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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[xx] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
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: 33-36670
Savin Electronics Inc.
(Exact name of registrant as specified in its charter)
New Jersey 22-3061278
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Gary B. Wolff, P.C., 747 Third Avenue, New York, New York 10017
(Address of principal executive offices) (Zip Code)
New York 212-644-6446 Israel 011 972 3 9211090
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[x] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's class of
common stock, as of the latest practicable date.
The number of shares outstanding of each of the registrant's classes of common
stock, as of August 15, 1996 is 8,150,000 shares, all of one class of $.0001 par
value common stock.
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TABLE OF CONTENTS
Page No.
--------
PART I
Item 1. Financial Statements 3-6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
and Plan of Operations 7-10
PART II
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a
Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
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SAVIN ELECTRONICS INC.
CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
($000 OMITTED)
(UNAUDITED)
ASSETS
<TABLE>
<S> <C> <C>
CURRENT ASSETS:
Cash $ 14
Trade receivables, less allowance for
doubtful accounts of $26 1997
Inventories 2550
Prepaid expenses and other assets 510
-----
TOTAL CURRENT ASSETS 5071
PROPERTY AND EQUIPMENT, less accumulated
depreciation of $644 554
OTHER ASSETS, primarily loans to shareholders 390
-----
$6015
=====
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
CURRENT LIABILITIES:
Credits from banks and others $3361
Trade payables 1369
Accrued expenses and other liabilities 925
-----
TOTAL CURRENT LIABILITIES 5655
LONG- TERM DEBT 385
SHAREHOLDERS' DEFICIENCY:
Common stock, $.0001 par value;
authorized 15,000,000 shares;
issued and outstanding 8,150,000 shares 1
Additional paid-in capital 1675
Cumulative translation adjustments 117
Accumulated deficit (1818)
-----
TOTAL SHAREHOLDERS' DEFICIENCY (25)
-----
$6015
=====
</TABLE>
See notes to financial statements.
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SAVIN ELECTRONICS INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
($000 OMITTED)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
SALES $ 3739 $ 3513 $ 1829 $ 1551
COST OF SALES 2438 2106 1221 876
------- ------- ------- -------
GROSS PROFIT 1301 1407 608 675
------- ------- ------- -------
OPERATING EXPENSES:
Selling, general and
administrative 789 764 417 367
Research and development 95 108 47 59
------- ------- ------- -------
884 872 464 426
------- ------- ------- -------
OPERATING INCOME 417 535 144 249
FINANCIAL AND OTHER EXPENSES 374 292 202 142
------- ------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES 43 243 (58) 107
PROVISIONS FOR INCOME TAXES -- 8 -- --
------- ------- ------- -------
NET INCOME (LOSS) $ 43 $ 235 $ (58) $ 107
======= ======= ======= =======
EARNINGS (LOSS) PER SHARE $ 0.01 $ 0.04 $ (0.01) $ 0.02
======= ======= ======= =======
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 7377500 6605000 8150000 6605000
======= ======= ======= =======
</TABLE>
See notes to financial statements.
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SAVIN ELECTRONICS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000 OMITTED)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1996 1995
----- -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 43 $ 235
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 82 77
Increase in accrued severance pay 23 15
Other 52 (22)
Changes in assets and liabilities:
Trade receivables (235) 8
Inventories (505) (75)
Prepaid expenses and other assets (283) (14)
Trade payables 133 (2)
Accrued expenses and other
liabilities 223 89
----- -----
CASH PROVIDED BY (USED IN) INVESTING
ACTIVITIES (467) 311
----- -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and
equipment and other assets (46) (56)
Proceeds from sale of marketable
securities -- 82
----- -----
CASH PROVIDED BY (USE IN) INVESTING
ACTIVITIES (46) 26
----- -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loans to shareholders (75) --
Decrease in credits from banks
and others (267) (174)
Decrease in long-term debt (27) (327)
Net proceeds from sale of stock 883 --
----- -----
CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 514 (501)
----- -----
EFFECT OF EXCHANGE RATE CHANGES ON
CASH 1 2
----- -----
NET INCREASE (DECREASE) IN CASH 2 (162)
CASH AT BEGINNING OF PERIOD 12 169
----- -----
CASH AT END OF PERIOD $ 14 $ 7
===== =====
</TABLE>
See notes to financial statements.
