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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
Annual Report pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Fiscal Year ended Commission File Number
September 30, 1996 0 - 10125
Radiant Technology Corporation
----------------------------------
(Exact name of the registrant as specified in its charter)
California 95-2800355
--------------- --------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) identification number)
1340 North Jefferson Ave., Anaheim, California 92807
----------------------------------------------------
(Address of principal executive offices)(zip code)
Registrant Telephone Number, including area code: (714) 961-0200
Securities registered pursuant to section 12 (b) of the act: None
Securities registered pursuant to section 12 (g) of the Act: Common
stock, without par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15 (d) of the Securities Exchange act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X__ No _____
The aggregate market value of the voting stock held by non-affiliates of
the registrant was $1,027,201 as of November 30, 1996.
The number of shares of the registrant's common stock, no par value,
outstanding as of December 31, 1996 was 1,867,638.
1
PART 1
ITEM 1 BUSINESS
--------
PREFACE
- - -------
Fiscal year 1996 was a significant year for the Company. Few companies
emerge from bankruptcy in a position of strength as has Radiant Technology
Corporation. The backlog has increased along with most other assets of the
Company while the Company achieved a significant reduction in debt. The
Company is moving in early fiscal 1997 to newer facilities in order to enhance
our future production and customer service requirements. The Company is
positioning itself for continued growth over the next several years.
HISTORY OF THE COMPANY
- - ----------------------
Radiant Technology Corporation (herein referred to as the "Company") was
incorporated in the State of California in 1972 with its primary business being
the manufacture and marketing of light and heavy immersion heaters. The
infrared furnace and oven segment gradually overtook the immersion heater
segment in sales volume and growth potential. In February 1986, the immersion
heater division was sold to Process Technology, Inc.
The Company is engaged in the manufacture and marketing of precision
conveyorized infrared ovens and furnaces used by the manufacturers of hybrid
microelectronic circuits, semiconductors, surface mounted device (SMD) printed
circuit assemblies, solar cells and general electronic devices.
Fiscal Year 1994 was operationally impaired as a result of the Working
Capital restrictions imposed upon the Company by the Bank of America. The
Company Backlog was increasing throughout Fiscal Year 1994. However, due to
the limitation of Working Capital, shipments were restricted to $2,219,260 or
55% of prior years shipment levels. The net loss for the Fiscal Year 1994 was
$656,400 which included both significant non recurring Reorganization charges
as a result of the Chapter 11 filing ($242,077) and a more conservative
position with respect to Inventory valuation ($232,000).
Actions were taken during Fiscal Year 1994 which included the removal of
the Bank of America as the sole secured creditor, the restructuring of the
Company and the acquisition of sufficient working capital to sustain a
significant future growth pattern in accordance with the Company's recently
developed substantive five year plan.
Fiscal Year 1995 was profitable with Sales of approximately $4,023,000.
The Company reported extraordinary income of $632,849 in the form of debt
forgiveness and net income of $548,018.
2
Fiscal Year 1996 continued to be profitable with Sales of approximately
$4,172,600. As in Fiscal Year 1995, the Company reported additional
extraordinary income of $223,691 related to debt forgiveness and net income of
$445,481. The emergence from bankruptcy strengthened the Balance Sheet as a
result of both converting insider financing of $350,000 in Notes Payable to
Equity and the settlement with the balance of creditors in accordance with the
Plan for Reorganization during the second quarter of Fiscal Year 1996. The
Company elected to utilize a "Fresh Start" approach allowable when emerging
from bankruptcy.
Adoption of "Fresh Start Reporting" resulted in the following:
1. Fixed Assets increased by $177,000 and Patents by $50,000.
2. Capital stock was reduced by $2,257,000. The accumulated deficit
of $2,484,000 was eliminated.
PRODUCTS
- - --------
During the fiscal years ended September 30, 1996, 1995, and 1994, the
Company's revenues were derived from sales of the following products:
1996 1995 1994
---- ---- ----
$ % $ % $ %
--------------------------------------------------
Conveyorized Infrared
Ovens and Furnaces 3,574,400 86 3,382,400 84 1,579,200 71
Field Service & Parts 598,200 14 640,800 16 640,100 29
Total 4,172,600 100 4,023,200 100 2,219,300 100
Conveyorized Infrared Ovens and Furnaces. The Company manufacturers
infrared ovens and furnaces for sale primarily to manufacturers of electronic
components and assemblies. The Company's conveyorized ovens and furnaces use
quartz-sheathed tungsten and nickel-chrome heating elements. The elements are
placed inside the heating chamber and differ from competitive conventional
furnaces. These differences offer increased performance of the Company's
equipment over that of its competitors' equipment.
The Company's infrared ovens and furnaces have a variety of industrial
uses, including drying and curing coating on precision electronic circuitry and
control components, fusing printing circuit boards, soldering surface mounted
device assemblies, drying and firing thick film on hybrid micro circuits and
solar cells and processing and semiconductors (used in computers and other
electronic equipment), and baking and heat treating various other electronic
components.
The infrared ovens and furnaces are capable of reaching stable, higher
temperature levels more rapidly, emit heat of a higher intensity while using
less energy than a conventional furnace, and are fully conveyorized with a
solid state or computer controls for temperature and conveyor belt speeds.
3
The nature and high intensity of the infrared heat produced in these
furnaces permit a high rate of heat absorption by the electronic parts
processed through them, making them more adaptable to the exacting tolerances
and high-speed heating requirements of certain industrial users. Since these
ovens and furnaces can be brought up to operating temperatures in a shorter
time span, operating at a faster conveyor belt speed, require less floor space
and use less electric energy, operating costs are significantly lower than
conventional ovens and furnaces.
FIELD SERVICE & PARTS
- - ---------------------
Field Service consists primarily of labor provided to repair or modify
existing furnaces. Parts are issued in support of the repair or modification
process.
MATERIAL
- - --------
The Company purchases raw materials, electronic components and mechanical
parts for production of the products. It also manufacturers most of its sheet
metal and some of its mechanical and electronic components. Alternate sources
of material exist for nearly all parts, components and materials. Final
assembly, test installation and maintenance processes are performed by the
Company.
CUSTOMERS
- - ---------
Ovens and Furnaces. The primary customers for the ovens and furnaces
produced by the Company are large manufacturers of microelectronic circuits,
printed circuit boards, electronic components, semiconductors and solar cells,
whose products require curing, baking and finishing under intense but precisely
controlled heat. In these industries, the Company's customers for Fiscal 1996
included many large international manufacturing companies in the following
industries:
Thick Film Hybrid & Solar Cell Industry
---------------------------------------
Semiconductor Industry
----------------------
Printed Circuit Assembly Industry
---------------------------------
During fiscal 1996, one customer contributed a total of 19% to the
Company's net sales. No other customer is the source of more than 10% of the
Company's net sales. There is no consistent repeatability of the same customer
from year to year.
Sales of ovens and furnaces are made throughout the world direct to
customers using a network of sales representatives and are shipped directly
from the Anaheim, California plant. In 1981 the Company entered into its first
distribution agreement in Western Europe. Since that time, the Company has
been continuously represented in this part of the world and is currently
represented by four European sales representatives. In the Pacific Rim area,
six sales distribution companies represent RTC products.
4
Because the Company's ovens and furnaces are capital equipment, new
business and repeat sales are dependent upon the growth of the markets in which
the Company and its customers are involved and the reliability of equipment
delivered.
Principal Markets. In fiscal year 1996 the principal markets for the
Company's products were the NAFTA Countries, the Pacific Rim and Western
Europe. The Company's products are also sold in India, Northern Africa and
Middle Eastern area.
