<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
Form 10-Q/A
(Amendment No. 1)
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1997
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 Number 0-21681
TRANSCRYPT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 47-0801192
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
4800 N.W. 1st STREET
LINCOLN, NEBRASKA 68521
(402) 474-4800
(Address, including zip code, and telephone number,
including area code, of registrant's
principal executive office)
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 NO X
----- -----
As of August 13, 1997, 10,115,543 shares of the Registrant's Common
Stock were outstanding.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRANSCRYPT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
(As Restated, See Note 11)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
------------ ------------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 12,699,287 $ --
Accounts receivable, net 1,442,069 1,256,800
Inventory 3,612,964 2,852,571
Income taxes recoverable -- 213,329
Prepaid expenses and other current assets 176,430 88,692
Deferred tax assets 3,019,750 1,773,140
------------ ------------
Total current assets 20,950,500 6,184,532
------------ ------------
Property, plant and equipment, at cost 7,637,241 6,100,051
Less: accumulated depreciation (2,164,476) (1,774,966)
------------ ------------
Net property, plant and equipment 5,472,765 4,325,085
------------ ------------
Deferred tax assets 754,937 438,983
Intangible assets, net 373,055 421,470
Deferred public offering costs -- 568,049
Other assets 39,158 --
------------ ------------
$ 27,590,415 $ 11,938,119
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft $ -- $ 385,694
Revolving line of credit and bank notes payable 152,000 1,022,000
Current portion of long-term debt 6,893 595,762
Accounts payable 1,193,043 1,174,364
Accrued expenses 1,215,192 1,162,011
------------ ------------
Total current liabilities 2,567,128 4,339,831
------------ ------------
Long-term debt, net of current portion 2,850,000 1,839,942
Deferred revenue 145,026 --
Revolving line of credit -- 792,070
------------ ------------
5,562,154 6,971,843
------------ ------------
Stockholders' equity:
Common stock 92,831 67,831
Additional paid-in capital 26,687,670 9,002,962
Accumulated deficit (4,752,240) (4,104,517)
------------ ------------
22,028,261 4,966,276
------------ ------------
$ 27,590,415 $ 11,938,119
============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
<PAGE> 3
TRANSCRYPT INTERNATIONAL, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1997 AND 1996 AND
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited And As Restated, See Note 11)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------------------- ---------------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 2,914,574 $ 2,577,453 $ 6,426,520 $ 5,019,065
Cost of sales 2,288,912 903,420 3,561,272 1,783,481
----------- ----------- ----------- -----------
Gross profit 625,662 1,674,033 2,865,248 3,235,584
----------- ----------- ----------- -----------
Operating expenses:
Research and development 682,570 648,562 1,315,789 1,084,618
Sales and marketing 731,426 404,370 1,672,893 873,043
General and administrative 651,452 614,707 1,223,694 1,240,651
----------- ----------- ----------- -----------
Total operating expenses 2,065,448 1,667,639 4,212,376 3,198,312
----------- ----------- ----------- -----------
Income (loss) from operations (1,439,786) 6,394 (1,347,128) 37,272
Interest income 192,167 -- 317,642 24,614
Interest expense (32,685) (31,883) (81,772) (75,109)
----------- ----------- ----------- -----------
Loss before income taxes (1,280,304) (25,489) (1,111,258) (13,223)
Benefit for income taxes (490,070) -- (463,535) --
----------- ----------- ----------- -----------
Net loss $ (790,234) $ (25,489) $ (647,723) $ (13,223)
=========== =========== =========== ===========
Pro forma information:
Loss before pro forma income taxes $(1,280,304) $ (25,489) $(1,111,258) $ (13,223)
Pro forma benefit for income taxes (490,070) (8,921) (463,535) (4,546)
----------- ----------- ----------- -----------
Pro forma net loss $ (790,234) $ (16,568) $ (647,723) $ (8,677)
=========== =========== =========== ===========
Pro forma net loss per share
- Basic and Diluted $ (0.09) $ (0.00) $ (0.07) $ (0.00)
=========== =========== =========== ===========
Weighted average common shares
- Basic and Diluted 9,283,078 6,783,078 8,991,412 6,783,078
=========== =========== =========== ===========
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
<PAGE> 4
TRANSCRYPT INTERNATIONAL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited And As Restated, See Note 11)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net cash flow provided by (used in) operating activities $ (2,922,512) $ 1,229,126
------------ ------------
Cash flow from investing activities:
Purchase of fixed assets (1,184,821) (544,879)
Payment under noncompete agreement -- (170,000)
------------ ------------
Net cash used in investing activities (1,184,821) (714,879)
------------ ------------
Cash flow from financing activities:
Issuance of industrial development revenue bonds 2,850,000 --
Payment of industrial development revenue bonds (850,000) --
Debt issuance costs of industrial development revenue bonds (75,493) --
Payment on term loans, lines of credit and capitalized leases (2,441,901) (206,970)
Bank overdraft (385,694) --
Partnership distributions paid -- (181,001)
Proceeds from IPO, net 17,709,708 --
------------ ------------
Net cash provided by (used in) financing activities 16,806,620 (387,971)
Net increase in cash 12,699,287 126,276
Cash and cash equivalent, beginning of period -- 291,712
------------ ------------
Cash and cash equivalent, end of period $ 12,699,287 $ 417,988
============ ============
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
<PAGE> 5
TRANSCRYPT INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited and as Restated, See Note 11)
1. GENERAL
The condensed consolidated balance sheet of Transcrypt International,
Inc. ("Transcrypt" or the "Company") at December 31, 1996 has been taken from
restated audited financial statements at that date and condensed. The condensed
consolidated financial statements as of June 30, 1997 and for the three months
and the six months ended June 30, 1997 and 1996 are unaudited and reflect all
normal and recurring accruals and adjustments which are, in the opinion of
management, necessary for a fair presentation of the financial position,
operating results and cash flows for the interim periods presented in this
quarterly report. The condensed consolidated financial statements should be read
in conjunction with the restated consolidated financial statements and notes
thereto, together with management's discussion and analysis of financial
condition and results of operations, contained in the Company's Annual Report on
Form 10-K/A (Amendment No. 1) for the year ended December 31, 1996. The results
of operations and cash flows for the six months ended June 30, 1997 are not
necessarily indicative of the results for the entire fiscal year ending December
31, 1997.
