-----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, O+6QhK3Y2yygI0EXaZcWHsH1JjJ4Aukh1e5fOPZ44upI6CyG2vsz3asTl81XfaDj 3TGAIgjauZoJiT2zIzmZOw== 0000032312-01-500006.txt : 20010223 0000032312-01-500006.hdr.sgml : 20010223 ACCESSION NUMBER: 0000032312-01-500006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010214 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EMCEE BROADCAST PRODUCTS INC CENTRAL INDEX KEY: 0000032312 STANDARD INDUSTRIAL CLASSIFICATION: RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT [3663] IRS NUMBER: 131926296 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 001-06299 FILM NUMBER: 1544235 BUSINESS ADDRESS: STREET 1: P O BOX 68 STREET 2: SUSQUEHANNA STREET EXTENSION WEST CITY: WHITE HAVEN STATE: PA ZIP: 18661-0068 BUSINESS PHONE: 5704439575 MAIL ADDRESS: STREET 1: POST OFFICE 68 CITY: WHITE HAVEN STATE: PA ZIP: 18661-0068 FORMER COMPANY: FORMER CONFORMED NAME: ELECTRONICS MISSILES & COMMUNICATIONS INC DATE OF NAME CHANGE: 19920703 EX-5 1 fds12.frm [ARTICLE] 5 [PERIOD-TYPE] 9-MOS [PERIOD-START] Apr-01-2000 [FISCAL-YEAR-END] Mar-31-2001 [PERIOD-END] Dec-31-2000 [CASH] 6,381 [SECURITIES] 0 [RECEIVABLES] 2,547,253 [ALLOWANCES] 0 [INVENTORY] 4,769,608 [CURRENT-ASSETS] 7,447,699 [PP&E] 3,077,731 [DEPRECIATION] 2,450,982 [TOTAL-ASSETS] 9,802,457 [CURRENT-LIABILITIES] 7,447,699 [BONDS] 0 [PREFERRED-MANDATORY] 0 [PREFERRED] 0 [COMMON] 73,450 [OTHER-SE] 6,560,616 [TOTAL-LIABILITY-AND-EQUITY] 9,802,457 [SALES] 5,232,294 [TOTAL-REVENUES] 5,232,294 [CGS] 4,226,411 [TOTAL-COSTS] 6,429,424 [OTHER-EXPENSES] 1,510 [LOSS-PROVISION] 110,000 [INTEREST-EXPENSE] 102,321 [INCOME-PRETAX] (1,205,524) [INCOME-TAX] (353,000) [INCOME-CONTINUING] (852,524) [DISCONTINUED] 0 [EXTRAORDINARY] 0 [CHANGES] 0 [NET-INCOME] (852,524) [EPS-BASIC] (0.21) [EPS-DILUTED] (0.21)
10QSB 2 edgar.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the quarterly period ended December 31, 2000 Commission file number 1-6299 EMCEE Broadcast Products, Inc. (Exact name of registrant as specified in its charter) Delaware 13-1926296 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) Registrant's telephone number, including area code: 570-443-9575 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 the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date: Common stock, $ .01-2/3 par value - 4,041,709 shares as of February 13, 2001. EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES I I N D E X PART I. FINANCIAL INFORMATION: PAGE (S) CONSOLIDATED BALANCE SHEETS - December 31, 2000 and March 31, 2000 3 CONSOLIDATED STATEMENTS OF LOSS - Three months and nine months ended Dec. 31, 2000 and 1999 4 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY - Nine months ended December 31, 2000 5 CONSOLIDATED STATEMENTS OF CASH FLOW - Nine months ended December 31, 2000 and 1999 6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7 - 8 INDEPENDENT ACCOUNTANTS' REPORT 9 MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 - 14 PART II. OTHER INFORMATION: SIGNATURES 15 NOTE: Any questions concerning this report should be addressed to Mr. Allan J. Harding, Vice President-Finance.
