SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
BOONTON ELECTRONICS CORPORATION
State: New Jersey Identification No. 22-1543137
File No. 0-2364
Address: 25 Eastmans Road, P.O. Box 465,
Parsippany, New Jersey 07054-0465
Telephone: 973-386-9696
"Indicate by checkmark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days."
YES [X] NO [_]
Shares Outstanding:
December 31, 1999 2,387,332
December 31, 1998 2,387,332
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
BOONTON ELECTRONICS CORPORATION
BALANCE SHEETS
Assets December 31, 1999 September 30, 1999
------------------ ------------------
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 86,259 $ 69,484
Trade receivables 930,236 866,475
Inventories 1,467,569 1,441,561
Deferred tax benefit 86,000 86,000
Prepaid expenses and other current assets 288,552 271,945
------------------ ------------------
Total current assets 2,858,616 2,735,465
------------------ ------------------
Plant and equipment - net 354,043 375,287
------------------ ------------------
Other assets:
Deferred tax benefit 322,435 322,435
Deposits 70,121 70,121
------------------ ------------------
Total other assets 392,556 392,556
------------------ ------------------
Total assets $ 3,605,215 $ 3,503,308
================== ==================
Liabilities and Stockholders' Equity
- ------------------------------------
Current liabilities:
Note payable $ 85,946 $ 84,303
Related party loans 43,530 43,530
Accounts payable - trade 1,076,701 1,082,132
Other current liabilities 322,479 298,717
------------------ ------------------
Total current liabilities 1,528,656 1,508,682
Note payable - noncurrent 215,932 234,849
Related party loans - noncurrent 218,970 218,970
------------------ ------------------
Total liabilities 1,963,558 1,962,501
------------------ ------------------
Commitments and contingencies
Stockholders' equity:
Common stock 238,733 238,733
Capital in excess of par 5,005,563 5,005,563
Deficit (3,602,639) (3,703,489)
------------------ ------------------
Total stockholders' equity 1,641,657 1,540,807
------------------ ------------------
Total liabilities and stockholders' equity $ 3,605,215 $ 3,503,308
================== ==================
</TABLE>
The accompanying notes are an integral part of these statements.
2
<PAGE>
(Unaudited)
BOONTON ELECTRONICS CORPORATION
STATEMENTS OF OPERATIONS
For the Three Months Ended
December 31, 1999 December 31, 1998
------------------ ------------------
Net sales $ 1,771,323 $ 1,507,840
Cost of goods sold 909,826 875,998
------------------ ------------------
Gross profit 861,497 631,842
------------------ ------------------
Operating expenses:
Commissions 226,693 136,098
Research and development 174,004 234,534
Other operating expenses 368,641 357,270
------------------ ------------------
Total operating expenses 769,338 727,902
------------------ ------------------
Income (loss) from operations 92,159 (96,060)
------------------ ------------------
Interest expense 9,830 14,487
Other (income) expense (18,521) 11,962
------------------ ------------------
Total other (income) expense (8,691) 26,449
------------------ ------------------
Income (loss) before taxes 100,850 (122,509)
Income taxes -- --
------------------ ------------------
Net income (loss) 100,850 (122,509)
Stockholders' equity - beginning 1,540,807 2,617,255
Common stock sold -- 442,000
------------------ ------------------
Stockholders' equity - ending $ 1,641,657 $ 2,936,746
================== ==================
Weighted average shares outstanding 2,387,332 2,243,775
================== ==================
Earnings (loss) per share $ 0.04 $ (0.05)
================== ==================
The accompanying notes are an integral part of these statements.
