ITEM 1 BUSINESS ---------
Radiant Technology Corporation (RTC) was incorporated in California in 1972. Our initial public offering (IPO) was in 1979. The Company is engaged in the marketing, design, manufacture and service of highly precision thermal processing systems that are primarily used by manufacturers of microelectronic componentry. The Company's conveyorized (belt) ovens and furnaces are in worldwide demand to meet ever-changing process requirements in the semiconductor packaging, flat panel display, hybrid thick film firing, multichip module, photovoltaic (solar cell) and printed circuit board assembly industries.
To obtain financial growth and stability we concentrate on managing the following key elements of its business:
Technological Leadership: We are constantly in contact with our customers soliciting their input for both continued product improvement and new product development. We encourage customers anticipating new thermal processing requirements to contact us regarding their new opportunities and needs.
Customer Diversity: Customers from different facets of the electronics industry are sought and maintained. As demand for the various manufacturing elements in the electronics high technology industry shifts, RTC works to position itself to be ready to be immediately responsive to changing market emphasis.
Service: We concentrate on providing timely, high quality, responsiveness to its customer base. Most service concerns are handled by Phone, FAX or E-mail immediately. Customer Service Engineers, when needed, are dispatched within the day. Internationally, we retains Sales/Service representatives, factory trained, to provide the same level of dedication in placing the concerns and needs of the customer first. Modems are installed in customers equipment, making it possible to analyze and implement customer requests online from Company headquarters.
MARKETS AND PRODUCTS:
The nature and high intensity of the infrared heat produced in our furnaces permits a high rate of heat absorption by the electronic parts processed through them, making them more adaptable to the exacting tolerances and high-speed heating requirements of certain industrial users. Since these ovens and furnaces can be brought up to operating temperatures in a shorter time span, operating at a faster conveyor belt speed, require less floor space and use less electric energy, operating costs are significantly lower than for conventional ovens and furnaces.
Our near infrared processing systems are principally in demand for the following applications:
Semiconductor Packaging: In recent years, flip chip packaging technology has gained widespread acceptance. The first process, called wafer bumping, involves a reflow solder process to form the solder balls on all of the input/output (I/O) pads on the wafer. Because of the extremely small geometries involved, in some instances this process is best accomplished in a hydrogen atmosphere. RTC offers a high temperature furnace for this application, equipped with the hydrogen package, providing a re-flow process in a 100% hydrogen atmosphere. For a second process, called "chip joining", RTC offers both a near infrared or forced convection oven. RTC's D-series ovens are well suited for low temperature curing applications such as "under-fill" epoxy or curing epoxy glob tops for chip on board manufacturers.
For more traditional chip packaging technologies, RTC offers an AG-series furnace designed specifically for the silver-glass die-attach process. A critical thermal profile is required to achieve the proper mechanical and thermal properties of the silver-glass material. Other packaging thermal processes such as final lid sealing (metal or glass) and lead frame embed or pin brazing are easily accomplished in RTC's furnaces.
Photovoltaics: For well over a decade, RTC has been the major supplier of sintering furnaces used by photocell manufacturers for firing metallized inks to form the front-side contacts and the back-side fields on the individual solar cells. The product ideally suited for sintering of the metallized inks is our C-series furnace. In recent years, RTC customers have been using a special version of our furnaces for phosphorus diffusion. An extremely precise thermal process is required for phosphorus diffusion as this step ultimately determines the cell's efficiency in generating power when exposed to sunlight.
Flat Panel Display: While the flat panel display market has been primarily in Japan, it is a relatively new market for US equipment manufacturers. RTC has developed, in close cooperation with a flat panel manufacturer, one of the first US built systems for processing large glass panels. The RTC furnace can handle glass panels up to 58 inches wide. In addition to the challenges of achieving uniform heating over the entire panel, there were unique mechanical challenges for handling the large glass panels while loading and unloading the furnace.
Printed Circuit Board: RTC offers both infrared and forced convection heating technology for printed circuit board assembly. These ovens are used for mass reflow soldering of surface mount components to a printed circuit assembly.
