U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A (No.1)
----------------------
(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
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
<PAGE>
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 .
In accordance with Rule 12b-15 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: July 9, 1998
/s/ Allan J. Harding
-------------------------
Allan J. Harding, Vice President -
Finance
Date: July 9, 1998
<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>
<PAGE>
<TABLE>
<CAPTION>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
LIABILITIES AND SHAREHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1998 AND 1997
March 31, March 31,
1998 1997
----------------------
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 117,000 $ 108,000
Accounts payable 311,424 355,401
Accrued expenses:
Payroll and related expenses 276,826 206,612
Other 118,625 130,172
Deposits from customers 260,048 121,195
Deferred income taxes 554,000
----------------------
Total current liabilities 1,083,923 1,475,380
----------------------
Long-term debt, net of current portion 746,888 807,189
-----------------------
Shareholders' equity:
Common stock, $.01 - 2/3 par;
authorized 9,000,000 shares; issued
4,384,161 shares, 1998; 4,378,364
shares, 1997 73,084 72,987
Additional paid-in capital 3,502,092 3,562,523
Retained earnings 6,927,987 6,412,703
-----------------------
10,503,163 10,048,213
Less shares held in treasury, at cost
(1998, 320,764; 1997, 212,763) 1,649,173 1,362,274
-------------------------
8,853,990 8,685,939
-------------------------
Total liabilities and equity $10,684,801 $10,968,508
==========================
<FN>
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 120,764 ( 386,673) (386,673)
Net income for the year 515,284
-----------------------------------
Balance, March 31, 1998 320,764 $(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
effect on the Company's future results of operations is being determined as
part of the detailed conversion planning.
