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 June 30, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES 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) has 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: 4,500,270 shares of common
stock of Acrodyne Communications, Inc. were outstanding on July 15, 1997.
<PAGE>
ACRODYNE COMMUNICATIONS, INC.
INDEX
Page
No.
PART I. FINANCIAL INFORMATION:
Consolidated Balance Sheet at June 30, 1997
and 1996 (unaudited)............................................ 2
Consolidated Statement of Operations for the Six Months Ended
June 30, 1997 and 1996 (unaudited)............................. 3
Consolidated Statement of Cash Flows for the Six Months Ended
June 30, 1997 and 1996 (unaudited).............................. 4
Notes to Consolidated Financial Statements (unaudited).......... 5
Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................... 7
PART II. OTHER INFORMATION, AS APPLICABLE................................. 11
SIGNATURES................................................................. 12
<PAGE>
Acrodyne Communications, Inc.
(formerly Acrodyne Holdings, Inc.)
Consolidated Balance Sheet
(Unaudited)___________________________________________________________________
June 30, June 30,
Assets 1997 1996
Current assets:
Cash and cash equivalents $2,594,509 $2,804,401
Accounts receivable,
net of allowance for doubtful accounts 1,701,825 1,999,250
Inventories 5,237,351 3,093,733
Prepaid expenses and deposits 28,739 25,220
---------- ----------
Total current assets 9,562,424 7,922,604
Property, plant and equipment, net 528,890 560,788
Note receivable 83,085 76,913
Non-compete agreement, net 548,322 623,323
Goodwill, net 4,290,450 4,446,946
---------- ----------
Total assets $15,013,171 $13,630,574
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of long-term debt $ 331,319 $ 412,897
Borrowings under line of credit 200,000 200,000
Accounts payable 1,211,106 1,116,758
Accrued expenses 330,062 291,737
Customer advances 171,163 520,706
--------- ---------
Total current liabilities 2,243,650 2,542,098
Long-term debt 413,938 771,585
Non-compete liability 717,389 727,170
--------- ---------
Total liabilities 3,374,977 4,040,853
Shareholders' equity:
Preferred stock, par value $1.00; 1,000,000 shares
authorized, 6,500 and 10,500 shares issued
and outstanding in 1997 and 1996, respectively 6,500 10,500
Common stock, par value $.01; 10,000,000 shares
authorized, 4,500,270 and 2,635,530 shares issued 45,003 33,075
and outstanding in 1997 and 1996, respectively
Additional paid-in capital 14,759,129 10,699,772
Accumulated deficit ( 3,172,438) (1,153,626)
----------- -----------
Total liabilities and shareholders' equity $15,013,171 $13,630,574
=========== ===========
See notes to consolidated financial statements
<PAGE>
Acrodyne Communications, Inc.
(formerly Acrodyne Holdings, Inc.)
Consolidated Statement of Operations
(Unaudited)___________________________________________________________________
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Net sales $2,710,845 $3,204,107 $4,979,043 $5,414,457
Cost of sales 1,999,268 2,184,455 3,671,153 3,700,628
---------- ---------- ---------- ----------
Gross profit 711,577 1,019,652 1,307,891 1,713,829
---------- ---------- ---------- ----------
Operating expenses:
Engineering, research
and development 217,627 208,866 411,524 375,682
Selling 566,777 426,175 894,000 626,810
Administration 412,591 352,609 766,299 697,737
Amortization 57,874 57,874 115,748 115,748
---------- ---------- ---------- ----------
Total operating expenses 1,254,869 1,045,524 2,187,571 1,815,977
---------- ---------- ---------- ----------
Operating profit (loss) ( 543,292) ( 25,872) (879,680) (102,148)
Other income (expense):
Interest expense, net ( 10,562) (45,049) ( 29,815) (89,304)
Other income, net 474 543 1,087 (248,224)
---------- ---------- ---------- ----------
Net profit (loss) ($ 553,380) ($ 70,378) ($ 908,408) ($439,676)
---------- ---------- ---------- ----------
Dividend on 8%
Convertible Redeemable
Preferred Stock ( 17,000) ( 18,661) ( 36,888) (18,661)
Net loss applicable
to common shares ($570,380) ($ 89,039) ($ 945,296) ($458,337)
========== =========== ========== =========
Net loss per common share ($0.13) ($0.03) ($0.21) ($0.07)
========== =========== ========== =========
Weighted average number of 4,461,122 3,100,000 4,427,574 2,851,000
common shares outstanding ========= ========== ========== =========
See notes to consolidated financial statements
<PAGE>
Acrodyne Communications, Inc.
(formerly Acrodyne Holdings, Inc.)
