<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 or
Transition 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 0-14677
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DSP TECHNOLOGY INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2832651
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(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number
48500 KATO RD., FREMONT, CA 94538
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(Address of principal executive offices) (Zip Code)
(510) 657-7555
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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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate number of shares outstanding of each of the issuer's classes of common
stock, at the latest practical date:
CLASS OUTSTANDING AS OF JUNE 9, 1995
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Common Stock 2,125,298
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DSP TECHNOLOGY INC. AND SUBSIDIARIES
TABLE OF CONTENTS
FORM 10-Q
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets -
April 30, 1995 and January 31, 1995 3
Consolidated Statements of Income -
Three months ended April 30, 1995 and 1994 4
Consolidated Statements of Cash Flows -
Three months ended April 30, 1995 and 1994 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 8
Signatures 8
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DSP TECHNOLOGY INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
April 30, January 31,
1995 1995
--------- ----------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,534 $ 1,334
Accounts receivable 1,724 3,003
Inventories 1,946 1,807
Deferred income taxes 257 257
Prepaid expenses 104 120
-------- --------
Total current assets 6,565 6,521
Property and equipment 1,019 972
Cost in excess of net assets of acquired
business 434 445
Other assets 654 806
-------- --------
$ 8,672 $ 8,744
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 534 $ 562
Accrued liabilities 1,373 1,399
Income taxes payable 128 370
-------- --------
Total current liabilities 2,035 2,331
Deferred income taxes 145 145
Commitments and contingencies -- --
Shareholders' equity:
Preferred stock. Authorized 2,500,000 shares;
none issued -- --
Common stock. 25,000,000 shares authorized;
shares issued and outstanding: 2,125,298 at
April 30 and 2,109,465 January 31 2,818 2,767
Retained earnings 3,674 3,501
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$ 8,672 $ 8,744
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DSP TECHNOLOGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
April 30,
--------------------
1995 1994
-------- --------
<S> <C> <C>
Net sales $ 3,211 $ 2,650
Cost of sales 1,238 1,124
-------- --------
Gross profit 1,973 1,526
Operating expenses:
Research and development 457 362
Marketing, general and administrative 1,270 1,053
-------- --------
1,727 1,415
-------- --------
Operating income 246 111
Interest income 32 14
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Income before income taxes 278 125
Income taxes 105 45
-------- --------
Net income $ 173 $ 80
-------- --------
-------- --------
Net income per common and common
equivalent share $ .08 $ .04
-------- --------
-------- --------
Weighted average common and common
equivalent shares outstanding 2,288 2,175
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DSP TECHNOLOGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
<TABLE>
<CAPTION>
Three months ended
April 30,
------------------
1995 1994
------ -----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 173 $ 80
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 93 121
Changes in current assets and liabilities:
Accounts receivable 1,279 (749)
Inventories (139) (291)
Prepaid expenses and other 16 5
Accounts payables (28) 139
Accrued liabilities (26) 40
Income taxes payable (242) 44
------- ------
Net cash provided by (used in) operating activities 1,126 (611)
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Cash flows from investing activities:
Purchases of property and equipment (129) (54)
Other 152 56
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Net cash provided by (used in) investing activities 23 2
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Cash flows from financing activities:
Proceeds from issuance of common stock 51 --
Increase (decrease) in cash 1,200 (609)
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Cash at beginning of period 1,334 1,109
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Cash at end of period $ 2,534 $ 500
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------- ------
Supplemental disclosure of cash flow information:
Cash paid during period for income taxes $ 345 $ 2
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------- ------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
DSP TECHNOLOGY INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION.
The accompanying consolidated financial statements have been prepared,
without audit, in accordance with Securities and Exchange Commission
requirements for interim financial statements. Therefore, they do not
include all the disclosures that would be presented in the Company's Annual
Report on Form 10-K. The financial statements should be read in
conjunction with the Company's January 31, 1995 financial statements and
accompanying notes thereto.
The information furnished reflects all adjustments (consisting only of
normal recurring adjustments) that are, in the opinion of management,
necessary for a fair presentation of financial position, results of
operations and cash flows for the interim period. The results of
operations for the periods presented are not necessarily indicative of
results to be expected for the full year.
