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United States Securities and Exchange Commission
Washington D.C. 20549
Form 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended May 31, 2009
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT OF 1934
Commission file number 0-12866
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PHAZAR CORP
(Exact name of registrant as specified in its charter)
Delaware 75-1907070
(State or other jurisdiction of (IRS Employer Identification No.)
Incorporation or organization)
101 S.E. 25th Avenue, Mineral Wells, Texas 76067 (940) 325-3301
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(Address of principal executive offices) (Issuer's telephone number)
Securities registered pursuant to Section 12(b) of the Act:
None
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 [ ]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act.)
Yes No (X)
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-K or
any amendment to this Form 10-K. [ X ]
The Company's net sales for Fiscal Year ended May 31, 2009, was $7,310,281.
1
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As of July 15, 2009 2,297,037 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 Capital Market) held by non-affiliates (1,909,767
shares) was $5,996,668.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this report, to the extent not set forth
herein, is incorporated by reference from the Registrant's definitive 2009 Proxy
Statement.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]
2
PART 1
Item 1. Description of Business.
General
PHAZAR CORP was incorporated in 1991 and operates as a holding company with
Antenna Products Corporation, Tumche Corp., Phazar Antenna Corp. and Thirco,
Inc. as its wholly owned subsidiaries. Antenna Products Corporation and Phazar
Antenna Corp. are operating subsidiaries with Thirco, Inc. serving as an
equipment leasing company to PHAZAR CORP's operating units. Phazar Antenna Corp.
is a separate legal entity that currently operates as a small division of
Antenna Products Corporation. Tumche Corp. has no sales or operations. PHAZAR
CORP has no other business activity. The address for PHAZAR CORP and
subsidiaries is 101 S.E. 25th Avenue, Mineral Wells, Texas 76067. The telephone
number is (940) 325-3301.
Product information is available from the Internet web page at:
www.antennaproducts.com, www.truemeshnetworks.com and www.phazar.com.
Antenna Products Corporation
Antenna Products Corporation was incorporated in Texas in 1984 to continue a
business started in 1947 and operated as a closely held "C" corporation until
January 24, 1992. Thereafter, Antenna Products Corporation has operated, as a
wholly owned Subsidiary of PHAZAR CORP.
Antenna Products Corporation designs, manufactures and markets standard and
custom antennas, wireless mesh network solutions, guyed and self supported
towers, support structures, masts and communication accessories worldwide.
Customers include the United States Government, both military and civil
agencies, United States Government prime contractors and commercial clients.
Examples of Antenna Products Corporation's United States Government products
include tactical military mesh radio wireless networking systems, 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 first responder emergency mesh radio
systems, commercial mesh radio systems, panel, sector, omnidirectional and
closed loop telecommunications antennas, automatic meter reading (AMR),
instrument scientific medical (ISM), cellular, paging and yagi antennas, guyed
towers and self supported towers.
The majority of Antenna Products Corporation's revenues come from fixed-price
contracts, secured through a bidding process, for particular, custom ordered
antenna production systems that Antenna Products Corporation builds according to
the specifications of the customer. Except for inventory of standard products
including small antennas, accessories and some towers in the amount of $610,030
at May 31, 2009, Antenna Products Corporation does not build and inventory
equipment for future off the shelf sales. The sales volume for a particular
antenna or antenna system is, therefore, a function of the fixed price contracts
for build to order antennas or systems awarded to Antenna Products Corporation.
However, a general product sales breakdown for the fiscal years ended May 31,
2009 and May 31, 2008, as a percentage of total sales are, as follows:
3
For the fiscal year ended
May 31,
Product Type 2009 2008
---- ----
Spares, Accessories and Others 26% 24%
Antennas 18% 19%
Collinear Antennas 14% 24%
Commercial Wireless 13% 14%
Instrument Landing System 13% 7%
Towers and Masts 12% 12%
Shipboard Equipment 4% 0%
-------- --------
100% 100%
Antenna Products Corporation's customer base is primarily government and
government prime contractor focused, but this is slowly changing as Antenna
Products Corporation continues to develop and market new commercial products.
Antenna Products Corporation's market is international in scope. Antenna
Products Corporation currently focuses on developing domestic and international
markets. The specialized need of Antenna Products Corporation's customers and
the technology required to meet those needs change constantly. Accordingly,
Antenna Products Corporation stresses its engineering, installation, service and
other support capabilities. Antenna Products Corporation uses its own sales and
engineering staff to service its principal markets. Some of Antenna Products
Corporation's contracts are large relative to total annual sales volume and,
therefore, the composition of the customer base is different year to year. In
2009, the United States Government was the single largest customer and accounted
for 13% of the total sales volume. Halliburton Energy was the second largest
customer and accounted for 9% of total sales. NextG Networks was the third
largest customer and accounted for 9% of total sales. Orders for equipment in
some of these product categories are in backlog and, therefore, the United
States Government is expected to be a major client again in 2010.
Antenna Products Corporation is one of many suppliers of antennas and related
manufacturing services to the government and government prime contractors.
Antenna Products Corporation competes on the basis of cost and product
performance in a market with no dominant supplier. Due to fixed-price contracts
and pre-defined contract specifications prevalent within this market, Antenna
Products Corporation competes primarily on the basis of its ability to provide
state-of-the-art solutions in the technologically demanding marketplace while
maintaining its competitive pricing.
Antenna Products Corporation, including its predecessors, has been building
antennas and related structures and systems for over 40 years. We believe that
Antenna Products Corporation enjoys a reputation for building quality products
at a competitive price, because we continue to be asked to bid for new work.
Because of our size and lack of significant liquid assets we are at a
competitive disadvantage to larger companies that have greater resources to be
4
able to bid a job at lower margins. In terms of gross assets, sales and number
of employees, Antenna Products Corporation is a relatively small company
compared to the companies with which we compete.
On the other hand, our customers know us, know our personnel and can rely on us
to build the antennas or towers or masts, etc. according to their
specifications. We, therefore, compete on the basis of our reputation and
history of building quality products at reasonable prices.
As discussed above, Antenna Products Corporation is primarily a build-to-order
company and most manufacturing requirements are established on a contract basis.
For this reason, the majority of the inventory is work in process. Approximately
24% of total inventory, $610,030 is currently maintained in stock for delivery
to customers. We have increased our raw material and finished goods inventory to
take advantage of lower raw material costs. Some raw materials are also
inventoried to support customer delivery schedules. Antenna Products Corporation
performs work for the United States Government primarily under fixed-price prime
contracts and subcontracts. Under fixed-price contracts, Antenna Products
Corporation realizes any benefit or detriment occasioned by lower or higher
costs of performance.
Antenna Products Corporation is subject to certain risks common to all companies
that derive a portion of their revenues from the United States Government. These
risks include rapid changes in technology, changes in levels of government
spending, and possible cost overruns. Recognition of profits on major contracts
is based upon estimates of final performance, which may change as contracts
progress. Contract prices and costs incurred are subject to Government
Procurement Regulations, and costs may be questioned by the United States
Government and are subject to disallowance. United States Government contracts
contain a provision that they may be terminated at any time for the convenience
of the United States Government. In such event, the contractor is entitled to
recover allowable costs plus any profits earned to the date of termination.
Collections are generally set in accordance with federal acquisition standards,
which require payment in accordance with "Net 30" terms after acceptance of
goods. Antenna Products Corporation is not directly regulated by any
governmental agency in the United States. Most of Antenna Products Corporation's
customers and the antenna and tower industries in general, are subject to
meeting various government standards. These performance standards necessitate
Antenna Products Corporation's ability to produce antenna designs, which can be
updated to conform to customer requirements in a changing regulatory
environment. These regulations have not adversely affected operations.
Antenna Products Corporation does not depend on any license, patent or
trademark, other than its good name, to secure business. While Antenna Products
Corporation does hold certain patents, they are not material to its business.
While Antenna Products Corporation complies with all environmental laws, the
costs and effects of compliance are not material to its operations.
Antenna Products Corporation plans to reinvest approximately 10% of sales in
research and development projects and bid and proposal activities, the costs are
charged to sales and administration expenses as incurred. The mix of
expenditures between the two areas in any given year is a function of the demand
for new independently developed innovative systems and the level of requirements
solicited. In 2009, Antenna Products Corporation, continued development on a new
5
mesh radio wireless networking product line. This product line includes
military, emergency first responder and commercial mesh radio systems that
utilize proprietary embedded intelligent routing software and multiple frequency
architecture to create dynamic wireless mesh networking systems that transmit
and share data, voice and video applications. This development program resulted
in a total investment in independent research and development (R&D) and bid and
proposal activities (B&P) of 15% of sales in 2009. The level of expenditures for
R&D and B&P as a ratio to sales was 8.8% of sales in 2008. As of May 31, 2009,
Antenna Products Corporation does not consider patents to be material to its
operations nor would the loss of any patents adversely affect operations.
Tumche Corp.
Tumche Corp. is a wholly owned subsidiary of PHAZAR CORP. It has no sales or
operations.
Phazar Antenna Corp.