Hybrid Thick Film: Hybrid thick film technology involves the firing of various types of "inks" screen printed on ceramic substrates to form conductors and resistors. Precise thermal profiles are required to achieve the desired resistor value, or electrical properties of the conductors. RTC offers furnaces for firing thick film inks in air, and for firing thick film materials in a controlled, inert atmosphere having a low oxygen content.
All systems use PCs to provide appropriate man/machine interface with embedded microprocessors achieving precise control of thermal operations. Such functions as power, temperature, belt speed, process gas measurement, profiling, maintenance requirements, data logging, local and remote communications diagnostics and operation, and computer integrated manufacturing with SECS/GEM interface are available.
MARKETING, SALES AND CUSTOMERS
We sell our products throughout the world, primarily to organizations engaged in the microelectronics manufacturing. RTC maintains direct sales offices in the United States. Internationally the Company is represented through independent sales/service organizations. Note 1 to the Financial Statements depicts a breakdown of international sales.
Customers evaluate furnace vendors on their technological leadership resulting in high process yield of material produced. This primary benefit combined with high up time, low meantime between failure, MTBF, quick reliable service and spare parts response time combine to produce low cost of equipment ownership.
Two customers, AMD and Astro Power accounted for 17%, and 15%, respectively, of RTC's revenue in fiscal year 2000. In 1999, they were: AMD 18% and AVX 13%. In 1998, they were: AMD 18%, Astro Power 11% and Plasmaco 11%.
The Company does not experience a seasonal demand for its product. Rather the demand for product, as above, is dependent on the demand for new manufacturing equipment.
BACKLOG
We regard as backlog all signed purchase orders received from customers for delivery at specified dates. At September 30, 2000, the backlog was $3,203,427 vs. $595,401 in 1999, and $796,430 in 1998. This backlog of orders will be completed over a three to five month period. There can be no assurance that backlog will be replicated or increased or translated into higher revenues in the future. The success of our business depends on a multitude of factors that are out of our control.
RESEARCH AND DEVELOPMENT
Research and Development expenses are charged to specific product enhancement activities and new product development. Research and Development expenses were $230,599, $282,766, and $250,964 in fiscal 2000, 1999 and 1998, respectively, which represents primarily the development of three new products, which it hopes will provide significant value to future years income. It is more ideal, theoretically, to have this many new products developed over a longer period of time. However, the opportunities of the market place dictated dedication to increased product development at this time.
COMPETITION
We confront competition from two primary domestic companies: BTU International, and Sierra-Therm. There are numerous other competitors both domestically and internationally.
We believe that we are one of the principal manufacturers of conveyorized, controlled atmosphere, variable speed, high temperature infrared furnaces used in the manufacture of precision, microelectronic circuitry for the semiconductor, solar cell, hybrid micro circuits and general electronic industries. The competitive environment in the market for ovens and furnaces is based on superior technology, design and delivery and ultimate cost of ownership over initial purchase price. The Company believes that its higher temperature near infrared products are more technologically advanced than that of the conventional products of its competitors. The Company has patents issued and pending covering the basic technology involved in the principal markets. See "Patents" below.
MATERIAL
We purchase raw materials, mechanical parts and electronic components. It manufactures most of its sheet metal and some mechanical and electronic components. Alternative sources of material exist for nearly all parts, components and materials. We have selected a single source supplier for much of its electronic componentry, due to high levels of quality and service. Should this favorable condition degenerate, an alternative supplier can be found but not without initial extra cost expenditures.
PATENTS
We own a number of current patents on its products issued from 1983 to 1997. It also has patents pending. Its patents are the result of its creative energies and innovative technology. RTC believes that it must continually work to maintain technological leadership for its customer base. We further believe that patents may prove creativity and provide competitive hurdles. However, it is primarily attention to customer service with high quality products, produced in a timely manner, ultimately providing the customer with low cost of ownership that provide us our most competitive strength.
Three important patents relate to RTC's infrared furnace and oven products. Patent No. 4,477,718 for Infrared Furnaces with Controlled Environment is effective for seventeen years beginning October 16, 1984. Patent No. 4,517,448 for infrared Furnaces with Atmosphere Control Capability is effective for seventeen years beginning May 14, 1985. Patent No. 4,987,364 - A Furnace Assembly for Reflowing Solder is effective for seventeen years beginning March 5, 1991.
