1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended NOVEMBER 26, 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 0-10558
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ALPHA MICROSYSTEMS
------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-3108178
- ---------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2722 S. FAIRVIEW STREET, SANTA ANA, CA 92704
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(Address of principal executive offices)
Registrant's telephone number, including area code: (714) 957-8500
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
As of January 3, 1996, there were 6,595,453 shares of the registrant's common
stock outstanding.
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ALPHA MICROSYSTEMS
INDEX
Page
Number
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PART I-- FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
at November 26, 1995 (Unaudited) and
February 26, 1995 3
Condensed Consolidated Statements of
Operations (Unaudited) for the Three
and Nine Months Ended November 26, 1995 and
November 27, 1994 4
Condensed Consolidated Statements of Cash Flows
(Unaudited) for the Nine Months Ended November 26,
1995 and November 27, 1994 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9
PART II-- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
EXHIBIT INDEX 15
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ALPHA MICROSYSTEMS
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
November 26, February 26,
1995 1995
------------ ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,155 $ 3,289
Accounts receivable, net 5,591 4,844
Inventories 1,264 1,948
Subsidiary held for sale - 269
Note receivable 236 -
Prepaid expenses and other current assets 763 564
-------- --------
Total current assets 9,009 10,914
Property and equipment, at cost 16,450 14,824
Less accumulated depreciation and amortization 11,969 11,220
-------- --------
Net property and equipment 4,481 3,604
Service contracts, net 953 1,039
Software costs, net 1,769 1,302
Goodwill, net 865 864
Other assets, net 173 179
-------- --------
$ 17,250 $ 17,902
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,525 $ 1,863
Deferred revenue 2,317 2,775
Other accrued liabilities 1,639 1,857
Accrued salaries and wages 156 836
Bank borrowings 500 -
Current portion of long-term debt 364 395
-------- --------
Total current liabilities 7,501 7,726
Long-term debt 232 140
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value; 5,000,000
shares authorized; none issued - -
Common stock, no par value; 20,000,000 shares
authorized; 6,565,403 and 6,557,403 shares
issued and outstanding at November 26, 1995 and
February 26, 1995, respectively 21,238 21,224
Accumulated deficit (11,623) (11,119)
Unamortized restricted stock plan expense (14) (19)
Foreign currency translation adjustment (84) (50)
-------- --------
Total shareholders' equity 9,517 10,036
-------- --------
$ 17,250 $ 17,902
======== ========
See accompanying notes.
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ALPHA MICROSYSTEMS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Three Months Ended Nine Months Ended
--------------------------------- -------------------------------------
November 26, November 27, November 26, November 27,
1995 1994 1995 1994
--------------- -------------- --------------- ------------------
Net sales:
Product $ 3,666 $ 4,772 $ 11,490 $ 14,325
Service 4,602 5,077 13,928 15,351
--------------- -------------- --------------- ------------------
Total net sales 8,268 9,849 25,418 29,676
--------------- -------------- --------------- ------------------
Cost of sales:
Product 2,401 2,911 6,962 9,104
Service 3,289 3,437 9,448 9,937
--------------- -------------- --------------- ------------------
Total cost of sales 5,690 6,348 16,410 19,041
--------------- -------------- --------------- ------------------
Gross Margin 2,578 3,501 9,008 10,635
Selling, general and administrative expense 2,716 3,205 8,277 9,925
Research and development expense 489 488 1,559 1,694
--------------- -------------- --------------- ------------------
Total operating expenses 3,205 3,693 9,836 11,619
--------------- -------------- --------------- ------------------
Loss from operations (627) (192) (828) (984)
Interest income (22) (37) (72) (114)
Interest expense 5 6 26 13
Other (income) expense, net 4 (15) (221) 53
Foreign exchange (gain) loss (17) 50 (57) (13)
--------------- -------------- --------------- ------------------
Total other (income) expenses (30) 4 (324) (61)
--------------- -------------- --------------- ------------------
Loss before taxes (597) (196) (504) (923)
Provision for income taxes - - - 5
--------------- -------------- --------------- ------------------
Net Loss $ (597) $ (196) $ (504) $ (928)
=============== ============== =============== ==================
Net loss per share $ (0.09) $ (0.03) $ (0.08) $ (0.14)
=============== ============== =============== ==================
Number of shares used in the
computation of per share amounts 6,565 6,557 6,561 6,548
=============== ============== =============== ==================
See accompanying notes.
