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 March 31, 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 ______________________
Commission file number 000-17259
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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 _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 ___ 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 5,423,191.
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<PAGE>
GC INTERNATIONAL, INC.
INDEX
PART I. FINANCIAL INFORMATION:
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Item 1. Financial Statements
Unaudited Condensed Balance Sheets
March 31, 2000 and June 30, 1999..........................1
Unaudited Condensed Statements of Operations Three months
and nine months ended March 31, 2000
and March 31, 1999........................................2
Unaudited Statements of Cash Flows for the nine months
Ended March 31, 2000 and March 31, 1999...................3
Notes to Unaudited Condensed Financial Statements..............4
Item 2. Management's Discussion and Analysis of
Financial Condition & Results of Operation................5
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
March 31, 2000 June 30, 1999
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<S> <C> <C>
ASSETS
Current Assets
Cash $ 181,531 $ 371,085
Accounts receivable, net of
Allowance for doubtful accounts
Of $5,133 at March 31 and
$5,133 at June 30, 1999 655,822 508,214
Inventories 481,140 472,931
Prepaid expenses 27,303 6,787
Prepaid income tax -- 26,561
Deferred tax benefit 18,395 18,395
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Total Current Assets 1,364,190 1,403,972
Property and equipment, net 478,866 548,106
Deposits & deferred expenses 43,043 35,999
Deferred tax benefit 336,734 336,734
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Total Assets $ 2,222,833 $ 2,324,812
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 161,924 $ 68,776
Accrued expenses 598,374 646,409
Income taxes payable -- --
Notes payable 250,489 258,188
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Total current liabilities 1,010,787 973,373
Other Liabilities:
Notes payable, net of current portion 129,730 181,194
Other long term debt 320,000 320,000
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Total other liabilities 449,730 501,194
Total liabilities 1,460,517 1,474,567
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Stockholders' equity:
Common stock, without par value 1,759,149 1,770,007
Accumulated deficit (996,833) (919,762)
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Net stockholders' equity 762,316 850,245
Total Liabilities and
Stock Holders Equity $ 2,222,833 $ 2,324,812
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</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 9 Months Ended
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3/31/00 3/31/99 3/31/00 3/31/99
(Unaudited) (Unaudited)
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Net sales $ 1,472,723 $ 1,228,737 $ 3,701,559 $ 4,025,333
Cost of sales 970,904 826,596 2,542,588 2,639,486
----------- ----------- ----------- -----------
Gross profit 501,819 402,142 1,158,971 1,385,847
Operating expenses:
Selling 81,634 61,472 169,627 203,997
Administrative 353,463 325,743 994,779 996,064
----------- ----------- ----------- -----------
Operating Profit 66,722 14,926 (5,435) 185,786
Other income (expense) (62,243) (23,837) (66,449) (86,839)
Interest Expense net of 42,189 (2,118) (5,699) (6,742)
----------- ----------- ----------- -----------
interest income
Income (loss) before income taxes 46,669 (11,029) (77,583) 92,204
Income tax benefit (expense) 511 6,203 511 (12,017)
Net income (loss) $ 47,180 $ (4,826) $ (77,072) $ 80,187
=========== =========== =========== ===========
Earnings per common share
Primary $ 0.01 $ (0.00) $ (0.01) $ 0.01
Fully diluted $ 0.01 $ (0.00) $ (0.01) $ 0.01
Weighted average shares outstanding
Primary 6,783,191 6,856,782 6,783,191 6,856,782
Fully diluted 6,783,191 6,856,782 6,783,191 6,856,782
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
GC INTERNATIONAL, INC.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
9 Months Ended
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March 31, 2000 March 31,1999
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<S> <C> <C>
Cash flows from operating activities:
Net income $ (77,072) $ 80,187
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 82,737 93,279
Gain on sale of property, plant & equipment (1,850)
Purchase of GCI Stock (10,859) (9,808)
Adjustments to cash from operations:
Accounts Receivables (incr)decr (147,609) 57,088
Inventory (incr)decr (8,209) (29,540)
Accrued payable incr(decr) 93,148 7,184
Accrued liabilities incr(decr) (56,034) (66,784)
Income tax payable incr(decr) 34,561 1,255
Deferred tax (incr)decr- -- --
Prepaid expenses (incr)decr (20,516) (10,060)
Other assets & deposits (incr)decr (7,043) (9,174)
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Net cash provided by operating activities (116,895) 111,777
Cash flows from investing activities:
Purchase of property, plant & equipment (13,497) (133,717)
Proceeds from sale of property, plant -- 1,850
& equipment
Net cash provided (used) by (13,497) (131,867)
investing activities
Cash flows from financing activities:
Payments on short term borrowings (7,698) (4,802)
Payments on long term borrowings (51,463) (34,526)
New long term borrowings -- 57,367
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Net cash provided (used) by
financing activities (59,161) 18,039
Increase (decrease) in cash & cash equivalents (189,554) (2,051)
Cash at beginning of period 371,085 323,920
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Cash at end of period $ 181,531 $ 321,869
========= =========
</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 March 31, 2000, and June 30, 1999, and the results of
it's operations for the three and nine months ended March 31, 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 and nine months ended March 31, 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:
March 31 March 31
2000 1999
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Raw materials $ 72,679 $ 65,862
Work in process 400,252 443,450
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Total $472,931 $509,312
Inventories decreased at the end of March 2000. Inventories are expected to
remain at the current level during the next quarter.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Liquidity and Capital Resources
- -------------------------------
As of March 31, 2000, the Company's cash position was $181,531 and working
capital was $353,403, compared to cash of $371,085 and working capital of
$430,600 in the prior period. The cash position and working capital decreased
during the period as a result of the purchase of new plant and equipment and a
slowdown in orders during the last nine months thus incurring losses. Management
believes that these funds and cash flow from operations are adequate to fund
ongoing operations subject to the final settlement with the EPA (see factors
affecting future results). The Company has no bank line of credit. Therefore,
there is no assurance that these funds will prove adequate if the Company is
unable to maintain positive cash flow operations in the future.
