UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission File No. 0-11359
LARCAN-TTC INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-0854061
State or other jurisdiction of
(I.R.S. Employer
incorporation or organization Identification
No.)
650 South Taylor Avenue, Louisville, Colorado 80027
State or other jurisdiction of (Zip Code)
incorporation or organization
Registrant's telephone number, including area code (303) 665-8000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None. None.
Securities registered pursuant to section 12(g) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $0.04 par value NASDAQ - Over the Counter
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 fm 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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates
of the registrants as of June 30, 1995 was $467,000 (based on the average
of the closing bid and asked prices on June 30, 1995
The number of shares outstanding of the registrant's Common Stock, par
value $0.04, as of September 15, 1994 was 11,543,934 shares.
This Form 10-K consists of 40 pages
.
INDEX
PART I
Page
Item 1 Business 3
Item 2 Properties 12
Item 3 Legal Proceedings 13
Item 4 Submission of Matters to a Vote of Security Holders 13
PART II
Item 5 Market for Registrant's Common Stock and
Related Stockholder Matters . 13
Item 6 Selected Financial Data 14
Item 7 Management's Discussion and Analysis
of Financial Condition and Results of Operations 15
Item 8 Financial Statements and Supplementary Data 18
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 18
PART III
Item 10 Directors and Executive Officers of the Registrant 19
Item 11 Executive Compensation 21
Item 12 Security Ownership of Certain Beneficial
Owners and Management 23
Item 13 Certain Relationships and Related Transactions 24
PART IV
Item 14 Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 25
PART I
ITEM 1. BUSINESS
INTRODUCTION
LARCAN-TTC INC. (the Company) is a Delaware Corporation whose executive
offices and manufacturing plant are located at 650 South Taylor Avenue,
Louisville, Colorado 80027. The Company's principal telephone number is
(303) 665-8000, and its fax number is (303) 673-9900. The Company has been
in existence continuously since 1967 when it was incorporated as a Maryland
corporation. It was reincorporated in 1983 under the laws of the State of
Delaware.
On October 15, 1993, Television Technology Corporation (TTC) sold to LARCAN
INC. (LARCAN) of Mississauga, Ontario, Canada, 3,636,364 shares of the
Company's authorized but previously unissued common stock for $1,000,000.
In addition, LARCAN acquired an additional 416,831 shares of the Company's
common stock from existing shareholders. As a condition of this purchase
and by vote of the shareholders of the Corporation at their annual meeting
on February 3, 1994, the TTC name was changed to LARCAN-TTC INC.
During June, 1995 LARCAN INC. subscribed for an additional 5,000,000 common
shares for $500,000 and for 500,000, 5% cumulative convertible, preferred
shares for $500,000. LARCAN controls approximately 78 percent of the
company's outstanding and subscribed common stock as of June 30, 1995.
LARCAN was established in 1981 when the employees of Canadian General
Electric (CGE), in association with LeBlanc & Royle Enterprises Inc.,
purchased CGE's broadcast operation. LARCAN has been a major supplier of
VHF (Channels 2-13) television transmitters for over 35 years. LARCAN
designs, manufactures, sells, and services VHF solid state television
transmitters with powers from 10 watts to 60,000 watts and has recently
manufactured and delivered (newly developed) 10,000 watt solid state UHF
television transmitters.. It is believed by the Company's management that,
with the LARCAN investment, the Company will be in a much better position
to serve the broadcast industry worldwide, as both companies now have a
complete product line to meet the users' needs.
The Company is a fully integrated producer of television (TV) and FM radio
transmission equipment. At its Louisville, Colorado, facility, the Company
designs, develops, and manufactures a variety of FM and television
broadcast transmitters/translators including low power television (LPTV)
equipment and high power UHF television equipment. The Company also
provides system design services, sells accessory items manufactured by the
Company and others, and performs installation as requested by its
customers.
ITEM 1. BUSINESS (Continued)
The Company operates in one market segment both internationally and
domestically. The ratio of international and domestic sales to the
Company's total sales for each of the last three fiscal years is shown in
Table 1.
<TABLE>
Table 1. Percent of Sales by Market
<CAPTION>
Fiscal Years Ended June
1995 1994 1993
<S> <C> <C> <C>
International 21% 47% 22%
Domestic 79% 53% 78%
</TABLE>
The Company's major products and markets are described below.
TRANSLATORS AND LOW POWER TELEVISION (LPTV)
Translators (sometimes known as transposers in the international
marketplace) function to rebroadcast the signal of a regular (primary)
radio or TV station automatically. They operate unattended, and retransmit
the signal of the primary station on a different (translated) channel.
They are commonly financed as a public service by local organizations or
governmental entities. They may also be owned and operated by primary
stations to extend their signal into areas which are not able to receive a
clean signal (shadowed areas) or to extend the station coverage area.
In contrast, LPTV stations have Federal Communication Commission (FCC)
authority to originate programs. Some of these stations operate a small
general purpose studio, while others maintain no studio, but continuously
transmit programs obtained from external sources. These purchased programs
may be delivered directly to the transmitter by satellite. While the low
transmitter power restricts the coverage area, LPTV stations operate under
much more flexible and less complex rules than traditional "full service"
TV stations. LPTV stations typically have much smaller start-up costs and
operating budgets. As a result, they are feasible as either commercial or
non-profit stations serving a small community or a specialized audience
with an interest in a particular programming format. The state of the Low
Power and translator market is shown in Table 2.
<TABLE>
Table 2. State of Low Power TV Industry
<CAPTION>
Construction
Permits Issued
Licensed (Pre-Licensed)
<S> <C> <C>
Translators 5,525 583
Low Power TV 1,670 1,612
</TABLE>
Source: Television & Cable Action Update (October 2, 1995)
ITEM 1. BUSINESS (Continued)
The Company believes that there may be pent-up demand in this market since
holders of Construction Permits (CP's) risk losing their right to build and
license the station if the station is not built and licensed within 18
months of the issuance date of the CP. The Company believes that its
continued commitment to the domestic LPTV/Translator market has allowed the
Company to maintain its market share. In the international market, more
and more countries are looking at LPTV/Transposers as a method of extending
television service into small villages and rural communities. The Company
continues to actively pursue this market.
One watt to 1kW television products are normally considered by the Company
to be in the low power transmitter/translator class. The range of list
prices for the Company's line of translators and LPTV transmitters is
$3,600 to $59,000. This price is dependent primarily on the power level of
the transmitter, with special features, if any, also having an impact.
The percentage of net sales that this product group accounted for is shown
on line 1 of Table 3.
<TABLE>
>
Table 3. Percent of Net Sales by Product Category
<CAPTION
Fiscal Year Ended June
1995 1994 1993
<S> <C> <C> <C>
LPTV/Translators 56% 50% 59%
High Power TV 16% 30% 17%
FM Radio 23% 18% 22%
Other 5% 2% 2%
</TABLE>
UHF HIGH POWER TELEVISION
Around the world, television broadcasting exists primarily in two bands,
Very High Frequency (VHF) and Ultra High Frequency (UHF). The VHF band
which came into use first, consists in the U.S. of Channels 2-13. The
Company does not manufacture VHF high power transmitters, however our
parent company, LARCAN INC. does. The Company does manufacture UHF High
Power transmitters. The UHF band consists, in the U.S., of Channels 14 -
69. The current state of the U.S. television industry can be seen in Table
4.
<TABLE>
Table 4. State of TV Industry
<CAPTION>
VHF UHF TOTAL
<S> <C> <C> <C>
Stations Operating 676 853 1,529
Construction Permits 17 109 126
Applications on File 31 94 125
</TABLE>
Source: Television & Cable Action Update (October 2, 1995)
ITEM 1. BUSINESS (Continued)
The Company believes those agencies responsible for telecommunications
around the world will continue to authorize a steady expansion of the
number of UHF television stations.
Transmitters rated at greater than 1kW constitute the Company's UHF high
power television broadcasting line. In major metropolitan areas, UHF
transmitters may be rated as high as 280kW.
In fiscal 1991 the Company completed the development of an "Inductive
Output Tube" (IOT) UHF transmitter. This transmitter uses an
"IOT/Klystroder type" tube to deliver RF energy to the antenna. Much of
the engineering effort during fiscal 1995 has gone into refining the second
generation of the IOT/Klystroder transmitter, known as the HDR Series. One
of the primary advantages of the "IOT/Klystroder type" is that power
consumption is reduced by approximately 60 percent over the more
conventional "klystron type" transmitter. The Company currently markets
"IOT/Klystroder type" transmitters ranging in output power from 10kW to
240kW.
