Annual Reports

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  • 10-K (Feb 19, 2013)
  • 10-K (Sep 21, 2012)
  • 10-K (Sep 23, 2011)
  • 10-K (Aug 20, 2010)
  • 10-K (Mar 24, 2010)

 
Quarterly Reports

 
8-K

 
Other

PHAZAR CORP 10-K 2011

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 June 30, 2011

 

OR

 

[    ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE EXCHANGE ACT OF 1934

 

Commission file number 0-12866

 

PHAZAR CORP

(Exact name of registrant as specified in its charter) 

 

 

Delaware

(State or other jurisdiction of

incorporation or organization)

 

75-1907070

(I.R.S. Employer

Identification No.)

 

101 S.E. 25th Avenue, Mineral Wells, Texas 76067      (940) 325-3301

(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 June 30, 2011, was $8,399,586.

 

As of September 14, 2011, 2,386,528 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 (1,898,252 shares) was $4,365,980.

 

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 2011 Proxy Statement.

 

Transitional Small Business Disclosure Format (check one): Yes [ ] No [ X ]

 
 


 

PHAZAR CORP AND SUBSIDIARIES

INDEX TO FORM 10-K

 

    PAGE
  PART I  
     
Item 1. Description of Business   3
Item 2. Description of Property   5
Item 3. Legal Proceedings   5
     
  PART II  
     
Item 5. Market for Common Equity and Related Stockholder Matters   5
Item 7. Management’s Discussion and Analysis or Plan of Operations   6
Item 8. Financial Statements and Supplementary Data   9
     
  Part III  
     
Item 9. Changes in and Disagreements with Accountants on Accounting  
  and Financial Disclosure 24   
Item 9A. Controls and Procedures 24
Item 9B. Other Information 24
Item 10. Directors, Executive Officers and Corporate Governance 24
Item 11. Executive Compensation 25
Item 12. Security Ownership of Certain Beneficial Owners and Management  
  Related Stockholder Matters 25
Item 13. Certain Relationships and Related Transactions 26
Item 14. Principal Accountant Fees and Services 26
     
  PART IV  
     
Item 15. Exhibits and Reports on Form 8-K 26
     
  Signatures 28
     
  Certifications  

 

 

 

 

2

 
 

 

PART I

 

Item 1. Description of Business.

 

General

 

PHAZAR CORP was incorporated in 1991 and operates as a holding company with Antenna Products Corporation, 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. 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 on the Internet at: www.antennaproducts.com and www.phazar.com. The holding company’s web site is www.phazarcorp.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, guyed and self-supported towers, support structures, masts and communication accessories worldwide. Customers include the United States Government, both military and civilian agencies, United States Government prime contractors and commercial clients. Examples of Antenna Products Corporation’s United States Government products include ground to air collinear antennas, instrument landing antennas and towers, fixed system multi-port antenna arrays, tactical quick erect antennas and masts, shipboard antenna tilting devices, surveillance antennas, antenna rotators, positioners and controls, and high power broadcast baluns. Examples of the Company’s commercial products include panel, sector, omnidirectional and distributed antenna system (DAS) antennas for the cellular and wireless markets, 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 $1,322,777 at June 30, 2011, 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 year ended June 30, 2011, the one month period ended June 30, 2010 and the fiscal year ended May 31, 2010, as a percentage of total sales are, as follows:

 

   

Fiscal Year

Ended

One Month Period Ended Fiscal Year Ended
Product Type   June 30, 2011 June 30, 2010 May 31, 2010
         
Instrument Landing System   31% 23% 22%
         
Spares,   Accessories and Others   23% 15% 27%
         
Commercial Wireless   17% 4% 20%
         
Towers and Masts   11% 0% 8%
         
Shipboard Equipment   8% 41% 2%
         
Collinear Antennas   7% 4% 10%
         
Antennas   3% 13% 11%
    100% 100% 100%

 


  

3

 

 
 

 

Antenna Products Corporation’s customer base is primarily government and government prime contractor focused, but this is 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. The United States Government was the single largest customer and accounted for 36% and 28% of the direct sales volume for the fiscal year ended June 30, 2011 and May 31, 2010, respectively. There are no other customers that represented 10% or more of the sales volume in either fiscal year 2011 or 2010. 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 2012.

 

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 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.

 

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 5-10% of fiscal year 2012 revenues in research and development projects, the costs of which will be charged to selling, general and administration expense as incurred. The mix of expenditures between the product development areas in any given year is a function of the demand for new independently developed innovative systems and the level of requirements solicited.

 

Phazar Antenna Corp.

 

Phazar Antenna Corp. 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 June 30, 2011 amounted to 20% of total sales. We expect that for fiscal year ended June 30, 2012, 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.

 

4

 
 

 

Backlog

 

The backlog of orders at Antenna Products Corporation and Phazar Antenna Corp. was $2,277,566 at year-end. This compares to $2,907,590 in backlog at the end of fiscal year 2010.

