<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Quarterly Period Ended September 30, 1997
or
[_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission File Number 333-6952
MAS TECHNOLOGY LIMITED
(Exact name of registrant as specified in its charter)
NEW ZEALAND NOT APPLICABLE
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organisation)
24 BRIDGE STREET, LOWER HUTT, WELLINGTON, NEW ZEALAND
(Address of principal executive offices, including zip code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (+64 4) 569-2170
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
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
ordinary shares as of the latest practicable date.
Ordinary Shares, No par value per 6,800,000 shares
share, each represented by one American (Outstanding at September 30, 1997)
Depositary Share
(Class)
Page 1
<PAGE>
This Form 10-Q/A (Amendment No. 1) amends Part II. of the Quarterly Report on
Form 10-Q for the quarter ended September 30, 1997, originally filed by MAS
Technology Limited on October 28, 1997. The effect of the restatement is due to
the addition of the Financial Data Schedule as Exhibit 27.
FORM 10-Q/A
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1
Page Number
<S> <C> <C>
Condensed Consolidated Interim Financial Statements:
Condensed Consolidated Balance Sheets as of September 30, 3
1997 and March 31, 1997.
Condensed Consolidated Statements of Operations for the Three 4
Months and Six Months Ended September 30, 1996 and 1997.
Condensed Consolidated Statements of Cash Flows for the Six 5
Months Ended September 30, 1996 and 1997.
Notes to Condensed Consolidated Interim Financial Statements 6
ITEM 2
Management's Discussion and Analysis of Financial Condition 16
and Results of Operations.
PART II. OTHER INFORMATION
ITEM 6
Exhibits and Reports on Form 8-K 23
SIGNATURES
EXHIBIT INDEX
</TABLE>
Page 2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1
- ------
MAS TECHNOLOGY LIMITED
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars)
<TABLE>
<CAPTION>
March 31, September 30, September 30,
1997 1997 1997
NZ$ NZ$ US$
(note 2)
(Audited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 10 $32,084 $20,527
Accounts receivables, net of allowance of NZ$97,
NZ$143 and US$91, respectively 19,392 18,592 11,895
Inventory 8,135 12,743 8,153
Prepaids and other 934 2,035 1,302
------- ------- -------
Total current assets 28,471 65,454 41,877
Deferred taxes, net 476 520 333
Property and equipment, net 2,122 2,418 1,547
Intangible assets 1,069 917 587
Deferred offering costs 2,150 - -
------- ------- -------
Total assets $34,288 $69,309 $44,344
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Cash overdraft $ 518 $ - $ -
Short-term borrowings 6,600 - -
Accounts payable 10,576 10,595 6,779
Accrued employee benefits payable 1,733 779 498
Accrued professional fees payable 1,380 146 93
Other accrued liabilities 315 331 212
Income taxes payable 1,095 1,272 814
Acquisition costs payable 755 - -
------- ------- -------
Total current liabilities 22,972 13,123 8,396
Shareholders equity
Ordinary shares, no par value; 4,500,000; 6,800,000;
6,800,000 issued and outstanding, respectively 4,734 45,636 29,198
Retained earnings 7,593 11,211 7,173
Cumulative translation adjustment (12) 38 24
Deferred compensation (999) (699) (447)
------- ------- -------
Total shareholders' equity 11,316 56,186 35,948
------- ------- -------
Total shareholders' equity and liabilities $34,288 $69,309 $44,344
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated interim
financial statements.
Page 3
<PAGE>
MAS TECHNOLOGY LIMITED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, SIX MONTHS ENDED SEPTEMBER 30,
------------------------------------ ----------------------------------
1996 1997 1997 1996 1997 1997
NZ$ NZ$ US$ NZ$ NZ$ US$
(note 2) (note 2)
<S> <C> <C> <C> <C> <C> <C>
Sales
Products and services revenue 8,328 24,943 15,959 16,403 39,421 25,222
Cost of sales
Products and services 5,276 15,824 10,124 10,318 25,206 16,127
------ ------ ------ ------ ------ ------
Gross profit 3,052 9,119 5,835 6,085 14,215 9,095
Operating expenses:
Research and development 861 1,383 885 1,706 2,566 1,642
Selling and marketing 1,499 3,216 2,058 2,469 5,979 3,825
General and administration 689 1,376 880 1,408 2,632 1,684
------ ------ ------ ------ ------ ------
Total operating expenses 3,049 5,975 3,823 5,583 11,177 7,151
Income from operations 3 3,144 2,012 502 3,038 1,944
Interest income (expense) (99) 424 271 (155) 281 180
Other income - 1,929 1,234 - 2,243 1,435
------ ------ ------ ------ ------ ------
Net income before taxes (96) 5,497 3,517 347 5,562 3,559
Income tax expense 3 1,883 1,205 186 1,944 1,244
------ ------ ------ ------ ------ ------
Net income (99) 3,614 2,312 161 3,618 2,315
====== ====== ====== ====== ====== ======
Net income per ordinary share $(0.02) $0.53 $0.34 $0.04 $0.62 $0.40
====== ====== ====== ====== ====== ======
Weighted average ordinary shares
and ordinary share equivalents
outstanding 4,175 6,852 6,852 4,163 5,813 5,813
====== ====== ====== ====== ======= ======
</TABLE>
The accompanying notes are an integral part of these consolidated interim
financial statements
Page 4
<PAGE>
MAS TECHNOLOGY LIMITED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------
1996 1997 1997
NZ$ NZ$ US$
(NOTE 2)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 161 $ 3,618 $ 2,315
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortisation expense 277 335 214
Unrealised foreign exchange (gains) loss - (1,741) (1,114)
Amortisation of deferred compensation 224 300 192
Deferred taxes 40 (44) (28)
Changes in assets and liabilities:
Accounts receivable 2,330 800 512
Prepaids and other 49 (1,101) (704)
Inventory (2,727) (4,608) (2,948)
Accounts payable (4,720) 19 12
Accrued employee benefits (428) (954) (610)
Accrued professional fees - 38 24
Other accrued liabilities (113) 16 10
Income taxes payable (757) 177 113
------- ------- -------
Net cash used by operating activities (5,664) (3,145) (2,012)
CASH FLOW FROM INVESTING ACTIVITIES:
Purchase consideration for NZ Telecoms (Pty) Limited - (728) (466)
Proceeds from disposal of fixed assets - 14 9
Acquisition of property and equipment (152) (520) (333)
------- ------- -------
Net cash used by investing activities (152) (1,234) (790)
CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from the issuance of ordinary shares, net of
offering costs of NZ$2,883 - 41,780 26,731
Proceeds from short-term borrowing 3,750 - -
Repayment of short-term borrowing - (6,600) (4,223)
Increase / (decrease) in cash overdraft 773 (518) (331)
------- ------- -------
Net cash provided by financing activities 4,523 34,662 22,177
Net increase / (decrease) in cash held (1,293) 30,283 19,375
Adjustment for foreign currency differences (7) 1,791 1,146
Cash and cash equivalents, beginning of period 1,300 10 6
------- ------- -------
Cash and cash equivalents, end of period $ - $32,084 $20,527
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated interim
financial statements.
