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 March 29, 1997
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)
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 April 7, 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 MARCH 29, 1997
INDEX
Page
Number
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Balance Sheet at March 29, 1997 (unaudited) and
December 28, 1996 . . . . . . . . . . . . . . . 3
Statement of Income and Accumulated Deficit
(unaudited) for the Quarters ended March 29, 1997
and March 30, 1996 . . . . . . . . . . . . . . 4
Statement of Cash Flows (unaudited) for the Quarters
ended March 29, 1997 and March 30, 1996 .. . . . . . . . 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 . . . . . . . . . . . 12
Signatures . . . . . . . . . . . . . . . . . . . . . . 13
Exhibit Index . . . . . . . . . . . . . . . . . . . 14
<PAGE>
<TABLE>
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements.
HYTEK MICROSYSTEMS, INC.
BALANCE SHEET
March 29, 1997 December 28, 1996
Assets (Unaudited)
<CAPTION>
----------------------------- ---------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 755,293 $ 1,426,716
Trade accounts receivable - net of
allowance for doubtful
accounts of $50,000 1,506,619 1,125,817
Inventories 1,659,170 1,268,881
Prepaid expenses and deposits 48,128 42,503
----------------------------- ---------------------------
Total current assets 3,969,210 3,863,917
Deferred income taxes 200,000 200,000
Plant and equipment, at cost, less
accumulated depreciation and amortization 368,702 370,362
----------------------------- ---------------------------
$ 4,537,912 $ 4,434,279
----------------------------- ---------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 610,909 $ 268,462
Accrued employee compensation and benefits 100,491 349,498
Accrued warranty, commissions and other 136,151 169,376
Customer deposits 122,717 172,080
Current obligations under capital lease 19,827 33,990
----------------------------- ---------------------------
Total current liabilities 990,095 993,406
Long-term obligations under capital lease 67,979 67,979
Shareholders' equity:
Common Stock, no par value: 7,500,000 shares
authorized, 2,941,424 shares issued and
outstanding (2,933,091 at 12/28/96) 4,974,676 4,962,677
Accumulated deficit (1,494,838) (1,589,783)
----------------------------- ---------------------------
Total shareholders' equity 3,479,838 3,372,894
----------------------------- ---------------------------
$ 4,537,912 $ 4,434,279
----------------------------- ---------------------------
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
HYTEK MICROSYSTEMS, INC.
STATEMENT OF INCOME AND ACCUMULATED DEFICIT
Quarters ended March 29, 1997 and March 30, 1996
3/29/97 3/30/96
(Unaudited) (Unaudited)
----------------- -----------------
Net revenues $ 1,586,794 $ 2,037,179
Costs and expenses:
Cost of sales 1,144,273 1,392,711
Engineering and development 174,561 147,483
Selling, general and
administrative 158,052 142,308
----------------- -----------------
Total costs and expenses 1,476,886 1,682,502
----------------- -----------------
Operating income 109,908 354,677
Interest income 12,012 297
Interest expense 1,975 701
----------------- -----------------
Income before provision
for income taxes 119,945 354,273
Provision for income taxes 25,000 -
----------------- -----------------
Net income $ 94,945 $ 354,273
Accumulated deficit:
Beginning of quarter $ (1,589,783) $ (3,516,428)
----------------- -----------------
End of quarter $ (1,494,838) $ (3,162,155)
----------------- -----------------
Net income per share $ .03 $ .11
----------------- -----------------
Common and common equivalent
shares used in per share calculations 3,088,501 3,090,005
See accompanying notes.
<PAGE>
<TABLE>
HYTEK MICROSYSTEMS, INC.