 

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 September 14, 2011, Antenna Products Corporation and Phazar Antenna Corp. combined, employed a total of sixty-four full time employees. Of the sixty-four, fourteen are employed in administration and sales, five in engineering and technical support and forty-five 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

 

See Note 2 of Notes to Consolidated Financial Statements.

 

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 66,000 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 and with the current complement of machinery and equipment are suitable and more than adequate to meet production requirements. Depending 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 property, plant 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.

 

See Note 7 of the Notes to Consolidated Financial Statements.

 

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 7, and the consolidated financial statements and the related notes thereto in Item 8.

 

5

 
 

 

 

 

 

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 2009 4.45 2.51
November 2009 4.48 2.88
February 2010 3.95 3.10
May 2010 4.40 2.88
     
One Month Ended    
June 2010 3.32 2.70
     
Quarter Ended    
September 2010 3.18 1.52
December 2010 6.32 2.60
March 2011 5.46 2.71
June 2011 3.74 2.67

 

Holders

 

At September 14, 2011, there were approximately 1,542 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, James Kenney and R. Allen Wahl each received 1,400 shares of PHAZAR CORP common stock and Garland P. Asher received 1,200 shares and Tom Reynolds received 600 shares of PHAZAR CORP common stock. Also, as partial consideration for attending the PHAZAR CORP Audit Committee meetings, R. Allen Wahl and Gary W. Havener each received an additional 200 shares of PHAZAR CORP common stock and James Kenney, Dennis Maunder and Tom Reynolds each received an additional 100 shares of PHAZAR CORP common stock.

 

These shares are issued pursuant and count against PHAZAR CORP’s 2009 Equity Compensation Plan. The resale of these shares may be authorized by PHAZAR CORP’s Form S-8 registration statement filed April 27, 2009.

 

Item 7. Management’s Discussion and Analysis or Plan of Operations

 

Results of Operations

 

Year ended June 30, 2011 (“2011”) compared with year ended May 31, 2010 (“2010”)

 

PHAZAR CORP recorded a net loss of $326,771 in 2011, compared to a net loss of $937,994 in 2010 attributed to a slight improvement in gross profit margin along with a decrease in selling, general and administration expense offset by higher level of income tax expense and a charge for loss from discontinued operations.

 

6

 
 

PHAZAR CORP’s consolidated sales from operations were $8,399,586 in 2011, compared to consolidated sales from operations of $6,997,833 in 2010, an increase of $1,401,753, or 20%. The increase in sales reflects growth in the instrument landing system (ILS) and tower product lines year over year.

 

Orders decreased by $486,790 from $8,846,659 in 2010 compared to $8,359,869 in 2011. Backlog was down $630,024 from $2,907,590 at the end of 2010 compared to $2,277,566 as of June 30, 2011 primarily due to the completion of an order placed by the Federal Aviation Administration for ILS equipment.

 

Cost of sales and contracts and gross profit for fiscal year 2011, were $4,713,705 and $3,685,881, respectively. For the same period in 2010, costs of sales and contracts and gross profit were $4,019,752 and $2,978,081, respectively. The gross profit margin for fiscal year 2011 was 44% compared to 43% in fiscal year 2010.

 

Sales and administration expenses were $2,586,064 in 2011, compared to $3,272,281 in 2010. The $686,217 decrease in sales and administration expense is attributed to $325,610 of non-recurring stock based compensation in fiscal year 2010 along with a continued increase in plant utilization overhead.

 

Research and development costs were $160,611 in 2011 compared to $209,154 in 2010, less than a one percent move on sales year over year.

 

The income from operations before income taxes was $1,017,521 in 2011 compared to a loss of $464,160 in 2010. The loss from discontinued operations, net of tax was $994,082 in 2011 up $362,707 from $631,375 in 2010. The Company recorded a net loss, of $326,771 in 2011 compared to $937,994 in 2010.

 

One month ended June 30, 2010

 

PHAZAR CORP recorded net income of $36,432 for the one month period ended June 30, 2010, after a $99,110 charge for loss from discontinued operations . The Company recorded consolidated sales from operations of $1,002,331 with a gross profit margin of 56% for the month of June 30, 2010. Selling, general and administration expenses were $318,886 for the one month period along with research and development costs of $7,813 .

 

Product Warranties

 

See Note 7 of the Notes to Consolidated Financial Statements.

 

Liquidity and Capital Resources

 

Sources of Liquidity

 

Based on current trends, funds from operations, recovery of a federal income tax net operating loss carryback and current cash balances PHAZAR CORP believes there are sufficient resources to run the Company’s operations for at least the next twelve months.

 

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, as needed and submitted to the Board of Directors for review and approval. In fiscal year 2011 there were $16,000 in capital expenditures for new and replacement equipment.

 

At June 30, 2011, PHAZAR CORP had cash and cash equivalents of $1,169,318. Deferred revenue at June 30, 2011, was $2,355.

