U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
X SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended March 31, 2000
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
__ THE SECURITIES EXCHANGE ACT OF 1934 [No Fee
Required]
For the transition period from _________
_________________ to ___________________
Commission file number 1-6299
EMCEE BROADCAST PRODUCTS, INC.
(Name of small business issuer in its charter)
DELAWARE 13-1926296
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
SUSQUEHANNA STREET EXTENSION, PO BOX 68, WHITE HAVEN, PA 18661-0068
(Address of principal executive (Zip Code)
offices)
Issuer's telephone number: (570) 443-9575
////
Securities registered under Section 12(b) of the Exchange Act:
Title of each class: Name of each exchange on which
registered:
Common NASDAQ National Market
Securities registered under Section 12(g) of the Exchange Act:
None
(TITLE OF CLASS)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past twelve (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 ninety (90)
days.
Yes X No
<PAGE>
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is met contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. __
State issuer's revenues for its most recent fiscal year, $4,738,493.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant is $3,855,763 computed by reference to the closing bid price of the
stock at June 23, 2000. This computation is based on the number of issued and
outstanding shares held by persons other than directors and officers of the
Registrant.
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
CLASS OUTSTANDING AT JUNE 23, 2000
Common stock, par value $.01-2/3 4,041,709
per share
DOCUMENTS INCORPORATED BY REFERENCE
Items 9, 10, 11 and 12 in Part III of this report are incorporated by
reference from the Proxy Statement expected to be filed within one hundred
twenty (120) days of the close of the Registrant's fiscal year ended March 31,
2000.
Transitional Small Business Disclosure Format (Check One)
Yes ; No X .
EMCEE BROADCAST PRODUCTS, INC.
FORM 10-KSB
FISCAL YEAR ENDED MARCH 31, 2000
TABLE OF CONTENTS PAGE NUMBER
PART I.
ITEM 1. DESCRIPTION OF BUSINESS 1
ITEM 2. DESCRIPTION OF PROPERTY 5
ITEM 3. LEGAL PROCEEDINGS 6
ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS 6
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS 6
ITEM 6. MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS 7
ITEM 7. FINANCIAL STATEMENTS 14
ITEM 8. CHANGE IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURES 14
<PAGE>
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT 14
ITEM 10. EXECUTIVE COMPENSATION 14
ITEM 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT 14
ITEM 12. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS 15
ITEM 13. EXHIBITS AND REPORTS ON
FORM 8-K 15
SIGNATURES 17
PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Registrant (sometimes alternatively referred to in this report as the
"Company" or "EMCEE") is a corporation, organized and existing under the laws
of the State of Delaware. The Company was incorporated in 1960.
The Company is engaged principally in the manufacture and sale of Multichannel
Multipoint Distribution Service ("MMDS") microwave transmitters and related
equipment for the wireless cable industry. The Company also manufactures and
sells low power television ("LPTV") transmitters and related equipment for the
television broadcast industry.
In addition, the Company provides all services relative to the design,
procurement and installation of television broadcast stations, with the
exception of licensing submissions.
With the April, 2000, asset acquisition of Kentucky based Advanced Broadcast
Systems, Inc., the Company plans to compete in the business of manufacturing
and selling medium and high powered television transmitters, which includes
transmitters used for high definition television ("HDTV").
Through its subsidiary, R.F. Internet Systems, Inc., the Company is involved
in two joint ventures, the purpose of which is to sell wireless high speed
Internet access. Presently, only one of these businesses is operational with
42 subscribers. The Company believes that the success of these businesses
will, in large measure, be dependent on Federal Communication Commission
("FCC") approval of 2-way high speed service (the ability to send information
10 to 100 times faster than traditional telco Internet access). The Company's
operating joint venture currently works off of an FCC approved application for
"experimental" 2-way high speed service. Although the Company will continue to
manufacture and sell transmitters and related equipment to this industry, it
has no plans to participate as an operator beyond the two joint ventures in
which it is currently involved.
The Company's products are sold and distributed primarily through the
Company's sales staff and independent sales representatives. Most sales occur
in the commercial, educational and private television system markets.
For more than the past three years, most of the Company's sales volume has
come from the wireless cable industry. While the Company plans to continue to
market and sell products to the LPTV market and develop the medium and high
power television business, it anticipates that MMDS sales will continue to
dominate in both foreign and domestic markets, with foreign sales of all
products to dominate total sales into the foreseeable future.
At March 31, 2000, the Registrant employed 51 people on a full-time basis.
The Company has a variety of raw material sources available to conduct its
present business. However, substantial periods of lead time for delivery are
sometimes experienced by the Company, making it necessary to inventory varied
<PAGE>
quantities of materials. Beginning in the fourth quarter of fiscal year 2000,
the Company experienced unusual difficulty securing transistor
and other parts for its digital MMDS products due to product shortages of
certain vendors. The problem continues but should be resolved sometime in the
second quarter of fiscal year 2001, which is when the Company believes
production will catch up with demand and raw material shortages will end, and
when the Company anticipates completing the re-design of amplifiers that
utilize another vendor's transistors.
Significant portions of the Registrant's revenues come from contracts with
customers who generally do not place orders on a regular basis. In addition,
the timing of these contracts relate to economic and regulatory developments
over which the Registrant has little or no control.
In fiscal year 2000, purchases by one overseas customer constituted $1.1
million or 24% of the Company's net sales. Although these purchases were
significant in both amount and as a percentage of sales, the Company is not
dependent on this customer for future sales.
The Registrant's principal suppliers are Andrew Corporation, Fujitsu
Corporation and Microwave Filter Company, Inc.
Substantially all of the Registrant's domestic products must receive FCC
approval prior to being marketed and sold. As of the date of this report, all
of the Registrant's products requiring FCC approval have received it.
While FCC regulations can have an effect on the demand for the Registrant's
domestic products, the Registrant neither knows of nor anticipates any
government regulation which would have a material effect on its business.
The amount of money spent on the Registrant's research and development
activities in fiscal years 1999 and 2000 was, respectively,$422,426 and
$430,678. An additional $9,000 of research and development costs was funded by
customers in fiscal year 1999.
