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United States
Securities and Exchange Commission
Washington, D.C. 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 December 31, 2003
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: 0-22122
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 No.)
614 Corporate Way, Valley Cottage, NY 10989
(Address of principal executive offices) (Zip Code)
(845) 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
Indicate by check mark whether the registrant's is an accelerated
filer (as defined in Rule 12b-2 of the Exchange Act)
Yes __ No X
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: The
number of shares outstanding of the registrant's common stock, par
Value $.001 per share, as of February 10, 2004 was 4,723,052
Part I Financial Information
Micros-to-Mainframes, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
December 31, 2003 March 31, 2003
Unaudited
ASSETS
Current Assets:
Cash and cash equivalents $ 49,774 $ 118,452
Accounts receivable - trade, net of allowance
of $977,000 and $873,000, respectively 16,339,851 13,459,765
Inventories 1,571,403 1,340,633
Prepaid expenses and other current assets 739,284 894,384
Deferred income taxes, net of
allowance of $314,000 23,000 23,000
-----------------------------
Total current assets 18,723,312 15,836,234
Property and Equipment 9,640,635 9,097,464
Less: accumulated deprecation and amortization 6,644,691 5,401,805
-----------------------------
2,995,944 3,695,659
Goodwill 3,228,729 3,228,729
Other Assets 265,679 193,788
-----------------------------
Total Assets $ 25,213,664 $ 22,954,410
===============================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Secured notes payable $ 6,868,285 $ 4,765,637
Inventory financing agreement 3,501,367 2,333,004
Accounts payable and accrued expenses 3,430,820 2,114,980
Current portion of capital lease obligations 194,322 366,344
-----------------------------
Total current liabilities 13,994,794 9,579,965
Capital Lease Obligations,
net of current portion - 109,797
Deferred income taxes 23,000 23,000
-----------------------------
Total liabilities 14,017,794 9,712,762
Commitments and Contingencies
Shareholders' Equity:
Common stock - $.001 par value; authorized
10,000,000 shares, issued and
outstanding 4,723,052 4,723 4,723
Additional paid-in capital 15,364,228 15,332,728
Accumulated deficit (4,173,081) (2,095,803)
--------------------------------
Total shareholders' equity 11,195,870 13,241,648
--------------------------------
Total Liabilities and Shareholders' Equity $ 25,213,664 $ 22,954,410
=================================
See Notes to Condensed Consolidated Financial Statements
Micros-to-Mainframes, Inc. and Subsidiaries
Condensed Consolidated Statements of Operation
Nine Month ended December 31,
2003 2002
Unaduited
Net revenues: -------------------------------
Products 30,572,749 28,268,583
Service and related product revenue 13,335,272 15,983,274
-------------------------------
43,908,021 44,251,857
Costs and expenses:
Cost of products sold 29,065,168 26,380,838
Cost of services provided and
related products 8,961,483 10,211,211
Selling, general and administrative expenses 7,633,823 8,502,386
--------------------------------
45,660,474 45,094,435
Other income 5,606 35,784
Interest expense 330,431 219,519
--------------------------------
Loss before benefit for income taxes (2,077,278) (1,026,313)
Benefit for income taxes (440,000)
--------------------------------
Net loss $ (2,077,278) $ (586,313)
================================
Net loss per common share:
Basic and diluted $ (0.44) $ (0.12)
=================================
Weighted average number of common shares
outstanding:
Basic 4,723,052 4,802,659
---------------------------------
Diluted 4,723,052 4,802,659
----------------------------------
See notes to condensed consolidated financial statements
Micros-to-Mainframes, Inc. and Subsidiaries
Condensed Consolidated Statements of Operation
Three Month ended December 31,
2003 2002
Unaduited
-------------------------------
Net revenues:
Products $ 10,621,503 $ 9,168,123
Service and related product revenue 4,122,188 5,020,298
-------------------------------
14,743,691 14,188,421
Costs and expenses:
Cost of products sold 10,004,682 8,558,428
Cost of services provided and
related products 3,460,203 3,174,826
Selling, general and administrative expenses 2,598,877 2,640,436
-------------------------------
16,063,762 14,373,690
Other income 2,454 2,508
Interest expense 128,826 64,605
-------------------------------
Loss before benefit for income taxes (1,446,443) (247,366)
Benefit for income taxes (58,000)
---------------------------------
Net loss (1,446,443) (189,366)
=================================
Net loss per common share:
Basic and diluted $ (0.31) $ (0.04)
=================================
Weighted average number of common shares
outstanding:
Basic 4,723,052 4,736,286
----------------------------------
Diluted 4,723,052 4,736,286
----------------------------------
See notes to condensed consolidated financial statements
Micros-to-Mainframes, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Nine Months Ended
December 31,
2003 2002
--------------------------
(Unaudited)
Cash flows from operating activities:
Net loss $ (2,077,278) $ (586,313)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,242,886 1,176,632
Deferred income taxes - (462,000)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (2,880,086) (898,935)
Decrease in inventory (230,770) 395,610
Decrease in prepaid expenses and
other current assets 155,100 244,325
Decrease in refundable income tax - 687,337
(Increase) decrease in other assets (40,391) 8,576
Increase (decrease) in accounts payable
and accrued expenses 1,315,840 574,552
--------------------------
Net cash provided by (used in) operating activities (2,514,699 1,139,784
--------------------------
Cash flows from investing activities:
Acquisition of property and equipment (543,171) (930,443)
--------------------------
Net cash used in investing activities (543,171) (930,443)
--------------------------
Cash flows from financing activities:
Borrowing (repayment) of secured notes payable 2,102,648 (582,440)
Increase in inventory financing 1,168,363 (20,233)
Retirement of common stock - (342,953)
Payments on Capital lease obligations (281,819) (270,807)
--------------------------
Net cash provided by (used in) financing activities 2,989,192 (1,216,433)
--------------------------
Net decrease in cash and cash equivalents (68,678) (1,007,092)
Cash and cash equivalents at the beginning of period 118,452 1,217,790
--------------------------
Cash and cash equivalents at the end of period $ 49,774 $ 210,698
==========================
Supplemental disclosures of cash flow information:
Cash paid during the quarter for:
Interest $ 401,420 $ 260,522
Income taxes $ 163,896 $ 28,220
Supplemental disclosure of non-cash investing and
financing transactions:
