10QSB 1 phazar10q15-oct.txt FIRST QUARTER REPORT U.S. Securities and Exchange Commission Washington D.C. 20549 Form 10-QSB (Mark One) [ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended August 31, 2001 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from ______________ to _______________ Commission file number 0-12866 ------- PHAZAR CORP (fka ANTENNA PRODUCTS, INC.) -------------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) Delaware 75-1907070 --------------------------------------------------- -------------------- (State or other jurisdiction of incorporation (IRS Employer or organization) Identification No.) 101 S.E. 25th Avenue, Mineral Wells, Texas 76067 ------------------------------------------------ (Address of principal executive offices) (940) 325-3301 -------------- (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 2,170,328 as of September 30, 2001. 1 PHAZAR CORP (fka ANTENNA PRODUCTS, INC.) AND SUBSIDIARIES INDEX TO FORM 10-QSB PAGE PART 1 FINANCIAL INFORMATION NUMBER Item 1. Financial Statements for PHAZAR CORP and Subsidiaries (unaudited) Consolidated Balance Sheets - 3 August 31, 2001 and May 31, 2001 Consolidated Statements of Operations - 5 Three Months Ended August 31, 2001 and August 31, 2000 Consolidated Statements of Cash Flows - 6 Three Months Ended August 31, 2001 and August 31, 2000 Notes to Consolidated Financial Statements 8 Item 2. Management's Discussion and Analysis of 14 Financial Condition and Results of Operation PART II OTHER INFORMATION 15 SIGNATURE 2 PHAZAR CORP (fka ANTENNA PRODUCTS, INC.) AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS August 31, 2001 May 31, 2001 (Unaudited) (Audited) ----------------- --------------- Current assets: Cash and cash equivalents $ 110,583 $ 341,413 Accounts receivable: Trade, net of allowance for doubtful accounts of $45,898 each year 940,261 1,074,572 United States Government 142,125 88,620 Inventories 2,392,199 2,270,438 Costs and estimated earnings in excess of billings on refurbishing contracts in progress 269,279 370,454 Prepaid expenses and other assets 83,234 33,340 Income taxes receivable 102,837 - Deferred income taxes 128,343 128,343 --------------- ------------- Total current assets 4,168,861 4,307,180 --------------- ------------- Property and equipment, net 2,102,490 2,165,288 Intangible Assets (Goodwill) 489,322 498,440 Identifiable Intangible Assets 1,426,961 1,483,241 --------------- ------------- TOTAL ASSETS $ 8,187,634 $ 8,454,149 =============== ============= The notes to consolidated financial statements are an integral part of these statements 3 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $ 505,000 $ 250,000 Current portion of long-term debt 266,892 266,856 Accounts payable 534,323 438,262 Accrued expenses 507,377 418,919 Billings in excess of costs and estimated earnings on refurbishing contracts in progress 3,564 52,907 Income taxes payable - 108,146 ----------- ----------- Total current liabilities 1,817,156 1,535,090 ----------- ----------- Long-term debt 1,980,358 2,051,385 Note payable to shareholder 800,000 800,000 Deferred income taxes 238,581 238,581 ----------- ----------- Total long-term liabilities 3,018,939 3,089,966 ----------- ----------- Total liabilities 4,836,095 4,625,056 ----------- ----------- Commitments and Contingencies - - MINORITY INTEREST IN SUBSIDIARY - 25,546 SHAREHOLDERS' EQUITY Common stock, $0.01 par, 8,000,000 shares authorized. 2,170,328 and 2,169,328 issued and outstanding respectively 21,703 21,694 Additional paid in capital 2,745,976 2,744,526 Retained earnings 583,860 1,037,327 ----------- ----------- Total shareholders' equity 3,351,539 3,803,547 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,187,634 $ 8,454,149 =========== =========== The Notes to Consolidated Financial Statements are an integral part of these statements 4 PHAZAR CORP (fka ANTENNA PRODUCTS, INC.) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE QUARTERS ENDED AUGUST 31, 2001 AND 2000 (Unaudited) 2001 2000 ------------------ ---------------- Sales and contract revenues $ 2,466,829 $ 4,000,233 Cost of sales and contracts 2,194,390 3,177,631 -------------- --------------- Gross Profit 272,439 822,602 Sales and administration expenses 794,307 658,817 -------------- --------------- Operating Profit (Loss) (521,868) 163,785 -------------- --------------- Other income (expense) Interest expense (66,231) (113,943) Interest income 17 7 Other Income 18,086 6,404 -------------- --------------- Total other expense (48,128) (107,532) -------------- --------------- Income (loss) from operations before income taxes and minority interest (569,996) 56,253 Income tax (provision) benefit 90,983 (19,126) -------------- --------------- Income (loss) before minority interest (479,013) 37,127 -------------- --------------- Minority interest in subsidiary's loss 25,546 - -------------- --------------- Net Income (loss) (453,467) 37,127 ============== =============== Earnings (loss) per common share $ (0.21) $ 0.02 ============== =============== The Notes to Consolidated Financial Statements are an integral part of these statements 5 PHAZAR CORP (fka ANTENNA PRODUCTS, INC.) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE QUARTERS ENDED AUGUST 31, 2001 AND 2000 (Unaudited) 2001 2000 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (453,467) $ 37,127 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 81,066 158,651 Amortization 65,398 - Stock based compensation 1,459 - Deferred federal income tax - - Changes in assets and liabilities: Accounts receivable 80,806 (17,581) Cost in excess of billings billings on refurbishing contracts in progress 101,175 (475,988) Inventory (121,761) 161,905 Prepaid expenses (49,894) (28,279) Income taxes receivable (102,837) 19,126 Accounts payable 96,061 336,635 Accrued expenses 88,458 - Billings in excess of costs and estimated earnings on refurbishing contracts in progress (49,343) 265,669 Income taxes payable (108,146) - Minority interest (25,546) - ---------- --------- Net cash provided by operating activities (396,571) 457,265 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (18,268) - ---------- --------- Net cash used in investing activities (18,268) - CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (payments) under bank line of credit 255,000 (551,229) Principal payments on long term debt (70,991) (55,640) ---------- --------- Net cash (used in) provided by financing activities 184,009 (606,869) ---------- --------- Net increase in cash and cash equivalents (230,830) (149,604) CASH AND CASH EQUIVALENTS, beginning of period 341,413 337,348 ---------- --------- CASH AND CASH EQUIVALENTS, end of period $ 110,583 $ 187,744 ========== ========= The Notes to Consolidated Financial Statements are an integral part of these statements. 6 PHAZAR CORP (fka ANTENNA PRODUCTS, INC.) AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE QUARTERS ENDED AUGUST 31, 2001 AND 2000 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (none capitalized) $ 66,214 $ 113,943 ========== ========= Income taxes $ - $ - ========== ========= SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Issuance of common stock in exchange for equipment and intangible assets $ - $ - ========== ========= Stock based compensation $ 1,459 $ - ========== ========= The Notes to Consolidated Financial Statements are an integral part of these statements. 7 PART 1 NOTE 1 STATEMENT OF INFORMATION FURNISHED The accompanying unaudited consolidated financial statements have been prepared in accordance with Form 10-QSB instructions and in the opinion of management contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of August 31, 2001, the results of operations for the three months ended August 31, 2001 and August 31, 2000 and the cash flows for the three months ended August 31, 2001 and August 31, 2000. These results have been determined on the basis of generally accepted accounting principles and practices applied consistently with those used in the preparation of the Company's audited financial statements for its fiscal year ended May 31, 2001. NOTE 2 BUSINESS General A majority of the shareholders of Antenna Products, Inc. approved changing the corporate name to PHAZAR CORP because there had been a tendency to confuse the Antenna Products, Inc. name with that of its original operating subsidiary, Antenna Products Corp. The name change was effective on the Nasdaq Stock Market as of the open of business on March 12, 2001. The trading symbol remained "ANTP". At the same time, the name of API Acquisition Corp. dba The Upholstery Shop, Inc.!, another operating subsidiary was changed to Phazar Aerocorp Inc. The Subsidiary will commence using the name Phazar Aerocorp Inc. when it moves in the fall of this year to its new 86,000 square foot facility currently under construction at Meacham International Airport in Fort Worth, Texas. PHAZAR CORP operates as a holding company with Antenna Products Corporation, Phazar Aerocorp Inc. (dba The Upholstery Shop, Inc.!), Phazar Antenna Corp. and Thirco, Inc. as its subsidiaries. Antenna Products Corporation, Phazar Aerocorp Inc. and Phazar Antenna Corp. are operating subsidiaries with Thirco, Inc. serving as an equipment leasing company to PHAZAR CORP's operating units. PHAZAR CORP has no other business activity. PHAZAR CORP's address is 101 S.E. 25th Avenue, Mineral Wells, Texas 76067. The telephone Number is (940) 325-3301. Product information is available from the Internet web page at: //www.antennaproducts.com and at: //www.phazar.com. Antenna Products Corporation Antenna Products Corporation was incorporated in Texas in 1984 to continue a business started in 1972 and operated as a closely held "C" corporation until January 24, 1992. Thereafter, Antenna Products Corporation has operated, as a wholly owned subsidiary of PHAZAR CORP. Antenna Products Corporations' address is 101 S.E. 25th Avenue, Mineral Wells, Texas 76067. The telephone number is (940) 325-3301. 