ORA ELECTRONICS INC, 10-K, 2000-07-14

ORA ELECTRONICS INC
10-K, 2000-07-14
ELECTRONIC COMPUTERS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

(Mark one)
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the fiscal year ended March 31, 2000 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 NUMBER: 0-21903

ORA ELECTRONICS, INC.
--------------------------------------------------
(Exact name of registrant as specified in its charter)

DELAWARE 95-4607830
-------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

9410 OWENSMOUTH AVE.
CHATSWORTH, CALIFORNIA 91311
----------------------------------------------------------
(Address of principal executive offices) (Zip Code)

(818) 772-2700
-----------------------------------------------------
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $.001 per share; Class A Warrants; Class B Warrants; Class C Warrants;
Class D Warrants

Indicate by check mark whether the registrant (1) has filed all reports 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 ____

<PAGE>2

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K 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.

Yes ____ No X

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

Yes X No ____

The aggregate market value of the voting stock held by non-affiliates of
the registrant at June 26, 2000 was approximately $658,042. The registrant had
7,517,638 shares of common stock, par value $.001 per share outstanding at June
26, 2000.

The registrant had each of 481,580 Class A Warrants; 647,903 Class B
Warrants; 566,675 Class C Warrants; and 735,085 Class D Warrants, outstanding at
June 26, 2000.

Documents Incorporated by Reference (To the Extent Indicated Herein):
Portions of the Definitive Proxy Statement for the 2000 Annual Meeting (in Part
III).

Exhibit Index on Page 44

<PAGE>3

ITEM 1 - BUSINESS

GENERAL

ORA Electronics, Inc. ("ORA" or the "Company") is a developer and
supplier of interface, connectivity solutions and peripheral accessories for
wireless communication devices, including cellular telephones, personal
communications systems ("PCS") and pagers, computing devices and intelligent
transportation systems ("ITS"). The Company currently carries over 500 products
which are sold to over 400 customers in the United States, and throughout North,
Central and South America. Among the Company's customers are major mass market
retailers, service providers and cellular carriers, original equipment
manufacturers ("OEMs"), auto manufacturers, regional distributors and dealers.

The Company is experiencing a significant reduction in its business and
projects that ongoing cash flow may not be sufficient to sustain business
operations after July 31, 2000. See the Liquidity and Capital Resources section
of Management's Discussion and Analysis of Financial Condition and Results of
Operations for a more complete discussion of this issue.

The Company's business began as a sole proprietorship in 1974 under the
name ORA Electronics and was incorporated in California in 1979 under the name
Alliance Research Corporation ("Alliance"). The Company's products have been
primarily sold under the "ORA" trade name. In December 1996, Alliance merged
into ORA Electronics, Inc. for the purposes of effecting its name change and
reincorporation from California to Delaware. References herein to "ORA" or the
"Company" include Alliance prior to the date of such merger, as applicable.

From April, 1987 to December 1996, the Company was taxed as an S
corporation under the Internal Revenue Code of 1986, as amended. From December
1996 forward, the Company has been taxed as a C corporation.

INDUSTRY

Wireless communications technology encompasses wireless communications
devices such as handheld, mobile and transportable handsets, pagers and two-way
radios. Since its inception in 1983, the wireless handset market has grown
rapidly. The Company believes that the wireless communications industry will
continue to grow for a number of reasons. Economic growth, increased service
availability and the lower cost of wireless service compared to conventional
landline telephone systems in emerging markets will, the Company believes,
continue to create demand for wireless communications products. The Company also
believes that the change from analog to digital technology will increase overall
market growth and encourage consumers to purchase the next generation of
products. In addition, advanced digital technologies have led to increases in
the number of network operators and resellers, which have resulted in increased
demand for wireless communications products. Finally, the proliferation of new
manufacturers is expected to lower prices, increase product selection and expand
sales channels. In the United States, wireless handset service was developed as
an alternative to conventional landline systems and existing mobile handset

<PAGE>4

service and has been one of the fastest growing market segments in the
communications industry.

The number of U.S. wireless subscribers has grown significantly since
the inception of the wireless handset industry in 1983. The Company believes
that the U.S. market for wireless services will continue to expand due to the
increasing affordability and availability of such services and shorter
development cycles for new products and enhancements. In addition, many wireless
service providers are upgrading their existing systems from analog to digital
technology as a result of capacity constraints in many of the larger wireless
markets and in order to respond to competition. Digital technology increases
system capacity and offers other advantages, such as improved overall average
signal quality, improved call security, lower incremental costs for additional
subscribers and the ability to provide data transmission services.

PRODUCTS

Sales of wireless accessory products accounted for approximately 98.7%,
97.5% and 97.1% of ORA's net sales for the fiscal years ended in 2000, 1999 and
1998, respectively. The various power cords offered by ORA as part of its
wireless handset accessory line accounted for approximately 25.1%, 21.3% and
22.7% of ORA's net sales for the fiscal years ended March 31, 2000, 1999 and
1998, respectively. ORA offers 13 different stock keeping units of power cords
which support different wireless telephone models offered by 6 different
manufacturers.

A new product category in ORA's line is ITS. ORA has developed numerous
proprietary ITS products that allow interconnectivity between automotive safety
systems, entertainment systems, navigation systems and wireless communications
devices. Telcar, a product developed by ORA, serves as an integration hub for
ITS products utilizing ORA's T-bus data protocols. Initial shipments of this
product began in March, 2000. ORA's patent applications with respect to these
products have been approved by the U.S. Patent and Trademark Office.

CUSTOMERS

ORA sells its products to over 400 customers in the United States and
throughout North, Central and South America. Among ORA's customers are major
mass market retailers, wireless service providers and carriers, original
equipment manufacturers ("OEMs"), auto manufacturers, regional distributors and
dealers.

Pursuant to its distribution agreement with ORA Electronics (UK) Ltd.
("ORA UK"), an unaffiliated company, the Company may not sell its products
bearing the "ORA" trade name and logo outside of North, Central and South
America. Under such agreement, which extends into perpetuity, the Company does
not generate any revenues with respect to sales made by ORA UK.

For the fiscal year ending March 31, 2000, one customer, CompUSA,
accounted for approximately 14.5%, of the Company's net sales. For the fiscal
years ending March 31, 1999 and 1998, Circuit City, accounted for approximately
52.6% and 38.5%, respectively, of the Company's net sales and Staples accounted
for approximately 5.9% and 17.3% , respectively, of the Company's net sales.
Circuit City and Staples are not currently active customers of the Company. For
a more complete discussion of this matter, see Management's Discussion and

<PAGE>5

Analysis of Financial Condition and Results of Operations for Fiscal Year ended
March 31, 2000 compared to Fiscal Year ended March 31, 1999.

MARKETING AND CUSTOMER SUPPORT

ORA places a strong emphasis on the marketing of its products. Though
its product line features many technologically sophisticated and innovative
products, the Company believes that its greatest strengths lie in its abilities
to manufacture for, and communicate with, the mass market, provide useable
products and superior customer service, and introduce high technology products
to the market.

To ensure comprehensive control of the marketing process, ORA has a
complete in-house marketing services department. The marketing services
department provides a full range of services. In addition to ad design and
production, product photography, line brochures, packaging and catalogs, the
department provides a number of specialized customer services including a
complete planogram service, cooperative advertising programs, store
merchandising, in-store display design and production, customer-specific
collateral material, ad slicks, clip art services, semi-private labeling,
private label catalogs, mail inserts and trade show exhibit management.

SALES AND DISTRIBUTION

ORA's products are distributed via national and regional consumer
electronics retailers, office supply retailers, department stores, auto parts
chains and other multiple outlet retailers, wireless service providers, catalog
and mail order houses, and electronics distributors. In addition, ORA designs
and supplies products to manufacturers of wireless communications devices,
automobile manufacturers and other manufacturers under "private label" and
special products agreements.

ORA's policy is to provide a 24-hour turnaround on a select group of
its products which are stocked in depth. In addition, an ongoing "stock
balancing" program allows retailers to return current, slow moving items every
three months in exchange for an offsetting double order. ORA's competitive
return policy for non-salable products, including damaged products, results in
significant returns for credit. ORA products carry warranties for defects in
material or workmanship. These warranties vary from one year to lifetime on
passive devices, with most products carrying warranties of three to five years.
The Company's payment terms are typically 30 to 60 days. However, under special
circumstances, the Company will offer extended terms.

The Company's business has historically been seasonal. For its fiscal
years ending March 31, 2000, 1999 and 1998, on average, approximately 31.7% of
the Company's net sales were in its second fiscal quarter and 27.4% in its third
fiscal quarter, with the balance split approximately evenly between the first
and fourth fiscal quarters.

<PAGE>6

BACKLOG

Most orders received by the Company are for immediate delivery. As of
March 31, 2000 and 1999, the Company had approximately $821,000 and $1,314,000,
respectively, in backlog orders, including orders for current delivery, orders
for later delivery, back orders and special orders, all of which may be
cancelled or modified by the customer.

RESEARCH AND DEVELOPMENT

The Company has always focused on innovation as a means of maximizing
margins and capturing and maintaining market share. During its fiscal years
ended March 31, 2000, 1999 and 1998, as reflected in its audited financial
statements, the Company spent approximately $615,000, $625,000 and $440,000,
respectively, on research and development related activities. In addition, the
Company estimates that approximately an additional $53,000, $57,000 and $36,000,
respectively, was spent for purchased materials that do not have alternative
future uses. ORA maintains an in-house research and development engineering
staff. The Company maintains extensive research and testing facilities
(including an anechoic chamber) at its corporate headquarters, allowing it to
conduct sophisticated operations such as testing radiation patterns for antennas
and, thus, promoting product safety. ORA also has strategic relationships with
other independent research and development companies to utilize their respective
specialized skills or equipment.

Many of ORA's products carry UL listings or FCC approvals. The Company
has been awarded the prestigious Innovation in Engineering Award from the
Electronics Industry Association five times in the last five years.
Additionally, ORA is Underwriter Laboratories ISO 9000 certified and operates
under the ISO 9002 quality standards.

