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 April 4, 1998
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 15, 1998, the issuer had outstanding 2,984,758 shares of Common
Stock, no par value.
<PAGE>
HYTEK MICROSYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED APRIL 4, 1998
INDEX
Page
Number
------
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Balance Sheet at April 4, 1998 (unaudited) and
January 3, 1998 . . . . . . . . . . . . . 3
Statement of Income (unaudited) for the Quarters ended
April 4, 1998 and March 29, 1997 . . . . . . . . . 4
Statement of Cash Flows (unaudited) for the Quarters ended
April 4, 1998 and March 29, 1997 . . . . . . . . . 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
<PAGE>
PART 1. - FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
HYTEK MICROSYSTEMS, INC.
BALANCE SHEET
April 4, 1998 January 3, 1998
Assets (Unaudited)
------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,508,325 $ 1,189,519
Accounts receivable - net of
allowance for doubtful accounts
of $50,000 at 4/4/98 and 1/3/98 2,429,036 2,513,668
Inventories 2,133,242 2,581,389
Prepaid expenses and deposits 77,297 50,035
------------- ---------------
Total current assets 6,147,900 6,334,611
Deferred income taxes 200,000 200,000
Plant and equipment, at cost, less
accumulated depreciation and amortization 795,828 755,845
------------- ---------------
Total assets $ 7,143,728 $ 7,290,456
============= ===============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 339,730 $ 1,308,335
Accrued employee compensation and benefits 297,152 349,725
Accrued warranty, commissions and other 190,742 206,569
Customer deposits 28,464 28,464
Current portion of long-term debt 48,333 43,951
Current obligations under capital leases 70,823 82,752
------------- ---------------
Total current liabilities 975,244 2,019,796
Long-term debt, less current portion 84,583 101,049
Long-term obligations under capital lease 112,662 123,041
Shareholders' equity:
Common Stock, no par value: 7,500,000 shares
authorized, 2,950,758 shares and 2,941,424
shares issued and outstanding at 4/4/98
and 1/3/98, respectively 4,981,843 4,974,676
Retained earnings 989,396 71,894
------------- ---------------
Total shareholders' equity 5,971,239 5,046,570
------------- ---------------
Total liabilities and equity $ 7,143,728 $ 7,290,456
============= ===============
</TABLE>
See accompanying notes.
<PAGE>
HYTEK MICROSYSTEMS, INC.
STATEMENT OF INCOME
(Unaudited)
Quarters ended April 4, 1998 and March 29, 1997
<TABLE>
4/4/98 3/29/97
-------------- --------------
<S> <C> <C>
Net revenues $ 3,587,294 $ 1,586,794
Costs and expenses:
Cost of sales 2,180,723 1,144,273
Engineering and development 224,460 174,561
Selling, general and
administrative 271,927 158,052
-------------- --------------
Total costs and expenses 2,677,110 1,476,886
-------------- --------------
Operating income 910,184 109,908
Interest income 11,917 12,012
Interest expense 4,599 1,975
-------------- --------------
Income before provision
for income taxes 917,502 119,945
Provision for income taxes - 25,000
-------------- --------------
Net income $ 917,502 $ 94,945
============== ==============
Basic earnings per share $ 0.31 0.03
Diluted earnings per share $ 0.29 0.03
Shares used in calculating
basic earnings per share 2,945,239 2,941,424
Shares used in calculating
diluted earnings per share 3,126,924 3,088,501
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
HYTEK MICROSYSTEMS, INC.
STATEMENT OF CASH FLOWS
QUARTERS ENDED APRIL 4, 11998 AND MARCH 29, 1997
Increase (decrease) in cash and cash equivalents
4/4/98 3/29/97
(Unaudited) (Unaudited)
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 917,502 $ 94,945
Adjustments to reconcile net income to net
cash provided by (used in)
operating activities:
Depreciation and amortization 53,072 29,884
Accounts receivable, net 84,632 (380,802)
Inventories 448,147 (390,289)
Prepaid expenses and deposits (27,262) (5,625)
Other assets - -
Accounts payable (968,605) 342,447
Accrued employee compensation and benefits (52,573) (249,007)
Customer deposits - (49,363)
Accrued warranty, commissions and other (15,827) (33,225)
------------ -----------
Net cash provided by (used in)
operating activities 439,086 (641,035)
Cash flows from investing activities:
Cash purchases of equipment (93,055) (28,224)
------------ -----------
Net cash used in investing activities (93,055) (28,224)
Cash flows from financing activities:
Principal payments on capital lease obligations (22,309) (14,163)
Principal payments on long-term debt (12,083) -
Proceeds from exercise of stock options 7,167 11,999
Short-term borrowings - -
------------ -----------
Net cash used in financing activities (27,225) (2,164)
Net increase (decrease) in cash and cash equivalents 318,806 (671,423)
Cash and cash equivalents at beginning of period 1,189,519 1,426,716
------------ -----------
Cash and cash equivalents at end of period $ 1,508,325 $ 755,293
============ ===========
</TABLE>
See accompanying notes.
