UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
Amendment No. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
----------------- ------------------
Commission File No. 0-25866
PHOENIX GOLD INTERNATIONAL, INC.
(Exact name of small business issuer as specified in its charter)
Oregon 93-1066325
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
9300 North Decatur Street
Portland, Oregon 97203
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
(503) 288-2008
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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 the past 90 days.
YES [X] NO [ ]
As of July 15, 1996, there were issued and outstanding 3,454,605 shares of the
Company's Common Stock.
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
<PAGE>
PHOENIX GOLD INTERNATIONAL, INC.
Form 10-QSB/A for the Quarter Ended June 30, 1996
INDEX
Part I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Balance Sheets at June 30, 1996 (unaudited, as restated) 3
and September 30, 1995 (audited)
Unaudited Statements of Operations for the 4
Three and Nine Months Ended June 30, 1996
(as restated) and 1995
Unaudited Statements of Cash Flows for the 5
Nine Months Ended June 30, 1996 (as restated)
and 1995
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis or Plan of Operation 9
Part II. OTHER INFORMATION
Items 1 through 6 13
Signatures 14
Index to Exhibits 15
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PHOENIX GOLD INTERNATIONAL, INC.
BALANCE SHEETS
ASSETS
June 30, September 30,
1996 1995
------------- -------------
(Unaudited) (Audited)
(As restated,
see Note 6)
Current assets:
Cash and cash equivalents $ 2,250 $ 2,101,563
Accounts receivable, net 5,919,431 3,825,473
Inventories 9,993,187 4,482,442
Prepaid expenses 595,171 328,047
Deferred taxes 53,614 53,614
------------ ------------
Total current assets 16,563,653 10,791,139
------------ ------------
Property and equipment, net 3,943,159 3,363,600
Goodwill, net 306,714 201,396
Other assets 431,851 153,114
------------ ------------
Total assets $ 21,245,377 $ 14,509,249
============ ============
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,508,669 $ 1,322,083
Notes payable 4,579,930 -
Accrued expenses 599,235 533,989
Current portion of long-term debt
and capital lease obligations 122,100 113,800
------------ ------------
Total current liabilities 8,809,934 1,969,872
Long-term obligations, net of current portion 193,540 286,189
Deferred taxes 217,970 240,000
Shareholders' equity:
Preferred Stock;
5,000,000 shares authorized;
none outstanding - -
Common stock, no par value; 20,000,000 shares
authorized; 3,454,605 and 3,445,000 shares
outstanding at June 30, 1996 and September
30, 1995, respectively 7,477,939 7,432,987
Retained earnings 4,545,994 4,580,201
------------ ------------
Total shareholders' equity 12,023,933 12,013,188
------------ ------------
Total liabilities and shareholders' equity $ 21,245,377 $ 14,509,249
============ ============
See Notes to Financial Statements
<PAGE>
PHOENIX GOLD INTERNATIONAL, INC.
STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
(As restated, (As restated,
see Note 6) see Note 6)
Net sales $ 7,461,921 $ 6,254,745 $19,348,725 $14,640,128
Cost of sales 5,092,831 3,949,959 13,769,299 9,349,832
----------- ----------- ----------- -----------
Gross profit 2,369,090 2,304,786 5,579,426 5,290,296
Operating expenses:
Selling 1,082,590 641,932 2,411,069 1,632,261
General and administrative 815,562 494,142 3,131,147 1,270,738
----------- ----------- ----------- -----------
Total operating expenses 1,898,152 1,136,074 5,542,216 2,902,999
----------- ----------- ----------- -----------
Income from operations 470,938 1,168,712 37,210 2,387,297
----------- ----------- ----------- -----------
Other income (expense):
Interest expense (72,829) (74,722) (112,945) (290,872)
Other income, net - 10,805 19,495 6,168
----------- ----------- ----------- -----------
Total other expense (72,829) (63,917) (93,450) (284,704)
----------- ----------- ----------- -----------
Earnings (loss) before taxes 398,109 1,104,795 (56,240) 2,102,593
Income tax expense (benefit) 152,882 426,120 (22,033) 829,535
----------- ----------- ----------- -----------
Net earnings (loss) $ 245,227 $ 678,675 $ (34,207) $ 1,273,058
=========== =========== =========== ===========
Net earnings (loss) per share $0.07 $0.23 $(0.00) $0.51
=========== =========== =========== ===========
Shares used in per share
calculation 3,641,755 2,969,456 3,447,237 2,509,713
=========== =========== =========== ===========
See Notes to Financial Statements
<PAGE>
PHOENIX GOLD INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 30,
1996 1995
------------- -------------
(As restated,
see Note 6)
Cash flows from operating activities:
Net earnings (loss) $ (34,207) $ 1,273,058
Adjustments to reconcile net earnings
(loss) to net cash used in operating
activities:
