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, 1997
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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
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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 January 31, 1997, was
5,328,303 shares.
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V BAND CORPORATION
FORM 10-Q QUARTERLY REPORT
FOR THE THREE MONTHS ENDED JANUARY 31, 1997
TABLE OF CONTENTS
PART I. Financial Information
Item 1. Financial Statements
Consolidated balance sheets at January 31, 1997 (unaudited) and
October 31, 1996
Consolidated statements of operations for the three months ended
January 31, 1997 and 1996 (unaudited)
Consolidated statements of cash flows for the three months ended
January 31, 1997 and 1996 (unaudited)
Notes to consolidated financial statements (unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SIGNATURES
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<CAPTION>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1997 AND OCTOBER 31, 1996
(in 000's, except share data)
January 31, October 31,
1997 1996
-------- --------
ASSETS (unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents ............................... $ 967 $ 2,258
Accounts receivable, less allowance for doubtful
accounts of $384 in 1997 and $381 in 1996 ... 6,481 6,737
Inventories, net ........................................ 8,334 7,798
Deferred tax asset....................................... 700 700
Prepaid expenses and other current assets................ 419 680
-------- --------
Total current assets ........... 16,901 18,173
-------- --------
Fixed Assets:
Furniture, fixtures, equipment and leasehold improvements 9,639 9,701
Less: Accumulated depreciation and amortization ......... (8,679) (8,591)
-------- --------
Total fixed assets ............. 960 1,110
-------- --------
Other Assets ............................................ 2,625 2,759
-------- --------
TOTAL ASSETS ................................ $ 20,486 $ 22,042
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt ......................................... $ 200 $
Accounts payable ........................................ 2,716 3,196
Accrued wages............................................ 703 973
Customer deposits ....................................... 1,585 1,773
Other accrued expenses .................................. 1,001 1,612
-------- --------
Total current liabilities ..... 6,205 7,554
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<CAPTION>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JANUARY 31, 1997 AND OCTOBER 31, 1996
(in 000's, except share data)
January 31, October 31,
1997 1996
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(unaudited)
<S> <C> <C>
Shareholders' Equity:
Common stock, $.01 par value; authorized 20,000,000 shares
issued 7,047,625 in 1997 and 7,042,492 in 1996....... 70 70
Capital in excess of par value ............................. 19,783 19,776
Retained earnings .......................................... 6,068 6,242
Cumulative translation adjustment........................... 128 168
-------- --------
26,049 26,256
Less - Treasury stock, at cost; 1,719,322 shares ........... (11,768) (11,768)
-------- --------
Total shareholders' equity .... 14,281 14,488
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY . $ 20,486 $ 22,042
======== ========
See notes to consolidated financial statements
</TABLE>
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<TABLE>
<CAPTION>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JANUARY 31, 1997 AND 1996 (unaudited)
(in 000's, except per share data)
1997 1996
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<S> <C> <C>
Sales
Equipment ................................. $ 6,106 $ 7,312
Service ................................... 1,396 1,238
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Total sales .......................... 7,502 8,550
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Cost of Sales
Equipment ................................. 3,769 4,388
Service.................................... 946 834
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Total cost of sales .................. 4,715 5,222
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Gross profit ......................... 2,787 3,328
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Operating Expenses
Selling, general and administrative ....... 2,160 2,405
Research and development................... 795 794
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Total operating expenses ............. 2,955 3,199
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Operating income (loss)............... (168) 129
Net Investment Income............................. 3 19
Other Expense..................................... (9) (80)
======= =======
Net income (loss) .................... $ (174) $ 68
======= =======
Per share data
Net income (loss) ......................... $ (.03) $ .01
======= =======
Weighted average number of shares of common
stock and common stock equivalents ........... 5,328 5,323
======= =======
See notes to consolidated financial statements
</TABLE>
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<TABLE>
<CAPTION>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 1997 AND 1996 (unaudited)
(in 000's)
1997 1996
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<S> <C> <C>
Cash Flows from Operating Activities
Net income (loss) ........................................ $ (174) $ 68
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation ......................................... 137 197
Amortization of other assets ......................... 106 113
Provision for doubtful accounts ...................... 3 3
Provision for inventory reserves ..................... -- 25
Changes in assets and liabilities
Accounts receivable ............................. 253 (1,942)
Inventories ..................................... (536) 251
Prepaid expenses and other current assets ....... 261 (50)
Other assets .................................... 52 101
Accounts payable and other current liabilities .. (1,548) (790)
Foreign currency translation adjustment ......... (40) (87)
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Net cash used in operating activities ...... (1,486) (2,111)
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Cash Flows from Investing Activities
Sales of marketable securities ........................... 86
Capital expenditures .................................... (12) (17)
------- -------
Net cash (used in) provided by investing
activities ................................. (12) 69
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<CAPTION>
V BAND CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED JANUARY 31, 1997 AND 1996 (unaudited)
(in 000's)
(continued)
1997 1996
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<S> <C> <C>
Cash Flows from Financing Activities
Proceeds from short-term debt............................. 200 --
Proceeds from issuance of common stock ................... 7 --
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Net cash provided by financing activities... 207 --
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Net decrease in cash and cash equivalents ..................... (1,291) (2,042)
Cash and Cash Equivalents, at beginning of period ............. 2,258 2,740
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Cash and Cash Equivalents, at end of period ................... $ 967 $ 698
======= =======
Supplementary Disclosures
Income taxes paid ........................................ $ 156 $ 65
======= =======
Interest paid............................................. $ 162 $ --
======= =======
See notes to consolidated financial statements
</TABLE>
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V BAND CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in 000's)
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, 1996 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, 1997 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, which includes maintenance contract revenue and repairs, is
recognized when the service has been completed.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current
period presentation.
