UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1999
Commission file number 0-13763
TECHNOLOGY RESEARCH CORPORATION
(Exact name of registrant as specified in its charter)
Florida 59-2095002
(State or other jurisdiction of (I.R.S. Employer
incorporation or Organization) Identification No.)
5250 140th Avenue North, Clearwater, Florida 33760
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (727) 535-0572
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.51 par value
(Title of Class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not 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-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of common stock held by non-affiliates of the
Registrant, as of June 9, 1999 was $9,077,361, based upon the $1.875 closing
sale price for the Common Stock on the NASDAQ National Market System on such
date. For the purposes of this computation, all executive officers and
directors of the Registrant have been deemed to be affiliates. Such
determination should not be deemed to be an admission that such directors and
officers are, in fact, affiliates of the Registrant.
As of June 9, 1999, the number of shares outstanding of the Registrant's
common stock, $.51 par value, was 5,455,756.
DOCUMENTS INCORPORATED BY REFERENCE
The Registrant's Proxy Statement related to its 1999 Annual Meeting of
Shareholders to be held on August 26, 1999 will be incorporated by reference
into Part III of this Form 10-K and be filed with the Securities and Exchange
Commission no later than July 16, 1999.
TABLE OF CONTENTS
PART I Page
Item 1. Business .................................................... 3
Item 2. Properties .................................................. 12
Item 3. Legal Proceedings ........................................... 12
Item 4. Submission of Matters to a Vote of Security Holders ..........12
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters ................................. 13
Item 6. Selected Financial Data ..................................... 14
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ......................... 15
Item 8. Financial Statements and Supplementary Data ................. 20
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ...................... 20
PART III
Item 10. Directors and Executive Officers of the Registrant .......... 21
Item 11. Executive Compensation ...................................... 21
Item 12. Security Ownership of Certain Beneficial
Owners and Management ....................................... 21
Item 13. Certain Relationships and Related Transactions .............. 21
PART IV
Item 14. Exhibits, Financial Statements Schedules,
and Reports on Form 8-K ..................................... 21
SIGNATURES ........................................................... 24
Part I
ITEM 1. BUSINESS
General
The Company was incorporated in Florida in June 1981 with the intended
purpose of pursuing orders for products to be designed and manufactured for
sale to the military engine generator set controls market, a segment with
respect to which the Company's founders had acquired substantial experience.
The Company currently designs, develops, manufactures and markets electronic
control and measurement devices related to the distribution of electrical power
and specializes in electrical safety products that prevent electrical fires and
protect people from electrocution and serious injury from electrical shock.
Such products include ground fault protective devices, fire prevention devices
for fires caused by aging appliance and extension cords, controls for
electrical power generating systems, transformers and magnetics. These
products are used in providing safe and efficient utilization and controlled
distribution of electricity and have consumer, commercial and governmental
applications in the United States and throughout the world.
Until the year ended March 31, 1989, a majority of the Company's revenues
were derived from sales of military products. The Company believes that its
successful design of ground fault devices for both personnel and equipment
protection as well as meeting electrical safety requirements for personal
care products, have formed the basis for the Company's success in the
consumer/commercial, non-military markets.
Net sales contributed by commercial and military products are as follows:
Year Ended
March 31 Commercial % Military % Total
-------- ---------- ---- -------- ---- ----------
1999 $ 13,929,177 81.4 $ 3,190,542 18.6 $ 17,119,719
1998 13,434,352 74.2 4,667,433 25.8 18,101,785
1997 12,803,181 85.3 2,200,413 14.7 15,003,594
1996 14,541,301 87.7 2,040,000 12.3 16,581,301
1995 18,095,134 86.4 2,840,423 13.6 20,935,557
Royalties from license agreements are as follows:
Year Ended
March 31 Royalties
-------- ---------
1999 $ 91,295
1998 329,166
1997 381,977
1996 797,920
1995 837,399
The Company's backlog of unshipped orders at March 31, 1999 was approximately
$2,000,000. This backlog consists of approximately 30% commercial product
orders and approximately 70% military product orders, all of which is expected
to ship within Fiscal Year 2000.
-3-
Commercial Products and Markets
Ground fault protective devices protect equipment and people against electrical
faults which can occur between electrically "live" conductors and ground.
These ground fault conditions can damage equipment, start fires, or seriously
or fatally injure humans.
Ground Fault Circuit Interrupters ("GFCI") and Appliance Leakage Circuit
Interrupters ("ALCI") provide protection from dangerous electrical shock by
sensing leakage of electricity and cutting off power. Equipment Leakage
Current Interrupters ("ELCI") detect current leakage within equipment such as
copy machines, printers and computers. GFCIs are currently available in three
types: circuit breaker, receptacle and portable. The Company specializes in
the portable types of these products.
A ground fault is a condition where electric current finds an unintentional
path to ground such as through the exposed metal parts of an appliance or tool.
Faults occur because of damage that causes internal wiring to touch these
exposed metal parts or because an appliance or tool gets wet. Upon such
occurrence, the entire device can become as electrically alive as the power
line to which it is attached. If a person is touching such a live device while
grounded (by being in contact with the ground or, for example, a metal pipe,
gas pipe, drain or any attached metal device), that person can be seriously or
fatally injured by electric shock. Fuses or circuit breakers do not provide
adequate protection against such shock, because the amount of current necessary
to injure or kill a normal adult is far below the level of current required for
a fuse to blow or a circuit breaker to trip. GFCIs constantly monitor
electric current, and as long as the amount of current returning from the
device is equal to the amount that is directed to the device, the GFCI
performs no activities. Conversely, if there is less current coming back
than there is flowing into the device, some portion must be taking a path
through a foreign body, thereby creating a hazard. Upon recognizing that
condition, the GFCI terminates the flow of electricity instantaneously.
An ALCI is a device intended to be used in conjunction with an electrical
appliance whose function is to interrupt both conductors of the electric
circuit to a load when a fault current to ground exceeds 4 - 6 mA (milli-
amperes) and is less than that required to operate the overcurrent protection
device of the circuit. The ALCI is intended to be used only in a circuit that
has a solidly grounded neutral conductor, and is not intended to be used in
place of a GFCI in applications where the GFCI is required. ALCIs are
considered "personnel protection" devices. This product is intended for
portable and short-time use, and should be used only while attended; for
example, with kitchen appliances, floor care products, hair dryers, and the
like, which are connected to a power supply circuit by means of a flexible
cord terminating in an attachment plug.
An ELCI is a device intended to protect equipment from excessive electrical
leakage current that could occur due to the breakdown of insulation between
live and grounded parts which could cause fires and other damage. Xerox
Corporation uses the Company's ELCI products to protect many of its business
machines. The Company also has a unique versatile consumer ELCI product called
the "Electra Shield" which, in addition to fire prevention capabilities, also
provides three-mode surge suppression, power line filtering, and facsimile
modem surge protection. This unique product offers multimedia protection for
home and office personal computers, fax modems, TV and entertainment systems.
-4-
Government and industry research into the major causes of fire has led to a
search for new, cost-effective methods to prevent electrical fires. In
response to this need, the Company developed and patented "Fire Shield", a
product designed to prevent fires caused by damaged or aging appliance power
supply cords and extension cords, which have been identified as a leading cause
of electrical fires. On June 1, 1999, the Company announced major enhancements
to its "Fire Shield" line of appliance power supply cords that will add a
higher degree of safety against fire and electric shock for two wire
appliances. These new capabilities have significant safety benefits to the
consumer. These enhancements are based on feedback from the industry and from
the staff of the United States Consumer Product Safety Commission ("CPSC") on
the need to protect not only the power cord, but also the internal wiring of
the appliance. According to the CPSC, these types of fires caused 149,900
residential structural fires involving electrical equipment, which resulted in
750 civilian deaths, more than 6,320 injuries and nearly $1.3 billion in
property losses. The CPSC estimates were based on 1994 fire service reports.
The National Electrical Code (the "Code") requires GFCIs for the protection of
all receptacle outlets located outdoors, as well as in bathrooms, garages and
other risk areas, and in new residences, hotels and public buildings. The Code
is followed by most local government building codes. There is increasing effort
by certain groups such as the National Electric Manufacturers Association and
Consumer Products Safety Commission to require GFCI protection in other
locations and applications. The Company presently focuses its marketing
efforts in certain spot markets which have developed in response to Code
imposed requirements.
For example, in January 1989, high-pressure sprayer/washer manufacturers that
desired Underwriter Laboratories ("UL") approval were required to include a
GFCI and/or double-insulation protection on each electrically driven sprayer/
washer. Sales to this industry were severely impacted in Fiscal Year 1996
as the majority of the sprayer/washer manufacturers opted for the more cost
effective double-insulated technology rather than GFCI technology. Effective
January 1996, the double-insulation provision was eliminated from the National
Electric Code, but until recently, UL had not updated its standard enforcing
this change. Sales to this industry were approximately $4.5 million less in
each of the Fiscal Years 1996, 1997, 1998 and 1999, compared to Fiscal Year
1995, due to the choice of sprayer/washer manufacturers not using the Company's
GFCI products and due to the delay of UL enforcing on the industry the
requirement for GFCI technology. The revised standard UL 1776 mandating the
use of GFCIs on sprayer/washers has been issued, and the effective date for
compliance is May 4, 2000. This action expands the Company's opportunity to
sell into this important market again, but the Company has no certainty of
returning back to its previous revenue level in this market.
Another example is a Code requirement that became effective on January 1, 1991
that requires a protective device to be incorporated into hair dryers, curling
irons and crimpers to protect users from possible electrocution. In response
to this Code change, the Company developed a smaller GFCI plug that
incorporates its patented GFCI/ALCI technology. Additionally, the Company
developed an Immersion Detection Circuit Interrupter ("IDCI") that can also be
used to protect users of these products.
Also, Article 625 of the 1996 Edition of the National Electrical Code requires
electric vehicle ("EV") charging systems to include a system that will protect
people against serious electric shock in the event of a ground fault. The
Company has shipped product to the majority of the major automobile
manufacturers in support of their small EV production builds, and the Company
-5-
is active with various standards and safety bodies, relating to the electric
vehicle, on a worldwide basis. Sales for the Company's EV safety products
remain relatively low due to the small number of electric vehicles produced.
Improvements in battery technology, along with mandates from individual states
for zero emission vehicles, are projected to make this a viable market in year
2003.
The Company currently manufactures and markets various portable GFCI, ALCI and
ELCI products, such as plug-in portable adapters, several extension cord
models in various lengths, various modules for OEM customers, and variations
of such products for voltage differences in both the United States and foreign
markets. The Company has been issued several domestic and foreign patents
on its portable GFCI which incorporate design features not available on any
similar product known to the Company (see Patents, Licenses and Trademarks on
page 9 for further information). The Company has entered into seven license
agreements and three sales and marketing agreements concerning the portable
GFCI, ALCI and ELCI. These agreements are with entities located in Australia,
France, Italy, Japan, the United Kingdom and the United States and are for the
purpose of market penetration in those areas where it would be difficult for
the Company to compete on a direct basis.
On February 16, 1999, the Company entered into a license agreement with
Windmere-Durable Holdings, Inc. (the "Agreement"), which is filed herewith.
Windmere-Durable Holdings, Inc. is a large Miami, Florida based manufacturer
and distributor of a wide variety of, among other items, household appliances
and portable personal care products utilizing electric current (e.g. washers
and dryers, hair dryers and curlers, irons, food mixers and numerous other
items), most of which are sold both domestically and internationally. Under
the Agreement, Windmere-Durable was granted a non-exclusive license to
manufacture, have manufactured, use and sell the Company's line of
"Fire Shield" products in exchange for royalties.
