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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, 2004
---------------------------------------
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 ___.
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 [ ].
As of September 30, 2004, the number of shares held by non-affiliates was
approximately 131,000 shares. The approximate market value based on the last
sale (i.e. $15.60 per share) of the Company's Common Stock as of the latest
trade date of August 27, 2004 held by non-affiliates was approximately
$2,043,600. The number of shares outstanding of the issuer's Common Stock as of
September 30, 2004 was 266,200.
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 the 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,
Power-Sonic Battery, Varta Battery, Enersys, Duracell, Renata, GP Direct,
Eveready Battery, Kan Industrial and Sanyo Energy. As an authorized distributor,
the Company purchases cells, assembles them into battery packs and maintains
inventory for resale. The Company sells its battery cells and/or battery packs
to the original equipment manufacturers and wholesalers without geographical
limitation and on a non-exclusive basis. The Company also designs and
manufactures battery packs to customers' specifications. The Company's batteries
have applications in mobility, instrumentation, laptops, surveying equipment,
radio control, alarms, U.P.S., door locks, and emergency lighting as well as
other various consumer products.
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, 2004 and 2003, the
Company had no significant backlog.
Competition
There are numerous companies producing and marketing batteries that
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. Smaller start-up companies are also
entering the industry that purchase directly from offshore battery manufacturers
and distributors, selling into the marketplace via web-based type operations. 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, 2004, the Company leases from a non-affiliated party its
staff which includes 24 persons. Such staff includes eight salespersons
(including two executive officers), three accounting and administrative staff,
three warehouse and shipping clerks and 10 production workers. For a fee which
is paid by the Company, the leasing company provides the payroll, 401(k) plan,
worker's compensation insurance and health insurance. The Company's agreement
with the leasing company can be terminated on short notice at any time by the
Company.
2
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 $7,878
(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 $750 per month, inclusive of sales taxes, are accrued on a
monthly basis.
The Company also leases from Grove Investment Company, a non-affiliated
company, 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,
2006. The Company currently pays a base rent of $5,340 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 2004.
3
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and
Issuer Purchases of Equity Securities.
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, 2004.
Fiscal 2004 High Low
- ----------- ---- ---
First Quarter $ 17.00 $ 14.20
Second Quarter 20.00 15.10
Third Quarter 18.50 15.00
Fourth Quarter 17.00 15.00
Fiscal 2003
- -----------
First Quarter $ 11.00 $ 8.50
Second Quarter 13.50 9.05
Third Quarter 12.00 9.50
Fourth Quarter 17.00 11.50
The closing last sale of the Company's Common Stock on July 23, 2004 was
$15.25, which was the last date that the Company's stock traded before its
fiscal year ended July 31, 2004. 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, 2004 was approximately 575 as supplied by the Company's
transfer agent, American Stock Transfer Company, 59 Maiden Lane, New York, NY
10038.
No cash dividends have been paid by the Company on its Common Stock in the
past. In the future, regular or special dividends may be paid by the Company at
the sole discretion of the Company's Board of Directors; however, there can be
no assurances given that any regular or special dividends will be declared and
paid by the Company.
4
Stock Repurchases - Fourth Quarter 2004
TNR's Stock Repurchase Plan of odd lots began in December 1995 as
described under "Management's Discussion and Analysis of Financial Condition and
Results of Operations." There is no announced expiration date of this Stock
Repurchase Plan. The following table provides information as to the number of
shares repurchased by TNR in the fourth quarter of 2004, the average price paid
per share and the historical number of shares repurchased under the Plan as of
the last day of each of the months shown in the table below. Also shown as of
the last day of each month in the last column to the right is the number of odd
lot shares estimated by Management that may be repurchased under the Plan.
Issuer Purchases of Equity Securities - Fourth Quarter 2004
- ------------------------ ----------------- ---------------------- ------------------------- --------------------------
(A) TOTAL (B) AVERAGE PRICE (C) TOTAL NUMBER OF (D) MAXIMUM NUMBER (OR
NUMBER OF SHARES PAID PER SHARE (OR SHARES (OR UNITS) APPROXIMATE DOLLAR
(OR UNITS) UNIT) PURCHASED AS PART OF VALUE) OF SHARES (OR
PURCHASED PUBLICLY ANNOUNCED UNITS) THAT MAY YET BE
PLANS OR PROGRAMS PURCHASED UNDER THE
PLANS OR PROGRAMS
- ------------------------ ----------------- ---------------------- ------------------------- --------------------------
May 1, 2004 55 $17.00 55 11,443 shs.
- ------------------------ ----------------- ---------------------- ------------------------- --------------------------
June -30, 2004 -0- -0- -0- 11,443 shs.
- ------------------------ ----------------- ---------------------- ------------------------- --------------------------
July 31, 2004 -0- -0- -0- 11,443 shs.
- ------------------------ ----------------- ---------------------- ------------------------- --------------------------
Total 55 $17.00 55 11,443 shs.
- ------------------------ ----------------- ---------------------- ------------------------- --------------------------
5
Recent Sales of Unregistered Securities
During the three years ended July 31, 2004, the Company had sales of
unregistered securities as follows:
- -------------- ------------ ----------- ----------------------------- --------------- --------------------------------
CONSIDERATION RECEIVED AND
DESCRIPTION OF UNDERWRITING
OR OTHER DISCOUNTS TO EXEMPTION IF OPTION, WARRANT OR
MARKET PRICE OR CONVERTIBLE FROM CONVERTIBLE SECURITY,
DATE OF SALE TITLE OF NUMBER SECURITY, AFFORDED TO REGISTRATION TERMS OF EXERCISE OR
SECURITY SOLD PURCHASERS CLAIMED CONVERSION
- -------------- ------------ ----------- ----------------------------- --------------- --------------------------------
4/26/02 Common 10,000 Options exercised at $3.25 Section 4(2) Non-Statutory Stock Options
Stock per share; no underwriting granted to a director in
compensation paid December 1996. These options were
fully vested, exercisable at
$3.25 per share and would have
expired in December 2006.
- -------------- ------------ ----------- ----------------------------- --------------- --------------------------------
4/26/02 Common 2,000 Options exercised at $5.00 Section 4(2) Non-Statutory Stock Options
Stock per share; no underwriting granted to a director in
compensation paid December 1998. These options were
fully vested, exercisable at
$5.00 per share and would have
expired in December 2008.
