U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file number
0-24886
ACRODYNE COMMUNICATIONS, INC.
-----------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 11-3067564
------------------------------- ----------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
516 Township Line Road
Blue Bell, Pennsylvania 19422
---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number: 215-542-7000
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 _____
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 4,384,270 shares of common
stock of Acrodyne Communications, Inc. were outstanding on November 8, 1996.
<PAGE>
ACRODYNE COMMUNICATIONS, INC.
INDEX
Page
No.
PART I. FINANCIAL INFORMATION:
Consolidated Balance Sheet at September 30, 1996 and 1995 (unaudited).......2
Consolidated Statement of Operations for the Three
and Nine Months Ended September 30, 1996 and 1995(unaudited)................3
Consolidated Statement of Cash Flows for the Nine
Months Ended September 30, 1996 and 1995 (unaudited) .......................4
Notes to Consolidated Financial Statements (unaudited)......................5
Management's Discussion and Analysis of Financial
Condition and Results of Operations.........................................6
PART II. OTHER INFORMATION, AS APPLICABLE.................................10
SIGNATURES.................................................................10
<PAGE>
<TABLE>
Acrodyne Communications, Inc.
(formerly Acrodyne Holdings, Inc.)
Consolidated Balance Sheet
(Unaudited)___________________________________________________________________
September 30, September 30,
1996 1995
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 4,578,934 $ 742,220
Accounts receivable 1,919,827 759,923
Inventories 3,549,154 2,038,193
Prepaid expenses and deposits 263,162 99,150
___________ ___________
Total current assets 10,311,077 3,639,486
Property, plant and equipment, net 578,784 448,893
Note receivable 78,416 72,400
Non-compete agreement, net 604,572 679,572
Goodwill 4,407,823 4,564,318
___________ ___________
Total assets $15,980,672 $ 9,404,669
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 375,075 $ 433,811
Borrowings under line of credit - -
Accounts payable 674,217 1,325,133
Accrued expenses 300,105 407,477
Customer advances 132,469 201,196
___________ ___________
Total current liabilities 1,481,866 2,367,617
Long-term debt 655,872 1,002,042
Non-compete liability 724,758 733,707
___________ ___________
Total liabilities 2,862,496 4,103,366
Shareholders' equity: (See Note 4)
Preferred stock, par value $1.00;
975,000 shares authorized, none issued
8% Convertible Redeemable Preferred Stock,
par value $1.00, 25,000 shares authorized,
10,500 shares issued and outstanding 10,500 -
Common stock, par value $.01; 10,000,000
shares authorized, 4,384,270 shares issued
and outstanding 43,843 23,853
Additional paid-in capital 14,418,827 6,444,791
Accumulated deficit ( 1,354,994) (1,167,341)
Total liabilities and ____________ ___________
shareholders' equity $15,980,672 $9,404,669
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
Acrodyne Communications, Inc.
(formerly Acrodyne Holdings, Inc.)
Consolidated Statement of Operations
(Unaudited)___________________________________________________________________
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales $2,648,394 $2,679,267 $8,062,851 $7,404,736
Cost of sales 1,857,904 1,719,201 5,558,532 4,819,387
__________ __________ __________ __________
Gross profit 790,490 960,066 2,504,319 2,585,349
Operating expenses:
Engineering,
research and development 196,228 175,984 571,910 514,184
Selling 383,883 193,800 1,010,693 687,395
Administration 378,693 400,302 1,076,430 1,310,158
Amortization 57,874 57,874 173,621 173,622
__________ _________ __________ __________
Total operating expenses 1,016,678 827,960 2,832,654 2,685,359
Operating profit (loss) (226,188) 132,106 (328,335) (100,010)
Other income (expense):
Interest income (expense), net 6,599 (47,697) ( 82,706) (128,201)
Other income (expense), net (440) 1,027 1,336 15,826
__________ _________ __________ __________
Net profit (loss) ($220,029) $ 85,436 ($ 409,705) ($212,385)
Dividend on 8% Convertible
Redeemable Preferred Stock ( 21,000) - ( 39,661) -
Net income (loss) applicable
to common shares ($ 241,029) $ 85,436 ($ 449,366) ($212,385)
=========== ========== =========== ==========
Net income/(loss) loss
per common share ($0.06) $0.04 ($0.14) ($0.09)
Weighted average number of 4,238,000 2,385,280 3,300,000 2,385,280
common shares outstanding =========== =========== =========== ===========
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
Acrodyne Communications, Inc.