Military Products and Markets
The Defense Logistics Agency established a program rating system for its
suppliers in 1995, and since its inception and for the fourth straight year,
the Company was honored as a Best Value Medalist for the highest rating Gold
Category, which signifies the Company's commitment to military contract
performance.
The Company is currently a supplier of control equipment used in engine
generator systems purchased by the United States military and its prime
contractors. The term "control equipment" refers to the electrical controls
used to control the electrical power output of the generating systems. In
general, the controls monitor and regulate the operation of generator mobile
electric generating system sets. Electric generating systems are basic to all
branches of the military, and demand has remained relatively constant, unlike
products utilized in armaments and missiles. Sales are made either directly
to the government for support parts or to prime contractors for new electric
generator sets which incorporate the Company's products. The Company is a
qualified supplier for 37 control equipment products as required by the
Department of Defense and is a supplier of the following types of control
equipment, among others: protective relays and relay assemblies,
instrumentation transducer controls, fault locating panel indicators, current
transformer assemblies for current sensing control and instrumentation, motor
operated circuit breaker assemblies and electrical load board and voltage
-6-
change board assemblies. These products are primarily furnished for spare
parts support for existent systems in the military inventory.
In late 1989, the Company completed the redesign of the control equipment
related to the Tactical Quiet Generator ("TQG") Systems program and provided
prototype units to a prime contractor for testing, which was completed in the
third fiscal quarter for the year ended March 31, 1992. Subsequently, the
Company received production orders for these products from the U.S.
Government's prime contractor in the approximate amount of $7,500,000 covering
the time period from August 1992 to October 1994 and an additional $4,900,000
covering the time period August 1996 to July 1998. All deliveries have been
completed under these contracts. The new contract that has been awarded by
the U.S. Government for 5/10/15KW TQG Systems to the prime contractor is for
a 10-year period with the last ordering period year being 2007. The Company
has received initial production releases for this new contract, valued at $1.9
million, and shipments commenced in the 4th quarter of Fiscal Year 1999. The
estimated value of the new 10-year contract for the Company for its 5/10/15KW
control equipment is $8.2 million. As previously reported, the Company also
received orders for approximately $6.3 million for the new 3KW military TQG
Systems program. Assuming successful completion of First Article Testing and
release of the production phase of the initial contract, shipments of
approximately 4,200 3KW TQG control equipment are now estimated to begin in
March 2000. The Company expects military sales to remain steady for Fiscal
Year 2000 with potential strengthening in the fourth quarter to the extent that
Shipments are made under the new 3KW TQ Program.
The Company continues to furnish various types of electrical power monitors
for military Naval shipboard requirements. The monitors are used on all
classes of Naval surface vessels, such as minesweepers, destroyers guided
missile cruisers and aircraft carriers in addition to other types of Naval
vessels. The monitors are furnished for new vessel production, retrofit
upgrades and existent vessels requiring spare support parts. The Company also
supplies the military with electrical devices for control and monitoring of the
on-board auxiliary power diesel electric generating system for the new C2v
Armored Tactical Vehicle, Electronic Command Post System and the newly
developed armored ambulances. These devices include A.C. power monitor
assemblies (which provide system protection and status display on on-board
computers), generator voltage regulators, power transformers, A.C. overcurrent
and short circuit protection monitor assemblies and current sensing
transformers. All of these products have met the high shock and vibration and
endurance testing requirements during both highly accelerated stress screening
tests and vehicle road testing at Aberdeen Proving Grounds. The Company
is now receiving order releases for the initial low rate production phase for
C2v vehicles.
The Company's contracts with the U.S. Government are on a fixed-price bid
basis. As with all fixed-price contracts, whether government or commercial,
the Company may not be able to negotiate higher prices to cover losses should
unexpected manufacturing costs occur.
All government contracts contain a provision that allows for cancellation by
the government "for convenience." However, the government must pay for costs
incurred and a percentage of profits expected if a contract is so canceled.
Contract disputes may arise which could result in a suspension of such contract
or a reduction in the amounts claimed.
-7-
Testing and Qualification
A number of the Company's commercial products must be tested and approved by
UL or an approved testing laboratory. UL publishes certain "Standards of
Safety" which various types of products must meet and performs specific tests
to ascertain whether a product meets the prescribed standards. If a product
passes these tests, it receives UL approval. Once the Company's products have
been initially tested and qualified by UL, they are subject to regular field
checks and quarterly reviews and evaluations. UL may withdraw its approval for
such products if they fail to pass these tests and if prompt corrective action
is not taken. The Company's portable electrical safety products have received
UL approval. In addition, certain of the Company's portable GFCI, ALCI and
ELCI products have successfully undergone similar testing procedures conducted
by comparable governmental testing facilities in Europe, Canada and Japan.
The Company's military products are subject to testing and qualification
standards imposed by the United States Government. The Company has
established a quality control system which has been qualified by the United
States Department of Defense to operate under the requirements of a
particular specification (MIL-I-45208). To the extent the Company designs
a product which it believes to meet those specifications, it submits the
product to the responsible government testing laboratory. Upon issue of the
qualification approval and source listing, the product is rarely subject to
re-qualification; however, the military may disqualify a product if it is
subject to frequent or excessive operational failures. Further, the current
specifications and requirements could be changed at any time, which would
require the Company to redesign its existing products or develop new
products which would have to be submitted for testing and qualification
prior to their approval for purchase by the military or its prime
contractors. Certain contracts require witness testing and acceptance by
government inspectors prior to shipment of the product.
The Company's wholly owned foreign subsidiary, TRC/Honduras S.A. de C.V. is an
ISO 9002 certified manufacturing facility.
Design and Manufacturing
The Company currently designs almost all of the products which it produces
and generally will not undertake special design work for customers unless it
receives a contract to produce the resulting products. The Company continues
to work with foreign licensees to design products for foreign markets.
A significant number of the Company's commercial and military electronic
products are specialized in that they combine both electronic and magnetic
features in design and production.
The business of an electronics manufacturer, such as the Company, primarily
involves assembly of component parts. The only products which the Company
manufactures from raw materials are its transformers and magnetic products.
The manufacture of such products primarily involves the winding of wire around
magnetic steel cores. Recently, in an effort to lower cost by vertical
integration, the Company also molds its own plastic parts for its commercial
product lines at its off-shore manufacturing facility in Honduras. The
remainder of the products which the Company manufactures are assembled from
component parts produced by other manufacturers.
-8-
On February 3, 1997, the Company's Board of Directors approved the
incorporation of TRC Honduras, S.A. de C.V., a wholly owned subsidiary of
Technology Research Corporation, for the purpose of manufacturing the Company's
high-volume products. This decision was made in line with the Company's goal of
always striving to improve quality, profit margins and customer satisfaction.
TRC Honduras, S.A. de C.V. resides in a leased 42,000 square foot building
located in ZIP San Jose, a free trade zone and industrial park, in San Pedro
Sula, Honduras. The lease is for a term of five years with an option to
extend the lease for another five years. The benefits of being located in a
free trade zone include no Honduran duties on imported raw materials or
equipment, no sales or export tax on exported finished product, a twenty year
Honduran federal income tax holiday and a ten year Honduran municipal income
tax holiday for the profits generated by the Honduran subsidiary, and various
other benefits.
The Company continues to manufacture its specialized military products and
low-volume commercial products in its 43,000 square foot facility in
Clearwater, Florida.
Patents, Licenses, and Trademarks
The Company's President, Mr. Legatti, has designed for the Company and the
Company has been issued four U.S. patents and two British, Canadian, Italian
and Australian patents with respect to its portable GFCIs that have features
not presently available on any similar product known to the Company. Also,
patents on the same device have been issued from France, Japan, Germany and
three other countries. The patents will be valid for 20 years in the United
States running from January 1986. Duration of patents in the other countries
vary from 15 to 20 years.
The Company licenses its technology for use by others in exchange for a
royalty or product purchases. Licensees are located in Australia, France,
Italy, Japan, the United Kingdom and the United States. Each licensee agrees
to pay the Company a royalty or purchase product based on schedules set forth
in the applicable agreement. The Company agrees to provide certain technical
support and assistance to its licensees. The licensees have agreed to
indemnify and hold the Company harmless against any liability associated with
the manufacture and sale of products subject to the license agreement,
including but not limited to defects in materials or workmanship.
The Company has no other patents on or licensee agreements with respect to
its products or technology, but has registered its TRC trademark with the U.S.
Office of Patents and Trademarks.
Marketing
The Company's products are sold throughout the world, primarily through an
expanded in-house sales force, licenses and sales and marketing agreements.
Although the Company will continue to market existing and new products through
these channels, the Company is looking for other viable channels through which
to market its products. The Company relies significantly upon the marketing
skills and experience, as well as the business experience, of the management
of the Company in marketing its products.
The Company complements its sales and marketing activity through the use of
additional distributors and sales representative organizations. The Company's
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internal distribution division, TRC Distribution, is supported by 23
independent sales representatives who sell to 445 electrical, industrial and
safety distributors.
The Company also markets through OEMs that sell the Company's GFCI products
under their own brand label. Additionally, the Company has exhibited its GFCI
products at numerous trade shows which have resulted in new commercial markets,
including the recreational vehicle industry and the appliance industry.
The Company utilizes primarily foreign licenses and sales and marketing
agreements to market its products internationally (see Patents, Licenses and
Trademarks for further information). The Company's products have world-wide
application, and the Company believes that international demand for these
products will continue to contribute to the Company's growth.
The Company offers its customers no specific product liability protection
except with regards to those customers that are specifically named as "Broad
Form Vendors" under its product liability coverage. The Company does extend
protection to purchasers in the event there is a claimed patent infringement
that pertains to the Company's portion of the final product. The Company also
carries product and general liability insurance for protection in such cases.
Major Customers and Exports
Individual customers and aggregate exports which accounted for 10% or more of
sales were:
Year ended March 31
Customer 1999 1998 1997
-------- ---- ---- ----
Xerox Corporation $ 1,934,740 2,838,905 2,529,398
Noma Appliance & Electric, Inc.
Noma Appliance, Inc.
f/k/a Fleck Manufacturing, Inc.
(a Xerox Corporation supplier) 1,623,904 1,666,516 1,776,424
Other Xerox suppliers 124,473 133,044 802,800
Fermont Division 1,397,211 2,817,079 1,434,422
--------- --------- ---------
$ 5,080,328 7,455,544 6,543,044
Exports: ========= ========= =========
Canada $ 1,794,855 1,894,215 1,831,898
Far East 394,156 486,277 1,057,605
Europe 2,787,224 2,554,772 1,396,823
Mexico 711,067 979,187 736,992
Australia 117,754 218,530 150,760
South America 37,383 20,994 82,838
Middle East 2,067 3,397 5,324
--------- --------- ---------
Total exports $ 5,844,506 6,157,372 5,262,240
========= ========= =========
Overall, the Company's exports were down approximately 5% in Fiscal Year 1999,
compared to the Company's prior fiscal year, due to Xerox Corporation and
its suppliers whose sales were down from the previous fiscal year by
approximately $1.0 million with the majority of the shortfall coming from the
second half of the Company's fiscal year. Xerox and its suppliers accounted
for approximately 22% of the Company's sales for Fiscal Year 1999, compared to
approximately 26% for the prior fiscal year, and because they account for such
a large percentage of the Company's sales, the loss of Xerox as a customer
would have a material adverse effect on the Company's business. Excluding
-10-
Xerox, exports to the Company's international OEM customers were stronger for
Fiscal Year 1999 compared to the Company's prior fiscal year.
