-----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, OezpQtH8kpuGM/9ra/E9iVIV2OzndbuXCjL4Ppa68lkWYjBNlcachVcdztRAMIHc r1cGXaeIOZye118qlt/pmg== 0001144204-05-015281.txt : 20050513 0001144204-05-015281.hdr.sgml : 20050513 20050513162603 ACCESSION NUMBER: 0001144204-05-015281 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20050513 DATE AS OF CHANGE: 20050513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARLTON TECHNOLOGIES INC CENTRAL INDEX KEY: 0000096988 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 221825970 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07708 FILM NUMBER: 05829702 BUSINESS ADDRESS: STREET 1: 2828 CHARTER RD STE 101 CITY: PHILADELPHIA STATE: PA ZIP: 19154 BUSINESS PHONE: 2156766900 MAIL ADDRESS: STREET 1: 2828 CHARTER RD CITY: PHILADELPHIA STATE: PA ZIP: 19154 FORMER COMPANY: FORMER CONFORMED NAME: TELESCIENCES INC DATE OF NAME CHANGE: 19880201 10-Q 1 v018142_10q.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2005 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to_______ Commission file number 1-7708 ------ MARLTON TECHNOLOGIES, INC. ------------------------------------------- (Exact name of issuer as specified in its charter) Pennsylvania 22-1825970 ------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 2828 Charter Road Philadelphia PA 19154 ------------------------------------------------------------------------------- (Address of principal executive offices) City State Zip Issuer's telephone number (215) 676-6900 -------------- Former name, former address and former fiscal year, if changed since last report: ____________________ Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Indicate by check mark whether the issuer is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes |_| No |X| APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Check whether the issuer 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 court. Yes |_| No |_| APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of each of the issuer's classes of common stock as of the last practicable date: 12,939,696 ITEM 1. FINANCIAL STATEMENTS MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (In thousands except share and per share data)
March 31, December 31, ASSETS 2005 2004 -------- -------- Current: Cash and cash equivalents $ 1,205 $ 311 Accounts receivable, net of allowance of $384 and $444, respectively 14,155 10,157 Inventories 7,968 7,069 Prepaid and other current assets 691 400 -------- -------- Total current assets 24,019 17,937 Property and equipment, net of accumulated depreciation of $10,960 and $10,792, respectively 3,157 2,469 Rental assets, net of accumulated depreciation of $4,361 and $4,239, respectively 2,875 2,875 Goodwill 2,750 2,750 Other intangible assets, net of accumulated amortization of $44 5,096 -- Other assets, net of accumulated amortization of $1,794 and $1,781, respectively 137 126 Notes receivable 158 178 -------- -------- Total assets $ 38,192 $ 26,335 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 1,209 $ 83 Accounts payable 6,606 5,596 Accrued expenses and other current liabilities 7,994 7,722 -------- -------- Total current liabilities 15,809 13,401 Long-term liabilities: Long-term debt, net of current portion 11,002 5,070 Other long-term liabilities 1,775 -- -------- -------- Total long-term liabilities 12,777 5,070 -------- -------- Total liabilities 28,586 18,471 -------- -------- Commitments and contingencies -- -- Stockholders' equity: Preferred stock, no par value - shares authorized 10,000,000; no shares issued or outstanding -- -- Common stock, no par value - shares authorized 50,000,000; 12,939,696 outstanding at March 31, 2005 and December 31, 2004 -- -- Stock warrants 1,528 742 Additional paid-in capital 32,998 32,998 Accumulated deficit (24,772) (25,728) -------- -------- 9,754 8,012 Less cost of 148,803 treasury shares (148) (148) -------- -------- Total stockholders' equity 9,606 7,864 -------- -------- Total liabilities and stockholders' equity $ 38,192 $ 26,335 ======== ========
The accompanying notes and the notes to the consolidated financial statements included in the Registrant's Annual Report on Form 10-K are an integral part of these financial statements. 2 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands except per share data) For the three months ended March 31, 2005 March 31, 2004 ---------------- ---------------- Net sales $ 18,835 $ 18,549 Cost of sales 14,422 13,810 ---------------- ---------------- Gross profit 4,413 4,739 Selling expenses 2,147 2,217 Administrative and general expenses 1,209 1,525 ---------------- ---------------- Operating profit 1,057 997 Other income (expense): Interest and other income 34 -- Interest expense (135) (92) ---------------- ---------------- Income before income taxes 956 905 Provision for income taxes -- -- ---------------- ---------------- Net income 956 905 ================ ================ Net income per common share: Basic $ 0.07 $.0.07 ================ ================ Diluted $ 0.06 $.0.07 ================ ================ The accompanying notes and the notes to the consolidated financial statements included in the Registrant's Annual Report on Form 10-K are an integral part of these financial statements. 3 MARLTON TECHNOLOGIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
For the three months ended March 31, 2005 March 31, 2004 ---------------- ---------------- Cash flows from operating activities: Net income $ 956 $ 905 Adjustments to reconcile net income to cash used in operating activities: Depreciation and amortization 348 569 Change in operating assets and liabilities: Increase in accounts receivable, net (2,685) (3,252) Increase in inventories (332) (57) (Increase) decrease in prepaid and other assets (291) 19 Decrease in notes and other receivables 20 26 Increase (decrease) in accounts payable, accrued expenses and other current liabilities (255) 915 ---------------- ---------------- Net cash used in operating activities (2,239) (875) ---------------- ---------------- Cash flows from investing activities: Acquisition of business, net of cash acquired (2,752) -- Capital expenditures (166) (106) ---------------- ---------------- Net cash used in investing activities (2,918) (106) ---------------- ---------------- Cash flows from financing activities: Proceeds from revolving credit facility, net 5,104 1,328 Proceeds from term loan 1,000 -- Payments for leasehold improvement obligation (18) (11) Payments for loan origination fees (25) (117) Payments for capital lease obligations (10) -- Payments for acqusition obligation -- (11) ---------------- ---------------- Net cash provided by financing activities 6,051 1,189 ---------------- ---------------- Increase in cash and cash equivalents 894 208 Cash and cash equivalents - beginning of period 311 241 ---------------- ---------------- Cash and cash equivalents - end of period $ 1,205 $ 449 ================ ================
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES Acquisition of Showtime Enterprises, Inc. Assets and Specified Liabilities: Cash purchase price $ 2,752 Long-term debt incurred 982 Other long-term liabilities incurred 1,775 Fair value of stock warrants 786 --------- Total purchase price $ 6,295 ========= Working capital acquired $ 343 Fair value of property, equipment and rental assets acquired 812 Covenants not to compete acquired 570 Customer relationships acquired 4,570 --------- Total purchase price $ 6,295 =========