Issuance of stock option on exchange for legal fees $ 31,500 -
See notes to condensed consolidated financial statements
Micros-to-Mainframes, Inc. and Subsidiaries
Notes to Unaudited 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. ("DCR") (collectively, the
"Company" or "MTM"), serve as a single source provider of advanced
technology solutions, including design and consulting services,
communication services and products, internet/Intranet development
services, and network and security managed services. In addition, the
Company delivers a total processing solution by providing computer hardware
and software revenues, 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. MTM is an authorized direct dealer and value
added reseller. The Company also serves as a systems integrator for its
clients whereby it integrates into single working systems, a group of hardware
and software products from more than 40 major computer vendors, including
Hewlett Packard/Compaq Computer Company, IBM Corporation, Dell Computer
Corporation, NEC Technologies, Inc., ISS Technology Inc., Citrix Systems,
Inc., Cisco Systems, Inc., Canon USA, Inc., Novell, Inc., Microsoft
Corporation, 3COM Corporation and Symantec Corporation. In addition,
the Company serves as a Managed Service Provider (MSP) providing automated
remote network, system and security management solutions and related
consulting and engineering to its clients.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for
interim financial information , 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 and nine months ended
December 31, 2003 are not necessarily indicative of the results that may be
expected for the Company's fiscal year ending March 31, 2004. For
further information, refer to the consolidated financial statements
and footnotes thereto included in the Company's Annual Report on Form
10-K (Commission file number: 0-22122) for the fiscal year ended
March 31, 2003.
Estimates:
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying
notes. Actual results could differ from those estimates.
Reclassification:
Certain of the March 31, 2003 balance sheet and statement of
cash flows accounts were reclassified to conform to the current period
presentation.
Accounts Receivable:
Accounts receivable are reported at their outstanding unpaid
principal balances reduced by an allowance for doubtful accounts. The
Company estimates doubtful accounts based on historical bad debts,
factors related to specific customers' ability to pay, and current economic
trends. The Company also records allowances based on certain percentages and
aged receivables. The Company writes off accounts receivable against the
allowance when a balance is determined to be uncollectible.
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.
Property and Equipment:
Property and equipment is stated at cost and is depreciated using
the straight-line method. Furniture, fixtures and other equipment and
software development costs have useful lives ranging from 3 to 7 years.
Leasehold improvements are amortized over the shorter of the lease term
or economic life of the related improvement. Expenditures which extend
the useful lives of existing assets are capitalized. Maintenance and
repair costs are charged to operations as incurred.
The Company incurred approximately $1,243,000 and $1,177,000 of
depreciation and amortization expense for the nine months ended
December 31, 2003 and 2002, respectively.
The following is the summary of property and equipment held by the
Company:
December 31 March 31,
2003 2003
AT COST
- --------
Property and equipment
Furniture and office equipment $ 2,620,339 $ 2,505,714
Capital lease equipment 1,183,104 1,183,104
Software and software development costs 5,674,393 5,267,446
Leasehold improvements 162,799 141,200
-------------------------------
9,640,635 9,097,464
Less accumulated deprecation and amortization 6,644,691 5,401,805
-------------------------------
Net property and equipment $ 2,995,944 $3,695,659
===============================
Software Development Costs:
The costs of software developed for internal use incurred during the
preliminary project stage are expensed as incurred. Direct costs incurred
during the application development stage are capitalized. Costs incurred
during the post-implementation/operation stage are expensed as incurred.
Capitalized software development costs are amortized on a straight-line
basis over their estimated useful lives.
Impairment of Long-lived Assets:
The Company identifies and records impairment on long-lived assets,
including capitalized software development costs and goodwill, when events
and circumstances indicate that such assets have been impaired. The Company
periodically evaluates the recoverability of its long-lived assets based on
expected discounted cash flows. At December 31, 2003, no such impairment
existed.
Income Taxes:
Deferred income taxes are provided, using the asset and liability
method, for temporary differences between financial and tax reporting,
which arise principally from the deductions related to the allowances for
doubtful accounts, certain capitalized software costs, the basis of
inventory and differences arising from book versus tax depreciation
methods. The Company files a consolidated federal income tax return and a
separate state income tax return for each of its subsidiaries.
Revenue Recognition:
The Company recognizes revenue in accordance with SAB 101. For all
revenue billed, the revenue recognition criteria were met. Accordingly, no
deferred revenue has been recorded.
The Company recognizes revenue from sales of hardware when the
rights and risks of ownership have passed to the customer, which is upon
shipment or receipt by the customer, depending on the terms of the sales
contract. Revenue from sales of software not requiring significant
modification or customization is recognized upon delivery or installation.
Revenue from services is recognized upon performance and acceptance after
consideration of all the terms and conditions of the customer contract.
Service contracts generally do not extend over more than one year, and
are billed periodically as services are performed. Revenue from both
products and services is recognized provided that persuasive evidence that
an arrangement exists, the sales price is fixed and determinable, and
collection of the resulting receivable is reasonably assured. Payments
arrangements with customers generally do not include specific customer
acceptance criteria. For arrangements with multiple deliverables, delivered
items are accounted for separately provided that the delivered item has value
to the customer on a stand alone basis and there is objective and reliable
evidence of the fair value of the undelivered items.
The Company periodically receives discretionary cost reimbursements
from suppliers. These reimbursements are accounted for as reductions to
cost of revenues.
Shipping and handling costs are included in the cost of revenues.