The Company's military product sales are primarily to OEM prime contractors
and secondarily to military procurement logistic agencies for field service
support on previously shipped systems. In Fiscal Year 1999, military sales
were approximately 19% of total sales, compared to 26% in the prior year. The
decrease was primarily due to the level of sales with Fermont Division, the
U.S. Government's prime contractor for the 5/10/15/30/60KW Tactical Quiet
Generator Systems Program. (See MD&A discussion for more detail). Sales to
Fermont Division were $1,397,211 in Fiscal Year 1999 compared to $2,817,079 in
the prior fiscal year.
The Company has no relationship with any of its customers except as a
supplier of product.
Competition
The commercial and military business of the Company is highly competitive.
In the commercial market, the Company has significant competition, except
with respect to the "Fire Shield" products. The Company believes, however,
that product knowledge, patented technology, ability to respond quickly to
customer requirements, positive customer relations, price, technical
background and industry experience are major competitive factors, and that it
competes favorably with respect to these factors. In addition, the Company's
patented GFCI technology utilizes, in certain adaptations, waterproofing, a
retractable ground pin and "trip mechanism" techniques, each of which
provides the Company, in the judgment of its management, with a current
competitive advantage.
In the military market, the Company's products must initially pass
government specified tests. The Company must compete with other companies,
some being larger and some smaller than the Company, acting as suppliers of
similar products to prime government contractors. The Company believes that
knowledge of the procurement process, engineering and technical support, price
and delivery are major competitive factors in the military market. The Company
believes that it has strength in all of these areas due to senior management's
involvement in the government procurement process and experience in the design
engineering requirements for military equipment. A substantial portion of
spare part procurement is set aside for small business concerns, which are
defined in general as entities with fewer than 1,000 employees. Because the
Company is classified as a small business concern, it qualifies for such set
aside procurements for which larger competitors are not qualified. The entry
barriers to the military market are great because of the need, in most cases,
for products to pass government tests and qualifications.
Research, Development and Engineering
The Company employs 18 persons in the Engineering Department, all of whom
are engaged either full or part-time in research and development activities.
This department is engaged in designing and developing new commercial and
military products and improving existing products to meet the needs of the
Company's customers.
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In connection with its efforts in developing the GFCI product, the Company
believes that the increasing use of portable GFCI protection will provide
new markets for the commercial marketplace, and accordingly, the Company has
modified its GFCI designs to fit these markets and new applications. There can
be no assurance, however, that the Company can maintain its sales levels in the
commercial market in view of the possibility that an increased level of
competition may develop.
The Company spent $1,107,253 in Fiscal Year 1999, $1,223,422 in Fiscal Year
1998 and $1,147,630 in Fiscal Year 1997 on research, development and
engineering activities. None of these activities were sponsored or financed
by customers, and all are expensed as incurred. The Company anticipates
spending levels to remain constant in the new fiscal year.
Employees
As of March 31, 1999, the Company employed 113 persons on a full time basis,
and of that total, 70 employees were engaged in manufacturing operations, 18 in
engineering, 15 in marketing and 10 in administration.
The Company's subsidiary employed 405 persons on a full time basis as of
March 31, 1999, and of that total, 400 employees were engaged in manufacturing
operations and 5 in administration.
None of the Company's employees are represented by a collective bargaining
unit, and the Company considers its relations with employees to be stable.
ITEM 2. PROPERTIES
The Company's executive offices and U.S. manufacturing facility are located on
4.7 acres of leased land in the St. Petersburg-Clearwater Airport Industrial
Park. The lease, with options, extends for 40 years until 2021 and is subject
to certain price escalation provisions every five years. This leased land is
adequate to enable the Company to expand this facility to 60,000 square feet.
The present facility provides a total of 43,000 square feet, including 10,000
square feet of offices and engineering areas, as well as 23,000 square feet of
production areas and 10,000 square feet of warehouse space.
In March 1997, the Company entered into a five year lease agreement with
ZIP San Jose, an industrial park located in San Pedro Sula, Honduras, for a
42,000 square foot building in which the Company manufactures its high-volume
products. The Company has the option of extending the lease another five years
if it wishes. Lease payments began in May 1997 and continue through July 2002.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of the Company, the ultimate
disposition of these matters will not have a material adverse effect on the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended March 31, 1999.
-12-
Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS
The Company's shares of Common Stock are registered under 12(g) of the
Securities Exchange Act of 1934 and are traded in the over-the-counter market
utilizing the NASDAQ trading system, to which the Company gained admittance in
December 1984, under the symbol "TRCI". In November 1995, NASDAQ approved the
Company's application for listing on the National Market. The following tables
set forth a range of high and low market prices for the Company's Common Stock
for the fiscal years ended March 31, 1999, 1998 and 1997 as reported by the
NASDAQ system.
Market Price Cash
Fiscal Year Ended High Low Dividends
March 31, 1999:
First Quarter ................. 2 1/2 1 1/16 $ -
Second Quarter ................. 2 27/32 1 9/16 -
Third Quarter ................. 2 15/16 -
Fourth Quarter ................. 1 3/8 1 -
-----
$ -
March 31, 1998:
First Quarter ................. 4 1/8 3 1/16 $ .06
Second Quarter ................. 4 1/2 3 9/16 .06
Third Quarter ................. 4 9/16 3 .06
Fourth Quarter ................. 3 7/16 1 15/16 -
-----
$ .18
March 31, 1997:
First Quarter ................. 6 1/4 4 1/2 $ .06
Second Quarter ................. 5 3/8 3 7/8 .06
Third Quarter ................. 4 5/8 4 .06
Fourth Quarter ................. 4 9/16 3 13/16 .06
-----
$ .24
As of May 28, 1999, the approximate number of the Company's shareholders was
530. This number does not include any adjustment for shareholders owning
common stock in the Depository Trust name or otherwise in "Street" name,
which the Company believes represents an additional 2,500 shareholders.
The Company's authorized capital stock, as of May 28, 1999, consisted of
10,000,000 shares of authorized common stock, par value $.51, of which
5,455,756 shares were issued and outstanding.
On March 16, 1998, the Company announced that its Board of Directors suspended
its fourth quarter dividend. The Company's Board of Directors review the
Company's dividend policy on a quarterly basis and make a determination at
such time as to whether the Company will resume payment of a dividend based on
the Company's cash and earnings position. The Company did not declare any
dividends during Fiscal Year 1999 but did declare dividends of $.18 per share
during Fiscal Year 1998 and $.24 per share during Fiscal Year 1997.
-13-
ITEM 6. SELECTED FINANCIAL DATA
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
Year ended March 31:
Operating revenues $ 17,211,014 18,430,951 15,385,571 17,379,221 21,772,956
Gross profit $ 4,078,461 4,836,280 4,747,997 5,895,687 5,246,105
Net income (loss) $ 15,892 (196,314) 566,658 2,038,785 1,867,957
Basic earnings
per share $ - (.04) .11 .39 .36
Weighted average number
of common shares
outstanding 5,455,756 5,332,571 5,321,698 5,281,932 5,159,614
Diluted earnings
per share $ - (.04) .10 .38 .35
Weighted average number
of common and
equivalent shares
outstanding 5,476,134 5,332,571 5,441,620 5,404,885 5,339,953
Cash dividends
declared $ - .18 .24 .24 -
March 31:
Working capital $ 6,899,677 6,875,679 9,651,145 10,931,740 10,089,672
Total assets $ 15,146,175 15,746,818 15,637,949 15,380,590 14,813,938
Current
liabilities $ 3,521,949 4,243,200 2,903,154 1,867,678 2,119,000
Long-term debt $ 56,250 131,250 206,250 281,350 356,350
Total liabilities $ 3,578,199 4,374,450 3,109,404 2,149,028 2,475,350
Retained earnings $ 1,257,068 1,241,176 2,397,353 3,108,371 2,340,267
Total stockholders'
equity $ 11,567,976 11,372,368 12,528,545 13,231,562 12,338,588
-14-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Operating Results:
Fiscal Years 1999 and 1998 Comparison
The Company's operating revenues (net sales and royalties) for the fourth
quarter ended March 31, 1999 were $4,276,183, compared to $4,415,303 reported
in the same quarter last year, a decrease of approximately 3%. The Company
lost $237,980 for the fourth quarter, compared to a loss of $466,204 for the
same quarter last year, the difference primarily being an income tax benefit
of $308,688, which was recorded in the current year's quarter. Basic and
diluted earnings (loss) were $(.04) per share for the fourth quarter, compared
to $(.09) per share for the same quarter last year. The loss in the fourth
quarter was primarily due to revenue level, continued manufacturing
inefficiencies and a physical inventory charge of approximately $250,000
recorded by the Company's off-shore manufacturing facility in Honduras. In
March 1999, the Company replaced the General Manager of its Honduras operation.
The Company's operating revenues (net sales and royalties) for the year ended
March 31, 1999 were $17,211,014, compared to $18,430,951 reported in the same
period last year, a decrease of approximately 7%. The Company earned $15,892
for the year, compared to a loss of $196,314, for the same period last year,
and basic and diluted earnings were $.00 per share for the year, compared to
basic and diluted earnings (loss) of $(.04) per share for the same period last
year.
The decline in revenues for the year ended March 31, 1999, as compared to the
same period last year, was due to a decrease in military sales and royalties of
$1,476,891 and $237,871, respectively. Total commercial sales were up $494,825
even though sales to Xerox Corporation, the Company's largest customer, were
down $1,081,566 for the year.
The Company's primary commercial distribution strategy of forming alliances
with companies that have a significant market presence, for which the Company's
products are used, contributed to the overall increase in commercial business.
The result, excluding Xerox, was that the Company's international sales
increased $337,503 and domestic sales increased $1,238,888 over the prior year.
The Company is optimistic that this strategy will continue to produce growth
in its domestic and international commercial business. The Company continues
new product development for Xerox, and indications are sales to Xerox and its
suppliers should increase in the second half of Fiscal Year 2000.
The decrease in military sales for Fiscal Year 1999 was mainly due to the
Company completing the previous contract related to the 5/10/15/30/60KW
Tactical Quiet Generator ("TQG") Systems program. The new contract that has
been awarded to the prime contractor by the U.S. Government for 5/10/15KW TQG
Systems is for a 10-year period with the last ordering period year being
2007. The Company has received initial production releases for this new
contract, valued at $1.9 million, and shipments commenced in the 4th quarter of
Fiscal Year 1999. The estimated value of the new 10-year contract for the
Company for its 5/10/15KW control equipment is $8.2 million. As previously
reported, the Company also received orders for approximately $6.3 million for
the new 3KW military TQG Program. Assuming successful completion of First
Article Testing and release of the production phase of the initial contract,
shipments of approximately 4,200 3KW TQG control devices are now estimated to
begin in March 2000. The Company expects military sales to remain steady for
-15-
Fiscal Year 2000 with potential strengthening in the fourth quarter to the
extent that shipments are made under the new 3KW TQ Program.
Royalty income was higher in Fiscal Year 1998 due to licensing fees of $135,000
from Yaskawa Control Company of Japan and a one-time final royalty payment of
$100,000 from Windmere Corporation recorded in the first quarter of that year.
The Company expects royalty income to remain constant over the coming year.
The Company's Fiscal Year 1999 business plan called for a reduction in
operating expenses of $800,000, and for the year ended March 31, 1999, the
Company reduced its operating expenses by $988,544, compared to the prior year.
The Company will continue this initiative in Fiscal Year 2000 in an effort to
bring expense in line with revenue.