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SAVIN ELECTRONICS INC.
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
1. Basis of Presentation
The financial statements include the accounts of Savin Electronics Inc.
(the "Company") and its wholly owned subsidiary Savin Electronics Ltd. (an
Israeli corporation hereinafter referred to as "SEL"). All intercompany
transactions and balances have been eliminated in consolidation.
The accompanying financial statements reflect all adjustments which, in
the opinion of management, are necessary for a fair presentation of the
financial position and the results of operations for the interim periods
presented. All such adjustments are of a normal and recurring nature. The
results of operations for the interim periods presented are not necessarily
indicative of the results of future operations.
Certain financial information which is normally included in financial
statements prepared in accordance with generally accepted accounting principles,
is not required for interim reporting purposes and, has accordingly been
condensed or omitted. The accompanying financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's report filed on Form 8-K, as amended, dated March 21, 1996.
2. Acquisition
In April 1996, the Company acquired all of the outstanding shares of SEL
in exchange for 6,150,000 shares of the Company's common stock. For accounting
purposes the transaction was treated as a recapitalization of SEL with SEL
deemed to be the acquirer (reverse acquisition). The financial statements prior
to April 1996 are those of SEL.
Pro forma information is not presented since the transaction is not a
business combination. The Company had no assets at March 31, 1996 and had
generated no revenues since its inception while incurring cumulative expenses of
$58,000 from inception to March 31, 1996.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS AND PLAN OF OPERATION
BACKGROUND
The Company had not had any revenues from operations from inception
through fiscal year ended March 31, 1996 and was basically an inactive public
"shell".
In September of 1995 a change in the control of the Company occurred when
pursuant to written agreement the Company's then principal stockholder and sole
officer and director resigned as both an officer and director and sold all
400,000 shares of Company common stock then owned by him (representing
approximately 88% of all then outstanding 455,000 shares of Company common
stock) to certain otherwise then wholly unaffiliated individuals and/or firms.
Thereafter and pursuant to the terms of an Acquisition Agreement
(heretofore filed with the Securities and Exchange Commission on April 4, 1996
as Exhibit A to the Company's Form 8-K with date of report of March 21, 1996)
the Company issued an aggregate of 6,150,000 shares of its common stock to two
individuals - Messrs. Meir Portnoy and Avi Pines - in exchange for all of the
issued and outstanding securities of an Israeli corporation known as Savin
Electronics Ltd. (hereinafter "SEL") thereby acquiring a wholly owned and
operating subsidiary. Additionally, the Company sold 1,545,000 shares of its
common stock in accordance with Private Placement Memorandum and forwarded net
proceeds approximating $883,000 to SEL for working capital purposes. As a result
thereof, a total of 8,150,000 shares of the Company's common stock are issued
and outstanding with Messrs. Portnoy and Pines each owning approximately 38% of
all issued and outstanding common stock of the Company.
Based upon the above, current Company plan of operations relate to
activities and operations of SEL whose business activities may be summarized as
follows:
SEL is an Israeli based manufacturer engaged in the power electronics
field with products oriented towards supplying quality power to sensitive
computer and electronics systems, utilized in large offices and industry. These
include Uninterrupted Power Supplies ("UPS"), Line Voltage Regulators, Power
Conditioners and Power Inverting and Converting equipment. SEL was established
in 1977 by a group of professionals specializing in the power electronics field
and is now one of the largest manufacturers of power electronics systems in the
State of Israel. Product portfolio includes UPS which accounts for approximately
80% of the production, thyristor power supplies, frequency converters,
inverters, telecom power supplies and inverters, power conditioners and power
conversion equipment. SEL international marketing supports in excess of 22,
exclusive (11) and non-exclusive (11), distributors carrying its product range.
