<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarter ended March 3l, 1996 or
( ) Transition report pursuant to Section l3 or l5(d) of
the Securities Exchange Act of l934
For the transition period N/A
Commission file Number 1-10346
MICROTEL INTERNATIONAL, INC. (formerly CXR Corporation)
(Exact name of registrant as specified in its charter)
Delaware 77-0226211
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2040 Fortune Dr. Suite 102 San Jose, California 95l3l
(Address of principal executive offices) (Zip Code)
Registrant's telephone number ------ (408) 435-8520
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
Common Stock, $.0033 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Title of Class
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 March 31, l996 there were 13,915,913 shares of Common Stock
outstanding.
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MICROTEL INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
Page
Part I - FINANCIAL INFORMATION
Item l. Financial Statements
Consolidated Condensed Balance Sheets
March 3l, l996 and December 31, l995 3
Consolidated Condensed Statements of Operations
Three Months Ended March 31, l996 and l995 4
Consolidated Condensed Statements of Cash Flows
Three Months Ended March 31, l996 and l995 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-8
Part II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults upon Senior Securities 9
Item 4. Submission of Matters to a Vote
of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
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MicroTel International, Inc.
Consolidated Condensed Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
March 31, Dec. 31,
1996 1995
---- ----
(in thousands)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents: $46 $432
Investments in marketable securities 152 152
Accounts receivable 3,336 3,582
Inventories:
Finished goods $1,648 $1,774
Work in process 829 960
Parts 1,484 1,414
------- -------
3,961 4,148
Other current assets 512 283
------- -------
Total current assets 8,007 8,597
Plant and equipment-net 812 866
Capitalized software 1,084 1,052
Foreign tax receivable 779 790
Other assets 45 20
------- -------
$10,727 $11,325
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $999 $759
Current portion long term debt 234 252
Accounts payable 2,045 2,184
Accrued payroll and related expenses 1,067 1,083
Other accrued liabilities 802 666
Deferred income 262 350
------- -------
Total current liabilities 5,409 5,294
Long term debt 240 227
Deferred compensation liability 788 803
Deferred rent 42 45
------- -------
Total liabilities 6,479 6,369
Stockholders' equity:
Common stock 45 45
Additional paid-in capital 22,378 22,293
Accumulated deficit (17,489) (16,774)
Stockholder's note receivable (1,337) (1,337)
Deferred compensation (76) (88)
Cumulative translation adjustments 727 817
------- -------
Stockholders' equity 4,248 4,956
------- -------
$10,727 $11,325
======= =======
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE>
MicroTel International, Inc.
Consolidated Condensed Statements of Operations
(Unaudited)
For the three months ended
March 31,
1996 1995
---- ----
(in thousands except
per share amounts)
Sales $4,134 $5,660
Costs and expenses:
Cost of sales 2,527 3,319
Engineering and product
development 543 435
Selling and marketing 1,038 1,102
Administration 793 672
Other expense\(income)-net (52) 44
------ ------
4,849 5,572
------ ------
Net income (loss) ($715) $88
====== ======
Net income (loss) per common share ($0.05) $0.01
====== ======
Weighted average number of
shares used in calculating
net income (loss) per share 13,817 13,039
====== ======
See notes to consolidated condensed financial statements.
4
<PAGE>
MicroTel International, Inc.
Consolidated Condensed Statements of Cash Flows
(Unaudited)
For the three months ended
March 31,
1996 1995
---- ----
(in thousands)
Cash flows from operating activities:
Net income (loss) ($715) $88
Reconciliation to cash provided
by (used in) operations:
Depreciation and amortization 80 68
Amortization of intangible assets 35 69
Changes in assets and liabilities:
Accounts receivable 245 653
Inventories 188 (672)
Other assets (229) 41
Accounts payable (139) 91
Other accrued liabilities 120 60
Other noncurrent liabilities (105) 36
------ ------
Cash provided by (used in) operations (520) 434
------ ------
Cash flows from investing activities:
Additions to plant and equipment
net of retirements (42) (78)
Capitalized software (109) (170)
------ ------
Cash used in investment activities (151) (248)
------ ------
Cash flows from financing activities:
Short-term borrowing 240 45
Long-term debt:
Additions 30 107
Repayments (24)
Common stock transactions, net 97
------ ------
Cash provided by financing activities 343 152
------ ------
Effect of exchange rate changes on cash (58) 272
------ ------
Net increase (decrease) in cash (386) 610
Cash and cash equivalents
at beginning of period 432 947
------ ------
Cash and cash equivalents
at end of period $46 $1,557
====== ======
See notes to consolidated condensed financial statements.
5
<PAGE>
MICROTEL INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(1) The unaudited consolidated condensed financial statements
reflect all adjustments, consisting of only normal recurring
adjustments, which are, in the opinion of management,
necessary to state fairly the results for the period
presented. The results for the period are not necessarily
indicative of the results to be expected for the full fiscal
year. It is suggested that these interim consolidated
financial statements should be read in conjunction with the
Company's Annual Report on Form 10K for the year ended
December 31, l995.
The currency of the country in which the foreign subsidiary is
located is considered its functional currency. Cumulative
translation adjustments result from converting from the
functional currency to U.S. dollars.
