UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 2000
Commission file number 1-6299
EMCEE Broadcast Products, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-1926296
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification
No.)
Registrant's telephone number, including area code: 570-443-9575
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES x NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practical date:
Common stock, $ .01-2/3 par value - 4,019,409 shares as of August 11, 2000.
<PAGE>
<PAGE>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
I N D E X
PAGE(S)
PART I. FINANCIAL INFORMATION:
CONSOLIDATED BALANCE SHEETS -
June 30, 2000 and March 31, 2000 3
CONSOLIDATED STATEMENTS OF INCOME (LOSS) -
Three Months ended June 30, 2000 and 1999 4
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY -
Three Months ended June 30, 2000 5
CONSOLIDATED STATEMENTS OF CASH FLOWS -
Three Months ended June 30, 2000 and 1999 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7
INDEPENDENT ACCOUNTANTS' REPORT 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 9 - 12
PART II. OTHER INFORMATION:
SIGNATURES 13
NOTE: Any questions concerning this report should be addressed to
Mr. Allan J. Harding, Vice President-Finance.
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<CAPTION>
PART I. FINANCIAL INFORMATION
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- JUNE 30, 2000 and MARCH 31, 2000 -
JUNE 30,2000 MARCH 31,2000
Unaudited
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $75,105 $261,304
U. S. Treasury Bills 1,585,704 1,773,600
Accounts receivable, net of allowance
for doubtful accts. June -$82,000/
March-$70,000 2,335,970 1,452,279
Inventories 3,683,333 3,080,313
Prepaid expenses 112,119 80,113
Income taxes refundable 497,000 402,000
Deferred income taxes 248,000 220,000
-------------------------
TOTAL CURRENT ASSETS 8,537,231 7,269,609
PROPERTY, PLANT & EQUIPMENT:
Land & land improvements 246,841 246,841
Building 617,475 617,475
Machinery & equipment 2,183,674 1,925,042
-------------------------
3,047,990 2,789,358
Less accumulated depreciation 2,316,639 2,249,467
-------------------------
NET PROPERTY, PLANT & EQUIPMENT 731,351 539,891
-------------------------
OTHER ASSETS 1,401,637 1,292,448
-------------------------
NOTE RECEIVABLE 529,000 525,000
Less deferred portion (529,000) (525,000)
-------------------------
0 0
-------------------------
TOTAL ASSETS $10,670,219 $9,101,948
==========================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt $106,000 $106,000
Notes payable (line of credit) 1,100,000 --
Accounts payable 569,153 368,671
Accrued expenses:
Payroll and related expense 216,096 214,316
Other 615,007 437,836
Deposits from customers 281,574 64,247
------------------------
TOTAL CURRENT LIABILITIES 2,887,830 1,191,070
------------------------
LONG-TERM DEBT, net of current portion 569,954 596,354
------------------------
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SHAREHOLDERS' EQUITY:
Common stock issued, $.01-2/3 par;
authorized 9,000,000 shares;issued-
4,406,361 shares 73,450 73,450
Additional paid-in capital 3,583,484 3,583,484
Retained earnings 5,244,086 5,518,241
-------------------------
8,901,020 9,175,175
Less shares held in treasury at cost:
364,752 shares June '00 and 401,764
shares Mar '00 1,688,585 1,860,651
--------------------------
TOTAL SHAREHOLDERS' EQUITY 7,212,435 7,314,524
--------------------------
TOTAL LIABILITIES &
SHAREHOLDERS' EQUITY $10,670,219 $9,101,948
===========================
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
THREE (3) MONTHS
06/30/00 06/30/99
<S> <C> <C>
NET SALES $1,680,281 $812,425
COST OF PRODUCTS SOLD 1,339,912 705,012
----------------------------
GROSS PROFIT 340,369 107,413
----------------------------
OPERATING EXPENSES:
Selling 254,079 229,892
General and administrative 367,811 225,677
Research and development 118,444 76,485
----------------------------
TOTAL OPERATING EXPENSES 740,334 532,054
----------------------------