In the MMDS industry, the Registrant occupies a strong position among its
competitors. However, the Company continues to experience significant pricing
pressures in the MMDS industry, primarily as a result of a reduction in demand
for MMDS products, both domestically and internationally.
The primary methods of competition in the Registrant's industry are product
pricing, the ready availability of quality products to accommodate demand,
offering quality service of products after sale, and maintaining a reputation
for having a high degree of technical knowledge.
There has been no material effect on the Registrant as a result of compliance
with federal, state or local environmental laws.
The Registrant's principal corporate logos, "EMCEE" and "EMCEE Broadcast
Products", are registered in the United States Patent and Trademark Office and
are used by the Registrant pursuant to a license with its wholly owned
subsidiary corporation, EMCEE Cellular Inc., which owns the marks. In the same
manner, the Registrant also uses the trademark, "Site Lock", which is a mark
associated with a product sold by the Registrant that enhances analog picture
quality for MMDS systems in close proximity to systems operating on the same
frequency, and utilizes a patent for a solid state S-band transmitter.
ITEM 2. DESCRIPTION OF PROPERTY
The Registrant conducts operations at its facility located on 25 acres, which
the Registrant owns, in White Haven, Pennsylvania.
The building was constructed specifically for the Registrant in 1968 and
consists of approximately 27,000 square feet, with the majority of the area
devoted to manufacturing. The front portion of the building, consisting of two
floors, houses administrative, engineering and sales offices. The land,
building and improvements are well maintained and in good condition.
The Registrant's land, building and improvements are subject to encumbrances
held by the Registrant's primary lending institution, First Union National
Bank. These encumbrances secure the Registrant's working line of credit,
mortgage loan and two term loans with the lender. As of the date of this
<PAGE>
report, the aggregate principal balance of these encumbrances is $684,234.
The Registrant also leases a warehouse in White Haven, Pennsylvania, in which
it stores equipment and archival documents.
ITEM 3. LEGAL PROCEEDINGS
There is no information relevant to the Registrant which must be disclosed
under this Item 3.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of fiscal year 2000.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The NASDAQ National Market is the principal market on which the Registrant's
common stock is traded.
MARKET INFORMATION
STOCK PRICE
The table below presents the high and low bid prices of the Registrant's
common equity for the two most recent fiscal years:
FISCAL YEAR 2000 FISCAL YEAR 1999
QTR ENDED: JUNE 30 SEPT 30 DEC 31 MAR 31 JUNE 30 SEPT 30 DEC 31 MAR 31
(BID) HIGH $4.00 $6.50 $14.00 $13.00 $3.25 $3.125 $2.38 $4.75
(BID) LOW $1.719 $1.25 $ 1.75 $5.375 $2.50 $1.25 $1.125 $1.031
The above high/low bid information was obtained from the NASDAQ Stock Market,
Inc.
HOLDERS
At March 31, 2000, the number of holders of the Registrant's common stock was
1,307.
DIVIDENDS
No dividends were declared during fiscal year 1999 or fiscal year 2000. The
Registrant's loan documents with its primary lending institution contain
certain financial covenants with which the Registrant must comply in order to
declare and pay dividends on its common stock.
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995:
Any statements contained in this report which are not historical facts are
forward looking statements; and, therefore, many important factors could cause
actual results to differ materially from those in the forward looking
statements. Such factors include, but are not limited to, changes
(legislative, regulatory and otherwise) in the Multichannel Multipoint
Distribution Service (MMDS) or Low Power Television (LPTV) industries or
medium to high definition television (HDTV) products, demand for the Company's
products both domestically and internationally, the development of competitive
products, competitive pricing, the timing of foreign shipments, market
acceptance of new product introductions (including, but not limited to, the
Company's digital and Internet products), technological changes, economic
conditions(both foreign and domestic), litigation and other factors, risks and
uncertainties identified in the Company's Securities and Exchange Commission
filings.
RESULTS OF OPERATIONS
Net sales for fiscal year 2000 (ended March 31, 2000) totaled $4,738,000
compared to $5,896,000 for fiscal year 1999. This downward trend in sales
began in fiscal year 1995 and is due to the lack of operators of MMDS
television service in the domestic market and the currency and other economic
problems in the foreign
markets.
Foreign shipments for fiscal year 2000 totaled $2,962,000, compared to
$2,992,000 for fiscal year 1999. The downward trend in foreign sales appears
to have abated, as foreign shipments for the fourth quarter of fiscal 2000
totaled $1,434,000 and orders for the first quarter of fiscal 2001 are strong.
Foreign sales have been historically more than half of total sales and
comprised 63%, 51% and 61% for fiscal years 2000, 1999 and 1998. The
composition of these shipments to the following geographic regions is as
follows:
<TABLE>
<CAPTION>
Region 2000* 1999* 1998*
-------------------------------------------
<C> <S> <S> <S>
Asia/Pacific Rim $1,516 $1,015 $2,118
Middle East $393 $372 $479
South America $698 $140 $893
North America $47 $368 $573
Central America $26 $102 $427
Caribbean $104 $423 $11
Europe $83 $365 $249
Africa -- $52 $206
Other $95 $155 $607
-----------------------
$2,962 $2,992 $5,563
=======================
<FN>
*Based on customers having $10,000 or more of sales; amounts in thousands
</FN>
</TABLE>
<PAGE>
Gross profit equaled $1,000,000 for fiscal 2000 compared to $1,352,000 for
fiscal 1999. Export shipments, which historically carry higher margins than
domestic sales, contributed $805,000 or 81% of gross profit compared to 57%
for fiscal 1999 and 67% for fiscal 1998.
The largest single customer for fiscal 2000 accounted for $1,122,000 (24% of
net sales) of wireless television and high speed digital Internet systems in
Korea. The orders, which totaled $2.3 million as of March 31, 2000, are
expected to be completed by September 30, 2000. By comparison, the largest
customers for fiscal 1999 consisted of several divisions of a federal
government contract totaling $718,000 or 12% of net shipments.
