FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2014
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from Not Applicable to Not Applicable
Commission file number: 0-147
HICKOK INCORPORATED
(Exact name of registrant as specified in its charter)
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Registrant's telephone number (216) 541-8060
Securities registered pursuant to
Section
12(b) of the Act:
NONE
Securities
registered pursuant to Section 12(g) of the Act:
Class
A Common Shares, without par value
(Title
of
Class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as
defined by Rule 405 of the Securities Act.
Yes
[ ] No
[X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate
by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes
[X]
No [ ]
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every
Interactive Data File required to be submitted and posted pursuant to
Rule 405 of Regulation S-T(232.405 of this chapter)during the preceding
12 months (or for such shorter period that the registrant was required
to submit and post such files).
Yes
[X] No [ ]
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K(229.405 of this chapter) is not contained herein, and
will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information
statements incorporated by reference in Part III of this Form 10-K or
any amendment to this Form 10-K.
[ ]
Indicate
by check
mark whether the registrant is a large accelerated filer, an
accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of "large accelerated filer,""accelerated filer" and
"smaller reporting company"
in Rule 12b-2 of the Exchange Act.
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Large accelerated
filer [ ]
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Accelerated
filer [ ]
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Non-accelerated
filer [ ]
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Smaller reporting
company [X]
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Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act).
Yes [ ] No [X]
As of
March 31, 2014 the Registrant had 1,163,349 voting shares of Class A
Common Stock outstanding and 474,866 voting shares of Class B Common
Stock outstanding. As of such date, non-affiliates held 641,405 shares
of Class A Common Stock and 85,056 shares of Class B Common Stock. As
of March 31, 2014, based on the closing price of $2.34 per
Class A Common Share on the Over The Counter Bulletin Board, the
aggregate
market value of the Class A Common Stock held by such non-affiliates
was approximately $1,500,888. There is no trading market in the shares
of Class B Common Stock.
As of
January 2, 2015, 1,163,349 shares of Class A Common Stock and 474,866
shares of Class B Common Stock were outstanding.
Documents Incorporated by Reference:
| PART OF FORM 10-K | DOCUMENT INCORPORATED BY REFERENCE |
| Part III (Items 10, 11, 12, 13 and 14) | Portions of the Registrant's Definitive Proxy Statement to be used in connection with its Annual Meeting of Shareholders to be held on February 25, 2015. |
Except as otherwise stated, the information contained in this Form 10-K is as of September 30, 2014.
PART I
General Development of Business
Hickok
Incorporated
was founded in 1910 and organized in 1915 as an Ohio corporation, and
first offered its securities to the public in 1959. Except as otherwise
stated, the terms "Company"
or "Hickok" as used herein mean Hickok Incorporated and its two
wholly-owned
subsidiaries, Supreme Electronics LLC and Waekon LLC. Hickok develops
and manufactures products used by companies in the transportation
industry. Primary markets served are automotive, emissions testing,
aircraft, and locomotive with sales both to original equipment
manufacturers (OEMs) and to the aftermarkets.
The
Company's Internet address is
http://www.hickok-inc.com
.
Hickok makes available free of charge on or through its website its
annual
report on Form 10-K, quarterly reports on Form 10-Q, current reports on
Form 8-K, and amendments to those reports filed or furnished pursuant
to Section 12(a) or 15(d) of the Securities Exchange Act of 1934 as
soon as reasonably practicable after the Company electronically files
such materials with, or furnishes it to, the Securities and Exchange
Commission (the "SEC"). The SEC maintains an Internet site that
contains these reports at
www.sec.gov
.
The Company was founded producing D’Arsonval indicators and continues to manufacture these products today. The current Indicator product line is focused on highly reliable specialized indicators used in the cockpits of certain aircraft, locomotives, and transit vehicles. It is a stable line of business with few competitors in the market. The indicator business represents approximately 24% of the Company’s revenue.
Until the mid 1980s, Hickok was known primarily for its ability to develop and manufacture electronic instruments for electronic servicers, precision indicating instruments for aircraft, locomotive, and industrial applications, and electronic teaching systems for vocational schools. For the past twenty-seven years the Company has used this expertise to develop and manufacture electronic diagnostic tools and equipment used by automotive technicians in the automotive service market. This is now the Company's largest business segment. The Company generated approximately 76% of its fiscal 2014 revenue from designing and manufacturing diagnostic tools for automotive diagnostics and testing. These tools enable service technicians to identify problems in both electronic systems and other non-electronic systems in automobiles and trucks.
Nineteen years ago, two large automotive OEM companies comprised over 80% of the Company's business. A substantial portion of this business was contingent on large programs initiated by these OEMs on a year-to-year basis. The Company recognized that OEMs were changing and that the likelihood of the continuation of these yearly large programs was diminishing. Recognizing that customer diversification was desirable and that much of the technology that had been developed for OEMs could have application to the non-dealer service market (known as the aftermarket), the Company added new products, customers and an established aftermarket sales channel with the acquisition of Waekon Industries in 1998. As a result, the Company executed a strategy to use this existing technical and manufacturing expertise and to develop sales and marketing skills applicable to the automotive aftermarket service industry. The Company uses Waekon, Hickok, and Hickok/Waekon as the brands of its products that are primarily marketed to aftermarket service organizations.
The Company continues to develop aftermarket service tools and in recent years has successfully cultivated relationships with Tier 1 OEM service tool suppliers as well. The Company has increased its revenue from these customers in the past several years and now puts as much emphasis on this market segment as it does with respect to tools for the aftermarket. Most of these tools are branded to the Tier 1 supplier’s requirements. These tools tend to be more complex than typical aftermarket tools, but the technology developed often has application to subsequent aftermarket products.
The Company's operations are currently concentrated in the United States of America. Sales are primarily to domestic customers, although the Company also makes sales to international customers through domestically based distribution companies.
Operating Segment Information
The Company's operations are combined into two reportable business segments: 1) indicators and gauges and 2) automotive diagnostic tools and equipment. Reference is made to "Segment and Related Information" included in the notes to the financial statements.
Indicators and Gauges
For over one hundred years the Company has developed and manufactured precision indicating instruments used in aircraft, locomotives and other applications. In recent years the Company has specialized in aircraft and locomotive cockpit instruments. Within the aircraft market, instruments are sold primarily to manufacturers or servicers of business, military, and pleasure aircraft. Within the locomotive market, indicators are sold to both original equipment manufacturers and to operators of railroad equipment. Indicators and gauges represented approximately 24% of the Company's sales for fiscal 2014 and 26% for fiscal 2013. A number of the Company's aircraft instruments are FAA certified and a number of others are type certified with aircraft manufacturers. A significant revenue source within this segment is for high reliability ruggedized movements used on certain military aircraft. However, these products are subject to federal government funding of military programs and can vary significantly from year to year.
Although the Company does not view this segment as having a high growth potential, it does contribute significant revenues and margins. The Company believes year to year variation of revenue is more dependent on customer timing than any general market direction.
Automotive Diagnostic Tools and Equipment
The Company has concentrated on designing and marketing instruments used to diagnose automotive electronic systems. These products were initially sold to one OEM but are now sold to several automotive OEMs through Tier 1 suppliers, and to the aftermarket using jobbers, wholesalers and mobile distributors. Sales of products designed specifically to OEM requirements have been balanced with products developed for automotive aftermarket servicers and the emissions testing industry. The aftermarket accounted for approximately 22% of the Company's automotive diagnostic and specialty tool sales in fiscal 2014 and 26% for fiscal 2013. As a whole, automotive diagnostic tools and equipment represented approximately 76% of the Company's sales for fiscal 2014 and 74% for fiscal 2013. The percentage increase was due primarily to higher OEM sales in fiscal 2014 compared to fiscal 2013.
The Company's primary expertise is electronic measurement of physical properties and it has cultivated a reputation for developing innovative tools for automotive diagnostics. The Company uses this reputation as leverage when it introduces new offerings. Our recent focus on tools for automotive technicians results in low cost tools that are easy to use, save technicians time, and improve diagnostic accuracy. OEM tools tend to be tools that are sophisticated and allow the technician diagnostic access to vehicle systems that are otherwise inaccessible for the technician to pinpoint the vehicle’s issue. An example of this is the Active Fuel Injector Tester ("AFIT"), which the Company introduced several years ago to General Motors dealers.
In
2009, at the OEM’s request, we developed accessory interfaces that
allow the same level of ability to diagnose fuel injection system
issues for Diesel engines and the recently introduced Gasoline Direct
Injection ("GDI") engines. General Motors decided to equip their North
American dealers with technology to diagnose fuel issues on their GDI
engines and the Company furnished over 3,800
adapters to the AFIT Tester during fiscal 2014. General Motors has also
inquired about the technology for a global tool to address the GDI
engines and the Company is currently preparing a proposal for
global use based on
the technology developed for North American dealers. In addition to
General Motors, the Company produces several testers for use on
Chrysler
and John Deere products as well as several other OEMs that are also
sold
through Tier 1 suppliers. Furthermore, an OEM has expressed
interest in three of our
aftermarket products as possible tools required in their dealerships
and we
have several active proposals with
Tier 1 suppliers for products they have expressed interest in for their
customers.
Over
the past four years, we have updated essentially all our aftermarket
products and recently introduced a unique product that economically
offers a service person the capabilities of an oscilloscope to view
waveforms, but with the simple operation of a digital camera.
Introduced
in September 2014, the response to this product, to date has been
exceptional. Our plan
is to continue to develop products for automotive service, and at least
four new products are currently expected to be introduced during fiscal
2015. The new products and the improved economy are resulting in
increased
sales activity and revenues on all the recent introductions.
Unfortunately, two older products sold in the aftermarket that were
originally OEM tools (NGS products) and were large revenue generators
for the Company in the past have been declining in sales, resulting in
only small
apparent increases in our aftermarket sales. Such older products no
longer
represent significant revenue to us and the actual growth in
aftermarket
sales of newer products should be evident in the future.
Aftermarket sales channels are always changing and 2014 was no exception. The most effective way to introduce new products has been to grant a major distributor an exclusive right to purchase and market for an initial period during introduction because they historically put a great emphasis on the product for the exclusivity period. Three of the products the Company introduced to the automotive aftermarket this past year followed this concept. Unfortunately, all three of these distributors underwent upheavals during the period of our product introduction and the emphasis we expected did not materialize. Late in fiscal 2014, the products were taken to the general distribution channels and all three are starting to build the customer acceptance we expected much earlier in the year. The Company’s plan is to continue to develop new and unique products for the automotive aftermarket and likely we will continue to use the exclusive distributor introduction strategy.
During 2014, our sales and marketing team have upgraded our internet sites and capabilities immensely. The Company introduced a subscription program for the NGS PC product that required developing the infrastructure and expertise necessary for an internet store. We believe many of our automotive aftermarket products with minor adaptations are attractive tools for many service technicians outside the automotive industry. Our current distribution channels are relatively concentrated in the automotive market, however, we have been successful in having a number of our products incorporated on the internet sites of Home Depot and Amazon and many of our sales through these channels have been to non-automotive service customers.
The
Company is planning to expand our offerings to these non-automotive
customers using the Internet as the initial sales channel. We are
extensively using social media, video demonstration, and e-mail
advertising to reach customers. To date these efforts have been to
customers in
automotive service but we intend to expand these techniques to other
industries. In addition, during fiscal 2014 we completed the upgrade of
our MIS system to the latest capability and began a major upgrade to
the Company's IT infrastructure, both hardware and software. The
Company's IT infrastructure upgrade is anticipated to be completed in
fiscal 2015. Our plan is to continue this emphasis to further improve
our presence in the electronic market places.
Emissions
testing products for gas caps and gas tanks were a major revenue
contributor for the Company for a number of years as new state testing
programs were implemented. Despite very few state programs being
implemented in recent years, we continue to enjoy a base level of
business for these products as replacements and as new stations join
the various state programs. In 2013, the only competing manufacturer of
gas cap testers announced that it was discontinuing the manufacture and
service of their gas cap testers. Thereafter we briefly enjoyed
increased business
in replacement testers and expected that this increased business to
continue
into 2014, but it did not. In addition, we continue to sell small
quantities of our gas tank tester to service stations in California.