Phazar Antenna Corp. is a wholly owned subsidiary of PHAZAR CORP. It was formed
as a Delaware Corporation and activated on June 1, 2000. Phazar Antenna Corp.
operates as a marketing and research and development unit.
Phazar Antenna Corp. provides a line of commercial wireless fixed and mobile
antennas for ISM (instrument scientific medical), ITS (intelligent
transportation systems), wireless Internet, wireless LAN, wireless local loop,
fixed GPS, MMDS (fixed wireless) and other WiMAX market applications. Phazar
Antenna Corp. also supplies a broad range of multiple band antennas for the
telecommunication market for DAS (Distributed Antenna Systems). The DAS antennas
for Cellular/SMR, AWS and PCS frequencies are installed on utility poles, street
lights, rooftops and lamp posts in urban and remote areas to increase wireless
carrier services. These product lines complement Antenna Products Corporation's
existing product lines of cellular, PCS, paging, ISM and AMR (automatic meter
reading), omni-directional and sector wireless antennas. Phazar Antenna Corp.
sales for the twelve months ended May 31, 2009, amounted to approximately 13% of
total sales. We expect that for fiscal year ended May 31, 2010, this percentage
will continue to increase as new products are added to the commercial wireless
product lines. The Phazar Antenna Corp. commercial wireless product lines are
manufactured at Antenna Products Corporation's plant in Mineral Wells, Texas.
Thirco, Inc.
Thirco, Inc. was formed on November 1, 1993 as a Delaware company to purchase
and lease equipment and facilities to the other operating units of PHAZAR CORP.
The primary lease arrangements are with Antenna Products Corporation. Thirco,
Inc. will occasionally assist in servicing the banking needs of PHAZAR CORP's
operating units. Since all activity is internal to PHAZAR CORP and its operating
subsidiaries, financial data is consolidated with PHAZAR CORP. Thirco, Inc. does
not employ any full time employees and does not intend to employ any in the
foreseeable future. Thirco, Inc. does not intend to engage in any outside
business transactions.
Seasonality
PHAZAR CORP's businesses are not dependent on seasonal factors.
6
Backlog
The backlog of orders at Antenna Products Corporation and Phazar Antenna Corp.
was $1,741,746 at year-end. This compares to $2,544,564 in backlog at the end of
fiscal year 2008.
Raw Material Source and Supply
PHAZAR CORP's operating subsidiaries' principal raw materials are steel,
aluminum, other metal alloys, plastic and composite tubing, hardware, electrical
wire, wire rope, electronic components and electro-mechanical components. The
materials are commonly available from numerous sources, including local
distributors in quantities sufficient to meet the needs of the subsidiaries. The
availability and supply of raw materials is not considered to be a problem for
PHAZAR CORP.
Employees
As of July 14, 2009, Antenna Products Corporation and Phazar Antenna Corp.
combined employed a total of eighty employees, seventy-nine full time and one
part time. Of the eighty, seventeen are employed in administration and sales,
nine in engineering and technical support, and fifty-four in manufacturing. None
of Antenna Products Corporation and Phazar Antenna Corp.'s employees are subject
to collective bargaining agreements.
Thirco, Inc. does not employ any full time employees and does not intend to
employ any in the foreseeable future.
Foreign Sales
Antenna Products Corporation's sales in international markets are primarily to
foreign governments or prime contractors to foreign governments and, as such,
represent a small percentage of the overall Company annual volume. Phazar
Antenna Corp. has sales in international markets to commercial customers. The
level of profits from the commitment of assets to this portion of the business
is no greater or no less than that of other market segments. International sales
for 2009 and 2008 were 13.6% and 26.5%, respectively, of total sales. Foreign
countries with sales greater than 5% of total sales for both fiscal years 2009
and 2008, are as follows:
2009 2008
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Canada 5.6% 11.9%
Spain - 12.2%
Item 2. Description of Property.
Antenna Products Corporation owns a ten-acre industrial site located along US
Highway 180 in Mineral Wells, Texas. The facility consists of a main building
containing 60,000 square feet of manufacturing area and 10,000 square feet of
administrative and engineering offices, a second building containing 20,000
square feet of manufacturing and shipping area; and a third building containing
15,000 square feet utilized for receiving and material control. Three additional
auxiliary buildings, which total in excess of 13,350 square feet, are utilized
for chemical etching, painting and storage. The facilities are in good condition
7
and with the current complement of machinery and equipment are suitable and more
than adequate to meet production requirements. Dependent on the mix of product
types in process in any given time period, the Company could potentially more
than double output with current and planned plant, property and equipment.
Phazar Antenna Corp. has no facilities. Phazar Antenna Corp. uses the facilities
of Antenna Products Corporation in Mineral Wells, Texas.
Thirco, Inc. owns a fifty-acre test site in Mineral Wells, Texas. The site
includes three buildings with 28,000 square feet of space. The space is
currently being leased to Antenna Products Corporation for test activity with
some storage of inventory. The two larger buildings, if needed, are suitable
with rearrangement and some conversion expense, for additional manufacturing
utilization.
Item 3. Legal Proceedings.
On June 26, 2008, the Company filed an arbitration claim against UBS Financial
Services, Inc. with FINRA Dispute Resolution relating to the sale of auction
rate certificates issued by the Massachusetts Education Financing Authority and
filed a related injunctive action in district court in Tarrant County, Texas. On
October 16, 2008 the Massachusetts Education Financing Authority redeemed all
$2,650,000 of the auction rate certificates owned by the Company and paid
accrued interest. The Company then dismissed the injunctive action but continued
pursuing its arbitration claim. On March 30, 2009, a FINRA arbitration panel
entered an award that the Company takes nothing from UBS Financial Services,
Inc. and required the parties to split hearing costs.
On August 15, 2008, Janet McCollum, as personal representative of the Estate of
Richard Alan Catoe, deceased, filed a wrongful death complaint against the
University of West Florida, Diamond Enterprise, Inc., North Safety Products,
L.L.C. a/k/a North Safety Products, Inc. and Antenna Products Corporation (the
"Lawsuit") in Circuit Court in Escambia County, Florida,. Antenna Products
Corporation is PHAZAR CORP's wholly owned and principal operating subsidiary.
The lawsuit alleges that the deceased fell to his death while climbing a ladder
inside a water tower on the University of West Florida campus to install
antennas. The lawsuit further alleges that while the deceased was descending the
ladder, he wore an Antenna Products Corporation safety sleeve affixed to a
safety rail manufactured by defendant North Safety Products that was attached to
the ladder and that the safety sleeve and rail were allegedly defective and
failed to prevent the deceased from falling, thus causing his death. Plaintiff
seeks recovery of unspecified amounts from all the defendants. Antenna Products
Corporation denies any liability to plaintiff and anticipates being dismissed
from the lawsuit. However, if we were found to be responsible or liable, we
would not expect such costs to be material to the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders through the solicitation
of proxies or otherwise during the fourth quarter of fiscal year 2009.
8
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
The information in this item should be read in conjunction with the Management
Discussion and Analysis of Financial Condition and Results of Operations in Item
6, and the consolidated financial statements and the related notes thereto in
Item 8.
Market Information For The Common Stock
PHAZAR CORP's common stock is traded on the Nasdaq Capital Market and is quoted
under the symbol "ANTP".
The table below presents the high and low prices for the last two fiscal years
and reflects inter-dealer prices, without retail mark-up, mark-down or
commission and may not represent actual transactions.
BID
Quarter Ended High Low
August 2007 11.10 5.55
November 2007 11.25 5.96
February 2008 8.48 4.24
May 2008 8.40 5.25
August 2008 6.40 4.35
November 2008 4.68 1.96
February 2009 2.95 1.99
May 2009 3.86 1.90
Holders
At July 14, 2009, there were approximately 1,814 holders of record of common
stock.
Dividends
PHAZAR CORP has never paid a regular cash dividend on common stock and has no
plans to institute payment of regular dividends.
Recent Sales of Unregistered Securities
As partial consideration for attending the PHAZAR CORP Board of Directors'
meetings, Gary W. Havener, Clark D. Wraight, James Kenney, R. Allen Wahl,
Garland P. Asher and Dennis Maunder each received 1,800 shares of PHAZAR CORP
common stock. James Miles received 200 shares of PHAZAR CORP common stock. Also,
as partial consideration for attending the PHAZAR CORP Audit Committee meetings,
James Kenney and Dennis Maunder each received an additional 900 shares of PHAZAR
CORP common stock. R. Allen Wahl received an additional 800 shares of PHAZAR
CORP common stock and Garland P. Asher received an additional 400 shares of
PHAZAR CORP common stock.
Item 6. Selected Financial Data
9
Company Overview
PHAZAR CORP's continuing operation is that of its subsidiaries, Antenna Products
Corporation, Phazar Antenna Corp., Tumche Corp. and Thirco, Inc. As previously
discussed in Item 1, for the purpose of this discussion, all results of Phazar
Antenna Corp. are included with the results of Antenna Products Corporation. The
management discussion presented in this item relates to the operations of
subsidiary units and the associated consolidated financials as presented in Item
8.