In addition, during fiscal 1995 the Company continued to devote substantial
resources and talent to the development of the High Definition Television
(HDTV) Standard for the next generation of U.S. television. Company
employees participated as members of the FCC subcommittees which are
supervising both the laboratory and field testing of the various proposed
HDTV systems. During fiscal 1993, the FCC delayed the HDTV development
schedule in order to create a standardized digital format that could be
used in the HDTV system that is eventually adopted by the FCC. During
fiscal 1994, this standardization was accomplished. Testing was
reinstituted with the first stage of field test completed in June 1994.
The Company believes its low power solid-state products will successfully
pass a digital HDTV signal and that the "IOT/Klystroder type" transmitter
will be an ideal originating transmitter for higher power primary stations
broadcasting digital HDTV signal.
Under proposed FCC HDTV rules, each primary broadcaster in the U.S. will be
offered a second channel to be used for a simultaneous broadcast of HDTV
while continuing to broadcast in NTSC (National Television Systems
Committee), the current broadcast standard, on the old channel. Virtually,
all of these channel allocations will be in the UHF band. Broadcasters
would have three years to apply for the HDTV channel and three years to
construct the new broadcast facility (including the purchase of a new
transmitter) and begin broadcasting. The Company believes the potential
demand created by most of the current 1,529 broadcasters (Table 4)
purchasing a second transmitter for simulcast broadcast of HDTV signals
offers a unique market opportunity to increase Company sales of its high
power UHF products over the next several years. Accordingly, the Company
continues in the development and advancement of products that are intended
to position the Company to take full advantage of High Definition
Television.
The current high power product line of the Company starts with a
conventional 5kW tetrode tube amplifier; and extends to 60kW cabinets which
can be combined to make transmitters of 240kW or more using conventional
Klystron or the new IOT/Klystron tubes.
ITEM 1. BUSINESS (Continued)
This range of products makes the Company unique in the marketplace for its
diversity of high power products. The range of list prices for the
Company's line of UHF high power transmitters ranges from $115,000 to
$2,000,000. The price is based primarily on the power level of the
equipment with special features and design configurations also having an
impact.
The percentage of the Company's net sales that this product group accounts
for is shown on Line 2 of Table 3.
FM RADIO TRANSMITTERS
The Company offers a full range of FM radio transmitters. This product
line satisfies the technical requirements of the broadcast regulatory
authorities of most countries and sales are made throughout the world.
The FM transmitter generates the necessary power to carry the station's
program to the listening public on the assigned frequency. These
transmitters range in power from 30 watts to 50kW. Customers include
commercial and non-commercial broadcast organizations and governmental
entities worldwide.
The range of list prices for the Company's FM radio transmitters is from
$5,400 to $103,000. These prices are based primarily on the power level of
the equipment.
The Company's radio product line includes a power line surge protector
offered for use in all types of electronic installations. It also includes
an FM broadcast exciter which can be sold as a stand-alone 30-watt
transmitter or as an upgrade for most FM transmitters, regardless of
manufacturer. The current sales volume in these products continues to be
small but consistent.
The percentage of net sales that this product group accounted for is shown
on Line 3 of Table 3.
SUPPLEMENTARY PRODUCTS AND ACCESSORIES
A number of products purchased by the Company from other manufacturers are
offered to complement the Company's own products. Typical items are pre-
amplifiers, filters, antennas, transmission line, studio equipment, and
test equipment. These products are obtained from a number of different
sources and no one supplier is considered critical. The Company estimates
that less than 10 percent of its sales for the fiscal year ended June 1995
was derived from the resale of these products, exclusive of products sold
as components of the Company's products or as part of an installed
broadcast system.
ITEM 1. BUSINESS (Continued)
From time to time, at the specific request of the customer, the Company
will perform system design and/or coverage design services. The Company
has in-house expertise, or can obtain the necessary expertise, to perform
these services. Additionally, the Company acts as its own installer when
contracted to do so and has the equipment, knowledge, and personnel to
complete these installations. These system and coverage design services
generally contribute less than ten percent of sales.
GOVERNMENTAL REGULATION
Suppliers of broadcast transmitters intended for use in the more developed
countries are generally required to obtain approval of the technical
characteristics of their transmitters from the appropriate regulatory
authority in their country. In the U.S., the Company must have FCC Type
Acceptance/Notice of its transmitters. FCC requirements are generally less
stringent than those imposed by competitive forces and, accordingly, the
Company generally does not experience difficulties obtaining Type
Acceptances for new or revised models. The Company has FCC Type
Acceptances/Notices for required products and comparable acceptances in
Canada for products sold in that country.
Customers of the Company constructing new broadcast stations of any class
in the U.S. generally must obtain a permit from the FCC. Such a permit is
granted to an applicant for an available channel based on an application
showing that the proposed station would meet the technical, legal, and
financial requirements of the FCC.
MARKETING
During fiscal 1995, the Company continued to refine its internal Sales and
Marketing Department and its technical service and support capabilities,
with the goal of exceeding industry standards. The Company continues to
investigate new ways to enhance its marketing effort and maximize its
market penetration.
Domestic
The Company's rural translator business depends heavily on a network of
dealers who buy the Company's products, related supplementary products and
accessories at a discount and resell the equipment to an end user. This is
usually done as part of an installed system. In some instances, business
relationships between these dealers and employees of the Company have
continued for more than 20 years. The Company acts as its own installer
when contracted to do so and has the equipment, knowledge, and personnel to
complete these installations.
ITEM 1. BUSINESS (Continued)
In the LPTV sector, equipment is sold both directly to an end user and
through distributors, some of whom focus on certain areas of interest (i.e.
religious, educational, etc.), rather than strictly on geographic areas.
The Company's internal sales/marketing staff coordinates, motivates, and
assists dealers/distributors as necessary, and makes direct sales to the
Company's end user customers when appropriate.
Beginning in fiscal 1994, the Company primarily focused its sales efforts
for high power transmitters in the United States through the efforts of LDL
Communications, Inc. (LDL) an affiliate company of LARCAN. LDL functions
as a dealer, and buys and resells LARCAN-TTC UHF high power transmitters
for resale in a stand-alone configuration or as a part of larger systems
containing materials from other manufacturers. Internationally, the
Company sells its high power transmitters to end users directly paying a
commission to independent manufacturers' representatives where appropriate.
The Company's FM radio products are sold through a network of dealers and
representatives, and when appropriate, directly to end users.
International
On a regular basis the Company receives requests for quotations and
proposals from many parts of the world. There continues to be an upward
trend in the number of such requests which the Company believes is due to
the increasing breadth of the Company's product line and its increasing
reputation in the world market.
The Company exports directly to both end users and to dealers or agents.
Some of these dealers/agents are based in the destination country and
others concentrate on particular countries from a business location in the
United States.
One of the major goals of the Company has been to achieve significant
penetration of the international low power and high power television
markets by making major sales to customers in developing countries.
The Company's export sales for each of the last three fiscal years are
shown in Note 9 of the Notes to Financial Statements. The Company's export
sales by significant geographic region as a percentage of total sales for
each of the last three fiscal years are shown in Table 5.
ITEM 1. BUSINESS (Continued)
<TABLE>
Table 5. Export Sales by Significant Geographic Region
Fiscal Years Ended June 30
<CAPTION>
1995
1994
1993
<S>
Middle
East
<C>
12%
<C>
0%
<C>
0%
Far East
0%
0%
4%
Africa
0%
25%
8%
Other
9%
22%
10%
Total
21%
47%
22%
</TABLE>
Backlog
The Company's backlog of unfilled orders for its major product lines is
shown in Table 6.
<TABLE>
Table 6. Order Backlog
Order Backlog at June 30
<CAPTION>
1995
1994
<S>
LPTV/
Translators
<C>
$914,000
<C>
$696,000
High Power TV
89,000
319,000
FM Radio
96,000
95,000
Other
- - ----
2,000
Total
$1,099,000
$1,112,00
0
</TABLE>
Substantially all of these orders are expected to be filled. Under the
Company's sales terms and industry practice, some orders may be subject to
cancellation by the customer. However, the Company does not expect that a
significant portion of the orders shown in the above table will be
cancelled.
SEASONAL VARIATION
The Company believes that there is a nominal seasonal variation in the
demand for its products (see Table 7).