Approximately 60% of its production (in unit numbers) is exported. Customers
include business, government, telecommunications, utilities and medical
facilities with the most frequent use of UPS equipment being for protection of
data processing equipment. During SEL's calendar year ended December 31, 1995
its single largest customer accounted for approximately 8.85% of total gross
sales (with the next 3 largest customers accounting for 7.48%, 7.31% and 6.77%
of gross
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sales). Management considers its relationship with each of its above referenced
four largest customers to be satisfactory. SEL's offices and production
facilities located in Kiryat Arie industrial zone on the outskirts of Tel Aviv,
Israel, encompassing approximately 35,000 square feet of air-conditioned space
and housing modern production facilities, testing and research laboratories,
training center for distributors and customers, a communications center and
executive and/or administrative offices. Transformer manufacture, wiring,
assembly and testing are all carried out at its factory. The transformer
facility manufactures to class H insulation. All magnetics are vacuum
impregnated and individually tested. SEL's currently held approvals include
ISO-9001 standard (under supervision of the Israeli Standards Institute) and
MIL-1-45208 (supervised by the Israeli M.O.D.) SEL transformer manufacturing is
approved by UL (Underwriters Laboratories - USA standards organization). SEL UPS
900 systems are listed by UL to UL standard 1778 and Canadian standard C22.2.
All systems supplied to the European Union are CE marked. Product construction
complies with major international standards. SEL currently employs approximately
80 people in Israel, including 25 engineers and technicians, 35 skilled
production workers and 5 service engineers.
In essence, the Company's plan of operations for the next 12 months
revolve around the activities of SEL and management currently feels that the
Company can satisfy its current cash requirements without the need to raise
substantial additional funds, if any, during the next 12 months. However,
management may either find it necessary to and/or decide to raise additional
capital during the next 12 months if deemed necessary for Company growth and/or
working capital purposes. See "Financing" below. Management does not currently
intend or expect to make any significant or material purchase (other than
possibly purchasing certain computer systems and/or production equipment) or
sale of plant within the next 12 months nor does it currently expect any
significant change to occur in the number of its employees. If and to the extent
that further employees are required within specific areas same may be hired on a
project by project basis. However, no formal plans with regard to hiring of any
significant number of additional employees currently exists.
COMPARATIVE INFORMATION
This discussion summarizes the significant factors affecting the
consolidated operating results, financial condition and liquidity/cash flows of
the Company for the period ended June 30, 1996 and the comparative (a) six month
periods ended June 30, 1996 and June 30, 1995 and (b) three month periods ended
June 30, 1996 and June 30, 1995. This discussion should be read in conjunction
with the consolidated financial statements and notes thereto included in this
report. Such consolidated financial statements include the accounts of the
Company and SEL.
Net sales for the six months ended June 30, 1996 were $3,739,000 as
compared to net sales of $3,513,000 for the six month period ended June 30,
1995, while cost of sales increased from the comparative preceding six month
period ended June 30, 1995 from $2,106,000 to $2,438,000 resulting in a gross
profit for the six month period ended June 30, 1996 of $1,301,000 as compared to
$1,407,000 for the comparative six month period ended June 30, 1995. The
decrease in gross profits of $106,000 may be attributed to the fact that while
sales increased by
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$226,000, cost of sales increased by $332,000. Operating expenses increased by
$12,000 (from $872,000 to $884,000 during the comparative six month periods)
primarily as a result of increases during the six month period ended June 30,
1996 in selling, general and administrative expenses of $25,000, offset by a
decrease of $13,000 in research and development expenses. As a result of the
above, operating income decreased by $118,000. Additionally, certain principal
additional expenses classified as "financial and other expenses" (which expenses
include, to a great degree, bank charges and interest on loans) increased by
$82,000, thereby creating a significant decrease in comparative net income of
$192,000.
