U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES ACT OF 1934
For the fiscal year ended September 30, 1998
Commission File Number 2-17411
BOONTON ELECTRONICS CORPORATION
A New Jersey corporation
IRS Employer Identification No. 22-1543137
Mailing Address:
25 Eastmans Road, Parsippany, NJ 07054-0465
(973) 386 9696
Securities registered under Section 12(b)
of the Exchange Act: None
Securities registered under Section 12(q)
of the Exchange Act:
Common Stock, par value $.10 per share
Check whether the Company (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No[ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of Company's knowledge, in definitive proxy or information statements
incorporated by reference in part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
The Company's net revenues for the year ended September 30, 1998 were
$6,849,143.
The aggregate market value of the voting stock held by non-affiliates of the
Company on December 18, 1998 was $282,591.
The number of shares outstanding of the Company's Common Stock, par value $.10
per share, on December 18, 1998 was 2,310,970.
Portions of the 1998 Annual Report of Company are incorporated in Parts I, II
and III of this From 10-KSB. This report consists of 36 consecutively numbered
pages. The Exhibit Index appears on page 35.
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INFORMATION REQUIRED IN REPORT
This 1998 report on Form 10-KSB contains certain statements that are not
historical facts and are considered "forward-looking statements" (as defined in
the Private Securities Act of 1995) which can be identified by terms/phrases
such as "believes", "expects", "may", "should", "anticipates", "the negatives
thereof", "goals" and/or "future expectations". Such forward-looking statements
involve opinions and predictions based on current information and assumptions,
and no assurance can be given that the future results will be achieved since
events or results may materially differ as a result of risks and uncertainties
facing the Company. These include, but are not limited to, economic, market or
regulatory conditions, competition, and investment risks, as well as risks
associated with the Company's entry into new markets, diversification and
catastrophic events.
PART I
Item 1. DESCRIPTION OF BUSINESS.
(a) BUSINESS DEVELOPMENT.
The Company is a New Jersey Corporation organized in 1947. Since
October 1, 1995, there have been no bankruptcy, receivership or similar
proceedings with respect to the Company. Effective October 1, 1997, the
Company dissolved its two wholly owned subsidiaries, Boonton International
Sales Corporation and Integra, Inc. Also, since October 1, 1995, there has
been no purchase or disposition of any material amount of assets otherwise
in the ordinary course of business; and there have been no material changes
in the mode of conducting business.
(b) BUSINESS OF COMPANY.
(1) 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.
(2) The Company markets and distributes its products throughout the
United States and abroad through some 13 domestic sales
representatives and 24 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 manufacturers, although these are
not generally competitive with the Company's products except that some
items handled by foreign distributors may be somewhat competitive.
(3) Not applicable.
(4) The Company is in competition with other manufacturers, several
of which are larger than the Company and have larger professional
staffs and greater financial and technical resources. Some of these
companies are Hewlett-Packard, IFR/Marconi, Rhode and Schwarz, and
Anritsu.
(5) The Company obtains raw materials from a variety of sources.
Neither the sources nor the availability of essential raw materials
are considered to play any significant part in the Company's business.
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(6) During this fiscal year ended September 30, 1998 approximately 5%
of the Company's sales were made to the United States Government and
agencies thereof. The Company believes that an additional substantial
portion of purchases made by its non-Governmental customers are
related to the filling of orders placed with such customers by the
United States Government and agencies thereof. The Company is not able
to determine the percentage of sales associated with purchases from
non-Governmental customers that are related to the filling of orders
placed by the United States Government and agencies thereof.
(7) The trademark "Boonton" was registered in the United States
Patent and Trademark Office on February 18, 1997 (Reg. No. 2,038,515).
The Company does not have any other patents, trademarks, licenses,
franchises, concessions, and royalty agreements or labor contracts.
(8) Not applicable.
(9) Under established United States Government contract procedures,
substantially all of the Company's Government contracts are subject to
cancellation, in which case the Company would be entitled to recover
its costs incurred to the date of cancellation plus a reasonable
profit thereon. The cancellation costs and a reasonable profit are
determined in accordance with standard Government accounting
practices.
(10) During the fiscal year ended September 30, 1998, the Company
spent approximately $992,461 on company-sponsored research and
development activities. The Company spent approximately $735,528 on
such activities during the fiscal year ended September 30, 1997. The
Company does not currently have any customer-sponsored research and
development activities.
(11) The New Jersey Department of Environmental Protection (the
"NJDEP") has conducted an investigation concerning disposal, at a
facility in New Jersey previously leased by the Company, of certain
materials formerly used by the Company's manufacturing operations at
that site and the possible effect of such disposal on the aquifer
underlying the property. The disposal practices and the use of the
materials in question were discontinued in 1978. The Company has
cooperated with the NJDEP investigation and has been diligently
pursuing the matter in an attempt to resolve it as rapidly as NJDEP
operating procedures permits. The Company and the NJDEP have agreed
upon a plan to correct ground water contamination at the site, located
in the Township of Parsippany-Troy Hills, pursuant to which wells have
been installed at an estimated cost to the Company of $300,000. The
plan contemplates that the wells will be operated and that soil and
water samples will be taken and analyzed until such time (which the
Company is unable to predict) as contamination levels satisfactory to
the NJDEP are attained. Operating expenditures incurred by the Company
during the fiscal year ended September 30, 1998 in connection with the
site amounted to approximately $57,205. The Company estimates that
operating expenditures in this regard during the current fiscal year,
including the costs of operating the wells and taking and analyzing
soil and water samples, will amount to approximately $52,000.
(12) As of September 30, 1998 the Company had 48 full time employees.
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Item 2. DESCRIPTION OF PROPERTY.
(a) The Company entered into a lease agreement, effective October 1, 1994,
with 25 Eastmans Road Associates, Ltd. to lease approximately 30, 000 square
feet of a facility located in Hanover Township, New Jersey. Effective October 1,
1997, the Company added approximately 3,300 square feet to its existing lease.
