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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended October 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number: 0-13011
TNR TECHNICAL, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
New York 11-2565202
- --------------------------------- -----------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
301 Central Park Drive
Sanford, Florida 32771
- ---------------------------------------- -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (407) 321-3011
None
(Former name, former address and former fiscal year if changed
since last report)
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 ___.
269,197 Common Shares, $.02 par value were issued and outstanding at October 31,
2002
TNR TECHNICAL, INC.
Index
Page
Number
------
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
October 31, 2002 (Unaudited) and
and July 31, 2002 1
Statements of Operations
Three months ended
October 31, 2002 (Unaudited) and
October 31, 2001 (Unaudited) 2
Statements of Cash Flows
Three months ended
October 31, 2002 (Unaudited) and
October 31, 2001 (Unaudited) 3
Notes to Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II. OTHER INFORMATION 7
SIGNATURES
TNR TECHNICAL, INC.
Balance Sheets
October 31, 2002
July 31, 2002 (Unaudited)
------------------ -----------------------
Assets
Current assets:
Cash and cash equivalents $ 854,729 1,171,811
Investments 1,750,819 1,918,371
Accounts receivable - trade, less allowance for doubtful
accounts of $18,733 and $20,736 577,050 666,728
Inventories 1,092,552 970,948
Prepaid expenses and other current assets 16,844 18,418
Income taxes receivable 23,000 -
Deferred income taxes 46,000 42,000
------------------ -----------------------
Total current assets 4,360,994 4,788,276
Property and equipment, at cost, net of accumulated
depreciation and amortization 115,202 112,889
Deposits 15,457 15,457
------------------ -----------------------
Total assets $ 4,491,653 4,916,622
================== =======================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 121,563 361,899
Accrued expenses 229,932 148,480
Income taxes payable - 58,000
------------------ -----------------------
Total current liabilities 351,495 568,379
------------------ -----------------------
Shareholders' equity:
Common stock - $0.02 par value, authorized 500,000
shares; issued 313,581 shares 6,272 6,272
Additional paid-in capital 2,698,261 2,698,261
Retained earnings 1,664,535 1,872,916
Treasury stock - 44,352 and 44,384 shares (228,910) (229,206)
------------------ -----------------------
Total shareholders' equity 4,140,158 4,348,243
------------------ -----------------------
$ 4,491,653 4,916,622
================== =======================
See accompanying notes to financial statements.
1
TNR TECHNICAL, INC.
Statements of Operations
Three Months Ended
October 31,
2002 2001
(Unaudited) (Unaudited)
----------------- ---------------
Revenues:
Net sales $ 1,997,269 2,030,707
----------------- ---------------
Cost and expenses:
Cost of goods sold 1,420,714 1,345,512
Selling, general and administrative 337,011 335,599
----------------- ---------------
1,757,725 1,681,111
----------------- ---------------
Operating income 239,544 349,596
Non-operating revenue:
Interest income 21,892 14,194
Investment income 46,155 -
----------------- ---------------
Income before income taxes 307,591 363,790
Provision for income taxes 99,210 136,718
----------------- ---------------
Net income $ 208,381 227,072
================= ===============
Basic earnings per share $ 0.77 0.88
================= ===============
Diluted earnings per share $ 0.73 0.80
================= ===============
Weighted average number of shares outstanding - basic 269,221 258,821
================= ===============
Weighted average number of shares outstanding - diluted 258,221 284,433
================= ===============
See accompanying notes to financial statements
2
TNR TECHNICAL, INC.