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ALPHA MICROSYSTEMS
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(IN THOUSANDS)
Nine Months Ended
----------------------------------------
November 26, November 27,
1995 1994
------------------ ------------------
Cash flow from operating activities:
Net loss $ (504) $ (928)
Adjustments to reconcile net loss
to net cash provided by (used in) operating activities:
Gain on sale of fixed assets (211) -
Depreciation and amortization 1,612 2,255
Provision for losses on accounts receivable (25) 61
Inventory provision 143 52
Other changes in operating assets and liabilities:
Accounts receivable (802) (570)
Inventories 541 (255)
Prepaid expenses and current assets (160) (282)
Accounts payable and other
accrued liabilities 434 581
Accrued salaries and wages (694) (631)
Deferred revenue (494) (158)
Other, net 46 (28)
----------------- ------------------
Net cash (used in) provided by
operating activities (114) 97
----------------- ------------------
Cash flow from investing activities:
Proceeds from sale of fixed assets 280 -
Acquisition of businesses (80) (84)
Acquisition of service assets (96) (511)
Purchases of equipment and leasehold improvements (1,552) (745)
Capitalization of software costs (745) (598)
Other, net 3 (54)
----------------- ------------------
Net cash used in investing activities (2,190) (1,992)
----------------- ------------------
Cash flows from financing activities:
Proceeds from borrowings 500 -
Issuance of stock 19 66
Principal debt repayments (343) (659)
----------------- ------------------
Net cash provided by (used in) financing activities 176 (593)
----------------- ------------------
Effect of exchange rate changes on cash (6) 92
----------------- ------------------
Decrease in cash and cash equivalents (2,134) (2,396)
Cash and cash equivalents at beginning of period 3,289 6,251
----------------- ------------------
Cash and cash equivalents at end of period $ 1,155 $ 3,855
================= ==================
See accompanying notes.
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ALPHA MICROSYSTEMS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. INTERIM ACCOUNTING POLICY
In the opinion of management of Alpha Microsystems (the "Company" or
"Alpha Micro"), the accompanying unaudited condensed consolidated financial
statements contain all adjustments necessary to fairly present the consolidated
financial position of the Company at November 26, 1995, the consolidated
results of its operations for the three and nine month periods ended November
26, 1995 and November 27, 1994 and its cash flows for the nine month periods
ended November 26, 1995 and November 27, 1994. These condensed consolidated
financial statements do not include all disclosures normally presented annually
under generally accepted accounting principles and, therefore, they should be
read in conjunction with the Company's annual report on Form 10-K for the year
ended February 26, 1995.
The results of operations for the nine month period ended November 26,
1995, are not necessarily indicative of the results to be expected for the full
fiscal year.
REVENUE RECOGNITION
The Company recognizes revenue on its hardware and software sales on
delivery, and recognizes revenue on its service sales and post contract
customer support on a straight line basis over the contract period. When
significant obligations remain after a software product has been delivered,
revenue is not recognized until obligations have been completed or are no
longer significant. The costs of any insignificant obligations are accrued when
the related revenue is recognized. Revenue is recognized only when collection
of the resulting receivable is probable.
PER SHARE INFORMATION
Per share information is based upon the weighted average common shares
outstanding during the periods ended November 26, 1995 and November 27, 1994.
TRANSLATION OF FOREIGN CURRENCIES
The Company's foreign entities use the local currency as the
functional currency. The Company translates all foreign entity assets and
liabilities at quarter-end exchange rates, all income and expense accounts at
average rates, and records adjustments resulting from translation in a separate
component of shareholders' equity.
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2. INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out
method) or market. Inventories net of reserves for excess and obsolete
inventories of $1,882,000 and $1,723,000 at November 26, 1995 and February 26,
1995, respectively, are comprised of the following:
(IN THOUSANDS)
-------------------------------------------------
NOVEMBER 26, FEBRUARY 26,
1995 1995
------------------- ------------------
Raw materials $ 136 $ 581
Work in process 8 180
Finished goods 1,120 1,187
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$ 1,264 $ 1,948
=================== ==================
3. DEBT
On July 10, 1995, the Company signed an agreement for a revolving line
of credit up to a maximum limit of $2,000,000, based upon 70% of the eligible
accounts receivable and under which letters of credit and the foreign exchange
portion shall not exceed $500,000 in the aggregate at any one time. Borrowing
under the line of credit will bear interest of prime plus one and one half
percent (1.5%) and a commitment fee for the first year of $15,000. In
addition, the Company agreed to issue 50,000 warrants to the lender, after the
40,000 warrants the lender previously received had been canceled. The price of
the new warrants is at the market value of the Company's common stock as of the
date of the credit line. As of November 26, 1995, the Company had borrowings
under its credit line of $500,000.
