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 April 30, 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
V BAND CORPORATION
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(Exact name of registrant as specified in its charter)
New York 13-2990015
- ------------------------------- -------------------
(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 May 31, 1995, was
5,316,448 shares.
<PAGE>
V BAND CORPORATION
FORM 10-Q QUARTERLY REPORT
FOR THE THREE AND SIX MONTHS ENDED APRIL 30, 1995
TABLE OF CONTENTS
PART I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets at April 30, 1995 and October 31, 1994
Consolidated Statements of Operations for the three and six months ended
April 30, 1995 and 1994
Consolidated Statements of Cash Flows for the six months ended April 30,
1995 and 1994
Notes to consolidated financial statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
SIGNATURES
<PAGE>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 30, 1995 AND OCTOBER 31, 1994
(in 000's, except share data)
<TABLE>
<CAPTION>
April 30, October 31,
1995 1994
--------- -----------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................................. $ 710 $ 3,122
Marketable securities, at cost (approximates market) ...... 3,706 4,603
Accounts receivable, less allowance for doubtful
accounts of $302 in 1995 and $263 in 1994 ............... 4,930 7,669
Inventories, net .......................................... 13,008 11,773
Deferred tax asset ........................................ 1,251 1,251
Prepaid expenses and other current assets ................. 583 505
-------- --------
Total current assets ............................ 24,188 28,923
-------- --------
Fixed Assets:
Furniture, fisxtures, equipment and leashold improvements . 9,739 10,019
Less: Accumulated depreciation and amortization ........... (8,557) (8,536)
-------- --------
Total fixed assets .............................. 1,182 1,483
-------- --------
Other Assets .............................................. 5,155 5,621
-------- --------
TOTAL ASSETS ......................................... $ 30,525 $ 36,027
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable .......................................... $ 1,915 $ 3,710
Accrued wages ............................................. 832 872
Customer deposits ......................................... 2,900 2,842
Other accrued expenses .................................... 2,480 2,564
-------- --------
Total current liabilities ....................... 8,127 9,988
-------- --------
Shareholders' Equity:
Common stock, $.01 par value; authorized 20,000,000 shares;
issued 7,035,770 ........................................ 70 70
Capital in excess of par value ............................ 19,756 19,756
Retained earnings ......................................... 14,187 17,809
Cumulative transition adjustment .......................... 153 172
-------- --------
34,166 37,807
Less - Treasury stock, at cost; 1,719,322 shares .......... (11,768) (11,768)
-------- --------
Total shareholders' equity ...................... 22,398 26,039
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ........... $ 30,525 $ 36,027
======== ========
</TABLE>
See notes to consolidated financial statements
<PAGE>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
FOR THE THREE MONTHS AND SIX MONTHS ENDED APRIL 30, 1995 AND 1994
(in 000's, except per share data)
<TABLE><CAPTION>
Three Months Ended Six Months Ended
April 30, April 30,
------------------ -------------------
1995 1994 1995 1994
------ ------ ------- -------
<S> <C> <C> <C> <C>
Sales
Equipment ......................... $4,993 $6,559 $ 9,144 $12,234
Service ........................... 2,300 946 4,449 1,507
------ ------ ------- -------
Total sales .................. 7,293 7,505 13,593 13,741
------ ------ ------- -------
Cost of Sales
Equipment ......................... 3,508 3,389 6,615 6,280
Service ........................... 1,167 636 2,441 977
------ ------ ------- -------
Total cost of sales .......... 4,675 4,025 9,056 7,257
------ ------ ------- -------
Gross profit ................. 2,618 3,480 4,537 6,484
------ ------ ------- -------
Operating Expenses
Selling, general and administrative 3,057 2,536 6,483 4,747
Research and development .......... 964 819 1,920 1,571
------ ------ ------- -------
Total operating expenses ..... 4,020 3,355 8,403 6,318
------ ------ ------- -------
Operating income (loss) ...... (1,402) 125 (3,866) 166
------ ------ ------- -------
Net Investment Income .................. 76 125 150 239
Other Income (Expense) ................. 55 (2) 94 (2)
------ ------ ------- -------
Net income (loss) ................. $(1,271) $ 248 $(3,622) $ 403
======= ====== ======= =======
Per share data
Net income (loss) ................. $ (.24) $ .05 $ (.68) $ .08
======= ====== ======= =======
Weighted average number of shares of
common stock and common stock
equivalents .......................... 5,323 5,310 5,322 5,298