Page 5
<PAGE>
MAS TECHNOLOGY LIMITED
AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(UNAUDITED)
1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of business
MAS Technology Limited and subsidiaries ("MAS" or the "Company") is
incorporated in Wellington, New Zealand. The Company designs, manufactures and
markets medium to long haul digital microwave radio systems for use in the
world-wide telecommunications market. The Company's systems are sold to end
users, domestically and internationally through its direct sales force,
strategic partners, systems providers, OEMs and distributors as well as directly
to end users.
Basis of presentation
These consolidated financial statements have been prepared in accordance
with United States generally accepted accounting principles (US GAAP).
The Company publishes its financial statements in New Zealand dollars. In
this Form 10-Q references to "US$" are to United States dollars and references
to "NZ$" are to New Zealand dollars. For the convenience of the reader, this
Form 10-Q contains translations of certain NZ$ amounts into US$. These
translations should not be construed as representations that the NZ$ amounts
actually represent such US$ amounts or could be converted into US$ at the rate
indicated. On September 30, 1997, the Noon Buying Rate was NZ$1.00 to US$0.6398.
See "Other Information - Exchange Rates".
The Company's fiscal year ends on March 31. As used in this Form 10-Q, the
fiscal year ended March 31, 1997 is referred to as "fiscal year 1997", and other
fiscal years are referred to in a corresponding manner.
Basis of consolidation
The accompanying condensed consolidated financial statements include the
accounts of MAS and its wholly-owned subsidiaries, MAS Technology (Pty) Limited
(incorporated in Australia), Marine-Air Services Limited, MAS Technology
Services Limited, Marine-Air Systems Employee Share Trustee Ltd, MAS Technology
Limited Company (incorporated in United States), MAS Technology (Pty) Limited
(incorporated in Republic of South Africa) (effective from September 1, 1996 due
to the acquisition of NZ Telecoms (Pty) Limited), NZ Telecoms (Pty) Limited
(incorporated in Republic of South Africa), Radio Communications and Engineering
Services Botswana (Pty) Limited (incorporated in Botswana) and NZ Telecomms
Botswana (Pty) Limited (incorporated in Botswana, Non-trading). All significant
intercompany transactions have been eliminated in consolidation.
Page 6
<PAGE>
MAS TECHNOLOGY LIMITED
AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(UNAUDITED)
Revenue recognition
Revenue from product sales is recognized once customers acceptance testing
is complete and the product is shipped provided the Company has not contracted
with the customer to provide value-added services, no significant obligations
remain, and collectability is probable. Provisions for estimated warranty
repairs, returns and allowances are recorded at the time products are shipped.
Deferred payments from customers are held under retention clauses which are
collectable within nine-twelve months after invoicing, typically this is
applicable in Southern Africa. Included in prepaids and other are retention
payments totalling NZ$1,563 as of September 30, 1997.
Contracts
A portion of the Company's revenue is derived from contracts to perform
value-added services, such as network planning, path planning, systems
integration and installation. These value-added services may be provided in
connection with the delivery and installation of the Company's products.
In these situations the Company recognizes revenue according to two methods:
(i) the percentage-of-completion and (ii) completed contract method. The Company
uses the percentage-of-completion method to recognize revenues and costs on
contracts that include value-added service components if the expected completion
date exceeds three months. Such contracts generally are fixed price and do not
exceed 18 months to complete. Revenues and costs are recognized on these
contracts (including the portion of these contracts that relate to product
sales) based on the costs for value-added services incurred to date compared to
estimated total costs for value-added services under the contract. Contract
costs include all direct material, direct labor and indirect costs related to
contract performance. If the expected completion date is less than three months
revenues and costs are accounted for using the completed contract method.
Selling, general and administrative costs are charged to expense as
incurred. Provisions for estimated losses on uncompleted contracts are recorded
in the period in which such losses become probable based on the current contract
estimates.
Page 7
<PAGE>
MAS TECHNOLOGY LIMITED
AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(UNAUDITED)
Cost and estimated earnings in excess of billings on uncompleted contracts
represent those contracts in progress for which revenue recognized exceeds
amounts billed. Billings in excess of costs and estimated earnings on
uncompleted contracts represent those contracts in progress for which billings
exceed revenues recognized. Billings are made in accordance with contract terms.
Cash and cash equivalents
Cash and cash equivalents consist of highly liquid debt instruments with
remaining maturities of three months or less at the date of purchase.
Property and equipment
Property and equipment are presented in the consolidated financial
statements at historical cost less accumulated depreciation.
All property and equipment (except land) are depreciated over their useful
lives using the straight-line method of depreciation. Depreciation of property
and equipment under capitalized leases is computed using the straight-line
method over the shorter of estimated lives or lease terms.
The average depreciable lives for major categories of fixed assets are as
follows:
<TABLE>
<S> <C>
Buildings..................................... 25 years
Office furniture.............................. 5 years
Furniture and fittings........................ 5 years
Plant and equipment........................... 5 years
Other fixed assets............................ 5 years
</TABLE>
Inventory
Inventory consists of raw material, work in progress and finished goods
which are presented in the consolidated financial statements at the lower of
cost (determined on a first in, first out basis) or net realizable value.
Page 8
<PAGE>
MAS TECHNOLOGY LIMITED
AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(UNAUDITED)
Intangible assets
Intangible assets consist of goodwill, which has an estimated useful life of
five years, resulting from the acquisition of the net assets of NZ Telecoms
(Pty) Limited. Intangible assets at September 30, 1997 comprised cost of
NZ$1,078 and accumulated amortisation of NZ$161.