Depreciation and amortization 601,085 424,612
Loss on sale of equipment - 4,491
Deferred taxes (22,030) 9,081
In-process research and development expenses 1,120,500 -
Changes in operating assets and liabilities:
Accounts receivable (2,093,958) (1,171,044)
Inventories (4,730,643) (501,629)
Prepaid expenses (267,124) (207,140)
Other assets (187,051) -
Accounts payable 2,186,586 (867,162)
Accrued expenses 65,242 (1,392)
------------- -------------
Net cash used in operating activities (3,361,600) (1,037,125)
------------- -------------
Cash flows from investing activities:
Capital expenditures, net (1,135,626) (1,321,620)
Acquisition of Carver Professional
Sound division (1,792,616) -
------------- -------------
Net cash used in investing activities (2,928,242) (1,321,620)
------------- -------------
Cash flows from financing activities:
Proceeds from long-term obligations - 2,092,563
Repayment of long-term obligations (84,350) (3,753,780)
Notes payable, net 4,229,930 (1,885,762)
Common stock issued 44,949 -
Proceeds from notes payable to shareholders - 22,865
Repayments of notes payable to shareholders - (122,865)
Proceeds from initial public offering - 7,770,436
------------- -------------
Net cash provided by financing activities 4,190,529 4,123,457
------------- -------------
Increase (decrease) in cash (2,099,313) 1,764,712
Cash and cash equivalents, beginning of period 2,101,563 18,038
------------- -------------
Cash and cash equivalents, end of period $ 2,250 $ 1,782,750
============= =============
Supplemental disclosures:
Cash paid during the period for interest $ 111,488 $ 310,855
Cash paid during the period for income taxes $ 101,800 $ 1,003,000
Note payable incurred via acquisition of
Carver Professional $ 350,000 $ -
Acquisition of equipment via accounts
payable $ - $ 80,405
Initial public offering expenses financed
via accounts payable $ - $ 535,003
See Notes to Financial Statements
<PAGE>
PHOENIX GOLD INTERNATIONAL, INC.
Notes to Financial Statements
(Unaudited)
(1) Unaudited financial statements
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted from these unaudited financial statements. These unaudited
financial statements should be read in conjunction with the financial statements
and notes included in the Company's Annual Report on Form 10-KSB for the fiscal
year ended September 24, 1995 filed with the Securities and Exchange Commission.
The results of operations for the three and nine-month periods ended June 30,
1996 are not necessarily indicative of the operating results for the full year.
In the opinion of management, all adjustments have been made to present fairly
the Company's financial position at June 30, 1996 and the results of its
operations and its cash flows for the three and nine-month periods ended June
30, 1996 and 1995.
(2) Reporting periods
The Company's fiscal year is the 52-week or 53-week period ending the last
Sunday in September. Fiscal 1995 was a 52-week year and fiscal 1996 is a 53-week
year. For presentation convenience, the Company has indicated in these financial
statements that its fiscal year ends on September 30. The first quarter of
fiscal 1995 was a 13-week period and the same quarter in fiscal 1996 was a
14-week period. The remaining quarters in fiscal years 1995 and 1996 are 13-week
quarters.
<PAGE>
PHOENIX GOLD INTERNATIONAL, INC.
Notes to Financial Statements
(Unaudited)
(3) Inventories
Inventories are stated at the lower of average cost or market and consist of the
following:
June 30, September 30,
1996 1995
------------- --------------
Raw materials $ 4,674,198 $ 1,161,666
Work-in-process 1,604,979 346,055
Finished goods 3,542,139 2,874,923
Supplies 171,871 99,798
------------- --------------
Total inventories, net $ 9,993,187 $ 4,482,442
============= ==============
(4) Property and equipment
Property and equipment consist of the following:
June 30, September 30,
1996 1995
------------- -------------
Machinery, equipment and vehicles $ 3,678,738 $ 3,020,056
Leasehold improvements 1,424,596 1,324,350
Construction in progress 432,019 55,315
------------- -------------
5,535,353 4,399,721
Less accumulated depreciation
and amortization (1,592,194) (1,036,121)
------------- -------------
Total property and equipment, net $ 3,943,159 $ 3,363,600
============= =============
(5) Subsequent Events
On July 11, 1996, the Company announced that it has hired Kurt W. Ruttum to
serve as Vice President and General Counsel. Mr. Ruttum will join Phoenix Gold
on October 1, 1996. Mr. Ruttum is a partner at the Portland, Oregon law firm of
Tonkon, Torp, Galen, Marmaduke and Booth. He joined that firm in 1986 and became
a partner in 1993. His practice has emphasized corporate finance, securities and
general corporate counseling. Mr. Ruttum received a B. A. degree in economics
from the University of Colorado and his J.D. degree from the University of
Chicago Law School.
