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, 2000
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. 001-12739
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
(Exact name of small business issuer as specified in its charter)
FLORIDA 59-2327381
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1810 N.E. 144th Street
NORTH MIAMI, FLORIDA 33181
(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 requirements for the past 90
days.
Yes [X] No [ ]
The number of shares outstanding of the issuer's Common Stock, as of
May 19, 2000, is 3,340,921 shares.
Transitional Small Business Disclosure Format (check one)
Yes [ ] No [X]
<PAGE>
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
Item 1. FINANCIAL STATEMENTS
<S> <C>
Condensed Consolidated Balance Sheets at December 31, 1999
and March 31, 2000 (unaudited)..................................................................1
Condensed Consolidated Statements of Income for the three months
ended March 31, 2000 (unaudited) and March 31, 1999 (unaudited).................................2
Condensed Consolidated Statements of Shareholders' Equity at March 31,
2000 (unaudited)................................................................................3
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2000 (unaudited) and March 31, 1999 (unaudited).................................4
Notes to Condensed Consolidated Financial Statements (unaudited)................................5
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION ......................................8
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS .............................................................................11
Item 2 CHANGES IN SECURITIES AND USE OF PROCEEDS......................................................11
Item 3. DEFAULTS UPON SENIOR SECURITIES................................................................11
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS .........................................11
Item 5. OTHER INFORMATION .............................................................................11
Item 6. EXHIBITS AND REPORTS ON FORM 8-K ..............................................................11
</TABLE>
(i)
<PAGE>
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT
Cash $ 2,327,378 $ 1,601,770
Accounts receivable, net of allowance for doubtful accounts of
$160,373 at March 31, 2000 and $60,000 at December 31, 1999 3,412,597 3,058,018
Inventories 5,981,005 5,688,914
Income tax receivable 39,573 38,187
Due from related parties 241,707 448,684
Prepaid expenses and other current assets 287,401 170,591
------------ ------------
TOTAL CURRENT ASSETS 12,289,661 11,006,164
PROPERTY AND EQUIPMENT, NET 449,369 492,208
INTANGIBLE ASSETS, NET 860,424 907,979
DEFERRED TAX ASSET 23,624 21,380
OTHER ASSETS 60,415 60,435
------------ ------------
TOTAL ASSETS $ 13,683,493 12,488,166
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Note Payable $ 2,144,471 $ 2,409,471
Accounts payable 3,198,331 2,382,798
Accrued expenses 1,011,705 778,431
Income taxes payable 215,069 272,661
Customer deposits and other 330,142 381,675
Current portion of long term debt 99,128 127,706
------------ ------------
Total current liabilities 6,998,846 6,352,742
LONG TERM LIABILITIES 230,136 228,758
------------ ------------
TOTAL LIABILITIES 7,228,982 6,581,500
------------ ------------
SHAREHOLDERS' EQUITY
Preferred stock, $.001 par value; 1,000,000 shares authorized;
none issued -- --
Common stock, $.001 par value; 20,000,000 shares authorized;
issued: 3,340,921 at March 31, 2000 and 3,233,921 at 3,341 3,234
December 31, 1999
Paid-in capital 9,951,094 9,615,501
Deficit (2,934,529) (3,181,922)
Cumulative foreign translation adjustment (565,395) (530,147)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 6,454,511 5,906,666
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 13,683,493 $ 12,488,166
============ ============
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
1
<PAGE>
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------------
2000 1999
- -------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
NET SALES $ 6,698,759 $ 6,445,688
- -------------------------------------------------------------------- ----------- -----------
OPERATING EXPENSES:
Cost of sales 3,986,747 3,460,656
Selling, general and administrative expenses 2,321,650 2,318,955
- -------------------------------------------------------------------- ----------- -----------
Total operating expenses 6,308,397 5,779,611
- -------------------------------------------------------------------- ----------- -----------
INCOME FROM OPERATIONS 390,362 666,077
Other income (expenses):
Interest, net (53,313) (42,366)
Other 45,961 (32,047)
- -------------------------------------------------------------------- ----------- -----------
INCOME BEFORE INCOME TAXES 383,010 591,664
Provision for income taxes 135,617 108,700
- -------------------------------------------------------------------- ----------- -----------
NET INCOME $ 247,393 $ 482,964
- -------------------------------------------------------------------- =========== ===========
