SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-KSB/A
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended May 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT OF 1934
Commission file number 0-12866
ANTENNA PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 75-1907070
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or organization)
1209 Orange St., Wilmington, Delaware 19801 (940) 325-3301
------------------------------------------- --------------
(Address of principal executive offices) (Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
-------------------
Common Stock, $0.01 par value
Check whether the issuer has (i) filed all reports required by Section 13 or
15(d) of the Exchange ACT during the past 12 months, and (ii) been subject
to such filing requirements for the past ninety (90) days. Yes [ X ] No [ ]
Check if there is no disclosure of delinquent filers in response to Item 405
of regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of the
Form 10-KSB or any amendment to this Form 10-KSB. [ X ]
The Company's net sales for Fiscal Year ended May 31, 2000 was $7,861,707.
As of August 10, 2000 2,135,728 shares of Common Stock were outstanding
and the aggregate market value of the Common Stock (based on the latest
price of known transactions on the Nasdaq Smallcap Market) held by non-
affiliates (880,082 shares) was approximately $1,842,544.
DOCUMENTS INCORPORATED BY REFERENCE
The Company's Proxy Statement dated August 25, 2000 for its annual
meeting of shareholders to be held October 10, 2000 is incorporated by
reference into Part III of this report.
Transitional Small Business Disclosure Format (check one) : Yes [ ]No[ X ]
===========================================================================
The following amendment to the Form 10-KSB for the fiscal year ended May 31,
2000 consists of an expanded explanation of the contents of the Intangible
Assets Described in Note 8 to the Consolidated Financial Statements.
The amendment does not change any other portion of the Form 10-KSB as
originally filed. The entire Consolidated Financial Statements as well as
amended Note 8 are included in this amendment for ease of reading.
ANTENNA PRODUCTS, INC.
CONSOLIDATED FINANCIAL
STATEMENTS
MAY 31, 2000
C O N T E N T S
INDEPENDENT AUDITOR'S REPORT..............................F-1
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets..........................F-2, F-3
Consolidated Statements of Operations................F-4
Consolidated Statements of Shareholders' Equity......F-5
Consolidated Statements of Cash Flows................F-6, F-7
Notes to Consolidated Financial Statements...........F-8 - F-19
INDEPENDENT AUDITOR'S REPORT
To The Board of Directors and Stockholders
Antenna Products, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Antenna
Products, Inc. and Subsidiaries as of May 31, 2000 and 1999, and the
related consolidated statements of operations, shareholders' equity and
cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Antenna
Products, Inc. and subsidiaries as of May 31, 2000 and 1999, and the results
of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
WEAVER AND TIDWELL, L.L.P.
Fort Worth, Texas
August 2, 2000, except for Note 8
as to which the date is September 13, 2000
3466
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 2000 AND 1999
2000 1999
_______ _______
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$ 337,348 $ 270,175
Accounts receivable:
Trade, net of allowances for doubtful accounts
of $7,021 in 2000 and 1999
1,342,733 1,077,917
United States Government
207,281 210,360
Inventories
2,826,358 2,638,172
Costs and estimated earnings in excess
of billings on refurbishing contracts
in progress
293,161 -
Prepaid expenses and other assets
55,872 33,368
Income taxes receivable
30,000 186,212
Deferred income taxes
69,528 65,880
_________ _________
Total current assets
5,162,281 4,482,084
Property and equipment, net
2,435,624 2,386,918
Intangible assets
2,164,349 -
_________ _________
$ 9,762,254 $ 6,869,002
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable $ 1,365,000 $ 1,300,000
Current portion of long-term debt
238,588 48,535
Accounts payable
468,586 247,407
Accrued expenses
382,390 323,489
Billings in excess of costs and
estimate earnings on refurbishing
contracts in progress
320,689 -
_________ _________
Total current liabilities
2,775,253 1,919,431
Long-term debt
2,324,387 846,900
Note payable to shareholder
800,000 800,000
Deferred income taxes
287,338 328,169
__________ __________
3,411,725 1,975,069
_________ _________
Total liabilities
6,186,978 3,894,500
The Notes to Consolidated Financial Statements
are an integral part of these statements.
