-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CI8VdqVgkRKFx4Kj3i1eXFSOUDYuq+VEzyk+iW8kcROY/mrSrgDR9nIRHrV6VTTG Hscq4U5tai6aJ6Cs6kBV7Q== 0000912057-96-017617.txt : 19960816 0000912057-96-017617.hdr.sgml : 19960816 ACCESSION NUMBER: 0000912057-96-017617 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: EIP MICROWAVE INC CENTRAL INDEX KEY: 0000026782 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 952148645 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-05351 FILM NUMBER: 96611671 BUSINESS ADDRESS: STREET 1: 3 CIVIC PLAZA STE 265 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 7147201766 MAIL ADDRESS: STREET 1: 3 CIVIC PLAZA STE 265 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FORMER COMPANY: FORMER CONFORMED NAME: JENOA INC DATE OF NAME CHANGE: 19800103 FORMER COMPANY: FORMER CONFORMED NAME: DANA ELECTRONICS INC DATE OF NAME CHANGE: 19780228 FORMER COMPANY: FORMER CONFORMED NAME: DANALAB INC DATE OF NAME CHANGE: 19750224 10QSB 1 FORM 10-QSB 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 JUNE 30, 1996 [ ] 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 incorporation (IRS Employer Identification No.) 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 August 5, 1996, 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: 14 Exhibit Index 11 1 EIP MICROWAVE, INC. FORM 10-QSB Quarter Ended June 30, 1996 PART I FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (unaudited) Condensed Consolidated Balance Sheets as of June 30, 1996 and September 30, 1995 Page 3 Condensed Consolidated Statements of Operations and Retained Earnings for the three months and nine months ended June 30, 1996 and 1995 Page 4 Condensed Consolidated Statements of Cash Flows for the nine months ended June 30, 1996 and 1995 Page 5 Notes to condensed consolidated financial statements Page 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Pages 7 - 8 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 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in thousands, except per share data, unaudited) June 30, September 30, 1996 1995 ------------ ----------------- ASSETS Current assets: Cash and cash equivalents $ 48 $ 126 Short-term investments 338 319 -------------------------------- 386 445 Accounts receivable, net 787 1,064 Inventories 1,016 1,133 Prepaid expenses 56 74 -------------------------------- Total current assets 2,245 2,716 -------------------------------- Property and equipment, net 473 271 Other assets 15 30 -------------------------------- $2,733 $3,017 -------------------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 611 $ 610 Accrued liabilities 540 691 Credit line debt 185 - -------------------------------- Total current liabilities 1,336 1,301 -------------------------------- Commitments and contingencies Stockholders' equity: Common stock, $.01 par value, authorized -10,000,000 shares; 423,307 issued and outstanding 5 5 Additional paid-in capital 844 844 Retained earnings 548 867 -------------------------------- Total stockholders' equity 1,397 1,716 -------------------------------- $2,733 $3,017 -------------------------------- 3 EIP MICROWAVE, INC. PART I/ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (Dollars in thousands, except per share data, unaudited)
Three Months Nine Months Ended June 30, Ended June 30, 1996 1995 1996 1995 ------------------ ------------------ Net sales $1,642 $1,679 $4,886 $4,880 Costs and expenses: Cost of sales 1,090 964 3,075 2,537 Research, development and engineering 258 172 724 544 Selling, general and administrative 496 540 1,548 1,710 Interest and other, net (5) (20) (142) (75) -------------------------------------- Total costs and expenses 1,839 1,656 5,205 4,716 -------------------------------------- Net income (loss) before income tax (197) 23 (319) 164 Income tax provision 0 0 0 1 -------------------------------------- Net income (loss) (197) 23 (319) 163 Retained earnings at beginning of period 745 882 867 742 -------------------------------------- Retained earnings at end of period $ 548 $ 905 $ 548 $ 905 -------------------------------------- Net income (loss) per share $ (.47) $ .05 $ (.75) $ .39 -------------------------------------- Weighted average common shares outstanding 423 423 423 423 --------------------------------------
4 EIP MICROWAVE, INC. PART I/ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Increase (decrease) in cash (Dollars in thousands, unaudited)
