SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OR THE SECURITIES EXCHANGE ACT OF 1934
For the 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 (IRS Employer
Incorporation or Organization) ID Number)
650 South Taylor Avenue, Louisville, Colorado 80027
(Address of Principal Executive Offices, Including Zip Code)
(303) 665-8000
(Registrant's Telephone No.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) or the Securities Exchange
Act of 1934 during the preceding 12 months (or for 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 [ ]
The number of shares outstanding of the registrant's Common Stock,
par value $0.04 as of September 30, 1997 was 11,543,934 shares.
LARCAN-TTC INC.
CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1 Balance Sheets -- September 30, 1997 and June 30, 1997 3
Statements of Operations -- Three months ended
September 30, 1997 and September 30, 1996 4
Statements of Cash Flows -- Three months ended
September 30, 1997 and September 30, 1996 5
Notes to Financial Statements 6
Item 2 Management's Discussion and Analysis of Results of
Operations and Financial Condition 7
PART II. OTHER INFORMATION
Item 1 Legal Proceedings 8
Item 2 Changes in Securities 8
Item 3 Defaults on Senior Securities 8
Item 4 Submission of Matters to a Vote of Security Holders 8
Item 5 Other Information 8
Item 6 Exhibits and Reports on Form 8-K 9
Signature Page 10
LARCAN-TTC INC.
BALANCE SHEETS
(Unaudited)
ASSETS
September 30, June 30,
1997 1997
(restated)
CURRENT ASSETS
Cash and cash equivalents $ 61,000 $ 65,000
Trade accounts receivable less
allowance for doubtful accounts of
$181,000 (September) and $173,000 (June) 200,000 378,000
Accounts Receivable - related party 399,000 96,000
Inventories (Net) 1,738,000 1,871,000
Other 31,000 42,000
TOTAL CURRENT ASSETS 2,429,000 2,452,000
Equipment and Improvements 1,809,000 2,034,000
Less accumulated depreciation and
amortization (1,578,000) (1,772,000)
Net equipment and Improvements 231,000 262,000
Note Receivable 11,000 13,000
Other Assets 20,000 20,000
TOTAL ASSETS 2,691,000 2,747,000
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Line of Credit $ 75,000 $ 154,000
Note Payable 69,000 ---
Advances from Stockholder 6,475,000 6,475,000
Accounts Payable-Trade 664,000 456,000
Accounts Payable - related party 324,000 78,000
Salaries, wages and employee benefits 115,000 145,000
Accrued expenses and other liabilities 214,000 158,000
Accrued warranty and other reserves 130,000 110,000
Accrued interest payable 557,000 420,000
Customer Advances 227,000 555,000
TOTAL CURRENT LIABILITIES 8,850,000 8,551,000
STOCKHOLDERS' DEFICIT
Preferred stock, $1.00 par value; 1,000,000
shares authorized Series A 5% cumulative
convertible, 500,000 shares issued and
outstanding, liquidation preferences
$1.00 per share 500,000 500,000
Common stock, $0.04 par value; 30,000,000
shares authorized,11,543,934 shares issued 462,000 462,000
Additional paid-in capital 4,682,000 4,694,000
Accumulated deficit (11,793,000) (11,450,000)
Common stock held in treasury,
at cost; 1,796 shares (10,000) (10,000)
TOTAL STOCKHOLDERS' DEFICIT (6,159,000) (5,804,000)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT 2,691,000 2,747,000
See note to financial statements
LARCAN-TTC INC.
