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 JULY 31, 2001
[ ] Transition report pursuant to section 13 or 15(d) of the
Securities and Exchange Act of 1934
For the transition period from _______ to ________
Commission file number 0-8419
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SBE, INC.
______________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 94-1517641
___________________________________ ________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4550 Norris Canyon Road, San Ramon, California 94583
_____________________________________________________
(Address of principal executive offices and zip code)
(925) 355-2000
____________________________________________________
(Registrant's telephone number, including area code)
Indicate by check mark whether Registrant (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
---- ----
The number of shares of Registrant's Common Stock outstanding as of September
13, 2001 was 3,521,222.
SBE, INC.
INDEX TO JULY 31, 2001 FORM 10-Q
PART I FINANCIAL INFORMATION
ITEM 1 Financial Statements
Condensed Consolidated Balance Sheets as of
July 31, 2001 and October 31, 2000 3
Condensed Consolidated Statements of Operations for the
three and nine months ended July 31, 2001 and 2000 4
Condensed Consolidated Statements of Cash Flows for the
nine months ended July 31, 2001 and 2000 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
ITEM 3 Quantitative and Qualitative Disclosures about
Market Risk 13
PART II OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K .13
SIGNATURES 14
EXHIBITS 16
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SBE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
July 31, October 31,
2001 2000
---------- -----------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . $ 5,124 $ 5,311
Trade accounts receivable, net. . . . . . . . 1,422 4,296
Inventories, net. . . . . . . . . . . . . . . 4,943 4,918
Other . . . . . . . . . . . . . . . . . . . . 458 427
---------- -------------
Total current assets. . . . . . . . . . . . 11,947 14,952
Property, plant and equipment, net. . . . . . . 1,775 2,143
Capitalized software costs, net . . . . . . . . 140 293
Other . . . . . . . . . . . . . . . . . . . . . 71 39
---------- -------------
Total assets. . . . . . . . . . . . . . . . $ 13,933 $ 17,427
========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable. . . . . . . . . . . . $ 854 $ 1,094
Accrued payroll and employee benefits . . . . 179 1,304
Accrued product warranties. . . . . . . . . . 143 145
Other accrued expenses. . . . . . . . . . . . 399 767
---------- -------------
Total current liabilities . . . . . . . . . 1,575 3,310
Refundable deposit. . . . . . . . . . . . . . . 4,870 --
Deferred rent and other . . . . . . . . . . . . 240 288
---------- -------------
Total liabilities . . . . . . . . . . . . . 6,685 3,598
---------- -------------
Stockholders' equity:
Common stock. . . . . . . . . . . . . . . . . 13,878 13,855
Deferred stock compensation . . . . . . . . . -- (164)
Treasury stock. . . . . . . . . . . . . . . . (409) (409)
Note receivable from stockholder. . . . . . . (744) (744)
Retained earnings (accumulated deficit) . . . (5,477) 1,291
---------- -------------
Total stockholders' equity. . . . . . . . . 7,248 13,829
---------- -------------
Total liabilities and stockholders' equity. $ 13,933 $ 17,427
========== =============
SBE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three months ended Nine months ended
July 31, July 31,
2001 2000 2001 2000
-------- ------ -------- -------
Net sales . . . . . . . . . . . . . $ 1,449 $7,835 $ 6,680 $23,748
Cost of sales . . . . . . . . . . . 915 2,946 3,818 8,279
-------- ------ -------- -------
Gross profit. . . . . . . . . . . 534 4,889 2,862 15,469
Product research and development. . 1,311 1,466 4,530 4,176
Sales and marketing . . . . . . . . 844 1,078 2,415 3,475
General and administrative. . . . . 684 1,061 2,483 3,563
Acquisition costs . . . . . . . . . -- 383 -- 383
Restructuring costs . . . . . . . . -- -- 384 --
-------- ------ -------- -------
Total operating expenses. . . . . 2,839 3,988 9,812 11,597
-------- ------ -------- -------
Operating (loss) income . . . . . (2,305) 901 (6,950) 3,872
Interest and other income, net. . . 63 38 183 104
-------- ------ -------- -------
(Loss) income before income taxes (2,242) 939 (6,767) 3,976
Provision for income taxes. . . . . 1 97 1 190
-------- ------ -------- -------
Net (loss) income . . . . . . . . $(2,243) $ 842 $(6,768) $ 3,786
