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CRAWFORD UNITED Corp - Quarter Report: 2010 December (Form 10-Q)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2010

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to ____ _ .

Commission File No. 0-147

HICKOK INCORPORATED
_____________________________________________________________
(Exact name of registrant as specified in its charter)


Ohio

34-0288470

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)



10514 Dupont Avenue, Cleveland, Ohio

44108

(Address of principal executive offices)

(Zip Code)



(Registrant's telephone number, including area code)

(216) 541-8060

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 Web site, 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 [ ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer [ ]
Accelerated filer [ ]     
Non-accelerated filer   [ ]
Smaller reporting company [X]


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No_X_

As of February 9, 2011:
 793,229 Hickok Incorporated Class A Common Shares and 454,866 Class B Common Shares were outstanding.


PART I. - FINANCIAL INFORMATION

Item 1. Financial Statements.

HICKOK INCORPORATED
CONSOLIDATED INCOME STATEMENTS
(Unaudited)

Three months ended
December 31,



2010

2009

Net Sales




   Product Sales

$1,012,057

$1,539,624

   Service Sales

100,586

97,093




      Total Net Sales

1,112,643

1,636,717




Costs and Expenses



   Cost of Product Sold

612,297

703,842

   Cost of Service Sold

77,728

56,333

   Product Development

255,334

254,458

   Marketing and Administrative
     Expenses

487,147

564,722

   Interest Charges

-

542

   Other Income

<1,881>

<7,889>




      Total Costs and Expenses
1,430,625

1,572,008




Income <Loss> before Provision for Income Taxes

<317,982>

64,709




Provision for <Recovery of> Income Taxes

-

-




Net Income <Loss>
$<317,982>

$64,709




Earnings per Common Share:




Net Income <Loss>

$<.25>

$.05




Earnings per Common Share Assuming Dilution:




Net Income <Loss>

$<.25>

$.05




Dividends per Common Share

$-0-

$-0-




See Notes to Consolidated Financial Statements


HICKOK INCORPORATED
CONSOLIDATED BALANCE SHEET


December 31,
2010
(Unaudited)

September 30,
2010
(Note)

December 31,
2009
(Unaudited)

Assets




Current Assets




Cash and Cash Equivalents

$292,399 $768,647 $804,829

Trade Accounts Receivable-Net

482,878 350,386
1,084,855

Inventories

2,050,851 2,122,972
2,190,322

Deferred Income Taxes-Net

- - -

Prepaid Expenses

133,190 70,423 141,656




Total Current Assets

2,959,318 3,312,428 4,221,662








Property, Plant and Equipment




Land

233,479 233,479 233,479

Buildings

1,429,718 1,429,718 1,429,718

Machinery and Equipment

2,338,183
2,336,995
2,345,408





4,001,380 4,000,192 4,008,605




Less: Allowance for Depreciation 3,532,487 3,504,989
3,414,074




Total Property - Net

468,893 495,203 594,531








Other Assets




Deferred Income Taxes - Net

- - -
Notes Receivable 39,100
-
-

Deposits

1,750 1,750 1,750




Total Other Assets

40,850
1,750 1,750




Total Assets

$3,469,061 $3,809,381 $4,817,943








Note: Amounts derived from audited financial statements previously filed with the
Securities and Exchange Commission.

See Notes to Consolidated Financial Statement
s 


December 31,
2010
(Unaudited)

September 30,
2010
(Note)

December 31,
2009
(Unaudited)

Liabilities and Stockholders' Equity




Current Liabilities




Trade Accounts Payable

$150,650
$183,036 $217,657

Accrued Payroll & Related Expenses

151,161
149,801 132,488

Accrued Expenses

142,408
148,850 97,707

Accrued Taxes Other Than Income

58,075
46,965 83,257

Accrued Income Taxes

-
- 3,960




Total Current Liabilities

502,294
528,652 535,069




















Stockholders' Equity




Class A, $1.00 par value;
   authorized 3,750,000 shares;
   793,229 shares outstanding
   excluding
15,795 shares in
   treasury
 

793,229 793,229 793,229




Class B, $1.00 par value;
   authorized 1,000,000 shares;
   454,866 shares outstanding
   excluding 20,667 shares in
   treasury

