1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
/x/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1995
OR
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _______________ to _______________
Commission file number 0-17219
GENTNER COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Utah 87-0398877
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1825 Research Way, Salt Lake City, Utah 84119
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (801) 975-7200
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report.)
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.
/x/ Yes / / No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
Class of Common Stock November 10, 1995
$0.001 par value 7,662,375 shares
2
GENTNER COMMUNICATIONS CORPORATION
BALANCE SHEETS
(Unaudited)
September 30, June 30,
1995 1995
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . $ 100,359 $ 119,238
Accounts receivable. . . . . . . . . . . . . 1,446,121 1,644,376
Inventory. . . . . . . . . . . . . . . . . . 3,743,475 3,324,866
Other current assets. . . . . . . . . . . . . 201,918 140,088
--------- ---------
Total current assets. . . . . . . . . . . . 5,491,873 5,228,568
Property and equipment, net. . . . . . . . . . 1,732,735 1,829,161
Other assets, net. . . . . . . . . . . . . . . 133,934 140,731
--------- ---------
Total assets. . . . . . . . . . . . . . . .$ 7,358,542 $ 7,198,460
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable. . . . . . . . . . . . . . . . $ 853,750 $ 1,508,687
Accounts payable. . . . . . . . . . . . . . . 1,208,026 943,723
Accrued expenses. . . . . . . . . . . . . . . 215,225 297,426
Current portion of long-term debt. . . . . . 156,718 93,506
Current portion of capital lease obligations. 133,047 128,486
--------- ---------
Total current liabilities. . . . . . . . . 2,566,766 2,971,828
Long-term debt. . . . . . . . . . . . . . . . . 545,380 229,372
Capital lease obligations. . . . . . . . . . . 243,810 283,799
--------- ---------
Total liabilities. . . . . . . . . . . . . 3,355,956 3,484,999
Shareholders' equity:
Common stock, 50,000,000 shares authorized,
par value $.001, 7,655,375 and 7,455,375
shares issued and outstanding at September
30, 1995 and June 30, 1995. . . . . . . . . . 7,655 7,455
Additional paid-in capital. . . . . . . . . . 4,381,941 4,244,641
Accumulated deficit . . . . . . . . . . . . (387,010) (538,635)
--------- ---------
Total shareholders' equity. . . . . . . . . 4,002,586 3,713,461
--------- ---------
Total liabilities and shareholders' equity.$ 7,358,542 $ 7,198,460
========= =========
3
GENTNER COMMUNICATIONS CORPORATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
-----------------------
1995 1994
--------- ---------
Net sales . . . . . . . . . . . . . . . . . . .$ 2,787,149 $ 2,274,913
Cost of goods sold . . . . . . . . . . . . . . 1,440,326 1,270,886
--------- ---------
Gross profit . . . . . . . . . . . . . . . 1,346,823 1,004,027
Operating expenses:
Marketing and selling . . . . . . . . . . . . 564,881 614,588
General and administrative . . . . . . . . . 336,284 475,969
Product development . . . . . . . . . . . . . 217,991 286,190
--------- ---------
Total operating expenses . . . . . . . . . 1,119,156 1,376,747
--------- ---------
Operating income (loss) . . . . . . . . . . 227,667 (372,720)
Other income (expense):
Interest income . . . . . . . . . . . . . . . 862 6,514
Interest expense . . . . . . . . . . . . . . (50,147) (28,388)
Other, net . . . . . . . . . . . . . . . . . - 14,886
--------- ---------
Total other income (expense) . . . . . . . (49,285) (6,988)
--------- ---------
Income (loss) before income taxes . . . . . . . 178,382 (379,708)
Provision (benefit) for income taxes . . . . . 26,757 -
--------- ---------
Net income (loss) . . . . . . . . . . . . .$ 151,625 $ (379,708)
========= =========
Net earnings (loss) per common share . . . . . $ 0.02 $ (0.05)
========= =========
4
GENTNER COMMUNICATIONS CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
-------------------------
1995 1994
---------- ----------
Cash flows from operating activities:
Cash received from customers . . . . . . . $ 3,016,895 $ 2,254,803
Cash paid to suppliers and employees . . . (2,792,477) (3,365,501)
Interest received . . . . . . . . . . . . . 862 6,139
Interest paid . . . . . . . . . . . . . . . (50,425) (28,388)
Income taxes paid . . . . . . . . . . . . . (5,900) -
---------- ----------
Net cash provided by (used in)
operating activities . . . . . . . . . . 168,955 (1,132,947)
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment . . . . (28,640) (262,931)
Decrease in other assets . . . . . . . . . 14,451 2,893
---------- ----------
Net cash used in investing activities . . (14,189) (260,038)
---------- ----------
Cash flows from financing activities:
Proceeds from employee stock option
exercises . . . . . . . . . . . . . . . . 137,500 -
Net borrowings (repayments) under line of
credit . . . . . . . . . . . . . . . . . . (398,000) 1,100,000
Principal payments of short-term notes to
vendors . . . . . . . . . . . . . . . . . (256,937) -
Proceeds from issuance of long-term debt . 400,000 282,500
Principal payments of capital lease
obligations . . . . . . . . . . . . . . . (35,428) (40,515)
Principal payments of long-term debt . . . (20,780) (6,328)
---------- ----------
Net cash provided by (used in)
financing activities . . . . . . . . . . (173,645) 1,335,657
---------- ----------
Net decrease in cash and cash equivalents . . (18,879) (57,328)
Cash and cash equivalents at the beginning
of the year . . . . . . . . . . . . . . . . 119,238 433,824
---------- ----------
Cash and cash equivalents at the end of the
period . . . . . . . . . . . . . . . . . . .$ 100,359 $ 376,496
========== ==========
5
GENTNER COMMUNICATIONS CORPORATION
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
(Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB of
Regulation S-B. Accordingly, certain information and footnote
disclosures normally included in complete financial statements have been
condensed or omitted. These financial statements should be read in
conjunction with the financial statements and footnotes thereto included
in the Company's 1995 Annual Report on Form 10-KSB.
