United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
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[ ] TRANSITON REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-11883
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TELEBYTE, INC.
(Exact name of small business issuer as
specified in its charter)
Delaware 11-2510138 (State or other jurisdiction of incorporation (IRS Employer
Identification No.)
or organization)
270 Pulaski Road, Greenlawn, New York 11740
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(631) 423-3232
------------------------------------------------------------------
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since
last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such 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 May 15, 2000, there were outstanding 1,253,631 shares of Common Stock,
$.01 par value.
Transitional Small Business Disclosure Format (check one);
Yes No X
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<PAGE>
TELEBYTE, INC. & SUBSIDIARY
INDEX
Part I Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet
March 31, 2000 (Unaudited)
Consolidated Statements of Earnings
Three months ended
March 31, 2000 and 1999 (Unaudited)
Consolidated Statement of Shareholders' Equity
Three months ended
March 31, 2000 (Unaudited)
Consolidated Statements of Cash Flows
Three months ended
March 31, 2000 and 1999 (Unaudited)
Notes to Condensed Consolidated Financial
Statements (Unaudited)
Item 2. Management's Discussion and
Analysis or Plan of Operation
Part II Other Information
<PAGE>
Part I Financial Information
Item 1. Financial Statements
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 428,754
Accounts receivable, less
allowance for doubtful accounts 910,787
Inventory 1,436,157
Prepaid expenses 57,444
Deferred income taxes 135,000
-------------------
TOTAL CURRENT ASSETS 2,968,142
PROPERTY, PLANT AND EQUIPMENT, less
accumulated depreciation and amortization 1,133,155
OTHER ASSETS 372,115
-------------------
$ 4,473,412
===================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 358,695
Accrued expenses 139,452
Income taxes payable 59,878
Current maturities of long-term debt 77,006
-------------------
TOTAL CURRENT LIABILITIES 635,031
LONG-TERM DEBT, less current maturities 1,019,016
DEFERRED INCOME TAXES 195,000
SHAREHOLDERS' EQUITY
Common stock - $.01 par value; 9,000,000
shares authorized; 1,253,631 shares
issued and outstanding 12,536
Capital in excess of par value 1,781,672
Retained earnings 830,157
-------------------
2,624,365
-------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,473,412
===================
The accompanying notes are an integral part of these financial statements.
<PAGE>
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months
Ended March 31,
--------------------------------------------
2000 1999
------------------- ----------------------
NET SALES $ 1,682,304 $ 1,365,280
COST OF SALES 800,795 678,467
------------------- ----------------------
GROSS PROFIT 881,509 686,813
------------------- ----------------------
OPERATING EXPENSES
Selling,
general and administrative 467,468 430,685
Research and development 131,811 129,119
------------------- ----------------------
599,279 559,804
------------------- ----------------------
Operating Income 282,230 127,009
------------------- ----------------------
OTHER INCOME (EXPENSE)
Rental Income 12,049 12,049
Interest Income 4,815 4,682
Interest Expense (26,636) (30,364)
------------------- ----------------------
Earnings before income taxes 272,458 113,376
Provision for income taxes 105,500 45,000
------------------- ----------------------
NET EARNINGS $ 166,958 $ 68,376
=================== ======================
Earnings per common share:
Basic $ 0.13 $ 0.05
=================== ======================
Diluted $ 0.10 $ 0.05
=================== ======================
Shares used in computing earnings per common share:
Basic 1,249,909 1,303,494
=================== ======================
Diluted 1,636,518 1,310,256
=================== ======================
The accompanying notes are an integral part of these financial statements.
