UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM
10-Q
(Mark
One)
x QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT
OF 1934
FOR
THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2009
COMMISSION
FILE NUMBER 000-10690
LAPIS
TECHNOLOGIES, INC.
(Exact
Name of Registrant as Specified in its Charter)
|
Delaware
|
|
27-0016420
|
|
(State
or other jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
19 W 34
Street, Suite 1008, New York, NY 10001
(Address
of principal executive offices)(Zip code)
Issuer's
telephone number: (212) 937-3580
Indicate
by check mark 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 o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit and post such
files). Yes o No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer ¨
|
Accelerated
filer ¨
|
|
|
|
|
Non-accelerated
filer ¨
|
Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No x
State the
number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: As of October 31, 2009, there were
6,483,000 outstanding shares of the Registrant's Common Stock, $.001 par
value.
TABLE
OF CONTENTS
|
|
Page
|
|
PART
I - FINANCIAL INFORMATION
|
|
|
|
|
|
Item 1. Financial Statements
|
3
|
|
Item 2. Management’s Discussion and Analysis or Plan of Operation
|
9
|
|
Item 3. Controls and Procedures
|
12
|
|
|
|
|
PART II - OTHER INFORMATION
|
|
|
|
|
|
Item 1. Legal Proceedings
|
13
|
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
13
|
|
Item 3. Defaults Upon Senior Securities
|
13
|
|
Item 4. Submission of Matters to a Vote of Security Holders
|
13
|
|
Item 5. Other Information
|
13
|
|
Item 6. Exhibits
|
13
|
|
|
|
|
SIGNATURES
|
14
|
PART
I - FINANCIAL INFORMATION
Item 1. Financial
Statements.
CONSOLIDATED
BALANCE SHEET
(In
Thousands, Except Share Amounts)
|
|
|
September 30,
|
|
|
December 31,
|
|
| |
|
2009
|
|
|
2008
|
|
| |
|
(Unaudited)
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
337 |
|
|
$ |
763 |
|
|
Accounts
receivable
|
|
|
3,848 |
|
|
|
4,884 |
|
|
Inventories
|
|
|
4,118 |
|
|
|
4,305 |
|
|
Prepaid
expenses and other current assets
|
|
|
659 |
|
|
|
91 |
|
|
Due
from stockholder
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
8,962 |
|
|
|
10,043 |
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
188 |
|
|
|
202 |
|
|
Deferred
income taxes
|
|
|
20 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,170 |
|
|
$ |
10,265 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
|
Bank
line of credit
|
|
$ |
453 |
|
|
$ |
1,248 |
|
|
Short
term bank loans
|
|
|
4,835 |
|
|
|
4,124 |
|
|
Current
portion of term loans
|
|
|
- |
|
|
|
197 |
|
|
Accounts
payable and accrued expenses
|
|
|
1,989 |
|
|
|
2,660 |
|
|
Due
to stockholder
|
|
|
- |
|
|
|
79 |
|
|
Due
to affiliates
|
|
|
- |
|
|
|
13 |
|
|
Income
taxes payable
|
|
|
- |
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
7,277 |
|
|
|
8,337 |
|
|
|
|
|
|
|
|
|
|
|
|
Term
loans, net of current portion
|
|
|
- |
|
|
|
52 |
|
|
Severance
payable
|
|
|
192 |
|
|
|
190 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
7,469 |
|
|
|
8,579 |
|
|
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minority
interest
|
|
|
576 |
|
|
|
501 |
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity:
|
|
|
|
|
|
|
|
|
|
Preferred
stock; $.001 par value, 5,000,000 shares authorized, none
issued
|
|
|
- |
|
|
|
- |
|
|
Common
stock; $.001 par value, 100,000,000 shares authorized,
6,483,000
|
|
|
|
|
|
|
|
|
|
shares
issued and outstanding
|
|
|
6 |
|
|
|
6 |
|
|
Additional
paid-in capital
|
|
|
78 |
|
|
|
78 |
|
|
Accumulated
other comprehensive income (loss)
|
|
|
28 |
|
|
|
108 |
|
|
Retained
Earnings
|
|
|
1,013 |
|
|
|
993 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
stockholders' equity
|
|
|
1,125 |
|
|
|
1,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
9,170 |
|
|
$ |
10,265 |
|
The
accompanying notes are an integral part of these financial
statements.