Income taxes
Income taxes are accounted for by the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the consolidated financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carry forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognised in income in the period that includes the
enactment date.
Foreign currency translation
The functional currencies of the Company's foreign subsidiaries are the
local currencies in which the foreign subsidiaries operate. Assets and
liabilities of the Company's foreign subsidiaries are translated into New
Zealand dollars at period-end exchange rates and revenues and expenses are
translated at average rates prevailing during the period. Translation gains and
losses are included in a separate component of shareholders' equity.
Foreign currency transactions
The Company uses forward foreign exchange contracts to manage its foreign
currency risks. The Company enters into forward foreign currency contracts to
limit the effect of exchange rate changes on anticipated but not firmly
committed transactions, principally future revenues. Gains and losses on these
contracts are recognized in the statement of operations as incurred.
Page 9
<PAGE>
MAS TECHNOLOGY LIMITED
AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(UNAUDITED)
The Company also enters into forward foreign currency contracts to limit the
effect of exchange rate changes on foreign currency denominated receivables and
payables as losses and gains on forward foreign currency exchange contracts are
offset by gains and losses on the foreign currency receivables and payables.
Gains and losses on the forward foreign currency contracts and on the underlying
receivables and payables are recognised in the statement of operations as
incurred.
Research and development costs
Research and development costs are expensed as incurred. The Company's
internally developed products include both system and application software.
Software development costs are expensed as incurred until technological
feasibility is achieved and all research and development activities for the
other components of the product have been completed as demonstrated by a working
model. Software development costs incurred subsequent to these two milestones
have been minimal and have been expensed as incurred.
Net income per ordinary share
Net income per ordinary share is computed using the weighted average number
of ordinary shares outstanding and dilutive ordinary share equivalents from the
assumed exercise of options outstanding during the period, if any, using the
treasury stock method.
The Financial Accounting Standards Board recently issued SFAS No. 128,
Earnings per Share. This statement requires the presentation of basic earnings
per share ("EPS") and, for companies with complex capital structures, diluted
EPS. SFAS No. 128 is effective for annual and interim periods ending after
December 31, 1997. The Company does not expect that the basic EPS will differ
materially from the net income per share data presented in the accompanying
consolidated financial statements.
Use of estimates
The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of expenses during the reporting
period. Actual results could differ from these estimates.
Page 10
<PAGE>
MAS TECHNOLOGY LIMITED
AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(UNAUDITED)
Concentration of credit risk
Financial instruments that potentially subject the Company to significant
concentrations of credit risk consist principally of cash, cash equivalents, and
trade accounts receivable. The Company invests its cash and cash equivalents in
a variety of financial instruments. The Company, by policy, limits the amount of
credit exposure to any one financial institution or commercial issuer.
The Company performs on-going credit evaluations of its customers' financial
condition and, generally, requires no collateral from its customers. It is the
Company policy to obtain confirmed letters of credit or other insurance or
guarantees from all customers whose unpaid balance exceeds a predetermined
threshold set by the Board of Directors. The Company maintains an allowance for
doubtful accounts to cover potential credit losses.
Recoverability of long-lived assets
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, requires long-lived assets to be evaluated
for impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. The Company adopted SFAS No. 121 in
fiscal 1996. The adoption of SFAS No. 121 did not have a material effect on the
Company's results of operations.
Pursuant to SFAS No. 121, the Company assesses the recoverability of the
carrying amount of its long-lived assets whenever events or changes in
circumstances indicate that the carrying amount of an asset may be impaired. If
the estimated future undiscounted operating cash flows over the remaining useful
life of the long lived asset is in excess of the carrying amount of the asset, a
charge to income would be recognized for the excess carrying amount of the asset
over its fair value.
Dividend policy
Pursuant to the Deposit Agreement between the Company and the Bank of New
York, should the Company declare and pay dividends, such dividends will be
declared in New Zealand Dollars and paid in United States Dollars with respect
to holders of American Depository Receipts.
Page 11
<PAGE>
MAS TECHNOLOGY LIMITED
AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(UNAUDITED)
Fair value of financial instruments
The carrying values of the Company's cash and cash equivalents, accounts
receivable, cash overdraft, accounts payable and short term borrowings
approximate their respective fair values due to the relatively short maturity of
these instruments.
Stock-based compensation
The Company accounts for its stock-based compensation arrangements in
accordance with the provisions of Accounting Principles Board (APB) Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations. As
such, compensation expense would be recorded on the date of grant only if the
fair value of the underlying stock exceeded the exercise price. On April 1,
1996, the Company adopted the disclosure provisions of SFAS No. 123, Accounting
for Stock-Based Compensation, which requires entities to provide pro forma net
income and pro forma earnings per share disclosures for employee stock option
grants made in fiscal year 1996 and future years as if the fair value-based
method defined in SFAS No. 123 had been applied.
Unaudited interim results
The accompanying balance sheet as of September 30, 1997 and the statements
of operations for the three and six months ended September 30, 1996 and 1997 and
its cash flows for the six months ended September 30, 1996 and 1997 are
unaudited. In the opinion of management, the statements have been prepared on
the same basis as the audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for the fair
statement of the results of interim periods. The data disclosed in these notes
to the consolidated financial statements for these periods are unaudited.
2. CONVERSION OF NEW ZEALAND DOLLAR AMOUNTS TO UNITED STATES AMOUNTS
The consolidated financial statements as of September 30, 1997 have been
translated for convenience purposes from New Zealand dollar amounts into United
States dollars. Unless otherwise stated, the translations of New Zealand dollars
into United States dollars have been made at NZ$1.00 to US$0.6398, the September
30, 1997, noon buying rate in New York City for cable transfers in New Zealand
dollars as reported by the Federal Reserve Bank of New York. These translations
should not be construed as representations that the New Zealand dollar amounts
actually represent such United States dollar amounts or could be converted into
United States dollars at the rate indicated.
Page 12
<PAGE>
MAS TECHNOLOGY LIMITED
AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(UNAUDITED)
3. CASH AND CASH EQUIVALENTS
Included in cash and cash equivalents at September 30, 1997 are US$
denominated balances totaling approximately NZ$29,181 (US$18,670).