Net income per common share - basic $ .08 $ .16
=========== ===========
Net income per common share - diluted $ .06 $ .15
- -------------------------------------------------------------------- =========== ===========
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE>
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Accumulated
Other Total Share-
Common Paid-In Comprehensive Comprehensive holders'
Stock Capital (Deficit) Income Income Equity
------ ---------- ------------ ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 2000 $3,234 $9,615,501 $(3,181,922) $(530,147) $ -- $5,906,666
Net Income 247,393 247,393 247,393
Issuance of common stock in
connection with exercise of
stock options 107 335,593 335,700
Foreign currency translation
adjustment (35,248) (35,248) (35,248)
-------------
$ 212,145
- ------------------------- ---------------------- ------------ ---------- ============= ----------
Balance at March 31, 2000 $3,341 $9,951,094 $(2,934,529) $(565,395) $6,454,511
- ------------------------- ------ ---------- ------------ ---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE>
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000 1999
- ---------------------------------------------------------------------------- ------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $247,393 $482,964
Adjustments to reconcile net income to net cash used in
operating activities:
Provision for losses on accounts receivable 100,373 19,413
Depreciation and amortization 91,688 62,626
(Increase) decrease, net of business acquired, in:
Accounts receivable (454,952) 336,135
Inventories (292,091) 31,892
Income tax receivable (1,386) (89,212)
Prepaid expenses and other current assets (116,810) (104,417)
Deferred tax asset (2,244) 28,409
Other assets 20 (4,778)
Increase (decrease) in:
Accounts payable and accrued expenses 1,048,807 (1,310,528)
Income taxes payable (57,592) 261,389
Other liabilities (51,533) 93,884
Deferred tax liability -- 26,684
- ---------------------------------------------------------------------------- ------------- -------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 511,673 (165,539)
- ---------------------------------------------------------------------------- ------------- -------------
INVESTING ACTIVITIES:
Cash from acquisition -- 339,812
Additions to property and equipment (1,294) (3,290)
Acquisition of business -- (299,451)
Collection of loans due from related parties 206,977 --
- ---------------------------------------------------------------------------- ------------- -------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 205,683 37,071
- ---------------------------------------------------------------------------- ------------- -------------
FINANCING ACTIVITIES:
Net proceeds (payments) on borrowings (292,200) (21,252)
Eliminate overdraft -- (67,632)
Proceeds from exercise of stock options 335,700 --
- ---------------------------------------------------------------------------- ------------- -------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 43,500 (88,884)
- ---------------------------------------------------------------------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH 760,856 (217,352)
Effect of exchange rate changes in cash (35,248) 24,788
CASH, AT BEGINNING OF YEAR 1,601,770 1,407,106
- ---------------------------------------------------------------------------- ------------- -------------
CASH, AT END OF PERIOD $2,327,378 $1,214,542
- ---------------------------------------------------------------------------- ------------- -------------
Supplemental information:
Cash paid for:
Interest $62,134 $46,194
Taxes $189,578 $ --
</TABLE>
SEE ACCOMPANYING NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE>
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated 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)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000. 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, 1999.
2. ACQUISITION
In March 1999, the Company completed the acquisition of the assets of
Communications Components Company, Inc. ("CCCI"), a manufacturer of network
connectivity products and systems. The purchase price of $800,000 excluding
acquisition costs of approximately $18,000, and the assumption of $341,000
accounts payable and accrued expenses, was payable $350,000 in cash at closing,
86,206 shares of common stock of the Company (valued at $150,000, or $1.74 per
share) and $300,000 payable with interest at 8% in annual installments over
three years. In connection with the acquisition of CCCI, the Company recorded
goodwill of approximately $391,000, which is being amortized over 15 years. The
balance of the purchase price was allocated as follows:
Cash $261,000
Accounts receivable 389,000
Inventory 118,000
---------
$768,000
=========
This acquisition was accounted for under the purchase method, whereby the
purchase price was allocated to the underlying assets and liabilities based upon
their estimated fair values. The accompanying condensed consolidated statements
of income include the results of the business acquired from its respective date
of acquisition.
