CORCAP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data )
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Net sales $ 2,892 $ 3,287 $ 5,222 $ 5,668
Cost of Sales 2,426 2,342 4,329 4,186
Gross margin 466 945 893 1,502
Selling, general and administrative expenses 479 702 1,013 1,199
Operating income (loss) (13) 243
(120) 303
Other income (expense):
Interest expense, net (8) (3)
(10) (2)
Other income (expense), net (15) 166 (12)
1,563
Total other income (expense), net (23) 163
(22) 1,561
Income (loss) from continuing operations (36) 406
(142) 1,864
Income tax (expense) benefit - (30) -
(31)
Income (loss) from continuing operations (36) 376
(142) 1,833
Discontinued operations:
Corcap income (loss) from
operations net of tax benefit (26) (26) (45) 20
Net Income (loss) (62) 350 (187)
1,853
Less: Outside shareholder interest in income of affiliate -
63 -0- 63
Net Income (loss) $ (62) $ 287 $ (187) $
1,790
Weighted average common shares 2,926 2,926 2,926
2,926
Net income (loss) per common share:
Continuing operations $ (.01) $ .11 $ (.05) $
.61
Discontinued operations (.01) (.01) (.01)
.01
Net income (loss) per share $ (.02) $ .10 (.06) $
.62
See Accompanying Notes to Consolidated
Condensed Financial Statements.
CORCAP, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Six Months Ended
June 30,
1995 1994
Cash flows provided by (used for) operating activities:
Income (loss) from continuing operations
$ (142) $ 1,770
Depreciation and amortization
5 1
Outside interest in income of affiliate
- 63
Changes in assets and liabilities:
(Increase) decrease in accounts receivable
(417) (85)
(Increase) decrease in inventories
(133) 4
Decrease in accounts payable and other accrued
liabilities 631
666
Decrease in accounts payable and other accrued
liabilities, related parties
- (22)
(Increase) decrease in other assets
- (2)
Decrease in long term liabilities
(73) (32)
(Increase) decrease in other, net
(107) (8)
Total (93)
521
Net cash provided (used) by continuing operations
(235) 251
Income (loss) from discontinued operations
(45) (223)
Increase (decrease) in net current liabilities
of discontinued operations 37 172
Increase (decrease) in net current liabilities
of discontinued operations
related parties -
(14)
Increase in net non-current liabilities of
discontinued operations - (87)
Net cash flows provided (used) by discontinued operations
(8) (152)
Net cash provided (used) by operating activities
(243) 99
Cash flows from investing activities:
Additions to property, plant and equipment
(7) (28)
Net cash used for investing activities
(7) (28)
Cash flows from financing activities:
Decrease in long-term debt
- (76)
Increase in short term debt
48 23
Net cash provided by (used for) financing activities
48 (53)
Net change in cash
(202) 18
Cash and cash equivalents at beginning of period
202 283
Cash and cash equivalents at end of period
$ - $ 301
Supplemental Schedule of Cash Flow Information:
Cash paid during the period for:
Interest $ 10
$ 114
Income taxes -
-0-
See Accompanying Notes to
Consolidated Condensed Financial Statements.
CORCAP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
All financial information for all interim periods presented
is unaudited. The financial
statements have been prepared in conformity with the
accounting principles described in the
Corcap, Inc. ("Corcap" or the "Company") and CompuDyne Corporation
("CompuDyne")
most recent Form 10-K filings. The management of Corcap
believes that all adjustments
necessary to present a fair statement of the results for the periods
have been included.
Principles of consolidation.
The accompanying consolidated financial statements
include the accounts of Corcap, its wholly owned subsidiaries,
and its investment in
CompuDyne Corporation. Significant intercompany transactions
have been eliminated in the
consolidated financial statements. The effect of consolidating
CompuDyne with Corcap was
to report CompuDyne's net sales from continuing operations
which totals $2.9 million and
$3.3 million for the quarters ended June 30, 1995, and 1994,
respectively.
Income taxes. The income tax provision is based on
management's estimate of Corcap's
annualized effective federal and state tax rates.
Net income (loss) per common share. Net income (loss)
per common share is based
on the weighted average of common shares outstanding during
the period, including the
effect of common stock equivalents and stock awards where
such effect would be dilutive.
BUSINESS SEGMENTS
Financial information for Corcap and CompuDyne on a separate company basis,
excluding
the elimination of adjustments made in consolidation, is as follows:
Discontinued Operations
Corcap - Formerly operated an elastomer products business.
The results of Corcap are accounted for as discontinued
operations in the Balance Sheet
and the Consolidated Statements of Operation in the financial
statements due to the
divestment of the Acadia segment on July 1, 1991.
Financial results for periods prior to the
date of discontinuance have been restated. Net current
liabilities and net non-current
liabilities of discontinued operations at June 30, 1995 and December 31, 1994
consisted of
the following:
<PAGE>
Corcap
June 30, December 31,
1995 1994
($ Thousands)
Property plant & equipment, net $ 1,017 $
1,044
Net current liabilities (1,926) (1,823)
Deferred pension liability (9)
(102)
Other non-current liabilities - -
(918) 881
Less current portion (918) (881)
Net non-current liabilities of
discontinued operations $ - $ -
Net assets (liabilities)
of discontinued operations,
related parties $ (13) $ (5)
For the Quarters ended June 30 1995
1994
($ Thousands)
Net Sales $ - $ -
Gross Margin - -
Net income (loss) $ (26) $ (26)
CompuDyne - Operates an electronics and engineering
services business and home improvement
division.
