Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission file number 0-22122
MICROS-TO-MAINFRAMES, INC.
(Exact name of registrant as specified in its charter)
New York 13-3354896
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation of organization)
614 Corporate Way, Valley Cottage, NY 10989
(Address of principal executive offices)
(914) 268-5000
(Registrant's telephone number )
Not applicable
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1994 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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, $.001 par value - 4,430,374 shares as of November 5, 1996
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Micros-to-Mainframes, Inc.
Condensed Consolidated Balance Sheets
September 30 March 31,
1996 1996
(Unaudited)
Assets
Current Assets
Cash $ 3,387,430 $ 5,284,587
Accounts receivable, net 10,943,754 8,844,204
Inventory 1,499,755 1,331,000
Prepaid expenses and other current assets 794,787 432,460
----------------------------
Total current assets 16,625,726 15,892,251
Property, plant and equipment 1,311,431 705,023
Less accumulated deprecation and amortization 555,384 457,884
----------------------------
756,047 247,139
Other Assets 845,206 69,162
----------------------------
Total assets $ 18,226,979 $ 16,208,552
============================
Liabilities and Shareholders' Equity
Current liabilities:
Secured notes payable $ 5,000 $ 5,000
Accounts payable and accrued expenses 6,381,203 5,083,969
Income taxes payable 87,338 119,140
----------------------------
Total current liabilities 6,473,541 5,208,109
Shareholders' Equity
Preferred stock (See note 3) - 1,400
Common stock 4,430 3,363
Additional paid-in capital 12,782,918 12,374,774
Retained (deficit) (1,033,910) (1,379,094)
----------------------------
Total shareholders' equity 11,753,438 11,000,443
----------------------------
Total liabilities and shareholders' equity $ 18,226,979 $ 16,208,552
============================
See accompanying footnotes
2
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Micros-to-Mainframes, Inc.
Condensed Consolidated Statements of Income
Unaudited
Three Months Ended
September 30
1996 1995
Net sales $ 13,450,430 $ 11,187,072
Costs and expenses:
Cost of products sold 11,245,215 9,693,766
Technical personnel salaries 539,277 281,063
Selling, general and administrative expenses 1,572,500 942,999
Interest expenses 349 2,332
----------------------------
13,357,341 10,920,160
Other Income 40,881
----------------------------
Income before income taxes 133,970 266,912
Provision for income taxes 55,000 112,000
----------------------------
Net income $ 78,970 $ 154,912
============================
Primary earnings per share $0.02 $0.06
============ ===========
Fully diluted (loss) per share NA ($1.39)
============ ===========
Weighted average number of common and
common equivalent shares used in calculation
primary earnings per share 4,445,934 3,146,983
Weighted average number of common and
common equivalent shares used in calculation
for fully diluted (loss) per share NA 3,931,798
See accompanying footnotes
3
<PAGE>
Micros-to-Mainframes, Inc.
Condensed Consolidated Statements of Income
Unaudited
Six Months Ended
September 30
1996 1995
Net sales $ 26,761,812 $22,090,771
Costs and expenses:
Cost of products sold 22,244,238 18,968,040
Technical personnel salaries 966,722 520,411
Selling, general and administrative expenses 3,060,182 1,907,949
Interest expenses 2,355 4,157
----------------------------
26,273,497 21,400,557
Other Income 86,868
----------------------------
Income before income taxes 575,183 690,214
Provision for income taxes 230,000 288,000
----------------------------
Net income $ 345,183 $ 402,214
============================
Primary earnings per share $0.08 $0.15
============ ===========
Fully diluted (loss) per share N/A ($1.44)
============ ===========
Weighted average number of common and
common equivalent shares used in calculation
primary earnings per share 4,476,475 3,138,875
Weighted average number of common and
common equivalent shares used in calculation
for fully diluted (loss) per share N/A 3,784,593
See accompanying footnotes
4
<PAGE>
Micros-to-Mainframes, Inc.
