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 June 28, 1997
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 June 28, 1997, the issuer had outstanding 2,941,424 shares of Common
Stock, no par value.
<PAGE>
HYTEK MICROSYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED JUNE 28, 1997
INDEX
Page
Number
------
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Balance Sheet at June 28, 1997 (unaudited) and
December 28, 1996 . . . . . . . . . . . . 3
Statement of Income and Accumulated Deficit
(unaudited) for the Quarter and Six Months ended
June 28, 1997 and June 29, 1996 . . . . . . . . . 4
Statement of Cash Flows (unaudited) for the Quarter and
Six Months ended June 28, 1997 and June 29, 1996 . . . 5
Notes to Interim Financial Statements (unaudited) . . . 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 7
Part II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders.. . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . 14
Exhibit Index. . . . . . . . . . . . . . . . . . . . . 15
<PAGE>
PART I. - FINANCIAL INFORMATION
<TABLE>
Item 1. Financial Statements.
HYTEK MICROSYSTEMS, INC.
BALANCE SHEET
June 28, 1997 December 28, 1996
Assets (Unaudited)
--------------------------- -------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,201,721 $ 1,426,716
Trade accounts receivable - net of
allowance for doubtful accounts
of $50,000 at 12/28/96 and 6/28/97 1,436,033 1,125,817
Inventories 1,231,002 1,268,881
Prepaid expenses and deposits 55,120 42,503
--------------------------- -------------------------
Total current assets 3,923,876 3,863,917
Deferred income taxes 200,000 200,000
Plant and equipment, at cost, less
accumulated depreciation and amortization 435,572 370,362
--------------------------- -------------------------
Total assets $ 4,559,448 $ 4,434,279
--------------------------- -------------------------
--------------------------- -------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 282,234 $ 268,462
Accrued employee compensation and benefits 177,835 349,498
Accrued warranty, commissions and other 137,667 169,376
Customer deposits 64,785 172,080
Current obligations under capital lease 33,990 33,990
--------------------------- -------------------------
Total current liabilities 696,511 993,406
Long-term obligations under capital lease 48,151 67,979
Shareholders' equity:
Common Stock, no par value: 7,500,000 shares
authorized, 2,941,424 shares issued and
outstanding at June 28, 1997 and 2,933,091 4,974,677 4,962,677
at December 28, 1996
Accumulated deficit (1,159,891) (1,589,783)
--------------------------- -------------------------
Total shareholders' equity 3,814,786 3,372,894
--------------------------- -------------------------
$ 4,559,448 $ 4,434,279
--------------------------- -------------------------
--------------------------- -------------------------
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
HYTEK MICROSYSTEMS, INC.
STATEMENT OF INCOME AND ACCUMULATED DEFICIT (Unaudited)
Quarters and six months ended June 28, 1997 and June 29, 1996
Quarter ended Six months ended
6/28/97 6/29/96 6/28/97 6/29/96
----------------- ---------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Net revenues $ 2,181,844 $ 2,628,372 $ 3,768,639 $ 4,665,551
Costs and expenses:
Cost of sales 1,480,574 1,791,961 2,624,847 3,184,672
Engineering and development 183,848 141,897 358,409 289,380
Selling, general and
administrative 174,348 175,231 332,400 317,539
----------------- ---------------- ---------------- --------------------
Total costs and expenses 1,838,770 2,109,089 3,315,656 3,791,591
----------------- ---------------- ---------------- --------------------
Operating income 343,074 519,283 452,983 873,960
Interest income 7,744 324 19,756 621
Interest expense 871 1,163 2,847 1,864
----------------- ---------------- ---------------- --------------------
Income before provision
for income taxes 349,947 518,444 469,892 872,717
Provision for income taxes 15,000 - 40,000 -
----------------- ---------------- ---------------- --------------------
Net income $ 334,947 518,444 $ 429,892 872,717
Accumulated deficit:
Beginning of period $ (1,494,838) $ (3,162,155) $ (1,589,783) $ (3,516,428)
----------------- ---------------- ---------------- --------------------
End of period $ (1,159,891) $ (2,643,711) $ (1,159,891) $ (2,643,711)
----------------- ---------------- ---------------- --------------------
---------------- --------------------
----------------- ----------------
Net income per share $ .11 $ .17 $ .14 $ .28
----------------- ---------------- ---------------- --------------------
----------------- ---------------- --------------------
----------------
Common and common equivalent
shares used in per share 3,075,538 3,081,420 3,083,361 3,084,724
calculations
See accompanying notes.
