SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[x] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934. For the fiscal year ended May 31, 2000.
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the transition period from __________ to ____________.
Commission file number 1-13679
TOP AIR MANUFACTURING, INC.
(Name of Small Business Issuer in its Charter)
Iowa 42-1155462
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
317 Savannah Park Road, Cedar Falls, Iowa 50613
Address of Principal Executive Offices) (Zip Code)
(319) 268-0473
(Issuer's Telephone Number)
Securities registered under Section 12(b)
of the Exchange Act:
Name of each exchange
Title of each class: on which registered:
-------------------- ---------------------
Common Stock, No Par Value The American Stock Exchange
Securities registered under Section 12(g) of the Act: None
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 12 months (or for such shorter
period that the Issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Issuer'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. [X]
The Issuer's revenues for its most recent fiscal year are $15,149,012.
The aggregate market value of the voting stock held by non-affiliates was
approximately $1,394,093 as of August 21, 2000 (The exclusion from such amount
of the market value of the shares owned by any person shall not be deemed an
admission by the Issuer that such person is an affiliate of the Issuer.) The
Issuer had 4,954,803 shares of common stock, no par value, outstanding as of
August 21, 2000.
Portions of the definitive proxy statement of the Issuer for the Issuer's 2000
annual meeting of shareholders, which definitive proxy statement will be filed
with the Securities and Exchange Commission not later than September 28, 2000
(120 days after the end of the Issuer's most recently completed fiscal year),
are hereby incorporated by reference into Items 9, 10, 11 and 12 of Part III
hereof.
Transitional Small Business Disclosure Format Yes [ ] No [X].
<PAGE>
TABLE OF CONTENTS
PART I
Page
ITEM 1. Description of Business 3
ITEM 2. Description of Property 7
ITEM 3. Legal Proceedings 7
ITEM 4. Submission of Matters to a Vote of Security Holders 7
PART II
ITEM 5. Market for Common Equity and Related Stockholder Matters 8
ITEM 6. Management's Discussion and Analysis or Plan of Operation 9
ITEM 7. Financial Statements 12
ITEM 8. Changes In and Disagreements With Accountants on
Accounting and Financial Disclosure 12
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 13
ITEM 10. Executive Compensation 13
ITEM 11. Security Ownership of Certain Beneficial
Owners and Management 13
ITEM 12. Certain Relationships and Related Transactions 13
ITEM 13. Exhibits and Reports on Form 8-K 13
SIGNATURES
INDEX TO EXHIBITS
<PAGE>
The information contained in this Form 10-KSB includes statements regarding
matters that are not historical facts (including statements as to the beliefs or
expectations of the Company) which are forward-looking statements within the
meaning of the federal securities laws. You can identify those statements by
forward-looking words such as "may", "will", "expect", "anticipate", "believe",
"estimate" and "continue" or similar words. Because such forward-looking
statements include risks and uncertainties, the Company's actual results could
differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
in the sections captioned "Description of Business," "Management's Discussion
and Analysis or Plan of Operation" and those factors discussed in Exhibit 99.
PART I
Item 1 - Description of Business
General
Top Air Manufacturing, Inc. (hereinafter referred to as "Top Air" or
the "Company") was incorporated under the laws of the State of Iowa in
1981. Top Air is engaged in the business of manufacturing several
products used primarily in agricultural operations, including several
types of agricultural sprayers, liquid manure handling equipment, grain
carts, grain wagons and wagon running gears, weigh wagons, milking
parlors, seed conveyors, feeding and forage equipment and a line of
attachments and replacement parts for all of the products that the
Company manufactures. The Company currently manufactures its products
in two facilities, one in Cedar Falls, Iowa and the other in Jefferson,
Iowa.
Acquisitions
On January 21, 2000, the Company acquired the Great Bend Manufacturing
running gear line (the "Great Bend Running Gear") from Allied Products
Corporation for a cash payment of $235,400. The assets acquired
consisted primarily of inventory, but also included production fixtures
and engineering documentation.
In March 1999, the Company acquired substantially all of the assets of
Parker Industries, ("Parker Industries") in exchange for a cash payment
of $3,500,000, a non-interest bearing note for $3,500,000 due February
15, 2001 and the assumption of current liabilities in the amount of
$500,000
Business of Issuer
Principal Products and Markets
Sprayers. The Company currently manufactures several types of
agricultural sprayers including skid mount, two-wheel models, saddle
tank models, home lawn models, trailer sprayers, tandem wheel sprayers,
T-Tank sprayers, Master Link sprayers, and models which can be mounted
in the bed of a pickup truck. The sprayers are sold in sizes ranging in
capacity from 14 to 1,100 gallons. The Company also offers various
accessories for the sprayers including several models of folding and
self-leveling booms in various lengths and designs.
The sprayers are used primarily for farming activities. They can be
pulled directly by a tractor or they can be hooked to a disc so that
their combined functions allow the farmer to eliminate one trip over
the ground. The sprayers are used for spraying jobs of all types,
including the spraying of chemicals, fertilizers, insecticides and weed
killers. They are used by farmers and commercial sprayers primarily for
row crops, but can also be used on other crops, golf courses,
cemeteries, etc. The wheels may be adjusted to compensate for difficult
row crop widths. Trees and shrubs may be sprayed by a hand gun
attachment to the sprayers.
Manure Handling Equipment. This product group consists of a line of
tanks ranging in size from 2,600 gallons to 6,000 gallons, which are
either trailer mounted or truck mounted and are used to transport
animal manure from a storage pit or a storage lagoon to a farm field.
The manure is then spread on top of the ground or injected several
inches under the surface as a fertilizer which is very cost effective
as opposed to the purchase of a commercial substitute. In addition to
the tanks, this product group includes several types of pumps to
agitate the storage pit or storage lagoon and subsequently load the
tank.
Grain Carts, Grain Wagons and Wagon Running Gears. The Company
manufactures a wide variety of agricultural grain handling equipment,
including side and center unloading (gravity) wagons, ranging in size
from 190 to 720 bushel capacity, and grain carts equipped with
integral, folding augers, which range in size from 400 to 1,000 bushel
capacity. The grain wagons consist of two basic units, the grain box
and the wagon running gear, which can be sold together or separately.
Prior to the acquisition of the Great Bend Running Gear, the Company
purchased all of its running gear needs from outside sources. Grain
carts are most commonly sold as complete units with large floatation
tires.
Grain carts are used in the farm fields during the harvest season to
transport grain from the combine to nearby roads where the grain is
transferred from the cart to trucks or grain wagons for transport to
storage facilities. Carts are favored for use in the field because they
help speed up the harvest process and can be pulled across wet fields
in which trucks often get stuck. Grain wagons can also be used during
spring planting as seed tenders for grain drills and planters.
Weigh Wagons. Calibrated weigh wagons are used in the seed industry to
measure grain weight at various estimated grain moisture levels. Weigh
wagons are invaluable harvest tools that provide growers with a number
of benefits when checking yields during fall harvest. Weigh wagons help
growers confirm seed purchase decisions. Growers use weigh wagons to
weigh and measure product performance in their fields to ensure they
have chosen the right hybrids or varieties for their farms. Weigh wagon
data helps growers make future cropping decisions. Late each fall, most
seed companies publish and distribute weight wagon data to area
growers. The information allows these growers to see how products
performed across their region and helps them make decisions for the
following year. The standard capacity of a weigh wagon is 150 bushels
and optional 12" side extensions will increase capacity to 200 bushels.
An optional bulk seed attachment allows weigh wagons to be used during
spring as a method of delivering bulk seed to the growers.
Seed Conveyor. The Company believes that the trend in agriculture is
away from handling seed in bags and toward bulk handling. Because seed
is very sensitive to cracking and breaking which reduces germination,
the traditional auger elevator or chain type conveyor is less desirable
in seed handling. The seed conveyor utilizes a poly vinyl type of belt
with rubber cleats vulcanized to the belt which substantially reduces
damage to the seed. The seed conveyor is available in either a six-inch
or twelve-inch width. The six-inch wide conveyor is normally mounted on
a gravity box or a grain drill while the twelve-inch wide unit is
mounted on a trailer for mobility.
Milking Parlors. Dairy farmers who remodel or build new facilities
normally install a milking parlor or expand the existing milking
parlor. The milking parlor substantially reduces the time required to
complete the milking process because more cows can be milked with fewer
man hours. Although the Company manufactures several types of milking
parlors, the most popular type is the rapid exit 90 degree parlor.
Feeding and Forage. Feeding and forage equipment consists of belt
feeders, belt conveyors and silo unloaders. These products are normally
used in a configuration to convey and feed chopped hay or corn silage
along with other ingredients to dairy cows or beef cattle. These
products are normally found in small to medium size farm operations.
Replacement Parts and Attachments. The Company stocks a full line of
repair parts and attachments to fit all of the products that it
manufactures. The Company distributes these parts to retailers and
utilizes them in its own manufacturing processes. The Company has
actively promoted these parts and has established itself as a major
supplier in the replacement parts market.
Other Products. The Company also custom manufactures products for other
firms on a contract basis. Traditionally, these have been limited
production runs of new designs.