Condensed Consolidated Statements of Cash Flows
Unaudited
Six Months Ended
September 30
1996 1995
Operating activities
Net income $ 345,183 $ 402,214
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 117,751 53,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (629,641) 484,234
Increase in inventory (137,356) (1,167,951)
(Increase) decrease in prepaid expenses and
other current assets (233,390) 15,502
Increase in other assets (63,394) (28,947)
Decrease in accounts payable
and accrued expenses 386,713 1,114,376
Decrease in income taxes payable (31,806) (261,340)
--------------------------
Net cash provided by (used in) operating activities (245,940) 611,088
Investing activities
Purchase of property and equipment (340,199) (144,518)
Purchase of Subsidiary, net of cash received (1,311,018)
--------------------------
Net cash used in investing activities (1,651,217) (144,518)
Financing activities
Issuance of common stock - 10,469
--------------------------
Net cash (used in) provided by financing activities - 10,469
--------------------------
Increase (decrease) in cash (1,897,157) 477,039
Cash at the beginning period 5,284,587 1,167,008
----------------------------
$ 3,387,430 $ 1,644,047
============================
Supplement disclosures of cash flow information
Cash paid during the quarter for:
Income taxes $264,008 $556,305
Noncash investing activities
Capital stock issued for acquisition (see note 2) $407,813 -
See accompanying footnotes
5
<PAGE>
Micros-to-Mainframes, Inc.
Notes to Condensed Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Micros-to-Mainframes, Inc. and its wholly-owned subsidiaries Data.Com RESULTS,
Inc. and MTM Advanced Technology, Inc. (hereafter collectively referred to as
the "Company") have been prepared in accordance with generally accepted
accounting principles for interim financial information and the instructions to
Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the six months ended
September 30, 1996 are not necessarily indicative of the results that may be
expected for the year ending March 31, 1997. For further information, refer to
the consolidated financial statements and footnotes thereto included in the
Company's Annual Report Form 10-K for the fiscal year ended March 31, 1996.
Inventories
Inventories which are comprised principally of computer hardware and software,
are stated at the lower-of-cost or market using the first-in, first-out (FIFO)
Method.
2. Acquisition of Data.Com RESULTS, Inc.
On May 6, 1996, a subsidiary of the Company (Data.Com) acquired substantially
all of the assets of Data.Com RESULTS, Inc., in exchange for issuance of 87,000
shares of Common Stock of the Company (valued at approximately $407,000), and
the assumption of certain of Data.Com's payables (primarily trade). Data.Com is
a data communications, wide area network (WAN) and local area network (LAN)
consultant and advanced technology solutions provider primarily serving clients
located in Connecticut.
The acquisition has been accounted for using the purchase method of accounting,
and, accordingly, the purchase price has been allocated to the assets acquired
and the liabilities assumed based upon the fair values at the date of
acquisition. The excess of the purchase price over the fair values of the net
assets acquired and the closing cost was approximately $720,000 and has been
recorded as goodwill, which is being amortized on a straight-line basis over 15
years.
In addition to the above consideration, contingent consideration is payable in
the Company's common stock based upon defined future levels of Data.Com's
earnings before taxes, depreciation, and amortization ("EBDTA") through
6
<PAGE>
Fiscal 1999. The maximum number of shares to be issued are 25,000, 25,000, and
35,000 in Fiscal 1997, 1998, and 1999, respectively. The contingent
consideration is not included in the calculation of the acquisition cost. In
addition to the above contingent consideration, the president of Data.Com will
be issued 5,000, 5,000, and 10,000 stock options in Fiscal 1997, 1998, and 1999,
respectively, if Data.Com's EBTDA is greater than $1.25 million, $1.25 million,
and $1.35 million for Fiscal 1997, 1998, 1999, respectively. The exercise price
for any option so granted shall be 110% of the fair market value of the
Company's common stock as at the first day of the taxable year in which the
respective options, if any, are granted. The options shall not vest until the
first day of the taxable year following the year of grant, at which time all
such options shall vest. Compensation expense will be recognized during the
target period based on the market value of the Company's common stock.
The following summarizes the pro forma results of operations for the Three
Months Ended September 30, 1996, 1995 and the Six Months Ended September 30,
1996, 1995, assuming the acquisition had occurred at the beginning of the
respective periods.