The Company has continued cost controls resulting in a decrease in total
operating expenses from $2,572,000 for fiscal year ended March 31, 1999 to
$2,402,000 for the fiscal year ended March 31, 2000; the exception being an
increase in research and development expenses from $422,000 for fiscal 1999 to
$431,000 for fiscal 2000.
Selling expense totaled $900,000 for fiscal 2000, a decrease of 10% compared
to fiscal 1999.
Travel expense increased from $24,000 for fiscal 1999 to $42,000 as additional
international travel was incurred including a trip to China in fiscal 2000.
Substantially the same amount was offset by a decrease in shows and
conventions expense for the same periods. The major reduction in fiscal 2000
compared to the previous year was the reduction of commissions due primarily
to the decrease in sales volume.
General and administrative expense totaled $1,072,000 for fiscal 2000, a
decrease of $81,000 (7%) from fiscal 1999. While most categories within this
department did not have significant changes, legal and related fees decreased
from $171,000 for fiscal 1999 to $90,000. Included in the amount for fiscal
1999 was approximately $80,000 for expenditures to evaluate a merger initiated
by a third party. A determination was made by management that the offer was
inadequate.
Bad debt provision increased from $31,000 for fiscal 1999 to $42,000 for
fiscal 2000. The Registrant increased the reserve to $70,000 as of March 31,
2000 in recognition of additional exposure as extended payment terms are being
offered to certain foreign customers.
Research and development expense was $431,000 for the year ended March 31,
2000 or approximately $8,000 more than the prior year as the Company continues
to develop and improve products for high definition television (HDTV) and MMDS
(including high speed Internet) products.
Due primarily to the decrease in sales for fiscal year 2000, a loss from
operations of $1,403,000 was incurred compared to a loss from operations of
$1,220,000 for fiscal year 1999.
Interest expense decreased from $72,000 for fiscal 1999 to $58,000 as $66,000
(net of borrowings) of long term debt was retired. Interest income decreased
from $227,000 for fiscal 1999 to $169,000 for fiscal 2000 as the reduction of
cash and cash equivalents decreased the amount available for investment.
Other income for fiscal 1999 totaled $48,000 and consisted primarily of fees
for cancellation of orders and equipment rentals. In fiscal 2000, equipment
rentals totaled $18,000 and cancellation fees were $6,000. Offsetting this
was recognition of an operating loss of a Limited Liability Company(LLC), of
<PAGE>
which the Registrant has an investment totaling $34,000. The net result was
net other income of $102,000 for fiscal 2000 compared to $204,000 for fiscal
1999.
Net loss before income tax benefits totaled $1,301,000 and $1,015,000 for
fiscal years 2000 and 1999, respectively. Income tax benefits reduced the net
loss to $827,000 or $(.21) cents per common share outstanding for fiscal 2000
compared to a net loss of $583,000 or $(.15) cents per common share
outstanding for fiscal 1999.
There is no state tax liability for periods under review as all profitable
companies in the consolidated reporting group are domiciled in jurisdictions
that do not impose income taxes.
Selected financial data by quarter for the year ended March 31, 2000 and 1999
is as follows:
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
2000 1999 2000 1999 2000 1999 2000 1999
--------------------------------------------------------
(Thousands of Dollars, except per share amounts)
<C> <S> <S> <S> <S> <S> <S> <S> <S>
Net Sales $812 $2,199 $975 $2,166 $1,147 $807 $1,804 $724
Gross profit(loss) $107 $656 $182 $713 $213 $64 $498 ($81)
Net income(loss) ($300) $16 ($288) $40 ($211)$377) ($28) ($262)
Per Share:
Basic $(.08) Nil $(.07) $.01 $(.05) $(.09)$(.01) $.07
Diluted $(.08) Nil $(.07) $.01 $(.05) $(.09)$(.01) Net
Income (loss) ($300) $16 ($288) $40 ($211) ($377) ($28)($262)
</TABLE>
Foreign currency valuations decreased foreign sales commencing in the third
quarter of fiscal 1999 and continued until the fourth quarter of fiscal 2000.
Low domestic sales volume will continue to affect sales for all quarters until
demand increases for new applications for high speed Internet service and
HDTV.
IMPACT OF YEAR 2000
The Registrant commenced fiscal year 2000 as of April 1, 1999 and has fully
implemented software applications with only minor changes need.
Liquidity and Capital Resources
Management believes that demand for its core product of MMDS television
transmitters for the domestic market has been non-existent for the last year
and for the future. There is however, a strong demand for these products in
the international market coupled with high speed Internet service trend
initiated in fiscal 1995.
The domestic market is in a transition mode waiting for the direction that
will be taken by large companies such as Sprint and WorldCom for communication
equipment utilizing the MMDS spectrum. The Registrant has developed equipment
that it believes will be an integral component of the developing systems for
television, telephone and Internet service.
<PAGE>
On April 17, 2000, the Company acquired the assets of Advanced Broadcast
Systems, Inc. for approximately $400,000 in cash, 37,112 shares of the
Company's common stock valued at the acquisition date at $2.78 per share and
the assumption of liabilities aggregating approximately $200,000 and other
consideration. The acquired company manufactures commercial high and medium
power analog and digital television transmitters for VHF broadcast markets.
Management believes that the acquisition will enhance the Company's present
product line of low power broadcast products and will enable the Company to
expand in the new market for digital HDTV service. This service has been
mandated by the Federal Communications Commission in which all television
stations are required to provide digital HDTV transmission by 2003. The
acquisition may also open additional foreign markets for the Company's
product.
The Registrant has also increased its investment in the domestic high speed
Internet service market. Management believes that this service using digital
MMDS equipment will have a positive return in fiscal 2001.
The Company's cash requirements were satisfied in fiscal 2000 from cash
on-hand and customer deposits. These funds were sufficient to meet the
Company's working capital requirements and debt payments. The Registrant, at
March 31, 2000, had mortgage and equipment loans from its primary lending
institution of $684,000. In addition, there is an available line of credit of
$2,000,000 from the same lending institution. The line of credit was not used
in fiscal 2000; however, borrowings were utilized in the first quarter of
2001 and there is $1,100,000 outstanding as of the date of this report.
