UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
Annual Report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Fiscal Year ended Commission File Number
September 30, 2002 0 - 10125
Radiant Technology Corporation
------------------------------
(Exact name of the registrant as specified in its charter)
California 95-2800355
---------- ----------
(State or other jurisdiction (I.R.S. Employer of
incorporation or organization) identification number)
1335 South Acacia Avenue, Fullerton, California 92831
-----------------------------------------------------
(Address of principal executive offices)(Zip code)
Registrant Telephone Number, including area code: (714) 991-0200
Securities registered pursuant to section 12 (b) of the act: None
Securities registered pursuant to section 12 (g) of the Act: Common stock,
without par value
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 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 _____
The aggregate market value of the voting stock held by non-affiliates of
the registrant was $ 321,193 as of December 2, 2002.
Applicable only to registrants involved in bankruptcy proceedings during
the preceding five years: Indicate by check mark whether the registrant has
filed all documents and reports required to be filed by section 12, 13, or 15
(d) of the Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes ___ No ___ Not applicable X
The number of shares of the registrant's common stock, no par value,
outstanding as of November 30, 2002 was 2,081,678.
1
Documents incorporated by reference. Part III Items 10 through 13 of this
Form 10-K are incorporated by reference to the registrant's definitive proxy
statement for the Annual Meeting of Shareholders held on April 22, 2002.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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.
PART 1
------
ITEM 1 BUSINESS
--------
Radiant Technology Corporation (RTC) was incorporated in California in
1972. The initial public offering (IPO) was in 1979. The Company is engaged in
the marketing, design, manufacture and service of highly precision thermal
processing systems that are primarily used by manufacturers of microelectronic
componentry. The Company's conveyorized ovens and furnaces are distributed
worldwide to meet ever-changing process requirements.
To obtain financial growth and stability we concentrate on managing the
following key elements of its business:
Technological Leadership: We are constantly in contact with our customers
soliciting their input for both continued product improvement and new product
development. We encourage customers anticipating new thermal processing
requirements to contact us regarding their new opportunities and needs.
Customer Diversity: Customers from different facets of the electronics and
photovoltaic industries are sought and maintained. As demand for the various
manufacturing elements in the electronics high technology industry shifts, RTC
works to position itself to be ready to be immediately responsive to changing
market emphasis.
Service: We concentrate on providing timeliness, high quality, and
responsiveness to our customer base. Most service concerns are handled by Phone,
FAX or E-mail immediately. Customer Service Engineers, when needed, are
dispatched within the day. Internationally, we retain Sales/Service
representatives, factory trained, to provide the same level of dedication in
placing the concerns and needs of the customer first.
MARKETS AND PRODUCTS:
The nature and high intensity of the infrared heat produced in our furnaces
permits a high rate of heat absorption by the electronic parts processed through
the furnaces, making them more adaptable to the exacting tolerances and
high-speed heating requirements of certain industrial users. Infrared heating
affords many advantages, including the furnace's ability to achieve operating
temperatures in a shorter time span, operate at a faster conveyor belt speed,
require less floor space, and use less electric energy, all of which result in
significantly lower operating costs than for conventional ovens and furnaces.
In addition to infrared heating furnaces, RTC also offers products based on
convection and conduction heating technology. Convection heating utilizes a
preheated gas such as clean dry air or nitrogen directed to a conveyor belt by
means of gas amplifiers. The impingement of this heated gas with the product is
the primary method of heat transfer. RTC's products utilizing conduction heating
is based on heating a very dense conveyor belt to transfer energy to the
processed product.
2
MARKETING, SALES AND CUSTOMERS
Our products are sold throughout the world, primarily to organizations
engaged in the microelectronics or photovoltaic manufacturing. RTC maintains
direct sales offices in the United States. Internationally the Company is
represented through independent sales/service organizations. Note 1 to the
Financial Statements depicts a breakdown of international sales.
Customers tend to evaluate furnace vendors for technological leadership
that results in high process yields for material produced. This primary benefit
combined with high RTC up time, low meantime between failure (MTBF), quick
reliable service and spare parts response combine to produce low cost of
equipment ownership for our customers.
In 2002 the largest customer accounted for 16% of total revenues. Two
customers accounted for 31% and 11% of RTC's revenue, respectively, in fiscal
year 2001. In 2000, the largest customer was - 17% of total revenue.
The Company does not experience a seasonal demand for its product. Rather
the demand for RTC furnaces tends to follow the demand for new manufacturing
equipment in the economy.
BACKLOG
We regard as backlog all signed purchase orders received from customers for
delivery at specified dates. At September 30, 2002, the backlog was $619,344 vs.
$808,484 in 2001, and $3,203,427 in 2000. This backlog of orders will be
completed over a three to five month period. There can be no assurance that
backlog will be replicated or increased or translated into higher revenues in
the future. The success of our business depends on a multitude of factors that
are out of our control.
RESEARCH AND DEVELOPMENT
Research and Development expenses are charged to specific product
enhancement activities and new product development. Research and Development
expenses were $377,324, $260,330 and $230,599, in fiscal 2002, 2001 and 2000,
respectively, which represents primarily the development of new products, which
it hopes will provide significant value to future years income.
COMPETITION
We confront competition from two primary domestic companies: BTU
International, and Sierra-Therm. There are numerous other competitors both
domestically and internationally.