4. INVENTORY
Inventory consists of the following:-
<TABLE>
<CAPTION>
MARCH 31, Sept 30,
1997 1997
-------------- --------------
NZ$ NZ$
(unaudited)
<S> <C> <C>
Raw materials 5,093 9,714
Finished goods 2,348 2,237
Work in progress 694 792
-------------- --------------
8,135 12,743
============== ==============
</TABLE>
5. SHAREHOLDERS' EQUITY
1997 Stock option plan
The Company's 1997 Stock Option Plan (the "1997 Plan") was adopted by the
Board on February 15, 1997 and approved by the shareholders on February 15,
1997. A maximum of 540,000 ordinary shares have been authorised for issuance
under the 1997 Plan. As of September 30, 1997 the number of stock options
granted under the 1997 Plan total 341,200 stock options. Under the 1997 Plan,
employees and non-employee members of the Board may, at the discretion of the
plan administrator, be granted options to purchase ordinary shares at an
exercise price not less than 85% of their fair value on the grant date.
The 1997 Plan is administered by the Compensation Committee (the "Plan
Administrator"). The Plan Administrator has complete discretion to determine
which eligible individuals are to receive option grants, the time or times when
such option grants are to be made, the number of ordinary shares subject to each
such grant, the vesting schedule to be in effect for the option grant and the
maximum term for which any granted option is to remain outstanding.
Page 13
<PAGE>
MAS TECHNOLOGY LIMITED
AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(UNAUDITED)
The Plan Administrator has the authority to provide for accelerated vesting of
the outstanding options in connection with certain changes in control of the
Company or the subsequent termination of employment following a change in
control event.
Upon an acquisition of the Company by merger or asset sale, each outstanding
option will be subject to accelerated vesting under certain circumstances.
Stock appreciation rights are authorized for issuance under the 1997 Plan
which provide the holders with the election to surrender their outstanding
options for a distribution from the Company equal to the excess of (i) the fair
market value of the vested ordinary shares subject to the surrendered option
over (ii) the aggregate exercise price payable for such ordinary shares. Such
distribution may be made in cash or in ordinary shares.
The Plan Administrator has the authority to effect the cancellation of
outstanding options under the 1997 Plan in return for the grant of new options
for the same or different number of ordinary shares with an exercise price per
ordinary share based upon the fair market value of the ordinary shares on the
new grant date.
The Board may amend or modify the 1997 Plan at any time. The 1997 Plan
will terminate on February 14, 2007, unless sooner terminated by the Board.
Company re-registration
On December 9, 1996 the Company re-registered under the New Zealand
Companies Act 1993 (the "Act"). In accordance with the provisions of the Act,
the Company has no authorized capital and the ordinary shares have no par value.
All applicable share and per share data have been adjusted for all periods
presented.
Ordinary share split
On April 11, 1997, the Company effected a 3.6-for-1 share split of the
Company's Ordinary Shares. All share, per share and stock option data for all
periods presented has been restated to reflect the share split.
Page 14
<PAGE>
MAS TECHNOLOGY LIMITED
AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
(UNAUDITED)
Initial Public Offering
On June 19, 1997, the Company consummated an initial public offering of
2,000,000 Ordinary Shares, each represented by one American Depositary Share, at
a price per share of US$14.00. On July 7, 1997, the Underwriters exercised an
over-allotment option to purchase 300,000 additional ADSs. After underwriting
discounts and expenses, the net proceeds to the Company from the sale of such
shares were approximately NZ$41,780 (approximately US$26,731).
6. SUPPLEMENTAL DISCLOSURE TO CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30,
-------------------------------------
1996 1997
--------- ---------
<S> <C> <C>
NZ$ NZ$
Supplemental disclosure of cash flow information:
Cash paid for interest $ 151 $ 206
========= =========
Cash paid for income taxes $ 528 $1,797
========= =========
Reclassification of deferred offering costs to
ordinary shares on closing of the initial public $ - $2,150
offering
========= =========
</TABLE>
Page 15
<PAGE>
ITEM 2
- ------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Except for historical information contained herein, the matters discussed in
this report contain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated by these forward-looking statements as a result of various factors,
including those set forth under "Risk Factors" and elsewhere in the Company's
Registration Statement on Form F-1 dated June 19, 1997. Factors that could
cause or contribute to such differences include those discussed herein as well
as those included in the documents that the Company has filed or may file from
time to time with the Securities and Exchange Commission.
OVERVIEW
Based in Wellington, New Zealand, the Company designs, manufactures, markets and
supports low and medium frequency, medium to long-haul digital microwave radio
links for use in the world-wide telecommunications market.
The Company's revenues from sales of telecommunications products consist
primarily of the following two components: (i) sales of the Company's DXR
products and related services such as network planning, installation and
training services; and (ii) sales of third party products and related services
which are complementary to the Company's products such as antennas, other
microwave equipment necessary to complete a transmission system and non-
proprietary telecommunications products sold under distributor agreements.
Sales of the Company's DXR products and related services during the three months
ended September 30, 1996 and 1997 accounted for 74.2% and 53.3% of sales,
respectively. Sales of the Company's DXR products and related services during
the six months ended September 30, 1996 and 1997 accounted for 67.3% and 60.9%
of sales, respectively. Gross margins on sales of the Company's DXR products
and the provision of related services are typically higher than gross margins on
sales of third party products and related services. Sales of third party
telecommunications products and related services have historically accounted for
a significant percentage of the Company's historical revenues. Sales of third
party telecommunications products and related services during the three months
ended September 30, 1996 and 1997 accounted for 25.7% and 64.2% of sales,
respectively. Sales of third party telecommunications products and related
services during the six months ended September 30, 1996 and 1997 accounted for
32.6% and 37.5% of sales, respectively.
Page 16
<PAGE>
During fiscal year 1997 and the three and six months ended September 30, 1997, a
majority of the Company's revenues were denominated in US$ while a majority of
the operating expenses were denominated in NZ$. If the value of the NZ$
increases relative to either the US$ or other international currencies in which
the Company's revenues are denominated, the Company's overall gross profit and
net income could be materially adversely affected. Fluctuations in exchange
rates may cause period to period fluctuations in net income and gross margins.
Net income for the six months ended September 30, 1997 includes NZ$1.7 million
of other income due to unrealized currency gains arising from the conversion of
cash and cash equivalents denominated in US$. See "Other Information -
Exchange Rates".
During fiscal year 1997, the Company significantly expanded its international
sales and marketing operations which resulted in increased costs. Over this
period the Company established offices in several regions and increased its
sales staff across these regions.
