U.S. Securities and Exchange Commission
Washington D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended August 31, 2009
---------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 0-12866
PHAZAR CORP
(Exact name of small business issuer as specified in its charter)
Delaware 75-1907070
- --------------------------------------------- -------------------
(State or other jurisdiction of incorporation (IRS Employer
or organization) Identification No.)
101 S.E. 25th Avenue, Mineral Wells, Texas 76067
------------------------------------------------
(Address of principal executive offices)
(940) 325-3301
--------------
(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. |X| Yes |_| No
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
|_| Large accelerated filer |_| Accelerated filer
|_| Non-accelerated filer |X| Smaller reporting company
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). |_|Yes |X|No
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 2,298,337 as of September 2, 2009.
1
PHAZAR CORP AND SUBSIDIARIES
INDEX TO FORM 10-Q
PAGE
PART I FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements for PHAZAR CORP
and Subsidiaries
Consolidated Balance Sheets - 3
August 31, 2009 (unaudited) and May 31, 2009
Unaudited Consolidated Statements of Operations - 5
Three Months Ended August 31, 2009 and August 31, 2008
Unaudited Consolidated Statements of Cash Flows - 6
Three Months Ended August 31, 2009 and August 31, 2008
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of 20
Financial Condition and Results of Operations
Item 4. Controls and Procedures 24
Management's Evaluation of Internal Control Over
Financial Reporting 24
Other Information 25
PART II OTHER INFORMATION
Item 1. Legal Proceedings 26
Item 5. Other Information 26
Item 6. Exhibits and Reports on Form 8-K 26
Signature 27
Certifications
2
Item 1. Financial Statements
PHAZAR CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 2009 AND MAY 31, 2009
ASSETS
August 31, 2009 May 31, 2009
(Unaudited) (Audited)
------------- -------------
CURRENT ASSETS
Cash and cash equivalents $ 2,927,442 $ 3,320,647
Accounts receivable:
Trade, net of allowance for doubtful
accounts of $2,002 as of August 31,
2009 and May 31, 2009 566,399 663,499
Inventories 2,715,209 2,531,816
Prepaid expenses and other current assets 170,130 76,261
Income taxes receivable 404,559 343,145
Deferred income taxes 74,853 74,853
------------ ------------
Total current assets 6,858,592 7,010,221
Property and equipment, net 1,137,747 1,140,141
Long -term deferred income tax 127,003 116,995
------------ ------------
TOTAL ASSETS $ 8,123,342 $ 8,267,357
============ ============
See accompanying Notes to the Consolidated Financial Statements.
3
PHAZAR CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 2009 AND MAY 31, 2009
LIABILITIES AND SHAREHOLDERS' EQUITY
August 31, 2009 May 31, 2009
(Unaudited) (Audited)
------------- -------------
CURRENT LIABILITIES
Accounts payable $ 221,257 $ 215,840
Accrued expenses 438,383 486,666
Deferred revenues - 16,884
------------ ------------
Total current liabilities 659,640 719,390
Total liabilities 659,640 719,390
------------ ------------
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 2,373,028 and 2,371,728 issued
and outstanding 23,731 23,718
Additional paid in capital 4,008,453 3,974,476
Treasury stock, at cost, 74,691 and 71,341
shares in 2010 and 2009 (215,918) (205,611)
Retained earnings 3,647,436 3,755,384
------------ ------------
Total shareholders' equity 7,463,702 7,547,967
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,123,342 $ 8,267,357
============ ============
See accompanying Notes to the Consolidated Financial Statements.
