10QSB 1 v018815_10qsb.txt SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10 QSB (Mark One) |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended March 31, 2005 |_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from _______________ to _______________ Commission file number: 000-33483 General Components, Inc. -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in Its Charter) Nevada 88-0496645 ------------------------------- ------------------------------------ (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) Suite 2021, 20F, Two Pacific Place 88 Queensway Hong Kong -------------------------------------------------------------------------------- (Address of Principal Executive Offices) 852-2167-8298 -------------------------------------------------------------------------------- (Issuer's Telephone Number, including area code) -------------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 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 |_| No |_| As of May 20, 2005, there were 20,030,000 shares of the issuer's common stock, par value $0.001 per share, outstanding. Transitional Small Business Disclosure Format (Check one): Yes |_| No |X| TABLE OF CONTENTS Page PART I. FINANCIAL INFORMATION........................................1 Item 1. Condensed Consolidated Financial Statements..................1 Item 2. Management's Discussion and Analysis or Plan of Operation....2 Item 3. Controls and Procedures......................................5 PART II. OTHER INFORMATION............................................7 Item 1. Legal Proceedings............................................7 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds..7 Item 3. Defaults Upon Senior Securities..............................7 Item 4. Submission of Matters to a Vote of Security Holders..........7 Item 5. Other Information............................................7 Item 6. Exhibits and Reports on Form 8-K.............................7 i PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements GENERAL COMPONENTS, INC. INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Page ---- Condensed Consolidated Balance Sheets F1 Condensed Consolidated Statements of Operations F2 Condensed Consolidated Statements of Stockholders' Equity F3 Condensed Consolidated Statements of Cash Flows F4 Notes to Condensed Consolidated Financial Statements F5 GENERAL COMPONENTS, INC. CONDENSED CONSOLIDATED BALANCE SHEET
March 31 December 31 2005 2004 --------- --------- (unaudited) US$ US$ ASSETS Current assets: Cash and cash equivalents 585,495 1,037,292 Accounts receivable, net of provision for doubtful accounts (US$896, US$896) 265,380 266,279 Inventories 617,239 581,874 Prepaid expenses and other current assets 135,683 103,663 --------- --------- Total current assets 1,603,797 1,989,108 Property, plant and equipment 123,651 123,136 Investment in and advances to equity investee 1,536,285 1,497,518 Amount due from an affiliate 500,000 500,000 Intangible assets 23,396 26,771 --------- --------- Total assets 3,787,129 4,136,533 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable 200,350 191,709 Accrued payroll and employee benefits 472 472 Customer deposits 22,228 13,590 Other accrued liabilities 388,620 445,555 Income taxes payable 10,449 10,449 --------- --------- Total current liabilities 622,119 661,775 Commitments and contingencies Stockholders' equity: Common stock, par value $0.001 per share; authorized 25,000,000 shares, shares issued and outstanding March 31, 2005 - 20,030,000 shares; December 31, 2004 - 20,000,000 shares 20,030 20,000 Series A preferred stock, par value $0.001 per share; authorized 10,000,000 shares, shares issued and outstanding March 31, 2005 - 10,000,000 shares; December 31, 2004 - 10,000,000 shares 10,000 10,000 Additional paid in capital 7,802,834 7,735,364 --------- --------- Accumulated losses (4,667,854) (4,290,606) --------- --------- Total stockholders' equity 3,165,010 3,474,758 --------- --------- Total liabilities and stockholders' equity 3,787,129 4,136,533 ========= =========
See accompanying notes to condensed consolidated financial statements. F-1 GENERAL COMPONENTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Three months ended March 31 --------------------------- 2005 2004 ----------- ----------- (unaudited) (unaudited) US$ US$ Net sales 315,456 382,809 Cost of sales (231,527) (273,143) ----------- ----------- Gross profit 83,929 109,666 Selling, general and administrative expenses (399,206) (299,614) Research and development costs -- (370,000) ----------- ----------- Operating losses (315,277) (559,948) Other income (expenses) Interest expenses -- (23,009) Interest income 271 3,301 Share of losses of equity investee (61,265) (38,765) Others, net (977) (1,322) ----------- ----------- Total other expenses, net (61,971) (59,795) ----------- ----------- Loss before income taxes (377,248) (619,743) Income taxes -- -- ----------- ----------- Net loss (377,248) (619,743) =========== =========== Net loss per share - basic and diluted (0.019) (0.157) =========== =========== Weighted average common stock outstanding - basic and diluted 20,024,333 3,954,463 =========== =========== See accompanying notes to condensed consolidated financial statements. F-2 GENERAL COMPONENTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