STATEMENT OF CASH FLOWS
QUARTERS ENDED MARCH 29, 1997 AND MARCH 30, 1996
Increase (decrease) in cash and cash equivalents
3/29/97 3/30/96
(Unaudited) (Unaudited)
<CAPTION>
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 94,945 $ 354,273
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 29,884 9,444
Accounts receivable, net (380,802) (113,231)
Inventories (390,289) (359,146)
Prepaid expenses and deposits (5,625) (8,130)
Other assets - -
Accounts payable 342,447 336,990
Accrued employee compensation and benefits (249,007) (43,735)
Customer deposits (49,363) (19,390)
Accrued warranty, commissions and other (33,225) (39,785)
--------------- ---------------
Net cash provided by (used in) operating activities (641,035) 117,290
Cash flows from investing activities:
Cash purchases of equipment (28,224) (96,773)
--------------- ---------------
Net cash used in investing activities (28,224) (96,773)
Cash flows from financing activities:
Payment of capital lease obligations (14,163) -
Proceeds from exercise of stock options 11,999 26,339
Short-term borrowings - 50,000
--------------- ---------------
Net cash used in financing activities (2,164) 76,339
Net increase (decrease) in cash and cash equivalents (671,423) 96,856
Cash and cash equivalents at beginning of period 1,426,716 92,995
--------------- ---------------
Cash and cash equivalents at end of period $ 755,293 $ 189,851
--------------- ---------------
<FN>
See accompanying notes.
</FN>
</TABLE>
<PAGE>
HYTEK MICROSYSTEMS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
MARCH 29, 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
ended March 29, 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 ten-year lease
expiring in 2000. The aggregate future minimum rental commitments as of March
29,1997 for this lease were:
1997 118,644
1998 164,760
1999 172,998
2000 88,608
--------
$ 544,010
--------
3. Inventories are stated at the lower of cost (determined using the
first-in, first-out method) or market. At March 29, 1997, inventories consisted
of:
Raw Material $ 922,573
Work-In-Process 708,332
Finished Goods 28,265
--------
$1,659,170
----------
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.
<PAGE>
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 Quarterly Report on Form10-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 under "Future
Outlook" and elsewhere in this section. 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 29, 1997 were $1,587,000,
representing a 22% decrease from net revenues of $2,037,000 for the quarter
ended March 30, 1996. This decrease is the direct result of a lower volume of
shipments to Chesapeake Sciences Corporation, ("Chesapeake"), the Company's
largest customer. Chesapeake accounted for 42% of net revenues in the quarter
ended March 29, 1997, as compared to 81% of net revenues in the first quarter of
1996.
Cost of sales was $1,144,000 or 72% of net revenues, for the quarter ended
March 29, 1997 as compared to $1,393,000, or 68% of net revenues, for the
quarter ended March 30, 1996. This increase, as a percentage of net revenues, is
attributable to increased direct labor cost resulting from changes in product
mix (the larger production lot sizes associated with higher volume Chesapeake
production lots are more efficient) and the spreading of fixed costs over a
smaller revenue base.
Engineering and development expenses were $175,000, or 11% of net revenues,
for the quarter ended March 29, 1997, as compared to $147,000, or 7% of net
revenues, for the quarter ended March 30, 1996. Increased engineering and
development expenditures are a direct result of higher employee compensation
costs attributable to increased engineering staff levels.
<PAGE>
Selling, general and administrative expenses were $158,000, or 10% of net
revenues, for the quarter ended March 29, 1997, as compared to $142,000, or 7%
of net revenues, in the quarter ended March 30, 1996. This increase is primarily
the result of increases in recruiting, auditing and data processing expenses,
partially offset by reduced compensation costs resulting from temporarily lower
S, G & A staff level.
As a result of the above-mentioned factors, the Company had an operating
profit of $110,000 for the quarter ended March 29, 1997, as compared to an
operating profit of $355,000 for the quarter ended March 30, 1996.
Net interest income was $10,000 for the quarter ended March 29, 1997 as
compared to $0 for the quarter ended March 30, 1997. This increase is the result
of larger cash balances available for interest-bearing investment.
Federal income tax expense of $25,000 was recognized in the quarter ended
March 29, 1997 as a result of the alternative minimum tax. There was no income
tax expense in the prior year's first quarter. The Company has remaining net
operating loss carryforwards for federal income tax purposes at December 28,
1996 of approximately $4.3 million. These carryforwards will expire between 2004
and 2008.
The Company's backlog of customer orders was $5,937,000 at March 28, 1997
as compared to $6,610,000 at March 30, 1996, and $6,474,000 at December 28,
1996. Approximately $5,200,000 of the total backlog at March 29, 1997 is
currently scheduled for shipment during 1997.* 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.
<PAGE>
Liquidity and Capital Resources
The Company's cash position decreased to $755,000 at March 29, 1997, as
compared to $1,427,000 at December 28, 1996. This decrease is primarily due to
the combined result of increases in accounts receivable and inventories during
the quarter.