Sources and Availability of Raw Materials
Raw materials essential to the business are acquired from a large number of United States of America manufacturers and some materials are now purchased from European and Southeast Asian sources. Materials acquired from the electronic components industry include transistors, integrated circuits, resistors, capacitors, switches, potentiometers, micro controllers, and other passive parts. Fabricated metal or plastic parts are generally purchased from local suppliers or manufactured by the Company from raw materials. In general, the required materials are available, if ordered with sufficient lead times, from multiple sources at current prices.
Importance of Patents, Licenses, Franchises, Trademarks and Concessions
The Company presently has several patents that relate to several of its products. The Company believes that its position in the industry is dependent upon its present level of engineering skill, research, sales relationships, production techniques and service. However, the Company does have several basic methodology patents related to products it offers that it considers very important to future revenue. Of the Company's most critical patents, one is related to the testing of evaporative emissions systems that was the basis for the Company's product offering for the State of California. This patent expires in the year 2022. Another critical patent is related to vehicle fuel cap testing which expires in 2018. The Company monitors the marketplace for infringement of its patents and intends to pursue its rights should an infringement take place. The Company is currently engaged in such a proceeding. See Item 3 Legal Proceedings. Other than the names "Hickok" and "Waekon", the Company does not have any material licenses, trademarks, franchises or concessions.
Seasonality
The Company believes that there is a seasonality to the automotive aftermarket revenues. Typically the first and fourth quarters tend to be weaker than the other two quarters in this market. Orders for OEM or emissions testing products are primarily subject to customer timing requirements and have no known seasonality aspect to them. As a result, operating results can fluctuate widely from quarter to quarter and year to year.
Practices Relative to Working Capital Items
The nature of the Company's business requires it to maintain sufficient levels of inventory to meet rapid delivery requirements of customers. The Company provides its customers with payment terms prevalent in the industry.
Dependence on Single or Few Customers
Several aftermarket distribution companies and several equipment OEMs have become significant sources of revenue for the Company. Sales in fiscal 2014 to Bosch, a Tier 1 supplier to numerous OEMs, amounted to approximately $2,768,000 or 44% of the consolidated sales of the Company, sales to Snap-On amounted to approximately $341,000 or 5% of the consolidated sales of the Company and sales to Electro-Motive amounted to approximately $284,000 or 4% of the consolidated sales of the Company. In fiscal 2013 sales to Bosch amounted to approximately $2,304,000 or 36% of the consolidated sales of the Company, sales to General Electric amounted to approximately $651,000 or 10% of the consolidated sales of the Company and sales to Opus Inspection, Inc. amounted to approximately $242,000 or 4% of the consolidated sales of the Company. Sales to Bosch amounted to approximately $905,000 or 19% of the consolidated sales of the Company, sales to General Electric amounted to approximately $710,000 or 15% of the consolidated sales of the Company and sales to Opus Inspection, Inc. amounted to approximately $229,000 or 5% of the consolidated sales of the Company during fiscal 2012. The Company does not have exclusive supply agreements or long-term contractual relationships with these large customers.
Backlog
The Company's order backlog as of September 30, 2014 totaled $539,000 as compared to $631,000 as of September 30, 2013 and $707,000 as of September 30, 2012. The decrease in fiscal 2014 versus 2013 was due to decreased orders for indicators and gauges of approximately $215,000. In addition, automotive diagnostic products orders to OEM's increased by approximately $102,000 and $24,000 for emission products, offset by a decrease of $3,000 for non-emission aftermarket products. The decrease in fiscal 2013 versus 2012 was due to decreased orders for indicators and gauges of approximately $36,000. In addition, automotive diagnostic products orders to OEM's decreased by approximately $56,000 and $2,000 for emission products, offset by an increase of $18,000 for non-emission aftermarket products.Government Contract Renegotiation
No major portion of the business is open to renegotiation of profits or termination of contracts or subcontracts at the election of the United States Government. The amount of revenue derived from government contracts is currently minimal and not material.
Competitive Conditions
The Company is engaged in a highly competitive industry and faces competition from domestic and international firms. Several of the Company's competitors have greater financial resources and larger sales organizations than the Company. Competition with respect to the Company's diagnostic tool business arises from the existence of a number of other significant manufacturers in the field, such as Bosch and Snap-On, which dominate the available market in terms of total sales. The instrumentation industry is composed primarily of companies that specialize in the production of particular items as compared to a full line of instruments. The Company believes that its competitive position in this field is in the area of smaller, specialized products, an area in which the Company has operated and in which the Company has established itself competitively by offering high-quality, high-performance products in comparison to high-volume, mass-produced items.
The
Company depends on the automotive industry for sales of its OEM and
aftermarket products. The Company's results of operations were
adversely affected by the deterioration in the automotive industry's
performance during the fiscal 2012 and 2011 years, as well as
poor economic conditions throughout the country. The Company
anticipates that it will continue to face significant challenges due to
competition, however markets appear to be continuing to improve. The
two markets
are driven by different considerations. The OEM market tends to be
driven by the need
for new tools due to the introduction of new technologies in vehicles
or excessive warranty costs. Because of dealership economics, OEMs
are reluctant to require dealers to purchase service tools. The
aftermarket is largely driven by the economics of fixing vehicles.
During poor economic times, purchases can be delayed. Although
aftermarket parts suppliers have done well during the past few years,
aftermarket tool suppliers have not. Our strategy of
developing products that target the technician and low cost tools for
shop use is an outgrowth of these realities in the marketplace. We
believe substantial opportunities for growth depends primarily on the
introduction of new
and innovative products to the sectors we service.
In addition to automotive service products, the Company diversified
some years ago into the emissions testing market. This market has also
been depressed partially because EPA
requirements for state emissions testing program requirements have
changed and partially because state budgets have not allowed the
implementation of new testing programs. The Company briefly experienced
improved sales of emissions products in part due to
the discontinuance of certain emissions products by a competitor
and we expect the market to remain at historical levels.
Research and Development Activities
The Company expensed as incurred product development costs of $965,975 in 2014, $939,373 in 2013 and $938,058 in 2012. These expenditures included engineering product support and development of manuals for both of the Company's business segments.
Compliance with Environmental Provisions
The Company's capital expenditures, earnings and competitive position are not materially affected by compliance with federal, state and local environmental provisions which have been enacted or adopted to regulate the distribution of materials into the environment.
Number of Persons Employed
Total employment by the Company at September 30, 2014 was 87 full-time employees which represents a 10% increase from 79 employees in fiscal 2013 and a 14% increase from 76 employees in fiscal 2012. The Company has no part-time employees. None of the employees are represented by a union. The Company considers its relations with its employees to be good.
Financial Information Concerning Foreign and Domestic Operations and Export Sales
During the fiscal year ended September 30, 2014, all manufacturing, research and development and administrative operations were conducted in the United States of America. Revenues derived from export sales approximated $156,000 in 2014, $148,000 in 2013, and $163,000 in 2012. Shipments to Australia, Canada, Mexico and Taiwan make up the majority of export sales.
Not
Applicable.
ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not Applicable.
As of December 17, 2014 the Company had facilities in the United States of America as shown below:
Cleveland,
Ohio
Two-story
brick construction; used for corporate
administrative
headquarters, marketing and product development with limited
manufacturing.
Greenwood,
Mississippi
One-story
modern concrete block construction; used for
manufacturing
instruments, test equipment, and fastening systems products.
Leased,
with annual renewal options extending through 2061.
The Company believes its plants and offices are in satisfactory
operating
condition, well maintained, adequate for the uses to which they are put
and are
adequately insured. Both of the Company's business segments utilize
these
properties.
ITEM 4. MINE SAFETY DISCLOSURES.
Not Applicable.
ITEM 4A. EXECUTIVE OFFICERS OF REGISTRANT.*
The following is a list of the executive officers of the Company as of September 30, 2014. The executive officers are elected each year and serve at the pleasure of the Board of Directors. Mr. Robert Bauman was elected Chairman by the Board of Directors in July 1993 and served as chairman until May 2001. He has been President since 1991 and Chief Executive Officer since 1993. The Board of Directors elected Mr. Gregory Zoloty Vice President of Finance and Chief Financial Officer in May 2001. Mr. Zoloty was Vice President of Accounting and Chief Accounting Officer since 1994. He joined the Company in 1986. Mr. James Allen was elected Vice President of Manufacturing by the Board of Directors in March 2012. Mr. Allen was elected Vice President of Production Engineering in February 2009. He joined the Company in August 1979. Mr. George Hart was elected Vice President of Engineering by the Board of Directors in February 2004. He joined the Company in April 1985. Mr. Patrick Bauman was elected Vice President Sales and Marketing by the Board of Directors in March 2012. Mr. Patrick Bauman was elected Vice President Distribution Sales and Marketing by the Board of Directors in February 2010. Mr. Patrick Bauman is the son of Mr. Robert Bauman. He joined the Company in December 1995.
| OFFICE | OFFICER | AGE |
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| President and Chief Executive Officer | Robert L. Bauman | 74 |
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| Vice President, Finance and Chief Financial Officer | Gregory M. Zoloty |
62
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| Vice President, Manufacturing |
James F. Allen
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52 |
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Vice President, Sales and Marketing
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Patrick R.
Bauman
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44
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Vice President,
Engineering
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George
R. Hart
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57
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*The description of Executive Officers called for in this Item is included pursuant to Instruction 3 to Section (b) of Item 401 of Regulation S-K.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
a) MARKET INFORMATION
During fiscal 2014 our Class A Common Shares were traded on The Over-The Counter Bulletin Board Market under the symbol HICKA.QB. There is no market for the Registrant's Class B Common Shares.
The following table sets forth the per share range of high and low bids (Over-The-Counter Bulletin Board) for the Registrant's Class A Common Shares for the periods indicated. The Over-The-Counter Bulletin Board prices reflect inter-dealer prices without retail markup, markdown or commissions and may not represent actual transactions. Data was supplied by Nasdaq.
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| Fourth Quarter |
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b) HOLDERS
As of January 2, 2015, there were approximately 184 shareholders of record of the Company's outstanding Class A Common Shares and 5 holders of record of the Company's outstanding Class B Common Shares.
c) DIVIDENDS
In
fiscal 2014, 2013 and
2012 the Company paid no dividends on either of its Class A or Class B
Common Shares. Pursuant to the Company's Amended Articles of
Incorporation, no dividends may be paid on Class B Common Shares until
cash dividends of ten cents per share per fiscal year are
paid on Class A Common Shares. Any determination to pay cash dividends
in
the future will be at the discretion of the Board of Directors after
taking into
account various factors, including the Company's financial condition,
results
of operations and current and anticipated cash needs.
ITEM 6. SELECTED FINANCIAL DATA.
FOR THE YEARS ENDED SEPTEMBER 30
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2014
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2013
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2012
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2011
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2010 | ||||||||
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| Net Sales |
$
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6,306
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$
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6,466
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$
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4,761
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$
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5,069
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$
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5,259
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| Net Income (Loss) |
$
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8
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$
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139
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$
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(784)
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$
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(673)
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$
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(949)
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| Working Capital |
$
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2,809
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$
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2,442
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$
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1,936
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$
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2,447
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$
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2,784
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| Total Assets |
$
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3,700
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$
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3,505
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$
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3,206
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$
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3,441
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$
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3,809
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| Long-term Debt |
$
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435
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$
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-0-
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$
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-0-
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$
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250
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$
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-0- | |||
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| Total Stockholders' Equity |
$
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2,759
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$
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2,748
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$
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2,318
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$
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2,621
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$
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3,281
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| Net Income (Loss) Per Share |
$
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.01
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$
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.09
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$
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(.57)
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$
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(.54)
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$
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(.76)
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| Dividends Declared |
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$
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-0-
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$
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-0-
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$
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-0-
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$
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-0-
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$
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-0-
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||||||||
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$
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-0-
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$
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-0-
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$
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-0-
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$
|
-0-
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$
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-0-
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| Stockholders' Equity |
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||||||||
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||||||||
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$
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1.68
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$
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1.68
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$
|
1.52
|
|
2.10
|
$
|
2.63
|
|||
|
|
|
|
|
|
|
||||||||
| Return on Sales |
.1%
|
2.1%
|
(16.5%)
|
(13.3%)
|
(18.1%)
|
||||||||
|
|
|
|
|
|
|
||||||||
| Return on Assets |
.2%
|
4.1%
|
(23.6%)
|
(18.6%)
|
(22.3%)
|
||||||||
|
|
|
|
|
|
|
||||||||
| Return on Equity |
.3%
|
5.5%
|
(31.7%)
|
(22.8%)
|
(25.3%)
|
||||||||
|
|
|
|
|
|
|
||||||||
| Closing Stock Price |
$
|
2.11
|
$
|
2.04
|
$
|
1.25
|
$
|
1.80
|
$
|
4.25
|
|||
|
|
|
|
|
|
|
||||||||
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
IntroductionExpense Control
Management continues to monitor its expense reduction initiatives implemented and revised from 2008 to 2011. During fiscal 2013 and 2012, management developed a plan that included a limited increase in personnel and a small increase in the compensation of existing personnel. The changes were intended to accelerate both the introduction of new products and to enhance the sales of existing products through improved market presence and promotion. Management believes its strategy to improve revenue and profitability aided results in fiscal 2014 and 2013 and will continue to aid results during fiscal 2015. The Company currently has no plans to add resources in fiscal 2015 unless revenue opportunities warrant such an increase.
