-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IYxF8uGGzNN+7TmKO+kLZaLxlp16jAa32AkgePOe8say1/oSiHpUI+L7+lWZdBA1 xKXbONWh24HnKlk3fFRWKA== 0001019056-97-000004.txt : 19970127 0001019056-97-000004.hdr.sgml : 19970127 ACCESSION NUMBER: 0001019056-97-000004 CONFORMED SUBMISSION TYPE: 10KSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19970124 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOONTON ELECTRONICS CORP CENTRAL INDEX KEY: 0000013191 STANDARD INDUSTRIAL CLASSIFICATION: INSTRUMENTS FOR MEAS & TESTING OF ELECTRICITY & ELEC SIGNALS [3825] IRS NUMBER: 221543137 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10KSB/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-02364 FILM NUMBER: 97510227 BUSINESS ADDRESS: STREET 1: 25 EASTMANS RD STREET 2: PO BOX 465 CITY: PARSIPPANY STATE: NJ ZIP: 07054-0465 BUSINESS PHONE: 2013869696 MAIL ADDRESS: STREET 1: 25 EASTMANS RD STREET 2: P O BOX 465 CITY: PARSIPPANY STATE: NJ ZIP: 07054-0465 10KSB/A 1 BOONTON ELECTRONICS 10KSB/AMENDMENT ITEM 7. FINANCIAL STATEMENTS. --------------------- Reference is made to the financial statements and supplementary data appearing on the pages of this report set forth below. PAGE(S) ------- Independent Auditors' Report 15 Consolidated Balance Sheet as of September 30, 1996 and 1995 16 Consolidated Statements of Operations for the Years Ended September 30, 1996, 1995 and 1994 17 Consolidated Statements of Changes in Stockholders' Equity for the Years Ended September 30, 1996, 1995 and 1994 18 Consolidated Statements for Cash Flows for the Years Ended September 30, 1996, 1995 and 1994 19 Notes to Consolidated Financial Statements 21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the Company has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BOONTON ELECTRONICS CORPORATION (Company) By/s/Ronald T. DeBlis --------------------- Ronald T. DeBlis, President and Chief Executive Officer Date: January 24, 1997 Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------- ----- ---- By /s/ Daniel Auzan Director, Chairman of January 24, 1997 ---------------- the Board Daniel Auzan By /s/ Ronald T. DeBlis Director, President January 24, 1997 ---------------- and Chief Executive Ronald T. DeBlis Officer (principal executive officer) By /s/ Jack Frucht Director January 24, 1997 ---------------- Jack Frucht By /s/ Otto H. York Director, Vice Chairman January 24, 1997 ---------------- of the Board Otto H. York By /s/ John E. Titterton Secretary and January 24, 1997 ----------------- Treasurer (principal John E. Titterton financial and accounting officer)
14 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, ------------- 1996 1995 ---- ---- Assets: Current assets: Cash and cash equivalents $ 113,041 $ 146,568 Trade receivable (Note 1) 971,342 1,011,980 Inventories (Notes 1 & 3) 1,210,940 1,203,358 Deferred tax benefit (Note 10) 81,058 107,412 Prepaid expenses 230,340 263,570 ----------- ----------- Total current assets 2,606,721 2,732,888 ----------- ----------- Property and equipment - net (Notes 1 & 4) 163,858 102,169 ----------- ----------- Other assets: Deferred tax benefit (Note 10) 988,651 1,186,170 Deposits 67,768 67,768 ----------- ----------- Total other assets 1,056,419 1,253,938 ----------- ----------- Total assets $ 3,826,998 $ 4,088,995 =========== =========== Liabilities and Stockholders' Equity: Current liabilities: Note payable (Note 6) $ 10,503 $ 97,765 Related party loans (Note 6) 43,530 -- Accounts payable 469,882 288,128 Accrued expenses 538,328 417,762 Unsecured claims payable (Chapter 11 settlement) - Current (Notes 2) 48,491 101,515 ----------- ----------- Total current liabilities 1,110,734 905,170 Note payable - noncurrent (Note 6) 77,837 -- Related party loans - noncurrent (Note 6) 218,970 262,500 Unsecured claims payable (Chapter 11 settlement) noncurrent (Note 2) 201,505 253,788 Total liabilities 1,609,046 1,421,458 Commitments and Contingencies (Note 8) Stockholders' equity: Common stock (Note 9) 155,659 152,209 Capital in excess of par 4,421,637 4,388,431 Deficit (2,359,344) (940,812) ----------- ----------- 2,217,952 3,599,828 Less: Treasury stock (Note 9) -- (932,291) ----------- ----------- Total stockholders' equity 2,217,952 2,667,537 ----------- ----------- Total liabilities and stockholders' equity $3,826,998 $4,088,995 =========== ===========
