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 September 30, 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: (775) 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 September 30, 2000 the issuer had outstanding 3,239,758 shares of Common
Stock, no par value.
<PAGE>
HYTEK MICROSYSTEMS, INC.
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
INDEX
Page
Number
------
Part I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Balance Sheet at September 30, 2000 (unaudited) and
January 1, 2000 . . . . . . . . . . . . . . . 3
Statement of Operations (unaudited) for the Quarters and Nine
Months ended September 30, 2000 and October 2, 1999. . . 4
Statement of Cash Flows (unaudited) for the Quarters and Nine
Months ended September 30, 2000 and October 2, 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.
<TABLE>
HYTEK MICROSYSTEMS, INC.
BALANCE SHEET
September 30, 2000 January 1, 2000
Assets (Unaudited)
---------------------------------- ----------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 4,210,584 $ 2,514,635
Trade accounts receivable - net of
allowance for doubtful accounts
of $50,000 at 9/30/00 and 1/1/00 1,136,716 727,918
Inventories 2,994,894 2,606,389
Prepaid expenses and deposits 92,042 74,271
---------------------------------- ----------------------
Total current assets 8,434,236 5,923,213
Deferred income taxes 200,000 200,000
Plant and equipment, at cost, less
accumulated depreciation and amortization 606,016 674,151
---------------------------------- ----------------------
Total assets $ 9,240,252 $ 6,797,364
================================== ======================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 289,359 $ 265,203
Accrued employee compensation and benefits 256,171 134,445
Accrued warranty, commissions and other 158,888 284,913
Customer deposits 1,617,309 32,308
Current obligations under capital leases - 38,708
---------------------------------- ----------------------
Total current liabilities 2,321,727 755,577
Shareholders' equity:
Common Stock, no par value: 7,500,000 shares
authorized, 3,239,758 shares and 3,064,758
shares issued and outstanding at 9/30/00
and 1/1/00, respectively 5,353,009 5,016,468
Retained earnings 1,565,516 1,025,319
---------------------------------- ----------------------
Total shareholders' equity 6,918,525 6,041,787
---------------------------------- ----------------------
Total liabilities and shareholders' equity $ 9,240,252 $ 6,797,364
================================== ======================
</TABLE>
See accompanying notes.
<PAGE>
HYTEK MICROSYSTEMS, INC.
STATEMENT OF OPERATIONS
(Unaudited)
Quarters and nine months ended September 30, 2000 and October 2, 1999
<TABLE>
Quarter ended Nine months ended
------------------------------------- -----------------------------------------
9/30/2000 10/2/1999 9/30/2000 10/2/1999
----------------- ----------------- ----------------- ---------------------
<S> <C> <C> <C> <C>
Net revenues $ 1,728,038 $ 1,014,742 $ 5,827,448 $ 4,002,746
Costs and expenses:
Cost of sales 1,110,632 967,936 3,808,711 3,615,077
Engineering and development 215,313 200,339 677,895 646,993
Selling, general and
administrative 337,872 286,294 993,427 805,823
----------------- ----------------- ----------------- ---------------------
Total costs and expenses 1,663,817 1,454,569 5,480,033 5,067,893
----------------- ----------------- ----------------- ---------------------
Operating income (loss) 64,221 (439,827) 347,415 (1,065,147)
Interest income 54,170 44,583 195,932 86,745
Interest expense - (1,056) (3,151) (8,966)
----------------- ----------------- ----------------- ---------------------
Income (loss) before provision
for income taxes 118,391 (396,300) 540,196 (987,368)
Provision for income taxes - - - (14,865)
----------------- ----------------- ----------------- ---------------------
Net income (loss) $ 118,391 $ (396,300)$ 540,196 $ (1,002,233)
================= ================= ================= =====================
Basic earnings (loss) per share $ 0.04 $ (0.13)$ 0.17 $ (0.33)
================= ================= ================= =====================
Diluted earnings (loss) per share $ 0.04 $ (0.13)$ 0.16 $ (0.33)
================= ================= ================= =====================
Shares used in calculating
basic earnings (loss) per share 3,217,744 3,064,758 3,158,833 3,059,996
================= ================= ================= =====================
Shares used in calculating
diluted earnings (loss) per share 3,368,031 3,064,758 3,324,326 3,059,996
================= ================= ================= =====================
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
HYTEK MICROSYSTEMS, INC.
