-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MrlpBAp309WSF6B5Z7Zf/XjaMDDgIFtI43RXrSPT08DKtlsBGPxykfBDK9w6+XlP QUENSXJE+NivwLESmLqxdA== 0001019687-98-000374.txt : 19981230 0001019687-98-000374.hdr.sgml : 19981230 ACCESSION NUMBER: 0001019687-98-000374 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981229 FILER: COMPANY DATA: COMPANY CONFORMED NAME: RADIANT TECHNOLOGY CORP CENTRAL INDEX KEY: 0000310235 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL PROCESS FURNACES & OVENS [3567] IRS NUMBER: 952800355 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-10125 FILM NUMBER: 98777313 BUSINESS ADDRESS: STREET 1: 1340 N JEFFERSON ST CITY: ANAHEIM STATE: CA ZIP: 92807 BUSINESS PHONE: 7149610200 MAIL ADDRESS: STREET 1: 1340 N JEFFERSON ST CITY: ANAHEIM STATE: CA ZIP: 92807 10-K 1 ANNUAL REPORT FYE 9/30/98 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-K Annual Report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Fiscal Year ended Commission File Number September 30, 1998 0 - 10125 Radiant Technology Corporation ------------------------------ (Exact name of the registrant as specified in its charter) California 95-2800355 - --------------------------------- ---------------------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) identification number) 1335 South Acacia Avenue, Fullerton, California 92831 ----------------------------------------------------- (Address of principal executive offices)(zip code) Registrant Telephone Number, including area code: (714) 991-0200 Securities registered pursuant to section 12 (b) of the act: None Securities registered pursuant to section 12 (g) of the Act: Common stock, without par value Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15 (d) of the Securities Exchange act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes__X__ No _____ The aggregate market value of the voting stock held by non-affiliates of the registrant was $6,160,824 as of December 18, 1998. Applicable only to registrants involved in bankruptcy proceedings during the preceding five years: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by section 12, 13, or 15 (d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes__X__ No_____ 2 The number of shares of the registrant's common stock, no par value, outstanding as of November 30, 1998 was 1,895,638. Documents incorporated by reference. Part III Items 10 through 13 of this Form 10-K are incorporated by reference to the registrant's definitive proxy statement for the Annual Meeting of Shareholders to be held on April 16, 1999. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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. [ ] PART 1 ------ ITEM 1. BUSINESS -------- PREFACE Radiant Technology Corporation completed the most profitable year in its history. This follows three years of analogous high earnings before any extraordinary items. Management believes growth would have been stronger had the Semiconductor portion of RTC's customer base had not reduced expenditures significantly in FY 1998. GENERAL: Radiant Technology Corporation (RTC) was incorporated in California in 1972. Its initial public offering (IPO) was in 1979. The Company is engaged in the marketing, design, manufacture and service of highly precision thermal processing systems that are primarily used by manufacturers of electronic componentry. The Company's conveyorized (belt) ovens and furnaces are in worldwide demand to meet ever-changing process requirements in the semiconductor packaging, flat panel display, hybrid thick film firing, multichip module, photovoltaic (solar cell) and printed circuit board assembly industries. To obtain financial growth and stability the Company concentrates on managing the following key elements of its business: Technological Leadership: The Company is constantly in contact with its customers soliciting their input for both continued product improvement and new product development. The Company encourages customers anticipating new thermal processing requirements to contact it regarding their new opportunities and needs. Customer Diversity: Customers from different facets of the electronics industry are sought and maintained. As demand for the various manufacturing elements in the electronics high technology industry shifts, RTC works to position itself to be ready to be immediately responsive to changing market emphasis. 3 Service: The Company concentrates on providing timely, high quality, responsiveness to its customer base. Most service concerns are handled by Phone, FAX or E-mail immediately. Customer Service Engineers, when needed, are dispatched within the day. Internationally, the Company retains Sales/Service representatives, factory trained, to provide the same level of dedication in placing the concerns and needs of the customer first. Modems are installed in customers equipment, making it possible to analyze and implement customer requests online from Company headquarters. MARKETS AND PRODUCTS: The Company's near infrared processing systems are principally in demand for the following applications: SemiConductor Packaging: In recent years, flip chip packaging technology has gained widespread acceptance. RTC provides products for key process steps in this packaging technology. The first process, called wafer bumping, involves a reflow solder process to form the solder balls on all of the input/output (I/O) pads on the wafer. Because of the extremely small geometries involved, this process is best accomplished in a hydrogen atmosphere. RTC offers the S-series high temperature furnace for this application which, when equipped with the hydrogen safety package, provides the high temperature (350(Degree)C) reflow process in a 100% hydrogen atmosphere. The second process, called "chip joining", is a reflow solder process for attaching the flip chip die to the semiconductor package or alternatively to a printed circuit assembly (direct chip attach). RTC offers both a near infrared or forced convection oven for the chip joining or direct chip attach processes. RTC's D-series ovens are suitable for low temperature curing applications such as required for the "under-fill" epoxy dispensed under the die in a flip chip package or curing epoxy glob tops for chip on board requirements. For more traditional chip packaging technologies, RTC offers an AG-series furnace designed specifically for the silver-glass die attach process. Silver-glass die attach is an adhesive curing step prior to the wire bonding of the die to the package. A critical thermal profile is required to achieve the proper mechanical and thermal properties of the silver-glass material. Other packaging thermal processes such as final lid sealing (metal or glass) and lead frame embed or pin brazing are easily accomplished in RTC's S- or AG-series furnaces. Photovoltaics: For well over a decade, RTC has been the major supplier of sintering furnaces used by photocell manufacturers for firing metallized inks to form the front-side contacts and the back-side fields on the individual solar cells. The product ideally suited for sintering of the metallized inks is our C-series furnace. In recent years, existing RTC customers have been experimenting with using a modified version of our S-series furnace for phosphorus diffusion which is the first thermal process in the manufacture of solar cells. This process had previously been accomplished in batch mode in a tube furnace. An extremely precise thermal process is required for phosphorus diffusion because this step ultimately determines the cell's efficiency in generating power when exposed to sunlight. Flat Panel Display: While the flat panel display market has been around for several years primarily in Japan, it is a relatively new market for US equipment manufacturers. RTC has developed, in close cooperation with a flat panel manufacturer, one of the first US built system for processing large glass panels. The RTC furnace can handle glass panels up to 58 inches wide. In addition to the challenges of achieving uniform heating over the entire panel, there were unique mechanical challenges for handling the large glass panels while loading and unloading the furnace. 