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, 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 0-13284
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 January 31, 1996, was
5,323,170 shares.
<PAGE>
V BAND CORPORATION
FORM 10-Q QUARTERLY REPORT
FOR THE THREE MONTHS ENDED JANUARY 31, 1996
TABLE OF CONTENTS
PART I. Financial Information
Item 1. Financial Statements
Consolidated balance sheets at January 31, 1996 (unaudited) and October
31, 1995
Consolidated statements of operations for the three months ended January
31, 1996 and 1995 (unaudited)
Consolidated statements of cash flows for the three months ended January
31, 1996 and 1995 (unaudited)
Notes to consolidated financial statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SIGNATURES
<PAGE>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1996 AND OCTOBER 31, 1995
(in 000's, except share data)
<TABLE>
<CAPTION>
January 31, October 31,
1996 1995
-------- --------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents ................................. $ 698 $ 2,740
Marketable securities, at cost (approximates market) ...... 101 187
Accounts receivable, less allowance for doubtful
accounts of $459 in 1996 and $456 in 1995 ............... 6,722 4,783
Inventories, net .......................................... 7,320 7,596
Deferred tax asset ........................................ 700 700
Prepaid expenses and other current assets ................. 480 430
-------- --------
Total current assets .......................... 16,021 16,436
-------- --------
Fixed Assets
Furniture, fixtures equipment and leasehold improvements .. 9,322 9,392
Less: Accumulated depreciation and amortization ........... (7,933) (7,821)
-------- --------
Total fixed assets ............................ 1,389 1,571
-------- --------
Other Assets .............................................. 2,993 3,205
-------- --------
TOTAL ASSETS ............................................ $ 20,403 $ 21,212
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable .......................................... $ 1,763 $ 1,538
Accrued wages ............................................. 719 1,097
Customer deposits ......................................... 1,330 1,846
Other accrued expenses .................................... 2,212 2,333
-------- --------
Total current liabilities ..................... 6,024 6,814
-------- --------
Shareholders' Equity
Common stock, $.01 par value; authorized 20,000,000 shares;
issued 7,042,492 shares ................................. 70 70
Capital in excess of par value ............................ 19,776 19,776
Retained earnings ......................................... 6,283 6,215
Cumulative translation adjustment ......................... 18 105
-------- --------
26,147 26,166
Less - Treasury stock, at cost; 1,719,322 shares .......... (11,768) (11,768)
-------- --------
Total shareholders' equity .................... 14,379 14,398
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY .............. $ 20,403 $ 21,212
======== ========
</TABLE>
See notes to consolidated financial statements
<PAGE>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JANUARY 31, 1996 AND 1995 (unaudited)
(in 000's, except per share data)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Sales
Equipment ........................................ $ 7,312 $ 4,855
Service .......................................... 1,238 1,444
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Total sales .................................... 8,550 6,299
------- -------
Cost of Sales
Equipment ........................................ 4,388 3,562
Service .......................................... 784 818
------- -------
Total cost of sales ............................ 5,172 4,380
------- -------
Gross profit ................................... 3,378 1,919
------- -------
Operating Expenses
Selling, general and administrative .............. 2,455 3,427
Research and development ......................... 794 956
------- -------
Total operating expenses ....................... 3,249 4,383
------- -------
Operating income (loss) ........................ 129 (2,464)
Net Investment Income .............................. 19 74
Other Income (Expense) ............................. (80) 39
------- -------
Net income (loss) .............................. $ 68 $(2,351)
======= =======
Per share data
Net income (loss) ................................ $ .01 $ (.44)
======= =======
Weighted average number of shares of common
stock and common stock equivalents ................ 5,328 5,322
======= =======
</TABLE>
See notes to consolidated financial statements
<PAGE>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 1996 AND 1995 (unaudited)
(in 000's)
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss) ................................................. $ 68 $(2,351)
Adjustments to reconcile net income (loss) to net
cash used in operating activities
Depreciation .................................................... 197 207
Amortization of other assets .................................... 113 233
Provision for doubtful accounts ................................. 3 34
Provision for inventory reserves ................................ 25 185
Gain on disposal of fixed assets ................................ -- (5)
Changes in assets and liabilities (net of business acquisitions)
(Increase) decrease in accounts receivable ................... (1,942) 1,324
Decrease (increase) in inventories ........................... 251 (1,112)
Increase in prepaid expenses and other current assets ........ (50) (7)
Decrease in other assets ..................................... 101 73
Decrease in accounts payable and accrued expenses ............ (790) (780)
Foreign currency translation adjustment ...................... (87) (13)
------- -------
Net cash used in operating activities ..................... (2,111) (2,212)
------- -------
Cash Flows from Investment Activities
Purchases of marketable securities ................................ (365)
Sales of marketable securities, net ............................... 86 348
Capital expenditures .............................................. (17) (48)
------- -------
Net cash provided by (used in) investing activities ....... 69 (65)
------- -------
Net decrease in cash and cash equivalents ................. (2,042) (2,277)
Cash and Cash Equivalents, at beginning of Period ................... 2,740 3,122
------- -------
Cash and Cash Equivalents, at end of Period ......................... $ 698 $ 845
======= =======
Supplementary Disclosures
Income taxes paid ................................................. $ 65 $ 78
======= =======
</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 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, 1995 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, 1996 and all periods
presented have been made.