In the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair
presentation have been included. The results of operations for interim
periods are not necessarily indicative of the results of operations to
be expected for the full year.
2. Earnings (Loss) Per Common Share
Earnings (loss) per common share was calculated using the modified
treasury stock method (see the accompanying exhibit, "Statement re:
Computation of Per Share Earnings"). Stock options and warrants
to purchase common stock have been excluded from the presented
computation of per share amounts in periods when the effect was
antidilutive.
3. Inventory
Inventory is summarized as follows:
(Unaudited)
September 30, June 30,
1995 1995
--------- ---------
Raw materials. . . . . . . . . . . . . .$ 1,262,243 $ 959,478
Work in progress. . . . . . . . . . . . 1,449,531 1,380,393
Finished goods. . . . . . . . . . . . . 1,031,701 984,995
--------- ---------
Total inventory. . . . . .$ 3,743,475 $ 3,324,866
========= =========
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Sales for the three months ended September 30, 1995 increased 23%
compared to the three months ended September 30, 1994. The increase was
attributable primarily to new products which began shipping since last
fall.
Broadcast market sales increased 36% during the first quarter of
fiscal 1996, compared to the same period during fiscal 1995. The main
reason for the increase was sales of the Company's new TS612 talk show
telephone system. The Company has received very favorable customer
response to this product, and is currently working on new system
enhancements which it anticipates introducing later during the current
fiscal year. Increased sales also resulted from another new product,
the Company's recently introduced Telehybrid telephone interface unit.
The new product allows broadcasters to make easy connections to either
digital or analog phone lines in various "on-air" broadcast
applications. It can also be used in situations involving
audioconferencing.
Sales to the audio segment of the Teleconferencing market (the
"Audioconferencing" market) increased 14% during the quarter ended
September 30, 1995 as compared to the same period a year ago. The
increase was due primarily to shipments of the new AVT line of products.
These units were designed specifically for use in conjunction with
videoconferencing and distance learning applications.
Audioconferencing sales were also higher than last year due to
shipments of the ET100 portable audioconferencer. The Company spent
time during this last quarter making design modifications and
improvements to the ET100, and plans to release version 2.0 during
fiscal 1996's second quarter. The Company expects this to grow sales
further, and expects more Audioconferencing sales resulting from new
product introductions later during this fiscal year.
The Company's gross profit margin percentage increased from 44%
during last year's first quarter, to 48% during the same period this
year. Although the Company did experience some variations in its sales
mix during the quarter, most of the difference was due to moderate price
increases which took effect July 1, 1995. The Company believes that
gross margins experienced during the rest of the 1996 fiscal year will
be slightly lower due to small decreases in profit margins of new
products scheduled to be introduced. However, the Company also
anticipates higher gross profits resulting from an overall increase in
sales.
7
RESULTS OF OPERATIONS - (Continued)
Operating expenses for the first quarter decreased 19% compared to
last year. The Company lowered costs in all areas, primarily those of
product development and general and administration. Product development
costs came down as a result of less resources being expended in
engineering new products. During the prior year's first quarter, the
Company was focused on getting the TS612 and ET100 products ready to
ship. Part of that process required important outside developmental
efforts unique to those two units. The Company was also involved in
more promotional activities last year, again related to the new
products. As a result, marketing and selling expenses decreased 8%
during this year's first quarter compared to last year. General and
administrative expenses were lower by 29% compared to last year, due
mainly as a result of cost saving efforts and efficiencies gained in
modifying the organizational structure.
