-----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, Pw6CUcO7GpLQJnzYNoAt3qKdIUQhWH/RM4d6xNQ+QjJC4RkcVteUczwGPmJ7mejU jYhU3hYQZbbyJxc4EEALTA== 0001005477-97-000558.txt : 19970222 0001005477-97-000558.hdr.sgml : 19970222 ACCESSION NUMBER: 0001005477-97-000558 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970219 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: POWER DESIGNS INC CENTRAL INDEX KEY: 0000079829 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 111708714 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-01921 FILM NUMBER: 97538990 BUSINESS ADDRESS: STREET 1: 250 EXECUTIVE DR CITY: EDGEWOOD STATE: NY ZIP: 11717 BUSINESS PHONE: 5165860200 MAIL ADDRESS: STREET 1: 250 EXECUTIVE DRIVE CITY: EDGEWOOD STATE: NY ZIP: 11717 10QSB 1 FORM 10-QSB SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB (Mark one) |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1996 OR |_| 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. 0-1921 POWER DESIGNS INC. ----------------------------------------------------------- (Name of Small Business Issuer as specified in its charter) New York 11-1708714 - ------------------------------- --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 14 Commerce Drive, Danbury, Connecticut 11717 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (203) 748-7001 - -------------------------------------------------------------------------------- (Issuer's Telephone Number, Including Area Code) 250 Executive Drive, Edgewood, New York, 11717 - -------------------------------------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |_| No |X| APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes___ No __X_ APPLICABLE ONLY TO CORPORATE REGISTRANTS State the number of shares outstanding of each of the issuer's classes of common equity as of the latest practicable date: 2,391,493 as of 1997 Transitional Small Business Disclosure Format (check one) Yes |_| No |X| Page - 1 - PART I. FINANCIAL INFORMATION Item 1. Financial Statements Page - 1 - POWER DESIGNS, INC. Condensed Consolidated Balance Sheet (Unaudited) December 31, 1996 and 1995 1996 1995 ---- ---- ASSETS Current assets: Cash $ 6,003 $ 4,148 Accounts receivable 1,100,315 17,392 Inventories 2,218,330 236,228 Prepaid expenses 5,571 3,953 ----------- ----------- Total current assets 3,330,219 261,721 ----------- ----------- Property and equipment, less accumulated depreciation 536,092 6,132 ----------- ----------- Other assets: Acquisition deposit -- -- Investment in partnership 21,221 21,294 Security deposits 3,855 3,855 Goodwill 1,962,724 -- Financing fees and organizational costs 256,269 -- ----------- ----------- 2,244,069 25,149 ----------- ----------- $ 6,110,380 $ 293,002 =========== =========== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Seller financing $ 2,750,000 $ 0 Cash overdraft 17,381 -- Accounts payable and accrued expenses 1,454,687 193,975 Intercompany payables -- -- Current portion of long-term debt -- 475,206 Payables related to reorganization, including accrued interest 143,609 59,375 ----------- ----------- Total liabilities 4,365,677 728,556 ----------- ----------- Long-term debt: Accrued liabilities - other -- 306,946 Notes payable - affiliates 4,112,986 -- ----------- ----------- 4,112,986 306,946 ----------- ----------- Stockholders' deficit Preferred stock 264,854 -- Common stock 240 218 Additional paid in capital 827,732 784,754 Deficit (3,461,111) (1,527,472) ----------- ----------- Total stockholders' deficit (2,368,285) (742,500) ----------- ----------- $ 6,110,380 $ 293,002 =========== =========== POWER DESIGNS, INC. Condensed Consolidated Statement of Operations (Unaudited) For The Three and Six Months Ended December 31, 1996 and 1995
3 months ended 3 months ended 6 months ended 6 months ended December 31, 1996 December 31, 1995 December 31, 1996 December 31, 1995 Net Sales $ 1,239,232 $ 175,763 $ 1,329,734 $ 318,094 Cost of Sales 997,556 91,709 1,077,198 200,140 ----------- --------- ----------- --------- Gross profit 241,676 84,054 252,536 117,954 Selling, general and admin. expense 1,326,104 87,028 1,434,424 157,322 ----------- --------- ----------- --------- Net loss before other income (expense) (1,084,428) (2,974) (1,181,888) (39,368) ----------- --------- ----------- --------- Other income (expense): Investment income 500 -- 1,500 8,231 Interest expense (216,486) (27,928) (250,433) (44,403) ----------- --------- ----------- --------- (215,986) (27,928) (248,933) (36,172) ----------- --------- ----------- --------- Net loss ($1,300,414) ($ 30,902) ($1,430,821) ($ 75,540) =========== ========= =========== ========= Net loss per share ($ 0.54) ($ 0.01) ($ 0.60) ($ 0.03) =========== ========= =========== =========