The Company's gross profit margin was approximately 24% of net sales for Fiscal
Year 1999 compared to 27% for the prior year. The difference was primarily
due to weaker profit margins resulting from the price reduction to Xerox
Corporation and manufacturing inefficiencies, inventory adjustments and
the Company restructuring its manufacturing operations from a contract
manufacturer in China to its wholly owned subsidiary in Honduras. The Company
believes this restructuring will ultimately result in lower duty, freight and
product costs thus positioning the Company to remain competitive in the future.
Selling, general and administrative expenses for Fiscal Year 1999 were
$3,150,830, compared to $4,023,205 for the prior year, a decrease of
approximately 22%. Selling expenses were $1,766,018 for Fiscal Year 1999,
compared to $2,710,774 for the prior year, a decrease of approximately 35%,
reflecting lower group insurance and advertising costs. General and
administrative expenses were $1,384,812 for Fiscal Year 1999, compared to
$1,312,431 for the prior year, an increase of approximately 6%, reflecting
higher professional fees and higher salary related expenses due to a greater
number of employees in the department.
Research, development and engineering expenses for Fiscal Year 1999 were
$1,107,253, compared to $1,223,422 for the prior year, a decrease of
approximately 9%, reflecting lower UL fees and lower salary related expenses
due to fewer number of employees in the department.
Interest expense, net of interest and sundry income, for Fiscal Year 1999 was
$106,133, compared to $4,462 for the prior year, reflecting higher interest
expense, due to the Company using its line of credit, and lower returns and
average balances on the Company's cash investments.
Income tax benefit for Fiscal Year 1999 was $210,352 and was based on the
Company's U.S. loss of $523,114. Due to provisions in the Honduran tax code,
the Company's wholly owned foreign subsidiary, TRC Honduras S.A. de C.V.,
benefits from a 20-year income tax holiday; therefore, no income tax expense
was recorded on the profit of $328,653 recognized by the subsidiary.
-16-
Fiscal Years 1998 and 1997 Comparison
The Company's operating revenues (net sales and royalties) for the fiscal year
ended March 31, 1998 ("Fiscal Year 1998") were $18,430,951, compared to
$15,385,571 reported for the Company's fiscal year ended March 31, 1997
("Fiscal Year 1997"), an increase of approximately 20%. The Company lost
$196,314 for Fiscal Year 1998, compared to earning $566,658 for Fiscal Year
1997, and basic and diluted earnings were $(.04) per share for Fiscal Year
1998, compared to basic earnings of $.11 per share and diluted earnings of
$.10 per share for Fiscal Year 1997. Common and equivalent shares outstanding
were comparable from year to year.
The Company's higher revenues for Fiscal Year 1998 were due to commercial sales
increasing by $631,171 and military sales increasing by $2,467,020 over the
prior year. The increase in commercial sales was primarily due to the level
of business with the Company's international OEM customers while sales to the
Company's domestic OEM customers were flat during Fiscal Year 1998. Sales to
Xerox Corporation and its suppliers decreased by $343,969 primarily due to
a price reduction which went into effect August 1, 1997. The increase in
military sales was primarily due to the Company being in full production of the
products related to the Tactical Quiet Generator Systems program.
Royalty income was down, as expected, by $52,811 due to less royalties from
Windmere Corporation. In April 1997, the Company agreed to accept a final
payment of $100,000 from Windmere to license the Company's products with the
understanding that no future royalties would be paid to the Company. On
May 17, 1997, the Company granted an exclusive license to Yaskawa Control of
Japan for the Company's full line of commercial electrical protection devices
and the Company's protective devices for the electric vehicle charging systems.
The Company received a licensing fee of $125,000 from Yaskawa Control in Fiscal
Year 1998 which substantially offset the loss of royalty income from Windmere
Corporation.
Although the Company's revenues were higher for Fiscal Year 1998, compared to
Fiscal Year 1997, net income decreased as a result of higher period expenses
and lower gross margins. Higher period expenses were primarily due to the
Company's special marketing programs, and lower gross margins were a result of
manufacturing inefficiencies and inventory adjustments related to the Company
restructuring its manufacturing operations from a contract manufacturer in
China to its wholly owned subsidiary in Honduras(see next paragraph). The
lower gross margins resulted from approximately $1,200,000 of additional
manufacturing cost variances incurred for the Company to produce its products
in Fiscal Year 1998, compared to the prior year, with the majority of these
variances occurring in the third and fourth quarters.
The Company's wholly owned subsidiary, TRC Honduras, S.A. de C.V., recorded a
loss of $375,264 for Fiscal Year 1998. As part of the Company's on-going
plan to produce its high-volume products at its Honduran subsidiary, the
Company added six additional products to the production process in Honduras in
the third quarter. Unfortunately, the manufacturing complexities associated
with adding these additional products caused its subsidiary not to meet its
production shipment plan for the third and fourth quarters, and the result was
that additional product continued to be produced at the Company's Clearwater
facility causing the use of temporary employees and heavy overtime as well as
higher labor rates in order to meet customer delivery commitments.
-17-
The Company's gross profit margin was approximately 27% of net sales for Fiscal
Year 1998 compared to 32% for the prior year. The difference was primarily
due to weaker profit margins resulting from the price reduction to Xerox
Corporation and manufacturing inefficiencies, inventory adjustments and
the Company restructuring its manufacturing operations from a contract
manufacturer in China to its wholly owned subsidiary in Honduras.
Selling, general and administrative expenses for Fiscal Year 1998 were
$4,023,205, compared to $3,458,872 for the prior year, an increase of
approximately 16%. Selling expenses were $2,710,774 for Fiscal Year 1998,
compared to $2,257,128 for the prior year, an increase of approximately 20%,
reflecting expenses related to the marketing of the "Fire Shield" products and
the consumer marketing program. General and administrative expenses were
$1,312,431, compared to $1,201,744 for the prior year, an increase of
approximately 9%, reflecting the additional administration expenses of the
Company's Honduran subsidiary.
Research, development and engineering expenses for Fiscal Year 1998 were
$1,223,422, compared to $1,147,630 for the prior year, an increase of
approximately 7%, reflecting primarily higher salary expenses related to a
a greater number of employees in the department.
Interest expense, net of interest and sundry income, for Fiscal Year 1998 was
$4,462, compared to interest and sundry income, net of interest expense, of
$173,670 for the prior year, reflecting higher interest expense, due to the
Company using its line of credit, and lower returns and average balances on
the Company's short-term investments.
Income tax expense for Fiscal Year 1998 was $110,671, compared to $130,484 in
the prior year, which was based on U.S. income before income tax of $289,621
and $697,142, respectively. The Internal Revenue Code does not allow a tax
benefit for losses on foreign subsidiaries, and no tax benefit is available in
Honduras. For this reason, the Company did not record any tax benefit from
the loss of $375,264 recorded by TRC Honduras S.A. de C.V., the Company's
wholly owned foreign subsidiary. The actual tax rate for Fiscal Year 1997
was less than the expected tax rate, primarily due to the Company receiving
a favorable ruling from the State of Florida regarding the apportionment
of sales.
Liquidity and Capital Resources
As of March 31, 1999, the Company's cash and cash equivalents decreased to
$1,653,952 from the March 31, 1998 total of $1,153,798 and short term
investments of $1,033,902. The short term investments were comprised of U.S.
Treasury Bills.
On August 28, 1999, the Company expects to renew its commercial line of credit,
which is currently $2,500,000, with its institutional lender for another year,
maturing in August 2000. The Company continues to have the option of borrowing
at the lender's prime rate of interest or the 30-day London Interbank Offering
Rate (L.I.B.O.R.) plus 175 basis points. The Company also has available a
Banker's Acceptance agreement which gives the Company the option of borrowing
up to $750,000 under the line of credit with the interest rate being determined
by the lender's International Division at the time of borrowing. The Company's
debt from advances on its line of credit was $2,450,100 as of March 31, 1999.
-18-
The Company's working capital increased by $23,998 to $6,899,677 at March
31, 1999, compared to $6,875,679 at March 31, 1998. The Company believes cash
flow from operations, the available bank line, and its short term investments
and current cash position will be sufficient to meet its working capital
requirements for the immediate future.
The mortgage payable to the Company's institutional lender as of March 31, 1999
was $131,250, compared to $206,250 at March 31, 1998, reflecting the Company's
payments on principal for the twelve-month period.
On March 16, 1998, the Company announced that its Board of Directors suspended
its fourth quarter dividend. The Company's Board of Directors review the
Company's dividend policy on a quarterly basis and make a determination at
such time as to whether the Company will resume payment of a dividend based on
the Company's cash and earnings position. The Company did not declare any
dividends during Fiscal Year 1999 but did declare dividends of $.18 per share
during Fiscal Year 1998 and $.24 per share during Fiscal Year 1997.
Year 2000 Issues
The Year 2000 issue is a result of certain microprocessors and computer
programs that were designed using two digits rather than four to define the
applicable year. Computer programs that have time sensitive software may
recognize a date using "00" as the year 1900 rather that the year 2000. This
could result in a system failure or miscalculation causing disruptions to
operations including, among other things, a temporary inability to process
transactions, send invoices or engage in similar activities.
The Company is continually working to resolve the potential risks and concerns
of the Year 2000 issues. The Company has made progress in assessing and
implementing systems to be Year 2000 ready completing the conversion of its
major business computer systems to be Year 2000 ready on January 1, 1999 at its
U.S. facility and on July 4, 1998 at its Honduran facility.
None of the Company's products are Year 2000 sensitive, so the total cost of
the Year 2000 project has been minimal so far at approximately $10,000. The
Company expensed all costs associated with these system changes as the costs
were incurred, and they were funded through operating cash flows. Since the
Company's major computer systems are already Year 2000 compliant, the Company
does not foresee the need of a contingency plan for those minor systems that
are not significant enough to disrupt the Company's business.
The Company is also assessing the readiness of its significant suppliers, which
if not Year 2000 ready, could have a material adverse effect on the Company's
operations. The Company believes that if certain suppliers were not Year 2000
ready, then alternate arrangements could be made to alleviate any material
impact on operations.
Achieving Year 2000 compliance is dependent on many factors, some of which are
not completely within the Company's control. There can be no assurances that
the Company will be able to identify all aspects of its business that are
subject to Year 2000 problems, specifically those related to suppliers that
could have a material effect on the Company. As a contingency plan, the
Company will maintain sufficient inventory of those parts with long lead times
that are critical to the manufacturing process.
-19-
NEW ACCOUNTING STANDARDS
In 1999, the Company adopted SFAS No. 130, Reporting Comprehensive Income.
SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income and its components to a full set of financial statements.
The Statement requires only additional disclosures in the financial statements;
it does not affect the Company's financial position or results of operations.
The Company has no components of comprehensive income, therefore the adoption
of this standard did not have any effect on the consolidated financial
statements.
In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information. SFAS No. 131 which is effective for fiscal
years beginning after December 15, 1997,changes the way public companies report
information about segments of their business in their annual financial
statements and requires them to report selected segment information in their
quarterly reports issued to shareholders. The Company operates in a single
segment of business. Therefore, there was no effect on the Company's
consolidated financial statements from the adoption of SFAS 131.
In 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, which establishes accounting and reporting standards
for derivative instruments and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities on the balance
sheet and measure those instruments at fair values. The Company will be
required to adopt this standard for financial statements issued beginning the
first quarter of fiscal year 2002. The Company has not historically had
derivative financial instruments, therefore, the adoption of this standard is
not expected to have any effect on the consolidated financial statements.