======== ====== ======== =======
Basic (loss) earnings per share . . $ (0.66) $ 0.26 $ (2.01) $ 1.21
======== ====== ======== =======
Diluted (loss) earnings per share . $ (0.66) $ 0.21 $ (2.01) $ 1.02
======== ====== ======== =======
Basic - Shares used
in per share computations . . . . 3,421 3,238 3,373 3,141
======== ====== ======== =======
Diluted - Shares used
in per share computations . . . . 3,421 3,989 3,373 3,703
======== ====== ======== =======
SBE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine months ended
July 31,
-----------------
2001 2000
-------- --------
Cash flows from operating activities:
Net (loss) income . . . . . . . . . . . . . . . . . . . . $(6,768) $ 3,786
Adjustments to reconcile net (loss) income to net cash
(used) provided by operating activities:
Amortization of deferred stock compensation . . . . . . 15 (82)
Depreciation and amortization:
Property and equipment. . . . . . . . . . . . . . . . 649 636
Capitalized Software costs. . . . . . . . . . . . . . 163 183
Changes in operating assets and liabilities:
Decrease (increase) in trade accounts receivable. . . 2,874 (1,112)
Increase in inventories . . . . . . . . . . . . . . . (25) (2,455)
Decrease (increase) in other assets . . . . . . . . . (63) 45
(Decrease) increase in trade accounts payable . . . . (240) 1,114
(Decrease) increase in other current liabilities. . . (1,495) 1,150
Increase in non current liabilities . . . . . . . . . 4,822 98
-------- --------
Net cash (used in) provided by operating activities (68) 3,363
-------- --------
Cash flows from investing activities:
Purchases of property and equipment . . . . . . . . . . . (281) (818)
Capitalized software costs. . . . . . . . . . . . . . . . (10) (193)
-------- --------
Net cash used in investing activities . . . . . . . (291) (1,011)
-------- --------
Cash flows from financing activities:
Purchase of treasury stock. . . . . . . . . . . . . . . . -- (51)
Proceeds from stock plans . . . . . . . . . . . . . . . . 172 1,267
-------- --------
Net cash provided by financing activities . . . . . 172 1,216
-------- --------
Net (decrease) increase in cash and cash equivalents. (187) 3,568
Cash and cash equivalents at beginning of period. . . . . . 5,311 3,385
-------- --------
Cash and cash equivalents at end of period. . . . . . . . . $ 5,124 $ 6,953
======== ========
SBE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. INTERIM PERIOD REPORTING:
These condensed consolidated financial statements of SBE, Inc. (the "Company")
are unaudited and include all adjustments, consisting of normal recurring
adjustments, that are, in the opinion of management, necessary for a fair
presentation of the financial position and results of operations and cash flows
for the interim periods. The condensed consolidated financial statements of the
Company include the financial position and results of operation of LAN Media
Corporation, which the Company acquired on July 14, 2000. The merger was
accounted for as a pooling of interests, and accordingly, financial statements
presented for all periods have been restated to reflect combined operations and
financial position. The results of operations for the nine months ended July 31,
2001 are not necessarily indicative of expected results for the full 2001 fiscal
year.
Certain information and footnote disclosures normally contained in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These condensed consolidated financial
statements should be read in conjunction with the financial statements and notes
contained in the Company's Annual Report on Form 10-K for the year ended October
31, 2000.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates. Significant estimates and
judgments made by management of the Company include matters such as
collectibility of accounts receivable, realizability of inventories and
recoverability of capitalized software and deferred tax assets.
2. INVENTORIES:
Inventories comprise the following (in thousands):
July 31, October 31,
2001 2000
---- ----
Finished goods $ 2,229 $ 2,144
Parts and materials 2,714 2,774
----- -----
$ 4,943 $ 4,918
===== =====
3. REFUNDABLE DEPOSIT
A refundable deposit associated with a multi-year supply agreement with Compaq
Computer Corporation of $4.9 million was received in April 2001. This deposit
is refundable as the Company delivers certain quantities of products to Compaq
over the next four years. The entire deposit has been classified as non current
because the first refund payment is not expected to be made within the next 12
months.
