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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly Commission file
period ended: number:
December 31, 1996 0-26614
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MVSI, INC.
(Name of Small Business Issuer as Specified In Its Charter)
Delaware 52-1707718
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8133 Leesburg Pike, Suite 750, Vienna, VA 22182
(Address of principal executive offices) (Zip code)
(703) 356-5353
(Company's telephone number, including area code)
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Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 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 past 90 days. Yes X
---
No____
As of December 31, 1996, 10,755,000 shares of the Registrant's Common
Stock, $.01 par value were outstanding.
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MVSI, INC.
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 12
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 15
SIGNATURES 16
2
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PART I. FINANCIAL INFORMATION
Item 1: Financial Statements
MVSI, Inc. and Subsidiaries
Contents
Interim Consolidated Financial Statements
Interim Consolidated Balance Sheets 4
Interim Consolidated Statements of Operations 5
Interim Consolidated Statements of Cash Flows 6
Notes to Interim Consolidated Financial Statements 7
3
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MVSI, Inc. and Subsidiaries
Interim Consolidated Balance Sheets
December 31, September 30,
1996 1996
---- ----
Assets (Unaudited) (Audited)
Current Assets
Cash and cash equivalents $ 754,303 $ 313,890
Investments 4,199,807 5,881,202
Accounts receivable, net of allowance for
doubtful accounts 5,194,262 4,555,259
Note receivable - 500,000
Inventory 2,569,805 2,612,539
Tax credits and income tax receivable 410,938 405,717
Prepaid expenses 406,199 348,302
---------- ----------
Total Current Assets 13,535,314 14,616,909
Property and Equipment, net 509,654 383,518
Capitalized Software Costs 1,464,912 1,164,182
Note receivable 1,000,000 -
Goodwill 2,667,049 2,735,638
Deferred Tax Asset 1,332,209 1,158,430
Other Assets 102,314 101,692
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$20,611,452 $20,160,369
---------- ----------
---------- ----------
Liabilities and Stockholders' Equity
Current Liabilities
Line of credit and financing arrangement $1,020,550 $1,099,973
Accounts payable and accrued liabilities 3,307,573 3,731,002
Shareholder loans and interest 226,637 222,395
Advance deposits 339,885 761
---------- ---------
Total Current Liabilities 4,894,645 5,054,131
Stockholders' Equity
Common stock, $.01 par value, 50,000,000 shares
authorized, 10,755,000 and 10,740,000 shares
issued and outstanding, respectively 107,550 107,400
Stock subscription receivable (150,000) (150,000)
Additional paid-in capital 20,637,416 20,577,566
Accumulated deficit (4,875,474) (5,475,602)
Unrealized loss on investments available for sale (33,913) (59,786)
Cumulative translation adjustment 31,228 106,660
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Total Stockholders' Equity 15,716,807 15,106,238
---------- ----------
$20,611,452 $20,160,369
---------- ----------
---------- ----------
The accompanying notes are an integral part of these statements.
4
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MVSI, Inc. and Subsidiaries
Interim Consolidated Statements of Operations
Three Months ended December 31, 1996 1995
---- ----
(Unaudited) (Unaudited)
Sales $8,379,933 $3,570,142
Cost of Sales 6,456,011 2,646,041
---------- ----------
Gross Profit 1,923,922 924,101
Expenses
Selling 509,532 95,837
Administrative 816,820 531,877
Research and development, net of tax credits 30,201 76,816
Depreciation and amortization 81,824 15,531
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1,438,377 720,061
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Earnings from Operations 485,545 204,040
Interest Income 192,100 134,063
Interest and Financing Charges (91,296) (7,744)
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Earnings Before Income Taxes 586,349 330,359
Income Tax (Benefit) Provision
Current 110,000 -
Deferred
(123,779) -
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(13,779) -
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Net Earnings $600,128 $330,359
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-------- --------
Earnings per Share $0.06 $0.03
-------- --------
-------- --------
The accompanying notes are an integral part of these statements
5
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MVSI, Inc. and Subsidiaries
Interim Consolidated Statements of Cash Flows
Three Months ended December 31,
1996 1995
---- ----
(Unaudited) (Unaudited)
Increase (Decrease) in Cash and Cash Equivalents
Cash Flows from Operating Activities
Net income $600,128 $330,359
-------- --------
Adjustments to reconcile net income to net cash
from operating activities
Deferred income taxes (13,779) -
Depreciation and amortization 81,824 23,909
(Gain) loss on foreign exchange (31,228) 103,363
Changes in operating assets and liabilities:
(Increase) in accounts receivable (636,067) (916,377)