4
PHAZAR CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED AUGUST 31, 2009 AND AUGUST 31, 2008
(Unaudited)
Three Months Ended
August 31, 2009 August 31, 2008
------------- -------------
Sales and contract revenues $ 1,896,852 $ 2,009,712
Cost of sales and contracts 1,055,118 1,253,734
------------ ------------
Gross profit 841,734 755,978
Selling, general and administration expenses 695,035 617,031
Research and development costs 376,145 159,009
------------ ------------
Total selling, general and administration expenses 1,071,180 776,140
Operating loss (229,446) (20,162)
Other income
Interest income 35,718 89,408
Other income 14,771 34,193
------------ ------------
Total other income 50,489 123,601
Income (loss) from operations before income taxes (178,957) 103,439
Income tax provision (benefit) (71,009) 9,647
------------ ------------
Net income (loss) $ (107,948) $ 93,792
============ ============
Basic earnings (loss) per common share $ (0.05) $ 0.04
============ ============
Diluted earnings (loss) per common share $ (0.05) $ 0.04
============ ============
Basic weighted average of common
shares outstanding 2,297,334 2,360,706
Diluted weighted average of common
shares outstanding 2,297,334 2,360,706
See accompanying Notes to the Consolidated Financial Statements.
5
PHAZAR CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 31, 2009 AND AUGUST 31, 2008
(Unaudited)
Three Months Ended
August 31, 2009 August 31, 2008
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (107,948) $ 93,792
Adjustments to reconcile net income (loss)
to net cash used by operating activities:
Depreciation 33,595 25,965
Stock based compensation 33,990 139,066
Tax benefit for employee stock options -
Deferred federal income tax (10,008) (37,489)
Changes in operating assets and liabilities:
Accounts receivable 97,100 (97,106)
Inventories (183,393) (241,861)
Income taxes receivable (61,414) 47,135
Prepaid expenses and other current assets (93,869) (28,813)
Accounts payable 5,417 (24,947)
Accrued expenses (48,283) (24,098)
Deferred revenues (16,884) 76,976
------------ ------------
Net cash used by operating activities (351,697) (71,380)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (31,201) -
Purchase of treasury stock (10,307) -
------------- ------------
Net cash used in investing activities (41,508) -
CASH FLOWS FROM FINANCING ACTIVIITES:
Proceeds from exercise of stock options - -
Federal income tax benefit-stock options expensed - -
------------- ------------
Net cash provided by financing activities - -
Net decrease in cash and cash equivalents (393,205) (71,380)
CASH AND CASH EQUIVALENTS, beginning of period 3,320,647 2,446,563
------------- ------------
CASH AND CASH EQUIVALENTS, end of period $ 2,927,442 $ 2,375,183
============= ============
See accompanying Notes to the Consolidated Financial Statements.
6
PART 1
NOTE 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 $661,232 at August 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
7
NOTE 1 DESCRIPTION OF BUSINESS - continued
Products Corporation. However, a general product sales breakdown for fiscal
year ended May 31, 2009, and the three month period ended August 31, 2009, as
a percentage of total sales are, as follows:
For three months For fiscal year
ended August 31, 2009 ended May 31, 2009
--------------------- ------------------
Product Type
Antennas 2% 18%
Instrument Landing System 12% 13%
Shipboard Equipment 0% 4%
Collinear Antennas 12% 14%
Towers and Masts 12% 12%
Spares, Accessories and Others 29% 21%
Commercial Wireless 11% 13%
Wireless Mesh Radio 13% 0%
Safety Climb 9% 5%
--------------------- ------------------
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 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
8
NOTE 1 DESCRIPTION OF BUSINESS - continued
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 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, $661,232 is currently
maintained in stock for delivery to customers. 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.
9
NOTE 1 DESCRIPTION OF BUSINESS - continued
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%-15% of
annual sales in research and development projects and bid and proposal
activities. 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 2010, Antenna Products
Corporation continued development on a new 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 20% of sales in the first quarter of 2010. The level of
expenditures for R&D and B&P as a ratio to sales was 8% of sales for the same
period in 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, 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 compliment
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 three months ended
August 31, 2009, amounted to approximately 11% of total sales. We expect that
for fiscal year ended May 31, 2010, this percentage will increase as new
products are continually being 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.
10
NOTE 1 DESCRIPTION OF BUSINESS - continued
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.