We believe that we are one of the principal manufacturers of conveyorized,
controlled atmosphere, variable speed, high temperature infrared furnaces used
in the manufacture of precision, microelectronic circuitry for the
semiconductor, solar cell, hybrid micro circuits and general microelectronic
industries. The competitive environment in the market for ovens and furnaces is
based on superior technology, design and delivery and ultimate cost of ownership
beyond initial purchase price. The Company believes that its higher temperature,
near infrared products, are more technologically advanced than that of the
conventional products of its competitors. The Company has patents issued and
pending covering the basic technology involved in the principal markets. See
"Patents" below.
3
MATERIAL
We purchase raw materials, mechanical parts and electronic components. The
Company manufactures a portion of its sheet metal and some mechanical and
electronic components. Alternative sources of material exist for nearly all
parts, components and materials. We have selected a single source supplier for
much of our electronic componentry, due to high levels of quality and service.
Should this favorable condition degenerate, an alternative supplier can be found
but not without extra initial expenditures.
PATENTS
RTC owns a number of current patents on its products also has patents
pending. The Company's patents are the result of its creative energies and
innovative technology. RTC believes that it must continually work to maintain
technological leadership for its customer base. We further believe that patents
may provide technological hurdles to competition. However, it is primarily our
attention to customer service with high quality products, produced in a timely
manner, ultimately providing the customer with low cost of ownership that
provide us our greatest competitive strength.
TRADEMARKS
We have registered trademark No. 1425668, "RTC radiant technology
corporation", with the United Stated patent and Trademark Office on January 20,
1987. The trademark is in force for twenty years. Numerous other Trademarks are
in force relating to specific equipment or processes exclusive to RTC.
EMPLOYEES
We employed 37 full-time individuals as of October 31, 2002.
WARRANTY
We warrant our ovens and furnaces against defects existing at the time of
shipment for material and workmanship under normal use and service for a period
of one year on parts and labor after shipment to an original user. Under this
warranty, the Company provides, components which, within the warranty period,
are proved to the satisfaction of the Company to have been defective.
GOVERNMENTAL REGULATIONS
The operations of the Company are subject to various federal and state laws
and regulations. Management believes the Company is in substantial compliance
with all applicable laws and regulations. The cost of compliance has not been a
significant burden to the Company.
ITEM 2. PROPERTIES
----------
Our executive offices and manufacturing facility are located in a quality
industrial park where expansion may be possible.
The 25,000 square foot building is leased for 5 years with two options to
renew at 3 year intervals. See Note 7 to the financial Statements, for more
detail.
4
ITEM 3. LEGAL PROCEEDINGS
-----------------
There are no legal proceedings pending at the time of this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter of FY 2002.
PART II
-------
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTER
---------------------------------------------------------------------
The Company's common stock is quoted on the OTC Bulletin Board. The table
below sets forth the representative high and low bid prices for the common stock
during each calendar period indicated. The quotations represent interdealer
prices without adjustments for retail mark-ups, mark-downs or commissions and
consequently do not necessarily reflect actual transactions.
Year Ended
September 30,
-------------
2002 2001
HIGH LOW HIGH LOW
---- --- ---- ---
1st Quarter $ 0.270 $ 0.270 $ 1.031 $ 0.375
2nd Quarter 1.250 1.250 2.500 0.375
3rd Quarter 1.100 1.100 1.750 0.350
4th Quarter 0.260 0.260 1.120 1.120
Holders of shares of Common Stock are entitled to receive such dividends, if
any, as may be declared by the Board of Directors of the Company out of funds
legally available therefore and, upon the liquidation, dissolution or winding up
of the Company are entitled to share ratably in all net assets available for
distribution to such shareholders. The Company has never paid any dividends. It
is anticipated that all earnings will be retained for development of working
capital to grow the business of the Company and there is no present intention to
declare dividends in the foreseeable future. See Item 7 "Management's Discussion
and Analysis of Financial Condition and Results of Operations".
Shareholders of Record: As of September 30, 2002, the number of record
holders of the Company's Common Stock was 400.
5
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
The following table summarizes certain selected financial data of the
Company:
Operating Data
(in thousands) except for per share information
Year Ended September 30,
------------------------
2002 2001 2000 1999 1998
---- ---- ---- ---- ----
Net Sales $ 3,762 $ 5,069 $ 4,717 $ 3,337 $ 4,686
Income (Loss) From Continuing (786) (157) 288 476 416
Total Assets 4,128 2,967 4,551 4,061 4,063
Long-Term Debt -- -- -- -- --
Per Share Information
Income (Loss) From Continuing (0.38) (0.08) 0.13 (0.25) 0.18
Operations
Cash Dividends per Common Share $ -- $ -- $ -- $ -- $ --
See Notes to Financial Statements
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
------------------------------------------------------------
AND RESULTS OF OPERATIONS
--------------------------
Cautionary Statement
This Annual Report contains statements relating to future results of the Company
(including certain projections and business trends) that are "forward-looking
statements" as defined in Section 27A of the Securities Act of 1933. Actual
results may differ materially from those projected as a result of certain risks
and uncertainties, including but not limited to economic and political changes
in markets where the Company competes such as inflation rates, recession, and
other external factors over which the Company has no control; domestic and
foreign government spending, budgetary and trade policies; demand for and market
acceptance of new and existing products; successful development of advanced
technologies; and competitive product and pricing pressures as well as other
risks and uncertainties, including but not limited to those detailed from time
to time in the Company's Securities and Exchange Commission filings.
