SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended:
September 30, 2000 Commission File Number 0-4431
AUTO-GRAPHICS, INC.
(Exact name of registrant as specified in its charter)
California 95-2105641
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3201 Temple Avenue, Pomona, California 91768
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (909) 595-7204
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
Total Shares Outstanding:
Common Stock: 4,757,234
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AUTO-GRAPHICS, INC.
Form 10-Q/A
September 30, 2000
TABLE OF CONTENTS
Part I - Financial Information 3
Unaudited Condensed Consolidated Statements of
Operations and Comprehensive Income
For Nine Months Ended September 30, 2000 and 1999 3
Unaudited Condensed Consolidated Statements of
Operations and Comprehensive Income
For Three Months Ended September 30, 2000 and 1999 4
Unaudited Condensed Consolidated Balance Sheets
September 30, 2000 and December 31, 1999 5
Unaudited Condensed Consolidated Statements of
Cash Flows For Nine Months Ended
September 30, 2000 and 1999 6
Notes to the Unaudited Condensed
Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 12
Part II - Other Information 16
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AUTO-GRAPHICS, INC.
Form 10-Q/A
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements.
Unaudited Condensed Consolidated
Statements of Operations and Comprehensive Income
For the Nine Months Ended September 30, 2000 and 1999
2000 1999
Net sales (See Note 4) $6,238,124 $5,928,238
Costs and expenses:
Cost of sales 3,671,675 3,417,328
Selling, general & administrative 3,292,803 2,242,885
Total costs and expenses 6,964,478 5,660,213
Income/(loss) from operations (726,354) 268,025
Interest/other 142,626 211,467
Income/(loss) before taxes (868,980) 56,558
Provision for taxes
based on income (See Note 5) 5,651 --
Minority Interest (See Note 2) (332,208) --
Net income/(loss) and
Comprehensive income/(loss) (See Note 3) $ (542,423) $ 56,558
Basic earnings/(loss) per share $ (0.11) $ 0.02
Weighted average shares outstanding 4,794,782 3,431,433
Diluted earnings/(loss) per share $ (0.11) $ 0.02
Weighted average shares outstanding 4,794,782 3,487,758
See Notes to Unaudited Condensed Consolidated Financial Statements
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AUTO-GRAPHICS, INC.
Form 10-Q/A
Unaudited Condensed Consolidated
Statements of Operations and Comprehensive Income
For Three Months Ended September 30, 2000 and 1999
2000 1999
Net sales (See Note 4) $1,858,787 $1,904,796
Costs and expenses:
Cost of sales 1,138,343 1,084,667
Selling, general & administrative 1,204,044 710,701
Total costs and expenses 2,342,387 1,795,368
Income/(loss) from operations (483,600) 109,428
Interest/other 35,053 84,494
Income/loss) before taxes (518,653) 24,934
Provision for taxes
based on income (See Note 5) 1,283 --
Minority Interest (See Note 2) (207,028) --
Net income/comprehensive
income/(loss) (See Note 3) $ (312,908) $ 24,934
Basic earnings/(loss) per share $ (0.07) $ 0.01
Weighted average shares outstanding 4,765,678 4,032,234
Diluted earnings/(loss) per share $ (0.07) $ 0.01
Weighted average shares outstanding 4,765,678 4,201,209
See Notes to Unaudited Condensed Consolidated Financial Statements
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AUTO-GRAPHICS, INC.