Statements of Cash Flows
Three months ended
October 31,
2002 2001
(Unaudited) (Unaudited)
----------------- ----------------
Cash flows from operating activities:
Net income $ 208,381 227,072
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,903 10,212
Deferred income taxes 4,000 -
Provision for bad debt 2,100 2,100
Net investment income (46,155) -
Changes in operating assets and liabilities:
Accounts receivable (91,778) (129,525)
Inventories 121,604 265,373
Prepaid expenses and other assets (1,574) 622
Income taxes payable 81,000 101,000
Accounts payable and accrued expenses 158,884 (139,089)
----------------- ----------------
Net cash provided by operating activities 444,365 337,765
----------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment (5,590) (2,465)
Purchase of investments and accrued interest (121,397) -
----------------- ----------------
Net cash used in investing activities (126,987) (2,465)
----------------- ----------------
Cash flows from financing activities:
Purchase of treasury stock (296) (90)
----------------- ----------------
Net cash used in financing activities (296) (90)
----------------- ----------------
Increase in cash and cash equivalents 317,082 335,210
Cash and cash equivalents - beginning of period 854,729 1,871,854
----------------- ----------------
Cash and cash equivalents - end of period $ 1,171,811 2,207,064
================= ================
See accompanying notes to financial statements
3
TNR TECHNICAL, INC.
Notes to Financial Statements
(1) Presentation of Unaudited Financial Statements
The unaudited financial statements have been prepared in accordance
with rules of the Securities and Exchange Commission and, therefore, do
not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash
flows, in conformity with generally accepted accounting principles. The
information furnished, in the opinion of management, reflects all
adjustments (consisting only of normal recurring accruals) necessary to
present fairly the financial position as of October 31, 2002, and
results of operations and cash flows for the three month periods ended
October 31, 2002 and 2001. The results of operations are not
necessarily indicative of results which may be expected for any other
interim period, or for the year as a whole.
(2) Sales to Major Customers
During the three months ended October 31, 2002 and 2001, no customer
accounted for more than 10% of total revenue.
(3) Inventories
Inventories consist of the following:
October 31, 2002
July 31, 2002 (Unaudited)
------------- ----------------
Finished goods $ 1,058,683 940,849
Work-in-progress 33,869 30,099
------------- ----------------
$ 1,092,552 970,948
============= ================
4
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Forward Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements involve risk and uncertainties, and actual results
could be significantly different than those discussed in this quarterly report
on Form 10-Q. Certain statements contained herein are forward-looking
statements. These statements discuss, among other things, expected growth,
future revenues and/or performance. Although we believe the expectations
expressed in such forward-looking statements are based on reasonable assumptions
within the bounds of our knowledge of our business, a number of factors could
cause actual results to differ materially from those expressed in any
forward-looking statements, whether oral or written, made by us or on our
behalf. The forward-looking statements are subject to risks and uncertainties
including, without limitation, the following: (a) changes in levels of
competition from current competitors and potential new competition and (b) costs
of acquiring inventory. The foregoing should not be construed as an exhaustive
list of all factors that could cause actual results to differ materially from
those expressed in forward-looking statements made by us. All forward-looking
statements included in this document are made as of the date hereof, based on
information available to the Company on the date thereof, and the Company
assumes no obligation to update any forward-looking statements.
Liquidity and Capital Resources
Working capital amounted to $4,219,897 at October 31, 2002 as compared to
$4,009,499 at July 31, 2002. Cash and investments amounted to $3,090,182 at
October 31, 2002 as compared to $2,605,548 at July 31, 2002. As more fully
described in the statement of cash flows included in the Company's financial
statements elsewhere herein, net cash provided by operating activities for the
quarter ended was $444,365.
During the quarter ended October 31, 2002, cash flow from operating activities
was provided primarily by the Company's net income of $208,381. Sales activity
during the first quarter resulted in increased accounts receivable balances
($91,778) while reducing inventory levels ($121,604). Increases in accounts
payable ($240,336), offset by reductions in accrued expenses ($81,452) resulted
in an overall increase of $158,884. Changes in accrued expenses are primarily
the result of the payout of accrued bonuses. Accounts payable increases are
mainly due to the timing of vendor payments made beyond the quarter end. Net
investment income during the quarter was $46,155. Income taxes payable increased
$81,000. In addition, net cash was used in investing activities to purchase
property and equipment and additional investments. Net cash was also used in
financing activities to purchase treasury stock.