4. NET (LOSS) EARNINGS PER SHARE:
Basic (loss) earnings per common share for the three and nine months ended July
31, 2001 and 2000 were computed by dividing net (loss) income by the weighted
average number of shares of common stock outstanding. Diluted (loss) earnings
per common share for the three and nine months ended July 31, 2000 were computed
by dividing net (loss) income by the weighted average number of shares of common
stock and common stock equivalents outstanding.
The following table sets forth the computation of basic and diluted net (loss)
income per share for the periods indicated (in thousands, except per share
data):
Three months ended Nine months ended
July 31, July 31,
---------------- ---------------
2001 2000 2001 2000
-------- ------ -------- ------
Basic:
Numerator
- -----------------------------------
Net (loss) income . . . . . . . . . $(2,243) $ 842 $(6,768) $3,786
Denominator
- -----------------------------------
Weighted average shares . . . . . . 3,421 3,238 3,373 3,141
-------- ------ -------- ------
Basic net (loss) income per share . $ (0.66) $ 0.26 $ (2.01) $ 1.21
-------- ------ -------- ------
Diluted:
Numerator
- -----------------------------------
Net (loss) income . . . . . . . . . (2,243) 842 (6,768) 3,786
Denominator
- -----------------------------------
Weighted average shares . . . . . . 3,421 3,238 3,373 3,141
Shares issuable under stock options --- 751 --- 562
-------- ------ -------- ------
Diluted shares. . . . . . . . . . . 3,421 3,989 3,373 3,703
Diluted net (loss) income per share $ (.66) $ 0.21 $ (2.01) $ 1.02
-------- ------ -------- ------
Diluted net loss per share for the three and nine month periods ended July 31,
2001 does not include the effect of any common stock issuable under stock option
plans as such common stock equivalents have an antidilutive effect.
5. RESTRUCTURING COSTS:
During the second fiscal quarter of 2001, the Company recorded a pre-tax
restructuring charge of $384,000 in connection with the Company's consolidation
and subleasing of facilities. The charge represents the estimated costs
associated with the unoccupied space, net of estimated sublease revenues.
The Company expects future cash expenditures related to this restructuring
activity to be
approximately $384,000, of which $236,000 is anticipated to be paid within the
next twelve
months. Cash payments of $148,000 were made during the quarter ended July 31,
2001 in connection with this matter. All cash payments were for unused leased
space.
6. CONCENTRATION OF RISK:
In the three and nine months ending July 31, 2001 and 2000, most of the
Company's sales were attributable to sales of wireless communications products
and were derived from a limited number of OEM customers. Sales to Compaq
Computer Corporation accounted for 32 percent and 69 percent of net sales during
the third quarter of fiscal 2001 and 2000, respectively, and 39 percent and 73
percent of the Company's net sales in the first nine months of fiscal 2001 and
2000, respectively. Sales to Lockheed Martin accounted for 38 and 3 percent of
net sales during the third quarter of fiscal 2001, respectively, and 15 and 4
percent of net sales for the first nine months of 2001 and 2000, respectively.
Also, Compaq accounted for 33 percent and 73 percent of the Company's accounts
receivable as of July 31, 2001 and July 31, 2000, respectively. The Company
expects that sales to Compaq and Lockheed will continue to constitute a
substantial portion of the Company's net sales in the remainder of fiscal 2001.
A significant reduction in orders from any of the Company's OEM customers,
particularly Compaq or Lockheed, could have a material adverse effect on the
Company's business, operating results and financial condition.
7. RECENT ACCOUNTING PRONOUNCEMENTS:
In July 2001 the Financial Accounting Standards Board (FASB) issued SFAS No. 141
"Business Combinations" and SFAS No. 142 "Goodwill and Other Intangible Assets."
