<PAGE>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 2 TO
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the quarterly period ended September 26, 1998
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------------- -------------
Commission File Number 0-3704
NAI TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
New York 11-1798773
<S> <C>
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
282 New York Avenue, Huntington, New York 11743
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: (516) 271-5685
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
--- ---
As of January 18, 1999, 9,192,067 shares of NAI Technologies, Inc.'s $.10 par
value Common Stock were outstanding.
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EXPLANATORY STATEMENT
This Form 10-Q/A is being filed by NAI Technologies, Inc., a New York
corporation ("NAI" or the "Company"), as Amendment No. 2 to its Quarterly Report
on Form 10-Q for the quarterly period ended September 26, 1998 to (a) make
certain amendments to Part I, Item 1--Notes to Consolidated Financial Statements
thereof, (b) make certain amendments to Part I, Item 2--Management's Discussion
and Analysis of Financial Condition and Results of Operations thereof, (c)
delete the reference to "Exhibit 11--Statement re: Computation of Per Share
Earnings" in Part II, Item 6--Exhibits thereof and (d) delete Exhibit 11
thereof.
2
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PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
* * *
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
* * *
The foregoing Section is amended to include the following additional
information:
Statement re: Computation of Per Share Earnings
- -----------------------------------------------
NAI TECHNOLOGIES, INC. AND SUBSIDIARIES
(In thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
Three Months Ended
Sep 26, Sep 27,
1998 1997
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income (loss) from continuing operations ($521) ($3,409)
Average shares of common stock outstanding during the period 9,174 9,133
------------- -------------
Basic Earnings per share ($0.06) ($0.37)
============= =============
Net Income (loss) (521) (3,409)
Interest on Convertible Debt (Net of Taxes) 0 0
Amortization of OID (Net of Taxes) 0 0
Amortization of Deferred Debt Expense (Net of Taxes) 0 0
------------- -------------
Adjusted Net Income (521) (3,409)
============= =============
Average shares of common stock outstanding during the period 9,174 9,133
Incremental shares from assumed exercise of stock options, stock
warrants & employee stock purchase plan 0 0
Dilution from Convertible Debt 0 0
Total shares used to calculate diluted EPS 9,174 9,133
------------- -------------
Diluted earnings per share ($0.06) ($0.37)
============= =============
</TABLE>
3
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NAI TECHNOLOGIES, INC. AND SUBSIDIARIES
(IN THOUSANDS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
NINE MONTHS
ENDED
SEP 26, SEP 27,
1998 1997
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income (loss) from continuing operations $ 37 ($2,529)
Average shares of common stock outstanding during the period 9,162 9,079
----- -------
Basic Earnings per share $0.00 ($ 0.28)
----- -------
Net Income (loss) 37 (2,529)
Interest on Convertible Debt (Net of Taxes) 0 0
Amortization of OID (Net of Taxes) 0 0
Amortization of Deferred Debt Expenses (Net of Taxes) 0 0
----- -------
Adjusted Net Income 37 (2,529)
===== =======
Average shares of common stock outstanding during the period 9,162 9,079
Incremental shares from assumed exercise of stock options,
stock warrants & employee stock purchase plan 2 0
Dilution from Convertible Debt 0 0
Total shares used to calculate diluted EPS 9,164 9,079
----- -------
Diluted earnings per share $0.00 ($ 0.28)
===== =======
</TABLE>
4
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Management's Discussion and Analysis of Financial Condition and Results of
Operations is deleted in its entirety and replaced with the following:
"On July 7, 1998, the NAI board passed a resolution to discontinue the
operations comprising NAI's Telecommunications segment, which consists of one
wholly-owned subsidiary, Wilcom, Inc. It is anticipated that all of the issued
and outstanding shares of Wilcom, Inc. will be sold to Wilcom Acquisition Corp.
pursuant to the Wilcom stock purchase agreement. The operating results for
Wilcom, Inc. are accounted for as discontinued operations. Accordingly, its
operations are segregated in the accompanying financial statements. The
financial statements for all prior reporting periods and all figures in the
NAI's management's discussion and analysis of financial conditions and results
of operations have been reclassified for amounts associated with Wilcom, Inc.