Form 10-Q/A
Unaudited Condensed Consolidated Balance Sheets
September 30, 2000 and December 31, 1999
ASSETS 2000 1999
Current Assets: (Audited)
Cash & cash equivalents $ 1,987,532 $ 3,816,286
Accounts receivable, less allowance
for doubtful accounts ($38,000 in
2000 and 1999) 1,081,963 1,401,325
Unbilled production costs 269,552 27,891
Other current assets 261,923 109,987
Total current assets 3,600,970 5,355,489
Software, equipment and leasehold
improvements, net 5,420,781 5,110,231
Other assets 93,273 181,595
$ 9,115,024 $10,647,315
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 459,403 $ 293,798
Deferred income 898,449 1,273,873
Accrued payroll and related
liabilities 400,392 497,076
Other accrued liabilities 120,114 124,601
Current portion of long-term debt 186,667 70,000
Total current liabilities 2,065,025 2,259,348
Long-term debt, less current portion 2,393,378 3,153,249
Deferred taxes based on income 475,236 475,236
Total liabilities 4,933,639 5,887,833
Minority Interests 449,412 676,850
Stockholders' equity:
Notes Receivable - Stock (See Note 2) (77,500) (127,500)
Common stock, 12,000,000
shares authorized, 4,757,234
shares issued and outstanding
in 2000, and 3,431,433 shares
issued and outstanding in 1999
(See Note 2) 4,193,754 3,793,332
Retained earnings (Accumulated Deficit) (362,104) 438,977
Accumulated Other Comprehensive Income (22,177) (22,177)
Total stockholders' equity 3,731,973 4,082,632
$ 9,115,024 $10,647,315
See Notes to Unaudited Condensed Consolidated Financial Statements
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AUTO-GRAPHICS, INC.
Form 10-Q/A
Unaudited Statements of Cash Flows
For the Nine Months Ended September 30, 2000 and 1999
2000 1999
Cash flows from operating activities:
Increase (Decrease) in Cash
Net income/(loss) $ (542,423) $ 56,558
Adjustments to reconcile net
income/(loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 977,769 915,225
Minority Interest (332,208) --
Changes in operating assets
and liabilities:
Accounts receivable 356,863 605,403
Unbilled production costs (241,661) (33,019)
Other current assets (151,937) 208,969
Other assets 48,246 --
Accounts payable 165,605 (504,336)
Deferred income (375,424) 140,112
Other accrued liabilities (4,488) 24,124
Accrued payroll and
related liabilities (96,685) (6,586)
Net cash provided by (used in)
operating activities (196,343) 1,406,450
Cash flows from investing activities:
Capital expenditures (1,285,738) (937,013)
Cash flows from financing activities:
Net principal payments under debt
agreements (643,206) (48,000)
Sale of capital
stock/warrants, net (See Note 2) 677,041 593,783
Repurchase of stock, net (See Note 2) (380,508) --
Net cash provided by (used in)
financing activities (346,673) 545,783
Net increase (decrease) in cash (1,828,754) 1,015,220
Cash & cash equivalents at beginning of year 3,816,286 292,744
Cash & cash equivalents at end of period $1,987,532 $1,307,964
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 222,778 $ 238,605
Income taxes 15,251 14,512
See Notes to Unaudited Condensed Consolidated Financial Statements
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AUTO-GRAPHICS, INC.
Form 10-Q/A
Notes to Unaudited Condensed
Consolidated Financial Statements
September 30, 2000
NOTE 1. The unaudited condensed consolidated financial statements
included herein have been prepared by the Registrant and include all
normal and recurring adjustments which are, in the opinion of Management,
necessary for a fair presentation of the financial position at September 30,
2000, the results of operations and the statements of cash flows for the
three and nine months ended September 30, 2000 and 1999 pursuant to the rules
and regulations of the Securities and Exchange Commission("SEC"). The
consolidated financial statements include the accounts of Auto-Graphics,
Inc. and its wholly and majority-owned subsidiaries. All material
intercompany accounts and transactions have been eliminated.
The results of operations for the subject periods are not necessarily
indicative of the results for the entire year.
This Quarterly Report on Form 10-Q is qualified in its entirety by the
information included in the Company's Annual Report to the SEC on Form 10-K,
for the period ended December 31, 1999 including, without limitation, the
financial statements and notes included therein.
