Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended July 31, 2001
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission File Number: 0-13011
TNR TECHNICAL, INC.
------------------------------------
(Exact name of Registrant as specified in its charter)
New York 11-2565202
------------------------------- ----------------------
(State of jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
301 Central Park Drive
Sanford, Florida 32771
------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (407) 321-3011
--------------
Securities registered pursuant to Section 12(b) of the Act:
--------------------------------------------------------------------------------
None
----------------------------------------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.02 Par Value
--------------------------------------------------------------------------------
(Title of Class)
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 |_|.
1
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and
will not be contained, to the best of Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in part III of this
Form 10-K or any amendment to this Form 10-K |X|.
As of September 18, 2001, the number of shares held by non-affiliates was
approximately 155,000 shares. The approximate market value of the Company's
Common Stock on that date held by non-affiliates was $1,084,000.
The number of shares outstanding of the issuer's Common Stock, as of July
31, 2001 was 258,829.
2
PART I
Item 1. Business
General
TNR Technical, Inc. (the "Company") was incorporated on October 4, 1979
under the laws of the State of New York. The Company designs, assembles and
markets primary and secondary batteries to a variety of industrial markets. The
Company is an authorized distributor for several major battery manufacturers,
which products are distributed nationally by Company. The Company's business is
conducted principally at its two facilities in Sanford, Florida and Santa Ana,
California.
The Company is an authorized distributor of nickel-cadmium, Ni-MH,
alkaline, lithium and sealed lead-acid batteries manufactured by Saft America,
Powersonic Battery, Varta Battery, Yuasa, Duracell, Renata, GP Battery, Eveready
Battery, and Sanyo Energy. As an authorized distributor, the Company purchases
cells, assembles them into battery packs and maintains an inventory for resale.
The Company sells its battery cells and/or battery packs to the industrial users
and wholesalers without geographical limitation and on a non-exclusive basis.
The Company also designs and assembles battery packs to customers'
specifications. The Company's batteries supply portable power for tools,
instruments, medical equipment, communications equipment, photography, radios
and remote control airplanes, video recorders, lighting and toys. The Company's
batteries supply standby power for electronic equipment, computer memories,
emergency lighting, fire and burglar alarms, electronic cash registers, logic
systems, medical instruments and communications systems.
Sales under industrial and distribution programs accounted for
substantially all of the Company's total revenues during the Company's past
three fiscal years and no one customer accounted for 10% or more of the
Company's total revenues during these years. At July 31, 2001 and 2000, the
Company had no significant backlog.
Competition
There are numerous companies producing and marketing batteries which
compete with those sold by the Company, including larger companies, battery
manufacturers and companies with a wider range of products and greater financial
and technical resources than the Company. It should be noted that the Company's
products and proposed products are technological in nature and that modern
technology often progresses rapidly. Accordingly, the Company's present and
proposed products are subject to the risk of obsolescence because of
technological innovation by competitors.
Employees
At September 30, 2001, the Company leases from a non-affiliated party its
staff which includes 27 persons. Such staff includes eight salespersons
(including two
3
executive officers), three administrative, two warehouse and shipping clerks and
thirteen factory workers. For a fee which is paid by the Company, the leasing
company provides the payroll, including, workmen"s compensation, 401(k) plan and
health insurance. The Company's agreement with the leasing company can be
terminated on short notice at any time by the Company.
Item 2. Properties
The Company's principal executive office, sales, distribution and assembly
facility is located at 301 Central Park Drive, Sanford, Florida 32771. These
facilities, which consist of approximately 8,000 square feet of space, are
leased from RKW Holdings Ltd., a Florida Limited Partnership, controlled by
Wayne Thaw, an executive officer and director of the Company. The Florida lease
provides for a term of ten years with a current monthly rent of $6,805
(including sales taxes) with annual increases of five percent over the preceding
year's base rent. The Company is also responsible for the payment of all
insurance, property, and other taxes related to the leased facilities. Property
taxes estimated at $660 per month, inclusive of sales taxes, are accrued on a
monthly basis.
The Company also leases a sales, distribution and assembly facility at
3400 W. Warner, Suites K, L and M, Santa Ana, CA 92704. These facilities consist
of 6,480 square feet of space. The California lease commenced on July 1, 2000
and expires on June 30, 2003, subject to the right of the Company to renew for
an additional two-year period. The Company currently pays a base rent of $4,583
per month, which is subject to increase for its share of the landlord's
increased operating expenses. The Company owns production equipment consisting
primarily of welding, soldering, testing, pneumatic and material handling
equipment, and inspection equipment which has been sufficient for its needs to
date.
Item 3. Legal Proceedings
There are no material legal proceedings to which the Company is a party.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the fourth
quarter of fiscal 2001.
4
PART II
Item 5. Market for Registrant's Securities and Related Stockholder Matters.
(a) Principal Market and Stock Prices.
The Company's Common Stock may be quoted in the over-the-counter market.
The high and low sales prices of the Common Stock are shown below for the
Company's last two fiscal years ended July 31, 2001.
High Low
---- ---
Fiscal 2000
First Quarter $ 4.75 $ 4.50
Second Quarter 12.00 1.00
Third Quarter 10.00 6.50
Fourth Quarter 8.25 6.25
Fiscal 2001
First Quarter $ 6.25 $ 5.50
Second Quarter 10.25 5.75
Third Quarter 9.00 9.00
Fourth Quarter 9.50 6.90
The closing last sale of the Company's Common Stock on September 26, 2001
was $6.90. The foregoing quotations represent approximately inter-dealers
prices, without retail markup, markdown or commission and do not represent
actual transactions. Such quotations should not be viewed as necessarily
indicative of the price that could have been obtained on that date for a
substantial number of securities due to the limited market and trading volume
for the Company's securities.
The approximate number of holders of record of the Company's Common Stock,
as of September 30, 2001 was 754 as supplied by the Company's transfer agent,
American Stock Transfer Company, 40 Wall Street, New York, NY 10005.
No cash dividends have been paid by the Company on its Common Stock and no
such payment is anticipated in the foreseeable future.
5
Item 6. SELECTED FINANCIAL DATA
The following selected financial data has been derived from the Company's
financial statements which have been examined by independent certified public
accountants. Such financial statements should be read in conjunction with the
following financial data.
