<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 SEPTEMBER 30, 2000
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.
<TABLE>
<CAPTION>
OUTSTANDING AT
CLASS OF SECURITIES NOVEMBER 1, 2000
------------------- ----------------
<S> <C>
COMMON STOCK, $.001 PAR VALUE 15,139,353
</TABLE>
================================================================================
<PAGE> 2
VSI ENTERPRISES, INC. AND SUBSIDIARIES
Index
<TABLE>
<CAPTION>
FINANCIAL INFORMATION Page
----
No.
---
<S> <C>
PART I. Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
September 30, 2000 (unaudited) and December 31, 1999............................ 3
Condensed Consolidated Statements of Operations
Three Months and Nine Months Ended September 30, 2000 and 1999 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30, 2000 and 1999 (unaudited)....................... 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 Capital Resources................................................. 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk............. 11
PART II. Item 1. Legal Proceedings...................................................... 12
Item 6. Exhibits and Reports on Form 8-K....................................... 12
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
VSI ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
SEPTEMBER 30,
2000 DECEMBER 31,
(UNAUDITED) 1999
------------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,169,086 $ 798,826
Accounts receivable, net 1,360,879 986,754
Inventories, net 615,249 776,340
Prepaid expenses and other assets 112 --
Net current assets of discontinued operations -- 476,153
------------ ------------
TOTAL CURRENT ASSETS 4,145,326 3,038,073
PROPERTY AND EQUIPMENT, NET
Continuing operations 266,843 166,572
Discontinued operations -- 577,676
OTHER ASSETS
Software development costs, net 564,821 205,295
Investments 3,680,243 --
Other long term assets 14,614 14,614
Other assets of discontinued operations -- 908,303
------------ ------------
$ 8,671,847 $ 4,910,533
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current portion of capital lease payable and short term
borrowings $ 25,000 $ 105,907
Convertible debentures -- 939,750
Accounts payable 439,448 941,301
Accrued expenses 542,853 1,001,837
Deferred revenues 893,356 1,000,512
Current liabilities of discontinued operations 84,350 --
------------ ------------
TOTAL CURRENT LIABILITIES 1,985,007 3,989,307
CAPITAL LEASE PAYABLES LESS CURRENT PORTION 46,766 --
COMMITMENTS AND CONTINGENCIES -- --
REDEEMABLE MINORITY INTEREST -- 2,118,293
STOCKHOLDERS' EQUITY (DEFICIT)
Common stock, authorized 40,000,000 shares of
$.001 par value; issued and outstanding, 15,116,353 at
September 30, 2000 and 12,300,144 at December 31, 1999 15,116 12,300
Additional paid in capital 56,587,135 48,508,074
Accumulated deficit (50,198,420) (49,717,441)
Unrealized gain on investments 236,243 --
------------ ------------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) 6,640,074 (1,197,067)
------------ ------------
$ 8,671,847 $ 4,910,533
============ ============
</TABLE>
The accompanying notes are an integral part of these statements
3
<PAGE> 4
VSI ENTERPRISES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------------- -----------------------------
2000 1999 2000 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 907,963 $ 2,050,673 $3,584,146 $ 5,153,565
Cost of sales 452,017 1,073,484 1,865,902 2,611,815
Selling, general and administrative 765,875 1,004,705 2,438,912 3,531,703
Research and development 87,939 99,591 347,816 407,689
------------ ------------ ------------ ------------
1,305,831 2,177,780 4,652,630 6,551,207
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (397,868) (127,107) (1,068,484) (1,397,642)
Other income (expenses) 1,652 (379,677) (313,768) (650,756)
------------ ------------ ------------ ------------
LOSS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES (396,216) (506,784) (1,382,252) (2,048,398)
Income tax benefit -- -- 373,000 --
------------ ------------ ------------ ------------
LOSS FROM CONTINUING OPERATIONS (396,216) (506,784) (1,009,252) (2,048,398)
Income (loss) from discontinued operations, net of taxes -- 74,694 (32,556) (294,930)
Gain (loss) on disposal of subsidiary, net of taxes -- (167,537) 560,829 (167,537)
------------ ------------ ------------ ------------
NET LOSS $ (396,216) $ (599,627) $ (480,979) $ (2,510,865)
============ ============ ============ ============