 

Cash Flows

 

Operating Activities

 

The $270,170 of cash flow provided by operations consists of a $994,082 loss from discontinued operations offset by a $580,494 decrease in accounts payable. The $994,082 loss from discontinued operations represents all revenues, costs of goods sold, selling general and administration costs, research and development costs and cost of inventory written off for the fiscal year ended June 30, 2011. The $580,494 decrease in accounts payable is attributed to the timing of goods received for inventory at fiscal year 2010 year end and paid in early fiscal year 2011.


 

7

 
 

 

 

Investing Activities

 

Cash of $504,691 was used in investing activities during the fiscal year ending June 30, 2011, which consists of the $488,691 funding of notes receivable (see Note 5 of the Notes to the Consolidated Financial Statements) and $16,000 was used to purchase property and equipment.

 

On December 8, 2009, the Company entered into a $500,000 Principal 8% Per Year Senior Secured Convertible Note with Tracciare, Inc. due in full on May 31, 2011. In addition, the Company received a warrant to purchase up to eighty percent of Tracciare’s equity for a total price of $500,000. In March, 2011, the note was amended to extend the maturity date to June 30, 2013. At June 30, 2011 Tracciare, Inc. had drawn all of the $500,000 note, along with additional fundings in the amount of $463,684 all under separate notes with the same terms and agreements as the original note.

 

Traccaire, Inc. is a development-stage company in the pilot-project phase. It focuses on automated meter intelligence for municipal utility customers.

 

Financing Activities

 

There were no financing activities requiring cash during the fiscal year ending June 30, 2011 and 2010. However there were non cash federal income tax benefits related to the stock based compensation expensed during the years ended June 30, 2011 and 2010 in the amounts of $35,104 and $145,810, respectively. At June 30, 2011 and 2010, PHAZAR CORP had no long-term debt outstanding.

 

 

 

 

 

8

 

 
 

 

 

Item 8. Financial Statements.

 

PHAZAR CORP consolidated financial statements for the fiscal year ended June 30, 2011, the one month period ended June 30, 2010 and fiscal year ended May 31, 2010.

 

 

PHAZAR CORP

 

Index to Financial Statements

 

 

  Page
   
Report of Independent Registered Public Accounting Firm 10
   
Consolidated Balance Sheets 11
   
Consolidated Statements of Operations 12
   
Consolidated Statements of Cash Flows 13
   
Consolidated Statements of Shareholders' Equity 14
   
Notes to Consolidated Financial Statements 15

 

 

 

 

 

 

 

9

 

 
 

 

REPORT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM

 

 

To The Board of Directors and Stockholders

PHAZAR CORP and Subsidiaries

 

We have audited the accompanying consolidated balance sheets of PHAZAR CORP and Subsidiaries as of June 30, 2011, June 30, 2010 and May 31, 2010, and the related consolidated statements of operations, shareholders’ equity and cash flows for the year ended June 30, 2011, one month period ended June 30, 2010 and the year ended May 31, 2010. 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 June 30, 2011, June 30, 2010 and May 31, 2010, and the results of their operations and their cash flows for the year ended June 30, 2011, one month period ended June 30, 2010 and the year ended May 31, 2010, in conformity with accounting principles generally accepted in the United States of America.

 

 

 

WEAVER AND TIDWELL, L.L.P.

 

Fort Worth, Texas

September 22, 2011

 

 

10

 

 
 

 

PHAZAR CORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


                 
    June 30, 2011     June 30, 2010     May 31, 2010
CURRENT ASSETS                           
     Cash and cash equivalents $ 1,169,318   $ 1,403,839   $ 2,030,774
     Accounts receivable:   785,664     1,207,057     748,671
          Trade, net of allowance for doubtful accounts of $0                
          as of June 30, 2011, June 30, 2010  and May 31, 2010                
     Inventories   2,732,232     2,642,607     3,012,904
     Prepaid expenses and other assets   125,989     75,544     95,586
     Income taxes receivable   236,366     286,769     316,374
     Deferred income taxes   224,875     96,169     105,314
     Assets held for discontinued operations   -     789,112     468,170
     Total current assets   5,274,444     6,501,097     6,777,793
                 
     Property and equipment, net   1,043,435     1,159,195     1,170,090
                 
     Notes receivable   963,684     474,993     432,146
     Long - term deferred income tax   252,617     226,314     232,188
     TOTAL ASSETS $ 7,534,180   $ 8,361,599   $ 8,612,217
                 
                 
CURRENT LIABILITIES                
     Accounts payable $ 216,575   $ 797,069   $ 477,111
     Accrued liabilities   284,969     372,476     538,952
     Deferred revenues   2,355     28,703     207,514
     Liabilities held for discontinued operations   178,060     87,607     360 ,120
     Total current liabilities $ 681,959   $ 1,285,855   $ 1,583,697
                 
                 
TOTAL LIABILITIES $ 681,959   $ 1,285,855   $ 1,583,697
                 
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 and 2,385,128, 2,378,728 and 2,378,428 issued and outstanding on June 30, 2011, June 30, 2010 and May 31, 2010, respectively   23,852     23,788     23,785
                 