Statement of Operations Summary:
===========================================================================================================
Year Ended Year Ended Year Ended Year Ended Year Ended
July 31, 2001 July 31, 2000 July 31, 1999 July 31, 1998 July 31, 1997
------------- ------------- ------------- ------------- -------------
-----------------------------------------------------------------------------------------------------------
Net sales $8,030,850 $8,014,576 $6,126,132 $5,719,806 $4,239,423
-----------------------------------------------------------------------------------------------------------
Net income 522,121 440,010 321,192 295,012 88,701
-----------------------------------------------------------------------------------------------------------
Net income per
Share 2.02 1.69 1.23 1.13 .34
-----------------------------------------------------------------------------------------------------------
Cash dividends -0- -0- -0- -0- -0-
===========================================================================================================
Balance Sheet Data:
===========================================================================================================
July 31, 2001 July 31, 2000 July 31, 1999 July 31, 1998 July 31, 1997
------------- ------------- ------------- ------------- -------------
-----------------------------------------------------------------------------------------------------------
Working capital 3,363,650 $2,890,360 $2,430,337 $2,021,076 $1,677,501
-----------------------------------------------------------------------------------------------------------
Total Assets 4,011,867 3,663,315 3,034,415 2,488,793 2,265,123
-----------------------------------------------------------------------------------------------------------
Long-term debt
(including capital
leases) -0- -0- 5,390 17,639 -0-
-----------------------------------------------------------------------------------------------------------
Total Shareholders'
equity 3,535,985 3,018,886 2,586,716 2,271,643 1,976,751
===========================================================================================================
6
Item 7. Managements Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
Working capital amounted to $3,363,650 at July 31, 2001 as compared to
$2,890,360 at July 31, 2000. Cash and short-term investments amounted to
$1,871,854 at July 31, 2001 as compared to $1,574,611 at July 31, 2000. As more
fully described in the "Statements of Cash Flows" included in the Company's
financial statements elsewhere herein, net cash provided by operating activities
for the fiscal years ended July 31, 2001, July 31, 2000 and July 31, 1999 were
$392,975 and $540,389 and $511,298, respectively.
During fiscal 2001, cash was provided by operating activities primarily
due to the Company's net income of $522,121. The primary reduction in cash of
$98,128 in income taxes payable resulted from payment of tax obligations and
estimated tax payments. Another significant reduction of cash included a
decrease in accounts payable and accrued expenses of $65,029 due to the payment
of certain obligations in connection with the retirement of the Company's former
chief executive officer. During fiscal 2001, cash was used in investing
activities to purchase property and equipment of $85,320. During fiscal 2001,
cash was used in financing activities to purchase treasury stock of $5,022 and
to make principal payments on notes payable of $5,390.
During fiscal 2000, net cash was provided by operating activities
primarily due to the Company's net income of $440,010 and an increase in
accounts payable and accrued expenses of approximately $184,000. This increase
is a combination of a reduction in accounts payable of $27,000 resulting from
more timely payments of vendor invoices in order to take advantage of discounts
offered and an increase in accrued expenses of $211,000 resulting from $101,000
in accrued bonuses, $76,000 in retirement accruals, $25,000 in moving expenses
for the Company's California office and the balance in miscellaneous accruals.
The primary reduction in cash resulted from increased spending on inventories of
$177,622 to sustain current sales demand. During fiscal 2000, cash was used in
investing activities to purchase property and equipment of $20,850. During
fiscal 2000, cash was used in financing activities to purchase treasury stock of
$7,840 and to make principal payments on notes payable of $12,249.
7
During fiscal 1999, cash was provided by operating activities primarily
due to the Company's net income of $321,192, an increase in accounts payable and
accrued expenses of $155,876 resulting primarily from increased inventory
purchases made at fiscal year end which were not paid for until August 1999, an
increase in income taxes payable of $86,011 and sales of short-term investments
of $167,181. The increase in income taxes payable resulted from tax obligations
relating to the Company's net income. Sale of short-term investments resulted
from the Company buying and selling select stocks, which practice was
discontinued during 2000. The primary reductions in cash resulted from increased
spending on inventories of $247,438 to sustain demand for the Company's products
and an increase in accounts receivable of $111,928 relating to increased sales
volume. During fiscal 1999, cash was used to purchase property and equipment of
$16,363. During fiscal 1999, cash was used to make principal payments on notes
payable of $11,338 and to purchase treasury stock of $6,119.
During the past three years, the Company's liquidity needs have been
satisfied from internal sources including cash from operations and amounts
available from the Company's working capital. During fiscal 2002, Management
expects this trend to continue. There are no material commitments for capital
expenditures or any long-term credit arrangements as of July 31, 2001.
Results of Operations
Sales for fiscal 2001 increased slightly from $8,014,576 in fiscal 2000 to
$8,030,850, an increase of $16,274 or less than one percent. Sales for fiscal
2000 increased from $6,126,132 in 1999 to $8,014,576, an increase of 31% or
$1,888,444. Sales increases in fiscal 2000 were due to increased demand for the
Company's products from the Company's existing client base ($451,064), and from
new customers, including customers derived from the Company's expansion of its
operations in California ($674,939 and $762,441, respectively). During the past
three years, no customer accounted for more than 10% of revenues.
The Company's gross margin percentage fluctuated only slightly from 27% in
fiscal 1999 to 26% in fiscal 2000 and fiscal 2001, primarily due to slight
differences in the mix of products sold during these periods. This reduction in
the gross margin percentages resulted in a decrease in gross profit of $80,000
in 2000 and 2001 from that of 1999. However, increases in sales volume offset
the gross margin decrease and resulted in and overall increased gross profit of
$30,758 and $409,337 in fiscal 2001 and fiscal 2000, respectively.
Operating (selling, general and administrative) expenses decreased from
$1,385,526 in fiscal 2000 to $1,342,652 in fiscal 2001. This decrease resulted
primarily from decreases in payroll costs and general office expenses of
approximately $83,000 and $15,000, respectively, offset by increases in rent and
computer consulting costs of $35,000 and $21,000, respectively. Decreases in
fiscal 2001 payroll were primarily related to the retirement of the Company's
Chief Executive Officer in 2000 and associated payroll costs.
8
General office expenses decreased primarily as a result of moving expenses
related to the Company's move to new office space in California in late 2000.
Correspondingly, as a result of this move, rent expense increased in 2001.
Computer consulting and training was necessary during fiscal 2001 as a result of
the Company's change from DOS based sales and accounting software to Windows
based software.
Operating expenses increased from $1,164,100 in fiscal 1999 to $1,385,526
in fiscal 2000. These increases were substantially due to increases in rent
($9,000), moving expenses ($25,000) to move the California office to a larger
facility, insurance ($3,000), and administrative salaries of approximately
$180,000, resulting primarily from retirement payments to the Company's Chief
Executive Officer and bonus accruals.
During the past three years, the Company did not charge its operations
with any research and development costs, except for $2,337 incurred in fiscal
2001. Interest income increased in fiscal 2001 and fiscal 2000 by approximately
20% and 98% over the comparable period of the prior year as a result of
increasing profitable operations and the corresponding increased cash balances.
Net income for fiscal 2001 was $552,121 as compared to $440,010 for fiscal
2000 as compared to $321,192 for fiscal 1999. Net income per share for fiscal
2001, fiscal 2000, and fiscal 1999 was $2.02, $1.69 and $1.23, respectively.
Purchase of Treasury Stock
Management of TNR Technical, Inc. has received a number of comments from
its odd lot stockholders regarding the costs associated with any sale of their
odd lots. Further, management would like to reduce TNR's expense of maintaining
mailings to odd lot holders. Accordingly, TNR will from time-to-time privately
purchase from odd lot holders of its common stock, such odd lots (i.e. 99 shares
or less) from its stockholders of record on December 15, 1995 so long as such
purchases would not have the effect of reducing TNR's record holders to 500 or
less. The purchase price to be paid will be based upon the closing asked price
on the NASD electronic bulletin board of TNR's Common Stock for the preceding
trading day. Stockholders will not be permitted to breakup their stockholdings
into odd lots and stockholders or their legal representatives must affirm to TNR
that the odd lot shares submitted for payment represent the stockholder's entire
holdings and that such holdings do not exceed 99 shares. (This offer shall be
open to all odd lot beneficial holders even those held in street or nominee name
so long as the proper representations can be obtained satisfactory to TNR that
the shares are odd lot shares, were owned by the beneficial stockholder as of
December 15, 1995 and represent such stockholder's entire holdings of TNR). This
offer will not be valid in those states or jurisdictions where such offer or
sale would be unlawful.