<PAGE>
HYTEK MICROSYSTEMS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
APRIL 4, 1998
(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 January 3, 1998, 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 April 4, 1998 are not necessarily indicative of the results that may be
expected for the entire year ending January 2, 1999. 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
April 4, 1998 for this lease were:
1998 $120,633
1999 164,856
2000 169,800
2001 - 2005 828,678
-------
$1,283,967
----------
3. Inventories are stated at the lower of cost (determined using
the first-in, first-out method) or market. Inventories
consisted of:
4-4-98 1-3-98
------ -------
Raw Material $1,047,420 $1,261,612
Work-In-Process 963,337 1,287,720
Finished Goods 122,485 32,057
---------- ------------
$2,133,242 $2,581,389
---------- ----------
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 April 4, 1998 were $3,587,000,
representing a 126% increase from net revenues of $1,587,000 for the quarter
ended March 29, 1997. This increase is the result of a higher volume of
shipments to Chesapeake Sciences Corporation, ("Chesapeake"), the Company's
largest customer, combined with increases in shipments to other customers.
Shipments to Chesapeake during the first quarter of the prior fiscal year were
lower than normal due to re-scheduling. Chesapeake accounted for 62% of net
revenues in the quarter ended April 4, 1998, as compared to 42% of net revenues
in the first quarter of 1997.
Cost of sales was $2,181,000 or 61% of net revenues, for the quarter
ended April 4, 1998 as compared to $1,144,000, or 72% of net revenues, for the
quarter ended March 29, 1997. The decrease in cost of sales, as a percentage of
net revenues, is attributable to increased direct labor efficiency resulting
from the larger production lot sizes associated with higher volume Chesapeake
production and the spreading of fixed costs over a much larger revenue base.
Engineering and development expenses were $224,000, or 6% of net
revenues, for the quarter ended April 4, 1998, as compared to $175,000, or 11%
of net revenues, for the quarter ended March 29, 1997. Increased engineering and
development expenditures are a direct result of higher employee compensation
costs attributable to increased engineering staff levels.
Selling, general and administrative expenses were $272,000, or 8% of
net revenues, for the quarter ended April 4, 1998, as compared to $158,000, or
10% of net revenues, in the quarter ended March 29, 1997. This increase in
dollar amount is primarily the result of increases in compensation costs due to
higher staffing levels, and increases in commission, travel and data processing
expenses. These increases are primarily associated with expanded sales efforts.
Although each category of costs and expenses discussed above increased in
dollar amount from the first quarter of 1997, to the first quarter of 1998, such
increases were outpaced by the growth in net revenues. As a result, each expense
category decreased as a percentage of net revenues.
<PAGE>
As a result of the above-mentioned factors, the Company had an
operating profit of $910,000 for the quarter ended April 4, 1998, as compared to
an operating profit of $110,000 for the quarter ended March 29, 1997.
Net interest income was $7,000 for the quarter ended April 4, 1998 as
compared to $10,000 for the quarter ended March 29, 1997. This decrease results
from increased interest expense on additional debt incurred to finance capital
equipment additions.
No federal income tax expense was recognized in the quarter ended April
4, 1998, as compared to federal income tax expense of $25,000 in the quarter
ended March 29, 1997. The Company has remaining net operating loss carryforwards
for federal income tax purposes at January 3, 1998 of approximately $2.5
million. These carryforwards will expire between 2004 and 2008. The Company may
have to recognize certain federal income tax expense during the balance of 1998
as a result of the alternative minimum tax.
The Company's backlog of customer orders was $7,841,000 at April 4,
1998, as compared to $5,937,000 at March 29, 1997, and $7,676,000 at January 3,
1998. Approximately $7,300,000 of the total backlog at April 4, 1998 is
currently scheduled for shipment during the remainder of 1998.* 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.