PHAZAR CORP operates as a holding company with Antenna Products Corporation,
Phazar Antenna Corp., Tumche Corp. and Thirco, Inc. as its wholly owned
subsidiaries. Antenna Products Corporation and Phazar Antenna Corp. are
operating subsidiaries with Thirco, Inc. serving as an equipment leasing company
to PHAZAR CORP's operating units. Tumche Corp. has no sales or operations.
Antenna Products Corporation designs, manufactures and markets antenna systems,
towers and communication accessories worldwide. The United States Government,
military and civil agencies and prime contractors are Antenna Products
Corporation's principal customers. Phazar Antenna Corp. designs and markets
fixed and mobile antennas for commercial wireless applications that include
cellular, PCS, ISM (instrument scientific medical), AMR (automatic meter
reading), wireless internet, wireless local area network, and other WiMax market
applications.
PHAZAR CORP is primarily a build-to-order company. As such, most United States
government and commercial orders are negotiated firm-fixed price contracts.
PHAZAR CORP's sales to major customers for the fiscal year ended May 31, 2009,
as a percentage of total sales were United States Government 13%, Halliburton
Energy 9% and NextG Networks 9%.
Executive Level Overview
The following table presents selected financial data of PHAZAR CORP. This
historical data should be read in conjunction with consolidated financial
statements and the related notes thereto in Item 8.
Fiscal Year Ending May 31,
2009 2008
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Net sales $ 7,310,281 $ 9,247,245
Foreign sales (as % of total sales) 13.6% 26.5%
Gross Product Margin 32.8% 36.6%
Operating Profit (loss) $ (1,249,551) $ 703,794
Net income (loss) $ (582,195) $ 622,904
Net income (loss) per share $ (0.25) $ 0.27
Total assets $ 8,267,357 $ 8,960,874
Long term debt $ - $ -
Total liabilities $ 719,390 $ 1,076,525
Capital expenditures $ - $ -
Dividends $ - $ -
10
Critical Accounting Policies
The preparation of PHAZAR CORP's consolidated financial statements in accordance
with accounting principles generally accepted in the United States of America
requires PHAZAR CORP to make estimates and assumptions that affect: the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements; and the reported amounts of
revenues and expenses during the reporting periods. PHAZAR CORP is required to
make judgments and estimates about the effect of matters that are inherently
uncertain. Actual results could differ from PHAZAR CORP's estimates. The most
significant areas involving PHAZAR CORP's judgments and estimates are described
below.
Inventory Valuation
Inventory is stated at the lower of cost or market, with cost being determined
on a first-in, first-out basis. Provisions are made to reduce excess or obsolete
inventory to its estimated net realizable value. The process for evaluating the
value of excess and obsolete inventory often requires PHAZAR CORP to make
subjective judgments and estimates concerning future sales levels, quantities
and prices at which such inventory will be able to be sold in the normal course
of business. Accelerating the disposal process or incorrect estimates of future
sales potential may necessitate future adjustments to these provisions.
Accounts Receivable Valuation
PHAZAR CORP maintains an allowance for doubtful accounts for estimated losses
resulting from the inability of PHAZAR CORP's customers to make required
payments. If the financial condition of PHAZAR CORP's customers were to
deteriorate resulting in an impairment of their ability to make payments,
additional allowances may be required.
Revenue Recognition
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 the United States Government 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 the costs allocable to the
delivered units as the cost of earned revenue. 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.
Foreign Sales
Antenna Products Corporation's sales in international markets are primarily to
foreign governments or prime contractors to foreign governments and, as such,
represent a small percentage of the overall Company annual volume. Phazar
Antenna Corp. has sales in international markets to commercial customers. The
11
level of profits from the commitment of assets to this portion of the business
is no greater or no less than that of other market segments. International sales
for 2009 and 2008 were 13.6% and 26.5%, respectively, of total sales. Foreign
countries with sales greater than 5% of total sales for both fiscal years 2009
and 2008, are as follows:
2009 2008
---------- -----------
Canada 5.6% 11.9%
Spain - 12.2%
Income Taxes
PHAZAR CORP 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 PHAZAR CORP's assets and liabilities at enacted tax
rates expected to be in effect when such amounts are realized or settled. The
current and deferred tax provision is allocated among members of the
consolidated group on the separate income tax return basis.
Item 7. Management's Discussion and Analysis or Plan of Operations
Results of Operations
Year ended May 31, 2009 ("2009") compared with year ended May 31, 2008 ("2008")
PHAZAR CORP's consolidated sales from operations were $7,310,281 in 2009,
compared to consolidated sales from operations of $9,247,245 in 2008. PHAZAR
CORP recorded a net loss of $582,195 in 2009, compared to a net profit of
$622,904 in 2008. PHAZAR CORP's net income fell $1,205,099 on a 21% decline in
sales of both military and commercial product lines, which included a
significant reduction in international sales.
Orders decreased by $1,625,006 across all product lines from $8,287,615 in 2008
compared to $6,662,609 in 2009. Backlog was down $802,818 from $2,544,564 at the
end of 2008 compared to $1,741,746 as of May 31, 2009 due to the reduction in
orders received and contracts being completed and shipped prior to year end. A
slow-down in government and government related contracting activity was a
contributing factor in lower orders and revenues for the year ended May 31,
2009.
Cost of sales and contracts and gross profit for fiscal year 2009, were
$4,910,677 and $2,399,604. For the same period in 2008, costs of sales and
contracts and gross profit were $5,866,837 and $3,380,408, respectively. The
gross profit margin for the operations for fiscal year 2009 was 32.8% compared
to 36.6% in 2008. The decrease in gross profit margin is attributed to increases
in commodity prices and inefficiencies associated with low production levels.
Sales and administration expenses were $3,649,155 in 2009, compared to
$2,676,614 in 2008. The $972,541 increase in sales and administration expense is
due to higher compensation costs associated with newly hired employees for the
mesh radio product line and executive group, incremental research and
12
development for continued development of our mesh radio wireless network product
line and legal fees associated with the FINRA arbitration claim against UBS
Financial Services.
The Company had an operating loss of $1,249,551 for the year ending May 31,
2009, compared to an operating profit of $703,794 for the same period in prior
year as a result of lower orders and sales along with the increase in sales and
administration expense.
Discretionary product development and bid/proposal spending totaled $1,093,462
or 15% of sales in fiscal year end 2009 compared to $814,462, or 9% for the same
period in 2008.
The income (loss) from operations before income taxes was a loss of $1,052,784
in 2009 compared to an income of $871,815 in 2008.
Product Warranties
PHAZAR CORP's management estimates accrued warranty expense based on warranty
work received but not performed and on analysis of historical trends including
actual expense as a percent of sales.
Changes in accrued warranty liability for the years ended May 31, are as
follows:
2009 2008
------------ ------------
Beginning balance $ 122,376 $ 68,376
Cost incurred for rework (145,708) (150,652)
Accrual for current year estimate 138,702 122,376
Change in accrued estimate 23,332 82,276
----------- -----------
Ending balance $ 138,702 $ 122,376
=========== ===========
Liquidity and Capital Resources
Sources of Liquidity
Funds generated from operations are the major internal sources of liquidity and
are supplemented by funds derived from capital markets, principally bank
facilities. The Company's operating subsidiary has a $2,000,000 revolving note
facility with a bank collateralized by the subsidiary's inventory and accounts
with PHAZAR CORP, the parent company, signing as the guarantor. The amount
available under the revolving note facility at May 31, 2009 was $2,000,000. At
May 31, 2009, the Company had a tangible net worth of $7,547,967 and had working
capital of $6,290,829. As of May 31, 2009, Antenna Products Corporation had
drawn $0 of the $2,000,000 line of credit with $2,000,000 of the borrowing base
available and unused. PHAZAR CORP believes that its cash and the credit
available at May 31, 2009, is sufficient to fund the Company's operations for at
least twelve months.
Interest is payable monthly at the prime rate (3.25% at May 31, 2009 and 5% at
May 31, 2008) until October 2, 2009, when any unpaid principal and interest
shall be due. Under the agreement, the Company must maintain a minimum working
13
capital of $2,500,000, tangible net worth of $4,000,000 and debt service ratio
of 1.25 and a maximum debt worth no greater than .5:1.
Capital Requirements
Management of the operating subsidiaries evaluates the facilities and review
equipment requirements for existing and projected contracts on a regular basis.
An annual capital plan is generated by management and submitted to the Board of
Directors for review and approval. In fiscal year 2009 there were $316,911 in
capital expenditures for new and replacement equipment. The Company intends to
limit the 2010 capital program to less than $100,000 for improvements and new
equipment.
At May 31, 2009, PHAZAR CORP had cash and cash equivalents of $3,320,647.
Deferred revenue at May 31, 2009, is $16,884.
Cash Flows
Operating Activities
The increase in cash and cash equivalents of $874,084 is primarily due to the
redemption of $2,650,000 in auction rate securities offset by a negative
$1,340,678 of cash flow from operations. In October, 2008, the Company announced
that all $2,650,000 of its auction rate securities had been redeemed at the par
value of $2,650,000 plus accrued interest by the issuer, the Massachusetts
Education Financing Authority. As of May 31, 2009, the Company has no monies
invested in auction rate securities.
