Notes
To Consolidated Financial Statements
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited consolidated financial
statements for Hauppauge Digital Inc. and subsidiaries (collectively, the “Company”) included herein have been prepared
in accordance with generally accepted accounting principles for interim period reporting in conjunction with the instructions to
Form 10-Q. Accordingly, these statements do not include all of the information required by generally accepted accounting principles
for annual financial statements. In the opinion of management, all known adjustments (consisting of normal recurring accruals and
reserves) necessary to present fairly the Company’s consolidated financial position, results of operations and cash flows
as of and for the interim periods have been included. It is suggested that these interim statements be read in conjunction with
the financial statements and related notes included in the Company's September 30, 2012 Form 10-K.
The operating results for the three months
and six months ended March 31, 2013 are not necessarily indicative of the results to be expected for the fiscal year ending September
30, 2013.
Note 2. Trade Accounts and Other Non-Trade
Receivables
Trade receivables consist of:
|
·
|
Trade receivables from sales to customers
|
|
·
|
Allowances, consisting of sales and bad debt
|
Other non trade receivables
consist of:
|
·
|
Receivables pertaining to component parts purchased from the Company
at cost by the Company’s contract manufacturers which are excluded from sales
|
|
·
|
General services tax (GST) and value added tax (VAT) reclaimable on
goods purchased by the Company’s Asian and European locations
|
|
·
|
Other minor non-trade receivables
|
Trade receivables and other non-trade
receivables as of March 31, 2013 and September 30, 2012 consisted of:
|
|
March 31,
|
|
|
September 30,
|
|
|
|
2013
|
|
|
2012
|
|
Trade receivables
|
|
$
|
7,012,744
|
|
|
$
|
6,319,544
|
|
Allowance for doubtful accounts
|
|
|
(102,123
|
)
|
|
|
(352,123
|
)
|
Sales reserve
|
|
|
(2,785,634
|
)
|
|
|
(3,349,340
|
)
|
Net trade receivables
|
|
$
|
4,124,987
|
|
|
$
|
2,618,081
|
|
Receivable from contract manufacturers
|
|
$
|
2,523,912
|
|
|
$
|
1,649,444
|
|
GST and VAT tax receivables
|
|
|
369,385
|
|
|
|
287,446
|
|
Other
|
|
|
53,140
|
|
|
|
58,764
|
|
Total other non trade receivables
|
|
$
|
2,946,437
|
|
|
$
|
1,995,654
|
|
HAUPPAUGE
DIGITAL INC. AND SUBSIDIARIES
Notes
To Consolidated Financial Statements
(Unaudited
Note 3. Inventories
Inventories have been valued at the lower
of average cost or market on a first in first out basis. The components of inventory consist of:
|
|
March 31,
|
|
|
September 30,
|
|
|
|
2013
|
|
|
2012
|
|
Component parts
|
|
$
|
3,523,524
|
|
|
$
|
3,412,673
|
|
Finished goods
|
|
|
4,429,443
|
|
|
|
3,563,284
|
|
Subtotal
|
|
$
|
7,952,967
|
|
|
$
|
6,975,957
|
|
Reserve for anticipated sales returns at cost
|
|
|
2,132,941
|
|
|
|
2,521,899
|
|
Total
|
|
$
|
10,085,908
|
|
|
$
|
9,497,856
|
|
Note 4. Net Income (Loss) Per Share
Basic net income (loss) per share includes
no dilution and is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding
for the period. Diluted net income (loss) per share reflects, in the periods in which they have a dilutive effect, the dilution
which would occur upon the exercise of stock options. A reconciliation of the shares used in calculating basic and diluted net
income per share is as follows:
|
|
Three months ended
|
|
|
Six months ended
|
|
|
|
March 31
|
|
|
March 31
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Weighted average shares outstanding-basic
|
|
|
10,122,344
|
|
|
|
10,122,344
|
|
|
|
10,122,344
|
|
|
|
10,122,344
|
|
Number of shares issued on the assumed exercise of stock options
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Weighted average shares outstanding-diluted
|
|
|
10,122,344
|
|
|
|
10,122,344
|
|
|
|
10,122,344
|
|
|
|
10,122,344
|
|
Options to purchase 1,478,125 and 1,535,567
shares of common stock, at prices from $0.74 to $7.45 and from $0.77 to $7.45, were outstanding for the three months and six months
ended March 31, 2013 and 2012, respectively, but were not included in the computation of diluted earnings per share because they
were anti-dilutive.
Note 5. Product segment and geographic
information
The Company operates
primarily
in one business segment, which is the development, marketing and manufacturing of
analog and digital
TV receiver and
video
recorder products
for the personal computer and
Apple iPad
®
and iPhone
®
market.
Most of the Company’s
products are
similar in function and share commonality of component parts and manufacturing processes. The Company’s products are either
sold, or can be sold, by the same retailers and distributors in the Company’s marketing channel. The Company also sells
its
TV receiver products
directly to PC manufacturers.
The
Company evaluates its product lines under the functional categories of TV receiver products, video recorder products and other
non TV receiver products.
HAUPPAUGE
DIGITAL INC. AND SUBSIDIARIES
Notes
To Consolidated Financial Statements
(Unaudited)
The Company’s products fall under three product categories:
|
·
|
TV receivers, which include Digital TV receivers for PCs, analog TV receivers, our Broadway Internet streaming TV receiver
and hybrid analog and digital TV receiver products
|
|
·
|
Video recorder products, such as USB-Live2, HD PVR, HD PVR 2 and Colossus
|
|
·
|
Non-TV receiver products such as the ImpactVCB, MediaMVP-HD and our TV applications for the PC and the Apple iPad and iPhone
.
|
The Company’s TV receiver products enable, among other
things, a PC user to watch TV in a resizable window on a PC. The Company’s video recorder products allow consumers to record
high definition video from a cable TV or satellite set top box or a game console such as a Xbox 360 or Sony Playstation 3. The
Company’s other non TV receiver products enable, among other things, the ability to watch and listen to PC based videos,
music and pictures on a TV set through a home network.
Sales by functional category are as follows:
|
|
Three months ended March 31,
|
|
|
Six months ended March 31
|
|
Product line sales
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Video recorder products
|
|
$
|
5,617,210
|
|
|
$
|
6,337,583
|
|
|
$
|
12,177,361
|
|
|
$
|
14,663,921
|
|
TV receiver products
|
|
|
3,922,930
|
|
|
|
4,036,006
|
|
|
|
8,272,616
|
|
|
|
10,174,117
|
|
Non TV receiver products
|
|
|
895,795
|
|
|
|
947,399
|
|
|
|
1,916,336
|
|
|
|
1,910,177
|
|
Total sales
|
|
$
|
10,435,935
|
|
|
$
|
11,320,988
|
|
|
$
|
22,366,313
|
|
|
$
|
26,748,215
|
|
The Company sells its products through a North
American and international network of distributors and retailers. It maintains sales offices in the United Stated, Europe and Asia.