POWER DESIGNS, INC. Condensed Consolidated Statement of Changes in Stockholders' Deficit (Unaudited) For The Three and Six Months Ended December 31, 1996 and 1995
Shares Shares Preferred Common Additional Stock Stock Preferred Common Paid In Outstanding Outstanding Stock Stock Capital Deficit Total ----------- ----------- ----- ----- ------- ------- ----- Balance, June 30, 1995 0 2,176,259 $ 0 $ 218 $ 784,754 ($1,451,932) ($ 666,960) Net loss -- -- -- -- -- (44,638) (44,638) Balance, September 30, 1995 -- 2,176,259 -- 218 784,754 (1,496,570) (711,598) Net loss -- -- -- -- -- (30,902) (30,902) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 1995 0 2,176,259 $ 0 $ 218 $ 784,754 ($1,527,472) ($ 742,500) =========== =========== =========== =========== =========== =========== =========== Balance, June 30, 1996 0 2,391,493 $ 0 $ 240 $ 820,732 ($2,025,464) ($1,204,492) Net loss -- -- -- -- -- (130,407) (130,407) Balance, September 30, 1996 -- 2,391,493 -- 240 820,732 (2,155,871) (1,334,899) Dividends accrued -- -- -- -- -- (4,826) (4,826) Stock issuance 316,473 -- 264,854 -- 7,000 -- 271,854 Net loss -- -- -- -- -- (1,300,414) (1,300,414) ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 1996 316,473 2,391,493 $ 264,854 $ 240 $ 827,732 ($3,461,111) ($2,368,285) =========== =========== =========== =========== =========== =========== ===========
POWER DESIGNS, INC. Condensed Consolidated Statement of Cash Flows (Unaudited) For The Three and Six Months Ended December 31, 1996 and 1995
3 months ended 3 months ended 6 months ended 6 months ended December 31, 1996 December 31, 1995 December 31, 1996 December 31, 1995 Cash flows from operating activities: Net loss ($1,300,414) ($ 30,902) ($1,430,821) ($ 75,540) Adjustments to reconcile net loss to net cash used in operating activities Depreciation 29,942 -- 30,193 -- (Increase) decrease in: Accounts receivable (447,152) 17,682 (484,919) (4,613) Inventories (111,032) (34,721) (143,843) (34,721) Prepaid Expenses (1,119) 126 (5,571) (230) Other assets 4,007 -- (55,993) -- Increase (decrease) in: Accounts payable and accrued expenses 759,573 27,734 792,743 20,840 Payables related to reorganization (117,922) (178,429) (118,046) (185,590) ----------- ----------- ----------- ----------- Cash flows used in operating activities (1,184,117) (198,510) (1,416,257) (279,854) ----------- ----------- ----------- ----------- Cash flows used in investing activities: Purchase of property and equipment (36,787) -- (36,787) -- ----------- ----------- ----------- ----------- Cash flows from (used in) financing activities: Advances from affiliates 2,493,211 -- 2,421,960 (34,391) Acquisition of Penril net assets * (1,546,558) -- (1,736,558) -- Cash received from long term financing 495,178 325,440 Cash received from stock issuance net of declared dividends 267,027 -- 267,027 -- ----------- ----------- ----------- ----------- Cash flows provided by financing activities 1,213,680 208,045 1,447,607 291,049 ----------- ----------- ----------- ----------- Net increase (decrease) in cash (7,224) 9,535 (5,437) 11,195 Cash (overdraft), beginning of period (4,153) (5,387) (5,940) (7,047) ----------- ----------- ----------- ----------- Cash (overdraft), end of period ($ 11,377) $ 4,148 ($ 11,377) $ 4,148 =========== =========== =========== ===========
