FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1996
o 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: 0-15967
EFI ELECTRONICS CORPORATION
(Exact name of small business issuer as specified in its charter)
Delaware 75-2072203
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2415 South 2300 West, Salt Lake City, Utah 84119
(Address of principal executive offices)
Registrant's telephone number, including area code: (801) 977-9009
x Check 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 past
twelve 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.
Number of shares of the registrant's common stock outstanding at July 31,1996:
3,629,254
<PAGE>
INDEX TO FORM 10-QSB
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheets as of June 30, 1996 (Unaudited) and
March 31, 1996 3
Statements of Operations for the periods ended
June 30, 1996 and June 30, 1995 (Unaudited) 4
Statements of Cash Flows for the periods ended
June 30, 1996 and June 30, 1995 (Unaudited) 5
Notes to Financial Statements (Unaudited) 6 - 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 8 - 10
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
BALANCE SHEETS
June 30, and March 31, 1996 JUNE 30 MARCH 31
- -------------------------------------------------------------------------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 672 $ 8,518
Receivables 2,473,692 2,653,371
Inventories 2,485,822 2,307,704
Prepaid expenses 127,336 35,452
- -------------------------------------------------------------------------------
Total current assets 5,087,522 5,005,045
Property - net 1,800,117 1,896,458
Investment in joint venture 135,660 117,705
Other assets 270,378 285,113
- -------------------------------------------------------------------------------
Total assets $ 7,293,677 $ 7,304,321
===============================================================================
LIABILITIES
Current liabilities:
Current installments of notes payable $ 194,300 $ 194,300
Accounts payable 1,432,071 1,503,860
Reserve for customer warranty 372,589 392,829
Revolving line of credit 2,897,078 2,797,590
Accrued liabilities 552,299 389,608
- -------------------------------------------------------------------------------
Total current liabilities 5,448,337 5,278,187
Notes Payable, less current installments 1,024,000 1,540,000
- -------------------------------------------------------------------------------
Total liabilities 6,472,337 6,818,187
- -------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock 363 354
Additional paid-in capital 365,833 816,546
Retained earnings 605,144 791,772
- -------------------------------------------------------------------------------
Total 971,340 1,608,672
Less:
Stock subscriptions and note receivable
from management and employees (150,000) (150,000)
Treasury stock, at cost - 362,156
shares at March 31 -0- (972,538)
- -------------------------------------------------------------------------------
Total stockholders' equity 821,340 486,134
- -------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 7,293,677 $ 7,304,321
===============================================================================
See notes to financial statements.
<PAGE>
STATEMENTS OF OPERATIONS (Unaudited)
For the three months ended June 30, 1996 1995
- -------------------------------------------------------------------------------
Sales $ 3,109,044 $ 3,150,854
Cost of sales 1,953,090 2,141,399
- ------------------------------------------------------------------------------
Gross profit 1,155,954 1,009,455
- ------------------------------------------------------------------------------
Operating expenses:
Selling, general and
administrative expenses 1,109,294 1,117,036
Research and development 133,515 141,218
- -------------------------------------------------------------------------------
Total operating expenses 1,242,809 1,258,254
- -------------------------------------------------------------------------------
Operating loss (86,855) (248,799)
Other income (expense):
Equity in earnings of joint venture 17,955 17,099
Interest expense (117,733) (57,537)
- -------------------------------------------------------------------------------
Total other income (expense) (99,778) (40,438)
- -------------------------------------------------------------------------------
Loss before income taxes (186,633) (289,237)
Benefit from (provision for) income taxes -0- -0-
- --------------------------------------------------------------------------------
Net loss $ (186,633) $ (289,237)
================================================================================
Net loss per common
and common equivalent share $ (0.06) $ (0.09)
===============================================================================
Weighted average shares and
common equivalent shares outstanding 3,178,549 3,080,638
===============================================================================
See notes to financial statements.
