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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 MARCH 30, 1996
OR
/ / TRANSITION REPORT UNDER 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)
<TABLE>
<S> <C>
CALIFORNIA 94-2234140
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
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 April 12, 1996, the issuer had outstanding 2,893,091 shares of Common
Stock, no par value.
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d1469a
HYTEK MICROSYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED MARCH 30, 1996
INDEX
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PAGE
NUMBER
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<S> <C> <C>
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Balance Sheet at March 30, 1996 (unaudited) and December 30, 1995........................... 3
Statement of Operations and Accumulated Deficit (unaudited) for the Quarters ended March 30,
1996 and April 1, 1995..................................................................... 4
Statement of Cash Flows (unaudited) for the Quarters ended March 30, 1996 and April 1,
1995....................................................................................... 5
Notes to Interim Financial Statements (unaudited)........................................... 6
Item 2. Management's Discussion and Analysis or Plan of Operation................................... 6
Part II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K............................................................ 9
Signatures ............................................................................................ 10
Exhibit Index ......................................................................................... 11
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2
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PART I. -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
HYTEK MICROSYSTEMS, INC.
BALANCE SHEET
ASSETS
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<CAPTION>
MARCH 30, DECEMBER 30,
1996 1995
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(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents.................................... $ 189,851 $ 92,995
Accounts receivable -- net of allowance for doubtful accounts
of $20,000.................................................. 1,293,078 1,179,847
Inventories.................................................. 1,598,931 1,239,785
Prepaid expenses and deposits................................ 39,715 31,585
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Total current assets....................................... 3,121,575 2,544,212
Property, plant and equipment, at cost, less accumulated
depreciation.................................................. 188,704 101,375
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$3,310,279 $ 2,645,587
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----------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................. $1,010,521 $ 673,531
Notes payable................................................ 50,000 0
Accrued employee compensation and benefits................... 147,532 191,267
Accrued warranty............................................. 75,000 75,000
Customer pre-payments........................................ 159,274 178,664
Commissions and other accrued liabilities.................... 89,962 129,747
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Total current liabilities.................................. 1,532,289 1,248,209
Shareholders' equity:
Common Stock, no par value: 7,500,000 shares authorized,
2,878,091 shares issued and outstanding
(2,811,425 at 12/30/95)..................................... 4,940,145 4,913,806
Accumulated deficit.......................................... (3,162,155) (3,516,428)
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Total shareholders' equity................................. 1,777,990 1,397,378
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$3,310,279 $ 2,645,587
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</TABLE>
See accompanying notes.
3
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HYTEK MICROSYSTEMS, INC.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
QUARTERS ENDED MARCH 30, 1996 AND APRIL 1, 1995
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<CAPTION>
3/30/96 4/1/95
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(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Net revenues...................................................................... $ 2,037,179 $ 840,374
Costs and expenses:
Cost of sales................................................................... 1,392,711 668,589
Research and development........................................................ 147,483 162,562
Selling, general and administrative............................................. 142,308 115,396
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Total costs and expenses...................................................... 1,682,502 946,547
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Operating income (loss)........................................................... 354,677 (106,173)
Interest income................................................................... 297 552
Interest expense.................................................................. 701 370
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Income (loss) before provision for income taxes................................... 354,273 (105,991)
Provision for income taxes........................................................ -- --
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Net income (loss)................................................................. $ 354,273 $ (105,991)
Accumulated deficit:
Beginning of quarter............................................................ $ (3,516,428) $ (4,037,469)
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End of quarter.................................................................. $ (3,162,155) $ (4,143,460)
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Net income (loss) per share....................................................... $ .11 $ (.04)
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Common and common equivalent shares used in per share calculations................ 3,090,005 2,751,425
</TABLE>
See accompanying notes.
4
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HYTEK MICROSYSTEMS, INC.
STATEMENT OF CASH FLOWS
QUARTERS ENDED MARCH 30, 1996 AND APRIL 1, 1995
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
3/30/96 4/1/95
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(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................................................... $ 354,273 $ (105,991)
Adjustments to reconcile net income (loss) to net cash (used in) provided by
operating activities:
Depreciation and amortization..................................................... 9,444 14,004
Accounts receivable, net.......................................................... (113,231) 83,944
Inventories....................................................................... (359,146) (298,257)
Prepaid expenses and deposits..................................................... (8,130) (3,471)
Other assets...................................................................... -- 2,928
Accounts payable.................................................................. 336,990 90,366
Accrued employee compensation and benefits........................................ (43,735) (23,518)
Customer pre-payments............................................................. (19,390) 72,705
Commissions and other accrued liabilities......................................... (39,785) 11,403
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Net cash provided by (used in) operating activities................................. 117,290 (155,887)
Cash flows from investing activities:
Cash purchases of equipment......................................................... (96,773) (27,555)
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Net cash used in investing activities............................................. (96,773) (27,555)
Cash flows from financing activities:
Proceeds from exercise of stock options............................................. 26,339 --
Short term borrowings............................................................... 50,000 --
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76,339 --
Net increase (decrease) in cash and cash equivalents.................................. 96,856 (183,442)
Cash and cash equivalents at beginning of period...................................... 92,995 383,555
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Cash and cash equivalents at end of period............................................ $ 189,851 $ 200,113
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</TABLE>
See accompanying notes.