4
<PAGE>
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. During 2000, the Company has been
able to arrange satisfactory equipment purchase contracts. The Company
anticipates that additional capital equipment will be required for the Company's
operating divisions during 2000 to 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 will be adequate.
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 March 31, 2000 was $167,365 compared to $181,900 at March 31, 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 will make last payment in August 2000. In April
2000 the Company received a settlement offer of approximately $569,258 from the
EPA for the final remediation. Since the Company has sufficient cash to cover
only ongoing operations and minimal equipment purchases, the future of the
Company could be in serious financial difficulty if substantial reductions and
term payouts cannot be arranged. The Company has reserved $120,000 based on the
previous settlement.
Results of Operations
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Comparison of three and nine months ended March 31, 2000, and March 31, 1999.
The Company's sales for the nine months ending March 31, 2000, decreased by
$323,774 or 8.0% and yet, increased for the three months by $243,986 or 19.9%
over the comparable period of the prior year. The Company is attempting to even
out the up and down sales by changing to Company employees in the sales
department.
There has been a noticeable decrease in the Company's markets. The backlog,
which was approximately $1,250,417 at June 30, 1999, increased at March 31, 2000
to $1,456,101, but this is still less than the June 30, 1998 backlog of
$1,852,052.
The Apollo Division profits exceeded the prior year. Apollo shipments are
expected to increase slightly during the next three months and are therefore
expected to provide increasing profits and cash flow. However, Apollo increases
are not sufficient to offset ALJ decreases. Therefore, it is probable that the
Company's profits, cash position and earnings per share will decrease
significantly as compared to 1999.
The cost of sales increased to 68.7% in March 2000 compared to 65.6% in the
previous period. The Company had to suddenly hire new production workers and had
to utilize a temp agency in order to meet customer requirements in the 3rd
quarter. Operating expenses decreased $35,655 as compared to the prior nine
month period. The Company expects to continue heavy selling activities during
the next three months to obtain new tooling and orders. Continuing mailings to
prospective customers have provided good results.
5
<PAGE>
Administrative expense decreased slightly. As a result, the Company had a net
profit of $47,180 in the quarter ended March 30, as compared to a loss of $4,826
in the prior period and for the nine month period the Company showed a loss of
$77,583 as compared to $80,187 profit in 1999.
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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
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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)
May 12, 2000 /s/ F. Willard Griffith II
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Date F. Willard Griffith II
Chairman, Chief Executive Officer and
Chief Financial Officer
6
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 181,531
<SECURITIES> 0
<RECEIVABLES> 660,955
<ALLOWANCES> (5,133)
<INVENTORY> 481,140
<CURRENT-ASSETS> 1,364,190
<PP&E> 1,682,134
<DEPRECIATION> (1,203,268)
<TOTAL-ASSETS> 2,222,833
<CURRENT-LIABILITIES> 1,010,787
<BONDS> 0
0
0
<COMMON> 1,759,149
<OTHER-SE> (996,833)
<TOTAL-LIABILITY-AND-EQUITY> 2,222,833
<SALES> 1,472,723
<TOTAL-REVENUES> 1,472,723
<CGS> 970,904
<TOTAL-COSTS> 1,406,000
<OTHER-EXPENSES> 15,853
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,201
<INCOME-PRETAX> 46,669
<INCOME-TAX> 511
<INCOME-CONTINUING> 47,180
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,180
<EPS-BASIC> 0.01
<EPS-DILUTED> 0.01
</TABLE>
