SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
AMENDMENT NO. 1
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the three month period ended SEPTEMBER 30, 1996.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-11685-NY
RADYNE CORP.
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(Exact name of registrant as specified in its charter)
NEW YORK
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(State or other jurisdiction of incorporation or organization)
11-2569467
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(IRS EMPLOYER IDENTIFICATION NO.)
5225 South 37th Street, Phoenix, AZ 85040
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(Address of principal executive offices)
602-437-9620
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(Registrant's Telephone number)
Indicate by check mark whether the registrant (1) 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 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 [_]
Indicate by check mark whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.
YES [X] NO [_]
The registrant had 18,748,605 shares of its common stock, par value $.002,
outstanding as of October 31, 1996.
PART I - FINANCIAL INFORMATION
RADYNE CORP.
CONDENSED BALANCE SHEETS
SEPT. 30, JUNE 30,
Item 1 - ASSETS 1996 1996
----------- ---------
(Unaudited) (Audited)
CURRENT ASSETS:
Cash and Temporary Cash Investments $ 437,950 $ 971
Accounts Receivable, less allowance
of $32,829 and $13,000, respectively 489,369 283,871
Inventories 1,580,776 1,150,669
Prepaid and Other Current Assets 16,934 20,426
----------- -----------
Total Current Assets 2,525,029 1,455,937
IMPROVEMENTS AND EQUIPMENT, Net of accumulated
depreciation of $92,705 and $62,405 respectively 589,375 571,927
OTHER ASSETS:
Designs and Drawings - Net of accumulated
amortization of $418,619 and $361,529 respectively 1,179,720 1,236,810
Deposits 8,012 8,012
----------- -----------
Total Assets $ 4,302,136 $ 3,272,686
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Temporary Bank Overdraft $ -0- $ 12,898
Accounts Payable-Trade 431,412 452,533
Accounts Payable to Affiliate 220,447 -0-
Accrued Liabilities 459,328 400,966
Current Portion Long-Term Debt and
Capitalized Lease Obligations 27,620 77,831
Loan from Bank - Short Term 1,700,000 -0-
Loan from Affiliate 4,550,000 4,594,696
----------- -----------
Total Current Liabilities 7,388,807 5,538,924
Long-Term Debt and capitalized lease obligations 128,157 130,414
----------- -----------
STOCKHOLDERS' EQUITY:
Common Stock, $.002 par value, 20,000,000
shares authorized, 18,748,605 shares
issued and outstanding 37,501 37,501
Additional Paid-In Capital 555,800 555,800
Accumulated (Deficit) (3,808,129) (2,989,953)
----------- -----------
Total Stockholders' Equity (3,214,828) (2,396,652)
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Total Liabilities and Stockholders' Equity $ 4,302,136 $ 3,272,686
=========== ===========
The accompanying notes are an integral part of these financial statements.
2
RADYNE CORP.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED
SEPT. 30, SEPT. 30,
1996 1995
--------- ---------
NET SALES $ 1,292,646 $ 1,296,792
COST AND EXPENSES:
Cost of Sales 1,052,385 775,652
Selling, general and administrative 507,578 403,231
Research and development 438,599 160,095
------------ ------------
Total Costs and Expenses 1,998,562 1,338,978
INCOME (LOSS) FROM OPERATIONS (705,916) (42,185)
INTEREST EXPENSE NET OF INTEREST INCOME 112,260 28,956
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES (818,176) (71,141)
PROVISION FOR INCOME TAXES -0- -0-
------------ ------------
NET INCOME (LOSS) $ (818,176) $ (71,141)
============ ============
NET INCOME (LOSS) PER COMMON SHARE (.044) (.004)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 18,748,605 18,650,084
============ ============
The accompanying notes are an integral part of these financial statements.