Consolidated Statement of Cash Flows
(Unaudited)___________________________________________________________________
Six Months Ended June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($ 908,408) ($ 189,676)
Adjustments to reconcile net income (loss)
to net cash used In operating activities:
Depreciation and amortization 187,032 161,388
Stock option accrual 8,333 8,333
Changes in assets and liabilities:
Accounts receivable 455,283 (849,250)
Inventories (749,464) (769,946)
Note receivable (3,149) (3,008)
Prepaids and deposits 35,218 66,250
Accounts payable (214,043) (64,053)
Accrued expenses (53,760) (148,126)
Customer advances (78,103) 364,970
---------- ----------
Net cash used in operating activities (1,321,061) (1,423,118)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (25,865) (84,105)
---------- ----------
Net cash used in investing activities (25,865) (84,105)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line-of-credit borrowings 200,000
Proceeds from the issuance of common stock, net 35,519 2,548,828
Proceeds from the issuance of preferred stock, net 1,050,000
Dividends on convertible preferred stock (36,888) 18,661
Payments on promissory notes (135,000) (135,500)
Capital leases repayments (39,040) (42,011)
Repayments on other borrowings and
non-compete liability (4,700) (10,279)
Net cash provided by (used in) ---------- ----------
financing activities 19,891 3,392,877
---------- ----------
Net decrease in cash and cash equivalents (1,327,035) 1,885,654
Cash and cash equivalents at beginning of period 3,921,544 918,747
---------- ----------
Cash and cash equivalents at end of period $2,594,509 $2,804,401
========== ==========
Supplemental cash flow information:
Cash paid for interest $ 42,181 $ 83,155
See notes to consolidated financial statements
<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 June 30,
1997 and the related consolidated statements of operations and of cash flows
for the six months ended June 30, 1997 and 1996 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
June 30, 1997, and the results of operations and cash flows for the six
months ended June 30, 1997 and 1996 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/A for the year ended December 31, 1996 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:
June 30,
1997 1996
Raw materials $2,779,968 $2,103,738
Work in process 2,143,141 773,433
Finished goods 314,241 216,562
---------- ----------
$5,237,351 $3,093,733
========== ==========
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. Restatement of Other income for the six months ending June 30, 1996
During 1996, the Company paid $125,200 and issued an aggregate of 465,000
warrants to a financial consulting firm for advisory services performed
during the year. The warrants are exercisable over a three year period at
prices ranging from $4.00 to $5.00. The common shares underlying 140,000
of these warrants has not been registered. In the fourth quarter, the
Company charged $250,000 to other expenses in connection with these warrant
issuances and accordingly, reported this transaction in the Company's Annual
Report on Form 10-KSB/A for the year ended December 31, 1996 filed with the
Securities and Exchange Commission. However, to properly reflect the impact
of this charge to the period affected, the entire $250,000 is included in the
Consolidated Statement of Operations for the six months ended June 30, 1996.
<PAGE>
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.
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 $2,000,000 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
The following compares the Company's summary results of operations for the
three and six months ended June 30, 1997 and for the three and six months
ended June 30, 1996:
Three Months Ended Six Months Ended
June 30, June 30,
(Unaudited) (Unaudited)
1997 1996 1997 1996
Net sales $2,710,845 $3,204,107 $4,979,873 $5,414,457
Cost of sales 1,999,268 2,184,455 3,671,153 3,700,628
---------- ---------- ---------- ----------
Gross profit 711,577 1,019,652 1,307,891 1,713,829
Operating expenses 1,254,869 1,045,524 2,187,571 1,815,977
---------- ---------- ---------- ----------
Operating profit (loss) $ (543,292) $ ( 25,872) $(879,680) $(102,148)
============ =========== ========== ==========
Net sales are consistently down in the three and six-month periods ending
June 30, 1997. Management believes that these results are attributable to
the continued delay of the broadcasting industry to launch the implementation
of Digital Television. The delay has been extended by recent transmission
conflict resulting from digital channel assignment by the FCC. Non-digital
sales remain slow as the market continues a wait-and-see approach and
continues to use and replace current equipment while delaying any longer
term expansion decisions for higher power equipment. While sales have
decreased in the high and low-power segments, sales have increased in the
mid-power segment as represented by the current replacement market.
<PAGE>
As a result of the Company's efforts to generate sales volume and meet the
demands of an increasingly competitive market, the Company's margin on sales
decreased from 31% in the three and six months ended June 30, 1996 to 26% in
the three and six months ended June 30, 1997.