Safe Harbor Statement
The statements in this report that relate to future plans, expectations,
events, performance and the like are forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995 and the
Securities Exchange Act of 1934. Actual results or events could differ
materially from those described in the forward-looking statements due to a
variety of factors, including those set forth in the Company's reports on
Form 10-K and 10-Q filed with the Securities and Exchange Commission.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Response to this item is submitted in a separate section of this report
starting at Page F-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
-20-
PART III
Part III of this Form 10-K is incorporated by reference from the registrant's
Proxy Statement for the Annual Meeting of Shareholders to be held on August
26, 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. Consolidated Financial Statements Page
of Technology Research Corporation:
Independent Auditors' Report .............................. F-1
Balance Sheets--March 31, 1999 and 1998 ................... F-2
Statements of Operations--Years Ended
March 31, 1999, 1998, and 1997 .......................... F-3
Statements of Stockholders' Equity--Years Ended
March 31, 1999, 1998, and 1997 .......................... F-4
Statements of Cash Flows--Years Ended
March 31, 1999, 1998, and 1997 .......................... F-5
Notes to Financial Statements ............................. F-6
2. The following Consolidated Financial Schedules for the years ended
March 31, 1999, 1998, and 1997 are submitted herewith
Schedule II--Valuation and Qualifying Accounts ............ F-20
All other schedules are omitted because they are not
applicable or the required information is shown in
the financial statements or notes thereto.
3. Exhibits included herein: (See Next Page)
(B) Reports on Form 8K
No reports on Form 8K have been filed by the registrant during the last
quarter of the fiscal year.
-21-
INDEX TO EXHIBITS (Item 14(A)3)
Exhibit
(3) (a) Articles of Incorporation and By-Laws*
(b) Certificate of Amendment to the Articles of Incorporation,
dated September 24, 1990***
(c) Certificate of Amendment to the Articles of Incorporation,
dated September 24, 1996***
(10) Material contracts:
(a) License Agreement, dated as of January 1, 1985, between the
Company and Societe BACO, a French corporation, granting BACO a
non-exclusive right to manufacture the Company's GFCI products
in France, and the non-exclusive right to sell GFCI products
other than in North America.*
(b) License Agreement between the Company and B & R Electrical
Products, Ltd., an English corporation ("B & R") dated
January 1, 1985, granting B & R a limited exclusive license to
manufacture GFCI products within the United Kingdom and a non-
exclusive license to market other such products other than in
North America.*
(c) License Agreement, dated as of January 8, 1987, between the
Company and HPM INDUSTRIES PTY LTD, an Australian corporation
("HPM"), granting to HPM an exclusive license to manufacture and
sell GFCI products in Australia, New Zealand, New Guinea, Papua
and Fiji.*
(f) Incentive Stock Option Plan, dated October 15, 1981.*
(g) The 1993 Incentive Stock Option Plan, which was previously filed
with and as part of the Registrant's Registration Statement on
Form S-8 (No. 33-62397).
(h) Non-Qualified Stock Option Agreements, dated as of various dates,
between the Company and each of its current directors and
officers, as well as two independent consultants, an independent
entity which had provided the Company with certain technology
rights and certain former directors.*
(i) The 1993 Amended and Restated Non-Qualified Stock Option Plan,
which was previously filed with and as part of the Registrant's
Registration Statement on Form S-8 (No. 33-62379).
(j) $600,000 Loan Agreement, dated January 8, 1993, between the
Company and First Union National Bank of Florida.***
(k) $2,500,000 Revolving Credit Agreement, dated November 12, 1993,
between the Company and First Union National Bank of Florida.***
-22-
(l) License Agreement, dated May 17, 1997, between the Company and
Yaskawa Controls Company, Ltd., a Japanese company, granting
Yaskawa an exclusive right to market and manufacture the Company's
products developed for use in electrical vehicle charging
systems.***
(m) Sales and Marketing Agreement, dated May 17, 1997, between the
Company and Yaskawa Controls Company, Ltd., a Japanese company,
granting Yaskawa exclusive sales and marketing rights to the
Company's full line of commercial electrical protection devices,
including "Fire Shield", "Shock Shield" and "Electra Shield".***
(n) License Agreement, dated February 16, 1999, between the Company
and Windmere-Durable Holdings, Inc. granting Windmere-Durable a
non-exclusive license to manufacture, have manufactured, use and
sell the Company's line of "Fire Shield" products.*****
(23) Consents of Experts and Counsel:
(a) Consent of Independent Certified Public Accountants. *****
* Previously filed with and as part of the Registrant's Registration
Statement on Form S-1 (No. 33-24647).
** Previously filed with and as a part of the Registrant's Registration
Statement on Form S-1 (No. 33-31967).
*** Previously filed with and as part of the Registrant's Annual Report
on Form 10-K.
**** Previously filed with and as part of the Registrant's Post-Effective
Amendment No. 1 to Form S-1 (No. 33-31967)
***** Filed herewith.
-23-
Independent Auditors' Report
The Board of Directors and Stockholders
Technology Research Corporation:
We have audited the consolidated balance sheets of Technology Research
Corporation and subsidiary as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we also have audited
the financial statements schedule as listed in the accompanying index. These
consolidated financial statements and financial statements schedule are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements and financial statement
schedule 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 Technology Research
Corporation and subsidiary as of March 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the years in the three-year
period ended March 31, 1999, in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedule,
when considered in relation to the basic consolidated financial statements
taken as a whole, presents fairly, in all material respects, the information
set forth therein.
KPMG LLP
St. Petersburg, Florida
April 30, 1999
F-1
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Consolidated Balance Sheets
March 31, 1999 and 1998
Assets 1999 1998
Current assets: ---- ----
Cash and cash equivalents $ 1,653,952 1,153,798
Short-term investments (note 2) - 1,033,902
Accounts receivable, less allowance for doubtful accounts of
$63,700 in 1999 and $64,700 in 1998 (note 6) 3,120,256 2,711,056
Income tax receivable 332,422 253,019
Inventories (notes 3 and 6) 4,724,182 5,325,409
Prepaid expenses and other current assets 75,804 235,595
Deferred income taxes (note 4) 515,010 406,100
---------- ----------
Total current assets 10,421,626 11,118,879
---------- ----------
Property, plant and equipment (notes 5 and 6) 9,806,134 9,033,808
Less accumulated depreciation 5,205,162 4,476,692
---------- ----------
Net property, plant and equipment 4,600,972 4,557,116
---------- ----------
Deferred income taxes (note 4) - 55,928
Other assets 123,577 14,895
---------- ----------
123,577 70,823
---------- ----------
$ 15,146,175 15,746,818
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of debt (note 6) $ 2,525,100 2,525,100
Trade accounts payable 649,252 1,216,624
Accrued expenses:
Compensation 232,972 372,218
Other 99,012 83,645
Dividends payable 15,613 45,613
---------- ----------
Total current liabilities 3,521,949 4,243,200
Debt, excluding current installments (note 6) 56,250 131,250
---------- ----------
Total liabilities 3,578,199 4,374,450
---------- ----------
Stockholders' equity (note 7):
Common stock, $.51 par value. Authorized
10,000,000 shares; issued and outstanding
5,455,756 in 1999 and 5,332,571 in 1998 2,782,435 2,719,611
Additional paid-in capital 7,528,473 7,411,581
Retained earnings 1,257,068 1,241,176
---------- ----------
Total stockholders' equity 11,567,976 11,372,368
---------- ----------
Commitments and contingencies (notes 8, 10 and 11)
$ 15,146,175 15,746,818
========== ==========
See accompanying notes to consolidated financial statements.
F-2
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Consolidated Statements of Operations
Years ended March 31, 1999, 1998 and 1997
1999 1998 1997
Operating revenues: ---- ---- ----
Net sales (note 9) $ 17,119,719 18,101,785 15,003,594
Royalties 91,295 329,166 381,977
---------- ---------- ----------
17,211,014 18,430,951 15,385,571
---------- ---------- ----------
Operating expenses:
Cost of sales 13,041,258 13,265,505 10,255,597
Selling, general, and administrative 3,150,830 4,023,205 3,458,872
Research, development, and engineering 1,107,253 1,223,422 1,147,630
---------- ---------- ----------
17,299,341 18,512,132 14,862,099
---------- ---------- ----------
Operating income (loss) (88,327) (81,181) 523,472
---------- ---------- ----------
Other income (deductions):
Interest and sundry income 84,211 131,727 206,944
Interest expense (193,902) (136,380) (33,274)
Gain on foreign exchange 3,558 191 -
---------- ---------- ----------
(106,133) (4,462) 173,670
---------- ---------- ----------
Income (loss) before income taxes (194,460) (85,643) 697,142
Income taxes expense (benefit) (note 4) (210,352) 110,671 130,484
---------- ---------- ----------
Net income (loss) $ 15,892 (196,314) 566,658
========== ========== ==========
Basic earnings (loss) per share $ - (.04) .11
========== ========== ==========
Diluted earnings (loss) per share $ - (.04) .10
========== ========== ==========
Weighted average number of common and
equivalent shares outstanding:
Basic 5,455,756 5,332,571 5,321,698
Diluted 5,476,134 5,332,571 5,441,620
========== ========== ==========
See accompanying notes to consolidated financial statements.
F-3
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years ended March 31, 1999, 1998 and 1997
Retained
Additional earnings Total
Common stock paid-in (accumulated stockholders'
Shares Amount capital deficit) equity
Balances at ------ ------ ------- ------- ------
March 31, 1996:
5,318,902 2,712,437 7,410,754 3,108,371 13,231,562
Exercise of stock
options via exchange
of 667 common shares
and cash of $8,001 for
14,336 new common
shares 13,669 7,174 827 - 8,001
Dividends - $.24 per share - - - (1,277,676) (1,277,676)
Net income - - - 566,658 566,658
--------- --------- --------- --------- ----------
Balances at
March 31, 1997: 5,332,571 2,719,611 7,411,581 2,397,353 12,528,545
Dividends - $.18 per share - - - (959,863) (959,863)
Net loss - - - (196,314) (196,314)
--------- --------- --------- --------- ----------
March 31, 1998: 5,332,571 $ 2,719,611 7,411,581 1,241,176 11,372,368
Exercise of stock
options via exchange
of 30,915 common shares
and cash of $179,716
for 154,100 new common
shares 123,185 62,824 72,524 - 135,348
Tax benefit related
to exercise of
employee stock options - - 44,368 - 44,368
Net income - - - 15,892 15,892
--------- --------- --------- --------- ----------
Balances at
March 31, 1999: 5,455,571 $ 2,782,435 7,528,473 1,257,068 11,567,976
========= ========= ========= ========= ==========
See accompanying notes to consolidated financial statements.