Liquidity and Capital Resources
- -------------------------------
The Company's cash position increased to $1,508,000 at April 4, 1998,
as compared to $1,190,000 at January 3, 1998. This increase is the combined
result of $439,000 generated by operating activities, partially offset by
$93,000 used to purchase capital equipment and $27,000 used in financing
activities.
Accounts receivable were $2,429,000 at April 4, 1998, as compared to
$2,514,000 at January 3, 1998. This change is primarily attributable to
increased customer payments during the current quarter.
Inventories were $2,133,000 at April 4, 1998, as compared to $2,581,000
at January 3, 1998. This decrease is the result of reductions in raw materials
and work-in-process attributable to increased sales volume partially offset by a
temporary increase in finished goods to accommodate customer delivery schedules.
(See Note 3. Of Notes to Interim Financial Statements on page 6.)
<PAGE>
Prepaid expenses and deposits were $77,000 at April 4, 1998 as compared to
$50,000 at January 3, 1998. This increase reflects normal ongoing business
transactions.
Accounts payable were $340,000 at April 4, 1998, as compared to
$1,308,000 at January 3, 1998. The primary factors effecting this reduction were
reduced purchases of raw materials during the quarter ended April 4, 1998
combined with increased cash flow, which allowed larger and more timely payments
to suppliers.
Accrued employee compensation and benefits were $297,000 at April 4,
1998 as compared to $350,000 at January 3, 1998. This reduction is the combined
result of payment, during the first quarter, of the 1998 accrued employee profit
sharing earned in fiscal 1997 together with changes in the timing of payroll
accruals at quarter end.
Accrued warranty, commissions and other expenses were $191,000 at April
4, 1998 as compared to $207,000 at January 3, 1998. This reduction is the net
effect of normal ongoing accruals combined with the payment during the first
quarter of 1998 of sales commissions and audit fees that had been accrued during
1997.
At April 4, 1998, the Company had Promissory Note and capital lease
obligations, for the purpose of financing production equipment, with SierraWest
Bank, in the amount of $316,000. The current portion of this indebtedness is
$119,000 at April 4, 1998, with the remaining portion of $197,000 classified as
long-term debt. These obligations bear annual interest at rates of 9.5% to
10.75%.
The Company also has a line of credit for $400,000 with SierraWest
Bank, which expires in October 1998 and bears interest at the prime rate plus
1.5%. At April 4, 1998 and January 3, 1998, the Company was in compliance with
all of the covenants of this loan agreement and no amounts were outstanding.
Future Outlook
- --------------
The Company's backlog of unfilled customer orders of $7,841,000
provides a stable platform for the balance of 1998.* Chesapeake Sciences Corp.
currently accounts for approximately 59% of this total backlog. The Company
currently anticipates that deliveries of data acquisition products to Chesapeake
will remain stable for the remainder of the current year.* However, there can be
no assurance that changes or 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.*
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.
<PAGE>
The Company's expanded sales force is continuing to pursue new
opportunities in the marketplace. The Company believes that this effort,
combined with our current backlog, will yield positive results for 1998.*
The foregoing discussion contains forward-looking statements that are
made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995. Actual results could differ materially. Investors are warned
that forward-looking statements involve risks and uncertainties including, but
not limited to, customer cancellation or rescheduling of orders, problems
affecting delivery of raw materials and components, unanticipated technical and
manufacturing problems and availability of direct labor resources. 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 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 April 4, 1998.
<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: May 14, 1998 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 April 4, 1998
EXHIBIT INDEX
-------------
Exhibit
Number Exhibit Description
- ------ -------------------
27.1 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Balance Sheet art April 4, 1998, Income Statement at April 4, 1998
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-02-1999
<PERIOD-END> APR-04-1998
<CASH> 1,508,325
<SECURITIES> 0
<RECEIVABLES> 2,479,036
<ALLOWANCES> 50,000
<INVENTORY> 2,133,242
<CURRENT-ASSETS> 6,147,900
<PP&E> 3,494,758
<DEPRECIATION> 2,698,930
<TOTAL-ASSETS> 7,143,728
<CURRENT-LIABILITIES> 975,244
<BONDS> 197,245
0
0
<COMMON> 4,981,843
<OTHER-SE> 989,386
<TOTAL-LIABILITY-AND-EQUITY> 7,143,728
<SALES> 3,586,477
<TOTAL-REVENUES> 3,587,294
<CGS> 2,180,723
<TOTAL-COSTS> 2,677,110
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,599
<INCOME-PRETAX> 917,502
<INCOME-TAX> 0
<INCOME-CONTINUING> 917,502
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 917,502
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.29
</TABLE>