GENERAL
We pioneered the design and application of near infrared high temperature
furnaces with the semiconductor manufacturing and electronics assembly markets.
RTC products are now principally used by manufacturers of semiconductor
packaging, solar cells, flat panel displays, printed circuit boards, hybrid
thick film and multichip modules. New and inventive uses of the product line for
other applications continue to be discovered.
6
RESULTS OF OPERATIONS
Revenues were $3.8 million, $5.1 million and $4.7 million in fiscal years
2002, 2001 and 2000 respectively, representing a decrease of 26% from 2001 to
2002 and an increase of 7% from 2000 to 2001. The decrease in fiscal year 2002
was primarily attributable to the slowing world economies and the sharp decline
in capital spending by manufacturers of semiconductor and industrial products.
Cost of sales consists of costs related to the purchase of raw materials,
assembled and subcontracted parts, services provided by third party suppliers,
as well as costs arising from in house manufacturing support operations and the
costs to run it. Cost of sales, as a percentage of revenues, was 75.9%, 73.4%
and 65.4% for fiscal years 2002, 2001 and 2000 respectively. The lower revenue
in 2002, due to the weak market demand, is the primary reason for the increase
in cost of sales ratio from 2001 to 2002. RTC continues to use the latest
technology available in an effort to reduce both cost of revenues (and the
maintenance of optimal inventory levels) and operating expenses, and ultimately
an increase overall company profits.
Research and development expense expressed as a percentage of revenues was
10.0%, 5.1% and 4.9% in fiscal years 2002, 2001 and 2000 respectively. These
reflect costs related to the design of the Waver Bump products, new product
development and product enhancements for existing standard products. These costs
are essential to the Company's long term future, a future that can move very
quickly in the high technology field.
Selling, general and administrative expenses represented 32.0%, 23.8%, and
20.0% of total revenues in fiscal years 2002, 2001 and 2000 respectively. The
increase in 2002 was attributed to the lower revenue as well as increased
marketing, and administrative salary levels, temporary help in administrative
functions and sharply higher costs for liability and workmen's compensation
insurance.
Interest income, net of interest expense, for fiscal year 2002 was
approximately 0.3% of revenues compared to 1.0% and 0.8% in fiscal years 2001
and 2000 respectively.
LIQUIDITY AND CAPITAL RESOURCES
Our consolidated cash decreased from $1,118,630 at September 30, 2001 to
$2,069,784 at September 30, 2002. The increase of $951,154 is attributable to a
short term loan of $1,916,000. Net cash used by operating activities of
$(931,910) compared to cash from operating activities of $202,613 in the prior
year. Management believes that the expected revenues from operations of RTC may
not be sufficient to provide adequate cash to fund anticipated working capital
and other cash needs. Short term borrowing or a revolving credit line will be
employed to fund working capital and other cash needs.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
----------------------------------------------------------
Inapplicable.
7
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The following are included in this 10-K as exhibits:
1. Report of Independent Certified Public Accountants
2. Balance Sheets as of September 30, 2002 and 2001.
3. Statements of Operations for the years ended September 30, 2002, 2001,
2000.
4. Statements of Stockholders' Equity for the years ended September 30,
2002, 2001, 2000.
5. Statements of Cash Flows for the years ended September 30, 2002, 2001,
2000.
6. Notes to Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
None.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The response to this item is incorporated herein by reference to the
Company's definitive proxy statement for the Annual Meeting of Stockholders to
be held on April 7, 2003
ITEM 11. EXECUTIVE COMPENSATION
----------------------
The response to this item is incorporated herein by reference to the
Company's definitive proxy statement for the Annual Meeting of Stockholders to
be held on April 7, 2003.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The response to this item is incorporated herein by reference to the
Company's definitive proxy statement for the Annual Meeting of Stockholders to
be held on April 7, 2003.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-----------------------------------------------
The response to this item is incorporated herein by reference to the
Company's definitive proxy statement for the Annual Meeting of Stockholders to
be held on April 7, 2003.
8
PART IV
-------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
----------------------------------------------------------------
(a) (1) Financial Statements
The following financial statements are included in this Form 10-K:
Page No.
--------
1. Report of Independent Certified Public Accountants. 15
2. Balance Sheets as of September 30, 2002 and 2001. 16
3. Statements of Operations for the years ended September 17
30, 2002, 2001 and 2000.
4. Statements of Stockholders' Equity for the years ended 18
September 30, 2002, 2001 and 2000.
5. Statements of Cash Flows for the years ended September 19-20
30, 2002, 2001 and 2000
6. Notes to Financial Statements 21-33
(2) Financial Statements Schedules
None.
(3) Exhibits
Exhibit No. Description Page No.
----------- ----------- --------
3.1 Certificate of Restated Articles of
Incorporation incorporated by reference to
the Registration Statement of Form S-18
(Registration No.2-72528-LA) filed on July 14,
1981.
3.1(a) Certificate of Amendment of Articles of
Incorporation incorporated by reference to
the Proxy Statement dated January 14, 1986.
