<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 July 1, 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 August 1, 1995, the issuer had outstanding 2,751,425 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 JULY 1, 1995
INDEX
Page
Number
------
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Balance Sheet at July 1, 1995 (unaudited) and
December 31, 1994 . . . . . . . . . . . . . . . . . . . . . . . . 3
Statement of Operations and Accumulated Deficit
(unaudited) for the Quarter and Six Months ended
July 1, 1995 and July 2, 1994 . . . . . . . . . . . . . . . . . . 4
Statement of Cash Flows (unaudited) for the Quarter and
Six Months ended July 1, 1995 and July 2, 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 4. Submission of Matters to a Vote of Security Holders . . . . . . .11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . .12
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
2
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PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements.
HYTEK MICROSYSTEMS, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
July 1, 1995 December 31, 1994
ASSETS (Unaudited)
----------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 145,310 $ 383,555
Accounts receivable - net of
allowance for doubtful
accounts of $6,741 584,173 465,279
Inventories 893,353 501,840
Prepaid expenses and deposits 30,855 30,198
----------------- -----------------
Total current assets 1,653,691 1,380,872
Property, plant and equipment, at cost, less
accumulated depreciation 77,726 70,230
Other assets - 5,958
----------------- -----------------
$ 1,731,417 $ 1,457,060
----------------- -----------------
----------------- -----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 533,293 $ 285,857
Accrued employee compensation and benefits 113,819 109,074
Accrued warranty 75,000 75,000
Customer pre-payments 9 16,919
Commissions and other accrued liabilities 90,322 121,404
----------------- -----------------
Total current liabilities 812,443 608,254
Shareholders' equity:
Common Stock, no par value: 7,500,000 shares
authorized, 2,751,425 shares issued and
outstanding 4,886,275 4,886,275
Accumulated deficit (3,967,301) (4,037,469)
----------------- -----------------
Total shareholders' equity 918,974 848,806
----------------- -----------------
$ 1,731,417 $ 1,457,060
----------------- -----------------
----------------- -----------------
</TABLE>
See accompanying notes.
3
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HYTEK MICROSYSTEMS, INC.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
Quarters and six months ended July 1, 1995 and July 2, 1994
<TABLE>
<CAPTION>
Quarter ended Six months ended
----------------------------------- -----------------------------------
7/1/95 7/2/94 7/1/95 7/2/94
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net revenues $ 1,380,324 $ 1,005,796 $ 2,220,698 $ 2,122,888
Costs and expenses:
Cost of sales 925,410 710,029 1,593,999 1,471,305
Research and development 148,343 156,900 310,905 337,497
Selling, general and
administrative 130,734 105,265 246,130 229,200
--------------- --------------- --------------- ---------------
Total costs and expenses 1,204,487 972,194 2,151,034 2,038,002
--------------- --------------- --------------- ---------------
Operating income 175,837 33,602 69,664 84,886
Interest income 877 540 1,429 869
Interest expense 555 - 925 -
--------------- --------------- --------------- ---------------
Income before provision
for income taxes 176,159 34,142 70,168 85,755
Provision for income taxes - - - -
--------------- --------------- --------------- ---------------
Net income $ 176,159 $ 34,142 $ 70,168 $ 85,755
Accumulated deficit:
Beginning of period $ (4,143,460) $ (3,987,822) $ (4,037,469) $ (4,039,435)
--------------- --------------- --------------- ---------------
End of period $ (3,967,301) $ (3,953,680) $ (3,967,301) $ (3,953,680)
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Net income per share $ .06 $ .01 $ .03 $ .03
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Common and common equivalent
shares used in per share calculations 2,751,425 2,751,425 2,751,425 2,751,425
</TABLE>
See accompanying notes.
4
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STATEMENT OF CASH FLOWS (unaudited)
Quarters and Six Months Ended July 1, 1995 and July 2, 1994
Increase (decrease) in cash and cash equivalents
<TABLE>
<CAPTION>
Quarters Ended Six Months Ended
----------------------------------- -----------------------------------
July 1, 1995 July 2, 1994 July 1, 1995 July 2, 1994
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 176,159 $ 34,142 $ 70,168 $ 85,755
Adjustments to reconcile net income to
cash flow provided by (used in) operations:
Depreciation and amortization 16,206 21,993 30,210 43,930
Accounts receivable (202,838) 57,631 (118,894) (49,164)
Inventories (93,256) 18,446 (391,513) 117,122
Prepaid expenses and deposits 2,814 2,125 (657) 20,307
Other assets 3,030 2,928 5,958 5,857
Accounts payable 157,070 (60,432) 247,436 (234,759)
Accrued employee compensation and benefits 28,264 19,577 4,745 (21,396)
Commissions and other accrued liabilities (42,485) (34,247) (31,082) (8,620)
Customer pre-payments (89,615) 6,318 (16,910) 6,318
---------------- ---------------- ---------------- ----------------
Net cash provided by (used in) operating activities (44,651) 68,481 (200,539) (34,650)
Cash flows from investing activities:
Cash purchases of equipment (10,152) (715) (37,706) (5,404)
---------------- ---------------- ---------------- ----------------
Net cash from investing activities (10,152) (715) (37,706) (5,404)
Cash flows from financing activities: - - - -
---------------- ---------------- ---------------- ----------------
Net cash used in financing activities - - - -
Net increase (decrease) in cash and cash equivalents (54,803) 67,766 (238,245) (40,054)
Cash and cash equivalents at beginning of period 200,113 107,572 383,555 215,392
---------------- ---------------- ---------------- ----------------
Cash and cash equivalents at end of period $ 145,310 $ 175,338 $ 145,310 $ 175,338
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
</TABLE>
See accompanying notes.