<TABLE>
Table 7. Percent of Sales per Quarter
Fiscal Quarter Ending
<CAPTION>
September
December
March
June
<S>
Fiscal 1995
<C>
27%
<C>
28%
<C>
19%
<C>
26%
Fiscal 1994
19%
31%
27%
23%
Fiscal 1993
24%
27%
26%
23%
</TABLE>
ITEM 1. BUSINESS (Continued)
COMPETITION
The Company's products compete in the marketplace on the basis of their
performance characteristics, price, and the Company's reputation for the
quality of its products and service to its customers.
In the translator and LPTV market, the Company and its three domestic
competitors account for most of the sales of television translators and
LPTV transmitters in the United States.
In the UHF high power transmitter market, the Company competes against two
domestic manufacturers (Harris and Comark). The Company believes these
domestic competitors each have greater sales volume than the Company.
Additionally, there are other minor manufacturers of directly competing
equipment which the Company believes account for less than 5 percent of the
domestic market.
In the international market, large companies such as NEC, Thomcast,
Marconi, and Rohde & Schwarz dominate in most developed countries due to
their long-standing and well-established direct sales organizations.
Developing countries currently offer the greatest potential for the
Company's products. The growing emergence of non-state controlled
broadcast stations, both FM and TV, continues to represent new and growing
opportunities for the Company's products.
The Company estimates there are more than 25 FM radio transmitter
manufacturers worldwide, several of which are substantially larger than the
Company. Almost half of these firms actively compete with the Company.
The Company believes several competitors have significantly greater sales
volume of these products than the Company.
PRODUCT DEVELOPMENT
The Company's engineering and support group pursues product development
efforts aimed at improving current products and developing new products.
Only a small effort is made toward applied research and none towards
fundamental research. The Company expended $615,000, $623,000, and
$725,000 respectively, for research and development during fiscal 1995,
1994, and 1993.
Research and development on High Definition Television continues to be an
on going expenditure commitment.
SINGLE SUPPLIER
Most materials and equipment used in manufacturing the Company's products
are available from more than one supplier and many are available from
numerous suppliers. Some materials and equipment are available from single
source suppliers, however, the Company strives to maintain good
relationships with these suppliers and is not aware of any plans that any
of these suppliers have to discontinue supplying these materials and
equipment.
ITEM 1. BUSINESS (Continued)
CUSTOMERS
Except for Saudi Arabia, no customer or individual region accounted for
more than 10% of the company's sales in fiscal 1995. Sales in Saudi Arabia
accounted for $770,000 or 12% of the total sales in fiscal 1995. Sales to
an affiliate company of LARCAN accounted for an additional 9% of total
revenues.
Sales to foreign customers are subject to unique risks which are not
present in sales to domestic customers. The Company attempts to mitigate
these risks by carefully considering the political and economic conditions
in a foreign country along with the financial viability of its customer
before doing business there. Generally, sales to foreign customers are
priced in U.S. dollars to avoid currency fluctuations and are sold under
irrevocable letters of credit, confirmed by a major U.S. bank, when the
political, economic, or financial viability is uncertain.
EMPLOYEES
The comparison of the labor force for fiscal years 1995, 1994, and 1993 is
shown in Table 7.
<TABLE>
Table 7. Employee Mix
Fiscal Years Ended June
<CAPTION>
1995
1994
1993
<S>
Executive & Administrative
<C>
6
<C>
13
<C>
11
Manufacturing &
Manufacturing Support
37
48
46
Sales & Marketing
7
5
6
Engineering & Support
12
9
8
Customer Service
5
6
5
Total
67
81
76
</TABLE>
ITEM 2. PROPERTIES
The Company occupies a 43,000 square foot facility in Louisville, Colorado
under a five-year non-cancelable operating lease, expiring on April 30,
1998. The lease on the primary facility currently carries an annual lease
cost of $288,000, subject to an annual increase based on the Consumer Price
Index. In addition, the lease is on a triple-net basis whereby the Company
also reimburses the landlord for property taxes, property insurance, and
property maintenance. The current facility will be sufficient for the
Company's operation for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
On June 8, 1995 the Company was named as a defendant in a lawsuit filed in
the federal District Court of the District of Colorado by a competitor who
alleges that the company has made, used, sold and/or induced others to use
television transmitters that infringe on the competitor's alleged patent.
Although the outcome cannot be predicted with certainty, it is
management's opinion that the litigation will be settled on terms which
will not have a materially adverse impact upon the Company or its financial
condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the quarter ended June 30, 1995, the following matters were
submitted for a vote of the shareholders at their annual meeting:
1. Election of Directors:
For the nominees Withhold authority
Paul A. Dickie Dirk B. Freeman Nancy E. McGee Byron W. St. Clair
P. Clyde Turner G. James Wilson
2. On the proposal for the amendment to increase the authorized
common stock from
10,000,000 to 30,000,000 shares.
<TABLE>
<C> <C> <C> <C>
For Against Abstain Not Voted
5,163,907 14,163 2.598 4,700
</TABLE>
3. On the proposal for the issuance of common and preferred shares to
LARCAN, INC.
<TABLE>
<C> <C> <C> <C>
For Against Abstain Not Voted
4,704,596 11,664 5,673 463,434
</TABLE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded on The OTC Bulletin Board under the
trading symbol LTTC.
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS (Continued)
The high and low bid price for the Company's common stock for each quarter
of the last two fiscal years is shown in Table 9.
<TABLE>
Table 9. Market Value of Common Stock
<CAPTION>
Quarter Ending High Low
<S> <C> <C>
September 30, 1993 12/16 6/16
December 31, 1993 10/16 6/16
March 31, 1994 10/16 6/16
June 30, 1994 10/16 6/16
September 30, 1994 4/16 4/16
December 31, 1994 4/16 4/16
March 31, 1995 3/16 3/16
June 30, 1995 3/16 3/16
</TABLE>
Source: Monthly Statistical Reports, NASD (June 30, 1995)
The prices in Table 9 represent quotations between dealers and do not
include retail mark-ups, mark-downs, or commissions and do not necessarily
represent actual transactions.
At August 15, 1995, the approximate number of holders of the Company's
common stock was 500, including both record and beneficial shareholders in
security position listings.
The Company has never declared or paid any cash dividends on its common
stock and has no present intention of declaring such dividend in the
future. The Company intends to retain all earnings, if any, for use in
development and expansion of its business.
ITEM 6. SELECTED FINANCIAL DATA
Table 10, which has been derived from the Company's audited financial
statements, shows selected financial data for the Company over the last
five fiscal years. The financial statements of the Company for each of the
three years in the periods ended June 30, 1995 are included at Item 8 of
this document. The selected financial data as of the fiscal years ended
June 1995, 1994, and 1993 should be read in conjunction with the Company's
financial statements and related notes included elsewhere in this document.
ITEM 6. SELECTED FINANCIAL DATA (Continued)
<TABLE>
Table 10. Five Year Summary Data
(000's, except per share amounts)
Fiscal Year Ended June
<CAPTION>
1995
1994
1993
1992
1991
<S>
<C>
<C>
<C>
<C>
<C>
Sales
$6,228
$8,649
$6,526
$9,645
$7,370
Net (Loss)
Income
(1,562)
(1,451)
(1,198)
78
39
Net (Loss)
Income Per
Common
Share
(.24)
(.27)
(.41)
.03
.02
Total
Assets
2,248
3,105
2,871
3,707
4,171
Net Working
Capital
(Deficiency
)
(1,331)
(845)
(409)
606
515
Long Term
Obligations
0
2
6
21
61
Cash
Dividends
Per Common
Share
None
None
None
None
None
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OPERATING RESULTS
For the fiscal year ended June 30, 1995, the Company reported a net loss of
$1,562,000. This compares to net loss of $1,451,000 and a net Loss of
$1,198,000 for the fiscal years ended June 30, 1994 and June 25, 1993,
respectively. Although sales decreased 27% from 1994 the decrease was due
to the large ($2,000,000) Nigerian shipment in 1994 that had no counter
part in 1995. Domestic revenues increased 7% from 1994.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
Gross margin, as a percentage of sales, decreased in fiscal 1995 to 13
percent from 18 percent in fiscal 1994, which decreased from 26 percent in
fiscal 1993. The decrease for fiscal 1995 was primarily due to
insufficient sales volume to overcome fixed overhead costs, caused by (1)
increased competition, (2) the Company's product mix, and (3) excessive
warranty costs that were attributable to a product problem eventually
corrected by the end of 1995. Because the ratio of material cost to labor
cost and its contribution to margin varies from product to product, changes
in product mix can have a significant impact on the gross margin. The
Company is continuing its efforts to reduce its manufacturing costs and
improve its margins.