Export Sales. During the 1996 fiscal year, export sales accounted for
approximately $1,065,600 or 26% of net sales, compared to $1,572,700 or 39% in
fiscal 1995 and $979,400 or 44% in fiscal 1994.
BACKLOG
- - -------
At September 30, 1996, the backlog of orders scheduled for delivery was
approximately $1,394,000 for the Company's continuing line of business of
Infrared ovens and furnaces. The Company's comparable backlog of orders at
September 30, 1995 for ovens and furnaces was approximately $1,227,400 and at
September 30, 1994 was approximately $913,000.
The Company regards as backlog all signed purchase orders received from
customers for delivery at specified dates.
Quoting Activity. The backlog does not include outstanding written
quotations submitted to the customer who has not issued a definitive purchase
order. However, based upon prior experience, the Company believes this activity
to be a significant indicator of future business. The Company submitted
proposals for ovens and furnaces at the request of prospective customers
totaling approximately $9,386,537 in 1996 compared to the 1995 fiscal year's
quotation of $7,069,142 and 1994 fiscal year's quotations of $7,113,175. The
bill-to-quote-ratio for 1996 was 33% compared to 40% for 1995 and 22% for 1994.
Cancellations. The Company's contracts provide certain cancellation
clauses, however, the Company does not generally dispute a timely cancellation
provided no significant costs have been incurred at the time of cancellation.
The incidence of cancellations experienced during the most recent fiscal year
has not been material.
COMPETITION
- - -----------
The Company believes that it presently is one of the principal
manufacturers of conveyorized, controlled atmosphere, variable speed, high
temperature infrared furnaces used in the manufacture of precision,
microelectronic circuitry for the semiconductor, solar cell, hybrid micro
circuits and general electronic industries; that the competitive environment
in the market for ovens and furnaces is based on superior technology, design
and delivery as opposed to price. The Company believes that its higher
temperature infrared products are more technologically advanced than that of
the conventional products of its competitors. The Company has patents issued
and pending covering the basic technology involved in the principal markets.
See "Patents" below.
5
In the printed circuit assembly market, technologic changes have caused
this market to shift from infrared reflow furnaces to forced convection type
reflow furnaces. This change has evolved over the last several years requiring
RTC to develop a new series of convection reflow ovens. Due to limited
resources, the Company was late to complete development of forced convection
and consequently lost market share in this segment. That product development
is now completed and though late to market, management believes the Company was
able to capitalize on competitor design shortcomings and to offer a high
performance product.
The Company has maintained a competitive position in the four major
markets it serves - Surface Mount Device (SMD) Printed Circuit Assembly,
Semiconductor packaging, Solar Cell and Thick Film Hybrid circuit manufacture.
The Company's line of large, production oriented Semiconductor furnaces places
the Company strongly in this growing marketplace. The Company maintains a
solid reputation as a leader and innovator in the semiconductor and Solar Cell
equipment markets.
RESEARCH AND DEVELOPMENT
- - ------------------------
Expenditures. For the three fiscal years ended September 30, 1996, 1995,
and 1994, approximate estimates for Company expenditures for research and
development were $264,954 (CILAP), $239,569, and $0 respectively. The research
and development costs pertain to large area processing. (See Part II, Item 7,
Results of Operation.)
PATENTS
- - -------
Within the U.S.A. the Company holds three patents related to its infrared
furnace and oven products. Patent No. 4,406,944 for devices for Mounting
Infrared Lamps in Furnaces is effective for seventeen years beginning September
27, 1983. Patent No. 4,477,718 for Infrared Furnaces with Controlled
environment is effective for seventeen years beginning October 16, 1984.
Patent No. 4,517,448 for infrared Furnaces with Atmosphere Control Capability
is effective for seventeen years beginning May 14, 1985.
Within the U.S.A. the Company has patent applications on its products
including methods for Firing Thick Film Electronic Circuits and Furnace
Assembly for Reflowing Solder and Printed Circuit Boards. Japan Patent Office
Patent No. 1344087 for Infrared Furnace is effective for fifteen years
beginning March 13, 1986 and is very important to the Company and the Company's
industry in Japan. Japan patent office No. 1477108 for Methods for
Manufacturing Multi-Layered Thick Film Circuits is effective for fifteen years
beginning January 27, 1989. The Company also holds a non-exclusive license to
manufacture , use and sell solder fusing machines under U. S. Patent No.
3,744,557 held by Argus International. The license relates to one of the
Company's obsolete products and therefore has limited value. The Company has
applied for patents during fiscal 1996 relating to furnace increased
productivity.
6
TRADEMARKS
- - ----------
The Company registered trademark No. 1425668, "RTC radiant technology
corporation", with the United Stated patent and Trademark Office on January 20,
1987. The trademark is in force for twenty years. The Company registered
trademark No. 1556707, "MEZZANINE", with the United States Patent and Trademark
Office on September 19, 1989. The trademark is in force for twenty years.
WARRANTY
- - --------
The Company warrants its ovens and furnaces against defects existing at
the time of shipment for material and workmanship under normal use and service
for a period of one year on parts, and for ninety days on labor after shipment
to an original user. Under this warranty, the Company will provide, F.O.B.
Anaheim, repair or replacement, at its own cost, any heating elements, SCR
control packages, printed circuit boards, components, and conveyor speed
controls (including digital readouts) which, within the warranty period, are
proved to the satisfaction of the Company to have been defective.
The Company currently employs six customer service engineers who install
and service the ovens and furnaces it manufactures. The Company also supplies a
complete installation service and installation manual with each piece of
equipment sold. The Company's foreign representatives have service personnel.
EMPLOYEES
- - ---------
Including the executive staff, the Company presently employs approximately
43 individuals full time at its facilities in Anaheim, California, of which 26
persons are engaged in production activities, 10 are engaged in sales and
general administrative activities and 7 are engaged in engineering research and
test functions. None of the Company's employees are covered by a collective
bargaining agreement. The Company has never experienced an interruption of
operations due to a labor dispute and considers its relations with its
employees to be excellent.
GOVERNMENT REGULATIONS
- - ----------------------
The operations of the Company are subject to various federal and state
laws and regulations. Management believes that the Company is in substantial
compliance with all applicable laws and regulations.
7
ITEM 2. PROPERTIES
----------
The Company's executive offices and manufacturing facilities are currently
located in Anaheim, CA.
The Company has located a newer and more suitable building located 3.5
miles to the west in the City of Fullerton. The Company will be moving to the
new facilities in January 1997. The move will cost approximately $100,000
inclusive of certain leasehold improvements and upgrading of machinery and
equipment. The initial lease term is for a five year period.
ITEM 3. LEGAL PROCEEDINGS
-----------------
On November 12, 1993, the Company voluntarily filed for protection under
Chapter 11 of the United States Bankruptcy code. (See Part II, Item 8) (See
Note 2 on the attached financial statements.)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The Company held an annual shareholders meeting on July 18, 1996. The
following were elected to the Board of Directors:
Number of Number of
Name Votes For Votes Withheld
- - ---- --------- --------------
Lawrence R. McNamee 1,502,194 2,521
Carson T. Richert 1,502,099 2,616
Joseph S. Romance 1,501,979 2,736
Peter D. Bundy 1,502,217 2,498
Robert B. Thompson 1,502,217 2,498
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED
SECURITY HOLDER MATTER
--------------------------------------------------
The Company's common stock is quoted by the National Quotation Bureau,
Inc. ("NQBI") on the "Pink Sheets". The table below sets forth the
representative high and low bid prices for the common stock during each
calendar period indicated. The Quotations represent interdealer prices without
adjustments for retail mark-ups, mark-downs or commissions and consequently do
not necessarily reflect actual transactions.
