UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the quarterly period ended September 30, 2000
Commission file number 1-6299
EMCEE Broadcast Products, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-1926296
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Registrant's telephone number, including area code: 570-443-9575
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days:
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common stock, $ .01-2/3 par value - 4,041,709 shares as of November
14, 2000.
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
I I N D E X
PART I. FINANCIAL INFORMATION: PAGE (S)
CONSOLIDATED BALANCE SHEETS -
September 30, 2000 and March 31, 2000 3
CONSOLIDATED STATEMENTS OF LOSS -
Three months and six months ended Sept. 30, 2000 and 1999 4
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY -
Six months ended September 30, 2000 5
CONSOLIDATED STATEMENTS OF CASH FLOW -
Six months ended September 30, 2000 and 1999 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7 - 8
INDEPENDENT ACCOUNTANTS' REPORT 9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 - 14
PART II. OTHER INFORMATION: SIGNATURES 15
NOTE: Any questions concerning this report should be addressed to
Mr. Allan J. Harding, Vice President-Finance.
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- SEPTEMBER 30, 2000 and MARCH 31, 2000 -
SEPT. 30, 2000 MARCH 31, 2000
(Unaudited)
<C> <C>
<S>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents $321,344 $ 261,304
U. S. Treasury Bills 399,309 1,773,600
Accounts receivable, net of allowance
for doubtful accounts,
Sept - $95,000 / March - $70,000 2,272,786 1,452,279
Inventories 4,709,083 3,080,313
Prepaid expenses 159,863 80,113
Income taxes refundable 266,000 402,000
Deferred income taxes 223,000 220,000
--------- ---------
TOTAL CURRENT ASSETS 8,351,385 7,269,609
--------- ---------
PROPERTY, PLANT AND EQUIPMENT:
Land & land improvements 246,841 246,841
Building 617,475 617,475
Machinery and equipment 2,180,473 1,925,042
--------- ---------
3,044,789 2,789,358
Less accumulated depreciation 2,383,811 2,249,467
--------- ---------
NET PROPERTY, PLANT AND EQUIPMENT 660,978 539,891
--------- --------
OTHER ASSETS 1,410,293 1,292,448
--------- ---------
NOTE RECEIVABLE 532,750 525,000
Less deferred portion (532,750) (525,000)
------- -------
0 0
---------- ---------
TOTAL ASSETS $10,422,656 $9,101,948
========== =========
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $106,000 $106,000
Notes payable (line of credit) 950,000 --
Accounts payable 744,975 368,671
Accrued expenses:
Payroll and related expenses 197,846 214,316
Other 592,060 437,836
Deposits from customers 351,395 64,247
--------- ---------
TOTAL CURRENT LIABILITIES 2,942,276 1,191,070
--------- ---------
<PAGE>
LONG-TERM DEBT, net of current portions 543,525 596,354
--------- ---------
SHAREHOLDERS' EQUITY:
Common stock issued, $.01-2/3 par;
authorized 9,000,000 shares;
issued 4,406,361 shares 73,450 73,450
Additional paid-in capital 3,583,484 3,583,484
Retained earnings 4,968,506 5,518,241
--------- ---------
8,625,440 9,175,175
--------- ---------
Less shares held in treasury at cost:
364,652 shares Sept. 2000 and
401,764 shares March 2000 1,688,585 1,860,651
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 6,936,855 7,314,524
--------- ---------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $10,422,656 $9,101,948
========== =========
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF LOSS
THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
SIX (6) MONTHS THREE (3) MONTHS
9/30/00 9/30/99 9/30/00 9/30/99
<C> <C> <C> <C>
<S>
NET SALES $3,451,455 $1,787,641 $1,771,174 $975,216
COST OF PRODUCTS SOLD 2,710,352 1,498,037 1,370,440 793,025
--------- --------- --------- -------
GROSS PROFIT 741,103 289,604 400,734 182,191
OPERATING EXPENSES:
Selling expenses 574,933 493,976 320,854 264,084
General and Admin 702,499 530,914 334,688 305,237
Research and development 248,468 173,507 130,024 97,022
-------- ------- ------- -------
TOTAL OPERATING EXPENSES 1,525,900 1,198,397 785,566 666,343
--------- --------- ------- -------
LOSS FROM OPERATIONS (784,797) (908,793) (384,832) (484,152)
------- -------- ------- -------
OTHER INCOME (EXPENSE), NET:
Interest expense (68,272) (26,754) (37,902) (7,890)
Interest income 64,433 84,140 28,030 43,805