F-2
COMMITMENTS AND CONTINGENCIES (Note 12)
- -
MINORITY INTEREST IN SUBSIDIARY
- -
SHAREHOLDERS' EQUITY
Common stock, $0.01 par, 8,000,000
shares authorized, 2,135,728
shares and 1,862,928 shares
issued and outstanding in 2000 and
1999, respectively
21,358 18,630
Additional paid-in capital
2,678,766 1,995,951
Retained earnings
875,152 959,921
_________ _______
Total shareholders' equity
3,575,276 2,974,502
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 9,762,254 $ 6,869,002
The Notes to Consolidated Financial Statements
are an integral part of these statements.
F-3
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MAY 31, 2000 AND 1999
2000 1999
____ ____
Sales and contract revenues
$ 7,861,707 $ 7,786,911
Cost of sales and contracts
6,001,637 5,896,240
_______________ _______________
Gross profit
1,860,070 1,890,671
Sales and administrative expenses
1,695,521 1,311,583
________________ _______________
Operating profit
164,549 579,088
Other income (expense)
Interest expense
( 282,571) ( 246,120)
Interest income
235 4,560
Other
18,000 21,242
___________ __________
Total other income (expense)
( 264,336) ( 220,318)
____________ _____________
Income (loss) from operations before
income taxes and minority interest
( 99,787) 358,770
Income tax provision (benefit)
( 14,818) 124,401
____________ ____________
Income (loss) before minority interest
( 84,969) 234,369
Minority interest in subsidiary's loss
200 -
___________ ____________
Net income (loss)
($ 84,769) $ 234,369
____________ ____________
Earnings (loss) per common share
( 0.04) 0.13
____________ ____________
The Notes to Consolidated Financial Statements
are an integral part of these statements.
F-4
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED MAY 31, 2000 AND 1999
Common Stock Additional
Number Paid In Retained
of Shares Amount Capital Earnings Total
_________ ______ _______ ________ _____
BALANCE, MAY 31, 1998,
as previously reported
1,812,928 $ 18,130 $1,921,451 $593,259 $2,532,840
Prior period adjustment
- - - 132,293 132,293
__________ _________ __________ ________ __________
BALANCE, MAY 31, 1998,
as restated
1,812,928 18,130 1,921,451 725,552 2,665,133
Issuance of common stock
50,000 500 74,500 - 75,000
_________ ________ _________ ________ __________
Net income
- - - 234,369 234,369
BALANCE, MAY 31, 1999,
as restated
1,862,928 18,630 1,995,951 959,921 2,974,502
_________ ______ _________ ________ _________
Issuance of common
Stock 272,800 2,728 682,815 - 685,543
Net loss
- - - ( 84,769) ( 84,769)
__________ ________ _________ __________ _____________
BALANCE, MAY 31, 2000
2,135,728 $ 21,358 $2,678,766 $875,152 $3,575,276
The Notes to Consolidated Financial Statements
are an integral part of these statements.
F-5
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED MAY 21, 2000 AND 1999
2000 1999
____________ ____________
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
($ 84,769) $ 234,369
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation
297,840 298,187
Amortization
44,313 -
Loss on disposal of assets
- 2,850
Deferred federal income tax
( 14,818) 145,022
Changes in assets and liabilities:
Accounts receivable
( 261,737) 53,303
Costs and estimated earnings in excess of
billings on refurbishing contracts
in progress
( 293,161) -
Inventory
( 188,186) 57,298
Prepaid expenses
( 22,504) ( 24,139)
Income taxes receivable
126,551 ( 170,620)
Accounts payable
221,179 ( 189,097)
Accrued expenses
58,901 ( 271,806)
Billings in excess of costs and estimated
earnings on refurbishing contracts in progress
320,689 -
____________ _______________
Net cash provided by operating activities
204,298 135,367
____________ _______________
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of assets
- 1,252
Purchase of property and equipment
( 198,096) ( 48,647)
Purchase of intangible assets
( 1,844,069) -
________________ ________________
Net cash used in investing activities
( 2,042,165) ( 47,395)
The Notes to Consolidated Financial Statements
are an integral part of these statements.