8
HIGH LOW
1996
1st Quarter...... * *
2nd Quarter...... * *
3rd Quarter...... .625 .188
4th Quarter...... 1.50 .313
1995
1st Quarter...... $.02 $.015
2nd Quarter...... .02 .015
3rd Quarter...... .15 .015
4th Quarter...... .02 .015
* No trading in this quarter due to trading suspension relative to the
reverse stock split processing as outlined in the reorganization plan.
Holders of shares of Common Stock are entitled to receive such dividends,
if any, as may be declared by the Board of Directors of the Company out of
funds legally available therefore and, upon the liquidation, dissolution or
winding up of the Company are entitled to share ratably in all net assets
available for distribution to such share holders. The Company has never paid
any dividends. The Company had an agreement not to declare any dividends
without the consent of the Bank under a prior loan arrangement. Although no
such agreement continues to exist, it is anticipated that all earnings, if
any, will be retained for development of working capital to grow the business
of the Company and there is no present intention to declare dividends in the
foreseeable future. See Item 7 "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
Shareholders of Record: As of September 30, 1996, the number of recorded
holders of the Company's Common Stock was 419.
ITEM 6. SELECTED FINANCIAL DATA
-----------------------
The following table summarizes certain selected financial data of the
Company :
9
Operating Data
(in thousands) Year Ended September 30
---------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Net Sales $4,173 $4,023 $2,219 $3,916 $3,938
Income (loss) from
Continuing Operations 222 (85) (656) 101 (928)
Total Assets 2,524 1,775 1,413 2,041 2,199
Long-term debt 0 0 0 0 0
Per Share Information
Income(loss) from
Continuing Operations .18 (.44) (3.47) .53 (4.87)
Cash Dividends 0 0 0 0 0
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
-------------------------------------------------
GENERAL
-------
Over the last twenty years, conveyorized infrared ovens and furnaces have
become the Company's principal product line, accounting in the aggregate for
approximately 86%, 84% and 71% of net sales for fiscal 1996, 1995, and 1994.
Successful application of infrared ovens and furnaces were first made for the
semiconductor industry, for the production of ceramic dual in-line ("CERDIP")
packages. In the last ten years, the application has become widely used by the
electronics manufacturing industry in electronic packaging technologies, such
as thick film hybrid circuitry and surface mounted device printed circuit
assemblies. The Company believes it is a leading manufacturer of high
temperature firing furnaces used by the manufacturers in the electronic
industries.
RESULTS OF OPERATIONS
- - ---------------------
Net sales of $4,172,575 increased $149,372 or 4% for the fiscal year ended
September 30, 1996 as compared to net sales of $4,023,203 for fiscal 1995. The
increased shipment level was obtained even though semiconductor sales in North
America were down.
Net sales of $4,023,203 fiscal 1995 increased $1,803,943 or 81% from the
fiscal 1994 level of $2,219,260, as a result of increased marketing efforts.
Cost of sales of $2,545,246 in 1996 was 61% of sales compared to
$2,548,852 or 63% of sales in 1995. Cost of sales was favorably affected by a
sales volume increase coupled with the continuance of certain fixed costs.
10
Gross profit of $1,627,329 in 1996 increased $152,978 or 10% from the
$1,474,351 level of 1995. The 1996 gross profit increase is a result of the
items outlined under the cost of sales. The 1995 gross profit increased
$1,087,301 or 281% from 1994 when gross profit was $387,050.
Selling and general and administrative expenses increased $204,181 or 23%
to $1,089,438 in fiscal 1996 compared to $885,257 in fiscal 1995. The 1996
increase was in support of increased bookings and shipment levels in addition
to $55,000 reserved for potential bad debts.
Fiscal 1996 showed an operating income of $272,937 compared to operating
income of $349,525 in fiscal 1995 and operating loss of ($137,168) in 1994.
Interest expense of $10,020 in 1996 was down $27,211 from the $37,231 in
1995 which itself was down $7,124 from the $44,355 in 1994. These reductions
are due to reductions in the borrowing level under the Company's bank line of
credit and the cessation of interest accrual on the Bank of America loan from
the point the loan converted to an unsecured debt in April 1994. In addition,
the McNamee and Operation Phoenix loan which were originated in 1994, were
converted to equity in the first quarter of fiscal year 1996 as part of the
reorganization plan. Additional inventory reserves of $232,000 were provided
in fiscal 1994 to allow for obsolete and slow-moving inventory.
Research and Development costs of $264,954 and $239,569 for 1996 and 1995
respectively, were incurred through a Consortium for Intelligent Large Area
Processing (CILAP). The Company's involvement was to provide a furnace to
reduce the cost of producing sophisticated microelectronic interconnect devices
called thin film multichip modules.
Extraordinary gains of $223,691 were realized in fiscal 1996. The gain was
from the debt forgiveness associated with the settlement of creditor claims
under the Reorganization Plan.
Reorganization costs were recognized during both fiscal 1996 and 1995 in
the amount of $40,327 and $460,525 respectively which relate directly to the
Company's Chapter 11 filing. The costs are comprised of professional fees and
the upwards adjustment of liabilities to reflect the allowed claims amount even
though they may be settled for lesser amounts.
Changes in the provision for taxes on income and extraordinary item for
reduction of federal and state income tax arising from utilization of loss
carry forward are discussed in Note 8 in the Company's Notes to Financial
Statements.
Corporate Restructuring
- - -----------------------
The landlord of the former Hunter street facility filed a lawsuit of
approximately $300,000 against Radiant Technology for the unexpired term of the
lease, though the building was immediately re-occupied by another tenant. The
Company was not in a financial position to withstand such a settlement and
therefore, filed for protection under Chapter 11 of the United States
Bankruptcy Code, November 12, 1993.
11
The Company planned to utilize the filing in order to clear up prior
period's egregious legal entanglements.
Following the Chapter 11 filing by the Company, the Bank of America
assumed the accounts receivable of Radiant Technology Corporation of
approximately $300,000 in mid-March 1994 in partial satisfaction of their prior
loan balance of approximately $870,000. The Bank reclaimed their cash
collateral of approximately $200,000 in mid-April 1994, further reducing the
loan balance.
In April 1994, a Radiant Technology Corporation Director, William
McLaughlin, paid the bank an additional $150,000 to obtain the banks'
collateralization position with respect to its owned non cash assets thereby
converting the Bank of America loan to an unsecured liability. In June 1994,
Lawrence R. McNamee, Chairman of the Board and Chief Executive Officer of
Radiant Technology Corporation assumed the $150,000 loan and related asset
collateral from Mr. McLaughlin, to eliminate McLaughlin's filed objection to an
operating capital loan from Operation Phoenix as described later on.
A minimum loan of $200,000 was necessary to provide the Company with
operating capital after the Bank of America withdrew its cash collateral in
April of 1994. A loan obtained from a partnership of employees and insiders
(Operation Phoenix, a limited partnership), was approved by the Bankruptcy
Court on June 13, 1994. Further Company support was given by certain employees
who donated their labor and expertise for a three month period from January to
April 1994 which contributed to the resumption of furnace production in May
1994.
The Company entered fiscal 1995 owing the Bank of America approximately
$370,000 on a revolving line of credit secured by substantially all of the
Company's assets. The Company resolved differences with the Bank of America
and paid off the balance in accordance with the Reorganization Plan.
Confirmation of the reorganization plan by the Bankruptcy Court was
obtained on August 3, 1995, existing Shareholders were diluted thirty to one.
The 5,712,266 shares currently outstanding converted to approximately 190,409
new common shares. Deferred employee compensation on volunteer labor,
occurring during between January and April 1994 was granted 380,818 new shares.
The limited Partnership (Operation Phoenix) and Lawrence McNamee received
571,277 and 380,818 new shares respectively for providing the financing
necessary to re-establish operations.