The second quarter 1998 results include a provision of $2,692,000 which is the
estimated loss on disposal including an estimate of future losses to be incurred
prior to the actual disposal of Wilcom, Inc. of $192,000. The disposition of
Wilcom, Inc. will proceed whether or not the merger with DRS is consummated.
Wilcom Acquisition Corp. is a Delaware corporation in which Charles S. Holmes
and Dennis McCarthy, two current directors of NAI, own all the outstanding
capital stock; Mr. Holmes is the majority stockholder of Wilcom Acquisition
Corp. Wilcom Acquisition Corp. will purchase Wilcom, Inc. for a purchase price
of (1) $150,000 and (2) Mr. Holmes' surrender of (a) 300,000 warrants to
purchase shares of NAI common stock at an exercise price of $3.00 per share and
(b) 1,700,000 NAI warrants with an exercise price of $2.50 per share held by Mr.
Holmes.
Third Quarter 1998 Compared with Third Quarter 1997
- -----------------------------------------------------
The nature of the Company's business is such that year to year changes in sales
levels are predominantly due to changes in shipping volume or product mix rather
than changing sales prices. Net sales for the third quarter of 1998 were $10.0
million, a 15% decrease when compared with $11.8 million for the same period in
1997.
5
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The following chart provides the sales breakdown by subsidiary:
<TABLE>
<CAPTION>
In thousands of dollars 1998 1997 % Change
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Rugged Systems Segment
Codar Technology, Inc. $3,832 $ 2,743 40%
Lynwood Rugged Systems Ltd. 5,069 4,525 12%
Inter-company (91) (32)
--------------------------
Total Rugged Systems Segment 8,810 7,236 22%
Systems Integration Segment
NAI Systems Division 1,217 4,595 (74%)
Inter-company (6) -
--------------------------
Total Systems Integration Segment 1,211 4,595 (74%)
TOTAL $10,021 $11,831 (15%)
===========================
</TABLE>
Sales in the Rugged Systems Segment (net of intercompany eliminations) increased
22% to $8.8 million from $7.2 million for the same period in 1997. The increased
sales were attributable to a 12% sales increase at Lynwood and a 40% sales
increase at Codar.
The sales increase at Lynwood was attributable to strong bookings and increased
export sales from the United Kingdom. Codar's sales increase was attributable to
higher sales on the CHS II contract in the third quarter of 1998 as compared to
the third quarter of 1997. The CHS II contract is an IDIQ (indefinite delivery
indefinite quantity) and revenue will vary in each quarter.
Sales in the Systems Integration Segment (net of intercompany eliminations)
decreased 74% to $1.2 million from 4.6 million for the same period in 1997. The
decrease in sales at the Systems division is attributable to a delay in
anticipated orders from the National Security Agency. The delay in orders is
believed to be due to changes in the Agency's fiscal 1998 budget as a result of
priority modifications by the Agency. Although delayed, the Company believes the
anticipated orders will be forthcoming now that the U.S. Government fiscal 1999
Budget is approved. However, there can be no assurance that such orders will be
received.
In recent years the Company has reduced its dependency on the United States
defense budget by expanding its non-military and export business operations.
However, the Company still expects approximately 35% of 1998 sales to be
directly to the U.S. military or through prime contractors to the U.S. military.
The Company is not aware of any programs in which it participates that are
specifically targeted for termination or curtailment. The Company's products are
utilized on many different U.S. Government programs, which reduces the adverse
impact of the cancellation of a single specific program. However, changes in
future U.S. defense spending levels could impact the Company's future sales
volume.
The gross margin percentage for the third quarter 1998 was 24.3%, as compared
with 1.0% in the comparable quarter of 1997. The following chart provides the
gross margin percentage by subsidiary.
<TABLE>
<CAPTION>
1998 1997
- - ------------------------------------------------------------------------
<S> <C> <C>
Codar Technology, Inc. 23.6% (75.9)%
NAI Systems Division 10.8% 18.4%
Lynwood Rugged Systems Ltd. 27.6% 29.8%
</TABLE>
6
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The improved margins at Codar are attributable to continued cost reduction
efforts at the Company, an ongoing emphasis to compete for higher margin work
and better cost absorption of fixed costs as a result of the increased sales.