For the three months ended October 31, 2001, cash flow from operating activities
was provided primarily by the Company's net income. Sales activity during the
first quarter resulted in increased accounts receivable balances while reducing
inventory levels. Accounts payable and accrued expenses were reduced during the
quarter primarily as a result of bonus payments and computer consulting costs,
combined with a reduction in accounts payable to take advantage of vendor
discounts, and a general slowing of purchases of inventory in an effort to
reduce overall inventory levels. In addition, net cash was used in investing
activities to purchase property and equipment and in financing activities to
purchase treasury stock.
The Company's short term and long term liquidity needs have been satisfied from
internal sources including cash from operations and amounts available from the
Company's working capital. During the balance of fiscal 2003 and on a long-term
basis, management expects this trend to continue. There are no material
commitments for capital expenditures or any long-term credit arrangements as of
October 31, 2002.
Results of Operations
Sales for the first quarter ended October 31, 2002 decreased less than 2% or
$33,438 from the first quarter ended October 31, 2001. Gross profit decreased 5%
or $108,640 from the first quarter ended October 31, 2001. Cost of goods sold
rose 5.5% or $75,202. Increased cost of goods sold and the subsequent decrease
in gross profit are directly related to implementing a reduced customer pricing
strategy in order to remain competitive in the current market.
Operating (selling, general and administrative) expenses increased from $335,599
for the three months ended October 31, 2001 to $337,011 for the three months
ended October 31, 2002, or less than one half of one percent. Operating expenses
when expressed as a percentage of net sales for the three months ended October
31, 2002 was approximately 16.8% as compared to 16.5% for the comparable period
of the prior year.
The Company did not charge its operations with any research and development
costs during the first quarter ended October 31, 2002. Interest and investment
income increased from $14,194 in the first quarter ended October 31, 2001 to
$68,047 for the first quarter ended October 31, 2002 primarily due to increased
investment activities, (primarily in U.S. Treasure notes) which commenced in the
last quarter of fiscal 2002.
Net income for the first quarter ended October 31, 2002 was $208,381 as compared
to $227,072 for the first quarter ended October 31, 2001. Basic earnings per
share were $.77 and $.88 in 2002 and 2001, respectively.
Management of TNR Technical, Inc. has received a number of comments from its odd
lot stockholders regarding the costs associated with the sale of their odd lots.
Further, Management would like to reduce TNR's expense of maintaining mailings
to odd lot holders (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 records 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 break up 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.
Item 3. Controls and Procedures
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and that such information
is accumulated and communicated to the Company's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure based closely on the definition of
"disclosure controls and procedures" in Rule 13a-14(c). In designing and
evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Within 90 days
prior to the date of this report, the Company carried out an evaluation, under
the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer and the Company's Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the foregoing, the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect the internal controls subsequent to the date the
Company completed its evaluation. Therefore, no corrective actions were taken.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Changes in Securities: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: During the quarter
ended October 31, 2002, there were no stockholder meetings. However, on December
6, 2002, the Company held its annual meeting. At that time, each current
director, namely, Wayne Thaw, Kathie Thaw, Mitchell Thaw, Norman Thaw, Patrick
Hoscoe and Jerrold Lazarus were nominated and re-elected for a period of one
year and until their successor is elected and shall qualify. Each director
received 243,628 shares voted in favor of their re-election and 1,878 shares
voted against their re-election.
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K:
(a) 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)
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) During the quarter ended October 31, 2002, no report on Form
8-K was filed or required to be filed, other than a Form 8-K
which was filed on December 6, 2002.
TNR TECHNICAL, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TNR TECHNICAL, INC.
-------------------------------------
(Registrant)
Dated: December 17, 2002
By: /s/ Wayne Thaw
----------------------------
Wayne Thaw, President, Chief
Executive Officer and Chief
Financial Officer
CERTIFICATION
I, Wayne Thaw, Chief Executive Officer and Chief Financial Officer of the
Registrant, certify that:
1. I have reviewed this quarterly report on Form 10-Q of TNR Technical, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure control and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entitles, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: December 17, 2002 /s/ Wayne Thaw
-------------------------
Wayne Thaw, Chief
Executive Officer and
Chief Financial Officer