Where appropriate, items within the condensed consolidated financial
statements have been reclassified from the previous periods to conform to the
current year's presentation.
2. ORGANIZATION AND CONSOLIDATION
Transcrypt International, Ltd. (the "Predecessor") was a limited
partnership formed in 1991 composed of the general partner, Transcrypt
International, Inc., a Nebraska corporation, and various limited partners.
Effective June 30, 1996, the assets and liabilities of the partnership were
merged tax-free into a Delaware corporation, Transcrypt International, Inc. Each
respective partnership unit was converted pro rata into common shares of the
Company.
The restated condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated in the
consolidation.
3. PRO FORMA PROVISION FOR INCOME TAXES
The pro forma provision for income taxes reflects the provision for
income taxes as if the Company had been taxed as a "C" Corporation under the
Internal Revenue Code of 1986, as amended, for the six months ended June 30,
1996.
4. PRO FORMA NET LOSS PER SHARE
The Company has adopted Statement of Financial Accounting Standards No.
128, "Earnings Per Share" ("FAS 128"). FAS 128 requires a basic calculation of
earnings per share ("EPS"), based upon the weighted average number of common
shares outstanding during the
<PAGE> 6
period. FAS 128 also requires a diluted EPS calculation that reflects the
potential dilution from common stock equivalents such as stock options. All
current and prior years' EPS calculations included herein have been restated
under the provisions of FAS 128. As the three months and six months ended June
30, 1997 and 1996 have net losses, the impact of the outstanding stock options
on weighted average common shares is anti-dilutive.
Pro forma net loss per share for 1996 is computed on the basis of the
weighted average number of partnership interest units outstanding during the
period converted into common shares on a one-to-one ratio, and adjusted for a
stock split discussed below.
STOCK SPLIT
On September 30, 1996, the Board of Directors and the stockholders
approved an increase in the Company's authorized common shares from 10 million
to 20 million. On November 18, 1996, the Company declared a 1.3106311-for-1
stock split in the form of a stock dividend. All shares and per share
information have been restated to reflect the split.
5. INITIAL PUBLIC OFFERING
On January 22, 1997, the Company completed an initial public offering
of 2,900,000 shares of common stock at a price of $8.00 per share. Of the
2,900,000 shares offered, 2,500,000 shares were sold by the Company and 400,000
were sold by certain of the Company's stockholders. The Company's net proceeds
from the offering, after underwriting commissions and expenses, were
approximately $17,710,000.
A portion of the Company's net proceeds from the offering was used to
retire certain term and installment notes payable and the revolving lines of
credit, as described in Notes 7 and 8. The remaining net proceeds, as of August
14, 1997, were being used for general working capital purposes and to support
the Company's growth and business strategy.
6. INVENTORY
The following is a summary of inventory at June 30, 1997 and December
31, 1996:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -------------------
<S> <C> <C>
Raw materials and supplies $1,531,905 $1,373,415
Work in progress 536,044 715,032
Finished goods 1,545,015 764,124
---------- ----------
$3,612,964 $2,852,571
========== ==========
</TABLE>
<PAGE> 7
7. REVOLVING LINES OF CREDIT
As of June 30, 1997, the Company had a working capital revolving line
of credit not to exceed $3,000,000, calculated using a specified borrowing base
of eligible inventories and accounts receivable. In addition, the Company had a
second revolving capital line of credit not to exceed $1,000,000, calculated
using a specified borrowing base of certain eligible fixed assets. At December
31, 1996, the Company had $1,022,000 outstanding on the working capital line of
credit and $792,070 on the capital equipment line of credit. On January 27,
1997, these revolving lines of credit were repaid in full using a portion of the
net proceeds from the initial public offering. As of June 30, 1997, the Company
had $152,000 outstanding on the working capital line of credit. As of August 14,
1997, the Company had established an irrevocable standby letter of credit in the
amount of $436,000, payable to creditors of E.F. Johnson Company ("EFJ") and
expiring July 22, 1998, and an irrevocable standby letter of credit in the
amount of $1,564,000 for performance bonds under contracts entered into by EFJ
expiring June 12, 1998. Both of such standby letters of credit are automatically
extended annually unless notified otherwise by the Company.
8. LONG-TERM DEBT
On January 27, 1997, the two term notes payable (totaling $626,791 at
December 31, 1996) and an installment note payable (totaling $359,017 at
December 31, 1996) were repaid in full using a portion of the net proceeds from
the initial public offering.
On March 25, 1997, the industrial development revenue bonds payable
(totaling $850,000 at December 31, 1996) and the construction note payable
(totaling $584,797 at December 31, 1996) were repaid through the issuance of new
industrial revenue bonds totaling $2,850,000. The new industrial revenue bonds
are due in annual principal payments of $140,000, plus interest at a variable
rate (4.5% at June 30, 1997), starting March 1, 1998 through March 1, 2007,
increasing to annual principal payments of $145,000, plus interest at a variable
rate, due March 1, 2008 through March 1, 2016, with the remaining principal and
accrued interest due March 1, 2017. At June 30, 1997, the remaining net proceeds
of $650,000 (net of debt offering costs) were held in escrow for the Company
pending the purchase of certain fixed assets by the Company.
9. COMMITMENTS AND CONTINGENCIES
For discussion of Commitments and Contingencies see Note 13 of the
Notes to the Company's Consolidated Financial Statements contained in the
Company's Current Report on Form 8-K filed with the Securities and Exchange
Commission (the "SEC") on July 15, 1998.
10. SUBSEQUENT EVENTS
On July 31, 1997, the Company completed the acquisition of EFJ in
exchange for cash consideration of $436,000 and the issuance of 832,465 shares
of the Company's common stock, with an approximate market value of $10,000,000.
