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, 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 August 14, 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 Condensed Financial Statements
Consolidated Balance Sheet
June 30, 2001 (Unaudited)
Consolidated Statements of Operations
Three and six months ended
June 30, 2001 and 2000 (Unaudited)
Consolidated Statement of Shareholders' Equity
Six months ended
June 30, 2001 (Unaudited)
Consolidated Statements of Cash Flows
Six months ended
June 30, 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
JUNE 30, 2001
(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 110,014
Accounts receivable, less
allowance for doubtful accounts of $24,000 757,130
Inventory 2,403,253
Prepaid expenses 127,747
Deferred income taxes 193,000
----------
TOTAL CURRENT ASSETS 3,591,144
PROPERTY AND EQUIPMENT, less
accumulated depreciation and amortization 1,223,463
OTHER ASSETS, net 194,036
----------
$5,008,643
==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 412,128
Accrued expenses 165,680
Income taxes payable --
Borrowings under line-of credit 322,527
Current maturities of long-term debt and capital lease obligations 94,624
----------
TOTAL CURRENT LIABILITIES 994,959
LONG-TERM BORROWINGS UNDER LINE OF CREDIT 100,036
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS, less current maturities 709,911
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 1,194,529
----------
2,988,737
----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,008,643
==========
The accompanying notes are an integral part of this financial statement.
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Six Months
ended June 30, ended June 30,
-------------------------- --------------------------
2001 2000 2001 2000
----------- ----------- ----------- -----------
NET SALES $ 1,368,573 $ 1,598,653 $ 3,047,805 $ 3,310,273
COST OF SALES 738,216 723,994 1,528,242 1,557,507
----------- ----------- ----------- -----------
GROSS PROFIT 630,357 874,659 1,519,563 1,752,766
----------- ----------- ----------- -----------
OPERATING EXPENSES
Selling, general and administrative 607,934 441,849 1,208,417 905,915
Research and development 188,328 130,128 328,532 261,939
----------- ----------- ----------- -----------
796,262 571,977 1,536,949 1,167,854
----------- ----------- ----------- -----------
Operating income (loss) (165,905) 302,682 (17,386) 584,912
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Other income -- -- 78,800 --
Rental income 12,049 12,049 24,098 24,098
Interest income 370 5,814 5,427 10,629
Interest expense (25,664) (22,595) (44,931) (49,231)
----------- ----------- ----------- -----------
Earnings (loss) before income taxes (179,150) 297,950 46,008 570,408
Provision (benefit) for income taxes (68,900) 115,000 18,600 220,500
----------- ----------- ----------- -----------
NET EARNINGS (LOSS) $ (110,250) $ 182,950 $ 27,408 $ 349,908
=========== =========== =========== ===========
Earnings (loss) per common share:
Basic $ (0.09) $ 0.15 $ 0.02 $ 0.28
=========== =========== =========== ===========
Diluted $ (0.09) $ 0.12 $ 0.02 $ 0.22
=========== =========== =========== ===========
Shares used in computing earnings per common share:
Basic 1,253,631 1,253,631 1,253,631 1,251,780
=========== =========== =========== ===========
Diluted 1,253,631 1,572,611 1,470,974 1,604,575
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 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 27,408 27,408
--------- ------- ---------- ---------- ----------
Balance at June 30, 2001 1,253,631 $12,536 $1,781,672 $1,194,529 $2,988,737
========= ======= ========== ========== ==========
The accompanying notes are an integral part of this financial statement.
