<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] 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 1-10927
VSI ENTERPRISES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 84-1104448
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5801 GOSHEN SPRINGS ROAD
NORCROSS, GEORGIA 30071
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(770) 242-7566
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
N/A
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL 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, and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
OUTSTANDING AT
CLASS OF SECURITIES MAY 10, 1999
-------------------
COMMON STOCK, $.001 PAR VALUE 12,300,144
- -------------------------------------------------------------------------------
<PAGE> 2
VSI ENTERPRISES, INC. AND SUBSIDIARIES
Index
<TABLE>
<CAPTION>
FINANCIAL INFORMATION Page No.
--------
<S> <C> <C>
PART I. Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
March 31, 1999 and December 31, 1998........................................... 3
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1999 and 1998...................................... 4
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1999 and 1998...................................... 5
Notes to Condensed Consolidated Financial Statements............................ 6
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations:
Financial Condition............................................................. 8
Results of Operations........................................................... 8
Liquidity and Sources of Capital................................................ 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk............. 11
PART II. Item 6. Exhibits and Reports on Form 8-K....................................... 12
</TABLE>
2
<PAGE> 3
VSI ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 494,699 $ 1,134,231
Accounts Receivable, net 3,835,478 5,975,254
Inventories, net 1,006,156 1,059,142
Demo inventory 125,477 136,883
Prepaid expenses and other assets 152,712 164,088
Current assets of discontinued operations 106,993 334,022
------------ ------------
TOTAL CURRENT ASSETS 5,721,515 8,803,620
PROPERTY AND EQUIPMENT, NET 984,488 1,048,983
OTHER ASSETS
Goodwill, net 931,796 955,688
Software development costs, net 73,246 75,349
Other long term assets 81,198 77,325
============ ============
$ 7,792,243 $ 10,960,965
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of notes payable
and short term borrowings $ 3,088,726 $ 2,795,324
Accounts Payable 1,669,053 2,235,852
Accrued Expenses 1,682,258 1,965,051
Deferred Revenues 1,452,203 1,522,416
Current liabilities of discontinued operations 223,597 334,022
------------ ------------
TOTAL CURRENT LIABILITIES 8,115,837 8,852,665
NOTES PAYABLE LESS CURRENT PORTION 0 1,105,655
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, authorized 15,000,000 shares of
$.001 par value; issued and outstanding
12,300,144 shares at March 31, 1999
and December 31, 1998 12,300 12,300
Additional paid in capital 48,183,581 48,209,039
Accumulated deficit (48,113,375) (46,877,847)
Cumulative comprehensive income (406,099) (340,847)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (323,594) 1,002,645
------------ ------------
$ 7,792,243 $ 10,960,965
============ ============
</TABLE>
The accompanying notes are an integral part of these statements
3
<PAGE> 4
VSI ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
MARCH 31, 1999
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
REVENUES $ 2,951,741 $ 2,438,798
COSTS AND EXPENSES
Cost of videoconferencing systems 869,249 1,725,723
Selling, general and administrative 2,780,967 3,065,662
Research and development 132,861 205,647
------------ ------------
3,783,077 4,997,032
------------ ------------
LOSS FROM OPERATIONS (831,336) (2,558,234)
Other expenses, primarily financing charges (226,361) (117,303)
------------ ------------
NET LOSS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (1,057,697) (2,675,537)
Income Taxes 0 0
------------ ------------
NET LOSS FROM CONTINUING OPERATIONS (1,057,697) (2,675,537)
LOSS FROM DISCONTINUED OPERATIONS (177,832) (228,877)
============ ============
NET LOSS $ (1,235,529) $ (2,904,414)
============ ============
Net loss per common share
Loss from continuing operations (0.09) (0.23)
Loss from discontinued operations (0.01) (0.02)
------------ ------------
(0.10) (0.25)
============ ============
Weighted average shares outstanding 12,300,144 11,625,233
============ ============
</TABLE>
The accompanying notes are an integral part of these statements
4
<PAGE> 5
VSI ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
MARCH 31, 1999
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(1,235,529) $(2,904,414)
Adjustments to reconcile net loss to net
cash used in operating activities:
Loss from discontinued operations 177,832 228,877
Depreciation and amortization 157,754 434,904
Allowance to reduce inventory to lower
of cost or market 20,000 40,427
Allowance for doubtful accounts 53,000 285,977
Changes in operating assets and liabilities:
Accounts receivable 2,086,776 858,092
Inventories 32,986 (1,297,384)
Rental and demonstration inventory 7,126
Prepaid expenses and other assets 11,376 138,304
Accounts payable (592,257) 546,300
Accrued expenses (333,327) (120,405)
Deferred revenues (70,213) 189,812