F-4
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years ended March 31, 1999, 1998 and 1997
1999 1998 1997
Cash flows from operating activities: ---- ---- ----
Net income (loss) $ 15,892 (196,314) 566,658
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Accretion of interest (21,098) (114,825) (185,977)
Allowance for doubtful accounts (1,000) (4,800) (14,500)
Depreciation and amortization 733,906 622,219 494,292
Decrease (increase) in
accounts receivable (408,200) (401,807) 317,203
Decrease (increase) in inventories 601,227 (182,641) 83,994
Decrease (increase) in prepaid expenses
and other current assets 159,791 (56,623) (84,767)
Increase in income taxes receivable (35,035) (74,889) (178,130)
Decrease (increase) in deferred
income taxes (52,982) 51,492 90,480
Decrease (increase) in other assets (114,118) 3,697 (23,505)
Increase (decrease) in
accounts payable (567,372) (390,492) 370,525
Increase (decrease) in
accrued expenses (123,879) 159,314 76,514
--------- --------- ---------
Net cash provided (used) by
operating activities 187,132 (585,669) 1,512,787
--------- --------- ---------
Cash flows from investing activities:
Maturities of short-term investments 1,055,000 3,112,000 5,190,000
Purchases of short-term investments - (1,000,064) (3,950,338)
Capital expenditures for property,
plant and equipment (772,326) (2,216,397) (1,030,145)
--------- --------- ---------
Net cash provided (used) by
investing activities 282,674 (104,461) 209,517
--------- --------- ---------
Cash flows from financing activities:
Net borrowings under line-of-credit
agreement - 1,872,101 577,899
Principal payments on mortgage
note payable (75,000) (75,000) (75,000)
Proceeds from exercise of
stock options 135,348 - 8,001
Dividends paid (30,000) (1,260,740) (1,267,238)
--------- --------- ---------
Net cash provided (used) by
financing activities 30,348 536,361 (756,338)
--------- --------- ---------
Net increase (decrease) in cash and
cash equivalents 500,154 (153,769) 965,966
Cash and cash equivalents at
beginning of year 1,153,798 1,307,567 341,601
--------- --------- ---------
Cash and cash equivalents at end of year $ 1,653,952 1,153,798 1,307,567
========= ========= =========
Supplemental cash flow information:
Cash paid for interest $ 193,902 136,380 33,274
========= ========= =========
Cash paid (received) for income taxes $ (228,299) 134,068 219,125
========= ========= =========
See accompanying notes to consolidated financial statements.
F-5
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
(1) Summary of Significant Accounting Policies
(a) Description of Business
Technology Research Corporation and subsidiary (the Company) is engaged in the
design, development, manufacturing, and marketing of electronic control and
measurement devices related to the distribution of electrical power and
specializes in electrical safety products that prevent electrical fires and
protect against electrocution and serious injury from electrical shock. The
Company's corporate headquarters are located in Clearwater, Florida. During
February 1997, the Company incorporated TRC Honduras, S.A. de C.V., a wholly-
owned subsidiary, for the purpose of manufacturing the Company's high volume
products in Honduras beginning in April 1997. The Company primarily sells its
products to governmental entities and original equipment manufacturers involved
in a variety of industries including business machinery and personal care
appliances. The Company performs credit evaluations of all new customers and
generally does not require collateral. Historically, the Company has
experienced minimal losses related to receivables from individual customers or
groups of customers in any particular industry or geographic area. The
Company's customers are located throughout the world. See note 9 for further
information on major customers. The Company also licenses its technology for
use by others in exchange for a royalty or product purchases. Licensees are
located in Australia, France, Italy, Japan, the United Kingdom and the United
States.
(b) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(c) Foreign Currency Translation
The U.S. dollar is the functional currency of the Honduran subsidiary. Foreign
currency denominated assets and liabilities of this subsidiary are remeasured
at the rates of exchange at the balance sheet date. Income and expense items
are remeasured at average monthly rates of exchange. Gains and losses from
foreign currency transactions of this subsidiary are included in operations.
F-6
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
(d) Financial Instruments
The Company believes the book value of its financial instruments (short-term
investments, accounts receivable, trade accounts payable, accrued expenses,
dividends payable, income taxes receivable and payable and debt) approximate
their fair value due to their short-term nature or with respect to debt, the
interest rate appropriately reflects the credit risk.
(e) Principles of Consolidation
The consolidated financial statements include the financial statements of
Technology Research Corporation and its wholly-owned subsidiary, TRC Honduras,
S.A. de C.V. All significant intercompany balances and transactions have been
eliminated in consolidation.
(f) Cash Equivalents
For purposes of the statements of cash flows, the Company considers all short-
term investments purchased with a maturity of three months or less to be cash
equivalents. There were no short-term investments considered cash equivalents
at March 31, 1999 or 1998.
(g) Short-Term Investments
The Company considers all of its short-term investments to be
"held-to-maturity," and therefore, are recorded at amortized cost.
(h) Revenue Recognition
Sales and cost of sales related to governmental contracts are recognized under
the unit-of-delivery method, whereby sales and cost of sales are recorded as
units are delivered. All other sales and cost of sales are recognized as
product is shipped. The Company accrues minimum royalties due over the related
royalty period. Royalties earned in excess of minimum royalties due are
recognized as reported by the licensees.
(i) Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of
The Company reviews long-lived assets and certain identifiable intangibles
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and
used is measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the
assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value, less costs to sell.
F-7
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
(j) Inventories
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
(k) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is calculated
on the straight-line method over the estimated useful lives of the assets.
(l) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(m) Stock-Based Compensation
On April 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 123 (SFAS 123), Accounting for Stock-Based Compensation, which
permits entities to recognize as expense over the vesting period the fair value
of all stock-based awards on the date of grant. Alternatively, SFAS 123 also
allows entities to continue to apply the provisions of APB 25 and provide pro
forma net income and pro forma earnings per share disclosures for employee
stock option grants made in 1995 and future years as if the fair-value-based
method defined in SFAS 123 had been applied.
The Company has elected to continue to apply the provisions of APB 25 and
provide the pro forma disclosures of SFAS 123 (see note 7).
(n) Earnings Per Share
Basic earnings per share has been computed by dividing net income by the
weighted average number of common shares outstanding. Common share equivalents
included in the dilutive weighted average shares outstanding computation
represent shares issuable upon assumed exercise of stock options which would
have a dilutive effect in years where there are earnings.
F-8
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
(o) New Accounting Standards
In 1999, the Company adopted SFAS No. 130, Reporting Comprehensive Income.
SFAS No. 130 establishes standards for reporting and presentation of
comprehensive income and its components to a full set of financial statements.
The Statement requires only additional disclosures in the financial statements;
it does not affect the Company's financial position or results of operations.
The Company has no components of comprehensive income; therefore the adoption
of this standard did not have any effect on the consolidated financial
statements.
In June 1997, the FASB issued SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information. SFAS No. 131 which is effective for fiscal
years beginning after December 15, 1997, changes the way public companies
report information about segments of their business in their annual financial
statements and requires them to report selected segment information in their
quarterly reports issued to shareholders. The Company operates in a single
segment of business; therefore, there was no effect on the Company's
consolidated financial statements from the adoption of SFAS 131.
In 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments
and Hedging Activities, which establishes accounting and reporting standards
for derivatives as either assets or liabilities on the balance sheet and
measure those instruments at fair values. The Company will be required to
adopt this standard for financial statements issued beginning the first quarter
of fiscal year 2002. The Company has not historically had derivative financial
instruments; therefore, the adoption of this standard is not expected to have
any effect on the consolidated financial statements.
(2) Short-Term Investments
The Company considers all of its investment securities to be held-to-maturity.
These securities are all classified in short-term investments on the
consolidated balance sheets and mature within one year. The amortized cost,
gross unrealized holding gains, gross unrealized holding losses, and fair value
for held-to-maturity securities at March 31, 1999 and 1998 were as follows:
Gross unrealized
Amortized holding Fair
cost Gains Losses value
---- ----- ------ -----
March 31, 1999 -
U.S. Treasury securities $ - - - -
========= ====== ====== =========
March 31, 1998 -
U.S. Treasury securities $ 1,033,902 - - 1,033,902
========= ====== ====== =========
The U.S. Treasury securities matured in August 1998 and the funds were
transferred to a money market account which is included in cash and cash
equivalents.
F-9
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
(3) Inventories
Inventories at March 31, 1999 and 1998 consist of:
1999 1998
---- ----
Raw materials $ 3,800,340 4,499,524
Work in process 242,683 387,170
Finished goods 681,159 438,715
--------- ---------
$ 4,724,182 5,325,409
========= =========
Approximately 29% and 27% of inventories were located in Honduras at
March 31, 1999 and 1998 respectively.
(4) Income Taxes
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at March 31, 1999 and
1998 are presented below:
1999 1998
---- ----
Deferred tax assets:
Accounts receivable, principally due to
allowance for doubtful accounts $ 23,000 23,300
Inventories, principally due to valuation
allowance for financial reporting purposes
and additional costs inventoried for
tax purposes 281,000 252,500
Accrued expenses, principally due to accrual
for financial reporting purposes 47,000 65,600
Net operating loss carryforwards 214,000 182,000
Tax credit carryforwards 221,000 214,000
-------- --------
Total gross deferred tax assets 786,000 737,400
Less valuation allowance (187,000) (187,000)
-------- --------
559,000 550,400
-------- --------
Deferred tax liabilities:
Property, plant and equipment, principally
due to differences in depreciation (83,990) (88,372)
-------- --------
Net deferred tax assets $ 515,010 462,028
======== ========
F-10
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
Net deferred tax assets are included in the accompanying balance sheets at
March 31, 1999 and 1998 as:
1999 1998
---- ----
Deferred income taxes, current asset $ 515,010 406,100
Deferred income taxes, noncurrent asset - 55,928
-------- --------
$ 515,010 462,028
======== ========
Management assesses the likelihood deferred tax assets will be realized which
is dependent upon the generation of taxable income during the periods in which
those temporary differences are deductible. Management considers historical
taxable income, the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this assessment.
In order to fully realize the deferred tax asset related to net operating loss
and tax credit carryforwards, the Company will need to generate future taxable
income of approximately $170,000 each year prior to the expiration of the net
operating loss and tax credit carryforwards in 2003 and 2002, respectively.
Based upon the level of historical taxable income and projections for future
taxable income, management believes it will realize the benefits of these
deductible differences, net of the existing valuation allowance at
March 31, 1999. The valuation allowance at March 31, 1999 and 1998 relates to
tax credit carryforwards which management expects will expire unused.
At March 31, 1999, the Company has net operating loss carryforwards for Federal
income tax purposes of approximately $306,000, which are available to offset
future taxable income through 2003 and approximately $233,000 which are
available to offset future taxable income through 2019. The Company also has
available tax credit carryforwards for Federal income tax purposes of
approximately $214,000, which are available to offset future Federal income
taxes through 2002 and $7,000 of tax credit carryforwards which have no
expiration date. As a result of an ownership change in 1989, the Internal
Revenue Code limits the income tax benefit of $306,000 of net operating loss
and $214,000 of tax credit carryforwards to approximately $65,000 each year.
F-11
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
Income tax expense (benefit) for the years ended March 31, 1999, 1998 and 1997
consists of:
1999 1998 1997
---- ---- ----
Current:
Federal $ (263,334) 59,179 156,748
State - - (116,744)
-------- -------- ---------
(263,334) 59,179 40,004
-------- -------- ---------
Deferred:
Federal 70,000 48,600 77,000
State (17,018) 2,892 13,480
-------- -------- ---------
52,982 51,492 90,480
-------- -------- ---------
$ (210,352) 110,671 130,484
======== ======== =========
Income tax expense (benefit) for the years ended March 31, 1999, 1998 and 1997
differs from the amounts computed by applying the Federal income tax rate of
34% to pretax income (loss) as a result of the following:
1999 1998 1997
---- ---- ----
Computed expected tax (benefit) expense $ (66,000) (29,000) 237,000
Increase (reduction) in income taxes
resulting from:
Foreign activity for which no
income tax has been provided (112,000) 128,000 -
State income taxes, net of
Federal income tax effect (8,000) 2,000 (68,000)
Other (24,352) 9,671 (38,516)
-------- -------- ---------
$ (210,352) 110,671 130,484
======== ======== =========
The operating results of the foreign manufacturing subsidiary are not subject
to foreign tax since it is operating under a tax holiday for at least twenty
years. The foreign operations resulted in income of $329,000 in 1999 and a
loss of $375,000 in 1998. No income taxes have been provided on these results
of operations.