454,866 454,866 454,866




Contributed Capital

1,192,381 1,188,361 1,176,301




Retained Earnings

526,291
844,273
1,858,478




Total Stockholders' Equity

2,966,767
3,280,729 4,282,874




Total Liabilities and
Stockholders' Equity

$3,469,061 $3,809,381 $4,817,943





HICKOK INCORPORATED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31,
(Unaudited)



2010 2009



Cash Flows from Operating Activities:



   Cash received from customers

$980,151 $1,681,450

   Cash paid to suppliers and employees

<1,416,466> <1,577,344>

   Interest paid

- -

   Interest received

355
1,714

   Income taxes <paid> refunded

-
-



      Net Cash Provided By <Used In> Operating
         Activities

<435,960>
105,820



Cash Flows from Investing Activities:



   Capital expenditures

<1,188> <17,857>
   Advances on notes receivable
<39,100>




      Net Cash Provided By <Used In> Investing 
         Activities

<40,288> <17,857>



Cash Flows from Financing Activities:









      Net Cash Provided By <Used In> Financing
         Activities

- -



Net increase <decrease> in cash and cash equivalents

<476,248> 87,963



Cash and cash equivalents at beginning of year

768,647
716,866



Cash and cash equivalents at end of first quarter

$292,399 $804,829




See Notes to Consolidated Financial Statements








2010 2009



Reconciliation of Net Income <Loss> to Net Cash  Provided By <Used In> Operating Activities:






   Net Income <Loss>

$<317,982> $64,709

   Adjustments to reconcile net income <loss> to
      net cash provided by operating activities:



         Depreciation 

27,498
33,136
         Share-based compensation expense
4,020
3,985
         Deferred income taxes
-
-

         Changes in assets and liabilities:



            Decrease <Increase> in accounts
               receivable

<132,492> 44,733

            Decrease <Increase> in inventories

72,121 <5,674>

            Decrease <Increase> in prepaid expenses

<62,767> <66,104>
            Decrease <Increase> in refundable income
               taxes
-
-

            Increase <Decrease> in accounts payable

<32,386> 60,330

            Increase <Decrease> in accrued payroll
               and related expenses

1,360 <6,854>

            Increase <Decrease> in accrued expenses
               and accrued taxes other than income

4,668
<22,441>



               Total Adjustments

<117,978>
41,111



               Net Cash Provided By <Used In>
                  Operating Activities

$<435,960> $105,820










HICKOK INCORPORATED
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
DECEMBER 31, 2010


1. Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended December 31, 2010 are not necessarily indicative of the results that may be expected for the year ended September 30, 2011. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended September 30, 2010.

2. Inventories

Inventories are valued at the lower of cost or market and consist of the following:


December 31,
2010

September 30,
2010

December 31,
2009





Components

$1,257,728

$1,382,484

$1,502,533

Work-in-Process

427,228
390,434
348,645

Finished Product

365,895

350,054

339,144





$2,050,851

$2,122,972

$2,190,322






The above amounts are net of reserve for obsolete inventory in the amount of $428,091, $380,000 and $493,803 for the periods ended December 31, 2010, September 30, 2010 and December 31, 2009 respectively.

3. Notes Receivable

The Company has notes receivable with certain employees at an interest rate of three percent per annum. The Company does not anticipate repayment within the next twelve months.

4. Capital Stock, Treasury Stock, Contributed Capital and Stock Options

Under the Company's Key Employees Stock Option Plans (collectively the "Employee Plans"), incentive stock options, in general, are exercisable for up to ten years, at an exercise price of not less than the market price on the date the option is granted. Non-qualified stock options may be granted at such exercise price and such other terms and conditions as the Compensation Committee of the Board of Directors may determine. No options may be granted at a price less than $2.925. Options for 27,650 Class A shares were outstanding at December 31, 2010 (41,500 shares at September 30, 2010 and 41,500 shares at December 31, 2009) at prices ranging from $3.125 to $3.55 per share. Options for 13,850 at a price of $3.125 per share expired during the three month period ended December 31, 2010. In addition, options for 17,900 at prices ranging from $3.125 to $5.00 per share expired during the three month period ended December 31, 2009. No other options were granted, exercised or canceled during the three month periods presented under the Employee Plans. All options granted under the Employee Plans are exercisable at December 31, 2010.

