SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
( X ) Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934 For the fiscal year ended December 31, 1996 ( ) Transition Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the
transition period from ______________ to _______________
Commission File Number 0-11883
Telebyte Technology, Inc.
(Exact name of registrant as specified in its charter)
Nevada 11-2510138
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
270 Pulaski Road, Greenlawn, New York 11740
(Address of principal executive) (Zip Code)
Registrant's telephone number, including area code (516) 423-3232
Securities registered pursuant to Section 12(b) of the Exchange Act:
None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock, par value $0.01 per share
(Title of class)
Check whether the registrant (1) filed all reports to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 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.
__X__ Yes _____ No
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. ( X )
The registrant's revenues for its most recent fiscal year were $4,136,685.
The aggregate market value of the voting stock held by non-affiliates of the
registrant at March 11, 1997 was $878,366.
The number of shares of common stock outstanding at March 11, 1997 was
1,481,766.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format (check one): Yes _____; No __X__
<PAGE>
2
PART 1
Item 1. Business
Telebyte Technology, Inc. (herein either the "Company" or "Telebyte") designs,
manufactures, and markets electronic data communications products that operate
over copper and fiber cables. The Company's operations are in a single business
segment and, except for sales to foreign distributors, the Company does not
conduct any foreign operations. The Company was formed as a New York corporation
in 1983 and re-incorporated in Nevada in 1987.
Introduction
The Company's data communications equipment is used principally to provide
connectivity solutions and maintain data communications networks. Telebyte's
products effectively link computers to other computers and peripheral devices in
a manner that enables them to operate as a complete system. An example of
growing areas are data acquisition systems, process control systems,
computerized time clocks, intelligent scales, and bar code reading equipment.
The Company's six principal data communications product categories are interface
converters, short haul modems, data communications test equipment, Local Area
Network (LAN) products, surge-lightning protectors and multiplexers. The Company
also sells a variety of data communications switching equipment and accessories.
In the large data communication marketplace, Telebyte focuses on the area of
"premises communication" or local networks. Telebyte addresses the needs of
customers that have computer systems with data communications applications
including distances whose range is from a few feet to a few miles. Accordingly,
Telebyte's products are used in data communication networks in facilities such
as industrial plants, factories, high rise office buildings, or campus like
environments. The transmission media used in this environment are "twisted pair"
copper wire and/or fiber optic cable. Fiber optic based products represents a
growing segment of the Company's product line.
The Company's products fill a variety of applications in the overall system plan
and are considered the "glue" to allow many different systems to function
properly. The Company's prospective market is increasing as the ubiquitous
personal computer (PC) embraces more applications. The Company endeavors to
maintain a broad product line by developing both improved versions of current
products and new products. Fiber optic products have been an increasingly
important factor in the Company's business and future product development will
continue to emphasize this area.
Business Developments for 1994, 1995 and 1996
During 1994 the Company expanded its product line through an original equipment
manufacturer (OEM) relationship with a Florida based company to resell, under
the Telebyte name, a group of switching products. Approximately 70,000 of the
Company's product catalogs were mailed in November of 1994. Neural network
processor development was completed and initial orders for the Company's Model
1000 Neuro Engine neurocomputer and neural network modules, Model 1001, were
received in the third quarter with initial deliveries beginning in late December
of 1994. New product development in 1994 resulted in eleven new product
introductions. In addition, several custom products were developed for customers
such as Trane Corp., VONS Supermarkets and Telegenix.
In 1995 Telebyte devoted efforts to redesign a significant number of its core
short haul modems and interface converters to include a new display feature.
This display, incorporating liquid crystal technology and called DataSpy(R),
provides a window onto the data link thereby simplifying installation and
maintenance of the network. DataSpy(R) is a registered trademark of Telebyte. In
addition, Telebyte submitted a patent application to cover this feature. It is
expected that this feature will act as a significant product differentiator
between Telebyte and its competitors.
<PAGE>
3
1995 saw large numbers of interface converters shipped to Intel and AT&T. A
system integrator, working for the U.S. government, took delivery of several
thousand modem abort timers. Also during 1995 the Company decided to exit the
video market which had become flooded with commodity products from Asia. This
competition caused margins to erode quickly and therefore the products did not
meet Telebyte's criteria for gross margin.
Many other companies availed themselves of Telebyte's ability to design special
products or modify existing products. This product "design-in" is expected to
produce additional volume sales as production begins for the programs, which
include these special Telebyte products.
1996 was a year in which the Company took on a more aggressive position in
establishing itself by virtue of increased media attention. This was realized by
advertising, catalog mailings and trade show attendance. This was augmented by
the single largest order for rack mounted interface converters, in the Company's
history, from a Government subcontractor.
Also in 1996, due to the poor sales of the neurocomputer and a deterioration of
the relationship between the Company and the owner of the neurocomputer
technology, Telebyte terminated the relationship with that owner and withdrew
from the neurocomputer technology market. Consistent with this decision was the
decision to focus on the growing of the data communications product line.
Products
Telebyte's products compete in six different product areas of data
communications networks. These are Interface Converters, Short Haul Modems, Test
Equipment, LAN Products, Lightning Protection and Multiplexers.
Interface converters transform the characteristics of the electrical interface
of one device to enable it to become compatible with the electrical interface of
another. This conversion may also include modifying the protocol and/or the
physical medium, i.e., copper wire to fiber cable. As a result, a data
communications network can be established or expanded using equipment which
otherwise would be unable to transmit or receive data from each other. Interface
converters represented 48% of Telebyte's revenue in 1996, and because the
industry continues to develop new interface standards, the Company anticipates
that the market may require greater varieties of interface converters, thereby
expanding the available market for existing products and creating opportunities
for new products. Telebyte's line of interface converters is available in most
of the configurations now required by the market and includes programmable
devices. When the appropriate opportunity presents itself, the Company will
manufacture custom interface converters to meet a particular customer's
requirements.
