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ANTP > SEC Filings for ANTP > Form 10-Q on 22-Apr-2013All Recent SEC Filings

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Form 10-Q for PHAZAR CORP


22-Apr-2013

Quarterly Report


Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management's discussion and analysis of certain significant factors that affected the Company's financial condition and operating results for the periods included in the consolidated financial statements in Item 1.

As reported on a Schedule 13D filed by Robert Fitzgerald on February 20, 2013, PHAZAR CORP received a going private merger offer from a company controlled by Mr. Fitzgerald. On March 13, 2013 the independent directors of PHAZAR CORP ("Company") approved the Agreement and Plan of Merger. Under the Merger Agreement, the shareholders of the Company will receive consideration of $1.25 per share in cash in immediately available funds.

As disclosed on Form 8-K dated March 19, 3013, the Company has entered into a definitive agreement pursuant to which the Company will go private and the existing shareholders of the Company will receive $1.25 per share in cash for their shares in the Company. Consummation of the going private transaction is subject to many factors including shareholder approval.

On April 2, 2013, the Company filed a preliminary proxy statement on Form 14A and the Company, QAR Industries, Inc., Antenna Products Acquisition Corp., Robert E. Fitzgerald and Concorde Equity II, LLC jointly filed a Schedule 13E-3.

The above referenced documents provide additional information on the Company and the contemplated going private transaction.

Company Overview

PHAZAR CORP's continuing operation is that of its subsidiaries, Antenna Products Corporation, Phazar Antenna Corp. and Thirco, Inc. The management discussion presented in this item relates to the operations of subsidiary units and the associated consolidated financials.

PHAZAR CORP operates as a holding company with Antenna Products Corporation, Phazar Antenna Corp. and Thirco, Inc. as its wholly owned subsidiaries. Antenna Products Corporation and Phazar Antenna Corp. are operating subsidiaries with Thirco, Inc. serving as an equipment leasing company to PHAZAR CORP's operating units. Antenna Products Corporation designs, manufactures and markets standard and custom antennas, guyed and self-supported towers, support structures, masts and communication accessories worldwide. The United States Government, military and civilian agencies and prime contractors are Antenna Products Corporation's principal customers. Phazar Antenna Corp. supplies a broad range of multiple band antennas for the telecommunication market.

PHAZAR CORP is primarily a build-to-order company. As such, most United States government and commercial orders are negotiated firm-fixed price contracts.


Executive Level Overview

The following table presents selected data of PHAZAR CORP. This historical data
should be read in conjunction with the consolidated financial statements and the
related notes.

                                Three Month Period Ended          Nine Month Period Ended
                                        March 31,                        March 31,
                                  2013             2012             2013            2012

Net Sales                     $   1,643,108     $ 1,485,107     $  4,298,074     $ 4,992,692

Gross profit margin percent              42 %            56 %             25 %            46 %

Net loss                      $    (168,196 )   $  (286,471 )   $ (3,187,683 )   $  (402,255 )

Net loss per share            $       (0.07 )   $     (0.12 )   $      (1.37 )   $     (0.17 )

Total assets                  $   4,424,430     $ 7,353,458     $  4,424,430     $ 7,353,458

Total liabilities             $   1,333,920     $   696,684     $  1,333,920     $   696,684

Capital expenditures          $           -     $    47,310     $          -     $    84,560

Results of Operations

Third Quarter Ended March 31, 2013 ("2013"), Compared to the Third Quarter Ended March 31, 2012 ("2012")

PHAZAR CORP's consolidated sales from operations were $1,643,108 for the quarter ended March 31, 2013 compared to sales of $1,485,107 for the quarter ended March 31, 2012. The Company's increase in revenues of $158,001, or 11%, is attributed to a 12% increase in the commercial wireless product line for the comparative quarters. Cost of sales and contracts from operations were $956,228 for the quarter ended March 31, 2013, compared to $651,211 for the quarter ended March 31, 2012, up $305,017, or 47% attributable to higher level of sales and an increase in plant utilization overhead charged to cost of goods sold. Gross profit margin for the quarter, at 42% is down fourteen basis points from the 56% gross profit margin reported in the comparable period last year.

Selling, general and administration expenses were down 41% for the quarter ended March 31, 2013, to $659,296 from $1,113,677 in the prior year, reflecting an increase in plant utilization overhead charged to cost of goods sold, lower level of wages and stock compensation expense partially offset by higher level of legal and professional costs for the comparative quarters. Discretionary product development spending for the quarter ended March 31, 2013 was $172,553, or 11% of sales, compared to $171,075, or 12% of sales for the comparable period last year.

The Company recorded a net loss of $168,196, or $(0.07) per share for the three month period ended March 31, 2013 compared to a net loss of $286,471 or $(0.12) per share for the comparable period in the prior year.