Prepetition creditors claims which were $300 or less and those creditors
adjusting their debt downward to $300 were fully paid in cash. The remaining
creditors had the option of holding a prorata distribution of 380,818 shares or
being paid off on 15% on the dollar. Most creditors preferred being paid off
in cash as opposed to retaining shares. The balance of 370,647 shares not
retained by the creditors rolled over to the prepetition shareholders on a
prorata basis.
Prepetition shareholders were reverse split 30:1 whereby one share was
issued for every 30 shares owned. In the event the split resulted in 5 shares
or less, the shares were automatically repurchased by the Company at $1.00.
The creditor rollover of 370,647 became equivalent to a stock dividend of
approximately 2 shares for every 1 new share which were issued upon the
reverse split. The net split effect to the remaining prepetition
shareholders after the creditor rollover distribution was approximately 11:1.
12
The Bankruptcy Court approved and confirmed the Reorganization Plan on
August 3, 1995. Consummation of the Plan transpired during Fiscal Year 1996
whereby the Company settled with shareholders and creditors within a specified
period. Dismissal of the Bankruptcy case occurred in February 1996, resulting
the release of Radiant Technology Corporation from legal entanglements, a
reduction of the debt structure and the freedom to pursue planned Company
objectives.
Liquidity and Capital Resources
- - -------------------------------
The Company expects a gradual increase of liquidity over the near term
through increasing sales.
Capital expenditures are expected to be minimal in the near term. Some
expenditures for leasehold improvements are included within the moving
expenses.
As of September 30, 1996, the Company had no debt.
Inflation and Other Factors
- - ---------------------------
Inflation has had no material effect on the Company's operations or
financial condition.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The following are included in this 10-K as exhibits:
1. Report of Independent Certified Public Accountants.
2. Balance sheets as of September 1996 and 1995.
3. Statement of Operation for the years ended September 30, 1996, 1995,
1994.
4. Statement of Stockholders Equity for the years ended September 30,
1996, 1995, 1994.
5. Statement of Cash Flows for the years ended September 30, 1996, 1995,
1994.
6. Notes to Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
-----------------------------------------------------------
None.
13
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
The directors and executive officers of the Company as of September 30,
1996 are listed below, together with a brief account of their business
experience and certain other information.
NAME AGE POSITION
---- --- --------
Lawrence R. McNamee 65 Chairman of the Board and
Chief Operating Officer
Carson T. Richert 57 President and a Director
Joseph S. Romance 65 Director
Peter Bundy 64 Director
Robert B. Thompson 60 Director
Mercy Gingrich 55 Corporate Secretary
Roger T. Horsburgh 57 Controller
Lawrence McNamee joined the Company in September 1990 and was elected
Chairman of the Board of Directors in March 1991. Mr. McNamee, a consultant,
has 14 years prior experience in working with companies in turnaround
management.
Carson T. Richert was a founder of the Company and has been a director
since its incorporation in 1972. Mr. Richert was Vice President - Marketing of
the Company from 1972 until 1981 when he was elected Executive Vice President.
Mr. Richert was elected President in August 1990.
Joseph S. Romance was a founder of the Company and has been Chairman of
the Board of Directors since its incorporation in 1972 until March of 1991.
From 1972 to October 1980 he also served as President, and again from July 1981
to February 1988.
Peter D. Bundy was elected to the Board of Directors in January 1995. Mr.
Bundy is an investor and consultant. His expertise is in marketing, He was a
partner with Howard Hirsh Group, a designer and manufacturer of several apparel
lines. Prior to that he was a Vice President of Associated Department Stores.
14
Robert B. Thompson was elected to the Board of Directors in July 1996.
Mr. Thompson is Vice Chairman and a Director of InspecTech, Inc., a company
engaged in the business of providing and franchising building inspection
services in connection with the transfer of real property. Mr. Thompson is
also an investor and consultant with expertise in the banking industry. Mr.
Thompson has previously served as President of Western Federal Bank of
California.
Mercy Gingrich was elected Secretary in September 1990. Ms. Gingrich
joined the Company in June 1990 and has held positions of Administrative
Assistant and Director of Human Resources within the Company.
Roger T. Horsburgh joined the Company in March 1993. Previously he was a
consultant to several businesses providing them with accounting services.
Prior to that he was Director of Finance for Irvin Industries from 1990 to 1992
with full financial responsibilities. From 1972-1989 he was Controller for
Edcliff Instruments where he prepared financial reports for commercial and
government contracts.
Directors of the Company hold office until the next annual meeting of
Shareholders and until their successors are elected and qualified. All officers
serve at the discretion of the Board of Directors. Except for Messrs. Romance
and Richert, who are first cousins, there are no family relationships between
any directors or officers of the Company. Members of the Board of Directors
who are not also officers of the corporation are paid $250 quarterly for their
attendance at board meetings.
ITEM 11. EXECUTIVE COMPENSATION
----------------------
Cash Compensation
- - -----------------
For the fiscal year ended September 30, 1996 the following table sets
forth certain information concerning the executive officers of the Company
whose aggregate cash compensation exceeded $100,000, and concerning all
executive officers as a group:
Name of Individual or
Number of Persons Capacities in Compensation
in Group Which Served 1994 1995 1996
- - ------------------- --------------- ------------------------
Lawrence R. McNamee Chairman of the Board $61,200 $98,800 $98,800
and Chief Operating Officer - - 4,090(1)
(1) Other compensation includes 113,598 shares issued in accordance with the
Reorganization Plan at a value of .036 a share for unpaid wages.
15
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth at September 30, 1996, information
regarding the ownership of the Company's Common Stock by (i) each person known
by the Company to be the beneficial owner of more than five percent of the out-
standing shares of Common Stock, (ii) each of the directors of the Company, and
(iii) all officers and directors of the Company as a group.
Amount and Nature
Name and Address of Beneficial Percent
of Beneficial Owner Ownership(1)(3) of Class
- - --------------------------- ----------------- ----------
Joseph S. Romance 144,329(2) 6.3%
Radiant Technology Corporation
1340 N. Jefferson Street
Anaheim, CA 92807
Carson T. Richert 177,587 7.7%
Radiant Technology Corporation
1340 N. Jefferson Street
Anaheim, CA 92807
Lawrence R. McNamee 983,890(4) 42.6%
Radiant Technology Corporation
1340 N. Jefferson Street
Anaheim, CA 92807
Raymond G. Kruzek 162,813(5) 7.0%
Radiant Technology Corporation
1340 N. Jefferson Street
Anaheim, CA 92807
Roger T. Horsburgh 147,813(6) 6.4%
Radiant Technology Corporation
1340 N. Jefferson Street
Anaheim, CA 92807
Mercy Gingrich 140,286(7) 6.0%
Radiant Technology Corporation
1340 N. Jefferson Street
Anaheim, CA 92807
All Directors and Officers 1,786,718 77.4%
as a group (7 persons)
_______________
16
(1) Each person has sole voting and investment power over the Common Stock
shown as beneficially owned, subject to community property laws where
applicable and the information contained in footnotes to this table.
(2) Includes 138,434 shares held in joint tenancy in a living trust with his
wife, over which Mr. Romance may be deemed to have shared investment power, and
includes an aggregate of 5,895 shares owned by his three adult children.
(3) The plan of reorganization called for current outstanding shares to be
converted to new shares at a ratio of 30 to 1. These amounts reflect the
results of the reverse stock split
(4) Includes 346,666 unexercised option shares for unpaid wages in prior
periods without an expiration date.
(5) Includes 40,000 unexercised option shares expiring 2/97.
(6) Includes 25,000 unexercised option shares expiring 2/98.
