UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to ________
Commission file number 1-13550
HAUPPAUGE DIGITAL, INC.
(Exact Name of registrant as specified in its charter)
Delaware 11-3227864
( State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
91 Cabot Court, Hauppauge, New York 11788
(Address of principal executive offices)
(516) 434-1600
(Issuer's telephone number)
Indicate by check mark 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
As of February 9, 2000, 4,352,002 shares of .01 par value Common Stock of the
registrant were Outstanding, not including treasury shares
<PAGE>
HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1.Financial Statements Page No.
Condensed Consolidated Balance Sheets-
December 31, 1999 and September 30, 1999 3
Condensed Consolidated Statements of Income-
Three Months ended December 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows-
Three Months ended December 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6-8
Item 2. Management's Discussion and Analysis of Financial Condition 8-13
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal proceedings 14
Item 6. Exhibits and Reports on form 8-K 14
SIGNATURES 15
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
December 31,
1999 September 30,
(Unaudited) 1999
------------------ ------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $5,224,771 $6,122,922
Accounts receivable, net of allowance for doubtful accounts 9,856,826 6,973,452
Inventories 12,777,810 12,957,439
Prepaid expenses and other current assets 561,681 407,916
Deferred tax assets 457,753 477,074
------------------ -----------------
Total current assets 28,878,841 26,938,803
Property, plant and equipment-at cost 834,610 718,562
Security deposits and other non-current assets 85,009 70,219
------------------ ------------------
$29,798,460 $27,727,584
================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY :
CURRENT LIABILITIES:
Accounts payable $12,521,753 11,208,777
Accrued expenses 1,951,903 2,698,161
Income taxes payable 494,557 498,555
------------------ ------------------
Total current liabilities 14,968,213 14,405,493
------------------ ------------------
SHAREHOLDERS' EQUITY
Common stock $.01 par value; 10,000,000 shares authorized, 4,563,302 and
4,560,302 issued as of December 31 , 1999 and September 30, 1999 45,633 45,603
Additional paid-in capital 10,728,179 10,696,208
Retained earnings 5,323,564 3,847,409
Treasury Stock, at cost, 214,300 shares (1,267,129) (1,267,129)
------------------ ------------------
Total stockholders' equity 14,830,247 13,322,091
------------------ ------------------
$29,798,460 $27,727,584
================== ==================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
(Unaudited) (Unaudited)
---------------------------------------
<S> <C> <C>
NET SALES $22,043,649 $15,056,999
COST OF SALES 16,735,724 11,048,110
---------------------------------------
Gross Profit 5,307,925 4,008,889
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,083,202 2,309,314
RESEARCH & DEVELOPMENT EXPENSES 402,970 241,092
---------------------------------------
Income from operations 1,821,753 1,458,483
OTHER INCOME :
Interest income 46,500 49,405
Other, net 37,902 41,763
---------------------------------------
Income before taxes on income 1,906,155 1,549,651
TAXES ON INCOME 430,000 597,000
---------------------------------------
Net income $1,476,155 $952,651
=================== ================
Net income per share-basic $0.34 $0.22
Net income per share-diluted $0.30 $0.21
=================== ================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Three Months Ended December 31,
1999 1998
(Unaudited) (Unaudited)
------------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $1,476,155 $952,651
------------------- ------------------
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization 58,676 36,072
Provision for uncollectible accounts receivable 15,000 10,000
Compensation paid in stock 9,504 2,400
Deferred income taxes 19,321 (58,388)
Changes in current assets and liabilities:
Accounts receivable (2,898,387) 1,547,764
Inventories 179,629 (364,023)
Prepaid expenses and other current assets (153,765) 53,566
Accounts payable 1,312,976 (1,918,443)
Accrued expenses (750,256) 183,791
------------------- ------------------
(2,207,302) (507,261)
------------------- ------------------
Net cash (used in) provided by operating activities (731,147) 445,390
------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (174,724) (95,725)
Security deposits and other (14,780) -
------------------- ------------------
Net cash used in investing activities (189,504) (95,725)
------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the exercise of stock options 22,500 26,900
------------------- ------------------
Net cash provided by financing activities 22,500 26,900
------------------- ------------------
Net (decrease) increase in cash and cash equivalents (898,151) 376,565
Cash and Cash Equivalents, beginning of period 6,122,922 6,281,852
------------------- ------------------
Cash and Cash Equivalents, end of period $5,224,771 $6,658,417
=================== ==================
SUPPLEMENTAL DISCLOSURES:
Income taxes paid $414,677 $829,992
=================== ==================
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
included herein have been prepared in accordance with generally accepted
accounting principles for interim period reporting in conjunction with the
instructions to Form 10-Q. Accordingly, these statements do not include all of
the information required by generally accepted accounting principles for annual
financial statements, and are subject to year-end adjustments. In the opinion of
management, all known adjustments (consisting of normal recurring accruals and
reserves) necessary to present fairly the financial position, results of
operations and cash flows for the three months ended December 31, 1999 have been
included. It is suggested that these interim statements be read in conjunction
with the financial statements and related notes included in the Company's
September 30, 1999 Form 10-K.