Codar's 1997 margin was adversely impacted by a $3.0 million charge
substantially related to an inventory write-down which resulted from lower than
expected sales along with the final withdrawal from electronic printer products
and the addition of certain more advanced Codar products on the CHS II program.
The lower gross margin percentage at NAI Systems Division is primarily
attributable to decreased shipping volumes and consequent under absorption of
fixed overhead expenses. Lynwood's margins were lower due to a less favorable
product mix and higher engineering expenditures in cost of sales due to the
change in mix between developmental and mature product contract awards.
Selling expense for the third quarter of 1998 was $0.9 million as compared to
0.7 million in the same period in 1997. This increase is attributable to higher
selling expense at Lynwood, due to higher sales volumes.
General and administrative expense for the third quarter of 1998 was 1.2 million
as compared to 1.3 million in 1997. Included in the 1998 general and
administrative expense is approximately $0.3 million related to merger expenses
associated with the proposed DRS transaction described earlier in this document.
Company-sponsored research and development expenditures for the third quarter of
1997 and 1998 were relatively unchanged at $0.2 million for both periods. The
company expects that internal research and development expenditures will remain
relatively constant for the remainder of 1998.
For the third quarter of 1998, the Company reported operating income of $0.04
million as compared with an operating loss of $2.2 million for the same period
in 1997.
Interest expense and amortization of deferred debt costs, net of interest
income, was $0.4 million for the third quarters of 1998 and 1997.
For the third quarter 1998, the Company accrued an income tax expense of $0.14
million as compared with an income tax expense of $0.13 million in 1997. The
entire tax expense for both periods pertains to the Company's Lynwood subsidiary
located in the U.K. Lynwood's earnings are taxed in the U.K. and, while the
Company has a U.S. net operating loss carry-forward, it is required to pay taxes
in the U.K. The Company is unable to recognize the future tax benefit associated
with its U.S. operating loss carry-forwards due to uncertainties as to whether
or not a future benefit will be realized.
For the third quarter of 1998 the Company recorded a loss from continuing
operations of $0.5 million as compared with a loss from continuing operations of
$2.8 million in the third quarter of 1997. The loss from discontinued operations
were $0.0 million and $0.6 million in the third quarter 1998 and 1997
respectfully. Net loss for the third quarter was $0.5 million as compared to a
net loss of $3.4 million in the third quarter of 1997. The basic loss per share
from continuing operations was $(0.06) per share as compared with a loss of
$(0.31) per share for the same period in 1997, based on a weighted average of
9.2 million and 9.1 million shares outstanding, respectively. The basic loss per
share from discontinued operations was $0.00 per share as compared with $(0.07)
per share for the same period in 1997, based on a weighted average of 9.2
million and 9.1 million shares outstanding, respectively. The basic loss per
share was $(0.06) per share as compared with $(0.37) per share for the same
period in 1997, based on a weighted average of 9.2 million and 9.1 million
shares outstanding, respectively. The diluted loss per share from continuing
operations was $(0.06) per share as compared with a loss of $(0.31) per share
for the same period in 1997, based on a weighted average of 9.2 million and 9.1
million shares outstanding, respectively. The diluted loss per share from
discontinued operations was $0.00 per share as compared with $(0.07) per
share for the same period in 1997, based on a weighted average of 9.2 million
and 9.1 million shares outstanding, respectively. The diluted loss per share
was $(0.06) per share as compared with $(0.37) per share for the same period
in 1997, based on a weighted average of 9.2 million and 9.1 million shares
outstanding, respectively.
Nine Months 1998 Compared with Nine Months 1997
The nature of NAI's business is such that year to year changes in sales
levels are predominantly due to changes in shipping volume or product mix rather
than changing sales prices. Net sales for the nine months of 1998 were $34.7
million, a 5% decrease when compared with $36.7 million for the same period in
1997.
7
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<PAGE>
The following chart provides the sales breakdown by subsidiary:
<TABLE>
<CAPTION>
In Thousands of Dollars 1998 1997 % Change
----------------------- ---------- --------- --------
<S> <C> <C> <C>
RUGGED SYSTEMS SEGMENT
Codar Technology, Inc. $ 11,875 $ 10,977 8%
Lynwood Rugged Systems Limited 16,261 13,278 22%
Inter-company (272) (456) --
-------- --------
Total Rugged Systems Segment 27,864 23,799 17%
SYSTEMS INTEGRATION SEGMENT
NAI Systems Division 7,531 12,967 (42)%
Inter-company (651) (108) --
-------- --------
Total Systems Integration Segment 6,880 12,859 (46)%
-------- --------
Total $ 34,744 $ 36,658 (5)%
-------- --------
-------- --------
</TABLE>
Sales in the Rugged Systems segment (net of intercompany eliminations)
increased 17% to $27.9 million from $23.8 million for the same period in 1997.
