SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
________________________________________
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
[ ] Transition Report Under Section 13 or 15(d) of the Exchange Act
For the transition period from __________ to ___________
COMMISSION FILE NUMBER 0-5351
EIP MICROWAVE, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 95-2148645
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3 Civic Plaza, Suite 265, Newport Beach, California 92660
(Address of principal executive offices) (Zip Code)
(714) 720-1766
(Issuer's telephone number)
__________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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 the
past 90 days. YES [X] NO [ ]
OUTSTANDING COMMON STOCK: As of May 2, 1995, Registrant had only one class
of common stock, and had 423,307 shares of this $.01 par value common stock
outstanding.
Transitional Small Business Disclosure Format (check one): YES [ ] NO [X]
Total Number of Pages: 20
Exhibit Index 11
1
EIP MICROWAVE, INC.
FORM 10-QSB
Quarter Ended March 31, 1995
Part I Financial Information
Item 1. Consolidated Financial Statements Pages 3 - 6
Item 2. Management's Discussion and Analysis of Pages 7 - 8
Results of Operations and Financial Condition
Part II Other Information
Item 2. Changes in Securities Page 9
Item 6. Exhibits and Reports on Form 8-K Page 9
Signatures Page 10
Index to Exhibits Page 11
2
EIP MICROWAVE, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
March 31, September 30,
1995 1994
--------- -------------
ASSETS
Current assets:
Cash and cash equivalents $ 77 $ 211
Short-term investments 308 308
-------------------------
385 519
Accounts receivable, net 936 714
Inventories 1,073 984
Prepaid expenses 34 38
-------------------------
Total current assets 2,428 2,255
-------------------------
Property, plant and equipment, net 338 459
Other assets 30 30
-------------------------
$2,796 $2,744
=========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 441 $ 527
Accrued liabilities 624 626
-------------------------
Total current liabilities 1,065 1,153
-------------------------
Commitments and contingencies
Shareholders' equity:
Common stock, $.01 par value, authorized -
10,000,000 shares, 423,307 and 423,307 shares
issued and outstanding, respectively 5 5
Additional paid-in capital 844 844
Retained earnings 882 742
-------------------------
Total shareholders' equity 1,731 1,591
-------------------------
$2,796 $ 2,744
=========================
3
EIP MICROWAVE, INC.
PART I/ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(In thousands except per share data, unaudited)
Three Months Six Months
Ended March 31, Ended March 31,
1995 1994 1995 1994
--------------- --------------
Net sales $1,750 $1,581 $3,201 $2,636
Costs and expenses:
Cost of sales 773 812 1,573 1,483
Research, development and engineering 196 162 372 318
Selling, general and administrative 661 607 1,170 1,130
Interest and other, net (56) (8) (55) (8)
--------------- --------------
Income (loss) before income tax 176 8 141 (287)
Income tax provision 1 1 1 1
--------------- --------------
Net income (loss) 175 7 140 (288)
Retained earnings at beginning of period 707 900 742 1,195
--------------- --------------
Retained earnings at end of period $ 882 $ 907 $ 882 $ 907
=============== ==============
Income (loss) per share $ .41 $ .02 $ .33 $ (.68)
=============== ==============
Shares of common stock 423 423 423 423
=============== ==============
4
EIP MICROWAVE, INC.
PART I/ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS (continued)
CONSOLIDATED STATEMENT OF CASH FLOWS
Increase (decrease) in cash
(In thousands, unaudited)
Six Months Ended
March 31, March 31,
1995 1994
--------- ---------
Cash flows from operating activities:
Net income (loss) $ 140 $(288)
Adjustments to reconcile net income (loss) to
net cash used by operating activities:
Depreciation and amortization 93 128
Change in assets and liabilities:
Accounts receivable, net (222) (39)
Inventories (89) 71
Prepaid expenses and other assets 4 53
Accounts payable (86) 119
Accrued liabilities (2) (2)
----------------
Cash provided (used) by operating activities (162) 42
----------------
Cash flows from investing activities:
Capital expenditures (1) --
Sales of capital equipment 29 --
----------------
Cash provided by investing activities 28 --
----------------
Increase (decrease) in cash and equivalents (134) 42
Cash and equivalents at beginning of year 211 247
----------------
Cash and equivalents at end of second quarter $ 77 $ 289
================
5
EIP MICROWAVE, INC.
