SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934
For the quarterly period ended January 31, 1995
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- ----- 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 0-13284
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V BAND CORPORATION
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(Exact name of registrant as specified in its charter)
New York 13-2990015
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
565 Taxter Road, Elmsford, New York 10523
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(Address and zip code of principal executive office)
(914) 789-5000
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 Common Stock outstanding, as of February 28, 1995, was
5,316,448 shares.
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V BAND CORPORATION
FORM 10-Q QUARTERLY REPORT
FOR THE THREE MONTHS ENDED JANUARY 31, 1995
TABLE OF CONTENTS
PART I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated balance sheets -- January 31, 1995 and October 31, 1994
Consolidated statements of operations -- For the three months ended
January 31, 1995 and 1994
Consolidated statements of cash flows -- For the three months ended
January 31, 1995 and 1994
Notes to consolidated financial statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
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V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31 1995 AND OCTOBER 31 1994
(in 000's)
<TABLE>
<CAPTION>
January 31, October 31,
1995 1994
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<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ................................. $ 845 $ 3,122
Marketable securities, at cost (approximates market) ...... 4,620 4,603
Accounts receivable, less allowance for doubtful
accounts of $206,000 in 1995 and $263,000 in 1994 ....... 6,311 7,669
Inventories, net .......................................... 12,700 11,773
Deferred tax asset ........................................ 1,251 1,251
Prepaid expenses and other current assets ................. 512 505
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Total current assets .......................... 26,239 28,923
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Fixed Assets
Furniture, fixtures, equipment and leasehold improvements . 9,774 10,019
Less: Accumulated depreciation and amortization ........... (8,445) (8,536)
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Total fixed assets ........................... 1,329 1,483
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Other Assets .............................................. 5,315 5,621
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TOTAL ASSETS .................................. $ 32,883 $ 36,027
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable .......................................... $ 2,932 $ 3,710
Accrued wages ............................................. 655 872
Customer deposits ........................................ 2,794 2,842
Other accrued expenses .................................... 2,827 2,564
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Total current liabilities ..................... 9,208 9,988
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Commitments and Contingencies (see notes)
Shareholders' Equity
Common stock, $.01 par value; authorized 20,000,000 shares;
issued 7,035,770 in 1995 and 1994 ....................... 70 70
Capital in excess of par value ............................ 19,756 19,756
Retained earnings ......................................... 15,458 17,809
Cumulative translation adjustment ......................... 159 172
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35,443 37,807
Less - Treasury stock, at cost; 1,719,322 shares .......... (11,768) (11,768)
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Total shareholders' equity .................... 23,675 26,039
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .............. $ 32,883 $ 36,027
======== ========
See notes to consolidated financial statements.
</TABLE>
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V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JANUARY 31, 1995 AND 1994
(in 000's, except per share data)
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
Sales
Equipment .................................................. $ 4,150 $ 5,675
Service .................................................... 2,149 561
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Total sales ............................................ 6,299 6,236
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Cost of Sales
Equipment ................................................... 3,107 2,891
Service ..................................................... 1,273 341
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Total cost of sales .................................... 4,380 3,232
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Gross profit ........................................... 1,919 3,004
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Operating Expenses
Selling, general and administrative ......................... 3,427 2,211
Research and development .................................... 956 752
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Total operating expenses ................................ 4,383 2,963
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Operating income (loss) ................................. (2,464) 41
Net investment income ......................................... 74 114
Other Income (Expense) ........................................ 39 0
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Net income(loss) ....................................... $(2,351) $ 155
======= =======
Per share data
Net income (loss) ........................................... $ (.44) $ .03
======= =======
Weighted average number of shares of common
stock and common stock equivalents ........................... 5,322 5,287
