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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 June 30, 2000
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
incorporation or organization) Identification Number)
614 Corporate Way, Valley Cottage, NY 10989
(Address of principal executive offices) (Zip Code)
(914) 268-5000
(Registrant's telephone number including area code)
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 _
The number of shares outstanding of the Registrant's common stock,
par value $.001 per share, as of August 8, 2000 was 4,894,569.
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INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors and Shareholders
Micros-to-Mainframes, Inc.
We have reviewed the accompanying condensed consolidated balance sheet
of Micros-to-Mainframes, Inc. and subsidiaries as of June 30, 2000, and
the related condensed consolidated statements of operations and cash
flows for the three-month period then ended. These financial
statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of
interim financial information consists principally of applying
analytical procedures to financial data and making inquiries of persons
responsible for financial and accounting matters. It is substantially
less in scope than an audit conducted in accordance with generally
accepted auditing standards, the objective of which is the expression
of an opinion regarding the condensed financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying condensed financial statements
for them to be in conformity with generally accepted accounting
principles.
GOLDSTEIN GOLUB KESSLER LLP
New York, New York
July 31, 2000
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Micros-to-Mainframes, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
June 30, March 31,
2000 2000
----------------------------
(Unaudited)
Assets
Current Assets
Cash and cash equivalents $ 146,449 $ 1,055,432
Accounts receivable, net 17,211,149 14,603,961
Inventories 2,533,451 1,908,082
Prepaid expenses and other current assets 2,089,752 1,252,689
Deferred income taxes 84,500 84,500
---------- ----------
Total current assets 22,065,301 18,904,664
Property and equipment 4,348,805 3,900,091
Less accumulated deprecation and amortization 1,848,531 1,677,097
---------- ----------
2,500,274 2,222,994
Goodwill, net of accumulated amortization 3,313,250 3,376,421
Other assets 488,716 446,181
Total Assets ----------- ------------
$28,367,541 $24,950,260
=========== ============
Liabilities and Shareholders' Equity
Current liabilities:
Secured notes payable $ 4,847,000 $ 3,040,000
Accounts payable and accrued expenses 7,251,571 5,630,567
Current portion of capital lease obligations 41,611 32,247
----------- ----------
Total current liabilities 12,140,182 8,702,814
Capital lease obligation, net of
current portion 21,521 40,764
Deferred income taxes 221,300 221,300
----------- ---------
Total liabilities 12,383,003 8,964,878
Commitments and Contingencies
Shareholders' Equity:
Common stock 4,881 4,878
Additional paid-in capital 14,981,760 14,974,888
Retained earnings 997,897 1,005,616
----------- -----------
Total shareholders' equity 15,984,538 15,985,382
----------- -----------
Total Liabilities and Shareholders' Equity $28,367,541 $24,950,260
=========== ===========
See notes to condensed consolidated financial statements
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Micros-to-Mainframes, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
Three Months
Ended June 30,
2000 1999
------------------------
(Unaudited)
Net Revenue:
Products $ 16,359,008 $ 13,062,295
Services 5,268,684 5,300,760
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21,627,692 18,363,055
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Costs and expenses:
Cost of products sold 15,228,777 12,356,007
Cost of services provided 3,559,842 3,510,437
Selling, general and administrative expenses 2,801,095 2,379,025
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21,589,714 18,245,469
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Other income 15,573 10,818
Interest expense 69,970 5,644
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Income (loss) from operations
before income taxes (16,419) 122,760
(Benefit) provision for income taxes (8,700) 50,000
----------- ----------
Net income (loss) $ (7,719) $ 72,760
============ ==========
Net income(loss) per common share:
Basic and Diluted $ - $ 0.02
============ ===========
Weighted-average number of common
shares outstanding:
Basic 4,880,212 4,570,895
=========== ===========
Diluted 4,880,212 4,641,720
=========== ===========
See notes to condensed consolidated financial statements
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Micros to Mainframes, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Three Months Ended June 30,
2000 1999
---------------------------
(Unaudited)
Cash flows from operating activities:
Net income (loss) $ (7,719) $ 72,760
Adjustments to reconcile net income (loss)
To net cash provided by (used in)
operating activities:
Depreciation and amortization 234,605 111,546
Deferred income taxes - 15,900
Loss from investment in Pivot Technologies, Inc. - 1,589
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (2,607,188) 505,047
Increase in inventory (625,369) (697,051)
Increase in prepaid expenses and
Other current assets (837,063) (70,539)
(Increase) decrease in other assets (42,535) 500
Increase (decrease) in accounts payable
and accrued expenses 1,621,004 725,555
---------- --------
Net cash provided by (used in)
operating activities (2,264,265) 665,307
---------- --------
Cash flows from investing activities:
Acquisition of property and equipment (448,714) (107,680)
Purchase of subsidiary, net of cash acquired - (371,227)