On September 1, 1996, the Company acquired certain net assets of a South African
based distributor, NZ Telecoms (Proprietary) Limited, and the shares of two of
its affiliates. This subsidiary sells the Company's and third party
telecommunications products in Southern Africa. The aggregate purchase price
was NZ$1,266,000 with an additional contingent earn-out that provides for
further payments through October 1998 of a maximum of US$2,744,000. The first
earn-out payment totaling NZ$728,000 was paid on April 30, 1997. Substantially
all of the acquisition price and potential earn-out payments will be treated as
goodwill and will be amortized on a straight line basis from the date of payment
until August 31, 2001.
The Company expects that its sales and marketing expenses will increase in
future periods, and if the Company's sales do not correspondingly increase, the
Company's business results of operations and financial condition would be
materially adversely affected.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
The Company has experienced, and may in the future experience, significant
fluctuations in quarterly sales, gross profits and results of operations
including certain seasonal effects. The Company's sales in any period are
generally derived from sales of products pursuant to large orders from a limited
number of customers. As the Company's gross margins on such orders can differ
substantially as a result of a variety of factors, including competitive
factors, product sales mix, or exchange rate fluctuations, the Company's overall
gross margins may vary significantly on a period-to-period basis. Several of
the Company's existing customers have fiscal years and capital investment budget
cycles that end in March. These same customers typically purchase products
towards the end of such fiscal years or budgetary cycles.
Page 17
<PAGE>
In addition, because the Company's products are often incorporated into a
customer's larger networking initiative, sales of the Company's products
typically involve a significant and lengthy technical evaluation, commitment of
management, sales and other resources and the delays frequently associated with
large capital expenditures. The sales cycle for the Company's products
typically range from six to twelve months. Consequently, the Company may incur
a significant amount of expenses in a period without recognizing a corresponding
sale. Moreover, the Company expects that the average selling price of its
products will also decline as such products mature and as competition increases.
Because of these as well as other factors, the Company believes that period-to-
period comparisons of its quarterly results of operations are not necessarily
meaningful and that such comparisons should not be relied upon as indications of
future performance.
The following table sets forth certain consolidated quarterly information of the
Company as a percentage of total sales for the three and six months ended
September 30, 1996 and 1997.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, SIX MONTHS ENDED SEPTEMBER 30,
--------------------------------------- -------------------------------------
1996 1997 1996 1997
------------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 63.4 63.4 62.9 63.9
------------- ------------- ------------ -------------
Gross profit 36.6 36.6 37.1 36.1
Operating expenses:
Research and development 10.3 5.6 10.4 6.5
Selling and marketing 18.0 12.9 15.1 15.2
General and administrative 8.3 5.5 8.6 6.7
------------- ------------- ------------ -------------
Total operating expenses 36.6 24.0 34.1 28.4
Income from operations - 12.6 3.0 7.7
Interest income (expense) (1.2) 1.7 (0.9) 0.7
Other income - 7.7 - 5.7
------------- ------------- ------------ -------------
Net income before income taxes (1.2) 22.0 2.1 14.1
Income tax expense - 7.5 1.1 4.9
------------- ------------- ------------ -------------
Net income (1.2)% 14.5% 1.0% 9.2%
------------- ------------- ------------ -------------
</TABLE>
Page 18
<PAGE>
RESULTS OF OPERATIONS
Sales. Sales increased by 199.5% to NZ$24.9 million in the three months
ended September 30, 1997 from NZ$8.3 million in the three months ended September
30, 1996. Included in sales for the three months ended September 30, 1997 is
restated revenue totalling NZ$4.0 million which was prematurely recognised in
the three months ended June 30, 1997. Sales of DXR products and related services
increased by 115.2% to NZ$13.3 million in the three months ended September 30,
1997 from NZ$6.2 million in the three months ended September 30, 1996. Sales of
third party products and related services increased by 415.9% to NZ$11.0 million
in the three months ended September 30, 1997 from NZ$2.1 million in the three
months ended September 30, 1996. The increase in the sales of third party
products and services is due to sales by NZ Telecoms (Proprietary) Limited and
sales to a customer expanding its cellular network totalling NZ$3.6 million and
NZ$5.5 million, respectively, for the three months ended September 30, 1997 as
compared to NZ$0 and NZ>$240,000, respectively, in the comparable period. NZ
Telecoms (Proprietary) Limited also distributed NZ$7.5 million of the Company's
DXR products and related services as compared to NZ$348,000 in the comparable
period. Telecommunications products and services accounts for 97.5% of sales in
the three months ended September 30, 1997 compared to 99.9% in the three months
ended September 30, 1996. In the three months ended September 30, 1997, 53.3% of
sales were generated from DXR products and services and 44.2% of sales were
generated from third party products and services, compared to 74.2% and 25.7%,
respectively in 1996.
Sales increased by 140.3% to NZ$39.4 million in the six months ended
September 30, 1997 from NZ$16.4 million in the six months ended September 30,
1996. Sales of DXR products and related services increased by 117.7% to
NZ$24.0 million in the six months ended September 30, 1997 from NZ$11.0
million in the six months ended September 30, 1996. Sales of third party
products and related services and other sales increased by 176.3% to NZ$14.8
million for the six months ended September 30, 1997 from NZ$5.4 million in the
six months ended 30 September, 1996. The increase in the sales of third party
products and services is due to sales by NZ Telecoms (Proprietary) Limited and
sales to a customer expanding its cellular network totalling NZ$5.0 million
and NZ$7.9 million, respectively, for the six months ended September 30, 1997
as compared to NZ$0 and NZ$512,000 in the comparable period. NZ Telecoms
(Proprietary) Limited also distributed NZ$9.4 million of the Company's DXR
products and related services as compared to NZ$1.9 million in the comparable
period prior to the acquisition by the Company. Telecommunications products
and services accounts for 98.4% of sales in the six months ended September 30,
1997 compared to 99.9% in the six months ended September 30, 1996. In the six
months ended September 30, 1997, 60.9% of sales were generated from DXR
products and services and 37.5% of sales were generated from third party
products and services, compared to 67.3% and 32.6%, respectively in 1996.
Gross profit. Gross profit increased 198.8% to NZ$9.1 million in the
three months ended September 30, 1997 from NZ$3.1 million in the three months
ended September 30, 1996. Gross margin was 36.6% both for the three months
ended September 30, 1997 and for the three months ended September 30, 1996.