The accompanying notes and the notes to the consolidated financial statements included in the Registrant's Annual Report on Form 10-K are an integral part of these financial statements. 4 MARLTON TECHNLOGIES, INC. AND SUBSDIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION: The consolidated financial statements included herein are unaudited and have been prepared in accordance with generally accepted accounting principles for interim financial reporting and Securities and Exchange Commission regulations. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the financial statements reflect all adjustments (of a normal and recurring nature), which are necessary to present fairly the financial position, results of operations and cash flows for the interim periods. Operating results for the quarter are not necessarily indicative of the results that may be expected for the full year or for future periods. These financial statements should be read in conjunction with the Form 10-K for the year ended December 31, 2004. 2. ACQUISITION OF BUSINESS: On March 15, 2005, Sparks Exhibits & Environments Corp., a subsidiary of the Company, acquired substantially all of the assets and assumed specified liabilities of Showtime Enterprises, Inc. and its subsidiary, Showtime Enterprises West, Inc. (collectively "Showtime"). Showtime designed, marketed and produced trade show exhibits, point of purchase displays, museums and premium incentive plans. Showtime had sales of approximately $21 million in 2004. The aggregate purchase price was $6.3 million, comprised of $2.8 million paid in cash, $1.7 million for contingent royalty and percentage of sales payments, $1 million of long-term debt assumption and $0.8 million for stock warrants. The Company financed this acquisition by increasing its revolving credit facility borrowing capacity and obtaining a new term loan. The Company's Audit Committee engaged the Company's registered public accounting firm to perform the required audit of Showtime's financial statements. It was subsequently determined that such audit could not be performed. The inability to file these audited financial statements may limit the Company's ability to engage in certain types of transactions requiring Securities and Exchange Commission review, including without limitation, public offerings and certain private offerings of securities and business combination transactions requiring shareholder approval. 5 MARLTON TECHNLOGIES, INC. AND SUBSDIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The estimated fair values of the assets acquired and liabilities assumed are summarized in the following table. The allocation of the purchase price to the business acquired is preliminary and may be adjusted based on completion of third party appraisals. At March 15, 2005 (in thousands) Current assets $1,880 Property, equipment and rental assets 812 Covenants not to compete 570 Customer relationships 4,570 ------ $7,832 Current liabilities $1,537 Long-term debt 982 Other long-term liabilities 1,775 Stock warrants 786 ------ Net assets acquired $2,752 ====== Covenants not to compete will be amortized over 6 years and customer relationships will be amortized over an estimated life of 10 years. The covenants not to compete and customer relationships will be reviewed annually by management for impairment. 3. MAJOR CUSTOMERS: During the first quarter of 2005, one customer accounted for 12% of the Company's total sales. During the first quarter of 2004, a different customer accounted for 12% of the Company's total sales. 6 MARLTON TECHNLOGIES, INC. AND SUBSDIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 4. PER SHARE DATA: The following table sets forth the computation of basic and diluted net income per common share (in thousands except per share data):
Three months ended March 31, March 31, 2005 2004 --------- --------- Net income $ 956 $ 905 ========= ========= Weighted average common shares outstanding used to compute basic net income per common share 12,940 12,845 Additional common shares to be issued assuming the exercise of stock options, net of shares assumed reacquired 4,218 742 --------- --------- Total shares used to compute diluted net income per common share 17,158 13,587 ========= ========= Basic net income per share $ 0.07 $ 0.07 ========= ========= Diluted net income per share $ 0.06 $ 0.07 ========= =========
Excluded in the computation of diluted income per common share were outstanding options and warrants to purchase 1,193,336 and 248,846 shares of common stock at March 31, 2005 and 2004, respectively, because the option and warrant exercise prices were greater than the market price of the common shares. 5. INVENTORIES: Inventories, as of the respective dates, consist of the following (in thousands): March 31, 2005 December 31, 2004 ----------------- ----------------- Raw materials $ 584 $ 440 Work in process 3,831 3,231 Finished goods 3,553 3,398 ----------------- ----------------- $ 7,968 $ 7,069 ================= ================= 7 MARLTON TECHNLOGIES, INC. AND SUBSDIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 6. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting for Exit or Disposal Activities" ("FASB Statement FAS 146"). FAS 146 addresses significant issues regarding the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force ("EITF") has set forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Effective in the first quarter of 2003, the Company adopted the provisions of SFAS 146. This new accounting principle had an impact on the timing and recognition of costs associated with the Company's relocation and consolidation of its West Coast operations, and is expected to have an impact on the timing and recognition of costs associated with the Showtime acquisition and subsequent integration. In December 2004, FASB issued FASB Statement No. 123 (revised 2004), Share-Based Payment ("FAS123(R)" or the "Statement"). FAS 123(R) requires that the compensation cost relating to share-based payment transactions, including grants of employee stock options, be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. FAS 123(R) covers a wide range of share-based compensation arrangements including stock options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. The effect of the Statement will require entities to measure the cost of employee services received in exchange for stock options based on the grant-date fair value of the award, and to recognize the cost over the period the employee is required to provide services for the award. FAS 123(R) permits entities to use any option-pricing model that meets the fair value objective in the Statement. The Company will be required to apply FAS 123(R) starting January 1, 2006. FAS 123(R) allows two methods for determining the effects of the transition: the modified prospective transition method and the modified retrospective method of transition. Under the modified prospective transition method, an entity would use the fair value based accounting method for all employee awards granted, modified, or settled after the effective date. As of the effective date, compensation cost related to the non-vested portion of awards outstanding as of that date would be based on the grant-date fair value of those awards as calculated under the original provisions of Statement No. 123; that is, an entity would not re-measure the grant-date fair value estimate of the unvested portion of awards granted prior to the effective date of FAS 123(R). An entity will have the further option to either apply the Statement to only the quarters in the period of adoption and subsequent periods, or apply the Statement to all quarters in the fiscal year of adoption. Under the modified retrospective method of transition, an entity would revise its previously issued financial statements to recognize employee compensation cost for prior periods presented in accordance with the original provisions of Statement No. 123. Although it has not yet completed its study of the transition methods, the Company believes it will elect the modified prospective transition method. Under this method, the Company estimates that the adoption of FAS 123(R) would require the Company to record approximately $15,000 of stock compensation expense in 2005 related to employee options issued and outstanding at December 31, 2004. Based on expected vesting of stock options outstanding at March 31, 2005, the Company may record compensation expense of approximately $270,000 in each of 2006 through 2010. Any further impact of this Statement on the Company in fiscal 2005 and beyond will depend upon various factors including future compensation strategy. The pro forma compensation costs are calculated using the Black-Scholes option pricing model and may not be indicative of amounts which should be expected in future years. 