Note C -- Inventories
Inventories are summarized as follows:
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<CAPTION>
January 31, October 31,
1997 1996
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<S> <C> <C>
Finished goods ............................. $ 5,818 $ 4,757
Parts and components ....................... 4,602 5,144
-------- --------
10,420 9,901
Less: Inventory reserves .................. (2,086) (2,103)
-------- --------
$ 8,334 $ 7,798
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Note D -- Short-Term Debt
In January 1997, the Company borrowed $200,000 from the Company's Chairman and
Chief Executive Officer, payable on demand and bearing 9% interest. The note is
secured by the Company's accounts receivable.
<PAGE>
Note E -- Income Taxes
As of October 31, 1996, the Company's deferred tax asset of $700 is net of a
valuation allowance of $4,818 and has available net operating loss carryfowards
for tax return purposes of approximately $8,900 which begin to expire in 2009.
During the first quarter of 1997, the Company settled a New York State income
tax examination relating to prior years and paid $320 which includes taxes and
interest. Such amounts were reserved for in the prior years.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
(in 000's except per share data)
Results of Operations
Sales for the first quarter of 1997, ended January 31, 1997, of $7,502 were
$1,048, or 12%, lower than the $8,550 reported in the first quarter of 1996.
Equipment sales of $6,106 in the first quarter of 1997 decreased by $1,206, or
16%, from the equipment sales of $7,312 in first quarter of 1996. The decrease
in equipment sales was primarily attributable to decrease in sales for the
Company's wholly-owned subsidiary, Licom, Inc. and to non-financial customers.
Equipment sales for Licom were $159 for the first quarter of 1997 compared to
$823 for the first quarter of 1996, a decrease of $664, or 81%. Equipment sales
to non-financial customers decreased $1,000 from $1,300 in 1996 to $300 in 1997.
Equipment sales for V Band's financial customers increased to $5,647 in 1997
from $5,189 in 1996, or a 9% increase. Sales from the Company's service business
increased to $1,396, or 13% for the first quarter of 1997 from $1,238 for the
first quarter of 1996 due to an increase in the Company's maintenance sales.
Gross profit margin for the first quarter of 1997 was 37% compared to 39% for
the first quarter of 1996. The gross profit margin for the equipment sales was
38% in the first quarter of 1997 compared to 40% for the same period in 1996.
The decrease in the gross profit margin for equipment sales was attributable to
the decline of Licom sales, which typically generate higher gross margins. The
gross profit margin for service sales was 32% for the first quarter of 1997 as
compared to 33% for the same period in 1996.
Operating expenses for the first quarter of 1997 were $2,955, or $244 lower than
the $3,199 reported for the first quarter of 1996. This decrease was
attributable primarily to a reduction in Licom's operating expenses as a result
of decreased sales. The Company recently announced its intentions to further
reduce Licom's operating expenses by relocating its operations to the Company's
corporate headquarters.
The net loss reported in the first quarter ended January 31, 1997 was $174 or
$.03 per share compared to a net income of $68 or $.01 per share, for the first
quarter of 1996. The Company's Licom subsidiary recorded an operating loss of
$195 compared to an operating loss of $9 in the first quarter of 1996. Excluding
Licom's operating loss, the Company's net income was $21 for the first quarter
of 1997 as compared to $77 for the first quarter of 1996. The average shares
outstanding for the quarter ended January 31, 1997 increased to 5,328 versus
5,323 for the same period in 1996.
Financial Condition
The Company's aggregate of cash and cash equivalents was $967 at January 31,
1997, a decrease of $1,291 from the October 31, 1996 balance of $2,258. The
decline was attributable primarily to an increase in inventory and a decrease in
accounts payable and other current liabilities.
In January 1997, the Company borrowed $200,000 on a short-term basis, from the
Company's Chairman and Chief Executive Officer. The Company has no other
indebtedness and believes it will be able to obtain a credit facility which,
together with other resources, would provide sufficient liquidity to meet
projected requirements.
<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 12, 1997
/s/ Thomas E. Feil
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Thomas E. Feil
Chairman & Chief Executive Officer
(Duly Authorized Officer)
Date: March 12, 1997
/s/ Mark R. Hahn
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Mark R. Hahn
Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JAN-31-1997
<CASH> 967
<SECURITIES> 0
<RECEIVABLES> 6,481
<ALLOWANCES> 384
<INVENTORY> 8,334
<CURRENT-ASSETS> 16,901
<PP&E> 9,639
<DEPRECIATION> (8,679)
<TOTAL-ASSETS> 20,486
<CURRENT-LIABILITIES> 6,205
<BONDS> 0
0
0
<COMMON> 19,853
<OTHER-SE> (5,572)
<TOTAL-LIABILITY-AND-EQUITY> 20,486
<SALES> 7,502
<TOTAL-REVENUES> 7,502
<CGS> 4,715
<TOTAL-COSTS> 2,160
<OTHER-EXPENSES> 795
<LOSS-PROVISION> 3
<INTEREST-EXPENSE> (9)
<INCOME-PRETAX> (174)
<INCOME-TAX> 0
<INCOME-CONTINUING> (174)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (174)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
