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 December 31, 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) of 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 December 31, 1997 was 11,543,934 shares.
LARCAN-TTC INC.
CONTENTS
PART I. FINANCIAL INFORMATION Page
Item 1 Balance Sheets -- December 31, 1997 and June 30, 1997 3
Statements of Operations -- Three months ended December 31,
1997 and 1996 and the Six months ended December 31, 1997 and
1996 4
Statements of Cash Flows -- Six months ended December 31, 1997
and 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 9
Item 2 Changes in Securities 9
Item 3 Defaults on Senior Securities 9
Item 4 Submission of Matters to a Vote of Security Holders 9
Item 5 Other Information 9
Item 6 Exhibits and Reports on Form 8-K 10
Signature Page 11
LARCAN-TTC INC.
BALANCE SHEETS
(Unaudited)
ASSETS
December 31, June 30,
1997 1997(restated)
CURRENT ASSETS
Cash and cash equivalents $ 74,000 $ 65,000
Trade accounts receivable less allowance for
doubtful accounts of $187,000 (December) and
$173,000 (June) 242,000 378,000
Accounts Receivable - related party 63,000 96,000
Inventories (Net) 1,694,000 1,871,000
Other 45,000 42,000
TOTAL CURRENT ASSETS 2,118,000 2,452,000
Equipment and Improvements 1,809,000 2,034,000
Less accumulated depreciation and
amortization (1,603,000) (1,772,000)
Net equipment and Improvements 206,000 262,000
Note Receivable 9,000 13,000
Other Assets 19,000 20,000
TOTAL ASSETS 2,352,000 2,747,000
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Line of Credit $ 75,000 $ 154,000
Note Payable 50,000 ---
Advances from Stockholder 6,575,000 6,475,000
Accounts Payable-Trade 577,000 456,000
Accounts Payable - related party 505,000 78,000
Salaries, wages and employee benefits 147,000 145,000
Accrued expenses and other liabilities 279,000 158,000
Accrued warranty and other reserves 77,000 110,000
Accrued interest payable 695,000 420,000
Customer Advances 136,000 555,000
TOTAL CURRENT LIABILITIES 9,116,000 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 (12,398,000)(11,450,000)
Common stock held in treasury, at cost;
1,796 shares (10,000) (10,000)
TOTAL STOCKHOLDERS' DEFICIT (6,764,000) (5,804,000)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT 2,352,000 2,747,000
See note to financial statements
LARCAN-TTC INC.
STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
December 31, December 31, December 31, December 31,
1997 1996(restated) 1997 1996(restated)
NET SALES $ 809,000 $ 1,638,000 $ 2,426,000 $ 3,164,000
COST OF GOODS SOLD 750,000 1,585,000 2,109,000 3,077,000
OPERATING EXPENSES:
Selling, general and
administrative 336,000 353,000 673,000 712,000
Research and
development 156,000 176,000 307,000 427,000
TOTAL EXPENSES 1,242,000 2,114,000 3,089,000 4,216,000
INCOME (LOSS) FROM
OPERATIONS (433,000) (476,000) (663,000) (1,052,000)
OTHER INCOME (EXPENSE)
Interest expense (141,000) (111,000) (281,000) (182,000)
Other income/(expense) (31,000) (2,000) (4,000) (5,000)
TOTAL OTHER (172,000) (113,000) (285,000) (187,000)
NET INCOME (LOSS) $ (605,000) $ (589,000) $ (948,000) $(1,239,000)
Preferred stock dividends 6,000 6,000 12,000 12,000
Net loss applicable to
common stockholders $ (611,000) $ (595,000) $ (960,000) $(1,251,000)
BASIC NET INCOME (LOSS)
PER COMMON SHARE $ (0.05) $ (0.05) $ (0.08) $ (0.11)
WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 11,543,934 11,543,934 11,543,934 11,543,934
See note to financial statements
LARCAN-TTC INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Six Months Ended
December 31, December 31,
1997 1996(restated)
Cash flows from operating activities:
Net Loss $ (948,000) $ (1,239,000)
Adjustments to reconcile net loss to net
cash (used in) operating activities:
Depreciation & Amortization 51,000 40,000
Provision for losses on A/R 14,000 (16,000)
Provision for losses on inventory 37,000 41,000
Gain on sale of fixed assets (57,000) -----
Change in operating assets and liabilities:
Trade A/R 155,000 651,000
Inventories 140,000 86,000
Other Current Assets (3,000) (21,000)
Trade A/P 548,000 (678,000)
Salaries, Wages & Benefits 2,000 (34,000)
Accrued Expenses & Other Liabilities 109,000 23,000
Accrued Warranty & Other Reserves (33,000) 87,000
Accrued interest payable 275,000 174,000
Customer Advances (419,000) 41,000
Other 1,000 -----
Total adjustments 820,000 394,000
Net cash used in operating activities (128,000) (845,000)
Cash flows from investing activities:
Purchase. of Equip. & Improvements (4,000) (70,000)
Proceeds from sale of fixed assets 66,000 -------
Net change of note receivable 4,000 3,000
Net cash provided by /(used in)
investing activities 66,000 (67,000)
Cash flows from financing activities:
Payments on note payable and line-of-credit (29,000) (25,000)
Borrowings from stockholder 100,000 950,000
Net cash provided by financing activities 71,000 925,000
Increase in Cash 9,000 13,000
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 74,000 111,000
Supplemental disclosures of cash flow information:
Cash paid for interest was $6,000 and $8,000 for December 31, 1997
and 1996, respectively.
Supplemental disclosure of non-cash financing activities:
Accrual of undeclared, cumulative preferred stock dividends was $12,000
and $12,000 for December 31, 1997 and 1996 (as restated), 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
December 31, 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 six months ended December 31, 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.
During the second quarter of fiscal 1998, the Company adopted the provisions
of Statement of Financial Accounting Standard No. 128, Earnings per Share
(FAS 128). FAS 128 established new definitions for calculating and
disclosing basic and diluted earnings per share. In accordance with FAS 128,
all prior periods have been restated to conform to the new methodology.
The restated amounts did not differ materially from amounts previously
reported. Additionally, as the Company has losses for all periods presented,
all potential dilutive common shares are antidilutive and therefore no
diluted earnings per share is presented.
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
Revenues for the six month period ended December 31 have decreased 23% from the
comparable period of the prior year. The continued uncertainty surrounding
channel allocations in the television market was a major factor in the revenue
decline. As market demand remains sluggish both high power and low power
television shipments have suffered. The drop has been most dramatic in the low
power market as buying decisions are postponed pending clarification of channel
assignments. Market demand for high power transmitters continues to be
adversely affected by the transition to a digital market. The traditional low
power market will consolidate into a replacement market until the transition to
digital service is clarified. Radio and service revenues are at comparable
levels to a year ago.
The forecasted trend in revenues is evidenced by the Company's backlog which
has declined by $894,000 (75%) from prior year and by $887,000 (75%) from
June 30, 1997. As of December 31, 1997, sales booked but not yet shipped were
$298,000. The backlog for all product lines has decreased from the fiscal year
ending June 30, 1997, again reflecting the decrease in new orders.
As revenues have declined the pressure on margins has increased resulting in a
reduction of average margins during the quarter to 7% from 16% in the prior
quarter. Gross margins on a year to year comparison however have risen from an
average of 3% at December 31, 1996 to 13% at December 31, 1997. Even though a
mid- teen gross margin percentage continues a favorable trend, the Company
remains well below the industry standards required for profitability.
Operating expenses have remained consistent quarter to quarter this fiscal year
but have declined $159,000 (14%) from the six month period ended December 31,
1996. The decrease was due primarily to the reduction in engineering project
spending.
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. The increase in other expenses is a reserve
provision for a facilities relocation.
Capital Resources
Continued operating losses have increased the working capital deficiency to
$6,998,000 at December 31, 1997 which is an increase of $899,000 from June 30,
1997. 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 $34,000.
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 $50,000. 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 canceled 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: February 12, 1998 /s/ G. James Wilson
G. James Wilson
Director/President
Date: February 12, 1998 /s/ Ronald M. Eve
Ronald M. Eve
Controller / Corporate Secretary
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<OTHER-SE> (12,398,000)
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