Additional paid in capital   4,517,234     4,414,050     4,403,261
Treasury stock, at cost, 74,691 shares on June 30, 2011, June 30, 2010 and May 31, 2010   (215,918)     (215,918)     (215,918)
Retained earnings   2,527,053     2,853,824     2,817,392
Total shareholders’ equity   6,852,221     7,075,744     7,028,520
                 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 7,534,180   $ 8,361,599   $ 8,612,217

 


See accompanying Notes to the Consolidated Financial Statements

 

 

 

 

 

 

 

 

11

 

 
 
PHAZAR CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
             

                 
    Twelve Months Ended     One Month Ended     Twelve Months Ended
   

 

June 30, 2011

   

 

June 30, 2010

   

 

May 31, 2010

Sales and contract revenues $ 8,399,586   $ 1,002,331   $ 6,997,833
Cost of sales and contracts   4,713,705     442,284     4,019,752
    Gross profit   3,685,881     560,047     2,978,081
                   
Selling, general  and administration expenses   2,586,064     318,886     3,272,281
  Research and development costs   160,611     7,813     209,154
Total selling, general and administration expenses   2,746,675     326,699     3,481,435
                 
    Operating income (loss)   939,206     233,348     (503,354)
                 
Other income (expense)                
     Interest income(expense) net   56,558     (3,237)     11,195
     Other income   21,757     1,110     27,999
Total other income (expense)   78,315     (2,127)     39,194
                 
Income (loss) from operations before income taxes   1,017,521     231,221     (464,160)
                 
Income tax expense (benefit)   350,210     95,679     (157,541)
                 
Net income (loss) before discontinued operations   667,311     135,542     (306,619)
                 
Loss from discontinued operations   (1,506,185)     (150,167)     (956,629)
Income tax benefit from discontinued operations   512,103     51,057     325,254
Net discontinued operations expense                     (994,082)                    99,110)                        (631,375)
                 
Net income (loss) $ ( 326,771)   $ 36,432   $ (937,994)
                 
Basic income (loss) per common share                
  Continuing operations $ 0.29   $ 0.06   $ (0.13)
  Discontinued operations   (0.45)                     (0.04)     (0.28)
    Net income (loss) $ (0.14)   $ 0.02   $ (0.41)
                 
Diluted income (loss) per common share                
  Continuing operations $ 0.29   $ 0.06   $ (0.13)
  Discontinued operations   (0.45)     (0.04)     (0.28)
    Net income (loss) $ (0.14)   $ 0.02   $ (0.41)
                 
Basic weighted average of common shares O/S   2,275,300     2,303,807     2,300,191
Diluted weighted average of common shares O/S   2,275,300     2.303,807     2,300,191

 


 

 

 

See accompanying Notes to the Consolidated Financial Statements

 

 

12

 
 

 

 

 

  

 

 

PHAZAR CORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

    Fiscal Year Ended    

 

One Month Ended

    Fiscal Year Ended
  June 30, 2011   June 30, 2010     May 31, 2010
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net income (loss) $   (326,771)   $   36,432   $ (937,994)
  Adjustments to reconcile net income (loss) to net cash                
  Provided by (used in) operating activities:          
       Depreciation   131,760     10,895     142,299
       Loss from discontinued operations   994,082     99,110     631,375
       Stock based compensation   103,248     10,792     428,855
       Deferred federal income tax   (155,009)     15,017     (145,654)
  Changes in operating assets and liabilities:                
       Accounts receivable   421,393     (458,386)     (85,172)
       Inventories   (89,625)     370,297     (644,179)
       Income taxes receivable                   50,403     29,605     26,771
       Prepaid expenses and other assets   (50,445)     20,043     (19,326)
       Accounts payable   (580,494)     319,958     261,271
       Accrued liabilities   (87,507)     (166,476)     52,286
       Deferred revenues   (26,348)     (178,810)     190,630
       Net cash used in discontinued operations   (114,517)     (692,565)     (576,334)
           Net cash provided by (used in) operating activities   270,170     (584,088)     (675,172)
                 
CASH FLOWS FROM INVESTING ACTIVITIES:                
   Funding of notes receivable   (488,691)     (42,847)     (432,146)
   Purchase of property and equipment   (16,000)     -     (172,248)
   Purchase of treasury stock   -     -     (10,307)
          Net cash used in investing activities     (504,691)     (42,847)     (614,701)
                 
Net decrease in cash and cash equivalents   (234,521)     (626,935)     (1,289,873)
CASH AND CASH EQUIVALENTS, beginning of period   1,403,839     2,030,774     3,320,647
CASH AND CASH EQUIVALENTS, end of period $ 1,169,318   $ 1,403,839   $ 2,030,774
                 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                
Cash paid during the period for:                
                 Interest expense $ -   $ -   $ -
                 Income taxes $ 262,500   $ -   $ -

 

See accompanying Notes to the Consolidated Financial Statements

 

 

13

 
 

 

 

 

 

 

 

 

 

