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, 1997
|_| 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 31,1997:
4,216,174
<PAGE>
INDEX TO FORM 10-QSB
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheets as of June 30, 1997 (Unaudited) and
March 31, 1997 ..................................... 3
Statements of Operations for the three months
ended June 30, 1997 and 1996 (Unaudited)............ 4
Statements of Cash Flows for the three months
ended June 30, 1997 and 1996 (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
Signatures............................................... 11
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
BALANCE SHEETS
JUNE 30, 1997 MARCH 31, 1997
(Unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 1,180 $ 10,123
Receivables 2,817,254 3,010,255
Inventories 2,916,740 2,674,607
Prepaid expenses 69,251 42,791
- ------------------------------------------------------------------------------------------------------
Total current assets 5,804,425 5,737,776
Property - net 1,824,149 1,658,901
Investment in joint venture 262,094 209,219
Other assets 81,995 88,872
- ------------------------------------------------------------------------------------------------------
Total assets $ 7,972,663 $ 7,694,768
======================================================================================================
LIABILITIES
Current liabilities:
Revolving line of credit $ 3,199,868 $ 3,198,381
Current maturities of notes payable 763,874 531,690
Accounts payable 1,093,768 1,142,637
Reserve for customer warranty 306,543 293,992
Accrued income taxes payable 69,809 113,309
Accrued liabilities 520,002 354,958
- ------------------------------------------------------------------------------------------------------
Total current liabilities 5,953,864 5,634,967
Notes payable, less current maturities 963,996 1,048,000
- ------------------------------------------------------------------------------------------------------
Total liabilities 6,917,860 6,682,967
- ------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Common stock 422 422
Additional paid-in capital 926,925 926,925
Retained earnings 337,456 294,454
- ------------------------------------------------------------------------------------------------------
Total 1,264,803 1,221,801
Less:
Stock subscriptions and notes
receivable from management (210,000) (210,000)
- ------------------------------------------------------------------------------------------------------
Total stockholders' equity 1,054,803 1,011,801
- ------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 7,972,663 $ 7,694,768
======================================================================================================
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS (Unaudited)
For the three months ended June 30, 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sales $ 3,639,459 $ 3,109,044
Cost of sales 2,284,857 1,953,090
- ------------------------------------------------------------------------------------------------------
Gross profit 1,354,602 1,155,954
- ------------------------------------------------------------------------------------------------------
Operating expenses:
Selling, general and
administrative expenses 1,037,601 1,109,294
Research and development 173,685 133,515
- ------------------------------------------------------------------------------------------------------
Total operating expenses 1,211,286 1,242,809
- ------------------------------------------------------------------------------------------------------
Operating income/(loss) 143,316 (86,855)
Other income/(expense):
Equity in earnings of joint venture 52,875 17,955
Interest expense (130,139) (117,733)
Other income/(expense), net (23,050) -0-
- ------------------------------------------------------------------------------------------------------
Total other expense (100,314) (99,778)
- ------------------------------------------------------------------------------------------------------
Earnings/(loss) before income taxes 43,002 (186,633)
Income taxes -0- -0-
- ------------------------------------------------------------------------------------------------------
Net earnings/(loss) $ 43,002 $ (186,633)
======================================================================================================
Earnings/(loss) per common share $ 0.01 $ (0.06)
======================================================================================================
Earnings/(loss) per common share -
assuming dilution $ 0.01 $ (0.06)
======================================================================================================
Weighted average shares outstanding 4,216,174 3,178,549
======================================================================================================
</TABLE>
See notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (Unaudited)
For the three months ended June 30, 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows provided from operating activities:
Net earnings/(loss) $ 43,002 $ (186,633)
Adjustments to reconcile net earnings/(loss) to net cash
provided by/(used in) operating activities:
Depreciation 137,686 169,554
Amortization 9,878 10,121
Equity in earnings of joint venture (52,875) (17,955)
Increase/(decrease) in cash due to change in:
Receivables 193,001 179,679
Inventories (242,133) (178,118)
