ITEM 7. FINANCIAL STATEMENTS.
---------------------
Reference is made to the financial statements and supplementary data
appearing on the pages of this report set forth below.
PAGE(S)
-------
Independent Auditors' Report 15
Consolidated Balance Sheet as of September 30,
1996 and 1995 16
Consolidated Statements of Operations for the
Years Ended September 30, 1996, 1995 and
1994 17
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended September 30, 1996, 1995 and 1994 18
Consolidated Statements for Cash Flows for the Years Ended
September 30, 1996, 1995 and 1994 19
Notes to Consolidated Financial Statements 21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange
Act, the Company has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BOONTON ELECTRONICS CORPORATION
(Company)
By/s/Ronald T. DeBlis
---------------------
Ronald T. DeBlis, President and Chief
Executive Officer
Date: January 24, 1997
Pursuant to the requirements of the Exchange Act, this report has been
signed below by the following persons on behalf of the Company and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
By /s/ Daniel Auzan Director, Chairman of January 24, 1997
---------------- the Board
Daniel Auzan
By /s/ Ronald T. DeBlis Director, President January 24, 1997
---------------- and Chief Executive
Ronald T. DeBlis Officer (principal
executive officer)
By /s/ Jack Frucht Director January 24, 1997
----------------
Jack Frucht
By /s/ Otto H. York Director, Vice Chairman January 24, 1997
---------------- of the Board
Otto H. York
By /s/ John E. Titterton Secretary and January 24, 1997
----------------- Treasurer (principal
John E. Titterton financial and accounting
officer)
</TABLE>
14
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
1996 1995
---- ----
<S> <C> <C>
Assets:
Current assets:
Cash and cash equivalents $ 113,041 $ 146,568
Trade receivable (Note 1) 971,342 1,011,980
Inventories (Notes 1 & 3) 1,210,940 1,203,358
Deferred tax benefit (Note 10) 81,058 107,412
Prepaid expenses 230,340 263,570
----------- -----------
Total current assets 2,606,721 2,732,888
----------- -----------
Property and equipment - net (Notes 1 & 4) 163,858 102,169
----------- -----------
Other assets:
Deferred tax benefit (Note 10) 988,651 1,186,170
Deposits 67,768 67,768
----------- -----------
Total other assets 1,056,419 1,253,938
----------- -----------
Total assets $ 3,826,998 $ 4,088,995
=========== ===========
Liabilities and Stockholders' Equity:
Current liabilities:
Note payable (Note 6) $ 10,503 $ 97,765
Related party loans (Note 6) 43,530 --
Accounts payable 469,882 288,128
Accrued expenses 538,328 417,762
Unsecured claims payable (Chapter 11 settlement)
- Current (Notes 2) 48,491 101,515
----------- -----------
Total current liabilities 1,110,734 905,170
Note payable - noncurrent (Note 6) 77,837 --
Related party loans - noncurrent (Note 6) 218,970 262,500
Unsecured claims payable (Chapter 11
settlement) noncurrent (Note 2) 201,505 253,788
Total liabilities 1,609,046 1,421,458
Commitments and Contingencies (Note 8)
Stockholders' equity:
Common stock (Note 9) 155,659 152,209
Capital in excess of par 4,421,637 4,388,431
Deficit (2,359,344) (940,812)
----------- -----------
2,217,952 3,599,828
Less: Treasury stock (Note 9) -- (932,291)
----------- -----------
Total stockholders' equity 2,217,952 2,667,537