The Company's Outside Directors Stock Option Plans (collectively the "Directors Plans"), provide for the automatic grant of options to purchase up to 44,000 shares of Class A Common Stock to members of the Board of Directors who are not employees of the Company, at the fair market value on the date of grant. Options for 44,000 Class A shares were outstanding at December 31, 2010 (44,000 shares at September 30, 2010 and 41,000 shares at December 31, 2009) at prices ranging from $2.925 to $11.00 per share. All outstanding options under the Directors Plans become fully exercisable on February 25, 2013.

The following is a summary of the range of exercise prices for stock options outstanding and exercisable under the Employee Plans and the Directors Plans at December 31, 2010:

   

Employee Plans
Outstanding Stock Options Exercisable 
Weighted Average
 Share Price
Weighted Average Remaining Life
Range of exercise prices:       
$3.55
27,650
$3.55
.3
 
   
 
27,650
$3.55







   

Directors Plans
Outstanding Stock Options
Weighted Average
 Share Price
Weighted Average Remaining Life
Number of Stock Options  Exercisable
Weighted Average Share Price
Range of exercise prices:       

$2.925 - $5.25
20,000
$3.95
4.1
16,667
$4.15
$6.00 - $7.25
14,000
$6.49
6.1
8,000
$6.85
$10.50 - $11.00
10,000
$10.75
6.8
8,333
$10.70
 

   


 
44,000
$6.30

33,000
$6.46









The Company accounts for Share-Based Payments under the modified prospective method for its stock options for both employees and non-employee Directors. Compensation cost for fixed based awards are measured at the grant date, and the Company uses the Black-Scholes option pricing model to determine the fair value estimates for recognizing the cost of employee and director services received in exchange for an award of equity instruments. The Black-Scholes option pricing model requires the use of subjective assumptions which can materially affect the fair value estimates. Employee stock options are immediately exercisable while Director's stock options are exercisable over a three year period. The fair value of stock option grants to Directors is amortized over the three year vesting period. During the quarter ended December 31, 2010 $4,020 was expensed as share-based compensation. During the quarter ended December 31, 2009 $3,985 was expensed as share-based compensation. The following weighted-average assumptions were used in the option pricing model for the three month periods ended December 31, 2010 and 2009 respectively: a risk free interest rate of 5.5% and 5.5%; an expected life of 10 and 10 years; an expected dividend yield of 0.0% and 0.0%; and a volatility factor of .75 and .54.

Unissued shares of Class A common stock (526,516 shares) are reserved for the share-for-share conversion rights of the Class B common stock and stock options under the Employee Plans and the Directors Plans.

5. Recently Issued Accounting Pronouncements

The Company did not incur any material impact to its financial condition or results of operations due to the adoption of any new accounting standards during the periods reported.

6. Earnings per Common Share

Earnings per common share information is computed on the weighted average number of shares outstanding during each period based on the provisions of FASB Codification ASC Topic 260, "Earnings per Share."  The required reconciliations are as follows:


Three Months ended
December 31,

2010

2009

Basic Income <Loss> per Share



Income <Loss> available
to common stockholders

$<317,982>

$64,709




Shares denominator

1,248,095

1,248,095




Per share amount

$<.25>

$.05




Effect of Dilutive Securities



Average shares outstanding

1,248,095

1,248,095

Stock options

-

16,635





1,248,095

1,264,730




Diluted Income <Loss> per Share



Income <Loss> available to common stockholders

$<317,982>

$64,709




Per share amount

$<.25>

$.05




Options to purchase 71,650 shares of common stock during the first quarter of fiscal 2011 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.

Options to purchase 26,000 shares of common stock during the first quarter of fiscal 2010 at prices ranging from $5.25 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.

7. Segment and Related Information

The Company's four business units have a common management team and infrastructure that offer different products and services. The business units have been aggregated into 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 and pleasure aircraft. Within the locomotive market, indicators and gauges are sold to both original equipment manufacturers and to 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 systems using electronic means to measure vehicle parameters. These products are sold to OEM's 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.

