U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
X SECURITIES EXCHANGE ACT OF 1934 [Fee Required]
For the fiscal year ended March 31, 1998
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
__ THE SECURITIES EXCHANGE ACT OF 1934 [No Fee
Required]
For the transition period from _________
_________________ to ___________________
Commission file number 1-6299
EMCEE BROADCAST PRODUCTS, INC.
(Name of small business issuer in its charter)
DELAWARE 13-1926296
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
SUSQUEHANNA STREET EXTENSION,
WEST, PO BOX 68, WHITE HAVEN, PA 18661-0068
(Address of principal executive (Zip Code)
offices)
Issuer's telephone number: (717) 443-9575
////
Securities registered under Section 12(b) of the Exchange Act:
Title of each class: Name of each exchange on which
registered:
Common NASDAQ National Market
Securities registered under Section 12(g) of the Exchange Act:
None
(TITLE OF CLASS)
Check whether the issuer (1) filed all reports required to be filed by Section
<PAGE>
13 or 15(d) of the Exchange Act during the past twelve (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 ninety (90) days.
Yes X No
Check if there is no disclosure of delinquent filers in response to Item 405
of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB
or any amendment to this Form 10-KSB.__
State issuer's revenues for its most recent fiscal year. $9,187,868.
The aggregate market value of the voting stock held by non-affiliates of the
Registrant is $10,963,767 computed by reference to the closing bid price
of the stock at June 23, 1998. This computation is based on the number of
issued
and outstanding shares held by persons other than directors and officers of
the
Registrant.
State the number of shares outstanding of each of the issuer's classes of
common
equity, as of the latest practicable date:
CLASS OUTSTANDING AT JUNE 23, 1998
Common stock, par value $.01-2/3 4,033,397
per share
DOCUMENTS INCORPORATED BY REFERENCE
Items 9, 10, 11 and 12 in Part III of this report are incorporated
by reference from the Proxy Statement expected to be filed within one hundred
twenty (120) days of the close of the Registrant's fiscal year ended March 31,
1998.
Transitional Small Business Disclosure Format (Check One)
Yes ; No X .<PAGE>
<PAGE>
EMCEE BROADCAST PRODUCTS, INC.
FORM 10-KSB
FISCAL YEAR ENDED MARCH 31, 1998
TABLE OF CONTENTS
PART I.
ITEM 1. DESCRIPTION OF BUSINESS 1
ITEM 2. DESCRIPTION OF PROPERTY 5
ITEM 3. LEGAL PROCEEDINGS 6
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 6
PART II.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS 6
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION 7
ITEM 7. FINANCIAL STATEMENTS 18
ITEM 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURES 18
PART III.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS; COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT 19
ITEM 10. EXECUTIVE COMPENSATION 19
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 19
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS 19
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K 19
SIGNATURES 21
<PAGE>
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
The Registrant (sometimes alternatively referred to in this report
as the Company or EMCEE) is a corporation, organized and existing under the
laws of the State of Delaware, having been incorporated in 1960.
The Registrant is engaged principally in the manufacture and sale of
Multichannel Multipoint Distribution Service (MMDS) microwave transmitters and
related equipment for the wireless cable industry and low power television
(LPTV) transmitters and related equipment for the television broadcast
industry. These principal products are distributed primarily through the
Registrant's sales staff and independent representatives, with most sales
occurring in the commercial, educational and private television system
markets. The Registrant also provides all services relative to the design,
procurement and installation of television broadcast stations, with the
exception of licensing submissions.
For more than the past three years, the Company's primary sales and
marketing focus has been on the wireless cable industry. While the Company was
also involved in the manufacture and sale of products to the LPTV market
during the same period of time, LPTV product sales have been overwhelmingly
subordinate to the Company's MMDS products. The Company anticipates that its
MMDS sales will continue to dominate in both domestic and foreign markets.
At March 31, 1998, the Registrant employed 66 people, of whom 64
were full time employees.
The Registrant has a variety of raw material sources available to
conduct its present business. However, substantial periods of lead time for
delivery are sometimes experienced by the Registrant, making it necessary to
inventory varied quantities of materials.
Significant portions of the Registrant's revenues come from
contracts with customers who generally do not place orders on a regular basis.
In addition,the timing of these contracts relate to economic and regulatory
developments over which the Registrant has little or no control.
In fiscal year 1998, purchases by three MMDS customers constituted,
in the aggregate, $2,261,789, or approximately 24.6% of the Company's net
sales. Although these purchases were significant in both amount and as a
percentage of sales, the Company's management believes that the loss of any or
all of these customers would not have a material adverse impact on the
Company.
The Registrant's principal suppliers are Andrew Corporation, Fujitsu
Corporation, and Microwave Filter Company, Inc.
Substantially all of the Registrant's domestic products must receive
Federal Communications Commission (FCC) approval prior to being marketed and
sold. As of the date of this report, the Registrant does not have any product
material to the Registrant's business pending approval by the FCC.
While FCC regulations, as promulgated or amended from time to time,
can have an effect on the demand for the Registrant's domestic products, the
Registrant does not presently know of any existing governmental regulation and
does not anticipate any probable governmental regulation which would have a
material effect on its business. However, recently issued FCC regulations
concerning high definition television (HDTV) may, for an interim period ending
as early as 2006, create a temporary market for a 2.5 kilowatt UHF transmitter
<PAGE>
developed by the Registrant and an unaffiliated entity which will facilitate
the simulcasting of HDTV and ordinary television signals. This technology is
still in the testing phase and is not presently being utilized by operators on
a regular basis. In fiscal year 1999, the Registrant has plans to further test
this technology with a public television station in Harrisburg, Pennsylvania.
Through a subsidiary, the Registrant is involved in a joint venture
with another entity to provide wireless high speed Internet access. Wireless
high speed Internet access involves connecting to the Internet using MMDS
transmitters. Although more expensive than traditional telephone Internet
access, wireless high speed Internet access technology, like its name
suggests, enables the user to access and utilize the Internet much faster than
through the telephone, so much so that a user can download information and
data from the Internet approximately 47 times faster than can be done using a
regular telephone modem. While the joint venture is not presently selling this
service to consumers or businesses, an application to do so in Utah is pending
before the FCC. If this business eventually proves successful, the Registrant
will seek to become involved in providing the service to other areas of the
United States as well.
By way of a partially owned subsidiary, EMCEE Broadcast Products
(Chengdu) Company, Ltd., and an agreement with an independent Chinese company,
the Registrant is seeking to increase sales in China. At present, the
Registrant sells both companies MMDS transmitter assembly kits. Eventually,
the Registrant hopes that these companies will be able to carry out
approximately 30% of the manufacturing process.
The amount of money spent on the Registrant's research and
development activities in fiscal years 1997 and 1998 was,
respectively,$444,669 and $377,557. An additional $61,296 and $20,000 of
research and development costs were funded by customers in fiscal years 1997
and 1998, respectively.
Competitive conditions in the Registrant's industry continue to be
intense. Nevertheless, in the field of MMDS, the Registrant occupies a strong
position among its competitors.
In the Registrant's opinion, the primary methods of competition in
its industry are product pricing, the ready availability of quality products
to accommodate demand, offering quality service of products after sale, and
maintaining a reputation for having a high degree of technical knowledge.
There has been no material effect on the Registrant as a result of
compliance with federal, state or local environmental laws.
The Registrant's principal corporate logos, EMCEE and EMCEE
Broadcast Products, are registered in the United States Patent and Trademark
Office and are used by the Registrant pursuant to a license with its wholly
owned subsidiary corporation, EMCEE Cellular Inc., which owns the marks. In
the same manner, the Registrant also uses the trademark, Site Lock, which is a
mark associated with a product sold by the Registrant that enhances picture
quality for MMDS systems in close proximity to systems operating on the same
frequency, and utilizes a patent for a solid state S-band transmitter.
ITEM 2. DESCRIPTION OF PROPERTY
The Registrant conducts operations at its facility located on 25
acres, which the Registrant owns in fee, in White Haven, Pennsylvania.
The building was constructed specifically for the Registrant in 1968
and consists of approximately 27,000 square feet, with the majority of the
area
<PAGE>
devoted to manufacturing. The front portion of the building, consisting of two
floors, houses administrative, engineering and sales offices. The land,
building and improvements are well maintained and in good condition.
The Registrant's land, building and improvements are subject to
encumbrances held by the Registrant's primary lending institution, CoreStates
Bank, N.A. These encumbrances secure the Registrant's working line of credit,
mortgage loan and two term loans with the lender. As of the date of this
report, the aggregate principal balance of these encumbrances is $848,060.
Presently, the Registrant also leases approximately 9,000 square
feet of space in White Haven, Pennsylvania, for research and development
activities, as well as a warehouse in which it stores certain equipment and
archival documents.
ITEM 3. LEGAL PROCEEDINGS
There is no information relevant to the Registrant which must be
disclosed under this Item 3.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the
fourth quarter of fiscal year 1998.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The NASDAQ National Market is the principal market on which the
Registrant's common stock is traded.
MARKET INFORMATION
STOCK PRICE
The table below presents the high and low bid prices of the
Registrant's common equity for the two most recent fiscal years:
<TABLE>
<CAPTION>
FISCAL YEAR 1998 FISCAL YEAR 1997
<S> <C> <C> <C> <C> <C> <C> <C> <C>
QTR ENDED: JUNE 30 SEPT 30 DEC 31 MAR 31 JUNE 30 SEPT 30 DEC 31 MAR 31
(BID) HIGH $4.25 $4.375 $4.375 $3.25 $10.50 $7.875 $7.975 $7.50
(BID) LOW $1.97 $2.03 $2.625 $2.813 $ 6.50 $5.875 $5.375 $3.00
</TABLE>
The above high/low bid information was obtained from the NASDAQ
Stock Market, Inc.
HOLDERS
At March 31, 1998, the number of holders of the Registrant's common
stock was 1,592.
DIVIDENDS
No dividends were declared during fiscal year 1997 or fiscal year
1998. The Registrant's loan documents with its primary lending institution
contain certain financial covenants with which the Registrant must comply in
order to declare and pay dividends on its common stock.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
<PAGE>
Net sales for the fiscal year ended March 31, 1998 totaled
$9,188,000, a decrease of 27% compared to net sales of $12,523,000 for fiscal
year ended March 31, 1997 and continued the downward trend from net sales of
$14,293,000 for the fiscal year ended March 31, 1996.
The reduction of shipments for the last two years is attributed to
a large foreign contract, which was terminated in fiscal 1998, and the
reduction of domestic demand due to the inability of Multichannel Multipoint
Distribution Service (MMDS) operators to fund new projects.
The termination of the large foreign contract, which entailed
equipment shipments to Saudi Arabia, has been resolved to the satisfaction of
both parties. Additional shipments for this project will be nominal, and the
contractor has indicated that the systems, which were originally designed as
analog, will be changed to digital. The future status of the project is
unknown to the Registrant at this time.
Domestic demand in the MMDS industry started its decline in the
second quarter of fiscal 1997 and continued as operators waited for successful
testing and installation of digital compression technology. The major
operators, who have historically been highly leveraged, are having cash flow
problems, and it appears that industry demand will not improve until
additional funding sources
are found.