Fair Value of Financial Instruments:
The estimated fair value of amounts reported in the consolidated
financial statements have been determined by using available market
information and appropriate valuation methodologies. All current assets
are carried at their cost and current liabilities at their contract amount,
which approximate fair value, because of their short-term nature.
Stock-Based Compensation
In December 2002, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards ("SFAS") No. 148 "Accounting
for Stock-Based Compensation - Transition and Disclosure," an amendment of
SFAS No. 123. SFAS No. 148 provides alternative methods of transition
for a voluntary change to the fair value based method of accounting for
stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123, "Accounting for Stock-Based
Compensation," to require prominent disclosures in annual and interim
financial statements about the method of accounting for stock-based
employee compensation and the effect in measuring compensation expense.
The disclosure requirements of SFAS No. 148 are effective for periods
beginning after December 15, 2002.
The Company has elected, in accordance with the provisions of
SFAS No. 123, as amended by SFAS No. 148, to apply the current accounting
rules under APB Opinion No. 25 and related interpretations in accounting for
employee stock options and, accordingly, has presented the disclosure-
only information as required by SFAS No. 123. If the Company had elected to
recognize compensation cost based on the fair value of the options
granted at the grant date as prescribed by SFAS No. 123, the Company's net
loss and net loss per common share for the nine months ended December
31, 2003 and 2002 (pro forma effect having been adjusted for income taxes)
would approximate the pro forma amounts indicated in the table below
(dollars in thousands).
December 31,
2003 2002
Net loss - as reported................ . . . . . . . $ (2,077) (586)
Net loss - pro forma....................... . . . . . (2,138) (624)
Basic net loss per common share - as reported . . . . (.44) (.12)
Diluted net loss per common share - as reported . . . (.44) (.12)
Basic net loss per common share - pro forma . . . . . (.45) (.13)
Diluted net loss per common share - pro forma . . . . (.45) (.13)
Pro forma information regarding net income (loss) and earnings per
share is required by SFAS No. 123, and has been determined as if the
Company had accounted for its employee stock options under the fair value
method of the statement. The fair value of these options was estimated at
the date of grant using a Black-Scholes option pricing model with the
following weighted-average assumptions for the nine months ended December 31,
2003 and 2002: risk-free interest rate of 3.0% and 2.8%, respectively; no
dividend yield for either period; a volatility factor of the expected
market price of the Company's common stock of $1.31 and $0.76,
respectively; and an expected life of 4 and 4.6 years, respectively.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions including the
expected stock price volatility. Because the Company's employee stock
options have characteristics significantly different from those of traded
options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion the
existing models do not necessarily provide a reliable single measure of
the fair value of its employee stock options.
Per Share Data
Basic net income per share is calculated using the weighted-average
number of common shares outstanding during the period. Diluted net income
per share is calculated using the weighted-average number of common shares
plus dilutive potential common shares outstanding during the period.
Dilutive securities have not been included in the weighted average shares
used for the calculation of earnings per share in periods of net loss
because the effect of such securities would be anti-dilutive. Because of
the Company's current capital structure, all reported earnings pertain
to common shareholders and no other assumed adjustments are necessary.
Bank Covenant
The Company major financing agreement is a $12,000,000 financing
facility (the "Financing Facility"). This Financing Facility is
comprised of a "floor plan" credit arrangement and a revolving
receivable financing arrangement. The Financing Facility is secured by
all of the Company's assets other than inventory and accounts
receivable financed under other arrangements providing for liens on
such inventory and accounts receivable. The Financing Facility was
scheduled to expire on January 17, 2004. The Financing Facility has
been extended for an additional three-month period. The lender under
the financing facility has stated that the it does not intend to renew
the Financing Facility at the end of the term of the Financing
Facility, as to extended. The Company is currently negotiating with
the present lender in an attempt to renew the Financing Facility and
with other financial institutions for a potential new facility on terms
similar to the Company than currently exist under the Financing
Facility. No assurance can be given that the Company will be able to
secure a renewal of the Financing Facility or a new credit facility,
whether comparable to the terms of the Financing Facility or otherwise.
The failure to secure a renewal of the Financing fFcility or other
replacement facility could adversely affect the Company's financial
condition and results of operations.
As of December 31, 2003, the Company did not meet the minimum tangible
net worth and the rolling EBITDA results as prescribed by the Financing
Facility . The Company has received a letter of forbearance from the
lender under the Financing Facility.
Pequot transaction
The Company has entered into a a definitive agreement regarding an
investment by Pequot Ventures, the private equity arm of Pequot Capital
Management, Inc., a leading investment firm.
The agreement contemplates that the Company will sell to Pequot up to
$25 million of convertible preferred stock and warrants in tranches.
The initial tranche of $7 million will be in the form of preferred
stock, convertible into 3,255,814 shares of MTM common stock and
500,000 warrants with an exercise price of $2.46 per share. The
purchase of any or all of the second and later tranches, in an
aggregate investment amount of up to $18 million, is solely at Pequot's
option.
The proceeds of these financings are intended to provide the Company
with funds to support future acquisitions as part of a consolidation
strategy in the IT services and consulting sector, and to provide
working capital. A portion of the proceeds of the initial Pequot
investment will be paid to certain of MTM's current executive officers,
in consideration of their cancellation of certain existing rights held
by them, their agreement to certain restrictions on the transfer and
voting of their MTM common stock and in connection with entering into
new employment agreements with the Company containing certain non-
competition and non-solicitation provisions.
Segment Information:
Micros-to-Mainframes, Inc. and subsidiaries act as a single source
provider of advanced technology solutions, including design, consulting and
communication services. The Company also sells, installs and services
microcomputers, microcomputer software products and supplies, accessories
and custom designed microcomputer systems. The Company has aggregated its
business units into three reportable segments, PIT Corporation also known
as Pivot Technologies ("Pivot"), Data.Com ("DCR")and Micros- to-Mainframes
("MTM"). The accounting policies of the segments are the same as those
described in the summary of accounting policies. There are no material
intersegment revenues.
Each segment shares facilities, sales and administrative support.
