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PMFI > SEC Filings for PMFI > Form 10-Q on 14-Nov-2012All Recent SEC Filings

Show all filings for PROBE MANUFACTURING INC

Form 10-Q for PROBE MANUFACTURING INC


14-Nov-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operation

Overview

Probe Manufacturing Industries, Inc. was incorporated on July 7, 1995. On April 21, 2005, the Company was re-domiciled from California to Nevada, and changed its name to Probe Manufacturing, Inc. (the "Company," "Probe," or "PMI") We provide global design and manufacturing services to original electronic equipment manufacturers from our 23,000 sq./ft. facility in Irvine, California and strategic locations worldwide. Our revenue is generated from sales of our services primarily to customers in the medical device, aerospace, automotive, industrial and instrumentation product manufacturers. We provide our domestic customers with low cost, low risk, flexible and high quality manufacturing services. We utilize global partnerships to secure the best cost and materials available by providing our customers with onshore, scalable manufacturing solutions. The services that we provide are commonly referred to as Electronics Manufacturing Services (EMS). Our EMS offerings include new product introduction, collaborative design, procurement and materials management, product manufacturing, product warranty repair, and end-of-life support. We offer our customers comprehensive and integrated design and manufacturing services, from initial product design to production and direct order fulfillment. Our engineering services include product design, printed circuit board layout, prototyping, and test development. Our supply chain management solutions include purchasing, management of materials, and order fulfillment. Our manufacturing services include surface mount and through-hole assembly, cable assembly, mechanical assembly, and fully integrated box build systems for high complexity electronics.

The majority of our revenue is driven from manufacturing a mix of complex printed circuit board assemblies (PCBA), and box build assemblies. Some examples of our customer's finished goods products includes medical devices such as portable ultrasound and electro-stimulation therapy equipment, electronic control units that help vehicles run on natural gas, electronic control units for precision laser welding equipment, PCB's for landing gear systems and flap controllers, RFID products, Industrial sensors and devices for defense industry.

Our vision is to be the preeminent manufacturing foundry for startups and technological innovators, while expanding our low cost and scalable domestic operations leveraging global opportunities.

As innovation, cost, and time to market become hyper competitive, domestic OEM's are now compelled to use EMS partners with easy onshore access, providing local program management during product conceptualization, development, and integration. Many of the mid-tier OEMs in industries such as military/aerospace, medical, industrial/instrumentation, and green-tech products tend to be too small for $1 billion-plus revenue EMS companies. Most of these OEMs value close proximity and the ability to provide complex manufacturing and personal customer service, which often favors regional providers that truly value and foster their relationships.

Furthermore, with the recent cost increases in labor, currency movements and freight concerns, the ability to also provide near-shore manufacturing is expected to generate increased interest. The low to medium EMS market compared to high volume has proved to be a higher margin with higher gross profits and sustained growth momentum. Our target accounts are mid-tier, U.S. based OEMs with annual sales from $15 million to $500 million.

We believe that the combination of: (i) our management expertise; (ii) low overhead and cost structure; (iii) sophisticated management system developed internally to oversee operational systems; (iv) high technology onshore and managed offshore manufacturing; and (v) global relationships and domestic customer centric program management team, PMI is well positioned to take advantage of the projected increase in outsourced onshore manufacturing.

Page 21 of 34

Table of Contents

Going Concern

The financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets and liquidation of liabilities in the normal course of business. Although for the nine months ended September 30, 2012, we had a net profit of $12,323 a working capital surplus of $185,767 and a shareholder surplus of $363,669; we had an accumulated deficit of $(226,160) our ability to operate as a going concern is still dependent upon our ability (1) to obtain sufficient debt and/or equity capital and/or (2) generate positive cash flow from operations and maintain profitability.

Plan of Operations

Management is taking the following steps to sustain profitability and growth:
(i) To build and pursue global opportunities leveraging core competencies; (ii) organic growth, new sales and expansion of services along the supply chain line;
(iii) manufacturing rights and equity through our manufacturing foundry platform; (iv) expansion of capabilities and competencies through mergers & acquisitions providing scale, cost synergies and revenue opportunities.

Our future success is likely dependent on our ability to sustain profitable growth and attain additional capital to support growth. There can be no assurance that we will be successful in obtaining any such financing, or that it will be able to generate sufficient positive cash flow from operations. The successful outcome of these or any future activities cannot be determined at this time and there is no assurance that if achieved, we will have sufficient funds to execute its business plans. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern.

There can be no assurances that this financing will be sufficient to sustain profitable growth and attain additional capital to support growth. There can be no assurance that we will be successful in obtaining any such additional financing, or that we will be able to generate sufficient positive cash flow from operations. The successful outcome of these or any future activities cannot be determined at this time and there is no assurance that if achieved, we will have sufficient funds to execute its business plans. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should we be unable to continue as a going concern.

Selected Financial Data

The following selected historical financial information of Probe Manufacturing, Inc. has been derived from the historical results and are not necessarily indicative of future results. The following table is qualified by reference to and should be read in conjunction with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Item 8, "Financial Statements and Supplementary Data."

Page 22 of 34

Table of Contents

Probe Manufacturing, Inc.
Statement of Operations
for the three and nine month periods ended
September 30, 2012 and 2011 respectively

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