<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB/A
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission File Number 1-15735
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Elgin Technologies, Inc.
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(Exact name of registrant as specified in its charter)
DELAWARE 95-4581906
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Columbia Drive
Amherst, NH 03031
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(Address of principal executive office) (Zip Code)
(603) 598-4700
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(Registrant's telephone number, including area code)
Not applicable
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(Former name, former address and former 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 periods 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 /X/
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13, or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of securities
under a plan confirmed by the court. Yes ___ No ___
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the Issuer's classes
of common stock, as of the latest practical date
Voting Common Stock, $.000833 par value per share - 17,591,601 shares as of
June 30, 2000.
<PAGE>
ELGIN TECHNOLOGIES, INC. AND SUBSIDIARIES
June 30, 2000
I N D E X
PART I FINANCIAL INFORMATION
ITEM I FINANCIAL STATEMENTS (Unaudited):
Consolidated Balance Sheets as at June 30, 2000 (Unaudited)
and March 31, 2000
Consolidated Statements of Operations
For the Three Months Ended June 30, 2000 and 1999 (Unaudited)
Consolidated Statements of Changes in Capital Deficiency
For the Three Months Ended June 30, 2000 (Unaudited)
and for the Years Ended March 31, 2000 and 1999
Consolidated Statements of Cash Flows
For the Three Months Ended June 30, 2000 and 1999 (Unaudited)
Notes to Consolidated Financial Statements
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
2
<PAGE>
ELGIN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly Cross Atlantic Capital, Inc.)
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
A S S E T S
<TABLE>
<CAPTION>
June 30, March 31,
2000 2000
------------ -----------
(Unaudited)
<S> <C> <C>
Currents assets:
Cash $ 94,082 $ 144,839
Accounts receivable, less allowances for
doubtful accounts and customer deductions 1,677,178 1,194,315
Inventories, at cost, less allowances for
obsolescence, excess of quantities and valuation 1,357,450 1,603,391
Prepaid expenses and other current assets 39,199 77,747
------------ ------------
Total current assets 3,167,909 3,020,292
------------ ------------
Property assets, net of accumulated depreciation 206,399 53,818
------------ ------------
Other assets:
Deferred financing costs, net 37,123 59,395
Deposits and other assets 4,088 88,708
------------ ------------
Total other assets 41,211 148,103
------------ ------------
$ 3,415,519 $ 3,222,213
============ ===========
<CAPTION>
LIABILITIES AND CAPITAL DEFICIENCY
<S> <C> <C>
Current liabilities:
Affiliate's Secured Note Payable $ 7,725,000 $ 6,725,000
Current maturities of long-term debt 2,206,663 2,206,663
Due to affiliates 1,424,448 1,141,273
Accounts payable 1,834,961 1,549,619
Pre-petition liabilities 1,012,000 1,012,000
Accrued expenses and other current liabilities 1,561,764 1,657,807
------------ ------------
Total current liabilities 15,764,836 14,292,362
------------ ------------
Long-term debt 2,206,663 2,206,663
Less: Current maturities 2,206,663 2,206,663
------------ ------------
Total long-term debt -- --
------------ ------------
Capital deficiency:
Common stock, $.000833 par value
Authorized - 60,000,000 shares
Issued - 17,591,601 shares at June 30, 2000
Issued - 17,591,601 at March 31, 2000 14,653 14,653
Additional paid-in capital 28,690,432 28,690,432
Accumulated deficit (41,054,402) (39,775,234)
------------ ------------
Total capital deficiency (12,349,317) (11,070,149)
------------ ------------
$ 3,415,519 $ 3,222,213
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE>
ELGIN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly Cross Atlantic Capital, Inc.)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three
Months Ended
June 30,
-----------------------------
2000 1999
------------ -------------
<S> <C> <C>
Net sales $ 2,156,589 $ 1,618,201
Cost of sales 2,168,087 1,693,147
------------ ------------
Gross margin (11,498) (74,946)
------------ ------------
Operating expenses:
Selling 158,723 200,330
Research and development 187,725 264,864
General and administrative 574,456 622,166
------------ ------------
Total operating expenses 920,904 1,087,360
------------ ------------
Loss from operations (932,402) (1,162,306)
------------ ------------
Other expenses:
Interest 325,314 203,874
Other expenses 21,452 14,110
------------ ------------
Total other expenses 346,766 217,984
------------ ------------
Net loss ($ 1,279,168) ($ 1,380,290)
============ ============
Net loss per common share ($0.07) ($0.08)
============ ============
Weighted average number of
shares outstanding 17,591,601 16,473,051
============ ============
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE>
ELGIN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly Cross Atlantic Capital, Inc.)