Page 19
<PAGE>
Gross profit increased 133.6% to NZ$14.2 million in the six months ended
September 30, 1997 from NZ$6.1 million in the six months ended September 30,
1996. Gross margin decreased to 36.1% in the six months ended September 30,
1997 from 37.1% in the six months ended September 30, 1996. The decrease in
gross margin is due to the increase in the sales of third party products and
related services as a percentage of total sales, which are typically sold at
gross margins lower than DXR products and related services.
Research and development costs. Research and development costs primarily
consist of salaries of research and development personnel, materials and
allocated overhead associated with the development and enhancement of the
Company's DXR product families. Research and development costs increased 60.6%
to NZ$1.4 million, or 5.6% of sales, in the three months ended September 30,
1997 from NZ$861,000, or 10.3% of sales in the three months ended September 30,
1996. This increase is primarily attributable to the expenditures on
additional staff of NZ$98,000 and NZ$220,000 for materials respectively for
developing enhancement of the DXR 100 product family. Substantially all of the
research and development expenditures in the three months ended September 30,
1997 were expended on the enhancement and development of new features for the
Company's DXR product families.
Research and development costs increased 50.4% to NZ$2.6 million, or 6.5%
of sales, in the six months ended September 30, 1997 from NZ$1.7 million or
10.4% of sales in the six months ended September 30, 1996. This increase is
primarily attributable to the expenditures on additional staff of NZ$228,000 and
NZ$292,000 for materials respectively for developing enhancement of the DXR 100
product family. Substantially all of the research and development expenditures
in the six months ended September 30, 1997 were expended on the enhancement and
development of new features for the Company's DXR product families. The
Company believes that significant ongoing investments in research and
development are required to remain competitive.
Selling and marketing expenses. Selling and marketing expenses primarily
consist of salaries of sales and marketing personnel, investment in
international operations and offices, sales commissions, travel expenses,
customer service and support expenses, trade show related activities and
advertising costs. Selling and marketing expenses increased 114.5% to NZ$3.2
million, or 12.9% of sales, in the three months ended September 30, 1997 from
NZ$1.5 million, or 18.0% of sales, in the three months ended September 30, 1996.
This increase is primarily attributable to the expansion of the Company's sales
and marketing efforts, including the cost of maintaining the new sales offices
totalling NZ$932,000, increased costs due to the acquisition of NZ Telecoms
(Proprietary) Limited totalling NZ$581,000 and the additional sales and
marketing personnel in the Europe, Africa, the Americas and Asia/Pacific sales
regions.
Page 20
<PAGE>
Selling and marketing expenses increased 142.2% to NZ$6.0 million, or
15.2% of sales, in the six months ended September 30, 1997 from NZ$2.5 million,
or 15.1% of sales, in the six months ended September 30, 1996. This increase
is primarily attributable to the expansion of the Company's sales and marketing
efforts, including the cost of maintaining the new sales offices totalling
NZ$2.3 million, increased costs due to the acquisition of NZ Telecoms
(Proprietary) Limited totalling NZ$881,000 and the additional marketing and
sales personnel in the Europe, Africa, the Americas and Asia/Pacific sales
regions.
General and administrative expenses. General and administrative expenses
primarily consist of salaries and other expenses for management, finance,
accounting, legal and other professional services. General and administrative
expenses increased 99.7% to NZ$1.4 million, or 5.5% of sales, in the three
months ended September 30, 1997 from NZ$689,000, or 8.3% of sales, in the three
months ended September 30, 1996. This increase was primarily attributable to
the increased costs due to the acquisition of NZ Telecoms (Proprietary) Limited
totalling NZ$523,000 and the hiring of additional management personnel and other
staff in New Zealand to support the Company's expanding operations and the
administration of regional sales offices.
General and administrative expenses increased 86.9% to NZ$2.6 million, or
6.7% of sales, in the six months ended September 30, 1997 from NZ$1.4 million,
or 8.6% of sales, in the six months ended September 30, 1996. This increase
was primarily attributable to the increased costs due to the acquisition of NZ
Telecoms (Proprietary) Limited totalling NZ$914,000.
Other income. Other income primarily consists of foreign exchange gains
and losses. Other income increased 100% to NZ$1.9 million or 7.7% of sales and
NZ$2.2 million or 5.7% of sales, respectively, in the three and six months ended
September 30, 1997 from NZ$0 in the three and six months ended September 30,
1996. This increase is primarily due to the conversion of the cash and cash
equivalents which are denominated in US$ to NZ$ at September 30, 1997, resulting
in unrealised foreign exchange gains totaling NZ$1.7 million. Other income
also includes realized foreign exchange gains of NZ$400,000 for the six months
ended September 30, 1997 as compared to NZ$0 in the six months ended September
30, 1996. See "Other Information - Exchange Rates".
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations to date through cash flow
from operations, bank loans and bank advances and the issuance of equity
securities. During June and July, 1997 the Company completed its initial
public offering including the exercising of the over-allotment of ADSs, raising
net proceeds of NZ$41.8 million (US$26.7 million). These funds have been and
will be used to fund (i) the repayment of NZ$7.1 million (approximately US$4.5
million) in bank loans and advances and (ii) working capital and general
corporate purposes.
Page 21
<PAGE>
The Company has used cash flows from operations of NZ$5.7 million and NZ$3.1
million for the six months ended September 30, 1996 and 1997, respectively. In
the six months ended September 30, 1997, operating activities used net cash of
NZ$3.1 million primarily due to the funding of inventory and prepaid and other
of NZ$4.6 million and NZ$1.1 million, respectively, and an increase in
unrealized foreign exchange gains of NZ$1.7 million. This was partially offset
by operating income and a decrease in accounts receivable of NZ$800,000.
Net cash flows used in investing activities in the six months ended September
30, 1997 were NZ$1.2 million. The cash flows used in investing activities have
resulted primarily from the first earn-out payment for the acquisition of NZ
Telecoms (Proprietary) Limited totaling NZ$728,000, and the purchases of plant
and equipment totaling NZ$520,000. The Company anticipates that it will
continue to incur significant capital expenditure in connection with further
expansion of its Research and Development activities and further development in
its sales channel structure.