Management evaluates performance on gross profits and operating results of
the three business segments. Summarized financial information concerning
the Company's reportable segments is shown on the following table.
For the nine months ended December 31, 2003
Consolidated
PIVOT DCR MTM Total
(In thousands)
_________________________________________________________________
Revenues:
Products 2,577 27,996 30,573
Services 1,236 4,766 7,333 13,335
Cost of good sold
Products 2,525 26,540 29,065
Services 388 3,189 5,385 8,962
Gross profit 848 1,629 3,404 5,881
Operating expenses 594 1,278 5,762 7,634
Interest expense 27 303 330
Other income 6 6
Income (loss) from
operations 227 351 (2,654) (2,077)
Segment assets 3,807 5,858 15,517 25,182
Capital expenditures 349 4 211 544
Depreciation expense 835 33 387 1,243
For the three months ended December 31, 2003
Consolidated
PIVOT DCR MTM Total
(In thousands)
_________________________________________________________________
Revenues:
Products 674 9,948 10,622
Services 358 1,128 2,636 4,122
Cost of good sold
Products - 752 9,253 10,005
Services 89 787 2,585 3,461
Gross profit 269 263 746 1,278
Operating expenses 208 212 2,179 2,599
Interest expense 6 - 122 128
Other income 3 3
Income (loss) from
operations 55 51 (1,552) (1,446)
Capital expenditures 84 4 57 145
Depreciation expense 288 12 133 433
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.
FORWARD-LOOKING STATEMENTS
Statements contained in this Form 10-Q include "forward-looking
statements" within the meaning of such term in Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. Forward-looking statements involve known and unknown risks,
uncertainties and other factors which could cause actual financial or
operating results, performances or achievements expressed or implied by
such forward-looking statements not to occur or be realized. Forward-
looking statements are not guarantees of future performance but,
rather, are based on currently available competitive, financial and
economic data and management's operating plans and generally are based
on best estimates of future results, performances or achievements,
predicated upon current conditions and the most recent results of the
companies involved and their respective industries. Forward-looking
statements may be identified by the use of forward-looking terminology
such as "may," "will," "could," "should," "project," "expect,"
"believe," "estimate," "anticipate," "intend," "continue," "potential,"
"opportunity" or similar terms, variations of those terms or the
negative of those terms or other variations of those terms or
comparable words or expressions. Potential risks and uncertainties
include, among other things, such factors as:
* the results our business strategies and future plans of operations,
* whether the Pequot transaction will be consummated, or consummated
on the terms set forth in the Pequot purchase agreement,
* our ability to continue to recruit and retain highly skilled
scientific, technical, managerial and sales and marketing personnel,
* our ability to find suitable acquisition candidates, to complete
such acquisitions and to successfully integrate acquired businesses,
* general economic conditions in the northeast United States and
elsewhere, as well as the economic conditions affecting the
industries in which we operate,
* our ability to raise additional capital, if and as needed,
* the cost-effectiveness of our product and service development
activities,
* political and regulatory matters affecting the industries in which
we operate,
* the market acceptance, revenues and profitability of our current and
future products and services,
* the extent that our sales network and marketing programs achieve
satisfactory response rates, and
* the other risks detailed in this form 10-Q statement and, from time to
time, in our other filings with the Securities and Exchange
Commission.
Readers are urged to carefully review and consider the various
disclosures made by the Company in this Quarterly report of Form 10-Q ,
the Comapny's Annual Report on Form 10-K for the year ended March 31, 2003
and our other filings with the SEC. These reports attempt to advise
interested parties of the risks and factors that may affect our
business, financial condition and results of operations and prospects.
The forward-looking statements made in this Quarterly Report of Form
10-Q speak only as of the date of this Form 10-Q and the Company
disclaims any obligation to provide updates, revisions or amendments to
any forward-looking statements to reflect changes in our expectations
or future events.
Overview
MTM is a provider of business and technology solutions, designed to
enhance and maximize the performance of its customers through the
adaptation and deployment of advanced information technology and
engineering services. The Company offices are located in the tri-state New
York City metropolitan area. The Company delivers a total processing
solution by providing computer hardware and software revenues, 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.
MTM is an authorized direct dealer and value added reseller. The Company
also serves as a systems integrator for its clients whereby it integrates
into single working systems, a group of hardware and software products from
more than 40 major computer vendors. The Company provides a diversified and
extensive range of service offerings and computer products.
The Company's customers consist of clients in banking and finance,
insurance, pharmaceutical, utility, technology, manufacturing,
distribution, and education and government sectors. The Company believes
that the breadth of services it offers fosters long-term client
relationships, affords cross-selling opportunities and minimizes the
Company's dependence on any single technology or service sector.
Many of the Company's clients are facing challenging economic times.
This is creating uncertainty in their ability to pursue technology
projects, which had previously been considered of competitive importance.
Many companies have laid off portions of their staffs and have reduced
investing in their computer systems, and greatly reduced the demand for
consulting services in attempts to maintain profitability haves had a
direct impact on the Company's revenue.
The Company presently realizes revenue from client engagements that
range from the placement of contract and temporary technical consultants to
project assignments that entail the delivery of end-to-end solutions.
These services are primarily provided to the client at hourly rates that are
established for each of the Company's employees based upon their skill
level, experience and the type of work performed. The Company also provides
project management and consulting services, which are billed either by
an agreed upon fixed fee or hourly rates, or a combination of both. The billing
rates and profit margins for project management and solutions services
generally are higher than those for professional consulting services. The
Company endeavors to expand its revenues by stressing higher margin solution
and project management services. The majority of the Company's services are
provided under purchase orders. Formal contracts are utilized on more
complex assignments where the engagements are for longer terms or where
precise documentation on the nature and scope of the assignment is
believed to be necessary. Contracts, although they normally relate to longer-
term and more complex engagements, generally do not obligate the customer to
purchase minimum levels of services and are terminable by the customer
generally on 60 to 90 days' notice.