Decrease (increase) in inventory 27,457 (429,781)
(Increase) in tax credits and
income taxes receivable (7,898) (152,775)
(Increase) decrease in prepaid expenses (58,383) 79,138
(Increase) in other assets (623) (12,654)
Increase (decrease) in advance deposits 339,129 (38,878)
(Decrease) in accounts payable and accrued
liabilities (585,609) (195,495)
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Net Cash (Used in) Operating Activities (285,049) (1,209,191)
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Cash Flows from Investing Activities
Borrowings on margin against investments 1,707,268 (12,633)
Property, plant and equipment purchases (136,930) (31,555)
Capitalized software costs (300,730) (260,381)
Loan to affiliated entity (500,000) -
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Net Cash Provided by (Used in) Investing Activities 769,608 (304,569)
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Cash Flows from Financing Activities
Net (decrease) increase in line of credit (77,411) 55,970
Proceeds from shareholder loans 4,242 -
Payment of shareholder loans - (300,000)
Payment of debt - (4,015)
Proceeds from issuance of common stock 150 -
Proceeds from conversion of warrants 59,850 180
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Net Cash (Used in) Financing Activities (13,169) (247,865)
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Effect of Exchange Rate Changes on Cash (30,977) 45,433
---------- --------
Net Increase (decrease) in Cash 440,413 (1,716,192)
Cash at Beginning of Period 313,890 2,343,036
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Cash at End of Period $754,303 $626,844
--------- ----------
--------- ----------
The accompanying notes are an integral part of these statements
6
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MVSI, Inc. and Subsidiaries
Notes to Interim Consolidated Financial Statements
December 31, 1996
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and
with the instructions to Form 10-QSB. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation
have been included. The results of operations for the three months ended
December 31, 1996 are not necessarily indicative of the results to be
expected for the full year. For further information, refer to the
financial statements and footnotes included in the Company's audited
financial statements for the fiscal year ended September 30, 1996.
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying interim consolidated financial statements include the
accounts of MVSI, Inc. (a Delaware corporation), and its three wholly owned
subsidiaries: MVS Modular Vision Systems, Inc. (MVS-Canada), a Montreal,
Quebec-based corporation engaged in the design and manufacture of
proprietary machine vision products and systems; Socrates, Inc. (Socrates),
a Gaithersburg, Maryland-based corporation, which integrates, installs and
supports high-end computer and communication equipment; and JMR
Distributors, Inc. (JMR), a Lorton, Virginia-based corporation specializing
in the purchase and sale of computer memory chips and network equipment
(collectively referred to as the "Company"). The results of operations of
Socrates are included in the accompanying financial statements since the
July 1, 1996 acquisition date. Significant intercompany accounts and
transactions have been eliminated in consolidation.
Revenue Recognition
Sales are recognized upon shipment of a finished product when title to the
product transfers to the customer. Typical terms of sale do not provide
the customer with the right of return except for defective products, which
are covered by the Company's warranty. Revenue billed in advance of
customer acceptance is deferred until such time as acceptance occurs.
Amounts received from customers prior to shipment are recorded as deposit
liabilities.
Cash and Cash Equivalents
Cash and cash equivalents include cash and money market accounts.
Investments
Investments consist of short-term U.S. treasury notes, net of margin loans
which bear interest at 7 1/2 percent. In accordance with Statement of
Financial Accounting Standards No. 115, the Company has classified these
investments as available for sale, and recorded the investments at market
value at December 31, 1996 and 1995. The Company has not realized any
proceeds from the sale of securities during the three months ended
December 31, 1996 and 1995.
7
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MVSI, Inc. and Subsidiaries
Notes to Interim Consolidated Financial Statements--Continued
December 31, 1996
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Accounts Receivable
Accounts receivable are stated at the unpaid balances, less allowance on
collectible accounts. Management periodically reviews its outstanding
accounts receivable to assess collectibility of balances based on past
experience and evaluation of current adverse situations which may affect
collectibility of receivables. As of December 31, 1996, management has
established an allowance for doubtful accounts of approximately $140,000.
Inventory Valuation
Inventory is valued at the lower of cost and market. Cost is determined on
a first-in, first-out (FIFO) basis.