Short haul modems differ from those modems which most people are familiar with,
those that operate over the dial-up telephone network. Short haul modem devices
provide the link over dedicated wires or optical fibers among computers and
accessory equipment such as terminals, printers, badge readers, scales, bar code
readers, and other computer controlled machines. Short haul modems are also used
in establishing communications between micro or personal computers and mini or
main frame computers. Thus, the role of the short haul modem has been expanded
from coupling terminals to a central processing unit to creating extensive
computer to computer/peripheral networks. The Company's short haul modem devices
are designed to provide data communications links ranging from relatively short
distances to several miles. The Company manufactures and sells a variety of
short haul modems designed for particular applications and the electrical
environment of the user. For example, Telebyte has three types of short haul
modems, with transmission capabilities that are suited for (i) factories or
heavy manufacturing operations, (ii) light manufacturing, and (iii) industrial
office areas or general office locations. Due to technological changes and
innovations, the Company has to develop new short haul modem products on a
continual basis to meet its customers' technical requirements and to remain
competitive in this market. Short haul modems represented 29% of Telebyte's net
sales in 1996.
<PAGE>
4
No other product areas had sales that exceeded 10% of net sales in 1996.
The third most important product area by sales revenue is called Test Equipment.
This area consists of two distinctly different product groups, namely wireline
simulation and protocol analyzers. The wireline simulator is used in engineering
development and in production tests. This area is experiencing growth due to the
availability of new communications services such ISDN (Integrated Services
Digital Network), HDSL (High Datarate Subscriber Line), ADSL (Asymmetric
Datarate Subscriber Line) and T1 (high-speed data services offered by telephone
companies). These services have created new product opportunities, which are
being satisfied by a host of companies for whom the Telebyte wireline simulators
have become a valuable piece of production test equipment to guarantee their
products comply with published specifications. These products are also
applicable to engineering product development and evaluation efforts to
determine the character and limitations of certain data communications and
transmission devices. New transmission technologies such as ATM (Asynchronous
Transfer Mode) are creating additional product opportunities for existing and
new wireline simulators.
The other area of test equipment is protocol analyzers which are used to analyze
and test the integrity of data communications networks. Telebyte's protocol
analyzer test equipment product line includes "plug-in" printed circuit boards
and stand alone units for use with IBM personal computers and compatible clones.
These items are supplied with the software necessary to enable the personal
computer user to monitor or emulate the data line with other devices in the data
communications network. This test equipment product assists in maintenance
because it can rapidly identify open leads, missing signals and other errors,
and intermittent problems can be tracked and stored in memory for later
analysis. During 1996 Telebyte initiated the development of a new protocol
analyzer to provide increased performance. This product, called the Model 905
Comscope, was released in the first quarter of 1997.
Telebyte manufactures and sells a number of lightning and surge protectors which
prevent damage to data communications equipment that can be caused by high
voltage surges and transients, ground currents, and other lightning induced
electrical disturbances encountered on data communication circuits. The Company
believes this area of business may expand as more diverse systems are deployed.
The Company's multiplexers allow data from a number of different devices to be
communicated simultaneously on the same circuit or channel. Telebyte's local
area multiplexers perform a task similar to its short haul modems, except that a
single communications link can support many users. Telebyte's multiplexer
products allow simultaneous data transfers over distances of up to 8,000 feet
for wire or 6,600 feet over fiber.
The Company generally manufactures and maintains an inventory of products based
upon historical levels of demand and sales forecasts. Most of its products are
standard or catalog items. On occasion, the Company produces custom products
manufactured to a customer's specifications or for a specific application.
The Company has not experienced a shortage of manufacturing materials or
components, and it purchases raw materials and supplies from domestic and
foreign sources. The Company does not depend upon any particular source of
supply, and not more than 10% of the purchases were from a single supplier. Raw
material and supplies are readily available from various sources.
The research and new product development budget for 1997 is $405,000 compared to
approximately $260,000 and $282,000 spent in 1996 and 1995, respectively. The
cost of research and development is not borne directly by the Company's
customers.
Federal, state, and local environmental laws and regulations have no material
impact on Telebyte or its business. The Company is subject to the governmental
regulations that apply to businesses generally.
<PAGE>
5
Sales and marketing
The Company markets its data communications products by promotional activities
such as telephone sales, paid advertising, press releases, post card decks,
direct mail campaigns, and participating in trade shows. Telebyte currently
conducts its sales and marketing efforts through an in-house sales staff and a
network of distributors.
On the basis of continuing market research the Company believes that the most
effective way to increase its end user business, currently the largest source of
revenues, is to increase the circulation and content of its catalog, the
Datacom/Networking Cookbook. In 1995 the Company distributed 100,000 catalogs
and in 1996 more than 200,000 were distributed. In 1996 the Company employed a
coverwrap over the catalog cover with a return postcard in order to capture
qualified leads from mailings whose source was rented lists. The Company
continues to build its prospect database.
While the catalog is the focus of the promotional activities, the Company also
uses other techniques in addition to those mentioned above. During 1996 the
Company established a Web site on the INTERNET that contains the Company's
complete catalog. This Web site, http://telebyteusa.com, is producing an
increasing number of inquiries which adds a large number of qualified leads to
the Company's database.
Sales generated by all of these promotional activities are primarily to
end-users rather than resellers. Such end-users include OEM's (Original
Equipment Manufacturer), system integrators or installers and customers who may
be employing the product for their own specific use.
The Company also uses distributors as resellers. At the end of 1996 the Company
had 20 domestic distributors of record. Domestic distributors do not have any
territorial exclusivity. In the domestic marketplace, the Company's sales to
end-users dominates its sales to distributors. The ratio of these sales were
3.13, 2.85 and 2.27 to 1 in 1996, 1995 and 1994, respectively. Internationally,
the Company uses 57 distributors. Some products are marketed through other
catalog distributors. Foreign sales represented approximately 10.6% in 1996,
11.8% in 1995 and 12.6% in 1994 of net sales.
Domestic sales to end-users and domestic distributors are serviced by internal
sales representatives who are paid commissions on all sales from those
customers. At the end of 1996 the Company had 5 such representatives on its
staff. Foreign sales are under the direction of the President of the Company
with the help of an assistant. These sales are carried out by a network of
international distributors. For the most part these distributors are given
territorial exclusivity. In some countries new laws make exclusive sales
arrangements illegal and additional distributors are being added.
The Company does not depend upon the sales to any single customer or a limited
group of customers. There are no sales to a single customer during the last
three years exceeding 10% of net sales. Sales of products to the U.S. government
are not subject to renegotiations of profits or termination of contracts at the
U.S. government's election. For the most part such sales are covered by the
Company's General Service Administration (GSA) contract. The Company's sales are
not materially affected by seasonal factors.