Revenues are recognized when services and or products are provided.
Costs of services and costs of related products primarily consist of
salaries, cost of outsourced labor and hardware products necessary to
complete the projects. Selling, general and administrative expenses
primary consist of salaries and benefits of personnel responsible for
administrative, finance, operative, sales and marketing activities and
all other corporate overhead expenses. Corporate overhead expenses include
rent, telephone charges, insurance premiums, accounting and legal fees,
deprecation and amortization expenses. Depreciation primarily relates
to the fixed assets and amortization related to software development
costs.
Revenue Recognition
The Company derives its revenues from several sources. The Company's
segments perform service engineering services, and resale of computers and
related products. The Information Technology Services segment also performs
project services. The services segment also includes revenue from sales of
high-end computer products.
The Company recognizes revenue in accordance with SAB 101. For all
revenue reflected in the financial statements, the revenue recognition
criteria were met and, accordingly, no deferred revenue has been
recorded.
The Company recognizes revenue from sales of hardware when the rights
and risks of ownership have passed to the customer, which is upon shipment
or receipt by the customer, depending on the terms of the sales contract/
purchase order. Revenue from sales of software not requiring significant
modification or customization is recognized upon delivery or installation.
Revenue from services is recognized upon performance and acceptance after
consideration of all the terms and conditions of the customer contract/
purchase order. Service agreements with customers generally do not extend
for more than one year, and are billed periodically as services are
performed. Revenue from both products and services is recognized provided
that persuasive evidence of an arrangement exists, the price is fixed and
determinable, and collection of the resulting receivable is reasonably
assured. Payment arrangements with customers generally do not include
specific customer acceptance criteria. For arrangements with multiple
deliverables, delivered items are accounted for separately provided that
the delivered item has value to the customer on a stand alone basis and
there is objective and reliable evidence of the fair value of the
undelivered items.
The Company periodically receives discretionary cost reimbursements
from suppliers. These reimbursements are accounted for as reductions to
cost of revenues.
Critical Accounting Policies
The discussion and analysis of our financial condition and results of
operations are based upon the Company's consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States of America. The preparation of these
financial statements requires the Company to make estimates and judgments
that affect the reported amount of assets and liabilities, revenues and
expenses, and related disclosure of contingent assets and liabilities at
the date of the Company's financial statements. Actual results may differ
from these estimates.
Critical accounting policies are defined as those that are reflective
of significant judgments and uncertainties, and potentially result in
materially different results under different assumptions and conditions.
The Company believes that its critical accounting policies include those
described below.
Goodwill and Intangibles
The Company recorded goodwill as a result of the acquisitions by the
Company of PTI Corporation (formerly known as PIVOT Technologies, Inc.),
and Data.Com Results, Inc. The Company determined the fair value of both
companies' operations through a discounted cash flow method. This analysis
was based on a projection of future revenues and earnings for a discrete
period of three years plus an assumed average growth rate for all years
beyond the initial projected period.
We develop our budgets based on recent sales data for existing
products, planned timing of new product launches, and customer commitments
related to existing and newly developed products. In estimating future
revenue and growth rates, we used our internal budgets and make comparisons
to other competitors.
We believe that the accounting estimate related to goodwill impairment
is a "critical accounting estimate" because: (1) it is highly susceptible
to change from period to period since it requires Company management to
make assumptions about future revenues, cost of revenues, and growth rates
over the next five years of the acquired entity; and (2) the impact that
recognizing an impairment would have on the assets reported on our balance
sheet, as well as our net income, would be material. Management's
assumptions about future sales prices, future sales volumes, and growth
rates require significant judgment because actual sales prices and volumes
have fluctuated in the past and are expected to continue to do so. If
management's assumptions change, then the Company could be required to
recognize an impairment loss, equal to the difference between the fair
value of the goodwill and the reported amount of the goodwill. Management
has discussed the development and selection of this critical accounting
estimate with the Company's Audit Committee and independent auditors.
Software Development Costs
In accordance with the Statement of Position ("SOP") 98-1, "Accounting
for Costs of Computer Software Developed or Obtained for Internal Use,"
certain costs related to the development of software are capitalized
and are amortized on a straight-line basis over their estimated useful lives.
During the nine months ended December 31, 2003, the Company capitalized
$320,000 of software costs in conformity with SOP 98-1.
We believe that the accounting estimate related to software development
costs is a "critical accounting estimate" because: (1) software developed
by the Company may be obsolete before the five year expected useful
life assumed by management, and (2) the impact of recognizing the asset
impairment could have a negative effect to the asset reported on the
balance sheet and net income.
Accounts Receivable
The Company performs ongoing credit evaluations of its customers and
adjusts credit limits based on payment history and the customer's current
credit worthiness, as determined by a review of their current credit
information. The Company continuously monitors collections and payments
from its customers and maintains a provision for estimated credit losses
based on historical experience and any specific customer collection issues
that have been identified. While such credit losses historically have been
within the Company's expectations and the provisions established, the
Company could not guarantee that it will continue to experience the same
credit loss rates that it has in the past.
Four customers collectively generated approximately 55.4% of
the Company's accounts receivable - trade at December 31, 2003. The
largest accounts receivable, representing approximately $3,595,000 or
20.8% of the total accounts receivable, is from a telecommunications
company. Another receivable, representing approximately $3,350,000 or
19.3% of the total accounts receivable, was generated in connection
with a federally funded project for the Board of Education of
Bridgeport, Connecticut. The Company received $1,050,000 on such
receivable in January 2004, and has been advised that approximately
$72,000 of $497,000 due under the project has been authorized for
payment and the Company expects to receive the balance by March 31,
2004. Two other Company customers each accounted for approximately
7.8% and 7.5%, respectively, of the accounts receivable at December 31, 2003.
The loss of any principal customer may have a material adverse effect
on the Company's financial position and results of operations.