Other (1,099) 14,389 1,824 9,696
-------- -------- ------- ------
TOTAL OTHER INCOME
(EXPENSE), NET (4,938) 71,775 (8,048) 45,611
-------- -------- ------ ------
LOSS BEFORE INCOME TAXES (789,735) (837,018) (392,880) (438,541)
INCOME TAX BENEFIT 240,000 248,400 117,300 150,250
------- ------- ------- -------
NET LOSS $(549,735) $(588,618) $(275,580) ($288,291)
======= ======= ======= ========
COMMON SHARE AND COMMON SHARE
EQUIVALENT OUTSTANDING:
Basic 4,038,474 3,982,397 4,041,719 3,982,397
========= ========= ========= =========
Diluted 4,038,474 3,982,397 4,041,719 3,982,397
========= ========= ========= =========
LOSS PER COMMON AND
COMMON SHARE EQUIVALENT:
Basic $(.14) $(.15) $(.07) $(.07)
=== === === ===
Diluted $(.14) $(.15) $(.07) $(.07)
=== === === ===
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
SIX MONTHS ENDED SEPTEMBER 30, 2000
(Unaudited)
ADDITIONAL
COMMON STOCK PAID-IN RETAINED TREASURY STOCK
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
<C> <C> <C> <C> <C> <C> <C>
<S>
BALANCE -
3/31/00 4,406,361 $73,450 $3,583,484 $5,518,241 401,764 $(1,860,651)$7,314,524
TREASURY
STOCK
ISSUED (37,112) 172,066 172,066
NET LOSS FOR
THE PERIOD ( 549,735) (549,735)
--------- ------ ---------- --------- -------- ---------- ---------
BALANCE -
9/30/00 4,406,361 $73,450 $3,583,484 $4,968,506 364,652 $(1,688,585)$6,936,855
========= ====== ========= ========= ======= ========= =========
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX (6) MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
SIX (6) MONTHS
9/30/00 9/30/99
<C> <C>
<S>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(549,735) $(588,618)
Adjustments:
Depreciation 134,344 133,398
Provision for doubtful accounts 25,000 18,000
(Increase) decrease in (net of
effect of acquisition):
Accounts receivable (754,912) (59,955)
Inventories (1,450,202) 169,587
Prepaid expenses (79,750) 328,140
Income taxes refundable 136,000 0
Deferred income taxes (3,000) (16,000)
Other assets 4,726 (26,526)
Increase (decrease) in (net of
effect of acquisition):
Accounts payable 331,775 (173,402)
Accrued expenses 117,615 (18,323)
Deposits from customers 287,148 49,840
-------- --------
NET CASH USED IN OPERATING ACTIVITIES (1,800,991) (183,859)
--------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant
and equipment (10,431) (26,872)
Purchase of U. S. Treasury Bills (421,345) (185,413)
Proceeds from maturities of
U.S. Treasury Bills 1,795,636 2,200,000
Purchase of Advanced Broadcast
Systems, Inc. (400,000) 0
--------- --------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 963,860 (12,285)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit borrowing 1,100,000 0
Payments on:
Long-term debt (52,829) (56,590)
Line of Credit (150,000) 0
------- -------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 897,171 (56,590)
------- ------
NET INCREASE (DECREASE) IN CASH 60,040 (252,734)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD 261,304 1,572,423
------- ---------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $321,344 $1,319,689
======== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid (refunded) during the period:
Interest expense $57,793 $21,375
Income taxes $(373,000) $(367,000)
Fair value of assets acquired and
liabilities assumed for purchase of
Advanced Broadcast Systems, Inc.:
Equipment $245,000
Inventory 178,568
Accounts receivable 90,595
Goodwill 272,571
Accounts payable (44,529)
Accrued liabilities (20,139)
Inter-company payables (150,000)
Treasury stock (172,066)
-------
Cash paid $400,000
=======
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The financial information presented as of any date other than March 31
has been prepared from the books and records of the Company without
audit. Financial information as of March 31 has been derived from the
audited financial statements of the Company, but does not include all
disclosures required by generally accepted accounting principles. In
the opinion of management, the accompanying unaudited consolidated
condensed financial statements contain all adjustments, consisting only
of normal recurring adjustments, necessary to present fairly EMCEE
Broadcast Products, Inc. and Subsidiaries' financial position, and the
results of their operations and changes in cash flow for the periods
presented.