CONSOLIDATED
STATEMENTS OF INCOME
(In
Thousands, Except Earnings Per Share and Share Amounts)
|
|
|
Nine Months Ended
|
|
|
Three Months Ended
|
|
| |
|
September 30,
|
|
|
September 30,
|
|
| |
|
2009
|
|
|
2008
|
|
|
2009
|
|
|
2008
|
|
|
Sales
|
|
$ |
6,339 |
|
|
$ |
7,613 |
|
|
|
2,007 |
|
|
|
2,268 |
|
|
Cost
of sales
|
|
|
4,773 |
|
|
|
5,615 |
|
|
|
1,504 |
|
|
|
1,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
|
|
1,566 |
|
|
|
1,998 |
|
|
|
503 |
|
|
|
823 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research
and development expenses
|
|
|
95 |
|
|
|
100 |
|
|
|
31 |
|
|
|
46 |
|
|
Selling
expenses
|
|
|
67 |
|
|
|
124 |
|
|
|
17 |
|
|
|
109 |
|
|
General
and administrative
|
|
|
932 |
|
|
|
1,330 |
|
|
|
314 |
|
|
|
270 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
1,094 |
|
|
|
1,554 |
|
|
|
362 |
|
|
|
425 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from operations
|
|
|
472 |
|
|
|
444 |
|
|
|
141 |
|
|
|
398 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net
|
|
|
(227 |
) |
|
|
(392 |
) |
|
|
(87 |
) |
|
|
(147 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) before provision for income taxes and minority
interest
|
|
|
245 |
|
|
|
52 |
|
|
|
54 |
|
|
|
251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for income taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Minority
interest
|
|
|
67 |
|
|
|
40 |
|
|
|
11 |
|
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
178 |
|
|
|
12 |
|
|
|
43 |
|
|
|
228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive (loss) income, net of taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
translation (loss) gain
|
|
|
37 |
|
|
|
126 |
|
|
|
(238 |
) |
|
|
115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
(loss) income
|
|
$ |
215 |
|
|
$ |
138 |
|
|
$ |
(195 |
) |
|
$ |
343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net income (loss) per share
|
|
$ |
0.03 |
|
|
$ |
0.00 |
|
|
$ |
0.01 |
|
|
$ |
0.04 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding
|
|
|
6,483,000 |
|
|
|
6,483,000 |
|
|
|
6,483,000 |
|
|
|
6,483,000 |
|
The
accompanying notes are an integral part of these financial
statements.
LAPIS
TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In
Thousands)
|
|
|
Nine Months Ended
|
|
| |
|
September 30,
|
|
| |
|
2009
|
|
|
2008
|
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
Net
income
|
|
$ |
178 |
|
|
$ |
12 |
|
|
Adjustments
to reconcile net income to net cash
|
|
|
|
|
|
|
|
|
|
provided
by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
54 |
|
|
|
68 |
|
|
Minority
interest
|
|
|
75 |
|
|
|
81 |
|
|
Gain
on sale of property and equipment
|
|
|
|
|
|
|
- |
|
|
Deferred
income tax
|
|
|
- |
|
|
|
(2 |
) |
|
Change
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
1,036 |
|
|
|
(732 |
) |
|
Inventories
|
|
|
187 |
|
|
|
(1,201 |
) |
|
Prepaid
expenses and other current assets
|
|
|
(568 |
) |
|
|
(92 |
) |
|
Accounts
payable and accrued expenses
|
|
|
(1,045 |
) |
|
|
1,172 |
|
|
Income
tax payable
|
|
|
(16 |
) |
|
|
(2 |
) |
|
Severence
payable
|
|
|
2 |
|
|
|
21 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) operating activities
|
|
|
(97 |
) |
|
|
(675 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase
of property and equipment
|
|
|
(40 |
) |
|
|
(46 |
) |
|
Increase
(decrease) in due to affilliates
|
|
|
46 |
|
|
|
62 |
|
|
Increase
(decrease) in due to stockholder
|
|
|
78 |
|
|
|
(51 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in investing activities
|
|
|
84 |
|
|
|
(35 |
) |
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in bank line of credit, net
|
|
|
(795 |
) |
|
|
(15 |
) |
|
Proceeds
from long term debt
|
|
|
462 |
|
|
|
5,519 |
|
|
Repayment
of long-term debt
|
|
|
- |
|
|
|
(4,722 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net
cash (used in) provided by financing activities
|
|
|
(333 |
) |
|
|
782 |
|
|
|
|
|
|
|
|
|
|
|
|
Effects