Sales percentages by geographic region are as follows:
|
|
Three months ended March 31,
|
|
|
Six months ended March 31
|
|
Geographic region
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
The Americas
|
|
|
67
|
%
|
|
|
54
|
%
|
|
|
64
|
%
|
|
|
57
|
%
|
Europe
|
|
|
28
|
%
|
|
|
41
|
%
|
|
|
32
|
%
|
|
|
39
|
%
|
Asia
|
|
|
5
|
%
|
|
|
5
|
%
|
|
|
4
|
%
|
|
|
4
|
%
|
Total
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
HAUPPAUGE
DIGITAL INC. AND SUBSIDIARIES
Notes
To Consolidated Financial Statements
(Unaudited)
Note 6. Tax provision
The Company’s tax provision for the
three and six months ended March 31, 2013 and 2012 is as
follows:
|
|
Three months ended March 31,
|
|
|
Six months ended March 31,
|
|
|
|
2013
|
|
|
2012
|
|
|
2013
|
|
|
2012
|
|
Current federal tax expense
|
|
$
|
28,850
|
|
|
$
|
-
|
|
|
$
|
28,850
|
|
|
$
|
-
|
|
Current state taxes
|
|
|
10,000
|
|
|
|
10,000
|
|
|
|
20,000
|
|
|
|
10,000
|
|
Current international tax expense
|
|
|
10,078
|
|
|
|
26,047
|
|
|
|
52,583
|
|
|
|
62,395
|
|
Deferred tax expense
|
|
|
211,517
|
|
|
|
113,907
|
|
|
|
683,316
|
|
|
|
550,838
|
|
Tax provision
|
|
$
|
260,445
|
|
|
$
|
149,954
|
|
|
$
|
784,749
|
|
|
$
|
623,233
|
|
The deferred tax expense was primarily
due to the utilization of net operating losses and the utilization of deferred timing differences related to our United States
subsidiary.
Note 7. Accrued expense-fees
The Company uses various software
and technologies in certain of its products. In certain cases, the Company purchases or licenses these software and
technologies from third parties. The related purchase or license agreements provide for payment of royalty and other fees
associated with the Company's sale of the related products. Such fees are estimated and get accrued and reflected as
a component of cost of sales when those sales occur. In certain circumstances, such fees are not specifically covered
by contractual arrangements but are nonetheless potentially due to the third party sellers or owners of the software
and technologies. The Company uses all available applicable information in determining these estimates and thus the accrued
amounts are subject to change as new information is made available to the Company. Occasionally, third parties audit the Company's historical
determination of fees and adjustments are made. Accrued fees are subject to elimination after three to seven years if
not billed by or requested from the third parties.
Based on new information obtained during
fiscal 2013, including the completion of a significant third party audit, the Company reduced its September 30, 2012 accrued expenses
- fees balance by $2,108,030. This estimate change resulted in an improved gross margin during fiscal 2013.
As of March 31, 2013 and September 30, 2012, the amount of accrued expense-fees amounted to $12,405,608 and $12,943,022, respectively.
Note 8. Accrued Expenses
Accrued expenses are for costs incurred for
goods and services which are based on estimates, charged as incurred to operations as period costs and for which no invoice has
been rendered. Accrued expenses as of March 31, 2013 and September 30, 2012 were $3,175,581 and $3,668,491, respectively. Included
in accrued expenses are accruals for product costs, accruals for sales costs relating to sales rebate programs, accruals for freight
and duty expenses, accruals for compensation, accruals for warranty repair costs and accruals for advertising and marketing costs.
For the six months ended March 31, 2013, the Company, using the most recent information available, reviewed its estimates for accruals
for which no invoice has been rendered. As a result of this review, the Company recorded a change in estimate of $400,697 as a
reduction in operating expenses related to unused severance accruals.
HAUPPAUGE
DIGITAL INC. AND SUBSIDIARIES
Notes
To Consolidated Financial Statements
(UnAUDITED)
Note 9. Fair Value Measurements
ASC Topic 820, “Fair Value Measurements
and Disclosures”, establishes a framework for measuring fair value, and expands the related disclosure requirements. The
ASC indicates, among other things, that a fair value measurement assumes a transaction to sell an asset or transfer a liability
occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market
for the asset or liability. The Company also adopted the provisions of ASC 820-10 with respect to its non-financial assets and
liabilities during the first quarter of fiscal 2010. In order to increase consistency and comparability in fair value measurements,
ASC 820-10 establishes a hierarchy for observable and unobservable inputs used to measure fair value into three broad Levels, which
are described below:
• Level
1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities
. The
fair value hierarchy gives the highest priority to Level 1 inputs.
• Level 2: Observable prices that
are based on inputs not quoted on active markets, but corroborated by market data.
• Level 3: Unobservable inputs are
used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.
In determining fair value, the Company
utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent
possible as well as considers counterparty credit risk in its assessment of fair value.
Additionally, on a nonrecurring basis,
the Company uses fair value measures when analyzing asset impairment. Long-lived assets and certain identifiable intangible assets
are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. If it is determined such indicators are present and the review indicates that the assets will not be fully recoverable,
based on undiscounted estimated cash flows over the remaining amortization periods, their carrying values are reduced to estimated
fair value. Measurements based on undiscounted cash flows are considered to be Level 3 inputs.
The carrying amount of cash, accounts
receivables and accounts payables and other short-term financial instruments approximate their fair value due to their
short-term nature.
Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations
Three Month
Period ENDED MARCH 31, 2013 Compared to THE THREE MONTH PERIOD ENDED MARCH 31, 2012
Results of operations for the three months
ended March 31, 2013 compared to the three months ended March 31, 2012 is as follows:
|
|
Three
|
|
|
Three
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Months
|
|
|
Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Variance
|
|
|
Percentage of sales
|
|
|
|
03/31/13
|
|
|
03/31/12
|
|
|
$
|
|
|
2013
|
|
|
2012
|
|
|
Variance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Sales
|
|
$
|
10,435,935
|
|
|
$
|
11,320,988
|
|
|
$
|
(885,053
|
)
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
|
|
-
|
|
Cost of sales
|
|
|
6,891,508
|
|
|
|
7,721,672
|
|
|
|
(830,164
|
)
|
|
|
66.04
|
%
|
|
|
68.21
|
%
|
|
|
-2.17
|
%
|
Gross Profit
|
|
|
3,544,427
|
|
|
|
3,599,316
|
|
|
|
(54,889
|
)
|
|
|
33.96
|
%
|
|
|
31.79
|
%
|
|
|
2.17
|
%
|
Gross Profit %
|
|
|
33.96
|
%
|
|
|
31.79
|
%
|
|
|
2.17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales & marketing
|
|
|
1,849,435
|
|
|
|
1,833,970
|
|
|
|
15,465
|
|
|
|
17.72
|
%
|
|
|
16.20
|
%
|
|
|
1.52
|
%
|
Sales & marketing-PCTV
|
|
|
47,278
|
|
|
|
61,081
|
|
|
|
(13,803
|
)
|
|
|
0.45
|
%
|
|
|
0.54
|
%
|
|
|
-0.09
|
%
|
Technical support
|
|
|
84,118
|
|
|
|
95,931
|
|
|
|
(11,813
|
)
|
|
|
0.81
|
%
|
|
|
0.85
|
%
|
|
|
-0.04
|
%
|
General & administrative
|
|
|
751,838
|
|
|
|
723,343
|
|
|
|
28,495
|
|
|
|
7.20
|
%
|
|
|
6.39
|
%
|
|
|
0.81
|
%
|
General & administrative-PCTV
|
|
|
80,019
|
|
|
|
66,205
|
|
|
|
13,814
|
|
|
|
0.77
|
%
|
|
|
0.58
|
%
|
|
|
0.19
|
%
|
Amortization of intangible assets
|
|
|
188,709
|
|
|
|
188,709
|
|
|
|
0
|
|
|
|
1.81
|
%
|
|
|
1.67
|
%
|
|
|
0.14
|
%
|
Selling, general and administrative stock compensation expense
|
|
|
18,296
|
|
|
|
21,931
|
|
|
|
(3,635
|
)
|
|
|
0.18
|
%
|
|
|
0.19
|
%
|
|
|
-0.01
|
%
|
Total selling, general and administrative expense
|
|
|
3,019,693
|
|
|
|
2,991,170
|
|
|
|
28,523
|
|
|
|
28.94
|
%
|
|
|
26.42
|
%
|
|
|
2.52
|
%
|
Research and development
|
|
|
499,220
|
|
|
|
517,193
|
|
|
|
(17,973
|
)
|
|
|
4.78
|
%
|
|
|
4.57
|
%
|
|
|
0.21
|
%
|
Research and development-PCTV
|
|
|
280,240
|
|
|
|
276,489
|
|
|
|
3,751
|
|
|
|
2.69
|
%
|
|
|
2.44
|
%
|
|
|
0.25
|
%
|
Research and development stock compensation expense
|
|
|
10,451
|
|
|
|
12,529
|
|
|
|
(2,078
|
)
|
|
|
0.10
|
%
|
|
|
0.11
|
%
|
|
|
-0.01
|
%
|
Total expenses
|
|
|
3,809,604
|
|
|
|
3,797,381
|
|
|
|
12,223
|
|
|
|
36.51
|
%
|
|
|
33.54
|
%
|
|
|
2.97
|
%
|
Loss from operations
|
|
|
(265,177
|
)
|
|
|
(198,065
|
)
|
|
|
(67,112
|
)
|
|
|
-2.55
|
%
|
|
|
-1.75
|
%
|
|
|
-0.80
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
888
|
|
|
|
1,147
|
|
|
|
(259
|
)
|
|
|
0.01
|
%
|
|
|
0.01
|
%
|
|
|
0.00
|
%
|
Foreign currency
|
|
|
(8,658
|
)
|
|
|
(309
|
)
|
|
|
(8,349
|
)
|
|
|
-0.08
|
%
|
|
|
0.00
|
%
|
|
|
-0.08
|
%
|
Total other income (expense)
|
|
|
(7,770
|
)
|
|
|
838
|
|
|
|
(8,608
|
)
|
|
|
-0.07
|
%
|
|
|
0.01
|
%
|
|
|
-0.08
|
%
|
Loss before tax provision
|
|
|
(272,947
|
)
|
|
|
(197,227
|
)
|
|
|
(75,720
|
)
|
|
|
-2.62
|
%
|
|
|
-1.74
|
%
|
|
|
-0.88
|
%
|
Current tax expense
|
|
|
48,928
|
|
|
|
36,047
|
|
|
|
12,881
|
|
|
|
0.46
|
%
|
|
|
0.32
|
%
|
|
|
0.14
|
%
|
Deferred tax expense
|
|
|
211,517
|
|
|
|
113,907
|
|
|
|
97,610
|
|
|
|
2.03
|
%
|
|
|
1.01
|
%
|
|
|
1.02
|
%
|
Net loss
|
|
$
|
(533,392
|
)
|
|
$
|
(347,181
|
)
|
|
$
|
(186,211
|
)
|
|
|
-5.11
|
%
|
|
|
-3.07
|
%
|
|
|
-2.04
|
%
|
Net sales for the three months ended March
31, 2013 decreased $885,053 compared to the three months ended March 31, 2012 as shown in the table below.
|
|
|
|
|
|
|
|
Increase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(decrease)
|
|
|
Increase
|
|
|
Percentage of sales by
|
|
|
|
Three Months
|
|
|
Three Months
|
|
|
Dollar
|
|
|
(decrease)
|
|
|
geographic region
|
|
|
|
ended 03/31/13
|
|
|
ended 03/31/12
|
|
|
Variance
|
|
|
variance %
|
|
|
2013
|
|
|
2012
|
|
The Americas
|
|
$
|
7,001,911
|
|
|
$
|
6,092,069
|
|
|
$
|
909,842
|
|
|
|
15
|
%
|
|
|
67
|
%
|
|
|
54
|
%
|
Europe
|
|
|
2,911,414
|
|
|
|
4,703,289
|
|
|
|
(1,791,875
|
)
|
|
|
-38
|
%
|
|
|
28
|
%
|
|
|
41
|
%
|
Asia
|
|
|
522,610
|
|
|
|
525,630
|
|
|
|
(3,020
|
)
|
|
|
-1
|
%
|
|
|
5
|
%
|
|
|
5
|
%
|
Total
|
|
$
|
10,435,935
|
|
|
$
|
11,320,988
|
|
|
$
|
(885,053
|
)
|
|
|
-8
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
Increased competition and tepid economic
conditions in Europe had a negative impact on sales for the second fiscal quarter. In addition, sales for the second quarter of
fiscal 2012 included the product rollout of the MY TV 2 Go
TV application for the PC, Apple iPad and iPhone product.