Selling, general, and administrative (SG & A) expenses remained unchanged
at 28 percent of net sales the same level as in fiscal 1994 compared to 32
percent in fiscal 1993. An aggressive cost reduction program coupled with
a reduction in headcount during the year reduced costs by $400,000 or 14%
from prior year spending. In addition there was a non-recurring expense of
$300,000 in 1994 in connection with an international sale. The increase in
expenses as a percentage of sales in fiscal 1993 was due to the decrease in
sales while expenses remained relatively the same. The Company is
instituting a refined budgeting process to gain better control over costs
in the future.
Research and product development costs for the fiscal year ended June 30,
1995 were 10 percent of sales compared to 7 percent for fiscal 1994 and 11
percent for fiscal 1993. The percentage increase from 1994 was impacted by
the lower sales volume. In actual dollars spending levels remained
constant from prior year. The total dollar commitment decreased 14 percent
in fiscal 1994 from fiscal 1993 due to a cost containment program in the
fourth quarter of 1993. An energetic research and development program is
considered by management to be the future foundation upon which revenue
growth will be based. Continued efforts in high definition television and
improved documentation will be management priorities requiring an on going
commitment in expenditures.
Interest expense as a percentage of sales remained at 1 percent as it has
in each of the three preceding fiscal years. There was a decrease in
actual dollars, however, for the third straight year. The decrease in 1995
was due to the continuing payoff of the bank line of credit. As in fiscal
1994 the Company received non-interest bearing advances from LARCAN (see
Note 5 of the Company's audited financial statements included else-where in
the document). Fiscal 1993 reflects the Company being fully extended on
its bank line of credit for over half the year.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity continues to be adversely impacted by low sales
volumes and constrained margins. The sales volumes in fiscal 1995 as in
1994 were not adequate to improve the Company's margins. However, several
factors will contribute to an improving outlook for the Company's
operational performance in fiscal 1996:
(1) The continued emphasis on the Company's high powered transmitter
product line along with a sharper focus on higher margin products.
(2) The first quarter of fiscal 1996 has seen a positive market
response from new product line research and development especially
for the Company's RMS series line.
(3) A continued emphasis on cost containment especially in overhead
areas will have a positive impact on operating margins.
At June 30, 1995 the Company had approximately $735,000 in trade accounts
payable, compared to $854,000 on June 30, 1994. This represents a 14
percent decrease in fiscal 1995 which was enabled primarily by advances
from its affiliate.
The deficiency in working capital grew to $1,331,000 from $845,000 in
fiscal 1994 primarily due to the Company's net loss from operations of
$1,562,000. The operating loss was partially offset by cash generation
from reducing inventories $558,000 and net affiliate borrowings $450,000.
During fiscal 1995 the Company renegotiated its bank line of credit
reducing the outstanding balance to $200,000. This represents a $500,000
decrease in current liabilities from June 30, 1994.
The Company's current ratio (current assets divided by current liabilities)
at June 30, 1995, was .61, compared to .77 at June 30, 1994, and its quick
ratio (cash and cash equivalent plus trade accounts receivable divided by
current liabilities) was .14 at June 30, 1995 as compared to .16 at June
30, 1994. The Company's debt to equity ratio was (3.00) at June 30, 1995
as compared to (6.52) at June 30, 1994.
Due to the Company's current cash flow constraints, there are no current
plans for significant capital expenditures. In addition, until the
Company's operations provide adequate working capital, the Company will be
dependent on its affiliates for its cash needs.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by this item are included in Part IV of
this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
On June 8, 1995 the Company filed a form 8-K reporting that it
had changed its principal independent accountants from Deloitte & Touche to
Ehrhardt Keefe Steiner & Hottman. PC.
PART III
On October 15, 1993, LARCAN purchased 3,636,364 shares of
previously-authorized but unissued shares of the Company's voting common
stock. In addition, LARCAN purchased 416,831 shares of the Company's
voting common stock from existing stockholders.
On May 18, 1995 the shareholders voted in favor of issuing
5,000,000 common shares to LARCAN INC. at a price of $.10 each for a cash
consideration of $500,000. On this same date, the shareholders also voted
in favor of issuing 500,000, 5% cumulative, convertible preferred shares
at a price of $1.00 each to LARCAN INC. also for a cash consideration.
The cumulative number of shares of voting common stock purchased
and subscribed by LARCAN is 9,053,195. The effect of these transactions is
that LARCAN became the registrant's major stockholder.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following are the six members of the Company's Board of
Directors. The Directors listed herein became the Company's Directors
effective October 15, 1993.
MEMBERS OF THE BOARD OF DIRECTORS
Paul A. Dickie, age 53, has been a Director of the Company since
October 15, 1993. He joined LeBlanc & Royle Telcom Inc. as Controller in
1972. During his years at LeBlanc & Royle, he rose steadily through the
corporate ranks to his current position as President of LeBlanc & Royle
Enterprises Inc. He oversees the operations of several of the companies in
the LeBlanc Group and is a member of the Board of Directors of LeBlanc &
Royle Enterprises Inc. and a number of its subsidiaries. Prior to joining
LeBlanc & Royle, Mr. Dickie was employed by Touche Ross & Co., Chartered
Accountants. While at Touche Ross, he received his CA designation.
Dirk B. Freeman, age 60, has been a Director of the Company
since March 31, 1990. He has a 36-year engineering and management history
in the broadcast industry. During the period from March 1987 to October
1988, he was the Vice President of Marketing at the Company. Mr. Freeman
started as a Broadcast Engineer in the U.S. Army. After the service, he
spent a four-year period on the staff of the University of Michigan. In
1961, Mr. Freeman joined the Broadcast Division of RCA. In the next 21
years, he held a number of increasingly responsible engineering, sales,
operations, and marketing management positions at RCA. In 1982, Mr.
Freeman left RCA to form Blair Media, Inc., a management consulting firm.
After founding Blair Media, Mr. Freeman was engaged in a number of
successful projects in broadcast management. In March 1990 Mr. Freeman was
elected to the Board of Directors. From March 1990 to October 1994 he
served as President of the Company. In October of 1994 Mr. Freeman resumed
his activities with Blair Media. Mr. Freeman attended Virginia Polytechnic
Institute majoring in Business Administration. He is also a graduate of
the U.S. Army War College and a retired Colonel in the U.S. Army Reserve.
Nancy E. McGee, age 43, has been a Director of the Company since
October 15, 1993. She joined LeBlanc & Royle in 1978 as Controller. Since
that time, as the company grew and invested in various other businesses,
she assumed the role of Senior Vice President. She is actively involved
in the finance and management areas of several companies in the LeBlanc
group. Before joining LeBlanc & Royle, Mrs. McGee was employed by Touche
Ross & Co. where she received her designation as a chartered accountant.
Mrs. McGee serves on the Boards of LeBlanc & Royle Enterprises Inc. and a
number of its subsidiaries.
Byron W. St. Clair, Ph.D., age 70, has been a Director of the
Company since its inception in 1967, Chairman of the Board since March 1986
and, additionally, serves as Secretary. Dr. St. Clair was Chief Executive
Officer from the inception of the Company to March 1988 and from January
1990 to March 1990. Since March 1988, he has been active full-time in the
Company's sales and engineering areas. He was one of the founders and,
from 1960 to 1965, the first President of
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
Electronics, Missiles and Communications, Inc. From 1957 to 1960, he was
the Director of Research and Development for Adler Electronics, Inc. In
these respective time periods, these two companies were the dominant
manufacturers of translators. From 1965 to 1967, he was General Manager of
Hammarlund Mfg. Company and from 1967 to 1970, Vice President of Racal
Communications, Inc. Dr. St. Clair received his B.S. and M.A. degrees from
Columbia University and a PH.D. in physics from Syracuse University.
P. Clyde Turner, age 65, has been a Director of the Company since
October 15, 1993 and, additionally, serves as Executive Vice President. He
is President, General Manager and a Director of LARCAN INC. Mr. Turner has
37 years experience in the broadcast industry including 4 years as Chief
Engineer of a broadcast station. He joined Canadian General Electric (CGE)
in 1953 and held several management positions including Manager of
Engineering.
In 1981, as a result of the management buyout of the Broadcast Division of
CGE, Mr. Turner became the Manager of Engineering of the then newly-
incorporated LARCAN INC. He was promoted to General Manager in 1988 and
President in 1991.