The operating results for the three months ended December 31, 1999 are not
necessarily indicative of the results to be expected for the September 30, 2000
year end.
NOTE 2. INVENTORIES
Inventories have been valued at the lower of average cost or market. The
components of inventory at December 31, 1999 and September 30, 1999 consist of:
December 31, September 30,
1999 1999
Component Parts $ 4,238,325 $ 4,875,940
Work in Progress 416,759 494,285
Finished Goods 8,122,726 7,587,214
--------- ---------
$ 12,777,810 $ 12,957,439
============= ============
NOTE 3. NET INCOME PER SHARE
Basic earnings per share includes no dilution and is computed by dividing net
income by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflect, in the periods in which they have a
diluted effect, the dilution which would occur upon the exercise of stock
options. A reconciliation of the shares used in calculating basic and diluted
earnings per share follows:
<PAGE>
HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Net income per share - continued
Three Months Ended
December 31,
1999 1998
---- ----
Weighted average shares outstanding-basic 4,346,589 4,297,640
Number of shares issued on the assumed
Exercise of stock options 545,331 301,857
------- -------
Weighted average shares outstanding-diluted 4,891,920 4,599,497
--------- ---------
The Company has repurchased 214,300 shares over the prior three fiscal years for
treasury purposes. These shares, on a weighted average basis, have been excluded
in calculating weighted average shares outstanding.
NOTE 4. INCOME TAXES
Income taxes through fiscal 1999 were based on annualized statutory rates
for federal and state income taxes. The provision for income taxes reflects an
annualized effective tax rate after deductions for the utilization of restricted
net operating loss carry forwards, adjustments for items deductible for book
purposes but not currently deductible for tax purposes and the benefit which
results from the utilization of a foreign sales corporation.
Effective October 1, 1999, the Company restructured its foreign operations.
The result of the restructuring eliminated the foreign sales corporation and
established a new Luxembourg corporation, which will function as the entity
which services the Company's European customers.
The company's tax provision for the quarter ended December 31, 1999 was
based on this new structure.
NOTE 5. STOCK REPURCHASE PROGRAM
On November 8, 1996, the Company approved a stock repurchase program. The
Company has repurchased 214,300 shares for $1,267,129 at an average purchase
price of approximately $5.91 per share.
<PAGE>
HAUPPAUGE DIGITAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 6 . PROSPECTIVE ACCOUNTING CHANGES
Investment Derivatives and Hedging Activities Income
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
("SFAS 133"), Accounting for Derivative Investments and Hedging Activities
Income. SFAS 133 is effective for transactions entered into after June 15, 2000.
SFAS 133 requires that all derivative instruments be recorded on the balance
sheet at fair value. Changes in the fair value of the derivatives are recorded
each period in current earnings or other comprehensive income, depending on
whether a derivative is designed as part of the hedge transaction and the type
of hedge transaction. The ineffective portion of all hedges will be recognized
in earnings. The Company is in the process of determining the impact that the
adoption of SFAS 133 will have on its results of operations and financial
position.
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Three Month Period ended December 31, 1999 versus December 31, 1998
Sales for the three months ended December 31, 1999 were $22,043,649
compared to $15,056,999 for the prior year's first fiscal quarter, resulting in
an increase of $6,986,650 or approximately 46%, comprised of a 74% increase in
domestic sales and a 33% increase in international sales. The forces driving the
sales growth were:
- - The strength of new products rolled out during the latter part of fiscal 1999.
- - The opening of new geographic markets.
- - Sales contribution from the company's Singapore office, which was opened
during the fourth quarter of fiscal 1999.
Unit sales for the three months ended December 31, 1999 increased about 82%
to approximately 303,000 as compared to approximately 166,000 for the prior
year. Sales to domestic customers for the first fiscal quarter were 31% of net
sales for this year's first fiscal quarter and 26% for the prior year's first
fiscal quarter. Sales to international customers were 69% of net sales compared
to 74% of net sales for the three months ended December 31, 1998.
