UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1995
Commission File Number 0-11353
CIRCUIT RESEARCH LABS, INC.
(Exact name of registrant as specified in its charter)
Arizona 86-0344671
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2522 West Geneva Drive, Tempe, Arizona 85282
(Address of Principal executive office) (Zip Code)
Registrant's telephone number,
including area code
(602) 438-0888
172743 20 5
(CUSIP Number)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Secu-
rities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing require-
ments 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 close of the period covered by
this report.
Outstanding at
Class June 30, 1995
Common stock, $.10 par value 597,682
INDEX
Part I. FINANCIAL INFORMATION:
Page
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
June 30, 1995 (Unaudited) and
December 31, 1994 3
Consolidated Condensed Statements of
Operations Three and six months ended
June 30, 1995 and 1994 (Unaudited) 5
Consolidated Condensed Statements of
Cash Flows Six months ended
June 30, 1995 and 1994 (Unaudited) 6
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations 7
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
1
PART I. FINANCIAL INFORMATION
The Consolidated Condensed Financial Statements included
herein have been prepared by the Company pursuant to the rules
and regulations of the Securities and Exchange Commission. The
Consolidated Condensed Balance Sheet as of June 30, 1995 and the
Consolidated Condensed Statements of Operations for the three and
six months ended June 30, 1995 and 1994 and the Consolidated
Condensed Statements of Cash Flows for the six months ended June
30, 1995 and 1994 have been prepared without audit.
Certain information and note disclosures normally included in
financial statements prepared in accordance with generally ac-
cepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company
believes that the disclosures are adequate to make the informa-
tion presented not misleading. It is suggested that these Con-
solidated Condensed Financial Statements be read in conjunction
with the consolidated financial statements and notes thereto
included in the Company's Annual Report for the year ended Decem-
ber 31, 1994.
In the opinion of management, the Consolidated Condensed
Financial Statements for the unaudited interim periods presented
herein include all adjustments, consisting only of normal recur-
ring adjustments, necessary to present a fair statement of the
results of operations for such interim periods. Net operating
results for any interim period may not be comparable to the same
interim period in previous years, nor necessarily indicative of
earnings that may be expected for the full year.
2
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, December 31,
1995 1994
------- ------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $170,330 $122,217
Securities available-for-sale 249,318 321,712
Accounts receivable, less allowance for
doubtful accounts of $16,500 148,328 209,597
Income taxes receivable 21,000 13,000
Inventories:
Raw materials and supplies 378,672 354,298
Work in process 98,248 97,433
Finished goods 268,485 259,315
-------- --------
Total inventories 745,405 711,046
Deferred income taxes 15,000 15,000
Prepaid expenses and other 91,786 74,259
--------- ---------
Total current assets 1,441,167 1,466,831
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land 130,869 130,869
Building and improvements 497,004 497,004
Furniture and fixtures 383,523 379,435
Machinery and equipment 545,022 528,270
--------- ---------
Total 1,556,418 1,535,578
Less accumulated depreciation 943,878 904,111
--------- ---------
Property, plant and equipment - net 612,540 631,467
--------- ---------
DEFERRED INCOME TAXES 15,000 15,000
OTHER ASSETS 115,877 119,001
STOCKHOLDERS' NOTES RECEIVABLE 1,081 4,462
--------- ---------
TOTAL $2,185,665 $2,236,761
========== ==========
(continued)
3
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, December 31,
1995 1994
--------- --------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $41,841 $14,839
Accrued salaries and benefits 39,211 47,696
Accrued professional fees 15,385 37,216
Other accrued expenses and liabilities 26,897 26,435
Long-term debt - current portion 7,638 7,169
--------- ---------
Total current liabilities 130,972 133,355
--------- ---------
LONG-TERM DEBT - LESS CURRENT PORTION 108,419 112,354
STOCKHOLDERS' EQUITY:
Preferred stock, $100 par value -
authorized 500,000 shares, none issued
Common stock, $.10 par value -
authorized 20,000,000 shares,
597,682 shares issued 59,768 59,768
Additional paid-in capital 1,247,240 1,247,240
Retained earnings 639,266 684,044
--------- ---------
Total stockholders' equity 1,946,274 1,991,052
--------- ---------
TOTAL $2,185,665 $2,236,761
========== ==========
4
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
June 30 June 30
------------------- -----------------
1995 1994 1995 1994
---- ---- ---- -----
(Unaudited) (Unaudited)
NET SALES $422,865 $441,928 $960,050 $896,491
COST OF GOODS SOLD 138,940 170,279 317,498 328,418
-------- -------- -------- --------
Gross profit 283,925 271,649 642,552 568,073
-------- -------- -------- --------
OPERATING EXPENSES:
Selling, general and
administrative 249,682 293,807 496,166 586,994
Research and development 94,541 82,894 201,274 188,338
-------- -------- -------- --------
Total operating expenses 344,223 376,701 697,440 775,332
-------- -------- -------- --------
LOSS FROM OPERATIONS (60,298 )(105,052 ) (54,888 ) (207,259 )
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Interest and other income 7,167 6,551 13,173 10,773