TRADEMARKS
We have registered trademark No. 1425668, "RTC radiant technology corporation", with the United Stated patent and Trademark Office on January 20, 1987. The trademark is in force for twenty years. The Company registered trademark No. 1556707, "MEZZANINE", with the United States Patent and Trademark Office on September 19, 1989. The trademark is in force for twenty years.
EMPLOYEES
We employed 49 full-time individuals as of November 30, 2000.
WARRANTY
We warrant our ovens and furnaces against defects existing at the time of shipment for material and workmanship under normal use and service for a period of one year on parts, and for ninety days on labor after shipment to an original user. Under this warranty, the Company will provide, F.O.B. Anaheim, repair or replacement, at its own cost, any heating elements, SCR control packages, printed circuit boards, components, and conveyor speed controls (including digital readouts) which, within the warranty period, are proved to the satisfaction of the Company to have been defective.
GOVERNMENTAL REGULATIONS
The operations of the Company are subject to various federal and state laws and regulations. Management believes the Company is in substantial compliance with all applicable laws and regulations. The cost of compliance has not been a significant burden to the Company.
ITEM 2.
ITEM 2. PROPERTIES ----------
Our executive offices and manufacturing facility are located in a quality industrial park where expansion may be possible.
The 25,000 square foot building is leased for 5 years with an option to renew for an additional 5 years. See Note 8 to the financial Statements, for more detail.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS -----------------
There are no legal proceedings pending at the time of this report.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth quarter of FY 2000.
PART II -------
ITEM 5.
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTER ---------------------------------------------------------------------
The Company's common stock is quoted on the OTC Bulletin Board. The table below sets forth the representative high and low bid prices for the common stock during each calendar period indicated. The Quotations represent interdealer prices without adjustments for retail mark-ups, mark-downs or commissions and consequently do not necessarily reflect actual transactions.
Holders of shares of Common Stock are entitled to receive such dividends, if any, as may be declared by the Board of Directors of the Company out of funds legally available therefore and, upon the liquidation, dissolution or winding up of the Company are entitled to share ratably in all net assets available for distribution to such shareholders. The Company has never paid any dividends. It is anticipated that all earnings, will be retained for development of working capital to grow the business of the Company and there is no present intention to declare dividends in the foreseeable future. See Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations".
SHAREHOLDERS OF RECORD: As of September 30, 2000, the number of record holders of the Company's Common Stock was 409.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA -----------------------
The following table summarizes certain selected financial data of the Company:
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS -------------------------------------------------
Cautionary Statement
This Annual Report contains statements relating to future results of the Company (including certain projections and business trends) that are "forward-looking statements" as defined in Section 27A of the Securities Act of 1933. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to economic and political changes in markets where the Company competes such as inflation rates, recession, and other external factors over which the Company has no control; domestic and foreign government spending, budgetary and trade policies; demand for and market acceptance of new and existing products; successful development of advanced technologies; and competitive product and pricing pressures as well as other risks and uncertainties, including but not limited to those detailed from time to time in the Company's Securities and Exchange Commission filings.
GENERAL
We pioneered the design and application of near infrared high temperature furnaces with the semiconductor manufacturing and electronics assembly markets. RTC products are now principally used by manufacturers of semiconductor packaging, solar cells, flat panel displays, printed circuit boards, hybrid thick film and multichip modules. New and inventive uses of the product line for other applications continue to be discovered.
RESULTS OF OPERATIONS
Revenues were $4.7 million, $3.3 million and $4.6 million in fiscal years 2000, 1999 and 1998 respectively, representing an increase of 42% from 1999 to 2000 and a decrease of 28% from 1998 to 1999. The increase in fiscal year 2000 was primarily attributable to increased volume shipments as a result of increased sales orders from existing customers.
Cost of sales consists of costs related to the purchase of raw materials, assembled and subcontracted parts, services provided by third party suppliers, as well as costs arising from in house manufacturing support operations and the costs to run it. Cost of sales as a percentage of revenues was 65.4%, 68.5% and 65.0% for fiscal years 2000, 1999 and 1998 respectively. RTC continues to use the latest technology available in an effort to reduce both cost of revenues (and the maintenance of optimal inventory levels) and operating expenses, and ultimately increase overall company profits.