- -------------- ------------ ----------- ----------------------------- --------------- --------------------------------
12/3/01 Common 23,000 Option granted under 1992 Section 4(2) Non-Statutory Stock Options
Stock Stock Option Plan; no cash granted to a director in
received December 2001. These options
were fully vested, exercisable
at $6.80 per share and will
expire on December 3, 2011.
- -------------- ------------ ----------- ----------------------------- --------------- --------------------------------
6
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, 2004 July 31, 2003 July 31, 2002 July 31, 2001 July 31, 2000
------------- ------------- ------------- -------------- -------------
- ---------------------------- ------------------ ------------------ ------------------ ------------------------- --------------------
Net sales $ 7,996,613 $ 8,178,802 $7,908,632 $8,030,850 $ 8,014,576
- ---------------------------- ------------------ ------------------ ------------------ ------------------------- --------------------
Net income 454,202 584,930 559,448 522,121 440,010
- ---------------------------- ------------------ ------------------ ------------------ ------------------------- --------------------
Basic earnings per
share 1.70 2.18 2.15 2.02 1.69
- ---------------------------- ------------------ ------------------ ------------------ ------------------------- --------------------
Cash dividends -0- -0- -0- -0- -0-
============================ ================== ================== ================== ========================= ====================
BALANCE SHEET DATA:
============================ ================== ================== ================== ======================== =====================
July 31, 2004 July 31, 2003 July 31, 2002 July 31, 2001 July 31, 2000
------------- ------------- ------------- ------------- -------------
- ---------------------------- ------------------ ------------------ ------------------ ------------------------ ---------------------
Working capital $ 4,999,652 $4,540,298 $4,009,499 3,363,650 $ 2,890,360
- ---------------------------- ------------------ ------------------ ------------------ ------------------------ ---------------------
Total Assets 5,457,584 5,093,227 4,491,653 4,011,867 3,663,315
- ---------------------------- ------------------ ------------------ ------------------ ------------------------ ---------------------
Long-term debt (including
capital leases) -0- -0- -0- -0- -0-
- ---------------------------- ------------------ ------------------ ------------------ ------------------------ ---------------------
Total Shareholders' equity 5,137,729 4,709,887 4,140,158 3,535,985 3,018,886
- ---------------------------- ------------------ ------------------ ------------------ ------------------------ ---------------------
7
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Forward Looking Statements
This annual report on Form 10-K 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 annual report on
Form 10-K. 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 $4,999,652 at July 31, 2004 as compared to
$4,540,298 at July 31, 2003. Cash and investments amounted to $3,319,346 at July
31, 2004 as compared to cash and investments of $2,823,960 at July 31, 2003. 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 fiscal years ended July 31, 2004, July 31, 2003, and July 31, 2002, were
$516,756, $269,561, and $632,820 respectively.
During fiscal 2004, cash was provided by operating activities primarily
due to the Company's net income of $454,202. Reduced sales resulted in decreases
in accounts receivable ($81,863). A concerted effort was made by management to
reduce the level of inventory on hand ($157,654) in response to reduced sales.
Accounts payable and accrued expenses decreased primarily as a result of reduced
inventory levels. The decrease in income tax payables and the subsequent
increase in income tax receivables result from the payment of tax obligations
and estimated tax payments. Cash was used in investing activities to purchase
equipment and fixed income investments and in financing activities to purchase
treasury stock.
During fiscal 2003, cash was provided by operating activities primarily
due to the Company's net income of $584,930. Increases in accounts receivable
resulted from increased sales. Inventory levels increased in response to longer
lead times from vendors and in anticipation of a short supply of certain items
with military applications. Decreases in accounts payable and accrued expenses
are primarily the result of decreased bonus accruals. Increases in income taxes
payable are related to estimated tax obligations. Cash was used in investing
activities to purchase equipment and fixed income investments. Cash was also
used in financing activities to purchase treasury stock.
8
During fiscal 2002, cash was provided by operating activities primarily
due to the Company's net income of $559,448. Other changes in cash were related
to reductions in accounts payable and accrued expenses primarily to satisfy
obligations associated with the Company's computer hardware and software
upgrades in late fiscal 2001 and to a reduction in overall inventory levels. The
reduction in inventory levels was a result of longer vendor lead times. Accounts
receivable was reduced as a result of increased credit card sales and
increasingly efficient credit collection. Income taxes payable/receivable was
decreased resulting from the payment of tax obligations and estimated tax
payments. During fiscal 2002, cash was used in investing activities to purchase
property and equipment. During fiscal 2002, changes in cash resulting from
financing activities were associated with the purchase of treasury stock and the
issuance of common stock subsequent to an exercise of stock options by the
former chief executive officer.
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 2005, Management
expects this trend to continue. There are no material commitments for capital
expenditures or any long-term credit arrangements as of July 31, 2004.
Recent Trends
Competition in wholesale distribution of batteries is increasing as
offshore manufacturers, and subsequently U.S. manufacturers, sell directly to
customers competing with distributors for the same market. Despite increased
competition, new battery companies are entering the market offering lower
prices, and selling directly to the end-user via web-based operations. This,
combined with the expansion of local battery franchises in cities throughout the
USA has increased the level of competition in the battery market.
Results of Operations
Net sales for fiscal 2004 fell 2.2% or $182,189 as compared to fiscal 2003
as more of our customers move to the offshore market. Net sales for fiscal 2003
rose 3.4%, or $270,170 as compared to fiscal 2002. Net sales for fiscal 2002
fell one and a half percent, or $122,218, as compared to fiscal 2001. Decreased
sales in 2002 were a result of increased competition and a general slowing of
the economy, which showed a modest recovery in 2003 that is reflected in the
increase in net sales for that period. During the past three years, no customer
accounted for more than 10% of revenues.
The Company's gross margin decreased less than one percent to 27.7% as
compared to 27.8% for fiscal 2003, up from 26.9% in fiscal 2002. Accordingly,
gross profit decreased $61,605 to $2,211,838 in fiscal 2004 as compared to
$2,273,443 in fiscal 2003.
