U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO
FORM 10-QSB
-----------------------------------------
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________to ________
Commission File Number 0-13992
CYBER DIGITAL, INC.
(Exact name of small business issuer as specified in its charter)
NEW YORK 11-2644640
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
400 Oser Avenue, Suite 1650, Hauppauge, New York 11788
(Address of principal executive offices)
(516) 231-1200
(Issuer's telephone number)
Check whether the issuer [1] has 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
--- ----
The number of shares of stock outstanding at September 30, 1998: 17,386,053
shares of Common Stock, par value $.01 per share.
<PAGE>
Cyber Digital, Inc.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30, March 31,
1998 1998
(Unaudited) (Audited)
<S> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,051,093 $ 2,436,473
Accounts receivable 492,611 383,603
Inventories 447,750 447,750
Prepaid expenses 6,083 23,545
------------------ ------------------
Total Current Assets $ 1,997,537 $ 3,291,371
------------------ ------------------
PROPERTY AND EQUIPMENT, NET
Equipment $ 359,201 $ 275,819
Furniture and Fixtures 68,271 68,271
Leasehold Improvements 3,920 2,920
------------------ ------------------
$ 431,392 $ 347,010
Accumulated depreciation (151,453) (119,045)
------------------ ------------------
Total Property And Equipment $ 279,939 $ 227,965
------------------ ------------------
OTHER ASSETS
Other $ 14,783 $ 14,350
------------------ ------------------
$ 2,292,259 $ 3,533,686
================== ==================
The accompanying notes are an integral part of these statements
2
<PAGE>
Cyber Digital, Inc.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, March 31,
1998 1998
(Unaudited) (Audited)
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 109,671 $ 140,949
------------------- -----------------
Total Current Liabilities $ 109,673 $ 140,949
Long-Term Debt, less current 0 0
maturities
------------------- -----------------
$ 109,673 $ 140,949
------------------- -----------------
SHAREHOLDERS' EQUITY
Convertible preferred stock - Series A $.05
par value; authorized 9,991,940 shares;
issued and outstanding, 0 and 0 shares at
September 30, 1998 and March 31, 1998 respectively $ 0 $ 0
Convertible, cumulative and participating
preferred stock - Series B-1 $.05 par value;
authorized 3,225 shares; issued and outstanding
2,200 and 2,200 shares at September 30, 1998
and March 31, 1998, respectively 110 110
Preferred Stock - Series B-2 cumulative,
convertible and participating $.05 par value,
authorized 4,835 shares; issued and outstanding;
none 0 0
Common Stock - $.01 par value; authorized,
30,000,000 shares; issued and outstanding, 17,386,053
shares and 17,386,053 shares at September 30, 1998
and March 31, 1998, respectively 173,861 173,861
Additional paid-in capital 13,860,257 13,860,257
Accumulated deficit (11,851,642) (10,641,491)
------------------- -----------------
$ 2,182,586 $ 3,392,737
------------------- -----------------
$ 2,292,259 $ 3,533,686
=================== =================
The accompanying notes are an integral part of these statements
3
<PAGE>
Cyber DigitaI, Inc.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
1998 1997
Net sales $ 182,679 $ 28,410
Cost of Sales 144,260 26,002
----------------- ------------------
Gross profit $ 38,419 $ 2,408
----------------- ------------------
Operating Expenses
Selling, general and administrative expenses $ 410,474 $ 413,603
Research and development 197,406 46,056
----------------- ------------------
Total Operating Expenses $ 607,880 $ 459,659
----------------- ------------------
Operating Loss $ (569,461) $ (457,251)
Other Income, net 17,426 50,380
----------------- ------------------
Net Loss $ (552,035) $ (406,871)
================= ==================
Earnings (loss) per common and common
equivalent share
Net earnings (loss) per common and common equivalent $ (0.03) $ (0.02)
================= ==================
Weighted average number of common shares 17,386,053 17,146,528
outstanding ================= ==================
The accompanying notes are an integral part of these statements
4
<PAGE>
Cyber DigitaI, Inc.
STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended
September 30,
1998 1997
Net sales $ 264,060 $ 28,410
Cost of sales 275,009 44,326
--------------- -----------------
Gross profit $ (10,949) $ (15,916)
--------------- -----------------
Operating Expenses
Selling, general and administrative expenses $ 872,005 $ 641,535
Research and development 370,979 91,564
---------------- -----------------
Total operating expenses $ 1,242,984 $ 733,099
---------------- -----------------
Operating Loss $ (1,253,933) $ (749,015)
Other Income, net 43,783 107,495
---------------- -----------------
Net Loss $ (1,210,150) $ (641,520)
================ =================
Earnings (loss) per common and common equivalent share
Net earnings (loss) per common and common equivalent $ (0.07) $ (0.04)
================ =================
Weighted average number of common shares
outstanding 17,386,053 17,146,528
================ =================
The accompanying notes are an integral part of these statements
5
<PAGE>
Cyber Digital, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
September 30,
1998 1997
Cash Flows from Operating Activities
Net earnings (loss) $ (1,210,150) $ (641,520)
Adjustments to reconcile net earnings (loss) to
net cash provided by (used in) operating activities:
Depreciation 32,408 11,576
Amortization 216 432
(Increase) decrease in operating assets
Accounts receivable (109,007) (30,010)
Inventories 0 (10,358)
Prepaid expenses 17,462 3,920
Other assets (649) 0
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (31,278) 35,263
------------------ -----------------
Net cash used in operating activities $ (1,300,998) $ (630,697)
------------------ -----------------
Cash Flows from Investing Activities
Purchase of equipment $ (83,382) $ (105,749)
Purchase of furniture & fixtures 0 (1,305)
Purchase of leasehold improvements (1,000) 0
------------------ -----------------
Net cash used in investing activities $ (84,382) $ (107,054)
------------------ -----------------
Cash Flows from Financing Activities
Redemption of preferred stock $ 0 $ (613,274)
Issuance of common stock 0 67,500
------------------ -----------------
Net cash provided by financing activities $ 0 $ (545,774)
------------------ -----------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ (1,385,380) $ (1,283,525)
Cash and cash equivalents at beginning of period 2,436,473 5,002,773
------------------ -----------------
Cash and cash equivalents at end of period $ 1,051,093 $ 3,719,248
================== =================
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the period for Income taxes $ 0 $ 0
</TABLE>
The accompanying notes are an integral part of these statements
6
<PAGE>
CYBER DIGITAL, INC.
NOTES TO FINANCIAL STATEMENTS
===================================
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six months ended September 30, 1998 are not
necessarily indicative of the results that may be expected for the year ending
March 31, 1999. For further information, refer to the financial statements and
footnotes thereto included in the Company's Form 10-KSB for the fiscal year
ended March 31, 1998.
NOTE 2 - INVENTORIES
Inventory of purchased parts and work-in-process for eventual resale to
customers are valued at the lower of cost or market, as determined by the
first-in, first-out (FIFO) method and consisted of the following:
September 30, March 31,
1998 1998
--------------- ----------------
Finished goods $ 312,792 $ 312,792
Work-in-process 37,076 37,076
Raw materials 97,882 97,882
--------------- ----------------
$ 447,750 $ 447,750
--------------- ----------------
7
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
Results of Operations
For Three Months Ended September 30, 1998
Net sales for quarter ended September 30, 1998 were $182,679 as compared to
$28,410 for quarter ended September 30, 1997. Increases in sales were due to
volume increases in services. Gross profit for quarter ended September 30, 1998
was 21% of net sales as compared to 8% for quarter ended September 30, 1997.
Fluctuations in gross profit margins are primarily attributable to price
changes, changes in sales mix by product or distribution channel. Selling,
general and administrative expenses for the quarter ended September 30, 1998
were $410,474 as compared to $413,603 for the quarter ended September 30, 1997.
Research and development expenses for quarter ended September 30, 1998 were
$197,406 as compared to $46,056 for quarter ended September 30, 1997. Loss from
operations for quarter ended September 30, 1998 was $(569,461) as compared with
$(457,251) for quarter ended September 30, 1997, primarily due to an increase in
research and development expenditure. Net loss for quarter ended September 30,
1998 was $(552,035) or $(.03) per share as compared to $(406,871) or $(.02) per
share for quarter ended September 30, 1997.
