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, 2000
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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 __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 the latest practicable date 5,350,798.
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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, 2000 and June 30, 2000..................................1
Unaudited Condensed Statements of Operations
Three months ended September 30, 2000
and September 30, 1999................................................2
Unaudited Statements of Cash Flows for the Three months
Ended September 30, 2000 and September 30, 1999...................3
Notes to Unaudited Condensed Financial Statements
Ended September 30, 2000 and September 30, 1999...................4
Item 2. Management's Discussion and Analysis of
Financial Condition & Results of Operation...............................4
PART II. OTHER INFORMATION:
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Item 1. Legal Proceedings........................................................5
Item 2. Changes in Securities....................................................5
Item 3. Defaults Upon Senior Securities..........................................5
Item 4. Submission of Matters to a Vote
of Security Holders.....................................................5
Item 5. Other Information........................................................5
Item 6. Exhibits & Reports on Form 8-K...........................................5
Signatures ............................................................. 6
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GC INTERNATIONAL, INC.
BALANCE SHEETS
Unaudited
September 30 June 30
2000 2000
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ASSETS
Current Assets
Cash $ 114,651 $ 173,019
Accounts receivable, net of 676,234 508,213
Allowance for doubtful accounts
Of $5,133 at September 30 and
$5,133 at June 30, 1999
Inventories 465,870 555,963
Prepaid expenses 14,818 8,261
Deferred tax benefit $ 19,338 $ 19,338
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Total current assets 1,290,910 1,304,979
Property and equipment, net 505,640 448,363
Deposits & deferred expenses 43,025 43,760
Deferred tax benefit 368,118 368,118
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Total assets $ 2,207,694 $ 2,165,220
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LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable $ 206,831 $ 123,604
Accrued expenses 578,635 592,539
Notes payable 242,142 248,876
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Total current liabilities 1,027,608 965,020
Other Liabilities:
Notes payable, net of current portion 169,385 113,063
Other long term debt 320,000 320,000
Stockholders' equity:
Common stock, without par value 1,759,149 1,759,149
Accumulated deficit (1,068,447) (992,011)
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Net stockholders' equity 690,701 767,138
Total Liabilities and
Stock Holders Equity $ 2,207,694 $ 2,165,220
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The accompanying notes are an integral part of these financial statements.
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GC INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
3 Months Ended
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September 30, 2000 September 30, 1999
(Unaudited) (Unaudited)
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Net sales $ 1,265,801 $ 1,037,899
Cost of sales 948,645 734,825
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Gross profit 317,155 303,074
Operating expenses:
Selling 56,009 41,911
General & Administrative 330,092 313,941
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Income (loss) from operations (68,945) (52,778)
Other income (expense)
Interest, net (2,072) (3,487)
Other (5,419) (5,847)
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Income before income taxes (76,437) (62,113)
Provision for income taxes -- --
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Net Income (loss) $ (76,437) $ (62,113)
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Earnings per common share
Primary and Fully diluted
Income from continuing operations $ (.01) $ .01
Weighted average shares outstanding
Primary 5,350,798 5,423,191
Fully diluted 5,350,798 5,423,191
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The accompanying notes are an integral part of these financial statements.
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<CAPTION>
GC INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
September 30 June 30
2000 2000
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Cash flows from operating activities:
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Net income $ (76,437) $ (72,249)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 33,048 127,064
Gain on sale of property, plant & equipment -- (510)
Adjustments to cash from operations:
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Accounts Receivables (127,835) (40,185)
Inventory (incr) decr 90,093 (83,032)
Accrued payable (incr) decr 83,226 54,828
Accrued liabilities incr (decr) (14,004) 61,870
Income taxes payable incr (decr) -- --
Reserve liability incr (decr) 100 --
Deferred tax incr (decr) -- (32,327)
Prepaid expenses (incr)(decr) (6,557) 33,088
Other assets & deposits (incr)(decr) 735 (7,761)
(incr)(decr) --------- ---------
Net cash provided by operating activities (17,631) (81,934
Cash flows from investing activities:
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Purchase of property, plant & equipment (90,325) (27,831)
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Net cash provided by investing activities (90,325) (27,831)
Cash flows from financing activities:
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Payments on long term debt (13,167) (95,597)
New long term borrowings 62,755 18,154
Re-purchase of common stock -- (10,858)
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Net cash provided by investing activities 49,588 (88,301)
Increase(decrease)in cash and cash equivalents (58,368) (198,066)
Cash at beginning of period 173,019 371,085
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Cash at end of period $ 114,651 $ 173,019
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The accompanying notes are an integral part of these financial statements.
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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, 2000 and June 30, 2000, and the results
of it's operation for the three months ended September 30, 2000 and 1999.
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, 2000 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
2000 1999
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Raw materials $ 58,935 $ 74,630
Work in process 406,935 396,643
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Total $465,870 $471,273
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Management's Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity and Capital Resources
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As of September 30, 2000, the Company's cash position was $114,651 and working
capital was $263,302, compared to cash of $173,019 in the prior period. The cash
position declined during the quarter as a result of current quarter losses. The
continuing losses are a result of poor manufacturing efficiency and lack of
qualified personnel plus the continued pressure of increases in minimum wage.
The company is working to increase efficiency to offset the increase in wages.
Management believes that these funds and cash flow from operations are adequate
to fund ongoing operations providing that profitability can be attained soon .
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.
See factors affecting future results.
Capital Equipment Requirements and Equipment Leases
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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 may be required for the Company's operating
divisions during 2001. 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 or other arrangements will be adequate or available.
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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, 2000 was $161,365 compared to $174,857 at September 30,
1999.
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 final payment of $20,000 in August 2000.
In April, 2000 EPA requested that the Company pay in excess of $500,000 for the
final remediation. However, the EPA also offered to settle for a lesser amount
based on a financial analysis of the Company's ability to pay. This analysis is
underway and as of November 1, the Company has not received any communication.
The Company believes that its reserve for future liability in the amount of
$120,000 is should be adequate to cover final settlement. However, there is no
guarantee that the Company will be able to settle the claim on terms that are
satisfactory.
Results of Operations
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Comparison of three months ended September 30, 2000, and September 30, 1999.
The Company's sales for the three months ending September 30, 2000, increased
$227,902 or 22% over the comparable period of the prior year. The Company
believes that changes made in the sales efforts are mostly responsible.
The backlog which was approximately $1,197,674 at June 30, 2000 , increased
significantly and at September 30, 2000 was approximately $1,370,631.
The cost of sales increased to 74.9% compared to 70.8% in the prior year period,
primarily as a result of the lack of available personnel. The result was reduced
efficiency in work flow and scrap. As a result, the loss for the quarter was
$76,437 compared to a loss of $62,113 for the prior year. Therefore, the net
loss after taxes and the loss per-share are comparable to the prior year.
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
5
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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.
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(Registrant)
November 12, 2000 F. Willard Griffith II
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Date F. Willard Griffith II
Chairman, Chief Executive Officer and
Chief Financial Officer
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