Research and development expense expressed as a percentage of revenues was 4.9%, 8.4% and 5.4% in fiscal years 2000, 1999 and 1998 respectively. These reflects costs related to the design of three new products, new product development and product enhancements for existing standard products. These costs are essential to the Company's long term future, a future that can move very quickly in the high technology field.
Selling, general and administrative expenses represented 20.0%, 32.8% and 17.0% of total revenues in fiscal years 2000, 1999 and 1998 respectively. The increase in 1999 was attributed to increased bad debts.
Interest income, net of interest expense, for fiscal year 2000 was approximately .8% of revenues compared to 1.3% and .9% in fiscal years 1999 and 1998 respectively.
RTC incurred a pre-tax income of $300,729 or $0.15 per share for fiscal ended 2000 compared to a pre-tax loss of $(475,820) or $(0.25) per share for fiscal 1999. This change is attributed principally to the increase in revenues and decrease in selling, general and administrative expenses for the fiscal ended 2000 over the comparable period in 1999.
LIQUIDITY AND CAPITAL RESOURCES
Our consolidated cash decreased from $2,384,902 at September 30, 1999 to $1,528,383 at September 30, 2000. The decrease of $856,519 is attributable to decreased net cash provided by financing activities of $998,625 and offset by cash used in operating activities of $171,039. Management believes that the expected revenues from operations of RTC will be sufficient to provide adequate cash to fund anticipated working capital and other cash needs. There may be occasional periods when short-term borrowing will be utilized, although little of this type of activity is foreseen.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ----------------------------------------------------------
Inapplicable.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -------------------------------------------
The following are included in this 10-K as exhibits:
1. Report of Independent Certified Public Accountants 2. Balance Sheets as of September 30, 2000 and 1999. 3. Statements of Operations for the years ended September 30, 2000, 1999, 1998. 4. Statements of Stockholders' Equity for the years ended September 30, 2000, 1999, 1998. 5. Statements of Cash Flows for the years ended September 30, 2000, 1999, 1998. 6. Notes to Financial Statements.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE ----------------------------------------------------------------------
None.
PART III --------
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT --------------------------------------------------
The response to this item is incorporated herein by reference to the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 19, 2001.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION ----------------------
The response to this item is incorporated herein by reference to the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 19, 2001.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT --------------------------------------------------------------
The response to this item is incorporated herein by reference to the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 19, 2001.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ----------------------------------------------
The response to this item is incorporated herein by reference to the Company's definitive proxy statement for the Annual Meeting of Stockholders to be held on April 19, 2001.
PART IV -------
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K ----------------------------------------------------------------
Exhibit No. Description Page No. - ----------- ----------- --------
3.1 Certificate of Restated Articles of Incorporation incorporated by reference to the Registration Statement of Form S-18 (Registration No. 2-72528-LA) filed on July 14, 1981.
3.1(a) Certificate of Amendment of Articles of Incorporation incorporated by reference to the Proxy Statement dated January 14, 1986.
3.1(b) Certificate of Amendment of Articles of Incorporation incorporated by reference to Annual Report on Form 10-K filed January 15, 1990.
3.2 Restated By-Laws incorporated by reference to the Registration Statement on Form S-18 (Registration No. 2-72528-LA) filed on July 14, 1981.
3.2(a) Amendment to Bylaws incorporated by reference to Annual Report on Form 10-K filed January 15, 1990.
4.1 Specimen Certificate of Common Stock incorporated by reference to the Registration Statement on Form S-18 (Registration No. 2-72528-LA) filed on July 14, 1981.
10.22(a) Amendment No. 1 to Employment Agreement effective as of November 7, 1991 by and between the Company and Lawrence R. McNamee incorporated by reference to Annual Report on Form 10-K filed January 15, 1990.
10.24 Form of Indemnity Agreement incorporated by reference to Annual Report of Form 10-K filed January 15, 1990.
(b) Reports on Form 8-K.
None.
SIGNATURES ----------
Pursuant to the requirements of section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on this behalf by the undersigned, thereunto duly authorized.