June 30, December 31,
1995 1994
($ Thousands)
Current assets $ 2,987 $ 2,580
Noncurrent assets 52 42
Total assets 3,039 2,622
Current liabilities, related parties -
-
Current liabilities 2,822 2,190
Non-current liabilities 359
432
Total liabilities 3,181 2,622
Net assets $ (142) $ -
For the Quarters ended June 30 1995 1994
($ Thousands)
Net Sales $ 2,892 $ 3,287
Gross Margin 465 945
Net income (loss) from:
Continuing operations (36) 376
Net income (loss) $ (36) $ 376
<PAGE>
COMPUDYNE NOTES AND LOAN PAYABLES
On November 18, 1994 CompuDyne obtained a $350 thousand
working capital line of credit
agreement with the Asian American Bank and Trust Company of Boston
Massachusetts. The
Company used the line of credit during the quarter and had a loan of
$48 thousand at June 30,
1995. The credit agreement requires the Company to maintain a working
capital ratio of 1.1 to 1.0.
As of June 30, 1995 the Company had a working capital ratio of 1.1 to
1.0. During July 1995 the
line of credit was increased to $500 thousand and the advance
rate was increased from 50% to 75%
of eligible accounts receivable.
RELATED PARTY TRANSACTIONS
CompuDyne provides corporate services to Corcap for which it charged
$-0- a month for the second
quarter of 1995 compared to $4 thousand a month during 1994.
Corcap's residual outstanding debt to CompuDyne was $13 thousand as
of June 30, 1995 compared
with $43 thousand as of June 30, 1994.
During April 1995 Corcap sold 13,500 shares of CompuDyne Common Stock
under Rule 144 of
the Securities Act of 1933.
As a result of the sale of the 27,000 shares by Corcap, Corcap's
ownership of CompuDyne Common
Stock decreased from 35.0% of the issued and outstanding shares
of CompuDyne Common Stock
as of December 31, 1994 to 33.2% as of June 30, 1995, and, after
assuming the exercise of
Warrants for 150,000 shares of CompuDyne Common Stock (which are
presently exercisable until
November 18, 1996) Corcap's ownership would be increased to 39%.
Pursuant to Stock Purchase
Agreements, dated August 1, 1993, between CompuDyne and five members of
management, such
persons may purchase up to an additional 106,250 shares of
CompuDyne Common Stock on each
of August 1, 1995 and 1996, assuming certain conditions are met.
During 1994, the stock ownership
of all members of CompuDyne management (four persons), increased to
13.3% of the issued and
outstanding shares of CompuDyne Common Stock, and, after assuming
the exercise of the Corcap
Warrants, management's ownership would decrease to 12.1%. If such
persons purchase all of such
shares, Corcap's ownership, on a fully diluted basis, would be
decreased to 33.1% and management's ownership, on a fully
diluted basis, would be increased to 20.6%.<PAGE>
CONTRACTS IN PROGRESS
Contracts in progress consist of the following:
($ in thousands) June 30, December 31,
1995 1994
U.S. Government Contracts:
Billed $ 1,353 $ 390
Unbilled 412 644(1)
Total $ 1,765 $ 1,044
(1): The reserve for disallowances of $168
thousand at December 31, 1994 and March 31,
1995 the reserve is included in other accrued expenses.
Almost all of the U.S. Government billed and unbilled receivables
are derived from cost-plus or
time-and material contracts. The conversion of the majority of
the dollars from unbilled to billed
receivables is merely a timing consideration, i.e., they will be
billed within six days after the month-
end closing date. The remainder will be billed following final
audit of direct and indirect costs by
the Defense Contract Audit Agency.
CONTINGENT LIABILITIES
Corcap no longer has any long term operating leases. CompuDyne has
noncancelable operating
lease commitments of $198 thousand in 1995, $437 thousand in 1996,
$450 thousand in 1997, $464
thousand in 1998, $477 thousand in 1999 and $80 thousand in 2000.
On March 10, 1986, the United States Environmental Protection Agency
("EPA") notified a
subsidiary of Corcap, (then a subsidiary of Lydall) and 34 other
entities that they may be potentially
responsible for response costs under the Comprehensive Environmental
Response Compensation
and Liability Act ("CERCLA") in connection with the release of
hazardous substances at a landfill
located in Michigan City, Indiana ("Landfill"). On November 10,
1987, the EPA notified the
subsidiary of Corcap that it and other entities identified in the
above matter also may be potentially
responsible for the EPA's response costs in connection with a property
located adjacent to the
Landfill, known as the Lin-See Property. The EPA has indicated that
it intends to expand the
Landfill matter to encompass the Lin-See Property. No specific money
claim has been made to
the subsidiary of Corcap by the EPA with regard to the Landfill
matter or the Lin-See Property,
and the total cost of the remediation is not yet known. The
preliminary indications are that the
subsidiary's contribution to the waste volume at the Landfill,
if any, was approximately 0.286% of
the total volume. Under the terms of the Post-Distribution
Agreement,
Corcap and Lydall will
share any loss which may be sustained in these matters based on
the ratio of the total market value
of the outstanding capital stock of each company at the time
the actual liability is determined.