F-6
ANTENNA PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31, 2000 AND 1999
2000 1999
___________ ____________
CASH FLOWS FROM FINANCING ACTIVIITES
Net borrowings under bank lines of credit
65,000 -
Proceeds on borrowings of long-term debt
1,750,000 -
Principal payments on long-term debt
( 82,460) ( 38,838)
Issuance of common stock
172,500 -
_________________ _______________
Net cash (used in)
provided by financing activities
1,905,040 ( 38,838)
Net increase in cash and cash
equivalents
67,173 49,134
CASH AND CASH EQUIVALENTS, beginning of year
270,175 221,041
___________ _______________
CASH AND CASH EQUIVALENTS, end of year
$ 337,348 $ 270,175
_______________ ______________
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during the period for:
Interest (none capitalized)
$ 282,751 $ 246,120
_______________ _____________
Income taxes
$ - $ 150,000
________________ ______________
SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Issuance of common stock in exchange
for equipment and intangible assets
$ 513,043 $ -
_______________ ________________
Issuance of common stock in settlement of lawsuit
$ - $ 75,000
The Notes to Consolidated Financial Statements
are an integral part of these statements.
F-7
ANTENNA PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BUSINESS AND NATURE OF OPERATIONS
Antenna Products, Inc. operates as a holding company with Antenna
Products Corporation and Thirco, Inc.as its wholly-owned subsidiaries,
and API Acquisition Corp., an 80% owned subsidiary. Antenna Products
Corporation is an operating subsidiary that designs, manufactures and
markets antenna systems, towers, and communication accessories worldwide.
The U. S. government, military and civil agencies, and prime
contractors represent Antenna Products' principal customers. Thirco serves
as an equipment leasing company to Antenna Products Corporation. API
Acquisition Corp. was formed during the year ended May 31, 2000, and its
operations consist primarily of contracting to refurbish the interiors of
corporate and private jets. The length of the contracts vary but are
typically less than one year. The Company's operations are performed in Texas
for customers throughout the country.
Following is a schedule of the Company's sales to major customers at May 31,
as a percentage of total sales:
2000 1999
Federal Government 18% 18%
AIRSYS ATM, Inc 14% 21%
Computing Devices Canada 9%
Raytheon 14%
At May 31, 2000 and 1999, trade receivables from two and three customers
comprised approximately 51% and 47%, respectively, of the trade receivable
balance at those dates.
NOTE 2. BUSINESS SEGMENTS
The Company's operations are classified into two principal business
segments based upon the nature of products and services.
Antennas Design, manufacture and marketing of antenna systems, towers, and
communications accessories worldwide
Refurbishing Contracting to refurbish the interiors of corporate and private
jets
F-8
ANTENNA PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2. BUSINESS SEGMENTS - continued
Following is a summary of segmented information for 2000 (because the
refurbishing operations were not acquired until the year ended May 31, 2000,
no segment information is presented for the year ended May 31,
1999):
Antennas Refurbishing Total
-------- ------------- ----
Revenues from external
Customers $6,304,222 $1,557,495 $7,861,707
Foreign sales 981,505 - 981,505
Interest revenue 23 - 235
Interest expense 225,402 57,169 282,571
Depreciation and
amortization 287,045 55,108 342,153
Income tax provision
(benefit) 7,128 ( 21,946) ( 14,818)
Segment profit (loss) 159,236 ( 64,546) 94,690
Segment assets 7,248,316 2,409,689 9,658,005
Expenditures for segment
assets 148,450 2,042,165 2,555,208
RECONCILIATIONS:
REVENUES
Total revenues for reportable segments 7,861,707
Other revenue -
------------
Total consolidated revenues $7,861,707
============
PROFIT OR LOSS
Total profit for reportable segments $ 94,690
Other loss ( 194,477)
--------------
Loss before income taxes ($ 99,787)
==============
ASSETS
Total assets for reportable segments $9,658,005
Other assets 104,249
--------------
Consolidated total $9,762,254
===============
Adjustments to reconcile total segment to total consolidated profit (loss)
before taxes and total assets is attributable to corporate headquarters,
which is not included in segment information. Corporate headquarters'
activity is recorded on Antenna Products, Inc. and consists primarily of
non-allocated general and administrative overhead costs and cash in bank.