MANUFACTURING AND PACKAGING

ORA out-sources the manufacturing of its products using contract
manufacturers and "bid" manufacturing. Contract manufacturers are used mainly
for proprietary products such as Telcar, battery chargers and hands-free
adapters. Bid manufacturers are used mainly to produce commodity items such as
battery packs and power cords. Manufacturing plants are located in the US,
Taiwan, China, Hong Kong and Korea. ORA is not dependent on any one manufacturer
to produce products. The Company believes that such production is "portable" and
can be moved rapidly to other manufacturers and assemblers. The Company is,
however, dependent on the availability of raw materials and labor, and is
subject to customs regulations and quotas both in the US and abroad.

The products manufactured for the Company in Asia, which represent
substantially all of the Company's products, are purchased by the Company from a
foreign trading company, Data-Spec Taiwan, Limited ("Data-Spec Taiwan").
Data-Spec Taiwan negotiates purchases with the various contract manufacturers,
"bid" manufacturers and remits payment to these companies for the products.
Data-Spec Taiwan also represents ORA in negotiations with respect to
procurement, specifications compliance and quality assurance. Data-Spec Taiwan
is ISO 9000 certified. Jack D.W. Song who owns over 10% of the Company's

<PAGE>7

outstanding Common Stock, is the majority owner of Data-Spec Taiwan.

The Company receives most of its inventory in bulk shipments. The bulk
products are then assembled and packaged in various configurations and kits
utilizing in-house packaging equipment and materials.

ASSET MANAGEMENT

Inventory control is important to the Company's ability to maintain
margins while offering its customers competitive prices and rapid delivery of a
wide variety of products. To be in a position to deliver products rapidly, the
Company maintains a significant investment in its product inventory and,
therefore, is subject to the risks of inventory obsolescence and excessive
inventory levels.

COMPETITION

The consumer electronics and wireless telecommunications accessory
market is highly fragmented and subject to intense competition. The market for
wireless products is characterized by rapidly changing technology and frequent
new product introductions. The Company's success depends in large part upon its
ability to identify and design products that will meet the changing requirements
and demands of the marketplace. ORA's competitors include (a) various companies
which offer broad lines of consumer electronic accessories, (b) other accessory
companies which offer certain product lines and (c) manufacturers of brand name
consumer electronics hardware, which market their own lines of similar
accessories. Certain of the Company's existing and potential competitors have
greater financial, technical, marketing or manufacturing resources and may
develop new accessories and other products that are superior to those of the
Company. The Company competes primarily on the basis of product variety and
quality, customer service and support, product reliability, company and brand
name recognition, ability to meet customer delivery needs, price, product
features and proprietary products. There can be no assurance that the Company
will be able to identify, obtain and offer products necessary to remain
competitive.

TRADEMARKS AND PATENTS

The Company actively pursues a program of protecting its intellectual
property by seeking patent, copyright and trademark protection for its products
to the maximum extent permissible under U.S. laws. Currently, the Company owns
33 issued patents covering various unique and novel aspects of certain of its
products in the United States. Most of the Company's patents have the majority
of their term remaining.

The Company also owns 25 trademarks registered on the Principal
Trademark Register of the United States under which the Company markets its
goods and offers its services. The Company also copyrights its manuals, sales
and product literature, as well as numerous software codes and protocols
necessary to operate several of its processor controlled products and systems.

No assurance can be given that the Company's existing patents or any
future patents will not be challenged, invalidated or circumvented, or that
competitors of the Company will not independently develop or patent technologies

<PAGE>8

which are substantially equivalent or superior to the Company's technologies.

EMPLOYEES

As of June 26, 2000, the Company had 29 employees. None of the
Company's employees is covered by a collective bargaining agreement. The Company
believes that its relationship with its employees is satisfactory.

ITEM 2 - PROPERTIES

The Company owns its 80,000 square foot headquarters and distribution
facility in Chatsworth, California. Such property is subject to a deed of trust
in favor of the Aid Association for Lutherans, which entity provided financing
for the acquisition of the property.

ITEM 3 - LEGAL PROCEEDINGS

None.

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended March 31, 2000.

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market for Common Stock

The Company's common stock, par value $.001 per share (the "Common
Stock"), was listed for trading on December 20, 1996, following its merger with
North American Energy of Delaware, Inc., on the OTC Bulletin Board. As of June
26, 2000, there were approximately 611 stockholders of record of the Company's
Common Stock. On July 13, 2000, the last reported sale price of the Common Stock
on the OTC Bulletin Board was $0.75. The following table sets forth the high
and low sales prices of the Common Stock for each quarterly period during the
most recent two fiscal years:

High Low
------ -----
Fiscal year ended March 31, 1999:

First Quarter...........................$2.31 $1.56
Second Quarter.......................... 2.25 1.50
Third Quarter........................... 1.75 1.63
Fourth Quarter.......................... 1.94 0.63

<PAGE>9

High Low
------ -----
Fiscal year ended March 31, 2000:

First Quarter........................... 0.88 0.19
Second Quarter.......................... 0.25 0.19
Third Quarter........................... 1.13 0.31
Fourth Quarter.......................... 6.25 1.03

Dividend Policy

The Company intends to use its cash flow from operations to finance its
working capital needs. The payment of cash dividends, if any, in the future is
within the discretion of the Company's Board of Directors and will depend upon
the Company's earnings, its capital requirements and financial condition and
other relevant factors. Since having become a C corporation for tax purposes in
December 1996, the Company has not paid a dividend on its Common Stock and does
not intend to declare any cash dividends in the foreseeable future.

ITEM 6 - SELECTED FINANCIAL DATA

The following table sets forth certain selected financial data
regarding the Company which is qualified by reference to, and should be read in
conjunction with, the financial statements and notes thereto (see "Index to
Financial Statements") and "Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations." The income statement and balance
sheet data presented below have been derived from the Company's financial
statements. The selected pro- forma income statement data set forth below is for
informational purposes only and may not necessarily be indicative of the
Company's results of operations in the future.

<PAGE>10

ORA ELECTRONICS, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS

Years Ended March 31,

2000 1999 1998 1997 1996
--------------- -------------- ------------- ------------- -------------

Net sales $ 3,456,167 $ 13,544,551 $ 15,443,432 $ 18,718,113 $ 24,110,436
Cost of goods sold 4,498,301 8,005,084 9,152,641 12,211,623 15,354,206
--------------- -------------- ------------- ------------- -------------
Gross profit (loss) (1,042,134) 5,539,467 6,290,791 6,506,490 8,756,230
--------------- -------------- ------------- ------------- -------------

Operating Expenses:
Selling and shipping expenses 1,267,535 2,449,563 2,434,547 3,163,863 3,997,970
Administrative and general expenses 3,593,814 4,121,929 5,742,427 5,183,082 5,202,191
--------------- -------------- ------------- ------------- -------------

Total operating expenses 4,861,349 6,571,492 8,176,974 8,346,945 9,200,161
--------------- -------------- ------------- ------------- -------------

Other (income) expenses:
Interest expense 617,537 714,619 702,128 1,072,107 1,056,529
Other expense (income) (169,280) (1,789,587) (10,627) (231,620) (58,783)
--------------- -------------- ------------- ------------- -------------

Total other (income) expenses 448,257 (1,074,968) 691,501 840,487 997,746
--------------- -------------- ------------- ------------- -------------

Total expenses 5,309,606 5,496,524 8,868,475 9,187,432 10,197,907
--------------- -------------- ------------- ------------- -------------

Net income (loss) before income taxes (6,351,740) 42,943 (2,577,684) (2,680,942) (1,441,677)
Provision (benefit) for income taxes 0 0 0 0 (23,822)
--------------- -------------- ------------- ------------- -------------
Net income (loss) $ (6,351,740) $ 42,943 $ (2,577,684) $ (2,680,942) $ (1,417,855)
=============== ============== ============= ============= =============
PRO FORMA DATA:
Historical income (loss) before income $ (6,351,740) $ 42,943 $ (2,577,684) $ (2,680,942) $ (1,441,677)
taxes
Proforma income tax (provision) benefit $ 0 $ 0 $ 0 $ 0 $ 713,913
--------------- -------------- ------------- ------------- -------------

Proforma net income (loss) $ (6,351,740) $ 42,943 $ (2,577,684) $ (2,680,942) $ (727,764)
--------------- -------------- ------------- ------------- -------------

Proforma net income (loss) per share $ (0.92) $ 0.01 $ (0.39) $ (0.41) $ (727.76)
--------------- -------------- ------------- ------------- -------------
Proforma weighted average common shares
outstanding 6,936,066 6,909,292 6,627,697 6,589,068 1,000
=============== ============== ============= ============= =============
BALANCE SHEET DATA:
Working capital $ (4,501,895) $ 894,758 $ 1,131,155 $ 2,829,897 $ 1,290,836
=============== ============== ============= ============= =============
Total assets $ 7,220,733 $ 13,627,151 $ 15,329,159 $ 16,728,304 $ 17,128,943
=============== ============== ============= ============= =============
Long term debt $ 5,668,126 $ 5,653,510 $ 6,105,477 $ 5,601,516 $ 7,188,902
=============== ============== ============= ============= =============
Stockholders' equity (deficiency) $ (3,804,138) $ 2,184,823 $ 2,141,880 $ 4,400,674 $ 1,278,217
=============== ============== ============= ============= =============
</TABLE>

The proforma data above is provided for information purposes only, to
reflect the effects of federal and state income taxes had the Company had been
taxed as a C corporation rather than an S corporation, since April 1, 1994.

<PAGE>11

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Management's discussion and analysis should be read in conjunction with
the Company's financial statements and the notes thereto.

RESULTS OF OPERATIONS

The following table sets forth operating results (as a percentage of
net sales) for the periods indicated.