LOSS FROM OPERATIONS (399,965) (424,641)
----------------------------
OTHER INCOME (EXPENSE), NET:
Interest expense (30,370) (18,864)
Interest income 36,403 40,335
Other (2,923) 4,693
----------------------------
TOTAL OTHER INCOME, NET 3,110 26,164
----------------------------
NET LOSS BEFORE INCOME TAXES (396,855) (398,477)
INCOME TAX EXPENSE (BENEFIT) (122,700) (98,150)
----------------------------
NET LOSS $(274,155) $(300,327)
COMMON SHARE AND COMMON
SHARE EQUIVALENT OUTSTANDING:
Basic 4,035,184 3,982,397
=============================
Diluted 4,037,266 3,982,397
=============================
LOSS PER COMMON AND
COMMON SHARE EQUIVALENT:
Basic $(.07) $(.08)
=============================
Diluted $(.07) $(.08)
=============================
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
<?TABLE>
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</TABLE>
<TABLE>
<CAPTION>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED JUNE 30, 2000
(Unaudited)
ADDITIONAL
COMMON STOCK PAID-IN RETAINED TREASURY STOCK
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNT TOTAL
---------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE-
3/31/00 4,406,361 $73,450 $3,583,484 $5,518,241 401,764($1,860,651)$7,314,524
TREASURY
STOCK
ISSUED (37,112) 172,066 172,066
NET LOSS
FOR THE
PERIOD (274,155) (274,155)
--------- --------
BALANCE-
6/30/00 4,406,361 $73,450 $3,583,484 $5,244,086 364,652($1,688,585)$7,212,435
=====================================================================
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
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<TABLE>
<CAPTION>
EMCEE BROADCAST PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE (3) MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
THREE (3) MONTHS
06/30/00 06/30/99
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(274,155) $(300,327)
Adjustments:
Depreciation 67,172 66,698
Provision for doubtful accounts 12,000 9,000
(Increase) decrease in:
Accounts receivable (805,096) 117,502
Inventories (424,452) 20,010
Prepaid expenses (32,006) 51,680
Income taxes refundable (95,000)
Deferred income taxes (28,000) 21,000
Other assets 13,382 (1,500)
Increase (decrease) in:
Accounts payable 155,953 (260,034)
Accrued expenses 158,812 8,155
Deposits from customers 217,327 29,610
----------------------
NET CASH USED IN OPERATING ACTIVITIES (1,034,063) (238,206)
----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property, plant and equipment (13,632) (7,445)
Purchase of U. S. Treasury Bills (412,104) (607,551)
Proceeds from maturities of U.S. Treasury Bills 600,000 600,000
Purchase of Advanced Broadcast Systems, Inc. (400,000)
-----------------------
NET CASH USED IN INVESTING ACTIVITIES (225,736) (14,996)
-----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long term debt (26,400) (15,865)
Proceeds from line of credit borrowing 1,100,000 0
------------------------
NET CASH PROVIDED BY (USED IN)FINANCING ACTIVITIES 1,073,600 (15,865)
------------------------
NET DECREASE IN CASH (186,199) (269,067)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 261,304 1,572,423
------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $75,105 $1,303,356
========================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period:
Interest Expense $27,619 $13,839
Income Taxes $0 $0
Fair Value of Assets acquired and liabilities
assumed for purchase of Advanced Broadcast
Systems, Inc.
Equipment $245,000 0
Inventory 178,568 0
Accounts receivable 90,595 0
<PAGE>
Goodwill 272,571 0
Accounts Payable (44,529) 0
Accrued liabilities (20,139) 0
Inter-company payables (150,000) 0
Treasury Stock (172,066) 0
Cash paid $400,000 $0
=========================
<FN>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
</FN>
</TABLE>
<PAGE>
EMCEE BROADCAST PRODUCTS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The financial information presented as of any date other than March 31,
has been prepared from the books and records of the Company without audit.