An optimistic sign in the domestic MMDS industry involves field
trials that have been underway for the past year, some of which include EMCEE
manufactured equipment. These trials involve the use of the MMDS spectrum for
the transmission of high speed data (Internet) and telephony (wireless local
loop). In addition to the ongoing trials, several MMDS operators have already
begun using the MMDS spectrum for high speed Internet service. The Company
expects that over the next few years, MMDS operators will be adding high speed
Internet and telephony services to the traditional video services currently
provided. The addition of these services should have a positive impact on the
Registrant's future MMDS business.
Foreign shipments for fiscal 1998 were $5,563,000, compared to
$7,056,000 for fiscal 1997 and $8,174,000 for fiscal 1996. Shipments in
fiscal 1997 included $2,113,000 for the large contract mentioned above, while
shipments in fiscal 1996 included $2,647,000 for a large contract in Malaysia.
Foreign shipments comprised 61%, 56% and 57% of total sales for the fiscal
years 1998, 1997 and 1996 respectively.
Gross profit for the fiscal year ending March 31, 1998 was
$3,070,000 or 33.4% of net shipments, compared to a gross profit of $4,500,000
(35.9% of net shipments) for fiscal year ended March 31, 1997. The decrease
in gross profit dollars and as a percent of sales for the last two fiscal
periods reflects the decrease in volume. Product mix between EMCEE
manufactured product (in which the Company receives a higher margin)and
original equipment manufactured by others (O.E.M.) did not have a significant
effect in the three years under review. Fiscal 1998 did include a cancellation
fee of a moderate six figure amount with minimal direct costs.
Operating expenses totaled $2,886,000 for the year ended March 31,
1998, a reduction of $229,000 (7%) from the prior year. Selling expense
decreased $75,000; general and administrative expense decreased $87,000 and
research and development decreased $67,000.
Selling expense was reduced in personnel and personnel related
expense (including commissions) as the cost containment program started in
fiscal 1997 was continued in fiscal 1998. Shows and conventions expense did
<PAGE>
increase approximately $37,000 in fiscal 1998 compared to fiscal 1997,
primarily for international shows committed to in the previous year. The
shows and conventions budget for fiscal 1999 has been reduced by 48%.
General and administrative costs totaled $1,099,000 for the year
ended March 31, 1998, compared to $1,186,000 for the year ended March 31,
1997. Legal expense decreased $74,000; in the prior year, costs were incurred
relating to international contracts and from the change in the Registrants's
primary lending institution. A reduction in recruiting costs of approximately
$22,000 was also realized in the latest fiscal year.
Research and development expense totaled $378,000 for fiscal year
ended March 31, 1998, compared to $445,000 for the previous year. Credits for
payments received for non-recurring engineering (NRE) totaled $20,000 for the
year just ended, compared to $61,000 received for fiscal 1997. Reduction of
expenses for the most recent year occurred in labor and labor related expenses
and consulting reflecting additional cost containment. Nonetheless, the
Company is committed to research and development especially in the digital,
Internet and high definition television (HDTV) technology.
Other income (expense), net totaled $479,000 for the year ended
March 31, 1998, compared to $2,759,000 for the year ended March 31, 1997. The
prior year included an amount of $2,500,000 received as a settlement of a note
receivable for a cellular license sold in fiscal 1992. The money, which was
received in April, 1998, was invested in Treasury Bills and money market
accounts realizing interest income of $260,000 for fiscal 1998, compared to
$110,000 for the previous year.
Payments on long-term debt decreased the amount of interest expense
incurred for fiscal 1998 to $84,000 from $93,000 for fiscal 1997.
The Registrant sold its remaining stock in Wireless Cable of
Atlanta, which was acquired by BellSouth, Inc., netting a profit of $277,000
in the year ended March 31, 1998, compared to a gain of $210,000 realized in
the prior year.
Other income totaled $25,000 for the fiscal year ended March 31,
1998, compared to $32,000 for the year ended March 31, 1997. Other income for
both years consisted primarily of rental income and forfeitures of customers'
down payments.
Net income before income taxes for fiscal 1998 was $662,000, while
net income before income taxes totaled $4,143,000 for fiscal 1997.
Federal income taxes for the year ended March 31, 1997 totaled
$1,127,000 or 27% of net income before federal taxes. The amount paid was
positively impacted due to the Registrants' use of a Foreign Sales Corporation
(FSC). Federal income taxes for the year ended March 31, 1998 totaled
$146,000 or 22% of net income before federal income taxes. Again, the Company
utilized the FSC and other tax credits to reduce income taxes; however, as a
prior year is under examination by the Internal Revenue Service, an additional
amount of approximately $54,000 has been included which, in management's
opinion, is adequate for any potential additional tax liability related to the
examination. As of the date of this report, a proposed settlement of any such
additional tax liability is pending approval by the Internal Revenue Service.
There is no state tax liability for periods under review since all profitable
companies in the consolidated reporting group are domiciled in jurisdictions
that do not impose income taxes.
Net income for the year ended March 31, 1998 was $515,000 or $.12
basic income and diluted income per share compared to net income of $3,016,000
or $.72 basic income ($.71 diluted income) per share for the year ended March
31, 1997.
<PAGE>
Selected financial data by quarter for the year ended March 31, 1998
and 1997 is as follows:
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter
3rd Quarter 4th Quarter
1998 1997 1998 1997 1998 1997 1998
1997
(Thousands of Dollars, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales $1,823 $4,229 $2,246 $3,322 $2.794 $3,019 $2,325 $1,883
Gross Profit 499 $1,565 $ 818 $1,383 $1,035 $1,193 $ 718 $ 359
Income before
extra-ordinary
items & cumulative
effect of a
change in
accounting $ 20 $ 638 $ 134 $ 404 $ 305 $ 283 $ 56 $1,691
Per Share:
Basic $ .01 $ .15 $ .03 $ .09 $ .07 $ .07 $ .01 $ .41
Diluted $ .01 $ .15 $ .03 $ .09 $ .07 $ .07 $ .01 $ .40
Net Income $ 20 $ 638 $ 134 $ 404 $ 305 $ 283 $ 56 $1,691
</TABLE>
The first quarter of fiscal 1997 was impacted favorably by the sales
to one customer for the Saudi Arabia contract. Earnings for the fourth
quarter of fiscal 1997 included receipt of $2,500,000 of proceeds on a Note
Receivable for a fiscal 1992 cellular license sale.
Impact of Year 2000
The Year 2000 issue is the result of computer programs written using
two digits rather than four to designate the applicable year. The Registrant
has a single source for its mainframe software programming. It has received
upgrades and has installed these upgrades that have been certified by the
vendor to be year 2000 compliant. Tests have been conducted on the existing
network and personal computers and the Company believes that the Year 2000
issue will neither pose significant operational problems for its computer
systems nor will it have a material impact on the results of operations of the
Company. While the Registrant is unaware of any Year 2000 problems with any
significant suppliers or customers, there can be no guarantee that the systems
of other companies, if not compliant, will not have an adverse effect on the
Registrant.
Liquidity and Capital Resources
The Company anticipates that industry demand for MMDS equipment,
especially domestic, will be soft for the remainder of calendar year 1998.
Management is optimistic, however, in the potential application for high-speed
Internet service using this equipment. The Company is investing in
development and marketing of this product.
<PAGE>
The Company's cash requirements were satisfied in fiscal 1998
principally from the cash flow from the sale of the cellular license, cash
from operations, cash on hand and customers' deposits. These funds were
sufficient to meet the Company's working capital expenditures and required
debt payments.
Cash and cash equivalents increased from $681,000 as of March 31,
1997 to $2,530,000 as of March 31, 1998 and U.S. Treasury Bills increased from
$1,679,000 to $2,270,000 for the same time periods. The increase is primarily
due to the cash received in April of 1997 for the note receivable settlement
discussed above.
The accounts receivable balance of $1,215,000 as of March 31, 1998
is $281,000 more than the balance at March 31, 1997. Although shipments were
less for fiscal year ended March 31, 1998 compared to the prior year, sales
for the fourth quarter of fiscal 1998 were 23% higher than the corresponding
quarter one year ago. The Company wrote-off $90,000 of accounts receivable
during fiscal 1998 compared to a write-off of $30,000 for fiscal 1997.
Reserve for doubtful accounts of $35,000 is believed by management to be
adequate as of March 31, 1998.
Deposits from customers increased from $121,000 as of March 31, 1997
to $260,000 as of March 31, 1998 due to the sales volume increase for the
comparable fourth quarters.
Inventories totaled $3,439,000 at March 31, 1998, a decrease of
$189,000 from the prior year end as controls were implemented to utilize
inventory that had been purchased for the large Saudi Arabia project.
Prepaid expenses totaled $115,000 as of March 31, 1998, as compared
to $379,000 for March 31, 1997, with the difference being primarily for
prepaid federal income taxes for the later year. Deferred income taxes, net,
changed from a $554,000 deferred tax liability at March 31, 1997 to an $80,000
deferred tax asset at March 31, 1998 primarily due to the $2,500,000 note
receivable being recognized in the Company's financial statements in fiscal
1997 and the Company's consolidated income tax return in fiscal 1998.
Property, plant and equipment less accumulated depreciation equaled
$826,000 as of March 31, 1998 a reduction of $233,000 compared to the same
date one year earlier. Purchases of new equipment were $31,000 for the year
ended March 31, 1998 while depreciation expense totaled $264,000. One Hundred
Five Thousand ($105,000) Dollars of fully depreciated assets was written-off
in fiscal 1998.
Other assets of $108,000 as of March 31, 1997 consisted primarily of
the Company's investment in a Wireless Cable operator referred to above. The
balance of this stock was sold in fiscal 1998 for a profit of $277,000. In
fiscal 1998, the Registrant, through a subsidiary, and, along with two other
parties, formed a limited liability company to operate an Internet service
entity. The Company's initial investment in the limited liability company was
$210,000, which was increased subsequent to March 31, 1998 to $470,000.
However, as a result of another equity holder's contractual "buy down right",
the Company's investment will be reduced to $130,000.00 or 10% of the limited
liability company's outstanding equity. The Company cannot know at this time
the likelihood or amount of profit (if any) that will be generated.
Management does believe that the knowledge obtained in operating an Internet
services will be valuable in marketing the equipment. The balance of $1,450
in the other asset categories at March 31, 1998 represents costs associated
with organizing subsidiaries of the Registrant.
<PAGE>
Note receivable of $500,000 for the periods March 31, 1998 and March
31, 1997 is the balance owing the Company as the result of a settlement
reached in connection with the sale of a cellular license in fiscal 1992. As
there is no definite collection period set and because there is not a
reasonable basis of collection, the receivable is fully reserved.
Long-term debt, including the current portion, totaled $864,000 as
of March 31, 1998, compared to $915,000 as of March 31, 1997. An amount of
$70,000 was procured at the early part of fiscal 1998 to finance engineering
test equipment. A total of $121,000 was paid against long-term debt during
this year. Current portion of payments as of March 31, 1998 and March 31, 1997
were $117,000 and $108,000, respectively.
There was no significant difference in the balance of accounts
payable as of the year ended March 31, 1998 and 1997.
Accrued expenses, payroll and related expenses of $277,000 at March
31, 1998, compared to March 31, 1997 of $207,000, included additional
commissions and payroll accruals due to timing differences. Other accrued
expense decreased a nominal $11,000 for the same periods.
Common stock and additional paid in capital totaled $3,575,000 as of
March 31, 1998, or a decrease of $60,000 over the balance at March 31, 1997.