3.1(b) Certificate of Amendment of Articles of
Incorporation incorporated by reference to
Annual Report on Form 10-K filed January 15, 1990.
3.2 Restated By-Laws incorporated by reference to the
Registration Statement on Form s-18 (Registration
No. 2-72528-LA) filed on July 14, 1981.
3.2(a) Amendment to Bylaws incorporated by reference
to Annual Report on Form 10-K filed January 15, 1990.
4.1 Specimen Certificate of Common Stock incorporated
by reference to the Registration Statementon Form
S-18 (Registration No. 2-72528-LA) filed on July 14,
1981.
9
10.22(a) Amendment No. 1 to Employment Agreement effective
as of November 7, 1991 by and between the Company
and Lawrence R. McNamee incorporated by reference
to Annual Report on Form 10-K filed January 15, 1990.
10.24 Form of Indemnity Agreement incorporated by reference
to Annual Report of Form 10-K filed January 15, 1990.
(b) Reports on Form 8-K.
None.
10
SIGNATURES
----------
Pursuant to the requirements of section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
this behalf by the undersigned, thereunto duly authorized.
Dated: January 13, 2003
RADIANT TECHNOLOGY CORPORATION
By: /s/ L. R. McNamee
----------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the persons on behalf of the registrant in the
capacities and on the dates indicated.
/s/ L. R. McNamee January 13, 2003
- ---------------------------------
Lawrence R. McNamee
Chairman of the Board and a Director
(Principal Financial Officer and
Principal Executive Officer)
/s/ C. T. Richert January 13, 2003
- ---------------------------------
Carson T. Richert
Executive Vice President and a Director
/s/ R. B. Thompson January 13, 2003
- ---------------------------------
Robert B. Thompson
Director
11
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
The Board of Directors and Stockholders
Radiant Technology Corporation
We have audited the accompanying balance sheets of Radiant Technology
Corporation as of September 30, 2002 and 2001, and the related statements of
operations, stockholders' equity and cash flows for each of the years in the
three-year period ended September 30, 2002. 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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Radiant Technology Corporation
as of September 30, 2002 and 2001 and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 2002 in
conformity accounting principles generally accepted in the United States.
CACCIAMATTA ACCOUNTANCY CORPORATION
Irvine, California
December 13, 2002
12
RADIANT TECHNOLOGY CORPORATION
Balance Sheets
SEPTEMBER 30,
-------------
2002 2001
--------------- ---------------
ASSETS
Current Assets:
Cash and equivalents $ 2,069,784 $ 1,118,630
Accounts receivable 449,162 407,814
Inventories 980,362 845,823
Prepaid expenses 31,841 53,467
Deferred taxes 263,500 283,500
------- -------
Total Current Assets 3,794,649 2,709,234
Property and equipment 321,873 252,243
Other assets 11,670 5,035
------ -----
Total Assets $ 4,128,192 $ 2,966,512
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short term debt $ 1,916,000 $ --
Accounts payable 364,341 274,582
Accrued expenses 199,439 216,080
Customer deposits 159,509 200,663
------- -------
Total Liabilities 2,639,289 691,325
--------- -------
Commitments & Contingencies -- --
Stockholders' Equity
Common stock, no par value 1,167,608 1,167,608
Retained earnings 321,295 1,107,579
------- ---------
Total Stockholders' Equity 1,488,903 2,275,187
--------- ---------
Total Liabilities & Stockholders' Equity $ 4,128,192 $ 2,966,512
============ ============
The accompanying notes are an integral part of these financial statements
13
RADIANT TECHNOLOGY CORPORATION
Statements of Operations
Year Ended September 30,
------------------------
2002 2001 2000
---- ---- ----
Net sales $3,761,802 $5,069,280 $4,717,316
Cost of sales 2,855,428 3,723,291 3,086,122
--------- --------- ---------
Gross profit 906,374 1,345,989 1,631,194
------- --------- ---------
Operating expenses:
Selling, general and administrative 1,204,095 1,182,813 944,293
Research and development 377,324 352,211 230,599
Depreciation and amortization 121,291 133,884 193,113
------- ------- -------
Total operating expenses 1,702,710 1,668,908 1,368,005
--------- --------- ---------
Income/(loss) from operations (796,336) (322,919) 263,189
Interest income, net 10,852 52,209 37,540
------ ------ ------
Income/(loss) before provision/ (785,484) (270,710) 300,729
(benefit) for income taxes
Provision (benefit) for income taxes 800 (113,500) 13,000
--- -------- ------
Net income/ (loss) $ (786,284) $ (157,210) $ 287,729
========== ========== ==========
Basic earnings (loss) per share $ (0.38) $ (0.08) $ 0.15
========== ========== ==========
Diluted earnings (loss) per share $ (0.38) $ (0.08) $ 0.13
========== ========== ==========
Basic number of common shares 2,081,678 2,040,445 1,901,594
outstanding ========== ========== ==========
Diluted number of common shares 2,081,678 2,040,445 2,188,764
outstanding ========== ========== ==========
14
RADIANT TECHNOLOGY CORPORATION
Statements of Stockholders' Equity
Years Ended September 30, 2000, 2001 and 2002
Common Stock Total
------------ Retained Stockholders'
Shares Amount Earnings Equity
------ ------ -------- ------
Balance, September 30, 1999 1,895,678 $ 1,153,108 $ 977,060 $2,130,168
Net Income 287,729 287,729