8 Antenna Products Corporation designs, manufactures and markets standard and custom antennas, guyed and self supported towers, monopoles, support structures, masts and communication accessories worldwide. Customers include the U.S. Government, both military and civil agencies, U.S. Government prime contractors and commercial clients. Examples of Antenna Products Corporation's U.S. Government supplied products include ground to air collinear antennas, instrument landing antennas and towers, fixed system multi-port antenna arrays, tactical quick erect antennas and masts, shipboard antenna tilting devices, transport pallets, surveillance antennas, antenna rotators, positioners and controls, and high power broadcast baluns. Examples of the Company's commercial products include panel, sector, omnidirectional and closed loop telecommunications antennas, automatic meter reading (AMR), instrument scientific medical (ISM), cellular, paging and yagi antennas, guyed towers, self supported towers and monopoles. Antenna Products Corporation's customer base is primarily government and government prime contractor focused, but this is slowly changing as Antenna Products Corporation continues to develop and market new commercial products. Antenna Products Corporation's market is international in scope. Antenna Products Corporation currently focuses on developing domestic markets and has a limited amount of foreign sales. The specialized need of Antenna Products Corporation's customers and the technology required to meet those needs change constantly. Accordingly, Antenna Products Corporation stresses its engineering, installation, service and other support capabilities. Antenna Products Corporation uses its own sales and engineering staff to service its principal markets. Some of Antenna Products Corporation's contracts are large relative to total annual sales volume and therefore the composition of the customer base is different year to year. In 2001 AIRSYS ATM, Inc. was the single largest customer, and accounted for 10% of the sales volume. The U.S. Government totaled 8% of sales. Orders for equipment in some of these product categories are in backlog and, therefore, AIRSYS ATM, Inc. and the U.S. Government are expected to be major clients again in 2002. Antenna Products Corporation is one of many suppliers of antennas and related manufacturing services to the government and government prime contractors. Antenna Products Corporation competes on the basis of cost and product performance in a market with no dominant supplier. Due to fixed-price contracts and pre-defined contract specifications prevalent within this market, Antenna Products Corporation competes primarily on the basis of its ability to provide state-of-the-art solutions in the technologically demanding marketplace while maintaining its competitive pricing. Antenna Products Corporation is primarily a build to order company and most manufacturing requirements are established on a contract basis. For this reason, the majority of the inventory is work in process. Approximately 18% of total inventory, $418,725 is currently maintained in stock for delivery to customers. Some raw materials are also inventoried to support customer delivery schedules. Antenna Products Corporation performs work for the United States Government primarily under fixed-price prime contracts and subcontracts. Under fixed-price contracts, Antenna Products Corporation realizes any benefit or detriment occasioned by lower or higher costs of performance. Antenna Products Corporation is subject to certain risks common to all companies that derive a portion of their revenues from the United States government. These 9 risks include rapid changes in technology, changes in levels of government spending, and possible cost overruns. Recognition of profits on major contracts is based upon estimates of final performance, which may change as contracts progress. Contract prices and costs incurred are subject to Government Procurement Regulations, and costs may be questioned by the Government and are subject to disallowance. United States Government contracts contain a