Financial information as of March 31 has been derived from the audited
financial statements of the Company, but does not include all disclosures
required by generally accepted accounting principles. In the opinion of
management, the accompanying unaudited consolidated condensed financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly EMCEE Broadcast Products, Inc. and
Subsidiaries' financial position, and the results of their operations and
changes in cash flow for the periods presented.
2. The results of operations for the three-month period ended June 30, 2000
and 1999 and are not necessarily indicative of the results to be expected
forthe full year.
3. At June 30, 2000, cash equivalents included $14,576 invested in a money
market portfolio.
4. INVENTORIES consisted of the following:
June 30, 2000 March 31, 2000
(UNAUDITED)
FINISHED GOODS $602,000 $440,000
WORK-IN-PROCESS $778,000 $468,000
RAW MATERIALS $1,169,000 $728,000
MANUFACTURED COMPONENTS $1,134,333 $1,444,313
--------------------------
$3,683,333 $3,080,313
--------------------------
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).
5. INCOME (LOSS) PER SHARE. Basic income (loss) per share is computed by
dividing earnings (loss) applicable to common shareholders by the weighted
average number of common shares outstanding. Diluted income (loss) per share
is similar to basic income (loss) 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 the period ended June 30, 1999 because the assumed exercise of the options
would be anti-dilutive. The number of options and warrants that could
potentially dilute basic earnings(loss) per share that have been excluded from
the computation of diluted earnings(loss) per share were 315,200 at June
30,1999.
<PAGE>
<PAGE>
Kronick Kalada Berdy & Co.
Certified Public Accountants
190 Lathrop Street
Kingston, PA 18704
Independent Accountants' Report
Officers and Directors
EMCEE Broadcast Products, Inc.
We have reviewed the accompanying consolidated balance sheet of EMCEE
Broadcast Products, Inc. and subsidiaries as of June 30, 2000, and the
consolidated statements of loss, shareholders' equity and cash flows for the
three-months then ended. These financial statements are the responsibility of
the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements for them to be in
conformity with generally accepted accounting principals.
August 9, 2000
/s/ Kronick Kalada Berdy & Co.
Kronick, Kalada Berdy & Co.
<PAGE> EMCEE BROADCAST PRODUCTS, INC.
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net sales for the first quarter of fiscal 2001 which ended June 30, 2000,
totaled $1,680,000, an increase of 107% compared to the quarter ended June 30,
1999. One foreign customer accounted for approximately 45% of the shipments
for the first quarter of fiscal 2001. Also included in the sales amount was
$149,000 from a new subsidiary formed by an asset purchase agreement on April
17, 2000.
Although sales for the quarter ended June 30, 2000 were an improvement over
the quarter ended June 30, 1999, these shipments were 7% less than the
preceding quarter ended March 31, 2000, due primarily to a shortage of certain
critical component parts.
As shown by the opening paragraph, foreign shipments have historically been a
significant portion of the Company's sales and will continue, especially in
the next two quarters, as domestic demand is low. Foreign sales for the first
quarter for fiscal 2001, 2000 and 1999 comprised 69%, 56% and 40% of total
sales. The composition of these shipments to the following geographic regions
is as follows:
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<CAPTION> Quarter ending June 30
Region 2000* 1999* 1998*
(000's omitted)
---------------------
<S> <C> <C> <C>
Asia/Pacific Rim 819 141 386
Middle East 8 157 19
South America 20 35 79
North America 215 --- 143
Central America 10 16 39
Caribbean 4 72 41
Europe 43 23 151
Africa 23 --- 5
Other 17 8 10
--------------------
1,159 452 873
</TABLE>
*Based on customers with $2,500 or more
of sales
Although shipments for the quarter ended June 30, 2000 increased over the
first quarter one year ago, and gross profit increased from $107,000 to
$340,000 for the same periods, the low volume produced a loss from operations
of $400,000 for the first quarter of fiscal 2001 compared to a loss from
operations of $425,000 for the like period one year ago.
Gross margin equaled 20% of net shipments for the quarter ended June 30, 2000
is an improvement over the first quarter one year ago but was 13% less than
historical profitable periods of more than 33% due to low sales volume.