Nine Months Ended June 30, June 30, 1996 1995 --------- --------- Cash flows from operating activities: Net income (loss) $(319) $ 163 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 134 144 (Gain) loss on sale of capital equipment (50) - Change in assets and liabilities: Accounts receivable, net 277 (42) Inventories 117 (146) Prepaid expenses and other assets 33 (1) Accounts payable 1 (129) Accrued liabilities (151) (3) --------------------- Cash provided by (used in) operating activities 42 (14) --------- --------- Cash flows from investing activities: Purchase of short-term investments (19) 4 Capital expenditures (347) (9) Proceeds from sale of capital equipment 61 28 --------- --------- Cash (used in) provided by investing activities (305) 23 --------- --------- Cash flows from financing activities: Borrowings under line of credit 185 - (Decrease) in cash and equivalents (78) 9 Cash and cash equivalents at beginning of period 126 211 --------- --------- Cash and cash equivalents at end of period $ 48 $ 220 --------- ---------
5 EIP MICROWAVE, INC. PART I/ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued) NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (a) The condensed consolidated financial statements presented in this Form 10-QSB have been prepared from the accounting records without audit on a basis consistent with the financial statements included in the Company's annual report filed with the Securities and Exchange Commission for the preceding fiscal year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. 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 1995 Annual Report on Form 10-KSB. The results of operations for the interim periods presented are not necessarily indicative of the results expected for the entire year. (b) Composition of certain balance sheet captions (dollars in thousands): June 30, September 30, 1996 1995 --------- --------------- Inventories: Raw materials $ 656 $ 633 Work-in-process 352 489 Finished goods 8 11 --------- --------- $ 1,016 $ 1,133 --------- --------- Property and equipment: Cost $ 5,147 $ 5,158 Accumulated depreciation (4,674) (4,887) --------- --------- $ 473 $ 271 --------- --------- 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 June 30, 1996, were $1,642,000, a 2% decrease from net sales of $1,679,000 in the same period last year. Net sales for the nine months ended June 30, 1996, were $4,886,000, comparable to net sales of $4,880,000 for the same period last year. The decrease in net sales for the three month period ended June 30, 1996, was primarily attributable to a decline in sales of microwave counters to government contractors and commercial customers. Sales of microwave counters have been and will be affected by a delay in the expected introduction of a new microwave counter by the Company. Gross margin decreased to 34% in the third fiscal quarter of 1996, from 43% in the third fiscal quarter of 1995. Gross margin was 37% for the nine months ended June 30, 1996, as compared to 48% for the same period last year. The decrease for both periods was primarily attributable to a lower average selling price on product sales for one government program. Due to new product orders for this government program, the Company expects the lower average selling price under this program to continue to impact the Company's overall gross margin. Incoming orders for the third fiscal quarter were $2,453,000, comparable to orders of $2,445,000 for the same period a year ago. Incoming orders for the nine months ended June 30, 1996, were $5,007,000, a 12% decrease from orders of $5,679,000 for the same period a year ago. Backlog at June 30, 1996, was $1,292,000, a 19% decrease from a backlog of $1,602,000 at the end of the third fiscal quarter last year. The decrease in orders for the nine month period ended June 30, 1996, and backlog, resulted primarily from a decrease in orders from government contractors for product configured in the VXIbus format, and a decrease in orders of microwave counters from government contractors and commercial customers, compared to the same period last year. Research, development and engineering expenses increased 50% to $258,000 in the third fiscal quarter of 1996, compared to $172,000 for the same quarter last year. Research, development and engineering expenses increased 33% to $724,000 for the nine months ended June 30, 1996, compared to $544,000 for the same period last year. The increase in research, development and engineering expenses for both periods was primarily attributable to new product development expenditures. Selling, general and administrative expenses decreased 8% to $496,000 during the third fiscal quarter of 1996, compared to $540,000 for the same quarter last year. Selling, general and administrative expenses decreased 9% to $1,548,000 for the nine months ended June 30, 1996, compared to $1,710,000 in the same period last year. The decrease in selling, general and administrative expenses for both periods is due primarily to a deferral of advertising costs until the introduction of the Company's next new product, and