For Six Months Ended September 30, 1998
Net sales for the six month period ended September 30, 1998 were $264,060 as
compared with $28,410 for the period ended September 30, 1997. Increases in
sales were due to volume increases in services. Gross profit (loss) for the
period ended September 30, 1998 was (4)% of net sales as compared to (56)% for
the period ended September 30, 1997. Selling, general and administrative
expenses for the period ended September 30, 1998 were $872,005 as compared to
$641,535 for the period ended September 30, 1997, primarily due to increased
sales and services expenses. Research and development expenses for the six month
period ended September 30, 1998 were $370,979 as compared with $91,564 for the
same period ended September 30, 1997. Loss from operations for the period ended
September 30, 1998 was $(1,253,933) as compared with $(749,015) for the period
ended September 30, 1997, primarily due to increases in research and development
and sales and service expenses. Net loss for the period ended September 30, 1998
was $(1,210,150) or $(.07) per share as compared with $(641,520) or $(.02) per
share for the period ended September 30, 1997.
The revenues for the six months ended September 30, 1998 were solely from
services provided by the Company's Technical Services Division in Bluffton,
Indiana, and do not reflect product sales. The Company incurred losses due to
U.S. sales, marketing and service activities. The Company made a strategic
decision to close its Technical Services Division and its sales offices in
Denver, Tampa and San Francisco in October, 1998 and to change its sales
strategy in the U.S. The Company intends to grow its business through (a)
strategic alliance and partnering with major companies that can market its
public switched network products, (b) acquisition of or partnership with
competitive local exchange carrier(s), particularly in New York City, (c)
distribution of its private switched network products to federal government and
internet service providers, and (d) the conversion of sales employees to
independent sales consultants paid on a commission basis. The Company has
reduced its payroll expense by the closing of the sales offices and the
retaining of most of the former employees as independent sales consultants.
Liquidity and Capital Resources
Total working capital decreased by $1,262,558 to $1,887,864 for quarter ended
September 30, 1998 from $3,150,422 for period ended March 31, 1998. The current
ratio decreased to 18.2 to 1 as at September 30, 1998 from 23.3 to 1 as at March
31, 1998. Current levels of inventory are adequate to meet short term sales.
There were no significant capital expenditures in the quarter ended September
30, 1998, and none are planned for the next quarter. The Company believes that
its current sources of liquidity will be sufficient to meet its needs for the
foreseeable future. The Company believes that, if needed, it will be able to
obtain additional funds required for future needs.
8
<PAGE>
Year 2000 (Y2K)
The Company has conducted a review of its operating and computer systems to
identify the areas which could be affected by the Y2K issue. The Company
presently believes the Year 2000 problem will not pose significant operational
problems for the Company and the estimated cost of becoming compliant is minimal
and is not expected to have a material effect on the financial condition,
liquidity or results of operations of the Company.
The Company's digital switching and networking systems which it designs,
develops, manufactures, markets and services have been designed to be Y2K
compliant and the Y2K issue is not expected to have a material effect on the
Company's ability to serve its customers.
As part of the Company's assessment of the Y2K issue, consideration was given to
the possible impact upon the Company from using purchased software, suppliers
and outside service providers. The Company's efforts with regard to Y2K issues
are dependent in part on information received from such suppliers and vendors
upon which the Company has reasonably relied. While it is not possible for the
Company to predict all future outcomes and eventualities, the Company is not
aware, at this time, of any Y2K non-compliant situations with regard to any of
its purchased software or its use of suppliers and outside service providers.
9
<PAGE>
CYBER DIGITAL, INC.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS IN FORM 8-K
A). Exhibits.
27 Financial Data Schedule
B). Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant for the three months
ended September 30, 1998.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CYBER DIGITAL, INC.
DATED: March 16, 1999
By: /s/ J.C. Chatpar
-----------------------------
J.C. Chatpar, Chairman,
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> SEP-30-1998
<CASH> 1,051,093
<SECURITIES> 0
<RECEIVABLES> 492,611
<ALLOWANCES> 0
<INVENTORY> 447,750
<CURRENT-ASSETS> 1,997,537
<PP&E> 431,392
<DEPRECIATION> 151,453
<TOTAL-ASSETS> 2,292,259
<CURRENT-LIABILITIES> 109,673
<BONDS> 0
0
110
<COMMON> 173,861
<OTHER-SE> 2,008,615
<TOTAL-LIABILITY-AND-EQUITY> 2,292,259
<SALES> 264,060
<TOTAL-REVENUES> 264,060
<CGS> 275,009
<TOTAL-COSTS> 1,242,984
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,253,933)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,253,933)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,210,150)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