4 Printed Circuit Board: RTC offers both infrared and forced convection heating technology for printed circuit board assembly. These low temperature ovens are used for mass reflow soldering of surface mount components to a printed circuit assembly after the solder paste has been screened onto the assembly and the various components have been placed into proper position. Hybrid Thick Film: Hybrid thick film technology involves the firing of various types of inks screen printed on ceramic substrates to form conductors and resistors. The thick film materials commonly referred to as inks consist of mixtures of metal, glass and/or ceramic powders dispersed in organic vehicles or solutions of polymers in solvents. Precise thermal profiles are required to achieve the desired resistor value, or electrical properties of the conductors. RTC offers the TF-series furnace for firing thick film inks in air, and the TFA-series for firing thick film materials in a controlled, inert atmosphere having a low oxygen content. Multichip Modules: Multichip module technology is an emerging packaging technology. All RTC products can be used in some combination to manufacture a multichip module (or package). A unique requirement exists in the manufacture of a MCM-D structure which is a thin film laminate structure whose inter-layer adhesion is critically dependent on multiple pass curing steps. RTC has developed an intelligent curing oven for just this purpose where integrated sensors, through feed back mechanisms, control the curing process in real-time. All systems use PCs to provide appropriate man/machine interface with embedded microprocessors achieving precise control of thermal operations. Such functions as power, temperature, belt speed, process gas measurement, profiling, maintenance requirements, data logging, local and remote communications diagnostics and operation, and computer integrated manufacturing with SECS/GEM interface are available. The nature and high intensity of the infrared heat produced in the Company's furnaces permits a high rate of heat absorption by the electronic parts processed through them, making them more adaptable to the exacting tolerances and high-speed heating requirements of certain industrial users. Since these ovens and furnaces can be brought up to operating temperatures in a shorter time span, operating at a faster conveyor belt speed, require less floor space and use less electric energy, operating costs are significantly lower than for conventional ovens and furnaces. 5 MARKETING, SALES AND CUSTOMERS The Company sells its products throughout the world, primarily to organizations engaged in the manufacture of electronic components and assemblies. RTC maintains direct sales offices in the United States. Internationally the Company is represented through independent sales/service organizations. Note 1 to the Financial Statements depicts a breakdown of international sales. Customers evaluate furnace vendors on their technological leadership resulting in high process yield of material produced. This primary benefit combined with high up time, low meantime between failure, MTBF, quick reliable service and spare parts response time combine to produce low cost of equipment ownership. Three customers accounted for over 10% of RTC's revenue in 1998. They are: AMD 18%, AstroPower 11% and Plasmaco 11%. Each company represents a major market application for RTC's product, i.e., Semiconductor Packaging, Photovoltaics and Flat Panel Display. AMD accounted for 35% of the Company's business in 1997. Dow Chemical contributed to 19% of its business in 1996. It is rare to report a consistent repeatability of the same customer from year to year. This is due to the cyclical nature of customers' need for new capital equipment. The Company does not experience a seasonal demand for its product. Rather the demand for product, as above, is dependent on the demand for new manufacturing equipment. BACKLOG The Company regards as backlog all signed purchase orders received from customers for delivery at specified dates. At September 30, 1998, the backlog was $796,430 vs. $1,830,640 in 1997, and $1,394,000 in 1996. This backlog of orders will be completed over a two to five month period. The Company's contracts include cancellation clauses, however, the Company does not generally dispute a timely cancellation provided no significant costs have been incurred at the time of cancellation. The Company has not experienced any material level of cancellations during the past two fiscal years. RESEARCH AND DEVELOPMENT Research and Development expenses are charged to specific product enhancement activities and new product development. RTC's expense of $250,964, in 1998, 5.4% of revenue, is approximately proportional to amounts invested in prior years. In 1997, $254,561 was expended vs. $264,954 in 1996. Sustaining engineering expenses, associated with standard product offerings, are chargeable against present contractual activities. 6 COMPETITION The Company confronts competition from three primary domestic companies: BTU International, Lindberg (Division of General Signal), and Sierra-Therm. There are numerous other competitors both domestically and internationally. The Company believes that it presently is one of the principal manufacturers of conveyorized, controlled atmosphere, variable speed, high temperature infrared furnaces used in the manufacture of precision, microelectronic circuitry for the semiconductor, solar cell, hybrid micro circuits and general electronic industries; and that the competitive environment in the market for ovens and furnaces is based on superior technology, design and delivery and cost of ownership over initial purchase price. The Company believes that its higher temperature near infrared products are more technologically advanced than that of the conventional products of its competitors. The Company has patents issued and pending covering the basic technology involved in the principal markets. See "Patents" below. MATERIAL The Company purchases raw materials, mechanical parts and electronic components. It manufactures most of its sheet metal and some mechanical and electronic components. Alternative sources of material exist for nearly all parts, components and materials. The Company has selected a single source supplier for much of its electronic componentry, due to high levels of quality and services. Should this favorable condition degenerate, an alternative supplier can be found but not without initial extra cost expenditures. PATENTS The Company owns a number of current patents on its products issued from 1983 to 1997. Its patents are the result of its creative energies and innovative technology. RTC believes that it must continually work to maintain technological leadership for its customer base. The Company further believes that patents may prove creativity and provide competitive hurdles. However, it is primarily attention to customer service with high quality products, produced in a timely manner, ultimately providing the customer with low cost of ownership that provides the Company its most competitive strength. Three important patents related to its infrared furnace and oven products. Patent No. 4,477,718 for Infrared Furnaces with Controlled Environment is effective for seventeen years beginning October 16, 1984. Patent No. 4,517,448 for infrared Furnaces with Atmosphere Control Capability is effective for seventeen years beginning May 14, 1985. Patent No. 4,987,364 - A Furnace Assembly for Reflowing Solder is effective for seventeen year beginning March 5, 1991. TRADEMARKS The Company registered trademark No. 1425668, "RTC radiant technology corporation", with the United Stated patent and Trademark Office on January 20, 1987. The trademark is in force for twenty years. The Company registered trademark No. 1556707, "MEZZANINE", with the United States Patent and Trademark Office on September 19, 1989. The trademark is in force for twenty years. 7 EMPLOYEES The Company employed 30 full-time individuals as of November 30, 1998. WARRANTY The Company warrants its ovens and furnaces against defects existing at the time of shipment for material and workmanship under normal use and service for a period of one year on parts, and for ninety days on labor after shipment to an original user. Under this warranty, the Company will provide, F.O.B. Anaheim, repair or replacement, at its own cost, any heating elements, SCR control packages, printed circuit boards, components, and conveyor speed controls (including digital readouts) which, within the warranty period, are proved to the satisfaction of the Company to have been defective. GOVERNMENTAL REGULATIONS The operations of the Company are subject to various federal and state laws and regulations. Management believes the Company is in substantial compliance with all applicable laws and regulations. The cost of compliance has not been a significant burden to the Company. ITEM 2. PROPERTIES ---------- The Company executive offices and manufacturing facility are located in a quality industrial park where expansion may be possible. The 25,000 square foot building is leased for 5 years with an option to renew for an additional 5 years. See Item #10, Notes to financial Statements, for more detail. ITEM 3. LEGAL PROCEEDINGS ----------------- There are no legal proceedings pending at the time of this report. 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 FY 1998. 8 PART II ------- ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED -------------------------------------------------- SECURITY HOLDER MATTER ---------------------- The Company's common stock is quoted on the OTC Bulletin Board. The table below sets forth the representative high and low bid prices for the common stock during each calendar period indicated. The Quotations represent interdealer prices without adjustments for retail mark-ups, mark-downs or commissions and consequently do not necessarily reflect actual transactions.