(formerly Acrodyne Holdings, Inc.)
Consolidated Statement of Cash Flows
(Unaudited)___________________________________________________________________
<CAPTION>
Nine Months Ended September 30,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (409,705) $ (212,385)
Adjustments to reconcile net income/(loss)
to net cash used in operating activities:
Depreciation and amortization 249,449 212,106
Stock option accrual 12,500 -
Changes in assets and liabilities:
Accounts receivable (769,827) (486,309)
Inventories (1,225,367) (79,647)
Note receivable (4,512) (4,512)
Prepaids and deposits (171,692) (64,845)
Accounts payable (506,594) 753,130
Accrued expenses (139,758) 187,858
Customer advances (23,267) (584,407)
___________ ___________
Net cash used in operating activities (2,988,773) (279,011)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (199,588) (69,749)
___________ ___________
Net cash used in investing activities (199,588) (69,749)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of
common stock, net 6,314,145 -
Proceeds from the issuance of
preferred stock, net 1,050,000 -
Payments on promissory notes (202,500) (267,500)
Payment on line-of-credit (200,000) -
Capital leases payments (72,378) -
Payment of dividends (39,661) -
Repayments on other borrowings and
non-compete liability (1,058) (42,051)
Net cash provided by/(used in) ___________ ___________
financing activities 6,848,548 (309,551)
Net increase/(decrease) in cash and
cash equivalents 3,660,187 (658,311)
Cash and cash equivalents at
beginning of period 918,747 1,400,531
__________ ___________
Cash and cash equivalents at end of period $4,578,934 $ 742,220
Supplemental cash flow information:
Cash paid for interest $ 120,037 $ 140,805
<FN>
See notes to consolidated financial statements
</TABLE>
<PAGE>
Acrodyne Communications, Inc.
(formerly Acrodyne Holdings, Inc.)
Notes to Consolidated Financial Statements (Unaudited)________________________
1. Unaudited Consolidated Financial Statements
The accompanying consolidated balance sheet of Acrodyne Communications, Inc.
(the "Company") and its subsidiaries (collectively "Acrodyne") at September
30, 1996 and the related consolidated statements of operations and of cash
flows for the nine months ended September 30, 1996 and 1995 have been prepared
by management and have not been audited by the Company's Independent
Accountants. In the opinion of management, all adjustments (consisting of
normal recurring adjustments only) necessary to present fairly the financial
position at September 30, 1996, and the results of operations and cash flows
for the nine months ended September 30, 1996 and 1995 have been made.
These consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-KSB for the year ended December 31, 1995 filed with the Securities
and Exchange Commission. The results of operations for interim periods are not
necessarily indicative of the results to be obtained for the entire year.
2. Inventories
Inventories comprise:
September 30,
1996 1995
Raw materials $2,413,424 $1,243,298
Work in process 887,289 529,930
Finished goods 248,441 264,965
__________ __________
$3,549,154 $2,038,193
3. Net Income (Loss) Per Share
The computation of net income (loss) per share is based on the weighted average
common shares outstanding for the applicable period. Potentially dilutive
securities have not been considered in the calculation of weighted average
common shares outstanding since they would have an anti-dilutive effect on the
loss per share.
<PAGE>
4. Shareholders' Equity
At the end of the first quarter of 1996, the Company privately placed an
aggregate of 7,900 shares of its then newly created class of 8% Convertible
Redeemable Preferred Stock, par value $1.00 per share (the "8% Preferred
Stock"). Aggregate proceeds of the sale, $790,000, were received at the
beginning of the second quarter. During the second quarter, the Company had
privately placed an additional 2,600 shares of 8% Preferred Stock, for which
the Company received aggregate proceeds of $260,000. This 8% Preferred Stock
has a liquidation preference of $100 per share plus all outstanding and unpaid
dividends and is redeemable at the discretion of the Company for the amount of
the liquidation value after one year from issuance date provided certain
stipulations are met. The 8% Preferred Stock is convertible into the number
of Common Stock shares obtained by dividing the liquidation value by the $4.00
per share conversion price subject to adjustment at the option of the holder.