The accompanying notes are an integral part of these statements. 16 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED SEPTEMBER 30, ------------------------- 1996 1995 1994 ---- ---- ---- DIP Net sales $6,038,336 $6,837,248 $6,000,555 Cost of sales 3,408,580 3,888,763 4,009,328 ------------ ------------ --------- Gross income 2,629,756 2,948,485 1,991,227 ------------ ------------ --------- Operating expenses: Commissions 640,517 586,969 696,937 Research and development 921,827 783,132 550,521 Other operating expenses 1,515,727 1,415,352 1,070,614 ------------ ------------ --------- Total operating expenses 3,078,071 2,785,453 2,318,072 ------------ ------------ --------- Income (loss) from operations (448,315) 163,032 (326,845) ------------ ------------ --------- Other income (expense): Interest expense (27,709) (44,181) (252,630) Chapter 11 expense - (34,037) (290,236) Gain on sale of assets - 21,771 979,763 Loss on disposal of equipment - - (173,322) Moving expense - (98,516) - Other income (expense) 1,823 (90,564) (153,306) ------------ ------------ --------- Total other income (expense) (25,886) (245,527) 110,269 ------------ ------------ --------- Income (loss) before taxes and special charges (474,201) (82,495) (216,576) Income taxes (benefit) 225,073 (316,339) (36,371) ------------ ------------ --------- Income/ (loss) before special charges (699,274) 233,844 (180,205) Special charges (Notes 2 & 13) (350,405) - 1,487,552 ------------ -------- --------- Net income (loss) $ (1,049,679) $ 233,844 $1,307,347 ============ ============= ========== Weighted average number of common shares outstanding 1,460,730 1,341,785 1,296,785 ============ ============= ========== Earnings (Loss) per common share: Earnings (loss) from continuing operations $(.48) $.17 $(.14) Special charges (.24) - 1.15 --- --- ---- Net income (loss) $(.72) $.17 $1.01 === ==== =====
The accompanying notes are an integral part of these statements. 17 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED SEPTEMBER 30, 1996, 1995, AND 1994
COMMON STOCK ADDITIONAL RETAINED TREASURY NUMBER OF PAID-IN EARNINGS/ SHARES AT SHARES PAR VALUE CAPITAL (DEFICIT) COST TOTAL ------ --------- ------- --------- ---- ----- Balance 9/30/93* 1,492,085 $ 149,209 $ 4,359,556 $(2,424,689) $(1,002,729) $ 1,081,347 Net income - year ended 9/30/94 -- -- -- 1,307,347 -- 1,307,347 ---------- ---------- ----------- ----------- ----------- ----------- Balance 9/30/94* 1,492,085 149,209 4,359,556 (1,117,342) (1,002,729) 2,388,694 Exercise of Stock Options 30,000 3,000 28,875 -- -- 31,875 Treasury Stock Reissued -- -- -- (57,314) 70,438 13,124 Net income - year ended 9/30/95 -- -- -- 233,844 -- 233,844 ---------- ---------- ----------- ----------- ----------- ----------- Balance 9/30/95 1,522,085 152,209 4,388,431 (940,812) (932,291) 2,667,537 Exercise of Stock Options 34,500 3,450 33,206 -- -- 36,656 Treasury Stock Reissued -- -- -- (368,853) 932,291 563,438 Net (loss) - year ended 9/30/96 -- -- -- (1,049,679) -- (1,049,679) ---------- ---------- ----------- ----------- ----------- ----------- 1,556,585 $ 155,659 $ 4,421,637 $(2,359,344) $ -- $ 2,217,952 ========== ========== =========== =========== =========== ===========
*DEBTOR-IN-POSSESSION The accompanying notes are an integral part of these statements. 18 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, ------------------------- 1996 1995 1994 ---- ---- ---- Cash flows from operating activities: DIP --- Net income (loss) $(1,049,679) $ 233,844 $ 1,307,347 Adjustments to reconcile net income: Depreciation and amortization 27,335 26,294 201,944 Deferred taxes 223,873 (316,339) (61,771) Gain on sale of land and building -- -- (979,763) (Gain)/loss on sale of equipment (1,000) (21,771) 173,322 Gain on secured debt restructure -- -- (889,685) Accrued interest on debt structure -- -- 300,867 Decrease (increase) in current assets: Accounts receivable 40,638 (7,616) 81,276 Inventories (7,582) (251,438) 1,195,184 Prepaid expenses 33,230 281,904 (381,176) Increase (decrease) in current liabilities: Accounts payable 181,754 159,953 87,151 Accrued expenses 120,566 (58,320) 42,053 Chapter 11 settlement-current (53,024) (10,854) 112,369 Liabilities subject to compromise -- -- (1,028,243) ----------- --------- ----------- Net cash provided (used) by operating activities (483,889) 35,657 160,875 ----------- --------- ----------- Cash flows from investing activities: Proceeds from sale of assets 1,000 21,771 2,442,000 Purchase of equipment (89,024) (71,647) (21,221) Proceeds from cash surrender of life insurance policies -- 245,190 -- Other -- (421) 5,675 ----------- --------- ----------- Net cash provided (used) by investing activities $ (88,024) $ 194,893 $ 2,426,454 ----------- --------- -----------
