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UNITED STATES
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 August 31, 1996
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[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 001-12810
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HI-SHEAR TECHNOLOGY CORPORATION
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(Exact name of small business issuer as
specified in its charter)
Delaware 22-2535743
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) (Identification No.)
24225 Garnier Street, Torrance, CA 90505-5355
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(Address of principal executive offices)
(Issuer's telephone number) (310) 784-2100
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(Former name, former address and former fiscal year, if changed since last
report. 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 subjected to such filing requirements for the past 90 days.
[X] Yes [_] No
[X] Yes [_] No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 6,631,000 of Common Stock, $.002 par
value as of August 31, 1996.
Transitional Small Business Disclosure Format (Check one): [_] Yes [X] No
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HI-SHEAR TECHNOLOGY CORPORATION
INDEX
PART 1 - FINANCIAL INFORMATION
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PAGE NO.
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Condensed consolidated balance sheets
August 31, 1996 and May 31, 1996.............................. 1
Condensed consolidated statement of Operations
three months ended August 31, 1996
and August 31, 1995.......................................... 2
Condensed consolidated statement of cash flow
three months ended August 31, 1996
and August 31, 1995........................................... 3
Notes to Financial Statements.................................. 4
PART 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS........................ 5
SIGNATURES..................................................... 7
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PART I FINANCIAL INFORMATION
BALANCE SHEETS
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AUGUST 31, MAY 31,
1996 1996
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(UNAUDITED)
ASSETS:
Current Assets:
Cash $ 66,000 $ 76,000
Accounts Receivable 4,254,000 4,322,000
Inventories 3,846,000 3,805,000
Prepaid expenses and other current assets 57,000 57,000
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TOTAL CURRENT ASSETS 8,223,000 8,260,000
EQUIPMENT, NET 1,216,000 1,258,000
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Other Assets
Deferred costs 387,000 417,000
Other intangible assets 148,000 150,000
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Total $9,974,000 $10,085,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable to bank $2,611,000 $ 2,636,000
Current portion of long-term debt 242,000 242,000
Accounts payable 1,411,000 1,425,000
Accrued payroll and related costs 327,000 480,000
Other accrued liabilities 462,000 449,000
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TOTAL CURRENT LIABILITIES 5,053,000 5,232,000
LONG-TERM DEBT 85,000 144,000
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TOTAL LIABILITIES 5,138,000 5,376,000
Excess of Net Assets Acquired Over Purchase Price 932,000 967,000
Stockholders' Equity
Preferred stock, $1.00 par value; 500,000 shares
authorized; no shares issued
Common stock, $.001 par value -25,000,000 shares
authorized; issued and outstanding, 6,631,000 shares
at August 31, 1996; 6,628,000 shares at May 31, 1996 7,000 7,000
Additional paid-in capital 6,992,000 6,977,000
Accumulated deficit (3,095,000) (3,242,000)
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TOTAL STOCKHOLDERS' EQUITY 3,904,000 3,742,000
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TOTAL $9,974,000 $10,085,000
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See notes to financial statements.
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HI-SHEAR TECHNOLOGY CORPORATION
STATEMENTS OF OPERATIONS (UNAUDITED)
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THREE-MONTH PERIOD
ENDED AUGUST 31,
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1996 1995
REVENUES $ 3,276,000 $ 2,350,000
Cost of Revenues 2,382,000 1,689,000
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GROSS PROFIT 894,000 661,000
Selling, General and Administrative Expenses 598,000 453,000
Research and Development Expenses 77,000 64,000
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OPERATING INCOME 219,000 144,000
Interest Expense (Income) 70,000 51,000
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INCOME BEFORE PROVISION FOR INCOME TAXES 149,000 93,000
Provision for Income Taxes 2,000 3,000
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NET INCOME $ 147,000 $ 90,000
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NET INCOME PER COMMON AND COMMON
EQUIVALENT SHARE $ 0.02 $ 0.01
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WEIGHTED AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES OUTSTANDING
DURING THE PERIOD 6,628,000 6,527,000
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HI-SHEAR TECHNOLOGY CORPORATION
STATEMENTS OF CASH FLOWS (UNAUDITED)
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THREE-MONTH PERIOD
ENDED AUGUST 31,
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1996 1995
CASH FLOWS FORM OPERATING
ACTIVITIES:
Net Income $ 147,000 $ 90,000
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 112,000 55,000
Amortization of excess of net assets
acquired over purchase price (35,000) (76,000)
Changes in assets and liabilities:
Accounts receivable 68,000 765,000
Inventories (41,000) (767,000)
Prepaid expenses and other assets - (268,000)
Accounts payable (14,000) 179,000
Accrued payroll and related costs (153,000) (31,000)
Other accrued liabilities 13,000 64,000
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Net cash (used in) provided by
operating activities 97,000 11,000
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CASH FLOWS FROM INVESTING ACTIVITIES-
Purchase of equipment (38,000) (18,000)
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CASH FLOWS FROM FINANCING ACTIVITIES-
Proceeds (payments) on note payable to bank (25,000) (54,000)
Proceeds from stock options exercised 15,000 -
Principal payments on long-term debt (59,000) (750,000)
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Net cash provided by
(used in) financing activities (69,000) (804,000)
NET INCREASE (DECREASE) IN CASH (10,000) (811,000)
CASH, BEGINNING OF PERIOD 76,000 1,248,000
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CASH, END OF PERIOD $ 66,000 $ 437,000
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NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
Reference is made to the Company's Annual Report on Form 10-KSB for the
year ending May 31, 1996.