During the second quarter of 1996, the Company entered into an agreement with
GKN Securities Corp. ("GKN") on May 24, 1996 to issue to GKN and its designees
of certain warrants to purchase an aggregate of 200,000 shares of the Company's
common shares, par value $.01, at $6.00 per share in consideration of GKN
waiving solicitation rights and costs as indicated in the Underwriting
Agreement, dated October 14, 1994 between Acrodyne Holdings, Inc. ("Acrodyne")
and GKN and the Warrant Agreement, dated as of October 14, 1994 between the
Company (f/k/a Acrodyne Holdings, Inc.) and GKN, and the Warrant Agreement,
dated as of October 14, 1994 between the Company and North American Transfer
Co. in connection with the acquisition by the Company of Acrodyne Industries,
Inc. on October 24, 1994. The Underwriting Agreement and the Warrant
Agreement shall remain in full force and effect except for the sections
covered by the waiver described above.
During the nine months ended September 30, 1996, the Company issued 1,823,740
shares of Common Stock pursuant to the exercise and redemption of warrants and
units yielding proceeds of $6,314,145, net of related attorney and issuance
fees.
ACRODYNE COMMUNICATIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
The business of Acrodyne Communications, Inc. (the "Company") is conducted
through its sole operating subsidiary Acrodyne Industries, Inc. ("Acrodyne").
Acrodyne was acquired by the Company pursuant to a stock acquisition agreement
on October 24, 1994 (the "Acrodyne Acquisition"). Prior thereto, the Company
had no operations. The Company changed its name from Acrodyne Holdings, Inc.
to Acrodyne Communications, Inc. on June 9, 1995.
<PAGE>
Acrodyne's transmitters and translators are manufactured to customer
specifications for installation in connection with television broadcasting
systems and range in price from $10,000 to $140,000 for lower power units and
$150,000 to $1,500,000 for higher power units. Acrodyne's business historically
has been dependent on a relatively small number of significant orders from
one-time customers. Customers establish delivery times often to coincide with
the completion of transmission towers and other components of the broadcasting
system, which is subject to delays beyond Acrodyne's control. As a result,
variances in sales from period to period may occur but are not necessarily
indicative of any particular positive or negative longer term trend.
RESULTS OF OPERATIONS
Three and Nine Months Ended September 30, 1996 Compared to the Three and Nine
Months Ended September 30, 1995
The following compares the Company's summary results of operations for the
three and nine months ended September 30, 1996 and for the three and nine
months ended September 30, 1995:
Three Months Ended Nine Months Ended
September 30, September 30,
(Unaudited) (Unaudited)
1996 1995 1996 1995
Net sales $2,648,394 $2,679,267 $8,062,851 $7,404,736
Cost of sales 1,857,904 1,719,201 5,558,532 4,819,387
__________ __________ __________ __________
Gross profit 790,490 960,066 2,504,319 2,585,349
Operating expenses 1,016,678 827,960 2,832,654 2,685,359
__________ __________ __________ __________
Operating profit (loss) $ (226,188) $ 132,106 $ (328,335) $ (100,010)
Operating results for the three and nine months ended September 30, 1996 showed
a significant decrease in operating profits as compared to the operating
results for the three and nine months ended September 30, 1995. These results
were primarily due to the poor results of the three months ended September 30,
1996 in which the Company experienced lower sales than anticipated, lower sales
margin in addition to higher operating expenses as compared to the three months
and nine months ended September 30, 1995. Although sales volume was only
slightly less, sales margin dropped 6% and 4% as compared to the margin earned
on sales during the three and nine months ended September 30, 1995 primarily
due to a lower margin on more significant sales and a more competitive market.
Management believes that sales were short of expectations primarily as a result
of the broadcasting industry postponing purchase decisions pending final
decision of the FCC (Federal Communications Commission) regarding digital
transmission specifications.
<PAGE>
Operating expenses for the three and nine months ended September 30, 1996
exceeded the prior year primarily due to increased domestic and international
sales and marketing costs due to increased travel, advertising and commissions
as well as increased research and development costs.
Interest expense for the three and nine months ended September 30, 1996 was
significantly lower than the corresponding periods in 1995 due to significant
debt repayments and interest income from invested cash as a result of a
significant cash increase during the period.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Acrodyne has financed its activities primarily from customer
deposits, internally generated funds, and use of its credit facility. At
September 30, 1996, the Company's working capital increased 316% to
approximately $8,800,000 compared to December 31, 1995 primarily due to
proceeds received from the issuance of Common Shares pursuant to the exercise
of warrants and the issuance of convertible preferred stock.