F-12
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
(5) Property, Plant and equipment
Property, plant and equipment at March 31, 1999 and 1998 consists of:
Estimated
1999 1998 useful lives
---- ---- ------------
Building and improvements $ 1,516,676 1,512,205 20 years
Machinery and equipment 8,289,458 7,521,603 5 - 15 years
--------- --------- ------------
$ 9,806,134 9,033,808
========= =========
Approximately 21% and 20% of property, plant and equipment is located in
Honduras at March 31, 1999 and 1998, respectively.
(6) Debt
Debt at March 31, 1999 and 1998 consists of the following:
1999 1998
---- ----
$2,500,000 line of credit; interest at LIBOR plus 175
and 200 basis points at March 31, 1999 and 1998,
respectively, (6.687% and 7.69% at March 31, 1999
and 1998, respectively), payable monthly,
due August 1999; secured by receivables,
inventories and equipment (subject to provisions
stated below) $ 2,450,100 2,450,100
First mortgage note payable; interest at LIBOR plus
175 and 200 basis points at March 31, 1999 and 1998,
respectively, (6.687%and 7.69% at March 31, 1999
and 1998 respectively); due in monthly installments
of $6,250, plus interest, matures December 2000;
secured by operating facility 131,250 206,250
--------- ---------
Total debt 2,581,350 2,656,350
Less current installments (2,525,100) (2,525,100)
--------- ----------
Debt, excluding current installments $ 56,250 131,250
========= ==========
F-13
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
Borrowings under the line of credit are limited to 80% of eligible accounts
receivable under 90 days, plus the lesser of 40% of eligible inventory or
$450,000. The line of credit is secured by receivables, inventories, and
property, plant and equipment, and requires the Company to maintain certain
financial ratios and a minimum tangible net worth amount. The Company was in
compliance with these covenants at March 31, 1999 and 1998.
The aggregate maturities of long-term debt are:
Year ending March 31,
---------------------
2000 $ 2,525,100
2001 56,250
---------
$ 2,581,350
=========
(7) Stock Options, Grants and Warrants
The Company has two qualified incentive stock option plans, one performance-
incentive stock option plan, and one nonqualified stock option plan
(the Plans). Options granted under the Plans are granted to directors,
officers and employees at fair value and expire ten years after the date of
grant. Except for the Performance Plan, options granted under the Plans
generally vest over three years. Options granted under the Performance Plan
vest at the end of year ten but are subject to accelerated vesting if certain
targets are met. Options may be exercised by payment of cash or with stock of
the Company owned by the officer or employee. In November 1998, the Board of
Directors approved a repricing of options under the qualified incentive stock
option and nonqualified stock option plans. The options were repriced on
November 19, 1998 based on the closing stock price on that date.
F-14
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
Option transactions and other information relating to the Plans for the three
years ended March 31, 1999 are as follows:
Qualified Performance Non-
incentive incentive qualified Weighted
stock stock stock average
option option option exercise
plans plan plan Total price
------- ------- ------- --------- --------
Outstanding at March 31, 1996 103,653 - 196,902 300,555 3.91
Granted 50,750 400,000 10,000 460,750 5.08
Exercised (6,002) - (8,334) (14,336) 0.75
Canceled (1,234) - - (1,234) 5.46
------- ------- ------- ---------
Outstanding at March 31, 1997 147,167 400,000 198,568 745,735 4.70
Granted 1,000 - 10,000 11,000 3.29
Canceled (14,020) - (2,000) (16,020) 5.29
------- ------- ------- ---------
Outstanding at March 31, 1998 134,147 400,000 206,568 740,715 4.32
Granted 141,911 - 46,134 188,045 1.57
Exercised - - (154,100) (154,100) 1.33
Canceled (134,147) - (52,468) (186,615) 5.08
------- ------- ------- ---------
Outstanding at March 31, 1999 141,911 400,000 46,134 588,045 3.99
======= ======= ======= =========
Total number of options available
under the plans 713,334 400,000 333,333 1,446,667
======= ======= ======= =========
Exercisable at March 31, 1999 - - 23,334 23,334 1.63
======= ======= ======= =========
Available for issue at
March 31, 1999 13,645 - 28,674 42,319
======= ======= ======= =========
The per share weighted average fair value of stock options granted during 1999,
1998 and 1997 was $1.15, $1.85 and $2.14, respectively, on the date of grant
using the Black Scholes option pricing model, with the following assumptions:
(1) risk free interest rate - 6.17% to 6.85%, (2) expected life - 6.5 to 10
years, (3) expected volatility - 72% to 75%, and (4) expected dividends - 5.1%
to 5.8%.
At March 31, 1999, the range of exercise prices and weighted average remaining
contractual life of options outstanding and exercisable was as follows:
Options Outstanding Options Exercisable
- ------------------------------------------------- ----------------------------
Number Weighted average Weighted Number Weighted
Range of outstanding remaining average exercisable average
exercise as of contractual exercise as of exercise
prices March 31, 1999 life price March 31, 1999 price
- -------- -------------- -------------- --------- -------------- --------
$1.63 169,045 9.65 1.63 23,334 1.63
$1.06 19,000 10.01 1.06 - -
$5.13 400,000 7.26 5.13 - -
F-15
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
The Company grants options at fair value and applies APB 25 in accounting for
its Plans. Accordingly, no compensation cost has been recognized for stock
options in the financial statements. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options under
SFAS 123, the Company's net income at March 31, 1999, 1998 and 1997 would have
been reduced to the pro forma amounts indicated below:
1999 1998 1997
---- ---- ----
Net income (loss):
As reported $ 15,892 (196,314) 566,658
========= ========= =========
Pro forma $ (70,343) (290,371) 476,123
========= ========= =========
Income (loss) per common share:
As reported $ - (.04) .10
========= ========= =========
Pro forma $ (.01) (.05) .09
========= ========= =========
Pro forma net income reflects only options granted in 1999, 1998, 1997 and
1996. Therefore, the full impact of calculating compensation costs for stock
options under SFAS 123 is not reflected in the pro forma net income amounts
presented above because compensation cost is reflected over the options'
vesting period of three to ten years, and compensation costs for options
granted prior to April 1, 1995 are not considered.
The Company has also reserved 32,667 shares of its common stock for issuance
to employees or prospective employees at the discretion of the Board of
Directors of which 16,033 shares are available for future issue. There were
no reserved shares issued during the years ended March 31, 1999, 1998 or 1997.
(8) Leases
The Company leases the land on which its operating facility is located. This
operating lease is for a period of twenty years through 2001 with options to
renew for two additional ten-year periods. The lease provides for rent
adjustments every five years. The Company is responsible for payment of taxes,
insurance, and maintenance. In the event the Company elects to terminate the
lease, title to all structures on the land reverts to the lessor. The
Company's subsidiary leases its operating facility in Honduras. This operating
lease is for five years through the year 2002, with an option to renew for an
additional five-year term. The Company also leases certain office equipment
under long-term operating lease agreements.
F-16
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
Future minimum lease payments under noncancelable operating leases as of March
31, 1999 are:
Year ending March 31,
---------------------
2000 $ 244,834
2001 245,184
2002 205,690
2003 17,141
--------
Total minimum lease payments $ 712,849
========
Rental expense for all operating leases was approximately $249,000 in 1999,
$187,000 in 1998 and $80,000 in 1997.
(9) Major Customers
The Company operates in one business segment - the design, development,
manufacture and marketing of electronic control and measurement devices for the
distribution of electric power. The Company only reports sales and standard
gross profit by market (commercial and military), no allocations of
manufacturing variances and other costs of operations or assets are made to
the market. Sales by market are:
1999 1998 1997
---- ---- ----
Commercial $ 13,929,177 13,434,352 12,803,181
Military $ 3,190,542 4,667,433 2,200,413
---------- ---------- ----------
$ 17,119,719 18,101,785 15,003,594
========== ========== ==========
Significant customers which accounted for 10% or more of sales in 1999, 1998
or 1997 and aggregate exports were:
Year ended March 31
-------------------
Customer 1999 1998 1997
-------- ---- ---- ----
Xerox Corporation $ 1,934,740 2,838,905 2,529,398
Noma Appliance & Electric, Inc.,
f/k/a Fleck Manufacturing, Inc.
(a Xerox Corporation supplier) 1,623,904 1,666,516 1,776,424
Other Xerox Corporation suppliers 124,473 133,044 802,800
Fermont Division 1,397,211 2,817,079 1,434,422
--------- --------- ---------
$ 5,080,328 7,455,544 6,543,044
F-17
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
Year ended March 31
-------------------
Customer 1999 1998 1997
-------- ---- ---- ----
Exports:
Canada $ 1,794,855 1,894,215 1,831,898
Far East 394,156 486,277 1,057,605
Europe 2,787,224 2,554,772 1,396,823
Mexico 711,067 979,187 736,992
Australia 117,754 218,530 150,760
South America 37,383 20,994 82,838
Middle East 2,067 3,397 5,324
--------- --------- ---------
Total exports $ 5,844,506 6,157,372 5,262,240
========= ========= =========
(10) Benefit Plan
The Company's 401(k) plan covers all employees with one year of service who are
at least twenty-one years old. The Company matches employee contributions
dollar-for-dollar up to $300. Total Company contributions were approximately
$25,000 in 1999, $29,000 in 1998 and $25,000 in 1997.
(11) Litigation
The Company is involved in various other claims and legal actions arising in
the ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Company's consolidated financial position, results of operations or liquidity.
F-18
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
(12) Selected Quarterly Data (Unaudited)
Information (unaudited) related to operating revenues, operating income, net
income and earnings per share, by quarter, for the years ended March 31, 1999
and 1998 are:
First Second Third Fourth
quarter quarter quarter quarter
------- ------- ------- -------
Year ended March 31, 1999:
Operating revenues $ 4,753,401 4,467,032 3,714,398 4,276,183
========= ========= ========= =========
Gross profit $ 1,426,715 1,282,222 829,614 539,910
========= ========= ========= =========
Operating income (loss) $ 410,425 160,780 (136,931) (522,601)
========= ========= ========= =========
Net income (loss) $ 239,862 84,010 (70,001) (237,979)
========= ========= ========= =========
Basic earnings per share $ .04 .02 (.02) (.04)
========= ========= ========= =========
Diluted earnings per share $ .04 .02 (.02) (.04)
========= ========= ========= =========
Year ended March 31, 1998:
Operating revenues $ 4,811,585 4,545,950 4,658,113 4,415,303
========= ========= ========= =========
Gross profit $ 1,488,247 1,336,956 1,140,074 871,003
========= ========= ========= =========
Operating income (loss) $ 467,494 106,385 (145,509) (509,551)
========= ========= ========= =========
Net income (loss) $ 326,315 74,019 (130,444) (466,204)
========= ========= ========= =========
Basic earnings per share $ .06 .01 (.02) (.09)
========= ========= ========= =========
Diluted earnings per share $ .06 .01 (.02) (.09)
========= ========= ========= =========
The fourth quarter of the years ended March 31, 1999 and 1998 were adversely
affected by an approximately $250,000 and $270,000, respectively, reduction in
inventory as a result of the Company's physical inventory. It is not
practicable to determine what, if any, other quarters are affected by this
adjustment.