Common stock Series A preferred stock --------------------- ------------------------ Additional Stock- Shares Shares paid-in Accumulated holders' outstanding Amount outstanding Amount capital Losses equity ----------- ------ ----------- ------ --------- ---------- --------- US$ US$ US$ US$ US$ Balance at December 31, 2004 20,000,000 20,000 10,000,000 10,000 7,735,364 (4,290,606) 3,474,758 Issuance of common stock to a director 30,000 30 -- -- 67,470 -- 67,500 Net loss -- -- -- -- -- (377,248) (377,248) ---------- ------ ---------- ------ --------- ---------- --------- Balance at March 31, 2005 20,030,000 20,030 10,000,000 10,000 7,802,834 (4,667,854) 3,165,010 ========== ====== ========== ====== ========= ========== =========
See accompanying notes to condensed consolidated financial statements. F-3 GENERAL COMPONENTS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended March 31 ------------------------ 2005 2004 ---------- ---------- (unaudited) (unaudited) US$ US$ Cash flows from operating activities Net loss (377,248) (619,743) Adjustment to reconcile net loss to net cash used in operating activities: Depreciation and amortization 13,636 20,088 Director's compensation by issuance of common stock 33,750 -- Loss on disposal of property, plant and equipment 680 1,783 Adjustment to reverse effect of write-up of technology rights (38,735) (38,735) Share of loss of an equity investee 100,000 77,500 Changes in operating assets and liabilities: Accounts receivable 899 1,618,658 Bills receivable -- 37,087 Inventories (35,365) (95,128) Prepaid expenses and other current assets 1,730 (30,403) Accounts payable 8,641 (1,238,122) Customer deposits 8,638 11,049 Other accrued liabilities (56,935) 2,447 Amounts due to a director -- (24,410) ---------- ---------- Net cash used in operating activities (340,309) (277,929) ---------- ---------- Cash flows from investing activities Purchase of property, plant and equipment (11,468) (488) Proceeds from sale of property, plant and equipment 12 60 Cash advance to an equity investee (100,032) -- ---------- ---------- Net cash used in investing activities (111,488) (428) ---------- ---------- Cash flows from financing activities Repayment of bank loans -- (626,506) Decrease in restricted cash -- 659,000 ---------- ---------- Net cash from financing activities -- 32,494 ---------- ---------- Net decrease in cash and cash equivalents (451,797) (245,863) Cash and cash equivalents, beginning of period 1,037,292 773,431 ---------- ---------- Cash and cash equivalents, end of period 585,495 527,568 ========== ========== Supplementary disclosures of cash flow information: Cash paid during the period for: Interest -- 23,009 Income taxes -- -- Supplementary disclosures of significant non-cash transaction: ========== ========== Issuance of common stock as compensation for a director 67,500 = ========== ==========
See accompanying notes to condensed consolidated financial statements. F-4 GENERAL COMPONENTS, INC. NOTES TO CONDENSES CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. Organization and Basis of Financial Statements General Components, Inc. (the "Company" or "GCI") was organized under the laws of the State of Nevada on January 14, 2000, under the name of Pro-Active Solutions, Inc. ("Pro-Active"). On July 7, 2004, Pro-Active changed its name to General Components, Inc., which had only limited operations and had been a development stage company. On September 24, 2004, GCI and the shareholders of General Components, Inc., ("GCI-Cayman"), a Cayman Islands corporation, ("Shareholders") closed the transactions contemplated by the share exchange agreement dated as of September 24, 2004 (the "Share Exchange Agreement"). Pursuant to the Share Exchange Agreement, Shareholders have agreed to transfer to GCI and GCI has agreed to acquire from the Shareholders all of the shares, which shares constituted 100% of the outstanding capital stock of GCI-Cayman, in exchange for 20 million shares of GCI's common stock to be issued on the closing date, which shares constituted 80% of the issued and outstanding shares of GCI's common stock immediately after the closing of the transactions. The share exchange transaction resulted in the Shareholders' obtaining a majority voting interest in GCI. Generally accepted accounting principles require that the company whose shareholders retain the majority interest in a combined business be treated as the acquiror for accounting purposes, resulting in a reverse acquisition. Accordingly, the share exchange transaction has been accounted for as a recapitalization of GCI. The financial year end date of GCI has been changed from May 31 to December 31 effective from the financial year ended December 31, 2004. In September 2004, a stock purchase agreement (the "Stock Purchase Agreement") was signed between GCI and a purchasers identified on Schedule A thereto (the "Purchasers"). Pursuant to the Stock Purchase Agreement, the Purchasers agreed to purchase 20% shares of the outstanding common stock of GCI for a consideration