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
September 30, September 30,
1997 1996
(restated)
NET SALES $ 1,617,000 $ 1,526,000
COST OF GOODS SOLD 1,359,000 1,492,000
OPERATING EXPENSES:
Selling, general and administrative 337,000 359,000
Research and development 151,000 251,000
TOTAL EXPENSES 1,847,000 2,102,000
LOSS FROM OPERATIONS (230,000) (576,000)
OTHER INCOME (EXPENSE)
Interest expense (140,000) (71,000)
Other income 27,000 (3,000)
TOTAL OTHER (113,000) (74,000)
NET LOSS $ (343,000) $ (650,000)
Preferred stock dividends 6,000 6,000
Net loss applicable to common stockholders $ (349,000) $ (656,000)
NET LOSS PER COMMON SHARE $ (0.03) $ (0.06)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 11,543,934 11,543,934
See note to financial statements
LARCAN-TTC INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
September 30, September 30,
1997 1996
(restated)
Cash flows from operating activities:
Net Loss $ (343,000) $ (650,000)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation & Amortization 26,000 18,000
Provision for losses on A/R 8,000 10,000
Provision for losses on inventory 15,000 15,000
Gain on sale of fixed assets (57,000) -----
Change in operating assets and liabilities:
Trade A/R (133,000) 15,000
Inventories 118,000 75,000
Other Current Assets 11,000 (18,000)
Trade A/P 454,000 (470,000)
Salaries, Wages & Benefits (30,000) (36,000)
Accrued Expenses & Other Liabilities 44,000 (15,000)
Accrued Warranty & Other Reserves 20,000 87,000
Accrued interest payable 137,000 66,000
Customer Advances (328,000) 336,000
Total adjustments 285,000 83,000
Net cash used in operating activities (58,000) (567,000)
Cash flows from investing activities:
Purchase. of Equip. & Improvements (4,000) (13,000)
Proceeds from sale of fixed assets 66,000 -------
Net change of note receivable 2,000 -------
Net cash used in investing activities 64,000 (13,000)
Cash flows from financing activities
Payments on note payable and line-of-credit (10,000) (12,000)
Borrowings from stockholder ---- 650,000
Net cash provided by financing activities (10,000) 638,000
Increase/Decrease in Cash (4,000) 58,000
Cash and cash equivalents at the beginning
of the fiscal year 65,000 98,000
Cash and cash equivalents at the end of
three months 61,000 156,000
Supplemental disclosures of cash flow information:
Cash paid for interest was $3,000 and $6,000 for
September 30, 1997 and 1996, respectively.
Supplemental disclosure of non-cash financing activities:
Accrual of undeclared, cumulative preferred stock
dividends was $6,000 and $0 for September 30, 1997
and 1996, respectively.
See note to financial statements
LARCAN-TTC INC.
NOTES TO FINANCIAL STATEMENTS
Reference is made to the financial statements included in the LARCAN-TTC
INC. (the Company) annual report on Form 10-KSB for the year ended June 30,
1997, which describes the accounting policies of the Company for annual
reporting purposes.
The Statement of Operations and the Statement of Cash Flows for the period
ended September 30, 1996 have been restated to reflect the accrual of
interest due on shareholder notes and the accrual for cumulative dividends
on preferred stock for the three months ended September 30, 1996. As
referenced in note 12 to the financial statements as of June 30, 1997
included in the Company's annual report on form 10-KSB, the Company accrued
the annual interest payable in the fourth quarter of the year ended June 30,
1997.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the Company's financial position,
and the results of its' operations and cash flows for the periods presented.
The results of the interm period are not necessarily indicative of results
to be expected for the full year.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Operating Results
First quarter revenues increased marginally (5%, $91,000) from the the prior
year. All product lines generated an increase except high power which
declined 37%. Low power products increased 33%, more than compensating for
the decrease in high power. Radio revenues were also up over prior year
while repair sales were flat. Market demand for high power transmitters
continues to be adversely affected by the transition to a digital market.
The market uncertainties surrounding this transition are also forecast to
impact low power products as well. The traditional low power market will
consolidate into a replacement market until the transition to digital
service is clarified.
The forecasted trend in revenues is evidenced by the Company's backlog which
declined $937,000 (64%) from prior year and $674,000 (56%) from June 30,
1997. As of September 30, 1997, sales booked but not yet shipped were
$511,000. The backlog for all product lines has decreased from the fiscal
year ending June 30, 1997 and new orders for the quarter were the lowest
in the last twelve fiscal quarters.
Gross margins increased to 16% from 2% in the prior year. Even though a
mid- teen gross margin percentage continues the upward trend of the
previous three quarters, the Company remains well below the industry
standards required for profitability.