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Net cash used in investing activities (448,714) (478,907)
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Cash flows from financing activities:
Borrowing (repayment) of secured notes payable 1,807,000 (400,000)
Proceeds from exercise of stock options 6,875 11,500
Payments on capital lease obligations (9,879) -
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Net cash provided by (used in)
financing activities 1,803,996 (388,500)
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Net decrease in cash and cash equivalents (908,983) (202,100)
Cash and cash equivalents at the
beginning of period 1,055,432 678,680
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Cash and cash equivalents at the end of period $ 146,449 $ 476,580
============ ===========
Supplemental disclosures of cash flow information:
Cash paid during the quarter for:
Interest $ 42,821 $ 5,644
Income taxes $ 7,137 -
Supplemental schedule of noncash financing activities:
Issuance of warrant in connection with
purchase of Pivot - $ 370,771
Issuance of common stock in connection with
purchase of Pivot - $ 1,437,804
See notes to condensed consolidated financial statements
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Micros-to-Mainframes, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
1. Description of Business and Basis Presentation
Micros-to-Mainframes, Inc. and its subsidiaries, MTM Advanced
Technology, Inc., PTI Corporation (formerly known as Pivot Technologies,
Inc.)("Pivot"), and Data.Com RESULTS, Inc. ("Data.Com") (collectively,
the "Company" or "MTM") serve as a "one-stop" organization for data
processing solutions by providing computer hardware and software sales,
systems design, installation, consulting, maintenance and integration of
microcomputer products, including the design and implementation of wide
area networks ("WAN's") and local area networks ("LANs"). The Company
sells, installs and services microcomputers, microcomputer software
products, supplies, accessories and custom designed microcomputer systems.
The accompanying unaudited condensed consolidated financial
statements 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 three
months ended June 30, 2000 are not necessarily indicative of the
results that may be expected for the year ending March 31, 2001. For
further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report Form 10-
K (Commission file number 0-22122) for the fiscal year ended March
31, 2000.
INVENTORIES
Inventories, comprised principally of computer hardware and
software, are stated at the lower of cost or market using the first-
in, first-out (FIFO) method.
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Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion and analysis of financial condition and
results of operations of the Company should be read in conjunction
with the condensed consolidated financial statements and notes
thereto included elsewhere in this Quarterly Report on Form 10-Q and
with the Company's Annual Report on Form 10-K. This discussion and
analysis contains certain forward-looking statements within the
meaning of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended, which are not
historical facts, and involve risks and uncertainties that could
cause actual results to differ materially from the results
anticipated in those forward-looking statements. These risks and
uncertainties include, but are not limited to, those set forth
below, those set forth in the Company's Annual Report on Form 10-K
for the year ended March 31, 2000, and those set forth in the
Company's other filings from time to time with the Securities and
Exchange Commission.
The following table sets forth, for the periods indicated, certain items
In the Company's Consolidated Statements of Operations expressed as a
percentage of that period's net sales.
Percentage of Sales
Three Months Ended June 30,
2000 1999
Product sales .......................... 75.64% 71.13%
Service sales ................ ....... 24.36 28.87
Net sales ...............................100.00 100.00
Cost of products sold( as a % of
product sales)..................... 93.09 94.59
Cost of service provided (as a % of
Services. . . . . . . . ..... . . 67.57 66.23
Total Direct Cost(as a % of total sales) 86.87 86.40
Selling, general and
administrative expenses............. 12.95 12.96
Income (loss) before income taxes ....... (0.08) 0.67
Net(loss) income......................... (0.04) 0.40
The Three Months Ended June 30, 2000, as compared to the Three Months
Ended June 30, 1999
The Company had net sales of approximately $21,628,000 for the
three months ended June 30, 2000 ("First Quarter 2001"), as compared
to approximately $18,363,000 for the three months ended June 30, 1999
("First Quarter 2000"). The increase in sales of approximately 18%, or
approximately $3,265,000, in the First Quarter 2001 was primarily
attributable to the increase in hardware sales of approximately $3,297,000,
or approximately 25%, to both new and existing customers.
As a percentage of product sales, the cost of products sold decreased
1.59% in the First Quarter 2001 and the costs of services as a percentage of
the service revenue increased 2.02%. The technical personnel salaries
increased approximately 35% to approximately $2,141,000 from
approximately $1,590,000 from the First Quarter 2000 to the First
Quarter 2001. The Company plans to continue increasing its technical
personnel to replace the use of outside parties to complete service
engagements.
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Selling, general and administrative expenses ("SG&A") were
approximately $2,801,000 in the First Quarter 2001 as compared to
$2,379,000 in the First Quarter 2000, an increase of $422,000 or 18%.