2. The results of operations for the three-month and six-month periods
ended September 30, 2000 and 1999 are not necessarily indicative of the
results to be expected for the full year.
3. At September 30, 2000, cash equivalents included $217,237 invested in a
money market portfolio.
4. INVENTORIES consisted of the following:
<TABLE>
<CAPTION>
Sept. 30, 2000 March 31, 2000
(UNAUDITED)
<C> <C>
<S>
FINISHED GOODS $1,024,000 $440,000
WORK-IN-PROCESS $846,000 $468,000
RAW MATERIALS $1,816,000 $728,000
MANUFACTURED COMPONENTS $1,023,083 $1,444,313
--------- ---------
$4,709,083 $3,080,313
========= =========
</TABLE>
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).
5. 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 the period ended September 30, 2000 and 1999 because the assumed
exercise of the options would be anti-dilutive. The number of options
and warrants that could potentially dilute basic loss per share that
have been excluded from the computation of diluted loss per share were
310,200 at September 30, 2000.
6. On October 30, 2000, the company received written notice from its
primary lending institution, First Union National Bank, that its working
capital line of credit would not be renewed. As a result, the bank made
a demand for the entire outstanding principal balance of the line, which
is $950,000, together with all accrued and unpaid interest and all
reimbursable fees and expenses of the bank. Under the provisions of the
bank's notice, these sums had to be paid on or before November 10, 2000,
but as of the date of this report remain unpaid. The company is,
therefore, in default of such payment. Because the line of credit is
cross defaulted under the bank's loan documents with all other
<PAGE>
indebtedness of the company to the bank, which totals $626,250 as of the
date of this report, the bank would have the right to accelerate the
maturity of such other indebtedness and, if not timely paid, hold the
company in default thereof as well.
However, the bank has notified officers of the company that it is not
taking any legal action against the company or any of the company's
assets at the present time. Instead, the company and the bank are in
the process of negotiating the terms and conditions of a forbearance
agreement under which, among other things, the bank would agree to
forbear from exercising its rights and remedies under the loan documents
and permit the company to repay the line during a specific period of
time and maintain scheduled payments on the other bank debt during that
time.
Concurrently, the company is exploring the refinancing of the line of
credit and its other indebtedness with other lending institutions. The
company is also actively pursuing liquidating certain investments to
provide working capital until additional funding can be secured.
The Registrant believes that, providing both the company and the bank
agree on the proposed forbearance agreement, its working capital coupled
with cash flow from operations and the above-mentioned funding from sale
of investments will be sufficient to fund anticipated working capital
and debt funding requirements for the remainder of fiscal 2001.
However, the Registrant recognizes that future growth in fiscal 2002 and
beyond will require outside funding to replace its present financing.
<PAGE>
Kronick Kalada Berdy & Co.
Certified Public Accountants
190 Lathrop Street
Kingston, PA 18704
Independent Accountants' Report
Officers and Directors
EMCEE Broadcast Products, Inc.
We have reviewed the accompanying condensed balance sheet of EMCEE Broadcast
Products, Inc. and subsidiaries as of September 30, 2000 and the condensed
statements of loss, shareholders' equity and cash flows for the three-months
and six-months then ended September 30, 2000 and 1999. These financial
statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. According, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying condensed financial statements for them to
be in conformity with generally accepted accounting principals.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of EMCEE Broadcast Products, Inc.
and subsidiaries as of March 31, 2000, and the related consolidated statements
of income, stockholders' equity, and cash flows for the year then ended (not
presented herein), and in our report dated May 17, 2000, we expressed an
unqualified opinion on those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed consolidated
balance sheet as of March 31, 2000 is fairly stated, in all material respects
to the consolidated balance sheet from which it has been derived.
November 9, 2000
/s/ Kronick Kalada Berdy & Co.