The
rollout of this product resulted in a concentration of sales in the second quarter of fiscal 2012.
Gross profit
Gross profit decreased $54,889 for the three months ended March
31, 2013 compared to the same quarter in the prior fiscal year. The decrease in gross profit was due to:
|
|
Three Months
|
|
|
|
ended
|
|
|
|
03/31/13
|
|
Gross profit in dollars-increase (decrease)
|
|
|
|
Lower sales
|
|
$
|
(379,735
|
)
|
Stronger Euro
|
|
|
16,069
|
|
Labor related and other costs
|
|
|
203,855
|
|
Mix of higher gross profit sales
|
|
|
(46,285
|
)
|
License fee adjustment
|
|
|
151,207
|
|
Total decrease in gross profit
|
|
$
|
(54,889
|
)
|
The increase in the gross profit percentage
was due to:
|
|
Three Months
|
|
|
|
ended
|
|
|
|
03/31/13
|
|
Gross profit percentage-increase (decrease)
|
|
|
|
Mix of lower gross profit retail sales
|
|
|
(0.64
|
)%
|
Stronger Euro
|
|
|
0.19
|
%
|
Labor related and other costs
|
|
|
1.01
|
%
|
License fee adjustment
|
|
|
1.61
|
%
|
Total gross profit percentage increase
|
|
|
2.17
|
%
|
The factors contributing to the gross profit
percentage increase of 2.17% for the three months ended March 31, 2013 were primarily:
|
·
|
Higher mix of lower gross profit product resulted in a decrease of 0.64%.
|
|
·
|
An increase in the Euro to USD exchange rate from $1.311 for the three months ended March 31, 2012
to $1.320 for the three months ended March 31, 2013 resulted in a gross profit increase of 0.19%.
|
|
·
|
Labor related and other costs resulted in a gross profit increase of 1.01%
|
|
·
|
Higher license fee adjustments resulted in a gross profit increase of 1.61%
|
Selling, general and administrative
expenses
The chart below illustrates the components
of selling, general and administrative expense.
|
|
Three months ended March 31,
|
|
|
|
Dollar Costs
|
|
|
|
|
|
Percentage of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2013
|
|
|
2012
|
|
|
(Decrease)
|
|
|
2013
|
|
|
2012
|
|
|
(Decrease)
|
|
Sales and marketing-HCW
|
|
$
|
1,849,435
|
|
|
$
|
1,833,970
|
|
|
$
|
15,465
|
|
|
|
17.72
|
%
|
|
|
16.20
|
%
|
|
|
1.52
|
%
|
Sales and marketing-PCTV
|
|
|
47,278
|
|
|
|
61,081
|
|
|
|
(13,803
|
)
|
|
|
0.45
|
%
|
|
|
0.54
|
%
|
|
|
-0.09
|
%
|
Technical support
|
|
|
84,118
|
|
|
|
95,931
|
|
|
|
(11,813
|
)
|
|
|
0.81
|
%
|
|
|
0.85
|
%
|
|
|
-0.04
|
%
|
General and administrative-HCW
|
|
|
751,838
|
|
|
|
723,343
|
|
|
|
28,495
|
|
|
|
7.20
|
%
|
|
|
6.39
|
%
|
|
|
0.81
|
%
|
General and administrative-PCTV
|
|
|
80,019
|
|
|
|
66,205
|
|
|
|
13,814
|
|
|
|
0.77
|
%
|
|
|
0.58
|
%
|
|
|
0.19
|
%
|
Amortization of intangible assets
|
|
|
188,709
|
|
|
|
188,709
|
|
|
|
0
|
|
|
|
1.81
|
%
|
|
|
1.67
|
%
|
|
|
0.14
|
%
|
Stock compensation
|
|
|
18,296
|
|
|
|
21,931
|
|
|
|
(3,635
|
)
|
|
|
0.18
|
%
|
|
|
0.19
|
%
|
|
|
-0.01
|
%
|
Total
|
|
$
|
3,019,693
|
|
|
$
|
2,991,170
|
|
|
$
|
28,523
|
|
|
|
28.94
|
%
|
|
|
26.42
|
%
|
|
|
2.52
|
%
|
Selling, general and administrative expense
for the second quarter of fiscal 2013 increased $28,523 from the prior year’s second fiscal quarter as follows:
Sales and marketing expenses increased $1,662,
driven primarily by $22,846 in higher compensation expenses related to addition of personnel resources and $25,575 in higher sales
office expense. The increase was offset by $48,759 in lower commission and co-operative advertising expense, which declined due
to lower sales.
The decrease in technical support of $11,813
was primarily due to lower personnel expenses. The increase in general and administrative expenses of $42,309 was due primarily
to higher legal fees for legal consultation required during the second quarter of fiscal 2013. The decrease in stock compensation
expense was due to fewer non vested options outstanding issued at a lower fair value price.
Research and development expenses
Research and development expenses for the
three months ended March 31, 2013 decreased $16,300 from the same quarter in the prior fiscal year. The decrease was mainly due
to lower material consumed during the product development cycle in the second quarter of fiscal 2013. The decrease in stock compensation
expense was due to lower option grants issued at a lower fair value.
Tax provision
Our tax provision for the three months
ended March 31, 2013 and 2012 is as follows:
|
|
Three months ended March 31,
|
|
|
|
2013
|
|
|
2012
|
|
Current federal tax expense
|
|
$
|
28,850
|
|
|
$
|
-
|
|
Current state taxes
|
|
|
10,000
|
|
|
|
10,000
|
|
Current international tax expense
|
|
|
10,078
|
|
|
|
26,047
|
|
Deferred tax expense
|
|
|
211,517
|
|
|
|
113,907
|
|
Tax provision
|
|
$
|
260,445
|
|
|
$
|
149,954
|
|
The deferred tax expense was primarily
due to the utilization of net operating losses and the utilization of deferred timing differences related to our United States
subsidiary.
Summary of operations
We recorded a net loss of $533,392 for the
three months ended March 31, 2013, which resulted in basic and diluted net loss per share of $0.05 on weighted average basic and
diluted shares of 10,122,344, compared to a net loss of $347,181 for the three months ended March 31, 2012, which resulted in basic
and diluted net loss per share of $0.03 on weighted average basic and diluted shares of 10,122,344.