F-9
ANTENNA PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances
and transactions are eliminated in consolidation.
Sales and Contract Revenues and Related Costs - Antennas
Antenna Products manufactures and markets standard and custom antennas,
guyed and self-supported towers, monopoles, support structures, masts
and communication accessories worldwide. Customers
include the U. S. Government, military and civil agencies,
U.S. Government prime contractors and
commercial clients. Examples of Antenna Products' U.S.
Government supplied products include ground to
air collinear antennas, instrument landing antennas and towers, fixed
system multi-port antenna arrays, tactical quick erect antennas and
masts, shipboard antenna tilting devices, transport pallets,
surveillance antennas, antenna rotators, positioners and controls, and
high power broadcast baluns. Examples of the
company's commercial products include panel, sector, omnidirectional
and closed loop PCS antennas, automatic meter reading (AMR),
cellular, paging and yagi antennas, guyed towers, self supported towers
and monopoles.
Antenna Products is primarily a build to order company. As such,
most orders are negotiated firm fixed-price contracts. Most
commercial contracts are single order and single delivery firm
fixed-price contracts. Some government contracts are multi-year
performance with established option dates with a predetermined
escalated price for delivery in that outyear. These types of
contracts can be valid from two to five years. Other types of
government contracts are called supply contracts where the government
buys a particular product and has estimated the quantity required over
an expected period. Antenna Products has contracts with major prime
contractors who negotiate contracts based on large quantities with
set escalation rates for future prices. The Government is attempting
to procure more and more products that have commercial
equivalents to military standards. These purchases are for off-the-
shelf products and therefore use credit cards and accept commercial
terms and shipping methods. Antenna Products recognizes an order or
resultant sale when official notification is received that an option is
being exercised and the order is shipped.
Revenue from short-term contracts calling for delivery of products
is recognized as the product is shipped. Revenue and costs under
certain long-term fixed price contracts with governments are recognized
on the units of delivery method.
This method recognizes as revenue the contract price of units of the
product delivered during each period and as the cost of earned
revenue the costs allocable to the delivered units; costs allocable
to undelivered units are reported in the balance sheet as inventory.
Amounts in excess of agreed upon contract price for customer directed
changes, constructive changes, customer delays or other causes of
additional contract costs are recognized in contract value if it is
probable that a claim for such amounts will result in additional
revenue and the amounts can be reasonably estimated. Revisions in
cost and profit estimates are reflected in the period in which the
facts requiring the revision become known and are estimable. Losses on
contracts are recorded when identified.
Accounting Basis for Revenue Recognition - Refurbishing
Revenue on contracts is recognized on the basis of the Company's
estimates of the percentage of completion of individual contracts. That
portion of the total contract price that is recognized as revenue is
based upon net contract costs incurred as a percentage of net estimated
costs. That method is used because
management considers total cost to be the best available measure of
progress on the contracts.
F-10
ANTENNA PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES - continued
Sales and Contract Revenues and Related Costs - Antennas
Accounting Basis for Revenue Recognition - Refurbishing
Contract costs include all direct material and labor costs and
those indirect costs related to contract
performance, such as indirect labor, supplies, tools, and repairs.