At September 30, 1997 the Company had working capital of NZ$52.3 million. At
September 30, 1997 the Company's principal source of liquidity was approximately
NZ$32.1 million in cash and cash equivalents. The increase in cash and cash
equivalents was primarily attributable to proceeds raised from the Company's
initial public offering in June 1997. The Company is currently re-evaluating
its funding and lines of credit with its bank.
The Company believes that its cash and cash equivalents of NZ$32.1 million as of
September 30, 1997 will be sufficient to meet its presently anticipated working
capital and capital expenditure requirements for at least the next twelve
months.
Page 22
<PAGE>
MAS TECHNOLOGY LIMITED
PART II OTHER INFORMATION
Item 1. Legal proceedings
There are no material legal proceedings against the Company.
Items 2 through 4.
Not applicable.
Item 5. Other information
Exchange rates
The following tables sets forth, for each period presented, the average
of the exchange rates on the last day of each month during the indicated
period, the high and low exchange rates, and the exchange rates at the
end of the indicated period for one NZ$, expressed in US$, based on the
noon buying rate (the "Noon Buying Rate") in New York City for cable
transfers payable in NZ$ as certified for customs purposes by the
Federal Reserve Bank of New Zealand.
<TABLE>
<CAPTION>
US$ PER NZ$
THREE MONTH PERIOD ENDED
-------------------------------------------------------------------------------------
SEPT 30, DEC 30, MARCH 31, JUNE 30, SEPT 30,
1996 1996 1997 1997 1997
<S> <C> <C> <C> <C> <C>
Average 0.6915 0.7048 0.6967 0.6901 0.6467
High 0.7021 0.7148 0.7085 0.6973 0.6780
Low 0.6823 0.6894 0.6835 0.6789 0.6305
Period end 0.6990 0.7065 0.6947 0.6790 0.6398
</TABLE>
Fluctuations in the exchange rate between the NZ$ and the US$ may affect
the Company's earnings, the book value of its assets and its
shareholders' equity as expressed in US$, and consequently may affect
the market price for the ADSs. Such fluctuations will also affect the
conversion into US$ by the Depositary of cash dividends, if any, paid in
NZ$ on the Ordinary Shares represented by the ADSs.
Item 6 - Exhibits and reports on Form 8-K
(a) Exhibits
Page 23
<PAGE>
Exhibit
- -------
Number Document Description
- ------ --------------------
3.1 Constitution. (Incorporated by reference to Exhibit 3.2 of the
Company's registration statement under the Securities Act on Form F-1,
Registration Statement No. 333-6952)
4.1 Form of American Depositary Receipt Certificate (Incorporated by
reference to Exhibit 4.1 of the Company's registration statement under
the Securities Act on Form F-1, Registration Statement No. 333-6952)
4.2 Form of Deposit Agreement among MAS Technology Limited, Bank of New York
as Depositary, and holders from time to time of ADSs issued thereunder.
(Incorporated by reference to Exhibit 4.2 of the Company's registration
statement under the Securities Act on Form F-1, Registration Statement
No. 333-6952)
11.1 Computation of Pro forma Net Income per Ordinary Share.
27 Financial Data Schedule.
99.1 Press release dated October 21, 1997.
(b) Reports on Form 8-K.
There were no reports on Form 8-K for the three months ended September 30,
1997.
Page 24
<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.
MAS TECHNOLOGY LIMITED
/s/ Peter Wright
Date: January 14, 1998 ------------------------
Peter Wright
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Page 25
<PAGE>
EXHIBIT 11.1
MAS TECHNOLOGY LIMITED
STATEMENT RE: COMPUTATION OF NET INCOME PER ORDINARY SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS ENDED
ENDED SEPTEMBER 30 SEPTEMBER 30,
------------------------------------ ----------------------------------
<S> <C> <C> <C> <C>
1996 1997 1996 1997
NZ$ NZ$ NZ$ NZ$
---------------- -------------- ----------------------------------
Net income (loss) (99) 3,614 161 3,618
================ ============== ============== ==============
Ordinary shares used in share computation -
Weighted average number of ordinary shares outstanding 4,175 6,755 4,163 5,716
Treasury stock effect of stock options - 97 - 97
---------------- -------------- -------------- --------------
Shares used in computation 4,175 6,852 4,163 5,813
---------------- -------------- -------------- --------------
Net income per ordinary share and equivalent shares NZ$(0.02) NZ$0.53 NZ$0.04 NZ$0.62
================ ============== ============== ==============
</TABLE>
Page 26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> NEW ZEALAND DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 0.6398
<CASH> 32,084
<SECURITIES> 0
<RECEIVABLES> 20,770
<ALLOWANCES> 143
<INVENTORY> 12,743
<CURRENT-ASSETS> 65,454
<PP&E> 4,997
<DEPRECIATION> 2,579
<TOTAL-ASSETS> 69,309
<CURRENT-LIABILITIES> 13,123
<BONDS> 0
0
0
<COMMON> 45,636
<OTHER-SE> 10,550
<TOTAL-LIABILITY-AND-EQUITY> 69,309
<SALES> 24,943
<TOTAL-REVENUES> 24,943
<CGS> 15,842
<TOTAL-COSTS> 15,842
<OTHER-EXPENSES> 5,975
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 424
<INCOME-PRETAX> 5,497
<INCOME-TAX> 1,883
<INCOME-CONTINUING> 3,614
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,614
<EPS-PRIMARY> 0.527
<EPS-DILUTED> 0.527
</TABLE>
<PAGE>
EXHIBIT 99.1
[LETTERHEAD OF MORGEN-WALKE ASSOCIATES, INC.]
MAS Technology Reports Second Quarter Results
WELLINGTON, New Zealand. Oct. 21 /PRNewswire/ -- MAS Technology Ltd
(Nasdaq: MASSY) today reported financial results for the second quarter and six
months ended September 30, 1997.
Revenues for the quarter ended September 30, 1997 were NZ$24.9 million,
which included NZ$4.0 million in revenues due to the restatement of fiscal first
quarter results. Excluding the effect of this restatement, revenues for the
second quarter of fiscal 1998 increased 151% to NZ$20.9 million compared to
NZ$8.3 million in the second quarter of fiscal 1997. Net income for the fiscal
second quarter was NZ$3.5 million, or NZ$0.53 per share. Excluding the effect of
the restatement, net income for the quarter grew to NZ$2.54 million, or NZ$0.37
per share, as compared to a net loss of NZ($100,000), or NZ($0.02) per share,
for the second quarter of fiscal 1997. Net income for the second quarter of
fiscal 1998 included NZ$959,000, or NZ$0.14 per share, of other income due to
unrealized currency gains arising from the conversion of cash and cash
equivalents held in US$.