3
RADYNE CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
SEPT. 30, SEPT. 30,
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (818,176) $ (71,141)
Adjustment to reconcile net income (loss)
to net cash flows provided by (used
in) operating activities:
Depreciation and Amortization 87,390 67,005
(Increase) Decrease in operating assets:
Accounts Receivable (205,498) (82,350)
Inventories (430,108) 442,518
Prepaid and Other 3,492 38,384
Increase (Decrease) in operating
liabilities:
Accounts Payable 186,428 (486,819)
Accrued Liabilities 58,363 (187,327)
----------- ---------
Total Adjustments (299,933) (208,589)
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES (1,118,109) (279,730)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital Expenditures (47,748) (92,756)
----------- ---------
NET CASH USED IN INVESTING ACTIVITIES (47,748) (92,756)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowing 1,700,000 -0-
Payments on Long Term Debt (52,468) (43,301)
Loans from Affiliates (44,696) 347,614
----------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,602,836 304,313
----------- ---------
NET INCREASE IN CASH 436,979 90,257
CASH, BEGINNING OF YEAR 971 2,109
----------- ---------
CASH, END OF PERIOD $ 437,950 $ 92,366
=========== =========
The accompanying notes are an integral part of these financial statements.
4
RADYNE CORP.
Notes to Financial Statements
(Information for SEPTEMBER 30, 1996 and SEPTEMBER 30, 1995 is Unaudited)
1. Business
Radyne Corp. (the "Company") was incorporated on November 25, 1980 and
commenced operations on May 22, 1981. The Company designs,
manufactures and sells products, systems and software used for the
transmission and reception of data over satellite and cable
communications networks.
2. Summary of Significant Accounting Policies
(a) Basis of presentation
The interim financial statements furnished reflect all adjustments
which are, in the opinion of management, necessary to a fair statement
of financial position as of September 30, 1996 and June 30, 1996 and
the results of operations and cash flows for the three months ended
September 30, 1996 and September 30, 1995. Such adjustments are of a
normal recurring nature. The financial statements should be read in
conjunction with the summary of significant accounting policies and
notes to financial statements included in the Company's Form 10-KSB
for the year ended June 30, 1996.
The results of operations for the interim period are not necessarily
indicative of the results to be expected for the full year.
(b) Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market value including material, direct labor and overhead costs.
(c) Improvements and Equipment
Improvements and equipment are stated at cost. Expenditures for
repairs and maintenance are charged to operations as incurred, and
improvements which extend the useful lives of the assets are
capitalized. Depreciation and amortization of improvements and
equipment are computed using the straight-line method based on the
following useful lives:
Improvements And Equipment 7 years
Furniture and fixtures 7 years
Leasehold improvements 5 years
5
RADYNE CORP.
Notes to Financial Statements
(Information for SEPTEMBER 30, 1996 and SEPTEMBER 30, 1995 is Unaudited)
(d) Research and Development
Expenditures for research and development are charged to operations in
the period incurred.
(e) Taxes on Income
The Company follows the liability method of accounting for income
taxes, as prescribed by Statement No. 109 of the Financial Accounting
Standards Board.
(f) Per Share Data
Earnings (loss) per share of common stock were computed by dividing
net income (loss) by the weighted average number of shares of common
stock outstanding during each of the periods presented.
3. Reorganization
On April 28, 1994, Radyne Corp. (the Predecessor Company) filed a
petition for relief under Chapter 11 of the federal bankruptcy laws in
the United States Bankruptcy Court for the Eastern District of New
York.
The Predecessor Company received approval from the Bankruptcy Court to
pay certain of its pre-petition obligations, employee wages and
benefits. Tax claims were rescheduled for payment in equal quarterly
installments of $8,720, with interest at 7%, over six years.
On December 16, 1994, the Bankruptcy Court confirmed the Predecessor
Company's Plan of Reorganization effective at the close of business on
December 16, 1994.
6
RADYNE CORP.
Notes to Financial Statements
(Information for SEPTEMBER 30, 1996 and SEPTEMBER 30, 1995 is Unaudited)
4. Inventories
Inventories consist of the following:
SEPT. 30, JUNE 30,
1996 1996
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Raw Materials and components $ 279,702 $ 626,525
Work in process 1,080,309 307,391
Finished Goods 335,765 293,660
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Sub Total 1,695,776 1,227,576
Less Valuation Allowance (115,000) (76,907)
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Total $ 1,580,776 $ 1,150,669
=========== ===========
7
RADYNE CORP.
