SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________
FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
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 000-17259
GC INTERNATIONAL , INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2278595
(State or other jurisdiction of (I.R.S. employer Identification no.)
incorporation or organization)
156 BURNS AVENUE, ATHERTON CALIFORNIA 94027
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (415) 322-8449
N/A
Former name, former address and former fiscal year, if changed since last
report.
Indicate by check mark whether the registrant (1) has filled 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 ___
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
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 ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of October 31, 1996 was 5,748,499.
<PAGE>
GC INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
September 30, 1996 and June 30, 1996 . . .1
Consolidated Condensed Statements of Operations
Three Months ended September 30, 1996
and September 30, 1995 . . . . . . . . . .2
Notes to Unaudited Condensed Financial
Statements . . . . . . . . . . . . . . . . .3
Item 2. Management's Discussion and Analysis of
Financial Condition & Results of Operation4
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings. . . . . . . . . . . . . . .6
Item 2. Changes in Securities. . . . . . . . . . . . .6
Item 3. Defaults Upon Senior Securities. . . . . . . .6
Item 4. Submission of Matters to a Vote
of Security Holders . . . . . . . . . . .6
Item 5. Other Information. . . . . . . . . . . . . . .6
Item 6. Exhibits & Reports on Form 8-K . . . . . . . .6
Signatures . . . . . . . 7
<PAGE>
GC INTERNATIONAL, INC.
Condensed Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
September 30 June 30
1996 1996
<S> <C> <C>
Assets
Current assets:
Cash ................................................ $ 240,117 $ 176,055
Accounts receivable, less allowance for doubtful
accounts of $6,365 and $6,361 ..................... 669,375 648,435
Inventories ......................................... 470,761 539,397
Prepaid expenses ................................... (431) -0-
---- -
Total current assets .................................. 1,379,822 1,363,887
Property and equipment, net ........................... 359,132 362,405
Deposits & Deferred Expenses .......................... 62,443 53,757
------ ------
$ 1,801,397 $ 1,780,049
=========== ===========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Short-term bank borrowings ......................... $ 121,559 $ 171,499
Current maturities of long-term debt ............... 41,650 21,023
Accounts payable ................................... 161,172 153,725
Accrued liabilities:
Payroll ............................................. 167,507 154,475
Customer Deposits ................................... 68,769 64,706
Commissions ......................................... 13,840 12,883
Vacation Pay ........................................ 238,214 261,248
Employee accruals ................................... 245,613 240,613
Other ............................................... 897,840 1,008,585
------- ---------
Total current liabilities .................... 1,956,164 2,088,757
Long-term debt, less current maturities ............. 112,416 58,070
Other long-term debt ................................ 121,868 128,424
Stockholders' equity (deficit):
Common stock, without par value. Authorized
30,000,000 shares; issued and outstanding
5,748,499 shares ............................ 1,791,590 1,791,590
Accumulated deficit ................................... (2,180,641) (2,286,792)
---------- ----------
Net stockholders' equity (deficit) ................ (389,051) (495,202)
-------- --------
$ 1,801,397 $ 1,780,049
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
GC INTERNATIONAL, INC.
Consolidated Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
3 Months Ended
------------------
Sept.30 Sept.30
1996 1995
---------------------
<S> <C> <C>
Net Sales ................... $ 1,403,516 $ 1,381,448
Cost of Sales ............... 984,849 955,556
Gross Profit ............ 418,667 425,892
Operating expenses:
Selling ................... 55,109 38,028
Administrative ............ 245,764 249,482
Operating Profit ........ 117,794 138,382
Other income (expense):
Other income (expense), net (6,899) (5,094)
Interest expense, net of
interest income ......... (3,171) (8,917)
___________ ___________
Income before taxes ..... 107,724 124,371
Income tax expense .......... 1,574 -0-
----- -
Net Profit ........... $ 106,150 $ 124,371
=========== ===========
Common stock: Outstanding ... 5,748,499 5,748,499
Income per common share ..... $ .02 $ .02
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
<PAGE>
GC INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to Condensed Financial Statements
(Unaudited)
Note 1
The financial statements included herein have been prepared by GC
International, Inc., ("GCI") without audit, and include all adjustments which
are, in the opinion of management, necessary for a fair presentation of the
Company's financial position as of September 30, 1996, and June 30, 1996, and
the results of operations for the three months ended September 30, 1996 and
1995. Certain information and note disclosures normally included in financial
statements have been condensed or omitted pursuant to such rules and regulations
of the Securities and Exchange commission, although the Company believes that
disclosure in such financial statements is adequate to make the information
presented not misleading.
These financial statements should be read in conjunction with the Company's
financial statements and notes thereto included in the Company's Form 10-K
Annual Report filed with the Securities and Exchange Commission. The results of
operations for the three-months ended September 30, 1996 are not necessarily
indicative of the results of the full year.
Note 2
Inventories are stated at the lower of cost (first-in, first-out method) or
market and consist of the following:
<TABLE>
<CAPTION>
Sept. 30 Sept. 30
1996 1995
-------- ---------
<S> <C> <C>
Raw materials $ 67,556 $ 54,336
Work in process 403,205 438,117
------- -------
Total $ 470,761 $ 492,513
========= =========
</TABLE>
<PAGE>
Management Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity, Capital Resources, and Bank Loan Agreement
Bank Loan Agreement
- -------------------
In Company's loan agreement with its bank was renewed until January 1,
1997. The agreement requires principal payments of $16,000/month; the
loan bears interest at a rate of 2-1/2% above the bank's prime rate. As
of September 30, 1996, outstanding borrowings on the loan were $121,559 as
compared to $320,781 a year earlier.