Exercise of Options 11,000 1,375 1,375
------ ----- ----- -----
Balance, September 30, 2000 1,906,678 1,154,483 1,264,789 2,419,272
Net Loss (157,210) (157,210)
Exercise of Options 175,000 13,125 13,125
------- ------ ----- ------
Balance, September 30, 2001 2,081,678 1,167,608 1,107,579 2,275,187
Net Loss (786,284) (786,284)
-------- -------- -------- --------
Balance, September 30, 2002 2,081,678 $ 1,167,608 $ 321,295 $1,488,903
========= =========== ========= ==========
15
RADIANT TECHNOLOGY CORPORATION
Statements of Cash Flows
Year Ended September 30,
------------------------
2002 2001 2000
---- ---- ----
Cash flows from Operating activities:
Net income/ (loss) $ (786,284) $ (157,210) $ 287,729
Adjustments to reconcile net income/
(loss) to net cash provided by
operating activities:
Bad debt expense 6,000 --
Depreciation and amortization 121,291 133,884 193,113
Inventory obsolescence 101,000 26,000 40,000
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable (47,348) 1,436,604 (1,253,112)
Inventory 235,539) (182,690) (305,227)
Prepaid expenses 21,645 406 --
Other assets -- 7,260
Deferred taxes 19,981 (113,519) --
Increase/(decrease) in:
Accounts payable 89,759 (135,582) 221,041
Accrued expenses (16,641) (38,674) 18,713
Income taxes payable -- -- 13,000
Customer deposits (41,154) (766,606) 948,522
------- -------- -------
Net cash provided by/ (used in) (767,290) 202,613 171,039
-------- ------- -------
operating activities
Cash flows from investing activities:
Capital expenditures (197,556) (125,491) (28,933)
-------- -------- -------
Cash flows from financing activities:
Issuance of common stock -- 13,125 1,375
Short term debt 1,916,000 -- 500,000
Repayment on short term debt -- (500,000) (1,500,000)
-------- -------- ----------
Net cash provided by financing 1,916,000 (486,875) (998,625)
--------- -------- --------
activities
Net increase (decrease) in cash and 951,154 (409,753) (856,519)
equivalents
Cash and equivalents, beginning of year 1,118,630 1,528,383 2,384,902
--------- --------- ---------
Cash and equivalents, end of year $2,069,784 $1,118,630 $1,528,383
========== ========== ==========
Supplemental disclosure of cash flow information and non-cash investing and
financing activities:
2002 2001 2000
---- ---- ----
Cash paid during the year for:
Interest $ 475 $ -- $ 429
Income Taxes $ 800 $ 8,070 $ --
16
RADIANT TECHNOLOGY CORPORATION
Notes to financial statements
28
September 30, 2002
1. Summary of significant accounting policies
------------------------------------------
Nature of Operations
--------------------
Radiant Technology Corporation (the "Company") is engaged in the
manufacturing and marketing of infrared conveyorized ovens and furnaces
used primarily by the microelectronics manufacturing industry.
All of the Company's operations are located in California. Sales to
entities located outside the United States are as follows:
Countries 2002 2001 2000
------------------- ----------- ----------- -----------
European $ 355,819 $1,047,596 $ 966,723
Asia 1,952,357 549,073 316,235
Other International 486,585 377,243 126,666
----------- ----------- -----------
Total International Sales $2,794,761 $1,973,912 $1,409,624
=========== =========== ===========
Revenue Recognition
-------------------
The Company recognizes revenue from product sales upon shipment or upon
completion when the customer requests the unit to be held at the facility
for later shipment.
Cash and cash equivalents
-------------------------
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposit and all highly liquid debt instruments
with original maturities of three months or less.
Accounts receivable
-------------------
The allowance for doubtful accounts includes management's estimate of the
amount expected to be lost on specific accounts and for losses on other
unidentified accounts included in accounts receivable. In estimating the
allowance component for unidentified losses, management relies on
historical experience. The amounts the Company will ultimately realize
could differ materially in the near term from the amounts assumed in
arriving at the allowance for doubtful accounts in the accompanying
financial statements.
Inventories
-----------
Inventories include material, direct labor and manufacturing overhead and
are reported at the lower of cost (determined on the first-in-first-out
method) or market. Allowances for slow moving and obsolete inventory are
based on management's estimate of the amount considered obsolete based on
specific review of inventory items. In estimating the allowance, management
relies on its knowledge of the industry as well as its current inventory
levels.
17
RADIANT TECHNOLOGY CORPORATION
Notes to financial statements
1. Summary of significant accounting policies (continued)
------------------------------------------------------
Equipment
---------
Equipment is stated at cost, less accumulated depreciation. Depreciation is
calculated using the straight-line method over the estimated useful lives
of the related assets or over the lesser of the term of the lease or the
estimated useful life for leasehold improvements.
Intangibles
-----------
The cost of patents are being amortized using the straight line method over
their estimated lives of five years. Amortization expense charged to
operations in 2002, 2001 and 2000 was $1,423, $11,939, and $8,712,
respectively.