Years Ended March 31,
2000 1999 1998
-------- -------- --------
Net sales 100.0% 100.0% 100.0%
Cost of sales 130.2 59.1 59.3
Gross profit (loss) (30.2) 40.9 40.7
Selling and shipping expense 36.7 18.1 15.3
Administrative and general expense 104.0 30.4 37.6
Loss from operations (170.8) (7.6) (12.2)
Interest expense 17.9 5.3 4.5
Other (income) (4.9) (13.2) (0.1)
Net income (loss) before taxes (183.8) 0.0% (16.7)%

FISCAL YEAR ENDED MARCH 31, 2000 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1999

Net Sales. Net sales decreased 74.5% to $3,456,167 in fiscal year 2000,
compared to $13,544,551 in fiscal year 1999, a decrease of $10,088,384.
Approximately $7,395,000 of this decrease is attributable to the loss of
business from Circuit City, which had previously been the Company's largest
customer. Net sales to Circuit City during fiscal year 2000 were approximately
$270,000, or 7.8% of the total annual net sales of $3,456,167. Net sales to
Circuit City during fiscal year 1999 were approximately $7,125,000, or 52.6% of
the total annual net sales of $13,544,551. The remaining decrease is
attributable to the effects of continued lower pricing by the Company's major
competitors, combined with an industry wide reduction in the sale of batteries.
The technological improvements and quality of batteries, particularly Lithium
Ion batteies, has reduced the number of replacement batteries being sold. The
Company is actively exploring ways to replace this reduction in net sales,
including alternative channels of distribution and new product offerings,
however, no assurance can be given that the Company will be able to do so.

If the Company is not able to substantially replace its lost revenues
by approximately July 31, 2000, the Company projects that the resultant serious

<PAGE>12

cash flow deficiencies may impact the Company's ability to continue as a going
concern. See the Liquidity and Capital Resources section of Management's
Discussion and Analysis of Financial Condition and Results of Operations for a
more complete discussion of this issue.

Gross Profit. Gross profit decreased by $6,581,601, resulting in a
gross loss of $1,042,134 for the fiscal year ended March 31, 2000 compared with
a gross profit of $5,539,467 in fiscal year 1999. This decrease was impacted by
a non-recurring reduction of the carrying value of the Company's inventory to
the lower of cost or market of approximately $2,300,000 during fiscal 2000. The
reduction in valuation was necessitated by the significant loss in the customer
base to whom these products could be sold to, combined with the rapid change in
wireless technology from analog to digital services, thus impacting the value of
the Company's remaining stock of inventory supporting analog handsets. The
remaining decrease in gross profit is primarily a result of the decline in net
sales described above. After giving effect to the Company's non-recurring
reduction in the carrying value of its inventory, gross profit as a percentage
of net sales was approximately 36.4% in fiscal year 2000 compared with
approximately 40.9% in fiscal year 1999. The decrease is primarily attributable
to the effects of continued lower pricing by the Company's major competitors.

Selling and Shipping Expense. Selling and Shipping expense decreased by
$1,182,028, or 48.3%, to $1,267,535 in fiscal year 2000 from $2,449,563 in
fiscal year 1999. The decrease in selling and shipping expenses is primarily
attributable to lower costs of shipping, warehousing, freight and sales
commissions associated with the decreased sales volume described above.

Administrative and General Expense. Administrative and general expense
decreased by $528,115, or 12.8%, to $3,593,814 in fiscal year 2000 from
$4,121,929 in fiscal year 1999. The decrease is primarily attributable to a
reduction in personnel and salaries of existing personnel during the fiscal year
2000 as part of the Company's efforts to reduce expenses.

Interest Expense. The Company had interest expense of $617,537 in
fiscal year 2000 compared to $714,619 in fiscal year 1999. The decrease is
primarily a result of the Company not having available the use of a line of
credit facility since May 12, 1999. The Company is attempting to find a
replacement credit facility, but no assurances can be given that the Company
will be able to do so.

Other Income. Other income decreased to $169,280 for fiscal year 2000
compared to $1,789,587 in fiscal year 1999. The decrease is primarily
attributable to approximately $1,675,000 in royalty income received in fiscal
year 1999 as a result of the Company granting to ORA Electronics (UK) Limited,
an unaffiliated company, an exclusive royalty-free right to use certain of the
Company's trademarks, including the "ORA" name, in perpetuity worldwide,
excepting North, Central and South America. The royalty income received from
this transaction was considered non-recurring.

Income Taxes. The Company has made no provision for income taxes as it
has a history of net losses, which has resulted in tax loss carry-forwards. At
March 31, 2000, the Company had available federal net operating loss
carry-forwards of approximately $9,163,000, which expire in 2012 through 2014,
and state net operating loss carry-forwards of approximately $2,749,000, which
expire in 2002 through 2004.

<PAGE>13

FISCAL YEAR ENDED MARCH 31, 1999 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1998

Net Sales. Net sales decreased 12.3% to $13,544,551 in fiscal year
1999, compared to $15,443,432 in fiscal year 1998, a decrease of $1,898,881.
This decrease reflected lower than expected orders from consumer electronics
retailers who had reported comparable store sales decreases compared to the
prior year. Retailers had reported that their wireless telephone activations
were lower as a result of reduced financial incentives offered to them by
wireless handset carriers. The Company believes that its traditional retail
customers may face increased competitive pressures from wireless service
providers and that, consequently, orders for its wireless products from such
retailers may continue to decline. In addition, the Company had been notified by
its largest customer, Circuit City, that continuing product orders would be
substantially reduced beginning in May, 1999. Net sales to Circuit City during
fiscal year 1999 were $7,124,434, or 52.6% of the total annual net sales of
$13,554,551. Net sales to Circuit City during fiscal year 1998 were $5,945,721,
or 38.5% of the total annual net sales of $15,446,432. Current expectations were
that business with Circuit City might be reduced by as much as 90%, or greater,
from its then current levels. The Company is actively exploring ways to replace
this expected reduction in net sales, including alternative channels of
distribution, however, no assurance can be given that the Company will be able
to do so.

If the Company is not able to substantially replace the expected
reduction in Circuit City business by approximately September, 1999, the Company
projects that it will have serious cash flow deficiencies. See the Liquidity and
Capital Resources section of Management's Discussion and Analysis of Financial
Condition and Results of Operations for a more complete discussion of this
issue.

Gross Profit. Gross profit decreased by $751,324, or 11.9%, to
$5,539,467 for the fiscal year ended March 31, 1999 compared with $6,290,791 in
fiscal year 1998, while gross profit as a percentage of net sales increased
slightly to 40.9% in fiscal year 1999 from 40.7% in fiscal year 1998. The
decrease in absolute dollars is primarily attributable to the decreased number
of units sold.

Selling and Shipping Expense. Selling and Shipping expense increased
slightly by $15,016, or 1.0%, to $2,449,563 in fiscal year 1999 from $2,434,547
in fiscal year 1998. Increases in media and promotional advertising and trade
show expenses of approximately $200,000 were partially offset by lower costs of
shipping, warehousing, freight and sales commissions associated with the
decreased sales volume.

Administrative and General Expense. Administrative and general expense
decreased by $1,620,498, or 28.2%, to $4,121,929 in fiscal year 1999 from
$5,742,427 in fiscal year 1998. The decrease is primarily attributed to the
legal fees and settlement costs associated with the resolution of the Company's
patent litigation against Telular Corporation in fiscal year 1998.

Interest Expense. The Company had interest expense of $714,619 in
fiscal year 1999 compared to $702,128 in fiscal year 1998. The increase is
primarily attributable to increases in the Company's bank line of credit usage
during fiscal 1999.

<PAGE>14

Other Income. Other income increased to $1,789,587 for fiscal year 1999
compared to $10,627 in fiscal year 1998. The increase is primarily attributable
to approximately $1,675,000 in royalty income received in fiscal year 1999 as a
result of the Company granting to ORA Electronics (UK) Limited, an unaffiliated
company, an exclusive royalty-free right to use certain of the Company's
trademarks, including the "ORA" name, in perpetuity worldwide, excepting North,
Central and South America. The royalty income received from this transaction is
considered non-recurring.

Income Taxes. The Company has made no provision for income taxes as it
has a history of net losses, which has resulted in tax loss carry-forwards. At
March 31, 1999, the Company had available federal net operating loss
carry-forwards of approximately $3,174,000, which expire in 2012 through 2013,
and state net operating loss carry-forwards of approximately $1,423,000, which
expire in 2002 through 2003.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary cash requirements are to fund working capital
needs, primarily accounts receivable and inventories. Historically, the Company
has satisfied these working capital requirements principally through cash flow
from operations and bank borrowings.

At March 31, 2000, the Company had $398,493 in cash and cash
equivalents with a working capital deficit of $4,501,895, contrasted to
$1,807,940 in cash and cash equivalents with a working capital surplus of
$894,758 at March 31, 1999. Net cash used in operating activities was $588,860
for the fiscal year ended March 31, 2000, compared with net cash provided by
operating activities of $2,136,854 for the fiscal year ended March 31, 1999. The
decrease in cash and cash equivalents of approximately $1,410,000 is primarily
due to the rapid deterioration of the business activities of the Company,
including a significant decline in net sales and a write down of its inventory
by approximately $2,300,000 to reflect its value at the lower of cost or market
at March 31, 2000.

On April 7, 1997, the Company had secured a $5,000,000 line of credit
from FINOVA Capital Corporation ("FINOVA"). The line of credit facility with
FINOVA was secured by all inventory, equipment, accounts receivable and
intellectual property. The initial term of the line of credit was for two years
with provisions for automatic renewals thereafter in one year increments.
Borrowings incurred interest at 1% above the reference rate of Citibank, N.A.
and there was an unused line fee of 0.5%. The Company's funds were swept daily
and capital was made available based on 70% of eligible accounts receivable and
35% of eligible inventory. In January, 1999, the Company was notified by FINOVA
that its revolving line of credit would not be extended after its scheduled
expiration date of April 4, 1999. On May 12, 1999, the entire balance owing at
that date was paid and the relationship with FINOVA was terminated.

On July 27, 1999, the Company secured a $1,200,000 revolving credit
facility from Celtic Capital Corporation, to be used for general working capital
purposes. The credit agreement allowed the Company to borrow funds at Citibank
N.A.'s reference rate plus 2.5%, based on an 80% advance rate on eligible trade
accounts receivable. There was a monthly collateral monitoring fee of .25% based
on the average trade accounts receivable during the month. On September 27,
1999, Celtic Capital withdrew the credit facility, citing the significant

<PAGE>15

deterioration in the Company's business. No borrowings were made from the credit
facility. The Company is attempting to find a replacement credit facility, but
no assurances can be given that the Company will be able to do so.