NOTE 2. In May 1999, the Company entered into a selling agreement with
an associate pertaining to the Company's 1999 private placement offering,
which raised $1,251,000 in equity investment and resulted in the sale/
issuance of an additional 1,501,200 shares of the Company's (restricted)
Common Stock. Pursuant to the selling agreement, the Company sold and
issued 240,000 3-year warrants for $800 entitling the associate to purchase
one share of the Company's (restricted) Common Stock for each warrant for
$.033 per share, which warrants remained issued and outstanding but
unexercised at September 30, 2000. The 240,000 shares of Common Stock
issuable through the exercise of these warrants reflect the Company's only
potentially dilutive securities currently outstanding. The warrants were
anti-dilutive for the nine months ended September 30, 2000. Subsequent to
September 30, 2000, the associate sold the warrants to the Company's outside
director for an amount representing a substantial discount for the
(restricted) shares of the Company's Common Stock underlying such warrants as
compared to the reported market price for "free trading" shares of the
Company's Common Stock. The purchaser/transferee then exercised the warrants
and purchased, and the Company caused to be sold and issued, the 240,000
shares of the Company's (restricted) Common Stock covered by such warrants for
the exercise (purchase) price for such shares under the warrants (aggregating
$8,000 or $0.033 per share).
In May 1999, the Company's principal director/shareholder granted an 18 month
option to the same associate to purchase 1,125,000 shares of the Company's
(restricted) Common Stock owned by such individual (and his Family Trust)
through November 15, 2000, subject to a one year renewal provision in favor
of the recipient, for $1.67 per share. (See Exhibit 10.30 "Option Agreement"
dated May 15, 1999 to Form 10-Q for the period ended June 30, 1999).
Likewise, the principal director/shareholder had an option under the same
agreement to require the associate to purchase an additional 445,173 shares
for $1.58 per share. The total shares (1,570,173) which are the subject of
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AUTO-GRAPHICS, INC.
Form 10-Q/A
Notes to Unaudited Condensed
Consolidated Financial Statements
September 30, 2000
NOTE 2. Continued
this option represent approximately 33% of the Company's issued and
outstanding Common Stock at September 30, 2000. The associate has recently
given notice that he is exercising the option to purchase the 1,125,000 shares
of the Company's Common Stock under the Option Agreement. The associate has
until January 31, 2001 to perform and complete "due diligence" regarding the
subject stock purchase transaction, and to purchase and pay for the shares
being purchased from the director/shareholder. The director/shareholder did
not exercise and therefore has lost his right to require the associate to
purchase the 445,173 shares by the November 24, 2000 deadline. No assurances
can be given as to whether or not the associate will, in fact, purchase the
1,125,000 shares of stock on or before the above referenced closing date;
however, if the associate does purchase the option shares as indicated above,
then such stock purchase transaction could and probably would represent a
change in control and management of A-G.
As part of the Company's above referenced private placement offering, the
Company sold an additional 93,000 shares of its (restricted) Common Stock on
4-year full recourse interest bearing notes totaling $77,500 to certain
senior management of the Company.
In December 1999, the Company and the associate formed two new subsidiaries,
Dataquad, Inc. and The LibraryCard, Inc. Both parties contributed nominal
cash consideration. The Company also contributed certain software and other
assets to such subsidiaries. A third party investor (who also invested in the
Company's 1999 private placement offering) invested $1.0 million in cash in
each of the subsidiaries in return for a 24.5% ownership interest. The
Company retained 60.9% and the associate retained a 5.5% interest personally
and a 9.1% interest as trustee, after the issuance of 700,000 shares of Common
Stock of each subsidiary to the associate as trustee for their stock
option/purchase plans on 30 month full recourse notes totaling $280,500. In
October 2000, the same investor reported to the Company that he did not believe
that the Company had fully performed all of its obligations in respect of such
subsidiaries securities sale and purchase transactions; and that, because the
Company had not satisfied the investor's expectations regarding the Dataquad
transaction, the investor maintained that his investment in LibraryCard was
also put into issue. The investor indicated that he has no facts upon which to
base any belief that the LibraryCard stock purchase transaction was not in
accordance with the party's agreement. At this point in time, it is unclear
whether or not the investor will actually assert any claims, in litigation or
otherwise, that he is entitled to rescission and/or damages in respect of his
investments in Dataquad, LibraryCard and/or the Company. The Company believes
that, with the recent significant decline in the market valuations for
technology including Internet stocks and the near term prospects for same, the
investor may be experiencing "buyer's remorse". The Company is not aware of
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AUTO-GRAPHICS, INC.
