U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 December 31, 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 December 31, 1998: 17,386,053
shares of Common Stock, par value $.01 per share.
<PAGE>
Cyber Digital, Inc.
BALANCE SHEETS
ASSETS
December 31, March 31,
1998 1998
(Unaudited) (Audited)
CURRENT ASSETS
Cash and cash equivalents $ 622,557 $ 2,436,473
Accounts receivable 367,231 383,603
Inventories 447,750 447,750
Prepaid expenses 4,719 23,545
-------------- ------------
Total Current Assets $ 1,442,257 $ 3,291,371
-------------- ------------
PROPERTY AND EQUIPMENT, NET
Equipment 366,396 275,819
Furniture and Fixtures 68,271 68,271
Leasehold Improvements $ 4,786 $ 2,920
-------------- ------------
$ 439,453 $ 347,010
Accumulated depreciation (171,093) (119,045)
-------------- ------------
Total Property And Equipment $ 268,360 $ 227,965
OTHER ASSETS
Other $ 14,566 $ 14,350
-------------- ------------
$ 1,725,183 $ 3,533,686
============== ============
The accompanying notes are an integral part of these statements
2
<PAGE>
Cyber Digital, Inc.
BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, March 31,
1998 1998
(Unaudited) (Audited)
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 71,031 $ 140,949
----------- -----------
Total Current Liabilities $ 71,031 $ 140,949
Long-Term Debt, less current maturities 0 0
----------- -----------
$ 71,031 $ 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 December 31, 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 December 31, 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 December 31, 1998
and March 31, 1998, respectively 173,861 173,861
Additional paid-in capital 13,860,257 13,860,257
Accumulated deficit (12,380,076) (10,641,491)
----------- -----------
$ 1,654,152 $ 3,392,737
----------- -----------
$ 1,725,183 $ 3,533,686
=========== ===========
The accompanying notes are an integral part of these statements
3
<PAGE>
</TABLE>
Cyber Digital, Inc.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1998 1997
<S> <C> <C>
Net Sales $ 15,866 $ 0
Cost of Sales 23,789 49,188
----------- ------------
Gross profit $ (7,923) $ (49,188)
----------- ------------
Operating Expenses
Selling, general and administrative expenses $ 343,225 $ 441,248
Research and development 187,310 67,457
----------- ------------
Total operating expenses $ 530,535 $ 508,705
----------- ------------
Operating Loss $ (538,458) $ (557,893)
Other Income, net 10,023 44,737
----------- ------------
Net Loss $ (528,435) $ (513,156)
========= ============
Earnings (Loss) per common and common equivalent share
Net earnings (loss) per common and common equivalent $ (0.03) $ (0.03)
----------- ------------
Weighted average number of common shares outstanding 17,386,053 17,327,822
=========== ============
</TABLE>
The accompanying notes are an integral part of these statements
4
<PAGE>
Cyber Digital, Inc.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
1998 1997
<S> <C> <C>
Net Sales $ 279,926 $ 28,410
Cost of Sales 298,798 93,514
------------ ------------
Gross profit $ (18,872) $ (65,104)
------------ ------------
Operating Expenses
Selling, general and administrative expenses $ 1,348,928 $ 1,082,784
Research and development 424,591 159,020
------------ ------------
Total operating expenses $ 1,773,519 $ 1,241,804
------------ ------------
Operating Loss $ (1,792,391) $ (1,306,908)
Other Income, net 53,806 152,232
------------ ------------
Net Loss $ (1,738,585) $ (1,154,676)
============ ============
Earnings (loss) per common and common equivalent share
Net earnings (loss) per common and common equivalent $ (0.10) $ (0.07)
============ ============
Weighted average number of common shares outstanding 17,386,053 17,327,822
============ ============
</TABLE>
The accompanying notes are an integral part of these statements
5
<PAGE>
Cyber Digital, Inc.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
December 31,
1998 1997
<S> <C> <C>
Cash Flows from Operating Activities
Net loss $ (1,738,585) $(1,154,676)
Adjustments to reconcile net earnings (loss) to net cash
provided by (used in) operating activities:
Depreciation 51,115 21,921
Amortization 1,365 770
(Increase) decrease in operating assets
Accounts receivable 16,372 (29,910)
Inventories 0 1,409
Prepaid expenses 18,826 3,828
Other assets (649) (4,720)
Increase (decrease) in operating liabilities
Accounts payable and accrued expenses (69,919) 28,754
------------ -----------
Net cash used in operating activities $ (1,721,475) $(1,132,624)
------------ -----------
Cash Flows from Investing Activities
Purchase of equipment $ (90,576) $ (162,914)
Purchase of furniture & fixtures 0 (1,305)
Purchase of leasehold improvements (1,866) 0
------------ -----------