----------- -----------
Total liabilities and stockholders' equity $3,826,998 $4,088,995
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
16
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
1996 1995 1994
---- ---- ----
DIP
<S> <C> <C> <C>
Net sales $6,038,336 $6,837,248 $6,000,555
Cost of sales 3,408,580 3,888,763 4,009,328
------------ ------------ ---------
Gross income 2,629,756 2,948,485 1,991,227
------------ ------------ ---------
Operating expenses:
Commissions 640,517 586,969 696,937
Research and development 921,827 783,132 550,521
Other operating expenses 1,515,727 1,415,352 1,070,614
------------ ------------ ---------
Total operating expenses 3,078,071 2,785,453 2,318,072
------------ ------------ ---------
Income (loss) from operations (448,315) 163,032 (326,845)
------------ ------------ ---------
Other income (expense):
Interest expense (27,709) (44,181) (252,630)
Chapter 11 expense - (34,037) (290,236)
Gain on sale of assets - 21,771 979,763
Loss on disposal of equipment - - (173,322)
Moving expense - (98,516) -
Other income (expense) 1,823 (90,564) (153,306)
------------ ------------ ---------
Total other income (expense) (25,886) (245,527) 110,269
------------ ------------ ---------
Income (loss) before taxes and special charges (474,201) (82,495) (216,576)
Income taxes (benefit) 225,073 (316,339) (36,371)
------------ ------------ ---------
Income/ (loss) before special charges
(699,274) 233,844 (180,205)
Special charges (Notes 2 & 13) (350,405) - 1,487,552
------------ -------- ---------
Net income (loss) $ (1,049,679) $ 233,844 $1,307,347
============ ============= ==========
Weighted average number of common
shares outstanding 1,460,730 1,341,785 1,296,785
============ ============= ==========
Earnings (Loss) per common share:
Earnings (loss) from continuing operations $(.48) $.17 $(.14)
Special charges (.24) - 1.15
--- --- ----
Net income (loss) $(.72) $.17 $1.01
=== ==== =====
</TABLE>
The accompanying notes are an integral part of these statements.
17
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TREASURY
NUMBER OF PAID-IN EARNINGS/ SHARES AT
SHARES PAR VALUE CAPITAL (DEFICIT) COST TOTAL
------ --------- ------- --------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
Balance 9/30/93* 1,492,085 $ 149,209 $ 4,359,556 $(2,424,689) $(1,002,729) $ 1,081,347
Net income - year ended
9/30/94 -- -- -- 1,307,347 -- 1,307,347
---------- ---------- ----------- ----------- ----------- -----------
Balance 9/30/94* 1,492,085 149,209 4,359,556 (1,117,342) (1,002,729) 2,388,694
Exercise of Stock
Options 30,000 3,000 28,875 -- -- 31,875
Treasury Stock
Reissued -- -- -- (57,314) 70,438 13,124
Net income - year ended
9/30/95 -- -- -- 233,844 -- 233,844
---------- ---------- ----------- ----------- ----------- -----------
Balance 9/30/95 1,522,085 152,209 4,388,431 (940,812) (932,291) 2,667,537
Exercise of Stock
Options 34,500 3,450 33,206 -- -- 36,656
Treasury Stock Reissued -- -- -- (368,853) 932,291 563,438
Net (loss) - year ended
9/30/96 -- -- -- (1,049,679) -- (1,049,679)
---------- ---------- ----------- ----------- ----------- -----------
1,556,585 $ 155,659 $ 4,421,637 $(2,359,344) $ -- $ 2,217,952
========== ========== =========== =========== =========== ===========
</TABLE>
*DEBTOR-IN-POSSESSION
The accompanying notes are an integral part of these statements.