to no accrued bonuses, compared to the same periods last year. 7 EIP MICROWAVE, INC. PART I/ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (continued) The Company incurred a net loss of $197,000 for the third fiscal quarter of 1996, as compared to net income of $23,000 during the same period last year. The Company incurred a net loss of $319,000 for the nine months ended June 30, 1996, as compared to net income of $163,000 for the same period last year. A credit of $111,000 due to the forgiveness by the Company's Board of Directors of accrued directors' fees as of February 13, 1996, is included in the nine month net loss ended June 30, 1996. A gain on sale of capital equipment of $50,000 is also included in the nine month net loss ended June 30, 1996. The decrease in earnings for both periods, compared to the same periods last year, is primarily due to a decreased gross margin resulting from product sales to one government program, and to increased research, development and engineering expenses. In addition, earnings have been and will be affected by the decrease in microwave counter sales and the delay in new product introduction. LIQUIDITY AND CAPITAL RESOURCES At June 30, 1996, the Company's cash, cash equivalents and short-term investment balance was $386,000, as compared with a cash, cash equivalents and short-term investment balance of $445,000 at September 30, 1995. At June 30, 1996, the Company had no material commitments for capital expenditures. At June 30, 1996, working capital decreased $506,000, from September 30, 1995, and the Company's current ratio decreased to 1.68:1 from 2.09:1 over the same time period. On November 27, 1995, the Company renewed its bank line of credit ("line") which was modified on June 28, 1996, and which as modified provides for borrowings up to 60% of eligible accounts receivable, not to exceed $500,000, which expires November 15, 1996. Interest is charged at the bank's prime rate plus 3% provided that the interest rate in effect each month shall not be less than 10% per annum, and is payable monthly. This line is secured by the Company's accounts receivable, inventory and fixed assets. The agreement, as modified, contains various restrictive covenants requiring, among other matters, the maintenance of minimum levels of tangible net worth and profitability and certain financial ratios, including minimum quick ratio and maximum debt to net worth ratio. At June 30, 1996, the Company was in compliance with the restrictive covenants of the line as modified. Borrowings of $185,000 were outstanding under the line at June 30, 1996. The Company believes that the cash on hand and funds generated from operations and borrowings under the Company's line of credit will adequately finance the Company's operations during the remaining portion of fiscal 1996. If the Company is unable to maintain compliance with the restrictive covenants under its line, the Company believes that additional funds sufficient to adequately finance its operations during fiscal 1996 can be obtained from the liquidation of its short-term investments and further reductions in expenses. 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 various restrictive covenants. The credit agreement is more fully described in Part I/Item 2 - Liquidity and Capital Resources. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 10(a) Loan Modification Agreement dated as of June 28, 1996 between the Company and Silicon Valley Bank. 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 June 30, 1996. 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: August 9, 1996 BY: /s/ J. Bradford Bishop ------------------------------- J. Bradford Bishop Chairman of the Board and Chief Executive Officer DATE: August 9, 1996 BY: /s/ John Ardizzone ------------------------------- John Ardizzone Vice President - Operations and Chief Financial Officer 10 EIP MICROWAVE, INC. INDEX TO EXHIBITS Sequentially Exhibit No. Description Numbered Page - ----------- ----------- ------------- 10(a) Loan Modification Agreement dated as of June 28, 1996 between the Company and Silicon Valley Bank 12 27 Financial Data Schedule 14 11 EX-10.(A) 2 EXHIBIT 10(A) EXHIBIT 10(A) FORM 10-QSB (6/30/96) LOAN MODIFICATION AGREEMENT This Loan Modification Agreement is entered into as of June 28, 1996, by and between EIP Microwave, Inc. ("Borrower") whose address is 1589 Centre Pointe Drive, Milpitas, CA 95035, and Silicon Valley Bank ("Silicon") whose address is 3003 Tasman Drive, Santa Clara, CA 95054. 