PART I. FINANCIAL INFORMATION EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - DECEMBER 31, 2000 and MARCH 31, 2000 - DEC. 31, 2000 MARCH 31, 2000 (Unaudited) ASSETS: CURRENT ASSETS: Cash and cash equivalents $ 6,381 $ 261,304 U. S. Treasury Bills -- 1,773,600 Cash - restricted 103,656 -- Accounts receivable, net of allowance for doubtful accounts, Dec - $110,000 / March - $70,000 2,437,253 1,452,279 Inventories 4,769,608 3,080,313 Prepaid expenses 130,801 80,113 --------- --------- TOTAL CURRENT ASSETS 7,447,699 6,647,609 --------- --------- PROPERTY, PLANT AND EQUIPMENT: Land & land improvements 246,841 246,841 Building 617,475 617,475 Machinery and equipment 2,213,415 1,925,042 --------- --------- 3,077,731 2,789,358 Less accumulated depreciation 2,450,982 2,249,467 --------- --------- NET PROPERTY, PLANT AND EQUIPMENT 626,749 539,891 --------- --------- OTHER ASSETS Income taxes refundable 389,000 402,000 Deferred income taxes 212,000 220,000 Other 1,127,000 1,292,448 --------- --------- 1,728,009 1,914,448 --------- --------- NOTE RECEIVABLE 536,500 525,000 Less deferred portion (536,500) (525,000) ------- ------- 0 0 --------- --------- TOTAL ASSETS $ 9,802,457 $9,101,948 ========== ========= LIABILITIES & SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 618,595 $ 106,000 Notes payable (line of credit) 725,000 --- Accounts payable 690,315 368,671 Accrued expenses: Payroll and related expenses 182,980 214,316 Other 495,854 437,836 Deposits from customers 435,647 64,247 --------- --------- TOTAL CURRENT LIABILITIES 3,148,391 1,191,070 --------- --------- LONG-TERM DEBT, net of current portions 20,000 596,354 --------- --------- SHAREHOLDERS' EQUITY: Common stock issued, $.01-2/3 par; authorized 9,000,000 shares; issued 4,406,361 shares 73,450 73,450 Additional paid-in capital 3,583,484 3,583,484 Retained earnings 4,665,717 5,518,241 --------- --------- 8,322,651 9,175,175 --------- --------- Less shares held in treasury at cost: 364,652 shares Dec. 2000 and 401,764 shares March 2000 1,688,585 1,860,651 --------- --------- TOTAL SHAREHOLDERS' EQUITY 6,634,066 7,314,524 --------- --------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 9,802,457 $9,101,948 ========= ========= SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF LOSS THREE MONTHS AND NINE MONTHS ENDED DECEMBER 31, 2000 AND 1999 (Unaudited) NINE (9) MONTHS THREE (3) MONTHS 12/31/00 12/31/99 12/31/00 12/31/99 NET SALES $ 5,232,294 $ 2,935,002 $ 1,780,839 $ 1,147,361 COST OF PRODUCTS SOLD 4,226,411 2,432,048 1,516,059 934,011 --------- --------- --------- ------- GROSS PROFIT 1,005,883 502,954 264,780 213,350 OPERATING EXPENSES: Selling expenses 844,295 685,259 269,362 191,283 General and Admin 1,039,988 778,841 337,489 247,927 Research and development 318,730 283,826 70,262 110,319 -------- ------- ------- ------- TOTAL OPERATING EXPENSES 2,203,013 1,747,926 677,113 549,529 --------- --------- ------- ------- LOSS FROM OPERATIONS (1,197,130) (1,244,972) (412,333) (336,179) --------- --------- ------- ------- OTHER INCOME (EXPENSE), NET: Interest expense (102,321) (41,959) (34,049) (15,205) Interest income 95,437 123,656 31,004 39,516 Other (1,510) 23,129 (411) 8,740 -------- -------- ------- ------ TOTAL OTHER INCOME (EXPENSE), NET (8,394) 104,826 (3,456) 33,051 ----- ------- ----- ------ LOSS BEFORE INCOME TAXES (1,205,524) (1,140,146) (415,789) (303,128) --------- --------- ------- ------- INCOME TAX BENEFIT (353,000) (341,100) (113,000) (92,700) ------- ------- ------- ------ NET LOSS $ (852,524) $ (799,046) $ (302,789) $(210,428) ======= ======= ======= ======== COMMON SHARE AND COMMON SHARE EQUIVALENT OUTSTANDING 4,039,550 3,982,397 4,041,709 3,982,397 ========= ========= ========= ========= LOSS PER COMMON AND COMMON SHARE EQUIVALENT $ (.21) $ (.20) $ (.07) $ (.05) === === === === SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY NINE MONTHS ENDED DECEMBER 31, 2000 (Unaudited) ADDITIONAL COMMON STOCK PAID-IN RETAINED TREASURY STOCK SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL BALANCE - 3/31/00 4,406,361 $73,450 $3,583,484 $5,518,241 401,764$(1,860,651)$7,314,524 TREASURY STOCK ISSUED (37,112) 172,066 172,066 NET LOSS FOR THE PERIOD (852,524) (852,524) --------- ------ ---------- --------- ------- --------- --------- BALANCE - 12/31/00 4,406,361 $73,450 $3,583,484 $4,665,717 364,652$(1,688,585)$6,634,066 ========= ====== ========= ========= ======= ========= ========= SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS NINE (9) MONTHS ENDED DECEMBER 31, 2000 AND 1999 (Unaudited) NINE (9) MONTHS 12/31/00 12/31/99 CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (852,524) $ (799,046) Adjustments: Depreciation 201,515 195,722 Amortization 10,800 -- Provision for doubtful accounts 40,000 26,986 (Increase) decrease