 

PHAZAR CORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

  Common Stock   Additional Paid in Capital   Treasury Stock   Retained Earnings   Total
 

Number

of Shares

  Amount        

Balance

May 31, 2009

 

2,371,728

  $ 23,718   $ 3,974,474   $ (205,611)   $ 3,755,386   $ 7,547,967
                                 
Stock issued to Directors 6,700     67     23,159     -     -     23,226
                                 
Stock based compensation -     -     405,628     -     -     405,628
                                 
Purchase   of  treasury stock -     -     -     (10,307)     -     (10,307)
                                 
Net loss -     -     -     -     (937,994)     (937,994)

Balance,

May 31, 2010

 

2,378,428

  $ 23,785   $ 4,403,261   $ (215,918)   $ 2,817,392   $ 7,028,520
                                 
Stock issued to Directors 300     3     924     -     -     927
                                 
Stock based compensation -     -     9,865     -     -     9,865
                                 
Net income -     -     -     -     36,432     36,432
                                 

Balance,

June 30, 2010

 

2,378,728

  $ 23,788   $ 4,414,050    

 

(215,918)

  $ 2,853,824   $ 7,075,744
                                 
Stock issued to Directors 6,400     64     22,934     -     -     22,998
                                 
Stock based compensation -     -     80,250     -     -     80,250
                                 
Net loss -     -     -     -     (326,771)     (326,771)
                                 

Balance,

June 30, 2011

 

2,385,128

  $ 23,852   $ 4,517,234   $ (215,918)   $ 2,527,053   $ 6,852,221


 

See accompanying Notes to the Consolidated Financial Statements

 

 14

 
 

 

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., and Thirco, Inc. as its wholly owned subsidiaries. Antenna Products Corporation is an operating subsidiary that designs, manufactures and markets antenna systems, 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, Inc. 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.

 

The only major customer with ten percent or more of revenues is the United States Government, who was the single largest customer and accounted for 36%, 22% and 28% of the sales volume for fiscal year ended June 30, 2011, one month period ended June 30, 2010 and fiscal year ended May 31, 2010, respectively.

 

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.

 

Change in Year End

 

On July 21, 2010, the Company’s Board of Directors approved the change in its fiscal year from May 31 to June 30. As the transition period covers a period of one month, the Company was not required to file a transition report, but instead, was required to include information on the transition period from June 1, 2010 through and including June 30, 2010 in the quarterly report on Form 10-Q for the quarter ended September 30, 2010.

 

The audited consolidated balance sheet, statement of operations, statement of cash flows and the statement of shareholder’s equity for the one month period, from June 1, 2010 through June 30, 2010, are incorporated in the fiscal year ended June 30, 2011 Form 10-K.

 

Allowance for Doubtful Accounts

 

The carrying value of our accounts receivable is continually evaluated based on the likelihood of collection. An allowance is provided, if required, for estimated losses resulting from our customers’ inability to make required payments. The allowance is determined by historical experience of uncollected accounts, the level of past due accounts, information about specific customers with respect to their inability to make payments and future expectations of conditions that might impact the collectability of accounts receivable.

 

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.

 

15

 
 

 

PHAZAR CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

 

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 fiscal years 2011 and 2010 were 7.8% and 10.6%, respectively, of total sales. There were no foreign countries with sales greater than 5% of total sales for fiscal year ended June 30, 2011 and the one month period ended June 30, 2010. Canada was the only country with sales of 5.0% or more in the fiscal year ended May 31, 2010.

 

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 improvements - 15 to 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 expense, 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

 

Management periodically evaluates 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.

 

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 liability method is used to account for income taxes 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 year ended June 30, 2011, the one month period ended June 30, 2010 and the year ended May 31, 2010, were $160,611, $7,815 and $209,154, respectively.

 

16

 
 

 

 

PHAZAR CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

 

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

 

Cash and Cash Equivalents

 

For purposes of reporting cash flows, cash and cash equivalents include cash and certificates of deposit with original 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 the accounting standard which required companies to recognize in their statement of operations the cost of employee services received in exchange for awards of equity instruments. The costs were based on their fair values at the time of the grant. The company uses the Black-Scholes option pricing model to determine the fair value of stock options granted to employees. Stock based compensation recognized in fiscal year ended 2011, the one month period ended June 30, 2010 and the fiscal year ended 2010 were $103,248, $10,792 and $428,855, respectively.

 

The income tax benefit related to stock-based compensation expense was $35,104, $3,669 and $145,810 for the year ended June 30, 2011, the one month period ended June 30, 2010 and the year ended May 31, 2010, respectively.

 

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 2,275,300, 2,303,807 and 2,300,191 for the year ended June 30, 2011, the one month period ended June 30, 2010 and the year ended May 31, 2010, respectively.