<PAGE>
6
Competition
There are a significant number of companies engaged in manufacturing and selling
data communications equipment in the same markets as the Company. Since
Telebyte's product line is diverse, it is difficult to define and enumerate its
competition. As a general matter, there are competitors that are larger and more
established than Telebyte, many with technical and capital resources, which the
Company does not possess, and more well-developed sales and marketing
capabilities.
The Company's principal competitors are RAD Data Communications, Ltd. (which is
based in Israel with local offices in New Jersey), Black Box (with headquarters
based in Pennsylvania), and Patton Electronics (based in Maryland), and a number
of small companies. Telebyte competes with these companies on the basis of
quality, price, breadth of product line, sales and marketing capability and
technological support, and innovation. The Company relies principally upon the
price/performance ratio of its converter, multiplexer, and surge protection
products. Telebyte also attracts market share by its ability to fill orders
quickly and provide technical support to its customers. The Company does not
have a significant market presence with its test equipment and data
communications accessories.
Historically, the Company has not relied upon patents, registered trademarks
or licenses to give it a competitive advantage.
Employees
As of December 31, 1996, the Company had 35 full time employees. Of these
employees, two are executives, six are in sales, four in research and
engineering, four in administration, and the balance in manufacturing, shipping,
and related activities. The Company uses subcontractors and part-time help to
support its current operations. None of the employees are represented by a labor
union, and the Company considers its employee relations to be good.
Backlog
At December 31, 1996, the Company's backlog was $119,780 all of which the
Company expects to fill in fiscal 1997. Comparable backlog at December 31, 1995
was $270,533.
Item 2. Properties
Telebyte's executive office, plant, and manufacturing facility are located in a
20,000 square foot building on 3.2 acres, at 270 Pulaski Road, Greenlawn, New
York 11740. The Company purchased the land and building in September 1985. The
Company refinanced the existing mortgage in May 1988 and the property now
secures a mortgage loan payable on a fully self-amortizing basis over 20 years.
Interest under the mortgage is based on 2.75% over the bank's prime rate,
however, such rate cannot be less than 10% and will be recalculated on June
1,1997. The outstanding principle balance of the mortgage loan, as of December
31, 1996, was $1,024,378. Management believes that all of its properties, plant,
and equipment are well maintained and adequate for its requirements.
Of the 20,000 square feet the Company has leased 5,000 square feet to a tenant.
Management believes that Telebyte's existing manufacturing facilities are
sufficient to support its present needs and anticipated growth, and the Company
does not foresee any significant capital expansion of its plant in Greenlawn.
<PAGE>
7
Item 3. Legal Proceedings
There are no material pending legal proceedings to which the Company is a party
or by which its properties are subject.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters
Until September 2, 1992, the Company's common stock was listed on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") under
the symbol "TBTI." After that date the stock was moved to the Over The Counter
Bulletin Board since it no longer met the requirements of NASDAQ's minimum bid
price.
The following table sets forth the high and low bid prices for the common stock
for each fiscal quarter during 1996 and 1995 as reported by the National
Association of Securities Dealers, NASD. The bid and ask prices for the common
stock on March 11, 1997 were $.81 and $1.13 respectively.
1996 1995
High Low High Low
First Quarter 7/8 3/4 7/8 5/8
Second Quarter 7/8 7/16 2 1/4 1 1/8
Third Quarter 7/8 23/32 2 1/8 1 1/8
Fourth Quarter 1 1/4 11/16 1 1/4 5/8
The above quotations reflect inter-dealer prices, and may not include retail
mark-up, mark-down or commissions and may not necessarily represent actual
transactions.
At March 7, 1997, there were approximately 321 holders of record of the
Company's common stock. Most of the shares of the common stock are held in
street name for a larger number of beneficial owners.
To date, Telebyte has not paid a cash dividend. The payment and amount of any
future dividends will necessarily depend upon conditions then existing,
including the Company's earnings, financial condition, working capital
requirements, and other factors. The Company does not anticipate paying any
dividends in the foreseeable future.
<PAGE>
8
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Fiscal 1996 Compared to Fiscal 1995
Sales for the year ended December 31, 1996 increased by 10% to $4,136,685. The
sales increase was primarily a result of the increased sales and marketing
efforts begun by the Company in 1996. This included increased catalog mailings
and attendance at many industry trade shows. The area of interface converters
continued to expand as well as fiber optic products as a group.
An analysis of the gross margin for 1996 reveals that it was 52.5% as compared
to 55.2% for 1995. This was primarily a function of product mix which includes
newer products that have reduced gross margins due to start-up charges and a
more competitive environment as well as an increased provision for obsolete
materials of inventory during 1996. Cost of sales increased by $281,704
reflecting the increase in sales as well the above factors.
Selling, general, and administrative costs increased by $190,092. The increase
resulted primarily from increased promotional expenses of $145,000 related to
the printing and distribution of a much larger quantity of the Company's catalog
and other related marketing efforts which include attendance at industry trade
shows.
Research and development decreased in 1996 to $260,322, or 6.3% of sales, from
$282,172, or 7.5% of sales in 1995. The decrease was due to the loss of a senior
engineer who was working on a part time basis.
Interest expenses of $113,033 in 1996 decreased to 2.7% of sales as compared to
$115,081, or 3.0% in 1995.
Interest income decreased by $1,971. The marginal decrease in 1996 reflects the
lower levels of cash on hand during 1996. In 1996 the Company had rental income
of $48,195, equal to the 1995 rental income. For 1997 the Company expects rental
income of approximately $48,000.
The Company generated net income of $30,455 or $0.02 per share, .7% of sales,
compared to $101,592 or $.07 per share, 2.7% of sales, for 1995. This decrease
reflects the higher selling, general and administrative, and promotional costs
incurred in 1996 and a slight decrease in the Company's gross profit percentage.
The Company believes that all of the market indications for the future of the
data communications market and for the Company's products are positive and will
increase for 1997; however there can be no assurance that this will happen. The
Company has terminated the external salesperson hired in 1995 as the Company
found that sales were not forthcoming from this effort.
<PAGE>
9
Liquidity and Capital Resources
In 1996, the Company invested $60,071 in property and equipment, which was
financed through internally generated funds. The statements of cash flows
indicate that the Company generated $107,760 in 1996 compared to $320,050 in
1995 in cash from operations. The decrease was primarily due to lower net income
and increased inventory levels.