1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be owing by Borrower to Silicon, Borrower is indebted to Silicon pursuant to, among other documents, a Loan and Security Agreement, dated March 10, 1992 (including the Schedule thereto), as such agreement may be amended from time to time (the "Loan Agreement"). The Loan Agreement provided for, among other things, a Credit Limit in the original principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) (the "A/R Facility"). Defined terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement. Hereinafter, all indebtedness owing by Borrower to Silicon shall be referred to as the "Indebtedness." 2. DESCRIPTION OF COLLATERAL AND GUARANTIES: Repayment of the Indebtedness is secured by the Collateral as described in the Loan Agreement. Hereinafter, the above-described security documents and guaranties, together with all other documents securing repayment of the Indebtedness shall be referred to as the "Security Documents." Hereinafter, the Security Documents, together with all other documents evidencing or securing the Indebtedness shall be referred to as the "Existing Loan Documents." 3. DESCRIPTION OF CHANGE IN TERMS. A. MODIFICATION(S) TO THE SCHEDULE TO LOAN AGREEMENT. 1. The first paragraph of section 1.1 entitled "Credit Limit" is hereby amended to read, in its entirety: An amount not to exceed the lesser of: (i) Five Hundred Thousand and 00/100 Dollars ($500,000.00); or (ii) sixty percent (60%) of the Net Amount of Borrower's accounts, which Silicon in its discretion deems eligible for borrowing. 2. The first sentence of section 1.2 entitled "Interest Rate"' is hereby amended to read, in its entirety: Effective as of the date hereof, a rate equal to the "Prime Rate", in effect from time to time, plus three (3.00) percent per annum, provided that the interest rate in effect in each month shall not be less than ten (10.00) percent per annum. 3. The Financial Covenants as provided in Section 4.1 entitled "Financial Covenants" are hereby amended as follows: QUICK ASSET RATIO. Borrower shall maintain, on a monthly basis, beginning with the month ended April 30, 1996, a ratio of "Quick Assets" to current liabilities of not less than .65 to 1.00. TANGIBLE NET WORTH. Borrower shall maintain, on a monthly basis, beginning with the month ended April 30, 1996, a tangible net worth of not less than $1,000,000.00. 12 EXHIBIT 10(A) DEBT TO TANGIBLE NET WORTH. Borrower shall maintain, on a monthly basis, beginning with the month ended April 30, 1996, a ratio of total liabilities to tangible net worth of not more than 1.25 to 1:00. PROFITABILITY. Borrower shall be profitable (after taxes) on a quarterly and annual basis, with an allowance for losses, provided such losses do not exceed $200,000.00 for the quarter ending June 30, 1996 and $175,000.00 for the quarter ending September 30, 1996. 4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above. 5. PAYMENT OF VARIANCE FEE. Borrower shall pay Silicon a fee in the amount of Five Hundred and 00/100 Dollars ($500.00) (the "Variance Fee") plus all out-of-pocket expenses. 6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing below) agrees that it has no defenses against the obligations to pay any amounts under the Indebtedness. 7. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing below) understands and agrees that in modifying the existing Indebtedness, Silicon is relying upon Borrower's representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and effect. Silicon's agreement to modifications to the existing Indebtedness pursuant to this Loan Modification Agreement in no way shall obligate Silicon to make any future modifications to the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Indebtedness. It is the intention of Silicon and Borrower to retain as liable parties all makers and endorsers of Existing Loan Documents, unless the party is expressly released by Silicon in writing. No maker, endorser, or guarantor will be released by virtue of this Loan Modification Agreement. The terms of this paragraph apply not only to this Loan Modification Agreement, but also to all subsequent loan modification agreements. 8. CONDITIONS. The effectiveness of this Loan Modification Agreement is conditioned upon payment of the Variance Fee. This Loan Modification Agreement is executed as of the date first written above. BORROWER: SILICON: EIP MICROWAVE, INC. SILICON VALLEY BANK By: /s/ John Ardizzone By: /s/ Christine L. Caywood ------------------------- ----------------------------- Name: John Ardizzone Name: Christine L. Caywood ----------------------- --------------------------- Title: CFO Title: Vice President ---------------------- -------------------------- 13 EX-27 3 EXHIBIT 27
5 0000026782 EIP MICROWAVE, INC. 1,000 9-MOS SEP-30-1996 OCT-01-1995 JUN-30-1996 48 338 861 74 1,016 2,245 5,147 4,674 2,733 1,336 0 0 0 5 1,392 2,733 4,886 4,886 3,075 3,075 2,130 0 0 (319) 0 0 0 0 0 (319) (.75) (.75)
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