TELEBYTE, INC. & SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months
ended June 30,
-----------------------
2001 2000
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 27,408 $ 349,908
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Provision for bad debts 11,752
Depreciation and amortization 117,522 137,992
Decrease (increase) in operating assets:
Accounts receivable 7,786 67,951
Inventories (728,560) 24,598
Prepaid expenses and other (4,379) 15,287
Increase (decrease) in operating liabilities:
Accounts payable 97,189 5,946
Accrued expenses and taxes (142,294) (90,893)
--------- ---------
Net cash (used in) provided by operating activities (613,576) 510,789
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (87,409) (50,179)
Purchase of intangibles -- (110,000)
--------- ---------
Net cash used in investing activities (87,409) (160,179)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments under mortgage obligation (36,965) (33,690)
Payments under debt obligations (8,302) 10,394
Net borrowings under line-of credit agreement 422,563 --
Proceeds from exercise of stock options -- --
--------- ---------
Net cash provided by (used in) financing activities 377,296 (23,296)
--------- ---------
Net (decrease) increase in cash and cash equivalents (323,689) 327,314
Cash and cash equivalents at beginning of period 433,703 370,527
--------- ---------
Cash and cash equivalents at end of period $ 110,014 $ 697,841
========= =========
Non cash financing activities
Issuance of common stock and note payable for purchase of
intangibles $ 60,825
Equipment acquired under capital lease obligation $ 33,460
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, 2001, 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, 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 June 30, 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 Six Months
Ended June 30, Ended June 30,
------------------------------------------------------
2001 2000 2001 2000
------------------------------------------------------
Weighted average common shares outstanding 1,253,631 1,253,631 1,253,631 1,251,780
for basic earnings per share
Common stock equivalents for stock options -- 318,980 217,343 352,795
--------- --------- --------- ---------
Weighted average common shares outstanding
for diluted earnings per share 1,253,631 1,572,611 1,470,974 1,604,575
========= ========= ========= =========
Excluded from the calculation of diluted earnings per share are 539,000 and
46,500 options to purchase the Company's common stock for the three and six
months ended June 30, 2001, respectively, 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 June 30, 2001 and 2000 are as follows:
Three Months Six Months
Ended June 30, Ended June 30,
-----------------------------------------------------------
2001 2000 2001 2000
-----------------------------------------------------------
Net sales from external customers
Telebyte $ 1,315,098 $ 1,527,448 $ 2,979,423 $ 3,195,586
Nextday.com 53,475 71,205 68,382 114,687
----------- ----------- ----------- -----------
$ 1,368,573 $ 1,598,653 $ 3,047,805 $ 3,310,273
=========== =========== =========== ===========
Intersegment net sales
Telebyte $ (76,640) $ 48,758 $ 217,532 $ 70,725
Nextday.com -- -- -- --
----------- ----------- ----------- -----------
$ (76,640) $ 48,758 $ 217,532 $ 70,725
=========== =========== =========== ===========
Operating profit (loss)
Telebyte $ (127,546) $ 391,830 $ 92,561 $ 776,259
Nextday.com (38,359) (89,148) (109,946) (191,347)
----------- ----------- ----------- -----------
$ (165,905) $ 302,682 $ (17,385) $ 584,912
=========== =========== =========== ===========
Identifiable assets
Telebyte $ 4,728,571 $ 4,352,461
Nextday.com 280,072 248,808
----------- -----------
$ 5,008,643 $ 4,601,269
=========== ===========
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 second quarter ended June 30, 2001 decreased 14.4% to
$1,368,573 compared to sales of $1,598,653 for the same period in 2000. The
decrease in sales was primarily due to the general downturn in the economy,
particularly in the telecommunications industry. Sales of Broadband test
equipment decreased by $146,906 compared to the second quarter of 2000, and
decreased by $362,156 compared to the first quarter of 2001.
Cost of sales for the second quarter of $738,216 (or 53.9% of sales) increased
from $723,994 (or 45.3% of sales) during the same period in 2000. The decrease
in our profit margin percentage was primarily due to specific customer sales
during the second quarter that had lower than normal profit margins.
Selling, general and administrative expenses for the second quarter of $607,934
increased by $166,085 from $441,849 during the second quarter of 2000. The
increase was due primarily to costs associated with a sales and marketing office
for the Broadband products located in Duluth, Georgia. This location was chosen
for recruitment of the sales and marketing personnel needed for Broadband
products. The office also had facilities for equipment demonstrations, training
and customer contact. During the later part of the second quarter of 2001
Company management began a review of the efficiency associated with having this
separate facility. As a result, on July 12, 2001, management decided to begin
preparations for closing this office.
Research and development expenses for the second quarter of $188,328 increased
by $58,200, compared to $130,128 during the same quarter in 2000. Detailed
planning activities by management have resulted in a strategic plan focused on
achieving long-term growth of the Company. Realization of the goals of this plan
required the development of new products and the enhancement of existing
products. This required the recruitment of necessary technical personnel.
Accordingly, during the second quarter of 2001 the Company expanded its research
and development department by adding several engineers. This resulted in the
increase of $58,200 in research and development expenses in the second quarter
of 2001 as compared to the second quarter of 2000.
Interest income decreased to $370 during the second quarter of 2001 from $5,814
for the same period in 2000. During the second quarter of 2001, the Company had
rental income of $12,049, which was comparable with the second quarter of 2000.
The effective tax rate in second quarter of 2001 was 38.5%, compared with 38.6%
in the same quarter of 2000.
The Company had a net loss of $(110,250), or $(0.09) diluted per share, for the
second quarter of 2001 as compared to net earnings of $182,950, or $.12 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 Research and Development
and selling, general and administrative expenses during the second quarter of
2001.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used by operating activities for the six months ended June 30, 2001 was
$613,576 compared to net cash provided of $510,789 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 June 30, 2001 by $104,292 to $2,596,185 compared
with $2,491,893 from December 31, 2000. The current ratio as of June 30, 2001
decreased to 3.61:1 compared to 4.5:1 as of December 31, 2000.
We have an agreement with a financial institution (the "Agreement"), expiring
June 30, 2002, 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 $322,527 at June 30, 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 June 30, 2001 was approximately $554,755.
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 $100,036
at June 30, 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: August 14, 2001