SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
of the
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ending March 31, 1999
Commission File No. 0-15927
COMPUTER POWER, INC.
(Exact name of small business issuer as specified in its Charter)
New Jersey 22-1981869
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
124 West Main Street, High Bridge, New Jersey 08829
(Address of principal or executive office) (Zip Code)
(908) 638-8000
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the prior 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
ninety (90) days.
YES [X]; NO [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date prior to filing: April 29,
1999; $0.01 par value per share; 2,852,700 shares of Common Stock.
Index on Page 2
Total number of pages - 13
COMPUTER POWER INC. & SUBSIDIARY
INDEX
Part I Basis of Presentation of Financial Statements 3
BALANCE SHEETS
As of March 31, 1999 and December 31, 1998 4
STATEMENTS OF OPERATIONS
For the three months ended March 31, 1999 and 1998 5
STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1999 and 1998 6
NOTES TO FINANCIAL STATEMENTS 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
RESULTS OF OPERATIONS AND FINANCIAL CONDITION 9
Part II Other Information 11
Signatures 12
COMPUTER POWER INC. & SUBSIDIARY
PART I - FINANCIAL INFORMATION
BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
The financial statements set forth herein are unaudited for the three
month periods ended March 31, 1999 and March 31, 1998 but, in the opinion of
the Company, all adjustments necessary to present fairly the financial
position and the results of operations for these periods have been made.
The accompanying unaudited financial statements have been prepared in
Accordance with the instructions to Form 10-QSB for quarterly reports under
Section 13 or 15(d) of the Securities Act of 1934, and therefore do not
include all information and footnotes necessary for fair presentation of
financial position, results of operations and cash flows in conformity with
generally accepted accounting principles.
The financial information included in this report has been prepared in
conformity with the accounting principles reflected in the financial
statements included in the Form 10-KSB as filed with the Securities
and Exchange Commission. Reference should be made to the notes to those
financial statements for a description of significant accounting policies,
commitments and other pertinent financial information.
COMPUTER POWER INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, 1999 December 31, 1998
(Unaudited) (Audited)
ASSETS --------------- -----------------
Current Assets
Cash and Cash Equivalents $ 70,233 $ 63,204
Accounts Receivable, less allowances
of $226,427 at March 31, 1999 and
$211,485 at December 31, 1998 1,171,221 1,478,937
Inventories 904,086 742,991
Prepaid Expenses and Other Current Assets 30,932 32,714
--------- ---------
Total Current Assets $2,176,472 $2,317,846
--------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost
Machinery, Equipment, and Furniture 1,290,268 1,280,783
Leasehold Improvements 333,274 333,274
Less: Accumulated Depreciation and
Amortization (1,292,812) (1,265,402)
--------- ---------
Net Property, Plant and Equipment 330,730 348,655
--------- ---------
TOTAL ASSETS $2,507,202 $2,666,501
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Notes and Other Debt Payable $2,252,617 $2,337,667
Current Maturities of Long Term Debt 846,527 775,694
Current Maturities of Capital Leases 60,154 53,143
Accounts Payable 1,038,551 798,866
Accrued Liabilities 807,014 1,014,221
--------- ---------
Total Current Liabilities $5,004,863 $4,979,591
--------- ---------
LONG TERM LIABILITIES
Capital leases excluding current
maturities 63,811 85,374
Long term debt excluding current
maturities 153,473 224,306
--------- ---------
Total Long Term Liabilities 217,284 309,680
--------- ---------
Total Liabilities $5,222,147 $5,289,271
--------- ---------
COMMITMENTS & CONTINGENCIES
SHAREHOLDERS' DEFICIT
Preferred Stock, par value $0.01 per share;
2,000,000 shares authorized, none issued
Common Stock, par value $0.01 per share;
12,000,000 shares authorized; 2,852,700
shares issued at March 31, 1999 and
2,602,700 shares issued at December 31,
1998 28,527 26,027
Capital in Excess of Par 3,764,619 3,757,119
Accumulated Deficit (6,433,403) (6,331,228)
Treasury Stock, 24,400 shares, at cost (74,688) (74,688)
--------- ---------
Total Deficit $(2,714,945) $(2,622,770)
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIT $ 2,507,202 $ 2,661,501
========= =========
See notes to the consolidated financial statements
COMPUTER POWER INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
--------------------------------
March 31, 1999 March 31, 1998
(Unaudited) (Unaudited)
NET SALES $ 1,635,922 $2,046,052
COST OF SALES 1,353,117 1,553,003
--------- ---------
GROSS PROFIT 282,805 493,049
OPERATING AND OTHER EXPENSES
Selling Expense 97,483 259,612
General and Administrative Expenses 229,833 276,790
Interest Expense, net (Note 5) 57,666 103,358
--------- --------
TOTAL OPERATING AND OTHER EXPENSES 384,482 639,760
--------- --------
NET LOSS $ (102,177) $ (146,711)
======== ========
EARNINGS PER SHARE AVAILABLE TO COMMON
SHAREHOLDERS (a):
Basic EPS-
Net Loss $ (.04) $ (.06)
======== ========
Weighted average common shares outstanding 2,811,633 2,578,300
========= =========
(a) Diluted EPS is not presented for either period as the effect of this
inclusion of potential shares would be antidilutive.