Reportable Segment Information
The Company is required to report segment information disclosures based on how management evaluates operating performance and resource allocations. The Company has determined that it has two reportable segments: 1) indicators and gauges, and 2) automotive related diagnostic tools and equipment.
Indicators and Gauges
This segment consists of products manufactured and sold primarily to companies in the aircraft and locomotive industry. Within the aircraft market, the primary customers are those companies that manufacture or service business, military and pleasure aircraft. Within the locomotive market, indicators and gauges are sold to original equipment manufacturers, servicers of locomotives, and operators of railroad equipment.
Automotive Diagnostic Tools and Equipment
This segment consists primarily of products designed and manufactured to support the testing or servicing of automotive and truck systems using electronic means to measure vehicle parameters. These products are sold to OEMs and to the aftermarket using several brand names and a variety of distribution methods. Included in this segment are products used for state required testing of vehicle emissions.
Results of Operations
Sales for the fiscal year ended September 30, 2014 decreased to $6,305,836, a decrease of approximately 3% from fiscal 2013 sales of $6,466,172. This decrease in sales was volume-driven and attributable primarily to lower product sales of approximately $112,000. Service sales in fiscal 2014 decreased by approximately $48,000 compared to fiscal 2013 due to volume. Product sales were $6,078,349 in fiscal 2014 compared to $6,190,260 in fiscal 2013. The decrease in product sales occurred in the indicator and gauge segment. Within the automotive diagnostic products, OEM products sales increased approximately $504,000 offset by a decrease in emissions products and aftermarket products of approximately $321,000 and $148,000 respectively. Sales of indicator products decreased in fiscal 2014 by approximately $147,000 and was volume related due primarily to decreased military movement orders. Both fiscal 2014 and 2013 benefited from a large order from a Tier 1 Supplier to a large OEM. The reduction in service sales was volume related and attributable to lower repair sales.Cost of services sold in fiscal 2014 was $149,068 or 65.5% of net service sales compared to $138,307 or 50.1% respectively in fiscal 2013. Cost of services sold during fiscal 2012 was $216,949 or 68.0% of net service sales. The dollar and percentage increase between fiscal 2014 and 2013 was due primarily to product specific technical issues of the chargeable repairs in fiscal 2014. The dollar and percentage decrease between fiscal 2013 and 2012 was due primarily to price adjustments, lower costs and the elimination of certain products for chargeable repairs.
Product development expenditures in fiscal 2014 were $965,975 or 15.9% of product sales compared to $939,373 or 15.2%, respectively, in fiscal 2013. Product development expenditures during fiscal 2012 were $938,058 or 21.1% of product sales. The percentage increase between fiscal 2014 and fiscal 2013 was due primarily to the decrease in sales volume during fiscal 2014. The dollar increase was primarily in labor costs and research and experimental material of approximately $19,000 and $9,000 respectively. The percentage decrease between fiscal 2013 and fiscal 2012 was due primarily to the increase in sales volume during fiscal 2013. The dollar increase was primarily in research and experimental material expense and labor costs of approximately $3,000 and $1,000 respectively, offset in part by a decrease in travel expenses of $3,000. Management believes current resources will be sufficient to maintain current product development commitments and to continue to develop a reasonable flow of new diagnostic products for both the OEM and aftermarket customers.
Marketing
and administrative expenses amounted to $1,728,107 which was
27.4% of net sales in fiscal 2014, $1,812,598 or 28.0% of net sales in
fiscal 2013 and $1,616,320 or 33.9% of net sales in fiscal 2012. The
dollar decrease in fiscal 2014 compared to fiscal 2013 was due to
decreases in both marketing and administrative expenses. Marketing
expenses were approximately $712,000 in fiscal 2014 compared to
$761,000 a year ago. Within marketing expenses, decreases were
primarily in commissions of $50,000, advertising of $14,000, promotion
expense of $5,000, collection expense of $5,000 and outside consulting
of $4,000. The decreases were offset in part by an increase in royalty
expense of $15,000 and labor costs of $12,000. Administrative expenses
were approximately $1,017,000 during the current fiscal year compared
to $1,052,000 a year ago. The dollar decrease was due primarily to
decreases in professional fees of $19,000, rent machinery and equipment
of $10,000, depreciation expense of $8,000, data processing fees of
$4,000, travel expense of $3,000 and repairs and maintenance costs of
$2,000. The decreases were offset in part by an increase in labor costs
of $18,000.
The percentage decrease in marketing and administrative expenses in fiscal 2013 compared to fiscal 2012 was due to the higher sales volume in fiscal 2013. The dollar increase in fiscal 2013 compared to fiscal 2012 was due to increases in both marketing and administrative expenses. Marketing expenses were approximately $761,000 in fiscal 2013 compared to $626,000 in fiscal 2012. Within marketing expenses, increases were primarily in royalty expense of $48,000, commissions of $44,000, labor costs of $24,000, advertising of $12,000, promotion expense of $5,000 and collection expense of $1,000. The increases were offset in part by a decrease in outside consulting of $3,000. Administrative expenses were approximately $1,052,000 during fiscal 2013 compared to $990,000 in fiscal 2012. The dollar increase was due primarily to increases in professional fees of $99,000, data processing fees of $7,000 and travel expense of $2,000. The increases were offset in part by a decrease in rent machinery and equipment of $14,000, depreciation of $12,000, repairs and maintenance costs of $6,000, directors fees of $4,000 and labor costs of $3,000.
Interest charges were $6,592 in fiscal 2014 compared with $91,178 in fiscal 2013 and $5,956 in fiscal 2012. The current year interest expense is primarily due to the recording of interest expense on the short-term demand notes of approximately $6,364. The decrease in interest charges in fiscal 2014 compared to fiscal 2013 was due primarily to recording as non-cash interest expense the present value of warrants issued in December 2012 with no similar charges in fiscal 2014. The increase in interest charges in fiscal 2013 compared to fiscal 2012 was due primarily to recording as non-cash interest expense the present value of warrants issued in December 2012. The current convertible note payable with one of the Company's major shareholders, who is also a director of the Company, is available through December 30, 2014.
Other income was $14,374 in fiscal 2014 compared with $13,816 in fiscal 2013 and $19,240 in fiscal 2012. Other income consists primarily of interest income on cash and cash equivalents and proceeds from the sale of scrap metal shavings. The increase in fiscal 2014 compared to fiscal 2013 was due primarily to to an increase in the sale of scrap metal shavings of approximately $5,000 offset by a decrease in interest income of approximately $4,000. The decrease in interest income in fiscal 2014 was due to a lower level of cash and cash equivalents available for investment. The decrease in fiscal 2013 compared to fiscal 2012 was due primarily to a decrease in the sale of scrap metal shavings of approximately $5,000 offset by an increase in interest income of approximately $3,000. In addition, fiscal 2013 did not have a gain on sale of fixed assets compared to the fiscal 2012 gain of $4,000. The increase in interest income in fiscal 2013 was due to higher level of cash and cash equivalents available for investment. Currently, excess cash is invested in a money market account.Income taxes in fiscal 2014 were $0 which includes an increase in the valuation allowance on deferred income taxes of $44,400. In fiscal 2013 income taxes were $0 which included a decrease in the valuation allowance on deferred income taxes of $114,400. In fiscal year 2012 management recorded a valuation allowance in the amount of $187,400 on the current year deferred taxes. It is anticipated that the effective tax rate in fiscal 2015 will be similar to fiscal 2014. The expiration of the Company's net operating loss and research and development credit carryforwards could occur before they can be used. The deferred tax benefits begin to expire in fiscal 2016.
Net income in fiscal 2014 was $8,376, or $.01 per share as compared to the net income of $138,804, or $.09 per share in fiscal 2013. The decrease in net income in fiscal 2014 was primarily due to a lower sales volume and lower product margins. The net income in fiscal 2013 was $138,805, or $.09 per share as compared to the net loss of $783,966 or $.59 per share in fiscal 2012. The improvement of approximately $923,000 in 2013 was due primarily to the increased sales volume attributed to the significant order from a Tier 1 supplier for an OEM. The net loss in fiscal 2012 was due primarily to a lower sales volume in 2012.
The Company has available a net operating loss carryforward of approximately $5,500,000 and research and development credit carryforwards of approximately $1,800,000 that begin to expire in fiscal 2016. The Company's entire deferred tax asset of $4,166,700 has been offset by a valuation allowance of $4,166,700. Because of the uncertainties involved with this significant estimate, it is reasonably possible that the Company's estimate may change.
Liquidity and Capital Resources
Current assets of $3,314,781 at September 30, 2014 were 6.6 times current liabilities and the total of cash and cash equivalents and receivables was 3.1 times current liabilities. These ratios compare to 4.2 and 2.1 respectively at the end of fiscal 2013. Cash and cash equivalents was $390,327 at September 30, 2014 and $938,852 at September 30, 2013. Total current assets increased by approximately $115,000 from the previous year end due primarily to an increase in accounts receivable, inventory and prepaid expenses of approximately $534,000, $124,000 and $6,000, respectively. The increases were offset by a decrease in cash and cash equivalents of approximately $549,000. The increase in accounts receivable was due primarily to an increase in the sales volume in the last quarter of the fiscal year 2014. Inventory increased due primarily to a decrease in the obsolescence reserve during the current year and the increase in prepaid expenses was due primarily to timing.
Working capital at September 30, 2014 was $2,809,348 as compared to $2,442,454 a year ago. The increase of approximately $367,000 was due primarily to an increase in accounts receivable, inventory and prepaid expenses of approximately $534,000, $124,000 and $6,000, respectively, by a decrease in cash and cash equivalents of approximately $549,000. In addition, there were decreases in accrued expenses, accounts payable and accrued payroll and related expense of approximately $217,000, $29,000, and $10,000, respectively. The increase in accounts receivable was due primarily to an increase in the sales volume in the last quarter of the fiscal year. The increase in inventory was due primarily to an decrease in the obsolescence reserve in the current year.
Internally generated funds in fiscal 2014 were a negative $606,811 and were not adequate to fund the Company's primary non-operating cash requirements consisting of capital expenditures of $141,714 consisting of tooling, machinery and equipment for product manufacturing and IT infrastructure. The primary reason for the negative cash flow from operations was the increase in accounts receivable and inventory of $535,952 and $124,381, respectively. Internally generated funds in fiscal 2013 were $685,922 and were adequate to fund the Company's primary non-operating cash requirements consisting of capital expenditures of $14,443 consisting of tooling and machining equipment for product manufacturing. The primary reason for the positive cash flow from operations in fiscal 2013 was the net income of $138,805, non-cash interest expense, non-cash depreciation, a reduction in accounts receivable, inventory and prepaid expenses, of $91,000, $64,186, $64,530, $144,954 and $91,615 respectively. In addition, accrued expenses increased by $89,083. Internally generated funds in fiscal 2012 were a negative $401,787. The primary reason for the negative cash flow from operations in fiscal 2012 was the net loss of $783,966. The Company anticipates approximately $110,000 of capital expenditures during fiscal 2015 primarily to complete the upgrade and replacement of the Company's IT infrastructure. The Company expects there will be internally generated funds in fiscal 2015 from operating activities in addition to probable available short-term or long-term financing, to provide adequate funding of the Company's working capital needs.