PART I/ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(a) The consolidated financial information presented in this Form 10-QSB
has been prepared from the accounting records without audit and
conforms with the financial statements included in the Company's
annual report filed with the Commission for the preceding fiscal
year. The information furnished reflects all adjustments and
disclosures which are, in the opinion of management, of a normal,
recurring nature, and necessary for a fair statement of the results
for the interim periods. This report should be read in conjunction
with the Company's 1994 Annual Report on Form 10-KSB.
(b) Composition of certain balance sheet captions (in thousands,
unaudited):
March 31, September 30,
1995 1994
--------- -------------
Inventories, net:
Raw materials $ 480 $ 576
Work-in-process 568 401
Finished goods 25 7
------ ------
$1,073 $ 984
------ ------
Property, plant and equipment:
Cost $5,327 $5,388
Accumulated depreciation (4,989) (4,929)
------ ------
$ 338 $ 459
------ ------
(c) On December 20, 1994, the Company obtained a bank line of credit
("line") which provides for borrowings up to 60% of eligible accounts
receivable, not to exceed $500,000, which expires December 5, 1995.
Interest is charged at the bank's prime rate plus 3.5% provided that
the interest rate in effect each month shall not be less than 7.5% per
annum, and is payable monthly. This line is secured by the Company's
accounts receivable, inventory and fixed assets. The agreement, as
amended, contains various restrictive covenants requiring, among other
matters, the maintenance of minimum levels of tangible net worth and
certain financial ratios, including debt to net worth. At March 31,
1995, the Company was in compliance with the restrictive covenants of
the line. No borrowings were outstanding under the line at March 31,
1995.
6
EIP MICROWAVE, INC.
PART I/ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Net sales for the three months ended March 31, 1995, were $1,750,000, an 11%
increase from the same period last year. Net sales for the six months ended
March 31, 1995, were $3,201,000, a 21% increase from the same period last
year. The increase in sales for both periods was primarily attributable to
increased sales to government contractors, increased sales of product
configured in the VXIbus standard, and an increase in international sales,
compared to the same periods last year. The Company still believes the
overall softness in domestic and foreign markets for the Company's products
will continue to affect sales.
Product cost of sales decreased to 44% of sales in the second fiscal quarter
of 1995, from 51% of sales in the second fiscal quarter of 1994. Product
cost of sales was 49% of sales for the six months ended March 31, 1995, as
compared to 56% of sales for the same period last year. The decrease for
both periods was primarily attributable to substantially higher production
volume, and change in product mix, compared to the same periods last year.
Incoming orders for the second fiscal quarter were $1,573,000, a 93% increase
from the same period a year ago. Incoming orders for the six months ended
March 31, 1995, were $3,234,000, a 20% increase from the same period a year
ago. Backlog at March 31, 1995, was $836,000, a 104% increase from the end of
the second fiscal quarter last year. The increase in orders for both
periods, and backlog, resulted primarily from increased orders from
government contractors, increased orders of product configured in the VXIbus
standard, and an increase in international orders, compared to the same
periods last year. The Company still believes the overall softness in
domestic and foreign markets for the Company's products will continue to
affect orders.
Research, development and engineering expenses increased 21% to $196,000 in
the second fiscal quarter of 1995, compared to the same quarter last year.
Research, development and engineering expenses increased 17% to $372,000 for
the six months ended March 31, 1995, compared to the same period last year.
The increase in research, development and engineering expenses for both
periods was primarily attributable to new product development.
Selling, general and administrative expenses increased 9% to $661,000 during
the second fiscal quarter of 1995, compared to the same quarter last year.
Selling, general and administrative expenses increased 4% to $1,170,000 for
the six months ended March 31, 1995, compared to the same period last year.
The increase in selling, general and administrative expenses for both periods
is due primarily to increased commission expense resulting from increased
sales volume and increased payroll costs.