The accompanying notes to the consolidated financial statements
are an integral part of the financial statements
COMPUTER POWER INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
March 31, 1999 March 31, 1998
(Unaudited) (Unaudited)
-------------- --------------
CASH PROVIDED BY (USED FOR) OPERATING
ACTIVITIES:
Net Loss $ (102,177) $ (146,711)
Adjustments to reconcile net loss to
cash provided by (used for) Operating activities
Depreciation & Amortization 27,410 15,224
Changes in Current Assets and Liabilities
Accounts Receivable 307,716 (201,085)
Inventories (161,095) (59,375)
Prepaid Expenses and Other Current
Assets 1,782 11,318
Accounts Payable 239,685 117,106
Accrued Liabilities & Deferred Revenue (207,207) 94,936
-------- -------
Cash Provided by (Used for) Operating
Activities 106,114 (168,587)
CASH USED FOR INVESTING ACTIVITIES:
Capital Expenditures (9,485) (29,459)
------- --------
Cash (Used for) Investing Activities (9,485) (29,459)
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Proceeds from Issuance of Debt 0 198,021
Proceeds from the issuance of Stock 10,000 0
Repayment of Capital Leases (14,550) 0
Repayment of Debt (85,050) 0
------- -------
Cash Provided by (Used for) Financing
Activities (89,600) 198,021
------- -------
(DECREASE) INCREASE IN CASH & CASH EQUIVALENTS 7,029 (25)
------- -------
CASH & CASH EQUIVALENTS, beginning of period 63,204 67,300
CASH & CASH EQUIVALENTS, end of period 70,233 67,275
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Income Taxes Paid 0 0
Interest Paid 51,177 35,805
The accompanying notes to the consolidated financial statements are
an integral part of the financial statements.
COMPUTER POWER INC. & SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
Note 1: The financial information as of March, 31, 1999 and the three
months ended March 31, 1999 are but in the opinion of the Company, all
adjustments necessary to present fairly the financial position and the
results of operations for these periods have been made. Reference
should be made to the notes to the financial statements included in the
Company's Form 10-KSB for a description of significant accounting
policies, commitments and other pertinent financial information.
Note 2: Inventories, which include material, labor and manufacturing
overhead costs, are stated at the lower of cost (on a first in, first
out basis) or market.