===== ===== ===== =====
</TABLE>
See notes to consolidated financial statements
<PAGE>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
FOR THE SIX MONTHS ENDED APRIL 30, 1995 AND 1994
(in 000's)
<TABLE>
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss) ................................................. $(3,622) $ 403
Adjustments to reconcile net income (loss) to net
cash used in operating acitivites:
Depreciation .................................................... 391 402
Amortization of other assets .................................... 545 364
Provision for doubtful accounts ................................. 70 45
Provision for inventories ....................................... 378 273
Gain on disposal of fixed assets ................................ (59) 0
Changes in assets and liabilities (net of business acquisitions):
Decrease (increase) in accounts receivable .................... 2,669 (833)
Increase in inventories ....................................... (1,613) (3,367)
Increase in prepaid expenses and other current assets ......... (78) (371)
(Increase) decrease in other assets ........................... (78) 24
(Decrease) increase in accounts payable and accrued expenses .. (1,861) 776
Foreign currency translation adjustment ....................... (19) 0
------- -------
Net cash used in operating activities .................... (3,277) (2,284)
------- -------
Cash Flows from Investing Activities
Purchases of marketable securities ................................ (1,147) (4,729)
Sales of marketable securities, net ............................... 2,044 6,201
Capital expenditures .............................................. (32) (176)
Payments for business acquisitions ................................ 0 (440)
------- -------
Net cash provided by investing activities ................. 865 856
------- -------
Cash Flows from Financing Activities
Proceeds from issuance of common stock ............................ 0 120
------- -------
Net cash provided by financing activities ................ 0 120
------- -------
Net decrease in cash and cash equivalents ................ (2,412) (1,308)
Cash and Cash Equivalents, at beginning of period .................. 3,122 3,003
------- -------
Cash and Cash Equivalents, at end of period ........................ $ 710 $ 1,695
======= =======
Supplementary Disclosures
Income taxes paid ................................................. $ 78 $ 63
Interest paid ..................................................... $ -- $ --
</TABLE>
See notes to consolidated financial statements
<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 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 April 30, 1995 and all periods presented have been
made.
Note B -- Significant accounting policy
Revenue recognition - Equipment revenue, which includes equipment and labor for
new system installations, for long-term contracts is recognized under the
percentage of completion method. Other equipment revenue is recognized as the
product is shipped. Service revenue is recognized when the service has been
completed.
Note C -- Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
April 30, October 31,
1995 1994
------------ ------------
<S> <C> <C>
Finished goods ................. $ 7,010,000 $ 5,920,000
Parts and components ........... 8,930,000 8,607,000
------------ ------------
15,940,000 14,527,000
Less: Inventory reserves ...... (2,932,000) (2,754,000)
------------ ------------
$ 13,008,000 $ 11,773,000
============ ============
</TABLE>
Note D -- 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 $1,251,000 is net of a valuation allowance of $150,000. There
was no benefit for income taxes recorded in the six months ended April 30, 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 six months
ended April 30, 1995.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Sales for the second quarter of 1995, ended April 30, 1995, of $7,293,000 were
slightly lower than the $7,505,000 reported in the second quarter of 1994. For
the six months ended April 30, 1995, sales were $13,593,000, which were slightly
lower than the $13,741,000 reported in 1994. Equipment sales of $4,993,000 in
the second quarter of 1995 declined $1,566,000, or 24%, from the $6,559,000
reported for the second quarter of 1994. For the six months ended April 30,
1995, equipment sales of $9,144,000 declined $3,090,000, or 25%, from the
$12,234,000 reported in the same period for 1994. This decrease was due in part
to a generally weaker demand for the Company's product and competitive pressures
in certain segments of the financial services market. Sales from the service
business increased 143% to $2,300,000 for the second quarter of 1995 as compared
to $946,000 for the second quarter of 1994. Service sales for the six month
period of $4,449,000 were $2,942,000 or 195% higher than the $1,507,000 reported
in 1994. This increase was attributable to the Company's sales and service
operations acquired during the latter part of 1994.