provision that they may be terminated at any time for the convenience of the Government. In such event, the contractor is entitled to recover allowable costs plus any profits earned to the date of termination. Collections are generally set in accordance with federal acquisition standards, which require payment in accordance with "Net 30" terms after acceptance of goods. Antenna Products Corporation is not directly regulated by any governmental agency in the United States. Most of Antenna Products Corporation's customers, and the antenna and tower industries in general, are subject to meeting various government standards. These performance standards necessitate Antenna Products Corporation's ability to produce antenna designs, which can be updated to conform to customer requirements in a changing regulatory environment. These regulations have not adversely affected operations. Antenna Products Corporation plans to reinvest from 2% to 5% of sales in research and development projects, and bid and proposal activities. The mix of expenditures between the two areas in any given year is a function of the demand for new independently developed innovative systems and the level of requirements solicited. In 2001 Antenna Products Corporation invested 2.1% of sales in independent research and development (R&D) and bid and proposal activities (B&P). The level of expenditures as a ratio to sales is expected to continue at this level in 2002. The level of expenditures for R&D and B&P as a ratio to sales was 3.3% of sales in 2000. Antenna Products Corporation does not consider patents to be material to its operations nor would the loss of any patents adversely affect operations. Phazar Aerocorp Inc. (fka API Acquisition Corp.) (dba "The Upholstery Shop, Inc.!") Phazar Aerocorp Inc. is an 80% owned subsidiary of PHAZAR CORP. It was formed on January 24, 2000 as a Texas corporation. Phazar Aerocorp Inc. purchased the assets and business of The Upholstery Shop, Inc.! on January 27, 2000. The assets purchased included the machinery and equipment. No land or buildings were included as part of this acquisition. The acquisition was recorded as a purchase transaction and the operations of the Upholstery Shop, Inc.! have been included in the financials from the date of acquisition. Phazar Aerocorp Inc. currently does business as The Upholstery Shop, Inc.! at a leased facility at 326 N. Highway 377, Roanoke, Texas 76262. The telephone number is (817) 430-2306. The Company will commence using the name Phazar Aerocorp Inc. when it moves in October 2001 to the new 86,000 square foot facility currently under construction at Meacham International Airport in Fort Worth Texas. Phazar Aerocorp Inc.'s new address at Meacham International Airport will be 4701 N. Main Street, Fort Worth, Texas 76106. The new telephone number will be (817) 626-2842. The Upholstery Shop, Inc.! provides complete refurbishment for a full range of corporate and executive aircraft interiors. The range and scope of these services include design and fabrication of seats, side panels, headliners, galleys and cabinets, as well as the design and installation of custom lighting, entertainment systems and cabin management systems. 10 The Upholstery Shop, Inc.! removes existing interiors of aircraft and installs new interiors designed to customer specifications and coordinates the refurbishment of exteriors for customers when required. The Upholstery Shop, Inc.! provides this service on virtually all-executive and corporate class aircraft, including, but not limited to: Lear, Cessna, Gulfstream, Galaxy, Dassault, and Bombardier. The refurbishments are diverse with the lower range being a minor upgrading of Lear 25's to total interior upgrading of the larger aircraft of the Gulfstream and Falcon family. Phazar Antenna Corp. Phazar Antenna Corp. is a wholly owned subsidiary of PHAZAR CORP. It was formed as a Delaware Corporation and activated on June 1, 2000. Phazar Antenna Corp. operates as a marketing, research and product development unit. Phazar Antenna Corp. currently leases space at 122 Remington Boulevard, Ronkonkoma, New York, 11779. The telephone number is (631) 471-6660. On November 20, 2000, Phazar Antenna Corp. purchased the non-mobile wireless antenna systems business unit of Hirschmann Electronics, Inc. The tangible assets purchased consisted of the tooling, fixtures, radome molds, test equipment, and office equipment. The intangible assets purchased included the engineering data, manufacturing drawings, test procedures, vendor lists, customer lists, product data sheets, and pattern information. No real property was included in the purchase. The acquisition was recorded as a purchase transaction and