G. James Wilson, age 61, was appointed President and CEO in late
fiscal year 1995 and has been a Director of the Company since October 15,
1993. He has been associated with the Broadcast Industry since 1962.
Prior to joining the LeBlanc Organization, he was with Andrew Corporation
in the position of Canadian sales manager.
He joined LeBlanc and Royle in 1977 as Sales Manager. As the company grew,
his responsibilities increased, and he assumed the role of Vice President,
Sales and Marketing.
In 1984, a decision was made to form a U.S. sales and marketing
organization to focus on the U.S. Broadcast Market. LDL Communications was
formed, and Mr. Wilson was appointed to the position of President. LDL is
responsible for the sales and marketing of the products manufactured by
LARCAN, LeBlanc, the Alan Dick Company, and LARCAN-TTC. Mr. Wilson serves
on the board of LeBlanc & Royle Enterprises Inc., and other boards within
the organization.
OFFICERS AND SIGNIFICANT EMPLOYEES OF THE CORPORATION WHO ARE NOT ALSO
MEMBERS OF THE BOARD OF DIRECTORS
None.
ITEM 11. EXECUTIVE COMPENSATION
The following table provides information concerning compensation
for the fiscal years 1995, 1994, and 1993, paid to Mr. Dirk B. Freeman, the
Chief Executive Officer of the Company. No corporate officers or employees
received compensation exceeding $100,000 during any of these fiscal years.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
AWARDS PAYOUTS
<S>
NAME AND
PRINCIPA
L
POSITION
<C>
FISCAL
YEAR
<C>
SALARY
($)
<C>
BONUS
($)
<C>
OTHER
ANNUAL
COMPEN-
SATION
($)
<C>
RESRICT
ED
STOCK
AWARDS
($)
<C>
OPTIONS
/SARs
($)
<C>
LTIP
PAYOUT
S ($)
<C>
ALL
OTHER
COMPEN
- - -
SATION
($)
Dirk B.
Freeman
(CEO)
1995
(throug
h April
15)
65,500
- - -0-
- - -0-
- - -0-
- - -0-
- - -0-
- - -0-
1994
80,000
- - -0-
- - -0-
- - -0-
- - -0-
- - -0-
- - -0-
1993
80,000
- - -0-
- - -0-
- - -0-
- - -0-
- - -0-
- - -0-
</TABLE>
At June 30, 1995, Mr. Freeman did not hold any options to purchase any
securities of the Company, he was not granted any such options during
the fiscal year, and he did not exercise any options during the fiscal
year.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
There were no options granted to executive officers in fiscal 1995.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
There are no aggregated options or options exercised by executive
officers as of and during the year ended June 30, 1995.
LONG-TERM INCENTIVE PLAN AWARDS
None.
ITEM 11. EXECUTIVE COMPENSATION (Continued)
PENSION PLAN BENEFITS
None.
COMPENSATION OF DIRECTORS
The Company paid no compensation to non-employee directors during the
fiscal year ended June 30, 1995.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
None.
REPORT ON REPRICING OF OPTIONS/SARs
None in 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
(1) Compensation Committee
Name Position Held
P. Clyde Turner Director
Paul A. Dickie Director
G. James Wilson Director
(2) Not applicable.
(3) Not applicable.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Not applicable.
PERFORMANCE GRAPH
Not applicable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table displays certain information, as of June 30,
1995 with respect to (a) each person who is known by the Company to be the
beneficial owner of more than five percent of the Company's Common Stock
(voting securities) and/or Preferred shares, (b) each director of the
Company and all nominees for director, and (c) all officers and directors
of the Company as a group. All stock ownership shown below is direct
unless otherwise indicated.
<TABLE>
Number of Shares Percent
Name and Address Owned Beneficially of Class
<S> <C> <C>
LARCAN INC. 1) 9,053,195 78.42
228 Ambassador Drive
Mississauga, Ontario
Canada L5T 2J2
Paul A. Dickie None -----
Director
650 South Taylor Avenue
Louisville, CO 80027
Dirk B. Freeman 905,803 7.85
Director/President
650 South Taylor Avenue
Louisville, CO 80027
Nancy E. McGee None ------
Director
650 South Taylor Avenue
Louisville, CO 80027
P. Clyde Turner None ------
Director
650 South Taylor Avenue
Louisville, CO 80027
Dr. Byron W. St. Clair 517,379 4.48
Chairman of the Board/Officer
650 South Taylor Avenue
Louisville, CO 80027
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT (Continued)
Number of Shares Percent
Name and Address Owned Beneficially of Class
G. James Wilson None ------
Director
650 South Taylor Avenue
Louisville, CO 80027 _____________ ____________
Total officers and Directors 10,476,377 90.75
All Others 1,067,557 9.25
Total Outstanding Shares 11,543,934 100.00
All Officers and Directors
as a Group 10,476,377 90.75
Series A, 5% Cumulative, Convertible Preferred shares
Number of Shares Percent
Owned Beneficially of Class
LARCAN INC. 2) 500,000 100.00
228 Ambassador Drive
Missauga, Ontario
Canada L5T 2J2
</TABLE>
1) On May 18, 1995 the shareholders voted in favor of issuing an additional
5,000,000 Common Stock to LARCAN INC. for $500,000. The proceeds were then
used for the purpose of repaying some of the Company's indebtedness to
LARCAN INC. for advances made to cover operating expenses during
approximately the last year.
2) On May 18, 1995, the shareholders voted in favor of issuing preferred
shares to LARCAN INC. also for the purpose of repaying debt to LARCAN INC.
as described above.
In June 1995, the board of Directors created Series A, 5% cumulative
(Convertible Preferred) stock value at $1.00 per share. The maximum
issuable shares under the series is 500,000 shares. The Convertible
Preferred stock is redeemable at the sole discretion of the Company.
Subsequent to January 1, 1997, each Convertible Preferred share is
convertible into common stock by multiplying the number of shares times the
"liquidation value" divided by $.10.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In June of 1995, LARCAN subscribed for 500,000 shares of the Convertible
Preferred stock for $500,000 cash. Subsequent to January 1, 1997 should
these shares be converted, LARCAN INC. would own 84.94% of the outstanding
common stock.
On October 15, 1993, LARCAN acquired 3,636,364 of authorized but unissued
shares of the Company's common stock for $1,000,000 and 416,831 shares of
the Company's common stock from existing shareholders.
During June, 1995 LARCAN INC. subscribed for an additional 5,000,000 common
shares for $500,000 and for 500,000, 5% cumulative convertible, preferred
shares for $500,000.
The Company receives advances from LARCAN for working capital and other
purposes. The Company had total borrowings from LARCAN of $1,575,000
outstanding (after the issuance of common and preferred shares) as of June
30, 1995. During the year ended June 30, 1995, its average outstanding
borrowings from LARCAN were $866,000. Subsequent to June 30, 1995, an
additional $975,000 has been received from LARCAN INC..
Sales to affiliated companies of LARCAN were approximately $572,000 for the
fiscal year ended June 30, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) 1. The following documents are filed as part of this Form 10-K:
Page
Independent Auditors' Report on Financial Statements
................................. F-1
Balance Sheets as of June 30, 1995 and June 30, 1994
................................... F-2
Statements of Operations for each of the three years in the period
ended June 30, 1995
...........................................................................
. F-3
Statements of Stockholders' Equity for each of the three years in
the period
ended June 30, 1995
........................................................................... F-4
Statements of Cash Flows for each of the three years in the period
ended June 30, 1995
...........................................................................
.. F-5
Notes to Financial Statements
................................................................ F-7
2. The financial statement schedule required to be filed as part of
this Form 10-K is listed below:
NONE
3. Exhibits required to be filed are listed below and immediately
follow the signature page of this Form 10-K.
Exhibit
Number Description
3.1 Articles of Incorporation (1)
3.1.1 Amendment to Certificate of Incorporation filed March 5, 1987 (4)
3.1.2 Amendment to Certificate of Incorporation filed July 10, 1990 (6)
3.1.3 Amendment to Certificate of Incorporation filed June 9, 1992 (8).
3.1.4 Amendment to Certificate of Incorporation filed February 2, 1994.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON
FORM 8-K (Continued)
3.2 By-Laws (1)
3.2.1 Amendments to By-Laws dated March 21, 1986 (4)
4.1 Specimen of Common Stock Certificate (1)
10.1 The Television Technology Corporation Employee Stock Ownership
Plan, as amended and restated (4)
10.2 Television Technology Corporation Stock Option Plan, as
amended (4)
10.3 Contract for Technology Transfer and Cooperation - China
National Electronic Technology Import and Export Corporation
and Anshan Broadcasting Equipment Plant (2)
10.4 Real property lease dated July 27, 1987 for Louisville,
Colorado facility (5)
10.5 LARCAN stock purchase agreement
Notes
(1) These exhibits are incorporated by reference from the corresponding
exhibits to the Company's Registration Statement on Form S-18, as
amended, SEC File No. 2-84666-D.
