UNITED STATES
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, 2000
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 July 1, 2000, the issuer had outstanding 3,170,208 shares of Common Stock,
no par value.
<PAGE>
HYTEK MICROSYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED JULY 1, 2000
INDEX
Page
Number
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Balance Sheet at July 1, 2000 (unaudited) and January 1, 2000 . . . 3
Statement of Operations (unaudited) for the Quarters and
Six Months ended July 1, 2000 and July 3, 1999. . . . . . . . . . . 4
Statement of Cash Flows (unaudited) for the Quarters and
Six Months ended July 1, 2000 and July 3, 1999. . . . . . . . . . . 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 Matter to a Vote of Security Holders. . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . 11
Signatures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
<PAGE>
PART 1. - FINANCIAL INFORMATION
Item 1. Financial Statements.
HYTEK MICROSYSTEMS, INC.
BALANCE SHEET
<TABLE>
July 1, 2000 January 1, 2000
Assets (Unaudited)
------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,276,101 $ 2,514,635
Trade accounts receivable - net of
allowance for doubtful accounts
of $50,000 at 7/1/00 and 1/1/00 1,487,550 727,918
Inventories 2,777,695 2,606,389
Prepaid expenses and deposits 129,791 74,271
------------ ------------
Total current assets 6,671,137 5,923,213
Deferred income taxes 200,000 200,000
Plant and equipment, at cost, less
accumulated depreciation and amortization 574,895 674,151
------------ ------------
Total assets $ 7,446,032 $ 6,797,364
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 321,439 $ 265,203
Accrued employee compensation and benefits 205,095 134,445
Accrued warranty, commissions and other 186,990 284,913
Customer deposits 110,523 32,308
Current obligations under capital leases 9,970 38,708
------------ ------------
Total current liabilities 834,017 755,577
Shareholders' equity:
Common Stock, no par value: 7,500,000 shares
authorized, 3,170,208 shares and 3,064,758
shares issued and outstanding at 7/1/00
and 1/1/00, respectively 5,164,890 5,016,468
Retained earnings 1,447,125 1,025,319
------------ ------------
Total shareholders' equity 6,612,015 6,041,787
------------ ------------
Total liabilities and shareholders' equity $ 7,446,032 $ 6,797,364
============ ============
</TABLE>
See accompanying notes.
<PAGE>
HYTEK MICROSYSTEMS, INC.
STATEMENT OF OPERATIONS
(Unaudited)
Quarters and six months ended July 1, 2000 and July 3, 1999
<TABLE>
Quarter ended Six months ended
------------- ----------------
7/1/2000 7/3/1999 7/1/2000 7/3/1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 2,171,821 $ 1,270,876 $ 4,099,410 $ 2,988,004
Costs and expenses:
Cost of sales 1,413,161 1,223,418 2,698,078 2,647,141
Engineering and development 228,420 203,193 462,582 446,653
Selling, general and
administrative 350,040 233,819 655,555 519,530
----------- ----------- ----------- -----------
Total costs and expenses 1,991,621 1,660,430 3,816,215 3,613,324
----------- ----------- ----------- -----------
Operating income (loss) 180,200 (389,554) 283,195 (625,320)
Interest income 72,783 21,161 141,822 42,162
Interest expense 430 3,672 3,211 7,910
----------- ----------- ----------- -----------
Income (loss) before provision
for income taxes 252,553 (372,065) 421,806 (591,068)
Provision for income taxes - - - 14,865
------------ ----------- ----------- -----------
Net income (loss) $ 252,553 $ (372,065) $ 421,806 $ (605,933)
============ =========== =========== ===========
Basic earnings (loss) per share $ 0.08 $ (0.12) $ 0.13 $ (0.20)
Diluted earnings (loss) per share $ 0.08 $ (0.12) $ 0.13 $ (0.20)
Shares used in calculating basic
earnings (loss) per share 3,167,296 2,992,480 3,129,215 3,057,615
Shares used in calculating diluted
earnings (loss) per share 3,303,614 3,176,803 3,288,458 3,057,615
</TABLE>
See accompanying notes.