As of August 14, 1997, transaction costs and restructuring costs for changes to
EFJ's operations were expected to approximate $5,000,000.
<PAGE> 8
EFJ develops and manufactures wireless communications products and
systems primarily for the land mobile radio market.
On October 20, 1997, the Company completed a secondary offering of
5,175,000 shares of common stock at a price of $21.00 per share. Of the
5,175,000 shares offered, 2,684,481 shares were sold by the Company and
2,490,519 were sold by certain of the Company's stockholders. The Company's net
proceeds from the offering, after underwriting commissions and expenses, were
approximately $52,939,000.
On March 27, 1998, the Company issued a press release announcing that
it would not file its 1997 Annual Report on Form 10-K with the SEC on March 31,
1998 because the audit of its 1997 financial statements was not yet completed.
The Company also announced that (i) certain accounting principles relating
primarily to revenue recognition were not yet resolved by the Company's
independent accountants, (ii) the accountants and Company management were
undertaking a review of the Company's accounting policies and (iii) adjustments
would be made to the Company's previously announced financial results.
On April 13, 1998, the Company announced that it would not file its
1997 Form 10-K on or before the extension date of April 15, 1998 due to ongoing
work being performed by the Company and its independent accountants. The Company
also announced that the Audit Committee of the Board of Directors had retained
independent counsel to conduct an investigation.
In April 1998, the SEC issued a formal order of investigation to
determine whether violations of certain aspects of the Federal securities laws
had occurred in connection with the Company.
On April 24, 1998, Coopers & Lybrand, L.L.P. resigned as the Company's
independent accountants. In conjunction with its resignation, Coopers & Lybrand
advised the Company that their reports with respect to the consolidated
financial statements of the Company and its subsidiaries as of and for the years
ended December 31, 1995 and 1996 were withdrawn as of the date of their
resignation.
On April 27, 1998, the Nasdaq National Market ("Nasdaq") effected a
temporary qualification trading halt in the Company's common stock. On May 11,
1998, the common stock was delisted from the Nasdaq National Market. The Company
has appealed the Nasdaq delisting.
On May 6, 1998, the Company announced that it had engaged KPMG Peat
Marwick LLP as its independent auditors for the fiscal years ended December 31,
1997, 1996 and 1995.
On May 18, 1998, the Company disclosed in a filing with the SEC that
its Quarterly Report on Form 10-Q for the Quarter Ended March 31, 1998 will not
be filed within the period prescribed for such report.
Effective May 31, 1998, Jeffery L. Fuller resigned as President, Chief
Executive Officer ("CEO") and Director of the Company. On June 8, 1998, the
Company announced that the Board of Directors had appointed a committee to
identify a CEO of the Company and that John T.
<PAGE> 9
Connor, who serves as Chairman of the Board, had been appointed as interim CEO.
Mr. Connor accepted such appointment until the earlier of September 8, 1998 or
the hiring of a permanent CEO. Mr. Connor has indicated that if a permanent CEO
is not hired by such date, he will discuss with the Board of Directors the
possibility of staying on for a longer time.
On July 8, 1998, the Company's primary bank lender, U.S. Bank National
Association ("U.S. Bank"), agreed to waive the Company's violations of its bank
credit facility arising out of the Company's failure to timely provide financial
statements, meet certain financial covenants and provide monthly borrowing base
certificates to U.S. Bank. U.S. Bank also agreed to amend the credit facility by
reducing the Company's required tangible net worth amount to $55 million from
$70 million.
The Company has been named as a defendant in several class action and
other lawsuits that were filed subsequent to the Company's announcement on March
27, 1998 that the filing of its Annual Report on Form 10-K for year ended
December 31, 1997 would be delayed and that adjustments would be made to the
Company's previously announced financial results. Between March 31, 1998 and May
27, 1998, twelve purported class action lawsuits were filed against the Company
in the United States District Court for the District of Nebraska, and one
complaint was filed in the District Court of Scotts Bluff County, Nebraska.
Certain of the complaints also name one or more officers of the Company as
additional defendants. The longest class period alleged in any of the class
complaints is the period from January 22, 1997 through April 24, 1998.
The complaints generally allege claims under Sections 10 and 20(a) of
the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, and
relate primarily to allegations of false and misleading financial statements and
representations and material omissions by the Company. The Nebraska action
alleges violations of Nebraska securities laws. The complaints seek unspecified
compensatory damages, punitive damages, attorneys' fees and costs. The federal
actions have recently been consolidated. The Company is not required to answer
or otherwise respond to the federal complaints until after a consolidated
complaint is filed.
The Company may in the future be the subject of additional lawsuits or
claims in connection with the events or facts surrounding its restatement of
previously announced financial results. The Company is unable to predict when or
whether such additional lawsuits or claims may be initiated or the likelihood of
the outcome or range or amount of potential liability that may arise therefrom.
Although the complaints described above do not allege the amount of
damages and other relief that the plaintiffs are seeking, the Company believes
the amount of damages ultimately sought by the plaintiffs will be significant.
In light of the Company's restatement of financial information contained in its
various registration statements and prospectuses, the Company believes that
there may be an unfavorable outcome for at least some of the claims asserted in
the lawsuits or which may be asserted in the future against the Company. The
Company believes that the stockholder class actions are more likely to settle
than proceed to trial, judgment and appeal. Given the circumstances of these
cases, the terms of a settlement would be structured in a manner to avoid
causing the Company to seek protection under the federal bankruptcy
reorganization laws. In any circumstances where the Company could not structure
a settlement of all claims within its financial resources, it would vigorously
defend any attempt to establish the amount of liability or to require
<PAGE> 10
payment beyond its resources. Many factors will ultimately affect and determine
the results of the litigation however, and the Company can provide no assurances
that the outcome will not have a significant adverse effect on the Company's
business, financial condition, results of operations and cash flows.
11. RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
On February 6, 1998, the Company issued a press release announcing its
consolidated financial results for 1997. Subsequently, it was determined to be
necessary to restate its previously released results for the three months and
year ended December 31, 1997, the Company's financial statements as of and for
the year ended December 31, 1996 and the financial statements as of and for each
of the quarterly periods ended March 31, June 30, September 30 and December 31
during 1997 and 1996.
The restatements for the quarters ended June 30, 1997 and 1996 and the
year ended December 31, 1996, relate primarily to: (i) revenue recognition for
certain sales for which collection was determined to not be reasonably assured
or was contingent on a future event; (ii) revenue recognition for certain sales
where a formal written agreement was not received; and (iii) revenue recognized
on sales of certain products which were subsequently returned to the Company. As
a result, the financial statements of the Company have been restated from
amounts previously reported.
The summary of the significant restatements as of June 30, 1997 and
December 31, 1996 and for the three months and six months ended June 30, 1997
and 1996 is as follows:
<PAGE> 11
TRANSCRYPT INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
As of June 30, 1997 As of December 31, 1996
------------------------------ ------------------------------
As Previously As Previously
As Restated As Restated
Reported Reported
------------ ------------ ------------ ------------
ASSETS (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 12,699,287 $ 12,699,287 $ -- $ --
Accounts receivable, net 7,923,373 1,442,069 4,215,403 1,256,800
Inventory 2,718,157 3,612,964 2,261,381 2,852,571
Income taxes recoverable -- -- -- 213,329
Prepaid expenses and other current assets 176,430 176,430 71,196 88,692
Deferred tax assets 320,287 3,019,750 196,234 1,773,140
------------ ------------ ------------ ------------
Total current assets 23,837,534 20,950,500 6,744,214 6,184,532
------------ ------------ ------------ ------------
Property, plant and equipment, at cost 8,320,682 7,637,241 6,672,832 6,100,051
Less: accumulated depreciation (2,099,066) (2,164,476) (1,765,394) (1,774,966)
------------ ------------ ------------ ------------
Net property, plant and equipment 6,221,616 5,472,765 4,907,438 4,325,085
------------ ------------ ------------ ------------
Deferred tax assets 1,713,190 754,937 1,723,190 438,983
Intangible assets, net 39,722 373,055 38,137 421,470
Deferred public offering costs -- -- 568,049 568,049
Other assets 39,158 39,158 -- --
------------ ------------ ------------ ------------
$ 31,851,220 $ 27,590,415 $ 13,981,028 $ 11,938,119
============ ============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank overdraft $ -- $ -- $ 385,694 $ 385,694
Revolving line of credit and bank notes payable 152,000 152,000 1,022,000 1,022,000
Current portion of long-term debt 6,893 6,893 595,762 595,762
Accounts payable 1,193,043 1,193,043 1,174,364 1,174,364
Accrued expenses 1,155,920 1,215,192 946,406 1,162,011
Income taxes payable 52,496 -- 151,894 --
------------ ------------ ------------ ------------
Total current liabilities 2,560,352 2,567,128 4,276,120 4,339,831
------------ ------------ ------------ ------------
Long-term debt, net of current portion 2,850,000 2,850,000 1,839,942 1,839,942
Deferred revenue -- 145,026 -- --
Revolving line of credit -- -- 792,070 792,070
============ ============ ============ ============
5,410,352 5,562,154 6,908,132 6,971,843
------------ ------------ ------------ ------------
Stockholders' equity:
Common stock 92,831 92,831 67,831 67,831
Additional paid-in capital 27,368,184 26,687,670 9,683,381 9,002,962
Retained deficit (1,020,147) (4,752,240) (2,678,316) (4,104,517)
============ ============ ============ ============
26,440,868 22,028,261 7,072,896 4,966,276
============ ============ ============ ============
$ 31,851,220 $ 27,590,415 $ 13,981,028 $ 11,938,119
============ ============ ============ ============
</TABLE>
<PAGE> 12
TRANSCRYPT INTERNATIONAL, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30,
--------------------------------------------------------------
1997 1996
----------------------------- ------------------------------
As Previously As Previously
Reported As Restated Reported As Restated
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 5,549,590 $ 2,914,574 $ 3,147,614 $ 2,577,453
Cost of sales 2,232,762 2,288,912 938,609 903,420
----------- ----------- ----------- -----------
Gross profit 3,316,828 625,662 2,209,005 1,674,033
----------- ----------- ----------- -----------
Operating expenses:
Research and development 682,570 682,570 648,562 648,562
Sales and marketing 879,095 731,426 404,372 404,370
General and administrative 559,154 651,452 614,707 614,707
----------- ----------- ----------- -----------
Total operating expenses 2,120,819 2,065,448 1,667,641 1,667,639
----------- ----------- ----------- -----------
Income (loss) from operations 1,196,009 (1,439,786) 541,364 6,394
Interest income 192,167 192,167 -- --
Interest expense (32,685) (32,685) (31,883) (31,883)
----------- ----------- ----------- -----------
Income (loss) before income taxes 1,355,491 (1,280,304) 509,481 (25,489)
Provision (benefit) for income taxes 379,742 (490,070) -- --
----------- ----------- ----------- -----------
Net Income (loss) $ 975,749 $ (790,234) $ 509,481 $ (25,489)
=========== =========== =========== ===========
Pro forma information:
Income (loss) before pro forma income taxes $ 1,355,491 $(1,280,304) $ 509,481 $ (25,489)
Pro forma provision (benefit) for income taxes 379,742 (490,070) 96,715 (8,921)
----------- ----------- ----------- -----------
Pro forma net income (loss) $ 975,749 $ (790,234) $ 412,766 $ (16,568)
=========== =========== =========== ===========
Pro forma net income (loss) per share - Basic and Diluted $ 0.10 $ (0.09) $ 0.06 $ (0.00)
=========== =========== =========== ===========
Weighted average common shares - Basic and Diluted 9,876,806 9,283,078 6,968,712 6,783,078
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
------------------------------------------------------------------
1997 1996
----------------------------- ------------------------------
As Previously As Previously
Reported As Restated Reported As Restated
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $ 10,277,993 $ 6,426,520 $ 5,727,829 $ 5,019,065
Cost of sales 3,864,889 3,561,272 1,849,747 1,783,481