<PAGE>
Total operating expenses were $740,000 for the quarter ended June 30, 2000, an
increase of 39% over the same period one year ago.
Selling expense totaled $254,000 for the quarter ended June 30, 2000 compared
to $230,000 for the quarter ended June 30, 1999. An amount of $10,000 is
attributable to the aforementioned new subsidiary formed in April of 2000. An
additional $30,000 was incurred in the first quarter of fiscal 2000 for travel
expense, primarily in connection with the large foreign order which was
partially completed in the quarter. An increase occurred in salary and salary
related expense for the quarter ended June 30, 2000 as a domestic sales
manager was added in the fourth quarter of fiscal 2000. Offsetting this
increase were decreases in expenses for advertising and shows and
conventions.
General and administrative expense increased from $226,000 for the first
quarter ended June 30, 1999 to $368,000 for the first quarter ended June 30,
2000. This increase was primarily caused by the addition of the new
subsidiary general and administrative expense of $64,000 and a restoration of
salary and related expenses(including board of directors fees), that had been
reduced in the prior years'quarter.
Research and development expense for the first quarter of fiscal 2001 totaled
$118,000 compared to $76,000 for the first quarter one year ago. The Company
has added personnel and hired consultants in an effort to redesign equipment
to accept alternative component parts to alleviate part shortages, as well as
completing new transmitters for digital television (DTV) and high speed
Internet service.
Interest expense totaled $30,000 for the first quarter ended June 30, 2000
compared to $19,000 for the same period one year ago as the Registrant
utilized its line of credit to supplement cash flow in the first quarter of
fiscal 2001. Interest income was $36,000 and $40,000 for the same respective
periods as cash and cash equivalents were used for operations during the first
quarter ended June 30, 2000.
Other income (expense), net, was an expense of $3,000 for the first quarter
ended June 30, 2000 versus income of $5,000 for the quarter ended June 30,
1999. Other income for the quarter ended June 30, 1999 consisted mainly of
rental of equipment while the expense for the quarter ended June 30, 2000
included the return of rent for equipment turned into a sale.
Net loss before income tax benefits for the quarter ended June 30, 2000
totaled $397,000, which was reduced by a tax benefit of $123,000, thereby
reducing net loss to $274,000 which is equal to seven cents per common share
outstanding. Net loss before income tax benefits for the first quarter ended
June 30, 1999 was $398,000, which was reduced by a tax benefit of $98,000,
thereby reducing net loss to $300,000, or eight cents per common share
outstanding. The difference between the tax benefit
of $123,000 for the quarter ended June 30, 2000 and the tax benefit of $98,000
for the period ended June 30, 1999 is due to the portion of foreign sales for
the two periods as the Registrant maintained a Foreign Sales Corporation (FSC)
subsidiary. There are no state tax liabilities for either periods under
discussion since all profitable companies are domiciled in jurisdictions that
do not impose income taxes.
Cash and cash equivalents decreased from $261,000 as of March 31, 2000 to
$75,000 as of June 30, 2000. The Registrant's investment in U.S. Treasury
<PAGE>
Bills decreased $188,000 for the same periods in order to offset negative cash
flow from the loss for the period ended June 30, 2000. In addition, new
borrowings of $1,100,000 on the line of credit from the Company's lending
institution were made to purchase inventory (which increased from $3,080,000
as of March 31, 2000 to $3,683,000 as of June 30, 2000), and to fund the
purchase of the assets of Advanced Broadcast Systems, Inc.
(ABS) in April of 2000.
Inventory purchases included materials and O.E.M. (original equipment
manufactured by others) for the large foreign contract to be completed in the
second quarter of fiscal 2001 and approximately $145,000 included in the ABS
purchase.
Accounts receivable net of reserve for doubtful accounts increased from
$1,453,000 as of March 31, 2000 to $2,336,000 as of June 30, 2000 as expanded
credit terms were given to the foreign contract mentioned above. The
Registrant anticipates collection of the balance by September 30, 2000 and
will use the proceeds to repay the balance of the line of credit. The reserve
for doubtful accounts was increased from $70,000 as of March 30, 2000 to
$82,000 to recognize the additional exposure.