Form 10-Q/A
Notes to Unaudited Condensed
Consolidated Financial Statements
September 30, 2000
NOTE 2. Continued
any factual basis for the investor asserting any misrepresentation, securities
laws or similar claims against the Company and/or LibraryCard in connection
with the investor's purchase of shares of LibraryCard (or the Company). The
Company is not aware of any facts upon which the investor could be expected to
prevail in any action asserting similar claims against Dataquad (or the
Company) in connection with the investor's purchase of shares of Dataquad. The
Company has invited the investor to submit a written complaint setting forth
whatever claims he thinks he may nevertheless have against the Company arising
out of his investment in Dataquad and the facts supporting any claim he
believes he may have against Dataquad.
On January 31, 2000, the Company announced a 3-for-1 stock split of its
Common Stock to shareholders of record on February 12, 2000, which stock
split occurred on February 28, 2000. Two additional shares were issued for
each share held on the record date. Following the stock split, shares
authorized increased from 4,000,000 to 12,000,000 and shares issued and
outstanding from 1,607,578 to 4,822,734 following the private placement and
share repurchase referenced below. Share amounts in the Statement of
Operations including basic and diluted earnings per share, and the
Consolidated Balance Sheets and notes thereto have been adjusted retroactively
to reflect the stock split for the periods presented.
In February 2000, the Company consummated a private placement of 225,000
shares (after giving effect to the 3-for-1 stock split) of its (restricted)
Common Stock with an offshore investment company for $4.125 per share for
gross proceeds of $930,000. The Company used a portion of the net proceeds
from the sale of such stock to reduce its capital line of credit with the
bank by $600,000.
In February 2000, the Company accelerated the purchase and retired the
remaining 187,200 shares outstanding (after giving effect to the 3-for-1
stock split) under a stock repurchase agreement with a former director and
stockholder of the Company for $203,000 in cash consideration. The Company
also transferred an insurance policy to the seller having a cash surrender
value of approximately $75,000.
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AUTO-GRAPHICS, INC.
Form 10-Q/A
Notes to Unaudited Condensed
Consolidated Financial Statements
September 30, 2000
The Company incurred direct and incremental expenses in connection with the
1999 $1,251,000 private placement offering, the sale of the $2.0 million in
shares of the Company's Dataquad, Inc. and The LibraryCard,Inc. subsidiaries,
and the above referenced 2000 private placement offering of $930,000
resulting in gross proceeds from the sale of all such securities of
$4,181,000. Equity funding costs and expenses in 2000, including legal,
and selling expenses totaling $254,000, have been offset against the
total equity raised.
In July 2000, the Company settled a lawsuit with a former officer (see Part
II, Item 1. "Legal Proceedings") for total consideration of $225,000 including
the repurchase of 65,500 shares of the Company's Common Stock for $105,000.
NOTE 3. As of January 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income". The
Statement establishes standards for reporting and display of comprehensive
income and its components in interim and annual financial statements.
Comprehensive income is defined as the change in the equity (net assets)
of an entity during a period from transactions, events and circumstances
excluding all transactions involving investments by or distributions to the
owners.
Note 4. As of the year ended December 31, 1998, the Company adopted
Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information". The Statement
establishes standards for reporting information about operating segments in
interim and annual financial statements. The following table summarizes
sales based on the location of the customers and assets based on the
location of the asset for the nine months ending September 30, 2000 and 1999:
2000 1999
----------- -----------
Geographic areas
Net sales
United States $ 4,914,002 $ 4,603,785
Foreign - Canada/Other 1,324,122 1,324,453
Long-lived assets, net
United States 5,268,341 4,874,642
Foreign - Canada 152,440 170,347
Note 5. Deferred tax assets and liabilities are recognized for the
expected future tax consequences of events that have been recognized in
the Company's financial statements or tax returns. At December 31, 1999, the
Company has available federal, state and Canadian net operating loss carry-
forwards of approximately $385,000, $498,000 and $337,000, respectively, for
income tax purposes. Federal net operating loss carry-forwards expire in
2018, and state and foreign taxes in 2005.
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AUTO-GRAPHICS, INC.