------------ ------------ ------------ ------------
Gross profit 6,413,104 2,865,248 3,878,082 3,235,584
------------ ------------ ------------ ------------
Operating expenses:
Research and development 1,315,789 1,315,789 1,084,618 1,084,618
Sales and marketing 1,965,212 1,672,893 835,122 873,043
General and administrative 1,037,460 1,223,694 1,240,651 1,240,651
------------ ------------ ------------ ------------
Total operating expenses 4,318,461 4,212,376 3,160,391 3,198,312
------------ ------------ ------------ ------------
Income (loss) from operations 2,094,643 (1,347,128) 717,691 37,272
Interest income 317,642 317,642 24,614 24,614
Interest expense (81,772) (81,772) (75,109) (75,109)
------------ ------------ ------------ ------------
Income (loss) before income taxes 2,330,513 (1,111,258) 667,196 (13,223)
Provision (benefit) for income taxes 672,249 (463,535) -- --
------------ ------------ ------------ ------------
Net Income (loss) $ 1,658,264 $ (647,723) $ 667,196 $ (13,223)
============ ============ ============ ============
Pro forma information:
Income (loss) before pro forma income taxes $ 2,330,513 $ (1,111,258) $ 667,196 $ (13,223)
Pro forma provision (benefit) for income taxes 672,249 (463,535) 134,645 (4,546)
------------ ------------ ------------ ------------
Pro forma net income (loss) $ 1,658,264 $ (647,723) $ 532,551 $ (8,677)
============ ============ ============ ============
Pro forma net income (loss) per share - Basic and Diluted $ 0.17 $ (0.07) $ 0.08 $ (0.00)
============ ============ ============ ============
Weighted average common shares - Basic and Diluted 9,596,406 8,991,412 6,968,712 6,783,078
============ ============ ============ ============
</TABLE>
Page 12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following tables set forth certain restated Consolidated Statements
of operations information as a percentage of revenues during the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30,
----------------------------------------------------
1997 1996
----------------------- -----------------------
<S> <C> <C> <C> <C>
Revenues $ 2,914,574 100.0% $ 2,577,453 100.0%
Cost of sales 2,288,912 78.5% 903,420 35.1%
----------- ----- ----------- -----
Gross profit 625,662 21.5% 1,674,033 64.9%
----------- ----- ----------- -----
Operating expenses
Research and development 682,570 23.4% 648,562 25.2%
Sales and marketing 731,426 25.1% 404,370 15.7%
General and administrative 651,452 22.4% 614,707 23.8%
----------- ----- ----------- -----
Total operating expenses 2,065,448 70.9% 1,667,639 64.7%
----------- ----- ----------- -----
Income (loss) from operations (1,439,786) (49.4)% 6,394 0.2%
Interest income 192,167 6.6% -- 0.0%
Interest expense (32,685) (1.1)% (31,883) (1.2)%
----------- ----- ----------- -----
Loss before income taxes (1,280,304) (43.9)% (25,489) (1.0)%
Benefit for income taxes (490,070) (16.8)% -- 0.0%
----------- ----- ----------- -----
Net loss $ (790,234) (27.1)% $ (25,489) (1.0)%
=========== ===== =========== =====
Loss before pro forma income taxes (1,280,304) (43.9)% (25,489) (1.0)%
Pro forma benefit for income taxes (490,070) (16.8)% (8,921) (0.3)%
----------- ----- ----------- -----
Pro forma net loss $ (790,234) (27.1)% $ (16,568) (0.6)%
=========== ===== =========== =====
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
---------------------------------------------------
1997 1996
----------------------- ----------------------
<S> <C> <C> <C> <C>
Revenues $ 6,426,520 100.0% $ 5,019,065 100.0%
Cost of sales 3,561,272 55.4% 1,783,481 35.5%
----------- ----- ----------- -----
Gross profit 2,865,248 44.6% 3,235,584 64.5%
----------- ----- ----------- -----
Operating expenses
Research and development 1,315,789 20.5% 1,084,618 21.6%
Sales and marketing 1,672,893 26.0% 873,043 17.4%
General and administrative 1,223,694 19.0% 1,240,651 24.7%
----------- ----- ----------- -----
Total operating expenses 4,212,376 65.5% 3,198,312 63.7%
----------- ----- ----------- -----
Income (loss) from operations (1,347,128) (21.0)% 37,272 0.7%
Interest income 317,642 4.9% 24,614 0.5%
Interest expense (81,772) (1.3)% (75,109) (1.5)%
----------- ----- ----------- -----
Loss before income taxes (1,111,258) (17.3)% (13,223) (0.3)%
Benefit for income taxes (463,535) (7.2)% -- 0.0%
----------- ----- ----------- -----
Net loss $ (647,723) (10.1)% $ (13,223) (0.3)%
=========== ===== =========== =====
Loss before pro forma income taxes (1,111,258) (17.3)% (13,223) (0.3)%
Pro forma benefit for income taxes (463,535) (7.2)% (4,546) (0.1)%
----------- ----- ----------- -----
Pro forma net loss $ (647,723) (10.1)% $ (8,677) (0.2)%
=========== ===== =========== =====
</TABLE>
Discussions of certain matters contained in this Quarterly Report on
Form 10-Q/A may constitute forward-looking statements under Section 27A of the
Securities Act of 1933, as
<PAGE> 14
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These statements may involve risks and uncertainties. These forward-looking
statements relate to, among other things, forecasts and projections regarding
the anticipated benefits of the restructuring and the future performance of the
Company and its EFJ subsidiary, expectations of the business environment in
which the Company operates, projections of future performance, both in domestic
and international markets, perceived opportunities in the market performance and
statements regarding the Company's mission and vision. The Company's actual
results, performance and achievements may differ materially from the results,
performance and achievements expressed or implied in such forward-looking
statements and from historical results. Among the factors that could cause such
a difference include the following: the timing of the full implementation of the
Company's restructuring program for EFJ, the effects of the restructuring
program on the customers, vendors and employees of the Company and EFJ, business
conditions generally, the state of the overall economy, development of the
markets for the Company's products, including the domestic digital land mobile
radio market, availability of third-party compatible products, other competitive
factors, and the risks and uncertainties discussed in the Company's reports
filed with the Securities and Exchange Commission, including under the caption
"ITEM 1. BUSINESS -- Summary of Business Considerations and Certain Factors That
May Affect Future Results of Operations and/or Stock Price" contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.