----------- -----------
Net cash provided (used) by operating activities
of continuing operations 308,398 (1,592,384)
Net cash (used) by discontinued operations (10,694) (5,386)
----------- -----------
Net cash provided (used) by operating activities 297,704 (1,597,770)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (55,858) (113,204)
Change in other assets (3,873) (32,522)
----------- -----------
Net cash (used) by investing activities (59,731) (145,726)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on notes payable
and short term credit facilities (812,252) (908,989)
Proceeds from exercise of stock options
and stock purchase plan 0 30,140
Proceeds from private placement net of
issuance costs 0 2,775,000
----------- -----------
Net cash (used) provided by financing activities (812,252) 1,896,151
----------- -----------
Effect of exchange rate changes on cash (65,253) (22,924)
Increase (decrease) in cash and cash and cash equivalents (639,532) 129,731
Cash and cash equivalents at beginning of the period 1,134,231 866,009
=========== ===========
Cash and cash equivalents at end of the period $ 494,699 $ 995,740
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements
5
<PAGE> 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
VSI ENTERPRISES, INC. AND SUBSIDIARIES
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are unaudited and
have been prepared by the management of VSI Enterprises, Inc. and subsidiaries
(the "Company" or "VSI") in accordance with the rules and regulations of the
Securities and Exchange Commission ("SEC"). Accordingly, certain information
and footnote disclosures usually found in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. In the opinion of the management of the Company, all adjustments
(consisting only of normal recurring adjustments) considered necessary for fair
presentation of the condensed consolidated financial statements have been
included, and the accompanying condensed consolidated financial statements
present fairly the financial position and the results of operations for the
interim periods presented. Operating results for the three month period ended
March 31, 1999 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1999. The condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and related footnotes included in the Company's 1998
Annual Report on Form 10-K, as filed with the SEC on April 15, 1999.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
During 1998, the shareholders of the Company approved a 1-for-4 reverse split
of shares of the Company's common stock, to be implemented at the discretion of
the Board of Directors. The board implemented the reverse split effective
January 15, 1999 to shareholders of record on January 14, 1999. All references
to shares of common stock and per share amounts have been restated to reflect
the effects of the reverse common stock split.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.
NOTE 3 - DISCONTINUED OPERATIONS
During the fourth quarter of 1998, the Company discontinued operations of its
wholly-owned system integration subsidiary, VSI Network Services, Inc., d/b/a
Integrated Network Services, Inc. (INS). Accordingly, operating results for the
discontinued operations have been reclassified and reported as discontinued
operations in accordance with Accounting Principles Board Opinion No. 30 for
the quarters ended March 31, 1999 and 1998.
NOTE 4 - NET INCOME (LOSS) PER SHARE
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share" requires the disclosure of basic net income (loss) per share and diluted
net income (loss) per share. Basic net income (loss) per share is computed by
dividing net income (loss) available to common shareholders by the
weighted-average number of common shares outstanding during the period and does
not include any other potentially dilutive securities. Diluted net income
(loss) per share gives effect to all potentially dilutive securities. Basic and
diluted net income (loss) are the same for the three month period ended March
31, 1999 and 1998 because the Company's potentially dilutive securities,
convertible debentures and stock options, are antidilutive in all periods
presented.
6
<PAGE> 7
NOTE 5 - ACCOUNTING FOR IMPAIRMENTS IN LONG-LIVED ASSETS
Long-lived assets and identifiable intangibles are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amounts
of assets may not be recoverable. Management periodically evaluates the
carrying value and the economic useful life of its long-lived assets based on
the Company's operating performance and the expected future undiscounted cash
flows and will adjust the carrying amount of assets which may not be
recoverable. Management believes long-lived assets in the accompanying
condensed consolidated balance sheets are appropriately valued.
NOTE 6 - COMPREHENSIVE INCOME
In 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income."
Comprehensive income includes the changes in equity resulting from transactions
with non-owners for periods reported. Foreign currency translation adjustments
represent the Company's only component of other comprehensive income. For the
three months ended March 31, 1999 and 1998, total comprehensive loss was
approximately $1,300,781 and $2,927,338, respectively.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's financial position or results of operations.