Gross profit increased to $5,307,925 from $4,008,889, an increase of
$1,299,036 or 32% over the comparable quarterly period of the prior fiscal year.
The gross profit percentage was 24% for the three months ended December 31, 1999
compared to 27% for the prior year's first fiscal quarter. The change in the
margins can be attributed to:
<PAGE>
Item 2. Management's Discussion and Analysis -Continued
- - Start up costs attributed to the introduction of several new products.
- - Decrease in sales of higher margin professional WinTV products due to Year
2000 "lockdowns".
- - Fluctuations in the Euro exchange rate.
The chart below illustrates the components of selling, general and
administrative expenses:
<TABLE>
<CAPTION>
Three months ended December 31,
-------------------------------
Dollar Costs Percentage of Sales
------------ -------------------
Increase/
1999 1998 Increase 1999 1998 (Decrease)
<S> <C> <C> <C> <C> <C> <C>
Sales & Promotional $2,031,614 $1,460,838 $ 570,776 9.2% 9.7% ( .5%)
Customer Support 126,533 96,762 29,771 .6% .6% -
Product Handling 212,684 126,229 86,455 1.0% .8% .2%
General & Admin 712,371 625,485 86,886 3.2% 4.2% (1.0%)
------- ------- ------ --- --- ------
Total $3,083,202 $2,309,314 $ 773,888 14.0% 15.3% (1.3%)
</TABLE>
As a percentage of sales, Selling, General and Administrative expenses declined
by 1.3% when compared to the first fiscal quarter of 1999. Declines in Sales and
Promotional expenses and General and Administrative expenses of 1.5% were offset
by a 0.2% increase in product handling. Represented in dollars, Selling General
and Administrative expenses increased $773,888 over the comparable prior year's
fiscal first quarter.
The increase in Sales and Promotional expenses of $570,776 was mainly due to:
- - Higher commission attributable to the sales increase of 46%.
- - Increased sales staff.
- - Sales and marketing programs for the Asian market.
- - Increased European marketing activities.
Customer Support and Product Handling expenses increased $29,771 and
$86,455 respectively. Customer Support costs increased due to additional staff
required to maintain a high level of customer service in support of the
Company's expanding worldwide customer base. Increased Product handling costs
was a function of greater shipment volume to customers.
The increase in General and Administrative expenses of $ 86,886 was primarily
due to :
- - Contractual wage increases for senior executives.
- - Higher professional fees for investment, tax and litigation advice.
- - General and administrative expenses of the company's Singapore office.
Research and development expenses increased $161,878 or approximately 67%.
The increase was due to engineering and development costs of our Singapore
office, increased personnel and increased material for digital prototypes.
<PAGE>
Item 2. Management's Discussion and Analysis -Continued
The Company had net other income of $84,402 compared to net other income
for the prior year's first fiscal quarter of $91,168. The decrease in net other
income was primarily due to slightly lower returns on monies invested.
Provision for income taxes was $430,000, or an effective tax rate of 23%
for the three months ended December 31, 1999 compared to $597,000 or an
effective tax rate of 38% for the three months ended December 31, 1998.
Effective October 1, 1999, the Company restructured its foreign operations.
The result of the restructuring eliminated the foreign sales corporation and
established a new Luxembourg corporation, which will function as the entity
which services the Company's European customers.
The company's tax provision for the quarter ended December 31, 1999 was
based on this new structure.
As a result of the above, the Company recorded net income after taxes for
the quarter ended December 31, 1999 of $1,476,155, which resulted in basic and
diluted earnings per share of $0.34 and $0.30, respectively, on weighted average
basic and diluted shares outstanding of 4,346,589 and 4,891,920, respectively,
compared to net income after taxes of $952,651 for the three months ended
December 31, 1998, which resulted in basic and diluted earnings per share of
$0.22 and $0.21, respectively, on weighted average basic and diluted shares of
4,297,640 and 4,599,497, respectively.
Since the company sells primarily to the consumer market, the Company has
experienced certain revenue trends. The Company has historically recorded
stronger sales results during the Company's first fiscal quarter (October to
December), which due to the holiday season, is a strong quarter for computer
equipment sales. The Company experienced this trend in each of the fiscal years
ended September 30, 1999 and September 30, 1998. In addition, the Company's
international sales, mostly in the European market, were 73%, 72% and 66% of
sales for the years ended 1999, 1998 and 1997, respectively. Due to this, the
Company's sales for its fourth fiscal quarter (July to September) can be
potentially impacted by the reduction of activity experienced with Europe during
the July and August summer holiday period.