 

Dilutive effect of stock options outstanding for the fiscal year ended June 30, 2011, one month period ended June 30, 2010 and the fiscal year ended May 31, 2010, are computed as follows:

 

  Fiscal Year One Month Fiscal Year
  Ended Ended Ended
  June 30, 2011 June 30, 2010 May 31, 2010
Numerator:      
          Net income (loss) $  ( 326,771) $           36,432 $       (937,994)

Numerator for basic and diluted earnings

per share

 

$   (326,771)

 

$           36,432

 

$       (937,994)

       

 

Denominator:      
          Weighted-average shares outstanding-basic       2,275,300 2,303,807 2,300,191
          Effect of dilutive securities:      
                   Stock options - - -
       

Denominator for diluted earnings per share-

Weighted-average shares

2,275,300 2,303,807 2,300,191
       
      Basic loss per share $         (0.14) $               0.02 $            (0.41)
       
      Diluted loss per share $         (0.14) $               0.02 $            (0.41)

 

17 

 
 

 

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 fiscal year ended June 30, 2011, the one month period ended June 30, 2010 and fiscal year ended May 31, 2010 is $2,355, $28,703 and $207,514, respectively.

 

Shipping and Handling Costs

 

The Company includes all shipping and handling costs together with cost of sales in the accompanying statements of operations.

 

NOTE 3. INVENTORIES

 

The major components of inventories are as follows:

 

  June 30, 2011 June 30, 2010 May 31, 2010
       
     Raw materials $          1,074,044 $      1,023,375 $       1,335,726
     Work in process                324,657 910,187 848,362
     Finished goods             1,333,531 709,045 828,816
       
     Total inventories $          2,732,232 $      2,642,607 $       3,012,904

 

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 June 30, 2011, June 30, 2010 and May 31, 2010, was $803,901, $960,195 and $959,478, 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:

 

  Estimated      
  Useful Life June 30, 2011 June 30, 2010 May 31, 2010
         
      Land   $            375,136 $      375,136 $      375,136
      Buildings and improvements 15-30 years            1,873,217 1,873,217 1,873,217
      Machinery and equipment      10 years            3,645,011 3,629,011 3,629,011
      Automobiles and equipment 10 years               107,541 107,541 107,541
      Office furniture and fixtures      10 years               429,070 505,850 505,850
               6,429,975 6,490,755 6,490,755
      Less accumulated depreciation            (5,386,540)    (5,331,560)   (5,320,665)
      Net property and equipment    $        1,043,435 $   1,159,195 $    1,170,090

 

NOTE 5. NOTES RECEIVABLE

 

On December 8, 2009, the Company entered into a $500,000 Principal 8% Per Year Senior Secured Convertible Note with Tracciare, Inc. due in full on May 31, 2011. In addition, the Company received a warrant to purchase up to eighty percent

 

18

 
 

 

PHAZAR CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

 

NOTE 5. NOTES RECEIVABLE – continued

 

of Tracciare’s equity for a total price of $500,000. In March, 2011, the note was amended to extend the maturity date to June 30, 2013. At June 30, 2011 Tracciare, Inc. had drawn all of the $500,000 note, along with additional fundings in the amount of $463,684 all under separate notes with the same terms and agreements as the original note and amendment.

 

NOTE 6. INCOME TAXES

 

Components of the provision for income taxes were as follows:

 

    Fiscal Year     One Month     Fiscal Year
    Ended     Ended     Ended
       June 30, 2011     June 30, 2010     May 31, 2010
                 
     Federal income taxes computed at statutory rate $ (166,167)   $ 27,578   $ (483,068)
                 
     Permanent differences                
               Meals and entertainment   3,030        307     -
               Domestic production deduction   -     (3,272)     -
               Other   -     -     2,621
                 
    Other reconciling items                
              Federal deferred pool true-ups   4,571     20,009     -
              Non-deductible expenses and other   (3,327)     -     (2,348)
                 
             Total $ (161,893)   $ 44,622   $ (482,795)
                 
   Current federal income taxes   (3,187)     33,080     (316,374)
   Deferred federal income taxes   (155,009)     15,017     (145,859)
   Federal true-up (current)   (163)     (3,475)     -
   Other   (3,534)     -     (20,562)
                         
             Total tax expense (benefit) $   (161,893)   $ 44,622   $ (482,795)

 

The components of the deferred tax assets and liabilities are as follows:

 

  Fiscal Year One Month Fiscal Year
  Ended Ended Ended
  June 30, 2011 June 30, 2010 May 31, 2010
     Deferred tax assets:      
             Accrued liabilities, due to warranty accrual $        26,322 $         69,103 $        69,103
             Accrued liabilities, due to vacation and compensation accrual 20,300 27,068 36,211
             Intangible assets, due to difference in amortization 40,188 50,379 52,872
             Compensation, stock options vested 287,580 261,005 265,234
             Inventory write-off from discontinued operations 178,253 - -
       
     Total deferred tax assets                                         $       52,643 $       407,555 $      423,420
       
     Deferred tax liabilities:      
              Property and equipment, principally due to depreciation      
              Difference $     (74,943) $       (85,072) $      (85,918)
              Other, net            (208) - -
       