in (net of effect of acquisition): Accounts receivable (934,379) (382,021) Inventories (1,510,727) 388,765 Prepaid expenses (50,688) 232,653 Income taxes refundable 13,000 -- Deferred income taxes 8,000 (9,000) Other assets 27,210 (18,780) Increase (decrease) in (net of effect of acquisition): Accounts payable 277,115 44,190 Accrued expenses 6,543 (36,865) Deposits from customers 371,400 (6,576) ------- ------ NET CASH USED IN OPERATING ACTIVITIES (2,392,735) (363,972) --------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Increase in cash - restricted (103,656) -- Acquisition of property, plant and equipment (43,373) (48,584) Purchase of U. S. Treasury Bills (809,101) (2,327,208) Proceeds from maturities of U.S. Treasury Bills 2,582,701 2,334,872 Purchase of Advanced Broadcast Systems, Inc. (400,000) --- Proceeds from sale of other assets 250,000 --- ------- -------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 1,476,571 (40,920) --------- ------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from line of credit borrowing 1,100,000 --- Additional borrowing on long-term debt 15,527 20,141 Payments on: Long-term debt (79,286) (66,862) Line of Credit (375,000) --- ------- ------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 661,241 (46,721) ------- ------ NET DECREASE IN CASH (254,923) (451,613) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 261,304 1,572,423 ------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,381 $ 1,120,810 ======= ========= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid (refunded) during the period: Interest expense $ 92,127 $ 36,934 Income taxes (373,000) $ 6,000 Fair value of assets acquired and liabilities assumed for purchase of Advanced Broadcast Systems, Inc.: Equipment $ 245,000 Inventory 178,568 Accounts receivable 90,595 Goodwill 272,571 Accounts payable (44,529) Accrued liabilities (20,139) Inter-company payables (150,000) Treasury stock (172,066) ------- Cash paid $400,000 ======= SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The financial information presented as of any date other than March 31 has been prepared from the books and records of the Company without audit. Financial information as of March 31 has been derived from the audited financial statements of the Company, but does not include all disclosures required by generally accepted accounting principles. In the opinion of management, the accompanying unaudited consolidated condensed financial statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly EMCEE Broadcast Products, Inc. and Subsidiaries' financial position, and the results of their operations and changes in cash flow for the periods presented. 2. The results of operations for the three-month and nine-month periods ended December 31, 2000 and 1999 are not necessarily indicative of the results to be expected for the full year. 3. At December 31, 2000, cash equivalents included $8,106 invested in a money market portfolio. 4. INVENTORIES consisted of the following:
Dec. 31, 2000 March 31, 2000 (UNAUDITED) FINISHED GOODS $ 768,000 $ 440,000 WORK-IN-PROCESS $ 807,000 $ 468,000 RAW MATERIALS $1,698,000 $ 728,000 MANUFACTURED COMPONENTS $1,496,608 $1,444,313 ---------- --------- $4,769,608 $3,080,313 ========= =========
Inventories are stated at the lower of standard cost, which approximates current actual cost (on a first-in, first-out basis) or market (net realizable value). 5. LOSS PER SHARE. Basic loss per share is computed by dividing loss applicable to common shareholders by the weighted average number of common shares outstanding. Diluted loss per share is similar to basic loss per share except that the weighted average of common shares outstanding is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued. There were no dilutive potential common shares in the period ended December 31, 2000 and 1999 because the assumed exercise of the options would be anti-dilutive. The number of options and warrants that could potentially dilute basic loss per share that have been excluded from the computation of diluted loss per share were 310,200 at December 31, 2000. 