NOTE 8 - SHAREHOLDERS' EQUITY
During October 1998, the Company's Board of Directors authorized a stock
repurchase program that will allow the Company to purchase up to 250,000 shares
of its common stock over a one-year period. The authorization allows
repurchases to be made from time to time on the open market at prevailing
market prices or in negotiated transactions off the market. No shares will be
knowingly purchased from Company insiders or their affiliates. As of May 10,
1999, the Company had not repurchased any shares of its common stock. Any
future purchases will be financed from the Company's cash reserves.
7
<PAGE> 8
PART I
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
VSI ENTERPRISES, INC. AND SUBSIDIARIES
FINANCIAL CONDITION
Since December 31, 1998, the Company's total assets decreased $3,168,722, or
approximately 29% to $7,792,243, primarily as a result of an approximately 56%
decrease in cash and an approximately 36% decrease in accounts receivable.
Accounts receivable declined because sales for the quarter ended March 31, 1999
were lower than sales for the quarter ended December 31, 1998. Cash was
negatively impacted by the Company's operating loss for the quarter, and was
further reduced by an approximately 25% reduction in accounts payable.
Current liabilities as of March 31, 1999 were $8,115,837, a decrease of
$736,828, or approximately 8%, from December 31, 1998. The decrease was
primarily due to a decrease of approximately 25% in accounts payable.
RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1998
Results for the three months ended March 31, 1998 have been restated to reflect
the December 1998 closure of VSI Network Services, Inc., d/b/a Integrated
Network Services, Inc. (INS), a wholly-owned subsidiary of the Company.
Revenues for the three months ended March 31, 1999 were $2,951,741, an increase
of approximately 21% from revenues of $2,438,798 earned during the three months
ended March 31, 1998. The increase was due primarily to improved sales in
network reselling at the Company's ETI subsidiary related to higher than
anticipated chargebacks for disconnections and cancellations in the first
quarter of 1998.
Gross margin as a percentage of revenues for the three months ended March 31,
1999 was approximately 71%, as compared to approximately 29% for the three
months ended March 31, 1998. The increase was primarily due to higher margins
in the sale of videoconferencing products and services, and the fact that in
the first quarter of 1998, commissions at ETI were lower than usual due to
higher than anticipated chargebacks for disconnections and cancellations.
Selling, general and administrative expenses for the three months ended March
31, 1999 were $2,780,967, a decrease of $284,695, or approximately 9%, over for
the three months ended March 31, 1998. The decrease was primarily due to the
consolidation of operations at the Company's videoconferencing subsidiaries,
and ongoing efforts to cut costs throughout the Company.
The Company charges research and development costs to expense as incurred until
technological feasibility of a software product has been established. Software
development costs incurred after technological feasibility has been established
are capitalized and amortized over the useful life of the product. For the
three months ended March 31, 1999, the Company's research and development
expenses were $132,861, a decrease of approximately 35% over the three month
period ended March 31, 1998. The decrease was primarily due to the completion
in 1998 of projects related to the development of the Company's new
videoconferencing system product line, and to reductions in workforce.
Non-operating expenses for the three months ended March 31, 1999 were $226,361,
an increase of approximately 93%, from the three months ended March 31, 1998.
This increase was primarily due to accrued interest expense and other charges
related to the Company's term notes, and other financing-related charges.
8
<PAGE> 9
Loss from discontinued operations for the three months ended March 31, 1999 was
$177,832, a decrease of approximately 22% from the three months ended March 31,
1998. Management does not anticipate any additional expenses related to the
liquidation of the assets and liabilities of INS, a wholly-owned subsidiary
closed by the Company in December 1998.
Net loss for the three months ended March 31, 1999 was $1,235,529, a decrease
of approximately 57% from the net loss of $2,904,414 for the three months ended
March 31, 1998. The decrease in net loss was due primarily to higher margins in
the sale of videoconferencing products and services, higher margin commissions
from telephone network reselling at ETI and the Company's efforts to reduce
costs.
LIQUIDITY AND SOURCES OF CAPITAL
As of March 31, 1999, the Company had cash and cash equivalents of $494,699.
The Company's liquidity sources include existing cash and credit facilities. In
order to meet its cash flow requirements, the Company will require additional
funding in 1999. This additional funding could be in the form of debt, equity
or both. A reduction in operating expenses could also be affected in order to
maximize the Company's allocation of cash resources. However, there can be no
assurance that the Company will be able to obtain such financing if and when
needed, or that if obtained, such financing will be sufficient or on terms and
conditions acceptable to the Company.