of exchange rates on cash
|
|
|
(80 |
) |
|
|
189 |
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash
|
|
|
(426 |
) |
|
|
260 |
|
|
Cash,
beginning of period
|
|
|
763 |
|
|
|
133 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
end of period
|
|
$ |
337 |
|
|
$ |
393 |
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$ |
227 |
|
|
$ |
392 |
|
|
Income
taxes
|
|
$ |
36 |
|
|
$ |
16 |
|
The
accompanying notes are an integral part of these financial
statements.
LAPIS
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(In
Thousands, Except Per Share Amounts)
SEPTEMBER
30, 2009
NOTE 1 -
DESCRIPTION OF BUSINESS
Lapis
Technologies, Inc. (the “Company”) was incorporated in the State of Delaware on
January 31, 2002. The Company was originally named Enertec
Electronics, Inc. and on April 23, 2002 changed its name to Opal Technologies,
Inc. which changed its name to Lapis Technologies, Inc. on October 3,
2002. The Company’s operations are conducted through its wholly-owned
Israeli Subsidiary, Enertec Electronics Ltd. (“Enertec”) and its majority owned
Israeli subsidiary Enertec Systems 2001 LTD (“Systems”). Enertec is
engaged in the manufacturing, distribution and marketing of electronic
components and products relating to power supplies, converters and related power
conversion products, automatic test equipment, simulators and various military
and airborne systems, within the State of Israel.
NOTE 2 –
BASIS OF PRESENTATION AND CONSOLIDATION
The
accompanying unaudited consolidated financial statements and related footnotes
have been prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial statements and pursuant to
the rules and regulations of the Securities and Exchange Commission for Form
10-Q. Accordingly, they do not include all of the information and
footnotes required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. For
further information read the financial statements and footnotes thereto included
in the Company's Annual Report to be filed in accordance with the rules and
regulations of the Securities and Exchange Commission on Form 10-K for the year
ended December 31, 2008. The results of operations for the nine and
three months ended September 30, 2009 are not necessarily indicative of the
operating results that may be expected for the year ending December 31,
2009.
The
accompanying financial statements include the accounts of the Company and their
ownership interest in its subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.
NOTE 3 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Stock
based compensation
The
Company has adopted Statement of Financial Accounting Statement (“SFAS”) No.
148, “Accounting for Stock-Based Compensation-Transition and Disclosure” (“SFAS
148”). SFAS 148 amends SFAS No. 123 “Accounting for Stock-Based
Compensation” (“SFAS 123”), and provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
employee compensation. The Company has adopted the fair value method
of accounting as discussed in SFAS 123 as of January 1,
2003. Accordingly, stock options, when issued, will be recorded in
accordance with the terms of that document.
Use of
Estimates
The
preparation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
LAPIS
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(In
Thousands, Except Per Share Amounts)
SEPTEMBER
30, 2009
NOTE 3 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Recent
Accounting Pronouncements
In
July 2006, the FASB issued Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes – An Interpretation of FASB Statement 109,” (“FIN
48”). FIN 48 prescribes a comprehensive model as to how a company should
recognize, measure, present and disclose in its financial statements uncertain
tax positions that the company has taken or expects to take on a tax return. The
adoption of FIN 48 is effective January 1, 2007. The Company has determined
there will be no effect on their financial statements.