To offset the above cycles, the Company continues to target a wide a range
of customer types in order to moderate the seasonality of retail sales.
<PAGE>
Liquidity and Capital Resources
The Company's cash, working capital and stockholders' equity position is
disclosed below:
December 31, 1999 September 30, 1999
----------------- -----------------
Cash $ 5,224,771 $ 6,122,922
Working capital 13,910,628 12,533,310
Stockholder's equity 14,803,247 13,322,091
The significant items of cash provided by and cash (consumed ) are detailed
below:
<TABLE>
<CAPTION>
<S> <C>
Net income (adjusted for non cash items), excluding deferred tax benefits $ 1,559,335
Changes to deferred tax assets 19,321
Increase in investment for current assets (2,872,523)
Operations funded by current liabilities-net 562,720
Purchase of Property, Plant & Equipment (174,724)
Other 7,720
</TABLE>
Net cash of $ 731,147 consumed by operating activities was primarily due to
cash generated from the Company's net income, (adjusted for non cash items) of
$1,559,335, deferred tax asset utilization of $ 19,321 and cash provided by the
increase in current liabilities of $562,720, offset by an increase in cash
invested in current assets, mainly receivables, of $2,872,523.
Cash of $ 174,724 was used to purchase fixed assets. The exercise of
employee options provided an additional $ 22,500 offset by other disbursements
of $14,780.
The Company's asset based credit facility expired on February 28, 1998. The
company has chosen not to renew the loan facility. The Company feels it is in a
position to obtain new financing at more competitive rates, and is currently
negotiating with new institutions to replace the expired loan facility.
On November 8, 1996, the Company approved a stock repurchase program. The
Company has repurchased 214,300 shares for $1,267,129 at an average purchase
price of approximately $5.91 per share.
The Company believes that its current cash position and its internally
generated cash flow will be sufficient to satisfy the Company's anticipated
operating needs for a least the ensuing twelve months.
Inflation
While inflation has not had a material effect on the Company's operations
in the past, there can be no assurance that the Company will be able to continue
to offset the effects of
<PAGE>
inflation on the costs of its products or services through price increases to
its customers without experiencing a reduction in the demand for its products;
or that inflation will not have an overall effect on the computer equipment
market that would have a material affect on the Company.
Effect of New Accounting Pronouncements
Investment Derivatives and Hedging Activities Income
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
("SFAS 133"), Accounting for Derivative Investments and Hedging Activities
Income. SFAS 133 is effective for transactions entered into after June 15, 2000.
SFAS 133 requires that all derivative instruments be recorded on the balance
sheet at fair value. Changes in the fair value of the derivatives are recorded
each period in current earnings or other comprehensive income, depending on
whether a derivative is designed as part of the hedge transaction and the type
of hedge transaction. The ineffective portion of all hedges will be recognized
in earnings. The Company is in the process of determining the impact that the
adoption of SFAS 133 will have on its results of operations and financial
position.
Year 2000
Many computer systems were not designed to handle dates beyond the year 1999.
The Company evaluated the effect of Year 2000 issues relating to its internal
computer systems and has concluded that its system was not Year 2000 compliant.
In recognition of this, the Company purchased and installed new software and
upgraded its computer hardware during fiscal 1999. Testing was performed in
house by Company personnel, with assistance from an outside consultant. The
hardware upgrades and the implementation of new software began in January 1999.
The new system was fully operational on October 1, 1999. The cost to the Company
to become Year 2000 compliant was approximately $150,000, which was funded
through internally generated cash flow, capitalized to fixed assets and will be
amortized over a period as prescribed by generally accepted accounting
principles.
The Company has been advised by its vendor that the Company's phone system,
installed during fiscal 1998, is Year 2000 compliant. The Company's facility
security system was upgraded during fiscal 1999 and the Company has been advised
by its vendor that such system is Year 2000 compliant.
During fiscal 1999, the Company sent Year 2000 questionnaires to third
parties the Company does business with in order to identify, if possible, the
status of the third parties' Year 2000 readiness. The Company received a
majority of responses back by the close of the 1999 fiscal year. Although the
responses showed that these third parties were either Year 2000 compliant or
working to resolve their Year 2000 compliance issues, the Company has limited or
no control over the actions taken by these third parties. Accordingly, there can
be no assurance that all the third parties the Company does business with will
successfully resolve all of their Year 2000 issues. The failure of these third
parties to resolve their Year 2000 issues could have a potentially adverse
affect on the Company. The Company continues to monitor the readiness of third
parties it currently does business with and look to procure new third parties
who are year 2000 compliant in an effort minimize the risk to the Company.