Prepaid expense totaled $112,000 as of June 30, 2000, an increase of $32,000
over the balance as of March 31, 2000 due to pre-payments of approximately
$24,000 for insurance and remainder for shows and conventions.
Income taxes refundable of $497,000 and deferred income taxes of $248,000 as
of June 30, 2000 increased from $402,000 and $220,000, respectively, as of
March 31, 2000 and reflect the loss from the quarter and temporary timing
differences.
Accounts payable increased from $368,000 as of March 31, 2000 to $569,000 as
of June 30, 2000 due to purchases for the large foreign sales order mentioned
previously. The Company has also increased purchases of certain components it
anticipates may have shortages or long lead times.
Other accrued expenses increased from $438,000 as of March 31 ,2000 to
$615,000 as of June 30, 2000. The major portions of both balances include
accrued commission to outside interests accrued, but not paid as of the
respective periods.
Property, plant and equipment increased a net $191,000 as of June 30, 2000
compared to March 31, 2000. Purchases consisted of $259,000 of which $245,000
was for the purchase agreement referred to previously. Depreciation for the
quarter ended June 30, 2000 totaled $67,000 of which $20,000 was for the ABS
asset purchase of April 17,2000.
Other assets increased from $1,292,000 as of March 31, 2000 to $1,402,000 as
of June 30, 2000. Included in the balance at June 30, 2000 is an amount of
$333,000 for goodwill in connection with the purchase of assets of the new
company. The remainder as of June 30, 2000 consists primarily of investments
in high speed Internet companies of $714,000 (same as of March 31, 2000), a
promissory note, plus interest, from a principal of one of the members in the
Limited Liability Corporation's (LLC)investment, and accounts receivable of
$211,000 ($282,000 as of March 31, 2000) with a collection period of more than
one year. The note receivable and interest of $115,000 was due June 12, 2000
subsequent to June 30, 2000. Subsequent to June 30,2000, an agreement has
<PAGE>
been reached in which the Company will receive an additional
investment in a LLC in exchange for the note.
Long-term debt decreased from $702,000 as of March 31, 2000 to $676,000 as
scheduled payments were made.
Shares of treasury stock decreased during the first quarter of fiscal 2000 by
37,112 shares equal to $172,000, which are held in an escrow account as part
of the payment for the asset purchases agreement of ABS in April of 2000.
The Registrant believes that its working capital coupled with cash flow from
operations will be sufficient to fund anticipated working capital and debt
funding requirements for fiscal 2001.
Employment for the Company totaled 60 full time employees and 2 part time
employees. Included in this figure are seven full time employees for the new
subsidiary.
The backlog of unsold order for the Company, including the new subsidiary,
totaled $2,176,000 as of June 30, 2000 compared to $1,367,000 as of March 31,
2000. Approximately 41% of the backlog represents a single company and 64%
represents foreign customers.
Large corporations such as WorldCom and Sprint have been acquiring
Multichannel Multipoint Distribution Service (MMDS) licenses for domestic
communications use, which includes high speed Internet service. The Company's
management believes that this service, which utilizes transmitters produced
by the Company, and the interest in the MMDS industry created by the
involvement of Sprint and WorldCom will create a demand for its product in
the latter half of the fiscal year.
The Registrant is also developing transmitters for the digital television
service (DTV), which will be required for all television stations by the year
2003.
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 and Internet products,),
technological changes, economic conditions, litigation and other factors,
risks and uncertainties identified in the Company's Securities and Exchange
Commission filings.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS
There is no information relevant to the Registrant which must be disclosed
under this item.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
EMCEE BROADCAST PRODUCTS, INC.
Date: August 11, 2000 /s/ JAMES L. DeSTEFANO
JAMES L. DeSTEFANO
President/CEO
Date: August 11, 2000 /s/ ALLAN J. HARDING
ALLAN J. HARDING
Vice President-Finance