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN CAPITAL DEFICIENCY
FOR THE THREE MONTHS ENDED JUNE 30, 2000 (Unaudited)
AND FOR THE YEAR ENDED MARCH 31, 2000
<TABLE>
<CAPTION>
Common Stock Additional Total
Number of Paid-In Accumulated Capital
Shares Amount Capital Deficit Deficiency
---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance at March 31, 1999 16,473,051 $ 13,722 $ 28,685,163 ($35,498,640) ($ 6,799,755)
Conversion of warrants into stock 1,117,000 930 (930) -- --
Conversion of debt into common stock 1,550 1 6,199 -- 6,200
Net loss for the year -- -- -- (4,276,594) (4,276,594)
---------- ------------ ------------ ------------ ------------
Balance at March 31, 2000 17,591,601 14,653 28,690,432 (39,775,234) (11,070,149)
Net loss for the three months
ended June 30, 2000 (Unaudited) -- -- -- (1,279,168) (1,279,168)
---------- ------------ ------------ ------------ ------------
Balance at June 30, 2000 17,591,601 $ 14,653 $ 28,690,432 ($41,054,402) ($12,349,317)
========== ============ ============ ============ ============
</TABLE>
See notes to consolidated condensed financial statements.
5
<PAGE>
ELGIN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly Cross Atlantic Capital, Inc.)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
June 30,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($1,279,168) ($1,380,290)
----------- -----------
Adjustments to reconcile net loss to
net cash used in operating activities:
Accrued interest on Affiliate's Secured Note Payable 283,175 146,974
Depreciation and amortization 38,366 53,858
Provision for inventory obsolescence (209,863) (2,051,218)
Provision for doubtful accounts (30,902) --
Changes in assets and liabilities:
Accounts receivable (451,960) 106,192
Inventories 455,804 1,865,617
Prepaid expenses and other current assets 38,548 20,225
Deposits and other assets 84,620 3,250
Accounts payable 285,342 195,822
Accrued expenses and other liabilities (96,044) (200,938)
----------- -----------
Total adjustments 397,086 139,782
----------- -----------
Net cash used in operating activities (882,082) (1,240,508)
----------- -----------
Cash flows used in investing activities:
Property assets (168,675) --
----------- -----------
Cash flows from financing activities:
Proceeds from (repayment of)
Affiliate's Secured Note Payable 1,000,000 (20,000)
Proceeds from (repayment of) debt -- (6,214)
----------- -----------
Net cash provided by (used in) financing activities 1,000,000 (26,214)
----------- -----------
Net decrease in cash (50,757) (1,266,722)
Cash at beginning of period 144,839 1,584,480
----------- -----------
Cash at end of period $ 94,082 $ 317,758
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
6
<PAGE>
ELGIN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly Cross Atlantic Capital, Inc.)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
<TABLE>
<CAPTION>
For the Three
Months Ended
June 30,
---------------------------
2000 1999
----------- ------------
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash payments for:
Interest expense $ -- $ --
=========== ===========
Income taxes $ -- $ --
=========== ===========
Conversion for debt to equity $ -- $ --
=========== ===========
Common stock issuances for:
Litigation settlement $ -- $ --
=========== ===========
Services rendered $ -- $ --
=========== ===========
</TABLE>
See notes to consolidated condensed financial statements.
7
<PAGE>
ELGIN TECHNOLOGIES, INC. AND SUBSIDIARIES
(Formerly Cross Atlantic Capital, Inc.)