Working capital increased as of December 31, 1996 by $15,284 to $1,876,550,
compared with $1,891,834 at December 31, 1995. The current ratio decreased to
6.2 to 1 at December 31, 1996, compared to 7.0 to 1 at December 31, 1995.
The Company has renewed its line of credit, which now expires in July 1997,
based upon eligible accounts receivable, raw materials, and finished goods
inventories, for a maximum of $1,000,000 from Merrill Lynch. The line of credit
is available for general working capital purposes and to finance business
growth. As of December 31, 1996, there was no outstanding balance due under the
line of credit. During the past three years the Company's operations have
generated sufficient working capital to sustain its current levels of operations
and the Company believes that cash generated by the Company's operations,
current cash and cash equivalents, and the line of credit should supply the cash
resources to meet its cash needs for the next twelve months. The Company has no
commitments for any major capital expenditures in 1997.
Effect of Inflation
During the five-year period ending December 31, 1996, the Company was able to
decrease its costs of sales of its products to compensate for the effect of
inflation on the cost of components. This was accomplished by changes in
manufacturing methodology, namely, increasing the amount of product manufactured
on a sub-contractor basis.
Item 7. Financial Statements
See "Index to Financial Statements" beginning on page F-1 below.
Item 8. Changes in and Disagreements with Accountants in Accounting and
Financial Disclosures
Not applicable.
<PAGE>
10
Part III
Item 9. Directors, Executive Officers, Promoters, and Control Persons;
The following table sets forth certain information concerning Company's officers
and directors as of December 31, 1996. Telebyte's directors are elected to serve
until the next annual meeting of shareholders or until their successors are
elected and qualified. The executive officers are appointed annually by, and
serve at the pleasure of, the Board of Directors.
Name, age, and positions Business experience during past Director
held with the Company five years and principal occupation since
Joel A. Kramer, age 59,(1) Mr. Kramer has served as President 1983
President and Chairman of of the Company since August 1983,
the Board of Directors and Chairman of the Board since
February 1989.
Kenneth S. Schneider,Ph.D., Dr. Schneider has served as Treasurer 1983
age 51, Vice President, and Vice President, of the Company
Treasurer, Secretary, and since August 1983; and he was elected
Director Secretary in March 1991. Dr. Schneider
is a senior member of the Institute of
Electrical and Electronic Engineers.
Jamil Sopher, age 53 (2) Mr. Sopher is a Principal Financial 1996
Director Analyst with the World Bank where
he has been employed for 18 years.
Robert M. Kramer, age 56 (3) Mr. Kramer is a private investor and has 1996
Director been since 1987. Prior thereto he held the
position of Vice President at Drexel Burnham
Lambert and Shearson-Lehman.
(1) Mr. Robert M. Kramer is the brother of Mr. Joel A. Kramer, the President and
Chairman of the Board of Directors of the Company.
(2) Mr. Sopher received a Bachelor of Science and MSEE from Cornell and an MBA
from Harvard.
(3) Mr. Kramer received a BSME from Polytechnic Institute, a MSME from City
College of NY and an MBA from the Wharton Graduate School.
Section 16 Compliance
Based upon a review of copies of the forms required to be filed under Section
16(a) of the Securities Exchange Act of 1934 or written representations from
officers and directors, the Company believes all officers and directors, and
greater than ten percent owners of the Company's common stock have complied with
Section 16(a.)
<PAGE>
11
Item 10. Executive Compensation
The following table sets forth the cash compensation paid or accrued during the
last three fiscal years to the executive officers of the Company whose cash
compensation exceeded $100,000. The table includes Company contributions on the
officer's behalf to the Company's 401(k) Plan.
<TABLE>
Summary Compensation Table
Annual Compensation Long-Term
Compensation
Awards Payouts
<CAPTION>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Other Annual Restricted Stock Long-Term All Other
Principal Year Salary Bonus Compensation Stock Awards Options/SARs Incentive Payout Compensation
Position
($) ($) ($) (No.) (No.) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Joel A. Kramer 1996 $107,100 $4,300 $ 11,481(1) 0 0 $11,281(2) $3,203
President, CEO 1995 $105,497 $13,300 $11,367(1) 0 5,000 $9,281(2) $2,997
& Director 1994 $97,968 $11,500 $12,697(1) 0 5,000 $9,281(2) $2,948
Kenneth S. 1996 $95,599 $3,150 $7,256 (1) 0 0 $4,080(2) $2,819
Schneider
Sr. V.P. 1995 $95,153 $9,000 $6,619(1) 0 5,000 $4,080(2) $2,668
Sales, Sec.,
Treas. & 1994 $90,394 $6,200 $6,678(1) 0 5,000 $4,080(2) $2,858
Director
<FN>
(1) Commissions - Mr. Kramer received a 2.5% commission of net sales to
customers not located within the United States. Mr. Schneider received a 0.5%
commission of net sales to customers located within the United States. The
amounts paid are set forth above under the caption entitled "Other Annual
Compensation".
(2) Deferred Compensation - see Long-Term Incentive Plans Table below.
</FN>
</TABLE>
<TABLE>
Long-Term Incentive Plans - Awards in Last Fiscal Year
Estimated Future Payouts under Non-Stock Price-Based Plans
<CAPTION>
Number of Shares, Performance or Other
Units or Other Period Until Threshold Target Maximum
Maturation
Name Rights (#) or Payout ($ or #) ($ or #) ($ or #)
<S> <C> <C> <C> <C> <C>
Joel A. Kramer June 11, 2002 $26,667(1) $26,667(1) $26,667(1)
Pres.,CEO & Director
Kenneth S. Schneider April 16, 2010 $26,667(1) $26,667(1) $26,667(1)
Sr.V.P. Sales,
Sec.,
Treas. & Director
<FN>
(1) In 1990 the Company entered into deferred compensation agreements with key
officers, pursuant to which the officers will receive a defined amount,
approximately 30% of their 1990 base salary, each year for a period 10 years
after reaching age 65. The deferred compensation plans are funded through life
insurance and are being provided for currently. The expense charged to
operations in 1996 for such future obligations was $15,361 ($11,281 and $4,080,
for Joel Kramer and Kenneth Schneider, respectively).