</TABLE>
<PAGE>
<TABLE>
HYTEK MICROSYSTEMS, INC.
STATEMENT OF CASH FLOWS (unaudited)
Quarters and Six Months Ended June 28, 1997 and June 29, 1996
Increase (decrease) in cash and cash equivalents
Quarter Ended Six Months Ended
---------------- ----------------- ------------------ -----------------
June 28, 1997 June 29, 1996 June 28, 1997 June 29, 1996
---------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 334,947 $ 518,444 $ 429,892 $ 872,717
Adjustments to reconcile net income to
cash flow provided by (used in) operations:
Depreciation and amortization 31,516 14,886 61,400 24,330
Accounts receivable 70,587 (66,695) (310,216) (179,926)
Inventories 428,168 144,020 37,879 (215,126)
Prepaid expenses and deposits (6,992) 4,643 (12,617) (3,487)
Accounts payable (328,675) (402,776) 13,772 (65,786)
Accrued employee compensation and benefits 77,344 139,382 (171,663) 95,647
Accrued warranty, commissions and other 1,516 13,543 (31,709) (26,242)
Customer pre-payments (57,932) 76,444 (107,295) 57,054
-------------- --------------- ------------------- ---------------
Net cash provided by (used in) operating activities 550,479 441,891 (90,557) 559,181
Cash flows from investing activities:
Purchases of equipment (98,386) (29,005) (126,610) (125,778)
-------------- --------------- ------------------- ---------------
Net cash used in investing activities (98,386) (29,005) (126,610) (125,778)
Cash flows from financing activities:
Repayment of short-term borrowings - (50,000) -
Payment of capital lease obligations (5,665) - (19,828) -
Proceeds from exercise of stock options - 22,532 12,000 48,871
-------------- --------------- ------------------- ---------------
Net cash used in financing activities (5,665) (27,468) (7,828) 48,871
Net increase (decrease) in cash and cash equivalents 446,428 385,418 (224,995) 482,274
Cash and cash equivalents at beginning of period 755,293 189,851 1,426,716 92,995
-------------- --------------- ------------------- ---------------
Cash and cash equivalents at end of period $ 1,201,721 $ 575,269 $ 1,201,721 $ 575,269
---------------- ---------------- ------------------ ----------------
---------------- ---------------- ------------------ ----------------
See accompanying notes.
</TABLE>
<PAGE>
HYTEK MICROSYSTEMS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
JUNE 28, 1997
(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 28, 1996, 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 six months ended June 28, 1997 are not necessarily indicative of the results
that may be expected for the entire year ending January 3, 1998. The Company
operates on a 52/53 week fiscal year, which approximates the calendar year.
2. The Company leases its Carson City facility pursuant to a continuing
lease expiring in 2005. The aggregate future minimum rental commitments as of
June 28, 1997 for this lease were:
1997 $ 78,846
1998 160,056
1999 164,856
2000 169,800
2001 - 2005 828,678
-------
$1,402,236
----------
3. Inventories are stated at the lower of cost (determined using the
first-in,first-out method)or market.At June 28,1997, inventories consisted of:
Raw Material $730,058
Work-In-Process 474,090
Finished Goods 26,854
---------
$1,231,002
----------
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.