Kronick Kalada Berdy
<PAGE>
EMCEE BROADCAST PRODUCTS, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net sales for the quarter ended September 30, 2000 were $1,771,000 and
brought net sales for the six-month period ended September 30, 2000 to
$3,451,000. Sales increased 82% compared to the quarter ended September 30,
1999, and 93% for the six-month period ended September 30, 2000.
Included in net sales for the first six months ended September 30, 2000
are sales of $622,000 for Advanced Broadcast Systems, Inc., a manufacturer of
high power television transmitters, whose assets were purchased by the
registrant on April 17, 2000.
Approximately 32% of net sales for the first half of fiscal 2001 that
ended September 30, 2000 were for a single foreign customer. Foreign sales
constituted 53% of total sales for the quarter and 61% of total sales for the
first six months of fiscal 2001 as compared to 46% for both the first six
months ended September 30, 1999 and 1998. Management anticipates an
increase of foreign sales for the next quarter as the interest is strong for
high-speed internet/TV systems. A comparison of export shipments by region for
the quarters and six-month periods ended September 30, 2000, 1999 and 1998 are
as follows:
<TABLE>
<CAPTION>
Quarter ended September 30, Six-Months Ending Sept. 30,
2000* 1999* 1998* 2000* 1999* 1998*
(000's omitted) (000's omitted)
<C> <C> <C> <C> <C> <C>
<S>
Asia/Pacific Rim $546 $134 $471 $1,365 $275 $857
Middle East 0 43 333 8 200 352
South America 179 107 76 199 142 155
North America 62 27 44 277 27 187
Central America 14 3 46 24 19 85
Caribbean 65 19 44 69 91 85
Europe 63 0 71 106 23 222
Africa 17 0 0 40 0 5
Other 0 33 64 17 41 74
-- --- -- ----- --- ---
$946 $366 $1,149 $2,105 $818 $2,022
=== === ===== ===== === =====
</TABLE>
*Based on customers with $2,500 or more of sales.
Gross profit totaled $401,000 for the quarter ended September 30, 2000
and increased gross profit to $741,000 for the first six months of fiscal
2001. This is an improvement compared to gross profit of $182,000 and
$290,000 for the comparable quarter and six-month period of fiscal 2000; due
primarily to the increase in sales volume although not enough to produce
profitable periods.
<PAGE>
Total operating expenses for the quarter ended September 30, 2000 were
$786,000 compared to $666,000 for the like period one year ago. Total
operating expenses increased to $1,526,000 for the six-month period ended
September 30, 2000 compared to $1,198,000 for the six months ended September
30, 1999. An amount of $126,000 of the increase was operating expenses of the
newly-purchased subsidiary.
Selling expenses increased from $494,000 for the six months ended
September 30, 1999 to $575,000 for the six months ended September 30, 2000, as
additional expenses were incurred in salaries and salary-related costs of
$31,000 due to additional personnel hired. Travel costs increased by $39,000,
as additional foreign travel expense was incurred to support the additional
foreign sales.
General & Administrative expenses totaled $702,000 for the six months
ended September 30, 2000, an increase of $172,000 over the first six months
ended September 30, 1999. General & administrative expense for the new
business added in fiscal 2001 accounted for $112,000 of this increase with the
remainder due to an increase in salary and salary-related expenses and
additional computer software expenses.
Research and development costs increased $75,000 for the six-month
period ended September 30, 2000 to $248,000 or 43%, compared to the six-month
period one year earlier as the Company is continuing the development of
digital products for UHF and VHF high power television transmitters for the
transition to digital broadcasting as required by the Federal Communications
Commission by the end of calendar 2003.
Loss from operations for the quarter ended September 30, 2000 was
$385,000, compared to $484,000 for the quarter ended September 30, 1999. Loss
from operations totaled $785,000 for the first six months of fiscal 2001,
compared to $909,000 for the like period for fiscal 2000.
As shown by the increase in sales for the six-month period ended
September 30, 2000 compared to the prior year's six months results and the
increase in the backlog of booked orders of $1,522,000 (versus $454,000 as of
September 30, 1999), management is confident that demand for the Company's
products will continue to increase for the remainder of fiscal 2001.