Year Ended September 30 ------------ 1998 1997 HIGH LOW HIGH LOW ------------------ ------------------ 1st Quarter................. .25 .25 $.50 $.125 2nd Quarter................. 1.00 .25 .25 .125 3rd Quarter................. 1.875 .375 .25 .125 4th Quarter................. 2.00 1.375 .25 .125
Holders of shares of Common Stock are entitled to receive such dividends, if any, as may be declared by the Board of Directors of the Company out of funds legally available therefore and, upon the liquidation, dissolution or winding up of the Company are entitled to share ratably in all net assets available for distribution to such shareholders. The Company has never paid any dividends. It is anticipated that all earnings, will be retained for development of working capital to grow the business of the Company and there is no present intention to declare dividends in the foreseeable future. See ITEM 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations". SHAREHOLDERS OF RECORD: As of September 30, 1998, the number of record holders of the Company's Common Stock was 410. 9 ITEM 6. SELECTED FINANCIAL DATA ----------------------- The following table summarizes certain selected financial data of the Company:
Operating Data - -------------- (in thousands) except per share Year Ended September 30 information ------------------------------------ 1998 1997 1996 ---- ---- ---- Net Sales $4,686 $4,412 $4,173 Income From Continuing Operations 416 592 222 Income Before Amortization, Depreciation, Income Taxes and Reorganization Expenses 602 553 364 Total Assets 4,063 4,102 2,524 Long-term debt 0 0 0 Per Share Information: Income From Continuing Operations .22 .32 .18 Income Before Amortization, Depreciation, Income Taxes and Reorganization Expenses .32 .30 .30 Net Income .22 .32 .37
See Notes to Financial Statements ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITIONS AND RESULTS OF OPERATIONS ------------------------------------ Cautionary Statement This Annual Report contains statements relating to future results of the Company (including certain projections and business trends) that are "forward-looking statements" as defined in Section 27A of the Securities Act of 1933. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to economic and political changes in markets where the Company competes such as inflation rates, recession, and other external factors over which the Company has no control; domestic and foreign government spending, budgetary and trade policies; demand for and market acceptance of new and existing products; successful development of advanced technologies; timely completion of Year 2000 modifications by the Company, governments and our key suppliers and customers; and competitive product and pricing pressures as well as other risks and uncertainties, including but not limited to those detailed from time to time in the Company's Securities and Exchange Commission filings. 10 GENERAL The Company pioneered the design and application of near infrared high temperature furnaces with the semiconductor manufacturing and electronics assembly markets. RTC products are now principally used by manufacturers of semiconductor packaging, solar cells, flat panel displays, printed circuit boards, hybrid thick film and multichip modules. New and inventive uses of the product line for other applications continue to be discovered. RESULTS OF OPERATIONS Net sales of $4,686,382 increased $274,348 or 6% for the fiscal year ended September 30, 1998 as compared to net sales of $4,412,024 for fiscal 1997. Net sales of $4,412,024 fiscal 1997 increased $239,425 or 6% from the fiscal 1996 level of $4,172,575. Fiscal 1998 was the most profitable in the history of the Company. Income before provision for taxes was $466,587. With the after tax amounting to $415,587, or $.22 per share. This represents a before tax Return on Equity, from the beginning of the year, of 21.4%. It compares most favorably with prior two years earnings, especially when the adjustment for taxes and extraordinary items are eliminated as depicted in the statements of income. Cost of Sales remained the same. Selling and G & A costs increased 7.7% due primarily to increased marketing efforts. Research and Development costs were maintained at the same relevant rate as prior years. These costs are essential to the Company's long term future. Future that can move very quickly in the high technology field. Interest was booked as income rather than expense. Borrowing is reserved only for short-term requirements. LIQUIDITY AND CAPITAL RESOURCES During 1998, cash provided by operations was $600,186, a 35% increase over 1997 cash generation of $446,476. The Company anticipates that it has sufficient cash to fund planned sales growth in 1999 without any long term borrowing. There may be occasional periods when short-term borrowing will be utilized, although little of this type of activity is foreseen. Furthermore, the Company anticipates having sufficient cash to purchase planned capital equipment, including Y2K, requirements. Year 2000, Y2K, Readiness Disclosure The Year 2000 issue, Y2K, is the result of older computer programs being written using two digits rather than four digits to define the applicable year. Computer equipment, software and other devices with embedded technology that are time-sensitive may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in the inability of business processes to function correctly in the year 2000 and could have serious adverse effects on companies and entities throughout the world. 11 RTC is addressing issues related to the impact of the Year 2000 in its products, internal computer systems that handle business and engineering processes, and suppliers. A strategy was created to ensure substantial completion of upgrades for critical systems by the middle of calendar 1999. The current project cost estimate is $50,000. Purchased hardware and software will be capitalized. Notwithstanding this plan program to make a smooth transition, there can be no assurance that these estimates will prove to be accurate and actual results could differ materially from those currently anticipated. Moreover, the Company could be adversely impacted by the Year 2000 issues faced by customers, vendors, governments and financial service organization with which the company interacts. The varying definitions of "compliance with Year 2000" and the products by the company in the past may lead to claims whose impact on the company is not currently estimable. The company has product and general liability insurance policies, which provide coverage in the event of certain product failures. We have not purchased Year 2000 specific insurance because the cost is prohibitive and likely of little value. No assurance can be given that the aggregate cost of defending and resolving such claims will not financially adversely affect the company. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ------------------------------------------- The following are included in this 10-K as exhibits: 1. Report of Independent Certified Public Accountants 2. Balance sheets as of September 30, 1998 and 1997. 3. Statement of Operation for the years ended September 30, 1998, 1997, 1996. 4. Statement of Stockholders Equity for the years ended September 30, 1998, 1997, 1996. 5. Statement of Cash Flows for the years ended September 30, 1998, 1997, 1996. 6. Notes to Financial Statements. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND --------------------------------------------------------------- FINANCIAL DISCLOSURE -------------------- None. 12 PART III -------- ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -------------------------------------------------- The response to this item is incorporated herein by reference to the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 16, 1999. ITEM 11. EXECUTIVE COMPENSATION ---------------------- The response to this item is incorporated herein by reference to the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 16, 1999. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT -------------------------------------------------------------- The response to this item is incorporated herein by reference to the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 16, 1999. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. ----------------------------------------------- The response to this item is incorporated herein by reference to the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 16, 1999. PART IV ------- ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ---------------------------------------------------------------- (a) (1) Financial Statements The following financial statements are included in this Form 10-K: Page No. -------- 1. Report of Independent Certified Public Accountants 2. Balance Sheets as of September 30, 1998 and 1997 3. Statements of Income for the years ended September 30, 1998, 1997 and 1996 4. Statements of Stockholders Equity (Deficit) for the years ended September 30, 1998, 1997 and 1996 13 5. Statements of Cash Flows for the years ended September 30, 1998, 1997 and 1996 6. Notes to Financial Statements (2) Financial Statements Schedules None. (3) Exhibits Exhibit No. Description Page No. ----------- ------------ -------- 3.1 Certificate of Restated Articles of Incorporation incorporated by reference to the Registration Statement of Form S-18 (Registration No. 2-72528-LA) filed on July 14, 1981. 3.1(a) Certificate of Amendment of Articles of Incorporation incorporated by reference to the Proxy Statement dated January 14, 1986. 3.1(b) Certificate of Amendment of Articles of Incorporation incorporated by reference to Annual Report on Form 10-K filed January 15, 1990. 3.2 Restated By-Laws incorporated by reference to the Registration Statement on Form s-18 (Registration No. 2-72528-LA) filed on July 14, 1981. 3.2(a) Amendment to Bylaws incorporated by reference to Annual Report on Form 10-K filed January 15, 1990. 4.1 Specimen Certificate of Common Stock incorporated by reference to the Registration Statement on Form S-18 (Registration No. 2-72528-LA) filed on July 14, 1981. 10.22(a) Amendment No. 1 to Employment Agreement effective as of November 7, 1991 by and between the Company and Lawrence R. McNamee incorporated by reference to Annual Report on Form 10-K filed January 15, 1990. 10.24 Form of Indemnity Agreement incorporated by reference to Annual Report of Form 10-K filed January 15, 1990. (b) Reports on Form 8-K. None. 14 SIGNATURES ---------- Pursuant to the requirements of section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on this behalf by the undersigned, thereunto duly authorized. Dated: December 24, 1998 RADIANT TECHNOLOGY CORPORATION By: /s/ L. R. McNamee ------------------------- L.R, McNamee Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the persons on behalf of the registrant in the capacities and on the dates indicated. /s/ L. R. McNamee December 24, 1998 - ------------------------------------ Lawrence R. McNamee Chairman of the Board and a Director (Principal Financial Officer and Principal Executive Officer) /s/ C. T. Richert December 24, 1998 - ------------------------------------ Carson T. Richert President and a Director /s/ R. B. Thompson December 24, 1998 - ------------------------------------ Robert B. Thompson Director 15 RADIANT TECHNOLOGY CORPORATION Financial Statements September 30, 1998 16 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS -------------------------------------------------- The Board of Directors and Stockholders Radiant Technology Corporation We have audited the accompanying balance sheets of Radiant Technology Corporation as of September 30, 1998 and 1997, and the related statements of income, stockholders' equity and cash flows for each of the years in the three year period ended September 30, 1998. 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 generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Radiant Technology Corporation as of September 30, 1998 and 1997 and the results of its income and its cash flows for each of the three years in the period ended September 30, 1998 in conformity with generally accepted accounting principles. CACCIAMATTA ACCOUNTANCY CORPORATION Irvine, California November 20, 1998 17 RADIANT TECHNOLOGY CORPORATION Balance Sheets
September 30, ---------------------------------- 1998 1997 --------------- --------------- ASSETS CURRENT ASSETS: Cash and equivalents $ 2,327,925 $ 1,817,316 Accounts receivable 565,777 756,505 Inventories 443,607 714,458 Deferred taxes 170,000 170,000 --------------- --------------- Total current assets 3,507,309 3,458,279 PROPERTY AND EQUIPMENT 502,378 573,504 OTHER 53,331 70,222 --------------- --------------- $ 4,063,018 $ 4,102,005 =============== =============== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Notes payable $ 1,000,000 $ 1,000,000 Accounts payable 61,040 168,598 Accrued expenses 197,884 384,722 Income taxes payable 38,640 - Customer deposits 159,466 368,384 --------------- --------------- Total current liabilities 1,457,030 1,921,704 --------------- --------------- COMMITMENTS AND CONTINGENCIES - - STOCKHOLDERS' EQUITY: Preferred stock - - Capital stock 1,153,108 1,143,008 Retained earnings 1,452,880 1,037,293 --------------- --------------- Total stockholders' equity 2,605,988 2,180,301 --------------- --------------- $ 4,063,018 $ 4,102,005 =============== =============== The accompanying notes are an integral part of these financial statements.
18 RADIANT TECHNOLOGY CORPORATION Statements of Income
Year Ended September 30, ---------------------------------------------------------- 1998 1997 1996 ----------------- ----------------- ----------------- NET SALES $ 4,686,382 $ 4,412,024 $ 4,172,575 COST OF SALES 3,038,095 2,859,096 2,545,246 ----------------- ----------------- ----------------- Gross profit 1,648,287 1,552,928 1,627,329 ----------------- ----------------- ----------------- OPERATING EXPENSES: Selling, general and administrative 976,756 906,379 1,089,438 Research and development 250,964 254,561 264,954 ----------------- ----------------- ----------------- Total operating expenses 1,227,720 1,160,940 1,354,392 ----------------- ----------------- ----------------- Income from operations 420,567 391,988 272,937 INTEREST INCOME (EXPENSE) 46,020 41,824 (10,020) ----------------- ----------------- ----------------- Income before reorganization expenses, provision for income taxes and extraordinary item 466,587 433,812 262,917 REORGANIZATION EXPENSES - PROFESSIONAL FEES - - 40,327 ----------------- ----------------- ----------------- Income before provision for income taxes and extraordinary item 466,587 433,812 222,590 PROVISION (BENEFIT) FOR INCOME TAXES 51,000 (158,000) 800 ----------------- ----------------- ----------------- Income before extraordinary item 415,587 591,812 221,790 EXTRAORDINARY ITEM: Gain on extinguishment of debt - - 223,691 ----------------- ----------------- ----------------- NET INCOME $ 415,587 $ 591,812 $ 445,481 ================= ================= ================= BASIC EARNINGS PER SHARE: Before extraordinary item $ 0.22 $ 0.32 $ 0.18 Extraordinary item - - 0.19 ----------------- ----------------- ----------------- Net income $ 0.22 $ 0.32 $ 0.37 ================= ================= ================= DILUTED EARNINGS PER SHARE: Before extraordinary item $ 0.18 $ 0.32 $ 0.18 Extraordinary item - - 0.19 ----------------- ----------------- ----------------- Net income $ 0.18 $ 0.32 $ 0.37 ================= ================= ================= BASIC NUMBER OF COMMON SHARES OUTSTANDING: 1,875,474 1,867,638 1,209,405 ================= ================= ================= DILUTED NUMBER OF COMMON SHARES OUTSTANDING: 2,277,096 1,867,638 1,209,405 ================= ================= ================= The accompanying notes are an integral part of these financial statements.
