-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, E+Ou0v6eNuEDjTAspKMR0iaRJxh28YwR/oTmJaOSW5kqD2NwFqgKYA2vk9RMAd2O fpf0OJ/ZJjOFQSYRmLN3QA== 0001005477-97-001497.txt : 19970520 0001005477-97-001497.hdr.sgml : 19970520 ACCESSION NUMBER: 0001005477-97-001497 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: RADYNE CORP CENTRAL INDEX KEY: 0000718573 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 112569467 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11685 FILM NUMBER: 97609719 BUSINESS ADDRESS: STREET 1: 5225 S 37TH ST CITY: PHOENIX STATE: AZ ZIP: 85040 BUSINESS PHONE: 6024379620 MAIL ADDRESS: STREET 1: 5225 S 37TH ST CITY: PHOENIX STATE: AZ ZIP: 85040 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the three month period ended March 31, 1997. [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-11685-NY RADYNE CORP. ------------ (Exact name of registrant as specified in its charter) NEW YORK -------- (State or other jurisdiction of incorporation or organization) 11-2569467 ---------- (IRS EMPLOYER IDENTIFICATION NO.) 5225 South 37th Street, Phoenix, AZ 85040 ----------------------------------------- (Address of principal executive offices) 602-437-9620 ------------ (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 3,759,721 shares of its common stock, par value $.002, outstanding as of March 31, 1997. PART I - FINANCIAL INFORMATION RADYNE CORP. BALANCE SHEETS MARCH 31, DECEMBER 31, Item 1 - ASSETS 1997 1996 ---------- ---------- (Unaudited) (Audited) CURRENT ASSETS: Cash and Cash Equivalents $ 373,387 $ 186,488 Accounts Receivable, less allowance for doubtful accounts of $13,000 2,440,721 2,733,902 Inventories 2,907,101 1,991,360 Prepaid and Other Current Assets 221,249 94,298 ---------- ---------- Total Current Assets 5,942,458 5,006,048 PROPERTY AND EQUIPMENT - NET 874,282 849,564 OTHER ASSETS: Designs and Drawings - Net of accumulated amortization of $536,791 and $475,696 respectively 640,548 701,643 Deposits 15,662 15,662 ---------- ---------- Total $7,472,950 6,572,917 ========== ========== The accompanying notes are an integral part of these financial statements 2 PART I - FINANCIAL INFORMATION RADYNE CORP. BALANCE SHEETS (Continued) LIABILITIES AND STOCKHOLDERS' CAPITAL DEFICIENCY MARCH 31, DECEMBER 31, 1997 1996 ----- ---- CURRENT LIABILITIES: Notes payable under lines of credit $ 6,393,820 $ 1,993,820 Notes payable to affiliates 4,100,000 6,600,000 Obligations under capital leases 49,568 53,042 Accounts Payable - trade 1,044,519 805,279 Accounts Payable - affiliate 20,170 436,362 Accrued Liabilities 594,034 926,956 Taxes payable 47,420 42,116 ------------ ------------ Total Current Liabilities 12,249,531 10,857,575 OBLIGATIONS UNDER CAPITAL LEASES 79,820 81,016 TAXES PAYABLE 64,380 80,952 ------------ ------------ Total Liabilities $ 12,393,731 11,019,543 ------------ ------------ STOCKHOLDERS' CAPITAL DEFICIENCY Common Stock, $.002 par value, 20,000,000 shares authorized, shares issued and outstanding, 3,759,721 at March 31, 1997 and December 31, 1996 7,519 7,519 Additional Paid-In Capital 605,782 605,782 Accumulated Deficit (5,534,082) (5,059,927) ------------ ------------ Total Stockholders' Capital Deficiency (4,920,781) (4,446,626) ------------ ------------ Total $ 7,472,950 $ 6,572,917 ============ ============ The accompanying notes are an integral part of these financial statements 3 RADYNE CORP. STATEMENTS OF OPERATIONS (Unaudited) THREE MONTHS ENDED MARCH 31, MARCH 31, 1997 1996 ----------- ----------- NET SALES $ 2,740,668 $ 886,763 COST OF SALES 1,679,812 488,432 ----------- ----------- Gross Profit 1,060,856 398,331 ----------- ----------- OPERATING EXPENSES: Selling, general and administrative 811,281 502,652 Research and development 551,643 541,490 ----------- ----------- Total Operating Expenses 1,362,924 1,044,142 LOSS FROM OPERATIONS BEFORE INTEREST EXPENSE (302,068) (645,811) INTEREST EXPENSE - NET 172,087 92,700 NET LOSS BEFORE PROVISION FOR INCOME TAXES (474,155) (738,511) PROVISION FOR INCOME TAXES -0- -0- ----------- ----------- NET LOSS (474,155) (738,511) =========== =========== NET LOSS PER COMMON SHARE (.13) (.20) =========== =========== WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 3,759,721 3,730,016 =========== =========== The accompanying notes are an integral part of these financial statements. 