As of December 31, 1994, Corcap's proportionate share of any
liability would have been less than
1%.
A wholly-owned subsidiary of Corcap received a preliminary report
in May 1989 from an
environmental consulting firm that certain substances are present
in the soil at the site of Corcap's
Dayville, Connecticut, plant as a consequence of past operations.
Corcap's tenant was exploring
the nature and distribution of those substances to determine
what remediation action was required.
On July 1, 1991, Corcap's subsidiary leased the property to
Clipper and, in connection therewith,
Clipper agreed to assume responsibility for up to $500 thousand
of remediation costs. Continued
site work and remediation analysis had been conducted by
environmental engineers contracted by
Corcap, on behalf on Clipper. On July 27, 1994 Clipper's
responsibility for environmental costs
ended upon the termination of the lease in consideration of their
cancellation of a mortgage to
Corcap. A final study plan was prepared for review by the
Connecticut Department of
Environmental Protection to ascertain the costs of remediation and a
reserve of $248 thousand was
provided for in the third quarter of 1994 and is included in
net current liabilities of discontinued
operations. The plan has been tentatively approved awaiting a
specific work schedule.
During the third quarter of 1991, a wholly-owned subsidiary of
Corcap received notification that
it may be a potential responsible party under the North Carolina
General Statutes in connection
with the closure and abatement of the Seaboard Chemical Corporation
site located in Jamestown,
North Carolina. Preliminary information supplied by the North
Carolina Department of
Environment, Health and Natural Resources indicates that, during
the fall of 1986 and early 1987,
a subsidiary of Lydall, which was part of its Elastomer
Products Group, may have shipped
approximately .0001016% of the aggregate waste material located
at the site. In connection with
the spinoff of Corcap from Lydall on July 1, 1988, Corcap succeeded
to the businesses and
operations that were formerly conducted by the Elastomer Products
Group of Lydall, and Corcap
agreed to indemnify Lydall with respect to liabilities arising
out of the conduct of the elastomer
products business prior to the spinoff. During the third quarter
of 1994 Corcap received a pro-rata
invoice from the consulting engineer for the site for approximately
$500. The environmental
engineers indicated that Corcap's potential liability may
approximate $8 thousand.
During 1991, Corcap management was advised that the Internal Revenue
Service was auditing
Lydall's tax returns for certain years in which Corcap's former
Acadia subsidiaries were part of
Lydall. On December 12, 1992 Lydall presented an invoice to Corcap
for $499 thousand
representing final taxes and interest paid to the IRS as a result
of an audit of Corcap entities for
the years 1983 through 1988. Corcap and Lydall are currently
engaged in negotiations to settle the
amount of this liability. The entire $499 thousand amount,
however, has been recognized as a
liability in Corcap's financial statements for the years ended
December 31, 1994 and 1993. In July
1991, Lydall informed Corcap that as a result of an audit of
Corcap entities for the years 1987-1989
Lydall had calculated that Corcap's share of the current assessment
is an additional $380 thousand.
Lydall has not presented Corcap with an invoice for that amount.
Lydall an Corcap are in final
negotiations to settle the claims. It is possible that significant
additional taxes could be levied on
Lydall for which Corcap would be obligated to reimburse Lydall
under the Post-Distribution
Agreement. Also under the Post-Distribution Agreement, it is
possible that Lydall may be obligated
to reimburse Corcap for certain tax benefits which it obtained
as a result of including the Acadia
subsidiaries in its consolidated tax return during such years.
It is not presently possible to ascertain
with any certainty the extent to which any such liabilities,
including any liabilities arising from the
Internal Revenue Service audit, will be incurred by either
company and, if incurred, the portion
of which will be allocated to Corcap or whether any such
liabilities will be covered by insurance
or recoverable from others.
On July 9, 1989 CompuDyne sold the land and building in Vienna,
Virginia which housed its Vega
Division. In conjunction with the transaction CDI, a subsidiary
of CompuDyne, entered into a five-
year agreement to lease back the Vienna property for $77 thousand
a month on a triple net basis.
As part of that agreement, Corcap agreed to guarantee certain
obligations of the lessee. On
November 29, 1990 two subsidiaries of CompuDyne entered into an
agreement with Carlton
Industries Inc., ("Carlton") for the sale of its Vega and OAR
operations. The terms of the
agreement included the assignment of the Vega building lease
in Vienna, Virginia to Carlton. In
March, 1991, Vega Precision Laboratories, Inc. ("VPL"), a
subsidiary of Carlton, negotiated a rent
deferral agreement whereby $25 thousand of the rent plus 10%
on that amount, would be deferred
each month until the end of December, 1991, after which VPL
agreed to pay such deferred amount
at not less than $10 thousand a month in 1992 and 1993.