Net income (loss) per common share (basic and diluted)
Continuing operations $ (0.03) $ (0.04) $ (0.07) $ (0.17)
Discontinued operations 0.00 (0.01) 0.04 (0.04)
------------ ------------ ------------ ------------
$ (0.03) $ (0.05) $ (0.03) $ (0.21)
============ ============ ============ ============
Weighted shares outstanding
Basic and diluted 15,048,402 12,300,144 14,377,101 12,300,144
</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
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------------
2000 1999
(UNAUDITED) (UNAUDITED)
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (480,979) $ (2,510,865)
Adjustments to reconcile net loss to net cash
(used) provided by operating activities:
(Gain) on sale of subsidiary (933,829) --
Depreciation and amortization 372,039 431,226
Changes in operating assets and liabilities:
Accounts receivable, net 125,875 2,087,910
Inventories, net 162,861 595,707
Prepaid expenses and other assets (96,463) 127,793
Accounts payable (501,853) (1,279,697)
Accrued expenses (454,552) (231,379)
Deferred revenues (107,156) (571,849)
Effect of operating activities of discontinued operations (110,320) (117,134)
------------ ------------
Net cash used by operating activities (2,024,377) (1,468,288)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, continuing operations (174,288) (11,764)
Purchases of property and equipment, discontinued operations (27,087) (52,015)
Change in other assets, continuing operations (433,298) 26,708
Change in other assets, discontinued operations 25,514 6,585
Proceeds from sale of subsidiary 1,287,835 --
------------ ------------
Net cash provided (used) by investing activities 678,676 (30,486)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on notes payable
and short term credit facilities (822,929) (2,396,642)
Proceeds from convertible debentures -- 939,750
Proceeds from exercise of stock options 154,876 295,510
Proceeds from private placement, net of issuance costs 4,054,876 --
Repurchase of minority interest (709,722) 1,955,096
------------ ------------
Net cash provided by financing activities 2,677,101 793,714
------------ ------------
Effect of exchange rate changes on cash -- 340,847
Increase (decrease) in cash and cash and cash equivalents 1,331,400 (364,213)
Cash provided by discontinued operations 38,860 49,023
Cash and cash equivalents at beginning of the period 798,826 1,099,718
------------ ------------
Cash and cash equivalents at end of the period $ 2,169,086 $ 784,528
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
VSI ENTERPRISES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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 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 and nine
month period ended September 30, 2000 are not necessarily indicative of the
results that may be expected for the year ending December 31, 2000. The
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and related footnotes included in the
Company's 1999 Annual Report on Form 10-K, as filed with the SEC on March 30,
2000.
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.
NOTE 2 - PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of the
Company and its wholly-owned and majority-owned subsidiaries. All significant
intercompany transactions and balances have been eliminated in consolidation.
NOTE 3 - DISCONTINUED OPERATIONS
On February 18, 2000, the Company and its network reselling subsidiary, VSI
Network Solutions Inc., doing business as Eastern Telecom, entered into a
definitive agreement to sell substantially all of the assets of Eastern Telecom
to PentaStar Communications, Inc., a Denver, Colorado based communications
services agent. The definitive agreement was subject to, among other things,
stockholder approval, which occurred at the annual meeting of VSI stockholders
held on May 18, 2000. We received initial consideration of approximately $1.8
million in cash, $500,000 of which will remain in escrow until specified
accounts receivable have been collected. In addition, we received 57,122 shares
of PentaStar Communications, Inc. stock, with a current value of approximately
$1,378,000. As a result of the decision to discontinue the Company's network
reselling business, operating results for Eastern Telecom have been reclassified
and reported as discontinued operations in accordance with Accounting Principles
Board Opinion No. 30 for all periods presented.
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.