Method of Distribution
The Company has seven salesmen and twenty-seven manufacturers'
representatives calling upon dealers and distributors in seventeen
states and Canada. The Company's efforts are ongoing to continue
expanding its sales territory into additional states and to further
enhance market penetration in the current marketing areas. The Company
is selling its products primarily to implement dealers, farm supply
stores and feed stores located primarily in lesser populated
agricultural areas for resale to farmers, tradesmen and to the general
public for commercial and individual use.
Seasonal Factors
In fiscal 2000, approximately 55% of the Company's sales occurred
during the last six months of the year, compared to approximately 50%
of sales for the same period in fiscal 1999. This increase in the
seasonality of sales is primarily a result of improved orders and
shipments of the Company's products during the last six months of
fiscal 2000 compared to the same period last year.
Competitive Conditions
The Company competes with a large number of other agricultural
equipment manufacturers and suppliers. The Company believes, however,
that its products are considered sufficiently different so that the
Company can establish and maintain a market for its products. In
addition, the Company offers a full line of sprayer products, liquid
manure handling equipment, grain wagons and carts, milking parlors and
feeding and forage equipment that add to the Company's ability to
penetrate the market. The Company offers various dating and billing
programs that allow the Company's dealers incentive to stock larger
quantities of products without the necessity to commit financial
resources several months in advance. This also allows the Company to
plan its production on a more consistent basis.
Major Customers
The Company's customer base is sufficiently broad so that no customer
accounts for 10% or more of the Company's sales.
Backlog Orders
The Company had a sales backlog of approximately $2,500,000 as of May
31, 2000 compared to a $1,300,000 sales backlog as of May 31, 1999. The
May 31, 2000 backlog consists mainly of grain carts and wagons
scheduled for summer delivery. See "Seasonal Factors."
Source and Availability of Raw Materials
The Company purchases its raw materials from a number of suppliers. The
Company has had no difficulty in obtaining component parts in the past
and does not anticipate any difficulty in obtaining sufficient
component parts and raw materials as production increases.
Patents and Trademarks
The Company has received a design patent on the master-link sprayer,
the self-leveling boom, and has trademark registrations for Top-Air(R)
and E-Z Boy(R). The Company also sells a line of agricultural spreaders
under the registered trade name of "Better-Bilt." The acquisition of
Parker Industries included design patents for grain carts equipped with
hydraulically driven discharge augers and drag augers, seed carts with
loading/unloading conveyor systems and trademark registrations for
Parker(R) and a stylized letter P. While the Company believes that its
patents and trademarks have significant value, the Company is not
dependent upon patents, trademarks, service marks or copyrights.
Environmental Compliance
The Company believes that it is presently in substantial compliance
with all existing applicable environmental laws and does not anticipate
that such compliance will have a material effect on its future capital
expenditures, earnings or competitive position.
Employees
On May 31, 2000, the Company's plant and executive offices employed 150
people on a full-time basis. Five of these employees are executive
officers and the remainder are sales representatives, office staff,
production workers and truck drivers. Fifty full-time production
workers are currently covered under a collective bargaining agreement
with Local 1728 of the IAMAW, which runs through June 30, 2001.
Research and Development
Research and development costs incurred for the years ended May 31,
2000, 1999 and 1998 were $800,823, $591,839 and $486,985, respectively.
Research and development activities consist primarily of wages paid for
the design and testing of new equipment and improvements to existing
equipment.
Item 2 - Description of Property
The Company's operations are located in Cedar Falls, Iowa, Jefferson, Iowa and
Onarga, Illinois. The Cedar Falls location is the Company's headquarters and
consists of an 112,000 square foot building (the "Cedar Falls Facility") that
was completed in November 1996. The Cedar Falls Facility is located in an
industrial park on thirteen acres of land and includes approximately 7,000
square feet of executive office space and an aggregate of approximately 95,000
square feet devoted to manufacturing, assembly, and warehousing functions. The
Company leases the Cedar Falls Facility from the City of Cedar Falls, Iowa (the
"City"). The lease term runs through 2006 and the City holds a five-year renewal
option. In the event that the City exercises such option, the Company shall have
the right to purchase the Cedar Falls Facility from the City for $1.3 million
upon the expiration of the five-year renewal term. The Company completed a
27,000 square foot expansion at a cost of approximately $1,000,000 during April
1999 pursuant to a Development Agreement with the City. Under the Development
Agreement, the Company received four acres of land at no cost and will be
entitled to 20.5% of the sale proceeds from the disposition of the Cedar Falls
Facility in the event such facility is sold prior to November 2011.
In connection with its acquisition of Parker Industries, the Company entered
into a lease for a production facility in Jefferson, Iowa (the "Jefferson
Facility") on March 5, 1999. The Jefferson Facility, which is located on 10.8
acres of land, consists of two buildings totaling 60,000 square feet.
Approximately 1,500 square feet is used for administrative offices with the
remainder used for manufacturing, engineering and warehousing. The Company is
leasing the Jefferson Facility from Greene County Development Corporation for a
term of ten years. Throughout the lease term, the Company has the option to
purchase the Jefferson Facility. The purchase price is $750,000 during the first
two years of the lease and declines to $539,175 in year seven. The purchase
price during the remaining three years of the lease is at appraised value.
The Company relocated all production from the Onarga Facility to the Cedar Falls
Facility on June 25, 1999. As of May 31, 2000, all of the land, buildings and
machinery in Onarga, Illinois have been sold except for the production plant.
The production plant is expected to be sold by August 31, 2000. The Company has
accrued a loss of $70,000 at May 31, 2000 for the sale of this production plant.
The Company believes that all of its facilities are adequately insured and are
adequate to meet the needs for which they are used.
Additional information regarding the Company's properties is included in "Note
12 - Lease Commitments" of the Notes to Financial Statements.
Item 3 - Legal Proceedings
There are no material legal proceedings pending to which the Company is a party
or of which any of its property is the subject. No proceedings were terminated
during the fourth quarter of the fiscal year covered by this Report.
Item 4 - Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Report.
<PAGE>
PART II
Item 5 - Market for Common Equity and Related Stockholder Matters
Market Information
On December 8, 1997, Top Air's common stock was approved for listing on
The American Stock Exchange under the symbol "TPC". Prior thereto, the
Company's common stock was quoted on the Nasdaq SmallCap Market.
The table below lists the high and low bid prices or sales prices, as
applicable, for each quarterly period during the years ended May 31,
2000 and 1999 that were provided by The American Stock Exchange.
Sales Price Range Sales Price Range
Fiscal 2000 Fiscal 1999
------------- -------------
High Low High Low
---- --- ---- ---
1st Quarter $1.9375 $.9375 $2.6250 $1.6875
2nd Quarter .8750 .7500 1.8750 1.1875
3rd Quarter 1.5000 .5625 1.4375 .8750
4th Quarter 1.2500 .7500 2.1250 .7500
Stockholders
As of May 31, 2000 the Company had approximately 800 holders of record
of the Company's common stock.
Dividends
The holders of common shares are entitled to receive dividends when, as
and if declared by the Board of Directors. Except for certain
provisions in the Company's loan agreement with Firstar Bank, which
require the bank's prior approval for a dividend to be paid and the
maintenance of certain working capital and tangible equity levels,
there are no agreements that restrict dividend payments. The Company
has never paid a cash dividend. Because the Company currently intends
to retain any earnings to finance the development of its business, it
does not anticipate payment of any cash dividends in the foreseeable
future.
Recent Sales of Unregistered Stock
On January 25, 2000 the Company raised $500,000 through a private
placement of the Company's convertible subordinated debentures due
January 2005 in the aggregate principal amount of $500,000. The
debentures were offered to the Company's significant shareholders
and/or directors. Each debenture is convertible into one share of the
Company's common stock at a conversion price of $1.25 per share. The
issuance of the debentures is exempt from registration pursuant to Rule
506 of Regulation D, promulgated under Section 4(2) of the Securities
Exchange Act of 1934, as amended.
Item 6 - Management's Discussion and Analysis or Plan of Operation
Overview
While fiscal 2000 showed a strong increase in sales as a result of the
acquisition of Parker Industries, low plant utilization during the
first three quarters and expenses related to the shutdown and
relocation of the Onarga facility put the Company in a net loss
position for the year. The Company is intensifying its efforts to
eliminate all non-essential costs, improve production efficiencies and
increase sales in order to withstand the current agriculture sector
conditions. Although the farm economy is well into its third year of
low commodity prices and weak demand for farm equipment, the Company
believes the actions taken during fiscal 1999 and 2000 to reduce dealer
inventories and maintain market share, should allow it to show
increases in orders and shipments during fiscal 2001 without a
substantial change in the economy. Strong order levels during the
fourth quarter of fiscal 2000 and the first quarter of 2001, coupled
with the operational plan implemented during the first quarter of
fiscal 2001, gives the Company confidence of improved results for
fiscal 2001.