9
Year 2000 Issue
Many existing computer programs used only two digits to identify a year in
the date field. These programs were designed and developed without considering
the impact of the recent change in the century. If not corrected, many computer
applications have failed or created erroneous results by or at the year 2000.
The Company purchased new computers which are year 2000 compliant and upgraded
its remaining equipment to correct the problem at a cost of approximately
$20,000. The Company's operations were not materially impacted by the year 2000
issue.
Item 8. Financial Statements and Supplementary Data.
The information required by Item 8, and an index thereto, appears at pages
F-1 through F-17 (inclusive) of this Report, which pages follow Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
10
TNR TECHNICAL, INC.
Financial Statements
July 31, 2001 and 2000
(With Independent Auditors' Report Thereon)
TNR TECHNICAL, INC.
Index to Financial Statements
Independent Auditors' Report.................................................F-1
Financial Statements:
Balance Sheets - July 31, 2001 and 2000................................F-2
Statements of Operations - Three years ended July 31, 2001.............F-4
Statements of Shareholders' Equity - Three years ended July 31, 2001...F-5
Statements of Cash Flows - Three years ended July 31, 2001.............F-6
Notes to Financial Statements................................................F-8
Independent Auditors' Report
The Shareholders and Board of Directors
TNR Technical, Inc.:
We have audited the accompanying balance sheets of TNR Technical, Inc. as of
July 31, 2001 and 2000, and the related statements of operations, shareholders'
equity and cash flows for the three years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 TNR Technical, Inc. as of July
31, 2001 and 2000 and the results of its operations and its cash flows for the
three years then ended in conformity with accounting principles generally
accepted in the United States of America.
/s/ Parks, Tschopp, Whitcomb & Orr, P.A.
September 10, 2001
Maitland, Florida
F-1
TNR TECHNICAL, INC.
Balance Sheets
July 31, 2001 and 2000
Assets
2001 2000
---------- ---------
Current assets:
Cash and cash equivalents $1,871,854 1,574,611
Accounts receivable - trade, less allowance for doubtful
accounts of $20,333 in 2001 and $33,018 in 2000 655,351 662,121
Inventories (note 2) 1,251,073 1,239,665
Prepaid expenses and other current assets 11,254 10,392
Deferred income taxes (note 6) 50,000 48,000
---------- ---------
Total current assets 3,839,532 3,534,789
Property and equipment, at cost, net of accumulated
depreciation and amortization (notes 3 and 4) 156,878 108,894
Other assets:
Deposits 15,457 19,632
---------- ---------
$4,011,867 3,663,315
========== =========
See accompanying notes to financial statements.
F-2
TNR TECHNICAL, INC.
Balance Sheets
July 31, 2001 and 2000
Liabilities and Shareholders' Equity
2001 2000
----------- ----------
Current liabilities:
Accounts payable $ 190,383 183,949
Accrued expenses 248,627 320,090
Income taxes payable 36,872 135,000
Current installments of note payable (note 4) -- 5,390
----------- ----------
Total current liabilities 475,882 644,429
----------- ----------
Commitment (note 7)
Shareholders' equity:
Common stock - $.02 par value, authorized 500,000
shares; issued and outstanding 301,581 shares (note 5) 6,032 6,032
Additional paid in capital 2,640,001 2,640,001
Retained earnings 1,105,087 582,966
----------- ----------
3,751,120 3,228,999
Less cost of treasury stock 42,752 and 42,023
shares in 2001 and 2000, respectively (215,135) (210,113)
----------- ----------
Total shareholders' equity 3,535,985 3,018,886
----------- ----------
4,011,867 3,663,315
=========== ==========
See accompanying notes to financial statements.
F-3
TNR TECHNICAL, INC.
Statements of Operations
Years ended July 31, 2001, 2000 and 1999
2001 2000 1999
---------- ---------- ---------
Revenues:
Net sales (note 8) $8,030,850 8,014,576 6,126,132
---------- ---------- ---------
Cost and expenses:
Cost of goods sold 5,938,449 5,952,933 4,473,826
Selling, general and administrative (note 9) 1,342,652 1,385,526 1,164,100
---------- ---------- ---------
7,281,101 7,338,459 5,637,926
---------- ---------- ---------
Operating income 749,749 676,117 488,206
Non-operating revenue (expense):
Interest income 79,698 66,620 33,609
Other, net (note 10) 3,012 (11,727) --
---------- ---------- ---------
Income before income taxes 832,459 731,010 521,815
Income tax expense (note 6) 310,338 291,000 200,623
---------- ---------- ---------
Net income $ 522,121 440,010 321,192
========== ========== =========
Basic earnings per share $ 2.02 1.69 1.23
========== ========== =========
Diluted earnings per share $ 1.88 1.60 1.11
========== ========== =========
Weighted average number of shares - Basic 259,116 260,135 261,480
========== ========== =========
Weighted average number of shares - Diluted 278,449 275,006 289,362
========== ========== =========
See accompanying notes to financial statements
F-4
TNR TECHNICAL, INC.
Statements of Shareholders' Equity
Years ended July 31, 2001, 2000 and 1999
Additional
Common Stock Paid-in Retained Treasury
Shares Amount Capital Earnings Stock
------- ------ --------- ---------- --------
Balances, July 31, 1998 301,581 $6,032 2,640,001 (178,236) (196,154)
Net income -- -- -- 321,192 --
Purchase of Company
stock -- -- -- -- (6,119)
------- ------ --------- ---------- --------
Balances, July 31, 1999 301,581 6,032 2,640,001 142,956 (202,273)
======= ====== ========= ========== ========
Net income -- -- -- 440,010 --
Purchase of Company
stock -- -- -- -- (7,840)
------- ------ --------- ---------- --------
Balances, July 31, 2000 301,581 6,032 2,640,001 582,966 (210,113)
======= ====== ========= ========== ========
Net income -- -- -- 522,121 --
Purchase of Company
stock -- -- -- -- (5,022)
------- ------ --------- ---------- --------
Balances, July 31, 2001 301,581 $6,032 2,640,001 1,105,087 (215,135)
======= ====== ========= ========== ========
See accompanying notes to financial statements
F-5
TNR TECHNICAL, INC.