The Registrant was in violation of two loan covenants with its primary lending
institution as of March 31, 2000. One covenant requires the Registrant to
maintain a cash flow to debt service coverage ratio of 3.00 to 1.00. The debt
service coverage ratio as of March 31, 2000 was (5.5). In addition, the loan
agreement requires the Company to obtain the institution's written consent
prior to investing in or making payments to third parties other than in the
normal course of business. During fiscal year 2000, the Registrant made
advances to two affiliated third parties for a total of $350,000. The
Registrant received notice of waiver of all loan covenant violations that
occurred in fiscal 2000.
Cash and cash equivalents decreased $1,311,000 as of March 31, 2000 compared
to March 31, 1999, principally due to the loss for fiscal 2000 and funds
invested in high speed Internet companies. Investment in Treasury Bills
totaled $1,774,000 as of March 31, 2000, almost the same as the amount of
$1,776,000 as of March 31, 1999.
Accounts receivables increased from $603,000 as of March 31, 1999 to
$1,452,000 as of March 31, 2000 primarily due to the result of increased sales
in the last month of fiscal year 2000. These shipments include the sales for
a Korean order and although export orders historically have been paid in
advance and/or by letters of credit, the Company has, in fiscal 2000, extended
terms on some orders to remain competitive. The Registrant has increased its
allowance for doubtful accounts from $35,000 as of March 31, 2000 to $70,000
to reflect the additional exposure.
Inventories were reduced from $3,523,000 as of March 31, 1999 to $3,080,000 as
of March 31, 2000 as a result of controls on purchasing enacted in fiscal
1999.
<PAGE>
Prepaid expense which totaled $80,000 as of March 31, 2000 compared to $92,000
as of March 31, 1999. The latter amount included prepaid convention expense
of $42,000, prepaid insurance of $21,000 and prepaid software maintenance of
$6,000. The balances of these prepaids as of March 31, 1999 were $26,000,
$20,000 and $26,000
Income taxes refundable decreased form $569,000 to $402,000 at march 31, 2000
due to estimated tax payments made in fiscal year 1999 that were not required
in fiscal year 2000.
Deferred income taxes totaled $220,000 as of March 31, 2000 versus $132,000 as
of March 31, 1999. The difference is due to temporary timing differences.
Property, plant and equipment net after accumulated depreciation equaled
$540,000 as of March 31, 2000. Purchases of $52,000 was more than offset by
depreciation for the year of $243,000 resulting in a net decrease of asset
value of $191,000 compared to the year ended March 31, 1999.
Other assets totaled $1,292,000 as of March 31, 2000 compared to $492,000 as
of March 31, 1999. The Company increased its investment by $100,000 in a LLC
formed to operate a high speed Internet system increasing ownership from 10%
to 16.14%. The Company invested $250,000 (approximately 6% of the entity) in
a venture capital company that will acquire spectrum, build and promote
operations in high speed Internet systems.
The Registrant maintains its original investment of $250,000 for a 50%
interest of another LLC in which operations are not expected to begin until
late calendar year 2000. The investment decreased approximately $21,000 due
primarily to a loss for calendar 1999.
Included in other asset balance for both periods under discussion is a note
receivable of $100,000 plus interest due from a principal of one of the
members in the LLC investments which was due June 12, 2000. As of June 12,
2000 this note, which is collateralized, has not been retired. This
receivable is in the process of collection as of the time of this report.
The remaining amount of other assets of $289,000 represents accounts
receivable with due dates more than a year from March 31, 2000.
Long term debt, including current portion equaled $702,000 as of March 31,
2000 compared to $768,000 as scheduled repayments of $86,000 were made while a
new borrowing of $20,000 (vehicle) was initiated.
Accounts payable increased from $288,000 as of March 31, 1999 to $369,000 as
of March 31, 2000 as inventories were purchased in March 2000 in connection
with a Korean order.
Accrued payroll and related expenses increased from $183,000 as of March 31,
1999 to $214,000 as of March 31, 2000 as employees have been added due to the
increase in orders, from 45 persons at March 31, 1999 to a total of 53 persons
as of March 31, 2000.
Other accrued expenses totaled $438,000 as of March 31, 2000 compared to
$115,000 as of March 31, 1999. The majority of this increase is due to
commissions to outside interests accrued but not paid as of March 31, 2000.
Common stock value of $73,084 and additional paid in capital of $3,502,000
increased over fiscal year 1999 to $73,450 and $3,583,000, respectively, as
<PAGE>
22,200 shares of registered common stock was issued upon exercise of options
under the Company's stock option plans. Retained earnings decreased by
$827,000 from March 31, 1999 to March 31, 2000 due to the net loss for fiscal
2000.
Inflation has not had a significant impact on cost or price in the past two
fiscal years under review; however, beginning in fiscal 2001 up to the time of
this report, the Company has had a significant amount of shortages for a
number of important parts that are part of certain final manufactured
products. Although it appears that this is a temporary problem, it will have
an impact on sales and earnings for the first quarter ending June 30, 2000.
The backlog of unsold orders totaled $1,367,000 as of March 31, 2000 compared
to $239,000 as of March 31, 1999. Over 90% of the backlog as of March 31,
2000 is for foreign orders.
ITEM 7. FINANCIAL STATEMENTS
See pages 19 to 35 of this report for the financial statements required by
this Item.
ITEM 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
There is no information relevant to the Registrant which must be disclosed
under this Item 8.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required by this Item 9 is incorporated herein from the Proxy
Statement expected to be filed within one hundred twenty (120) days of the
close of the Registrant's fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item 10 is incorporated herein from
the Proxy Statement expected to be filed within one hundred twenty (120) days
of the close of the Registrant's fiscal year.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item 11 is incorporated herein from the Proxy
Statement expected to be filed within one hundred twenty (120) days of the
close of the Registrant's fiscal year.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 12 is incorporated herein from the Proxy
Statement expected to be filed within one hundred twenty (120) days of the
close of the Registrant's fiscal year.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following is an Exhibit Index of the applicable Exhibits to this
report:
DESCRIPTION OF EXHIBIT EXHIBIT NUMBER PAGE NUMBER
Articles of Incorporation
and Bylaws
Restated Certificate
of Incorporation 3 i (1)
<PAGE>
Bylaws 3 ii (2)
Material Contracts
1996 Stock Option Plan 10 (1)
Officers Incentive Compensation
Plan 10 (1)
Agreement (Change in Control
Agreements for certain Executive
Officers) 10 (3)
Non-Negotiable, Non-Transferable
Stock Warrant 10 (3)
Settlement and Release Agreement 10 (1)
Asset Purchase Agreement between
Advanced Broadcast Systems, Inc.
