United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITON REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 0-11883
TELEBYTE, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 11-2510138
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
270 Pulaski Road, Greenlawn, New York 11740
(Address of principal executive offices)
(631) 423-3232
(Issuer's telephone number)
(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
subject to such filing requirements for the past 90 days.
Yes X No
As of August 14, 2000, there were outstanding 1,253,631 shares of Common Stock,
$.01 par value.
Transitional Small Business Disclosure Format (check one);
Yes No X
TELEBYTE, INC. & SUBSIDIARY
INDEX
Part I Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheet
June 30, 2000 (Unaudited)
Consolidated Statements of Earnings
Three and six months ended
June 30, 2000 and 1999 (Unaudited)
Consolidated Statement of Shareholders' Equity
Six months ended
June 30, 2000 (Unaudited)
Consolidated Statements of Cash Flows
Six months ended
June 30, 2000 and 1999 (Unaudited)
Notes to Condensed Consolidated Financial
Statements (Unaudited)
Item 2. Management's Discussion and
Analysis or Plan of Operation
Part II Other Information
Part I Financial Information
Item 1. Financial Statements
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 697,841
Accounts receivable, less
allowance for doubtful accounts 790,966
Inventory 1,494,679
Prepaid expenses 51,177
Deferred income taxes 135,000
---------------
TOTAL CURRENT ASSETS 3,169,663
PROPERTY, PLANT AND EQUIPMENT, less
accumulated depreciation and amortization 1,107,404
OTHER ASSETS 324,202
----------------
$ 4,601,269
================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 278,462
Accrued expenses 119,441
Income taxes payable 118,628
Current maturities of long-term debt 73,571
--------------
TOTAL CURRENT LIABILITIES 590,102
LONG-TERM DEBT, less current maturities 1,008,852
DEFERRED INCOME TAXES 195,000
SHAREHOLDERS' EQUITY
Common stock - $.01 par value;
9,000,000 shares authorized;
1,253,631 shares issued and
outstanding 12,536
Capital in excess of par value 1,781,672
Retained earnings 1,013,107
---------------
2,807,315
---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 4,601,269
===============
The accompanying notes are an integral part of these financial statements.
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
-----------------------------------------------------------------------------------------
2000 1999 2000 1999
------------------------------------------------------------------------------------
NET SALES $1,570,600 $1,362,966 $3,252,905 $2,728,246
COST OF SALES 695,498 620,941 1,496,294 1,299,408
------------------------------------------------------------------------------------
GROSS PROFIT 875,102 742,025 1,756,611 1,428,838
------------------------------------------------------------------------------------
OPERATING EXPENSES
Selling, general and administrative 442,292 504,955 909,760 935,640
Research and development 130,128 149,768 261,939 278,887
------------------------------------------------------------------------------------
572,420 654,723 1,171,699 1,214,527
------------------------------------------------------------------------------------
Operating Income 302,682 87,302 584,912 214,311
------------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)
Rental Income 12,049 12,049 24,098 24,098
Interest Income 5,814 313 10,629 4,995
Interest Expense (22,595) (30,525) (49,231) (60,889)
------------------------------------------------------------------------------------
Earnings before income taxes 297,950 69,139 570,408 182,515
Provision for income taxes 115,000 25,000 220,500 70,000
------------------------------------------------------------------------------------
NET EARNINGS $182,950 $44,139 $349,908 $112,515
====================================================================================
Earnings per common share:
Basic $ 0.15 $ 0.04 $ 0.28 $ 0.09
====================================================================================
Diluted $ 0.12 $ 0.03 $ 0.22 $ 0.09
====================================================================================
Shares used in computing earnings per common share:
Basic 1,253,631 1,248,631 1,251,780 1,275,911
====================================================================================
Diluted 1,572,611 1,276,061 1,604,575 1,303,342
====================================================================================
The accompanying notes are an integral part of these financial statements.
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 2000
(Unaudited)
Number of Capital in
shares Common excess of Retained
issued stock par value earnings Total
Balance at January 1, 2000 1,248,631 $ 12,486 $ 1,740,472 $ 663,199 $ 2,416,157
Common stock issued for purchase 5,000 50 41,200 41,250
of intangibles
Net earnings 349,908 349,908
----------- ---------- ------------- ----------- -------------
Balance at June 30, 2000 1,253,631 $ 12,536 $ 1,781,672 $ 1,013,107 $ 2,807,315
=========== ========== ============= =========== =============
The accompanying notes are an integral part of these financial statements.