Notes to Financial Statements
(Information for SEPTEMBER 30, 1996 and SEPTEMBER 30, 1995 is Unaudited)
5. Improvements and Equipment
Improvements and Equipment consist of the following:
SEPT. 30, JUNE 30,
1996 1996
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Office Equipment $ 7,812 $ 7,812
Manufacturing Equipment 466,269 434,050
Computers and Software 207,999 192,470
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682,080 634,332
Less: accumulated depreciation
and amortization (92,705) (62,405)
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$ 589,375 $ 571,927
========= =========
6. Accrued Liabilities
Accrued liabilities consist of the following:
SEPT. 30, JUNE 30,
1996 1996
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Payroll and vacation $124,320 $153,894
Warranty Reserve 124,775 109,775
Professional fees 71,625 77,125
Other 138,608 60,172
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$459,328 $400,966
======== ========
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7. Borrowings
On August 12, 1996, all of the outstanding shares of Engineering and
Technical Services, Inc. ("ETS"), the Company's indirect controlling
shareholder, were acquired by Stetsys US, Inc., an indirect subsidiary of
Singapore Technologies Pte Ltd ("STPL"), a corporation organized under the
laws of the Republic of Singapore. On that date, Singapore Technologies
Electronics Pte Ltd, a subsidiary of STPL, made a loan to the Company in
the amount of $4,500,000 repayable on February 10, 1997 with interest at
the rate of 8% per annum. The proceeds of this loan were used, together
with $504,000 of the Company's cash, to repay the Company's indebtedness to
ETS. In addition, STPL guaranteed a new $2,000,000 line of credit for the
Company provided by Bank of America NT&SA. As of September 30, 1996, the
Company had drawn down $1,700,000 under this line of credit, with
maturaties ranging from February 14, 1997 to March 24, 1997 and interest
rates of 6.3375% per annum on $1,200,000 and 6.4% on $500,000.
8. Related Party Transactions
In July of 1995, the Company's manufacturing operations were
transferred to ETS, then the beneficial owner of 90.67% of the Company's
common stock, pending the Company's relocation to Phoenix. At the time,
$163,770 of inventory and $119,367 of machinery and equipment was exchanged
for a reduction in the Company's indebtedness to ETS. During the quarter
ended September 30, 1996, in recognition of the completion of the move to
Phoenix and increase in staffing, the Board determined that the Company
should resume direct manufacturing. To this end, the Company repurchased
$22,100 of machinery and equipment from ETS during the quarter and
purchased $347,000 of inventory from ETS, which ETS had acquired and/or
processed in the ordinary course of fulfilling purchase orders from the
Company and which the Company was obligated to purchase from ETS. However,
as the Company's products were undergoing constant improvement, the Company
considered it necessary to treat $70,000 of such inventory as obsolete and
another $20,000 thereof as slow-moving. Ongoing product development
rendered another $90,000 of this inventory obsolete during the subsequent
quarter.
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RADYNE CORP
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
The Company's assets have increased from $3,272,686 at June 30, 1996
to $4,302,136 at September 30, 1996, while the Company's liabilities have
increased from $5,669,338 at June 30, 1996 to $7,516,964 at September 30,
1996. The decrease in net assets (assets minus liabilities) of $818,176
relates to the Company's net loss for the three month period ending
September 30, 1996.
Results of operations for the three month period ended September 30,
1996 compared to the fiscal quarter ended September 30, 1995, are as
follows:
The Company's net sales decreased .3% to $1,292,646 during the period
ended September 30, 1996 from $1,296,792 during the quarter ended September
30, 1995.
The Company's cost of sales as a percentage of sales increased to 81%
during the period ended September 30, 1996 from 60% during the fiscal
quarter ended September 30, 1995. $90,000 in the Company's cost of sales
(7% of sales) was as a result of a charge, taken against indirect cost of
goods sold, to set up a reserve for inventory which was purchased from ETS
under an agreement whereby the Company's manufacturing operations were
moved to Phoenix from ETS' facilities in Melbourne, FL. The charge
reflected the cost of inventory which was rendered "Excess and Slow Moving"
as a result of design changes made by the Company and incorporated into its
products to enhance their capabilities. Start-up costs associated with the
delivery of new products to the market place accounted for the balance of
the increase in costs. (See Item 1, Notes to the Financial Statements, note
8 above).
Selling, general and administrative costs increased to $507,578 during
the current period from $403,231 during the fiscal quarter ended September
30, 1995. Contributing to the Company's increased level of expenses for the
period was an increase in the Company's base organizational and
manufacturing capacity as a result of increased orders taken during the
period.
Research and development expenditures increased to $438,599 during the
period ended September 30, 1996 from $160,095 during the period ended
September 30, 1995. The prior year's lower level of R&D effort was mainly
due to the inability of the Company to
10
finance the investment needed in this industry to stay abreast of the
technology curve.