5
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HYTEK MICROSYSTEMS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
JULY 1, 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
ans six months ended July 1, 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 July 1, 1995 for this
lease were:
<TABLE>
<S> <C>
1995 $ 72,900
1996 149,448
1997 156,918
1998 164,760
1999 172,998
2000 88,608
---------
$ 805,632
---------
---------
</TABLE>
3. Inventories are stated at the lower of cost (determined using the
first-in, first-out method) or market. 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 July 1, 1995 increased 37% from net
revenues for the quarter ended July 2, 1994. Net revenues for the quarter ended
July 1, 1995 were $1,380,000, as compared to $1,006,000 for the quarter ended
July 2, 1994. Net revenues for the six months ended July 1, 1995 increased 5%
to $2,221,000 from net revenues for the six months ended July 2, 1994 of
$2,123,000. The increase in net revenues for the quarter and six months ended
July 1, 1995 over the prior year period is attributable to increased sales to
Chesapeake Sciences Corp.("Chesapeake"),the Company's largest customer during
this period.
The Company's backlog of customer orders was $3,900,000 at July 1, 1995 as
compared to $2,878,000 at July 2, 1994, and $2,816,000 at December 31, 1994.
Approximately $3,670,000 of the total backlog is currently scheduled for
shipment during the remainder of 1995, with the balance scheduled to ship in
1996. Approximately $2,576,000, or 66%, of the total backlog relates to orders
from the Company's largest customer, Chesapeake, which accounted for
approximately 64% of the Company's net revenues during the quarter ended July 1,
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.
Cost of sales was $925,000, or 67% of net revenues, for the quarter ended
July 1, 1995, as compared to $710,000, or 71% of net revenues, for the quarter
ended July 2, 1994. This improvement in gross margin is primarily attributable
to the spreading of fixed costs over a higher revenue base. Both quarters
contained large customer programs with a high material cost content per revenue
dollar. Cost of sales for the six months ended July 1, 1995 was $1,594,000, or
72% of net revenues, as compared to $1,471,000, or 69% of net revenues for the
six months ended July 2, 1994. This increase in cost of sales as a percentage
of net revenues
7
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is a result of the higher material cost associated with the Chesapeake Sciences
program and lower than anticipated first quarter shipments.
Research and development expenses were $148,000, or 11% of net revenues,
for the quarter ended July 1, 1995, as compared to $157,000, or 16% of net
revenues, for the quarter ended July 2, 1994. Research and development
expenses for the six months ended July 1, 1995 were $311,000, or 14% of net
revenues, as compared to $337,000, or 16% of net revenues, for the six months
ended July 2, 1994. This decrease in research and development expenses for the
quarter and six-month periods is the result of reduced compensation costs
attributable to changes in the mix of personnel. The Company is continuing its
efforts to develop additional standard products and in May 1995 introduced its
new high speed laser diode driver (HY-6110) for the digital modulation of laser
diodes. The Company has applied for a patent on the technology utilized in this
new device.
Selling, general and administrative expenses were $131,000, or 9% of net
revenues, for the quarter ended July 1, 1995, as compared to $105,000, or 10% of
net revenues in the quarter ended July 2, 1994. Selling, general and
administrative expenses for the six months ended July 1, 1995 were $246,000, or
11% of net revenues, as compared to $229,000, or 11% of net revenues, for the
six months ended July 2, 1994. The increase in selling, general and
administrative expense for the quarter and six -month periods is the result of
increases in compensation cost, legal fees and shareholder related expense
offset by a decrease in sales commission expense.
The Company had an operating profit of $176,000 for the quarter ended
July 1, 1995, as compared to operating profit of $34,000 for the quarter ended
July 2, 1994. The increase in quarterly profit was primarily attributable to
increased sales, reduced research and development expense and improved gross
margins discussed above. The Company had an operating profit of $70,000 for the
six months ended July 1, 1995, as compared to an operating profit of $85,000 for
the six months ended July 2, 1994. This decrease was due to lower revenues
during the first quarter of 1995 resulting from delays in production on the
Chesapeake Sciences program.