The Company is currently negotiating new covenants with its bank since
the Company anticipates that it will breach certain covenants prior to fiscal
year end. Management believes that it will be successful in negotiating such
covenants based upon preliminary discussions with its bank, however, no
assurances can be made. The line of credit is secured by substantially all of
the Company's assets. Its availability is subject to current financial
covenants requiring that the Company maintain a quick ratio of not less than
1.3 to 1, a tangible net worth of not less than $5,900,000, and a ratio of
total liabilities to tangible net worth of no more than 1.0 to 1. The agreement
also includes covenants which require that the Company must not have two or
more consecutive quarterly losses exceeding $700,000 in aggregate, and the
Company must make a net profit on a consolidated basis for fiscal 1996.
4. NOTE RECEIVABLE
As part of the consideration for selling the Belgian subsidiary to a
member of local management, the Company received a note for 15,000,000 Belgian
francs which is payable over the next two years.
5. ACQUISITIONS
On September 15, 1995, the Company acquired the ongoing service
contracts and certain related assets of Instant Data Systems Incorporated
("IDS") for a purchase price of $300,000, plus a
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potential bonus payment of $50,000. The purchase price will be paid over
eighteen months, and the ultimate price and cash paid will depend upon the
contract revenues purchased.
6. TAXES
The Company has significant federal net operating loss carryforwards
totaling approximately $15.0 million at February 26, 1995, which begin expiring
in 2006. As a result, the Company recorded no tax provision for the nine months
ended November 26, 1995. If there is a greater than 50% change in the Company's
ownership during any three-year period, the utilization of the net operating
loss and general business credit carryforward can be limited. During the last
three-year period ended February 26, 1995, the Company had experienced an
approximate 41% change in ownership.
7. GOODWILL AND INTANGIBLES
Management routinely evaluates events or conditions that might
diminish the fair market value of intangible assets. Intangible assets include
acquired service contracts, capitalized computer software costs and goodwill.
The book value of goodwill and acquired service contracts is associated with
the acquisition of companies or assets. Software cost is the accumulation of
capitalized development costs or the assigned value of software associated with
an acquisition.
8. CONTINGENCIES
PRIOR LEASE OBLIGATIONS
The Company is in the process of negotiating the requirements and
costs associated with exiting its previous location and has not yet paid an
exit fee of $250,000. Although the Company has accrued an appropriate amount
for this contingency, it is still negotiating a payment schedule to minimize
the cash impact.
LITIGATION
Two former employees of Alpha Microsystems Belgium S.A. ("AMB") have
filed a lawsuit which asserts eight separate claims against AMB and the
Company. The primary claim is that AMB is in breach of its obligations under
Belgium employment law to pay salaries for a notice period of up to two years
and that the Company has alter ego liability for these obligations. The
employees are claiming compensatory damages in excess of $780,000 and
unspecified punitive damages. Management of the Company believes that the
claim is without merit.
A former Pick dealer, who the Company took to collection in order to
recover a past due amount of $19,166.90, has countersued alleging irreparable
damage, loss of current business, loss of business reputation and loss of
future business due to operating system failure and has claimed damages of
$1,050,000. The Company believes that the claim is without merit.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
SUMMARY
The following table was derived from the Condensed Consolidated
Statements of Operations as a percentage of net sales for the three and nine
month periods ended November 26, 1995, and November 27, 1994:
THREE MONTHS ENDEDATIONSHIP TO NET SALENINE MONTHS ENDED
----------------------------------------------------------------------
NOVEMBER 26, NOVEMBER 27, NOVEMBER 26, NOVEMBER 27,
1995 1994 1995 1994
------------ ------------ ------------ ------------
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Costs of sales 68.8 64.5 64.6 64.2
------- ------- ------- -------
Gross margin 31.2 35.5 35.4 35.8
Selling general and administrative expense 32.8 32.5 32.6 33.4
Research and development expense 5.9 5.0 6.1 5.7
Interest income (0.3) (0.4) (0.3) (0.4)
Interest expense 0.1 0.1 0.1 -
Other (income) expense, net 0.1 (0.2) (0.9) 0.2
Foreign exchange (gain) loss (0.2) 0.5 (0.2) -
------- ------- ------- -------
Loss from operations before taxes (7.2) (2.0) (2.0) (3.1)
Provision (benefit) for income taxes - - - -
------- ------- ------- -------
Net loss (7.2)% (2.0)% (2.0)% (3.1)%
======= ======= ======= =======
GENERAL
The Company, which for its first decade was principally a designer and
vendor of computer hardware and related systems software, continues to
transition its business towards areas which it believes offer greater growth
potential. The Company's strategy is to concentrate on vertical markets, and
expand its already broad base of support services, including field maintenance
and networking. In support of its strategy, the Company has continued its
efforts to consolidate European operations, reduce expenses and establish new
asset management techniques, and shift toward system assembly and integration.