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 in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-lived
Assets and Long-lived Assets to be disposed of," which requires that the
impairment loss be measured as the amount by which the carrying value of the
asset exceeds the fair value of the asset. Management believes long-lived assets
in the accompanying condensed consolidated balance sheets are appropriately
valued in accordance with SFAS No. 121.
NOTE 6 - REVENUE RECOGNITION
Revenues on systems sales are recognized upon shipment. If installation costs
relating to the systems sold are significant, revenue is only recognized for the
installation as the costs associated with the installation are incurred. Revenue
on maintenance contracts are recognized over the term of the related contract.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
We are involved in various claims and legal actions arising in the ordinary
course of business. In our opinion, the ultimate disposition of these matters
will not have a material adverse effect on our financial position or results
of operations.
NOTE 8 - COMPREHENSIVE INCOME
In 1998, we adopted SFAS No. 130, "Reporting Comprehensive Income."
Comprehensive income includes the changes in equity resulting from transactions
with non-owners for the periods reported. The unrealized gain on marketable
securities represents our only component of comprehensive income. Comprehensive
income (loss) for the three month and nine month period ended September 30, 2000
was $(342,518) and $(244,736), respectively.
NOTE 9 - INVESTMENTS
Investments consist primarily of equity securities, which are accounted for as
available for sale securities and are stated at fair value. Unrealized gains and
losses on these investments are included in the shareholders equity section of
the balance sheet.
NOTE 10 - CONVERTIBLE DEBENTURES
During the first quarter ended March 31, 2000, we raised $4,054,876 through the
sale of 1,351,625 shares of common stock at $3.00 per share to 38 accredited
investors. Approximately, $826,668 of the proceeds were used to repay the
balance of the 7% Secured Convertible Debentures held by Thompson Kernaghan &
Co. LTD.
NOTE 11 - MINORITY INTEREST
With the sale of Eastern Telecom to PentaStar Communications, Inc., we exchanged
524,126 of our common shares for 240,265 (24%) of Eastern Telecom shares held by
its minority shareholders. In so doing, we retired 68% of our put obligations
under a shareholders agreement that gave Eastern Telecom's minority shareholders
the right to put their shares to us at $6.50 per share. The remaining minority
interest shares were repurchased pursuant to the terms of a shareholders
agreement at the time of the sale of Eastern Telecom, which amounted to
$709,722.
7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION
During the nine months ended September 30, 2000, total assets increased
approximately 77% to $8,671,847 from $4,910,533, primarily as a result of a
$1,370,260 increase in cash and cash equivalents and a $3,680,243 increase in
long-term investments offset by a reduction in assets of $1,384,456 due to the
sale of our network reselling subsidiary, VSI Network Solutions Inc., doing
business as Eastern Telecom to PentaStar Communications. In March 2000, we
raised $4,054,876 through the sale of 1,351,625 shares of common stock at $3.00
per share to 38 accredited investors. Approximately $826,668 of the proceeds
were used to repay the remaining balance of the 7% Secured Convertible Debenture
held by Thompson Kernaghan & Co. Ltd. ("Kernaghan). The increase in long term
investments results from an equity transaction whereby we issued to ACIS, Inc.,
a Texas based, privately-held software technology company 500,000 shares of our
common stock in exchange for 250,000 shares of the common stock of ACIS. The
transaction was valued at the closing price of our common stock on the date of
the transaction, February 29, 2000. In addition, we received 50,000 additional
shares in ACIS for the development of an advanced operating kernel to support
our new product architecture for PC-based device control, which was valued based
on the estimated fair value of the services provided. On May 18, 2000 we
received $1,887,000 in cash from the sale of Eastern Telecom, of which $500,000
was placed in escrow pending the collection of specified accounts receivable. We
also received 57,122 shares of PentaStar Communications stock with present
market value as of September 30, 2000 of $1,378,000.
Current liabilities decreased by $2,004,300 or 50% principally due to the
repayment of the Kernaghan debt, other borrowings and a $960,865 decrease in
accounts payable and accrued expenses resulting from on-going efforts to pay
down amounts owed to vendors.