The negative $1,340,678 of cash flow from operations consists of a $754,481
increase in inventory, a $ 582,195 net loss, a $298,770 decline in deferred
revenues offset by a $323,759 reduction in accounts receivable. The $754,481, or
43% increase in inventory levels for fiscal year 2009 versus fiscal year 2008
represents a decision by management to take advantage of lower material costs
and increase stock levels in certain finished goods products. The net loss of
$582,195 in fiscal year 2009 represents a 21% drop in revenues associated with a
slow-down in government and government related contracting activity along with
36% increase in sales and administrative expenses. Higher compensation costs
associated with newly hired employees for the mesh radio product line and
executive group, incremental research and development costs for continued
development of our mesh radio wireless network product line and legal fees
associated with the FINRA arbitration claim against UBS Financial Services are
all contributing factors to the increase in sales and administrative expenses.
The $298,770 decline in deferred revenues for fiscal year 2009 compared to
fiscal year 2008 is simply a function of customer contracts that are required to
provide prepayments prior to production of the order, often a requirement for
international customers. The decrease in accounts receivable from $987,258 at
May 31, 2008 to $663,499 represents a $323,759 source of operating cash flows
and reflects the decreased level of business volume in fiscal year 2009.
Investing Activities
Cash of $2,127,478 was provided by investing activities during the fiscal year
ending May 31, 2009, which consists of the $2,650,000 of redemption of auction
rate securities less capital expenditures of $316,911 and $205,611 for the
purchase of treasury stock. Cash was not used in investing activities during the
14
year ended May 31, 2008, however, $2,650,000 of marketable securities were
transferred to long term marketable securities during the year.
Financing Activities
There were no financing activities requiring cash during the fiscal year ending
May 31, 2009. The financing activities incurred in prior year ending May 31,
2008 consisted primarily of proceeds from the exercise of stock options and the
federal income tax benefit resulting from the exercise of stock options. At May
31, 2009 and 2008, PHAZAR CORP had no long-term debt outstanding.
15
Item 8. Financial Statements.
PHAZAR CORP consolidated financial statements for the fiscal years ended May 31,
2009 and 2008.
C O N T E N T S
Page
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets..........................................19-20
Consolidated Statements of Operations................................21
Consolidated Statements of Shareholders' Equity......................22-23
Consolidated Statements of Cash Flows................................24
Notes to Consolidated Financial Statements...........................25
16
- -------
| | |
| | |
Weaver
-and-
Tidwell
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
L.L.P.
Certified Public
Accountants To The Board of Directors and Stockholders
and Consultants PHAZAR CORP and Subsidiaries
We have audited the accompanying consolidated balance sheets
of PHAZAR CORP and Subsidiaries as of May 31, 2009 and 2008,
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 the standards of the
Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is
not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. Our
audit included consideration of internal control over
financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the
effectiveness of the company's internal control over
financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements, 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 PHAZAR CORP and subsidiaries as of
May 31, 2009 and 2008, and the results of their operations
and their cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United
States of America.
/s/ Weaver and Tidwell, LLP
17
WEAVER AND TIDWELL, L.L.P.
Fort Worth, Texas
August 12, 2009
WWW.WEAVERANDTIDWELL.COM
AN INDEPENDENT MEMBER OF
BAKER TILLY
INTERNATIONAL
OFFICES IN
DALLAS FORT WORTH HOUSTON SAN ANTONIO
18
PHAZAR CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 2009 AND 2008
ASSETS
2009 2008
------------- -------------
CURRENT ASSETS
Cash and cash equivalents $ 3,320,647 $ 2,446,563
Accounts receivable:
Trade, net of allowance for
doubtful accounts of $1,120
in 2009, and $2,002 in 2008 663,499 987,258
Inventories 2,531,816 1,777,335
Prepaid expenses and other assets 76,261 47,761
Income taxes receivable 343,145 169,597
Deferred income taxes 74,853 67,697
------------ ------------
Total current assets 7,010,221 5,496,211
Property and equipment, net 1,140,141 939,084
Marketable securities - 2,346,840
Long-term deferred income tax 116,995 178,739
------------ ------------
TOTAL ASSETS $ 8,267,357 $ 8,960,874
============ ============
See accompanying Notes to the Consolidated Financial Statements
19
PHAZAR CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MAY 31, 2009 AND 2008
LIABILITIES AND SHAREHOLDERS' EQUITY
2009 2008
------------- -------------
CURRENT LIABILITIES
Accounts payable $ 215,840 $ 298,192
Accrued expenses 486,666 462,679
Deferred revenues 16,884 315,654
------------ ------------
Total current liabilities 719,390 1,076,525
Total liabilities 719,390 1,076,525
------------ ------------
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Preferred stock, $1 par, 2,000,000 shares
authorized, none issued or outstanding,
attributes to be determined when issued - -
Common stock, $0.01 par, 6,000,000 shares
authorized 2,371,728 and 2,357,728
issued and outstanding 23,718 23,578
Additional paid in capital 3,974,476 3,723,278
Treasury Stock, at cost, 71,341 shares in 2009 (205,611) -
Retained earnings 3,755,384 4,337,579
Accumulated other comprehensive loss, net of tax - (200,086)
------------ ------------
Total shareholders' equity 7,547,967 7,884,349
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,267,357 $ 8,960,874
============ ============
See accompanying Notes to the Consolidated Financial Statements
20
PHAZAR CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED MAY 31, 2009 AND 2008
2009 2008
------------- -------------
Sales and contract revenues $ 7,310,281 $ 9,247,245
Cost of sales and contracts 4,910,677 5,866,837
------------ ------------
Gross Profit 2,399,604 3,380,408
Sales and administration expenses 3,649,155 2,676,614
------------ ------------
Operating Profit (loss) (1,249,551) 703,794
------------ ------------
Other income
Interest income (net of $5,521 interest expense) 154,691 114,081
Other income 42,076 53,940
------------ ------------
Total other income 196,767 168,021
------------ ------------
Income (loss) from operations before income taxes (1,052,784) 871,815
Income tax provision (benefit) (470,589) 248,911
------------ ------------
Net income (loss) $ (582,195) $ 622,904
============ ============
Basic earnings (loss) per common share $ (0.25) $ 0.27
============ ============
Diluted earnings (loss) per common share $ (0.25) $ 0.27
============ ============
See accompanying Notes to the Consolidated Financial Statements
21
PHAZAR CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED MAY 31, 2009 AND 2008
Common Stock Accumulated
------------ Additional Other
Number Paid In Comprehensive Treasury Retained
of Shares Amount Capital Income (loss) Stock Earnings Total
--------- ------- ---------- ------------- ----------- ---------- ----------
BALANCE,
MAY 31, 2007 2,308,128 $23,082 $3,417,399 $ - $ - $3,714,675 $7,155,156
Stock issued
to Directors 10,600 106 73,175 - - - 73,281
Stock based
compensation - - 80,988 - - - 80,988
Stock options
exercised 39,000 390 77,610 - - - 78,000
Tax benefit
for employee
stock options - - 74,106 - - - 74,106
Temporary
impairment on
available for
sale securities,
net of tax - - - (200,086) - - (200,086)
Net income(loss) - - - - - 622,904 622,904
--------- ------- ---------- ------------- --------- ---------- ----------
BALANCE,
MAY 31, 2008 2,357,728 $23,578 $3,723,278 $ (200,086) $ - $4,337,579 $7,884,349
========= ======= ========== ============ ========= ========== ==========
See accompanying Notes to the Consolidated Financial Statements
22
PHAZAR CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED MAY 31, 2009 AND 2008
Common Stock Accumulated
------------ Additional Other
Number Paid In Comprehensive Treasury Retained
of Shares Amount Capital Income (loss) Stock Earnings Total
--------- ------- ---------- ------------- ----------- ---------- ----------
Stock issued to
Directors 14,000 140 57,236 - - - 57,376
Stock based
compensation - - 193,962 - - - 193,962
Stock options
exercised - - - - - - -
Tax benefit for
employee stock
options - - - - - - -
Reverse temporary
impairment on
available for sale
securities
(net of tax) - - 200,086 - - 200,086
Purchase of
Treasury Stock - - - - (205,611) - (205,611)
Net income (loss) - - (582,195) (582,195)
--------- ------- ---------- ------------ --------- ---------- ----------
BALANCE,
MAY 31, 2009 2,371,728 $23,718 $3,974,476 $ - $(205,611) $3,755,384 $7,547,967
========= ======= ========== ============ ========= ========== ==========
See accompanying Notes to the Consolidated Financial Statements
23
PHAZAR CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MAY 31, 2009 AND 2008
2009 2008
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (582,195) $ 622,904
Adjustments to reconcile net
income (loss)to net cash provided
(used) by Operating activities:
Depreciation 115,854 113,682
Amortization - -
Stock based compensation 251,338 154,269
Tax benefit for employee stock options (87,283) (74,106)
Deferred federal income tax (48,487) (51,707)
Changes in operating assets and liabilities:
Accounts receivable 323,759 (653,510)
Inventory (754,481) (74,171)
Income taxes receivable (173,548) 133,882
Prepaid expenses (28,498) 16,370
Accounts payable (82,352) 169,613
Accrued expenses 23,987 157,531
Deferred revenue (298,770) 315,654
------------ ------------
Net cash provided(used) by operating activities (1,340,678) 830,411
CASH FLOWS FROM INVESTING ACTIVITIES:
Transfer to marketable securities - (2,650,000)
Redemption of marketable securities 2,650,000 -
Purchase of property and equipment (316,911) -
Purchase of treasury stock (205,611) -
------------ ------------
Net cash provided by(used in)investing activities 2,127,478 (2,650,000)
CASH FLOWS FROM FINANCING ACTIVIITES:
Proceeds from exercise of stock options - 78,000
Federal income tax benefit-stock options expensed 87,283 74,106
------------ ------------
Net cash provided by financing activities 87,283 152,106
Net increase(decrease)in cash and cash equivalents 874,084 (1,667,483)
------------ ------------
CASH AND CASH EQUIVALENTS, beginning of year 2,446,563 4,114,046
------------ ------------
CASH AND CASH EQUIVALENTS, end of year $ 3,320,647 $ 2,446,563
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest expense $ 5,521 $ -
Income taxes $ - $ 160,000
See accompanying Notes to the Consolidated Financial Statements
24
PHAZAR CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BUSINESS AND NATURE OF OPERATION
PHAZAR CORP operates as a holding company with Antenna Products
Corporation, Phazar Antenna Corp., Tumche Corp. and Thirco, Inc. as its
wholly owned subsidiaries. Antenna Products Corporation is an operating
subsidiary that designs, manufactures and markets antenna systems, wireless
mesh network solutions, towers, and communication accessories worldwide.