Dated: December 22, 2000
RADIANT TECHNOLOGY CORPORATION
By: /s/ L. R. McNamee ------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the persons on behalf of the registrant in the capacities and on the dates indicated.
/s/ L. R. McNamee December 22, 2000 - ----------------------------------- Lawrence R. McNamee Chairman of the Board and a Director (Principal Financial Officer and Principal Executive Officer)
/s/ C. T. Richert December 22, 2000 - ----------------------------------- Carson T. Richert President and a Director
/s/ R. B. Thompson December 22, 2000 - -----------------------------------
Robert B. Thompson Director
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS --------------------------------------------------
The Board of Directors and Stockholders Radiant Technology Corporation
We have audited the accompanying balance sheets of Radiant Technology Corporation as of September 30, 2000 and 1999, and the related statements of operations, stockholders' equity and cash flows for each of the years in the three year period ended September 30, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Radiant Technology Corporation as of September 30, 2000 and 1999 and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2000 in conformity with generally accepted accounting principles.
CACCIAMATTA ACCOUNTANCY CORPORATION
Irvine, California November 15, 2000
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
The accompanying notes are an integral part of these financial statements.
RADIANT TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ------------------------------------------------
Nature of Operations --------------------
Radiant Technology Corporation (the "Company") is engaged in the marketing and manufacturing of infrared conveyorized ovens and furnaces used primarily by the microelectronics manufacturing industry.
All of the Company's operations are located in California. Sales to entities located outside the United States are as follows:
COUNTRIES 2000 1999 1998 ---------------- ----------- ----------- -----------
European $ 966,723 $ 640,511 $ 605,800 Pacific Rim 316,235 178,170 847,700 NAFTA 120,935 38,963 116,200 Middle East 5,731 443,178 - ----------- ----------- ----------- 1,409,624 $1,300,822 $1,569,700 =========== =========== ===========
Revenue recognition -------------------
The Company recognizes revenue from product sales upon shipment or upon completion when the customer requests the unit to be held at the facility for later shipment.
Cash and cash equivalents -------------------------
For purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less.
Accounts receivable -------------------
The allowance for doubtful accounts includes management's estimate of the amount expected to be lost on specific accounts and for losses on other unidentified accounts included in accounts receivable. In estimating the allowance component for unidentified losses, management relies on historical experience. The amounts the Company will ultimately realize could differ materially in the near term from the amounts assumed in arriving at the allowance for doubtful accounts in the accompanying financial statements.
Inventories -----------
Inventories include material, direct labor and manufacturing overhead and are reported at the lower of cost (determined on the first-in-first-out method) or market. Allowances for slow moving and obsolete inventory are based on management's estimate of the amount considered obsolete based on specific review of inventory items. In estimating the allowance, management relies on its knowledge of the industry as well as its current inventory levels.
RADIANT TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) - ------------------------------------------------------------
Equipment ---------
Equipment is stated at cost, less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets or over the lesser of the term of the lease or the estimated useful life for leasehold improvements.
Intangibles -----------
The cost of patents is amortized using the straight line method over their estimated lives of five years. Amortization expense charged to operations in 2000, 1999 and 1998 was $8,712, 8,716, and $8,737, respectively.
Software development costs --------------------------
The Company capitalizes internal software development costs in accordance with Statement of Financial Accounting Standards No. 86. The capitalization of these costs begins when a product's technological feasibility has been established and ends when the product is available for general release to customers. The Company uses the working model approach to establish technological feasibility. Amortization is computed on an individual product group on the straight-line method over the estimated economic life of the product. Currently, the Company is using an estimated economic life of three years for all capitalized software costs. Amortization expense was $77,213, $106,550, and $63,330 for 2000, 1999, and 1998, respectively.
Customer deposits -----------------
The Company may require a deposit from customers before commencing work on a furnace. It is the Company's policy to record the deposit as a receivable with a corresponding deferred liability at the time the sales order is written. When the cash deposit is received, the receivable is relieved.
Income taxes ------------
Deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities.
RADIANT TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) - ------------------------------------------------------------
Earnings per common share -------------------------
Earnings per common share is computed by dividing reported earnings by the weighted average number of common shares outstanding during the respective periods. Common stock equivalents were excluded from the computation of earnings per share in 1999 because the effect of including such equivalents in the computation would have been anti-dilutive.