In
June 2006, the FASB ratified the Emerging Issues Task Force
(“EITF”) consensus on EITF Issue No. 06-2, “Accounting for Sabbatical
Leave and Other Similar Benefits Pursuant to FASB Statement No. 43.” EITF
Issue No. 06-2 requires companies to accrue the costs of compensated
absences under a sabbatical or similar benefit arrangement over the requisite
service period. EITF Issue No. 06-2 is effective for us beginning
July 1, 2007. The cumulative effect of the application of this consensus on
prior period results should be recognized through a cumulative-effect adjustment
to retained earnings as of the beginning of the year of adoption. Elective
retrospective application is also permitted. The application of this consensus
won‘t have a material impact on our financial statements.
In
September 2006, the Financial Accounting Standards Board (“FASB”) issued
SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans, an amendment of FASB Statements No. 87, 88, 106 and
132(R),” (“FAS 158”). Among other things, FAS 158 requires companies to
prospectively recognize a net liability or asset and to report the funded status
of their defined benefit pension and other postretirement benefit plans on their
balance sheets, with an offsetting adjustment to accumulated other comprehensive
income; such recognition will not affect the Company’s statement of income. The
adoption of FAS 158 is effective for the year ending December 31, 2006. The
Company has determined there will be no effect on their financial
statements.
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option
for Financial Assets and Financial Liabilities—Including an Amendment of FASB
Statement No. 115.” This Standard allows entities to voluntarily choose, at
specified election dates, to measure many financial assets and financial
liabilities (as well as certain non-financial instruments that are similar to
financial instruments) at fair value. The election is made on an
instrument-by-instrument basis and is irrevocable. If the fair value option is
elected for an instrument, the Statement specifies that all subsequent changes
in fair value for that instrument shall be reported in earnings. SFAS No. 159 is
effective for ATMI beginning on January 1, 2008. We are currently
evaluating the impact this new Standard could have on our financial position and
results of operations.
In
December 2007 the FASB issued SFAS No. 160 “Non-controlling Interests in
Consolidated Financial Statements”. FAS 160 seeks to improve the relevance,
comparability, and transparency of the financial information that a reporting
entity provides in its consolidated financial statements by establishing
accounting and reporting standards. This statement is effective for fiscal years
beginning after December 15, 2008. The Company has not yet determined what the
effect will be, if any, on their financial statements.
LAPIS
TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(In
Thousands, Except Per Share Amounts)
SEPTEMBER
30, 2009
NOTE 3 -
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Recent
Accounting Pronouncements
Management does not believe that any
other recently issued, but not yet
effective accounting pronouncements, if adopted, would have a
material effect on the accompanying consolidated financial
statements.
NOTE 4 –
PROVISION FOR INCOME TAXES –
The income tax expense for the nine and
three months ended September 30, 2009 is based upon the income tax
laws of Israel. Israeli tax law does not allow a parent company to offset its’
income with losses from any of its subsidiaries.
Item 2. Management’s Discussion and Analysis
or Plan of Operation.
This
Report contains forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. These statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as "may," "will," "should," "expect," "plan," "anticipate,"
"believe," "estimate," "predict," "potential" or "continue," the negative of
such terms, or other comparable terminology. These statements are only
predictions. Actual events or results may differ materially from those in the
forward-looking statements as a result of various important factors. Although we
believe that the expectations reflected in the forward-looking statements are
reasonable, such should not be regarded as a representation by Lapis
Technologies, Inc., or any other person, that such forward-looking statements
will be achieved. The business and operations of Lapis Technologies, Inc. and
its subsidiaries are subject to substantial risks, which increase the
uncertainty inherent in the forward-looking statements contained in this Report.
Because these forward-looking statements involve risks and uncertainties, there
are important factors that could cause actual results to differ materially from
those expressed or implied by these forward-looking statements, including our
plans, objectives, expectations and intentions and other factors discussed under
"Risk Factors," included in our Registration Statement on Form 10-K for the year
ended December 31, 2008 filed with the Securities and Exchange Commission on
March 31, 2009.