Prepaid expenses (26,460) (91,884)
Other assets (3,001) 4,619
Accounts payable (48,869) (71,789)
Warranty reserve 12,551 (20,240)
Accrued income taxes payable (43,500) -0-
Accrued liabilities 165,044 184,525
- ------------------------------------------------------------------------------------------------------
Net cash provided by/(used in) operating activities 144,324 (18,121)
- ------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Capital expenditures (302,934) (73,213)
- ------------------------------------------------------------------------------------------------------
Net cash used in investing activities (302,934) (73,213)
- ------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Net borrowings under revolving line of credit 1,487 99,488
Principal payments on notes payable (56,820) (16,000)
Principal borrowings on notes payable 205,000 -0-
- ------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 149,667 83,488
- ------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (8,943) (7,846)
Cash and cash equivalents at beginning of period 10,123 8,518
- ------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 1,180 $ 672
======================================================================================================
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ 43,500 $ -0-
Interest $ 129,886 $ 95,076
======================================================================================================
</TABLE>
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, 1997 and March 31, 1997, and the results of its
operations and its cash flows for the three months ended June 30, 1997 and 1996.
The results of operations for the three months ended June 30, 1997 are not
necessarily indicative of the results that may be expected for the year ending
March 31, 1998.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted as specified by the instructions to Form 10-QSB
and Item 310 of Regulation S-B. It is suggested that these financial statements
be read in conjunction with the Company's 1997 Form 10-KSB included in the
Annual Report to Shareholders.
1. RECEIVABLES
<TABLE>
<CAPTION>
Receivables consisted of the following:
June 30,1997 March 31, 1997
- ------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Trade receivables $ 2,718,062 $ 3,124,292
Receivable from joint venture 135,953 234,340
- ------------------------------------------------------------------------------------------------------
2,854,015 3,358,632
Allowance for doubtful accounts (36,761) (348,377)
- ------------------------------------------------------------------------------------------------------
Total Receivables $ 2,817,254 $ 3,010,255
======================================================================================================
2. INVENTORIES
Inventories consisted of the following:
June 30, 1997 March 31, 1997
- ------------------------------------------------------------------------------------------------------
(Unaudited)
Raw materials $ 1,556,454 $ 1,367,125
Work-in-process 419,317 498,178
Finished goods 940,969 809,304
- ------------------------------------------------------------------------------------------------------
Total $ 2,916,740 $ 2,674,607
======================================================================================================
</TABLE>
3. NET EARNINGS/(LOSS) PER COMMON SHARE
Net earnings/(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. Stock subscriptions receivable are treated as outstanding
shares for purposes of this computation.
<PAGE>
NOTES TO FINANCIAL STATEMENTS - Continued (Unaudited)
4. NOTES PAYABLE AND REVOLVING LINE OF CREDIT
At June 30 and March 31, 1997, notes payable and revolving line of credit, the
carrying value of which approximates fair value, consisted of the following:
<TABLE>
<CAPTION>
June 30, 1997 March 31, 1997
- ------------------------------------------------------------------------------------------------------
(Unaudited)
<S> <C> <C>
Revolving line of credit $ 3,199,868 $ 3,198,381
======================================================================================================
Notes payable:
Collateralized promissory note $ 992,000 $ 1,040,000
Uncollateralized subordinated note - director 500,000 500,000
Uncollateralized note to former officer 30,870 39,690
Collateralized promissory note - machinery 205,000 -0-
- ------------------------------------------------------------------------------------------------------
1,727,870 1,579,690
Less current maturities (763,874) (531,690)
- ------------------------------------------------------------------------------------------------------
Total notes payable, less current installments $ 963,996 $ 1,048,000
======================================================================================================
</TABLE>
The revolving line of credit provides for borrowings up to $3,200,000 based on
certain asset ratios and contains financial covenants, the most restrictive of
which require that the Company maintain not less than $1,350,000 of net worth
plus subordinated debt. At June 30, 1997, the Company was in compliance with
these covenants or had obtained appropriate waivers.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
General:
The following discussion should be read in conjunction with the financial
statements and notes thereto elsewhere herein.
