SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ________
Commission File No. 000-21889
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
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(Exact name of small business issuer as specified in its charter)
FLORIDA 2327-381
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1810 N.E. 144th Street
NORTH MIAMI, FLORIDA 33181
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(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number, Including Area Code: (305) 944-7710
Check whether the issuer (1) has 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 require ments for the past 90
days.
Yes ___ No X
The number of shares outstanding of the issuer's Common Stock, as of
May 9, 1997, is 1,732,500
Transitional Small Business Disclosure Format (check one)
Yes ___ No X
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ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
INDEX
PART I. FINANCIAL INFORMATION
PAGE
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Item 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheet at
March 31, 1997..............................................................................................3
Condensed Consolidated Statements of Income for the three months
ended March 31, 1997 and 1996..............................................................................4
Condensed Consolidated Statements of Shareholders' Equity for the
three months ended March 31, 1997 and 1996.................................................................5
Condensed Consolidated Statements of Cash Flows for the three
months ended March 31, 1997 and 1996 ......................................................................6
Notes to Condensed Consolidated Financial Statements........................................................7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL POSITION AND RESULTS OF OPERATIONS.......................................................11
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDING......................................................................................15
Item 2. CHANGES IN SECURITIES.................................................................................15
Item 3. DEFAULTS UPON SENIOR SECURITIES.......................................................................15
Item 4. SUBMISSION OF MATTERS TO VOTE
OF SECURITY HOLDERS.................................................................................15
Item 5. OTHER INFORMATION.....................................................................................15
Item 6. EXHIBITS AND REPORTS ON FORM 8-K......................................................................15
2
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Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
MARCH 31, 1997
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ASSETS
CURRENT
Cash $ 1,473,084
Accounts receivable, net of allowance for
doubtful accounts of $70,000 3,227,278
Inventories 4,364,943
Prepaid expenses and other current assets 285,358
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Total current assets 9,350,663
PROPERTY AND EQUIPMENT, net 399,816
OTHER ASSETS 51,500
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$ 9,801,979
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Notes payable $ 322,000
Accounts payable and accrued expenses 1,283,393
Income taxes payable 131,163
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Total current liabilities 1,736,556
Notes payable shareholders 1,439,125
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Total liabilities 3,175,681
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COMMITMENTS
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SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value; 1,000,000
shares authorized; none issued -
Common stock, $.001 par value; 20,000,000 shares
authorized; 1,732,500 shares issued and outstanding 1,733
Paid-in capital 6,273,357
Retained earnings 366,002
Cumulative foreign currency translation adjustment (14,794)
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Total shareholders' equity 6,626,298
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$ 9,801,979
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SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 1996
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Net sales $ 3,594,049 $ 3,515,931
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OPERATING EXPENSES:
Cost of sales 1,905,676 2,098,960
Selling, general and administrative expenses 1,327,959 967,507
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Total operating expenses 3,233,635 3,066,467
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INCOME FROM OPERATIONS 360,414 449,464
Other income (expense)
Interest (48,426) (29,239)
Other (23,364) 6,166
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INCOME BEFORE INCOME TAXES 288,624 426,391
Provision for income taxes 92,652 49,761
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NET INCOME $ 195,972 $ 376,630
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PRO FORMA AMOUNTS:
Income before income taxes $ 288,624 $ 426,391
Provision for income taxes 103,652 178,761
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PRO FORMA NET INCOME $ 184,972 $ 247,630
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Pro forma net income per share $ .14 $ .20
Weighted average number of shares of common stock