The additional space plus a portion of the initial leased space was sub-let to
B+K Precision. The agreement with B+K Precision is further explained in NOTE 8.
to the Company's financial statements filed herewith. The term of the lease
agreement is for seven years beginning on October 1, 1994 and ending on
September 30, 2001. The lease also contains an option to extend the term of the
lease by five years. (b) and (c) Not applicable.
Item 3. LEGAL PROCEEDINGS.
(a) Reference is made to the discussion in Item 1.(b)(11) above regarding
an investigation by the NJDEP concerning certain discontinued disposal practices
of the Company and their effect on the soil and ground water at a certain
facility formerly occupied by the Company. No administrative or judicial
proceedings have been commenced in connection with such investigation. The owner
of the Parsippany-Troy Hills facility has notified the Company, that if the
investigation proves to interfere with the sale of the property, it may seek to
hold the Company liable for any resulting damages. Since May 1983, the owner has
been on notice of this problem and has failed to institute any legal proceedings
with respect thereto. While this does not bar the owner from instituting a suit,
it is the opinion of the Company's legal counsel that it is doubtful that the
owner would prevail on any claim due to the fact that such a claim would be
barred by the statute of limitations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
4
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PART II
Item 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
(a) MARKET INFORMATION.
(1) The Company's common stock is traded (symbol "BOON") on the OTC
Bulletin Board. The following is the range of high and low bid
information for the Company's common stock for each quarterly period
within the two most recent fiscal years. These prices represent
inter-dealer quotations, do not include markups, markdowns or
commissions, and do not necessarily represent actual transactions.
For the Quarter Ended High Low
--------------------- ---- ---
12/31/96 1 5/8 1 1/4
3/31/97 1 3/8 1 1/8
6/30/97 1 7/16 1 1/16
9/30/97 1 1/4 1 1/8
12/31/97 1 1/8 29/32
3/31/98 1 13/16
6/30/98 7/8 11/16
9/30/98 1 1/8 13/32
(b) HOLDER.
There were 659 record holders of the Company's common stock as of
December 18, 1998.
(c) DIVIDENDS.
(1) There were no cash dividends declared on the Company's common stock
for the fiscal years ended September 30, 1998 and 1997. The Company
does not anticipate paying any dividends on the common stock in the
foreseeable future.
(2) Not applicable.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.
(a) RESULTS OF OPERATIONS.
(i) 1998 VERSUS 1997
Net sales of $6,849,143 for the fiscal year 1998 was $359,914 or
4.9% below the prior year. Gross profit increased to 49.9 % of sales versus a
prior year 42.6% as the reduced revenue was primarily in military sales that
carry lower profit margins.
Commission expense increased to 10.3% of sales versus 9.9% of
sales for the prior year due to the decreased military contract revenues that
carry lower commission rates. Income from operations was $285,348 or 4.2% of
sales as compared to a prior years $71,845 or 1.0% of sales. Research and
development expenses increased $256,933 over the prior year as the company put
increased emphasis on new products. The other operating expense categories
decreased $113,978 as the company continued to take steps to hold these costs
down.
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Other expenses increased to $85,809 due to higher interest costs,
higher environmental expenses and lower gain on sale of assets. In fiscal 1997
the gain on sales of assets was higher due to the sale of machine tools when the
company shut down its machine shop operations. The net income was $142,959
versus a prior year income of $31,344. Earnings per share was $.09 versus a
prior year $.02.
Accounts receivable increased to $1,299,281 due to sales in the
month of September of approximately $1,000,000. Inventories increased $138,130
to $1,444,245. $69,250 of the inventory increase was due to increased
demonstrator equipment capitalized as a result of new product introductions.
$68,880 of the inventory increase was for manufacturing purposes in preparation
for October and November 1998 shipments. The average production turnover was 2.7
compared to 3.4 the prior year. The current ratio was 2.1 to 1 versus a prior
year 2.2 to 1. The Company's order backlog at September 30, 1998 was $981,668 as
compared to $1,176,119 at September 30, 1997.
The Company has now reported two consecutive years of profits and
as noted above the net income for fiscal 1998 was $142,959 or $111,615 greater
than the prior year. The Company expects to exceed the current year's revenues
and net income in fiscal 1999.
(ii) 1997 VERSUS 1996
Net sales of $7,209,057 for the fiscal year 1997 were $1,170,721
or 19.4% above the prior year. Domestic sales increased $1,400,296 that
reflected a recovery from the overall industry decline experienced in fiscal
1996 included with an increase of $607,603 in military contract revenues that
resulted from the major Air Force contracts awarded in August 1996.
International sales declined by $229,575 from the prior year as a result of
economic difficulties in Europe.
The company had a gross income of $3,068,958 or 42.6% of sales.
Commission expense decreased to 9.9% sales versus 10.6% of sales for the prior
year due to the increased military contract revenues that carry a lower
commission rate. There was a profit from operations of $71,845 compared to a
prior year loss from operations of $448,315. During the year management
continued to take steps to reduce operating costs. With the exception of
commission expense all other categories of operating expense decreased in total
by $156,276 when compared to fiscal 1996.
Other expenses increased to $40,501 in fiscal 1997 versus $25,886
in fiscal 1996. The increase was primarily due to increased interest expense
associated with the increased borrowings pursuant to the New Jersey Economic
Development Authority (NJEDA) direct loan. The company borrowed an additional
$394,071 under the NJEDA loan during the fiscal year, however, it should be
noted that no further borrowings shall occur subsequent to July 31, 1997. There
was a $51,660 gain realized from the sale of assets that resulted from the
Company's sale of all of machine shop equipment. The machine shop department was
eliminated during the fiscal year with all machined parts now being purchased
from outside sources.
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The profit before taxes and special charges was $31,344 versus a
prior year loss of $474,201. There were no taxes or special charges during the
fiscal year resulting in a net income of $31,344 or $0.02 earnings per share
versus a prior year net loss of $1,049,679 or $0.72 loss per share.
Accounts receivable increased to $1,051,887 from the prior year
end balance of $971,342, however, the average collection period declined to 51.2
days from the prior year's 59.9 days. Inventories increased to $1,306,115 from a
$1,210,940 prior year balance. It should be noted that $51,820 of the increase
in inventories was associated with the capitalization of demonstrator equipment.