General and administrative costs are
charged to expense as incurred. Provisions for estimated losses
on contracts in progress are made in the
period in which such losses are determined. Changes in job
performance, job conditions, and estimated
profitability may result in revisions to costs and income, which
are recognized in the period in which the revisions are determined.
Changes in estimated job profitability resulting from job
performance, job conditions, contract penalty provisions, claims,
change orders, and settlements, are accounted for as
changes in estimates in the current period.
Inventories
Inventories are stated at the lower of first-in, first-out cost or
market, net of any applicable progress payments.
Property and Equipment
Property and equipment are recorded at cost and depreciated by the
straight-line method over the expected useful lives of the assets.
Expenditures for normal maintenance and repairs are charged to
income, and significant improvements are capitalized. The cost of
assets sold or abandoned and the related accumulated
depreciation are eliminated from the accounts and the net amount, less
proceeds from disposal, is charged or credited to income.
Use of Estimates and Assumptions
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported revenues and expenses.
Actual results could vary from the estimates that were used.
Income Taxes
The Company accounts for income taxes pursuant to Statement of
Financial Accounting Standards No.109, "Accounting for Income Taxes"
(SFAS 109) which utilizes the asset and liability method of
computing deferred income taxes. The objective of the asset and
liability method is to establish deferred tax assets and liabilities
for the temporary differences between the financial reporting basis
and the tax basis of the Company's assets and liabilities at enacted
tax rates expected to be in effect when such amounts are realized or
settled.
Research and Development Costs
Research and development costs are charged to operations when
incurred and are included in operating expenses. The amounts
charged for the years ended May 31, 2000 and 1999 were $205,218
and $263,339, respectively.
F-11
ANTENNA PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3. SIGNIFICANT ACCOUNTING POLICIES - continued
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents
include cash and certificates of deposit with original maturities
of three months or less.
Shares, Per Share Data, Earnings Per Share,
and Stock Split, and Common Stock Par Value
Earnings per share are computed by dividing net income available for
common stock by the weighted average number of common shares outstanding
during the year. Weighted average shares outstanding
were 1,919,620 and 1,852,650 for the years ended May 31, 2000 and 1999,
respectively. No dilutive securities exist in the company's capital
structure.
NOTE 4. REFURBISHING CONTRACTS RECEIVABLE
Included in accounts receivable at May 31, 2000, are refurbishing
contracts receivable of $50,599, which consists entirely of completed
contracts.
NOTE 5. REFURBISHING CONTRACTS IN PROGRESS
Information with respect to refurbishing contracts in progress at
May 31, 2000 follows:
Cost incurred on contracts in progress $ 754,663
Estimated earnings thereon 282,586
------------
1,037,249
Less billings applicable thereto ( 1,064,777)
------------
($ 27,528)
=============
These amounts are included in the accompanying balance sheet under
the following captions:
Costs and estimated earnings in excess
of billings on contracts in progress $ 293,161
Billings in excess of costs and estimated
earnings on contracts in progress ( 320,689)
--------------
($ 27,528)
==============
NOTE 6. INVENTORIES
The major components of inventories are as follows:
2000 1999
---- ----
Raw materials $ 399,796 $ 646,355
Work in process 1,730,276 1,523,201
Finished goods 696,286 468,616
----------- -----------
$2,826,358 $2,638,172
=========== ===========
Certain allocable overhead costs such as depreciation, insurance, property
taxes and utilities are included in inventory based upon percentages
developed by the Company. The aggregate amount of these costs included
in inventory during the years ended May 31, 2000 and 1999 were $988,405
and $952,301, respectively.