18
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
1996 1995 1994
---- ---- ----
Cash flows from operating activities: DIP
---
<S> <C> <C> <C>
Net income (loss) $(1,049,679) $ 233,844 $ 1,307,347
Adjustments to reconcile net income:
Depreciation and amortization 27,335 26,294 201,944
Deferred taxes 223,873 (316,339) (61,771)
Gain on sale of land and building -- -- (979,763)
(Gain)/loss on sale of equipment (1,000) (21,771) 173,322
Gain on secured debt restructure -- -- (889,685)
Accrued interest on debt structure -- -- 300,867
Decrease (increase) in current assets:
Accounts receivable 40,638 (7,616) 81,276
Inventories (7,582) (251,438) 1,195,184
Prepaid expenses 33,230 281,904 (381,176)
Increase (decrease) in current liabilities:
Accounts payable 181,754 159,953 87,151
Accrued expenses 120,566 (58,320) 42,053
Chapter 11 settlement-current (53,024) (10,854) 112,369
Liabilities subject to compromise -- -- (1,028,243)
----------- --------- -----------
Net cash provided (used) by operating
activities (483,889) 35,657 160,875
----------- --------- -----------
Cash flows from investing activities:
Proceeds from sale of assets 1,000 21,771 2,442,000
Purchase of equipment (89,024) (71,647) (21,221)
Proceeds from cash surrender of life
insurance policies -- 245,190 --
Other -- (421) 5,675
----------- --------- -----------
Net cash provided (used) by investing
activities $ (88,024) $ 194,893 $ 2,426,454
----------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
1996 1995 1994
---- ---- ----
Cash flows from financing activities: DIP
---
<S> <C> <C> <C>
Treasury stock reissued $ 932,291 $ 70,438 $ --
Excess cost of treasury stock reissued (368,853) (57,314) --
Increase in notes payable 90,019 -- 400,000
Payments on bank loans (99,444) (279,902) (3,372,333)
Borrowings from Board of Directors loans -- 300,000 --
Payments on Board of Directors loans -- (37,500) --
Chapter 11 settlement-noncurrent (52,283) (13,771) 267,559
Payment of borrowings on life insurance policies -- (229,921) --
Proceeds from stock options exercised 36,656 31,875 --
--------- --------- -----------
Net cash provided (used) by financing
activities 538,386 (216,095) (2,704,774)
--------- --------- -----------
Increase (decrease) in cash and cash
equivalents (33,527) 14,455 (117,445)
Cash and cash equivalents at beginning of
period 146,568 132,113 249,558
--------- --------- -----------
Cash and cash equivalents at end of
period $ 113,041 $ 146,568 $ 132,113
========= ========= ===========
Supplemental schedule of non-cash transaction:
Gain on unsecured claims
payable-(Chapter 11 settlement) -- -- $ 597,867
========= ========= ===========
Supplemental disclosures of cash flow information:
Income taxes paid $ 1,025 $ 7,125 $ 13,347
========= ========= ===========
Interest paid $ 33,082 $ 38,808 $ 233,088
========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
20
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES AND DESCRIPTION
OF BUSINESS:
A. The Company is a New Jersey corporation organized in 1947. The
Company designs and produces electronic testing and measuring
instruments including power meters, voltmeters and modulation meters.
Recent models are microprocessor controlled and are often used in
computerized automatic testing systems. The Company's equipment is
marketed throughout the world to commercial and government customers
in the electronics industry.
The Company markets and distributes its products throughout the
United States and abroad through some 15 domestic sales
representatives and 35 foreign distributors. Representatives sell on
a commission basis, while distributors buy products for resale at
discounted ex-factory prices. Its representatives and distributors
also handle the products of other manufactures, although these are
not generally competitive with the Company's products except that
some items handled by foreign distributors may be somewhat
competitive.
B. The consolidated financial statements include the accounts of Boonton
Electronics Corporation and its wholly-owned subsidiaries, Boonton
International Sales Corporation and Integra, Inc. All material
intercompany accounts and transactions have been eliminated in
consolidation. The wholly-owned subsidiaries ceased operations
effective October 1, 1994.
C. Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results may differ from those estimates.
D. The company accounts for uncollectible accounts under the direct
write-off method whereas generally accepted accounting principals
require provision for such expenses under the allowance method. The
effect of using this method approximates the allowance method as all
amounts are deemed to be fully collectible.
E. Inventories - stated at the lower of cost or market determined by the
first-in, first-out (FIFO) method.
F. Property, plant and equipment - Depreciation and amortization is
calculated by the straight-line method for financial reporting
purposes at rates based on the following estimated useful lives:
Building and improvement 39
Machinery and equipment 5-10
Office furniture and fixtures 5-10
Transportation equipment 3
The accelerated cost recovery system and modified accelerated cost
recovery system is used for income tax purposes. Cost of major
renewals and betterments that extend the life of the property and
equipment are capitalized. Expenditures for maintenance and repairs
are charged to expenses as incurred.
G. Financial risk - The Company regularly maintains bank account
balances in excess of FDIC insurable limit.