5. In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, Earnings per Share, which is required to be adopted on
December 31, 1997. At that time, the Company will be required to change the
method currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per share,
the dilutive effect of stock options will be excluded. This impact is expected
to result in a one cent increase in the net income per share for the quarter and
six months ended June 28, 1997 and a one cent and two cent increase,
respectively, for the quarter and six months ended June 29, 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
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 June 28, 1997 decreased 17% from net
revenues for the quarter ended June 29, 1996. Net revenues for the quarter ended
June 28, 1997 were $2,182,000, as compared to $2,628,000 for the quarter ended
June 29, 1996. Net revenues for the six months ended June 28, 1997 decreased 19%
from net revenues for the six months ended June 29, 1996. Net revenues for the
six months ended June 28, 1997 were $3,769,000 as compared to $4,666,000 for the
six months ended June 29, 1996. The decrease in net revenues for the quarter and
six months ended June 28, 1997 over the comparable period of the prior year is
attributable to a reduced demand for product from Chesapeake Sciences Corp.
("Chesapeake"), the Company's largest customer during each of these periods.
Chesapeake accounted for 42% of net revenues for both the quarter and six months
ended June 28, 1997.
The Company's backlog of customer orders was $6,052,000 at June 28,
1997 as compared to $5,095,000 at June 29, 1996, and $6,474,000 at December 28,
1996. Approximately $2,046,000, or 34% of the total backlog, relates to orders
from Chesapeake. 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.*
<PAGE>
Cost of sales was $1,481,000, or 68% of net revenues, for the quarter
ended June 28, 1997, as compared to $1,792,000, or 68% of net revenues, for the
quarter ended June 29, 1996. Both quarters contained large customer programs
with a high materials cost content per revenue dollar. Cost of sales for the six
months ended June 28, 1997 was $2,625,000, or 70% of net revenues, as compared
to $3,185,000, or 68% of net revenues, for the six months ended June 29, 1996.
This increase in cost of sales as a percentage of net revenues is primarily a
result of spreading fixed costs over a smaller revenue base.
Engineering and development expenses were $184,000, or 8% of net
revenues, for the quarter ended June 28, 1997, as compared to $142,000, or 5% of
net revenues for the quarter ended June 29, 1996. Engineering and development
expenses for the six months ended June 28, 1997 were $358,000, or 10% of net
revenues, as compared to $289,000, or 6% of net revenues, for the six months
ended June 29, 1996. This increase in the dollar amount of engineering and
development expenses for the quarter and six-month periods is the result of
increased staffing levels required to meet customer delivery and technical
requirements. The Company is continuing its efforts to develop additional
standard products, and has released two additional versions of its High Speed
Laser Diode Driver during the past six months. The increase in research and
development expenses as a percentage of net revenues is a combined result of
spreading such expenses over a smaller revenue base and increased actual
expenditures.
Selling, general and administrative expenses remained relatively stable
in amount at $174,000, or 8% of net revenues, for the quarter ended June 28,
1997, as compared to $175,000, or 7% of net revenues, for the quarter ended June
29, 1996. Selling, general and administrative expenses for the six months ended
June 28, 1997 were $332,000, or 9% of net revenues, as compared to $318,000, or
7% of net revenues, for the six months ended June 29, 1996. The increase in
selling, general and administrative expense for the six-month period is
primarily the result of increases in expenditures for recruitment, audit
expense, data processing and investor relations and shareholder related expenses
such as annual reports and transfer agent fees, partially offset by reduced
compensation costs resulting from an unexpected loss of personnel. The increase
in selling, general and administrative expenses as a percentage of net revenues
is primarily due to the spreading of such expenses over a smaller revenue base.
<PAGE>
The Company had an operating profit of $343,000 for the quarter ended
June 28, 1997, as compared to operating profit of $519,000 for the quarter ended
June 29, 1996. The Company had an operating profit of $453,000 for the six
months ended June 28, 1997, as compared to an operating profit of $874,000 for
the six months ended June 29, 1996. The decrease in quarterly and six-month
profit was primarily attributable to decreased sales volume.
Net interest income was $7,000 for the quarter and $17,000 for the six
months ended June 28, 1997 as compared to net interest expense of $1,000 for
each of the comparable prior year periods. This increase results from larger
cash balances available for interest-bearing investment.