The increased sales were attributable to a 22% sales increase at Lynwood and a
8% sales increase at Codar.
The sales increase at Lynwood was attributable to strong bookings and
increased export sales from the United Kingdom. New orders for the first nine
months of 1998 were more than double the comparable figure in 1997. Lynwood
attributes its strong booking performance to:
establishment of a high profile in the major European markets of France,
Germany, Italy, Spain, Norway and Sweden and the high degree of
collaboration now taking place between the major defense companies in these
countries and the UK defense base;
an increased focus within the United Kingdom to take advantage of Lynwood's
rugged COTS capabilities by targeting a number of vertical product areas
such as "embedded avionics computers," "combat system consoles" and "battle
management systems"; and
increased emphasis on opportunities in the Far East to take advantage of
Lynwood's ability to satisfy contractual off-set requirements now
that it has established a manufacturing presence in Australia.
Codar's sales increase was attributable to higher sales on the CHS II contract
in the first nine months of 1998 as compared to the first nine months of 1997.
The CHS II contract is an IDIQ (indefinite delivery indefinite quantity) and
revenue will vary in each quarter.
Sales in the Systems Integration segment (net of intercompany eliminations)
decreased 46% to $6.9 million from $12.9 million for the same period in 1997.
The decrease in sales at the Systems division is attributable to a delay in
anticipated orders from the National Security Agency. The delay in orders is
believed to be due to changes in the Agency's fiscal 1998 budget as a result of
priority modifications by the Agency. The National Security Agency is the major
customer (in excess of 90% of segment sales) of the Systems Integration segment.
If it were to stop awarding business to this segment, the impact on
profitability would be significant both to the segment and NAI and most likely
would result in a significant reduction in size in the NAI Systems Division.
Because the Agency's work is custom work, no inventory is procured in advance of
receipt of contract awards. Therefore, a significant decline in future agency
orders would not necessitate any inventory adjustments. As of December 9, 1998,
only $1,146,000 of the $11,000,000 in orders that were expected to be placed in
the near term have been booked. It is believed that some additional delays in
placing the orders have resulted from the fact that several agencies are waiting
for authorization to
8
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<PAGE>
make 1999 expenditures. Although delayed, NAI believes the anticipated orders
will be forthcoming now that the U.S. government fiscal 1999 budget is approved.
However, there can be no assurance that such orders will be received.
In recent years NAI has reduced its dependency on the United States defense
budget by expanding its non-military and export business operations. However,
NAI still expects approximately 35% of 1998 sales to be directly to the U.S.
military or through prime contractors to the U.S. military. NAI is not aware of
any programs in which it participates that are specifically targeted for a
termination or curtailment. NAI's products are utilized in many different U.S.
government programs, which reduces the adverse impact of the cancellation of a
single specific program. However, changes in future U.S. defense spending levels
could impact NAI's future sales volume.
The gross margin percentage for the nine months of 1998 was 24.4%, as
compared with 18.2% in the comparable period of 1997. The following chart
provides the gross margin percentage by subsidiary.
<TABLE>
<CAPTION>
1998 1997
----- ------
<S> <C> <C>
Codar Technology, Inc. 19.9% (8.6)%
NAI Systems Division 23.0% 24.8%
Lynwood Rugged Systems Limited 26.9% 33.3%
</TABLE>
The improved margins at Codar are attributable to better cost absorption
associated with higher sales, continued cost reduction efforts, as well as an
emphasis on competing for higher margin work. Codar's 1997 margin was adversely
impacted by a $3.0 million charge substantially related to an inventory
write-down which resulted from lower than expected sales along with the final
withdrawal from electronic printer products and the addition of certain more
advanced Codar products on the CHS II program.