Treasury stock increased from $1,362,000 as of March 31, 1997 to $1,649,000 as
of March 31, 1998. A stock award of 18,560 shares of Company stock was
granted as a bonus to an officer during fiscal 1998 by transferring 12,763
shares of Treasury Stock held as of March 31, 1997 and issuing the balance
from authorized but unissued common stock. The Company, through a wholly owned
subsidiary, purchased on the open market 119,000 shares of the Company's stock
during the fiscal year ended March 31, 1998 for a total cash outlay of
$381,000. The Company's management has been authorized by the Board of
Directors to purchase up to $600,000 of Company stock. As of the date of this
report, the Company has purchased an additional 30,000 shares in the first
quarter of fiscal 1999 for approximately $91,000.
In addition to the above mentioned purchases, an additional 1,764
shares were purchased during the year ended March 31, 1998 from former
employees under the KSOP plan agreement for a cost of $6,000.
Inflation has not had a significant impact on cost or price in the
two fiscal years under review. However, as a significant portion of component
materials are obtained from sources outside the United States and especially
from Asia, and significant portions of the Company's sales have historically
been to the Pacific Rim, financial problems in these countries could have a
significant affect on the business of the Registrant for the next fiscal year.
The backlog of unsold orders as of March 31, 1998 was $2,421,000
compared to $2,853,000 as of March 31, 1997. The present backlog is expected
to be shipped in the first six months of fiscal 1999.
EMCEE and Superior Group Corporation are partners in a joint venture
company named EMCEE Broadcast Products (Chengdu) Co., Ltd ("EMCEE - Chengdu"),
for purposes of manufacturing and marketing wireless cable transmitters. The
products will be manufactured from EMCEE-Chengdu's factory located in Chengdu
City, Capital City of Sichuan Province, People's Republic of China.
Production is expected to begin in the summer of 1998.
<PAGE>
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
Any statements contained in this report which are not historical
facts are forward looking statements; and, therefore, many important factors
could cause actual results to differ materially from those in the forward
looking statements. Such factors include, but are not limited to, changes
(legislative, regulatory and otherwise) in the MMDS or LPTV industry, demand
for the Company's products (both domestically and internationally), the
development of competitive products, competitive pricing, the timing of
foreign shipments, market acceptance of new product introductions (including,
but not limited to, the Company's digital products), technological changes,
economic conditions (both domestically and internationally, including monetary
policies of Asian countries), litigation and other factors, risks and
uncertainties identified in the Company's Securities and Exchange Commission
filings.
ITEM 7. FINANCIAL STATEMENTS
See pages 23 to 33 of this report for the financial statements
required by this Item.
ITEM 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
There is no information relevant to the Registrant which must be
disclosed under this Item 8.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required by this Item 9 is incorporated herein from
the Proxy Statement expected to be filed within one hundred twenty (120) days
of the close of the Registrant's fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item 10 is incorporated herein from
the Proxy Statement expected to be filed within one hundred twenty (120) days
of the close of the Registrant's fiscal year.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required by this Item 11 is incorporated herein from
the Proxy Statement expected to be filed within one hundred twenty (120) days
of the close of the Registrant's fiscal year.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 12 is incorporated herein from
the Proxy Statement expected to be filed within one hundred twenty (120) days
of the close of the Registrant's fiscal year.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following constitutes an Exhibit Index of the applicable
Exhibits to this report:
<PAGE>
DESCRIPTION OF EXHIBIT EXHIBIT NUMBER PAGE NUMBER
Articles of Incorporation and Bylaws
Restated Certificate
of Incorporation 3 i (1)
Bylaws 3 ii 34
Material Contracts
1996 Stock Option Plan 10 (1)
1988 Stock Option Plan 10 64
Officers Incentive Compensation
Plan 10 (1)
Agreement (Change in Control
Agreements for certain Executive
Officers) 10 (2)
Non-Negotiable, Non-Transferable
Stock Warrant 10 (2)
Settlement and Release Agreement 10 (1)
Subsidiaries 21 75
Financial Data Schedule 27 (3)
(1) Incorporated by reference from the Form 10-KSB filed by the
Registrant with the U.S. Securities and Exchange Commission for fiscal year
ended 1997.
(2) Incorporated by reference from the From 10-KSB filed with the U.S.
Securities and Exchange Commission for fiscal year ended 1996.
(3) This Exhibit was filed electronically, but is not included in the
paper copy of this report.
(b) Form 8-K filings: The Registrant did not file any reports on Form
8-K during the last quarter of the period covered by this report.
In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
EMCEE BROADCAST PRODUCTS, INC.
/s/ JAMES L. DESTEFANO
James L. DeStefano, President/CEO
Date: June 25, 1998
/s/ ALLAN J. HARDING
Allan J. Harding, Vice President-
Finance
Date: June 25, 1998
<PAGE>
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
/s/ JAMES L. DESTEFANO Date: June 25, 1998
James L. DeStefano, Director
/s/ JOE B. HASSOUN Date: June 25, 1998
Joe B. Hassoun, Director
/s/ MICHAEL J. LEIB Date: June 25, 1998
Michael J. Leib, Director
/s/ RICHARD J. NARDONE Date: June 25, 1998
Richard J. Nardone, Director
/s/ EVAGELIA ROGIOKOS Date: June 25, 1998
Evagelia Rogiokos, Director
<PAGE>
Independent Auditors' Report
Board of Directors
EMCEE Broadcast Products, Inc.
White Haven, Pennsylvania
We have audited the consolidated balance sheets of EMCEE Broadcast Products,
Inc. and subsidiaries as of March 31, 1998 and 1997 and the related
consolidated statements of income, shareholders' equity and cash flows for the
years then ended. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in 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 audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of EMCEE
Broadcast Products, Inc. and subsidiaries as of March 31, 1998 and 1997, and
the results of their operations and their cash flows for the years then ended,
in conformity with generally accepted accounting principles.
Kronick, Kalada, Berdy & Co
Kingston, Pennsylvania
May 19, 1998
<PAGE>
<TABLE>
<CAPTION>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
YEARS ENDED MARCH 31, 1998 AND 1997
ASSETS
March 31, March 31,
1998 1997
---------------------------
<S> <C> <C>
Current assets:
Cash and equivalents $ 2,529,594 $ 681,335
U.S. Treasury Bills 2,269,549 1,679,164
Accounts receivable, net of
allowance for doubtful accounts
(1998, $35,000; 1997,$100,000) 1,214,651 933,535
Inventories 3,438,599 3,627,803
Prepaid expenses 115,292 379,358
Deferred income taxes 80,000
Note receivable 2,500,000
------------------------
Total current assets 9,647,685 9,801,195
------------------------
Property, plant and equipment:
Land and land improvements 246,841 246,841
Building 618,686 629,212
Machinery 1,956,085 2,019,717
------------------------
2,821,612 2,895,770
Less accumulated depreciation 1,995,946 1,836,630
------------------------
825,666 1,059,140
------------------------
Other assets 211,450 108,173
------------------------
Note receivable 500,000 500,000
Less deferred portion ( 500,000) ( 500,000)
-------------------------
0 0
Total assets $10,684,801 $10,968,508
--------------------------
--------------------------
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED MARCH 31, 1998 AND 1997
March 31, March 31,
1998 1997
------------------------
<S> <C> <C>
Net sales $ 9,187,868 $12,522,811
Costs of products sold 6,118,332 8,023,300
-----------------------
Gross profit 3,069,536 4,499,511
-----------------------
Operating expenses:
Selling 1,409,927 1,484,962
General and administrative 1,098,909 1,186,329
Research and development 377,557 444,669
------------------------
2,886,393 3,115,960
------------------------
Income from operations 183,143 1,383,551
------------------------
Other income (expense), net:
Interest expense ( 83,714)( 92,909)
Interest income 259,704 109,976
Gain on sale of equity securities 277,324 210,069
Settlement of note receivable 2,500,000
Other 25,237 32,015
------------------------
478,551 2,759,151
------------------------
Income before income taxes 661,694 4,142,702
Income taxes 146,410 1,126,800
------------------------
Net income $ 515,284 $3,015,902
=========================
Basic income per share $.12 $.72
=========================
Diluted income per share $.12 $.71
==========================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION> EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1998 AND 1997
Common stock Additional Retained
Shares Amount paid-in capital earnings
<S> <C> <C> <C> <C>
Balance,
March 31, 1996 4,359,381 $ 72,653 $ 3,517,778 $ 3,396,801
Common stock
issued under
stock option plan 18,983 334 44,745
Treasury stock
purchased
Net income for
the year 3,015,902
-----------------------------------------------------
Balance,
March 31, 1997 4,378,364 72,987 3,562,523 6,412,703
Common stock
issued 5,797 97 ( 60,431)
Treasury stock
purchased
Net income for
the year 515,284
-----------------------------------------------------
Balance,
March 31, 1998 4,384,161 $ 73,084 $3,502,092 $ 6,927,987
=====================================================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<PAGE>
<TABLE>
Treasury Stock Total
Shares Amount ------
-----------------
<S> <C> <C> <C>
Balance, March 31, 1996 7,325 $ (52,064) $6,935,168
Common stock issued under
stock option plan 45,079
Treasury Stock Purchased 205,438 ( 1,310,210) (1,310,210)
Net income for the year 3,015,902
-----------------------------------
Balance, March 31, 1997 212,763 ( 1,362,274) 8,685,939
Common stock issued ( 12,763) 99,774 39,440
Treasury stock purchased 119,000 ( 386,673) (386,673)
Net income for the year 515,284
-----------------------------------
Balance, March 31, 1998 319,000 $(1,649,173) $8,853,990
===================================
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1998 AND 1997
March 31, March 31,
1998 1997
----------------------
<S> <C> <C>
Cash flows
from operating activities:
Net income $ 515,284 $ 3,015,902
Adjustments:
Depreciation 264,313 242,625
Provision for doubtful accounts 25,000 35,000
Common stock issued for
compensation 39,440
Recognition of note receivable (2,500,000)
Gain from sale of equity securities ( 277,324) ( 210,069)
(Increase) decrease in:
Accounts receivable ( 306,116) 850,453
Inventory 189,204 ( 251,902)
Prepaid expenses 264,066 ( 131,425)
Deferred income taxes ( 80,000) 226,000
Other assets ( 209,277) 727
Increase (decrease) in:
Accounts payable ( 43,977) ( 429,758)
Accrued expenses 58,667 ( 215,722)
Deposits from customers 138,853 ( 405,004)
Deferred income taxes ( 554,000) 554,000
-------------------------
Net cash provided by operating activities 24,133 780,827
-------------------------
Cash flows from investing activities:
Purchases of:
Property, plant and equipment ( 30,839) ( 355,023)
U.S. Treasury Bills (3,990,385) (2,310,138)
Proceeds from maturities of:
U.S. Treasury Bills 3,400,000 2,200,000
Note receivable 2,500,000
Proceeds from sale of equity securities 383,324 316,069
------------------------
Net cash provided by(used in)investing activities 2,262,100 ( 149,092)
------------------------
Cash flows from financing activities:
Acquisition of treasury stock ( 386,673) (1,310,210)
Proceeds from issuance of:
Long-term debt 70,000 887,000
Common stock 45,079
<PAGE>
Repayment of long-term debt ( 121,301) (1,110,028)
-------------------------
Net cash used in financing activities ( 437,974) (1,488,159)
-------------------------
Net increase (decrease) in cash and equivalents 1,848,259 ( 856,424)
Cash and equivalents, beginning 681,335 1,537,759
-------------------------
Cash and equivalents, ending $ 2,529,594 $ 681,335
=========================
<FN>
Supplemental disclosures of cash flow information:
Cash paid for interest expense amounted to $84,000 and $95,000 in
1998 and 1997, respectively. Cash paid for income taxes was $646,000 and
$531,000 in 1998 and 1997, respectively.