SFAS No. 141 which requires business combinations initiated after June 30, 2001
to be accounted for using the purchase method of accounting and prohibits the
use of the pooling of interest method . SFAS No. 142 changes the accounting for
goodwill from an amortization method to an impairment approach. Amortization of
goodwill, including goodwill recorded in prior business combinations, will cease
prospectively upon the adoption of the standard, which will be adopted by the
Company on January 1, 2002. The company does not anticipate significant impact
on its financial statements as a result of the adoption of these accounting
standards.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks and
uncertainties. Such forward-looking statements include information that is not
historical including, without limitation, the Company's expectations regarding
sales to Compaq Computer in fiscal 2001, the belief that the market for
client-server networking products is growing, the adequacy of anticipated
sources of cash, planned capital expenditures, the effect of interest rate
increases and trends or expectations regarding the Company's operations. Words
such as "believes," "anticipates," "expects," "intends" and similar expressions
are intended to identify forward-looking statements, but are not the exclusive
means of identifying such statements. Readers are cautioned that the
forward-looking statements reflect management's analysis only as of the date
hereof, and the Company assumes no obligation to update these statements.
Actual events or results may differ materially from the results discussed in or
implied by the forward-looking statements. Factors that might cause such a
difference include, but are not limited to, those risks and uncertainties
discussed below in this Quarterly Report on Form 10-Q, as well as other risks
set forth under the caption "Risk Factors" in the Company's Annual Report on
Form 10-K for the fiscal year ended October 31, 2000. The following discussion
should be read in conjunction with the Financial Statements and the Notes
thereto included in Item 1 of this Quarterly Report on Form 10-Q and in the
Company's Form 10-K for the fiscal year ended October 31, 2000.
SBE, Inc. designs, markets, sells and supports high-speed intelligent
communications controller products for use in telecommunications systems
worldwide. Our products enable both traditional and emerging telecommunications
service providers to deliver advanced communications equipment and services,
which we believe help these providers compete more effectively in today's highly
competitive telecommunications service market. Our products include WAN
interface adapters and high performance communications controllers that are used
principally in workstations, media gateways, routers, internet access devices,
home location registers and data messaging applications.
Our business is characterized by a concentration of sales to a small number of
OEM customers and consequently the timing of significant orders from major
customers and their product cycles causes fluctuation in our operating results.
Sales to Compaq Computer Corporation, our largest customer, represented 67
percent of our net sales in fiscal 2000. If any of our major customers,
especially Compaq, reduces orders for our products, we could lose revenues,
whereby our operating results and financial condition would suffer. Sales to
Compaq accounted for 39 percent of our net sales in the nine months ended July
31, 2001 and 73 percent for the first nine months of fiscal 2000. Orders by our
OEM customers are affected by factors such as new product introductions, product
life cycles, inventory levels, manufacturing strategy, contract awards,
competitive conditions and general economic conditions.
We are attempting to diversify our sales with the introduction of new products
that are targeted at large growing markets within the telecommunications
industry. Our Highwire products are focused on the telecommunications
applications market. We believe the growth in this market is driven by the
convergence of traditional telephony applications with the Internet. We cannot
assure you that we will be able to succeed in penetrating this market and
diversifying our sales.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of net sales, consolidated
statements of operations data for the three and nine months ended July 31, 2001
and 2000. These operating results are not necessarily indicative of our
operating results for any future period.
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 31, JULY 31,
----------- -------------
2001 2000 2001 2000
------ ----- ------ -----
Net sales . . . . . . . . . . . . . 100% 100% 100% 100%
Cost of sales . . . . . . . . . . . 63 38 57 35
------ ----- ------ -----
Gross profit. . . . . . . . . . . 37 62 43 65
------ ----- ------ -----
Product research and development. . 90 18 68 17
Sales and marketing . . . . . . . . 58 14 36 15
General and administrative. . . . . 47 14 37 15
Restructuring / acquisition costs . -- 5 6 1
------ ----- ------ -----
Total operating expenses. . . . . 196 51 147 49
------ ----- ------ -----
Operating (loss) income . . . . . (159) 11 (104) 16
Interest and other income, net. . . 4 1 3 1
------ ----- ------ -----
(Loss) income before income taxes (155) 12 (101) 17
Provision for income taxes. . . . . -- (1) -- (1)
------ ----- ------ -----
Net (loss) income . . . . . . . . (155)% 11% (101)% 16%
====== ===== ====== =====
NET SALES
Net sales for the third quarter of fiscal 2001 were $1.4 million, an 82 percent
decrease from $7.8 million in the third quarter of fiscal 2000. For the first
nine months of fiscal 2001 net sales were $6.7 million, which represented a 72
percent decrease from $23.7 million in the same period in fiscal 2000. This
decrease was primarily attributable to significantly lower sales to Compaq in
fiscal 2001 -- $5.0 million in the third quarter of fiscal 2001 and $15.2
million for the first nine months of fiscal 2001. In addition, the Company
experienced a $1.4 million decrease in sales of all other product lines combined
for the third quarter of fiscal 2001, and an $1.9 million decrease in sales of
all other product lines for the first nine months of fiscal 2001, compared to
fiscal 2000. Declining market and economic conditions within the
telecommunications industry, as well as the technology sector generally, and
product design delays at several of our large customers also contributed to the
decrease. Many of our customers are reducing demand as a result of the industry
slowdown in telecommunications equipment markets and therefore, the
predictability of future orders is very limited as a result of these depressed
market conditions.