Interest expense increased from $8,000 for the second quarter of fiscal
2000 to $38,000 for the second quarter of fiscal 2001. Conversely, interest
income decreased for the same periods from $44,000 to $28,000, respectively,
as cash, cash equivalents and investments were reduced and additional amounts
borrowed to fund ongoing operations. Interest expense totaled $68,000 for the
six months ended September 30, 2000 compared to $27,000 for the same period
one year ago. Interest income totaled $64,000 for the six months ended
September 30, 2000 compared to $84,000 for the first two quarters ended
September 30, 1999.
Under the sub-category of "Other", a nominal income of $2,000 (from
scrap, rental and miscellaneous) for the quarter ended September 30, 2000
reduced other expenses (due primarily to rental income returned) to $1,000 for
the six months ended September 30, 2000. "Other" totaled $10,000 and $14,000,
respectively, for the quarter and six-month period ended September 30, 1999
due primarily from rental of the Company's salable products.
<PAGE>
Net other expense of $8,000 for the quarter ended September 30, 2000 and
$5,000 for the six months ended September 30, 2000 resulted in a net loss
before income tax of $393,000 and $790,000 for the respective periods. Tax
benefits reduced the losses to a net loss of $276,000 for the quarter ended
September 30, 2000 compared to a net loss of $288,000 for the quarter ended
September 30, 1999; both equaling seven cents per share of stock outstanding.
Net loss for the six months ended September 30,2000 was $550,000 or fourteen
cents per share of stock outstanding compared to a net loss of $589,000 or
fifteen cents per share of stock outstanding for the six months ended
September 30, 1999.
While cash and cash equivalents increased from $261,000 as of March 31,
2000 to $321,000 as of September 30, 2000, an amount of $1,374,000 of U.S.
Treasury bills were redeemed to fund operations and investment activities for
the first six months of fiscal 2001.
Accounts receivable increased $821,000 during the period from March 31,
2000 to September 30, 2000. The Registrant's primary customer for the period
received special terms with scheduled payments over a six-month period.
Allowance for doubtful accounts has been increased by $25,000 to $95,000 as of
September 30, 2000 due to the additional volume of exposure.
Inventories totaled $4,709,000 as of September 30, 2000, an increase of
$1,629,000. Since March 2000, the Company (as well as other companies) has
been plagued by a shortage of certain critical component parts that are
essential in its end product. Management has made a decision to purchase
quantities of available parts to alleviate the shortages and/or long-lead
time. The result of this decision was an increase of inventories and a
dramatic reduction of U.S. Treasury bills.
Prepaid expenses increased from $80,000 as of March 31, 2000 to $160,000
as of September 30, 2000 due to payments of approximately $40,000 for shows
and conventions for calendar year 2001. The remainder of the increase was for
insurance deposits and costs of annual reports to be amortized over the
remaining fiscal year ended March 31, 2001.
Income taxes refundable totaled $266,000 and deferred income taxes were
$223,000 as of September 30, 2000 for a total of $489,000, compared to a total
of $627,000 as of March 31, 2000. A total of $373,000 refund of federal tax
payments was received in the second quarter ended September 30, 2000. The
balances reflect an additional net tax benefit of $240,000 for the year-to-
date loss and temporary federal income tax timing differences.
Notes payables (line of credit) borrowing, which had not been utilized
since December 1993, was used in April, May and June 2000 for a total of
$1,100,000 to fund the inventory purchases noted above. In August 2000,
$150,000 was repaid bringing the outstanding amount to $950,000 as of
September 30, 2000. Accounts payable, which totaled $369,000 as of March 31,
2000, increased to $745,000 as of September 30, 2000 as inventory was
purchased for shipments in the third quarter ending December 31, 2000.
Long-term debt, net of current portion, decreased from $596,000 as of
March 31, 2000 to $543,000 as of September as retirement payments were made as
scheduled.
<PAGE>
On October 30, 2000, the company received written notice from its
primary lending institution, First Union National Bank, that its working
capital line of credit would not be renewed. As a result, the bank made a
demand for the entire outstanding principal balance of the line, which is
$950,000, together with all accrued and unpaid interest and all reimbursable
fees and expenses of the bank. Under the provisions of the bank's notice,
these sums had to be paid on or before November 10, 2000, but as of the date
of this report remain unpaid. The company is, therefore, in default of such
payment. Because the line of credit is cross defaulted under the bank's loan
documents with all other indebtedness of the company to the bank, which totals
$626,250 as of the date of this report, the bank would have the right to
accelerate the maturity of such other indebtedness and, if not timely paid,
hold the company in default thereof as well.
