One customer accounted for 22.9% of net sales for the year ended January 31, 1998 and 22.7% of net sales for the year ended January 31, 1997.
The Company's research and development expenditures were $7.2 million and $6.1 million for the fiscal years ended January 31, 1998 and January 31, 1997, respectively.
The Company protects its properties through trademark protection whenever feasible and is currently threatening litigation against another company for such trademark infringement.
The Company's backlog on January 31, 1998 was approximately $22.3 million compared with an approximate backlog of $11.9 million at January 31, 1997.
The Company's backlog at the beginning of each quarter typically is not sufficient to achieve expected sales for the quarter. To achieve its sales objective the Company is dependent upon obtaining orders during each quarter for shipment that quarter.
In the internet access and LAN access equipment market, the Company competes primarily with Cisco, 3Com, Ascend Communications, Cabletron, Bay Networks, Lucent, Cienna, Northern Telecom, Pirelli, NEC, Allatel, Siemens, IBM, Motorola, Intel and several other companies.
While the Company has no current agreements or negotiations underway with respect to any new acquisitions, the Company may acquire additional businesses, products or technologies in the future.
Net sales increased to $119.0 million in fiscal 1998 from $115.9 million in fiscal 1997. The increase in net sales during the year was primarily the result of increasing unit sales of the Network Access family of products. Sales to international customers increased to 23.1% of net sales in fiscal 1998 from 18.9% for fiscal 1997.
Gross margins increased to 31.2% during fiscal 1998 from 28.6% in fiscal 1997. The increase is due to several factors, including the continued shift in revenue mix to the Company's higher-margin products offset by the fact that prices of component parts have fluctuated in the recent past, and the Company expects that this trend may continue. The Company's gross margins may continue to increase in the future as the revenue mix shifts to the Company's newly launched products which have a higher gross margin. However, an increase in the cost of components which the Company may not be able to pass through to its customers may have a material adverse impact on gross margins.
Included in fiscal 1998 expenses are approximately $3.0 million for
non-recurring charges including legal and other professional fees, litigation settlement costs, and relocation expenses for both personnel and assets.
The Company finances its operations and acquisitions from debt issuances, bank lines of credit and security placements.
The Company incurred a cash flow deficit of $2.4 million from operating activities during the year ended January 31, 1998, as compared to a $1.7 million deficit during the year ended January 31, 1997. The Company anticipates positive cash flows from its operating activities during its next fiscal year, however, there can be no assurance that positive cash flows from operations will be achieved. |