outstanding 1,365,098 1,254,948
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Supplemental pro forma net income per share $ .13
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SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
CUMULATIVE
FOREIGN TOTAL
CURRENCY STOCK-
COMMON PAID-IN RETAINED TRANSLATION HOLDERS'
STOCK CAPITAL EARNINGS ADJUSTMENT EQUITY
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Balance at January 1, 1996 $ 813 $ 45,901 $ 3,345,549 $ 13,108 $ 3,405,371
Distributions - - (164,694) - (164,694)
Net Income - - 376,630 - 376,630
Cumulative foreign currency translation
adjustment - - - (991) (991)
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Balance at March 31, 1996 $ 813 $ 45,901 $ 3,557,485 $ 12,117 $ 3,616,316
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BALANCE AT JANUARY 1, 1997 $ 813 $ 45,901 $ 3,762,635 $ (4,891) $ 3,804,458
DISTRIBUTIONS (NOTE 1) - 719,560 (2,458,685) - (1,739,125)
NET PROCEEDS FROM ISSUANCE OF COMMON
STOCK AND WARRANTS 920 4,373,976 - - 4,374,896
NET INCOME - - 195,972 - 195,972
RECLASSIFICATION OF CUMULATIVE UNDISTRIBUTED
EARNING APPLICABLE TO THE COMPANY'S
S CORPORATION STATUS - 1,133,920 (1,133,920) - -
CUMULATIVE FOREIGN CURRENCY TRANSLATION
ADJUSTMENT - - - (9,903) (9,903)
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BALANCE AT MARCH 31, 1997 $ 1,733 $ 6,273,357 $ 366,002 $ (14,794) $ 6,626,298
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SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 1996
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OPERATING ACTIVITIES:
Net income $ 195,972 $ 376,630
Adjustments to reconcile net income to net cash
used in operating activities:
Provision for losses on accounts receivable 4,685 6,000
Depreciation and amortization 19,667 26,223
Deferred income taxes (32,000) -
(Increase) decrease in:
Accounts receivable (516,360) 197,049
Inventories 329,975 (152,491)
Prepaid expenses and other current assets (130,776) (13,561)
Increase (decrease) in:
Accounts payable and accrued expenses (1,734,675) (723,123)
Income taxes payable 114,262 36,893
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Net cash used in operating activities (1,749,250) (246,380)
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INVESTING ACTIVITIES:
Additions to property equipment (16,359) (33,520)
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FINANCING ACTIVITIES:
Net proceeds (payments) on borrowings (1,304,293) 400,023
Dividend distributions - (164,694)
Payment on notes payable-shareholders (300,000) -
Proceeds from sale of stock and warrants, net 4,637,085 -
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Net cash provided by financing activities 3,032,792 235,329
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NET (DECREASE) INCREASE IN CASH 1,267,183 (44,571)
Effect of exchange rate changes in cash (9,903) 3,062
CASH, AT BEGINNING OF YEAR 215,804 203,804
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CASH, AT END OF PERIOD $ 1,473,084 $ 162,295
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Supplemental information:
Cash paid for
Interest $ 23,665 $ 27,145
Taxes $ - $ -
Non-cash distribution to shareholders in the form of a
convertible subordinated promissory note $ 1,739,125 $ -
Non-cash distribution credited to paid-in capital $ 719,560 -
Non-cash reclassification of cumulative undistributed earnings
applicable to the Company's S corporation status $ 1,133,920 $ -
Deferred offering costs charged against paid-in capital
in connection with initial public offering $ 262,189 $ -
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SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF The accompanying unaudited condensed consolidated
PRESENTATION financial statements have been prepared in accordance with
generally accepted accounting principles for interim
financial information and with the instructions to Form
10-QSB. 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, except for the adjustment to
record deferred taxes discussed below considered necessary
for a fair presentation have been included. Operating
results for the three month period ended March 31, 1997
are not necessarily indicative of the results that may be
expected for the year ending December 31, 1997. For
further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's
Annual Report on Form 10-KSB for the year ended December
31, 1996.
Pro forma net income per share is based on the weighted
average number of shares of common stock outstanding
during each period, after giving effect to the stock split
(described in Note 2), the assumed conversion of the notes
to be issued to the principal shareholders at $4.00 a
share, and the exercise of the options with respect to
63,000 shares as described in Note 2.
Supplemental pro forma net income per share for the three
months ended March 31, 1997 is based on the weighted
average number of outstanding shares of common stock used
in the computation of pro forma net income per share plus
the 295,000 shares, calculated at an offering price of
$6.00 per share, sold by the Company in the offering to
repay borrowings, including the $300,000 payment made to
shareholders with respect to the convertible subordinated
notes of $1,739,125 at the date of the public offering of
the Company's common stock. The computation gives effect
to elimination of interest costs associated with the
borrowings, net of pro forma income taxes.