Whenever there may be a requirement to increase inventory in fiscal 2015, there will be a negative but temporary impact on liquidity. As previously noted, management implemented expense reductions in response to the economic downturn and uncertainty in the markets the Company serves. These expense reductions began in fiscal 2009 and have continued through fiscal 2014, and are anticipated to continue into fiscal 2015. The Company has reduced headcount, product development, and marketing, administrative and sales related expenses at points during this expense reduction program in order to appropriately manage its working capital.
In December 2014, management entered into Amendment No. 3 of the Convertible Loan Agreement which may provide approximately $467,000 of liquidity to meet on going working capital requirements. The amended Convertible Loan Agreement is between the Company and a major shareholder who is also a Director, as discussed in Note 4 to the Company's financial statements. This amended agreement modified the terms of the previously amended agreement by modifying the terms and extending the due date of the loan agreement from December 30, 2014 to December 30, 2015 and continues to allow $250,000 of borrowing on the agreement at the Company's discretion. During fiscal 2014, the Company borrowed $200,000 against this facility and at September 30, 2014 this balance is outstanding.
During
the
third quarter of fiscal 2014, the Company entered into various
short-term
unsecured demand notes with Robert L. Bauman. The Company borrowed
$683,400 to help meet the on going working capital requirements related
to the large order received in January of 2014. The agreements were
with a major shareholder who is also an employee of the Company as
discussed in Note 5 to the Company's financial statements. The Company
had no outstanding balance on the various short-term demand notes
at September 30, 2014.
Business Condition and Uncertainties
Until the past two years, the Company suffered recurring losses from operations due primarily to decreasing sales of existing product lines and a general economic downturn in all markets the Company serves. The resulting lower sales levels have impacted the Company's accounts receivable and cash balances. If this situation were to continue, it could prevent the Company from generating sufficient cash flow to sustain its operations.
The ability of the Company to continue as a going concern is dependent on improving the Company's profitability and cash flow and securing additional financing if needed. Management continues to review and revise its strategic plan and believes in the viability of its strategy to increase revenues and profitability through increased sales of existing products and the introduction of new products to the marketplace. In addition, management took steps to reduce expenses described above under the caption "Expense Control" and continues to monitor expenses closely. In addition, subsequent to the end of fiscal 2012, the Company entered into the financing arrangements described above under the caption "Liquidity and Capital Resources". Management believes that the actions presently being taken by the Company will provide the stimulus for it to continue as a going concern, however, because of the inherent uncertainties there can be no assurances to that effect. These consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
Hickok has no off-balance sheet arrangements (as defined in Regulation S-K Item 303 paragraph (a)(4)(ii)) that have or are reasonably likely to have a material current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Critical Accounting Policies
The Company describes its significant accounting policies in the notes to the consolidated financial statements included in the Company's Annual Report on Form 10-K. However, in response to the SEC's Release No. FR-60, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies", issued December 12, 2001, the Company has identified the policies it believes are most critical to an understanding of the Company's financial statements. Since application of these accounting policies involves the exercise of judgment and use of estimates, actual results could differ from those estimates.
Revenue Recognition - Revenue is recognized as manufactured items are shipped to customers, legal title has passed, and all significant contractual obligations of the Company have been satisfied. Revenue from development contracts is recorded as agreed upon milestones are achieved.
Inventory Valuation and Reserves - Inventories are valued at the lower of cost or market using the first-in, first-out (FIFO) method. The Company's business may require an increase in inventory of component parts, work-in-process and finished goods in order to meet anticipated delivery schedules of customers. However, the Company is responsible for excess and obsolete inventory purchases in excess of inventory needed to meet customer demand forecasts, as well as inventory purchases generally not covered by supply agreements, or parts that become obsolete before use in production. If the Company's forecasts change or excess inventory becomes obsolete, the inventory reserves included in the Company's financial statements may be understated.
Deferred Taxes - Deferred income taxes are provided for temporary differences between financial and tax reporting. Significant factors considered by the Company in estimating the probability of the realization of deferred taxes include expectations of future earnings and taxable income, as well as application of tax laws in the jurisdictions in which the Company operates.
The Company does not have off-balance sheet arrangements, financing, or other relationships with unconsolidated entities or persons, also known as "special purpose entities" (SPEs).
Impact of Inflation
Over the past five years, inflation has had a minimal effect on the Company because of low rates of inflation and the Company's policy minimizing the acceptance of long-term fixed rate contracts without provisions permitting adjustment for inflation.
Forward-Looking Statements
The foregoing discussion includes forward-looking statements relating to the business of the Company. These forward-looking statements, or other statements made by the Company, are made based on management's expectations and beliefs concerning future events impacting the Company and are subject to uncertainties and factors (including, but not limited to, those specified below) which are difficult to predict and, in many instances, are beyond the control of the Company. As a result, actual results of the Company could differ materially from those expressed in or implied by any such forward-looking statements. These uncertainties and factors include (a) the Company's dependence upon a limited number of customers and the automotive industry, (b) the highly competitive industry in which the Company operates, which includes several competitors with greater financial resources and larger sales organizations, (c) the acceptance in the marketplace of new products and/or services developed or under development by the Company including automotive diagnostic products and indicating instrument products, (d) the ability of the Company to further establish distribution and a customer base in the automotive aftermarket, (e) the Company's ability to capitalize on market opportunities including state automotive emissions programs and OEM tool programs, and (f) the Company's ability to obtain cost effective financing.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market Risk
The Company is exposed to certain market risks from transactions that are entered into during the normal course of business. The Company has not entered into derivative financial instruments for trading purposes. The Company's primary market risks are exposure related to interest rate risk and equity market fluctuations. The Company's only debt subject to interest rate risk was various short-term demand notes with fixed interest rates. The Company has no outstanding balance on any demand notes at September 30, 2014. As a result, the Company believes that the market risk relating to interest rate movements is minimal.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following pages contain the Financial Statements and Supplementary Data as specified for Item 8 of Part II of Form 10-K.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
SHAREHOLDERS AND BOARD OF DIRECTORS
HICKOK INCORPORATED
CLEVELAND, OHIO
We have audited the accompanying consolidated balance sheets of HICKOK INCORPORATED as of September 30, 2014 and 2013, and the related consolidated statements of income, stockholders' equity and cash flows for each of the years in the three-year period ended September 30, 2014. The Company's management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board "United States". Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Hickok Incorporated as of September 30, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the years in the three-year period ended September 30, 2014 in conformity with accounting principles generally accepted in the United States of America.
/s/ Meaden & Moore, Ltd.
MEADEN & MOORE, Ltd.
CERTIFIED PUBLIC ACCOUNTANTS
January 6, 2015
CLEVELAND, OHIO
F-1
F-2
F-3
CONSOLIDATED
STATEMENT OF INCOME
HICKOK
INCORPORATED
FOR THE
YEARS
ENDED SEPTEMBER 30
|
|
2014
|
2013
|
2012
|
||
|
|
|
|
|
||
| NET SALES: |
|
|
|
||
| Product sales |
$6,078,349
|
$6,190,260
|
$4,442,133
|
||
| Service sales |
227,487
|
275,912
|
319,156
|
||
|
|
|
||||
|
|
Total Net Sales |
6,305,836
|
6,466,172
|
4,761,289
|
|
|
|
|
|
|
||
| COSTS AND EXPENSES: |
|
|
|
||
| Cost of product sold |
3,462,092
|
3,359,727
|
2,787,212
|
||
| Cost of services sold |
149,068
|
138,307
|
216,949
|
||
| Product development |
965,975
|
939,373
|
938,058
|
||
| Marketing and administrative |
1,728,107
|
1,812,598
|
1,616,320
|
||
|
|
expenses | ||||
| Interest charges |
6,592
|
91,178
|
5,956
|
||
| Other income |
(14,374)
|
(13,816)
|
(19,240)
|
||
|
|
|
||||
| Total Costs and Expenses |
6,297,460
|
6,327,367
|
5,545,255
|
||
|
|
|
||||
|
|
Income (Loss) before Provision for Income Taxes |
8,376
|
138,805
|
(783,966)
|
|
| Provision For Income Taxes: |
|
|
|
||
|
Current
|
(44,400)
|
114,400
|
-
|
||
| Deferred |
44,400
|
(114,400)
|
-
|
||
|
|
|
||||
|
|
-
|
-
|
-
|
||
|
|
|
|
|
||
|
|
Net Income (Loss)
|
$8,376
|
$138,805
|
$(783,966)
|
|
|
|
|
|
|
||
|
|
NET Income (LOSS) PER COMMON SHARE - BASIC | $.01 | $.09 | $(.57) | |
|
|
|
||||
|
|
NET
Income (LOSS) PER
COMMON SHARE - DILUTED |
$.01 | $.08 | $(.57) | |
|
|
|
|
|||
| WEIGHTED AVERAGE SHARES OF COMMON STOCK OUTSTANDING |
1,638,215
|
1,610,571
|
1,372,812
|
||
|
|
|
||||
F-4
CONSOLIDATED
STATEMENT OF STOCKHOLDERS' EQUITY
HICKOK
INCORPORATED
FOR THE
YEARS
ENDED SEPTEMBER 30, 2014, 2013, AND 2012
|
|
|
NO PAR VALUE |
|
|||
|
|
RETAINED
EARNINGS |
CLASS A | CLASS B |
CONTRIBUTED
CAPITAL |
TREASURY
SHARES |
TOTAL |
|
|
|
|
|
|
|
|
| Balance at October 1, 2011 | $171,738 | $793,229 | $454,866 | $1,862,652 | $(661,676) | $2,620,809 |
|
|
|
|
|
|
|
|
|
Sale of Class B shares from
treasury |
-
|
-
|
20,000
|
(391,335)
|
408,335
|
37,000
|
|
|
|
|
|
|
|
|
|
Conversion of convertible
notes payable to Class A shares |
-
|
252,368
|
-
|
214,511
|
-
|
466,879
|
|
|
|
|
|
|
|
|
|
Convertible notes issue cost
|
-
|
-
|
-
|
(34,235)
|
-
|
(34,235)
|
|
|
|
|
|
|
|
|
| Share-based compensation expense |
-
|
-
|
-
|
11,388
|
-
|
11,388
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
(783,966)
|
-
|
-
|
-
|
-
|
(783,966)
|
|
|
|
|||||
| Balance at September 30, 2012 |
$(612,228)
|
$1,045,597
|
$474,866
|
$1,662,981
|
$(253,341)
|
$2,317,875
|
|
|
|
|
|
|
|
|
|
Fees for additional authorized
Class A, Class B and Preferred shares |
-
|
-
|
-
|
(21,925)
|
-
|
(21,925)
|
|
|
|
|
|
|
|
|
|
Conversion of convertible
notes payable to Class A shares |
-
|
208,591
|
-
|
-
|
-
|
208,591
|
|
|
|
|
|
|
|
|
|
Class A shares issued for
professional services |
-
|
7,000
|
-
|
-
|
-
|
7,000
|
|
|
|
|
|
|
|
|
|
Warrants issued for debt
offering |
-
|
-
|
-
|
91,000
|
-
|
91,000
|
|
|
|
|
|
|
|
|
|
Share-based compensation expense
|
-
|
-
|
-
|
6,465
|
-
|
6,465
|
|
|
|
|
|
|
|
|
|
Net Income
|
138,805
|
-
|
-
|
-
|
-
|
138,805
|
|
|
|
|||||
|
Balance
at September 30, 2013
|
$(473,423)
|
$1,261,188
|
$474,866
|
$1,738,521
|
$(253,341)
|
$2,747,811
|
|
|
|
|
|
|
|
|
| Share-based compensation expense |
-
|
-
|
-
|
2,837
|
-
|
2,837
|
|
|
|
|
|
|
|
|
|
Net Income
|
8,376
|
-
|
-
|
-
|
-
|
8,376
|
|
|
|
|||||
| Balance at September 30, 2014 |
$(465,047)
|
$1,261,188
|
$474,866
|
$1,741,358
|
$(253,341)
|
$2,759,024
|
|
|
|
|||||
See accompanying summary of accounting policies and notes to consolidated financial statements.