The United States Government, military and civil agencies, and prime
contractors represent Antenna Products Corporation's principal customers.
Phazar Antenna Corp. is a separate legal entity that currently operates as
a small division of Antenna Products Corporation. Thirco serves as an
equipment leasing company to Antenna Products Corporation. The Company's
operations are performed in Texas for customers throughout the United
States and international markets.
Following is a schedule of the Company's sales to major customers at May
31, as a percentage of total sales:
2009 2008
---- ----
United States Government 13% 24%
Halliburton Energy 9% -
NextG Networks 9% -
Paige Iberica, Spain - 12%
General Dynamics - 9%
At May 31, 2009, and 2008, trade receivables from four customers comprised
approximately 51% and 50%, respectively, of the trade receivable balance at
those dates.
NOTE 2. 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.
Revenue Recognition
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 the United States Government 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 the costs allocable to the delivered units as the cost of earned
revenue. 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
25
PHAZAR CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
revision become known and are estimable. Losses on contracts are recorded
when identified.
Foreign Sales
Antenna Products Corporation's sales in international markets are primarily
to foreign governments or prime contractors to foreign governments and, as
such, represent a small percentage of the overall Company annual volume.
Phazar Antenna Corp. has sales in international markets to commercial
customers. The level of profits from the commitment of assets to this
portion of the business is no greater or no less than that of other market
segments. International sales for 2009 and 2008 were 13.6% and 26.5%,
respectively, of total sales. Foreign countries with sales greater than 5%
of total sales for both fiscal years 2009 and 2008, are as follows:
2009 2008
--------- ---------
Canada 5.6% 11.9%
Spain - 12.2%
Inventories
Inventories are valued at the lower of cost or market, with cost determined
on the first-in, first-out basis. Market is replacement cost or net
realizable value. Work in progress and finished goods include material,
labor and overhead.
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. The
estimated useful lives are: building and improvement - 15-30 years;
machinery and equipment - 10 years; automobiles and equipment - 10 years;
and office furniture and fixtures - 10 years. 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.
Impairment of Long-Lived Assets and Identifiable Intangible Assets
We periodically evaluate the carrying value of long-lived assets, including
identifiable intangible assets, to be held and used for potential
impairment. The carrying value of long-lived assets to be held and used is
considered impaired when the carrying value is not recoverable through
undiscounted future cash flows and the fair value of the asset is less than
its carrying value. Fair value is determined primarily using the
anticipated cash flows discounted at a rate commensurate with the risks
involved.
26
PHAZAR CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Use of Estimates and Assumptions
Management uses estimates and assumptions in preparing consolidated
financial statements in accordance with U.S. 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. The current and deferred tax provision is
allocated among the members of the consolidated group on the separate
income tax return basis.
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, 2009, and 2008, were approximately $919,683 and $563,160,
respectively.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
cash and certificates of deposit with original or remaining maturities at
the time of purchase of three months or less.
Warranties
The Company provides for the estimated cost of product warranties. Actual
costs as incurred are charged directly to cost of sales and the adequacy of
the liability is assessed on a quarterly basis.
Other Comprehensive Income (Loss)
Other comprehensive income (loss) is defined as the change in equity of a
business enterprise during a period from transactions and other events and
circumstances from non-owner sources. Comprehensive income consists of net
income (loss), net holding gains (losses) on investments, net unrecognized
loss on pensions, deferred gains (losses) from derivatives and gains
(losses) from foreign currency translation. All transactions are shown net
of tax.
27
PHAZAR CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Stock-based Employee Compensation
On June 1, 2006, the Company adopted Statement of Financial Accounting
Standard No. 123R , Share-Based Payment ("SFAS 123R") which required all
share based payments to employees, including grants of employee stock
options, to be recognized in the statement of operations based on their
fair values at the time of the grant. The company uses the Black-Scholes
Model option pricing model to determine the fair value of stock options
granted to employees. Stock based compensation recognized in fiscal years
ended 2009 and 2008 were $251,338 and $154,269, respectively.
The income tax benefit related to stock-based compensation expense was
$87,283 and $74,106 for the years ended May 31, 2009 and 2008 respectively.
In accordance with SFAS 123R, the Company has presented excess tax benefits
from the exercise of stock-based compensation awards as a financing
activity in the consolidated statement of cash flows.
Shares, Per Share Data, Earnings Per Share, and Stock Split, and Common Stock
Par Value
Earnings per share are computed by dividing net income (loss) by the
weighted average number of common shares outstanding during the year.
Weighted average shares outstanding were 2,358,101 and 2,340,338 for the
years ended May 31, 2009, and 2008, respectively.
Dilutive effect of stock options outstanding for the years ended May 31, 2009
and 2008, are computed as follows:
2009 2008
------------ ------------
Numerator:
Net income (loss) $ (582,195) $ 622,904
----------- -----------
Numerator for basic and
diluted earnings per share $ (582,195) $ 622,904
----------- -----------
Denominator:
Weighted-average shares outstanding-basic 2,358,101 2,340,338
Effect of dilutive securities:
Stock options - 5,292
--------- ---------
Denominator for diluted earnings per share-
Weighted-average shares 2,358,101 2,345,630
--------- ---------
Basic earnings (loss) per share $ (0.25) $ 0.27
========= =========
Diluted earnings (loss) per share $ (0.25) $ 0.27
========= =========
28
PHAZAR CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Deferred Revenue
Payments which are received in advance of the completion of the related
phase of a contract are recorded as deferred revenue when received. Revenue
is recognized when earned based on cost incurred to date plus estimated
profit margin in relation to the total estimated cost plus profit margin on
the entire project. Estimated losses will be recognized in their entirety
when they become apparent. Deferred revenue recorded at each of the years
ended May 31, 2009 and 2008 is $16,884 and $315,654, respectively.
Shipping and Handling Costs
The Company includes all shipping and handling costs together with cost of
sales on the accompanying statements of operations.
New Accounting Pronouncements
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities - an amendment of FASB Statement No.
133. SFAS 161 changes the disclosure requirements for derivative
instruments and hedging activities. The provisions of SFAS 161 are
effective for financial statements issued for fiscal years and interim
periods beginning after November 15, 2008. The adoption of this standard
had no impact on the Company's consolidated financial statements.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally
Accepted Accounting Principles. SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles used
in the preparation of financial statements of nongovernmental entities that
are presented in conformity with generally accepted accounting principles.
Statement 162 became effective November 15, 2008. The adoption of this
statement did not have a material effect on the Company's consolidated
financial statements.
In May 2008, the FASB issued SFAS No. 163, Accounting for Financial
Guarantee Insurance Contracts - an interpretation of FASB Statement No. 60.
This statement interprets FASB Statement No. 60 and amends existing
accounting pronouncements to clarify their application to the financial
guarantee insurance contracts included within the scope of this Statement.
This Statement is effective for financial statements issued for fiscal
years beginning after December 15, 2008, and all interim periods within
those fiscal years. The adoption of this statement did not have an impact
on the Company's consolidated financial statements.
In April, 2009, the FASB issued SFAS No. 164, Not-for-Profit Entities:
Mergers and Acquisitions - Including an amendment of FASB Statement No.