Sales to Compaq, primarily of VMEBus products, represented 32 percent of sales
for the third quarter and 39 percent of sales for the first nine months of
fiscal 2001, while sales to Lockheed represented 38 percent of net sales during
the third quarter and 15 percent of sales for the first nine months of fiscal
2001. No other customer accounted for over 10 percent of sales in the three or
nine month periods. We expect to continue to experience fluctuation in product
sales as large customers' needs change.
GROSS PROFIT
Gross profit as a percentage of sales in the third quarter of fiscal 2001 was 37
percent, as compared to 62 percent during the third quarter of fiscal 2000. For
the first nine months of fiscal 2001 the gross profit percentage was 43 percent,
as compared to 65 percent during the same period of fiscal 2000. Gross margin
percentages have been lower in fiscal 2001 due to significantly lower sales
being spread over relatively fixed production costs.
PRODUCT RESEARCH AND DEVELOPMENT
Product research and development expenses were $1.3 million in the third quarter
of fiscal 2001, an decrease of 11 percent from $1.5 million in the third quarter
of fiscal 2000, and down 17 percent from the second quarter of fiscal 2001. For
the first nine months of fiscal 2001, research and development expenses were
$4.5 million, an 8 percent increase from $4.2 million for the first nine months
of fiscal 2000. The increase in research and development spending from the
fiscal 2000 period to the fiscal 2001 period was a result of increased spending
for development of our HighWire and other new telecommunications products in the
early part of fiscal 2001. As a result of the industry slowdown for
telecommunications equipment, we have significantly lowered our research and
development spending levels from fiscal 2000 levels. We are focusing our efforts
additional new products that are targeted at current customers or potential new
strategic customers applications
SALES AND MARKETING
Sales and marketing expenses for the third quarter of fiscal 2001 were $844,000,
a decrease of 22 percent from $1.1 million in the third quarter of fiscal 2000.
The sales and marketing expenses for the first nine months of fiscal 2001 were
$2.4 million, a 31 percent decrease from $3.5 million in fiscal 2000. The
decrease for fiscal 2001 was primarily due to lower marketing program spending
for products already introduced during previous quarters, but not yet fully
available in volume along with lower commission expenses due to lower sales.
Expenditures were closely monitored in light of current market conditions, and
less than expected revenue year to date. Overall, we expect sales and marketing
expenses will decrease from current levels as we aggressively manage expenses in
response to the current poor economic conditions.
GENERAL AND ADMINISTRATIVE
General and administrative expenses were $684,000 for the third quarter of
fiscal 2001, a decrease of 36 percent from $1.1 million in the third quarter of
fiscal 2000. For the first nine months of fiscal 2001 general and
administrative expenses were $2.5 million, a decrease of 30 percent from $3.5
million for the first nine months of fiscal 2000. This decrease was due to
carefully maintaining or reducing spending levels in response to lower income
levels during the third quarter of fiscal 2001. In future periods, we expect
that general and administrative expenses may continue to decrease from current
expenditure levels as overhead levels are reduced.