Accounts Receivable at September 30, 1996 increased significantly compared to
September 30, 1995 primarily as a result of changed credit terms on more
significant sales of 30 kilowatt and higher power transmitters. Company
credit terms were changed due to an expanded product line into high power
transmitters, strong financial competition in the high power market and slower
demand due to delayed purchasing decisions as a result of the FCC delaying its
decision on a digital transmission format. Generally, sales of transmitters
up to 10 kilowatts continue to be made with credit terms of 30% as a deposit
at the time of placing the order, 60% prior to shipment, and 10% net thirty
days. The Company continues to require an irrevocable letter of credit on
international orders.
The significant increase in raw materials and work-in-process inventories at
September 30, 1996 compared to September 30, 1995 is due to the Company's
recent strategy to improve turnaround time to the customer in order to
strengthen market position. Raw materials also increased significantly as a
result of the Company obtaining additional discounts from higher volume
purchasing.
The Company and Acrodyne, as co-borrowers, have a $1,200,000 credit facility
with a bank for working capital purposes, of which $500,000 is reserved for
an irrevocable standby letter of credit to partially secure the Senior
Subordinated Note (see below). At September 30, 1996 there was no balance
outstanding under such credit facility. The interest rate on this facility is
based on prime plus 1% and was 9.25% on September 30, 1996. The credit
facility and the standby letter of credit are secured by substantially all the
assets of the Company and Acrodyne and contain certain restrictive covenants.
The amount available to be borrowed under the credit facility is calculated
based on certain percentages of the monthly balances of accounts receivable
and inventory. At September 30, 1996, there was approximately $500,000
available to be borrowed by the Company under the credit facility.
<PAGE>
The Company is obligated to pay the former majority shareholder of Acrodyne
quarterly installments of principal and interest over a five-year period
under the terms of the $1,450,000 Senior Subordinated Note. Interest on such
note is payable at the rate of 9% per annum. Such note is partially secured
by the irrevocable standby letter of credit in the principal amount of $500,000
mentioned above. The first seven quarterly payments totaling $841,126
(including interest) under such note have been made through October 23, 1996
according to the agreement. The next quarterly payment of $85,725 (including
interest) is due on January 23, 1997.
In the three months ended March 31, 1996, the Company privately placed an
aggregate of 7,900 shares of its then newly created class of 8% Convertible
Redeemable Preferred Stock, par value $1.00 per share (the "8% Preferred
Stock"). Although such private placement occurred as of the end of the first
quarter, the Company did not receive the aggregate proceeds of the sale,
$790,000, until the beginning of the second quarter. During the second quarter
of 1996, the Company privately placed an additional 2,600 shares of 8%
Preferred Stock, for which the Company received aggregate proceeds of $260,000.
The Company has and will use the proceeds of the private placements for
general corporate purposes. Pursuant to agreements with the investors in such
private placements, the Company has registered the shares of Common Stock,
into which the 8% Preferred Stock held by such investors is convertible, under
the Securities Act of 1933, as amended (the "Securities Act").
As set forth in the Certificate of Designation of the Preferred Stock (the
"Certificate of Designation"), the holders of the 8% Preferred Stock (the
"Preferred Holders") vote, on a fully converted basis, together with the
holders of Common Stock and, in the event of certain dividend arrearages, have
the right to elect one director to the Company's Board. Subject to the terms
of the Certificate of Designation, (i) the Preferred Holders will receive a
per share liquidation value of $100 (as such amount may be adjusted, the
"Liquidation Value") plus accumulated but unpaid dividends thereon before any
payment or asset distribution to holders of junior stock, including Common
Stock; (ii) Preferred Holders may convert each share of 8% Preferred Stock held
by them into shares of Common Stock at a conversion price of $4.00 per share of
Common Stock, subject to certain adjustments (the "Conversion Price"), with the
number of shares of Common Stock issuable upon such conversion being equal to
the quotient of the Liquidation Value divided by the Conversion Price then in
effect; and (iii) after March 29,1997, the Company may redeem the 8% Preferred
Stock at a redemption price equal to its Liquidation Value plus all accumulated
but unpaid dividends thereon, provided that (x) the then current market price
of the Common Stock shall have been at least $6.00 per share for a specified
period prior to the mailing of any notice of redemption and (y) the Company
shall have registered the shares of Common Stock into which the 8% Preferred
Stock to be redeemed is convertible under the Securities Act.
Available cash on hand combined with cash flow from operations and available
funds under the line of credit and other financing sources are anticipated to
be sufficient to finance the operations and obligations of the Company through
1997.