The accompanying unaudited financial statements reflect all adjustments
which, in the opinion of the Company, are the results of operations for
the interim periods presented. All such adjustments are of a normal,
recurring nature. The results of the Company's operations for any
interim period are not necessarily indicative of the results for a full
fiscal year.
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Part 2 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
Hi-Shear Technology Corporation (the "Company") designs and manufactures
highly reliable electronic and pyrotechnic-separation products for the
aerospace and defense industry, and has adapted its technology to a select
group of emerging commercial products. The Company operates through two
business groups, Aerospace and Defense Products and Commercial Products.
The Company's Aerospace and Defense Products are used by customers ranging
from NASA and the U.S. Government to foreign governments and agencies and
other aerospace and defense companies. Its Aerospace and Defense Products
are primarily used in space, strategic missile and weapon systems and
advanced fighter aircraft. Beginning in fiscal year 1993, the Company
began the design, testing and development of a select group of commercial
products that utilize its highly reliable aerospace and defense technology.
Since beginning its commercial group, the Company has completed development
of two commercial product lines, the LifeShear rescue cutters and high
security locks. The Company has also accelerated the development of a low-
cost environmentally safe liquid airbag inflator system.
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the financial
statements included elsewhere in this report. This discussion contains
forward-looking statements about the Company's business, and actual results
may differ from those anticipated in these forward-looking statements as a
result of certain factors including, the acceptance of its new aerospace
and defense products, the acceptance and pricing of its commercial
products, the development and nature of its relationship with key strategic
partners, the resolution of federal budgetary issues and the economy in
general.
Three Months Ended August 31, 1996, compared with Three Months Ended
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August 31, 1995.
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At the beginning of the first quarter which ended August 31, 1996, the
Company had a backlog of $13,184,000 and received $3,454,000 of additional
orders during the quarter. This compares to the previous year when the
Company began its quarter with a backlog of $12,924,000 and received during
the quarter $2,456,000 of new orders. In this regard, the Company increased
its bookings by 40% during the first quarter of fiscal 1997 as compared to
the same period fiscal 1996. Shipments were mostly from the Company's
backlog during the quarter ending August 31, 1996 and produced sales of
$3,276,000 as compared to $2,350,000 in the same quarter of the prior year.
Generally, most of the Company's products have an average 6-9 month lead
time. This lead time is the average period of time required from the date
the order is received until it is shipped when sales are recognized.
Therefore, the beginning backlog for a period is a strong indicator of the
Company's performance over the next several quarters. However, for the
prior years first quarter, a significant addition to the Company's backlog
was received late in fiscal 1995 and therefore did not ship and become
sales during the quarter.
Gross profit for the three months ending August 31, 1996 was $894,000 or
27% of revenue as compared to $661,000 or 28% in the prior year's quarter.
The 34% increase in gross profit for the quarter was directly attributable
to the Company's increased sales volume. Additionally, the Company has
continued to maintain a tight control on expenses. Although selling,
general and administrative expenses increased to $598,000 as compared to
$453,000 in the year earlier period,
5
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these expenses decreased as a percentage of sales to 18% from 19%.
Research and development expenses remained approximately even at 2% of
revenues. The Company intends to continue its research and development on
new and existing products, but does not foresee such expenses to
significantly increase as a percentage of sales.
Operating income increased to $219,000 during the quarter ending August 31,
1997 as compared to $144,000 during the same period last fiscal year. This
52% increase in operating profit is a result of the increase in revenues as
well as the Company's efforts to tightly control expenses.
Net interest expense during the first quarter of fiscal 1997 increased
slightly to $70,000 as compared to $51,000 during the same period last year
reflecting interest paid on average borrowings.
Net income increased to $147,000 during the quarter ending August 31, 1997
as compared to $90,000 during the first quarter of fiscal 1996.
The Company was able to use a portion of its net-operating loss carry-
forward to offset its tax liability other than certain minimum state taxes.
Liquidity and Capital Resources
-------------------------------
Net cash of $97,000 was generated by operations during the quarter as
compared to $11,000 in last year's first quarter. The Company increased
slightly its capital expenditures for equipment during the quarter to
$38,000 as compared to $18,000 for the same period last year. The Company
maintains a $3,500,000 line of credit with a bank for working capital
purposes and pays market interest on the outstanding balance. At the end of
the quarter, the Company had drawn down $2,611,000 against the line. Based
on discussions with the bank, management expects that the line of credit
will be renewed during the second quarter on comparable terms.
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SIGNATURES
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In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
HI-SHEAR TECHNOLOGY CORPORATION
Date: October 15, 1996 By: /s/ THOMAS R. MOONEY
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Thomas R. Mooney
Chairman and President
Date: October 15, 1996 By: /s/ GEORGE W. TRAHAN
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George W. Trahan
Executive Vice President
(Principle Accounting Officer)
7
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<PAGE>
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<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 66,000
<SECURITIES> 0
<RECEIVABLES> 4,254
<ALLOWANCES> 0
<INVENTORY> 3,846
<CURRENT-ASSETS> 8,223
<PP&E> 1,216
<DEPRECIATION> 0
<TOTAL-ASSETS> 9,974
<CURRENT-LIABILITIES> 5,053
<BONDS> 0
0
0
<COMMON> 6,631,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9,974
<SALES> 3,276,000
<TOTAL-REVENUES> 3,276,000
<CGS> 2,382,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 70,000
<INCOME-PRETAX> 149,000
<INCOME-TAX> 2,000
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 147,000
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
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