Options to purchase 1,478,125 and 1,535,567
shares of common stock, at prices from $0.74 to $7.45 and from $0.77 to $7.45, were outstanding for the three months ended March
31, 2013 and 2012, respectively, but were not included in the computation of diluted earnings (loss) per share because they were
anti-dilutive.
SIX Month
Period ENDED MARCH 31, 2013 Compared to THE SIX MONTH PERIOD ENDED MARCH 31, 2012
Results of operations for the six months ended
March 31, 2013 compared to the six months ended March 31, 2012 is as follows:
|
|
Six
|
|
|
Six
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Months
|
|
|
Months
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
Variance
|
|
|
Percentage of sales
|
|
|
|
03/31/13
|
|
|
03/31/12
|
|
|
$
|
|
|
2013
|
|
|
2012
|
|
|
Variance
|
|
Net Sales
|
|
$
|
22,366,313
|
|
|
$
|
26,748,215
|
|
|
$
|
(4,381,902
|
)
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
|
|
0.00
|
%
|
Cost of sales
|
|
|
13,429,945
|
|
|
|
18,139,136
|
|
|
|
(4,709,191
|
)
|
|
|
60.05
|
%
|
|
|
67.81
|
%
|
|
|
-7.76
|
%
|
Gross Profit
|
|
|
8,936,368
|
|
|
|
8,609,079
|
|
|
|
327,289
|
|
|
|
39.95
|
%
|
|
|
32.19
|
%
|
|
|
7.76
|
%
|
Gross Profit %
|
|
|
39.95
|
%
|
|
|
32.19
|
%
|
|
|
7.76
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales & marketing
|
|
|
3,628,440
|
|
|
|
3,926,587
|
|
|
|
(298,147
|
)
|
|
|
16.22
|
%
|
|
|
14.68
|
%
|
|
|
1.54
|
%
|
Sales & marketing-PCTV
|
|
|
116,586
|
|
|
|
129,621
|
|
|
|
(13,035
|
)
|
|
|
0.52
|
%
|
|
|
0.48
|
%
|
|
|
0.04
|
%
|
Technical support
|
|
|
164,698
|
|
|
|
186,718
|
|
|
|
(22,020
|
)
|
|
|
0.74
|
%
|
|
|
0.70
|
%
|
|
|
0.04
|
%
|
General & administrative
|
|
|
1,427,615
|
|
|
|
1,494,351
|
|
|
|
(66,736
|
)
|
|
|
6.38
|
%
|
|
|
5.59
|
%
|
|
|
0.79
|
%
|
General & administrative-PCTV
|
|
|
143,750
|
|
|
|
134,935
|
|
|
|
8,815
|
|
|
|
0.64
|
%
|
|
|
0.50
|
%
|
|
|
0.14
|
%
|
Amortization of intangible assets
|
|
|
377,418
|
|
|
|
377,418
|
|
|
|
0
|
|
|
|
1.69
|
%
|
|
|
1.41
|
%
|
|
|
0.28
|
%
|
Selling, general and administrative stock compensation expense
|
|
|
34,960
|
|
|
|
40,277
|
|
|
|
(5,317
|
)
|
|
|
0.16
|
%
|
|
|
0.15
|
%
|
|
|
0.01
|
%
|
Total selling, general and administrative expense
|
|
|
5,893,467
|
|
|
|
6,289,907
|
|
|
|
(396,440
|
)
|
|
|
26.35
|
%
|
|
|
23.51
|
%
|
|
|
2.84
|
%
|
Research and development
|
|
|
1,076,624
|
|
|
|
1,036,978
|
|
|
|
39,646
|
|
|
|
4.81
|
%
|
|
|
3.88
|
%
|
|
|
0.93
|
%
|
Research and development-PCTV
|
|
|
400,243
|
|
|
|
558,605
|
|
|
|
(158,362
|
)
|
|
|
1.79
|
%
|
|
|
2.09
|
%
|
|
|
-0.30
|
%
|
Research and development stock compensation expense
|
|
|
19,971
|
|
|
|
23,010
|
|
|
|
(3,039
|
)
|
|
|
0.09
|
%
|
|
|
0.09
|
%
|
|
|
0.00
|
%
|
Total expenses
|
|
|
7,390,305
|
|
|
|
7,908,500
|
|
|
|
(518,195
|
)
|
|
|
33.04
|
%
|
|
|
29.57
|
%
|
|
|
3.47
|
%
|
Income from operations
|
|
|
1,546,063
|
|
|
|
700,579
|
|
|
|
845,484
|
|
|
|
6.91
|
%
|
|
|
2.62
|
%
|
|
|
4.29
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
1,968
|
|
|
|
2,835
|
|
|
|
(867
|
)
|
|
|
0.01
|
%
|
|
|
0.01
|
%
|
|
|
0.00
|
%
|
Foreign currency
|
|
|
(6,588
|
)
|
|
|
16,570
|
|
|
|
(23,158
|
)
|
|
|
-0.03
|
%
|
|
|
0.06
|
%
|
|
|
-0.09
|
%
|
Total other income (expense)
|
|
|
(4,620
|
)
|
|
|
19,405
|
|
|
|
(24,025
|
)
|
|
|
-0.02
|
%
|
|
|
0.07
|
%
|
|
|
-0.09
|
%
|
Income (loss) before tax provision
|
|
|
1,541,443
|
|
|
|
719,984
|
|
|
|
821,459
|
|
|
|
6.89
|
%
|
|
|
2.69
|
%
|
|
|
4.20
|
%
|
Current tax expense
|
|
|
101,433
|
|
|
|
72,395
|
|
|
|
29,038
|
|
|
|
0.45
|
%
|
|
|
0.27
|
%
|
|
|
0.18
|
%
|
Deferred tax expense
|
|
|
683,316
|
|
|
|
550,838
|
|
|
|
132,478
|
|
|
|
3.06
|
%
|
|
|
2.06
|
%
|
|
|
1.00
|
%
|
Net income
|
|
$
|
756,694
|
|
|
$
|
96,751
|
|
|
$
|
659,943
|
|
|
|
3.38
|
%
|
|
|
0.36
|
%
|
|
|
3.02
|
%
|
Net sales for the six months ended March
31, 2013 increased $4,381,902 compared to the six months ended March 31, 2012 as shown in the table below.