On July 24, 1997 the Company reported revenues for the first quarter of
fiscal 1998 of NZ$18.5 million and net income of NZ$1.08 million, or NZ$0.23 per
share. As a result of the restatement, adjusted first quarter revenues were
NZ$14.5 million compared to NZ$8.1 million for the first quarter of fiscal 1997,
and net income was NZ$4,000, or NZ$0.00 per share, compared to NZ$251,000, or
NZ$0.06 per share for the first quarter of fiscal 1997.
For the six months, revenues grew 140% to NZ$39.4 million from NZ$16.4
million reported in the same period last year. Net income for the six months
was NZ$3.62 million, or NZ$0.62 per share, compared to NZ$160,000, or NZ$0.04
per share, for the six months of last year.
"We are pleased to report a strong second quarter performance," commented
Neville Jordan, Chief Executive Officer. "Notably, our sales of DXR radios and
related services increased by 70% over the same period last year, which we
believe is a testament to the advanced technology of our low frequency microwave
radios. Sales generated from the DXR product range accounted for 50.1% of sales
in fiscal 1998, with the balance generated from third party products and
services. During the quarter, we expanded our U.S. operations and opened a new
sales office in San Jose, California. Additionally, the DXR product range was
significantly expanded in the quarter with new frequencies for the DXR 100
product and the launch of the DXR 700P which takes us into higher capacity, long
haul applications."
(more)
[LOGO OF MORGEN-WALKE ADDRESS]
<PAGE>
-2-
"We continue to focus our sales teams world-wide on providing a 'complete
solution' approach to our customers by selling our own low frequency DXR radios,
our installation services and high frequency microwave radios from third party
partners," Mr. Jordan added. "This sales focus had a favorable effect on results
in the second quarter, as third party product and installation sales increased
359% over the same period last year and 71% over the immediately preceding first
quarter. As we continue to broaden our product line into new areas, we believe
our 'complete solution' approach will further increase our presence in the
marketplace."
After a detailed review of several contracts completed toward the end of
the first quarter, the Company discovered several orders destined for emerging
markets that had been prematurely recognized as revenue during that quarter. As
a result, the Company has reclassified relevant revenues, direct costs, and
operating expenses into the second quarter of fiscal 1998.
Mr. Jordan continued, "We have completed a review of our existing
contractual documents and internal accounting procedures for inventory dispatch
and have implemented actions to further strengthen our reporting and control
systems. As a result, we strongly believe we have put the potential for
recurrence of this problem behind us."
MAS Technology Ltd. designs, manufactures, markets and supports DXR digital
microwave radio links for use in the worldwide telecommunications market. DXR
systems are used as digital links by network operators to interconnect wired and
wireless networks, including cellular and local loop systems. DXR systems are
also used by telephone operators to provide voice and data services to their
customers.
With the exception of the actual reported financial results and statements
of historical fact, the statements made in this news release are forward
looking, reflect the Company's current expectations and involve certain risks
and uncertainties. There can be no assurance that the Company's actual future
performance will meet the Company's expectations. As discussed in the Company's
Registration Statement for the Company's initial public offering completed June
19, 1997, the Company's future operating results are difficult to predict and
subject to significant fluctuations. Factors that may cause future results to
differ materially from the Company's current expectations include, among others:
the volume and timing of orders for the Company's products, the ability of the
Company and its suppliers to respond to changes made by the customers in their
orders, the ability to add innovative features that differentiate its products
from those of its competitors, new product introductions by the Company or its
competitors, competition in the microwave radio business, fluctuations in
foreign currency, exchange rates, regulatory developments and general economic
conditions.
(more)
<PAGE>
-3-
MAS TECHNOLOGY LIMITED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of dollars, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
1997 1996 1997 1996
$NZ $NZ $NZ $NZ
<S> <C> <C> <C> <C>
Sales
Products and services revenue 24,943 8,328 39,421 16,403
Cost of Sales
Products and services 15,824 5,276 25,206 10,318
Gross profit 9,119 3,052 14,215 6,085
Operating expenses:
Research and development 1,383 861 2,566 1,706
Selling and marketing 3,216 1,499 5,979 2,469
General and administration 1,376 689 2,632 1,408
Total operating expenses 5,975 3,049 11,177 5,583
Income from operations 3,144 3 3,038 502
Interest income (expense) 424 (99) 281 (155)
Other income 1,929 -- 2,243 --
Net income before taxes 5,497 (96) 5,562 347
Income tax expense 1,883 3 1,944 186
Net income 3,614 (99) 3,618 161
Net income per ordinary share $ 0.53 $(0.02) $ 0.62 $ 0.04
Weighted average ordinary shares
and ordinary share equivalents
outstanding 6.852 4.175 5.813 4.163
</TABLE>
(more)
<PAGE>
-4-
MAS TECHNOLOGY LIMITED
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousand of dollars, except per share amounts)
(unaudited)
RESTATEMENT OF 1ST QUARTER FINANCIAL RESULTS
FOR FISCAL 1998
<TABLE>
<CAPTION>
Three Months Ended
June 30,
1997 1996
NZ$ NZ$
<S> <C> <C>
Sales
Products and services
revenue 14,478 8,075
Cost of Sales
Products and services 9,382 5,042
Gross profit 5,096 3,033
Operating expenses:
Research and development 1,183 845
Selling and marketing 2,763 970
General and administration 1,256 719
Total operating expenses 5,202 2,534
Income from operations (106) 499
Interest income (expense) (143) (56)
Other income 314 -
Net income before taxes 65 443
Income tax expense 61 183
Net income 4 260
Net income per ordinary share $ 0.00 $ 0.06
Weighted average ordinary
shares and ordinary share
equivalents outstanding 4.677 4.151
SOURCE MAS Technology Ltd
-0- 10/21/97
</TABLE>
/CONTACT: Peter Wright, Chief Financial Officer of MAS Technology Ltd, 64
4 569 2170; or Chris Danne or Alex Williamson, 415-296-7383, or Vince Daniels,
212-850-5600, or Josh Passman, 212-850-5698, all of Morgan-Walke Associates, for
MAS Technology/
(MASSY)