The accompanying notes are an integral part of these statements. 19 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 30, ------------------------- 1996 1995 1994 ---- ---- ---- Cash flows from financing activities: DIP --- Treasury stock reissued $ 932,291 $ 70,438 $ -- Excess cost of treasury stock reissued (368,853) (57,314) -- Increase in notes payable 90,019 -- 400,000 Payments on bank loans (99,444) (279,902) (3,372,333) Borrowings from Board of Directors loans -- 300,000 -- Payments on Board of Directors loans -- (37,500) -- Chapter 11 settlement-noncurrent (52,283) (13,771) 267,559 Payment of borrowings on life insurance policies -- (229,921) -- Proceeds from stock options exercised 36,656 31,875 -- --------- --------- ----------- Net cash provided (used) by financing activities 538,386 (216,095) (2,704,774) --------- --------- ----------- Increase (decrease) in cash and cash equivalents (33,527) 14,455 (117,445) Cash and cash equivalents at beginning of period 146,568 132,113 249,558 --------- --------- ----------- Cash and cash equivalents at end of period $ 113,041 $ 146,568 $ 132,113 ========= ========= =========== Supplemental schedule of non-cash transaction: Gain on unsecured claims payable-(Chapter 11 settlement) -- -- $ 597,867 ========= ========= =========== Supplemental disclosures of cash flow information: Income taxes paid $ 1,025 $ 7,125 $ 13,347 ========= ========= =========== Interest paid $ 33,082 $ 38,808 $ 233,088 ========= ========= ===========
The accompanying notes are an integral part of these statements. 20 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNT POLICIES AND DESCRIPTION OF BUSINESS: A. The Company is a New Jersey corporation organized in 1947. The Company designs and produces electronic testing and measuring instruments including power meters, voltmeters and modulation meters. Recent models are microprocessor controlled and are often used in computerized automatic testing systems. The Company's equipment is marketed throughout the world to commercial and government customers in the electronics industry. The Company markets and distributes its products throughout the United States and abroad through some 15 domestic sales representatives and 35 foreign distributors. Representatives sell on a commission basis, while distributors buy products for resale at discounted ex-factory prices. Its representatives and distributors also handle the products of other manufactures, although these are not generally competitive with the Company's products except that some items handled by foreign distributors may be somewhat competitive. B. The consolidated financial statements include the accounts of Boonton Electronics Corporation and its wholly-owned subsidiaries, Boonton International Sales Corporation and Integra, Inc. All material intercompany accounts and transactions have been eliminated in consolidation. The wholly-owned subsidiaries ceased operations effective October 1, 1994. C. Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from those estimates. D. The company accounts for uncollectible accounts under the direct write-off method whereas generally accepted accounting principals require provision for such expenses under the allowance method. The effect of using this method approximates the allowance method as all amounts are deemed to be fully collectible. E. Inventories - stated at the lower of cost or market determined by the first-in, first-out (FIFO) method. F. Property, plant and equipment - Depreciation and amortization is calculated by the straight-line method for financial reporting purposes at rates based on the following estimated useful lives: Building and improvement 39 Machinery and equipment 5-10 Office furniture and fixtures 5-10 Transportation equipment 3 The accelerated cost recovery system and modified accelerated cost recovery system is used for income tax purposes. Cost of major renewals and betterments that extend the life of the property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expenses as incurred. G. Financial risk - The Company regularly maintains bank account balances in excess of FDIC insurable limit. 