8 MARLTON TECHNLOGIES, INC. AND SUBSDIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 7. STOCK-BASED COMPENSATION The Company accounts for grants of stock options under its stock option plans based on the recognition and measurement principles of APB Opinion No. 25 and related Interpretations. The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of FASB Statement No. 123 to stock-based employee compensation (in thousands except per share data): For the three months ended March 31, 2005 March 31, 2004 --------------- --------------- Net income, as reported $ 956 $ 905 --------------- --------------- Deduct: Total stock-based employee compensation expense determined under fair value based method, net of tax (3) -- --------------- --------------- Pro forma net income $ 953 $ 905 =============== =============== Earnings per share: Basic: As Reported $ 0.07 $ 0.07 =============== =============== Pro forma $ 0.07 $ 0.07 =============== =============== Diluted: As reported $ 0.06 $ 0.07 =============== =============== Pro forma $ 0.06 $ 0.07 =============== =============== The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Three months ended March 31, 2005 as compared with three months ended March 31, 2004 Sales Three Months Ended (in thousands) March 31, 2005 March 31, 2004 ---------------- ---------------- Trade show exhibits group $ 13,412 $ 13,208 Permanent and scenic displays group 5,423 5,341 ---------------- ---------------- Total sales $ 18,835 $ 18,549 ================ ================ Total net sales of $18.8 million for the first quarter of 2005 increased 1.5% from total net sales of $18.5 million for the first quarter of 2004. Sales of trade show exhibits and related services increased 1.5% in the first quarter of 2005 from the same prior year period as sales to new customers offset budget reductions experienced for existing customers. Sales of permanent and scenic displays also increased 1.5% in the first quarter of 2005 from the comparable 2004 period as lower sales of permanent museum displays were offset by higher sales of store fixtures and point of purchase displays. Gross Profit Gross profit, as a percentage of net sales, decreased to 23.4% for the first quarter of 2005 from 25.5% for the first quarter of 2004. This decrease was attributable to several factors, including additional facility costs incurred for the acquired Showtime business with no related trade show exhibit sales and lower gross profit margins earned on certain first quarter 2005 projects. Higher facility costs are expected to continue in 2005 and in the foreseeable future, which should be absorbed by higher volume anticipated from the Showtime business. The Company will relocate the Showtime Paulsboro, NJ facility to its Philadelphia, PA facility in the second quarter of 2005. Costs incurred for this relocation and consolidation are expected to reduce the Company's second quarter gross profit by approximately $300,000. Selling Expenses Selling expenses of $2.1 million, or 11.4% of net sales, for the first quarter of 2005 decreased from $2.2 million, or 11.9% of net sales, for the corresponding period of 2004. This decrease was largely the result of cost reduction initiatives, partially offset by approximately $200,000 for initial Showtime payroll costs with no corresponding trade show exhibit sales. 10 Administrative and General Expenses Administrative and general expenses decreased to $1.2 million in the first quarter of 2005 from $1.5 million in the same prior year period. This decrease was principally attributable to a bad debt recovery of $575,000 from a bankruptcy settlement. Specifically, the Company received 4,266 shares of Sears Holding Corp (previously K-Mart) stock from its bankruptcy claim for accounts receivable and inventories, which were fully reserved for in 2001. The total number of shares from the bankruptcy claim is 5,019, with approximately 15% being subject to a holdback for the potential settlement of any excess bankruptcy claims. The Company will recognize an additional bad debt recovery based on the market price of Sears Holding Corp stock if and when the remaining 753 shares are received. The Company also recorded a reserve provision of $175,000 for a customer dispute in the first quarter 2005, which partially offset the bad debt recovery. Other Income (Expense) In the first quarter of 2005, the Company recognized income of $34,000 from a former affiliate company. Interest expense increased to $135,000 in the first quarter of 2005 from $92,000 in the first quarter of 2004 primarily as a result of higher interest rates under the Company's new borrowing base facility discussed below and additional indebtedness incurred in connection with the Showtime business acquisition. Operating Profit Operating profit increased to $1.1 million for the first quarter of 2005 from $1 million for the same period of 2004 largely as a net result of the bad debt recovery reported under general and administrative expenses partially offset by lower gross profit margins. Provision for Income Taxes The Company is currently using operating loss carry forwards to offset its taxable income. As a result, the Company did not record an income tax provision in the first quarters of 2005 or 2004. The Company currently has a full valuation allowance against its operating loss carry forwards. This allowance is reviewed by management for possible recovery on a periodic basis. Net Income Net income of $1 million for the first quarter 2005 increased from $0.9 million for the comparable 2004 period largely as a result of the bad debt recovery, partially offset by the lower gross profit margins. Backlog The Company's backlog of orders was approximately $33 million at March 31, 2005 and $21 million at March 31, 2004. The increase in the backlog is due in large part to new permanent museum display projects, a substantial portion of which extends through 2006. 11 LIQUIDITY AND CAPITAL RESOURCES On February 6, 2004, the Company replaced its revolving credit and security agreement with a new credit facility provided by a commercial asset-based lender. The new credit facility originally expired on February 6, 2007 and provided for maximum borrowing capacity of up to $12 million based on a percentage of eligible accounts receivable and inventories. This facility bore interest based on the 30-day dealer placed commercial paper rate plus a formula-determined spread of 4.5% in 2004, restricts the Company's ability to pay dividends, and includes certain financial covenants (fixed charge coverage ratio and maximum capital expenditure amount). Based on the Company's performance in 2004, the formula-determined spread was reduced to 3.5% effective March 22, 2005, resulting in a total effective rate of 6.2% at such date. On March 21, 2005, the Company amended its credit facility to increase the maximum borrowing capacity from $12 million to $15 million, to increase the maximum borrowings on certain inventories and to extend the term by one year to February 6, 2008. The Company also obtained a one-year term loan for $1 million, bearing interest at the commercial paper rate plus 3.75% and requiring monthly principal payments of $25,000 starting on April 1, 2005, with the remaining balance of $700,000 due on March 21, 2006. The Company had borrowings of approximately $10 million and additional borrowing capacity of approximately $4.9 million at March 31, 2005. This credit facility amendment and term loan were obtained to finance the Showtime acquisition. The Company's working capital increased $3.7 million in the first quarter of 2005 to $8.2 million at March 31, 2005 from $4.5 million at December 31, 2004, largely due to a $4 million increase in accounts receivable. The increase in accounts receivable was largely due to higher sales in the first quarter of 2005 as compared with the fourth quarter of 2004 ($18.8 million versus $16 million) and accounts receivable acquired in connection with the Showtime acquisition. The Company anticipates capital expenditures of approximately $1 million for 2005. The Company has lease commitments for certain facilities under non-cancelable operating leases. Timing of future lease commitments as well as maturities of long-term debt are as follows:
Payment due by period (in thousands) Less than 1 More than Contractual Obligations Total Year-2005 1-3 Years 3-5 Years 5 Years - ------------------------------ ---------- ---------- ---------- ---------- ---------- Long-Term Debt Obligations $ 12,211 $ 1,209 $ 11,002 $ -- $ -- Capital Lease Obligations -- -- -- -- -- Operating Lease Obligations 6,986 1,697 4,563 726 -- Purchase Obligations -- -- -- -- -- Other Long-Term Liabilities Reflected on the Registrant's Balance Sheet Under GAAP 1,775 -- 1,318 457 -- ---------- ---------- ---------- ---------- ---------- Total $ 20,972 $ 2,906 $ 16,883 $ 1,183 -- ========== ========== ========== ========== ----------