The
following discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and related notes included elsewhere in this
Report.
Overview.
We were formed in Delaware on January
31, 2002 under the name Enertec Electronics, Inc. and have filed two
certificates of amendment changing our name to Opal Technologies, Inc. and then
to Lapis Technologies, Inc. We conduct operations in Israel through our wholly
owned subsidiary, Enertec Electronics Limited ("Enertec Electronics"), an
Israeli corporation formed on December 31, 1991, and Enertec Systems 2001 LTD
("Enertec Systems"), an Israeli corporation formed on August 28, 2001, of which
we have a 73% equity interest. We are manufacturers and distributors of various
military and airborne systems, simulators, automatic test equipment (ATE),
electronic components and products related to power supplies, converters and
other power conversion products.
Liquidity
and Capital Resources
As of September 30, 2009
our cash balance was $337,000 as compared to $393,000 at September 30, 2008.
Total current assets at September 30, 2009 were $8,962,000 as compared to
$11,686,000 at September 30, 2008. The decrease in current assets is mainly due
to the decrease in accounts receivables and work in process &
inventories.
Our
accounts receivables at September 30, 2009 were $3,848,000 as compared to
$6,146,000, at September 30, 2008. This decrease in accounts receivables is
primarily due to a decrease in sales, improved payment terms from our customers
and increase in USD/Shekel exchange rate. The USD/Shekel exchange rate increased
by 9.9% from 3.421 for the nine months period ended September 30, 2008 to 3.758
for the period ended September 30, 2009.
As of
September 30, 2009 our working capital was $1,685,000 as compared to $1,777,000
at September 30, 2008. The decrease in the working capital is due primarily to a
greater decrease in current assets than the decrease in
current liabilities.
There was
no current portion of long-term loans at September 30, 2009 as compared to
$225,000 at September 30, 2008. Our total short-term loans amounted to
$4,835,000 for the nine month period ended September 30, 2009 as compared to
$4,822,000 for the nine-month period ended September 30, 2008.
As of
September 30, 2009, our total bank debt was $5,288,000 as compared to $6,498,000
at the end of September 30, 2008. These funds were borrowed as
follows:
$4,835,000
as various short term bank loans due through 2010, and $453,000 using our bank
lines of credit. As a result we decreased the amount borrowed for the nine
months ended September 30, 2009 by $1,210,000 compared to the same period in
2008. The decrease in bank debt is mainly due to the decrease in accounts
receivables and the increase in USD/Shekel exchange rate since the loans are in
shekels. The USD/Shekel exchange rate increased by 9.9 % from 3.421 for the nine
months period ended September 30, 2008 to 3.758 for the period ended September
30, 2009.
There are
no other lines of credit available to us to refinance our short-term bank loans.
Additionally, we currently do not have any other sources of financing available
to us for refinancing our short-term loans. As of September 30,2 009, we are
current with all of our bank debt and compliant with all the terms of our bank
debt.
Financing
Needs
Although
we currently do not have any material commitments for capital expenditures, we
expect our capital requirements to increase over the next several years as we
continue to develop and test our suite of products, increase marketing and
administration infrastructure, and embark on developing in-house business
capabilities and facilities. Our future liquidity and capital funding
requirements will depend on numerous factors, including, but not limited to, the
levels and costs of our research and development initiatives, the cost of hiring
and training additional sales and marketing personnel to promote our products
and the cost and timing of the expansion of our marketing efforts.
Based on
our current business plan, we anticipate that our existing cash balances and
cash generated from future sales will be sufficient to permit us to conduct our
operations and to carry out our contemplated business plans for the next twelve
months. However, management may undertake additional debt or equity financings
to better enable Lapis to grow and meet its future operating and capital
requirements. Currently, the only external sources of liquidity are our banks,
and we may seek additional financing from them or through securities offerings
to expand our operations, using new capital to develop new products, enhance
existing products or respond to competitive pressures.