<PAGE>
HYTEK MICROSYSTEMS, INC.
STATEMENT OF CASH FLOWS (unaudited)
Quarters and Six Months Ended July 1, 2000 and July 3, 1999
Increase (decrease) in cash and cash equivalents
<TABLE>
Quarter Ended Six Months Ended
------------------------------------- -----------------------------------
July 1, 2000 July 3, 1999 July 1, 2000 July 3, 1999
----------------- ----------------- --------------- -----------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 252,553 $ (372,065) $ 421,806 $ (605,933)
Adjustments to reconcile net income (loss)
to cash flow provided by (used in) operations:
Depreciation and amortization 78,180 87,897 156,702 179,118
Accounts receivable (423,368) 920,942 (759,632) 1,090,158
Inventories (180,210) 241,972 (171,306) 27,174
Prepaid expenses and deposits 2,604 27,816 (55,520) (40,935)
Accounts payable 83,133 (108,456) 56,236 (185,448)
Accrued employee compensation and benefits (2,008) (79,691) 70,650 (274,117)
Accrued warranty, commissions and other 10,738 (13,421) (97,923) (34,909)
Customer pre-payments 44,469 - 78,215 -
----------------- ----------------- --------------- -----------------
Net cash provided by (used in) operating
activities (133,909) 704,994 (300,772) 155,108
Cash flows from investing activities:
Purchases of equipment (24,037) (83) (57,446) (2,201)
----------------- ----------------- --------------- -----------------
Net cash used in investing activities (24,037) (83) (57,446) (2,201)
Cash flows from financing activities:
Principal payments on long-term debt - (11,933) - (23,586)
Payment of capital lease obligations (14,526) (13,312) (28,738) (26,338)
Proceeds from exercise of stock options 14,153 - 148,422 9,375
----------------- ----------------- --------------- -----------------
Net cash provided by (used in) financing
activities (373) (25,245) 119,684 (40,549
Net increase (decrease) in cash and cash equivalents (158,319) 679,666 (238,534) 112,358
Cash and cash equivalents at beginning of period 2,434,420 2,069,874 2,514,635 2,637,182
----------------- ----------------- --------------- -----------------
Cash and cash equivalents at end of period $ 2,276,101 $ 2,749,540 $ 2,276,101 $ 2,749,540
================= ================= =============== =================
</TABLE>
See accompanying notes.
<PAGE>
HYTEK MICROSYSTEMS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
JULY 1, 2000
(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 1,
2000, 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 July 1, 2000
are not necessarily indicative of the results that may be expected for the
entire year ending December 30, 2000. The Company operates on a 52/53 week
fiscal year, which approximates the calendar year.
2. The Company leases its main Carson City facility pursuant to a continuing
lease expiring in 2005. It also leases a small amount of office space on a lease
expiring in 2003. The aggregate future minimum rental commitments as of July 1,
2000 for these leases were:
2000 $ 94,363
2001 - 2005 867,617
----------
$ 961,980
----------
3. Inventories are stated at the lower of cost (determined using the first-in,
first-out method) or market. Inventories consisted of:
7-1-00 1-1-00
------ ------
Raw Material $1,705,826 $1,267,558
Work-In-Process 690,765 781,142
Finished Goods 381,104 557,689
---------- ----------
$2,777,695 $2,606,389
---------- ----------
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 seven
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 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 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). All statements
made herein are made as of the date of filing of this Form 10-QSB. The Company
disclaims any obligation to update such statements after the date of filing of
this Form 10-QSB, except as may be required by law.
Results of Operations
Net sales for the second quarter ended July 1, 2000 increased 71% from net
sales for the quarter ended July 3, 1999. Net sales for the quarter ended July
1, 2000 were $2,172,000 as compared to $1,271,000 for the quarter ended July 3,
1999. Net sales for the six months ended July 1, 2000 increased 37% from net
sales for the six months ended July 3, 1999. Net sales for the two six-month
periods were $4,099,000 and $2,988,000, respectively.