Three and six-month operating expense variances are consistent and indicative
of continued price pressures from current stagnated market and due to the
addition of five manufacturing positions to improve production, materials
management and service. The decreased profitability trend reflects the
increased discounts being provided to customers by the Company to place
itself in a more competitive market position and to motivate purchases in
the high power market. Sales of medium-power equipment continue to yield
the highest sales margin. Sales and marketing expenditures were significantly
higher due to the Company's efforts to improve its foreign and domestic
sales and marketing presence through increased advertising, its foreign
travel and trade show participation as well as the implementation of a sales
commission program.
Interest expense decreased significantly as a result of the Company repayment
of several bank and capital lease debts due to a strong cash flow position.
Additionally, interest income increased significantly due to the investment
of operating cash obtained primarily from warrant exercises during calendar
year ended December 31, 1996.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Historically, Acrodyne has financed its activities primarily from customer
deposits, internally generated funds, and use of its credit facility. At
June 30, 1997, the Company's working capital decreased approximately $917,000
compared to December 31, 1996, primarily due to the use of working capital
for operations and a lack of sales activity during the six month period ended
June 30, 1997.
Accounts Receivable at June 30, 1997 decreased approximately $455,000 and
$297,000 compared to December 31, 1996 and June 30, 1996, respectively,
primarily as a result of lower sales volume during the six months ended
June 30, 1997. Sale of transmitters up to 10kW continue to be made with
credit terms of 30% as a deposit at the time of placing the order, 40-60%
prior to shipment, and 10-30% 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
June 30, 1997 compared to June 30, 1996 is due to lower sales volume, slow
inventory turnover due to delayed purchasing of Digital transmission
equipment and for replacement or upgrading of current transmission equipment,
the Company's strategy to provide quick turnaround to strengthen market
position, and higher volume purchasing by the Company to take advantage of
discount opportunities.
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 June 30, 1997 there was $200,000
outstanding under such credit facility. The interest rate on this facility
is based on prime plus 1% and was 9.50% on June 30, 1997. The credit
facility and the standby letter of credit are secured by substantially all
the assets of the Company and Acrodyne and contain no restrictive covenants.
In October 1996, the bank amended the credit facility, as it pertains to the
formal Borrowing Base Certificate requirement, to permit borrowing of up to
$1,200,000 (less any outstanding Letters of Credit) without being limited by
a formal borrowing formula. At June 30, 1997, there was approximately
$500,000 available to be borrowed by the Company under the credit facility.
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 eleven quarterly payments totaling
$1,099,620 (including interest) under such note have been made through
July 23, 1997 according to the agreement. The next quarterly payment of
$81,169 (including interest) is due on October 23, 1997.
As of February 12, 1997, 2,000 shares of the Company's 8% Convertible
Redeemable Preferred Stock, par value $1.00 per share (the "8% Preferred
Stock"), were converted into 50,000 shares of common stock in accordance with
the conversion provisions of the 8% Preferred Stock. As of June 6, 1997,
2,000 additional shares of 8% Preferred Stock were converted into 50,000
shares of common stock.
<PAGE>
On April 15, 1997, the Company's Board of Directors approved the 1997 Stock
Option Plan with authorization to grant options with respect to an aggregate
of up to 450,000 shares of the Company's common stock.
On May 31, 1997, Colin Winthorp exercised 10,000 warrants at $4.00 per share.
On June 6, 1997 Alchemy Capital exercised 3,000 warrants at $3.00 per share
and on June 30, 1997, exercised an additional 3,000 warrants at $3.00 per
share.
On July 1, 1997, the Company imposed an indefinite freeze on all salaries,
wages and new hires. Employee headcount was reduced by 25%.
Available cash on hand combined with cash flow from operations and available
funds under the Company's 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 August 11, 1997, the Company had approximately $2,400,975 of available
cash on hand.
<PAGE>
ACRODYNE COMMUNICATIONS, INC.
PART II. OTHER INFORMATION
______________________________________________________________________________
Item 4. Submission of Matters to a Vote of Security-Holders
(a) At the Annual Meeting of Stockholders of the Company
held on June 9, 1997, the Company's stockholders elected the
following Directors with the following votes:
For Withheld
A. Robert Mancuso 3,894,377 23,650
Daniel D. Traynor 3,896,377 21,650
Martin J. Hermann 3,893,327 24,700
Dr. Elmer M. Lipsey 3,880,252 37,775
Item 6. Exhibits and Reports on Form 8-KSB
(a) Exhibits
(b) No Form 8-KSB was filed during the quarter ended
June 30, 1997.
<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.
Acrodyne Communications, Inc.
-----------------------------
(Registrant)
Date: August 11, 1997 /s/ A. Robert Mancuso
-----------------------------
A. Robert Mancuso
Chairman, President, and Chief
Financial Officer
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