The SG&A expenses as a percentage of net sales were 12.95% and 12.96% in
the First Quarter 2001 and the First Quarter 2000, respectively. The
increase is due to additional expenses in payroll, payroll taxes,
telephone, and deprecation and amortization expenses during the First
Quarter 2001.
Other income increased to approximately $16,000 in the First Quarter
2001 as compared to approximately $11,000 in the First Quarter 2000.
Interest expenses increased to approximately $70,000 in the First
Quarter 2001 from approximately $6,000 in the First Quarter 2000, due to
higher borrowing from its bank in the First Quarter 2001.
The effective income tax rates were approximately 53% for First Quarter
2001 and 41% the First Quarter 2000.
As a result of the forgoing, the Company had a net loss of approximately
$8,000 in the First Quarter 2001 compared to net income of
approximately $73,000 in the First Quarter 2000. The basic and
dilutive earnings per common share were $0.00 in the First Quarter 2001
compared to $0.02 in the First Quarter 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company measures its liquidity in a number of ways, including the
following:
June 30, March 31,
2000 2000
(Dollars in thousands,
except current ratio data)
Cash and cash equivalents............... $ 146 $ 1,055
Working capital ......................... $ 9,925 $10,202
Current ratio .......................... 1.82:1 2.17:1
Secured notes payable .................. $ 4,847 $ 3,040
Working capital lines available.......... $ 6,463 $ 7,064
The Company had working capital of approximately $9,925,000
as of June 30, 2000, a decrease of approximately $277,000 from March
31, 2000.
During the First Quarter 2001, the Company had net cash used in
operating activities of approximately $2,264,000 consisting primarily
of approximately $8,000 of net losses, an increase in accounts
receivable of approximately $2,607,000, an increase in inventory of
approximately $625,000, and an increase in prepaid expenses and other
current assets of $837,000 which were offset by an increase in accounts
payable and accrued expenses of approximately $1,621,000.
The Company had cash used in investing activities of approximately
$449,000 consisting of the acquisition of property and equipment of
approximately $197,000 and approximately $252,000 from costs incurred in
development of computer software.
The Company had an increase in its net cash from financing
activities of $1,803,000 primarily from increased borrowings from its
bank.
As a result of the foregoing, the Company had a net decrease in
cash of approximately $909,000.
The Company has entered into two financing agreements for the
purchase of inventory. One of these agreements is a $15,000,000 credit
facility which included a $2,000,000 temporary increase on June 22, 2000
that expires on August 22, 2000. This credit facility includes a
$10,000,000 floor plan agreement and a $5,000,000 revolving receivable
financing facility. The combined facility is secured by the Company's
assets (other than inventories and accounts receivable directly financed
by other floor planners who have the lien thereon).
On the revolving receivable financing facility, the Company has a
choice of two types of loans: (i) the prime rate loan, in which
interest is calculated at the prime rate (9.50% at June 30, 2000) on the
daily contract balance, and (ii) the LIBOR loan, in which the unpaid
principal amount of LIBOR loans shall bear interest prior to maturity at
a rate per annum equal to the LIBOR in effect for each interest period
(7.65% at June 30, 2000), plus 1.5% per annum.
The other financing agreement is a $1,300,000 floor plan agreement
and is secured by the Company's assets (other than inventories and
accounts receivable directly financed by other floor planners who have
the lien thereon).
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The financing agreements are effective until notice of termination
is given by either party (within a specific time-frame, as defined).
The floor-plan agreements generally allow the Company to borrow interest
free for a period of 30 to 60 days. Interest is charged to the Company
only after the due date. In addition, one of these agreements provides
for minimum amounts of tangible net worth and specified financial
ratios.
The Company's total outstanding debt under the $5,000,000
revolving receivable financing facility was $4,847,000 and $3,040,000 at
June 30, 2000 and March 31, 2000, respectively. The Company also pays an
unused line fee of .125% per annum on the daily average of the unused
amount of the revolving receivable financing facility.
The Company's current ratio decreased to 1.82:1 at June 30, 2000
from 2.17:1 at March 31, 2000.
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. There can
be no assurance, however, that changes in Company's plans or other
events affecting the Company will not result in unexpected expenditures
or cash requirements.
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PART II OTHER INFORMATION
Item 6. Exhibit
27.1 Financial Data Schedule
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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 : August 8, 2000 By: /s/ Howard A. Pavony
Howard A. Pavony
Chairman of the Board
of Directors
Date : August 8, 2000 By: /s/ Steven H. Rothman
Steven H. Rothman
Chief Executive Officer,
President and Director
(Principal Executive Officer)
Date : August 8, 2000 By: /s/ Frank T. Wong
Frank T. Wong
Vice President - Finance
Principal Financial and
Accounting Officer)and
Secretary
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