U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
[ ] 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: 5,318,270 SHARES OF COMMON STOCK OF
ACRODYNE COMMUNICATIONS, INC. WERE OUTSTANDING ON MAY 8, 1998.
<PAGE>
The Form 10-QSB for the three months ended March 31, 1998 filed by Acrodyne
Commmunications Inc. on May 15, 1998 is hereby amended and restated in its
entirety to correct, among other things, certain computational errors related to
earnings per share calculations contained in such May 15th filing.
ACRODYNE COMMUNICATIONS, INC.
INDEX
Page
NO.
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheet at March 31, 1998
(unaudited) and December 31, 1997 ..................................... 2
Consolidated Statement of Operations for the Three
Months Ended March 31, 1998 and 1997 (unaudited)....................... 3
Consolidated Statement of Cash Flows for the Three
Months Ended March 31, 1998 and 1997 (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 ........................................................... 11
<PAGE>
PART I. FINANCIAL INFORMATION
ACRODYNE COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-------------- -----------------
(unaudited)
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $2,418,561 $3,011,294
Accounts receivable, net of allowance for doubtful accounts 1,175,845 943,183
Inventories 5,347,917 5,271,449
Prepaid expenses and deposits 196,232 105,067
------------- -------------
Total current assets 9,138,555 9,330,993
Property, plant and equipment, net 614,254 666,395
Note receivable 86,940 85,436
Non-compete agreement, net 492,072 510,822
Goodwill, net 4,173,079 4,212,202
----------- -----------
Total assets $14,504,900 $14,805,848
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $352,082 $352,082
Accounts payable 1,022,764 1,151,372
Accrued expenses 170,348 238,796
Customer advances 318,789 347,378
---------- ----------
Total current liabilities 1,863,983 2,089,628
Long-term debt 284,868 379,196
Non-compete liability 720,071 722,647
---------- ----------
Total liabilities 2,868,922 3,191,471
Shareholders' equity:
Preferred stock, par value $1.00; 1,000,000 shares
authorized, 25,000 shares designated as
8% Convertible Redeemable Preferred Stock, 6,500 shares
issued and outstanding on March 31, 1998 and
December 31, 1997 6,500 6,500
Common stock, par value $.01; 10,000,000 shares
authorized, 5,314,270 shares issued and outstanding
on March 31, 1998 and December 31, 1997 53,143 53,143
Additional paid-in capital 17,166,690 17,180,718
Accumulated deficit (5,590,355) (5,625,984)
----------- -----------
Total liabilities and shareholders' equity $14,504,900 $14,805,848
=========== ===========
See notes to consolidated financial statements
</TABLE>
<PAGE>
ACRODYNE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
---- ----
<S> <C> <C>
Net sales $3,163,975 $2,268,198
Cost of sales 2,133,438 1,671,885
--------- ----------
Gross profit 1,030,537 596,313
--------- --------
Operating expenses:
Engineering, research and development 219,437 193,897
Selling 337,836 327,223
Administration 385,434 353,708
Amortization 57,874 57,874
------ --------
Total operating expenses 1,000,581 932,702
---------- -----------
Operating profit (loss) 29,956 (336,389)
Other income (expense)
Interest income (expense), net 5,674 (19,253)
Other income, net _______ 613
-----------
Net income (loss) $35,630 ($355,029)
Dividends on 8% Convertible (14,028) (19,888)
-------- ----------
Redeemable Preferred Stock
Net income (loss) available to common shares $21,602 $(374,917)
======= ==========
Net income (loss) per common share-basic $0.004 $(0.09)
====== =======
Weighted average common shares outstanding-basic 5,314,270 4,410,937
========= ==========
Net income (loss) per common share-diluted $0.004 $(0.09)
====== ======
Weighted average common shares outstanding-diluted 5,528,805 4,410,937
========= =========
See notes to consolidated financial statements
</TABLE>
<PAGE>
ACRODYNE COMMUNICATIONS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
---- ----
CASH FLOWS FROM OPERATING
ACTIVITIES:
<S> <C> <C>
Net income (loss) $35,630 ($355,029)
Adjustments to reconcile net income to net cash used
