SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Commission file number 0-12370
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the Quarterly period ended January 31, 2004 |
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission file number 0-12370
SI TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
95-3381440 (I.R.S. Employer Identification Number) |
14192 Franklin Avenue, Tustin, CA 92780
(Address of principal executive offices) (Zip Code)
714-505-6483
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12 (g):
Common Stock, par value $.01 per share
(Title of Class)
Indicate by checkmark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities 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 requirements for the past 90 days. Yes x No ¨
Indicate by checkmark whether the registrant is an accelerated filer (as defined in A Rule 12b-2 of the Exchange Act. Yes ¨ No x
The number of shares outstanding of the registrant’s common stock as of March 15, 2004 was 4,026,996.
PART I–FINANCIAL INFORMATION
| ITEM 1. | FINANCIAL STATEMENTS |
SI TECHNOLOGIES, INC.
Consolidated Balance Sheets
(in thousands)
| January 31, 2004 |
July 31, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: |
||||||||
| Cash |
$ | 294 | $ | 284 | ||||
| Trade accounts receivable, less allowance for doubtful accounts of $312 and $296, respectively |
4,887 | 5,516 | ||||||
| Inventories, net |
9,984 | 10,234 | ||||||
| Other current assets |
454 | 337 | ||||||
| Total current assets |
15,619 | 16,371 | ||||||
| Property and equipment, net |
1,475 | 1,679 | ||||||
| Deferred income taxes |
1,509 | 1,509 | ||||||
| Other assets |
||||||||
| Goodwill |
7,002 | 7,002 | ||||||
| Other intangibles, net |
88 | 91 | ||||||
| Other assets |
250 | 291 | ||||||
| Total assets |
$ | 25,943 | $ | 26,943 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: |
||||||||
| Revolving lines of credit |
$ | 7,565 | $ | 8,242 | ||||
| Current maturities of long-term debt |
1,748 | 1,898 | ||||||
| Accounts payable |
3,178 | 3,050 | ||||||
| Accrued liabilities |
1,647 | 1,557 | ||||||
| Total current liabilities |
14,138 | 14,747 | ||||||
| Long-term debt, less current maturities |
3,030 | 3,366 | ||||||
| Other liabilities |
243 | 408 | ||||||
| Stockholders’ equity |
||||||||
| Preferred stock, par value $0.01 per share; authorized, 2,000,000 shares; none outstanding |
— | — | ||||||
| Common stock, par value $.01 per share; authorized 10,000,000 shares; 4,026,996 issued and outstanding |
40 | 40 | ||||||
| Additional paid-in capital |
11,188 | 11,163 | ||||||
| Accumulated deficit |
(2,811 | ) | (2,798 | ) | ||||
| Accumulated other comprehensive income |
115 | 17 | ||||||
| Total stockholders’ equity |
8,532 | 8,422 | ||||||
| Total liabilities and stockholders’ equity |
$ | 25,943 | $ | 26,943 | ||||
See condensed notes to consolidated financial statements
2
SI TECHNOLOGIES, INC.
Consolidated Statements of Operations
(in thousands except share and per share data)
(Unaudited)
| For the three months ended January 31 |
For the six months ended January 31 |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net sales |
$ | 8,478 | $ | 8,230 | $ | 17,054 | $ | 16,066 | ||||||||
| Cost of sales |
5,516 | 5,178 | 11,251 | 9,979 | ||||||||||||
| Gross profit |
2,962 | 3,052 | 5,803 | 6,087 | ||||||||||||
| Operating expenses: |
||||||||||||||||
| Selling, general and administrative |
2,259 | 2,159 | 4,369 | 4,294 | ||||||||||||
| Research, development and engineering |
437 | 353 | 915 | 693 | ||||||||||||
| Amortization of intangibles |
2 | 8 | 4 | 16 | ||||||||||||
| 2,698 | 2,520 | 5,288 | 5,003 | |||||||||||||
| Income from operations |
264 | 532 | 515 | 1,084 | ||||||||||||
| Interest expense |
(218 | ) | (243 | ) | (452 | ) | (503 | ) | ||||||||
| Other income (expense), net |
(36 | ) | 47 | (84 | ) | 81 | ||||||||||
| Income (loss) before income tax expense |
10 | 336 | (21 | ) | 662 | |||||||||||
| Income tax benefit (expense) |
(4 | ) | 17 | 8 | 6 | |||||||||||
| Net income (loss) |
$ | 6 | $ | 353 | $ | (13 | ) | $ | 668 | |||||||
| Income (loss) per common share-basic |
$ | 0.00 | $ | 0.10 | $ | 0.00 | $ | 0.19 | ||||||||
| Income (loss) per common share-diluted |
$ | 0.00 | $ | 0.10 | $ | 0.00 | $ | 0.19 | ||||||||
| Weighted average shares outstanding basic |
4,026,996 | 3,579,935 | 4,026,996 | 3,579,935 | ||||||||||||
| Weighted average shares outstanding-diluted |
4,249,236 | 3,642,759 | 4,138,116 | 3,607,119 | ||||||||||||
See condensed notes to consolidated financial statements
3
SI TECHNOLOGIES, INC.