19 RADIANT TECHNOLOGY CORPORATION Statements of Stockholders' Equity Years Ended September 30, 1998, 1997 and 1996
(Accumulated Capital Stock Deficit) ------------------------------- Retained Stockholders' Shares Amount Earnings Equity -------------- ---------------- ------------------ ------------------ BALANCE, SEPTEMBER 30, 1995 190,409 2,981,195 (2,484,324) 496,871 Issuance of shares - Bankruptcy reorganization McNamee loan 380,818 175,051 - 175,051 Operation Phoenix loan 571,227 229,172 - 229,172 Creditors and original shareholders 380,818 3,900 - 3,900 Employees 380,818 13,709 - 13,709 Other 90,750 36,300 - 36,300 Repurchase of shares (127,202) (38,989) - (38,989) Application of fresh start accounting - (2,257,330) 2,484,324 226,994 Net income - - 445,481 445,481 -------------- ---------------- ------------------ ------------------ BALANCE, SEPTEMBER 30, 1996 1,867,638 1,143,008 445,481 1,588,489 Net income - - 591,812 591,812 -------------- ---------------- ------------------ ------------------ BALANCE, SEPTEMBER 30, 1997 1,867,638 1,143,008 1,037,293 2,180,301 Exercise of options 28,000 10,100 - 10,100 Net income - - 415,587 415,587 -------------- ---------------- ------------------ ------------------ BALANCE, SEPTEMBER 30, 1998 1,895,638 $ 1,153,108 $ 1,452,880 $ 2,605,988 ============== ================ ================== ================== The accompanying notes are an integral part of these financial statements.
20 RADIANT TECHNOLOGY CORPORATION Statements of Cash Flows
Year Ended September 30, ------------------------------------------------------ 1998 1997 1996 ------------------ ----------------- ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 415,587 $ 591,812 $ 445,481 Adjustments to reconcile net income to net cash provided by operating activities: Gain on forgiveness of debt - - (223,691) Issuance of stock for compensation - - 13,709 Bad debt expense 3,500 17,800 71,300 Depreciation and amortization 179,539 118,924 100,236 Inventory obsolescence 39,000 15,000 80,000 Changes in assets and liabilities: (Increase) decrease in: Accounts receivable 187,228 (15,182) (217,839) Inventory 231,851 (88,612) (138,749) Deferred taxes - (170,000) - Prepaid and other assets 8,155 (9,087) 9,398 Increase (decrease) in: Accounts payable (107,558) (6,162) 128,126 Accrued expenses (148,198) 70,084 (28,223) Customer deposits (208,918) (78,101) 235,400 ------------------ ----------------- ----------------- Net cash provided by operating activities before reorganization items 600,186 446,476 475,148 ------------------ ----------------- ----------------- Changes in reorganization items: Increase (decrease) in liabilities: Subject to compromise - - (45,809) ------------------ ----------------- ----------------- Net change in reorganization items - - (45,809) ------------------ ----------------- ----------------- Net cash provided by operating activities 600,186 446,476 429,339 ------------------ ----------------- ----------------- CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (99,677) (239,288) (160,158) ------------------ ----------------- ----------------- (continued) The accompanying notes are an integral part of these financial statements.
21 RADIANT TECHNOLOGY CORPORATION Statements of Cash Flows (continued)
Year Ended September 30, ------------------------------------------------------ 1998 1997 1996 ------------------ ----------------- ----------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repurchase of common stock $ - $ - $ (38,989) Issuance of common stock 10,100 Repayment of line of credit (1,000,000) - - Borrowing on line of credit 1,000,000 1,000,000 - ------------------ ----------------- ----------------- Net cash provided (used) by financing activities 10,100 1,000,000 (38,989) ------------------ ----------------- ----------------- Net increase in cash 510,609 1,207,188 230,192 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 1,817,316 610,128 379,936 ------------------ ----------------- ----------------- CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,327,925 $ 1,817,316 $ 610,128 ================== ================= =================
Supplemental disclosures of cash flow information and non-cash investing and financing activities:
1998 1997 1996 ------------------ ----------------- ----------------- Cash paid during the year for: Interest $ 7,317 $ - $ - Income taxes $ 9,270 $ 800 $ 800
In 1996, as part of the bankruptcy plan, debt and accrued interest of $406,223 and payables of $3,900 were satisfied through the issuance of common stock. In 1996, the Company issued common shares with a value of $36,309 to purchase accounts receivable originally seized by Bank of America during the bankruptcy proceedings. Upon emergence from bankruptcy the Company applied fresh-start accounting, resulting in an increase in fixed assets and patents, the elimination of accumulated deficit and a reduction in the capital stock as follows: Fixed assets $ 176,994 Patents 50,000 Capital stock 2,257,330 Retained Earnings (2,484,324) ----------------- $ - ================= The accompanying notes are an integral part of these financial statements. 22 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ------------------------------------------------ Nature of Operations -------------------- Radiant Technology Corporation (the "Company") is engaged in the manufacturing and marketing of infrared conveyorized ovens and furnaces used by the microcircuit manufacturing industry. All of the Company's operations are located in California. Sales to entities located outside the United States are as follows:
1998 1997 1996 ------------ ------------- ------------- Pacific Rim countries $ 847,700 $ 616,900 $ 538,100 European countries 605,800 819,600 311,600 NAFTA countries 116,200 52,500 215,900 ------------ ------------- ------------- $ 1,569,700 $ 1,489,000 $ 1,065,600 ============ ============= =============
Revenue recognition ------------------- The Company recognizes revenue from product sales upon shipment. Cash and cash equivalents ------------------------- For purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. Accounts receivable and sales returns ------------------------------------- The allowance for doubtful accounts and sales returns includes management's estimate of the amount expected to be lost on specific accounts and for losses on other as yet unidentified accounts included in accounts receivable. In estimating the allowance component for unidentified losses and returns, management relies on historical experience. The amounts the Company will ultimately realize could differ materially in the near term from the amounts assumed in arriving at the allowance for doubtful accounts and sales returns in the accompanying financial statements. Inventories ----------- Inventories include material, direct labor and manufacturing overhead and are reported at the lower of cost (determined on the first-in-first-out method) or market. Allowances for slow moving and obsolete inventory are based on management's estimate of the amount considered obsolete based on specific review of inventory items. In estimating the allowance, management relies on its knowledge of the industry as well as its current inventory levels. 23 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) - ------------------------------------------------------------ Equipment --------- Equipment is stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets or over the lesser of the term of the lease or the estimated useful life for leasehold improvements. Intangibles ----------- The cost of patents are being amortized using the straight line method over their estimated lives of five years. Amortization expense charged to operations in 1998, 1997 and 1996 was $8,737, $8,695 and $4,358, respectively. Software development costs -------------------------- The Company capitalizes internal software development costs in accordance with Statement of Financial Accounting Standards No. 86. The capitalization of these costs begins when a product's technological feasibility has been established and ends when the product is available for general release to customers. The Company uses the working model approach to establish technological feasibility. Amortization is computed on an individual product group on the straight-line method over the estimated economic life of the product. Currently, the Company is using an estimated economic life of three years for all capitalized software costs. Amortization expense was $63,330, $45,363 and $52,794 for 1998, 1997 and 1996, respectively. Customer deposits ----------------- The Company often requires a deposit from customers before commencing work on a furnace. It is the Company's policy to record the deposit as a receivable with a corresponding deferred liability at the time the sales order is written. When the deposit is received, the receivable is relieved. Income taxes ------------ Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities. 