(7) Includes 30,000 unexercised option shares expiring in 10,000 shares blocks
12/97, 2/98,12/00, respectively.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-----------------------------------------------
Cruttenden and Company Warrants
- - -------------------------------
In conjunction with a private placement, Cruttenden and Company was issued
warrants to purchase up to 240,000 shares of the Company common stock at a per
share exercise price of $.40. Upon confirmation of the Chapter 11 bankruptcy
approved Reorganization Plan, the exercise price increased to $12.00 per share
and expire in August 1997.
Notes Payable
- - -------------
A Promissory Note payable to Lawrence McNamee for $150,000 at 10% interest
due April 1995, for payment on the Bank of America loan was established by the
Company in April 1994. The note was converted to equity in accordance with the
reorganization plan.
A Promissory Note payable to Operation Phoenix for $200,000 at 10% interest
due June 1995, for working capital cash infusion was entered into by the
Company in August 1994. The note was converted to equity in accordance with
the reorganization plan.
17
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------
(a) (1) Financial Statements
The following are included in this 10-K as exhibits:
1. Report of Independent Certified Public Accountants
2. Balance sheets as of September 1996 and 1995.
3. Statement of Operation for the years ended September 30, 1996, 1995,
1994.
4. Statement of Stockholders Equity for the years ended September 30,
1996, 1995, 1994.
5. Statement of Cash Flows for the years ended September 30, 1996, 1995,
1994.
6. Notes to Financial Statements.
The financial statements required pursuant to this Item have been filed as a
part of this Report under Part II, Item 8.
(2) Financial Statement Schedules
-----------------------------
None.
(3) Exhibits
--------
Exhibit No. Description Page No.
- - ----------- ----------- ---------
3.1 Certificate of Restated Articles of
Incorporation of the Company.(1)
3.1(a) Certificate of Amendment of Articles
of Incorporation.(3)
3.1(b) Certificate of Amendment of Articles of Incorporation. (7)
3.2 Restated By-Laws of the Company.(1)
3.2(a) Amendment to By-Laws of the Company. (7)
4.1 Specimen Certificate of Common Stock.(1)
4.2 Warrant Agreement between the Company and U.S. Stock
Transfer Corporation.(1)
18
10.22(a) Amendment No. 1 Employment Agreement effective as of
November 7, 1991 by and between the Company and
Lawrence R. McNamee.(7)
10.24 Form of Indemnity Agreement. (7)
10.25 Warrant granted to Cruttenden and Company to purchase up to
240,000 shares of the Company common stock. (7)
24.2 Consent to include opinion of Helsley, Mulcahy & Fesler.
(1) Filed as an exhibit to the Company Registration Statement on Form 2-
18 (Registration No. 2-72528-IA) filed on July 14, 1981, and incorporated
herein by this reference.
(2) Filed as an exhibit to the Company's 1984 Annual Report on Form 10-K
filed December 29, 1984 and incorporated herein by this reference.
(3) Incorporated by reference to the Company's Proxy Statement dated
January 14, 1986.
(4) Filed as an exhibit to the Company's 1988 Annual Report on Form 10-K
filed December 27, 1988 and incorporated herein by this reference.
(5) Filed as an exhibit to the Company's 1989 Annual Report on Form 10-K
filed January 22, 1990 and incorporated herein by this reference.
(6) Filed as an exhibit to the Company's 1990 Annual Report on Form 10-K
filed January 15, 1990 and incorporated herein by this reference.
(7) Filed as an exhibit to the Company's 1990 Annual Report on Form 10-K
filed January 15, 1990 and incorporated herein by this reference.
(b) Reports on Form 8-K.
None.
19
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, this 9th day of
January, 1997.
RADIANT TECHNOLOGY CORPORATION
By: /s/Lawrence R. McNamee
------------------------------------
Lawrence R. McNamee
Chairman of the Board
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS that such person whose signature appears
below constitutes and appoints Lawrence R. McNamee, his attorney-in-fact, with
power of substitution, for him in any and all capacities, to sign this Annual
Report on Form 10-K, and any amendments thereto, each with Exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorney-in-fact, or
his substitute may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities 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/ Lawrence R. McNamee Chairman of the Board January 9, 1997
Lawrence R. McNamee and Chief Operating Officer
/s/ Roger Horsburgh Corporate Controller January 9, 1997
Roger Horsburgh (Principal Financial
and Accounting Officer)
/s/ Carson T. Richert President and a January 9, 1997
Carson T. Richert Director
20
RADIANT TECHNOLOGY CORPORATION
Financial Statements
September 30, 1996
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
The Stockholders
Radiant Technology Corporation
We have audited the accompanying balance sheets of Radiant Technology
Corporation as of September 30, 1996 and 1995 and the related statements of
operations, stockholders' deficit and cash flows for each of the years in
the three year period ended September 30, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Radiant Technology
Corporation as of September 30, 1996 and 1995, and the results of its
operations and its cash flows for each of the three years in the period
ended September 30, 1996, in conformity with generally accepted accounting
principles.
CACCIAMATTA ACCOUNTANCY CORPORATION
Irvine, California
December 3, 1996
RADIANT TECHNOLOGY CORPORATION
Balance Sheets
September 30,
--------------------------
1996 1995
--------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 610,128 $ 379,936
Accounts receivable 759,123 576,284
Inventories 640,846 582,097
Other 5,900 14,468
------------ ------------
Total current assets 2,015,997 1,552,785
Property and equipment 444,445 204,001
Other 63,930 18,288
------------ ------------
$ 2,524,372 $ 1,775,074
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 174,760 $ 46,634
Accrued liabilities 314,638 397,084
Customer deposits 446,485 211,085
Post-petition notes payable - 350,000
Subject to compromise - 273,400
------------ -----------
Total current liabilities 935,883 1,278,203
------------ -----------
Commitments and contingencies - -
Stockholders' equity:
Preferred stock - -
Capital stock 1,143,008 2,981,195
Retained earnings (deficit) 445,481 ( 2,484,324)
------------ -----------
Total stockholders' equity 1,588,489 496,871
------------ -----------
$ 2,524,372 $ 1,775,074
============ ===========
The accompanying notes are an integral part of these financial statements.
RADIANT TECHNOLOGY CORPORATION
Statements of Operations
Year Ended September 30,
------------------------------------------
1996 1995 1994
------------------------------------------
Net sales $ 4,172,575 $ 4,023,203 $ 2,219,260
Cost of sales 2,545,246 2,548,852 1,832,210
------------ ------------ ------------
Gross profit 1,627,329 1,474,351 387,050
Operating expenses:
Selling, general and administrative 1,089,438 885,257 524,218
Research and development 264,954 239,569 -
------------ ------------ ------------
Total operating expenses 1,354,392 1,124,826 524,218
------------ ------------ ------------
Operating income (loss) 272,937 349,525 ( 137,168)
------------ ------------ ------------
Other expense:
Interest 10,020 37,231 44,355
Write down of inventory - - 232,000
------------ ------------ ------------
Total other expense 10,020 37,231 276,355
------------ ------------ ------------
Income (loss) before reorganization
expenses, provision for income taxes
and extraordinary item 262,917 312,294 ( 413,523)
------------ ------------ ------------
Reorganization expenses:
Provision for bankruptcy claims - 373,130 130,827
Professional fees 40,327 87,395 111,250
------------ ------------ ------------
40,327 460,525 242,077
------------ ------------ ------------
Income (loss) before provision for
income taxes and extraordinary item 222,590 ( 148,231) ( 655,600)
Provision (benefit) for income taxes 800 ( 63,400) 800
------------ ------------ ------------
Income (loss) before extraordinary item 221,790 ( 84,831) ( 656,400)
Extraordinary item:
Gain on extinguishment of debt, net
of taxes of $64,200 in 1995 223,691 632,849 -
------------ ------------ ------------
Net income (loss) $ 445,481 $ 548,018 ($ 656,400)
============ ============ ============
Income (loss) per share:
Before extraordinary item $ .18 ($ .44) ($ 3.45)
Extraordinary item .19 3.32 -
------------ ------------ ------------
Net income (loss) $ .37 $ 2.88 ($ 3.45)
============ ============ ============
Shares used in computing net income
(loss) per share 1,209,405 190,409 190,409
============ ============ =============
The accompanying notes are an integral part of these financialstatements.