Consolidated Statements of Cash Flows
(In Thousands)
(Unaudited)
| For the six months ended January 31, |
||||||||
| 2004 |
2003 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net income (loss) |
$ | (13 | ) | $ | 668 | |||
| Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
||||||||
| Depreciation and amortization |
244 | 326 | ||||||
| Loss on sale of fixed assets |
21 | — | ||||||
| Deferred lease cost |
(166 | ) | (130 | ) | ||||
| Deferred income taxes |
— | (289 | ) | |||||
| Provision for doubtful accounts |
48 | — | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Trade accounts receivable |
581 | (3 | ) | |||||
| Inventories |
250 | (2,317 | ) | |||||
| Other current assets |
(75 | ) | 298 | |||||
| Accounts payable |
127 | 1,369 | ||||||
| Accrued liabilities and customer advances |
90 | (72 | ) | |||||
| Net cash provided by (used in) operating activities |
1,107 | (150 | ) | |||||
| Cash flows from investing activities: |
||||||||
| Purchase of property and equipment |
(59 | ) | (181 | ) | ||||
| Net cash (used in) investing activities |
(59 | ) | (181 | ) | ||||
| Cash flows from financing activities: |
||||||||
| Stock option granted to consultant |
26 | — | ||||||
| Net (repayments) borrowings on line of credit |
(677 | ) | 707 | |||||
| Payments on long-term debt |
(486 | ) | (437 | ) | ||||
| Net cash used in financing activities |
(1,137 | ) | 270 | |||||
| Effect of translation adjustments on cash |
99 | 31 | ||||||
| Net increase (decrease) in cash |
10 | (30 | ) | |||||
| Cash at beginning of period |
284 | 238 | ||||||
| Cash at end of period |
$ | 294 | $ | 208 | ||||
| Cash paid during period for: |
||||||||
| Interest |
$ | 439 | $ | 503 | ||||
See condensed notes to consolidated financial statements
4
SI Technologies, Inc. and Subsidiaries
Condensed Notes to Consolidated Financial Statements
(In Thousands Except Share and Per Share Data)
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial statements of SI Technologies, Inc. and its subsidiaries (“the Company”) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. 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 such rules and regulations. These financial statements reflect all adjustments, consisting of only normal recurring adjustments which, in the opinion of management, are necessary to fairly present the financial position of the Company at January 31, 2004 and the results of operations and the cash flows for the six months ended January 31, 2004 and 2003. The results of operations for interim periods are not necessarily indicative of the results to be expected for the entire fiscal year ending July 31, 2004. This Form 10-Q should be read in conjunction with the Company’s Annual Report and Form 10-K for the year ended July 31, 2003.
Note 2. Equity Compensation Plan Information
The Company accounts for stock-based employee compensation under the requirements of APB Opinion No. 25, which does not require compensation to be recorded if the consideration to be received is at least equal to fair value of the Company’s common stock at the measurement date. Non-employee stock-based transactions and stock warrants are accounted for under the requirements of SFAS No. 123, Accounting for Stock-Based Compensation, which requires compensation to be recorded based on the fair value of the securities issued or the services received, whichever is more reliably measurable.
The following table shows the pro forma effect of stock based compensation on net income had the Company used the fair value method of accounting for stock options:
| Three Months ended January 31 |
Six Months ended January 31 |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| Net Income (loss), as reported |
$ | 6 | $ | 353 | ($ | 13 | ) | $ | 668 | |||||||
| Deduct total stock-based employee compensation expense determined under the fair value method for all awards, net of related tax effects |
(23 | ) | (44 | ) | (33 | ) | (196 | ) | ||||||||
| Pro Forma net income (loss) |
($ | 17 | ) | $ | 309 | $ | (46 | ) | $ | 472 | ||||||
| Income (loss) per share: |
||||||||||||||||
| Basic: |
||||||||||||||||
| As reported |
$ | 0.00 | $ | 0.10 | $ | 0.00 | $ | 0.19 | ||||||||
| Pro forma |
$ | 0.00 | $ | 0.09 | ($ | 0.01 | ) | $ | 0.15 | |||||||