Management intends to monitor market and business conditions and be flexible in
considering appropriate shifts in strategy.
During the first nine months of fiscal 1996, the Company incurred a
net loss of $504,000, or $0.08 per share. The loss was primarily due to
continued investment in the Company's food service administration (Panda) and
dental practice management (Alpha 2000) software products, for which revenues
have not yet sufficiently developed to offset this investment, and an
unexpectedly steep decline in revenues from the Company's traditional
AMOS-based hardware products during the third quarter. The Company experienced
a $2,835,000 reduction in product revenues during the first nine months of
fiscal 1996 when compared to the same period during the previous fiscal year.
A significant portion of this decline was associated with the sale of the PICK
64 and VSO product lines. In response to the third quarter results, the
Company has reduced personnel by 25 individuals as part of a consolidation of
the traditional hardware business with the Company's service operation and has
also taken other cost containment actions. The effects of these reductions are
not expected to have a significant impact until the first quarter of fiscal
1997.
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The Company's strategic marketing efforts continue to progress with
its Alpha 2000 product which has been well received at several trade shows and
individually by key dental industry opinion leaders. Alpha 2000 is actively
being marketed and the Company has been taking orders for delivery in the
fourth quarter of the current fiscal year. So far this fiscal year the Company
has received four new orders for Panda from California school districts where
it has a direct sales force and it has been setting up Value Added Resellers
("VARs") and strategic relations to market Panda in other states.
Based upon the favorable market response but subject to resource
constraints, the Company intends to expand its sales and marketing resources
for both its dental and food service vertical products. While it is unlikely
that revenues from these products will increase sufficiently to offset the
additional investment in the short term, the Company believes that its
capabilities to gain a larger market share over the long term will be
significantly enhanced. The operating expenses associated with additional
marketing and sales efforts towards introducing these products will likely have
a negative impact on the Company's short-term performance.
RESULTS OF OPERATIONS
Nine Months Ended November 26, 1995 and November 27, 1994
Net sales decreased $4,258,000, or 14.3%, to $25,418,000 for the nine
month period ended November 26, 1995, from $29,676,000 for the same period
ended November 27, 1994. Total product revenues declined $2,835,000, or 19.8%
to $11,490,000 during the first nine months of fiscal 1996, from $14,325,000 for
the comparable period during fiscal 1995.
The decline in the product revenues was due to lower customer demand
for the Company's traditional AMOS-based hardware products, the sale of the
PICK and VSO product lines, and lower revenues from Belgian customers. PICK and
VSO revenues accounted for approximately $322,000 in the nine months ended
November 26, 1995, compared to approximately $1,182,000 in the comparable
period of fiscal 1995. The Belgian subsidiary, Alpha Microsystems Belgium, S.A.
("AMB"), which was sold to a member of its Belgian management team at the end
of fiscal 1995, had accounted for $2,051,000 in revenues in the first nine
months of fiscal 1995. In the first nine months of fiscal 1996, sales to the
Belgian company accounted for $1,506,000 in revenues. The negative impact of
reduced AMB revenues was offset, however, by the elimination of overhead and
other expenses associated with the subsidiary.
Total service revenue for the nine months ended November 26, 1995
declined $1,423,000, or 9.3%, to $13,928,000 from $15,351,000 for the same
period in the prior year. The decrease was attributable both to a reduction in
service revenue from operations recently acquired (Alpha Computer Services,
Inc. and MGI Group International, Inc.) and the continued decline in
traditional AMOS-based service contracts. The Company has expanded its base of
support services, including field maintenance and networking, and intends to
invest additional resources in this area.