RADIANT TECHNOLOGY CORPORATION
Statements of Stockholders' Equity (Deficit)
Years Ended September 30, 1996, 1995 and 1994
(Accumulated
Deficit) Stockholders'
Capital Stock Retained Equity
Shares Amount Earnings (Deficit)
-------- ---------- ------------- ----------------
Balance, September 30, 1993 190,409 $2,981,195 ($2,375,942) $ 605,253
Net loss - - ( 656,400) ( 656,400)
----------- ----------- ------------ -----------
Balance, September 30, 1994 190,409 2,981,195 ( 3,032,342) ( 51,147)
Net income - - 548,018 548,018
----------- ----------- ------------ -----------
Balance, September 30, 1995 190,409 2,981,195 ( 2,484,324) 496,871
Issuance of shares -
Bankruptcy reorganization
McNamee loan 380,818 175,051 - 175,051
Operation Phoenix loan 571,227 229,172 - 229,172
Creditors and original shareholders 380,818 3,900 - 3,900
Employees 380,818 13,709 - 13,709
Other 90,750 36,300 - 36,300
Repurchase of shares ( 127,202) ( 38,989) - ( 38,989)
Application of fresh start accounting - (2,257,330) 2,484,324 226,994
Net Income - - 445,481 445,481
----------- ----------- ------------ -----------
Balance, September 30, 1996 1,867,638 $1,143,008 $ 445,481 $1,588,489
=========== =========== ============ ===========
The accompanying notes are an integral part of these financial statements.
RADIANT TECHNOLOGY CORPORATION
Statements of Cash Flows
Year Ended September 30,
------------------------------------
1996 1995 1994
------------------------------------
Cash flows from operating activities
Net income (loss) $ 445,481 $ 548,018 ($ 656,400)
Adjustments to reconcile net income
to net cash provided by operating
activities:
Gain on forgiveness of debt ( 223,691) ( 632,849) -
Issuance of stock as compensation 13,709 - -
Bad debt expense 55,000 23,500 7,500
Depreciation and amortization 100,236 131,422 151,094
Inventory obsolescence 53,000 - 232,000
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable ( 201,539) ( 296,271) ( 105,840)
Inventories ( 111,749) ( 84,897) 158,191
Other assets 9,398 22,825 ( 21,218)
Increase (decrease) in:
Accounts payable 128,126 - ( 216,069)
Accrued expenses ( 28,223) - ( 401,650)
Customer deposits 235,400 - -
---------- ---------- ----------
Net cash provided (used) by
operating activities before
reorganization items 475,148 ( 288,252) ( 852,392)
---------- ---------- ----------
Changes in reorganization items:
Increase (decrease) in liabilities:
Not subject to compromise - 446,985 376,042
Subject to compromise ( 45,809) - 342,026
---------- ---------- ----------
Net change in reorganization items ( 45,809) 446,985 718,068
---------- ---------- ----------
Net cash provided (used) by
operating activities 429,339 158,733 ( 134,324)
---------- ---------- ----------
Cash flows from investing activities
Capital expenditures ( 160,158) ( 48,183) ( 1,033)
---------- ---------- ----------
(continued)
The accompanying notes are an integral part of these financial statements.
RADIANT TECHNOLOGY CORPORATION
Statements of Cash Flows (Continued)
Year Ended September 30,
------------------------------------
1996 1995 1994
------------------------------------
Cash flows from financing activities
Repurchase of common stock ($ 38,989) $ - $ -
Net borrowings from related
parties (post petition) - - 350,000
Principal reductions on short-term debt - - ( 187,926)
---------- ---------- ----------
Net cash provided (used) by
financing activities ( 38,989) - 162,074
---------- ---------- ----------
Net increase in cash 230,192 110,550 26,717
Cash and cash equivalents,
beginning of year 379,936 269,386 242,669
---------- ---------- ----------
Cash and cash equivalents, end of year $ 610,128 $ 379,936 $ 269,386
========== ========== ==========
Supplemental disclosures of cash flow information and non-cash investing and
financing activities:
1996 1995 1994
-----------------------------
Cash paid during the year for:
Interest $ - $ - $ 14,501
Income taxes $ 800 $ 13,369 $ -
In 1994, short term debt was reduced by $233,800 when Bank of America seized
the accounts receivable collateralizing the line of credit.
In 1996, as a part of the bankruptcy plan, debt and accrued interest of
$404,223 and payables of $3,900 were retired through the issuance of common
stock.
In 1996 the Company issued common shares with a value of $36,300 to purchase
accounts receivable originally seized by Bank of America during the
bankruptcy proceedings.
Upon emergence from bankruptcy the Company applied fresh-start accounting,
resulting in an increase in fixed assets and patents, the elimination of
accumulated deficit and a reduction in the capital stock, as follows:
Fixed assets $ 176,994
Patents 50,000
Capital stock 2,257,330
Retained Earnings ( 2,484,324)
-------------
$ -
=============
The accompanying notes are an integral part of these financial statements
RADIANT TECHNOLOGY CORPORATION
Notes to Financial Statements
September 30, 1996
1. Summary of significant accounting policies
- - ----------------------------------------------
Nature of Operations
- - --------------------
Radiant Technology Corporation (the Company) is engaged in the manufacturing
and marketing of infrared conveyorized ovens and furnaces used by the
microcircuit manufacturing industry.
All the Company's operations are located in California. Sales to entities
located outside the United States totaled $1,065,600, $1,572,700 and
$979,400 in 1996, 1995 and 1994, respectively. Of these amounts, sales to
Pacific Rim countries were $538,100, $1,037,400 and $243,300 and sales to
European countries were $311,600, $207,100 and $258,100 in 1996, 1995 and
1994, respectively. Sales to NAFTA countries were $215,900, $328,200 and
$477,600 in 1996, 1995 and 1994, respectively.
During 1996, as percentages of net sales, the Company's largest customer
provided 19 percent, while in 1995 the Company's largest customer provided
14 percent. In 1994 no customer provided more than 10 percent of net sales.
Concentrations of Credit Risk
- - -----------------------------
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and trade
receivables. The Company's cash is in high credit quality banks, which
limits the Company's exposure to loss from concentration.
The Company's trade receivables are concentrated within three industries.
To minimize the risk of loss, the Company routinely assesses the financial
strength of its customers, and may require a substantial downpayment prior
to commencing machine production.
Fair Value of Financial Instruments
- - -----------------------------------
The carrying value of cash, receivables and accounts payable approximates
fair value due to the short maturity of these instruments. None of the
financial instruments are held for trading purposes.
Cash and Equivalents
- - --------------------
For purposes of the statement of cash flows, cash equivalents include time
deposits, certificates of deposit, and all highly liquid debt instruments
with original maturities of three months or less.
Inventories
- - -----------
Inventories include material, direct labor and manufacturing overhead and
are priced at the lower of cost (first-in, first-out) or market.