(2) This is incorporated by reference to Form 10-K filed for the year
ended June 30, 1986.
(3) This is incorporated by reference to Form 8-K filed April 7, 1986.
(4) This is incorporated by reference to Form 10-K filed for the year
ended June 30, 1987.
(5) This is incorporated by reference to Form 10-K filed for the year
ended June 30, 1989.
(6) This is incorporated by reference to Form 10-K filed for the year
ended June 30, 1990.
(7) This is incorporated by reference to Form 10-K filed for the year
ended June 30, 1991.
(8) This is incorporated by reference to Form 10-K filed for the year
ended June 26, 1992.
(b) The Registrant filed an 8-K Report during the quarter ended June
30, 1995 to reflect a
change in auditors.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: September 30, 1995 LARCAN-TTC INC.
(Registrant)
By:
G. James Wilson
President and Chief Executive Officer
Pursuant to the requirements of the Securities and 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 Date
9/30/95
Byron W. St. Clair
Chairman of the Board and Corporate Secretary
9/30/95
Dirk B. Freeman
Director
9/30/95
P. Clyde Turner
Director and Executive Vice President
9/30/95
Paul A. Dickie
Director
9/30/95
Nancy McGee
Director
9/30/95
G. James Wilson
Director
Table of Contents
Page
Independent Auditors' Report F - 1
Financial Statements
Balance Sheets F - 3
Statements of Operations F - 4
Statements of Stockholders' Deficit F - 5
Statements of Cash Flows F - 6
Notes to Financial Statements F - 7
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
LARCAN-TTC, INC.
Louisville, Colorado
We have audited the balance sheet of LARCAN-TTC, INC. as of June 30,
1995 and the related statement of operations, stockholders' deficit
and cash flows for the year then ended. These financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit 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 misstatements. 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 audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of LARCAN-
TTC, INC. as of June 30, 1995 and the results of its operations and
its cash flows for the year then ended, in conformity with generally
accepted accounting principles.
Ehrhardt Keefe Steiner and Hottman
PC
August 31, 1995
Denver, Colorado
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
LARCAN-TTC INC.
Louisville, Colorado
We have audited the accompanying balance sheet of LARCAN-TTC INC. as
of June 30, 1994, and the related statements of operations,
stockholders' deficit, and cash flows for the years ended June 30,
1994 and June 25, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the financial position of LARCAN-TTC INC. as of
June 30, 1994, and the results of its operations and its cash flows
for the years ended June 30, 1994 and June 25, 1993 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Denver, Colorado
September 19, 1994
<TABLE>
Balance Sheets
<CAPTION>
June 30,
1995
1994
Assets
<S>
<C>
<C>
Current assets
Cash and cash equivalents
$ 118,000
$ 195,000
Accounts receivable - trade, less
allowance for doubtful accounts of
$203,000 (1995) and $131,000 (1994)
(Note 4)
350,000
382,000
Inventories, net (Notes 2 and 4)
1,564,000
2,226,000
Other
10,000
18,000
Total current assets
2,042,000
2,821,000
Equipment and improvements (Notes 3 and
4)
1,788,000
1,743,000
Less accumulated depreciation and
amortization
(1,601,000)
(1,479,000)
187,000
264,000
Other assets
19,000
20,000
Total
$ 2,248,000
$ 3,105,000
Liabilities and Stockholders' Deficit
Current liabilities
Line-of-credit (Note 4)
$ 200,000
$ 700,000
Note payable (Note 4)
70,000
-
Advances from stockholder (Note 5)
1,575,000
1,125,000
Accounts payable - trade
735,000
854,000
Salaries, wages and employee benefits
177,000
244,000
Accrued expenses and other liabilities
100,000
264,000
Accrued warranty and other reserves
34,000
134,000
Customer advances
482,000
345,000
Total current liabilities
3,373,000
3,666,000
Long-term liabilities
-
2,000
Total liabilities
3,373,000
3,668,000
Commitments and contingencies (Note 7)
Stockholders' deficit (Notes 5 and 8)
Preferred stock, $1.00 par value;
1,000,000 shares authorized
Series A 5% cumulative convertible,
no shares issued and outstanding,
liquidation preference $1.00 per
share
-
-
Series A subscribed, 500,000 shares
500,000
-
Common stock, $.04 par value;
30,000,000 shares authorized, 6,543,934
(1995) and 6,542,934 (1994) shares
issued
262,000
262,000
Common stock subscribed, 5,000,000
shares
200,000
-
Additional paid-in capital
4,744,000
4,444,000
Accumulated deficit
(6,821,000)
(5,259,000)
Common stock held in treasury, at cost;
1,796 shares
(10,000)
(10,000)
Total stockholders' deficit
(1,125,000)
(563,000)
Total liabilities and stockholders'
deficit
$ 2,248,000
$ 3,105,000
</TABLE>
<TABLE>
Statements of Operations
<CAPTION>
Fiscal Years
Ended June
1995
1994
1993
<S>
<C>
<C>
<C>
$ 6,228,000
$ 8,649,000
$
6,526,000
Operating expenses (Note 7)
Cost of sales
5,423,000
7,057,000
4,822,000
Selling, general and
administrative
1,695,000
2,361,000
2,082,000
Research and development
615,000
623,000
725,000
Total operating expenses
7,733,000
10,041,000
7,629,000
Loss from operations
(1,505,000)
(1,392,000)
(1,103,00
0)
Other expense
Interest
(36,000)
(50,000)
(73,000)
Other
(21,000)
(9,000)
(22,000)
Total other expense
(57,000)
(59,000)
(95,000)
Net loss
$ (1,562,000)
$ (1,451,000)
$
(1,198,00
0)
Net loss per common share
$ (.24)
$ (.27)
$ (.41)
Weighted average number of common
shares outstanding
6,543,561
5,450,229
2,900,339
</TABLE>
<TABLE>
Statements of Stockholders' Deficit
For the Years Ended June 1995, 1994, and 1993
<CAPTION>
Preferred Stock, Series A
Common Stock
Additi
onal
Accumu
- - -
Subscribed
Subscribed
Paid
In
lated
Treasury
Stock
Shares
Amount
Shares
Amount
Shares
Amount
Shares
Amount
Capita
l
Defici
t
Shares
Amount
<S>
<C>
<C>
<C>
<C>
<C>
<C>
<C>
<C>
<C>
<C>
<C>
<C>
Year
ended
June 26,
1992
-
$ -
-
$ -
2,889,301
$
116,0
00
-
$ -
$ 3,579,000
$
(2,61
0,000)
1,7
96
$ (10,000)
Issuance
of
common
stock to
employee
stock
ownershi
p plan
(Note 8)
-
-
-
-
17,269
1,000
-
-
10,000
-
-
-
Net loss
-
-
-
-
-
-
-
-
-
(1,19
8,000)
-
-
Year
ended
June 25,
1993
-
-
-
-
2,906,570
117,0
00
-
-
3,589,000
(3,80
8,000)
1,7
96
(10,000)
Issuance
of
common
stock
for cash
(Note 8)
-
-
-
-
3,636,364
145,0
00
-
-
855,000
-
-
-
Net loss
-
-
-
-
-
-
-
-
-
(1,45
1,000)
-
-
Year
ended
June 30,
1994
-
-
-
-
6,542,934
262,0
00
-
-
4,444,000
(5,25
9,000)
1,7
96
(10,000)
Issuance
of
common
stock
for cash
(Note 8)
-
-
-
-
1,000
-
-
-
-
-
-
-
Subscript
ion of
Series A
Preferre
d Stock
(Note 8)
-
-
500,
000
500,0
00
-
-
-
-
-
-
-
-
Subscript
ion of
Common
Stock
(Note 8)
-
-
-
-
-
-
5,000
,000
200,000
300,000
-
-
-
Net loss
-
-
-
-
-
-
-
-
-
(1,56
2,000)
-
-
Year
Ended
June 30,
1995
-
$ -
500,
000
$
500,0
00
6,543,934
$
262,0
00
5,000
,000
$ 200,000
$ 4,744,000
$
(6,82
1,000)
1,7
96
$ (10,000)
</TABLE>
<TABLE>
Statements of Cash Flows
<CAPTION>
Fiscal Years
Ended June
1995
1994
1993
<S>
<C>
<C>
<C>
Cash flows from operating
activities
Net loss
$ (1,562,000)
$ (1,451,000)
$
(1,198,00
0)
Adjustments to reconcile net loss
to net cash used in (provided
by) operating activities
Depreciation and amortization
122,000
123,000
172,000
Provision for losses on
accounts receivable
72,000
48,000
(61,000)
Write-off of inventories
-
-
(400,000)
Provision for inventory
reserves
104,000
120,000
175,000
Loss on disposal of assets
-
-
24,000
Change in assets and
liabilities
Trade accounts receivable
(40,000)
484,000
117,000