9
Operating (selling, general and administrative) expenses increased $79,678
to $1,507,757 from fiscal 2003 mainly as a result of net salary increases
($60,442) and overall employee related expenses ($29,075). In addition, there
was a net decrease in general non-salary related expenses ($9,839). Operating
expenses increased $82,833 in fiscal 2003 from $1,345,246 in fiscal 2002 mainly
as a result of net salary increases ($34,894) and an increase in overall
employee related expenses ($23,163). In addition, there were increases in
depreciation expense ($17,538) and general non-salary expenses ($4,179).
During the past three years, the Company did not charge its operations
with any research and development costs. Decreases in interest income of $1,338
and in investment gains of $48,113 were a result of the continued low in
interest rates.
Net income for fiscal 2004 was $454,202 as compared to $584,930 for fiscal
2003 and $559,448 for fiscal 2002. Basic earnings per share for fiscal 2004,
fiscal 2003, and fiscal 2002 were $1.70, $2.18, and $2.15 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 the Company'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. The
purchase price to be paid will be based upon the closing asked price on the NASD
electronic bulletin board of the Company'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.
During fiscal 2004, 2003, 2002, and 2001, the Company redeemed a total of
1,713 shares from 37 persons, 608 shares from 29 persons, 1,600 shares from 68
persons and 729 shares from 22 persons, respectively, pursuant to the Company's
program to repurchase odd lots. In June 2003, the Company also repurchased a
total of 691 shares held by a director and the Company's former chief executive
officer at a purchase price of $12.00 per share.
- ---------------------------------------------------- ------------ ------------ ----------- ---------- ----------------
2003 - 2004 QTR 1 QTR 2 QTR 3 QTR 4 YTD
- ---------------------------------------------------- ------------ ------------ ----------- ---------- ----------------
# SHARES REPURCHASED 1,330 228 100 55 1,713
- ---------------------------------------------------- ------------ ------------ ----------- ---------- ----------------
# SHAREHOLDERS 28 7 1 1 37
- ---------------------------------------------------- ------------ ------------ ----------- ---------- ----------------
AVG. SHARE PRICE $15.09 $16.16 $17 $17 $15.39
- ---------------------------------------------------- ------------ ------------ ----------- ---------- ----------------
10
Item 7(a). Quantitative and Qualitative Disclosures about Market Risk.
The Company is not exposed to financial market risks from changes in
foreign currency exchange rates or changes in interest rates. The Company does
not use derivative financial instruments.
Item 8. Financial Statements and Supplementary Data.
The information required by Item 8, and an index thereto, appears at pages
F-1 through F-19 (inclusive) of this Report, which pages follow Item 9(b).
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
Item 9(a) 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, 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 disclosure controls and procedures or in other factors that
could significantly affect the disclosure controls and procedures subsequent to
the date the Company completed its evaluation. Therefore, no corrective actions
were taken.
Item 9(b) Other Information
None.
11
FINANCIAL STATEMENTS
TNR TECHNICAL, INC.
JULY 31, 2004 AND 2003
TNR TECHNICAL, INC.
FINANCIAL STATEMENTS
JULY 31, 2004 AND 2003
(WITH INDEPENDENT AUDITORS' REPORT THEREON)
TNR TECHNICAL, INC.
INDEX TO FINANCIAL STATEMENTS
Independent Auditors' Report...........................................................................F-1
Financial Statements:
Balance Sheets - July 31, 2004 and 2003........................................................F-2
Statements of Operations - Three years ended July 31, 2004.....................................F-4
Statements of Shareholders' Equity - Three years ended July 31, 2004...........................F-5
Statements of Cash Flows - Three years ended July 31, 2004.....................................F-6
Notes to Financial Statements..........................................................................F-8
TSCHOPP, WHITCOMB & ORR, P.A.
2600 MAITLAND CENTER PARKWAY, SUITE 330
MAITLAND, FL 32751
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, 2004 and 2003, and the related statements of operations, shareholders'
equity and cash flows for each of the years in the three-year period ended
July 31, 2004. 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 standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 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, 2004 and 2003 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/ TSCHOPP, WHITCOMB & ORR, P.A.
September 10, 2004
Maitland, Florida
TNR TECHNICAL, INC.
BALANCE SHEETS
July 31, 2004 and 2003
ASSETS
2004 2003
------------------- -------------------
Current assets:
Cash and cash equivalents $ 710,636 833,901
Investments (note 4) 2,608,710 1,990,059
Accounts receivable - trade, less allowance for doubtful
accounts of $19,652 in 2004 and $16,871 in 2003 649,018 739,281
Inventories (note 2) 1,127,143 1,284,797
Income taxes receivable (note 6) 70,258 --
Prepaid expenses and other current assets 32,742 26,600
Deferred income taxes (note 6) 102,000 49,000
------------------- -------------------
Total current assets 5,300,507 4,923,638
Property and equipment, at cost, net of accumulated
depreciation and amortization (note 3) 140,886 153,398
Other assets:
Deposits 16,191 16,191
------------------- -------------------
$5,457,584 5,093,227
=================== ===================
See accompanying notes to financial statements.
F-2
TNR TECHNICAL, INC.
BALANCE SHEETS
July 31, 2004 and 2003
LIABILITIES AND SHAREHOLDERS' EQUITY
2004 2003
------------------ ------------------
Current liabilities:
Accounts payable $ 124,280 132,163
Accrued expenses 176,575 193,151
Income taxes payable (note 6) -- 58,026
------------------- ------------------
Total current liabilities 300,855 383,340
Deferred tax liability (note 6) 19,000 --
------------------- ------------------
Total liabilities 319,855 383,340
------------------- ------------------
Commitment (note 7)
Shareholders' equity:
Common stock - $.02 par value, authorized 500,000
shares; issued and outstanding 313,581
shares in 2004 and 2003 (note 5) 6,272 6,272
Additional paid-in capital 2,698,261 2,698,261
Retained earnings 2,703,667 2,249,465
------------------- ------------------
5,408,200 4,953,998
Less cost of treasury stock 47,373 and 45,660
shares in 2004 and 2003, respectively (270,471) (244,111)
------------------- ------------------
Total shareholders' equity 5,137,729 4,709,887
------------------- ------------------
$ 5,457,584 5,093,227
=================== ==================
See accompanying notes to financial statements.