</FN>
</TABLE>
<PAGE>
12
<TABLE>
Aggregate Option Grants in Last Fiscal Year
<CAPTION>
% of Total Options Exercise or
Number of Options Granted to Employees Base Price Expiration
Name Granted in Fiscal Year 1995 ($/Sh) Date
<S> <C> <C> <C> <C>
Joel A. Kramer 0 0 - -
Kenneth S. Schneider 0 0 - -
<FN>
The following table sets forth information concerning each exercise of stock
options during fiscal 1996 by each of the named executive officers and fiscal
year-end value of unexercised options:
</FN>
</TABLE>
<TABLE>
Aggregate Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values
<CAPTION>
Number of Value of Unexercised
Number of Shares Value Unexercised Options at In-the-Money Options
Name Acquired on Exercise Realized ($) December 31, 1996 at December 31, 1996
<S> <C> <C> <C> <C>
Joel A. Kramer 0 0 10,000 (2) 0 (3)
Kenneth S. Schneider 0 0 10,000 (2) 0 (3)
<FN>
(1) Calculation based upon the average of the high and low bid prices of the
Company's Common Stock from the National Quotation Bureau on December 31, 1996.
(2) All such options are currently exercisable. (3) All such options have
exercise prices greater than the value of the Company's Common Stock on December
31, 1996.
</FN>
</TABLE>
Compensation Plans and Other Compensation
The Company adopted a Stock Option Plan (the "1993 Plan") under which options to
purchase 100,000 shares of the Company's common stock, par value $.01 per share
have been reserved. As of December 31, 1996, there were 75,000 shares available
for grants under the 1993 Plan. Pursuant to the 1993 Plan, the Company is
permitted to issue incentive stock options ("Incentive Stock Options") and
non-qualified stock options. Incentive Stock Options under the 1993 Plan are
intended to qualify for the tax treatment accorded under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code.")
All directors, officers or other key employees of the Company are eligible to
participate in the 1993 Plan. The 1993 Plan is administered by the Board of
Directors of the Company, which, to the extent it shall determine, may delegate
its power with respect to the administration of the 1993 Plan to a committee
consisting of not less than three directors.
Under the 1993 Plan, Incentive Stock Options to purchase shares of the Company's
common stock shall not be granted for less than 100 percent of the fair market
value of the common stock on the date the Incentive Stock Option is granted;
provided, however, that in the case of an Incentive Stock Option granted to any
person then owning 10 percent of the voting power of all classes of the
Company's stock, the purchase price per share subject to the Incentive Stock
Option may be not less than 110 percent of the fair market value of the stock on
the date of the grant of the option. Non-qualified stock options to purchase the
Company's common stock are granted at prices determined by the Company's Board
of Directors.
Options under the 1993 Plan may not have a term of more than 10 years; provided,
however, that an Incentive Stock Option granted to a person then owning more
than 10 percent of the voting power of all classes of the Company's stock may
not be exercisable more than 5 years after the date such option is granted. In
addition, the aggregate fair market value, determined at the time the option is
granted, of the stock with respect to which Incentive Stock Options are
exercisable for the first time by an employee in any calendar year under the
1993 Plan may not exceed $100,000.
Options were granted for 5,000 shares to a director of the Company during the
year ended December 31, 1996 with an exercise price of $.79, which was the fair
market value of the Company's stock on the date of the grant. No other options
were granted or exercised during 1996.
The Company's 1983 Stock Option Plan terminated in 1994. No executive officers
or directors have any outstanding options under the 1983 Stock Option Plan.
<PAGE>
13
The Company has an informal bonus plan in which officers and other key personnel
participate. The bonus award, if any, is fixed annually by the Board of
Directors. Bonuses were allocated and paid to executive officers under this plan
during fiscal 1996 and shown on the foregoing Summary Compensation Table.
The Company maintains a deferred compensation plan under Internal Revenue Code
Section 401(k). All employees are eligible to participate; the Company
contributes 50% of the first 2% deferred by the employee. Each employee can
contribute between 2% and 15% of his annual salary. Contributions in calendar
year 1996 cannot exceed $9,240. Benefits are 100% vested and are payable upon
the employee's death, disability, retirement, termination, and under certain
financial circumstances. At December 31, 1996, $2,027 was contributed to the
plan for officers. All contributions are reflected in the salary column in the
Summary Compensation Table.
Except for life and medical insurance benefit programs, which are available to
all employees, the Company has no other compensation plans.
Outside directors receive a per meeting fee of $500, in addition to
reimbursement of expenses for attending each meeting. By agreement with the
World Bank, Mr. Sopher cannot accept the meeting fee.
Item 11. Security
Ownership of Certain Beneficial Owners and Management
The following table sets forth as of December 31, 1996 information concerning
(i) the shares held by each person or group known to own beneficially more than
5% of the outstanding shares of common stock, (ii) shares owned by directors and
(iii) the shares owned by all directors and officers as a group.
Name and Address of Number of Shares Percent of
Beneficial Owner Beneficially Owned Class
Kenneth S. Schneider 294,538 (1) (2) 19.7%
270 Pulaski Road
Greenlawn, NY 11740
Joel A. Kramer 274,996 (2) (3) 18.5%
270 Pulaski Road
Greenlawn, NY 11740
Jamil Sopher 1,730 (5)
270 Pulaski Road
Greenlawn, NY 11740
Robert M. Kramer 5,000(4) (5)
270 Pulaski Road
Greenlawn, NY 11740
All officers and directors
as a group (4 in number) 576,264 38.2%
(1) Includes 1,500 shares owned by Dr. Schneider as custodian for his minor
children.
(2) Includes 10,000 shares issuable upon the exercise of stock options granted
under the Company's 1993 Stock Option Plan.
(3) Includes 2,361 shares owned of record by Mr. Kramer's children.
(4) Includes 5,000 shares issuable upon exercise of stock options granted under
the Company's 1993 Stock Option Plan.
(5) Less than 1%.
<PAGE>
14
item 12. Certain Relationships and Related Transactions
None.
Item 13. Exhibits and Reports on Form 8-K(a)
Exhibits
3(a) The Company's Certificate of Incorporation under the State of Nevada was
filed as an Exhibit with the Proxy Statement filed in June 1987 (File No.
0-11883) and is incorporated by reference herein.
3(b)The By-laws of the Company as a Nevada corporation were filed as an Exhibit
on Form 8-K in third quarter of 1987 (File No. 0-11883) and are incorporated by
reference herein.
10(a)The Company's 1993 Stock Option Plan was filed as an Exhibit to the
Company's definitive 1994 proxy statement filed in May 1994 (File No. 0-11883),
and is incorporated by reference herein.