has been included in the consolidated financials from the date of purchase. Key technical and marketing personnel from the Hirschmann business unit also joined Phazar Antenna Corp. The wireless antenna systems business purchased from Hirschmann provides a complete line of fixed and mobile antennas for ISM (instrument scientific medical), wireless Internet, wireless LAN, wireless local loop, fixed GPS, MMDS (fixed wireless) and embedded Bluetooth market applications. This product line complements the Company's existing product lines of cellular, PCS, paging, ISM and AMR (automatic meter reading) omni-directional and sector wireless antennas and is currently being produced at Antenna Products Corporation's plant in Mineral Wells, Texas. Thirco, Inc. Thirco, Inc. was formed on November 1, 1993 as a Delaware company to purchase and lease equipment and facilities to the other operating units of PHAZAR CORP. The primary lease arrangements are with Antenna Products Corporation. Thirco will occasionally assist in servicing the banking needs of PHAZAR CORP's operating units. Since all activity is internal to PHAZAR CORP and its operating subsidiaries, financial data is consolidated with PHAZAR CORP. Thirco does not employ any full time employees and does not intend to employ any in the foreseeable future. Thirco does not intend to engage in any outside business transactions. Seasonality PHAZAR CORP's businesses are not dependent on seasonal factors. 11 Backlog The backlog of orders at Antenna Products Corporation was $3.8 million on August 31, 2001. This compares to $3.1 million in backlog at the end of fiscal year 2001. Over 80% of this backlog will be delivered in the balance of the 2002 fiscal year. The backlog of orders at Phazar Aerocorp Inc. (fka API Acquisition Corp) (dba The Upholstery Shop, Inc.!) was $800 thousand on August 31, 2001. This compares to $1.2 million in backlog at the end of fiscal year 2001. All of the $800 thousand in backlog will be delivered in the 2002 fiscal year. Phazar Antenna Corp. orders are normally shipped within 2 weeks; hence Phazar Antenna Corp. backlog of orders was negligible on August 31, 2001. NOTE 3 INVENTORIES The major components of inventories are as follows: August 31,2001 May 31, 2001 -------------- ------------ Raw materials $ 459,585 $ 360,284 Work in process 1,513,889 1,297,008 Finished goods 418,725 613,146 -------------- ------------ $ 2,392,199 $ 2,270,438 NOTE 4 NOTES PAYABLE At August 31, 2001 and May 31, 2001, notes payable consist of a revolving note payable to a bank, with a maximum amount not to exceed the lesser of $3,000,000, or a calculated borrowing base determined by a formula based upon the amount of certain qualified receivables and inventories as defined in the loan agreement. Interest is payable monthly at the prime rate (6.5% and 7% at August 31, 2001, and May 31, 2001, respectively) plus 1% until October 31, 2001, when any unpaid principal and interest shall be due. Borrowings under the revolving note payable are collateralized by accounts receivable and inventories as defined in the loan agreement. At August 31, 2001, available borrowings under this credit facility were limited to the borrowing base amount of $1,897,987. Borrowings are partially guaranteed by a principal shareholder and under the agreement, the Company must maintain a minimum net worth of $1,500,000 and working capital of $1,000,000. At August 31, 2000 and May 31, 2001, note payable to shareholder consists of an $800,000 subordinated note to a principal shareholder of the Company. In the initial years, only interest at the prime rate (6.5% and 7% at August 31, 2001 and May 31, 2001, respectively) is payable, with monthly principal payments scheduled to begin in June 2002, and maturing in May 2007. The commencement of principal payments on the subordinated note is prohibited under the terms of the bank note until the bank note is paid in full. 12 NOTE 5 LONG TERM DEBT At August 31, 2001 and May 31, 2001, long-term debt consists of the following: August 31, 2001 May 31, 2001 --------------- ------------ Mortgage note to a bank, guaranteed 80% by a U.S. Government agency, payable $10,050 per month, including interest at the prime rate (6.5 % and 7% at August 31, 2001 and May 31, 2001, respectively) plus 1/2 %; collateralized by certain real estate, fixtures and assignment of life insurance policy with a principal shareholder and the Company is required to maintain certain covenants including $1,000,000 in working capital and a ratio of maximum debt to net worth of seven to one. $ 797,185 $ 809,848 Note payable to a bank, payable in installments of $28,724 per month until maturity date of January 26, 2007, when