Three Months Ended Six Months Ended
September 30, September 30,
1996 1995 1996 1995
Net Sales $13,450,430 $12,568,431 $27,362,835 $24,653,484
Net Income 78,970 98,949 73,176 280,143
Earnings per
share-primary .02 .03 .02 .09
3. Shareholders' Equity
Capital stock consists of the following at September 30, 1996:
Common Stock, $.001 par value; 10,000,000 shares
authorized; 3,940,374 shares issued and outstanding $ 4,430
=======
Preferred Stock , $.001 par value; 2,000,000 shares
authorized, no shares issued and outstanding $ 0
-------
At the Annual Meeting of Shareholders, held on August 20, 1996, the Company
ratified the conversion of the 1,400,000 outstanding shares of the previously
authorized Series A Preferred Stock into 980,000 shares of Common Stock and an
amendment to the Certificate of Incorporation to eliminate the Series A
Preferred Stock. At the same time it authorized an amendment to the Certificate
of Incorporation to authorize 2,000,000 shares of "Blank Check" preferred stock
at a par value of $.001 per share.
During the second quarter of Fiscal 1997, 1,400,000 shares of preferred
stock were converted into to 980,000 shares of common stock.
7
<PAGE>
The stock options granted under the Company's 1993 Employee Stock Option Plan
are summarized as follows:
Number of Option Exercise
Options Price Per Share
March 31, 1996 balance 225,000 $1.25 - $7.00
Options issued during the period 15,000 $3.9375-4.0625
-------
Outstanding at September 30, 1996 240,000 $1.25 - $7.00
=======
Exercisable at September 30, 1996 176,250
=======
8
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
The following table sets forth for the periods indicated certain items in the
Company's Consolidated Statements of Income expressed as a percentage of that
period's net sales.
Percentage of Sales
Six Months ended Three Months ended
September 30, September 30,
1996 1995 1996 1995
------------------- -----------------
Net Sales ................... 100.00% 100.00% 100.00% 100.00%
Cost of products sold ....... 83.12 85.86 83.60 86.65
Technical personnel
salaries................. 3.61 2.36 4.01 2.51
Selling, general and
administrative expenses. 11.43 8.64 11.69 8.43
Interest .................... .01 .02 .00 .02
Income from operations ...... 2.15 3.12 1.00 2.39
Net Income................... 1.29 1.82 0.59 1.38
The Company had net sales of approximately $26,762,000 for the Six Months Ended
September 30, 1996 (the "1997 Period"), as compared to approximately $22,090,000
for the Six Months Ended September 30, 1995 (the "1996 Period"). The Company had
net sales of approximately $13,450,000 for the Three months Ended September 30,
1996 (the "1997 Quarter"), as compared to $11,187,000 for the Three Months Ended
September 30, 1995 (the "1996 Quarter"). The increase in sales of approximately
21% and 20% for the 1997 Period and 1997 Quarter, respectively, were primary
attributable to increased sales of hardware sales to both new and existing
customers. The revenue related to the service and consulting business was
approximately $2,503,000 for the 1997 Period and approximately $1,187,000 in the
1997 Quarter as compared to approximately 2,293,000 for the 1996 Period and
approximately $1,026,000 for the 1996 Quarter.
As a percentage of net sales, the cost of products sold decreased by
approximately 3% for the 1997 Period and 1997 Quarter as compared to the prior
year's comparable periods. The decrease was due in part to sales of high-end
network computer products relating to sales of technology consulting services
which yielded higher profit margins.
The Company increased its technical personnel salaries by approximately $446,000
or 86% in the 1997 Period compared to the 1996 Period and approximately $258,000
or 92% in the 1997 Quarter as compared to the 1996 Quarter. This increase in
personnel is due to the acquisition of Data.Com in May whose technical personnel
salaries were approximately $231,000 and $82,000 in the 1997 Quarter. The
increase is also due to the customer demand for the Company's technical and
consulting services, as indicated by the continued growth of the Company's
Advanced Technology Group.
9
<PAGE>
Selling, general and administrative expenses ("SG&A") were approximately
$3,060,000 in the 1997 Period as compared to $1,908,000 in the 1996 Period and
$1,573,000 for the 1997 Quarter compared to $943,000 for the 1996 Quarter. This
represented an increase of approximately 60% for SG&A during the 1997 Period as
compared to the 1996 Period and an increase of approximately 67% during the 1997
Quarter as compared to the 1996 Quarter. The increase is attributable to
approximately $773,000 of expenses related to Data.Com in the 1997 Period and
approximately $520,000 of expenses in the 1997 Quarter as a result of the
acquisition. In addition, the Company opened a new office in New Jersey in
February 1996. Furthermore there was an increase in salesperson compensation due
to increase sales, and other increases including employee payroll, benefits and
payroll taxes, insurance, legal and accounting and other professional fees.