Results Of Operations
Fiscal 2000 Compared to Fiscal 1999
Net sales increased $2,853,159 to $15,149,012 in fiscal year 2000,
which represents a 23% increase from fiscal 1999 net sales of
$12,295,853. The increase resulted primarily from including sales of
Parker Industries for a full twelve months during fiscal 2000, coupled
with contract manufacturing sales of approximately $700,000 performed
for other manufacturers. These sales increases offset a decrease in
sales of the Ficklin product line of approximately $1,500,000. Although
the general conditions in the farm economy continue to experience
difficult times, orders and shipments of the Company's products showed
promising increases during the final quarter of fiscal year 2000 and
are expected to increase in the first quarter of fiscal 2001.
The Company's gross margin increased to $3,008,548 in fiscal 2000, an
increase of 39%. This increase was primarily due to increased net sales
volume. Gross margin as a percentage of net sales increased to 19.9% in
fiscal 2000 from 17.6% in 1999. This increase in margin is primarily a
result of the higher sales volume absorbing more fixed costs, coupled
with overhead savings from closing the Onarga, Illinois facility during
June 1999. The Company believes it can continue the trend of increasing
gross margins for fiscal 2001 by improving production efficiencies,
reducing expenses and increasing revenue growth. In addition to these
reductions and improvements, the one time costs incurred in connection
with the shutdown and relocation of the Onarga facility, will not recur
in 2001.
Operating expenses increased $729,996 to $4,316,111 in fiscal 2000,
which was a 20% increase from $3,586,115 in 1999. The increase was due
primarily to the incremental expenses associated with the first full
year of operations of Parker Industries. Operating expenses as a
percentage of net sales decreased to 28.5% in fiscal 2000 compared to
29.2% in fiscal 1999. The Company is currently implementing plans in an
effort to significantly reduce this percentage for fiscal year 2001.
Interest expense increased $258,603 to $809,455 in fiscal 2000, which
was a 46.9% increase from $550,852 in fiscal 1999. The increase was due
to higher levels of long-term debt necessary to finance the purchase of
Parker Industries coupled with higher interest rates. Interest expense
as a percentage of net sales increased to 5.3% in fiscal year 2000 from
4.5% in fiscal 1999.
The income tax credit increased $87,757 to $753,600 in fiscal 2000,
which is a 13% increase from a credit of $665,843 in fiscal 1999. The
increase resulted from the higher loss for fiscal 2000.
Net loss increased $64,119 to a loss of $1,339,986 in fiscal 2000,
which was a 5% increase from the net loss of $1,275,867 in 1999. Net
loss as a percentage of net sales improved to (8.8%) in fiscal 2000
from (10.4%) in fiscal 1999.
Fiscal 1999 Compared to Fiscal 1998
Net sales decreased $4,266,608 to $12,295,853 in fiscal year 1999,
which represents a 26% decrease from fiscal 1998 net sales of
$16,562,461. The sales decrease is a result of the current farm
recession that began in the spring of 1998. Sales were lower for
virtually all product lines but were offset by $1,690,069 of
incremental sales of Parker Industries since the acquisition date of
March 5, 1999. Although the Company does not believe the general
outlook for the farm economy will improve during the upcoming year, the
Company does anticipate an increase in sales for fiscal 2000 as a
result of the acquisition of Parker Industries. The Company is also
increasing its volume of subcontract work for other companies in order
to increase plant utilization.
The Company's gross margin decreased to $2,170,203 in fiscal 1999, a
decrease of 60%. This decrease was primarily a result of the
significant reduction in sales. Gross margin as a percentage of net
sales decreased to 17.6% in fiscal 1999 from 32.9% in 1998. This
decrease in margin is a result of the lower net sales volume absorbing
fixed costs that were intended to support significantly higher sales
volumes. The Company is continuing its efforts to control and reduce
costs through various means, including temporary plant shutdowns
planned for both the Cedar Falls Facility and the Jefferson Facility
and the permanent closing of the Onarga Facility on June 25, 1999. All
of the Onarga Facility production has been moved to the Cedar Falls
Facility and the Company is in the process of selling the land,
buildings and machinery at the Onarga Facility. The Company believes
that the closing of the Onarga Facility will reduce manufacturing
overhead and operating expenses by approximately $300,000 annually.
Operating expenses increased $55,690 to $3,586,115 in fiscal 1999,
which was a 2% increase from $3,530,425 in 1998. The increase was due
to incremental expenses of $250,000 associated with the acquisition of
Parker Industries for the last three months of the year and a $100,000
loss accrued for the sale of the Onarga Facility, offset by a $330,000
decrease in sales expenses related to the lower volume of sales.
Operating expenses as a percentage of net sales increased to 29.2% in
fiscal 1999 compared to 21.3% in fiscal 1998.
Interest expense increased $180,261 to $550,852 in fiscal 1999, which
was a 48.6% increase from $370,591 in fiscal 1998. The increase was due
to higher levels of short-term and long-term debt necessary to finance
the operation of Parker Industries and the completion of the 27,000
square foot expansion of the Cedar Falls Facility. Interest expense as
a percentage of net sales increased to 4.5% in fiscal year 1999 from
2.2% in fiscal 1998.
Income tax expense decreased $1,226,842 to a credit of $665,843 in
fiscal 1999, which was a 219% decrease from $560,999 expense in fiscal
1998. The decrease was a result of the loss for fiscal 1999.
Net income decreased $2,275,874 to a loss of $1,275,867 in fiscal 1999,
which was a 228% decrease from net income of $1,000,007 in 1998. Net
income as a percentage of net sales decreased to (10.4%) in fiscal 1999
from 6.0% in fiscal 1998.
Liquidity
Due to the seasonality of the period of use for the Company's products,
it is necessary for the Company to build inventories ahead and finance
accounts receivable for extended terms. As a result, the Company's need
for working capital continues to increase as sales grow.
The Company has used a combination of cash generated from operations
and short-term bank loans to fund working capital requirements. The
same combination is intended to be used to fund fiscal 2001
requirements.
As of May 31, 2000, the Company had a $1,600,000 line of credit from a
bank pursuant to a credit and security agreement originally dated March
4, 1999 and a forbearance agreement dated April 18, 2000 which expired
July 18, 2000 and bore interest of 12.5%. As of May 31, 2000, there was
$1,227,000 outstanding under the Company's line of credit.
As has been previously reported, the Company has been unable to meet
certain financial covenants associated with this line of credit. On
August 24, 2000, the Company and its lender entered into a forbearance
agreement in which the lender agreed to forbear from exercising its
rights and remedies against the Company up to and through October 31,
2000. This forbearance agreement also permits the Company to borrow up
to $2,000,000 at an interest rate of 12.5% based on a percentage of
inventory, trade receivables and property and equipment.
The Company is continuing to seek alternative sources of debt and/or
equity financing. As of the date of this report, the Company has not
received a commitment from any source to provide such financing. The
Company cannot give any assurance that it will be able to obtain more
permanent financing of its working capital requirements from its bank
lender or any other source. If the Company is unable to obtain such
accommodation and financing, the Company could not fund its ongoing
operations.
The Company's working capital on May 31, 2000 was $217,505 compared to
$8,155,944 in fiscal 1999 and $5,697,623 in fiscal 1998. Working
capital decreased primarily as a result of the loss for the year, the
reclassification of $7,000,000 of long term debt to current notes
payable offset by $500,000 in convertible debentures issued during the
year. The current ratio decreased to 1.02:1 in fiscal 2000 from 2.02:1
in fiscal 1999 and 2.48:1 in fiscal 1998.
Net cash from operations for fiscal 2000 was $3,756,469, an increase of
$4,345,042 from the net cash used in fiscal 1999 of $588,573. The
increase was primarily a result of reductions in inventory and current
trade receivables.
Net cash used in investing activities during fiscal 2000 was $240,300,
a decrease of $4,776,456 from the net cash used in fiscal 1999 of
$5,016,756. The decrease was primarily a result of investments made
during fiscal 1999 in buildings, production machinery and equipment and
the acquisition of Parker Industries.
Net cash used in financing activities during fiscal 2000 was
$3,570,672, a decrease of $9,229,012 from net cash provided by
financing activities in fiscal 1999 of $5,658,340. The decrease was due
to reduced short-term and long-term borrowings as a result of paying
down debt related to the Parker Industries acquisition with the
collection of current trade receivables.
Capital Resources
During January 2000 the Company began the implementation of a new ERP
computer system, driven primarily by the expiration of Parker's
computer usage lease with Owosso Corporation. This new computer system
will enable the Company to bring both of its locations' information
systems together on one platform and will provide many valuable tools
the current system does not provide. The total cost of this new ERP
system will be approximately $250,000.
The Company anticipates no significant outlays for property and
equipment in the near future.
Year 2000 Readiness Disclosure
The Company developed a Year 2000 Plan during 1999 to assess its vulnerability
to system failures arising from the Millennium change that could impact the
Company adversely. These threats were identified, and priorities established to
address these risks based on the financial threat or seriousness of the
implications. The project's primary emphasis was to look at the risks with the
most severe financial implication first, and then to address those critical
problems. The risks to the Company and the Company's Year 2000 Plan have been
described in the Company's quarterly report on Form 10-QSB for the quarter
ending November, 30, 1999.