The average production inventory turnover increased to 3.4 times as compared to
a prior year's 2.8 times. The current ratio was 2.2 to 1 versus a prior year's
2.3 to 1. The working capital at year end was $1,603,146 versus the prior year's
$1,495,987. The Company's order backlog at September 30, 1997 was $1,176,115 as
compared to its backlog at September 30, 1996 that was $1,362,193.
It is important to note that after six years of losses the
Company reported a profit before taxes and special charges of $31,344 for the
fiscal year ended September 30, 1997. The Company attained its goal of $7.2
million in revenues for the fiscal year and management expects to match or
exceed that level of revenues in fiscal year 1998. Also the Company, in August
1997, was notified of a military contract award for the Marines that upon
completion should total approximately $1 million in revenues.
(b) LIQUIDITY AND CAPITAL RESOURCES.
The Company's working capital for the fiscal years ended September 30, 1998
and 1997 was $1,684,369 and $1,603,146, respectively.
On February 6, 1995, The Board of Directors loaned $300,000 at 14% interest
per annum to the Company. Initially these loans were scheduled to be repaid by
April 1995 however due to the Company's need to maintain the use of the proceeds
from these loans repayment was waived. Effective September 1, 1995, the interest
rate for these loans was reduced to 9% per annum. Repayment of these loans is
now covered by a Subordination Agreement by and between the Directors and the
New Jersey Economic Development Authority (NJEDA) in accordance with the terms
of a loan the Company has with NJEDA that is discussed below.
On July 31, 1996, the Company executed a Direct Loan Agreement by and
between the Company and the NJEDA. The agreement provided for a direct loan of
$500,000 at 6 3/4% per annum. The proceeds of the loan are to be used primarily
for the acquisition of capital assets. As of September 30, 1998, the Company had
used $484,090 of the loan amount and had repaid principal of $103,261.
Total debt-to-capital at September 30, 1998 was 80.2% compared to 83.2% the
prior year-end. During 1999 the Company expects to finance capital spending and
working capital requirements with cash provided from operations.
The Company is of the opinion that it shall be Year 2000 compliant before
the end of its fiscal year 1999. The final system required to be Year 2000
compliant should be the installation of a new integrated computer software. This
installation is expected to be completed by June 1999 and shall cost
approximately $90,000.
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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 16
Balance Sheets as of September 30, 1998 and 1997 17
Statements of Operations for the Years
Ended September 30, 1998, 1997 and 1996 18
Statements of Changes in Stockholders Equity
for the Years Ended September 30, 1998, 1997 and 1996 19
Statements for Cash Flows for the Years Ended
September 30, 1998, 1997 and 1996 20
Notes to Financial Statements 22
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
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PART III
Item 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
Listed below are the names and ages of the directors of the Company,
all positions and offices held by each such person and the period or periods
during which he has served in such positions and offices. All are now directors
and were elected to their present term of office at Annual Meetings of
Shareholders as set forth in the table below. The By-Laws of the Company provide
for a Board of Directors consisting of up to seven members. No candidacy is the
subject of any arrangement or understanding between such director and any other
person or persons, except the directors and officers of the Company acting
solely in that capacity.
All of the directors listed below have been engaged for the past five
years in the "Principal Occupation" listed below.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Position with Issuer Period As
Name Age and Principal Occupation Director
- ---- --- ------------------------ --------
Elected 1998 with terms expiring in 2001:
- -----------------------------------------
Jack Frucht 84 Director; retired Chairman 1947 - Present
of the Board and Chief
Executive Officer
of the Corporation
Ronald T. DeBlis 74 Director; retired Dun & 1981 - Present
Bradstreet
Yves Guyomar 61 Director, President and 1997 - Present
CEO of the Corporation
Elected 1997 with terms expiring in 2000:
- -----------------------------------------
John M. Young 80 Director, retired Vice 1947 - Present
President and Operations
Manager of the Corporation
Abel Sheng 57 Director, President, Raamco 1996 - Present
International, Inc. and 1991 - 1994
Sidco Investments, Inc.,
Investment companies
Elected 1996 with terms expiring in 1999:
- -----------------------------------------
Daniel Auzan 55 Director, Chairman of 1996 - Present
The Board, President
Directeur General,
General de Mesure et de
Maintenance Electronique, S.A.
Otto H. York 88 Director, Vice Chairman 1969 - Present
Of the Board, President,
York Resources, Inc.
- ----------------------------------------------------------------------------------------------
</TABLE>
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Listed below are the names and ages of the executive officers of the
Company and the period during which they have served as such. Each officer
generally serves for a term of one year at the pleasure of the Board of
Directors. The selection of none of the officers is the subject of any
arrangement or understanding between such officer and any other person or
persons, except the directors and officers of the Company acting solely in that
capacity.
Position with Issuer Period As
Name Age and Principal Occupation Officer
- ---- --- ------------------------ -------
Yves Guyomar 61 President and Chief Executive 1997 - Present
Officer
John E. Titterton 49 Vice President Finance and 1986 - Present
Secretary/Treasurer
- -------------------------------------------------------------------------------
Mr. Guyomar is employed as President and CEO of the Company for a
period expiring April 15, 1999 pursuant to an agreement that provides for an
annual salary of $140,000. This agreement provides that should Mr. Guyomar's
employment is terminated by the Company during the term of the agreement other
than for "cause" (as defined in the agreement) the Company will continue to pay
his salary through the end of the term.
Mr. Guyomar was a member of the Board of Directors and Sales and
Marketing Director of General Electronique, Brive, France in 1996. Previously
from 1982 to 1995 he was General Manager of the Technique and Industrial Center
for TRT, a subsidiary of Phillips, in Brive. The Technique and Industrial Center
had a staff of 1,000 employees that included 100 engineers and technicians in
Research and Development. The center specialized in Radio Frequency equipment
for military applications and in microwave link for public and private
communication. Mr. Guyomar, from the University of Lille, Lille, France, holds a
Diploma of Engineering in electronics and microwave. The Board of Directors
appointed him President and CEO in April 1997.