Through February 14, 1997, AESP, with the consent of its
stockholders, elected to be taxed as an S Corporation.
Shareholders of an S Corporation are taxed on their
proportionate share of the Company's taxable income.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Accordingly, no provision for federal income tax was
required for periods prior to the Company's initial public
offering.
AESP Germany and AESP Sweden are subject to taxation in
Germany and Sweden and accordingly, calculate and report
the tax charges in accordance with applicable statutory
regulations.
Upon the Company becoming subject to income taxes, a net
deferred tax asset was recorded for the three months ended
March 31, 1997 for the tax effect of cumulative temporary
differences between financial statement and tax purposes.
Such net deferred tax asset resulted principally from
temporary differences relating to allowance for doubtful
accounts and the repatriation of the income of the foreign
subsidiaries and aggregated approximately $13,000.
For the purpose of these financial statements the Company
has adopted the provisions of Statement of Financial
Accounting Standards ("SFAS") 109, Accounting for Income
taxes for all periods presented. Under the asset and
liability method of SFAS 109, deferred taxes are
recognized for differences arising from the differences
between financial statement and income tax bases of assets
and liabilities.
2. INITIAL PUBLIC The Company completed an initial public offering in
OFFERING AND February and March 1997 of an aggregate of 920,000 shares
REORGANIZATION of $.001 par value per share common stock of the Company
at $6.00 per share plus an aggregate of 920,000 redeemable
common share purchase warrants of the Company at $.125 per
warrant, including an over-allotment option of 120,000
shares and warrants. In this connection, the Company
received net proceeds of approximately (or $4,637,000 net
of certain capitalized expenses in connection with the
Company's initial public offering) of which $1,470,000 was
utilized to repay a substantial portion of its then
outstanding line of credit and $300,000 to make a
principal payment on the subordinated promissory notes to
the Company's principal shareholders. (See below.)
The accompanying financial statements give effect to the
recapitalization, effected on February 13, 1997, of the
Company in connection with the public offering of its
common stock, the termination of AESP's federal income
status
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
as an S Corporation and the contribution, to AESP, of the
shares of stock in AESP Sweden and AESP Germany, whose
shares of common stock were owned by the principal
shareholders of AESP. The contribution of shares is
accounted for under the pooling of interest method as the
transaction is a combination of companies under common
control.
In connection with the public offering, immediately prior
to the effectiveness of the registration statement, AESP
issued a stock dividend in the form of a stock split,
whereby the 66 2/3 shares of stock then outstanding
(after cancellation of the shares held in treasury), were
converted into 812,500 shares of common stock. AESP
increased its authorized capital from 100 shares, $1 par
value to 20,000,000 shares of common stock, $.001 par
value per share and 1,000,000 shares of preferred stock,
$.001 par value per share.
Upon completion of the initial offering, the Company
entered into a financial advisory agreement with the
underwriter for a period of two years, for an aggregate
fee of $47,000, which was prepaid at the closing.
In connection with the offering, the Company (i) made a
distribution to its principal shareholders of $1,739,125,
in the form of a seven year, prime + 1%, convertible (at
$4.00 per share) subordinated promissory note payable,
(ii) entered into five year employment agreements with its
principal shareholders which includes a minimum annual
compensation of $150,000 plus performance bonuses and
(iii) issued options, to each of its two principal
shareholders, to purchase 180,250 shares of common stock
at the initial public offering price of $6.00 per share;
such options are considered contingent options which vest
and are exercisable seven years after the date of grant,
with provisions for earlier vesting based upon future
earnings per share, net income or trading prices of the
Company's common stock (all as defined). In connection
with the favorable conversion price of the subordinated
promissory notes referred to above, the Company recorded a
$719,560 distribution to the principal shareholders, with
a corresponding credit to paid-in capital. Such amount is
based upon the difference in the conversion price and the
public
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
offering price times the number of shares issuable upon
conversion of the notes.