7
EIP MICROWAVE, INC.
PART I/ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION (continued)
The Company earned $175,000 for the second fiscal quarter of 1995, as
compared to net income of $7,000 recorded for the second fiscal quarter of
the previous year. The Company earned $140,000 for the six months ended
March 31, 1995, compared to a $288,000 loss for the same period last year. A
gain on sale of fixed assets of $56,000 is included in the second quarter and
six month earnings figures. The Company still believes that the overall
softness in domestic and foreign markets for the Company's products will
continue to affect earnings.
FINANCIAL CONDITION
At March 31, 1995, the Company's cash and short-term investment balance was
$385,000, as compared with a cash and short-term investment balance of
$519,000 at September 30, 1994. At March 31, 1995, the Company had no
material commitments for capital expenditures. At March 31, 1995, working
capital increased $261,000 from September 30, 1994, and the Company's current
ratio increased to 2.3:1 from 2.0:1 over the same time period.
The Company still believes that the overall softness in domestic and foreign
markets for the Company's products will continue to affect incoming orders
and net sales and may result in a loss for fiscal 1995. This market softness
will be at least partially offset by increased orders and sales of products
configured in the VXIbus standard and the recently introduced pulsed
frequency counter with peak power measurement. The Company will continue to
control expenses and minimize debt during fiscal 1995.
On December 20, 1994, the Company obtained a line of credit agreement with a
bank that allows the Company to borrow on a short-term basis through December
5, 1995. The maximum borrowings under this agreement are the lesser of
$500,000, or 60% of the net amount of the Company's eligible accounts
receivable as determined by the bank, bearing interest at the prime rate plus
3.5% per annum, provided that the interest rate in effect each month shall
not be less than 7.50% per annum. The agreement, as amended, contains
various restrictive covenants requiring, among other matters, the maintenance
of minimum levels of tangible net worth and certain financial ratios,
including debt to net worth.
The Company believes that the cash on hand, funds generated from operations
and the Company's line of credit will adequately finance the Company's
operations during fiscal 1995.
8
EIP MICROWAVE, INC.
PART II - OTHER INFORMATION
Item 2. Changes in Securities
The existing credit facility between the Company and its commercial bank
contains restrictions on dividend payments and financial ratios regarding,
among other matters, the maintenance of minimal levels of tangible net worth,
minimum quick ratio and limits of debt to net worth. The credit agreement is
more fully described in Part I/Item 2 - Financial Condition.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Shareholders on
February 8, 1995. Two items were voted on by the shareholders.
(1) Robert D. Johnson was re-elected as a Class III member of
the Board of Directors with term expiring at the 1998
Annual Meeting. The votes cast for or withheld for Robert
D. Johnson were as follows: For - 312,142; Withheld -
2,165. John F. Bishop, and J. Bradford Bishop, each a
Class I director, and J. Sidney Webb, Jr., and James J.
Shelton, each a Class II director, were not up for
re-election and continue in office.
(2) The shareholders approved the Company's 1994 Stock Option
Plan, as adopted by the Board of Directors. Vote to
approve as follows: For - 218,510; Against - 11,335;
Abstain - 764.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
10(a) Non-qualified Stock Option Agreement-Form
10(b) Incentive Stock Option Agreement-Form
27 Financial Data Schedule.
(b) Reports on Form 8-K.
The Company did not file with the Commission any reports on
Form 8-K in the quarter ended March 31, 1995.
9
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
EIP MICROWAVE, INC.
(Registrant)
DATE: May 2, 1995 BY: /s/ J. Bradford Bishop
---------------------------
J. Bradford Bishop
Chairman of the Board and
Chief Executive Officer
DATE: May 2, 1995 BY: /s/ John Ardizzone
----------------------------
John Ardizzone
Vice President - Finance and
Chief Financial Officer
10
EIP MICROWAVE, INC.
INDEX TO EXHIBITS
Sequentially
Exhibit No. Description Numbered Page
- ----------- ----------- -------------
10(a) Non-qualified Stock Option Agreement-Form 12
10(b) Incentive Stock Option Agreement-Form 16
27 Financial Data Schedule 20
11