F-3
TNR TECHNICAL, INC.
STATEMENTS OF OPERATIONS
Years ended July 31, 2004, 2003 and 2002
2004 2003 2002
------------------ ------------------ -------------------
Revenues:
Net sales (note 9) $ 7,996,613 8,178,802 7,908,632
------------------ ------------------ -------------------
Cost and expenses:
Cost of goods sold 5,784,775 5,905,359 5,775,174
Selling, general and administrative (note 10) 1,507,757 1,428,079 1,345,246
------------------ ------------------ -------------------
7,292,532 7,333,438 7,120,420
------------------ ------------------ -------------------
Operating income 704,081 845,364 788,212
Non-operating revenue (expense):
Interest income 1,338 12,738 56,357
Investment gains, net (note 4) 48,113 68,096 61,769
Other, net (note 11) (10,330) (8,058) (7,044)
------------------ ------------------ -------------------
Income before income taxes 743,202 918,140 899,294
Income tax expense (note 6) 289,000 333,210 339,846
------------------ ------------------ -------------------
Net income $ 454,202 584,930 559,448
================== ================== ===================
Basic earnings per share $ 1.70 2.18 2.15
================== ================== ===================
Diluted earnings per share $ 1.52 1.97 1.99
================== ================== ===================
Weighted average number of shares - Basic 266,552 268,745 260,727
================== ================== ===================
Weighted average number of shares - Diluted 299,389 296,212 281,349
================== ================== ===================
See accompanying notes to financial statements.
F-4
TNR TECHNICAL, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
Years ended July 31, 2004, 2003 and 2002
ADDITIONAL
COMMON STOCK PAID-IN RETAINED TREASURY
SHARES AMOUNT CAPITAL EARNINGS STOCK
----------------- ----------------- ---------------- ----------------- -----------------
Balances, July 31, 2001 301,581 $ 6,032 2,640,001 1,105,087 (215,135)
Net income -- -- -- 559,448 --
Purchase of Company
stock -- -- -- -- (13,775)
Issuance of common
stock upon exercise
of related options 12,000 240 58,260 -- --
----------------- ----------------- ---------------- ----------------- -----------------
Balances, July 31, 2002 313,581 6,272 2,698,261 1,664,535 (228,910)
Net income -- -- -- 584,930 --
Purchase of Company
stock -- -- -- -- (15,201)
----------------- ----------------- ---------------- ----------------- -----------------
Balances, July 31, 2003 313,581 6,272 2,698,261 2,249,465 (244,111)
Net income -- -- -- 454,202 --
Purchase of Company
stock -- -- -- -- (26,360)
----------------- ----------------- ---------------- ----------------- -----------------
Balances, July 31, 2004 313,581 $ 6,272 2,698,261 2,703,667 (270,471)
================= ================= ================ ================= =================
See accompanying notes to financial statements.
F-5
TNR TECHNICAL, INC.
STATEMENTS OF CASH FLOWS
Years ended July 31, 2004, 2003 and 2002
2004 2003 2002
----------------- ----------------- -----------------
Cash flows from operating activities:
Net income $ 454,202 584,930 559,448
Adjustments to reconcile net income to net cash
provided by operations:
Deferred income taxes (34,000) (3,000) 4,000
Depreciation and amortization 45,305 57,790 40,252
Provision for doubtful accounts 8,400 8,400 8,400
Investment gains, net (48,113) (68,096) (61,769)
Loss on disposition of fixed assets 10,330 8,058 7,044
Changes in operating assets and liabilities:
Accounts receivable 81,863 (170,631) 69,901
Inventories 157,654 (192,245) 158,521
Prepaid expenses and other assets (6,142) (9,756) (5,590)
Accounts payable and accrued expenses (24,459) (26,181) (87,515)
Deposits -- (734) --
Income taxes receivable/payable (128,284) 81,026 (59,872)
----------------- ----------------- -----------------
Net cash provided by operating activities 516,756 269,561 632,820
----------------- ----------------- -----------------
Cash flows from investing activities:
Purchase of property and equipment (43,123) (104,044) (5,620)
Purchase of investments and accrued interest (570,538) (171,144) (1,689,050)
----------------- ----------------- -----------------
Net cash used in investing activities (613,661) (275,188) (1,694,670)
----------------- ----------------- -----------------
See accompanying notes to financial statements.
F-6
TNR TECHNICAL, INC.
STATEMENTS OF CASH FLOWS
Years ended July 31, 2004, 2003 and 2002
2004 2003 2002
----------------- ----------------- -----------------
Cash flows from financing activities:
Purchase of treasury stock $ (26,360) (15,201) (13,775)
Issuance of common stock -- -- 58,500
----------------- ----------------- -----------------
Net cash provided by (used in) financing activities (26,360) (15,201) 44,725
----------------- ----------------- -----------------
Decrease in cash and cash equivalents (123,265) (20,828) (1,017,125)
Cash and cash equivalents - beginning of year 833,901 854,729 1,871,854
----------------- ----------------- -----------------
Cash and cash equivalents - end of year $ 710,636 833,901 854,729
================= ================= =================
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ -- -- --
================= ================= =================
Cash paid during the year for income taxes $ 452,258 255,184 387,000
================= ================= =================
See accompanying notes to financial statements.
F-7
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 2004 and 2003
(1) SUMMARY OF SIGNIFICANT ACCOUNTING 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) ACCOUNTS RECEIVABLE
Accounts receivable are stated at the amount management expects to
collect from outstanding balances. Management provides for probable
uncollectible amounts using the reserve method based on its
assessment of the current status of the individual receivables and
after using reasonable collection efforts. As of July 31, 2004, the
balance of the reserve recorded for uncollectible amounts amounted
to approximately $20,000.
(C) INVESTMENTS
Management determines the appropriate classification of investments
at the time of acquisition and reevaluates such determination at
each balance sheet date. Trading securities are carried at fair
value, with unrealized holding gains and losses included in
earnings. Available-for-sale securities are carried at fair value,
with unrealized holding gains and losses, net of tax reported as a
separate component of stockholders' equity. Investments in equity
securities and limited partnerships that do not have readily
determinable fair values are stated at cost and are categorized as
other investments. Realized gains and losses are determined using
the specific identification method based on the trade date of a
transaction. Interest on corporate obligations, as well as dividends
on preferred stock, are accrued at the balance sheet date.