Federal income tax expense of $15,000 and $40,000, respectively, was
recognized in the quarter and six months ended June 28, 1997 as a result of the
alternative minimum tax. There was no income tax expense in the prior year
periods. The Company has remaining net operating loss carrryforwards for federal
income tax purposes at December 28, 1996 of approximately $4.3 million. These
carryforwards will expire between 2004 and 2008.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company had $1,202,000 in cash at June 28, 1997, as compared to
$1,427,000 at December 28, 1996. This decrease of $225,000 from year end is
comprised of $91,000 used in operating activities, $127,000 used for the
purchase of capital equipment and $8,000 used in financing activities.
Accounts receivable were $1,436,000 at June 28, 1997, as compared to
$1,126,000 at December 28, 1996. This increase is the result of higher levels of
shipments at the end of the second quarter of 1997 as compared to the 1996
fiscal year end.
Inventories remained relatively stable at $1,231,000 on June 28, 1997,
as compared to $1,269,000 at December 28, 1996. However, raw materials increased
to $730,000 at June 28, 1997 as compared to $279,000 at fiscal 1996 year end due
to the reduced level of shipments to Chesapeake Sciences Corp.
Accounts payable were $282,000 at June 28, 1997, as compared to
$268,000 at December 28, 1996.
<PAGE>
Accrued employee compensation and benefits was $178,000 at June 28,
1997, as compared to $349,000 at December 29, 1996. This decrease is primarily
the result of reduced amounts currently accrued for employee profit sharing due
to lower net income levels in the first half of 1997.
Accrued warranty, commissions and other accrued liabilities were
$138,000 at June 28, 1997, as compared to $169,000 at December 28, 1996. This
reduction is the net effect of normal ongoing accruals for sales commision
expense, legal and audit fees and shareholder related expenses, combined with
the payment during the first six months of 1997 of expenses accrued in 1996.
Customer pre-payments were reduced to $65,000 at June 28, 1997 as
compared to $172,000 at December 28, 1996 as a result of the delivery of
pre-paid products to customers.
At June 28, 1997, the Company had long-term lease obligations of
$48,000 outstanding on its Continuing Master Equipment Lease Agreement with
SierraWest Bank. This lease agreement, entered into in December 1996, bears an
annual interest rate of 10.75% and has a term of three years. This lease is
secured by the related equipment.
The Company also has a line of credit for $100,000 with SierraWest
Bank, which expires in December 1997 and bears interest at the prime rate plus
2%. At June 28, 1997, the Company was in compliance with all of the covenants of
this loan agreement and no amounts were outstanding.
FUTURE OUTLOOK
- --------------
During the quarter and six months ended June 28, 1997, revenues and
earnings declined from the prior year period as had been anticipated and
previously disclosed. This decline was the result of customer initiated delays
in delivery to Chesapeake Sciences Corp. However, during the second quarter,
Chesapeake delivery rates were increased by approximately 40% over first quarter
levels. In addition, recent orders received from Eaton Corp. and other customers
are, to a significant extent, deliverable during the remainder of the current
year.* Current projections indicate that the Company may be able to increase
both revenues and earnings in the latter half of 1997 as compared to the first
half of 1997.*
<PAGE>
Management believes that ongoing operations during the remainder of
1997, together with the unused portion of its line of credit, will provide
sufficient cash to meet normal operating needs without additional financing
activities through the remainder of the current fiscal year.* However, since the
Company desires to expand its technological base and production capacity,
investments in resources requiring additional new equity or debt, may be
necessary.* In such case, there can be no assurance that such financing will be
available on terms acceptable to the Company or at all.
The Company's backlog of unfilled orders increased slightly during the
six months ended June 28, 1997. Orders from Chesapeake Sciences Corp. continue
to represent the largest portion of the Company's current backlog. Any
cancellation or delayed delivery of orders by, or disruption of operations at,
Chesapeake Sciences Corporation or any other major customer, would have a major
adverse impact on the Company's future operating results.