Results of Operations:
Net Sales for the three months ended June 30, 1997, increased by $530 thousand
(17%) compared to the three months ended June 30, 1996. Revenue consists
primarily of plug-in and hardwire product sales, as follows:
Plug-in revenue increased for the three months ended June 30, 1997, by $110
thousand (5%) over the same period of 1996. These increases are the result
of the Company's continuing focus on increasing Private Label/OEM business
and increases in utility market penetration.
Hardwire revenue increased by $420 thousand (43%) for the period ended June
30, 1997 compared to the same period ended June 30, 1996. The Company's
penetration of the utility market contributed nearly two-thirds of this
increase. Increases in the international and construction markets accounted
for the balance.
Gross Profit on sales for the three months ended June 30, 1997, increased by
$199 thousand (17%) compared to the three months ended June 30, 1996. This
increase is due to the significant increase in revenue of $530 thousand for the
three months ended June 30, 1997 as compared to the same period in 1996. The
gross margin as a percent of sales remained unchanged.
Operating Expenses for the three months ended June 30, 1997 decreased by $32
thousand (3%), compared to the three months ended June 30, 1996. Operating
expenses changed as described below:
Sales expenses decreased by $93 thousand for the three months ended June
30, 1997 as compared to the same period ended June 30, 1996. Reductions
occurred in commissions, benefits, seminars, promotional expenses and
postage. This decrease is due to a restructuring of the sales department
during fiscal 1997.
As reported in the March 31, 1997 annual report, the Company discontinued
the Network Response Systems (NRS) business group. The Company incurred no
expenses during the current period for NRS. Expenses for NRS decreased by
$107 thousand for the three months ended June 30, 1997 as compared to the
three months ended June 30, 1996.
Research and development expenses increased $40 thousand, for the three
months ended June 30, 1997, as compared to the same period ended June 30,
1996 due to increases in new product development and UL expenses.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations, continued
Expenses in the marketing department for the same three months increased
$23 thousand due to increases in wages, consulting and travel due to new
marketing and promotional opportunities.
General and administrative expenses increased $104 thousand for the three
months ended June 30, 1997 as compared to June 30, 1996 due to increases in
incentive compensation and travel to foreign countries to sign new
international customers to increase foreign sales.
Net Earnings for the three months ended June 30, 1997, increased to $43
thousand, an improvement of $230 thousand compared to the net loss of $187
thousand for the three months ended June 30, 1996. These improvements resulted
from improvements in revenue and gross profit coupled with reductions in
operating expenses.
Liquidity and Capital Resources:
Cash Flows From Operating Activities for the three months ended June 30, 1997
increased by $162 thousand compared to the three months ended June 30, 1996
providing the first positive cash flow from operating activities since September
1995. In addition to improvement in net income, the items that influenced this
increase are described below:
Receivables decreased by $193 thousand net of bad debt allowance during the
first quarter. This decrease is due primarily to payments received from the
Company's joint venture in Europe and the collection of a past due account
in the amount of $125,000.
Inventories increased by $242 thousand. This increase is due to a buildup
of raw materials and finished goods related to the increase in hardwire
sales. In addition, the Company is beginning to place raw material orders
for larger quantities to obtain better pricing.
Accounts payable decreased by $49 thousand during the first three months of
fiscal 1998. The Company has continued to improve its position with
suppliers. The Company has maintained adequate relationships with its
suppliers and remains on "open account" with all significant vendors.
Accrued liabilities increased $165 thousand for the period ended June 30,
1997. This increase is due to increases in incentive compensation and
payroll and fringe benefit accruals, which are affected by timing of actual
payments made.