Mr. Titterton was employed as Vice President and Controller of Ruesch
Machine Company, a wholly-owned subsidiary of Met-Coil Systems Corporation,
prior to his entering the employ of the Company in October 1986. Prior thereto,
he was employed as a Senior Accountant by Price Waterhouse. Mr. Titterton holds
a Bachelor of Arts degree in Economics/Accounting from Rutgers University,
Newark College of Arts and Sciences.
Item 10. EXECUTIVE COMPENSATION.
(a) EXECUTIVE COMPENSATION:
The following table sets forth, for the fiscal years indicated, all
compensation awarded to, earned by or paid to the Chief Executive Officer
("CEO") of the Company. There were no executive officers of the Company other
than the CEO whose compensation exceeded $100,000 with respect to the fiscal
years ended September 30, 1997, 1996, 1995.
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<TABLE>
<CAPTION>
Summary Compensation Table
Long-Term
Name and Annual Compensation Compensation All other
Principal Position Year Salary Bonus Other Awards Compensation
- ------------------ ---- ----------- ----- ----- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Yves L. Guyomar 1998 $ 140,000 N/A N/A N/A N/A
President & CEO
Yves L. Guyomar 1997 $ 105,000 N/A N/A N/A N/A
President & CEO
Ronald T. DeBlis 1996 N/A N/A N/A N/A N/A
President & CEO
Otto H. York 1996 N/A N/A N/A N/A N/A
President & CEO
Holmes Bailey 1996 $ 72,962 N/A N/A N/A $32,308
President & CEO
</TABLE>
Note: Pre-requisites and other personal benefits, securities or property to each
officer did not exceed either $50,000 or 10% of such executive salary and bonus
(b) BOARD OF DIRECTORS COMPENSATION:
Those Directors of the Company who are not salaried officers (Messrs.
Auzan, DeBlis, Frucht, Sheng, York and Young) are paid Directors' fees at the
rate of $10,000 per year, in quarterly installments, plus $500 per scheduled
meeting of the Board or any committee. The Board has, by resolution, agreed to
be paid fifty percent (50%) of their fees for the fiscal year 1997.
(c) AGGREGATED FISCAL YEAR-END OPTION VALUES:
Not applicable.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following tabulation lists, as to (I) each present Director of the
Company, (ii) each other person known to the Company to be the beneficial owner
of more than five percent of the voting common stock of the Company, and (iii)
all Directors and officers as a group, the number and percentage of the
Company's voting common stock owned by each beneficial owner, Director and group
on the date indicated. Except as reflected in the tabulation, all shares of
common stock are directly owned by the named individual and group members, and
such individuals and group member possess sole voting and investment power with
respect to such shares.
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Number of Shares
Beneficially Owned Percentage
Beneficial Owner on December 18, 1998 of Ownership
- --------------------------------------------------------------------------------
Daniel Auzan (Director) -- --
C/o General Electronique SA
ZI de Bracheux
16 rue Joseph Cugnot
60000 Beauvais
France
Ronald T. DeBlis (Director) 105,315 4.56%
37 Farmstead Road
Short Hills, NJ 07087
Jack Frucht (Director) 78,449 3.39%
380 Mountain Road, Apt. #512
Union City, NJ 07087
Yves Guyomar 41,667 1.85%
(President and Director)
1012 Gates Court
Morris Plains, NJ 07950
Abel Sheng (Director) 360,466* 15.60%
270 Sylvan Avenue
Englewood Cliffs, NJ 07632
Otto H. York (Director) 347,754 15.05%
130 Hempstead Court
Madison, NJ 07940
John M. Young (Director) 172,273** 7.45%
9749 Maplecrest Circle, SE
Lehigh Acres, FL 33936
G.E.M. USA, Inc. 540,933 23.41%
Sidco Investment, Inc. 62,755* 2.72%
All directors and officers 1,722,212*** 74.12%
As a group (8 persons)
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- --------------------------------------------------------------------------------
* Mr. Sheng is the indirect beneficial owner of the shares owned by
Sidco Investment, Inc.
** Includes 6,000 shares owned by his wife, to which Mr. Young is claims
beneficial ownership.
*** Includes 12, 500 shares which may be acquired on exercise of
outstanding options.
- --------------------------------------------------------------------------------
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
Item 13. EXHIBITS AND REPORTS ON FORM 8-K.
Exhibits: (See Page 35 for Index to Exhibits filed in the Annual
Report on Form 10-KSB for the year ended September 30, 1998.)
Exhibit 3.1 Certificate of Amendment of the Certificate of Incorporation of
the Company filed February 28, 1991. Filed as an Exhibit in the
Annual Report on Form 10-K for the year ended September 30,
1991, and incorporated herein by reference.
3.2 Articles of Incorporation of the Company as amended to date.
Filed as an Exhibit in the Annual Report on Form 10-K for the
year ended September 30, 1991, and incorporated herein by
reference.
3.3 By-Laws of the Company as amended to date. Filed as an Exhibit
in the Annual Report 10-K for the year ended September 30, 1991,
and incorporated herein by reference.
10.1 1987 Incentive Stock Option Plan, 1987 Employee Stock Purchase
Plan and 1987 Stock Option Program for Non-Employee Directors
and form of option grant(s) thereunder. Filed as an Exhibit in
the Annual Report on Form 10-K for the year ended September 30,
1988, and incorporated herein by reference.
10.2 Report on Form 8-K dated December 23, 1994 for "Other Events",
"order Confirming Debtors' Plan of Reorganization", effective
November 15, 1994. Filed as an Exhibit in the Annual Report on
Form 10-KSB for the year ended September 30, 1994, and
incorporated herein by reference.
10.3 Lease Agreement with Eastmans Road Associates, Ltd. Effective
October 1, 1994. Filed as an Exhibit in the Annual Report on
Form 10-KSB for the year ended September 30, 1994, and
incorporated herein by reference.
10.4 Employment Agreement with Holmes Bailey dated January 1, 1995.
Filed as an Exhibit in the Annual Report on Form 10-KSB for the
year ended September 30, 1995, and incorporated herein by
reference.