CDI remained as the primary lessee and
Corcap remained as guarantor. On December 31, 1991,
CDI filed a voluntary petition in bankruptcy
under Chapter 7 of the United States Bankruptcy Code
(See "Information Regarding CompuDyne-
Description of Business"). On June 18, 1993 Carlton Industries
was sold to Herley Industries, Inc.
who acquired VPL. Neither the bankruptcy of CDI or the sale of
Carlton affected Corcap's position
as guarantor. The lease expired on June 30, 1994, the building
was razed and the Company has not
been made aware of any defaults on the lease.
Corcap and its subsidiaries including CompuDyne are party to
certain legal actions and inquiries
for environmental and other matters resulting from the normal
course of business. Although the
total amount of liability with respect to these matters cannot
be ascertained, management of the
Company believes that any resulting liability should not have
a material effect on its financial
position or results of future operations.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Corcap had a net loss for the 1995 second quarter of $62 thousand
compared with income of $287
thousand for the quarter ended June 30, 1994. CompuDyne had a
loss of $36 thousand for the 1995
second quarter compared with a net income of $376 thousand for
the 1994 second quarter. The loss
for the 1995 second quarter was primarily attributable to Suntec
division which lost $100 thousand
and Data Control which lost $24 thousand. Quanta earned $152
thousand for the quarter while
Corporate activities cost $64 thousand. Net income during the
1994 second quarter was primarily
attributable to debt forgiveness of $162 thousand resulting
from the modification to the Clipper
Loan Agreement on May 9, 1994 and income from operations of
$214 thousand. At the end of the
second quarter the Company's backlog remained at $7 million.
The discontinued operations of
Corcap accounted for a loss of $26 thousand during the quarter.
Net sales from continuing operations in the second quarter
of 1995 decreased 12% to $2.9 million
from $3.3 million in the second quarter of 1994. The decrease
was primarily due to the Suntec
division which had sales of $324 thousand compared with
$1.043 million for the 1994 second
quarter. This was offset by increases in sales at Quanta Systems
division where revenues increased
by $368 thousand to $2.4 million for the 1995 second quarter.
Data Control division had a small
sales decline of $15 thousand when compared with the 1994
second quarter.
Gross margin for the first quarter of 1995 decreased $480 thousand
(51%) to $465 thousand from
$945 thousand for the second quarter of 1994. Suntec's Gross
Margin decreased by $431 thousand
as a result of lower sales volume. DCS had a decrease of
$22 thousand and Quanta Systems
Division had a decrease of $36 thousand.
Selling, general and administrative expense decreased $255 thousand,
or 36%, to $445 thousand
from $700 thousand for the 1994 second quarter. The decrease was
primarily due to Suntec's
reduction of costs of $238 thousand.
Research and development costs which were totally attributable
to DCS, increased $32 thousand
to $34 thousand compared with the second quarter of 1994.
CompuDyne's interest expense for the 1995 first quarter decreased
$9 thousand to $3 thousand
compared with the 1994 first quarter of $3 thousand.
The decrease was attributable to amount of
interest paid on the Clipper obligation in 1994.
Other expense of $15 thousand for the 1995 second quarter compares
with other income of $166
thousand for the 1994 second quarter. During the second quarter
of 1994, the Company negotiated
a debt forgiveness of $162 thousand from Clipper.
Corcap had a loss from discontinued operations which represented
the costs of operating the
Dayville plant less a gain on sale of CompuDyne stock sold
during the quarter.
FINANCIAL CONDITION
At the end of the 1994 second quarter Corcap's consolidated
working capital deficiency, which
includes $918 thousand of discontinued operations, increased to
$753 thousand from a deficiency
of $491 thousand at December 31, 1994. Of the $262 thousand
decrease, $187 thousand was due
to the loss for the first two quarters and $73 thousand
was due to reduction in deferred
compensation.
Corcap's Continued Existence
Due to the disposition of assets in 1990 and 1991, Corcap's
remaining assets are CompuDyne
Common Stock and the Dayville Property. On July 14, 1995 Corcap
entered into a purchase and
sale agreement with Fabrilock, Inc. whereby Fabrilock purchased
the Dayville property in exchange
for 20% of Fabrilock's issued and outstanding shares. CompuDyne
is currently prohibited under
state law from paying dividends because its assets do not
exceed its liabilities. Consequently, Corcap
does not have any revenue or cash flow. Corcap is obligated
to make quarterly payments to its
qualified retirement plans. During 1992, Corcap was unable
to make the last required quarterly
payment to the Plans and was unable to make any payments
during 1993 and 1994, which caused
the Plans to have an unwaived funding deficiency with
respect to the unpaid quarterly amounts,
subjecting Corcap to excise tax liability under the Internal
Revenue Code of 1986, as amended, of
at least 10% of the funding deficiency. On March 21, 1995
Corcap filed an application with the
Internal Revenue Service requesting a waiver of the minimum
funding standard, which was denied
by the Internal Revenue Service in June 1995. In addition, Corcap
has a number of contingent
liabilities, including a liability to Lydall for up to $499
thousand as a result of an IRS audit and an
additional pending $786 thousand which has not been recorded.
