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 April 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 April 1, 2000, the issuer had outstanding 3,166,458 shares of Common
Stock, no par value.
<PAGE>
HYTEK MICROSYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED APRIL 1, 2000
INDEX
Page
Number
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Balance Sheet at April 1, 2000 (unaudited) and January 1, 2000 . . . . . 3
Statement of Operations (unaudited) for the Quarters ended April 1, 2000
and April 3, 1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Cash Flows (unaudited) for the Quarters ended April 1, 2000
and April 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 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>
April 1, 2000 January 1, 2000
Assets (Unaudited)
------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,434,420 $ 2,514,635
Trade accounts receivable - net of
allowance for doubtful accounts
of $50,000 at 4/1/00 and 1/1/00 1,064,182 727,918
Inventories 2,597,485 2,606,389
Prepaid expenses and deposits 132,395 74,271
------------ ------------
Total current assets 6,228,482 5,923,213
Deferred income taxes 200,000 200,000
Plant and equipment, at cost, less
accumulated depreciation and
amortization 629,038 674,151
------------ ------------
Total assets $ 7,057,520 $ 6,797,364
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 238,306 $ 265,203
Accrued employee compensation and benefits 207,103 134,445
Accrued warranty, commissions and other 176,252 284,913
Customer deposits 66,054 32,308
Current obligations under capital leases 24,496 38,708
------------ ------------
Total current liabilities 712,211 755,577
Long-term debt, less current portion - -
Long-term obligations under capital lease - -
Shareholders' equity:
Common Stock, no par value: 7,500,000 shares
authorized, 3,166,458 shares and 3,064,758
shares issued and outstanding at 4/1/00
and 1/1/00, respectively 5,150,737 5,016,468
Retained earnings 1,194,572 1,025,319
------------ ------------
Total shareholders' equity 6,345,309 6,041,787
------------ ------------
Total liabilities and shareholders equity $ 7,057,520 $ 6,797,364
============ ============
</TABLE>
See accompanying notes.
<PAGE>
HYTEK MICROSYSTEMS, INC.
STATEMENT OF OPERATIONS
(Unaudited)
Quarters ended April 1, 2000 and April 3, 1999
<TABLE>
4/1/2000 4/3/1999
-------------- -------------
<S> <C> <C>
Net revenues $ 1,927,589 $ 1,717,128
Costs and expenses:
Cost of sales 1,284,919 1,423,723
Engineering and development 234,162 243,460
Selling, general and
administrative 305,514 285,711
------------ ------------
Total costs and expenses 1,824,595 1,952,894
------------ ------------
Operating income (loss) 102,994 (235,766)
Interest income 69,040 21,001
Interest expense 2,781 4,238
------------ ------------
Income (loss) before provision
for income taxes 169,253 (219,003)
Provision for income taxes - (14,865)
------------ ------------
Net income (loss) $ 169,253 $ (233,868)
============ ============
Basic earnings (loss) per share $ 0.05 $ (0.08)
Diluted earnings (loss) per share $ 0.05 $ (0.08)
Shares used in calculating basic
earnings per share 3,090,710 3,050,036
Shares used in calculating diluted
earnings per share 3,244,774 3,050,036
</TABLE>
See accompanying notes.
<PAGE>
HYTEK MICROSYSTEMS, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
Quarters Ended April 1, 2000 and April 3, 1999
Increase (decrease) in cash and cash equivalents
<TABLE>
4/1/2000 4/3/1999
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 169,253 $(233,868)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 78,522 91,221
Accounts receivable, net (336,264) 169,216
Inventories 8,904 (214,798)
Prepaid expenses and deposits (58,124) (68,751)
Accounts payable (26,897) (76,992)
Accrued employee compensation and benefits 72,658 (194,426)
Customer deposits 33,746 -
Accrued warranty, commissions and other (108,661) (21,488)
------------ -----------
Net cash used in operating activities (166,863) (549,886)
Cash flows from investing activities:
Cash purchases of equipment (33,409) (2,118)
------------ -----------
Net cash used in investing activities (33,409) (2,118)
Cash flows from financing activities:
Principal payments on capital lease
obligations (14,212) (13,026)
Principal payments on long-term debt - (11,653)
Proceeds from exercise of stock options 134,269 9,375
Short-term borrowings - -
------------ -----------
Net cash provided by (used in) financing
activities 120,057 (15,304)
Net increase (decrease) in cash and cash
equivalents (80,215) (567,308)
Cash and cash equivalents at beginning
of period 2,514,635 2,637,182
------------ -----------
Cash and cash equivalents at end of period $ 2,434,420 $ 2,069,874
============ ===========
</TABLE>
See accompanying notes.