<PAGE>
6) Restatement
Subsequent to the issuance of the financial statements for the nine months ended
June 30, 1996, and based upon a subsequent independent valuation related to the
Company's acquisition of the professional sound division of Carver Corporation,
management determined that the allocation of the purchase price among the
acquired assets should be revised. Accordingly, these unaudited financial
statements have been restated to reflect a one-time charge related to in-process
research and development costs associated with that purchase and an increase in
the acquired costs and related cost of sales of certain finished goods purchased
from Carver Corporation in that transaction. The effects of the restatement are
as follows:
As of June 30, 1996:
As Previously As Restated
Reported
Current assets $16,584,343 $16,563,653
Noncurrent assets 6,024,916 4,681,724
Current liabilities 9,103,750 8,809,934
Total liabilities 9,806,215 9,221,444
Retained earnings 5,325,105 4,545,994
For the three months ended
June 30, 1996:
As Previously As Restated
Reported
Net income $ 185,384 $ 245,227
Net income per share $ 0.05 $ 0.07
Shares used in per share calculation 3,641,755 3,641,755
<PAGE>
For the nine months ended
June 30, 1996:
As Previously As Restated
Reported
Net income (loss) $ 744,900 $ ( 34,207)
Net income (loss) per share $ 0.20 $ (0.01)
Shares used in per share calculation 3,638,279 3,447,237*
- -------------------
* Share equivalents are anti-dilutive and excluded from calculation.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis or Plan of Operation
RESULTS OF OPERATIONS
- ---------------------
Net sales increased $1.21 million, or 19.3%, to $7.46 million for the three
months ended June 30, 1996, compared to $6.25 million for the three months ended
June 30, 1995. Sales of electronics products in the quarter ended June 30, 1996
increased 31.4% from the quarter ended June 30, 1995. Sales of speakers and
accessories increased 17.1% and .5%, respectively, in the third quarter of
fiscal 1996 compared to the same fiscal 1995 quarter. Net sales increased $4.71
million, or 32.2%, to $19.35 million for the nine months ended June 30, 1996,
compared to $14.64 million for the nine months ended June 30, 1995. Sales of
electronics products, speakers and accessories increased 50.5%, 22.9% and 7.4%,
respectively, in the first nine months of fiscal 1996 compared to the same
fiscal 1995 period. The increases in net sales for the three and nine month
periods were principally due to the commencement in December 1995 of sales of
the Company's new professional sound products.
International sales increased 4.2% to $2.90 million for the three months ended
June 30, 1996, from $2.78 million in the comparable 1995 period. International
sales increased 30.7% to $7.87 million for the nine months ended June 30, 1996,
from $6.02 million in the comparable 1995 period. International sales
represented 38.8% and 44.5% of net sales for the three months ended June 30,
1996 and 1995, respectively. International sales represented 40.7% and 41.1% of
net sales for the nine months ended June 30, 1996 and 1995, respectively.
Gross profit decreased to 31.7% of net sales for the three months ended June 30,
1996 from 36.8% in the comparable fiscal 1995 period. Gross profit decreased to
28.8% of net sales for the nine months ended June 30, 1996 from 36.1% in the
comparable fiscal 1995 period. The decrease in gross profit for the three and
nine months ended June 30, 1996 was primarily due to changes in the product
sales mix, which included sales of lower margin professional sound products
acquired from Carver Corporation in November 1995 and start-up costs associated
with manufacturing new products.
During the three and nine months ended June 30, 1996, sales of the Company's car
audio electronics and accessories decreased as a percentage of total sales
compared to the same fiscal 1995 periods. These decreases in percentages were
the result of sales of the Company's new professional sound products.