12 The Company jointly leases a 31,000 square foot facility with International Expo Services ("IES"), in which the Company holds a minority interest. The annual lease commitment for this facility is $214,000 through September 22, 2007, which is not included with the above future operating lease commitments since IES occupies this entire facility and pays the rent. The Company leases a facility from a partnership controlled by two shareholders of the Company. This lease, which expires on May 14, 2019, contains an option for the Company to terminate after May 14, 2009 subject to the landlord's ability to re-rent the premises. The minimum annual rent is $771,000 through May 14, 2009 and is reset thereafter (not included in the table above). The Company is also responsible for taxes, insurance and other operating expenses for this facility. OUTLOOK The Company expects sales of trade show exhibits and related services to increase in 2005 due to the Showtime acquisition. Planned profit improvements for the Company's base businesses in 2005 are expected to be offset by relocation and transition costs anticipated to integrate the Showtime business with the Company's existing businesses. Subsequent to this relocation and transition, the Company expects profit improvements in 2006. The Company wrote off accounts receivable and inventories in 2001 as a result of K-Mart, a DMS Store Fixtures customer, filing for bankruptcy. The subsequent settlement from its bankruptcy claim is for 5,019 shares of Sears Holding Corp (previously K-Mart) common stock. The company received 4,266 shares of the stock and recognized a bad debt recovery of $575,000 in the first quarter of 2005. Based on the current market price of Sears Holding Corp common stock, the Company has a contingent additional bad debt recovery of approximately $109,000 for the remaining 753 shares from this bankruptcy settlement. The Company acquired a past-due accounts receivable from mPhase Technologies, Inc. ("mPhase") in connection with the 2003 acquisition of Exhibit Crafts, Inc. In March 2005, the Company settled the claim with this customer for approximately 213,000 shares of mPhase restricted common stock. Based on the current market value of this common stock, the Company has a contingent gain of approximately $50,000. Any gain will be recognized when the restrictions on the Company's right to sell this common stock expire. RECENTLY ISSUED ACCOUNTING STANDARDS In June 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting for Exit or Disposal Activities" ("FASB Statement FAS 146"). FAS 146 addresses significant issues regarding the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force ("EITF") has set forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Effective in the first quarter of 2003, the Company adopted the provisions of SFAS 146. This new accounting principle had an impact on the timing and recognition of costs associated with the Company's relocation and consolidation of its West Coast operations, and is expected to have an impact on the timing and recognition of costs associated with the Showtime acquisition and subsequent integration. 13 In December 2004, FASB issued FASB Statement No. 123 (revised 2004), Share-Based Payment ("FAS123(R)" or the "Statement"). FAS 123(R) requires that the compensation cost relating to share-based payment transactions, including grants of employee stock options, be recognized in financial statements. That cost will be measured based on the fair value of the equity or liability instruments issued. FAS 123(R) covers a wide range of share-based compensation arrangements including stock options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. The effect of the Statement will require entities to measure the cost of employee services received in exchange for stock options based on the grant-date fair value of the award, and to recognize the cost over the period the employee is required to provide services for the award. FAS 123(R) permits entities to use any option-pricing model that meets the fair value objective in the Statement. The Company will be required to apply FAS 123(R) starting January 1, 2006. FAS 123(R) allows two methods for determining the effects of the transition: the modified prospective transition method and the modified retrospective method of transition. Under the modified prospective transition method, an entity would use the fair value based accounting method for all employee awards granted, modified, or settled after the effective date. As of the effective date, compensation cost related to the non-vested portion of awards outstanding as of that date would be based on the grant-date fair value of those awards as calculated under the original provisions of Statement No. 123; that is, an entity would not re-measure the grant-date fair value estimate of the unvested portion of awards granted prior to the effective date of FAS 123(R). An entity will have the further option to either apply the Statement to only the quarters in the period of adoption and subsequent periods, or apply the Statement to all quarters in the fiscal year of adoption. Under the modified retrospective method of transition, an entity would revise its previously issued financial statements to recognize employee compensation cost for prior periods presented in accordance with the original provisions of Statement No. 123. Although it has not yet completed its study of the transition methods, the Company believes it will elect the modified prospective transition method. Under this method, the Company estimates that the adoption of FAS 123(R) would require the Company to record approximately $15,000 of stock compensation expense in 2005 related to employee options issued and outstanding at December 31, 2004. Based on expected vesting of stock options outstanding at March 31, 2005, the Company may record compensation expense of approximately $270,000 in each of 2006 through 2010. Any further impact of this Statement on the Company in fiscal 2005 and beyond will depend upon various factors including future compensation strategy. The pro forma compensation costs are calculated using the Black-Scholes option pricing model and may not be indicative of amounts which should be expected in future years. FORWARD-LOOKING STATEMENTS This report contains forward-looking statements. When used in this report, the words "intends," "believes," "plans," "expects," "anticipates," "probable," "could," "should" and similar words are used to identify these forward looking statements. In connection with the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, there are certain important factors that could cause the Company's actual results to differ materially from those included in such forward-looking statements. Some of the important factors which could cause actual results to differ materially from those projected include, but are not limited to: the Company's ability to relocate and consolidate the Paulsboro, NJ facility of the Showtime business while maintaining the customer base; continue to identify and enter new markets and expand existing business; continued availability of financing to provide additional sources of funding for capital expenditures, working capital and investments; the effects of competition on products and pricing; growth and acceptance of new product lines through the Company's sales and marketing programs; changes in material and labor prices from suppliers; changes in customers' financial condition; the Company's ability to attract and retain competent employees; the Company's ability to add and retain customers; changes in sales mix; the Company's ability to integrate and upgrade technology; uncertainties regarding accidents or litigation which may arise; uncertainties about the impact of the threat of future terrorist attacks on business travel and related trade show attendance; and the effects of, and changes in the economy, monetary and fiscal policies, laws and regulations, inflation and monetary fluctuations as well as fluctuations in interest rates, both on a national and international basis. 