21 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 H. Income Taxes - The Company adopted the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" which requires a company to recognize deferred tax liabilities and assets for the expected future tax consequences of events that have been recognized in a Company's financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial statement carrying amounts and tax basis of assets and liabilities using expected tax rates in effect in the years in which the differences are expected to reverse. The Company recognized the benefit of net operating loss carryforwards applying the valuation allowance which requires that the tax benefit be limited bases on the weight of available evidence and the probability that some portion of the deferred tax asset will be realized. I. Financial Instruments - The Company's financial instruments include cash, cash equivalents, trade receivables and payable, long-term debt and loans from related parties for which carrying amounts approximate fair value. It is not practicable to estimate the fair value of related party loans and long-term debt. NOTE 2 - PROCEEDINGS UNDER CHAPTER 11 AND GOING CONCERN PRESENTATION: The Company operated under Chapter 11 proceedings for the period September 7, 1993 through November 15, 1994 when, on the later date, the order confirming the Plan of Reorganization was entered by the United States Bankruptcy Court, District of New Jersey subject to the court closing the case 180 days after said entry (Local Rule 25(a)) cause for extension of time in closing case (Local Rule 25(b)) and filing of application for allowance of fees and allowance within 90 days after entry of final order confirming plan (Local Rule 25(c)). 22 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 In accordance with S.A.S. Sections 560.03, the Company has adjusted downward all liability accounts that were affected by the confirmed Plan of Reorganization entered on November 15, 1994. Therefore, the financial statements reflect the maximum liabilities to creditors under the Chapter 11 proceedings and the Plan of Reorganization. As a result of the Plan of Reorganization, $1,487,552 of indebtedness was forgiven and has been included as an special charges in the accompanying financial statements for the fiscal year ended September 30, 1994. The settlement of unsecured claims under the confirmed Plan of Reorganization totaling 35% of allowed claims for accounts payable and accrued expenses which is reflected in the financial statements, provided for the following payments to be made subsequent to November 15, 1994: % -- 10 From after tax proceeds from termination of the company's pension plan 5 One year after initial payout 5 Two years after initial payout 15 Three years after initial payout Pre-petition liabilities in accordance with the November 15, 1994 confirmed plan of reorganization were compromised of the following: Accounts payable $ 702,233 Accrued expenses: Commissions payable 126,370 Vacation pay 96,250 Severance pay 25,108 Other 78,282 ----------- Total September 30, 1994 1,028,243 Court authorized payments/adjustments (75,073) ----------- Balance subject to settlement 953,170 Amount discharged 703,174 ----------- Balance of Chapter 11 settlement - September 30, 1996 $ 249,996 =========== 23 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 NOTE 3 - INVENTORIES SEPTEMBER 30, ------------- 1996 1995 ---- ---- Raw material $ 468,619 $ 496,238 Work in process 688,273 649,284 Finished Goods 54,048 57,836 ---------- ---------- Total $1,210,940 $1,203,358 ========== ========== NOTE 4 - PROPERTY, PLANT AND EQUIPMENT: SEPTEMBER 30, ------------- 1996 1995 ---- ---- Leasehold improvements $ 61,054 $ 61,054 Machinery and equipment 1,512,488 1,436,087 Office furniture and fixtures 444,959 432,336 Transportation equipment 13,188 13,188 ---------- ---------- Total 2,031,689 1,942,665 Less: Accumulated depreciation and amortization 1,867,831 1,840,496 ---------- ---------- Net depreciated cost $ 163,858 $ 102,169 ========== ========== Management has removed $1,868,423 of fully depreciated machinery, equipment and office furniture and fixtures disposed of and/or abandoned during the relocation of the Company's operations to the Township of Hanover. 