Management evaluates obsolete and slow-moving inventory at each reporting
date and excludes such inventory from the valuation. No reserve to record
inventory at lower of cost or market was deemed necessary at December 31,
1996. The value of inventories written off because of obsolescence or slow
movement has not been material to date.
Property and Equipment
Property and equipment are carried at cost, net of an allowance for
accumulated depreciation and amortization. Depreciation is computed on
equipment and furniture, principally using the double-declining balance
method over estimated lives ranging from five to seven years.
Demonstration and research equipment is depreciated on a straight-line
basis over a four-year period. Leasehold improvements are amortized on a
straight-line basis over the shorter of the lease term or estimated useful
lives of the related assets.
Capitalized Software Costs
Beginning in fiscal year 1995, certain software development costs not
reimbursed by the Canadian government have been capitalized in accordance
with Statement of Financial Accounting Standards No. 86. Software
development costs incurred subsequent to achievement of technological
feasibility, and not reimbursed by the Canadian government, were not
material in previous years. Technological feasibility occurs when the
Company has completed all planning and testing activities necessary to
establish that the product can be produced to meet its design
specifications, including functions, features and technological performance
requirements. No amortization has been recorded in the accompanying
financial statements pending release of the associated products.
Management believes that these products will be available for sale during
late fiscal year 1997. When these products are ready for sale, the
Company's policy will be to amortize capitalized software costs by the
greater of (a) the ratio the current gross revenue for a product bears to
the total current and anticipated future gross revenue for that product or
(b) the straight-line method over the remaining economic life of the
product including the period being reported on. It is reasonably possible
that those estimates of anticipated future gross revenue, the remaining
estimated economic life of the product, or both will be reduced
significantly in the near term. As a result, the carrying amount of the
capitalized software costs may be reduced materially in the near term.
8
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MVSI, Inc. and Subsidiaries
Notes to Interim Consolidated Financial Statements--Continued
December 31, 1996
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Goodwill
Goodwill represents the excess of cost over the fair value of net assets
acquired in business combinations accounted for as purchases. Goodwill is
being amortized on the straight-line method over ten years. Amortization
expense charged to operations for the three months ended December 31, 1996
and 1995 was $68,589 and $11,250, respectively.
Research and Development Costs
Research and development costs are expensed as incurred. The Company,
however, is eligible to receive tax credits for certain research and
development costs incurred from both the Canadian federal government and
the Province of Quebec. Tax credits received or due from the Canadian
federal government for research and development costs incurred can be
realized only as an offset to future taxes payable from income generated in
Canada. These tax credits can be carried forward up to ten years from the
date generated.
Tax credits received or due from the Province of Quebec for research and
development costs incurred have been offset against current research and
development expenditures and are included as a receivable in the
accompanying balance sheet, as such amounts are currently refundable in
cash in the year following the year in which they are incurred.
Equipment used in research and development activities which has alternative
future uses is capitalized and depreciated.
Income Taxes
The Company has net operating loss carryforwards and tax credit
carryforwards to offset future taxable income and taxes payable. Although
the Company has recognized income before income taxes through December 31,
1996, this has not resulted in the recognition of income tax expense due to
the existence of available net operating loss carryforwards. Deferred
taxes are recognized, subject to a valuation allowance, for temporary
differences in the timing of recognition of certain income and expenses.
Earnings Per Share
Earnings per share (EPS), both primary and fully diluted, are computed,
under the modified treasury stock method, and are based on the weighted
average number of shares actually outstanding plus the shares that would be
outstanding assuming conversion, at the beginning of the year, of the
Company's Class A and Class B warrants which are considered to be common
stock equivalents. As of December 31, 1996 and 1995, the Company's common
stock equivalents are anti-dilutive. Accordingly, primary and
fully-diluted earnings per share are not presented and only the basic
earnings per share computation is disclosed. The weighted average number
of common shares outstanding used in the basic EPS, computed without regard
to common stock equivalents, was 10,746,625 and 10,240,000 for the three
months ended December 31, 1996 and 1995, respectively.
9
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MVSI, Inc. and Subsidiaries
Notes to Interim Consolidated Financial Statements--Continued
December 31, 1996
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--Continued
Using Estimates in Preparing Financial Statements
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Reclassifications
Certain prior period amounts have been reclassified to conform to the
current period presentation.
Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate the value:
The carrying amount approximates fair value for cash and cash equivalents,
accounts receivable, notes receivable, accounts payable, line of credit and
other accrued liabilities.
Investment securities classified as current assets are based on quoted
market price.
Translation of Foreign Currency and Concentration of Credit Risk
A portion of the Company's operations are transacted in Canadian dollars.
The balance sheet of Canadian operations is translated into U.S. dollars at
the year-end rate of exchange, and all statement of operations items are
translated at the weighted average exchange rates for the year. The
resulting translation adjustments are made directly to a separate component
of stockholders' equity.
The Company's customers are not concentrated in any specific geographic
region. As a matter of policy, the Company requires its larger customers
to furnish letters of credit (and in some instances, advance deposits) to
minimize credit risk to the Company after shipment of the products. For
other customers, the Company reviews a customer's credit history before
extending credit.
NOTE B--SUBSEQUENT EVENTS
Restructuring of e-Net, Inc. Relationship
On January 14, 1997, MVSI announced the restructuring of its relationship
with e-Net, Inc., a Washington, D.C. area based telecommunications products
and services company. As previously reported, MVSI announced its intention
in August, 1996 to acquire e-Net, Inc., a Delaware corporation, in an
exchange of securities valued in August, 1996 at approximately $60 million,
and approximately $5.3 million in operating cash over a two-year period,
subject to obtaining a fairness opinion and the ratification by a majority
of MVSI shareholders at its next shareholders meeting.
10
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MVSI, Inc. and Subsidiaries
Notes to Interim Consolidated Financial Statements--Continued
December 31, 1996
NOTE B--SUBSEQUENT EVENTS--Continued
However, certain uncontrollable events negatively affected the proposed
acquisition: particularly, the expulsion on December 5, 1996 of MVSI's
former underwriter, investment banker and principal market maker from the
securities industry. This action severely impacted the trading volume and
depressed the price of MVSI's securities and thereby substantially
decreased the value of the MVSI securities to be exchanged in the proposed
acquisition of e-Net.
As a result of this adverse and untimely development, MVSI and e-Net have
agreed that it is not in the best interests of the shareholders of either
company to proceed with the proposed acquisition of e-Net by MVSI. As of
December 31, 1996, MVSI had provided e-Net $1,000,000 in working capital
(see note receivable in accompanying balance sheet) and had on January 14,
1997 provided e-Net an additional $250,000 in working capital, pursuant to
a promissory note under an October 1996 agreement. Terms of the promissory
note include the payment of interest at 9% per annum. In the new
agreement, dated January 14, 1997, e-Net has granted MVSI, for the $1.25
million loan made to e-Net, a five-year conversion option to acquire e-Net
securities at a fixed price in future financing obtained by e-Net from
other sources. This conversion option may be exercised, at MVSI's
discretion, in lieu of MVSI demanding cash repayment of the loan during the
five-year period. As a result of the restructured agreement, the
$1,000,000 note receivable at December 31, 1996 has been reclassified as a
long-term asset. In addition, MVSI has acquired a perpetual original
equipment manufacture (OEM) license to e-Net's Telecom 2000, a proprietary
telecommunications product which allows secure, private voice
communications across the Internet and intranets. MVSI and e-Net will
continue to explore cooperation through possible future technology
transfers or licensing of their respective technology products and
services.
South Korean Joint Venture Agreement
MVS Modular Vision Systems, Inc. ("MVS") and Kyung Pil Woo, a South Korean
distributor of high technology products, entered into a joint venture
agreement, effective December 1, 1996, whereby MVS and Mr. Woo have
established a South Korean company ("TRIVISION") to service, assemble and
perform the final manufacture of MVS and other high technology products.
The Joint Venture will also promote, market, sell and distribute these
products in South Korea and other Asian markets. The Joint Venture will be
owned equally (50%/50%) by MVS and Mr. Woo in exchange for each party's
capital contribution of $500,000 in cash to the Joint Venture's working
capital. The Joint Venture became fully operational in January, 1997. The
Company believes that the Joint Venture is essential to establishing a
larger market presence for MVS products in South Korea and other Asian
nations.
11
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PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
The Company reported sales of $8,379,933 for the three month period ended
December 31, 1996 as compared to $3,570,142 for the same period in fiscal year
1996. The increase in sales of $4,809,791 or 135% is attributable to the
acquisition of Socrates, Inc. and continued growth in the Company's computer
memory chip contract manufacture and distribution business, as well as the
Company's laser machine vision products and systems.