14 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company's revolving credit facility bears a floating rate of interest, based on the 30-day dealer placed commercial paper rate plus 3.50%. The Company had borrowings of approximately $10 million from its revolving credit facility at March 31, 2005. Fluctuations in foreign currency exchange rates do not significantly affect the Company's financial position and results of operations. ITEM 4. CONTROLS AND PROCEDURES (a) Evaluation of disclosure controls and procedures The Company established a Disclosure Committee chaired by the Company's Chief Financial Officer and comprised of managers representing the Company's major areas, including financial reporting and control, sales, operations and information technology. This Committee carried out an evaluation of the effectiveness and operation of the Company's disclosure controls and procedures, and established ongoing procedures to monitor and evaluate these controls and procedures in the future. Based upon that evaluation, within the 90 days prior to the date of this report, the Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company (including its consolidated subsidiaries) required to be included in the Company's periodic SEC filings. (b) Changes in internal controls There were no significant changes in the Company's internal controls or in other factors that would significantly affect these controls subsequent to the date of their evaluation. PART II - OTHER INFORMATION ITEM 5. OTHER INFORMATION The Company's Audit Committee engaged the Company's registered public accounting firm to perform the required audit of Showtime's financial statements as previously reported on Form 8-K. It was subsequently determined that such audit could not be performed. The inability to file these audited financial statements may limit the Company's ability to engage in certain types of transactions requiring Securities and Exchange Commission review, including without limitation, public offerings and certain private offerings of securities and business combination transactions requiring shareholder approval. 15 Employment agreements for the Company's executive officers were amended on May 12, 2005 in a manner substantially consistent with the disclosures in the Company's Form 10-K/A. Copies of such amendments are filed as exhibits to this Form 10-Q. ITEM 6. EXHIBITS EXHIBIT NO. DESCRIPTION OF EXHIBIT 2.1 Agreement and Plan of Merger of the Company (Incorporated by reference to the Company's Proxy Statement dated September 27, 2001, filed with the Commission). 2.2 Asset Purchase Agreement made as of January 11, 2005, by and among Showtime Enterprises, Inc., Showtime Enterprises West, Inc., and Sparks Exhibits & Environments Corp. (Incorporated by reference to Exhibit 2.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 2.3 Order entered March 4, 2005 in the United States Bankruptcy Court for the District of New Jersey in Showtime Enterprises, Inc. and Showtime Enterprises West, Inc. (Case Nos. 05-11089 and 05-11090). (Incorporated by reference to Exhibit 2.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 3.1 Articles of Incorporation of the Company (Incorporated by reference to the Company's Proxy Statement dated September 27, 2001, filed with the Commission). 3.2 Amended and Restated By-laws of the Company (Incorporated by reference to Exhibit 3(ii)(a) of the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, filed with the Commission). 4.1 Warrant issued to Argosy Investment Partners II, L.P. to acquire shares of Marlton common stock at an exercise price of $0.98 per share (Incorporated by reference to Exhibit 4.1 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 4.2 Warrant issued to Argosy Investment Partners II, L.P. to acquire shares of Marlton common stock at an exercise price of $1.48 per share. (Incorporated by reference to Exhibit 4.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 4.3 Warrant issued to Alliance Mezzanine Investors, L.P. to acquire shares of Marlton common stock at an exercise price of $0.98 per share. (Incorporated by reference to Exhibit 4.3 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 16 4.4 Warrant issued to Alliance Mezzanine Investors, L.P. to acquire shares of Marlton common stock at an exercise price of $1.48 per share. (Incorporated by reference to Exhibit 4.4 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 10.1 Amended and Restated Employment Agreement dated November 20, 2001 between the Company and Robert B. Ginsburg (Incorporated by reference to the Company's September 27, 2001 Proxy Statement, filed with the Commission).* 10.2 Employment Agreement dated 11/20/01 between the Company and Jeffrey K. Harrow (Incorporated by reference to the Company's September 27, 2001 Proxy Statement, filed with the Commission).* 10.3 Employment Agreement dated 11/20/01 between the Company and Scott Tarte (Incorporated by reference to the Company's September 27, 2001 Proxy Statement, filed with the Commission).* 10.4 Form of Warrants issued by the Company to Jeffrey K. Harrow, Scott Tarte, Robert B. Ginsburg and Alan I. Goldberg on 11/20/01 (Incorporated by reference to the Company's September 27, 2001 Proxy Statement, filed with the Commission). Schedule of grants (Incorporated by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Commission). 10.5 Stockholders' Agreement dated 11/20/01 among Jeffrey K. Harrow, Scott Tarte, Robert B. Ginsburg and the Company (Incorporated by reference to the Company's September 27, 2001 Proxy Statement, filed with the Commission).* 10.6 Registration Rights Agreement dated 11/20/01 among Jeffrey K. Harrow, Scott Tarte, Robert B. Ginsburg, Alan I. Goldberg and the Company (Incorporated by reference to the Company's September 27, 2001 Proxy Statement, filed with the Commission). 10.7 Amended Agreement of Employment, dated December 11, 1992, between the Company and Alan I. Goldberg. (Incorporated by reference to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the year ended December 31, 2003, filed with the Commission).* 10.8 Letter Agreement dated January 2, 1998 to Amended Employment Agreement with Alan I. Goldberg (Incorporated by reference to Exhibit 7(2) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1998, filed with the Commission).* 17 10.9 Letter Agreement dated 11/20/01 to Amended Employment Agreement with Alan I. Goldberg. (Incorporated by reference to Exhibit 10(k) to the Company's Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Commission).* 10.10 Employment Agreement dated November 24, 1999 with Stephen P. Rolf (Incorporated by reference to Exhibit 10(l) to the Company Annual Report of Form 10-K for the year ended December 31, 1999, filed with the Commission).* 10.11 Option Agreement dated January 10, 2000 with Stephen P. Rolf (Incorporated by reference to Exhibit 10(x) to the Company Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, filed with the Commission).* 10.12 Option Agreements with Outside Directors (Incorporated by reference to Company Proxy Statement dated April 30, 1999, filed with the Commission).* 10.13 Option Agreements dated August 7, 2000 with Outside Directors (Incorporated by reference to Exhibit 10(x) to the Company Quarterly Report on Form 10-Q for the quarter ended June 30, 2000, filed with the Commission).* 10.14 Option Agreements dated March 1, 2002 with Outside Directors (Incorporated by reference to Exhibit 10(e) to the Company's Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Commission).* 10.15 2000 Equity Incentive Plan (Incorporated by reference to Exhibit 10(n) to the Company's Annual Report on Form 10-K for the year ended December 31, 2001, filed with the Commission).* 10.16 2001 Equity Incentive Plan (Incorporated by reference to Exhibit 10(ee) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2001, filed with the Commission).* 10.17 Lease for Premises located at 2828 Charter Road, Philadelphia, PA dated May 14, 1999 (Incorporated by reference to Exhibit 10(f) to the Company Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Commission). 10.18 Amendment to Lease 2828 Charter Road, Philadelphia, PA dated February 25, 2000 (Incorporated by reference to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Commission). 18 10.19 Lease for Premises located at 8125 Troon Circle, Austell, GA 30001 (Incorporated by reference to Exhibit 10(s) to the Company's Annual Report on Form 10-K for the year ended December 31, 2003, filed with the Commission). 10.20 Exhibit removed. 