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1998 AND 1997
1. Summary of significant accounting policies:
Principles of consolidation:
The consolidated financial statements include the accounts of EMCEE Broadcast
Products, Inc. and its subsidiaries, all of which are wholly-owned (together,
the Company). All significant intercompany accounts and transactions have
been eliminated.
Revenue recognition, sale of license:
During 1992, a rural cellular license was sold for $3,100,000. The initial
payment was $845,000, net of closing costs of $155,000. The $2,100,000
balance, which bore interest at 7% payable at maturity, was due in December
1996. None of the deferred payment and the related interest income was
recognized prior to 1997 because of their extended collection period and
because there was not a reasonable basis to evaluate the likelihood of
collection. On April 3, 1997 the Company collected $2,500,000 and received a
non-interest bearing, unsecured $500,000 note receivable as settlement of the
original note. The $500,000 note receivable is due and payable upon the
occurrence of any one or more of certain specified events involving the debtor
including, but not limited to, acquisition, merger, bankruptcy, and
insolvency. None of the specified events relate to the debtor's normal
operations. The note receivable is fully reserved because it has no definite
collection period and because there is not a reasonable basis to evaluate the
likelihood of collection.
Cash, equivalents and U.S. Treasury Bills:
The Company considers cash equivalents to be all highly liquid investments
purchased with an original maturity of three months or less. U.S. Treasury
Bills with an original maturity of more than three months are considered to be
investments. All U.S. Treasury Bills are stated at cost which approximates
market and are considered as available for sale. All U.S. Treasury Bills not
included as cash equivalents had contracted maturities of at least six months.
Inventories:
Inventories are stated at the lower of standard cost which approximates
current actual cost (on a first-in, first-out basis) or market (net realizable
value).
Property, plant and equipment and depreciation:
Property, plant and equipment are stated at cost. Depreciation is provided on
the straight-line method over the estimated useful lives of the assets.
Advertising:
These expenses are recorded when incurred. They amounted to $78,000 and
$75,000 for 1998 and 1997, respectively.
Fair value:
The fair value of long-term debt that is variable rate debt that reprices
regularly, the notes receivable of $2,500,000 which were collected in April
<PAGE>
1997 and U.S. Treasury Bills approximates the amounts recorded in the
financial statements. It was not practicable to estimate the fair value of
the $500,000 note receivable because the Company was unable to estimate the
timing and form of the ultimate settlement of the amount due to it. The
Company has fully provided for any potential loss resulting from the
non-payment of this receivable.
Use of estimates:
Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities and the
reported revenues and expenses.
Reclassifications:
Certain amounts reported in the 1997 financial statements have been
reclassified to conform with the 1998 presentation.
2. Income per share:
Basic income per share is computed by dividing earnings applicable to common
shareholders by the weighted average number of common shares outstanding.
Diluted income per share is similar to basic income per share except that the
weighted average of common shares outstanding is increased to include the
number of additional common shares that would have been outstanding if the
dilutive potential common shares had been issued. There were no dilutive
potential common shares in 1998 because the assumed exercise of the options
would be anti-dilutive. Income per share for 1997 has been restated based
upon the provisions of a revised accounting standard that become effective in
the current year.
The following table presents the basic and diluted EPS computations:
March 31, 1998
-----------------------------------
Per-share
Income Shares amount
Basic EPS
Net income which is income
available to common
stockholders $ 515,284 4,134,780 $ .12
======
1997
----------------------------------
Per-share
Income Shares amount
Basic EPS
Net income which is income
available to common
stockholders $3,015,902 4,188,743 $ .72
Effect of dilutive
securities, stock options 36,132 .01
--------------------------------
Diluted EPS
Income available to common
stockholders $3,015,902 4,224,875 $ .71
=================================
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1998 AND 1997
3. Cash and equivalents:
At March 31, 1998, cash held at a brokerage corporation in the amount of
$2,095,000 is not insured.
4.Industry, sales and accounts receivable concentration information:
The Company's primary activity is in one segment which consists of the
assembly and sale of equipment for the domestic and foreign television
broadcasting industry. Major customers are those that individually account
for more than 10% of the Company's consolidated revenues. For the years ended
March 31, 1998 and 1997, one customer with total sales of $939,000 and two
customers with total sales of $3,476,000, respectively, qualified as major
customers. Worldwide export sales amounted to $5,563,000 and $7,056,000 for
1998 and 1997, respectively. At March 31, 1998 and 1997, there were no
significant accounts receivable concentrations. The Company performs ongoing
credit evaluations of its customers and typically requires deposits and a
letter of credit on foreign sales and deposits on domestic sales.
Historically, the Company's uncollectible accounts receivable have been
immaterial.
5.Inventories:
1998 1997
--------------------------
Finished goods $ 454,000 $ 399,000
Work-in-process 777,000 738,000
Raw materials 1,323,000 1,574,000
Manufactured components 884,599 916,803
---------------------------
$3,438,599 $3,627,803
============================
6. Line of credit:
The Company has a line of credit agreement with a bank aggregating $2,000,000
collateralized by inventories, accounts receivable and all property, plant and
equipment. The line of credit agreement requires monthly interest payments at
.50% below the bank's prime rate of interest or 1.75% above LIBOR which was
5.625% at March 31, 1998. There were no principal borrowings during the years
ended March 31, 1998 and 1997.
The loan agreement contains restrictive covenants when amounts are outstanding
which, among other things, require the Company to maintain a maximum total
liabilities to net worth ratio, a minimum current ratio and a debt coverage
ratio. The Company is allowed to pay dividends on its common stock if it is
in compliance with the financial covenants and ratios.
<PAGE>
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1998 AND 1997
7.Long-term debt:
1998 1997
--------------------------
Term loan, bank $ 686,000 $ 735,000
Equipment loans 177,888 152,000
Other 28,189
--------------------------
863,888 915,189
Less current portion 117,000 108,000
--------------------------
$ 746,888 $ 807,189
===========================
The term loan, bank at March 31, 1998 matures in 2012 and requires principal
payments of $4,083, plus interest. Interest is calculated at 2.25% above
LIBOR which was 5.625% at March 31, 1998. The bank has the option of
adjusting the monthly payments required under this loan to provide for changes
in the interest rates. The term and equipment loans are cross-collateralized
with and have the same restrictive covenants as the line of credit (see Note
6).
Principal payments on long-term debt, based on current interest rates, are as
follows:
1999 $ 117,000
2000 100,000
2001 80,000
2002 80,000
2003 50,000
Thereafter 436,888
-----------
$ 863,888
============
8. Defined contribution pension plan:
A defined contribution pension plan covers all full time employees who meet
age and service requirements. Contributions to the plan, determined at the
discretion of the Board of Directors, were $28,000 and $29,000 in 1998 and
1997,respectively.
9. Common stock:
Nonqualified stock option plans provide for the grant of options to purchase
up to 300,000 shares. Upon the termination or expiration of any stock options
granted, the shares covered by such terminated or expired stock options will
be available for further grant; 38,587 options were available for grant at
March 31, 1998. The Board of Directors, at the date of grant of an option,
determines the number of shares subject to the grant and the terms of such
option. All outstanding options granted expire after 5 years and vest over
two years.
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1998 AND 1997
9. Common stock (continued):
Changes in outstanding common stock options granted are summarized below:
<TABLE>
<CAPTION>
1998 1997
Number Average Number Average
of exercise of exercise
shares price shares price
<S> <C> <C> <C> <C>
Balance at beginning
of year 163,250 $ 5.36 80,083 $ 2.82
Options granted 115,200 6.16
163,250 195,283
Options exercised 18,983 2.37
Options expired 11,375 3.44 13,050 1.31
Balance at end of
year 151,875 $ 5.50 163,250 $ 5.36
Options exercisable
at year-end 36,675 $ 3.44 48,050 $ 3.44
Weighted-average grant
date fair value of
options granted
during the year $ 3.09
</TABLE>
At March 31, 1998, 36,675 and 115,200 options had an exercise price of $3.44
and $6.16, respectively. Such options had remaining contractual lives of 2.3
years and 3.7 years, respectively.
The Company in accordance with an election under generally accepted accounting
principles for stock options has recorded no compensation cost for its stock
options in the accompanying consolidated financial statements.
Had compensation cost for stock options been determined based on the fair
value at the grant dates for awards under the plans, the Company's net income
and income per share would have been reduced to the proforma amounts disclosed
below:
<TABLE>
<CAPTION>
1998 1997
----------------------------------
<S> <C> <C>
Net income:
As reported $ 515,284 $3,015,902
Proforma 445,284 2,972,000
<PAGE>
Basic income per share:
As reported $ .12 $ .72
Proforma .11 .71
Diluted income per share:
As reported $ .12 $ .71
Proforma .11 .70
</TABLE>
Proforma net income does not reflect options granted before April 1, 1995.
Therefore, the full impact of calculating compensation cost for stock options
is not reflected in the proforma amounts presented above because compensation
cost is reflected over the options' vesting period of two years and compensa-
tion cost for options granted in the year ended March 31, 1995 are not consid-
ered for the year ended March 31, 1997.
The fair values were determined using the Black-Scholes option-pricing model
with the following weighted average assumptions:
1998 1997
----------------------
Dividend yield .0% .0%
Risk free interest rate 5.84% 5.84%
Expected life 5 Years 5 Years
Volatility 17.54% 48.88%
During 1997, warrants to purchase 200,000 shares of common stock at $9.76 a
share were issued and remain outstanding at March 31, 1998.
10.Income taxes:
The following table sets forth the current and deferred amounts of the
provisions for income taxes for the years ended March 31, 1998 and 1997:
1998 1997
-------------------------
Current $ 780,410 346,800
Deferred ( 634,000) 780,000
-------------------------
$ 146,410 $1,126,800
=========================
The provisions for income taxes at the Company's effective rate differed from
the provision for income taxes at the statutory Federal rate of 34% for the
years ended March 31, 1998 and 1997 as
follows:
<PAGE>
<TABLE>
<CAPTION>
1998 1997
---------------------------
<S> <C> <C>
Federal income tax at the statutory rate $ 225,000 $ 1,408,000
Foreign sales corporation benefit ( 74,000) ( 180,000)
Federal income tax credit ( 15,000) ( 50,000)
Stock compensation ( 43,590) ( 51,200)
Adjustment to prior year's
tax liability 54,000 _
-------------------------
Provision for income taxes $ 146,410 $ 1,126,800
==========================
</TABLE>
The tax effects of temporary differences that give rise to deferred income
taxes at March 31, 1998 and 1997 are presented in the table below:
<TABLE>
<CAPTION>
1998 1997
----------------------------
<S> <C> <C>
Deferred tax assets:
Inventory $ 41,000 $ 101,000
Employee benefits 51,000 51,000
Other differences 11,000 35,000
Total gross deferred tax assets 103,000 187,000
Deferred tax liabilities,
Note receivable ( 714,000)
Property and equipment ( 23,000) ( 27,000)
-----------------------
Net deferred tax asset (liability) $ 80,000 $( 554,000)
=======================
</TABLE>
11. Litigation:
In the normal course of business, there are various outstanding legal pro-
ceedings. In the opinion of management, after consultation with legal
counsel, the consolidated financial statements of the Company will not be
materially affected by the outcome of such legal proceedings.