In addition to the foregoing distribution, in April 1997,
the Company made a distribution of approximately $260,000
to its two principal shareholders, representing the income
taxes they are individually required to pay in connection
with the Company's S Corporation earnings.
The aforementioned employment agreements provide for
annual increases, as defined. In the event of a change in
control of the Company (as defined) the shareholders may
terminate their employment with the Company for a lump sum
payment of $750,000 each. In addition, the Company will
provide the shareholders with a $1,000,000 term life
insurance policy and an automobile allowance.
Effective January 1, 1997, the Company entered into a
consulting agreement for a period of one year in which the
consultant will be paid $16,300 per month. In addition ,
the Company has granted the consultant, in 1996, an eight
year option to purchase 23,000 shares of its common stock,
at $4.00 a share and a five year option to purchase 40,000
shares of its common stock at $6.00 a share.
3. NOTES PAYABLE Notes payable consist of the following:
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MARCH 31, 1997
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Prime + .50% (9.00% at March 31, 1997) line of credit with a
financial institution in the amount
of $2,500,000, payable monthly, due July 1997. $ 202,000
8.5% note payable to an entity owned by the principal
shareholders of the Company, payable upon demand. 120,000
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$ 322,000
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND
RESULTS OF OPERATIONS
Except for the historical information contained herein, the matters
discussed in this Quarterly Report on Form 10-QSB contain forward-looking
statements which involve risks and uncertainties, including, but not limited to,
economic, competitive, governmental and technological factors affecting the
Company's operations, markets, products, services and prices, and the factors
discussed in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996 and the Company's Prospectus dated February 13, 1997.
RESULTS OF OPERATIONS
Please refer to the Company's "Results of Operations" section in Item 6
of its Annual Report on Form 10-KSB for the year ended December 31, 1996, which
is incorporated into this Quarterly Report by reference. Item 6 of the Annual
Report contains a discussion of, among other things, the importance to the
Company of the impact on the Company's operating results from period to period
of the mix of sales between retail and original equipment manufacturer ("OEM")
sales. Item 6 also contains a discussion on how the Company's retail sales have
increased in comparison to its OEM sales, and how this increase has positively
impacted the Company's gross profit margins and caused an increase in selling,
general and administrative ("SG&A") expenses, which are generally higher with
respect to retail sales.
For the quarter ended March 31, 1997, the Company achieved first
quarter net sales of $3,594,049, a slight increase of 2.2% compared to net sales
of $3,515,931 for the first quarter of 1996. This increase in net sales from
period to period was primarily attributable to increases in retail sales
(including catalog sales and sales to computer stores) and sales to the
Company's international custmers, including its distributors in the Ukraine and
Russia offset by the decrease in OEM sales from 1996 to 1997. The decrease in
OEM sales from 1996 to 1997 results from the fact that two OEM customers who
made significant purchases during the first quarter of 1996 experienced
significant problems (unrelated to the Company) during the latter part of 1996
and into 1997 and as a result purchased significantly less products from the
Company during the first quarter of 1997.
Gross profit margin for the quarter ended March 31, 1997 was 47.0%,
compared to 40.3% for the quarter ended March 31, 1996. The increase in gross
profit margin was due to the shift in the sales mix from period to period from
OEM sales to retail and international sales, which generally have a higher
margin. OEM sales represented 18.4% of net sales for the quarter ended March 31,
1997, compared to 48.6% of net sales for the quarter ended March 31, 1996.
(Please refer to Item 6 "Results of Operation" in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 1996 for a discussion on the
reduction in sales to two OEM customers which is the principal cause of this
decrease in OEM sales during 1997.) The Company believes the level of gross
profit margin achieved in the first quarter of 1997 is high for the computer
networking and connectivity industry, and that as the Company grows and
increases its sales volume,
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margins will drop somewhat due to the lower profit margins often associated with
larger sales accounts.
SG&A expenses increased significantly to $1,327,959 for the quarter
ended March 31, 1997, an increase of 37.3% compared to the quarter ended March
31, 1996, which had $967,507 in SG&A expenses. The increase in SG&A expenses was
due in part to the increase in retail sales versus OEM sales. While retail sales
generally have a higher gross margin than OEM sales, they also have a higher
SG&A expenses, such as marketing, shipping, warehousing and handling expenses.