* In addition the company received $2,750,000 in seller financing to purchase assets and assume liabilities from Penril (see Note 2). POWER DESIGNS, INC. --------- Notes To The Condensed Consolidated Financial Statement For The Three and Six Months Ended December 31, 1996 and 1995 -------- Note 1 - Basis of Presentation: The financial information included herein is unaudited; however such information reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the periods shown. The results of operations for the three and six months ended December 31, 1996 are not necessarily indicative of the results to be expected for the full year. The consolidated statements of operations for the periods ended December 31, 1996 include the operations of PDIXF Acquisition Corporation (see Note 2) for the period October 11, 1996 through December 31, 1996. Note 2 - Significant Events: On October 11, 1996, a wholly owned subsidiary of Power Designs, Inc. (PDIXF Acquisition Corporation) acquired for approximately $4,430,000, the assets of two divisions of Penril Datacomm Networks, Inc. (PENRIL). These two divisions, Technipower, Inc. and Constant Power, Inc., are manufacturers of power supplies, auto transformers, power line conditioners and uninterruptable power supplies. Additionally, the Company repaid loans, notes payable and obligations to creditors totaling approximately $1,490,000 that existed as of October 11, 1996. The Company also incurred approximately $260,000 in costs (financing and organizational) related to the transaction. Funding for the above transaction ( approximately $6,180,000 ) was provided by the following: 316,743 shares of preferred stock convertible to common stock at a conversion rate to be determined at a future date $ 265,000 Warrants convertible into 416,749 shares of common stock at 87.5 cents per share 7,000 Subordinate debt from six individuals and a limited partnership 1,087,000 Note payable to Inverness Corporation (Due April 1, 1998) 2,290,000 Seller financing (Due 12/31/96) 2,750,000 ----------- Total sources 6,399,000 Less: cash deposited into PDIXF Corp. for working capital ( 219,000) ----------- $ 6,180,000 =========== The Company has defaulted on the $2,750,000 note (secured by the majority of the assets owned by Power Designs, Inc. due to Penril at December 31, 1996). As a result of the default, the company is in breach of its asset purchase agreement. As of this date, the Company and Penril are continuing discussions to cure the default but no agreement has been reached. Although Penril has taken no action, they have also failed to waive either the default or the consequent breach. The Company expects to do a secondary stock offering subsequent to December 31, 1996 which would provide the funds to repay the seller financing provided by Penril. The Company is simultaneously working to arrange the necessary bridge financing needed until such time as that offering occurs. Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations. Current Developments On October 11, 1996, the issuer, through its wholly-owned subsidiary PDIXF Acquisition Corp. ("PAC") purchased the assets of Technipower, Inc. ("TPI"), Constant Power, Inc. ("CPI"), two subsidiaries of Penril Datacomm Networks, Inc ("Penril"), under an Asset Purchase Agreement (the "Agreement"). That acquisition was reported on a Form 8-K dated October 28, 1996. After the transaction was completed, the issuer also began taking steps to wind down operations at its Long Island headquarters, so that it could consolidate its managerial and manufacturing operations at former Penril sites in Connecticut. This move was completed on November 5, 1996. Under the terms of the Agreement, the issuer acquired all of the TPI and CPI assets employed in the manufacture of three product lines (the "Business"): "Variac" autotransformers, "Mil Spec" power supplies and AC power protection devices. It intends to maintain the current use of these assets. Total consideration, which was determined through arms-length negotiations, consisted of $1,586,085 in cash, a $2,750,000 Term Note issued to Penril by PAC, a royalty equal to 2% of the Business's gross sales during the period from July 1, 1997 through June 30, 2001, and various assumed liabilities related to the acquired lines of business, valued at approximately $632,600. The Term Note bears annual interest of 2% above prime rate, and a maturity date of December 31, 1996. The Term Note is currently in default. See Part II -- Item 3. Defaults upon Senior Securities. As is discussed in more detail in "Liquidity and Capital Resources" below, funds for the transaction were obtained through additional financing. In addition, in early 1995, the