10.21 Loan and Security Agreement dated as of February 6, 2004 with General Electric Capital Corporation. (Incorporated by reference to Exhibit 10(u)) to the Company's Annual Report on Form 10-KK for the year ended December 31, 2003, filed with the Commission). 10.22 Option Agreement dated June 3, 2002 with Robert B. Ginsburg (Incorporated by reference to Exhibit 10(cc) to the Company`s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed with the Commission).* 10.23 Option Agreement dated June 3, 2002 with Alan I. Goldberg (Incorporated by reference to Exhibit 10(dd) to the Company`s Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, filed with the Commission).* 10.24 Option Agreement dated October 23, 2002 with Washburn Oberwager (Incorporated by reference to Exhibit 10ee) to the Company`s Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, filed with the Commission).* 10.25 Fourth Amendment to Lease Agreement dated September 11, 2003 for premises located at 8125 Troon Circle, Austell, GA 30001 (Incorporated by reference to Exhibit 10(cc) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, filed with the Commission). 10.26 Exhibit removed. 10.27 Exhibit removed 10.28 Lease Agreement, First and Second Amendments for Premises located at Building J, 10232 Palm Drive, Santa Fe Springs, CA 90670 (Incorporated by reference to Exhibit 10(ff) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, filed with the Commission). 10.29 Lease Agreement, First and Second Amendments for Premises located at Building G, Heritage Springs Business Park, Santa Fe Springs (Incorporated by reference to Exhibit 10(gg) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, filed with the Commission). 10.30 Option Agreement dated May 13, 2004 with Stephen P. Rolf (Incorporated by reference to Exhibit 10(c) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2004, filed with the Commission).* 19 10.31 Fifth Amendment to Lease Agreement dated April 27, 2004 for the Premises located at 8125 Troon Circle, Austell, GA (Incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004). 10.32 Lease dated November 17, 1998 by and between Sunset & Valley Distribution Center Joint Venture (the "Joint Venture") and Showtime Enterprises West, Inc. ("Showtime West"), as amended by and together with, the first amendment thereto dated June 22, 1999, the second amendment thereto dated March 31, 2000, by and between The Northwestern Mutual Life Insurance Company ("Northwestern"), Sunset and Valley View Partners ("Partners") and Showtime West the third amendment thereto dated March 27, 2003 by and between Northwestern, Partners and Showtime West and the fourth amendment thereto dated February 29, 2004 by and between Northwestern, Partners and Showtime West. (Incorporated by reference to the Company's Annual Report dated December 31, 2004, filed with the Commission). 10.33 Employment Agreement dated March 15, 2005 by and between Sparks Exhibits & Environments Corp. and David S. Sudjian* (Incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 10.34 Employment Agreement dated March 15, 2005 by and between Sparks Exhibits & Environments Corp. and Harold Jensen.* (Incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 10.35 Royalty Agreement dated March 15, 2005 by and among Sparks Exhibits & Environments Corp., Argosy Investment Partners II, LP and Alliance Mezzanine Investors, L. P. (Incorporated by reference to Exhibit 10.35 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 10.36 Stock Option Agreement dated as of March 15, 2005 by Marlton Technologies, Inc and David S. Sudjian with respect to the grant of 500,000 shares of Marlton common stock.* (Incorporated by reference to Exhibit 10.36 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 10.37 Stock Option Agreement dated as of March 15, 2005 by Marlton Technologies, Inc and Harold Jensen with respect to the grant of 500,000 shares of Marlton common stock.* ((Incorporated by reference to Exhibit 10.37 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 20 10.38 Letter agreement dated March 15, 2005 by and among Sparks Exhibits & Environments Corp., David S. Sudjian and Harold Jensen.* (Incorporated by reference to Exhibit 10.38 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 10.39 First Amendment to Loan and Security Agreement with General Electric Capital Corporation (Incorporated by reference to Exhibit 10(f) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2004, filed with the Commission). 10.40 Consent and Second Amendment to Loan and Security Agreement dated as of March 15, 2005 by and among General Electric Capital Corporation, Sparks Exhibits & Environments Corp., Sparks Exhibits & Environments, Ltd., Sparks Exhibits & Environments, Inc. and DMS Store Fixtures LLC. (Incorporated by reference to Exhibit 10.40 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 10.41 Term Note issued by Sparks Exhibits & Environments Corp. in favor of General Electric Capital Corporation. (Incorporated by reference to Exhibit 10.41 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 10.42 Note dated April 23, 2002 in favor of the United States Business Administration (the "SBA Note"). (Incorporated by reference to Exhibit 10.42 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 10.43 Promissory Note made by Sparks Exhibits & Environments Corp. in face amount of $257,144 in favor of Argosy Investment Partners II, L.P. (Incorporated by reference to Exhibit 10.43 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 10.44 Promissory Note made by Sparks Exhibits & Environments Corp. in face amount of $142,856 in favor of Alliance Mezzanine Investors, L.P. (Incorporated by reference to Exhibit 10.44 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 10.45 Agreement for Assumption of Indebtedness dated December 14, 2004 by and among the U.S. Small Business Administration, Showtime Enterprises, Inc. and Sparks Exhibits & Environments Corp. (Incorporated by reference to Exhibit 10.45 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 21 10.46 Unconditional Guarantee issued by Marlton Technologies, Inc. in favor of the U.S. Small Business Administration with respect to the SBA Note. (Incorporated by reference to Exhibit 10.46 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 10.47 Option Agreement with Jeffrey Harrow dated December 20, 2004 * 10.48 Option Agreement with Scott Tarte, dated December 20, 2004 * 10.49 Agreement dated March 15, 2005 by and between Sparks Exhibits & Environments Corp., Argosy Investment Partners II, L.P. and Alliance Mezzanine Investors, L.P. (Incorporated by reference to Exhibit 10.49 to the Company's Annual Report on Form 10-K for the year ended December 31, 2004, filed with the Commission). 10.50 Amendment to Employment Agreement with Scott Tarte dated May 12, 2005 10.51 Amendment to Employment Agreement with Jeffrey Harrow dated May 12, 2005 10.52 Amendment to Employment Agreement with Robert B. Ginsburg dated May 12, 2005 10.53 Amendment to Employment Agreement with Alan I. Goldberg dated May 12, 2005 10.54 Amendment to Employment Agreement with Stephen P. Rolf dated May 12, 2005 14 Code of Ethics (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2003, filed with the Commission) 21 Subsidiaries of the Company (Incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 2003, filed with the Commission) 31.1 Rule 13a - 14(a) / 15(d) - 14(a) Certification, Chief Executive Officer 31.2 Rule 13a - 14(a) / 15(d) - 14(a) Certification, Chief Financial Officer 32 Section 1350 Certifications 22 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MARLTON TECHNOLOGIES, INC. By: /s/ Robert B. Ginsburg ---------------------- Robert B. Ginsburg President and Chief Executive Officer By: /s/ Stephen P. Rolf ------------------- Stephen P. Rolf, Chief Financial Officer Dated: May 13, 2005 23 EX-10.47 2 v018142_harroption.txt MARLTON TECHNOLOGIES, INC. STOCK OPTION AGREEMENT THIS STOCK OPTION (the "Option") is granted as of the 20th day of December 2004, by MARLTON TECHNOLOGIES, INC., a Pennsylvania corporation (the "Company") to JEFFREY K. HARROW (the "Optionee"). W I T N E S S E T H : 1. Grant. Pursuant to the Company's 2001 Equity Incentive Plan (the "Plan"), the Company hereby grants to the Optionee Stock Options (the "Options") to purchase on the terms and conditions set forth herein, an aggregate of One Hundred Twenty-Five Thousand (125,000) shares (appropriately adjusted for any subsequent stock splits, stock combinations or similar capital restructuring) of the Company's Common Stock, no par value per share (the "Option Shares"), at a purchase price per share of Eight-two and One-half Cents ($.825) (the "Option Price"). 