Form 10-Q/A
Notes to Unaudited Condensed
Consolidated Financial Statements
September 30, 2000
Note 6. As of fiscal year-end December 31, 1997, the Company adopted
Statement of Financial Accounting Standards ("FAS") No. 128, "Earnings Per
Share". The standard requires the Company to present basic earnings per
share and diluted earnings per share, using the treasury method and requires
restatement of prior earnings per share data presented. Basic earnings per
share computations are based on the weighted average number of shares of
Common Stock outstanding during the year. Diluted earnings per share
computations are based on the weighted average number of shares of Common
Stock outstanding during the year plus the dilutive effect of warrants. For
the nine and three months ended September 30, 2000, 240,000 of warrants were
outstanding but were not included in the computation of loss per share because
the effect of exercise would have had an anti-dilutive effect on loss per
share.
The following table reconciles the numerator and denominator of the basic and
diluted earnings per share computations shown on the Consolidated Statements
of Operations and Comprehensive Income for the nine months ended
September 30, 2000 and 1999:
2000 1999
----------- -----------
Net Income/(loss) $ (542,423) $ 56,558
Weighted average shares
outstanding - Basic 4,794,782 3,431,433
Dilutive effect of warrants -- 56,325
----------- -----------
Weighted average shares
outstanding - Diluted 4,794,782 3,487,758
Net income/(loss) per share - Basic ($0.11) $0.02
Net income/(loss) per share - Diluted ($0.11) $0.02
The following table reconciles the numerator and denominator of the basic
and diluted earnings per share computations shown on the Consolidated
Statement of Operations and Comprehensive Income for the three months ended
September 30, 2000 and 1999:
2000 1999
----------- -----------
Net Income/(loss) $ (312,908) $ 24,934
Weighted average
shares outstanding - Basic 4,765,678 4,032,234
Dilutive effect of warrants -- 168,975
----------- -----------
Weighted average shares
outstanding - Diluted 4,765,678 4,201,209
Net income/(loss) per share - Basic ($0.07) $0.01
Net income/(loss) per share - Diluted ($0.07) $0.01
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AUTO-GRAPHICS, INC.
Form 10-Q/A
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
FINANCIAL CONDITION
December 31, 1999 to September 30, 2000
Liquidity and capital resources. Working capital decreased
$1,560,000 primarily as a result of capital expenditures of $1,286,000 and
principal payments on long-term debt of $643,000. Accounts receivable also
declined by $357,000 despite an increase in net sales as a growing proportion
of the Company's net sales and accounts receivable are being paid in advance
via customer deposits (deferred income), which also declined by $375,000.
The average collection period for accounts receivable was unchanged at 55 days
at December 31, 1999 and September 30, 2000. Net cash used in operations was
$196,000 in the first nine months of 2000 down from $1,406,000 provided by
operations in the first nine months of 1999 due primarily to net losses
(offset by minority interests) from additional staff and expenses related to
the start-up of two new subsidiaries, Dataquad and LibraryCard and an increase
in legal expenses. Capital expenditures year-to-date increased to $1,286,000
through the third quarter of 2000 up from $937,000 through the third quarter
of 1999 due to software development expenditures for the next generation
Impact/Online and Impact/CMS editor systems and the procurement of computer
equipment, office equipment and furniture associated with the consolidation of
office space at the Company's Pomona headquarters. Unbilled production costs
increased $242,000 due to an increase in Datacat catalog projects. Other
current assets increased $152,000 due to miscellaneous increases in prepaid
expenses through the first nine months of 2000.
Management believes that liquidity and capital resources will
be adequate to fund operations including development of the business of
the Company's new majority-owned Dataquad(tm)subsidiary into 2001.
However, LibraryCard's current independent financial resources are sufficient
to sustain the subsidiary only through the balance of 2000. The Company
recently committed to provide additional funding in an amount of up to
$250,000 which should sustain the present operation through at least March
2001. The Company is initiating a private placement offering to raise gross
proceeds of $750,000 through the sale of 1,000,000 shares of LibraryCard
(restricted) Common Stock at $0.75 per share. The subject LibraryCard shares
are convertible, at the option of the purchaser for a period of two years into
one share of the Company's (restricted) Common Stock for every two shares of
LibraryCard (restricted) Common Stock. No assurances can be given that the
LibraryCard offering will be successful or that such subsidiary will be able
to obtain adequate additional financing required to continue the development,
operation and, ultimately, formal introduction and promotion of the site (and
business) on a nation-wide basis without ongoing financial assistance from the
Company and/or that the Company will determine to provide such assistance, and
in what amounts over what period of time, beyond the $250,000 referenced above
as having been committed to date.