F-12
ANTENNA PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7. PROPERTY AND EQUIPMENT
The following is a summary of the Company's property and equipment:
Estimated
Useful Life 2000 1999
---- ----
Land $ 375,136 $ 375,136
Buildings and improvements 15-30 years 1,873,217 1,873,216
Machinery and equipment 10 year 3,226,999 2,934,342
Automobiles and trucks 3 years 151,217 97,328
Office furniture and
fixtures 10 years 586,788 586,788
___________ __________
6,213,357 5,866,810
Less accumulated depreciation 3,777,733 3,479,892
___________ _________
Net property and equipment $2,435,624 $2,386,918
__________ __________
NOTE 8. INTANGIBLE ASSETS
Included in intangible assets at May 31, 2000 is the following:
Goodwill(Upholstery Shop) $ 547,069
Drawing, wiring diagrams, test procedures,
productions records, etc. (Upholstery Shop) 1,222,000
Non-compete Agreement (Upholstery Shop) 75,000
Patents, copyrights and other
intellectual property(Phazar Antenna) 364,593
----------
2,208,662
Accumulated amortization ( 44,313)
---------------
$2,164,349
===============
Goodwill is being amortized on the straight-line basis over a
fifteen year period. Drawings, wiring diagrams, test procedures, production
records, etc. are being amortized on the straight-line basis over a ten
year period. Patents, copyrights and other intellectual property and
the non-compete agreement are being amortized on the straight-line basis
over a five year period.
NOTE 9. NOTES PAYABLE
At May 31, 2000 and 1999, notes payable consist of a revolving note payable
to a bank, with a maximum amount not to exceed the lesser of $3,000,000
and $2,000,000, respectively, or a calculated borrowing base
determined by a formula based upon the amount of certain qualified
receivables and inventories as defined in the loan agreement.
Interest is payable monthly at the prime rate (9.5% and 7.75% at
May 31, 2000 and 1999, respectively) plus 1%
until September 30, 2000, when any unpaid principal and interest
shall be due. Borrowings under the revolving note payable are
collateralized by accounts receivable and inventories and are
guaranteed by a principal shareholder. Under the agreement, the
Company must maintain minimum net worth of $1,500,000 and working
capital of $1,000,000.
At May 31, 2000 and 1999, note payable to shareholder consist of
subordinated note to a principal shareholder of the company. In the
initial years, only interest at the prime rate (9.5% and 7.75% at
May 31, 2000 and 1999, respectively) is payable, with monthly
principal payments scheduled to begin in June 2002, and maturing in
May 2007. Interest charged to operations under the note was
$67,835 and $64,345 for the years ended May 31, 2000 and 1999,
respectively.
F-13
ANTENNA PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10. LONG-TERM DEBT
At May 31, 2000 and 1999, long-term debt consists of the following:
2000 1999
Mortgage note to a bank, guaranteed 80% by a U.S.
government agency, payable $10,050 per month,
including interest at the prime rate (9.5%
and 7.75% at May 31, 2000 and 1999, respectively)
plus 1/2%; collateralized by certain real
estate, fixtures and assignment of life insurance
policy with a principal shareholder. The note is
also guaranteed by a principal shareholder and
the Company is required to maintain
certain covenants including $1,000,000 in working
capital and a ratio of maximum debt to net worth
of seven to one. $ 853,586 $ 895,435
Note payable to a bank, payable in installments
of $28,724 per month until maturity date of
January 26, 2007, when remaining balance is due,
including interest at the prime rate
(9.50% at May 31, 2000) plus 1%, secured by
property and equipment.
The note is also guaranteed by a principal
shareholder. 1,691,458 -
Loan to credit institution, due on
February 11, 2004, payable monthly
installments of $495, including interest at
10.75%, secured by a utility vehicle.