The following discussion is intended to provide a better understanding
of the significant changes in trends relating to the Company's financial
condition and results of operations. Management's Discussion and Analysis should
be read in conjunction with the accompanying Condensed Consolidated Financial
Statements and Notes thereto.
Revenues
Revenues are recognized when product is shipped, less an estimate for
an allowance for returns, if applicable, if collection is reasonably assured.
For shipments where collection is not reasonably assured, the Company recognizes
revenue as cash is received. If collection is contingent on a future event, such
as a reseller of product selling the product to the end user, the Company
recognizes revenue when the contingency lapses, generally upon cash collection.
Costs associated with the installation and servicing of equipment are
charged to expense as incurred and allowances are provided for returns. The
Company defers income for prepayments of significant initial engineering costs,
which are components of the selling price of certain products sold. Also
included in deferred revenue are prepayments from foreign customers for which
goods cannot be shipped until certain export regulations are met.
Revenues increased 13.1% to $2.9 million during the second quarter of
1997 and 28.0% to $6.4 million during the first six months of 1997, compared to
$2.6 million and $5.0 million, respectively, during the same periods in 1996.
In August 1995, the Company entered into a three-year supply agreement
with Motorola to provide socket scrambler modules at fixed prices for domestic
markets. Such agreement provided for minimum purchases by Motorola of $3.7
million of socket scrambler modules during the eighteen-
<PAGE> 15
month period beginning on April 1, 1996 (of which $2.1 million had been
purchased as of December 31, 1996). In the first quarter of 1997, this agreement
was amended such that Motorola agreed to complete its minimum purchase
commitment by purchasing $1.0 million of socket scrambler modules which are
exportable into certain international markets, which obligation was satisfied by
Motorola in the first quarter of 1997. Although Motorola has no further minimum
purchase requirement under the agreement, as of August 14, 1997, the Company
believed that the opportunity to sell exportable products into foreign markets
through Motorola under the terms of the supply agreement would, in the future,
allow the Company to expand the markets in which it serves in Latin America and
Asia. Sales during the second quarter of 1997 under this agreement were
approximately $150,000.
International sales as a percentage of revenues for the three and six
months ended June 30, 1997 were 44.0% and 59.9%, respectively, compared to 63.6%
and 49.9% for the same periods in 1996. As of August 14, 1997, the Company
anticipated that international sales would continue to represent a significant
portion of revenues in the future, although domestic sales might increase as a
percentage of revenues in the future due to the Company's increased marketing
emphasis on domestic sales, including the expanded marketing domestically of the
Company's digital radio products. In addition, as of August 14, 1997, the
Company believed that domestic sales as a percentage of revenues might also
increase in the future as a result of the acquisition by the Company of the EFJ
subsidiary in July 1997, due to EFJ's historically greater emphasis on domestic
sales.
Gross Profit
Cost of sales includes materials, labor, depreciation and overhead
costs associated with the production of the Company's products, as well as
shipping, royalty and warranty product costs. Gross profits decreased to
$626,000 (21.5% gross margin) for the second quarter of 1997 and $2.9 million
(44.6% gross margin) for the first six months of 1997, compared to $1.7 million
(64.9% gross margin) and $3.2 million (64.5% gross margin), respectively, for
the same periods in 1996. Shipments of the Company's stand-alone LMR and
cellular telephone products, which generally have lower gross margins than
add-on modules and other products, continued strong during the first six months
of 1997 and increased relative to total sales. Additionally, in the second
quarter of 1997 inventory obsolescence was charged to cost of goods sold for
products returned by a customer which was not sellable to other customers which
contributed to the lower gross profit for the quarter. Future gross margins are
likely to vary based predominantly upon the mix of products comprising revenues
for that period.
Research and Development
Research and development expenses consist primarily of the costs
associated with research and development personnel, materials and the
depreciation of research and development equipment and facilities. Research and
development expenses increased to $683,000 for the second quarter of 1997 from
$649,000 for the second quarter of 1996 due to the addition of new members of
the engineering staff. However, research and development expenses as a
percentage of sales decreased to 23.4% for the second quarter of 1997, compared
to 25.2% for the second quarter of 1996, due to
<PAGE> 16
greater sales in the 1997 period. As of August 14, 1997, the Company continued
to develop APCO 25 digital LMR's and telephony products and data security
products. As of August 14, 1997, the Company anticipated that it would continue
to devote increased overall resources to research and development during 1997
relative to 1996.
Sales and Marketing
Sales and marketing expenses consist primarily of salaries and related
costs of sales personnel, including sales commissions and travel expenses, and
costs of advertising, public relations, bad debt provisions and trade show
participation. Sales and marketing expenses increased to $731,000 (25.1% of
sales) for the second quarter of 1997 and $1.7 million (26.0% of sales) for the
first six months of 1997, compared to $404,000 (15.7% of sales) and $873,000
(17.4% of sales) for the same periods in 1996. The increases in 1997 were due
primarily to the addition of direct sales personnel and associated expenses,
advertising and tradeshows. As of August 14, 1997, the Company expected to
continue its increased commitment to sales and marketing during 1997 through the
addition of direct sales and marketing personnel, primarily to support the
introduction of new products, including digital LMRs.
General and Administrative
General and administrative expenses consist primarily of salaries and
other expenses associated with the Company's management, accounting, finance and
administrative functions and amortization of intangible assets. General and
administrative expenses increased to $651,000 for the second quarter of 1997,
compared to $615,000 for the second quarter of 1996. General and administrative
expense was $1.2 million for each of the first six months of 1997 and 1996.