The Company believes that available cash, cash flow from operations and
any borrowings that might be made available through a yet to be obtained
replacement credit facility, may not be sufficient to meet operating needs and
capital expenditure requirements in the immediate future.

The Company has incurred operating losses of $5,903,483, $1,032,025 and
$1,886,183 in the fiscal years ended March 31, 2000, 1999 and 1998,
respectively. For several years the company's major competitors, many with
greater resources, have aggressively lowered their selling prices in an attempt
to increase market share. Although the company has benefited from its own
internal cost reduction programs, the effects of lower pricing by major
competitors has more than offset the company's cost reductions.

The Company's management team, has been developing a broad operational
and financial restructuring plan. The plan, which is designed to leverage the
company's brand, distribution and technology strengths, includes reducing costs,
disposition of certain assets, focusing on development of alternative channels
of distribution and capitalizing on the company's patented technologies.
Restructuring costs must be incurred to implement the plan.

Going forward, significant cash flow will be needed to pay the
restructuring costs to implement the proposed business plan and to fund losses
until the company has returned to profitability. While there is no assurance
that funding will be available to execute the plan, the company is continuing to
seek financing to support its turnaround efforts and is exploring a number of
alternatives in this regard.

The company's independent public accountants have included a "going
concern" emphasis paragraph in their audit reports accompanying the March 31,
2000 and March 31, 1999 financial statements. The paragraph states that the
company's recurring losses and its inability to secure working capital financing
raise substantial doubt about the company's ability to continue as a going
concern and cautions that the financial statements do not include adjustments
that might result from the outcome of this uncertainty.

Existing cash flow is not expected to be sufficient to cover liquidity
requirements after July 31, 2000, and the company is currently facing the
prospect of not having adequate funds to operate its business. There can be no
assurance that an affordable working capital credit facility can be arranged or
that any long-term restructuring alternative can be successfully initiated or
implemented by July 31, 2000, in which case the company may be compelled to
pursue a bankruptcy filing in the absence of a proposed or pre-approved
financial restructuring.

<PAGE>16

Management believes that, despite the financial hurdles and funding
uncertainties going forward, it has under development a business plan that, if
successfully funded and executed as part of a financial restructuring, can
significantly improve operating results. The support of the company's vendors,
customers, potential lenders, stockholders and employees will continue to be key
to the company's future success.

On December 23, 1996, the Company obtained a $1,000,000 loan from an
unrelated third party which was used to pay the initial required $1,000,000
reduction on its then existing credit facility. Such $1,000,000 loan bears
interest at 8% per annum and all principal and interest is due and payable upon
maturity on December 31, 2001. At March 31, 2000, the balance of principal and
accrued interest was $1,298,116.

The loan from the Aid Association for Lutherans ("AAL") obtained by the
Company to purchase its headquarters and distribution facility in Chatsworth,
California is, by its terms, callable by AAL upon six months notice. As of March
31, 2000, the outstanding principal balance of such loan was $4,454,880. Such
loan bears interest at 9.875% per year, is payable in monthly installments of
$43,418, representing both principal and interest, matures in February 2019 and
is secured by the real property on which the facility is located.

Net cash provided by investing activities of $686,952 for fiscal year
2000 is primarily attributed to approximately $341,000 received as repayment of
loans receivable from officer, and the exercise of approximately 207,000 stock
options which had previously been issued to the Company's former interim CEO.

Net cash used in financing activities of $1,507,539 for fiscal year
2000 principally reflects repayments on the Company's then existing revolving
line of credit of approximately $947,000 and repayments of long term debt of
approximately $561,000.

Subsequent to fiscal year end March 31, 2000, pursuant to a Stock
Purchase Agreement dated May 23, 2000, Mrs. Ruth Cooper, a director and
beneficial owner of 4,982,600 shares of the Registrants common stock, sold
3,982,600 shares of such common stock to SATX, Inc. ("SATX"). As of such date,
SATX owns approximately 56% of the issued and outstanding common stock of the
Registrant. In consideration for the sale of her 3,982,600 shares of common
stock, SATX paid to Mrs. Cooper $150,000 in cash, $23,185 payable in twelve
monthly installments, 400,000 shares of SATX common stock and assumed the
liability for a promissory note owed to ORA Electronics, Inc. by Mrs.
Cooper in the amount of $299,347.

Officer loans receivable of $298,097, at March 31, 2000, consisted of
one note for $243,982 plus accrued interest of $54,115, bearing interest at
5.05%. Repayment liability for the promissory note, due March 31, 2001, was
assumed by SATX, Inc. ("SATX") in connection with its purchase of a majority
interest in the common stock of the Company. On July 10, 2000, SATX paid a total
of $302,284 to the Company, which represented $243,982 principal and $58,302
accrued interest through that date, in full satisfaction of the note.

<PAGE>17

significantly improve operating results. The support of the Company's vendors,
customers, potential lenders, stockholders and employees will continue to be key
to the Company's future success.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 1997, the FASB issued SFAS 130, "Reporting Comprehensive
Income" ("SFAS 130") effective for fiscal years beginning after December 15,
1997. The new rules establish standards for the reporting of comprehensive
income and its components in financial statements. Comprehensive income consists
of net income and other gains and losses affecting stockholders' equity that,
under generally accepted accounting principles, are excluded from net income,
such as unrealized gains and losses on investments available for sale, foreign
currency translation gains and losses and minimum pension liability. The Company
has adopted the provisions of SFAS 130 as of April 1, 1998. For all periods
presented in this Annual Report, there was no comprehensive income.

In June 1997, the FASB issued SFAS 131, "Disclosures about Segments of
an Enterprise and Related Information", ("SFAS 131") effective for fiscal years
beginning after December 15, 1997. The new rules establish revised standards for
public companies relating to the reporting of financial and descriptive
information about their operating segments in financial statements. SFAS 131 is
effective for the Company in fiscal 1999. The Company currently evaluates its
operations as one segment.

YEAR 2000 ISSUE

Many computer systems and other equipment with embedded chips or
processors in use today were designed and developed using two digits, rather
than four, to specify the year. As a result, such systems will recognize the
Year 2000 as "00" and may assume that the year is 1900 rather than 2000. This is
commonly known as the Year 2000 issue, which could potentially result in a
system failure or in miscalculations causing disruptions of operations,
including among other things, a temporary inability to process transactions,
send invoices or engage in other similar normal business activities. The Company
has been informed that the portion of the Company's computer software systems
relating to the general ledger, payroll and other employee records is presently
Year 2000 compliant. To date, the Company has not experienced any problems
relating to these systems.

The Company is in the process of evaluating the potential cost to it in
addressing the Year 2000 issue with respect to its other software and the
potential consequences of an incomplete or untimely resolution of the Year 2000
issue. Due to the serious deterioration of the Company's operating performance,
and its related effect on cash flows, the Company has not been able to afford
the conversion and implementation of new Year 2000 compliant software for those
systems that the Company is aware require such replacement. Instead, the Company
has elected to design workarounds to its present non-compliant software in the
hopes that essential information needed to manage the business and to report
results on a timely basis will continue to be available. So far, since December
31, 1999, the Company has not experienced significant operational failures with
the non-compliant systems. However, there can be no assurance that its systems
will continue to operate and that the Company's failure to adequately address

<PAGE>18

the Year 2000 issue will not have a material adverse effect upon the Company.

The Company does not conduct any of its purchase transactions through
computer systems that interface directly with suppliers. However, the Company
has completed a formal assessment of its significant suppliers to determine the
extent to which the Company would be vulnerable if those third parties fail to
remedy Year 2000 issues. To date, the Company has received written responses
from most of its suppliers. The Company has evaluated these responses and has
determined that all critical suppliers have prepared for the Year 2000.

The Company currently has no material systems that interface directly
with its customers, financial institutions or others with whom it conducts
business. However, if those third parties with which the Company conducts
business are unsuccessful in implementing timely solutions, the Year 2000 issue
could have a material adverse effect on the Company's business, financial
condition and results of operations.

The Company has reviewed each of its product lines and has determined
that its products will operate properly in the Year 2000 and beyond.

Since it is not possible to anticipate all future outcomes, especially
when third parties are involved, there could be circumstances in which the
Company is adversely affected by Year 2000 problems. As of July 14, 2000, the
Company has not experienced any significant Year 2000 issues relating to the
procurement, sales or support of the Company's products. The Company believes
that it may take several more months to determine the impact of the Year 2000,
if any, on its customers or suppliers.

FORWARD LOOKING INFORMATION

This Annual Report on Form 10-K contains forward-looking statements
within the meaning of that term in the Private Securities Litigation Reform Act
of 1995 (Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934). Additional written or oral forward-looking
statements may be made by the Company from time to time, in filings with the
Securities Exchange Commission or otherwise. Statements contained herein that
are not historical facts are forward-looking statements made pursuant to the
safe harbor provisions referenced above. The matters discussed herein with
respect to the anticipated growth of the wireless telephone industry and the
development of new wireless communications technologies, the introduction of new
products by the Company, the Company's ability to penetrate new distribution
channels, the Company's ability to restructure its existing business, the
Company's ability to replace business from lost customers, future sales levels,
costs associated with a new management information system, compliance with
financial covenants in loan agreements, the Company's ability to secure future
financing and the potential outcome of any pending litigation involving the
Company, among others, are forward looking statements. In addition, when used in
this discussion, the words "anticipates," "expects," "intends," "plans" and
variations thereof and similar expressions are intended to identify
forward-looking statements.

<PAGE>19

Forward-looking statements are inherently subject to risks and
uncertainties, some of which cannot be predicted or quantified based on current
expectations. Consequently, future events and actual results could differ
materially from those set forth in, contemplated by, or underlying the
forward-looking statements contained in this Annual Report. Statements in this
Annual Report, particularly in "Item 1. Business", the Notes to Financial
Statements and "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations," describe certain factors, among others,
that could contribute to or cause such differences. Other factors that could
contribute to or cause such differences include, but are not limited to,
unanticipated developments in any one or more of the following areas: the
receptivity of consumers to new consumer electronics technologies, the rate and
consumer acceptance of new product introductions, competition, the number and
nature of customers and their product orders, timely replacement of lost
customers, pricing, foreign manufacturing, sourcing and sales (including foreign
government regulation, trade and importation concerns and fluctuation in
exchange rates), borrowing costs, the receptivity in the market place of the
Company's restructuring efforts, changes in taxes due to changes in the mix of
U.S. and non U.S. revenue, pending or threatened litigation, the availability of
key personnel and other risk factors which may be detailed from time to time in
the Company's Securities and Exchange Commission filings.