10.5 Report on Form 8-K dated September 27, 1995 for "Other Events",
"Letter of Intent", effective September 25, 1995. Filed as an
Exhibit in the Annual Report on Form 10-KSB for the year ended
September 30, 1995, and incorporated herein by reference.
10.6 Report on Form 8-K dated December 15, 1995 for "Other Events",
"Letter of Intent", effective December 5, 1995. Filed as an
Exhibit in the Annual
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Report on Form 10-KSB for the year ended September 30, 1996, and
incorporated herein by reference.
10.7 Report on Form 8-K dated February 26, 1996 for "Other Events",
"Purchase of Treasury Stock", effective February 23, 1996. Filed
as an Exhibit in the Annual Report on Form 10-KSB for the year
ended September 30, 1996, and incorporated herein by reference.
10.8 Report on Form 8-K dated March 18, 1996 for "Other Events",
"Purchase of Treasury Stock", effective March 7, 1996. Filed as
an Exhibit in the Annual Report on Form 10-KSB for the year
ended September 30, 1996, and incorporated herein by reference.
10.9 Report on Form 8-K dated January 7, 1997 for "Other Events",
"Purchase of Stock", effective December 9, 1996. Filed as an
Exhibit in the Annual Report on Form 10-KSB for the year ended
September 30, 1996, and incorporated herein by reference.
10.10 Report on Form 8-K dated June 18, 1997 for "Other Events",
"Purchase of Stock", effective June 9, 1997. Filed as an Exhibit
in the Annual Report on Form 10-KSB for the year ended September
30, 1997, and incorporated herein by reference.
10.11 Report of on Form 8-K dated July 7, 1997 for "Other Events",
"Purchase of Stock" and "Appointment of President and CEO",
effective June 30, 1997. Filed as an Exhibit in the Annual
Report on Form 10-KSB for the year ended September 30, 1997, and
incorporated herein by reference.
10.12 Employment Agreement with Yves Guyomar effective April 16 1997.
Filed as an Exhibit in the Annual Report on Form 10-KSB for the
year ended September 30, 1997, and incorporated herein by
reference.
10.13 Shared Manufacturing and Facilities Agreement between Boonton
Electronics Corporation and G.E.M. Illinois, Inc. dated October
1, 1997. Filed as an Exhibit in the Annual Report on Form 10-KSB
for the year ended September 30, 1997, and incorporated herein
by reference.
27. Financial Data Schedule filed herewith.
Exhibit (11) is omitted because the computation can be readily determined from
the financial statements in Item 7. above.
14
<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/ YVES GUYOMAR
-------------------------------
Yves Guyomar, President and
Chief Executive Officer
Date: January 8, 1999
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.
Signature Title Date
- --------- ----- ----
By /s/ RONALD T. DEBLIS Director January 8, 1999
---------------------
Ronald T. DeBlis
By /s/ YVES GUYOMAR Director, President and January 8, 1999
--------------------- Chief Executive Officer
Yves Guyomar (principal executive officer)
By /s/ JACK FRUCHT Director January 8, 1999
---------------------
Jack Frucht
By /s/ OTTO H. YORK Director, Vice Chairman January 8, 1999
--------------------- of the Board
Otto H. York
By /s/ JOHN E. TITTERTON Secretary and January 8, 1999
--------------------- Treasurer (principal
John E. Titterton financial and accounting
officer)
15
<PAGE>
INDEPENDENT AUDITORS REPORT
To the Board of Directors and Shareholders
Boonton Electronics Corporation and Subsidiaries
We have audited the accompanying Balance Sheets of Boonton Electronics
Corporation as of September 30, 1998 and 1997 and the related Statements of
Operations, Changes in Stockholders' Equity and Cash Flows for the years then
ended. We have also audited the Consolidated Statements of Operations, Changes
in Stockholders' Equity and Cash Flows of Boonton Electronics Corporation and
Subsidiaries for the year ended September 30, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit 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 the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 Boonton Electronics
Corporation as of September 30, 1998 and 1997 and Boonton Electronics
Corporation and Subsidiaries as of September 30, 1996, and the results of its
operations and cash flows for the years then ended in conformity with generally
accepted accounting principles.
By /s/ I. WEISMANN ASSOCIATES
--------------------------------
CERTIFIED PUBLIC ACCOUNTANTS
Morristown, New Jersey
November 30, 1998
16
<PAGE>
BOONTON ELECTRONICS CORPORATION
BALANCE SHEETS
SEPTEMBER 30,
--------------------------
1998 1997
----------- -----------
ASSETS:
Current assets:
Cash and cash equivalents $ 113,812 $ 121,620
Trade receivable (Note 1) 1,299,281 1,051,887
Inventories (Notes 1 & 3) 1,444,245 1,306,115
Deferred tax benefit (Note 10) 86,000 81,058
Prepaid expenses 318,442 333,325
----------- -----------
Total current assets 3,261,780 2,894,005
----------- -----------
Property and equipment - net (Notes 1 & 4) 457,160 534,023
----------- -----------
Other assets:
Deferred tax benefit (Note 10) 927,129 988,651
Deposits 70,121 71,169
----------- -----------
Total other assets 997,250 1,059,820
----------- -----------
Total assets $ 4,716,190 $ 4,487,848
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Note payable (Note 6) $ 73,333 $ 63,379
Related party loans (Note 6) 43,530 93,530
Accounts payable 783,247 800,931
Other current liabilities 527,366 284,528
Unsecured claims payable (Chapter 11 settlement)
- current (Notes 2) 144,993 48,491
----------- -----------
Total current liabilities 1,572,469 1,290,859
Note payable - non current (Note 6) 307,496 375,351
Related party loans (Note 6) 218,970 218,970
Unsecured claims payable (Chapter 11
settlement) non current (Note 2) -- 153,372
----------- -----------
Total liabilities 2,098,935 2,038,552
----------- -----------
Commitments and contingencies (Note 8)
Stockholders' equity:
Common stock (Note 9) 164,430 163,659
Capital in excess of par 4,637,866 4,613,637
Deficit (2,185,041) (2,328,000)
----------- -----------
Total stockholders' equity 2,617,255 2,449,296
----------- -----------
Total liabilities and stockholders' equity $ 4,716,190 $ 4,487,848
=========== ===========
The accompanying notes are an integral part of these statements.
