United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
For the quarter ended September 30, 1997
[ ] Transition Report Under 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 (IRS Employer
Incorporation or organization) Identification No.)
270 Pulaski Road, Greenlawn, New York 11740
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (516) 423-3232
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes X No
As of November 11, 1997 there were outstanding 1,481,766 shares of Common Stock,
$.01 par value.
Transitional Small Business Disclosure Format (check one);
Yes No X
<PAGE>
TELEBYTE TECHNOLOGY, INC.
INDEX
Part I Financial Information
Item 1. Financial Statements
Balance Sheet
September 30, 1997 (Unaudited)
Statements of Earnings
Three and nine months ended
September 30, 1997 and 1996 (Unaudited)
Statements of Cash Flows
Nine months ended
September 30, 1997 and 1996 (Unaudited)
Notes to Condensed Financial
Statements (Unaudited)
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation.
Part II Other Information
<PAGE>
Part I Financial Information
Item 1. Financial Statements
TELEBYTE TECHNOLOGY, INC.
BALANCE SHEET
SEPTEMBER 30,1997
(unaudited)
ASSETS
CURRENT ASSETS
Cash & cash equivalents $ 337,228
Accounts receivable, less
allowance for doubtful accounts 766,442
Inventory 1,157,126
Prepaid expenses 112,441
Deferred income taxes 80,000
------------------
TOTAL CURRENT ASSETS 2,453,237
PROPERTY, PLANT AND EQUIPMENT, less
accumulated depreciation and amortization 1,129,634
OTHER ASSETS 176,122
------------------
$ 3,758,993
==================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 384,843
Accrued expenses 120,667
Current maturities of long-term debt 59,013
------------------
TOTAL CURRENT LIABILITIES 564,523
LONG-TERM DEBT, less current maturities 939,857
SHAREHOLDERS' EQUITY
Common stock, par value $.01 per share
1,636,566 issued and 1,481,766 outstanding 16,366
Capital in excess of par value 2,751,988
Accumulated deficit (412,648)
Less treasury stock, at cost, (154,800 shares) (101,093)
------------------
2,254,613
------------------
TOTAL LIABILITIES AND SHAREHOLDER'S' EQUITY $ 3,758,993
==================
The accompanying notes are an integral part of these financial statements.
<PAGE>
TELEBYTE TECHNOLOGY, INC.
STATEMENTS OF EARNINGS
(Unaudited)
Three Months Nine Months
Ended September 30, Ended September 30,
------------------------- ------------------------
1997 1996 1997 1996
------------- ----------- ----------- ------------
NET SALES $ 1,480,196 $ 1,265,191 $ 3,739,257 $ 3,169,648
COST OF SALES 683,967 601,538 1,713,642 1,462,684
------------- ----------- ----------- ------------
GROSS PROFIT 796,229 663,653 2,025,615 1,706,964
------------- ----------- ----------- ------------
OPERATING EXPENSES
Research and development 90,433 53,213 234,464 177,625
Selling, G&A 532,028 419,524 1,601,610 1,333,726
------------- ----------- ----------- ------------
622,461 472,737 1,836,074 1,511,351
------------- ----------- ----------- ------------
Operating Income 173,768 190,916 189,541 195,613
------------- ----------- ----------- ------------
OTHER INCOME (EXPENSE)
Rental Income 12,048 12,048 36,146 36,146
Interest Income 2,924 3,088 9,119 9,207
Interest Expense (29,911) (28,444) (84,523) (86,178)
-------------- ----------- ----------- ------------
Income before income taxes 158,829 177,608 150,283 154,788
Provision for income taxes 2,500 2,500 2,500 2,500
-------------- ----------- ---------- ------------
NET INCOME $ 156,329 $ 175,108 $ 147,783 $ 152,288
=============== =========== =========== ============
NET INCOME PER SHARE $ 0.11 $ 0.12 $ .10 $ 0.10
=============== =========== =========== ============
Average number of shares 1,481,766 1,489,932 1,481,766 1,492,688
=============== =========== =========== ============
The accompanying notes are an integral part of this financial statement
<PAGE>
TELEBYTE TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months
Ended September 30,
----------------------------------
1997 1996
-------------- ---------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 147,783 $ 152,288
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation and amortization 67,450 65,475
Increase in assets:
Accounts receivable (352,489) (200,525)
Inventories (79,015) (117,207)
Prepaid expenses and other (166,128) (28,454)
Increase (decrease) in liabilities:
Accounts payable 186,820 82,780
Accrued expenses 25,924 (28,168)
-------------- ---------------
Net cash used in operating activities (169,655) (73,811)
-------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash was paid for:
Property and equipment (27,049) (36,616)
-------------- ---------------
Net cash used in investing activities (27,049) (36,616)
-------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash was used for:
Purchase Treasury Stock 0 (15,148)
Principal payments of long-term debt (49,789) (37,787)
-------------- ---------------
Net cash used in financing activities (49,789) (52,935)
-------------- ---------------
Net decrease in cash and cash equivalents (246,493) (163,362)
Cash and cash equivalents at
beginning of period 583,721 609,467
--------------- ---------------
Cash and cash equivalents at
end of period $ 337,228 $ 446,105
=============== ===============
The accompanying notes are an integral part of these financial statement.