The large increase in sales for the quarter and six months ended July 1,
2000 is primarily attributable to significantly stronger sales of the Company's
opto-electronic support products, together with a modest sales increase in
traditional custom products.
Cost of sales was $1,413,000, or 65% of net sales, for the quarter ended
July 1, 2000, as compared to $1,223,000, or 96% of net sales, for the quarter
ended July 3, 1999. Cost of sales for the six months ended July 1, 2000 was
$2,698,000, or 66% of net sales, as compared to $2,647,000, or 89% of net sales,
for the six months ended July 3, 1999. The large decrease in cost of sales as a
percentage of net sales results from spreading fixed costs over a much larger
revenue base combined with greater efficiencies achieved at higher production
levels.
Engineering and development expenses were $228,000, or 10% of net sales,
for the quarter ended July 1, 2000, as compared to $203,000, or 16% of net
sales, for the quarter ended July 3, 1999. Engineering and development expenses
for the six months ended July 1, 2000 were $463,000, or 11% of net sales, as
compared to $447,000, or 15% of net sales, for the six months ended July 3,
1999. The increase in engineering and development expenses in the second quarter
is primarily attributable to costs associated with new product development and
introduction.
<PAGE>
Selling, general and administrative expenses were $350,000, or 16% of net
sales for the quarter ended July 1, 2000, as compared to $234,000, or 18% of net
sales, for the quarter ended July 3, 1999. Selling, general and administrative
expenses for the six months ended July 1, 2000 were $656,000, or 16% of net
sales, as compared to $520,000, or 17% of net sales, for the six months ended
July 3, 1999. The increase in selling, general and administrative expenses for
the quarter and six-month period is attributable to increased costs from a
variety of sources, including sales commission expense, advertising and sales
promotion expense, relocation of personnel and data processing expense.
The large increase in sales for the quarter and six months ended July 1,
2000 resulted in an operating profit of $180,000 for the quarter ended July 1,
2000 and an operating profit of $283,000 for the six months ended July 1, 2000.
This compares to operating losses for the quarter and six months ended July 3,
1999 of $390,000 and $625,000, respectively.
Net interest income was $72,000 for the quarter and $139,000 for the six
months ended July 1, 2000, as compared to $17,000 and $34,000 for each of the
comparable prior year periods. This increase results from interest payments from
Chesapeake Sciences under the terms of the "Final Settlement Agreement."
No income tax expense was recognized in the six-month period ended July 1,
2000. Income tax expense in the prior six-month period was $15,000. As of
January 1, 2000, the Company had net operating loss and tax credit carryforwards
of approximately $1,122,000 and $134,000, respectively. The net operating loss
carryforwards will expire in 2020 and the tax credit carryforwards will not
expire.
Liquidity and Capital Resources
The Company had $2,276,000 in cash and cash equivalents at July 1, 2000, as
compared to $2,515,000 at January 1, 2000. This decrease of $239,000 from year
end is comprised of $301,000 used in operating activities, $57,000 used for the
purchase of capital equipment and $120,000 generated by financing activities.
Cash generated by financing activities consists of $148,000 of proceeds from
stock option exercises, partially offset by payments of capital lease
obligations.
<PAGE>
Accounts receivable were $1,488,000 at July 1, 2000, as compared to
$728,000 at January 1, 2000, as a result of significantly increased sales during
the quarter and six-month period. At July 1, 2000, approximately $150,000, or
10%, of total receivables were in excess of 60 days. Of this past due amount,
$145,000 was with one long-term customer with whom the Company has arranged an
extended payment schedule. The Company fully expects to receive these funds and
does not believe additional reserves are required at this time.
Inventories were $2,778,000 at July 1 2000, as compared to $2,606,000 at
January 1, 2000. The increase in inventories consists solely of raw materials
required to support higher production levels of opto-electronic products and
other new customer orders.
Accounts payable were $321,000 at July 1, 2000, as compared to $265,000 at
January 1, 2000. This increase reflects the current higher level of business
activity.