Results
of Operations
Three
and Nine Months Ended September 30, 2009 Compared to Three and Nine Months Ended
September 30, 2008
Revenues for the three and
nine months ended September 30, 2009 were $2,007,000 and $6,339,000 respectively
as compared to $2,268,000 and $7,613,000, for the three and
nine months ended September 30, 2008, respectively. This
represents a decrease of $261,000 or 11.5% for the quarter
ended September 30, 2009 and a decrease of $1,274,000 or 16.7 %, for the nine
months ended September 30, 2009, when compared to the same periods of
2008. The decrease in revenues for the three-months and the nine
months period ended September 30, 2009 as compared to the same period of 2008 is
mainly the result of the decrease in the revenues of the commercial business and
the increase in USD/Shekel exchange rate since the sales are in shekels. The
average USD/Shekel exchange rate increased by 13.6% from 3.512 for the nine
months period ended September 30, 2008 to 3.989 for the period ended September
30, 2009.
Gross
profit totaled approximately $503,000 for the quarter ended September 30, 2009
and $1,566,000 for the nine months ended September 30, 2009. For the
three and nine months ended September 30,2008, gross profit totaled $823,000 and
$1,998,000 respectively. Comparing the three-month period ended September 30,
2009 to the same period of 2008, gross profit decreased by approximately
$320,000, or 38.9 %. For the nine-month period ended September 30, 2009, gross
profit decreased approximately $432,000 or 21.6%, compared to the same period of
2008. The decrease in gross profits is primarily due to the decrease in
sales.
Gross
profit as a percentage of sales was 25.1% for the three-month period
ended September 30, 2009 compared to 36.3% for the same period of
2008 and for the nine month period ended September 30, 2008, was 24.7% as
compared to 26.2% for the same period of 2008.
The decrease
in gross profit as a percentage of sales for the three-month period ended
September 30, 2009 as compared to the same period of 2008 is mainly the result
of the unusual high figure for gross profit as percentage of sale in the third
quarter of 2008.The high figure of gross profit as a percentage of sales for the
three-month period ended September 30, 2008 was mainly a result
of lower cost of sales and higher profit margins for some
projects in the military field delivered during the third quarter of
2008.
The
decrease in gross profit as a percentage of sales for the nine-month
period ended September 30, 2009 as compared to the same period of 2008 is mainly
the result of the decrease in gross profit as a percentage of sales for the
three-month period ended September 30, 2009 as compared to the same period of
2008 as elaborated above.
For the
three months and nine months ended September 30, 2009, operating expenses
totaled $362,000 and $1,094,000 respectively. This was a decrease of
$63,000 (14.8%) and $460 (29.6 %) when compared to the three and nine-month
periods ended September 30, 2008.The decrease in operating expenses for the
three-month period ended September 30, 2009 as compared to the same period of
2008 is attributable mainly to the decrease in research & development and
selling expenses partly offset by the increase in general & administrative
expenses. The decrease in operating expenses for the nine-month period as
compared to the same period of 2008 is attributable mainly to the decrease in
general & administrative and selling expenses .
Research
and development expenses decreased by $15,000 for the three months period and
decreased by $5,000 for the nine months period ended September 30, 2009 as
compared to the same period in 2008. The decrease in research and development
expenses for the three month and nine months period ended September 30, 2009 as
compared to the same period in 2008 is mainly the result of the increase in
USD/Shekel exchange rate since the Research and Development expenses are in
shekels . The average USD/Shekel exchange rate increased by 13.6% from 3.512 for
the nine months period ended September 30, 2008 to 3.989 for the period ended
September 30, 2009.
Selling
expenses decreased by $ 92,000 and $ 57,000 for the three months and nine months
period ended September 30, 2009 as compared to the same period in 2008. The
decrease in selling expenses during 2009 as compared to 2008 is mainly due to
the reduced selling expense in the commercial field while operating
in the shrinking commercial market of 2009.