Readers are cautioned not to place undue reliance on any
forward-looking statements contained herein, which speak only as of the date
hereof. The Company undertakes no obligation to publicly release the result of
any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unexpected events.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See "Index to Financial Statements" at Item 14(a) for a listing of the
financial statements and supplementary data submitted as part of this report.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item will be contained in the
Company's Proxy Statement for its Annual Shareholders Meeting scheduled for
September 25, 2000, to be filed with the Securities and Exchange Commission
within 120 days after March 31, 2000, and is incorporated herein by reference.

ITEM 11 - EXECUTIVE COMPENSATION

<PAGE>20

within 120 days after March 31, 2000, and is incorporated herein by reference.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

<PAGE>21

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) The following documents are filed as a part of this Report:

(1) Financial Statements:

Report of Independent Auditors

Balance Sheets at March 31, 2000 and 1999

Statements of Operations for the Twelve-Month Periods Ended March 31,
2000, 1999 and 1998

Statements of Stockholders' Equity for the Twelve-Month Periods Ended
March 31, 2000 and 1999

Statements of Cash Flows for the Twelve-Month Periods Ended March 31,
2000, 1999 and 1998

Notes to Financial Statements

(2) Financial Statement Schedules:

The schedules specified under Regulation S-X are either not applicable
or immaterial to the Company's financial statements for each of the
three years in the period ended March 31, 2000.

(3) Exhibits:

The Exhibits listed on the accompanying Index to Exhibits immediately
following the financial statement schedules are filed as part of, or
incorporated by reference into, this Report.

Exhibit
No. Description
-------- ----------------------------------------------------------------------
2.1 Plan of Reorganization of North American Energy of Delaware, Inc. (1)

2.2 Agreement and Plan of Merger between ORA Electronics, Inc., a Delaware
corporation, and North American Energy of Delaware, Inc., a Delaware
corporation. (2)

3.1 Restated Certificate of Incorporation of ORA Electronics, Inc, (2)

3.2 Bylaws of ORA Electronics, Inc. (2)

4.1 Specimen Common Stock Certificate of ORA Electronics, Inc. (2)

<PAGE>22

4.2 Specimen Class A Warrant Certificate. (2)

4.3 Specimen Class B Warrant Certificate. (2)

4.4 Specimen Class C Warrant Certificate. (2)

4.5 Specimen Class D Warrant Certificate. (2)

4.6 Warrant Agreement between the Company and Continental Stock Transfer &
Trust Company (the "Warrant Agent"), dated as of December 20, 1996,
(2)

4.7 Letter Agreement, dated June 10, 1997, from Sheppard, Mullin, Richter
& Hampton LLP to the Warrant Agent. (4)

10.1 Loan and Security Agreement, dated April 4, 1997, by and between the
Company and FINOVA Capital Corporation ("FINOVA"). (4)

l0.2 Amendment to Loan Agreement, dated April 4, 1997, between the Company
and FINOVA. (4)

10.3 Collateral Assignment, Patent Mortgage and Security Agreement, dated
as of April 4, 1997, by and between the Company and FINOVA. (4)

10.4 Waiver and Second Amendment to Loan Agreement, dated June 26, 1997,
between the Company and FINOVA. (4)

10.5 Waiver and Third Amendment to Loan Agreement, dated November 13, 1997,
between the Company and FINOVA. (5)

10.6 Waiver and Fourth Amendment to Loan Agreement, dated February 11, 1998
between the Company and FINOVA. (7)

10.7 Waiver and Fifth Amendment to Loan Agreement, dated March 27, 1998,
between the Company and FINOVA. (8)

10.8 Second Deed of Amendment, by and between the Company and ORA
Electronics (UK) Limited ("ORA UK"), dated as of April 1, 1998. (7)

10.9 Distribution Agreement, by and between Alliance Research Corporation
(predecessor to the Registrant) and Contactace Limited (doing business
as ORA UK), dated as of 1990. (7)

10.10 Form of Indemnification Agreement. (3)

10.11 Employment Agreement dated as of December 19, 1996 by and between the
Company and Gershon N. Cooper. (3)

<PAGE>23

10.12 Amended and Restated Promissory Note dated December 17, 1996, made by
Gershon, Cooper and Ruth Cooper in favor of the Company. (3)

10.13 Promissory Note dated December 6, 1996, made by Gershon N. Cooper and
Ruth Cooper in favor of the Company. (3)

10.14 Amended and Restated Commercial Credit Agreement dated as of December
31, 1996, by and among Sanwa Bank California, the Company, Gershon N.
Cooper, Ruth Cooper and the Cooper Living Trust. (3)

10.15 Amended and Restated Security Agreement dated as of December 31,
1996, by and between the Company and Sanwa Bank California. (3)

10.16 Secured Promissory Note dated as of February 1, 1989, made by the
Company in favor of the Aid Association for Lutherans. (3)

10.17 Promissory Note dated as of December 23, 1996, made by the Company in
favor of General Funding Corporation. (3)

10.18 ORA Electronics, Inc. 1996 Stock Plan. (3)

10.19 Form of ORA Electronics, Inc., 1996 Stock Plan Stock Option Grant
Agreement. (3)

10.20 Form of ORA Electronics, Inc. Non-Employee Directors Stock Option
Plan. (3)

10.21 Form of ORA Electronics, Inc. Non-Employee Directors Stock Option
Agreement. (3)

11 Statement re: Computation of Earnings Per Share.

23.1 Independent Auditors' Consent of Richard & Hedrick.

27 Financial Data Schedule.

99.1 Letter Agreement dated December 19, 1996 between the Company and DLS
Financial Services, Inc. (3)

99.2 Registration Rights Agreement, dated as of December 20, 1996, between
the Company and The Cooper Family Living Trust. (3)

99.3 Settlement Agreement and Mutual General Release dated March 2, 1998,
between the Registrant and Telular Corporation. (6)

<PAGE>24

-----------------------

(1) Incorporated by reference from the Form 8-K/A filed on December 20, 1996,
by North American Energy of Delaware, Inc., predecessor to the Registrant.

(2) Incorporated by reference from the Registrant's Form 8-K filed on December
20, 1996.

(3) Incorporated by reference from the Registrant's Form 10-Q filed on February
14, 1997.

(4) Incorporated by reference from the Registrant's Form 10-K filed on June 30,
1997.

(5) Incorporated by reference from the Registrant's Form 10-Q filed on February
14, 1998.

(6) Incorporated by reference from the Registrant's Form 8-K filed on March 3,
1998.

(7) Incorporated by reference from the Registrant's Form 8-K filed on April 17,
1998.

(8) Incorporated by reference from the Registrant's Form 10-K filed on June 29,
1998.

(b) Reports on Form 8-K:

No reports on Form 8-K were filed by the Company during the fiscal Quarter
ended March 31, 2000.

<PAGE>25

ORA ELECTRONICS, INC.

INDEX TO FINANCIAL STATEMENTS

Page Number
-----------

INDEPENDENT AUDITORS' REPORT (Richard & Hedrick) 26

FINANCIAL STATEMENTS:

Balance Sheets at March 31, 2000 and 1999. 27

Statements of Operations for the Twelve-Month periods ended March 31, 2000, 1999
and 1998. 28

Statements of Stockholders' Equity for the Twelve-Month periods ended March 31,
2000 and 1999. 29

Statements of Cash Flows for the Twelve-Month periods ended March 31, 2000, 1999
and 1998. 30

Notes to Financial Statements. 31 - 42

</TABLE>

<PAGE>26

RICHARD & HEDRICK
ACCOUNTANCY CORPORATION * CERTIFIED PUBLIC ACCOUNTANTS
MEMBER OF AICPA * MEMBER OF CSCPA
5857 UPLANDER WAY * CULVER CITY, CA 90230
PHONE 310-348-4188 * FAX 310-348-4189

June 23, 2000

ORA Electronics, Inc.
Chatsworth, CA 91311

To the Shareholders and the Board of Directors of ORA Electronics, Inc.:

We have audited the accompanying balance sheets of ORA Electronics, Inc. as
of March 31, 2000 and 1999 and the related statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended March 31, 2000. These financial statements are the responsibility of the
Corporation's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating an overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ORA Electronics, Inc. as of
March 31, 2000 and 1999 and the results of their operations and their cash flows
for each of the three years in the period ended March 31, 2000, in conformity
with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and has not obtained a working capital line of credit that raises substantial
doubt about the ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.

Richard & Hedrick
An Accountancy Corporation

<PAGE>27

ORA ELECTRONICS, INC.
BALANCE SHEET
March 31, 2000 and 1999

ASSETS 2000 1999
--------------- ----------------
Current assets:
Cash and cash equivalents (Note 5) $ 398,493 $ 1,807,940
Trade accounts receivable, less allowances for sales returns and doubtful
accounts (Note 5) 214,939 2,206,849
Inventories (Notes 5 and 14) 195,286 2,565,673
Prepaid expenses 12,552 103,114
--------------- ----------------

Total current assets 821,270 6,683,576

Property and equipment, less accumulated depreciation (Note 7) 5,814,784 6,038,045

Other assets:
Loan receivable, officer (Notes 6 and 18) 298,097 609,802
Deferred expenses (Note 5) 286,582 295,728
--------------- ----------------

Total assets $ 7,220,733 $ 13,627,151
=============== ================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current maturities of long-term debt (Note 9) $ 84,870 $ 693,830
Notes payable (Note 8) - 946,775
Trade payables 3,131,464 1,966,103
Accrued interest (Notes 8 and 9) 19,173 49,707
Other accounts payable and accrued expenses 2,087,658 2,132,403
--------------- ----------------

Total current liabilities 5,323,165 5,788,818

Security deposit 33,580 -
Long-term debt (Note 9) 5,668,126 5,653,510
--------------- ----------------

Total liabilities $ 11,024,871 $ 11,442,328
=============== ================

Commitments and contingencies (Note 12)

Stockholders' equity:
Preferred stock $.001 par value; authorized 5,000,000 shares; none issued - -
Common stock $.001 par value; authorized 30,000,000 shares; reserved for
options and warrants 2,602,223 shares and 2,599,402 shares at
March 31, 2000 and 1999; issued and outstanding 7,117,638 shares
and 6,909,959 shares at March 31, 2000 and 1999. (Note 3) 7,118 6,910
Paid-in capital (Note 3) 6,487,950 6,125,379
Retained (deficit) (10,299,206) (3,947,466)
--------------- ----------------

Total stockholders' equity (3,804,138) 2,184,823

Total liabilities and stockholders' equity $ 7,220,733 $ 13,627,151
=============== ================
</TABLE>

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.