2. Term. This Option Agreement and Optionee's right to exercise Options vested in accordance with Paragraph 3 shall terminate on the earlier of (i) December 19, 2009, or (ii) upon termination of Optionee's employment or Employment Agreement with the Company, provided that in the event of termination due to Optionee's death or disability, Optionee (or Optionee's spouse or estate) may exercise this Option Agreement for a period of six months following the date of termination as to Options fully vested on or before the date of termination. 3. Vesting. The Options will vest in full on the date of this Agreement. 4. Method of Exercise and Payment. Vested Options may be exercised from time to time, in whole or in part. The Option may be exercised by written notice to the Company specifying the total number of Option Shares to be exercised. The notice shall be accompanied by payment in cash or by check equal to the aggregate Option Price of all Option Shares covered by such notice. 5. Notices. Any notice to be given to the Company shall be addressed to the Company at its principal executive office, and any notice to be given to the Optionee shall be addressed to the Optionee at the address then appearing on the records of the Company or at such other address as either party hereafter may designate in writing to the other. Any such notice shall be deemed to have been duly given when deposited in the United States mail, addressed as aforesaid, registered or certified mail, and with proper postage and registration or certification fees prepaid. 6. General. This Option shall not be assignable by Optionee. Stock certificates representing the Option Shares acquired shall bear any legends required by applicable state and federal securities laws. Company stock issuances are unregistered, requiring a one year holding period. 7. Tax Provision. This Option Agreement shall be interpreted and construed in a manner consistent with, and to satisfy the requirements of, the incentive stock option provisions of the Internal Revenue Code of 1986, as it may be amended from time to time (the "Code") and of the Plan. This Option Agreement is intended to satisfy the requirements of the Plan, Section 422A(b) of the Code and qualify for special tax treatment under Section 421 et seq. of the Code. IN WITNESS WHEREOF, the parties have executed this Option Agreement as of the day and year first above written. MARLTON TECHNOLOGIES, INC. Attest: ______________________________ By:____________________________ Alan I. Goldberg, Secretary Robert B. Ginsburg, President Witness: ______________________________ ____________________________ Optionee: Jeffrey K. Harrow EX-10.48 3 v018142_tartoption.txt MARLTON TECHNOLOGIES, INC. STOCK OPTION AGREEMENT THIS STOCK OPTION (the "Option") is granted as of the 20th day of December 2004, by MARLTON TECHNOLOGIES, INC., a Pennsylvania corporation (the "Company") to SCOTT J. TARTE (the "Optionee"). W I T N E S S E T H : 1. Grant. Pursuant to the Company's 2001 Equity Incentive Plan (the "Plan"), the Company hereby grants to the Optionee Stock Options (the "Options") to purchase on the terms and conditions set forth herein, an aggregate of One Hundred Twenty-Five Thousand (125,000) shares (appropriately adjusted for any subsequent stock splits, stock combinations or similar capital restructuring) of the Company's Common Stock, no par value per share (the "Option Shares"), at a purchase price per share of Eight-two and One-half Cents ($.825) (the "Option Price"). 2. Term. This Option Agreement and Optionee's right to exercise Options vested in accordance with Paragraph 3 shall terminate on the earlier of (i) December 19, 2009, or (ii) upon termination of Optionee's employment or Employment Agreement with the Company, provided that in the event of termination due to Optionee's death or disability, Optionee (or Optionee's spouse or estate) may exercise this Option Agreement for a period of six months following the date of termination as to Options fully vested on or before the date of termination. 3. Vesting. The Options will vest in full on the date of this Agreement. 4. Method of Exercise and Payment. Vested Options may be exercised from time to time, in whole or in part. The Option may be exercised by written notice to the Company specifying the total number of Option Shares to be exercised. The notice shall be accompanied by payment in cash or by check equal to the aggregate Option Price of all Option Shares covered by such notice. 5. Notices. Any notice to be given to the Company shall be addressed to the Company at its principal executive office, and any notice to be given to the Optionee shall be addressed to the Optionee at the address then appearing on the records of the Company or at such other address as either party hereafter may designate in writing to the other. Any such notice shall be deemed to have been duly given when deposited in the United States mail, addressed as aforesaid, registered or certified mail, and with proper postage and registration or certification fees prepaid. 6. General. This Option shall not be assignable by Optionee. Stock certificates representing the Option Shares acquired shall bear any legends required by applicable state and federal securities laws. Company stock issuances are unregistered, requiring a one year holding period. 7. Tax Provision. This Option Agreement shall be interpreted and construed in a manner consistent with, and to satisfy the requirements of, the incentive stock option provisions of the Internal Revenue Code of 1986, as it may be amended from time to time (the "Code") and of the Plan. This Option Agreement is intended to satisfy the requirements of the Plan, Section 422A(b) of the Code and qualify for special tax treatment under Section 421 et seq. of the Code. IN WITNESS WHEREOF, the parties have executed this Option Agreement as of the day and year first above written. MARLTON TECHNOLOGIES, INC. Attest: ______________________________ By:____________________________ Alan I. Goldberg, Secretary Robert B. Ginsburg, President Witness: ______________________________ ____________________________ Optionee: Scott J. Tarte EX-10.50 4 v018142_tartsallet.txt May 12, 2005 Mr. Scott Tarte Marlton Technologies, Inc. 2828 Charter Road Philadelphia, PA 19154 Re: Employment Agreement dated November 20, 2001 Dear Scott: Confirming the actions of the Compensation Committee of the Board of Directors of Marlton Technologies, Inc. ("Company"): Effective January 1, 2005, your annual base salary was increased to $250,000. As described in Note 7 of the Item 11 Summary Compensation Table included in the Company's Form 10-K/A for the fiscal year ended December 31, 2004, you have waived (i) your rights to the salary reductions described in Notes 2, 3 and 6 of such Table, and (ii) except as contemplated by Note 4 to such Table, your entitlement pursuant to your Employment Agreement to parity with Jeffrey Harrow and Robert B. Ginsburg in salary and bonus for all periods through December 31, 2004. The Company shall provide you with reimbursement of life and disability insurance premiums of up to $9,500 per year. The provisions of your Employment Agreement relating to the above subject matter are superseded by this amendment; otherwise the Employment Agreement shall remain in full force and effect in accordance with its terms and shall constitute the legal, valid and binding agreement of the Company. --------------------------------- Richard Vague Chairman of Compensation Committee Agreed this _____ day of May, 2005. - ---------------------------------- Scott Tarte EX-10.51 5 v018142_harrsallet.txt May 12, 2005 Mr. Jeffrey Harrow Marlton Technologies, Inc. 2828 Charter Road Philadelphia, PA 19154 Re: Employment Agreement dated November 20, 2001 Dear Jeff: Confirming the actions of the Compensation Committee of the Board of Directors of Marlton Technologies, Inc. ("Company"): Effective January 1, 2005, your annual base salary was increased to $250,000. As described in Note 7 of the Item 11 Summary Compensation Table included in the Company's Form 10-K/A for the fiscal year ended December 31, 2004, you have waived (i) your