Nine Months Ended March 31, 2013 ("2013"), Compared to the Nine Months Ended March 31, 2012 ("2012")

Consolidated sales from operations for PHAZAR CORP were $4,298,074 for the nine months ended March 31, 2013 compared to $4,992,692 for the nine months ended March 31, 2012. The Company's sales fell by $694,618, or 14% attributable to a $1,116,454 non-recurring antenna shipment to EID-Portugal in fiscal year 2012 partially offset by an upturn in commercial wireless, shipboard and safety climb product lines during fiscal year 2013.

Costs of sales and contracts from operations were $3,207,190 for the nine months ended March 31, 2013 compared to $2,703,592 for the nine months ended March 31, 2012, up $503,598, or 19%. The increase is attributed to the $600,000 slow moving inventory reserve recorded in in the first quarter of fiscal year 2013 and an increase in plant utilization overhead offset by a decline in revenues over the nine month period. The gross profit margin for the nine month period ended March 31, 2013, at 25% was down twenty one basis points compared to the gross profit margin of 46% for the same period in the prior year.


Selling, general and administration expenses of $1,790,844 are down $787,791, or 31% for the nine months ended March 31, 2013 compared to $2,578,635 for the nine month period ended March 31, 2012. The $787,791 decline related to an increase in plant utilization overhead charged to cost of goods sold, along with a lower level of wages and stock compensation expense partially offset by an increase in legal and professional fees for the nine month period ended March 31, 2013 compared to the same nine month period in prior year. The impairment of note receivable reflects a $1,547,513 impairment charge on the Tracciare, Inc. note receivable.

Discretionary product development spending for the nine month period ended March 31, 2013 was $531,525, or
12 % of sales, compared to $397,935, or 8% of sales for the comparable period last year. Year over year there is an increase of $133,590 in discretionary product development spending. The increase represents continued product development for the commercial wireless product line.

The Company recorded a net loss of $3,187,683, or $(1.37) per share for the nine month period ended March 31, 2013 compared to a net loss of $402,255, or $(0.17) per share for the comparable period in the prior year.

Liquidity and Capital Resources

Sources of Liquidity

As previously discussed, the Company has entered into an agreement by which it will go private no later than July 31, 2013, provided it receives shareholder approval. The Company currently anticipates that it has adequate operating capital through the close of the transaction. But should the Company experience unexpected operational difficulties or delays in the transaction closing or if the transaction is not consummated for any reason, the Company will most likely need additional capital, including capital to repay the $500,000 loan received from QAR Industries, Inc. which carries a maturity date of July 31, 2013. There is no guarantee that the Company will be able to procure additional capital and if it is successful, it is likely that such capital will be highly dilutive to current shareholders.

Capital Requirements

Management of the operating subsidiaries evaluates the facilities and reviews equipment requirements for existing and projected contracts on a regular basis. For the nine month period ended March 31, 2013, there were no capital expenditures for new and replacement equipment compared to $84,560 in capital expenditures in the comparable period of fiscal year 2012.

At March 31, 2013, PHAZAR CORP had cash and cash equivalents of $683,499. There was $262,341 of deferred revenues at March 31, 2013 and $500,000 in funds received from QAR Industries, Inc. Promissory Note funded on March 18, 2013.

Cash Flows

Operating Activities

Cash and cash equivalents of $683,499 at March 31, 2013 are up $154,623, or 29% compared to a balance of $528,876 as of June 30, 2012. The primary components of the increase in cash at the end of the period consists of $500,000 of cash provided from the funding of a promissory note from QAR Industries, Inc. offset by $275,025 of cash used in operating activities, consisting of a $277,739 increase in inventories (net of slow moving reserve) associated with work in process jobs scheduled to ship later in the fiscal year and a $138,489 decrease in accounts payable.

Investing Activities

Cash of $70,352 was used in investing activities during the nine month period ended March 31, 2013, which consists of $70,352 of funding for the note receivable.

Financing Activities

There was $500,000 of financing activities from the funding of the promissory note from QAR Industries, Inc. during the nine month period ended March 31, 2013. At March 31, 2013 and 2012, PHAZAR CORP had no long-term debt outstanding.


Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company's financial conditions.

Forward Looking Statement Disclaimer

This Form 10-Q contains forward-looking information within the meaning of
Section 29A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performances and underlying assumption and other statements, which are other than statements of historical facts. Certain statements contained herein are forward-looking statements and, accordingly, involve risks and uncertainties, which could cause actual results, or outcomes to differ materially from those expressed in the forward-looking statements. The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitations, management's examination of historical operating trends, data contained in the Company's records and other data available from third parties, but there can be no assurance that management's expectations, beliefs or projections will result, or be achieved, or accomplished.

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