of US$2 million. The principal activity of the Company and its subsidiaries is to provide broadband technology for the "last mile" market. The Company's products are produced by OEM manufacturers and sold under the "General Components" and "Reachhome" brands. The Company has also developed plastic optical fiber ("POF") cable technology and related networking equipment. The Company has filed patents in the USA and Asia on its proprietary POF technology, related manufacturing process and production machinery. The Company currently offers a wide range of entry-level to high-end modular, upgradeable systems in the last mile broadband connectivity market. It also licenses its POF technology and manufacturing process to and procures the production machinery for selected partner customers. 2. Basis of Presentation The condensed consolidated financial statements included herein have been prepared by the Company and are unaudited. The financial statements have been prepared in accordance with the instructions for Form 10-QSB and therefore, do not necessarily include all information and footnote disclosures required by generally accepted accounting principles. These statements reflect all adjustments, consisting of normal recurring adjustments which, in the opinion of the Company, are necessary for fair presentation of the information contained therein. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's annual audited financial statements for the year ended December 31, 2004. The Company follows the same accounting policies in preparation of interim reports. Results of operations for the interim periods are not necessarily indicative of annual results. F-5 3. Commitments and Contingencies The Company was obligated under operating leases requiring minimum rentals as follows: US$ Nine months ending December 31, 2005 78,926 Years ending December 31 2006 28,739 2007 4,567 ------- Total minimum lease payments 112,232 ======= The Company has been named as a defendant in patent infringement suit filed by Panduit Corp. ("Panduit") in connection with its patent entitled "Angled Patch Panel With Cable Support Bar For Network Cable Racks". Panduit filed the complaint in the United States District Court for the Northern District of Illinois, Eastern Division on March 15, 2005. Panduit seeks an injunction against use of the patent and damages to be determined by a jury. The management considers Panduit's claim is without merit and does not expect it to adversely affect its business. There are no other material commitments and contingencies. 4. Stockholders' Equity Common stock In January 2005, the Company issued 30,000 shares of common stock as compensation for a newly appointed director. F-6 Item 2. Management's Discussion and Analysis or Plan of Operation Forward-Looking Statements This Discussion and Analysis or Plan of Operation contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, including our statements regarding increases in sales and marketing expenditures, commitment of resources, and reduction in operating costs and the possible further reduction of personnel and suspension of salary increases and capital expenditures. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as "may," "will," "should," "estimates," "predicts," "potential," "continue," "strategy," "believes," "anticipates," "plans," "expects," "intends," and similar expressions are intended to identify forward-looking statements. You should not place undue reliance on these forward-looking statements. Actual results could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including our good faith assumptions being incorrect, our business expenses being greater than anticipated due to competitive factors or unanticipated development or sales costs; revenues not resulting in the manner anticipated due to a continued slow down in technology spending, particularly in the telecommunications market; our failure to generate investor interest or to sell certain of our assets or business segments. The forward-looking statements may also be affected by the additional risks faced by us as described in this Report and in our filings with the Securities and Exchange Commission (the "SEC"). All forward-looking statements included in this Report are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Critical Accounting Policies The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. The critical accounting policies are as follows: Revenue recognition - Sales of goods are recognized when goods are delivered and title of goods sold has passed to the purchaser. Revenue from license to technology right is generally recognized as deliveries are made or at the completion of contractual billing milestones. Income taxes- Income taxes are provided on an asset and liability approach for financial accounting and reporting of income taxes. Current tax is based on the profit or loss from ordinary activities adjusted for items that are non-assessable or disallowable for income tax purpose and is calculated using tax rates that have been enacted or substantively enabled at the balance sheet date. Deferred income tax liabilities or assets are recorded to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and the financial reporting amounts at each year end. A valuation allowance is recognized if it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. Use of 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 reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements. 