SG&A expenses for the first quarter of 1997 also increased due in part to
expenses associated with the opening of a Western OEM sales office in San Jose,
California. This sales office is intended to work directly with a wide range of
computer hardware manufacturers to increase the OEM sales of the Company.
Increased OEM sales from these activities are not expected to impact the
Company's results of operations until the latter part of 1997 or the beginning
of 1998, because of the long lead times related to these type of sales. Higher
SG&A expenses in 1997 versus 1996 also reflect costs associated with the
Company's compliance with its responsibilities as a public company, increased
costs associated with expanding the Company's sales and marketing personnel,
particularily in Europe, the addition of an audio/visual/cable TV sales
department in late 1996 and increased consulting fees.
Interest expense for the quarter ended March 31, 1997 was $48,426
compared to $29,239 for the quarter ended March 31, 1996. The increased interest
expense was due primarily to increased borrowing during the quarter on the
Company's line of credit as well as additional interest accrued on the
subordinated convertible promissory notes payable to the Company's principal
shareholders.
As a result of the factors set forth above, the Company's income before
taxes was $288,624 for the quarter ended March 31, 1997, a decrease of $137,767
or 32.3% compared to income before taxes of $426,391 for 1996. Pro forma net
income, which reflects the Company's net income had the Company been taxed as a
C Corporation for the entire first quarter of 1996 and 1997 was $184,972 ($.14
per share) for 1997, compared to $247,630 ($.20 per share) for 1996. There were
8.8% or 110,150, more weighted shares outstanding for the 1997 first quarter
primarily as a result of the completion during the period of the Company's
initial public offering.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
On February 19, 1997 the Company closed its initial public offering of
800,000 shares of Common Stock and 800,000 of Redeemable Common Stock Purchase
Warrants. On March 20, 1997 the Company sold an additional 120,000 shares of
Common Stock and 120,000 of its Redeemable Common Stock Purchase Warrants in
connection with the exercise by the underwriters of their over-allotment option.
Collectively, the Company raised net proceeds of approximately $4,862,000 in its
initial public offering (or $4,637,000 net of certain capitalized expenses in
connection with the offering).
At March 31, 1997, the Company's working capital was $7,614,107 and its
current ratio was 5.38:1, compared to working capital of $3,119,645 and a
current ratio of 1.67:1 as of December 31, 1996. The increase in working capital
is due primarily to the Company's receipt of the proceeds of its initial public
offering, which contributed to the increase in cash, the decrease in current
portion of long-term debt through repayment of amounts due under the Company's
line
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of credit and the decrease in accounts payable and accrued expenses.
Also contributing to the increase in working capital was an increase in accounts
receivable and other current assets offset by a decrease in inventories, as
discussed below.
As of March 31, 1997 accounts receivable increased $511,675 or 18.84%
primarily due to the Company extending longer terms to a large customer and the
increase in business with new customers. Inventories decreased $329,975 or
7.03%. The decrease in inventories was due to sales to new retail customers, and
in particular sales to international customers.
As of March 31, 1997, accounts payable and accrued expenses decreased
$1,734,675 compared to December 31, 1996. This decrease is primarily due to a
portion of the proceeds from the Company's initial public offering being used to
pay trade accounts payable and various accrued expenses.
The Company has a $2,500,000 revolving line of credit with an
institutional lender. Borrowings under this line of credit bear interest at the
rate of prime plus .5% per annum and are secured by a lien on accounts
receivable, inventory and all other assets of the Company. As of March 31, 1997,
the amounts due under the line of credit had decreased $1,268,000 to $202,000
when compared to December 31, 1996, primarily due to repayment of the line of
credit with a portion of the proceeds from the Company's initial public
offering. Borrowings available to the Company under the line of credit are based
upon specific percentages of eligible accounts receivable and inventories. As of
March 31, 1997, there is $1,970,149 available to the Company under the line of
credit borrowing formula.