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months
Ended June 30,
-------------------------------
2000 1999
--------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $349,908 $ 12,515
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 137,992 75,388
Decrease (increase) in operating assets:
Accounts receivable 67,951 (117,195)
Inventories 24,598 (194,213)
Prepaid expenses and other 15,287 (7,436)
Increase (decrease) in operating liabilities:
Accounts payable 5,946 45,922
Accrued expenses and taxes (90,893) 96,728
-------------------------------
Net cash provided by operating activities 510,789 11,709
-------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (50,179) (42,292)
Purchase of intangibles (110,000) -
Cost of non-compete agreement - (203,124)
--------------------------------
Net cash used in investing activities (160,179) (245,416)
---------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under mortgage obligation (33,690) (30,126)
Net borrowings under debt obligations 10,394 386,983
Purchase of treasury stock - (927,430)
Proceeds from exercise of stock options - 3,950
---------------------------------
Net cash used in financing activities (23,296) (566,623)
----------------------------------
Net increase (decrease) in cash and cash equivalents 327,314 (800,330)
Cash and cash equivalents at beginning of period 370,527 919,630
----------------------------------
Cash and cash equivalents at end of period $ 697,841 $ 119,300
==================================
Non cash financing activities
Issuance of common stock and note payable for purchase of
intangibles $ 60,825
The accompanying notes are an integral part of these financial statements.
TELEBYTE, INC. & SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The consolidated balance sheet as of June 30, 2000, the consolidated statement
of earnings, stockholders' equity and cash flows for the six-month period then
ended have been prepared by us without audit. In the opinion of management, all
adjustments (which include only normal recurring accrual adjustments) necessary
to present fairly, the financial position, results of operations and cash flows
at June 30, 2000 have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the financial statements and notes thereto included
in our Annual Report to Shareholders for the fiscal year ended December 31,
1999. The results of operations for the period ended June 30, 2000 are not
necessarily indicative of the operating results for the full year.
2. EARNINGS PER SHARE
The numbers of shares used in the Company's basic and diluted earnings per share
computations are as follows:
Three Months Six Months
Ended June 30, Ended June 30,
----------------------------------------------------------
2000 1999 2000 1999
----------------------------------------------------------
for basic earnings per share 1,253,631 1,248,631 1,251,780 1,275,912
Common stock equivalents for stock options 318,980 27,430 352,795 27,430
Weighted average common shares outstanding
for diluted earnings per share 1,572,611 1,276,061 1,604,575 1,303,342
Item 2. Management's Discussion and Analysis or Plan of Operation.
When used herein, the words "believe," "anticipate," "think," "intend," "will
be," "expect" and similar expressions identify forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
statements are not guarantees of future performance and involve certain risks
and uncertainties discussed herein and under the caption "Risk Factors" in our
Annual Report on Form 10-K for the year ended December 31, 1999, which could
cause actual results to differ materially from those in the forward-looking
statements. Readers are cautioned not to place undue reliance on the
forward-looking statements, which speak only as of the date hereof. Readers are
also urged carefully to review and consider the various disclosures made by us
which attempt to advise interested parties of the factors which affect our
business, including, without limitation, the disclosures made under the caption
"Management's Discussion and Analysis or Plan of Operation." All references to a
fiscal year are to our fiscal year, which ends December 31.
RESULTS OF OPERATIONS
Sales during the second quarter ended June 30, 2000 increased 15% to $1,570,600
compared to sales of $1,362,966 for the same period in 1999. The increase in
sales was primarily due to an increase in sales of our DSL Test Equipment and
Short haul modem product lines.
Cost of sales for the second quarter of $695,498 (or 44.3% of sales) increased
compared to the $620,941 (or 45.6% of sales) during the same period in 1999. The
increase in our profit margin percentage was primarily a function of product
mix.