4 RADYNE CORP. STATEMENTS OF CASH FLOWS (Unaudited) THREE MONTHS ENDED MARCH 31, MARCH 31, 1997 1996 ----------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (474,155) $ (738,511) Adjustment to reconcile net loss to net cash flows used in operating activities: Depreciation and Amortization 118,565 103,800 Changes in operating assets and liabilities: Accounts Receivable 293,181 152,953 Inventories (915,741) (92,888) Prepaid and Other Current Assets (126,951) 33,565 Deposits -0- 20,134 Accounts Payable - Trade 239,240 80,714 Accounts Payable - Affiliates (416,192) -0- Accrued Liabilities (332,922) (75,830) Taxes Payable (11,268) (34,308) ----------- ----------- NET CASH USED IN OPERATING ACTIVITIES (1,626,243) (550,371) ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital Expenditures (82,188) (205,883) ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (82,188) (205,883) ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings From Notes Payable Under Line of Credit Agreements 4,400,000 -0- Payments on Notes Payable to Affiliates (2,500,000) -0- Payments on Long Term Debt (4,670) (10,024) Proceeds from Notes Payable to Affiliates -0- 755,781 ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 1,895,330 745,757 ----------- ----------- NET INCREASE (DECREASE) IN CASH 186,899 (10,497) CASH, BEGINNING OF YEAR 186,488 46,130 ----------- ----------- CASH, END OF PERIOD $ 373,387 $ 35,633 =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash Paid for Interest $ 289,959 $ -0- =========== =========== The accompanying notes are an integral part of these financial statements. 5 RADYNE CORP. Notes to Financial Statements (Information for MARCH 31, 1997 and MARCH 31, 1996 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 for a fair statement of financial position as of March 31, 1997 and December 31, 1996 and the results of operations and cash flows for the three months ended March 31, 1997 and March 31, 1996. 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-K for the year ended December 31, 1996. The results of operations for the interim period are not necessarily indicative of the results to be expected for the full year. (b) Revenue Recognition The Company recognizes revenue upon shipment of products. (c) Inventories Inventories are stated at the lower of cost (first-in, first-out) or market value including material, direct labor and overhead costs. (d) Property and Equipment Property 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 machinery and equipment are computed using the straight-line method based on the following useful lives: Machinery and Equipment 7 years Furniture and fixtures 7 years Leasehold improvements 5 years 6 RADYNE CORP. Notes to Financial Statements (Information for MARCH 31, 1997 and MARCH 31, 1996 is Unaudited) (e) Designs and Drawings The evaluation of designs and drawings is the result of adjustments made by the Company to adopt Fresh Start reporting in accordance with AICPA Statement of Position 90-7, `Financial Reporting By Entities in Reorganization Under the Bankruptcy Code,' and represents the excess reorganization value that has been applied to the acquired technology supporting the Company's products (Note 3). Amortization of designs and drawings is computed using the straight-line method over an estimated useful life of four to seven years. (f) Research and Development Expenditures for research and development are charged to operations in the period incurred. (g) 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. (h) Per Share Data Earnings (loss) per share of common stock were computed by dividing Net Loss by the weighted average number of shares of common stock outstanding during each of the periods presented. (i) Rights Offering In November 1996, the Board of Directors approved the distribution to stockholders, other than its principal stockholder, Stetsys US, Inc. ("ST"), of subscription rights to purchase up to 215,833 shares of the Company's common stock at a price of $2.50 per share. The Board of Directors further approved the distribution of subscription rights to an affiliate of ST to purchase up to 2,040,000 shares of the Company's common stock