<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from _________ to __________
Commission file number 0-11880
HYTEK MICROSYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
California 94-2234140
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
400 Hot Springs Road, Carson City, Nevada 89706
(Address of principal executive offices)
Issuer's telephone number: (702) 883-0820
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 _____
As of October 31, 1995, the issuer had outstanding 2,791,425 shares of Common
Stock, no par value.
1
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HYTEK MICROSYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
INDEX
<TABLE>
<CAPTION>
Page
Number
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<S> <C>
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Balance Sheet at September 30, 1995 (unaudited) and
December 31, 1994. . . . . . . . . . . . . . . . . . . . . . . . 3
Statement of Operations and Accumulated Deficit
(unaudited) for the Quarter and Nine Months ended
September 30, 1995 and October 1, 1994 . . . . . . . . . . . . . 4
Statement of Cash Flows (unaudited) for the Quarter and
Nine Months ended September 30, 1995 and
October 1, 1994. . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Interim Financial Statements (unaudited). . . . . . . . 6
Item 2. Management's Discussion and Analysis or
Plan of Operation. . . . . . . . . . . . . . . . . . . . 7
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
</TABLE>
2
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PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
<CAPTION>
HYTEK MICROSYSTEMS, INC.
BALANCE SHEET
September 30, 1995 December 31, 1994
ASSETS (Unaudited)
------------------ -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 110,223 $ 383,555
Accounts receivable - net of
allowance for doubtful
accounts of $6,741 745,913 465,279
Inventories 1,332,988 501,840
Prepaid expenses and deposits 42,841 30,198
-------------- --------------
Total current assets 2,231,965 1,380,872
Property, plant and equipment, at cost, less
accumulated depreciation 78,734 70,230
Other assets - 5,958
-------------- --------------
$ 2,310,699 $ 1,457,060
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 742,856 $ 285,857
Accrued employee compensation and benefits 119,578 109,074
Accrued warranty 75,000 75,000
Customer pre-payments 178,673 16,919
Commissions and other accrued liabilities 100,051 121,404
-------------- --------------
Total current liabilities 1,216,158 608,254
Shareholders' equity:
Common Stock, no par value: 7,500,000 shares
authorized, 2,766,425 shares issued and
outstanding (2,751,425 at 12/31/94) 4,894,244 4,886,275
Accumulated deficit (3,799,703) (4,037,469)
-------------- --------------
Total shareholders' equity 1,094,541 848,806
-------------- --------------
$ 2,310,699 $ 1,457,060
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
3
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HYTEK MICROSYSTEMS, INC.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
Quarters and nine months ended September 30, 1995 and October 1, 1994
<TABLE>
<CAPTION>
Quarter ended Nine months ended
----------------------------------- -----------------------------------
9/30/95 10/1/94 9/30/95 10/1/94
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Net revenues $ 1,309,447 $ 956,344 $ 3,530,145 $ 3,079,233
Costs and expenses:
Cost of sales 873,581 770,508 2,467,580 2,241,814
Research and development 142,839 147,566 453,744 485,063
Selling, general and
administrative 125,552 110,360 371,682 339,560
--------------- --------------- --------------- ---------------
Total costs and expenses 1,141,972 1,028,434 3,293,006 3,066,437
--------------- --------------- --------------- ---------------
Operating income (loss) 167,475 (72,090) 237,139 12,796
Interest income 863 298 2,292 1,167
Interest expense (740) - (1,665) -
--------------- --------------- --------------- ---------------
Income (loss) before provision
for income taxes 167,598 (71,792) 237,766 13,963
Provision for income taxes - - - -
--------------- --------------- --------------- ---------------
Net income (loss) $ 167,598 $ (71,792) $ 237,766 $ 13,963
Accumulated deficit:
Beginning of period $ (3,967,301) $ (3,953,680) $ (4,037,469) $ (4,039,435)
--------------- --------------- --------------- ---------------
End of period $ (3,799,703) $ (4,025,472) $ (3,799,703) $ (4,025,472)
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Net income (loss) per share $ .06 $ (.03) $ (.08) $ .01
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Common and common equivalent
shares used in per share calculations 3,023,692 2,751,425 2,939,597 2,751,425
</TABLE>
See accompanying notes.
4
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HYTEK MICROSYSTEMS, INC.