17,931 0
Less current portion of long-term debt 238,588 48,535
___________ __________
$2,324,387 $ 846,900
___________ ___________
Maturities of long-term debt for each of the five years subsequent
to May 31, 2000 are as follows (including
$160,000 per year beginning in June 2002 for the shareholder note,
although it is subordinated to the note
payable to a bank):
2001 $ 238,588
2002 262,557
2003 448,938
2004 475,964
2005 503,457
Thereafter 1,433,471
_________
$3,362,975
F-14
ANTENNA PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11. INCOME TAXES
Components of the income tax provision (benefit) are as follows:
2000 1999
---- ----
Income taxes (benefit) at statutory
rate on income before income taxes ($ 33,928) $ 121,982
Non-deductible expenses and other 19,110 2,419
______________ ___________
Total provision ($ 14,818) $ 124,401
______________ ___________
Deferred portion (benefit)
of provision ($ 14,818) $ 145,022
Current portion (benefit) - ( 20,621)
_____________ ____________
Total provision (benefit) ($ 14,818) $ 124,401
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities
are presented below:
2000 1999
---- ----
Deferred tax assets:
Accounts receivable due to
allowance for doubtful
accounts $ 2,387 $ 2,387
Inventories, due to estimated
losses on contracts 17,000 17,000
Inventories, due to additional costs
inventoried for tax purposes pursuant
to the Tax Reform Act of 1966 - 10,367
Accrued expenses, due to warranty accrual 25,500 17,000
Accrued expenses, due to vacation accrual 20,780 19,126
Net operating loss carryforward 3,861 -
__________ _________
Total deferred tax assets 69,528 65,880
Deferred tax liabilities:
Intangible assets, due to difference in $ 44 $ -
amortization
Property and equipment, principally due to
difference in depreciation ( 287,782) ( 328,169)
___________ ___________
Net deferred tax liability ($ 287,338) ($ 328,169)
F-15
ANTENNA PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 12. COMMITMENTS AND CONTINGENCIES
The Company has adopted an employee profit sharing plan under Section
401(k) of the Internal Revenue Code. All employees with a minimum of
one year of employment are eligible to participate. The Company will
match employee contributions for an amount up to 3% of each employee's
salary if certain earnings requirements are met. Contributions are
invested at the direction of the employee in one or more funds.
Company contributions vest after three years of service. Company
contributions amounted to $-0- and $22,013 for the years ended
May 31, 2000 and 1999, respectively.
During the year ended May 31, 1999, the Company settled a lawsuit with a
customer. The settlement resulted in the Company being required to pay
the customer an aggregate of $382,000 in cash ($297,000 in August 1999
and $85,000 in November 1999) and 50,000 shares of the Company's common
stock valued at $75,000 (issued in August 98). The settlement amount
was recorded by the Company in accrued expenses as of May 31, 1999.
Concentration of Credit Risk
The Company deposits its cash primarily in deposit accounts
with major banks. Certain cash deposits
may occasionally be in excess of federally insured limits. The
Company has not incurred losses
related to its cash.
The Company sells many of its products to the U.S. Government,
both military and civil agencies, and
prime contractors. Although the Company might be directly affected
by the well-being of the defense
industry, management does not believe significant credit risk
exists at May 31, 2000.
Ongoing credit evaluations of customer's financial condition are
performed and, generally, no collateral is required. The
Company maintains reserves for potential credit losses and such
losses have not exceeded management's expectations.
Fair Value of Financial Instruments
The following disclosure of the estimate fair value of financial
instruments is made in accordance with
the requirements of SFAS No. 107, Disclosures about Fair Value of
Financial Instruments. The estimated fair value amounts have been
determined by the Company, using available market
information and appropriate valuation methodologies.
The fair value of financial instruments classified as current assets
or liabilities including cash and cash equivalents, receivables
and accounts payable approximate carrying value due to the short-term
maturity of the instruments. The fair value of short-term and
long-term debt approximate carrying
value based on their effective interest rates compared to current
market rates.
Operating Leases
API Acquisition Corp. leases office space from an employee and
minority interest shareholder. Future minimum lease obligations
under the lease agreement are as follows:
2001 $ 60,748
The agreement contains two options to extend the lease for
additional terms of one year each at an increased base rent.
F-16
ANTENNA PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. STOCK OPTIONS
In October 1999, the Board of Directors approved two stock option
plans which provided the option to purchase 40,000 shares and 60,000
shares at $1.3125 and $2.00, respectively, to an officer of the Company.
The plans had expiration dates of October 25, 1999 and the earlier of
the officer's last day of employment or May 31, 2001, respectively.