12. Year 2000:
The Company recognizes the need to ensure its operations will not be adversely
impacted by Year 2000 software failures. Software failures due to processing
errors potentially arising from calculations using the Year 2000 date are a
known risk. The Company is addressing this risk to the availability and
integrity of financial systems and the reliability of operating systems. The
Company has established processes for evaluating and managing the risks and
costs associated with this problem. The total cost of compliance and its
<PAGE>
effect on the Company's future results of operations is being determined as
part of the detailed conversion planning.
REVISED BY-LAWS OF ELECTRONICS, MISSILES
AND COMMUNICATIONS, INC.
ADOPTED ON NOVEMBER 24, 1986
ARTICLE I - OFFICES
Section 1.1 Registered Office. The registered office of the corporation
shall be located within the State of Delaware, and unless removed to a
different location within the State of Delaware by appropriate action of the
Board of Directors as it may determine appropriate from time to time, the
registered office shall be in the City of Wilmington, County of New Castle,
State of Delaware.
Section 1.2 Other Offices. The corporation may also have offices at such
other places within and without the State of Delaware as the Board of
Directors may, from time to time, determine or the business of the corporation
may require.
ARTICLE II - MEETINGS OF STOCKHOLDERS
Section 2.1 Place of Stockholders' Meetings. Meetings of stockholders of
the corporation shall be held at such place either within or without the State
of Delaware as may from time to time be designated by the Board of Directors
and dated in the Notice of Meeting.
Section 2.2 Annual Meeting. Commencing in 1986, an annual meeting of
stockholders shall be held on any civil day no later than in the month of
September, as determined by the Board of Directors, at which meeting there
shall be an election of the Board of Directors. The stockholders may transact
such other business as may properly be brought before the Annual Meeting.
Section 2.3 Special Meeting of Stockholders.
(a) Special meetings of stockholders, for any proper purpose or purposes,
unless otherwise prescribed by lay, the certificate of incorporation, as
amended,
or the by-laws, may be called by the Chief Executive Officer of the
corporation
and shall be called by the Chief Executive Officer or Secretary of the
corporation at the request in writing of a majority of the Board of Directors
or
upon the request in writing of stockholders owning a majority in amount of the
entire capital stock of the corporation issued and outstanding and entitled to
vote. Such written request shall state the purpose or purposes of the proposed
meeting.
(b) Upon receipt of an appropriate written request by the Chief Executive
Officer or Secretary of the corporation from any person or persons entitled to
call a special meeting, it shall be the duty of the Secretary to fix the date
of such meeting to be held at such time, being not less than ten (10) days nor
more than sixty (60) days after the receipt of such request, as the Secretary
may determine, and to give due notice thereof. If the Secretary shall neglect
or refuse to fix a date for such meeting and gives notice thereof within ten
(10) days after receipt of such request, the person or persons calling the
meeting may do so.
(c) Business transacted at any special meeting of stockholders shall be
limited to the purposes set forth in the Notice of such meeting.
Section 2 4 Notice of Shareholders' Meeting. Written notice stating the
date, place and hour and, if required by law or these by-laws, the purpose of
any meeting the stockholders, shall be given to each stockholder of record
entitled to vote at the meeting at least ten (10) days prior to the date
designated for the meeting, unless otherwise required by law. Such notices may
be given at the discretion of, or in the name of, the Board of Directors,
President, Vice-President, Secretary or Assistant Secretary. When a meeting
is adjourned, it shall not be necessary to give any notice of the adjourned
meeting or of the
<PAGE>
business to be transacted at the adjourned meeting, other than by announcement
at the meeting at which such adjournment is taken.
Section 2.5 Quorum for Action by Stockholders.
(a) Unless otherwise provided by law, in the Articles of Incorporation,
as
amended, or in these by-laws, the presence, in person or by proxy, of the
holders
of a majority of the issued and outstanding shares of stock entitled to vote
at
such meeting shall constitute a quorum for the purpose of transacting such
business as may properly come before the meeting. The stockholders present at
a
duly organized meeting can continue to do business until adjournment,
notwithstanding the withdrawal of enough stockholders resulting in less than a
quorum being present.
(b) If a stockholders meeting cannot be organized because a quorum has
not
attended, in person or by proxy, those present may, except as otherwise
provided
by law, adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present, in person or by
proxy. At such adjourned meeting at which a quorum shall be present, any
business
may be transacted which might have been transacted at the meeting as
originally
notified.
Section 2.6 Action by Stockholders. Unless otherwise required by law,
the
Articles of Incorporation, as amended, or in these by-laws, when a quorum is
present at a Stockholders' Meeting, the vote of a majority of the stock
present,
in person or by proxy, entitled to vote at the meeting shall constitute the
acts
of the stockholders. If the matter considered at the meeting requires the vote
of a different percentage of the stock present by virtue of applicable law,
the
Articles of Incorporation, as amended, or these by-laws, such different
percentage shall govern and control the vote in order for a decision to
constitute action by stockholders.
Section 2.7 Voting.
(a) Each stockholder shall at every meeting of the stockholders be
entitled
to one vote, in person or by proxy, for each share of the common stock having
voting power held by such stockholder, but no proxy shall be voted on after
three
years from its date, unless the proxy provides for a longer period, and,
except
where the transfer books of the corporation have been closed or a date has
been
fixed as a record date for the determination of its stockholders entitled to
vote, no share of stock shall be voted on at any election for Directors which
has
been transferred on the books of the corporation within twenty days next
proceeding such election of Directors.
(b) The Board of Directors shall fix, in advance, a record date, which
shall not be more than sixty nor less than ten days before the date of a
Stockholders Meeting, for the purpose of determining the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a
meeting,
or entitled to receive payment of any dividend or other distribution or
allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action
of
the corporation.
Section 2.8 Action by Unanimous Consent of Stockholders. Whenever the
vote
of stockholders at a meeting thereof is required or permitted to be taken in
connection with any corporate action by any provisions of the law or the
Articles
of Incorporation, as amended, the meeting and vote of stockholders may be
<PAGE>
dispensed with, if all of the stockholders who would have been entitled to
vote
upon action if such meeting were held, shall consent in writing to such
corporate
action being taken.
Section 2.9 Action by Less Than Unanimous Consent of Stockholders.
(a) Unless otherwise provided in the Articles of Incorporation, any
action
required to be taken by stockholders of any annual or special meeting of
stockholders of the corporation, or any action which may be taken at any
annual
or special meeting of such shareholders, may be taken without a meeting,
without
prior notice and without a vote, if a consent in writing, setting for the
action
so taken, shall be signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
(b) Prompt notice of the taking of corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have
not consented in writing.
Section 2.10 Chairperson of Stockholder's Meetings. The Board of
Directors
shall designate such person as the Board deems appropriate to chair respective
stockholder meetings. In the absence of such designation, the corporation's
Chief
Executive Officer shall chair, or designate the person to chair, the
respective
stockholder meetings.
Section 2.11 Secretary for Stockholder's Meetings. The Secretary or
Assistant Secretary of the corporation shall act as Secretary of all meetings
of
Stockholders; and, in the absence of either such officer, the Chairperson may
appoint any legally competent person to act as Secretary of the meeting.
ARTICLE III - BOARD OF DIRECTORS
Section 3.1 Number. The Board of Directors shall consist of not less than
three nor more than ten members. Within the limits specified in this section,
the
number of Directors shall be determined by resolution of the Board of
Directors
or by the stockholders at the Annual Meeting. Once elected, Directors shall
serve
until the next Annual Meeting of the Stockholders and until their successors
are
duly elected and qualified or until their earlier resignation or removal.
Section 3.2 Election. Members of the Board of Directors shall be elected
at the Annual Meeting of the Stockholders, except as provided in Section 3.3
of
this Article. Members of the Board of Directors need not be stockholders in
the
corporation.
Section 3.3 Vacancies. In the event any vacancies shall occur in the
Board
of Directors, by reason of death, resignation, or increase in the number of
Directors or otherwise, it may be filled by a majority of the remaining
Directors, though less than a quorum, for the balance of the term except that,
in the case of an increase in the number of Directors, such vacancy may be
filled
only until the next Annual Meeting of Stockholders, at which time the vacancy
shall be filled by vote of the stockholders.
Section 3.4 Quorum. A majority of the Directors in~office shall be
necessary to constitute a quorum for the transaction of business, and the acts
of a majority of the Directors present at a meeting at which a quorum is
present
shall be considered as the acts of the Board of Directors. If there is no
quorum
present at a duly convened meeting of the Board of Directors, the majority of
those present may adjourn the meeting from time to time and place to place,
until
a quorum shall be present, whereupon the meeting may be held, as adjourned,
<PAGE>
without further notice. At any meeting at which every Director shall be
present,
even though without any notice, any business of the corporation may be
transacted.
Section 3.5 Place of Meeting. Meetings of the Board of Directors of the
corporation, both regular and special, may be held either within or without
the
State of Delaware as a majority of the Directors may from time to time appoint
or as may be designated in the notice calling the meeting.
Section 3.6 First Meeting.
(a) The first meeting of each newly elected Board of Directors shall be
held annually, immediately following the Annual Meeting of the Stockholders at
the place where such meeting of the stockholders is held or at such other
place,
date and hour as a majority of the newly elected Directors may designate. No
notice of such meeting shall be necessary to the newly elected Directors in
order
to legally constitute the meeting, provided a quorum shall be present. At such
meeting the Board of Directors shall elect officers of the corporation.
(b) In addition to such regular meeting at the conclusion of the Annual
Meeting of Shareholders, the Board of Directors shall have the power to fix by
resolution the place, date and hour of other regular meetings of the Board.
Such
regular meetings of the Board of Directors may be held without notice at such
time and at such place as shall from time to time be determined by the Board.
Section 3.7 Special Meetings. Special meetings of the Board of Directors
shall be held whenever called by the Chief Executive Officer of the
corporation,
by a majority of the executive committee, if any or by written request of two
Directors in office. Notice of special meetings of the Board of Directors
shall
be given to each Director, either personally, by direct telephone contact, by
mail, or by telegram. Such notice shall designate the place, date and hour of
the
special meeting as determined by a majority of the Directors in office, or in
lieu of such a decision, by the Chief Executive Officer of the corporation.
Section 3.8 Notices of Meetings of Board of Directors.
(a) Regular Meetings: No notice shall be required to be given of any
regular meeting of the Board of Directors, if a schedule of regular meetings
is
adopted at the Annual Reorganization Meeting, unless the same is held at other
than the time or place for holding such meetings and fixed in accordance with
Section 3.5 of these by-laws, in which event at least five (5) days written
notice shall be given to each Director in advance of the time and place of
such
meeting.
(b) Special Meetings: Written notice stating the date, place and hour of
any special meeting of the Board of Directors shall be given at least one (1)
day
prior to the date named for such special meeting.