(now known as Alpha Holding, Inc.)
and EMCEE Holding Corp. (now known
as Advanced Broadcast Systems,
Inc.) 10 36
Winbeam Incorporated Subscribtion
Agreement 10 80
Subsidiaries 21 81
Financial Data Schedule 27 (4)
(1) Incorporated by reference from the Form 10-KSB filed by the Registrant
with the U.S. Securities and Exchange Commission for fiscal year ended 1997.
(2) Incorporated by reference from the Form 10-KSB filed with the U.S.
Securities and Exchange Commission for fiscal year 1998.
(3) Incorporated by reference from the Form 10-KSB filed with the U.S.
Securities and Exchange Commission for fiscal year ended 1996.
(4) This Exhibit was filed electronically, but is not included in the paper
copy of this report.
(b) Form 8-K filings: The Registrant filed one report on Form 8-K during the
last quarter of the period covered by this report. That report announced that
the Registrant entered into a letter of intent to acquire substantially all of
the assets of Advanced Broadcast Systems, Inc.
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
EMCEE BROADCAST PRODUCTS, INC.
/s/ JAMES L. DESTEFANO
James L. DeStefano, President/CEO
Date: June 26, 2000
/s/ ALLAN J. HARDING
Allan J. Harding, Vice President-Finance
Date: June 26, 2000
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
/s/ JAMES L. DESTEFANO Date: June 26, 2000
James L. DeStefano, Director
/s/ JOE B. HASSOUN Date: June 26, 2000
Joe B. Hassoun, Director
<PAGE>
/s/ MICHAEL J. LEIB Date: June 26, 2000
Michael J. Leib, Director
/s/ RICHARD J. NARDONE Date: June 26, 2000
Richard J. Nardone, Director
/s/ EVAGELIA ROGIOKOS Date: June 26, 2000
Evagelia Rogiokos, Director
/s/ ROBERT HOSTETLER Date: June 26, 2000
Robert Hostetler, Director
Independent Auditors' Report
Board of Directors
EMCEE Broadcast Products, Inc.
White Haven, Pennsylvania
We have audited the consolidated balance sheets of EMCEE Broadcast Products,
Inc. and subsidiaries as of March 31, 2000 and 1999 and the related
consolidated statements of loss, shareholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of EMCEE
Broadcast Products, Inc. and subsidiaries as of March 31, 2000 and 1999, and
the results of their operations and their cash flows for the years then ended,
in conformity with generally accepted accounting principles.
Kronick, Kalada, Berdy & Company
Kingston, Pennsylvania
May 17, 2000
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS - MARCH 31, 2000 AND 1999
ASSETS
2000 1999
-------------------------------------
<C> <S> <S>
Current assets:
Cash and equivalents $ 261,304 $ 1,572,423
U.S. Treasury Bills 1,773,600 1,775,933
Accounts receivable, net
of allowance for doubtful
accounts (2000, $70,000; 1999,
$35,000) 1,452,279 603,248
Inventories 3,080,313 3,522,579
Prepaid expenses 80,113 91,842
Income taxes refundable 402,000 569,000
Deferred income taxes 220,000 132,000
------------------------------------
Total current assets 7,269,609 8,267,025
------------------------------------
Property, plant and equipment:
Land and land improvements 246,841 246,841
Building 617,475 617,670
Machinery 1,925,042 2,017,084
-----------------------------------
2,789,358 2,881,595
Less accumulated depreciation 2,249,467 2,150,315
-----------------------------------
539,891 731,280
-----------------------------------
Other assets 1,292,448 492,149
------------------------------------
Note receivable, sale of license 525,000 510,000
Less deferred portion ( 525,000) ( 510,000)
-------------------------------------
0 0
-------------------------------------
Total assets $ 9,101,948 $ 9,490,454
=====================================
<FN>
See notes to consolidated financial statement.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
2000 1999
--------------------------
<C> <S> <S>
Current liabilities:
Current portion of long-term debt $ 106,000 $ 119,000
Accounts payable 368,671 288,029
Accrued expenses:
Payroll and related expenses 214,316 183,254
Other 437,836 114,500
Deposits from customers 64,247 76,745
---------------------------
Total current liabilities 1,191,070 781,528
---------------------------
Long-term debt, net of current portion 596,354 649,287
---------------------------
Shareholders' equity:
Common stock, $.01 - 2/3 par;
authorized 9,000,000 shares; issued
4,406,361 shares and 4,384,161 shares
for 2000 and 1999, respectively 73,450 73,084
Additional paid-in capital 3,583,484 3,502,092
Retained earnings 5,518,241 6,345,114
---------------------------
9,175,175 9,920,290
Less shares held in treasury, at cost
(2000 and 1999, 401,764) 1,860,651 1,860,651
---------------------------
7,314,524 8,059,639
---------------------------
Total liabilities and equity $ 9,101,948 $9,490,454
============================
</TABLE>
<PAGE>
<TABLE>
<CAPTION> EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF LOSS
YEARS ENDED MARCH 31, 2000 AND 1999
2000 1999
-----------------------------
<C> <S> <S>
Net sales $ 4,738,493 $ 5,895,567
Costs of products sold 3,738,735 4,543,418
----------------------------
Gross profit 999,758 1,352,149
---------------------------
Operating expenses:
Selling 900,028 997,115
General and administrative 1,071,668 1,152,195
Research and development 430,678 422,426
----------------------------
2,402,374 2,571,736
----------------------------
Loss from operations (1,402,616) (1,219,587)
--------------------------
Other income (expense), net:
Interest expense ( 57,724) ( 71,641)
Interest income 168,772 227,337
Other ( 9,305) 48,418
---------------------------
101,743 204,114
---------------------------
Loss before income taxes (1,300,873) (1,015,473)
Income taxes benefit 474,000 432,600
---------------------------
Net loss $( 826,873) $( 582,873)
===========================
Basic loss per share $(.21) $(.15)
===========================
Diluted loss per share $(.21) $(.15)
===========================
<FN>
See notes to consolidated financial statements
<FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED MARCH 31, 2000 AND 1999
Common stock Additional
paid-in
Shares Amount capital
----------------------------------
<C> <S> <S> <S>
Balance,
March 31, 1998 4,384,161 $ 73,084 $ 3,502,092
Treasury stock purchased