Based upon the actions taken by the Company and the information it has received
to date, the Company does not believe that the Millennium change has materially
affected its customers and vendors and the Company believes that its contingency
plans, if required to be implemented, would be successful. Although problems as
a result of the Millennium change may still occur in the future, as of August
29, 2000, the Company has not encountered any material negative effects from the
Millennium change. The Company will continue to monitor its systems and the
risks identified in its Year 2000 Plan for any potential problems and take the
appropriate actions to minimize any adverse consequences.
Item 7 - Financial Statements
The financial statements of the Company are included herein as a separate
section of this Report which begins on page F-1.
Item 8 - Changes In and Disagreements with Accountants
On Accounting and Financial Disclosure
Not Applicable.
<PAGE>
PART III
Items 9, 10, 11 and 12
The information called for by Items 9, 10, 11 and 12 is incorporated by
reference to the definitive proxy statement for the 2000 Annual Meeting of
Shareholders of the Company (which involves the election of Directors), which
definitive proxy statement will be filed with the Securities and Exchange
Commission (the "Commission") not later than September 28, 2000 (120 days after
the end of the Company's most recently completed fiscal year).
Item 13 - Exhibits and Reports on Form 8-K
(a) Exhibits
See Index to Exhibits of this Report.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the quarter ended May
31, 2000.
The following reports have been filed since May 31, 2000:
Form 8-K dated July 12, 2000 reporting the Company's receipt of a
notice of default from its bank lender pertaining to the
Company's outstanding Line of Credit.
Form 8-K dated July 5, 2000 reporting the Company's entering into
an agreement to obtain additional working capital funds from its
bank lender pursuant to the Company's outstanding Line of Credit.
<PAGE>
TOP AIR MANUFACTURING, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL REPORT
May 31, 2000
CONTENTS
Page
----
INDEPENDENT AUDITOR'S REPORT F-2
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheets F-3
Consolidated statements of operations F-5
Consolidated statements of stockholders' equity F-6
Consolidated statements of cash flows F-7
Notes to financial statements F-9
F-1
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Top Air Manufacturing, Inc.
Cedar Falls, Iowa
We have audited the accompanying consolidated balance sheets of Top Air
Manufacturing, Inc. and subsidiaries as of May 31, 2000 and 1999, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the years ended May 31, 2000, 1999 and 1998. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated 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 Top Air
Manufacturing, Inc. and subsidiaries as of May 31, 2000 and 1999, and the
results of their operations and their cash flows for the years ended May 31,
2000, 1999 and 1998 in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
Waterloo, Iowa
August 24, 2000
F-2
<PAGE>
Top Air Manufacturing, Inc. and subsidiaries
Consolidated Balance Sheets
May 31, 2000 and 1999
<TABLE>
<CAPTION>
ASSETS (Note 3) 2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 3,654 $ 58,157
Trade receivables, less allowances for doubtful
accounts and discounts 2000 $528,811; 1999 $628,000 4,672,455 7,341,602
Income tax refund receivable 22,227 520,000
Current portion of long-term notes receivable (Note 4) 141,028 161,315
Inventories (Note 2) 6,151,665 7,851,251
Prepaid expenses 107,071 116,956
Deferred income taxes (Note 5) 334,700 68,200
-----------------------------------
Total current assets 11,432,800 16,117,481
-----------------------------------
Long-Term Receivables, Intangibles and Other Assets
Notes receivable, net of current portion (Note 4) 98,748 126,782
Assets held for sale (Note 13) 80,377 187,150
Deferred income taxes (Note 5) 672,200 214,500
Goodwill 912,759 983,159
Other assets 9,572 33,572
-----------------------------------
1,773,656 1,545,163
-----------------------------------
Property and Equipment
Land and improvements 222,699 222,699
Buildings 625,944 655,944
Machinery and equipment 3,319,315 3,371,638
Transportation equipment 638,846 689,588
Office equipment 750,038 523,345
-----------------------------------
5,556,842 5,463,214
Less accumulated depreciation 1,817,300 1,403,788
-----------------------------------
3,739,542 4,059,426
-----------------------------------
$ 16,945,998 $ 21,722,070
-----------------------------------
See Notes to Financial Statements.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities
Notes payable (Note 3) $ 1,227,000 $ 2,382,000
Current maturities of long-term debt (Note 3) 7,996,417 3,726,245
Accounts payable 1,116,387 722,699
Accrued salaries and bonuses 172,035 228,240
Accrued commissions payable 275,930 377,086
Other accrued expenses, including amounts due to
officers and related party 2000 $24,548; 1999 $6,000 427,526 389,926
Income taxes payable (Note 5) - 135,341
-----------------------------------
Total current liabilities 11,215,295 7,961,537
-----------------------------------
Long-Term Liabilities
Long-term debt (Note 3) 486,245 7,655,969
Convertible subordinated debentures (Note 9) 500,000 -
Deferred revenue (Note 12) 116,000 120,000
-----------------------------------
1,102,245 7,775,969
-----------------------------------
Commitments (Notes 6 and 12)
Stockholders' Equity (Note 3)
Capital stock, common, no par value; stated
value $.0625 per share; authorized 20,000,000
shares; issued 2000
5,177,432 shares; 1999 5,170,099 shares (Note 6) 323,589 323,131
Additional paid-in capital 2,910,918 2,903,324
Retained earnings 1,754,099 3,094,085
-----------------------------------
4,988,606 6,320,540
Less cost of common stock reacquired for the treasury
2000 222,629 shares; 1999 201,142 shares 360,148 335,976
-----------------------------------
4,628,458 5,984,564
-----------------------------------
$ 16,945,998 $ 21,722,070
-----------------------------------
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
Top Air Manufacturing, Inc. and subsidiaries
Consolidated Statements of Operations
Years Ended May 31, 2000, 1999 and 1998
2000 1999 1998
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $ 15,149,012 $ 12,295,853 $ 16,562,461
Cost of goods sold 12,140,464 10,125,650 11,120,801
--------------------------------------------------
Gross profit 3,008,548 2,170,203 5,441,660
--------------------------------------------------
Operating expenses:
Selling 1,863,399 1,419,820 1,585,741
Provision for doubtful accounts (22,964) (30,403) 47,208
Other general and administrative, including
amounts paid to related parties 2000 $50,500;
1999 and 1998 $48,000 (Note 7) 2,475,676 2,196,698 1,897,476
--------------------------------------------------
4,316,111 3,586,115 3,530,425
--------------------------------------------------
Operating income (loss) (1,307,563) (1,415,912) 1,911,235
--------------------------------------------------
Financial income (expense):
Interest income 23,432 25,054 20,362
Interest expense (809,455) (550,852) (370,591)
--------------------------------------------------
(786,023) (525,798) (350,229)
--------------------------------------------------
Income (loss) before income taxes (2,093,586) (1,941,710) 1,561,006
Federal and state income taxes (credits) (Note 5) (753,600) (665,843) 560,999
--------------------------------------------------
Net income (loss) $ (1,339,986) $ (1,275,867) $ 1,000,007
--------------------------------------------------
Earnings (loss) per share (Note 10):
Basic $ (0.27) $ (0.25) $ 0.20
--------------------------------------------------
Fully diluted $ (0.27) $ (0.25) $ 0.19
--------------------------------------------------
Weighted average shares (Note 10):
Basic 4,965,017 5,006,588 5,088,646
Fully diluted 4,965,017 5,006,588 5,249,873
See Notes to Financial Statements.
</TABLE>
F-5
<PAGE>
Top Air Manufacturing, Inc. and
subsidiaries
<TABLE>
<CAPTION>
Consolidated Statements of Stockholders' Equity
Years Ended May 31, 2000, 1999 and 1998
-------------------------------------------------------------------------------------------------------
Capital Additional
Stock, Paid-In Retained Treasury
Issued Capital Earnings Stock Total
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, May 31, 1997 $ 322,798 $ 2,898,636 $ 3,369,945 $ (19,691) $ 6,571,688
Net income - - 1,000,007 - 1,000,007
Purchase of 54,425 shares
of common stock for the
treasury - - - (112,322) (112,322)
Issuance of 2,333 shares of
common stock upon the
exercise of options 146 2,052 - - 2,198
----------------------------------------------------------------------
Balance, May 31, 1998 322,944 2,900,688 4,369,952 (132,013) 7,461,571
Net (loss) - - (1,275,867) - (1,275,867)
Purchase of 117,500 shares
of common stock for the
treasury - - - (203,963) (203,963)
Issuance of 3,001 shares of
common stock upon the
exercise of options 187 2,636 - - 2,823
----------------------------------------------------------------------
Balance, May 31, 1999 323,131 2,903,324 3,094,085 (335,976) 5,984,564
Net (loss) - - (1,339,986) - (1,339,986)
Purchase of 21,487 shares
of common stock for the
treasury - - - (24,172) (24,172)
Issuance of 7,333 shares of
common stock upon the
exercise of options 458 7,594 - - 8,052
----------------------------------------------------------------------
Balance, May 31, 2000 $ 323,589 $ 2,910,918 $ 1,754,099 $ (360,148) $ 4,628,458
----------------------------------------------------------------------
See Notes to Financial Statements.