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
AS AT JUNE 30, 2000 AND FOR THE THREE MONTHS
ENDED JUNE 30, 2000 AND 1999 (UNAUDITED)
NOTE 1 - REALIZATION OF ASSETS - GOING CONCERN.
The accompanying consolidated condensed financial statements
have been prepared in conformity with generally accepted
accounting principles, which contemplate continuation of the
Company as a going concern. The Company has incurred substantial
operating losses in each of its segments for the year ended
March 31, 2000 and three months ended June 30, 2000.
Management on June 1, 1998 placed its contract engineering
division of its telecommunications segment into voluntary
liquidation when management caused a filing under Chapter 7 of
Title 11 of the United States Bankruptcy Code for its
wholly-owned subsidiary, e2 Electronics, Inc. ("Petitioner"). The
Court appointed a trustee who is liquidating the assets of
Petitioner for the benefit of its creditors.
The accompanying consolidated financial statements reflect a
working capital deficiency of $11,272,000 and $12,597,000 at March
31, 2000 and June 30, 2000, respectively, of which $1,012,000 is
attributable to the net obligations of the Petitioner. Upon the
conclusion of the liquidation of the Petitioner, the capital
deficiency at June 30, 2000, will decrease by the forgiveness of
the net indebtedness of the Petitioner of $1,012,000. For the
three months ended June 30, 2000, the Company incurred losses from
operations of $932,000. The Company's primary source of cash has
been the sale of its securities and loans from a related party.
The Company and/or its continuing subsidiaries are defendants
in a number of legal actions, some of which, should the plaintiffs
prevail, would have a serious adverse effect on the Company's
financial condition.
The substantial operating losses of the Company incurred
through and subsequent to June 30, 2000, and the Company's limited
ability to obtain financing other than from a stockholder raises
substantial doubt concerning the ability of the Company to realize
its assets and pay its obligations as they mature in the ordinary
course of business. These conditions, among others, raise
substantial doubt about the Company's ability to continue as a
going concern. The accompanying consolidated financial statements
do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and
classification of liabilities that might result should the Company
be unable to continue as a going concern.
8
<PAGE>
NOTE 1 - REALIZATION OF ASSETS - GOING CONCERN. (Continued)
The new management team believes that it is possible to turn
around the Company's financial performance and has begun
implementing its business plan. This plan calls for focusing on
two main performance areas which are: 1) overhead reduction and 2)
revenue/margin improvement.
Overhead reduction:
Since the new management team came on board, the Company has
reduced its overhead and will continue to look for overhead
reduction opportunities in the future. Benefits have been realized
by consolidating all facilities and moving headquarters to a lower
cost facility, reducing staffing by streamlining operations and
closing facilities, and by implementing other outsourcing
strategies to limit the Company's overhead structure.
Revenue margin improvement:
The Company has a 60 year history of providing quality products
to the industry, and management has repositioned its marketing of its
products to focus on that history. Management has implemented new
strategies to improve margins by streamlining its product offerings by
focusing on those items in its product lines that have higher margins
and have strong market demand. By narrowing its product offerings and
purchasing more efficiently, the Company is able to reduce its raw
materials cost component thereby adding to margin improvement.
Management also intends to overhaul its marketing efforts and
restructure its sales department to strengthen these strategies.
In addition, the Company is completing its beta site testing of
its Master Lite fluorescent product line. It is anticipated that the
Company will be able to generate revenues from this product line in
2001.
NOTE 2 - BANKRUPTCY PROCEEDINGS - CHAPTER 7.
On June 1, 1998, management filed a petition for its wholly owned
subsidiary, e2 Electronics, Inc., under Chapter 7 of Title 11 of the
United States Bankruptcy Code in the Western District of Pennsylvania
of the United States Bankruptcy Court (the "Court"). e2 Electronics,
Inc. sought to have the court liquidate its assets and disburse the
proceeds therefrom to its creditors for which the Court appointed
Trustee.
Certain assets aggregating $915,000 at historical cost and
certain liabilities aggregating $1,032,000 of the Petitioner which
were part of the Company's telecom power system manufacturing segment
were sold by management to another of the Company's subsidiaries in
that segment at the time of the filing of the petition. This sale was
reviewed by the Trustee who required an auction for the net assets.