Note 3: At March 31, 1999 and December 31, 1998, notes payable and current
debt included amounts due to related parties and other lenders as
follows:
March 31, 1999 December 31,1998
Revolving credit agreement due -------------- ----------------
January 31, 2000, bearing interest
at prime plus fees based upon
performance $ 861,164 $ 910,098
Subordinated, unsecured notes to a
related entity due July 1, 1999 bearing
interest at 9.5%, with quarterly
interest payments 565,000 565,000
Term loan, due January 31, 2000 bearing
interest at prime plus 3.5% 248,884 285,000
Subordinated, unsecured note payable to a
related entity due February 1, 1998,
bearing interest at 10%, with quarterly
interest payments 250,000 250,000
Subordinated, unsecured note payable to a
director due July 1, 1999, bearing
interest at 9.5%, with quarterly
interest payments 150,000 150,000
Subordinated, unsecured demand note, bearing
interest at 8% 96,569 96,569
Subordinated, unsecured note payable due
October 31,1997 bearing interest at 10%,
with quarterly interest payments 32,000 32,000
Subordinated, unsecured note payable to a
director due February 1, 1998, bearing
interest at 10% 30,000 30,000
Subordinated, unsecured note payable to a
director due October 31, 1997 bearing
interest at 10% 19,000 19,000
--------- ---------
Total Notes and Other Debt Payable 2,252,617 2,337,667
Long-term debt consists of the following at
March 31,1999 and December 31, 1998:
March 31, 1999 December 31, 1998
-------------- -----------------
Subordinated note, due August 1, 2000
bearing interest at prime plus 4%,
payable monthly $ 700,000 $ 700,000
Convertible debenture, due November 2000
bearing interest at 9.5%, payable monthly 300,000 300,000
--------- ---------
Total Long Term Debt 1,000,000 1,000,000
Less: Current Portion 846,527 775,694
--------- ---------
Net Long Term Debt 153,473 224,306
========= =========
The Company has a revolving credit agreement and a loan with an asset
based lender. The revolving agreement provides for a maximum borrowing
of 85% of eligible accounts receivable, as defined. The loan provides
for a maximum borrowing of 50% of eligible inventory, as defined. The
total amount of revolving credit and loan borrowing is capped at $2,000,000.
Note 4. At March 31, 1999 the Company had 1,899,079 stock subscription
warrants and 75,000 stock options outstanding. The stock
subscription warrants are exercisable at various prices range from
$0.125 to $0.40 per share. The exercise period for the warrants
ranges from June 1, 1996, through June 1, 2006. The stock options were
issued under an approved stock option plan at market prices at the time
of issue. At March 31, 1999, no warrants or options were determined
to be common stock equivalents because the average market price for the
first quarter of 1999 was lower than the exercise price of the warrants
and options.
COMPUTER POWER INC. & SUBSIDIARY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND OPERATING
RESULTS
1. GENERAL COMMENTS
FORWARD-LOOKING STATEMENTS: NO ASSURANCES INTENDED
This report contains certain forward-looking statements regarding the Company,
its business prospects and results of operations that are subject to certain
risks and uncertainties posed by many factors and events that could cause the
Company's actual business, prospects and results of operations to differ
materially from those that may be anticipated by such forward looking
statements. Factors that may affect such forward-looking results, such as,
the Company's ability to successfully develop new products for new markets;
acceptance of new products; the possibility of the Company losing a large
customer or key personnel; the Company's ability to manage growth; periodic
cash shortages; the impact of the competition on the Company's revenue; delays
in the Company's introduction of new products; and the possibility of the
Company failing to keep pace with emerging technologies.
Accordingly no assurances can be given that events or results mentioned in any
such forward-looking statements will in fact occur. When used in this
discussion, words such as "believes" and phrases such as "are expected"
and similar expressions are intended to identify forward looking statements,
but are not the exclusive means of identifying forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this report. The Company
undertakes no obligation to revise any forward-looking statements in order to
reflect events or circumstances that may subsequently arise. Readers are
urged to carefully review and consider the various disclosures made by the
Company in this report and in the Company's reports filed with the Securities
and Exchange Commission.
The analysis of the Company's financial condition, capital resources and
operating results should be viewed in conjunction with the accompanying
consolidated financial statements, including the notes thereto.
The Company recorded a net loss of $102,177 during the first quarter of 1999,
or ($.04) per share compared to a net loss of $146,711 or ($.06) per share
during the first quarter of 1998. Sales for the first quarter of 1999 were
$410,130 lower than the first quarter of 1998.
2. REVENUES
For the three months ended March 31, 1999 net sales were $1,635,922 or 20%
below the first quarter of 1998. The Astralite product line experienced an
44% decline in sales from $595,000 in 1998 to 259,000 in 1999, primarily due
to a planned phase out of the low margin Astralite business and competitive
pressures in the marketplace. The Company has experienced a steady and
continuous decline in its Astralite business due to a 1998 change in certain
lighting requirements that caused extensive product redesign. These
modifications resulted in increasing the manufacturing costs. Management is
currently in the process of deciding a more appropriate strategy for this
business segment, including a possible sale of the entire business segment.
3. COST OF SALES
Cost of sales declined from $1,553,503 for the period ending March 31, 1998 to
$1,353,117 for the period ending March 31, 1999. The decline in the cost of
sales is primarily due to lower sales volume, a change in the mix of sales and
the material component of those sales.