<PAGE>
STATEMENTS OF CASH FLOWS (Unaudited)
For the three months ended June 30, 1996 1995
- -------------------------------------------------------------------------------
Cash flows provided from operating activities:
Net income (loss) $ (186,633) $ (289,237)
Adjustments to reconcile net income (loss)
to net cash provided by(used in)
operating activities:
Depreciation 169,554 188,201
Amortization 10,121 10,121
Equity in earnings of joint venture (17,955) (17,099)
Increase (decrease) in cash, net of
the sale of the UPS line in 1995, due
to change in:
Receivables 179,679 36,190
Inventories (178,118) 88,350
Prepaid expenses (91,884) (31,810)
Other assets 4,619 11,913
Accounts payable (71,789) (124,313)
Warranty reserve (20,240) -0-
Accrued liabilities 184,525 (150,094)
- -------------------------------------------------------------------------------
Net cash used in operating activities (18,121) (277,778)
- -------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (73,213) (71,833)
Sale of fixed assets related to UPS line -0- 290,957
Proceeds from sale of UPS line -0- 99,291
- -------------------------------------------------------------------------------
Net cash provided by (used in) investing
activities (73,213) 318,415
- -------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowing (repayments) under revolving
credit agreement 99,488 (80,489)
Principal payments on notes payable (16,000) (151,080)
Proceeds from sale of common stock -0- 104,273
- -------------------------------------------------------------------------------
Net cash provided by (used in) financing
activities 83,488 (127,296)
- -------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (7,846) (86,659)
Cash and cash equivalents at beginning of period 8,518 96,259
- -------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 672 $ 9,600
===============================================================================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ -0- $ -0-
Interest $ 95,076 $ 57,537
===============================================================================
Supplemental disclosures of non-cash investing and financing activities:
Subordinated debt plus accrued interest
exchanged for 455,432 shares of common
stock (See Note 6) $ 521,834 $ -0-
Common stock issued for legal settlement $ -0- $ 75,000
===============================================================================
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
In the opinion of Management, the accompanying financial statements contain
adjustments, consisting of normal recurring accruals, necessary for a fair
presentation of the financial position of EFI Electronics Corporation (the
"Company") at June 30, 1996, and the results of its operations and its cash
flows for the periods ended June 30, 1996 and June 30, 1995. The results of
operations for the period ended June 30, 1996 are not necessarily indicative of
results for the full year period.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the Company's 1996 Form 10-KSB included in the
Annual Report to Shareholders.
1. RECEIVABLES
Receivables consisted of the following:
June 30,1996 March 31, 1996
- --------------------------------------------------------------------------------
(Unaudited)
Trade receivables $ 2,483,103 $ 2,612,467
Receivable from joint venture 76,006 51,156
Warranty premium receivable -0- 23,553
Income tax refund receivable -0- 59,309
- -------------------------------------------------------------------------------
2,559,109 2,746,485
Allowance for doubtful accounts (85,417) (93,114)
- -------------------------------------------------------------------------------
Total Receivables $ 2,473,692 $ 2,653,371
===============================================================================
2. INVENTORIES
Inventories consisted of the following:
June 30, 1996 March 31, 1996
- --------------------------------------------------------------------------------
(Unaudited)
Raw materials $ 1,553,066 $ 1,457,424
Work-in-process 317,606 217,262
Finished goods 615,150 633,018
- --------------------------------------------------------------------------------
Total $ 2,485,822 $ 2,307,704
===============================================================================
3. NET INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Net income (loss) per common and common equivalent share is computed based on
the number of common and dilutive common stock equivalent shares outstanding and
is adjusted for the assumed conversion of shares issuable upon exercise of
options or warrants, after the assumed repurchase of common shares with the
related proceeds. The stock subscriptions receivable are treated as warrants for
purposes of this computation.
4. BENEFIT FROM (PROVISION FOR) INCOME TAX
The Company utilizes the liability method of accounting for income taxes. Under
the liability method, deferred tax assets and liabilities are determined based
on the difference between the financial statement and tax bases of assets and
liabilities and are measured using enacted tax rates and laws that will be in
effect when the differences are expected to reverse. An allowance against
deferred tax assets is recorded when it is more likely than not that such tax
benefits will not be realized.
<PAGE>
NOTES TO FINANCIAL STATEMENTS - Continued (Unaudited)
5. NOTES PAYABLE AND REVOLVING LINE OF CREDIT:
Notes payable consisted of the following:
June 30, 1996 March 31, 1996
- --------------------------------------------------------------------------------
(Unaudited)
Revolving line of credit $ 2,897,078 $ 2,797,590
===============================================================================
The revolving line of credit contains financial covenants, the most restrictive
of which require that the Company maintain not less than $800,000 of net worth
plus subordinated debt. At June 30, 1996, the Company was in compliance with
these covenants or had obtained appropriate waivers.