      Total deferred tax liabilities $     (75,151) $       (85,072) $      (85,918)
       
       
     Deferred income tax assets, net of deferred tax liabilities $      477,492 $        322,483 $      337,502

 

19

 
 

 

 

PHAZAR CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

 

NOTE 6. INCOME TAXES – continued

 

     The net deferred tax assets are classified on the balance sheet as follows:    
       
               Current deferred tax assets $      224,875 $          96,169 $      105,314
               Non-current deferred tax assets, net 252,617 226,314 232,188
       
               Net deferred tax assets $      477,492 $        322,483 $      337,502

 

There are no uncertain tax positions expected to be taken on the 2010 federal or state 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 FASB ASC 740-10. As Company policy, accrued interest or penalties associated with unrecognized tax benefits will be recorded as income tax expense. Since there is no applicable liability under FASB ASC 740-10 for 2010, no interest or penalties are included in the Consolidated Statement of Operations. The Company and its subsidiaries file a consolidated federal tax return. The 2007-2010 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.

 

NOTE 7. 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 United States Government, both military and civilian 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 June 30, 2011.

 

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.

 

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.

 

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.

 

20

 
 

 

PHAZAR CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued

 

NOTE 7. COMMITMENTS AND CONTINGENCIES – continued

 

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, are as follows:

 

  Fiscal Year One Month Fiscal Year
  Ended Ended Ended
  June 30, 2011 June 30, 2010 May 31, 2010
       
Beginning balance $        203,244 $       203,244 $       138,702
Cost incurred for rework        (132,238) - (116,239)
Accrual for current year estimate - - 203,244
Change in accrued estimate              6,412 - (22,463)
       
Ending balance $          77,418 $       203,244 $        203,244

 

NOTE 8. STOCK OPTIONS

 

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 207,700 options granted (net of forfeitures) under this plan as of June 30, 2011.

 

The PHAZAR CORP 2009 Equity Incentive Plan was approved by a majority of the PHAZAR CORP shareholders in October 2009. Options for 273,600 shares of common stock are authorized under this plan. Options granted under this plan may be either Incentive Stock Options or Non-Statutory Stock Options, at the discretion of the Board. As of June 30, 2011, there have been 70,500 options granted and stock issued to Directors under this plan and 156,100 options available under the plan.

 

A summary of the status of the Company’s outstanding stock options issued under separate employment agreements as of June 30, 2011, June 30, 2010 and May 31, 2010 and changes for the periods then ended are as follows:

 

    Outstanding Options
   

 

 

Number

of Options

 

Weighted

Average

Exercise

Price

         
Outstanding at May 31, 2010   355,400   4.50
               Granted   -   -
               Exercised   -   -
               Forfeited   -   -
Outstanding at June 30, 2010   355,400   4.50
               Granted   -    
               Exercised   -    
               Forfeited   (89,700)   5.43
         
Outstanding at June 30, 2011   265,700   3.76

 

21

 
 

 

PHAZAR CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

 

NOTE 8. STOCK OPTIONS – continued

 

  Fiscal Year One Month Fiscal Year
  Ended Ended Ended
  June 30, 2011 June 30, 2010 May 31, 2010
Number of options vested 122,034 160,733 160,733
Weighted average remaining contract life – years 7.48 8.20 8.20
       
Number of options exercisable 122,034 160,733 160,733

 

The following table details stock-based compensation expense included in the statement of operations for the fiscal year ended June 30, 2011, one month period ended June 30, 2010 and fiscal year ended May 31, 2010.

 

  Fiscal Year One Month Fiscal Year
  Ended Ended Ended
  June 30, 2011 June 30, 2010 May 31, 2010
       
Selling, general and administrative expense $      103,248 $          10,792 $        428,855
FIT Provision         (35,104) (3,669) (145,810)
      Impact on net income (loss) $        68,144 $            7,123 $        283,485

Impact on net income per share -

Basic and diluted EPS

 

$           0.03

 

$              0.00

 

$              0.12

 


22

 
 

 

PHAZAR CORP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued

 

 

NOTE 9. DISCONTINUED OPERATIONS

 

In January 2011, the Company announced that after a thorough review of the progress and status of the True Mesh Network Radio program, the Board of Directors concluded that commercial viability and profitability was unlikely to be achievable in the foreseeable future and voted to discontinue further development. As a result, for the year ended June 30, 2011, the Company recorded a charge of $994,082, of which $508,546 relates to activity prior to the decision to discontinue operations and a charge of $99,110 and $631,375 for discontinued operations, net of tax, for the one month period ended June 30, 2010 and for the year ended May 31, 2010, respectively.