However, the bank has notified officers of the company that it is not
taking any legal action against the company or any of the company's assets
at the present time. Instead, the company and the bank are in the process
of negotiating the terms and conditions of a forbearance agreement under
which, among other things, the bank would agree to forbear from exercising
its rights and remedies under the loan documents and permit the company to
repay the line during a specific period of time and maintain scheduled
payments on the other bank debt during that time.
Concurrently, the company is exploring the refinancing of the line of
credit and its other indebtedness with other lending institutions. The
company is also actively pursuing liquidating certain investments to provide
working capital until additional funding can be secured.
The Registrant believes that, providing both the company and the bank
agree on the proposed forbearance agreement, its working capital coupled with
cash flow from operations and the above-mentioned funding from sale of
investments will be sufficient to fund anticipated working capital and debt
funding requirements for the remainder of fiscal 2001. However, the
Registrant recognizes that future growth in fiscal 2002 and beyond will
require outside funding to replace its present financing.
Payroll and payroll-related liabilities decreased a nominal $17,000 to
$198,000 as of September 30, 2000 due to changes in the accrual for vacation
pay.
Accrued Expenses Other increased from $438,000 as of March 31, 2000 to
$592,000 as of September 30, 2000. The major portion of the balance for both
periods includes accrued commissions to outside interests that has been
accrued, but not paid, for the respective dates.
Deposits from customers increased from $64,000 as of March 31, 2000 to
$351,000 as new orders increased over the six-month period ended September 30,
2000.
Total property, plant and equipment of $3,045,000 as of September 30,
2000 includes machinery and equipment valued at $245,000 for the acquisition
of April 17, 2000. Acquisition of new equipment was $10,400 for the six-month
period ended September 30,2000. Depreciation totaled $134,000 for the period
ended September 30, 2000 including $41,000 for the aforementioned acquisition.
<PAGE>
Other assets totaled $1,410,000 as of September 30, 2000 compared to
$1,292,000 as of March 31, 2000. Investments in high-speed internet
operations totaled $714,000 as of March 31, 2000. This total increased by
$115,000 as a note receivable (also included in other assets) was exchanged
for additional ownership of one of the entities. Accounts receivable and
associated interest due after twelve months decreased $59,000 as of September
30, 2000 compared to March 31, 2000. Goodwill in connection with the purchase
of Advanced Broadcast Systems, Inc. totaled $327,000 (net of amortization) as
of September 30, 2000.
Treasury stock decreased by 37,112 shares, equal to the value of
$172,000, as the shares were used as partial payment of the acquisition of
April 17, 2000. These shares are held in an escrow account until April 1,
2001.
Employment for the Registrant was a total of 56 employees as of
September 30, 2000. This total includes 6 employees for the acquired entity.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995
Any statements contained in this report which are not historical facts are
forwarding looking statements; and, therefore, many important facts could
cause actual results to differ materially from those in the forward looking
statements. Such factors include, but not limited to, changes (legislative,
regulatory and otherwise) in the MMDS or LPTV industry, 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, litigation and other factors, risks and
uncertainties identified in the Company's Securities and Exchange Commission
filings.
PART II. OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
That portion of footnote 6 of the financial statements accompanying this
report and that portion of Management's Discussion and Analysis of the
Financial Condition and Results of Operations above, which disclose (a) notice
and demand by the company's primary lending institution for all outstanding
indebtedness on the company's line of credit, (b) defaults by the company on
such indebtedness and other indebtedness of company to bank, (c) the
negotiation of a forbearance agreement with respect to such defaults, and (d)
other matters related thereto, are incorporated by reference into this Item 3
and Part II of this report.
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 thereto duly authorized.
EMCEE BROADCAST PRODUCTS, INC.
Date: November 13, 2000 /s/ JAMES L. DeSTEFANO
JAMES L. DeSTEFANO
President/CEO
Date: November 13, 2000 /s/ ALLAN J. HARDING
ALLAN J. HARDING
Vice President-Finance