3
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
BOONTON ELECTRONICS CORPORATION
STATEMENTS OF CASH FLOWS
For the Three Months Ended
December 31, 1999 December 31, 1998
----------------- -----------------
Cash provided (used) by operations:
<S> <C> <C>
Net income (loss) $ 100,850 $ (122,509)
Adjustments to reconcile net income (loss):
Depreciation 21,244 21,929
Gain on sale of assets -- (150)
Decrease (increase) in current assets:
Accounts receivable (63,761) 454,688
Inventories (26,008) (97,816)
Prepaid expenses and other current assets (16,607) (123,770)
Increase (decrease) in current liabilities:
Accounts payable (5,431) (177,408)
Accrued liabilities 23,762 (293,537)
Chapter 11 settlement - current -- (144,993)
---------------- ----------------
Net cash provided (used) by operations 34,049 (483,566)
---------------- ----------------
Cash provided (used) by investing activities:
Purchase of equipment -- (3,010)
Proceeds from sale assets -- 150
---------------- ----------------
Net cash provided (used) by investing activities -- (2,860)
---------------- ----------------
Cash provided (used) by financing activities:
Payments on loans (17,274) (21,957)
Proceeds from sale of common stock -- 442,000
---------------- ----------------
Net cash provided (used) by financing activities (17,274) 420,043
---------------- ----------------
Increase (decrease) in cash and cash equivalents 16,775 (66,383)
Cash and cash equivalents at beginning of period 69,484 113,812
---------------- ----------------
Cash and cash equivalents at end of period $ 86,259 $ 47,429
================ ================
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
(Unaudited)
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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 via domestic sales representatives and 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.
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 trade accounts under the direct
write-off method whereas generally accepted accounting principles
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 are valued by the
first-in, first-out (FIFO) method.
E. 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
5
<PAGE>
(Unaudited)
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
The accelerated cost recovery and modified accelerated cost recovery
systems are used for income tax purposes. Cost of major renewals and
improvements that extend the life of the plant 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 limits.
G. Income taxes - The Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
that 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 differences between the financial statement 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 forward applying the
valuation allowance that 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 shall 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 the 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 Accounting
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).
6
<PAGE>
<TABLE>
<CAPTION>
(Unaudited)
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 2 - INVENTORIES:
December 31, 1999 September 30, 1999
----------------- ------------------
<S> <C> <C>
Raw material $ 826,444 $ 846,594
Work in process 329,434 326,332
Finished goods 311,691 268,635
----------------- -----------------
Total inventories $ 1,467,569 $ 1,441,561
================= =================
NOTE 3 - PLANT AND EQUIPMENT:
December 31, 1999 September 30, 1999
----------------- ------------------
Building and improvements $ 62,329 $ 62,329
Machinery and equipment 1,675,512 1,675,512
Office furniture and fixtures 583,232 583,232
----------------- -----------------
Total - at cost 2,321,073 2,321,073
Accumulated depreciation (1,967,030) (1,945,786)
----------------- -----------------
Plant and equipment - net $ 354,043 $ 375,287
================= =================
NOTE 4 - NOTES PAYABLE:
December 31, 1999 September 30, 1999
----------------- ------------------
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
================= =================
</TABLE>
Interest expense for the fiscal years ended September 30, 1999 and 1998 amounted
to $23,953 and $24,035, respectively. No principal payments were made during the
year ended September 30, 1999 since these notes are subordinated to the NJEDA
loan.
7
<PAGE>
(Unaudited)
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
December 31, 1999 September 30, 1999
----------------- ------------------
B. New Jersey Economic Development
Authority:
Note, dated July 31, 1996, payable
in monthly installments of $7,620
including interest at 6.75% per
annum through June 30, 2003: $ 301,878 $ 319,152
Less current portion 85,946 84,303
-------------- -------------
Non current portion $ 215,932 $ 234,849
============== =============
Interest expense for the fiscal years ended September 30, 1999 and 19998
amounted to $24,855 and $28,061, respectively. Future principal payments under
the terms of the agreement are as follows:
Fiscal year Amount
----------- -----------
2000 $ 84,303
2001 77,778
2002 83,271
2003 73,800
-----------
Total $ 319,152
===========
NOTE 5 - 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 the
Securities Investor Protection Corporation (SIPC). The Company at times during
the period 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 abroad.
8
<PAGE>
(Unaudited)
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 6 - 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 October 1, 1995, the Company
increased the matching contribution to 50% of the elective
deferral amount of each participant that does not exceed 6% of
total compensation. The amounts charged to operations for the
fiscal years ended September 30, 1999 and 1998 were $32,854 and
$33,792, respectively.
B. Employee Stock Option 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 Plan 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.
<TABLE>
<CAPTION>
Price per share Number of shares
--------------- ----------------
<S> <C> <C> <C> <C>
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
Expired $ 1.0625 (14,000)
---------
Shares under option at September 30, 1999 $ 1.0625 12,500
=========
</TABLE>
C. Lease commitments:
Effective September 28, 1994, the Company entered into a
seven-year lease (with a five-year renewal option) for its present
office and manufacturing facility in Hanover Township, New Jersey.