24 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 NOTE 5 - RESULTS OF OPERATIONS: The Company has incurred losses from operations during the last three fiscal years. Management does not expect this to continue based on its operating plan for fiscal 1997 which anticipates a 19% increase in revenue and a net income of approximately $200,000. The 1997 first quarter revenues were approximately $1.8 million which supports, on an annualized basis, the expected increase in revenues. The military contracts awarded in fiscal 1996, which will total $1.7 million in revenues upon completion, contributed approximately $265,000 to the first quarter 1997 revenues. The Company's backlog as of December 31, 1996 was $1,296,718 which included an additional $546,000 for the military contracts. An additional $299,000 was released by the Air Force in November 1996 against these contracts. The loss in 1996 was partially attributable to the reduced volume but was also impacted by certain costs that were non-recurring in nature. These costs, which represent 46.2% of the loss from operations, were "CE" mark audit fees of $108,525, funds provided for new technology research at the New Jersey Institute of Technology totaling $65,000, and severance expense for the former president of $33,920. Management of the Company has already instituted steps to reduce operating costs in fiscal 1997 which steps include reductions in wages and payroll taxes due to personnel reductions. Further cost reductions will be implemented as identified by management as fiscal 1997 progresses. The special charges of $350,405 was primarily a result of costs, and accrued costs for work to be performed in 1997, associated with further environmental delineation work performed at a site formerly leased by the Company. This work is being performed in order to obtain a "Conditional No Further Action Letter" from the New Jersey Department of Environmental Protection (NJDEP) which would allow the Company to finalize its groundwater remediation program. 25 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 NOTE 6 - NOTES PAYABLE SEPTEMBER 30, ------------- 1996 1995 ---- ---- A. BANK: United Jersey Bank: Unsecured note payable (as part of secured debt restructure with bank) in monthly installments of $25,000 including interest at 8% per annum through January 1996: $ -- $ 97,765 Less current portion $ -- 97,765 ---------- ---------- Noncurrent portion $ -- $ -- ========== ========== Interest expense for the years ended September 30, 1996 and 1995 amounted to $2,649 and $20,098, respectively. SEPTEMBER 30, ------------- 1996 1995 ---- ---- B. BOARD OF DIRECTORS: Notes, subordinated to NJEDA loan, dated February 6, 1995, payable in monthly installments of $5,449 including interest at 9% per annum through September 30, 2001: $ 262,500 $ 262,500 Less: current portion $ 43,530 -- ----------- ----------- Noncurrent portion $ 218,970 $ 262,500 =========== =========== Interest expense for the fiscal year ended September 30, 1996 and 1995 amounted to $24,019 and $23,844, respectively. SEPTEMBER 30, ------------- 1996 1995 ---- ---- C. NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY: Note, dated July 31, 1996, payable in monthly installments of $1,352 including interest at 6.75% per annum through June 30, 2003: $ 88,342 $ -- Less: current portion $ 10,503 -- ----------- ------------ Noncurrent portion $ 77,837 $ -- =========== ============ Interest expense for the fiscal year ended September 30, 1996 amounted to $1,042. Under the provisions of this loan agreement, the Company will borrow a total of $500,000. 26 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 NOTE 7 - CONCENTRATION OF CREDIT RISK: The Company maintains cash and cash equivalents at three financial institutions that are insured by the Federal Deposit Insurance Corporation (FDIC) and/or Securities Investor Protection Corporation (SIPC). The Company at times during the year had amounts in these institutions that exceeded insurable limits of $100,000 FDIC and $500,000 SIPC. In the normal course of business, the Company extends unsecured credit to customers in the United States and Asia. NOTE 8 - COMMITMENTS AND CONTINGENCIES: COMMITMENTS: A. RETIREMENT PLANS: The Company adopted a non-contributory employee pension plan which became effective January 1, 1972 and was consequently revised to meet the requirements of the ERISA pension law. Substantially, all employees were eligible to participate. Under the plan, the Company was obligated to contribute such amounts as were actuarially required to fund the plan. Effective October 1, 1987, the Company adopted Statement of Financial Accounting Standards No. 87, Employers' Accounting for Pensions (FAS No. 87, for its non-contributory defined benefit employee pension plan). Effective September 9, 1994, The Company terminated the plan pending approval of the Internal Revenue