in operating activities:
Depreciation and amortization 110,015 92,636
Stock option accrual 0 4,166
Changes in assets and liabilities:
Accounts receivable (232,662) 417,059
Inventories (76,468) (643,694)
Note receivable (1,504) (1,645)
Prepaids and deposits (91,164) (32,780)
Accounts payable (128,608) (375,154)
Accrued expenses (68,448) (100,673)
Customer advances (28,590) (8,044)
-------- ---------
Net cash used in operating activities (481,799) (1,003,158)
--------- ----------
CASH USED IN INVESTING ACTIVITIES:
Purchase of property, plant and equipment 0 (22,844)
---------- --------
Net cash used in investing activities 0 (22,844)
---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends on convertible preferred stock (14,028) (19,888)
Payments on promissory notes (67,500) (67,500)
Capital leases repayments (26,829) (25,430)
Repayments on other borrowings and
non-compete liability (2,577) (2,306)
------ ------
Net cash provided by financing activities (110,934) (115,124)
-------- --------
Net decrease in cash and cash equivalents (592,733) (1,141,126)
Cash and cash equivalents at beginning of period 3,011,294 3,921,544
---------
Cash and cash equivalents at end of period $2,418,561 $2,780,418
========== ===========
Supplemental cash flow information:
Cash paid for interest $29,482 $38,947
See notes to consolidated financial statements
</TABLE>
<PAGE>
ACRODYNE COMMUNICATIONS, 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 March 31, 1998
and the related consolidated statements of operations and of cash flows for the
three months ended March 31, 1998 and 1997 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 March 31, 1998, and the
results of operations and cash flows for the three months ended March 31, 1998
and 1997 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, 1997 filed with the Securities
and Exchange Commission, as amended through the date hereof on Forms 10-KSB/A-2
and 10-KSB/A-3. 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:
MARCH 31, 1998 DECEMBER 31, 1997
Raw materials $2,300,876 $2,381,914
Work in process 1,406,146 1,035,065
Finished goods 1,640,895 1,854,470
--------- ----------
$5,347,917 $5,271,449
========== ==========
3. Earnings Per Share
Basic earnings per share is computed by dividing net income available to common
shareholders by the weighted average number of shares outstanding. Diluted
earnings per share is computed using the weighted average number of shares
determined for the basic computation plus the number of shares of common stock
that would be issued assuming all contingently issuable shares having a dilutive
effect on earnings per share were outstanding.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
THE COMPANY. The business of Acrodyne Communications, Inc. (formerly Acrodyne
Holdings, Inc.), a Delaware corporation (the "Company"), is conducted through
its sole operating subsidiary, Acrodyne Industries, Inc. ("Acrodyne"). Acrodyne
was acquired by the Company on October 24, 1994 (the "Acquisition"). Prior
thereto, the Company had no operations. The Company changed its name to Acrodyne
Communications, Inc. on June 9, 1995.
BUSINESS OF ACRODYNE. Acrodyne (together with its predecessor) has designed,
manufactured and marketed television transmitters and translators which have
been sold in the United States and internationally since 1971. The function of a
television transmitter is to broadcast on the air television signals to a
specific audience receiving such signals by regular antenna or by a local cable
company which then feeds the signal to their subscribers. Television
translators, which operate unattended, retransmit incoming signals from primary
stations on different channels within areas where direct reception of the
original signal may be limited by mountains or other geographic impediments.
ACRODYNE PRODUCTS AND SERVICES. Acrodyne designs, manufactures and markets
digital and analog television broadcast transmitters and translators for
domestic and international television stations, broadcasters, government
agencies, not-for-profit organizations and educational institutions. The useful
life of a television transmitter or translator is approximately 20 years.