Rent that was charged to operations for the fiscal year ended
September 30, 1999 totaled $332,000. Future minimum lease payments
required under the lease for fiscal years 2000 and 2001 are
$332,000 and $332,000, respectively.
9
<PAGE>
(Unaudited)
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
The Company leases certain equipment under operating lease
arrangements that are generally 60-month terms. These operating
leases expire in various years through 2005. One of these leases
may be renewed at the end of three years. Future minimum payments
consisted of the following at September 30, 1999:
Fiscal Year Amount
----------- -----------
2000 $ 52,186
2001 54,624
2002 51,511
2003 49,287
2004 44,536
2005 2,438
Contingencies:
A. Environmental Contingencies:
Follow 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 groundwater management plan into effect as approved by the NJDEP.
Costs associated with the plan are charged directly to income as
incurred. The owner of the site has notified the Company that if the
NJDEP investigation proves to interfere 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
groundwater management plan for the fiscal years ended September 30,
1999 and 1998 amounted to $79,855 and $57,205, respectively. The
Company estimates the expenditures in this regard for the fiscal
year ending September 30, 2000 shall amount to approximately
$80,000.
B. Income Tax Contingencies:
The Company's income tax returns for the fiscal years ended
September 30, 1999, 1998, 1997 and 1996 are subject to review.
C. The Company remains liable for certain claims by a former
stockholder until full payment of the Stock Purchase by an
affiliated company.
D. A former employee has charged the Company with wrongful
dismissal. The Company contends there was no such discrimination and
intends to contest the suit.
10
<PAGE>
(Unaudited)
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Contingencies - continued:
E. In September 1999, the Company was a party to an Agreement and
Plan of Reorganization. In October 1999, the Purchasers terminated
the Agreement pursuant to specific conditions. The Agreement
provided that should the Company or its Shareholders enter into any
acquisition Transaction involving a third party within one year
after such termination, the Company would be obligated to pay the
Purchasers $100,000 plus certain other expenses up to a maximum of
$500,000. Management contends that any such claim would be without
merit and would vigorously defend their position.
F. Management intends to pursue business alternatives including a
strategic- alliance, merger or sale of the Company.
NOTE 7 - COMMON STOCK:
<TABLE>
<CAPTION>
December 31, 1999 September 30, 1999
------------------ ------------------
Common Stock:
$.10 par value authorized 5,000,000 shares,
<S> <C> <C>
Issued and outstanding 2,387,332 shares $ 238,733 $ 238,733
================== ==================
NOTE 8 - INCOME TAXES:
The components of the deferred tax asset are:
December 31, 1999 September 30, 1999
------------------ ------------------
Deferred tax asset $ 3,029,700 $ 3,029,700
Valuation allowance (2,621,265) (2,621,265)
------------------ ------------------
Net deferred tax asset $ 408,435 $ 408,435
================== ==================
</TABLE>
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".
The ultimate realization of this deferred tax asset depends on the ability
to generate sufficient taxable income in the future. The Company has undergone
substantial restructuring changes and has made strategic realignments of its
operations that management believes will result in future profitability. 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 for the portion of the total deferred tax asset that will not be
realized as related to the operating loss carry forward.
11
<PAGE>
(Unaudited)
BOONTON ELECTRONICS CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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. In the event the Company reports sufficient profitability in the
future to use all or a portion of the deferred tax asset the valuation allowance
shall be reduced or eliminated through a credit to expense (thereby increasing
stockholders' equity). The Company has net loss carry forwards for Federal and
State purposes approximating $6,706,500 and $8,327,500 that expire in various
years through 2014 and 2006, respectively. These loss carry forwards can be
utilized to reduce future taxable income dollar for dollar.
The following is a reconciliation of income taxes at the federal statutory
rate with income taxes recorded by the Company:
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Computed income taxes at statutory rate $ 31,203 $ --
Recognition of net operating loss (31,203) --
--------------- ---------------
Expense (benefit) $ -- $ --
=============== ===============
</TABLE>
NOTE 9 - 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.