The following unaudited pro forma information presents the results of operations
of the Company as if the acquisition had occurred on January 1, 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 2000 1999
- --------------------------------------------------------- -------------- -------------
<S> <C> <C>
Net sales $6,698,759 $6,677,305
Net income (loss) 247,393 505,403
Net income (loss) per common share - basic .08 .16
Net income (loss) per common share - diluted .06 .15
</TABLE>
5
<PAGE>
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
3. EARNINGS PER SHARE
The following reconciles the components of the earnings per share (EPS)
computation:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 2000 1999
- -----------------------------------------------------------------------------------------------------------------
Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Earnings per common share
Net income available to
common Shareholders $ 247,393 3,264,097 $ 0.08 $ 482,964 3,111,408 $ 0.16
Effect of Dilutive
Securities:
Exercisable options to
purchase shares of common
stock 624,295 171,031
- -----------------------------------------------------------------------------------------------------------------
Net income available to
common Shareholders plus
assumed conversions $ 247,393 3,888,392 $ 0.06 $ 482,964 3,282,439 $ 0.15
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
For the three months ended March 31, 2000 and 1999, the average number of
exercisable options that are considered dilutive are 624,295 and 171,031,
respectively.
Options to purchase 10,000 shares of common stock at $3.69 per share were
outstanding during 2000, but not included in the computation of diluted EPS as
the options' exercise price was greater than the average market price of the
common shares. The options which expire in 2007 were outstanding at March 31,
2000.
Options to purchase 63,000 shares and 90,000 shares of common stock at $2.13 and
$3.69 per share, respectively, were outstanding during 1999, but not included in
the computation of diluted EPS as the options' exercise price was greater than
the average market price of the common shares. The options with expirations from
2006 to 2007 were outstanding at March 31, 1999.
6
<PAGE>
ADVANCED ELECTRONIC SUPPORT PRODUCTS, INC.
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. SUBSEQUENT EVENT
On May 12, 2000 the Board of Directors granted a total of 342,000 options to
purchase shares of the Company's common stock, at an exercise price per share of
$1.75 (fair market value on the date of grant), to officers, directors and
employees of the Company. The options expire in 10 years and vest over a three
year period, except for awards to outside directors totaling 90,000 options
which vested on May 12, 2000. Messrs Stein and Briskin, the Company's principal
shareholders, each received 75,000 options, of which 50,000 each vested May 12,
2000 and 25,000 each will vest in September 2000.
5. RECLASSIFICATION
Certain 1999 amounts have been reclassified for comparative purposes.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE MATTERS
DISCUSSED IN THIS QUARTERLY REPORT ON FORM 10-QSB CONTAIN FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, WHICH ARE INTENDED TO BE
COVERED BY THE SAFE HARBORS CREATED THEREBY. THESE FORWARD-LOOKING STATEMENTS
INVOLVE RISKS AND UNCERTAINTIES, INCLUDING BUT NOT LIMITED TO THE FOLLOWING:
COMPETITION FROM OTHER MANUFACTURERS AND DISTRIBUTORS OF CONNECTIVITY AND
NETWORKING PRODUCTS BOTH NATIONALLY AND INTERNATIONALLY; THE BALANCE OF THE MIX
BETWEEN ORIGINAL EQUIPMENT MANUFACTURER SALES (WHICH HAVE COMPARATIVELY LOWER
GROSS PROFIT MARGINS WITH LOWER EXPENSES) AND RETAIL SALES (WHICH HAVE
COMPARATIVELY HIGHER GROSS PROFIT MARGINS WITH HIGHER EXPENSES) FROM PERIOD TO
PERIOD; AND THE COMPANY'S DEPENDENCE ON THIRD PARTIES FOR MANUFACTURING AND
ASSEMBLY OF PRODUCTS AND THE ABSENCE OF SUPPLY AGREEMENTS. THESE AND ADDITIONAL
FACTORS ARE DISCUSSED HEREIN. THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN
INVOLVE AND ARE SUBJECT TO KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER
FACTORS WHICH COULD CAUSE THE COMPANY'S ACTUAL RESULTS, PERFORMANCE (FINANCIAL
OR OPERATING) OR ACHIEVEMENTS TO DIFFER FROM THE FUTURE RESULTS, PERFORMANCE
(FINANCIAL OR OPERATING), ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENT. INVESTORS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE
ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE
COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES AFTER THE DATE
HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS.