Three and Nine Months Ended December 31, 2003, as compared to Three and
Nine Months Ended December 31, 2002
The Company had net revenues of approximately $43,908,000 for the nine
months ended December 31, 2003(the "2004 Period"), as compared to
approximately $44,252,000 for the nine months ended December 31, 2002
(the "2003 Period"). The Company had net revenues of approximately
$14,744,000 for the three months ended December 31, 2003 ("Third
Quarter 2004"), as compared to approximately $14,188,000 for the three
months Ended December 31, 2002 ("Third Quarter 2003"). Product sales
were comprised primarily of desktop and turnkey computer components.
Services and related product sales included maintenance and consulting
services, high-end computer products and sales of the Pivot automated
remote network management system and high-end service related product
sales.
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 revenues.
Percentage of Net Revenue
Nine months ended Three Months ended
December 31, December 31,
2003 2002 2003 2002
Products ............... 69.63% 63.88% 72.04% 64.62%
Services and related
product revenue . .. . . 30.37 36.12 27.96 35.38
Net revenues.............. 100.00 100.00 100.00 100.00
Cost of product sold (as a
% of product revenue).. 95.07 93.32 94.19 93.35
Cost of services provided and
related products
(as a % of services and
related product revenue)... 67.20 63.89 83.94 63.24
Total direct costs (as a % of
net revenues)....... 86.61 82.69 91.33 82.69
Selling, general and
administrative expenses. 17.39 19.21 17.63 18.61
Income (loss) before
income taxes. ...... . . (4.73) (2.32) (4.73) (2.32)
Net (loss) Income............ (4.73) (1.32) (4.73) (1.32)
Revenue by Product and Service
Product sales increased 8.2% or approximately $2,304,000 to $30,573,000
for the 2004 Period from $28,269,000 for the 2003 Period. In the Third
Quarter 2004, product sales increased 16% or approximately $1,453,000
to $10,622,000 from $9,168,000 in the Third Quarter 2003. A decision
by one of the company's major customers to upgrade its computer system
led to the increase in product hardware sales. On a going forward
basis, there is no assurance that such increases will continue. Such
increases are not considered the trend of the current IT market.
Services and service related sales decreased 17% or approximately
$2,648,000 to $13,335,000 for the 2004 Period from $15,983,000 for the
2003 Period; a decrease of 18% or approximately $898,000 to $4,122,000
for the Third Quarter 2004 from $5,020,000 for the Third Quarter 2003.
This decrease resulted primarily from a continued industry-wide
slowdown in technology spending due to the general weakness in the U.S.
economy. This reduction had a direct impact on the Company's revenue.
Given these conditions, the Company's strategy is to aggressively
pursue higher margin service revenue, avoid sales with low margins, and
concentrate in the service end of the business.
Gross Profit
Gross profit is the difference between net revenues from product
sales and cost of products sold. Cost of products sold includes the
direct costs of products sold and freight expenses, offset by rebates
from manufacturers. The gross profit decreased by 1.7% in the 2004
Period and by 0.8% in the Third Quarter 2004 from the prior year's
comparable period and quarter. The Company in the 2004 Period and
Third Quarter 2004, the Company recorded approximately $4 million in
low profit hardware business from one of its customer. The decrease in
gross profit margins also due to the competitive market, which had an
adverse impact on selling prices of both hardware and services revenue.
The cost of services and related product revenue includes the
personnel costs associated with providing technical services along with
the products and parts related to the service contract. Gross profit
decreased by 3.3% for the 2004 Period and decreased by 20.7% in the
Third Quarter 2004 from the prior year's comparable period and quarter.
The 2004 Period decrease in gross profit margins from service sales
primarily resulted from a decrease in the use of outside contractors to
perform certain services and the increased use of the Company's
technical and engineering staff. The Company expects to continue
hiring additional professional technicians and engineers for its
consulting and service business in order to meet the expected demand in
the outsourcing and services business for the coming year and will
continue to lower its dependency on third party service subcontractors
in the future. To the extent necessary, the Company will continue to
use subcontractors.
The Company continues to face competitive market pressures, which
impact its gross profit . The Company currently faces a number of
adverse business conditions, including price and gross margin
pressures, market consolidation and a slow down in the general U.S.
economy. In recent years, all major hardware vendors have instituted
extremely aggressive price reductions in response to lower component
costs and discount pricing by certain microcomputer manufacturers. The
increased price competition among major hardware vendors has resulted
in declining gross margins for many microcomputer distributors,
including the Company, and may result in a reduction in existing vendor
subsidies in the future. The Company believes that these current
conditions, which are forcing certain of the Company's direct
competitors out of business, may present the Company with opportunities
to expand its business. There can be no assurance, however, that the
Company will be able to continue to compete effectively in this
industry, given the intense price reductions and competition currently
existing in the microcomputer industry.
Selling and Administrative Expenses
Selling, general and administrative expenses ("SG&A") were
approximately $7,634,000 in the 2004 Period as compared to
approximately $8,502,000 in the 2003 Period and approximately
$2,599,000 for the Third Quarter 2004 compared to approximately
$2,640,000 for the Third Quarter 2003. This represented a decrease of
approximately 10.2% for SG&A during the 2004 Period as compared to the
2003 Period and a decrease of approximately 1.6% during the Third
Quarter 2004 as compared to the Third Quarter 2003. The decreases
between the period and quarter primarily are due to the general
reduction of payroll, payroll taxes and employee benefits resulting
from employee layoffs during the 2004 Period.
Other Income and Interest Expense
Other income was approximately $6,000 in the 2004 Period as
compared to approximately $36,000 in the 2003 Period. In the Third
Quarter 2004, other income was approximately $2,000 as compared to
approximately $2,000 in the Third Quarter 2003. Interest expense
increased to approximately $330,000 in the 2004 Period from
approximately $220,000 in the 2003 Period and to approximately $129,000
in the Third Quarter 2004 from approximately $65,000 in the Third
Quarter 2003. The increases in interest expense resulted from
increased borrowing levels and an increase in the interest rate
borrowing to 10% in the 2004 Period and Third Quarter 2004 from 3.75%
in the prior year's period and quarter.