The foregoing discussion contains statements that are forward-looking.
Actual results could differ materially. The primary factors that could cause a
material difference in actual results include customer cancellation or
rescheduling of orders and problems affecting delivery of vendor-supplied raw
materials and components. The Company disclaims any responsibility to update the
forward-looking statements contained herein, except as may be required by law.
<PAGE>
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 16, 1997 (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 2,521,359 13,050
Charles S. Byrne 2,521,359 13,050
Robert Boschert 2,521,359 13,050
Edward W. Moose 2,521,359 13,050
Edward Y. Tang 2,521,359 13,050
Approval of Amendment to 1991 Stock Option Plan:
For 2,442,202
Against 75,267
Abstained 3,525
Broker Non-Votes 13,415
Ratification of the selection of Ernst & Young to serve as
auditors for fiscal 1997:
For - 2,525,509
---------
Against - 4,600
---------
Abstained - 4,300
-----
Broker Non-Votes - 0
--------
(d) Not applicable.
<PAGE>
The foregoing matters are described in more detail in the issuer's definitive
proxy statement dated April 8, 1997 relating to the Annual Meeting of
Shareholders held on May 16, 1997.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits.
10.1 Lease Addendum dated May 23, 1997 to Lease for
400 Hot Springs Road, Carson City, Nevada.
10.2 Incentive Compensation Agreement dated May 16,
1997 with Charles S. Byrne.
10.3 Incentive Compensation Agreement dated May 16,
1997 with Jon B. Presnell.
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
No Reports on Form 8-K were filed during the quarter ended
June 28, 1997.
<PAGE>
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: July 28, 1997 By: /s/ Charles S. Byrne
--------------------
Charles S. Byrne,
President, Chief
Executive Officer and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
HYTEK MICROSYSTEMS, INC.
Quarterly Report on Form 10-QSB
for the Quarter ended June 28, 1997
EXHIBIT INDEX
-------------
Exhibit
Number Exhibit Description
- ------ -------------------
10.1 Lease Addendum dated May 23, 1997.
10.2 Incentive Compensation Agreement
with Charles S. Byrne.
10.3 Incentive Compensation Agreement
with Jon B. Presnell.
27.1 Financial Data Schedule.
<PAGE>
EXHIBIT 10.1
SECOND ADDENDUM TO LEASE
------------------------
THIS SECOND ADDENDUM TO LEASE ("Addendum") is dated for reference as of
May 23, 1997 and is made between Rubin/Sadd Development ("Lessor") and Hytek
Microsystems, Inc. ("Lessee") and is to be a part of the original lease between
these parties dated March 28, 1990. This addendum is to become effective on July
1, 1997, concerning 23,800 square feet of property located in the County of
Carson City, State of Nevada, commonly known as 400 Hot Springs Road (the
"Premises"). Lessor and Lessee agree that the Lease is hereby modified and
supplemented as follows:
1. The term of this lease is hereby extended through June 30, 2005. Lessor
hereby grants to Lessee an option to extend the term of the lease for an
additional five (5) years, with Lessee to provide notice as required by the
original lease
2. Should the Lessor desire to sell or otherwise divest of the premises, the
Lessee shall be informed by Lessor of Lessors intent to divest and the
price, terms and conditions that Lessor is offering. Within fifteen (15)
days of receipt of written notice by Lessee, Lessee shall inform Lessor if
they intend to purchase the subject property and initiate negotiations.
After the expiration of fifteen days Lessor shall be free to sell the
subject property or otherwise divest itself as it wishes.
3. Rent: On July 1, 1997 the rent shall increase three percent (3%) to
$13,141.00 per ---- month. On each subsequent July 1 through the term of
the lease or any extension thereof the rent shall increase by three percent
(3%) per annum.
All other terms and conditions remain unchanged.
Lessor: Lessee:
RUBIN/SADD DEVELOPMENT HYTEK MICROSYSTEMS, INC.