at a price of $2.50 per share. This Rights Offering became effective on May 12, 1997. The subscription rights will generally expire June 16, 1997. ST's affiliate has indicated its intention to exercise 1,696,000 of its rights for $4,240,000 on June 2, 1997 and the balance of its rights no later than June 23, 1997. The proceeds from the exercise of those rights will be used, in part, to pay off the note payable to affiliate shown on the accompanying balance sheet as at March 31, 1997. At March 31, 1997, the Company has recorded $178,033 of deferred offering costs relating to the registration of these rights. (j) Reverse Split All per share information in these financial statements has been adjusted to give effect to the 1-for-5 reverse split of common shares which was effective January 9, 1997. 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. 7 RADYNE CORP. Notes to Financial Statements (Information for MARCH 31, 1997 and MARCH 31, 1996 is Unaudited) 4. Inventories Inventories consist of the following:
MARCH 31, DECEMBER 31, 1997 1996 ----------- ----------- Raw Materials and components $ 1,105,581 $ 1,108,109 Work in process 1,566,199 792,119 Finished Goods 710,321 577,222 ----------- ----------- Sub Total 3,382,101 2,477,360 Less Valuation Allowance (475,000) (486,000) ----------- ----------- Total $ 2,907,101 $ 1,991,360 =========== =========== 5. Property and Equipment Property and Equipment consist of the following: MARCH 31, DECEMBER 31, 1997 1996 ----------- ----------- Machinery and Equipment $ 760,201 $ 731,778 Furniture and Fixtures 297,324 243,559 ----------- ----------- 1,057,525 975,337 Less: accumulated depreciation and amortization (183,243) (125,773) ----------- ----------- $ 874,282 $ 849,564 =========== =========== 6. Accrued Liabilities Accrued liabilities consist of the following: MARCH 31, DECEMBER 31, 1997 1996 ----------- ----------- Wages and related payroll taxes $ 116,440 $ 356,624 Interest Expense 76,620 194,492 Warranty Reserve 125,775 139,775 Professional fees 112,612 171,000 Other 162,587 65,065 ----------- ----------- $ 594,034 $ 926,956 =========== ===========
8 7. Related Party Transactions In June 1995, the Company acquired certain assets of Merit Microwave, Inc., as well as the manufacturing rights to the Merit line of microwave products, which include translators and frequency converters. The purchase price of approximately $120,000 was allocated to inventory and machinery and equipment, and was paid by the issuance of 30,000 shares of the Company's stock ($40,000), cash of $60,000, and the assumption of a payable of $20,000. Under the terms of the agreement, the principal stockholder and chief operating officer of Merit entered into a one-year agreement with the Company to serve as president of the newly created Radyne Microwave Products Division for annual compensation of $75,000. In addition, the Company is required to pay royalties to Merit of 5-10% on certain sales of microwave products. From December 31, 1996 to March 31, 1997, the Company paid no royalties under the agreement. At March 31, 1997, notes payable to ST and affiliates were as follows: Note payable plus interest at 6.625% per annum, principal due July 31, 1997............................................. $4,100,000 Interest expense on notes payable to affiliates was $111,950 and $91,552 for the three month period ended March 31, 1997 and the three month period ended March 31, 1996, respectively, of which $20,170 was included in accounts payable to affiliates in the accompanying balance sheet as of March 31, 1997. 8. Notes Payable The Company has a note payable under a line of credit agreement with Bank of America, that permits outstanding borrowings of $5,000,000 with interest payable at IBOR plus 1.25% per annum (rates varied from 6.625%--7.40% on balances owed at March 31, 1997). The outstanding balance under this agreement as of March 31, 1997 was $2,993,820. Subsequent to March 31, 1997, the Company has borrowed an additional 196,180 under the agreement. The line of credit agreement expires in March 1998 and is renewable annually at the option of the Bank. Subsequent to December 31, 1996, the Company entered into a new $5,500,000 credit agreement with Citibank, N.A. that includes $5,000,000 available under an uncommitted line of credit facility and facilities for bank guarantees and/or standby letters of credit up to $500,000. ST's grandparent company has issued a nonbinding letter of awareness in connection with this credit agreement. Borrowings under the line of credit bear interest at a fluctuating rate equal to IBOR plus 1% per annum or alternative Citibanks Quoted Rate plus 1% per annum annum (rates varied from 6.625%-7.0% on balances owed at March 31, 1997). The credit agreement requires the Company to capitalize at least $4,100,000 of its notes payable to affiliates and also requires that the Company maintain certain financial leverage ratios. The availability of additional borrowings under the credit agreement expires December 31, 1997 and is renewable annually at the option of the Bank. The Company owed $3,400,000 under the agreement as of March 31, 1997 and has borrowed an additional $400,000 subsequent to March 31, 1997. 9 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 $6,572,917 at December 31, 1996 to $7,472,950 at March 31, 1997, while the company's liabilities have increased from $11,019,543 at December 31, 1996 to $12,393,731 at March 31, 1997. The decrease in net assets (assets minus liabilities) of $474,155 relates to the Company's net loss for the three month period ending March 31, 1997. Results of operations for the three month period ended March 31, 1997 compared to the fiscal quarter ended March 31, 1996, are as follows: The Company's net sales increased 209% to $2,740,668 during the period ended March 31, 1997 from $886,763 during the quarter ended March 31, 1996 as a result of the Company's introduction of new products. The Company's cost of sales as a percentage of sales increased to 61% during the period ended March 31, 1997 from 55% during the fiscal quarter ended March 31, 1996. Start-up costs associated with the delivery of new products to the market place accounted for the major portion of the increase in costs. Selling, general and administrative costs increased to $811,281 (30% of sales) during the current period from $502,652 (57% of sales) during the fiscal quarter ended March 31, 1996. The increased level of expenses for the period (and the related reduction in costs in terms of percentage of sales) was as a result of the increase in the Company's base business level during the period. Research and development expenditures increased to $551,643 (20% of sales) during the period ended March 31, 1997 from $541,490 (61% of sales) during the period ended March 31, 1996. The increased level of expenses for the period (and the related reduction in costs in terms of percentage of sales) was as a result of the increase in the Company's base business level during the period. Net interest expense increased from $92,700 in the quarter ended March 31, 1996 to $172,087 in the current period due to an increase in the Company's debt level. Based on the increases in costs and expenses outlined above, the Company experienced a net loss of ($474,155) during the period ended March 31, 1997 as compared with a net loss of ($738,511) during the quarter ended March 31, 1996. The Company's new-orders-booked (Bookings) increased 110% to $2,132,948 for the period ended March 31, 1997 from $1,017,211 for the quarter ended March 31, 1996. This increase was primarily due to the introduction of certain new product lines to the market after the period ended March 31, 1996. The Company's level of unfilled-orders-to-ship (Backlog) increased 443% to $1,865,545 at March 31, 1997 from $343,463 at March 31, 1996 primarily due to the increased Bookings referred to above and like increases in the previous quarter. 