As of November 8,1996, the Company had approximately $5,068,892 of available
cash on hand. The significant increase from the December 31, 1995 balance is
primarily due to the receipt of proceeds from the issuance of Common Stock
pursuant to the exercise of warrants and units in the nine months ended
September 30, 1996 yielding proceeds of $6,314,145 net of related attorney and
issuance fees.
<PAGE>
ACRODYNE COMMUNICATIONS, INC.
PART II. OTHER INFORMATION
______________________________________________________________________________
Item 6. Exhibits and Reports on Form 8-KSB
(a) Exhibits
10.19 Financial consulting agreement dated August 20, 1996
between Company and Colin Winthrop & Co., Inc.
(b) No Form 8-KSB was filed during the quarter ended
September 30, 1996.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934,
the registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Acrodyne Communications, Inc.
(Registrant)
Date: November 7, 1996 /s/A. Robert Mancuso/s/
A. Robert Mancuso
Chairman, President, and Chief
Financial Officer
August 20, 1996
Acrodyne Communications, Inc.
516 Township Line Road
Blue Bell, Pa. 19422
This letter supersedes our letter agreement of January 1996.
Gentlemen:
You have agreed that Colin Winthrop & Co., Inc. ("Colin Winthrop") may act as
financial consultant to Acrodyne communications, Inc., a Delaware Corporation
("Acrodyne") in connection with corporate finance transactions and other
financial service matters. Colin Winthrop hereby agrees to make such time
available to the business of the Acrodyne as Acrodyne may reasonably request,
and to promote the best interests of Acrodyne without jeopardizing any
fiduciary duties owed to any of its other clients.
This agreement shall be effective on august 20, 1996 and shall expire on
November 19, 1996, subject to renewal as set forth below. As full
compensation for all services rendered to Acrodyne pursuant to this agreement
during the period from August 20, 1996 until November 19, 1996, Acrodyne will
issue to Colin Winthrop warrants to purchase up to one hundred forty thousand
(140,000) shares of Acrodyne's common stock, par value $.01 per share,
exercisable at $4.50 per share on substantially the terms set forth in the
form of warrants previously given to us and Acrodyne will pay to Colin Winthrop
the sum of $58,400.00 upon the execution of this agreement.
Colin Winthrop agrees not to disclose to any third party any confidential plans
or other business information which is furnished by Acrodyne to Colin Winthrop.
This agreement has been executed and delivered in the Commonwealth of
Pennsylvania and shall be governed by the laws of such state. This agreement
shall be binding upon and enforceable against, the successors and permitted
assigns of each of the undersigned. This agreement may not be assigned by a
party hereto without the prior written consent of the other party.
Colin Winthrop agrees that Acrodyne may renew this consulting agreement for no
more than two successive three month periods after the expiration of the
initial term, in Acrodyne's sole discretion, and that during each renewal term,
if any, the consideration to be paid by Acrodyne to Colin Winthrop during such
period shall be an amount of warrants as shall be mutually acceptable to Colin
Winthrop and Acrodyne: provided however, that Acrodyne will not issue more
than an aggregate of 140,000 warrants @ $4.50 (including those issued during
the initial term hereof). In addition, if Acrodyne dies renew the agreement,
Acrodyne agrees to pay Colin Winthrop the sum of $25,000.00 upon each of the
two potential renewal periods, so that the maximum amount paid if the two
renewal periods, so that the maximum amount if the two renewal periods are
renewed by Acrodyne is $50,000.00.
Please sign this letter at the place indicated below, whereupon it will
constitute our mutually binding agreement with respect to the matters
contained herein.
Very truly yours,
Colin Winthrop & Co., Inc.
By:_________________________
Jack Skidell
President
Agreed to and accepted
this 20th day of August, 1996:
Acrodyne Communications, Inc.
By: ________________________
A. Robert Mancuso
President & CEO
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 4578934
<SECURITIES> 0
<RECEIVABLES> 2104795
<ALLOWANCES> 184968
<INVENTORY> 3549154
<CURRENT-ASSETS> 10311077
<PP&E> 1093899
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<TOTAL-ASSETS> 15980672
<CURRENT-LIABILITIES> 1481866
<BONDS> 2862496
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0
10500
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<CGS> 5558532
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<OTHER-EXPENSES> (1336)
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<INTEREST-EXPENSE> 82706
<INCOME-PRETAX> (409705)
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