The Board of Directors of Corcap
is continuing to consider various options that may enable
Corcap to meet its obligations and to
serve the best interests of its shareholders.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) 28.1 CompuDyne Corporation's Form 10-Q for the quarter
ended June 30, 1995
(b) Reports on Form 8-K
Corcap sale of the Dayville property to Fabrilock.<PAGE>
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.
CORCAP, INC.
Date: August 10, 1995 /s/ Norman Silberdick
Norman Silberdick
President and (Chief Accounting
Officer)
INDEX TO EXHIBITS
Page number
28.1 CompuDyne Corporation's Form 10-Q for the quarter
ended June 30, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS AND THE CONSOLIDATED BALANCE SHEETS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2244
<ALLOWANCES> 0
<INVENTORY> 647
<CURRENT-ASSETS> 2987
<PP&E> 706
<DEPRECIATION> (677)
<TOTAL-ASSETS> 3118
<CURRENT-LIABILITIES> 3740
<BONDS> 0
<COMMON> 29
0
0
<OTHER-SE> 269
<TOTAL-LIABILITY-AND-EQUITY> 3118
<SALES> 5222
<TOTAL-REVENUES> 5222
<CGS> 4329
<TOTAL-COSTS> 5342
<OTHER-EXPENSES> 1013
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (10)
<INCOME-PRETAX> (142)
<INCOME-TAX> 0
<INCOME-CONTINUING> (142)
<DISCONTINUED> (45)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (187)
<EPS-PRIMARY> (06)
<EPS-DILUTED> (06)
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Filed pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report
July 27, 1995
CORCAP, INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation)
1-09964 06-1237135 (Commission
File Number) (IRS Employer Identification No.)
90 State House Square
Hartford Connecticut 06103-3720
(Address of principal executive office)(Zip Code)
Registrant's telephone number, including area code
(203) 247-7611
ITEM 5. OTHER EVENTS
On July 14, 1995, Corcap entered into a purchase and sale
agreement with Fabrilock Inc., a newly formed corporation, whereby
Fabrilock purchased the Dayville Property in
exchange for 20% of Fabrilock's issued and
outstanding shares and the assumption by Fabrilock of the
cost of the
environmental remediation of the property estimated to be between
$58 thousand
and $248 thousand. Fabrilock manufactures specialty non-woven
textiles. Corcap
recorded an environmental reserve for $248 thousand in the third
quarter of
1994. According to the purchase and sale agreement, five years
after the sale
of the Dayville Property, Fabrilock would have the right to
repurchase 50% of
Corcap's holding of Fabrilock shares for $675 thousand and Corcap
would then
have the right to require Fabrilock to purchase the remaining 50%
of the
Fabrilock shares for $675 thousand. The purchase price of the
shares
would be
reduced by the amount of environmental remediation costs
incurred by
Fabrilock
in excess of $100,000.
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 hereunto duly authorized.
Date: July 27, 1995 By:/s/Norman Silberdick
Norman Silberdick
President and Chief Executive Officer
FORM 10-Q
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 June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
For the transition period from to
Commission File Number 1-4245
CompuDyne Corporation (Exact name
of registrant as specified in its charter)
Pennsylvania 23-1408659
(State or other jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
90 State House Square, Hartford, Connecticut 06103-3720
(Address of principal executive offices)
(203) 247-7611
(Registrant's telephone number, including area code)
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
As of August 8, 1995, a total of 1,709,622 shares of Common Stock, $.75 par
value,
were outstanding.
COMPUDYNE CORPORATION AND SUBSIDIARIES
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994 3
Consolidated Statements of
Operations - Three Months and Six Months Ended
June 30, 1995 and 1994 4
Consolidated Statements of
Cash Flows
Six Months Ended June 30, 1995 and 1994 5
Notes to Consolidated
Financial Statements 6-9
Item 2. Management's Discussion and Analysis of
Results of Operations
and Financial
Condition 10-11
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
Index to Exhibits 14
Computation of Net Income Per
Share
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(Unaudited)
June 30, December 31,
1995 1994
ASSETS
Current Assets:
Cash $
- $ 202
Accounts receivable, net
2,244 1,827
Inventories:
Work in process
377 260
Raw materials and supplies
270 254
Total inventories
647 514
Prepaid expenses and other current assets
96 37
Total Current Assets
2.987 2,580
Non-current receivables, related parties
13 5
Property, plant and equipment, at cost
706 699
Less: accumulated depreciation and amortization
(677) (672) Net
property, plant and equipment
29 27
Other assets, net
10 10
Total Assets
$ 3,039 $ 2,622
LIABILITIES AND SHAREHOLDERS'(DEFICIT) EQUITY
Current Liabilities:
Accounts payable
$ 1,831 1,137
Bank Line Payable
48 -
Customer deposits
21 92
Accrued pension costs
25 25
Accrued expenses
801 865
Current portion of deferred compensation
96 71
Total Current Liabilities
2,822 2,190
Long term pension liability
298 304
Deferred compensation, net of current portion
61 128
Total Liabilities
3,181 2,622
SHAREHOLDERS' (DEFICIT) EQUITY:
Common stock, par value $.75 per share 10,000,000 shares
authorized; 1,603,372 shares issued and outstanding
1,202 1,202
Other capital
7,988 7,988
Receivable from management
(92) (92)
Deficit (9,240)
(9,098)
Total Shareholders Equity (Deficit)
(142) -
Total Liabilities and Shareholders' Equity (Deficit)
$ 3,039 $ 2,622
See Notes to Consolidated Financial Statements.