<PAGE>28

ORA ELECTRONICS, INC.
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998
<TABLE>
<S> <C> <C> <C>

2000 1999 1998
---------------- --------------- ---------------

Net sales (Notes 5 & 11) $ 3,456,167 $ 13,544,551 $ 15,443,432

Cost of goods sold 4,498,301 8,005,084 9,152,641
---------------- --------------- ---------------

Gross profit (loss) (1,042,134) 5,539,467 6,290,791
---------------- --------------- ---------------

Operating expenses:
Selling and shipping 1,267,535 2,449,563 2,434,547
Administrative and general 3,593,814 4,121,929 5,742,427
---------------- --------------- ---------------

Total operating expenses 4,861,349 6,571,492 8,176,974
---------------- --------------- ---------------

Loss from operations 5,903,483 1,032,025 1,886,183
Other (income) expenses:
Interest expense 617,537 714,619 702,128
Interest/other income (169,280) (1,789,587) (10,627)
---------------- --------------- ---------------

Total other (income) expenses 448,257 (1,074,968) 691,501
---------------- --------------- ---------------

Income (loss) before income taxes (6,351,740) 42,943 (2,577,684)

Income tax (benefit) (Note 15) 0 0 0
---------------- --------------- ---------------

Net income (loss) $ (6,351,740) $ 42,943 $ (2,577,684)
================ =============== ===============

Earnings (loss) per share:
Basic and diluted $ (0.92) $ 0.01 $ (0.39)

Number of shares used in the per share calculation:
Basic and diluted 6,936,066 6,909,292 6,627,697

</TABLE>

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.

<PAGE>29

ORA ELECTRONICS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 2000 AND 1999

Common Stock
------------------------------------------
Number Preferred Paid-In Retained Stockholders'
Options Warrants of Shares Amount Stock Capital (Deficit) Equity
-------- --------- ---------- ------- --------- ----------- ------------ -------------

Balance - March 31, 1998 170,980 2,415,888 6,908,722 $6,909 $ 0 $6,125,380 ($3,990,409) $2,141,880

Issuance of warrants 12,534

Issuance of common shares 1,237 1 (1)

Net income for the year
ended March 31, 1999 42,943 42,943
-------- --------- ---------- ------- --------- ----------- ------------ -------------

Balance - March 31, 1999 170,980 2,428,422 6,909,959 $6,910 $ 0 $6,125,379 $(3,947,466) $2,184,823

Issuance of Warrants 2,821

Issuance of common shares 207,679 208 362,571 362,779

Net loss for the year
(6,351,740) (6,351,740)
-------- --------- ---------- ------- --------- ----------- ------------ -------------
Balance - March 31, 2000 170,980 2,431,243 7,117,638 $7,118 $ 0 $6,487,950 $(10,299,206) $(3,804,138)
======== ========= ========== ======= ========= =========== ============ =============

</TABLE>

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.

<PAGE>30

ORA ELECTRONICS, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 2000, 1999 AND 1998
<TABLE>
<S> <C> <C> <C>

2000 1999 1998
-------------- ------------- --------------
Cash flows from operating activities:
Net income (loss) $ (6,351,740) $ 42,943 $ (2,577,684)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 219,939 253,422 266,588
Provision for losses and returns on accounts (303,376) (333,101) 305,371
receivable
Changes in assets and liabilities:
Accounts receivable 2,295,286 1,229,988 1,081,854
Inventories 2,370,387 2,061,578 821,777
Federal tax refund - - 219,927
Prepaid expenses 90,562 (28,839) (8,383)
Accounts payable, accrued interest and other
accrued expenses 1,090,082 (1,089,137) (1,046,527)
-------------- ------------- --------------
Net cash provided by (used in) operating
activities (588,860) 2,136,854 (937,077)
-------------- ------------- --------------
Cash flows from investing activities:
Capital expenditures 12,468 (50,826) (182,001)
Loan receivable, officer 311,705 (29,969) (28,497)
Proceeds from issuance of stock 362,779 1 318,890
-------------- ------------- --------------

Net cash provided by (used in) investing activities 686,952 (80,794) 108,392

Cash flows from financing activities:
Borrowing (repayment) of notes payable (946,775) (409,072) 98,650
Repayment of trust deed payable (76,920) (69,716) (69,715)
Issuance (repayment) of long-term debt (483,844) (177,026) 885,797
-------------- ------------- --------------

Net cash provided by (used in) financing activities (1,507,539) (655,814) 914,732
-------------- ------------- --------------

Net increase (decrease) in cash and cash equivalents (1,409,447) 1,400,246 86,047
Cash and cash equivalents at beginning of year 1,807,940 407,694 321,647
-------------- ------------- --------------

Cash and cash equivalents at end of year $ 398,493 $ 1,807,940 $ 407,694
============== ============= ==============

Supplemental disclosure of cash flow information:
Interest paid $ 518,052 $ 622,758 $ 617,307
============== ============= ==============
Income taxes paid $ - $ - $ -
============== ============= ==============
</TABLE>

SEE ACCOMPANYING NOTES TO THE FINANCIAL STATEMENTS.

<PAGE>31

ORA ELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1 - BUSINESS:

ORA Electronics, Inc. (the "Company") is a developer and supplier of
interface, connectivity solutions and peripheral accessories for wireless
communication devices. The Company's products supplement the effectiveness of
cellular telephones, personal communications systems ("PCS"), pagers, computing
devices and Intelligent transportation Systems industry. The Company currently
carries over 500 products which are sold to over 400 customers in the United
States, and throughout North, Central and South America. Among the Company's
customers are major retailers such as OfficeMax and Cablevision Electronics,
service providers and wireless carriers, original equipment manufacturers
("OEMs"), auto manufacturers, regional distributors and dealers.

NOTE 2 - FINANCIAL RESULTS AND LIQUIDITY

Existing cash flow is not expected to be sufficient to cover liquidity
requirements after July 31, 2000, and the company is currently facing the
prospect of not having adequate funds to operate its business (See Note 8 to the
financial statements for details of the Company's efforts to obtain a
replacement working capital line of credit). There can be no assurance that an

<PAGE>32

ORA ELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS

affordable working capital credit facility can be arranged or that any long-term
restructuring alternative can be successfully initiated or implemented by July
31, 2000, in which case the company may be compelled to pursue a bankruptcy
filing in the absence of a proposed or pre-approved financial restructuring.

NOTE 3 - REORGANIZATION:

In December 1996, Alliance Research Corporation merged into a newly
formed Delaware corporation named ORA Electronics, Inc. (ORA Electronics was a
trade name of Alliance Research Corporation).

On December 20, 1996, North American Energy of Delaware, Inc.
merged into ORA Electronics, Inc. by exchanging 250,000 common shares of ORA
Electronics, Inc. and options for 2,200 common shares at $1.50 per share, and
warrants for 2,156,000 common shares for all the shares issued and to be issued
of North American Energy of Delaware, Inc.

In consideration for advisory services rendered for this transaction,
ORA Electronics, Inc. issued 160,566 common shares and options for 75,180 common
shares.

The options and warrants are exercisable as follows:

Options Warrants* Price Expires
----------- ------------------------ ---------- -----------------

14,772 Class A 480,819 $ 5.00 December 31, 2000
20,208 Class B 646,859 $ 10.00 June 30, 2001
17,478 Class C 565,772 $ 15.00 June 30, 2001
23,022 Class D 733,897 $ 20.00 December 20, 2001
----------- ----------
75,480 2,427,347
=========== ==========

* Actual warrant numbersare subject to the round-up provisions under the
terms of the merger

<PAGE>33

ORA ELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS

North American Energy of Delaware, Inc. had no business expenses for the
five years previous to the merger date and no tangible assets or liabilities at
the merger date.

NOTE 4 - S CORPORATION STATUS:

The Company, with the consent of its shareholders, had elected S
corporation status effective April 1, 1987 for both federal and state income tax
purposes. In lieu of federal corporate income taxes, the shareholders of an S
corporation are taxed on their proportionate share of the Company's taxable
income. For state purposes, S corporations are taxed at a rate of 1 1/2% of
taxable income.

In connection with the S corporation election, the Company also elected
to retain its fiscal year end of March 31. According to Internal Revenue Service
regulations, to compensate the government for the tax deferral obtained through
the use of a taxable year end other than the required taxable year end of
December 31, the Company is obligated to make an annual "required payment" on
May 15. This payment is considered a deposit and is refundable when there is no
longer a tax deferral resulting from the use of a fiscal year end other than
December 31. The amount deposited as "required payment" for the year ended March
31, 1997 was $219,927, which was refunded to the company in the fiscal year
ended March 31, 1998.

In December 1996, the Company terminated the S corporation election and
has been subsequently taxed as a C corporation.

NOTE 5 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Cash and Cash Equivalents

Cash and cash equivalents include short-term investments with original
maturities of 90 days or less.

Allowance for Sales Returns and Doubtful Accounts

The Company reduces gross sales by the amount of discounts and returns
to determine net sales. The Company estimates a reserve for returns based on
historical experience and the amount of gross sales.