10 Liquidity and Capital Resources The Company's working capital deficit was ($6,307,000) at March 31, 1997, an increase of $455,000 from ($5,852,000) at December 31, 1996. The increase in the deficit was due primarily to $1,900,000 of new net borrowings, and an approximately $293,000 decrease in accounts receivable, as offset by increases of approximately $187,000 in cash and cash equivalents, $127,000 in prepaid and other assets, $916,000 in inventories, a $333,000 reduction in accrued liabilities and a $177,000 net reduction in accounts payable. Net cash used in operating activities was $1,626,000 for the quarter ended March 31, 1997, as compared to $550,000 used in the quarter ended March 31, 1996. Management considers these differences to be consistent with the introduction of new products which resulted in increased inventory levels coupled with an increase in the overall business activities of the Company. Cash used in investing activities, consisting of additions to equipment, amounting to $82,000 for the quarter ended March 31, 1997 was considerably less than the prior period reported herein because that period included a buildup of the Company's infrastructure to handle increased business activity. The Company derived net cash from financing activities of $1,895,000 and $746,000, respectively, during the quarters ended March 31, 1997 and March 31, 1996, 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 $187,000 and decreased its cash balances by $10,000 for the quarter ended March 31, 1997 and the quarter ended March 31, 1996, respectively. PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders A special meeting of shareholders in lieu of annual meeting was held on January 8, 1997. Proxies were neither solicited nor given. 17,110,500 shares were represented at the meeting. The following matters were voted on at the meeting: (1) The election of Lim Ming Seong, Lee Yip Loi, Chan Wee Piak, Robert A. Grimes and Robert C. Fitting as Directors of the Company. All 17,110,500 shares represented at the meeting were voted for each of the five candidates. (2) Amendment of the Company's Certificate of Incorporation (A) to provide that the purpose for which the Company is formed is to engage in any lawful activity for which corporations may be organized, (B) to provide for a 1-for-5 reverse split of the Company's Common Stock, (C) to eliminate shareholders' preemptive rights under Section 622 of the New York Business Corporation Law, (D) to remove a paragraph purporting to govern the Company's choice of accounting year, and (E) to update the Company's address for copies of process. All 17,110,500 shares represented at the meeting were voted for items (A), (D) and (E). 17,110,000 shares were voted for, and 500 shares were voted against, items (B) and (C). (3) Approval of the Company's 1996 Incentive Stock Option Plan. All 17,110,500 shares represented at the meeting were voted in favor of approval. (4) Ratification of the selection of Deloitte & Touche LLP as the Company's independent certified public accountants for the fiscal year ended December 31, 1996. All 17,110,500 shares represented at the meeting were voted in favor of ratification. Item 6 - Exhibits and Reports on Form 8-K. 11 (a) Exhibit Description ------- ----------- 3.1* Restated Certificate of Incorporation 3.2* Bylaws, as amended and restated 10.1** 1996 Incentive Stock Option Plan 10.2*** Employment Agreement with Robert C. Fitting (Radyne Termsheet) 10.3*** Agreement with Merit Microwave, inc. and Peter Weisskopf 27 Financial Data Schedule (b) No reports on Form 8-K were filed during the quarter covered by this report. * Incorporated by reference from Registrant's report on Form 10-Q, filed March 11, 1997. ** Incorporated by reference from Registrant's Registration Statement on Form S-8, dated and declared effective on March 12, 1997. *** Incorporated by reference from Registrant's amended Registration Statement on Form S-1, dated May 9, 1997 and declared effective on May 12, 1997. 12 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: May 15, 1997 RADYNE CORP. By: /s/Robert C. Fitting ------------------------------------- Robert C. Fitting President By: /s/Garry D. Kline ------------------------------------- Garry D. Kline Acting Chief Financial Officer EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the financial statements contained in the Form 10-Q for the quarter ended 3-31-97 and is qualified in its entirety by reference to such financial statements. 3-MOS DEC-31-1997 MAR-31-1997 373,387 0 2,453,721 (13,000) 2,907,101 5,942,458 1,057,525 (183,243) 7,472,950 12,249,531 0 0 0 7,519 605,782 7,472,950 2,740,668 2,740,668 1,679,812 1,679,812 1,362,924 (13,000) 172,087 (474,155) 0 (474,155) 0 0 0 (474,155) (0.13) (0.13)
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