The decrease in operating expenses of $122,000 (20%) in comparison to the
first quarter of the prior year was due primarily to the reduction in
engineering spending reflecting the suspension in the development program
for the high power members of the RMS series.
Interest expense increased under the terms of the interest bearing loan
agreement with LARCAN.
Other income reflected the sale of excess machine shop equipment no longer
used in the production process.
Capital Resources
The deficiency in working capital grew by $322,000 to $6,421,000 from
June 30, 1997. The primary reason was the operating losses of $343,000 in
the quarter. The reclassification of advances from LARCAN to current
liabilities as of June 1997 unfavorably impacts comparisons with prior year,
when the company reported working capital of $180,000.
Reflecting the renegotiation of the Company's short term bank borrowings,
the revolving line of credit was reduced to $75,000 from $150,000 at June
30, 1997 with $75,000 being converted to a term note payable. During the
quarter the balance on the term note payable was reduced to $69,000. The
line of credit note is due June 1, 1998 and the term note expires September
15, 1998.
This forgoing discussion contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of
the Exchange Act which are intended to be covered by the safe harbors
created thereby. These statements include the plans and objectives of
management for future operations based on current expectations that
involve numerous risks and uncertainties. These plans involve judgments with
respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of
the Company. Although the Company believes that the assumptions underlying
the forward-looking statements are reasonable, any of the assumptions could
be inaccurate and, therefore, there can be no assurance that any
forward-looking statements included in this 10-QSB will prove to be accurate.
In light of the significant uncertainties inherent in the forward-looking
statements included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS ON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
ITEM 5. OTHER INFORMATION
Subsequent to June 30, 1997 the Board of Directors of the Company agreed to
a proposed merger between the Company and a wholly owned subsidiary of
LARCAN with the Company as the surviving entity. Under the terms of the
agreement each outstanding share of Common Stock of the Company (other than
those owned by LARCAN) shall be cancelled in exchange for $.0625 which is
the price equal to the trading price for the 30 days preceding the merger
agreement. As a result of the merger the Company will become a wholly owned
subsidiary of LARCAN. The merger is subject to shareholder approval.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(A) Exhibits
1. Exhibits incorporated by reference
(A) Articles of Incorporation (1)
(B) Amendment to Certificate of Incorporation filed March 5, 1987 (4)
(C) Amendment to Certificate of Incorporation filed July 10, 1990 (6)
(D) Amendment to Certificate of Incorporation filed June 9, 1992 (8)
(E) Amendment to Certificate of Incorporation filed February 2, 1994 (9).
(F) By-Laws (1)
(G) Amendments to By-Laws dated March 21, 1986 (4)
(H) Specimen of Common Stock Certificate (1)
(I) The Television Technology Corporation Employee Stock Ownership Plan,
as amended and restated (4)
(J) Television Technology Corporation Stock Option Plan, as amended (4)
(K) Contract for Technology Transfer and Cooperation - Shina National
Electronic Technology Import and Export Corporation and Anshan
Broadcasting Equipment Plant (2)
(L) Real property lease dated July 27, 1987 for Louisville, Colorado
facility (5)
(M) LARCAN stock purchase agreement (9)
(N) Merger Agreement dated July 17, 1997 (10)
(O) Loan Agreement made between Larcan Inc. and Larcan TTC Inc. dated
August 1, 1996 (10)
(P) Refinancing Agreement made between Larcan Inc. and Larcan TTC Inc.
dated August 1, 1996. (10)
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 30, 1992.
(9) This is incorporated by reference to Form 10-K filed for the year
ended June 30, 1995.
(10) This is incorporated by reference to Form 10-KSB filed for the year
ended June 30, 1997.
27. Financial Data Schedule
(B) Reports on form 8-K
During the last quarter of the period covered by this report
the registrant did not file any report on Form 8-K.
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.
LARCAN - TTC INC.
(Registrant)
Date: November 12, 1997 /s/ G. James Wilson
G. James Wilson
Director/President
Date: November 12, 1997 /s/ Ronald M. Eve
Ronald M. Eve
Controller / Corporate Secretary
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