s<PAGE>
HYTEK MICROSYSTEMS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
APRIL 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 April 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 "month to month" basis. The aggregate future minimum rental
commitments as of April 1, 2000 for this lease were:
2000 127,977
2001 - 2005 828,678
-------
$ 956,655
3. Inventories are stated at the lower of cost (determined using the
first-in, first-out method) or market. Inventories consisted of:
4-1-00 1-1-00
---------- ----------
Raw Material $1,509,790 $1,267,558
Work-In-Process 693,258 781,142
Finished Goods 394,437 557,689
$2,597,485 $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 Quarterly 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 duty to update such statements after the date of filing of this
Form 10-QSB, except as required by law.
Results of Operations
Net revenues for the quarter ended April 1, 2000 were $1,928,000,
representing a 12% increase from net revenues of $1,717,000 for the quarter
ended April 3, 1999. The increase in net revenues is primarily attributable to
increased sales of opto-electronic support products, principally Thermo-Electric
Cooler Controllers . Net revenues from shipments to Chesapeake Sciences Corp.
amounted to $356,000 (18% of net revenues) for the first quarter of 2000, as
compared to $408,000 (24% of net revenues) during the first quarter of 1999. As
of the date of this filing, Chesapeake has made its scheduled payments of
principle and interest in accordance with the terms of the Final Settlement
Agreement.
Cost of sales was $1,285,000, or 67% of net revenues, for the quarter
ended April 1, 2000 as compared to $1,424,000, or 83% of net revenues, for the
quarter ended April 3, 1999. The reduction in cost of sales reflects ongoing
cost reduction measures implemented during 1999 in the face of significantly
reduced revenues.
Engineering and development expenses were $234,000, or 12% of net
revenues, for the quarter ended April 1, 2000, as compared to $243,000, or 14%
of net revenues, for the quarter ended April 3, 1999.
Selling, general and administrative expenses were $306,000, or 16% of
net revenues, for the quarter ended April 1, 2000, as compared to $286,000, or
17% of net revenues, in the quarter ended April 3, 1999. This increase in dollar
amount is primarily the result of increases in advertising and sales promotion
expenses as the Company seeks to expand its customer base.
The Company had an operating profit of $103,000 for the quarter ended
April 1, 2000, as compared to an operating loss of $236,000 for the quarter
ended April 3, 1999.
<PAGE>
Net interest income was $66,000 for the quarter ended April 1, 2000 as
compared to $17,000 for the quarter ended April 3, 1999. This increase is the
result of monthly interest payments received from Chesapeake Sciences Corp. per
the terms of the Final Settlement Agreement. Under that agreement, additional
principal payments totaling $1.7 million are due in June and August of 2000.
No provision for income tax was recognized for the quarter ended April
1, 2000 as compared to $15,000 income tax expense for the prior year period. The
Company has remaining future tax credit carryforwards for federal income tax
purposes at January 1, 2000 of approximately $134,000. These carryforwards will
not expire.
The Company's backlog of deliverable customer orders was $3,709,000 at
April 1, 2000, as compared to $3,756,000 at April 3, 1999, and $4,498,000 at
January 1, 2000. The reduction in deliverable backlog from fiscal year-end is
the result of reduced bookings of new custom product business during the first
quarter. 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.
Information and Data Processing (Year 2000)
The Company relies on an internal computer network for much of its day-to day
operating and financial information. The software for this network is a
commercial `off-the-shelf' package provided and maintained by a reputable
supplier. Software upgrades provided and installed by the supplier and the
Company's internal efforts on its over 40 workstations have been successful in
eliminating any internal Year 2000 problems as of the date of this filing.
In addition, the Company has not experienced any significant Year 2000
problems through its customers, suppliers or financial institutions.
The cost of the Company's preparations for Year 2000 computer readiness
were approximately $40,000. All costs have been funded through operating cash
flow.
Liquidity and Capital Resources
The Company's cash position decreased to $2,434,000 at April 1, 2000,
from $2,515,000 at January 1, 2000. This decrease is the combined result of
$167,000 used in operating activities and $33,000 used to purchase capital
equipment, partially offset by $120,000 provided by financing activities. Cash
flow from financing activities reflected $134,269 in proceeds from the exercise
of stock options, prompted by the increase in the Company's stock price during
the first quarter of 2000.
<PAGE>
Accounts receivable were $1,064,000 at April 1, 2000, as compared to
$728,000 at January 1, 2000. This increase is primarily attributable to
increased sales during the current quarter. At April 1, 2000, approximately
$65,000, or 6% of total receivables, were in excess of 60 days.