Selling, general and administrative costs for the second quarter of $442,292
decreased by $62,663 from $504,955 during the second quarter of 1999. The
decrease during the second quarter was due primarily to our change in marketing
strategy. The Company saw no need to print and distribute a new product catalog
during this quarter, as was done in the second quarter of 1999 at a cost of
approximately $65,000. However, the Company expects to print and distribute its
next product catalog during the first half of 2001.
The Company's marketing focus has shifted toward a stronger presence on the
Internet, at trade shows and at industry and standards organizations. In
particular, the Company incorporated a "live" net agent capability feature into
its web site. This allows a Company's sales representative to respond to
customer inquiries through an instant messaging feature in real time. In terms
of timely responsiveness the Company considers it a great improvement over both
telephone and e-mail interaction. The Company initiated the translation of the
product description web pages into Spanish. This is a first step to a complete
"internationalization" of its web site. The Company participated in major trade
shows for its Digital Subscriber Line products. Such trade shows were both
within and outside of the United States. The Company became active in industry
and standards groups associated with its products such as the DSL Forum and the
VDSL Coalition.
Research and development expenses for the second quarter of $130,128 decreased
by $19,640 from $149,768 during the same quarter in 1999. During the second
quarter, we continued the development of our Universal Serial Bus (USB) product
line and expect to introduce our first USB products during the fourth quarter of
2000. The USB products that should be introduced in the fourth quarter of 2000
include a USB-to-EIA 232 converter, a USB-to-RS 422 converter, a USB-to-RS 485
converter and a USB-to-Fiber converter. The Company continued the development of
a multi-line wire line simulator, which can simulate up to 16 local loops up to
20,500 feet each. We expect to release this new product to production during the
third quarter of 2000.
Interest income increased to $5,814 during the second quarter of 2000 compared
to $313 for the same period in 1999. This increase in interest income was due
primarily to higher levels of cash on deposit. During the second quarter of
2000, we had rental income of $12,049, which was in line with the comparable
quarter of 1999.
The effective tax rate in first quarter of 2000 was 38.6%, compared with 36.2 %
in same quarter in 1999.
The net earnings of $182,950 or $.12 diluted per share for the second quarter of
2000 increased 315% compared to the net earnings of $44,139 or $.03 diluted per
share in the same quarter in 1999. The increase in profitability is attributed
to the increase in sales during the second quarter of 2000 and the reduction of
overall expenses resulting from the re-organization of the Company initiated in
January of 1999.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the six months ended June 30, 2000
was $510,789 compared to net cash provided of $11,709 in the same period of
1999. This change was due to an increase in net earnings and decreases in
accounts receivable, inventories and prepaid expenses.
Working capital increased as of June 30, 2000 by $312,604 to $2,579,561,
compared with $2,266,957 from December 31, 1999. The current ratio as of June
30, 2000 increased to 5.4:1 compared to 4.4:1 as of December 31, 1999.
We have an agreement with a financial institution, which provides us with a line
of credit of up to $500,000 based on our eligible accounts receivable and
purchased components and materials and finished goods inventories, as defined in
the agreement. Further, the agreement contains certain financial covenants that
require us to maintain a minimum level of tangible net worth and places
limitations on the ratio of our total debt to our tangible net worth, as defined
in the agreement. Borrowings under the line of credit bear interest at the
bank's specified prime rate plus .75%. There was no outstanding indebtedness
under this line of credit as of June 30, 2000.
In January 1999, we secured an additional reducing revolving line of credit from
the same institution that provides for initial borrowings up to a maximum of
$1,000,000. Availability under the reducing revolving line of credit decreases
by approximately $11,900 per month, and the line expires January 2006.
Availability under this line at June 30, 2000 was approximately $565,280.
Borrowings under this loan agreement bear interest at the 30-Day Commercial
Paper Rate plus 2.90%. Net borrowings under this line of credit totaled $232,335
at June 30, 2000.
We believe that cash generated by our operations, current cash and cash
equivalents, and the lines of credit should supply sufficient cash resources to
meet our cash needs for the next 12 months.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
None
SIGNATURES
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.
TELEBYTE, INC.
By: __________\s\_________________
Kenneth S. Schneider
Chairman of the Board
(Principal Executive Officer)
By: ___________\s\________________
Michael Breneisen
President
(Principal Financial and Accounting Officer)
Date: August 14, 2000