6. On October 30, 2000, the company received written notice from its primary lending institution, First Union National Bank, that its working capital line of credit would not be renewed. As a result, the bank made a demand for the entire outstanding principal balance of the line which is, at the date of this report, $675,000 together with all accrued and unpaid interest and all reimbursable fees and expenses of the bank. Under the provisions of the bank's notice, these sums had to be paid on or before November 10, 2000, but as of the date of this report remain unpaid. The company is, therefore, in default of such payment. Because the line of credit is cross defaulted under the bank's loan documents with all other indebtedness of the company to the bank, which other indebtedness totals $601,400 as of the date of this report, the bank would have the right to accelerate the maturity of such other indebtedness and, if not timely paid, hold the company in default thereof as well. However, the bank has notified officers of the company that it is not taking any legal action against the company or any of the company's assets at the present time. Instead, the company and the bank are in the process of negotiating the terms and conditions of a forbearance agreement under which, among other things, the bank would agree to forbear from exercising its rights and remedies under the loan documents and permit the company to repay the line during a specific period of time and maintain scheduled payments on the other bank debt during that time. Concurrently, the company is exploring the refinancing of the line of credit and its other indebtedness with other lending institutions. The company has liquidated certain investments and is actively pursuing liquidating other investments to provide working capital until additional funding can be secured. The Registrant believes that, providing both the company and the bank agree on the proposed forbearance agreement, its working capital coupled with cash flow from operations and the above-mentioned funding from sale of investments will be sufficient to fund anticipated working capital and debt funding requirements for the remainder of fiscal 2001. However, the Registrant recognizes that future growth in fiscal 2002 and beyond will require outside funding to replace its present financing. Kronick Kalada Berdy & Co. Certified Public Accountants 190 Lathrop Street Kingston, PA 18704 Independent Accountants' Report Officers and Directors EMCEE Broadcast Products, Inc. We have reviewed the accompanying condensed consolidated balance sheet of EMCEE Broadcast Products, Inc. and subsidiaries as of December 31, 2000 and the condensed statements of loss, shareholders' equity and cash flows for the three-months and nine-months then ended December 31, 2000 and 1999. These financial statements are the responsibility of the company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. According, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed financial statements for them to be in conformity with generally accepted accounting principals. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of EMCEE Broadcast Products, Inc. and subsidiaries as of March 31, 2000, and the related consolidated statements of income, stockholders' equity, and cash flows for the year then ended (not presented herein), and in our report dated May 17, 2000, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of March 31, 2000 is fairly stated, in all material respects to the consolidated balance sheet from which it has been derived. February 12, 2001 /s/ Kronick Kalada Berdy & Co. Kronick Kalada Berdy EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net sales totaled $1,781,000 for the quarter ended December 31, 2000, an increase of 55% over the quarter ended December 31, 1999. Net sales for the nine-month period ended December 31, 2000 equaled $5,232,000, an increase of 78% compared to the nine months ended December 31, 1999. Advanced Broadcast Systems, Inc., which manufactures high power television transmitters and whose assets were purchased by the registrant in April, 2000, contributed net sales of $483,000 for the quarter and $1,105,000 for the nine months ended December 31,2000. Foreign shipments of $931,000 for the third quarter and $3,036,000 for the first three quarters ended December 31, 2000 accounted for 52% and 58% of shipments respectively. Although export shipments have historically been a major aspect of the Company's business, management anticipates that domestic demand, especially in high power products, will dominate sales for the next six months. A comparison of export shipments by region for the quarters and nine-month periods ended December 31, 2000, 1999 and 1998 are as follows:
Quarter ended December 30, Nine-Months Ending Dec. 30, 2000* 1999* 1998* 2000* 1999* 1998* (000's omitted) (000's omitted) Asia/Pacific Rim $662 $ 78 $145 $2,027 $353 $1,002 Middle East 0 193 0 8 393 352 South America 59 391 7 258 533 162 North America 66 (7) 186 343 20 373 Central America 15 5 6 39 24 91 Caribbean 72 24 134 141 115 219 Europe 42 32 89 148 55 311 Africa 0 0 40 40 0 45 Other 15 (6) (68) 32 35 6 -- --- --- ----- ----- ----- $931 $710 $539 $3,036 $1,528 $2,561 === === ==== ===== ===== =====