Statements of Cash Flows
Years ended July 31, 2001, 2000 and 1999
2001 2000 1999
--------- -------- --------
Cash flows from operating activities:
Net income $ 522,121 440,010 321,192
Adjustments to reconcile net income to net cash
provided by operations:
Deferred income taxes (2,000) (13,000) 57,000
Depreciation and amortization 35,522 37,186 53,567
Provision for doubtful accounts 8,400 8,400 18,400
Loss on disposition of fixed assets 1,814 22,927 --
Changes in operating assets and liabilities:
Sales of short term investments -- -- 167,181
Accounts receivable (1,630) 22,511 (111,928)
Inventories (11,408) (177,622) (247,438)
Prepaid expenses and other assets (862) (2,982) 11,204
Accounts payable and accrued expenses (65,029) 183,979 155,876
Deposits 4,175 (6,020) 233
Income taxes receivable/payable (98,128) 25,000 86,011
--------- -------- --------
Net cash provided by operating activities 392,975 540,389 511,298
--------- -------- --------
Cash flows from investing activities:
Purchase of property and equipment (85,320) (20,850) (16,363)
--------- -------- --------
Net cash used in investing activities (85,320) (20,850) (16,363)
--------- -------- --------
See accompanying notes to financial statements
F-6
TNR TECHNICAL, INC.
Statements of Cash Flows
Years ended July 31, 2001, 2000 and 1999
2001 2000 1999
----------- ---------- ----------
Cash flows from financing activities:
Purchase of treasury stock $ (5,022) (7,840) (6,119)
Principal payments on note payable (5,390) (12,249) (11,338)
---------------------------------------
Net cash used in financing activities (10,412) (20,089) (17,457)
---------------------------------------
Increase in cash and cash equivalents 297,243 499,450 477,478
Cash and cash equivalents - beginning of year 1,574,611 1,075,161 597,683
---------------------------------------
Cash and cash equivalents - end of year $ 1,871,854 1,574,611 1,075,161
=======================================
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 82 938 1,849
=======================================
Cash paid during the year for income taxes $ 410,466 279,000 57,612
=======================================
See accompanying notes to financial statements
F-7
TNR TECHNICAL, INC.
Notes to Financial Statements
July 31, 2001 and 2000
(1) Summary of Significant Policies
(a) Nature of Operations
TNR Technical, Inc. (TNR or the Company) designs, assembles and
markets batteries and multi-cell battery packs to a wide variety of
industrial markets. The Company is a distributor for a number of
major U.S. battery manufacturers and markets its products
nationally.
(b) Inventories
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
(c) Property and Equipment
Property and equipment are recorded at cost. The Company provides
depreciation for machinery and equipment using the straight-line
method over the estimated useful lives of the respective assets,
which range from five to ten years. Amortization of leasehold
improvements is computed using the straight-line method over the
lesser of the lease term or estimated useful lives of the
improvements.
(d) Research and Development Costs
Research and development costs are charged against income in the
year incurred.
(e) Revenue Recognition
The Company, consistent with the practice of most entities operating
in the battery distribution business, recognizes revenue upon
shipment of battery products from its warehouse facilities. The
Company's customers take title to the products at the time of
shipment and bear the cost of freight. There is no continuing
performance obligation by the Company subsequent to shipment of
product.
(f) Advertising Costs
Advertising expenditures relating to product distribution and
marketing efforts consisting primarily of product presentation
material, catalog preparation, printing and postage expenses are
expensed as incurred.
(Continued)
F-8
TNR TECHNICAL, INC.
Notes to Financial Statements
July 31, 2001 and 2000
(1) Summary of Significant Policies - Continued
(g) Use of Estimates
Management of the Company has made certain estimates and assumptions
relating to the reporting of assets and liabilities and disclosure
of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(h) Financial Instruments Fair Value, Concentration of Business and
Credit Risks
The carrying amount reported in the balance sheet for cash, accounts
receivable, accounts payable and accrued expenses approximates fair
value because of the immediate or short-term maturity of these
financial instruments. The carrying amount reported in the
accompanying balance sheet for note payable approximates fair value
because the actual interest rate does not significantly differ from
current rates offered for instruments with similar characteristics.
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of trade accounts
receivable which amount to approximately $650,000 and money market
funds amounting to approximately $1,300,000. The Company performs
periodic credit evaluations of its trade customers and generally
does not require collateral. The Company maintains its cash balances
at certain financial institutions in which balances are insured by
the Federal Deposit Insurance Corporation up to $100,000. The
Company's uninsured balances amount to approximately $1,200,000 and
$1,100,000 at July 31, 2001 and 2000, respectively.
(i) Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" (SFAS 123) which sets forth accounting
and disclosure requirements for stock-based compensation
arrangements. The new statement encourages but does not require,
companies to measure stock-based compensation using a fair value
method, rather than the intrinsic value method prescribed by
Accounting Principles Board Opinion No. 25 ("APB no. 25".) The
Company has adopted disclosure requirements of SFAS 123 and has
elected to continue to record stock-based compensation expense using
the intrinsic value approach prescribed by APB
(Continued)
F-9
TNR TECHNICAL, INC.
Notes to Financial Statements
July 31, 2001 and 2000
(1) Summary of Significant Policies - Continued
(i) Stock-Based Compensation - Continued
No. 25. Accordingly, the Company computes compensation cost for each
employee stock option granted as the amount by which the quoted
market price of the Company's common stock on the date of grant
exceeds the amount the employee must pay to acquire the stock. The
amount of compensation cost, if any, will be charged to operations
over the vesting period. SFAS 123 requires companies electing to
continue using the intrinsic value method to make certain pro forma
disclosures (see note 5).
(j) Income Taxes
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(k) Cash Flows
For purposes of cash flows, the Company considers all highly liquid
investments with an initial maturity of three months or less to be
cash equivalents.
(l) Earnings Per Common Share
Basic earnings per common share have been computed based upon the
weighted average number of common shares outstanding during the
years presented. Common stock equivalents resulting from the
issuance of the stock options are included in the calculation of
diluted earnings per share information.
(m) Reclassifications
Certain amounts from 2000 and 1999 have been reclassified to conform
with the 2001 presentation.
F-10
TNR TECHNICAL, INC.
Notes to Financial Statements
July 31, 2001 and 2000
(2) Inventories
Inventories consist of the following:
2001 2000
---- ----
Finished goods $1,213,541 1,196,277
Work-in-process 37,532 43,388
---------- ---------
$1,251,073 1,239,665
========== =========
(3) Property and Equipment
Property and equipment consists of the following:
2001 2000
---- ----
Machinery and equipment $251,854 206,317
Leasehold improvements 20,347 20,347
-------- -------
272,201 226,664
Less accumulated depreciation
and amortization 115,323 117,770
-------- -------
$156,878 108,894
======== =======
(4) Note Payable
Note payable consisted of an obligation payable (secured by vehicles) in
monthly installments of $1,099 including interest at 7.75%. The note was
paid in full during the year ended July 31, 2001.
(5) Stock Option Plans
In November 1992, the Board of Directors approved an Incentive and
Non-Qualified Stock Option Plan (Plan), which was ratified by the
stockholders in January 1993. The Plan covers 60,000 shares of Common
Stock, subject to adjustment of shares under the anti-dilution provisions
of the Plan. The Plan authorizes the issuance of the options covered
thereby as either "Incentive Stock Options" within the meaning of the
Internal Revenue Code of 1986, as amended, or as "Non-Statutory Stock
Options." No options may be granted after November 16, 2002. Under the
Plan the aggregate fair market value (determined at the time the option is
granted) of the optioned stock for which Incentive Stock Options are
exercisable for the first time by any employee during any calendar year
shall not exceed $100,000.
(Continued)
F-11
TNR TECHNICAL, INC.