(D) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out method.
(Continued)
F-8
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 2004 and 2003
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
(E) 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.
(F) RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged against income in the
year incurred.
(G) 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. The costs incurred by the Company for shipping and handling
are reported as an expense.
(H) 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.
(I) 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.
(Continued)
F-9
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 2004 and 2003
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
(J) FINANCIAL INSTRUMENTS FAIR VALUE, CONCENTRATION OF BUSINESS AND
CREDIT RISKS
The carrying amount reported in the balance sheet approximates fair
value for cash, investments, accounts receivable, accounts payable
and accrued expenses. Financial instruments, which potentially
subject the Company to concentrations of credit risk, consist
principally of trade accounts receivable which amount to
approximately $650,000. 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 $466,000 and $526,000 at
July 31, 2004 and 2003, respectively.
(K) 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 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).
(L) 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.
F-10
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 2004 and 2003
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
(M) 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.
(N) 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.
(O) RECLASSIFICATIONS
Certain amounts from 2003 and 2002 have been reclassified to conform
with the 2004 presentation.
(2) INVENTORIES
Inventories consist of the following:
2004 2003
---- ----
Finished goods $1,093,329 1,246,254
Work-in-process 33,814 38,543
---------- ---------
$1,127,143 1,284,797
========== =========
(3) PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
2004 2003
---- ----
Machinery and equipment $ 275,840 295,044
Leasehold improvements 25,748 26,948
---------- ---------
301,588 321,992
Less accumulated depreciation and amortization 160,702 168,594
---------- ---------
$ 140,886 153,398
========== =========
F-11
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 2004 and 2003
(4) INVESTMENTS
Investments held by the Company are classified as trading securities and
consist of certain government and corporate fixed income securities.
Unrealized gains and losses associated with trading securities are
included in earnings on a current basis. The Company determines cost on
the specific identification basis. The following table summarizes the
Company's investments at July 31, 2004.
Fair Unrealized
Value Cost Gains (Losses)
----------------- ---------------- --------------------
U.S. Government notes $2,387,370 2,394,278 (6,908)
Corporate fixed income bonds 182,570 175,000 7,570
Accrued interest 38,770 38,770 --
----------------- ---------------- --------------------
$2,608,710 2,608,048 662
================= ================ ====================
(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.
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.
In December 2001, the Company granted options to purchase 23,000 shares at
an exercise price of $6.80 per share to its chief executive officer and
chairman of the board.
(Continued)
F-12
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 2004 and 2003
(5) STOCK OPTION PLANS -CONTINUED
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.
At July 31, 2004 no stock options have been granted under this plan.
Options granted and issued by the Company consist of the following:
NUMBER WEIGHTED AVERAGE PRICE
------ ----------------------
Balance outstanding, July 31, 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
Options granted 23,000 6.80
Options exercised (12,000) 3.54
------------------- ---------------------------------
Balance outstanding, July 31, 2002 48,000 5.13
(Continued)
F-13
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 2004 and 2003
(5) STOCK OPTION PLANS - CONTINUED
NUMBER WEIGHTED AVERAGE PRICE
------ ----------------------
Balance outstanding, July 31, 2002 48,000 5.13
Options granted -- --
Options exercised -- --
------------------- ---------------------------------
Balance outstanding, July 31, 2003 48,000 5.13
Options granted -- --
Options exercised -- --
------------------- ---------------------------------
Balance outstanding, July 31, 2004 48,000 $ 5.13
=================== =================================
Information relating to options at July 31, 2004, summarized by exercise
price, is as follows:
OUTSTANDING AND EXERCISABLE WEIGHTED AVERAGE
--------------------------- ----------------
EXERCISE PRICE EQUIVALENT SHARES EXERCISE PRICE YEAR
-------------- ----------------- -------------- ----
$ 3.25 20,000 3.25 3.5
5.00 5,000 5.00 5.5
6.80 23,000 6.80 8.3
------
48,000 5.13 6.0
======
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:
(Continued)
F-14
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 2004 and 2003
(5) STOCK OPTION PLANS - CONTINUED
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 remaining
options granted during 1999 and the options granted in 2002 approximated
$2.12 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, 2004, 2003 and 2002.
(6) INCOME TAXES
The income tax provision for the years ended July 31, 2004, 2003 and 2002
consists of the following:
2004 2003 2002
---- ---- ----
Current:
Federal $240,000 270,000 273,500
State 55,000 66,210 62,346
-------- ------- -------
295,000 336,210 335,846
-------- ------- -------
Deferred:
Federal (5,000) (2,000) 3,500
State (1,000) (1,000) 500
-------- ------- -------
(6,000) (3,000) 4,000
-------- ------- -------
Total $289,000 333,210 339,846
======== ======= =======
(Continued)
F-15
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 2004 and 2003
(6) INCOME TAXES - CONTINUED
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:
2004 2003 2002
---- ---- ----
Computed "expected" tax expense $253,000 312,000 305,000
Increase (reduction) in income tax expense
resulting from:
State income taxes, net of federal
income tax benefit 37,000 44,000 47,000
Overaccrual of income tax
liability in prior year -- (22,790) (9,500)
Adjustment to deferred tax assets to
reflect current effective tax rates
and other (1,000) -- (2,654)
-------- ------- -------
$289,000 333,210 339,846
======== ======= =======
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at July 31, 2004 and
2003 are presented below:
2004 2003
---- ----
Deferred tax assets:
Inventories, principally due to additional costs
inventoried for tax purposes $ 48,000 43,000
Accounts receivable, due to allowance for
uncollectible accounts 7,000 6,000
Investments, due to exclusion of unrealized losses
for tax purposes 47,000 --
-------- --------
102,000 49,000
Less valuation allowance -- --
-------- --------
102,000 49,000
-------- --------
Deferred tax liabilities:
Property and equipment, due to additional
depreciation for tax purposes (19,000) --
-------- --------
Net deferred tax assets $ 83,000 $ 49,000
======== ========
(Continued)
F-16
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 2004 and 2003
(6) INCOME TAXES - CONTINUED
Deferred taxes are presented in the accompanying balance sheets as:
2004 2003
---- ----
Current deferred tax assets $102,000 49,000
Noncurrent deferred tax liability (19,000) --
-------- ------
$ 83,000 49,000
======== ======
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,
2004 and 2003.