Total gross margin for the Company for the nine months ended November
26, 1995 decreased to 35.4% compared to 35.8% during the same period last year.
While product gross margin for the first nine months of fiscal 1996
increased to 39.4% compared to 36.4% during the same period in the prior year,
product gross margin for the third quarter ended November 26, 1995 decreased to
34.5%. The increase in the nine month period ended November 26, 1995 was due
to a higher percentage of revenues from traditional hardware products with
higher gross margin as compared to the same period in the prior year in which a
higher percentage of lower margin PICK, VSO and non-proprietary products were
sold. The decrease in
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product gross margin for the third quarter ended in November 26, 1995 was the
result of lower revenue and the related effect of overhead absorption.
Service business gross margin declined to 32.2% during the nine months
ended November 26, 1995 from 35.3% during the same period in the prior year.
The decline was primarily due to reductions in cost of goods sold, primarily
labor costs, not fully offsetting the revenue decline. However, the service
organization reduced selling, general and administrative expenses which
assisted in partially offsetting the overall impact of the service revenue
decline. The service organization is focusing on obtaining new contracts for
its networking support services, supporting vertical markets with services, and
increasing third party services in an effort to improve revenues. Revenues from
these new areas of focus generally produce lower margins than the Company's
traditional service business.
Selling, general and administrative expenses decreased $1,648,000 to
$8,277,000 for the nine months ended November 26, 1995 from $9,925,000 for the
comparable period in the prior fiscal year. This reduction was primarily due
to the Company's decision to divest itself of non-core activities during the
first part of fiscal 1996. The reductions were approximately $789,000,
$394,000 and $160,000 due to the divestiture of AMB, VSO, and Imaging
operations, respectively. Selling, general and administrative expenses were
also reduced by streamlining certain other areas within the business. The
Company utilized some of these savings by investing in additional resources to
enhance its position in its vertical markets. Approximately $2,840,000 in
selling, general and administrative expenses in the first nine months of the
current fiscal year was due to this investment in vertical markets, compared to
$1,861,000 for the same period in the prior fiscal year.
On March 24, 1995 the Company sold its rights to reproduce and license
Pick64+ distributed database software to Sequoia Systems, Inc., for $100,000
cash and a $200,000 note receivable. In addition, the Company was entitled to
a potential earnout above the purchase price. On January 5, 1996 the Company
and Sequoia Systems, Inc. agreed to a final aggregate purchase price of
$340,000. The gain on sale for this transaction in the first quarter of this
fiscal year was $211,000.
Research and development expenses incurred for the nine months ended
November 26, 1995 decreased by $135,000 to $1,559,000 from $1,694,000 during
the same period in the prior fiscal year. Approximately $745,000 of new
software development expenses have been capitalized in the first nine months of
the current fiscal year, compared to $598,000 in the comparable period of the
prior fiscal year.
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended November 26, 1995 the Company's working
capital decreased by $1,679,000 to $1,509,000 from $3,188,000 at February 26,
1995. Net cash and cash equivalents decreased during the nine month period
ended November 26, 1995 by $2,134,000 to $1,155,000, primarily as a result of
the costs incurred in connection with the Company's move to its new facilities,
investment in development of vertical software and repayment of notes to the
previous owners of Alpha Computer Services ("ACS") and AlphaHealthCare ("AHC").
Net cash used in operating activities during the first nine months of the
current fiscal year was $114,000 compared to $97,000 provided by operating
activities during the same period in the prior fiscal year.
Inventories decreased from $1,948,000 at February 26, 1995 to
$1,264,000 at November 26, 1995. Management has placed strict controls on
inventory purchases to maintain a lower inventory level. Net accounts
receivable increased from $4,844,000 at February 26, 1995 to $5,591,000 at
November 27, 1995. This increase was primarily due to the receivable
associated with the sale of
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the PICK product line and a larger portion of revenue coming from the European
operations which tend to extend longer payment terms.