Additionally, we exchanged 524,126 of our common shares for 240,265 (24%) of the
Eastern Telecom shares held by its minority shareholders. By this transaction,
we retired 68% of our put obligations under a shareholders agreement that gave
Eastern Telecom's minority shareholders the right to put their shares to us at
$6.50 per share. The remaining minority interest shares were repurchased
pursuant to the terms of a shareholders agreement at the time of the sale of
Eastern Telecom which amounted to $709,722.
RESULTS OF OPERATIONS
Results for the three months and nine months ended September 30, 1999 have been
restated to reflect the discontinuance and sale of the operations of Eastern
Telecom.
REVENUES
Revenues were $907,963 and $2,050,673 for the three months ended September 30,
2000 and 1999, respectively. The 56% decrease from 1999 to 2000 was primarily
due to our continuing efforts to only pursue profitable sales and to become
smaller and more efficient, as we reduced our losses and began to pursue
strategies more consistent with our mission.
For the nine months ended September 30, 2000, revenues were $3,584,146,
reflecting a decrease of 30% from revenues of $5,153,565 from the same period in
1999. Sales decreased as we refocused our efforts on new business opportunities
related to our new "Ongoer" product (formerly known as "Voyager").
8
<PAGE> 9
GROSS MARGIN
Gross margin as a percentage of revenues was approximately 50% and 48% for the
three months ended September 30, 2000 and 1999, respectively. For the nine
months ended September 30, 2000 and 1999, respectively, gross margin as a
percentage of revenues was approximately 48% and 49%. The slight differences in
the gross margin percentages for both the three months and nine months periods
resulted from variations in the product mix.
SELLING, GENERAL & ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses were $765,875 and $1,004,705 for
the three months ended September 30, 2000 and 1999, respectively. For the nine
months ended September 30, 2000 and 1999, selling, general and administrative
expenses were $2,438,912 and $3,531,703, respectively. The decreases in both the
three months and nine months periods ended September 30, 2000 compared to the
similar periods in 1999 resulted from the consolidation of operations,
reductions in personnel and ongoing efforts to cut costs.
RESEARCH AND DEVELOPMENT EXPENSES
We charge 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. These
expensed costs were $87,939 and $99,591 for the three months ended September 30,
2000 and 1999, respectively. The expensed costs for the nine months ended
September 30, 2000 and 1999 were $347,816 and $407,689, respectively. During the
three months and nine months ended September 30, 2000, we capitalized $137,768
and $382,649, respectively, in software development costs related to new
products under development.
OTHER INCOME AND EXPENSES
Other income was $1,652 for the three months ended September 30, 2000 and
$379,677 in other expenses for the three months ended September 30, 1999. Other
expenses, primarily financing expenses, were $313,768 and $650,756 for the nine
months ended September 30, 2000 and 1999, respectively. Interest income in the
three months ended September 30, 2000 was the result of short term investments
in money market accounts. The expenses in both the three and nine month periods
ended September 30, 1999 and the nine month period ended September 30, 2000 are
primarily related to the amortization of warrant values, offset by a decrease in
interest expense, debt discount costs, and foreign currency exchange losses. The
decrease in other expenses for the nine months ended September 30, 2000 as
compared to the nine months ended September 30, 1999 was the result of the
repayment of the balance of the Thompson Kernaghan & Co. LTD. 7% Secured
Convertible Debentures and other debt from the proceeds of the private placement
in March 2000.