The Company intends to reborrow funds from its credit facility to fund
its future growth after utilizing the net proceeds from its initial public of
offering. There can be no assurance that the Company will be in a position to
borrow funds under its credit line at such time as they are required.
Additionally, the credit facility will mature on July 26, 1997. While the
Company expects that it will be able to renew the facility, there can be no
assurance that the credit facility will be renewed or even if renewed that it
can be renewed on its current terms. The line of credit is personally
guranteed by the Company's principal shareholders.
Since its inception, the Company has generally foregone the
distribution of profits in an effort to grow the Company. As a result, Messrs.
Stein and Briskin, the principal shareholders of the Company have in the past
personally paid taxes on profits that remained with the Company and were not
distributed to them. In addition, Messrs. Stein and Briskin personally paid
taxes on undistributed profits of the Company for the period from January 1,
1996 to February 13, 1997, for which the Company reimbursed such persons. The
distributions to such persons for this purpose were approximately $260,000 in
April 1997.
In order to reimburse Messrs. Stein and Briskin for the loss of tax
benefits associated with the previously taxed profits of the Company, the
Company on February 13, 1997 executed two seven
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year Convertible Subordinated Promissory Notes (the "Principal Shareholders'
Notes") each in the amount of $869,562.50 in favor of Messrs. Stein and
Briskin. The Principal Shareholders' Notes bear interest at a rate of one
percent over the floating prime rate charged by Citibank, N.A. The holders of
the notes have the right to convert the principal amount of the notes at any
time prior to maturity into shares of the Company's Common Stock based upon a
conversion rate of $4.00 per share. In the event that the holders of the
Principal Shareholders' Notes exercise the conversion rights, the shares of
Common Stock issued upon conversion will be afforded one-time demand
registration rights and certain piggyback registration rights.
The Company believes that the cash balances, along with the unused
balances available under the existing line of credit and the net cash flow
generated from operating activities, will be adequate to fund the Company's
operations in 1997. This is a projection, however, and no assurance can be given
that the Company's cash from operations and from its available line of credit
will be sufficient to meet the Company's cash requirements during 1997. For
example, if the Company were to make a significant acquisition during 1997, it
might require additional working capital in order to complete such acquisition
and/or finance the operations of the acquired business, depending upon the
particular circumstances of the acquisition and the Company's capital resources
at that time.
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Part II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable
ITEM 2. CHANGES IN SECURITIES
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter
ended March 31, 1997.
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SIGNATURES
In accordance with 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.
ADVANCED ELECTRONIC SUPPORT
PRODUCTS, INC.
Date: May 14, 1997 By: /S/ SLAV STEIN
--------------------------------------
SLAV STEIN, President and Chief Executive
Officer
By: /S/ ROMAN BRISKIN
--------------------------------------
ROMAN BRISKIN, Executive Vice President,
Treasurer, and Secretary
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
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27.1 Financial Data Schedule
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,473,084
<SECURITIES> 0
<RECEIVABLES> 3,292,278
<ALLOWANCES> (70,000)
<INVENTORY> 4,364,943
<CURRENT-ASSETS> 9,350,663
<PP&E> 644,923
<DEPRECIATION> (245,107)
<TOTAL-ASSETS> 9,801,979
<CURRENT-LIABILITIES> 1,736,556
<BONDS> 0
0
0
<COMMON> 1,733
<OTHER-SE> 6,624,565
<TOTAL-LIABILITY-AND-EQUITY> 9,801,979
<SALES> 3,594,049
<TOTAL-REVENUES> 3,594,049
<CGS> 1,905,676
<TOTAL-COSTS> 3,233,635
<OTHER-EXPENSES> 23,364
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,426
<INCOME-PRETAX> 288,624
<INCOME-TAX> 103,652<F1>
<INCOME-CONTINUING> 184,972<F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 184,972<F1>
<EPS-PRIMARY> .14<F1>
<EPS-DILUTED> .14<F1>
<FN>
<F1>- Proforma as if the Company had been taxed as a C-Corporation during the
period.
</FN>
</TABLE>