Inventories remained relatively stable, amounting to $2,597,000 at
April 1, 2000, as compared to $2,606,000 at January 1, 2000. Raw materials
increased from year-end reflecting higher levels of opto-electronic materials
required to meet increased demand. Reductions in work-in-process and finished
goods from year-end reflect some improvements in production cycle times and
shipments during the first quarter of Chesapeake finished goods.
Prepaid expenses and deposits were $132,000 at April 1, 2000 as
compared to $74,000 at January 1, 2000. This increase reflects normal ongoing
business transactions.
Accounts payable were $238,000 at April 1, 2000, as compared to
$265,000 at January 1, 2000. This decrease reflects normal fluctuation in vendor
payments and the timing of material receipts at quarter end.
Accrued employee compensation and benefits were $207,000 at April 1,
2000 as compared to $134,000 at January 1, 2000. This increase results from
changes in the timing and amount of payroll accruals at quarter end.
Accrued warranty, commissions and other expenses were $176,000 at April
1, 2000 as compared to $285,000 at January 1, 2000. This reduction is the net
effect of normal ongoing accruals combined with the payment during the first
quarter of 2000 of a customer pricing adjustment that was accrued January 1,
2000.
At April 1, 2000, the Company had Capital Lease obligations, for the
purpose of financing production equipment, with Bank of the West, in the amount
of $24,000. These obligations are secured by the related equipment and are
classified as short-term debt.
The Company also has a line of credit for $1,000,000 with Bank of the
West, which expires in May 2000 and bears interest at the prime rate. At April
1, 2000 and January 1, 2000, the Company was in compliance with all of the
covenants of this loan agreement and no amounts were outstanding. The Company is
currently negotiating a renewal of this line of credit.
Future Outlook
While we have made progress during the first quarter of the new
millennium, the uphill battle is far from over. Fiscal 2000 appears currently to
have potentially improved operating results over the prior year;* however, we
must capture new orders within the next two to three months in order to make
this a reality.
<PAGE>
At April 1, 2000, the portion of the Company's backlog representing
customer orders that are scheduled to be shipped during for the remainder of
2000 was approximately $3,100,000. The Company needs to book a significant
amount of new business in the short term to achieve a significant improvement
over 1999 results.* At the present time, however, there is no assurance that
such new business can or will be captured in time to have an impact on 2000
operating results. Further changes or delays in existing delivery schedules
could also have a negative impact on the Company's operating results.* The
Company currently believes that results of operations, its current cash position
and its existing line of credit will provide sufficient cash to meet operating
needs over the next 12 months.*
For the longer term, the recent increase in both bookings and sales of
opto-electronic support products is encouraging. Recent media data on the laser
diode and fiber-optic communications markets predicts significant growth in this
area over the next several years.(1) Hytek intends to vigorously pursue further
expansion into this market through continued strong marketing efforts and the
development of additional standard products to fill anticipated demand.*
The Company will continue to explore all avenues for growth and expansion
that will ultimately contribute to increased shareholder value.
The Company currently has approximately $1,200,000 in raw material,
work-in-process and finished goods inventory on its books for the Chesapeake
program. The "Final Settlement Agreement" with Chesapeake calls for monthly
interest payments and quarterly principal payments against this inventory and
associated costs. As of May 2, 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 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, non-acceptance of new products in the marketplace 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.
(1) LASER FOCUS WORLD February, 2000
<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 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: May 7, 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 April 1, 2000
EXHIBIT INDEX
Exhibit
Number Exhibit Description
- ------- -------------------
27.1 Financial Data Schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Balance Sheet at April 1, 2000, Statement of Operations at April 1, 2000 and
April 3, 1999.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-END> APR-01-2000
<CASH> 2,434,420
<SECURITIES> 0
<RECEIVABLES> 1,114,182
<ALLOWANCES> 50,000
<INVENTORY> 2,597,485
<CURRENT-ASSETS> 6,228,482
<PP&E> 3,976,777
<DEPRECIATION> 3,347,738
<TOTAL-ASSETS> 7,057,520
<CURRENT-LIABILITIES> 712,211
<BONDS> 0
<COMMON> 5,150,737
0
0
<OTHER-SE> 1,194,572
<TOTAL-LIABILITY-AND-EQUITY> 7,057,520
<SALES> 1,901,074
<TOTAL-REVENUES> 1,927,589
<CGS> 1,284,919
<TOTAL-COSTS> 1,824,595
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (66,259)
<INCOME-PRETAX> 169,253
<INCOME-TAX> 0
<INCOME-CONTINUING> 169,253
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 169,253
<EPS-BASIC> 0.055
<EPS-DILUTED> 0.052
</TABLE>