|
|
|
|
|
|
|
|
Increase
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(decrease)
|
|
|
Increase
|
|
|
Percentage of sales by
|
|
|
|
Six Months
|
|
|
Six Months
|
|
|
Dollar
|
|
|
(decrease)
|
|
|
geographic region
|
|
|
|
ended 03/31/13
|
|
|
ended 03/31/12
|
|
|
Variance
|
|
|
variance %
|
|
|
2013
|
|
|
2012
|
|
The Americas
|
|
$
|
14,113,494
|
|
|
$
|
15,072,925
|
|
|
$
|
(959,431
|
)
|
|
|
-6
|
%
|
|
|
64
|
%
|
|
|
57
|
%
|
Europe
|
|
|
7,276,704
|
|
|
|
10,551,779
|
|
|
|
(3,275,075
|
)
|
|
|
-31
|
%
|
|
|
32
|
%
|
|
|
39
|
%
|
Asia
|
|
|
976,115
|
|
|
|
1,123,511
|
|
|
|
(147,396
|
)
|
|
|
-13
|
%
|
|
|
4
|
%
|
|
|
4
|
%
|
Total
|
|
$
|
22,366,313
|
|
|
$
|
26,748,215
|
|
|
$
|
(4,381,902
|
)
|
|
|
-16
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
Increased competition and tepid economic
conditions in Europe had a negative impact on sales for the first six months of fiscal 2013. In addition, sales for the first six
months of fiscal 2012 included the product rollouts of the DCR-2650 cable card, the Broadway, the HD-PVR gaming unit and the MY
TV 2 Go
TV application for the PC, Apple iPad and iPhone product.
The rollout of these products
resulted in a concentration of sales for the first six months of fiscal 2012.
Gross profit
Gross profit increased $327,289 for the six months ended March
31, 2013 compared to the same period in the prior fiscal year. The increase in gross profit was due to:
|
|
Six Months
|
|
|
|
ended
|
|
|
|
03/31/13
|
|
Gross profit in dollars-increase (decrease)
|
|
|
|
Higher sales
|
|
$
|
(1,848,877
|
)
|
Weaker Euro
|
|
|
(150,074
|
)
|
Labor related and other costs
|
|
|
376,762
|
|
Mix of higher gross profit sales
|
|
|
182,683
|
|
License fee adjustment
|
|
|
1,766,795
|
|
Total increase in gross profit
|
|
$
|
327,289
|
|
The increase in the gross profit percentage
was due to:
|
|
Six Months
|
|
|
|
ended
|
|
|
|
03/31/13
|
|
Gross profit percentage-increase (decrease)
|
|
|
|
Mix of higher gross profit sales
|
|
|
0.17
|
%
|
Weaker Euro
|
|
|
(0.28
|
)%
|
Labor related and other costs
|
|
|
(0.28
|
)%
|
License fee adjustment
|
|
|
8.15
|
%
|
Total gross profit percentage increase
|
|
|
7.76
|
%
|
The factors contributing to the gross profit
percentage increase of 7.76% for the six months ended March 31, 2013 were primarily:
|
·
|
Larger mix of higher gross profit product resulted in an increase of 0.17%.
|
|
·
|
A decrease in the Euro to USD exchange rate from $1.3297 for the six months ended March 31, 2012
to $1.1.3089 for the six months ended March 31, 2013 resulted in a gross profit decrease of 0.28%.
|
|
·
|
Labor related and other costs resulted in a gross profit decrease of 0.28%
|
|
·
|
Higher license fee adjustments resulted in a gross profit increase of 8.15%
|
Selling, general and administrative
expenses
The chart below illustrates the components
of selling, general and administrative expense.
|
|
Six months ended March 31,
|
|
|
|
Dollar Costs
|
|
|
|
|
|
Percentage of Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
2013
|
|
|
2012
|
|
|
(Decrease)
|
|
|
2013
|
|
|
2012
|
|
|
(Decrease)
|
|
Sales and marketing-HCW
|
|
$
|
3,628,440
|
|
|
$
|
3,926,587
|
|
|
$
|
(298,147
|
)
|
|
|
16.22
|
%
|
|
|
14.68
|
%
|
|
|
1.54
|
%
|
Sales and marketing-PCTV
|
|
|
116,586
|
|
|
|
129,621
|
|
|
|
(13,035
|
)
|
|
|
0.52
|
%
|
|
|
0.48
|
%
|
|
|
0.04
|
%
|
Technical support
|
|
|
164,698
|
|
|
|
186,718
|
|
|
|
(22,020
|
)
|
|
|
0.74
|
%
|
|
|
0.70
|
%
|
|
|
0.04
|
%
|
General and administrative-HCW
|
|
|
1,427,615
|
|
|
|
1,494,351
|
|
|
|
(66,736
|
)
|
|
|
6.38
|
%
|
|
|
5.59
|
%
|
|
|
0.79
|
%
|
General and administrative-PCTV
|
|
|
143,750
|
|
|
|
134,935
|
|
|
|
8,815
|
|
|
|
0.64
|
%
|
|
|
0.50
|
%
|
|
|
0.14
|
%
|
Amortization of intangible assets
|
|
|
377,418
|
|
|
|
377,418
|
|
|
|
0
|
|
|
|
1.69
|
%
|
|
|
1.41
|
%
|
|
|
0.28
|
%
|
Stock compensation
|
|
|
34,960
|
|
|
|
40,277
|
|
|
|
(5,317
|
)
|
|
|
0.16
|
%
|
|
|
0.15
|
%
|
|
|
0.01
|
%
|
Total
|
|
$
|
5,893,467
|
|
|
$
|
6,289,907
|
|
|
$
|
(396,440
|
)
|
|
|
26.35
|
%
|
|
|
23.51
|
%
|
|
|
2.84
|
%
|
Selling, general and administrative expense
for the six months ended March 31, 2013 decreased $396,440 from same period in the prior fiscal year as follows:
Sales and marketing expenses decreased $311,182,
driven primarily by $202,490 in lower commission and co-operative advertising expense, which declined due to lower sales and a
reduction in expenses of $213,783 for a change in estimate for unused severance liabilities. The decrease in expenses was offset
somewhat by $84,438 in higher compensation expenses related to addition of sales resources.
The decrease in technical support of $22,020
was primarily due to lower personnel expenses. The decrease in general and administrative expenses of $57,921 was due primarily
to decreases in rent and utilities due to the relocation of offices to smaller spaces, lower credit card processing fees due to
the issuing lines of credit to certain customers who previously purchased product with credit cards and lower bad debt expense.
This was offset by to higher legal fees for consultation required during fiscal 2013. The decrease in stock compensation expense
was due to fewer non vested options outstanding issued at a lower fair value price.
Research and development expenses
Research and development expenses for the
six months ended March 31, 2013 decreased $121,755 from the six months ended March 31, 2012. The decrease was mainly due to lower
compensation expenses of $173,575, primarily due to a change in estimate for unused severance liabilities offset by $54,809 in
higher product development related expenses. The decrease in stock compensation expense was due to fewer non vested options outstanding
issued at a lower fair value price.