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
Top Air Manufacturing, Inc. and subsidiaries
Consolidated Statements of Cash Flows
Years Ended May 31, 2000, 1999 and 1998
2000 1999 1998
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income (loss) $ (1,339,986) $ (1,275,867) $ 1,000,007
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 621,896 482,777 409,457
Amortization 94,400 101,420 97,516
Deferred income taxes (724,200) (273,200) 154,000
Allowance on disposal of assets held for
sale (Note 13) - 100,000 -
(Gain) loss on sale of equipment 93,382 - (11,631)
Change in assets and liabilities, net of the
effects of business acquisitions (Note 11):
(Increase) decrease in:
Trade receivables 2,669,147 631,485 (866,262)
Income tax refund receivables 497,773 (520,000) -
Inventories 1,699,586 759,753 (1,282,590)
Prepaid expenses 9,885 27,450 (38,347)
Increase (decrease) in:
Accounts payable and accrued expenses 273,927 (822,540) 110,768
Income taxes payable (135,341) 80,149 (236,623)
Deferred revenue (4,000) 120,000 -
----------------------------------------------------
Net cash provided by (used in)
operating activities 3,756,469 (588,573) (663,705)
----------------------------------------------------
Cash Flows From Investing Activities
Proceeds from sale of equipment 176,378 - 19,600
Purchase of property and equipment (464,999) (1,518,399) (1,034,552)
Acquisition of certain net assets of Parker
Industries (Note 11) - (3,522,792) -
Payments received on long-term
notes and other receivable 48,321 24,435 34,613
Increase in intangible and other assets - - (699)
----------------------------------------------------
Net cash (used in) investing activities (240,300) (5,016,756) (980,339)
----------------------------------------------------
(Continued)
</TABLE>
F-7
<PAGE>
<TABLE>
<CAPTION>
Top Air Manufacturing, Inc. and subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years Ended May 31, 2000, 1999 and 1998
2000 1999 1998
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Financing Activities
Proceeds from short-term borrowings 6,719,400 9,889,699 8,712,400
Principal payments on short-term borrowings (7,874,400) (9,535,274) (7,524,400)
Proceeds from long-term borrowings 149,945 11,985,206 725,000
Principal payments on long-term borrowings (3,049,497) (6,480,151) (416,505)
Proceeds from issuance of convertible
subordinated debentures 500,000 - -
Purchase of common stock for the treasury (24,172) (203,963) (112,322)
Proceeds from issuance of common stock 8,052 2,823 2,198
--------------------------------------------------
Net cash provided by (used in)
financing activities $ (3,570,672) $ 5,658,340 $ 1,386,371
--------------------------------------------------
Increase (decrease) in cash
and cash equivalents $ (54,503) $ 53,011 $ (258,372)
Cash and Cash Equivalents
Beginning 58,157 5,146 263,518
--------------------------------------------------
Ending $ 3,654 $ 58,157 $ 5,146
--------------------------------------------------
Supplemental Disclosures of Cash Flow
Information
Cash payments for:
Interest $ 770,522 $ 549,150 $ 363,444
--------------------------------------------------
Income taxes, net of (refunds) $ (391,832) $ 47,195 $ 643,622
--------------------------------------------------
Supplemental Schedule of Noncash Investing
and Financing Activities
Deferred revenue on land received (Note 12) $ 120,000
-----------------
Acquisition of Parker Industries (Note 11):
Working capital acquired $ 6,394,184
Fair value of other assets acquired,
principally property and equipment 634,688
Long-term debt assumed (3,506,080)
-----------------
$ 3,522,792
-----------------
Cash purchase price $ 3,522,792
-----------------
See Notes to Financial Statements.
</TABLE>
F-8
<PAGE>
Top Air Manufacturing, Inc. and subsidiaries
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 1. Nature of Business and Significant Accounting Policies
Nature of business: The Company's operations consist of the design, manufacture
and sale of agricultural equipment and repair and replacement parts to dealers
located primarily in the midwestern states on credit terms that the Company
establishes for individual customers.
Significant accounting policies:
Principles of consolidation: The consolidated financial statements include the
accounts of the Company and its subsidiaries, Ficklin Machine Co., Inc. and
Parker Industries, Inc., which are wholly-owned. All significant intercompany
accounts and transactions have been eliminated.
Accounting estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and cash equivalents: For purposes of reporting cash flows, the Company
considers all money market funds and savings accounts to be cash equivalents.
Inventories: Inventories are valued at the lower of cost (first-in, first-out
method) or market.
Assets held for sale: These assets are valued at the lower of cost or fair
market value less estimated costs of disposal.
Property and equipment and depreciation: Property and equipment is carried at
cost. Depreciation on property and equipment is computed by the straight-line
method over the estimated useful lives of the assets.
Goodwill: Goodwill resulting from the Company's acquisition of Ficklin Machine
Co., Inc. is being amortized over 15 years using the straight-line method and is
periodically reviewed for impairment based upon an assessment of future
operations to ensure that they are appropriately valued. Accumulated
amortization on goodwill totaled $253,295 and $178,245 at May 31, 2000 and 1999
respectively.
Deferred revenue: The fair market value of land contributed to the Company by
the City of Cedar Falls, Iowa has been accounted for as deferred revenue and is
being amortized to income over the estimated useful life of the building
constructed on the land. See Note 12.
Revenue recognition: Sales of all products are recognized as goods are shipped.
Reclassification of certain assets: Certain assets on the balance sheet as of
May 31, 1999 have been reclassified, with no effect on total assets or equity,
to be consistent with the classification, adopted at May 31, 2000.
F-9
<PAGE>
Top Air Manufacturing, Inc. and subsidiaries
Notes to Financial Statements
--------------------------------------------------------------------------------
Income taxes: Deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences and operating
loss carryforwards and deferred tax liabilities are recognized for taxable
temporary differences. Temporary differences are the differences between the
reported amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of management,
it is more likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.
Research and development: Research and development costs are charged to
operations as they are incurred.
Stock options issued to employees: The Company has adopted the provisions of
SFAS No. 123, "Accounting for Stock-Based Compensation", which establishes a
fair value based method for the financial reporting of its stock-based employee
compensation plans. However, as allowed by the new standard, the Company has
elected to continue to measure compensation using the intrinsic value based
method as prescribed by Accounting Principles Board Option No. 25, "Accounting
for Stock Issued to Employees." Under this method, compensation is measured as
the difference between the market value of the stock on the grant date, less the
amount required to be paid for the stock. The difference, if any, is charged to
expense over the periods of service.
Earnings (loss) per share: Basic earnings (loss) per share is computed by
dividing net income available to common stockholders by the weighted average
number of shares outstanding. In computing diluted earnings per share, the
dilutive effect of stock options during the periods presented, as well as the
effect of contingently issuable shares, increase the weighted average number of
shares.
Fair value of financial instruments: The carrying amount of cash and cash
equivalents, trade receivables and accounts payable approximates fair value
because of the short maturity of these instruments. The carrying amounts of
notes receivable, current notes payable and long-term debt approximate fair
values because these instruments bear interest at approximate current rates
available to the Company for similar instruments.
Recently issued accounting standards: In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended by SFAS No. 138 issued in June 2000. This
statement establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. This statement must be adopted no later
than May 31, 2002, although earlier application is permitted. Management
believes the adoption of SFAS No. 133 will not have a significant effect on its
financial statements.
In December 1999, the Securities and Exchange Commission issued SAB No. 101
"Revenue Recognition in Financial Statements," as amended by SAB No. 101B issued
in June 2000. This bulletin summarizes certain of the staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. The Company will adopt SAB No. 101 when required in the fourth
quarter of 2000. The Company is in the process of determining the impact the
adoption will have on its financial statements.