Service and the Pension Benefit Guaranty Corporation. Benefits provided by the plan ceased accruing on the same date. As stated in Note 2, 10% of unsecured claims in accordance with the confirmed plan of reorganization will be provided from the after tax proceeds of the terminated plan. The termination of the plan was finalized and the plan assets were distributed on October 13, 1995. The 10% payments to the unsecured creditors were made October 27, 1995. Effective July 1, 1989, the Company adopted a defined contribution plan for all eligible employees. In accordance with Internal Revenue Code Section 401(k), the plan provides for elective deferral of up to 15% of total compensation. The plan further provided for a Company matching contribution of 25% of the elective deferral amount of each participant that did not exceed 6% of total compensation. Effective January 1, 1994, the matching Company contribution was suspended due to the company's financial condition and pending reorganization. Effective October 1, 1995, the Company reinstated a matching contribution at 50% of the elective 27 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 deferral amount for each participant that does not exceed 6% of total compensation. The amounts charged to operations were $46,151 and $0 for the years ended September 30, 1996 and 1995, respectively. B. EMPLOYEE STOCK OPTIONS PLANS: On February 26, 1987, the Stockholders approved the 1987 Incentive Stock Option Plan, the 1987 Employee Stock Purchase Plan and the 1987 Stock Option Program for Non-Employee Directors. Subject to the provisions of these plans, an aggregate of 150,000 shares of the Company's stock was made available for option purchases; namely, 75,000 shares, 37, 500 shares and 37,500 shares, respectively. The number of shares available for future grants at September 30, 1995 were 11,700, 11,900 and 7,500, respectively. The number of shares available for future grants at September 30, 1996 were 11,700, 12,150 and 7,500, respectively. OPTION ------ PRICE PER SHARE NUMBER OF SHARES --------------- ---------------- Shares under option at September 30, 1993 $3.00 53,500 Expired 3.00 (3,500) ------- Shares under option at September 30, 1994 3.00 50,000 Granted $1.0625 130,000 Exercised $1.06.25 (30,000) Expired $1.0625 (18,750) Expired/surrender $3.00 (50,000) ------- Shares under option at September 30, 1995 $1.0625 81,250 Exercised $1.0625 (34,500) Expired $1.0625 (250) ------- Shares under option at September 30, 1996 $1.0625 46,500 ======= C. SUPPLEMENTAL EXECUTIVE PENSION PLAN: On June 8, 1989, the Board of Directors adopted a Supplemental Executive Retirement Plan for certain executive employees to restore pension benefits which had been reduced by legislative action. The Company purchased life insurance contracts through a trust to fund its obligations for the participants and recognized a liability for vested benefits as accrued. The supplemental plan was terminated and insurance contracts canceled with proceeds of $33,804 credited to expense for the year ended September 30, 1994. 28 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 D. LEASE COMMITMENTS Subsequent to the sale of the Company's facility in Randolph, New Jersey on September 28, 1994, the company entered into a seven year lease for its present office and manufacturing facility in Hanover Township, New Jersey with a five year renewal option. Rent charged to operations for the fiscal year ended September 30, 1996 was $227,400. Annual rent for the initial seven year term is $227,400 for the first four years and $300,00 for years five through seven. Future minimum lease payments required under the operating lease are as follows: FISCAL YEAR AMOUNT ----------- ------ 1997 227,400 1998 227,400 1999 300,000 2000 300,000 2001 300,000 The Company leases office equipment under a five-year operating lease with an option to upgrade after three years which it intends to exercise. The annual lease payment for the term of the lease is $17,617. Future lease payments required under the operating lease are as follows: FISCAL YEAR AMOUNT ----------- ------ 1997 17,617 1998 17,617 1999 17,617 2000 17,617 2001 1,468 CONTINGENCIES: A. ENVIRONMENTAL CONTINGENCIES: Following an investigation by the New Jersey Department of Environmental Protection (NJDEP) of the Company's waste disposal practices at a certain site that it formerly leased, the Company put a ground water management plan into effect as approved by the