2 Business Overview General Components, Inc. ("we", "us", "our", the "Company", or "GCI") was incorporated under the laws of the State of Nevada on January 14, 2000 under the name of Pro-Active Solutions, Inc. On July 7, 2004, we changed our name to General Components, Inc. Our predecessor was founded in 1998. We are engaged in the development, manufacture and marketing of broadband networking products and systems for the "last mile" broadband connectivity market. We currently offer a wide range of basic to high-end modular, upgradeable systems that enable end-users to send and receive high-speed data communications through the Internet Backbone Network. Our products include cables, patch cords, panels, adapters, converters, switches and wireless devices that are produced by OEM manufacturers and sold under the "General Components" and "Reachhome" brands. We are also developing plastic optical fiber ("POF") cable technology and related networking equipment. We have filed patents in the United States and Asia on our proprietary POF technology. We also license our POF technology and manufacturing process to procure production machinery for select customer partners. We distribute our products in China, the Pacific Rim, the Middle East and Eastern Europe primarily through our distributors, resellers and/or system integrators to both office and residential markets. It is our intention to expand our distribution channels into the North American market. We are headquartered in Hong Kong and have numerous offices throughout China. On September 24, 2004, the Company consummated a Share Exchange Agreement (the "Exchange Agreement") with General Components, Inc., a privately owned Cayman Islands company ("GCI Cayman"), and GCI Cayman's shareholders, (the "Shareholders"), pursuant to which the Company acquired all of the issued and outstanding shares of stock of GCI Cayman in exchange for the issuance in the aggregate of 20,000,000 of our shares of common stock (the "Shares") to the Shareholders. As a result of the transaction, GCI Cayman became a wholly-owned subsidiary of the Company and, upon the issuance of the Shares, the Shareholders owned approximately 80% of all of the Company's issued and outstanding common stock. Immediately following the share exchange, a total of 25,000,000 shares of common stock were issued and outstanding. Stockholders of record as of October 14, 2004 of the Company received a dividend paid in shares of common stock on October 25, 2004 on a one-for-one basis per share of common stock (the "Dividend"). The transaction increased the total number of outstanding shares of common stock from 5,000,000 to 10,000,000. Prior to the payment of the Dividend, the Company effected a recapitalization of the Company pursuant to which 20,000,000 shares of the Company's outstanding common stock was exchanged for 10,000,000 shares of the Company's Series A Preferred Stock. Each share of Series A Preferred Stock is convertible into eight (8) shares of common stock and each share of Series A Preferred Stock is entitled to eight (8) votes, voting together with the holders of common stock as a single class. Further, holders of Series A Preferred Stock are entitled to receive cumulative dividends on a pro-rata basis with all other holders of common stock on an as-converted basis. Holders of Series A Preferred Stock also are entitled to receive a liquidation preference as follows: for each one (1) share of common stock, the holders of Series A Preferred Stock then outstanding are entitled to cash in amount equal to eight (8) times (i) par value, as adjusted, plus all accrued and unpaid dividends and (ii) pro rata share of any proceeds with all other holders of common stock on an as-converted basis. Additionally, in connection with the transactions contemplated by the Exchange Agreement, the Company and certain investors (the "Investors"), executed and delivered a Stock Purchase Agreement in which such Investors received 10,000,000 shares of common stock of the Company for consideration of $2,000,000. As at March 31, 2005, there were 20,030,000 shares of common stock of the Company issued and outstanding and 10,000,000 shares of Series A Preferred Stock of the Company issued and outstanding on an undiluted basis. The following discussion and analysis of our plan of operation should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere herein. This Quarterly Report on Form 10-QSB should also be read in conjunction with the Company's Annual Report on Form 10-KSB. 3 Business Outlook The first quarter is normally a slow sales season in China due to the Lunar Chinese New Year holidays. The impact is even more visible in manufacturing businesses because a large number of its workforce is due for a long holiday and the facilities are temporarily closed usually for an entire month. However, we use the season to deploy a VoIP team and develop