F-5
CONSOLIDATED
STATEMENT OF CASH FLOWS
HICKOK
INCORPORATED
FOR THE
YEARS
ENDED SEPTEMBER 30
|
|
2014
|
2013
|
|
2012
|
|
|
|
|||
| CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
| Cash received from customers |
$5,771,884
|
$6,530,702
|
|
$4,781,174
|
|
Cash
paid to
suppliers
and
employees |
(6,373,180)
|
(5,848,654)
|
|
(5,177,377)
|
| Interest paid |
(6,174)
|
-
|
|
(6,641)
|
| Interest received |
659
|
3,874
|
|
1,057
|
|
|
|
|||
| Net Cash Provided by (Used in) Operating Activities |
(606,811)
|
685,922
|
|
(401,787)
|
|
|
|
|
|
|
| CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
| Capital expenditures |
(141,714)
|
(14,443)
|
|
(55,180)
|
|
Payments received (advances) on notes
receivable
|
-
|
30,500
|
|
3,500
|
| Proceeds on sale of assets |
-
|
-
|
|
9,500
|
|
|
|
|||
|
Net Cash Provided by (Used in) Investing Activities |
(141,714)
|
16,057
|
|
(42,180)
|
|
|
|
|
|
|
| CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
| Short-term borrowings | 683,400 | 250,000 |
|
- |
| Payments on short-term borrowings | (683,400) | (250,000) |
|
- |
|
Payments on long-term borrowings
|
-
|
-
|
|
(250,000)
|
|
Proceeds from Convertible Notes
Payable |
200,000
|
-
|
|
675,470
|
|
Sale of Class B shares from
treasury |
-
|
-
|
|
37,000
|
|
Convertible notes issue costs
|
-
|
-
|
|
(34,235)
|
|
Cost for additional authorized shares
|
-
|
(21,925)
|
|
-
|
|
|
|
|||
| Net Cash Provided by (Used in) Financing Activities |
200,000
|
(21,925)
|
|
428,235
|
|
|
|
|||
|
|
|
|
|
|
| Increase (Decrease) in Cash and Cash Equivalents |
(548,525)
|
680,054
|
|
(15,732)
|
|
|
|
|
|
|
| Cash and Cash Equivalents at Beginning of Year |
938,852
|
258,798
|
|
274,530
|
|
|
|
|||
| Cash and Cash Equivalents at End of Year |
$390,327
|
$938,852
|
|
$258,798
|
|
|
|
|||
|
|
|
|
|
|
|
See
accompanying
summary
of accounting policies and notes to consolidated financial statements.
|
||||
F-6
|
|
2014
|
2013
|
2012
|
|
|
|
||
|
RECONCILIATION
OF
NET INCOME (LOSS) TO NET CASH
PROVIDED BY OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
Net
Income (Loss)
|
$8,376
|
$138,805
|
$(783,966)
|
|
ADJUSTMENTS
TO
RECONCILE NET INCOME (LOSS) TO NET
CASH PROVIDED BY OPERATING ACTIVITIES: |
|
|
|
|
Depreciation
|
62,195
|
64,186
|
86,257
|
|
(Gain)loss
on
disposal of assets
|
-
|
- |
(3,548)
|
|
Share-based compensation expense
|
2,837
|
6,465
|
11,388
|
|
Non-cash professional service expense
|
-
|
7,000
|
-
|
|
Warrants issued for debt offering
|
-
|
91,000
|
-
|
|
CHANGES
IN
ASSETS AND LIABILITIES:
|
|
|
|
|
Decrease
(Increase)
in accounts receivable
|
(533,952)
|
64,530
|
19,885
|
|
Decrease (Increase)
in
inventories
|
(124,381)
|
144,954
|
229,173
|
|
Decrease (Increase)
in prepaid
expenses
|
(5,647)
|
91,615
|
(70,690)
|
|
Increase
(Decrease)
in accounts payable
|
(28,679)
|
(4,599)
|
4,987
|
|
Increase
(Decrease)
in accrued payroll and
related expenses |
(9,800)
|
(7,117)
|
6,687
|
|
Increase
(Decrease)
in other accrued
expenses and accrued taxes other than income and long-term liabilities |
22,240
|
89,083
|
98,040
|
|
|
|
||
|
Total
Adjustments
|
(615,187)
|
547,117
|
382,179
|
|
|
|
||
|
|
|
|
|
|
Net
Cash
Provided by (Used in) Operating
Activities |
$(606,811)
|
$685,922
|
$(401,787)
|
|
|
|
||
|
Supplemental Schedule of
Non-Cash Financing
Activities: |
|
|
|
|
Conversion of convertible notes payable
to Class A shares |
$-
|
$208,591
|
$466,879
|
|
|
|
|
|
|
|
|
|
|
F-7
F-8
NOTES
TO
CONSOLIDATED FINANCIAL STATEMENTS
HICKOK
INCORPORATED
SEPTEMBER 30, 2014, 2013 AND 2012
Hickok Incorporated and its wholly-owned domestic subsidiaries ("Company") develop and manufacture products used by companies in the transportation and emissions testing industries. Among the products are indicators and gauges sold to companies in aircraft and locomotive markets. On a much larger scale, the Company manufactures diagnostic equipment used by technicians to test the various electronic systems in automobiles and trucks, and emissions testing equipment specified by various states for testing vehicle emissions. The Company serves the automotive, locomotive and general aviation markets predominately in North America. Sales in the Company's principal product classes, as a percent of consolidated sales, are as follows:
| Product Classes |
2014
|
2013
|
2012
|
||||||
|
|
|
||||||||
| Automotive Test Equipment |
|
76.3
|
% |
74.4
|
% |
66.1
|
% | ||
| Indicating Instruments |
23.7
|
25.6
|
|
33.9
|
|
||||
|
|
|
||||||||
|
|
|
|
|
||||||
| Total |
|
100.0
|
% |
100.0
|
% |
100.0
|
% | ||
|
|
|
||||||||
Current operating properties consist of a manufacturing plant in Greenwood, Mississippi, and a corporate headquarters, marketing and product development facility in Cleveland, Ohio.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles
of Consolidation :
The
consolidated
financial statements include the accounts of Hickok Incorporated and
its
wholly-owned domestic subsidiaries. Significant intercompany
transactions
and balances have been eliminated in the financial statements.
Concentration
of
Credit Risk :
The
Company
sells its products and services primarily to customers in the United
States
of America and to a lesser extent overseas. All sales are made in
United
States of America dollars. The
Company extends normal credit terms to
its customers. Customers
in
the automotive industry comprise 87%
of outstanding receivables at September 30, 2014 (60% in 2013).
Sales
to three customers approximated $2,768,000,
$341,000 and $284,000
(2014),
$2,304,000, $651,000 and $242,000 (2013), $905,000,
$710,000
and $229,000
(2012), and accounts receivable to these customers amounted to
approximately $731,000, $90,000 and
$65,000
(2014), and
$99,000, $163,000 and $14,000 (2013).
Use
of
Estimates
in the
Preparation of Financial Statements :
The
preparation
of financial statements in conformity with generally accepted
accounting
principles requires management to make estimates and assumptions that
may
affect the reported amounts of certain assets and liabilities and
disclosure
of contingencies at the date of the financial statements, and the
reported
amounts of revenue and expenses during the reporting period. Actual
results
could differ from those estimates.
Fair Value of Financial Instruments:
Accounting for "Financial Instruments" requires the Company to disclose
estimated fair values of financial instruments. Financial instruments
held by the Company include, among others, accounts receivable,
accounts payable, and convertible notes payable. The carrying amounts
reported in the consolidated balance sheet for assets and liabilities
qualifying as financial instruments is a reasonable estimate of fair
value.
Revenue
Recognition :
The
Company
records sales as manufactured items are shipped to customers on an FOB
shipping
point arrangement, at which time title passes and the earnings process
is
complete. The Company primarily records service sales as the items are
repaired.
The customer does not have a right to return merchandise unless
defective
or warranty related and there are no formal customer acceptance
provisions.
Sales
returns and allowances were immaterial during each of
the
three years in the period ending September 30, 2014.
Product
Warranties :
The
Company warrants certain products against defects for
periods
ranging primarily from 12 to 48
months. The
Company's
estimated future warranty claims is included
in
"Accrued
expenses"
and are as follows:
|
|
2014
|
2013
|
2012
|
|
|
|
|
|||
|
Balance
October 1
|
$89
|
$451
|
$993
|
|
|
|
Current year provisions |
10,275
|
8,690
|
7,564
|
|
|
Expenditures |
(10,355)
|
(9,052)
|
(8,106)
|
|
|
|
|
|
|
|
Balance
September 30
|
$9
|
$89
|
$451
|
|
|
|
|
|
||
|
|
|
|
|
|
Product
Development
Costs :
Product
development
costs, which include engineering production support, are expensed as
incurred.
Research and development performed for customers represents no more
than
1% of sales in each year. The arrangements do not include a repayment
obligation
by the Company.
Cash
and
Cash
Equivalents :
For
purposes
of the Statement of Cash Flows, the Company considers all highly liquid
debt
instruments purchased with a maturity of three months or less to be
cash equivalents.
From time to time the Company maintains cash balances in excess of the
FDIC
limits. The cash balance at September 30, 2014 and 2013 amounted to
$390,327
and
$938,852,
respectively.
Accounts
Receivable
:
The
Company
establishes an allowance for doubtful accounts based upon factors
surrounding
the credit risk of specific customers, historical trends and other
information.
Inventories
:
Inventories
are valued at the lower of cost (first-in, first-out) or market and
consist
of:
|
|
2014
|
2013
|
|
|
|
|
| Raw materials and component parts |
$1,066,672
|
$852,229
|
| Work-in-process |
521,424
|
590,687
|
| Finished products |
126,101
|
146,900
|
|
|
|
|
|
|
|
|
|
|
$1,714,197
|
$1,589,816
|
|
|
|
|
Property,
Plant and Equipment :
Property,
plant
and equipment are carried at cost. Maintenance and repair costs are
expensed
as incurred. Additions and betterments are capitalized. The
depreciation
policy of the Company is generally as follows:
| Class | Method |
|
|
|
||
| Buildings | Straight-line | 10 to 40 years |
| Machinery and equipment | Straight-line | 3 to 10 years |
| Tools and dies | Straight-line | 3 years |
Depreciation
amounted to $62,195 (2014), $64,186 (2013), and $86,257 (2012).
Valuation
of Long-Lived Assets :
Long-lived
assets
such as property, plant and equipment and software are reviewed for
impairment
whenever events or changes in circumstances indicate that the carrying
amount
may not be recoverable. If the total of the expected future
undiscounted
cash flows is less than the carrying amount of the asset, a loss is
recognized
for the difference between the fair value and carrying value of the
asset.
Shipping
and
Handling
Costs :
Shipping
and
handling costs are classified as cost of product sold.
Advertising
Costs
:
Advertising
costs are expensed as incurred and amounted to $9,017
(2014),
$6,558 (2013)
and $6,940 (2012).
Income
Taxes :
The provision
for
income taxes is determined using the asset and liability approach of
accounting for
income taxes. Under this approach, deferred taxes represent the future
tax
consequences expected to occur when the reported amounts of assets and
liabilities
are recovered or paid. The provision for income taxes represents income
taxes
paid or payable for the current year plus any change in deferred taxes
during
the year. Deferred taxes result from differences between the tax basis
of
assets and liabilities and their reported amounts in the consolidated
financial
statements and are adjusted for changes in tax rates and tax laws when
changes
are enacted. Valuation allowances
are recorded to reduce deferred tax
assets
when it is more likely than not that a tax benefit will not be realized.
Income
per Common Share :
Income per
common
share information is computed on the weighted average number of shares
outstanding
during each period as disclosed in Note 10.
|
|
Current
Portion |
|
|
|
|
|||
|
|
2014
|
2014
|
2013
|
| Unsecured note receivable from current employee which bears interest at 3% per annum | $- | $4,100 |
$4,100
|
|
|
|
|
|
|
|
|
|
|
|
|
$-
|
4,100
|
4,100
|
|
|
|
|
|
|
Less current portion
|
|
-
|
-
|
|
|
|
|
|
|
Long-term portion
|
|
$4,100
|
$4,100
|
|
|
|
|
|
|
|
|
|
|
The
Company had a
credit
agreement of $250,000 with Robert L. Bauman, one of its major
shareholders who is also an
employee of the Company. The agreement
was to expire in April 2013 but was modified on December 31, 2012 to
extend the maturity
date to December 2013. Effective October
30, 2012
for the remainder of the agreement, the lender could have terminated
the
agreement with 45 days written notice, and at the discretion of
the Company to deny the termination notice until December 2013 if it
would
have had a negative effect on the solvency of the Company.