The reserve is adjusted periodically to reflect the Company's actual
return experience. The Company provides allowances for doubtful accounts

<PAGE>34
ORA ELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS

receivable when it determines that such amounts are uncollectible. Actual bad
debt and sales return experience has been in line with management's
expectations. The allowances are as follows at March 31,

2000 1999
--------------- ----------------

Trade accounts receivable $ 608,835 $ 2,904,347
Less allowance for doubtful accounts 318,896 (200,000)
Less allowance for sales returns 75,000 (497,498)
--------------- ----------------
Trade accounts receivable, net $ 214,939 $ 2,206,849
=============== ================

Inventories

Inventories are stated at the lower of cost (determined on a weighted
average cost basis) or market. Market value is based upon net realizable value.
Appropriate consideration is given to deterioration, obsolescence, and other
factors in evaluating net realizable value.

Goodwill

Goodwill consists of the excess of consideration paid over the fair
value of net assets acquired and is amortized on a straight-line basis against
income over 40 years. Goodwill of $299,188 at March 31, 2000 and 1999 is
included in deferred expenses net of accumulated amortization of $44,269 and
$36,790 respectively.

Revenues

Revenues are recognized upon shipment of product to customers.

Research and Development Expenses

Research and development expenditures are expensed as incurred and are
included in general and administrative expenses.

The total research and development costs for new products for the years
ended March 31, 2000, 1999 and 1998 were approximately $615,000, $625,000 and
$440,000 respectively, including $53,000, $57,000 and $36,000 of purchased
materials that do not have alternative future uses.

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.

<PAGE>35

ORA ELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS

Concentration of Cash Balances

The Company maintains cash balances with two banks. The amount on
deposit in one financial institution exceeds the $100,000 federally insured
limit by $59,280 at March 31, 2000.

Advertising

Cooperative advertising obligations are accrued and the costs expensed
at the same time the related revenue is recognized. All other advertising costs
are expensed as incurred.

Comparatives

For comparative purposes, certain amounts in the financial statements
from the prior year have been reclassified.

Recent Accounting Pronouncements

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" ("SFAS 130") effective for fiscal years beginning after December 15,
1997. The new rules establish standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. Comprehensive income is defined as the change in equity of
a business enterprise during a period, resulting from transactions and other
events and circumstances from nonowner sources. The Company has adopted the
provisions of SFAS 130 as of April 1, 1998. For all periods presented, there was
no comprehensive income.

In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information" (SFAS 131") effective for fiscal years
beginning after December 15, 1997. The new rules establish revised standards for
public companies to report financial and other information about key
revenue-producing segments of the entity for which such information is available
and is utilized by the chief operating decision maker. Specific information to
be reported for individual segments includes profit or loss, certain revenue and
expense items and total assets. A reconciliation of segment financial
information to amounts reported in the financial statements would be provided.
SFAS 131 is effective for the Company in fiscal 1999. The Company currently
evaluates its operations as one segment.

NOTE 6 - OFFICER LOANS RECEIVABLE:

Officer loans receivable of $298,097, at March 31, 2000, consists of
one note for $243,982 plus accrued interest of $54,115, bearing interest at
5.05%. Principal and interest are due March 31, 2001. See Note 18 to the
Financial Statements regarding the repayment of this note subsequent to March
31, 2000.

<PAGE>36

ORA ELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 7 - PROPERTY AND EQUIPMENT:

Property and equipment are stated at cost. Major renewals and
improvements are capitalized while maintenance and repairs are expensed as
incurred. Interest and taxes have been capitalized in connection with the
construction of building improvements. The capitalized interest and taxes are
included in the cost of the building and are being depreciated over the
building's estimated useful life. Property and equipment are depreciated on the
straight-line and accelerated methods over the estimated useful lives of the
property as follows:

Useful Life
Assets In Years March 31, 2000 March 31, 1999
------------- ---------------- ----------------

Land $ 2,900,000 $ 2,900,000
Building and improvements 31.5 - 39 4,269,917 4,245,548
Machinery and equipment 5 - 7 585,061 687,386
Computer equipment 5 491,824 491,824
Furniture and fixtures 5 - 7 412,482 438,152
----------------- -----------------
8,659,284 8,762,910
Less: accumulated depreciation 2,844,500 2,724,865
----------------- -----------------
Net property and equipment $ 5,814,784 $ 6,038,045
================= =================

</TABLE>

NOTE 8 - NOTES PAYABLE:

On April 7, 1997, the Company secured a $5,000,000 line of credit from
FINOVA Capital Corporation ("FINOVA"). The line of credit facility with FINOVA
was secured by all inventory, equipment, accounts receivable and intellectual
property. The initial term of the line of credit was for two years with
provisions for automatic renewals thereafter in one year increments. Borrowings
incurred interest at 1% above the reference rate of Citibank, N.A. and there was
an unused line fee of 0.5%. The Company's funds were swept daily and capital was
made available based on 70% of eligible accounts receivable and 35% of eligible
inventory. In January, 1999, the Company was notified by FINOVA that its
revolving line of credit would not be extended after its scheduled expiration
date of April 4, 1999. On May 12, 1999, the entire balance owing at that date
was paid and the relationship with FINOVA was terminated.

On July 27, 1999, the Company secured a $1,200,000 revolving credit
facility to be used for general working capital purposes. The credit agreement
allowed the Company to borrow funds at Citibank N.A.'s reference rate plus 2.5%,
based on an 80% advance rate on eligible trade accounts receivable. There was a
monthly collateral monitoring fee of .25% based on the average trade accounts
receivable during the month. On May 15, 1999, Celtic Capital withdrew the credit
facility, citing the significant deterioration in the Company's business. No
borrowings were made from the credit facility. The Company is attempting to find
a replacement credit facility, but no assurances can be given that the Company
will be able to do so.

<PAGE>37

ORA ELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 9 - LONG-TERM DEBT:

<TABLE>
<S> <C> <C>
March 31, March 31,
2000 1999
----------------- ----------------
Long-term debt consists of the following:
Trust deed payable, secured by certain real estate, payable in monthly
installments of $43,418 including interest at 9.875% per annum, due
February 2019, callable with six months notice. $ 4,454,880 $ 4,531,800

Note payable with interest payable at a rate of 8% per annum, principal
and interest due December 31, 2001. 1,298,116 1,198,630

Note payable to Telular Corporation, non-interest bearing, payable in
monthly installments of $25,000 with additional payments of $225,000 on March
1, 1999 and February 1, 2000, due February 1, 2000. 0 650,000
Less unamortized discount, 10% per annum 0 (33,090)
----------------- ----------------

Total Debt 5,752,996 6,347,340

Less: current maturities 84,870 693,830
----------------- ----------------
Total Long-Term Debt $ 5,668,126 $ 5,653,510
================= ================

</TABLE>

Maturities of long-term debt for the years subsequent to March 31, 2000 are as
follows:

2000 $ 84,870
2001 1,391,775
2002 103,318
2003 113,995
2004 125,775
Thereafter 3,933,263
---------------
$ 5,752,996
===============

NOTE 10 - 401(k) PROFIT SHARING PLAN:

On January 1, 1992, the Company adopted a defined contribution Profit
Sharing Savings Plan pursuant to Section 401(K) of the Internal Revenue Code
covering substantially all eligible officers and employees. Under the terms of
the Plan, employees can voluntarily elect to contribute to the Plan, by salary
reduction, up to 15% of their compensation, subject to certain IRS limitations
then in effect. Additionally, the Company can, at its discretion, match 100% of
the voluntary employee contributions not to exceed $250. The Company has
received a determination letter from the IRS indicating that the above Plan is

<PAGE>38

ORA ELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS

qualified within the terms of the applicable provisions of ERISA.

NOTE 11 - MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK:

At March 31, 2000 approximately 53.6% of the trade accounts receivable
were represented by one customer and at March 31, 1999, approximately 67.6% of
the trade accounts receivable were represented by two customers. For the fiscal
year ended March 31, 2000, one customer accounted for approximately 14.5% of the
Company's net sales and for the fiscal year ended March 31, 1999, two customers
accounted for approximately 52.3% of the Company's net sales.

To reduce credit risk, the Company performs ongoing credit evaluations
of its customers financial condition but does not generally require collateral.

The Company purchases substantially all of its inventory through a
foreign trading company. The trading company negotiates purchases with various
foreign manufacturing companies and remits payment to these companies.

NOTE 12 - COMMITMENTS AND CONTINGENCIES:

Legal Proceedings

On March 2, 1998, the Company reached settlement in a patent
infringement case with Telular Corporation. Pursuant to a Settlement Agreement
and Mutual General Release dated March 2, 1998, the Company agreed to pay
Telular Corporation $500,000 in cash, a $1,000,000 promissory note payable
February 1, 2000 and 300,000 shares of the Company's common stock. Telular had
the right to receive additional shares of common stock on February 1, 2000, if
necessary, to ensure that the total shares of such common stock received by
Telular Corporation had a market value of $1,500,000 as of such date.

The Company made the final cash payment to Telular in full satisfaction
of the $1,000,000 promissory note on February 18, 2000. With respect to
Telular's right to receive additional shares of ORA's common stock, the Company
and Telular reached agreement on February 18, 2000 to extend the implementation
of that provision until February 1, 2002.

The Company is involved in other legal proceedings, many of which arise
in the ordinary course of its business. While any litigation contains as element
of uncertainty, management believes that the outcome of such proceedings will
not have a material adverse effect on the Company's results of operations.

<PAGE>39

ORA ELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 13 - STOCK PLANS:

The Company's 1996 stock plans, approved by the shareholders, provide
grants of non-qualified or incentive stock options, restricted stock awards and
stock appreciation "SARs". All plans are administered by the Company's Board of
Directors ("Board"). Stock options may be granted with or without SARs. The
total number of shares of Common Stock subject to issuance under the 1996 stock
plan is 2,000,000, subject to adjustments as provided for in the 1996 Stock
Plan. Grant prices for incentive stock options and non-qualified stock options
are not less than 100% and 85% of the fair market value of the Common Stock at
the time of grant, respectively. Options and SARs normally extend for 10 years
and under Board policy become exercisable in installments of 25 percent per year
commencing one year from the date of grant or over a vesting period determined
by the Board.

Restricted stock awards issued under the plan provide that shares
awarded may not be sold or otherwise transferred until restrictions as
established by the Board have lapsed. Upon termination of employment, shares
upon which restrictions have not lapsed must be returned to the Company.