======= =======
See notes to consolidated financial statements
</TABLE>
<PAGE>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OP CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31. 1995 AND 1994
(in 000's)
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss) ................................................ $(2,351) $ 155
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation ................................................... 207 206
Amortization of other assets ................................... 233 182
Provision for doubtful accounts ................................ 34 23
Provision for inventories ...................................... 185 234
Gain on disposal of fixed assets ............................... (5) 0
Changes in assets and liabilities(net of business acquisitions):
Decrease in accounts receivable ............................. 1,324 89
(Increase)in inventories .................................... (1,112) (1,474)
(Increase) in prepaid expenses and other current assets ..... (7) (79)
Decrease(increase) in other assets .......................... 73 (22)
(Decrease) in accounts payable and accrued expenses ......... (780) (607)
Foreign currency translation adjustment ..................... (13) 0
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Net cash used in operating activities .................... (2,212) (1,293)
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Cash Flows from Investing Activities
Purchases of marketable securities ............................... (365) (2,897)
Sales of marketable securities, net .............................. 348 2,996
Capital expenditures ............................................. (48) (68)
Payments for business acquisitions ............................... 0 (440)
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Net cash used in investing activities .................... (65) (409)
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Cash Flows from Financing Activities
Proceeds from issuance of common stock ........................... 0 27
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Net cash provided by financing activities ................ 0 27
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Net decrease in cash and cash equivalents ................ (2,277) (1,675)
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Cash and Cash Equivalents, at beginning of period .................. 3,122 3,003
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Cash and Cash Equivalents, at end of period ........................ $ 845 $ 1,328
======= =======
Supplementary Disclosures
Income taxes paid ................................................ $ 78 --
Interest paid .................................................... -- --
See notes to consolidated financial statements
</TABLE>
<PAGE>
V BAND CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A -- Basis of Presentation
The accompanying consolidated financial statements include the accounts of V
Band Corporation and its wholly owned subsidiaries (the "Company"). All
significant intercompany balances and transactions have been eliminated. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. These consolidated financial statements should be read in
conjunction with the Company's audited financial statements for the fiscal year
ended October 31, 1994 as set forth in the Company's annual report on Form 10-K.
In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows at January 31, 1995 and all periods
presented have been made.
Note B -- Inventories
Inventories are summarized as follows:
January 31, October 31,
1995 1994
------------ ------------
Finished goods ......................... $ 6,541,000 $ 5,920,000
Parts and components ................... 8,990,000 8,607,000
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15,531,000 14,527,000
Less: Inventory reserves .............. (2,831,000) (2,754,000)
------------ ------------
$ 12,700,000 $ 11,773,000
============ ============
Note C -- Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" during the first quarter of 1994. The deferred tax
asset valued at $1,242,000, net of a valuation allowance of $150,000 was
recorded in the Company's fourth quarter of 1994. As of October 31, 1994, the
Company had available net operating loss carryfowards for tax return purposes of
$397,000 which expire in 2007. There was no benefit for income taxes recorded in
the three months ended January 31, 1995 as the loss incurred cannot be carried
back to prior years. Management has not recorded an incremental tax asset
related to the loss incurred in the first quarter of 1995.
Note D -- Lease Commitments
On March 1, 1995, the Company entered into an agreement to lease a facility, in
Elmsford, New York, with approximately 15,000 square feet of space to be used
for the Company's production and assembly operations. Accordingly, the Company
excercised its right to terminate, with 120 days' notice, its current lease for
67,000 square feet in Yonkers, New York. The Company recorded a $400,000
non-recurring restructuring charge related to expenses to be incurred and assets
to be disposed of during the transition of the manufacturing facility to the new
location.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Sales for the first quarter of fiscal 1995 ended January 31, 1995, of $6,299,000
were slightly higher than the $6,236,000 reported in the first quarter of 1994.
Equipment sales of $4,150,000, in the first quarter of 1995, represents a
decline of $1,525,000, or 27%, from the equipment sales of $5,675,000 in first
quarter of 1994. This decrease was due in part to a generally weaker demand in
certain segments of the financial services market. Sales from the Company's
service business increased to $2,149,000, or 283%, for the first quarter of 1995
as compared to $561,000 for the first quarter of 1994. This increase was
attributable to the Company's sales and service operations acquired during the
latter part of fiscal 1994.