The agreement provided for a
revolving credit
facility of
$250,000 with interest at 0.24% per annum and was unsecured and
included
a three-year warrant for 100,000 shares of Class A common stock at a
price of $2.50 per share. In
addition, the agreement generally allowed for
borrowing based on an amount equal to eighty percent
of eligible accounts receivables or $250,000. The revolving line of
credit was not extended.
In partial
consideration for the original extension of the revolving credit
facility the Company and
Bauman entered into a Warrant Agreement, dated December 30, 2012
whereby the Company issued a warrant
to Bauman to purchase, at his option, up to 100,000 shares of Class A
Common Stock of the Company at an exercise price of $2.50 per share,
subject to certain anti-dilution and other adjustments. If not
exercised, this warrant will expire on December 30, 2015.
|
2015
|
$6,866
|
|
|
2016
|
2,880
|
|
|
2017
|
-
|
|
|
|
|
|
|
|
Total |
$9,746
|
|
|
|
|
Rental expense
under these commitments was $10,521 (2014), $10,444 (2013) and $7,971
(2012).
A facility held under a capital lease has a net book value of $0 at September 30, 2014. Future minimum lease payments which extend through 2061 are immaterial.
On February 27,
2013, the Company's
2013 Omnibus Equity Plan was approved and adopted by an
affirmative vote of a majority of the Company's Class A and
Class B Shareholders.
The 2013
Omnibus Plan will provide the Company with the flexibility to grant a
variety of share-based awards for covered employees, consultants and
Directors. The
2013 Omnibus Plan provides for the grant of the following types of
incentive awards: stock options, stock appreciation
rights, restricted shares, restricted share units, performance
shares and Class A Common Shares. Those who will be eligible
for
awards under the 2013 Omnibus Plan include employees who provide
services to the Company and its affiliates, executive officers,
non-employee Directors and consultants designated by the Compensation
Committee. The Plan has
150,000 Class A Common Shares reserved for
issuance. The Class A Common Shares may be either
authorized, but unissued, common shares or treasury shares. No
share-based awards have been granted under the 2013 Omnibus Equity
Plan as of September 30, 2014.
Under
the
Company's expired Key Employees Stock Option Plans there are no options
currently
available for grant and there are no options outstanding at September
30,
2014.
Non-cash compensation expense related to stock option plans for fiscal years ended September 30, 2014, 2013 and 2012 was $2,837, $6,465 and $11,388 respectively.
Transactions
involving
the Directors Plans are summarized as follows:
Exercise
Exercise
Exercise
Option
Shares
Directors
Plans:
Outstanding
October
1,
Granted
-
Canceled/expired
Exercised
Outstanding
September
30, ($2.925 to $11.00
per share)
Exercisable
September
30,
| Directors Plans |
Outstanding
Stock Options |
Weighted
Average Exercise Price |
Weighted
Average Remaining Life |
Number
of
Stock Options Exercisable |
Weighted
Average Exercise Price |
|
|
|||||
|
Range
of exercise
prices: |
|
|
|
|
|
| $2.925 - 5.25 | 13,000 | $3.28 | 5.9 | 11,000 | $3.35 |
| $6.00 - 7.25 | 5,000 | $6.18 | 3.5 | 5,000 | $6.18 |
| $10.50 - 11.00 | 4,000 | $10.75 | 3.0 | 4,000 | $10.75 |
|
|
|
|
|
|
|
|
|
22,000 | $5.30 |
|
20,000 | $5.54 |
8. CAPITAL STOCK, TREASURY STOCK, AND CONTRIBUTED CAPITAL
On October 11,
2012, the Company's
Amended Articles of Incorporation and the Amended Code of Regulations
were adopted by an
affirmative vote of more than two-thirds of the Company's Class A and
Class B Shareholders.
The Amended Articles amend and restate the Current Articles in a number
of significant ways and are primarily as follows: increased the number
of Class A Shares and Class B Shares from 3,750,000 and 1,000,000 to
10,000,000 and 2,500,000 respectively, and added a class of 1,000,000
Serial Preferred Shares; eliminated par value for Class A Shares
and Class B Shares; updated certain provisions relating to the payment
of dividends; removed restrictions on the issuance of additional Class
A Shares; clarified the method by which the Company may repurchase its
shares; reduced the percentage of shareholder vote required to
authorize corporate actions from two-thirds of the voting power to a
majority of the voting power; and made other technical or conforming
changes.
The Amended Regulations amend and restate the Current Regulations in a number of
significant ways and are primarily as follows: updated certain
provisions relating to the Company's meetings of shareholders in order
to provide more consistency in the regulations regarding the Company's
practices in this area; further clarifying the roles of the Company's
officers and directors in conducting the Company's business; updated
the Company's policy regarding the indemnification of its directors,
officers, employees, and others; revised
provisions allowing for the Board of Directors to adopt amendments to
the Amended Regulations to the extent permitted by Ohio law; and made other
technical or conforming changes.
Unissued shares of Class A common stock (949,233 and 958,233 shares in 2014 and 2013, respectively) are reserved for the share-for-share conversion rights of the Class B common stock, stock options under the Directors Plans, conversion rights of the Convertible Promissory Note and available warrants (see Notes 4, 5 and 7). The Class A shares have one vote per share and the Class B shares have three votes per share, except under certain circumstances such as voting on voluntary liquidation, sale of substantially all the assets, etc. Dividends up to $.10 per year, noncumulative, must be paid on Class A shares before any dividends are paid on Class B shares.
A
reconciliation of
the provision (recovery) of income taxes to the statutory federal
income
tax rate is as follows:
|
|
2014
|
2013
|
2012
|
|
|
|
|
|||
|
|
|
|
|
|
| Income (Loss) Before Provision for Income Taxes |
$8,376
|
$138,805
|
$(783,966)
|
|
|
|
Statutory rate |
34%
|
34%
|
34%
|
|
|
|
|
||
|
|
|
2,848
|
47,194
|
(266,548)
|
|
|
|
|
|
|
|
|
Permanent differences |
1,200
|
1,200
|
2,500
|
|
|
Research and development credit - net |
(46,300)
|
(44,900)
|
(8,500)
|
|
|
Valuation allowance
|
44,400
|
-
|
274,600
|
|
|
Other |
(2,148)
|
(3,494)
|
(2,052)
|
|
|
|
|
||
|
|
|
$-
|
$-
|
$-
|
|
|
|
|
||
|
|
2014
|
2013
|
|
|
|
|
|
|
| Current: |
|
|
|
|
|
Inventories |
$128,900
|
$277,300
|
|
|
Bad debts | 3,400 | 3,400 |
|
|
Accrued liabilities |
(11,700)
|
63,000
|
|
|
Prepaid expense |
(12,900)
|
(9,500) |
|
|
|
|
|
|
|
|
107,700
|
334,200
|
|
|
Valuation allowance |
(107,700)
|
(334,200)
|
|
|
|
|
|
|
|
Total current deferred income taxes |
-
|
-
|
|
|
|
|
|
| Noncurrent: |
|
|
|
|
|
Depreciation and amortization |
45,100
|
42,700
|
|
|
Research and development and other credit carryforwards |
1,903,800
|
1,830,600
|
|
|
Net operating loss carryforward | 1,880,200 | 1,817,200 |
|
|
Contribution carryforward
|
8,900 | 8,900 |
|
|
Directors stock option plan |
40,000
|
39,000
|
|
|
Acquisition costs
|
101,000
|
49,700
|
|
|
Accrued liabilities |
80,000
|
-
|
|
|
|
|
|
|
|
|
4,059,000
|
3,788,100
|
|
|
Valuation allowance
|
(4,059,000)
|
(3,788,100)
|
|
|
|
|
|
|
|
Total long-term deferred income taxes
|
-
|
-
|
|
|
|
|
|
|
|
Total |
$-
|
$-
|
|
|
|
|
|
The
Company did not
incur any material impact to its financial condition or results of
operations due to the financial statement recognition and measurement
of a tax position taken
or expected to be taken in a tax return.
The
Company is
subject to U.S federal jurisdiction income tax examinations for the tax
years 2010 through 2012. In addition, the Company is subject to state
and local income tax examinations for the tax years 2010 through 2012.
The
Company has
available a net operating loss carryforward of approximately $5,500,000,
and a research and
development credit carryforward of approximately $1,800,000, and a
contribution carryforward of approximately $26,000. The
net operating loss, research and development credit and contribution
carryforwards will begin
to expire in fiscal 2025, 2016, and 2015 respectively.
The Company's ability to realize the entire benefit of its deferred tax assets requires that the Company achieve certain future earning levels prior to the expiration of its net operating loss, research and development credit and contribution carryforwards. Because of the uncertainties involved with this significant estimate, it is reasonably possible that the Company's estimate may change in the near term.
The
following
table
sets forth the computation of basic and diluted earnings per share.
|
|
2014
|
2013
|
2012
|
|
|
|
||
| Basic Income (Loss) Per Share |
|
|
|
| Income (Loss) available to common stockholders |
$8,376
|
$138,805
|
$(783,966)
|
|
|
|
|
|
| Shares denominator |
1,638,215
|
1,610,571
|
1,372,812
|
|
|
|
|
|
| Per share amount |
$.01
|
$.09
|
$(.57)
|
|
|
|
||
| Effect of Dilutive Securities |
|
|
|
| Average shares outstanding |
1,638,215
|
1,610,571
|
1,372,812
|
|
|
|
|
|
|
Options
available under convertible note
|
31,097
|
23,505
|
-
|
|
|
|
||
|
|
1,669,312
|
1,634,076
|
1,372,812
|
| Diluted Income (Loss) Per Share |
|
|
|
| Income (Loss) available to common stockholders |
$8,376
|
$138,805
|
$(783,966)
|
|
|
|
|
|
| Per share amount |
$.01
|
$.08
|
$(.57)
|
|
|
|
||
Options and
warrants to purchase 22,000
and 200,000 shares of common
stock respectively during fiscal 2014
at prices ranging from $2.50
to $11.00
per share
were outstanding but were not included in the computation of diluted
earnings
per share because the option's and warrant's effect was antidilutive or
the exercise
price
was greater than the average market price of the common share.
In fiscal
2013 options and
warrants to purchase 31,000
and 200,000 shares of common
stock respectively at prices ranging from $2.50
to $11.00
per share
were outstanding but were not included in the computation of diluted
earnings
per share because the option's and warrant's effect was antidilutive or
the exercise
price
was greater than the average market price of the common share.
In fiscal 2012 options to purchase 42,000 shares of common stock at prices ranging from $2.925 to $11.00 per share were outstanding but were not included in the computation of diluted earnings per share because the option's effect was antidilutive or the exercise price was greater than the average market price of the common share. In addition, conversion rights to purchase 365,119 shares of common stock at a price of $1.85 per share were not included in the computation of diluted earnings per share because the conversion rights of the Convertible Promissory Notes effect was antidilutive.
The Company has a 401(k) Savings and Retirement Plan covering all full-time employees. Company contributions to the plan, including matching of employee contributions, are at the Company's discretion. For fiscal years ended September 30, 2014, 2013 and 2012, the Company made matching contributions to the plan in the amount of $16,979, $16,003 and $15,178, respectively. The Company does not provide any other postretirement benefits to its employees.12. SEGMENT AND RELATED INFORMATION
The Company's four business units have a common management team and infrastructure. The indicators and gauges unit has different technologies and customers than the other business units. Therefore, the business units have been aggregated into two reportable segments: 1.) indicators and gauges and 2.) automotive related diagnostic tools and equipment. The Company's management evaluates segment performance based primarily on operating earnings before taxes. Non-operating items such as interest income and interest expense are included in general corporate expenses. Depreciation expense on assets used in manufacturing are considered part of each segment's operating performance. Depreciation expense on non-manufacturing assets is included in general corporate expenses.