2. INVENTORIES. Inventories are stated at the lower of cost (first-in, first-
out) or market. Inventories consist of:
<TABLE>
<CAPTION>
April 30, January 31,
1995 1995
----------- -----------
(thousands)
<S> <C> <C>
Raw materials $ 939 $ 975
Work in process 585 440
Finished goods 422 392
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$ 1,946 $ 1,807
------- -------
------- -------
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the first quarter of fiscal 1996 (three months ended April
30, 1995) increased by $561,000 or 21% to $3,211,000 from $2,650,000 in the
first quarter of fiscal 1995 (three months ended April 30, 1994). The increase
was primarily due to higher shipments of the company's core products brought
about by a higher beginning shippable sales backlog at this compared to last
year.
Cost of sales as a percentage of net sales decreased to 39% in this year's
first quarter compared to 42% in the first quarter last year. The decrease is a
result of economies of scale because of larger volume this year.
Research and development expenses increased by $95,000 or 26% in the first
quarter this year to $457,000 compared to the same period a year ago. The
increase in expenses is primarily due to the $75,000 capitalization of the
dynamometer control software development costs last year.
Marketing, general and administrative expenses in the first quarter of
fiscal 1996 increased by $217,000 or 21% to $1,270,000 from $1,053,000 in the
same quarter last year. As a percentage of sales, however, expenses remained at
the 40% level in both quarters. The increase in expenses was principally due to
higher expenses associated with the a major trade show and by higher selling
expenses.
Net interest income was $32,000 compared to $14,000 in the first quarter
last year. The increase reflected higher cash balances invested in interest
bearing accounts with higher interest rates this year compared to last year.
The effective tax rate computed for the first quarter this year was 38%
compared to 36% in last year's first quarter. The Company reviews the tax rate
quarterly and could make minor adjustments to reflect changing estimates.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Large system orders represent an increasingly large percentage of the
Company's sales. Also, sales of such systems have been concentrated in a
relatively small number of customers. The Company did not receive a large
system order in the first quarter this year while last year, the first quarter
sales and orders benefited from receipt of two major system contracts totaling
approximately $3.6 million which were delayed from the previous year. Hence,
the Company's operating results may fluctuate, especially when measured on a
quarterly basis, as a result of the timing of receipt of major system orders.
The Company's future operating results may also be affected by a number of
factors, including: its ability to introduce new products and enhancements for
its customers as demands for increasingly sophisticated measurement and control
systems continue; uncertainties relative to global economic conditions; the
Company's ability to withstand competition particularly from several companies
that are much larger in size than the Company; natural disasters, particularly
earthquakes which may stike the California area where the Company's headquarters
and manufacturing facility are located; and availability and cost of components
for its products.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased by $1,200,000 during the quarter ended
April 30, 1995, to $2,534,000. The Company's working capital, also, increased
to $4,530,000 at April 30, 1995 compared to $4,190,000 at January 31, 1995 and
the current ratio stood at 3.2 to 1.0 at April 30, 1995 from 2.8 to 1.0 at
January 31, 1995. At April 30, 1995, the Company has $1,000,000 secured bank
line of credit. The Company currently anticipates that internally generated
funds and bank borrowings will be sufficient to satisfy its anticipated
operating and capital needs over the foreseeable future.
At April 30, 1995, the Company had no material outstanding commitments to
purchase capital equipment. Management believes that inflation has not had a
material effect on the Company's operations and financial condition.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits: None.
B. Reports on Form 8-K: None.
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.
DSP TECHNOLOGY INC.
------------------------
(Registrant)
By: /s/ Jose M. Millares
-------------------------
Jose M. Millares
Chief Financial Officer
Date: June 14, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> APR-30-1995
<CASH> 2,534
<SECURITIES> 0
<RECEIVABLES> 1,774
<ALLOWANCES> 50
<INVENTORY> 1,946
<CURRENT-ASSETS> 6,565
<PP&E> 3,097
<DEPRECIATION> 2,078
<TOTAL-ASSETS> 8,672
<CURRENT-LIABILITIES> 2,035
<BONDS> 0
<COMMON> 2,818
0
0
<OTHER-SE> 3,674
<TOTAL-LIABILITY-AND-EQUITY> 8,672
<SALES> 3,211
<TOTAL-REVENUES> 3,211
<CGS> 1,238
<TOTAL-COSTS> 1,238
<OTHER-EXPENSES> 1,727
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 278
<INCOME-TAX> 105
<INCOME-CONTINUING> 173
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 173
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