Notes payable:
Collateralized promissory notes 1,184,000 1,200,000
Uncollateralized subordinated note - director -0- 500,000
Uncollateralized note to former officer 34,300 34,300
- -------------------------------------------------------------------------------
1,218,300 1,734,300
Less current installments of long-term debt (194,300) (194,300)
- -------------------------------------------------------------------------------
Total notes payable, less current installments $ 1,024,000 $ 1,540,000
===============================================================================
6. STOCKHOLDERS' EQUITY
In January 1996, a major shareholder and director of the Company loaned the
Company $500,000 in the form of a subordinated note. As of June 30, 1996, this
note plus accrued interest of $21,834 was exchanged for 455,432 shares of
restricted common stock of the Company. Of these shares, 362,156 were issued
from treasury stock; the balance represents shares issued from the Company's
authorized but unissued stock.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations:
Net Sales for the three months ended June 30, 1996, decreased by $42 thousand
(1%) compared to the three months ended June 30, 1995, reflecting the
termination of UPS revenue in fiscal 1995 which was nearly offset by increases
in TVSS sales. The major components of net sales were:
Revenue by Product
(in thousands)
6/30/96 6/30/95
------- -------
TVSS revenue $ 3,081 $ 2,754
UPS revenue -0- 400
Other revenue 28 (3)
------- -------
Total $ 3,109 $ 3,151
======= =======
Contribution margin percentage 54% 51%
Gross margin percentage 37% 32%
Note: Contribution margin reflects only direct, unburdened material and
labor costs.
TVSS revenue increased by $327 thousand (12%) for the three months ended June
30, 1996 as compared to the three months ended June 30, 1995. TVSS revenue
consists of plug-in and hardwire product sales, as follows:
Plug-in revenue increased for the three months ended June 30, 1996, by $21
thousand (1%) over the same period of 1995. The Company's revenue in the
LAN/PC distribution channel decreased approximately $100 thousand as the
Company has focused on establishing OEM/Private Label business. This decline
was more than offset by increases in OEM/Private Label and government plug-in
revenue.
Hardwire revenue increased by $306 thousand (47%) for the period ended June
30, 1996 compared to the period ended June 30, 1995. The Company has entered
the new construction and bid specification market, which accounted for more
than $200 thousand of the increase. In addition, the Company has increased
its penetration of the utility market with its HomeGuard and related
products. The Company is expending significant effort to continue growth in
both markets.
UPS revenue for the current period is zero as a result of the sale of the
Company's UPS product line in June 1995. Ongoing UPS revenue ceased at that
time. Subcontract income on UPS products since the sale is included in other
revenue.
Other revenue includes income primarily from subcontract manufacture and
assembly of UPS products sold to the buyer of the Company's UPS product line.
The contract to perform this service lasts until June 14, 1997.
Gross Profit on sales for the three months ended June 30, 1996, increased by
$146 thousand (15%) compared to the three months ended June 30, 1995. As a
percentage of sales, gross profit improved from 32% to 37%. These changes are
the result of several factors:
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Hardwire sales for the three months ended June 30, 1996 were significantly
higher than the previous year as described above. These sales have much
higher margins than the Company average. An increase causes a higher overall
margin percentage.
There were no UPS sales in the three months ended June 30, 1996. UPS margins
are lower than the overall average Company margin. The absence of these
products improved overall margin percentage for this period.
Manufacturing and other direct costs decreased $68 thousand (12%) during the
current period as a result of a reduction in warranty claims and positive
manufacturing variances.
Operating Expenses for the three months ended June 30, 1996 decreased by $15
thousand (1%), compared to the three months ended June 30, 1995. Operating
expenses for the Company's core TVSS business (excluding NRS expenses of $108
thousand for the current quarter and $86 thousand for the same quarter in the
prior year) decreased $37 thousand (3%). This decrease was the result of expense
savings in several areas, including telephone, legal, audit and headcount
related expenses.
Net Loss for the three months ended June 30, 1996, improved by $103 thousand
(35%) compared to the three months ended June 30, 1995. Operating income in the
core TVSS business (excluding NRS expenses) for the three months ended June 30,
1996, was $21 thousand, an improvement of $184 thousand from the previous year.
These improvements resulted from improvements in contribution margin coupled
with reductions in warranty claims, indirect manufacturing costs and operating
expenses.