Net loss for the year
-----------------------------------
Balance, March 31, 1999 4,384,161 73,084 3,502,092
Common stock issued 22,200 366 81,392
Net loss for the year
------------------------------------
Balance, March 31, 2000 4,406,361 $ 73,450 $ 3,583,484
======================================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Treasury stock
Retained
earnings Shares Amount Total
---------------------------------------------------
<S> <S> <S> <S>
$ 6,927,987 319,000 $(1,649,173) $ 8,853,990
82,764 ( 211,478) ( 211,478)
( 582,873) ( 582,873)
------------------------------------------------------
6,345,114 401,764 (1,860,651) 8,059,639
81,758
( 826,873) ( 826,873)
-------------------------------------------------------
$ 5,518,241 401,764 $(1,860,651) $ 7,314,524
=======================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION> EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 2000 AND 1999
2000 1999
----------------------
<C> <S> <S>
Cash flows from operating activities:
Net loss $( 826,873)$( 582,873)
Adjustments:
Depreciation 243,577 274,359
Provision for doubtful accounts 42,000 31,000
Loss on equity investment 33,800
(Increase) decrease in:
Accounts receivable ( 891,031) 580,403
Inventory 442,266 ( 169,450)
Prepaid expenses 11,729 ( 10,407)
Income taxes refundable 167,000 ( 535,143)
Deferred income taxes ( 88,000) ( 52,000)
Other assets ( 288,470) 724
Increase (decrease) in:
Accounts payable 80,642 ( 23,395)
Accrued expenses 354,398 ( 97,697)
Deposits from customers ( 12,498)( 183,303)
-------------------------
Net cash used in operating activities ( 731,460) ( 767,782)
-------------------------
Cash flows from investing activities:
Purchases of:
Property, plant and equipment ( 52,188)( 94,503)
U.S. Treasury Bills (3,197,667)(3,506,384)
Proceeds from maturities of U.S.
Treasury Bills 3,200,000 4,000,000
Other assets ( 545,629)( 281,423)
------------------------
Net cash provided by(used in)
investing activities ( 595,484) 117,690
------------------------
Cash flows from financing activities:
Acquisition of treasury stock ( 211,478)
Proceeds from issuance of:
Long-term debt 20,141
Common stock 81,758
Repayment of long-term debt ( 86,074)( 95,601)
--------------------------
Net cash provided by (used in)
financing activities 15,825 ( 307,079)
--------------------------
Net decrease in cash and equivalents (1,311,119)( 957,171)
Cash and equivalents, beginning 1,572,423 2,529,594
---------------------------
Cash and equivalents, ending $ 261,304 1,572,423
===========================
<PAGE>
Supplemental disclosures of cash flow information:
Cash paid (refunded) during the year for:
Interest $ 61,000 $ 72,000
Income taxes $( 530,000) $ 160,000
Non-cash items:
Transfer of inventory to fixed assets $ 85,470
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2000 AND 1999
1. Summary of significant accounting policies:
Principles of consolidation:
The consolidated financial statements include the accounts of
EMCEE Broadcast Products, Inc. and its subsidiaries, all of which are wholly-
owned (together, the Company). All significant inter-company accounts and
transactions have been eliminated.
Revenue recognition:
Revenue from product sales of equipment is recognized at the time of delivery
and after consideration of all the terms and conditions of the customers'
contract (purchase order). None of the customers' contracts are considered
long-term contracts.
During 1992, a rural cellular license was sold for $3,100,000. The initial
payment was $845,000, net of closing costs of $155,000. The $2,100,000
balance, which bore interest at 7% payable at maturity, was due in December
1996. None of the deferred payment and the related interest income was
recognized prior to 1997 because of their extended collection period and
because there was not a reasonable basis to evaluate the likelihood of
collection. On April 3, 1997 the Company collected $2,500,000 and received an
unsecured $500,000 note receivable as settlement of the original note.
The $525,000 note receivable is due and payable upon the occurrence of any one
or more of certain specified events involving the debtor including, but not
limited to, acquisition, merger, bankruptcy, and insolvency. None of the
specified events relate to the debtor's normal operations. The $525,000
includes accrued interest calculated at 3%. The note receivable is fully
reserved because it has no definite collection period and because there is not
a reasonable basis to evaluate the likelihood of collection.
Cash, equivalents and U.S. Treasury Bills:
The Company considers cash equivalents to be all highly liquid investments
purchased with an original maturity of three months or less. U.S. Treasury
Bills with an original maturity of more than three months are considered to be
investments. All U.S. Treasury Bills are stated at cost which approximates
market and are considered as available for sale. All U.S. Treasury Bills not
included as cash equivalents had contracted maturities of at least six months.
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2000 AND 1999
1. Summary of significant accounting policies (continued):
Inventories:
Inventories are stated at the lower of standard cost which approximates
current actual cost (on a first-in, first-out basis) or market (net realizable
value).
Property, plant and equipment and depreciation:
Property, plant and equipment are stated at cost. Depreciation is provided on
the straight-line method over the estimated useful lives of the assets.
Investments:
Investments are accounted for under the equity method if the Company has
ownership of between 20% and 50%. Investments where the Company's ownership
is less than 20% are accounted for under the cost method.
Advertising:
These expenses are recorded when incurred. They amounted to $21,000 and
$52,000 for 2000 and 1999, respectively.
Use of estimates:
Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities and the
reported revenues and expenses.
Reclassifications:
Certain amounts reported in the 1999 financial statements have been
reclassified to conform with the 2000 presentation.
