-----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, Td+IdnEcyxv1nS/7tHJC38oIknpU3EtNl0cj+FnNS6HEweT73GLVfCZj/VLZNaYL EsajNRUDqonoiHl0hWBYTg== 0001012870-97-001804.txt : 19970918 0001012870-97-001804.hdr.sgml : 19970918 ACCESSION NUMBER: 0001012870-97-001804 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970731 FILED AS OF DATE: 19970917 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DSP TECHNOLOGY INC CENTRAL INDEX KEY: 0000773720 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 942832651 STATE OF INCORPORATION: CA FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-14677 FILM NUMBER: 97681452 BUSINESS ADDRESS: STREET 1: 48500 KATO RD CITY: FREMONT STATE: CA ZIP: 94538 BUSINESS PHONE: 5106577555 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q X Quarterly report pursuant to Section 13 or 15(d) of the Securities ----- Exchange Act of 1934 For the quarterly period ended JULY 31, 1997 or ------------- Transition report pursuant to Section 13 or 15(d) of the Securities ----- Exchange Act of 1934 For the transition period from to ------------------- -------------------- Commission File Number 0-14677 --------------------------------------------------------- DSP TECHNOLOGY INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) CALIFORNIA 94-2832651 - --------------------------------------- ---------------------------------- (State or other jurisdiction of I.R.S. Employer incorporation or organization) Identification Number 48500 Kato Rd., Fremont, CA 94538 - --------------------------------------- ---------------------------------- (Address of principal executive offices) (Zip Code) (510) 657-7555 - -------------------------------------------------------------------------------- (Registrant's telephone number including area code) Indicate by check mark whether the registrant (1) has 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 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 ------- ------- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 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 NO -------- ------- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate number of shares outstanding of each of the issuer's classes of common stock, at the latest practical date: CLASS OUTSTANDING AS OF SEPTEMBER 9, 1997 ----- ----------------------------------- COMMON STOCK 2,204,028 1 DSP TECHNOLOGY INC. AND SUBSIDIARIES TABLE OF CONTENTS FORM 10-Q Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Consolidated Balance Sheets - July 31, 1997 and January 31, 1997 3 Consolidated Statements of Income - Three months and six months ended July 31, 1997 and 1996 4 Consolidated Statements of Cash Flows - Six months ended July 31, 1997 and 1996 5 Notes to Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders Item 6. Exhibits and Reports on Form 8-K. 8 Signatures 9 2 DSP TECHNOLOGY INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in thousands)
July 31, January 31, 1997 1997 ----------- ----------- ASSETS (Unaudited) Current assets: Cash and certificates of deposit $ 1,139 $1,323 Accounts receivable 7,097 4,784 Inventories 2,733 2,015 Deferred income taxes 154 154 Prepaid expenses 340 304 ------- ------ Total current assets 11,463 8,580 Property and equipment 1,428 1,540 Cost in excess of net assets of acquired business 311 362 Other assets 1,280 1,317 ------- ------ $14,482 $11,799 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,030 $ 799 Accrued liabilities 3,294 1,849 Income taxes payable 641 206 ------- ------- Total current liabilities 4,965 2,854 Deferred income taxes 258 258 Commitments and contingencies -- -- Shareholders' equity: Preferred stock. Authorized 2,500,000 shares; none issued -- -- Common stock. 25,000,000 shares authorized; shares issued and outstanding: 2,187,361 at July 31 and 2,179,962 at January 31 3,012 2,988 Retained earnings 6,247 5,699 ------- ------- Total shareholders' equity 9,259 8,687 ------- ------- $14,482 $11,799 ======= =======
The accompanying notes are an integral part of these financial statements. 3 DSP TECHNOLOGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts) (Unaudited)
Three months ended Six months ended July 31, July 31, ------------------ ---------------- 1997 1996 1997 1996 -------- -------- ------- ------- Net sales $5,445 $4,411 $9,912 $8,186 Cost of sales 2,570 1,900 4,737 3,438 ------ ------ ------ ------ Gross profit 2,875 2,511 5,175 4,748 Operating expenses: Research and development 530 573 1,108 1,069 Marketing, general and administrative 1,605 1,647 3,310 3,122 ------ ------ ------ ------ 2,135 2,220 4,418 4,191 ------ ------ ------ ------ Operating income 740 291 757 557 Other income 69 40 109 82 ------ ------ ------ ------ Income before income taxes 809 331 866 639 Income taxes 324 104 346 211 ------ ------ ------ ------ Net income $ 485 $ 227 $ 520 $ 428 ====== ====== ====== ====== Net income per common and common equivalent share $ .21 $ .10 $ .23 $ .19 ====== ====== ====== ====== Weighted average common and common equivalent shares outstanding 2,315 2,309 2,310 2,312 ====== ====== ====== ======
The accompanying notes are an integral part of these financial statements. 4 DSP TECHNOLOGY INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands)