Net cash used in investing activities $ (92,442) $ (164,219)
------------ -----------
Cash Flows from Financing Activities
Redemption of preferred stock Series A $ 0 $ (613,274)
Issuance of common stock 0 83,800
------------ -----------
Net cash used in financing activities $ 0 $ (529,474)
------------ -----------
NET DECREASE IN CASH AND CASH
EQUIVALENTS $ (1,813,917) $(1,826,317)
Cash and cash equivalents at beginning of period 2,436,474 5,002,773
------------ -----------
Cash and cash equivalents at end of period $ 622,557 $ 3,176,456
============ ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for Income taxes $ 0 $ 126
</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 nine months ended December 31, 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:
December 31, 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 December 31, 1998
Net sales for the quarter ended December 31, 1998 were $15,866 as compared to
zero for quarter ended December 31, 1997. Increase in sales were due to volume
increases in services. Gross profit for quarter ended December 31, 1998 was
$(7,923) as compared to $(49,188) for quarter ended December 31, 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 were $343,225 in quarter ended December 31,
1998 as compared to $441,248 for quarter ended December 31, 1997, primarily due
to decreases in sales and service expenses. Research and development expenses
for quarter ended December 31, 1998 were $187,310 as compared to $67,457 for
quarter ended December 31, 1997. Loss from operations for quarter ended December
31, 1998 was $(538,458) as compared with $(557,893) for quarter ended December
31, 1997. Net loss for quarter ended December 31, 1998 was $(528,435) or $(.03)
per share as compared to $(513,156) or $(.03) per share for quarter ended
December 31, 1997.
For Nine Months Ended December 31, 1998
Net sales for the period ended December 31, 1998 were $279,926 as compared to
$28,410 for the period ended December 31, 1997. Increases in sales were due to
volume increases in services. Gross profit (loss) for the period ended December
31, 1998 was $(18,872) as compared to $(65,104) for the period ended December
31, 1997. Selling, general and administrative expenses were $1,348,928 for the
period ended December 31, 1998 as compared to $1,082,784 for the period ended
December 31, 1997, primarily due to increased sales and service expenses.
Research and development expenses for the nine month period ended December 31,
1998 were $424,591 as compared with $159, 020 for the same period ended December
31, 1997. Loss from operations for the period ended December 31, 1998 was
$(1,792,391) as compared with $(1,306,908) for the period ended December 31,
1997, primarily due to increases in research and development. and sales and
service expenses. Net loss for the period ended December 31, 1998 was
$(1,738,585) or $(.10) per share as compared with $(1,154,676) or $(0.07) per
share for the period ended December 31, 1997.
As reported in the previous quarter, 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), ("CLEC"), particularly in New York
City, and (c) distribution of its private switched network products to federal
government and Internet service providers, ("ISP"). During the last few months
the Company has made significant strides towards possible strategic alliance
with a major company as well as partnership with a New York City CLEC and ISP.
Liquidity and Capital Resources
Total working capital decreased by $1,779,196 to $1,371,226 for quarter ended
December 31, 1998 from $3,150,422 for period ended March 31, 1998. The current
ratio decreased to 20.3 to 1 as at December 31, 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 December 31,
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>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
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 December 31, 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: February 12, 1998
By: \s\ J.C. Chatpar
----------------
Chairman, Principal Financial
Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1998
<CASH> 622,557
<SECURITIES> 0
<RECEIVABLES> 367,231
<ALLOWANCES> 0
<INVENTORY> 447,750
<CURRENT-ASSETS> 1,442,257
<PP&E> 439,453
<DEPRECIATION> 171,093
<TOTAL-ASSETS> 1,725,183
<CURRENT-LIABILITIES> 71,031
<BONDS> 0
0
110
<COMMON> 173,861
<OTHER-SE> 1,480,181
<TOTAL-LIABILITY-AND-EQUITY> 1,725,183
<SALES> 279,926
<TOTAL-REVENUES> 279,926
<CGS> 298,798
<TOTAL-COSTS> 1,773,519
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,792,391)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,792,391)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,738,585)
<EPS-PRIMARY> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