21
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
H. Income Taxes - The Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
which requires a company to recognize deferred tax liabilities and
assets for the expected future tax consequences of events that have
been recognized in a Company's financial statements or tax returns.
Under this method, deferred tax liabilities and assets are determined
based on the differences between the financial statement carrying
amounts and tax basis of assets and liabilities using expected tax
rates in effect in the years in which the differences are expected to
reverse. The Company recognized the benefit of net operating loss
carryforwards applying the valuation allowance which requires that
the tax benefit be limited bases on the weight of available evidence
and the probability that some portion of the deferred tax asset will
be realized.
I. Financial Instruments - The Company's financial instruments include
cash, cash equivalents, trade receivables and payable, long-term debt
and loans from related parties for which carrying amounts approximate
fair value. It is not practicable to estimate the fair value of
related party loans and long-term debt.
NOTE 2 - PROCEEDINGS UNDER CHAPTER 11 AND GOING CONCERN
PRESENTATION:
The Company operated under Chapter 11 proceedings for the period
September 7, 1993 through November 15, 1994 when, on the later date, the order
confirming the Plan of Reorganization was entered by the United States
Bankruptcy Court, District of New Jersey subject to the court closing the case
180 days after said entry (Local Rule 25(a)) cause for extension of time in
closing case (Local Rule 25(b)) and filing of application for allowance of fees
and allowance within 90 days after entry of final order confirming plan (Local
Rule 25(c)).
22
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
In accordance with S.A.S. Sections 560.03, the Company has adjusted
downward all liability accounts that were affected by the confirmed Plan of
Reorganization entered on November 15, 1994. Therefore, the financial statements
reflect the maximum liabilities to creditors under the Chapter 11 proceedings
and the Plan of Reorganization. As a result of the Plan of Reorganization,
$1,487,552 of indebtedness was forgiven and has been included as an special
charges in the accompanying financial statements for the fiscal year ended
September 30, 1994.
The settlement of unsecured claims under the confirmed Plan of
Reorganization totaling 35% of allowed claims for accounts payable and accrued
expenses which is reflected in the financial statements, provided for the
following payments to be made subsequent to November 15, 1994:
%
--
10 From after tax proceeds from termination of the company's pension plan
5 One year after initial payout
5 Two years after initial payout
15 Three years after initial payout
Pre-petition liabilities in accordance with the November 15, 1994
confirmed plan of reorganization were compromised of the following:
Accounts payable $ 702,233
Accrued expenses:
Commissions payable 126,370
Vacation pay 96,250
Severance pay 25,108
Other 78,282
-----------
Total September 30, 1994 1,028,243
Court authorized payments/adjustments (75,073)
-----------
Balance subject to settlement 953,170
Amount discharged 703,174
-----------
Balance of Chapter 11 settlement -
September 30, 1996 $ 249,996
===========
23
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 3 - INVENTORIES
SEPTEMBER 30,
-------------
1996 1995
---- ----
Raw material $ 468,619 $ 496,238
Work in process 688,273 649,284
Finished Goods 54,048 57,836
---------- ----------
Total $1,210,940 $1,203,358
========== ==========
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT:
SEPTEMBER 30,
-------------
1996 1995
---- ----
Leasehold improvements $ 61,054 $ 61,054
Machinery and equipment 1,512,488 1,436,087
Office furniture and fixtures 444,959 432,336
Transportation equipment 13,188 13,188
---------- ----------
Total 2,031,689 1,942,665
Less: Accumulated depreciation
and amortization 1,867,831 1,840,496
---------- ----------
Net depreciated cost $ 163,858 $ 102,169
========== ==========
Management has removed $1,868,423 of fully depreciated machinery, equipment and
office furniture and fixtures disposed of and/or abandoned during the relocation
of the Company's operations to the Township of Hanover.
24
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 5 - RESULTS OF OPERATIONS:
The Company has incurred losses from operations during the last three
fiscal years. Management does not expect this to continue based on its operating
plan for fiscal 1997 which anticipates a 19% increase in revenue and a net
income of approximately $200,000. The 1997 first quarter revenues were
approximately $1.8 million which supports, on an annualized basis, the expected
increase in revenues. The military contracts awarded in fiscal 1996, which will
total $1.7 million in revenues upon completion, contributed approximately
$265,000 to the first quarter 1997 revenues. The Company's backlog as of
December 31, 1996 was $1,296,718 which included an additional $546,000 for the
military contracts. An additional $299,000 was released by the Air Force in
November 1996 against these contracts.