Interest expense (3,730 ) (4,909 ) (11,063 ) (12,603 )
-------- -------- -------- --------
Total other (expense) income 3,437 1,642 2,110 (1,830 )
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES (56,861 )(103,410 ) (52,778 ) (209,089 )
INCOME TAX BENEFIT (9,600 ) (30,000 ) (8,000 ) (50,000 )
-------- -------- -------- --------
NET LOSS $(47,261 )$(73,410 )$(44,778 )$(159,089 )
======== ======== ======= =========
LOSS PER COMMON SHARE $(.08 ) $(.12) $(.07 ) $(.27)
======= ======= ======= =======
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 597,682 597,682 597,682 597,682
======= ======= ======= =======
5
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
----------------
1995 1994
---- ----
(Unaudited)
OPERATING ACTIVITIES:
NET LOSS $(44,778 ) $(159,089 )
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH USED IN OPERATING ACTIVITIES:
Depreciation and amortization 43,890 46,069
Deferred income taxes 3,200
Changes in assets and liabilities:
Accounts receivable 61,269 12,948
Income taxes receivable (8,000 ) (50,000 )
Inventories (34,359 ) (64,268 )
Prepaid expenses and other (17,527 ) 1,988
Other assets (999 ) (12,105 )
Accounts payable and accrued expenses (2,852 ) (18,200 )
-------- --------
NET CASH USED IN OPERATING ACTIVITIES: (3,356 ) (239,457 )
-------- --------
INVESTING ACTIVITIES:
Purchase of securities (74,318 )
Proceeds on sale or maturity of securities 146,712 96,842
Capital expenditures (20,840 ) (18,943 )
Payments received on stockholders' notes 3,381 3,454
-------- --------
NET CASH PROVIDED BY INVESTING ACTIVITIES 54,935 81,353
-------- --------
FINANCING ACTIVITIES:
Borrowings under credit line 20,000
Principal payments on long-term debt (3,466 ) (3,055 )
-------- --------
NET CASH (USED IN) PROVIDED BY FINANCING
ACTIVITIES (3,466 ) 16,945
-------- --------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 48,113 (141,159 )
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 122,217 183,200
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $170,330 $42,041
======= =======
SUPPLEMENTAL CASH FLOW INFORMATION 11,063 12,603
Cash paid for interest ======= =======
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The Company had net working capital of $1,310,195 and a
current ratio of 11 to 1 at June 30, 1995, which was comparable
to net working capital of $1,333,476 and a current ratio of 11 to
1 at December 31, 1994.
Inventories at June 30, 1995 increased by $34,359 from
December 31, 1994 which is attributed to an increase in raw
materials in order to meet future production requirements for
current and new products. Production of CRL's new digital proces-
sor, the DP100, and the RDS/RBDS generator, the SC100 V1, are
scheduled to start production in the third quarter of 1995.
The Company's credit line of $500,000 was not utilized
during the quarter, and at June 30, 1995 had no outstanding
balance. The credit agreement was renewed on July 1 , 1995, for
$200,000 and is collateralized by accounts receivable and inven-
tories, and bears interest at prime plus 1%. Management does
not contemplate usage of the line for anything other than offset-
ting investment timing and cash flow management.
The Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 115 in
May 1993 establishing certain new financial accounting and re-
porting standards for investments in debt and equity securities.
SFAS No. 115 requires the classification of securities at acqui-
sition into one of three categories: held-to-maturity, available-
for-sale, or trading -- with different reporting requirements for
each classification. All of the Company's marketable securities
are classified as available-for-sale.
The Company adopted SFAS No. 115 as of January 1, 1994.
The estimated fair value of the Company's securities approximated
cost at December 31, 1994 and June 30, 1995.
7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales during the second quarter of 1995 totaled
$422,865 which included $8,000 in royalty income and were compar-
able to the second quarter net sales in 1994 of $441,928.
Cost of goods sold was 33% and 39% of net sales and gross
margins were 67% and 61% for the three month periods ended June
30, 1995 and 1994, respectively. Improvement is due to a more
favorable product mix.
The Company incurred $249,682 of selling, general and
administrative expenses in the second quarter of 1995 which was a
decrease of $44,125 compared to selling, general and administra-
tive expenses of $293,807 in the second quarter of 1994. The
decrease in 1995 is the result of management's cut backs of
support personnel in accounting, administration and marketing
that were instituted in the third quarter of 1994.
Research and development expense in the second quarter of
1995 totaled $94,541, an increase of $11,647 from the second
quarter of 1994. The increase was the result of contract engi-
neering work on the new products, the DP100 and the RDS/RBDS
units.
Interest and other income of $7,167 for the second quarter
of 1995 was comparable to the second quarter of 1994.
Interest expense consists of the interest on the long-term
mortgage collateralized by the Company's headquarter facility
plus bank costs for the Company's credit line which is occasion-
ally used to manage cash flow.
Net loss for the second quarter of 1995 was $47,261 as
compared to a net loss for the second quarter of 1994 of $73,410.
8
II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits included herein - None.
(b) Reports on Form 8-K - None.
9
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.
Registrant
CIRCUIT RESEARCH LABS,
INC.
DATE: NOVEMBER 12, 1995
BY /s/Gary D. Clarkson
Gary D. Clarkson
Treasurer (Authorized
Officer for signature)
10