Information by industry segment is set forth below:

Three Months Ended
December 31,



2010

2009

Net Sales



Indicators and Gauges

$243,806

$307,670

Automotive Diagnostic Tools and Equipment

868,837

1,329,047




$1,112,643

$1,636,717




Income <Loss> before Provision for Income Taxes



Indicators and Gauges

$<18,760>

$15,974

Automotive Diagnostic Tools and Equipment

<7,711>

327,320

General Corporate Expenses

<291,511>

<278,585>





$<317,982>

$64,709




Asset Information



Indicators and Gauges

$588,403

$784,268

Automotive Diagnostic Tools and Equipment

1,940,928
2,477,703

Corporate

939,730
1,555,972




$3,469,061

$4,817,943




Geographical Information



Included in the consolidated financial statements are the following amounts related to geographical locations:



Revenue:



United States

$1,036,125

$1,632,743

Australia
25,856
-

Canada

37,835
2,163

Other foreign countries

12,827
1,811




$1,112,643

$1,636,717





All export sales to Australia, Canada and other foreign countries are made in United States of America Dollars.

8. Commitments and Contingencies

Legal Matters

The Company is the plaintiff in a suit pursuing patent infringement against a competitor in the emissions market. Management believes that it is not currently possible to estimate the impact, if any, that the ultimate resolution of this matter will have on the Company's results of operations, financial position or cash flows.

9. Subsequent Events

The Company has evaluated subsequent events through February 7, 2011, which is the date the financial statements were available to be issued, and has determined there were no subsequent events to recognize or disclose in these financial statements.

10.
Going Concern and Management Plan

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has suffered recurring losses from operations during the past several years 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 reduced the Company's accounts receivable and cash balances, if this situation continues it may 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 financing if needed. During fiscal 2010 management reviewed and revised 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 market place. 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.

In December of 2008 management took steps to reduce non-direct product related expenses throughout the Company in response to the economic downturn and the uncertainty in the markets the Company serves. The steps included a substantial reduction in personnel, wage reductions for all personnel and expenditure restrictions in most aspects of the Company’s operations. Management took additional steps in April 2009 and made additional reductions in personnel throughout the Company due to the continued decline in sales to the markets the Company serves. For the quarter ended December 30, 2010 and 2009 the Company achieved the savings that were anticipated from the cost cutting measures implemented in fiscal 2009. The Company anticipates the cost cutting measures will continue for the fiscal year ended September 30, 2011.

Management is implementing additional expense reductions that will be effective in the near future. Current plans estimate an approximate $30,000 per month reduction in expenses. Management also believes its strategy to improve revenue and profitability will show significant results during the remainder of the fiscal year. In addition, management has identified a possible source of limited short-term financing if it were to become necessary.

Management had recorded a valuation allowance on the entire balance of deferred tax assets at September 30, 2010 due to the continued losses during the past several years, the current economic uncertainties, the negative effects of the current economic crisis on all the Company's markets and concern that a more likely than not expiration of the Company's net operating loss and research and development credit carryforwards could occur before they can be used.

In addition, management recorded a valuation allowance in the amount of $117,000 on the current quarter deferred taxes.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Results of Operations, First Quarter (October 1, 2010 through December 31, 2010)
Fiscal 2011 Compared to First Quarter Fiscal 2010
-----------------------------------------------------------------------------------------

Reportable Segment Information

The Company has determined that it has two reportable segments: 1)indicators and gauges and 2)automotive related diagnostic tools and equipment. The indicators and gauges 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. Revenue in this segment was $243,806 and $307,670 for the first quarter of fiscal 2011 and fiscal 2010, respectively. The automotive diagnostic tools and equipment segment consists primarily of products designed and manufactured to support the testing or servicing of automotive systems using electronic means to measure vehicle parameters. These products are sold to OEM's 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. Revenue in this segment was $868,837 and $1,329,047 for the first quarter of fiscal 2011 and fiscal 2010, respectively. The prior year increase was due primarily to the completion of an order for automotive diagnostic testing equipment for an OEM.

Results of Operations

Product sales for the quarter ended December 31, 2010 were $1,012,057 versus $1,539,624 for the quarter ended December 31, 2009. The decrease in product sales during the current quarter of approximately $528,000 was volume related due primarily to decreased sales of automotive diagnostic products, primarily, testing products to OEM's of approximately $467,000. Sales of emissions testing products increased approximately $14,000 offset by a decrease in non-emission aftermarket products of approximately $4,000. Indicator product sales decreased by approximately $71,000. Management continues to be concerned about the current economic conditions in the markets the Company serves. Although the current economic uncertainties make forecasting difficult, product sales are expected to increase slightly during the remainder of fiscal 2011.