5
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HYTEK MICROSYSTEMS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
MARCH 30, 1996
(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 30, 1995, 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
ended March 30, 1996 are not necessarily indicative of the results that may be
expected for the entire year ending December 28, 1996. 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 March 30, 1996 for this lease
were:
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<S> <C>
1996..................................................... $ 112,998
1997..................................................... 156,918
1998..................................................... 164,760
1999..................................................... 172,998
2000..................................................... 88,608
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$ 696,282
---------
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3. Inventories are stated at the lower of cost (determined using the
first-in, first-out method) or market. At March 30, 1996, inventories consisted
of:
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<S> <C>
Raw Material........................................... $ 774,573
Work-In-Process........................................ 709,076
Finished Goods......................................... 115,282
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$1,598,931
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</TABLE>
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.
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%.
This Interim Report on Form 10-QSB contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Actual results could differ
materially from those projected in the forward-looking statements as a result of
various factors, including the risk factors set forth below. The Company has
attempted to identify forward-looking statements by placing an asterisk
immediately following the sentence or phrase containing the forward-looking
statement(s).
RESULTS OF OPERATIONS
Net revenues for the quarter ended March 30, 1996 were $2,037,000,
representing a significant increase from net revenues of $840,000 for the
quarter ended April 1, 1995. This increase is the result of increasing high
volume shipments to Chesapeake Sciences Corporation, ("Chesapeake"), the
Company's largest customer. Chesapeake accounted for 81% of net revenues in the
quarter ended March 30, 1996, as compared to 32% of net revenues in the first
quarter of 1995.
6
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Cost of sales was $1,393,000, or 68% of net revenues, for the quarter ended
March 30, 1996 as compared to $669,000, or 80% of net revenues, for the quarter
ended April 1, 1995. The improvement in cost of sales as a percentage of net
revenues is attributable to the increased volume achieved in the first quarter
of 1996 as compared to the prior year quarter, allowing the Company to spread
its fixed costs over a much higher revenue base. In addition, manufacturing
inefficiencies were experienced in the quarter ended April 1, 1995 due to lower
than anticipated revenues and technical problems.
Research and development expenses were $147,000, or 7% of net revenues, for
the quarter ended March 30, 1996, as compared to $163,000, or 19% of net
revenues, for the quarter ended April 1, 1995. Research and development
expenditures decreased in amount as a result of reduced employee compensation
costs resulting from inter-department transfer of certain functions and reduced
expenditures for consumable supplies and equipment.
Selling, general and administrative expenses were $142,000, or 7% of net
revenues, for the quarter ended March 30, 1996, as compared to $115,000, or 14%
of net revenues, in the quarter ended April 1, 1995. This increase is the result
of higher compensation costs due to additional staffing in both sales and
administrative functions, partially offset by reductions in sales commission
expense, as no commissions are paid on sales to Chesapeake.
As a result of the above-mentioned factors, the Company had an operating
profit of $355,000 for the quarter ended March 30, 1996, as compared to an
operating loss of $106,000 for the quarter ended April 1, 1995.
The Company's backlog of customer orders was $6,610,000 at March 30, 1996 as
compared to $2,548,000 at April 1, 1995, and $7,912,000 at December 30, 1995.
Essentially all of the total backlog at March 30, 1996 is currently scheduled
for shipment during 1996.* 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, the Company's backlog
as of any particular date may not be indicative of actual future sales.
There was no provision for income taxes in the first quarter of 1996 as the
Company has net operating loss carryforwards for both Federal and California
income tax purposes. The Company accounts for deferred income taxes under the
method prescribed by Financial Accounting Standards Board Statement No. 109,
"Accounting for Income Taxes". Under this statement, deferred tax liabilities
and assets are determined based on differences between financial reporting and
tax bases of assets and liabilities.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash position has increased to $190,000 at March 30, 1996, as
compared to $93,000 at December 30, 1995. This increase reflects $117,000
provided by operating activities (primarily net income and an increase in
accounts payable), $76,000 provided from financing activities (principally short
term bank borrowings) and $97,000 used for the purchase of capital equipment.