Inventories
558,000
(834,000)
708,000
Other current assets
8,000
55,000
95,000
Trade accounts payable
(119,000)
(445,000)
347,000
Salaries, wages and employee
benefits
(67,000)
17,000
18,000
Accrued expenses and other
liabilities
(164,000)
198,000
(33,000)
Accrued warranty and other
reserves
(100,000)
43,000
(196,000)
Customer advances
137,000
(131,000)
242,000
511,000
(322,000)
1,208,000
Net cash (used in)
provided by operating
activities
(1,051,000)
(1,773,000)
10,000
Cash flows from investing
activities
Purchases of equipment and
improvements
(45,000)
(91,000)
(11,000)
Decrease (increase) in other
assets
1,000
(13,000)
2,000
Net cash used in investing
activities
(44,000)
(104,000)
(9,000)
Cash flows from financing
activities
Borrowings on note payable and
line-of-credit
70,000
3,360,000
2,127,000
Payments on note payable and
line-of-credit
(500,000)
(3,478,000)
(2,092,00
0)
Borrowings from affiliate
1,450,000
2,275,000
-
Payments to affiliate
(1,000,000)
(650,000)
-
Principal payments on capital
lease obligations
(2,000)
(4,000)
(62,000)
Proceeds from issuance of
common stock and preferred
stock
1,000,000
500,000
11,000
Net cash provided by (used
in) financing activities
1,018,000
2,003,000
(16,000)
Net (decrease) increase in cash
and cash equivalents
(77,000)
126,000
(15,000)
Cash and cash equivalents at
beginning of year
195,000
69,000
84,000
Cash and cash equivalents at end
of year
$ 118,000
$ 195,000
$ 69,000
Supplemental disclosures of cash flow information:
Cash paid for interest was $36,000, $58,000, and $69,000 for
1995, 1994, and 1993, respectively.
Supplemental disclosure of non-cash financing activities:
In October 1993, the Company converted $500,000 in cash advances
received from LARCAN during September 1993 to equity.
Note 1 - Organization and Summary of Significant Accounting Policies
Organization
LARCAN-TTC, INC. (the Company), is a fully integrated producer of
television and FM radio transmission equipment. The Company designs,
develops and manufactures a variety of FM and television broadcast
transmitters/translators including low power television equipment and
high power UHF television equipment. The Company also provides
system design services, sells accessory items manufactured by the
Company and others, and performs installation as requested by its
customers. LARCAN, INC. (a Canadian Corporation) (LARCAN) controls
approximately 78 percent of the Company's outstanding and subscribed
common stock as of June 30, 1995. The Company continues to be
partially dependent on continued funding from LARCAN.
Change in Year End
During fiscal 1994, the Company changed its fiscal year end from a
52/53 week year which ended on the Friday preceding June 30 to a June
30 year end.
Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with an
original maturity of three months or less at the time of purchase to
be cash equivalents. At June 30, 1995, the Company had cash balances
in depository accounts of approximately $116,000 in excess of
insurable limits.
Inventories
Inventories are stated at the lower of cost (first-in, first-out
method) or market.
Equipment and Improvements
Equipment and improvements are stated at cost. Depreciation and
amortization are provided using the straight line method over the
estimated useful life of the related assets, or the related lease
term for leasehold improvements.
Revenue Recognition
Sales are recognized when the product is shipped, or pursuant to the
terms of sales contracts when manufacturing is completed. Revenues
from services are recognized when the services are rendered.
Warranty Costs
The Company generally provides a limited warranty for its products of
one to two years. Included in cost of sales are projected future
costs of providing such warranties on products which have been sold.
Note 1 - Organization and Summary of Significant Accounting Policies
(continued)
Research and Development
Research and product development expenditures are charged to
operations as incurred.
Net loss per common share
Loss per share of common stock was computed based on the weighted
average number of common shares outstanding during the period.
Common stock equivalents are not included as their effect would be
antidilutive.
Note 2 - Inventories
Inventories consist of the following:
</TABLE>
<TABLE>
<CAPTION>
June
30,
1995
1994
<S>
<C>
<C>
Parts, raw materials and sub-assemblies
$
1,676,00
0
$
2,160,00
0
Work in process
112,000
186,000
1,788,00
0
2,346,00
0
Less inventory reserves
(224,000
)
(120,000
)
$
1,564,00
0
$
2,226,00
0
</TABLE>
Note 3 - Equipment and Improvements
Equipment and improvements consist of the following:
<TABLE>
<CAPTION>
June
30,
1995
1994
<S>
<C>
<C>
Manufacturing equipment
$ 993,000
$ 960,000
Furniture and fixtures
666,000
654,000
Leasehold improvements
88,000
88,000
Transportation equipment
41,000
41,000
1,788,000
1,743,000
Less accumulated depreciation and
amortization
(1,601,000)
(1,479,000)
$ 187,000
$ 264,000
</TABLE>
Note 4 - Note Payable and Line-of-Credit
Note payable and line-of-credit consist of the following:
<TABLE>
<CAPTION>
June
30,
1995
1994
<S>
<C>
<C>
Bank revolving line-of-credit, interest
at prime (9% at June 30, 1995), matures
June 1, 1996, cross-collateralized by
trade accounts receivable, inventories,
and equipment
$ 200,000
$ 700,000
Bank term loan, interest at prime plus
1.5% (totaling 10.5% at June 30, 1995),
monthly principal and interest payments
of approximately $7,000 through June 1,
1996, cross-collateralized by trade
accounts receivable, inventories and
equipment
$ 70,000
$ -
</TABLE>
The revolving line-of-credit agreement with a bank contains certain
covenants relating to, among other matters, minimum levels of net
worth, restrictions on additional debt and the payment of common
stock dividends. At June 30, 1995 the Company was in violation of
certain of these covenants. The Company received a waiver from the
bank as of June 30, 1995. The Company was not in compliance with
these covenants subsequent to June 30, 1995.
Note 5 - Related Parties
The following is a summary of significant transactions with
affiliated companies:
Advances from Stockholder
The Company receives advances from its major stockholder, LARCAN, for
working capital and other purposes. These advances are subordinate
to the bank debt (Note 4), are non-interest-bearing, unsecured, and
have no fixed terms of repayment. The Company had total borrowings
from LARCAN of $1,575,000 (1995) and $1,125,000 (1994) outstanding.
Subsequent to June 30, 1995, an additional $475,000 has been received
from LARCAN.
As further discussed in Note 8, during the year ended June 30, 1995,
LARCAN subscribed 500,000 shares of the Company's Series A preferred
stock and 5,000,000 shares of the Company's common stock for
$1,000,000. The proceeds from the stock subscription were used to
pay down the advances received from LARCAN.
Sales to Affiliates
Sales to an affiliate of the Company's major stockholder, LARCAN,
were approximately $572,000, $55,000 and $0 for the years ended June
30, 1995, 1994 and 1993, respectively.
Note 6 - Income Taxes
Income Taxes
The Company recognizes deferred tax liabilities and assets based on
the difference between the financial statement and tax basis of
assets and liabilities using enacted tax rates in effect for the year
in which differences are expected to reverse. The measurement of
deferred tax assets is reduced if necessary, by the amount of any tax
benefits that, based on available evidence, are not expected to be
realized.