A Nevada corporation A California corporation
By: s/s Adeeb G. Sadd By: s/s Charles S. Byrne
------------------ ---------------------
Name: Adeeb G. Sadd Name: Charles S. Byrne
President
Date: May 23, 1997 Date: May 23, 1997
<PAGE>
Exhibit 10.2
INCENTIVE COMPENSATION AGREEMENT FOR CHARLES S. BYRNE
FOR THE FISCAL YEAR ENDING JANUARY 3, 1997
Upon completion of the audit for the fiscal year 1997 and certification of the
Company's financial statements for the year, Hytek will pay the following
incentive to Charles S. Byrne based upon achievement of the following criteria:
Criteria Maximum Incentive
- -------- -----------------
1. Achieve 1997 original forecast pre-tax profit
of $730,000 : $6,000
Achieve additional $520,000 pre-tax profit for
1997 (total $1,250,000): additional $3,000 $9,000
2. Achieve additional revenue over the 1996
forecast ($6,610K) of $2,000,000 payable
in increments:
Additional $1,000,000 = $3,000
Additional $2,000,000 = $6,000 $6,000
3. Achieve reductions in inventory levels which
equate to an annualized inventory turns ratio
of 5.5 times. (Said turns ratio to be verified
by Ernst & Young.) $3,000
- ------
Total Potential Incentive $18,000
Each criteria above is a separate item and will be awarded if such item is
achieved. This incentive program is authorized by the Compensation Committee of
the Board of Directors as of May 16, 1997, and is duly recorded in the minutes
of such meeting.
s/s Charles S. Byrne
Secretary
<PAGE>
Exhibit 10.3
INCENTIVE COMPENSATION AGREEMENT FOR JON B. PRESNELL
FOR THE FISCAL YEAR ENDING JANUARY 3, 1997
Upon completion of the audit for the fiscal year 1997 and certification
of the Company's financial statements for the year, Hytek will pay the following
incentive to Jon B. Presnell based upon achievement of the following criteria:
Criteria Maximum Incentive
- -------- -----------------
1. Achieve 1997 forecast confident bookings
of $5,553,500. $2,500
2. Book an additional $3,000,000 in business
over the forecast confident bookings. Payable
in increments:
Additional $2,000,000 = $4,000
Additional $2,500,000 = $4,500
Additional $3,000,000 = $5,000 $5,000
3. Achieve 1997 forecast sales of $6,610,000. $2,500
4. Achieve 1997 forecast gross margin of
$2,490,000. $2,500
5. Successfully complete "MAX-MRP" implementation
with system operational and producing desired
results. (As determined by C. Byrne & E&Y) $2,500
------
Total Potential Incentive $15,000
Each criteria above is a separate item and will be awarded if such item is
achieved. This incentive program is authorized by the Compensation Committee of
the Board of Directors as of May 16, 1997, an is duly recorded in the minutes of
such meeting.
By s/s Charles S. Byrne
---------------------
Charles S. Byrne, Secretary
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit Description
27.1 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet at 6/28/97, Statement of Income and Accumulated Deficit at 6/28/97 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> JUN-28-1997
<CASH> 1,201,721
<SECURITIES> 0
<RECEIVABLES> 1,486,033
<ALLOWANCES> 50,000
<INVENTORY> 1,231,002
<CURRENT-ASSETS> 3,923,876
<PP&E> 3,007,582
<DEPRECIATION> 2,572,010
<TOTAL-ASSETS> 4,559,448
<CURRENT-LIABILITIES> 696,511
<BONDS> 48,151
0
0
<COMMON> 3,814,786<F1>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,559,448
<SALES> 3,764,931
<TOTAL-REVENUES> 3,768,639
<CGS> 2,624,847
<TOTAL-COSTS> 3,315,656
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,847
<INCOME-PRETAX> 469,892
<INCOME-TAX> 40,000
<INCOME-CONTINUING> 429,892
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 429,892
<EPS-PRIMARY> 0.146
<EPS-DILUTED> 0.139
<FN>
<F1> Common Stock as reported above is net of $1,159,891 Accumulated Deficit.
</FN>
</TABLE>