142. The objective of this Statement is to improve the information that a
not-for-profit entity provides in its financial reports about a combination
with one or more other not-for-profit entities, businesses, or nonprofit
activities. This Statement is effective for mergers and acquisitions for
29
PHAZAR CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
which the merger is on or after the beginning of an initial reporting
period beginning on or after December 15, 2009. The adoption of this
statement will not have an impact on the Company's consolidated financial
statement
In May, 2009, the FASB issued SFAS No. 165, Subsequent Events. The
objective of this Statement is to establish general standards of accounting
for and disclosure of events that occur after the balance sheet date but
before financial statements are issued or are available to be issued. An
entity should apply the requirements to interim or annual financial periods
ending after June 15, 2009. The adoption of this statement will not have an
impact on the Company's consolidated financial statements.
In June, 2009, the FASB issued SFAS No. 166, Accounting for Transfers of
Financial Assets and No. 167, Amendments to FASB Interpretation No 46(R),
which change the way entities account for securitizations and
special-purpose entities. The effective date is for balance sheets of
financial institutions beginning in 2010. When adopted by the Company,
neither statement will have an impact on the Company's consolidated
financial statements.
In February, 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Liabilities including an amendment of FASB statement
No. 115. This statement permits all entities to choose, at specified
elections dates, to measure eligible items at fair value. This statement is
effective as the first fiscal year that begins after November 15, 2007. The
Company adopted this standard as required and adoption of this statement
did not have a material effect of the Company's financial statements.
In December, 2007, the FASB issued SFAS No. 141R, Business Combination. The
revised statement improves on the information provided by a reporting
entity about a business combination and its effects. This statement applies
prospectively to business combination for which the acquisition date is on
or after the beginning of the first annual reporting period beginning on or
after December 15, 2008.
NOTE 3. INVENTORIES
The major components of inventories are as follows:
2009 2008
------------- -------------
Raw materials $ 935,803 $ 691,096
Work in process 985,983 778,633
Finished goods 610,030 307,606
------------ ------------
Total inventories $ 2,531,816 $ 1,777,335
============ ============
30
PHAZAR CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 3. INVENTORIES - continued
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 as of May 31, 2009 and 2008, were $856,854 and $589,411,
respectively.
All of the above stated inventories are that of the operating subsidiaries,
Antenna Products Corporation and Phazar Antenna Corp. No other subsidiaries
carry inventory.
NOTE 4. PROPERTY AND EQUIPMENT
The following is a summary of the Company's property and equipment at May 31:
Estimated
Useful Life 2009 2008
----------- ------------- -------------
Land $ 375,136 $ 375,136
Buildings and improvements 15-30 years 1,873,217 1,873,217
Machinery and equipment 10 years 3,559,096 3,359,626
Automobiles and equipment 10 years 147,220 106,898
Office furniture and fixtures 10 years 435,210 435,210
------------ ------------
6,389,879 6,150,087
Less accumulated depreciation (5,249,738) (5,211,003)
------------ ------------
Net property and equipment $ 1,140,141 $ 939,084
============ ============
NOTE 5. INTANGIBLE ASSETS
2009 2008
------------ ------------
Included in intangible assets
at May 31 are the following:
Noncompete agreements
(Phazar Antenna Corp.) $ 60,000 $ 60,000
Patents, copyrights and other
intellectual property
(Phazar Antenna Corp.) 389,593 389,593
----------- -----------
449,593 449,593
Accumulated amortization (449,593) (449,593)
----------- -----------
$ - $ -
=========== ===========
Patents, copyrights and other intellectual property were being amortized on
the straight-line basis over a weighted average five-year period.
Non-compete agreements were being amortized on the straight-line basis over
weighted average three and one third year contractual basis.
31
PHAZAR CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 6. NOTES PAYABLE
At May 31, 2009, and 2008 there are no outstanding notes payable or current
debt. The Company's operating subsidiary has a $2,000,000 revolving note
facility with a bank collateralized by the subsidiary's inventory and
accounts with PHAZAR CORP, the parent company, signing as the guarantor.
The amount available under the revolving note facility at May 31, 2009 was
$2,000,000.
Interest is payable monthly at the prime rate (3.25% at May 31, 2009 and 5%
at May 31, 2008) until October 2, 2009, when any unpaid principal and
interest shall be due. Under the agreement, the Company must maintain a
minimum working capital of $2,500,000, tangible net worth of $4,000,000 and
debt service ratio of 1.25 and a maximum debt worth no greater than .5:1.
NOTE 7. LONG-TERM DEBT
At May 31, 2009 and 2008, PHAZAR CORP had no long-term debt.
NOTE 8. INCOME TAXES
Components of the provision
for income taxes were as follows: 2009 2008
------------- -------------
Federal income taxes computed at
statutory rate $ (357,946) $ 294,708
Permanent differences
Tax exempt interest income (36,099) -
Other 2,621 -
Other reconciling items
R&D credit refunds (38,407) -
Non-deductible expenses and other (40,758) (45,797)
------------ ------------
Total $ (470,589) $ 248,911
============ ============
Current federal income taxes (343,145) 300,618
Deferred federal income taxes (48,279) (51,707)
Other (40,758) -
R&D credit refunds (38,407) -
------------ ------------
Total tax expense (benefit) $ (470,589) $ 248,911
============ ============
32
PHAZAR CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 8. INCOME TAXES - continued
The components of the deferred tax assets
and liabilities are as follows: 2009 2008
------------ ------------
Deferred tax assets:
Accounts receivable, due to allowance for
doubtful accounts $ 381 $ 681
Accrued expenses, due to warranty accrual 47,159 41,608
Accrued expenses, due to vacation and
compensation accrual 44,310 25,408
Intangible assets, due to difference in
amortization 60,462 68,871
Compensation, stock options vested 119,423 53,476
Investments, due to impairment for
book purposes - 103,072
----------- -----------
Total deferred tax assets $ 271,735 $ 293,116
Deferred tax liabilities:
Property and equipment, principally due
to depreciation
Difference $ (79,887) $ (46,680)
Other, net - -
Total deferred tax liabilities $ (79,887) $ (46,680)
Deferred income tax assets, net of
deferred tax liabilities $ 191,848 $ 246,436
=========== ===========
The net deferred tax assets are classified
on the balance sheet as follows:
Current deferred tax assets $ 74,853 $ 67,697
Non-current deferred tax assets, net 116,995 178,739
----------- -----------
Net deferred tax assets $ 191,848 $ 246,436
=========== ===========
There are no uncertain tax positions expected to be taken on the 2008
federal or state income tax returns to be filed, and no liability has been
recorded for any prior years that are still subject to examination by
federal or state taxing jurisdictions. Accordingly, no additional
disclosures have been made on the current financial statements regarding
FIN 48.
As Company policy, accrued interest or penalties associated with
unrecognized tax benefits will be recorded as income tax expense. Since
there is no applicable FIN 48 liability for 2008, no interest or penalties
are included in the Consolidated Statement of Operations.
33
PHAZAR CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 8. INCOME TAXES - continued
The Company and its subsidiaries file a consolidated federal tax return.
The 2005-2008 federal tax returns are currently open under the statute of
limitations. State income tax returns are generally open for examination
for a period of 3-5 years after the filing of the respective return. The
Company and its subsidiaries have no federal or state returns currently
under examination, appeals or litigation.
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
$73,874 for the years ended May 31, 2009 and 2008, respectively.
NOTE 9. COMMITMENTS AND CONTINGENCIES
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, 2009.
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 estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 157,
Fair Value Measurements. 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.
Legal Proceedings
On June 26, 2008, the Company filed an arbitration claim against UBS
34
PHAZAR CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 9. COMMITMENTS AND CONTINGENCIES - continued
Financial Services, Inc. with FINRA Dispute Resolution relating to the sale
of auction rate certificates issued by the Massachusetts Education
Financing Authority and filed a related injunctive action in district court
in Tarrant County, Texas. On October 16, 2008, the Massachusetts Education
Financing Authority redeemed all $2,650,000 of the auction rate
certificates owned by the Company and paid accrued interest. The Company
then dismissed the injunctive action but continued pursuing its arbitration
claim. On March 30, 2009, a FINRA arbitration panel entered an award that
the Company takes nothing from UBS Financial Services, Inc. and required
the parties to split hearing costs.
On August 15, 2008, Janet McCollum, as personal representative of the
Estate of Richard Alan Catoe, deceased, filed a wrongful death complaint
against the University of West Florida, Diamond Enterprise, Inc., North
Safety Products, L.L.C. a/k/a North Safety Products, Inc. and Antenna
Products Corporation (the "Lawsuit") in Circuit Court in Escambia County,
Florida,. Antenna Products Corporation is PHAZAR CORP's wholly owned and
principal operating subsidiary.
The lawsuit alleges that the deceased fell to his death while climbing a
ladder inside a water tower on the University of West Florida campus to
install antennas. The lawsuit further alleges that while the deceased was
descending the ladder, he wore an Antenna Products Corporation safety
sleeve affixed to a safety rail manufactured by defendant North Safety
Products that was attached to the ladder and that the safety sleeve and
rail were allegedly defective and failed to prevent the deceased from
falling, thus causing his death. Plaintiff seeks recovery of unspecified
amounts from all the defendants. Antenna Products Corporation denies any
liability to plaintiff and anticipates being dismissed from the lawsuit.