Backlog
The Company's backlog of orders on August 31, 2009, totaled $2,135,560
compared to $1,970,266 at August 31, 2008, an increase of 8.4%. Backlog at
our May 31, 2009 year-end was $1,741,746. Incoming orders for the current
three month period totaled $2,309,869 versus $1,492,888 for the comparable
period last year. The Company's book to ship ratio was 121% for the three
month period ended August 31, 2009 compared to 74% for the comparable three
month period last year.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-Q instructions and in the opinion of
management contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of August 31,
2009, the results of operations for the three months ended August 31, 2009
and August 31, 2008, and the cash flows for the three months ended August 31,
2009 and August 31, 2008. These results have been determined on the basis of
United States generally accepted accounting principles and practices applied
consistently with those used in the preparation of the Company's audited
financial statements for its fiscal year ended May 31, 2009.
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.
11
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
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 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 were 14% of total sales, for both the first quarter of
fiscal year 2010 and 2009. Foreign countries with sales greater than 5% of
total sales for both quarters ended August 31, 2009 and 2008 are as follows:
2009 2008
--------------- ----------------
Canada 14% 12%
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.
12
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
Use of Estimates and Assumptions
Management uses estimates and assumptions in preparing 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 quarters
ended August 31, 2009, and 2008, were approximately $376,145 and $159,009,
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.
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 income statement 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 the three month period
ended August 31, 2009 and 2008 was $33,990 and $139,066, respectively.
The income tax benefit related to stock-based compensation expense was
$11,556 and $47,282 for the three month period ended August 31, 2009 and 2008
13
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
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 2,297,334 and 2,360,706 for the three month period
ended August 31, 2009, and 2008, respectively.
Dilutive effect of stock options outstanding for the quarters ended August
31, 2009 and 2008 are computed as follows:
2009 2008
------------ -----------
Numerator:
Net income (loss) $ (107,948) $ 93,792
----------- ----------
Numerator for basic and
diluted earnings per share $ (107,948) $ 93,792
----------- ----------
Denominator:
Weighted-average shares outstanding-basic 2,297,334 2,360,706
Effect of dilutive securities:
Stock options - -
----------- ----------
Denominator for diluted earnings per
share-Weighted-average shares 2,297,334 2,360,706
----------- ----------
Basic earnings per share $ (0.05) $ 0.04
=========== ==========
Diluted earnings per share $ (0.05) $ 0.04
=========== ==========
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 quarters ended
August 31, 2009 and 2008, is $0 and $392,630, respectively.
Shipping and Handling Costs
The Company includes all shipping and handling costs together with cost of
sales on the accompanying statements of operations.
14
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
New Accounting Pronouncements
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. We are currently unable to predict the potential
impact, if any, of the adoption of SFAS No. 141R on future acquisitions.
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.
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 June, 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles -
a replacement of FASB Statement No. 162. The FASB Accounting Standards
Codification will become the source of authoritative U.S. generally accepted
accounting principles recognized by the FASB to be applied by nongovernmental
entities. This statement is effective for financial statements issued for
interim and annual periods ending after September 15, 2009. The adoption of
this statement will not have an impact on the Company's consolidated
financial statements.
NOTE 3 INVENTORIES
The major components of inventories are as follows:
August 31, May 31,
2009 2009
------------ ------------
Raw materials $ 928,134 $ 935,803
Work in process 1,125,843 985,983
Finished goods 661,232 610,030
----------- -----------
Total inventories $ 2,715,209 $ 2,531,816
=========== ===========
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 August 31, 2009 and May 31, 2009, were $924,965 and $856,854,
respectively.
15
NOTE 4. PROPERTY AND EQUIPMENT
The following is a summary of the Company's property and equipment at:
Estimated
Useful Life August 31, May 31,
2009 2009
----------- ------------- -------------
Land $ 375,136 $ 375,136
Buildings and improvements 15-30 years 1,873,217 1,873,217
Machinery and equipment 10 years 3,558,603 3,559,096
Automobiles and equipment 10 years 107,541 147,220
Office furniture and fixtures 10 years 435,210 435,210
------------ ------------
6,349,707 6,389,879
Less accumulated depreciation (5,211,960) (5,249,738)
------------ ------------
Net property and equipment $ 1,137,747 $ 1,140,141
============ ============
Included in property and
equipment at August 31, 2009,
and May 31, 2009 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.