Income Taxes
The effective income tax rate for the 2004 Period and 2004
Quarter was 0%. The effective tax rate was approximately 43% for the
2003 Period and 23% in Third Quarter.
Net Income and Loss
As a result of the foregoing, the Company had a net loss of
approximately $2,077,000 in the 2004 Period compared to a net loss of
approximately $1,026,000 in the 2003 Period. The Company incurred a
$1,446,000 net loss in the Third Quarter 2004 as compared to net loss
of approximately $189,000 for the Third Quarter 2002. The basic and
diluted loss per share was $0.44 in the 2004 Period, as compared to net
loss per share of $0.12 for the 2003 Period. The basic and diluted net
loss per share was $0.31 for the Third Quarter 2004 as compared to
$0.04 net income per share in the Third Quarter 2003.
Recently Issued Accounting Standard
On July 20, 2001, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No.142,"Goodwill
and Intangible Assets." SFAS No.142 is effective for fiscal years beginning
after December 15, 2001. SFAS No. 142 includes requirements to test
goodwill and indefinite lived intangible assets for impairment rather than
amortize them; accordingly, the Company no longer amortizes goodwill and
indefinite lived intangible assets.
In November 2002, the Emerging Issues Task Force ("EITF") issued EITF 00-21,
"Accounting for Revenue Arrangements with Multiple Deliverables."
This consensus provides guidance in determining when a revenue arrangement
with multiple deliverables should be divided into separate units of
accounting and, if separation is appropriate, how the arrangement consideration
should be allocated to the identified accounting units. The provisions of EITF
00-21 are effective for revenue arrangements entered into in fiscal
periods beginning after June 15, 2003. The Company evaluates multiple element
arrangements in accordance with this EITF guideline for all new arrangements
into which it enters.
On May 15, 2003, FASB issued SFAS No. 150,"Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and
Equity." SFAS No. 150 establishes standards for how an issuer classifies and
measures certain financial instruments with characteristics of both
liabilities and equity. It requires that an issuer classify a financial
instrument that is within its scope as a liability (or an asset in some
circumstances). Many of those instruments were previously classified as
equity.
SFAS No. 150 affects the issuer's accounting for three types of
freestanding financial instruments:
* mandatorily redeemable shares, which the issuing company is obligated
to buy back in exchange for cash or other assets;
* instruments that do or may require the issuer to buy back some of its
shares in exchange for cash or other assets, including put options and
forward purchase contracts; and
* obligations that can be settled with shares, the monetary value of
which is fixed, tied solely or predominantly to a variable such as
a market index, or varies inversely with the value of the issuers'
shares.
SFAS No. 150 does not apply to features embedded in a financial
instrument that is not a derivative in its entirety.
Most of the guidance in SFAS No. 150 is effective for all financial
instruments entered into or modified after May 31, 2003, and otherwise
is effective at the beginning of the first interim period beginning
after June 15, 2003. The adoption of SFAS No. 150 is not expected to
have a material effect on the Company's consolidated financial
position, results of operations, or cash flows. The Company does not
believe that any other recently issued but not yet effective
accounting standards will have a material effect on the Company's
financial position or results of operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company measures its liquidity in a number of ways, including the
following:
December 31, March 31,
2003 2003
(Dollars in thousands,
except current ratio data)
Cash and cash equivalents............... $ 50 $ 118
Working capital ......................... $ 4,729 $ 6,256
Current ratio .......................... 1.34:1 1.65:1
Secured notes payable .................. $ 6,868 $ 4,766
Working capital lines available.......... $ 2,930 $10,201
The Company had working capital of approximately $4,729,000 as of
December 31, 2003, representing a decrease of approximately $1,527,000
from March 31, 2003.
For the nine months ended December 31, 2003, the Company met its cash
requirements primarily from an increased use of its bank line. The
cash was used to finance its accounts receivable, which increased to
approximately $16,340,000 from $13,460,000. The Company's largest
customer is a telecommunications company, which represented
approximately $3,595,000 or 20.8% of the Company's accounts receivable.
The second largest customer is a federal government funded City Board
of Education, which represented approximately $3,350,000, or 19.3% of
the Company's trade receivables in the nine months ended December 31,
2003. While the federally funded program was has been reviewed and
approved, the normal funding process has been delayed.
During the period ending December 31, 2003, the Company had net
cash used in operating activities of approximately $2,515,000,
consisting primarily of an increase in accounts receivable of
approximately $2,880,000, increase in inventory approximately $231,000
and an operating loss of $2,077,000. This cash shortfall was offset by
an increase in payables and accrued expenses of $1,316,000, and a
decrease in prepaid expenses and other current assets of approximately
$155,000.
The Company reported net cash used in investing activities of
approximately $543,000 consisting of the acquisition of property and
equipment of approximately $168,000, and approximately $375,000 from
costs incurred in the development of computer software and network
infrastructure in its newly leased office space in New York City.
The Company reported an approximate $2,989,000 increase in its
net cash provided by financing activities in the nine months ended
December 31, 2003. This increase is primarily related to $2,103,000 in
borrowings from financing facilities and a $1,168,000 increase in
inventory financing, offset by payment of a $282,000 capital lease
obligation.
As a result of the foregoing, the Company incurred a net decrease
in cash of approximately $68,000.
The Company has entered into two separate credit agreements with
two finance companies.