(2) The Company's U.S. subsidiary, CXR Telcom, has a bank line of
credit with available borrowings thereunder based on eligible
receivables and inventory and with a maximum borrowing limit
of $l,000,000. The line of credit agreement contains
covenants which provide for, among other things, the
maintenance of certain financial ratios and profitability of
CXR Telcom. At December 3l, l995, CXR Telcom was in violation
of the profitability covenant and the bank waived the default
with the stipulation that CXR Telcom return to profitability
by March 3l, l996 and recover all losses incurred during l995
by June 30, l996 or the line of credit would be converted to
a factoring arrangement. On May 15, l996, although CXR Telcom
incurred a loss for the first quarter, the bank further waived
reconsideration of the credit facility until its scheduled
renewal on June 3, l996.
6
<PAGE>
MICROTEL INTERNATIONAL, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
Results of Operations - First Quarter l996 vs. First Quarter l995
Consolidated sales and gross margins for the first quarter
were comprised of the following results for the Company's U.S.
operating subsidiary, CXR Telcom, and its French operating
subsidiary, CXR S.A.
Quarter Ended March 31,
l996 l995
---- ----
(in thousands)
Sales
CXR Telcom $1,796 $2,360
CXR S.A. 2,338 3,300
------ ------
Total $4,l34 $5,660
====== ======
Gross Margins
CXR Telcom $ 645 $ 972
CXR S.A. 962 l,369
------ ------
Total $l,607 $2,34l
====== ======
Consolidated sales declined by $l,526,000 or 27% in l996 as
compared to the first quarter of l995, comprised of declines of
$564,000 and $962,000 for CXR Telcom and CXR S.A., respectively.
CXR Telcom's sales of both test instruments and transmission
products were impacted by delays in buying by its principal
customers, AT&T and the Regional Bell Operating Companies (RBOC's),
which has resulted from the consolidation and/or restructuring of
these companies in the wake of the passage of the l995
Telecommunications Bill. CXR S.A.'s sales decline resulted from
very strong price competition in the European modem market, a trend
which is expected to continue, coupled with a general decline in
sales to its major customer, France Telecom, which is undergoing a
reorganization to facilitate its privatization.
To replace these revenues in the short term, CXR S.A. plans to
convert to European format and introduce certain of CXR Telcom's
products to its product line and continues to emphasize growth
through the distribution of an increasing number of other
manufacturers' telecommunications products. In the U.S., the
impact of the reorganizations of CXR Telcom's customers is a
temporary phenomenon, which is expected to result in significant
growth as the changed entities emerge and the long-distance
carriers vie for the local loop business of the RBOC's and the
RBOC's compete for long distance services.
Consolidated gross margins declined from 4l% in l995 to 39% in
7
<PAGE>
l996. CXR S.A. was able to maintain its overall margins at 4l%
with lower margins on transmission product sales being offset by
higher margins on distributor product sales, but CXR Telcom's
margins declined from 41% to 36%. CXR Telcom's margins were
negatively impacted by underabsorption of fixed manufacturing
overhead costs due to the decline in production levels accompanying
the lower sales volume.
Engineering and product development costs increased by
$l08,000 in the first quarter of l996 over l995, principally as a
result of greater net capitalization of engineering costs in l995
due to the relative mix of product development versus product
maintenance efforts during the respective periods.
Selling and marketing costs increased in relation to sales
from l9% in l995 to 25% in l996 due to fixed departmental expenses
not being as fully leveraged in the current period with the decline
in sales.
Administration expenses increased by $l2l,000 due principally
to training costs incurred by CXR Telcom to achieve its ISO 9001
certification.
Other (income) expense-net improved by $96,000 due to the
prorata recognition over the year of l996 of a $350,000 extension
fee received by the Company to extend the due date of a stock
subscription note receivable from December 31, l995 to December 15,
l996.
Liquidity and Capital Resources
Cash used in operations during the first quarter of l996 was
$520,000 versus operations providing $437,000 in cash flow in the
first quarter of l995. The most significant cause of the
fluctuation was the decline in results of operations, with
comparative asset and liability changes substantially offsetting
each other.
At December 31, l995, CXR Telcom was in default of certain
covenants of its bank line of credit agreement and had obtained a
waiver, with the understanding that the subsidiary would return to
profitability in the first quarter of l996 or the credit facility
would be converted to a factoring arrangement. On May l5, l996,
although CXR Telcom incurred a loss in the first quarter, the bank
further waived reconsideration of the credit facility until its
scheduled renewal date on June 3, l996.
With improvement of results expected, management believes that
cash flows from operations and available borrowings will be
sufficient to support its working capital needs during l996.
Aggressive planned product development efforts may, however,
require that the Company raise additional funds through the private
placement of its securities.
8
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
No material developments.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
There were no reports on Form 8-K filed during the three
months ended March 31, l996.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
l934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MicroTel International, Inc.
/s/ Barry E. Reifler
May , 1996 ------------------------------
Barry E. Reifler, CFO
(Principal Accounting and
Financial Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 46
<SECURITIES> 152
<RECEIVABLES> 3,336
<ALLOWANCES> 0
<INVENTORY> 3,961
<CURRENT-ASSETS> 8,007
<PP&E> 1,084
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,727
<CURRENT-LIABILITIES> 5,409
<BONDS> 0
0
0
<COMMON> 45
<OTHER-SE> 22,378
<TOTAL-LIABILITY-AND-EQUITY> 10,727
<SALES> 4,134
<TOTAL-REVENUES> 4,134
<CGS> 2,527
<TOTAL-COSTS> 4,849
<OTHER-EXPENSES> (52)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (715)
<INCOME-TAX> 0
<INCOME-CONTINUING> (715)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (715)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