24 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) - ------------------------------------------------------------ Earnings per common share ------------------------- Earnings per common share is computed by dividing reported earnings by the weighted average number of common shares outstanding during the respective periods. Common stock equivalents were excluded from the computations of earnings per share in 1997 and 1996 because the effect of including such equivalents in the computation would have been anti-dilutive. Fair value of financial instruments ----------------------------------- The fair value of financial instruments, consisting principally of notes payable is based on interest rates available to the Company and comparison to quoted prices. The fair value of these financial instruments approximates carrying value. Stock based compensation ------------------------ The Company accounts for compensation costs related to employee stock options and other forms of employee stock-based compensation plans in accordance with the requirements of Accounting Principles Board Opinion 25 ("APB 25"). APB 25 requires compensation costs for stock based compensation plans to be recognized based on the difference, if any, between the fair market value of the stock on the date of the grant and the option exercise price. In October 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards 123, Accounting for Stock-Based Compensation ("SFAS 123"). SFAS 123 established a fair value-based method of accounting for compensation costs related to stock options and other forms of stock-based compensation plans. However, SFAS 123 allows an entity to continue to measure compensation costs using the principles of APB 25 if certain pro forma disclosures are made. The Company adopted the provisions of pro forma disclosure requirements of SFAS 123 in fiscal 1997. Options granted to non-employees are recognized at their estimated fair value at the date of grant. Use of estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Reclassifications ----------------- Certain items in the 1996 and 1997 financial statements have been reclassified to conform with the 1998 presentation. 25 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 2. BANKRUPTCY PROCEEDINGS - ---------------------------- On November 12, 1993 the Company filed petition for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Central District of California. The Bankruptcy Court confirmed the Plan of Reorganization on August 3, 1995 and the bankruptcy was dismissed on February 20, 1996. The plan called for the following: - - Existing outstanding common shares at the time of bankruptcy were diluted 30:1. Upon this reverse stock split, the shareholders in this class were given the option to redeem all their new shares for $.20 per share. Shareholders left with five or fewer shares after the reverse split were subject to automatic repurchase. - - Unsecured general creditors with claims in excess of $300 were given the option to either a) convert to equity by accepting a pro-rata portion of 380,818 shares of common stock or b) accept cash equivalent to 15 percent of their allowed claims. If option a) was selected, the pro-rata share was determined by claims allowed, not by the number of creditors selecting this option. Any of the 380,818 shares not distributed because the creditors elected option b) were distributed to existing shareholders who did not elect to receive cash for their shares. As a result 370,647 shares were distributed to existing shareholders. - - Unsecured general creditors with claims of $300 or less were paid in full. - - Lawrence McNamee received 380,818 shares of common stock as payment for his post-petition loan and related accrued interest totaling $177,051. - - Operation Phoenix, a general partnership consisting of Company employees, received 571,227 shares of common stock as payment for a post-petition loan and related accrued interest totaling $229,172. - - Employees who agreed to take no wages during the shutdown period and agreed to reduce wages for a period of two years were awarded 380,818 shares of common stock. Total debt forgiven was $920,740. The Company accounted for the reorganization using fresh-start reporting. Accordingly all assets and liabilities were restated at the date of dismissal to reflect their reorganization value, which approximates fair value at the date of reorganization. Independent appraisers were used to determine the fair value of assets. The book value of fixed assets were increased by $177,000 and patents by $50,000. Accumulated deficit of $2,484,324 was eliminated with a corresponding net reduction in capital stock. 26 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 3. CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS - ------------------------------------------------------------ The Company, from time to time, has cash deposits at financial institutions in amounts in excess of federally-insured limits. The Company believes that credit risk related to its cash deposits is limited due to the quality of the financial institutions. The Company's customers are located in several geographic markets, primarily in the United States, Europe and Pacific Rim countries and are concentrated within three industries. To minimize the risk of loss, the Company routinely assesses the financial strength of its customers, and may require a substantial downpayment prior to commencing machine production. Net accounts receivable by geographic markets are as follows: 1998 1997 ---------- ---------- United States 52% 94% European countries 16% 5% Pacific Rim countries 16% 1% NAFTA countries 16% - ---------- ---------- 100% 100% ========== ========== During 1998, 1997 and 1996, the five largest customers represented 53, 63 and 38 percent of revenues, respectively. At September 30, 1998 and 1997 the five largest account receivable balances represented 66 and 74 percent, respectively, of total accounts receivable. 4. ACCOUNTS RECEIVABLE - ------------------------- 1998 1997 ---------- ---------- Trade receivables $ 603,277 $ 794,005 Allowance for doubtful accounts (37,500) (37,500) ---------- ---------- $ 565,777 $ 756,505 ========== ========== 27 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 4. ACCOUNTS RECEIVABLE (CONTINUED) - ------------------------------------- Activity relating to the allowance for doubtful accounts and sales returns is as follows: 1998 1997 1996 --------- ---------- ---------- Balance at beginning of year $ 37,500 $ 86,000 $ 31,000 Provision 3,500 17,800 71,300 Write offs (3,500) (66,300) (16,300) --------- --------- ---------- Balance at end of year $ 37,500 $ 37,500 $ 86,000 ========= ========= =========== 5. INVENTORIES - ----------------- 1998 1997 ------------ ------------ Raw materials $ 461,931 $ 455,848 Work in process 81,676 358,610 ------------ ------------ 543,607 814,458 Allowance for obsolete inventories (100,000) (100,000) ------------ ------------ $ 443,607 $ 714,458 ============ ============ Activity relating to the allowance for obsolete inventories is as follows: 1998 1997 1996 ---------- ---------- ---------- Balance at beginning of year $ 100,000 $ 179,000 $ 126,000 Provision 39,000 15,000 80,000 Write offs (39,000) (94,000) (27,000) ---------- ---------- ---------- Balance at end of year $ 100,000 $ 100,000 $ 179,000 ========== ========== ========== 28 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 6. EQUIPMENT - --------------- Life in years 1998 1997 ------------------ ---------- ---------- Machinery and equipment 7 $ 372,262 $ 318,649 Office furniture and equipment 7 51,116 43,200 Leasehold improvements 5 53,226 60,867 Vehicles 5 15,050 15,050 Capitalized computer software 3 319,259 273,470 ---------- ---------- 810,913 711,236 Less: accumulated depreciation and amortization (308,535) (137,732) ---------- ---------- $ 502,378 $ 573,504 ========== ========== Depreciation and amortization for 1998 and 1997 was $179,540 and $110,229, respectively. 