Fair value of financial instruments -----------------------------------
The fair value of financial instruments, consisting principally of short-term debt is based on interest rates available to the Company and comparison to quoted prices. The fair value of these financial instruments approximates carrying value.
Stock based compensation ------------------------
The Company accounts for compensation costs related to employee stock options and other forms of employee stock-based compensation plans in accordance with the requirements of Accounting Principles Board Opinion 25 ("APB 25"). APB 25 requires compensation costs for stock based compensation plans to be recognized based on the difference, if any, between the fair market value of the stock on the date of the grant and the option exercise price. Statement of Financial Accounting Standards 123, Accounting for Stock-Based Compensation ("SFAS 123"). established a fair value-based method of accounting for compensation costs related to stock options and other forms of stock-based compensation plans. However, SFAS 123 allows an entity to continue to measure compensation costs using the principles of APB 25 if certain pro forma disclosures are made. Options granted to non-employees are recognized at their estimated fair value at the date of grant.
Use of estimates ----------------
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
Reclassifications -----------------
Certain items in the 1998 and 1999 financial statements have been reclassified to conform with the 2000 presentation.
RADIANT TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
2. CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS - ------------------------------------------------------------
The Company, from time to time, has cash deposits at financial institutions in amounts in excess of federally-insured limits. The Company believes that credit risk related to its cash deposits is limited due to the quality of the financial institutions.
The Company's customers are located in several geographic markets, primarily in the United States, Europe, Middle East and NAFTA countries and are concentrated within three industries. To minimize the risk of loss, the Company routinely assesses the financial strength of its customers, and may require a substantial downpayment prior to commencing machine production.
Net accounts receivable by geographic markets are as follows:
COUNTRIES 2000 1999 --------------------- ------------- ------------- United States 73% 28% European 14% 51% Middle East 8% 21% NAFTA 5% - ------------- ------------- 100% 100% ============= =============
- --------------------------------------------------------------------------------
During 2000, 1999 and 1998, the five largest customers represented 51, 52 and 53 percent of revenues, respectively. At September 30, 2000 and 1999 the five largest balances represented 82 and 72 percent, respectively, of total accounts receivable.
3. ACCOUNTS RECEIVABLE - -------------------------
2000 1999 --------------- --------------- Trade receivables $ 1,849,418 $ 802,123 Allowance for doubtful accounts and sales returns (5,000) (210,817) --------------- --------------- $ 1,844,418 $ 591,306 =============== ===============
RADIANT TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
3. ACCOUNTS RECEIVABLE (CONTINUED) - -------------------------------------
Activity in the allowance for doubtful accounts and sales returns is as follows:
2000 1999 1998 ---------- ---------- ----------
Balance at beginning of year $ 210,817 $ 37,500 $ 37,500
Provision - 183,807 3,500
Write offs (205,817) (10,490) (3,500) ---------- ---------- ----------
Balance at end of year $ 5,000 $ 210,817 $ 37,500 ========== ========== ==========
4. INVENTORIES - -----------------
2000 1999 ---------- ----------
Raw materials $ 384,727 $ 358,778 Work in process 313,357 183,774 Finished goods 121,049 31,354 ---------- ----------
819,133 573,906
Allowance for obsolescence (130,000) (140,000) ---------- ----------
$ 689,133 $ 433,906 ========== ==========
- -------------------------------------------------------------------------------- Activity in the allowance for obsolescence is as follows:
2000 1999 1998 ---------- ---------- ----------
Balance at beginning of year $ 140,000 $ 100,000 $ 100,000
Provision 40,000 40,000 39,000
Write offs (50,000) - (39,000) ---------- ---------- ----------
Balance at end of year $ 130,000 $ 140,000 $ 100,000 ========== ========== ==========
RADIANT TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
5. EQUIPMENT - ---------------
Life in years 2000 1999 ------------- ---------- ----------
Machinery and equipment 7 $ 387,530 $ 384,270 Office furniture and equipment 7 68,847 66,371 Leasehold improvements 5 67,934 53,226 Vehicles 5 15,050 15,050 Capitalized computer software 3 405,542 397,714 ---------- ----------
944,902 916,631
Less: accumulated depreciation and amortization (679,231) (494,830) ---------- ----------
$ 265,671 $ 421,801 ========== ==========
- --------------------------------------------------------------------------------
Depreciation and amortization expense for 2000, 1999, and 1998 was $193,113, $195,011 and $179,539, respectively.
