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 March 31, 2001
[ ] 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 (IRS Employer Identification No.)
incorporation 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 May 15, 2001, 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
March 31, 2001 (Unaudited)
Consolidated Statements of Earnings
Three months ended
March 31, 2001 and 2000 (Unaudited)
Consolidated Statement of Shareholders' Equity
Three months ended
March 31, 2001 (Unaudited)
Consolidated Statements of Cash Flows Three
months ended March 31, 2001 and 2000
(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
MARCH 31, 2001
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 44,085
Accounts receivable, less
allowance for doubtful accounts of $14,000 779,286
Inventory 2,407,367
Prepaid expenses 106,607
Deferred income taxes 193,000
----------
TOTAL CURRENT ASSETS 3,530,345
PROPERTY, PLANT AND EQUIPMENT, less
accumulated depreciation and amortization 1,205,421
OTHER ASSETS 210,675
----------
$4,946,441
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 437,778
Accrued expenses 237,859
Income taxes payable 70,300
Borrowings under line-of-credit 93,165
Current maturities of long-term debt 81,811
----------
TOTAL CURRENT LIABILITIES 920,913
LONG-TERM DEBT, less current maturities 711,541
DEFERRED INCOME TAXES 215,000
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 1,304,779
----------
3,098,987
----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $4,946,441
==========
The accompanying notes are an integral part of this financial statement.
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
Three Months
ended March 31,
---------------
2001 2000
---- ----
NET SALES $ 1,679,232 $ 1,711,620
COST OF SALES 790,025 833,513
----------- -----------
GROSS PROFIT 889,207 878,107
----------- -----------
OPERATING EXPENSES
Selling, general and administrative 600,483 464,066
Research and development 140,204 131,811
----------- -----------
740,687 595,877
----------- -----------
Operating Income 148,520 282,230
----------- -----------
OTHER INCOME (EXPENSE)
Other income 78,800 --
Rental income 12,049 12,049
Interest income 5,057 4,815
Interest expense (19,268) (26,636)
----------- -----------
Earnings before income taxes 225,158 272,458
Provision for income taxes 87,500 105,500
----------- -----------
NET EARNINGS $ 137,658 $ 166,958
=========== ===========
Earnings per common share:
Basic $ 0.11 $ 0.13
=========== ===========
Diluted $ 0.09 $ 0.10
=========== ===========
Shares used in computing earnings per common share:
Basic 1,253,631 1,249,909
=========== ===========
Diluted 1,515,531 1,636,518
=========== ===========
The accompanying notes are an integral part of these financial statements.
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2001
(Unaudited)
Number of Capital in
shares Common excess of Retained
issued stock par value earnings Total
--------- ------ --------- -------- -----
Balance at January 1, 2001 1,253,631 $ 12,536 $1,781,672 $1,167,121 $2,961,329
Net earnings 137,658 137,658
--------- ---------- ---------- ---------- ----------
Balance at March 31, 2001 1,253,631 $ 12,536 $1,781,672 $1,304,779 $3,098,987
========= ========== ========== ========== ==========
The accompanying notes are in integral pat of his finanacial statement.
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months
ended March 31,
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 137,658 $ 166,958
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 57,669 62,069
Decrease (increase) in operating assets:
Accounts receivable (2,618) (51,870)
Inventories (732,674) 83,120
Prepaid expenses and other 16,975 3,351
Increase (decrease) in operating liabilities:
Accounts payable 122,839 86,179
Accrued expenses and taxes 185 (129,632)
------- -------
Net cash (used in) provided by operating activities (399,966) 220,175
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (59,827) (42,251)
Purchase of intangibles -- (110,000)
------- -------
Net cash used in investing activities (59,827) (152,251)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under mortgage obligation (17,990) (14,602)
Net (payments) borrowings under debt obligations (5,000) 4,905
Net borrowings under line-of-credit 93,165 --
Proceeds from exercise of stock options -- --
------- -------
Net cash provided by (used in) investing activities 70,175 (9,697)
------- -------
Net (decrease) increase in cash and cash equivalents (389,618) 58,227
Cash and cash equivalents at beginning of period 433,703 370,527
------- -------
Cash and cash equivalents at end of period $ 44,085 $ 428,754
======= =======
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 March 31, 2001, the consolidated statement
of earnings, stockholders' equity and cash flows for the three-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 March 31, 2001 have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States of America 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 on Form 10-KSB for
the fiscal year ended December 31, 2000. The results of operations for the
period ended March 31, 2001 are not necessarily indicative of the operating
results for the full year.
2. EARNINGS PER SHARE
The number of shares used in the Company's basic and diluted earnings per share
computations are as follows:
Three months ended
March 31,
2001 2000
---------- ----------
Weighted average common shares outstanding
for basic earnings per share 1,253,631 1,249,909
Common stock equivalents for stock options 261,900 386,609
--------- ---------
Weighted average common shares outstanding
for diluted earnings per share 1,515,531 1,636,518
--------- ---------
Excluded from the calculation of diluted earnings per share for the three
months ended March 31, 2001 are 28,500 options to purchase the Company's common
stock, as their inclusion would be anti-dilutive.