STATEMENT OF CASH FLOWS (unaudited)
Quarters and Nine Months Ended September 30, 2000 and October 2,1999
Increase (decrease) in cash and cash equivalents
Quarter Ended Nine Months Ended
------------------------------- ----------------------------
September 30, October 2, September 30, October 2,
2000 1999 2000 1999
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 118,391 $ (396,300) $ 540,196 $ (1,002,233)
Adjustments to reconcile net income (loss) to
cash flow provided by (used in) operations:
Depreciation and amortization 74,993 85,784 231,695 264,902
Accounts receivable 350,834 207,870 (408,798) 1,298,028
Inventories (217,199) 16,442 (388,505) 43,616
Prepaid expenses and deposits 37,749 (2,305) (17,771) (43,240)
Accounts payable (32,080) 87,369 24,156 (98,079)
Accrued employee compensation and benefits 51,076 32,204 121,726 (241,913)
Accrued warranty, commissions and other (28,102) 1,686 (126,025) (33,223)
Customer deposits 1,506,786 240,208 1,585,001 240,208
------------ ------------ ------------ ------------
Net cash provided by (used in) operating activities 1,862,448 272,958 1,561,675 428,066
Cash flows from investing activities:
Cash purchases of equipment (106,114) (6,911) (163,559) (9,112)
------------ ------------ ------------ ------------
Net cash (used in) investing activities (106,114) (6,911) (163,559) (9,112)
Cash flows from financing activities:
Principal payments on long-term debt - (12,218) - (35,804)
Payment of capital lease obligations (9,970) (13,607) (38,708) (39,945)
Proceeds from exercise of stock options 188,119 - 336,541 9,375
------------ ------------ ------------ ------------
Net cash provided by (used in) financing activities 178,149 (25,825) 297,833 (66,374)
Net increase (decrease) in cash and cash equivalents 1,934,483 240,222 1,695,949 352,580
Cash and cash equivalents at beginning of period 2,276,101 2,749,540 2,514,635 2,637,182
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 4,210,584 $ 2,989,762 $ 4,210,584 $ 2,989,762
============ ============ ============ ============
</TABLE>
See accompanying notes.
<PAGE>
HYTEK MICROSYSTEMS, INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
SEPTEMBER 30, 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 September
30, 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
September 30, 2000 for these leases were:
2000 $ 47,182
2001 - 2005 867,617
----------
$ 914,799
-----------
3. Inventories are stated at the lower of cost (determined using the first-in,
first-out method) or market. Inventories consisted of:
9-30-00 1-1-00
------- ------
Raw Material $1,862,616 $1,267,558
Work-In-Process 782,868 781,142
Finished Goods 349,410 557,689
---------- ----------
$2,994,894 $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 of Financial
Condition and Results 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 factors set forth below and 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 September 30, 2000 increased by 70% from
net revenues for the quarter ended October 2, 1999. Net revenues for the quarter
ended September 30, 2000 were $1,728,000, as compared to $1,015,000 for the
quarter ended October 2, 1999. Net revenues for the nine months ended September
30, 2000 increased 46% to $5,827,000 from net revenues for the nine months ended
October 2, 1999 of $4,003,000. The increase in revenues during the quarter and
nine-month period reflects increased unit sales of both custom circuits and the
Company's standard products. Although results of operations for the year 2000
periods showed improvement over the comparable periods in 1999, third quarter
2000 revenues and earnings fell short of the Company's internal expectations. In
addition, revenues from optical products declined in the third quarter of 2000
in comparison to the second quarter of 2000.