The loss in 1996 was partially attributable to the reduced volume but
was also impacted by certain costs that were non-recurring in nature. These
costs, which represent 46.2% of the loss from operations, were "CE" mark audit
fees of $108,525, funds provided for new technology research at the New Jersey
Institute of Technology totaling $65,000, and severance expense for the former
president of $33,920. Management of the Company has already instituted steps to
reduce operating costs in fiscal 1997 which steps include reductions in wages
and payroll taxes due to personnel reductions. Further cost reductions will be
implemented as identified by management as fiscal 1997 progresses.
The special charges of $350,405 was primarily a result of costs, and
accrued costs for work to be performed in 1997, associated with further
environmental delineation work performed at a site formerly leased by the
Company. This work is being performed in order to obtain a "Conditional No
Further Action Letter" from the New Jersey Department of Environmental
Protection (NJDEP) which would allow the Company to finalize its groundwater
remediation program.
25
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 6 - NOTES PAYABLE
SEPTEMBER 30,
-------------
1996 1995
---- ----
A. BANK:
United Jersey Bank:
Unsecured note payable (as part of
secured debt restructure with bank)
in monthly installments of $25,000
including interest at 8% per annum
through January 1996: $ -- $ 97,765
Less current portion $ -- 97,765
---------- ----------
Noncurrent portion $ -- $ --
========== ==========
Interest expense for the years ended September 30, 1996 and 1995 amounted to
$2,649 and $20,098, respectively.
SEPTEMBER 30,
-------------
1996 1995
---- ----
B. BOARD OF DIRECTORS:
Notes, subordinated to NJEDA loan,
dated February 6, 1995, payable in
monthly installments of $5,449
including interest at 9% per annum
through September 30, 2001: $ 262,500 $ 262,500
Less: current portion $ 43,530 --
----------- -----------
Noncurrent portion $ 218,970 $ 262,500
=========== ===========
Interest expense for the fiscal year ended September 30, 1996 and 1995 amounted
to $24,019 and $23,844, respectively.
SEPTEMBER 30,
-------------
1996 1995
---- ----
C. NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY:
Note, dated July 31, 1996, payable
in monthly installments of $1,352
including interest at 6.75% per annum
through June 30, 2003: $ 88,342 $ --
Less: current portion $ 10,503 --
----------- ------------
Noncurrent portion $ 77,837 $ --
=========== ============
Interest expense for the fiscal year ended September 30, 1996 amounted to
$1,042. Under the provisions of this loan agreement, the Company will borrow a
total of $500,000.
26
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 7 - CONCENTRATION OF CREDIT RISK:
The Company maintains cash and cash equivalents at three financial
institutions that are insured by the Federal Deposit Insurance Corporation
(FDIC) and/or Securities Investor Protection Corporation (SIPC). The Company at
times during the year had amounts in these institutions that exceeded insurable
limits of $100,000 FDIC and $500,000 SIPC. In the normal course of business, the
Company extends unsecured credit to customers in the United States and Asia.
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
COMMITMENTS:
A. RETIREMENT PLANS:
The Company adopted a non-contributory employee pension plan which
became effective January 1, 1972 and was consequently revised to
meet the requirements of the ERISA pension law. Substantially, all
employees were eligible to participate. Under the plan, the Company
was obligated to contribute such amounts as were actuarially
required to fund the plan. Effective October 1, 1987, the Company
adopted Statement of Financial Accounting Standards No. 87,
Employers' Accounting for Pensions (FAS No. 87, for its
non-contributory defined benefit employee pension plan).
