SECURITIES AND EXCHANGE COMMISSIONNN
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the three month period ended SEPTEMBER 30, 1996.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-11685-NY
RADYNE CORP.
------------
(Exact name of small business issuer as specified in its charter)
NEW YORK
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(State or other jurisdiction of incorporation or organization)
11-2569467
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(IRS EMPLOYER IDENTIFICATION NO.)
5225 South 37th Street, Phoenix, AZ 85040
-----------------------------------------
(Address of principal executive offices)
602-437-9620
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(Issuer's telephone number)
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 period
that the issuer was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
----- -----
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
YES X NO
----- -----
The issuer had 18,748,605 shares of its common stock, par value $.002,
outstanding as of October 31, 1996.
Transitional Small Business Disclosure Format YES NO X
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<PAGE>
PART I - FINANCIAL INFORMATION
RADYNE CORP.
CONDENSED BALANCE SHEETS
SEPT. 30, JUNE 30,
Item 1 - ASSETS 1996 1996
------ ----------- -----------
(Unaudited) (Audited)
CURRENT ASSETS:
Cash and Temporary Cash Investments $ 437,950 $ 971
Accounts Receivable, less allowance
of $32,829 and $13,000, respectively 489,369 283,871
Inventories 1,580,776 1,150,669
Prepaid and Other Current Assets 16,934 20,426
----------- -----------
Total Current Assets 2,525,029 1,455,937
IMPROVEMENTS AND EQUIPMENT, Net of accumulated
depreciation of $92,705 and $62,405 respectively 589,375 571,927
OTHER ASSETS:
Designs and Drawings - Net of accumulated
amortization of $418,619 and $361,529 respectively 1,179,720 1,236,810
Deposits 8,012 8,012
----------- -----------
Total Assets $ 4,302,136 $ 3,272,686
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Temporary Bank Overdraft $ -0- $ 12,898
Accounts Payable 651,859 452,533
Accrued Liabilities 459,328 400,966
Current Portion Long-Term Debt and
Capitalized Lease Obligations 27,620 77,831
Loan from Bank - Short Term 1,700,000 -0-
Loan from Affiliate 4,550,000 4,594,696
----------- -----------
Total Current Liabilities 7,388,807 5,538,924
Long-Term Debt and capitalized lease obligations 128,157 130,414
----------- -----------
STOCKHOLDERS' EQUITY:
Common Stock, $.002 par value,
20,000,000 shares authorized,
18,748,605 shares issued
and outstanding 37,501 37,501
Additional Paid-In Capital 555,800 555,800
Accumulated (Deficit) (3,808,129) (2,989,953)
----------- -----------
Total Stockholders' Equity (3,214,828) (2,396,652)
----------- -----------
Total Liabilities and Stockholders' Equity $ 4,302,136 $ 3,272,686
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
RADYNE CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED
SEPT. 30, SEPT. 30,
1996 1995
------------ ------------
NET SALES $ 1,292,646 $ 1,296,792
COST AND EXPENSES:
Cost of Sales 1,052,385 775,652
Selling, general and administrative 507,578 403,231
Research and development 438,599 160,095
------------ ------------
Total Costs and Expenses 1,998,562 1,338,978
INCOME (LOSS) FROM OPERATIONS (705,916) (42,185)
INTEREST EXPENSE NET OF INTEREST INCOME 112,260 28,956
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES (818,176) (71,141)
PROVISION FOR INCOME TAXES -0- -0-
------------ ------------
NET INCOME (LOSS) $ (818,176) $ (71,141)
============ ============
NET INCOME (LOSS) PER COMMON SHARE (.044) (.004)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 18,748,605 18,650,084
============ ============
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
RADYNE CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
SEPT. 30, SEPT. 30,
1996 1995
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (818,176) $ (71,141)
Adjustment to reconcile net income
(loss) to net cash flows provided
by (used in) operating activities:
Depreciation and Amortization 87,390 67,005
(Increase) Decrease in operating assets:
Accounts Receivable (205,498) (82,350)
Inventories (430,108) 442,518
Prepaid and Other 3,492 38,384
Increase (Decrease) in operating
liabilities:
Accounts Payable 186,428 (486,819)
Accrued Liabilities 58,363 (187,327)
----------- -----------
Total Adjustments (299,933) (208,589)
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (1,118,109) (279,730)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (47,748) (92,756)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (47,748) (92,756)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowing 1,700,000 -0-
Payments on Long Term Debt (52,468) (43,301)
Loans from Affiliates (44,696) 347,614
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,602,836 304,313
----------- -----------
NET INCREASE IN CASH 436,979 90,257
CASH, BEGINNING OF YEAR 971 2,109
----------- -----------
CASH, END OF PERIOD $ 437,950 $ 92,366
=========== ===========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
RADYNE CORP.
Notes to Financial Statements
- -----------------------------
(Information for SEPTEMBER 30, 1996 and SEPTEMBER 30, 1995 is Unaudited)
1. Business
Radyne Corp. (the "Company") was incorporated on November 25, 1980
and commenced operations on May 22, 1981. The Company designs,
manufactures and sells products, systems and software used for the
transmission and reception of data over satellite and cable
communications networks.