10(b)Commercial mortgage and consolidation agreement dated May 25, 1988 between
Home Federal Savings Bank and Telebyte Technology, Inc., filed as an Exhibit to
the Company's 1988 Annual Report on Form 10-K (File No. 0-11883) and is
incorporated by reference herein.
10(c)Deferred compensation agreements dated December 12, 1990 between Telebyte
Technology, Inc. and Joel A. Kramer and Kenneth S. Schneider, filed as an
Exhibit to the Company's 1990 Annual Report on Form 10-K (File No. 0-11883) and
is incorporated by reference herein.
10(e)$1,000,000 Revolving Line of Credit agreement dated June 23, 1994 between
Merrill Lynch and Telebyte Technology, Inc. and was filed as an exhibit on Form
10-KSB for the year ended December 31, 1994 (File No. 0-11883) and is
incorporated by reference herein.
(23) Consent of Grant Thornton LLP, independent certified public accountants
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the fourth quarter for the fiscal
year ended December 31, 1996.
<PAGE>
15
Signatures
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant had duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TELEBYTE TECHNOLOGY, INC.
By: __________\s\_________________
Joel A. Kramer, President and
Chairman of the Board
(Principal Executive Officer)
By: ___________\s\________________
Michael Breneisen, Vice President of Finance
(Principal Financial and Accounting Officer)
Date: March 28, 1997
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant, and in the
capacities and on the dates indicated.
March 28, 1997 __________\s\_____________
Joel A. Kramer, Director
March 28, 1997 __________\s\_____________
Kenneth S. Schneider, Director
March 28, 1997 ___________\s\____________
Jamil Sopher, Director
March 28, 1997 ___________\s\____________
Robert M. Kramer, Director
<PAGE>
F-1
Telebyte Technology, Inc.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountants F-2
Balance Sheets as of December 31, 1996 and 1995 F-3
Statements of Earnings for the years ended
December 31, 1996 and 1995 F-5
Statement of Shareholders' Equity for the years
ended December 31, 1996 and 1995 F-6
Statements of Cash Flows for the years ended
December 31, 1996 and 1995 F-7
Notes to Financial Statements F-8
<PAGE>
F-2
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders of
Telebyte Technology, Inc.
We have audited the accompanying balance sheets of Telebyte Technology, Inc. as
of December 31, 1996 and 1995, and the related statements of earnings,
shareholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Telebyte Technology, Inc. as of
December 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
GRANT THORNTON LLP
Melville, New York
March 11, 1997
<PAGE>
F-3
Telebyte Technology, Inc.
BALANCE SHEETS
December 31,
ASSETS 1996 1995
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 583,721 $ 609,466
Accounts receivable, net of allowance of
$15,000 413,953 464,688
Inventories 1,078,111 963,904
Prepaid expenses and other 79,083 87,354
Deferred income taxes 80,000 80,000
--------- ---------
Total current assets 2,234,868 2,205,412
PROPERTY AND EQUIPMENT - AT COST,
less accumulated depreciation 1,170,035 1,198,462
OTHER ASSETS 43,352 47,552
---------- ----------
$3,448,255 $3,451,426
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE>
F-4
Telebyte Technology, Inc.
BALANCE SHEETS (continued)
December 31,
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995
------ ------
CURRENT LIABILITIES
Accounts payable $ 198,023 $ 133,068
Accrued expenses 94,743 119,890
Current maturities of long-term debt 65,552 60,620
---------- -----------
Total current liabilities 358,318 313,578
LONG-TERM DEBT, less current maturities 983,107 1,046,325
COMMITMENTS
SHAREHOLDERS' EQUITY
Common stock - $.01 par value; 9,000,000
shares authorized; 1,636,566 shares issued;
1,481,766 and 1,501,566 shares outstanding
in 1996 and 1995, respectively 16,366 16,366
Capital in excess of par value 2,751,988 2,751,988
Accumulated deficit (560,431) (590,886)
Treasury stock - 154,800 and 135,000 shares
at cost, in 1996 and 1995, respectively (101,093) (85,945)
----------- -----------
2,106,830 2,091,523
---------- -----------
$3,448,255 $3,451,426
========== ==========
The accompanying notes are an integral part of these statements.
<PAGE>
F-5
Telebyte Technology, Inc.
STATEMENTS OF EARNINGS
Year ended December 31,
1996 1995
---- ----
Net sales $4,136,685 $3,758,953
Cost of sales 1,965,382 1,683,678
---------- ----------
Gross profit 2,171,303 2,075,275
Operating expenses
Selling, general and administrative 1,833,069 1,642,977
Research and development 260,322 282,172
--------- ---------
2,093,391 1,925,149
Operating profit 77,912 150,126
Other income (expense)
Interest income 18,381 20,352
Rental income 48,195 48,195
Interest expense (113,033) (115,081)
---------- ---------
(46,547) (46,534)
Earnings before income taxes 31,455 103,592
Income tax provision (benefit) 1,000 (2,000)
-------- ---------
NET EARNINGS $ 30,455 $101,592
======== =========
Earnings per common share $.02 $.07
======== =========
Weighted average number of common
shares outstanding 1,489,958 1,511,292
========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
F-6
<TABLE>
Telebyte Technology, Inc.
STATEMENT OF SHAREHOLDERS' EQUITY
Years ended December 31, 1996 and 1995
<CAPTION>
Number of Capital in
shares Common excess of Accumulated Treasury
issued stock par value deficit stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 1,636,566 $16,366 $2,751,988 $(692,478) $(77,658) $1,998,218
Purchase of treasury stock (8,287) (8,287)
Net earnings 101,592 101,592
--------- ------- ---------- ---------- --------- ------------
Balance at December 31, 1995 1,636,566 16,366 2,751,988 (590,886) (85,945) 2,091,522
Purchase of treasury stock (15,148) (15,148)
Net earnings 30,455 30,455
--------- -------- ---------- ---------- --------- ------------
Balance at December 31, 1996 1,636,566 $16,366 $2,751,988 $(560,431) $(101,093) $2,106,830
========= ======== ========== ========== ========== ============
<FN>
The accompanying notes are an integral part of this statement.
</FN>
</TABLE>
<PAGE>
F-7
Telebyte Technology, Inc.