Amortization expense decreased to $21,000 in the second quarter of 1997 from
$270,000 in the second quarter of 1996. 1996 intangible assets consisted
primarily of the costs associated with the acquisition of the Company's business
in December 1991. The Company amortized these intangible assets on a
straight-line basis over a 60-month period, which resulted in an amortization
expense of $546,000 for the first six months of 1996. The reduction in
amortization was primarily offset by increases in cost primarily attributable to
the addition of several administrative employees and costs associated with
becoming, and maintaining its status as, a publicly held company in 1997. As of
August 14, 1997, the Company expected to continue to incur additional general
and administrative expenses in 1997 due to its publicly-held status and upgrades
to its management information systems. General and administrative expenses as a
percentage of revenues decreased to 22.4% and 19.0% for the second quarter of
1997 and for the first six months of 1997, compared to 23.8% and 24.7% for the
same periods in 1996.
In connection with the Company's purchase of all of the outstanding
shares of capital stock of EFJ effective July 31, 1997, as of August 14, 1997,
the Company believed that a substantial amount of goodwill related to such
purchase would be created as an intangible asset in the third quarter of 1997
and that such asset would be amortized by the Company beginning in August 1997.
As of August 14, 1997, the amount of such intangible asset had not yet been
determined.
<PAGE> 17
Net Interest Income or Expense
Net interest income consists of interest income earned on cash and
investable funds, net of interest expense related to amounts payable on the
Company's term and installment loans and bank lines of credit. Net interest
income was $159,000 for the second quarter of 1997 and $236,000 for the first
six months of 1997, compared to a $32,000 interest expense for the second
quarter of 1996 and a $50,000 interest expense for the first six months of 1996.
The increase in net interest income in the second quarter and first six
months of 1997 is attributable to the repayment of certain debt during 1997 and
an increase in interest income due to investment of a portion of the net
proceeds from the Company's initial public offering in interest-bearing
instruments.
Provision for Income Taxes
Prior to June 1996, the Company was organized as a partnership, and
therefore was not subject to income taxation except to the extent that its
earnings were attributed to its partners. The Company converted from a
partnership to a "C" corporation effective June 30, 1996. Pro forma net loss and
pro forma net loss per share calculations reflect a pro forma provision for
income taxes as if the Company had been taxed as a "C" corporation in the second
quarter of 1996 and the first six months of 1996.
The Company has benefited and continues to benefit from state tax
credits arising from a 1993 agreement with the State of Nebraska, which results
in annual state income tax credits through 1999. In addition, the Company
utilizes its foreign sales corporation subsidiary located in Guam to exempt from
income taxation a portion of the Company's foreign sales income.
Liquidity and Capital Resources
As of August 14, 1997, the Company had financed its operations and met
its capital requirements primarily through short-term borrowings, long-term
debt, an initial public offering completed on January 22, 1997, and cash flow
generated from operations in years prior to 1997. The Company's operating
activities used cash of $2.9 million for the first six months of 1997 and
generated cash of $1.2 million in the same period in 1996. Cash used in
operating activities in the first six months of 1997 consisted primarily of a
net loss, plus an increase in accounts receivable and inventory accounts, offset
in part by depreciation and an increase in accrued expenses. Cash provided by
operating activities for the first six months of 1996 consisted primarily of
depreciation and amortization and a decrease in accounts receivable, offset in
part by a net loss plus a decrease in accrued expenses.
The deferred tax assets totaling $3.8 million (which resulted primarily
from net operating loss carryforwards and the stock option related special
compensation expense of $5.4 million incurred in September 1996) were 13.7% and
17.1% of total assets and stockholders' equity, respectively, at June 30, 1997.
Management believes that it is more likely than not that future taxable income
will be sufficient to fully utilize all deferred tax assets recorded.
Cash used for investing activities, attributable primarily to capital
expenditures in the first six months of 1997 and capital expenditures and
payments for non-compete agreements for the first six months of 1996, totaled
$1.2 million and $715,000, respectively, during such periods. Capital
<PAGE> 18
expenditures consisted primarily of computer and networking equipment, office
furniture and manufacturing equipment for both six month periods and expenses
related to the Phase 2 expansion of the Company's Lincoln facility during the
second quarter of 1997. In May 1997, the Company completed construction, begun
in August 1996, of the 21,000 square foot expansion of its existing Lincoln
facility, primarily to accommodate additional manufacturing capacity. As of June
30, 1997, the Company had no additional firm commitments for capital
expenditures, although as of August 14, 1997, the Company expected to commence
construction related to the Phase 3 expansion of its facilities in the second
half of 1997.
Financing activities, which have consisted primarily of borrowings
under and payments on an industrial development revenue bond issue ("IDR"), term
and installment notes payable, a construction loan and bank lines of credit and
proceeds received from the Company's initial public offering completed on
January 22, 1997 totaled $16.8 million cash provided and $388,000 cash used
during the first six months of 1997 and 1996, respectively.
The Company's two term notes were secured by substantially all of the
Company's assets, with interest payable at the bank's regional money market rate
plus 0.5%. The installment note was secured specifically by equipment with
interest at the bank's national prime rate plus 0.5%. The bank lines of credit
provided for working capital and capital advances not to exceed $4.0 million,
with specific advances calculated based upon a percentage of eligible
inventories, accounts receivable and fixed assets. As of August 14, 1997,
interest was payable monthly at the bank's money market rate and was
collateralized by substantially all of the Company's assets. The Company paid
off all of the outstanding balances on the two term notes, the installment note
and the bank lines of credit on January 27, 1997.
At June 30, 1997, the Company had outstanding $152,000 on its working
capital line of credit, which bore an interest rate of 8.5% at such date,
payable monthly. The line of credit renewed annually and the outstanding balance
was payable on May 31 of each year.