The effective income tax rates for the 1997 Period and 1997 quarter as compared
to the 1996 Period and 1996 Quarter was approximately 41% and 42%, respectively.
As a result of the forgoing, the Company had net income of approximately
$345,000 in the 1997 Period compared to $402,000 in the 1996 Period, and $79,000
for the 1997 Quarter compared to $154,000 for the 1996 Quarter. This represents
a decrease of 14% in the 1997 Period as compared to the 1996 Period and 49% for
the 1997 Quarter compared to the 1996 Quarter. The Company believes that its
recent investments in personnel, software and equipment, which has increased
overhead and expenses in the 1997 Period and 1997 Quarter, will have long term
benefits for shareholder.
Earnings per share were $0.08 in the 1997 Period compared to $0.15 in the 1996
Period, and $0.02 in both the 1997 Quarter and 1996 Quarter. The earnings per
share calculations are based on the total weighted average common shares
outstanding and the net effect of dilutive stock options and warrants (4,476,475
shares in the 1997 Period and 3,138,875 shares in the 1996 Period, 4,445,934
shares in the 1997 Quarter and 3,146,983 shares in the 1996 Quarter). The
increase in weighted average common and common equivalent shares outstanding is
primary attributable to the inclusion of 980,000 shares of Common Stock from the
conversion of preferred shares and the issuance of approximately 1,200,000 share
of common stock in December 1995 from the exercise of substantially all of the
Company's Warrants and Representatives Warrants. The fully diluted (loss) per
share was ($1.44) in the 1996 Period based on 3,784,593 weighted average shares
outstanding, and the (loss) per share was ($1.39) in the 1996 Quarter based on
3,931,798 weighted average shares outstanding.
10
<PAGE>
Liquidity and Capital Resources
The Company measures its liquidity in a number of ways, including the following:
September 30, March 31
1996 1996
(Dollars in thousands,
except current ratio data)
Cash and cash equivalents............... $ 3,387 $ 5,285
Working capital ........................ $10,152 $10,685
Current ratio .......................... 2.57:1 3.05:1
Working capital line available ......... $ 8,125 $ 8,759
The Company had working capital of approximately $10,152,000 as of September 30,
1996, a decrease of approximately $533,000, or 5%, from March 31, 1996. The
decrease was due to the acquisition of Data.com, the purchases of new office
equipment and the opening of the new office in New Jersey, offset by the net
profit of $345,000 for the 1997 Period.
During the 1997 Period, the Company had net cash used in operating activities of
approximately $246,000, derived primarily from $345,000 of net income, an
increase in accounts payable of approximately $387,000, offset by the increase
in accounts receivable of approximately $630,000, an increase in inventory of
approximately $137,000, an increase in other current assets of approximately
$233,000, and a decrease in income taxes payable of approximately $32,000. The
Company used net cash in investing activities of $1,651,000, resulting from the
purchase of office equipment of approximately $340,000 and the acquisition of
Data.Com of approximately $1,311,000.
The Company finances much of its business through a two-year $5,000,000
revolving credit facility from a bank, and separately arranged floor-plan
financing agreements aggregating $6,800,000, which are alternate credit lines
provided by manufacturers or vendors. The floor-plan agreements generally allow
the Company to borrow for a period of 30 to 60 days interest free. Interest is
charged to the Company only after the due date. These arrangements generally
provide for security interests in the related inventory and/or accounts
receivable, and liens against all assets of the Company. All of such borrowings
are subordinated to the Company's bank revolver except as to inventory, as to
which the floor-planners hold a first lien pursuant to intercreditor agreements.
On September 30, 1996, the Company's total outstanding debt under these
arrangements with floor-planners was approximately $3,670,000 and a balance of
$3,130,000 was available under such lines of credit. On September 30, 1996, the
Company's outstanding debt under the bank revolver line of credit was $5,000
with a balance of $4,995,000 available under such line of credit.