However, if we were found to be responsible or liable, we would not expect
such costs to be material to the Company.
Product Warranties
PHAZAR CORP's management estimates accrued warranty expense based on
warranty work received but not performed and on analysis of historical
trends including actual expense as a percent of sales.
Changes in accrued warranty liability for the years ended May 31, are as
follows:
2009 2008
------------ ------------
Beginning balance $ 122,376 $ 68,376
Cost incurred for rework (145,708) (150,652)
Accrual for current year estimate 138,702 122,376
Change in accrued estimate 23,332 82,276
----------- -----------
Ending balance $ 138,702 $ 122,376
=========== ===========
35
PHAZAR CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 9. COMMITMENTS AND CONTINGENCIES - continued
The accrual for warranty reserve for 2008 was increased for the recall and
modification of a safety sleeve product.
NOTE 10. STOCK OPTIONS
In 2000, the board approved options to purchase 75,000 shares of common
stock at $2.00 per share to an employee of the Company all were exercised
before the options expiration date of November 20, 2007.
In 2006, the Board approved options to purchase 50,000 shares of common
stock at $9.22 per share to an employee of the Company. The options are
exercisable pro-rata over a five year period. No options have been
exercised. The options expire between May 29, 2012 and May 29, 2016, or the
earlier of the employee's last day of employment.
In 2008, the Board approved options to purchase 30,000 shares of common
stock at $5.70 per share to an employee of the Company. The options are
exercisable at a rate of 6,000 shares per year over a five year period. No
options have been exercised. The options expire between March 23, 2014 and
March 23, 2019, or the earlier of the employee's last day of employment.
On August 12, 2008, the Board of Directors approved options to purchase
36,400 shares of common stock at $5.06 per share to certain employees of
the Company. The options were broken out into two groups, the first
consisted of 16,400 options that were granted fully vested and the second
group of 20,000 options are exercisable pro-rata over a three year period.
The options expire between August 12, 2013 and August 12, 2016, or the
earlier of the employee's last day of employment.
On September 15, 2008, PHAZAR CORP announced the appointment of Garland P.
Asher as Chairman, President and Chief Executive Officer for the Company,
effective September 9, 2008. Mr. Asher was granted options to purchase
160,000 shares of common stock of the Company under the Company's 2006
Incentive Stock Option Plan at an exercise price of $4.12 per share. The
options shall vest and become exercisable contingent upon the Company
achieving certain sales and pretax income levels over a six year period.
A summary of the status of the Company's outstanding stock options issued
under separate employment agreements as of May 31, 2009 and May 31, 2008
and changes for the years then ended are as follows:
36
PHAZAR CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 10. STOCK OPTIONS - continued
Outstanding Options
------------------------------
Weighted
Average
Number Exercise
of Options Price
------------- -------------
Outstanding at May 31, 2007 89,000 6.06
Granted 30,000 5.70
Exercised (39,000) 2.00
Forfeited -
------------ -----------
Outstanding at May 31, 2008 80,000 7.90
Granted 196,400 4.29
Exercised - -
Forfeited (10,000) 5.06
------------ -----------
Outstanding at May 31, 2009 266,400 5.34
============ ===========
May 31,
2009 2008
------------ ------------
Number of options vested 52,400 20,000
Weighted average remaining
contract life - years 5.48 6.75
Number of options exercisable 52,400 20,000
In October 2006, a majority of the PHAZAR CORP shareholders approved the
2006 Incentive Stock Option Plan (the "Plan"). Options for 250,000 shares
of common stock are authorized under this plan. Options granted may be
either Incentive Stock Options or Non-Statutory Stock Options, at the
discretion of the Board. There have been 216,400 options granted (net of
forfeitures) under this plan as of May 31, 2009.
The following table details stock-based compensation expense included in
the statement of operations for the years ended May 31, 2009 and 2008.
For the year ended
May 31,
--------------------------
2009 2008
Selling, general and administrative
expense $ 193,962 $ 80,988
FIT Provision (65,947) (27,535)
----------- -----------
Impact on net income (loss) $ 128,015 $ 53,453
=========== ===========
Impact on net income per share -
Basic and diluted EPS $ 0.05 $ 0.02
=========== ===========
37
PHAZAR CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 11. INVESTMENTS IN AUCTION -RATE SECURITIES
As of May 31, 2008 the Company held auction-rate securities with a par
value of $2,650,000. The securities were backed by student loans covered by
bond insurance and were rated AA3 by Moody's as of August 31, 2008.
On October 20 and 22, 2008, the Company announced that all $2,650,000 of
its auction rate securities had been redeemed at the par value of
$2,650,000 plus accrued interest by the issuer, the Massachusetts Education
Financing Authority. As of May 31, 2009, the Company has no monies invested
in auction rate securities.
NOTE 12. FAIR VALUE MEASUREMENT
As discussed in NOTE 2, SFAS No. 157 became effective for measuring and
reporting financial assets and liabilities in our financial statements as
of the first quarter of fiscal year 2009.
SFAS No. 157 established a three-tiered fair value hierarchy that
prioritizes inputs to valuation techniques used in fair value calculations.
The three levels of inputs are defined as follows:
Level 1 - Unadjusted quoted market prices for identical assets or
liabilities in active markets that the Company has the ability to access.
Level 2 - Quoted prices for similar assets or liabilities in active
markets; quoted prices for identical or similar assets or liabilities in
inactive markets; or valuations based on models where the significant
inputs are observable or can be corroborated by observable market data.
Level 3 - Valuations based on models where significant inputs are not
observable. The unobservable inputs reflect the Company's own assumptions
about the assumptions that market participants would use.
Items measured at fair value on a recurring basis:
Level 1 Level 2 Level 3 Total
Long-term investments
Auction Rate Securities $ - $ - $ - $ -
======= ======= ======= =======
Changes in fair value during the period Level 2
Balance, May 31, 2008 $ 2,346,840
Plus unrealized loss - included in other
comprehensive income 303,160
-----------
$ 2,650,000
Redemption of securities (2,650,000)
-----------
Balance May 31, 2009 -
-----------
38
PHAZAR CORP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
NOTE 12. FAIR VALUE MEASUREMENT - continued
All of our financial assets measured at fair value were classified as
available-for-sale securities. Adjustments to fair value of these
investments were recorded as an increase or decrease, net of taxes, in
accumulated other comprehensive income except where losses are considered
to be other-than-temporary, in which case the losses are recorded in other
income (expense) net.
PART III
Item 9. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 9A. Controls and Procedures
Management's Evaluation of Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Rule 13a-15(f) of
the Exchange Act. This system is designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of the
consolidated financial statements for external purposes in accordance with
generally accepted accounting principles. Our internal control over financial
reporting includes those policies and procedures that: (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect
our transactions and disposition of our assets; (2) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of
consolidated financial statements in accordance with generally accepted
accounting principles, and that our receipts and expenditures are being made
only in accordance with authorizations of our management and directors; and (3)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a
material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. All internal control systems,
no matter how well designed, have inherent limitations. Therefore, even those
systems determined to be effective can provide only reasonable assurance with
respect to financial statement preparation and presentation. The scope of
management's assessment of the effectiveness of internal control over financial
reporting includes all of our Company's subsidiaries.
The Company's Chief Executive Officer and Chief Financial Officer evaluated the
Company's disclosure controls and procedures as of May 31, 2009. In making their
assessment, the Company's Chief Executive Officer and Chief Financial Officer
were guided by the releases issued by the SEC and to the extent applicable was
39
based upon the framework in Internal Control - Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. The
Company's Chief Executive Officer and Chief Financial Officer have concluded
that the Company's disclosure controls and procedures were effective as of May
31, 2009. The Company has had no change during the quarter ending May 31, 2009
that has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.
This Annual Report on Form 10-K does not include an attestation report of the
Company's independent registered public accounting firm regarding internal
control over financial reporting. Management's report was not subject to
attestation by the Company's independent registered public accounting firm
pursuant to temporary rules of the Securities and Exchange Commission that
permit the Company to provide only management's report in this annual report.
Item 9B. Other Information
Effective May 31, 2009, Mr. Clark D. Wraight resigned as a Director of PHAZAR
CORP and all officer positions per the Form 8-K filed May 13, 2009.
Previously, on December 16, 2008, NASDAQ gave notice to the Company of
non-compliance with listing standards due to lacking a majority of independent
directors and provided until October 14, 2009 to return to compliance. With Mr.
Wraight's resignation as a director, the Company now has a majority of
independent directors and has obtained compliance with the number of independent
directors listing standard.
Item 10. Directors, Executive Officers and Corporate Governance.