 

    Fiscal Year   One Month   Fiscal Year
      Ended   Ended   Ended
      June 30, 2011   June 30, 2010   May 31,2010
               
The following is a summary of the results of the            
discontinued operations:            
  Revenues $ 193,930 $ 3,042 $ 640,778
  COGS (including inventory write offs)   (992,278)   (34,393)   (344,350)
      (798,348)   (31,351)   296,428
               
  Selling, general and administration expense   (257,594)   (33,941)   (411,190)
  Research and development costs   (450,243)   (84,875)   (841,867)
      (707,837)   (118,816)   (1,253,057)
               
  Net loss before income taxes $ (1,506,185) $ (150,167) $ (956,629)
               
  Provision (benefit) for income taxes   (512,103)   (51,057)   (325,254)
  Net loss $ (994,082) $ (99,110) $ (631,375)
               
The following is a summary of the assets and            
liabilities of discontinued operations:            
  Assets of discontinued operations:            
    Inventories $             - $ 789,112 $ 468,170
        Total assets of discontinued operations $             - $ 789,112 $ 468,170
               
  Liabilities of discontinued operations:            
    Accrued liabilities $ 178,060 $ 87,607 $ 360,120
        Total liabilities of discontinued operations $ 178,060 $ 87,607 $ 360,120

 

 23 

 
 

 

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 June 30, 2011. 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 effective as of June 30, 2011. The Company has had no change during the period covered by this report 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 an exemption for smaller reporting companies under Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

 

Item 9B. Other Information

 

None

 

Item 10. Directors, Executive Officers and Corporate Governance

 

The information required by this item with regard to executive officers is as follows:

 

Mr. Garland Asher, age 66, has served as President and Chief Executive Officer since September, 2008 and as a Director since October, 2007. Mr. Asher served as Director and Chairman of the Audit Committee of Universal Power Group, Inc., a power equipment and battery distributor from December, 2006 through August 2008. Mr. Asher has served as a member of the City of Fort Worth Audit Committee from 2006 through 2008. 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.

 

 24 

 
 

 

 

Ms. Deborah Inzer, age 61, has served as Vice President, Chief Financial Officer and Treasurer of PHAZAR CORP since March 2008. 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 2011 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 2011 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 2011 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 2011 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 2011 Annual Meeting of Shareholders.

 

The following table provides a summary of information as of June 30, 2011, relating to our equity compensation plans in which our Common Stock is authorized for issuance.

 

 

Equity Compensation Plan Information:

       
    (a) (b) (c)
    Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted average exercise price of outstanding options, warrants and rights Number of securities remaining available for future issuance under equity compensation plans (excluding shares reflected in column (a)
         

Equity Compensation Plans

approved by shareholders (1)

 

 

207,700

 

4.29

 

42,300

         

Equity Compensation Plans

approved by shareholders (2)

 

 

58,000

 

3.86

 

156,100

 

(1)     Consists of the 2006 Incentive Stock Option Plan

(2)     Consists of the 2009 Equity Incentive Plan adopted by the Board of Directors on April 8, 2009

 

 25 

 

 
 

 

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 2011 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.

 

On July 22, 2010, 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 12, 2010, the registrant filed a Form 8-K for the purpose of announcing its first quarter financial results

 

On October 21, 2010, the registrant filed a Form 8-K for the purpose of announcing a major website upgrade for Antenna Products Corporation

 

On November 11, 2010, the registrant filed a Form 8-K for the purpose of announcing a web conference for a presentation held at the Southwest IDEAS Investor Conference held in Dallas, Texas

 

On January 11, 2011, the registrant filed a Form 8-K for the purpose of announcing the discontinuance of the development of the True Mesh Network Radio Program

 

On January 19, 2011, the registrant filed a Form 8-K for the purpose of announcing its second quarter 2011 financial results

 

On February 2, 2011, the registrant filed a Form 8-K for the purpose of announcing the appointment of an additional director

 

On February 14, 2011, the registrant filed a Form 8-K for the purpose of disclosing a notice of listing deficiency letter from NASDAQ

 

On April 7, 2011, the registrant filed a Form 8-K for the purpose of disclosing that NASDAQ had accepted the proposed listing compliance plan and closed the listing deficiency matter

 

On May 12, 2011, the registrant filed a Form 8-K for the purpose of announcing its third quarter 2011 financial results

 26 

 
 

 

 

On June 2, 2011, the registrant filed a Form 8-K for the purpose of announcing a contract award to Antenna Products Corporation

 

On August 24, 2011, the registrant filed a Form 8-K for the purpose of announcing its third quarter 2011 financial results

 

On September 12, 2011, the registrant filed a Form 8-K for the purpose of announcing personnel additions to Antenna Products Corporation

 

 

 

 

 

 

 

  27

 
 

 

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: September 22, 2011

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 September 22, 2011
Gary W. Havener      
       
/s/ James Kenney   Director September 22, 2011
James Kenney      
       
/s/ R. Allen Wahl   Director September 22, 2011
R. Allen Wahl      
       
/s/ Thomas B. Reynolds   Director September 22, 2011
Thomas B. Reynolds      

 

 28 

 

 
 

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 24, 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

 

Exhibit 99.1(2) - Revised Audit Committee Charter dated July 21, 2010 incorporated by reference to the like numbered exhibit in the Registrant’s Form 10-K filed on August 20, 2010


29

 

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