DISCONTINUED OPERATIONS
We discontinued the operations of our system integration subsidiary, VSI Network
Services, Inc., doing business as Eastern Telecom, on December 31, 1998. On
September 30, 1999, we sold our European subsidiary, Videoconferencing Systems,
n.v. to certain members of its executive team. Also, on February 18, 2000, we
entered into a definitive agreement to sell Eastern Telecom to PentaStar
Communications, Inc, and, as a result have accounted for Eastern Telecom as
discontinued operations. The sale of Eastern Telecom was approved at our annual
meeting of shareholders, which was held on May 18, 2000. We received initial
consideration of approximately $1.8 million in cash, $500,000 of which will
remain in escrow until specified accounts receivable have been collected. In
addition, we received 57,122 shares of PentaStar Communications stock, with a
current value of approximately $1,378,000. Immediately prior to the closing, we
repurchased the remaining redeemable minority interest in Eastern Telecom for
$709,722. Accordingly, operating results for these subsidiaries have been
reclassified and reported as discontinued operations. Operating income (loss)
from discontinued operations was $0 and ($32,556) for the three months and nine
months ended September 30, 2000 compared to an operating (loss) of $74,694) and
($294,930) for the three months and nine months ended September 30, 1999.
9
<PAGE> 10
GAIN ON DISPOSAL OF SUBSIDIARY
We realized a gain of $560,829 for the nine month period ended September 30,
2000, net of a taxes of $373,000, from the sale of Eastern Telecom. We also
realized a loss on the disposal of our European subsidiary, Videoconferencing
Systems, n.v. of $(167,537) for the three month and nine month periods ended
September 30, 1999.
NET LOSS
Net loss for the three months ended September 30, 2000 was $396,216; a decrease
of 34% from the net loss of $599,627 for the three months ended September 30,
1999. The decrease in the loss was the result of lower selling, general and
administrative expenses and financing charges. The net loss for the nine months
ended September 30, 2000 was $480,979, a decrease of $2,029,886 from the net
loss of $2,510,865 for the nine months ended September 30, 1999. The 81%
decrease was the result of the sale of Eastern Telecom for a net gain of
$933,829, before taxes and decreases in overhead expenses and financing costs.
LIQUIDITY AND CAPITAL RESOURCES
GENERAL
As of September 30, 2000, we had cash and cash equivalents of $2,169,086. As
part of the sale of Eastern Telecom to PentaStar Communications, Inc. we were
required to escrow $500,000 until specified accounts receivable have been
collected. As of September 30, 2000 approximately $175,000 of the $500,000 of
the proceeds has been collected but not yet released from the escrow account.
The Eastern Telecom assets will be combined with the assets of USTeleCenters,
Inc. and Vermont Network Services Corporation, which were acquired by PentaStar
on February 18, 2000. Under an earn-out provision in the sales agreement, we are
entitled to additional consideration from PentaStar based on the combined
financial results of these entities for calendar year 2000. We do not know at
this time, what if any, additional consideration will be forth coming.
We believe that existing cash will be sufficient to meet our cash flow
requirements at least until the end of 2000. We may require additional funding
in fiscal 2001 to fund our development activities. This additional funding could
be in the form of the sale of assets, debt, equity, or a combination of these
financing methods. However, there can be no assurance that we 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 us.
We expect to spend approximately $100,000 for capital expenditures in the
remainder of fiscal 2000.
FORWARD-LOOKING STATEMENTS
Certain statements contained herein 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 sales and 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, our ability
to complete the development and launch of the Company's new PC-based device
control product, named "Ongoer" and other uncertainties detailed from time to
time in the Company's Securities and Exchange Commission filings, including our
Annual Report on Form 10-K, our quarterly reports on Form 10-Q and our
Registration Statement on Form S-3 (Registration No. 333-35578).
10
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We have minimal exposure to market risks such as changes in foreign currency
exchange rates and interest rates. The value of the our financial instruments
are generally not significantly impacted by changes in the interest rates and we
have no investments in derivatives. Fluctuations in interest rates are not
expected to have a material impact on interest income or expense. Changes in
foreign currency exchange rates have no effect on financial statements
subsequent to September 1999, due to the sale of our European subsidiary.
11
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PART II
ITEM 1. LEGAL PROCEEDINGS
NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The following exhibits are filed with this report:
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule
(b) Reports on Form 8-K:
None
12
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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: November 13, 2000 /s/ Richard W. Egan
------------------------ ------------------------------
Chief Executive Officer
/s/ Robert W. Morris
------------------------------
Chief Financial Officer
13