Effective September 9, 1994, The Company terminated the plan
pending approval of the Internal Revenue Service and the Pension
Benefit Guaranty Corporation. Benefits provided by the plan ceased
accruing on the same date. As stated in Note 2, 10% of unsecured
claims in accordance with the confirmed plan of reorganization will
be provided from the after tax proceeds of the terminated plan. The
termination of the plan was finalized and the plan assets were
distributed on October 13, 1995. The 10% payments to the unsecured
creditors were made October 27, 1995.
Effective July 1, 1989, the Company adopted a defined contribution
plan for all eligible employees. In accordance with Internal
Revenue Code Section 401(k), the plan provides for elective
deferral of up to 15% of total compensation. The plan further
provided for a Company matching contribution of 25% of the elective
deferral amount of each participant that did not exceed 6% of total
compensation. Effective January 1, 1994, the matching Company
contribution was suspended due to the company's financial condition
and pending reorganization. Effective October 1, 1995, the Company
reinstated a matching contribution at 50% of the elective
27
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
deferral amount for each participant that does not exceed 6% of
total compensation. The amounts charged to operations were $46,151
and $0 for the years ended September 30, 1996 and 1995,
respectively.
B. EMPLOYEE STOCK OPTIONS PLANS:
On February 26, 1987, the Stockholders approved the 1987 Incentive
Stock Option Plan, the 1987 Employee Stock Purchase Plan and the
1987 Stock Option Program for Non-Employee Directors. Subject to
the provisions of these plans, an aggregate of 150,000 shares of
the Company's stock was made available for option purchases;
namely, 75,000 shares, 37, 500 shares and 37,500 shares,
respectively. The number of shares available for future grants at
September 30, 1995 were 11,700, 11,900 and 7,500, respectively. The
number of shares available for future grants at September 30, 1996
were 11,700, 12,150 and 7,500, respectively.
OPTION
------
PRICE PER SHARE NUMBER OF SHARES
--------------- ----------------
Shares under option at
September 30, 1993 $3.00 53,500
Expired 3.00 (3,500)
-------
Shares under option at
September 30, 1994 3.00 50,000
Granted $1.0625 130,000
Exercised $1.06.25 (30,000)
Expired $1.0625 (18,750)
Expired/surrender $3.00 (50,000)
-------
Shares under option at
September 30, 1995 $1.0625 81,250
Exercised $1.0625 (34,500)
Expired $1.0625 (250)
-------
Shares under option at
September 30, 1996 $1.0625 46,500
=======
C. SUPPLEMENTAL EXECUTIVE PENSION PLAN:
On June 8, 1989, the Board of Directors adopted a Supplemental
Executive Retirement Plan for certain executive employees to
restore pension benefits which had been reduced by legislative
action. The Company purchased life insurance contracts through a
trust to fund its obligations for the participants and recognized a
liability for vested benefits as accrued. The supplemental plan was
terminated and insurance contracts canceled with proceeds of
$33,804 credited to expense for the year ended September 30, 1994.
28
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
D. LEASE COMMITMENTS
Subsequent to the sale of the Company's facility in Randolph, New
Jersey on September 28, 1994, the company entered into a seven year
lease for its present office and manufacturing facility in Hanover
Township, New Jersey with a five year renewal option. Rent charged
to operations for the fiscal year ended September 30, 1996 was
$227,400. Annual rent for the initial seven year term is $227,400
for the first four years and $300,00 for years five through seven.
Future minimum lease payments required under the operating lease
are as follows:
FISCAL YEAR AMOUNT
----------- ------
1997 227,400
1998 227,400
1999 300,000
2000 300,000
2001 300,000
The Company leases office equipment under a five-year operating
lease with an option to upgrade after three years which it intends
to exercise. The annual lease payment for the term of the lease is
$17,617. Future lease payments required under the operating lease
are as follows:
FISCAL YEAR AMOUNT
----------- ------
1997 17,617
1998 17,617
1999 17,617
2000 17,617
2001 1,468
CONTINGENCIES:
A. ENVIRONMENTAL CONTINGENCIES:
Following an investigation by the New Jersey Department of
Environmental Protection (NJDEP) of the Company's waste disposal
practices at a certain site that it formerly leased, the Company
put a ground water management plan into effect as approved by the
Department. Costs associated with this site are charged directly to
income as incurred. The lessor of this site has
29
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
notified the Company that if the NJDEP investigation proves to have
interfered with a sale of the property, the lessor may seek to hold
the Company liable for any loss it suffers as a result. However,
corporate counsel has informed management that, in their opinion,
the lessor would not prevail in any lawsuit filed due to the
imposition by law of the statute of limitations.