Net sales for the three months ended June 30, 1996 were $1,829,000 as
compared to net sales of $1,551,000 for the three month period ended June 30,
1995, while cost of sales increased from the comparative preceding three month
period ended June 30, 1995 from $876,000 to $1,221,000 resulting in a gross
profit for the three month period ended June 30, 1996 of $608,000 as compared to
$675,000 for the comparative three month period ended June 30, 1995. The
decrease in gross profits of $67,000 may be attributed to the fact that while
sales increased by $278,000, cost of sales increased by $345,000. Operating
expenses increased by $38,000 (from $426,000 to $464,000 during the comparative
three month periods) primarily as a result of increases during the three month
period ended June 30, 1996 in selling, general and administrative expenses of
$50,000, offset by a decrease of $12,000 in research and development expenses.
As a result of the above, operating income decreased by $105,000. Additionally,
certain principal additional expenses classified as "financial and other
expenses" (which expenses include, to a great degree, bank charges and interest
on loans) increased by $60,000, thereby creating a significant decrease in
comparative net income of $165,000.
Total assets of the Company at June 30, 1996 amounted to $6,015,000 while
total liabilities amounted to $6,040,000 thereby resulting in a total
stockholders' deficiency of $(25,000). Total current assets at June 30, 1996
amounted to $5,071,000 while total current liabilities amounted to $5,655,000
thereby creating a working capital deficiency of $(584,000).
FINANCING AND LIQUIDITY
Raising of capital required for operating and working capital purposes was
recently accomplished, as aforesaid, as a result of the Company having sold
1,545,000 shares of its common stock for net proceeds approximating $883,000.
From time to time certain Company stockholders have received sums of money
from the Company as loans to such shareholders. The balance due to the Company
as at June 30, 1996 was $368,000.
While the Company did have net income from operations for the six month
period ended June 30, 1996 of $43,000 same may be attributed to the fact that
net income for the three month period ended March 31, 1996 amounted to $101,000
while net income (loss) for the three month period ended June 30, 1996 amounted
to $(58,000). Therefore, if the Company is unable to operate at a profit during
succeeding quarters the raising of additional working capital may be
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necessary. Such possibility is further enhanced by virtue of the fact that the
Company, as aforesaid, has a working capital deficiency in that its currently
liabilities exceed its current assets by $584,000. In the event that material
liquidity and/or capital resource problems arise and/or significant long term
liquidity needs occur and the Company is unable to finance same through income
derived from operations then in that event management may have to contemplate
satisfying such needs through an as yet undetermined combination of debt and/or
equity financing, bank loans and/or receivable financing. Notwithstanding the
Company's ability to recently raise funds through sale of shares of its common
stock as heretofore indicated there can be no assurance that the Company will be
able to satisfy its above referenced potential needs (if same arise) in the
manner contemplated and/or in any other manner satisfactory to the Company or
otherwise.
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PART II
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a
Vote of Security Holders - None
Item 5. Other Information - None
Item 6. (a) Exhibits - None
(b) Reports on Form 8-K None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SAVIN ELECTRONICS INC.
By: AVI PINES
--------------------
Avi Pines, Secretary
Dated: August 16, 1996
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
27 FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 14
<SECURITIES> 0
<RECEIVABLES> 2023
<ALLOWANCES> 26
<INVENTORY> 2550
<CURRENT-ASSETS> 5071
<PP&E> 1198
<DEPRECIATION> 644
<TOTAL-ASSETS> 6015
<CURRENT-LIABILITIES> 5655
<BONDS> 385
0
0
<COMMON> 1
<OTHER-SE> (26)
<TOTAL-LIABILITY-AND-EQUITY> 6015
<SALES> 3457
<TOTAL-REVENUES> 3739
<CGS> 2329
<TOTAL-COSTS> 2438
<OTHER-EXPENSES> 95
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 352
<INCOME-PRETAX> 43
<INCOME-TAX> 0
<INCOME-CONTINUING> 43
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