Research and Development
------------------------
Research and development has been expensed as incurred. Research and
development expenses were $377,324; $352,211 and $230,599 in fiscal 2002,
2001, and 200, respectively.
Software development costs
--------------------------
The Company capitalizes internal software development costs in accordance
with Statement of Financial Accounting Standards No. 86. The capitalization
of these costs begins when a product's technological feasibility has been
established and ends when the product is available for general release to
customers. The Company uses the working model approach to establish
technological feasibility. Amortization is computed on an individual
product group on the straight-line method over the estimated economic life
of the product. Currently, the Company is using an estimated economic life
of three years for all capitalized software costs. Amortization expense was
$31,001, $31,001 and $77,213 for 2002, 2001, and 2000, respectively.
Customer deposits
-----------------
The Company often requires a deposit from customers before commencing work
on a furnace. It is the Company's policy to record the deposit as a
receivable with a corresponding deferred liability at the time the sales
order is written. When the deposit is received, the receivable is relieved.
Income taxes
------------
Deferred income taxes are recognized for the tax consequences in future
years of differences between the tax bases of assets and liabilities and
their financial reporting amounts at each year-end based on enacted tax
laws and statutory rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
18
RADIANT TECHNOLOGY CORPORATION
Notes to financial statements
1. Summary of significant accounting policies (continued)
------------------------------------------------------
Earnings per common share
-------------------------
Earnings per common share is computed by dividing reported earnings by the
weighted average number of common shares outstanding during the respective
periods. Common stock equivalents were excluded from the computation of
earnings per share in 2002 and 2001 because the effect of including such
equivalents in the computation would have been anti-dilutive.
Fair value of financial instruments
-----------------------------------
The fair value of financial instruments, consisting principally of
short-term debt payable is based on interest rates available to the Company
and comparison to quoted prices. The fair value of these financial
instruments approximates carrying value.
Stock based compensation
------------------------
The Company accounts for compensation costs related to employee stock
options and other forms of employee stock-based compensation plans in
accordance with the requirements of Accounting Principles Board Opinion 25
("APB 25"). The Company has adopted the provisions of pro forma disclosure
requirements of Statement of Financial Accounting Standards 123, Accounting
for Stock-Based Compensation. Options granted to non-employees are
recognized at their estimated fair value at the date of grant.
Use of estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Reclassifications
-----------------
Certain items in the 2000 and 2001 financial statements have been
reclassified to conform with the 2002 presentation.
2. Concentration of credit risk and significant customers
------------------------------------------------------
The Company, from time to time, has cash deposits at financial institutions
in amounts in excess of federally-insured limits. The Company believes that
credit risk related to its cash deposits is limited due to the quality of
the financial institutions.
The Company's customers are located in several geographic markets,
primarily in the United States, Middle East, Europe and Pacific Rim
countries and are concentrated within three industries. To minimize the
risk of loss, the Company routinely assesses the financial strength of its
customers, and may require a substantial downpayment prior to commencing
machine production.
19
RADIANT TECHNOLOGY CORPORATION
Notes to financial statements
3. Accounts receivable (continued)
-------------------------------
Net accounts receivable by geographic markets are as follows:
Countries 2002 2001 2000
------------------- --------- --------- ---------
United States 27% 48% 73%
European 1% 9% 14%
Asia 70% 26% -
Other International 2% 17% 13%
--------- ---------- ---------
100% 100% 100%
========= ========== =========
During 2002, 2001 and 2000, the five largest customers represented 49, 65,
and 51 percent of revenues, respectively. At September 30, 2002 and 2001
the five largest balances represented 89 and 70 percent, respectively, of
total accounts receivable.
2002 2001 2000
---------- ---------- ----------
Trades Receivables $ 460,162 $ 412,814 $1,849,418
Allowance for Doubtful Accounts (11,000) (5,000) (5,000)
---------- ---------- ----------
$ 449,162 $ 407,814 $1,844,418
========== ========== ==========
Activity relating to the allowance for doubtful accounts and sales returns
is as follows:
2002 2001 2000
---------- ---------- ----------
Balance at beginning of year $ 5,000 $ 5,000 $ 210,817
Provision 6,000 490 --
Recoveries (Write offs) -- (490) (205,817)
---------- ---------- ----------
Balance at end of year $ 11,000 $ 5,000 $ 5,000
========== ========== ==========
20
RADIANT TECHNOLOGY CORPORATION
Notes to financial statements
4. Inventories
2002 2001
------------ ------------
Raw Material $ 400,050 $ 471,882
Work in Process 660,413 313,090
Finished Goods 176,899 216,851
------------ ------------
Total Inventories 1,237,362 1,001,823
Allowance for Slow Moving Inventory (257,000) (156,000)
------------ ------------
Net Inventories $ 980,362 $ 845,823
============ ============
Activity relating to the allowance for obsolescence is as follows:
2002 2001 2000
---------- ---------- ----------
Balance at beginning of year $ 156,000 $ 130,000 $ 140,000
Provision 101,000 56,000 40,000
Write Offs -- (30,000) (50,000)
---------- ---------- ----------
Balance at end of year $ 257,000 $ 156,000 $ 130,000
========== ========== ==========
5. Property and Equipment
----------------------
Life in Years 2002 2001
---------- ---------- ----------
Machinery & equipment 3 - 7 $ 483,573 $ 327,011
Office furniture & equipment 7 181,890 176,996
Leasehold improvements 5 67,934 67,934
Vehicles 5 15,050 15,050
Computer software 3 345,500 475,145
---------- ----------
Property & equipment 1,093,947 1,062,136
Less accumulated depreciation (772,074) (795,676)
---------- ----------
Net property & equipment $ 321,873 $ 266,460
========== ==========
Depreciation expense for 2002, 2001, and 2000 was $119,868, $133,884, and
$193,113, respectively.