Liquidity and Capital Resources:
Cash Flows From Operating Activities for the three months ended June 30, 1996
increased by $260 thousand compared to the three months ended June 30, 1995. The
items that influenced this increase are described below:
Receivables decreased by $180 thousand net of bad debt allowance during the
first quarter. This reduction is due to the aggressive collection efforts of
past due accounts and more restrictive credit policies.
Inventories increased by $178 thousand net of the reserve for obsolete
inventory. This increase is due to a buildup of raw materials and work in
process for product shipments to new private label customers expected during
the second quarter of fiscal 1997.
Accounts payable decreased by $72 thousand during the first three months of
fiscal 1997. The Company has attempted to improve its position with
suppliers. The Company has maintained adequate relationships with its
suppliers and remains on "open account" with all significant vendors.
Reserve for customer warranty decreased by $20 thousand as payments for the
Company's discontinued Triple Crown Warranty program were applied against the
reserves previously established.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Accrued liabilities increased $185 thousand for the period ended June 30,
1996. This increase is due to increases in payroll and fringe benefit
accruals, which are affected by timing of actual payments made.
Cash Flows from Investing Activities decreased for the three months ended June
30, 1996 by $392 thousand compared to the three months ended June 30, 1995.
Property - Investments in new equipment of $73 thousand were made in the
three months ended June 30, 1996. These were primarily for molds and tooling
related to new plug-in products, and the purchase of updated computer
hardware.
Proceeds from the sale of UPS line occurred in June 1995, and is the largest
portion of the decrease in cash flows from investing activities during the
1996 period when compared to the same period in 1995.
Cash Flows from Financing Activities increased by $211 thousand for the three
months ended June 30, 1996 compared to the three months ended June 30, 1995.
Refinancing of the Company's revolving line of credit agreement during the last
quarter of fiscal year 1996 has allowed the Company greater borrowing
availability and the ability to reduce accounts payable. The related reduction
and renegotiation of the Company's term debt has also significantly reduced
current re-payment obligations.
Factors Affecting Future Results:
Although the Company has improved it's gross profit and lowered overhead costs
to the point that it achieved an operating profit on core TVSS business in the
current quarter, it's liquidity and financial condition remain fragile. On
August 9, 1996, a group of officers and directors contributed cash of $400
thousand in exchange for common stock and subordinated debt. Based on this
infusion and expected revenue, management believes it can fund its operations
from internally generated cash flow. Management's expectations are subject to
risks and uncertainties that include, but are not limited to, the Company's
dependence on several key customers and its fragile liquidity and financial
condition.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits.
Exhibit 27 - Financial Data Schedule
B) Effective June 26, 1996, Coopers & Lybrand, LLP, the Company's
independent accountant, resigned. The Company filed a report on Form 8-K
on July 3, 1996 to disclose this resignation. Subsequently, the Company
appointed Grant Thornton, LLP as it's independent accountant, as
disclosed in Form 8-K filed on July 31, 1996.
SIGNATURE
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.
EFI ELECTRONICS CORPORATION
(Registrant)
Date: August 14, 1996
/s/ Richard D. Clasen
Richard D. Clasen
Chief Executive Officer, President and
Director (Principal Executive Officer)
/s/ David G. Bevan
David G. Bevan
Chief Financial Officer, Executive Vice
Vice President & Secretary (Principal
Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1996
<CASH> 672
<SECURITIES> 0
<RECEIVABLES> 2,483,103
<ALLOWANCES> 85,417
<INVENTORY> 2,485,822
<CURRENT-ASSETS> 5,087,522
<PP&E> 4,309,348
<DEPRECIATION> 2,509,231
<TOTAL-ASSETS> 7,293,677
<CURRENT-LIABILITIES> 5,448,337
<BONDS> 1,024,000
0
0
<COMMON> 363
<OTHER-SE> 820,977
<TOTAL-LIABILITY-AND-EQUITY> 7,293,677
<SALES> 3,109,044
<TOTAL-REVENUES> 3,126,999
<CGS> 1,953,090
<TOTAL-COSTS> 1,242,809
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 117,733
<INCOME-PRETAX> 186,633
<INCOME-TAX> 0
<INCOME-CONTINUING> 186,633
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 186,633
<EPS-PRIMARY> (0.06)
<EPS-DILUTED> (0.06)
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