Accounts receivable were $1,293,000 at March 30, 1996, as compared to
$1,180,000 at December 30, 1995. This increase is attributable to increased
sales volume over the prior quarter. Accounts in excess of 60 days amounted to
less than 1% of total accounts receivable at both March 30, 1996 and December
30, 1995.
Inventories were $1,599,000 at March 30, 1996, as compared to $1,240,000 at
December 30, 1995. During the quarter ended March 30, 1996, the Company
increased inventory levels for Chesapeake Sciences products and one other large
customer program in anticipation of higher shipment levels in ensuing quarters.*
In the quarter ending March 30, 1996 the Company purchased $97,000 in
additional capital equipment. These additions included additional test equipment
to support higher production levels and office and computer equipment, including
an upgraded telephone system, necessitated by the Company's growth.
7
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Accounts payable were $1,011,000 at March 30, 1996, as compared to $674,000
at December 30, 1995. Increased raw material purchases are primarily responsible
for this increase.
During the quarter ended March 30, 1996, the Company borrowed $50,000 under
its line of credit with Sierra Bank of Nevada, which amount was outstanding at
first quarter end. This line of credit is collateralized with the Company's
accounts receivable and inventories. At March 30, 1996, the Company was in
compliance with all of the covenants of the loan agreement. There were no
short-term borrowings outstanding at December 30, 1995.
Accrued employee compensation and benefits were $148,000 at March 30, 1996,
as compared to $191,000 at December 30, 1995. This decrease is the net result of
differences in the timing of pay periods at the quarter end and a reduction in
accrued employee profit sharing resulting from payment of the 1995 profit
sharing bonuses to employees during the quarter ended March 30, 1996.
Commissions and other accrued liabilities were $90,000 at March 30, 1996, as
compared to $130,000 at December 30, 1995. This decrease reflects normal ongoing
accruals for 1996, offset by the payment of commissions and other 1995
liabilities during the quarter ended March 30, 1996.
FUTURE OUTLOOK
During the quarter ended March 30, 1996 the Company increased both quarterly
revenues and earnings, achieved positive cash flow, and increased its working
capital. Management believes that ongoing operations during the remainder of
1996 will provide sufficient cash to meet operating needs without additional
financing activities.* However, there are certain risk factors which could
affect the overall results of the current fiscal year. The Company has a large
portion of its backlog concentrated in one single customer (Chesapeake). Any
cancellation of orders by, or disruption in operations at Chesapeake Sciences
Corporation, would have a major adverse impact on the Company's future operating
results. While the Company, at this time, has no indications of any such
circumstances, delays in delivery or cancellations by Chesapeake remain the
largest single risk to the Company's future operating results.*
8
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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 March 30, 1996.
9
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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: April 26, 1996
By: /s/ CHARLES S. BYRNE
-----------------------------------
Charles S. Byrne,
PRESIDENT, CHIEF EXECUTIVE OFFICER
AND CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND
ACCOUNTING OFFICER)
10
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HYTEK MICROSYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED MARCH 30, 1996
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
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<S> <C>
27.1 Financial Data Schedule.
</TABLE>
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AT 3/30/96 AND STATEMENT OF OPERATIONS AT 3/30/96 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1996
<PERIOD-END> MAR-30-1996
<CASH> 189,851
<SECURITIES> 0
<RECEIVABLES> 1,313,078
<ALLOWANCES> 20,000
<INVENTORY> 1,598,931
<CURRENT-ASSETS> 3,121,575
<PP&E> 2,650,503
<DEPRECIATION> 2,461,799
<TOTAL-ASSETS> 3,310,279
<CURRENT-LIABILITIES> 1,532,289
<BONDS> 0
0
0
<COMMON> 1,777,990<F1>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,310,279
<SALES> 2,035,398
<TOTAL-REVENUES> 2,037,179
<CGS> 1,392,711
<TOTAL-COSTS> 1,682,502
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 701
<INCOME-PRETAX> 354,273
<INCOME-TAX> 0
<INCOME-CONTINUING> 354,273
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 354,273
<EPS-PRIMARY> 0.123
<EPS-DILUTED> 0.115
<FN>
<F1>COMMON STOCK AS REPORTED ABOVE IS NET OF $3,162,155 ACCUMULATED DEFICIT.
</FN>
</TABLE>