Indicators and Gauges:
Information
by industry segment is set forth below:
Years
Ended
September
30,
Net
Sales
Indicators
and
Gauges
Automotive
Diagnostic Tools and Equipment
Income
(Loss)
Before
Provision for Income Taxes
Indicators
and
Gauges
Automotive
Diagnostic
Tools and Equipment
General
Corporate
Expenses
Asset Information :
| Years Ended September 30, |
2014
|
2013
|
|||||
|
|
|
|
|||||
| Identifiable Assets |
|
|
|||||
|
|
Indicators and Gauges |
|
$685,198
|
|
$898,555
|
||
|
|
Automotive Diagnostic Tools and Equipment |
2,199,779
|
1,327,932 | ||||
|
|
Corporate | 814,680 | 1,278,196 | ||||
|
|
|
||||||
|
|
|
$3,699,657
|
|
$3,504,683
|
|||
|
|
|
||||||
|
|
|
|
|||||
All
export
sales to Australia, Canada, Mexico, Taiwan and other foreign
countries are
made in United States of America Dollars.
|
|
First
|
Second
|
Third
|
Fourth
|
|
|
|
|
||||
| Net Sales |
|
|
|
|
|
|
|
$1,050,242
|
$1,116,467
|
$2,130,412
|
$2,008,715
|
|
|
|
1,738,903
|
1,964,338
|
1,339,931
|
1,423,000
|
|
|
|
1,181,501
|
1,178,538
|
1,271,803
|
1,129,447
|
|
|
|
|
|
|
|
|
| Gross Profit |
|
|
|
|
|
|
|
360,838
|
428,031
|
1,124,914
|
780,893 | |
|
|
812,501
|
856,177
|
572,192
|
727,268
|
|
|
|
392,712
|
402,681
|
479,189
|
482,546
|
|
|
|
|
|
|
|
|
| Net Income (Loss) |
|
|
|
|
|
|
|
(320,287)
|
(297,655)
|
386,911
|
239,407
|
|
|
|
143,804
|
119,431
|
(133,777)
|
9,347
|
|
|
|
(183,140)
|
(224,781)
|
(170,975)
|
|
(205,070)
|
|
|
|
|
|
|
|
| Net Income (Loss) per Common Share |
|
|
|
|
|
|
|
|
|
|
|
|
| Basic |
|
|
|
|
|
|
|
(.20)
|
(.18)
|
.24
|
.15
|
|
|
|
.09
|
.08
|
(.08)
|
.01
|
|
|
|
(.15)
|
(.16)
|
(.12)
|
(.14)
|
|
|
|
|
|
|
|
|
| Diluted |
|
|
|
|
|
|
|
(.20)
|
(.18)
|
.23
|
.14
|
|
|
|
.09
|
.07
|
(.08)
|
.01
|
|
|
|
(.15)
|
(.16)
|
(.12)
|
(.14)
|
|
|
|
|||||
|
|
|||||
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not
Applicable.
ITEM
9A.
CONTROLS AND PROCEDURES.
As
of September 30,
2014,
an evaluation was performed, under the supervision and with the
participation of the Company's management, including the Company's
Chief Executive Officer along with the Company's Vice President,
Finance and Chief Financial Officer, of the effectiveness of the design
and operation of the Company's
disclosure controls and procedures. Based upon that evaluation, the
Company's
management, including the Chief Executive Officer along with the
Company's Vice President, Finance and Chief Financial Officer,
concluded that the Company's disclosure controls and procedures as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange
Act of 1934, as amended ("Exchange Act") were effective as of September
30, 2014 to ensure that information required
to be disclosed by the Company in reports that it files and submits
under
the Exchange Act is (1) recorded, processed, summarized and reported,
within
the time periods specified in the Commission's rules and forms, and (2)
is
accumulated and communicated to the Company's management, including its
principal
executive and principal financial officer, as appropriate to allow
timely
decisions regarding required disclosure. There were no changes in the
Company's
internal controls over financial reporting during the fourth fiscal
quarter
ended September 30, 2014 that have materially affected, or are
reasonably
likely to materially affect the Company's internal control over
financial
reporting.
The
Company's internal
control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external reporting purposes in
accordance with generally accepted accounting principles. The Company's
internal control over financial reporting includes
policies and procedures that (1) pertain to maintaining records that,
in reasonable
detail, accurately and fairly reflect the transactions and dispositions
of
the Company assets, (2) provide reasonable assurance that transactions
are
recorded as necessary to permit preparation of financial statements in
accordance
with generally accepted accounting principles, and that the Company's
receipts
and expenditures are being made only in accordance with authorization
of
the Company's management and directors, and (3) provide reasonable
assurance regarding prevention or the timely detection of unauthorized
acquisition, use or disposal of the company's assets that could have a
material effect on the financial statements.
Management, including the Company's Chief Executive Officer along with the Company's Vice President, Finance and Chief Financial Officer, does not expect that the Company's internal controls will prevent or detect all errors and all fraud. An internal control system no matter how well designed and operated can provide only reasonable, not absolute, assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, collusion of two or more people, or by management override of the control. Also, any evaluation of the effectiveness of controls in future periods are subject to the risk that those internal controls may become inadequate because of changes in business conditions, or that the degree of compliance with the policies or procedures may deteriorate.
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The management of Hickok Incorporated is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended. Under the supervision and with the participation of management, including the Company's Chief Executive Officer along with the Company's Vice President, Finance and Chief Financial Officer, we conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of September 30, 2014, as required by Rule 13a-15(c) of the Securities Exchange Act of 1934, as amended. In making this assessment, we used the criteria set forth in the framework in Internal Control-Integrated Framework (1992) for Small Public Companies issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control-Integrated Framework for Small Public Companies, our management concluded that our internal control over financial reporting was effective as of September 30, 2014.
This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
/s/ R. L. Bauman
R.
L. Bauman
Chief Executive Officer
/s/ G. M. Zoloty
G.
M. Zoloty
Chief Financial Officer
January
13, 2015
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
The information required by this Item 10 as to the Directors of the Company is incorporated herein by reference to the information set forth under the caption "Information Concerning Nominees for Directors" in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on February 25, 2015, since such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A. Information required by this Item 10 as to the Executive Officers of the Company is included in Part I of this Annual Report on Form 10-K. Information required by this Item as to the Audit Committee, the Audit Committee financial expert, the procedures for recommending nominees to the Board of Directors and compliance with Section 16(a) of the Exchange Act is incorporated herein by reference to the information set forth under the captions "Information Regarding Meetings and Committees of the Board of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on February 25, 2015.
The
Company
has
historically operated under informal ethical guidelines, under which
the
Company's principal executive, financial, and accounting officers, are
held accountable. In accordance with these guidelines, the Company has
always
promoted honest, ethical and lawful conduct throughout the organization
and
has adopted a written Code of Ethics
for the Chief
Executive
Officer and Chief Financial Officer.
In
addition,
the
Company adopted and the Board of Directors approved a written Code of
Business Conduct for all officers and employees. The Company also
implemented a system to address the "Whistle Blower" provision of the
Sarbanes-Oxley Act of 2002.
The information required by this Item 11 is incorporated by reference to the information set forth under the caption "Executive Compensation" in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on February 25, 2015, since such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
Equity Compensation Plan Information
The
following table
provides
information as of September 30, 2014 with respect to compensation plans
(including
individual compensation arrangements) under which Common Stock of the
Company
is authorized for issuance under compensation plans previously approved
and
not previously approved by shareholders of the Company.
|
|
|
|
|
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted-average exercise price of outstanding options, warrants and rights |
Number
of securities remaining available for future issuance
under
equity compensation plans (excluding securities reflected in column
(a)) (1)
|
________________________________________________________________________________
| Equity compensation plans approved by security holders |
|
|
|
| Equity compensation plans not approved by security holders |
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
(1)Represents
the total amount of securities available under the Hickok Incorporated
2013 Omnibus Equity Plan (the "Plan"). Types of awards issuable under
the Plan include stock options, stock appreciation rights, restricted
shares, restricted share units, preference shares and Class A Common
Shares in such amounts determined by the Compensation Committee. No
securities have been issued under the Plan.
Other information required by this Item 12 is incorporated by reference to the information set forth under the captions "Principal Shareholders" and "Share Ownership of Directors and Officers" in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on February 25, 2015, since such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
The
information
required by this Item 13 is incorporated by reference to the
information
set forth under the caption "Transactions with Management" in the
Company's definitive Proxy Statement for the Annual Meeting of
Shareholders to be held
on February 25, 2015,
since
such Proxy
Statement will be filed with the Securities and Exchange Commission not
later than 120 days after the end of the Company's fiscal year pursuant
to Regulation 14A.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.
The information required by this Item 14 is incorporated by reference to the information set forth under the caption "Independent Public Accountants" in the Company's definitive Proxy Statement for the Annual Meeting of Shareholders to be held on February 25, 2015, since such Proxy Statement will be filed with the Securities and Exchange Commission not later than 120 days after the end of the Company's fiscal year pursuant to Regulation 14A.ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
(a) (1) FINANCIAL STATEMENTS
The
following
Consolidated
Financial Statements of the Registrant and its subsidiaries are
included
in Part
II, Item 8:
Report
of
Independent
Registered Public Accounting Firm
F-1
Consolidated
Balance
Sheet - As of September 30, 2014 and 2013
F-2
Consolidated
Statement
of Income - Years Ended September 30, 2014, 2013 and 2012
F-4
Consolidated
Statement
of Stockholders' Equity - Years Ended
September
30, 2014, 2013 and 2012
F-5
Consolidated
Statement
of Cash Flows - Years Ended September 30, 2014, 2013 and 2012
F-6
Notes
to
Consolidated
Financial Statements
F-8
(a) (2) FINANCIAL STATEMENT SCHEDULES
The following Consolidated Financial Statement Schedules of the Registrant and its subsidiaries are included in Item 15 hereof.
SEQUENTIAL
PAGE
| Report of Independent Registered Public Accounting Firm as to Schedules |
|
|
|
|
|
Schedule II - Valuation and Qualifying Accounts
|
|
|
|
|
|
All other Schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange
Commission are not required under the related instructions or are
inapplicable, and therefore have been omitted.
|
|
|
|
|
Reference is made to the Exhibit Index set forth herein.
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 its behalf by the undersigned, thereunto duly authorized.
|
|
HICKOK
INCORPORATED
By: /s/ Robert L. Bauman Robert L. Bauman President and Chief Executive Officer Date: January 13, 2015 |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on the 13th day of January, 2015:
| SIGNATURE: | TITLE |
|
|
|
|
/s/ Brian E. Powers
|
Chairman |
| Brian E. Powers |
|
|
|
|
|
|
|
| /s/ Robert L. Bauman | President and Chief Executive Officer |
| Robert L. Bauman | (Principal Executive Officer) |
|
|
|
|
|
|
| /s/ Gregory M. Zoloty | Vice President and Chief Financial |
| Gregory M. Zoloty | Officer |
|
|
(Principal Financial and Accounting Officer) |
|
|
|
|
|
|
|
/s/ Edward F.
Crawford
|
Director |
|
Edward F. Crawford
|
|
|
|
|
|
|
|
|
/s/ Matthew V.
Crawford
|
Director
|
|
Matthew V. Crawford
|
|
|
|
|
|
|
|
|
/s/ Jennifer A.