STATEMENT OF CASH FLOWS (unaudited)
Quarters and Nine Months Ended September 30, 1995 and October 1, 1994
Increase (decrease) in cash and cash equivalents
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
------------------------------------- ------------------------------------
September 30, 1995 October 1, 1994 September 30, 1995 October 1, 1994
------------------ --------------- ------------------ ---------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 167,598 $ (71,792) $ 237,766 $ 13,963
Adjustments to reconcile net income (loss) to
cash flow provided by (used in) operations:
Depreciation and amortization 13,575 21,993 43,785 65,923
Accounts receivable (161,740) 34,412 (280,634) (14,752)
Inventories (439,635) 33,998 (831,148) 151,120
Prepaid expenses and deposits (11,986) - (12,643) 20,307
Other assets - 2,928 5,958 8,784
Accounts payable 209,563 8,222 456,999 (226,535)
Accrued employee compensation and benefits 5,759 (32,845) 10,504 (54,241)
Accrued warranty - - - -
Commissions and other accrued liabilities 9,729 (7,859) (21,353) (16,480)
Customer deposits 178,664 (9,265) 161,754 (2,947)
------------ ------------ ------------ ------------
Net cash (used in) operating activities (28,473) (20,208) (229,012) (54,858)
Cash flows from investing activities:
Cash purchases of equipment (14,583) (5,164) (52,289) (10,568)
------------ ------------ ------------ ------------
Net cash (used in) investing activities (14,583) (5,164) (52,289) (10,568)
Cash flows from financing activities:
Proceeds from exercise of stock options 7,969 - 7,969 -
------------ ------------ ------------ ------------
Net cash provided by financing activities 7,969 - 7,969 -
Net increase (decrease) in cash and cash equivalents (35,087) (25,372) (273,332) (65,426)
Cash and cash equivalents at beginning of period 145,310 175,338 383,555 215,392
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 110,223 $ 149,966 $ 110,223 $ 149,966
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See accompanying notes.
5
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HYTEK MICROSYSTEMS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(Unaudited)
1. In the opinion of management, the accompanying unaudited financial
statements include all adjustments (consisting of only normal recurring
adjustments) that are necessary in order to make the financial statements
contained herein not misleading. These financial statements, notes and analyses
should be read in conjunction with the financial statements for the fiscal year
ended December 31, 1994, and notes thereto, which are contained in the Company's
Annual Report on Form 10-KSB for such fiscal year. The results for the quarter
and nine months ended September 30, 1995 are not necessarily indicative of the
results that may be expected for the entire year ending December 30, 1995. The
Company operates on a 52/53 week fiscal year, which approximates the calendar
year.
2. The Company leases its previously owned Carson City facility pursuant
to a sale/leaseback transaction consummated in 1990. This lease was renewed on
July 1, 1995 pursuant to an existing option for an additional five-year period.
The aggregate future minimum rental commitments as of September 30, 1995 for
this lease were:
1995 $ 36,450
1996 149,448
1997 156,918
1998 164,760
1999 172,998
2000 88,608
--------
$ 769,182
--------
--------
3. Inventories are stated at the lower of cost (determined using the
first-in, first-out method) or market. At September 30, 1995 inventories
consisted of:
Raw Material $799,921
Work-In-Process 504,906
Finished Goods 28,161
--------
$1,332,988
----------
----------
4. Plant and equipment are stated at cost and depreciated on a straight-
line basis over the estimated useful life of the assets, generally three to
eight years.
6
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Item 2. Management's Discussion and Analysis
or Plan of Operation
For the purposes of the following discussion, dollar amounts have been
rounded to the nearest $1,000 and all percentages have been rounded to the
nearest 1%.
RESULTS OF OPERATIONS
Net revenues for the quarter ended September 30, 1995 increased 37% from
net revenues for the quarter ended October 1, 1994. Net revenues for the
quarter ended September 30, 1995 were $1,309,000, as compared to $956,000 for
the quarter ended October 1, 1994. Net revenues for the nine months ended
September 30, 1995 increased 15% to $3,530,000 from net revenues for the nine
months ended October 1, 1994 of $3,079,000. The increase in net revenues for
the first nine months of 1995 over the same period of the prior year was
attributable to increased shipments of customer orders during 1995. A majority
of this increase is shipments is attributable to orders from Chesapeake Sciences
Corporation.