During the three and nine months ended June 30, 1996, the Company was unable to
obtain adequate supplies of components from third-party vendors for its Cyclone
and XMAX speaker lines. As a result, speaker sales, and overall gross margins,
were less than the Company anticipated. Speakers generally carry higher gross
margins than electronics products.
<PAGE>
Operating expenses consist of selling, general and administrative expenses.
Total operating expenses increased $762,000, or 67.1% to $1.90 million for the
three months ended June 30, 1996 compared to $1.14 million for the three months
ended June 30, 1995. Operating expenses were 25.4% and 18.2% of net sales in the
respective three-month periods. Operating expenses increased $2.64 million, or
90.9%, to $5.54 million for the nine months ended June 30, 1996 compared to
$2.90 million for the nine months ended June 30, 1995. Operating expenses were
28.6% and 19.8% of net sales in the respective nine-month periods.
Selling expenses increased $441,000, or 68.6%, to $1.08 million for the three
months ended June 30, 1996 compared to $642,000 for the comparable fiscal 1995
period. Selling expenses were 14.5% and 10.3% of net sales in the respective
three-month periods. Selling expenses increased $779,000, or 47.7%, to $2.41
million for the nine months ended June 30, 1996 compared to $1.63 million for
the comparable fiscal 1995 period. Selling expenses were 12.5% and 11.1% of net
sales in the respective nine-month periods. The increased selling expenses in
dollar amount for the three and nine months ended June 30, 1996 were principally
due to increased marketing and advertising programs and related expenses to
support sales of existing and newly introduced products and personnel related
expenses.
General and administrative expenses increased $321,000, or 65.0%, to $816,000
for the three months ended June 30, 1996, compared to $494,000 for the
comparable fiscal 1995 period principally due to increased bad debt expenses,
increased research and development costs and higher legal, accounting and
investor relations expenses. General and administrative expenses were 10.9% and
7.9% of net sales in the respective three-month periods. General and
administrative expenses increased $1.86 million, or 146.5%, to $3.13 million for
the nine months ended June 30, 1996 compared to $1.27 million for the comparable
fiscal 1995 period principally due to a one-time charge of $1.12 million related
to in-process research and development costs associated with the purchase of
certain assets of the professional sound division of Carver Corporation in
November 1995, and the foregoing factors. General and administrative expenses
were 16.2% and 8.7% of net sales in the respective nine-month periods.
Other expenses, net of other income, increased $9,000, or 13.9%, to $73,000 for
the three months ended June 30, 1996 compared to $64,000 for the comparable
fiscal 1995 period. The change was due to increased interest expense on
borrowings and reduced interest income from investment of initial public
offering proceeds during the three-month period in fiscal 1996.
Other expenses, net of other income, decreased $192,000, or 67.2% to $93,000 for
the nine months ended June 30, 1996 compared to $285,000 for the comparable
fiscal 1995 period. The change was due to reduced interest expense on borrowings
and interest income from investment of initial public offering proceeds.
<PAGE>
Net earnings were $245,000, or $.07 per share, for the three months ended June
30, 1996 compared to $679,000, or $.23 per share, for the comparable prior
period in fiscal 1995. Net earnings were 3.3% and 10.9% of net sales in the
respective three-month periods. Net loss was $34,000, or $.01 per share, for the
nine months ended June 30, 1996 compared to net earnings of $1.27 million, or
$.51 per share, for the comparable fiscal 1995 period. The weighted average
number of shares increased in the three and nine-month periods in fiscal 1996
due to the initial public offering of the Company's Common Stock in May 1995.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's primary needs for funds are for working capital and, to a lesser
extent, for capital expenditures. The Company financed its operations during the
nine months ended June 30, 1996 principally from proceeds from short-term
borrowings. In May 1996, the Company negotiated with its lender an increase of
$2.0 million in its operating line of credit. As of June 30, 1996, the Company
had a $6.0 million revolving bank operating line of credit expiring on December
31, 1996. There was $4.23 million outstanding on the line at June 30, 1996, and
the Company was eligible to borrow an additional $1.16 million under such line
on that date. Interest on borrowings is equal to the bank's prime lending rate
(8.25% at June 30, 1996) for the first $4.0 million in borrowings and an
additional .25% for borrowings above $4.0 million. Borrowings under the line of
credit are secured by substantially all of the Company's assets. Net cash used
in operating activities was $3.36 million for the nine months ended June 30,
1996. Cash and cash equivalents decreased $2.1 million and working capital
decreased $1.07 million during the nine months ended June 30, 1996, primarily
due to increased short-term borrowings and cash used for the acquisition of the
Carver Professional Sound division in November 1995.