F-19
TECHNOLOGY RESEARCH CORPORATION
AND SUBSIDIARY
Schedule II
Valuation and Qualifying Accounts
Years ended March 31, 1999, 1998 and 1997
Additions
----------------------
Balances at Charged to Charged to Balances
beginning costs and other at end of
Description of period expenses accounts Deductions period
----------- ---------- ---------- ---------- ---------- ---------
Allowance for
doubtful accounts:
Year ended
March 31, 1999 $ 64,700 24,500 - 25,000 63,700
======= ======= ======= ======= =======
Year ended
March 31, 1998 $ 69,500 - - 4,800 64,700
======= ======= ======= ======= =======
Year ended
March 31, 1997 $ 84,000 - - 14,500 69,500
======= ======= ======= ======= =======
F-20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
TECHNOLOGY RESEARCH CORPORATION
Dated: 6/11/1999 By: /s/ Robert S. Wiggins
Robert S. Wiggins
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and
on the dates indicated:
Signature Title Date
Chairman, Chief Executive
Officer, and Director
(Principal Executive
/s/ Robert S. Wiggins Officer) 6/11/1998
Robert S. Wiggins
Vice President of Finance and
Chief Financial Officer
(Principal Financial
/s/ Scott J. Loucks Officer) 6/11/1998
Scott J. Loucks
/s/ Raymond H. Legatti President and Director 6/16/1999
Raymond H. Legatti
Senior Vice President
Government Operations
and Marketing and
/s/ Raymond B. Wood Director 6/22/1999
Raymond B. Wood
/s/ Gerry Chastelet Director 6/18/1999
Gerry Chastelet
/s/ Russell Cleveland Director 6/15/1999
Russell Cleveland
/s/ Edmund F. Murphy, Jr. Director 6/21/1999
Edmund F. Murphy, Jr.
/s/ Martin L. Poad Director 6/17/1999
Martin L. Poad
-24-
LICENSE AGREEMENT
THIS AGREEMENT is made this 16th day of February, 1999, between TECHNOLOGY
RESEARCH CORPORATION, a corporation organized under the laws of the State of
Florida, United States of America (herein "TRC"), having its registered office
at: 5250 140th Avenue North, Clearwater, Florida 34620, and WINDMERE-DURABLE
HOLDINGS INC. AND ITS SUBSIDIARIES (hereinafter "WINDMERE") a corporation
organized under the laws of the State of Florida, United States of America, and
having its principal office at: 5980 Miami Lakes Drive, Miami Lakes, Florida
33014.
WITNESSETH THAT: WHEREAS, TRC has developed expertise in technology used in a
line cord product offering ground fault protection and fire prevention features
( "FIRESHIELD") and is the proprietor of such expertise and technology ("TRC
Technology") as defined in Exhibit "A" hereto.
WHEREAS, TRC desires to extend to WINDMERE certain rights to manufacture, have
manufactured, use and sell products ("Licensed Products") using the TRC
Technology.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein and for other good and valuable consideration, the parties hereto agree
as follows:
1. Recitals
The above recitals are true and correct and are incorporated herein by
reference.
2. Grant and Scope of License
TRC grants WINDMERE a non-exclusive world-wide license subject to the terms and
conditions of this Agreement for the use of the TRC Technology to manufacture,
have manufactured, use and sell Licensed Products during the term of this
Agreement and provided that WINDMERE is not in default hereunder.
3. Term
This Agreement shall be valid for the term of 10 years, subject to termination
as provided herein.
4. Royalties for License
WINDMERE shall pay TRC the amount equal to:
1. Ten Cents $0.10 per unit manufactured for use on WINDMERE products.
2. Twenty Cents $0.20 per unit manufactured and sold by WINDMERE to other
OEM accounts
1
5. Royalty Payments
1. 21 days following the end of each calendar quarter, WINDMERE will make
the royalty payments provided for herein. Payment shall be made to a
bank or other institution as shall be designated by TRC.
2. WINDMERE will keep at its office at 5980 Miami Lakes Drive, Miami Lakes,
Florida 33014, a true and accurate account of all products which are the
subject of this Agreement. Such records will show the total number of
products manufactured, whether any such products have been disposed of
other than by sale, and the number and manner of their disposition.
This list shall include shipments to any other company or affiliate
whether or not a normal invoice was prepared. TRC shall have and is
hereby given right of access itself or through an authorized
representative to those books of WINDMERE related to these transactions
which are the subject of this Agreement for the purpose of verifying
statements received by it, such access to be at reasonable business
hours, upon 48 hours prior notice, and at TRC's expense.
6. Support and Assistance
TRC will provide WINDMERE all detailed technical information concerning the
manufacture of "FIRESHIELD" utilizing the technology set forth in Exhibit "A"
which is available to it, or of which it is otherwise aware, with the exception
of the internal construction of integrated circuit Part No. 10020. TRC shall
provide WINDMERE with basic operating parameters of integrated circuit Part
No. 10020.
7. Manufacturing and Inspection Standards
Products manufactured by WINDMERE pursuant to this Agreement must meet all TRC
manufacturing and inspection standards as reasonably specified from time to
time. TRC shall have the right of access to WINDMERE manufacturing facilities
and relevant records at all times during normal business hours 9 am-5 p.m.
Monday to Friday to assure compliance with such standards.
8. Confidentiality
WINDMERE will use its best endeavors during the terms of this Agreement so that
WINDMERE or its employees will not disclose any trade secrets, confidential
information or data, processes or methods of production of same or any know-how
with respect thereto obtained from TRC pursuant to this Agreement to any third
party without prior written authorization of TRC, except where necessary in the
course of normal commercial practices. Such documents shall be clearly marked
as confidential and/or proprietary. All confidential information that is
orally disclosed shall be reduced to writing within 30 days after such
disclosure. WINDMERE'S obligation to maintain TRC's confidential information
in confidence shall not extend to any confidential information that is:
(1) known to WINDMERE or in the public domain prior to receipt of same by
WINDMERE; (2) subsequently becomes known by reason or acts of others other than
WINDMERE; or (3) subsequently becomes available to WINDMERE as a matter of
right from another source on a non-confidential basis.
2
9. Improvements
In the event that TRC or WINDMERE develop improvements to products or
technology which are the subject of this Agreement, whether patented or not,
the developing party shall make such improvements available to the other party
for no additional royalty.
10. Disclosure of Relationship
TRC has the right, without the prior approval of WINDMERE, to announce that
WINDMERE is utilizing the TRC Technology in production of the Licensed Products
which are the subject of this Agreement.
11. Termination of the Agreement
1. TRC shall have the right to terminate this Agreement upon the
occurrence of any of the following events:
a. WINDMERE's failure to pay royalties as and when due, where such
failure is not remedied within 30 days of WINDMERE's receipt of
written notice from TRC thereof.
b...WINDMERE's breach of or failure to perform any other material
obligation under this Agreement where such failure is not remedied
within 60 days of WINDMERE's receipt of written notice from TRC
thereof.
c. If any petition and bankruptcy is filed by or against WINDMERE or
if any other right or remedy sought by or against under any
bankruptcy or insolvency laws.
2. Upon the termination of this Agreement, all unpaid royalties shall
become due and payable immediately.
3. Upon the termination of this Agreement, WINDMERE shall return to TRC
any and all parts, pieces, drawings and/or technical information which
it obtained from TRC in connection with this Agreement.
4. Termination under this provision shall become effective thirty (30)
days after receipt of written notice.
12. Rights of Termination
WINDMERE shall have the right to terminate this Agreement upon the occurrence
of:
1. In the event of any material failure by TRC to comply with its
obligations hereunder, TRC will be required to modify the amount of
royalties payable pursuant to the Agreement (past and future) to
adequately account for such breach or violation by TRC that is not
corrected within 60 days of TRC's receipt of written notice from
WINDMERE.
3
2. Any suit being successfully brought against either or both of WINDMERE
or TRC by any third party for infringement of any intellectual
property right licensed pursuant to this Agreement, unless such
situations are resolved to mutual satisfaction.
3. Any of the intellectual property rights licensed pursuant to this
Agreement being held to be infringing the rights of any third party,
or otherwise being invalid unless such situations are resolved to
mutual satisfaction.
4. Termination under this provision shall become effective 30 days after
receipt of written notice.
13. Assignments of Rights
WINDMERE may not assign or transfer in any manner, including to any successor
or assigns, the rights benefits, or obligations it has under this Agreement
without the express written permission of TRC, which should not unreasonably
be withheld.
14. Product Liability
1. WINDMERE shall indemnify and hold TRC harmless from and against any
and all actions, claims or demands alleging any liability whatsoever
arising out of the manufacture and sale of products subject to this
Agreement, including, but not limited to, defects in materials and
workmanship.
2. TRC shall indemnify and hold WINDMERE harmless from and against any
liability arising from any actions, claims, or demands commenced or
made by any third parties alleging infringement of any technology,
patent, or other intellectual property right licensed by TRC pursuant
to this Agreement, or from any material defect arising from the
product design, or from any defect in materials or workmanship of any
parts that are supplied by TRC.
15. Notices and Consents
Any notice, certification or consent required under this Agreement shall not be
deemed given to a party unless it is in writing and mailed by registered post,
such notice shall be deemed to be received five (5) days after posting,
delivered to such party at the address specified in the preamble to this
Agreement or sent by telex or facsimile to such party.
Notice provided under this Agreement shall be given to:
If to TRC: Technology Research Corporation
5250 140th Avenue North
Clearwater, FL 33760
Attn: Raymond Legatti
If to Windmere: Windmere-Durable Holdings, Inc.
5980 Miami Lakes Dr.
Miami Lakes, FL 33014
Attn: David A. Goldenberg, Esq.
4
16. Modifications and Waivers
This instrument constitutes the sole Agreement between and the parties with
respect to the subject matter hereof, supersedes all prior Agreements, oral or
written and is enforceable in accordance with its terms and is binding upon the
successors and assigns hereof. Neither this Agreement nor any provision hereof
may be modified, waived, discharged, or terminated except by a writing signed
by the parties hereto. Any waiver or any provision or requirement of this
Agreement shall be valid only in the instance for which given, shall not be
deemed continuing and shall not constitute a waiver of any other provision
hereof.
17. Severability
If any provision of this Agreement is found to be invalid, the remainder of
this Agreement shall be valid and not affected thereby.
18. Governing Law
This Agreement shall be governed and construed under the laws of the State of
Florida.
19. Annual Meetings
Annual Meetings will be arranged between the principals of WINDMERE and TRC,
the first to take place within twelve (12) months of the day of this Agreement
and subsequently to be held within twelve (12) months of the previous meeting.
20. Captions
The captions of the paragraphs hereof have no effect in interpreting this
Agreement
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the
date first written above.
TECHNOLOGY RESEARCH CORPORATION, a corporation organized under the laws of the
State of Florida
By: /s/ Raymond Legatti
Raymond Legatti, President
WINDMERE-DURABLE HOLDINGS, INC., a corporation organized under the laws of the
State of Florida.
By: /s/ Arnold Thaler
Arnold Thaler, Director
5
EXHIBIT A
TRC Technology
Under the terms and conditions of this Agreement it is recognized that TRC
possesses experience and know-how relating to the technology in Design and
Manufacture of "FIRESHIELD" products designed by TRC, and is the owner of
UNITED STATES PATENT 4,931,894
The aforementioned experience and know how includes but are not restricted
to: Patents, manufacturing procedures, test criteria, schematics, design and
support documentation, to facilitate manufacture of "FIRESHIELD" products.
6
Consent of Independent Certified Public Accountants
---------------------------------------------------
The Board of Directors
Technology Research Corporation:
We consent to incorporation by reference in the registration statements
(Nos. 33-62379 and No. 33-62397) on Form S-8 of Technology Research
Corporation of our report dated April 30, 1999, relating to the consolidated
balance sheets of Technology Research Corporation and subsidiary as of
March 31, 1999 and 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the years in the three-year
period ended March 31, 1999, and related schedule, which report appears in the
March 31, 1999, annual report on Form 10-K of Technology Research Corporation.
KPMG LLP
St. Petersburg, Florida
June 25, 1999
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<PERIOD-END> Mar-31-1999
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