7. OTHER ASSETS - ------------------- 1998 1997 ---------- ---------- Deposits $ 19,630 $ 24,430 Patents, net of amortization of $21,790 and $13,053 at September 30, 1998 and 1997, respectively 28,210 36,947 Other 5,491 8,845 ---------- ---------- $ 53,331 $ 70,222 ========== ========== 8. NOTES PAYABLE - ------------------- The Company has a $1,000,000 revolving line of credit, bearing interest at the LIBOR rate plus 2 percent. The line expired in September 1998, and was renewed for another year. 29 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 9. ACCRUED EXPENSES - ---------------------- 1998 1997 ----------- ----------- Payroll and related items $ 78,916 $ 143,388 Commissions 37,185 52,792 Warranties 40,000 120,000 California franchise tax 38,640 - Other 41,783 68,542 ----------- ----------- $ 236,524 $ 384,722 =========== =========== 10. COMMITMENTS AND CONTINGENCIES - ----------------------------------- Operating leases ---------------- In November 1996 the Company signed a five year lease on a building in Fullerton, California. Base monthly rent is $10,600 plus common area charges of approximately $2,300 per month. Minimum future lease payments under non-cancelable operating leases for each of the next five years and in the aggregate are: Year ending September 30, 1999 $ 155,595 2000 164,340 2001 164,340 2002 68,475 ----------- $ 552,750 =========== Rent expense for 1998, 1997 and 1996 was $150,090, $147,200 and $121,000 respectively. Environmental matters --------------------- The Company, like others in similar businesses, is subject to federal, state and local environmental laws and regulations. Although Company environmental policies and practices are designed to ensure compliance with these laws and regulations, future developments and increasingly stringent regulation could require the Company to make unforeseen environmental expenditures. 30 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 11. STOCKHOLDERS' EQUITY - -------------------------- Preferred stock --------------- At September 30, 1998 and 1997 there were 5,000,000 authorized shares of preferred stock, of which no shares were issued and outstanding. Common stock ------------ The Company has authorized 24,000,000 shares of no par value common stock. At September 30, 1998 and 1997, 1,895,638 and 1,867,638 shares, respectively were issued and outstanding. EMPLOYEE STOCK OPTIONS ---------------------- Incentive and non-statutory option plan --------------------------------------- The Company adopted an incentive and non-statutory stock option plan which provides for granting options to key employees and officers. Under the plan, options up to 1,000,000 shares may be granted at a price not less than the fair market value of such shares on the date of the grant, and the maximum term of each option may not exceed ten years. With respect to any participant who owns stock possessing more than 10% of the voting rights of the Company's outstanding capital stock, the exercise price of any stock option must not be less than 110% of the fair market value on the date of the grant and the maximum term may not exceed five years. On January 22, 1998 the Board authorized options to purchase 70,000 shares of which 50,000 were granted at an exercise price of $.75, which was at or above the market price on the date of the grant. These options vest on January 5, 2000 and expire January 5, 2003. Non-statutory director options ------------------------------ On September 30, 1996, the Company granted 20,000 non-statutory options to each of three outside board members. The options vested 50% at September 30, 1996 and 50% at September 30, 1997, and expire three years after vesting. The option price is $.48 per share, which was equal to the market price at the date of the grant. 31 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 11. STOCKHOLDERS' EQUITY (CONTINUED) - -------------------------------------- Lawrence McNamee ---------------- On January 1, 1991, the Company and its chairman, Lawrence McNamee, executed a one year employment agreement wherein Mr. McNamee was granted six blocks of options totaling 275,350 options which amounted to 10% of the outstanding shares. The option price varied according to the date of the grant. The employment agreement provided that in the event the Company issued any additional (or repurchased existing) shares of common stock (excluding shares issued or issuable pursuant to Mr. McNamee's employment agreement), the number of options issued to Mr. McNamee should be automatically and proportionately adjusted as to preserve the ratio of ten percent of the outstanding common stock. Under certain conditions, Mr. McNamee may be issued additional options in the amount equal to five percent of the outstanding options and warrants excluding those belonging to Mr. McNamee. The exercise price of any additional options issued would be the fair market value of the stock on the date of grant. This adjustment provision of Mr. McNamee's employment agreement is referred to as the "Adjustment" clause. During the year ended September 30, 1996 Mr. McNamee was granted 167,723 options under this adjustment clause, while 248,715 of the original options expired. Option prices range from $.075 to $.375. In fiscal 1997, all of these options expired. Mr. McNamee also holds options to acquire 346,666 shares at $.075 per share issued to him in lieu of salary in 1992. These options have no expiration date. The following table summarizes shares under option, including options both under the Plan and outside the Plan, for the years ended September 30, 1998 and 1997:
Weighted Number of Price Average Shares Per Share Exercise price Exercisable ---------------- ---------------- ----------------- ----------------- September 30, 1996 704,022 $.0625-.50 $0.25 644,014 ---------------- ---------------- ----------------- ================= Granted 50,000 $0.48 $0.48 Exercised - - - Canceled (234,356) $.075-.50 $0.44 ---------------- ---------------- ----------------- September 30, 1997 519,666 $.0625-.48 $0.19 439,666 ---------------- ---------------- ----------------- ================= Granted 50,000 $0.75 $0.75 Exercised (28,000) $.0625-.48 $0.33 Canceled (45,000) $.3125-.375 $0.36 ---------------- ---------------- ----------------- September 30, 1998 496,666 $.0625-.48 $0.22 446,666 ================ ================ ================= =================
32 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 11. STOCKHOLDERS' EQUITY (CONTINUED) - -------------------------------------- Stock options (continued) ------------------------- The following information applies to employee options outstanding at September 30, 1998:
Outstanding ----------------------------------------------------------------- Weighted Average Weighted Remaining Average Range of Number of Contractual Exercise exercise prices Shares Life (Years) Price --------------------- ------------------ ---------------------- --------------- $0.0625 10,000 1 $0.06 $0.075 346,666 4 $0.08 $0.48 90,000 2 $0.48 $0.75 50,000 5 $0.75 ------------------ --------------- 496,666 $0.22 ================== ===============
Statement of Financial Accounting Standards 123, "Accounting for Stock-Based Compensation", encourages but does not require companies to record compensation cost for stock-based employee compensation plans at fair value. The Company has chosen to continue to account for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board Opinion 25, "Accounting for Stock Issued to Employees", and related interpretations. Accordingly, compensation cost for stock options is measured as the excess, if any, of the quoted market price of the Company's stock at the date of grant over the amount an employee must pay to acquire the stock. Had compensation cost for the plan been determined based on the fair value of the options at the grant dates consistent with the method of SFAS 123, the Company's net income and earnings per share would have been: 1998 1997 ------------ ------------ Net income: As reported $ 415,587 $ 591,812 Pro forma $ 377,821 $ 543,759 Basic earnings per share: As reported $ 0.22 $ 0.32 Pro forma $ 0.20 $ 0.29 Diluted earnings per share: As reported $ 0.18 $ 0.32 Pro forma $ 0.17 $ 0.29 33 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 11. STOCKHOLDERS' EQUITY (CONTINUED) - -------------------------------------- Stock options (continued) ------------------------- These pro forma amounts may not be representative of future disclosures because they do not take into effect pro forma compensation expense related to grants made before 1996. In addition, potential deferred tax benefits of approximately $15,000, $19,200 and $15,700 in 1998, 1997 and 1996, respectively, have not been reflected in the pro forma amounts due to the uncertainty of realizing any benefit. The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for 1998, 1997 and 1996: Expected life (years) 4 Risk-free interest rate 6.00% Volatility 100% Expected dividends None The weighted fair value of options granted during the years ended September 30, 1998 and 1997 for which the exercise price approximated the market price on the grant date was $.62. 