Acrodyne's television transmitters, which range in transmission power levels
from one watt for localized applications to tens of thousands of watts for large
television broadcasters, have a modularized design which permits Acrodyne to
respond to specific customer requests. Acrodyne classifies its transmitters into
two categories based upon the power output of such transmitters. Lower power
transmitters and higher power transmitters transmit signals in both UHF and VHF
frequency bands. The VHF band covers channels two through thirteen and the UHF
band covers channels above thirteen. Typically each transmitter permits the
sender to broadcast over one channel. In the case of adjacent channel
assignments, for which the broadcaster transmits two television signals on
adjacent channels, one analog and one digital, Acrodyne offers a single
transmitter to transmit both signals. To the Company's knowledge, none of its
competitors offers this single transmitter capability. In addition, Acrodyne
manufactures a full line of Multichannel Multipoint Distribution System
transmitters for the wireless cable industry.
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED
MARCH 31, 1997
The following compares the Company's summary results of operations for the three
months ended March 31, 1998 and for the three months ended March 31, 1997:
Three Months Ended March 31,
1998 1997
(Unaudited)
Net Sales $3,163,975 $2,268,198
Cost of sales 2,133,438 1,671,885
--------- ---------
Gross profit 1,030,537 596,313
Operating expenses 1,000,581 932,702
--------- -------
Operating profit (loss) $ 29,956 ($336,389)
============ ============
Net sales for the three months ended March 31, 1998 showed a 39% increase over
net sales for the three months ended March 31, 1997. Management believes that
the issuance of final channel allocations relative to Digital Television by the
Federal Communications Commission contributed greatly to the increase in sales
volume. The volume of sales of High Power Transmitters in the domestic market,
which was basically non existent in fiscal 1997, increased to $1,793,580 during
the three months ended March 31, 1998 as compared to zero sales volume during
the three months ended March 31, 1997. The Company's margin on sales increased
to 32% in the three months ended March 31, 1998 from 26% in the three months
ended March 31, 1997. This increase is attributable to the sale of High Power
transmitters which are less labor intensive and to the higher content of foreign
sales which can command higher margins in the industry.
Operating expenses for the three months ended March 31, 1998 increased by
$67,879 to $1,000,581 as compared to the three months ended March 31, 1997. This
was due to a 9% increase in research and development expenditures and a 9%
increase in administrative expenses.
LIQUIDITY AND CAPITAL RESOURCES
Historically, Acrodyne has financed its activities primarily from customer
deposits, internally generated funds, and use of its credit facility. At March
31, 1998, the Company's working capital increased by $33,207 to $7,274,572 as
compared to $7,241,365 at December 31, 1997.
Accounts receivable at March 31, 1998 were $1,175,845 and reflect a $232,662
increase from December 31, 1997. This increase is due mainly to the higher sales
volume experienced during the first quarter of 1998 as compared to all of fiscal
1997. The majority of the Company's sales of domestic transmitters are made with
credit terms of a non-refundable 30% deposit at the time of placing the order,
40% to 60% prior to shipment and 10% to 30% net thirty days. The Company
continues to require an irrevocable letter of credit on international orders.
Inventories, net of reserves, increased only slightly to $5,347,917 at March 31,
1998 from $5,271,449 at December 31, 1997 due to a growth in order backlog.
In March of 1998, the Company and Acrodyne, as co-borrowers, established a new
$1,500,000 credit facility with a bank for working capital purposes to replace
its then existing bank credit facilities. Also, in the same month, the company
reserved $500,000 for an irrevocable standby letter of credit to secure the
Senior Subordinated Note described below. At December 31, 1997 and March 31,
1998, there was no balance outstanding under the new credit facility. The new
credit facility is secured by the assignment of a certificate of deposit in the
amount of $1,500,000 maintained at the bank. The standby letter of credit is
secured by a $500,000 treasury bill maintained at the issuing bank. As the
outstanding balance on the Senior Subordinated Note has fallen below $500,000
the Company is beginning to see and will continue to see slight increases in its
available cash on a quarterly basis as less collateral is required.
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 a $1,450,000 Senior Subordinated Note. Interest on such note is
payable at the rate of 9% per annum. Such note is secured by the irrevocable
standby letter of credit in the principal amount of $500,000 mentioned above.
The first fourteen (14) quarterly payments totaling $1,338,570 (including
interest) under such note have been made through April 23, 1998 pursuant to the
agreement. The next quarterly payment of $76,613 (including interest) is due on
July 23, 1998.