F-10
<PAGE>
Top Air Manufacturing, Inc. and subsidiaries
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 2. Composition of Inventories
Inventories at May 31, 2000 and 1999 consisted of the following:
2000 1999
--------------------------------
Raw materials $ 1,076,737 $ 1,239,815
Work in process 471,672 830,326
Finished goods 4,603,256 5,781,110
--------------------------------
$ 6,151,665 $ 7,851,251
--------------------------------
Note 3. Pledged Assets and Related Debt
The Company has a line of credit agreement with a bank which expires July 18,
2000, under which they may borrow funds based on a percentage of inventory,
trade receivables and property and equipment. Based on the levels of inventory,
trade receivables and property and equipment, $1,602,000 could be borrowed under
this agreement at May 31, 2000. The interest rate on advances under this
agreement is 12.5% at May 31, 2000. The Company has borrowings on this line of
$1,227,000 and $2,382,000 as of May 31, 2000 and 1999, respectively. (a)
Long-term debt at May 31, 2000 and 1999 consisted of the following:
<TABLE>
<CAPTION>
Amount Owed
--------------------------------
2000 1999
--------------------------------
<S> <C> <C>
Note payable, bank, due in monthly installments of $52,557,
including interest at 12.5%, through November 10, 2005. (a) $ 4,015,970 $ 4,348,002
Note payable, bank, due in monthly installments of $42,067,
including interest at 12.5%, through March 10, 2004. (a) 3,220,511 3,464,816
Note payable, corporation, non interest bearing, due in monthly
installments equal to monthly collections of trade receivables
that were due to Parker Industries Inc. on March 5, 1999, the
day the Company acquired certain net assets of Parker Industries,
Inc. Minimum payments required under this agreement are
$192,482 and $488,159 on November 15, 2000 and
February 15, 2001, respectively. Collateralized by Parker
Industries, Inc. trade receivables, of $694,000. 680,641 3,098,503
Note payable, State of Iowa, non-interest bearing, due in monthly
installments of $1,667 through July 31, 2004. Up to $200,000 of
this loan is forgiveable if certain employment goals are met on
June 30, 2002. Collateralized by substantially all assets of the
Company. 283,333 300,000
Contract payable, due in monthly installments of $2,625, including
interest at 7.75%, through March 10, 2005. Collateralized by three
semi tractors with a depreciated cost of $129,000. 123,828 145,178
Contract payable, due in monthly installments of $3,349, including
interest at 12.50%, through March 1, 2005. Collateralized by
computer hardware and software with a book value of $219,000
at May 31, 2000. 145,522 -
(Continued)
F-11
<PAGE>
Top Air Manufacturing, Inc. and subsidiaries
Notes to Financial Statements
--------------------------------------------------------------------------------
(Continued)
Other 12,857 25,715
--------------------------------
8,482,662 11,382,214
Less current maturities 7,996,417 3,726,245
--------------------------------
$ 486,245 $ 7,655,969
--------------------------------
<FN>
(a) These borrowings are collateralized by substantially all assets of
the Company. The agreements contain various restrictive covenants including,
among others, ones which require the Company to maintain a certain amount of
working capital, tangible equity and certain financial ratios and prohibit the
payment of dividends. The Company is not in compliance with certain of these
covenants at May 31, 2000 and was declared to be in default of the agreements.
On August 24, 2000 the Company was still in default and on that date the Company
and its lender entered into a forbearance agreement in which the lender agreed
to forbear from exercising its rights and remedies against the Company up to and
through October 31, 2000. As a result, the long-term debt to the bank has been
classified as current maturities of long-term debt. Under this forbearance
agreement the Company can borrow up to $2,000,000 in current notes payable based
on a percentage of inventory, trade receivables and property and equipment. All
borrowings bear interest at the bank's prime rate plus 3%. The Company is
continuing to seek alternative sources of debt and/or equity financing.
</FN>
</TABLE>
The following is a schedule by years of the maturities of the long-term debt as
of May 31, 2000:
Year ending May 31:
2001 $ 7,996,417
2002 71,299
2003 76,704
2004 82,716
2005 72,195
Thereafter 183,331
----------------
$ 8,482,662
----------------
Note 4. Notes Receivable
Notes receivable as of May 31, 2000 consist of the following:
To be received $2,500 monthly, including interest
at 10%, through March 1, 2001, with balance
due at that date. 133,338
To be received $1,386 monthly, including
interest at 8%, through June 2009. 106,438
----------------
239,776
Less current portion 141,028
----------------
$ 98,748
----------------
F-12
<PAGE>
Top Air Manufacturing, Inc. and subsidiaries
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 5. Income Taxes
Net deferred tax assets consist of the following components as of May 31, 2000
and 1999:
2000 1999
--------------------------------
Deferred tax assets:
Trade receivables $ 148,000 $ 6,000
Accrued expenses 70,000 40,000
Net operating loss carryforward 955,900 419,000
Alternative minimum tax carryforward 30,000 30,000
Deductible goodwill of predecessor
company 148,000 170,000
Property and equipment 25,000 37,000
Inventory 56,000 -
--------------------------------
1,432,900 702,000
--------------------------------
Deferred tax liabilities:
Property and equipment 317,000 219,300
Inventory 30,000 114,000
Trade receivables 79,000 86,000
--------------------------------
426,000 419,300
--------------------------------
$ 1,006,900 $ 282,700
--------------------------------
The deferred tax amounts mentioned above have been classified on the
accompanying balance sheets as of May 31, 2000 and 1999 as follows:
2000 1999
--------------------------------
Current assets $ 334,700 $ 68,200
Noncurrent assets 672,200 214,500
--------------------------------
$ 1,006,900 $ 282,700
--------------------------------
For income tax purposes, the Company has net operating loss carryforwards of
approximately $2,400,000 which may be used to affect future taxable income.
These loss carryforwards expire in various amounts in 2019 and 2020. In
addition, the Company acquired operating loss carryforwards in connection with
the purchase of certain assets of Clay Equipment Corporation in June 1995.
Limitations imposed by current tax laws limit the utilization of these acquired
carryforwards to approximately $40,000 per year through 2009.
Income tax expense (benefit) is made up of the following components:
Year Ended May 31,
--------------------------------------------
2000 1999 1998
--------------------------------------------
Current tax expense (benefit):
Federal $ (14,240) $ (344,918) $ 397,999
State (15,160) (47,725) 9,000
--------------------------------------------
(29,400) (392,643) 406,999
Deferred tax expense (credit) (724,200) (273,200) 154,000
--------------------------------------------
$ (753,600) $ (665,843) $ 560,999
--------------------------------------------
F-13
<PAGE>
Top Air Manufacturing, Inc. and subsidiaries
Notes to Financial Statements
--------------------------------------------------------------------------------
Total reported tax expense (benefit) applicable to the Company's operations
varies from the amount that would have resulted by applying the federal income
tax rate to income (loss) before income taxes for the following reasons:
<TABLE>
<CAPTION>
Year Ended May 31,
-----------------------------------------------
2000 1999 1998
-----------------------------------------------
<S> <C> <C> <C>
Income tax expense (benefit) at statutory federal
Income tax rate $ (732,755) $ (679,599) $ 546,352
State tax expense (benefit), net of federal
Income tax benefit (9,854) (31,021) 6,202
Benefit of income taxed at lower rates - 19,417 (15,610)
Other (10,991) 25,360 24,055
-----------------------------------------------
$ (753,600) $ (665,843) $ 560,999
-----------------------------------------------
</TABLE>
Note 6. Stock-Based Compensation
At May 31, 2000, the Company has a stock-based compensation plan which is
described below. As permitted under generally accepted accounting principles,
grants under this plan are accounted for following APB Opinion No. 25 and
related interpretations. Accordingly, no compensation cost has been recognized
for grants under the plan. Had compensation cost for the stock based
compensation plan been determined based on the grant date fair values of the
awards (the method prescribed in SFAS No. 123), reported net income (loss) and
earnings (loss) per share would have been adjusted to the pro forma amounts
shown below:
Year Ended May 31,
----------------------------------------------
2000 1999 1998
----------------------------------------------
Net income (loss)
As reported $ (1,339,986) $ (1,275,867) $ 1,000,007
Pro forma (1,409,986) (1,356,867) 940,007
Basic earnings (loss) per share
As reported (0.27) (0.25) 0.20
Pro forma (0.28) (0.26) 0.18
Fully diluted earnings (loss)
per share
As reported (0.27) (0.25) 0.19
Pro forma (0.28) (0.26) 0.18
The Company has a stock option plan adopted in 1993 which provides for the
issuance of a maximum of 425,000 shares of common stock to officers, directors
and key employees at a price per share of not less than 100% of the market price
at the date of grant. The options granted under this plan become exercisable
over three years.
In addition, the Company granted options to purchase 50,000 share of common
stock of the Company to a non-employee in connection with the acquisition of
Ficklin Machine Co., Inc.
F-14
<PAGE>
Top Air Manufacturing, Inc. and subsidiaries
Notes to Financial Statements
--------------------------------------------------------------------------------
The fair value of each grant is estimated at the grant date using the
Black-Scholes option-pricing model with the following weighted-average
assumptions for grants:
Year Ended May 31,
---------------------------------------------
2000 1999 1998
---------------------------------------------
Risk free interest rate - 5.04% 5.71%
Expected life - 10 years 10 years
Price volatility - 46.2% 40.4%
Expected dividends - - -
The following table summarizes the options to purchase shares of the Company's
common stock:
Stock Options
------------------------------
Weighted
Average
Exercise
Outstanding Price
-------------- --------------
Balance at May 31, 1997 309,501 1.0952
Granted 67,500 2.6875
Exercised (2,333) 0.9421
Canceled (5,667) 1.2831
-------------- --------------
Balance at May 31, 1998 369,001 1.3846
Granted 88,500 1.0000
Exercised (3,001) 0.9409
Canceled (9,000) 1.5834
-------------- --------------
Balance at May 31, 1999 445,500 1.3071
Granted - -
Exercised (7,333) 1.0980
Canceled (14,667) 1.7777
------------------------------
Balance at May 31, 2000 423,500 1.2943
------------------------------
Number of Options
----------------------------------------
2000 1999 1998
----------------------------------------
Exercisable, end of year 348,335 293,334 239,500
Weighted-average fair value per option
of options granted during the year $ - $ 0.65 $ 1.66
Options are exercisable over varying periods ending on January 2009.