The following table summarizes stock option activity:

Option Shares 2000 1999
------------ -----------
Outstanding at beginning of fiscal year 95,500 95,500
Granted 0 0
Exercised 0 0
Forfeitures 16,500 0
------------ -----------
Outstanding March 31 ($5.00 per share) 79,000 95,500
============ ===========
Exercisable March 31 64,000 47,750
============ ===========

The shareholders also approved a Non-Employee Directors Stock Option
Plan. Under the plan, a maximum of 100,000 shares may be granted to non-employee
directors at not less than 100% of the fair market value at the date of grant.
Shares may be exercised in two equal installments commencing on the first
anniversary of the date of the grant.

NOTE 14 - LOWER OF COST OR MARKET ADJUSTMENT:

Adjustments of $2,300,000, $579,000 and $978,256 were made in the
fiscal years ended March 31, 2000, 1999 and 1998, respectively, to reflect
inventory at the lower of cost or market, as determined by management's
estimates of value below the Company's cost.

<PAGE>40

ORA ELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 15 - INCOME TAXES:

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes, and operating
loss and tax credit carryforwards. Significant components and the approximate
tax effect of the Company's deferred tax assets as of March 31, 2000 and 1999
are as follows:

2000 1999
-------------- ------------------
Net operating loss carryforwards $4,069,605 $1,121,543
Less valuation allowance (4,069,605) (1,121,543)
-------------- ------------------
Net deferred tax asset - -
============== ==================

The company establishes valuation allowances in accordance with the
provisions of FASB Statement No. 109, "Accounting for Income Taxes". The company
periodically reviews the adequacy of the valuation allowance to estimate whether
or not these tax benefits will be realized in future periods. Management
believes that sufficient uncertainty exists regarding the realizability of the
net operating losses, and accordingly, a valuation allowance has been recorded
at March 31, 2000 and 1999.

No income taxes were paid for the years ended March 31, 2000 and 1999.

NOTE 16 - OTHER INCOME:

In April, 1998, pursuant to the terms of a Second Deed of Amendment,
the company granted ORA Electronics (UK) Limited ("ORA UK") an exclusive
royalty-free right to use certain of the Company's trademarks, including,
without limitation, the "ORA" name, in perpetuity worldwide except for North,
Central, and South America. The total consideration paid by ORA UK to the
company for such perpetual right was 1,000,000 GBP, or approximately $1,659,000,
which is included in Other Income in the fiscal year ended March 31, 1999.
Gershon N. Cooper, formerly the President and Chief Executive Officer of the
Company, was a former member of the Board of Directors of ORA UK.

NOTE 17 - YEAR 2000 ISSUE:

<PAGE>41

ORA ELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS

has been informed that the portion of the Company's computer software systems
relating to the general ledger, payroll and other employee records is presently
Year 2000 compliant. To date, the Company has not experienced any problems
relating to these systems.

The Company has reviewed each of its product lines and has determined
that its products will operate properly in the Year 2000 and beyond.

<PAGE>42

ORA ELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 18 - SUBSEQUENT EVENTS:

CHANGE IN CONTROL OF REGISTRANT

Subsequent to fiscal year end March 31, 2000, pursuant to a Stock
Purchase Agreement dated May 23, 2000, Mrs. Ruth Cooper, a director and
beneficial owner of 4,982,600 shares of the Registrants common stock, sold
3,982,000 shares of such common stock to SATX, Inc. ("SATX"). As of such date,
SATX owns approximately 56% of the issued and outstanding common stock of the
Registrant. In consideration for the sale of her 3,982,600 shares of common
stock, SATX paid to Mrs. Cooper $150,000 in cash, $23,185 payable in twelve
monthly installments, 400,000 shares of SATX common stock and assumed the
liability for a promissory note owed to ORA Electronics, Inc. by Mrs.
Cooper in the amount of $299,347.

SATX, a publicly held company engaged in telecommunications technology,
develops and markets prepaid cellular handsets and global tracking devices in
addition to investing in relevant technology companies. SATX common stock trades
on the OTC Electronic Bulletin Board under the symbol "SATX".

In connection with the transaction, Mrs. Ruth Cooper resigned as a
director and three members of the Board of Directors of SATX were appointed to
the Registrants Board of Directors.

REPAYMENT OF OFFICER LOAN

<PAGE>43

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 14th of July,
2000.

ORA ELECTRONICS, INC.

By: /s/ MERRITT W. JESSON
----------------------
Merritt W. Jesson
President

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 on the 14th day of July, 2000.

Signature Title

By: /s/ MERRITT W. JESSON Chairman of the Board, Chief Executive Officer and President (Principal
------------------------- Executive Officer)
Merritt W. Jesson

By: /s/ JOHN M. BURRIS Vice President, Chief Financial Officer and Director (Principal Financial
------------------------- and Accounting Officer)
John M. Burris

By: /s/ MATTHEW F. JODZIEWICZ Vice President of Technology and Legal Affairs, Secretary and Director
-------------------------
Matthew F. Jodziewicz

By: /s/ ROBERT W. ELLIS Director
-------------------------
Robert W. Ellis

By: /s/ KHOREN SHAGINIAN Director
-------------------------
Khoren Shaginian

</TABLE>

<PAGE>44

EXHIBIT INDEX

Exhibit No. Description

2.1 Plan of Reorganization of North American Energy of Delaware, Inc. (1)

2.2 Agreement and Plan of Merger between ORA Electronics, Inc., a Delaware
corporation, and North American Energy of Delaware, Inc., a Delaware
corporation. (2)

3.1 Restated Certificate of Incorporation of ORA Electronics, Inc, (2)

3.2 Bylaws of ORA Electronics, Inc. (2)

4.1 Specimen Common Stock Certificate of ORA Electronics, Inc. (2)

4.2 Specimen Class A Warrant Certificate. (2)

4.3 Specimen Class B Warrant Certificate. (2)

4.4 Specimen Class C Warrant Certificate. (2)

4.5 Specimen Class D Warrant Certificate. (2)

4.6 Warrant Agreement between the Company and Continental Stock Transfer &
Trust Company (the "Warrant Agent"), dated as of December 20, 1996, (2)

4.7 Letter Agreement, dated June 10, 1997, from Sheppard, Mullin, Richter &
Hampton LLP to the Warrant Agent. (4)

10.1 Loan and Security Agreement, dated April 4, 1997, by and between the
Company and FINOVA Capital Corporation ("FINOVA"). (4)

l0.2 Amendment to Loan Agreement, dated April 4, 1997, between the Company
and FINOVA. (4)

10.3 Collateral Assignment, Patent Mortgage and Security Agreement, dated as
of April 4, 1997, by and between the Company and FINOVA. (4)

10.4 Waiver and Second Amendment to Loan Agreement, dated June 26, 1997,
between the Company and FINOVA. (4)

<PAGE>45

10.5 Waiver and Third Amendment to Loan Agreement, dated November 13, 1997,
between the Company and FINOVA. (5)

10.6 Waiver and Fourth Amendment to Loan Agreement, dated February 11, 1998
between the Company and FINOVA. (7)

10.7 Waiver and Fifth Amendment to Loan Agreement, dated March 27, 1998,
between the Company and FINOVA. (8)

10.8 Second Deed of Amendment, by and between the Company and ORA
Electronics (UK) Limited ("ORA UK"), dated as of April 1, 1998. (7)

10.9 Distribution Agreement, by and between Alliance Research Corporation
(predecessor to the Registrant) and Contactace Limited (doing business
as ORA UK), dated as of 1990. (7)

10.10 Form of Indemnification Agreement. (3)

10.11 Employment Agreement dated as of December 19, 1996 by and between the
Company and Gershon N. Cooper. (3)

10.12 Amended and Restated Promissory Note dated December 17, 1996, made by
Gershon, Cooper and Ruth Cooper in favor of the Company. (3)

10.13 Promissory Note dated December 6, 1996, made by Gershon N. Cooper and
Ruth Cooper in favor of the Company. (3)

10.14 Amended and Restated Commercial Credit Agreement dated as of December
31, 1996, by and among Sanwa Bank California, the Company, Gershon N.
Cooper, Ruth Cooper and the Cooper Living Trust. (3)

10.15 Amended and Restated Security Agreement dated as of December 31, 1996,
by and between the Company and Sanwa Bank California. (3)

10.16 Secured Promissory Note dated as of February 1, 1989, made by the
Company in favor of the Aid Association for Lutherans. (3)

10.17 Promissory Note dated as of December 23, 1996, made by the Company in
favor of General Funding Corporation. (3)

10.18 ORA Electronics, Inc. 1996 Stock Plan. (3)

<PAGE>46

10.19 Form of ORA Electronics, Inc., 1996 Stock Plan Stock Option Grant
Agreement. (3)

10.20 Form of ORA Electronics, Inc. Non-Employee Directors Stock option
Plan. (3)

10.21 Form of ORA Electronics, Inc. Non-Employee Directors Stock Option
Agreement. (3)

11 Statement re: Computation of Earnings Per Share.

23.1 Independent Auditors' Consent of Richard & Hedrick

27 Financial Data Schedule

99.1 Letter Agreement dated December 19, 1996 between the Company and DLS
Financial Services, Inc. (3)

99.2 Registration Rights Agreement, dated as of December 20, 1996, between
the Company and The Cooper Family Living Trust. (3)

99.3 Settlement Agreement and Mutual General Release dated March 2, 1998,
between the Registrant and Telular Corporation. (6)

--------------------

(1) Incorporated by reference from the Form 8-K/A filed on December 20, 1996,
by North American Energy of Delaware, Inc., predecessor to the Registrant.

(2) Incorporated by reference from the Registrant's Form 8-K filed on December
20, 1996.

(3) Incorporated by reference from the Registrant's Form 10-Q filed on February
14, 1997.

(4) Incorporated by reference from the Registrant's Form 10-K filed on June 30,
1997.

(5) Incorporated by reference from the Registrant's Form 10-Q filed on February
14, 1998.

(6) Incorporated by reference from the Registrant's Form 8-K filed on March 3,
1998.

(7) Incorporated by reference from the Registrant's Form 8-K filed on April 17,
1998.

(8) Incorporated by reference from the Registrant's Form 10-K filed on June 29,
1998