Note B -- Significant accounting policies
Revenue recognition - Equipment revenue, which includes equipment and labor for
new system installations and modifications to existing systems at customer
locations, is recognized as the product is shipped. For long-term contracts,
equipment revenue is recognized under the percentage of completion method.
Service revenue is recognized when the service has been completed.
Reclassifications - Certain reclassifications have been made to the prior year
quarter's information to conform to the current quarter's presentation.
Note C -- Inventories
Inventories are summarized as follows:
<TABLE>
<CAPTION>
January 31, October 31,
1996 1995
------------ ------------
<S> <C> <C>
Finished goods ......................... $ 6,459,000 $ 6,270,000
Parts and components ................... 5,261,000 5,761,000
------------ ------------
11,720,000 12,031,000
Less: Inventory reserves .............. (4,400,000) (4,435,000)
------------ ------------
$ 7,320,000 $ 7,596,000
============ ============
</TABLE>
Note D -- Income Taxes
The deferred tax asset valued at $700,000 is net of a valuation allowance of
$5,026,000. As of October 31, 1995, the Company had available net operating loss
carryfowards for tax return purposes of approximately $6,800,000 which begin to
expire in 2009. Management has not recorded a provision for income taxes in the
three months ended January 31, 1996 as a result of the available net operating
loss carryfowards.
<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 1996, ended January 31, 1996, of
$8,550,000 were $2,251,000, or 36%, higher than the $6,299,000 reported in the
first quarter of 1995. Equipment sales of $7,312,000 in the first quarter of
1996 represents an increase of $2,457,000, or 51%, from the equipment sales of
$4,855,000 in first quarter of 1995. This increase was due in part to an
increase in sales for the Company's eXchange Phone, Power Deck and DXi products.
Sales from the Company's service business were $1,238,000 for the first quarter
of 1996, a decrease of 14%, compared to $1,444,000 for the first quarter of
1995, resulting from periodic variances in the completion of repair sales
orders.
Gross profit margin for the first quarter of 1996 was 40% compared to 30% for
the first quarter of 1995. The gross profit margin for the equipment sales
increased to 40% in the first quarter of 1996 compared to 26% for the same
period in 1995. The increase in equipment gross profit margin was attributable
to several factors -- a higher volume of equipment sales; a changing mix of
equipment sold in favor of products with higher gross margins; and reduced
production costs as result of the manufacturing restructuring initiative
completed in fiscal 1995. In addition, in the fourth quarter of 1995, the
Company wrote-off certain assets and increased certain inventory reserves. As a
result, the gross margin for the first quarter 1996 reflects a lower level of
amortization expense and reserves for inventory than the level of such items in
the first quarter of 1995. The gross profit margin for service sales was 37% for
the first quarter of 1996 as compared to 41% for the same period in 1995. This
decrease was primarily attributable to the decreased repair department sales
which typically earn a higher gross profit.
Operating expenses for the first quarter of 1996 were $3,249,000, or $1,134,000
lower than the $4,383,000 reported for the first quarter of 1995. This decrease
in operating costs was attributable primarily to reduced payroll expenses as a
result of the Company-wide restructuring initiative undertaken in fiscal 1995.
Additionally, during the first quarter of 1995, the Company recorded a $400,000
charge related to the transition of its manufacturing facility to a new
location.
The net income reported in the first quarter ended January 31, 1996 was $68,000
or $.01 per share compared to a net loss of $2,351,000 or $.44 per share, for
the first quarter of 1995. The average shares outstanding for the quarter ended
January 31, 1996 increased to 5,328,000 versus 5,322,000 for the same period in
1995.
Financial Condition
The Company's aggregate of cash, cash equivalents and marketable securities was
$799,000 at January 31, 1996, a decrease of $2,128,000 from the October 31, 1995
balances of $2,927,000. The decline was attributable primarily to the increase
in accounts receivable for several large orders the Company shipped during the
quarter for which, at October 31, 1995, the Company held partial deposits.
The Company's cash management practice has been to invest mainly in United
States Treasury and United States Government Agency securities and medium to
high-grade municipal 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: February 26, 1996 /s/ Thomas E. Feil
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Thomas E. Feil
Chairman & Chief Executive Officer
(Duly Authorized Officer)
Date: February 26, 1996 /s/ Mark R. Hahn
------------------------------------
Mark R. Hahn
Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> JAN-31-1996
<CASH> 698
<SECURITIES> 101
<RECEIVABLES> 6,722
<ALLOWANCES> 459
<INVENTORY> 7,320
<CURRENT-ASSETS> 16,021
<PP&E> 9,322
<DEPRECIATION> 7,933
<TOTAL-ASSETS> 20,403
<CURRENT-LIABILITIES> 6,024
<BONDS> 0
0
0
<COMMON> 19,846
<OTHER-SE> (5,467)
<TOTAL-LIABILITY-AND-EQUITY> 20,403
<SALES> 8,550
<TOTAL-REVENUES> 8,550
<CGS> 5,172
<TOTAL-COSTS> 2,455
<OTHER-EXPENSES> 794
<LOSS-PROVISION> 3
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 68
<INCOME-TAX> 0
<INCOME-CONTINUING> 68
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