2. Summary of Significant Accounting Policies
(a) Basis of presentation
---------------------
The interim financial statements furnished reflect all adjustments
which are, in the opinion of management, necessary for a fair
presentation of the statement of financial position as of September
30, 1996 and June 30, 1996 and the results of operations and cash
flows for the three months ended September 30, 1996 and September
30, 1995. The financial statements should be read in conjunction
with the summary of significant accounting policies and notes to
financial statements included in the Company's Form 10-KSB for the
year ended June 30, 1996.
The results of operations for the interim period are not
necessarily indicative of the results to be expected for the full
year.
(b) Inventories
-----------
Inventories are stated at the lower of cost (first-in, first-out)
or market value including material, direct labor and overhead
costs.
(c) Improvements and Equipment
--------------------------
Improvements and equipment are stated at cost. Expenditures for
repairs and maintenance are charged to operations as incurred, and
improvements which extend the useful lives of the assets are
capitalized. Depreciation and amortization of improvements and
equipment are computed using the straight-line method based on the
following useful lives:
Improvements And Equipment 7 years
Furniture and fixtures 7 years
Leasehold improvements 5 years
5
<PAGE>
RADYNE CORP.
Notes to Financial Statements
- -----------------------------
(Information for SEPTEMBER 30, 1996 and SEPTEMBER 30, 1995 is Unaudited)
(d) Research and Development
------------------------
Expenditures for research and development are charged to operations
in the period incurred.
(e) Taxes on Income
---------------
The Company follows the liability method of accounting for income
taxes, as prescribed by Statement No. 109 of the Financial
Accounting Standards Board.
(f) Per Share Data
--------------
Earnings (loss) per share of common stock were computed by dividing
net income (loss) by the weighted average number of shares of
common stock outstanding during each of the periods presented.
6
<PAGE>
RADYNE CORP.
Notes to Financial Statements
- -----------------------------
(Information for SEPTEMBER 30, 1996 and SEPTEMBER 30, 1995 is Unaudited)
3. Reorganization
On April 28, 1994, Radyne Corp. (the Predecessor Company) filed a
petition for relief under Chapter 11 of the federal bankruptcy
laws in the United States Bankruptcy Court for the Eastern
District of New York.
The Predecessor Company received approval from the Bankruptcy
Court to pay certain of its pre-petition obligations, employee
wages and benefits. Tax claims were rescheduled for payment in
equal quarterly installments of $8,720, with interest at 7%, over
six years.
On December 16, 1994, the Bankruptcy Court confirmed the
Predecessor Company's Plan of Reorganization effective at the
close of business on December 16, 1994.
4. Inventories
Inventories consist of the following:
SEPT. 30, JUNE 30,
1996 1996
---------- -----------
Raw Materials and components $ 279,702 $ 626,525
Work in process 1,080,309 307,391
Finished Goods 335,765 293,660
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Sub Total 1,695,776 1,227,576
Less Valuation Allowance (115,000) (76,907)
---------- -----------
Total $1,580,776 $ 1,150,669
========== ===========
7
<PAGE>
RADYNE CORP.
Notes to Financial Statements
- -----------------------------
(Information for SEPTEMBER 30, 1996 and SEPTEMBER 30, 1995 is Unaudited)
5. Improvements and Equipment
Improvements and Equipment consist of the following:
SEPT. 30, JUNE 30,
1996 1996
---------- ----------
Office Equipment $ 7,812 $ 7,812
Manufacturing Equipment 466,269 434,050
Computers and Software 207,999 192,470
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682,080 634,332
Less: accumulated depreciation
and amortization (92,705) (62,405)
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$ 589,375 $ 571,927
========== ==========
6. Accrued Liabilities
Accrued liabilities consist of the following:
SEPT. 30, JUNE 30,
1996 1996
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Payroll and vacation $ 124,320 $ 153,894
Warranty Reserve 124,775 109,775
Professional fees 71,625 77,125
Other 138,608 60,172
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$ 459,328 $ 400,966
========== ==========
8
<PAGE>
RADYNE CORP
Item 2 - Management's Discussion and Analysis or Plan of Operation.
----------------------------------------------------------
Financial Condition
The Company's assets have increased from $3,272,686 at June
30, 1996 to $4,302,136 at September 30, 1996, while the company's
liabilities have increased from $5,669,338 at June 30, 1996 to
$7,516,964 at September 30, 1996. The decrease in net assets (assets
minus liabilities) of $818,176 relates to the Company's net loss for
the three month period ending September 30, 1996.
A bank line of credit, in the amount of $2,000,000, was
established for the Company with Bank of America, Asian Banking Unit,
by Stetsys US, Inc., the new beneficial owner of 90.67% of the
Company's outstanding stock. As of the end of the period reported
herein, the Company had drawn down $1,700,000 of the available funds.
This is a demand loan, guaranteed by an affiliate of Stetsys US, Inc.