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended
Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Net sales $ 2,892 3,287 $ 5,223 $ 5,688
Cost of sales 2,427 2,342 4,330 4,186
Gross margin 465
945 893 1,502
Selling, general and administrative
expenses 445
700 3 974 1,181
Research and Development 34
2 39 18
Operating income (loss) (14)
243 (120) 303
Other (income) expense
Interest expense 3
12 10 15
Interest income 4
(9) - (13)
Other (income) expense 15
(166) 12 (1,563)
Total other (income) expense, net (36)
163 22 (1,561)
Income (loss) from continuing operations
before income tax provision (36)
406 (142) 1,864
Income tax provision (benefit) -
30 - 31
Net income (loss) $ (36)
$ 376 $ (142) $ 1,833
Weighted average common shares 1,603
1,671 1,603 1,717
Net income (loss) per common share:
Continuing operations $ (.02)
$ .23 $ (.09) $ 1.07
Net income (loss) $ (.02)
$ .23 $ (.09) $ 1.07
See Notes to Consolidated Financial Statements
COMPUDYNE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
Six Months Ended
June 30,
1995 1994
Cash flows provided by (used for) operating activities:
Income (loss) from continuing operations
$ (142) $ 1,833
Depreciation and amortization
5 1
Changes in assets and liabilities:
Increase in accounts receivable
(417) (475)
Increase in accounts receivable, related parties
(8) (28)
Increase in prepaid expenses
(59)
(Increase) decrease in inventories
(133) (82)
Increase (decrease) accounts payable
694 (120)
Increase (decrease) in accrued liabilities
(64) (427)
Increase (decrease) in customer deposits
(71) -
Increase (decrease) in other, net
(48) (26)
Cash flows provided by (used for) operating activities
(243) 676
Cash flows used for investing activities:
Additions to property, plant and equipment
(7) -
Net cash flows used for investing activities
(7) -
Cash flows (used for) financing activities:
Collection of receivable from management
- 8
Increase (decrease) in short term debt
48 (1)
Decrease in long term debt
- (900)
Net cash (used for) provided by financing activities
48 (893)
Net increase (decrease) in cash
(202) (217)
Cash and cash equivalents at beginning of period
202 298
Cash and cash equivalents at end of period
$ - $ 81
Supplemental Schedule of Cash Flow Information:
Cash paid during the period for:
Interest
$ 10 $ 28
Income Taxes
- -
See Notes to Consolidated Financial Statements.
COMPUDYNE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIGNIFICANT ACCOUNTING POLICIES
All financial information for all interim periods presented is
unaudited. The financial statements have been prepared in
conformity with the accounting principles described in CompuDyne
Corporation's ("CompuDyne" or the "Company") most recent Form 10-
K filing. The management of CompuDyne believes that all
adjustments necessary to present a fair statement of the results
for the periods have been included. The adjustments consisted
only of normal reoccurring accruals.
Net Income (Loss) per common share. Net income (loss) per common
share was determined by dividing net income (loss) by the
weighted average number of common shares outstanding during the
period including the effect of common stock equivalents and stock
awards where such effect would be dilutive.
CONTRACTS IN PROGRESS
Contracts in progress consist of the following:
($ in thousands) June 30, December 31,
1995 1994
U.S. Government Contracts:
Billed $ 1,353$ 390
Unbilled 412 644(1)
Total $ 1,765$ 1,044
(1): The reserve for disallowances of $168 thousand at
December 31, 1994 and June 30, 1995 the reserve is included in
other accrued expenses.
Almost all of the U.S. Government billed and unbilled receivables
are derived from cost plus fixed fee and time and material
contracts. The conversion of the majority of the dollars from
unbilled to billed receivables is merely a timing consideration,
i.e., they will be billed within six days after the month-end
closing date. The remainder will be billed following final audit
of direct and indirect costs by the Defense Contract Audit
Agency.
NOTES PAYABLE
On November 18, 1994 CompuDyne obtained a $350 thousand working
capital line of credit agreement with the Asian American Bank and
Trust Company of Boston Massachusetts. The Company used the line
of credit during the quarter and had a loan of $48 thousand at
June 30, 1995. The credit agreement requires the Company to
maintain a working capital ratio of 1.1 to 1.0. As of June 30,
1995 the Company had a working capital ratio of 1.1 to 1.0.
During July 1995 the line of credit was increased to $500
thousand and the advance rate was increased from 50% to 75% of
eligible accounts receivable.
COMMITMENTS AND CONTINGENT LIABILITIES
The Company and certain of its subsidiaries are obligated as
lessees under various operating leases for office, distribution
and manufacturing facilities. Noncancelable operating lease
commitments are approximately $198 thousand in 1995, $437
thousand in 1996, $450 thousand in 1997, $464 thousand in 1998,
$477 thousand in 1999 and $80 thousand in 2000.