In spite of the disappointing results, however, customer activity was
strong and bookings were up significantly in the quarter. The Company's backlog
of customer orders was $4,931,000 at September 30, 2000, as compared to
$3,802,000 at October 2, 1999, and $4,498,000 at January 1, 2000. Because
customers may place orders for delivery at various times throughout the year,
and due to the possibility of customer changes in delivery schedules (which have
been experienced in the past), 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.*
Cost of sales was $1,111,000, or 64% of net revenues, for the quarter ended
September 30, 2000, as compared to $968,000, or 95% of net revenues, for the
quarter ended October 2, 1999. Cost of sales for the nine months ended September
30, 2000 was $3,809,000, or 65% of net revenues, as compared to $3,615,000, or
90% of net revenues, for the nine months ended October 2, 1999. Cost of sales
was favorably impacted in the third quarter of 2000 by a $200,000 adjustment of
inventory reserves for the Chesapeake program. Chesapeake made the final payment
for inventory and associated costs in September 2000, in accordance with the
term of the Final Settlement Agreement. The decrease in cost of sales as a
percentage of net revenues results primarily from the spreading of fixed costs
over a higher revenue base.
<PAGE>
Engineering and development expenses were $215,000, or 12% of net revenues,
for the quarter ended September 30, 2000, as compared to $200,000, or 20% of net
revenues, for the quarter ended October 2, 1999. Engineering and development
expenses for the nine months ended September 30, 2000 were $678,000, or 12% of
net revenues, as compared to $647,000, or 16% of net revenues, for the nine
months ended October 2, 1999. The increase in expenditures in the 2000 quarter
and nine month period reflects additional effort on standard product
development. The decrease as a percentage of net revenues is due to a higher net
revenue base.
Selling, general and administrative expenses were $338,000, or 20% of net
revenues, for the quarter ended September 30, 2000, as compared to $286,000, or
28% of net revenues in the quarter ended October 2, 1999. Selling, general and
administrative expenses for the nine months ended September 30, 2000 were
$993,000, or 17% of net revenues, as compared to $806,000, or 20% of net
revenues, for the nine months ended October 2, 1999. The increase in selling,
general and administrative expenses is the combined result of increased
expenditures for compensation, advertising and sales promotion, sales commission
expense, travel expense, data processing and shareholder-related expenses.
The Company had an operating profit of $64,000 for the quarter ended
September 30, 2000, as compared to an operating loss of $440,000 for the quarter
ended October 2, 1999. If not for the reversal of the Chesapeake inventory
reserves, the Company would have reported an operating loss for the third
quarter of 2000 of $136,000. As a result of increased revenues, the Company had
an operating profit of $347,000 for the nine months ended September 30, 2000 as
compared to an operating loss of $1,065,000 for the nine months ended October 2,
1999.
Net interest income increased to $193,000 for the nine months ended
September 30, 2000, as compared to $78,000 for the prior nine-month period,
primarily as a result of interest payments received on the Chesapeake contract.
No income tax expense was recognized in the nine months ended September 30,
2000. Income tax expense in the prior year period was $15,000. The Company has
remaining future net operating loss and tax credit carryforwards for federal
income tax purposes 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 $4,211,000 in cash and cash equivalents at September 30,
2000, as compared to $2,515,000 at January 1, 2000. This increase of $1,696,000
from year end is comprised of $1,562,000 provided by operating activities
(primarily Chesapeake Sciences payment for inventory), partially offset by
$164,000 used for the purchase of capital equipment and $298,000 provided by
financing activities ($39,000 used in payment of capital lease obligations
offset by $337,000 in proceeds from stock option exercises).
Accounts receivable were $1,137,000 at September 30, 2000, as compared to
$728,000 at January 1, 2000. This increase results from increased sales volume.