Notes to Financial Statements
July 31, 2001 and 2000
(5) Stock Option Plans (Continued)
In December 1996, the Company granted options to purchase 30,000 shares of
stock at an exercise price of $3.25 per share (the fair market value of
the underlying stock at the date of grant) to three of its officers and
directors. The options are exercisable for a ten-year period expiring in
December 2006. In December 1998, the Company granted additional stock
options to purchase 7,000 shares at an exercise price of $5.00 per share
(the fair market value of the underlying stock at the date of grant) to
three of its directors. The options are exercisable through December 2008.
The 1998 Incentive and Non-Qualified Stock Option Plan, (the "1998 Plan"),
was approved by the Board of Directors effective December 15, 1998 subject
to stockholder approval within 12 months. The 1998 Plan covers 30,000
shares of Common Stock, subject to adjustment of shares under the
anti-dilution provisions of the 1998 Plan. The 1998 Plan authorizes the
issuance of the options covered thereby as either "Incentive Stock
Options" within the meaning of the Internal Revenue Code of 1986, as
amended, or as "Non-Statutory Stock Options." Persons eligible to receive
options under the 1998 Plan include employees, directors, officers,
consultants or advisors, provided that bona fide services shall be
rendered by consultants or advisors and such services must not be in
connection with the offer or sale of securities in a capital raising
transaction; however, only employees (who may also be officers and/or
directors) are eligible to receive an Incentive Stock Option. The 1998
Plan also provides that no options may be granted after December 15, 2008.
Except for the foregoing, the 1998 Plan is identical to the 1992 Plan. As
of July 31, 2001, no options have been granted under the 1998 Plan.
Options granted and issued by the Company consist of the following:
Weighted Average
Number Price
------ ----------------
Balance outstanding, August 1, 1997 30,000 $3.25
Options granted -- --
Options expired -- --
------ -----
Balance outstanding, July 31, 1998 30,000 3.25
Options granted 7,000 5.00
Options expired -- --
------ -----
Balance outstanding, July 31, 1999 37,000 3.58
Options granted -- --
Options expired -- --
------ -----
Balance outstanding, July 31, 2000 37,000 3.58
------ -----
Options granted -- --
Options expired -- --
------ -----
Balance outstanding, July 31, 2001 37,000 $3.58
====== =====
(Continued)
F-12
TNR TECHNICAL, INC.
Notes to Financial Statements
July 31, 2001 and 2000
(5) Stock Option Plans (Continued)
Information relating to options at July 31, 2001, summarized by exercise
price, is as follows:
Outstanding and Exercisable Weighted Average
--------------------------- ----------------
Exercise Price Equivalent Shares Exercise Price Year
-------------- ----------------- -------------- ----
$ 3.25 30,000 3.25 5.5
5.00 7,000 5.00 7.5
------
37,000 3.58 5.9
======
The Company continues to account for stock-based compensation using the
intrinsic value method prescribed by Accounting Principles Board Opinion
No. 25 under which no compensation cost for stock options is recognized
for stock option awards granted at or above fair market value.
Had compensation expense been determined based upon fair values at the
grant date for the award of options as described herein in accordance with
SFAS No. 123, "Accounting for Stock-Base Compensation," the Company's net
earnings and earnings per share would not be materially changed from the
amounts as reported in the accompanying financial statements. The
computation of the effect on net earnings and earnings per share with
respect to outstanding options in accordance with SFAS 123 was calculated
using the Black-Scholes option-pricing model which included the following
significant assumptions:
Risk-free interest rate 5.25%
Expected volatility 10.00%
Expected dividend yield 0.00%
Expected life 10 years
The weighted average fair value at the date of grant of the options
granted during 1999 approximated $2.05 per option.
Accordingly, management has not presented the pro forma effects of the
application of SFAS No. 123 herein with respect to net earnings and
earnings per share for the years ended July 31, 2001, 2000 and 1999.
(Continued)
F-13
TNR TECHNICAL, INC.
Notes to Financial Statements
July 31, 2001 and 2000
(6) Income Taxes
The income tax provision for the years ended July 31, 2001, 2000 and 1999
consists of the following:
2001 2000 1999
---- ---- ----
Current:
Federal $ 259,338 246,000 128,623
State 53,000 58,000 15,000
--------- -------- -------
312,338 304,000 143,623
--------- -------- -------
Deferred:
Federal (1,600) (11,000) 51,000
State (400) (2,000) 6,000
--------- -------- -------
(2,000) (13,000) 57,000
--------- -------- -------
Total $ 310,338 291,000 200,623
========= ======== =======
Income tax expense attributable to income before income tax differed from
the amount computed by applying the U.S. Federal income tax rate of 34% to
income from operations before income taxes as a result of the following:
2001 2000 1999
---- ---- ----
Computed "expected" tax expense $ 283,000 249,000 178,000
Increase (reduction) in income tax
expense resulting from:
State income taxes, net of
federal income tax benefit 44,000 37,000 24,000
Overaccrual of income tax
liability in prior year (14,000) -- --
Adjustment to deferred tax
assets to reflect current
effective tax rates and other (2,662) 5,000 (1,377)
--------- ------- --------
$ 310,338 291,000 200,623
========= ======= ========
(Continued)
F-14
TNR TECHNICAL, INC.
Notes to Financial Statements
July 31, 2001 and 2000
(6) Income Taxes - Continued
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets at July 31, 2001 and 2000 are
presented below:
2001 2000
---- ----
Deferred tax assets:
Inventories, principally due to additional
costs inventoried for tax purposes $42,000 37,000
Accounts receivable, due to allowance
for uncollectible accounts 8,000 11,000
------- ------
50,000 48,000
Less valuation allowance -- --
------- ------
Total $50,000 48,000
======= ======
Deferred taxes are presented in the accompanying
balance sheets as:
2001 2000
---- ----
Current deferred tax assets $50,000 48,000
Noncurrent deferred tax assets -- --
------- ------
$50,000 48,000
======= ======
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of
the deferred tax assets will be realized. Management considers the
projected future taxable income and tax planning strategies in making this
assessment. The Company believes that future earnings in addition to the
amount of the taxable differences which will reverse in future periods,
will be sufficient to offset recorded deferred tax assets and,
accordingly, a valuation allowance is not considered necessary at July 31,
2001 and 2000.
F-15
TNR TECHNICAL, INC.
Notes to Financial Statements
July 31, 2001 and 2000
(7) Lease Commitments
Commencing in June 1996, the Company entered into an agreement to lease
its Florida office, warehouse and distribution facilities from a
partnership controlled by an executive officer, shareholder and director
of TNR. The lease agreement provides payment of real estate taxes and
insurance and extends for a term of ten years. The Company also leases
warehouse and distribution facilities in California from an unrelated
party under a three-year operating lease agreement. Future minimum rental
payments associated with these operating lease obligations are indicated
below:
Year Ending July 31,
--------------------
2002 $131,777
2003 133,232
2004 85,960
2005 91,117
2006 74,526
Total lease and rental expense amounted to $148,499, $111,330, and $95,953
in 2001, 2000, and 1999, respectively. In 2001, 2000 and 1999 lease
expense associated with related parties amounted approximately to $86,000,
$81,000 and $78,000, respectively.