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH THE INFORMATION SET FORTH IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN
OF OPERATION" IN THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR 1998.
RESULTS OF OPERATIONS
For the three month period ended March 31, 2000, the Company had
consolidated net sales of $6.7 million, an increase of $253,000, or 3.9%, over
consolidated net sales of $6.4 million for the same period of 1999. A
substantial portion of the increase is attributable to sales by CCCI, which was
acquired in March 1999. Sales in 2000 were also impacted by exchange rates.
While sales to the Company's international customers were higher from period to
period in the currency used in each of the Company's european subsidiaries,
these sales were lower in U.S. dollars based on exchange rate differences during
the three months ended March 31, 2000 compared to exchange rate differences
during the three months ended March 31, 1999.
The Company's gross profit was $2.7 million for the quarter ended March
31, 2000, compared with $3.0 million for the comparable period of 1999. Gross
profit margin was 40.5% for the 2000 first quarter, compared to a gross profit
margin of 46.3% for the 1999 first quarter. Margins are expected to drop
slightly in the future as the Company expands sales of networking products
(active and passive products), which have lower gross profit margin but a much
larger potential for the Company to grow compared with PC connectivity products.
SG&A expenses were $2.3 million for the quarter ended March 31, 2000,
unchanged from SG&A expenses of $2.3 million for the comparable period of 1999.
For the reasons set forth above, the Company reported income from
operations of $390,000 for the quarter ended March 31, 2000, a decrease of
$276,000 from income from operations of $666,000 for the comparable 1999 period.
Interest expense was $53,000 for the quarter ended March 31, 2000, a
increase from interest expense of $42,000 for the comparable period of 1999.
This increased was attributed to increased of cost of borrowing during the last
year and additional interest paid for funds borrowed in connection with the
acquisition of CCCI. The foreign currency losses
8
<PAGE>
during the period ended March 31,2000 was $21,000 compared to $65,000 for the
1999 period, which reflects the strength of the US dollar compared with
European currencies.
At March 31, 2000, basic shares outstanding were 3,264,097, an increase
of 4.9% over basic shares outstanding at March 31, 1999 of 3,111,408. The
increase was due primarily to the issuance of 173,000 shares as result of
exercised options, plus the issuance in March 1999 of 86,206 shares in
conjunction with the acquisition of CCCI. Average diluted shares outstanding
increased by 18.5% to 3,888,392 shares, from 3,282,439 shares, as additional
options to purchase the Company's common stock became dilutive. Reflecting these
increases in average basic and diluted shares, basic earnings per share were
$.08 per share for the quarter ended March 31, 2000, compared to $.16 per share
for the comparable period of 1999, and diluted earnings per share were $.06 per
share for the quarter ended March 31, 2000, compared to $.15 per share for the
comparable period in 1999.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has financed its operations primarily with
cash flow from operations and with borrowings under its available credit lines.
At March 31, 2000, the Company's working capital was $5.3 million, and its
current ratio was 1.76:1, compared to working capital of $4.7 million and a
current ratio of 1.73:1 at December 31, 1999. At March 31, 2000, accounts
receivable were $3.4 million, an increase of 11.6% over accounts receivable of
$3.1 million at December 31, 1999. This increase was due to increased sales for
the quarter ending March 31, 2000, offset in part by an increase in the
allowance for doubtful accounts. At March 31, 2000, accounts payable and accrued
expenses were $4.2 million, an increase of 33.2% from accounts payable and
accrued expenses of $3.2 million at December 31, 1999. As of March 31, 2000,
note payable, representing borrowings from a financial institution under the
Company's line of credit, were reduced to $2.1 million, from $2.4 million at
December 31, 1999.