remaining balance is due, including interest at the prime rate (6.5 % and 7% at August 31, 2001 and May 31, 2001, respectively) plus 1% secured by property and equipment. The note is also guaranteed by a principal shareholder. $ 1,450,065 $ 1,508,393 Less current portion of long-term debt $ 266,892 $ 266,856 ------------- ------------ $ 1,980,358 $ 2,051,385 ============= ============ 13 PHAZAR CORP (fka ANTENNA PRODUCTS, INC.) AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OPERATION AND FINANCIAL CONDITION The following is management's discussion and analysis of certain significant factors that have affected the Company's financial condition and operating results for the period included in the accompanying financial statements. Results of Operations --------------------- First Quarter Ended August 31, 2001 Compared to First Quarter Ended August 31, 2000 PHAZAR CORP consolidated sales from operations were $2,466,829 for the quarter ended August 31, 2001 compared to sales of $4,000,233 for the first quarter ended August 31, 2000. PHAZAR CORP recorded a net loss of $453,467 for the first quarter of fiscal year 2002 compared to a net profit of $37,127 for the first quarter of fiscal year 2001. The Company's loss in the first quarter of fiscal year 2002 was the direct result of slow sales and lower volumes at Antenna Products Corporation, Phazar Antenna Corp. and Phazar Aerocorp Inc. The gross profit margin for the first quarter was 11% compared to 21% for the first quarter of last year. The gross profit margin decreased due to the slowdown in production areas and the need to reassign direct labor personnel to internal jobs related to the completion of the new facility at Meacham International Airport, Fort Worth, Texas. Due to the addition of key technical and marketing personnel at Phazar Antenna Corp. in November, 2000, sales and administrative expenses were higher in the first quarter of fiscal year 2002, $794,307 versus $658,817 in the first quarter of fiscal year 2001. Sales and administrative expenses as a ratio to sales were 32% in the first quarter of this year compared to 16% in the same period last year. Interest expense in the first quarter of fiscal year 2002 was $66,231 versus $113,943 in the same time period of fiscal year 2001. PHAZAR CORP's backlog totaled $4.6 million on August 31, 2001. This included $3.8 million at Antenna Products Corporation and $800 thousand at Phazar Aerocorp Inc. PHAZAR CORP backlog totaled $5.4 million on August 31, 2000. Based on early second quarter customer requirements, Antenna Products Corporation's sales are expected to improve in the second quarter of fiscal year 2002. Phazar Aerocorp Inc.'s sales are expected to improve after the subsidiary completes the move into the new 86,000 square foot facility at Meacham International Airport in Fort Worth, Texas in October. 14 Liquidity and Capital Resources PHAZAR CORP's current assets total $4,168,861 as of August 31, 2001 with $3,474,585 in inventory and accounts receivable. Receivables are $1,082,386 at quarter ending August 31, 2001 compared to $1,163,192 at fiscal 2001 year-end. Net inventories have increased slightly from $2,270,438 at May 31, 2001 to $2,392,199. Cash accounts have decreased $230,830 from May 31, 2001. Current liabilities of the Company increased $282,066 from fiscal year end due to the increase in accounts payable and accrued expenses. PHAZAR CORP has a $3.0 million revolving demand line of credit that is partially guaranteed by a principal shareholder. The credit line is regulated under a borrowing base formula using inventories and accounts receivable as collateral. The interest rate is established as one percentage point over Wall Street prime and is subject to a loan agreement with restrictive covenants. The most restrictive financial covenant requires Antenna Products Corporation to maintain $1.5 million in tangible net worth and $1.0 million of working capital. As of August 31, 2001 Antenna Products Corporation and Phazar Aerocorp Inc. had drawn $505 thousand of the $3.0 million line of credit with $1,392,987 of the borrowing base available and unused. The revolving credit line agreement is renewable in October 2001. PHAZAR CORP anticipates renewal of this credit line and has projected that the credit available is sufficient to cover the operational requirements of the subsidiaries in fiscal year 2002. PHAZAR CORP (fka ANTENNA PRODUCTS, INC.) AND SUBSIDIARIES PART II-OTHER INFORMATION SIGNATURE --------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PHAZAR CORP Date: October 15, 2001 /s/ Clark D. Wraight -------------------------------------------- Clark D. Wraight, Vice President and Principal Financial Officer 15