17
<PAGE>
<TABLE>
<CAPTION>
BOONTON CORPORATION
STATEMENTS OF OPERATIONS
Years Ended September 30,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net sales $ 6,849,143 $ 7,209,057 $ 6,038,336
Cost of sales 3,431,001 4,140,099 3,408,580
----------- ----------- -----------
Gross profit 3,418,142 3,068,958 2,629,756
----------- ----------- -----------
Operating expenses:
Commissions 708,561 715,835 640,517
Research and development 992,461 735,528 921,827
Other operating expenses 1,431,772 1,545,750 1,515,727
----------- ----------- -----------
Total operating expenses 3,132,794 2,997,113 3,078,071
----------- ----------- -----------
Income/(loss) from operations 285,348 71,845 (448,315)
----------- ----------- -----------
Other (income)/expense:
Interest expense 52,096 47,823 27,709
Gain on sale of assets (3,700) (51,660) (1,000)
Environmental expense 57,205 43,173 51,879
Interest income (1,302) (4,257) (39,390)
Other (income)/expense (18,490) 5,422 (13,312)
----------- ----------- -----------
Total other expense 85,809 40,501 25,886
----------- ----------- -----------
Income/(loss) before taxes and special charges
199,539 31,344 (474,201)
Income taxes 56,580 -- 225,073
----------- ----------- -----------
Income/(loss) before special charges
142,959 31,344 (699,274)
Special charges (Note 12) -- -- (350,405)
----------- ----------- -----------
Net income/(loss) $ 142,959 $ 31,344 $(1,049,679)
=========== =========== ===========
Earnings/(loss) per common share (Note 13):
Earnings/(loss) from continuing
operations $ .09 $ .02 $ (.48)
Special charges -- -- (.24)
----------- ----------- -----------
Net earnings/(loss) $ .09 $ .02 $ (.72)
=========== =========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
BOONTON ELECTRONICS CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 30, 1998, 1997, AND 1996
Additional Retained Treasury
Number of Common Stock Paid-in Earnings/ Shares at
Shares Par Value Capital (Deficit) cost Total
----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
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 income -
year ended
9/30/96 -- -- -- (1,049,679) -- (1,049,679)
----------- ----------- ----------- ----------- ----------- -----------
Balance 9/30/96 1,556,585 155,659 4,421,637 (2,359,344) -- 2,217,952
Exercise of stock
options 80,000 8,000 192,000 -- -- 200,000
Net income -
year ended
9/30/97 -- -- -- 31,344 -- 31,344
----------- ----------- ----------- ----------- ----------- -----------
Balance 9/30/97 1,636,585 163,659 4,613,637 (2,328,000) -- 2,449,296
Exercise of stock
option 7,716 771 24,229 -- -- 25,000
Net income -
year ended
9/30/98 -- -- -- 142,959 -- 142,959
----------- ----------- ----------- ----------- ----------- -----------
Balance 9/30/98 1,644,301 $ 164,430 $ 4,637,866 $(2,185,041) $ -- $ 2,617,255
=========== =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
BOONTON ELECTRONICS CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended September 30,
-----------------------------------------
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income/(loss) $ 142,959 $ 31,344 $(1,049,679)
Adjustments to reconcile net income:
Depreciation and amortization 89,113 60,398 27,335
Deferred taxes 56,580 -- 223,873
Gain on sale of equipment (3,700) (51,660) (1,000)
Decrease/(increase) in current assets:
Accounts receivable (247,394) (80,545) 40,638
Inventories (138,130) (95,175) (7,582)
Prepaid expenses 14,883 (102,985) 33,230
Increase/(decrease) in current liabilities:
Accounts payable (17,684) 331,049 181,754
Accrued expenses 242,838 (253,800) 120,566
Chapter 11 settlement-current 96,502 -- (53,024)
----------- ----------- -----------
Net cash provided/(used) by operating
activities 235,967 (161,374) (483,889)
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of assets 3,700 51,660 1,000
Purchase of equipment (12,250) (430,563) (89,024)
Other 1,048 (3,401) --
----------- ----------- -----------
Net cash provided/(used) by
investing activities $ (7,502) $ (382,304) $ (88,024)
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
20
<PAGE>
<TABLE>
<CAPTION>
BOONTON ELECTRONICS CORPORATION
STATEMENTS OF CASH FLOWS
Years Ended September 30,
-----------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from financing activities:
Treasury stock reissued $ -- $ -- $ 932,291
Excess cost of treasury stock reissued -- -- (368,853)
Increase in notes payable -- 394,071 90,019
Payments on loans (57,901) (43,681) (99,444)
Related party borrowings -- 50,000 --
Payments on related party loans (50,000) -- --
Chapter 11 settlement-non current (153,372) (48,133) (52,283)
Proceeds from stock options exercised 25,000 200,000 36,656
--------- --------- ---------
Net cash provided/(used) by financing
Activities (236,273) 552,257 538,386
--------- --------- ---------
Increase/(decrease) in cash and cash equivalents
(7,808) 8,579 (33,527)
Cash and cash equivalents at beginning
121,620 113,041 146,568
--------- --------- ---------
Cash and cash equivalents at ending $ 113,812 $ 121,620 $ 113,041
========= ========= =========
Supplemental disclosures of cash flow information:
Income taxes paid $ 21,136 $ 1,425 $ 1,025
========= ========= =========
Interest paid $ 28,061 $ 33,575 $ 33,082
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
21
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING 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 13 domestic sales representatives and
24 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 manufacturers, although these are not generally competitive
with the Company's products except that some items handled by foreign
distributors may be somewhat competitive.
B. 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 could differ from those estimates.
C. 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.
D. Inventories - stated at the lower of cost or market determined by the
first-in, first-out (FIFO) method.