The Company's backlog of customer orders was $8,554,000 at September 30,
1995 as compared to $2,918,000 at October 1, 1994, and $2,816,000 at December
31, 1994. Approximately $2,000,000 of the total backlog at September 30, 1995
is currently scheduled for shipment during the fourth quarter of 1995, with the
balance scheduled to ship in 1996. Approximately $7,133,000, or 83%, of the
total backlog relates to orders from the Company's largest customer, Chesapeake
Sciences Corporation, which accounted for approximately 61% of the Company's net
revenues during the quarter ended September 30, 1995. Because customers may
place orders for delivery at various times throughout the year, and due to the
possibility of customer changes in delivery schedules or cancellation of orders
with little or no penalty, the Company's backlog as of any particular date may
not be indicative of actual future sales. In particular, any rescheduling or
cancellations of orders from Chesapeake would have a material adverse effect on
the Company's future results of operations. The Company has no long term
contract with Chesapeake Sciences Corporation but operates with this customer on
a purchase order basis.
Cost of sales was $874,000, or 67% of net revenues, for the quarter ended
September 30, 1995, as compared to $771,000, or 81% of net revenues, for the
quarter ended October 1, 1994. This decrease, as a percentage of net revenues,
is largely attributable to a decrease in material
7
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cost per revenue dollar. Cost of sales for the nine months ended September 30,
1995 was $2,468,000, or 70% of net revenues, as compared to $2,242,000, or 73%
of net revenues for the nine months ended October 1, 1994. This decrease in
cost of sales as a percentage of net revenues is primarily a result of reduced
material costs combined with the increase in net revenues in 1995 as compared to
1994, which spread the fixed costs over higher net revenues.
Research and development expenses were $143,000, or 11% of net revenues,
for the quarter ended September 30, 1995, as compared to $148,000, or 15% of net
revenues, for the quarter ended October 1, 1994. Research and development
expenses for the nine months ended September 30, 1995 were $454,000, or 13% of
net revenues, as compared to $485,000, or 16% of net revenues, for the nine
months ended October 1, 1994. The decease in research and development expenses
for the nine months ended September 30, 1995, as compared to the nine months
ended October 1, 1994, is primarily attributable to reduced compensation costs
resulting from changes in the mix of personnel. This decrease in research and
development expenses, as a percentage of net revenues, is the result of
spreading these costs over a higher sales volume. The Company is continuing in
its efforts to develop new standard products. In addition to the High Speed
Laser Diode Driver, introduced in May 1995, the Company is continuing work on
other projects, which include a revised crystal oscillator and a D/C-to-D/C
power supply product.
Selling, general and administrative expenses were $126,000, or 10% of net
revenues, for the quarter ended September 30, 1995, as compared to $110,000, or
12% of net revenues in the quarter ended October 1, 1994. Selling, general and
administrative expenses for the nine months ended September 30, 1995 were
$372,000, or 11% of net revenues, as compared to $340,000, or 11% of net
revenues, for the nine months ended October 1, 1994. The increase in selling,
general and administrative expenditures for the nine months ended September 30,
1995 is mainly attributable to increased compensation cost resulting from
changes in the mix of personnel and increased legal expenses, partially offset
by reduced sales commission expense.
The Company had an operating profit of $167,000 for the quarter ended
September 30, 1995, as compared to an operating loss of $72,000 for the quarter
ended October 1, 1994. The improvement in quarterly operating results was
primarily attributable to increased net revenues and gross margins. The Company
had an operating profit of $237,000 for the nine months ended September 30,
1995, as compared to an operating
8
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profit of $13,000 for the nine months ended October 1, 1994. This change was
primarily due to higher revenues and gross margin during the first nine months
of 1995.
There was no provision for income taxes in the third quarter of 1995 as the
Company has net operating loss carryforwards for both Federal and California
income tax purposes. The net operating loss carryforwards will eliminate the
need for any significant provision for income taxes in the foreseeable future.
The Company accounts for deferred income taxes under the method prescribed by
Financial Accounting Standards Board Statement No. 109, "Accounting for Income
Taxes".
LIQUIDITY AND CAPITAL RESOURCES
The Company had $110,000 in cash at September 30, 1995, as compared to
$384,000 at December 31, 1994. This decrease of $274,000 from year end is
comprised of $229,000 used in operating activities and $52,000 used for the
purchase of capital equipment, partially offset by $8,000 proceeds from the
exercise of stock options. Cash used in operating activities reflects
increases in inventories and accounts receivable, partially offset by increases
in accounts payable, net income and customer deposits.
Accounts receivable were $746,000 at September 30, 1995, as compared to
$465,000 at December 31, 1994. This increase is the result of the higher sales
volume achieved during this period as compared to the fourth quarter of 1994.