Section 3.9 Participation in Meetings by Conference Telephone. Any
member
of the Board of Directors, including the entire Board of Directors, may
participate in any meeting of the Board of Directors or any committee of the
Board of Directors (provided such Director is otherwise entitled to
participate),
be counted for the purposes of determining a quorum thereof and exercise all
rights and privileges to which the Director might be entitled were such
Director
personally in attendance, including the right to vote, by means of conference
telephone or other similar communications equipment by means of which all
persons
at the meeting can hear each other.
<PAGE>
Section 3.10 Informal Action By Board of Directors. Any action which may
be taken at a meeting of the Directors, or of the members of any committee of
the
Board of Directors, may be taken without a meeting if a consent or consents in
writing, setting forth the action so taken, shall be signed by all of the
Directors, or the members of the committee, as the case may be, and shall be
filed with the Secretary of the corporation. Such action shall be deemed filed
with the Secretary regardless of whether the Secretary or some other
authorized
person has actual possession of the minute book. Written consents by all of
the
Directors executed pursuant to this Section 3.10 may be executed in any number
of counterparts and shall be deemed effective as of the date set forth
therein.
Section 3.11 Powers of the Board of Directors.
(a) General Powers. The Board of Directors shall have all of the power
and
authority granted by law to the Board, including all power necessary or
appropriate to the management of the business and affairs of the corporation.
(b) Specified Powers. Without limiting the general powers conferred by
the
last preceding subsection and the powers conferred by the Articles of
Incorporation and these by-laws of the Corporation, it is hereby expressly
declared that the Board of Directors shall have the following powers:
(i) To confer upon any officer or officers of the corporation
the power to choose, remove or suspend assistant officers, agent, or
servants.
(ii) To appoint any person, firm or corporation to accept and
hold in trust for the corporation any property belonging to the
corporation or in which it is interested, and to authorize any such
person, firm or corporation to execute any documents and to perform
any duties that may be requisite in relation to such trust.
(iii) To appoint a person or persons to vote shares of another
corporation held and owned by the corporation.
(iv) By resolution adopted by a majority of the entire Board
of Directors, to designate one or more committees, each committee to
consist of two or more Directors of the corporation. To the extent
provided in any such resolution, and to the extent permitted by law,
a committee so designated shall have and may exercise the authority
of the Board of Directors in the management of the business and
affairs of the corporation. The Board of Directors may designate one
or more Directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the
committee. If it is specifically granted this power by the Board in
its resolution establishing the committee, in the absence or
disqualification of any member and all designated alternates of such
committee or committees or if the entire Board of Directors has
failed thereof to present or provide alternate members, the member
or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may
unanimously appoint another Director to act at the meeting in the
place of any such absent or disqualified member.
(v) To fix the place, date, time and purpose of meetings of
stockholders.
(vi) To fix compensation of Directors and officers for
services rendered.
<PAGE>
Section 3.12 Conduct of Meetings of Board of Directors. Meetings of the
Board of Directors shall be conducted by the Chairperson of the Board, the
President of the corporation, or by an officer of the corporation designated
by
the Board of Directors.
Section 3.13 Manifestation of Dissent. A Director of the corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken
unless the Director's dissent shall be entered in the minutes of the meeting
or
unless the Director shall file a written dissent to such action with the
person
acting as the Secretary of the meeting before adjournment thereof, or shall
forward such dissent by registered or certified mail to the Secretary of the
corporation immediately after adjournment of the meeting. Such right of
dissent
shall not be afforded to a Director who voted in favor of such action.
Section 3.14 Compensation. The Directors shall receive such compensation
for their services as Directors and as members of any committee appointed by
the
Board as may be prescribed by the Board of Directors and shall be reimbursed
by
the corporation for ordinary and reasonable expenses incurred in the
performance
of their duties. Payment of compensation for services as a Director shall not
preclude any Director from serving the corporation in any other capacity and
receiving compensation therefore.
ARTICLE IV - COMMITTEES OF THE BOARD OF DIRECTORS
Section 4.1 Authority. The Board of Directors may, by resolution passed
by
a majority of the entire Board, designate one or more committees, each
committee
to consist of two or more of the Directors of the corporation, which, to the
extent provided in the authorizing resolution, shall have and may exercise the
powers of the Board of Directors in the management of the business and affairs
of the corporation and may authorize the seal of the corporation to be affixed
to all papers which may require it.
Section 4.2 Minutes of Meetings. Each committee shall keep minutes of its
meetings and report the same to the Board of Directors when required.
Section 4.3 Executive Committee. The Board of Directors may appoint from
among its members an executive committee of not less than two members, which
committee shall designate one of its members as Chairperson. The Board of
Directors reserves to itself alone the power to declare dividends, issue
stock,
recommend to stockholders any action requiring their approval, change the
membership of any committee at any time, fill vacancies therein, and discharge
any committee either with or without cause at any time. Subject to the
foregoing
limitations, the executive committee shall possess and exercise all other
powers
of the Board of Directors during intervals between meetings.
Section 4.4 Finance Committee. The Board of Directors may appoint a
Finance
Committee of three or more Directors, and shall designate one Director as
Chairperson of the Committee. The Committee shall have the power to fix from
time
to time the compensation of all principal officers of the corporation and so
otherwise exercise all powers which may be specifically delegated to it by the
Board of Directors and act upon such matters as may be referred to it from
time
to time for study and recommendation by the Board of Directors. The finance
committee shall also serve as the audit committee to review the audited
financial
statements submitted by the corporation's certified public accountant, as well
as the periodic reports filed by the corporation with regulatory authorities.
Section 4.5 Nominating Committee. The Board of Directors may appoint from
<PAGE>
among its members at least two Directors for the purpose of making
recommendations to the Board of Directors for nomination of individuals to
serve
on the Board of Directors of the corporation.
Section 4.6 Other Committees. The Board of Directors may also appoint
from
among its own members such other committees as the Board may determine which
shall in each case consist of not less than two Directors, and which shall
have
such powers and duties as shall from time to time be prescribed in resolutions
by the Board of Directors. The Chief Executive Officer shall be a member ex
officio of each such committee appointed by the Board of Directors.
ARTICLE V - OFFICERS
Section 5.1 Election and Office. The officers of the corporation shall be
elected by the Board of Directors and shall be those officers with such titles
and duties as shall be stated, from time to time, by the Board of Directors in
a resolution. Two or more offices may be held by the same person, expect that
where the offices of President and Secretary are held by the same person, such
person shall not hold any other office.
Section 5.2 Term. The Board of Directors at its first regular meeting
after
each Annual Meeting of Stockholders may elect such officers with such titles
and
duties as shall be stated, from time to time, by the Board of Directors in a
resolution, including, but not limited to a Chief Executive Officer, a
President,
one or more Vice-Presidents, a Secretary, a Treasurer, and such assistant
officers as the Board may determine necessary, none of whom need to be a
member
of the Board of Directors. Each such officer shall serve at; the pleasure of
the
Board of Directors until the Annual Meeting of the Board of Directors
following
the next annual meeting of stockholders when their successors are chosen and
qualified, unless sooner removed from office by an affirmative vote of the
Board
of Directors during their respective tenures.
Section 5.3 Compensation. Compensation for all officers of the
corporation
shall be fixed by the Board of Directors.
Section 5.4 Duties of President or Alternatively Chief Executive Officer.
(a) Subject to the provisions of 2.10 the President or such other officer
as may be designated from time to time by a Resolution of the Board of
Directors
shall be the Chief Executive Officer of the corporation, shall preside at all
meetings of the stockholders and of the Board of Directors, shall have general
and active management authority over the business of the corporation and shall
see that all orders and resolutions of the Board of Directors are carried into
effect.
(b) The President or such other officer as may be designated from time to
time by a Resolution of the Board of Directors, shall execute Bonds,
Mortgages,
and other contracts requiring a seal, under the seal of the Corporation,
except
where required or permitted by law to be otherwise signed and executed and
except
where the signing and execution thereof shall be expressly delegated by the
Board
of Directors to some other officer or agent of the corporation.
(c) Unless otherwise determined by the Board of Directors, the President
or Chief Executive Officer shall have full power and authority on behalf of
the
corporation to attend and act and to vote at any meeting of the stockholders
of
any corporation in which the corporation may hold stock, and, at any such
meeting, shall possess and may exercise any and all rights and powers incident
to the ownership of such stock and which, as the owner thereof, the
corporation
<PAGE>
may have possessed and exercised.
Section 5.5 Duties of Vice-President. The Vice-President, or if there
shall
be more than one, Vice-Presidents, in the order determined by the Board of
Directors shall, in the absence or disability of the President or a Chief
Executive Officer, perform the duties and exercise the powers of the President
or Chief Executive Officer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe. The
Vice-
President shall have such additional powers and perform such duties as may be
assigned to them by the Board of Directors or the President or Chief Executive
Officer. A Vice-President may sign and execute contracts and other obligations
pertaining to the regular course of the Vice-President's duties.
Section 5.6 Duties of Secretary and Assistant Secretary.
(a) The Secretary shall attend all meetings of the Board of Directors and
all meetings of the stockholders and record all the proceedings of the
meetings
of the corporation and of the Board of Directors and a book to be kept for
that
purpose and shall perform similar duties for the standing committees when
required. The Secretary shall give, or cause to be given, notice of all
meetings
of stockholders and special meetings of the Board of Directors, and shall
perform
such other duties as may be prescribed by the Board of Directors, President or
Chief Executive Officer, under whose supervision the Secretary shall serve.
The
Secretary shall keep in safe custody both the shareholder records and the seal
of the corporation and, when authorized by the Board of Directors, affix the
same
to any instrument requiring it and, when so affixed, it shall be attested by
the
Secretary's signature or by the signature of an assistant Secretary.
(b) The assistant Secretary, or if there is more than one, assistant
Secretaries in the order determined by the Board of Directors, shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such
other
powers as the Board of Directors may, from | time to time, prescribe.
Section 5.7 Duties of Treasurer and Assistant Treasurer.
(a) Except where otherwise designated by the Board of Directors, from
time
to time, the Treasurer shall, subject to the direction of a designated Vice-
President, have general custody of all the funds and securities of the Company
and have general supervisions of the collection and disbursement of funds of
the
Company. He may sign, with the President, or such other person or persons as
may
be designated for the purpose by the Board of Director, all bills of exchange
or
promissory notes of the Company. He shall enter or cause to be entered
regularly
in the books of the Company full and accurate account of all monies received
and
paid by him on account of the Company; shall at all reasonable times exhibit
his
books and accounts to any Director of the Company upon application of the
office
of the Company during business hours; and whenever required by the Board of
Directors or the President, shall render a statement of his accounts. He shall
perform such other duties as may be prescribed from time to time by the Board
of
Directors or the By-Laws; he shall give bond to the faithful performance of
his
duties in such sum and with such surety as shall be approved by the Board of
Directors.
(b) The Treasurer shall have charge of all the funds and securities of
the
corporation which may come into the possession of the corporation. When
necessary
or proper, unless otherwise determined by the Board of Directors, the
Treasurer
shall endorse for collection on behalf of the corporation checks, notes, and
<PAGE>
other obligations, and shall deposit the same to the credit of the corporation
in such banks or depositories as the Board of Directors may designate and
shall
file all receipts and vouchers for payments made to the corporation. The
Treasurer shall sign all checks made by the corporation, except when the Board
of Directors shall otherwise direct. The Treasurer shall be responsible for
the
regular entry and books of the corporation to be kept for such purpose, and
the
full and accurate account of all funds and securities received and paid by an
account of the corporation. Whenever required by the Board of Directors, the
Treasurer shall render a statement of the financial condition of the
corporation.