The
general & administrative expenses increased by $44,000 for the three months
period and decreased by $398,000 for the nine months period ended September 30,
2009 as compared to the same period in 2008.The increase for the three month
period ended Sept 2009 is mainly due to the increase in the professional
services as compared to the same period in 2008. The decrease for the nine month
period is mainly due to the decrease in the professional services and the
increase in the USD/Shekel exchange rate since the G&A expenses are in
Shekels.
Our net
profit was $43,000 in the three months ended September 30, 2009 and $178,000 in
the nine months ended September 30, 2009. This compares to a net profit of
$228,000 in the three months ended September 30, 2008 and $12,000 in the nine
months ended September 30, 2008.This represents a decrease in net income of
$185,000 or 81.1%, comparing the three months ended September 30, 2009 to the
three months ended September 30, 2008, and an increase in net income of $166,000
or 1383.3%, comparing the nine months ended September 30, 2009 to the
nine months ended September 30, 2008.
The
decrease in the net profit for the three-month period ended September 30,2009 as
compared to the same period in 2008 was mainly a result of a larger decrease in
the gross profit than the decrease in the operating and interest
expenses.
The
increase in the profitability for the nine month period ending September 30,
2009 as compared to the same period in 2008 was mainly a result of a larger
decrease in the operating and interest expenses than the decrease in the gross
profit.
As of September 30, 2009, we had 2
customers that accounted for approximately 64.5% of the accounts receivable. For
the nine months ended September 30, 2008, approximately 68.2% of our sales were
to 2 customers.
Research
and Development Costs
Research and development costs are part
of operating expenses. Research and development costs for the three and nine
months ended September 30, 2009 were $31,000and $95,000, respectively.
Research and development costs for the three and nine months ended September 30,
2008 were $46,000 and $100,000,respectively.
Off-Balance
Sheet Arrangements
We do not
have any off balance sheet arrangements that are reasonably likely to have a
current or future effect on our financial condition, revenues, and results of
operations, liquidity or capital expenditures.
Critical
Accounting Policies
Concentration
of Credit Risk - Concentrations of credit risk with respect to trade receivables
are limited to customers dispersed primarily across Israel. All trade
receivables are concentrated in the manufacturing and distribution of electronic
components segment of the economy; accordingly the Company is exposed to
business and economic risk. Although the Company does not currently foresee a
concentrated credit risk associated with these trade receivables, repayment is
dependent upon the financial stability of this segment of the
economy.
Revenue
Recognition and Customer Deposits - Revenue is recorded as product is shipped,
the price has been fixed or determined, collectibility is reasonably assured and
all material specific performance obligations have been completed. The product
sold by the Company is made to the specifications of each customer; sales
returns and allowances are allowed on a case-by-case basis, are not material to
the financial statements and are recorded as an adjustment to sales. Cash
payments received in advance are recorded as customer deposits.
Revenue
relating to service is recognized on the straight-line basis over the life of
the agreement, generally one year. For the three months ended
September 30, 2009
revenue relating to service contracts were less than one percent of net
sales.
Financial
Instruments - The carrying amounts of financial instruments, including cash and
cash equivalents, accounts receivable, bank line of credit, short term bank
loans and accounts payable and accrued expenses approximate fair value at
September 30, 2009 because of the relatively short maturity of the instruments.
The fair value of due from stockholder is not practical to estimate without
incurring excessive cost and is carried at cost at September 30,
2009. The carrying value of the long-term debt approximate fair value
at September 30, 2009 based upon debt terms available for companies under
similar terms.
Foreign
Currency Translation - Lapis Technologies, Inc. has one wholly owned subsidiary,
Enertec Electronics Limited, an Israeli corporation, and one majority owned
subsidiary, Enertec Systems 2001 Ltd., an Israeli corporation. The assets and
liabilities of the foreign subsidiaries are translated at current exchange rates
and related revenues and expenses at average exchange rates in effect during the
periods reported. Resulting translation adjustments, if material, are recorded
as a separate component of accumulated other comprehensive income or
loss.
Item 3. Quantitative and Qualitative
Disclosures about Market Risk.