3. BUSINESS SEGMENTS
The Company has two reportable segments: Telebyte is a manufacturer of
technology products and Nextday.com distributes products through e-commerce.
The Company's chief operating decision maker utilizes net sales and net earnings
(loss) information in assessing performance and making overall operating
decisions and resource allocations. The accounting policies of the operating
segments are the same as those described in the summary of significant
accounting policies as set forth in the December 31, 2000 Annual Report on Form
10-KSB. Information about the Company's segments for periods ended March 31,
2001 and 2000 are as follows:
Three Months
ended March 31,
2001 2000
---- ----
Net sales from external customers
Telebyte $ 1,664,325 $ 1,668,138
Nextday.com 14,907 43,482
----------- -----------
$ 1,679,232 $ 1,711,620
=========== ===========
Intersegment net sales
Telebyte $ 294,173 $ 21,967
Nextday.com -- --
----------- -----------
$ 294,173 $ 21,967
=========== ===========
Operating profit (loss)
Telebyte $ 220,108 $ 384,430
Nextday.com (71,588) (102,200)
----------- -----------
$ 148,520 $ 282,230
=========== ===========
Identifiable assets
Telebyte $ 4,591,343 $ 4,236,361
Nextday.com 355,098 237,051
----------- -----------
$ 4,946,441 $ 4,473,412
=========== ===========
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-KSB for the year ended December 31, 2000, 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 first quarter ended March 31, 2001 decreased 2% to $1,679,232
compared to sales of $1,711,620 for the same period in 2000. The decrease in
sales was primarily due to a decrease in overall sales of our Datacom products
of $262,670, offset by an increase of $234,425 in overall sales of our Broadband
products.
Cost of sales for the first quarter of $790,025 (or 47.0% of sales) decreased
from $833,513 (or 48.7% of sales) during the same period in 2000. The increase
in our profit margin percentage was primarily a function of product mix.
Selling, general and administrative expenses for the first quarter of $600,483
increased by $136,417 from $464,066 during the first quarter of 2000. The
increase was due primarily to costs associated with the new sales and marketing
office for the Broadband division located in Duluth, Georgia. During the first
quarter, the Company continued to implement its strategy to "e-business enable"
the entire organization on a common platform. Nextday.com was successfully
launched on the new platform late during the first quarter, and Telebyte expects
to launch during the second half of 2001.
Research and development expenses for the first quarter of $140,204 increased
slightly, compared to $131,811 during the same quarter in 2000. During the first
quarter the Company completed development of a smart RS-232 to RS-485 converter
for Brooks Automation. The Company continued to expand the fiber optic product
line with a new fiber optic line driver designed for DB9 applications and a new
multi-interface converter, also for DB9 applications. The Company introduced two
additional local loop modules (3.8km and 6.3km) for its Model 458 multi-channel
line simulator that accurately represents ITU 0.4mm (paper insulation) cable
characteristics per ITU standard G.996.1. These new modules are primarily
marketed to Japanese xDSL modem manufacturers.
Interest income increased to $5,057 during the first quarter of 2001 from $4,815
for the same period in 2000. During the first quarter of 2001, the Company had
rental income of $12,049, which was comparable with the first quarter of 2000.
During the first quarter of 2001, the Company had other income totaling $78,800,
which represented a settlement the Company received from a service provider that
breached an agreement.
The effective tax rate in first quarter of 2001 was 38.9%, compared with 38.7%
in the same quarter of 2000.
The net earnings of $137,658, or $.09 diluted per share, for the first quarter
of 2001 decreased 17.5% compared to net earnings of $166,958, or $.10 diluted
per share, in the same quarter of 2000. The decrease in profitability is due
primarily to the decrease in sales and the increase in selling, general and
administrative expenses during the first quarter of 2001.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities for the three months ended March 31, 2001
was $399,966 compared to net cash provided of $220,175 in the same period of
2000. This change is due primarily to an increase in inventory for broadband
test equipment.
Working capital increased as of March 31, 2001 by $117,539 to $2,609,432,
compared with $2,491,893 from December 31, 2000. The current ratio as of March
31, 2001 decreased to 3.83:1 compared to 4.5:1 as of December 31, 2000.
We have an agreement with a financial institution (the "Agreement"), expiring
May 31, 2001, which provides us with a line of credit of up to $500,000 based on
our eligible accounts receivable, purchased components and materials and
finished goods inventories, as defined in the Agreement. Further, the Agreement
contains certain financial covenants, which 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%.
Net borrowings under this line of credit totaled $93,165 at March 31, 2001.
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 March 31, 2001 was approximately $690,000.
Borrowings under this loan agreement bear interest at the 30-Day Commercial
Paper Rate plus 2.90%. There was no outstanding indebtedness under the line of
credit as of March 31, 2001.
We believe that cash generated by our future operations, current cash and cash
equivalents, and the line of credit should supply the cash resources to meet our
cash needs for at least 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: May 15, 2001