In order to accelerate development and expand the scope of the
Company's Internet/Web initiatives and business, the Company will continue
to explore opportunities to raise additional equity including the above
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AUTO-GRAPHICS, INC.
Form 10-Q/A
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations - Continued.
referenced private placement offering (although there can be no assurances
that such equity financing will be available on terms and conditions
acceptable to the Company or at all). In 1999, the Company raised
approximately $3.0 million through the sale of stock in the Company and in
the Dataquad(tm) and LibraryCard(tm) subsidiaries. In February 2000, the
Company raised an additional $930,000 in equity through the sale of stock,
and used $600,000 of such proceeds to pay down the Company's $3.0 million
capital line of credit to $2.4 million. At September 30, 2000, the Company's
cash position was approximately $2.0 million.
In August 2000, the Company restructured and extended the term of
its credit facilities with its bank (Wells Fargo Bank, N.A.) through June 3,
2002. The new facility is now comprised of a single revolving line of credit.
In light of the Company's present cash resources, and anticipated reduced
need for bank credit, the newly implemented line of credit starts at a $3.0
million commitment and decreases over the 2-year term to a $2.0 million
commitment and carries a lower rate of interest and reduced loan fees. The
loan covenants provide the Company with greater flexibility to incur
consolidated net losses (see Net Loss in 2000 below) and commit its cash
resources to new initiatives consistent with less restrictive financial ratio
covenants; and the Company has agreed to maintain conservative liquidity
ratios which are designed to encourage the Company to finance future growth
with investment capital (as opposed to bank debt).
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AUTO-GRAPHICS, INC.
Form 10-Q/A
RESULTS OF OPERATIONS
First Nine Months 2000 as Compared to First Nine Months 1999
Net sales increased $310,000 or 5% to $6,238,000 in 2000 up from
$5,928,000 in 1999. The net sales increase is due primarily to two large
non-recurring library processing and conversion projects representing net
sales of $715,000.
Cost of sales increased $254,000 or 7% corresponding to the
increase in net sales.
Selling, general and administrative expenses increased $1,050,000
or 47% in 2000 over 1999 due to additional staff and other recurring and
non-recurring expenses related to the start-up of the new Dataquad(tm) and
LibraryCard(tm) subsidiaries and an increase in legal expenses from $190,000
in 1999 to $371,000 in 2000. The Company expects these elevated expense
levels to continue through 2000 and into 2001.
Income from operations declined from $268,000 in 1999 to a loss of
$726,000 in 2000 for the same reasons indicated above.
Interest expense/other decreased $69,000 or 33% due to additional
interest income earned on excess cash balances and lower average borrowings.
Provision for taxes based on income reflects minimum state income
taxes payable. (See Note 5 of Notes to Unaudited Condensed Consolidated
Financial Statements).
Minority Interests reflects the non-Company owners' share of the
losses realized by the two new subsidiaries referenced above.
Net losses were $542,000 in 2000 compared to net income of $57,000
in 1999 for the same reasons indicated above.
Basic earnings per share and diluted earnings per share decreased
from $0.02 in 1999 to a loss of $0.11 per share in 2000 for the same reasons
indicated above. Shares outstanding have been retroactively restated for a
3-for-1 stock split in February 2000. See Note 2 and Note 6 of Notes to
Unaudited Condensed Consolidated Financial Statements.
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AUTO-GRAPHICS, INC.
Form 10-Q/A
Third Quarter 2000 as Compared to Third Quarter 1999
Net sales decreased $46,000 or 2% to $1,859,000.
Cost of sales decreased $54,000 or 5% corresponding to the decrease
in net sales.
Selling, general and administrative expenses increased $493,000 or
69% due to additional staff and other recurring and non-recurring expenses
related to the start-up of the two new Dataquad(tm) and LibraryCard(tm)
subsidiaries and an increase in legal expenses from $58,000 in 1999 to
$131,000 in 2000.