Accounts receivable were $1,507,000 at March 29, 1997, as compared to
$1,126,000 at December 28, 1996. This increase is primarily attributable to
increased sales volume in the last month of the current quarter.
Inventories were $1,659,000 at March 29, 1997, as compared to $1,269,000 at
December 28, 1997. During the quarter ended March 29, 1997, inventory levels
increased as a result of revisions to delivery schedules for Chesapeake Sciences
Corp. that delayed delivery of product until later in the current year, causing
a build up of raw materials that had already been procured based on the original
delivery schedule.
Prepaid expenses and deposits were $48,000 at March 29, 1997 as compared to
$43,000 at December 28, 1996. This increase reflects normal ongoing business
transactions.
Accounts payable were $611,000 at March 29, 1997, as compared to $268,000
at December 28, 1996. Increased raw material purchases are primarily responsible
for this increase.
Accrued employee compensation and benefits was $100,000 at March 29, 1997
as compared to $349,000 at December 28, 1996. This reduction is primarily the
result of payment, during the first quarter, of the 1996 accrued employee profit
sharing.
Accrued warranty, commissions and other expenses were $136,000 at March
29,1997 as compared to $169,000 at December 28, 1996. This reduction is the net
effect of normal ongoing accruals combined with the payment of sales commissions
and audit fees that had been accrued during 1996.
<PAGE>
Customer deposits were reduced to $123,000 at March 29, 1997 as compared to
$172,000 at December 28, 1996 as a result of delivery of pre-paid products to
customers.
At March 29, 1997, the Company had long-term lease obligations of $68,000
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
March 29, 1997, the Company was in compliance with all of the covenants of this
loan agreement and no amounts were outstanding.
Future Outlook
As a result of reduced deliveries to Chesapeake Sciences Corp., revenues
and earnings for the quarter ended March 29, 1997 were below prior year first
quarter levels. Shipments to Chesapeake accounted for 42% of total revenues in
the current quarter as compared to 81% of revenues in the prior year's first
quarter. The Company currently anticipates that deliveries of Chesapeake data
acquisition products will increase in the third and fourth quarters of the
current year.* However, there can be no assurance that further delays in
delivery schedules will not occur. The Company believes that results of
operations and its existing line of credit will provide sufficient cash to meet
operating needs over the next twelve months.*
The Company's backlog of unfilled customer orders was $5,937,000 at March
29, 1997, of which approximately $5,200,000 is currently scheduled for delivery
in the current year. However, since 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
at any particular date may not be a reliable indicator of actual future sales.
There are certain risk factors that could materially affect the overall
results of the current fiscal year. Approximately 48% of the Company's backlog
is concentrated in one single customer (Chesapeake). Any cancellation or further
<PAGE>
re-scheduling of orders by, or disruption in operations at Chesapeake, 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.*
In an attempt to reduce the volatility in revenue and earnings that
results from continuing reliance on one large customer, the Company is
concentrating its effort to expand its customer base and attract new business.
During the past quarter, we have expanded our sales coverage domestically with
the addition of an experienced representative organization in the northeastern
United States. The Company's level of new customer inquiries and quoting
activity remains strong.
<PAGE>
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 29, 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: April 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 March 29, 1997
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 3/29/97, Statement of Income and Accumulated Deficit at 3/29/97 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1998
<PERIOD-END> MAR-29-1997
<CASH> 755,293
<SECURITIES> 0
<RECEIVABLES> 1,556,619
<ALLOWANCES> 50,000
<INVENTORY> 1,659,170
<CURRENT-ASSETS> 3,969,210
<PP&E> 2,909,195
<DEPRECIATION> 2,540,493
<TOTAL-ASSETS> 4,537,912
<CURRENT-LIABILITIES> 990,095
<BONDS> 67,979
0
0
<COMMON> 3,479,838<F1>
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,537,912
<SALES> 1,585,222
<TOTAL-REVENUES> 1,586,794
<CGS> 1,144,273
<TOTAL-COSTS> 1,476,886
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,975
<INCOME-PRETAX> 119,945
<INCOME-TAX> 25,000
<INCOME-CONTINUING> 94,945
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94,945
<EPS-PRIMARY> 0.032
<EPS-DILUTED> 0.031
<FN>
<F1> Common Stock as reported above is net of $1,494,838 Accumulated Deficit.
</FN>
</TABLE>