NOTE 5 NOTES PAYABLE
At August 31, 2009 and May 31, 2009 there are no outstanding notes payable or
current debts. 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 August 31, 2009 and May
31, 2009 was $2,000,000.
Interest is payable monthly at the prime rate (3.25% at August 31, 2009 and
May 31, 2009) until October 2, 2009, when any unpaid principal and interest
shall be due. The Company is currently is in the process of renewing this
agreement. 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.
16
NOTE 6 LONG TERM DEBT
At August 31, 2009 and May 31, 2009, PHAZAR CORP had no long-term debt.
NOTE 7 COMMITMENTS AND CONTINGENCIES
The Company has adopted an employee profit sharing plan under Section 401(k)
of the Internal Revenue Code. All employees with a minimum of one year of
employment are eligible to participate. The Company will match employee
contributions for an amount up to 3% of each employee's salary if certain
earnings requirements are met. Contributions are invested at the direction of
the employee in one or more funds. Company contributions vest after three
years of service. Company contributions amounted to $0 and $73,874 for the
years ended May 31, 2009 and 2008, respectively.
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 United States 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 August 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 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.
17
NOTE 7 COMMITMENTS AND CONTINGENCIES - continued
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.
Poduct 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.
NOTE 8 STOCK OPTIONS
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 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.
A summary of the status of the Company's outstanding stock options issued
under separate employment agreements as of August 31, 2009 and changes for
the quarter then ended are as follows:
18
NOTE 8 STOCK OPTIONS - continued
Outstanding Options
--------------------
Weighted
Average
Number Exercise
of Options Price
---------- --------
Outstanding at May 31, 2009 266,400 5.34
Granted - -
Exercised - -
Forfeited - -
--------- -------
Outstanding at August 31, 2009 266,400 5.34
August 31,
2009
----------
Number of options vested 52,400
Weighted average remaining contract life - years 5.23
Number of options exercisable at August 31, 2009 52,400
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 under this plan as of
August 31, 2009.
On April 8, 2009, the Board of Directors of PHAZAR CORP adopted the 2009
Equity Incentive Plan ("Plan") and on April 27, 2009 the Plan was attached as
Exhibit 10.1 in the Company's Form S-8 filed with the Securities and Exchange
Commission. The 2009 Equity Incentive Plan requires shareholder approval and
has been included for approval and ratification of the Amendment to the
Certificate of Incorporation in the Company's Proxy Statement mailed on
September 11, 2009. The Annual Meeting of Stockholders is scheduled on
October 13, 2009.
The following table details stock-based compensation expense included in the
statement of operations for the quarters ended August 31, 2009 and 2008.
For the quarter ended
August 31,
---------------------
2009 2008
Selling, general and administrative expense $ 33,990 $ 139,066
FIT Provision (11,556) (42,282)
---------- ---------
Impact on net income $ 22,434 $ 96,784
========== =========
Impact on net income per share -
Basic and diluted EPS $ 0.01 $ 0.04
19
NOTE 9 SUBSEQUENT EVENTS
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.
On September 3, 2009, NASDAQ notified the Company that it now complies with
listing rule 5605(b)(1) and the matter is now closed.
On September 10, 2009, the Board of PHAZAR CORP amended Garland P. Asher's
employment agreement. Under the terms of his agreement, effective September
1, 2009, Mr. Asher shall receive a salary of $200,000 per year and out of the
original grant of 160,000 options, 30,000 of the stock options are to be 100%
vested as of the date of the Board approval, September 10, 2009 at the market
price on the approval date ($3.21 pershare). The remaining 130,000 options
shall vest and become exercisable contingent upon the Company achieving
certain revised sales and pretax income levels over a five year period.
On October 2, 2009, Antenna Products Corporation completed the renewal of its
$2 million revolving note payable collateralized by the Company's inventory
and accounts with PHAZAR CORP signing as its guarantor. Interest is payable
monthly at a prime rate until October 28, 2010, when any unpaid principal and
interest shall be due. The Company's credit facility requires maintenance of
ratios related to minimum working capital and quick ratios, tangible net
worth, interest coverage and leverage.