Credit Facilities
VSI
- ---
Since June 1995, Videoconferencing Systems, Inc. (VSI), a subsidiary of the
Company, has had a revolving credit and security agreement with Fidelity
Funding of California Inc. This credit facility provides the Company with up to
$4,000,000 at an interest rate of prime plus 2% per annum. Funds available
under the credit facility are based on 80% of eligible VSI accounts receivable
invoices, with certain restrictions. The credit facility is secured by the
accounts receivable, inventory and certain fixed assets of VSI. At March 31,
1999, no amounts were owed to Fidelity Funding.
ETI
- ---
On October 8, 1998, ETI entered into a financing agreement with RFC Capital,
Inc., whereby RFC Capital, Inc. purchases eligible accounts receivable for 90%
of the accounts receivable amount, up to $1,500,000, at an interest rate of
prime plus 2.75% per annum. This amount may be increased, subject to additional
payment of commitment fees by ETI, to $5,000,000. If any account receivable is
not paid within 90 days, ETI is required to buy back the account receivable for
the full purchase price. The credit facility is secured by eligible accounts
receivable. As of March 31, 1999, approximately $737,000 was owed to RFC
Capital, Inc.
INS
- ---
In December 1996, VSI Network Services, Inc. (d/b/a Integrated Network
Services, or INS), a wholly owned subsidiary of the Company, established a
revolving credit and security agreement with Presidential Financial
Corporation. This credit facility provided INS with up to $750,000 at an
interest rate of prime plus 3% per annum. Funds available under the credit
facility are based on 80% of eligible accounts receivable invoices, with
certain restrictions. The credit facility is secured by accounts receivable,
inventory and fixed assets of INS.
With INS ceasing operations on December 31, 1998, VSI is obligated to repay the
balance owed Presidential Financial Corporation. On March 31, 1999, that amount
was approximately $138,000. The Company expects to repay the full amount during
1999 upon the collection of outstanding INS accounts receivable.
VSI n.v.
- --------
In February 1998, Videoconferencing Systems, n.v., a wholly owned subsidiary of
the Company, entered into a
9
<PAGE> 10
revolving credit and security agreement with Kredietbank, n.v. This credit
facility provides Videoconferencing Systems, n.v. with up to $550,000 at an
interest rate of U.S. prime plus 1% per annum. The credit facility is secured
by 137,500 shares of Common Stock of the Company, held in escrow by
Kredietbank, n.v. At March 31, 1999, approximately $149,000 was owed to
Kredietbank, n.v.
At March 31, 1999, Videoconferencing Systems, n.v. had a secured bank facility
with Generale Bank of approximately $161,000, of which approximately $151,000
was outstanding at that time.
CONVERTIBLE DEBENTURES/TERM NOTES
On February 23, 1998, the Company issued $3,000,000 of 5% Convertible
Debentures due February 2000 ("the Debentures") to Thomson Kernaghan & Co. Ltd.
("Thomson Kernaghan"), the proceeds of which were utilized for working capital
purposes. During 1998, $710,000 of debentures, plus accrued interest of
$13,531, were converted by the debenture holder into 445,956 shares of common
stock of the Company. The Company also paid $128,858 in accrued interest and
fees. In November 1998, the remaining debentures were converted into a $900,000
term note to Thomson Kernaghan, due May 16, 1999. As of March 31, 1999, the
outstanding balance under this note, including accrued interest and penalties,
was $1,006,257.
On April 22, 1999 the Company entered into an agreement with the Debenture
holder to restructure the term note. The agreement calls for the conversion of
the balance of the note plus accrued interest and penalties from April 1, 1999,
into shares of the Company's common stock, and the release of the Company's
intellectual property that was pledged as collateral for the note. The agreement
is contingent upon the Company meeting certain conditions, including the
conversion of $1,000,000 of the Company's 18 month term notes (due March 31,
2000) into shares of the Company's common stock (as of May 13, 1999, the Company
had received commitments to convert approximately $1.13 million), and the
receipt of $1,000,000 of additional equity. The shares of common stock required
by this agreement and the additional equity placement must be authorized by the
shareholders, and is on the agenda for the 1999 annual meeting of shareholders
to be held on June 11, 1999.
YEAR 2000
The Company has assessed the impact of the Year 2000 issue on its computer
systems and is in the process of remediating the affected hardware and
software.