2.Loss per share:
Basic loss per share is computed by dividing loss applicable to common
shareholders by the weighted average number of common shares outstanding.
Diluted loss per share is similar to basic loss per share except that the
weighted average of common shares outstanding is increased to include the
number of additional common shares that would have been outstanding if the
dilutive potential common shares had been issued. There were no dilutive
potential common shares in 1999 because the assumed exercise of the options
would be anti-dilutive.
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2000 AND 1999
2.Loss per share (continued):
The following table presents the basic and diluted EPS computations:
<TABLE>
<CAPTION>
2000
------------------------------------
Per share
Net loss Shares amount
------------------------------------
<C> <S> <S> <S>
Basic EPS
Net loss which relates
to common stockholders $(826,873) 3,983,147 $(.21)
Effect of dilutive
securities, stock options 10,613
-------------------------------------
Diluted EPS
Net loss which relates
to common stockholders $(826,873) 3,993,760 $(.21)
=====================================
1999
-------------------------------------
Per-share
Net loss Shares amount
Basic and diluted EPS
Net loss which relates
to common stockholders $(582,873) 4,007,305 $(.15)
</TABLE>
3.Cash and equivalents:
At March 31, 2000, cash held at a brokerage corporation in the amount of
$146,000 is not insured.
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2000 AND 1999
4.Industry, sales and accounts receivable concentration information:
The Company's primary activity is in one segment which consists of the
assembly and sale of equipment for the domestic and foreign television
broadcasting industry. To determine segments to be reported, management has
considered products and services. Management believes that the Company's
business requires similar technology and marketing strategies. Major customers
are those that individually account for more than 10% of the Company's
consolidated revenues.
<PAGE>
For the years ended March 31, 2000 and 1999, one customer with total sales of
$1,122,000 and a different customer, consisting of four divisions of a
Federal government agency, with total sales of $718,000, respectively,
qualified as major customers. At March 31, 2000, the major customer accounted
for 72% of the Company's consolidated current accounts receivable. There were
no significant receivable concentrations at March 31, 1999. The Company
performs ongoing credit evaluations of its customers and, when deemed
necessary, requires deposits and a letter of credit on foreign sales and
deposits on domestic sales. Historically, the Company's uncollectible accounts
receivable have been immaterial.
Foreign sales amounted to $2,962,000 and $2,992,000 for 2000 and 1999,
respectively. Sales by foreign geographic regions are as follows:
2000 1999
============================
Asia/Pacific Rim $ 1,516,000 $ 1,015,000
South America 698,000 140,000
Caribbean 104,000 423,000
Middle East 393,000 372,000
North America 47,000 368,000
Europe 83,000 365,000
Central America 26,000 102,000
Africa 52,000
Other 95,000 155,000
-----------------------------
$ 2,962,000 $ 2,992,000
=============================
Revenues are attributed to regions based on location of customers.
All long-lived assets and deferred tax assets are attributable to the United
States. All foreign sales are contracted in United States currency; therefore
there is no impact from foreign currency rates.
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2000 AND 1999
5.Inventories:
<TABLE>
<CAPTION>
2000 1999
-------------------------
<C> <S> <S>
Finished goods $ 440,000$ 266,000
Work-in-process 468,000 686,000
Raw materials 728,000 1,008,000
Manufactured components 1,444,313 1,562,579
-------------------------
$ 3,080,313 $ 3,522,579
========================
</TABLE>
<PAGE>
6.Other assets:
<TABLE>
<CAPTION>
2000 1999
-------------------------
<C> <S> <S>
Investments, equity method $ 233,265 $ 254,000
Investments, cost method 480,639 131,173
Note receivables 266,115 106,976
Accounts receivable 289,243
Other 23,186
-------------------------
$ 1,292,448 $ 492,149
==========================
</TABLE>
The investments are in companies who own and/or operate a business that
provides rapid access to the Internet, wireless cable television, and any
other type of telecommunication service.
7. Line of credit:
The Company has a line of credit agreement with a bank aggregating $2,000,000
collateralized by inventories, accounts receivable and all property, plant and
equipment. The line of credit agreement requires monthly interest payments at
2.00% above LIBOR which was 6.13% at March 31, 2000. There were no principal
borrowings during the years ended March 31, 2000 and 1999.
The loan agreement contains restrictive covenants when amounts are outstanding
which, among other things, require the Company to maintain a maximum total
liabilities to net worth ratio, a minimum current ratio and a debt coverage
ratio. The Company did not meet the debt coverage ratio as of March 31, 2000.
In addition, the loan agreement requires the Company to obtain the bank's
written consent prior to investing in or making payments to third parties
other than in the usual and ordinary course of business. The Company did not
obtain the bank's written consent for its investments in three third parties.
The bank waived both covenant violations. The Company is allowed to pay
dividends on its common stock when amounts are borrowed if it is in compliance
with the financial covenants and ratios.
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2000 AND 1999
8.Long-term debt:
2000 1999
------------------------
Term loan, bank $ 601,000 $ 637,000
Equipment loans, bank 101,354 131,287
------------------------
702,354 768,287
Less current portion 106,000 119,000
------------------------
$ 596,354 $ 649,287
========================
<PAGE>
The term loan, bank at March 31, 2000 matures in 2002 and requires monthly
principal payments of $4,083, plus interest. Interest is calculated at 2.25%
above LIBOR which was 6.13% at March 31, 2000. The term and equipment loans
are cross-collateralized with and have the same restrictive covenants as the
line of credit (see Note 7).
Principal payments on long-term debt, based on current interest rates, are as
follows:
2001 $ 106,000
2002 592,000
2003 4,354
-----------
$ 702,354
===========
9. Common stock:
Non-qualified stock option plans provide for the grant of options to purchase
up to 300,000 shares. Upon the termination or expiration of any stock options
granted, the shares covered by such terminated or expired stock options will
be available for further grant; 173,325 options were available for grant at
March 31, 2000. The Board of Directors, at the date of grant of an option,
determines the number of shares subject to the grant and the terms of such
option. All outstanding options granted expire after 5 years and vest over
two years.