PHAZAR CORP AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors that have affected the Company's financial condition and operating
results for the period included in the consolidated financial statements in Item
1.
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.
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,
20
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 at May 31, 2009, as a percentage of total
sales were United States Government 13%, Halliburton Energy 9% and NextG 9%.
Executive Level Overview
The following table presents selected data of PHAZAR CORP. This historical data
should be read in conjunction with consolidated financial statements and the
related notes.
Three Month Period ended
August 31, 2009 August 31, 2008
------------- -------------
Net Sales $ 1,896,852 $ 2,009,712
Gross profit margin percent 44% 38%
Operating profit (loss) $ 841,734 $ 755,978
Net income (loss) $ (107,948) $ 93,792
Net income (loss) per share $ (0.05) $ 0.04
Total assets $ 8,123,342 $ 9,064,952
Long term debt $ - $ -
Total liabilities $ 659,640 $ 1,104,456
Capital expenditures $ 31,201 $ -
Dividends $ - $ -
Results of Operations
First Quarter Ended August 31, 2009 ("2010"), Compared to First Quarter Ended
August 31, 2008 ("2009")
PHAZAR CORP's consolidated sales from operations were $1,896,852 for the quarter
ended August 31, 2009 compared to sales of $2,009,712 for the first quarter
ended August 31, 2008. The Company's revenue fell $112,860, or 5.6%, a decline
in sales of both military and commercial product lines ($352,834) offset by
initial sales in the new mesh radio product line ($239,974).
Cost of sales and contracts for the operations were $1,055,118 for the quarter
ended August 31, 2009 compared to $1,253,734 for the first quarter ended August
31, 2008, down $198,616, or 15.8%. The reduction in cost of goods sold is
attributable to lower raw material costs and an improved product mix, resulting
in a 6% increase in the gross profit margin for the first quarter of fiscal year
2010 at 44% compared to 38% for the same period in 2009.
21
PHAZAR CORP's operating profit margin for the first quarter of fiscal year 2010
was -12% compared to -1% in the first quarter of fiscal year 2009.
Sales and administration expenses were higher in the first quarter of the fiscal
year 2010, $1,071,180 versus $776,140 for the first quarter of fiscal year 2009.
The $295,040, or 38.0% increase in sales and administration expense includes a
$217,136 increase in discretionary research and development costs quarter over
quarter associated with the continued development of our mesh radio wireless
networking product line.
Discretionary product development spending for the quarter ended August 31, 2009
was $376,145, or 19.8% of sales, compared to $159,009, or 7.9% of sales for the
comparable period last year. The spending level is up $217,136 as the Company
continues development on our mesh radio wireless networking products for
commercial and military applications. During the quarter ended August 31, 2009,
13% of the Company's revenues were from the mesh radio product line.
Other income for the three month period ended August 31, 2009 is $50,489 down
from $123,601, impacted by the Company no longer having investments in high
yield auction-rate securities.
United States Government contracts contain a provision that they may be
terminated at any time for the convenience of the Government. In such event, the
contractor is entitled to recover allowable costs plus any profits earned to the
date of termination. The possibility that Government priorities could change,
causing a delay or cancellation of this contract and any potential follow-on
work, makes it impossible to accurately predict whether revenues will increase
or decrease in the upcoming year.
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 August 31, 2009 was $2,000,000.
At August 31, 2009, the Company had a tangible net worth of $7,463,702 and had
working capital of $6,198,952. As of August 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 August 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 August 31, 2009 and May
31, 2009) until October 2, 2009, when any unpaid principal and interest shall be
due. The Company is currently in the process of renewing this agreement. Under
the agreement, the Company must maintain a minimum working capital of
$2,500,000, a tangible net worth of $4,000,000 and a debt service ratio of 1.25
and a maximum debt worth no greater than .5:1.