The Company utilizes various computer workstations and software packages as
tools in running its accounting and operations areas. Most are PC-based and are
Year 2000 compliant, with the exception of some older workstations that will be
phased out by 2000. Also, the primary accounting systems at Videoconferencing
Systems, Inc. and at ETI are not currently Year 2000 compliant, and management
plans during 1999 to implement any necessary vendor upgrades and modifications
to ensure continued functionality with respect to any accounting software
problems associated with Year 2000.
With respect to the production of its own proprietary software and hardware,
the Company has taken the necessary steps to ensure that its proprietary
technology is Year 2000 compliant. The Company's videoconferencing products use
PC controllers of recent vintage that are computed in and displayed in
four-digit format. In addition, the Company's Omega(TM) software uses "C"
libraries that compute the date based on a count of the number of seconds from
January 1970. Those software libraries are in no danger of being out of
compliance before the year 2038.
Also, the Company has surveyed the vendors who supply key computer-based
components for its videoconferencing systems and services, and found that all
are Year 2000 compliant. The Company will continue to monitor and assess the
Year 2000 situation on an ongoing basis, especially in its dealings with new
vendors or suppliers, and will take appropriate corrective action as needed.
Contingency planning is a normal part of VSI's sales cycle, given lead time
for parts and installation windows. VSI has included Year 2000 concerns into
normal contingency planning without forming a separate department of task force
to address these concerns. The Company has not developed a separate Year 2000
contingency plan, since to date no adverse
10
<PAGE> 11
effect from the Year 2000 issue has been identified. Should it be determined
that any major vendors, service providers or partners may be negatively impacted
by the Year 2000 issue, the Company will develop contingency plans for affected
areas or make use of alternate suppliers.
Expenditures for the Year 2000 project have to date been immaterial and are
being expensed as incurred. These expenditures have not had, and are not
expected to have, a material impact on the consolidated financial position,
results of operation or cash flows of the Company.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this filing are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
such as statements relating to financial results and plans for future business
development activities, and are thus prospective. Such forward-looking
statements are subject to risks, uncertainties and other factors which could
cause actual results to differ materially from future results expressed or
implied by such forward-looking statements. Potential risks and uncertainties
include, but are not limited to, economic conditions, competition and other
uncertainties detailed from time to time in the Company's Securities and
Exchange Commission filings.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
11
<PAGE> 12
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
---------
The following exhibit is filed with this report:
27.1 Financial Data Schedule (for SEC use only)
27.2 Restated Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
--------------------
The following report on Form 8-K was filed during the quarter ended
March 31, 1999: Current Report on Form 8-K dated January 5, 1999 (relating to
the engagement of Grant Thornton LLP and the dismissal of Arthur Andersen LLP
as the Company's independent auditor for the year ended December 31, 1998).
12
<PAGE> 13
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.
VSI ENTERPRISES, INC.
Date: May 14, 1999 /s/ Julia B. North
------------------------ -----------------------------------------
President & Chief Executive Officer
/s/ Samuel D. Horgan
-----------------------------------------
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 495
<SECURITIES> 0
<RECEIVABLES> 3,835
<ALLOWANCES> 0
<INVENTORY> 1,006
<CURRENT-ASSETS> 5,722
<PP&E> 984
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,792
<CURRENT-LIABILITIES> 8,116
<BONDS> 0
0
0
<COMMON> 12
<OTHER-SE> (336)
<TOTAL-LIABILITY-AND-EQUITY> 7,792
<SALES> 2,952
<TOTAL-REVENUES> 2,952
<CGS> 869
<TOTAL-COSTS> 3,783
<OTHER-EXPENSES> 226
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,058)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,058)
<DISCONTINUED> (178)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,236)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,134
<SECURITIES> 0
<RECEIVABLES> 5,975
<ALLOWANCES> 0
<INVENTORY> 1,059
<CURRENT-ASSETS> 8,804
<PP&E> 1,049
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,961
<CURRENT-LIABILITIES> 8,853
<BONDS> 1,106
0
0
<COMMON> 12
<OTHER-SE> 991
<TOTAL-LIABILITY-AND-EQUITY> 10,961
<SALES> 2,439
<TOTAL-REVENUES> 2,439
<CGS> 1,726
<TOTAL-COSTS> 4,997
<OTHER-EXPENSES> 117
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,676)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,676)
<DISCONTINUED> (229)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,904)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