The gross margin of the Company decreased to 20% for the three months ended
December 31, 1996, principally as a result of relatively lower gross profit
margins in the Company's computer distribution and reselling businesses. These
lower profit margins have also been impacted by a decrease in excess of 75% in
worldwide memory chip prices since December 31, 1995.
For the three months ended December 31, 1996, selling expenses increased by
$413,695 (432%) to $509,532, primarily as a result of the hiring of additional
sales staff at MVS and the Company's acquisition of Socrates, Inc. During
fiscal year 1997, the Company intends to aggressively expand its marketing and
sales presence in each market that the Company's products compete in.
Administrative expenses increased $284,943 (54%) to $816,820 for the three
months ended December 31, 1996, as a result of an increase in the Company's
overall level of operations and the acquisition of Socrates.
Research and development expenditures, shown net of Canadian tax credits
and capitalized software costs, decreased by $46,415 to $30,201 for the three
months ended December 31, 1996, in part due to the Company's products maturing
necessitating less research and development. Additionally, subsequent to the
Company achieving technological feasibility on several software development
efforts late in fiscal year 1995, the Company continues to capitalize, in
accordance with Statement of Financial Accounting Standards No. 86, labor costs
associated with these research and development efforts. Management expects to
begin amortizing such costs in fiscal year 1997 upon release of the associated
products. Depreciation and amortization expenses for the three months ended
December 31, 1996 increased by $66,293 to $81,824 as a direct result of an
increase in depreciable assets from the Company's acquisition of Socrates, Inc.
and the resulting goodwill amortization recorded subsequent to the acquisition.
Interest income and expense and financing charges decreased by $25,515 from
$126,319 for the three month period ended December 31, 1996. The decrease is
primarily attributable to an increase in interest income from an outstanding
note receivable, as well as an increase in other income, offset by an increase
in margin loan interest expense.
The Company has net operating loss carryforwards and tax credit
carryforwards to offset future taxable income and taxes payable. Although the
Company has recognized income before income taxes through December 31, 1996,
this has not resulted in the recognition of income tax expense due to the
existence of available net operating loss carryforwards. Future use of these
net operating loss carryforwards was not affected by the Company's
acquisitions during fiscal year 1996. However, in the event a change in
control occurs in the future, use of all or a portion of the U.S.
carryforwards could be affected. Moreover, as a result of the Company's
anticipation of increasing levels of profitability, the Company may be
required to begin paying income taxes during fiscal year 1997.
The current provision for income taxes in the accompanying Statements of
Operations is based upon the estimated annualized effective tax rate and is
largely determined by management's estimate as of the
12
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interim date of projected taxable income for the entire fiscal year. The
Company was able to offset the current income tax expense at December 31, 1996,
by realizing available deferred tax benefits.
Net income for the three months ended December 31, 1996 was $600,128 or
$0.06 per share, as compared to net income of $330,359 or $0.03 per share for
the three months ended December 31, 1995.
As of December 31, 1996, the Company had working capital of $8,640,669
compared to $9,562,778 as of September 30, 1996. The fiscal year 1996
acquisitions of JMR Distributors, Inc. and Socrates, Inc. and future expansion
of the Company's laser vision business, including continual software
development, may require increased working capital to finance increases in
inventory and accounts receivable comparable to or greater than the increase
experienced in the three month period ended December 31, 1996 (see Consolidated
Statements of Cash Flows). While no assurances can be given, the Company
believes that cash generated from operations, along with existing resources and
available credit are sufficient to meet the Company's short-term working capital
and other financing requirements for fiscal 1997. The Company, however,
believes that it may have to obtain additional funding or financing to satisfy
the long-term capital needs of the Company's subsidiary operations and to
provide for adequate working capital reserves. The Company has no significant
long-term debt outstanding as of December 31, 1996.
The Company has a bank line of credit with a Canadian bank for support of
its Canadian operations temporary cash flow requirements, with interest payable
monthly at the prime rate plus 2% (prime was 4.75% on December 31, 1996). At
December 31, 1996, borrowings outstanding on the line of credit amounted to
$554,745. The line of credit is collateralized by all present and future
accounts receivable, Canadian tax credits receivable and inventory.