Service sales for the quarter ended December 31, 2010 were $100,586 versus $97,093 for the quarter ended December 31, 2009. The increase was volume related and due primarily to a higher sales volume for chargeable repairs. The current level of service sales related to product repair sales is expected to continue for the balance of the fiscal year.

Cost of product sold in the first quarter of fiscal 2011 was $612,297 (60.5% of product sales) as compared to $703,842 (45.7% of product sales) in the first quarter of fiscal 2010. The increase in the cost of product sold percentage was due primarily to a lower sales volume, lower plant utilization and a change in product mix. The current cost of product sold percentage is expected to decrease slightly for the balance of the fiscal year due to an anticipated change in product mix and additional cost reductions.  

Cost of service sold in the first quarter of fiscal 2011 was $77,728 (77.3% of service sales) as compared to $56,333 (58.0% of service sales) in the first quarter of fiscal 2010. The dollar and percentage increase was due primarily to a lower plant utilization. The current cost of services sold percentage is expected to decrease slightly for the balance of the fiscal year due to additional cost reductions.

Product development expenses were $255,334 in the first quarter of fiscal 2011 (25.2% of product sales) as compared to $254,458 (16.5% of product sales) in the first quarter of fiscal 2010. The percentage increase was due primarily to lower product sales during the current quarter. The current level of product development expenses is expected to decrease slightly for the balance of the fiscal year due to additional cost reductions. The Company believes the current resources will be sufficient to continue to develop identified new products for both OEM and Aftermarket customers.

Marketing and administrative expenses were $487,147 (43.8% of total net sales) in the first quarter of fiscal 2011 versus $564,722 (34.5% of total net sales) for the same period a year ago. The percentage increase was due primarily to the lower level of total sales for the current quarter. Marketing expenses were approximately $194,000 in the first quarter of fiscal 2011 versus $279,000 for the same period a year ago. Within marketing expenses, commissions, consulting fees, labor costs and royalties decreased by approximately $36,000, $29,000, $26,000 and $4,000 respectively. Travel expense, credit and collection expense and promotion expense increased by approximately $5,000, $3,000 and $3,000 respectively. Administrative expenses were approximately $293,000 in the first quarter of fiscal 2011 versus $286,000 for the same period a year ago. Within administrative expenses, wages, employee benefits and data processing expenses increased approximately $3,000, $3,000 and $1,000 respectively. The current level of marketing and administrative expenses are expected to decrease for the balance of the fiscal year due to additional cost reductions.

Interest expense was $0 in the first quarter of fiscal 2011 which compares with $542 in the first quarter of fiscal 2010. The decrease in interest charges in the current quarter compared to a year ago was due to no loan facility during the current fiscal year. The prior year interest was a charge on the unused portion of a $1,000,000 loan facility. The current level of interest expense could increase for the third and fourth quarters of the year due to possible financing requirements of forecasted orders.

Other income was $1,881 in the first quarter of fiscal 2011 which compares with $7,889 in the first quarter of fiscal 2010. Other income consists primarily of interest income on cash and cash equivalents invested and the proceeds from the sale of scrap metal shavings. The decrease is due primarily to a lower level of scrap metal sales and a lower level of cash available for investment during the current quarter.

Income taxes in the first quarter of fiscal 2011 was $0 which compares with income taxes of $0 in the first quarter of fiscal 2010. In the first quarter of fiscal 2011 recovery of income taxes was recorded at an effective tax rate of 37% offset by the increase in the valuation allowance. In the first quarter of fiscal 2010 income taxes was calculated at an effective tax rate of 37% offset by a decrease in the valuation allowance netting to $0.

The net loss in the first quarter of fiscal 2011 was $317,982 which compares with net income of $64,709 in the first quarter of fiscal 2010. The net loss in fiscal 2011 was primarily the result of a lower sales volume.

In December of 2008 management took steps to reduce non-direct product related expenses throughout the Company in response to the economic downturn and the uncertainty in the markets the Company serves. The steps included a substantial reduction in personnel, wage reductions for all personnel and expenditure restrictions in most aspects of the Company’s operations. Management took additional steps in April 2009 and made additional reductions in personnel throughout the Company due to the continued decline in sales to the markets the Company serves. The expected annual cost savings of approximately $3,000,000 took into consideration possible increases in other expenses that might occur. The savings were realized in approximately equal amounts per month with similar impact on both earnings and cash flows. In addition, management is implementing additional expense reductions expected to save approximately $30,000 per month.