The winning bid for the net assets of $177,000 was from an entity
controlled by the Company's investment bankers. This entity in 1999
sold these net assets to another of the Company's subsidiaries for the
same amount as its successful bid.
9
<PAGE>
NOTE 3 - ACCOUNTING POLICIES.
In the opinion of management, all adjustments and accruals
(consisting only of normal recurring adjustments), which are necessary
for a fair presentation of operating results, are reflected in the
accompanying financial statements. Reflected in the accompanying
financial statements. References should be made to Elgin Technologies,
Inc.'s Annual Report on Form 10-KSB for the fiscal year ended March
31, 2000 for a summary of significant accounting policies. Interim
period amounts are not necessarily indicative of the results of
operations for the full fiscal year.
NOTE 4 - FINANCING.
Secured Note Paybale:
In November 1998, the Company entered into a revolving loan with
a major stockholder. At March 31, 2000, $6,725,000 was outstanding
under this facility. Through June 30, 2000, the stockholder advanced
an additional $1,000,000 under the facility, which had a total
outstanding principal balance of $7,725,000 as at June 30, 2000. Since
the Company has not made the required monthly stated interest payments
of 10%, pursuant to the terms of the agreement, the holder of the note
is entitled to raise the interest rate to 15% per annum. Accrued
interest of $1,253,000 and $973,000 is outstanding at June 30, 2000
and March 31, 2000, respectively, which is included in amounts due to
affiliates in the accompanying financial statements. Interest charged
to operations was $277,000 for the three months ended June 30, 2000
and $179,000 for the comparable period in fiscal period in fiscal 2000
at an average interest rate of 15%. The outstanding principal and
accrued interest thereon is collateralized by all of the Company's
assets. Additionally, at the holder's option, the principal
outstanding indebtedness is convertible into the Company's common
stock at $0.55 per share for the first $4,225,000 of the obligation,
$0.20 per share for the next $1,050,000 of the obligation, and $0.10
per share for the amounts in excess of $5,275,000.
The convertibility of that portion of the convertible debt which
could result in the issuance of shares of common stock that would
exceed the number of shares authorized pursuant to the Company's
Certificate of Amendment, is subject to and conditioned upon the
amendment of the Certificate of Incorporation to authorize the
issuance of such shares of common stock.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and related notes included herein.
FORWARD LOOKING STATEMENTS AND CERTAIN RISK FACTORS
The Company cautions readers that certain important factors may affect the
Company's actual results and could cause such results to differ materially from
any forward-looking statements that may be deemed to have been made in this Form
10-QSB or that are otherwise made by or on behalf of the Company. For this
purpose, any statements contained in the Form 10-QSB that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the generality of the foregoing, words such as "may," "expect," "believe,"
"anticipate," "intend," "could," "estimate," or "continue" or the negative or
other variations thereof or comparable terminology are intended to identify
forward-looking statements. Factors that may affect the Company's results
include, but are not limited to, the Company's lack of profitability, its
dependence on a limited number of customers and key personnel, its ongoing need
for additional financing and its dependence on certain industries. The Company
is also subject to other risks detailed herein or which will be detailed from
time to time in the Company's future filings with the Securities and Exchange
Commission.
RESULTS OF OPERATIONS
SALES
The Company had sales of $2,157,000 and $1,618,000 for the three months
ended June 30,2000 and 1999 respectively. The increase in sales of $539,000
(33%) was mainly the result of a large order from a new customer. Management
believes that sales trends for the Company's telecommunications products in the
future will remain positive as market conditions continue to be strong. In
addition, the Company hopes to begin marketing its Master Lite product sometime
during this fiscal year, which should have a positive effect on sales.
COST OF SALES
The cost of sales for the three months ended June 30,2000 and 1999 were
$2,168,000 and $1,693,000 (representing 100% and 105% of sales respectively).
The low volume levels that the company has experienced in both fiscal years has
limited the margin contribution to fixed manufacturing costs resulting in
nominal gross margins. Cost of sales consists of the costs for purchasing
components and direct materials, costs for internally manufactured components,
compensation and employee benefits for manufacturing personnel, and overhead
costs for purchasing and manufacturing.