Approximately $370,000 was paid to Engineering and Technical
Service, Inc. (ETS), the former beneficial owner of 90.67% of the
Company's outstanding stock, during the period, for the repurchase of
inventories originally sold to ETS by Radyne in July, 1995, at a time
when ETS was acting as the Company's manufacturing subcontractor. In
recognition of the fact that the Company is now fully settled into its
Phoenix facility and has sufficient staff to do so, the Board
determined that the Company should resume the direct conduct of this
manufacturing activity.
The Company borrowed $4,500.000 (plus $50,000 in accrued
interest) from ST Electronics Pte. Ltd., a related company, the
proceeds from which were used to pay down the loan payable to ETS. An
additional $504,000 of the Company's cash was used to pay the balance
of the ETS loan.
The Company's working capital deficit was ($4,863,778) at
September 30, 1996; an increase of $780,791 from ($4,082,987) at June
30, 1996.
Results of operations for the three month period ended
September 30, 1996 compared to fiscal quarter ended September 30, 1995,
are as follows:
The Company's net sales decreased .3% to $1,292,646 during the
period ended September 30, 1996 from $1,296,792 during the quarter
ended September 30, 1995.
9
<PAGE>
The Company's cost of sales as a percentage of sales increased
to 81% during the period ended September 30, 1996 from 60% during the
fiscal quarter ended September 30, 1995. Approximately $105,000 in the
Company's cost of sales (8% of sales) was as a result of a charge,
taken against indirect cost of goods sold, to set up reserves for
inventory which was repurchased from ETS under an agreement whereby the
manufacturing of equipment will be moved to Phoenix from ETS'
facilities in Melbourne, FL.
Selling, general and administrative costs increased to
$507,578 during the current period from $403,231 during the fiscal
quarter ended September 30, 1995. Contributing to the Company's
increased level of expenses for the period were professional fees
relative to the transfer of 90.67% of the Company's outstanding common
stock to Stetsys US, Inc. (See 8-K filed August 23, 1996) and an
increase in the Company's base organizational and manufacturing
capacity as a result of increased orders taken during the period.
Research and development expenditures increased to $438,599
during the period ended September 30, 1996 from $160,095 during the
period ended September 30, 1995. The prior year's lower level of R&D
effort was mainly due to the inability of the Company to finance the
investment needed in this industry to stay abreast of the technology
curve.
Based on the increases in expenses outlined above, the Company
experienced a net loss of ($818,176) during the period ended September
30, 1996 as compared with a net loss of ($71,141) during the quarter
ended September 30, 1995.
The Company's new orders booked increased 201% to $3,579,183
for the period ended September 30, 1996 from $1,190,441 for the quarter
ended September 30, 1995.
The Company's backlog of orders to ship increased 324% to
$3,725,575 for the period ended September 30, 1996 from $878,453 for
the quarter ended September 30, 1995.
Typically, the Company must ship its backlog within 90 days to
maintain "on-time" delivery schedules.
The Company anticipates that it will be able to handle this
large increase in orders while substantially maintaining this delivery
schedule. This is expected to result in a significant increase in net
sales form the quarter ended September 30, 1996 to the quarter ended
December 31, 1996.
10
<PAGE>
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibit Description
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27 Financial Data Schedule
(b) Report on Form 8-K. A report on Form 8-K was filed on August
23, 1996 (electronic confirming copy accepted September 24, 1996)
relating to Item 1 (change in control of registrant), Item 5
(change in number and identity of directors) and Item 8 (change in
fiscal year).
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: 25 November, 1996 RADYNE CORP.
---------------------
By:/s/ Robert C. Fitting
--------------------------------
Robert C. Fitting
President
By:/s/ Garry D. Kline
--------------------------------
Garry D. Kline
Acting Chief Financial Officer
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FINANCIAL STATEMENTS CONTAINED IN THE
FORM 10-QSB FOR THE QUARTER ENDED 9-30-96 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 437,950
<SECURITIES> 0
<RECEIVABLES> 522,198
<ALLOWANCES> (32,829)
<INVENTORY> 1,580,776
<CURRENT-ASSETS> 2,525,029
<PP&E> 682,080
<DEPRECIATION> (92,705)
<TOTAL-ASSETS> 4,302,136
<CURRENT-LIABILITIES> 7,388,807
<BONDS> 0
0
0
<COMMON> 37,501
<OTHER-SE> 555,800
<TOTAL-LIABILITY-AND-EQUITY> 4,302,136
<SALES> 1,292,646
<TOTAL-REVENUES> 1,292,646
<CGS> 1,052,384
<TOTAL-COSTS> 1,052,384
<OTHER-EXPENSES> 946,176
<LOSS-PROVISION> 19,829
<INTEREST-EXPENSE> 112,260
<INCOME-PRETAX> (818,176)
<INCOME-TAX> 0
<INCOME-CONTINUING> (818,176)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (818,176)
<EPS-PRIMARY> (0.044)
<EPS-DILUTED> (0.044)
</TABLE>