(7) LEASE COMMITMENTS
The Company leases 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,
--------------------
2005 159,565
2006 143,220
(Continued)
F-17
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 2004 and 2003
(7) LEASE COMMITMENTS - CONTINUED
Total lease and rental expense amounted to $161,420, $155,290, and
$145,206 in 2004, 2003, and 2002, respectively. In 2004, 2003 and 2002
lease expense associated with related parties amounted approximately to
$91,000, $89,000 and $86,000, respectively.
(8) RETIREMENT PLAN
The Company participates in a qualified retirement plan (Plan) with a
salary deferral feature designed to qualify under Section 401 of the
Internal Revenue Code. Employees of the Company are eligible to
participate in the Plan if they meet certain minimum age and period of
credited service requirements. The Plan allows participants to defer up to
25% of their compensation on a pre-tax basis subject to certain maximum
amounts. The Plan allows the Company to make matching contributions not to
exceed 6% of the eligible participant compensation. In 2004, 2003 and
2002, the Company made matching contributions of $34,608, $20,838 and
$13,172, respectively.
(9) SALES TO MAJOR CUSTOMERS
During the years ended July 31, 2004, 2003 and 2002 no customer accounted
for more than 10% of total revenues.
(10) SUPPLEMENTARY INFORMATION
2004 2003 2002
---- ---- ----
Advertising costs $17,590 $10,157 24,722
Provision for doubtful accounts 8,400 8,400 8,400
The provision for doubtful accounts and advertising costs are included in
selling, general and administrative costs in the accompanying statements
of operations.
(11) NON-OPERATING REVENUE (EXPENSE)
Other non-operating revenue (expense), net, for the years ended July 31,
2004, 2003 and 2002, is comprised of the following:
2004 2003 2002
---- ---- ----
Loss on disposition of fixed assets $ (10,330) (8,058) (7,044)
-------------- ------------- ----------------
$ (10,330) (8,058) (7,044)
============== ============= ================
F-18
TNR TECHNICAL, INC.
NOTES TO FINANCIAL STATEMENTS
July 31, 2004 and 2003
(12) SELECTED FINANCIAL DATA (UNAUDITED)
The following is a summary of the quarterly results of operations for the
years ended July 31, 2004 and 2003, respectively:
QUARTER ENDED QUARTER ENDED QUARTER ENDED QUARTER ENDED YEAR ENDED
OCTOBER 31, JANUARY 31, APRIL 30, JULY 31, JULY 31,
----------- ----------- --------- -------- --------
2004
----
Net revenues $ 2,108,438 1,893,663 2,044,975 1,949,537 7,996,613
Net income from operations 199,969 154,731 155,461 190,389 700,550
Basic earnings per share 0.51 0.43 0.30 0.45 1.69
Weighted-average number of
shares issued and outstanding 267,003 266,461 266,313 266,221 266,552
2003
----
Net revenues $ 1,997,269 2,002,166 2,003,275 2,176,092 8,178,802
Net income from operations 239,544 240,217 308,157 57,446 845,364
Basic earnings per share 0.77 0.55 0.76 0.10 2.18
Weighted-average number of
shares issued and outstanding 269,221 268,961 268,735 268,171 268,745
F-19
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 47 (1) 1983 Chairman of the
Board, Chief
Executive Officer
President
Jerrold Lazarus 72 (1) 1987 Retired
Norman L. Thaw 71 (1) 1979 President of
Stride Rite
Stables, Inc.,
Private Investor
Kathie Thaw 49 (1) 1996 Vice-President
Mitchell Thaw 48 (1) 1998 Co-Manager -
Hedge Fund
Patrick Hoscoe 41 (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.
13
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. Kathie 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.
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 has served as a consultant to the President over the past
eight 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. Mr.
Thaw is currently a co-manager of a hedge fund. From November 2000 until
September 2001, he was Executive Vice President of KBC Securities, an
international securities firm. 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 25 years experience in the battery industry and
worked for House of Batteries for the 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.
14
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "Commission"). Officers, directors and greater than ten percent
stockholders are required by the Commission's regulations to furnish the Company
with copies of all Section 16(a) forms they file. During fiscal 2004, no
officers, directors or greater than 10% stockholders filed any forms late, other
than Wayne Thaw who filed a Form 4 late in July 2004.
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 does not currently have an Audit Committee of its Board of Directors or
independent directors to form an Audit Committee. However, it is the Company's
intention to elect two independent directors at its 2005 Annual Meeting of
Stockholders currently scheduled for January 10, 2005 and to promptly form an
Audit Committee composed of these two newly elected directors. Two qualified
persons have been interviewed and have given the Board of Directors of the
Company preliminary indications of their willingness to serve on the Board and
its Audit Committee, subject to there being officers and directors liability
insurance. One of such candidates is believed to be a "Financial Expert" within
the meaning of Sarbanes-Oxley Act of 2002, as amended. An independent director
is defined in Rule 4200(a)(14) of the NASD's Listing Standards to mean a person
other than an officer or employee of the Company or its subsidiaries or any
other individual having a relationship which, in the opinion of the Company's
Board of Directors, would interfere with the exercise of independent judgment in
carrying out the responsibilities of a director. The following persons should
not be considered independent:
o A director who is employed by the Company or any of its affiliates for
the current year or any of the past three years;
o A director who accepts any compensation from the Company or any of its
affiliates in excess of $60,000 during the previous fiscal year other than
compensation for Board service, benefits under a tax qualified retirement plan,
or non discretionary compensation;
o A director who is a member of the immediate family of an individual who
is, or has been in any of the past three years, employed by the Company or any
of its affiliates as an executive officer. Immediate family includes a person's
spouse, parents, children, siblings, mother-in-law, father-in-law,
sister-in-law, brother-in-law, son-in-law, daughter-in-law, and anyone who
resides in such person's home;
o A director who is a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which the Company
made, or from which the Company received, payments (other than those arising
solely from investments in the Company's securities) that exceed 5% of the
Company's or business organizations consolidated gross revenues for that year,
or $200,000, whichever is more, in any of the past three years;
o A director who is employed as an executive of another entity where any
of the Company's executives serve on that entity's compensation committee.