The lower gross margin percentage at NAI Systems Division is primarily
attributable to decreased shipping volumes and the consequent under absorption
of fixed overhead expenses. Lynwood's margins were lower due to an unfavorable
product mix and higher engineering expenditures associated with recent new
contract awards. Margins at Lynwood should improve as these contracts evolve
into mature production work.
Selling expense for the nine months of 1998 was $2.4 million as compared to
$2.3 million for the same period in 1997.
General and administrative expenses for the nine months of 1998 were $3.4
million as compared to $3.2 million in the same period in 1997. This increase is
primarily attributable to merger related expenses of $0.47 million.
NAI-sponsored research and development expenditures for the nine months of
1998 were $0.4 million as compared with $0.7 million for the same period in
1997, which represents a decrease of 44%. The decrease is attributable to a
change in the mix between NAI-sponsored research and development and customer
funded engineering.
For the nine months of 1998, NAI reported operating income of $1.9 million
as compared with operating income of $0.02 million for the same period in 1997.
Interest expense and amortization of deferred debt costs, net of interest
income, was $1.3 million and $1.4 million for the nine months of 1998 and the
nine months of 1997, respectively.
9
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For the nine months of 1998 and 1997, NAI recorded income tax expense of
$0.5 million. The entire tax expense in both periods pertains to NAI's Lynwood
subsidiary located in the U.K. The apparent high effective tax rate is due to
the profitability of the NAI foreign operations in the U.K which are accruing
tax expense while the U.S. domestic operations are incurring losses for which no
tax benefit is being recognized in accordance with applicable accounting rules.
For this reason, NAI is accruing tax expense even though the consolidated
operations are showing a pre-tax loss. The figures for the nine months ended
September 26, 1998 are as follows:
<TABLE>
<CAPTION>
Taxable Income* Tax Expense Effective Rate
--------------- ----------- ---------------
<S> <C> <C> <C>
Domestic ($1,114,000) $ -0-
Foreign $1,665,000 $514,000 31%
========== ========
$551,000 $514,000 93%
========== ========
</TABLE>
*Before loss from discontinued operations
Liquidity and Capital Resources
Cash and cash equivalents totaled $2.0 million at September 26, 1998, as
compared to $0.6 million at December 31, 1997. Cash provided by operating
activities amounted to $0.9 million in the first nine months of 1998, as
compared to $0.8 million in the comparable period of 1997. During the first nine
months, accounts receivable decreased by $0.1 million, inventory decreased by
$0.7 million, and accounts payable and other accrued expenses decreased by $1.0
million from December 31, 1997, respectively.
During the nine months ended September 26, 1998, NAI had borrowings of long
term debt and notes payable of $3.4 million, and had payments of long term debt
and notes payable of $2.9 million. Net borrowings of $0.5 million were used for
working capital purposes. From time to time, borrowings are necessary because of
the timing differences between payments due to NAI's vendors and the payment of
related receipts by NAI's customers. Payments due to vendors tend to precede the
payment of related receivables. At various times during the year NAI borrows
funds in the first month of each quarter in order to meet its financial
obligations to its vendors. This is necessitated because a disproportionate
amount of NAI's quarterly shipments take place in the last three weeks of the
quarter. Because of this shipment schedule, the first month of the following
quarter usually results in low receivable collections and high vendor payments.
This is usually reversed as the quarter progresses and the borrowed funds are
paid back to the extent possible.
At September 26, 1998 NAI's outstanding borrowing under NAI's credit
agreement was $6.5 million. NAI will be required to repay $750,000 on December
31, 1998. The remaining amount outstanding is due and payable on January 15,
1999.
As of September 26, 1998 NAI would have been in violation of the
consolidated current ratio and consolidated quick ratio debt covenants under its
credit agreement had it not received a waiver from its two lending banks. At the
same time, NAI also received a waiver to allow it to defer a required principal
payment of $750,000 until the maturity of the loan on January 15, 1999. The
terms of the waivers provide that NAI must comply with all of the terms of its
credit agreement. The waivers also require the Secretary or Executive Vice
President of NAI to certify periodically to the lenders that NAI is not in
default under the terms of its credit agreement and that NAI's representations
and warranties set forth in its credit agreement continue to be true and
accurate. The covenant waivers will expire on the fiscal quarter ended December
31, 1998 at which time NAI anticipates that it will once again be in violation
of the same two covenants. It is NAI's intention to request a waiver on the two
covenants as well as a deferral on the principal requirement of $750,000. If the
banks were to refuse to grant such a waiver, NAI would be in default under the
terms of its credit agreement, and the entire loan balance currently amounting
to $6,500,000 would be due immediately. It is unlikely that NAI would be able to
make the payment in this schedule without an alternative financing plan in
place.