The Company had outstanding on its IDR at December 31, 1996 a principal
amount of $850,000, which bore a fixed interest rate of 6.25%, was
non-amortizing and was scheduled to mature in January 2004. On March 25, 1997,
the $850,000 IDR and the Company's construction note payable of $892,000 were
repaid through the issuance of a new IDR totaling $2,850,000. The new IDR is due
in annual principal payments of $140,000, plus interest at a variable rate (4.5%
at June 30, 1997), from March 1, 1998 through March 1, 2007, increasing to
annual principal payments of $145,000, plus interest at a variable rate, from
March 1, 2008 through March 1, 2016, with the remaining principal and accrued
interest due on March 1, 2017. At June 30, 1997, the remaining net proceeds of
$650,000 (net of debt offering costs and the aforementioned repayments) were
held in escrow for the Company pending the completion of the Company's
construction project and related purchases of certain fixed assets.
As of August 14, 1997, the Company intended to retain earnings, if any,
to support its growth strategy and did not anticipate paying cash dividends in
the foreseeable future.
In connection with the Company's acquisition of EFJ effective July 31,
1997, on June 12, 1997 the Company delivered an irrevocable letter of credit
with a face amount of $1.6 million to
<PAGE> 19
provide additional collateral under a surety bond issued by one of EFJ's bonding
companies, and on July 22, 1997, the Company delivered an irrevocable standby
letter of credit with a face amount of $436,000 to one of EFJ's lenders to
provide additional collateral under certain indebtedness incurred by EFJ. Both
letters of credit were for a term of one year, but are automatically extended
annually by the issuing bank unless otherwise notified by the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II. OTHER INFORMATION
ITEMS 1-3.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS.
(a) On May 6, 1997, the Annual Meeting of Stockholders of the Company
(the "Annual Meeting") was held in Lincoln, Nebraska.
(b) The formal matters voted upon at the Annual Meeting were (i) the
election of two directors to serve until the election of directors
in 2000 and until their respective successors are elected and have
qualified, and (ii) the ratification of Coopers & Lybrand L.L.P. as
independent public accountants for the Company for its fiscal year
ended December 31, 1997.
(c) There were 9,065,536 shares of common stock entitled to vote at
the meeting and a total of 7,567,090 shares or 83.5% were
represented in person or by proxy at the Annual Meeting. All
proposals were adopted by the stockholders.
The voting was as follows:
ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
ELECTION OF DIRECTORS For Withhold Authority
----------------- --------------------
<S> <C> <C>
Thomas R. Larsen 7,516,890 5,200
Winston J. Wade 7,562,690 4,400
</TABLE>
<PAGE> 20
RATIFICATION OF APPOINTMENT OF COOPERS AND LYBRAND L.L.P.
<TABLE>
<CAPTION>
For Against Abstain Abstain
--------- ------- ------- -------
<S> <C> <C> <C> <C>
RATIFICATION OF APPOINTMENT OF COOPERS 7,563,010 1,000 3,080 0
AND LYBRAND L.L.P. 0
</TABLE>
ITEM 5. OTHER INFORMATION
Not applicable.
Item 6. Exhibits and Reports on 8-K.
(a) Exhibits
The following exhibits are being filed herewith:
Exhibit No. Description
- ------------ -----------
11 Computation of pro forma net loss per share.
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed a report on Form 8-K on June 12, 1997 under Item
5. "Other Events" to report the execution of a letter of intent with E.F.
Johnson and other parties relating to the Company's acquisition of substantially
all of the assets and assumption of certain liabilities of E.F. Johnson.
<PAGE> 21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934,as amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
TRANSCRYPT INTERNATIONAL, INC.
Date: July 28, 1998 By: /s/ CRAIG J. HUFFAKER
----------------------------------------
Craig J. Huffaker
Chief Financial Officer
(Principal Financial and Accounting
Officer)
<PAGE> 1
EXHIBIT 11
TRANSCRYPT INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF PRO FORMA NET LOSS PER SHARE
(Unaudited And As Restated, See Note 11)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------------- ----------------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Pro Forma Net Loss $ (790,234) $ (16,568) $ (647,723) $ (8,677)
=========== =========== =========== ===========
PRO FORMA NET LOSS PER SHARE - BASIC
Shares used in this computation:
Weighted average common shares - Basic 9,283,078 6,783,078 8,991,412 6,783,078
=========== =========== =========== ===========
Pro forma net loss per share - Basic $ (0.09) $ (0.00) $ (0.07) $ (0.00)
=========== =========== =========== ===========
PRO FORMA NET LOSS PER SHARE - DILUTED
Shares used in this computation:
Weighted average common shares - Basic 9,283,078 6,783,078 8,991,412 6,783,078
Dilutive effect of shares under employee stock plans (*) -- -- -- --
----------- ----------- ----------- -----------
Weighted average common shares - Diluted 9,283,078 6,783,078 8,991,412 6,783,078
=========== =========== =========== ===========
Pro forma net loss per share - Diluted $ (0.09) $ (0.00) $ (0.07) $ (0.00)
=========== =========== =========== ===========
</TABLE>
(*) Common stock equivalents were not included as their effect would be
anti-dilutive.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM TRANSCRYPT
INT'L INC'S CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND CONSOLIDATED
CONDENSED BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 12,699
<SECURITIES> 0
<RECEIVABLES> 1,442
<ALLOWANCES> 0
<INVENTORY> 3,613
<CURRENT-ASSETS> 20,950
<PP&E> 7,637
<DEPRECIATION> 2,164
<TOTAL-ASSETS> 27,590
<CURRENT-LIABILITIES> 2,567
<BONDS> 2,850
0
0
<COMMON> 93
<OTHER-SE> 21,935
<TOTAL-LIABILITY-AND-EQUITY> 27,590
<SALES> 6,427
<TOTAL-REVENUES> 6,427
<CGS> 3,561
<TOTAL-COSTS> 3,561
<OTHER-EXPENSES> 4,212
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (236)<F1>
<INCOME-PRETAX> (1,111)
<INCOME-TAX> (464)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (648)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
<FN>
<F1>INTEREST EXPENSE IS NET OF $318 OF INTEREST INCOME LESS $82 OF INTEREST
EXPENSE.
</FN>
</TABLE>