The first agreement is a $12,000,000 financing facility (the
"Financing Facility"). This Financing Facility is comprised of a
"floor plan" credit arrangement and a revolving receivable financing
arrangement. The Financing Facility is secured by all of the Company's
assets other than inventory and accounts receivable financed under
other arrangements providing for liens on such inventory and accounts
receivable. This Financing Facility was scheduled to expire on January
17, 2004. The Company has extended three-month from the lender stating
the lender's intention not to renew the Financing Facility at the end
of the term of the Financing Facility. The Company is currently
negotiating with the present lender in an attempt to renew the
Financing Facility and with other financial institutions for a
potential new facility on terms similar or more beneficial to the
Company than currently exist under the Financing Facility. No
assurance can be given that the Company will be able to secure a
renewal of the Financing Facility or a new credit facility, whether
comparable to the terms of the Financing Facility or otherwise. The
failure to secure a renewal or other credit facility could adversely
affect the Company's financial condition and results of operations.
The second credit agreement is a $1,300,000 floor plan
arrangement that also is secured by the Company's assets other than
inventory and accounts receivable financed under other arrangements
providing for liens on such inventory and accounts receivable. This
floor-plan arrangement (along with the "floor plan" arrangement under
the Financing Facility) generally allows the Company to borrow funds
for inventory purchases for periods of 30 days interest free. Interest
is charged to the Company only after the due date provided. The floor
plan financing arrangement under the Financing Facility, does not
contain covenants requiring the Company to maintain specified tangible
net worth and other financial ratios. The Company was not in
compliance with all the terms within the floor plan finance agreement
as of December 31, 2003. The Company did not meet the minimum tangible
net worth and the rolling EBITDA results as prescribed by the bank
covenant. The Company has received a letter of forbearance from its
bank. At default, the bank borrowing rate is 10%.
The borrowing interest rate on the revolving receivables financing
loan is a per annum rate of one half of one percentage point (0.5%)
below the base rate. In the event that the loan amount is in excess of
the eligible collateral, the per annum rate is four percentage points
above the base rate (4.00%), and the financing company may charge the
Company 0.0075% on the over advance amount. The base rate is the prime
rate as listed in The Wall Street Journal. The Company's loan balance
is $1,475,117 at the borrowing rate of 3.5% and $5,393,167 on the loan
at a borrowing rate of 10.00% as of December 31, 2003. The total
outstanding amount due under the floor plan lines was $3,501,367 as of
December 31, 2003.
The Company's total outstanding debt under the revolving
receivable financing facility was $6,868,284 and $4,765,637 at December
31, 2003 and March 31, 2003, respectively. The Company is charged a
facility management fee of $40,000 per annum for this financing
facility.
The Company's current ratio decreased to 1.34:1 at December 31,
2003 from 1.65:1 at March 31, 2003.
The results of the Quarter will put the Company in violation of
certain loan agreement covenants. The Company has received a letter of
forbearance from its bank.
The Company has signed a definitive agreement regarding an
investment by Pequot Ventures, the private equity arm of Pequot Capital
Management, Inc., The agreement contemplates that the Company will sell
to Pequot up to $25 million of convertible preferred stock and warrants
in tranches. The initial tranche of $7 million will be in the form of
preferred stock, convertible into 3,255,813 shares of MTM common stock
at a conversion price of $2.15 per share, and 500,000 warrants with an
exercise price of $2.46 per share. The purchase of any or all of the
second and later tranches, in an aggregate investment amount of up to
$18 million, is solely at Pequot's option. The proceeds of these
financings are intended to provide the Company with, among other
things, funds to support future acquisitions as part of a consolidation
strategy in the IT services and consulting sector, and to provide
working capital. A portion of the proceeds of the initial Pequot
investment will be paid to certain of MTM's current executive officers,
in consideration of their cancellation of certain existing rights held
by them, their agreement to certain restrictions on the transfer and
voting of their MTM common stock and in connection with entering into
new employment agreements with the Company containing certain non-
competition and non-solicitation provisions.
The Company's sources of liquidity include, but are not limited
to, funds from operations and funds available under the two
aforementioned credit facilities. Its capital requirements depend on a
variety of factors, including but not limited to, the rate of increase
or decrease in the Company's existing business base; the success,
timing and amounts of investment required to bring new products on-
line; revenue growth or decline; and potential acquisitions. Therefore
the Company believes that it has the financial resources to meet its
future business requirements through the next twelve months.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable
Item 4. Controls and Procedures
The Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer, evaluated the
effectiveness of the design of the Company's disclosure controls and
procedures, as defined in Rule 13a-15(e) under the Securities Exchange
Act of 1934 (the "Exchange Act") as of the end of the period covered on
this Quarterly Report on Form 10-Q. Based on the evaluation, these
officers concluded the Company's disclosure controls and procedures
were effective, in all material respects, to ensure that the
information required to be disclosed in the reports the Company files
and submits under the Exchange Act is recorded, processed, summarized
and reported as and when required.
There have been no significant changes (including corrective
actions with regard to significant deficiencies and material
weaknesses) in the Company's internal controls or in other factors
subsequent to the date the Company carried out its evaluation that
could significantly affect these controls.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
References is made to the disclosures contained in item 3 of the Company's
Annual report on Form 10-K, for the fiscal year ended March 31, 2003, for
information concerning material legal proceeding involving the company.
Item 6 Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed on the quarterly report Form 10-Q
Exhibits
31.1 Certification of Howard A. Pavony pursuant to Exchange Act
Rule 13a-14(a) promulgated under the Exchange Act.
31.2 Certification of Steven H. Rothman pursuant to Exchange Act
Rule 13a-14(a) promulgated under the Exchange Act.
32.1 Certification of Howard A. Pavony pursuant to Exchange Act Rule
13a-14(b) promulgated under the Exchange Act.
32.2 Certification of Steven H Rothman pursuant to Exchange Act Rule
13a-14(b) promulgated under the Exchange Act
(b) The Registrant filed Current Reports, Form 8-K on November 26,2003
and February 6, 2004.
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 : February 12, 2004 By: /s/ Howard A. Pavony
Howard A. Pavony
Chief Executive Officer,
President and Director
(Principal Executive Officer)
Date : February 12, 2004 By: /s/ Steven H. Rothman
Steven H. Rothman
Chief Financial Officer
Chairman of the Board
of Directors
(Principal Financial and
Accounting Officer)