*Based on customers with $2,500 or more of sales. Gross profit for the quarter ended December 31, 2000 was $265,000 or 15% of net sales compared to $213,000 or 19% of net sales for the quarter ended December 31, 1999. Although volume was up for the most recent quarter, unfavorable manufacturing variances, due in large part to the learning curve involved with the implementation of new productions, reduced the expected margin. Gross Profit for the nine months ended December 31, 2000 was $1,006,000 or 19% of net sales compared to $503,000 or 17% of net sales for the first nine months one year ago. Total operating expenses of $677,000 for the third quarter ended December 31, 2000 was 23% over the like period one year ago and increased total operating expenses to $2,203,000 for the nine months ended December 31, 2000 or 26% over the amount of $1,748,000 for the nine months ended December 31, 1999. General and Administrative expense totaled $337,000 for the quarter ended December 31, 2000 compared to $248,000 for the quarter ended December 31, 1999 and $1,040,000 for the nine months ended December 31, 2000 compared to $779,000 for the same period one year ago. Approximately $52,000 of the increase for the comparative quarter ($164,000 year to date) is attributable to the new business acquired in April 2000. The remainder of the increase for both the quarter and year-to-date are for various legal and professional fees in connection with bank debt, vendor negotiations and consulting fees related to the acquisition of Advanced Broadcast Systems, Inc. Selling expense of $269,000 for the quarter ended December 31, 2000 exceeded the amount of $191,000 for the quarter ended December 31, 1999 by 41%. Approximately $24,000 of this difference is attributable to selling expense for the aforementioned acquisition. Additional expense was incurred in the latest quarter compared to the former for salaries in the amount of $27,000 for the addition of personnel and commissions due to the increase in sales volume. Advertising was also increased for the quarter for new products. Travel expenditures were reduced in the quarter compared to the third quarter of fiscal 2000. Selling expenses for the nine months ended December 31, 2000 totaled $844,000 compared to $685,000 for the nine months ended December 31, 1999. The increases included the new acquisition selling expense of $37,000. For the year-to-date, additional selling expense of approximately $30,000 is related to a large order for Korea. Research and Development expense for the quarter ended December 31, 2000 decreased to $70,000 compared to $110,000 for the same quarter one year ago, although research and development for the nine months ended December 31, 2000 increased to $319,000 from $284,000 for the year ended December 31, 1999. The quarter expense was reduced as engineering personnel were deployed for manufacturing and test efforts for new products. The Company is committed to development of new products for both the MMDS and digital product line. The increase in operating expenses somewhat offset the increase in sales volume and produced a loss from operations for the quarter ended December 31, 2000 of $412,000 compared to a loss from operations of $336,000 for the third quarter one year ago. Year-to-date loss from operations of $1,197,000 improved only slightly from the loss from operations of $1,245,000 for the nine months ended December 31, 1999. Interest expense for the quarter ended December 31, 2000 totaled $34,000 and increased interest expense to $102,000 for the nine months ended December 31, 2000 compared to interest expense of $15,000 and $42,000 respectively, for the quarter and nine months ended December 31, 1999 as the line of credit was utilized in fiscal 2001. Interest income decreased from $40,000 for the quarter ended December 31, 1999 to $31,000 for the quarter ended December 31, 2000 due to the reduction of securities investment in U.S. T-bills and money markets. For this reason, year-to-date interest decreased from $124,000 to $95,000 for the comparable nine months ended December 31, 1999 and 2000. Other income (expense) was a nominal $400 (expense) for the quarter and $1,500 (expense) for the first three quarters ended December 31,2000 compared to other income of $9,000 and $23,000 for the same periods one year ago as the Company received rent for salable products. Loss before income tax benefit was $416,000 for the quarter ended December 31, 2000 and $1,206,000 for the nine months ended December 31, 2000. Expected tax benefits reduced the losses to a net loss of $303,000 (seven cents per share of outstanding stock) for the quarter ended December 31, 2000 and $853,000 (twenty-one cents per share of outstanding stock). Comparable amounts were losses of $210,000 and $799,000 for the quarter and year-to-date ended December 31, 1999 equivalent to five cents and twenty cents for outstanding shares, respectively. Management believes that