The borrowing rate on the Company's $5,000,000 credit facility is the "Alternate
Bank Rate" as defined by the Bank. At September 30, 1996 such rate was 8.5%. The
credit facility will expire on November 30, 1996. The credit facility provides,
among other matters, for: (i) a general security interest first lien on
substantially all of the Company's assets (a second lien to the extent a first
lien on inventory is held under the financing agreements described above); (ii)
unconditional guarantees of MTM Advanced Technology, Inc., and (iii) financial
covenants, including minimum amounts of
11
<PAGE>
working capital, tangible net worth, restrictions on certain transactions,
including the payment of dividends, and specified financial ratios. The Company
intends to obtain a new credit line upon the expiration of this facility on
market term.
On August 12, 1996, the Company announced, as it had previously announced on
January 6, 1995, its intention to purchase up to 100,000 shares of Common Stock
from time to time on the open market. As of November 5, 1996 the Company had
4,430,374 shares of Common Stock outstanding. The timing of any purchases will
depend upon the price and availability of the stock. As of the date hereof, the
Company has not repurchased any of its own stock.
The Company's current ratio decreased to 2.57:1 at September 30, 1996 from
3.05:1 at March 31, 1996.
The Company believes that expected cash flow from its operations combined with
available financing arrangements will be sufficient to satisfy its expected cash
requirements for the next 12 months.
12
<PAGE>
PART II OTHER INFORMATION
Item 2. Changes in Securities
At the Annual Meeting of Shareholders on August 20, 1996, the Company
eliminated and removed from its Certificate of Incorporation the old Series A
Preferred Stock and instead designated a new class of 2,000,000 shares preferred
stock giving the Board of Directors the authority to designate one or more
series of preferred stock. Such provisions are often referred to as "blank
check" provisions, as they give the Board of Directors the flexibility, at any
time or from time to time, without further shareholder approval, to create one
or more series of preferred stock and to determine the designations, preferences
and limitations of each such series, including but not limited to (i) the number
of shares, (ii) dividend rights, (iii) voting rights, (iv) conversion
privileges, (v) redemption provisions, (vi) sinking fund provisions and (vii)
rights upon liquidation, dissolution or winding up of the Company.
The preferred stock, along with the Company's ability to issue debt and/or
additional shares of Common Stock, provides the Company with the flexibility to
address potential future financing needs by creating a series of preferred stock
customized to meet the needs of any particular transaction. The Company also
could issue preferred stock for other corporate purposes, such as to implement
joint ventures or to make acquisitions. The Company is not currently considering
the issuance of preferred stock for such financing or transactional purposes.
If any series of preferred stock authorized by the Board provides for
dividends, such dividends, when and as declared by the Board of Directors out of
any funds legally available therefor, may be cumulative and may have a
preference over the Common Stock as to the payment of such dividends. In
addition, if any series of preferred stock authorized by the Board so provides,
in the event of any dissolution, liquidation or winding up of the Company,
whether voluntary or involuntary, the holders of each such series may be
entitled to receive, prior to the distribution of any assets or funds to the
holders of Common Stock, a liquidation preference established by the Board of
Directors, together with all accumulated and unpaid dividends. Depending upon
the consideration paid, the liquidation preference and other matters, the
issuance of preferred stock could therefore result in a reduction in the assets
available for distribution to the holders of Common Stock in the event of
liquidation of the Company. Holders of Common Stock do not have any preemptive
rights to acquire preferred stock or any other securities of the Company.
13
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Stockholders held on August 20, 1996,
the following proposals were adopted by the vote specified below:
Proposal For Against Withheld
Election Election Authority
1. Election of Directors:
Steven H. Rothman 4,592,578 35,175 -0-
Howard Pavony 4,592,578 35,175 -0-
Frank T. Wong 4,592,578 35,175 -0-
Robert A. Fries 4,592,578 35,175 -0-
Ramon Mota 4,592,578 35,175 -0-
Joseph J. Farley 4,592,578 35,175 -0-
William Lerner 4,592,578 35,175 -0-
2. Ratification of 1996 Stock Option Plan
For Against Abstain Broker Non-vote
3,033,646 100,005 28,465 1,461,397
3. Conversion of 1,400,000 shares Series A Preferred Stock into
980,000 shares of common stock and amendment to the Certificate of
Incorporation to eliminate Series A Preferred Stock
For Against Abstain Broker Non-vote
3,070,351 62,265 29,500 1,461,397
4. Amendment to Certificate of Incorporation to authorize 2,000,000
shares of "Blank Check" Preferred Stock, par value $.001 per share
For Against Abstain Broker Non-vote
2,993,626 147,590 20,900 1,461,397
5. Ratification of the appointment of Ernst & Young LLP as
independent auditors for fiscal year ending March 31, 1997
For Against Abstain Broker Non-vote
4,598,518 15,625 13,610 -0-
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
3.1 Certificate of Amendment.
11.1 Statement Re: Computation of Per Share Earnings.
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
None
14
<PAGE>
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.
MICROS-TO-MAINFRAMES, INC.
Date : November 5, 1996 By: /s/ Howard A. Pavony
Howard A. Pavony
Chairman of the Board
of Directors
Date : November 5, 1996 By: /s/ Steven H. Rothman
Steven H. Rothman
Chief Executive Officer and
President
Date : November 5, 1996 By: /s/ Frank T. Wong
Frank T. Wong
Vice President - Finance
(Principal Financial and
Accounting Officer) and Secretary
15
Exhibit 3.1
CERTIFICATE OF AMENDMENT
OF THE CERTIFICATE OF INCORPORATION OF
MICROS-TO-MAINFRAMES, INC.
Under Section 805 of the Business Corporation Law
It is hereby certified that:
1. The name of the corporation is Micros-To-Mainframes, Inc.
2. The certificate of incorporation of the corporation was filed by the
Department of State on May 12, 1986. The corporation was formed under the name
Micros to Mainframes Inc.
3. The amendments to the certificate of incorporation of the corporation
effected by this certificate of amendment are as follows:
a. To change the 1,400,000 authorized shares of Series A Convertible
Preferred Shares, par value $.001 per share (the "Series A Preferred"), all of
which are issued, into 980,000 issued shares of common stock, par value $.001
per share ("Common Shares"), the terms of the change being at the rate of .7
issued Common Shares for 1 issued share of Series A Preferred;
b. To reduce the Series A Preferred capital account from $1,400 to $0 by
the transfer of $980 of stated capital from the Series A Preferred capital
account to the Common Shares capital account and by the transfer of the
remaining $420 from the Series A Preferred capital account to additional
paid-in-capital;
c. To remove from authorized shares the authorized class of Series A
Preferred; and
d. To increase the aggregate number of shares which the corporation shall
have authority to issue by authorizing the corporation to issue up to 2,000,000
shares of preferred stock, par value $.001 per share, the designations, relative
rights, preferences and limitations of which may be fixed, from time to time, by
the Board of Directors.
e. Before the changes described above, there were 3,450,374 issued Common
Shares and 6,549,626 unissued Common Shares, and after such changes there are
4,430,374 issued Common Shares and 5,569,626 unissued Common Shares, out of a
total of 10,000,000 authorized Common Shares; and before such changes there were
1,400,000 authorized and issued shares of Series A Preferred, and after such
changes there are no authorized or issued shares of Series A Preferred and
2,000,000 shares of undesignated, unissued preferred stock, par value $.001.
4. To accomplish the foregoing amendment, Article FOURTH of the certificate
of incorporation of the corporation, relating to authorized shares is hereby
amended to read as follows:
"FOURTH: The maximum number of shares of capital stock that this
Corporation is authorized to have outstanding at any time is twelve million
(12,000,000), consisting of ten million (10,000,000) shares of common
stock, par value $.001 per share and two million (2,000,000) shares of
preferred stock, par value $.001 per share ("Preferred Stock").