15
The term "Financial Expert" is defined as a person who has the following
attributes: an understanding of generally accepted accounting principles and
financial statements; has the ability to assess the general application of such
principles in connection with the accounting for estimates, accruals and
reserves; experience preparing, auditing, analyzing or evaluating financial
statements that present a breadth and level of complexity of accounting issues
that are generally comparable to the breadth and complexity of issues that can
reasonably be expected to be raised by the Company's financial statements, or
experience actively supervising one or more persons engaged in such activities;
an understanding of internal controls and procedures for financial reporting;
and an understanding of audit committee functions.
No assurances can be given that the Board's efforts to select two persons
to serve as independent directors and on the proposed Audit Committee will be
successful. In the event an Audit Committee is established, its first
responsibility would be to adopt a written charter. Such charter would be
expected to include, among other things:
o annually reviewing and reassessing the adequacy of the committee's
formal charter;
o reviewing the annual audited financial statements with the Company's
management and its independent auditors and the adequacy of its
internal accounting controls;
o reviewing analyses prepared by the Company's management and
independent auditors concerning significant financial reporting
issues and judgments made in connection with the preparation of its
financial statements;
o being directly responsible for the appointment, compensation and
oversight of the independent auditor, which shall report directly to
the Audit Committee, including resolution of disagreements between
management and the auditors regarding financial reporting for the
purpose of preparing or issuing an audit report or related work;
o reviewing the independence of the independent auditors;
o reviewing the Company's auditing and accounting principles and
practices with the independent auditors and reviewing major changes
to its auditing and accounting principles and practices as suggested
by the independent auditor or its management;
o reviewing all related party transactions on an ongoing basis for
potential conflict of interest situations; and
o all responsibilities given to the Audit Committee by virtue of the
Sarbanes-Oxley Act of 2002, which was signed into law by President
George W. Bush on July 30, 2002.
Code of Ethics
Effective March 3, 2003, the Securities & Exchange Commission requires
registrants like the Company to either adopt a code of ethics that applies to
the Company's Chief Executive Officer and Chief Financial Officer or explain why
the Company has not adopted such a code of ethics. For purposes of item 406 of
Regulation S-K, the term "code of ethics" means written standards that are
reasonably designed to deter wrongdoing and to promote:
o Honest and ethical conduct, including the ethical handling of actual
or apparent conflicts of interest between personal and professional
relationships;
16
o Full, fair, accurate, timely and understandable disclosure in
reports and documents that the Company files with, or submits to,
the Securities & Exchange Commission and in other public
communications made by the Company;
o Compliance with applicable governmental law, rules and regulations;
o The prompt internal reporting of violations of the code to an
appropriate person or persons identified in the code; and
o Accountability for adherence to the code.
The Company has not adopted a Code of Ethics. The Board intends to adopt
an appropriate Code of Ethics after the establishment of an Audit Committee.
17
Item 11. Executive Compensation.
The following table provides a three-year summary compensation table with
respect to the Company's Chief Executive Officer and any executive officers
earning salaries and bonuses of $100,000 or more during fiscal 2004. During the
past three fiscal years, the Company has not granted restricted stock awards or
stock appreciation rights. In addition, the Company does not have a defined
benefit or actuarial plan.
SUMMARY COMPENSATION TABLE
================ =========== =============== ============== =============== ========================================== =============
Long Term Compensation
------------------------------------------
Annual Compensation Awards Payouts
- ---------------- ----------- ---------------------------------------------- ----------------------------- ------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other All
Name Annual Restricted Other
And Compen- Stock Number LTIP Compen-
Principal Year sation Award(s) of Payout Sation
Position Salary ($) Bonus ($) ($)(1) ($) Options ($) ($)
- ---------------- ----------- --------------- -------------- --------------- -------------- -------------- ------------ -------------
Wayne Thaw, 2004 199,105 27,350 7,695 (2) 0 0 0 0
CEO, ----------- --------------- -------------- --------------- -------------- -------------- ------------ -------------
President 2003 168,256 4,000 0 0 0 0 0
----------- --------------- -------------- --------------- -------------- -------------- ------------ -------------
2002 125,008 54,164 0 0 23,000 0 0
- ---------------- ----------- --------------- -------------- --------------- -------------- -------------- ------------ -------------
Patrick 2004 104,540 26,520 0 0 0 0 0
Hoscoe, ----------- --------------- -------------- --------------- -------------- -------------- ------------ -------------
Vice President 2003 89,835 30,000 0 0 0 0 0
----------- --------------- -------------- --------------- -------------- -------------- ------------ -------------
2002 85,670 26,000 0 0 0 0 0
================ =========== =============== ============== =============== ============== ============== ============ =============
- ----------
(1) Does not include the value of a leased or company owned automobile
provided to the CEO for business purposes.
(2) For fiscal 2004, $7,695 was paid in lieu of vacation pay.
18
The Company has no employment contracts with its executive officers. Wayne
Thaw is currently receiving a bi-weekly salary of approximately $7,700 plus such
increases and 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 for Mr. Wayne Thaw's use. Patrick Hoscoe currently
receives a bi-weekly salary of approximately $4,040 plus such increases 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 $1.00 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 covered 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 included 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) were eligible to
receive an Incentive Stock Option. The 1992 Plan also provided that no options
may be granted after November 16, 2002. In December 1996, the Company 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). In December 2001, the Company granted Wayne Thaw
10-year Non-Statutory Stock Options to purchase 23,000 shares of the Company's
Common Stock at an exercise price of $6.80 per share. In April 2002, Jerrold
Lazarus exercised his options to purchase 12,000 shares. Accordingly, all 60,000
options have been granted under the 1992 Plan with 48,000 options remaining
outstanding and 12,000 options have been exercised.
19
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 provided that the Board of directors shall determine
the exercise price of the Common Stock under each option. The 1992 Plan also
provided 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. 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 the filing date of this Form 10-K, no
options have been granted under the 1998 Plan.