Income from operations declined from $109,000 to a loss of
$484,000 in 2000 for the same reasons indicated above.
Interest expense/other was $35,000 in 2000 down from $84,000
in 1999 due to additional interest income earned on excess cash balances
and lower average borrowings.
Provision for taxes based on income reflects minimum state income
taxes payable. (See Note 5 of Notes to Unaudited Condensed Consolidated
Financial Statements).
Minority Interests reflects the non-Company owners' share of the
losses realized by the two new subsidiaries referenced above.
Net losses were $313,000 in 2000, compared to net income of $25,000
in 1999 for the same reasons indicated above.
Basic earnings per share decreased from $0.01 per share in 1999 to a
loss of $0.07 per share in 2000 and diluted earnings per share from $0.01 to
a loss of $0.06 per share for the same reasons indicated above. Shares
outstanding have been retroactively restated for a 3-for-1 stock split in
February 2000. See Note 2 and Note 6 of Notes to Unaudited Condensed
Consolidated Financial Statements.
Net Loss in 2000
Management expects that 2000 net sales will increase slightly over
1999 net sales of $8.39 million. The additional equity raised by the Company
in 1999 and in 2000 will be used to fund the Company's Internet/Web and
software development initiatives in 2000 (and 2001). Under AICPA Statement of
Position 98-5, "Reporting on the Costs of Start-Up Activities", certain costs
incurred by the Company of a "start-up" nature must be expensed as incurred.
Such "start-up" expenses, and other non-capitalized costs/expenses associated
with the Company's new software and Internet/Web initiatives, primarily in the
Company's Dataquad(tm) and LibraryCard(tm) subsidiaries, are anticipated to
result in the Company reporting a consolidated net loss in the $750,000-$1.0
million range for the year ending December 31, 2000.
Information Relating To Forward-Looking Statements
This Report includes forward-looking statements, which reflect
the Company's current views with respect to future events and financial
performance. The Company undertakes no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
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AUTO-GRAPHICS, INC.
Form 10-Q/A
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
At the time of the departure of the Company's former Chief
Operating Officer, William J. Kliss, in April of 2000, Mr. Kliss
filed suit against the Company in Orange County California Superior
Court, Case No. 000004363 captioned William Kliss v. Auto-Graphics,
Inc., et al., alleging that he was entitled to receive a grant of
stock options under the Company's nonqualified stock option plan
attributable to his past employment with the Company (the "Action").
At the time of the Action, Mr. Kliss owned approximately 65,500
shares of the Company's issued and outstanding Common Stock 60,000
(post 3-for-1 split) shares of which had been purchased by Mr. Kliss
in the Company's 1999 private placement offering for a promissory
note payable to the Company from Mr. Kliss in the amount of $50,000
secured by such shares of restricted stock (the "Note"). In July
2000, the Company and Mr. Kliss agreed to settle the Action (the
"Settlement"). Pursuant to the Settlement, the Company will
purchase or arrange for the purchase by third parties of all of the
65,500 shares of the Company's Common Stock owned by Mr. Kliss (the
"Stock"), and Mr. Kliss will receive total consideration for the
Settlement including as payment for the Stock in the amount of
$225,000 payable over a period of fifteen (15) months, plus interest
at the rate of 5%, commencing in September 2000; and the original
promissory note will be forgiven. The Settlement with Mr. Kliss
will not require the Company to take any additional charge over and
above the Company's existing reserve in respect of employee
termination matters.
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.
(a) Exhibits:
10.41 First Amended and Restated Credit Agreement between Wells
Fargo and Auto-Graphics, Inc. dated August 1, 2000.
10.42 Revolving Reducing Note date August 1, 2000.
10.43 LibraryCard Revolving Line of Credit Agreement and Note dated
November 1, 2000.
-17-
AUTO-GRAPHICS, INC.
Form 10-Q/A
PART II - OTHER INFORMATION
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.
AUTO-GRAPHICS, INC.
Date: 12/20/00 ss/ Michael K. Skiles
------------------------ ---------------------------------
Michael K. Skiles, President
Date: 12/20/00 ss/ Daniel E. Luebben
------------------------ ----------------------------------
Daniel E. Luebben, Chief Financial
Officer and Secretary