relationships with the distribution channels for the China market. The VoIP team consists of sales, marketing, product engineering and technical support staff. Product engineers have set up a centralized hosting server capable of handling 100,000 retail IP phone users concurrently. We have also purchased more glass optical fiber line to support the bandwidth. On the sales and distribution side, we have established relationships with 48 distributors to launch the VoIP phone products to the market. The VoIP marketing team is aiming to reach more distributors throughout China in 2005. Beginning April of 2005, we have seen a steady growth in consumer demand for VoIP products. A concrete example of this progress is our success in providing Motorola China with our pioneer enterprise VoIP system. Based on the fact of relatively low penetration of VoIP service and high growth potential in American and European voice call market, we aim to supply US based and Europe based VoIP resellers and wholesalers with a complete OEM solution with ensured quality control, design capability and integration ability. Structured Cable and POF We have two areas of product development: structured cables and POF cables. We have an applied OEM business model to service customers in China and in other parts of the world. We anticipate that POF products will be one of the next generation networking mediums because of its higher bandwidth, lower cost and lack of magnetic interference, which may replace the copper wire cables. We are developing manufacturing technology to engage in continuous mass production of POF cables, which are widely used in automotive industry (Europe and Japan), home electronics and potentially in LANs. We have completed Phase 1 of the trial production of the POF batch manufacturing. We anticipate continuing the development of Phase 2 in 2005. VOIP In late 2004, we entered the fast-growing enterprise VoIP market in China. In early 2005, we signed a reseller agreement with VocalData, Inc., a subsidiary of Tekelec, to become their only software distributor of enterprise VoIP products in China. With respect to hardware, we established OEM relationships with a number of Chinese VoIP equipment manufacturers. We anticipate that our involvement in the connectivity market and with distributors will help the future sales of VoIP products to enterprise users and system integrators. We expect that a reasonable portion of our 2005 revenue will be derived from VoIP product sales. GCI is currently providing solutions to three types of enterprise markets: small-medium enterprises (SME); large corporations; and special interest groups (retail users). Results of Operations Three Months Ended March 31, 2005 Compared to Three Months Ended March 31, 2004 Revenues. There was a slight decrease in revenue in 2005 because the Company's top three customers contributed just over 10% of our total revenues for the first quarter of 2005. These top three customers are distributors respectively based in Southern and Eastern China and the Middle East, particularly in Dubai, UAE. Gross Margin. Gross margin from 29% in 2004 to 27% in 2005. This decrease is attributable to the slight decline of our OEM business in China and the continuous increase in copper prices since 2004. These factors prompted us to dispose inventory at discounted prices to mitigate the loss during the said period. However, this decline is not expected to persist for more than one year. We had established favorable relationships with distributors in South East Asia, the Middle East and Eastern Europe. We anticipate a steady growth for our structured cable products in these markets in 2005. With the growth of home and office networking in North America, we are actively looking for US based partners with distribution capability to enter the North American market in 2005. 4 Net loss. The decrease in net loss is mainly attributable to the reduction of research and development expenses for the installation and maintenance of the POF production lines, which have been completed at beginning of 2004. Selling, general and administrative expenses. The increase in selling, general and administrative expenses is attributable to professional fees, such as legal fees, audit fees, salary of the our executives, and consultants. In 2005, we anticipate our selling, general and administrative expenses would increase in an attempt to boost our marketing efforts in China, the Middle East, Russia and potentially, North America. Other expenses. The increase in other expenses is attributable to the reduction in collaborative arrangements during the year. Research & Development costs. There are no research and development costs incurred for the first quarter of 2005 as compared to $370,000 for the same period in 2004. In 2004, research and development costs are attributable to the installation of Phase 1 of the POF production line in China at the beginning of the year. In 2005, we anticipate research and development costs will increase due to developments in the VoIP enterprise product and Phase 2 of the POF production line. We also intend to raise capital through private placement and use the proceeds thereof to