F-15
<PAGE>
Top Air Manufacturing, Inc. and subsidiaries
Notes to Financial Statements
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
A further summary of the fixed options outstanding at May 31, 2000 is as
follows:
Options Outstanding Options Exercisable
----------------------------------------- -----------------------------
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------------- ------------------------------------------- ----------------------------
<S> <C> <C> <C> <C> <C>
0.5938 33,000 2.625 0.5938 33,000 0.5938
0.8438 35,000 3.625 0.8438 35,000 0.8438
0.7500 to 1.0000 53,500 4.578 0.8303 53,500 0.8303
1.2188 to 1.2813 54,000 5.584 1.2618 54,000 1.2618
1.3750 106,000 6.625 1.3750 106,000 1.3750
2.6875 58,500 7.660 2.6875 39,002 2.6875
1.0000 83,500 8.706 1.0000 27,833 1.0000
------------------------------------------- ----------------------------
423,500 $ 6.2273 $ 1.2943 348,335 $ 1.2634
------------------------------------------- ----------------------------
</TABLE>
Note 7. Research and Development
Research and development costs included in the statements of income as part of
other general and administrative expenses totaled $800,823, $591,839 and
$486,985 for the years ended May 31, 2000, 1999 and 1998, respectively.
Note 8. Employee Benefit Plan
The Company has a 401(k) defined contribution plan covering substantially all
employees. The plan provides for a matching employer contribution based on the
employee's contributions up to 5% of compensation. Additional discretionary
contributions to the plan may also be made. Employer contributions for the years
ended May 31, 2000, 1999 and 1998 were $150,705, $80,986 and $52,569,
respectively.
Note 9. Convertible Subordinated Debentures
On January 25, 2000 the Company completed a private placement of $500,000 of
convertible subordinated debentures due January 15, 2005 which are unsecured and
convertible into shares of the Company's common stock at any time before
maturity, unless previously redeemed or repurchased, at a conversion price of
$1.25 per share. These debentures are subordinated to the notes payable to the
bank and borrowings under the line of credit agreement discussed in Note 3. The
interest rate is prime rate plus 1% and is payable semi-annually on July 15 and
January 15. Payment of interest on these debentures has been deferred under the
Company's borrowing agreement as discussed in Note 3. The debentures will not be
redeemable at the option of the Company, in whole or in part, until January 15,
2002. From January 15, 2002 to January 15, 2003, the debentures will be
redeemable at the option of the Company, in whole or in part, at 105% of their
principal amount declining to 103% of their principal from January 15, 2003 to
January 15, 2004 and at par from January 15, 2004 to January 15, 2005. At May
31, 2000 the balance of the debentures was $500,000.
F-16
<PAGE>
Top Air Manufacturing, Inc. and subsidiaries
Notes to Financial Statements
--------------------------------------------------------------------------------
Note 10. Earnings (loss) Per Share
Basic and diluted earnings (loss) per share are as follows:
<TABLE>
<CAPTION>
Year Ended May 31,
------------------------------------------------
2000 1999 1998
------------------------------------------------
<S> <C> <C> <C>
Basic earnings (loss) per share:
Net income (loss) available to common
Stockholders-basic $ (1,339,986) $ (1,275,867) $ 1,000,007
------------------------------------------------
Weighted average shares outstanding-basic 4,965,017 5,006,588 5,088,646
------------------------------------------------
Basic earnings (loss) per share $ (0.27) $ (0.25) $ 0.20
------------------------------------------------
Diluted earnings (loss) per share:
Net income available to
Common stockholders-diluted $ (1,339,986) $ (1,275,867) $ 1,000,007
------------------------------------------------
Weighted average shares outstanding-basic 4,965,017 5,006,588 5,088,646
Effect of dilutive securities, employee stock options
and convertible subordinated debentures - - 161,227
------------------------------------------------
Weighted average shares outstanding-diluted 4,965,017 5,006,588 5,088,646
------------------------------------------------
Diluted earnings (loss) per share $ (0.27) $ (0.25) $ 0.19
------------------------------------------------
Antidilutive convertible debentures excluded
from the above calculations 400,000 - -
------------------------------------------------
Antidilutive options excluded from above
Calculations 423,500 445,500 67,500
------------------------------------------------
</TABLE>
Note 11. Business Acquisition
Parker Industries, Inc.: On March 5, 1999 the Company formed a wholly owned
subsidiary which acquired certain net assets of Parker Industries ("Parker") of
Jefferson, Iowa in exchange for a cash payment of $3,522,792 and a non-interest
bearing note of $3,506,080.
Parker designs, manufactures and distributes grain wagons and carts and other
bulk seed equipment. The Company currently intends to continue the business of
Parker in substantially the same manner as conducted prior to the acquisition.
The acquisition has been accounted for by the purchase method and the results of
operations of Parker since the date of acquisition are included in the financial
statements.
F-17
<PAGE>
Top Air Manufacturing, Inc. and subsidiaries
Notes to Financial Statements
--------------------------------------------------------------------------------
Unaudited pro forma consolidated condensed financial statements for the years
ended May 31, 1999 and 1998 as though Parker had been acquired as of June 1,
1997 are as follows:
1999 1998
--------------------------------
Net sales $ 17,207,000 $ 30,849,000
Net income (loss) (2,296,000) 1,675,000
Earnings (loss) per share:
Basic (0.46) 0.33
Diluted (0.46) 0.32
Note 12. Lease Commitments
In connection with the acquisition of Parker, the Company entered into a 10 year
noncancelable agreement to lease a 60,000 square foot facility from the City of
Jefferson, Iowa ("Jefferson"). The lease requires 5 annual payments of $67,405
beginning March 5, 2002 and 3 annual payments of $175,000 beginning March 5,
2007 through March 5, 2009. Rent is being expensed by the straight-line method
over the term of the lease. In addition, the Company is required to pay all
property taxes, insurance and maintenance on the property. The Company has the
option to purchase the facility at any time for $750,000 in year one decreasing
to $539,175 in year seven and appraised value after that.
The Company has entered into a 10 year noncancelable agreement to lease an
85,000 square foot facility from the City of Cedar Falls, Iowa ("City"). The
lease requires monthly payments of $16,722 plus insurance, utilities, and other
expenses to be paid by the Company. The City has the option to renew and extend
the lease for an additional 5 years at the end of the original lease term with
an increase in monthly rental not to exceed 3%. At the end of the lease
extension period, the Company has the option to purchase the facility for
approximately $1.3 million plus all reasonable costs and expenses incurred by
the City for the sale.
On July 13, 1998 the Company received a contribution of approximately 4 acres of
land from the City in exchange for an agreement to expand its current
manufacturing facilities. The Company completed the expansion of its Cedar Falls
facility at a cost of approximately $1,000,000 during 1999. As a part of this
agreement, in the event that the existing 85,000 square foot facility discussed
above is sold prior to the Company's right to exercise its purchase option, the
Company would receive 20.5% of the proceeds of the sale.
F-18
<PAGE>
Top Air Manufacturing, Inc. and subsidiaries
Notes to Financial Statements
--------------------------------------------------------------------------------
The total minimum rental commitment, under the above agreements, including
extension periods, at May 31, 2000 is approximately $3,162,000 which is due as
follows:
Year ending May:
2001 $ 200,000
2002 267,400
2003 267,400
2004 267,400
2005 267,400
Thereafter 1,892,400
----------------
$ 3,162,000
----------------
Under these agreements, the Company incurred approximately $248,000, $212,000
and $200,000 in rent expense for the years ended May 31, 2000, 1999 and 1998,
respectively.
Note 13. Assets Held for Sale
On June 25, 1999 the Company closed its Onarga, Illinois facility and began
moving production to its Cedar Falls, Iowa facility. The buildings, land and
improvements in Onarga have been classified as assets held for sale on the
accompanying balance sheet as of May 31, 2000 and have been reduced to their
estimated fair market values less costs of disposal.
F-19
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized:
TOP AIR MANUFACTURING, INC.
Date: August 29, 2000
By /s/ Steven R. Lind
---------------------------------------
Steven R. Lind,
President and Chief Executive Officer
In accordance with the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Steven R. Lind
--------------------------- President, Chief Executive August 29, 2000
Steven R. Lind Officer and Director
(Principal Executive Officer)
/s/ Steven F. Bahlmann
--------------------------- Chief Accounting Officer August 29, 2000
Steven F. Bahlmann (Principal Accounting Officer)
/s/ Wayne C. Dudley
--------------------------- Director August 29, 2000
Wayne C. Dudley
/s/ Dennis W. Dudley
--------------------------- Director August 29, 2000
Dennis W. Dudley
--------------------------- Director August ___, 2000
Robert J. Freeman
/s/ Franklin A. Jacobs
--------------------------- Director August 25, 2000
Franklin A. Jacobs
/s/ S. Lee Kling
--------------------------- Director August 25, 2000
S. Lee Kling
--------------------------- Director August ___, 2000
Sanford W. Weiss
/s/ Thaddeus P. Vannice, Sr.
--------------------------- Director August 29, 2000
Thaddeus P. Vannice, Sr.