21
RADIANT TECHNOLOGY CORPORATION
Notes to financial statements
6. Accrued expenses
----------------
2002 2001
------------ ------------
Payroll and Related Items $ 146,510 $ 126,785
Commissions 20,366 39,682
Warranties 30,000 30,000
Other 2,563 19,613
------------ ------------
Total accrued expenses $ 199,439 $ 216,080
============ ============
7. Commitments and contingencies
-----------------------------
Operating leases
----------------
In October 8, 2001 the Company signed a five year addendum to the lease on
a building in Fullerton, California, expiring on February 28, 2007. Base
monthly rent is $11,395 plus common area charges of approximately $2,649
per month. The Company also leases office equipment under operating leases
expiring in January, 2002. Minimum future lease payments under
non-cancelable operating leases are:
Year ending September 30,
2003 $142,410
2004 $144,902
2005 $149,175
2006 $62,898
Rent expense for 2002, 2001 and 2000 was $170,079, $146,112, and $168,650,
respectively.
Short Term Debt
---------------
The Company received a short term advance on September 20, 2002 in the
amount of $1,916,000 from a financial institution. The advance is to be
repaid within 10 days and the borrowing rate is less than 5% annual rate of
interest.
8. Environmental Matters
---------------------
The Company, like others in similar businesses, is subject to federal,
state and local environmental laws and regulations. Although Company
environmental policies and practices are designed to ensure compliance with
these laws and regulations, future developments and increasingly stringent
regulation could require the Company to make unforeseen environmental
expenditures.
22
RADIANT TECHNOLOGY CORPORATION
Notes to financial statements
9. Stockholders' equity
--------------------
Preferred stock
----------------
At September 30, 2002 and 2000 there were 5,000,000 authorized shares of
preferred stock, of which no shares were issued and outstanding.
Common stock
------------
The Company has authorized 24,000,000 shares of no par value common stock.
At September 30, 2002 and 2001, 2,081,678 shares were issued and
outstanding.
Employee stock options
----------------------
Incentive and non-statutory option plan
---------------------------------------
The Company adopted an incentive and non-statutory stock option plan which
provides for granting options to key employees and officers. Under the
plan, options up to 1,000,000 shares may be granted at a price not less
than the fair market value of such shares on the date of the grant, and the
maximum term of each option may not exceed ten years. With respect to any
participant who owns stock possessing more than 10% of the voting rights of
the Company's outstanding capital stock, the exercise price of any stock
option must not be less than 110% of the fair market value on the date of
the grant and the maximum term may not exceed five years. On January 22,
1998, April 15, 1999, January 2, 2001 and as of September 30, 2002 the
Board authorized options to purchase 70,000, 100,000, 55,000 and 220,000
shares, respectively. These shares were granted at an exercise price that
was at or above the market price on the date of the grant. The options vest
on various dates in 2000, 2001, 2002, 2003 and 2004 and expire three years
from the vesting date. As of September 30, 2002 519,666 of these options
remained outstanding.
Non-statutory director options
------------------------------
As of September 30, 2002, the Company granted 20,000 non-statutory options
to each of three outside board members. The options vested immediately and
expire July 18, 2005 The option price is $.45 per share, which was greater
than the market price at the date of the grant. At September 30, 2002, all
of these options remain outstanding.
Lawrence McNamee
----------------
Mr. McNamee held options to acquire 346,666 shares at $.075 per share
issued to him in lieu of salary in 1992; 175,000 of these options were
exercised in 2001, resulting in options for 171,666 shares outstanding at
September 30, 2002. These options have no expiration date.