E. Property, plant and equipment - Depreciation and amortization are
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
22
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
The accelerated cost recovery system and modified accelerated cost
recovery system is used for income tax purposes. Cost of major
renewals and betterment's that extend the life of the property and
equipment are capitalized. Expenditures for maintenance and repairs
are charged to expenses as incurred.
F. Financial risk - The Company regularly maintains bank account balances
in excess of FDIC insurable limit.
G. 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
carry forwards applying the valuation allowance which requires that
the tax benefit be limited based on the weight of available evidence
and the probability that some portion of the deferred tax asset will
not be realized.
H. Financial Instruments - The Company's financial instruments include
cash, cash equivalents, trade receivables and payables, 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.
I. Stock-Based Compensation - The Company has elected to follow Account
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees (APB25) and related interpretations in accounting for its
employee stock options. Under APB25, because the exercise price of
employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recorded. Effective
October 1, 1997, the Company has adopted the disclosure only
provisions of Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation (Statement 123).
23
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 2 - PROCEEDINGS UNDER CHAPTER 11:
The Company operated under Chapter 11 proceedings for the period
September 7, 1993 through November 15, 1994 when, on the later date, an order
confirming the Plan of Reorganization was entered by the United States
Bankruptcy Court, District of New Jersey.. The settlement of unsecured claims
under the confirmed Plan of Reorganization totaling 35% of allowed claims for
accounts payable and accrued expenses 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 payment
5% Two years after initial payment
15% Three years after initial payment (Paid in full October 30, 1998.)
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 and/or paid to date 808,177
-----------
Chapter 11 settlement total September 30,1998 $ 144,993
===========
24
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 3 - INVENTORIES
September 30,
------------------------------
1998 1997
---------- ----------
Raw material $ 707,729 $ 639,045
Work in process 532,470 577,337
Finished Goods 204,046 89,733
---------- ----------
Total inventories $1,444,245 $1,306,115
========== ==========
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT:
September 30,
------------------------------
1998 1997
---------- ----------
Building and improvements $ 62,329 $ 62,329
Machinery and equipment 1,670,068 1,657,819
Office furniture and fixtures 582,518 582,518
Transportation equipment 13,188 13,188
---------- ----------
Total 2,328,103 2,315,854
Less Accumulated depreciation 1,870,943 1,781,831
---------- ----------
Net depreciated cost $ 457,160 $ 534,023
========== ==========
NOTE 5 - RESULTS OF OPERATIONS:
The Company reported a net income of $142,959 for the current fiscal
year ended September 30, 1998. This was an increase of $111,615 over the net
income of $31,344 reported for the fiscal year ended September 30, 1997.
The loss for the fiscal year ended September 30, 1996 was primarily
attributable to; a) the reduced sales volume; b) recurring costs for research
and development in connection with the approval for a "CE" mark necessary for
international sales and; c) severance pay for a former employee
25
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
NOTE 6 - NOTES PAYABLE
September 30,
------------------------------
1998 1997
----------- -----------
A. 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 43,530
----------- -----------
Non current portion $ 218,970 $ 218,970
=========== ===========
Interest expense for the fiscal years ended September 30, 1998 and 1997 amounted
to $24,035 and $24,757, respectively. No principal payments were made due to
these notes being subordinated to the NJEDA loan.
September 30,
------------------------------
1998 1997
----------- -----------
B. New Jersey Economic Development
Authority:
Notes, dated July 31, 1996, payable in
Monthly installments of $1,352
Including interest at 6.75% per
Annum through June 30, 2003: $ 380,829 $ 438,730
Less current portion 73,333 63,379
----------- -----------
Non current portion $ 307,496 $ 375,351
=========== ===========
Interest expense for the fiscal years ended September 30, 1998 and 1997 amounted
to $28,061 and $23,066, respectively. Future principal payments under the terms
of the agreement are as follows:
Fiscal Year Amount
----------- --------
1999 $ 73,333
2000 72,647
2001 77,778
2002 83,271
2003 73,800
--------
TOTAL: $380,829
========
26
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
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:
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 deferral amount for each participant that does not
exceed 6% of total compensation. The amounts charged to
operations were $33,792 and $37,581 for the years ended September
30, 1998 and 1997, 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 plans ended effective December
1996 and no further grants may be made for options.
27
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
Option
--------------------------------
Price per share Number of shares
--------------- ----------------
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
Expired $ 1.0625 (20,000)
-------
Shares under option at
September 30, 1997 $ 1.0625 26,500
=======
Shares under option at
September 30, 1998 $ 1.0625 26,500
=======
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 that was charged to operations for the fiscal year
ended September 30, 1998 totaled $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
----------- -------
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 that 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:
28
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
Fiscal Year Amount
----------- -------
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 owner of this site has notified the
Company that if the NJDEP investigation proves to have interfered
with a sale of the property, the owner 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 $57,205 and $43,173 for the years
ended September 30, 1998 and 1997, respectively. The Company
estimates the expenditures in this regard for the fiscal year
ending September 30, 1999 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. Contingent Subscription and Option Agreement:
On June 30, 1997, the Board of Directors of Boonton Electronics
Corporation (BEC) agreed to enter into a Subscription and Option
Agreement with G.E.M. USA, Inc. (GEM), a wholly-owned subsidiary
of General de Mesure et de Maintenance Electronique, S.A. (GMME),
whereby GEM shall have the option to buy 435,984 shares of the
common stock of BEC at an option price of $3.24 per share. The
term of the option agreement shall be for a period of two years.
GEM paid BEC $25,000 for this option and simultaneously purchased
7,716 shares of BEC's common stock from the corporation for an
additional $25,000.
29
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
Further, on June 30, 1997, the Board of Directors of BEC
resolved to enter into a Shared Facilities Agreement with B&K
Precision, Inc. (B&K), a wholly-owned subsidiary of GEM, as
additional consideration for the above noted option. B&K shall
pay BEC a monthly management fee of $15,000 and shall also pay
rent at the same price per square foot as BEC for the area sublet
to B&K.
The effective date of both of the above noted agreements was
October 1, 1997, one day subsequent to the fiscal year end,
September 30, 1997. The company also received the payment of
$50,000 on October 1, 1997.