6. SHORT-TERM DEBT - ---------------------
The Company's borrowings are at LIBOR plus 2 3/8 percent and due on demand. The entire balance of $500,000 was repaid on October 2, 2000.
7. ACCRUED EXPENSES - ----------------------
2000 1999 --------- ---------
Payroll and related items $109,499 $ 96,173 Commissions 89,959 79,100 Warranties 40,000 40,000 Other 15,296 20,768 --------- --------- $254,754 $236,041 ========= =========
RADIANT TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
8. COMMITMENTS AND CONTINGENCIES - -----------------------------------
Operating leases ----------------
In November 1996 the Company signed a five year lease on a building in Fullerton, California. Base monthly rent is $10,600 plus common area charges of approximately $3,400 per month. The Company also leases office equipment under operating leases expiring in various years through 2002. Minimum future lease payments under non-cancelable operating leases are:
Year ending September 30,
2001 $ 175,512 2002 71,524 ------------ $ 247,036 ============
- -------------------------------------------------------------------------------- Rent expense for 2000, 1999 and 1998 was $168,650, $172,228, and $150,090, respectively.
Environmental matters ---------------------
The Company, like others in similar businesses, is subject to federal, state and local environmental laws and regulations. Although Company environmental policies and practices are designed to ensure compliance with these laws and regulations, future developments and increasingly stringent regulation could require the Company to make unforeseen environmental expenditures.
9. STOCKHOLDERS' EQUITY - --------------------------
Preferred stock ---------------
At September 30, 2000 and 1999 there were 5,000,000 authorized shares of preferred stock, of which no shares were issued and outstanding.
Common stock ------------
The Company has authorized 24,000,000 shares of no par value common stock. At September 30, 2000 and 1999, 1,906,678 and 1,895,638, respectively shares were issued outstanding.
RADIANT TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
9. STOCKHOLDERS' EQUITY (CONTINUED) - --------------------------------------
EMPLOYEE STOCK OPTIONS ----------------------
Incentive and non-statutory option plan ---------------------------------------
The Company adopted an incentive and non-statutory stock option plan which provides for granting options to key employees and officers. Under the plan, options up to 1,000,000 shares may be granted at a price not less than the fair market value of such shares on the date of the grant, and the maximum term of each option may not exceed ten years. With respect to any participant who owns stock possessing more than 10% of the voting rights of the Company's outstanding capital stock, the exercise price of any stock option must not be less than 110% of the fair market value on the date of the grant and the maximum term may not exceed five years. On January 22, 1998 and April 15, 1999 the Board authorized options to purchase 70,000 and 100,000 shares, respectively. Of these shares, 120,000 have been granted at an exercise price that was at or above the market price on the date of the grant. The options vested on January 5, 2000 and expire three years from the vesting date. During fiscal year 2000, 55,000 of these options were canceled and 11,000 exercised.
Non-statutory director options ------------------------------
On September 30, 1996, the Company granted 20,000 non-statutory options to each of three outside board members. The options vested immediately and expire 50% at September 30, 2000 and 50% at September 30, 2001. The option price is $.48 per share, which was equal to the market price at the date of the grant. At September 30, 2000, 20,000 of these options remain outstanding.
Lawrence McNamee ----------------
Mr. McNamee holds options to acquire 346,666 shares at $.075 per share issued to him in lieu of salary in 1992. These options have no expiration date.