Costs charged to operations in connection with the water management
plan amounted to $51,879 and $60,409 for the years ended September
30, 1996 and 1995, respectively. The Company estimates the
expenditures in this regard for the fiscal year ending September
30, 1997 will amount to approximately $52,000. The Company will
continue to be liable under the plan in all future years until such
time as the NJDEP releases it from all obligations applicable
thereto.
B. INCOME TAX CONTINGENCIES:
The Company's income tax returns through the fiscal year ended
September 30, 1992 have been accepted as filed or are barred from
further assessment.
NOTE 9 - COMMON AND TREASURY STOCK:
SEPTEMBER 30,
-------------
1996 1995
---- ----
COMMON STOCK:
$.10 par value, authorized 5,000,000
shares, issued and outstanding 1,556,585
shares and issued 1,522,085 shares. $155,659 $152,209
======== ========
TREASURY STOCK (AT COST):
No shares and 180,300 shares,
respectively -- $932,291
======== ========
Represents the repurchase of stock on November, 1987 as resolved by
the Board of Directors. 180,300 shares were reissued to G.E.M. USA, Inc. in
accordance with the terms of the definitive Stock Purchase Agreement executed on
February 23, 1996 by and between the
30
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
Company and General de Mesure et de maintenance Electronique, S.A. (GMME).
G.E.M. USA, Inc., is a wholly-owned subsidiary of GMME.
NOTE 10 - INCOME TAXES:
The components of the deferred tax asset are:
SEPTEMBER 30,
1996 1995
---- ----
DIP
---
Net operating loss carry forwards $3,799,877 $3,371,985
Less: Valuation allowance (2,730,168) (2,078,403)
---------- ---------
Net deferred tax asset $1,069,709 $1,293,582
========== =========
Financial Accounting Standards Board Statement No. 109, "Accounting
for Income Taxes", requires that the Company record a valuation allowance when
it is "more likely than not that some portion or all of the deferred tax assets
will not be realized". It further states that "forming a conclusion that a
valuation allowance is not needed is difficult when there is negative evidence
such as cumulative losses in recent years".
The ultimate realization of this deferred income tax asset depends on
the ability to generate sufficient taxable income in the future. The Company is
undergoing substantial restructuring changes and has made strategic realignments
of its operations in association with its Plan or Reorganization that management
believes will result in future profitability. While it is management's belief
that these measures will allow the total deferred income tax asset to be
realized by future operating results, the losses in recent years and a desire to
be conservative make it appropriate to record a valuation allowance.
Accordingly, the Company has provided a valuation allowance (based on
estimated future taxable income) for the portion of the total deferred income
tax asset that will not be realized as related to the operating loss
carryforward.
Income tax laws allow for the utilization of loss carryforwards over
periods not to exceed 15 and 7 years for Federal and State purposes,
respectively. If the Company is not able to generate sufficient taxable income
in the future through operating results, increases in the valuation allowance
will be required through a charge to expense (reducing stockholder's equity). In
the event the Company reports sufficient profitability to use all of the
deferred income tax assets, the valuation allowance will be eliminated through a
credit to expense (increasing stockholder's equity).
31
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
The provision for income taxes consists of the following:
SEPTEMBER 30,
-------------
1996 1995
---- ----
Current:
Federal -- --
State $ 1,200 --
--------- ---------
1,200 --
--------- ---------
Deferred:
Federal 198,510 $(272,143)
State 25,363 (44,196)
--------- ---------
223,873 (316,339)
Total $ 225,073 $(316,339)
========= =========
The following is a reconciliation of income taxes at the federal statutory rate:
SEPTEMBER 30,
-------------
1996 1995
---- ----
Computed income taxes at statutory rate $(280,366) $ (28,049)
Recognition of net operating loss (139,441) --
Increase(decrease) in tax asset valuation
allowance 651,765 (288,290)
Other items - net (6,885) --
--------- ----------
Expense (Benefit) $ 225,073 $(316,339)
========= ==========
For federal tax purposes, the Company's subsidiary, Boonton
International Sales Corporation, elected to be treated as a Domestic
International Sales Corporation (DISC) under Section 992(b) of the Internal
Revenue Code. The Company is entitled to defer federal taxes on the income of
the DISC which amounted to $223,449 for 1994. This subsidiary ceased operations
effective October 1, 1994.