Liquidity
- ---------
As of September 30, 1996, the Company's cash position was $240,117 and
working capital was a negative $576,342, compared to cash of $136,831 and
a negative $807,796 in the prior year. The cash position and payments to
trade creditors improved during the quarter as a result of the profit of
the company during the first quarter.
Other Impacts on Liquidity
The Company's liquidity is continuing to be positive and negatively
impacted because of:
(1) The company reported continuing profits and positive cash flow for
the three months period ending September 30, 1996.
(2) The Company must make payments to Pre-petition Creditors in
accordance with the Plan of Reorganization. Due to the cash shortage of
the company in the past, few payments have been made to creditors.
Although the Company is in default with substantially all of the
creditors, the Company is working with certain creditors who have
requested payment. The creditor notes generally do not provide for any
specific remedies or for acceleration in the event of non-payment.
(3) The Company owes the various legal counsel approximately $70,000 in
connection with the 1991 bankruptcy.
(4) The Company settled a claim with the EPA under a partial consent
decree for an amount of $100,000 plus interest for a Superfund Site
cleanup in connection with waste generated by the company's former Raytee
division. The company made the first payment of $20,000 in August 1996.
Payments of $20,000 plus fixed interest are due each successive August
with the last payment due August 2000.
Capital Equipment Requirements and Equipment Leases
- ---------------------------------------------------
The Company, from time to time, has satisfied certain of its capital
equipment requirements by entering into equipment leases with third
parties or purchase arrangements with the equipment manufacturers. During
1995 and 1996, the Company has been able to arrange satisfactory equipment
and automobile leases or purchase contracts.
The Company anticipates that additional capital equipment will be
required for the Company's operating divisions during 1997. Because of
the Company's negative net worth and lack of working capital, it may not
be possible to lease or purchase some or all of such equipment on terms
satisfactory to the Company. If sufficient capital equipment is not
available, the Company could be materially adversely affected. In
addition, a continued shortage of capital resources could materially
adversely affect the ability of the Company to make needed improvements
and reduce profit levels.
The Company will use its best efforts to satisfy its capital needs by
using internally generated cash in excess of mandated debt repayments and
by entering into other arrangements as available. There can be no
assurances that cash resources will be adequate.
Results of Operations
- ---------------------
Comparison of three months ended September 30, 1996, and September 30,
1995.
The Company's sales for the three months ending September 30, 1996,
increased $22,068 or 1.6% over the comparable period of the prior year,
generally reflecting the increase in new orders received by the Company's
ALJ division during the past year.
The backlog has remained relatively consistent throughout the Quarter and
at October 31, 1996 was approximately $ 1,425,000.
The cost of sales increased to 70.2% compared to 69.2% in the prior year
period, primarily as a result of increased overhead in quoting and
engineering. Operating expenses increased to $300,873 compared to
$287,510 in the prior period primarily as a result of increased investment
in the company's sales representative program and marketing expense.
Interest expense on bank debt decreased as a result of the reduction in
principal. As a result profit for the quarter was $106,150 or 7.6%
compared to $124,371 or 9.0% for the prior year. The profit per share
remained constant at $.02/ share.
<PAGE>
PART II
Item 1 Legal Proceedings: None
Item 2 Changes in Securities: Not Applicable
Item 3 Defaults upon Senior Securities: Not Applicable
Item 4 Submission of Matters to a Vote of Securities Holders:
Not Applicable.
Item 5 Other Information: None
Item 6 Exhibits and Reports on Form 8K: None
<PAGE>
GC INTERNATIONAL, INC.
Signatures
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.
GC International, Inc.
(Registrant)
November 11, 1996 F. Willard Griffith II
Date F. Willard Griffith II
Chairman, Chief Executive Officer and
Chief Financial Officer
<PAGE>
GC INTERNATIONAL, INC.
Signatures
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.
GC International, Inc.
(Registrant)
November 11, 1996
Date F. Willard Griffith II
Chairman, Chief Executive Officer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from (A) The
Consolidated statements of operations and the consolidated balance sheets and is
qualified in its entirety by reference to such (B) September 1996 10-Q
reporting.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-mos
<FISCAL-YEAR-END> jun-30-1997
<PERIOD-START> jul-01-1996
<PERIOD-END> sep-30-1996
<EXCHANGE-RATE> 1
<CASH> 240,117
<SECURITIES> 0
<RECEIVABLES> 675,740
<ALLOWANCES> (6,365)
<INVENTORY> 470,761
<CURRENT-ASSETS> 1,379,822
<PP&E> 1,282,221
<DEPRECIATION> (923,089)
<TOTAL-ASSETS> 1,801,397
<CURRENT-LIABILITIES> 1,956,164
<BONDS> 0
0
0
<COMMON> 1,791,590
<OTHER-SE> (2,180,641)
<TOTAL-LIABILITY-AND-EQUITY> 1,801,397
<SALES> 1,403,516
<TOTAL-REVENUES> 1,403,516
<CGS> 984,849
<TOTAL-COSTS> 984,849
<OTHER-EXPENSES> 307,772
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,171
<INCOME-PRETAX> 107,724
<INCOME-TAX> 1,574
<INCOME-CONTINUING> 106,150
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 106,150
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
<FN>
Primary and fully diluted EPS are calculated using the treasury stock
method for options outstanding that had an option price less than the estimated
market value. Number of shares O/S including O/S options with purchase price
less than market value = 7,048,499.
</FN>
</TABLE>