The Board of Directors, from time to time, may designate one or more
series of Preferred Stock, pursuant to the provisions of Section 502 of the
Business Corporation Law, by resolution or resolutions as to each series,
followed by the filing of a
1
<PAGE>
Certificate of Amendment to the Certificate of Incorporation as required
thereby, and the Board of Directors shall have the power:
(a) to fix the distinctive serial designation of the shares of
such series;
(b) to fix the rate per annum at which the holders of the
shares of such series shall be entitled to receive dividends or the
amount of dividends which the holders of the shares of such series
shall be entitled to receive, if any, the dates on which said dividends
shall be payable, and if the directors determine that the dividends
with respect to said series shall be cumulative, the date or dates from
which such dividends shall be cumulative;
(c) to determine whether the shares of such series shall have
voting power, and, if so, the extent and definition of such voting
power;
(d) to fix the price or prices at which the shares of such
series may be redeemed, if at all, and to determine whether the shares
of such series may be redeemed in whole or in part or only as a whole;
(e) to fix the amounts payable on the shares of such series in
the event of liquidation, dissolution or winding up of the Corporation;
(f) to determine whether or not the shares of any such series
shall be made convertible into or exchangeable for shares of any other
class or classes of stock of the Corporation or of any other series of
Preferred Stock and the conversion price, or prices, or the rate, or
rates, of exchange at which such conversion or exchange may be made;
(g) to determine the amount of the sinking fund, purchase
fund, or any analogous fund, if any, to be provided with respect to
each such series; and
(h) to fix any other preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, applicable to each such series."
5. The foregoing amendment of the certificate of incorporation of the
corporation was authorized by the unanimous vote of the Board of Directors of
the corporation followed by the vote of the holders of a majority of all
outstanding shares entitled to vote thereon at a meeting of shareholders.
IN WITNESS WHEREOF, we have subscribed this document on the date set
forth below and do hereby affirm, under the penalties of perjury, that the
statements contained therein have been examined by us and are true and correct.
Dated: August 20, 1995 /s/ Steven H. Rothman
-------------------------
Steven H. Rothman, President
/s/ Frank T. Wong
---------------------------
Frank T. Wong, Secretary
2
Exhibit (11.1) - Statement Re: Computation of Earnings Per Share
Three Months Ended Six Months Ended
September 30 September 30
1996 1995 1996 1995
Primary:
Average shares outstanding 4,397,276 2,181,282 4,413,825 2,179,357
Net effect of dilutive stock
options and warrants--based
on treasury stock method using
average market price 48,658 965,701 62,650 959,518
---------- ---------- --------- ---------
Average shares outstanding
as adjusted for calculation 4,445,934 3,146,983 4,476,475 3,138,875
Actual net income $ 78,970 $154,912 $ 345,183 $ 402,214
Add 6% (assumed T-Bill rate)
interest net of federal
income tax effect _ 26,000 - 61,000
----------- ---------- --------- -------
$ 78,970 $180,912 $345,183 $463,214
---------- ---------- --------- --------
Per share amount $0.02 $0.06 $0.08 $0.15
===== ====== ===== =====
Fully diluted:
Actual net income $79,745 $154,914 $345,183 $402,214
Adjustment to reflect
additional earnings to reach
earnings targets 1,345,088 1,097,786
Adjustments to recognize
compensatory nature of
Preferred Stock (6,982,500) (6,982,500)
Add 6% (assumed T-Bill rate)
interest net of federal
income tax effect 12,000 15,705
---------- ------------ --------- ----------
Net (Loss) adjusted for
calculation $79,745 $(5,470,421) $345,183 $(5,466,795)
========= =========== ======== ============
Average shares outstanding 4,397,276 3,161,282 4,413,825 3,159,357
Net effect of dilutive stock
options and warrants--based
on treasury stock method using
Ending market price 30,277 770,516 50,224 625,236
----------- --------- --------- ---------
Average shares outstanding
as adjusted for calculation 4,427,553 3,931,798 4,464,049 3,784,593
----------- ---------- --------- ----------
Per share amount $.02 $(1.39) $.08 $(1.44)
====== ========== ===== ========
3
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> SEP-30-1996
<CASH> 3,387
<SECURITIES> 0
<RECEIVABLES> 10,944
<ALLOWANCES> 0
<INVENTORY> 1,500
<CURRENT-ASSETS> 795
<PP&E> 1,311
<DEPRECIATION> 555
<TOTAL-ASSETS> 18,227
<CURRENT-LIABILITIES> 6,474
<BONDS> 0
0
1
<COMMON> 4
<OTHER-SE> 11,753
<TOTAL-LIABILITY-AND-EQUITY> 18,227
<SALES> 26,762
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 22,244
<OTHER-EXPENSES> 4,027
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2
<INCOME-PRETAX> 575
<INCOME-TAX> 230
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 345
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