The Treasurer shall have such other powers and shall perform such~other duties
as the Treasurer may be assigned from time to time by the Board of Directors.
The
Treasurer shall give such bond, if any, for the faithful performance of the
duties set forth herein as shall be required by the Board of Directors and any
such bond shall remain in the custody of the President or Chief Executive
Officer.
(c) The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors, shall,
in the absence or disability of the Treasurer, perform the duties and exercise
the powers of the Treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 5.8 Powers and Duties of Vice-President and Assistant Officers.
To
the extent not explicitly set forth above and in the absence of a President,
each
Vice-President and each Assistant Officer shall have the powers and perform
the
duties of the respective superior officers. Vice-President and Assistant
Officers
shall have such rank as may be designated by the Board of Directors. Vice-
Presidents may be designated by the Board of Directors. Vice-Presidents may be
designated as having responsibility for a specific area of the corporation's
affairs, in which event such Vice-President shall be superior to other Vice-
Presidents in relation to matters within his area. The President or Chief
Executive Officer shall be the superior officer to the Vice-President or Vice-
Presidents. The Treasurer and Secretary shall be superior officers to the
Assistant Treasurers and the Assistant Secretaries, respectively.
Section 5.9 Delegation of Office. The Board of Directors may delegate the
powers or duties of any officer of the corporation to any other person from
time
to time.
Section 5.10 Vacancies. The Board of Directors shall have the power to
fill
any vacancies in any office occurring for whatever reason.
ARTICLE VI - COMMON STOCK
Section 6.1 Stock Certificates. Every holder of stock in the corporation
shall be entitled to have a certificate which shall be such form as the Board
of
Directors may from time to time prescribe, signed by, or in the name of the
corporation by, the President or Chief Executive Officer or a Vice-President,
and
the Treasurer or Assistant Treasurer, or the Secretary or Assistant Secretary
of
the corporation, certifying the number of shares owned by such holder in the
corporation.
Section 6.2 Transfer Agent. The Board of Directors shall have power to
appoint one or more Transfer Agents and registers for the transfer and
registration of certificates of stock, and may require that
stock certificates shall be countersigned and registered by one or more of
such
Transfer Agents and Registrars. Where a certificate is signed (1) by a
Transfer
<PAGE>
Agent or an Assistant Transfer Agent, or (2) by a Transfer Clerk acting on
behalf
of the corporation and a Registrar, the signature of any such President, Chief
Executive Officer, Vice-President, Treasurer, Assistant Treasurer, Secretary
or
Assistant Secretary may be a facsimile. In case any officer or officers who
have
signed, or whose facsimile signature or signatures have been used on, any such
certificate or certificates shall cease to be such officer or officers of the
corporation, whether because of death, resignation or otherwise, before such
certificate or certificates have been delivered by the corporation, such
certificate or certificates may nevertheless be adopted by the corporation and
be issued and delivered as though the person or persons who signed such
certificate or certificates or whose facsimile signature or signatures have
been
used thereon have not ceased to be such officer or officers of the
corporation.
Section 6.3 Lost Certificates. The Board of Directors may direct a new
certificate or certificates be issued in place of any certificate or
certificates
theretofore issued by the corporation alleged to have been lost or destroyed,
upon the making of an Affidavit of that fact by the person claiming the
Certificate of Stock to be lost or destroyed. When authorizing such issue of a
new Certificate or Certificates, the Board of Directors may, in its discretion
and as a condition precedent to the issuance, require the owner of such lost
or
destroyed Certificate or Certificates, or the owner's legal representative, to
advertise the same in such manner as it shall require and/or to give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the Certificate
alleged
to be lost or destroyed.
Section 6.4 Transfer of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate of shares duly endorsed,
with
a duly executed Stock Power attached, or otherwise accompanied by proper
evidence
of succession, assignment or authority to transfer, it shall be the duty of
the
corporation 'to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its books.
Section 6.5 Closing of Transfer Books. The Board of Directors may close
the
stock transfer books of the corporation for a period not exceeding sixty days
preceding the date of any meeting of stockholders or the date for payment of
any
dividends or the date for the allotment of rights or the date when any change
or
conversion or exchange of capital stock shall go into effect or for a period
not
exceeding sixty days in connection with obtaining the consent of stockholders
for
any purpose. In lieu of closing the stock transfer books as aforesaid, the
Board
of Directors may fix in advance, a day not exceeding sixty days preceding the
date of any meeting of stockholders, or the date for the payment of any
dividends, or the date for the allotment of any rights or the date when any
change or conversion or exchange of common stock shall go into effect, or a
date
in connection with obtaining such an expense, as a record date for the
determination of stockholders entitled to notice of, and to vote at, any such
meetings, and any adjournment thereof, or entitlement to receive payment of
such
dividends, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of capital stock, or to
give
such consent, and in such case such stockholders, and only such stockholders,
as
shall be stockholders of record on the date so fixed shall be entitled to such
notice of, and to vote at, such meeting and any adjournment thereof, or to
receive payment of such dividends, or to receive such allotment of rights, or
to
<PAGE>
exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the corporation
after
such record date fixed as aforesaid.
Section 6.6 Holders of Record. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for
calls and assessments a person registered on its books as the owner of shares,
and shall not be bound to recognize any equitable or other claim to or
interest
in such share or shares on the part of any other person, whether or not it
shall
have express or other notice thereof, except as otherwise provided by the laws
of the State of Delaware.
ARTICLE VII - DIVIDENDS
Section 7.1 Declared by Board of Directors. Dividends upon the common
stock
of the corporation, subject to the provisions of the Articles of
Incorporation,
if any, may be declared by the Board of Directors at a regular or special
meeting, pursuant to law. Dividends may be paid in cash, in property, or in
shares of the common stock, subject to the provisions of the certificate of
incorporation.
Section 7.2 Reserves. Before making any dividend, there may be set aside
out of the funds of the corporation available for dividends such sum or sums
as
the Directors from time to time, in their sole and absolute discretion, think
proper as a reserve or reserves to meet contingencies, or for equal dividends,
or for repairing or maintaining any property of the corporation, or for such
other purpose as the Directors shall think conducive to the interests of the
corporation, and the Directors may modify or abolish any such reserve in the
matter in which it was created.
ARTICLE VIII - MISCELLANEOUS
Section 8.1 Annual Statement. The Board of Directors shall present at
each
annual meeting, and at any special meeting of the stockholders when called for
by vote of the stockholders, a full and clear statement of the business and
condition of the corporation as prepared by its certified public accountant.
Section 8.2 Fiscal Year. The fiscal year of the corporation shall be
fixed
by resolution of the Board of Directors.
Section 8.3 Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer of officers or such other person
or
persons as the Board of Directors may from time to time designate.
Section 8.4 Seal. The corporate seal shall have inscribed thereon the
name
of the corporation, the year it was organized and words "Corporate Seal,
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Section 8.5 Waiver of Notice. Any notice required to be given under the
provisions of these by-laws or otherwise may be waived by the stockholder,
Director or Officer to whom such notice is required to be given.
ARTICLE IX - INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHER PERSONS
Section 9.1 Indemnification.
(a) The corporation shall indemnify Directors or Officers of the
corporation against expenses (including legal expenses), Judgments, fines and
amounts paid in settlement, actually and reasonably incurred by such person,
to
the fullest extent now or hereafter permitted by law in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
<PAGE>
criminal, administrative or investigative, brought or threatened to be brought
against such person, including actions or suits by or in the right of the
corporation, by reason of the fact that such person is or was a Director or
Officer of the corporation, its parent or any of its subsidiaries, or acted as
a Director or Officer or in any other capacity on behalf of the corporation,
its
parent or any of its subsidiaries, or is or was serving at the request of the
corporation as a Director, Officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise.
(b) The Board of Directors may, by resolution, similarly indemnify any
person other than a Director or Officer of the corporation to the fullest
extent
now or hereafter permitted by law for liabilities incurred by such person in
connection with services rendered for or at the request of the corporation,
its
parent or any of its subsidiaries.
(c) The provisions of this Section shall be applicable to all actions,
suits or proceedings commenced after its adoption, whether such arise out of
acts
or omissions which occurred as to a person who has ceased to be Director or
Officer or to render services for or at the request of the corporation and
shall
inure to the benefit of the heirs, executors and administrators of such
person.
The rights of indemnification provided for herein shall not be deemed to be
the
exclusive rights to which any Director, Officer, employee or other agent of
the
corporation may be entitled.
Section 9.2 Advances. The corporation may pay the expenses incurred by
any
person entitled to be indemnified by the corporation in defending a civil or
criminal action, suit or proceeding in advance of the final disposition of
such
action, suit or proceeding upon receipt and undertaking by or on behalf of
such
person, to repay such amount unless it shall ultimately be determined that
such
person is entitled to be indemnified by the corporation as authorized by law.
Section 9.3 Insurance. The corporation may purchase and maintain
insurance
on behalf of any person who is or was a Director, Officer, employee or agent
of
the corporation or who is or was serving in any capacity in any other
corporation
or organization at the request of the corporation against any liability
asserted
against such person or incurred by such person in any such capacity or arising
out of such person's status as such, whether or not the corporation would have
the power to indemnify such person against such liability under law.
ARTICLE X - AMENDMENTS
Section 10.1. The Board of Directors shall have the power to add any
provision to or to alter or repeal any provision of these by-laws by a vote of
a majority of all of the Directors at a regular or special meeting of the
Board
provided that a statement of the proposed action shall have been included in
the
notice or waiver of notice of such meeting of the Board of Directors. The
power
of the Board of Directors to alter, amend and repeal these by-laws shall be
subject always to the power of the stockholders to further alter, amend or
repeal
these by-laws.
Section 10.2 Stockholders. The stockholders may alter, amend, and repeal
any provision of the by-laws by a vote of a majority of the stockholders at
any
meeting, provided that a statement of the proposed action shall have been
included in the notice or waiver of notice of such meeting of stockholders.
Section 10.3 Notice of Meeting. No change of the time or place of the
meeting for a vote on a proposal to alter, amend, or repeal these by-laws
shall
be made within sixty days before the date on which such meeting is to be held,
<PAGE>
and in the case of any change of such time or place, notice thereof shall be
given to each stockholder in person or by letter mailed to the stockholder's
last
known post office address at least twenty days before the meeting is held.
ELECTRONICS MISSILES & COMMUNICATIONS, INC.
NONQUALIFIED STOCK OPTION PLAN
SECTION 1. PURPOSE
This Nonqualified Stock Option Plan (hereafter the PLAN) is intended to
advance the interests of Electronics, Missiles & Communications Inc. (hereafter
EMCEE or the COMPANY), its shareholders and its subsidiaries by encouraging and
enabling selected officers and other key employees upon whose judgment,
initiative and effort the Company is largely dependent for the successfulconduct
of its business, to acquire and retain a proprietary interest in the Company by
ownership of its stock. Options granted under the Plan are intended to be
options which do not meet the requirements of Section 422 of the Internal
Revenue Code of 1954, as amended.
SECTION 2. DEFINITIONS
A. BOARD means the Board of Directors of EMCEE;
B. COMMITTEE means the body administering this Plan as designated by the
Board;
C. COMMON STOCK means the common stock of EMCEE, par value $.01667; and
may include lettered, legend or restricted stock of the Company as approved by
the Company's counsel;
D. DATE OF GRANT means the date on which an Option is granted under this
Plan pursuant to a written nonqualified stock option agreement;
E. OPTION means an option granted under this Plan;
F. OPTION AGREEMENT means the written agreement between the Optionee and
the Company setting forth the details of the Option.