Department. Costs associated with this site are charged directly to income as incurred. The lessor of this site has 29 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 notified the Company that if the NJDEP investigation proves to have interfered with a sale of the property, the lessor may seek to hold the Company liable for any loss it suffers as a result. However, corporate counsel has informed management that, in their opinion, the lessor would not prevail in any lawsuit filed due to the imposition by law of the statute of limitations. Costs charged to operations in connection with the water management plan amounted to $51,879 and $60,409 for the years ended September 30, 1996 and 1995, respectively. The Company estimates the expenditures in this regard for the fiscal year ending September 30, 1997 will amount to approximately $52,000. The Company will continue to be liable under the plan in all future years until such time as the NJDEP releases it from all obligations applicable thereto. B. INCOME TAX CONTINGENCIES: The Company's income tax returns through the fiscal year ended September 30, 1992 have been accepted as filed or are barred from further assessment. NOTE 9 - COMMON AND TREASURY STOCK: SEPTEMBER 30, ------------- 1996 1995 ---- ---- COMMON STOCK: $.10 par value, authorized 5,000,000 shares, issued and outstanding 1,556,585 shares and issued 1,522,085 shares. $155,659 $152,209 ======== ======== TREASURY STOCK (AT COST): No shares and 180,300 shares, respectively -- $932,291 ======== ======== Represents the repurchase of stock on November, 1987 as resolved by the Board of Directors. 180,300 shares were reissued to G.E.M. USA, Inc. in accordance with the terms of the definitive Stock Purchase Agreement executed on February 23, 1996 by and between the 30 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 Company and General de Mesure et de maintenance Electronique, S.A. (GMME). G.E.M. USA, Inc., is a wholly-owned subsidiary of GMME. NOTE 10 - INCOME TAXES: The components of the deferred tax asset are: SEPTEMBER 30, 1996 1995 ---- ---- DIP --- Net operating loss carry forwards $3,799,877 $3,371,985 Less: Valuation allowance (2,730,168) (2,078,403) ---------- --------- Net deferred tax asset $1,069,709 $1,293,582 ========== ========= Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes", requires that the Company record a valuation allowance when it is "more likely than not that some portion or all of the deferred tax assets will not be realized". It further states that "forming a conclusion that a valuation allowance is not needed is difficult when there is negative evidence such as cumulative losses in recent years". The ultimate realization of this deferred income tax asset depends on the ability to generate sufficient taxable income in the future. The Company is undergoing substantial restructuring changes and has made strategic realignments of its operations in association with its Plan or Reorganization that management believes will result in future profitability. While it is management's belief that these measures will allow the total deferred income tax asset to be realized by future operating results, the losses in recent years and a desire to be conservative make it appropriate to record a valuation allowance. Accordingly, the Company has provided a valuation allowance (based on estimated future taxable income) for the portion of the total deferred income tax asset that will not be realized as related to the operating loss carryforward. Income tax laws allow for the utilization of loss carryforwards over periods not to exceed 15 and 7 years for Federal and State purposes, respectively. If the Company is not able to generate sufficient taxable income in the future through operating results, increases in the valuation allowance will be required through a charge to expense (reducing stockholder's equity). In the event the Company reports sufficient profitability to use all of the deferred income tax assets, the valuation allowance will be eliminated through a credit to expense (increasing stockholder's equity). 