Accrued employee compensation and benefits were $205,000 at July 1, 2000,
as compared to $134,000 at January 1, 2000. This increase results from a higher
level of direct labor required to meet increased production levels and the
inclusion of profit sharing accruals.
Accrued warranty, commissions and other accrued liabilities were $187,000
at July 1, 2000, as compared to $285,000 at January 1, 2000. This reduction is
the net effect of normal ongoing accruals and the payment in the first quarter
of a customer pricing adjustment that was accrued at January 1, 2000.
At July 1, 2000, the Company had capital lease obligations, for the purpose
of financing production equipment, with Bank of the West, in the amount of
$10,000. These obligations are secured by the related equipment.
The Company also has a line of credit for $1,000,000 with Bank of the West,
which expires in May 2001 and bears interest at the prime rate. At July 1, 2000,
the Company was in compliance with all of the covenants of this loan agreement
and no amounts were outstanding.
<PAGE>
Future Outlook
At July 1, 2000, The Company's total backlog was approximately $3.4
million, of which approximately $2.6 million scheduled to ship during the
remainder of fiscal year 2000. Subsequent to the quarter end, Chesapeake
Sciences Corp. released an additional $700,000 in product shipment for the third
and fourth quarters of fiscal 2000, which is in addition to the above backlog
amount.
The growth in demand for our opto-electronic support products has continued
through the second quarter. We have introduced additional products during the
second quarter and are currently in development of further versions of the
Thermo-Electric Cooler Controller and Laser Diode Driver. We intend to develop
additional optical support products in the future as our technology base and
resources expand.* Industry research indicates continuing growth in this market
for several years.*
Sales in our traditional custom hybrid business (exclusive of Chesapeake)
improved in the second quarter. There is continuing demand in this market and we
currently anticipate modest growth in this area in the future.*
At July 1, 2000, the Company had approximately $1,200,000 in raw material,
work-in-process and finished goods inventory on its books for the Chesapeake
program. As noted above, a portion of this inventory is expected to ship by
year-end. The "Final Settlement Agreement" with Chesapeake calls for monthly
interest payments and quarterly principal payments against this inventory and
associated costs. As of July 24, 2000, the scheduled payments have been made by
Chesapeake. Failure by Chesapeake to fully comply in the future with all terms
of the agreement could have a serious negative impact on future operating
results.
The Company's cash position remains stable at $2.3 million at July 1, 2000,
and working capital has increased by approximately $670,000 during the past six
months. The Company believes that from this position, together with our line of
credit, we will have sufficient cash to meet operating needs for the next twelve
months.* However, the Company may pursue additional debt or equity financing in
the future should opportunities for expansion arise.*
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, problems affecting delivery of vendor-supplied raw
materials and components or the inability to attract and retain qualified
personnel sufficient to meet customer requirements. 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 19, 2000 (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 2,954,922 10,790
--------- ------
Charles S. Byrne 2,954,922 10,790
--------- ------
Robert Boschert 2,954,922 10,790
--------- ------
Edward W. Moose 2,954,922 10,790
--------- ------
Edward Y. Tang 2,954,922 10,790
--------- ------
Ratification of the selection of Ernst & Young to serve
as auditors for fiscal 2000:
For - 2,955,362
---------
Against - 9,640
---------
Abstained - 710
---------
Broker Non-Votes - 0
---------
(d) Not applicable.
The foregoing matters are described in more detail in the issuer's definitive
proxy statement dated April 7, 2000 relating to the Annual Meeting of
Shareholders held on May 19, 2000.
<PAGE>
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 July 1, 2000.
<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: August 4, 2000 By:/s/ Sally B. Chapman
Sally B. Chapman
Chief Financial Officer
(Principal Financial and
Accounting Officer)
<PAGE>
HYTEK MICROSYSTEMS, INC.
Quarterly Report on Form 10-QSB
for the Quarter ended July 1, 2000
EXHIBIT INDEX
-------------
Exhibit
Number Exhibit Description
------ -------------------
27.1 Financial Data Schedule.