There was no provision for income taxes in any period presented as the
Company has net operating loss carryforwards for both Federal and California
income tax purposes. The Company accounts for deferred
8
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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 $145,000 in cash at July 1, 1995, as compared to $384,000
at December 31, 1994. This decrease of $239,000 from year end is comprised of
$201,000 used in operating activities and $38,000 used for the purchase of
capital equipment related to production requirements. Cash used in operating
activities primarily reflects increases in inventories and accounts receivable,
partially offset by increases in accounts payable and net income.
Accounts receivable were $584,000 at July 1, 1995, as compared to $465,000
at December 31, 1994. This increase is the result of higher levels of shipments
at the end of the second quarter of 1995 as compared to the 1994 fiscal year
end. At July 1, 1995, accounts in excess of 60 days amounted to 1% of total
accounts receivable, as compared to 2% at December 31, 1994.
Inventories were $893,000 at July 1, 1995, as compared to $502,000 at
December 31, 1994. This increase of $391,000 is comprised of increases in both
raw materials and work in process required to meet the increased level of
shippable backlog for the year.
Accounts payable were $533,000 at July 1, 1995, as compared to $286,000 at
December 31, 1994. This increase results from increased raw material purchases
and an increase in the average length of the Company's payment cycles to its
vendors.
Accrued employee compensation and benefits was $114,000 at July 1, 1995, as
compared to $109,000 at December 31, 1994. This minor increase is due a slight
increase in the number of employees during 1995.
Commissions and other accrued liabilities were $90,000 at July 1, 1995, as
compared to $121,000 at December 31, 1994. The primary reason for this
reduction is a lower level of sales commission expense incurred during the first
half of 1995. This reduction is due to the fact that Chesapeake, the Company's
largest volume customer, is not subject to sales commission expense.
9
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Although cash flow for the six months ended July 1, 1995 was negative, the
Company has increased its working capital by over $68,000. The Company believes
that operations will generate sufficient cash to meet its operating needs over
at least 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 the terms on which
it might be obtained would be favorable.
10
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PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders of the Company was held on May 12,
1995 (the "Meeting").
(b) The following directors were elected at the Meeting:
Shou-Chen Yih
Charles S. Byrne
Robert Boschert
Edward W. Moose
Edward Y. Tang
(c) The results of the vote on each matter submitted to the shareholders
at the Meeting were as follows:
Election of Directors: For Withheld
--- --------
Shou-Chen Yih 2,262,448 9,067
Charles S. Byrne 2,262,448 9,067
Robert Boschert 2,262,448 9,067
Edward W. Moose 2,262,448 9,067
Edward Y. Tang 2,262,448 9,067
Approval of Amendment to 1991 Stock Option Plan to increase the number
of shares issuable thereunder by 100,000:
For- 2,184,648
Against- 51,725
Abstained- 1,400
Broker Non-Votes- 0
Ratification of the selection of Ernst & Young to serve as auditors
for fiscal 1995:
For - 2,218,390
Against - 51,725
Abstained - 1,400
Broker Non-Votes - 0
11
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(d) Not applicable.
The foregoing matters are described in more detail in the issuer's
definitive proxy statement dated April 10, 1995 relating to the Annual Meeting
of Shareholders held on May 12, 1995.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
27.1 Financial Data Schedules
(b) Reports on Form 8-K.
No Reports on Form 8-K were filed during the quarter ended
July 1, 1995.
12
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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: August 8, 1995 By: /s/ Charles S. Byrne
--------------------
Charles S. Byrne,
President, Chief
Executive Officer and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
13
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HYTEK MICROSYSTEMS, INC.
Quarterly Report on Form 10-QSB
for the Quarter and Six Months ended July 1, 1995
EXHIBIT INDEX
Exhibit
Number Exhibit Description
------- -------------------
27.1 Financial Data Schedules.
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AT JULY 1, 1995 AND STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT AT
JULY 1, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-30-1995
<PERIOD-END> JUL-01-1995
<CASH> 145,310
<SECURITIES> 0
<RECEIVABLES> 590,914
<ALLOWANCES> 6,741
<INVENTORY> 893,353
<CURRENT-ASSETS> 1,653,691
<PP&E> 2,545,275
<DEPRECIATION> 2,467,549
<TOTAL-ASSETS> 1,731,417
<CURRENT-LIABILITIES> 812,443
<BONDS> 0
<COMMON> 918,974<F1>
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1,731,417
<SALES> 2,217,381
<TOTAL-REVENUES> 2,220,698
<CGS> 1,593,999
<TOTAL-COSTS> 2,151,034
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 925
<INCOME-PRETAX> 70,168
<INCOME-TAX> 0
<INCOME-CONTINUING> 70,168
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,168
<EPS-PRIMARY> .026
<EPS-DILUTED> .024
<FN>
<F1>Common Stock as reported above is net of $3,967,301 Accumulated Deficit.
</FN>
</TABLE>