31 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 The provision for income taxes consists of the following: SEPTEMBER 30, ------------- 1996 1995 ---- ---- Current: Federal -- -- State $ 1,200 -- --------- --------- 1,200 -- --------- --------- Deferred: Federal 198,510 $(272,143) State 25,363 (44,196) --------- --------- 223,873 (316,339) Total $ 225,073 $(316,339) ========= ========= The following is a reconciliation of income taxes at the federal statutory rate: SEPTEMBER 30, ------------- 1996 1995 ---- ---- Computed income taxes at statutory rate $(280,366) $ (28,049) Recognition of net operating loss (139,441) -- Increase(decrease) in tax asset valuation allowance 651,765 (288,290) Other items - net (6,885) -- --------- ---------- Expense (Benefit) $ 225,073 $(316,339) ========= ========== For federal tax purposes, the Company's subsidiary, Boonton International Sales Corporation, elected to be treated as a Domestic International Sales Corporation (DISC) under Section 992(b) of the Internal Revenue Code. The Company is entitled to defer federal taxes on the income of the DISC which amounted to $223,449 for 1994. This subsidiary ceased operations effective October 1, 1994. Cumulative undistributed earnings of the DISC subsequent to December 31, 1984 was $1,023,055. The Company does not recognize the deferred income taxes since there is no intention to distribute the DISC income. The Company has net operating loss carryforwards for federal and state purposes approximating $9,478,000 and $9,647,000 that will begin to expire until the year 2006 and 1998, respectively. These loss carryforwards can be utilized to reduce future taxable income dollar for dollar. 32 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 NOTE 11 - SEGMENT INFORMATION: The Company is engaged in the manufacture and sale of electronic test and measurement equipment and management considers its business as a single segment for reporting purposes. A. The Company's export sales were as follows: YEARS ENDED % OF SEPTEMBER 30, AMOUNT TOTAL SALES - ------------- ------ ----------- 1996 $2,599,074 42% 1995 2,702,439 40% 1994 2,177,321 36% B. Customers sales to domestic government agencies were as follows: YEARS ENDED % OF SEPTEMBER 30, AMOUNT TOTAL SALES - ------------- ------ ----------- 1996 $907,189 15% 1995 636,020 9% 1994 383,932 6% NOTE 12 - SUBSEQUENT EVENT: On December 9, 1996, G.E.M. USA, Inc. purchase 80,000 shares of the Company's common stock for $200,000 at two dollars and fifty cents ($2.50) a share U.S. These shares were purchased in accordance with the terms of a definitive Stock Purchase Agreement executed by and between the Company and GMME on October 21, 1996. The Agreement provides an option to GMME to purchase an additional 443,700 shares for $1,437,588 at three dollars and twenty-four cents ($3.24) a share U.S. This option will expire on June 9, 1997 and is conditioned upon the satisfactory completion of further delineation of the environmental issue at a site formerly leased by the Company as disclosed in Note 8 - Contingencies (A) and Note 13 - Special Charges. NOTE 13 - SPECIAL CHARGES: In accordance with the GMME agreement, the Company was required to attempt to obtain an agreement, acceptable to GMME, with the New Jersey Department of Environmental Protection for finalizing the clean-up of a site it formerly leased. In order to fulfill this requirement, it was necessary for the Company to incur and accrue charges of $271,772 33 BOONTON ELECTRONICS CORPORATION & SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 for services of environmental consultants and counsel that were deemed not to be in the ordinary course of business. Additionally, the Company has accrued $45,000 for its expected settlement in the Sharkey Landfill clean up. Although the Company contends that it did not send hazardous waste to the Landfill, it was determined by counsel that the NJDEP will prevail against all companies named in the suit to some extent. The Company has accrued $33,633 for penalties imposed, by the NJDEP, for missing a reporting event in 1994, payable in four quarterly installments during fiscal 1997. NOTE 14 - QUARTERLY FINANCIAL DATA: SEPTEMBER 30, 1996 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. - ------------------ -------- -------- -------- -------- Sales $1,632,222 $ 1,559,269 $ ,410,126 $ 1,436,719 Gross Profit 803,166 766,387 644,537 415,666 Net income/(loss) 52,710 (47,683) (294,884) (759,822) Earnings/(loss) per share .04 (.04) (.19) (.53) SEPTEMBER 30, 1995 1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR. - ------------------ -------- -------- -------- -------- Sales $ 1,494,193 $1,655,059 $1,818,211 $1,869,785 Gross Profit 633,993 707,582 808,337 798,573 Net income/(loss) (132,458) 40,179 99,128 226,995 Earnings/(loss) per share (.10) .03 .07 .17 34 -----END PRIVACY-ENHANCED MESSAGE-----