<PAGE>
Inventories were $2,995,000 at September 30, 2000, as compared to
$2,606,000 at January 1, 2000. The inventory increase consists of additional raw
materials to support increased orders, a reduction in finished goods inventory
and a reduction in inventory reserves resulting from the Chesapeake payment.
Prepaid expenses and deposits were $92,000 at September 30, 2000 as
compared to $74,000 at January 1, 2000. This increase reflects normal ongoing
business transactions.
Property, plant and equipment, net, decreased to $606,000 at September 30,
2000, as compared to $674,000 at January 1, 2000. This decrease is the result of
depreciation on existing equipment, partially offset by new equipment purchases.
Accounts payable were $289,000 at September 30, 2000, as compared to
$265,000 at January 1, 2000.
Accrued employee compensation and benefits were $256,000 at September 30,
2000, as compared to $134,000 at January 1, 2000. This increase reflects profit
sharing accruals for the current nine-month period and differences in accrued
payroll amounts due to pay period timing at quarter end.
Accrued warranty, commissions and other accrued liabilities were $159,000
at September 30, 2000, as compared to $285,000 at January 1, 2000. This
reduction reflects normal recurring accruals and transactions and the subsequent
payment of items accrued at January 1, 2000.
Customer deposits were $1,617,000 at September 30, 2000 as compared to
$32,000 at January 1, 2000. The entire amount is related to the Chesapeake
program and will be adjusted as product is shipped to Chesapeake in the future.
At September 30, 2000, the Company had no short-term or long-term
obligations under loan and capital lease agreements with Bank of the West
(formerly SierraWest Bank). This is a reduction from $39,000 outstanding at
January 1, 2000, as a result of the repayment of capital lease obligations. The
Company uses these loan and lease agreements to finance certain purchases of
capital equipment.
At September 30, 2000, the Company also maintained a $1,000,000 revolving
line of credit with Bank of the West (formerly SierraWest Bank). At such date,
the Company was in compliance with all covenants of the loan agreement and no
amounts were outstanding. Interest on this line of credit is at the prime rate.
Future Outlook
--------------
At September 30, 2000, the Company's total backlog was approximately $4.9
million of which approximately $2.2 million is scheduled to ship during the
remainder of fiscal year 2000. While the operating results for the nine months
ended September 30, 2000 are an improvement over the prior year, we still have a
long way to go to reach the next plateau.
<PAGE>
Customer orders booked improved significantly in the third quarter and are
continuing on a strong trend as we enter the fourth quarter. While there is no
assurance that this trend will continue, we are encouraged by the number of
potential opportunities for additional business that are on the horizon.*
Although shipments of our optical support products declined in the third quarter
from the previous quarter level, customer interest in these products remains
strong. Several potential volume customers* have indicated that our optical
support products are "designed in" to their upcoming applications.
Our relationship with Chesapeake Sciences Corp. is still very strong. We
believe there are significant opportunities to participate with Chesapeake in
new programs (other than geophysical exploration) that are expected to arise
within the next year.* To this end, we intend to add additional equipment and
manufacturing processes, which will include automated pick and place capability,
Ball Grid Array (BGA) attachment and Flip-Chip mounting to expand our overall
manufacturing capability and provide additional options to our customers.* We
currently anticipate the capital expenditure for these added capabilities to
occur in the first quarter of 2001.*
The Company's cash position increased by $1.7 million in the quarter ended
September 30, 2000, to approximately $4.2 million. Chesapeake Sciences final
payment under the "Final Settlement Agreement" contributed $1.4 million of this
cash increase. We believe that this cash position, together with our line of
credit, will provide 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 significant 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 failure to expand the customer
base, 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 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 September 30, 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: November 8, 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 September 30, 2000
EXHIBIT INDEX
-------------
Exhibit
Number Exhibit Description
------ -------------------
27.1 Financial Data Schedule.