No plans are in place to cure the inadequate cash flow situation. NAI's
cash flow is a major reason why the NAI board is in favor of the merger. It is
the intent of DRS to use a portion of the proceeds from the Mellon credit
agreement to pay down the entire outstanding principal and interest amounts
under NAI's credit agreement. NAI has had preliminary discussions with its two
principal banks regarding the need to refinance the January 1999 balloon payment
requirement. However, the banks have not made any commitment regarding the
loans. Although the NAI board has discussed the possibility of alternative
financing, NAI has not approached any new potential lenders. The NAI board
believes that it is difficult to approach potential lenders when the perception
is that NAI will be merging with DRS in the near future.
10
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Inflation
NAI's financial statements are prepared in accordance with historical
accounting systems, and therefore, do not reflect the effect of inflation. The
impact of changing prices on the financial statements is not considered to be
significant.
Year 2000
NAI's Year 2000 Project is proceeding on schedule. NAI's Year 2000 Project
is addressing the issue of computer and embedded computer chips being unable to
distinguish between the year 1900 and the year 2000.
NAI's Year 2000 Project is divided into three major sections: (1) IT
Systems (infrastructure and applications software); (2) External Agents
(third-party suppliers and customers); and (3) Product Issues (Year 2000
issues inherent in products sold by NAI).
The IT Systems section evaluates hardware and systems software. This
section is on schedule, and NAI estimates that approximately 95% of the
activities related to this section were completed as of September 26, 1998. All
IT Systems activities are expected to be completed by December 31, 1998.
The External Agents section includes the process of identifying and
prioritizing critical suppliers and customers at the direct interface level, and
communicating with them about their plans and progress in addressing the Year
2000 problem. Detailed evaluations of the most critical third parties have not
yet been initiated but will commence before December 31, 1998 and should be
completed by mid-1999. These evaluations will be followed by the development of
contingency plans, if considered necessary.
The Product Issues section includes the process of identifying any products
sold by NAI which may not be Year 2000 compliant, determining a corrective
course of action and disseminating relevant information to customers. Detailed
evaluations have recently begun, are approximately 15% complete and scheduled to
be completed by mid-1999.
The total cost associated with required modifications to become Year 2000
compliant is not expected to be material to NAI's financial position.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect NAI's results of
operations, liquidity and financial condition. Due to the general uncertainty
inherent in the Year 2000 problem, resulting in part from the uncertainty of the
Year 2000 readiness of third-party suppliers and customers, NAI is unable to
determine at this time whether the consequences of Year 2000 failure will have a
material impact on NAI's results of operations, liquidity or financial
condition. NAI's Year 2000 Project is expected to reduce significantly NAI's
level of uncertainty about the Year 2000 problem. NAI believes that, with the
completion of its Year 2000 Project as scheduled, the possibility of significant
interruptions of normal operations should be reduced.
The Company does not currently have any contingency plans in place to
address the failure of timely conversion of its and/or third-party systems in
respect of the Year 2000 issue.
This document may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These statements are based
on current plans and expectations of NAI Technologies, Inc. and involves risks
and uncertainties that could cause actual future activities and results of
operations to be materially different from those set forth in the forward-
looking statements. Important factors that could cause actual results to differ
include, among others, changes in government purchasing policies and budget
constraints, competition, the continuity of booking trends, the absence of
supply interruptions, new products' market acceptance and warranty
performance."
11
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S I G N A T U R E S
-------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Amendment No. 2 to Quarterly Report to be signed
on its behalf by the undersigned thereunto duly authorized.
NAI TECHNOLOGIES, INC.
(Registrant)
<TABLE>
<S> <C>
DATE January 22, 1999 By: /s/ Richard A. Schneider
---------------------- ------------------------------------
Richard A. Schneider
Executive Vice President
(On behalf of the registrant and as
Principal Financial Officer)
</TABLE>
. 12