4. OPERATING AND OTHER EXPENSES
Operating and other expenses for the quarter totaled $383,482 compared to
$639,760, representing a decrease of $255,278.
Selling expenses were $97,483 for the first quarter of 1999 versus $259,612
for the same period in 1998. This was primarily due to a reduction in
salaries, lower commissions and reduced advertising and promotion expenses.
General and administrative expenses were approximately $229,833 in 1999
compared to $276,790 in the same quarter in 1998. The decrease was primarily
due to a reduction in personnel and other expense reductions.
Interest expense for the first quarter of 1999 was $57,660 compared to
$103,358 in 1998. The decrease primarily resulted from interest forgiveness
by a major creditor of the Company.
5. LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company's operations generated $106,114 in cash. This
was the result of a $307,716 decrease in accounts receivable and an increase
of $32,478 in accounts payable and other liabilities. This
additional cash flow from operations was primarily used to reduce bank
borrowings and capital leases by $99,600. The Company received $10,000 in cash
from the sale of stock to its President. As a result, cash for the quarter
improved by $7,029.
The Company's financial resources are primarily borrowings available to it
through its revolving credit agreement and inventory loan facilities. At March
31, 1999, the Company has no additional funds available under its line of
credit. Historically, the Company has successfully managed to meet its
financial commitments during periods of low cash availability largely by
extending its vendors. Accounts payables are currently approximately 45 days
beyond normal trade terms. The Company feels that an additional $100,000-
$200,000 in supplemental cash is required to avoid vendor credit problems and
continue certain new strategic projects.
As noted in Note (12) to the Company's audited Consolidated Financial
Statements for the year ended December 31, 1998, in January, 1999 Public
Access Lighting, L.L.C. ("PAL") purchased certain Company notes, warrants
and shares of Common stock. At that time, PAL stated its intent to
recapitalize the Company with new financing and to assist in a marketing
association with the Company. Negotiations with PAL are ongoing and there is
no assurance that an agreement will be reached. Thus, the Company is unable
to determine whether its efforts in this regard will be successful. If the
Company is unsuccessful in these initiatives and unable to secure other
alternative sources of financing, it may be forced to seek the protection of
the federal bankruptcy laws.
There were 2,811,633 diluted weighted average common shares outstanding for
the period ending March 31, 1999 and 2,578,300 for the same period in 1998.
For the three months ending March 31, 1999, and 1998 the effects of options
and warrants were not considered when calculating fully diluted earnings per
share, since the results would have been anti-dilutive.
During 1998 the Company has purchased a year 2000 compliant enterprise
resource planning system, and will begin implementation training in the first
quarter of 1999, with a go live date of second quarter 1999. The cost of
compliance and its effect on future results of operations is not anticipated
to be material in any given year.
COMPUTER POWER INC. & SUBSIDIARY
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
None
ITEM 2. CHANGE IN SECURITIES:
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
None
ITEM 5. OTHER INFORMATION:
Mr. John M. Perry resigned from the Board of Directors and as President
and Chief Executive Officer for personal reasons, effective
April 12, 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
a) Exhibits: Resignation and Separation Agreement and General Release
between John M. Perry and Computer Power, Inc., effective
April 12, 1999.
b) Reports on Form 8-K:
1. CHANGE OF CONTROL OF REGISTRANT, dated February 9, 1999.
2. ADMENDMENT TO CHANGE OF CONTROL, as originally filed on
February 9, 1999, and filed under Form 8K/A dated February 22,
1999 and filed on February 23, 1999.
COMPUTER POWER INC. & SUBSIDIARY
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.
Date: May 14, 1999 /s/ Paul A. Kohlmescher
------------------------------------
Paul A. Kohlmescher
Chief Financial Officer & Controller
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
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<RECEIVABLES> 1,130,513
<ALLOWANCES> 226,427
<INVENTORY> 904,806
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<PP&E> 1,623,542
<DEPRECIATION> 1,292,812
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0
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<COMMON> 28,527
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<TOTAL-LIABILITY-AND-EQUITY> 2,507,202
<SALES> 1,635,922
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<CGS> 1,353,117
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<OTHER-EXPENSES> 327,316
<LOSS-PROVISION> 0
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<INCOME-PRETAX> (102,177)
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