During the first quarter, the Company earned little interest
income compared to the same period last year, due to lower cash
investment balances. Interest expense increased 77% during the three-
month period ended March 31, 1995, as a result of increased usage of the
Company's line of credit facility.
FINANCIAL CONDITION AND LIQUIDITY
The Company's current ratio increased from 1.8:1 to 2.1:1 during
the three months since June 30, 1995. The factor contributing most to
the change was an adjustment of short-term debt which occurred during
the quarter. The Company obtained permanent long-term financing for
several items of furniture and equipment acquired over the last eighteen
months, and applied the proceeds towards the short-term line of credit.
Another working capital change was the 12% decline in accounts
receivable due to lower sales during the quarter than in the quarter
ended June 30, 1995. Inventory increased 13% during the quarter because
the Company is continuing its efforts of providing adequate finished
product availability to satisfy current and expected customer demand.
Yet it also intends to fully implement ongoing inventory management
programs started during fiscal 1995. Such efforts are intended to
improve raw material purchasing efficiencies and reduce inventory size
overall. The 28% increase in accounts payable coincides with the
increase in inventory.
During the first quarter of fiscal 1996, the Company renewed its
line of credit arrangement with a commercial bank. The terms of the
arrangement remained the same as before, with $1.75 million available at
1% over prime, maturing on October 31, 1996.
The Company is continuing to maximize its efforts to maintain
stable cash flows during a time of sales growth and ongoing product
development. Changing its short-term debt position helped to increase
available cash reserves. However, the Company believes that ongoing
cash flows will improve more as a result of continuing management's
focus on maintaining satisfactory profitability following last year's
period of operational expansion and intense product promotion. Already
the Company has seen the positive operational cash flow results from
this course of action. As sales continue to increase and profits are
achieved, the Company is confident that it can achieve its business plan
through a combination of internally generated funds, and short-term
and/or long-term borrowing, if necessary.
8
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement re Computation of Per Share Earnings
(27) Financial Data Schedule
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
GENTNER COMMUNICATIONS CORPORATION
/s/ David L. Harmon
-------------------------
David L. Harmon
Chief Financial Officer
Date: November 10, 1995
EXHIBIT 11
GENTNER COMMUNICATIONS CORPORATION
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Three Months Three Months
Ended Ended
September 30, September 30,
1995 1994
---------- ----------
Primary:
Earnings (loss):
Net income (loss) . . . . . . . . . . . .$ 151,625 $ (379,708)
Assumed interest expense reduction on
retirement of acquirable long-term
liabilities . . . . . . . . . . . . . . - -
Assumed interest income increase on
purchase of investments . . . . . . . . - -
---------- ----------
Adjusted net income (loss) . . . . . . $ 151,625 $ (379,708)
========== ==========
Shares:
Weighted average number of common shares
outstanding. . . . . . . . . . . . . . . 7,574,179 7,338,375
Assumed exercise of weighted average
number of options and warrants
outstanding . . . . . . . . . . . . . . - -
Assumed repurchase of common shares . . . - -
---------- ----------
Adjusted weighted average of common
shares outstanding . . . . . . . . . . 7,574,179 7,338,375
========== ==========
Primary Earnings (Loss) Per Share . . . . . $0.02 ($0.05)
========== ==========
Fully Diluted:
Earnings (loss):
Net income (loss) . . . . . . . . . . . .$ 151,625 $ (379,708)
Assumed interest expense reduction on
retirement of acquirable long-term
liabilities . . . . . . . . . . . . . . . 37,052 -
Assumed interest income increase on
purchase of investments . . . . . . . . . 10,012 -
---------- ----------
Adjusted net income (loss) . . . . . . $ 198,689 $ (379,708)
========== ==========
Shares:
Weighted average number of common shares
outstanding. . . . . . . . . . . . . . . 7,574,179 7,338,375
Assumed exercise of weighted average
number of options and warrants
outstanding . . . . . . . . . . . . . . 3,963,742 -
Assumed repurchase of common shares . . . (1,531,075) -
---------- ----------
Adjusted weighted average of common
shares outstanding . . . . . . . . . . 10,006,846 7,338,375
========== ==========
Fully Diluted Earnings (Loss) Per Share . . $0.02 ($0.05)
========== ==========
5
3-MOS
JUN-30-1996
SEP-30-1995
100,359
0
1,580,121
134,000
3,743,475
5,491,873
3,689,153
1,956,418
7,358,542
2,566,766
789,190
7,655
0
0
3,994,931
7,358,542
2,787,149
2,787,149
1,440,326
1,440,326
0
0
50,147
178,382
26,757
151,625
0
0
0
151,625
0.02
0.02