Accounts receivable increased $2.09 million during the nine months ended June
30, 1996, principally due to increased sales volume during the latter part of
the third quarter ended June 30, 1996.
Inventories increased $5.51 million, or 123.0%, to $9.99 million during the nine
months ended June 30, 1996. This increase is due primarily to the acquisition of
raw material components necessary for the manufacture of the Company's new
professional sound products, its newly introduced car audio electronics and
Cyclone speaker products.
A significant quantity of these raw materials was purchased from Carver
Corporation and its outside vendors in order to support production of
professional sound products while the Company establishes alternative sources
for all parts, many of which have long lead-times for procurement. The remaining
increases in inventory were due to higher levels of work-in-process and other
finished goods. Increases in inventory were partially funded by increases in
accounts payable of $2.19 million. The remaining amount was financed with
short-term borrowings.
<PAGE>
Prepaid expenses increased $267,000 during the nine months ended June 30, 1996,
primarily due to insurance costs incurred in the Company's third fiscal quarter
and trade show expenses incurred during the nine months ended June 30, 1996 that
will be amortized over the remainder of fiscal 1996.
The Company made capital expenditures of $1.14 million during the nine months
ended June 30, 1996. These expenditures related primarily to the continued
automation of certain manufacturing operations, tooling costs associated with
the manufacturing of new speaker products and the upgrade and expansion of the
Company's existing information system. Management anticipates that capital
expenditures for the remainder of fiscal 1996 will be approximately $200,000.
These anticipated expenditures will be financed from proceeds of long-term debt.
FORWARD-LOOKING STATEMENTS
- --------------------------
This Report contains "forward-looking statements" within the meaning of the
Private Securities Reform Act of 1995, including, without limitation, statements
as to expectations, beliefs and future financial performance, that are based on
current expectations and are subject to certain risks, trends and uncertainties
that could cause actual results to vary from those projected, which variances
may have a material adverse effect on the Company. Among the factors that could
cause actual results to differ materially are the following: business conditions
and growth in the car audio, professional sound and custom audio/video and home
theater markets and the general economy; competitive factors such as rival
products and price pressures; the failure of new products to compete
successfully in existing or new markets; the failure to achieve timely
improvement in the manufacturing ramp with respect to new products; changes in
product mix; availability and price of components, subassemblies and products
supplied by third party vendors; and cost and yield issues associated with
production at the Company's factory.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings NONE
Item 2. Changes in Securities NONE
Item 3. Defaults Upon Senior Securities NONE
Item 4. Submission of Matters to a Vote of Security Holders NONE
Item 5. Other Information NONE
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
(27) Financial Data Schedule
B. Reports on Form 8-K
NONE
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 1 to be signed on its behalf by
the undersigned, thereunto duly authorized.
PHOENIX GOLD INTERNATIONAL, INC.
\s\ David D. Bills
- --------------------------------
David D. Bills
Vice President - Finance
(Principal Financial and Accounting Officer)
Dated: December 30, 1996
<PAGE>
FORM 10-QSB
PHOENIX GOLD INTERNATIONAL, INC.
Exhibit Index
Exhibit Page
- ------- ----
(27) Financial Data Schedule 16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PHOENIX
GOLD INTERNATIONAL, INC.'S FINANCIAL STATEMENTS CONTAINED IN ITS QUARTERLY
REPORT ON FORM 10-QSB/A FOR THE PERIOD ENDING JUNE 30, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-29-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,250
<SECURITIES> 0
<RECEIVABLES> 5,919,431
<ALLOWANCES> 0
<INVENTORY> 9,993,187
<CURRENT-ASSETS> 16,563,653
<PP&E> 5,535,353
<DEPRECIATION> 1,592,194
<TOTAL-ASSETS> 21,245,377
<CURRENT-LIABILITIES> 8,809,934
<BONDS> 193,540
0
0
<COMMON> 7,477,939
<OTHER-SE> 4,545,994
<TOTAL-LIABILITY-AND-EQUITY> 21,245,377
<SALES> 19,348,725
<TOTAL-REVENUES> 19,348,725
<CGS> 13,769,299
<TOTAL-COSTS> 19,311,515
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 112,945
<INCOME-PRETAX> (56,240)
<INCOME-TAX> (22,033)
<INCOME-CONTINUING> (34,207)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (34,207)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