G. OPTIONEE means a person to whom an Option, which has not expired, has
been granted under this Plan;
H. PLAN means EMCEE's Nonqualified Stock Option Plan as herein set
forth;
I. SUBSIDIARY or SUBSIDIARIES means a subsidiary corporation or
corporations of the Company as defined in Section 425 of the Internal Revenue
Code;
J. SUCCESSOR means the legal representative of the estate of a deceased
Optionee or the person or persons who acquired the right to exercise an Option
by bequest or inheritance or by reason of the death of any optionee.
SECTION 3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Board or a Committee appointed by the
Board. If the Plan is administered by a Committee, the Committee shall
immediately draft and submit for review and approval by the Board a procedural
statement for obtaining Board approval of any action taken by the Committee in
carrying out the provisions of this Plan. If no Committee is appointed, the
entire Board shall constitute the Committee. Options to members of the Committee
may be granted only by a majority vote of the disinterested members of theBoard.
The Committee shall have full and final authority in its discretion, subject to
the provisions of the Plan and Board review, to determine the following:
A. The individuals to whom options shall be granted;
B. The time or times at which options shall be granted;
C. The number of shares covered by each option;
D. The purchase price of common stock covered by each option;
<PAGE>
E. The construction and interpretation of the Plan;
F. Subject to Section 6, to determine the terms and provisions of the
respective Option Agreements, which terms and provisions need not be identical
in any respect including, but without limitation, differing terms covering the
payment of the option price;
G. To make all other determinations;
H. To take all other actions deemed necessary or advisable for the
proper administration of the Plan.
All such actions and determinations shall be conclusively binding for all
purposes and upon all persons, unless such actions are determined by the Board
to be in contravention of the Plan, relevant law or accounting practices.
SECTION 4. COMMON STOCK SUBJECT TO OPTIONS
The initial aggregate number of shares of the Company's common stock which
may be issued upon the exercise of options granted under the Plan shall not
exceed 200,000, subject to adjustments under the provisions under Section 7. The
shares of common stock to be issued upon the exercise of options may be
authorized but unissued shares; shares issued and reacquired by the Company;
shares bought on the market for the purposes of the Plan; and lettered, legend
or restricted stock. In the event any option shall, for any reason, terminate or
expire or be surrendered without having been exercised in full, the shares
subject to such option but not purchased thereunder shall again be available for
options to be granted under the Plan.
SECTION 5. PARTICIPANTS
Options may be granted under the Plan to any person who is a director,
officer or employee of the Company or any of its subsidiaries.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS
Any option granted under the Plan shall be evidenced by an agreement
executed by the Company and the Optionee, which agreement shall contain such
terms and be in such form as the Committee from time to time approves, subject
to the following limitations and conditions:
A. Option Price. The option price per share with respect to each Option
shall be determined by the Board, whether or not the Plan is administered by a
Committee, but in no instance shall the consideration for the price per share be
less than the par value of said stock;
B. Period of Option. The expiration date of each Option shall be fixed
by the Committee, but such expiration date shall not be more than ten (10) years
from the date of the grant;
C. Vesting of Shareholder's Rights. Neither an Optionee nor the
Optionee's successor shall have any of the rights of a shareholder of theCompany
until the certificates evidencing the shares purchased are properly delivered to
such Optionee or the Optionee's successor;
D. Exercise of Option. Each Option shall be exercisable from time to
time or over a period commencing on the Date of Grant and ending upon the
expiration or termination of the Option; provided, however, that the Committee
may, by the provisions of any Option Agreement, limit the number of shares
purchasable thereunder in any period or periods of time during which the Option
is exercisable;
<PAGE>
E. Nontransferrability of Option. Each Option shall be exercisable
during the Optionee's lifetime only by the Optionee. No Option shall be
transferrable or assignable by an Optionee, otherwise than by will or by thelaws
of descent and distribution. Except upon the written consent of the Committee
waiving this provision, the Option shall terminate and become null and void if
the Option is pledged or hypothecated in any way, or becomes subject to levy,
execution, attachment or similar process.
F. Termination of Employment. Unless otherwise provided in this Option
Plan, upon termination of an Optionee's employment with the Company or with any
of its subsidiaries, or in the case of a Director, ceases to be such, the
Optionee's option privilege shall be limited in the manner set forth in his/her
Option Agreement, or if not specified therein, to the shares which were
immediately purchasable by him/her at the date of such termination and such
option privileges shall expire unless exercised by the Optionee within thirty
(30) days after the date of such termination. The granting of an Option to an
eligible person does not alter in any way the Company's or a relevant
subsidiary's existing rights to terminate such person's employment at any time
for any reason, nor does it confer upon such person any rights or privileges
except as specifically provided for in the Plan;
G. Death of Optionee. If an Optionee dies while in the employ of the
Company or any subsidiary, the employee's option privileges shall be limited to
the shares which were immediately purchasable by the Optionee at the date of
death and such option privileges shall expire unless exercised by his successor
within one hundred eighty (180) days after the date of Optionee's death.
SECTION 7. ADJUSTMENTS
A. In the event that the outstanding shares of common stock of the
Company are hereafter increased or decreased, or changed into or exchanged for
a different number or kind of shares or other securities of the Company or
another corporation by reason of a recapitalization, reclassification, stock-
split, combination of shares, dividend or other distribution payable in capital
stock, appropriate adjustments shall be made by the Committee in the number and
kind of shares for the purchase of which Options may be granted under the Plan.
In addition, the Committee shall make appropriate adjustments in the number and
kind of shares as to which outstanding Options, or portions thereof then
unexercised, shall be exercisable, to the end that the proportionate interest of
the holder of the Option shall, to the extent practicable, be maintained as
before the occurrence of such event. Such adjustment in outstanding Optionsshall
be made without change in the total price applicable to the unexercised portion
of the Option but with a corresponding adjustment in the option price per share.
B. In the event of dissolution or liquidation of the Company, any Option
granted under the Plan shall terminate as of the date fixed by the Committee,
provided that not less than thirty (30) days written notice of the date so fixed
shall be given to each Optionee and each such Optionee shall have the right
during such period to exercise the Option as to all or any part of the shares
covered thereby, including shares as to which such Option would not otherwise be
exercisable by reason of an insufficient lapse of time.
<PAGE>
C. In the event of a reorganization in which the Company is not the
surviving or acquiring Company, or in which the Company is or becomes a wholly
owned subsidiary of another Company after the effective date of the
reorganization, then:
(i) If there is no plan or agreement respecting the
reorganization, or if the reorganization agreement does not
specifically provide for the change, conversion or exchange of the
shares under outstanding and unexercised stock options for
securities of another corporation, then the Option shall terminate;
or
(ii) If there is a reorganization agreement and the
reorganization agreement specifically provides for the change,
conversion or exchange of the shares under outstanding and
unexercised stock options for securities of another corporation,
then the Committee shall adjust the shares under such outstanding
and unexercised stock options (and shall adjust the shares remaining
under the Plan which are then available to be optioned under the
Plan, if the reorganization agreement makes specific provisions
therefore) in a manner not inconsistent with the provisions of the
reorganization agreement for the adjustment, change, conversion or
exchange of such stock and such options.
(iii) The term reorganization as used in this section shall
mean any statutory merger, statutory consolidation, sale of all or
substantially all of the assets of the Company, or sale, pursuant to
an agreement with the Company, of securities of the Company pursuant
to which the Company is or becomes a wholly owned subsidiary of
another Company after the effective date of the reorganization.
D. Adjustments and determinations under this Section shall be made by
the Committee, whose decisions as to what adjustments or determination shall
be
made, and the extent thereof, shall be final, binding and conclusive.
SECTION 8. RESTRICTION ON ISSUING SHARES
The exercise of each Option shall be subject to the condition that if at
any time the Company shall determine in its discretion that the satisfaction
of
withholding tax or other withholding liabilities, or that the listing,
registration, or qualification of any shares otherwise deliverable upon such
exercise upon any securities exchanged or under any state or federal law, or
that
the consent or approval of any regulatory body, is necessary or desirable as a
condition of, or in connection with, such exercise of the delivery or purchase
of shares pursuant thereto, then in any such event, such exercise shall not be
effective unless such withholding, listing, registration, qualification,
consent,
or approval shall have been effected or obtained free of any conditions not
acceptable to the Company.
SECTION 9. AMENDMENT, SUSPENSION AND TERMINATION OF PLAN
The Board may at any time suspend or terminate the Plan or may amend it
from time to time in such respects as the Board may deem advisable in order
that
the Options granted hereunder may conform to any changes in the law or in any
other respect which the Board may deem to be in the best interests of the
<PAGE>
Company; provided, however, that without approval by the shareholders of the
Company representing a majority of the voting power, no such amendment shall
except as provided in Section 4, increase the maximum number of shares for
which
Options may be granted under the Plan, (a) change the provisions of
subparagraph
A of Section 6 relating to the establishment of the option price, (b) change
the
provisions of subparagraph B of Section 6 relating to the expiration date of
each
Option, or (c) change the provisions of the next sentence of this Section 9
relating to the term of this Plan. Unless the Plan shall theretofore have been
terminated by the Board or as provided in Section 7, the Plan shall terminate
ten
(10) years after the effective date of the Plan. No Option may be granted
during
any suspension or after termination of the Plan. Except as provided in Section
7, no amendment, suspension, or termination of the Plan shall, without the
Optionee's consent, alter or impair any of the rights or obligations under any
Option theretofore granted to such Optionee under the Plan.
SECTION 10. EFFECTIVE DATE OF PLAN AND SHAREHOLDER APPROVAL
The effective date of the Plan is September 8, 1988, the date of its
approval by the Shareholders of the Company.
Approved and accepted the 13th day of February, 1989.
ATTEST: ELECTRONICS, MISSILES &
COMMUNICATIONS, INC.
s/s Kay E. Krull By: s/s S. Stanley Fischman
KAY E. KRULL S. STANLEY FISCHMAN
CORP. ASST. SEC'Y PRESIDENT/CEO
SUBSIDIARIES OF EMCEE BROADCAST PRODUCTS, INC. (1)
The following constitute all of the Registrant's subsidiary corporations:
1. EMCEE Cellular Inc., a Delaware corporation;
2. EMCEE Export Sales Company, Inc., a Delaware corporation (this
corporation is a wholly owned subsidiary of EMCEE Cellular Inc.);
3. R.F. Systems, Inc., a Delaware corporation (this corporation is a
wholly owned subsidiary of EMCEE Cellular Inc.);
4. R.F. Systems of Nevada, Inc., a Nevada corporation (this corporation
is a wholly owned subsidiary of EMCEE Cellular Inc.);
5. Universal Rapid Access, LLC (this limited liability company is a
partially owned subsidiary of R.F. Systems of Nevada, Inc., which owns 50% of
the
outstanding equity of the limited liability company); and
6. EMCEE Broadcast Products (Chengdu) Company, Ltd. (the Registrant
owns
25% of the issued and outstanding capital stock of this corporation).
(1) All subsidiaries are wholly owned by the Registrant unless otherwise
indicated.
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<NAME> EMCEE BROADCAST PRODUCTS, INC.
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