12. INCOME TAXES - ------------------ Income tax expense (benefit) consisted of the following: 1998 1997 1996 ---------- ---------- ---------- Current tax expense $ 51,000 $ 12,000 $ 800 Deferred tax benefit - (170,000) - ---------- ---------- ---------- $ 51,000 $(158,000) $ 800 ========== ========== ========== 34 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 12. INCOME TAXES (CONTINUED) - ------------------------------ Income tax expense (benefit) differed from the amounts computed by applying the U.S. federal income tax rate of 34% to pretax income from continuing operations in 1998, 1997 and 1996 as a result of the following: 1998 1997 1996 ---------- ---------- ---------- Continuing operations: Federal expected tax expense $ 159,000 $ 147,000 $ 68,600 State expected tax expense 44,000 40,000 20,700 Inventory allowance (25,000) (32,000) - Accounts receivable allowance - (19,000) - Moving expense accrual - (36,000) - Depreciation timing differences 32,000 14,000 - Deferred tax valuation allowance - (170,000) - Use of NOL carryforwards - federal (159,000) (88,000) (68,600) Use of NOL carryforwards - state - (14,000) (19,900) ---------- ---------- ---------- 51,000 (158,000) 800 ---------- ---------- ---------- Extraordinary item: Federal - - 69,000 California - - 20,800 Benefit of NOL carryforward - - (89,800) ---------- ---------- ---------- Income tax expense (benefit) $ 51,000 $(158,000) $ 800 ========== ========== ========== The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities at September 30, 1998 and 1997 are as follows: 1998 1997 ---------- ---------- Net operating loss carryforwards $ 360,000 $ 520,000 Allowance for slow moving inventories 34,000 34,000 Allowance for doubtful accounts 15,000 15,000 Other (144,000) (106,000) ---------- ---------- Deferred tax assets 265,000 463,000 Less valuation allowance (95,000) (293,000) ---------- ---------- Net deferred tax asset $ 170,000 $ 170,000 ========== ========== 35 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 12. INCOME TAXES (CONTINUED) - ------------------------------ During 1998 the Company reduced the valuation allowance to reflect the deferred tax assets utilized in fiscal 1998. The recognized deferred tax asset is based upon expected utilization of the net operating loss carryforwards and reversal of certain temporary differences. The ultimate realization of the deferred tax asset will require aggregate taxable income of approximately $1,055,000 in future years. At September 30, 1998, the Company had net operating loss carryforwards for federal income tax purposes expiring as follows: 2007 $ 433,811 2009 620,976 ------------- $ 1,054,787 ============= Federal investment credit and other general business credit carryforwards total $35,600 and $105,500, respectively, and expire at various dates through 2003. 13. BASIC AND DILUTED EARNINGS PER SHARE - ------------------------------------------ The following tables illustrate the required disclosure of the reconciliation of the numerators and denominators of the basic and diluted earnings per share computations.
1998 1997 1996 ----------- ----------- ----------- BASIC EARNINGS PER SHARE: ------------------------- Numerator Income before extraordinary item $ 415,587 $ 591,812 $ 221,790 Extraordinary item - - 223,691 ----------- ----------- ----------- Net income $ 415,587 $ 591,812 $ 445,481 =========== =========== =========== Denominator Basic weighted average number of common shares outstanding during the period 1,875,474 1,867,638 1,209,405 =========== =========== =========== Basic earnings per share before extraordinary item $ 0.22 $ 0.32 $ 0.18 Basic earnings per share - extraordinary item $ - $ - $ 0.19 ----------- ----------- ----------- Basic net income per share $ 0.22 $ 0.32 $ 0.37 =========== =========== ===========
36 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 13. BASIC AND DILUTED EARNINGS PER SHARE (CONTINUED) - ------------------------------------------------------
1998 1997 1996 ----------- ----------- ----------- DILUTED EARNINGS PER SHARE: --------------------------- Numerator Income before extraordinary item $ 415,587 $ 591,812 $ 221,790 Extraordinary item - - 223,691 ----------- ----------- ----------- Net income $ 415,587 $ 591,812 $ 445,481 =========== =========== =========== Denominator Weighted average number of common shares used in basic earnings per share 1,875,474 1,867,638 1,209,405 Effect of dilutive securities: Stock options (1) 401,622 - - ----------- ----------- ----------- Weighted number of common shares and dilutive potential common stock used in diluted earnings per share 2,277,096 1,867,638 1,209,405 =========== =========== =========== Diluted earnings per share before extraordinary item $ 0.18 $ 0.32 $ 0.18 Diluted earnings per share - extraordinary item $ - $ - $ 0.19 ----------- ----------- ----------- Diluted net income per share $ 0.18 $ 0.32 $ 0.37 =========== =========== ===========
(1) Stock options were anti-dilutive for the years ended September 30, 1997 and 1997. See Note 11 for stock option activity. 14. EMPLOYEE BENEFIT PLAN - --------------------------- The Company's 401(k) plan was re-activated during fiscal 1996. All employees are eligible as long as they are 21 years of age and have completed one year of employment. The plan provides for Contributions by the Company in such amounts as management may determine. No expense was charged to operations in 1998 or 1997. 37 RADIANT TECHNOLOGY CORPORATION NOTES TO FINANCIAL STATEMENTS 15. RECENT PRONOUNCEMENTS - --------------------------- In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive Income", which established standards for the reporting and display of comprehensive income and its components (revenues, expenses, gains and losses). SFAS 130 requires all items that are required to be recognized under accounting standards as components of comprehensive income to be reported in a financial statement that is displayed with the same prominence as other financial statements. SFAS 130 requires an enterprise to (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. SFAS 130 is effective for fiscal years beginning after December 15, 1997. Management has determined that the adoption of SFAS 130 will not have a material impact on the Company's financial position or results of operations. In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of an Enterprise and Related Information", which established standards for public business enterprises to report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to stockholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. SFAS 131 requires, among other items, that a public business enterprise report a measure of segment profit or loss, certain specific revenue and expense items, segment assets, information about the revenues derived from the enterprise's products or services and major customers. SFAS 131 also requires that the enterprise report descriptive information about the way that the operating segments were determined and the products and services provided by the operating segments. SFAS 131 is effective for financial statements for periods beginning after December 15, 1997. In the initial year of application, comparative information for earlier years is required to be restated. SFAS 131 need not be applied to interim financial statements in the initial year of application, but comparative information for interim periods in the initial year of application is to be reported in financial statements for interim periods in the second year of application. Management has determined that the adoption of SFAS 131 will not have a material impact on the Company's financial reporting. EX-27 2 FINANCIAL DATA SCHEDULE
5 1 YEAR SEP-30-1998 OCT-01-1997 SEP-30-1998 2327925 0 565777 0 443607 3507309 502378 0 4063018 1457030 0 0 0 1153108 1452880 4063018 4686382 4686382 3038095 3038095 1227720 0 46020 466587 51000 415587 0 0 0 415587 0.22 0.18
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