23
RADIANT TECHNOLOGY CORPORATION
Notes to financial statements
9. Stockholders' equity (continued)
--------------------------------
The following table summarizes the activities under the Plan and outside
the Plan:
Weighted Number
Number of Price Average of Shares
Shares Per Share Exercise Price Exercisable
--------- ------------- -------------- -----------
September 30, 2000 499,666 $.075 - $0.75 $0.23 459,666
========
Granted 55,000 $0.05 $0.53
Exercised (175,000) $0.07 $0.075
Cancelled (65,000) $.48 - $0.75 $0.55
--------- ------------ ------
September 30, 2001 314,666 $.075 - $0.75 $0.30 229,666
========
Granted 260,000 $0.45 $0.45
Cancelled (77,000) $.48 - $0.525 $0.51
--------- ------------- -----
September 30, 2002 497,666 $.075 - $0.75 $0.40 315,166
======== ============= ======== ========
The following information applies to employee options outstanding at
September 30, 2002:
Weighted Average Weighted
Remaining Average
Range of Number of Contractual Exercise
exercise prices Shares Life (Years) Price
--------------- ------------- ---------- ----------
$0.075 171,666 No Expiration $0.075
$0.45 - $0.48 280,000 1.83 $0.450
$0.525 8,000 0.04 $0.525
$0.750 36,000 0.02 $0.750
24
RADIANT TECHNOLOGY CORPORATION
Notes to financial statements
9. Stockholders' equity (continued)
--------------------------------
Stock options (continued)
-------------------------
Had compensation cost for the plan been determined based on the fair value
of the options at the grant dates consistent with the method of SFAS 123,
the Company's net income/(loss) and earnings/(loss) per share would have
been:
2002 2001 2000
---------- ---------- ----------
Net Income / (Loss)
As Reported $ (786,284) $ (157,210) $ 287,729
Pro Forma $ (830,582) $ (169,952) $ 284,444
Basic earnings per share:
As Reported $ (0.38) $ (0.08) $ 0.15
Pro Forma $ (0.40) $ 0.08 $ 0.15
Diluted earnings per share:
As Reported $ (0.38) $ (0.08) $ 0.13
Pro Forma $ (0.40) $ (0.08) $ 0.13
These pro forma amounts may not be representative of future disclosures
because they do not take into effect pro forma compensation expense related
to grants made before 1996. In addition, potential deferred tax benefits of
approximately $12,500, $15,000, and $19,200 in 2000, 1999 and 1998
respectively, have not been reflected in the pro forma amounts due to the
uncertainty of realizing any benefit. The fair value of these options was
estimated at the date of grant using the Black-Scholes option-pricing model
with the following weighted average assumptions for 2002, 2001, and 2000:
2002 2001
------------ ------------
Expected Life (years) 3.5 4.0
Risk-free interest rate 4.00% 6.00%
Volatility 100% 100%
Expected dividends None None
The weighted fair value of options granted during the years ended September
30 2002, 2001 and 2000 for which the exercise price approximated the market
price on the grant date was $.33, $.525 and $.21, respectively.
25
RADIANT TECHNOLOGY CORPORATION
Notes to financial statements
10. Income taxes
------------
Income tax expense (benefit) consisted of the following:
--------------------------------------------------------
2002 2001 2000
---------- ---------- ----------
Current tax $ 800 $ -- $ 13,000
Deferred tax -- (113,500) --
---------- ---------- ----------
Net income tax expense (benefit) $ 800 $ (113,500) $ 13,000
========== ========== ==========
Income tax expense (benefit) differed from the amounts computed by applying
the U.S. federal income tax rate of 34% to pretax income from continuing
operations in 2002, 2001 and 2000 as a result of the following:
The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and liabilities at September 30, 2002 and
2001 are as follows:
2002 2001
------------ ------------
Net operating loss carryforwards $ 629,000 $ 441,000
Allowance for slow moving inventories 103,000 52,000
Allowance for doubtful accounts 4,000 2,000
------------ ------------
Deferred tax assets $ 736,000 $ 495,000
Less valuation allowance (472,500) (325,000)
------------ ------------
Net deferred tax asset $ 263,500 $ 170,000
============ ============
26
RADIANT TECHNOLOGY CORPORATION
Notes to financial statements
10. Income taxes (continued)
------------------------
The recognized deferred tax asset is based upon expected utilization of the
net operating loss carryforwards and reversal of certain temporary
differences.
At September 30, 2002, the Company had net operating loss carryforwards for
federal and state income tax purposes expiring as follows:
Federal State
------------ ------------
2007 $ 247,175 $ --
2009 620,976
2011 100,000
2014 167,361
2015 198,790
2016 786,000
------------ ------------
$ 2,020,302 $ 100,000
============ ============
11. Employee benefit plan
---------------------
The Company's 401(k) plan was re-activated during fiscal 1996. All
employees are eligible as long as they are 21 years of age and have
completed one year of employment. The plan provides for contributions by
the Company in such amounts as management may determine. Contribution
expense charged to operations in 2000 was $12,474. No expense was charged
to operations in 2002 and 2001.
27
RADIANT TECHNOLOGY CORPORATION
Notes to financial statements
12. Basic and diluted earnings/(loss) per share
-------------------------------------------
The following tables illustrate the required disclosure of the
reconciliation of the numerators and denominators of the basic and diluted
earnings/(loss) per share computations.
2002 2001 2000
----------- ----------- -------------
Basic earnings (loss) per share:
Numerator
Net Income (Loss) ($786,284) ($157,210) $287,729
=========== =========== =============
Denominator
Basic weighted average number of common
shares outstanding during the period 2,081,678 2,040,445 1,901,594
=========== =========== =============
Basic net income (loss) per share ($0.38) ($0.08) $0.15
=========== =========== =============
Diluted earnings (loss) per share:
Denominator
Basic weighted average number of common
shares used in basic earnings per share 2,081,678 2,040,445 1,901,594
Effect of Diluted Securities
Stock options (1) 287,170
----------- ----------- -------------
Weighted number of common shares
and diluted potential common stock
used in diluted earnings per share 2,081,678 2,040,445 2,188,764
=========== =========== =============
Diluted earnings (loss) per share ($0.38) ($0.08) $0.13
=========== =========== =============
1. Stock options were anti-dilutive for the years ended September 30, 2002
and 2001. See Note 9 for stock option activity
28