Tax provision
Our tax provision for the six months ended
March 31, 2013 and 2012 is as follows:
|
|
Six months ended March 31,
|
|
|
|
2013
|
|
|
2012
|
|
Current federal tax expense
|
|
$
|
28,850
|
|
|
$
|
-
|
|
Current state taxes
|
|
|
20,000
|
|
|
|
10,000
|
|
Current international tax expense
|
|
|
52,583
|
|
|
|
62,395
|
|
Deferred tax expense
|
|
|
683,316
|
|
|
|
550,838
|
|
Tax provision
|
|
$
|
784,749
|
|
|
$
|
623,233
|
|
The deferred tax expense was primarily
due to the utilization of net operating losses and the utilization of deferred timing differences related to our United States
subsidiary.
Summary of operations
We recorded a net income of $756,694 for the
six months ended March 31, 2013, which resulted in basic and diluted net income per share of $0.07 on weighted average basic and
diluted shares of 10,122,344, compared to a net income of $96,751 for the six months ended March 31, 2012, which resulted in basic
and diluted net income per share of $0.01 on weighted average basic and diluted shares of 10,122,344.
Options to purchase 1,478,125 and 1,535,567
shares of common stock, at prices from $0.74 to $7.45 and from $0.77 to $7.45, were outstanding for the six months ended March
31, 2013 and 2012, respectively, but were not included in the computation of diluted earnings (loss) per share because they were
anti-dilutive.
Seasonality
As our sales are primarily to the consumer
market, we have experienced certain seasonal revenue trends. Historically, our peak sales quarter due to holiday season sales is
our first fiscal quarter (October to December), followed by our second fiscal quarter (January to March). In addition, our international
sales, mostly in the European market, were 44% of sales for fiscal year ended September 30, 2012 and 41% for the fiscal year ended
September 30, 2011. Part of our third and fourth quarters (April through June and July to September) can be potentially impacted
by the reduction of activity experienced in Europe during the summer holiday period.
We target a wide range of customer types to
attempt to moderate the seasonal nature of our retail sales.
Liquidity and capital resources
We had cash and cash equivalents as of
March 31, 2013 of $3,132,059, a decrease of $1,963,794 from September 30, 2012.
The decrease in cash was due to:
|
|
Operating
|
|
|
Investing
|
|
|
Financing
|
|
|
|
|
|
|
Activities
|
|
|
Activities
|
|
|
Activities
|
|
|
Total
|
|
Sources of cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income adjusted for non cash items
|
|
$
|
1,948,613
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
1,948,613
|
|
Total sources of cash
|
|
|
1,948,613
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,948,613
|
|
Less cash used for:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase in accounts receivable
|
|
|
(1,904,970
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(1,904,970
|
)
|
Increase in inventory
|
|
|
(1,177,010
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(1,177,010
|
)
|
Decrease in accounts payable and accrued expenses
|
|
|
(751,007
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(751,007
|
)
|
Increase in prepaid expenses and other current assets
|
|
|
(62,303
|
)
|
|
|
0
|
|
|
|
0
|
|
|
|
(62,303
|
)
|
Capital equipment purchases
|
|
|
0
|
|
|
|
(29,383
|
)
|
|
|
0
|
|
|
|
(29,383
|
)
|
Total cash usage
|
|
|
(3,895,290
|
)
|
|
|
(29,383
|
)
|
|
|
0
|
|
|
|
(3,924,673
|
)
|
Effect of exchange rates on cash
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
12,266
|
|
Net cash decrease
|
|
($
|
1,946,677
|
)
|
|
($
|
29,383
|
)
|
|
$
|
0
|
|
|
($
|
1,963,794
|
)
|
Cash used in operating
activities of $1,946,677 was due to an increase in accounts receivable of $1,904,970, an increase in inventory of $1,177,010, a
decrease in accounts payable and accrued expenses of $751,007 and an increase in prepaid expenses and other current assets of $62,303.
The increase in accounts receivable was due to an increase in sales of approximately 20.28% between the second quarter of fiscal
2013 and the fourth quarter of fiscal 2012. The increase in inventory was due to a change in the delivery method of product from
air shipments to boat shipments. We believe we will save on freight costs but need to invest more in inventory in recognition of
the anticipated four week travel time on the boat. The decrease in accounts payable and accrued expenses was due to the timing
of payment to suppliers. Sources of cash came from net income adjusted for non cash items of $1,948,613. Cash of $29,383 was used
to purchase capital equipment. We had working capital of $19,169 as of March 31, 2013 compared to a working capital deficit of
$1,433,704 as of September 30, 2012.
Our cash requirements for the next twelve
months will include, among other things, the cash needed to fund our operating and working capital needs. With the proper execution
of our business and operating plan, we believe that our cash and cash equivalents as of March 31, 2013 and our internally generated
cash will provide us with sufficient liquidity to meet our capital needs for the next twelve months. Failure to meet the business
and operating plan could require the need for additional sources of capital. In light of the current economic and credit conditions
there can be no assurances that we will be able to find external sources of financing to fund our additional capital needs. In
addition, if we are able to obtain financing, there can be no assurances that it will be on financially reasonable terms.
Future contractual obligations
The following table shows our contractual
obligations related to lease obligations as of March 31, 2013:
|
|
Payments due by period
|
|
|
|
Total
|
|
|
Less than 1 year
|
|
|
1-3 years
|
|
|
3 to 5 years
|
|
Operating lease obligations
|
|
$
|
1,594,141
|
|
|
$
|
601,667
|
|
|
$
|
992,474
|
|
|
$
|
0
|
|
Inflation
While inflation has not had a material effect
on our operations in the past, there can be no assurance that we will be able to continue to offset the effects of inflation on
the costs of our products or services through price increases to our customers without experiencing a reduction in the demand for
our products; or that inflation will not have an overall effect on the computer equipment market that would have a material effect
on us.
Recent Accounting Pronouncements
In October 2012, the FASB issued ASU 2012-04,
“Technical Corrections and Improvements.” ASU 2012-04 contains amendments to clarify the ASC, correct unintended application
of guidance, or make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice
or create a significant administrative cost to most entities. Additionally, the amendments are intended to make the ASC easier
to understand and the fair value measurement guidance easier to apply by eliminating inconsistencies and providing needed clarifications.
The amendments that do not have transition guidance were effective upon issuance. The amendments that are subject to the transition
guidance will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not anticipated
to have a material impact on our results of operations or our financial position.