On December 31, 1993, CompuDyne Inc. ("CDI") a wholly-owned
subsidiary of the Company filed a petition in bankruptcy under
Chapter 7 of the United States Bankruptcy Code with the U. S.
Bankruptcy Court in Hartford Connecticut. At the time CDI filed
for bankruptcy it was indebted to the Company in an amount of
approximately $2.6 million. It is improbable that the Company
will recover any portion of this indebtedness. CDI is the subject
of several federal and state administrative proceedings and
lawsuits with respect to environmental and other matters. As a
result of the bankruptcy petition, such proceedings and lawsuits
have been stayed. Management is unable to assess whether the
Company will be held responsible for environmental clean-up costs
with respect to any of the properties now or formerly owned by
CDI. The only claim which has been made against the Company was
settled in December 1992 for $10 thousand.
On December 20, 1993, the Company received a summons naming it as
a third party defendant in four asbestosis cases pending against
a former subsidiary of CDI. The Company's insurance carriers are
currently defending the claims. Management believes that any
ultimate obligation relative to this claim, if any, will not have
a material impact on the Company's financial position and results
of operations. During the second quarter of 1995 the Company
received another claim which was defended by its insurance
carrier.
During the third quarter of 1994, the Company and CDI received
notice from Everbrite Electric Signs, Inc. (Everbrite) notifying
the Company that it may be a potential responsible party under
the North Carolina General Statutes in connection with the
closure and abatement of the Seaboard Chemical Corporation site
located in Jamestown, North Carolina. Preliminary information
supplied by the North Carolina Department of Environment, Health
and Natural Resources indicates that General Indicator Corp. a
former subsidiary of CDI sent 1,540 gallons of paint related
matter in 1986 to the site. According to the purchase and sale
agreement with Everbrite, the Company has an obligation to defend
them on actions of this nature prior to 1988. Accordingly, the
Company recommended that Everbrite join a Seaboard Defense Group
which it did. The total anticipated costs of remediating the site
will be approximately $4-6 thousand to the Company.
In October 1994, the Company received notice from three former
employees of QDi alleging incidences of sexual harassment from
supervisors and employees during their period of employment. The
employees have offered to settle the claim for $100 thousand each
or have threatened to initiate litigation. The Company has
thoroughly investigated the incident upon its allegation and
determined that the claims are without merit and will vigorously
defend any litigation against it. In June 1995 the claimants
filed a complaint with the Montgomery County Human Rights
Commission ( Commission ). The Commission asked the Company to
participated in a voluntary mediation proceeding. The Company
provided information to the Commission s investigator indicating
that the Company had researched the allegation and denied its
validity. The Company is waiting to hear from the Commission.
The Company is party to certain legal actions and inquiries for
environmental and other matters resulting from the normal course
of business. Although the total amount of liability with respect
to these matters cannot be ascertained, management of the Company
believes that any resulting liability should not have a material
effect on its financial position or results of future operations.
RELATED PARTIES
CompuDyne provides corporate services to Corcap for which it
charged $8 thousand for the second quarter of 1995 compared with
$4 thousand a month during 1994.
Corcap's residual outstanding debt to CompuDyne was $13 thousand
as of June 30, 1995 compared with $22 thousand as of March 31,
1994.
During April 1995 Corcap sold 13,500 shares of CompuDyne Common
Stock under Rule 144 of the Securities Act of 1933.
As a result of the sale of the 27,000 shares by Corcap, Corcap's
ownership of CompuDyne Common Stock decreased from 35.0% of the
issued and outstanding shares of CompuDyne Common Stock as of
December 31, 1994 to 33.2% as of June 30, 1995, and, after
assuming the exercise of Warrants for 150,000 shares of CompuDyne
Common Stock (which are presently exercisable until November 18,
1996) Corcap's ownership would be increased to 39%. Pursuant to
Stock Purchase Agreements, dated August 1, 1993, between
CompuDyne and five members of management, such persons may
purchase up to an additional 106,250 shares of CompuDyne Common
Stock on each of August 1, 1995 and 1996, assuming certain
conditions are met. During 1994, the stock ownership of all
members of CompuDyne management (four persons), increased to
13.3% of the issued and outstanding shares of CompuDyne Common
Stock, and, after assuming the exercise of the Corcap Warrants,
management's ownership would decrease to 12.1%. If such persons
purchase all of such shares, Corcap's ownership, on a fully
diluted basis, would be decreased to 33.1% and management's
ownership, on a fully diluted basis, would be increased to 20.6%.
COMPUDYNE CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
At the end of the 1995 second quarter CompuDyne had working
capital of $165 thousand which compares with $390 thousand at
year end. The $225 thousand decrease was primarily due to the
loss for the first two quarters of 1995 of $142 thousand and a
reduction of deferred compensation of $67 thousand and an
increase in receivables from related parties of $8 thousand.