fund Phase 2 of the POF production's research and development costs. Income Taxes No provision for taxes has been recorded for the three months ended March 31, 2005, as we had no assessable profits for the year. Liquidity and Capital Resources As of March 31, 2005, we had $585,495 of cash and cash equivalents and $981,678 of working capital as compared to $1,037,292 and $1,327,333, respectively, at December 31, 2004. The account receivables have been reduced from $266,279 in 2004 to $265,380 in 2005. We believe that we may not have sufficient cash and cash equivalents for the next twelve months for the growing and development of POF operations. We intend to raise additional funds in the form of equity and/or debt financing to fund the expansion of our POF business and further the development of our POF technology. In the event that we are not able to raise additional financing, we may face a reduction of growth and development of our POF operations. However, we expect to retain positive cashflow from the other two units of business, Structured Cabling and VoIP. Overall, cash flows in March 31, 2005 decreased by 44%, from $1,037,292 in December 31, 2004 to $585,495 in March 31, 2005. Cash flows from operations is a net outflow of $340,309 in March 31, 2005 compared to $1,362,949 in December 31, 2004. With respect to cash flows from investing activities, we have a net cash outflow of $111,488 from a cash inflow of $1,594,316 in December 31, 2004. The 2005 net cash outflows primarily represent an advance to an associate of $100,032 during the three months ended March 31, 2005. 5 Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. Item 3. Controls and Procedures We maintain "disclosure controls and procedures," as such term is defined under the Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to our management, including our President (Principal Executive Officer) and Chief Financial Officer, as appropriate, to allow timely decisions regarding the required disclosures. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and in reaching a reasonable level of assurance our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation under the supervision and with the participation of our management, including our President (Principal Executive Officer) and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2005. Based upon their evaluation and subject to the foregoing, the President (Principal Executive Officer) and Chief Financial Officer concluded that as of March 31, 2005 our disclosure controls and procedures were effective at the reasonable assurance level in ensuring that material information relating to us, is made known to the President (Principal Executive Officer) and Chief Financial Officer by others within our company during the period in which this report was being prepared. 6 PART II. OTHER INFORMATION Item 1. Legal Proceedings We have been named as a defendant in patent infringement suit filed by Panduit Corp. in connection with its patent entitled "Angled Patch Panel With Cable Support Bar For Network Cable Racks". Panduit filed the complaint in the United States District Court for the Northern District of Illinois, Eastern Division on March 15, 2005. Panduit also names Leviton Manufacturing Company, Inc., The Siemon Company, Tyco Electronics Corporation, Molex, Inc. and AESP, Inc. as defendants in the case. Panduit seeks an injunction against use of the patent and damages to be determined by a jury. Panduit's claim is without merit and we do not expect it to adversely affect our business. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Not applicable. Item 3. Defaults Upon Senior Securities Not applicable. Item 4. Submission of Matters to a Vote of Security Holders No matter was submitted to a vote of security holders during the first quarter ended March 31, 2005. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The following exhibits are furnished as part of the Quarterly Report on Form 10-QSB: Exhibit No. Description ----------- ----------- 31.1 Certification of the President (Principal Executive Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32 Certifications of the President (Principal Executive Officer) and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K A current report on Form 8-K dated January 24, 2005, and amended on February 1, 2005, was filed with the SEC reporting the appointment of Dr. James K. Walker as a director of the Board, amendment to the Articles of Incorporation to increase the number of authorized shares of common stock to 280,000,000, and change of our fiscal year to December 31. A current report on Form 8-K dated January 25, 2005 was filed with the SEC reporting our intent to seek additional financings from a small number of institutional or accredited investors to raise capital for the Company. 7 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: May 20, 2005 GENERAL COMPONENTS, INC. By: /s/ Bruce A. Cole ---------------------------------------------- Name: Bruce A. Cole Title: President (Principal Executive Officer) GENERAL COMPONENTS, INC. By: /s/ Jonathan Chan ---------------------------------------------- Name: Jonathan Chan Title: Chief Financial Officer