Cumulative undistributed earnings of the DISC subsequent to December
31, 1984 was $1,023,055. The Company does not recognize the deferred income
taxes since there is no intention to distribute the DISC income.
The Company has net operating loss carryforwards for federal and state
purposes approximating $9,478,000 and $9,647,000 that will begin to expire
until the year 2006 and 1998, respectively. These loss carryforwards can be
utilized to reduce future taxable income dollar for dollar.
32
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 11 - SEGMENT INFORMATION:
The Company is engaged in the manufacture and sale of electronic test
and measurement equipment and management considers its business as a single
segment for reporting purposes.
A. The Company's export sales were as follows:
YEARS ENDED % OF
SEPTEMBER 30, AMOUNT TOTAL SALES
- ------------- ------ -----------
1996 $2,599,074 42%
1995 2,702,439 40%
1994 2,177,321 36%
B. Customers sales to domestic government agencies were as follows:
YEARS ENDED % OF
SEPTEMBER 30, AMOUNT TOTAL SALES
- ------------- ------ -----------
1996 $907,189 15%
1995 636,020 9%
1994 383,932 6%
NOTE 12 - SUBSEQUENT EVENT:
On December 9, 1996, G.E.M. USA, Inc. purchase 80,000 shares of the
Company's common stock for $200,000 at two dollars and fifty cents ($2.50) a
share U.S. These shares were purchased in accordance with the terms of a
definitive Stock Purchase Agreement executed by and between the Company and GMME
on October 21, 1996. The Agreement provides an option to GMME to purchase an
additional 443,700 shares for $1,437,588 at three dollars and twenty-four cents
($3.24) a share U.S. This option will expire on June 9, 1997 and is conditioned
upon the satisfactory completion of further delineation of the environmental
issue at a site formerly leased by the Company as disclosed in Note 8 -
Contingencies (A) and Note 13 - Special Charges.
NOTE 13 - SPECIAL CHARGES:
In accordance with the GMME agreement, the Company was required to
attempt to obtain an agreement, acceptable to GMME, with the New Jersey
Department of Environmental Protection for finalizing the clean-up of a site it
formerly leased. In order to fulfill this requirement, it was necessary for the
Company to incur and accrue charges of $271,772
33
<PAGE>
BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
for services of environmental consultants and counsel that were deemed not to be
in the ordinary course of business.
Additionally, the Company has accrued $45,000 for its expected
settlement in the Sharkey Landfill clean up. Although the Company contends that
it did not send hazardous waste to the Landfill, it was determined by counsel
that the NJDEP will prevail against all companies named in the suit to some
extent. The Company has accrued $33,633 for penalties imposed, by the NJDEP, for
missing a reporting event in 1994, payable in four quarterly installments during
fiscal 1997.
NOTE 14 - QUARTERLY FINANCIAL DATA:
SEPTEMBER 30, 1996 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
- ------------------ -------- -------- -------- --------
Sales $1,632,222 $ 1,559,269 $ ,410,126 $ 1,436,719
Gross Profit 803,166 766,387 644,537 415,666
Net income/(loss) 52,710 (47,683) (294,884) (759,822)
Earnings/(loss)
per share .04 (.04) (.19) (.53)
SEPTEMBER 30, 1995 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
- ------------------ -------- -------- -------- --------
Sales $ 1,494,193 $1,655,059 $1,818,211 $1,869,785
Gross Profit 633,993 707,582 808,337 798,573
Net income/(loss) (132,458) 40,179 99,128 226,995
Earnings/(loss)
per share (.10) .03 .07 .17
34