Unshipped customer orders as of December 31, 2010 were $435,000 versus $831,000 at December 31, 2009. The decrease was due primarily to decreased orders for indicator products and aftermarket products which include emissions products of $347,000 and $49,000 respectively. The Company anticipates that most of the current backlog will be shipped in fiscal 2011.

Liquidity and Capital Resources

Total current assets were $2,959,318, $3,312,428 and $4,221,662 at December 31, 2010, September 30, 2010 and December 31, 2009, respectively. The decrease of approximately $1,262,000 from December to December is due primarily to the decrease in cash and cash equivalents, accounts receivable, inventory and prepaid expenses of approximately $512,000, $602,000, $140,000 and $8,000 respectively. The decrease in accounts receivable was due to decreased sales during the current month of December. The decrease from September 30, 2010 to December 31, 2010 is due primarily to the decrease in cash and cash equivalents and inventory of $476,000 and $72,000 respectively, offset in part by the increase in accounts receivable and prepaid expenses of approximately $132,000 and $63,000 respectively.

Working capital as of December 31, 2010 amounted to $2,457,024 as compared with $3,686,593 a year earlier. Current assets were 5.9 times current liabilities and total cash and cash equivalents and receivables were 1.5 times current liabilities. These ratios compare to 7.9 and 3.5, respectively, at December 31, 2009.

Internally generated funds during the three months ended December 31, 2010 were a negative $435,960. Capital expenditures during the period were $1,188. The primary reason for the negative cash flow from operations was the net loss during the current quarter. The Company does not anticipate any material capital expenditures during fiscal 2011. In addition, the Company believes that cash and cash equivalents together with funds anticipated to be generated by operations in addition to available short-term financing will provide adequate funding of the Company's working capital needs.

Shareholders' equity during the three months ended December 31, 2010 decreased by $313,962 which was the net loss during the period of $317,982 and $4,020 of share-based compensation expense.

During fiscal 2011 the Company's business may require a short-term increase in inventory and accounts receivables. Whenever there may be a requirement to increase inventory in fiscal 2011 there will be a negative but temporary impact on liquidity. As previously noted, management implemented expense reductions during fiscal 2009 in response to the economic downturn and uncertainty in the markets the Company serves and is preparing to implement additional reductions. The Company has reduced headcount, product development, and marketing, administrative and sales related expenses in order to appropriately manage its working capital. The Company believes that internally generated funds and available short-term financing will provide sufficient liquidity to meet ongoing working capital requirements. In addition, the Company is currently evaluating other short-term financing alternatives but there can be no assurance that such arrangements will be available. 

Critical Accounting Policies

Our critical accounting policies are as presented in Notes to Consolidated Financial Statements and Management's Discussion and Analysis of Financial Condition and Results of Operation in our Form 10-K for the year ended September 30, 2010.

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, fastening systems 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 3. 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 risk is exposure related to interest rate risk, however, the Company does not currently have a credit facility in place.

Item 4. Controls and Procedures. 

As of December 31, 2010, 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 Senior 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 Senior Vice President, Finance and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective as of December 31, 2010 in ensuring that information required to be disclosed by the Company in the reports 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 first fiscal quarter ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

The Company is the plaintiff in a suit pursuing patent infringement against a competitor in the emissions market. There has been no material developments in this legal proceeding since the filing of Form 10-K for fiscal 2010. Management believes that it is not currently possible to estimate the impact, if any, that the ultimate resolution of the patent infringement matter will have on the Company's results of operations, financial position or cash flows.

Item 6. Exhibits.

Exhibit No.

Description



11

Statement Regarding Computation of Earnings Per Share and Common Share Equivalents



31.1

Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer



31.2

Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer



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



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


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



HICKOK INCORPORATED
(Registrant)




Date: February 14, 2011

/s/ R. L. Bauman


R. L. Bauman, Chief Executive Officer,
President, and Treasurer





Date: February 14, 2011

/s/ G. M. Zoloty


G. M. Zoloty, Chief Financial Officer