20
OPTION GRANTS TABLE
The information provided in the table below provides information with
respect to individual grants of stock options during fiscal 2004 of each of the
executive officers named in the summary compensation table above. The Company
did not grant any stock appreciation rights during 2004.
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 5% ($) 10% ($)
Name (#) Year (1) ($/Sh) Date
- ----------------- ------------------- ------------------- ------------------- ----------------- ----------------- ------------------
Wayne Thaw 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.
21
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 2004 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
Unexercised In-the-Money
Options at Options
Shares Value FY-End (#) at Fy-End($)
Acquired on Realized Exercisable/ Exercisable/
Name Exercise (#) ($)(1) Unexercisable Unexercisable(1)
- -------------------- -------------- -------------- ---------------------- ---------------------------
Wayne Thaw (2) -0- -0- 46,000/0 465,100/0
- -------------------- -------------- -------------- ---------------------- ---------------------------
Patrick Hoscoe -0- -0- 2,000/0 20,500/0
- -------------------- -------------- -------------- ---------------------- ---------------------------
(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 $15.25
per share determined as of the close of business on July 23, 2004, the
last trade before the end of our fiscal year on July 31, 2004.
(2) Includes options to purchase 10,000 shares held by his wife, Kathie Thaw.
Report of the Board of Directors on Executive Compensation
During fiscal 2004, 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
Norman Thaw
Kathie Thaw
Mitchell Thaw
Patrick Hoscoe
22
Compensation Committee Interlocks and Insider Participation
During fiscal 2004, 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
and Related Stockholder Matters.
As of September 30, 2004, the Company had outstanding approximately
266,200 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.
=========================== ====================================== ==================== ===================
Title of Class Name and Address of Number of Approximate
Beneficial Owner (1) Shares Percent
--------------------------- -------------------------------------- -------------------- -------------------
Common Stock Wayne Thaw and Kathie Thaw (3)(6) 95,470 30.6
--------------------------- -------------------------------------- -------------------- -------------------
Common Stock Norman L. Thaw (2)(6) 55,228 20.7
--------------------------- -------------------------------------- -------------------- -------------------
Common Stock Jerrold Lazarus -0- -0-
--------------------------- -------------------------------------- -------------------- -------------------
Common Stock Patrick Hoscoe (4) 2,000 .8
--------------------------- -------------------------------------- -------------------- -------------------
Common Stock Mitchell A. Thaw (6) 33,525 12.6
--------------------------- -------------------------------------- -------------------- -------------------
Common Stock All Directors and 186,223 59.3
Officers as a group
(six persons) (5)
=========================== ====================================== ==================== ===================
(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.
(3) Includes options to purchase 36,000 shares granted to Wayne Thaw and
options to purchase 10,000 shares granted to Kathie Thaw.
(4) Consists of options to purchase 2,000 shares.
23
(5) Includes options to purchase 48,000 shares granted to officers and
directors.
(6) Wayne Thaw and Kathie Thaw are married and their individual stock
ownership which is in a family trust for their benefit is shown jointly.
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.
Equity Compensation Plan
The following summary information relates to our Compensation Plans
described in Item 11 pursuant to which we have granted options to purchase our
Common Stock:
- ------------------------------- ------------------------------ ---------------------- --------------------------------
(a) (b) (c)
- ------------------------------- ------------------------------ ---------------------- --------------------------------
Plan category Number of securities to Weighted average Number of securities
be issued upon exercise exercise price of remaining available for
of outstanding options outstanding future issuance under
options (1) equity compensation plan
(excluding securities
reflected in column (a))
- ------------------------------- ------------------------------ ---------------------- --------------------------------
Equity compensation
Plan approved by
Security Holders 48,000 5.13 30,000
- ------------------------------- ------------------------------ ---------------------- --------------------------------
- ---------------------
(1) Based upon 20,000 options exercisable at $3.25 per share, 23,000 options
exercisable at $6.80 per share and 5,000 options exercisable at $5.00 per
share.
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 2004, 2003, 2002, 2001 and 2000, $90,785, $88,462, $85,345,
$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 2005. The
foregoing amounts paid to RKW do not include insurance reimbursement of
approximately $2,000 per year and property taxes paid of approximately $9,000
per year.
In June 2003, the Company also repurchased a total of 691 shares held by
Jerrold Lazarus, a director and the Company's former chief executive officer, at
a purchase price of $12.00 per share.
24
Item 14. Principal Accountant Fees and Services
Audit Fees
For the fiscal year ended July 31, 2004, the aggregate fees billed for
professional services rendered by Parks, Tschopp, Whitcomb & Orr P.A.
("independent auditors") for the audit of the Company's annual financial
statements and the reviews of its financial statements included in the Company's
quarterly reports totaled approximately $17,000.
Financial Information Systems Design and Implementation Fees
For the fiscal year ended July 31, 2004, there were no fees billed for
professional services by the Company's independent auditors rendered in
connection with, directly or indirectly, operating or supervising the operation
of its information system or managing its local area network.
All Other Fees
For the fiscal year ended July 31, 2004, there was approximately $4,000 in
fees billed for tax and limited consulting services.
PART IV
Item 15. Exhibits and Financial Statement Schedules.
(a) 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.
(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, 2004.
(c) 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)
25
11 Earnings per share. See Financial Statements
31 Chief Executive Officer and Chief Financial Officer Rule 13a-
14(a)/15d-14(a) Certification (*)
32 Chief Executive Officer and Chief Financial Officer Section
1350 Certification (*)
99 1998 Incentive and Non-Statutory Stock Option Plan (4)
-------------
* Filed herewith.
(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.
26
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 14, 2004
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 14, 2004
- ----------------------
Norman L. Thaw
/s/ Jerrold Lazarus Director October 14, 2004
- -----------------------
Jerrold Lazarus
/s/ Wayne Thaw Chairman of the October 14, 2004
- --------------------- Board, Chief
Wayne Thaw Executive Officer
President,
Chief Financial
and Accounting
Officer
/s/ Kathie Thaw Vice President, October 14, 2004
- ----------------------- Treasurer,
Kathie Thaw Secretary
and Director
/s/ Mitchell Thaw Director October 14, 2004
- ----------------------
Mitchell Thaw
/s/ Patrick Hoscoe Vice President October 14, 2004
- -------------------- 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.
27