Six months ended July 31, --------------------------- 1997 1996 -------- -------- (Unaudited) Cash flows from operating activities: Net income $ 485 $ 428 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 537 337 Changes in current assets and liabilities: Accounts receivable (2,313) (1603) Inventories (718) (186) Prepaid expenses (36) (35) Accounts payables 231 (67) Accrued liabilities 1,445 914 Income taxes payable 435 (98) ------- ------- Net cash provided by (used in) operating activities 66 (310) ------- ------- Cash flows from investing activities: Purchases of property and equipment (195) (515) Investment in software development (195) (285) Other 116 (50) ------- ------- Net cash (used in) investing activities (274) (850) ------- ------- Cash flows from financing activities: Proceeds from issuance of common stock 24 12 ------- ------- Net cash provided by financing activities 24 12 ------- ------- Increase (decrease) in cash (184) (1,148) ------- ------- Cash at beginning of period 1323 2,015 ------- ------- Cash at end of period $ 1,139 $ 867 ======= ======= Supplemental disclosure of cash flow information: Cash paid during period for income taxes $ 10 $ 270 ======= =======
The accompanying notes are an integral part of these financial statements. 5 DSP TECHNOLOGY INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation. --------------------- The accompanying consolidated financial statements have been prepared, without audit, in accordance with Securities and Exchange Commission requirements for interim financial statements. Therefore, they do not include all the disclosures that would be presented in the Company's Annual Report on Form 10-K. The financial statements should be read in conjunction with the Company's January 31, 1997 financial statements and accompanying notes thereto. The information furnished reflects all adjustments (consisting only of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of financial position, results of operations and cash flows for the interim period. The results of operations for the periods presented are not necessarily indicative of results to be expected for the full year. For accounting purposes, the Company changed to a 52/53 week convention with the fiscal year ending on the Sunday nearest the end of January. However, for financial reporting purposes, each fiscal quarter or year is presented as if it ended on the last day of such period. 2. Inventories. Inventories are stated at the lower of cost (first-in, first- ----------- out) or market. Inventories consist of:
July 31, January 31, 1997 1997 ----------- ----------- (thousands) Raw materials $1,575 $1,316 Work in process 820 639 Finished goods 338 426 ------ ------ $2,733 $2,381 ====== ======
6 Item 2. Management's Discussion and Analysis of Financial Condition and Results - -------------------------------------------------------------------------------- of Operations - ------------- This section of the report contains forward-looking statements regarding the Company's expected growth and enhanced future performance. All forward- looking statements are subject to risk and actual results could differ materially from those projected in the forward-looking statements as a result of many factors which are set forth below. Results of Operations - --------------------- Net sales for the second quarter of fiscal 1998 ended August 3, 1997 increased by $1,034,000 or 23% to $5,445,000 from $4,411,000 in the second quarter of fiscal 1997 ended July 31, 1996. Net sales for the first six months of fiscal 1998 were $9,912,000 or 21% higher than net sales of $8,186,000 in the first six months of fiscal 1997. The increases were due to continued strong demand for the company's RedLine data acquisition products and turnkey services. Cost of sales as a percentage of net sales increased to 47% in this year's second quarter from 43% in the same period last year. Cost of sales as a percentage of net sales also increased to 48% in the first half of fiscal 1998 compared to 42% in the first half of fiscal 1997. The increases is a result of product mix with service-related revenues becoming a bigger part of the Company's business as had been anticipated. Cost of sales for the Company's core products, the RedLine ADAPT and ACAP systems, remain at historical 40% levels. Research and development expenses decreased by $43,000 to $530,000 in the second quarter this year compared to $573,000 in the same period last year while expenses in the first half of this year increased by $39,000 to $1,108,000 from $1,069,000 in the first half of fiscal 1997. The decrease in the second quarter this year is primarily due to lower prototyping costs and higher expense allocation to cost of sales. The increase in the first half this year is due to the continued ramp up of joint new product development with FEV, the Company's strategic ally in Germany. Marketing, general and administrative expenses in the second quarter of fiscal 1998 decreased by $42,000 or 3% to $1,605,000 compared to the same period a year ago. Expenses in the first six months of this year increased by $188,000 to $3,310,000 from $3,122,000 last year. As a percentage of sales, however, expenses decreased to 29% from 37% in the second quarter this year and to 33% from 38% in the first half of this year compared to the respective periods last year. The decrease in the second quarter reflect the Company's ability to use its resources more efficiently. Net other income was $69,000 in this year's second quarter compared to $40,000 last year and $109,000 in the first half compared to $82,000 in the same period last year. Higher other incomes reflect gains from sale of fixed assets and higher available cash invested in interest-bearing accounts at higher interest rates this year compared to the same period last year. The effective tax rate computed for the second quarter and first half this year was 40% compared to 31% and 33% in last year's second quarter and first half, respectively. The higher tax rates this year reflect the higher domestic income contribution this year versus last year. Domestic tax rates tend to be higher than the Company's foreign subsidiary's tax rates. The company reviews the tax rate quarterly and could make minor adjustments to reflect changing estimates. 