As of May 8, 1998, the Company had approximately $2,220,000 of available cash
and cash equivalents on hand, as compared to $3,011,294 as of December 31, 1997.
The reduction is due primarily to the use of capital for funding the growth in
operating performance during the first quarter of fiscal 1998 and the
acceleration of payments of current liabilities. In addition, as of May 8, 1998,
the Company had an outstanding balance of $400,000 against its credit facility.
Available cash on hand combined with cash flows 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
March 1999.
SIGNIFICANT AND RECENT EVENTS
During 1996, the Company privately placed, pursuant to Rule 505 under the
Securities Act of 1933, as amended (the "Act"), 10,500 shares of its then newly
created class of 8% convertible redeemable preferred stock, par value $1.00 per
share (the "Preferred Stock"), for which the Company received aggregate proceeds
of $1,050,000. The Preferred Stock is convertible at the option of the holders
into the number of common shares obtained by dividing the liquidation value by a
$4.00 per share conversion price, as such price may from time to time be
adjusted pursuant to the terms of the Preferred Stock. As of December 31, 1997,
the conversion price has been adjusted to $3.71 per share because of the sale of
common stock in 1997 described below. As of the dates of issuance of the
Preferred Stock, the weighted average market price for the Company's common
stock was $5.55. Accordingly, the beneficial conversion feature of the Preferred
Stock had an intrinsic value of $421,563 which was recorded as an immediate
dividend in accordance with rules established by the staff of the Securities and
Exchange Commission (the "SEC"). To properly reflect the impact to the year
affected, the Company reported this transaction on Form 10-KSB/A for the year
ended December 31, 1996 filed with the SEC on March 31, 1998. During 1997, 4,000
shares of the Preferred Stock were converted into common stock at a conversion
price of $4.00 per share. As of May 8, 1998 there have been no other
conversions.
On April 15, 1997, the Company's Board of Directors approved the Company's 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 January 20,
1998, the stock option plan was amended to add another 200,000 shares of the
Company's common stock. There have been no options granted under such plan
through May 8, 1998.
On November 7, 1997, the Company privately placed with a group of investors
800,000 shares of its common stock at a purchase price of $2.50 per share, for
an aggregate purchase price of $2,000,000. Concurrently, the Company also issued
warrants for the purchase of up to 500,000 shares of its common stock, with such
warrants being exercisable until November 7, 2002 at an exercise price of $3.00
per share of common stock. These securities were all issued pursuant to the
exemption from registration under the Act set forth in Section 4(2) of the Act
(such issuance of the shares and warrants, collectively, the "Private Placement"
and, the investors in such Private Placement, the "Scorpion Investor Group").
Scorpion Holdings Inc. ("Scorpion") arranged for the financing by the investors
in the Private Placement. The Company has entered into a financial advisory
agreement with Scorpion pursuant to which Scorpion has agreed to provide
financial management, strategic planning and to arrange private and public
financing along with review and analysis of potential acquisition candidates.
The Company filed on April 17, 1998 a registration statement on Form S-3 with
the Securities and Exchange Commission to, among other things, register for
resale, under the Act, the shares of common stock sold, and the shares of common
stock underlying the warrants sold, in the Private Placement, as well as the
shares of common stock underlying certain other warrants previously issued by
the Company issued to other investors. However, the Scorpion Investor Group has
agreed not to sell or otherwise dispose of such shares and warrants for a period
of one year after the Private Placement.
During April 1998, Alchemy Capital exercised a total of 4,000 warrants at an
exercise price of $3.00 per warrant share.
<PAGE>
PART II. OTHER INFORMATION, AS APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
No matter was submitted to a vote of security holders during the first quarter
of fiscal 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-KSB.
(a) No Exhibits.
(b) No Form 8-KSB was filed during the quarter ended March 31, 1998.
<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: May 20, 1998 /S/ A. ROBERT MANCUSO
A. Robert Mancuso
Chairman and President
/S/ RONALD R. LANCHONEY
Ronald R. Lanchoney
Chief Financial Officer