OPERATING EXPENSES
Operating expenses were down $166,000 (15%) from $1,087,000 (67% of sales)
11
<PAGE>
in the first quarter 1999 to $921,000 (43% of sales) in 2000. Cost reductions
and lower research and development were the major contributors to this
reduction.
OTHER EXPENSES
Other expenses increased $129,000 (60%) from $218,000 (13% of sales) to
$347,000 (16% of sales) in fiscal 1999 and 2000, respectively. Of which interest
expense increased by $122,000. Increased borrowings from an affiliate
represented $98,000 of the interest increase.
SUBSEQUENT EVENTS
A major stockholder advanced the Company an additional $500,000 in July
2000 for working capital. As per the facility agreement, the principal
outstanding indebtedness is convertible by the holder into the Company's stock
at $0.10 per share.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is subject to various legal proceedings and claims that are
discussed in the Company's 1999 Form 10-K. In addition, Plaintiffs Lewis W.
Kuniegel and Judith A. Kuniegel (collectively, the "Kuniegels") filed a
Complaint dated March 6, 2000 against the Company in the Cumberland Court
Superior Court (Portland, Maine) (LEWIS W. KUNIEGEL, et al. v. ELGIN
TECHNOLOGIES, INC., Civil Action Docket No. CV-00-162). On April 6, 2000, the
Company removed the Superior Court Action to the United States District Court
for the District of Maine (LEWIS W. KUNIEGEL, et al. v. ELGIN TECHNOLOGIES,
INC., Civil No. CV-98-P-C). On or about April 21, 2000, the Kuniegels filed a
first amended complaint in the District Court action. Pursuant to the first
amended complaint, Warren Power Systems, Inc. was added as a defendant to the
District Court action. The Kuniegels allege that (i) the Company made
intentional and/or negligent misrepresentations to the Kuniegels in connection
with the merger of their company, Communication Service Company ("CSC"), into
[the Company] and (ii) wrongfully terminated Lewis Kuniegel's employment
agreement with the Company. The Kuniegels allege damages "in an amount not yet
determined but believed to be a t least $1,000,000." The Company denied the
allegations and asserted a counterclaim against the Kuniegels for breach of the
merger agreement, breach of an employment agreement, fraud, negligent
misrepresentation, and punitive damages in connection with the merger.
The results of legal proceedings cannot be predicted with certainty;
however, in the opinion of management, the Company does not have a potential
liability related to any legal proceedings and claims that would have a material
adverse effect on its financial condition or results of operations.
Item 2. Changes in Securities (Not applicable)
Item 3. Defaults upon Senior Securities (Not applicable)
12
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
(Not applicable)
Item 5. Other information
In July 2000 the Company's subsidiary, Logic Laboratories Inc.,
terminated for cause the employment agreement of Robert Smallwood. Mr.
Smallwood served as Vice President of Logic Laboratories, Inc. under the
above employment agreement since December 1, 1997.
On April 7, 2000 for value received, the Company executed a Third
Amendment to the Secured Note Payable (the "Note") in favor of
Horace T. Ardinger, Jr. The amendment increased the principal due on the Note
by $500,000. The additional principal is convertible into common stock of the
Company at conversion rates set to reflect the market price of the stock as
of the close of business on April 7, 2000.
On May 22, 2000 the Company executed a Fourth Amendment to the Note in
favor of Horace T. Ardinger, Jr. The amendment increased the principal due on
the Note by $500,000. The additional principal is convertible into common stock
of the Company at conversion rates set to reflect the market price of the stock
as of the close of business on May 22, 2000.
Item 6. Exhibits and Reports on Form 8-K
The Company did not file any reports on Form 8-K during the three months
ended June 30, 2000.
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.
Elgin Technologies, Inc.
-------------------------------------
(Registrant)
Date: December 20, 2000 /s/ Michael J. Smith
----------------- ------------------------------------
Name: MICHAEL J. SMITH
Title: EXECUTIVE VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
13