Deferred income taxes at a tax rate of 37% are comprised of the
following:
<TABLE>
<CAPTION>
June
30
1995
1994
<S>
<C>
<C>
Deferred tax assets
Allowance for doubtful accounts
$ 75,000
$ 49,000
Inventory
257,000
258,000
Accrued vacation and other
liabilities
68,000
22,000
Accrued warranty and other reserves
12,000
50,000
Research and development
84,000
104,000
Net operating loss carryforwards
1,086,000
852,000
1,582,000
1,335,000
Valuation allowance on deferred tax
assets
(1,567,00
0)
(1,317,00
0)
Net deferred tax asset
15,000
18,000
Deferred tax liability - equipment
and improvements depreciation
(15,000)
(18,000)
Net deferred taxes
$ -
$ -
</TABLE>
A valuation allowance of $1,567,000 and $1,317,000 as of June 30,
1995 and 1994, respectively, has been recognized to offset the
related deferred tax assets due to the uncertainty of realizing the
benefit of these items.
The Company has available, for federal income tax purposes, net
operating loss carryforwards of approximately $2,900,000 which expire
in varying amounts through 2008. The Company's net operating loss
carryforwards, computed under the provisions of the alternative
minimum tax, are not significantly different from the Company's
regular net operating loss carryforwards. In addition, due to the
change in control of stock ownership of the Company (Note 8), the
Company's utilization of its net operating losses, which were
incurred prior to the change in control, are subject to an annual
limitation. The annual limitation of the net operating loss
carryforwards incurred prior to the change in control, which total
approximately $575,000, is approximately $38,000 before adjustment
for any limitation amount not utilized in prior years.
Note 7 - Commitments and Contingencies
ESOP
The Company terminated its Employee Stock Ownership Plan (ESOP) in
1993. In connection with the termination of the ESOP, participants
will receive shares of the Company's common stock. The amount to be
received will equal the participant's vested interest in the fair
value of the ESOP's assets as of the termination date.
Leases
The Company has a noncancelable operating lease for its office and
manufacturing facility. The lease, which expires April, 1998,
provides for an increase in rental payments based on increases in the
Consumer Price Index. In addition, the Company is required to pay
property taxes, insurance and maintenance costs relating to the
leased facility. The Company has also entered into certain other
noncancelable operating leases extending through 1998. As of June
30, 1995, the Company's future minimum rental commitments under these
operating leases are as follows:
<TABLE>
<CAPTION>
Fiscal Years Ending June 30,
<S>
<C>
1996
$ 356,000
1997
335,000
1998
256,000
Total minimum lease
payments
$ 947,000
</TABLE>
Total rental expense under operating leases for the fiscal years
ended June 1995, 1994, and 1993 was $356,000, $360,000 and $300,000,
respectively.
Litigation
On June 8, 1995, the Company was named as a defendant in a lawsuit
filed in the federal District Court of the District of Colorado by a
competitor who alleges that the Company has made, used, sold and/or
induced others to use television transmitters that infringe on the
competitor's alleged patent. Although the outcome cannot be
predicted with certainty, it is management's opinion that the
litigation will be settled on terms which will not have a materially
adverse impact upon the Company or its financial condition.
Note 8 - Stockholders' Deficit
Preferred Stock
During 1995, the Company amended its Articles of Incorporation to
provide for 1,000,000 shares of preferred stock, $1.00 par value,
with such rights, preferences, designations and to be issued in such
series as to be determined by the Company's Board of Directors.
In June 1995, the Board of Directors created Series A, 5% cumulative
convertible preferred (Convertible Preferred) stock value at $1.00
per share. The maximum issuable shares under the series is 500,000
shares. Holders of the Convertible Preferred shares shall be
entitled to dividends as declared by the Board of Directors at $.05
per share.
The Convertible Preferred stockholders, in the event of liquidation
of the Company, will receive an amount equal to $1.00 per share plus
declared and unpaid dividends before any holder of common stock
receives any amount.
The Convertible Preferred stock is redeemable at the sole discretion
of the Company. Subsequent to January 1, 1997, each Convertible
Preferred share is convertible into common stock by multiplying the
number of shares times the "liquidation value" divided by $.10.
In June 1995, the Company's majority stockholder subscribed 500,000
shares of the Convertible Preferred stock for $500,000 cash. The
stock was formally issued subsequent to June 30, 1995.
Common Stock
In June 1995, the Company amended its Articles of Incorporation to
increase the authorized shares of common stock from 10,000,000 shares
to 30,000,000. All authorized share information has been restated to
retroactively reflect the change in authorized shares.
Issuance of Common Stock
In 1993, LARCAN acquired 3,636,364 of authorized but unissued shares
of the Company's common stock for $1,000,000 and 416,831 shares of
the Company's common stock from existing shareholders.
Common Stock Subscription
In June 1995, the Company's majority stockholder subscribed 5,000,000
shares of the Company's common stock for $500,000. The stock was
formally issued subsequent to June 30, 1995.
Note 8 - Stockholders' Deficit (continued)
Stock Option Plan
In June 1983, the Company adopted an Incentive Stock Option Plan (the
Plan) which, as amended in February 1986, allowed the issuance of up
to 687,500 shares of both incentive stock options (ISOs), as amended,
and non-qualified options (NQOs), which are options that do not
qualify as ISOs. Under the Plan, any employee of the Company,
including salaried officers and directors, could be granted options
to purchase common stock of the Company. The Plan expired in June
1993. Stock options granted pursuant to the terms of the Plan
continue to be governed by the Plan's provisions.
The following is a summary of changes in the qualified options for
the last three years:
<TABLE>
<CAPTION>
Number of
Option Price
Shares
Range Per
Share
<S>
<C>
<C>
Outstanding at June 26, 1992
294,108
$ .84 -
2.50
Granted
172,000
.44 -
.56
Canceled
(157,088)
.84 -
1.38
Outstanding at June 25, 1993
309,020
.44 -
2.50
Granted
-
-
Canceled
(158,688)
.28 -
.64
Outstanding at June 30, 1994
150,332
.28
Granted
-
-
Canceled
(38,566)
.28
Exercised
(1,000)
.28
Outstanding at June 30, 1995
110,766
$ .28
Total exercisable at June 30, 1995
104,098
$ .28
</TABLE>
Effective October 15, 1993, the Board of Directors authorized a
resolution which reset all qualified options to $.28 per share.
Note 9 - Concentration of Credit Risk
The Company operates in one industry segment and sells some products
in foreign markets. Export sales totaled $1,322,000, $4,047,000 and
$1,437,000 for the fiscal years ended June 30, 1995, 1994 and 1993,
respectively. During the year ended June 30, 1995, 59 percent of
export sales were to Saudi Arabia. In fiscal 1994, 54 percent of
export sales were to Nigeria. There were no geographic areas
included in export sales which totaled 10 percent or more of total
sales for the fiscal year ended June 26, 1993.
Note 9 - Concentration of Credit Risk (continued)
Sales to international customers are subject to unique risks which
are not present in sales to domestic customers. The Company attempts
to mitigate these risks by carefully considering the political and
economic conditions in a foreign country along with the financial
viability of its customer before doing business there. For
international customers, sales are priced in U.S. dollars to avoid
currency fluctuations and are sold under irrevocable letters of
credit, which are usually confirmed by a major U.S. bank when the
political, economic, or financial viability is uncertain.
Generally, it is the Company's policy to obtain a cash advance from
its domestic customers of approximately 35 percent of the sales price
prior to commencement of production. Subsequently, progress payments
are received during the production of the equipment.
The Company had individual customers whose sales accounted for 12, 25
and 0 percent of total sales during the years ended June 1995, 1994
and 1993, respectively.
LARCAN-TTC, INC.
16
17
3
LARCAN-TTC, INC.
F - 30
F - 1
F - 2
LARCAN-TTC, INC.
[FN]
See notes to financial statements.
F - 6
[FN]
See notes to financial statements.
F - 7
LARCAN-TTC, INC.
See notes to financial statements.
F - 7
LARCAN-TTC, INC.
Notes to Financial Statements
F - 18
F - 17
28
29
28
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 118,000
<SECURITIES> 0
<RECEIVABLES> 553,000
<ALLOWANCES> 203,000
<INVENTORY> 1,564,000
<CURRENT-ASSETS> 2,042,000
<PP&E> 1,788,000
<DEPRECIATION> 1,601,000
<TOTAL-ASSETS> 2,248,000
<CURRENT-LIABILITIES> 3,373,000
<BONDS> 0
<COMMON> 462,000
0
500,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2,248,000
<SALES> 6,228,000
<TOTAL-REVENUES> 6,228,000
<CGS> 5,423,000
<TOTAL-COSTS> 7,773,000
<OTHER-EXPENSES> 21,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,000
<INCOME-PRETAX> (1,562,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,562,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,562,000)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