STATEMENTS OF CASH FLOWS
Year ended December 31,
1996 1995
----- -----
Cash flows from operating activities
Net earnings $30,455 $ 101,592
Adjustments to reconcile net earnings to net
cash provided by operating activities
Depreciation and amortization 88,497 76,193
Deferred income taxes
Provision for losses on accounts
receivable (1,633)
(Increase) decrease in operating assets
Accounts receivable 50,735 (51,312)
Inventories (114,207) 88,153
Prepaid expenses and other 12,471 58,528
Other assets
Increase (decrease) in operating liabilities.
Accounts payable 64,956 (8,149)
Accrued expenses (25,147) 56,678
-------- --------
Net cash provided by operating activities 107,760 320,050
-------- --------
Cash flows from investing activities
Additions to property and equipment (60,071) (112,161)
-------- ---------
Net cash used in investing activities (60,071) (112,161)
Cash flows from financing activities
Principal payments of long-term debt (58,286) (55,770)
Purchase of treasury stock (15,148) (8,287)
Proceeds from long-term debt 26,257
-------- --------
Net cash used in financing activities (73,434) (37,800)
-------- --------
NET (DECREASE)INCREASE IN CASH
AND CASH EQUIVALENTS (25,745) 170,089
Cash and cash equivalents at beginning of year 609,466 439,377
--------- ---------
Cash and cash equivalents at end of year $ 583,721 $ 609,466
========= =========
The accompanying notes are an integral part of these statements.
<PAGE>
F-8
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Telebyte Technology, Inc. (the "Company") designs, manufactures and markets
electronic data communications products. The Company's products are
primarily sold to end-users, domestic dealers and distributors, foreign
dealers and distributors and original equipment manufacturers. The Company
does not depend upon sales to a single customer or a limited group of
customers and there were no sales to a single customer during the last two
years exceeding 10% of net sales. The Company operates in a single business
segment and has no foreign operations. Export sales were $441,000 and
$445,000 in 1996 and 1995, respectively.
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statementS follows:
1. Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market.
2. Property and Equipment
Property and equipment are stated at cost, less accumulated
depreciation. Depreciation is computed on the straight-line basis over
the estimated useful lives of the assets, which are 35 years for
building and improvements and 5 years for equipment.
3. Income Taxes
Deferred income taxes are recognized for temporary differences between
financial statement and income tax bases of asset and liabilities and
loss carryforwards for which income tax benefits are expected to be
realized in future years. A valuation allowance has been established to
reduce the deferred tax assets as it is more likely than not that all,
or some portion, of such deferred tax assets will not be realized. The
effect on deferred taxes of a change in tax rates is recognized in
income in the period that includes the enactment date.
4. Earnings Per Share
Earnings per share of common stock are based on the weighted average
number of shares of common stock outstanding during the year. Common
stock equivalents are not material to the calculation of earnings per
share.
5. Stock-Based Compensation Plans
The Company maintains two fixed stock option plans, as more fully
described in Note G to the financial statements, accounted for using
the "intrinsic value" method pursuant to the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." The fair value and pro forma effects on the Company's net
earnings and net earnings per common share are not presented as
the fair value of the options granted (determined
<PAGE>
F-9 Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996 and 1995
NOTE A (continued)
pursuant to Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation") is not material to the
financial statements.
6. Statements of Cash Flows
For purposes of the statements of cash flows, the Company considers
highly liquid cash investments with an original maturity of three
months or less to be cash equivalents. The Company paid interest of
$113,033 and $115,871 and income taxes of $1,000 and $2,208 in 1996 and
1995, respectively.
7. Revenue Recognition
Revenue is recognized from sales when a product is shipped. Service
fees are recognized upon the completion of the related service.
8. Use of Estimates and Fair Value of Financial Instruments
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of
the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates.
The Company has estimated the fair value of financial instruments using
available market information and other valuation methodologies in
accordance with Financial Accounting Standards No. 107, "Disclosures
About Fair Value of Financial Instruments." Management of the Company
believes that the fair value of financial instruments, consisting
of cash, accounts receivable and debt, approximate carrying value due
to the immediate or short-term maturity associated with its cash and
accounts receivable and the interest rates associated with its debt.
NOTE B - INVENTORIES
Inventories consist of the following at December 31:
1996 1995
------ ------
Purchased components and materials $519,645 $521,082
Work in process 222,963 171,230
Finished goods 335,503 271,592
----------- --------
$ 1,078,111 $963,904
=========== ========
<PAGE>
F-10 Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996 and 1995
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
1996 1995
----- -----
Land $300,000 $300,000
Building and improvements 1,024,583 1,024,583
Equipment 514,825 454,754
--------- ---------
1,839,408 1,779,337
Less accumulated depreciation 669,373 580,875
---------- ----------
$1,170,035 $1,198,462
========== ==========
NOTE D - DEBT
1. Line of Credit Facility
The Company has an agreement with a financial institution, expiring in
July 1997, which provides the Company with a line of credit facility of
up to $1,000,000 based on eligible accounts receivable and purchased
components and materials and finished goods inventories of the Company,
as defined in the agreement. Borrowings under the line of credit bear
interest at the bank's specified prime rate plus .75% (9.25% at
December 31, 1996). There was no outstanding balance against this line
at December 31, 1996.
2. Long-Term Debt
The Company's first mortgage note is collateralized by land and
building and the other notes payable are collateralized by equipment.
The remaining unpaid mortgage note balance at December 31, 1996 is
payable in equal monthly installments of $12,484 (inclusive of interest
at 10%) with a maturity date of June 2008. The interest rate is
computed based on a 2.75% increment over the bank's prime interest
rate,however,such rate cannot be less than 10% and will be recalculated
on June 1, 1997 and thereafter every three years. Financing and
other costs aggregating $85,122 incurred in connection with the
acquisition of real property and the refinancing of mortgage debt are
stated at cost, net of accumulated amortization of $44,047 and
$39,847 at December 31, 1996 and 1995, respectively, and are included
in "Other assets" in the accompanying balance sheets. Amortization is
provided on a straight-line basis over the life of the mortgage note of
20 years.