RESTRUCTURING COSTS
Restructuring costs of $384,000 were recorded during the first nine months of
2001 related to the Company's consolidation and subleasing of facilities. The
charge represented the estimated costs of facilities leases net of estimated
sublease revenues.
INTEREST AND OTHER INCOME, NET
Net interest and other income increased to $63,000 in the third quarter of
fiscal 2001 from $38,000 in the same period in fiscal 2000, an increase of 66
percent . Also, for the first nine months of fiscal 2001 net interest and other
income was $183,000, an increase of 74 percent from $104,000 in fiscal 2000.
This increase was due to higher average cash balances in fiscal 2001.
INCOME TAXES
We recorded a minor provision for taxes in the third quarter of fiscal 2001 and
for the first nine months of fiscal 2001. We did not recognize any benefit for
taxes principally due to the uncertainty in realizing the benefit derived from
our net operating losses and unused tax credits in future periods. Therefore
the tax benefits related to the net operating losses and tax credits were fully
reserved against. We recorded a provision for taxes in the third quarter of
fiscal 2000 of $97,000. For the first nine months of fiscal 2000 we recorded a
provision of $190,000. In the event of future taxable income, our effective
income tax rate in future periods could be lower than the statutory rate as
operating loss and tax credit carryforwards are recognized.
NET (LOSS) INCOME
As a result of the factors discussed above, we recorded a net loss of $2.2
million in the third quarter of fiscal 2001, as compared to net income of
$842,000 in the third quarter of fiscal 2000. For the first nine months of
fiscal 2001 the loss was $6.8 million, compared to a net income of $3.8 million
for the first nine months of fiscal 2000.
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 2001, we had cash and cash equivalents of $5.1 million, as compared
to $5.3 million at October 31, 2000. In the first nine months of fiscal 2001,
$68,000 of cash was used through operating activities, primarily as a result of
the $6.8 million net loss and a decrease in current liabilities related to the
payment of year end compensation accruals. This was offset by an $2.8 million
decrease in accounts receivable and a $4.8 million increase in non current
liabilities related to a deposit from Compaq for a multi year supply agreement.
The accounts receivable decrease was primarily a result of decreased sales.
Working capital at July 31, 2001 was $10.4 million, as compared to $11.6 million
at October 31, 2000.
In the first nine months of fiscal 2001, the Company purchased $281,000 of fixed
assets, consisting primarily of computer and engineering equipment. Purchased
software costs amounting to $10,000 were capitalized during the first nine
months of 2001. We expect capital expenditures will remain at minimal levels
for the remainder of fiscal 2001.
We received $172,000 in the first nine months of fiscal 2001 from payments
related to employee stock option exercises and purchases made by employees
pursuant to our employee stock purchase plan.
Based on the current operating plan and forecasted sales, we anticipate that our
current cash balances and anticipated cash flows or usage from operations will
allow for us to meet our working capital needs over the next 12 months.
However, this estimate is based on our belief that customer orders will increase
in mid 2002. Should this prove not to be the case, we will need to secure
additional financing. Any such financing could take the form of a sale of our
equity securities, which could be dilutive to our existing stockholders. Any
such financing could also take the form of debt, which would cause us to incur
additional interest expense. Although, we may not be able to raise new funds on
acceptable terms, or at all.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our cash and cash equivalents are subject to interest rate risk. We invest
primarily on a short-term basis. Our financial instrument holdings at July 31,
2001 were analyzed to determine their sensitivity to interest rate changes. The
fair values of these instruments were determined by net present values. In our
sensitivity analysis, the same change in interest rate was used for all
maturities and all other factors were held constant. If interest rates
increased by 10 percent, the expected effect on net income related to our
financial instruments would be immaterial.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) List of Exhibits:
11.1 Statements of Computation of Net (Loss) Income per Share
(b) Reports on Form 8-K:
No report on Form 8-K was filed by the Company during the quarter ended July 31,
2001.
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, on September 13, 2001.
SBE, INC.
- ----------
Registrant
Timothy J. Repp
Chief Financial Officer, Vice President of
Finance and Secretary (Principal Financial
and Accounting Officer)
EXHIBIT INDEX
Exhibit Description Page
- ------- ----------- ----
11.1 Statements of Computation of Net Income (Loss) 16
per share.