The Company also maintains a credit agreement with a local finance company
for inventory financing for one of its subsidiaries. The agreement provides the
Company with the ability to pay certain inventory balances (purchases) in
scheduled interest-free installments. Borrowings outstanding under the
agreement, at December 31, 1996, amounted to $465,805. The agreement is subject
to annual renewal and is collateralized by all present and future accounts
receivable and inventory of the Company's subsidiary.
In October, 1996, the Company filed a Post-Effective Amendment to the
Company's Form S-3 Registration Statement. The Post-Effective Amendment related
to the continuing resale and conversion of the Company's Class A Warrants
previously issued in connection with the Company's August, 1995 initial public
offering. The Class A Warrants became exercisable on the effective date of the
Post-Effective Amendment filing. Should all 5,140,000 Class A Warrants and
1,000,000 Class B Warrants, plus the underwriters' purchase option for 360,000
shares and 360,000 Class A Warrants, be exercised, the Company will receive the
proceeds therefrom, aggregating up to $29,215,000. As of December 31, 1996,
15,000 Class A Warrants had been exercised. The Company can make no assurances
that any of the remaining warrants or underwriters' purchase option shares will
be exercised.
Through September 30, 1995, the Company had borrowed $667,000 from Edward
Ratkovich, chairman of the board of directors, president, chief executive
officer and a principal shareholder of the Company, to enable the Company to
meet its on-going cash flow requirements. These loans bear interest at 9% and
are due on demand.. During fiscal year 1996, the Company repaid $524,000 on the
loans to the stockholder from operating cash flow to partially repay these
loans. Total loans and accrued interest outstanding at December 31, 1996 total
$226,637.
The Company and its representatives may from time to time make written or
oral forward-looking statements, including statements contained in the Company's
filings with the U.S. Securities and Exchange Commission and in its reports to
stockholders. In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company is hereby identifying
important factors that
13
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could cause actual results to differ materially from those contained in any
forward-looking statement made by or on behalf of the Company. Any such
statement is qualified by reference to the following cautionary statements.
The Company's operating results could be affected by a number of factors.
They include the availability and cost of components, an unexpected inability to
manage expenses relative to sales growth, and an inability to anticipate
downward price pressures by customers using our products and services. Also,
there is the potential problem of competing with companies having significantly
greater financial, technical and market resources than the Company.
A significant percentage of the Company's sales to major customers
historically has occurred in the last month of a quarter. Changes in purchasing
patterns by one or more of the Company's major customers, and the inability of
the Company to anticipate in advance the mix of customer orders and its ability
to ship the necessary quantities of product near the end of a fiscal quarter,
could result in material fluctuations in quarterly operating results.
The Company participates in competitive industries marked by changing
technology, which could result in volatility of the Company's common stock
price. Additionally, any shortfall in revenue or earnings from the levels
expected by securities analysts could have an immediate and significant effect
on the trading price of the Company's common stock in any given period.
Moreover, it is possible the Company may not learn of such shortfalls until late
in the fiscal quarter, which could result in an even more immediate and adverse
effect on the trading price of the Company's stock.
14
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits.
Exhibit 27, Article 5 - Financial Data Schedule
b. Reports on Form 8-K.
No reports on Form 8-K were filed during the first quarter ended
December 31, 1996.
15
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MVSI, INC.
January 30, 1997
By: Edward Ratkovich
---------------------
Edward Ratkovich
Chairman of the Board
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS
FOUND ON PAGES 4 AND 5 OF THE COMPANY'S FORM 10-QSB FOR THE THREE MONTHS
ENDED DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 754,303
<SECURITIES> 4,199,807
<RECEIVABLES> 6,334,262
<ALLOWANCES> 140,000
<INVENTORY> 2,569,805
<CURRENT-ASSETS> 13,535,314
<PP&E> 782,608
<DEPRECIATION> 272,954
<TOTAL-ASSETS> 20,611,452
<CURRENT-LIABILITIES> 4,894,645
<BONDS> 0
0
0
<COMMON> 107,550
<OTHER-SE> 15,609,257
<TOTAL-LIABILITY-AND-EQUITY> 20,611,452
<SALES> 8,379,933
<TOTAL-REVENUES> 8,379,933
<CGS> 6,456,011
<TOTAL-COSTS> 6,456,011
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (100,804)
<INCOME-PRETAX> 586,349
<INCOME-TAX> (13,779)
<INCOME-CONTINUING> 600,128
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 600,128
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0.06
</TABLE>