At September 30, 1995, accounts in excess of 60 days amounted to less than 1% of
total accounts receivable, as compared to 2% at December 31, 1994.
Inventories were $1,333,000 at September 30, 1995, as compared to $502,000
at December 31, 1994. This large increase is attributable to multiple factors.
First, the Company has procured raw material for its largest customer program
(Chesapeake) at a level necessary to meet the customer's requested delivery
dates. However, certain suppliers failed to meet their scheduled deliveries,
which resulted in reduced shipments on this program during the quarter and a
build-up of raw materials and work in process for the Chesapeake program.
Further, another customer has postponed delivery of product from the third
quarter of 1995 into the first quarter of 1996. This change in delivery
schedule was made after a majority of materials for the program had been
received. This customer has made partial advance payments to fund the
inventory.
9
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Prepaid expenses and deposits were $43,000 at September 30, 1995 as
compared to $30,000 at December 31, 1994. This increase is the result of the
prepayment of October 1995 employee group insurance premiums due to contractual
changes.
Accounts payable were $743,000 at September 30, 1995, as compared to
$286,000 at December 31, 1994. This increase is the result of higher levels of
raw material purchases required to meet customer requested delivery schedules.
Accrued employee compensation and benefits were $120,000 at September 30,
1995, as compared to $109,000 at December 31, 1994. This increase is
attributable to an increase in the number of employees during the year.
Commissions and other accrued liabilities were $100,000 at September 30,
1995, as compared to $121,000 at December 31, 1994. This reduction is primarily
attributable to a lower level of sales commission expense incurred during 1995.
The decrease in sales commission expense is due to the fact that sales to
Chesapeake, the Company's largest volume customer, are not subject to sales
commissions.
Customer pre-payments were $179,000 at September 30, 1995 as compared to
$17,000 at December 31, 1994. This increase results from one customer funding
the Company's investment in inventory for their program on which delivery has
been postponed until the first quarter of 1996.
Although cash flow for the nine months ended September 30, 1995 was
negative, the Company has increased its working capital during the first nine
months of 1995 by $243,000. This increase in working capital consists primarily
of accounts receivable and inventories, which, the Company believes should
generate future positive cash flow. The Company believes that operations will
generate sufficient cash to meet operating needs over the next twelve months.
The Company has no financing arrangements or lines of credit in force at the
present time, but may pursue debt or equity financing in the future if
conditions so warrant. However, there can be no assurance that the Company can
obtain such financing or that it will be obtainable on terms favorable to the
Company.
10
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PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
No Reports on Form 8-K were filed during the
quarter ended September 30, 1995.
11
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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.
HYTEK MICROSYSTEMS, INC.
(Registrant)
Date: November 9, 1995 By: /s/ Charles S. Byrne
--------------------
Charles S. Byrne,
President, Chief
Executive Officer and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
12
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HYTEK MICROSYSTEMS, INC.
Quarterly Report on Form 10-QSB
for the Quarter and Nine Months ended September 30, 1995
EXHIBIT INDEX
Exhibit
Number Exhibit Description
------ -------------------
27.1 Financial Data Schedule.
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
BALANCE SHEET AT SEPTEMBER 30, 1995 AND STATEMENT OF OPERATIONS AND
ACCUMULATED DEFICIT AT SEPTEMBER 30, 1995.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-30-1995<F1>
<PERIOD-END> SEP-30-1995
<CASH> 110,223
<SECURITIES> 0
<RECEIVABLES> 752,654
<ALLOWANCES> 6,741
<INVENTORY> 1,332,988
<CURRENT-ASSETS> 2,231,965
<PP&E> 2,538,810
<DEPRECIATION> 2,460,076
<TOTAL-ASSETS> 2,310,699
<CURRENT-LIABILITIES> 1,216,158
<BONDS> 0
<COMMON> 1,094,541
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,310,699
<SALES> 3,523,325
<TOTAL-REVENUES> 3,530,145
<CGS> 2,467,580
<TOTAL-COSTS> 3,293,006
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,665
<INCOME-PRETAX> 237,766
<INCOME-TAX> 0
<INCOME-CONTINUING> 237,766
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 237,766
<EPS-PRIMARY> .086
<EPS-DILUTED> .081
<FN>
<F1>TAG 21 - COMMON STOCK AS REPORTED ABOVE IS NET OF $3,799,703
ACCUMULATED DEFICIT.
</FN>
</TABLE>