The Company has a contingency plan to respond to the possible effects the
Year 2000 problem has on third parties that are important to the Company's
operations. The Company has
<PAGE>
Year 2000-continued
communicated with its critical suppliers, vendors, customers, utilities,
financial institutions and telecommunication providers with whom it does
significant business to identify any Year 2000 issues. The Company will continue
to communicate with and review the progress of these third party enterprises in
resolving their Year 2000 issues. The ability to accurately assess the Company's
third parties' readiness is dependent in large part upon the reliability and
completeness of their representations.
To date, the Company has not experienced any Year 2000 issues.
Market Risks
Since the Company has extensive sales to European customers, the Company is
exposed to market risks resulting from the fluctuations in the foreign currency
exchange rates to the dollar. The Company attempts to reduce these risks by
utilizing foreign exchange hedging contracts.
The value of the Euro and British Pound against the dollar can affect the
Company's financial results. Changes in exchange rates may positively or
negatively affect the Company's revenues (as expressed in U.S. dollars), gross
margins, operating income and retained earnings. Where it deems prudent, the
Company engages in hedging programs aimed at limiting, in part, the impact of
currency fluctuations. Primarily selling foreign currencies through window
contracts, the Company attempts to hedge its foreign sales against currency
fluctuations.
These hedging activities provide only limited protection against currency
exchange risks. Factors that could impact the effectiveness of the Company's
programs include volatility of the currency markets and availability of hedging
instruments. The contracts the Company procures are specifically entered into as
a hedge against existing or anticipated exposure. The Company does not enter
into contracts for speculative purposes. Although the Company maintains these
programs to reduce the impact of changes in currency exchange rates, when the
U.S. dollar sustains a strengthening position against the currencies in which
the Company sells it products, the Company's revenues can be adversely affected.
Special Note Regarding Forward Looking Statements
Certain statements in this Report constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things, the
following: the Company's ability to manage growth; the risks associated with
successfully integrating acquired businesses; the risks associated with
dependence on resellers, contract manufacturers and other third-party
relationships; the uncertainty of continued market acceptance of PC-based video
products; the Company's highly competitive industry and rapid technological
change within the Company's industry; the risks associated with development and
<PAGE>
Special Note Regarding Forward Looking Statements-continued
introduction of new products; the need to manage product transitions; the risks
associated with product defects and reliability problems; the risks associated
with single source suppliers; the uncertainty of patent and proprietary
technology protection and reliance on technology licensed from third parties;
the risks of third party claims of infringement; the Company's dependence on
retention and attraction of key employees; the risks associated with future
acquisitions; the risks associated with international licensing and operations;
general economic and business conditions; and other factors referenced in this
Report.
PART II. OTHER INFORMATION
Item 1 Legal Proceedings
There are no new events to report subsequent to the disclosures contained
in the Company's September 30, 1999 Form 10K.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
27. Financial Data Schedule
(b) Reports on form 8-K
None
<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.
HAUPPAUGE DIGITAL, INC.
-----------------------
Registrant
Date: February 11, 2000 By /s/ Kenneth Plotkin
------------------------
KENNETH PLOTKIN
Vice President and
Chief Executive Officer
Date: February 11, 2000 By /s/ Gerald Tucciarone
------------------------
GERALD TUCCIARONE
Treasurer and Chief
Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000930803
<NAME> Hauppauge Digital, Inc.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 5,224,771
<SECURITIES> 0
<RECEIVABLES> 9,856,826
<ALLOWANCES> 150,000
<INVENTORY> 12,777,810
<CURRENT-ASSETS> 28,878,841
<PP&E> 1,411,307
<DEPRECIATION> 576,697
<TOTAL-ASSETS> 29,798,460
<CURRENT-LIABILITIES> 14,968,213
<BONDS> 0
0
0
<COMMON> 45,633
<OTHER-SE> 14,784,614
<TOTAL-LIABILITY-AND-EQUITY> 29,798,460
<SALES> 22,043,649
<TOTAL-REVENUES> 22,043,649
<CGS> 16,735,724
<TOTAL-COSTS> 3,486,172
<OTHER-EXPENSES> (84,402)
<LOSS-PROVISION> 15,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,906,155
<INCOME-TAX> 430,000
<INCOME-CONTINUING> 1,476,155
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,476,155
<EPS-BASIC> 0.34
<EPS-DILUTED> 0.30
</TABLE>