(8) Sales to Major Customers
During the years ended July 31, 2001, 2000 and 1999 no customer accounted
for more than 10% of total revenues.
(9) Supplementary Information
2001 2000 1999
---- ---- ----
Advertising costs $28,766 29,184 54,390
Provision for doubtful accounts 8,400 8,400 18,400
The provision for doubtful accounts and advertising costs are included in
selling, general and administrative costs in the accompanying statements
of operations.
F-16
TNR TECHNICAL, INC.
Notes to Financial Statements
July 31, 2001 and 2000
(10) Non-Operating Expense
Other non-operating expense for the years ended July 31, 2001 and 2000,
net is comprised of the following:
2001 2000
---- ----
Loss on disposition of fixed assets $ (1,814) (22,927)
Miscellaneous income (primarily customer
reimbursed freight costs) 4,826 11,200
-------- -------
$ 3,012 (11,727)
======== =======
F-17
PART III
Item 10. Directors and Executive Officers of the Registrant.
The names, ages and principal occupations of the Company's present
directors, and the date on which their term of office commenced and expires, are
listed below.
Term First
Of Became Principal
Name Age Office Director Occupation
---- --- ------ -------- ----------
Wayne Thaw 44 (1) 1983 Chairman of the Board
Chief Executive Officer
President
Jerrold Lazarus 69 (1) 1987 Retired
Norman L. Thaw 68 (1) 1979 President of
Stride Rite
Stables, Inc.,
Private Investor
Kathie Thaw 46 (1) 1996 Vice-President
Mitchell Thaw 45 (1) 1998 Temporarily
Retired
Patrick Hoscoe 38 (1) 1998 Vice President and
Operations Manager
of the Company's West
Coast Division
----------
(1) Directors are elected at the annual meeting of stockholders and hold
office until the following annual meeting.
Wayne Thaw is Chairman of the Board, Chief Executive Officer, Chief
Financial Officer and President of the Company. Kathie Thaw and Patrick Hoscoe
each serve as a Vice President of the Company. Katherine Thaw also serves as
Secretary and Treasurer of the Company. The terms of all officers expire at the
annual meeting of directors following the annual stockholders meeting. Officers
serve at the pleasure of the Board and may be removed, either with or without
cause, by the Board of Directors, and a successor elected by a majority vote of
the Board of Directors, at any time.
11
Wayne Thaw has served as Chairman of the Board and Chief Executive officer
since December 2000 and President and Chief Operating Officer of the Company
since November 1987. Mr. Thaw has been a full-time employee since 1980.
Jerrold Lazarus has served as a director of the Company since October
1987. Mr. Lazarus was a full time employee and Chairman of the Board and Chief
Executive Officer of the Company between October 1987 and January 2001. Since
Mr. Lazarus retired from serving as an executive officer of the Company in
January 2001, he has not been affiliated with another company.
Norman L. Thaw is one of the founders of the Company and served as its
Chairman and Chief Executive Officer between March 1987 and April 1988. For more
than the past five years, Mr. Thaw's principal occupation is the President of
Stride Rite Stables, Inc., a thoroughbred racing and breeding farm in South
Florida.
Kathie Thaw has been Vice-President and a director of the Company since
December 1996 and his served as a consultant to the President over the past five
years. Since December 2000, she has also served as Secretary and Treasurer of
the Company.
Mitchell Thaw has been director of the Company since December 1998 and has
been temporarily retired since October 2001. From November 2000 until September
2001, he was Executive Vice President of KBC Securities, an international
securities firm that traded derivatives stock options such as convertible bonds
and Japanese warrants. From May 2000 to October 2000, he acted as a professional
trader for his own account. From April 1999 through May 2000, Mr. Thaw served as
a Director of Institutional Options at Schroder & Co., Inc. From 1988 through
April 1998, Mr. Thaw was an executive for UBS Securities. Between April 1998 and
March 1999, Mr. Thaw was not associated with any firms.
Patrick Hoscoe has been Vice President and a director of the Company since
1998. Mr. Hoscoe also serves as Operations Manager of the Company's West Coast
operations. Mr. Hoscoe has 18 years experience in the battery industry and
worked for House of Batteries for the past five years prior to joining the
Company in 1997.
Family Relationships
Norman L. Thaw is the father of Wayne Thaw and Mitchell Thaw. Wayne Thaw
and Kathie Thaw are married.
12
Lack of Committees
The Company has no standing audit, nominating and compensation committees
of the Board of Directors or committees performing similar functions. The
Company intends to nominate and elect an audit committee at such time as it has
at least two independent directors who would make up at least a majority of the
audit committee. The audit committee would establish a charter for the committee
with responsibilities to include, without limitation, the power to: (i) select
the independent certified public accountant and determine its independence; (ii)
satisfy itself on behalf of the board that the external and internal auditing
procedures assure reliable and informative accounting and financial reporting;
(iii) have meetings with management, or with the auditors, or with both
management and auditors, to review the scope of the auditor's examination, audit
reports and our internal auditing procedures and reviews; (iv) monitor policies
established to prohibit unethical, questionable, or illegal activities by those
associated with us; and (v) review the compensation paid to the auditors through
annual audit and non-audit fees and the effect on the independence of the
auditors in relation thereto, and to exercise the powers and authority of the
Board of Directors to implement changes in connection with the foregoing or, at
the Audit Committee's option, to make recommendations to the entire Board of
Directors for its approval.
The Company can provide no assurance that it will be successful in
electing two independent directors to serve on the Board of Directors and audit
committee thereof.
13
Item 11. Compensation of Directors and Executive Officers.
The following table provides a summary compensation table with respect to
each of the persons who served as executive officers of the Company in the past
three years. During the past three fiscal years, the Company has not granted
restricted stock awards or stock appreciation rights. In addition, the Company
does not have a defined benefit or actuarial plan.
SUMMARY COMPENSATION TABLE
==================================================================================================
Long Term Compensation
--------------------------
Annual Compensation Awards Payouts
------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restricted Other
and Compen- Stock Number LTIP Compen-
Principal sation Award(s) of Payout Sation
Position Year Salary ($) Bonus ($) ($)(1) ($) Options ($) ($)
--------------------------------------------------------------------------------------------------
2001 31,900 1,450 97,314(2) 0 0 0 0
--------------------------------------------------------------------------------
Jerrold Lazarus,
Former CEO 2000 75,400 27,000 0 0 0 0 0
--------------------------------------------------------------------------------
1999 75,400 18,000 0 0 2,000 0 0
--------------------------------------------------------------------------------------------------
2001 123,677 42,404 0 0 0 0 0
--------------------------------------------------------------------------------
Wayne Thaw,
CEO, President 2000 112,288 38,400 0 0 -0- 0 0
--------------------------------------------------------------------------------
1999 107,042 17,000 0 0 3,000 0 0
--------------------------------------------------------------------------------------------------
Patrick Hoscoe, 2001 82,201 24,147 0 0 0 0 0
Vice President --------------------------------------------------------------------------------
2000 73,724 22,717 0 0 -0- 0 0
--------------------------------------------------------------------------------
1999 68,909 18,000 0 0 2,000 0 0
--------------------------------------------------------------------------------------------------
----------
(1) Does not include the value of a leased or company owned automobile
provided to each officer for business purposes.