<PAGE>
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2000
(Unaudited)
<TABLE>
<CAPTION>
Number of Capital in
shares Common excess of Retained
issued stock par value earnings Total
------- ------ ---------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at January 1, 2000 1,248,631 $ 12,486 $ 1,740,472 $ 663,199 $2,416,157
Common stock issued for purchase
of intangibles 5,000 50 41,200 41,250
Net earnings 166,958 166,958
--------------- ---------------- ------------------ ----------------- -------------------
Balance at March 31, 2000 1,253,631 $ 12,536 $ 1,781,672 $ 830,157 $2,624,365
================= ================ ================== ================= ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months
Ended March 31,
----------------------------
2000 1999
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 166,958 $ 68,376
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 62,069 37,695
Decrease (increase) in operating assets:
Accounts receivable (51,870) (84,440)
Inventories 83,120 (169,898)
Prepaid expenses and other 3,351 27,844
Increase (decrease) in
operating liabilities:
Accounts payable 86,179 173,614
Accrued expenses and taxes (129,632) 88,700
------------- -------------
Net cash provided by operating activities 220,175 141,891
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (42,251) (22,944)
(110,000) -
Purchase of intangibles
Cost of non-compete agreement - (203,124)
------------ --------------
Net cash used in investing activities (152,251) (226,068)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under mortgage obligation (14,602) (15,525)
Net borrowings under debt obligations 4,905 259,045
Purchase of treasury stock - (927,430)
Proceeds from exercise of stock options - 3,950
------------- --------------
Net cash used in financing activities (9,697) (679,960)
------------- --------------
Net increase (decrease) in
cash and cash equivalents 58,227 (764,137)
Cash and cash equivalents at beginning of period 370,527 919,630
------------- --------------
Cash and cash equivalents at end of period $ 428,754 $ 155,493
============= ==============
Non cash financing activities
Issuance of common stock and
note payable for purchase of intangibles $ 60,825
The accompanying notes are an integral part of these financial statements.
<PAGE>
TELEBYTE, INC. & SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of March 31, 2000, the consolidated statement
of earnings, stockholders' equity and cash flows for the three-month period then
ended have been prepared by us 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 March 31, 2000 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 our Annual Report to Shareholders for the fiscal year ended December 31,
1999. The results of operations for the period ended March 31, 2000 are not
necessarily indicative of the operating results for the full year.
2. EARNINGS PER SHARE
The number of shares used in the Company's basic and diluted earnings per share
computations are as follows:
Weighted average common shares outstanding
for basic earnings per share 1,249,909
Common stock equivalents for stock options 386,609
---------
Weighted average common shares outstanding
for diluted earnings per share 1,636,518
---------
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
When used herein, the words "believe," "anticipate," "think," "intend," "will
be," "expect" and similar expressions identify forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are not guarantees of future performance and involve certain risks
and uncertainties discussed herein and under the caption "Risk Factors" in our
Annual Report on Form 10-K for the year ended December 31, 1999, which could
cause actual results to differ materially from those in the forward-looking
statements. Readers are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the date hereof. Readers are
also urged carefully to review and consider the various disclosures made by us
which attempt to advise interested parties of the factors which affect our
business, including, without limitation, the disclosures made under the caption
"Management's Discussion and Analysis or Plan of Operation." All references to a
fiscal year are to our fiscal year, which ends December 31.
RESULTS OF OPERATIONS
Sales during the first quarter ended March 31, 2000 increased 23% to $1,682,304
compared to sales of $1,365,280 for the same period in 1999. We believe that the
increase in sales was primarily due to an increase in sales of our new DSL Test
Equipment units, which were introduced during the fourth quarter of 1999.
Cost of sales for the first quarter of $800,795 (or 47.6% of sales) increased
compared to the $678,467 (or 49.7% of sales) during the same period in 1999. The
increase in our profit margin percentage was primarily a function of product
mix.
Selling, general and administrative costs for the first quarter of $467,468
increased by $36,783 from $430,685 during the first quarter of 1999. The
increase during the first quarter was due primarily to expenses related to our
subsidiary, Nextday.com, totaling $150,307 partially offset by cost cutting
measures implemented by us during 1999. We believe that our investment in
Nextday.com will have a greater impact on sales beginning in 2001.
