SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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, 1999
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OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 000-17259
GC INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2278595
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(State or other jurisdiction of (I.R.S. employer Identification no.)
incorporation or organization)
156 BURNS AVENUE, ATHERTON CALIFORNIA 94027
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (650) 322-8449
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N/A
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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 ___ No _X_
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 No X
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APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date 5,423,191.
<PAGE>
GC INTERNATIONAL, INC.
INDEX
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PART I. FINANCIAL INFORMATION:
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Item 1. Financial Statements
Unaudited Condensed Balance Sheets
September 30, 1999 and June 30, 1999...........................1
Unaudited Condensed Statements of Operations
Three months ended September 30, 1999
and September 30, 1998.......................................2
Unaudited Statements of Cash Flows for the Three months
Ended September 30, 1999 and September 30, 1998................3
Notes to Unaudited Condensed Financial Statements
Ended September 30, 1999 and September 30, 1998................4
Item 2. Management's Discussion and Analysis of
Financial Condition & Results of Operation..............4
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 ............................................ 6
<PAGE>
GC INTERNATIONAL, INC.
<TABLE>
<CAPTION>
BALANCE SHEETS
September 30 June 30
1999 1999
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<S> <C> <C>
ASSETS
Current Assets
Cash ........................................ $ 293,986 $ 371,085
Accounts receivable, net of ................. 582,013 508,213
Allowance for doubtful accounts
Of $5,133 at September 30 and
$5,133 at June 30, 1999
Inventories ................................. 471,273 472,931
Prepaid expenses ................................... (2,747) 6,787
Deferred tax benefit ............................... $ 18,395 $ 26,044
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Total current assets ................. 1,362,919 1,385,060
Property and equipment, net ................. 518,639 548,106
Deposits & deferred expenses ................ 46,505 35,999
Deferred tax benefit ........................ 336,734 281,164
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Total assets ........................ $ 2,264,797 $ 2,250,329
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable ............................ $ 171,538 $ 68,776
Accrued expenses ............................ 628,885 654,408
Income taxes payable ........................ (34,561) (2,725)
Notes payable ............................... 252,536 258,187
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Total current liabilities ............... 1,018,398 978,646
Other Liabilities:
Notes payable, net of current portion ....... 146,467 181,193
Other long term debt ........................ 320,000 320,000
Stockholders' equity:
Common stock, without par value ............. 1,761,805 1,770,007
Accumulated deficit ......................... (981,873) (999,517)
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Net stockholders' equity ................ 779,932 770,490
Total Liabilities and
Stock Holders Equity ................. $ 2,264,797 $ 2,250,329
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
GC INTERNATIONAL, INC.
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
3 Months Ended
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September 30, September 30,
1999 1998
(Unaudited) (Unaudited)
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<S> <C> <C>
Net sales ........................................ $ 1,037,899 $ 1,456,212
Cost of sales .................................... 734,825 927,101
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Gross profit ..................................... 303,074 529,111
Operating expenses:
Selling ................................... 41,911 68,650
General & Administrative .................. 313,941 361,926
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Income from operations ........................... (52,778) 98,535
Other income (expense)
Interest, net ............................. (3,487) (4,040)
Other ..................................... (5,847) (13,181)
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Income before income taxes ....................... (62,113) 81,314
Provision for income taxes ....................... 0 9,010
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Income before extraordinary items ................ (62,113) 72,305
Net income ....................................... $ (62,113) $ 72,305
=========== ===========
Earnings per common share
Primary and Fully diluted
Income (loss) from con't operations ..... $ (.01) $ 0.01
Weighted average shares outstanding
Primary ................................... 5,423,191 5,548,401
Fully diluted ............................. 5,423,191 5,548,401
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
GC INTERNATIONAL, INC.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
September 30 June 30
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
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Net income ............................................ $ (62,113) $ 72,305
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .................. 31,265 31,843
Gain on sale of property, plant & equipment .... -- (1,850)
Adjustments to cash from operations:
- ------------------------------------
Accounts Receivables .............. (incr)decr (73,800) (58,533)
Inventory ......................... (incr)decr 1,658 (9,507)
Accrued payable ................... (incr)decr 102,762 53,428
Accrued liabilities ............... (incr)decr (25,523) 1,576
Income taxes payable .............. (incr)decr 47,921 24,915
Deferred tax ....................... (incr)decr (47,921) --
Prepaid expenses ................... (incr)decr 9,534 5,818
Other assets & deposits ............ (incr)decr (10,505) (3,252)
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Net cash provided by operating activities ...... (26,721) 116,742
Cash flows from investing activities:
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Purchase of property, plant & equipment ........ (1,797) (33,398)
Proceeds from sale of property, plant
& equipment .................................. -- 1,850
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Net cash provided by financing activities ...... (1,797) (31,548)
Cash flows from financing activities:
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Payments on short term borrowings .............. (5,652) (8,548)
Payments on long term debt ..................... (34,726) (31,813)
Re-purchase of common stock .................... (8,203) --
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Net cash provided by investing activities ...... (48,581) (40,361)
Increase in cash and cash equivalents ................. (77,099) 44,833
Cash at beginning of period ........................... 371,085 323,920
--------- ---------
Cash at end of period ................................. $ 293,986 $ 368,753
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
GC INTERNATIONAL, INC.