RADIANT TECHNOLOGY CORPORATION
Notes to Financial Statements
1. Summary of significant accounting policies (continued)
- - ----------------------------------------------------------
Property and Equipment
- - ----------------------
Property and equipment are recorded at cost. The cost and related
accumulated depreciation and amortization of property and equipment retired
or sold are removed from the accounts, and any gains or losses are included
in income. The Company follows the policy of capitalizing expenditures that
significantly increase the life of the asset and charging ordinary
maintenance and repairs to operations as incurred.
Depreciation and amortization are provided over the estimated useful lives
of the assets using the straight-line method as follows:
Description Life
----------- ----
Machinery and equipment 10 years
Vehicles 10 years
Leasehold improvements 5 years
Office furniture & fixtures 5 years
Product development software 3 years
Customer Deposits
- - -----------------
The Company often requires a deposit from customers before beginning work on
a furnace. It is the Company's policy to record the deposit as a receivable
with a corresponding deferred liability at the time a sale order is written.
When the deposit is received, the receivable is relieved.
Earnings Per Share
- - ------------------
The computation of earnings per common share in each year is based on the
weighted average number of common shares outstanding. When dilutive, stock
options and warrants are included as share equivalents using the treasury
stock method. As part of the bankruptcy reorganization plan, all current
shares were converted to new shares. See Note 2.
Income Taxes
- - ------------
Effective October 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (FAS 109).
Under the provisions of FAS 109, an entity recognizes deferred tax assets
and liabilities for temporary differences between the financial reporting
basis and the tax basis of its assets and liabilities. Deferred tax assets
are reduced by a valuation allowance when deemed appropriate. The
measurement of deferred tax assets and liabilities is based on provisions of
the enacted tax law; the effects of future changes in tax laws or rates are
not anticipated. Under FAS 109, measurement is computed using applicable
current tax rates (34% for 1995 and 1994). Prior year taxes have been
computed using APB 11, Accounting for Income Taxes. The change in
accounting principle had no material effect on the 1994 financial
statements.
RADIANT TECHNOLOGY CORPORATION
Notes to Financial Statements
1. Summary of significant accounting policies (continued)
- - ----------------------------------------------------------
New accounting pronouncement
- - ----------------------------
The Financial Accounting Standards Board has recently issued Statement of
Financial Accounting Standard No. 123, Accounting for Stock-Based
Compensation, which requires the determination and disclosure of
compensation costs implicit in stock option grants or other stock rights.
Under the employee transaction provisions, companies are encouraged, but not
required, to adopt the fair value of accounting for employee stock-based
transactions. Companies are also permitted to continue to account for such
transactions under Accounting Principles Board Opinion No. 25 (APB 25),
Accounting for Stock Issued to Employees, but would be required to disclose,
in a note to the financial statements, pro forma net earnings and, if
presented, earnings per share as if the Company had adopted SFAS No. 123.
The Company will continue to account for employee stock-based compensation
under APB No. 25. The additional disclosures will be presented in fiscal
1997.
Use of Estimates
- - ----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Reclassification of Prior Year Amounts
- - --------------------------------------
Certain items in the 1994 and 1995 financial statements have been
reclassified to conform with the 1996 presentation.
2. Bankruptcy proceedings
- - --------------------------
On November 12, 1993 the Company filed petition for relief under Chapter 11
of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the
Central District of California. Under Chapter 11, certain claims against the
Debtor in existence prior to the filing of the petitions for relief under
the federal bankruptcy laws are stayed while the Debtor continues business
operations as Debtor-in-possession. Additional claims may arise subsequent
to the filing date resulting from rejection of executory contracts,
including leases, and from the determination by the court (or agreed to by
parties in interest) of allowed claims for contingencies and other disputed
amounts. Claims secured against the Debtor's assets ("secured claims") also
are stayed, although the holders of such claims are secured primarily by
liens on the Debtor's property, plant, and equipment. All claims are
reflected in the September 30, 1995 balance sheet as "subject to
compromise".
RADIANT TECHNOLOGY CORPORATION
Notes to Financial Statements
2. Bankruptcy proceedings (continued)
- - --------------------------------------
The Bankruptcy Court confirmed the plan of Reorganization on August 3, 1995
and the bankruptcy was dismissed on February 20, 1996. The plan called for
the following:
- - - Existing outstanding common shares at the time of bankruptcy were diluted
30:1. Upon this reverse stock split, the shareholders in this class were
given the option to redeem all their new shares for $.20 per share.
Shareholders left with 5 or fewer shares after the reverse split were
subject to automatic repurchase.
- - - Unsecured general creditors with claims in excess of $300 were given the
option to either a) convert to equity by accepting a pro-rata portion of
380,818 shares of common stock or b) accept cash equivalent to 15 percent of
their allowed claims. If option a) was selected, the pro-rata share was
determined by claims allowed, not by the number of creditors electing this
option. Any of the 380,818 shares not distributed because the creditors
elected option b) were distributed to existing shareholders who did not
elect to receive cash for their shares. As a result 370,647 shares were
distributed to existing shareholders.
- - - Unsecured general creditors with claims of $300 or less were paid in
full.
- - - Lawrence McNamee received 380,818 shares of common stock as payment for
his post-petition loan and related accrued interest totaling $177,051.
- - - Operation Phoenix, a general partnership consisting of Company employees,
received 571,227 shares of common stock as payment for a post-petition loan
and related accrued interest totaling $229,172.
- - - Employees who agreed to take no wages during the shutdown period and
agreed to reduced wages for a period of two years were awarded 380,818
shares of common stock.
Total debt forgiven was $920,740. The Company accounted for the
reorganization using fresh-start reporting. Accordingly all assets and
liabilities were restated at the date of dismissal to reflect their
reorganization value, which approximates fair value at the date of
reorganization. Independent appraisals were used to determine the fair
value of assets. The book value of fixed assets were increased by $176,000
and patents by $50,000. Accumulated deficit of $2,484,324 was eliminated
with a corresponding net reduction in capital stock.
While prior year financial statement information is presented to satisfy
regulatory requirements, this presentation should not be viewed as a
continuum because the 1996 financial statements are those of a different
reporting entity prepared using a different basis of accounting, and
therefore, are not comparable to those of prior periods.