Net interest expense increased from $28,956 in the quarter ended
September 30, 1995 to $112,260 in the current period due to an increase in
the Company's debt.
Based on the increases in costs and expenses outlined above, the
Company experienced a net loss of ($818,176) during the period ended
September 30, 1996 as compared with a net loss of ($71,141) during the
quarter ended September 30, 1995.
The Company's new-orders-booked (Bookings) increased 201% to
$3,579,183 for the period ended September 30, 1996 from $1,190,441 for the
quarter ended September 30, 1995. This increase was primarily due to the
introduction of certain new product lines to the market during the period.
The Company's level of unfilled-orders-to-ship (Backlog) increased
324% to $3,725,575 at September 30, 1996 from $878,453 at September 30,
1995 primarily due to the increased Bookings referred to above.
Typically, the Company must ship its backlog within 90 days to
maintain "on-time" delivery schedules.
The Company anticipates that it will be able to handle this large
increase in orders while substantially maintaining this delivery schedule.
This is expected to result in a significant increase in net sales from the
quarter ended September 30, 1996 to the quarter ended December 31, 1996.
11
Liquidity and Capital Resources
The Company's working capital deficit was ($4,863,778) at September
30, 1996; an increase of $780,791 from ($4,082,987) at June 30, 1996. The
increase in the deficit was due primarily to $1,700,000 of new bank
borrowings, and an approximately $200,000 increase in accounts payable,
partially offset by increases of approximately $437,000 in cash and cash
equivalents, $206,000 in accounts receivable and $430,000 in inventories.
Net cash used in operating activities was $1,118,109 for the three
months ended September 30, 1996, as compared to $279,730 used in the three
months ended September 30, 1995. The principal causes for the difference
were the increased operating loss and the increases in inventories and
accounts receivable, partially offset by increases in accounts payable and
accrued liabilities. Management considers these differences to be
consistent with the introduction of new products and the increases in
Bookings and Backlog discussed above.
Cash used in investing activities, consisting of additions to
equipment, amounted to $47,748 for the quarter ended September 30, 1996, or
approximately $45,000 less than the amount expended during the quarter
ended September 30, 1995 for this purpose. The Company anticipates capital
expenditures of not more than an additional $210,000 for the remainder of
calendar 1996, which will be financed from the Company's operations and
borrowings.
The Company derived net cash from financing activities of $1,602,836
and $304,313, respectively, during the quarter ended September 30, 1996 and
the quarter ended September 30, 1995, with the difference resulting from
greater net borrowings during the current period.
As a result of the foregoing, the Company increased its cash balances
by $436,979 and $90,257, respectively, for the three months ended September
30, 1996 and the three months ended September 30, 1995.
A bank line of credit, in the amount of $2,000,000, was established
for the Company with Bank of America NT&SA, Asian Banking Unit, by Stetsys
US, Inc., the new beneficial owner of 90.67% of the Company's outstanding
stock. As of the end of the period reported herein, the Company had drawn
down $1,700,000 of the available funds. This is a demand loan, bearing
interest at the rates ranging from 6.3375% to 6.4%, guaranteed by an
affiliate of Stetsys US, Inc. (See Item 1, Note 7)
The Company borrowed $4,500.000 (plus $50,000 in accrued interest)
from Singapore Technologies Electronics Pte Ltd, a
12
related company, the proceeds from which were used to pay down the loan
payable to ETS. An additional $504,000 of the Company's cash was used to
pay the balance of the ETS loan. The Company has been, and is expected to
remain, dependent on its principal shareholder for capital needs to fund
operating and investing activities.
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibit Description
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3(i) Restated Certificate of Incorporation
3(ii) By-Laws, as Amended and Restated
27 Financial Data Schedule
(b) Report on Form 8-K. A report on Form 8-K was filed on August 23, 1996
(electronic confirming copy accepted September 24, 1996) relating to Item 1
(change in control of registrant), Item 5 (change in number and identity of
directors) and Item 8 (change in fiscal year).
13
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: March 6, 1997 RADYNE CORP.
By: /s/ Robert C. Fitting
-----------------------------------
Robert C. Fitting
President
By: /s/ Garry D. Kline
-----------------------------------
Garry D. Kline
Acting Chief Financial Officer
14