RADIANT TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
9. STOCKHOLDERS' EQUITY (CONTINUED) - --------------------------------------
Stock options (continued) -------------------------
The following table summarizes the activities under the plan and outside the plan:
The following information applies to employee options outstanding at September 30, 2000:
Outstanding ---------------------------------------- Weighted Average Weighted Remaining Average Range of Number of Contractual Exercise exercise prices Options Life (Years) Price --------------- --------- ---------------- ---------
$0.075 346,666 N/A $0.075 $0.48 70,000 2 $0.48 $0.50 30,000 3 $0.50 $0.75 54,000 4 $0.75 --------- --------- 500,666 $0.23 ========= ==========
RADIANT TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
9. STOCKHOLDERS' EQUITY (CONTINUED) - --------------------------------------
Stock options (continued) -------------------------
Had compensation cost for the plan been determined based on the fair value of the options at the grant dates consistent with the method of SFAS 123, the Company's net income/(loss) and earnings/(loss) per share would have been:
2000 1999 1998 ---------- ---------- ----------
Net income/(loss): As reported $ 287,729 $(475,820) $ 415,587 Pro forma $ 284,444 $(507,110) $ 377,821
Basic earnings per share: As reported $ 0.15 $ (0.25) $ 0.22 Pro forma $ 0.15 $ (0.27) $ 0.20
Diluted earnings per share: As reported $ 0.13 $ (0.25) $ 0.18 Pro forma $ 0.13 $ (0.27) $ 0.17
These pro forma amounts may not be representative of future disclosures because they do not take into effect pro forma compensation expense related to grants made before 1996. In addition, potential deferred tax benefits of approximately $12,500, $15,000, and $19,200 in 2000, 1999 and 1998 respectively, have not been reflected in the pro forma amounts due to the uncertainty of realizing any benefit. The fair value of these options was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for 2000, 1999 and 1998:
Expected life (years) 4 Risk-free interest rate 6.00% Volatility 100% Expected dividends None
The weighted fair value of options granted during the years ended September 30, 1999 and 1998 for which the exercise price approximated the market price on the grant date was $.21 and $.58, respectively.
RADIANT TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
10. INCOME TAXES - ------------------
Income tax expense (benefit) consisted of the following:
2000 1999 1998 ------------- ------------- -------------
Current tax expense $ 13,000 $ - $ 51,000 ============= ============= =============
Income tax expense (benefit) differed from the amounts computed by applying the U.S. federal income tax rate of 34% to pretax income from continuing operations in 2000, 1999 and 1998 as a result of the following:
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities at September 30, 2000 and 1999 are as follows:
2000 1999 ---------- ----------
Net operating loss carryforwards $ 441,000 $ 516,000 Allowance for slow moving inventories 52,000 56,000 Allowance for doubtful accounts 2,000 32,000 Other - (1,000) ---------- ----------
Deferred tax assets 495,000 603,000
Less valuation allowance (325,000) (433,000) ---------- ----------
Net deferred tax asset $ 170,000 $ 170,000 ========== ==========
RADIANT TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
10. INCOME TAXES (CONTINUED) - ------------------------------
During 1998 the Company reduced the valuation allowance to reflect the deferred tax assets utilized in fiscal 1998. The recognized deferred tax asset is based upon expected utilization of the net operating loss carryforwards and reversal of certain temporary differences. The ultimate realization of the deferred tax asset will require aggregate taxable income of approximately $1,298,000 in future years.
At September 30, 2000, the Company had net operating loss carryforward for federal and state income tax purposes expiring as follows:
FEDERAL STATE ---------------------------------
2007 $ 245,788 $ - 2009 620,976 - 2014 431,356 - ---------------------------------
$ 1,298,120 $ - =================================
Federal investment credit and other general business credit carryforward total $35,600 and $105,500, respectively, and expire at various dates through 2003.
11. BASIC AND DILUTED EARNINGS/(LOSS) PER SHARE - -------------------------------------------------
The following tables illustrate the required disclosure of the reconciliation of the numerators and denominators of the basic and diluted earnings/(loss) per share computations.
RADIANT TECHNOLOGY CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) Stock options were anti-dilutive for the year ended September 30, 1999. See Note 9 for stock option activity.
12. EMPLOYEE BENEFIT PLAN - ---------------------------
The Company's 401(k) plan was re-activated during fiscal 1996. All employees are eligible as long as they are 21 years of age and have completed one year of employment. The plan provides for contributions by the Company in such amounts as management may determine. Contribution expense charged to operations in 2000 and 1999 were $12,474 and $13,027 respectively. No expense was charged to operations in 1998.