3. Accounts receivable
- - ------------------------
1996 1995
---------- ----------
Trade receivables $ 845,123 $ 607,284
Less: allowance for doubtful accounts ( 86,000) ( 31,000)
---------- ----------
$ 759,123 $ 576,284
========== ==========
RADIANT TECHNOLOGY CORPORATION
Notes to Financial Statements
4. Inventories
- - ---------------
1996 1995
---------- ----------
Raw materials $ 394,176 $ 407,149
Work in process 425,670 300,948
---------- ----------
819,846 708,097
Less: allowance for obsolescence ( 179,000) ( 126,000)
---------- ----------
$ 640,846 $ 582,097
========== ==========
5. Property and equipment
- - --------------------------
1996 1995
---------- ----------
Machinery and equipment $ 288,935 $1,001,234
Leasehold improvements 125,408 125,408
Office furniture and equipment 31,873 291,969
Vehicles 15,050 37,761
Computer software 136,090 537,750
---------- -----------
597,356 1,994,122
Accumulated depreciation and amortization ( 152,911) (1,790,121)
---------- -----------
$ 444,445 $ 204,001
========== ===========
6. Accrued liabilities
- - -----------------------
1996 1995
---------- -----------
Payroll and related items $ 77,364 $ 71,207
Commissions 64,973 88,261
Warranties 40,000 40,000
Professional fees 24,500 128,686
Moving expenses 90,000 -
Other 17,801 68,930
---------- -----------
$ 314,638 $ 397,084
========== ===========
7. Postpetition notes payable
- - ------------------------------
1996 1995
---------- -----------
Loan payable-officer, 10%, secured by
contract rights, inventory and equipment. $ - $ 150,000
Loan payable-officers and employees, 10%,
secured by accounts receivable, all
patents and a second position to
equipment on the officer loan above. - 200,000
---------- -----------
$ - $ 350,000
========== ===========
RADIANT TECHNOLOGY CORPORATION
Notes to Financial Statements
8. Income taxes
- - ----------------
1996 1995 1994
---------- ---------- ----------
Currently payable:
Continuing operations
Federal $ 68,600 ($ 50,400) $ -
State 20,700 ( 13,000) 800
Benefit of NOL carryforward ( 88,500) - -
---------- ---------- ----------
800 ( 63,400) 800
---------- ---------- ----------
Extraordinary item:
Federal 69,000 215,200 -
State 20,800 58,900 -
Benefit of NOL carryforward ( 89,800) ( 274,100) -
---------- ---------- -----------
- - -
---------- ---------- -----------
$ 800 ($ 63,400) $ 800
========== ========== ===========
The Company's deferred tax assets, which have been offset entirely by
valuation allowances, comprise the following at September 30, 1996 and 1995:
Federal California
---------- ------------
1996
- - ----
Loss carryforwards $1,930,200 $ 341,100
Temporary differences - -
---------- -----------
1,930,200 341,100
Applicable tax rate X 34% X 9.3%
---------- -----------
656,268 31,722
Valuation allowance ( 656,268) ( 31,722)
---------- -----------
Deferred tax assets $ - $ -
========== ===========
Federal California
---------- ------------
1995
- - ----
Loss carryforwards $2,375,700 $ 786,600
Temporary differences - -
---------- -----------
2,375,700 786,600
Applicable tax rate X 34% X 9.3%
---------- -----------
807,738 73,154
Valuation allowance ( 807,738) ( 73,154)
---------- -----------
Deferred tax assets $ - $ -
========== ===========
Federal investment credit and other general business credit carryforwards
total $35,600 and $105,500, respectively, and expire at various dates
through 2003. Net operating loss carryforwards expire at various dates
through 2009.
The valuation account has been reduced by approximately $192,900 in 1996 to
account for the use of loss carryforwards to offset current taxes.
RADIANT TECHNOLOGY CORPORATION
Notes to Financial Statements
9. Commitments and contingencies
- - ---------------------------------
Lease
- - -----
The Company subleases a building under a month-to-month agreement which
requires payments of $11,000 per month, including property taxes and fire
insurance.
In November 1996 the Company signed a five year lease on a building in
Fullerton California. Base monthly rent will be $10,600 commencing March
1997. Minimum future lease payments under non-cancelable operating leases
for each of the next five years and in the aggregate are:
Year ending September 30,
1997 $ 74,200
1998 127,200
1999 127,995
2000 136,740
2001 136,740
Subsequent to 2001 56,975
-----------
Total $ 659,850
===========
Rental expense for 1996, 1995 and 1994 was $121,000, $96,942 and $95,733,
respectively.
Environmental matters
- - ---------------------
The Company, like others in similar businesses, is subject to extensive
Federal, state and local environmental laws and regulations. Although
company environmental policies and practices are designed to ensure
compliance with these laws and regulations, future developments and
increasingly stringent regulation could require the company to make
unforeseen environmental expenditures.
10. Stockholders' equity
- - -------------------------
Preferred stock
- - ---------------
At September 30, 1996 and 1995 there were 5,000,000 authorized shares of
preferred stock, of which no shares were issued and outstanding.
Common stock
- - ------------
The Company has authorized 24,000,000 shares of no par value common stock.
At September 30, 1996 and 1995 1,867,638, and 190,409, shares, respectively,
were issued and outstanding.
Stock split
- - -----------
As a part of the plan of reorganization, the Board of Directors authorized a
1 for 30 reverse stock split, effective October 1, 1995. All references in
the accompanying financial statements to the number of common shares and
per-share amounts for 1995 and 1994 have been restated to reflect the
reverse stock split.
RADIANT TECHNOLOGY CORPORATION
Notes to Financial Statements
10. Stockholders' equity (continued)
- - -------------------------------------
Warrants
- - --------
As a result of a successful private placement, an investment banking firm
was issued stock warrants to purchase up to 8,000 shares of the company's
capital stock at $12.00 per share. None of the warrants, which became
exercisable at June 30, 1992, have been exercised. The warrants expire in
August 1997.
Employee Stock Option Plans
- - ---------------------------
Incentive and non-statutory
- - ---------------------------
The Company adopted an incentive and non-statutory stock option plan which
provides for granting options to key employees and officers. Under the
plan, options up to 1,000,000 shares may be granted at a price not less than
the fair market value of such shares on the date of grant, and the maximum
term of each option may not exceed ten years. With respect to any
participant who owns stock possessing more than 10% of the voting rights of
the Company's outstanding capital stock, the exercise price of any stock
option must be not less than 110% of the fair market value on the date of
grant and the maximum term may not exceed five years.
Non-statutory director options
- - ------------------------------
On September 30, 1996, the Company granted 20,000 non-statutory options to
each of the five board members. The options vest fifty percent at the end of
one year with the balance vesting at the end of year two, and the options
expire three years after vesting. The option price was $0.48 per share which
was equal to fair market value at the date of grant.
Lawrence McNamee
- - ----------------
On January 1, 1991, the Company and its chairman, Lawrence McNamee, executed
a one year employment agreement wherein Mr. McNamee was granted six blocks
of options totaling 276,360 options and amounting to 10% of the outstanding
shares. The option price varied according to the date of grant. The
employment agreement provided that in the event that the Company issued any
additional (or repurchased existing) shares of common stock (excluding
shares issued or issuable pursuant to Mr. McNamee's employment agreement),
the number of options issued to Mr. McNamee should be automatically and
proportionately adjusted so as to preserve the ratio of ten percent of the
outstanding common stock. On September 10, 1992, Mr. McNamee was granted
additional options totalling 346,680 to preserve his 10 percent ratio.
Under certain conditions, Mr. McNamee may be issued additional options in an
amount equal to five percent of the outstanding options and warrants
excluding those belonging to Mr. McNamee. The exercise price of any
additional options issued would be the fair market value of the stock on the
date of grant. This adjustment provision of Mr. McNamee's employment
agreement is referred to as the "Adjustment" clause. All 623,040 of Mr.
McNamee's options were outstanding at September 30, 1996, 1995 and 1994, at
option prices ranging from $.075 to $0.375. Subsequent to September 30,
1996, 276,360 of these options expired.
Mr. McNamee also holds option to acquire 326,666 shares at $0.075 per share
which were issued to Mr. McNamee in lieu of salary owed to him in 1992.
RADIANT TECHNOLOGY CORPORATION
Notes to Financial Statements
10. Stockholder's equity (continued)
- - -------------------------------------
Option activity
- - ---------------
A summary of stock option activity follows:
Number of Option Price
Shares Per Share
--------- ---------------
Outstanding at September 30, 1994 765,006 $0.0625 - $0.50
Granted -
Canceled/terminated -
Outstanding at September 30, 1995 765,006 $0.0625 - $0.50
Granted 267,723 $0.036 - $0.48
Canceled/terminated ( 308,715) $0.075 - $0.50
--------- ---------------
Outstanding at September 30, 1996 724,014 $0.036 - $0.50
=========
Exercisable at September 30, 1996 724,014 $0.036 - $0.50
=========
11. Employee benefit plan
- - --------------------------
The Company's 401(K) Plan was re-activated during fiscal year 1996. All
employees are eligible as long as they are 21 years of age and have
completed one year of employment. The plan provides for Contributions by
the Company in such amounts as management may determine. No expense was
charged to operations for the year ended September 30, 1996.