Gross profit margin for the first quarter of 1995 was 30% as compared to 48% for
the first quarter of 1994. The gross profit margin for the equipment sales
declined to 25% in the first quarter of 1995 as compared to 49% for the same
period in 1994. The decline in equipment gross profit margin was due primarily
to lower volume of equipment sales, lower pricing for the Company's products and
a lower portion of sales of the Company's Viax Analog product, for which gross
margins are typically higher. The gross profit margin for service sales was 41%
for the first quarter of 1995 as compared to 39% for the same period in 1994.
This increase was primarily attributable to gross profits derived from
cancellation charges related to a contract in the Company's United Kingdom
operation.
Operating expenses for the first quarter of 1995 were $4,383,000, or $1,420,000
higher than the $2,963,000 reported for the first quarter of 1994. This increase
in operating costs was attributable primarily to expenses associated with the
Company's newly-acquired service businesses and higher research and development
expenses related to new products. Additionally, on March 1, 1995, the Company
entered into an agreement to lease a facility, in Elmsford, New York, with
approximately 15,000 square feet of space to be used for the Company's
production and assembly operations. Accordingly, the Company excercised its
right to terminate, with 120 days' notice, its current lease for 67,000 square
feet in Yonkers, New York. The Company recorded a $400,000 non-recurring
restructuring charge related to expenses to be incurred and assets to be
disposed of during the transition of the manufacturing facility to the new
location. Management believes the reorganized production plans, which will rely
to a greater extent on out-sourced contract manufacturing of its product
sub-assemblies, will enable the Company to improve its plant utilization.
Net investment income declined to $74,000 for the first quarter of 1995 as
compared to $114,000 for the first quarter of 1994. This decrease was
attributable primarily to a decrease in marketable securities, of which $4.4
million was used for the Company's 1994 business acquisitions.
The net loss reported in the first quarter ended January 31, 1995 was $2,351,000
or a loss of $.44 per share as compared to a net income of $155,000 or $.03 per
share for the first quarter of 1994. The average shares outstanding for the
quarter ended January 31, 1995 increased to 5,322,000 versus 5,287,000 for the
same period in 1994.
Financial Condition
The Company's aggregate of cash, cash equivalents and marketable securities was
$5,465,000 at January 31, 1995, a decrease of $2,260,000 from the October 31,
1994 balances of $7,725,000. The net decrease reflects the use of approximately
$1,700,000 of cash to fund the quarter's net loss. The remaining reduction in
cash was attributable primarily to increases in inventory, to support orders to
be shipped in the next quarter and a decrease in current liabilities related
costs incurred in fulfilling existing larger sales orders, for which the Company
had received deposits in the fourth quarter of 1994. Offsetting these reductions
to cash was a decrease in accounts receivables which was attributable to lower
quarterly sales for the first quarter of 1995 as compared to the fourth quarter
of 1994.
The Company's cash management practice has been to invest mainly in medium to
high-grade municipal securities and United States Treasury and United States
Government Agency securities, with maturities ranging from 90 days to three
years.
<PAGE>
V BAND CORPORATION
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
V BAND CORPORATION
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(Registrant)
Date: March 10, 1995
/s/ Thomas E. Feil
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Thomas E. Feil
Chairman & Chief Executive Officer
(Duly Authorized Officer)
Date: March 10, 1995
/s/ George J. Rogers
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George J. Rogers
Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> JAN-31-1995
<CASH> 845
<SECURITIES> 4,620
<RECEIVABLES> 6,311
<ALLOWANCES> 206
<INVENTORY> 12,700
<CURRENT-ASSETS> 26,239
<PP&E> 9,774
<DEPRECIATION> 8,445
<TOTAL-ASSETS> 32,883
<CURRENT-LIABILITIES> 9,208
<BONDS> 0
<COMMON> 19,826
0
0
<OTHER-SE> 3,849
<TOTAL-LIABILITY-AND-EQUITY> 32,883
<SALES> 6,299
<TOTAL-REVENUES> 6,299
<CGS> 4,380
<TOTAL-COSTS> 3,427
<OTHER-EXPENSES> 956
<LOSS-PROVISION> 34
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,351)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,351)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,351)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> (.44)
</TABLE>