<PAGE>
TELEBYTE TECHNOLOGY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED FINANCIAL STATEMENTS
The balance sheet as of September 30, 1997, the statement of earnings for the
three and nine months then ended and the statements of cash flows for the nine
month period then ended have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only normal recurring
accrual adjustments) necessary to present fairly the financial position, results
of operations and cash flows at September 30, 1997 have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the financial statements and notes thereto included
in the Company's annual report to shareholders for the fiscal year ended
December 31, 1996. The results of operations for the period ended September 30,
1997 are not necessarily indicative of the operating results for the full year.
2. NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128. Earnings per share, which is effective
for financial statements for both interim and annual periods ending after
December 15, 1997. Early adoption of the new standard is not permitted. The
standard eliminates primary and fully diluted earnings per share and requires
presentation of basic and diluted earnings per share together with disclosure of
how the per share amounts were computed. The adoption of this new standard is
not expected to have a material impact on the disclosure of earnings per share
in the financial statements.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation.
Statements in this Form 10-QSB that are not descriptions of historical fact are
forward-looking statements that are subject to risks and uncertainties. Actual
results could differ materially from those currently anticipated due to a number
of factors, including risks relating to competition; and other factors impacting
the data communications industry.
SIGNIFICANT EVENTS
During the third quarter, the Company announced that it was the recipient of a
contract for $288,000 for custom lightning protection equipment from its
distributor, Graybar Electric. This order emanated from Motorola, who is
building systems for the U.S. Air Force. This order is expected to be shipped in
its entirety in the fourth quarter. It is believed that this is the first of a
multi-year procurement for this equipment.
In addition, the Company has announced that orders for the third quarter were
the best for any quarter in the Company's history. New orders for the third
quarter ended September 30, 1997 were $2,029,000, as compared to $1,260,000 for
the comparable period of 1996. In addition to the $288,000 Graybar order, the
quarter also included orders for custom products from Intel, IBM, Hill-Rom,
Lucent and Acuson, and orders for standard products from GTE Supply, Alcatel,
Pair Gain, So. California Edison, Sprint, U.S. Robotics and others.
RESULTS OF OPERATIONS
Sales for the third quarter ended September 30, 1997 increased 17% to $1,480,196
compared to sales of $1,265,191 for the comparable period in 1996, and sales of
$1,227,978 for the second quarter of 1997. The higher sales level can be
attributed to continued success of the Company's decision to expand promotional
activities, which began during the first quarter of 1996.
Cost of sales for the third quarter of $683,967 or 46.2% of sales decreased
compared to $601,538 or 47.5% of sales during the same period in 1996. The
increase in the Company's gross profit margin was primarily a function of
product mix.
Selling, general and administrative expenses of $532,028 for the third quarter
ended September 30, 1997 increased 27% compared to $419,524 for the same quarter
in 1996 and increased 12% compared to $476,036 for the second quarter of 1997.
Such increases are a result of the Company's increase in its promotional
activities in an effort to boost sales. During the third quarter of 1997, the
Company distributed over 100,000 product catalogs, this is in addition to the
200,000 catalogs sent during the first half of 1997.
Research and development expenses increased to $90,433 in the third quarter of
1997, as compared to $53,213 for the third quarter of 1996 and $84,603 in the
second quarter of 1997, due to increased demand for specialty products.
Engineering efforts during the third quarter focused on the development of a
T1/E1 to Fiber Optic converter. Also under development were several custom
products including a lightning protection subsystem for use in a field
deployable computer system being developed by Motorola for the Air Force. Other
custom products included a switching device for Intel Corporation and a
communication controller device for Hill-Rom and Arial Systems Corp.
<PAGE>
Interest income decreased to $2,924 and $9,119 for three and nine months ended
September 30, 1997, compared to $3,088 and $9,207 for the comparable periods
ended September 30, 1996. The slight decrease reflects lower levels of
short-term investments of cash equivalents.
Net income of $156,329 for the third quarter of 1997 decreased compared to
$175,108 for the third quarter of 1996. The decrease can be primarily attributed
to higher selling and engineering expenses during the third quarter. However the
Company views these expenses as an investment in future growth.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities of $169,655 was used primarily to fund
increased levels of inventory and accounts receivable due to increased sales
revenues. Working capital decreased to $1,888,714 at September 30, 1997, a
decrease of $346,154 from December 31 1996. The current ratio at September 30,
1997 decreased to 4.3 to 1 compared to 6.2 to 1 at December 31, 1996. The
Company renewed its $1,000,000 line of credit with Merrill Lynch, effective July
1, 1997, for two years. The Company has no amounts outstanding under the line of
credit at this time. The Company considers its working capital to be adequate to
fund presently foreseeable working capital requirements.
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit No. 27 - Financial Data Schedule
(b) Reports on Form 8-K - None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
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: November 11, 1997
<TABLE> <S> <C>
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<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 1
<CASH> 337,228
<SECURITIES> 0
<RECEIVABLES> 781,442
<ALLOWANCES> 15,000
<INVENTORY> 1,157,126
<CURRENT-ASSETS> 2,453,237
<PP&E> 1,866,454
<DEPRECIATION> 736,820
<TOTAL-ASSETS> 3,758,993
<CURRENT-LIABILITIES> 564,523
<BONDS> 0
0
0
<COMMON> 16,366
<OTHER-SE> 2,238,247
<TOTAL-LIABILITY-AND-EQUITY> 3,758,993
<SALES> 1,480,196
<TOTAL-REVENUES> 1,480,196
<CGS> 683,967
<TOTAL-COSTS> 683,967
<OTHER-EXPENSES> 622,461
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29,911
<INCOME-PRETAX> 158,829
<INCOME-TAX> 2,500
<INCOME-CONTINUING> 156,329
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 156,329
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
</TABLE>