Notes to Condensed Financial Statements
Note 1
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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, 1999 and June 30, 1999, and the results
of it's operation for the three months ended September 30, 1999 and 1998.
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
it's 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, 1999 are not necessarily
indicative of the results of the full year.
Note 2
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Inventories are stated at the lower of cost (first-in, first-out method) or
market and consist of the following:
September 30 September 30
1999 1998
---- ----
Raw materials $ 74,630 $ 60,675
Work in process 396,643 428,605
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Total $471,273 $489,280
======= =======
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity and Capital Resources
- -------------------------------
As of September 30, 1999, the Company's cash position was $293,986 and working
capital was a positive $344,522, compared to cash of $371,085 in the prior
period. The cash position declined during the quarter as a result of current
quarter losses due to a downturn in orders at the Company's ALJ Division.
Management believes that these funds and cash flow from operations are adequate
to fund ongoing operations. However, there is no assurance that these funds will
prove adequate if the Company is unable to maintain positive cash flow from
operations in the future.
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.
The Company anticipates that additional capital equipment will be required for
the Company's operating divisions during 2000. The Company will use its best
efforts to satisfy its capital needs by using internally generated cash in
excess of debt repayments and by entering into other arrangements as available.
There can be no assurances that cash resources will be adequate.
4
<PAGE>
Factors Affecting Future Results
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The Company must make payments to certain creditors in accordance with the
Company's 1991 Plan of Reorganization. The total of the non-interest bearing
notes, at September 30, 1999 was $174,857 compared to $190,899 at September 30,
1998.
The Company settled an interim claim with the EPA for $100,000 plus interest for
a Superfund Site cleanup in connection with waste generated in the 1970's by a
former division. The Company made the fourth payment of $20,000 in August 1999,
with the last payment due August 2000. Based on the settlement reached with the
EPA in 1996 for the interim claim, the Company believes that its reserve for
future liability in the amount of $120,000 is adequate to cover any final
settlement.
The Company has reviewed its internal computer systems for year 2000 compliance
and is satisfied that all of its internal computer systems are either already
year-2000 compliant or can be made year-2000 compliant through simple upgrades.
The Company does not expect the costs of achieving full year-2000 compliance to
be material for the internal systems. However, there can be no assurance that
coding errors or other defects will not be discovered in the future. In
addition, since the Company is very small in relation to many of its customers
and suppliers, the Company has been unable to ascertain if any of its suppliers
and customers are year-2000 compliant. Therefore, there can be no assurances
that the Company's cash flow and materials from suppliers will not be
interrupted which could result in severe disruptions in the Company's
operations.
Results of Operations
- ---------------------
Comparison of three months ended September 30, 1999, and September 30, 1998.
The Company's sales for the three months ending September 30, 1999, decreased
$418,313 or 28.7% over the comparable period of the prior year due to completion
of certain contracts with a large customer. Unfortuantely, the orders could not
be replaced.
As a result of the completed contracts, the backlog which was approximately
$1,852,052 at June 30, 1999, decreased significantly and at September 30, 1999
was approximately $1,364,960.
The cost of sales increased to 70.8% compared to 63.7% in the prior year period,
primarily as a result of reduced sales. Operating expenses decreased to
$355,852(approximately $74,724) compared to $430,576 in the prior period as a
result of reduced expenditures. As a result, the loss for the quarter was
$62,113 compared to a profit of $81,314 for the prior year. Therefore, the net
loss after taxes was $62,113 or (6%) of sales versus 5% profit for the prior
year. The loss per share for the three month period was $.01/share compared to a
profit of $.01/share for the 1998 period.
5
<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
6
<PAGE>
GC INTERNATIONAL, INC.
Signatures
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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.
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(Registrant)
November 10, 1999 /s/ F. Willard Griffith II
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Date F. Willard Griffith II
Chairman, Chief Executive Officer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 293,986
<SECURITIES> 0
<RECEIVABLES> 587,146
<ALLOWANCES> (5,133)
<INVENTORY> 471,273
<CURRENT-ASSETS> 1,362,919
<PP&E> 1,670,434
<DEPRECIATION> (1,151,795)
<TOTAL-ASSETS> 2,264,797
<CURRENT-LIABILITIES> 1,018,398
<BONDS> 0
0
0
<COMMON> 1,761,805
<OTHER-SE> (981,873)
<TOTAL-LIABILITY-AND-EQUITY> 779,932
<SALES> 1,037,899
<TOTAL-REVENUES> 1,037,899
<CGS> 734,825
<TOTAL-COSTS> 734,825
<OTHER-EXPENSES> 361,699
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,487
<INCOME-PRETAX> (62,113)
<INCOME-TAX> 0
<INCOME-CONTINUING> (62,113)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (62,113)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