N/A.
Item 4T. Controls and
Procedures.
Evaluation
of Disclosure Controls and Procedures
Our
management is responsible for establishing and maintaining a system of
disclosure controls and procedures (as defined in Rule 13a-15(e)) under the
Exchange Act of 1934, as amended (the “Exchange Act”)) that is designed to
ensure that information required to be disclosed by the Company in the reports
that we file or submit under the Exchange Act is recorded, processed, summarized
and reported, within the time specified in the Security and Exchange
Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by an issuer in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the issuer's
management, including its principal executive officer or officers and principal
financial officer or officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required
disclosure.
Pursuant
to Rule 13a-15(b) under the Exchange Act the Company carried out an evaluation
with the participation of the Company’s management, including Harry Mund, the
Company’s Chief Executive Officer (“CEO”) and Miron Markovitz, the Company’s
Chief Financial Officer (“CFO”), of the effectiveness of the Company’s
disclosure controls and procedures (as defined under Rule 13a-15(e) under the
Exchange Act) as of the period ended September 30, 2009. Based upon
that evaluation, the Company’s Chief Executive Officer and Chief Financial
Officer concluded that the Company’s disclosure controls and procedures are
effective to ensure that information required to be disclosed by the Company in
the reports that the Company files or submits under the Exchange Act, is
recorded, processed, summarized and reported, within the time periods specified
in the SEC’s rules and forms, and that such information is accumulated and
communicated to the Company’s management, including the Company’s CEO and CFO,
as appropriate, to allow timely decisions regarding required
disclosure.
Changes
in internal controls
Our
management, with the participation our Chief Executive Officer and Chief
Financial Officer, performed an evaluation as to whether any change in our
internal controls over financial reporting occurred during the Quarter
ended September 30, 2009. Based on that evaluation, our CEO and
CFO concluded that no change occurred in the Company's internal controls over
financial reporting during the quarter ended September 30, 2009 that
has materially affected, or is reasonably likely to materially affect, the
Company's internal controls over financial reporting.
PART
II- OTHER INFORMATION
Item
1. Legal Proceedings.
We are
not a party to any pending legal proceeding, nor is our property the subject of
a pending legal proceeding, that is not in the ordinary course of business or
otherwise material to the financial condition of our business. None of our
directors, officers or affiliates is involved in a proceeding adverse to our
business or has a material interest adverse to our business.
Item
1A. Risk Factors.
N/A.
Item
2. Unregistered Sales of Equity Securities and Use of Proceeds.
N/A.
Item
3. Defaults Upon Senior Securities.
N/A.
Item
4. Submission of Matters to a Vote of Security Holders.
N/A.
Item
5. Other Information.
Not
applicable.
Item 6.
Exhibits.
|
Exhibit
Number
|
|
Description
|
|
|
|
|
|
31.1
|
|
Certification
by Chief Executive Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
of the Exchange Act
|
|
|
|
|
|
31.2
|
|
Certification
by Chief Financial Officer, required by Rule 13a-14(a) or Rule 15d-14(a)
of the Exchange Act
|
|
|
|
|
|
32.1
|
|
Certification
by Chief Executive Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the
United States Code
|
|
|
|
|
|
32.2
|
|
Certification
by Chief Financial Officer, required by Rule 13a-14(b) or Rule 15d-14(b)
of the Exchange Act and Section 1350 of Chapter 63 of Title 18 of the
United States Code
|
SIGNATURES
In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
LAPIS
TECHNOLOGIES, INC.
|
|
|
|
|
|
Date:
November 13, 2009
|
By:
|
/s/ Harry Mund
|
|
|
|
Harry
Mund
|
|
|
|
Chief Executive Officer (principal executive
officer), President
and
Chairman of the Board
|
|
|
|
|
|
Date: November
13, 2009
|
By:
|
/s/ Miron
Markovitz
|
|
|
|
Miron
Markovitz
|
|
|
|
Chief
Financial Officer, Chief Accounting
Officer
(Principal Financial Officer) and
Director
|