For the quarter ended March 31, 2000, net cash generated by operations
was $512,000, as the Company's net income plus a decrease in prepaid expenses
and increases in accounts payable and accrued expenses led to cash being
generated, offset by increases in accounts receivable and inventories, and a
decrease in income taxes payable and other labilities. During the comparable
period in 1999, net cash used in operations was $166,000, as the Company's net
income, plus decreases in accounts receivable and increases in income taxes
payable and other liabilities were applied primarily to a reduction in accounts
payable and accrued expenses.
For the quarter ended March 31, 2000, net cash generated by financing
activities were $44,000, reflecting $336,000 in proceeds from the sale of stock
upon the exercise of stock options, offset by a reduction in borrowings of
$292,000. During the 1999 period, net cash used in financing activities was
$89,000, reflecting the payment of certain short term financial obligations and
repayment of a bank overdraft.
Net cash provided by investing activities in the 2000 first quarter
included collection of loans from related parties of $207,000. In the 1999 first
quarter, net cash from investing activities was primarily related to the
acquisition of CCCI.
In September 1999, the Company obtained a $3.5 million line of credit
from a financial institution. Borrowings available under the new line of credit,
which matures on September 2, 2000, bear interest at the rate of prime plus
one-quarter (.25) percent. Borrowings under the new line of credit are based on
specific percentages of the Company's receivables and inventories. The line of
credit is secured by a lien on the Company assets, including its accounts
receivable and inventories. The line of credit is also guaranteed by the
Company's principal stockholders, who have pledged the shares of the Company's
common stock which they own to secure their respective guarantees. Under the
terms of the loan agreement relating to the new line of credit, the Company is
required to comply with certain affirmative and negative covenants and to
maintain certain financial benchmarks and ratios during future periods. As of
March 31, 2000, the Company was in compliance with all of the aforementioned
benchmarks and ratios. As of March 31, 2000, $2,144,000 was outstanding under
the credit line and $451,000 was available for borrowing under the line of
credit, based on applicable borrowing base formulas.
The Company believes that the combination of its current working
capital position, internally generated cash flow and its existing or a new line
of credit will be sufficient to fund the Company's operations for the balance of
its fiscal year ending December 31, 2000. This is a projection, however, and
there can be no assurance that the Company's cash flow from operations and from
available lines of credit will satisfy the Company's working capital
requirements. Additionally, while the Company expects that its credit facility
will be renewed (or be replaced on similar terms) for another year, there can be
no assurance that this will occur.
9
<PAGE>
The Company does not believe that inflation has had a significant
effect on the Company's operations during the last several years. The Company
believes that it has historically been able to pass on increased costs of
production to its customers. However, given the labor-intensive nature of its
products and the fact that the majority of its production occurs in the Far
East, the Company may not continue to be able to pass on such increased costs in
the future.
The Company was not impacted by Year 2000 related problems in its
operations, and believes that its present computer systems are Y2K compliant.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
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
None
11
<PAGE>
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 19, 2000 By: /S/ SLAV STEIN
---------------------------------
Slav Stein, President
12
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the Company's
Quarterly Report on Form 10-QSB for the quarter ended March 31, 2000 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,327,378
<SECURITIES> 0
<RECEIVABLES> 3,572,970
<ALLOWANCES> (160,373)
<INVENTORY> 5,981,005
<CURRENT-ASSETS> 12,289,661
<PP&E> 449,369
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,683,493
<CURRENT-LIABILITIES> 6,998,846
<BONDS> 0
0
0
<COMMON> 3,341
<OTHER-SE> 6,451,170
<TOTAL-LIABILITY-AND-EQUITY> 13,683,493
<SALES> 6,698,759
<TOTAL-REVENUES> 6,698,759
<CGS> 3,986,747
<TOTAL-COSTS> 6,308,397
<OTHER-EXPENSES> 45,961
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (53,313)
<INCOME-PRETAX> 383,010
<INCOME-TAX> 135,617
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 247,393
<EPS-BASIC> 0.08
<EPS-DILUTED> 0.06
</TABLE>