Cash Flows used in Investing Activities increased for the three months ended
June 30, 1997 by $230 thousand compared to the three months ended June 30, 1996,
as a result of an investment in a state of the art axial component insertion
machine. This replaces an existing machine and will improve capacity and
productivity of the Company's circuit board assembly operation.
Cash Flows provided by Financing Activities increased by $66 thousand for the
three months ended June 30, 1997 compared to the three months ended June 30,
1996. This was the result of a note in the amount of $205,000 incurred to
finance the insertion machine described above, offset by repayments of notes
payable.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations, continued
Factors Affecting Future Results:
Although the Company generated net earnings for the current quarter, it's
financial condition remains guarded. Based on expected future revenues,
management believes it can fund its operations from internally generated cash
flows. 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 limited liquidity and financial condition.
This Form 10-Q contains forward-looking statements within the meaning of that
term in the Private Securities Litigation Reform Act of 1995 (Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934).
Additional written or oral forward-looking statements may be made by the Company
from time to time, in filings with the Securities and Exchange Commission or
otherwise. Readers are cautioned not to place undue reliance on any
forward-looking statements contained herein, which speak only as of the date
hereof. The Company undertakes no obligation to publicly release the result of
any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unexpected events.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A) Exhibits.
Exhibit 11 - Computation of Earnings Per Share
Exhibit 27 - Financial Data Schedule
B) None.
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.
EFI ELECTRONICS CORPORATION
(Registrant)
Date: August 14, 1997
/s/ Richard D. Clasen
---------------------
Chief Executive Officer, President and
Director (Principal Executive Officer)
/s/ David G. Bevan
------------------
Chief Financial Officer, Executive Vice
President & Secretary (Principal
Financial Officer)
EFI Electronics Corporation
Exhibit 11 - Computation of Earnings (Loss) per Share
June 30, 1997 and 1996
Weighted Average Common and Common Equivalent Shares Outstanding
Three months ended June 30, 1997
Shares Weighted Average
Outstanding Shares Outstanding
----------- ------------------
Common shares outstanding, March 31, 1997: 4,216,174 4,216,174
Additional shares outstanding due to:
Stock issued 0 0
Stock split 0 0
Stock acquired (Treasury) 0 0
Stock retired 0 0
---------- ----------
Common shares outstanding June 30, 1997: 4,216,174 4,216,174
========== ==========
Weighted Average Common and Common Equivalent Shares Outstanding
Three months ended June 30, 1996
Shares Weighted Average
Outstanding Shares Outstanding
----------- ------------------
Common shares outstanding, March 31, 1996: 3,173,822 3,173,822
Additional shares outstanding due to:
Stock issued 455,432 4,727
Stock split 0 0
Stock acquired (Treasury) 0 0
Stock retired 0 0
---------- ----------
Common shares outstanding June 30, 1996: 3,629,254 3,178,549
========== ==========
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,180
<SECURITIES> 0
<RECEIVABLES> 2,718,062
<ALLOWANCES> 36,761
<INVENTORY> 2,916,740
<CURRENT-ASSETS> 5,804,425
<PP&E> 4,718,067
<DEPRECIATION> 2,893,918
<TOTAL-ASSETS> 7,972,663
<CURRENT-LIABILITIES> 5,953,864
<BONDS> 963,996
0
0
<COMMON> 422
<OTHER-SE> 1,054,803
<TOTAL-LIABILITY-AND-EQUITY> 7,972,663
<SALES> 3,639,459
<TOTAL-REVENUES> 3,641,978
<CGS> 2,284,857
<TOTAL-COSTS> 1,211,286
<OTHER-EXPENSES> 23,050
<LOSS-PROVISION> 36,761
<INTEREST-EXPENSE> 130,139
<INCOME-PRETAX> 43,002
<INCOME-TAX> 0
<INCOME-CONTINUING> 43,002
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,002
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