demand for digital and analog television products will increase sales by the beginning of May 2001, and is confident the Registrant can be profitable by September 2001 provided outside financing is secured. Cash and cash equivalents were decreased from $261,000 as of March 31, 2000 to $110,000 as of December 31, 2000 and U.S. treasury bills were liquidated during the same period to provide funding for the acquisition of Advanced Broadcast Systems, Inc. in April 2000, increases in receivables and inventories and payments of borrowings. The Registrant acquired the assets of Advanced Broadcast Systems, Inc. on April 17, 2000 for approximately $400,000 in cash, 37,112 shares of the Company's stock valued as of the acquisition date at $2.78 per share and the assumption of liabilities aggregating approximately $200,000. Additional amounts may be paid based on the initial year revenues and earnings of the acquired company. Advanced Broadcast Systems, Inc. is a manufacturer of commercial high and medium power analog and digital television transmitters for UHF broadcast markets and is significant in the Registrant's marketing strategy for the new digital transmitter market. Accounts receivables increased from $1,452,000 as of March 31, 2000 to $2,437,000 as of December 31, 2000. Approximately 70% of receivables as of December 31, 2000 are from foreign customers, a portion of which is on extended payment terms. A scheduled payment of $108,000 was received in January 2001 from a South American customer. However, a significant customer has delayed payments due in December 2000 and January 2001. A partial payment was received in February and management believes the outcome of the receivable will be satisfactory. Reserves for doubtful accounts has been increased from $60,000 as of March 31, 2000 to $110,000 as of December 31, 2000. Inventories increased from $3,080,000 as of March 31, 2000 to $4,770,000 as of December 31, 2000. The Company had ordered additional inventory due to expected shortages of critical parts. The result was additional inventories that will require at least six months to work down. Prepaid expenses, which are comprised of prepaid insurance and convention expense, increased from $80,000 as of March 31, 2000 to $131,000 as of December 31, 2000 due to outlays for shows scheduled for the spring and summer of 2001. Income taxes refundable and deferred income taxes totaled $601,000 as of December 31, 2000 compared to a total of $622,000 as of March 31, 2000. A total of $373,000 refund of federal tax was received in the second quarter of the current fiscal year. The current balances reflect the tax benefit of $353,000 for the current year's loss and temporary federal income tax timing differences. All borrowings from the primary lending institution is shown as current, as it is expected that the forbearance agreement in discussion with this bank will require payments within a year. The long term debt is for scheduled payment on two vehicles. Accounts payable increased from $369,000 as of March 31, 2000 to $690,000 as of December 31, 2000 due primarily to the increase in inventories. Accrued expenses for payroll and related expenses decreased from $214,000 as of March 31, 2000 to $183,000 as of December 31, 2000 due primarily to a reduction of vacation pay accrual at December 31, 2000. Other accrued expenses increased from $438,000 as of March 31, 2000 to $496,000 as of December 31, 2000 with the increase due to the addition of ABS (Advanced Broadcast Systems) and timing of accruals. An indication of the strength of the demand for new orders is demonstrated in the increase of Deposits from Customers from $64,000 as of March 31, 2000 to $436,000 as of December 31, 2000. Property, plant and equipment increased $288,000 from $2,789,358 at March 31, 2000 to $3,078,000 as of December 31, 2000. Of the total increase, $245,000 was equipment purchased in the acquisition of ABS (Advanced Broadcast Systems). Depreciation reserve was increased by $202,000 for the nine month period ended December 31, 2000. Other assets decreased from $1,292,000 as of March 31, 2000 to $1,127,000 as of December 31, 2000. An increase of $331,000 for Goodwill in connection with the acquisition of Advanced Broadcast Systems, Inc. in April 2000 was more than offset by reduction in investments and other advances to Advanced Broadcast Systems, Inc. at March 31, 2000 of $174,000 (and prior to the acquisition) was reduced at the time of acquisition. The investment of $250,000 in a venture capital company was sold at cost to provide additional liquidity. The balance of accounts receivables (included in other assets) due in more than one year was reduced from $282,000 as of March 31, 2000 to $141,000 as scheduled payments were made. The backlog of unsold