22
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 as stated in Item 9B of our Form 10-K for
the year ending May 31, 2009, the Company now has a majority of independent
directors and has obtained compliance with the number of independent directors
listing standard.
On September 3, 2009, NASDAQ notified the Company that it now complies with
listing rule 5605(b)(1) and the matter is now closed.
Capital Requirements
Management of the operating subsidiaries evaluates the facilities and reviews
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 the first quarter of fiscal year 2010,
there were $31,201 in capital expenditures for new and replacement equipment and
no expenditures in the first quarter of fiscal year 2009. The Company intends to
limit the fiscal year 2010 capital program to less than $100,000 for
improvements and new equipment.
At August 31, 2009, PHAZAR CORP had cash and cash equivalents of $2,927,442.
There were no deferred revenues at August 31, 2009.
Cash Flows
Operating Activities
Cash and cash equivalents of $2,927,442 at August 31, 2009 are down $393,205, or
11.8% on a balance of $3,320,647 as of May 31, 2009. (separated into two
paragraphs)
The negative $351,697 of cash flow from operations consists of a $183,393
increase in inventory, a $107,948 net loss and a $93,869 increase in prepaid
expenses. The 7.2% increase in inventory levels for the quarter ended August 31,
2009 compared to fiscal year end May 31, 2009, represents a continued effort by
management to take advantage of lower raw material costs and increase stock
levels in certain finished goods products. The net loss of $107,948 in the first
quarter of fiscal year 2010 represents a 5.6% drop in revenues and a 38%
increase in selling, general and administrative expenses on first quarter of
fiscal year 2009. Commenting on the quarter, Garland P. Asher, Chairman and CEO,
stated "Given the long lead time in production of much of our product line, 90
to 120 days on average, the lower sales reported in the first quarter reflected
the soft bookings we experienced in the February through May period". The
increase of $295,040, or 38% in sales and administrative expenses included a
$217,136 increase in research and development costs quarter over quarter
associated with continued development of our mesh radio wireless networking
product line. Prepaid and other current assets of $170,130 as of August 31, 2009
were up $93,869 compared to $76,261 as of May 31, 2009, the increase represents
prepaid deposits along with annual maintenance contracts being amortized over
the appropriate periods.
23
Investing Activities
Cash of $41,508 was used in investing activities during the first quarter ending
August 31, 2009, which consists of the $31,201 of capital expenditures and
$10,307 for the purchase of treasury stock. Cash was not used in investing
activities during the quarter ended August 31, 2008.
Financing Activities
There were no financing activities requiring cash during the first quarter
ending August 31, 2009 and 2008. At August 31, 2009 and 2008, PHAZAR CORP had no
long-term debt outstanding.
Item 4. Controls and Procedures
Management's Evaluation of Internal Controls 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 U.S.
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 U.S. 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 August 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 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
24
effective as of August 31, 2009. The Company has had no change during the
quarter ending August 31, 2009 that has materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.
Other Information
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.
On September 3, 2009, NASDAQ notified the Company that it now complies with
listing rule 5605(b)(1) and the matter is now closed.
25
PART II-OTHER INFORMATION
Item 1. Legal Proceedings
On August 15, 2008, in the Circuit Court of the First Judicial Circuit in and
for Escambia County, Florida, 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"). Antenna Products Corporation is our
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 (among other allegations) that the safety
sleeve and rail were defective and failed to prevent the deceased fall,
causing his death. The plaintiff seeks recovery of an unspecified amount 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 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. Financial Statements. See Item 1.
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.
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.
On September 23, 2009, the registrant filed a Form 8-K related to its
press releases dated September 11, 2009 relating to its Quad
Omni-Directional antenna developed as an integral component of DAS
(Distributed Antenna Systems) and its September 15, 2009 press
release on its quarterly earnings for the quarter ended August 31,
2009.
26
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PHAZAR CORP
/s/ Garland P. Asher
Date: October 8, 2009 ---------------------------------------------
Garland P. Asher, Principal Executive Officer
and Director
27
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, 2006 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 10.b - Amended and restated agreement with Garland Asher dated
September 9, 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 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
28