C. Income Tax Contingencies:
The Company's income tax returns for the fiscal years ended
September 30, 1995, 1996 and 1997 are subject to review.
NOTE 9 - COMMON AND TREASURY STOCK:
September 30,
--------------------
1998 1997
-------- --------
Common Stock:
$.10 par value authorized 5,000,000
shares, issued and outstanding 1,644,301
shares and 1,636,585 shares, respectively. $164,430 $163,659
======== ========
NOTE 10 -INCOME TAXES:
The components of the deferred tax asset are:
September 30,
------------------------
1998 1997
---------- ----------
Deferred tax asset $2,788,561 $2,867,591
Less: Valuation allowance (1,775,432) (1,797,882)
---------- ----------
Net deferred tax asset $1,013,129 $1,069,709
========== ==========
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".
30
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
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 of 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 carry
forward.
Income tax laws allow for the utilization of loss carry forwards 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).
The provision for income taxes consists of the following:
September 30,
-----------------------------
1998 1997
--------- ---------
Current:
Federal $ 38,622 $ 443,904
State 17,958 129,125
--------- ---------
56,580 573,029
--------- ---------
Deferred:
Federal (36,342) (443,094)
State (20,238) (129,125)
--------- ---------
(56,580) (573,029)
--------- ---------
Total $ -- $ --
========= =========
31
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
The following is a reconciliation of income taxes of the federal statutory rate
with income taxes recorded by the Company:
September 30,
-------------------------
1998 1997
--------- ---------
Computed income taxes at statutory rate $ 56,580 $ 573,029
Recognition of net operating loss (56,580) (573,029)
Increase/(decrease) in tax asset valuation allowance (56,580) (932,286)
IC-DISC dissolution -- 932,286
--------- ---------
Expense/(Benefit) $ -- $ --
========= =========
The Company has net operating loss carry forwards for federal and state
purposes approximating $6,067,127 and $8,063,752 that shall have expired in the
year 2011and 2003, respectively. These loss carry forwards can be utilized to
reduce future taxable income dollar for dollar.
In May 1997, the Company dissolved Boonton International Sales
Corporation (BIS) (former wholly-owned subsidiary) and received a Certificate of
Dissolution from the state of New Jersey. BIS, as an Interest Charge Domestic
International Sales Corporation (IC-DISC), had $1,456,000 of deferred income.
The deferred income became taxable to the Company upon the dissolution of BIS
and therefore reduced the deferred tax asset and related valuation allowance
accordingly.
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
------------- ---------- -----------
1998 $2,392,508 35%
1997 2,369,499 33%
199 2,599,074 42%
32
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
B. Customers sales to domestic government agencies were as follows:
Years Ended % of
September 30, Amount Total Sales
------------- ------ -----------
1998 $ 321,850 5%
1997 1,514,792 21%
1996 907,189 15%
NOTE 12 - SPECIAL CHARGES:
In accordance with the GMME agreement, the Company was required 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, for the year ended September 30, 1996,
from its environmental consultants and counsel that were deemed not to be in the
ordinary course of business. Other components of the total special charge amount
of $350,405 in 1996 were $45,000 for anticipated settlement for the Sharkey
Landfill and $33,633 penalty from the NJDEP for a missed monitoring event at the
site formerly leased.
NOTE 13 - EARNINGS PER SHARE:
Earnings/(loss) per share have been computed by dividing net earnings
/(loss) by the weighted average number of common shares outstanding of 1,644,301
for 1998, 1,621,462 for 1997 and 1,460,730 for 1996. Options to purchase a total
of 443,700 shares of common stock at $3.24 per share were not included because
the exercise price exceeded the average market price that would result in anti
dilution. Incentive stock options to purchase 26,500 shares in 1998, 26,500
shares in 1997 and 46,500 shares in 1996 were not included because they were
insignificant.
33
<PAGE>
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
NOTE 14 - QUARTERLY FINANCIAL DATA:
September 30, 1998 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
- ------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales $1,657,200 $1,562,204 $1,422,653 $2,207,086
Gross Profit 799,625 767,576 742,306 1,108,635
Net income/(loss) 18,209 (161) (31,642) 156,553
Earnings/(loss)
per share .01 .00 (.02) .10
September 30, 1997 1st Qtr. 2nd Qtr. 3rd Qtr. 4th Qtr.
- ------------------ ---------- ---------- ---------- ----------
Sales $1,811,075 $1,793,647 $1,798,348 $1,805,987
Gross Profit 823,780 788,830 744,175 712,173
Net income/(loss) 25,377 31,204 (15,182) (10,055)
Earnings/(loss)
per share .02 .02 (.01) (.01)
</TABLE>
34
<PAGE>
BOONTON ELECTRONICS CORPORATION
INDEX TO EXHIBITS FILED
IN THE ANNUAL REPORT ON FORM 10-KSB
FOR THE YEAR ENDED SEPTEMBER 30, 1998
27. Financial Data Schedule ...........................................36
35
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(PAGE 36)
</LEGEND>
<CIK> 0000013191
<NAME> BOONTON ELECTRONICS CORPORATION
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 113,812
<SECURITIES> 0
<RECEIVABLES> 1,299,281
<ALLOWANCES> 0
<INVENTORY> 1,444,245
<CURRENT-ASSETS> 3,261,780
<PP&E> 2,328,103
<DEPRECIATION> 1,870,943
<TOTAL-ASSETS> 4,716,190
<CURRENT-LIABILITIES> 1,572,469
<BONDS> 0
0
0
<COMMON> 164,430
<OTHER-SE> 2,452,825
<TOTAL-LIABILITY-AND-EQUITY> 4,716,190
<SALES> 6,849,143
<TOTAL-REVENUES> 6,849,143
<CGS> 3,431,001
<TOTAL-COSTS> 3,132,794
<OTHER-EXPENSES> 33,713
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,096
<INCOME-PRETAX> 199,539
<INCOME-TAX> 56,580
<INCOME-CONTINUING> 142,959
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 142,959
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