(2) Jerry Lazarus retired in January 2001 and received $83,199 in cash and
$14,115, representing the value of an automobile. Of the $83,199,
approximately $75,000 was accrued in fiscal 2000 and the balance of his
retirement benefits of $21,914 was accrued in fiscal 2001.
14
The Company has no employment contracts with its executive officers. Wayne
Thaw is currently receiving an annual salary of $125,000 plus bonuses as
determined by the Board of Directors. The Company also pays for the cost of
gasoline, repairs and insurance related to an automobile purchased by the
Company in December 2000 for Mr. Wayne Thaw's use. Patrick Hoscoe currently
receives an annual salary of approximately $86,000 plus bonuses as determined by
the Company's Board of Directors.
Directors do not presently receive compensation for serving on the Board
or on its committees. Depending on the number of meetings and the time required
for the Company's operations, the Company may decide to compensate its directors
in the future.
The Company leases its employees from a non-affiliated company which has
established a 401(k) plan pursuant to which the Company matches employees'
contributions of an amount equal to $.50 per employee's contributed dollar up to
a maximum matching contribution of six percent of the income of each respective
employee. The Company has no other annuity, pension, or retirement benefits for
its employees. Except as described herein, the Company has not afforded any of
its officers or directors any other personal benefits, the value of which
exceeds 10% of his cash compensation, which is not directly related to job
performance or provided generally to all salaried employees.
Stock Option Plans
The 1992 Plan
The 1992 Incentive and Non-Qualified Stock Option Plan, (the "1992 Plan"),
was approved by the Board of Directors on November 17, 1992 and ratified by
stockholders on January 29, 1993. The 1992 Plan covers 60,000 shares of Common
Stock, subject to adjustment of shares under the anti-dilution provisions of the
1992 Plan. The 1992 Plan authorizes the issuance of the options covered thereby
as either "Incentive Stock Options" within the meaning of the Internal Revenue
Code of 1986, as amended, or as "Non-Statutory Stock Options." Persons eligible
to receive options under the 1992 Plan includes employees, directors, officers,
consultants or advisors, provided that bona fide services shall be rendered by
consultants or advisors and such services must not be in connection with the
offer or sale of securities in a capital raising transaction; however, only
employees (who may also be officers and/or directors) are eligible to receive an
Incentive Stock Option. The 1992 Plan also provides that no options may be
granted after November 16, 2002. In December 1996, the Company has granted ten
year non-statutory options to purchase 30,000 shares at an exercise price of
$3.25 per share to Wayne Thaw (10,000 shares), Jerrold Lazarus (10,000 shares)
and Kathie Thaw (10,000 shares). In December 1998, the Company granted ten year
non-statutory stock options to purchase 7,000 shares at an exercise price of
$5.00 per share to Jerrold Lazarus (2,000 shares), Wayne Thaw (3,000 shares) and
Patrick Hoscoe (2,000 shares). No additional options have been granted by the
Board of Directors since December 1998.
15
The 1992 Plan is administered by the Company's Board of Directors or a
stock option committee consisting of three members of the Board which has the
authority to determine the persons to whom options shall be granted, whether any
particular option shall be an Incentive Option or a Non-Statutory Option, the
number of shares to be covered by each option, the time or times at which
options will be granted or may be exercised and the other terms and provisions
of the Options.
Under the 1992 Plan, the aggregate fair market value (determined at the
time the option is granted) of the optioned stock for which Incentive Stock
Options are exercisable for the first time by any employee during any calendar
year (under all such Plans of the individual's Employer Corporation and its
parent and subsidiary corporation) shall not exceed $100,000.
The 1992 Plan also provides that the Board of directors shall determine
the exercise price of the Common Stock under each option. The 1992 Plan also
provides that: (i) the exercise price of Incentive Stock Options granted
thereunder shall not be less than 100% (110% if the optionee owns 10% or more of
the outstanding voting securities of the Company) of the fair market value of
such shares on the date of grant, as determined by the Board or Committee, and
(ii) no option by its terms may be exercised more than ten years (five years in
the case of an Incentive Stock Option, where the optionee owns 10% or more of
the outstanding voting securities of the Company) after the date of grant. Any
options which are canceled or not exercised within the option period become
available for future grants. All Stock Options are non-transferable except by
will or the laws of descent and distribution.
The 1998 Plan
The 1998 Incentive and Non-Qualified Stock Option Plan, (the "1998 Plan"),
was approved by the Board of Directors effective December 15, 1998 subject to
stockholder approval within 12 months. The 1998 Plan covers 30,000 shares of
Common Stock, subject to adjustment of shares under the anti-dilution provisions
of the 1998 Plan. The 1998 Plan authorizes the issuance of the options covered
thereby as either "Incentive Stock Options" within the meaning of the Internal
Revenue Code of 1986, as amended, or as "Non-Statutory Stock Options." Persons
eligible to receive options under the 1998 Plan includes employees, directors,
officers, consultants or advisors, provided that bona fide services shall be
rendered by consultants or advisors and such services must not be in connection
with the offer or sale of securities in a capital raising transaction; however,
only employees (who may also be officers and/or directors) are eligible to
receive an Incentive Stock Option. The 1998 Plan also provides that no options
may be granted after December 15, 2008. Except for the foregoing, the 1998 Plan
is identical to the 1992 Plan. As of September 30, 2001, no options have been
granted under the 1998 Plan.
16
OPTION GRANTS TABLE
The information provided in the table below provides information with
respect to individual grants of stock options during fiscal 2001 of each of the
executive officers named in the summary compensation table above. The Company
did not grant any stock appreciation rights during 2001.
Option Grants in Last Fiscal Year
====================================================================================================
Potential
Individual Grants Realizable Value at
Assumed Annual
Rates of Stock Price Appreciation
for Option Term (2)
----------------------------------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f) (g)
% of
Total
Options/
Granted to
Options Employees Exercise Expira-
Granted in Fiscal Price tion
Name (#) Year (1) ($/Sh) Date 5% ($) 10% ($)
----------------------------------------------------------------------------------------------------
Wayne Thaw 0 0 N/A N/A N/A N/A
----------------------------------------------------------------------------------------------------
Jerrold Lazarus 0 0 N/A N/A N/A N/A
----------------------------------------------------------------------------------------------------
Patrick Hoscoe 0 0 N/A N/A N/A N/A
----------------------------------------------------------------------------------------------------
N/A - Not Applicable.
----------
(1) The percentage of total options granted to employees in fiscal year is
based upon options granted to officers, directors and employees.
(2) The potential realizable value of each grant of options assumes that the
market price of the Company"s Common Stock appreciates in value from the
date of grant to the end of the option term at annualized rates of 5% and
10%, respectively, and after subtracting the exercise price from the
potential realizable value.
17
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
The information provided in the table below provides information with
respect to each exercise of stock option during fiscal 2001 by each of the
executive officers named in the summary compensation table and the fiscal year
end value of unexercised options.