In February 2013, the FASB issued ASU 2013-02,
“Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income.”
ASU 2013-02 requires an entity to report the effect of significant reclassifications out of accumulated other comprehensive income
on the respective line items in net income if the amount being reclassified is required to be reclassified in its entirety to net
income. For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period,
an entity is required to cross-reference other disclosures that provide additional detail about these amounts. The amendments do
not change the current requirements for reporting net income or other comprehensive income in financial statements. For public
entities, the amendments are effective prospectively for reporting periods beginning after December 15, 2012. Early adoption is
permitted.
Item 3. Quantitative and Qualitative
Disclosures About Market Risk
Item 305 of Regulation S-K “Quantitative
and Qualitative Disclosures About Market Risk” is not required for Smaller Reporting Companies.
Item 4. Controls and Procedures
Disclosure Controls
and Procedures
We maintain disclosure controls and procedures
(as defined in Exchange Act Rule 13a-15(e)) that are designed to
ensure
that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated
and communicated to management, including our principal executive officer and principal financial officer, as appropriate to allow
timely decisions regarding required
disclosure
.
As required by Exchange Act Rule 13a-15(b),
as of the end of the period covered by this Quarterly Report, with the participation of our principal executive officer and principal
financial officer, we evaluated the effectiveness of our disclosure controls and procedures. Based on this evaluation, our principal
executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March
31, 2013.
Changes in Internal Control Over Financial
Reporting
There was no change in our internal control
over financial reporting
, identified in connection with the evaluation
required by paragraph (d) of Rule 13a-15 of the Exchange Act, that occurred
during our most recently completed fiscal quarter
that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Special note regarding forward-looking
statements
This Quarterly Report on Form 10-Q
contains forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking
statements contained in this Quarterly Report on Form 10-Q may not occur. Generally these statements relate to business plans
or strategies, projected or anticipated benefits or other consequences of our plans or strategies, financing plans, projected
or anticipated benefits from acquisitions that we may make, or projections involving anticipated revenues, earnings or other aspects
of our operating results or financial position, and the outcome of any contingencies. Any statements contained herein that are
not historical facts are forward-looking statements. Any such forward-looking statements are based on current expectations, estimates
and projections of management. We intend for these forward-looking statements to be covered by the safe-harbor provisions for
forward-looking statements. Words such as “may,” “will,” “expect,” “believe,”
“anticipate,” “project,” “plan,” “intend,” “estimate,” and “continue,”
and their opposites and similar expressions are intended to identify forward-looking statements. We caution you that these statements
are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many
of which are beyond our control, that may influence the accuracy of the statements and the projections upon which the statements
are based. Factors that could cause actual results to differ materially from those set forth or implied by any forward-looking
statement include, but are not limited to, the mix of products sold and the profit margins thereon, order cancellation or a reduction
in orders from customers, competitive product offerings and pricing actions, the availability and pricing of key raw materials,
dependence on key members of management, successful integration of acquisitions, economic conditions in the United States and
abroad, fluctuation of the value of the Euro versus the U.S. dollar, continued operating losses, our ability to obtain financing,
our ability to make timely filings of the required periodic reports
and other reports with the Securities
and Exchange Commission,
issues relating to our ability to maintain effective internal control over financial reporting
and disclosure controls and procedures, our failure to maintain compliance
with Nasdaq’s continued
listing requirements or our
failure to maintain our Nasdaq listing, as well as other risks and uncertainties discussed
in our reports filed with the Securities and Exchange Commission, including, but not limited to, our Annual Report on Form 10-K
for the fiscal year ended September 30, 2012,
this
Quarterly Report on
Form
10-Q, the
Quarterly Report on
Form 10-Q for the three months ended December 31, 2012
,
and the risk of litigation or governmental investigations or proceedings relating to any of the foregoing
matters
.
Copies of these filings are available at
www.sec.gov
.
Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and
whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements
could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly
update or revise any forward-looking statements, whether from new information, future events or otherwise. All cautionary statements
made in
this
Quarterly Report on
Form 10-Q
should be read
as being applicable to all related forward-looking statements wherever they appear.
PART
II. OTHER INFORMATION
Item 6. Exhibits
3.1
|
Certificate of Incorporation (1)
|
|
|
3.1.1
|
Certificate of Amendment of the Certificate of Incorporation, dated July 14, 2000 (2)
|
|
|
3.2
|
By-laws, as amended to date (3)
|
|
|
4.1
|
Form of Common Stock Certificate (1)
|
|
|
31.1
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
31.2
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/Rule 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
|
32
|
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
|
|
|
101 INS
|
XBRL Instance Document **
|
101 SCH
|
SCH XBRL Taxonomy Extension Schema Document **
|
101 CAL
|
CAL XBRL Taxonomy Extension Calculation Linkbase Document **
|
101 LAB
|
LAB XBRL Taxonomy Extension Label Linkbase Document **
|
101 PRE
|
PRE XBRL Taxonomy Extension Presentation Linkbase Document**
|
101 DEF
|
DEF XBRL Taxonomy Extension Definition Linkbase Document**
|
|
|
|
** Users of this data are advised pursuant to Rule 406T of Regulation S-T that this interactive data file is deemed not filed or part of a registration statement or prospectus for the purposes of section 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections
.
|
|
|
|
(1)
|
Denotes document filed as an Exhibit to our Registration Statement on Form SB-2 (No. 33- 85426),
as amended, effective January 10, 1995 and incorporated herein by reference.
|
|
(2)
|
Denotes document filed as an Exhibit to our Form 10-K for the period ended September 30, 2006 (File
Number: 001-13550, Film Number: 061302843) and incorporated herein by reference.
|
|
(3)
|
Denotes document filed as an Exhibit to our Form 8-K (File Number: 001-13350, Film
Number:071326765) dated December 26, 2007 and incorporated herein by reference.
|
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.
|
|
|
HAUPPAUGE DIGITAL INC.
|
|
|
|
|
Date:
May 14, 2013
|
|
By:
|
/s/Kenneth Plotkin
|
|
|
|
KENNETH PLOTKIN
|
|
|
|
Chief Executive Officer, Chairman of the
|
|
|
|
Board, President (Principal Executive Officer)
|
Date:
May 14, 2013
|
|
By:
|
/s/Gerald Tucciarone
|
|
|
|
GERALD TUCCIARONE
|
|
|
|
Treasurer, Chief Financial Officer,
|
|
|
|
(Principal Financial Officer and Principal
|
|
|
|
Accounting Officer) and Secretary
|