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
*2(a) Share Exchange Agreement between Wayne W. Whalen and the Company
dated January 15, 1997 under which the Company acquired Ficklin
Machine Co., Inc., filed as Exhibit 2.1 to the Company's Form 8-K
dated January 24, 1997
*2(b) Asset Purchase Agreement by and among the Company, Parker
Acquisition Sub, Inc., Owosso Corporation and DWZM, Inc., dated
as of March 3, 1999, filed as Exhibit 2.1 to the Company's Form
8-K dated March 8, 1999
*3(a) Amended and Restated Articles of Incorporation, filed as Exhibit
3(c) to the Company's Annual Report on Form 10-KSB for fiscal
year 1991 (the "1991 Form 10-KSB")
*3(b) Amended and Restated By-laws, filed as Exhibit 3(d) to the 1991
Form 10-KSB
*3(c) Amendments to the Amended and Restated By-laws, effective October
21, 1992, filed as Exhibit 3(c) to the Company's Annual Report on
Form 10-KSB for fiscal year 1993 (the "1993 Form 10-KSB)
*9 Amended and Restated Voting Trust Agreement by and among Robert
J. Freeman and Dennis W. Dudley and their successors, dated
September 15, 1992, filed as Exhibit 9 to the 1993 Form 10-KSB
*10(a) Promissory Note dated January 1, 1991, between the Company and
Wayne C. Dudley (the "Dudley Note"), filed as Exhibit 10(b) to
the 1991 Form 10-KSB
*10(b) Letter Amendment, dated August 5, 1994, to the Dudley Note, filed
as Exhibit 10(c) to the Company's Annual Report on Form 10-KSB
for fiscal year 1994 (the "1994 Form 10-KSB")
*10(c)+ Employment Agreement between the Company and Steven R. Lind dated
as of November 6, 1992, filed as Exhibit 10(c) to the Company's
Annual Report on Form 10-KSB for fiscal year 1999 (the "1999 Form
10-KSB")
*10(d)+ First Amendment to Employment Agreement between the Company and
Steven R. Lind dated as of October 19, 1994, filed as Exhibit
10(d) to the Company's Annual Report on Form 10-KSB for fiscal
year 1999 (the "1999 Form 10-KSB")
*10(e)+ 1993 Stock Option Plan adopted by the Board of Directors November
6, 1992, filed as Exhibit 10(c) to the 1993 Form 10-KSB
*10(f)+ Summary Plan description for 401(k) plan adopted by the Board of
Directors on October 22, 1991, filed as Exhibit 28(b) to the
Company's Annual Report on Form 10-KSB for fiscal year 1992 (the
"1992 Form 10-KSB")
*10(g)+ First Amendment to 1993 Stock Option Plan dated October 1, 1995,
filed as Exhibit 10(h) to the Company's Annual Report on Form
10-KSB for the fiscal year 1997 (the "1997 Form 10-KSB")
*10(h)+ Second Amendment to 1993 Stock Option Plan dated March 4, 1997,
filed as Exhibit 10(i) to the 1997 Form 10-KSB
*10(i) Consulting Agreement dated December 12, 1996 between the Company
and Gregory Wilson, together with a Stock Option Agreement issued
in connection therewith, filed as Exhibit 10(j) to the 1997 Form
10-KSB
*10(j) Building lease dated April 17, 1995 between the Company and the
City of Cedar Falls, Iowa, filed as Exhibit 10(l) to the
Company's Annual Report on Form 10-KSB for the fiscal year 1998
(the "1998 Form 10-KSB")
*10(k) Developmental Agreement dated July 13, 1998 between the Company
and the City of Cedar Falls, Iowa, filed as Exhibit 10(m) to the
1998 Form 10-KSB
*10(l) Loan Agreement between the Company and Mercantile Bank Midwest,
dated November 2, 1998, filed as Exhibit 10(l) to the Company's
Annual Report on Form 10-KSB for fiscal year 1999 (the "1999 Form
10-KSB")
<PAGE>
*10(m) Modification Agreement to a Loan Agreement dated November 2, 1998
between the Company and Mercantile Bank Midwest, dated March 4,
1999, filed as Exhibit 10(m) to the Company's Annual Report on
Form10-KSB for fiscal year 1999 (the "1999 Form 10-KSB")
*10(n) Promissory Note in the principal amount of $4,500,000 in favor of
Mercantile Bank Midwest, dated November 2, 1998, filed as Exhibit
10(n) to the Company's Annual Report on Form10-KSB for fiscal
year 1999 (the "1999 Form 10-KSB")
*10(o) Promissory Note in the principal amount of $3,500,000 in favor of
Mercantile Bank Midwest, dated March 4, 1999, filed as Exhibit
10(o) to the Company's Annual Report on Form10-KSB for fiscal
year 1999 (the "1999 Form 10-KSB")
*10(p) Promissory Note in the principal amount of $6,000,000 in favor of
Mercantile Bank Midwest, dated March 4, 1999, filed as Exhibit
10(p) to the Company's Annual Report on Form10-KSB for fiscal
year 1999 (the "1999 Form 10-KSB")
**10(q) Loan Extension Agreement between the Company and Mercantile Bank
Midwest, dated November 10, 1999
**10(r) Forbearance Agreement between the Company and Mercantile Bank
Midwest, dated January 28, 2000
*10(s) Community Economic Betterment Account ("CEBA") Agreement by and
among the Iowa Department of Economic Development, City of
Jefferson and Parker Industries, Inc., dated as of February 18,
1999,filed as Exhibit 10(s) to the Company's Annual Report on
Form10-KSB for fiscal year 1999 (the "1999 Form 10-KSB")
*10(t) Promissory Note in the principal amount of $300,000 in favor of
The City of Jefferson, dated as of February 18, 1999, as part of
the Iowa Department of Economic Development CEBA Program, filed
as Exhibit 10(t) to the Company's Annual Report on Form10-KSB for
fiscal year 1999 (the "1999 Form 10-KSB")
*10(u) Lease Agreement between the Company and Greene County Development
Corporation, dated as of March 5, 1999, filed as Exhibit 10(u) to
the Company's Annual Report on Form10-KSB for fiscal year 1999
(the "1999 Form 10-KSB")
*10(v) Promissory Note in favor of DWZM, Inc., dated March 5, 1999,
issued in connection with the acquisition of the assets of Parker
Industries, filed as Exhibit 10(v) to the Company's Annual Report
on Form10-KSB for fiscal year 1999 (the "1999 Form 10-KSB")
*10(w)+ Employment Agreement between the Company and James R. Harken
dated as of October 19, 1998, filed as Exhibit 10(w) to the
Company's Annual Report on Form10-KSB for fiscal year 1999 (the
"1999 Form 10-KSB")
*10(x)+ Employment Agreement between the Company and Scott L. Wildeboer
dated as of October 19, 1998, filed as Exhibit 10(x) to the
Company's Annual Report on Form10-KSB for fiscal year 1999 (the
"1999 Form 10-KSB")
*10(y)+ Employment Agreement between the Company and Steven F. Bahlmann
dated as of October 19, 1998, filed as Exhibit 10(y) to the
Company's Annual Report on Form10-KSB for fiscal year 1999 (the
"1999 Form 10-KSB")
*10(z)+ Employment Agreement between the Company and Jerome M. Sechler
dated as of May 11, 1999, filed as Exhibit 10(z) to the Company's
Annual Report on Form10-KSB for fiscal year 1999 (the "1999 Form
10-KSB")
*10(aa) Amendment No. 1 to Amended and Restated Voting Trust Agreement,
filed as Exhibit 9 to the Company's Form 10-Q dated January 14,
2000
**10(bb) Convertible Subordinate Debenture due 2005 issued to S. Lee Kling
on January 25, 2000
**10(cc) Convertible Subordinate Debenture due 2005 issued to Wayne W.
Whalen on January 25, 2000
**10(dd) Convertible Subordinate Debenture due 2005 issued to Franklin A.
Jacobs on January 25, 2000
<PAGE>
**10(ee) Convertible Subordinate Debenture due 2005 issued to Sanford W.
Weiss on January 25, 2000
*10(ff) Securities Purchase Agreement between the Company and S. Lee
Kling dated as of January 25, 2000, filed as Exhibit 1 to the
Schedule 13D filed by Mr. Kling on February 3, 2000
*10(gg) Securities Purchase Agreement between the Company and Wayne W.
Whalen dated as of January 25, 2000, filed as Exhibit 1 to the
Schedule 13D filed by Mr. Whalen on February 3, 2000
**10(hh) Securities Purchase Agreement between the Company and Sanford W.
Weiss, dated as of January 25, 2000
**10(ii) Securities Purchase Agreement between the Company and Franklin A.
Jacobs dated as of January 25, 2000
**10(jj) Agreement by and between Firstar Bank, N.A. f/k/a Mercantile Bank
Midwest, Top Air Manufacturing, Inc., Parker Industries, Inc. and
Parker Acquisition Sub, Inc. dated as of August 24, 2000
**11 Statement re Computation of Per Share Earnings
**21 List of Subsidiaries
**23 Consent of Accountants
**27 Financial Data Schedule (Filed in EDGAR version only)
**99 Cautionary Statement Identifying Important Factors that Could
Cause the Company's Actual Results to Differ from those Projected
in Forward-Looking Statements
---------------
* Incorporated by reference to the indicated documents or parts
thereof, previously filed with the Commission.
** Filed herewith.
+ Management contract or compensatory plan or arrangement.