issuer's shareholders approved a resolution calling for the reincorporation of the issuer under Delaware law, by merging the issuer into a Delaware corporation also named Power Designs Inc. The merger remains unexecuted pending approval by the New York State Department of State, Division of Corporations. Liquidity and capital resources. On October 11, 1996, the issuer obtained outside financing totalling approximately $6.2 million. The financing consisted of three primary components: a private placement of debt and equity securities for $1,087,000 to six individuals and a limited partnership; a note payable to Inverness in the amount of $2,290,000, and a Term Note payable to Penril of $2.75 million, due on December 31, 1996. (The Page - 8 - Term Note is currently in default. See Part II -- Item 3. Defaults upon Senior Securities.) As part of the acquisition and financing, the issuer also created a class of preferred stock, $.01 par value, which had been authorized by vote of the shareholders in fiscal year 1995. Shares of such preferred stock were included with the securities placed with the six individuals and limited partnership. The financing permitted the issuer to pay in full several outstanding debts, including a loan of $130,500 from Venture Partners, Ltd., acting as agent, and a Revolving Loan Agreement with Inverness Corporation, under which the issuer had borrowed $834,097 as of June 30, 1996. In addition, when the issuer emerged from bankruptcy in 1994 it entered into a plan of reorganization that required payments to pre-bankruptcy creditors of approximately $59,000 per year through fiscal 1997 and $49,000 from then through fiscal 2000. The issuer is continuing to make these payments. Because of the completed acquisition of the Penril subsidiaries, the issuer hopes to be able to supply a greater percentage of its working capital needs through operating cash flow during the 1997 fiscal year. Nevertheless, the issuer expects that it will be in need of additional financings through offerings of debt or equity. The remaining capital necessary for operating purposes and capital investment is anticipated to be supplied by financings secured by its receivables and additional loans. It is currently exploring the possibility either of a public offering of stock or bridge financing, but has made no definite decisions in this regard. The issuer currently has a deficit in shareholders' equity, meaning that amounts owed to its creditors, including without limitation Inverness Corp., exceed the value of its assets. As of the end of the reporting period, the issuer has no plans beyond the above to remedy the deficit in shareholders' equity. Certain statements contained in this Item 2 regarding matters that are not historical facts, including, among others, statements regarding the future adequacy of the issuer's working capital, its ability to raise capital through debt or equity offerings, its ability to maintain or improve its present cash flow, are forward looking statements (as such term is defined in the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended). Such forward looking statements are not guarantees of future performance. There remain substantial risks that the issuer will be unable to obtain adequate financing to improve its performance and achieve its business goals. Results of operations The issuer's internal financial information for the period ended December 31, 1995 is limited because of personnel and procedural changes in the issuer's auditing department. Nevertheless, the issuer has concluded that it can prepare unaudited Page - 9 - financial statements for those periods on a basis comparable to that of the fiscal 1997 financial statements. First six months of fiscal 1997 versus first six months of fiscal 1996 Results for the second quarter of fiscal 1997 reflect the acquisition of the Constant Power and Technipower assets, and therefore represent a substantial change from the figures for 1997's first quarter. Although gross profit more than doubled -- to $252,536 -- compared to first half of FY 1996, and net sales increased from $175,000 to $1.2 million, the combined entity experienced losses of $1.4 million as the constituent businesses worked to integrate their