orders equaled $1,068,000 as of December 31, 2000 compared to $1,367,000 as of March 31, 2000. In January 2001, the Registrant received an order in the amount of $573,000 for a high power television transmitter to be completed by July 2001. The Company has 55 full and part time employees at its facilities in Pennsylvania and Kentucky as of the date of this report. Treasury stock decreased by 37,112 shares, equal to the value of $172,000, as the shares were used as partial payment for the acquisition of April 17, 2000. These shares are held in an escrow account until April 1, 2001. On October 30, 2000, the company received written notice from its primary lending institution, First Union National Bank, that its working capital line of credit would not be renewed. As a result, the bank made a demand for the entire outstanding principal balance of the line which is, at the date of this report, $675,000, together with all accrued and unpaid interest and all reimbursable fees and expenses of the bank. Under the provisions of the bank's notice, these sums had to be paid on or before November 10, 2000, but as of the date of this report remain unpaid. The company is, therefore, in default of such payment. Because the line of credit is cross defaulted under the bank's loan documents with all other indebtedness of the company to the bank, which other indebtedness totals $601,400 as of the date of this report, the bank would have the right to accelerate the maturity of such other indebtedness and, if not timely paid, hold the company in default thereof as well. However, the bank has notified officers of the company that it is not taking any legal action against the company or any of the company's assets at the present time. Instead, the company and the bank are in the process of negotiating the terms and conditions of a forbearance agreement under which, among other things, the bank would agree to forbear from exercising its rights and remedies under the loan documents and permit the company to repay the line during a specific period of time and maintain scheduled payments on the other bank debt during that time. Concurrently, the company is exploring refinancing of the line of credit and its other indebtedness with other lending institutions. The company has liquidated certain investments and is actively pursuing liquidating other investments to provide working capital until additional funding can be secured. The Registrant believes that, providing both the company and the bank agree on the proposed forbearance agreement, its working capital coupled with cash flow from operations and the above-mentioned funding from sale of investments will be sufficient to fund anticipated working capital and debt funding requirements for the remainder of fiscal 2001. However, the Registrant recognizes that future growth in fiscal 2002 and beyond will require outside funding to replace its present financing. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 Any statements contained in this report which are not historical facts are forwarding looking statements; and, therefore, many important facts could cause actual results to differ materially from those in the forward looking statements. Such factors include, but not limited to, changes (legislative, regulatory and otherwise) in the MMDS or broadcast industry, demand for the Company's products (both domestically and internationally), the development of competitive products, competitive pricing, the timing of foreign shipments, market acceptance of new product introductions (including, but not limited to, the Company's digital and internet products), technological changes, economic conditions, litigation and other factors, risks and uncertainties identified in the Company's Securities and Exchange Commission filings. PART II. OTHER INFORMATION ITEM 3. DEFAULTS UPON SENIOR SECURITIES. That portion of footnote 6 of the financial statements accompanying this report and that portion of Management's Discussion and Analysis of the Financial Condition and Results of Operations above, which disclose (a) notice and demand by the company's primary lending institution for all outstanding indebtedness on the company's line of credit, (b) defaults by the company on such indebtedness and other indebtedness of the company to the bank, (c) the negotiation of a forbearance agreement with respect to such defaults, and (d) other matters related thereto, are incorporated by reference into this Item 3 and Part II of this report. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. EMCEE BROADCAST PRODUCTS, INC. Date: February 13, 2001 /s/ JAMES L. DeSTEFANO JAMES L. DeSTEFANO President/CEO Date: February 13, 2001 /s/ ALLAN J. HARDING ALLAN J. HARDING Vice President-Finance -----END PRIVACY-ENHANCED MESSAGE-----