<PAGE>
F-11 Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996 and 1995
NOTE D (continued)
Long-term debt is summarized as follows at December 31:
1996 1995
------ ------
First mortgage note payable to bank in
equal monthly installments, including
interest, through June 2008 $1,024,378 $1,067,501
Notes payable to bank in equal monthly
installments, including interest
at 9% to 10%, through February 1998 24,281 39,444
--------- ---------
1,048,659 1,106,945
Less current maturities 65,552 60,620
--------- -----------
$ 983,107 $1,046,325
========= ==========
Aggregate maturities of long-term debt as of December 31, 1996 are as
follows:
1997 $65,552
1998 63,130
1999 60,535
2000 66,874
2001 73,877
Thereafter 718,691
----------
$1,048,659
==========
<PAGE>
F-12
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996 and 1995
NOTE E - EMPLOYEE BENEFIT PLANS
The Company sponsors an employee investment savings 401(k) plan to which
both the Company and employees contribute. Employer contributions of
$7,094 and $7,172 were made to the plan in 1996 and 1995, respectively.
The Company maintains deferred compensation agreements with several key
officers, whereby the officers will receive a defined amount approximating
30% of their 1990 base salary for a period of 10 years after reaching age
65. The deferred compensation plans are funded through life insurance and
are being provided for currently. The expense charged to operations in 1996
and 1995 for such future obligations was approximately $15,400 and
$13,400, respectively for each year.
NOTE F - INCOME TAXES
The provision for income taxes consists of current state taxes in 1996 and 1995.
The actual income tax expense differs from the Federal statutory rate as
follows:
1996 1995
Amount % Amount %
---------------- -------------------
Federal statutory rate $10,700 34.0% $35,200 34.0%
State income taxes, net of
Federal income tax benefit 700 2.1 1,300 1.2
Officers' life insurance 5,200 16.6 3,900 3.7
Other 300 1.2 900 .9
Benefit of net operating loss
carryforward (15,900) (50.7) (39,300) (37.9)
-------- ------ -------- -------
$1,000 3.2 % $2,000 1.9%
======== ======= ======== =======
<PAGE>
F-13
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996 and 1995
NOTE F (continued)
At December 31, 1996, the Company has net operating loss carryforwards and
tax credits expiring from 2001 through 2006 of approximately $950,000 and
$79,000, respectively, available to reduce Federal income taxes resulting
from future operations.
The tax effects of temporary differences which give rise to deferred tax
assets (liabilities) at December 31, 1996 and 1995, are summarized as
follows:
1996 1995
------ ------
Deferred tax assets
Net operating loss carryforwards $ 379,000 $ 420,000
Investment tax credit carryforwards 79,000 79,000
Inventory valuation 48,000 21,000
Allowance for doubtful accounts 6,000 6,000
--------- ---------
Gross deferred tax assets 512,000 526,000
Deferred tax liabilities
Excess tax over book depreciation (153,000) (145,000)
---------- ----------
Net deferred tax assets before
valuation allowance 359,000 381,000
Valuation allowance (279,000) (301,000)
--------- -----------
Net deferred tax asset $ 80,000 $ 80,000
=========== ===========
NOTE G - STOCK OPTION PLANS
In 1983, the Company adopted a plan which provided for the granting to
officers and key employees of the Company of incentive stock options, as
defined in the Internal Revenue Code, for the purchase of a maximum of
250,000 shares of the Company's common stock. Under the terms of the plan,
the options, which expire ten years after grant, are exercisable at a price
equal to the fair market value of the stock at the date of the grant. The
options become exercisable in four annual installments, the first
installment occurring within one year after the date of grant.
<PAGE>
F-14
Telebyte Technology, Inc.
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 1996 and 1995
NOTE G (continued)
In 1994, the Company adopted the 1993 Stock Option Plan (the "1993 Plan"),
which provides for the granting to directors and key employees of the
Company of incentive stock options and nonqualified stock options for the
purchase of a maximum of 100,000 shares of the Company's common stock.
Under the terms of the 1993 Plan, the options, which expire ten years after
grant, are exercisable at a price equal to the fair market value of the
stock at the date of the grant for incentive stock options and at prices
determined by the Board of Directors for nonqualified stock options, and
become exercisable in accordance with terms established at the time of the
grant. At December 31, 1996, the Company had reserved 65,000 shares under
the 1993 Plan.
The following is a summary of activity with respect to stock options under
the plans:
Number Option price Weighted average
of shares Per share exercise price
--------- --------------- --------------
Outstanding at January 1, 1995 66,250 $.3125 to $1.03 $.66
Granted 15,000 2.04 2.04
Expired (4,500) .3125 to .75 .36
------
Outstanding at December 31, 1995 76,750 .3125 to 2.04 .95
Granted 5,000 .79 .79
Expired (10,000) 1.03 to 2.04 1.54
--------
Outstanding at December 31, 1996 71,750 .3125 to 2.04 .86
========
Balance exercisable at 12/31/96 66,750 .3125 to 2.04 .84
========
NOTE H - COMMITMENTS
The Company leases certain equipment used in its operations pursuant to
noncancellable operating leases expiring through October 1998. Rental
expense for such equipment was $17,015 and $15,502 in 1996 and 1995,
respectively. The minimum rental commitments under these noncancellable
operating leases, at December 31, 1996, are summarized as follows:
1997 $ 14,147
1998 9,391
--------
$23,538
========
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated March 11, 1997, accompanying the financial
statements included in the Annual Report of Telebyte Technology, Inc. on Form
10-KSB for the year ended December 31, 1996. We hereby consent to the
incorporation by reference of said report in the Registration Statement of
Telebyte Technology, Inc. on Form S-8 (File No. 0-11883).
GRANT THORNTON LLP
Melville, New York
March 11, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 583,721
<SECURITIES> 0
<RECEIVABLES> 428,953
<ALLOWANCES> 15,000
<INVENTORY> 1,078,111
<CURRENT-ASSETS> 2,234,868
<PP&E> 1,839,408
<DEPRECIATION> 669,373
<TOTAL-ASSETS> 3,448,255
<CURRENT-LIABILITIES> 358,318
<BONDS> 0
0
0
<COMMON> 16,366
<OTHER-SE> 2,090,464
<TOTAL-LIABILITY-AND-EQUITY> 3,448,255
<SALES> 4,136,685
<TOTAL-REVENUES> 4,136,685
<CGS> 1,965,382
<TOTAL-COSTS> 1,965,382
<OTHER-EXPENSES> 2,093,391
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 113,033
<INCOME-PRETAX> 31,455
<INCOME-TAX> 1,000
<INCOME-CONTINUING> 30,455
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,455
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