The Companies export sales were as follows:
Three Months Ended December 31, Amount % of Total Sales
------------------------------- ---------- ----------------
1999 $ 768,830 43%
1998 595,136 39%
The Companies sales to domestic government agencies were as follows:
Three Months Ended December 31, Amount % of Total Sales
------------------------------- ---------- ----------------
1999 $ 41,040 2%
1998 195,947 13%
NOTE 10 - EARNINGS PER SHARE:
Earnings per share have been computed by dividing net income by the
weighted-average number of shares outstanding of 2,387,332 for 1999 and
2,243,775 for 1998. Options to purchase a total of 428,268 shares of common
stock at $3.24 per share in 1998 were not included because the exercise price
exceeded the average market price and would have therefore resulted in
anti-dilution. Incentive stock option shares were not included because they were
insignificant.
12
<PAGE>
BOONTON ELECTRONICS CORPORATION
MANAGEMENT DISCUSSION AND ANALYSIS OF STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
Net sales for the three months ended December 31, 1999 at $1,771,323
were $263,483 higher than net sales of $1,507,840 reported for the three months
ended December 31, 1998. Domestic revenues increased by $89,789 and export
revenues increased by $173,694. The primary reason for the increase in reported
revenues was the successful launch of the Company's new product. Gross profit as
a percentage of net sales increased to 48.6% in the current period versus 41.9%
a year ago. The increase was directly related to the increased revenues coupled
with the positive benefit resulting from cost reduction programs instituted
during fiscal year 1999.
Commission expense increased by $90,595 over the prior year's
comparable period. The increase was due to the increase in export revenues that
carry a higher commission rate than domestic revenues. Research and development
expense decreased by $60,530 due to completion of the new product design by the
end of the 1999 fiscal year. Income from operations of $92,159 was reported for
the three months ended December 31, 1999 as compared to a loss from operations
of $96,060 the previous year. Net income of $100,850 was a $223,359 increase
over the prior year's net loss of $122,509. Earnings per share were $.04 versus
a loss per share of $.05 the prior year.
Trade receivables were up slightly as a result of the increased
revenues. Inventory also increased slightly to $1,467,569 and continues to
include a reserve for obsolescence of approximately $212,000. The current ratio
at December 31, 1999 improved to 1.87 as compared to 1.81 at September 30, 1999
and working capital increased to $1,329,960 at December 31, 1999 versus
$1,226,783 at September 30, 1999.
The Company's backlog at December 31, 1999 was $2,358,977 reflecting an
increase of $1,301,231 over the September 30, 1999 backlog and an increase of
$511,750 over the December 31, 1998 backlog. The increase was primarily due to a
$1,112,320 order placed in December 1999 for 8701 VXI Modulation Meters.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BOONTON ELECTRONICS CORPORATION
By/s/ YVES GUYOMAR
---------------------------------------
Yves Guyomar, President and Chief
Executive Officer and Principal
Accounting Officer
February 9, 2000
14
<PAGE>
BOONTON ELECTRONICS CORPORATION
INDEX TO EXHIBITS FILED
IN THE QUARTERLY REPORT ON FORM 10-QSB
FOR THE THREE MONTHS ENDED DECEMBER 31, 1999
Exhibit No. Page
- ----------- ----
27 Financial Data Sheet 16
15
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000013191
<NAME> Boonton Electronics Corporation
<MULTIPLIER> 1
<CURRENCY> USD
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 86,259
<SECURITIES> 0
<RECEIVABLES> 930,236
<ALLOWANCES> 0
<INVENTORY> 1,467,569
<CURRENT-ASSETS> 2,858,616
<PP&E> 2,321,073
<DEPRECIATION> 1,967,030
<TOTAL-ASSETS> 3,605,215
<CURRENT-LIABILITIES> 1,528,656
<BONDS> 0
0
0
<COMMON> 238,733
<OTHER-SE> 1,402,924
<TOTAL-LIABILITY-AND-EQUITY> 3,605,215
<SALES> 1,771,323
<TOTAL-REVENUES> 1,771,323
<CGS> 909,826
<TOTAL-COSTS> 769,338
<OTHER-EXPENSES> (18,521)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,830
<INCOME-PRETAX> 100,850
<INCOME-TAX> 0
<INCOME-CONTINUING> 100,850
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100,850
<EPS-BASIC> .04
<EPS-DILUTED> .04
</TABLE>