The officer exercised all of the options and was issued 100,000
shares of common stock during the year ended May 31, 2000. The Company
applies APB opinion 25 and related Interpretations in accounting for
its plan. Accordingly, no compensation has been recognized in operations
as of May 31, 2000. Had compensation cost for the Company's stock-based
compensation been determined based on fair
value at the grant date for awards under the plan consistent with the
method of FASB Statement 123, the Company would have recognized total
compensation of $7,000 under the stock based employee compensation
awards during the year ended May 31, 2000.
Additionally, in March 1999, the Board of Directors approved a stock
option plan which provided the option to
purchase 60,000 shares at $2 over a 2 year period to an officer of the
Company. Had compensation cost for the
Company's stock-based compensation been determined based on fair value
at the grant date for awards under the plan consistent with the method
of FASB Statement 123, the Company would have recognized total
compensation of $42,000 under the stock based employee compensation award
during the year ended May 31, 1999.
The Company's net income and earnings per share as of May 31, 2000 and
1999, would have been reduced to the pro forma amounts indicated below:
2000 1999
Net income (loss) As reported ($ 84,769) $234,369
Pro forma ($ 89,455) $206,623
Primary earnings (loss)
per share As reported ( 0.04) .13
Pro forma ( 0.05) .11
The compensation cost was estimated using the Black-Scholes model with
the following assumptions for 2000: $1.19 stock price at grant date;
lives of 13 and 125 days; expected volatility of 98 percent; and risk
free interest rates of 4.45 and 4.84 percent. The assumptions used
under the 1999 plan were as follows: $1.75 stock price at
grant date; expected life of 2 years; expected volatility of 76 percent;
and risk free interest rate of 5.6 percent.
F-17
ANTENNA PRODUCTS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13. STOCK OPTIONS - continued
A summary of the status of the Company's stock option plans as
of May 31, 2000 and 1999 and changes for the
years then ended are as follows:
Weighted
Average
Exercise
Shares Price
Outstanding at May 31, 1998 - $ -
Granted 60,000 2.00
Exercised - -
Forfeited - -
_______ _________
Outstanding at May 31, 1999 60,000 2.00
Granted 100,000 1.73
Exercised 100,000 1.73
Forfeited - -
________ _________
Outstanding at May 31, 2000 60,000 $ 2.00
________ _________
2000 1999
Exercisable at year end 60,000 60,000
Weighted average fair value of
options granted during the year $ .07 $ .70
Weighted
Average
Exercise
Shares Price
Weighted averaged remaining
contractual life (in years) .8 1.8
NOTE 14. ACQUISITIONS
On January 27, 2000, API Acquisition Corp. purchased the assets and
business of The Upholstery Shop, Inc.
for $2,000,000. The Upholstery Shop, Inc. provides complete
refurbishment for a full range of corporate and executive aircraft interior.
The acquisition was recorded using the purchase method of accounting.
The results of operations of The Upholstery Shop, Inc. from January 27, 2000
through May 31, 2000 are included in the Company's consolidated statement
of income.
On May 1, 2000, the Company acquired the Phazar Antenna Business Unit, which
included inventory, equipment, patents, copyrights and other intellectual
property, from BAE Systems Aerospace Inc. in exchange for $360,000
and 172,800 shares of common stock, the fair value of which was $513,043
on that date.
F-18
NOTE 15. PRIOR PERIOD ADJUSTMENTS
Subsequent to issuance of the 1999 financial statements, an error
was discovered in the tax basis of property and equipment used
to calculate deferred income taxes in prior years. Accordingly,
an adjustment was recorded in 2000 to reduce the deferred tax liability
and increase retained earnings at May 31, 1998. There was
no effect on earnings for the years ended May 31, 2000 and 1999.
F-19
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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 14, 2000
Antenna Products, Inc.
signature on file
BY:_________________________
Gary W. Havener
Principal Executive Officer
and Director
2
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