================================================================================
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Shares Unexercised In-the-Money
Acquired Options at Options
on Value FY-End (#) at Fy-End($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($)(1) Unexercisable Unexercisable(1)
--------------------------------------------------------------------------------
Wayne Thaw -0- -0- 13,000/0 42,200/ 0
--------------------------------------------------------------------------------
Jerrold Lazarus -0- -0- 12,000/0 40,300/ 0
--------------------------------------------------------------------------------
Patrick Hoscoe -0- -0- 2,000/0 3,800/0
--------------------------------------------------------------------------------
(1) The aggregate dollar values in column (c) and (e) are calculated by
determining the difference between the fair market value of the Common
Stock underlying the options and the exercise price of the options at
exercise or fiscal year end, respectively. In calculating the dollar value
realized upon exercise, the value of any payment of the exercise price is
not included. Fiscal year end value based upon a market price of $6.90 per
share determined as of the close of business on June 26, 2001, the last
trade before the end of our fiscal year on July 31, 2001.
Report of the Board of Directors on Executive Compensation
During fiscal 2001, the entire Board which consists of Norman Thaw,
Jerrold Lazarus, Wayne Thaw, Kathie Thaw , Mitchell Thaw and Patrick Hoscoe,
held primary responsibility for determining executive compensation levels. The
goals of the Company's compensation program is to align compensation with
business objectives and performance and to enable the Company to attract, retain
and reward executive officers and other key employees who contribute to the
long-term success of the Company. The Company has provided on a prospective
basis annual incentive opportunity to several of its key employees sufficient to
provide motivation to achieve specific operating goals. The foregoing report has
been approved by all members of the board of directors.
Wayne Thaw -Chairman
Jerrold Lazarus - Former Chairman
Norman Thaw
Kathie Thaw
Mitchell Thaw
Patrick Hoscoe
18
Compensation Committee Interlocks and Insider Participation
During fiscal 2001, Jerrold Lazarus, Wayne Thaw, Kathie Thaw and Patrick
Hoscoe, executive officers of the Company, were involved in determining
executive officer compensation levels as members of the Board of Directors.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of September 30, 2001, the Company had outstanding 258,829 shares of
Common Stock. The only persons of record who presently hold or are known to own
(or believed by the Company to own) beneficially more than 5% of the outstanding
shares of such class of stock is listed below. The following table also sets
forth certain information as to holdings of the Company's Common Stock of all
officers and directors individually, and all officers and directors as a group.
The shares shown in the table below for Norman Thaw and his sons, Wayne Thaw and
Mitchell Thaw are not beneficially owned by each other and are listed
separately.
================================================================================
Name and Address of Number of Approximate
Title of Class Beneficial Owner (1) Shares Percent
--------------------------------------------------------------------------------
Common Stock Wayne Thaw (3)(8) 64,592 23.8
--------------------------------------------------------------------------------
Common Stock Norman L. Thaw (2)(8) 55,228 21.3
--------------------------------------------------------------------------------
Common Stock Jerrold Lazarus (5) 12,691 4.7
--------------------------------------------------------------------------------
Common Stock Kathie Thaw (4)(8) 10,000 3.7
--------------------------------------------------------------------------------
Common Stock Patrick Hoscoe (6) 2,000 0.8
--------------------------------------------------------------------------------
Common Stock Mitchell A. Thaw (8) 21,525 8.3
--------------------------------------------------------------------------------
Common Stock All Directors and
Officers as a group
(six persons) (7) 166,036 56.1
--------------------------------------------------------------------------------
----------
(1) All shares are directly owned, and the sole investment and voting power is
held, by the persons named. The address for all officers and directors is
301 Central Park Drive, Sanford, Florida 32771.
(2) May be deemed to be a parent and/or founder of the Company under the
Securities Act of 1933, as amended and may be deemed to be a "control
person" of the Company within the meaning of the Securities Exchange Act
of 1934.
19
(3) Includes options to purchase 13,000 shares.
(4) Includes options to purchase 10,000 shares.
(5) Includes options to purchase 12,000 shares.
(6) Includes options to purchase 2,000 shares.
(7) Includes options to purchase 37,000 shares granted to officers and
directors.
(8) Wayne Thaw and Kathie Thaw are married and their individual stock
ownership is shown separately. Both Wayne Thaw and Kathie Thaw may be
deemed to also own the shares owned by the other person. Norman Thaw is
the father of Wayne Thaw and Mitchell A. Thaw.
The Company does not know of any arrangement or pledge of its securities
by persons now considered in control of the Company that might result in a
change of control of the Company.
Item 13. Certain Relationships and Related Transactions.
See Item 2 regarding the description of lease between the Company and a
RKW Holding Ltd. ("RKW"), a Florida Limited Partnership, controlled by Wayne
Thaw. In fiscal 2001, 2000 and 1999, $78,424, $74,690 and $71,133, respectively,
were paid by the Company to RKW, which amount is expected to increase by
approximately 5% for fiscal 2002. The foregoing amounts paid to RKW do not
include insurance reimbursement of approximately $2,000 per year and property
taxes paid of approximately $8,000 per year.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a)(1)(2) Financial Statements and Financial Statement Schedules.
A list of the Financial Statements and Financial Statement
Schedules filed as a part of this Report is set forth in Item
8, and appears at Page F-1 of this Report, which list is
incorporated herein by reference.
(a)(3) Exhibits
3 Certificate of Incorporation and Amendments thereto. (1)
3(A) By-Laws. (1)
3(B) February 1992 Certificate of Amendment to Certificate of
Incorporation (2)
20
10 Lease Agreement dated January 17, 1996 by and between RKW
Holding Ltd. and the Registrant (3)
11 Earnings per share. See Financial Statements
99 1998 Incentive and Non-Statutory Stock Option Plan (4)
----------
(1) Exhibits 3 and 3(A) are incorporated by reference from Registration No.
2-85110 which were filed in a Registration Statement on Form S-18.
(2) Incorporated by reference to Form 10-K for the fiscal year ended July 31,
1992.
(3) Incorporated by reference to Form 10-K for the fiscal year ended July 31,
1996.
(4) Incorporated by reference to Form 10-K for the fiscal year ended July 31,
1999.
(b) Reports on Form 8-K.
--------------------
No Reports on Form 8-K were filed or required to be filed
during the quarter ended July 31, 2001.
21
SIGNATURES
Pursuant to the requirements Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TNR TECHNICAL, INC.
By: /s/ Wayne Thaw
-------------------------------------
Wayne Thaw, Chief Executive Officer
Dated: Sanford, Florida
October 19, 2001
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:
Signatures Title Date
---------- ----- ----
/s/ Norman L. Thaw Director October 19, 2001
-----------------------
Norman L. Thaw
/s/ Jerrold Lazarus Director October 19, 2001
-----------------------
Jerrold Lazarus
/s/ Wayne Thaw Chairman of the October 19, 2001
----------------------- Board, Chief
Wayne Thaw Executive Officer
President,
Chief Financial
and Accounting
Officer
/s/ Kathie Thaw Vice President, October 19, 2001
----------------------- Treasurer,
Kathie Thaw Secretary
and Director
/s/ Mitchell Thaw Director October 19, 2001
-----------------------
Mitchell Thaw
/s/ Patrick Hoscoe Vice President October 19, 2001
----------------------- and Director
Patrick Hoscoe
Norman Thaw, Kathie Thaw, Wayne Thaw, Mitchell Thaw, Patrick Hoscoe and Jerrold
Lazarus represent all the members of the Board of Directors.
22