7 Liquidity and Capital Resources - ------------------------------- Cash decreased by $184,000 during the six month period ended July 31, 1997. The decrease was due to the increase in accounts receivable brought about by high shipments in the last month of the period. The primary use of the Company's cash in the first half of fiscal 1997 has been: a) the purchase of capital equipment used to equip additional personnel, and b) investment in software development. Working capital at July 31, 1997 was $6,498,000 compared to $5,726,000 at the beginning of the fiscal year, while the current ratios stood at 2.3 to 1.0 at July 31, 1997 and at 3.0 to 1.0 at January 31, 1997. At July 31, 1997, the Company has a $1,000,000 secured bank line of credit. The Company currently anticipates that internally generated funds and bank borrowings will be sufficient to satisfy its anticipated operating and capital needs over the foreseeable future. At July 31, 1997, the Company had no material outstanding commitments to purchase capital equipment. Management believes that inflation has not had a material effect on the Company's operations or financial condition. Factors That May Affect Future Results - -------------------------------------- The Company's future operating results may be affected by a number of factors, including: its ability to introduce new products, services and enhancements for its customers as demands for increasingly sophisticated measurement and control systems continue; timing of receipt of major system orders; timing of service revenues; product mix; uncertainties relative to global economic conditions; ability to compete for qualified personnel in various technical positions; the Company's ability to withstand competition particularly from several companies that are much larger in size than the Company; natural disasters, particularly earthquakes which may strike the California area where the Company's headquarters and manufacturing facility are located; and availability and cost of components for its products. Management expanded the services side of the Company's transportation market business. These services include systems integration, project management, commissioning and installation. These services are usually coupled with the sale of our RedLine products and has allowed us to pursue further growth in the transportation market by providing "one-stop" shopping to our customers. This services business raises several risk factors. Specifically, the success depends on the time it takes for services personnel and future staff to come up to speed on our products, customers and the services they will provide; market acceptance of the services; and the ability to manage customer projects profitably. Because of the foregoing factors, as well as other factors affecting the Company's operating results, past financial performance should not be considered to be a reliable indicator of future performance, and investors should not use historical trends to anticipate results or trends in future periods. Part II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ The Company's Annual Meeting of Shareholders was held on June 20, 1997. There were 2,180,962 shares outstanding on April 25, 1997, the date of record. There were 2,116,121 (approximately 97%) shares represented at the meeting in person or by proxy. 8 All four director candidates were elected with no director candidate receiving fewer than 1,981,000 votes. The proposal to increase the number of shares of the Company's Common Stock reserved for issuance under its 1991 Stock Option Plan by 100,000 from 918,327 to 1,018,327 was approved. Total votes counted were 2,093,442 shares with 1,555,923 shares or 74.3% of total votes for, 448,499 or 21.4% against and 89,020 or 4.3% abstaining. The proposal for the reincorporation of the Company in the State of Delaware and other related changes to the rights of shareholders was approved with 1,091,548 votes for, 435,634 against and 18,687 abstaining. The appointment of Grant Thornton as the independent accountants of the Company for the fiscal year ending January 31, 1998 was ratified with 1,924,000 votes for, 199,451 against, and 12,300 abstaining. The voting with respect to the proposals to approve Proposal Four which contain certain additional anti-takeover measures under the Company's Delaware Certificate of Incorporation and Delaware By-Laws was adjourned until July 21, 1997, because votes from a large portion of the outstanding shares had not yet been cast. The Annual Meeting was reconvened on July 21, 1997 to take up Proposal Four whose voting was adjourned at the June 20, 1997 meeting. There were 2,116,121 (approximately 97%) shares represented at the meeting in person or by proxy. It was announced that based upon shareholder voting by proxy, no portion of Proposal Four passed. None of the measures of Proposal Four received more than 842,000 votes for the measure. Item 6. Exhibits and Reports on Form 8-K - ----------------------------------------- A. Exhibits: Exhibit 27-Financial Data Schedule. B. Reports on Form 8-K: None. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DSP TECHNOLOGY INC. ----------------------- (Registrant) By: /s/ Jose M. Millares ----------------------------- Jose M. Millares Chief Financial Officer Date: September 11, 1997 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS JAN-31-1998 FEB-01-1997 JUL-01-1997 1,139 0 7,147 50 2,733 11,463 4,699 3,271 14,482 4,965 0 0 0 3,012 6,247 14,482 9,912 9,912 4,737 4,737 4,418 0 0 866 346 520 0 0 0 520 .23 .23
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