<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, 1996 OR
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 0-14677
_____________________________________________________
DSP TECHNOLOGY INC.
___________________________________________________________________________
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-2832651
___________________________________ _________________________
(State or other jurisdiction of I.R.S. Employer
incorporation or organization) Identification Number
48500 KATO RD., FREMONT, CA 94538
________________________________________ _________________________
(Address of principal executive offices) (Zip Code)
(510) 657-7555
____________________________________________________________________________
(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
_________ _________
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 daae:
CLASS OUTSTANDING AS OF JUNE 12, 1996
----- -------------------------------
Common Stock 2,160,963
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DSP TECHNOLOGY INC. AND SUBSIDIARIES
TABLE OF CONTENTS
FORM 10-Q
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets -
April 30, 1996 and January 31, 1996 3
Consolidated Statements of Income -
Three months ended April 30, 1996 and 1995 4
Consolidated Statements of Cash Flows -
Three months ended April 30, 1996 and 1995 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 9
2
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DSP TECHNOLOGY INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
April 30, January 31,
1996 1996
----------- -----------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 1,434 $1,816
Certificates of deposit 99 199
Accounts receivable 3,456 3,302
Inventories 2,126 2,195
Deferred income taxes 257 257
Prepaid expenses 183 155
------- ------
Total current assets 7,555 7,924
Property and equipment 1,229 1,044
Cost in excess of net assets of acquired
business 392 403
Other assets 1,112 923
------- ------
$10,288 $10,294
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 432 $ 459
Accrued liabilities 1,263 1,371
Income taxes payable 543 622
------- -------
Total current liabilities 2,238 2,452
Deferred income taxes 145 144
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: 2,159,963 at
April 30 and 2,154,463 at January 31 2,926 2,920
Retained earnings 4,979 4,778
------- -------
$10,288 $10,294
------- -------
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,
------------------
1996 1995
------ ------
<S> <C> <C>
Net sales $3,775 $3,211
Cost of sales 1,538 1,238
------ ------
Gross profit 2,237 1,973
Operating expenses:
Research and development 496 457
Marketing, general and administrative 1,475 1,270
------ ------
1,971 1,727
------ ------
Operating income 266 246
Interest income 42 32
------ ------
Income before income taxes 308 278
Income taxes 107 105
------ ------
Net income $ 201 $ 173
====== ======
Net income per common and common
equivalent share $.09 $.08
====== ======
Weighted average common and common
equivalent shares outstanding 2,315 2,288
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
DSP TECHNOLOGY INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
<TABLE>
<CAPTION>
Three months ended
April 30,
-------------------
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 201 $ 173
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 183 93
Changes in current assets and liabilities:
Accounts receivable (154) 1,279
Inventories 69 (139)
Prepaid expenses and other (28) 16
Accounts payables (27) (28)
Accrued liabilities (108) (26)
Income taxes payable (79) (242)
------ ------
Net cash provided by (used in) operating activities 57 1,126
------ ------
Cash flows from investing activities:
Purchases of property and equipment (295) (129)
(Purchases) redemptions of certificates of deposit, net 100 --
Investment in software development (175)
Other (75) 152
------ ------
Net cash provided by (used in) investing activities (445) 23
------ ------
Cash flows from financing activities:
Proceeds from issuance of common stock 6 51
Increase (decrease) in cash (382) 1,200
------ ------
Cash at beginning of period 1,816 1,334
------ ------
Cash at end of period $1,434 $2,534
====== ======
Supplemental disclosure of cash flow information:
Cash paid during period for income taxes $ 175 $ 345
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<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, 1996 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,
1996 1996
--------- -----------
(thousands)
<S> <C> <C>
Raw materials $1,265 $1,247
Work in process 414 492
Finished goods 447 456
------ ------
$2,126 $2,195
====== ======
</TABLE>
6
<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 1997 (three months ended April
30, 1996) increased by 18% to $3,775,000 from $3,211,000 in the first quarter of
fiscal 1996 (three months ended April 30, 1995). The Transportation Group's
RedLine products, which remain the Company's largest product line led the
increase in first quarter sales this year compared to last year's first quarter.
Cost of sales as a percentage of net sales increased to 41% in this year's
first quarter compared to 39% in the first quarter last year. The increase is a
result of the addition of new service personnel in anticipation of future
growth. These service personnel are responsible for customizing our products to
customers' specific requirements. In addition, they install and commission the
Company's systems in the field.
Research and development expenses increased by $39,000 or 9% in the first
quarter this year to $496,000 compared to the same period a year ago. The
increase in expenses is primarily due to the ramp up of joint new product
development with FEV, the Company's strategic ally in Germany and offset by
higher capitalization of software development costs in this year's first
quarter.
Marketing, general and administrative expenses in the first quarter of
fiscal 1997 increased by $205,000 or 16% to $1,475,000 from $1,270,000 in the
same quarter last year. As a percentage of sales, however, expenses remained at
the 39-40% level in both quarters. The increase in expenses was primarily due
to the addition of new sales and marketing personnel. The Company's strategy is
to add these new personnel to help deal with the current and future increase in
sales activity level.
Net interest income was $42,000 compared to $32,000 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 35%
compared to 38% in last year's first quarter. The lower tax rate is
attributable to increase in profit contribution from our United Kingdom
subsidiary which enjoys a lower overall tax rate than our US operations. 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 received a large system order
in the first quarter this year while last year, there was no large system order
placed. A little under half of the large system order received this year is not
shippable in the current fiscal 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.
7
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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.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents decreased by $382,000 during the quarter ended
April 30, 1996, to $1,434,000. The decrease was due primarily to the Company's:
a) purchases of equipment for additional personnel and to upgrade our
information systems capabilities, and b) investment in software development.
The Company's working capital, also, decreased slightly to $5,317,000 at April
30, 1996 compared to $5,472,000 at January 31, 1996. Notwithstanding, current
ratio remained strong at 3.4 to 1 at April 30, 1996 from 3.2 to 1.0 at January
31, 1996. At April 30, 1996, 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, 1996, 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.
8
<PAGE>
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 13, 1996
9
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<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1997
<PERIOD-START> FEB-01-1996
<PERIOD-END> APR-30-1996
<CASH> 1434
<SECURITIES> 99
<RECEIVABLES> 3506
<ALLOWANCES> 50
<INVENTORY> 2126
<CURRENT-ASSETS> 7555
<PP&E> 3784
<DEPRECIATION> 2555
<TOTAL-ASSETS> 10288
<CURRENT-LIABILITIES> 2238
<BONDS> 0
2926
0
<COMMON> 0
<OTHER-SE> 4979
<TOTAL-LIABILITY-AND-EQUITY> 10288
<SALES> 3775
<TOTAL-REVENUES> 3775
<CGS> 1538
<TOTAL-COSTS> 1538
<OTHER-EXPENSES> 1971
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 308
<INCOME-TAX> 107
<INCOME-CONTINUING> 201
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 201
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