rights to the salary reductions described in Notes 2, 3 and 6 of such Table, and (ii) except as contemplated by Note 4 to such Table, your entitlement pursuant to your Employment Agreement to parity with Scott Tarte and Robert B. Ginsburg in salary and bonus for all periods through December 31, 2004. The Company shall provide you with reimbursement of life and disability insurance premiums of up to $9,500 per year. The provisions of your Employment Agreement relating to the above subject matter are superseded by this amendment; otherwise the Employment Agreement shall remain in full force and effect in accordance with its terms and shall constitute the legal, valid and binding agreement of the Company. --------------------------------- Richard Vague Chairman of Compensation Committee Agreed this _____ day of May, 2005. - ---------------------------------- Jeffrey Harrow EX-10.52 6 v018142_ginssallet.txt May 12, 2005 Mr. Robert Ginsburg Marlton Technologies, Inc. 2828 Charter Road Philadelphia, PA 19154 Re: Employment Agreement dated November 20, 2001 Dear Bob: Confirming the actions of the Compensation Committee of the Board of Directors of Marlton Technologies, Inc. ("Company"): Effective January 1, 2005, your annual base salary was changed to $200,000 based on your commitment to devote not less than 80% of your business time to Marlton, subject to further adjustment, based on an annual rate of $250,000 for 100% of your business time, if and when you devote more or less of your business time to the Company. As described in Note 7 of the Item 11 Summary Compensation Table included in the Company's Form 10-K/A for the fiscal year ended December 31, 2004, you have waived (i) your rights to the salary reductions described in Notes 2, 3 and 6 of such Table, and (ii) except as contemplated by Note 4 to such Table, your entitlement pursuant to your Employment Agreement to parity with Scott Tarte and Jeffrey Harrow in salary and bonus for all periods through December 31, 2004. The following phrase shall be added to the end of the last sentence of Section 5(a) of your Employment Agreement: ", subject to proportionate reduction in the event the Employee devotes less than 100% of his business time to the Company." The Company shall provide you with reimbursement of life and disability insurance premiums of up to $9,500 per year. You have waived the requirement under your Employment Agreement and under the Stockholders' Agreement dated November 20, 2001 that the Company and its Board of Directors use their best efforts to cause you to be elected and re-elected to the Company's Board of Directors, as long as the Company provides you with Board observer rights allowing you to receive notice and all materials for Board meetings as provided to Board members and the right to attend Board meetings without voting rights. The provisions of your Employment Agreement relating to the above subject matter are superseded by this amendment; otherwise the Employment Agreement shall remain in full force and effect in accordance with its terms and shall constitute the legal, valid and binding agreement of the Company. --------------------------------- Richard Vague Chairman of Compensation Committee Agreed this _____ day of May, 2005. - ---------------------------------- Robert B. Ginsburg EX-10.53 7 v018142_goldsallet.txt May 12, 2005 Mr. Alan I. Goldberg Marlton Technologies, Inc. 2828 Charter Road Philadelphia, PA 19154 Re: Employment Agreement dated December 11, 1992, as amended Dear Alan: Confirming the actions of the Compensation Committee of the Board of Directors of Marlton Technologies, Inc. ("Company"): Effective January 1, 2005 and in accordance with the terms of your Employment Agreement, your annual base salary was changed to $184,481 for your employment on a thirty hour per week basis. Your Employment Agreement entitlement to future annual salary increases of 3% will be eliminated, and your salary will be reviewed annually by the Company to consider future increases in your salary, consistent with the Company's general consideration for senior level executives of the Company. Effective January 1, 2005, your existing bonus plan will be replaced with a bonus plan to be determined annually by the Company, consistent with the Company's general consideration for senior level executives of the Company. As described in Note 7 of the Item 11 Summary Compensation Table included in the Company's Form 10-K/A for the fiscal year ended December 31, 2004, you have waived your rights to the salary reductions described in Notes 2, 3 and 6 of such Table. The Company shall provide you with reimbursement of life and disability insurance premiums of up to $9,500 per year. You have waived the requirement under your Employment Agreement that the Company and its Board of Directors use their best efforts to cause you to be elected and re-elected to the Company's Board of Directors, as long as the Company provides you with Board observer rights allowing you to receive notice and all materials for Board meetings as provided to Board members and the right to attend Board meetings without voting rights. The provisions of your Employment Agreement relating to the above subject matter are superseded by this amendment; otherwise the Employment Agreement shall remain in full force and effect in accordance with its terms and shall constitute the legal, valid and binding agreement of the Company. --------------------------------- Richard Vague Chairman of Compensation Committee Agreed this _____ day of May, 2005. - ---------------------------------- Alan I. Goldberg EX-10.54 8 v018142_rolfsallet.txt May 12, 2005 Mr. Stephen P. Rolf Marlton Technologies, Inc. 2828 Charter Road Philadelphia, PA 19154 Re: Employment Agreement dated November 24, 1999 Dear Steve: Confirming the actions of the Compensation Committee of the Board of Directors of Marlton Technologies, Inc. ("Company"): Effective August 1, 2004, your annual base salary was increased to $140,000. For 2004, you were awarded a discretionary bonus of $12,000. The provisions of your Employment Agreement relating to the above subject matter are superseded by this amendment; otherwise the Employment Agreement shall remain in full force and effect in accordance with its terms and shall constitute the legal, valid and binding agreement of the Company. --------------------------------- Richard Vague Chairman of Compensation Committee Agreed this _____ day of May, 2005. - ---------------------------------- Stephen P. Rolf EX-31.1 9 v018142_ex31-1.txt EXHIBIT 31.1 SECTION 302 CERTIFICATION I, Robert B. Ginsburg, the Chief Executive Officer, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Marlton Technologies, Inc. 2. Based upon my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: May 13, 2005 /s/ Robert B. Ginsburg - -------------------------------- Robert B. Ginsburg Chief Executive Officer EX-31.2 10 v018142_ex31-2.txt EXHIBIT 31.2 SECTION 302 CERTIFICATION I, Stephen P. Rolf, the Chief Financial Officer, certify that: 1. I have reviewed this Quarterly Report on Form 10-Q of Marlton Technologies, Inc. 2. Based upon my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report. 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and (c) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. 5. The registrant's other certifying officer and I have disclosed, based on our most t 6 0 recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing equivalent functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: May 13, 2005 /s/ Stephen P. Rolf - ----------------------------- Stephen P. Rolf Chief Financial Officer EX-32 11 v018142_ex32.txt EXHIBIT 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Marlton Technologies, Inc. (the "Company") on Form 10-Q for the period ending March 31, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Robert B. Ginsburg, Chief Executive Officer of the Company, and Stephen P. Rolf, Chief Financial Officer of the Company, each certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, based on their knowledge: (1) The Report fully complies with the requirements of Section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. - ------------------------------- ------------------------------ Robert B. Ginsburg Stephen P. Rolf Chief Executive Officer Chief Financial Officer May 13, 2005 May 13, 2005 -----END PRIVACY-ENHANCED MESSAGE-----