Gross profit margins for the second quarter and six months ended April 30, 1995
were 36% and 33%, respectively, as compared to 46% and 47%, respectively, for
the same periods in 1994. The gross profit margins for the equipment sales
declined to 30% and 28%, respectively, in the second quarter and six months
ended April 30, 1995 as compared to 48% and 49%, respectively, for the same
periods 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 margins for service sales were
49% and 45%, respectively, for the second quarter and six months of 1995 as
compared to 33% and 35%, respectively, for the same periods in 1994. These
increases in margin were primarily attributable to increased maintenance
contract and repair sales for which margins are typically higher and gross
profits derived from cancellation charges related to a contract in the Company's
United Kingdom operations.
Operating expenses for the second quarter of 1995 were $4,020,000, or $665,000
higher than the $3,355,000 reported for the second quarter of 1994. For the six
months ended April 30, 1995, operating expenses were $8,403,000, or $2,085,000
higher than the $6,318,000 for the same period in 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. In addition, the Company recorded a $400,000
non-recurring manufacturing restructuring charge related to expenses to be
incurred and assets to be disposed of during the transition of the Company's
manufacturing facility to a 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 $76,000 and $150,000 for the second quarter
and six months ended April 30, 1995 as compared to $125,000 and $239,000 for the
same period 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 for the second quarter ended April 30, 1995 was
$1,271,000, or $.24 per share, as compared to a net income of $248,000, or $.05
per share, for the second quarter of 1994. The net loss reported for the six
months ended April 30, 1995 was $3,622,000, or $.68 per share, as compared to a
net income of $403,000, or $.08 per share, for the same period in 1994. The
average shares outstanding for the period ended April 30, 1995 increased to
5,323,000 versus 5,298,000 for the same period in 1994.
Financial Condition
The Company's aggregate of cash, cash equivalents and marketable securities was
$4,416,000 at April 30, 1995, a decrease of $3,309,000 from the October 31, 1994
balances of $7,725,000. The net decrease reflects the use of approximately
$2,300,000 of cash to fund the year-to-date 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 to
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
sales for the second 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
------------------------------------
(Registrant)
Date: June 9, 1995 /s/ Thomas E. Feil
------------------------------------
Thomas E. Feil
Chairman & Chief Executive Officer
(Duly Authorized Officer)
Date: June 9, 1995 /s/ George J. Rogers
------------------------------------
George J. Rogers
Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> APR-30-1995
<CASH> 710
<SECURITIES> 3,706
<RECEIVABLES> 4,930
<ALLOWANCES> 302
<INVENTORY> 13,008
<CURRENT-ASSETS> 24,188
<PP&E> 9,739
<DEPRECIATION> 8,557
<TOTAL-ASSETS> 30,525
<CURRENT-LIABILITIES> 8,127
<BONDS> 0
<COMMON> 19,826
0
0
<OTHER-SE> 2,572
<TOTAL-LIABILITY-AND-EQUITY> 30,525
<SALES> 13,593
<TOTAL-REVENUES> 13,593
<CGS> 9,056
<TOTAL-COSTS> 6,483
<OTHER-EXPENSES> 1,920
<LOSS-PROVISION> 70
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,622)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,622)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,622)
<EPS-PRIMARY> (.68)
<EPS-DILUTED> (.68)
</TABLE>