The Company currently has a revolving line of credit up to a maximum
limit of $2,000,000, based upon 70% of the eligible accounts receivable and
under which letters of credit and the foreign exchange portion shall not exceed
$500,000 in the aggregate at any one time. The line of credit is secured by
substantially all of the Company's assets. Its availability is subject to
current financial covenants requiring that the Company maintain a quick ratio
of not less than 1.3 to 1, a tangible net worth of not less than $5,900,000,
and a ratio of total liabilities to tangible net worth of no more than 1.0 to
1. The agreement also includes covenants which require that the Company must
not have two or more consecutive quarterly losses exceeding $700,000 in
aggregate, and the Company must make a net profit on a consolidated basis for
fiscal 1996. Borrowings under the line of credit may bear interest of prime
plus one and one half percent (1.5%) and the commitment fee for the first year
is $15,000. In addition, the Company agreed to issue 50,000 warrants to the
lender, after the 40,000 warrants the lender previously received had been
canceled. The price of the new warrants is at the market value of the
Company's common stock as of the date of the credit line.
During the third quarter it was necessary for the Company to utilize
its credit line to fund its vertical market investment. As of November 26,
1995 the Company had borrowings under its credit line of $500,000.
The Company is currently negotiating new covenants with its bank since
the Company anticipates that it will be in breach of certain covenants prior to
fiscal year end. The Company believes that it will be successful in
renegotiating such covenants based upon preliminary discussions with its bank;
however, no assurances can be made.
The Company entered into a new 66-month lease and has moved into a
66,200 square foot facility located within one mile of its prior 104,000 square
foot facility effective July 1, 1996. The average annual rent for the new
facility is $285,000, compared to $680,000 in fiscal 1995 for the prior
facility. The lease extends through December 31, 2000 and the Company has an
option to extend the new lease term for an additional three years.
Under its new lease, the Company agreed to pay the up-front costs of
certain leasehold improvements. The leasehold improvements for which the
Company assumed responsibility include office construction, plumbing, wiring,
and general tenant improvements. The total cost of these improvements was
approximately $886,000, which will be depreciated over the life of the lease.
The cost of these improvements, fully recorded during the first nine months of
the current fiscal year, is the primary reason that gross property and
equipment increased to $16,450,000 at November 26, 1995, from $14,824,000 at
February 26, 1995.
The Company believes that the current cash position augmented by
operating activities will provide it with sufficient resources to finance its
working capital requirements for the remainder of the fiscal year. The
Company's future capital requirements depend on a variety of factors,
including, but not limited to, the rate of decline in the traditional business,
the success and timing and amount of investment required to penetrate the
vertical markets, and service revenue growth or decline.
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PART II. OTHER INFORMATION
6. Exhibits and Reports on Form 8-K.
(a) See Exhibit Index.
(b) No Form 8-K was filed during the quarter ended
November 26, 1995.
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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.
ALPHA MICROSYSTEMS
(Registrant)
Date: January 09, 1996 By:/s/ Douglas J. Tullio
-----------------------
President and
Chief Executive Officer
Date: January 09, 1996 By:/s/ Michael J. Lowell
-----------------------
Vice President and
Chief Financial Officer
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10-Q EXHIBITS
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10.150 Amendment to Loan Agreement by and between Registrant and
Silicon Valley Bank dated November 30, 1995.
10.151 Agreement to Grant Incentive Stock Option (Pursuant to 1993
Employee Stock Option Plan) between Registrant and Philip
D. Smith dated April 3, 1995 for 40,000 shares of common stock.
10.152 Agreement to Grant Incentive Stock Option (Pursuant to 1993
Employee Stock Option Plan) between Registrant and Michael
J. Lowell dated April 3, 1995 for 40,000 shares of common
stock.
10.153 Agreement to Grant Incentive Stock Option (Pursuant to 1993
Employee Stock Option Plan) between Registrant and Randy
Parks dated April 3, 1995 for 10,000 shares of common stock.
10.154 Agreement to Grant Incentive Stock Option (Pursuant to 1993
Employee Stock Option Plan) between Registrant and Peggy
Denson dated April 3, 1995 for 10,000 shares of common stock.
10.155 Agreement to Grant Incentive Stock Option (Pursuant to 1993
Employee Stock Option Plan) between Registrant and Douglas J.
Tullio dated May 5, 1995 for 15,000 shares of common stock.
10.156 Agreement to Grant Incentive Stock Option (Pursuant to 1993
Employee Stock Option Plan) between Registrant and John F.
Glade dated May 5, 1995 for 7,500 shares of common stock.
27 Financial Data Schedule.
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