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2000 AND 1999
9.Common stock (continued):
Changes in outstanding common stock options granted are summarized below:
<TABLE>
<CAPTION>
2000 1999
-------------------------------------------
Number Average Number Average
of exercise of exercise
shares price shares price
--------------------------------------------
<C> <S> <S> <S> <S>
Balance at beginning
of year 151,875 $ 5.50 151,875 $ 5.50
Options exercised 22,200 3.68
Options forfeited 3,000 6.16
------ -------
Balance at end of
year 126,675 $ 5.81 151,875 $ 5.50
=======================================
Options exercisable
at year-end 126,675 $ 5.81 151,875 $ 5.50
</TABLE>
<PAGE>
At March 31, 2000, 110,200 and 16,475 options had an exercise price of $6.16
and $3.44, respectively. Such options had remaining contractual lives of 1.67
years and .5 years, respectively.
The Company in accordance with an election under generally accepted accounting
principles for stock options has recorded no compensation cost for its stock
options in the accompanying consolidated financial statements.
Had compensation cost for stock options been determined based on the fair
value at the grant dates for awards under the plans, the Company's net loss
and per share amounts would have been changed to the proforma amounts
disclosed below:
1999
--------
Net loss:
As reported $(582,873)
Proforma (615,735)
Basic loss per share:
As reported $( .15)
Proforma ( .15)
Diluted loss per share:
As reported $( .15)
Proforma ( .15)
Proforma amounts are not reported for 2000 because all options vested in 1999
and all related proforma compensation expense was reported prior to 2000.
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2000 AND 1999
9.Common stock (continued):
The fair values were determined using the Black-Scholes option pricing model
with the following weighted average assumptions:
1999
------------
Dividend yield .0 %
Risk free interest rate 5.84%
Expected life 5 Years
Volatility 104.83%
During 1997, warrants to purchase 200,000 shares of common stock at $9.76 a
share were issued and remain outstanding at March 31, 2000. These warrants
expire in May 2001.
10.Income taxes:
The following table sets forth the current and deferred amounts of the
provisions for income tax benefit for the years ended March 31, 2000 and 1999:
<PAGE>
2000 1999
-----------------------------
Current $ 386,000 $ 380,600
Deferred 88,000 52,000
----------------------------
$ 474,000 $ 432,600
=============================
The provisions for income taxes at the Company's effective rate differed from
the provision for income taxes at the statutory Federal rate of 34% for the
years ended March 31, 2000 and 1999 as follows:
2000 1999
----------------------
Federal income tax benefit at
the statutory rate $ 441,000 $ 345,000
Foreign sales corporation benefit 13,000 69,000
Federal income tax credit 18,000 16,000
Other 2,000 2,600
----------------------
Benefit for income taxes $ 474,000 $ 432,600
=======================
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2000 AND 1999
10. Income taxes (continued):
The tax effects of temporary differences that give rise to deferred income
taxes at March 31, 2000 and 1999 are presented in the table below:
<TABLE>
<CAPTION>
2000 1999
--------------------------
<C> <S> <S>
Deferred tax assets:
Inventory $ 121,000 $ 74,000
Employee benefits 47,000 46,000
Property and equipment 26,000
Other differences 26,000 14,000
------------------------
Total gross deferred
tax assets 220,000 134,000
Deferred tax liability,
property and equipment ( 2,000)
------------------------
Net deferred tax asset $ 220,000 $ 132,000
========================
</TABLE>
11.Fair value of financial instruments:
Many of the Company's financial instruments lack an available trading market
as characterized by a willing buyer and a willing seller engaging in an
<PAGE>
exchange transaction. The Company's fair value estimates for those
instruments are based upon subjective assumptions and involve significant
uncertainties resulting in estimates that vary with changes in assumptions.
Any changes in assumptions or estimation methodologies may have a material
effect on the estimated fair values disclosed.
A summary at March 31, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
2000 1999
------------------------------------------
Carrying Fair Carrying Fair
value value value value
------------------------------------------
<C> <S> <S> <S> <S>
Short-term assets $3,889,183 $3,889,183 $4,520,604 $4,520,604
Notes receivables 266,115 266,115 106,976 106,976
Other long-term assets 1,026,333 1,413,065 385,173 750,448
Short-term liabilities 1,085,070 1,085,070 662,528 662,528
Long-term debt 702,354 702,354 768,287 768,287
</TABLE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED MARCH 31, 2000 AND 1999
11. Fair value of financial instruments (continued):
Short-term asset and liabilities (exclusive of bank debt):
The fair values of cash and equivalents, U.S. Treasury Bills, accounts and tax
refund receivables, accounts payable and other short-term financial
liabilities approximate their carrying values due to the short-term nature of
these financial instruments.
Other long-term assets:
The fair values of investments is based upon industry formulas that take into
account the number of available subscribers and/or spectrum availability in
the coverage area. Fair value of other long-term assets is estimated to
approximate carrying value.
Notes receivables:
The carrying value of notes receivable included in other assets is estimated
to approximate fair values. Although there are no quoted market prices
available for these instruments, the fair value estimates were based on the
change in interest rate and risk related interest rate spreads since the notes
origination date. It was not practicable to estimate the fair value of the
$525,000 note receivable, sale of license, because the Company was unable to
estimate the timing and form of the ultimate settlement of the amount due to
it. The Company has fully provided for any potential loss resulting from the
non-payment of this receivable.
Long-term debt:
The fair value of long-term debt that is variable rate debt that reprices
regularly approximates the carrying amounts.
<PAGE>
12. Litigation:
In the normal course of business, there are various outstanding legal
proceedings. In the opinion of management, after consultation with legal
counsel, the consolidated financial statements of the Company will not be
materially affected by the outcome of such legal proceedings.
13.Subsequent event:
On April 17, 2000, the Company completed its acquisition of Advanced Broadcast
Systems (ABS) for approximately $400,000 in cash, 37,112 shares of the
Company's common stock valued as of the acquisition date at $2.78 per share
and the assumption of liabilities aggregating approximately $200,000.
Additional amounts may be paid based on the initial year revenues and earnings
of the acquired company. ABS is a manufacturer of commercial high and medium
power analog and digital television transmitters for UHF broadcast markets.