The information required by this item with regard to executive officers is as
follows:
Name Age Principal Occupation Since
- ---- --- -------------------- -----
Garland Asher 64 President, and Chief Executive Officer,
PHAZAR CORP Past Director and Chairman
of Audit Committee, Universal Power Group,
Inc.; Past Member, City of Fort Worth Audit
Committee; Past President and COO,
Integration Concepts, Inc. October 2007
Deborah A. Inzer 58 Vice President, Chief Financial Officer,
PHAZAR CORP; Treasurer, Antenna Products
Corp., Phazar Antenna Corp., Tumche Corp.,
and Thirco, Inc. March 2008
Mr. Asher has served as President and Chief Executive Officer since September,
2008. Mr. Asher served as Director and Chairman of the Audit Committee of
Universal Power Group, Inc., a power equipment and battery distributor since
December, 2006. Mr. Asher has served as a member of the City of Fort Worth Audit
Committee since 2006. Mr. Asher served as President and COO of Integration
Concepts, Inc., a healthcare software company, from September 1999 through June
2004. Since then he has been involved in personal investment activities.
40
Ms. Inzer served as Controller of Shared Technologies, Inc. a telecommunications
company from January, 2005 until March, 2008. Ms. Inzer has served as Vice
President, Accounting and Controller at Dave & Buster's in Dallas, Texas from
1999 to 2005 and Senior Vice President, Accounting at AmBrit Energy Corp in
Dallas, Texas from 1989 to 1999.
Information regarding directors of the Company required by this Item is
incorporated by reference to the section entitled "Election of Directors" set
forth in the Proxy Statement for our 2009 Annual Meeting of Shareholders.
The information regarding compliance and the evaluation of late filings under
Section 16(a) of the Exchange Act required by this Item is incorporated by
reference to the section entitled "Section 16(a) Beneficial Ownership Reporting
Compliance" set forth in the Proxy Statement for our 2009 Annual Meeting of
Shareholders.
Information regarding our audit committee financial experts and code of ethics
and business conduct required by this item is incorporated by reference to the
section entitled "Matters Relating to Corporate Governance, Board Structure,
Director Compensation and Stock Ownership" set for in the Proxy Statement for
our 2009 Annual Meeting of Shareholders.
The Company has adopted a Code of Business Conduct and Ethics that applies to
all of its directors, officers and employees. The Code of Business Conduct and
Ethics is on the Company's website at www.phazarcorp.com under the caption
"Corporate Governance"
Item 11. Executive Compensation.
The information required by this Item is incorporated herein by reference to the
section entitled "Executive Compensation" and the section entitled "Matters
Relating to Corporate Governance, Board Structure, Director Compensation and
Stock Ownership - Fees Paid to Directors" set forth in our Proxy Statement for
our 2009 Annual Meeting of Shareholders
Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
The information required by this Item is incorporated herein by reference to the
section entitled "Executive Compensation" and the section entitle "Matters
Relating to Corporate Governance, Board Structure, Director Compensation and
Stock Ownership - Security Ownership of Management" set forth in the Proxy
Statement for our 2009 Annual Meeting of Shareholders.
The following table provides a summary of information as of May 31, 2009,
relating to our equity compensation plans in which our Common Stock is
authorized for issuance.
41
Equity Compensation Plan Information:
(a) (b) (c)
Number of Weighted Number of securities
securities average remaining available
to be issued exercise for future issuance
upon exercise price of under equity
of outstanding outstanding compensation plans
options, options, (excluding shares
warrants warrants reflected in column
and rights and rights (a))
-------------- ------------ --------------------
Equity Compensation Plans
approved by shareholders (1) 216,400 $ 4.45 33,600
Equity Compensation Plans
not approved by
shareholders (2) 250,000 - 250,000
(1) Consists of the 2006 Incentive Stock Option Plan
(2) The 2009 Equity Incentive Plan adopted by the Board of Directors on
April 8, 2009 and published as Exhibit 10.1 to the Company's Form S-8,
filed on April 27, 2009, is being presented for ratification in the
2009 Proxy Statement (the Annual Meeting of Shareholders to be held on
October 13, 2009)
Item 13. Certain Relationships and Related Transactions.
None
Item 14. Principal Accountant Fees and Services
Information required by this Item is incorporated by reference to the section
entitled "Audit Fees", are set forth in our Proxy Statement for our 2009 Annual
Meeting.
PART IV
Item 15. Exhibits and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements. See Item 8.
2. Financial Statement Schedules. Not applicable.
All other schedules have been omitted because the required
information is shown in the consolidated financials or
notes thereto, or they are not applicable.
3. Exhibits. See Index to Exhibits for listing of exhibits
which are filed herewith or incorporated by reference.
(b) Reports on Form 8-K.
42
On July 11, 2008, the registrant filed a Form 8-K for the
purpose of disclosing a FINRA arbitration claim and suit
against UBS Financial Services
On July 15, 2008, the registrant filed a Form 8-K for the
purpose of disclosing the departure of Directors or Principal
Officers; Election of Directors; Appointment of Principal
Officers
On September 15, 2008, the registrant filed a Form 8-K for the
purpose of disclosing the departure of Directors or Principal
Officers; Election of Directors; Appointment of Principal
Officers
On October 20, 2008 the registrant filed a Form 8-K for the
purpose of disclosing the redemption of $1.6 million of the
Company's long term marketable securities
On October 22, 2008 the registrant filed a Form 8-K for the
purpose of disclosing the redemption of the balance of the
Company's long term marketable securities
On December 18, 2008, the registrant filed a Form 8-K that
disclosed that Nasdaq staff had notified it of non-compliance
with a listing standard, specifically lacking a majority of
"independent" directors as defined by Nasdaq rule and granting
the Company a time period to seek compliance with the listing
standard
On January 15, 2009, the registrant filed a Form 8-K for the
purpose of disclosing the Board Resolution authorizing a share
repurchase program
On April 23, 2009, the registrant filed a Form 8-K for the
purpose of disclosing possible technical issues with the
Certificate of Incorporation
On May 13, 2009, the registrant filed a Form 8-K for the
purpose of disclosing the departure of Directors or Principal
Officer; Election of Directors; Appointment of Principal
Officers
On July 10, 2009, the registrant filed a Form 8-K for the
purpose of disclosing the FAA contract granted to Antenna
Products Corporation, a wholly owned subsidiary of PHAZAR CORP
43
SIGNATURES
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: August 14, 2009
PHAZAR CORP
/s/ Garland P. Asher
--------------------------------
BY: Garland P. Asher, President and
Chief Executive Officer
Pursuant to the requirements of the Securities and Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Gary W. Havener
- ------------------------------- Director August 14, 2009
Gary W. Havener
/s/ James Kenney
- ------------------------------- Director August 14, 2009
James Kenney
/s/ R. Allen Wahl
- ------------------------------ Director August 14, 2009
R. Allen Wahl
/s/ Dennis Maunder
- ------------------------------ Director August 14, 2009
Dennis Maunder
44
EXHIBIT INDEX
Exhibit 3.(i) - Registrant's Articles of Incorporation, as amended, incorporated
by reference to the like numbered exhibit in the Registrant's
Annual Report on Form 10-KSB/A for the fiscal year ended May 31,
2000, filed on February 20, 2004
Exhibit 3.(ii)- Registrant's By Laws, incorporated by reference to the like
numbered exhibit in the Registrant's Annual Report on Form
10-KSB/A for the fiscal year ended May 31, 2000, filed on
February 20, 2004
Exhibit 4.1(1)- 2006 Incentive Stock Option Plan, incorporated by reference as
Exhibit A to the Registrant's Definitive Proxy Statement dated
September 15, 2009 and filed on September 15, 2006. Also
incorporated by reference to the like numbered exhibit in the
Registrant's Form S-8 dated January 8, 2007 and filed on January
8, 2007
Exhibit 4.1(2)- 2009 Equity Compensation Plan dated April 22, 2009, incorporated
by reference to the Registrant's Form S-8, filed on April 27,
2009
Exhibit 4.(ii)- Loan agreement between Antenna Products Corporation and Texas
Bank, dated September 30, 1991, incorporated by reference to the
like numbered exhibit in the Registrant's Annual Report on Form
10-KSB/A for the fiscal year ended May 31, 2000, filed on
February 20, 2004
Exhibit 10.b - Agreement with Garland Asher dated January 14, 2009 incorporated
by reference to the like numbered exhibit in the Registrant's
Form 10-Q filed on January 14, 2009
Exhibit 14.1- Code of Ethics and Business Conduct for the Senior Executive
Officers and Senior Financial Officers incorporated by reference
to the like numbered exhibit in the Registrant's annual report
on form 10-KSB for the fiscal year ended May 31, 2004, filed on
August 6, 2004
Exhibit 21. - A list of all subsidiaries of the Registrant, incorporated by
reference to the like numbered exhibit in the Registrant's
Annual Report on Form 10-KSB/A for the fiscal year ended May 31,
2000 filed on February 20, 2004
Exhibit 23.1- Consent of Weaver & Tidwell, LLP
Exhibit 31.1- Rule 13a-14(a)/15d-14(a) Certification of Chief Executive
Officer
Exhibit 31.2- Rule 13a-14(a)/15d-14(a) Certification of Chief Financial
Officer
Exhibit 32.1- Section 1350 Certification
Exhibit 99.1- Nominating Committee Charter incorporated by reference to the
like numbered exhibit in the Registrant's Form 8-K filed on
November 7, 2005
45