Research and development expenses for the first quarter of $131,811 increased
slightly, compared to $129,119 during the same quarter in 1999. During the first
quarter, we continued the development of our USB product line and expect to
introduce our first USB product during the third quarter of 2000. During the
first quarter, we began development of a multi-line wire line simulator, which
can simulate up to 16 local loops up to 18,500 feet each. We believe this new
product will broaden our DSL product line and enable us to be more competitive
in the marketplace.
Interest income increased to $4,815 during the first quarter of 2000 compared to
$4,682 for the same period in 1999. This slight increase in interest income was
due primarily to higher levels of cash on deposit. During the first quarter of
2000, we had rental income of $12,049, which was in line with the comparable
quarter of 1999.
The effective tax rate in first quarter of 2000 was 38.7%, compared with 39.7 %
in same quarter in 1999.
The net earnings of $166,958 or $.10 diluted per share for the first quarter of
2000 increased 144% compared to the net earnings of $68,376 or $.05 per share in
the same quarter in 1999. The increase in profitability is due primarily to the
increase in sales during the first quarter of 2000.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the three months ended March 31,
2000 was $220,175 compared to net cash provided of $141,891 in the same period
of 1999. This change is due primarily to an increase in net earnings.
Working capital increased as of March 31, 2000 by $66,154 to $2,333,111,
compared with $2,266,957 from December 31, 1999. The current ratio as of March
31, 2000 increased to 4.7:1 compared to 4.4:1 as of December 31, 1999.
We have an agreement with a financial institution, expiring June 30, 2001, which
provides us with a line of credit of up to $500,000 based on our eligible
accounts receivable and purchased components and materials and finished goods
inventories , as defined in the agreement. Further, the agreement contains
certain financial covenants which require us to maintain a minimum level of
tangible net worth and places limitations on the ratio of our total debt to our
tangible net worth, as defined in the agreement. Borrowings under the line of
credit bear interest at the bank's specified prime rate plus .75%. There was no
outstanding indebtedness under the line of credit as of March 31, 2000.
In January 1999, we secured an additional reducing revolving line of credit from
the same institution that provides for initial borrowings up to a maximum of
$1,000,000. Availability under the reducing revolving line of credit decreases
by approximately $11,900 per month and the line expires January, 2006.
Borrowings under this loan agreement bear interest at the 30-Day Commercial
Paper Rate plus 2.90%. Net borrowings under this line of credit totaled $226,846
at March 31, 2000.
We believe that cash generated by our operations, current cash and cash
equivalents, and the line of credit should supply the cash resources to meet our
cash needs for at least the next 12 months.
<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
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, INC.
By: __________\s\_________________
Kenneth S. Schneider
Chairman of the Board
(Principal Executive Officer)
By: ___________\s\________________
Michael Breneisen, President
(Principal Financial and Accounting Officer)
Date: May 15, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 428,754
<SECURITIES> 0
<RECEIVABLES> 929,807
<ALLOWANCES> 19,020
<INVENTORY> 1,436,157
<CURRENT-ASSETS> 2,968,142
<PP&E> 2,130,256
<DEPRECIATION> 997,101
<TOTAL-ASSETS> 4,473,412
<CURRENT-LIABILITIES> 635,031
<BONDS> 0
0
0
<COMMON> 12,536
<OTHER-SE> 2,611,829
<TOTAL-LIABILITY-AND-EQUITY> 4,473,412
<SALES> 1,682,304
<TOTAL-REVENUES> 1,682,304
<CGS> 800,795
<TOTAL-COSTS> 800,795
<OTHER-EXPENSES> 599,279
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,636
<INCOME-PRETAX> 272,458
<INCOME-TAX> 105,500
<INCOME-CONTINUING> 166,958
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 166,958
<EPS-BASIC> .13
<EPS-DILUTED> .10
</TABLE>