Elliott
|
Director
|
|
Jennifer A. Elliott
|
|
|
|
|
|
|
|
| /s/ James T. Martin | Director |
| James T. Martin |
|
|
|
|
|
|
|
|
/s/ Steven H. Rosen
|
Director |
|
Steven H. Rosen
|
|
|
|
|
|
|
|
|
/s/ Janet H. Slade
|
Director
|
|
Janet H. Slade
|
|
|
|
|
|
|
|
| /s/ Kirin M. Smith | Director |
| Kirin M. Smith |
|
| EXHIBIT NO.: | DOCUMENT |
|
|
3(a)
|
Amended
Articles of Incorporation. (incorporated
herein by
reference to the appropriate exhibit to the Company's Form 10-K as
filed
with the Commission on January 14, 2013).
|
|
|
|
|
|
|
3(b)
|
Amended and Restated Code of Regulations. (incorporated herein by reference to the appropriate exhibit to the Company's Form 10-K as filed with the Commission on January 14, 2013). |
|
|
|
|
|
|
10(a)
|
Convertible Promissory Note, dated April 9, 2014, issued by the Company to Roundball in the principal amount of $100,000.00 (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 2, 2014) effective through December 30, 2014. |
|
|
|
|
|
|
10(b)
|
Convertible Promissory Note, dated May 2, 2014, issued by the Company to Roundball in the principal amount of $100,000.00 (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 2, 2014) effective through December 30, 2014. |
|
|
|
|
|
| 10(c) |
Hickok
Incorporated 2003 Outside Directors Stock Option Plan (incorporated
herein by reference to the appropriate exhibit to the Company's
Registration Statement on Form S-8 as filed with the Commission on June
9, 2005).**
|
|
|
|
|
|
|
10(d)
|
Hickok Incorporated 2007 Outside Directors Stock Option Plan (incorporated herein by reference to Appendix A of the Company's definitive proxy statement for its 2007 annual meeting of shareholders as filed with the Commission on January 22, 2007).** |
|
|
|
|
|
| 10(e) | Hickok Incorporated 2010 Outside Directors Stock Option Plan (incorporated herein by reference to Appendix A of the Company's definitive proxy statement for its 2010 annual meeting of shareholders as filed with the Commission on January 26, 2010).** |
|
|
|
|
|
|
10(f)
|
Hickok Incorporated 2013 Omnibus Equity Plan (incorporated herein by reference to Appendix A of the Company's definitive proxy statement for its 2013 annual meeting of shareholders as filed with the Commission on January 28, 2013).** |
|
|
|
|
|
|
10(g)
|
Convertible Loan Agreement, dated December 30, 2011, among the Company, the Investors, and solely with respect to Section 3 thereof, Robert L. Bauman (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 5, 2012) effective through December 30, 2012. |
|
|
|
|
|
|
10(h)
|
Convertible Promissory Note, dated December 30, 2011, issued by the Company to Roundball in the principal amount of $466,879.87 (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 5, 2012) effective through December 30, 2012. |
|
|
|
|
|
|
10(i)
|
Convertible Promissory Note, dated December 30, 2011, issued by the Company to the Aplin Trust in the principal amount of $208,591.20 (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 5, 2012) effective through December 30, 2012. |
|
|
|
|
|
|
10(j)
|
Registration Rights Agreement, dated December 30, 2011, among the Company and the Investors (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 5, 2012) effective through December 30, 2012. |
|
|
|
|
|
|
10(k)
|
Voting Agreement, dated December 30, 2011, among the Company, the Investors and the Class B Shareholders of the Company (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 5, 2012) effective through December 30, 2012. |
|
|
|
|
|
|
10(l)
|
Subscription Agreement, dated December 30, 2011, between the Company and Roundball (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 5, 2012) effective through December 30, 2012. |
|
|
|
|
|
|
10(m)
|
Form of Employment Agreement (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 5, 2012).** |
|
|
|
|
|
| 10(n) | Warrant Agreement, dated December 30, 2012, by and between the Company and Robert L. Bauman (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 4, 2013) effective through December 30, 2015. |
|
|
|
|
|
|
10(o)
|
Amendment No. 1 to Convertible Loan Agreement, dated December 30, 2012, by and between the Company and Roundball, LLC. (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 4, 2013) effective through December 30, 2013. |
|
|
|
|
|
| 10(p) | Warrant Agreement, dated December 30, 2012, by and between the Company and Roundball, LLC. (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 4, 2013) effective through December 30, 2015. |
|
|
|
|
|
|
10(q)
|
Amendment No. 2 to Convertible Loan Agreement, dated December 30, 2013, by and between the Company and Roundball, LLC. (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 1, 2014) effective through December 30, 2014. |
|
|
|
|
|
|
10(r)
|
Credit Promissory Note No. 1, dated April 24, 2014, by and
between the Company and Robert L. Bauman
(incorporated herein by reference to the appropriate exhibit to the
Company's Form 8-K as filed with the Commission on May 15, 2014).
|
|
|
|
|
|
|
10(s)
|
Credit Promissory Note No. 2, dated May 2, 2014, by and between the Company and Robert L. Bauman (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on May 15, 2014). |
|
|
|
|
|
|
10(t)
|
Credit Promissory Note No. 3, dated May 6, 2014, by and between the Company and Robert L. Bauman (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on May 15, 2014). |
|
|
|
|
|
|
10(u)
|
Credit Promissory Note No. 4, dated May 8, 2014, by and between the Company and Robert L. Bauman (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on May 15, 2014). |
|
|
|
|
|
|
10(v)
|
Credit Promissory Note No. 5, dated May 21, 2014, by and between the Company and Robert L. Bauman (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on May 30, 2014). |
|
|
|
|
|
|
10(w)
|
Credit Promissory Note No. 6, dated May 29, 2014, by and between the Company and Robert L. Bauman (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on May 30, 2014). |
|
|
|
|
|
|
10(x)
|
Credit Promissory Note No. 7, dated June 20, 2014 by and between the Company and Robert L. Bauman (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on June 23, 2014). |
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10(y)
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Amendment No. 3 to Convertible Loan Agreement, dated December 31, 2014, by and between the Company and Roundball, LLC. (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 6, 2015) effective through December 30, 2015. |
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10(z)
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Amendment No. 1 to Registration Rights Agreement, dated December 31, 2014, by and between the Company and Roundball, LLC. (incorporated herein by reference to the appropriate exhibit to the Company's Form 8-K as filed with the Commission on January 6, 2015) effective through December 30, 2015. |
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| 11 | Computation of Net Income Per Common Share. |
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14
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Hickok
Incorporated
Financial
Code of Ethics for the Chief Executive Officer and Specified Financial
Officers.
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| 21 | Subsidiaries of the Registrant. |
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| 23 | Consent of Independent Registered Public Accounting Firm. |
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| 31.1 | Rule 13a-14(a)/15d-14(a)Certification by the Chief Executive Officer. |
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| 31.2 | Rule 13a-14(a)/15d-14(a)Certification by the Chief Financial Officer. |
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| 32.1 | Certification by the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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| 32.2 | Certification by the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
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101.INS*
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XBRL Instance
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101.SCH*
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XBRL Taxonomy Extension Schema
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101.CAL*
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XBRL Taxonomy Extension Calculation
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101.DEF*
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XBRL Extension Definition
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101.LAB*
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XBRL Taxonomy Extension Labels
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101.PRE*
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XBRL Taxonomy Extension Presentation
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM AS TO CONSOLIDATED SCHEDULES
To
the
Shareholders
and Board of Directors
Hickok
Incorporated
Cleveland,
Ohio
We
have audited the
consolidated
financial statements of HICKOK INCORPORATED (the "Company") as of
September
30, 2014 and 2013, and for each of the years in the three-year period
ended
September 30, 2014, and have issued our report thereon dated January 6, 2015;
such
consolidated financial statements and report are included in Part
II, Item 8
of
this Form 10-K. Our audits also included the consolidated financial
statement
schedules ("schedules") of the Company listed
in
Part IV, Item 15.
These
schedules are the responsibility of the
Company's
management. Our responsibility is to express an opinion based on our
audits. In our opinion, such schedules, when considered in relation to
the basic financial
statements taken as a whole, present fairly in all material respects
the
information set forth therein.
/s/ Meaden & Moore, Ltd.
MEADEN
&
MOORE, Ltd.
Certified
Public
Accountants
January 6,
2015
Cleveland,
Ohio
HICKOK INCORPORATED
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Col. A Col. B Col. C Col. D Col. E
----------------------- ---------- ------------------------------- --------- ------------
Additions
-------------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Period Expenses Accounts Deductions of Period
----------------------------- ---------- ------------ ------------ ----------- ------------
Deducted from Asset Accounts:
Year Ended September 30, 2012
------------------------------
Reserve for doubtful accounts $ 10,000 $ 374 (1) $ - (2) $ 374 (3) $ 10,000
Reserve for inventory obsolescence $ 714,000 $ 185,697 $ - $ 48,697 (4) $ 851,000
Reserve for product warranty $ 993 $ 7,565 $ - $ 8,107 $ 451
Valuation allowance deferred taxes $4,049,300 $ 187,400 $ - $ - $4,236,700
Year Ended September 30, 2013
------------------------------
Reserve for doubtful accounts $ 10,000 $ 2,049 (1) $ - (2) $ 2,049 (3) $ 10,000
Reserve for inventory obsolescence $ 851,000 $ 60,107 $ - $ 118,107 (4) $ 793,000
Reserve for product warranty $ 451 $ 8,690 $ - $ 9,052 $ 89
Valuation allowance deferred taxes $4,236,700 $ - $ - $ 114,400 $4,122,300
Year Ended September 30, 2014
------------------------------
Reserve for doubtful accounts $ 10,000 $ (4,446) (1) $ - (2) $ (4,446) (3) $ 10,000
Reserve for inventory obsolescence $ 793,000 $(113,603) $ - $ 315,897 (4) $ 363,500
Reserve for product warranty $ 89 $ 10,275 $ - $ 10,335 $ 9
Valuation allowance deferred taxes $4,122,300 $ 44,400 $ - $ - $4,166,700
(1) Classified as bad debt expense.
(2) Recoveries on accounts charged off in prior years.
(3) Accounts charged off during year as uncollectible.
(4) Inventory charged off during the year as obsolete.
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Years Ended September 30,
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2014
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2013
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2012
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NET INCOME
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Net income (loss) applicable to common shares for basic
earnings per share
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$8,376
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$138,805
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$(783,966)
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Net Income (loss) applicable to common shares for diluted
earnings per share
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$8,376
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$138,805
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$(783,966)
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SHARES OUTSTANDING
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Weighted average shares for basic earnings per share
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1,638,215
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1,610,571
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1,372,812
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Net effect of dilutive options available under convertible
note - based on the treasury stock method using year-end
market
price, if higher than average market price
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31,097
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23,505
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-*
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Total shares for diluted earnings per share
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1,669,312
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1,634,076
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1,372,812
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Basic Earnings Per Common Share
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$.01
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$.09
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$(.57) |
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Diluted Earnings Per Common Share
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$.01
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$.08
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$(.57)
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* Net effect of stock
options was antidilutive for the period.
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HICKOK INCORPORATED
Subsidiaries of Registrant
COMPANY NAME STATE OF INCORPORATION
Supreme Electronics LLC Mississippi
Waekon LLC Ohio
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8
(Nos. 33-68196, 333-63597 and 333-125672) of Hickok Incorporated (the "Company") of our report dated
January 6, 2015, related to the consolidated balance sheets as of September 30, 2014 and 2013,
and the related consolidated statements of income, stockholders' equity, and cash flows for each of
the years in the three-year period ended September 30, 2014, which appear in this Form 10-K.
/s/ Meaden & Moore, Ltd.
MEADEN & MOORE, Ltd.
Independent Registered Public Accounting Firm
Cleveland, Ohio
January 6, 2015
I have reviewed this annual report
on Form 10-K of Hickok Incorporated (the
"registrant");
Based on 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;
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;
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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over
financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c) 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
d) 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 fiscal 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;
and
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 the registrant's board of directors (or persons performing the 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.
By:
/s/ R. L. Bauman
R. L. Bauman
Chief Executive Officer
January 13, 2015
RULE 13a-14(a)/15d-14(a) CERTIFICATION
I have reviewed this annual report
on Form 10-K of Hickok Incorporated (the
"registrant");
Based on 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;
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;
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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over
financial reporting, or caused such internal control over financial
reporting to be designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
c) 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
d) 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 fiscal 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;
and
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 the registrant's board of directors (or persons performing the 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.
By:
/s/ G. M. Zoloty
G. M. Zoloty
Vice President, Finance and Chief Financial Officer
January 13, 2015
Exhibit 32.1
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 Annual Report of Hickok Incorporated (the "Company") on Form 10-K for the period ending September 30, 2014 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Robert L. Bauman, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that:
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ R. L. Bauman
R. L. Bauman
Chief Executive Officer
January 13, 2015
Exhibit 32.2
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 Annual
Report of Hickok Incorporated (the "Company") on Form 10-K for the
period
ending September 30, 2014 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Gregory M. Zoloty,
Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C.
section
1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of
2002, that:
the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ G. M. Zoloty
G. M. Zoloty
Chief Financial Officer
January 13, 2015