operations. Selling, general and administrative expenses were especially high over this period, reflecting extraordinary professional and other costs required to execute the acquisition and financing described above at Item 2. Furthermore, the interim statements reflect that as part of the consideration for the acquisition, the issuer agreed to assume accounts payable and other liabilities totalling over $1.4 million and undertook short-term debt of $2.75 million, bringing total current liabilities to $4.3 million. These acquisition-related costs thus increased in stockholder's deficit to approximately $2.3 million from $742,500. Because of the issuer's default on a $2.75 million note, disclosed at Part II -- Item 3 below, the issuer is in negotiations to obtain bridge financing to repay the note and provide working capital. No agreement has been reached at this time. Simultaneously, the issuer is preparing to undertake a secondary stock offering, which would provide the necessary funds for repayment and for capital needs. Certain statements contained in this Item 6 regarding matters that are not historical facts, including, among others, statements regarding future effects of the October 11, 1996 acquisition, the future adequacy of the issuer's working capital, its ability to raise capital through debt or equity offerings, and its ability to maintain or improve its present cash flow, are forward looking statements (as such term is defined in the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended). Such forward looking statements are not guarantees of future performance. There remain substantial risks that the issuer will be unable to obtain adequate financing to improve its performance and achieve its business goals. PART II. OTHER INFORMATION Item 3. Defaults Upon Senior Securities As was reported on a Form 8-K dated January 14, 1997, on December 31, 1996, the issuer's wholly-owned subsidiary PDIXF Acquisition Corp. ("PAC") defaulted on a $2,750,000 Term Note (the "Note") to Penril Datacomm Networks, Inc. The note bears annual interest of 2% above prime rate. Because of the default, the issuer and PAC have breached the Asset Purchase Agreement described above at Item 2. -- Current Developments. Page - 10 - As of this Report, the issuer, PAC and Penril are continuing discussions to cure the default, but no agreement has been reached as of this report. Although Penril has taken no action against the issuer or PAC, Penril has also failed to waive either the default or the consequent breach. Item 4. Submission of Matters to a Vote of Security Holders No matter was submitted during the reporting period covered by this report to a vote of security holders, through the solicitation of proxies, or otherwise. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits ================================================================================ Page in consecutively Exhibit Page numbered copy ================================================================================ (10) Material Contracts (i) Asset Purchase Agreement Incorporated by Reference to the Report On Form 8-K dated October 28, 1996 (ii) $2,750,000 Term Note Incorporated by Reference to the Report On Form 8-K dated October 28, 1996 Page - 11 - (b) A report on Form 8-K was filed on October 28, 1996. Subsequent to the end of the quarter, a report on Form 8-K was filed on January 14, 1997, reporting the default described at Item 3 above. SIGNATURES Pursuant to the requirements of the Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: February 18, 1997 POWER DESIGNS INC. ------------------ (Registrant) By: /s/ Rudolf Zeidler ---------------------------------- Rudolf Zeidler, President Page - 12 - EX-27 2 FDS
5 This schedule contains summary financial information extracted from Power Designs Inc. Consolidated Financial Statements December 31, 1996 and 1995 and is qualified in its entirety by reference to such financial statements. 6-MOS JUN-30-1997 JUL-01-1996 DEC-31-1996 6,003 0 1,100,315 0 2,218,330 3,330,219 607,432 71,340 6,110,380 4,365,677 0 0 264,854 240 (2,633,379) 6,110,380 1,329,734 1,331,234 1,077,198 1,077,198 1,684,857 0 0 (1,430,821) 0 (1,430,821) 0 0 0 (1,430,821) (.60) (.60)
-----END PRIVACY-ENHANCED MESSAGE-----