RESULTS OF OPERATIONS
CompuDyne had a loss of $36 thousand for the 1995 second quarter
compared with a net income of $376 thousand for the 1994 second
quarter. The loss for the 1995 second quarter was primarily
attributable to Suntec division which lost $100 thousand and Data
Control which lost $24 thousand. Quanta earned $152 thousand for
the quarter while Corporate activities cost $64 thousand. Net
income during the 1994 second quarter was primarily attributable
to debt forgiveness of $162 thousand resulting from the
modification to the Clipper Loan Agreement on May 9, 1994 and
income from operations of $214 thousand. At the end of the
second quarter the Company's backlog remained at $7 million.
Net sales from continuing operations in the second quarter of
1995 decreased 12% to $2.9 million from $3.3 million in the
second quarter of 1994. The decrease was primarily due to the
Suntec division which had sales of $324 thousand compared with
$1,043 million for the 1994 second quarter. This was offset by
increases in sales at Quanta Systems division where revenues
increased by $368 thousand to $2.4 million for the 1995 second
quarter. Data Control division had a small sales decline of $15
thousand when compared with the 1994 second quarter.
Gross margin for the second quarter of 1995 decreased $480
thousand (51%) to $465 thousand from $945 thousand for the second
quarter of 1994. Suntec's Gross Margin decreased by $431
thousand as a result of lower sales volume. DCS had a decrease
of $22 thousand and Quanta Systems Division had a decrease of $36
thousand.
Selling, general and administrative expense decreased $255
thousand, or 36%, to $445 thousand from $700 thousand for the
1994 second quarter. The decrease was primarily due to Suntec's
reduction of cost of $238 thousand.
Research and development costs which were totally attributable
to DCS increased $32 thousand to $34 thousand compared with the
second quarter of 1994.
<PAGE>
CompuDyne's interest expense for the 1995 second quarter
decreased $9 thousand to $3 thousand compared with the 1994
second quarter of $12 thousand. The decrease was attributable to
the amount of interest paid on the Clipper obligation in 1994.
Other expense of $15 thousand for the 1995 second quarter
compares with other income of $166 thousand for the 1994 second
quarter. During the second quarter of 1994, the Company
negotiated a debt forgiveness of $162 thousand from Clipper.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit (11) - Consolidated Computation of Net Income
(Loss) Per Share
(b) Reports on Form 8-K
July 28, 1995 Report on forthcoming merger with
MicroAssembly Systems, Inc.; the issuance of convertible
debentures of $400 thousand; and proposed sale of the Suntec
Division of Quanta Systems.
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.
COMPUDYNE CORPORATION
Date: August 9, 1995
/s/ I. Elaine Chen
I. Elaine Chen
Corporate Controller
(Chief Accounting Officer)
INDEX TO EXHIBITS
Computation of Net Income Per Common Share
Exhibit 11
COMPUDYNE CORPORATION
COMPUTATION OF NET INCOME PER COMMON SHARE
(In Thousands, Except for Per Share Data)
(Unaudited)
Three Months Ended
June 30
Average Shares Outstanding 1995 1994
1. Average number of common shares outstanding 1,603 1,478
2. Adjusted weighted average stock options - 63
3. Adjusted weighted average number of Marc
common stock warrants outstanding -
130
standing 1,603
1,671
4. Income (loss) from continuing operations $ (36) $ 376
Net Income (Loss) Per Share
5. Income (loss) per common share from continuing
operations $ (.02) $ .23
Net income per share $ (.02) $ .23
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report
July 28, 1995
COMPUDYNE CORPORATION
(Exact name of registrant as specified in its charter)
PENNSYLVANIA
(State or other jurisdiction of incorporation)
1-4245 23-1408659
(Commission File Number) (IRS Employer
Identification No.)
90 State House Square
Hartford, Connecticut 06103-3720
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code
(203) 247-7611<PAGE>
ITEM 5. OTHER EVENTS
On July 25, 1995, the Board of Directors of CompuDyne
Corporation approved in principle the
acquisition of MicroAssembly Systems, Inc. It is contemplated that CompuDyne
will issue 1,260,460 shares of a newly created class of convertible preferred
stock to the
shareholders of MicroAssembly, convertible share for share into CompuDyne
Common Stock.
The shareholders of MicroAssembly have also agreed to purchase
a ten-year $400,000 convertible debenture from CompuDyne. the debenture will
be convertible into CompuDyne
Common Stock.
The funds from the sale of the debenture will be used
for working capital purposes at CompuDyne.
It is also expected that CompuDyne will sell its
Suntec division to Norman Silberdick, Chairman and Chief Executive Officer of
CompuDyne, who will resign those positions
coincident with the
signing of a definitive acquisition agreement. Martin Roenigk, Chairman of
MicroAssembly, will be appointed by the Board of Directors of CompuDyne to
succeed Silberdick
as Chairman and CEO of CompuDyne. The number of directors on the CompuDyne
Board will remain unchanged,
but Roenigk will have the right to appoint the majority of its
members to service until the next annual meeting of shareholders. Under the
anticipated terms of the Suntec sale
agreement, it is
expected that CompuDyne will retain a 2% royalty on Suntec's future revenues.
The acquisition and financing is expected to be completed
by the end of August 1995.
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 hereunto duly
authorized.
COMPUDYNE CORPORATION
Date: July 28, 1995 By:/s/ Norman Silberdick
Norman Silberdick
President and Chief Executive Officer
